Page Range | 49139-49516 | |
FR Document |
Page and Subject | |
---|---|
81 FR 49515 - Delegation of Certain Authorities and Assignment of Certain Functions Under the Trade Facilitation and Trade Enforcement Act of 2015 | |
81 FR 49164 - Drawbridge Operation Regulation; New Jersey Intracoastal Waterway (NJICW), Atlantic City, NJ | |
81 FR 49271 - Records Schedules; Availability and Request for Comments | |
81 FR 49320 - Self-Regulatory Organizations; NYSE Arca, Inc.; Order Granting Approval of Proposed Rule Change, as Modified by Amendment No. 7 Thereto, Amending NYSE Arca Equities Rule 8.600 To Adopt Generic Listing Standards for Managed Fund Shares | |
81 FR 49347 - Submission for OMB Review; Comment Request | |
81 FR 49248 - Methodology for Prioritizing Status Reviews and Accompanying 12-Month Findings on Petitions for Listing Under the Endangered Species Act | |
81 FR 49225 - Generic Drug User Fee-Abbreviated New Drug Application, Prior Approval Supplement, Drug Master File, Final Dosage Form Facility, and Active Pharmaceutical Ingredient Facility Fee Rates for Fiscal Year 2017 | |
81 FR 49210 - Privacy Act of 1974; System of Records | |
81 FR 49268 - Nemko-CCL, Inc.: Grant of Expansion of Recognition | |
81 FR 49210 - Procurement List; Additions | |
81 FR 49214 - Higher Initial Maximum Uniform Allowance Rate | |
81 FR 49220 - Board of Scientific Counselors Safe and Sustainable Water Resources Subcommittee; Notification of Public Meeting and Public Comment | |
81 FR 49165 - Etoxazole; Pesticide Tolerance | |
81 FR 49245 - Mortgage and Loan Insurance Programs Under the National Housing Act-Debenture Interest Rates | |
81 FR 49215 - Submission for OMB Review; Comment Request | |
81 FR 49255 - Renewal of Agency Information Collection for Tribal Energy Resource Agreements | |
81 FR 49247 - 60 Day Notice of Proposed Information Collection for License for the Use of Personally Identifiable Information Protected Under the Privacy Act of 1974 | |
81 FR 49214 - Charter Amendment of Department of Defense Federal Advisory Committees | |
81 FR 49284 - New Postal Products | |
81 FR 49234 - Status of Overboard Detection Technology for Cruise Vessels | |
81 FR 49195 - Special Local Regulation; Little Annemessex River and Somers Cove, Crisfield, MD | |
81 FR 49274 - LaCrosseSolutions, LLC, Dairyland Power Cooperative, La Crosse Boiling Water Reactor | |
81 FR 49281 - Southern California Edison Company; San Onofre Nuclear Generating Station, Units 1, 2, and 3 | |
81 FR 49216 - Agency Information Collection Activities; Submission to the Office of Management and Budget for Review and Approval; Comment Request; 2018 Teaching and Learning International Survey (TALIS 2018) Main Study Recruitment and Field Test | |
81 FR 49221 - Change in Bank Control Notices; Acquisitions of Shares of a Bank or Bank Holding Company | |
81 FR 49221 - Formations of, Acquisitions by, and Mergers of Bank Holding Companies | |
81 FR 49273 - Meeting of the ACRS Subcommittee on Fukushima; Notice of Meeting | |
81 FR 49164 - Special Local Regulation; Annual Marine Events on the Colorado River, Between Davis Dam (Bullhead City, Arizona) and Headgate Dam (Parker, Arizona) Within the San Diego Captain of the Port Zone | |
81 FR 49358 - Open Meeting of the Taxpayer Advocacy Panel Joint Committee | |
81 FR 49357 - Proposed Collection; Comment Request for Form 5500-EZ | |
81 FR 49193 - Tribal Transportation Self-Governance Program; Negotiated Rulemaking Proposed Committee Membership and First Meeting | |
81 FR 49358 - Proposed Collection; Comment Request for Regulation Project | |
81 FR 49355 - EUROCAE WG-99 PLENARY #8/RTCA SC-234 Plenary #5-Calling Notice “Portable Electronic Devices (PEDs)” | |
81 FR 49242 - Texas; Amendment No. 4 to Notice of a Major Disaster Declaration | |
81 FR 49354 - WTO Dispute Settlement Proceeding Regarding China-Anti-Dumping and Countervailing Duty Measures on Broiler Products From the United States-Recourse by the United States to Article 21.5 of the DSU | |
81 FR 49259 - Renewal of Approved Information Collection; OMB Control No. 1004-0194 | |
81 FR 49237 - West Virginia; Amendment No. 6 to Notice of a Major Disaster Declaration | |
81 FR 49356 - Agency Information Collection Activities: Information Collection Renewal; Comment Request; Guidance on Sound Incentive Compensation Practices | |
81 FR 49256 - Notice of Realty Action: Competitive Sale of 16 Parcels of Public Land in Clark County, NV | |
81 FR 49228 - Use of Real-World Evidence to Support Regulatory Decisionmaking for Medical Devices; Draft Guidance for Industry and Food and Drug Administration Staff; Availability | |
81 FR 49208 - Agenda and Notice of Public Meeting of the Montana Advisory Committee | |
81 FR 49245 - 30-Day Notice and Request for Comments | |
81 FR 49261 - Notice of Resource Advisory Council Meetings for the Dominguez-Escalante National Conservation Area Advisory Council | |
81 FR 49265 - Certain Intermediate Bulk Containers; Institution of Investigation | |
81 FR 49215 - Notice of Intent To Grant Partially Exclusive License; 5D Analytics, LLC | |
81 FR 49171 - Suspension of Community Eligibility | |
81 FR 49237 - Proposed Flood Hazard Determinations | |
81 FR 49242 - Final Flood Hazard Determinations | |
81 FR 49223 - Statement of Organization, Functions, and Delegations of Authority: Office of the Deputy Assistant Secretary for Administration; Office of the Assistant Secretary | |
81 FR 49235 - Technical Mapping Advisory Council | |
81 FR 49236 - Technical Mapping Advisory Council | |
81 FR 49209 - Community Broadband Summit | |
81 FR 49169 - Suspension of Community Eligibility | |
81 FR 49177 - Final Flood Elevation Determinations | |
81 FR 49240 - Changes in Flood Hazard Determinations | |
81 FR 49224 - Vaccines and Related Biological Products Advisory Committee; Notice of Meeting | |
81 FR 49175 - Suspension of Community Eligibility | |
81 FR 49244 - Final Flood Hazard Determinations | |
81 FR 49270 - Proposed Collection of Existing Collection; Comment Request | |
81 FR 49270 - Proposed Collection; Comment Request | |
81 FR 49231 - Advisory Committee on Heritable Disorders in Newborns and Children; Notice of Meeting | |
81 FR 49266 - Geoffrey D. Peterson, N.P.; Decision and Order | |
81 FR 49233 - Agency Information Collection Activities: Submission for OMB Review; Comment Request | |
81 FR 49221 - Agency Forms Undergoing Paperwork Reduction Act Review | |
81 FR 49201 - Air Plan Approval; TN: Revisions to Logs and Reports for Startups, Shutdowns and Malfunctions | |
81 FR 49262 - Emulsion Styrene-Butadiene Rubber From Brazil, Korea, Mexico, and Poland; Institution of Antidumping Duty Investigations and Scheduling of Preliminary Phase Investigations | |
81 FR 49263 - Certain Potassium Chloride Powder Products; Institution of Investigation | |
81 FR 49264 - Certain Three-Dimensional Cinema Systems and Components Thereof Commission's Final Determination Finding a Violation of Section 337; Issuance of a Limited Exclusion Order and Cease and Desist Orders; Termination of the Investigation | |
81 FR 49205 - Partial Approval and Partial Disapproval of Air Quality Implementation Plans; NJ; Infrastructure SIP Requirements for 2008 Lead, 2008 Ozone, 2010 Nitrogen Dioxide, 2010 Sulfur Dioxide, 2011 Carbon Monoxide, 2006 PM10 | |
81 FR 49285 - Product Change-First-Class Package Service Negotiated Service Agreement | |
81 FR 49279 - Guidance on Making Changes to Emergency Plans for Nuclear Power Reactors | |
81 FR 49261 - Native American Graves Protection and Repatriation Review Committee: Notice of Nomination Solicitation | |
81 FR 49209 - Notice of Public Meeting of the Michigan Advisory Committee | |
81 FR 49208 - Notice of Public Meeting of the Indiana Advisory Committee | |
81 FR 49280 - Information Collection: NRC Forms 366, 366A, and 366B, “Licensee Event Report” | |
81 FR 49348 - Self-Regulatory Organizations; National Stock Exchange, Inc.; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change To Amend Exchange Rule 11.26 To Implement the Quoting and Trading Provisions of the Regulation NMS Plan To Implement a Tick Size Pilot Program | |
81 FR 49336 - Self-Regulatory Organizations; BOX Options Exchange LLC; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change To Amend the Fee Schedule on the BOX Market LLC (“BOX”) Options Facility | |
81 FR 49304 - Self-Regulatory Organizations; NYSE MKT LLC; Notice of Filing of Amendment No. 2 to a Proposed Rule Change and Order Instituting Proceedings To Determine Whether To Approve or Disapprove a Proposed Change, as Modified by Amendment Nos. 1 and 2, Establishing Fees Relating to End Users and Amending the Definition of “Affiliate,” as well as Amending the NYSE MKT Equities Price List and the NYSE Amex Options Fee Schedule To Reflect the Changes | |
81 FR 49332 - Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing of Amendment No. 2 to a Proposed Rule Change and Order Instituting Proceedings To Determine Whether To Approve or Disapprove a Proposed Change, as Modified by Amendment Nos. 1 and 2, Establishing Fees Relating to End Users and Amending the Definition of “Affiliate,” as well as Amending the NYSE Arca Equities Schedule of Fees and Charges for Exchange Services and the NYSE Arca Options Fee Schedule To Reflect the Changes | |
81 FR 49300 - Self-Regulatory Organizations; New York Stock Exchange LLC; Notice of Filing of Amendment No. 2 to a Proposed Rule Change and Order Instituting Proceedings To Determine Whether To Approve or Disapprove a Proposed Change, as Modified by Amendment Nos. 1 and 2, Establishing Fees Relating to End Users and Amending the Definition of “Affiliate,” as Well as Amending the NYSE Price List To Reflect the Changes | |
81 FR 49299 - Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Designation of a Longer Period for Commission Action on a Proposed Rule Change Relating to the Listing and Trading of Shares of the Virtus Japan Alpha ETF Under NYSE Arca Equities Rule 8.600 | |
81 FR 49341 - Self-Regulatory Organizations; The Nasdaq Stock Market LLC; Notice of Filing of Proposed Rule Change, as Modified by Amendment No. 1 Thereto, to List and Trade Exchange-Traded Managed Funds | |
81 FR 49286 - Self-Regulatory Organizations; The NASDAQ Stock Market LLC; Notice of Designation of a Longer Period for Commission Action on Proceedings To Determine Whether To Approve or Disapprove a Proposed Rule Change, as Modified by Amendment Nos. 1 and 2 Thereto, To List and Trade Shares of the First Trust Municipal High Income ETF of First Trust Exchange-Traded Fund III | |
81 FR 49309 - Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing of Proposed Rule Change Amending NYSE Arca Equities Rules 2.16(c) and 2.21(i) to Harmonize the Requirement of When an ETP Holder Must File a Uniform Termination Notice for Securities Industry Registration With the Rules of Other Exchanges and FINRA | |
81 FR 49293 - Self-Regulatory Organizations; NASDAQ PHLX LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change Related to Affiliated Entities | |
81 FR 49286 - Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing of Proposed Rule Change Amending Rules 2.17(c) and 2.23(i) To Harmonize the Requirement of When OTP Holders and OTP Firms Must File a Uniform Termination Notice for Securities Industry Registration With the Rules of Other Exchanges and FINRA | |
81 FR 49288 - Self-Regulatory Organizations; The NASDAQ Stock Market LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change Related to Affiliated Entities | |
81 FR 49309 - Self-Regulatory Organizations; The Depository Trust Company; Notice of Designation of a Longer Period for Commission Action on Proposed Rule Change Pursuant to Which DTC Would Impose Deposit Chills and Global Locks and Provide Fair Procedures to Issuers | |
81 FR 49315 - Self-Regulatory Organizations; New York Stock Exchange LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change Amending the Exchange's Price List | |
81 FR 49327 - Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing and Immediate Effectiveness of Proposed Rule Change Amending the NYSE Arca Options Fee Schedule the NYSE Arca Equities Schedule of Fees and Charges for Exchange Services | |
81 FR 49311 - Self-Regulatory Organizations; NYSE MKT LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change Amending the NYSE MKT Equities Price List and the NYSE Amex Options Fee Schedule | |
81 FR 49216 - Agency Information Collection Activities; Submission to the Office of Management and Budget for Review and Approval; Comment Request; Program for International Student Assessment (PISA 2018) Recruitment and Field Test | |
81 FR 49233 - Center for Scientific Review; Notice of Closed Meetings | |
81 FR 49232 - National Institute of Biomedical Imaging and Bioengineering; Notice of Closed Meeting | |
81 FR 49233 - National Institute on Deafness and Other Communication Disorders; Notice of Meeting | |
81 FR 49356 - Petition for Exemption; Summary of Petition Received | |
81 FR 49230 - Adaptive Designs for Medical Device Clinical Studies; Guidance for Industry and Food and Drug Administration Staff; Availability | |
81 FR 49217 - Notice of Availability of Midterm Evaluation Draft Technical Assessment Report for Model Year 2022-2025 Light Duty Vehicle GHG Emissions and CAFE Standards | |
81 FR 49198 - Supportive Services for Veteran Families Program | |
81 FR 49180 - Schedule of Application Fees | |
81 FR 49158 - Repair Stations | |
81 FR 49156 - Airworthiness Directives; Bombardier, Inc. Airplanes | |
81 FR 49139 - Federal Agricultural Mortgage Corporation Governance; Standards of Conduct; Risk Management; and Disclosure and Reporting | |
81 FR 49432 - Disclosure of Order Handling Information | |
81 FR 49163 - Order Recognizing the Resource Extraction Payment Disclosure Requirements of the European Union, Canada and the U.S. Extractive Industries Transparency Initiative as Substantially Similar to the Requirements of Rule 13q-1 Under the Securities Exchange Act of 1934 | |
81 FR 49360 - Disclosure of Payments by Resource Extraction Issuers |
National Telecommunications and Information Administration
Navy Department
Centers for Disease Control and Prevention
Children and Families Administration
Food and Drug Administration
Health Resources and Services Administration
National Institutes of Health
Substance Abuse and Mental Health Services Administration
Coast Guard
Federal Emergency Management Agency
Secret Service
Fish and Wildlife Service
Indian Affairs Bureau
Land Management Bureau
National Park Service
Drug Enforcement Administration
Occupational Safety and Health Administration
Workers Compensation Programs Office
Federal Aviation Administration
Federal Highway Administration
Comptroller of the Currency
Internal Revenue Service
Consult the Reader Aids section at the end of this issue for phone numbers, online resources, finding aids, and notice of recently enacted public laws.
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Farm Credit Administration.
Final rule.
The Farm Credit Administration (FCA, we, or our) is finalizing new regulations related to the Federal Agricultural Mortgage Corporation's (Farmer Mac or Corporation) risk governance and making enhancements to existing disclosure and reporting requirements. The risk governance regulations require the Corporation to establish and maintain a board-level risk management committee and a risk officer, as well as risk management policies and internal controls. The changes to disclosure and reporting requirements remove repetitive reporting and allow for electronic filing of reports. We also finalize rules on the examination and enforcement authorities held by the FCA Office of Secondary Market Oversight (OSMO) over the Corporation.
This regulation shall become effective no earlier than 30 days after publication in the
Joseph Connor, Associate Director for Policy and Analysis, Office of Secondary Market Oversight, Farm Credit Administration, McLean, VA 22102-5090, (703) 883-4364, TTY (703) 883-4056, or Laura McFarland, Senior Counsel, Office of General Counsel, Farm Credit Administration, McLean, VA 22102-5090, (703) 883-4020, TTY (703) 883-4056.
The purpose of this final rule is to:
• Enhance risk governance at the Corporation to further its long-term safety and soundness and mission achievement;
• Remove repetitious disclosure and reporting requirements, given the dual reporting responsibilities of the Corporation to the FCA and the Securities and Exchange Commission (SEC); and
• Clarify the examination and enforcement authority of FCA.
Farmer Mac is a stockholder-owned, federally chartered instrumentality that is an institution of the Farm Credit System (System) and a Government-sponsored enterprise (GSE). The Corporation was established and chartered by the Agricultural Credit Act of 1987 (1987 Act)
The Corporation has two classes of voting common stock: Class A and Class B. Class A voting common stock is owned by banks, insurance companies, and other financial institutions. Class B voting common stock is owned by System institutions. In addition, the Corporation has nonvoting common stock (Class C), the ownership of which is not restricted and is a means for the Corporation to raise capital. The Corporation may also issue nonvoting preferred stock.
The Corporation is regulated by FCA through the Office of Secondary Market Oversight (OSMO). Congress charged us to issue regulations to ensure mission compliance and the safety and soundness of the Corporation. When issuing regulations for the Corporation, the Act requires FCA to consider:
• The purpose for which Farmer Mac was created;
• The practices appropriate to the conduct of secondary markets in agricultural loans; and
• The reduced levels of risks associated with appropriately structured secondary market transactions.
Farmer Mac, as a publicly traded company, is also subject to many of the governance requirements of Sarbanes-Oxley Act of 2002 (Sarbanes-Oxley),
As a GSE, the Corporation has a public policy purpose embedded in its corporate mission. One aspect of this public policy mission includes financial services to customer-stakeholders (institutions that lend to farmers, ranchers, rural homeowners, and rural utility cooperatives) and the resulting flow-through benefits to rural borrowers. Another key aspect is the protection of taxpayer-stakeholders because the risk that the Corporation accepts in the course of business exposes both investors (debt and equity holders) and taxpayers to potential loss. The taxpayer's exposure arises in part from the Corporation's authority to issue debt to the Department of the Treasury to cover guarantee losses under certain adverse circumstances.
We issued a proposed rule to amend our standards of conduct, board governance, and reporting regulations for the Corporation on March 26, 2015 (80 FR 15931). The comment period for the proposed rule closed on June 24, 2015, and 77 comment letters were received. The comments submitted were from Farmer Mac, stockholders in Farmer Mac, a consultant to Farmer Mac,
The 77 comments submitted in response to the proposed rule made various suggestions for changing what we had proposed. Of these commenters, 69 limited their remarks and suggestions to part 651, “Standards of Conduct.” Comments to the Standards of Conduct provisions involved both existing and proposed provisions.
As a GSE, the Corporation has certain strategic objectives that are public policy or “mission” oriented. Standards of conduct must be understood and interpreted not only in the context of the fiduciary responsibilities to the Corporation and its shareholders, but also in the context of the statutory duty to further the Congressional purposes the Corporation was chartered to achieve. We believe standards of conduct to be among the most potentially complex and nuanced areas of corporate governance. For this reason, and because of the variety of comments received to this area of the proposed rule, we believe it prudent to address proposed changes and related comments on the more complex components of standards of conduct and board governance regulations in a separate rulemaking. Thus, we are not finalizing in this rulemaking many of the proposed changes to part 651, but instead intend to revisit changes to part 651 in a separate rulemaking.
Proposed changes to parts 650, 653, and 655 are finalized as proposed unless we say otherwise in this preamble. Included in finalized changes is the reorganization of our rules addressing the Corporation's operations through the addition of a new part 653 and organizational revisions to existing parts 650, 651, and 655. We make no changes to part 652 or reserved part 654.
Existing part 650 contains general provisions, without subparts, on the supervision of the Corporation. We finalize adding a new subpart A, entitled “Regulation, examination and enforcement,” as well as moving existing provisions into a new subpart B, entitled “Conservators, receivers, and liquidations.” We finalize the redesignation of existing §§ 650.1 and 650.5 on appointing and removing receivers or conservators as new §§ 650.13 and 650.14, respectively. We make no other changes to these existing provisions.
We discuss comments received to this part and any changes to the appropriate sections below.
We finalize as proposed all definitions in new § 650.1. We received no comments objecting to the terms as proposed, but a stockholder-commenter requested we consolidate all proposed definitions for parts 650, 651, 653 and 655 into one section and asked for the term “agent” to be defined for part 650. We cannot accommodate either of these requests. We already maintain a global definition section for all our rules in part 619. Maintaining separate definition sections for use only in certain regulations eliminates confusion that may arise from placing terms having specific application for a secondary market along with terms applicable to Farm Credit banks and associations. We recognize that many of the terms for the definition sections we proposed in parts 650, 651, 652, and 655 are duplicative, but their location in the applicable sections avoids confusion with usage of the terms in other regulations. We also cannot accommodate the request to define in part 650 the term “agent.” The term “agent” as used in part 650 has two different applications: (1) Agents of the Corporation; and (2) agents of FCA. A single definition would not capture the two separate applications of the term, particularly in regards to the existing rules on liquidation and receivership.
We finalize the addition of new § 650.2, which provides clarity on the situation of the Corporation having FCA as its primary regulator, while also being subject to certain SEC regulatory disclosure requirements. The new § 650.2 identifies FCA as the “primary regulator” of the Corporation, possessing examination, enforcement, conservatorship, liquidation, and receivership authority over the Corporation. We finalize this section with one clarifying change made based on comments received. In § 650.2(b), we clarify that our supervisory authority to ensure the Corporation follows laws and regulations relates to compliance with applicable laws and regulations.
There were four commenters to this section: Farmer Mac, the FCC, and two stockholders in Farmer Mac. The FCC expressed strong support for the section clarifying that the Corporation is a GSE with a public mission. The stockholder-commenters also supported the section addressing the public policy purpose of the Corporation. Farmer Mac objected to the provisions on FCA's authority over it, contending that FCA has no authority over compliance with all laws and regulations. Farmer Mac explained that instead FCA is to ensure a dependable source of credit through its examination of the Corporation and regulation of its safe and sound conduct. Farmer Mac also asked us to either remove § 650.2(c) or specify the SEC regulations to which it is subject and exactly mirror language from the Act when describing our role. However, Farmer Mac added objections to our using the language of the Act to describe its relationship with the SEC. In that instance, Farmer Mac asked us to capture the “nuances of Farmer Mac's regulation by the SEC.”
We have clarified that the laws and regulations referenced are those applicable to the Corporation. We do not name those laws and regulations as they are subject to change. We also decline the request to include in the rule an analysis of the Corporation's relationship with both FCA and SEC, which is not the intent of the rule. The rule at § 650.2 is identifying us as the primary regulator of the Corporation. As explained in the proposed rule, the
Farmer Mac asked that we add language in § 650.2(a) for USDA-guaranteed loans sold into the secondary market. The Corporation has established a secondary market for the guaranteed portions of USDA-Farm Service Agency guaranteed Farm Ownership and Operating Loans and USDA-Rural Development Guaranteed Business and Industry, Community Facility and Water and Environmental Program loans.
We finalize adding a new § 650.3 to incorporate into our regulations the supervision and enforcement authorities over the Corporation that are given us under the Act. Our enforcement authorities provide reasonable assurance that, among other things, the Corporation is adequately capitalized and operating safely. We finalize this section with clarifying changes made based on comments received.
There were six commenters to this section: Farmer Mac, the FCC, three stockholders in Farmer Mac, and an agent of Farmer Mac. Three commenters objected to agents being subject to FCA's enforcement authorities. Sections 5.25 and 5.26 of the Act specify that agents of a System institution are subject to our enforcement authorities and Farmer Mac is identified as a System institution in section 8.1(a)(2) of the Act. It is these provisions we relied upon when proposing the provision so we decline to make changes based on the comments. Two of the stockholder-commenters remarked that financial safety and soundness oversight should include making the Corporation subject to the Basel III capital standards. We decline to make changes to our rules in response to these comments. The existing rules addressing the Corporation's capital requirements already incorporate appropriate Basel capital standards, as well as analogous standards of other U.S. regulators.
Farmer Mac asked for the entire section identifying our enforcement authorities to be removed or that we directly quote the Act when identifying those authorities, using no further interpretation of the statutory language. We are directed by section 5.17(a)(9) of the Act to issue regulations necessary or appropriate for the implementation of the Act's provisions, which involves more than a recitation of the Act. Farmer Mac also asked that we provide a specific “exhaustive list” of our enforcement authorities. We likewise decline this request as our enumerated enforcement authorities may be amended by Congress or court interpretations. Further, we do not agree with Farmer Mac's interpretation of our authorities and decline to make changes to the rule based on its analysis. Farmer Mac also stated that our safety and soundness authority should not be viewed to include addressing board committees, director elections, or recordkeeping activities of the Corporation. Again, our oversight of the safe and sound operations of the Corporation necessitates that we consider the Corporation's board operations and the records of its decision-making analysis and financial condition.
Farmer Mac objected to § 650.3(b) referencing when the Corporation engages in activities having “excessive risk,” arguing the term is undefined. Farmer Mac stated that all of its activities involve risk and the provision would allow FCA to restrict these activities and substitute our judgment on how to run the Corporation. However, Farmer Mac acknowledged section 8.37 of the Act uses the term “excessive risk”. Farmer Mac also objected to separating risk from its impact on capital and suggested objective, measureable standards be set for risk levels. In § 650.3(b), we clarify that risks having adverse impact to capital, which may lead to certain enforcement actions, generally refers to the adequacy of the Regulatory Capital level maintained by the Corporation.
There were three comments objecting to the inclusion of agents in this section: Farmer Mac, a stockholder in Farmer Mac, and an agent of Farmer Mac. The agent who commented objected to classifying certain types of professional assistance received by the Corporation as an agency relationship, contending that FCA has no authority over certain types of agents (
We finalize this section with one change based on comments received. In § 650.4(b), we replace the word “agents” with a more detailed explanation of the personnel required to be available to us when requested, which includes those engaged by the Corporation to participate in the business conducted by the Corporation. For example, during an examination it may be necessary for our exam staff to speak with the External Auditor. The Act specifies that directors, officers, employees, agents, and “other persons participating in the conduct of the affairs”
Farmer Mac also asked us to limit our access to Corporation documents to non-confidential items. In addition, Farmer Mac asked that there be a materiality and document age threshold controlling which documents and personnel we could access during our
We finalize as proposed the addition of new §§ 650.5 and 650.6, containing cross-citations to existing regulatory provisions regarding access to FCA Reports of Examination and the Corporation's obligation to make criminal referrals in certain circumstances. We received no comments to these two sections. We believe these cross-cites clarify the applicability of these provisions to the Corporation, and thereby facilitate compliance with them.
Part 651 contains the existing corporate governance provisions for Farmer Mac, without subparts. As explained earlier in this preamble, this final rule does not include many of the proposed changes to part 651 since we intend to revisit part 651 in the future. Although we received many comments on the contents of part 651, no comments opposing the proposed organizational changes were made and, therefore, we finalize them as proposed. Specifically, we finalize the addition of a new subpart A, entitled “General,” a new subpart B, entitled “Standards of Conduct,” and a new subpart C, entitled “Board Governance.” We also finalize as proposed the movement of the existing provisions of part 651 into the relevant subparts and adding new sections in reserve for future rulemaking. We discuss other final changes to part 651, and the comments received related to the changed provisions, in the appropriate sections below.
We finalize the proposed revisions to our definitions in existing § 651.1, with two changes based on comments received. We are changing the term “potential conflict of interest” to “conflict of interest”, while finalizing the definition as proposed. Two stockholder-commenters pointed out the definition covered both material and potential conflicts of interest and that we had no general definition for the term “conflict of interest.” We agree with the commenters that the definition defined conflicts of interest in general so should be identified as such.
We are also modifying the definition for “reasonable person” by removing the phrase “based on societal requirements for the protection of the general interest.” The proposed definition for the term “reasonable person” was based on general use of the term in conflict-of-interest proceedings and substantially resembled the legal meaning of the term. However, comments from Farmer Mac and a consultant of Farmer Mac objected to the phrase “societal requirements”, arguing it was not part of the Model Business Code. One of these commenters also stated the term should be defined in a manner that directed attention to the Corporation's activities, not the public at large.
We do not agree with the commenters in this regard. As one commenter acknowledged, corporate governance allows consideration of the public impact of corporate behavior. In addition, the Corporation is a GSE with a public policy purpose and has directors appointed by the President of the United States to represent the public's interests in the operations of the Corporation. While we disagree with the reasons given by the commenters, we are removing the phrase “based on societal requirements for the protection of the general interest” from the definition for “reasonable person” as we believe the remaining language allows for addressing public concerns; specifically, the use of “average level of care.” We recognize that these same two commenters also objected to using an average level of care measurement when defining “reasonable person”, arguing it expanded the Corporation's activities to include consideration of the general public and not just stockholders. We agree that using an average level of care standard could involve consideration of the public, but unlike the commenters, we do not view that as a difficulty. We also do not agree with comments that the phrase “average level of care” in the definition for “reasonable person” under our conflict of interest rules expands the mission of the Corporation. Instead, we believe it emphasizes the scope of the Corporation's impact. As explained earlier, the Corporation has a statutory public policy purpose and public representatives on its board of directors. We believe retaining the “average level of care” language in the definition for “reasonable person” is appropriate.
Farmer Mac and stockholders in Farmer Mac commented on the term “material”, asking that we delete the definition. Farmer Mac commented that the definition was appropriate for most of part 651, but stated concerns with how the term would work with securities regulations, which have a different definition for the term. Farmer Mac specified its concern was focused on proposed § 651.24. Stockholder-commenters remarked that the term “material” does not carry the same meaning or standard applied to other System institutions. These commenters made particular note of a separate proposed rulemaking affecting Farm Credit banks and associations, but not Farmer Mac.
Farmer Mac asked that we remove the existing definition of “agent” from § 651.1, while three stockholder-commenters and an agent of Farmer Mac objected to agents being included in the rule at all, arguing that the existing definition was too broad in its application. Farmer Mac also stated the existing definition was too broad and exceeds the scope of FCA authority. We also received a call from a member of the general public asking about the definition and suggesting it may be problematic for dual compliance with both FCA and SEC requirements. The definition is an existing term that has been in our rules for over 20 years and we proposed no changes to it. Commenters offered no examples of difficulties that had been encountered in that time and did not express past
A stockholder-commenter remarked that the term “officer” seemed to exclude risk officers and asked if that was intentional on our part. We reviewed the existing term “officer”, to which we had proposed no changes, and agree that it could result in the risk officer not being included in the definition. However, that would depend on whether the Corporation makes the risk officer a vice president. If not, then the risk officer would be covered by the definition of “employee” instead of “officer.”
We finalize moving existing § 651.4 to new subpart B and redesignating it as new § 651.24. This section addresses director, officer, employee, and agent responsibilities. We finalize adding new §§ 651.21 and 651.25 under subpart B, but with no content, in reserve for future rulemaking.
We finalize the proposed movement of the existing § 651.2 contents, regarding conflict-of-interest policies, to new subpart B and redesignating it as new § 651.22. We are reserving § 651.2, with no content, for future rulemaking. Also, we finalize some amendments to the existing contents of redesignated § 651.22 and make two clarifying changes. Other proposed changes to the contents of this section are not being finalized in this rulemaking.
We finalize moving the list of imputed interests currently contained in the existing § 651.1(i) definition of a “potential conflict-of-interest” to this section (thereby removing it from the definition) as we received no comments on this proposed action. We also finalize the proposed revisions to the list of imputed interest, as they also received no comments: removing highly specific relationships such as “spouse” and “child” and replacing them with language to address all persons residing in the household or who are otherwise legal dependents. These changes are premised on the ever-evolving understanding of what is considered a family, as well as intended to address non-residential dependents whose activities and interests may create a conflict-of-interest for a director, officer, or employee. We make two clarifying changes to the list of imputed interest: A person's general partner refers to a business partner and employment arrangements include both current and prospective employment.
We finalize moving existing § 651.3 to new subpart B and redesignating it as new § 651.23. This section addresses implementation of the conflict-of-interest policy. Farmer Mac offered comments on the existing language of this section, asking that the separate disclosure categories be removed. The rule currently requires Farmer Mac to provide its conflict of interest policy to its shareholders, investors, and potential investors when requested. Farmer Mac posed that these parties can obtain the policy from the Corporation's Web site or SEC filings so the provision should be removed. Farmer Mac did not state that this service could not continue to be provided, nor assert that the volume of requests was so high as to create a burden. We decline to remove this existing requirement as we continue to believe the Corporation should strive to accommodate requests from its shareholders, investors and, most especially, potential investors for copies of the policy.
Farmer Mac, a stockholder in Farmer Mac, and an agent of Farmer Mac asked that we remove references to “agents” from the existing rule. Some of these commenters remarked that agents should not be treated the same as directors, officers, and employees. Others argued that monitoring agent conduct is burdensome, may deter agents from working for the Corporation, and was contrary to standard contractual agreements with agents. The agent stated that consultants and advisors were not intended by Congress to be subject to our regulatory or examination authority. The stockholder-commenter added that we should instead rely on the Corporation's existing practices regarding monitoring agent behavior.
Congress gave us certain enforcement authorities for agents of Farm Credit institutions.
We finalize adding new §§ 651.30, 651.35, and 651.40 under subpart C, but with no content, in reserve for future rulemaking. We also finalize adding a new § 651.50 on board committees. The new § 651.50 addresses the relationship between the entire board and its committees, requires certain committees, and establish minimum operational requirements for board committees (
In general, Farmer Mac objected to any regulation of board committees. Farmer Mac asked that we change the requirement for all committees to be chartered, explaining often ad hoc committees are used in the Corporation's business and allowing committees to develop their own charters may be a transfer of board authority. The proposed provision stated that the Corporation's board is the body approving the charter, not the committee. However, we clarify in § 651.50(c) that the committees develop the charters, but those charters are not effective unless approved by action of the full board. In addition, we intended the provision to apply to standing committees of the Corporation, so have modified the rule to clearly limit the charter requirements to those committees required to exist by regulation (
Both commenters objected to the provision in § 651.50(a) that use of a board committee does not relieve board members of their legal responsibilities. The commenters stated that delegations to committees are permitted and the
We received comments from Farmer Mac and its consultant on § 651.50, both objecting to the proposed requirement that each committee have representation from the three types of directors serving on the Corporation board (Class A elected, Class B elected, and appointed). The commenters stated the provision may result in conflicts of interest, unqualified directors serving on committees, and create division on the board. Commenters offered no support for the named concerns, but we consider this issue to be among those we plan to review when we revisit part 651 in the future. As a result, we are not finalizing in § 651.50(c) the requirement that each committee have representation from the three types of directors serving on the Corporation board. In conformance with this, we also remove the proposed paragraph designations in paragraph (c).
Farmer Mac and its consultant also objected to limiting the number of committees a director may chair. We proposed in § 651.50(c) that no director may serve as chair of more than one committee. The commenters stated that this was an unnecessary restriction. We decline to change this limitation based on comments received. We believe this limitation is necessary, as it reasonably distributes responsibilities among individual members of the board. We also believe that too great a concentration of responsibilities among too few directors would detract from the board's overall effectiveness and may create potential, and unnecessary, safety and soundness concerns.
Farmer Mac objected to the § 651.50(d) requirement that board committees have agendas for their meetings. Farmer Mac explained that some ad hoc meetings occur with no prior planning, making development of an agenda impossible. We appreciate that a situation like the one described may occur and have modified the rule to allow for an equivalent list of issues under discussion to be part of the meeting minutes in lieu of an agenda.
We finalize adding a part 653, with no subparts, to address risk management within the Corporation. In doing so, we remove proposed references to “risk tolerance” throughout part 653, while retaining references to risk-appetite, as we determined the term “risk-appetite” encompassed risk tolerance consideration. We received comments from Farmer Mac, stockholders of Farmer Mac, and the FCC to this part and discuss them, and any changes, in the appropriate sections below.
We received comments from Farmer Mac, the FCC, and stockholders in Farmer Mac on new § 650.2, which addresses general board-level risk management matters. Farmer Mac expressed agreement with requiring its board to be actively involved in the Corporation's risk framework, but considered it unreasonable to expect it to “ensure” all risk-taking is safe and sound. Farmer Mac asked that it be allowed to address its “risk appetite” by areas, such as liquidity risk or operational risk, instead of one unified assessment, explaining that the risk committee's role represents the intersection of oversight of all risk areas. We generally expect functional area specialists (
In the same way, we view the risk officer as playing a role that represents the intersection of risks across functional area managers. We view the risk officer's role to involve monitoring the balance of risk across all functional areas and, as needed, recommending adjustments to re-balance the enterprise-wide risk profile in a manner consistent with the board-approved risk appetite. This role does not eliminate risk management responsibility from other members of the Corporation's management team. If a functional area manager knows that his or her performance will be evaluated on the basis of the productivity of that area, the manager's focus on that area's performance could become out of proportion to the impact of that effort on the Corporation's enterprise-wide risk position. The risk officer would then serve as a means of alerting senior management and the board of the potential impact that functional area managers' activities and positions may have on the Corporation at the enterprise-wide level. This should enable appropriate actions and strategies to be evaluated and taken when functional area risk taking exceeds the overall risk appetite of the board.
The FCC and two stockholder-commenters agreed with requiring the Corporation's board to be actively involved in the Corporation's risk framework, but wanted it expanded to include capital considerations. These stockholder-commenters added that the requirement was not preventative enough as the Corporation's board should be required to approve risk-bearing capacity and consider the Corporation's public policy mission as well as capital adequacy. A third stockholder-commenter remarked that the part 653 requirements were not unreasonable, but better suited to non-regulatory guidance. This stockholder-commenter explained that the science of risk management is an emerging area, subject to rapid changes, so placing risk management requirements within a rule may hinder the Corporation's ability to keep pace with best practices in risk management.
We are replacing the term “ensure” with the phrase “provide reasonable assurance” when discussing risk-taking activities in response to comments. We also add as a clarifying change that the requirement to monitor risk activities is expected to be on a regular basis. We make no other changes to new § 653.2. While we appreciate the comment regarding the evolving nature of risk management, we believe it appropriate to establish an essential risk management structure within regulation and then supplement the rules with the suggested informal guidance if
We finalize, with changes, new § 650.3, which contains the minimum required risk management program activities of the Corporation. We received comments to this section from Farmer Mac, the FCC, and three Farmer Mac stockholders. We discuss the comments, and any changes, in the appropriate sections below.
We are making the following changes to new § 653.3(a), which requires the Corporation's board of directors to have a risk management program:
• Replacing the phrase “in effect at all times” in the introductory language of paragraph (a) with the more measurable standard “establish, maintain, and periodically update” the risk management program;
• Removing the language “addresses the Corporation's exposure to credit, market, liquidity, business, and operational risks” in paragraph (a)(3) as it is redundant of language contained § 653.3(b)(2);
• Adding language in paragraph (a) to recognize that implementation of the risk management program may be handled by senior management; and
• Adding language to clarify that the list of requirements in new § 653.3(a) are the minimum.
We received comments to new § 650.3(a) from the FCC agreeing with the provision, but expressing concern that there was insufficient distinction between risks in the System and risks faced by the Corporation. The FCC asked that “casual” references linking the Corporation to the System be eliminated and that we specify the Corporation is a separate GSE from the System. In response, we clarify in this preamble that the Corporation is an institution of the Farm Credit System, but is not liable for any debt or obligation of any other System institution, and the other System institutions have no liability for Farmer Mac's debt. Also, Farmer Mac is organized as an investor-owned corporation, not a member-owned cooperative as are other System institutions, and the Farm Credit System Insurance Corporation does not insure Farmer Mac's securities.
Farmer Mac remarked that the board does not often involve itself in day-to-day risk decisions: That is more properly handled by senior management. As mentioned above, we have made clarifying changes to recognize that daily implementation of the risk management program may reside with senior management. Two stockholder-commenters stated agreement with the risk management provisions, but asked that we expand them to include risk-bearing capacity and require management of the Corporation's capital to be consistent with Basel III. We have previously responded to their comment. These commenters also asked that OSMO provide further guidance to the Corporation on specific risk tolerance measures and for OSMO to closely monitor the program to ensure it is implemented in an effective manner. As noted, FCA may provide for the guidance on risk management as part of its oversight of this area. These stockholder-commenters objected to the § 653.3(a) provision requiring risk management to include consideration of compensation practices and asked for the provision to be removed. We believe the incentive structures related to functional area managers' performance and risk-taking activities, referred to in our earlier response to comments on § 653.2, includes incentive compensation policies and practices and that the Corporation's enterprise-wide risk management oversight would be incomplete without such consideration.
We received comments from Farmer Mac and two Farmer Mac stockholders on new § 653.3(b), which addresses the responsibilities of the risk committee. The stockholder-commenters agreed in general with the provisions, but asked that they more closely resemble the requirements for other GSEs, including System institutions. We note that we do not currently require other System institutions to have risk committees and so cannot accommodate the request of those commenters asking for consistency among System institutions. Also, we note that the Corporation is of a different structure than other System institutions, necessitating some different risk management aspects. However, we did consider the provisions of the recent risk management rulemaking by the Federal Housing Finance Agency (FHFA).
Farmer Mac asked that we use the same experience requirement for the risk committee as is used for the risk officer since it could be difficult to ensure a risk expert is always elected to the board. For the same reason, Farmer Mac asked that we change the committee responsibilities to a level of understanding of risk rather than possession of expertise. We agree and substitute in new § 653.3(b)(1) the phrase “an understanding of” and remove the proposed “expertise” requirement when talking about the requirement that the risk committee have at least one member who is familiar with risk management. We also make changes in new § 653.3(b) to replace the requirement that the risk committee be responsible for the oversight of the risk management program, as that responsibility rightfully belongs to the entire Corporation board. In its place, we require the risk committee to assist the Corporation board in overseeing the risk management program. We believe it is essential that the tone of the Corporation's risk culture and its procedures for risk decision-making be set by the Board, even when based on management's recommendations. Further, the board of directors play a critical role in the ongoing oversight of, and cohesive implementation of, operational strategies and plans that conform to established risk appetites.
We also replaced the proposed requirement in paragraph (b)(2)(i) that the risk committee oversee and document risk management activities with a requirement to periodically assess management's implementation of the risk management program. Similarly, we remove the proposed review requirement of paragraph (b)(2)(ii) and clarify that risk committee recommendations relate to changes to the risk management program. We also clarify in paragraph (b)(2)(iii) that the risk committee's receipt of reports from Corporation staff is not limited to the risk officer. We recognize that any personnel responsible for implementing the risk management program may be tasked by Farmer Mac with offering reports to the risk committee.
We are making technical changes in new § 653.3(b) to align language with that contained in other sections (
We received comments from Farmer Mac and two Farmer Mac stockholders on new § 653.3(c), which requires the Corporation to have a risk officer. The stockholder-commenters agreed in general with the need for a risk officer, but stated that FCA should not require it as FCA should not make staffing decisions within a System institution. These commenters also contended that requiring a risk officer offers no assurance, from a safety and soundness perspective, of compliance with risk management policies. The stockholder-commenters asked that the entire paragraph be removed. Farmer Mac commented on the use of the term “experience” versus “expertise”, asking for similar use for both the risk committee and the risk officer. Farmer Mac explained that using different terms implied different expectations regarding the background of the risk officer versus the risk committee expert. Farmer Mac also asked that the standard be an understanding of risk issues and not direct experience in risk issues to facilitate recruitment. Finally, Farmer Mac asked for a 1-year phase in to fill the position.
We earlier addressed most of Farmer Mac's comment regarding the level of expertise required in § 653.3(b). In response to remaining comments, we are changing the name of paragraph (c) from “Risk Officer” to “Management of risk” and making conforming changes to reference a “risk officer, however styled” so as to encompass other personnel responsible for implementing the risk management program. We also remove specific reporting requirements to “the chief executive officer and board risk committee” in new § 653.3(c)(4) and (5) to recognize that Farmer Mac will exercise its own discretion in designing a risk management position(s). We decline to reduce the level of experience for risk officers to a mere understanding of risk and have retained the requirement for experience in risk management. We are not delaying the effective date of this rule as requested by Farmer Mac to facilitate the Corporation having a risk officer in place before the rule is effective. Should the Corporation encounter difficulties in having a risk officer in place after this rule is effective, Farmer Mac should contact the Director of OSMO.
We received comments on new § 653.4 from Farmer Mac and two Farmer Mac stockholders. Farmer Mac asked that we remove the entire section on internal controls, stating the Corporation's internal control activities under SEC regulations are sufficient. Farmer Mac then asked us to mirror SEC regulation if we retained the provision or make the following changes to it: remove the term “ensure”, incorporate more flexibility, and avoid expanding the role of the directors. Farmer Mac also asked for clarification on paragraph (b)(6) regarding information reported to the board of directors, as it considered the provision to be vague.
We decline the request to remove the entire section requiring internal controls. We continue to believe that the Corporation's board oversight of internal controls is a critical component of its responsibility for monitoring corporate activities and providing reasonable assurances that the controls will prevent excessive risk taking, mitigate operational risks, and minimize the potential for unsafe and unsound activities. The corporate environment is influenced by management's philosophy, operating style, integrity, ethical values, and commitment to competence. If this foundation is strong, if the corporate environment is positive, the overall system of internal controls will be more effective. Further, a sound system of comprehensive and integrated internal controls is vital to the operations of any organization and especially those whose business is taking financial risk. In the more than two decades since the Corporation was chartered, business and operational environments have become significantly more complex and technology-driven. A system of internal controls should dynamically respond to such changes in complexity—not just in business unit operations but also in compliance with increasingly complex laws, regulations, and industry standards. We also decline to rely solely on the internal control assessment the Corporation prepares for the SEC since that assessment is targeted at financial reporting issues, pursuant to provisions in the Sarbanes-Oxley Act.
Farmer Mac also asserted that requiring it to have internal controls would deviate from what FHFA requires of the only other secondary market GSEs (Fannie Mae and Freddie Mac).
We had proposed in paragraphs (c) and (d) that the Corporation establish a monitoring system for its internal controls and to report to us on the effectiveness of those controls. Stockholder-commenters objected to the requirement for annual reports on internal controls, explaining such reports would be burdensome and could reduce the attention given the issue during FCA examinations. The commenters instead stated that FCA should rely primarily on its examination authority for review of internal controls. We make changes to paragraphs (c) and (d) to address the comments objecting to annual reports on internal controls, but do so in a manner that also satisfies the underlying purpose of proposing an annual report on the effectiveness of internal controls. We are removing paragraph (d), which required the annual report to OSMO, in its entirety. In connection with this, we enhance the provision in paragraph (c) to require the monitoring of internal controls to include an identification and documentation of weaknesses in internal controls. We continue to believe the Corporation's internal control system needs to be monitored to assess whether controls are effective and operating as intended. On-going monitoring occurs through routine managerial activities such as supervision, reconciliations, checklists, comparisons, performance evaluations, and status reports. Monitoring may also occur through separate internal evaluations (
Part 655 contains the existing financial disclosure and reporting provisions for the Corporation. We received comments to part 655 from Farmer Mac, an agent of Farmer Mac, and a Farmer Mac stockholder. There were no comments opposing the proposed organizational changes and, therefore, we finalize them as proposed. We also finalize as proposed the movement of existing provisions into the relevant subparts.
We discuss final changes to part 655, and the related comments received, in the appropriate sections below.
We received a comment from Farmer Mac on the definition for “material” in part 655, asking us to remove the definition or restate that used by the SEC. We proposed defining “material” as information required when “there is a substantial likelihood that a reasonable person would attach importance in making investor decisions or determining the financial condition of the Corporation.” We decline Farmer Mac's request as it did not argue that the term “material,” as used in part 655, presented any conflict with SEC reporting rules.
We received comments on new § 655.2 from Farmer Mac and an agent of Farmer Mac. Farmer Mac asked that all references to “agents” be removed and that the provision include a materiality standard so as to limit FCA actions. Farmer Mac asserted that FCA has no authority to regulate non-System persons or entities, suggesting FCA limit itself to imposing an obligation on the Corporation to monitor its agents. Farmer Mac again stated that FCA should not intrude into areas under SEC jurisdiction. Farmer Mac also asked that we defer to the SEC for determining compliance, specifically mentioning the SEC rules on omissions and misstatements in reports filed with the SEC. The agent to Farmer Mac stated the regulation of agents was intrusive and burdensome, adding that Congress did not intend consultants and advisors to be subject to FCA authority.
We proposed new § 655.2 to prohibit directors, officers, employees, or agents of the Corporation from making misleading, inaccurate, or incomplete part 655 disclosures. The provision would have covered reports and disclosures made to FCA, stockholders of Farmer Mac, and the general public. Contrary to the remarks of some commenters, the provision did not assert direct regulatory authority over the general actions of an agent of Farmer Mac. Instead, the provision would have required Farmer Mac to control its agents, or issue corrections to disclosures made by the same if those disclosures were determined to be misleading, inaccurate, or incomplete. As explained in section 8.3(c)(4) of the Act, Farmer Mac has a statutory duty to take necessary precautions, including obtaining surety bonds, against any losses caused by the acts of its agents. Further, FCA has statutory authority to issue cease-and-desist orders to agents of the Corporation in appropriate circumstances. In addition, we reject the argument of Farmer Mac that misleading, inaccurate, or incomplete disclosures are the exclusive jurisdiction of the SEC. Not every report or disclosure made by Farmer Mac is in response to a requirement of the SEC, particularly those we require under our rules in part 655. Rather, activities of the Corporation extend beyond registered securities issued or guaranteed by Farmer Mac, and we have long had regulations addressing Farmer Mac disclosures related to securities not
Our existing rule requires the Corporation to make annual reports to its shareholders, and we had proposed enhancements to this existing requirement. The enhancement included adding quarterly reports, increasing the information in the reports, reducing distribution timeframes, and requiring the reports to be signed and certified as accurate. We received comments on these proposed changes from Farmer Mac and a Farmer Mac stockholder. The stockholder-commenter only remarked that we should remove references to “EDGAR”, the SEC Web site portal, as the name of the portal may change. We agree and have removed all references to “EDGAR” in part 655.
Farmer Mac objected to our rules containing any different reporting or disclosure requirements than those required by the SEC. Farmer Mac stated reporting and disclosures are the jurisdiction of the SEC and FCA should reconsider any regulation of the matter. We reject the argument of Farmer Mac that financial reports and disclosures are the exclusive jurisdiction of the SEC and remind the Corporation that we have long had regulations addressing financial reports and disclosures made by the Corporation. Further, FCA may require disclosure necessary to the safety and soundness of the Corporation.
While we understand Farmer Mac's desire to only concern itself with one unified set of reporting and disclosure requirements, we cannot uniformly adopt SEC reporting and disclosure requirements. As explained in the proposed rulemaking, SEC requires certain reporting and disclosures to satisfy its role in ensuring listed companies provide sufficient information to the investing public. We, on the other hand, concern ourselves with ensuring disclosures and report made by the Corporation address safety and soundness concerns, which include all the activities of the Corporation. Where we can in this rule, we have allowed Farmer Mac to use SEC filings in satisfaction of our requirements. However, the SEC is a separate agency and can change its reporting and disclosure requirements without consulting FCA. For this reason, we limit the extent that SEC filing requirements may also satisfy our requirements and do so in a manner to avoid conflict with SEC requirements and unnecessary duplication of effort by Farmer Mac.
Our existing rule requires the Corporation to make annual reports to its shareholders consistent with shareholder reports required by the SEC, and to submit copies of such to us. We note that the Corporation must also file annual and quarterly reports with the SEC (10Q and 10K, respectively), which may include additional information not part of the annual report to shareholders.
Farmer Mac said that there was no need for requiring signatures and certifications on reports as the SEC already addresses how reports are to be signed and certified. Farmer Mac also asked that we define “financially accurate” as used in new § 655.10(b), explaining it is not a term used in the SEC-required certification of reports. We finalize with changes the signature and certification requirements of new § 655.10(b). Our proposed certification did not conflict with SEC laws or regulations, but may have caused compliance issues with SEC instructions. SEC rules §§ 240.13a-14 and 240.15d-14 require certification of quarterly and annual reports filed with them, but SEC instructions for completing these certifications prohibit filers from making changes to the certification language provided in the SEC rules. Our proposed certification requirements captured most of the same information as the SEC certifications, without giving specific language that had to be used. To address the commenter's concern regarding compliance with both the SEC and FCA, we are changing our certification requirements to require the use of SEC certifications.
Farmer Mac objected to reducing distribution deadlines to 90 days, asking that we keep the current 120-day deadline so as to provide it greater flexibility. Farmer Mac added that the proposed 90-day timeframe “deviates from SEC rules,” but does not name the SEC rules being referenced. Farmer Mac also asserted the shorter timeframe could increase compliance burden.
Absent a citation to the SEC rules, we do not see where the number of days FCA proposed created any compliance problems with SEC requirements. The SEC has a three-tiered deadline for annual reports filed with them that is based on the size of the filer: 60 days after fiscal year end for large accelerated filers, 75 days after fiscal year end for regular accelerated filers, and 90 days after fiscal year end for nonaccelerated
Our existing rule requires distribution of annual reports to shareholders within 120 days of the fiscal year end (
We proposed in § 655.15 that the Corporation provide us copies of interim reports (
We decline to remove the § 655.15(a) requirement to provide these complete filings to OSMO as we continue to believe it is essential that communications between the Corporation and OSMO, its primary regulator, include the substantive communications the Corporation has with the SEC. We also fail to see how providing us copies of reports and filings already being prepared is a burden on the Corporation. We have clarified in § 655.15(b) that the public Web site postings may be limited to the public aspects of the notices, interim reports, and proxy statements.
Farmer Mac objected to being required in § 655.20 to send paper copies to us of reports on unregistered securities activities. We have removed the requirement for both electronic and paper copies, replacing it with a requirement for either a paper or electronic copy, whichever is most conducive to transmitting the information. We also added language to clarify the reports are to be sent to the Director of OSMO.
Farmer Mac requested we clarify the types of documents covered by § 655.20 and whether daily transactions (
Farmer Mac requested we update existing terminology in § 655.20(b)(2) regarding securities purchased by the Corporation under section 8.6(e) of the Act. We agree that the specific citation to the Act needed to be updated to reference the correct paragraph of section 8.6.
We proposed expanding the existing requirement to send us copies of substantive correspondence between Farmer Mac and the SEC or U.S. Treasury to cover all subject matters, instead of just those substantive communications related to securities activities and SEC compliance matters. We also proposed adding similar
Material such as mass-produced market updates are not “substantive correspondence between the Corporation and the SEC, U.S. Treasury, or NYSE” nor would we expect to be sent SEC and NYSE communique provided to a subscriber list. However, to alleviate any confusion, we clarify that correspondence directly addressing the activities of the Corporation is what is covered by the provision. Further, we refer to past clarifications on this issue, explaining that non-substantive transmittal letters accompanying SEC filings, for example, would not be considered “substantial” and therefore not required to be filed with the FCA.
Farmer Mac asked that we exclude communications to NYSE that would be duplicative of official filings with the SEC. We agree and have changed the language of § 655.21(a) accordingly. Farmer Mac also requested guidance on how to transmit to us communique issued via secure electronic portals. We encourage Farmer Mac to contact us when they have such communique, at which time we will provide instructions on how to provide us copies of such.
In addition, Farmer Mac objected to being required in § 655.21(c) to notify us of any exemption it obtained from the SEC. Farmer Mac asked that we limit the requirement to those SEC exemptions obtained under the Securities Act of 1934. In making this request, Farmer Mac explained it is not subject to complete regulation by SEC and, except for certain mortgage-backed securities, it is not subject to the 1933 Securities Act and must only file reports under the 1934 Securities Act. We decline the request to limit the rule by naming a specific securities law. The definition for “securities” contained in § 655.1 explains that it means the securities law(s) appropriate to the context of the employing provision. However, we have changed the requirement to only require notice to us of those exemptions that are not generally available under SEC rules to similarly situated filers.
We received comments on portions of the proposed rule preamble language that do not address regulatory provisions and result in no change to the rule. These comments are discussed below.
We received a comment from an agent of Farmer Mac regarding the Regulatory Flexibility Act (RFA).
One stockholder-commenter expressed general concern with FCA regulating the corporate governance and disclosures for Farmer Mac given existing SEC rules in these areas. This commenter asked FCA to use caution as SEC rules are constantly changing. The commenter also stated FCA did not need to regulate governance behavior at Farmer Mac as the Corporation has a strong history of sophisticated corporate governance practices.
Voluntary governance is valuable, but it does not replace the stability that rules provide in assuring stakeholders of the safety and soundness of the Corporation. Our governance rules set a minimum level of performance that is mandatory for the Corporation. While we believe it is important to preserve individual operating flexibility wherever and whenever possible, our responsibility as regulator requires us to issue regulations we determine appropriate for safety and soundness reasons. We believe the assurances derived from a regulatory minimum standard, combined with the Corporation's voluntary governance efforts, will increase stockholder, investor, and public confidence in Farmer Mac.
Farmer Mac questioned the need for any regulatory changes, stating that insufficient recognition was given to its status as a public company. Farmer Mac also stated that it is unnecessary for FCA to regulate many corporate governance areas due to SEC requirements and thus we should remove those provisions. Farmer Mac explained that it is the mission of the SEC to protect investors, and the SEC provides sufficient regulation of board activities and corporate disclosures. Farmer Mac added that portions of the rule presented compliance concerns with other regulatory elements unrelated to FCA, but provided no specific citation to these other rules. Farmer Mac also asserted that the rulemaking would potentially harm the Corporation and those it serves in a material way instead of enhance safe and sound operations, but again offered no specifics.
The FCA, acting through OSMO, examines and provides general supervision over the activities of Farmer Mac pursuant to section 8.11 of the Act. As discussed elsewhere in this preamble, the role the SEC plays in the disclosure and reporting aspects of the Corporation does not remove our
Farmer Mac stated that FCA did not publish its current concerns with the risk management and governance operations of the Corporation in support of the rulemaking. This rulemaking is intended to ensure that appropriate board governance and risk management practices are in place at Farmer Mac. We are not limited to issuing regulations only when there is an existing adverse risk or problem. Our responsibilities as a safety and soundness regulator requires us to be proactive and prudent in our rulemaking, as well as reactive by providing standards that help avert potential problems. Thus, we have flexibility to issue rules either in response to a problem or proactively to ensure the Corporation's continued safe and sound business operations.
Farmer Mac also asserted FCA has in the past “deferred” to the oversight of the SEC and NYSE. We reject this assertion. The FCA, as an independent regulator of the Corporation, is not required to follow the actions of other regulators and we have never deferred our regulatory oversight to another agency. We do not view our past efforts to accommodate the Corporation's requests to modify our regulations in light of those issued by other regulators (whose regulations also affect the Corporation's operations) as a relinquishment of our safety and soundness authority.
Farmer Mac asked that we define an assortment of terms and phrases used throughout the rule, asserting that many of these terms and phrases are not “established” in a body of law. Most of the terms and phrases identified by Farmer Mac are derived from corporate case law, model codes, and the Act itself. As such, we do not believe it necessary to further define them.
Farmer Mac commented that it viewed many aspects of the rule as unnecessary and burdensome, making them inconsistent with the “Congressional mandate” that we eliminate unnecessary regulations. As we understand this comment, Farmer Mac is referring to the instructions of the Farm Credit System Reform Act of 1996 (1996 Act)
Pursuant to section 605(b) of the Regulatory Flexibility Act (5 U.S.C. 601
Agriculture, Banks, banking, Credit, Reporting and recordkeeping requirements, Rural areas.
Agriculture, Banks, banking, Conduct standards, Conflict of interests, Elections, Ethical conduct, Rural areas.
Agriculture, Banks, banking, Capital, Conduct standards, Credit, Finance, Rural areas.
Accounting, Agriculture, Banks, banking, Accounting and reporting requirements, Disclosure and reporting requirements, Financial disclosure, Rural areas.
For the reasons stated in the preamble, parts 650, 651, 653, and 655 of chapter VI, title 12 of the Code of Federal Regulations are amended as follows:
Secs. 4.12, 5.9, 5.17, 5.25, 8.11, 8.12, 8.31, 8.32, 8.33, 8.34, 8.35, 8.36, 8.37, 8.41 of Pub. L. 92-181, 85 Stat. 583 (12 U.S.C. 2183, 2243, 2252, 2261, 2279aa-11, 2279aa-12, 2279bb, 2279bb-1, 2279bb-2, 2279bb-3, 2279bb-4, 2279bb-5, 2279bb-6, 2279cc); sec. 514 of Pub. L. 102-552, 106 Stat. 4102; sec. 118 of Pub. L. 104-105, 110 Stat. 168.
The following definitions apply to this part:
(a)
(b)
(c)
The Act provides FCA, acting through OSMO, with enforcement authority to protect the financial safety and soundness of the Corporation and to ensure that the Corporation's powers, functions, and duties are exercised in a safe and sound manner.
(a)
(1) Issue an order to cease and desist;
(2) Issue a temporary order to cease and desist;
(3) Assess civil monetary penalties against the Corporation and its directors, officers, employees, and agents; and
(4) Issue an order to suspend, remove, or prohibit directors and officers.
(b)
(a) The Corporation must make its records available promptly upon request by OSMO, at a location and in a form and manner acceptable to OSMO.
(b) The Corporation must make directors, officers, employees and other individuals or entities engaged by the Corporation to participate in the conduct of the Corporation's business available to OSMO during the course of an examination or supervisory action when OSMO determines it necessary to facilitate an examination or supervisory action.
The Corporation is subject to the provisions in 12 CFR part 602 regarding FCA Reports of Examination.
The rules at 12 CFR part 612, subpart B, regarding “Referral of Known or Suspected Criminal Violations” are applicable to the Corporation.
Secs. 4.12, 5.9, 5.17, 8.3, 8.11, 8.14, 8.31, 8.32, 8.33, 8.34, 8.35, 8.36, 8.37, 8.41 of Pub. L. 92-181, 85 Stat. 583 (12 U.S.C. 2183, 2243, 2252, 2279aa-3, 2279aa-11, 2279aa-14, 2279bb, 2279bb-1, 2279bb-2, 2279bb-3, 2279bb-4, 2279bb-5, 2279bb-6, 2279cc); sec. 514 of Pub. L. 102-552, 106 Stat. 4102; sec. 118 of Pub. L. 104-105, 110 Stat. 168.
The following definitions apply to this part:
The Corporation shall establish and administer a conflict-of-interest policy that will provide reasonable assurance that the directors, officers, employees, and agents of the Corporation discharge their official responsibilities in an objective and impartial manner in furtherance of the interests and statutory purposes of the Corporation. The policy shall, at a minimum:
(a) Define the types of transactions, relationships, or activities that could reasonably be expected to give rise to potential conflicts of interest. For the purpose of determining whether a potential conflict of interest exists, the following interests shall be imputed to a person subject to this regulation as if they were that person's own interests:
(1) Interests of any individual residing in that person's household;
(2) Interests of any individual identified as a legal dependent of that person;
(3) Interests of that person's general business partner;
(4) Interests of an organization or entity that the person serves as officer, director, trustee, general partner or employee; and
(5) Interests of a person, organization, or entity with which that person is negotiating for or has an arrangement concerning current or prospective employment.
(b) Require each director, officer, and employee to report in writing, annually, and at such other times as conflicts may arise, sufficient information about financial interests, transactions, relationships, and activities to inform the Corporation of potential conflicts of interest;
(c) Require each director, officer, and employee who had no transaction, relationship, or activity required to be reported under paragraph (b) of this section at any time during the year to file a signed statement to that effect;
(d) Establish guidelines for determining when a potential conflict is material in accordance with this subpart;
(e) Establish procedures for resolving or disclosing material conflicts of interest.
(f) Provide internal controls to ensure that reports are filed as required and that conflicts are resolved or disclosed in accordance with this subpart.
(g) Notify directors, officers, and employees of the conflict-of-interest policy and any subsequent changes thereto and allow them a reasonable period of time to conform to the policy.
(a) The Corporation shall disclose any unresolved material conflicts of interest involving its directors, officers, and employees to:
(1) Shareholders through annual reports and proxy statements; and
(2) Investors and potential investors through disclosure documents supplied to them.
(b) The Corporation shall make available to any shareholder, investor, or potential investor, upon request, a copy of its policy on conflicts of interest. The Corporation may charge a nominal fee to cover the costs of reproduction and handling.
(c) The Corporation shall maintain all reports of all potential conflicts of interest and documentation of materiality determinations and resolutions of conflicts of interest for a period of 6 years.
(a) Each director, officer, employee, and agent of the Corporation shall:
(1) Conduct the business of the Corporation following high standards of honesty, integrity, impartiality, loyalty, and care, consistent with applicable law and regulation in furtherance of the Corporation's public purpose;
(2) Adhere to the requirements of the conflict-of-interest policy established by the Corporation and provide any information the Corporation deems necessary to discharge its responsibilities under this subpart.
(b) Directors, officers, employees, and agents of the Corporation shall be subject to the penalties of part C of title V of the Farm Credit Act of 1971, as amended, for violations of this regulation, including failure to adhere to the conflict-of-interest policy established by the Corporation.
(a)
(b)
(c)
(d)
Secs. 8.3, 8.4, 8.6, 8.8, and 8.10 of Pub. L. 92-181, 85 Stat. 583 (12 U.S.C. 2279aa-3, 2279aa-4, 2279aa-6, 2279aa-8, and 2279aa-10).
The following definitions apply to this part:
The Corporation's board of directors must approve the overall risk-appetite of the Corporation and regularly monitor internal controls to provide reasonable assurance that risk-taking activities are conducted in a safe and sound manner.
(a)
(1) Periodically assess and document the Corporation's risk profile.
(2) Align the Corporation's risk profile with the board-approved risk appetite and the Corporation's operational planning strategies and objectives.
(3) Specify management's authority to carry out risk management responsibilities.
(4) Integrate risk management and control objectives into management goals and compensation structures.
(5) Comply with all applicable FCA regulations and policies.
(b)
(1) The risk committee must have at least one member with an understanding of risk management commensurate with the Corporation's capital structure, risk profile, complexity, activities, size, and other appropriate risk-related factors.
(2) The responsibilities of the risk committee include, but are not limited to:
(i) Periodically assessing management's implementation of the enterprise-wide risk management program;
(ii) Recommending changes to the risk management program to keep the program commensurate with the Corporation's capital structure, risk appetite, complexity, activities, size, and other appropriate risk-related factors; and
(iii) Receiving and reviewing regular reports directly from personnel responsible for implementing the Corporation's risk management program.
(c)
(1) Identifying and monitoring compliance with risk limits, exposures, and controls;
(2) Implementing risk management policies, procedures, and risk controls;
(3) Developing appropriate processes and systems for identifying and reporting risks, including emerging risks;
(4) Reporting on risk management issues, emerging risks, and compliance concerns; and
(5) Making recommendations on adjustments to the risk management policies, procedures, and risk controls of the Corporation.
(a) The Corporation's board of directors must adopt an internal controls policy that provides adequate directions for, and identifies expectations in, establishing effective safety and soundness control over, and accountability for, the Corporation's operations, programs, and resources.
(b) The internal controls system must address:
(1) The efficiency and effectiveness of the Corporation's activities;
(2) Safeguarding the assets of the Corporation;
(3) Evaluating the reliability, completeness, and timely reporting of financial and management information;
(4) Compliance with applicable laws, regulations, regulatory directives, and the policies of the Corporation's board of directors and senior management;
(5) The appropriate segregation of duties among the Corporation personnel so that personnel are not assigned conflicting responsibilities; and
(6) The completeness and quality of information provided to the Corporation's board of directors.
(c) The Corporation is responsible for establishing and implementing an effective system to identify internal controls weaknesses and taking action to correct detected weaknesses. The Corporation must document:
(1) The process used to identify weaknesses,
(2) Any found weaknesses, and
(3) How identified weaknesses were addressed.
Secs. 5.9, 8.3, 8.11, and 8.12 of Pub. L. 92-181, 85 Stat. 583 (12 U.S.C. 2243, 2279aa-3, 2279aa-11, 2279aa-12).
The following definitions apply to this part:
(a)
(b)
(c)
(1) The Corporation must publish on its Web site a copy of each annual report to shareholders within 3 business days of filing the report with us. The report must remain on the Web site until the next report is posted. When the reports are the same as those filed with the SEC, electronic links to the SEC filings Web site may be used in satisfaction of this requirement.
(2) Upon receiving a request for an annual report of condition from a stockholder, investor, or the public, the Corporation must promptly provide the requester the most recent annual report issued in compliance with this section.
(a) The Corporation must provide to us one paper and one electronic copy of every interim report, notice, and proxy statement filed with the SEC within 1 business day of filing the item with the SEC, including all papers and documents that are a part of the report, notice, or statement.
(b) The Corporation must publish a copy of each interim report, notice, and proxy statement on its Web site within 5 business days of filing the document(s) with the SEC. The Corporation may omit from these postings confidential, non-public information contained in the interim report, notice, or proxy statement. The interim report, notice, or proxy statement must remain on the Web site for 6 months or until the next annual report of condition is posted, whichever is later. Electronic links to the SEC filings Web site may be used in satisfaction of this requirement.
The Corporation must make special filings with the Director of OSMO for securities either issued or guaranteed by the Corporation that are not registered under the Securities Act. These filings include, but are not limited to:
(a) Either one paper or one electronic copy of any offering circular, private placement memorandum, or information statement prepared in connection with the securities offering at or before the time of the securities offering.
(b) For securities backed by qualified loans as defined in section 8.0(9)(A) of the Act, either one paper or one electronic copy of the following within 1 business day of the finalization of the transaction:
(1) The private placement memoranda for securities sold to investors; and
(2) The final agreement and all supporting documents material to the Corporation's purchase of a security under section 8.6(e) of the Act.
(c) For securities backed by qualified loans as defined in section 8.0(9)(B) of the Act, the Corporation must provide summary information on such securities issued during each calendar quarter in the form prescribed by us. Such summary information must be provided with each report of condition and performance (Call report) filed pursuant to § 621.12, and at such other times as we may require.
(a) The Corporation must send us one paper and one electronic copy of every filing made with U.S. Treasury, the SEC, or NYSE, including financial statements and related schedules, exhibits, and other documents that are a part of the filing. Such items must be filed with us no later than 1 business day after the U.S. Treasury, SEC, or NYSE filing. For those filings with the NYSE that duplicate ones made to the SEC, the Corporation may send only the SEC filing to us. If the filing is one addressed in subpart B of this part, no action under this paragraph is required.
(b) The Corporation must send us, within 3 business days and according to instructions provided by us, copies of all substantive correspondence between the Corporation and the U.S. Treasury, the SEC, or NYSE that are directed at the activities of the Corporation.
(c) The Corporation must notify us within 1 business day if it becomes exempt or claims exemption from the filing requirements of the Securities Act. Notice is not required when the Corporation claims an exemption that is generally available under SEC rules and regulations to similarly situated filers.
Federal Aviation Administration (FAA), Department of Transportation (DOT).
Final rule.
We are adopting a new airworthiness directive (AD) for certain Bombardier, Inc. Model BD-700-1A10 and BD-700-1A11 airplanes. This AD was prompted by reports of operator inability to open the main passenger door following severe hot soak conditions. This AD requires the incorporation of a new configuration to the passenger door external handle detent to enhance the performance across the full range of the airplane operating temperatures. We are issuing this AD to prevent thermal expansion and permanent deformation at severe hot soak conditions, creating high friction between the spring pot housing and the slider that could result in inability to open the main passenger door and impede evacuation in the event of an emergency.
This AD is effective August 31, 2016.
The Director of the Federal Register approved the incorporation by reference of certain publications listed in this AD as of August 31, 2016.
For service information identified in this final rule, contact Bombardier, Inc., 400 Côte-Vertu Road West, Dorval, Québec H4S 1Y9, Canada; telephone 514-855-5000; fax 514-855-7401; email
You may examine the AD docket on the Internet at
Cesar A. Gomez, Aerospace Engineer, Airframe and Mechanical Systems Branch, ANE-171, FAA, New York Aircraft Certification Office (ACO), 1600 Stewart Avenue, Suite 410, Westbury, NY 11590; telephone 516-228-7318; fax 516-794-5531.
We issued a notice of proposed rulemaking (NPRM) to amend 14 CFR part 39 by adding an AD that would apply to certain Bombardier, Inc. Model BD-700-1A10 and BD-700-1A11 airplanes. The NPRM published in the
Transport Canada Civil Aviation (TCCA), which is the aviation authority for Canada, has issued Canadian Airworthiness Directive CF-2015-03, dated March 13, 2015 (referred to after this as the Mandatory Continuing Airworthiness Information, or “the MCAI”), to correct an unsafe condition for certain Bombardier, Inc. Model BD-700-1A10 and BD-700-1A11 airplanes. The MCAI states:
There have been reports where operators experienced an inability to open the main passenger door following severe hot soak conditions.
Investigation determined that the nylon slider in the plunger assembly of the door handle is susceptible to thermal expansion
This condition, if not corrected, could result in an inability to open the main passenger door and could impede evacuation in the event of an emergency.
This [Canadian] AD mandates the incorporation of a new configuration to the passenger door external handle detent to enhance the performance across the full range of the aeroplanes operating temperatures.
You may examine the MCAI in the AD docket on the Internet at
We gave the public the opportunity to participate in developing this AD. We received no comments on the NPRM or on the determination of the cost to the public.
We reviewed the relevant data and determined that air safety and the public interest require adopting this AD as proposed except for minor editorial changes. We have determined that these minor changes:
• Are consistent with the intent that was proposed in the NPRM for correcting the unsafe condition; and
• Do not add any additional burden upon the public than was already proposed in the NPRM.
Bombardier issued the following service Information:
• Bombardier Service Bulletin 700-1A11-52-021, Revision 01, dated February 3, 2015.
• Bombardier Service Bulletin 700-52-044, Revision 01, dated February 3, 2015.
• Bombardier Service Bulletin 700-52-5008, Revision 01, dated February 3, 2015.
• Bombardier Service Bulletin 700-52-6008, Revision 01, dated February 3, 2015.
The service information describes procedures to incorporate a new configuration to the passenger door external handle detent. This service information is reasonably available because the interested parties have access to it through their normal course of business or by the means identified in the
We estimate that this AD affects 60 airplanes of U.S. registry.
We also estimate that it would take about 4 work-hours per product to comply with the basic requirements of this AD. The average labor rate is $85 per work-hour. Required parts would cost about $0 per product. Based on these figures, we estimate the cost of this AD on U.S. operators to be $20,400, or $340 per product.
Title 49 of the United States Code specifies the FAA's authority to issue rules on aviation safety. Subtitle I, section 106, describes the authority of the FAA Administrator. “Subtitle VII: Aviation Programs,” describes in more detail the scope of the Agency's authority.
We are issuing this rulemaking under the authority described in “Subtitle VII, Part A, Subpart III, Section 44701: General requirements.” Under that section, Congress charges the FAA with promoting safe flight of civil aircraft in air commerce by prescribing regulations for practices, methods, and procedures the Administrator finds necessary for safety in air commerce. This regulation is within the scope of that authority because it addresses an unsafe condition that is likely to exist or develop on products identified in this rulemaking action.
We determined that this AD will not have federalism implications under Executive Order 13132. This AD will not have a substantial direct effect on the States, on the relationship between the national government and the States, or on the distribution of power and responsibilities among the various levels of government.
For the reasons discussed above, I certify that this AD:
1. Is not a “significant regulatory action” under Executive Order 12866;
2. Is not a “significant rule” under the DOT Regulatory Policies and Procedures (44 FR 11034, February 26, 1979);
3. Will not affect intrastate aviation in Alaska; and
4. Will not have a significant economic impact, positive or negative, on a substantial number of small entities under the criteria of the Regulatory Flexibility Act.
Air transportation, Aircraft, Aviation safety, Incorporation by reference, Safety.
Accordingly, under the authority delegated to me by the Administrator, the FAA amends 14 CFR part 39 as follows:
49 U.S.C. 106(g), 40113, 44701.
This AD is effective August 31, 2016.
None.
This AD applies to Bombardier Inc. Model BD-700-1A10 and BD-700-1A11 airplanes, certificated in any category, serial numbers (S/Ns) 9002 through 9515 inclusive and S/N 9998.
Air Transport Association (ATA) of America Code 52, Doors.
This AD was prompted by reports of operator inability to open the main passenger door following severe hot soak conditions. We are issuing this AD to prevent thermal expansion and permanent deformation at severe hot soak conditions, creating high friction between the spring pot housing and the slider that could result in inability to open the main passenger door that could impede evacuation in the event of an emergency.
Comply with this AD within the compliance times specified, unless already done.
Within 15 months after the effective date of this AD, incorporate the new configuration to the passenger door external handle detent, in accordance with the Accomplishment Instructions of the applicable service information identified in paragraphs (g)(1) through (g)(4) of this AD:
(1) Bombardier Service Bulletin 700-1A11-52-021, Revision 01, dated February 3, 2015 (for Model BD-700-1A11 airplanes).
(2) Bombardier Service Bulletin 700-52-044, Revision 01, dated February 3, 2015 (for Model BD-700-1A10 airplanes).
(3) Bombardier Service Bulletin 700-52-5008, Revision 01, dated February 3, 2015 (for Model BD-700-1A11 airplanes).
(4) Bombardier Service Bulletin 700-52-6008, Revision 01, dated February 3, 2015 (for Model BD-700-1A10 airplanes).
This paragraph provides credit for actions required by paragraph (g) of this AD, if those actions were performed before the effective date of this AD using the following service information, as applicable. This service information is not incorporated by reference in this AD.
(1) Bombardier Service Bulletin 700-1A11-52-021, dated November 9, 2012.
(2) Bombardier Service Bulletin 700-52-044, dated November 9, 2012.
(3) Bombardier Service Bulletin 700-52-5008, dated November 9, 2012.
(4) Bombardier Service Bulletin 700-52-6008, dated November 9, 2012.
The following provisions also apply to this AD:
(1)
(2)
Refer to Mandatory Continuing Airworthiness Information (MCAI) Canadian Airworthiness Directive CF-2015-03, dated March 26, 2015, for related information. This MCAI may be found in the AD docket on the Internet at
(1) The Director of the Federal Register approved the incorporation by reference (IBR) of the service information listed in this paragraph under 5 U.S.C. 552(a) and 1 CFR part 51.
(2) You must use this service information as applicable to do the actions required by this AD, unless this AD specifies otherwise.
(i) Bombardier Service Bulletin 700-1A11-52-021, Revision 01, dated February 3, 2015.
(ii) Bombardier Service Bulletin 700-52-044, Revision 01, dated February 3, 2015.
(iii) Bombardier Service Bulletin 700-52-5008, Revision 01, dated February 3, 2015.
(iv) Bombardier Service Bulletin 700-52-6008, Revision 01, dated February 3, 2015.
(3) For service information identified in this AD, contact Bombardier, Inc., 400 Côte-Vertu Road West, Dorval, Québec H4S 1Y9, Canada; telephone 514-855-5000; fax 514-855-7401; email
(4) You may view this service information at the FAA, Transport Airplane Directorate, 1601 Lind Avenue SW., Renton, WA. For information on the availability of this material at the FAA, call 425-227-1221.
(5) You may view this service information that is incorporated by reference at the National Archives and Records Administration (NARA). For information on the availability of this material at NARA, call 202-741-6030, or go to:
Federal Aviation Administration (FAA), DOT.
Interim final rule.
The Federal Aviation Administration (FAA) is revising its repair station rules to remove the requirement that a repair station with an airframe rating provide suitable permanent housing to enclose the largest type and model aircraft listed on its operations specifications. The FAA is also revising its general housing and facilities regulation to provide that a repair station's housing for its facilities, equipment, materials, and personnel must be consistent not only with its ratings, but also with its limitations to those ratings. Finally, the FAA is adding an additional general purpose limited rating to cover maintenance work not covered by the existing 12 limited rating categories. These changes are necessary because the existing ratings and housing rules impose unnecessary housing requirements on certain repair stations that work only on component parts of an aircraft. These changes will enable some repair stations to obtain a limited rating that is tailored to their intended scope of work, and will relieve repair stations that have a limited airframe rating, but that work only on component parts of an aircraft, from having to provide large and expensive housing to enclose the entire aircraft when that type of housing is not needed for the limited scope of their work.
Effective July 27, 2016.
Submit comments on or before August 26, 2016.
Send comments identified by docket number FAA-2016-8744 using any of the following methods:
•
•
•
•
For technical questions concerning this action, contact Susan Traugott Ludwig, Aircraft Maintenance Division, Repair Station Branch, AFS-340, Federal Aviation Administration, 800 Independence Avenue SW., Washington, DC 20591; telephone (214) 587-8887; email
Section 553(b)(3)(B) of the Administrative Procedures Act (APA) (5 U.S.C.) authorizes agencies to dispense with notice and comment procedures for rules when the agency for “good cause” finds that those procedures are “impracticable, unnecessary, or contrary to the public interest.” Under this section, an agency, upon finding good cause, may issue an interim final rule without seeking comment prior to the rulemaking.
The FAA finds that notice and public comment to this interim final rule are unnecessary and contrary to the public interest. The provisions in this interim final rule will remove restrictive housing language affecting repair stations that hold limited airframe ratings and perform maintenance on airframe component parts rather than the entire aircraft. This rule will also amend the limited ratings section by adding a rating that will provide certificate holders and applicants with an additional option for defining the work they actually intend to perform. The removal of the restrictive housing language and adding an additional limited rating will not adversely affect current and future certificate holders. Regarding the restrictive housing language, this change is also consistent with how this regulation has been applied in practice. In addition, the removal of the restrictive language and adding an additional limited rating will not have a negative safety impact. The language is adopted to relieve economic burdens on the repair station industry and the possibility of forced repair station closings if the amended language were to be applied literally. Therefore, the FAA has determined that notice and public comment prior to publication are unnecessary.
In addition, in accordance with 5 U.S.C. 553(d)(1), the FAA is making this interim final rule effective upon publication because it is a substantive rule that relieves a restriction.
The Regulatory Policies and Procedures of the Department of Transportation (DOT), (44 FR 1134; February 26, 1979), provide that to the maximum extent possible, operating administrations for the DOT should provide an opportunity for public comment on regulations issued without prior notice. Although the FAA is inviting comments, we have made the determination to adopt this interim final rule without prior notice and public comment due to the need to expedite a resolution for repair stations that perform maintenance on airframe component parts by removing the restrictive housing requirement and providing an additional limited rating as another option.
The FAA's authority to issue rules on aviation safety is found in Title 49 of the United States Code. Subtitle I, Section 106 describes the authority of the FAA Administrator. Subtitle VII, Aviation Programs, describes in more detail the scope of the agency's authority.
This rulemaking is promulgated under the authority described in Subtitle VII, Part A, Subpart III, Section 44701, General requirements, and section 44707, Examining and rating air agencies. Under section 44701, the FAA may prescribe equipment and facilities for, and the timing and manner of, inspecting, servicing, and overhauling of aircraft, aircraft engines, propellers, appliances and constituent parts thereof. Under section 44707, the FAA may examine and rate repair stations. This regulation is within the scope of section 44701 since it specifies the facilities required, and the regulation is within the scope of 44707 since it specifies the ratings that are held by the repair stations.
The FAA's rules provide for two categories of repair station ratings that define and govern which articles
(1) Airframes of a particular make and model;
(2) Engines of a particular make and model;
(3) Propellers of a particular make and model;
(4) Instruments of a particular make and model;
(5) Radio equipment of a particular make and model;
(6) Accessories of a particular make and model;
(7) Landing gear components;
(8) Floats, by make;
(9) Nondestructive inspection, testing, and processing;
(10) Emergency equipment;
(11) Rotor blades, by make and model; and
(12) Aircraft fabric work.
Prior to 2001, § 145.33(b)
In many cases, the issuance of these ratings ran afoul of the agency's repair station housing and facilities regulations because many airframe-rated repair stations performing only component part maintenance did not provide housing that could enclose the entire aircraft listed on their operations specifications. Although these categories of repair stations could easily meet the requirements of § 145.103(a)(1) (which requires housing for the facilities, equipment, materials, and personnel consistent with the repair station's ratings) if their work was limited to working only on component parts, many did not meet the requirements of § 145.103(b). To answer the question whether the term “airframe rating” as used in § 145.103(b) contemplates a limited airframe rating, in March 2015, the FAA's Office of the
Prior to the March 2015 interpretation, some FAA offices that issued limited airframe ratings for component parts work interpreted the term airframe rating in § 145.103(b) to refer only to a
Currently, many repair stations hold a limited airframe rating and do not have housing to enclose the largest type and model aircraft listed on their operations specifications. As one consequence of the above-referenced legal interpretation, some repair stations that perform maintenance on component parts only, and hold a limited airframe rating, are being advised by their local FAA offices to either obtain costly housing to enclose the largest type and model aircraft on their operations specifications, or to seek an exemption from the housing requirement. This has created an economic burden on these repair stations and a potential resource burden on the FAA to process a likely flood of petitions for exemption.
To remedy the situations whereby some limited airframe-rated repair stations are not in full compliance with the housing regulation, and where, in some cases, the scope of work being performed does not technically fit within the airframe rating, this interim final rule will remove the one-size-fits-all requirement of current § 145.103(b) and provide an additional limited rating category to cover work not addressed by the existing 12 categories. These actions will assist the repair station industry by eliminating the costly housing requirement that is not necessary in many cases. In place of that housing regulation, we are adding two amendments that will address and resolve this issue.
First, the FAA is adding “and limitations” to the housing and facilities requirements in § 145.103(a)(1). With this change, the housing for a repair station's facilities, equipment, materials, and personnel must be consistent not only with its ratings, but also with the limitations to those ratings. Adding “limitations” to this regulation will assist both the repair stations and the FAA in determining a repair station's housing needs by considering the limitations associated with the rating under review. For example, a repair station with a limited powerplant rating may list a certain make and model of powerplant under its limited rating, but intend to maintain or repair only specified component parts of the engine, such as blade or vane repairs. The repair station would only need to provide housing, equipment, materials, and personnel to perform maintenance on blades and vanes if it does not perform work on the entire engine.
Second, the FAA is adding the 13th limited rating category under § 145.61(b) that was removed in the 2001 final rule. The new limited rating will allow the FAA to issue a limited rating for any other purpose for which it finds the applicant's request is appropriate. The additional limited rating is intended to be issued for repair stations that wish to perform maintenance on items such as aircraft interiors, upholstering, serving carts, cabinets, unit load devices, and other component items that do not necessarily fit into one of the 12 existing limited ratings. This action provides future certificate holders another option for ratings that will better define the type of maintenance they wish to perform. It will reduce the number of limited airframe ratings issued for component part work for which an airframe rating is not needed. In some cases, existing repair stations that hold limited airframe ratings issued for items that do not fit the category may amend their rating to the newly restored 13th limited rating, but such amendments are not required. If, however, an existing airframe-rated repair station wishes to add a non-airframe component to its operations specifications or capabilities list, it would have to apply for a limited rating in one of the other 12 categories, as appropriate.
In order to remedy the above-described problems caused by the restrictive housing requirements of § 145.103(b), the FAA is removing the text in its entirety. Removing existing § 145.103(b) provides flexibility to certificate holders and applicants with regard to the type of housing they are required to provide. Current § 145.103(c) provides that a certificated repair station may perform maintenance on articles outside of its housing if it provides suitable facilities that meet the general housing and facilities requirements of § 145.103(a) so that the work can be done in accordance with 14 CFR part 43. This paragraph is renumbered as § 145.103(b).
Although the requirement to enclose the largest type and model aircraft is no longer required, suitable housing as identified in §§ 145.101 and 145.103(a) remains applicable for all repair stations, regardless of whether they hold class or limited ratings. Section 145.101 requires, generally, that each certificated repair station “must provide housing, facilities, equipment, materials, and data that meet the applicable requirements for the issuance of the certificate and ratings the repair station holds.” Therefore, the FAA must evaluate each repair station application to assure that the housing and other requirements appropriate to the rating sought are met. In order to meet the requirements of §§ 145.101 and 145.103(a), repair stations that intend to work on an entire aircraft, or large portions of it, would still be required to provide housing that ensures appropriate protection from environmental elements for the work being performed.
The FAA is removing the introductory phrase of § 145.205(d) (“Notwithstanding the housing requirement of § 145.103(b)”) because the referenced section is being withdrawn by this rulemaking. As a result of that withdrawal, part 145 will no longer contain a specific housing regulation requiring an entire aircraft to be enclosed—rather the general
In addition, the FAA is adding the phrase “and limitations” to the end of paragraph (1) of § 145.103(a). The section will now require that each certificated repair station must provide: “(1) Housing for the facilities, equipment, materials, and personnel consistent with its ratings and limitations.” With this change, if a repair station's scope of work is limited to work that does not require the size and type of housing that the rating without the limitation would require, the repair station would need to provide housing only sufficient to accommodate its limited scope of work.
Finally, this interim final rule adds a limited rating to § 145.61(b) that allows the FAA to issue limited ratings for any other purpose for which it finds the applicant's request is appropriate. This new rating provides applicants and existing certificate holders another option for ratings that will better define the type of maintenance they wish to perform, whether it be on component parts of an airframe, powerplant, propeller, or on any other article in the class ratings identified in § 145.59. Without this additional rating category, many repair stations could continue to be issued a limited airframe rating as a catch all rating, which does not always clearly identify the actual type of work being performed.
Changes to Federal regulations must undergo several economic analyses. First, Executive Order 12866 and Executive Order 13563 direct that each Federal agency shall propose or adopt a regulation only upon a reasoned determination that the benefits of the intended regulation justify its costs. Second, the Regulatory Flexibility Act of 1980 (Pub. L. 96-354) requires agencies to analyze the economic impact of regulatory changes on small entities. Third, the Trade Agreements Act (Pub. L. 96-39) prohibits agencies from setting standards that create unnecessary obstacles to the foreign commerce of the United States. In developing U.S. standards, the Trade Act requires agencies to consider international standards and, where appropriate, that they be the basis of U.S. standards. Fourth, the Unfunded Mandates Reform Act of 1995 (Pub. L. 104-4) requires agencies to prepare a written assessment of the costs, benefits, and other effects of proposed or final rules that include a Federal mandate likely to result in the expenditure by State, local, or tribal governments, in the aggregate, or by the private sector, of $100 million or more annually (adjusted for inflation with base year of 1995). This portion of the preamble summarizes the FAA's analysis of the economic impacts of this interim final rule.
Department of Transportation Order DOT 2100.5 prescribes policies and procedures for simplification, analysis, and review of regulations. If the expected cost impact is so minimal that a proposed or final rule does not warrant a full evaluation, this order permits that a statement to that effect and the basis for it to be included in the preamble if a full regulatory evaluation of the cost and benefits is not prepared. Such a determination has been made for this rule. The reasoning for this determination follows.
Currently, § 145.103(b) states that a certificated repair station with an airframe rating must provide suitable permanent housing to enclose the largest type and model of aircraft listed on its operations specifications. This requirement is problematic for airframe rated repair stations that perform maintenance only on component parts and not the entire aircraft. Airframe-rated repair stations that do not provide the housing because they do not need it for their scope of work need to petition for an exemption from it. This rule will remove § 145.103(b) and retain the general housing and facilities requirements in §§ 145.101 and 145.103(a) and (c), which specify that each repair station must provide suitable housing consistent with its ratings. Thus this rule will remove an unnecessary burden for airframe-rated repair stations, and the costs would be minimal, as it is relieving in nature.
The FAA's review of past exemption requests prompted by the existing requirement in § 145.103(b) showed that from 2004 to the present, the agency processed 15 petitions for exemption. The FAA estimates that, on average, a petitioner spends 20 hours to prepare a petition for exemption from § 145.103(b), and the FAA takes 50 hours to process each of those petitions. According to data from the Bureau of Labor Statistics, in 2016 the mean hourly wage with benefits is $41.38 for a mechanic and supervisor. The average hourly wage for a J band FAA employee in Washington DC is $58.00. Over a twelve-year period at today's wages, the estimated savings equals 15 exemptions multiplied by 20 hours per exemption multiplied by $41.38 per hour, plus 15 exemptions multiplied by 50 hours per exemption multiplied by $58.00 per hour, which equals $56,000, or approximately $4,700 annually. This is a minimal cost; therefore, under Department of Transportation Order DOT 2100.5, the agency is not required to prepare a full regulatory evaluation.
The FAA has, therefore, determined that this rule is not a “significant regulatory action” as defined in section 3(f) of Executive Order 12866, and is not “significant” as defined in DOT's Regulatory Policies and Procedures.
The Regulatory Flexibility Act of 1980 (Pub. L. 96-354) (RFA) establishes “as a principle of regulatory issuance that agencies shall endeavor, consistent with the objectives of the rule and of applicable statutes, to fit regulatory and informational requirements to the scale of the businesses, organizations, and governmental jurisdictions subject to regulation.” To achieve this principle, agencies are required to solicit and consider flexible regulatory proposals and to explain the rationale for their actions to assure that such proposals are given serious consideration. The RFA covers a wide-range of small entities, including small businesses, not-for-profit organizations, and small governmental jurisdictions.
Agencies must perform a review to determine whether a rule will have a significant economic impact on a substantial number of small entities. If the agency determines that it will, the agency must prepare a regulatory flexibility analysis as described in the RFA.
However, if an agency determines that a rule is not expected to have a significant economic impact on a substantial number of small entities, section 605(b) of the RFA provides that the head of the agency may so certify and a regulatory flexibility analysis is not required. The certification must include a statement providing the
Many repair stations are small entities. Future business decisions to provide repair of aircraft components can be negatively impacted if the existing housing rule for airframe-rated repair stations remains in place. Currently each airframe-rated repair station must provide suitable permanent housing to enclose the largest type and model of aircraft listed on its operations specifications. For those airframe-rated repair stations that provide component maintenance only, and not full aircraft maintenance, the requirement to provide permanent housing for the aircraft would be very expensive and counterproductive. Most of the petitions for exemption from § 145.103(b) are from repair stations that do not work on an entire aircraft. This rule removes § 145.103(b) so that all repair stations will need to provide only the housing necessary to conduct their repair business. Thus this rule will be relieving in nature and be a benefit to small entities, albeit a small benefit. While the rule will impact a substantial number of small entities, it will not impose a significant economic impact on them.
If an agency determines that a rulemaking will not result in a significant economic impact on a substantial number of small entities, the head of the agency may so certify under section 605(b) of the RFA. Therefore, as provided in section 605(b), the head of the FAA certifies that this rulemaking will not result in a significant economic impact on a substantial number of small entities.
The Trade Agreements Act of 1979 (Pub. L. 96-39), as amended by the Uruguay Round Agreements Act (Pub. L. 103-465), prohibits Federal agencies from establishing standards or engaging in related activities that create unnecessary obstacles to the foreign commerce of the United States. Pursuant to these Acts, the establishment of standards is not considered an unnecessary obstacle to the foreign commerce of the United States, so long as the standard has a legitimate domestic objective, such as the protection of safety, and does not operate in a manner that excludes imports that meet this objective. The statute also requires consideration of international standards and, where appropriate, that they be the basis for U.S. standards. The FAA has assessed the potential effect of this rule and determined that it offers the same relieving impact on affected international repair stations.
Title II of the Unfunded Mandates Reform Act of 1995 (Pub. L. 104-4) requires each Federal agency to prepare a written statement assessing the effects of any Federal mandate in a proposed or final agency rule that may result in an expenditure of $100 million or more (in 1995 dollars) in any one year by State, local, and tribal governments, in the aggregate, or by the private sector; such a mandate is deemed to be a “significant regulatory action.” The FAA currently uses an inflation-adjusted value of $155 million in lieu of $100 million. This rule does not contain such a mandate; therefore, the requirements of Title II of the Act do not apply.
The Paperwork Reduction Act of 1995 (44 U.S.C. 3507(d)) requires that the FAA consider the impact of paperwork and other information collection burdens imposed on the public. The FAA has determined that there is no new requirement for information collection associated with this interim final rule.
In keeping with U.S. obligations under the Convention on International Civil Aviation, it is FAA policy to conform to International Civil Aviation Organization (ICAO) Standards and Recommended Practices to the maximum extent practicable. The FAA has determined that there are no ICAO Standards and Recommended Practices that correspond to these proposed regulations.
Harmonization. This rulemaking will not be involved in harmonization with any foreign aviation authorities.
FAA Order 1050.1F identifies FAA actions that are categorically excluded from preparation of an environmental assessment or environmental impact statement under the National Environmental Policy Act in the absence of extraordinary circumstances. The FAA has determined this rulemaking action qualifies for the categorical exclusion identified in paragraph 5-6.6 and involves no extraordinary circumstances.
The FAA has analyzed this interim final rule under the principles and criteria of Executive Order 13132, Federalism. The agency determined that this action will not have a substantial direct effect on the States, or the relationship between the Federal Government and the States, or on the distribution of power and responsibilities among the various levels of government, and, therefore, does not have Federalism implications.
The FAA analyzed this interim final rule under Executive Order 13211, Actions Concerning Regulations that Significantly Affect Energy Supply, Distribution, or Use (May 18, 2001). The agency has determined that it is not a “significant energy action” under the executive order and it is not likely to have a significant adverse effect on the supply, distribution, or use of energy.
Executive Order 13609, Promoting International Regulatory Cooperation, (77 FR 26413, May 4, 2012) promotes international regulatory cooperation to meet shared challenges involving health, safety, labor, security, environmental, and other issues and to reduce, eliminate, or prevent unnecessary differences in regulatory requirements. The FAA has analyzed this action under the policies and agency responsibilities of Executive Order 13609, and has determined that this action would have no effect on international regulatory cooperation.
An electronic copy of a rulemaking document may be obtained by using the Internet—
1. Search the Federal eRulemaking Portal (
2. Visit the FAA's Regulations and Policies Web page at
3. Access the Government Printing Office's Web page at:
Copies may also be obtained by sending a request (identified by notice, amendment, or docket number of this rulemaking) to the Federal Aviation Administration, Office of Rulemaking, ARM-1, 800 Independence Avenue SW., Washington, DC 20591, or by calling (202) 267-9680.
Comments received may be viewed by going to
The Small Business Regulatory Enforcement Fairness Act (SBREFA) of 1996 requires FAA to comply with small entity requests for information or advice about compliance with statutes and regulations within its jurisdiction. A small entity with questions regarding this document, may contact its local FAA official, or the person listed under the
Aircraft, Aviation safety, and Reporting and recordkeeping requirements.
In consideration of the foregoing, the Federal Aviation Administration amends chapter I of title 14, Code of Federal Regulations as follows:
49 U.S.C. 106(g), 40113, 44701-44702, 44707, 44709, 44717.
The addition reads as follows:
(b) * * *
(13) Any other purpose for which the FAA finds the applicant's request is appropriate.
(a) Each certificated repair station must provide—
(1) Housing for the facilities, equipment, materials, and personnel consistent with its ratings and limitations.
(2) Facilities for properly performing the maintenance, preventive maintenance, or alterations of articles or the specialized service for which it is rated. Facilities must include the following:
(i) Sufficient work space and areas for the proper segregation and protection of articles during all maintenance, preventive maintenance, or alterations.
(ii) Segregated work areas enabling environmentally hazardous or sensitive operations such as painting, cleaning, welding, avionics work, electronic work, and machining to be done properly and in a manner that does not adversely affect other maintenance or alteration articles or activities;
(iii) Suitable racks, hoists, trays, stands, and other segregation means for the storage and protection of all articles undergoing maintenance, preventive maintenance, or alterations, and;
(iv) Space sufficient to segregate articles and materials stocked for installation from those articles undergoing maintenance, preventive maintenance, or alterations to the standards required by this part.
(v) Ventilation, lighting, and control of temperature, humidity, and other climatic conditions sufficient to ensure personnel perform maintenance, preventive maintenance, or alterations to the standards required by this part.
(b) A certificated repair station may perform maintenance, preventive maintenance, or alterations on articles outside of its housing if it provides suitable facilities that are acceptable to the FAA and meet the requirements of § 145.103(a) so that the work can be done in accordance with the requirements of part 43 of this chapter.
(d) The FAA may grant approval for a certificated repair station to perform line maintenance for an air carrier certificated under part 121 or part 135 of this chapter, or a foreign air carrier or foreign person operating a U.S.-registered aircraft in common carriage under part 129 of this chapter on any aircraft of that air carrier or person, provided-
Securities and Exchange Commission.
Order.
We are issuing an order recognizing the resource extraction payment disclosure requirements of the European Union, Canada and the U.S. Extractive Industries Transparency Initiative as substantially similar to the requirements of Rule 13q-1 under the Securities Exchange Act of 1934.
July 27, 2016.
Shehzad K. Niazi, Special Counsel; Office of Rulemaking, Division of Corporation Finance, at (202) 551-3430; or Elliot Staffin, Special Counsel; Office of International Corporate Finance, Division of Corporation Finance, at (202) 551-3450, U.S. Securities and Exchange Commission, 100 F Street NE., Washington, DC 20549.
Order Recognizing the Resource Extraction Payment Disclosure Requirements of the European Union, Canada and the U.S. Extractive Industries Transparency Initiative as Substantially Similar to the Requirements of Rule 13q-1 under the Securities Exchange Act of 1934 (“Exchange Act”).
For the reasons set forth in the adopting release for Rule 13q-1 and the accompanying amendments to Form SD,
1. Directive 2013/34/EU of the European Parliament and of the Council of 26 June 2013 on the annual financial statements, consolidated financial statements and related reports of certain types of undertakings (“EU Accounting Directive”) as implemented in a European Union or European Economic Area member country;
2. Directive 2013/50/EU of the European Parliament and of the Council of 22 October 2013 amending Directive 2004/109/EC on transparency requirements in relation to information about issuers whose securities are admitted to trading on a regulated market, Directive 2003/71/EC of the European Parliament and of the Council on the prospectus to be published when securities are offered to the public or admitted to trading and Commission Directive 2007/14/EC on the implementation of certain provisions of Directive 2004/109/EC (“EU Transparency Directive”) as implemented in a European Union or European Economic Area member country;
3. Canada's Extractive Sector Transparency Measures Act (“ESTMA”); and
4. The U.S. Extractive Industries Transparency Initiative (“USEITI”).
Issuers are advised that our determination of substantial similarity with respect to each of these four regimes may be subject to reconsideration if there should be any significant modifications to those regimes.
The Commission also hereby finds that this determination is in the public interest and consistent with the protection of investors. Accordingly, it is hereby ordered pursuant to Section 36(a) of the Exchange Act that a resource extraction issuer, as defined in Item 2.01(d) of Form SD, that files a report complying with the reporting requirements of either the EU Accounting Directive or the EU Transparency Directive, in each case as implemented in a European Union or European Economic Area member country, ESTMA, or the USEITI, in accordance with the requirements set forth in paragraph (c) of Item 2.01(c) of Form SD and the conditions specified below, will satisfy its disclosure obligations under Rule 13q-1.
1. USEITI reports only satisfy a resource extraction issuer's disclosure obligations under Item 2.01(a) of Form SD for payments made to the Federal Government.
2. A resource extraction issuer may not follow the USEITI submission deadline to the extent it differs from the 150 day deadline in General Instruction B.2 of Form SD and must provide the required payment information on a fiscal year basis.
By the Commission.
Coast Guard, DHS.
Notice of enforcement of regulation.
The Coast Guard will enforce the special local regulations for the Bullhead City River Regatta marine event on the navigable waters of the Colorado River on August 13, 2016. This action is necessary to provide for the safety of the participants, crew, spectators, safety vessels, and general users of the waterway. Our regulation for the annual marine events on the Colorado River, between Davis Dam (Bullhead City, Arizona) and Headgate Dam (Parker, Arizona) identifies the regulated area for this event. During the enforcement period, no spectator shall anchor, block, loiter, nor impede the through transit of participants or official patrol vessels within this regulated area unless authorized by the Captain of the Port, or a designated representative.
The regulations in 33 CFR 100.1102 will be enforced from 6 a.m. through 6 p.m. on August 13, 2016 for Item 16 in Table 1 of 33 CFR 100.1102.
If you have questions on this publication, call or email Petty Officer Randolph Pahilanga, Waterways Management, U.S. Coast Guard Sector San Diego, CA; telephone 619-278-7656,
The Coast Guard will enforce the special local regulations in 33 CFR 100.1102 for the Bullhead City River Regatta in 33 CFR 100.1102, Table 1, Item 16 of that section from 6 a.m. to 6 p.m. on August 13, 2016. This action is necessary to provide for the safety of the participants, crew, spectators, safety vessels, and general users of the waterway. Our regulation for the annual marine events on the Colorado River, between Davis Dam (Bullhead City, Arizona) and Headgate Dam (Parker, Arizona) identifies the regulated entities for this event. Under the provisions of 33 CFR 100.1102, no spectator shall anchor, block, loiter, nor impede the through transit of participants or official patrol vessels within this regulated area of the Colorado River unless authorized by the Captain of the Port, or his designated representative. The Coast Guard may be assisted by other Federal, state, or local law enforcement agencies in enforcing this regulation.
This document is issued under authority of 33 CFR 100.1102 and 5 U.S.C. 552(a). In addition to this document in the
If the Captain of the Port or his designated representative determines that the regulated area need not be enforced for the full duration stated on this document, he or she may use a Broadcast Notice to Mariners or other communications coordinated with the event sponsor to grant general permission to enter the regulated area.
Coast Guard, DHS.
Notice of deviation from drawbridge regulations.
The Coast Guard has issued a temporary deviation from the operating
The deviation is effective from 6:30 a.m. to 12:30 p.m. on August 14, 2016.
The docket for this deviation, [USCG-2016-0612] is available at
If you have questions on this temporary deviation, call or email Mr. Michael Thorogood, Bridge Administration Branch Fifth District, Coast Guard, telephone 757-398-6557, email
The DelMoSports, LLC, on behalf of the New Jersey Department of Transportation, who owns the US40-322 (Albany Avenue) Bridge across the NJICW (Inside Thorofare), mile 70.0, at Atlantic City, NJ, has requested a temporary deviation from the current operating regulations set out in 33 CFR 117.733(f) to ensure the safety of the participants and spectators associated with the 2016 6th Annual Atlantic City Triathlon.
Under this temporary deviation, the bridge will be maintained in the closed-to-navigation position from 6:30 a.m. to 12:30 p.m. on August 14, 2016. The bridge is a double bascule bridge and has a vertical clearance in the closed-to-navigation position of 10 feet above mean high water.
The NJICW (Inside Thorofare) is used by recreational vessels. The Coast Guard has carefully considered the nature and volume of vessel traffic in publishing this temporary deviation.
Vessels able to pass through the bridge in the closed position may do so at anytime. The bridge will be able to open in case of an emergency. The Coast Guard will also inform the users of the waterways through our Local and Broadcast Notice to Mariners of the change in operating schedule for the bridge so that vessel operators can arrange their transits to minimize any impact caused by the temporary deviation.
In accordance with 33 CFR 117.35(e), the drawbridge must return to its regular operating schedule immediately at the end of the effective period of this temporary deviation. This deviation from the operating regulations is authorized under 33 CFR 117.35.
Environmental Protection Agency (EPA).
Final rule.
This regulation establishes a tolerance for residues of etoxazole in or on soybean seed. Valent U.S.A. Corporation requested this tolerance under the Federal Food, Drug, and Cosmetic Act (FFDCA).
This regulation is effective July 27, 2016. Objections and requests for hearings must be received on or before September 26, 2016, and must be filed in accordance with the instructions provided in 40 CFR part 178 (see also Unit I.C. of the
The docket for this action, identified by docket identification (ID) number EPA-HQ-OPP-2015-0735, is available at
Susan Lewis, Registration Division (7505P), Office of Pesticide Programs, Environmental Protection Agency, 1200 Pennsylvania Ave. NW., Washington, DC 20460-0001; main telephone number: (703) 305-7090; email address:
You may be potentially affected by this action if you are an agricultural producer, food manufacturer, or pesticide manufacturer. The following list of North American Industrial Classification System (NAICS) codes is not intended to be exhaustive, but rather provides a guide to help readers determine whether this document applies to them. Potentially affected entities may include:
• Crop production (NAICS code 111).
• Animal production (NAICS code 112).
• Food manufacturing (NAICS code 311).
• Pesticide manufacturing (NAICS code 32532).
You may access a frequently updated electronic version of EPA's tolerance regulations at 40 CFR part 180 through the Government Printing Office's e-CFR site at
Under FFDCA section 408(g), 21 U.S.C. 346a, any person may file an objection to any aspect of this regulation and may also request a hearing on those objections. You must file your objection or request a hearing on this regulation in accordance with the instructions provided in 40 CFR part 178. To ensure proper receipt by EPA, you must identify docket ID number EPA-HQ-OPP-2015-0735 in the subject line on the first page of your submission. All objections and requests for a hearing must be in writing, and must be received by the Hearing Clerk on or before September 26, 2016. Addresses for mail and hand delivery of objections and hearing requests are provided in 40 CFR 178.25(b).
In addition to filing an objection or hearing request with the Hearing Clerk as described in 40 CFR part 178, please submit a copy of the filing (excluding any Confidential Business Information (CBI)) for inclusion in the public docket. Information not marked confidential pursuant to 40 CFR part 2 may be disclosed publicly by EPA without prior notice. Submit the non-CBI copy of your objection or hearing request, identified by docket ID number EPA-HQ-OPP-2015-0735, by one of the following methods:
•
•
•
Additional instructions on commenting or visiting the docket, along with more information about dockets generally, is available at
In the
Based upon review of the data supporting the petition, EPA has modified the level at which the tolerance is being established. The reason for this change is explained in Unit IV.D.
Section 408(b)(2)(A)(i) of FFDCA allows EPA to establish a tolerance (the legal limit for a pesticide chemical residue in or on a food) only if EPA determines that the tolerance is “safe.” Section 408(b)(2)(A)(ii) of FFDCA defines “safe” to mean that “there is a reasonable certainty that no harm will result from aggregate exposure to the pesticide chemical residue, including all anticipated dietary exposures and all other exposures for which there is reliable information.” This includes exposure through drinking water and in residential settings, but does not include occupational exposure. Section 408(b)(2)(C) of FFDCA requires EPA to give special consideration to exposure of infants and children to the pesticide chemical residue in establishing a tolerance and to “ensure that there is a reasonable certainty that no harm will result to infants and children from aggregate exposure to the pesticide chemical residue. . . .”
Consistent with FFDCA section 408(b)(2)(D), and the factors specified in FFDCA section 408(b)(2)(D), EPA has reviewed the available scientific data and other relevant information in support of this action. EPA has sufficient data to assess the hazards of and to make a determination on aggregate exposure for etoxazole including exposure resulting from the tolerances established by this action. EPA's assessment of exposures and risks associated with etoxazole follows.
EPA has evaluated the available toxicity data and considered its validity, completeness, and reliability as well as the relationship of the results of the studies to human risk. EPA has also considered available information concerning the variability of the sensitivities of major identifiable subgroups of consumers, including infants and children.
The effects in the etoxazole database show liver toxicity in all species tested (enzyme release, hepatocellular swelling and histopathological indicators), and the severity does not appear to increase with time. In rats only, there were effects on incisors (elongation, whitening, and partial loss of upper and/or lower incisors). There is no evidence of neurotoxicity or immunotoxicity. No toxicity was seen at the limit dose in a 28-day dermal toxicity study in rats. Etoxazole was not mutagenic.
No increased quantitative or qualitative susceptibilities were observed following
Specific information on the studies received and the nature of the adverse effects caused by etoxazole as well as the no-observed-adverse-effect-level (NOAEL) and the lowest-observed-adverse-effect-level (LOAEL) from the toxicity studies can be found at
Once a pesticide's toxicological profile is determined, EPA identifies toxicological points of departure (POD) and levels of concern to use in evaluating the risk posed by human exposure to the pesticide. For hazards that have a threshold below which there is no appreciable risk, the toxicological POD is used as the basis for derivation of reference values for risk assessment. PODs are developed based on a careful analysis of the doses in each toxicological study to determine the dose at which no adverse effects are observed (the NOAEL) and the lowest dose at which adverse effects of concern are identified (the LOAEL). Uncertainty/safety factors are used in conjunction with the POD to calculate a safe exposure level—generally referred to as a population-adjusted dose (PAD) or a reference dose (RfD)—and a safe margin of exposure (MOE). For non-threshold risks, the Agency assumes that any amount of exposure will lead to some degree of risk. Thus, the Agency estimates risk in terms of the probability of an occurrence of the adverse effect expected in a lifetime. For more information on the general principles EPA uses in risk characterization and a complete description of the risk assessment process, see
A summary of the toxicological endpoints for etoxazole used for human risk assessment is discussed in Unit III.B. of the final rule published in the
1.
i.
No such effects were identified in the toxicological studies for etoxazole;
ii.
iii.
iv.
2.
Based on the FQPA Index Reservoir Screening Tool (FIRST) and Pesticide Root Zone Model Ground Water (PRZM GW) models, the estimated drinking water concentrations (EDWCs) of etoxazole for chronic exposures are estimated to be 4.761 parts per billion (ppb) for surface water and 0.746 ppb for ground water.
Modeled estimates of drinking water concentrations were directly entered into the dietary exposure model. For the chronic dietary risk assessment, the water concentration of value 4.761 ppb was used to assess the contribution to drinking water.
3.
4.
EPA has not found etoxazole to share a common mechanism of toxicity with any other substances, and etoxazole does not appear to produce a toxic metabolite produced by other substances. For the purposes of this tolerance action, therefore, EPA has assumed that etoxazole does not have a common mechanism of toxicity with other substances. For information regarding EPA's efforts to determine which chemicals have a common mechanism of toxicity and to evaluate the cumulative effects of such chemicals, see EPA's Web site at
1.
2.
3.
i. The toxicity database for etoxazole is complete.
ii. There is no indication that etoxazole is a neurotoxic chemical and there is no need for a developmental neurotoxicity study or additional UFs to account for neurotoxicity.
iii. The observed qualitative postnatal susceptibility is protected for by the selected endpoints.
iv. There are no residual uncertainties identified in the exposure databases. The dietary food exposure assessments were performed based on 100 PCT and tolerance-level residues. EPA made conservative (protective) assumptions in the ground and surface water modeling used to assess exposure to etoxazole in drinking water. These assessments will not underestimate the exposure and risks posed by etoxazole.
EPA determines whether acute and chronic dietary pesticide exposures are safe by comparing aggregate exposure estimates to the acute PAD (aPAD) and chronic PAD (cPAD). For linear cancer risks, EPA calculates the lifetime probability of acquiring cancer given the estimated aggregate exposure. Short-, intermediate-, and chronic-term risks are evaluated by comparing the estimated aggregate food, water, and residential exposure to the appropriate PODs to ensure that an adequate MOE exists.
1.
2.
3.
A short- and intermediate-term adverse effect was identified; however, etoxazole is not registered for any use patterns that would result in either short- or intermediate-term residential exposure. Short- and intermediate-term risk is assessed based on short- or intermediate-term residential exposure plus chronic dietary exposure. Because there is no short- or intermediate-term residential exposure and chronic dietary exposure has already been assessed under the appropriately protective cPAD (which is at least as protective as the POD used to assess short- or intermediate-term risk), no further assessment of short- or intermediate-term risk is necessary, and EPA relies on the chronic dietary risk assessment for evaluating short- and intermediate-term risk for etoxazole.
4.
5.
Adequate enforcement methodology (gas chromatography/mass-selective detector (GC/MSD) or GC/nitrogen-phosphorus detector (NPD)) are available to enforce the tolerance expression.
The methods may be requested from: Chief, Analytical Chemistry Branch, Environmental Science Center, 701 Mapes Rd., Ft. Meade, MD 20755-5350; telephone number: (410) 305-2905; email address:
In making its tolerance decisions, EPA seeks to harmonize U.S. tolerances with international standards whenever possible, consistent with U.S. food safety standards and agricultural practices. EPA considers the international maximum residue limits (MRLs) established by the Codex Alimentarius Commission (Codex), as required by FFDCA section 408(b)(4). The Codex Alimentarius is a joint United Nations Food and Agriculture Organization/World Health Organization food standards program, and it is recognized as an international food safety standards-setting organization in trade agreements to which the United States is a party. EPA may establish a tolerance that is different from a Codex MRL; however, FFDCA section 408(b)(4) requires that EPA explain the reasons for departing from the Codex level.
The Codex has not established a MRL for etoxazole in or on soybean seed.
A comment was submitted by the Center for Food Safety and was primarily concerned about environmental risks, including impacts on pollinators and endangered species, and Agency's assessment of the pesticide product under the Federal Insecticide, Fungicide, and Rodenticide Act (FIFRA). The comment did not raise any specific issues concerning the safety of etoxazole under the FFDCA. As such, this comment is not relevant to the Agency's evaluation of safety of the etoxazole tolerances; section 408 of the FFDCA focuses on potential harms to human health and does not permit consideration of effects on the environment.
The proposed tolerance of 0.01 ppm is below the validated limit of quantification (LOQ) of 0.02 ppm for the analytical method and is therefore being raised to the LOQ level.
Therefore, a tolerance is established for residues of etoxazole, 2-(2,6-difluorophenyl)-4-[4-(1,1-dimethylethyl)-2-ethoxyphenyl]-4,5-dihydrooxazole, in or on soybean, seed at 0.02 ppm.
This action establishes a tolerance under FFDCA section 408(d) in response to a petition submitted to the Agency. The Office of Management and Budget (OMB) has exempted these types of actions from review under Executive Order 12866, entitled “Regulatory Planning and Review” (58 FR 51735, October 4, 1993). Because this action has been exempted from review under Executive Order 12866, this action is not subject to Executive Order 13211, entitled “Actions Concerning Regulations That Significantly Affect Energy Supply, Distribution, or Use” (66 FR 28355, May 22, 2001) or Executive Order 13045, entitled “Protection of Children from Environmental Health Risks and Safety Risks” (62 FR 19885, April 23, 1997). This action does not contain any information collections subject to OMB approval under the Paperwork Reduction Act (PRA) (44 U.S.C. 3501
Since tolerances and exemptions that are established on the basis of a petition under FFDCA section 408(d), such as the tolerance in this final rule, do not require the issuance of a proposed rule, the requirements of the Regulatory Flexibility Act (RFA) (5 U.S.C. 601
This action directly regulates growers, food processors, food handlers, and food retailers, not States or tribes, nor does this action alter the relationships or distribution of power and responsibilities established by Congress in the preemption provisions of FFDCA section 408(n)(4). As such, the Agency has determined that this action will not have a substantial direct effect on States or tribal governments, on the relationship between the national government and the States or tribal governments, or on the distribution of power and responsibilities among the various levels of government or between the Federal Government and Indian tribes. Thus, the Agency has determined that Executive Order 13132, entitled “Federalism” (64 FR 43255, August 10, 1999) and Executive Order 13175, entitled “Consultation and Coordination with Indian Tribal Governments” (65 FR 67249, November 9, 2000) do not apply to this action. In addition, this action does not impose any enforceable duty or contain any unfunded mandate as described under Title II of the Unfunded Mandates Reform Act (UMRA) (2 U.S.C. 1501
This action does not involve any technical standards that would require Agency consideration of voluntary consensus standards pursuant to section 12(d) of the National Technology Transfer and Advancement Act (NTTAA) (15 U.S.C. 272 note).
Pursuant to the Congressional Review Act (5 U.S.C. 801
Environmental protection, Administrative practice and procedure, Agricultural commodities, Pesticides and pests, Reporting and recordkeeping requirements.
Therefore, 40 CFR chapter I is amended as follows:
21 U.S.C. 321(q), 346a and 371.
(a) * * *
Federal Emergency Management Agency, DHS.
Final rule.
This rule identifies communities where the sale of flood insurance has been authorized under the National Flood Insurance Program (NFIP) that are scheduled for suspension on the effective dates listed within this rule because of noncompliance with the floodplain management requirements of the program. If the Federal Emergency Management Agency (FEMA) receives documentation that the community has adopted the required floodplain management measures prior to the effective suspension date given in this rule, the suspension will not occur and a notice of this will be provided by publication in the
The effective date of each community's scheduled suspension is the third date (“Susp.”) listed in the third column of the following tables.
If you want to determine whether a particular community was suspended on the suspension date or for further information, contact Patricia Suber, Federal Insurance and Mitigation Administration, Federal Emergency Management Agency, 500 C Street SW., Washington, DC 20472, (202) 646-4149.
The NFIP enables property owners to purchase Federal flood insurance that is not otherwise generally available from private insurers. In return, communities agree to adopt and administer local floodplain management measures aimed at protecting lives and new construction from future flooding. Section 1315 of the National Flood Insurance Act of 1968, as amended, 42 U.S.C. 4022, prohibits the sale of NFIP flood insurance unless an appropriate public body adopts adequate floodplain management measures with effective enforcement measures. The communities listed in this document no longer meet that statutory requirement for compliance with program regulations, 44 CFR part 59. Accordingly, the communities will be suspended on the effective date in the third column. As of that date, flood insurance will no longer be available in the community. We recognize that some of these communities may adopt and submit the required documentation of legally enforceable floodplain management measures after this rule is published but prior to the actual suspension date. These communities will not be suspended and will continue to be eligible for the sale of NFIP flood insurance. A notice withdrawing the suspension of such communities will be published in the
In addition, FEMA publishes a Flood Insurance Rate Map (FIRM) that identifies the Special Flood Hazard Areas (SFHAs) in these communities. The date of the FIRM, if one has been published, is indicated in the fourth column of the table. No direct Federal financial assistance (except assistance pursuant to the Robert T. Stafford Disaster Relief and Emergency Assistance Act not in connection with a flood) may be provided for construction or acquisition of buildings in identified SFHAs for communities not participating in the NFIP and identified for more than a year on FEMA's initial FIRM for the community as having flood-prone areas (section 202(a) of the Flood Disaster Protection Act of 1973, 42 U.S.C. 4106(a), as amended). This prohibition against certain types of Federal assistance becomes effective for the communities listed on the date shown in the last column. The Administrator finds that notice and public comment procedures under 5 U.S.C. 553(b), are impracticable and unnecessary because communities listed in this final rule have been adequately notified.
Each community receives 6-month, 90-day, and 30-day notification letters addressed to the Chief Executive Officer stating that the community will be suspended unless the required floodplain management measures are met prior to the effective suspension date. Since these notifications were made, this final rule may take effect within less than 30 days.
Flood insurance, Floodplains.
Accordingly, 44 CFR part 64 is amended as follows:
42 U.S.C. 4001
Federal Emergency Management Agency, DHS.
Final rule.
This rule identifies communities where the sale of flood insurance has been authorized under the National Flood Insurance Program (NFIP) that are scheduled for suspension on the effective dates listed within this rule because of noncompliance with the floodplain management requirements of the program. If the Federal Emergency Management Agency (FEMA) receives documentation that the community has adopted the required floodplain management measures prior to the effective suspension date given in this rule, the suspension will not occur and a notice of this will be provided by publication in the
The effective date of each community's scheduled suspension is the third date (“Susp.”) listed in the third column of the following tables.
If you want to determine whether a particular community was suspended on the suspension date or for further information, contact Patricia Suber, Federal Insurance and Mitigation Administration, Federal Emergency Management Agency, 500 C Street SW., Washington, DC 20472, (202) 646-4149.
The NFIP enables property owners to purchase Federal flood insurance that is not otherwise generally available from private insurers. In return, communities agree to adopt and administer local floodplain management measures aimed at protecting lives and new construction from future flooding. Section 1315 of the National Flood Insurance Act of 1968, as amended, 42 U.S.C. 4022, prohibits the sale of NFIP flood insurance unless an appropriate public body adopts adequate floodplain management measures with effective enforcement measures. The communities listed in this document no longer meet that statutory requirement for compliance with program regulations, 44 CFR part 59. Accordingly, the communities will be suspended on the effective date in the third column. As of that date, flood insurance will no longer be available in the community. We recognize that some of these communities may adopt and submit the required documentation of legally enforceable floodplain management measures after this rule is published but prior to the actual suspension date. These communities will not be suspended and will continue to be eligible for the sale of NFIP flood insurance. A notice withdrawing the suspension of such communities will be published in the
In addition, FEMA publishes a Flood Insurance Rate Map (FIRM) that identifies the Special Flood Hazard Areas (SFHAs) in these communities. The date of the FIRM, if one has been published, is indicated in the fourth column of the table. No direct Federal financial assistance (except assistance pursuant to the Robert T. Stafford Disaster Relief and Emergency Assistance Act not in connection with a flood) may be provided for construction or acquisition of buildings in identified SFHAs for communities not participating in the NFIP and identified for more than a year on FEMA's initial FIRM for the community as having flood-prone areas (section 202(a) of the Flood Disaster Protection Act of 1973, 42 U.S.C. 4106(a), as amended). This prohibition against certain types of Federal assistance becomes effective for the communities listed on the date shown in the last column. The Administrator finds that notice and public comment procedures under 5 U.S.C. 553(b), are impracticable and unnecessary because communities listed in this final rule have been adequately notified.
Each community receives 6-month, 90-day, and 30-day notification letters addressed to the Chief Executive Officer stating that the community will be suspended unless the required floodplain management measures are met prior to the effective suspension date. Since these notifications were made, this final rule may take effect within less than 30 days.
Flood insurance, Floodplains.
Accordingly, 44 CFR part 64 is amended as follows:
42 U.S.C. 4001
Federal Emergency Management Agency, DHS.
Final rule.
This rule identifies communities where the sale of flood insurance has been authorized under the National Flood Insurance Program (NFIP) that are scheduled for suspension on the effective dates listed within this rule because of noncompliance with the floodplain management requirements of the program. If the Federal Emergency Management Agency (FEMA) receives documentation that the community has adopted the required floodplain management measures prior to the effective suspension date given in this rule, the suspension will not occur and a notice of this will be provided by publication in the
The effective date of each community's scheduled suspension is the third date (“Susp.”) listed in the third column of the following tables.
If you want to determine whether a particular community was suspended on the suspension date or for further information, contact Patricia Suber, Federal Insurance and Mitigation Administration, Federal Emergency Management Agency, 500 C Street SW., Washington, DC 20472, (202) 646-4149.
The NFIP enables property owners to purchase Federal flood insurance that is not otherwise generally available from private insurers. In return, communities agree to adopt and administer local floodplain management measures aimed at protecting lives and new construction from future flooding. Section 1315 of the National Flood Insurance Act of 1968, as amended, 42 U.S.C. 4022, prohibits the sale of NFIP flood insurance unless an appropriate public body adopts adequate floodplain management measures with effective enforcement measures. The communities listed in this document no longer meet that statutory requirement for compliance with program regulations, 44 CFR part 59. Accordingly, the communities will be suspended on the effective date in the third column. As of that date, flood insurance will no longer be available in the community. We recognize that some of these communities may adopt and submit the required documentation of legally enforceable floodplain management measures after this rule is published but prior to the actual suspension date. These communities will not be suspended and will continue to be eligible for the sale of NFIP flood insurance. A notice withdrawing the suspension of such communities will be published in the
In addition, FEMA publishes a Flood Insurance Rate Map (FIRM) that identifies the Special Flood Hazard Areas (SFHAs) in these communities. The date of the FIRM, if one has been published, is indicated in the fourth column of the table. No direct Federal financial assistance (except assistance pursuant to the Robert T. Stafford Disaster Relief and Emergency Assistance Act not in connection with a flood) may be provided for construction or acquisition of buildings in identified SFHAs for communities not participating in the NFIP and identified for more than a year on FEMA's initial FIRM for the community as having flood-prone areas (section 202(a) of the Flood Disaster Protection Act of 1973, 42 U.S.C. 4106(a), as amended). This prohibition against certain types of Federal assistance becomes effective for the communities listed on the date shown in the last column. The Administrator finds that notice and public comment procedures under 5 U.S.C. 553(b), are impracticable and unnecessary because communities listed in this final rule have been adequately notified.
Each community receives 6-month, 90-day, and 30-day notification letters addressed to the Chief Executive Officer stating that the community will be suspended unless the required floodplain management measures are met prior to the effective suspension date. Since these notifications were made, this final rule may take effect within less than 30 days.
Flood insurance, Floodplains.
Accordingly, 44 CFR part 64 is amended as follows:
42 U.S.C. 4001
Federal Emergency Management Agency, DHS.
Final rule.
Base (1-percent-annual-chance) Flood Elevations (BFEs) and modified BFEs are made final for the communities listed below. The BFEs and modified BFEs are the basis for the floodplain management measures that each community is required either to adopt or to show evidence of being already in effect in order to qualify or remain qualified for participation in the
The date of issuance of the Flood Insurance Rate Map (FIRM) showing BFEs and modified BFEs for each community. This date may be obtained by contacting the office where the maps are available for inspection as indicated in the table below.
The final BFEs for each community are available for inspection at the office of the Chief Executive Officer of each community. The respective addresses are listed in the table below.
Rick Sacbibit, Chief, Engineering Services Branch, Federal Insurance and Mitigation Administration, FEMA, 400 C Street SW., Washington, DC 20472, (202) 646-7659, or (email)
The Federal Emergency Management Agency (FEMA) makes the final determinations listed below for the modified BFEs for each community listed. These modified elevations have been published in newspapers of local circulation and ninety (90) days have elapsed since that publication. The Deputy Associate Administrator for Insurance and Mitigation has resolved any appeals resulting from this notification.
This final rule is issued in accordance with section 110 of the Flood Disaster Protection Act of 1973, 42 U.S.C. 4104, and 44 CFR part 67. FEMA has developed criteria for floodplain management in floodprone areas in accordance with 44 CFR part 60.
Interested lessees and owners of real property are encouraged to review the proof Flood Insurance Study and FIRM available at the address cited below for each community.
The BFEs and modified BFEs are made final in the communities listed below. Elevations at selected locations in each community are shown.
Administrative practice and procedure, Flood insurance, Reporting and recordkeeping requirements.
Accordingly, 44 CFR part 67 is amended as follows:
42 U.S.C. 4001
Federal Communications Commission.
Final rule.
In this document, the Commission makes changes to the Commission's rules, and amends its Schedule of Application Fees to adjust its fees for processing applications and other filings. Section 8(a) of the Communications Act of 1934, as amended (“the Act”), requires the Commission to “assess and collect application fees at such rates as the Commission shall establish or at such modified rates as it shall establish pursuant to” section 8(b). Section 8(b)(1) requires that the Schedule of Application Fees “be reviewed by the Commission every two years after October 1, 1991, and adjusted by the Commission to reflect changes in the Consumer Price Index.” As required by section 8(b)(1), this Order increases application fees to reflect the net change in the Consumer Price Index for all Urban Consumers (“CPI-U”) of 1.8 percent.
Effective August 26, 2016.
Roland Helvajian, Office of Managing Director at (202) 418-0444.
This is a summary of the Commission's
1. This document does not contain new or modified information collection requirements subject to the Paperwork Reduction Act of 1995 (PRA), Public Law 104-13. In addition, therefore, it does not contain any new or modified information collection burden for small business concerns with fewer than 25 employees, pursuant to the Small Business Paperwork Relief Act of 2002, Public Law 107-198,
2. The Commission will send a copy of this
3. By this Order, the Commission makes rule changes to Part 1 of the Commission's rules, and amends its Schedule of Application Fees, 47 CFR 1.1102
4. The methodology and timing of adjustments to application fees are prescribed by statute at 47 U.S.C. 158(b). Because our action implementing the statute leaves us no discretion, prior notice and comment is unnecessary pursuant to 5 U.S.C. 553(b)(3)(B). This
5. Accordingly,
6.
Administrative practice and procedure.
Federal Communications Commission.
For the reasons discussed in the preamble, the Federal Communications Commission amends 47 CFR part 1 as follows:
15 U.S.C. 79,
In the table below, the amounts appearing in the column labeled “Fee Amount” are for application fees only. Those services designated in the table below with an asterisk (*) in the column labeled “Payment Type Code” also have associated regulatory fees that must be paid at the same time the application fee is paid. Please refer to the FY 2014 Wireless Telecommunications Fee Filing Guide (updated and effective 9/17/15) for the corresponding regulatory fee amount located at
Payment can be made electronically using the Commission's electronic filing and payment system “Fee Filer” (
Payment can be made electronically using the Commission's electronic filing and payment system “Fee Filer” (
Payment can be made electronically using the Commission's electronic filing and payment system “Fee Filer” (
Payment can be made electronically using the Commission's electronic filing and payment system “Fee Filer” (
Payment can be made electronically using the Commission's electronic filing and payment system “Fee Filer” (
Payment can be made electronically using the Commission's electronic filing and payment system “Fee Filer” (
Payment can be made electronically using the Commission's electronic filing and payment system “Fee Filer” (
Payment can be made electronically using the Commission's electronic filing and payment system “Fee Filer” (
Federal Highway Administration, DOT.
Notice of rulemaking committee meeting.
As required by the Negotiated Rulemaking Act, the Secretary of Transportation has selected the proposed members of a committee to develop proposed rules for the Tribal Transportation Self-Governance Program (TTSGP). Tribes in each of the 12 Bureau of Indian Affairs (BIA) Regions, as well as national and regional tribal organizations were invited to nominate a primary and alternate representative to serve on the committee. After considering the nominations received, the Secretary proposes to appoint the persons named in this document as committee members. Tribes, tribal organizations, and individual tribal members who believe that their interests will not be adequately represented by the persons identified in this document may submit comments on the proposed selection, apply for membership on the committee, or submit other nominations. Additionally, the Agency announces that the first meeting of the TTSGP committee will be held August 16-18, 2016. The meeting is open to the public.
Comments on the proposed committee membership to this negotiated rulemaking committee must be received no later than August 26, 2016.
The meeting will be held on August 16-18, 2016, from 8 a.m. to 5 p.m., ET.
The meeting will be held at the Eastern Federal Lands Highway Division, Loudoun Tech Center, 21400 Ridgetop Circle, Sterling, VA 20166-6511. Attendance is open to the public up to the room's capacity. Copies of the TTSPG Committee materials and an agenda will be made available in advance of the meeting at
Send nominations and comments to Mr. Robert Sparrow, Designated Federal Official, Federal Highway Administration, Room E61-314, 1200 New Jersey Ave. SE., Washington, DC 20590. Or email to:
Nominations and comments received by FHWA will be available for inspection at the address listed above from 9 a.m. to 4 p.m., Monday through Friday.
Robert W. Sparrow, Designated Federal Official, 1200 New Jersey Avenue SE., Washington, DC 20590. Telephone: (202) 366-9483 or at
As required by Section 1121 of the Fixing America's Surface Transportation (FAST) Act, the Secretary shall, pursuant to a negotiated rulemaking process, develop a Notice of Proposed Rulemaking (NPRM) that contains the regulations required to carry the TTSGP. Section 1121 also requires that in establishing this committee, the Secretary will (1) apply the procedures of negotiated rulemaking under subchapter III of chapter 5 of title 5 (the Negotiated Rulemaking Act) in a manner that reflects the unique government-to-government relationship between the Indian tribes and the United States and (2) select the tribal representatives for the committee from among elected officials of tribal governments (or their designated employees with authority to act on their behalf), acting in their official capacities. To the maximum extent possible, FHWA considered geographical location, size, and existing transportation and self-governance experience, in selecting tribal committee representatives.
The Secretary invites organizations and individuals to comment on the nominations in this document or nominate other persons for membership on the committee. The Secretary intends that the proposed committee (including any additional members selected) reflect balanced interests as follows:
(1) Members of geographically diverse small, medium, and large Indian tribes;
(2) Members of tribes identified as Self-Governance Tribes in transportation or other programs as well as from tribes whose tribes have existing Title 23 U.S.C. funding agreements with the Department; and
(3) Members of tribes with various levels and types of experience in the diverse concerns of transportation, management, and leadership.
On April 25, 2016 (81 FR 24158), FHWA announced its intent to establish a negotiated rulemaking committee to negotiate and develop proposed regulations to implement Section 1121 of the FAST Act and to solicit applications for nominations for membership on the TTSGP committee. A total of 33 nominations were received for tribal membership to the committee. This included multiple nominations from tribes located within 10 of the 12 BIA Regions. Only one nomination was received from tribes located within the BIA Midwest Region as well as the BIA Rocky Mountain Region. In addition, nominations and letters of support were received from national and regional tribal organizations.
The Secretary has selected 12 primary regional tribal representatives, 2 tribal representatives that received backing and support from national or regional tribal organization/committees, and 4 additional tribal representatives based on their experience and knowledge as well as to improve the overall diversity of the committee. In addition, the Secretary has selected 7 Federal representatives for the committee, bringing the total proposed committee membership to 25, which meets the requirements of Negotiated Rulemaking Act (5 U.S.C. 565). Five additional alternate representatives were also selected. Generally, tribal members selected to the committee as either
• Robert Sparrow, Designated Federal Official, FHWA, Washington, DC.
• Vivian Philbin, Assistant Chief Counsel, FHWA, Lakewood, CO.
• Basharat Siddiqi, Division Administrator, FHWA, Oklahoma City, OK.
• Kenneth Martin, Deputy Assistant Secretary for Tribal Government Affairs, Office of the Secretary, USDOT, Washington, DC.
• Elan Flippin, Tribal Transit Program Manager, FTA, Washington, DC.
• (TBD), USDOT, Washington, DC.
• LeRoy Gishi, Chief, BIA Division of Transportation, Washington, DC.
• ALASKA REGION—Denise Michaels, Director of Transportation, Kawerak, Inc., Nome, AK.
• EASTERN REGION—Wesley Woodruff, Facilities Division Director, Poarch Band of Creek Indians, Atmore, AL.
• EASTERN OKLAHOMA REGION—Palmer S. Mosely V, Executive Officer of Self-Determination, The Chickasaw Nation, Ada, OK.
• GREAT PLAINS REGION—Ron His Horse is Thunder, Transportation Director, Standing Rock Sioux Tribe, Ft. Yates, SD.
• MIDWEST REGION—David Conner, Self-Governance Coordinator, Red Lake Band of Chippewa Indians, Red Lake, MN.
• NAVAJO REGION—Darryl Bradley, Principal Civil Engineer, Navajo Nation, Window Rock, AZ.
• NORTHWEST REGION—Timothy Ballew II, Tribal Chairman, Lummi Nation, Bellingham, WA.
• PACIFIC REGION—Michael Hostler, Transportation Director, Hoopa Valley Tribe, Hoopa, CA.
• ROCKY MOUNTAIN REGION—John Smith, Transportation Director, Eastern Shoshone and Northern Arapaho Tribes' Joint Business Council on the Wind River Indian Reservation, Arapahoe, WY.
• SOUTHERN PLAINS REGION—Beverly Edwina Butler Wolfe, Governor, Absentee Shawnee Tribe of Oklahoma, Shawnee, OK.
• SOUTHWEST REGION—Joe Garcia, Head Councilman, Ohkay Owingeh Pueblo, Ohkay Owingeh, NM.
• WESTERN REGION—Jennifer Lynn Jack, Roads Manager, Salt River Pima-Maricopa Indian Community, Scottsdale, AZ.
• Mickey Peercy, Executive Director of Self-Governance, Choctaw Nation of Oklahoma, Tishomingo, OK, proposed by the DOI Self-Governance Workgroup.
• Jody Clark, Director—Seneca Nation DOT, Seneca Nation, Salamanca, NY, proposed by United Southern and Eastern Tribes (USET). Will also act as the Alternate representative for the Eastern Region, if required.
• Gerald Hope, Transportation Director, Sitka Tribe of Alaska, Sitka, AK. Will also act as the Alternate representative for the Alaska Region, if required.
• Karen Woodard, Administrator—Realty, Planning, Construction Services and Facilities, Morongo Band of Mission Indians, Banning, CA. Will also act as the Alternate representative for the Pacific Region, if required.
• Elizabeth Kay Wallace Rhoads, Principal Chief—Sac and Fox Nation, Meeker, OK. Will also act as the Alternate representative for the Southern Plains Region, if required.
• Royce Gchachu, Transportation Director, Zuni Pueblo, Zuni, NM. Will also act as the Alternate representative for the Southwest Region, if required.
• EASTERN OKLAHOMA REGION—Lindsay Earls, Legislative Counsel for Government Relations, The Cherokee Nation, Tahlequah, OK.
• GREAT PLAINS REGION—David Kelly, Transportation Director, Oglala Sioux Tribe, Pine Ridge, SD.
• NAVAJO REGION—Jonah Begay, GIS Supervisor, Navajo Nation, Window Rock, AZ.
• NORTHWEST REGION—Mary Beth Frank-Clark, Transportation Planner, Nez Pierce Tribe, Lewiston, ID.
• WESTERN REGION—Octavio Machado, Transit Manager, Ak-Chin Indian Community, Maricopa, AZ.
If you believe that your interests will not be adequately represented by any person identified as being a member of the committee, you may apply or nominate another person for membership on the committee. Each application or nomination must include:
(1) The name of the nominee.
(2) The tribal interest(s) to be represented by the nominee (based on the interests listed above).
(3) Evidence that the applicant or nominee is authorized to represent parties related to the interest(s) the person proposed to represent.
(4) The reasons that the proposed members of the committee identified in this document do not represent the interests of the person submitting the application or nomination.
(5) Your name, address, telephone number, and the name of the tribe or tribal organization with which you are affiliated. To be considered, comments and nominations must be received by the close of business on August 26, 2016, at the location indicated in the
The meeting will be open to the public. Time has been set aside during each day of the meeting for members of the public to contribute to the discussion and provide oral comments.
The committee will dedicate a substantial amount of time at the first meeting to establishing the rules, procedures, and process of the committee, such as outlining the voting rights of the committee members and defining the meaning of “consensus.”
Members of the public may submit written comments on the topics to be considered during the meeting by August 1, 2016, to Federal Docket Management System (FDMS) Docket Number FHWA-2016-0002. If you submit a comment, please include the docket number for this document (FHWA-2016-0002). You may submit your comments and material online or by fax, mail, or hand delivery, but please use only one of these means. The FHWA recommends that you include your name and a mailing address, an email address, or a phone number in the body of your document so that FHWA can contact you if there are questions regarding your submission.
To submit your comment online, go to
If you submit your comments by mail or hand delivery, submit them in an unbound format, no larger than 8
To view comments, as well as any documents mentioned in this preamble as being available in the docket, go to
In accordance with 5 U.S.C. 553(c), DOT solicits comments from the public to better inform its rulemaking process. The DOT posts these comments, without edit, including any personal information the commenter provides, to
Decisions with respect to future meetings will be made at the first meeting and from time to time thereafter. Notices of all future meetings will be shown on the FHWA TTP Web site at
Coast Guard, DHS.
Notice of proposed rulemaking.
The Coast Guard proposes to establish special local regulations for certain waters of the Little Annemessex River and Somers Cove. This action is necessary to provide for the safety of life on these navigable waters located in Somerset County at Crisfield, MD, during an open water swim competition on September 17, 2016. This proposed rulemaking would prohibit persons and vessels from being in the regulated area unless authorized by the Captain of the Port Maryland-National Capital Region or Coast Guard Patrol Commander. We invite your comments on this proposed rulemaking.
Comments and related material must be received by the Coast Guard on or before August 26, 2016.
You may submit comments identified by docket number USCG-2016-0500 using the Federal eRulemaking Portal at
If you have questions about this proposed rulemaking, call or email Mr. Ronald Houck, U.S. Coast Guard Sector Maryland-National Capital Region; telephone 410-576-2674, email
On June 1, 2016, OC Tri-Running Sports of Bishopville, MD notified the Coast Guard that it will be conducting the swim portion of the Crisfield CrabMan Triathlon from 6:30 a.m. until 9 a.m. on September 17, 2016. The open water swim competition is to be held along a designated 0.93-mile (1500 meters/1.5k) linear course that starts from a stationary barge located in the Little Annemessex River in approximate position latitude 37°58′15″ N., longitude 075°52′09″ W., and finishes at the Somers Cove Marina in Somers Cove at Crisfield, MD. Prior to the swim start, participants will be transported from the Crisfield City Dock to the barge on board a ferry. Hazards from the swim competition include approximately 200 participants operating within and adjacent to designated navigation channels and interfering with vessels intending to operate within those channels, as well as operating within the narrow entrance to Somers Cove. The COTP Maryland-National Capital Region has determined that potential hazards associated with the swim competition would be a safety concern for anyone intending to operate within certain waters of the Little Annemessex River and Somers Cove at Crisfield, MD.
The purpose of this rulemaking is to protect event participants, spectators and transiting vessels on certain waters of the Little Annemessex River and Somers Cove before, during, and after the scheduled event.
The Coast Guard proposes this rulemaking under authority in 33 U.S.C. 1233, which authorize the Coast Guard to establish and define special local regulations.
The COTP Maryland-National Capital Region proposes to establish special local regulations from 5:30 a.m. until 10 a.m. on September 17, 2016, and if necessary due to inclement weather, from 5:30 a.m. until 10 a.m. on September 18, 2016. The regulated area would cover all navigable waters of the Little Annemessex River and Somers
We developed this proposed rule after considering numerous statutes and executive orders (Executive Orders) related to rulemaking. Below we summarize our analyses based on a number of these statutes and Executive Orders, and we discuss First Amendment rights of protestors.
Executive Orders 12866 and 13563 direct agencies to assess the costs and benefits of available regulatory alternatives and, if regulation is necessary, to select regulatory approaches that maximize net benefits. Executive Order 13563 emphasizes the importance of quantifying both costs and benefits, of reducing costs, of harmonizing rules, and of promoting flexibility. This NPRM has not been designated a “significant regulatory action,” under Executive Order 12866. Accordingly, the NPRM has not been reviewed by the Office of Management and Budget.
This regulatory action determination is based on the size and duration of the regulated area, which would impact a small designated area of the Little Annemessex River and Somers Cove for 4.5 hours. The Coast Guard would issue a Broadcast Notice to Mariners via VHF-FM marine channel 16 about the status of the regulated area. Moreover, the rule would allow vessels to seek permission to enter the regulated area, and vessel traffic would be able to safely transit the regulated area once the Coast Guard Patrol Commander deems it safe to do so.
The Regulatory Flexibility Act of 1980, 5 U.S.C. 601-612, as amended, requires Federal agencies to consider the potential impact of regulations on small entities during rulemaking. The term “small entities” comprises small businesses, not-for-profit organizations that are independently owned and operated and are not dominant in their fields, and governmental jurisdictions with populations of less than 50,000. The Coast Guard certifies under 5 U.S.C. 605(b) that this proposed rule would not have a significant economic impact on a substantial number of small entities.
While some owners or operators of vessels intending to transit the regulated area may be small entities, for the reasons stated in section IV.A above this proposed rule would not have a significant economic impact on any vessel owner or operator.
If you think that your business, organization, or governmental jurisdiction qualifies as a small entity and that this rule would have a significant economic impact on it, please submit a comment (see
Under section 213(a) of the Small Business Regulatory Enforcement Fairness Act of 1996 (Pub. L. 104-121), we want to assist small entities in understanding this proposed rule. If the rule would affect your small business, organization, or governmental jurisdiction and you have questions concerning its provisions or options for compliance, please contact the person listed in the
This proposed rule would not call for a new collection of information under the Paperwork Reduction Act of 1995 (44 U.S.C. 3501-3520).
A rule has implications for federalism under Executive Order 13132, Federalism, if it has a substantial direct effect on the States, on the relationship between the national government and the States, or on the distribution of power and responsibilities among the various levels of government. We have analyzed this proposed rule under that Order and have determined that it is consistent with the fundamental federalism principles and preemption requirements described in Executive Order 13132.
Also, this proposed rule does not have tribal implications under Executive Order 13175, Consultation and Coordination with Indian Tribal Governments, because it would not have a substantial direct effect on one or more Indian tribes, on the relationship between the Federal Government and Indian tribes, or on the distribution of power and responsibilities between the Federal Government and Indian tribes. If you believe this proposed rule has implications for federalism or Indian tribes, please contact the person listed in the
The Unfunded Mandates Reform Act of 1995 (2 U.S.C. 1531-1538) requires Federal agencies to assess the effects of their discretionary regulatory actions. In particular, the Act addresses actions that may result in the expenditure by a State, local, or tribal government, in the aggregate, or by the private sector of $100,000,000 (adjusted for inflation) or more in any one year. Though this proposed rule would not result in such an expenditure, we do discuss the effects of this rule elsewhere in this preamble.
We have analyzed this proposed rule under Department of Homeland Security Management Directive 023-01 and Commandant Instruction M16475.lD, which guide the Coast Guard in complying with the National Environmental Policy Act of 1969 (42 U.S.C. 4321-4370f), and have made a preliminary determination that this action is one of a category of actions that do not individually or cumulatively have a significant effect on the human environment. This proposed rule involves implementation of regulations within 33 CFR part 100 applicable to organized marine events on the navigable waters of the United States that could negatively impact the safety of waterway users and shore side activities in the event area lasting for 4.5 hours. The category of water activities includes but is not limited to sail boat regattas, boat parades, power boat racing, swimming events, crew racing, canoe and sail board racing. Normally such actions are categorically excluded from further review under paragraph 34(h) of Figure 2-1 of Commandant Instruction M16475.lD. A preliminary environmental analysis checklist and
The Coast Guard respects the First Amendment rights of protesters. Protesters are asked to contact the person listed in the
We view public participation as essential to effective rulemaking, and will consider all comments and material received during the comment period. Your comment can help shape the outcome of this rulemaking. If you submit a comment, please include the docket number for this rulemaking, indicate the specific section of this document to which each comment applies, and provide a reason for each suggestion or recommendation.
We encourage you to submit comments through the Federal eRulemaking Portal at
We accept anonymous comments. All comments received will be posted without change to
Documents mentioned in this NPRM as being available in the docket, and all public comments, will be in our online docket at
Marine safety, Navigation (water), Reporting and recordkeeping requirements, Waterways.
For the reasons discussed in the preamble, the Coast Guard proposes to amend 33 CFR part 100 as follows:
33 U.S.C. 1233.
(a)
(b)
(2)
(3)
(4)
(c)
(2) Except for participants and vessels already at berth, mooring, or anchor, all persons and vessels within the regulated area at the time it is implemented are to depart the regulated area.
(3) Persons desiring to transit the regulated area must first obtain authorization from the Captain of the Port Maryland-National Capital Region or Coast Guard Patrol Commander. Prior to the enforcement period, to seek permission to transit the area, the Captain of the Port Maryland-National Capital Region can be contacted at telephone number 410-576-2693 or on Marine Band Radio, VHF-FM channel 16 (156.8 MHz). During the enforcement period, to seek permission to transit the area, the Coast Guard Patrol Commander can be contacted on Marine Band Radio, VHF-FM channel 16 (156.8 MHz) for direction.
(4) The Coast Guard may be assisted in the patrol and enforcement of the regulated area by other Federal, State, and local agencies. The Coast Guard Patrol Commander and official patrol vessels enforcing this regulated area can be contacted on marine band radio VHF-FM channel 16 (156.8 MHz) and channel 22A (157.1 MHz).
(5) The Coast Guard will publish a notice in the Fifth Coast Guard District Local Notice to Mariners and issue a marine information broadcast on VHF-FM marine band radio announcing specific event date and times.
(d)
Department of Veterans Affairs.
Proposed rule.
The Department of Veterans Affairs (VA) proposes to amend its regulations that govern the Supportive Services for Veteran Families (SSVF) Program. This rulemaking would clarify VA's procedures for continuing to fund SSVF Program services in communities that have lost grants due to the non-renewal or termination of services of an existing award to a grantee by awarding non-renewed or deobligated funds to other existing SSVF grantees in or near the affected community. This award of non-renewed or deobligated funds would prevent potential access issues associated with grant termination. This rulemaking would also reduce the number of satisfaction surveys grantees are required to provide to participants in order to reduce the burden on grantees and participants.
Comments must be received on or before September 26, 2016.
Written comments may be submitted through
John Kuhn, National Center for Homelessness Among Veterans, Supportive Services for Veteran Families Program Office, 4100 Chester Avenue, Suite 200, Philadelphia, PA 19104, (877) 737-0111. (This is a toll-free number).
Title 38, section 2044, United States Code (U.S.C.), requires the Secretary to provide financial assistance to eligible entities to provide and coordinate the provision of supportive services for very low-income veteran families occupying permanent housing. The Secretary's implementing regulations are in 38 CFR part 62, which established the SSVF Program. Through the SSVF Program, VA awards supportive services grants to private non-profit organizations or consumer cooperatives to provide or coordinate the provision of supportive services to very low-income veteran families who are residing in permanent housing and at risk of becoming homeless; lacking a fixed, regular, and adequate nighttime residence, at risk of remaining so but for grantee assistance, and scheduled to become residents of permanent housing within 90 days pending the location or development of housing suitable for permanent housing; or, after exiting permanent housing, are seeking other housing that is responsive to their needs and preferences. This proposed rulemaking would clarify existing VA policy regarding award of non-renewed or deobligated funds to other existing SSVF grantees in or near the affected community where the funds were originally used in order to maintain continuity in the services offered to these communities.
Current § 62.25 provides the process to select grantees applying for renewal of supportive services grants. Paragraph (a) of § 62.25 of 38 CFR states that VA will score the grantee using the scoring criteria set forth in § 62.24 as long as the grantee continues to meet the threshold requirements in § 62.21. Paragraph (b) provides that VA will rank in order from highest to lowest the grantees who receive at least the minimum amount of total points and points per category in the Notice of Funding Availability (NOFA). Lastly, paragraph (c) states that VA will use the grantee's ranking as the basis for selection for funding and fund the highest-ranked grantees for which funding is available. Although § 62.25 does not expressly address the award of any non-renewed funds, it is VA's policy under this authority to offer to award non-renewed funds to other qualifying existing grantees within the same community applying the same criteria in this section when re-awarding non-renewed funds. Otherwise, the community that was served by the grantee may suffer an interruption in services to those who are homeless or at-risk of becoming homeless. We propose to amend § 62.25 to expressly codify this current practice in the regulation. We propose to add a new paragraph (d) to state the process by which VA would, in its discretion, offer to award any non-renewed funds to other qualifying existing grantees. This process would be similar to the award of deobligated funds under the proposed revisions to § 62.80(d)(2).
Section 62.36 establishes the operation requirements for grantees that provide supportive services. Paragraph (c) establishes the notifications a grantee must provide to participants before the grantee provides supportive services, which include that the services are paid for in whole or part by VA, the types of services available to the participant, and any restrictions or conditions on the receipt of the services. Paragraph (c) also states that a grantee must provide each participant with a satisfaction survey. This satisfaction survey helps VA evaluate the provision of supportive services by a grantee to a participant. The results of the satisfaction survey also assist VA in determining if future SSVF Program funds should be awarded to a grantee.
Under current paragraph (c)(2), a satisfaction survey must be provided to the participant within 45 to 60 days of the participant's entry into the grantee's program, and also within 30 days prior to the participant's pending exit from the program. However, requesting two satisfaction surveys has resulted in poor response rates by participants and has created an unnecessary burden on the grantees and the participants. Therefore, we propose to reduce the number of satisfaction surveys by eliminating the survey that must be provided to the participant within 45 to 60 days of the participant's entry to the program. By reducing the number of satisfaction surveys, VA expects to reduce the burden to the grantees and the participants and, in turn, improve the response rate. We propose to amend paragraph (c)(2) to state that a “grantee must provide each participant with a satisfaction survey, which the participant can submit directly to VA, within 30 days of such participant's pending exit from the grantee's program.”
Current paragraph (a) of § 62.80 states that VA will recover from grantees any SSVF funds that are not used in accordance with the SSVF Program requirements. In addition, paragraph (b)
We would amend § 62.80(d) by revising paragraph (d)(2). The proposed revision to § 62.80(d)(2) would state that VA may award deobligated or non-renewed funds to a qualified existing SSVF grantee serving the community where the deobligation or non-renewal occurred. A grantee who is currently serving the affected community would be better able to address the needs of the community because the grantee is already working within that community. VA understands that there may be more than one grantee in a community that is qualified to receive the deobligated funds. We would, therefore, first offer to award the deobligated or non-renewed funds to the grantee with the highest grant score (based on existing grantees most recent scores) that has the capacity to provide immediate services to the affected community. The requirement that the grantee be able to immediately offer services would be made in order to make certain that the grantee who is offered the funds is quickly able to address the needs of the impacted community and reduce added delays in providing services. However, such grantee may not want to take on the added funds or responsibilities. In such case, VA would offer the funds to the next qualified grantee in rank order until all funds are awarded. There may be instances where there are no other grantees serving the community where the deobligation occurred. In such circumstances, VA would offer to award the deobligated funds to qualified grantees in rank order who serve the adjacent community, subject to the grantee's agreement to use the funds to serve the community where the deobligation occurred. We would add the requirement that the funds must be used in the community where the funds were deobligated because the deobligated funds are offered as a means of providing continuous services to the affected community, not to add more funds to a community that is already funded otherwise.
The Code of Federal Regulations, as proposed to be revised by this proposed rulemaking, would represent the exclusive legal authority on this subject. No contrary rules or procedures would be authorized. All VA guidance would be read to conform with this proposed rulemaking if possible or, if not possible, such guidance would be superseded by this rulemaking.
Although this action contains provisions constituting collections of information at 38 CFR 62.36, under the Paperwork Reduction Act of 1995 (44 U.S.C. 3501-3521), no new or proposed revised collections of information are associated with this proposed rule. The information collection requirements for § 62.36 are currently approved by the Office of Management and Budget (OMB) and have been assigned OMB control number 2900-0757.
The Secretary hereby certifies that this proposed rule would not have a significant economic impact on a substantial number of small entities as they are defined in the Regulatory Flexibility Act (5 U.S.C. 601-612). This proposed rule would only impact those entities that choose to participate in the SSVF Program. Small entity applicants will not be affected to a greater extent than large entity applicants. Small entities must elect to participate, and it is considered a benefit to those who choose to apply. To the extent this proposed rule would have any impact on small entities, it would not have an impact on a substantial number of small entities. Therefore, under 5 U.S.C. 605(b), this rulemaking would be exempt from the initial and final regulatory flexibility analysis requirements of sections 603 and 604.
Executive Orders 12866 and 13563 direct agencies to assess the costs and benefits of available regulatory alternatives and, when regulation is necessary, to select regulatory approaches that maximize net benefits (including potential economic, environmental, public health and safety effects, and other advantages; distributive impacts; and equity). Executive Order 13563 (Improving Regulation and Regulatory Review) emphasizes the importance of quantifying both costs and benefits, reducing costs, harmonizing rules, and promoting flexibility. Executive Order 12866 (Regulatory Planning and Review) defines a “significant regulatory action,” requiring review by OMB, unless OMB waives such review, as “any regulatory action that is likely to result in a rule that may: (1) Have an annual effect on the economy of $100 million or more or adversely affect in a material way the economy, a sector of the economy, productivity, competition, jobs, the environment, public health or safety, or State, local, or tribal governments or communities; (2) Create a serious inconsistency or otherwise interfere with an action taken or planned by another agency; (3) Materially alter the budgetary impact of entitlements, grants, user fees, or loan programs or the rights and obligations of recipients thereof; or (4) Raise novel
The economic, interagency, budgetary, legal, and policy implications of this regulatory action have been examined, and it has been determined not to be a significant regulatory action under Executive Order 12866. VA's impact analysis can be found as a supporting document at
The Unfunded Mandates Reform Act of 1995 requires, at 2 U.S.C. 1532, that agencies prepare an assessment of anticipated costs and benefits before issuing any rule that may result in the expenditure by State, local, and tribal governments, in the aggregate, or by the private sector, of $100 million or more (adjusted annually for inflation) in any one year. This proposed rule would have no such effect on State, local, and tribal governments, or on the private sector.
The Secretary of Veterans Affairs, or designee, approved this document and authorized the undersigned to sign and submit the document to the Office of the Federal Register for publication electronically as an official document of the Department of Veterans Affairs. Gina S. Farrisee, Deputy Chief of Staff, Department of Veterans Affairs, approved this document on July 19, 2016, for publication.
Administrative practice and procedure, Day care, Disability benefits, Government contracts, Grant programs—health, Grant programs—housing and community development, Grant programs—veterans, Heath care, Homeless, Housing, Indians—lands, Individuals with disabilities, Low and moderate income housing, Manpower training programs, Medicaid, Medicare, Public assistance programs, Public housing, Relocation assistance, Rent subsidies, Reporting and recordkeeping requirements, Rural areas, Social security, Supplemental Security Income (SSI), Travel and transportation expenses, Unemployment compensation.
For the reasons set out in the preamble, the Department of Veterans Affairs proposes to amend 38 CFR part 62 as follows:
38 U.S.C. 501, 2044, and as noted in specific sections.
(d) At its discretion, VA may award any non-renewed funds to an applicant or existing grantee. If VA chooses to award non-renewed funds to an applicant or existing grantee, funds will be awarded as follows:
(1) VA will first offer to award the non-renewed funds to the applicant or grantee with the highest grant score under the relevant Notice of Fund Availability that applies for, or is awarded a renewal grant in, the same community as, or a proximate community to, the affected community. Such applicant or grantee must have the capacity and agree to provide immediate services to the affected community. Under this section 62.25, the relevant Notice of Fund Availability is the most recently published Notice of Fund Availability which covers the geographic area that includes the affected community, or for multi-year grant awards, the Notice of Fund Availability for which the grantee received the multi-year award.
(2) If the first such applicant or grantee offered the non-renewed funds refuses the funds, VA will offer to award the funds to the next highest-ranked such applicant or grantee, per the criteria in paragraph (d)(1) of this section, and continue on in rank order until the non-renewed funds are awarded.
(c) * * *
(2) The grantee must provide each participant with a satisfaction survey, which the participant can submit directly to VA, within 30 days of such participant's pending exit from the grantee's program.
(d) * * *
(2) At its discretion, VA may re-advertise in a Notice of Fund Availability the availability of funds that have been deobligated under this section or award deobligated funds to an applicant or existing grantee. If VA chooses to award deobligated funds to an applicant or existing grantee, funds will be awarded as follows:
(i) VA will first offer to award the deobligated funds to the applicant or grantee with the highest grant score under the relevant Notice of Fund Availability that applied for or was awarded funds in the same community as, or proximate community to, the affected community. Such applicant or grantee must have the capacity and agree to provide immediate services to the affected community. Under this section 62.80 the relevant Notice of Fund Availability is the most recently published Notice of Fund Availability which covers the geographic area that includes the affected community, or for multi-year grant awards, the most recently published Notice of Fund Availability which covers the geographic area that includes the affected community for which the grantee received the multi-year award.
(ii) If the first such applicant or grantee offered the deobligated funds refuses the funds, VA will offer to award funds to the next highest-ranked such applicant or grantee, per to the criteria in paragraph (d)(2)(i) of this section, and continue on in rank order until all deobligated funds are awarded.
Environmental Protection Agency.
Proposed rule.
The Environmental Protection Agency (EPA) is proposing to approve a State Implementation Plan (SIP) revision submitted by the State of Tennessee, through the Tennessee Department of Environment and Conservation (TDEC), on September 25, 2013. The SIP submittal includes a change to the TDEC regulation “Logs and Reports.” EPA is proposing to approve this SIP revision because it is consistent with the Clean Air Act (CAA or Act) and federal regulations governing SIPs.
Comments must be received on or before August 26, 2016.
Submit your comments, identified by Docket ID No. EPA-R04-OAR-2015-0403 at
D. Brad Akers, Air Regulatory Management Section, Air Planning and Implementation Branch, Air, Pesticides and Toxics Management Division, U.S. Environmental Protection Agency, Region 4, 61 Forsyth Street SW., Atlanta, Georgia 30303-8960. Mr. Akers can be reached by telephone at (404) 562-9089 or via electronic mail at
On September 25, 2013, TDEC submitted a change to the Tennessee rules to EPA for approval and incorporation into the Tennessee SIP. Specifically, the submittal includes a change to remove the existing text of subparagraph (2) from Tennessee Air Pollution Control Regulation (TAPCR) Rule 1200-3-20-.04, “Logs and Reports,” and replace it with the word “Reserved.” Existing subparagraph (2) provides that all sources located in or having a significant impact on a nonattainment area submit a quarterly report to the Technical Secretary of Tennessee's Air Pollution Control Board that (1) identifies periods of startups, shutdowns, and/or malfunctions (SSM events) that result in an exceedance of an emission limitation, (2) estimates the excess emissions released during such SSM events, and (3) provides total source emissions where such emissions are not otherwise required to be reported under Tennessee Air Pollution Control Regulations (TAPCR) Chapters 1200-3-10-.02 or 1200-3-16. EPA is proposing to approve Tennessee's September 25, 2013, SIP revision because the proposed revision is consistent with the requirements of the CAA and federal regulations governing SIPs.
Section 110(a)(2)(A) of the Act requires SIP provisions such as emission limitations to be enforceable, and sections 110(a)(2)(F)(i) and (F)(ii) require plans to contain certain types of provisions related to emissions monitoring and reporting, as prescribed by the Administrator. Accordingly, 40 CFR part 51, subpart K, “Source Surveillance,” requires a SIP to provide for monitoring the status of compliance with the regulations in it, including “legally enforceable procedures” for recordkeeping and reporting.
In support of its proposed SIP revision, TDEC explains in its September 25, 2013, submittal that it considers the existing quarterly reporting requirement to be outdated in light of more recently enacted federal regulations requiring less frequent reporting. TDEC specifically points to EPA's 1999 rulemaking that reduced the required reporting frequency under the General Provisions for 40 CFR parts 60, 61, and 63 from quarterly to semi-annually.
Even if EPA approves Tennessee's request to remove the reporting requirements at TAPCR Rule 1200-3-20-.04(2) from Tennessee's SIP, major sources will continue to be subject to the title V reporting requirements, as well as other emissions reporting requirements in Tennessee's SIP. Regarding title V reporting requirements, Tennessee has an EPA-approved title V operating permits program and TDEC is the permitting authority.
The title V operating permits program also requires “[p]rompt reporting of deviations from permit requirements, including those attributable to upset conditions as defined in the permit, the probable cause of such deviations, and any corrective actions or preventative measures taken.”
In addition to the title V reporting requirements, Tennessee's SIP authorizes the Tennessee Air Pollution Control Board's Technical Secretary to require enhanced reporting as needed to verify that a “major stationary source” is operating in compliance with applicable requirements.
With respect to TDEC's request to remove the requirement in TAPCR Rule 1200-3-20-.04(2) that sources located in or impacting nonattainment areas report total emissions (if such reports are not otherwise required), EPA notes that other federal reporting requirements would ensure that similar emissions information is reported on a regular basis. Specifically, EPA's Air Emissions Reporting Requirements (AERR), set forth at Subpart A to 40 CFR part 51, specify that the state must submit triennial reports of annual (12-month) emissions for all sources and every-year reports of annual emissions of criteria air pollutants and their precursors for all major sources as well as annual emissions reporting from certain larger sources, as outlined in Appendix A to Subpart A. While the reporting requirement that TDEC proposes to remove from its SIP applies only to sources located in or impacting nonattainment areas, the AERR applies to all major sources located in all areas, regardless of attainment status. Specifically, under the AERR, if a source is considered a major source under 40 CFR part 70 for one criteria air pollutant or precursor pollutant, then the state must report all emissions of criteria air pollutants and precursors for that source. TDEC implements the AERR by collecting reports of annual emissions from sources in June of each year, depending on whether the triennial or annual report applies, and then compiling and submitting the information to EPA's emissions inventory system. On its Web site, TDEC outlines the thresholds, timeframes, and structure of these emissions reports, citing the AERR and a statute at Tennessee Code Annotated Section 68-201-105(b)(2), which gives the Division of Air Pollution Control the authority to “[r]equire that any person furnish the department information required by it in discharge of its duties under this part, if the department has reason to believe such person is, or may be about to, causing or contributing to air pollution.”
There are two types of minor sources of air pollution: “true minors” and “synthetic minors.” “Synthetic minors” are sources that restrain their “potential to emit” to a level that is below the major source applicability threshold through the use of emissions control, restriction on hours of operation, or other means.
Synthetic minor sources, in accordance with TAPCR 1200-3-9-.02(11)(a), are subject to an enforceable limit restricting potential to emit and must implement “detailed monitoring, reporting and recordkeeping requirements that prove the source is abiding by its more restrictive emission and/or production limits.” EPA approved Tennessee's request to incorporate TAPCR 1200-3-9-.02(11)(a) into the Tennessee SIP on February 13, 1997. 62 FR 6724. Accordingly, Tennessee's synthetic minor emission limits are federally enforceable.
Due to their relatively small amount of emissions, true minor sources are subject to significantly fewer emissions-related reporting obligations than major or synthetic minor sources. There is no general federal requirement for true minor sources to directly report their emissions to the state or to EPA. However, the CAA and federal regulations do require source-specific emissions reporting for true minor sources under certain circumstances. Specifically, for areas designated as marginal-or-above nonattainment for the ozone NAAQS, any source emitting 25 tons per year or more of nitrogen oxides (NO
Emissions from true minor sources also are captured to some extent by the AERR. Specifically, under the AERR, Tennessee must compile minor source emissions data and periodically submit that data to EPA for inclusion in the EPA's National Emissions Inventory. The rule requires triennial reports of VOC emissions in “serious,” “severe,” and “extreme” ozone nonattainment areas for sources that emit greater than or equal to 50 tons per year, 25 tons per year and 10 tons per year, respectively.
Subsequent to the September 25, 2013, submittal, TDEC submitted a memorandum that addressed true minor sources. In that memorandum, Tennessee highlighted the Technical Secretary's authority under 1200-3-10-.02(1)(a) to collect reports from “any air contaminant source.” TDEC notes that if there were a reason to think a true minor source was impacting air quality standards, the Division of Air Pollution Control could collect these reports of emissions. This memorandum is included in the Docket for today's proposed action.
In light of the combination of federal reporting requirements, reporting requirements under Tennessee's SIP, and Tennessee's authority to request additional information on source emissions when necessary, EPA proposes to find that Tennessee's September 25, 2013, SIP revision would not impair Tennessee's ability to determine the nature and amount of emissions from both major and minor sources and whether such sources are operating in compliance with Tennessee's SIP. Accordingly, EPA's proposed approval of Tennessee's September 25, 2013, SIP revision is consistent with the minimum SIP requirements pertaining to enforceability and emissions reporting, including the “Source Surveillance” requirements specified at 40 CFR 51.211.
As discussed above, before the removal of this paragraph, sources were required to report excess emissions during SSM events, as well as total emissions, each calendar quarter. If this provision is removed from the SIP, the requisite reporting from major sources and synthetic minor sources generally will be less frequent, and emissions from true minor sources generally will be accounted for only in aggregate for periodic AERR reporting from the state (unless TDEC exercises its authority to request submittal of additional emissions information). The effect of less frequent, or less overall required reporting constitutes a potential SIP relaxation. Section 110(l) of the Act provides that “the Administrator shall not approve a revision of a plan if the revision would interfere with any applicable requirement concerning attainment and reasonable further progress (as defined in section 171), or any other applicable requirement of this Act.” Accordingly, if provisions are removed from the federally approved SIP, states must provide a noninterference demonstration pursuant to section 110(l) of the Act.
Additionally, section 193 of the Act, the general savings clause, states: “No control requirement in effect, or required to be adopted by an order, settlement agreement, or plan in effect before the date of the enactment of the [CAA] Amendments of 1990 in any area which is a nonattainment area for any air pollutant may be modified . . . unless the modification insures equivalent or greater emission reductions of such air pollutant.” Tennessee's September 25, 2013, SIP revision would revise a regulation that was approved into Tennessee's SIP in 1980 and that impacts requirements applicable to sources located in or having a significant impact on air quality in a nonattainment area.
Tennessee originally provided a brief section 110(l) and section 193 analysis in the response to public comments section of the final September 25, 2013, submittal to account for the relaxation of emissions reporting requirements.
EPA preliminarily concludes that removal of the quarterly reporting requirement at TAPCR Rule 1200-3-20-.04 from Tennessee's SIP will not result in an increase in emissions of any air pollutant and therefore will not impact attainment, reasonable further progress toward attainment, or maintenance of the NAAQS. While the proposed SIP revision reduces emissions reporting obligations, SIP emission limits remain unchanged. Furthermore, as discussed above, the array of reporting requirements that will remain in effect, including title V reporting requirements, SIP reporting requirements, emissions reporting required by the State pursuant to the AERR, and additional reporting as the State deems necessary, will provide Tennessee with sufficient information to ensure that sources operate in compliance with applicable emission limits. Therefore, EPA is proposing to find that Tennessee's September 25, 2013, SIP revision is consistent with the requirements of both sections 110(l) and 193 of the Act.
In this action, EPA is not proposing to approve or disapprove revisions to any existing emission limitations that apply during SSM events. EPA notes that on June 12, 2015, the Agency published a formal finding that a number of states have SIPs with SSM provisions that are contrary to the CAA and existing EPA guidance.
In this rule, EPA is proposing to include in a final EPA rule regulatory text that includes incorporation by reference. In accordance with requirements of 1 CFR 51.5, EPA is proposing to incorporate by reference the TDEC Rule 1200-3-20-.04, entitled “Logs and Reports,” effective June 19, 2013, which removed a quarterly reporting requirement for total emissions and for excess emissions during SSM. EPA has made, and will continue to make, these documents generally available electronically through
EPA is proposing to approve the September 25, 2013, Tennessee SIP revision consisting of removing and reserving paragraph (2) of Rule 1200-3-20-.04, “Logs and Reports” because it is consistent with the CAA and federal regulations governing SIPs.
Under the CAA, the Administrator is required to approve a SIP submission that complies with the provisions of the Act and applicable Federal regulations.
• Is not a significant regulatory action subject to review by the Office of Management and Budget under Executive Orders 12866 (58 FR 51735, October 4, 1993) and 13563 (76 FR 3821, January 21, 2011);
• does not impose an information collection burden under the provisions of the Paperwork Reduction Act (44 U.S.C. 3501
• is certified as not having a significant economic impact on a substantial number of small entities under the Regulatory Flexibility Act (5 U.S.C. 601
• does not contain any unfunded mandate or significantly or uniquely affect small governments, as described in the Unfunded Mandates Reform Act of 1995 (Pub. L. 104-4);
• does not have Federalism implications as specified in Executive Order 13132 (64 FR 43255, August 10, 1999);
• is not an economically significant regulatory action based on health or safety risks subject to Executive Order 13045 (62 FR 19885, April 23, 1997);
• is not a significant regulatory action subject to Executive Order 13211 (66 FR 28355, May 22, 2001);
• is not subject to requirements of Section 12(d) of the National Technology Transfer and Advancement Act of 1995 (15 U.S.C. 272 note) because application of those requirements would be inconsistent with the CAA; and
• does not provide EPA with the discretionary authority to address, as appropriate, disproportionate human health or environmental effects, using practicable and legally permissible methods, under Executive Order 12898 (59 FR 7629, February 16, 1994).
The SIP is not approved to apply on any Indian reservation land or in any other area where EPA or an Indian tribe has demonstrated that a tribe has jurisdiction. In those areas of Indian country, the rule does not have tribal implications as specified by Executive Order 13175 (65 FR 67249, November 9, 2000), nor will it impose substantial direct costs on tribal governments or preempt tribal law.
Environmental protection, Incorporation by reference, Reporting and recordkeeping requirements.
42 U.S.C. 7401
Environmental Protection Agency.
Proposed rule.
The Environmental Protection Agency (EPA) is proposing to partially approve and partially disapprove elements of New Jersey's State Implementation Plan (SIP) revision submitted regarding the infrastructure requirements of section 110(a)(1) and (2) of the Clean Air Act (CAA) for the 2008 Lead, 2008 Ozone, 2010 Nitrogen Dioxide (NO
Comments must be received on or before August 26, 2016.
Submit your comments, identified by Docket ID Number EPA-R02-OAR-2016-0389 at
Kenneth Fradkin, Environmental Protection Agency, 290 Broadway, 25th Floor, New York, NY 10007-1866, (212) 637-3702, or by email at
Pursuant to section 110(a)(1) of the CAA, states are required to submit SIPs that provide for the implementation, maintenance and enforcement of a new or revised NAAQS within 3 years following the promulgation of a new or revised NAAQS. Section 110(a)(2) lists specific requirements that states must meet in these SIP submissions, as applicable. The EPA refers to this type of SIP submission as the “infrastructure” SIP because the SIP ensures that states can implement, maintain and enforce the air standards. Within these requirements, section 110(a)(2)(D)(i) contains requirements to address interstate transport of NAAQS pollutants. A SIP revision submitted for this sub-section is referred to as an “interstate transport SIP.” Section 110(a)(2)(D)(i) contains two subsections: (D)(i)(I) and (D)(i)(II). Section 110(a)(2)(D)(i)(I) requires SIPs to contain adequate provisions to prohibit emissions from the state that will contribute significantly to nonattainment of the NAAQS in any other state (commonly referred to as prong 1), or interfere with maintenance of the NAAQS in any other state (prong 2). Section 110(a)(2)(D)(i)(II) requires that infrastructure SIPs include provisions prohibiting any source or other type of emissions activity in one state from interfering with measures required to prevent significant deterioration (PSD) of air quality (prong 3) and to protect visibility (prong 4) in another state.
On March 12, 2008 (73 FR 16436 (March 27, 2008)), EPA promulgated a revised NAAQS for ozone. EPA revised the level of the 8-hour ozone NAAQS from 0.08 parts per million (ppm) to 0.075 ppm.
On October 15, 2008 (73 FR 66964 (Nov. 12, 2008)), EPA promulgated a new NAAQS, rolling 3-month average NAAQS for lead. The 2008 lead NAAQS is 0.15 micrograms per cubic meter of air (µg/m
On September 21, 2006 (71 FR 61144 (Oct. 17, 2006)), EPA retained the primary and secondary 24-hour PM
On October 17, 2014 the New Jersey Department of Environmental Protection (NJDEP) submitted a revision to its SIP to address requirements under section 110(a)(2) of the CAA (the infrastructure requirements) related to the 2008 Lead, 2008 Ozone, 2010 NO
The submittal addressed all four prongs of the interstate transport
This proposed action pertains only to the portion of the SIP submittal addressing section 110(a)(2)(D)(i)(II)(prongs 3 and 4). EPA will address the other portions of the October 17, 2014 infrastructure SIP submittal in a separate action.
Under 110(a)(2)(D)(i)(II) (prong 3) SIPs are required to have provisions prohibiting emissions that would interfere with measures required to be in another state's SIP under part C of the CAA to prevent significant deterioration of air quality.
New Jersey's SIP is not approved with respect to the PSD permit program required by Part C of the CAA. As a result, EPA's regulations at 40 CFR 52.21 have been incorporated into New Jersey's applicable state plan. New Jersey has been delegated authority by EPA to implement 40 CFR 52.21. Although New Jersey has been successfully implementing the program, a state's infrastructure SIP submittal cannot be considered for approvability with respect to prong 3 until EPA has issued final approval of that state's PSD SIP, or, alternatively, has issued final approval of a SIP that EPA has otherwise found adequate to prohibit interference with other state's measures to prevent significant deterioration of air quality. Therefore, we are proposing to disapprove New Jersey's 110(a) submissions for the 2008 Lead, 2008 Ozone, 2010 NO
In this action, EPA is proposing that, for the 2008 Lead, 2008 Ozone, 2010 NO
In EPA's approval of New Jersey's Regional Haze Plan, EPA has determined that the plan contains emission reductions needed to achieve New Jersey's share of emission reductions that were determined to be reasonable through the regional planning process. Further, New Jersey's Regional Haze Plan ensures that emissions from the State will not interfere with the Reasonable Progress Goals for neighboring States' Class I areas.
Thus, New Jersey's approved Regional Haze SIP ensures that emissions from sources within the State are not interfering with measures to protect visibility in other states.
EPA is proposing to disapprove the portion of the October 17, 2014 New Jersey SIP submittal for 2008 Lead, 2008 Ozone, 2010 NO
EPA is proposing approval of the portion of the October 17, 2014 New Jersey SIP submittal for 2008 Lead, 2008 Ozone, 2010 NO
EPA is soliciting public comments on the issues discussed in this proposal. These comments will be considered before EPA takes final action. Interested parties may participate in the Federal rulemaking procedure by following the directions in the
Under the Clean Air Act, the Administrator is required to approve a SIP submission that complies with the provisions of the Act and applicable Federal regulations. 42 U.S.C. 7410(k); 40 CFR 52.02(a). Thus, in reviewing SIP submissions, EPA's role is to approve state choices, provided that they meet the criteria of the Clean Air Act. Accordingly, this action merely approves state law as meeting Federal requirements and does not impose additional requirements beyond those imposed by state law. For that reason, this action:
• Is not a “significant regulatory action” subject to review by the Office of Management and Budget under Executive Order 12866 (58 FR 51735, October 4, 1993);
• does not impose an information collection burden under the provisions of the Paperwork Reduction Act (44 U.S.C. 3501
• is certified as not having a significant economic impact on a substantial number of small entities under the Regulatory Flexibility Act (5 U.S.C. 601
• does not contain any unfunded mandate or significantly or uniquely affect small governments, as described in the Unfunded Mandates Reform Act of 1995 (Public Law 104-4);
• does not have Federalism implications as specified in Executive Order 13132 (64 FR 43255, August 10, 1999);
• is not an economically significant regulatory action based on health or safety risks subject to Executive Order 13045 (62 FR 19885, April 23, 1997);
• is not a significant regulatory action subject to Executive Order 13211 (66 FR 28355, May 22, 2001);
• is not subject to requirements of Section 12(d) of the National Technology Transfer and Advancement Act of 1995 (15 U.S.C. 272 note) because application of those requirements would be inconsistent with the Clean Air Act; and
• does not provide EPA with the discretionary authority to address, as appropriate, disproportionate human health or environmental effects, using practicable and legally permissible methods, under Executive Order 12898 (59 FR 7629, February 16, 1994).
Environmental protection, Air pollution control, Intergovernmental relations, Incorporation by reference, Carbon monoxide, Lead, Nitrogen dioxide, Ozone, Particulate matter, Sulfur Dioxide, Reporting and recordkeeping requirements, Volatile organic compounds.
42 U.S.C. 7401
Commission on Civil Rights.
Announcement of meeting.
Notice is hereby given, pursuant to the provisions of the rules and regulations of the U.S. Commission on Civil Rights (Commission), and the Federal Advisory Committee Act (FACA), that a briefing meeting of the Montana Advisory Committee to the Commission will convene at 1 p.m. (MDT) on Monday, August 29, 2016, at the Al Bedoo Shrine Auditorium, 1125 Broadwater Avenue, Billings, MT 59102. The purpose of the briefing meeting is to gather information from federal and tribal government officials and others regarding bordertown discrimination in Montana. Briefing topics will include discrimination that impacts Native Americans in the areas of education, employment, services, public accommodations, law enforcement, and the legal.
Persons who plan to attend the meeting and require other accommodations, please contact Evelyn Bohor at
Time will be set aside at the end of the briefing so that members of the public may address the Committee after the formal presentations have been completed. Persons interested in the issue are also invited to submit written comments; the comments must be received in the regional office by Thursday, September 29, 2016. Written comments may be mailed to the Rocky Mountain Regional Office, U.S. Commission on Civil Rights, 1961 Stout Street, Suite 13-201, Denver, CO 80294, faxed to (303) 866-1050, or emailed to Evelyn Bohor at
Records and documents discussed during the meeting will be available for public viewing as they become available at
Monday, August 29, 2016 (MDT).
Al Bedoo Shrine Auditorium, 1125 Broadwater Avenue, Billings, MT 59102.
Malee Craft at
U.S. Commission on Civil Rights.
Announcement of meeting.
Notice is hereby given, pursuant to the provisions of the rules and regulations of the U.S. Commission on Civil Rights (Commission) and the Federal Advisory Committee Act that the Indiana Advisory Committee (Committee) will hold a meeting on Thursday, August 25, 2016, from 11 a.m.-12 p.m. EDT. The Committee will discuss findings and recommendations regarding school discipline policies and practices which may facilitate disparities in juvenile justice involvement and youth incarceration rates on the basis of race, color, disability, or sex, in what has become known as the “School to Prison Pipeline,” in preparation to issue a report to the Commission on the topic.
This meeting is open to the public vial the following toll free call in number 888-397-5354 conference ID 2312476. Any interested member of the public may call this number and listen to the meeting. The conference call operator will ask callers to identify themselves, the organization they are affiliated with (if any), and an email address prior to placing callers into the conference room. Callers can expect to incur regular charges for calls they initiate over wireless lines, according to their wireless plan. The Commission will not refund any incurred charges. Callers will incur no charge for calls they initiate over land-line connections to the toll-free telephone number. Persons with hearing impairments may also follow the proceedings by first calling the Federal Relay Service at 1-800-977-8339 and providing the Service with the conference call number and conference ID number.
Members of the public are invited to make statements during the designated open comment period. In addition, members of the public may submit written comments; the comments must be received in the regional office within 30 days following the meeting. Written comments may be mailed to the Regional Programs Unit, U.S. Commission on Civil Rights, 55 W. Monroe St., Suite 410, Chicago, IL 60615. They may also be faxed to the Commission at (312) 353-8324, or emailed to Carolyn Allen at
Records and documents discussed during the meeting will be available for public viewing prior to and following the meeting at
The meeting will be held on Thursday August 25, 2016, from 11 a.m.-12 p.m. EDT.
Melissa Wojnaroski, DFO, at 312-353-8311 or
U.S. Commission on Civil Rights.
Announcement of meeting.
Notice is hereby given, pursuant to the provisions of the rules and regulations of the U.S. Commission on Civil Rights (Commission) and the Federal Advisory Committee Act that the Michigan Advisory Committee (Committee) will hold a meeting on Wednesday, August 10, 2016, at 10 a.m. EDT for the purpose of discussing civil rights topics emerging from testimony regarding civil asset forfeiture practices in the state.
Members of the public can listen to the discussion. This meeting is available to the public through the following toll-free call-in number: 888-428-9496, conference ID: 5429444. Any interested member of the public may call this number and listen to the meeting. An open comment period will be provided to allow members of the public to make a statement as time allows. The conference call operator will ask callers to identify themselves, the organization they are affiliated with (if any), and an email address prior to placing callers into the conference room. Callers can expect to incur regular charges for calls they initiate over wireless lines, according to their wireless plan. The Commission will not refund any incurred charges. Callers will incur no charge for calls they initiate over land-line connections to the toll-free telephone number. Persons with hearing impairments may also follow the proceedings by first calling the Federal Relay Service at 1-800-977-8339 and providing the Service with the conference call number and conference ID number.
Members of the public are also entitled to submit written comments; the comments must be received in the regional office within 30 days following the meeting. Written comments may be mailed to the Midwestern Regional Office, U.S. Commission on Civil Rights, 55 W. Monroe St., Suite 410, Chicago, IL 60615. They may also be faxed to the Commission at (312) 353-8324, or emailed to Carolyn Allen at
Records generated from this meeting may be inspected and reproduced at the Midwestern Regional Office, as they become available, both before and after the meeting. Records of the meeting will be available via
The meeting will be held on Wednesday, August 10, 2016, at 10 a.m. EDT.
Carolyn Allen at
National Telecommunications and Information Administration, U.S. Department of Commerce.
Notice of open meeting.
The National Telecommunications and Information Administration (NTIA), through the BroadbandUSA program, will hold a regional broadband summit, “Big Sky Broadband Workshop,” to share information to help communities build their broadband capacity and utilization. The summit will present best practices and lessons learned from broadband network infrastructure build-outs and digital inclusion programs from Montana and surrounding states, including projects that NTIA awarded through its Broadband Technology Opportunities Program (BTOP) and State Broadband Initiative (SBI) grant programs and funded by the American Recovery and Reinvestment Act of 2009.
The Big Sky Broadband Workshop will be held on August 31, 2016, from 12:00 p.m. to 5:00 p.m., and September 1, 2016, from 9:00 a.m. to 5:00 p.m., Mountain Daylight Time.
The meeting will be held in Montana at the Hilton Garden Inn, 3720 N. Reserve St., Missoula, MT 59808.
Barbara Brown, National Telecommunications and Information Administration, U.S. Department of Commerce, Room 4628, 1401 Constitution Avenue NW., Washington, DC 20230; telephone: (202) 280-8260; email:
NTIA's BroadbandUSA program provides expert advice and field-proven tools for assessing broadband adoption, planning new infrastructure, and engaging a wide range of partners in broadband projects. BroadbandUSA convenes workshops on a regular basis to bring stakeholders together to discuss ways to improve broadband policies, share best practices, and connect communities to other
The Big Sky Broadband Workshop features subject matter experts from NTIA's BroadbandUSA initiative and will include NTIA presentations that discuss lessons learned through the implementation of the BTOP and SBI grants. A panel will explore key elements required for successful broadband projects using a mix of regional examples. Topics will include marketing and demand aggregation, outreach, coordinating with government agencies, partnership strategies, construction, and oversight. A second panel will explore why broadband matters in comprehensive community planning and will provide real-world examples about how broadband applications help communities improve economic development, workforce development and education opportunities. A third panel will examine business model options, including private networks, public/private partnerships, co-ops, and municipal systems. Panelists will provide tips to communities on how to research funding options, make a compelling case to funders, and leverage multiple federal and state and non-profit funding streams.
The summit will be open to the public and press. Pre-registration is requested, and space is limited. Portions of the meeting will be webcast. Information on how to pre-register for the meeting and how to access the free, live webcast will be available on NTIA's Web site:
The public meeting is physically accessible to people with disabilities. Individuals requiring accommodations, such as language interpretation or other ancillary aids, are asked to notify Barbara Brown at the contact information listed above at least five (5) business days before the meeting.
Committee for Purchase From People Who Are Blind or Severely Disabled.
Addition to the Procurement List.
This action adds a service to the Procurement List that will be provided by the nonprofit agency employing persons who are blind or have other severe disabilities.
Committee for Purchase From People Who Are Blind or Severely Disabled, 1401 S. Clark Street, Suite 715, Arlington, Virginia, 22202-4149.
Patricia Briscoe, Telephone: (703) 603-7740, Fax: (703) 603-0655, or email
On 4/8/2016 (81 FR 20624-20625), the Committee for Purchase From People Who Are Blind or Severely Disabled published notice of proposed addition to the Procurement List.
After consideration of the material presented to it concerning capability of qualified nonprofit agencies to provide the service and impact of the addition on the current or most recent contractors, the Committee has determined that the service listed below is suitable for procurement by the Federal Government under 41 U.S.C. 8501-8506 and 41 CFR 51-2.4.
I certify that the following action will not have a significant impact on a substantial number of small entities. The major factors considered for this certification were:
1. The action will not result in any additional reporting, recordkeeping or other compliance requirements for small entities other than the small organizations that will provide the service to the Government.
2. The action will result in authorizing small entities to provide the service to the Government.
3. There are no known regulatory alternatives which would accomplish the objectives of the Javits-Wagner-O'Day Act (41 U.S.C. 8501-8506) in connection with the service proposed for addition to the Procurement List.
Accordingly, the following service is added to the Procurement List:
Office of the Secretary of Defense, DoD.
Notice to alter a system of records.
Pursuant to the Privacy Act of 1974, 5 U.S.C. 552a, and Office of Management and Budget (OMB) Circular No. A-130, notice is hereby given that the Office of the Secretary of Defense (OSD) proposes to alter a system of records, DMDC 02 DoD, entitled “Defense Enrollment Eligibility Reporting Systems (DEERS)” last published at 80 FR 68304, November 4, 2015.
The system of records exists to: Record the issuance of Department of Defense (DoD) badges and identification cards; authenticate and identify DoD affiliated personnel; grant physical and logical access to DoD facilities; determine eligibility for DoD entitlements and privileges; support DoD health care management programs; assess manpower, support personnel and readiness functions; and provide appropriate contact information of DoD personnel and beneficiaries for the purpose of conducting surveys authorized by the DoD.
This alteration adds a routine use enabling information from the system of records to be disclosed to national consumer reporting agencies to ensure eligible Service members are afforded protections under the Military Lending Act (MLA) in accordance with 32 CFR 232, Limitations on Terms of Consumer Credit Extended to Service Members and Dependents. In addition, the following Department of Defense (DoD) blanket routine have been applied to this system: Law Enforcement, Disclosure When Requesting Information, Congressional Inquiries Disclosure, Disclosure to the Office of Personnel Management, Disclosure of information to the National Archives and Records Administration, and Data Breach Remediation Purposes. This alteration also reflects administrative changes to the categories of individuals, authorities, and storage sections of the systems of the system of records notice.
Comments will be accepted on or before August 26, 2016. This proposed action will be effective the day following the end of the comment period unless comments are received which result in a contrary determination.
You may submit comments, identified by docket number and title, by any of the following methods:
*
*
Mrs. Luz D. Ortiz, Chief, Records, Privacy and Declassification Division (RPD2), 1155 Defense Pentagon, Washington, DC 20301-1155, or by phone at (571) 372-0478.
The Office of the Secretary of Defense notices for systems of records subject to the Privacy Act of 1974 (5 U.S.C. 552a), as amended, have been published in the
The proposed system report, as required by 5 U.S.C. 552a(r) of the Privacy Act of 1974, as amended, was submitted on July 6, 2016, to the House Committee on Oversight and Government Reform, the Senate Committee on Governmental Affairs, and the Office of Management and Budget (OMB) pursuant to paragraph 4 of Appendix I to OMB Circular No. A-130, “Federal Agency Responsibilities for Maintaining Records About Individuals,” revised November 28, 2000 (December 12, 2000 65 FR 77677).
Defense Enrollment Eligibility Reporting Systems (DEERS) (November 4, 2015, 80 FR 68304).
Delete entry and replace with “Members, former members, retirees, civilian employees (includes non-appropriated fund) and contractor employees of the DoD and all of the Uniformed Services; Presidential appointees of all Federal Government agencies; Medal of Honor recipients; U.S. Military Academy students; DoD and Department of Veterans Affairs (DVA) beneficiaries (
Delete entry and replace with “5 U.S.C. App. 3, Inspector General Act of 1978; 5 U.S.C. Chapter 90, Long-Term Care Insurance; 10 U.S.C. 136, Under Secretary of Defense for Personnel and Readiness; 10 U.S.C. Chapter 53, Miscellaneous Rights and Benefits; 10 U.S.C. Chapter 54, Commissary and Exchange Benefits; 10 U.S.C. Chapter 58, Benefits and Services for Members being Separated or Recently Separated; 10 U.S.C. Chapter 75, Deceased Personnel; 10 U.S.C. 2358, Research and Development Projects; 10 U.S.C. Chapter 49 Section 987, Terms of Consumer Credit Extended to Members and Dependents: Limitations; 20 U.S.C. 1070a (f)(4), Higher Education Opportunity Act; 31 U.S.C. 3512(c), Executive Agency Accounting and Other Financial Management Reports and Plans; 42 U.S.C. 18001 note, Patient Protection and Affordable Care Act (Pub. L. 111-148); 52 U.S.C. 20301, Federal Responsibilities; 50 U.S.C. Chapter 23, Internal Security; 50 U.S.C. 501, Servicemembers Civil Relief Act; 38 CFR part 9.20, Traumatic injury protection; 38 U.S.C. Chapter 19, Subchapter III, Service members' Group Life Insurance; DoD Directive 1000.04, Federal Voting Assistance Program (FVAP); DoD Directive 1000.25, DoD Personnel Identity Protection (PIP) Program; DoD Instruction 1015.09, Professional U.S. Scouting Organization Operations at U.S. Military Installations Overseas; DoD Instruction 1100.13, DoD Surveys; DoD Instruction 1241.03, TRICARE Retired Reserve (TRR) Program; DoD Instruction 1241.04, TRICARE Reserve Select (TRS) Program; DoD Instruction 1336.05, Automated Extract of Active Duty Military Personnel Records; DoD Instruction 1341.2, Defense Enrollment Eligibility Reporting System (DEERS) Procedures; DoD Instruction 3001.02, Personnel Accountability in Conjunction with Natural or Manmade Disasters; Homeland Security Presidential Directive 12, Policy for a Common Identification Standard for Federal Employees and Contractors; DoD Instruction 7730.54, Reserve Components Common Personnel Data System (RCCPDS); and E.O. 9397 (SSN), as amended.”
Delete entry and replace with “In addition to those disclosures generally permitted under 5 U.S.C. 552a(b) of the Privacy Act of 1974, as amended, the records contained herein may specifically be disclosed outside the DoD as a routine use pursuant to 5 U.S.C. 552a(b)(3) as follows:
1. To Federal agencies and/or their contractors, the Transportation Security Administration and other federal transportation agencies, for purposes of authenticating the identity of individuals who, incident to the conduct of official business, present the Common Access Card or other valid identification as proof of identity to gain physical or logical access to government and contractor facilities, locations, networks, systems, or programs.
2. To Federal and State agencies to validate demographic data (
3. To the Social Security Administration for the purpose of verifying an individual's identity.
4. To the Department of Veterans Affairs (DVA):
a. To provide uniformed service personnel (pay, wounded, ill, and injured) identification data for present and former uniformed service personnel for the purpose of evaluating use of veterans' benefits, validating benefit eligibility and maintaining the health and well-being of veterans and their family members.
b. To provide identifying uniformed service personnel data to the DVA and its insurance program contractor for the purpose of conducting outreach and administration of benefits to qualified Servicemembers, Veterans and their dependents (38 U.S.C. 1977), notifying separating eligible Reservists of their right to apply for Veteran's Group Life Insurance coverage under the Veterans Benefits Improvement Act of 1996 (38 U.S.C. 1968) and for DVA to administer the Traumatic Servicemember's Group Life Insurance (TSGLI) (Traumatic Injury Protection Rider to Servicemember's Group Life Insurance (TSGLI), 38 CFR part 9.20).
c. To register eligible veterans and their dependents for DVA programs.
d. To provide former uniformed service personnel and survivor's financial benefit data to DVA for the purpose of identifying retired pay and survivor benefit payments for use in the administration of the DVA's Compensation and Pension Program (38 U.S.C. 5106). The information is to be used to process all DVA award actions more efficiently, reduce subsequent overpayment collection actions, and minimize erroneous payments.
e. To provide identifying uniformed service personnel data to the DVA for the purpose of notifying such personnel of information relating to educational assistance as required by the Veterans Programs Enhancement Act of 1998 (38 U.S.C. 3011 and 3034).
f. Providing to the Veterans Benefits Administration, DVA uniformed service personnel and financial data for the purpose of determining initial eligibility and any changes in eligibility status to insure proper payment of benefits for GI Bill education and training benefits by the DVA under the Montgomery GI Bill (10 U.S.C. Chapter 1606—Selected Reserve and 38 U.S.C. Chapter 30—Active Duty), the REAP educational benefit (Title 10 U.S.C. Chapter 1607), and the National Call to Service enlistment educational benefit (10 Chapter 510), the Post 9/11 GI Bill (38 U.S.C. Chapter 33) and The Transferability of Education Assistance to Family Members. The administrative responsibilities designated to both agencies by the law require that data be exchanged in administering the programs.
5. To consumer reporting agencies:
a. To obtain identity confirmation and current addresses of separated uniformed services personnel to notify them of potential benefits eligibility.
b. To the national consumer reporting agencies for the purpose of ensuring eligible Service members receive Military Lending Act (MLA) protections in accordance with 32 CFR 232.
7. To Federal Agencies, to include OPM, United States Postal Service, Executive Office of the President and Administrative Office of the Courts; Department of Health and Human Services; Department of Education; Department of Veterans Affairs to conduct computer matching programs regulated by the Privacy Act of 1974, as amended (5 U.S.C. 552a), for the purpose of:
a. Providing all members of the Reserve Component of the Armed Forces to be matched against the Federal agencies for identifying those Reserve Component Service members that are also Federal civil service employees with eligibility for the Federal Employees Health Benefits (FEHB) program. This disclosure by the Federal agencies will provide the DoD with the FEHB program eligibility and Federal employment information necessary to determine initial and continuing eligibility for the TRICARE Reserve Select (TRS) program and the TRICARE Retired Reserve (TRR) program (collectively referred to as purchased TRICARE programs). Reserve Component members who are not eligible for FEHB program are eligible for TRS (section 1076d of title 10) or TRR (section 1076e of title 10).
b. Providing all members of the Reserve Component of the Armed Forces to be matched against the Federal agencies for the purpose of identifying the Ready Reserve Component Service members who are also employed by the Federal Government in a civilian position, so that reserve status can be terminated if necessary. To accomplish an emergency mobilization, individuals occupying critical civilian positions cannot be mobilized as Reservists.
c. Providing to the Department of Education for the purpose of identifying dependent children of those Armed Forces members killed in Operation Iraqi Freedom and Operation Enduring Freedom (OIF/OEF), Iraq and Afghanistan Only, for possible benefits.
d. Providing to the Veterans Benefits Administration, DVA uniformed service data for the purpose of determining eligibility and any changes in eligibility status to insure proper administration of benefits for GI Bill education and training benefits under the Montgomery GI Bill (10 U.S.C. Chapter 1606—Selected Reserve and 38 U.S.C. Chapter 30—Active Duty), the Post 9/11 GI Bill (38 U.S.C. Chapter 33).
e. Providing to the Centers for Medicaid and Medicare Services, Department of Health and Human Service, for the purpose of identifying DoD eligible beneficiaries both over and under the age of 65 who are Medicare eligible. Current law requires Defense Health Agency to discontinue military health care benefits to Military Heath Services beneficiaries who are Medicare eligible unless they are enrolled in Medicare Part B.
f. Providing to the Centers for Medicaid and Medicare Services, Department of Health and Human Services, for the purpose of verifying individual's healthcare eligibility status, in accordance with the Affordable Care Act. Data provided to CMS will be used to make eligibility determinations for insurance affordability programs, administered by Medicaid, the Children's Health Insurance Program (CHIP), the Basic Health Program (BHP) and the American Health Benefit Exchange.
8. To Federal agencies for the purpose of notifying Servicemember and dependent individuals of payments or
9. To State agencies for the purpose of supporting State Veteran Affairs activities.
10. To the Department of Labor for unemployment compensation calculations.
11. To other Federal agencies and state, local and territorial governments to identify fraud and abuse of the Federal agency's programs and to identify debtors and collect debts and overpayment in the DoD health care programs.
12. To each of the fifty states and the District of Columbia for the purpose of determining the extent to which state Medicaid beneficiaries may be eligible for Uniformed Services health care benefits, including CHAMPUS, TRICARE, and to recover Medicaid monies from the CHAMPUS program.
13. To State and local child support enforcement agencies for purposes of providing information, consistent with the requirements of 29 U.S.C. 1169(a), 42 U.S.C. 666(a)(19), and E.O. 12953 and in response to a National Medical Support Notice (NMSN) (or equivalent notice if based upon the statutory authority for the NMSN), regarding the military status of identified individuals and whether, and for what period of time, the children of such individuals are or were eligible for DoD health care coverage. NOTE: Information requested by the States is not disclosed when it would contravene U.S. national policy or security interests (42 U.S.C. 653(e)).
14. To the Department of Health and Human Services (HHS):
a. For purposes of providing information, consistent with the requirements of 42 U.S.C. 653 and in response to an HHS request, regarding the military status of identified individuals and whether the children of such individuals are or were eligible for DoD healthcare coverage and for what period of time they were eligible. NOTE: Information requested by HHS is not disclosed when it would contravene U.S. national policy or security interests (42 U.S.C. 653(e)).
b. For purposes of providing information so that specified Medicare determinations, specifically late enrollment and waiver of penalty, can be made for eligible (1) DoD military retirees and (2) spouses (or former spouses) and/or dependents of either military retirees or active duty military personnel, pursuant to section 625 of the Medicare Prescription Drug, Improvement, and Modernization Act of 2002 (as codified at 42 U.S.C. 1395p and 1395r).
c. To the Office of Child Support Enforcement, Federal Parent Locator Service, pursuant to 42 U.S.C. 653 and 653a; to assist in locating individuals for the purpose of establishing parentage; establishing, setting the amount of, modifying, or enforcing child support obligations; or enforcing child custody or visitation orders; the relationship to a child receiving benefits provided by a third party and the name and SSN of those third party providers who have a legal responsibility. Identifying delinquent obligors will allow state child support enforcement agencies to commence wage withholding or other enforcement actions against the obligors.
d. For purposes of providing information to the Centers for Medicare and Medicaid Services (CMS) to account for the impact of DoD healthcare on local reimbursement rates for the Medicare Advantage program as required in 42 CFR 422.306.
15. To Coast Guard and Public Health Service to complete Individual Mandate Reporting and Employer Mandate reporting to the Internal Revenue Service (IRS) as required by Patient Protection and Affordable Care Act of 2010 (Pub. L. 111-148) and Sections 6055 and 6056 of the IRS Code.
16. To Federal and contractor medical personnel at joint DoD/DVA health care clinics, for purposes of authenticating the identity of individuals who are registered as patients at the clinic and maintaining, through the correlation of DoD ID number and Integration Control Number (ICN), a shared population of DoD and DVA beneficiaries who are users of the clinic.
17. To the American Red Cross for purposes of providing emergency notification and assistance to members of the Armed Forces, retirees, family members or survivors.
18. To the Office of Disability and Insurance Security Programs, for the purpose of expediting disability processing of wounded military service members and veterans.
19. To Federally Funded Research Centers and grantees for the purpose of performing research on manpower problems for statistical analyses.
20. To Defense contractors to monitor the employment of former DoD employees and uniformed service personnel subject to the provisions of 41 U.S.C. 423.
21. Disclosure of Requested Information Routine Use: A record from a system of records maintained by a DoD Component may be disclosed to a federal agency, in response to its request, in connection with the hiring or retention of an employee, the issuance of a security clearance, the reporting of an investigation of an employee, the letting of a contract, or the issuance of a license, grant, or other benefit by the requesting agency, to the extent that the information is relevant and necessary to the requesting agency's decision on the matter.
22. To Federal and quasi Federal agencies, territorial, state and local governments, and contractors and grantees for the purpose of supporting research studies concerned with the health and well-being of active duty, reserve, and retired uniformed service personnel or veterans, to include family members. DMDC will disclose information from this system of records for research purposes when DMDC:
a. Has determined that the use or disclosure does not violate legal or policy limitations under which the record was provided, collected, or obtained;
b. has determined that the research purpose (1) cannot be reasonably accomplished unless the record is provided in individually identifiable form, and (2) warrants the risk to the privacy of the individual that additional exposure of the record might bring;
c. has required the recipient to (1) establish reasonable administrative, technical, and physical safeguards to prevent unauthorized use or disclosure of the record, and (2) remove or destroy the information that identifies the individual at the earliest time at which removal or destruction can be accomplished consistent with the purpose of the research project, unless the recipient has presented adequate justification of a research or health nature for retaining such information, and (3) make no further use or disclosure of the record except (A) in emergency circumstances affecting the health or safety of any individual, (B) for use in another research project, under these same conditions, and with written authorization of the Department, (C) for disclosure to a properly identified person for the purpose of an audit related to the research project, if information that would enable research subjects to be identified is removed or destroyed at the earliest opportunity consistent with the purpose of the audit, or (D) when required by law;
d. has secured a written statement attesting to the recipients' understanding of, and willingness to abide by these provisions.
23. To the Department of Homeland Security for the conduct of studies related to the health and well-being of Coast Guard members and to authenticate and identify Coast Guard personnel.
24. To Federal and State agencies for purposes of obtaining socioeconomic information on uniformed service personnel so that analytical studies can be conducted with a view to assessing the present needs and future requirements of such personnel.
25. To the Bureau of Citizenship and Immigration Services, Department of Homeland Security, for purposes of facilitating the verification of individuals who may be eligible for expedited naturalization (Pub. L. 108-136, Section 1701, and E.O. 13269, Expedited Naturalization).
26. To Coast Guard recruiters in the performance of their assigned duties.
27. Law Enforcement Routine Use: If a system of records maintained by a DoD Component to carry out its functions indicates a violation or potential violation of law, whether civil, criminal, or regulatory in nature, and whether arising by general statute or by regulation, rule, or order issued pursuant thereto, the relevant records in the system of records may be referred, as a routine use, to the agency concerned, whether federal, state, local, or foreign, charged with the responsibility of investigating or prosecuting such violation or charged with enforcing or implementing the statute, rule, regulation, or order issued pursuant thereto.
28. Disclosure When Requesting Information Routine Use: A record from a system of records maintained by a DoD Component may be disclosed as a routine use to a federal, state, or local agency maintaining civil, criminal, or other relevant enforcement information or other pertinent information, such as current licenses, if necessary to obtain information relevant to a DoD Component decision concerning the hiring or retention of an employee, the issuance of a security clearance, the letting of a contract, or the issuance of a license, grant, or other benefit.
29. Congressional Inquiries Disclosure Routine Use: Disclosure from a system of records maintained by a DoD Component may be made to a congressional office from the record of an individual in response to an inquiry from the congressional office made at the request of that individual.
30. Disclosure to the Office of Personnel Management Routine Use: A record from a system of records subject to the Privacy Act and maintained by a DoD Component may be disclosed to the Office of Personnel Management (OPM) concerning information on pay and leave, benefits, retirement deduction, and any other information necessary for the OPM to carry out its legally authorized government-wide personnel management functions and studies.
31. Disclosure of information to the National Archives and Records Administration Routine Use: A record from a system of records maintained by a DoD Component may be disclosed as a routine use to the National Archives and Records Administration for the purpose of records management inspections conducted under authority of 44 U.S.C. 2904 and 2906.
32. Data Breach Remediation Purposes Routine Use. A record from a system of records maintained by a Component may be disclosed to appropriate agencies, entities, and persons when (1) The Component suspects or has confirmed that the security or confidentiality of the information in the system of records has been compromised; (2) the Component has determined that as a result of the suspected or confirmed compromise there is a risk of harm to economic or property interests, identity theft or fraud, or harm to the security or integrity of this system or other systems or programs (whether maintained by the Component or another agency or entity) that rely upon the compromised information; and (3) the disclosure made to such agencies, entities, and persons is reasonably necessary to assist in connection with the Components efforts to respond to the suspected or confirmed compromise and prevent, minimize, or remedy such harm.
The DoD Blanket Routine Uses set forth at the beginning of the Office of the Secretary of Defense (OSD) compilation of systems of records notices may apply to this system. The complete list of DoD Blanket Routine Uses can be found Online at:
Delete entry and replace with “Electronic storage media.”
Department of Defense.
Amend Federal Advisory Committee charter.
The Department of Defense (DoD) is publishing this notice to announce it is amending the charter for the Air University Board of Visitors.
Jim Freeman, Advisory Committee Management Officer for the Department of Defense, 703-692-5952.
This committee's charter is being amended in accordance with the Federal Advisory Committee Act (FACA) of 1972 (5 U.S.C., Appendix, as amended) and 41 CFR 102-3.50(d). The amended charter and contact information for the Designated Federal Officer (DFO) can be obtained at
Office of the Under Secretary of Defense (Personnel and Readiness), Department of Defense.
Notice.
This is the final notice that the Department of Defense (DoD), is establishing a higher initial maximum uniform allowance to procure and issue uniform items for uniformed security guard personnel. This action is pursuant to the authority granted to the DoD by section 591.104 of title 5, Code of Federal Regulations (CFR), which states
Ms. Cheryl Opere, 571-372-1682.
The DoD is implementing a higher initial maximum uniform allowance to procure and issue uniform items for uniformed security guard personnel. This is being established in accordance with 5 CFR 591.104, which states that an agency may establish one or more initial maximum uniform allowance rates greater than the Governmentwide maximum uniform allowance rate established under 5 CFR 591.103. The current $800.00 limit has become inadequate to maintain the uniform standards and professional image expected of Federal uniformed security guards. The uniform items for uniformed security guard personnel include the following items or similar items such as: Winter gloves; battle dress uniform pants and blouses; cold weather and light weight duty jackets; duty sweaters; dress duty trousers; short sleeve summer and long sleeve winter duty dress shirts; jacket and pants rain gear; felt hats; duty caps; high gloss duty shoes; leather duty boots; duty ties; heavy duty battle dress uniform duty coats; cloth uniform insignia patches and cloth uniform badges. The average total uniform cost for the listed items is $1,800.00. Based on these current costs, the DoD is increasing the initial maximum uniform allowance for uniformed security guards to $1,800.00. The number of DoD uniformed security guard personnel affected by this change would be approximately 3,400 employees.
On Thursday, April 7, 2016 (81 FR 20375), the DoD published a notice titled “Higher Initial Maximum Uniform Allowance Rate.” The 30-day public comment period ended on May 9, 2016. At the close of the public comment period, no public comments were received. Since no comments were received by the due date, the DoD is proceeding with the establishment of the higher initial maximum uniform allowance rate for uniformed security guard personnel. The effective date of this higher initial maximum uniform allowance rate is July 31, 2016.
Notice.
The Department of Defense has submitted to OMB for clearance, the following proposal for collection of information under the provisions of the Paperwork Reduction Act.
Consideration will be given to all comments received by August 26, 2016.
Fred Licari, 571-372-0493.
Comments and recommendations on the proposed information collection should be emailed to Ms. Jasmeet Seehra, DoD Desk Officer, at
You may also submit comments and recommendations, identified by Docket ID number and title, by the following method:
•
Written requests for copies of the information collection proposal should be sent to Mr. Licari at WHS/ESD Directives Division, 4800 Mark Center Drive, East Tower, Suite 02G09, Alexandria, VA 22350-3100.
DoD Department of the Navy, DoD.
Notice.
The invention listed below is assigned to the United States Government as represented by the Secretary of the Navy. The Department of the Navy hereby gives notice of its intent to grant to 5D Analytics, LLC, a revocable, nonassignable, partially exclusive license to practice in the United States, for the Full Life Cycle Status Information System (FLCSIS) (Navy Case No. 200,386) government-owned software for resource allocation planning and management. FLCSIS is designed around the Oracle Relational Database System and provides management information regarding acquired assets, their current configurations, projected configuration changes, and asset initialization information.
Anyone wishing to object to the grant of this license has fifteen (15) days from the date of this notice to file written objections along with supporting evidence, if any.
Written objections are to be filed with Naval Surface Warfare Center, Crane Div, Code OOL, Bldg 2, 300 Highway 361, Crane, IN 47522-5001.
Mr. Christopher Monsey, Naval Surface Warfare Center, Crane Div, Code OOL, Bldg 2, 300 Highway 361, Crane, IN 47522-5001, telephone 812-854-4100.
35 U.S.C. 207, 37 CFR part 404.
National Center for Education Statistics (NCES), Department of Education (ED).
Notice.
In accordance with the Paperwork Reduction Act of 1995 (44 U.S.C. chapter 3501
Interested persons are invited to submit comments on or before August 26, 2016.
To access and review all the documents related to the information collection listed in this notice, please use
For specific questions related to collection activities, please contact NCES Information Collections at
The Department of Education (ED), in accordance with the Paperwork Reduction Act of 1995 (PRA) (44 U.S.C. 3506(c)(2)(A)), provides the general public and Federal agencies with an opportunity to comment on proposed, revised, and continuing collections of information. This helps the Department assess the impact of its information collection requirements and minimize the public's reporting burden. It also helps the public understand the Department's information collection requirements and provide the requested data in the desired format. ED is soliciting comments on the proposed information collection request (ICR) that is described below. The Department of Education is especially interested in public comment addressing the following issues: (1) Is this collection necessary to the proper functions of the Department; (2) will this information be processed and used in a timely manner; (3) is the estimate of burden accurate; (4) how might the Department enhance the quality, utility, and clarity of the information to be collected; and (5) how might the Department minimize the burden of this collection on the respondents, including through the use of information technology. Please note that written comments received in response to this notice will be considered public records.
National Center for Education Statistics (NCES), Department of Education (ED).
Notice.
In accordance with the Paperwork Reduction Act of 1995 (44 U.S.C. chapter 3501
Interested persons are invited to submit comments on or before August 26, 2016.
To access and review all the documents related to the information collection listed in this notice, please use
For specific questions related to collection activities, please contact NCES Information Collections at
The Department of Education (ED), in accordance with the Paperwork Reduction Act of 1995 (PRA) (44 U.S.C. 3506(c)(2)(A)), provides the general public and Federal agencies with an opportunity to comment on proposed, revised, and continuing collections of information. This helps the Department assess the impact of its information collection requirements and minimize the public's reporting burden. It also helps the public understand the Department's information collection requirements and provide the requested data in the desired format. ED is soliciting comments on the proposed information collection request (ICR) that is described below. The Department of Education is especially interested in public comment addressing the following issues: (1) Is this collection necessary to the proper functions of the Department; (2) will this information be processed and used in a timely manner; (3) is the estimate of burden accurate; (4) how might the Department enhance the quality, utility, and clarity of the information to be collected; and (5) how might the Department minimize the burden of this collection on the respondents, including through the use of information technology. Please note that written comments received in response to this notice will be considered public records.
Environmental Protection Agency (EPA) and Department of Transportation (DOT), National Highway Traffic Safety Administration (NHTSA).
Notice.
The Environmental Protection Agency (EPA) and the National Highway Traffic Safety Administration (NHTSA) have established a coordinated National Program for Federal standards for greenhouse gas (GHG) emissions and corporate average fuel economy (CAFE) for light-duty vehicles. As part of that National Program, EPA and NHTSA, along with the California Air Resources Board (CARB), have jointly prepared and are requesting comment on a Draft Technical Assessment Report. In the Draft Technical Assessment Report, the agencies examine a wide range of issues relevant to GHG emissions and CAFE standards for model years (MY) 2022-2025, and share with the public their initial technical analyses of those issues. EPA is required to prepare the Draft Technical Assessment Report by its rules which establish the Midterm Evaluation. The draft TAR is the first formal step in the Midterm Evaluation process. NHTSA is participating in the Midterm Evaluation process as part of its
Submit your comments, identified by Docket ID No. EPA-HQ-OAR-2015-0827 and/or Docket No. NHTSA-2016-0068, to the
NHTSA also allows comments to be submitted by the following methods:
•
•
NHTSA and EPA request comment on all aspects of the Draft Technical Assessment Report discussed below. This section describes how you can participate in this process.
For the convenience of all parties, comments submitted to the EPA docket will be considered comments submitted to the NHTSA docket, and vice versa. Therefore, commenters only need to submit comments to either one of the two agency dockets, although they may choose to submit comments to both. Comments that are submitted for consideration by one agency should be identified as such, and comments that are submitted for consideration by both agencies should be identified as such. Absent such identification, each agency will exercise its best judgment to determine whether a comment is directed at its individual work.
Further instructions for submitting comments to either the EPA or NHTSA docket are described below.
When submitting comments, remember to:
• Identify the action by docket number and other identifying information (subject heading,
• Explain why you agree or disagree, suggest alternatives, and substitute language for your requested changes.
• Describe any assumptions and provide any technical information and/or data that you used.
• If you estimate potential costs or burdens, explain how you arrived at
• Provide specific examples to illustrate your concerns, and suggest alternatives.
• Explain your views as clearly as possible, avoiding the use of profanity or personal threats.
• Make sure to submit your comments by the comment period deadline identified in the
Any confidential business information (CBI) submitted to one of the agencies will also be available to the other agency. However, as with all public comments, any CBI information only needs to be submitted to either one of the agencies' dockets and it will be available to the other. Following are specific instructions for submitting CBI to either agency.
In addition, you should submit a copy from which you have deleted the claimed confidential business information to the Docket by one of the methods set forth above.
You may read the materials placed in the docket for this document (
The EPA and NHTSA have conducted two joint rulemakings to establish a coordinated National Program for stringent Federal CAFE and GHG emissions standards for light-duty vehicles. The agencies finalized the first set of National Program standards covering MYs 2012-2016 in May 2010
The rulemaking establishing the National Program for MY 2017-2025 light-duty vehicles included a regulatory requirement for EPA to conduct a Midterm Evaluation (MTE) of the GHG standards established for MYs 2022-2025.
The MTE is a collaborative, data-driven, and transparent process that will be a holistic assessment of all of factors considered in standards setting, and the expected impact of those factors on manufacturers' ability to comply, without placing decisive weight on any particular factor or projection. See 77 FR 62784 (October 15, 2012). The MTE analysis is to be as robust and comprehensive as that in the original 2012 final rule.
The Draft TAR is the first formal step in the MTE process and is being issued jointly by EPA, NHTSA, and CARB for
The agencies have conducted extensive research and analyses to support the MTE, as discussed throughout the Draft TAR. As part of gathering robust data and information to inform the MTE, the agencies also have conducted extensive outreach with a wide range of stakeholders—including auto manufacturers, automotive suppliers, non-governmental organizations, consumer groups, labor unions, state and local governments, the academic and research communities, and others. Among other things, the Draft TAR presents analyses reflecting this research and information obtained during the agencies' outreach, presents updated assessments of available technologies' effectiveness and costs since the 2012 final rule, and offers an opportunity for public comment on the agencies' analyses thus far. The agencies will fully consider public comments on the Draft TAR as they continue the MTE process.
The Draft TAR and related materials are available in the public dockets for this action (see
Environmental Protection Agency (EPA).
Notification of public meeting and public comment.
Pursuant to the Federal Advisory Committee Act, Public Law 92-463, the U.S. Environmental Protection Agency (EPA) hereby provides notice that the Board of Scientific Counselors (BOSC) Safe and Sustainable Water Resources Subcommittee (SSWR) will host a public meeting at the Hyatt Regency in Cincinnati, Ohio, convening on Wednesday, August 24, 2016, from 8:30 a.m. to 5:00 p.m.; and Thursday, August 25, 2016, 8:00 a.m. to 3:00 p.m. Eastern Time. The focus of the meeting will be on discussing the Safe and Sustainable Water Resources Strategic Research Action Plan's water systems research. There will be a public comment period from 10:45 a.m. to 11:15 a.m. Eastern Time on August 25, 2016.
For information on registering to attend the meeting or to provide public comment, please see the
The BOSC SSWR meeting will be held on Wednesday, August 24, 2016, from 8:30 a.m. to 5:00 p.m.; and Thursday, August 25, 2016, 8:00 a.m. to 3:00 p.m. All times noted are Eastern Time and are approximate.
Questions or correspondence concerning the meeting should be directed to Tom Tracy, Designated Federal Officer, Environmental Protection Agency, by mail at 1200 Pennsylvania Avenue NW., (MC 8104 R), Washington, DC 20460, by telephone at 202-564-6518; fax at 202-565-2911; or via email at
The Charter of the BOSC states that the advisory committee shall provide independent advice to the Administrator on technical and management aspects of the ORD's research program. Additional information about the BOSC is available at:
The companies listed in this notice have applied to the Board for approval, pursuant to the Bank Holding Company Act of 1956 (12 U.S.C. 1841
The applications listed below, as well as other related filings required by the Board, are available for immediate inspection at the Federal Reserve Bank indicated. The applications will also be available for inspection at the offices of the Board of Governors. Interested persons may express their views in writing on the standards enumerated in the BHC Act (12 U.S.C. 1842(c)). If the proposal also involves the acquisition of a nonbanking company, the review also includes whether the acquisition of the nonbanking company complies with the standards in section 4 of the BHC Act (12 U.S.C. 1843). Unless otherwise noted, nonbanking activities will be conducted throughout the United States.
Unless otherwise noted, comments regarding each of these applications must be received at the Reserve Bank indicated or the offices of the Board of Governors not later than August 22, 2016.
A. Federal Reserve Bank of St. Louis (David L. Hubbard, Senior Manager) P.O. Box 442, St. Louis, Missouri 63166-2034. Comments can also be sent electronically to
1.
The notificants listed below have applied under the Change in Bank Control Act (12 U.S.C. 1817(j)) and § 225.41 of the Board's Regulation Y (12 CFR 225.41) to acquire shares of a bank or bank holding company. The factors that are considered in acting on the notices are set forth in paragraph 7 of the Act (12 U.S.C. 1817(j)(7)).
The notices are available for immediate inspection at the Federal Reserve Bank indicated. The notices also will be available for inspection at the offices of the Board of Governors. Interested persons may express their views in writing to the Reserve Bank indicated for that notice or to the offices of the Board of Governors. Comments must be received not later than August 11, 2016.
A. Federal Reserve Bank of Chicago (Colette A. Fried, Assistant Vice President) 230 South LaSalle Street, Chicago, Illinois 60690-1414:
1.
The Centers for Disease Control and Prevention (CDC) has submitted the following information collection request to the Office of Management and Budget (OMB) for review and approval in accordance with the Paperwork Reduction Act of 1995. The notice for the proposed information collection is published to obtain comments from the public and affected agencies.
Written comments and suggestions from the public and affected agencies concerning the proposed collection of information are encouraged. Your comments should address any of the following: (a) Evaluate whether the proposed collection of information is necessary for the proper performance of the functions of the agency, including whether the information will have practical utility; (b) Evaluate the accuracy of the agencies estimate of the burden of the proposed collection of information, including the validity of the methodology and assumptions used; (c) Enhance the quality, utility, and clarity of the information to be collected; (d) Minimize the burden of the collection of information on those who are to respond, including through the use of appropriate automated, electronic, mechanical, or other technological collection techniques or other forms of information technology,
To request additional information on the proposed project or to obtain a copy of the information collection plan and instruments, call (404) 639-7570 or send an email to
Environmental Public Health Tracking Network (Tracking Network)—Existing Collection in use without an OMB Control Number—National Center for Environmental Health (NCEH), Centers for Disease Control and Prevention (CDC).
In September, 2000, the Pew Environmental Health Commission issued a report entitled “America's Environmental Health Gap: Why the Country Needs a Nationwide Health Tracking Network.” In this report, the Commission documented that the existing environmental health systems were inadequate and fragmented and recommended a “Nationwide Health Tracking Network for disease and exposures.” In response to the report, Congress appropriated funds in the fiscal year 2002's budget for the CDC to establish the National Environmental Public Health Tracking Network (Tracking Network).
Continuously since 2008, and at the national level, the program collects data from (1) other CDC programs such as the National Center for Health Statistics, (2) other federal agencies such as the Environmental Protection Agency, (3) publically accessible systems such as the Census Bureau, and (4) funded and unfunded state and local health departments (SLHD). These data are integrated into and disseminated from the Tracking Network and used for analyses which can inform national programs, interventions, or policies; guide further development and activities within the Tracking Program; or advance the practice and science of environmental public health tracking. The Tracking Program also collects information from funded SLHD to monitor their progress related to their funding and for program evaluation. This information collection request (ICR) is focused on data and information gathered by the Tracking Program from SLHD.
Due to voluntary program efforts to continuously improve compliance, the CDC recently determined that the Paperwork Reduction Act (PRA) should apply to the Tracking Network collections. Thus, the CDC requests a three-year PRA clearance to collect these data.
One part of the collection involves health, exposure, and hazard data from SLHD. The Tracking Network provides the United States with accurate and timely standardized data from existing health, exposure, and hazard surveillance systems and supports ongoing efforts within the public health and environmental sectors. The goal of the Tracking Network is to improve health tracking, exposure and hazard monitoring, and response capacity. When such data are available, the Tracking Program obtains data from national or public sources in order to reduce the burden on SLHD. When data are not available nationally or publically, the Tracking Program relies on funded SLHD to obtain and submit these data to the Tracking Network. Data from unfunded SLHD are accepted but not requested or solicited.
Data submitted annually by SLHD to the Tracking Program include: (1) Birth defects prevalence, (2) childhood lead blood levels, if a SLHD does not already report such data to CDC, (3) community drinking water monitoring, (4) emergency department visits, (5) hospitalizations, and (6) radon testing. The Tracking Program receives childhood lead blood levels data from CDC's Childhood Lead Poisoning Prevention Program (under the Healthy Homes and Lead Poisoning Surveillance System [HHLPSS—OMB Control No. 0920-0931, expiration date 5/31/2018]). A metadata record, a file describing the original source and collection procedures for the data being submitted, is also submitted with each dataset (1 per dataset for a total of 6 metadata records per year) using the Tracking Program's metadata creation tool.
Standardized extraction, formatting, and submission processes are developed in collaboration between CDC and SLHD for each dataset. Additions or modifications to these standardized datasets will also be developed collaboratively in order to improve the accuracy, completeness, efficiency, or utility of data submitted to CDC. Such changes will occur at most once a year. Examples of changes to data processes may include: (1) Addition of new variables or outcomes, (2) updates to case definitions, (3) modifications to temporal or spatial aggregation, and (4) changes in formatting for submission. As required, the Tracking Network will submit future additions and modifications as nonsubstantive change requests or revision ICRs.
The other part of the collection involves program monitoring information from funded SLHD. In addition to standard reporting required by CDC's Procurement and Grants Office, the Tracking Program also collects information from funded SLHD for the purposes of program evaluation and monitoring. This information includes performance measures collected quarterly, a communications plan collected annually, an earned values management report collected quarterly, an evaluation plan collected annually, and Web site analytics collected quarterly as documents emailed to the Tracking Program.
There are no costs for the respondents other than their time. The total estimated time burden is 25,320 hours. This estimate includes the time it takes to extract the data from the original data source(s), standardize and format the data to match the corresponding Tracking Network data form, and submit the data to the Tracking Network. In some cases, the data at the source are centralized and easily extracted. In other cases, like for radon data, the data are not. In those cases, the number of hours for extracting and standardizing the data is much greater. Four respondents have been added to the 26 SLHDs the program currently funds to account for the data voluntarily received from unfunded SLHDs and to allow for potential program growth over the next three years.
Administration for Children and Families, HHS.
Notice.
Statement of Organizations, Functions, and Delegations of Authority. The Administration for Children and Families (ACF) has reorganized the Office of the Deputy Assistant Secretary for Administration (ODASA). This reorganization moves the Office of Information Services from ODASA and establishes it as the new Office of the Chief Information Officer, which reports directly to the Assistant Secretary for Children and Families.
Lila Lee, Office of Administration, Chief of Staff, 330 C Street SW., Washington, DC 20201, (202) 401-5329.
Part K of the Statement of Organization, Functions, and Delegations of Authority of the Department of Health and Human Services (HHS), Administration for Children and Families (ACF) is being amended at Chapter K, Administration for Children and Families, as last amended at 81 FR 7346-7351, February 11, 2016, Chapter KP, Office of the Deputy Assistant Secretary for Administration (ODASA), as last amended at 75 FR 42760-42762, July 22, 2010 and most recently at 77 FR 67653-67655, November 13, 2012, as follows:
I. Under Chapter K, Administration for Children and Families, delete Section K.10, in in its entirety and replace with the following:
K.10 Organization. The Administration for Children and Families (ACF) is a principal operating division of the Department of Health and Human Services (HHS). The Administration is headed by the Assistant Secretary for Children and Families, who reports directly to the Secretary. The Assistant Secretary also serves as the Director of Child Support Enforcement. In addition to the Assistant Secretary, the Administration consists of the Principal Deputy Assistant Secretary, the Chief of Staff, the Deputy Assistant Secretary for Administration, the Deputy Assistant Secretary for Policy, the Deputy Assistant Secretary for Early Childhood Development, the Deputy Assistant Secretary for External Affairs, and Staff and Program Offices. ACF is organized as follows:
II. Under Chapter KQ, Create the Office of the Chief Information Officer:
KQ.00 MISSION. The mission of the Office of the Chief Information Officer (OCIO) is to obtain, procure, or develop cost effective and efficient information technology (IT) solutions that enable ACF's staff and grantees to successfully fulfill programmatic missions that result in the realization of the ACF vision. The OCIO implements IT strategies, policies, and governance frameworks to improve the efficiency and performance of ACF's IT systems that support ACF business processes in a manner that balances risk and cost with required outcomes, while ensuring compliance with all federal statutes and regulations. OCIO has ACF-wide responsibility for the direction and development of ACF's IT acquisition strategy, planning analysis and approval, management of IT investments both pre- and post-award, and leadership of key technology initiatives. The OCIO provides oversight and guidance on the use of business process reengineering, performance measurement, and continuous process improvement in the development, operation, and application of information systems and infrastructure. The OCIO manages cross-organizational stakeholder relations to maintain a flexible and adaptive IT posture that supports a resilient risk management approach to IT security and privacy. The OCIO creates policies to provide improved management of information resources and technology to more efficiently and effectively service ACF's internal and external clients and ACF employees. The OCIO will identify the appropriate continuing education for staff in the domain of records management, IT security and privacy, and incident response protocols.
KQ.10 ORGANIZATION. The OCIO is headed by the ACF Chief Information Officer (CIO) who also serves as ACF's Principal Information Resource Management Official, and consists of:
KQ.20 FUNCTIONS. The Office of the Director supports the Assistant Secretary for Children and Families in providing centralized IT policy, procedures, standards, and guidelines. OCIO's responsibilities include strategy, policy, and IT governance, including performance measurement and innovation; security, privacy, and risk management, including business continuity, standardization and oversight of business processes, external compliance, and security strategy and management; financial and vendor management and IT acquisition oversight, including acquisition strategies, technological approaches, performance measurement, vendor selection, cost estimating and optimization; service planning and architecture, including quality management and enterprise architecture; program and project management; portfolio management, applications management, development, and maintenance; IT infrastructure and operations; and data services, big data analytics, and business intelligence.
A. The Division of IT Acquisition and Vendor Management provides financial and vendor management and IT acquisition oversight, including acquisition strategies, technological approaches, performance measurement, vendor selection, cost estimating and optimization; and provides procurement support and post-award oversight.
B. The Division of Strategy, Policy, and Governance responsibilities include strategy, policy, and IT governance, including performance measurement and innovation. Provides governance and oversight of centralized enterprise-wide IT functions, including enterprise architecture, creation and maintenance of the technology roadmap.
C. The Division of Security, Privacy, and Risk Management provides security, privacy, and risk management, including business continuity, standardization and oversight of business processes, external compliance, and security strategy and management. The OCIO will identify the appropriate continuing education for staff in the domain of records management, IT security and privacy, and incident response protocols.
D. The Division of Infrastructure, Data and Web Services provides service planning and architecture, program and project management, portfolio management, applications management, development and maintenance, and IT infrastructure and operations, including data services, big data analytics, and business intelligence.
III. Under KP, Office of the Deputy Assistant Secretary for Administration, delete KP.00 Mission in its entirety and replace with:
KP.00 MISSION. The Deputy Assistant Secretary for Administration serves as principal advisor to the Assistant Secretary for Children and Families on all aspects of personnel administration and management; financial management activities; grants policy and overseeing the issuance of grants; acquisition advisory services; the ethics program; staff development and training activities; organizational development and organizational analysis; administrative services; and facilities management. The Deputy Assistant Secretary for Administration oversees the Diversity Management and Equal Employment Opportunity program and all administrative special initiative activities for ACF.
IV. Under Chapter KP, Office of the Deputy Assistant Secretary for Administration, delete KP.10 Organization in its entirety and replace with:
KP.10 ORGANIZATION. The Office of the Deputy Assistant Secretary for Administration is headed by the Deputy Assistant Secretary who reports to the Assistant Secretary for Children and Families. The Office is organized as follows:
V. Under Chapter KP, Office of the Deputy Assistant Secretary for Administration, Delete KP.20 Functions, Paragraph B, Office of Information Systems, in its entirety.
VI. Under Chapter KN, Office of Communications, delete KN.20, Functions, Paragraph C, in its entirety and replace with the following:
Division of Digital Information is responsible for the content of ACF's public-facing digital presence. It also coordinates printing services for ACF. The division conducts preparation and clearance of ACF communications associated with web content, audiovisual products, digital publications and graphic designs, but does not include planning, budgeting, and oversight of the Web site maintenance and support contract. It provides guidance and support to program offices related to web content, social media, print publications, audio-visual materials, and digital information and communication activities.
VII.
VIII.
Food and Drug Administration, HHS.
Notice.
The Food and Drug Administration (FDA) announces a forthcoming public advisory committee meeting of the Vaccines and Related Biological Products Advisory Committee. The general function of the committee is to provide advice and recommendations to the Agency on FDA's regulatory issues. The meeting will be open to the public to attend in person at the FDA White Oak campus in Silver Spring, MD. Members will participate via teleconference.
The meeting will be held on October 13, 2016, from 1 p.m. to 4:30 p.m.
FDA White Oak Campus, 10903 New Hampshire Ave., Bldg. 31 Conference Center, the Great Room (Rm. 1503), Silver Spring, MD 20993-0002. Answers to commonly asked questions including information regarding special accommodations due to a disability, visitor parking, and transportation may be accessed at:
Sujata Vijh or Rosanna Harvey, Center for Biologics Evaluation and Research, Food and Drug Administration, 10903 New Hampshire Ave., Bldg. 71, Rm. 6128, Silver Spring, MD 20993-0002, at 240-402-7107,
FDA intends to make background material available to the public no later than 2 business days before the meeting. If FDA is unable to post the background material on its Web site prior to the meeting, the background material will be made publicly available at the location of the advisory committee meeting, and the background material will be posted on FDA's Web site after the meeting. Background material is available at
Persons attending FDA's advisory committee meetings are advised that the Agency is not responsible for providing access to electrical outlets.
FDA welcomes the attendance of the public at its advisory committee meetings and will make every effort to accommodate persons with disabilities. If you require accommodations due to a disability, please contact Sujata Vijh at least 7 days in advance of the meeting.
FDA is committed to the orderly conduct of its advisory committee meetings. Please visit our Web site at
Notice of this meeting is given under the Federal Advisory Committee Act (5 U.S.C. app. 2).
Food and Drug Administration, HHS.
Notice.
The Food and Drug Administration (FDA) is announcing the rates for abbreviated new drug applications (ANDAs), prior approval supplements to an approved ANDA (PASs), drug master files (DMFs), generic drug active pharmaceutical ingredient (API) facilities, and finished dosage form (FDF) facilities user fees related to the Generic Drug User Fee Program for fiscal year (FY) 2017. The Federal Food, Drug, and Cosmetic Act (the FD&C Act), as amended by the Generic Drug User Fee Amendments of 2012 (GDUFA), authorizes FDA to assess and collect user fees for certain applications and supplements for human generic drug products, on applications in the backlog as of October 1, 2012 (only applicable to FY 2013), on FDF and API facilities, and on type II active pharmaceutical ingredient DMFs to be made available for reference. This document establishes the fee rates for FY 2017.
David Haas, Office of Financial Management, Food and Drug Administration, 8455 Colesville Rd., COLE-14202I, Silver Spring, MD 20993-0002, 240-402-9845.
Sections 744A and 744B of the FD&C Act (21 U.S.C. 379j-41 and 379j-42) establish fees associated with human generic drug products. Fees are assessed on: (1) Certain applications in the backlog as of October 1, 2012 (only applicable to FY 2013); (2) certain types of applications and supplements for human generic drug products; (3) certain facilities where APIs and FDFs are produced; and (4) certain DMFs associated with human generic drug products (see section 744B(a)(1)-(4) of the FD&C Act).
For FY 2017, the generic drug fee rates are: ANDA ($70,480), PAS ($35,240), DMF ($51,140), domestic API facility ($44,234), foreign API facility ($59,234), domestic FDF facility ($258,646), and foreign FDF facility ($273,646). These fees are effective on October 1, 2016, and will remain in effect through September 30, 2017.
Fees for ANDA and PAS will decrease in FY 2017 compared to the FY 2016 fees due to an increase in the number of submissions estimated to be submitted in FY 2017 compared to the estimated number of submissions to be submitted in FY 2016. Fees for DMFs will increase in FY 2017 compared to the FY 2016 fee due to a decrease in the number of submissions estimated to be submitted in FY 2017 compared to the estimated number of submissions to be submitted in 2016. The fees for all types of facilities will increase in FY 2017 compared to the FY 2016 fees in due to a decrease in the number of facilities that self-identified for FY 2017.
The base revenue amount for FY 2017 is $299 million, as set in the statute prior to the inflation and final year adjustments (see section 744B(c)(2) of the FD&C Act). GDUFA directs FDA to use the yearly revenue amount as a starting point to set the fee rates for each fee type. For more information about GDUFA, please refer to the FDA Web site (
GDUFA specifies that the $299 million is to be adjusted for inflation increases for FY 2017 using two separate adjustments—one for personnel compensation and benefits (PC&B) and one for non-PC&B costs (see section 744B(c)(1) of the FD&C Act).
The component of the inflation adjustment for PC&B costs shall be one
Table 1 summarizes the actual cost and total FTE for the specified fiscal years, and provides the percent change from the previous fiscal year and the average percent change over the first three of the four fiscal years preceding FY 2017. The 3-year average is 1.8759 percent.
The statute specifies that this 1.8759 percent should be multiplied by the proportion of PC&B expended for human generic drug activities for the first three of the preceding four fiscal years. Table 2 shows the amount of PC&B and the total amount obligated for human generic drug activities from FY 2013 through FY 2015.
The payroll adjustment is 1.8759 percent multiplied by 44.2719 percent (or 0.8305 percent).
The statute specifies that the portion of the inflation adjustment for non-PC&B costs for FY 2017 is the average annual percent change that occurred in the Consumer Price Index (CPI) for urban consumers (Washington-Baltimore, DC-MD-VA-WV; not seasonally adjusted; all items; annual index) for the first three of the preceding four years of available data multiplied by the proportion of all costs other than PC&B costs to total costs of human generic drug activities (see section 744B(c)(1)(C) of the FD&C Act). Table 3 provides the summary data for the percent change in the specified CPI for the Baltimore-Washington area. The data are published by the Bureau of Labor Statistics and can be found on their Web site at
To calculate the inflation adjustment for non-pay costs, we multiply the 3-year average percent change in the CPI (1.1297 percent) by the proportion of all costs other than PC&B to total costs of human generic drug activities obligated. Since 44.2719 percent was obligated for PC&B as shown in Table 2, 55.7281 percent is the portion of costs other than PC&B. The non-pay adjustment is 1.1297 percent times 55.7281 percent, or 0.6296 percent.
To complete the inflation adjustment for FY 2017, we add the PC&B component (0.8305 percent) to the non-PC&B component (0.6296 percent) for a total inflation adjustment of 1.4601 percent (rounded) for FY 2017.
GDUFA provides for this inflation adjustment to be compounded after FY 2013 (see section 744B(c)(1) of the FD& C Act). This factor for FY 2017 (1.4601 percent) is compounded by adding one to it, and then multiplying it by the compounded inflation adjustment factor for FY 2016 (1.064759), as published in the
For FY 2017, the Secretary may, in addition to the inflation adjustment, further increase the fee revenues and fees established if such an adjustment is necessary to provide for not more than 3 months of operating reserves of carryover user fees for human generic drug activities for the first 3 months of FY 2018. Such fees may only be used in FY 2018. If such an adjustment is necessary, the rationale for the amount of the increase shall be contained in the
After running analyses on the status of GDUFA's operating reserves and its estimated balance as of the beginning of FY 2018, FDA estimates that the GDUFA program will have carryover balances for such activities in excess of 3 months of such operating reserves, thus FDA will not be performing a final year adjustment.
Under GDUFA, the FY 2017 ANDA and PAS fees are owed by each applicant that submits an ANDA or a PAS, on or after October 1, 2016. These fees are due on the receipt date of the ANDA or PAS. Section 744B(b)(2)(B) specifies that the ANDA and PAS fees will make up 24 percent of the $323,011,000, which is $77,523,000 (rounded to the nearest thousand dollars), and further specifies that the PAS fee is equal to half the ANDA fee.
In order to calculate the ANDA fee, FDA estimated the number of full application equivalents (FAEs) that will be submitted in FY 2017. This is done by assuming ANDAs count as one FAE and PASs (supplements) count as one-half an FAE since the fee for a PAS is one half of the fee for an ANDA. GDUFA also requires, however, that 75 percent of the fee paid for an ANDA or PAS filing fee be refunded if the ANDA or PAS is refused due to issues other than failure to pay fees (section 744B(a)(3)(D) of the FD&C Act). Therefore, an ANDA or PAS that is considered not to have been received by the Secretary due to reasons other than failure to pay fees counts as one-fourth of an FAE if the applicant initially paid a full application fee, or one-eighth of an FAE if the applicant paid the supplement fee (one half of the full application fee amount).
FDA utilized data from ANDAs and PASs submitted from October 1, 2013, to May 31, 2016, to estimate the number of new original ANDAs and PASs that will incur filing fees in FY 2017. For FY 2017, the Agency estimates that approximately 891 new original ANDAs and 439 PASs will be submitted and incur filing fees. Not all of the new original ANDAs and PASs will be received by the Agency, and some of those not received will be resubmitted in the same fiscal year. Therefore, the Agency expects that the FAE count for ANDAs and PASs will be 1,100 for FY 2017.
The FY 2017 application fee is estimated by dividing the number of FAEs that will pay the fee in FY 2017 (1,100) into the fee revenue amount to be derived from application fees in FY 2017 ($77,523,000). The result, rounded to the nearest $10, is a fee of $70,480 per ANDA. The PAS fee is one-half that amount, or $35,240, rounded to the nearest $10.
The statute provides that those ANDAs that include information about the production of active pharmaceutical ingredients other than by reference to a DMF will pay an additional fee that is based on the number of such active pharmaceutical ingredients and the number of facilities proposed to produce those ingredients (see section 744B(a)(3)(F) of the FD&C Act). FDA considers that this additional fee is unlikely to be assessed often; therefore, FDA has not included projections concerning the amount of this fee in calculating the fees for ANDAs and PASs.
Under GDUFA, the DMF fee is owed by each person that owns a type II active pharmaceutical ingredient DMF that is referenced, on or after October 1, 2012, in a generic drug submission by an initial letter of authorization. This is a one-time fee for each individual DMF. This fee is due no later than the date on which the first generic drug submission is submitted that references the associated DMF. Under section 744B(a)(2)(D)(iii) of the FD&C Act, if a DMF has successfully undergone an initial completeness assessment and the fee is paid, the DMF will be placed on a publicly available list documenting DMFs available for reference. Thus, some DMF holders may choose to pay the fee prior to the date that it would otherwise be due in order to have the DMF placed on that list.
In order to calculate the DMF fee, FDA assessed the volume of DMF submissions over time. The statistical forecasting methodology of power regression analysis was selected because this model showed a very good fit to the distribution of DMF submissions over time. Based on data representing the total paid DMFs from October 2013 to May 2016 and projecting a 5-year timeline (October 2013 to September 2018), FDA is estimating 379 fee-paying DMFs for FY 2017.
The FY 2017 DMF fee is determined by dividing the DMF target revenue by the estimated number of fee-paying DMFs in FY 2017. Section 744B(b)(2)(A) specifies that the DMF fees will make up six percent of the $323,011,000, which is $19,381,000 (rounded to the nearest thousand dollars). Dividing the DMF revenue amount ($19,381,000) by the estimated fee-paying DMFs (379), and rounding to the nearest $10, yields a DMF fee of $51,140 for FY 2017.
Under GDUFA, the fee for a facility located outside the United States and its territories and possessions shall be not less than $15,000 and not more than $30,000 higher than the amount of the fee for a facility located in the United States and its territories and possessions, as determined by the Secretary. The basis for this differential is the extra cost incurred by conducting an inspection outside the United States and its territories and possessions. For FY 2017, FDA has determined that the differential for foreign facilities will be $15,000.
Under GDUFA, the annual FDF facility fee is owed by each person that owns a facility which is identified, or intended to be identified, in at least one generic drug submission that is pending or approved to produce one or more finished dosage forms of a human generic drug. These fees are due no later than the first business day on or after October 1 of each such year. Section 744B(b)(2)(C) of the FD&C Act specifies that the FDF facility fee revenue will make up 56 percent of $323,011,000, which is $180,886,000 (rounded to the nearest thousand dollars).
In order to calculate the FDF fee, FDA used data submitted by generic drug facilities through the self-identification process mandated in the GDUFA statute and specified in a Notice of Requirement published on October 2, 2012 (77 FR 60125). The total number of FDF facilities identified through self-identification was 675. Of the total facilities identified as FDF, there were 255 domestic facilities and 420 foreign facilities. The foreign facility fee differential is $15,000. In order to calculate the fee for domestic facilities, we must first subtract the fee revenue that will result from the foreign facility fee differential. We take the foreign facility differential ($15,000) and multiply it by the number of foreign facilities (420) to determine the total fees that will result from the foreign facility differential. As a result of that calculation the foreign fee differential will make up $6,300,000 of the total FDF fee revenue. Subtracting the foreign facility differential fee revenue ($6,300,000), from the total FDF facility target revenue ($180,886,000) results in a remaining fee revenue balance of $174,586,000. To determine the
Under GDUFA, the annual API facility fee is owed by each person that owns a facility which produces, or which is pending review to produce, one or more active pharmaceutical ingredients identified, or intended to be identified, in at least one generic drug submission that is pending or approved or in a Type II active pharmaceutical ingredient drug master file referenced in such generic drug submission. These fees are due no later than the first business day on or after October 1 of each such year. Section 744B(b)(2)(D) of the FD&C Act specifies that the API facility fee will make up 14 percent of $323,011,000 in fee revenue, which is $45,221,000 (rounded down to the nearest thousand dollars).
In order to calculate the API fee, FDA used data submitted by generic drug facilities through the self-identification process mandated in the GDUFA statute and specified in a Notice of Requirement published on October 2, 2012. The total number of API facilities identified through self-identification was 789. Of the total facilities identified as API facilities, there were 101 domestic facilities and 688 foreign facilities. The foreign facility differential is $15,000. In order to calculate the fee for domestic facilities, we must first subtract the fee revenue that will result from the foreign facility fee differential. We take the foreign facility differential ($15,000) and multiply it by the number of foreign facilities (688) to determine the total fees that will result from the foreign facility differential. As a result of that calculation, the foreign fee differential will make up $10,320,000 of the total API fee revenue. Subtracting the foreign facility differential fee revenue ($10,320,000) from the total API facility target revenue ($45,221,000) results in a remaining balance of $34,901,000. To determine the domestic API facility fee, we divide the $34,901,000 by the total number of facilities (789) which gives us a domestic API facility fee of $44,234. The foreign API facility fee is $15,000 more than the domestic API facility fee, or $59,234.
The fee rates for FY 2017 are set out in Table 4.
The new fee rates are effective October 1, 2016. To pay the ANDA, PAS, DMF, API facility, and FDF facility fee, you must complete a Generic Drug User Fee Cover Sheet, available at
FDA has partnered with the U.S. Department of the Treasury to utilize
Please include the user fee ID number on your check, bank draft, or postal money order and make payable to the order of the Food and Drug Administration. Your payment can be mailed to: Food and Drug Administration, P.O. Box 979108, St. Louis, MO 63197-9000. If checks are to be sent by a courier that requests a street address, the courier can deliver checks to: U.S. Bank, Attention: Government Lockbox 979108, 1005 Convention Plaza, St. Louis, MO 63101. (
If paying by wire transfer, please reference your unique user fee ID number when completing your transfer. The originating financial institution may charge a wire transfer fee. Please ask your financial institution about the wire transfer fee and include it with your payment to ensure that your fee is fully paid. The account information is as follows: U.S. Department of Treasury, TREAS NYC, 33 Liberty St., New York, NY 10045, account number: 75060099, routing number: 021030004, SWIFT: FRNYUS33, Beneficiary: FDA, 8455 Colesville Rd., 14th Floor, Silver Spring, MD 20993-0002. The tax identification number of FDA is 53-0196965.
Food and Drug Administration, HHS.
Notice of availability.
The Food and Drug Administration (FDA or Agency) is announcing the availability of the draft guidance entitled “Use of Real-World Evidence to Support Regulatory Decisionmaking for Medical Devices.” FDA is issuing this draft guidance to clarify how we evaluate real-world data (RWD) to determine whether it may be sufficiently relevant and reliable to generate the types of real-world evidence that can be used in regulatory decisionmaking for medical devices. This guidance also clarifies when an
Although you can comment on any guidance at any time (see 21 CFR 10.115(g)(5)), to ensure that the Agency considers your comment of this draft guidance before it begins work on the final version of the guidance, submit either electronic or written comments on the draft guidance by October 25, 2016.
You may submit comments as follows:
Submit electronic comments in the following way:
•
• If you want to submit a comment with confidential information that you do not wish to be made available to the public, submit the comment as a written/paper submission and in the manner detailed (see “Written/Paper Submissions” and “Instructions”).
Submit written/paper submissions as follows:
•
• For written/paper comments submitted to the Division of Dockets Management, FDA will post your comment, as well as any attachments, except for information submitted, marked and identified, as confidential, if submitted as detailed in “Instructions.”
•
An electronic copy of the guidance document is available for download from the Internet. See the
Benjamin Eloff, Center for Devices and Radiological Health, Food and Drug Administration, 10903 New Hampshire Ave., Bldg. 66, Rm. 2254, Silver Spring, MD 20993-0002, 301-796-8528.
To protect and promote the public health, FDA needs to understand and evaluate the available evidence related to regulated products. For medical devices, available evidence is traditionally comprised of non-clinical and in some cases, clinical studies conducted and provided to FDA by the device manufacturer or sponsor. However, FDA recognizes that a wealth of data covering medical device experience exists and is routinely collected in the course of treatment and management of patients. Under certain circumstances, these RWD may be of sufficient quality to help inform or augment FDA's understanding of the benefit-risk profile of devices at various points in their life cycle, and could potentially be used to aid FDA in regulatory decisionmaking.
This document describes the characteristics and sources of RWD that may be sufficient for use in making various regulatory decisions. Because of its nature, the quality (
This guidance does not affect any federal, state or local laws or regulations or foreign laws or regulations that may otherwise be applicable to the use or collection of real-world evidence and that provide protections for human subjects or patient privacy. When finalized, this guidance should be used to complement, but not supersede, other device-specific and good clinical practice guidance documents.
This draft guidance is being issued consistent with FDA's good guidance practices regulation (21 CFR 10.115). The draft guidance, when finalized, will represent the current thinking of FDA on “Use of Real-World Evidence to Support Regulatory Decisionmaking for Medical Devices.” It does not establish any rights for any person and is not binding on FDA or the public. You can use an alternative approach if it satisfies the requirements of the applicable statutes and regulations.
Persons interested in obtaining a copy of the draft guidance may do so by downloading an electronic copy from the Internet. A search capability for all Center for Devices and Radiological Health guidance documents is available at
This guidance refers to previously approved collections of information found in FDA regulations and guidance. These collections of information are subject to review by the Office of Management and Budget (OMB) under the Paperwork Reduction Act of 1995 (44 U.S.C. 3501-3520). The collections of information in 21 CFR part 807, subpart E have been approved under OMB control number 0910-0120; the collections of information in 21 CFR part 814, subparts A through E (premarket approval) have been approved under OMB control number 0910-0231; the collections of information in 21 CFR part 814, subpart H (humanitarian device exemption) have been approved under OMB control number 0910-0332; the collections of information in 21 CFR part 812 (investigational device exemption) have been approved under OMB control number 0910-0078; the collections of information in 21 CFR part 822 (postmarket surveillance) have been approved under OMB control number 0910-0449; the collections of information in 21 CFR part 50.23 (exception from general requirements for informed consent) have been approved under OMB control number 0910-0586; the collections of information in 21 CFR part 54 (financial disclosure by clinical investigators) have been approved under OMB control number 0910-0396; the collections of information in 21 CFR part 56.115 (IRB records) have been approved under OMB control number 0910-0130; and the collections of information in 21 CFR parts 50 (informed consent) and 56 (IRBs) have been approved under OMB control number 0910-0755. The collections of information in the guidance “Requests for Feedback on Medical Device Submissions: The Pre-Submission Program and Meetings with Food and Drug Administration Staff” have been approved under OMB control number 0910-0756.
Food and Drug Administration, HHS.
Notice of availability.
The Food and Drug Administration (FDA or Agency) is announcing the availability of the guidance entitled “Adaptive Designs for Medical Device Clinical Studies.” This guidance provides sponsors and FDA staff with guidance on how to plan and implement adaptive designs for clinical studies when used in medical device development programs. An adaptive design for a medical device clinical study is defined as a clinical trial design that allows for prospectively planned modifications based on accumulating study data without undermining the trial's integrity and validity. Adaptive designs, when properly implemented, can reduce resource requirements and/or increase the chance of study success.
Submit either electronic or written comments on this guidance at any time. General comments on Agency guidance documents are welcome at any time.
You may submit comments as follows:
Submit electronic comments in the following way:
• Federal eRulemaking Portal:
• If you want to submit a comment with confidential information that you do not wish to be made available to the public, submit the comment as a written/paper submission and in the manner detailed (see “Written/Paper Submissions” and “Instructions”).
Submit written/paper submissions as follows:
• Mail/Hand delivery/Courier (for written/paper submissions): Division of Dockets Management (HFA-305), Food and Drug Administration, 5630 Fishers Lane, Rm. 1061, Rockville, MD 20852.
• For written/paper comments submitted to the Division of Dockets Management, FDA will post your comment, as well as any attachments, except for information submitted, marked, and identified, as confidential, if submitted as detailed in “Instructions.”
• Confidential Submissions—To submit a comment with confidential information that you do not wish to be made publicly available, submit your comments only as a written/paper submission. You should submit two
An electronic copy of the guidance document is available for download from the Internet. See the
Gerry Gray, Center for Devices and Radiological Health, Food and Drug Administration, 10903 New Hampshire Ave., Bldg. 66, Rm. 2112, Silver Spring, MD 20993-0002, 301-796-6012; or the Division of Biostatistics, Center for Devices and Radiological Health, Food and Drug Administration, 10903 New Hampshire Ave., Bldg. 66, Silver Spring, MD 20993-0002, 301-796-5750; or Stephen Ripley, Center for Biologics Evaluation and Research, Food and Drug Administration, 10903 New Hampshire Ave., Bldg. 71, Rm. 7301, Silver Spring MD 20993, 240-402-7911.
This guidance provides sponsors and FDA staff with guidance on how to plan and implement adaptive designs for clinical studies when used in medical device development programs. This document addresses adaptive designs for medical device clinical trials and is applicable to premarket medical device submissions including premarket approval applications (PMA), premarket notification (510(k)) submissions, de novo submissions (evaluation of automatic class III designation), humanitarian device exemption (HDE) applications, and investigational device exemption (IDE) submissions. This guidance can be applied throughout the clinical development program of a medical device, from feasibility studies to pivotal clinical trials. This guidance does not apply to clinical studies of combination products or codevelopment of a pharmaceutical product with an unapproved diagnostic test. The draft guidance was available from May 18, 2015, to August 17, 2015. FDA received 151 comments from seven entities and has incorporated most of them in this final guidance.
This guidance is being issued consistent with FDA's good guidance practices regulation (21 CFR 10.115). The guidance represents the current thinking of FDA on “Adaptive Designs for Medical Device Clinical Studies.” It does not establish any rights for any person and is not binding on FDA or the public. You can use an alternative approach if it satisfies the requirements of the applicable statutes and regulations.
Persons interested in obtaining a copy of the guidance may do so by downloading an electronic copy from the Internet. A search capability for all Center for Devices and Radiological Health guidance documents is available at
This guidance refers to previously approved collections of information found in FDA regulations. These collections of information are subject to review by the Office of Management and Budget (OMB) under the Paperwork Reduction Act of 1995 (44 U.S.C. 3501-3520). The collections of information in 21 CFR part 807, subpart E have been approved under OMB control number 0910-0120; the collections of information in 21 CFR part 812, have been approved under OMB control number 0910-0078; the collections of information in 21 CFR part 814, subparts A through E, have been approved under OMB control number 0910-0231; the collections of information in 21 CFR part 814,subpart H, have been approved under OMB control number 0910-0332; and the collections of information in the guidance document “Requests for Feedback on Medical Device Submissions: The Pre-Submission Program and Meetings with Food and Drug Administration Staff” have been approved under OMB control number 0910-0756.
In accordance with section 10(a)(2) of the Federal Advisory Committee Act (Pub. L. 92-463, codified at 5 U.S.C. App.), notice is hereby given of the following meeting:
August 26, 2016, 9:00 a.m. to 3:00 p.m. (Meeting time is tentative.)
More information on the Advisory Committee is available at
Pursuant to section 10(d) of the Federal Advisory Committee Act, as amended (5 U.S.C. App.), notice is hereby given of the following meeting.
The meeting will be closed to the public in accordance with the provisions set forth in sections 552b(c)(4) and 552b(c)(6), Title 5 U.S.C., as amended. The grant applications and the discussions could disclose confidential trade secrets or commercial property such as patentable material, and personal information concerning individuals associated with the grant applications, the disclosure of which would constitute a clearly unwarranted invasion of personal privacy.
Pursuant to section 10(d) of the Federal Advisory Committee Act, as amended (5 U.S.C. App.), notice is hereby given of the following meetings.
The meetings will be closed to the public in accordance with the provisions set forth in sections 552b(c)(4) and 552b(c)(6), Title 5 U.S.C., as amended. The grant applications and the discussions could disclose confidential trade secrets or commercial property such as patentable material, and personal information concerning individuals associated with the grant applications, the disclosure of which would constitute a clearly unwarranted invasion of personal privacy.
Pursuant to section 10(d) of the Federal Advisory Committee Act, as amended (5 U.S.C. App.), notice is hereby given of a meeting of the National Deafness and Other Communication Disorders Advisory Council.
The meeting will be open to the public as indicated below, with attendance limited to space available. Individuals who plan to attend and need special assistance, such as sign language interpretation or other reasonable accommodations, should notify the Contact Person listed below in advance of the meeting.
The meeting will be closed to the public in accordance with the provisions set forth in sections 552b(c)(4) and 552b(c)(6), Title 5 U.S.C., as amended. The grant applications and/or contract proposals and the discussions could disclose confidential trade secrets or commercial property such as patentable material, and personal information concerning individuals associated with the grant applications and/or contract proposals, the disclosure of which would constitute a clearly unwarranted invasion of personal privacy.
Any interested person may file written comments with the committee by forwarding the statement to the Contact Person listed on this notice. The statement should include the name, address, telephone number and when applicable, the business or professional affiliation of the interested person.
In the interest of security, NIH has instituted stringent procedures for entrance onto the NIH campus. All visitor vehicles, including taxicabs, hotel, and airport shuttles will be inspected before being allowed on campus. Visitors will be asked to show one form of identification (for example, a government-issued photo ID, driver's license, or passport) and to state the purpose of their visit.
Information is also available on the Institute's/Center's home page:
Periodically, the Substance Abuse and Mental Health Services Administration (SAMHSA) will publish a summary of information collection requests under OMB review, in compliance with the Paperwork Reduction Act (44 U.S.C. Chapter 35). To request a copy of these documents, call the SAMHSA Reports Clearance Officer on (240) 276-1243.
In 2009 the Substance Abuse and Mental Health Services Administration (SAMHSA) of the U.S. Department of Health and Human Services established a Technical Assistance Center to assist in the implementation of the SSI/SSDI Outreach Access and Recovery (SOAR) effort in all states. The primary objective of SOAR is to improve the allowance rate for Social Security Administration (SSA) disability benefits for people who are experiencing or at risk of homelessness, and who have a serious mental illness.
During the SOAR training, the importance of keeping track of SSI/SSDI applications through the process is stressed. In response to requests from states implementing SOAR, the Technical Assistance Center, under SAMHSA's direction, developed a web-based data form that case managers can use to track the progress of submitted applications, including decisions
In addition, data from the web-based form can be compiled into reports on decision results and the use of SOAR core components, such as the SSA-1696 Appointment of Representative, which allows SSA to communicate directly with the case manager assisting with the application. These reports will be reviewed by agency directors, SOAR state-level leads, and the national SOAR Technical Assistance Center to quantify the success of the effort overall and to identify areas where additional technical assistance is needed.
The changes to this form include questions on military discharge status, VA disability compensation, applicant earnings per month, number of consultative exams ordered, and whether access to benefits facilitated housing. Additionally, we added three questions to the user registration form that include county, funding source, and SOAR training completed.
The estimated response burden has not changed and is as follows:
Written comments and recommendations concerning the proposed information collection should be sent by August 26, 2016 to the SAMHSA Desk Officer at the Office of Information and Regulatory Affairs, Office of Management and Budget (OMB). To ensure timely receipt of comments, and to avoid potential delays in OMB's receipt and processing of mail sent through the U.S. Postal Service, commenters are encouraged to submit their comments to OMB via email to:
Coast Guard, DHS.
Notice of request for comments.
The Coast Guard is soliciting information on the status and availability of technology for immediately detecting cruise vessel passengers who have fallen overboard.
Comments must be submitted to the online docket via
You may submit comments and supporting materials identified by docket number USCG-2016-0492 using our online docket at
For information about this document call or email LT Paul Folino, Office of Design and Engineering Standards (CG-ENG-1), U.S. Coast Guard Headquarters; 2703 Martin Luther King Jr. Avenue SE., Washington, DC 20593; telephone 202-372-1361, email
We encourage you to submit comments or related material on the status of overboard detection technology for cruise vessels. Your comments will help us prepare a report that accurately reflects the status and availability of overboard detection technology for use by the cruise line industry, and also help us better deliberate on international standards development for overboard detection technology. If you submit a comment, please include the docket number for this notice, indicate the specific section in this notice and the question number to which each comment applies, and provide a reason for each suggestion or recommendation. At this time, we do not anticipate publishing a response to the comments received.
We encourage you to submit comments to our online docket at
We accept anonymous comments. All comments received will be posted without change to
On February 8, 2016, the President signed the Coast Guard Authorization Act of 2015 into law. Section 608 of the Act requires the Coast Guard to provide a report to Congress on the status of technology for immediately detecting passengers who have fallen overboard (man overboard (MOB) incidents) within 18 months of the signing of the Act.
Also, the International Organization for Standardization (ISO) Technical Committee 8 (TC8) Subcommittee 1 (SC1) is developing a standard for MOB detection systems. Input received in response to this notice could influence the Coast Guard's collaborative role in that process.
The Coast Guard, therefore, solicits comments from the public on the status and availability of this MOB detection technology.
The Coast Guard requests public comment on the following questions. It would be helpful if commenters answer
(1) If applicable, what is your position in the maritime community? (Please be as specific as possible,
(2) What is the MOB detection technology equipment that you manufacture and what is its status? (Please provide an overall description of the system including make, model, and other pertinent information.)
(3) Is the MOB detection technology built to any recognized standards?
(4) Has the MOB detection technology been tested on any vessels and is it currently used on any vessels?
(5) What is the testing regimen used to validate whether the MOB detection technology system is effective (including developmental lab testing and in-service testing performed on a floating platform)?
(6) How reliable is the equipment? (In describing reliability, it is helpful to give specific, tested metrics instead of open-ended phrases such as “reliable in all sea conditions.”)
(7) Was the MOB detection technology tested in sea states, and if so, what states, and what were the subsequent false positive and false negative rates?
(8) In what weather conditions was the MOB detection technology tested and what were the subsequent false positive and false negative rates?
(9) How many times was the control test, described in questions 7 and 8 conducted?
(10) Did the expected reliability match the operational reliability?
(11) In the case of a power outage, does the MOB detection technology system maintain operability?
(12) What areas of the vessel is the MOB detection technology system designed to monitor?
(13) Can the system detect the size of an object that is falling overboard,
(14) Can the system detect anything else (
(15) How does the system eliminate false positives of birds and other items that fall overboard?
(16) What is the suggested maintenance and inspection cycle of the MOB detection technology system to ensure its operability?
(17) Does the system require calibration, and if so, what is the calibration interval?
(18) What is the availability of technicians globally to install and service the MOB detection technology system?
(19) Does the marine environment (
(20) What training will be required for use of the MOB detection technology system, and are there any refresher training requirements?
(21) Can existing cameras and systems be retrofitted with this MOB detection technology system or is it stand-alone?
(22) How does the system integrate with the ship's existing safety command center?
(23) Is the system designed with any automation features?
(24) Does the system work in tandem with other technologies (
(25) How does the alarm system work, where do the alarms sound, and in what way are the alarms visible?
(26) How many cruise vessels use tested MOB detection technology that can detect passengers who have fallen overboard?
(27) If you do not have vessels that use MOB detection technology, is there currently a plan to integrate this technology on cruise vessels?
(28) Has anyone fallen overboard on a cruise vessel while the MOB detection technology was operating?
(29) Did the system alert the crew that someone fell overboard?
(30) How does the alarm system work, where do the alarms sound, and in what way are the alarms visible?
(31) How many cruise vessels use image capture technology for passengers who have fallen overboard?
(32) Did you receive any training on MOB detection technology? If so, please describe it.
(33) What alternative source(s) for detecting persons falling overboard would you recommend? How would you rate the alternative source(s) in terms of: (a) User cost; (b) reliability; and (c) usefulness of the information?
(34) Is there any other technology available that vessels can integrate to assist in facilitating the search and rescue of a passenger who has fallen overboard?
(35) In Section 608 of the 2015 Coast Guard Authorization Act, Congress directs the Coast Guard to consider the cost of MOB detection technology systems when determining feasibility. Our current best available cost data regarding the installation of an MOB detection technology system on an average cruise vessel is $300,000 with annual system maintenance costs of $40,000 per year. Please provide information on the costs of MOB detection technology systems, including costs for equipment and labor for installation, integration, operation, and maintenance on a range of cruise vessel sizes.
Comments regarding these questions and any other pertinent matters that you would like us to consider during the comment period will be taken into account in our future actions regarding the issues raised in this notice. We encourage you to provide your comments as we move forward with drafting the report to Congress.
This notice is issued under authority of 5 U.S.C. 552(a).
Federal Emergency Management Agency, DHS.
Committee Management; Notice of Federal Advisory Committee Meeting.
The Federal Emergency Management Agency (FEMA) Technical Mapping Advisory Council (TMAC) will meet via conference call on September
The TMAC will meet via conference call on Tuesday, September 13, 2016 from 10:00 a.m. to 5:00 p.m. Eastern Daylight Time (EDT), and on Wednesday, September 14, 2016 from 10:00 a.m. to 5:00 p.m. EDT. Please note that the meeting will close early if the TMAC has completed its business.
For information on how to access to the conference call, information on services for individuals with disabilities, or to request special assistance for the meeting, contact the person listed in
To facilitate public participation, members of the public are invited to provide written comments on the issues to be considered by the TMAC, as listed in the “Supplementary Information” section below. The Agenda and other associated material will be available for review at
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A public comment period will be held on September 13, 2016, from 11:00-11:20 a.m. and September 14, 2016 from 11:00-11:20 a.m. EST. Speakers are requested to limit their comments to no more than two minutes. Each public comment period will not exceed 20 minutes. Please note that the public comment periods may end before the time indicated, following the last call for comments. Contact the individual listed below to register as a speaker by close of business on Monday, September 12, 2016.
Kathleen Boyer, Designated Federal Officer for the TMAC, FEMA, 500 C Street SW., Washington, DC 20024, telephone (202) 646-4023, and email
Notice of this meeting is given under the Federal Advisory Committee Act, 5 U.S.C. Appendix.
As required by the
Federal Emergency Management Agency, DHS.
Committee management; notice of Federal advisory committee meeting.
The Federal Emergency Management Agency (FEMA) Technical Mapping Advisory Council (TMAC) will meet in person on August 10-11, 2016 in Reston, VA. The meeting will be open to the public.
The TMAC will meet on Wednesday, August 10, 2016 from 8:00 a.m.-5:30 p.m. Eastern Daylight Time (EDT), and Thursday, August 11, 2016 from 8:00 a.m.-5:00 p.m. EDT. Please note that the meeting will close early if the TMAC has completed its business.
The meeting will be held in the auditorium of the United States Geological Survey (USGS) headquarters building located at 12201 Sunrise Valley Drive, Reston, VA 20192. Members of the public who wish to attend the meeting must register in advance by sending an email to
For information on facilities or services for individuals with disabilities or to request special assistance at the meeting, contact the person listed in
To facilitate public participation, members of the public are invited to provide written comments on the issues to be considered by the TMAC, as listed in the
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A public comment period will be held on Wednesday, August 10, 2016, from 4:00 to 4:30 p.m. EDT and again on Thursday, August 11, 2016, from 3:00 to 3:30 p.m. EDT. Speakers are requested to limit their comments to no more than three minutes. The public comment period will not exceed 30 minutes. Please note that the public comment period may end before the time indicated, following the last call for comments. Contact the individual listed below to register as a speaker by close of business on Tuesday, August 9, 2016.
Kathleen Boyer, Designated Federal Officer for the TMAC, FEMA, 400 C Street SW., Washington, DC 20024, telephone (202) 646-4023, and email
Notice of this meeting is given under the Federal Advisory Committee Act, 5 U.S.C. Appendix.
As required by the
Federal Emergency Management Agency, DHS.
Notice.
This notice amends the notice of a major disaster declaration for the State of West Virginia (FEMA-4273-DR), dated June 25, 2016, and related determinations.
Effective on July 13, 2016.
Dean Webster, Office of Response and Recovery, Federal Emergency Management Agency, 500 C Street SW., Washington, DC 20472, (202) 646-2833.
The notice of a major disaster declaration for the State of West Virginia is hereby amended to include the following areas among those areas determined to have been adversely affected by the event declared a major disaster by the President in his declaration of June 25, 2016.
Braxton, Gilmer, Lewis, Randolph, Upshur, and Wayne Counties for Public Assistance. Lincoln County for Public Assistance [Categories A and C-G] (already designated for Individual Assistance and emergency protective measures [Category B], including direct federal assistance, under the Public Assistance program).
The following Catalog of Federal Domestic Assistance Numbers (CFDA) are to be used for reporting and drawing funds: 97.030, Community Disaster Loans; 97.031, Cora Brown Fund; 97.032, Crisis Counseling; 97.033, Disaster Legal Services; 97.034, Disaster Unemployment Assistance (DUA); 97.046, Fire Management Assistance Grant; 97.048, Disaster Housing Assistance to Individuals and Households In Presidentially Declared Disaster Areas; 97.049, Presidentially Declared Disaster Assistance—Disaster Housing Operations for Individuals and Households; 97.050 Presidentially Declared Disaster Assistance to Individuals and Households—Other Needs; 97.036, Disaster Grants—Public Assistance (Presidentially Declared Disasters); 97.039, Hazard Mitigation Grant.
Federal Emergency Management Agency, DHS.
Notice.
Comments are requested on proposed flood hazard determinations, which may include additions or
Comments are to be submitted on or before October 25, 2016.
The Preliminary FIRM, and where applicable, the FIS report for each community are available for inspection at both the online location and the respective Community Map Repository address listed in the tables below. Additionally, the current effective FIRM and FIS report for each community are accessible online through the FEMA Map Service Center at
You may submit comments, identified by Docket No. FEMA-B-1623, to Rick Sacbibit, Chief, Engineering Services Branch, Federal Insurance and Mitigation Administration, FEMA, 500 C Street SW., Washington, DC 20472, (202) 646-7659, or (email)
Rick Sacbibit, Chief, Engineering Services Branch, Federal Insurance and Mitigation Administration, FEMA, 500 C Street SW., Washington, DC 20472, (202) 646-7659, or (email)
FEMA proposes to make flood hazard determinations for each community listed below, in accordance with section 110 of the Flood Disaster Protection Act of 1973, 42 U.S.C. 4104, and 44 CFR 67.4(a).
These proposed flood hazard determinations, together with the floodplain management criteria required by 44 CFR 60.3, are the minimum that are required. They should not be construed to mean that the community must change any existing ordinances that are more stringent in their floodplain management requirements. The community may at any time enact stricter requirements of its own or pursuant to policies established by other Federal, State, or regional entities. These flood hazard determinations are used to meet the floodplain management requirements of the NFIP and also are used to calculate the appropriate flood insurance premium rates for new buildings built after the FIRM and FIS report become effective.
The communities affected by the flood hazard determinations are provided in the tables below. Any request for reconsideration of the revised flood hazard information shown on the Preliminary FIRM and FIS report that satisfies the data requirements outlined in 44 CFR 67.6(b) is considered an appeal. Comments unrelated to the flood hazard determinations also will be considered before the FIRM and FIS report become effective.
Use of a Scientific Resolution Panel (SRP) is available to communities in support of the appeal resolution process. SRPs are independent panels of experts in hydrology, hydraulics, and other pertinent sciences established to review conflicting scientific and technical data and provide recommendations for resolution. Use of the SRP only may be exercised after FEMA and local communities have been engaged in a collaborative consultation process for at least 60 days without a mutually acceptable resolution of an appeal. Additional information regarding the SRP process can be found online at
The watersheds and/or communities affected are listed in the tables below. The Preliminary FIRM, and where applicable, FIS report for each community are available for inspection at both the online location and the respective Community Map Repository address listed in the tables. For communities with multiple ongoing Preliminary studies, the studies can be identified by the unique project number and Preliminary FIRM date listed in the tables. Additionally, the current effective FIRM and FIS report for each community are accessible online through the FEMA Map Service Center at
I. Watershed-based studies:
II. Non-watershed-based studies:
Federal Emergency Management Agency, DHS.
Notice.
This notice lists communities where the addition or modification of Base Flood Elevations (BFEs), base flood depths, Special Flood Hazard Area (SFHA) boundaries or zone designations, or the regulatory floodway (hereinafter referred to as flood hazard determinations), as shown on the Flood Insurance Rate Maps (FIRMs), and where applicable, in the supporting Flood Insurance Study (FIS) reports, prepared by the Federal Emergency Management Agency (FEMA) for each community, is appropriate because of new scientific or technical data. The FIRM, and where applicable, portions of the FIS report, have been revised to reflect these flood hazard determinations through issuance of a Letter of Map Revision (LOMR), in accordance with Title 44, Part 65 of the Code of Federal Regulations (44 CFR part 65). The LOMR will be used by insurance agents and others to calculate appropriate flood insurance premium rates for new buildings and the contents of those buildings. For rating purposes, the currently effective community number is shown in the table below and must be used for all new policies and renewals.
These flood hazard determinations will become effective on the dates listed in the table below and revise the FIRM panels and FIS report in effect prior to this determination for the listed communities.
From the date of the second publication of notification of these changes in a newspaper of local circulation, any person has 90 days in which to request through the community that the Deputy Associate Administrator for Insurance and Mitigation reconsider the changes. The flood hazard determination information may be changed during the 90-day period.
The affected communities are listed in the table below. Revised flood hazard information for each community is available for inspection at both the online location and the respective community map repository address listed in the table below. Additionally, the current effective FIRM and FIS report for each community are accessible online through the FEMA Map Service Center at
Submit comments and/or appeals to the Chief Executive Officer of the community as listed in the table below.
Rick Sacbibit, Chief, Engineering Services Branch, Federal Insurance and Mitigation Administration, FEMA, 400 C Street SW., Washington, DC 20472, (202) 646-7659, or (email)
The specific flood hazard determinations are not described for each community in this notice. However, the online location and local community map repository address where the flood hazard determination information is available for inspection is provided.
Any request for reconsideration of flood hazard determinations must be submitted to the Chief Executive Officer of the community as listed in the table below.
The modifications are made pursuant to section 201 of the Flood Disaster Protection Act of 1973, 42 U.S.C. 4105, and are in accordance with the National Flood Insurance Act of 1968, 42 U.S.C. 4001
The FIRM and FIS report are the basis of the floodplain management measures that the community is required either to adopt or to show evidence of having in effect in order to qualify or remain qualified for participation in the National Flood Insurance Program (NFIP).
These flood hazard determinations, together with the floodplain management criteria required by 44 CFR 60.3, are the minimum that are required. They should not be construed to mean that the community must change any existing ordinances that are more stringent in their floodplain management requirements. The community may at any time enact stricter requirements of its own or pursuant to policies established by other Federal, State, or regional entities. The flood hazard determinations are in accordance with 44 CFR 65.4.
The affected communities are listed in the following table. Flood hazard determination information for each community is available for inspection at both the online location and the respective community map repository address listed in the table below. Additionally, the current effective FIRM and FIS report for each community are accessible online through the FEMA Map Service Center at
Federal Emergency Management Agency, DHS.
Notice.
This notice amends the notice of a major disaster declaration for the State of Texas (FEMA-4272-DR), dated June 11, 2016, and related determinations.
Dean Webster, Office of Response and Recovery, Federal Emergency Management Agency, 500 C Street SW., Washington, DC 20472, (202) 646-2833.
The notice of a major disaster declaration for the State of Texas is hereby amended to include the following areas among those areas determined to have been adversely affected by the event declared a major disaster by the President in his declaration of June 11, 2016.
Bandera, Brown, Caldwell, Houston, Jasper, and Polk Counties for Public Assistance.
Bastrop, Eastland, Fayette, and Kleberg Counties for Public Assistance (already designated for Individual Assistance.)
Fort Bend, Grimes, Hood, San Jacinto, and Washington Counties for Public Assistance [Categories A and C-G] (already designated for Individual Assistance and emergency protective measures [Category B], including direct federal assistance, under the Public Assistance program.)
The following Catalog of Federal Domestic Assistance Numbers (CFDA) are to be used for reporting and drawing funds: 97.030, Community Disaster Loans; 97.031, Cora Brown Fund; 97.032, Crisis Counseling; 97.033, Disaster Legal Services; 97.034, Disaster Unemployment Assistance (DUA); 97.046, Fire Management Assistance Grant; 97.048, Disaster Housing Assistance to Individuals and Households In Presidentially Declared Disaster Areas; 97.049, Presidentially Declared Disaster Assistance—Disaster Housing Operations for Individuals and Households; 97.050 Presidentially Declared Disaster Assistance to Individuals and Households—Other Needs; 97.036, Disaster Grants—Public Assistance (Presidentially Declared Disasters); 97.039, Hazard Mitigation Grant.
Federal Emergency Management Agency, DHS.
Final notice.
Flood hazard determinations, which may include additions or modifications of Base Flood Elevations (BFEs), base flood depths, Special Flood Hazard Area (SFHA) boundaries or zone designations, or regulatory floodways on the Flood Insurance Rate Maps (FIRMs) and where applicable, in the supporting Flood Insurance Study (FIS) reports have been made final for the communities listed in the table below.
The FIRM and FIS report are the basis of the floodplain management measures that a community is required either to adopt or to show evidence of having in effect in order to qualify or remain qualified for participation in the Federal Emergency Management Agency's (FEMA's) National Flood Insurance Program (NFIP). In addition, the FIRM and FIS report are used by insurance agents and others to calculate appropriate flood insurance premium rates for buildings and the contents of those buildings.
The effective date of November 4, 2016 which has been established for the FIRM and, where applicable, the supporting FIS report showing the new or modified flood hazard information for each community.
The FIRM, and if applicable, the FIS report containing the final flood hazard information for each community is available for inspection at the respective Community Map Repository address listed in the tables below and will be available online through the FEMA Map Service Center at
Rick Sacbibit, Chief, Engineering Services Branch, Federal Insurance and Mitigation Administration, FEMA, 400 C Street SW., Washington, DC 20472, (202) 646-7659, or (email)
The Federal Emergency Management Agency (FEMA) makes the final determinations listed below for the new or modified flood hazard information for each community listed. Notification of these changes has been published in newspapers of local circulation and 90 days have elapsed since that publication. The Deputy Associate Administrator for Insurance and Mitigation has resolved any appeals resulting from this notification.
This final notice is issued in accordance with section 110 of the Flood Disaster Protection Act of 1973, 42 U.S.C. 4104, and 44 CFR part 67. FEMA has developed criteria for floodplain management in floodprone areas in accordance with 44 CFR part 60.
Interested lessees and owners of real property are encouraged to review the new or revised FIRM and FIS report available at the address cited below for each community or online through the FEMA Map Service Center at
The flood hazard determinations are made final in the watersheds and/or communities listed in the table below.
I. Non-watershed-based studies:
Federal Emergency Management Agency, DHS.
Final notice.
Flood hazard determinations, which may include additions or modifications of Base Flood Elevations (BFEs), base flood depths, Special Flood Hazard Area (SFHA) boundaries or zone designations, or regulatory floodways on the Flood Insurance Rate Maps (FIRMs) and where applicable, in the supporting Flood Insurance Study (FIS) reports have been made final for the communities listed in the table below.
The FIRM and FIS report are the basis of the floodplain management measures that a community is required either to adopt or to show evidence of having in effect in order to qualify or remain qualified for participation in the Federal Emergency Management Agency's (FEMA's) National Flood Insurance Program (NFIP). In addition, the FIRM and FIS report are used by insurance agents and others to calculate appropriate flood insurance premium rates for buildings and the contents of those buildings.
The effective date of November 18, 2016 which has been established for the FIRM and, where applicable, the supporting FIS report showing the new or modified flood hazard information for each community.
The FIRM, and if applicable, the FIS report containing the final flood hazard information for each community is available for inspection at the respective Community Map Repository address listed in the tables below and will be available online through the FEMA Map Service Center at
Rick Sacbibit, Chief, Engineering Services Branch, Federal Insurance and Mitigation Administration, FEMA, 400 C Street SW., Washington, DC 20472, (202) 646-7659, or (email)
The Federal Emergency Management Agency (FEMA) makes the final determinations listed below for the new or modified flood hazard information for each community listed. Notification of these changes has been published in newspapers of local circulation and 90 days have elapsed since that publication. The Deputy Associate Administrator for Mitigation has resolved any appeals resulting from this notification.
This final notice is issued in accordance with section 110 of the Flood Disaster Protection Act of 1973, 42 U.S.C. 4104, and 44 CFR part 67. FEMA has developed criteria for floodplain management in floodprone areas in accordance with 44 CFR part 60.
Interested lessees and owners of real property are encouraged to review the new or revised FIRM and FIS report available at the address cited below for each community or online through the FEMA Map Service Center at
The flood hazard determinations are made final in the watersheds and/or communities listed in the table below.
The Department of Homeland Security (DHS) has submitted the following information collection requests (ICR) to the Office of Management and Budget (OMB) for review and clearance in accordance with the Paperwork Reduction Act of 1995: 1620-0002. This information collection was previously published in the
Comments are encouraged and will be accepted until August 26, 2016.
Written comments and/or suggestions regarding the items contained in this notice should be directed to the Office of Information and Regulatory Affairs, Office of Management and Budget, Attn: Desk Officer for United States Secret Service, Department of Homeland Security, and sent via electronic mail to
Requests for additional information or copies of the form(s) and instructions should be directed to: United States Secret Service, Security Management Division, Attn: ATSAIC Jonathan Bryant, Communications Center (SMD), 345 Murray Lane SW., Building T5, Washington, DC 20223. Telephone number: 202-406-6658.
Section 3506 of the Paperwork Reduction Act of 1995 (44 U.S.C. Chapter 35) requires each Federal agency to provide interested Federal agencies and the public an early opportunity to comment on information collection requests. The notice for this proposed information collection contains the following: (1) The name of the component of the U.S. Department of Homeland Security; (2) Type of review requested,
The Department of Homeland Security invites public comment.
The Department of Homeland Security is especially interested in public comment addressing the following issues: (1) Is this collection necessary to the proper functions of the Department, including whether the information will have practical utility; (2) Is the estimate of burden for this information collection accurate; (3) How might the Department enhance the quality, utility, and clarity of the information to be collected; and (4) How might the Department minimize the burden of this collection on the respondents, including through the use of information technology. All comments will become a matter of public record. In this document the U.S. Secret Service is soliciting comments concerning the following information collection:
This process is conduced in accordance with 5 CFR 1320.10.
Office of the Assistant Secretary for Housing—Federal Housing Commissioner, HUD.
Notice.
This notice announces changes in the interest rates to be paid on debentures issued with respect to a loan or mortgage insured by the Federal
Yong Sun, Department of Housing and Urban Development, 451 Seventh Street SW., Room 5148, Washington, DC 20410-8000; telephone (202) 402-4778 (this is not a toll-free number). Individuals with speech or hearing impairments may access this number through TTY by calling the toll-free Federal Relay Service at (800) 877-8339.
Section 224 of the National Housing Act (12 U.S.C. 1715o) provides that debentures issued under the Act with respect to an insured loan or mortgage (except for debentures issued pursuant to section 221(g)(4) of the Act) will bear interest at the rate in effect on the date the commitment to insure the loan or mortgage was issued, or the date the loan or mortgage was endorsed (or initially endorsed if there are two or more endorsements) for insurance, whichever rate is higher. This provision is implemented in HUD's regulations at 24 CFR 203.405, 203.479, 207.259(e)(6), and 220.830. These regulatory provisions state that the applicable rates of interest will be published twice each year as a notice in the
Section 224 further provides that the interest rate on these debentures will be set from time to time by the Secretary of HUD, with the approval of the Secretary of the Treasury, in an amount not in excess of the annual interest rate determined by the Secretary of the Treasury pursuant to a statutory formula based on the average yield of all outstanding marketable Treasury obligations of maturities of 15 or more years.
The Secretary of the Treasury (1) has determined, in accordance with the provisions of section 224, that the statutory maximum interest rate for the period beginning July 1, 2016, is
For convenience of reference, HUD is publishing the following chart of debenture interest rates applicable to mortgages committed or endorsed since January 1, 1980:
Section 215 of Division G, Title II of Public Law 108-199, enacted January 23, 2004 (HUD's 2004 Appropriations Act) amended section 224 of the Act, to change the debenture interest rate for purposes of calculating certain insurance claim payments made in cash. Therefore, for all claims paid in cash on mortgages insured under section 203 or 234 of the National Housing Act and endorsed for insurance after January 23, 2004, the debenture interest rate will be the monthly average yield, for the month in which the default on the mortgage occurred, on United States Treasury Securities adjusted to a constant maturity of 10 years, as found in Federal Reserve Statistical Release H-15. The Federal Housing Administration has codified this provision in HUD regulations at 24 CFR 203.405(b) and 24 CFR 203.479(b).
Section 221(g)(4) of the Act provides that debentures issued pursuant to that paragraph (with respect to the assignment of an insured mortgage to the Secretary) will bear interest at the “going Federal rate” in effect at the time the debentures are issued. The term “going Federal rate” is defined to mean the interest rate that the Secretary of the Treasury determines, pursuant to a statutory formula based on the average yield on all outstanding marketable Treasury obligations of 8- to 12-year
The Secretary of the Treasury has determined that the interest rate to be borne by debentures issued pursuant to section 221(g)(4) during the 6-month period beginning July 1, 2016, is 1 3/4 percent.
The subject matter of this notice falls within the categorical exemption from HUD's environmental clearance procedures set forth in 24 CFR 50.19(c)(6). For that reason, no environmental finding has been prepared for this notice.
Sections 211, 221, 224, National Housing Act, 12 U.S.C. 1715b, 1715l, 1715o; Section 7(d), Department of HUD Act, 42 U.S.C. 3535(d).
Office of Policy Development and Research, HUD.
Correction; notice.
This notice replaces the document HUD published on July 11, 2016 at 81 FR 44891. The proposed information collection requirement described below will be submitted to the Office of Management and Budget (OMB) for review, as required by the Paperwork Reduction Act. The Department is soliciting public comments on the subject proposal.
Interested persons are invited to submit comments regarding this proposal. Comments should refer to the proposal by name and/or OMB Control Number and should be sent to: Anna Guido, Reports Management Officer, QDAM, Department of Housing and Urban Development, 451 7th Street SW., Room 4176, Washington, DC 20410-5000; telephone 202-402-5535 (this is not a toll-free number) or email at
Anna Guido, Reports Management Officer, QDAM, Department of Housing and Urban Development, 451 7th Street SW., Washington, DC 20410; email Anna Guido at
Copies of available documents submitted to OMB may be obtained from Ms. Guido.
The Department will submit the proposed information collection to OMB for review, as required by the Paperwork Reduction Act of 1995 (44 U.S.C. chapter 35, as amended). This notice is soliciting comments from members of the public and affected agencies concerning the proposed collection of information to: (1) Evaluate whether the proposed collection of information is necessary for the proper performance of the functions of the agency, including if the information will have practical utility; (2) Evaluate the accuracy of the agency's estimate of the burden of proposed collection of information; (3) Enhance the quality, utility, and clarity of the information to be collected; and (4) Minimize the burden of the collection of information on those who are to respond, including through the use of appropriate automated collection techniques or other forms of information technology,
This notice also lists the following information:
Title 12, U.S.C., section 1701z-1
Fish and Wildlife Service, Interior.
Notice.
We, the U.S. Fish and Wildlife Service (Service), announce a final methodology for prioritizing status reviews and accompanying 12-month findings on petitions for listing species under the Endangered Species Act. This methodology is intended to allow us to address outstanding workload strategically as our resources allow and to provide transparency to our partners and other stakeholders as to how we establish priorities within our upcoming workload.
The Service plans to put this methodology in place immediately in order to prioritize upcoming status reviews and develop our National Listing Workplan.
You may review the reference materials and public input used in the creation of this final methodology at
Douglas Krofta, U.S. Fish and Wildlife Service, Division of Conservation and Classification, MS: ES, 5275 Leesburg Pike, Falls Church, VA 22041-3803; telephone 703/358-2171; facsimile 703/358-1735. If you use a telecommunications device for the deaf (TDD), call the Federal Information Relay Service (FIRS) at 800-877-8339.
Under the Endangered Species Act, as amended (Act; 16 U.S.C. 1531
As a result of petitions to list a large number of species under the Act received between 2007 and 2012, our workload requires us to complete more than 500 status reviews and accompanying 12-month findings on those petitions. At the same time, our resources to complete these findings are limited. Beginning in 2010, we took steps to streamline our listing program, and we continue to find efficiencies in our procedures for evaluating petitions and conducting listing actions. However, these efforts are not sufficient to keep up with the demands of our workload. This methodology is intended to allow us to address the outstanding workload of status reviews and accompanying 12-month findings strategically as our resources allow and to provide transparency to our partners and other stakeholders as to how we establish priorities within our workload into the future.
To balance and manage this existing and anticipated future status review and accompanying 12-month finding workload in the most efficient manner, we have developed this methodology to help us fulfill our mission and to use our resources in a consistent and predictable manner. We intend to achieve this goal by working on the highest-priority status reviews and accompanying 12-month petition findings (actions) first. The methodology consists of five prioritization categories. For each action, we will determine where (into which category) each action belongs, and we will use that information to establish the order in which we plan to complete status reviews and accompanying 12-month findings on petitions to list species under the Act. This prioritization of status reviews and accompanying 12-month petition findings will inform a multi-year National Listing Workplan for completing all types of actions in the listing program workload—including not only status reviews and accompanying 12-month findings, but also status reviews initiated by the Service, proposed and final listing determinations, and proposed and final critical habitat designations. We will share the National Listing Workplan with other Federal agencies, State fish and wildlife agencies, Native American Tribes, and other stakeholders and the public at large through our Web site (
We plan to evaluate unresolved status reviews and accompanying 12-month findings for upcoming listing actions and prioritize them using the prioritization categories identified in this methodology to assign each action to one of five priority categories, or “bins,” as described below. In prioritizing status reviews and accompanying 12-month findings, we will consider information from the 90-day finding, any petitions, and any other information in our files. We recognize that we may not always have
Below is a summary of changes from the draft methodology as a result of public review and comment.
1. We added to the description of Bin 1 to clarify our intent to include species for which there is an urgent need for protection under the Act.
2. A clarification of “reasonable timeframe” was added to the description of Bin 3.
3. The word “Opportunities” in the title of Bin 4 was changed to “Efforts” to more closely align with language in our Policy for Evaluation of Conservation Efforts When Making Listing Decisions (PECE).
4. We changed “completed in time” to “reasonable timeframe” in the description of Bin 4, clarified the phrase, and added language clarifying our consideration of conservation efforts.
5. We have split the section of the draft methodology titled Additional Considerations into two sections for the final methodology—“Sub-Ranking Considerations” and “Exceptions to Priority Order.” We clarified that the sub-ranking considerations are only to be used to move actions for species within bins, not between bins. We also explained the circumstances in which the exceptions to priority order may be used.
6. We made several other minor edits to increase clarity and readability of the methodology.
Below we describe the categories we have identified for prioritizing status reviews and accompanying 12-month petition findings and the information that we will consider when placing specific actions into the appropriate priority bin. An action need not meet every facet of a particular bin in order to be placed in that bin. If an action meets the conditions for more than one bin, the Service will seek to prioritize that action by considering any case-specific information relevant to determining what prioritization would, overall, best advance the objectives of this methodology—including protecting the species that are most in need of, and that would benefit most from, listing under the Act first, and increasing the efficiency of the listing program. If an action meets the definition for Bin 1 (see descriptions of bins, below) and one or more of the other bins, we will place the action in Bin 1 to address the urgency and degree of imperilment associated with that bin.
The sub-ranking considerations that follow the descriptions of the bins will be used to determine the relative timing of actions within bins, not to move actions between bins. Additionally, we identify two exceptions to the binning methodology that may, in certain circumstances, result in actions being completed out of priority order.
Highest priority will be given to a species experiencing severe threat levels across a majority of its range, resulting in severe population-level impacts. Species that are critically imperiled, meaning they appear to be in danger of extinction now, and need immediate listing action in order to prevent extinction, will be given highest priority. Actions placed in this bin include actions for which we have strong information indicating an urgent need for protection of species under the Act as well as emergency listings. In section 4(b)(7) of the Act, the Secretary is granted discretion to issue a regulation that takes effect immediately upon publication in the
Actions for which we currently have strong information concerning the species' status will receive next highest priority. We acknowledge that the Act requires that we base our decisions on the best available information at the time we make a determination, and we will continue to adhere to that requirement. Our experience implementing the Act has shown us that high-quality scientific information leads to stronger, more defensible decisions that have increased longevity. Therefore, we will generally place actions for which we have particularly strong scientific data supporting a clear decision on a species' status—either a decision that the species likely warrants listing or likely does not warrant listing—at a higher priority than actions placed in Bins 3, 4, and 5, discussed below.
As stated previously, higher-quality scientific information leads to better decision-making, which focuses our resources on providing the protections of the Act to species most in need. Scientific uncertainty regarding information that could affect a species' status is often encountered in listing decisions. With the new, emerging information, a more-informed decision could be made (
This bin is appropriate when the emerging science or study is already underway, or a report is expected soon, or the data exist, but they need to be compiled and analyzed. Placing an action in this bin does not put off working on the listing action; it just prioritizes work on actions in Bins 1 and 2 for completion first. An action for which ongoing research is not expected to produce results in the near future would not be placed in this bin. We intend to move forward with decision-making after the research results become available.
Where efforts to conserve species are organized, underway, and likely to address the threats to the species, we will consider these actions as our fourth highest priority. Conservation efforts should be at a scale that is relevant to the conservation of the species and likely to be able to influence the outcome of a listing determination. Placing an action in this bin allows the Service to focus its resources on other species whose status is unlikely to change, while conservation efforts for this species get underway, and obtain
Actions for a species where limited information is available regarding its threats or status will be given fifth highest priority. If we do not have much information about a species without conducting research or further analysis, the action would be suitably placed in this bin. Placing an action in this bin does not put off working on the listing action; it just prioritizes work on actions in Bins 1, 2, 3, and 4 for completion first.
According to the standard under the Act, we need to make listing decisions based on the best available scientific and commercial data. Because the best available data for species in this bin may be very limited even if the Service conducts further research, we will prioritize work on species for which we have more and better data already available.
The three considerations set forth below will only be used to determine the relative timing of species within their respective bins (
a. The level of complexity surrounding the status review and accompanying 12-month finding, such as the degree of controversy, biological complexity, or whether the status review and accompanying 12-month finding covers multiple species or spans multiple geographic regions of the Service.
b. The extent to which the protections of the Act would be able to improve conditions for that species and its habitat or to provide benefits to many other species. For example, a species primarily under threat due to sea-level rise from the effects of climate change is unlikely to have its condition much improved by the protections of the Act. By contrast, a species primarily under threat due to habitat destruction or fragmentation from a specific human activity would more directly benefit from the protections of the Act. Although this consideration may be used to determine the relative timing of making determinations for different species within a particular bin, the Service does not consider this information in making status determinations of whether or not species warrant listing.
c. Whether the current highest priorities are clustered in a geographic area, such that our scientific expertise at the field office level is fully occupied with their existing workload. We recognize that the geographic distribution of our scientific expertise will in some cases require us to balance workload across geographic areas.
In some specific instances, we may complete work on actions outside of priority order (
a. Where there are opportunities to maximize efficiency by batching multiple species for the purpose of status reviews, petition findings, or listing determinations. For example, actions could be batched by taxon, by species with like threats, by similar geographic location, or other similar circumstances. Batching may result in lower-priority actions that are tied to higher-priority actions being completed earlier than they would otherwise.
b. Where there are any special circumstances whereby an action should be bumped up (or down) in scheduling. One limitation that might result in divergence from priority order is when the current highest priorities are clustered in a geographic area, such that our scientific expertise at the field office level is fully occupied with their existing workload. We recognize that the geographic distribution of our scientific expertise will in some cases require us to balance workload across geographic areas.
On January 15, 2016, we published a document in the
However, we decline to define the other phrases highlighted by the commenters because the particular facts of what constitutes a “severe threat,” what the “majority of its range” represents, and what “severe population-level impacts” means are highly specific to the circumstances of individual species.
. . . we will generally place an action for which we have particularly strong scientific data supporting a clear decision on status—either a decision that the species likely warrants listing or likely does not warrant listing—at a higher priority than species in Bins 3, 4, and 5 . . .
Regarding the request to rephrase “we know almost nothing about its threats or status,” we have rephrased the description of Bin 5 in this final methodology to “limited information is available regarding its threats or status.”
The third and fourth bullets under Additional Considerations in the draft methodology do not relate to ranking within bins, but rather are important considerations regarding exceptions to the priority order in scheduling actions in the National Listing Workplan. In the final methodology, above, this information is now titled Exceptions to Priority Order.
As mentioned above, we intend to use this methodology to prioritize work on status reviews and accompanying 12-month findings and to assist with prioritizing actions. Below we make determinations provided for under several Executive Orders and statutes that may apply where a Federal action is not a binding rule or regulation.
We have analyzed this final methodology in accordance with the criteria of the National Environmental Policy Act (NEPA; 42 U.S.C. 4321
We have determined that this methodology is categorically excluded from NEPA documentation requirements consistent with 40 CFR 1508.4 and 43 CFR 46.210(i). This categorical exclusion applies to policies, directives, regulations, and guidelines that are “of an administrative, financial, legal, technical, or procedural nature.” This action does not trigger an extraordinary circumstance, as outlined at 43 CFR 46.215, applicable to the categorical exclusion. Therefore, this methodology does not constitute a major Federal action significantly affecting the quality of the human environment.
This final methodology does not contain any collections of information that require approval by the Office of Management and Budget (OMB) under the Paperwork Reduction Act (44 U.S.C. 3501
In accordance with the President's memorandum of April 29, 1994, “Government-to-Government Relations with Native American Tribal Governments” (59 FR 22951), Executive Order 13175 “Consultation and Coordination with Indian Tribal Governments,” the Department of the Interior Manual at 512 DM 2, and the Department of Commerce
The primary authors of this final methodology are the staff members of the Division of Conservation and Classification, U.S. Fish and Wildlife Service, 5275 Leesburg Pike, Falls Church, VA 22041.
The authority for this action is the Endangered Species Act of 1973, as amended (16 U.S.C. 1531
Bureau of Indian Affairs, Interior.
Notice of submission to OMB.
In compliance with the Paperwork Reduction Act of 1995, the Bureau of Indian Affairs (BIA) has submitted to the Office of Management and Budget (OMB) a request for renewal of the collection of information for Tribal Energy Resource Agreements, authorized by OMB Control Number 1076-0167. This information collection expires July 31, 2016.
Interested persons are invited to submit comments on or before August 26, 2016.
Please submit your comments to the Desk Officer for the Department of the Interior at the Office of Management and Budget, by facsimile to (202) 395-5806 or you may send an email to:
Ms. Elizabeth K. Appel, (202) 273-4680; email:
To assist Indian Tribes in the development of energy resources and further the goal of Indian self-determination, the Secretary of the Interior (Secretary) shall establish and implement an Indian energy resource development program to assist consenting Indian Tribes and Tribal energy resource development organizations in achieving the purpose, as authorized by 25 U.S.C. 3501
This information collection conducted under TERA regulations at 25 CFR 224, will allow the Office of
• Enables IEED to engage in a consultation process with Tribes that is designed to foster optimal pre-planning of development proposals and speed-up the review and approval process for TERA agreements;
• Provides wide public notice and opportunity for review of TERA agreements by the public, industry, and government agencies;
• Ensures that the public has an avenue for review of the performance of Tribes in implementing a TERA;
• Creates a process for preventing damage to sensitive resources as well as ensuring that the public has fully communicated with the Tribe in the petition process;
• Ensures that a Tribe is fully aware of any attempt by the Department of the Interior to resume management authority over energy resources on Tribal lands; and
• Ensures that the Tribal government fully endorses any relinquishment of a TERA.
The data will be maintained by BIA's IEED Office. The burden hours for this continued collection of information are reflected in the Estimated Total Annual Hour Burden in this notice.
The Assistant Secretary—Indian Affairs requests your comments on this collection concerning: (a) The necessity of this information collection for the proper performance of the functions of the agency, including whether the information will have practical utility; (b) The accuracy of the agency's estimate of the burden (hours and cost) of the collection of information, including the validity of the methodology and assumptions used; (c) Ways we could enhance the quality, utility, and clarity of the information to be collected; and (d) Ways we could minimize the burden of the collection of the information on the respondents.
Please note that an agency may not conduct or sponsor and an individual need not respond to, a collection of information unless it displays a valid OMB Control Number.
It is our policy to make all comments available to the public for review at the location listed in the
The Assistant Secretary—Indian Affairs also requests your comments on ways to revise and reduce the burden of the governing regulations for TERAs under 25 CFR 224. Currently, the total annual hour burden for this information collection is 10,752 hours with an estimated time per response from 32 to 1,080 hours. Please submit comments on the following topics to the contact listed in the
Please also specify any language within the regulations that you believe should be adjusted in order to reduce the burden associated with this information collection. Additionally, if you believe that an adjustment to statutory language would reduce the burden associated with this information collection, please specifically identify this language.
Bureau of Land Management, Interior.
Notice.
The Bureau of Land Management (BLM) proposes to offer 16 parcels of public land totaling 182.93 acres in the Las Vegas Valley by competitive sale, at not less than the appraised fair market values (FMV). The BLM is proposing to offer the parcels for sale pursuant to the Southern Nevada Public Land Management Act of 1998 (SNPLMA), as amended. The sale will be subject to the applicable provisions of section 203 of the Federal Land Policy and Management Act of 1976 (FLPMA) and BLM land sale regulations.
Interested parties may submit written comments regarding the sale until September 12, 2016. The sale by sealed bid and oral public auction will occur on November 30, 2016, at Clark County Government Center, Clark County Commission Chambers, 500 South Grand Central Parkway, Las Vegas, Nevada, 89155 at 10 a.m., Pacific Time. The FMV for the parcels will be available 30 days prior to the sale. The BLM will start accepting sealed bids beginning November 16, 2016. Sealed bids must be received by the BLM, Las Vegas Field Office (LVFO) no later than 4:30 p.m. Pacific Time on November 25, 2016.
The BLM will open sealed bids on the day of the sale just prior to the oral bidding.
Mail written comments and submit sealed bids to the BLM LVFO,
Luis Rodriguez by email:
The BLM proposes to offer 16 parcels of public land in the southwest and southeast areas of the Las Vegas Valley. Fourteen of the parcels are located in the southwest part of the valley, south of Beltway 215 and west of Interstate 15 and one parcel is located east of Interstate 15 and south of St. Rose near Las Vegas Boulevard and Roban Avenue. The last parcel is located northeast of Cheyenne Avenue and Hualapai Way.
The subject public lands are legally described as:
N-94534, 12.50 acres:
N-94535, 5.00 acres:
N-94536, 2.50 acres:
N-94537, 2.50 acres:
N-94538, 10.00 acres:
N-94539, 25.00 acres:
N-94540, 2.50 acres:
N-94541, 2.50 acres:
N-94542, 37.50 acres:
N-94543, 15.00 acres:
N-94544, 1.25 acres:
N-94545, 25.00 acres:
N-94549, 2.50 acres:
N-94550, 30.00 acres:
N-94551, 3.75 acres:
N-94552, 5.43 acres:
The areas described aggregate 182.93 acres.
A sales matrix is available on the BLM Web site at:
This competitive sale is in conformance with the BLM Las Vegas Resource Management Plan and decision LD-1, approved by Record of Decision on October 5, 1998, and complies with Section 203 of FLPMA. The land is not needed for any Federal purpose, and its disposal is in the public interest. The Las Vegas Valley Disposal Boundary Environmental Impact Statement analyzed the sale parcels and Record of Decision on December 23, 2004. A parcel-specific Determination of National Environmental Policy Act Adequacy document numbered DOI-BLM-NV-S010-2016-0056-DNA was prepared in connection with this Notice of Realty Action.
Submit comments on this sale notice to the address in the
Sale procedures: Registration for oral bidding will begin at 8 a.m. Pacific Time and will end at 10 a.m. Pacific Time at the Clark County Government Center, Clark County Commission Chambers, 500 South Grand Central Parkway, Las Vegas, Nevada, 89155, on the day of the sale, November 30, 2016. There will be no prior registration before the sale date. To participate in the competitive sale, all registered bidders must submit a bid guarantee deposit in the amount of $10,000 by certified check, postal money order, bank draft, or cashier's check made payable to the Department of the Interior-Bureau of Land Management on the day of the sale or submit the bid guarantee deposit along with the sealed bids. The public sale auction will be through sealed and oral bids. Sealed bids will be opened and recorded on the day of the sale to determine the high bids among the qualified bids received. Sealed bids above the FMV will set the starting point for oral bidding on a parcel. Parcels that receive no qualified sealed bids will begin at the established FMV. Bidders who are participating and attending the oral auction on the day of the sale are not required to submit a sealed bid but may choose to do so.
Sealed-bid envelopes must be clearly marked on the lower front left corner with the parcel number and name of the sale, for example: “N-XXXXX, 16-parcel SNPLMA Fall Sale 2016.” If multiple sealed bids are submitted, only the envelope that contains the bid guarantee needs to be noted with “bid guarantee.” Sealed bids must include an amount not less than 20 percent of the total bid amount and the $10,000 bid guarantee noted above by certified check, postal money order, bank draft, or cashier's check made payable to the “Department of the Interior-Bureau of Land Management.” The bid guarantee and bid deposit may be combined into one form of deposit; the bidder must specify the amounts of the bid deposit and the bid guarantee. If multiple sealed bids are submitted, the first sealed bid of the
All funds submitted with unsuccessful bids will be returned to the bidders or their authorized representative upon presentation of acceptable photo identification at the BLM-LVFO or by certified mail. The apparent high bidder may choose to apply the bid guarantee towards the required deposit. Failure to submit the deposit following the close of the sale under 43 CFR 2711.3-1(d) will result in forfeiture of the bid guarantee. If the successful bidder offers to purchase more than one parcel and fails to submit the 20 percent bid deposit resulting in default on any single parcel following the sale, the BLM will retain the $10,000.00 bid guarantee, and may cancel the sale of all the parcels to that bidder. If a high bidder is unable to consummate the transaction for any reason, the BLM may offer the parcel to the second highest bidder. If there are no acceptable bids, a parcel may remain available for sale at a future date in accordance with competitive sale procedures without further legal notice.
Federal law requires that bidders must be: (1) A citizen of the United States 18 years of age or older; (2) A corporation subject to the laws of any State or of the United States; (3) A State, State instrumentality, or political subdivision authorized to hold property; or (4) An entity legally capable of conveying and holding lands or interests therein under the laws of the State of Nevada.
Evidence of United States citizenship is a birth certificate, passport, or naturalization papers. Failure to submit the above requested documents to the BLM within 30 days from receipt of the high-bidder letter will result in cancellation of the sale and forfeiture of the bid deposit. Citizenship documents and Articles of Incorporation (as applicable) must be provided to the BLM-LVFO for each sale. The successful bidder is allowed 180 days from the date of the sale to submit the remainder of the full purchase price.
According to SNPLMA as amended, section 4(c) of Public Law 105-263, lands identified within the Las Vegas Valley Disposal Boundary are withdrawn from location and entry under the mining laws, and from operation under the mineral leasing and geothermal leasing laws until such times as the Secretary terminates the withdrawal or the lands are patented. Any subsequent applications will not be accepted, will not be considered as filed, and will be returned to the applicant.
Terms and Conditions: All minerals for the sale parcels will be reserved to the United States. The patents, when issued, will contain a mineral reservation to the United States for all minerals. To clarify mineral reservations as it relate to mineral materials, such as sand and gravel, we refer interested parties to the regulations at 43 CFR 3601.71(b), which provides that the owner of the surface estate of lands with reserved Federal minerals may “use a minimal amount of mineral materials for . . . personal use” within the boundaries of the surface estate without a sales contract or permit. The regulation provides that all other use, absent statutory or other express authority, requires a sales contract or permit. We also refer interested parties to the explanation of this regulatory language in the preamble to the final rule published in the
The parcels are subject to limitations prescribed by law and regulation, and certain encumbrances in favor of third parties. Prior to patent issuance, a holder of any right-of-way (ROW) within the sale parcels will have the opportunity to amend the ROW for conversion to a new term, including perpetuity, if applicable, or conversion to an easement. The BLM will notify valid existing ROW holders of record of their ability to convert their compliant ROWs to perpetual ROWs or easement. In accordance with Federal regulations at 43 CFR 2807.15, once notified, each valid holder may apply for the conversion of their current authorization.
The following numbered terms and conditions will appear on the conveyance documents for the sale parcels:
1. All minerals deposits in the lands so patented, and to it, or persons authorized by it, the right to prospect for, mine, and remove such deposits from the same under applicable law and regulations to be established by the Secretary of the Interior are reserved to the United States, together with all necessary access and exit rights;
2. A right-of-way is reserved for ditches and canals constructed by authority of the United States under the Act of August 30, 1890 (43 U.S.C. 945);
3. The parcels are subject to valid existing rights;
4. The parcels are subject to reservations for road, public utilities and flood control purposes, both existing and proposed, in accordance with the local governing entities' transportation plans; and
5. An appropriate indemnification clause protecting the United States from claims arising out of the lessees/patentee's use, occupancy, or occupations on the leased/patented lands will be included in the patents issued.
Pursuant to the requirements established by Section 120(h) of the Comprehensive Environmental Response, Compensation and Liability Act, 42 U.S.C. 9620(h) (CERCLA), as amended, notice is hereby given that the lands have been examined and no evidence was found to indicate that any
No warranty of any kind, express or implied, is given by the United States as to the title, whether or to what extent the land may be developed, its physical condition, future uses, or any other circumstance or condition. The conveyance of a parcel will not be on a contingency basis. However, to the extent required by law, the parcel is subject to the requirements of section 120(h) of the CERCLA.
Unless the BLM authorized officer approved other satisfactory arrangements in advance, conveyance of title will be through escrow. Designation of the escrow agent will be through mutual agreement between the BLM and the prospective patentee, and costs of escrow will be borne by the prospective patentee.
The BLM-LVFO must receive the request for escrow instructions prior to 30 days before the prospective patentee has scheduled closing date. There are no exceptions.
All name changes and supporting documentation must be received at the BLM- LVFO 30 days from the date on the high-bidder letter by 4:30 p.m. Pacific Time. There are no exceptions. To submit a name change, the apparent high bidder must submit the name change in writing on the Certificate of Eligibility form to the BLM-LVFO.
The remainder of the full bid price for the parcel must be received no later than 4:30 p.m. Pacific Time, within 180 days following the day of the sale. Payment must be submitted in the form of a certified check, postal money order, bank draft, cashier's check, or made available by electronic fund transfer made payable in U.S. dollars to the “Department of the Interior—Bureau of Land Management” to the BLM-LVFO. The BLM will not accept personal or company checks.
Arrangements for electronic fund transfer to the BLM for payment of the balance due must be made a minimum of two weeks prior to the payment date. Failure to pay the full bid price prior to the expiration of the 180th day will disqualify the high bidder and cause the entire 20 percent bid deposit to be forfeited to the BLM. Forfeiture of the 20 percent bid deposit is in accordance with 43 CFR 2711.3-1(d). No exceptions will be made. The BLM cannot accept the remainder of the bid price after the 180th day of the sale date.
The BLM will not sign any documents related to 1031 Exchange transactions. The timing for completion of such an exchange is the bidder's responsibility. The BLM cannot be a party to any 1031 Exchange.
In accordance with 43 CFR 2711.3-1(f), within 30 days the BLM may accept or reject any or all offers to purchase, or withdraw any parcel of land or interest therein from sale if the BLM authorized officer determines consummation of the sale would be inconsistent with any law, or for other reasons as may be provided by applicable law or regulations. No contractual or other rights against the United States may accrue until the BLM officially accepts the offer to purchase and the full bid price is paid.
Upon publication of this Notice and until completion of this sale, the BLM will no longer accept land use applications affecting the parcel identified for sale. The parcel may be subject to land use applications received prior to publication of this Notice if processing the application would have no adverse effect on the marketability of title, or the FMV of the parcel. Information concerning the sale, encumbrances of record, appraisals, reservations, procedures and conditions, CERCLA, and other environmental documents that may appear in the BLM public files for the proposed sale parcels are available for review during business hours, 8 a.m. to 4:30 p.m. Pacific Time, Monday through Friday, at the BLM-LVFO, except during Federal holidays.
In order to determine the FMV through appraisal, certain extraordinary assumptions and hypothetical conditions may have been made concerning the attributes and limitations of the lands and potential effects of local regulations and policies on potential future land uses. Through publication of this Notice, the BLM advises that these assumptions may not be endorsed or approved by units of local government.
It is the buyer's responsibility to be aware of all applicable Federal, State, and local government laws, regulations and policies that may affect the subject lands, including any required dedication of lands for public uses. It is also the buyer's responsibility to be aware of existing or prospective uses of nearby properties. When conveyed out of federal ownership, the lands will be subject to any applicable laws, regulations, and policies of the applicable local government for proposed future uses. It is the responsibility of the purchaser to be aware through due diligence of those laws, regulations, and policies, and to seek any required local approvals for future uses. Buyers should make themselves aware of any Federal or State law or regulation that may affect the future use of the property. Any land lacking access from a public road or highway will be conveyed as such, and future access acquisition will be the responsibility of the buyer.
Any comments regarding the proposed sale will be reviewed by the BLM Nevada State Director or other authorized official of the Department of the Interior, who may sustain, vacate, or modify this realty action in response to such comments. In the absence of any comments, this realty action will become the final determination of the Department of the Interior.
43 CFR 2711.1-2.
Bureau of Land Management, Interior.
30-Day notice and request for comments.
The Bureau of Land Management (BLM) has submitted an information collection request to the Office of Management and Budget (OMB) to continue a collection of information that assists the BLM in managing operations authorized by the mining laws, in preventing unnecessary or undue degradation of public lands, and in obtaining financial guarantees for the reclamation of public lands. The Office of Management and Budget (OMB) previously approved this information collection activity, and assigned it control number 1004-0194.
The OMB is required to respond to this information collection request within 60 days but may respond after 30 days. For maximum consideration, written comments should be received on or before August 26, 2016.
Please submit comments directly to the Desk Officer for the Department of the Interior, Office of Management and Budget, Office of Information and Regulatory Affairs, fax 202-395-5806, or by electronic mail at
Please indicate “Attn: 1004-0194” regardless of the form of your comments.
Adam Merrill, at 202-912-7044. Persons who use a telecommunication device for the deaf may call the Federal Information Relay Service at 1-800-877-8339, to leave a message for Mr. Merrill. You may also review the information collection request online at
The Paperwork Reduction Act (44 U.S.C. 3501-3521) and OMB regulations at 5 CFR part 1320 provide that an agency may not conduct or sponsor a collection of information unless it displays a currently valid OMB control number. Until OMB approves a collection of information, you are not obligated to respond. In order to obtain and renew an OMB control number, Federal agencies are required to seek public comment on information collection and recordkeeping activities (see 5 CFR 1320.8(d) and 1320.12(a)).
As required at 5 CFR 1320.8(d), the BLM published a 60-day notice in the
1. Whether the collection of information is necessary for the proper functioning of the BLM, including whether the information will have practical utility;
2. The accuracy of the BLM's estimate of the burden of collecting the information, including the validity of the methodology and assumptions used;
3. The quality, utility and clarity of the information to be collected; and
4. How to minimize the information collection burden on those who are to respond, including the use of appropriate automated, electronic, mechanical, or other forms of information technology.
Please send comments as directed under
The following information pertains to this request:
• Form 3809-1, Surface Management Surety Bond;
• Form 3809-2, Surface Management Personal Bond;
• Form 3809-4, Bond Rider Extending Coverage of Bond to Assume Liabilities for Operations Conducted by Parties Other Than the Principal;
• Form 3809-4a, Surface Management Personal Bond Rider; and
• Form 3809-5, Notification of Change of Operator and Assumption of Past Liability.
The estimated burdens are itemized in the following table:
Bureau of Land Management, Interior.
Notice of public meetings.
In accordance with the Federal Land Policy and Management Act of 1976 and the Federal Advisory Committee Act of 1972, the U.S. Department of the Interior, Bureau of Land Management (BLM) Dominguez-Escalante National Conservation Area (NCA) Advisory Council (Council) will meet as indicated below.
The meeting will be held August 31, 2016. Any adjustments to this meeting will be advertised on the Dominguez-Escalante NCA RMP Web site:
The meeting will be held at the Mesa County Courthouse, 544 Rood Avenue, Grand Junction, CO 81501.
Collin Ewing, Advisory Council Designated Federal Official, 2815 H Road, Grand Junction, CO 81506. Phone: (970) 244-3049. Email:
The 10-member Council advises the Secretary of the Interior, through the BLM, on a variety of planning and management issues associated with the RMP process for the Dominguez-Escalante NCA and Dominguez Canyon Wilderness.
Topics of discussion during the meeting may include presentations from BLM staff on management actions contained in the Proposed RMP and travel management plan, particularly those actions which are part of the Proposed Plan Alternative as a result of public comments on the Draft RMP.
These meetings are open to the public. The public may present written comments to the Council. Time will be allocated at the middle and end of each meeting to hear public comments. Depending on the number of persons wishing to comment and time available, the time for individual, oral comments may be limited at the discretion of the chair.
National Park Service, Interior.
Request for nominations.
The National Park Service is seeking nominations for one member of the Native American Graves Protection and Repatriation Review Committee (Review Committee). The Secretary of the Interior will appoint the member from nominations submitted by Indian tribes, Native Hawaiian organizations, and traditional Native American religious leaders. The nominee must be a traditional Indian religious leader.
Nominations must be received by September 26, 2016.
Melanie O'Brien, Designated Federal Officer, Native American Graves Protection and Repatriation Review Committee, National NAGPRA Program (2253), National Park Service, 1849 C Street NW., Washington, DC 20240, or via email
The Review Committee was established by the Native American Graves Protection and Repatriation Act of 1990 (NAGPRA), at 25 U.S.C. 3006, and the Federal Advisory Committee Act (FACA), 5 U.S.C. Appendix 2.
The Review Committee is responsible for:
1. Monitoring the NAGPRA inventory and identification process;
2. Reviewing and making findings related to the identity or cultural affiliation of cultural items, or the return of such items;
3. Facilitating the resolution of disputes;
4. Compiling an inventory of culturally unidentifiable human remains and developing a process for disposition of such remains;
5. Consulting with Indian tribes and Native Hawaiian organizations and museums on matters within the scope of the work of the Review Committee affecting such tribes or organizations;
6. Consulting with the Secretary of the Interior in the development of regulations to carry out NAGPRA; and
7. Making recommendations regarding future care of repatriated cultural items.
The Review Committee consists of seven members appointed by the Secretary of the Interior. The Secretary may not appoint Federal officers or employees to the Review Committee. Three members are appointed from nominations submitted by Indian tribes, Native Hawaiian organizations, and traditional Native American religious leaders. At least two of these members must be traditional Indian religious leaders. Three members are appointed from nominations submitted by national museum or scientific organizations. One member is appointed from a list of persons developed and consented to by all of the other members.
Members serve as Special Government Employees, which requires completion of annual ethics training. Members are appointed for 4-year terms and incumbent members may be reappointed for 2-year terms. The Review Committee's work takes place during public meetings. The Review Committee normally meets in person two times per year, normally for two or three days. The Review Committee may
Review Committee members serve without pay but shall be reimbursed for each day the member participates in Review Committee meetings. Review Committee members are reimbursed for travel expenses incurred in association with Review Committee meetings (25 U.S.C. 3006(b)(4)). Additional information regarding the Review Committee, including the Review Committee's charter, meeting protocol, and dispute resolution procedures, is available on the National NAGPRA Program Web site, at
Individuals who are federally registered lobbyists are ineligible to serve on all FACA and non-FACA boards, committees, or councils in an individual capacity. The term “individual capacity” refers to individuals who are appointed to exercise their own individual best judgment on behalf of the government, such as when they are designated Special Government Employees, rather than being appointed to represent a particular interest.
Nominations should:
1. Be submitted on the official letterhead of the Indian tribe or Native Hawaiian organization.
2. Affirm that the signatory is the official authorized by the Indian tribe or Native Hawaiian organization to submit the nomination.
3. If applicable, explain that the signatory is a traditional Native American religious leader.
4. Include the nominee's full legal name, home address, home telephone number, and email address.
5. Include the nominee's resume or a brief biography of the nominee, in which the nominee's NAGPRA experience and ability to work as a member of a Federal advisory committee are addressed.
Melanie O'Brien, Designated Federal Officer, Native American Graves Protection and Repatriation Review Committee, National NAGPRA Program (2253), National Park Service, 1849 C Street NW., Washington, DC 20240, or via email
United States International Trade Commission.
Notice.
The Commission hereby gives notice of the institution of investigations and commencement of preliminary phase antidumping duty investigation Nos. 731-TA-1334-1337 (Preliminary) pursuant to the Tariff Act of 1930 (“the Act”) to determine whether there is a reasonable indication that an industry in the United States is materially injured or threatened with material injury, or the establishment of an industry in the United States is materially retarded, by reason of imports of certain emulsion styrene-butadiene rubber from Brazil, Korea, Mexico, and Poland, provided for in subheading 4002.19.00 of the Harmonized Tariff Schedule of the United States, that are alleged to be sold in the United States at less than fair value. Unless the Department of Commerce extends the time for initiation, the Commission must reach a preliminary determination in antidumping duty investigations in 45 days, or in this case by September 6, 2016. The Commission's views must be transmitted to Commerce within five business days thereafter, or by September 13, 2016.
Effective July 21, 2016.
Nathanael N. Comly (
For further information concerning the conduct of these investigations and rules of general application, consult the Commission's Rules of Practice and Procedure, part 201, subparts A and B (19 CFR part 201), and part 207, subparts A and B (19 CFR part 207).
In accordance with sections 201.16(c) and 207.3 of the rules, each document filed by a party to the investigations must be served on all other parties to the investigations (as identified by either the public or BPI service list), and a certificate of service must be timely filed. The Secretary will not accept a document for filing without a certificate of service.
These investigations are being conducted under authority of title VII of the Tariff Act of 1930; this notice is published pursuant to section 207.12 of the Commission's rules.
By order of the Commission.
U.S. International Trade Commission.
Notice.
Notice is hereby given that a complaint was filed with the U.S. International Trade Commission on June 15, 2016, under section 337 of the Tariff Act of 1930, as amended, 19 U.S.C. 1337, on behalf of Lehigh Valley Technologies, Inc. of Allentown, Pennsylvania; Endo Global Ventures of Bermuda; Endo Ventures Limited of Ireland; and Generics Bidco I, LLC (d/b/a Qualitest Pharmaceuticals and Par Pharmaceutical) of Huntsville, Alabama. The complaint alleges violations of section 337 based upon the importation into the United States, or the sale of certain potassium chloride powder products by reason of false advertising, the threat or effect of which is to destroy or substantially injure an industry in the United States.
The complainants request that the Commission institute an investigation and, after the investigation, issue a limited exclusion order and cease and desist orders.
The complaint, except for any confidential information contained therein, is available for inspection during official business hours (8:45 a.m. to 5:15 p.m.) in the Office of the Secretary, U.S. International Trade Commission, 500 E Street SW., Room 112, Washington, DC 20436, telephone (202) 205-2000. Hearing impaired individuals are advised that information on this matter can be obtained by contacting the Commission's TDD terminal on (202) 205-1810. Persons with mobility impairments who will need special assistance in gaining access to the Commission should contact the Office of the Secretary at (202) 205-2000. General information concerning the Commission may also be obtained by accessing its internet server at
The Office of Unfair Import Investigations, U.S. International Trade Commission, telephone (202) 205-2560.
The authority for institution of this investigation is contained in section 337 of the Tariff Act of 1930, as amended, and in section 210.10 of the Commission's Rules of Practice and Procedure, 19 CFR 210.10 (2016).
(1) Pursuant to subsection (b) of section 337 of the Tariff Act of 1930, as amended, an investigation be instituted to determine whether there is a violation of subsection (a)(1)(A) of section 337 in the importation into the United States, or the sale of certain potassium chloride powder products, the threat or effect of which is to destroy or substantially injure an industry in the United States;
(2) Pursuant to Commission Rule 210.50(b)(1), 19 CFR 210.50(b)(1), the presiding administrative law judge shall take evidence or other information and hear arguments from the parties and other interested persons with respect to the public interest in this investigation, as appropriate, and provide the Commission with findings of fact and a recommended determination on this issue, which shall be limited to the statutory public interest factors set forth in 19 U.S.C. 1337(d)(1), (f)(1), (g)(1);
(3) For the purpose of the investigation so instituted, the following are hereby named as parties upon which this notice of investigation shall be served:
(a) The complainants are:
(b) The respondents are the following entities alleged to be in violation of section 337, and are the parties upon which the complaint is to be served:
(c) The Office of Unfair Import Investigations, U.S. International Trade Commission, 500 E Street SW., Suite 401, Washington, DC 20436; and
(4) For the investigation so instituted, the Chief Administrative Law Judge, U.S. International Trade Commission, shall designate the presiding Administrative Law Judge.
Responses to the complaint and the notice of investigation must be submitted by the named respondents in accordance with section 210.13 of the Commission's Rules of Practice and Procedure, 19 CFR 210.13. Pursuant to 19 CFR 201.16(e) and 210.13(a), such responses will be considered by the Commission if received not later than 20 days after the date of service by the Commission of the complaint and the notice of investigation. Extensions of
Failure of a respondent to file a timely response to each allegation in the complaint and in this notice may be deemed to constitute a waiver of the right to appear and contest the allegations of the complaint and this notice, and to authorize the administrative law judge and the Commission, without further notice to the respondent, to find the facts to be as alleged in the complaint and this notice and to enter an initial determination and a final determination containing such findings, and may result in the issuance of an exclusion order or a cease and desist order or both directed against the respondent.
By order of the Commission.
U.S. International Trade Commission.
Notice.
Notice is hereby given that the U.S. International Trade Commission has found a violation of section 337 of the Tariff Act of 1930, as amended, 19 U.S.C. 1337, in this investigation. The Commission has issued a limited exclusion order prohibiting the importation of certain three-dimensional cinema systems, and components thereof, that infringe certain claims of the patents at issue. The Commission has also issued cease and desist orders directed to the two respondents. The remedial orders are suspended as to certain patent claims pending final resolution of a validity issue. The investigation is terminated.
Lucy Grace D. Noyola, Office of the General Counsel, U.S. International Trade Commission, 500 E Street SW., Washington, DC 20436, telephone 202-205-3438. Copies of non-confidential documents filed in connection with this investigation are or will be available for inspection during official business hours (8:45 a.m. to 5:15 p.m.) in the Office of the Secretary, U.S. International Trade Commission, 500 E Street SW., Washington, DC 20436, telephone 202-205-2000. General information concerning the Commission may also be obtained by accessing its Internet server (
The Commission instituted this investigation on December 12, 2014, based on a complaint filed by RealD, Inc. of Beverly Hills, California (“RealD”). 79 FR 73902-03 (Dec. 12, 2014). The complaint alleges violations of section 337 of the Tariff Act of 1930, as amended, 19 U.S.C. 1337, in the importation into the United States, the sale for importation, and the sale within the United States after importation of certain three-dimensional cinema systems, and components thereof, that infringe certain claims of U.S. Patent Nos. 7,905,602 (“the '602 patent”); 8,220,934 (“the '934 patent”); 7,857,455 (“the '455 patent”); and 7,959,296 (“the '296 patent”).
On July 23, 2015, the Commission terminated the investigation as to various of the asserted claims and the '602 patent in its entirety. Notice (July 23, 2015) (determining not to review Order No. 6 (July 2, 2015)); Notice (Aug. 20, 2015) (determining not to review Order No. 7 (Aug. 3, 2015)).
On September 25, 2015, the Commission determined on summary determination that RealD satisfied the economic prong of the domestic industry requirement through its significant investment in plant, significant investment in labor, and substantial investment in engineering, research, and development. Notice (Sept. 25, 2015) (determining to review in part Order No. 9 (Aug. 20, 2015)). The Commission, however, reversed the summary determination with respect to RealD's investment in equipment.
On December 16, 2015, the presiding administrative law judge (“ALJ”) issued a final initial determination (“ID”) finding a violation of section 337 with respect to the three remaining asserted patents. The ALJ found that the asserted claims of the '455, '296, and '934 patents are infringed and not invalid or unenforceable. The ALJ found that the technical prong of the domestic industry requirement was satisfied for the '455, '296, and '934 patents. The ALJ also issued a Recommended Determination on Remedy and Bonding (“RD”), recommending that a limited exclusion order and cease and desist orders should issue and that a bond of 100 percent should be imposed during the period of Presidential review.
On December 29, 2015, MasterImage filed a petition for review challenging various findings in the final ID. On January 6, 2016, RealD filed a response to MasterImage's petition. On January 15, 2016, and January 19, 2016, MasterImage and RealD respectively filed post-RD statements on the public interest under Commission Rule 210.50(a)(4). The Commission did not receive any post-RD public interest comments from the public in response to the Commission notice issued on December 22, 2015. 80 FR 80795 (Dec. 28, 2015).
On February 16, 2016, the Commission determined to review the final ID in part and requested additional briefing from the parties on certain issues. 81 FR at 8744-45. Specifically, the Commission determined to review (1) the ID's construction of the “uniformly modulate” limitation recited in claims 1 and 17 of the '455 patent; (2) the ID's infringement findings with respect to the asserted claims of the '455 patent; (3) the ID's findings on validity of the asserted claims of the '455 patent; (4) the ID's finding of proper inventorship of the '296 patent; (5) the ID's findings on validity of the asserted claims of the '934 patent; and (6) the ID's finding regarding the technical prong of the domestic industry requirement with respect to the '455 patent.
On March 1, 2016, the parties filed initial written submissions addressing the Commission's questions and the issues of remedy, the public interest, and bonding. On March 11, 2016, the parties filed response briefs. No comments were received from the public. On April 18, 2016, the Commission requested additional briefing on the effect of a Final Written Decision issued by the Patent Trial and
Having examined the record of this investigation, including the final ID and the parties' submissions, the Commission has determined that RealD has proven a violation of section 337 based on infringement of claims 1-3, 9-11, 13, 15, 17-19, and 21 of the '455 patent; claims 1, 2, 7, 8, 11, and 12 of the '296 patent; and claims 1, 6, and 11 of the '934 patent. The Commission has determined to modify the ALJ's construction of the “uniformly modulate” limitation recited in claims 1 and 17 of the '455 patent. Under the modified construction, the Commission has determined that RealD has proven that the accused MasterImage Horizon 3D, 3D S, M, Rv1, and Rv2 products infringe the asserted claims of the '455 patent and that the technical prong of the domestic industry requirement is satisfied with respect to that patent. The Commission has determined that the asserted claims of the '455 patent are not invalid under 35 U.S.C. 102(e), 102(g), 103, and 112, ¶¶ 1 and 2. The Commission has determined that the asserted claims of the '296 patent are not invalid under 35 U.S.C. 116 for improper inventorship. The Commission has also determined that the asserted claims of the '934 patent are not invalid under 35 U.S.C. 102(g) and 103.
The Commission has determined the appropriate remedy is a limited exclusion order prohibiting the importation of certain three-dimensional cinema systems, and components thereof, that infringe the asserted claims of the '455, '296, and '934 patents and cease and desist orders directed against MasterImage. The Commission has determined the public interest factors enumerated in section 337(d)(1) and (f)(1) do not preclude issuance of the limited exclusion order or cease and desist orders.
In view of the PTAB's Final Written Decision finding certain claims of the '934 patent unpatentable, the Commission has determined to suspend the enforcement of the limited exclusion order and cease and desist orders as to claims 1, 6, and 11 of the '934 patent pending final resolution of the PTAB's Final Written Decision.
The authority for the Commission's determination is contained in section 337 of the Tariff Act of 1930, as amended (19 U.S.C. 1337), and in part 210 of the Commission's Rules of Practice and Procedure (19 CFR part 210).
By order of the Commission.
U.S. International Trade Commission.
Notice.
Notice is hereby given that a complaint was filed with the U.S. International Trade Commission on June 22, 2016, under section 337 of the Tariff Act of 1930, as amended, 19 U.S.C. 1337, on behalf of Schütz Container Systems Inc. of North Branch, New Jersey. The complaint was supplemented on June 29 and July 7, 2016. The complaint, as supplemented, alleges violations of section 337 based upon the importation into the United States or sale of certain composite intermediate bulk containers by reason of infringement of certain trade dress, the threat or effect of which is to substantially destroy or injure a domestic industry.
The complainant requests that the Commission institute an investigation and, after the investigation, issue a limited exclusion order and a cease and desist order.
The complaint, except for any confidential information contained therein, is available for inspection during official business hours (8:45 a.m. to 5:15 p.m.) in the Office of the Secretary, U.S. International Trade Commission, 500 E Street SW., Room 112, Washington, DC 20436, telephone (202) 205-2000. Hearing impaired individuals are advised that information on this matter can be obtained by contacting the Commission's TDD terminal on (202) 205-1810. Persons with mobility impairments who will need special assistance in gaining access to the Commission should contact the Office of the Secretary at (202) 205-2000. General information concerning the Commission may also be obtained by accessing its internet server at
The Office of Unfair Import Investigations, U.S. International Trade Commission, telephone (202) 205-2560.
(1) Pursuant to subsection (b) of section 337 of the Tariff Act of 1930, as amended, an investigation be instituted to determine whether there is a violation of subsection (a)(1)(A) of section 337 in the importation into the United States or sale of certain composite intermediate bulk containers, the threat or effect of which is to substantially destroy or injure a domestic industry;
(2) For the purpose of the investigation so instituted, the following are hereby named as parties upon which this notice of investigation shall be served:
(a) The complainant is: Schütz Container Systems Inc., 200 Aspen Hill Road, North Branch, NJ 08876-5950.
(b) The respondent is the following entity alleged to be in violation of section 337, and is the party upon which the complaint is to be served: Zhenjiang Runzhou Jinshan Packaging Factory, Road Dantu City Industrial Park, Hengshun Zhenjiang, China.
(c) The Office of Unfair Import Investigations, U.S. International Trade Commission, 500 E Street SW., Suite 401, Washington, DC 20436; and
(3) For the investigation so instituted, the Chief Administrative Law Judge, U.S. International Trade Commission, shall designate the presiding Administrative Law Judge.
Responses to the complaint and the notice of investigation must be submitted by the named respondent in accordance with section 210.13 of the Commission's Rules of Practice and Procedure, 19 CFR 210.13. Pursuant to 19 CFR 201.16(e) and 210.13(a), such responses will be considered by the Commission if received not later than 20 days after the date of service by the Commission of the complaint and the
Failure of the respondent to file a timely response to each allegation in the complaint and in this notice may be deemed to constitute a waiver of the right to appear and contest the allegations of the complaint and this notice, and to authorize the administrative law judge and the Commission, without further notice to the respondent, to find the facts to be as alleged in the complaint and this notice and to enter an initial determination and a final determination containing such findings, and may result in the issuance of an exclusion order or a cease and desist order or both directed against the respondent.
The authority for institution of this investigation is contained in section 337 of the Tariff Act of 1930, as amended, and in section 210.10 of the Commission's Rules of Practice and Procedure, 19 CFR 210.10 (2016).
By order of the Commission.
On April 14, 2015, the Deputy Assistant Administrator, Office of Diversion Control, Drug Enforcement Administration, issued an Order to Show Cause to Geoffrey D. Peterson, N.P. (hereinafter, Registrant), of Hixson, Tennessee. The Show Cause Order proposed the revocation of Registrant's DEA Certificate of Registration MP3330545,
First, the Show Cause Order alleged that effective January 27, 2015, the Tennessee Nursing Board had summarily suspended Registrant's nurse practitioner license.
Second, the Show Cause Order alleged that Registrant materially falsified his October 7, 2014 application for the above registration.
The Show Cause Order also notified Registrant of his right to request a hearing on the allegations or to submit a written statement while waiving his right to a hearing, the procedure for electing either option, and the consequence of failing to elect either option.
On April 7, 2016, the Government forwarded a Request for Final Agency Action. Therein, the Government represented that neither Registrant “nor anyone representing him has requested a hearing or sent any other correspondence to DEA.” Req. for Final Agency Action, at 7. Based on the Government's representation, I find that 30 days have now passed since the Show Cause Order was served on Registrant and that he has neither requested a hearing nor submitted a written statement in lieu of hearing. 21 CFR 1301.43(b) & (c). Accordingly, I find that Registrant has waived his right to a hearing or to submit a written statement and issue this Decision and Order based on the evidence submitted by the Government.
Registrant is the holder of DEA Certificate of Registration MP3330545, pursuant to which he is authorized to dispense controlled substances in schedules II through V, as a mid-level practitioner, at the registered address of Hormone Replacement Specialists, 5550 Highway 153, Suite 103, Hixson, Tennessee. GX 7, at 1. Registrant renewed this registration on October 7, 2014, at which time he was required to answer the following question: “Has the applicant ever been convicted of a crime in connection with controlled substance(s) under state or federal law, or been excluded or directed to be excluded from participation in a medicare or state health care program, or any [sic] such action pending?” GX 6. Registrant entered “N” for no.
On February 17, 2014, Registrant was arrested by a member of the Sequatchie County Sheriff's Department and charged with felony possession of marijuana, an offense under Tenn. Code Ann. § 39-17-415. GX 5, at 1, 3, 6. According to a March 31, 2015 letter from the Clerk of the General Sessions Court of Sequatchie County, criminal charges were pending against Registrant “as of October 31, 2014.” GX 8. The Clerk's letter further states that the “[c]harges were expunged on 11/21/2014.”
Registrant was also previously licensed by the Tennessee Board of Nursing (Board) as an advanced practice nurse (APN) and held a Certificate of Fitness to prescribe. GX 4, at 2. However, on January 27, 2015, the Board ordered the summary suspension of Registrant's advance practice nurse license and Certificate of Fitness to Prescribe.
The Board also based its order on findings that from April 1, 2013 through March 31, 2014, Registrant was “a top 50 prescriber in Tennessee based on morphine equivalents,” and that in a letter to the Board, he had stated that “he had no intention of curbing his prescribing practices.”
Based on these and other findings, the Board found that Registrant “[i]s unfit or incompetent by reason of negligence, habits or other cause”; “[i]s guilty of unprofessional conduct”; and “[h]as violated or attempted to violate, directly or indirectly, or assisted in or abetted the violation of or conspired to violate any provision of this chapter or any lawful order of the board.”
Subsequently, on May 6, 2015, Registrant entered into an Agreed Order with the Board, which the latter approved on August 6, 2015 and which suspended his APN license and his Certificate of Fitness to prescribe.
Therein, the parties agreed to a variety of factual findings pertinent to his prescribing of controlled substances. These included that during 2011, he had worked at a Chattanooga-based clinic (Superior One Medical Clinic) and “wrote prescriptions for schedule II controlled substances with no medical necessity or supporting documentation as to the condition which would warrant such prescribing.”
Registrant also stipulated to the findings of the Summary Suspension Order regarding the various controlled substances and paraphernalia found during the execution of a search warrant at his residence, the findings that he was a Top 50 prescriber of morphine equivalents and had told the Board that he did not intend to curb his prescribing, and the findings related to his obstruction of the Department of Health's investigation of his father's pain clinic.
Pursuant to 21 U.S.C. 824(a)(3), “[a] registration . . . to . . . dispense a controlled substance . . . may be suspended or revoked by the Attorney General upon a finding that the registrant . . . has had his State license or registration suspended, revoked, or denied by competent State authority and is no longer authorized by State law to engage in the . . . dispensing of controlled substances.” This Agency has further held that notwithstanding that this provision grants the Agency authority to suspend or revoke a registration, other provisions of the Controlled Substances Act “make plain that a practitioner can neither obtain nor maintain a DEA registration unless the practitioner currently has authority under state law to handle controlled substances.”
These provisions include section 102(21), which defines the term “practitioner” to “mean[ ] a physician . . . licensed, registered, or otherwise permitted, by . . . the jurisdiction in which he practices . . . to distribute, dispense, [or] administer . . . a controlled substance in the course of professional practice,” 21 U.S.C. 802(21), as well as section 303(f), which directs that “[t]he Attorney General shall register practitioners . . . to dispense . . . controlled substances . . . if the applicant is authorized to dispense . . . controlled substances under the laws of the State in which he practices.”
Here, it undisputed that the Tennessee Board of Nursing has suspended Registrant's advance practice nursing license and his Certificate of Fitness to prescribe. I therefore find that Registrant is without authority to dispense controlled substances in Tennessee, the State in which he is registered. Because Registrant no longer meets the CSA's prerequisite for maintaining a practitioner's registration, I will order that his existing registration be revoked.
Pursuant to section 304(a)(1), the Attorney General is also authorized to suspend or revoke a registration “upon a finding that the registrant . . . has materially falsified any application filed pursuant to or required by this subchapter.” 21 U.S.C. 824(a)(1). Based on Registrant's failure to disclose his arrest for marijuana possession on his October 7, 2014 application, the Government contends that he materially falsified the application when he answered “N” or no to the question: “Has the applicant ever been convicted of a crime in connection with controlled substance(s) under state or federal law, or been excluded or directed to be excluded from participation in a medicare or state health care program, or any [sic] such action pending?” GX 6.
Notably, the Government does not argue that Registrant has been convicted of the unlawful possession of marijuana, let alone that he had been convicted of the offense prior to submitting his
The clerk's letter does not, however, even identify what charges were pending against Registrant at the time. Moreover, the Government does not rely on the line of cases holding that a deferred adjudication of an offense falling under 21 U.S.C. 824(a)(2) which ultimately results in dismissal of the charge is still a conviction for purposes of the Controlled Substances Act and that the failure to disclose such conviction on a subsequent application is a material falsification.
Instead, the Government argues that Registrant materially falsified his application because “the new application required that [Registrant] disclose this arrest because the application asked: `Has the applicant ever been convicted of a crime in connection with controlled substance(s) or is any action pending?' ” Request for Final Agency Action, at 5-6. The question does not, however, require the disclosure of an arrest. Rather, it requires the disclosure of “any action pending,” and while this is reasonably read to include a criminal prosecution for a controlled substance offense which is ongoing at the time an application is submitted, the Government's evidence establishes only that charges were pending 24 days after Registrant submitted his application and not on the date he submitted his application. While it may be that the marijuana possession charge was pending on October 7, 2014 and was expunged pursuant to a deferred adjudication, which under Agency precedent constitutes a conviction even where the conviction is later expunged, the Government did not produce any evidence establishing that this was the basis for the expungement of the charge.
Accordingly, I find that the Government has failed to provide substantial evidence to support its contention that Registrant materially falsified his application. Nonetheless, because Registrant no longer holds authority under Tennessee law to dispense controlled substances, he is not entitled to maintain his registration. Accordingly, I will order that his registration be revoked.
Pursuant to the authority vested in me by 21 U.S.C. 823(f) and 824(a), as well as 28 CFR 0.100(b), I order that DEA Certificate of Registration MP3330545 issued to Geoffrey D. Peterson, N.P., be, and it hereby is, revoked. I further order that any application of Geoffrey D. Peterson to renew or modify the above registration be, and it hereby is, denied. This Order is effective immediately.
Occupational Safety and Health Administration (OSHA), Labor.
Notice.
In this notice, OSHA announces its final decision to expand the scope of recognition for Nemko-CCL, Inc., as a Nationally Recognized Testing Laboratory (NRTL).
The expansion of the scope of recognition becomes effective on July 27, 2016.
Information regarding this notice is available from the following sources:
OSHA hereby gives notice of the expansion of the scope of recognition of Nemko-CCL, Inc. (CCL), as an NRTL. CCL's expansion covers the addition of two recognized testing and certification sites and twenty-two additional test standards to their NRTL scope of recognition.
OSHA recognition of an NRTL signifies that the organization meets the requirements in Section 1910.7 of Title 29, Code of Federal Regulations (29 CFR 1910.7). Recognition is an acknowledgment that the organization can perform independent safety testing and certification of the specific products covered within its scope of recognition and is not a delegation or grant of government authority. As a result of recognition, employers may use products properly approved by the NRTL to meet OSHA standards that require testing and certification.
The Agency processes applications by an NRTL for initial recognition, or for expansion or renewal of this recognition, following requirements in Appendix A to 29 CFR 1910.7. This appendix requires that the Agency publish two notices in the
CCL submitted two applications, dated January 28, 2015 (OSHA-2013-0016-0008) and January 26, 2016 (OSHA-2013-0016-0011), to expand its recognition to include the addition of two recognized testing and certification sites located at: Nemko USA, Inc., 2210 Faraday Avenue, Suite 150, Carlsbad, California 92008; and Nemko Canada,
CCL's first application also requested the addition of twenty-two test standards to its scope of recognition. OSHA staff performed a detailed analysis of the application packet, reviewed other pertinent information, and conducted the on-site reviews described above in relation to this application.
OSHA published the preliminary notice announcing CCL's expansion application in the
To obtain or review copies of all public documents pertaining to the CCL's application, go to
OSHA staff examined CCL's expansion application, conducted detailed on-site assessments, and examined other pertinent information. Based on its review of this evidence, OSHA finds that CCL meets the requirements of 29 CFR 1910.7 for expansion of its recognition, subject to the limitations and conditions listed below.
OSHA, therefore, is proceeding with this final notice to grant CCL's scope of recognition to include the two new test sites. OSHA limits the expansion of CCL's recognition to include the sites at Nemko Canada Inc., Ottawa, Ontario, Canada; Nemko-CCL, Inc. Salt Lake City, Utah, Nemko USA, Inc., Carlsbad, California. Further, OSHA approves CCL's request to relocate its headquarters to the Ottawa, Canada site and recognizes the new administrative site at the Nemko-CCL Salt Lake site. Additionally, OSHA acknowledges the name change of Nemko-CCL, Inc. to Nemko North America, Inc. and will adjust future correspondence and reference to Nemko North America, Inc. [NEMKO]. OSHA's recognition of these sites limits CCL to performing product testing and certifications only to the test standards for which the site has the proper capability and programs, and for test standards in CCL's scope of recognition. This limitation is consistent with the recognition that OSHA grants to other NRTLs that operate multiple sites.
OSHA is also proceeding with this final notice to grant CCL's scope of recognition to include the twenty-two test standards. OSHA limits this expansion of CCL's recognition to testing and certification of products for demonstration of conformance to the test standards listed in Table 1 below.
OSHA's recognition of any NRTL for a particular test standard is limited to equipment or materials for which OSHA standards require third-party testing and certification before using them in the workplace. Consequently, if a test standard also covers any products for which OSHA does not require such testing and certification, an NRTL's scope of recognition does not include these products.
The American National Standards Institute (ANSI) may approve the test standards listed above as an American National Standards. However, for convenience, we may use the designation of the standards-developing organization for the standard as opposed to the ANSI designation. Under the NRTL Program's policy (see OSHA Instruction CPL 1-0.3, Appendix C, paragraph XIV), any NRTL recognized for a particular test standard may use either the proprietary version of the test
In addition to those conditions already required by 29 CFR 1910.7, CCL also must abide by the following conditions of the recognition:
1. CCL must inform OSHA as soon as possible, in writing, of any change of ownership, facilities, or key personnel, and of any major change in its operations as an NRTL, and provide details of the change(s);
2. CCL must meet all the terms of its recognition and comply with all OSHA policies pertaining to this recognition; and
3. CCL must continue to meet the requirements for recognition, including all previously published conditions on CCL's scope of recognition, in all areas for which it has recognition.
Pursuant to the authority in 29 CFR 1910.7, OSHA hereby expands the recognition of CCL, subject to these limitations and conditions specified above.
David Michaels, Ph.D., MPH, Assistant Secretary of Labor for Occupational Safety and Health, 200 Constitution Avenue NW., Washington, DC 20210, authorized the preparation of this notice. Accordingly, the Agency is issuing this notice pursuant to 29 U.S.C. 657(g)(2), Secretary of Labor's Order No. 1-2012 (77 FR 3912, Jan. 25, 2012), and 29 CFR 1910.7.
Division of Coal Mine Workers' Compensation, Office of Workers' Compensation Programs, Department of Labor.
Notice.
The Department of Labor, as part of its continuing effort to reduce paperwork and respondent burden, conducts a pre-clearance consultation program to provide the general public and Federal agencies with an opportunity to comment on proposed and/or continuing collections of information in accordance with the Paperwork Reduction Act of 1995 (PRA95) [44 U.S.C. 3506(c)(2)(A)]. This program helps to ensure that requested data can be provided in the desired format, reporting burden (time and financial resources) is minimized, collection instruments are clearly understood, and the impact of collection requirements on respondents can be properly assessed. Currently, the Office of Workers' Compensation Programs is soliciting comments concerning the proposed collection: Survivor's Form for Benefits (CM-912). A copy of the proposed information collection request can be obtained by contacting the office listed below in the
Written comments must be submitted to the office listed in the
Ms. Yoon Ferguson, U.S. Department of Labor, 200 Constitution Ave. NW., Room S-3323, Washington, DC 20210, telephone/fax (202) 354-9647, Email
• Evaluate whether the proposed collection of information is necessary for the proper performance of the functions of the agency, including whether the information will have practical utility;
• evaluate the accuracy of the agency's estimate of the burden of the proposed collection of information, including the validity of the methodology and assumptions used;
• enhance the quality, utility and clarity of the information to be collected; and
• minimize the burden of the collection of information on those who are to respond, including through the use of appropriate automated, electronic, mechanical, or other technological collection techniques or other forms of information technology,
Comments submitted in response to this notice will be summarized and/or included in the request for Office of Management and Budget approval of the information collection request; they will also become a matter of public record.
Division of Coal Mine Workers' Compensation, Office of Workers' Compensation Programs, Department of Labor
Notice.
The Department of Labor, as part of its continuing effort to reduce paperwork and respondent burden,
Written comments must be submitted to the office listed in the addresses section below on or before September 26, 2016.
Ms. Yoon Ferguson, U.S. Department of Labor, 200 Constitution Ave. NW., Room S-3323, Washington, DC 20210, telephone/fax (202) 354-9647, Email
The Federal Mine Safety and Health Act of 1977, as amended (30 U.S.C. 901) and 20 CFR 725.535, require that DOL Black Lung benefit payments to a beneficiary for any month be reduced by any other payments of state or federal benefits for workers' compensation due to pneumoconiosis. To ensure compliance with this mandate, DCMWC must collect information regarding the status of any state or Federal workers' compensation claim, including dates of payments, weekly or lump sum amounts paid, and other fees or expenses paid out for this award, such as attorney fees and related expenses associated with pneumoconiosis. Form CM-905 is used to request the amount of those workers' compensation benefits. This information collection is currently approved for use through December 31, 2016.
The Department of Labor is particularly interested in comments which:
• Evaluate whether the proposed collection of information is necessary for the proper performance of the functions of the agency, including whether the information will have practical utility;
• evaluate the accuracy of the agency's estimate of the burden of the proposed collection of information, including the validity of the methodology and assumptions used;
• enhance the quality, utility and clarity of the information to be collected; and
• minimize the burden of the collection of information on those who are to respond, including through the use of appropriate automated, electronic, mechanical, or other technological collection techniques or other forms of information technology,
The Department of Labor seeks the approval for the extension of this currently-approved information collection in order to gather information to determine the amounts of Black Lung benefits paid to beneficiaries. Black Lung amounts are reduced dollar for dollar, for other Black Lung related workers' compensation awards the beneficiary may be receiving from State or Federal programs.
Comments submitted in response to this notice will be summarized and/or included in the request for Office of Management and Budget approval of the information collection request; they will also become a matter of public record.
National Archives and Records Administration (NARA).
Notice of availability of proposed records schedules; request for comments.
The National Archives and Records Administration (NARA) publishes notice at least once monthly of certain Federal agency requests for records disposition authority (records schedules). Once approved by NARA, records schedules provide mandatory instructions on what happens to records when agencies no longer need them for current Government business. The records schedules authorize agencies to preserve records of continuing value in the National Archives of the United States and to destroy, after a specified period, records lacking administrative, legal, research, or other value. NARA publishes notice in the
NARA must receive requests for copies in writing by August 26, 2016. Once NARA finishes appraising the records, we will send you a copy of the schedule you requested. We usually prepare appraisal memoranda that contain additional information concerning the records covered by a proposed schedule. You may also request these. If you do, we will also provide them once we have completed the appraisal. You have 30 days after we send to you these requested documents in which to submit comments.
You may request a copy of any records schedule identified in this notice by contacting Records Appraisal and Agency Assistance (ACRA) using one of the following means:
You must cite the control number, which appears in parentheses after the name of the agency that submitted the schedule, and a mailing address. If you would like an appraisal report, please include that in your request.
Margaret Hawkins, Director, by mail at
Each year, Federal agencies create billions of records on paper, film, magnetic tape, and other media. To control this accumulation, agency records managers prepare schedules proposing records retention periods and submit these schedules for NARA's approval. These schedules provide for timely transfer into the National Archives of historically valuable records and authorize the agency to dispose of all other records after the agency no longer needs them to conduct its business. Some schedules are comprehensive and cover all the records of an agency or one of its major subdivisions. Most schedules, however, cover records of only one office or program or a few series of records. Many of these update previously approved schedules, and some include records proposed as permanent.
The schedules listed in this notice are media neutral unless otherwise specified. An item in a schedule is media neutral when an agency may apply the disposition instructions to records regardless of the medium in which it creates or maintains the records. Items included in schedules submitted to NARA on or after December 17, 2007, are media neutral unless the item is expressly limited to a specific medium. (See 36 CFR 1225.12(e).)
Agencies may not destroy Federal records without Archivist of the United States' approval. The Archivist approves destruction only after thoroughly considering the records' administrative use by the agency of origin, the rights of the Government and of private people directly affected by the Government's activities, and whether or not the records have historical or other value.
In addition to identifying the Federal agencies and any subdivisions requesting disposition authority, this notice lists the organizational unit(s) accumulating the records (or notes that the schedule has agency-wide applicability when schedules cover records that may be accumulated throughout an agency); provides the control number assigned to each schedule, the total number of schedule items, and the number of temporary items (the records proposed for destruction); and includes a brief description of the temporary records. The records schedule itself contains a full description of the records at the file unit level as well as their disposition. If NARA staff has prepared an appraisal memorandum for the schedule, it also includes information about the records. You may request additional information about the disposition process at the addresses above.
1. Department of Agriculture, Commodity Credit Corporation (DAA-0161-2016-0002, 2 items, 2 temporary items). Financial and administrative records related to the cotton transition assistance and cotton ginning cost-sharing programs.
2. Department of Agriculture, Commodity Credit Corporation (DAA-0161-2016-0003, 1 item, 1 temporary item). Records related to approved warehouses for storing agricultural commodities.
3. Department of Agriculture, Commodity Credit Corporation (DAA-0161-2016-0004, 1 item, 1 temporary item). Records related to price support payments for producers of wool and mohair commodities.
4. Department of Agriculture, Commodity Credit Corporation (DAA-0161-2016-0005, 1 item, 1 temporary item). Records related to supply and foreign purchases.
5. Department of Agriculture, Commodity Credit Corporation (DAA-0161-2016-0006, 1 item, 1 temporary item). Records related to dairy indemnity payments.
6. Department of Agriculture, Commodity Credit Corporation (DAA-0161-2016-0007, 1 item, 1 temporary item). Records related to price support programs.
7. Department of Agriculture, Farm Service Agency (DAA-0145-2015-0010, 1 item, 1 temporary item). Master file of an electronic information system that contains records pertaining to the consolidated natural disaster assistance program.
8. Department of Agriculture, Farm Service Agency (DAA-0145-2016-0006, 1 item, 1 temporary item). Records related to loan deficiency payments made through the marketing assistance program.
9. Department of the Army, Agency-wide (DAA-AU-2016-0010, 1 item, 1 temporary item). Master files of an electronic information system that contains records relating to the readiness status of equipment and materiel.
10. Department of the Army, Agency-wide (DAA-AU-2016-0021, 1 item, 1 temporary item). Master files of an electronic information system used to control and monitor a wastewater treatment facility.
11. Department of Defense, Defense Threat Reduction Agency (DAA-0374-2014-0043, 1 item, 1 temporary item). Master files of an electronic information system used for tracking and management of weapon system parts including stock numbers, name assignments, location and related information.
12. Department of Defense, National Reconnaissance Office (N1-525-12-7, 6 items, 5 temporary items). Records related to varied security functions and counterintelligence case files. Proposed for permanent retention are policy and subject files.
13. Department of Defense, Office of the Secretary of Defense (DAA-0330-2016-0006, 1 item, 1 temporary item). Master files of an electronic information system that manages training for military service members and their families in quality-of-life issues such as financial readiness, health and wellness, and deployment and transition.
14. Department of Defense, Office of the Secretary of Defense (DAA-0330-2016-0011, 1 item, 1 temporary item). Master files of an electronic information system used to screen individuals for assignment eligibility as Sexual Assault Prevention and Response Coordinators and Victim Advocates.
15. Department of Defense, Office of the Secretary of Defense (DAA-0330-2016-0013, 4 items, 3 temporary items). Records relating to the Federal Voting Assistance Program including research into new technology, general correspondence, and call center files. Proposed for permanent retention are program guidance and promotional materials.
16. Department of Energy, Naval Nuclear Propulsion Program (DAA-0434-2015-0010, 39 items, 39 temporary items). Records regarding personnel management including acknowledgement forms, badge photographs, dispensary logs, nondisclosure agreements, temporary employment, specialized and other training, labor relations, computer access, and related matters.
17. Department of Health and Human Services, Administration for Children and Families (DAA-0292-2016-0001, 2 items, 1 temporary item). Records relating to the agency welfare waiver program to include minor welfare waiver requests. Proposed for permanent retention are waiver records that document efforts from states to significantly reform welfare programs.
18. Department of Health and Human Services, Administration for Children and Families (DAA-0292-2016-0003, 4
19. Department of Health and Human Services, Administration for Children and Families (DAA-0292-2016-0004, 1 item, 1 temporary item). Training records, including technical assistance documents used by agency staff and contracted vendors to assist in employee development and program performance.
20. Department of Health and Human Services, Administration for Children and Families (DAA-0292-2016-0005, 2 items, 2 temporary items). Records relating to rulemaking, including drafts, guidance documents, background materials, regulation logs, and correspondence.
21. Department of Homeland Security, United States Citizenship and Immigration Services (DAA-0566-0016-0006, 8 items, 2 temporary items). Applications, petitions, and requests for deferred action for childhood arrivals when incomplete, unsigned, or rejected for incorrect fees or insufficient funds. Proposed for permanent retention are all other applications, petitions, and requests for deferred action for childhood arrivals (approved, denied, abandoned, withdrawn, terminated, and administratively closed).
22. Department of Homeland Security, United States Citizenship and Immigration Services (DAA-0566-0016-0007, 8 items, 2 temporary items). Applications, petitions, and requests for temporary protected status when incomplete, unsigned, or rejected for incorrect fees or insufficient funds. Proposed for permanent retention are all other applications, petitions, and requests for temporary protected status (approved, denied, abandoned, withdrawn, terminated, and administratively closed).
23. Department of Housing and Urban Development, Office of the Inspector General (DAA-0207-2014-0002, 3 items, 1 temporary item). Includes non-significant case files, copies of reports, administrative correspondence, and working papers and drafts. Proposed for permanent retention are records of the Inspector General including policy and program records, and significant case files.
24. Department of State, Bureau of Counterterrorism (DAA-0059-2014-0012, 8 items, 8 temporary items). Subject and chronological files for the Office of Homeland Security.
25. Department of State, Bureau of Counterterrorism (DAA-0059-2014-0013, 5 items, 5 temporary items). Records of the Office of Terrorist Screening and Interdiction Programs, including non-recordkeeping copies of agreements, working files, and employee-related administrative records.
26. Department of State, Bureau of Counterterrorism (DAA-0059-2014-0014, 2 items, 2 temporary items). Records of the Office of Regional Affairs and Programs, including copies of position papers, policy statements and guidance, and working files.
27. Department of State, Bureau of Human Resources (DAA-0059-2016-0004, 3 items, 1 temporary item). Working files of the Foreign Service Selection Board. Proposed for permanent retention are Board precepts and final reports.
28. Department of State, Bureau of Oceans and International Environmental and Scientific Affairs (DAA-0059-2014-0023, 3 items, 2 temporary items). Records of the Office of Environmental Quality and Transboundary Issues related to application review files to include supporting documentation and comments. Proposed for permanent retention are records compiled during each phase of the permitting process for projects.
29. Department of the Treasury, Internal Revenue Service (DAA-0058-2015-0006, 3 items, 3 temporary items). Routine contract, renewal, and criminal investigation case files of intermediary agreements between the agency and foreign financial institutions.
30. Department of the Treasury, Internal Revenue Service (DAA-0058-2016-0006, 1 item, 1 temporary item). Agency employee wage garnishment data records.
31. Department of the Treasury, Internal Revenue Service (DAA-0058-2016-0014, 1 item, 1 temporary item). Master files of an electronic information system used by the agency and its partners to produce advertising materials primarily related to refundable tax credits.
32. Department of the Treasury, Internal Revenue Service (DAA-0058-2016-0015, 1 item, 1 temporary item). Master files of an electronic information system used to support the individual tax return audit appeal process.
33. Commodity Futures Trading Commission, Agency-wide (DAA-0180-2016-0002, 3 items, 3 temporary items). Records of reviews and audits of compliance with regulations and laws by market participants.
34. General Services Administration, Agency-wide (DAA-0269-2016-0010, 2 items, 1 temporary item). Routine security program records. Proposed for permanent retention are records related to the collection and reporting of security programs, including inspection reports, regulations and related correspondence.
35. General Services Administration, Agency-wide (DAA-0269-2016-0011, 3 items, 2 temporary items). Information technology support program records. Proposed for permanent retention are records related to standards and specifications published by the General Services Administration.
36. General Services Administration, Agency-wide (DAA-0269-2016-0012, 5 items, 2 temporary items). Records related to professional services performed for other agencies. Proposed for permanent retention are records related to Presidential transitions, oversight responsibilities associated with the Federal Advisory Committee Act, and management of Federal regulations and manuals.
37. General Services Administration, Agency-wide (DAA-0269-2016-0013, 5 items, 5 temporary items). Records related to customer service and business development.
38. Securities and Exchange Commission, Office of Compliance Inspections and Examinations (DAA-0266-2015-0003, 2 items, 2 temporary items). Master file of an electronic information system containing records relating to nationwide examinations of entities regulated and registered by the Securities and Exchange Commission.
The ACRS Subcommittee on Fukushima will hold a meeting on August 17, 2016, Room T-2B1, 11545 Rockville Pike, Rockville, Maryland 20852.
The meeting will be open to public attendance with the exception of portions that may be closed to protect information pursuant to number 5 U.S.C.552b(c)(9)(B).
The agenda for the subject meeting shall be as follows:
The Subcommittee will be briefed on criteria and guidance for NRC decisionmaking related to possible regulatory actions in accordance with COMSECY-15-0019. The Subcommittee will also hear the NRC staff's plans for addressing comments received on SECY-15-0065, “Proposed Rule: Mitigation of Beyond-Design-Basis Events.” The Subcommittee will hear presentations by and hold discussions with the NRC staff and other interested persons regarding this matter. The Subcommittee will gather information, analyze relevant issues and facts, and formulate proposed positions and actions, as appropriate, for deliberation by the Full Committee.
Members of the public desiring to provide oral statements and/or written comments should notify the Designated Federal Official (DFO), Mike Snodderly (Telephone: 301-415-2241 or Email:
Detailed meeting agendas and meeting transcripts are available on the NRC Web site at
If attending this meeting, please enter through the One White Flint North building, 11555 Rockville Pike, Rockville, Maryland 20852. After registering with Security, please contact Mr. Theron Brown (Telephone: 240-888-9835) to be escorted to the meeting room.
Nuclear Regulatory Commission.
Exemption; issuance.
The U.S. Nuclear Regulatory Commission (NRC) is issuing exemptions from several of the record keeping requirements in its regulations in response to a request from LaCrosse
Please refer to Docket ID NRC-2015-0279 when contacting the NRC about the availability of information regarding this document. You may obtain publicly-available information related to this document using any of the following methods:
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Marlayna G. Vaaler, Office of Nuclear Material Safety and Safeguards; telephone: 301-415-3178; email:
The La Crosse Boiling Water Reactor (LACBWR) was an Atomic Energy Commission (AEC) Demonstration Project Reactor that first went critical in 1967, commenced commercial operation in November 1969, and was capable of producing 50 megawatts electric. The LACBWR is located on the east bank of the Mississippi River in Vernon County, Wisconsin. The Allis-Chalmers Company was the original licensee; the AEC later sold the plant to the Dairyland Power Cooperative (DPC) and granted it Provisional Operating License No. DPR-45 on August 28, 1973 (ADAMS Legacy Accession No. 3001002570).
The LACBWR permanently ceased operations on April 30, 1987 (ADAMS Legacy Accession No. 8705280175), and reactor defueling was completed on June 11, 1987 (ADAMS Legacy Accession No. 8707090206). In a letter dated August 4, 1987 (ADAMS Legacy Accession No. 8708060296), the NRC terminated DPC's authority to operate LACBWR under Provisional Operating License No. DPR-45, and granted the licensee a possess-but-not-operate status. By letter dated August 18, 1988 (ADAMS Legacy Accession No. 8808240330), the NRC amended DPC's Provisional Operating License No. DPR-
The NRC issued an order to authorize decommissioning of LACBWR and approve the licensee's proposed Decommissioning Plan (DP) on August 7, 1991 (ADAMS Legacy Accession No. 9108160044). Because the NRC approved DPC's DP before August 28, 1996, pursuant to 10 CFR 50.82, the DP is considered the Post-Shutdown Decommissioning Activities Report (PSDAR) for LACBWR. The PSDAR public meeting was held on May 13, 1998, and subsequent updates to the LACBWR decommissioning report have combined the DP and PSDAR into the “LACBWR Decommissioning Plan and Post-Shutdown Decommissioning Activities Report” (D-Plan/PSDAR).
The DPC developed an onsite Independent Spent Fuel Storage Installation (ISFSI) and completed the movement of all 333 spent nuclear fuel elements from the Fuel Element Storage Well to dry cask storage at the ISFSI by September 19, 2012 (ADAMS Accession No. ML12290A027). The remaining associated buildings and structures are ready for dismantlement and decommissioning activities.
By Order dated May 20, 2016 (ADAMS Accession No. ML16123A073), the NRC approved the direct transfer of Possession Only License No. DPR-45 for LACBWR from DPC to LaCrosse
By letter dated October 13, 2015 (ADAMS Accession No. ML15314A068), as supplemented by letter dated December 2, 2015 (ADAMS Accession No. ML15357A054), which replaced the October 13, 2015, submittal in its entirety, the licensee filed a request for NRC approval of a permanent exemption from the record retention requirements of: (1) 10 CFR part 50, appendix A, Criterion 1, which requires certain records be retained throughout the life of the unit; (2) 10 CFR part 50, appendix B, Criterion XVII, which requires certain records be retained consistent with regulatory requirements for a duration established by the licensee; (3) 10 CFR 50.59(d)(3), which requires certain records be maintained until termination of a license issued pursuant to 10 CFR part 50; (4) 10 CFR 50.71(c), which requires certain records be maintained consistent with various elements of the NRC regulations, facility technical specifications and other licensing bases documents; and (5) 10 CFR 72.72(d), which requires that certain records of spent fuel and high-level radioactive waste in storage be kept in duplicate in a separate location sufficiently remote from the original records that a single event would not destroy both sets of records. The request was made pursuant to 10 CFR 50.12, “Specific exemptions,” and 10 CFR 72.7, “Specific exemptions.”
The licensee is proposing to: (1) Eliminate these records for LACBWR when the licensing basis requirements previously applicable to the nuclear power unit and associated systems, structures, and components (SSCs) are no longer effective (
Records associated with residual radiological activity and programmatic controls necessary to support decommissioning, such as security and quality assurance (QA), are not affected by the exemption request because they will be retained as decommissioning records until the termination of the LACBWR license. In addition, the licensee did not request an exemption associated with any other record keeping requirements for the storage of spent fuel at its ISFSI under 10 CFR part 50 or the general license requirements of 10 CFR part 72. No exemption was requested from the decommissioning records retention requirements of 10 CFR 50.75, or any other requirements of 10 CFR part 50 applicable to decommissioning.
Pursuant to 10 CFR 50.12, the Commission may, upon application by any interested person or upon its own initiative, grant exemptions from the requirements of 10 CFR part 50 when the exemptions are authorized by law, will not present an undue risk to public health or safety, and are consistent with the common defense and security. However, the Commission will not consider granting an exemption unless special circumstances are present. Special circumstances are described in 10 CFR 50.12(a)(2).
Pursuant to 10 CFR 72.7 the Commission may, upon application by any interested person or upon its own initiative, grant exemptions from the requirements of 10 CFR part 72 when it determines that the exemptions are authorized by law, will not endanger life or property or the common defense and security, and are otherwise in the public interest.
As described in the DP/PSDAR and subsequent updates, LACBWR is being returned to a condition suitable for unrestricted use. According to the December 2, 2015, submittal, there are no SSCs classified as safety-related remaining on the site, and the nuclear reactor and essentially all associated SSCs in the nuclear steam supply system and balance of plant that supported the generation of power have been retired in place, are being prepared for removal, or have already been dismantled. The only SSCs that remain operable are associated with the liquid waste discharge system. The plant is considered to be in a “cold and dark” condition awaiting final dismantlement and the completion of decommissioning.
The licensee's general justification for eliminating records associated with LACBWR SSCs that have been or will be removed from service under the NRC license, dismantled, or demolished, is that these SSCs will not in the future serve any LACBWR functions regulated by the NRC. The licensee's dismantlement plans involve evaluating SSCs with respect to the current facility safety analysis; progressively removing them from the licensing basis where necessary through appropriate change mechanisms (
While the licensee intends to retain the records required by its license as the project transitions from current plant conditions to a fully decommissioned state, plant dismantlement will obviate the regulatory and business need for maintenance of most records. As the SSCs already removed from the licensing basis are subsequently dismantled and the need for the associated records is, on a practical basis, eliminated, the licensee proposes that they be exempted from the records retention requirements for SSCs and historical activities that are no longer relevant, thereby eliminating the associated regulatory and economic burdens of creating alternative storage locations, relocating records, and retaining irrelevant records.
The exemption request states that all records necessary for spent fuel and spent fuel storage SSCs and activities have been, and will continue to be, retained for LACBWR and the LACBWR ISFSI in accordance with the applicable sections of 10 CFR part 50 and 10 CFR part 72. However, under the proposed exemption from 10 CFR 72.72(d), the licensee would eliminate the duplicate storage requirement for the LACBWR ISFSI spent fuel records and instead store them in the same manner used for the LACBWR plant's QA records, using a single storage facility subject to the same procedures and processes outlined in the NRC-approved QAPD. The NRC previously determined that the QAPD meets the applicable requirements of appendix B to 10 CFR part 50. Under the provisions of the QAPD, both the LACBWR ISFSI and plant's spent fuel documents are considered QA records to be stored in accordance with the QAPD.
According to Revision 29 of the LACBWR QAPD, document storage requirements must meet American National Standards Institute (ANSI) standard N45 2.9-1974, “Requirements for Collection, Storage, and Maintenance of Quality Assurance Records,” which specifies, in part, design requirements for use in the construction of record storage facilities when the use of a single storage facility is desired. In approving the QAPD, the NRC also approved the single facility location used for the storage and maintenance of QA records at LACBWR.
Section XVII, “Quality Assurance Records,” of the LACBWR QAPD states that the facility has established measures for maintaining ISFSI records that cover all documents and records associated with the operation, maintenance, installation, repair, and modification of SSCs covered by the QAPD. Also included are historical records gathered and collected during plant and ISFSI operations that are either required to support the dry cask storage systems stored at the ISFSI or ultimate shipment of the fuel to a federal repository. The QAPD also allows for QA records to be stored in accordance with ANSI N45 2.9-1974 in a single storage facility designed and maintained to minimize the risk of damage from adverse conditions. The licensee affirmed in its application that the record storage vault at LACBWR was constructed and is maintained to meet the requirements of the NRC-approved QAPD.
In addition, the licensee recognized in its application that the LACBWR site will continue to be under NRC regulation until license termination, primarily due to residual radioactivity. The operational, radiological, and other necessary programmatic controls (such as security and QA) for the facility, as well as the implementation of controls for the decommissioning activities, are and will continue to be appropriately addressed through the 10 CFR part 50 license and current decommissioning documents such as the DP/PSDAR and plant technical specifications.
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The partial exemption from the record keeping requirements of 10 CFR 50.71(c); 10 CFR part 50, appendix A, Criterion I; 10 CFR part 50, appendix B, Criterion XVII; and 10 CFR 50.59(d)(3) for the records described above is administrative in nature and will have no impact on any remaining decommissioning activities or on radiological effluents. The exemption will only advance the schedule for disposition of the specified records. Considering the content of these records, the elimination of these records on an advanced timetable will have no reasonable potential of presenting any undue risk to the public health and safety.
The exemption from the portion of 10 CFR 72.72(d) that requires records for spent fuel in storage to be kept in duplicate for the LACBWR ISFSI continues to meet the record keeping requirements of 10 CFR part 50, appendix B, and other applicable 10 CFR part 72 requirements in that the spent fuel records will be stored and maintained in accordance with the NRC-approved QAPD. Specifically, 10 CFR 72.140(d) states that a QA program that is approved by the NRC as meeting the applicable requirements of appendix B to 10 CFR part 50, will be accepted as satisfying the requirements of 10 CFR 72.140(b) for establishment of an ISFSI QA program, except the licensee must also meet the record keeping provisions of 10 CFR 72.174. As noted above, the NRC previously reviewed the licensee's QA program and determined that it met the applicable requirements of appendix B to part 50. In addition, the exemption will not affect the record content, retrievability, or retention requirements specified in 10 CFR 72.72 or 10 CFR 72.174, such that the licensee will continue to meet all other applicable record requirements for the LACBWR ISFSI and associated special nuclear materials. The NRC staff determined that the process and procedures that will be used to store these records (
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Rather, the exemption requested is administrative in nature and would only advance the current schedule for disposition of the specified records. Therefore, the partial exemption from the record keeping requirements of 10 CFR 50.71(c); 10 CFR part 50, appendix A, Criterion I; 10 CFR part 50, appendix B, Criterion XVII; and 10 CFR 50.59(d)(3) for the types of records described above is consistent with the common defense and security.
The exemption from 10 CFR 72.72(d) continues to meet the record keeping requirements of 10 CFR part 50, appendix B, and other applicable 10 CFR part 72 requirements in that the spent fuel records will be stored and maintained in accordance with the NRC-approved QAPD. In addition, the exemption will not affect the record content, retrievability, or retention requirements specified in 10 CFR 72.72 or 10 CFR 72.174, such that the licensee will continue to meet all other applicable record requirements for the LACBWR ISFSI and associated special nuclear materials. Therefore, the exemption will not endanger the common defense and security.
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Criterion 1 of 10 CFR part 50, Appendix A, states in part: “Appropriate records of the design, fabrication, erection, and testing of structures, systems, and components important to safety shall be maintained by or under the control of the nuclear power unit licensee throughout the life of the unit.”
Criterion XVII of 10 CFR part 50, appendix B, states in part: “Sufficient records shall be maintained to furnish evidence of activities affecting quality.”
Paragraph 50.59(d)(3) states in part: “The records of changes in the facility must be maintained until the termination of an operating license issued under this part. . . .”
Paragraph 50.71(c), states in part: “Records that are required by the regulations in this part or part 52 of this chapter, by license condition, or by technical specifications must be retained for the period specified by the appropriate regulation, license condition, or technical specification. If a retention period is not otherwise specified, these records must be retained until the Commission terminates the facility license. . . .”
In the statement of considerations (SOC) for the final rulemaking, “Retention Periods for Records” (53 FR 19240; May 27, 1988), in response to public comments received during the rulemaking process, the NRC stated that records must be retained “for NRC to ensure compliance with the safety and health aspects of the nuclear environment and for the NRC to accomplish its mission to protect the public health and safety.” In the SOC, the Commission also explained that requiring licensees to maintain adequate records assists the NRC “in judging compliance and noncompliance, to act on possible noncompliance, and to examine facts as necessary following any incident.”
These regulations apply to licensees in decommissioning despite the fact that, during the decommissioning process, safety-related SSCs are retired or disabled and subsequently removed from NRC licensing basis documents by appropriate change mechanisms. Appropriate removal of an SSC from the licensing basis requires either a determination by the licensee or an approval from the NRC that the SSC no longer has the potential to cause an accident, event, or other problem which would adversely impact public health and safety.
The records subject to removal under this exemption are associated with SSCs that had been important to safety during power operation or operation of the SFP but are no longer capable of causing an event, incident, or condition that would adversely impact public health and safety, as evidenced by their appropriate removal from the licensing basis documents. If the SSCs no longer have the potential to cause these scenarios, then it is reasonable to conclude that the records associated with these SSCs would not reasonably be necessary to assist the NRC in determining compliance and noncompliance, taking action on possible noncompliance, and examining facts following an incident. Therefore, their retention would not serve the underlying purpose of the rule.
In addition, once removed from the licensing basis documents, SSCs are no longer governed by the NRC's regulations, and therefore are not subject to compliance with the safety and health aspects of the nuclear environment. As such, retention of records associated with SSCs that are or will no longer be part of the facility serves no safety or regulatory purpose, nor does it serve the underlying purpose of the rule of maintaining compliance with the safety and health aspects of the nuclear environment in order to accomplish the NRC's mission. Accordingly, special circumstances are present which the NRC may consider, pursuant to 10 CFR 50.12(a)(2)(ii), to grant the requested exemption.
Records which continue to serve the underlying purpose of the rule, that is, to maintain compliance and to protect public health and safety in support of the NRC's mission, will continue to be retained pursuant to the regulations in 10 CFR part 50 and 10 CFR part 72. These retained records not subject to the exemption include those associated with programmatic controls, such as those pertaining to residual radioactivity, security, and quality assurance, as well as records associated with the ISFSI and spent fuel assemblies.
The retention of records required by 10 CFR 50.71(c); 10 CFR part 50, appendix A, Criterion I; 10 CFR part 50,
However, the cost effect of retaining operational phase records beyond the operations phase until the termination of the license was not fully considered or understood when the records retention rule was put in place. For example, existing records storage facilities are often eliminated as decommissioning progresses. Retaining records associated with SSCs and activities that no longer serve a safety or regulatory purpose would therefore necessitate creation of new facilities and retention of otherwise unneeded administrative support personnel. As such, compliance with the rule would result in an undue cost in excess of that contemplated when the rule was adopted. Accordingly, special circumstances are present which the NRC may consider, pursuant to 10 CFR 50.12(a)(2)(iii), to grant the requested exemption.
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The NRC staff has determined that approval of the exemption request involves no significant hazards consideration because allowing the licensee exemption from the record keeping requirements of 10 CFR 50.71(c); 10 CFR part 50, appendix A, Criterion I; 10 CFR part 50, appendix B, Criterion XVII; and 10 CFR 50.59(d)(3); and 10 CFR 72.72(d) at the decommissioning La Crosse Boiling Water Reactor does not: (1) Involve a significant increase in the probability or consequences of an accident previously evaluated; (2) create the possibility of a new or different kind of accident from any accident previously evaluated; or (3) involve a significant reduction in a margin of safety (10 CFR 50.92(c)). Likewise, there is no significant change in the types or significant increase in the amounts of any effluents that may be released offsite, and no significant increase in individual or cumulative public or occupational radiation exposure.
The exempted regulations are not associated with construction, so there is no significant construction impact. The exempted regulations do not concern the source term (
Therefore, pursuant to 10 CFR 51.22(b) and 10 CFR 51.22(c)(25), no environmental impact statement or environmental assessment need be prepared in connection with the approval of this exemption request.
The NRC staff has determined that the requested partial exemption from the record keeping requirements of 10 CFR 50.71(c); 10 CFR part 50, appendix A, Criterion I; 10 CFR part 50, appendix B, Criterion XVII; 10 CFR 50.59(d)(3); and 10 CFR 72.72(d) will not present an undue risk to the public health and safety, nor endanger life or property. The destruction of the identified records will not impact remaining decommissioning activities; plant operations, configuration, and/or radiological effluents; operational and/or installed SSCs that are quality-related or important to safety; or nuclear security.
The NRC staff has determined that the destruction of the identified records is administrative in nature and does not involve information or activities that could potentially impact the common defense and security of the United States. In addition, the staff determined that the exemption is in the public interest because it will allow decommissioning at LACBWR to be accomplished more efficiently and effectively without the need to maintain redundant record retention systems, unneeded administrative personnel, and the associated costs.
The purpose for the record keeping regulations is to assist the NRC in carrying out its mission to protect the public health and safety by ensuring that the licensing and design basis of the facility is understood, documented, preserved and retrievable in such a way that will aid the NRC in determining compliance and noncompliance, taking action on possible noncompliance, and examining facts following an incident. Since the LACBWR SSCs that were safety-related or important to safety have been or will be removed from the licensing basis and removed from the plant, the staff agrees that the records identified in the partial exemption will no longer be required to achieve the underlying purpose of the records retention rule.
The NRC previously approved the QAPD, including use of the single facility location for the storage and maintenance of QA records at LACBWR. This approach remains acceptable to satisfy the record keeping requirements of both 10 CFR part 50, appendix B, and 10 CFR part 72. Granting an exemption from the duplicate record keeping requirement in 10 CFR 72.72(d) will not affect the record content, retrievability, or retention requirements specified in 10 CFR 72.72 or 10 CFR 72.174, such that the licensee will continue to meet all other applicable record requirements for the LACBWR ISFSI and associated special nuclear materials.
Accordingly, the Commission has determined that, pursuant to 10 CFR 50.12 and 10 CFR 72.7, the exemption is authorized by law, will not present an undue risk to the public health and safety, will not endanger life or property or the common defense and security, is consistent with the common defense and security, and is in the public interest. Also, special circumstances are present. Therefore, the Commission hereby grants the Dairyland Power Cooperative a one-time partial exemption from the record keeping requirements of 10 CFR 50.71(c); 10 CFR part 50, appendix A, Criterion I; 10 CFR part 50, appendix B, Criterion XVII; 10 CFR 50.59(d)(3); and 10 CFR 72.72(d) for the La Crosse Boiling Water Reactor to advance the schedule to remove records associated with SSCs that have been removed from NRC licensing basis documents by appropriate change mechanisms.
This exemption is effective upon issuance.
For the Nuclear Regulatory Commission.
Nuclear Regulatory Commission.
Revision to regulatory guide; issuance.
The U.S. Nuclear Regulatory Commission (NRC) is issuing Revison 1 to Regulatory Guide (RG) 1.219, “Guidance on Making Changes to Emergency Plans for Nuclear Power Reactors.” This guidance has been updated to clarify how the guidance applies to emergency plan changes at facilities that have certified permanent cessation of operations.
Revision 1 to RG 1.219 is available on July 27, 2016.
Please refer to Docket ID NRC-2015-0278 when contacting the NRC about the availability of information regarding this document. You may obtain publicly-available information related to this document using any of the following methods:
• Federal Rulemaking Web site: Go to
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Regulatory guides are not copyrighted, and NRC approval is not required to reproduce them.
Stephen F. LaVie, Office of Nuclear Security and Incident Response, telephone: 301-287-3741, email:
The NRC is issuing a revision to an existing guide in the NRC's “Regulatory Guide” series. This series was developed to describe and make available to the public information regarding methods that are acceptable to the NRC staff for implementing specific parts of the agency's regulations, techniques that the NRC staff uses in evaluating specific issues or postulated events, and data that the NRC staff needs in its review of applications for permits and licenses.
Revision 1 of RG 1.219 was issued with a temporary identification of Draft Regulatory Guide, DG-1324. This revision of the guide (Revision 1) addresses how the staff regulatory guidance applies to emergency plan changes at facilities that have certified permanent cessation of operation under § 50.82 of title 10 of the
The NRC published a notice of the availability of DG-1324 in the
This regulatory guide is a rule as defined in the Congressional Review Act (5 U.S.C. 801-808). However, the Office of Management and Budget has not found it to be a major rule as defined in the Congressional Review Act.
Revision 1 of RG 1.219 describes methods that the staff of the NRC considers acceptable for nuclear power reactor licensees to change their emergency preparedness plans. Issuance of this RG does not constitute backfitting as defined in § 50.109 (the Backfit Rule) and is not otherwise inconsistent with the issue finality provisions in 10 CFR part 52. As discussed in the “Implementation” section of the RG, the NRC has no current intention to impose this RG on holders of current operating licenses or combined licenses. Moreover, explanations of the process by which a licensee makes changes to its emergency plan, provided in response to misinterpretations of the NRC's regulations by licensees, do not constitute modifications of or additions to systems, structures, components, or design of a facility; or the procedures or organization required to design, construct or operate a facility within the meaning of § 50.109(a)(1). Accordingly, the issuance of this regulatory guide does not constitute “backfitting” as defined in § 50.109(a)(1) and is not otherwise inconsistent with the applicable issue finality provisions in 10 CFR part 52.
Regulatory Guide 1.219 may be applied to applications for operating licenses and combined licenses docketed by the NRC as of the date of issuance of the final RG, as well as future applications for operating licenses and combined licenses submitted after the issuance of the RG. Such action would not constitute backfitting as defined in § 50.109(a)(1) or be otherwise inconsistent with the applicable issue finality provision in 10 CFR part 52 because such applicants or potential applicants are not within the scope of entities protected by the Backfit Rule or the relevant issue finality provisions in 10 CFR part 52.
For the Nuclear Regulatory Commission.
Nuclear Regulatory Commission.
Renewal of existing information collection; request for comment.
The U.S. Nuclear Regulatory Commission (NRC) invites public comment on the renewal of Office of Management and Budget (OMB) approval for an existing collection of information. The information collection is entitled, NRC Forms 366, 366A, and 366B, “Licensee Event Report.”
Submit comments by September 26, 2016. Comments received after this date will be considered if it is practical to do so, but the Commission is able to ensure consideration only for comments received on or before this date.
You may submit comments by any of the following methods:
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For additional direction on obtaining information and submitting comments, see “Obtaining Information and Submitting Comments” in the
David Cullison, Office of the Chief Information Officer U.S. Nuclear Regulatory Commission, Washington, DC 20555-0001; Telephone: 301-415-2084; email:
Please refer to Docket ID NRC-2016-0016 when contacting the NRC about the availability of information for this action. You may obtain publicly-available information related to this action by any of the following methods:
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Please include Docket ID NRC-2016-0016 in the subject line of your comment submission, in order to ensure that the NRC is able to make your comment submission available to the public in this docket.
The NRC cautions you not to include identifying or contact information in comment submissions that you do not want to be publicly disclosed in your comment submission. The NRC will post all comment submissions at
If you are requesting or aggregating comments from other persons for submission to the NRC, then you should inform those persons not to include identifying or contact information that they do not want to be publicly disclosed in their comment submission. Your request should state that the NRC does not routinely edit comment submissions to remove such information before making the comment submissions available to the public or entering the comment into ADAMS.
In accordance with the Paperwork Reduction Act of 1995 (44 U.S.C. Chapter 35), the NRC is requesting public comment on its intention to request the OMB's approval for the information collection summarized below.
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The NRC is seeking comments that address the following questions:
1. Is the proposed collection of information necessary for the NRC to properly perform its functions? Does the information have practical utility?
2. Is the estimate of the burden of the information collection accurate?
3. Is there a way to enhance the quality, utility, and clarity of the information to be collected?
4. How can the burden of the information collection on respondents be minimized, including the use of automated collection techniques or other forms of information technology?
For the Nuclear Regulatory Commission.
Nuclear Regulatory Commission.
Exemption; issuance.
The U.S. Nuclear Regulatory Commission (NRC) is issuing a partial exemption from several of the record keeping requirements in its regulations in response to an August 13, 2015, request from the Southern California Edison Company (the licensee). Specifically, the licensee requested that the San Onofre Nuclear Generating Station, Units 1, 2, and 3, be granted a partial exemption from regulations that require retention of records for certain systems, structures, and components until the termination of the operating license.
Please refer to Docket ID NRC-2016-0148 when contacting the NRC about the availability of information regarding this document. You may obtain publicly-available information related to this document using any of the following methods:
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Marlayna Vaaler, Office of Nuclear Material Safety and Safeguards; telephone: 301-415-3178; email:
The San Onofre Nuclear Generating Station, Units 1, 2, and 3 (SONGS), operated by the Southern California Edison Company (SCE) is located approximately 4 miles south of San Clemente, California. SONGS, Unit 1, Docket No. 50-206, was a Westinghouse 456 megawatt electric (MWe) pressurized water reactor which was granted Facility Operating License No. DPR-13 on January 1, 1968 (ADAMS Accession No. ML13309A138), and ceased operation on November 30, 1992 (ADAMS Accession No. ML13319B040). The licensee completed defueling on March 6, 1993 (ADAMS Accession No. ML13319B055), and maintained the unit in SAFSTOR until June 1999, when it initiated decommissioning (ADAMS Accession No. ML13319B111). On December 28, 1993 (ADAMS Accession No. ML13319B059), the NRC approved the Permanently Defueled Technical Specifications for SONGS, Unit 1. SCE submitted the proposed Decommissioning Plan for SONGS, Unit 1, on November 3, 1994 (ADAMS Accession No. ML13319B073). As a result of the 1996 revision to the regulations in section 50.82 of title 10 of the
SONGS, Units 2 and 3, Docket Nos. 50-361 and 50-362, are Combustion Engineering 1127 MWe pressurized water reactors, which were granted Facility Operating Licenses NPF-10 on February 16, 1982, and NPF-15 on November 15, 1982, respectively. In June 2013, pursuant to 10 CFR 50.82(a)(1)(i), the licensee certified to the NRC that as of June 12, 2013, operations had ceased at SONGS, Units 2 and 3 (ADAMS Accession No. ML131640201). The licensee later certified, pursuant to 10 CFR 50.82(a)(1)(ii), that all fuel had been removed from the reactor vessels of both units, and committed to maintaining the units in a permanently defueled status (ADAMS Accession Nos. ML13204A304 and ML13183A391 for Unit 2 and Unit 3, respectively). Therefore, pursuant to 10 CFR 50.82(a)(2), SCE's 10 CFR part 50 licenses do not authorize operation of SONGS or emplacement or retention of fuel into the reactor vessels.
The PSDAR for SONGS, Units 2 and 3, was submitted on September 23, 2014 (ADAMS Accession No. ML14272A121), and the associated public meeting was held on October 27, 2014, in Carlsbad, California (ADAMS Accession No. ML14352A063). The NRC confirmed its review of the SONGS, Units 2 and 3, PSDAR and addressed public comments in a letter dated August 20, 2015 (ADAMS Accession No. ML15204A383). On July 17, 2015, the NRC approved the Permanently Defueled Technical Specifications for SONGS, Units 2 and 3 (ADAMS Accession No. ML15139A390).
By letter dated August 13, 2015 (ADAMS Accession No. ML15231A107), SCE filed a request for NRC approval of an exemption from the record retention requirements of: (1) 10 CFR part 50, appendix A, Criterion 1, which requires
The licensee is proposing to eliminate: (1) The records related to the nuclear power units and associated systems, structures, and components (SSCs), when the licensing basis requirements previously applicable to the nuclear power units and associated SSCs are no longer effective (
Records associated with residual radiological activity and with programmatic controls necessary to support decommissioning, such as security and quality assurance, are not affected by the exemption request because they will be retained as decommissioning records until the termination of the SONGS license. In addition, the licensee did not request an exemption associated with any other record keeping requirements for the storage of spent fuel at its Independent Spent Fuel Storage Installation (ISFSI) under 10 CFR part 50 or the general license requirements of 10 CFR part 72. No exemption was requested from the decommissioning records retention requirements of 10 CFR 50.75, or any other requirements of 10 CFR part 50 applicable to decommissioning and dismantlement.
Pursuant to 10 CFR 50.12, the Commission may, upon application by any interested person or upon its own initiative, grant exemptions from the requirements of 10 CFR part 50 when the exemptions are authorized by law, will not present an undue risk to public health or safety, and are consistent with the common defense and security. However, the Commission will not consider granting an exemption unless special circumstances are present. Special circumstances are described in 10 CFR 50.12(a)(2).
As described in the PSDAR, SONGS, Unit 1, is being returned to a condition suitable for unrestricted use. According to the August 13, 2015, submittal, there are no SSCs classified as safety-related remaining at SONGS, Unit 1. Plant dismantlement is complete and nearly all of the SSCs have been shipped offsite for disposal. Only the spent fuel, reactor vessel, and the below-grade portions of some buildings remain onsite. The principal remaining decommissioning activities are soil remediation, compaction, and grading. This is to be completed in conjunction with the future decommissioning of the ISFSI subsequent to shipment offsite of the SONGS stored spent fuel.
The August 13, 2015, submittal also stated that decommissioning of SONGS, Units 2 and 3, has begun and the nuclear reactor and essentially all associated SSCs in the nuclear steam supply system and balance of plant that supported the generation of power have been retired in place and are being prepared for removal. The SSCs that remain operable are associated with the SFP and the spent fuel building, are needed to meet other regulatory requirements, or are needed to support other site facilities (
The licensee's general justification for eliminating records associated with SONGS, Units 1, 2, and 3, SSCs that have been or will be removed from service under the NRC license, dismantled, or demolished, is that these SSCs will not in the future serve any SONGS, Units 1, 2, or 3 functions regulated by the NRC. SCE's dismantlement plans involve evaluating SSCs with respect to the current facility safety analysis; progressively removing them from the licensing basis where necessary through appropriate change mechanisms (
While SCE intends to retain the records required by its licenses as the project transitions from current plant conditions to a fully dismantled plant with the fuel in dry storage, plant dismantlement will obviate the regulatory and business need for maintenance of most records. As the SSCs are removed from the licensing basis and the need for the associated records is, on a practical basis, eliminated, the licensee proposes that they be exempted from the records retention requirements for SSCs and historical activities that are no longer relevant, thereby eliminating the associated regulatory and economic burdens of creating alternative storage locations, relocating records, and retaining irrelevant records.
The exemption request states that all records necessary for spent fuel and spent fuel storage SSCs and activities have been, and will continue to be, retained for the SFP throughout its functional life. Similar to other plant records, once the SFP is emptied of fuel, drained and ready for demolition, there will be no safety-significant function or other regulatory need for retaining SFP related records. In addition, SCE recognized in its application that the SONGS site will continue to be under NRC regulation until license termination, primarily due to residual radioactivity. The operational, radiological, and other necessary programmatic controls (such as security and quality assurance) for the facility, as well as the implementation of controls for the defueled condition and decommissioning activities, will continue to be appropriately addressed through the 10 CFR part 50 licenses and current decommissioning plan documents such as the PSDAR, Updated Final Safety Analysis Report, and plant technical specifications.
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The partial exemption from the record keeping requirements of 10 CFR 50.71(c); 10 CFR part 50, appendix A, Criterion I; 10 CFR part 50, appendix B, Criterion XVII; and 10 CFR 50.59(d)(3) for the records described above is administrative in nature and will have no impact on any remaining decommissioning activities or on radiological effluents. The exemption will only advance the schedule for disposition of the specified records. Considering the content of these records, the elimination of these records on an advanced timetable will have no reasonable possibility of presenting any undue risk to the public health and safety.
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Rather, the exemption requested is administrative in nature and would only advance the current schedule for disposition of the specified records. Therefore, the partial exemption from the record keeping requirements of 10 CFR 50.71(c); 10 CFR part 50, appendix A, Criterion I; 10 CFR part 50, appendix B, Criterion XVII; and 10 CFR 50.59(d)(3) for the types of records described above is consistent with the common defense and security.
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Criterion 1 of 10 CFR part 50, Appendix A, states in part: “Appropriate records of the design, fabrication, erection, and testing of structures, systems, and components important to safety shall be maintained by or under the control of the nuclear power unit licensee throughout the life of the unit.”
Criterion XVII of 10 CFR part 50, Appendix B, states in part: “Sufficient records shall be maintained to furnish evidence of activities affecting quality.”
Paragraph 50.59(d)(3) states in part: “The records of changes in the facility must be maintained until the termination of an operating license issued under this part. . . .” Paragraph 50.71(c), states in part: “Records that are required by the regulations in this part or Part 52 of this chapter, by license condition, or by technical specifications must be retained for the period specified by the appropriate regulation, license condition, or technical specification. If a retention period is not otherwise specified, these records must be retained until the Commission terminates the facility license. . . .”
In the Statement of Considerations (SOC) for the final rulemaking, “Retention Periods for Records” (53 FR 19240; May 27, 1988), in response to public comments received during the rulemaking process, the NRC stated that records must be retained “for NRC to ensure compliance with the safety and health aspects of the nuclear environment and for the NRC to accomplish its mission to protect the public health and safety.” In the SOC, the Commission also explained that requiring licensees to maintain adequate records assists the NRC “in judging compliance and noncompliance, to act on possible noncompliance, and to examine facts as necessary following any incident.”
These regulations apply to licensees in decommissioning despite the fact that, during the decommissioning process, safety-related SSCs are retired or disabled and subsequently removed from NRC licensing basis documents by appropriate change mechanisms. Appropriate removal of an SSC from the licensing basis requires either a determination by the licensee or an approval from the NRC that the SSC no longer has the potential to cause an accident, event, or other problem which would adversely impact public health and safety.
The records subject to removal under this exemption are associated with SSCs that had been important to safety during power operation or operation of the SFP but are no longer capable of causing an event, incident, or condition that would adversely impact public health and safety, as evidenced by their appropriate removal from the licensing basis documents. If the SSCs no longer have the potential to cause these scenarios, then it is reasonable to conclude that the records associated with these SSCs would not reasonably be necessary to assist the NRC in determining compliance and noncompliance, taking action on possible noncompliance, and examining facts following an incident. Therefore, their retention would not serve the underlying purpose of the rule.
In addition, once removed from the licensing basis documents, SSCs are no longer governed by the NRC's regulations, and therefore are not subject to compliance with the safety and health aspects of the nuclear environment. As such, retention of records associated with SSCs that are or will no longer be part of the facility serves no safety or regulatory purpose, nor does it serve the underlying purpose of the rule of maintaining compliance with the safety and health aspects of the nuclear environment in order to accomplish the NRC's mission. Accordingly, special circumstances are present which the NRC may consider, pursuant to 10 CFR 50.12(a)(2)(ii), to grant the requested exemption.
Records which continue to serve the underlying purpose of the rule, that is, to maintain compliance and to protect public health and safety in support of the NRC's mission, will continue to be retained pursuant to the regulations in 10 CFR part 50 and 10 CFR part 72. These retained records not subject to the exemption include those associated with programmatic controls, such as those pertaining to residual radioactivity, security, and quality assurance, as well as records associated with the ISFSI and spent fuel assemblies.
The retention of records required by 10 CFR 50.71(c); 10 CFR part 50, appendix A, Criterion I; 10 CFR part 50, appendix B, Criterion XVII; and 10 CFR 50.59(d)(3) provides assurance that records associated with SSCs will be captured, indexed, and stored in an environmentally suitable and retrievable condition. Given the volume of records associated with the SSCs, compliance with the records retention rule results in a considerable cost to the licensee.
However, the cost effect of retaining operational phase records beyond the operations phase until the termination of the license was not fully considered or understood when the records retention rule was put in place. For example, existing records storage facilities are often eliminated as decommissioning progresses. Retaining records associated with SSCs and activities that no longer serve a safety or regulatory purpose would therefore necessitate creation of new facilities and retention of otherwise unneeded administrative support personnel. As such, compliance with the rule would result in an undue cost in excess of that contemplated when the rule was adopted. Accordingly, special circumstances are present which the NRC may consider, pursuant to 10 CFR 50.12(a)(2)(iii), to grant the requested exemption.
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The NRC staff has determined that approval of the exemption request involves no significant hazards consideration because allowing the licensee exemption from the record keeping requirements of 10 CFR 50.71(c); 10 CFR part 50, appendix A, Criterion I; 10 CFR part 50, appendix B, Criterion XVII; and 10 CFR 50.59(d)(3) at the decommissioning San Onofre Nuclear Generating Station, Units 1, 2, and 3 does not (1) involve a significant increase in the probability or consequences of an accident previously evaluated; (2) create the possibility of a new or different kind of accident from any accident previously evaluated; or (3) involve a significant reduction in a margin of safety (10 CFR 50.92(c)). Likewise, there is no significant change in the types or significant increase in the amounts of any effluents that may be released offsite, and no significant increase in individual or cumulative public or occupational radiation exposure.
The exempted regulations are not associated with construction, so there is no significant construction impact. The exempted regulations do not concern the source term (
Therefore, pursuant to 10 CFR 51.22(b) and 10 CFR 51.22(c)(25), no environmental impact statement or environmental assessment need be prepared in connection with the approval of this exemption request.
The NRC staff has determined that the requested partial exemption from the record keeping requirements of 10 CFR 50.71(c); 10 CFR part 50, appendix A, Criterion I; 10 CFR part 50, appendix B, Criterion XVII; and 10 CFR 50.59(d)(3) will not present an undue risk to the public health and safety. The destruction of the identified records will not impact remaining decommissioning activities; plant operations, configuration, and/or radiological effluents; operational and/or installed SSCs that are quality-related or important to safety; or nuclear security. The NRC staff has determined that the destruction of the identified records is administrative in nature and does not involve information or activities that could potentially impact the common defense and security of the United States.
The purpose for the record keeping regulations is to assist the NRC in carrying out its mission to protect the public health and safety by ensuring that the licensing and design basis of the facility is understood, documented, preserved and retrievable in such a way that will aid the NRC in determining compliance and noncompliance, taking action on possible noncompliance, and examining facts following an incident. Since the SONGS SSCs that were safety-related or important to safety have been or will be removed from the licensing basis and removed from the plant, the staff agrees that the records identified in the partial exemption will no longer be required to achieve the underlying purpose of the records retention rule.
Accordingly, the Commission has determined that, pursuant to 10 CFR 50.12, the exemption is authorized by law, will not present an undue risk to the public health and safety, and is consistent with the common defense and security. Also, special circumstances are present. Therefore, the Commission hereby grants the Southern California Edison Company a one-time partial exemption from the record keeping requirements of 10 CFR 50.71(c); 10 CFR part 50, appendix A, Criterion I; 10 CFR part 50, appendix B, Criterion XVII; and 10 CFR 50.59(d)(3) for the San Onofre Nuclear Generating Station, Units 1, 2, and 3 to advance the schedule to remove records associated with SSCs that have been removed from NRC licensing basis documents by appropriate change mechanisms.
This exemption is effective upon issuance.
For the Nuclear Regulatory Commission.
Postal Regulatory Commission.
Notice.
The Commission is noticing recent Postal Service filings for the Commission's consideration concerning negotiated service agreements. This notice informs the public of the filing, invites public comment, and takes other administrative steps.
Submit comments electronically via the Commission's Filing Online system at
David A. Trissell, General Counsel, at 202-789-6820.
The Commission gives notice that the Postal Service filed request(s) for the Commission to consider matters related to negotiated service agreement(s). The request(s) may propose the addition or removal of a negotiated service agreement from the market dominant or the competitive product list, or the modification of an existing product currently appearing on the market dominant or the competitive product list.
Section II identifies the docket number(s) associated with each Postal Service request, the title of each Postal Service request, the request's acceptance date, and the authority cited by the Postal Service for each request. For each request, the Commission appoints an officer of the Commission to represent the interests of the general public in the proceeding, pursuant to 39 U.S.C. 505 (Public Representative). Section II also establishes comment deadline(s) pertaining to each request.
The public portions of the Postal Service's request(s) can be accessed via the Commission's Web site (
The Commission invites comments on whether the Postal Service's request(s) in the captioned docket(s) are consistent with the policies of title 39. For request(s) that the Postal Service states concern market dominant product(s), applicable statutory and regulatory requirements include 39 U.S.C. 3622, 39 U.S.C. 3642, 39 CFR part 3010, and 39 CFR part 3020, subpart B. For request(s) that the Postal Service states concern competitive product(s), applicable statutory and regulatory requirements include 39 U.S.C. 3632, 39 U.S.C. 3633, 39 U.S.C. 3642, 39 CFR part 3015, and 39 CFR part 3020, subpart B. Comment deadline(s) for each request appear in section II.
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This notice will be published in the
Postal Service
Notice.
The Postal Service gives notice of filing a request with the Postal Regulatory Commission to add a domestic shipping services contract to the list of Negotiated Service Agreements in the Mail Classification Schedule's Competitive Products List.
Elizabeth A. Reed, 202-268-3179.
The United States Postal Service® hereby gives notice that, pursuant to 39 U.S.C. 3642 and 3632(b)(3), on July 21, 2016, it filed with the Postal Regulatory Commission a
Postal Service
Notice.
The Postal Service gives notice of filing a request with the Postal Regulatory Commission to add a domestic shipping services contract to the list of Negotiated Service Agreements in the Mail Classification Schedule's Competitive Products List.
Elizabeth A. Reed, 202-268-3179.
The United States Postal Service® hereby gives notice that, pursuant to 39 U.S.C. 3642 and 3632(b)(3), on July 21, 2016, it filed with the Postal Regulatory Commission a
On January 6, 2016, The NASDAQ Stock Market LLC (“Nasdaq” or the “Exchange”) filed with the Securities and Exchange Commission (“Commission”), pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 (“Act” or “Exchange Act”)
Section 19(b)(2) of the Act
The Commission finds that it is appropriate to designate a longer period within which to issue an order approving or disapproving the proposed rule change so that it has sufficient time to consider the proposed rule change, as modified by Amendment Nos. 1 and 2 thereto.
Accordingly, the Commission, pursuant to Section 19(b)(2) of the Act,
For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.
Pursuant to Section 19(b)(1)
The Exchange proposes to amend Rules 2.17(c) and 2.23(i) to harmonize the requirement of when OTP Holders and OTP Firms must file an [sic] Uniform Termination Notice for Securities Industry Registration (“Form U-5”) with the rules of other exchanges and FINRA. The proposed rule change is available on the Exchange's Web site at
In its filing with the Commission, the self-regulatory organization included statements concerning the purpose of, and basis for, the proposed rule change and discussed any comments it received on the proposed rule change. The text of those statements may be examined at the places specified in Item IV below. The Exchange has prepared summaries, set forth in sections A, B, and C below, of the most significant parts of such statements.
The Exchange proposes to amend Rules 2.17 and 2.23 to harmonize the requirement of when OTP Holders and OTP Firms must file a Form U-5 with the requirements on [sic] other exchanges and the Financial Industry Regulatory Authority (“FINRA”). This filing is not intended to address any other registration requirements in Exchange rules.
Specifically, under current Rule 2.17(c), an OTP Holder that terminates an OTP is required to file a Form U-5 or any amendment thereto within ten (10) business days of the termination or the occurrence requiring the amendment. Under current Rule 2.23(i), OTP Holders and OTP Firms are required to file a Form U-5 and any amendment thereto within ten (10) business days of the termination date of an employee that has been approved for admission to the trading floor or participation on any trading system. While each of these rules govern the same topic, they do not use the same rule language.
The Exchange proposes to amend these two rules by replacing the current requirements of when to electronically file a Form U-5 with the same requirement in each rule that an OTP Holder or OTP Firm (as applicable) promptly file a Form U-5 electronically with the Central Registration Depository (“CRD”), but not later than 30 calendar days after the date of termination of an OTP or employee (as applicable). The proposed rule would further require that any amendment to a Form U-5 must also be promptly filed electronically with CRD, but not later than 30 calendar days after learning of the facts or circumstances giving rise to the amendment. Finally, the proposed rule would provide that all Forms U-5 must also be provided to the terminated person concurrently with filing.
The proposed rule text is based on the requirements of other exchanges and FINRA and therefore would harmonize the requirement of when OTP Holders or OTP Firms must file a Form U-5 with the rules of other exchanges and FINRA.
The Exchange believes that the proposed changes are consistent with Section 6(b) of the Act,
Specifically, the Exchange believes that the proposed rule changes would remove impediments to and perfect the mechanisms of a free and open market by conforming the time period within which OTP Holders and OTP Firms must file a Form U-5 to the requirement that such forms be filed promptly, but not later than 30 days after the termination event. The Exchange believes that the proposed rule changes would protect investors and the public interest by adding that Form U-5s should be filed promptly, rather than requiring only that they be filed within 10 days. In addition, the Exchange believes that adding the requirement that a Form U-5 be filed not later than 30 days after the event would eliminate the disparity among the exchanges, other SROs and the affected persons stemming from the cessation of their employment. In this regard, the proposed changes would foster cooperation and coordination with persons engaged in regulating, clearing, settling, processing information with respect to, and facilitating transactions in securities as they would both harmonize the time period for filing the requisite Form U-5 across multiple self-regulatory organizations and establish a known consistent standard to further ensure adherence. Such action would not affect nor diminish the abilities of the Exchange, OTP Holders or OTP Firms to fulfill their regulatory responsibilities under the Act or the rules promulgated thereunder, including but not limited to the responsibilities to monitor the activities of such persons, nor would such proposed amendment affect the rights of such terminated persons.
The Exchange believes this additional transparency and clarity removes a potential impediment to, and would contribute to perfecting, the mechanism for a free and open market and a national market system, and, in general, would protect investors and the public interest by harmonizing the time period for filing the requisite Form U-5 across multiple SROs, and by imposing the requirement that such form be filed promptly.
The Exchange does not believe that these proposed rule changes would impose any burden on competition not necessary or appropriate in furtherance of the purposes of the Act. The proposed changes are not designed to address any competitive issue but rather to harmonize Exchange time-filing requirements to a standard prevalent among other exchanges and FINRA, thereby reducing any potential confusion and making the Exchange's rules easier to understand and navigate. The Exchange believes that the proposed rule changes would serve to promote regulatory clarity and consistency, thereby reducing burdens on the marketplace and facilitating investor protection.
No written comments were solicited or received with respect to the proposed rule change.
Within 45 days of the date of publication of this notice in the
(A) By order approve or disapprove the proposed rule change, or
(B) institute proceedings to determine whether the proposed rule change should be disapproved.
Interested persons are invited to submit written data, views, and arguments concerning the foregoing, including whether the proposed rule change is consistent with the Act. Comments may be submitted by any of the following methods:
• Use the Commission's Internet comment form (
• Send an email to
• Send paper comments in triplicate to Secretary, Securities and Exchange Commission, 100 F Street NE., Washington, DC 20549-1090.
For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.
Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 (“Act”),
The Exchange proposes to amend the NASDAQ Options Market LLC's (“NOM”) pricing at Chapter XV to permit certain affiliated market participants to aggregate eligible volume for pricing in Chapter XV, Sections 2(1) and 2(6), for which a volume threshold or volume percentage is required to obtain the pricing.
The text of the proposed rule change is available on the Exchange's Web site at
In its filing with the Commission, the Exchange included statements concerning the purpose of and basis for the proposed rule change and discussed any comments it received on the proposed rule change. The text of these statements may be examined at the places specified in Item IV below. The Exchange has prepared summaries, set forth in sections A, B, and C below, of the most significant aspects of such statements.
The purpose of the proposed rule change is to permit certain affiliated market participants to aggregate volume in Chapter XV, Sections 2(1) and 2(6), for which a volume threshold or volume percentage is required to qualify for various pricing incentives. The Exchange's proposal is intended to incentivize Participants to submit for execution a greater amount of order flow on NOM to obtain more advantageous pricing.
The Exchange proposes to add three definitions to Chapter XV of NOM
The Exchange proposes to define the term “Appointed MM” as a NOM Market Maker
The Exchange proposes to define the term “Appointed OFP” as an OFP who has been appointed by a NOM Market Maker for purposes of qualifying as an Affiliated Entity.
The Exchange proposes to define the term “Affiliated Entity” as a relationship between an Appointed MM and an Appointed OFP for purposes of aggregating eligible volume for pricing in Chapter XV, Sections 2(1) and 2(6), for which a volume threshold or volume percentage is required to qualify for higher rebates or lower fees.
In order to become an Affiliated Entity, NOM Market Makers and OFPs will be required to send an email to the Exchange to appoint their counterpart, at least 3 business days prior to the last day of the month to qualify for the next month.
Each Affiliated Entity relationship will commence on the 1st of a month and may not be terminated prior to the end of any month. An Affiliated Entity relationship will terminate after a one (1) year period, unless either party terminates earlier in writing by sending an email to the Exchange at least 3 business days prior to the last day of the month to terminate for the next month. Affiliated Entity relationships must be renewed annually. For example, if the start date of the Affiliated Entity relationship is August 1, 2016, the counterparties may determine to commence a new relationship as of August 1, 2017 by sending two new emails by July 27, 2017 (3 business days prior to the end of the month). Participants under Common Ownership
As proposed, an Affiliated Entity shall be eligible to aggregate their volume for purposes of qualifying for certain pricing in Chapter XV, Sections 2(1) and 2(6) for which a volume threshold or volume percentage is required to obtain a higher rebate or lower fee. With this proposal, Affiliated Entities will be eligible to aggregate pricing in Chapter XV, Section 2(1) in both Penny and Non-Penny Pilot Options
Currently, the Exchange offers Customers,
The Exchange's proposal would incentivize certain Participants, who are not by definition under Common Ownership, to enter into an Affiliated Entity relationship for the purpose of aggregating volume to qualify for higher rebates and lower fees. With this proposal the Exchange is offering Affiliated [sic] OFPs the ability to obtain higher rebates and is also offering Appointed MMs the ability to obtain lower fees by aggregating volume at Chapter XV, Section 2(1).
The Exchange currently offers a Market Access and Routing Subsidy or “MARS” to qualifying NOM Participants in Chapter XV, Section 2(6).
In note “d” of Chapter XV, Section 2(1), the Exchange also offers NOM Participants that qualify for MARS Payment Tiers 1, 2 or 3 an additional $0.03 per contract Penny Pilot Options Customer and/or Professional Rebate to Add Liquidity for each transaction which adds liquidity in Penny Pilot Options in that month, in addition to qualifying Penny Pilot Options Customer and/or Professional Rebate to Add Liquidity Tiers 1 through 8. NOM Participants that qualify for a note “c” incentive receive the greater of the note “c” or note “d” incentive.
The Exchange's proposal would incentivize certain Participants, who are not by definition under Common Ownership, to enter into an Affiliated Entity relationship for the purpose of aggregating volume to qualify for higher MARS rebates. With this proposal the Exchange is offering Affiliated [sic] OFPs the ability to obtain higher MARS rebates by aggregating volume with an Affiliated [sic] MM with whom they are qualified as an Affiliated Entity and also be able to aggregate volume for purposes of qualifying for the Chapter XV, Section 2(1) note “d” rebate.
The Exchange believes that its proposal to amend its Pricing Schedule is consistent with Section 6(b) of the Act,
The Commission and the courts have repeatedly expressed their preference for competition over regulatory intervention in determining prices, products, and services in the securities markets. In Regulation NMS, while adopting a series of steps to improve the current market model, the Commission highlighted the importance of market forces in determining prices and SRO revenues and, also, recognized that current regulation of the market system “has been remarkably successful in promoting market competition in its broader forms that are most important to investors and listed companies.”
Likewise, in
Further, “[n]o one disputes that competition for order flow is `fierce.' . . . As the SEC explained, `[i]n the U.S. national market system, buyers and sellers of securities, and the broker-dealers that act as their order-routing agents, have a wide range of choices of where to route orders for execution'; [and] `no exchange can afford to take its market share percentages for granted' because `no exchange possesses a monopoly, regulatory or otherwise, in
The Exchange's proposal to amend Chapter XV to add the definitions of “Appointed MM,” “Appointed OFP” and “Affiliated Entity” is reasonable because the Exchange is proposing to identify the applicable market participants that may qualify to aggregate volume as an Affiliated Entity. Further the Exchange seeks to make clear the manner in which Participants may participate on the Exchange as Affiliated Entities by setting timeframes for communicating agreements among market participants and terms of early termination. The Exchange also clearly states that no Participant under Common Ownership may become a counterparty to an Affiliated Entity. Any Participant who meets the definition of Common Ownership shall not be eligible to become an Affiliated Entity. The Exchange believes that these terms are reasonable because they would allow Participants to elect to become a counterparty to an Affiliated Entity, provided they are not under Common Ownership.
The Exchange's proposal to amend Chapter XV to add the definitions of “Appointed MM,” “Appointed OFP” and “Affiliated Entity” is equitable and not unreasonably discriminatory because all Participants that are not under Common Ownership by definition may choose to enter into an Affiliated Entity relationship.
The Exchange's proposal to permit Affiliated Entities to aggregate volume for purposes of qualifying Appointed OFPs for higher Penny Pilot and Non-Penny Pilot Options rebates
The Exchange's proposal to permit Affiliated Entities to aggregate volume for purposes of qualifying Appointed OFPs for higher Penny Pilot and Non-Penny Pilot Options rebates and qualifying Appointed MMs for lower fees in Chapter XV, Section 2(1) and the note “c” incentive is equitable and not unfairly discriminatory because all NOM Participants, other than those that meet the definition of Common Ownership, may elect to become an Affiliated Entity as either an Appointed MM or an Appointed OFP.
The Exchange's proposal to exclude Participants that are under Common Ownership from qualifying as an Affiliated Entity is reasonable because Participants under Common Ownership may aggregate volume today for purposes of Chapter XV, Section 2(1) pricing.
The Exchange's proposal to permit NOM Participants that provide certain order routing functionalities to other NOM Participants and/or use such functionalities themselves, and meet certain System Eligibility, to aggregate volume as an Affiliated Entity for purposes of receiving MARS Payments including the note “d” incentive is reasonable because NOM Participants will be incentivized to send more order flow to NOM. MARS Payments are made on Firm, Non-NOM Market Maker, Broker-Dealer and JBO equity option orders that add liquidity and are electronically delivered and executed. All Participants may benefit from the increased order flow because they may interact with this liquidity. Permitting NOM Participants to affiliate for purposes of qualifying Appointed OFPs for higher MARS rebates may also encourage Affiliated Entities to incentivize each other to attract and seek to execute more volume on NOM. The Affiliated Entity relationship would permit the Appointed OFP to benefit from orders executed on NOM in terms of qualifying for higher MARS rebates. In turn, market participants would benefit from the increased liquidity with
The Exchange's proposal to permit NOM Participants that provide certain order routing functionalities to other NOM Participants and/or use such functionalities themselves, and meet certain System Eligibility, to aggregate volume as an Affiliated Entity for purposes of receiving MARS Payments including the note “d” incentive is equitable and not unfairly discriminatory because all NOM Participants, other than those that meet the definition of Common Ownership, may qualify as an Affiliated Entity as either an Appointed MM or an Appointed OFP. Also, all NOM Participants may qualify for a MARS Payment provided they meet applicable System Eligibility requirements. NOM Participants may participate in only one Affiliated Entity relationship at a given time, which imposes a measure of exclusivity among market participants, allowing each party to rely on the other's executed volume on NOM to receive a corresponding benefit in terms of a rebate. The Exchange will apply all qualifications in a uniform manner to all market participants that elect to become counterparties of an Affiliated Entity.
The Exchange does not believe that the proposed rule change will impose any burden on competition not necessary or appropriate in furtherance of the purposes of the Act. Specifically, the Exchange does not believe that permitting Affiliated Entities to aggregate volume to qualify for certain rebates and reduced fees will impose any undue burden on competition, as discussed below.
The Exchange operates in a highly competitive market in which many sophisticated and knowledgeable market participants can readily and do send order flow to competing exchanges if they deem fee levels or rebate incentives at a particular exchange to be excessive or inadequate. Additionally, new competitors have entered the market and still others are reportedly entering the market shortly. These market forces ensure that the Exchange's fees and rebates remain competitive with the fee structures at other trading platforms.
The Exchange does not believe that the proposed rule change will impose any burden on competition not necessary or appropriate in furtherance of the purposes of the Act. In terms of inter-market competition, the Exchange notes that it operates in a highly competitive market in which market participants can readily favor competing venues if they deem fee levels at a particular venue to be excessive, or rebate opportunities available at other venues to be more favorable. In such an environment, the Exchange must continually adjust its fees to remain competitive with other exchanges and with alternative trading systems that have been exempted from compliance with the statutory standards applicable to exchanges. Because competitors are free to modify their own fees in response, and because market participants may readily adjust their order routing practices, the Exchange believes that the degree to which fee changes in this market may impose any burden on competition is extremely limited.
In sum, if the changes proposed herein are unattractive to market participants, it is likely that the Exchange will lose market share as a result. Accordingly, the Exchange does not believe that the proposed changes will impair the ability of members or competing order execution venues to maintain their competitive standing in the financial markets. In terms of inter-market competition, the Exchange notes that other options markets have similar incentives in place to attract volume to their markets.
The Exchange's proposal to amend Chapter XV to add the definitions of “Appointed MM,” “Appointed OFP,” and “Affiliated Entity” does not impose an undue burden on competition because these definitions apply to all Participants uniformly.
In terms of intra-market competition, the Exchange does not believe that its proposal to permit counterparties of an Affiliated Entities to aggregate volume for purposes of qualifying for Chapter XV, Section 2(1) higher rebates and lower fees and the note “c” incentive imposes an undue burden on intra-market competition because all NOM Participants, other than those under Common Ownership, may qualify as an Affiliated Entity as either an Appointed MM or an Appointed OFP. Also, each NOM Participant may participate in only one Affiliated Entity relationship at a given time, which imposes a measure of exclusivity among market participants, allowing each party to rely on the other's executed NOM volume on NOM to receive a corresponding benefit in terms of a higher rebate or lower fee. The Exchange will apply all qualifications in a uniform manner to all market participants that elect to become counterparties of an Affiliated Entity. Any market participant that by definition is a Participant under Common Ownership may not become a counterparty of an Affiliated Entity.
Also, NOM Market Makers are valuable market participants that provide liquidity in the marketplace and incur costs that other market participants do not incur. NOM Market Makers are subject to burdensome quoting obligations
The Exchange's proposal to exclude Participants that are under Common Ownership from becoming an Affiliated Entity does not impose and [sic] undue burden on intra-market competition because Participants under Common Ownership may aggregate volume today for purposes of qualifying for higher rebates or lower fees.
In terms of intra-market competition, the Exchange does not believe that its proposal to permit Affiliated Entities to aggregate volume for purposes of qualifying for Chapter XV, Section 2(6) MARS rebates and the note “d” incentive imposes an undue burden on intra-market competition because all NOM Participants, other than those under Common Ownership, may qualify as an Affiliated Entity as either an
No written comments were either solicited or received.
The foregoing rule change has become effective pursuant to Section 19(b)(3)(A)(ii) of the Act.
At any time within 60 days of the filing of the proposed rule change, the Commission summarily may temporarily suspend such rule change if it appears to the Commission that such action is: (i) Necessary or appropriate in the public interest; (ii) for the protection of investors; or (iii) otherwise in furtherance of the purposes of the Act. If the Commission takes such action, the Commission shall institute proceedings to determine whether the proposed rule should be approved or disapproved.
Interested persons are invited to submit written data, views, and arguments concerning the foregoing, including whether the proposed rule change is consistent with the Act. Comments may be submitted by any of the following methods:
• Use the Commission's Internet comment form (
• Send an email to
• Send paper comments in triplicate to Secretary, Securities and Exchange Commission, 100 F Street NE., Washington, DC 20549-1090.
For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.
Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 (“Act”),
The Exchange proposes to amend the Preface, Section B and Section II of the Exchange's Pricing Schedule to permit certain affiliated market participants to aggregate volume and qualify for various pricing incentives in the Pricing Schedule.
The text of the proposed rule change is available on the Exchange's Web site at
In its filing with the Commission, the Exchange included statements concerning the purpose of and basis for the proposed rule change and discussed any comments it received on the proposed rule change. The text of these statements may be examined at the places specified in Item IV below. The Exchange has prepared summaries, set forth in sections A, B, and C below, of the most significant aspects of such statements.
The purpose of the proposed rule change is to permit certain affiliated market participants to aggregate volume and qualify for various pricing incentives in the Pricing Schedule. Specifically, the Exchange proposes to amend the Pricing Schedule at Section B, Customer
The Exchange proposes to add three definitions to the Preface of the Pricing Schedule. The Exchange proposes to define the terms “Appointed MM,” “Appointed OFP,” and “Affiliated Entity.” The Exchange proposes to define the term “Appointed MM” as a Phlx Market Maker
As proposed, an Affiliated Entity shall be eligible to aggregate their volume for purposes of qualifying for certain pricing specified in the Pricing Schedule, as described below.
The Exchange proposes to amend Section B, entitled “Customer Rebate Program” to permit Affiliated Entities to aggregate their Customer volume for purposes of calculating Customer Rebate Tiers and receiving rebates. Currently, the Exchange has a Customer Rebate Program consisting of the following five tiers that pay Customer rebates on three Categories, A, B and C, of transactions:
A Phlx member qualifies for a certain rebate tier based on the percentage of total national customer volume in multiply-listed options that it transacts monthly on Phlx. The Exchange calculates Customer volume in Multiply Listed Options by totaling electronically-delivered and executed volume, excluding volume associated with electronic Qualified Contingent Cross (“QCC”) Orders, as defined in Exchange Rule 1080(o).
Affiliated Entities may aggregate Customer volume as between the Appointed MM and Appointed OFP to qualify for any of the five tiers of Customer Rebates that pay Category, A, B or C rebates on transactions. An Appointed OFP would be eligible to receive the additional $0.02 per contract Category A and B rebate and the additional $0.03 per contract Category C rebate, paid in addition to the applicable Tier 2 and 3 rebate, currently available to a Specialist or Market Maker or its member or member organization affiliate under Common Ownership, provided the Appointed MM has reached the Monthly Market Maker Cap, as defined in Section II.
The Exchange proposes to amend the language in Section B to clarify the applicability of the $0.02 per contract rebate in addition to Categories A and B and the $0.03 per contract rebate in addition to Category C, applicable to Tiers 2 and 3. The Exchange proposes to relocate certain language and add language to amend the sentence as follows: “The Exchange will pay a $0.02 per contract Category A and B rebate and a $0.03 per contract Category C rebate in addition to the applicable Tier 2 and 3 rebate, provided the Specialist, Market Maker or Appointed MM has reached the Monthly Market Maker Cap as defined in Section II, to: (1) A Specialist or Market Maker who is not under Common Ownership or is not a party of an Affiliated Entity; or (2) an OFP member or member organization affiliate under Common Ownership; or (3) an Appointed OFP of an Affiliated Entity.”
The Exchange's proposal would incentivize certain members and member organizations, which are not under Common Ownership, to enter into an Affiliated Entity relationship for the purpose of aggregating Customer volume to qualify the Appointed OFP for Customer Rebates in Section B of the Pricing Schedule. Phlx members and member organizations that are under 75% common ownership or control will be considered under Common Ownership and therefore by definition are not eligible to enter an Affiliated Entity relationship.
The Exchange proposes to amend Section II of the Pricing Schedule to offer members and member organizations that are Appointed OFPs of Affiliated Entities transacting non-Customer orders an opportunity to reduce non-Penny Pilot electronic Options Transaction Charges. Today, the Exchange assesses a Professional,
The Exchange's proposal would incentivize certain members and member organizations, who are not under Common Ownership, to enter into an Affiliated Entity relationship for the purpose of aggregating Customer volume to qualify for reduced non-Penny Pilot Options Transaction Charges.
The Exchange believes that its proposal to amend its Pricing Schedule is consistent with Section 6(b) of the Act,
The Commission and the courts have repeatedly expressed their preference for competition over regulatory intervention in determining prices, products, and services in the securities markets. In Regulation NMS, while adopting a series of steps to improve the current market model, the Commission highlighted the importance of market forces in determining prices and SRO revenues and, also, recognized that current regulation of the market system “has been remarkably successful in promoting market competition in its broader forms that are most important to investors and listed companies.”
Likewise, in
Further, “[n]o one disputes that competition for order flow is `fierce.' . . . As the SEC explained, `[i]n the U.S. national market system, buyers and sellers of securities, and the broker-dealers that act as their order-routing agents, have a wide range of choices of where to route orders for execution'; [and] `no exchange can afford to take its market share percentages for granted' because `no exchange possesses a monopoly, regulatory or otherwise, in the execution of order flow from broker dealers' . . . .”
The Exchange's proposal to amend the Preface of the Pricing Schedule to add the definitions of “Appointed MM,” “Appointed OFP” and “Affiliated Entity” is reasonable because the Exchange is proposing to identify the applicable market participants that may qualify to aggregate volume as an Affiliated Entity. Further the Exchange seeks to make clear the manner in which members and member organizations may participate on the Exchange as Affiliated Entities by setting timeframes for communicating agreements among market participants and terms of early termination. The Exchange also clearly states that no member or member organization under Common Ownership may become a counterparty to an Affiliated Entity. Any Phlx member or member organization who meets the definition of Common Ownership shall not be eligible to become an Affiliated Entity. The Exchange believes that these terms are reasonable because they would allow members or member organizations to elect to become a counterparty to an Affiliated Entity, provided they are not under Common Ownership.
The Exchange's proposal to amend the Preface of the Pricing Schedule to add the definitions of “Appointed MM,” “Appointed OFP” and “Affiliated Entity” is equitable and not unfairly discriminatory because all member or members that are not under Common Ownership by definition may choose to enter into an Affiliated Entity relationship.
The Exchange's proposal to permit Affiliated Entities to aggregate Customer volume for purposes of qualifying Appointed OFPs for Section B Customer Rebates is reasonable because it will attract additional Customer order flow to the Exchange. Customer liquidity benefits all market participants by providing more trading opportunities, which attracts Market Makers and Specialists. An increase in the activity of these market participants in turn facilitates tighter spreads, which may cause an additional corresponding increase in order flow from other market participants. Appointed OFPs directing order flow to the Exchange may be eligible to qualify for a Customer Rebate or a higher Customer Rebate tier, with this proposal, as a result of aggregating volume with an Appointed MM and thereby qualifying for higher Customer Rebates. Permitting members and member organizations to affiliate for purposes of qualifying for Section B Customer Rebates may also encourage the counterparties that comprise the Affiliated Entities to incentivize each other to attract and seek to execute more Customer volume on Phlx. In turn, market participants would benefit from the increased liquidity with which to interact and potentially tighter spreads on orders. Overall, incentivizing market participants with increased opportunities to earn higher Customer rebates may increase the quality of the liquidity available on Phlx.
The Exchange's proposal to permit Affiliated Entities to aggregate Customer volume for purposes of qualifying Appointed OFPs for Section B Customer rebates is equitable and not unfairly discriminatory because all Phlx members and member organizations, other than those that meet the definition of Common Ownership, may elect to become an Affiliated Entity as either an Appointed MM or an Appointed OFP.
The Exchange's proposal to exclude members and member organizations that are under Common Ownership from qualifying as an Affiliated Entity is reasonable because members and member organizations under Common Ownership may aggregate volume today for purposes of Section B Customer Rebates.
The Exchange's proposal to amend note 3 of Section II of the Pricing Schedule to offer members and member organizations that are Affiliated Entities an opportunity to reduce non-Customer non-Penny Pilot electronic Options Transaction Charges is reasonable because the Exchange believes it will encourage these market participants to transact a greater amount of Customer volume on Phlx. The Exchange's proposal to permit Appointed OFPs of Affiliated Entities to qualify for the reduced non-Penny Pilot electronic Options Transaction Charges by qualifying for Customer Rebate Tiers 4 or 5 in Section B of the Pricing Schedule will attract additional Customer order flow to the Exchange. Customer liquidity benefits all market participants by providing more trading opportunities, which attracts Market Makers and Specialists. An increase in the activity of these market participants in turn facilitates tighter spreads, which may cause a corresponding increase in order flow from other market participants. Appointed OFPs directing order flow to the Exchange may be eligible to qualify for these Customer rebate tiers as a result of aggregating volume with another appointed member and benefit from reduced non-Penny Pilot electronic Options Transaction Charges. Permitting members and member organizations to affiliate for purposes of qualifying for Section B Customer rebates may also encourage the counterparties of an Affiliated Entity to incentivize each other to attract and seek to execute more Customer volume on Phlx. The Affiliated Entity relationship would permit the Appointed OFP to benefit from reduced non-Penny Pilot electronic Options Transaction Charges. In turn, market participants would benefit from the increased liquidity with which to interact and potentially tighter spreads on orders. The Exchange believes that lowering these fees for electronic non-Penny Pilot Options Transaction Charges, as compared to Penny Pilot Options Transaction Charges, is reasonable because today, Penny Pilot Options are the most traded and more liquid than Non-Penny Pilot Options. Electronic Penny Pilot Options Transaction Charges are lower for Professionals, Broker-Dealers and Firms because of the demand in the marketplace. The Exchange is offering Appointed OFPs the opportunity to reduce the higher electronic non-Penny Pilot Options Transaction Charges for
The Exchange's proposal to amend note 3 of Section II of the Pricing Schedule to offer members and member organizations that are Affiliated Entities an opportunity to reduce non-Customer non-Penny Pilot electronic Options Transaction Charges is equitable and not unfairly discriminatory because the Exchange will assess Appointed OFPs a reduced Professional, Broker-Dealer and Firm electronic Options Transaction Charge in Non-Penny Pilot Options. The Exchange does not assess Customers an electronic Options Transaction Charge in Non-Penny Pilot Options because Customer order flow enhances liquidity on the Exchange for the benefit of all market participants. Customer liquidity benefits all market participants by providing more trading opportunities, which attracts Specialists and Market Makers. An increase in the activity of these market participants in turn facilitates tighter spreads, which may cause an additional corresponding increase in order flow from other market participants. Specialists and Market Makers are assessed lower electronic Options Transaction Charges in Non-Penny Pilot Options as compared to Professionals, Broker-Dealers and Firms because they have obligations to the market and regulatory requirements, which normally do not apply to other market participants.
The Exchange's proposal to amend note 4 of Section II of the Pricing Schedule to offer Appointed MMs of an Affiliated Entity an opportunity to reduce the Specialist and Marker Maker electronic non-Penny Pilot electronic Options Transaction Charges is reasonable because today the Exchange offers all market participants, excluding Customers who are not assessed a non-Penny Pilot electronic Options Transaction Charges, a means to reduce electronic Options Transaction Charges by qualifying for a Customer Rebate in Section B of the Pricing Schedule. Even with the reduced rate for Professionals, Broker-Dealers and Firms of $0.60 per contract, Specialists and Market Makers will continue to be assessed the lowest electronic Options Transaction Charge in Non-Penny Pilot Options because they have obligations to the market and regulatory requirements, which normally do not apply to other market participants.
The Exchange's proposal to amend note 4 of Section II of the Pricing Schedule to offer Appointed MMs of an Affiliated Entity an opportunity to reduce the Specialist and Marker Maker electronic non-Penny Pilot electronic Options Transaction Charges is equitable and not unfairly discriminatory because the Exchange seeks to incentivize Specialists and Market Makers to increase their activity on Phlx and in turn facilitate tighter spreads, which may cause an additional corresponding increase in order flow from other market participants. Specialists and Market Makers have obligations to the market and regulatory requirements, which normally do not apply to other market participants.
The Exchange does not believe that the proposed rule change will impose any burden on competition not necessary or appropriate in furtherance of the purposes of the Act. Specifically, the Exchange does not believe that permitting counterparties to an Affiliated Entity to aggregate volume to qualify for certain rebates and reduced fees will impose any undue burden on competition, as discussed below.
The Exchange operates in a highly competitive market in which many sophisticated and knowledgeable market participants can readily and do send order flow to competing exchanges if they deem fee levels or rebate incentives at a particular exchange to be excessive or inadequate. Additionally, new competitors have entered the market and still others are reportedly entering the market shortly. These market forces ensure that the Exchange's fees and rebates remain competitive with the fee structures at other trading platforms.
The Exchange does not believe that the proposed rule change will impose any burden on competition not necessary or appropriate in furtherance of the purposes of the Act. In terms of inter-market competition, the Exchange notes that it operates in a highly competitive market in which market participants can readily favor competing venues if they deem fee levels at a particular venue to be excessive, or rebate opportunities available at other venues to be more favorable. In such an environment, the Exchange must continually adjust its fees to remain competitive with other exchanges and with alternative trading systems that have been exempted from compliance with the statutory standards applicable to exchanges. Because competitors are free to modify their own fees in response, and because market participants may readily adjust their order routing practices, the Exchange believes that the degree to which fee
In sum, if the changes proposed herein are unattractive to market participants, it is likely that the Exchange will lose market share as a result. Accordingly, the Exchange does not believe that the proposed changes will impair the ability of members or competing order execution venues to maintain their competitive standing in the financial markets. In terms of inter-market competition, the Exchange notes that other options markets have similar incentives in place to attract volume to their markets.
The Exchange's proposal to amend the Preface of the Pricing Schedule to add the definitions of “Appointed MM,” “Appointed OFP” and “Affiliated Entity” does not impose an undue burden on competition because these definitions apply to all members and member organizations uniformly.
In terms of intra-market competition, the Exchange does not believe that its proposal to permit counterparties of an Affiliated Entity to aggregate Customer volume for purposes of qualifying for Section B Customer Rebates imposes an undue burden on intra-market competition because all Phlx members and member organizations, other than those under Common Ownership, may become an Affiliated Entity as either an Appointed MM or an Appointed OFP. Also, each Phlx member or member organization may participate in only one Affiliated Entity relationship at a given time, which imposes a measure of exclusivity among market participants, allowing each party to rely on the other's executed Customer volume on Phlx to receive a corresponding benefit in terms of a higher rebate. The Exchange will apply all qualifications in a uniform manner to all market participants that elect to become counterparties of an Affiliated Entity. Any market participant that is by definition a member or member organization under Common Ownership may not become a counterparty of an Affiliated Entity.
Market Makers and Specialists are valuable market participants that provide liquidity in the marketplace and incur costs that other market participants do not incur. Market Makers and Specialists are subject to burdensome quoting obligations
The Exchange's proposal to exclude members and member organizations that are under Common Ownership from becoming an Affiliated Entity does not impose and [sic] undue burden on intra-market competition because member and member organizations under Common Ownership may aggregate volume today for purposes of qualifying for Customer Rebates.
The Exchange's proposal to amend note 3 of Section II of the Pricing Schedule to offer Appointed OFPs of Affiliated Entities an opportunity to reduce non-Customer non-Penny Pilot electronic Options Transaction Charges does not impose an undue burden on intra-market competition because the Exchange will assess Appointed OFPs a reduced Professional, Broker-Dealer and Firm electronic Options Transaction Charge in Non-Penny Pilot Options. The Exchange does not assess Customers an electronic Options Transaction Charge in Non-Penny Pilot Options because Customer order flow enhances liquidity on the Exchange for the benefit of all market participants. Customer liquidity benefits all market participants by providing more trading opportunities, which attracts Specialists and Market Makers. An increase in the activity of these market participants in turn facilitates tighter spreads, which may cause an additional corresponding increase in order flow from other market participants. Specialists and Market Makers are assessed lower electronic Options Transaction Charges in Non-Penny Pilot Options as compared to Professionals, Broker-Dealers and Firms because they have obligations to the market and regulatory requirements, which normally do not apply to other market participants.
The Exchange's proposal to amend note 4 of Section II of the Pricing Schedule to offer Appointed MMs of Affiliated Entities an opportunity to reduce non-Customer electronic non-Penny Pilot electronic Options Transaction Charges does not impose an undue burden on intra-market competition because the Exchange seeks to incentivize Specialists and Market Makers to increase their activity on Phlx and in turn facilitate tighter spreads, which may cause an additional corresponding increase in order flow from other market participants. Specialists and Market have obligations to the market and regulatory requirements, which normally do not apply to other market participants.
No written comments were either solicited or received.
The foregoing rule change has become effective pursuant to Section 19(b)(3)(A)(ii) of the Act.
At any time within 60 days of the filing of the proposed rule change, the Commission summarily may temporarily suspend such rule change if it appears to the Commission that such action is: (i) Necessary or appropriate in the public interest; (ii) for the protection of investors; or (iii) otherwise in furtherance of the purposes of the Act. If the Commission takes such action, the Commission shall institute proceedings to determine whether the proposed rule should be approved or disapproved.
Interested persons are invited to submit written data, views, and arguments concerning the foregoing, including whether the proposed rule change is consistent with the Act. Comments may be submitted by any of the following methods:
• Use the Commission's Internet comment form (
• Send an email to
• Send paper comments in triplicate to Secretary, Securities and Exchange Commission, 100 F Street NE., Washington, DC 20549-1090.
For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.
On May 24, 2016, NYSE Arca, Inc. (“Exchange”) filed with the Securities and Exchange Commission (“Commission”), pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 (“Act”)
Section 19(b)(2) of the Act
The Commission finds it appropriate to designate a longer period within which to take action on the proposed rule change so that it has sufficient time to consider this proposed rule change. Accordingly, the Commission, pursuant to Section 19(b)(2) of the Act,
For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.
On April 4, 2016, New York Stock Exchange LLC (the “Exchange” or “NYSE”) filed with the Securities and Exchange Commission (“Commission”), pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 (“Act”)
In response to the Comment Letters, the NYSE submitted a response (“Response Letter”) and filed Amendment No. 2.
The Commission is publishing this order to solicit comments on Amendment No. 2 from interested persons and to institute proceedings pursuant to Exchange Act Section 19(b)(2)(B) to determine whether to approve or disapprove the proposed rule change, as modified by Amendment Nos. 1 and 2.
The Exchange proposes to establish certain fees relating to end users. Specifically, the Exchange proposes to amend the co-location section of the NYSE Price List to (i) add the newly defined terms “Rebroadcasting User” and “Multicast End User;” as well as “Transmittal User” and “Unicast End User;” (ii) amend the definition of Affiliate; (iii) establish new reporting requirements applicable to Rebroadcasting Users and Transmittal Users; (iv) establish new fees applicable to Rebroadcasting Users and Transmittal Users; and (v) make certain related technical changes.
The Exchange operates a data center in Mahwah, New Jersey (“data center”) from which it provides co-location services to Users.
The Exchange proposes to add several new definitions to the Fee Schedules. The Exchange proposes to define a “Rebroadcasting User” as “a User that rebroadcasts to its customers data received from the Exchange in multicast format, unless such User normalizes the raw market data before sending it to its customers.”
In addition, as originally proposed, the Exchange would assess a Rebroadcasting User with one or two connections, either directly or through another Multicast End User, to a Multicast End User, a $1,700 monthly charge for the first two connections, and $850 for each additional connection to that Multicast End User.
According to the Exchange, customers use unicast format to send messages related to orders or for clearing purposes.
As originally proposed, the Exchange would assess a Transmittal User with one or two connections, either directly or through another Unicast End User, to a Unicast End User, a $1,500 monthly charge for the first two connections,
The Exchange also proposes that the terms Multicast End User and Unicast End User would exclude an entity that is an Affiliate of its Rebroadcasting User or Transmittal User, respectively.
In its filing, the Exchange states that the proposed fees relate to additional connectivity and co-location services the Exchange provides to Rebroadcasting and Transmittal Users and would “fairly and equitably allocate the costs associated with maintaining the Data Center facility, hardware and equipment and related to personnel required for installation and ongoing monitoring, support and maintenance of such service among all Users.”
The Exchange represents that it incurs more costs on the account of Rebroadcasting and Transmittal Users;
As noted, the Commission received two comment letters.
In the Response Letter, the NYSE states that the Comment Letters have “not provided any credible argument why the [. . .] proposal is not consistent with the requirements of the Act.”
In Amendment No. 2, the Exchange offers additional justification for the proposed rule change. In Amendment No. 2, the Exchange proposes that a Rebroadcasting User not be charged a fee for its first two Multicast End Users, and similarly that a Transmittal User not be charged a fee for its first two Unicast End Users.
The Exchange adds that it believes that Rebroadcasting Users that have only one or two Multicast End Users are an exception to the general statement that the Exchange has a greater administrative burden and incurs greater operational costs to support Rebroadcasting Users.
The Commission is instituting proceedings pursuant to Section 19(b)(2)(B) of the Act
Pursuant to Section 19(b)(2)(B) of the Act, the Commission is providing notice of the following grounds for disapproval that are under consideration:
• Section 6(b)(4) of the Act, which requires that the rules of a national securities exchange “provide for the equitable allocation of reasonable dues, fees, and other charges among its members and issuers and other persons using its facilities,”
• Section 6(b)(5) of the Act, which requires, among other things, that the rules of a national securities exchange be “designed to perfect the operation of a free and open market and a national market system” and “protect investors and the public interest,” and not be “designed to permit unfair discrimination between customers, issuers, brokers, or dealers,”
• Section 6(b)(8) of the Act, which requires that the rules of a national securities exchange “not impose any burden on competition not necessary or appropriate in furtherance of the purposes of [the Act].”
As discussed above, the Exchange states that the proposed end user fees applicable to Rebroadcasting Users and Transmittal Users would “fairly and equitably allocate the costs associated with maintaining the Data Center facility, hardware and equipment and related to personnel required for
Furthermore, the proposed fees would not apply to all end users of Rebroadcasting Users and Transmittal Users. For example, they would not apply to end users that are Affiliates of a Rebroadcasting User or a Transmittal User. While the Exchange asserts that “[i]n its experience, entities that are Affiliates typically act as one entity, with one infrastructure, one administration, and one network support group,” so that “the Exchange is effectively supporting one entity, irrespective of how many Affiliate end users are involved,”
Finally, the Commission is concerned that the Exchange has not demonstrated that its proposal does not impose an unnecessary or inappropriate burden on competition. The Exchange asserts that it meets this statutory standard because “it operates in a highly-competitive market in which market participants can readily favor competing venues if, for example, they deem fee levels at a particular venue to be excessive or if they determine that another venue's products and services are more competitive than on the Exchange.”
For all of the foregoing reasons, the Commission believes that questions are raised as to whether the proposed fees are consistent with the Act, and specifically, with its requirements that exchange fees be reasonable and equitably allocated; be designed to perfect the mechanism of a free and open market and the national market system, protect investors and the public interest, and not be unfairly discriminatory; and not impose an unnecessary or inappropriate burden on competition.
The Commission requests that interested persons provide written submissions of their views, data and arguments with respect to the concerns identified above, as well as any other concerns they may have with the proposed rule change, as modified by Amendment Nos. 1 and 2. In particular, the Commission invites the written views of interested persons concerning whether the proposal, as modified by Amendment Nos. 1 and 2, is consistent with Sections 6(b)(4), (5), or (8)
Interested persons are invited to submit written data, views, and arguments regarding whether the proposal, as modified by Amendment Nos. 1 and 2, should be approved or disapproved by August 17, 2016. Any person who wishes to file a rebuttal to any other person's submission must file that rebuttal by August 31, 2016. In light of the concerns raised by the proposed rule change, as discussed above, the Commission invites additional comment on the proposed rule change, as modified by Amendment Nos. 1 and 2, as the Commission continues its analysis of the proposed rule change's consistency with Sections 6(b)(4), (5) and (8),
Comments may be submitted by any of the following methods:
• Use the Commission's Internet comment form (
• Send an email to
• Send paper comments in triplicate to Brent J. Fields, Secretary, Securities and Exchange Commission, 100 F Street NE., Washington, DC 20549-1090.
For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.
On April 4, 2016, NYSE MKT LLC (the “Exchange” or “NYSE MKT”) filed with the Securities and Exchange Commission (“Commission”), pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 (“Act”)
In response to the Comment Letters, the NYSE submitted a response (“Response Letter”) and filed Amendment No. 2 to the NYSE companion filing. As they are relevant to the instant filing, the Comment Letters and Response Letter on the NYSE companion filing are discussed below.
The Commission is publishing this order to solicit comments on Amendment No. 2 from interested persons and to institute proceedings pursuant to Exchange Act Section 19(b)(2)(B) to determine whether to approve or disapprove the proposed rule change, as modified by Amendment Nos. 1 and 2.
The Exchange proposes to establish certain fees relating end users. Specifically, the Exchange proposes to amend the co-location section of the NYSE MKT Equities Price List and the NYSE Amex Options Fee Schedule (collectively “Fee Schedules”) to (i) add the newly defined terms “Rebroadcasting User” and “Multicast End User;” as well as “Transmittal User” and “Unicast End User;” (ii) amend the definition of Affiliate; (iii) establish new reporting requirements applicable to Rebroadcasting Users and Transmittal Users; (iv) establish new fees applicable to Rebroadcasting Users and Transmittal Users; and (v) make certain related technical changes.
The Exchange operates a data center in Mahwah, New Jersey (“data center”) from which it provides co-location services to Users.
The Exchange proposes to add several new definitions to the Fee Schedules. The Exchange proposes to define a “Rebroadcasting User” as “a User that rebroadcasts to its customers data received from the Exchange in multicast format, unless such User normalizes the raw market data before sending it to its customers.”
In addition, as originally proposed, the Exchange would assess a Rebroadcasting User with one or two connections, either directly or through another Multicast End User, to a Multicast End User, a $1,700 monthly charge for the first two connections, and $850 for each additional connection to that Multicast End User.
According to the Exchange, customers use unicast format to send messages related to orders or for clearing purposes.
As originally proposed, the Exchange would assess a Transmittal User with one or two connections, either directly or through another Unicast End User, to a Unicast End User, a $1,500 monthly charge for the first two connections,
The Exchange also proposes that the terms Multicast End User and Unicast End User would exclude an entity that is an Affiliate of its Rebroadcasting User or Transmittal User, respectively.
In its filing, the Exchange states that the proposed fees relate to additional connectivity and co-location services the Exchange provides to Rebroadcasting and Transmittal Users and would “fairly and equitably allocate the costs associated with maintaining the Data Center facility, hardware and equipment and related to personnel required for installation and ongoing monitoring, support and maintenance of such service among all Users.”
The Exchange represents that it incurs more costs on the account of Rebroadcasting and Transmittal Users;
As noted, the Commission received two comment letters on the NYSE companion filing, which are likewise applicable to this filing.
In the Response Letter, the NYSE states that the Comment Letters have “not provided any credible argument why the [. . .] proposal is not consistent with the requirements of the Act.”
In Amendment No. 2, the Exchange offers additional justification for the proposed rule change. In Amendment No. 2, the Exchange proposes that a Rebroadcasting User not be charged a fee for its first two Multicast End Users, and similarly that a Transmittal User not be charged a fee for its first two Unicast End Users.
The Exchange adds that it believes that Rebroadcasting Users that have only one or two Multicast End Users are an exception to the general statement that the Exchange has a greater administrative burden and incurs greater operational costs to support Rebroadcasting Users.
The Commission is instituting proceedings pursuant to Section 19(b)(2)(B) of the Act
Pursuant to Section 19(b)(2)(B) of the Act, the Commission is providing notice of the following grounds for disapproval that are under consideration:
• Section 6(b)(4) of the Act, which requires that the rules of a national securities exchange “provide for the equitable allocation of reasonable dues, fees, and other charges among its members and issuers and other persons using its facilities,”
• Section 6(b)(5) of the Act, which requires, among other things, that the rules of a national securities exchange be “designed to perfect the operation of a free and open market and a national market system” and “protect investors and the public interest,” and not be “designed to permit unfair discrimination between customers, issuers, brokers, or dealers,”
• Section 6(b)(8) of the Act, which requires that the rules of a national securities exchange “not impose any burden on competition not necessary or appropriate in furtherance of the purposes of [the Act].”
As discussed above, the Exchange states that the proposed end user fees applicable to Rebroadcasting Users and Transmittal Users would “fairly and equitably allocate the costs associated with maintaining the Data Center facility, hardware and equipment and related to personnel required for installation and ongoing monitoring, support and maintenance of such service among all Users.”
Furthermore, the proposed fees would not apply to all end users of Rebroadcasting Users and Transmittal Users. For example, they would not apply to end users that are Affiliates of a Rebroadcasting User or a Transmittal User. While the Exchange asserts that “[i]n its experience, entities that are Affiliates typically act as one entity, with one infrastructure, one administration, and one network support group,” so that “the Exchange is effectively supporting one entity, irrespective of how many Affiliate end users are involved,”
Finally, the Commission is concerned that the Exchange has not demonstrated that its proposal does not impose an unnecessary or inappropriate burden on competition. The Exchange asserts that it meets this statutory standard because “it operates in a highly-competitive market in which market participants can readily favor competing venues if, for example, they deem fee levels at a particular venue to be excessive or if they determine that another venue's products and services are more competitive than on the Exchange.”
For all of the foregoing reasons, the Commission believes that questions are raised as to whether the proposed fees are consistent with the Act, and specifically, with its requirements that exchange fees be reasonable and equitably allocated; be designed to perfect the mechanism of a free and open market and the national market system, protect investors and the public interest, and not be unfairly discriminatory; and not impose an unnecessary or inappropriate burden on competition.
The Commission requests that interested persons provide written submissions of their views, data and arguments with respect to the concerns identified above, as well as any other concerns they may have with the proposed rule change, as modified by Amendment Nos. 1 and 2. In particular, the Commission invites the written views of interested persons concerning whether the proposal, as modified by Amendment Nos. 1 and 2, is consistent with Sections 6(b)(4), (5), or (8)
Interested persons are invited to submit written data, views, and arguments regarding whether the proposal, as modified by Amendment Nos. 1 and 2, should be approved or disapproved by August 17, 2016. Any person who wishes to file a rebuttal to any other person's submission must file that rebuttal by August 31, 2016. In light of the concerns raised by the proposed rule change, as discussed above, the Commission invites additional comment on the proposed rule change, as modified by Amendment Nos. 1 and 2, as the Commission continues its analysis of the proposed rule change's consistency with Sections 6(b)(4), (5) and (8),
Comments may be submitted by any of the following methods:
• Use the Commission's Internet comment form (
• Send an email to
• Send paper comments in triplicate to Brent J. Fields, Secretary, Securities and Exchange Commission, 100 F Street NE., Washington, DC 20549-1090.
On May 27, 2016, The Depository Trust Company (“DTC”) filed with the Securities and Exchange Commission (“Commission”) proposed rule change SR-DTC-2016-003 pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 (“Act”),
Section 19(b)(2) of the Act
The Commission finds that it is appropriate to designate a longer period within which to take action on the proposed rule change so that it has sufficient time to consider the comments received on the proposed rule change. Accordingly, the Commission, pursuant to Section 19(b)(2) of the Act,
For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.
Pursuant to Section 19(b)(1)
The Exchange proposes to amend NYSE Arca Equities Rules 2.16(c) and 2.21(i) to harmonize the requirement of when an ETP Holder must file an [sic] Uniform Termination Notice for Securities Industry Registration (“Form U-5”) with the rules of other exchanges and FINRA. The proposed rule change is available on the Exchange's Web site at
In its filing with the Commission, the self-regulatory organization included statements concerning the purpose of, and basis for, the proposed rule change and discussed any comments it received on the proposed rule change. The text of those statements may be examined at the places specified in Item IV below. The Exchange has prepared summaries, set forth in sections A, B, and C below, of the most significant parts of such statements.
The Exchange proposes to amend NYSE Arca Equities Rules 2.16(c) and 2.21(i) to harmonize the requirement of when an ETP Holder must file a Form U-5 with the requirements on [sic] other exchanges and the Financial Industry Regulatory Authority (“FINRA”). This filing is not intended to address any other registration requirements in Exchange rules.
Specifically, under current Rule 2.16(c), an ETP Holder is required to electronically file a Form U-5 and any amendment thereto within 30 days of the termination when a person
The Exchange proposes to amend these two rules by replacing the current requirements of when to electronically file a Form U-5 with the same requirement in each rule that an ETP Holder promptly file a Form U-5 electronically with CRD, but not later than 30 calendar days after the date of termination of a person associated with the ETP Holder or an employee (as applicable). The proposed rule would further require that any amendment to a Form U-5 must also be promptly filed electronically with CRD, but not later than 30 calendar days after learning of the facts or circumstances giving rise to the amendment. Finally, the proposed rule would provide that all Forms U-5 must also be provided to the terminated person concurrently with filing.
The proposed rule text is based on the requirements of other exchanges and FINRA and therefore would harmonize the requirement of when an ETP Holder must file a Form U-5 with the rules of other exchanges and FINRA.
The Exchange believes that the proposed changes are consistent with Section 6(b) of the Act,
Specifically, the Exchange believes that the proposed rule changes would remove impediments to and perfect the mechanisms of a free and open market by conforming the time period within which ETP Holders must file a Form U-5 to the requirement that such forms be filed promptly, but not later than 30 calendar days after the termination event. The Exchange believes that the proposed rule changes would protect investors and the public interest by adding that Form U-5s should be filed promptly, rather than requiring only that they be filed within 30 days. In addition, the Exchange believes that adding the requirement that a Form U-5 be filed not later than 30 calendar days after the event would eliminate the disparity among the exchanges, other SROs and the affected persons stemming from the cessation of their employment. In this regard, the proposed changes would foster cooperation and coordination with persons engaged in regulating, clearing, settling, processing information with respect to, and facilitating transactions in securities as they would both harmonize the time period for filing the requisite Form U-5 across multiple self-regulatory organizations and establish a known consistent standard to further ensure adherence. Such action would not affect nor diminish the abilities of the Exchange or an ETP Holder to fulfill their [sic] regulatory responsibilities under the Act or the rules promulgated thereunder, including but not limited to the responsibilities to monitor the activities of such persons, nor would such proposed amendment affect the rights of such terminated persons.
The Exchange believes this additional transparency and clarity removes a potential impediment to, and would contribute to perfecting, the mechanism for a free and open market and a national market system, and, in general, would protect investors and the public interest by harmonizing the time period for filing the requisite Form U-5 across multiple SROs, and by imposing the requirement that such forms be filed promptly.
The Exchange does not believe that this proposed rule changes would impose any burden on competition not necessary or appropriate in furtherance of the purposes of the Act. The proposed changes are not designed to address any competitive issue but rather to harmonize an [sic] Exchange time-filing requirements to a standard prevalent among other exchanges and FINRA, thereby reducing any potential confusion and making the Exchange's rules easier to understand and navigate. The Exchange believes that the proposed rule changes would serve to promote regulatory clarity and consistency, thereby reducing burdens on the marketplace and facilitating investor protection.
No written comments were solicited or received with respect to the proposed rule change.
Within 45 days of the date of publication of this notice in the
(A) by order approve or disapprove the proposed rule change, or
(B) institute proceedings to determine whether the proposed rule change should be disapproved.
Interested persons are invited to submit written data, views, and arguments concerning the foregoing, including whether the proposed rule change is consistent with the Act. Comments may be submitted by any of the following methods:
• Use the Commission's Internet comment form (
• Send an email to
• Send paper comments in triplicate to Secretary, Securities and Exchange Commission, 100 F Street NE., Washington, DC 20549-1090.
For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.
Pursuant to Section 19(b)(1)
The Exchange proposes to amend the NYSE MKT Equities Price List (“Price List”) and the NYSE Amex Options Fee Schedule (“Fee Schedule”) to add additional wireless connections and update or remove obsolete text. The proposed rule change is available on the Exchange's Web site at
In its filing with the Commission, the self-regulatory organization included statements concerning the purpose of, and basis for, the proposed rule change and discussed any comments it received on the proposed rule change. The text of those statements may be examined at the places specified in Item IV below. The Exchange has prepared summaries, set forth in sections A, B, and C below, of the most significant parts of such statements.
The Exchange's co-location
More specifically, the Exchange proposes to amend the connections to BZX and EDGX as follows:
• The wireless connection to BZX data would also include Bats Pitch BYX Gig shaped data (“BYX”), and
• the wireless connection to EDGX data would also include Bats EDGA Gig shaped data (“EDGA”).
The related fees would not change.
Any User that presently has a wireless connection to BZX or EDGX data would also receive BYX or EDGA data, respectively, upon effectiveness of the proposed change. Such User would not be required to pay a second non-recurring initial charge.
In addition, the Exchange proposes to add a seventh Third Party Data feed, which would include NASDAQ TotalView Ultra (FPGA) and BX TotalView-ITCH data (“FPGA and TotalView-ITCH”). Both such data feeds are currently offered separately. For each wireless connection to FPGA and TotalView-ITCH, a User would be charged a $5,000 non-recurring initial charge and a monthly recurring charge (“MRC”) of $14,500.
Any User that presently has a wireless connection to the separate FPGA and TotalView-ITCH feeds would become subject to the $14,500 MRC upon effectiveness of the proposed change. Such User would not be required to pay another non-recurring initial charge.
The Exchange accordingly proposes to revise the Price List and Fee Schedule to include the following:
As with all the Third Party Data, the Exchange would utilize a network vendor to provide a wireless connection to BZX and BYX, EDGX and EDGA or FPGA and TotalView-ITCH data (together, the “Additional Third Party Data”) through wireless connections from an Exchange access center to its data center in Mahwah, New Jersey, through a series of towers equipped with wireless equipment. A User that wished to receive Additional Third Party Data would enter into a contract with the relevant third party provider, which would charge the User the applicable market data fees. The Exchange would charge the User fees for the wireless connection.
As with the previously approved wireless connections to Third Party Data, if a User purchases two wireless connections to Additional Third Party Data, it pays two non-recurring initial charges. Wireless connections include the use of one port for connectivity to Third Party Data.
The Exchange proposes to offer the wireless connections to provide Users with an alternative means of connectivity to Additional Third Party Data. Currently, Users can receive such Third Party Data from wireless networks offered by third party vendors.
The proposed connectivity to the FPGA and TotalView-ITCH data feeds would be available upon effectiveness. The proposed connectivity to the BZX and BYX or EDGX and EDGA data feeds is expected to be available no later than September 1, 2016. The Exchange will announce the date that the wireless connections will be made available through a customer notice.
In addition, the Exchange proposes to replace the existing references to “DirectEdge” and “BATS” in the Price List and Fee Schedule with references to “Bats” in order to reflect the recent name changes of BATS Exchange, Inc. and EDGX Exchange, Inc. to Bats BZX Exchange, Inc. and Bats EDGX Exchange, Inc., respectively.
Finally, the Exchange proposes to delete statements in the Price List and Fee Schedule that say that the wireless connections for Third Party Data are expected to be available no later than March 1, 2016, as such statements are obsolete. This proposed change would have no impact on pricing.
As is the case with all Exchange co-location arrangements, (i) neither a User nor any of the User's customers would be permitted to submit orders directly to the Exchange unless such User or customer is a member organization, a Sponsored Participant or an agent thereof (
The proposed change is not otherwise intended to address any other issues relating to co-location services and/or related fees, and the Exchange is not aware of any problems that Users would have in complying with the proposed change.
The Exchange believes that the proposed rule change is consistent with Section 6(b) of the Act,
The Exchange believes that the proposed service is not designed to permit unfair discrimination between customers, issuers, brokers, or dealers because the proposed changes would provide Users with an alternative means of connectivity to the Additional Third Party Data. Users that do not opt to utilize the Exchange's proposed wireless connections would still be able to obtain the Additional Third Party Data through other methods, including, for example, from wireless networks offered by third party vendors, another User, through a telecommunications provider, or over the IP network. Users that opt to use wireless connections to Additional Third Party Data would receive the Additional Third Party Data that is available to all Users, as all market participants that contract with the relevant third party market for the Additional Third Party Data may receive it.
The Exchange believes that this removes impediments to, and perfects the mechanisms of, a free and open market and a national market system and, in general, protects investors and the public interest because it would provide Users with choices with respect to the form and optimal latency of the connectivity they use to receive Additional Third Party Data, allowing a User that opts to receive such Additional Third Party Data to select the connectivity and number of ports that better suit its needs, helping it tailor its data center operations to the requirements of its business operations.
The Exchange believes that the proposed change is equitable and not unfairly discriminatory because it will result in fees being charged only to Users that voluntarily select to receive the corresponding services and because those services will be available to all Users. Furthermore, the Exchange believes that the services and fees proposed herein are not unfairly discriminatory and are equitably allocated because, in addition to the services being completely voluntary, they are available to all Users on an equal basis (
Overall, the Exchange believes that the proposed change is reasonable because the Exchange proposes to offer the wireless connections to described herein as a convenience to Users, but in doing so would incur certain costs, including costs related to the data center facility, hardware and equipment and costs related to personnel required for initial installation and monitoring, support and maintenance of such services. The costs associated with the wireless connections are incrementally higher than fiber optics-based solutions due to the expense of the wireless equipment, cost of installation and testing and ongoing maintenance of the network.
The Exchange believes that it is reasonable not to charge a User a second non-recurring initial charge if it has a wireless connection to BZX or EDGX data as of the date of effectiveness of the proposed change, because such User would have already paid a non-recurring initial charge for the wireless connection to BZX or EDGX data that it already has. The Exchange believes that it is reasonable that a User that presently has a wireless connection to the separate FPGA and TotalView-ITCH feeds would become subject to the $14,500 MRC upon effectiveness of the proposed change, because such User would have the same service as a User that obtained wireless connectivity to the FPGA and TotalView-ITCH feeds after effectiveness. Similarly, the Exchange believes that it is reasonable that such a User would not be required to pay another non-recurring initial charge, because such User would have already paid non-recurring initial charges for the two wireless connections that it already has.
The Exchange believes that it is reasonable that a User that has already purchased wireless connections to other Third Party Data would be charged a non-recurring initial charge when it purchases a wireless connection to Additional Third Party Data, because the Exchange would incur certain costs in installing the wireless connection to such Third Party Data irrespective of whether the User had existing wireless connections to other Third Party Data. Such costs related to initial installation include, in particular, costs related to personnel required for initial installation and testing. The costs associated with installing wireless connections are incrementally higher than those associated with installing fiber optics-based solutions.
The Exchange believes that the proposed pricing is reasonable because it allows Users to select the Additional Third Party Data connectivity option that better suits their needs. The fees also reflect the benefit received by Users in terms of lower latency over the fiber optics option. For competitive reasons, the Exchange has opted not to change the existing fees for the BZX and EDGX Third Party Data feeds. Accordingly, Users that already receive the BZX or EDGX Third Party Data feed will receive an additional feed at no incremental cost.
The Exchange believes that the proposed waiver of the first month's MRC is reasonable as it would allow Users to test the receipt of the feed for a month before incurring any monthly recurring fees and may act as an incentive to Users to connect to Additional Third Party Data.
Moreover, the Exchange believes that the proposed fees are equitably allocated and not unfairly discriminatory because the wireless connections to Additional Third Party Data would provide Users with an alternative means of connectivity to such feeds. Users that do not opt to utilize the Exchange's proposed wireless connections would still be able to obtain Additional Third Party Data through other methods, including, for example, from wireless networks offered by third party vendors, another User, through a telecommunications provider, or over the IP network. Users that opt to use wireless connections for Additional Third Party Data would receive the Additional Third Party Data that is available to all Users, as all market participants that contract with the relevant third party market for the Additional Third Party Data may receive it.
The Exchange believes that deleting statements in the Price List and Fee Schedule that say that the wireless connections for Third Party Data are expected to be available no later than March 1, 2016, is reasonable, equitable and not unfairly discriminatory because the reference is obsolete and no longer has an impact on pricing. The Exchange also believes that replacing the existing references to “DirectEdge” and “BATS” in the Price List and Fee Schedule with references to “Bats” is reasonable, equitable and not unfairly discriminatory, because it will reflect the recent name changes of BATS Exchange, Inc. and EDGX Exchange, Inc. to Bats BZX Exchange, Inc. and Bats EDGX Exchange, Inc., respectively. The proposed changes would result in the removal or update of obsolete text from the Price List and Fee Schedule and therefore add greater clarity to the Price List and Fee Schedule regarding the services offered and the applicable fees.
For the reasons above, the proposed changes do not unfairly discriminate between or among market participants that are otherwise capable of satisfying any applicable co-location fees, requirements, terms and conditions established from time to time by the Exchange.
Finally, the Exchange believes that it is subject to significant competitive forces, as described below in the Exchange's statement regarding the burden on competition.
For these reasons, the Exchange believes that the proposed fees are reasonable, equitable, and not unfairly discriminatory.
In accordance with Section 6(b)(8) of the Act,
The Exchange believes that the proposed rule changes will not impose any burden on competition that is not necessary or appropriate in furtherance of the purposes of the Act because such access will provide Users with wireless connectivity to additional Third Party Data feeds. Currently, Users can receive Additional Third Party Data from wireless networks offered by third party vendors. Based on the information available to it, the Exchange believes that its proposed wireless connection would provide data at the same or similar speed and at the same or similar cost as the other wireless networks. Accordingly, the proposed wireless connections to Additional Third Party Data would provide Users with an additional wireless connectivity option, thereby enhancing competition.
The Exchange notes that the proposed wireless connections to Additional Third Party Data would compete not just with other wireless connections to such Additional Third Party Data, but also with fiber optic network connections to Additional Third Party Data, which may be more attractive to some Users as they are more reliable and less susceptible to weather conditions. Users that do not opt to utilize wireless connections would be able to obtain Additional Third Party Data through other methods, including, for example, from another User, through a telecommunications provider, or over the IP network. In this way, the proposed changes would enhance competition by helping Users tailor their connectivity to Additional Third Party Data to the needs of their business operations by allowing them to select the form and optimal latency of the connectivity they use to receive such Additional Third Party Data that best suits their needs, helping them tailor their data center operations to the requirements of their business operations.
The proposed wireless connections to Additional Third Party Data would traverse wireless connections through a series of towers equipped with wireless equipment, including a pole on the grounds of the data center. The wireless network has exclusive rights to operate wireless equipment on the data center pole. The Exchange will not sell rights to third parties to operate wireless equipment on the pole, due to space limitations, security concerns, and the interference that would arise between equipment placed too closely together. In addition to space issues, there are contractual restrictions on the use of the roof that the Exchange has determined would not be met if it offered space on the roof for third party wireless equipment. Moreover, access to the pole or roof is not required for third parties to establish wireless networks that can compete with the Exchange's proposed service, as witnessed by the existing wireless networks currently serving Users. Based on the information available to it, the Exchange believes that its proposed wireless connections to Additional Third Party Data would provide data at the same or similar speed, and at the same or similar cost, as its proposed wireless connection, thereby enhancing competition.
Finally, the Exchange notes that it operates in a highly competitive market in which market participants can readily favor competing venues if they deem fee levels at a particular venue to be excessive. In such an environment, the Exchange must continually review, and consider adjusting, its services and related fees and credits to remain competitive with other exchanges. For the reasons described above, the Exchange believes that the proposed rule change reflects this competitive environment.
No written comments were solicited or received with respect to the proposed rule change.
Because the foregoing proposed rule change does not: (i) Significantly affect the protection of investors or the public interest; (ii) impose any significant burden on competition; and (iii) become operative for 30 days from the date on which it was filed, or such shorter time as the Commission may designate, it has become effective pursuant to Section 19(b)(3)(A)(iii) of the Act
The Exchange has asked the Commission to waive the 30-day operative delay so that the proposal may become operative immediately upon filing. The Commission believes that waiver of the operative delay is consistent with the protection of investors and the public interest because such waiver will allow Users that elect to receive wireless connections to both NASDAQ Totalview Ultra (FPGA) and BX Totalview-ITCH data to do so without delay at a reduced fee through the new bundle price. The Commission has therefore determined to waive the 30-day operative delay and designate the proposed rule change as operative upon filing with the Commission.
At any time within 60 days of the filing of such proposed rule change, the Commission summarily may temporarily suspend such rule change if it appears to the Commission that such action is necessary or appropriate in the public interest, for the protection of investors, or otherwise in furtherance of the purposes of the Act. If the Commission takes such action, the Commission shall institute proceedings under Section 19(b)(2)(B) of the Act
Interested persons are invited to submit written data, views, and arguments concerning the foregoing, including whether the proposed rule change is consistent with the Act. Comments may be submitted by any of the following methods:
• Use the Commission's Internet comment form (
• Send an email to
• Send paper comments in triplicate to Brent J. Fields, Secretary, Securities and Exchange Commission, 100 F Street NE., Washington, DC 20549-1090.
For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.
Pursuant to Section 19(b)(1)
The Exchange proposes to amend the Exchange's Price List to add additional wireless connections and update or remove obsolete text. The proposed rule change is available on the Exchange's Web site at
In its filing with the Commission, the self-regulatory organization included statements concerning the purpose of, and basis for, the proposed rule change and discussed any comments it received on the proposed rule change. The text of those statements may be examined at the places specified in Item IV below. The Exchange has prepared summaries, set forth in sections A, B, and C below,
The Exchange's co-location
More specifically, the Exchange proposes to amend the connections to BZX and EDGX as follows:
• The wireless connection to BZX data would also include Bats Pitch BYX Gig shaped data (“BYX”), and
• the wireless connection to EDGX data would also include Bats EDGA Gig shaped data (“EDGA”).
The related fees would not change.
Any User that presently has a wireless connection to BZX or EDGX data would also receive BYX or EDGA data, respectively, upon effectiveness of the proposed change. Such User would not be required to pay a second non-recurring initial charge.
In addition, the Exchange proposes to add a seventh Third Party Data feed, which would include NASDAQ TotalView Ultra (FPGA) and BX TotalView-ITCH data (“FPGA and TotalView-ITCH”). Both such data feeds are currently offered separately. For each wireless connection to FPGA and TotalView-ITCH, a User would be charged a $5,000 non-recurring initial charge and a monthly recurring charge (“MRC”) of $14,500.
Any User that presently has a wireless connection to the separate FPGA and TotalView-ITCH feeds would become subject to the $14,500 MRC upon effectiveness of the proposed change. Such User would not be required to pay another non-recurring initial charge.
The Exchange accordingly proposes to revise its Price List to include the following:
As with all the Third Party Data, the Exchange would utilize a network vendor to provide a wireless connection to BZX and BYX, EDGX and EDGA or FPGA and TotalView-ITCH data (together, the “Additional Third Party Data”) through wireless connections from an Exchange access center to its data center in Mahwah, New Jersey, through a series of towers equipped with wireless equipment. A User that wished to receive Additional Third Party Data would enter into a contract with the relevant third party provider, which would charge the User the applicable market data fees. The Exchange would charge the User fees for the wireless connection.
As with the previously approved wireless connections to Third Party Data, if a User purchases two wireless connections to Additional Third Party Data, it pays two non-recurring initial charges. Wireless connections include the use of one port for connectivity to Third Party Data.
The Exchange proposes to offer the wireless connections to provide Users with an alternative means of connectivity to Additional Third Party Data. Currently, Users can receive such Third Party Data from wireless networks offered by third party vendors.
The proposed connectivity to the FPGA and TotalView-ITCH data feeds would be available upon effectiveness. The proposed connectivity to the BZX and BYX or EDGX and EDGA data feeds is expected to be available no later than September 1, 2016. The Exchange will announce the date that the wireless connections will be made available through a customer notice.
In addition, the Exchange proposes to replace the existing references to “DirectEdge” and “BATS” in the Price List with references to “Bats” in order to reflect the recent name changes of BATS Exchange, Inc. and EDGX Exchange, Inc. to Bats BZX Exchange, Inc. and Bats EDGX Exchange, Inc., respectively.
Finally, the Exchange proposes to delete statements in the Price List that say that the wireless connections for Third Party Data are expected to be available no later than March 1, 2016, as such statements are obsolete. This proposed change would have no impact on pricing.
As is the case with all Exchange co-location arrangements, (i) neither a User nor any of the User's customers would be permitted to submit orders directly to the Exchange unless such User or customer is a member organization, a Sponsored Participant or an agent thereof (
The proposed change is not otherwise intended to address any other issues relating to co-location services and/or related fees, and the Exchange is not aware of any problems that Users would have in complying with the proposed change.
The Exchange believes that the proposed rule change is consistent with Section 6(b) of the Act,
The Exchange believes that the proposed service is not designed to permit unfair discrimination between customers, issuers, brokers, or dealers because the proposed changes would provide Users with an alternative means of connectivity to the Additional Third Party Data. Users that do not opt to utilize the Exchange's proposed wireless connections would still be able to obtain the Additional Third Party Data through other methods, including, for example, from wireless networks offered by third party vendors, another User, through a telecommunications provider, or over the IP network. Users that opt to use wireless connections to Additional Third Party Data would receive the Additional Third Party Data that is available to all Users, as all market participants that contract with the relevant third party market for the Additional Third Party Data may receive it.
The Exchange believes that this removes impediments to, and perfects the mechanisms of, a free and open market and a national market system and, in general, protects investors and the public interest because it would provide Users with choices with respect to the form and optimal latency of the connectivity they use to receive Additional Third Party Data, allowing a User that opts to receive such Additional Third Party Data to select the connectivity and number of ports that better suit its needs, helping it tailor its data center operations to the requirements of its business operations.
The Exchange believes that the proposed change is equitable and not unfairly discriminatory because it will result in fees being charged only to Users that voluntarily select to receive the corresponding services and because those services will be available to all Users. Furthermore, the Exchange believes that the services and fees proposed herein are not unfairly discriminatory and are equitably allocated because, in addition to the services being completely voluntary, they are available to all Users on an equal basis (
Overall, the Exchange believes that the proposed change is reasonable because the Exchange proposes to offer the wireless connections to described herein as a convenience to Users, but in doing so would incur certain costs, including costs related to the data center facility, hardware and equipment and costs related to personnel required for initial installation and monitoring, support and maintenance of such services. The costs associated with the wireless connections are incrementally higher than fiber optics-based solutions due to the expense of the wireless equipment, cost of installation and testing and ongoing maintenance of the network.
The Exchange believes that it is reasonable not to charge a User a second non-recurring initial charge if it has a wireless connection to BZX or EDGX data as of the date of effectiveness of the proposed change, because such User would have already paid a non-recurring initial charge for the wireless connection to BZX or EDGX data that it already has. The Exchange believes that it is reasonable that a User that presently has a wireless connection to the separate FPGA and TotalView-ITCH
The Exchange believes that it is reasonable that a User that has already purchased wireless connections to other Third Party Data would be charged a non-recurring initial charge when it purchases a wireless connection to Additional Third Party Data, because the Exchange would incur certain costs in installing the wireless connection to such Third Party Data irrespective of whether the User had existing wireless connections to other Third Party Data. Such costs related to initial installation include, in particular, costs related to personnel required for initial installation and testing. The costs associated with installing wireless connections are incrementally higher than those associated with installing fiber optics-based solutions.
The Exchange believes that the proposed pricing is reasonable because it allows Users to select the Additional Third Party Data connectivity option that better suits their needs. The fees also reflect the benefit received by Users in terms of lower latency over the fiber optics option. For competitive reasons, the Exchange has opted not to change the existing fees for the BZX and EDGX Third Party Data feeds. Accordingly, Users that already receive the BZX or EDGX Third Party Data feed will receive an additional feed at no incremental cost.
The Exchange believes that the proposed waiver of the first month's MRC is reasonable as it would allow Users to test the receipt of the feed for a month before incurring any monthly recurring fees and may act as an incentive to Users to connect to Additional Third Party Data.
Moreover, the Exchange believes that the proposed fees are equitably allocated and not unfairly discriminatory because the wireless connections to Additional Third Party Data would provide Users with an alternative means of connectivity to such feeds. Users that do not opt to utilize the Exchange's proposed wireless connections would still be able to obtain Additional Third Party Data through other methods, including, for example, from wireless networks offered by third party vendors, another User, through a telecommunications provider, or over the IP network. Users that opt to use wireless connections for Additional Third Party Data would receive the Additional Third Party Data that is available to all Users, as all market participants that contract with the relevant third party market for the Additional Third Party Data may receive it.
The Exchange believes that deleting statements in the Price List that say that the wireless connections for Third Party Data are expected to be available no later than March 1, 2016, is reasonable, equitable and not unfairly discriminatory because the reference is obsolete and no longer has an impact on pricing. The Exchange also believes that replacing the existing references to “DirectEdge” and “BATS” in the Price List with references to “Bats” is reasonable, equitable and not unfairly discriminatory, because it will reflect the recent name changes of BATS Exchange, Inc. and EDGX Exchange, Inc. to Bats BZX Exchange, Inc. and Bats EDGX Exchange, Inc., respectively. The proposed changes would result in the removal or update of obsolete text from the Price List and therefore add greater clarity to the Price List regarding the services offered and the applicable fees.
For the reasons above, the proposed changes do not unfairly discriminate between or among market participants that are otherwise capable of satisfying any applicable co-location fees, requirements, terms and conditions established from time to time by the Exchange.
Finally, the Exchange believes that it is subject to significant competitive forces, as described below in the Exchange's statement regarding the burden on competition.
For these reasons, the Exchange believes that the proposed fees are reasonable, equitable, and not unfairly discriminatory
In accordance with Section 6(b)(8) of the Act,
The Exchange believes that the proposed rule changes will not impose any burden on competition that is not necessary or appropriate in furtherance of the purposes of the Act because such access will provide Users with wireless connectivity to additional Third Party Data feeds. Currently, Users can receive Additional Third Party Data from wireless networks offered by third party vendors. Based on the information available to it, the Exchange believes that its proposed wireless connection would provide data at the same or similar speed and at the same or similar cost as the other wireless networks. Accordingly, the proposed wireless connections to Additional Third Party Data would provide Users with an additional wireless connectivity option, thereby enhancing competition.
The Exchange notes that the proposed wireless connections to Additional Third Party Data would compete not just with other wireless connections to such Additional Third Party Data, but also with fiber optic network connections to Additional Third Party Data, which may be more attractive to some Users as they are more reliable and less susceptible to weather conditions. Users that do not opt to utilize wireless connections would be able to obtain Additional Third Party Data through other methods, including, for example, from another User, through a telecommunications provider, or over the IP network. In this way, the proposed changes would enhance competition by helping Users tailor their connectivity to Additional Third Party Data to the needs of their business operations by allowing them to select the form and optimal latency of the connectivity they use to receive such Additional Third Party Data that best suits their needs, helping them tailor their data center operations to the requirements of their business operations.
The proposed wireless connections to Additional Third Party Data would traverse wireless connections through a series of towers equipped with wireless equipment, including a pole on the grounds of the data center. The wireless network has exclusive rights to operate wireless equipment on the data center pole. The Exchange will not sell rights to third parties to operate wireless equipment on the pole, due to space limitations, security concerns, and the interference that would arise between equipment placed too closely together. In addition to space issues, there are contractual restrictions on the use of the roof that the Exchange has determined would not be met if it offered space on the roof for third party wireless
Finally, the Exchange notes that it operates in a highly competitive market in which market participants can readily favor competing venues if they deem fee levels at a particular venue to be excessive. In such an environment, the Exchange must continually review, and consider adjusting, its services and related fees and credits to remain competitive with other exchanges. For the reasons described above, the Exchange believes that the proposed rule change reflects this competitive environment.
No written comments were solicited or received with respect to the proposed rule change.
Because the foregoing proposed rule change does not: (i) Significantly affect the protection of investors or the public interest; (ii) impose any significant burden on competition; and (iii) become operative for 30 days from the date on which it was filed, or such shorter time as the Commission may designate, it has become effective pursuant to Section 19(b)(3)(A)(iii) of the Act
The Exchange has asked the Commission to waive the 30-day operative delay so that the proposal may become operative immediately upon filing. The Commission believes that waiver of the operative delay is consistent with the protection of investors and the public interest because such waiver will allow Users that elect to receive wireless connections to both NASDAQ Totalview Ultra (FPGA) and BX Totalview-ITCH data to do so without delay at a reduced fee through the new bundle price. The Commission has therefore determined to waive the 30-day operative delay and designate the proposed rule change as operative upon filing with the Commission.
At any time within 60 days of the filing of such proposed rule change, the Commission summarily may temporarily suspend such rule change if it appears to the Commission that such action is necessary or appropriate in the public interest, for the protection of investors, or otherwise in furtherance of the purposes of the Act. If the Commission takes such action, the Commission shall institute proceedings under Section 19(b)(2)(B) of the Act
Interested persons are invited to submit written data, views, and arguments concerning the foregoing, including whether the proposed rule change is consistent with the Act. Comments may be submitted by any of the following methods:
• Use the Commission's Internet comment form (
• Send an email to
• Send paper comments in triplicate to Brent J. Fields, Secretary, Securities and Exchange Commission, 100 F Street NE., Washington, DC 20549-1090.
For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.
On November 6, 2015, NYSE Arca, Inc. (“Exchange”) filed with the Securities and Exchange Commission (“Commission”), pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 (“Act”)
On November 23, 2015, the Exchange filed Amendment No. 1 to the proposed rule change, which amended and replaced the original proposal in its entirety.
On February 12, 2016, the Exchange filed Amendment No. 4 to the proposed rule change.
On June 3, 2016, the Exchange filed Amendment No. 5 to the proposed rule change.
The Exchange proposes to amend NYSE Arca Equities Rule 8.600 and to adopt generic listing standards for Managed Fund Shares, which are securities issued by an open-end investment company. Unlike exchange-traded funds (“ETFs”) whose performance is based on the performance of an underlying index of securities,
According to the Exchange, all Managed Fund Shares listed and traded pursuant to NYSE Arca Equities Rule 8.600 (including trading pursuant to unlisted trading privileges) are subject to the full panoply of Exchange rules and procedures that currently govern the trading of equity securities on the Exchange. In addition, NYSE Arca Equities Rule 8.600 currently requires that the Exchange submit a proposed rule change with the Commission to list and trade each new series of Managed Fund Shares on the Exchange.
The Exchange proposes to amend Commentary .01 to NYSE Arca Equities Rule 8.600 and adopt generic listing standards that would permit the listing and trading (including trading pursuant to unlisted trading privileges) of Managed Fund Shares pursuant to Rule 19b-4(e) under the Act, which pertains to new derivative securities products.
Commentary .01(a) to NYSE Arca Equities Rule 8.600 sets forth the standards for a Managed Fund Share portfolio holding equity securities, which are defined to be U.S. Component Stocks,
As set forth in Commentary .01(a)(1) to NYSE Arca Equities Rule 8.600,
(a) Component stocks (excluding Derivative Securities Products and Index-Linked Securities) that in the aggregate account for at least 90% of the equity weight of the portfolio (excluding such Derivative Securities Products and Index-Linked Securities) each must have a minimum market value of at least $75 million;
(b) Component stocks (excluding Derivative Securities Products and Index-Linked Securities) that in the aggregate account for at least 70% of the equity weight of the portfolio (excluding such Derivative Securities Products and Index-Linked Securities) each must have a minimum monthly trading volume of 250,000 shares, or minimum notional volume traded per month of $25,000,000, averaged over the previous six months;
(c) The most heavily weighted component stock (excluding Derivative Securities Products and Index-Linked Securities) must not exceed 30% of the equity weight of the portfolio, and, to the extent applicable, the five most heavily weighted component stocks (excluding Derivative Securities Products and Index-Linked Securities) must not exceed 65% of the equity weight of the portfolio;
(d) Where the equity portion of the portfolio does not include Non-U.S. Component Stocks, the equity portion of the portfolio shall include a minimum of 13 component stocks; provided, however, that there shall be no minimum number of component stocks if (i) one or more series of Derivative Securities Products or Index-Linked Securities constitute, at least in part, components underlying a series of Managed Fund Shares, or (ii) one or more series of Derivative Securities Products or Index-Linked Securities account for 100% of the equity weight of the portfolio of a series of Managed Fund Shares;
(e) Except as provided in Commentary .01(a), equity securities in the portfolio must be U.S. Component Stocks listed on a national securities exchange and must be NMS Stocks as defined in Rule 600 of Regulation NMS;
(f) American Depositary Receipts (“ADRs”) may be exchange-traded or non-exchange-traded; however, no more than 10% of the equity weight of the portfolio shall consist of non-exchange-traded ADRs.
As set forth in Commentary .01(a)(2) to NYSE Arca Equities Rule 8.600,
(a) Non-U.S. Component Stocks each shall have a minimum market value of at least $100 million;
(b) Non-U.S. Component Stocks each shall have a minimum global monthly trading volume of 250,000 shares, or minimum global notional volume traded per month of $25,000,000, averaged over the last six months;
(c) The most heavily weighted Non-U.S. Component Stock shall not exceed 25% of the equity weight of the portfolio, and, to the extent applicable, the five most heavily weighted Non-U.S. Component Stocks shall not exceed 60% of the equity weight of the portfolio;
(d) Where the equity portion of the portfolio includes Non-U.S. Component Stocks, the equity portion of the portfolio shall include a minimum of 20 component stocks; provided, however, that there shall be no minimum number of component stocks if (i) one or more series of Derivative Securities Products or Index-Linked Securities constitute, at least in part, components underlying a series of Managed Fund Shares, or (ii) one or more series of Derivative Securities Products or Index-Linked Securities account for 100% of the equity weight of the portfolio of a series of Managed Fund Shares; and
(e) Each Non-U.S. Component Stock shall be listed and traded on an exchange that has last-sale reporting.
Commentary .01(b) to NYSE Arca Equities Rule 8.600
The components of the fixed income portion of a portfolio must meet the following criteria initially and on a continuing basis:
(a) Components that in the aggregate account for at least 75% of the fixed income weight of the portfolio each shall have a minimum original principal amount outstanding of $100 million or more;
(b) No component fixed-income security (excluding Treasury Securities and GSE Securities) could represent more than 30% of the fixed income weight of the portfolio, and the five most heavily weighted component fixed income securities in the portfolio (excluding Treasury Securities and GSE Securities) must not in the aggregate account for more than 65% of the fixed income weight of the portfolio;
(c) An underlying portfolio (excluding exempted securities) that includes fixed income securities must include a minimum of 13 non-affiliated issuers; provided, however, that there shall be no minimum number of non-affiliated issuers required for fixed income securities if at least 70% of the weight of the portfolio consists of equity securities as described in Commentary .01(a).
(d) Component securities that in aggregate account for at least 90% of the fixed income weight of the portfolio must be: (i) From issuers that are
(e) Non-agency, non-GSE, and privately-issued mortgage-related and other asset-backed securities components of a portfolio shall not account, in the aggregate, for more than 20% of the weight of the fixed income portion of the portfolio.
Commentary .01(c) to NYSE Arca Equities Rule 8.600
(a) U.S. Government securities, including bills, notes, and bonds differing as to maturity and rates of interest, which are either issued or guaranteed by the U.S. Treasury or by U.S. Government agencies or instrumentalities;
(b) Certificates of deposit issued against funds deposited in a bank or savings and loan association;
(c) Bankers' acceptances, which are short-term credit instruments used to finance commercial transactions;
(d) Repurchase agreements and reverse repurchase agreements;
(e) Bank time deposits, which are monies kept on deposit with banks or savings and loan associations for a stated period of time at a fixed rate of interest;
(f) Commercial paper, which are short-term unsecured promissory notes; and
(g) Money market funds.
Commentary .01(d) to NYSE Arca Equities Rule 8.600
(a) In the aggregate, at least 90% of the weight of holdings invested in futures, exchange-traded options, and listed swaps shall, on both an initial and continuing basis, consist of futures, options, and swaps for which the Exchange may obtain information via the Intermarket Surveillance Group (“ISG”) from other members or affiliates of the ISG or for which the principal market is a market with which the Exchange has a comprehensive surveillance sharing agreement;
(b) The aggregate gross notional value of listed derivatives based on any five or fewer underlying reference assets shall not exceed 65% of the weight of the portfolio (including gross notional exposures), and the aggregate gross notional value of listed derivatives based on any single underlying reference asset shall not exceed 30% of the weight of the portfolio (including gross notional exposures).
Commentary .01(e) to NYSE Arca Equities Rule 8.600
Commentary .01(f) to NYSE Arca Equities Rule 8.600
In addition to the generic listing standards applicable to Managed Fund Shares that satisfy those specific generic criteria, the Exchange also proposes to amend certain other aspects of NYSE Arca Equities Rule 8.600, which governs the listing and trading of all Managed Fund Shares.
As part of the proposed rule change, the Exchange also proposes to amend NYSE Arca Equities Rule 8.600(c) to require that the Web site for all series of Managed Fund Shares, including Managed Fund Shares listed and traded on the Exchange pursuant to Commentary .01 to NYSE Arca Equities Rule 8.600, disclose certain additional information regarding the Disclosed Portfolio. The required information includes the following, to the extent applicable: Ticker symbol; CUSIP or other identifier; a description of the holding; with respect to holdings in derivatives, the identity of the security, commodity, index, or other asset upon which the derivative is based; the strike price for any options; the quantity of each security or other asset held as measured by select metrics (par value, notional value, number of shares,
In addition, the Exchange proposes to amend NYSE Arca Equities Rule 8.600(d) to specify that all Managed Fund Shares must have a stated investment objective, which must be adhered to under normal market conditions.
The Exchange seeks to amend the continued listing requirement in NYSE Arca Equities Rule 8.600(d)(2)(A) by changing the requirement that a Portfolio Indicative Value for Managed Fund Shares be widely disseminated by one or more major market data vendors at least every 15 seconds during the time when the Managed Fund Shares trade on the Exchange to a requirement that the Portfolio Indicative Value be widely disseminated by one or more major market data vendors at least every 15 seconds during the Core Trading Session (as defined in NYSE Arca Equities Rule 7.34).
In support of the proposed rule change, the Exchange represents that:
(1) The Managed Fund Shares will continue to conform to the initial and continued listing criteria under NYSE Arca Equities Rule 8.600.
(2) The Exchange's surveillance procedures are adequate to continue to properly monitor the trading of the Managed Fund Shares in all trading sessions and to deter and detect violations of Exchange rules. Specifically, the Exchange intends to utilize its existing surveillance procedures applicable to derivative products, which will include Managed Fund Shares, to monitor trading in the Managed Fund Shares.
(3) Prior to the commencement of trading of a particular series of Managed Fund Shares, the Exchange will inform its Equity Trading Permit (“ETP”) Holders in a Bulletin of the special characteristics and risks associated with trading the Managed Fund Shares, including procedures for purchases and redemptions of Managed Fund Shares, suitability requirements under NYSE Arca Equities Rule 9.2(a), the risks involved in trading the Managed Fund Shares during the Opening and Late Trading Sessions when an updated Portfolio Indicative Value will not be calculated or publicly disseminated, information regarding the Portfolio Indicative Value and the Disclosed Portfolio, prospectus delivery requirements, and other trading information. In addition, the Bulletin will disclose that the Managed Fund Shares are subject to various fees and expenses, as described in the applicable registration statement, and will discuss any exemptive, no-action, and interpretive relief granted by the Commission from any rules under the Act. Finally, the Bulletin will disclose that the net asset value for the Managed Fund Shares will be calculated after 4:00 p.m. Eastern Time each trading day.
(4) The issuer of a series of Managed Fund Shares will be required to comply with Rule 10A-3 under the Act for the initial and continued listing of Managed Fund Shares, as provided under NYSE Arca Equities Rule 5.3.
(5) The Exchange, on a periodic basis and no less than annually, will review issues of Managed Fund Shares listed pursuant to Commentary .01 to NYSE Arca Equities Rule 8.600 for compliance with NYSE Arca Equities Rule 8.600, and will provide a report to the Regulatory Oversight Committee of the Exchange's Board of Directors regarding the Exchange's findings. In addition, the Exchange will provide the Commission staff with a report each calendar quarter that includes the following information for issues of Managed Fund Shares listed during such calendar quarter under Commentary .01 to NYSE Arca Equities Rule 8.600: (1) Trading symbol and date of listing on the Exchange; (2) the number of active authorized participants and a description of any failure of an issue of Managed Fund Shares listed pursuant to Commentary .01 to NYSE Arca Equities Rule 8.600 or of an authorized participant to deliver shares, cash, or cash and financial instruments in connection with creation or redemption orders; and (3) a description of any failure of an issue of Managed Fund Shares to comply with NYSE Arca Equities Rule 8.600.
(6) Prior to listing pursuant to Commentary .01 to NYSE Arca Equities Rule 8.600, an issuer would be required to represent to the Exchange that it will advise the Exchange of any failure by a series of Managed Fund Shares to comply with the continued listing requirements, and, pursuant to its obligations under Section 19(g)(1) of the Act, the Exchange will monitor for compliance with the continued listing requirements. If a series of Managed Fund Shares is not in compliance with the applicable listing requirements, the Exchange will commence delisting procedures under NYSE Arca Equities Rule 5.5(m).
After careful review, the Commission finds that the Exchange's proposal to amend Commentary .01 to NYSE Arca Equities Rule 8.600 to adopt generic listing standards for Managed Fund Shares and to amend certain other provisions in NYSE Arca Equities Rule 8.600 applicable to the listing and trading of all Managed Fund Shares on the Exchange is consistent with the Act and the rules and regulations thereunder applicable to a national securities exchange.
In support of its proposal, the Exchange states that its proposed requirements for Managed Fund Shares are based in large part on the generic listing criteria currently applicable to Investment Company Units.
Second, the generic listing standards differ slightly from the existing generic standards for Investment Company Units with respect to Non-U.S. Component Stocks. The standards provide that
Third, while the Exchange's existing generic listing standards for index-based ETFs do not apply concentration limits to an index's exposure to specified exchange-traded products (called “Derivative Securities Products”), which have concentration limits or price transparency requirements within their own listing standards, proposed Commentary .01(a) to NYSE Arca Rule 8.600 would also deem portfolio concentration limits not to apply to holdings of specified exchange-traded notes (called “Index-Linked Securities”). The Commission believes that this change should not increase the susceptibility of Managed Fund Shares to manipulation because Index-Linked Securities, like Derivative Securities Products, have asset-exposure concentration limits and requirements promoting price transparency within their own listing standards, and both Derivative Securities Products and Index-Linked Securities are listed and traded on national securities exchanges (which are all members of ISG), publicly provide information about listed Derivative Securities Products and Index-Linked Securities, including price and other information relating to the underlying index or reference asset, as the case may be, and provide trading and price information and other quantitative date for investors and other market participants.
And fourth, under current generic listing standards, index-based ETFs cannot seek inverse returns greater than 300% of the performance of their reference index, and there is no limit on positive leverage versus an index. By contrast, the proposed standards would impose an absolute cap—25%—on the amount of an ETF's portfolio that could be invested in leveraged or inverse-leveraged exchange-traded products. The Commission believes that a limitation on the overall use of leveraged exchange-traded products is consistent with Section 6(b)(5) of the Act because it will limit the extent to which the performance of a generically listed, actively managed ETF can be tied to a product whose performance over periods of longer than one day can differ significantly from its stated daily performance objective.
The Commission believes that, taken together, the requirements for the fixed income portion of the portfolio are reasonably designed to ensure that a substantial portion of the portfolio consists of fixed income securities for which information is publicly available, and, when applied in conjunction with the other applicable listing requirements, will permit the listing and trading only of Managed Fund Shares that are sufficiently broad-based to
With respect to listed derivatives under Commentary .01(d) to NYSE Arca Equities Rule 8.600, the generic criterion allows a generically listed ETF to use listed derivatives to achieve 100% of its portfolio exposure, provided that, in the aggregate, at least 90% of the weight of the holdings in futures, exchange-traded options, and listed swaps consists of futures, options, and swaps for which (1) the Exchange may obtain information from other ISG members or affiliate members, or (2) the principal market is a market with which the Exchange has a comprehensive surveillance sharing agreement.
With respect to OTC derivatives, Commentary .01(e) to NYSE Arca Equities Rule 8.600 permits the portfolio to include OTC derivatives, but would limit the amount of these derivatives to 20% of the fund's assets in the portfolio, thereby ensuring that the preponderance of a fund's investments would not be in derivatives that are not listed and centrally cleared. The Commission believes that this limitation is sufficient to mitigate the risks associated with price manipulation because at least 80% of a Managed Fund Shares portfolio would consist of: Cash and cash equivalents; listed derivatives, of which 90% by portfolio weight would be traded on a principal market that is a member of ISG; and equity securities or fixed income instruments subject to numerous restrictions designed to prevent manipulation and ensure pricing transparency. The Commission notes that, for purposes of calculating this 20% limitation on OTC derivatives holdings, a portfolio's investment in OTC derivatives will be calculated as the aggregate gross notional value of the OTC derivatives.
The Commission further notes that, in addition to the listing criteria described above for specific underlying asset classes, the Exchange has committed to conduct an ongoing compliance review of the ETFs that are generically listed as Managed Fund Shares. Specifically, the Exchange has represented that, no less than annually, it will review the Managed Fund Shares generically listed and traded on the Exchange under NYSE Arca Equities Rule 8.600 for compliance with that rule and will provide a report to its Regulatory Oversight Committee presenting the findings of its review. The Exchange has also committed to provide, on a quarterly basis, a report to the Commission staff that contains, for each ETF whose shares are generically listed and traded under Commentary .01 to NYSE Arca Equities Rule 8.600: (a) The symbol and date of listing; (b) the number of active authorized participants and a description of any failure by either a fund or an authorized participant to deliver promised baskets of shares, cash, or cash and instruments in connection with creation or redemption orders; and (c) a description of any failure by an ETF to comply with NYSE Arca Equities Rule 8.600.
The Commission also notes that, prior to listing pursuant to Commentary .01 to NYSE Arca Equities Rule 8.600, an issuer would be required to represent to the Exchange that it will advise the Exchange of any failure by a series of Managed Fund Shares to comply with the continued listing requirements, and, pursuant to its obligations under Section 19(g)(1) of the Act, the Exchange will monitor for compliance with the continued listing requirements.
The Commission believes that the Managed Fund Shares generic listing criteria, taken together, should promote the listing only of Managed Fund Shares that are not susceptible to manipulation. Additionally, the generic listing standards as a whole should ensure that the underlying portfolios are composed predominantly of securities and instruments for which available intra-day values allow market participants to identify and capitalize upon arbitrage opportunities, which in turn should help keep the intra-day prices of generically listed Managed Fund Shares reasonably aligned with the intra-day values of their underlying assets.
For the reasons discussed above, the Commission finds that the generic listing standards for Managed Fund Shares are consistent with Section 6(b)(5) of the Act.
In addition, the Exchange amends certain requirements of NYSE Arca Equities Rule 8.600 that apply to
The Exchange also amends the continued listing requirement in NYSE Arca Equities Rule 8.600(d)(2)(A), which is applicable to all Managed Fund Shares, to require dissemination of the Portfolio Indicative Value at least every 15 seconds during the Core Trading Session, as defined in NYSE Arca Equities Rule 7.34. The Commission believes that this requirement is consistent with the intraday indicative value dissemination requirement for Investment Company Units,
Finally, the Exchange adds as an initial listing criterion applicable to all Managed Fund Shares (including those that are generically listed) the requirement that Managed Fund Shares must have a stated investment objective, which shall be adhered to under “Normal Market Conditions,” defined as circumstances including, but not limited to, the absence of: Trading halts in the applicable financial markets generally; operational issues causing dissemination of inaccurate market information or systems failure; or
For the foregoing reasons, the Commission finds that the proposed rule change, as modified by Amendment No. 7 thereto, is consistent with Section 6(b)(5) of the Act
For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.
Pursuant to Section 19(b)(1)
The Exchange proposes to amend the NYSE Arca Options Fee Schedule (the “Options Fee Schedule”) and, through its wholly owned subsidiary NYSE Arca Equities, Inc. (“NYSE Arca Equities”), the NYSE Arca Equities Schedule of Fees and Charges for Exchange Services (the “Equities Fee Schedule” and, together with the Options Fee Schedule, the “Fee Schedules”) to add additional wireless connections and update or remove obsolete text. The proposed rule change is available on the Exchange's Web site at
In its filing with the Commission, the self-regulatory organization included statements concerning the purpose of, and basis for, the proposed rule change and discussed any comments it received on the proposed rule change. The text of those statements may be examined at the places specified in Item IV below. The Exchange has prepared summaries, set forth in sections A, B, and C below, of the most significant parts of such statements.
The Exchange's co-location
More specifically, the Exchange proposes to amend the connections to BZX and EDGX as follows:
• The wireless connection to BZX data would also include Bats Pitch BYX Gig shaped data (“BYX”), and
• the wireless connection to EDGX data would also include Bats EDGA Gig shaped data (“EDGA”).
The related fees would not change.
Any User that presently has a wireless connection to BZX or EDGX data would also receive BYX or EDGA data, respectively, upon effectiveness of the proposed change. Such User would not be required to pay a second non-recurring initial charge.
In addition, the Exchange proposes to add a seventh Third Party Data feed, which would include NASDAQ TotalView Ultra (FPGA) and BX TotalView-ITCH data (“FPGA and TotalView-ITCH”). Both such data feeds are currently offered separately. For each wireless connection to FPGA and TotalView-ITCH, a User would be charged a $5,000 non-recurring initial charge and a monthly recurring charge (“MRC”) of $14,500.
Any User that presently has a wireless connection to the separate FPGA and TotalView-ITCH feeds would become subject to the $14,500 MRC upon effectiveness of the proposed change. Such User would not be required to pay another non-recurring initial charge.
The Exchange accordingly proposes to revise the Fee Schedules to include the following:
As with all the Third Party Data, the Exchange would utilize a network vendor to provide a wireless connection to BZX and BYX, EDGX and EDGA or FPGA and TotalView-ITCH data (together, the “Additional Third Party Data”) through wireless connections from an Exchange access center to its data center in Mahwah, New Jersey, through a series of towers equipped with wireless equipment. A User that wished to receive Additional Third Party Data would enter into a contract with the relevant third party provider, which would charge the User the applicable market data fees. The Exchange would charge the User fees for the wireless connection.
As with the previously approved wireless connections to Third Party Data, if a User purchases two wireless connections to Additional Third Party Data, it pays two non-recurring initial charges. Wireless connections include the use of one port for connectivity to Third Party Data.
The Exchange proposes to offer the wireless connections to provide Users with an alternative means of connectivity to Additional Third Party
The proposed connectivity to the FPGA and TotalView-ITCH data feeds would be available upon effectiveness. The proposed connectivity to the BZX and BYX or EDGX and EDGA data feeds is expected to be available no later than September 1, 2016. The Exchange will announce the date that the wireless connections will be made available through a customer notice.
In addition, the Exchange proposes to replace the existing references to “DirectEdge” and “BATS” in the Fee Schedules with references to “Bats” in order to reflect the recent name changes of BATS Exchange, Inc. and EDGX Exchange, Inc. to Bats BZX Exchange, Inc. and Bats EDGX Exchange, Inc., respectively.
Finally, the Exchange proposes to delete statements in the Fee Schedules that say that the wireless connections for Third Party Data are expected to be available no later than March 1, 2016, as such statements are obsolete. This proposed change would have no impact on pricing.
As is the case with all Exchange co-location arrangements, (i) neither a User nor any of the User's customers would be permitted to submit orders directly to the Exchange unless such User or customer is a member organization, a Sponsored Participant or an agent thereof (
The proposed change is not otherwise intended to address any other issues relating to co-location services and/or related fees, and the Exchange is not aware of any problems that Users would have in complying with the proposed change.
The Exchange believes that the proposed rule change is consistent with Section 6(b) of the Act,
The Exchange believes that the proposed service is not designed to permit unfair discrimination between customers, issuers, brokers, or dealers because the proposed changes would provide Users with an alternative means of connectivity to the Additional Third Party Data. Users that do not opt to utilize the Exchange's proposed wireless connections would still be able to obtain the Additional Third Party Data through other methods, including, for example, from wireless networks offered by third party vendors, another User, through a telecommunications provider, or over the IP network. Users that opt to use wireless connections to Additional Third Party Data would receive the Additional Third Party Data that is available to all Users, as all market participants that contract with the relevant third party market for the Additional Third Party Data may receive it.
The Exchange believes that this removes impediments to, and perfects the mechanisms of, a free and open market and a national market system and, in general, protects investors and the public interest because it would provide Users with choices with respect to the form and optimal latency of the connectivity they use to receive Additional Third Party Data, allowing a User that opts to receive such Additional Third Party Data to select the connectivity and number of ports that better suit its needs, helping it tailor its data center operations to the requirements of its business operations.
The Exchange believes that the proposed change is equitable and not unfairly discriminatory because it will result in fees being charged only to Users that voluntarily select to receive the corresponding services and because those services will be available to all Users. Furthermore, the Exchange believes that the services and fees proposed herein are not unfairly discriminatory and are equitably allocated because, in addition to the services being completely voluntary, they are available to all Users on an equal basis (
Overall, the Exchange believes that the proposed change is reasonable because the Exchange proposes to offer the wireless connections to described herein as a convenience to Users, but in doing so would incur certain costs, including costs related to the data center facility, hardware and equipment and costs related to personnel required for initial installation and monitoring, support and maintenance of such services. The costs associated with the wireless connections are incrementally higher than fiber optics-based solutions due to the expense of the wireless equipment, cost of installation and
The Exchange believes that it is reasonable not to charge a User a second non-recurring initial charge if it has a wireless connection to BZX or EDGX data as of the date of effectiveness of the proposed change, because such User would have already paid a non-recurring initial charge for the wireless connection to BZX or EDGX data that it already has. The Exchange believes that it is reasonable that a User that presently has a wireless connection to the separate FPGA and TotalView-ITCH feeds would become subject to the $14,500 MRC upon effectiveness of the proposed change, because such User would have the same service as a User that obtained wireless connectivity to the FPGA and TotalView-ITCH feeds after effectiveness. Similarly, the Exchange believes that it is reasonable that such a User would not be required to pay another non-recurring initial charge, because such User would have already paid non-recurring initial charges for the two wireless connections that it already has.
The Exchange believes that it is reasonable that a User that has already purchased wireless connections to other Third Party Data would be charged a non-recurring initial charge when it purchases a wireless connection to Additional Third Party Data, because the Exchange would incur certain costs in installing the wireless connection to such Third Party Data irrespective of whether the User had existing wireless connections to other Third Party Data. Such costs related to initial installation include, in particular, costs related to personnel required for initial installation and testing. The costs associated with installing wireless connections are incrementally higher than those associated with installing fiber optics-based solutions.
The Exchange believes that the proposed pricing is reasonable because it allows Users to select the Additional Third Party Data connectivity option that better suits their needs. The fees also reflect the benefit received by Users in terms of lower latency over the fiber optics option. For competitive reasons, the Exchange has opted not to change the existing fees for the BZX and EDGX Third Party Data feeds. Accordingly, Users that already receive the BZX or EDGX Third Party Data feed will receive an additional feed at no incremental cost.
The Exchange believes that the proposed waiver of the first month's MRC is reasonable as it would allow Users to test the receipt of the feed for a month before incurring any monthly recurring fees and may act as an incentive to Users to connect to Additional Third Party Data.
Moreover, the Exchange believes that the proposed fees are equitably allocated and not unfairly discriminatory because the wireless connections to Additional Third Party Data would provide Users with an alternative means of connectivity to such feeds. Users that do not opt to utilize the Exchange's proposed wireless connections would still be able to obtain Additional Third Party Data through other methods, including, for example, from wireless networks offered by third party vendors, another User, through a telecommunications provider, or over the IP network. Users that opt to use wireless connections for Additional Third Party Data would receive the Additional Third Party Data that is available to all Users, as all market participants that contract with the relevant third party market for the Additional Third Party Data may receive it.
The Exchange believes that deleting statements in the Fee Schedules that say that the wireless connections for Third Party Data are expected to be available no later than March 1, 2016, is reasonable, equitable and not unfairly discriminatory because the reference is obsolete and no longer has an impact on pricing. The Exchange also believes that replacing the existing references to “DirectEdge” and “BATS” in the Fee Schedules with references to “Bats” is reasonable, equitable and not unfairly discriminatory, because it will reflect the recent name changes of BATS Exchange, Inc. and EDGX Exchange, Inc. to Bats BZX Exchange, Inc. and Bats EDGX Exchange, Inc., respectively. The proposed changes would result in the removal or update of obsolete text from the Fee Schedules and therefore add greater clarity to the Fee Schedules regarding the services offered and the applicable fees.
For the reasons above, the proposed changes do not unfairly discriminate between or among market participants that are otherwise capable of satisfying any applicable co-location fees, requirements, terms and conditions established from time to time by the Exchange.
Finally, the Exchange believes that it is subject to significant competitive forces, as described below in the Exchange's statement regarding the burden on competition.
For these reasons, the Exchange believes that the proposed fees are reasonable, equitable, and not unfairly discriminatory.
In accordance with Section 6(b)(8) of the Act,
The Exchange believes that the proposed rule changes will not impose any burden on competition that is not necessary or appropriate in furtherance of the purposes of the Act because such access will provide Users with wireless connectivity to additional Third Party Data feeds. Currently, Users can receive Additional Third Party Data from wireless networks offered by third party vendors. Based on the information available to it, the Exchange believes that its proposed wireless connection would provide data at the same or similar speed and at the same or similar cost as the other wireless networks. Accordingly, the proposed wireless connections to Additional Third Party Data would provide Users with an additional wireless connectivity option, thereby enhancing competition.
The Exchange notes that the proposed wireless connections to Additional Third Party Data would compete not just with other wireless connections to such Additional Third Party Data, but also with fiber optic network connections to Additional Third Party Data, which may be more attractive to some Users as they are more reliable and less susceptible to weather conditions. Users that do not opt to utilize wireless connections would be able to obtain Additional Third Party Data through other methods, including, for example, from another User, through a telecommunications provider, or over the IP network. In this way, the proposed changes would enhance competition by helping Users tailor their connectivity to Additional Third Party Data to the needs of their business operations by allowing them to select the form and optimal latency of the connectivity they use to receive such Additional Third Party Data that best suits their needs, helping them tailor their data center operations to the requirements of their business operations.
The proposed wireless connections to Additional Third Party Data would traverse wireless connections through a
Finally, the Exchange notes that it operates in a highly competitive market in which market participants can readily favor competing venues if they deem fee levels at a particular venue to be excessive. In such an environment, the Exchange must continually review, and consider adjusting, its services and related fees and credits to remain competitive with other exchanges. For the reasons described above, the Exchange believes that the proposed rule change reflects this competitive environment.
No written comments were solicited or received with respect to the proposed rule change.
Because the foregoing proposed rule change does not: (i) Significantly affect the protection of investors or the public interest; (ii) impose any significant burden on competition; and (iii) become operative for 30 days from the date on which it was filed, or such shorter time as the Commission may designate, it has become effective pursuant to Section 19(b)(3)(A)(iii) of the Act
The Exchange has asked the Commission to waive the 30-day operative delay so that the proposal may become operative immediately upon filing. The Commission believes that waiver of the operative delay is consistent with the protection of investors and the public interest because such waiver will allow Users that elect to receive wireless connections to both NASDAQ Totalview Ultra (FPGA) and BX Totalview-ITCH data to do so without delay at a reduced fee through the new bundle price. The Commission has therefore determined to waive the 30-day operative delay and designate the proposed rule change as operative upon filing with the Commission.
At any time within 60 days of the filing of such proposed rule change, the Commission summarily may temporarily suspend such rule change if it appears to the Commission that such action is necessary or appropriate in the public interest, for the protection of investors, or otherwise in furtherance of the purposes of the Act. If the Commission takes such action, the Commission shall institute proceedings under Section 19(b)(2)(B) of the Act
Interested persons are invited to submit written data, views, and arguments concerning the foregoing, including whether the proposed rule change is consistent with the Act. Comments may be submitted by any of the following methods:
• Use the Commission's Internet comment form (
• Send an email to
• Send paper comments in triplicate to Brent J. Fields, Secretary, Securities and Exchange Commission, 100 F Street NE., Washington, DC 20549-1090.
For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.
On April 4, 2016, NYSE Arca, Inc. (the “Exchange” or “NYSE Arca”) filed with the Securities and Exchange Commission (“Commission”), pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 (“Act”)
In response to the Comment Letters, the NYSE submitted a response (“Response Letter”) and filed Amendment No. 2 to the NYSE companion filing. As they are relevant to the instant filing, the Comment Letters and Response Letter on the NYSE companion filing are discussed below.
The Commission is publishing this order to solicit comments on Amendment No. 2 from interested persons and to institute proceedings pursuant to Exchange Act Section 19(b)(2)(B) to determine whether to approve or disapprove the proposed rule change, as modified by Amendment Nos. 1 and 2.
The Exchange proposes to establish certain fees relating to end users. Specifically, the Exchange proposes to amend the co-location section of the NYSE Arca Equities Schedule of Fees and Charges for Exchange Services and the NYSE Arca Options Fee Schedule (collectively “Fee Schedules”) to (i) add the newly defined terms “Rebroadcasting User” and “Multicast End User;” as well as “Transmittal User” and “Unicast End User;” (ii) amend the definition of Affiliate; (iii) establish new reporting requirements applicable to Rebroadcasting Users and Transmittal Users; (iv) establish new fees applicable to Rebroadcasting Users and Transmittal Users; and (v) make certain related technical changes.
The Exchange operates a data center in Mahwah, New Jersey (“data center”) from which it provides co-location services to Users.
The Exchange proposes to add several new definitions to the Fee Schedules. The Exchange proposes to define a “Rebroadcasting User” as “a User that rebroadcasts to its customers data received from the Exchange in multicast format, unless such User normalizes the raw market data before sending it to its customers.”
In addition, as originally proposed, the Exchange would assess a
According to the Exchange, customers use unicast format to send messages related to orders or for clearing purposes.
As originally proposed, the Exchange would assess a Transmittal User with one or two connections, either directly or through another Unicast End User, to a Unicast End User, a $1,500 monthly charge for the first two connections,
The Exchange also proposes that the terms Multicast End User and Unicast End User would exclude an entity that is an Affiliate of its Rebroadcasting User or Transmittal User, respectively.
In its filing, the Exchange states that the proposed fees relate to additional connectivity and co-location services the Exchange provides to Rebroadcasting and Transmittal Users and would “fairly and equitably allocate the costs associated with maintaining the Data Center facility, hardware and equipment and related to personnel required for installation and ongoing monitoring, support and maintenance of such service among all Users.”
The Exchange represents that it incurs more costs on the account of Rebroadcasting and Transmittal Users;
As noted, the Commission received two comment letters on the NYSE companion filing, which are likewise applicable to this filing.
In the Response Letter, the NYSE states that the Comment Letters have “not provided any credible argument why the [. . .] proposal is not consistent with the requirements of the Act.”
In Amendment No. 2, the Exchange offers additional justification for the proposed rule change. In Amendment No. 2, the Exchange proposes that a Rebroadcasting User not be charged a fee for its first two Multicast End Users, and similarly that a Transmittal User not be charged a fee for its first two Unicast End Users.
The Exchange adds that it believes that Rebroadcasting Users that have only one or two Multicast End Users are an exception to the general statement that the Exchange has a greater administrative burden and incurs greater operational costs to support Rebroadcasting Users.
The Commission is instituting proceedings pursuant to Section 19(b)(2)(B) of the Act
Pursuant to Section 19(b)(2)(B) of the Act, the Commission is providing notice of the following grounds for disapproval that are under consideration:
• Section 6(b)(4) of the Act, which requires that the rules of a national securities exchange “provide for the equitable allocation of reasonable dues, fees, and other charges among its members and issuers and other persons using its facilities,”
• Section 6(b)(5) of the Act, which requires, among other things, that the rules of a national securities exchange be “designed to perfect the operation of a free and open market and a national market system” and “protect investors and the public interest,” and not be “designed to permit unfair discrimination between customers, issuers, brokers, or dealers,”
• Section 6(b)(8) of the Act, which requires that the rules of a national securities exchange “not impose any burden on competition not necessary or appropriate in furtherance of the purposes of [the Act].”
As discussed above, the Exchange states that the proposed end user fees applicable to Rebroadcasting Users and Transmittal Users would “fairly and equitably allocate the costs associated with maintaining the Data Center facility, hardware and equipment and related to personnel required for installation and ongoing monitoring, support and maintenance of such service among all Users.”
Furthermore, the proposed fees would not apply to all end users of Rebroadcasting Users and Transmittal Users. For example, they would not apply to end users that are Affiliates of a Rebroadcasting User or a Transmittal User. While the Exchange asserts that “[i]n its experience, entities that are Affiliates typically act as one entity, with one infrastructure, one administration, and one network support group,” so that “the Exchange is effectively supporting one entity, irrespective of how many Affiliate end users are involved,”
Finally, the Commission is concerned that the Exchange has not demonstrated that its proposal does not impose an unnecessary or inappropriate burden on competition. The Exchange asserts that it meets this statutory standard because “it operates in a highly-competitive market in which market participants can readily favor competing venues if, for example, they deem fee levels at a particular venue to be excessive or if they determine that another venue's products and services are more competitive than on the Exchange.”
For all of the foregoing reasons, the Commission believes that questions are raised as to whether the proposed fees are consistent with the Act, and specifically, with its requirements that exchange fees be reasonable and equitably allocated; be designed to perfect the mechanism of a free and open market and the national market system, protect investors and the public interest, and not be unfairly discriminatory; and not impose an unnecessary or inappropriate burden on competition.
The Commission requests that interested persons provide written submissions of their views, data and arguments with respect to the concerns identified above, as well as any other concerns they may have with the proposed rule change, as modified by Amendment Nos. 1 and 2. In particular, the Commission invites the written views of interested persons concerning whether the proposal, as modified by
Interested persons are invited to submit written data, views, and arguments regarding whether the proposal, as modified by Amendment Nos. 1 and 2, should be approved or disapproved by August 17, 2016. Any person who wishes to file a rebuttal to any other person's submission must file that rebuttal by August 31, 2016. In light of the concerns raised by the proposed rule change, as discussed above, the Commission invites additional comment on the proposed rule change, as modified by Amendment Nos. 1 and 2, as the Commission continues its analysis of the proposed rule change's consistency with Sections 6(b)(4), (5) and (8),
Comments may be submitted by any of the following methods:
• Use the Commission's Internet comment form (
• Send an email to
• Send paper comments in triplicate to Brent J. Fields, Secretary, Securities and Exchange Commission, 100 F Street NE., Washington, DC 20549-1090.
For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.
Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 (the “Act”),
The Exchange is filing with the Securities and Exchange Commission (“Commission”) a proposed rule change to amend the Fee Schedule to make changes to Section I (Exchange Fees for Non-Auction Transactions) on the BOX Market LLC (“BOX”) options facility. The text of the proposed rule change is available from the principal office of the Exchange, at the Commission's Public Reference Room and also on the Exchange's Internet Web site at
In its filing with the Commission, the Exchange included statements concerning the purpose of and basis for the proposed rule change and discussed any comments it received on the proposed rule change. The text of these statements may be examined at the places specified in Item IV below. The Exchange has prepared summaries, set forth in Sections A, B, and C below, of the most significant aspects of such statements.
The Exchange proposes to make changes to Section I (Exchange Fees for Non-Auction Transactions).
The Exchange proposes to adjust certain fees for Non-Auction Transactions. Currently, for all non-auction transactions, fees and credits are assessed depending upon three factors: (i) The account type of the Participant submitting the order; (ii) whether the Participant is a liquidity provider or liquidity taker; and (iii) the account type of the contra party. Non-Auction Transactions in Penny Pilot Classes are assessed different fees or credits than Non-Auction Transactions in Non-Penny Pilot Classes.
The current fees for Non-Auction Transactions are:
First, the Exchange proposes to raise the fees assessed for Public Customers that make or take liquidity against all account types in in both Penny and Non-Penny Classes to $0.05 from $0.00.
Next, the Exchange proposes to adjust the fees assessed for Professional Customers and Broker Dealers. In Penny Pilot Classes, the Exchange proposes to adjust the fees assessed for Professional Customers and Broker Dealers that take liquidity from all other Participants. Specifically, the Exchange proposes to lower the fee assessed to Professional Customers and Broker Dealers that take liquidity from Public Customers to $0.45 from $0.50. Further, the Exchange proposes to increase the fees assessed to Professional Customers and Broker Dealers that take liquidity from Professional Customers/Broker Dealers and Market Makers to $0.45 from $0.40 and $0.44, respectively. Additionally, the Exchange proposes to lower the fees assessed for Professional Customers and Broker Dealers making liquidity against Professional Customers and Broker Dealers and Market Makers in Penny Pilot Classes to $0.05 from $0.25. For Non-Penny Pilot Classes, the Exchange proposes to reduce the fees assessed for Professional Customers and Broker Dealers making liquidity against Non-Public Customers to $0.05 from $0.35. The Exchange also proposes to decrease the fees assessed for Professional Customers and Broker Dealers taking liquidity from Public Customers to $0.85 from $1.07. Lastly, with regard to Professional Customers/Broker Dealers taking liquidity from Professional Customers/Broker Dealers and Market Makers in Non-Penny Pilot Classes, the Exchange proposes to increase the fees assessed to $0.60 from $0.40 and $0.44, respectively.
The Exchange then proposes to adjust the fees assessed for Market Makers in Non-Auction Transactions. First, the Exchange proposes to decrease the fees assessed on Market Makers making liquidity against a Public Customer to $0.27 from $0.51. With regard to Market Makers taking liquidity against Public Customers in Penny Pilot Classes, the Exchange proposes to decrease the fee to $0.43 from $0.50. Further, the Exchange proposes to increase the fee for Market Makers taking liquidity against Professional Customers and Broker Dealers in Penny Pilot Classes to $0.29 from $0.05. Lastly, the Exchange proposes to adjust the fees assessed to Market Makers in Non-Penny Pilot Classes. Specifically, the Exchange proposes to decrease the fee assessed to a Market Maker when making liquidity from a Public Customer in Non-Penny Pilot Classes to $0.65 from $0.85. In Non-Penny Pilot Classes, the Exchange proposes to decrease the fee assessed to Market Makers taking liquidity from a Public Customer to $0.80 from $1.03. Lastly, the Exchange proposes to increase the fees assessed to Market Makers taking liquidity from Professional Customers/Broker Dealers and Market Makers in Non-Penny Pilot Classes, to $0.40 from $0.10 and $0.29, respectively.
The fees for Non-Auction Transactions will be as follows:
The Exchange proposes to amend Section I.A.1. of the BOX Fee Schedule, Tiered Volume Rebate for Non-Auction Transactions. Specifically, the Exchange proposes to specify that transactions in which a Public Customer is a contra party will be considered exempt from the Tiered Volume Rebate for Market Makers in Non-Auction Transactions.
The Exchange also proposes to adjust the rebates in the Tiered Volume Rebate for Public Customers in Non Auction Transactions. The current Tiered Volume Rebate for Public Customers in Non-Auction Transactions is as follows:
Specifically, the Exchange proposes to reduce each of the maker and taker rebates in Tiers 2 through 4 of the Tiered Volume Rebate structure for Public Customers in both Penny Pilot Classes and Non-Penny Pilot Classes. The new per contract rebate for Public Customers in Non-Auction Transactions as set forth in Section I.A.1. of the BOX Fee Schedule will be as follows:
The Exchange believes that the proposal is consistent with the requirements of Section 6(b) of the Act, in general, and Section 6(b)(4) and 6(b)(5)of the Act,
The Exchange believes it is equitable, reasonable and not unfairly discriminatory to assess fees according to the account type of the Participant originating the order and the contra party. This fee structure has been in place on the Exchange since 2014 and the Exchange is simply adjusting certain fees within the structure.
The Exchange believes raising the non-auction transaction fees for Public Customers making or taking liquidity in Penny and Non-Penny Pilot Classes to $0.05 from $0.00 is reasonable, equitable and not unfairly discriminatory. While the Exchange proposes to slightly raise the fees assessed to Public Customers for Non-Auction Transactions, the Public Customers may still receive the benefit of a volume based rebate, which in turn could offset the proposed $0.05 fee.
The Exchange believes that the proposed fees for Professional
The Exchange believes that charging Professional Customers and Broker Dealers higher fees than Public Customers for most of their Non-Auction Transactions is equitable and not unfairly discriminatory. Professional Customers, while Public Customers by virtue of not being Broker Dealers, generally engage in trading activity more similar to Broker Dealer proprietary trading accounts. The Exchange believes that the higher level of trading activity from these Participants will draw a greater amount of BOX system resources, which the Exchange aims to recover its costs by assessing Professional Customers and Broker Dealers higher fees for transactions.
The Exchange notes that Professional Customers or Broker Dealers will now be charged the same rate as Public Customers when making liquidity against Professional Customers, Broker Dealers, and Market Makers in both Penny and Non-Penny Pilot Classes. The Exchange believes it is equitable and not unfairly discriminatory to assess the same low rate for these transactions on both Public Customers and Professional Customers/Broker Dealers to promote liquidity on the Exchange, ultimately benefitting all Participants trading on BOX. Further, the Exchange notes that Public Customers have the ability to achieve a rebate for their Non-Auction transactions, and Professional Customer or Broker Dealers do not.
The Exchange believes that the proposed fees for Market Makers in Non-Auction Transactions are reasonable. With the proposed fee changes, a Market Maker making liquidity will now be charged a lower fee of $0.27 (Penny Pilot) and $0.65 (Non-Penny Pilot) for interacting with a Public Customer. Further, a Market Maker taking liquidity against a Public Customer will now be charged a lower fee of $0.43 in Penny Pilot Classes and a lower fee of $0.80 in Non-Penny Pilot Classes. If a Market Maker is taking liquidity in Penny and Non-Penny Pilot Classes and interacts with a Professional Customer, Broker Dealer or a Market Maker, they will now be charged a fee of $0.29 in Penny Pilot Classes and $0.40 in Non-Penny Pilot Classes. The Exchange believes the fees listed above are reasonable and appropriate as they are in line with what is currently charged by the industry.
Further, the Exchange believes it is equitable and not unfairly discriminatory to charge the Market Maker less for making or taking liquidity than Professional Customers or Broker Dealers. Specifically, Market Makers have certain obligations that other Participants do not and can ultimately provide more value by directing liquidity to the Exchange, which the Exchange believes will benefit all Participants trading on BOX.
Additionally, the Exchange believes that charging Market Makers who interact with Professional Customers/Broker Dealers and Market Makers in Penny and Non-Penny Pilot Classes less than Public Customers is reasonable. As discussed above, Market Makers have certain obligations that Public Customers do not and can provide value by directing more liquidity to the Exchange. The Exchange believes that charging Market Makers no fee for adding liquidity against Professional Customers, Broker Dealers and Market Makers will promote liquidity on the Exchange, ultimately benefitting all market participants. Further, the Exchange believes that charging Market Makers less than Public Customers when adding liquidity is reasonable, as other exchanges in the industry also treat Market Makers more favorably than a Public Customer for adding liquidity.
The Exchange believes it is reasonable, equitable and not unfairly discriminatory for Professional Customers, Broker Dealers and Market Makers to be charged higher fees when interacting with Public Customers than interacting with other Participants on BOX. The Exchange believes they are reasonable as they are in a similar range with the fees in the options industry.
The Exchange believes it is reasonable, equitable and not unfairly discriminatory that Professional Customers, Broker Dealers and Market Makers be charged a higher fee for certain orders removing liquidity, when compared to the fee they receive for orders that add liquidity. Charging a lower fee for orders that add liquidity will promote liquidity on the Exchange and ultimately benefit all participants on BOX. Further, the concept of incentivizing orders that add liquidity over orders that remove liquidity is commonly accepted within the industry as part of the “Make/Take” liquidity model.
Finally, the Exchange also believes it is reasonable to charge Professional Customers and Broker Dealers and Market Makers less for certain
BOX believes it is reasonable, equitable and not unfairly discriminatory to adjust certain rebates in the volume based thresholds for Market Makers and Public Customers in all Non-Auction Transactions. The volume thresholds and applicable rebates are meant to incentivize Public Customers and Market Makers to direct order flow to the Exchange to obtain the benefit of the rebate, which will in turn benefit all market participants by increasing liquidity on the Exchange. Other exchanges employ similar incentive programs;
With regard to the Public Customer Tiered Volume Rebate for Non-Auction Transactions, the Exchange believes it is reasonable to offer a higher per contract rebate for transactions in Non-Penny Pilot Classes compared to Penny Pilot Classes because Non-Penny Pilot Classes are typically less actively traded and have wider spreads. The Exchange believes that offering a higher rebate will incentivize Public Customer order flow in Non-Penny Pilot issues on the Exchange, ultimately benefitting all Participants trading on BOX.
The Exchange believes it is reasonable to increase the rebates in Tiers 3 and 4 of the Tiered Volume Rebate for Market Makers making liquidity in Non-Auction Transactions. The rebates are meant to incentivize Market Makers to direct order flow to the Exchange to obtain the benefit of the rebate, which will in turn benefit all market participants by increasing liquidity on the Exchange.
The Exchange continues to believe it is equitable and not unfairly discriminatory to only have these rebate structures for Public Customers and Market Makers in Non-Auction transactions. The practice of incentivizing increased Public Customer and Market Maker order flow is common in the options markets. While the Exchange proposes to decrease the Public Customer rebates in Penny and Non-Penny Pilot Classes, the Exchange believes that Public Customers will still benefit from the opportunity to obtain a rebate. As discussed above, most Public Customers currently achieve a volume based rebate in their Non-Auction transactions, which will offset any exchange fees they are assessed in Section I.A of the BOX Fee Schedule. Additionally, the Exchange believes that Market Makers can provide high volumes of liquidity and lowering certain Market Maker Non-Auction Transaction fees and raising certain maker rebates in the Tiered Volume Rebates for Market Makers in Non-Auction Transactions will potentially help attract a higher level of Market Maker order flow and create liquidity, which the Exchange believes will ultimately benefit all Participants trading on BOX.
Lastly, the Exchange believes that exempting transactions where a Public Customer is a contra party from the Market Maker Tiered Volume Rebate is reasonable, equitable and not unfairly discriminatory. BOX provides these volume based rebates to incentivize Market Makers to direct order flow to the Exchange to obtain the benefit of the rebate, which will in turn benefit all market participants by increasing liquidity on the Exchange. The Exchange believes by providing a rebate to transactions that do not have a Public Customer as the contra party will further encourage Market Makers to quote. Further, the Exchange believes that Public Customer interaction does not need further encouragement within the BOX fee schedule.
The Exchange does not believe that the proposed rule change will impose any burden on competition not necessary or appropriate in furtherance of the purposes of the Act.
The Exchange believes that the proposed adjustments to fees in the Non-Auction Transactions fee structure will not impose a burden on competition among various Exchange Participants. Rather, BOX believes that the changes will result in the Participants being charged appropriately for these transactions and are designed to enhance competition in Non-Auction transactions on BOX. Submitting an order is entirely voluntary and Participants can determine which type of order they wish to submit, if any, to the Exchange. Further, the Exchange believes that this proposal will enhance competition between exchanges because it is designed to allow the Exchange to better compete with other exchanges for order flow.
The Exchange believes that amending the proposed rebate structure for Customer and Market Maker Non-Auction Transactions will not impose a burden on competition among various Exchange Participants. The Exchange believes that the proposed changes will result in Customers and Market Makers being rebated appropriately for these transactions. Further, the Exchange believes that this proposal will enhance competition between exchanges because it is designed to allow the Exchange to better compete with other exchanges for order flow.
Finally, the Exchange notes that it operates in a highly competitive market in which market participants can readily favor competing exchanges. In such an environment, the Exchange must continually review, and consider adjusting, its fees and credits to remain competitive with other exchanges. For the reasons described above, the Exchange believes that the proposed rule change reflects this competitive environment.
No written comments were either solicited or received.
The foregoing rule change has become effective pursuant to Section 19(b)(3)(A)(ii) of the Exchange Act
At any time within 60 days of the filing of the proposed rule change, the Commission summarily may temporarily suspend the rule change if it appears to the Commission that the action is necessary or appropriate in the public interest, for the protection of investors, or would otherwise further the purposes of the Act. If the Commission takes such action, the Commission shall institute proceedings to determine whether the proposed rule should be approved or disapproved.
Interested persons are invited to submit written data, views, and arguments concerning the foregoing, including whether the proposed rule change is consistent with the Act. Comments may be submitted by any of the following methods:
• Use the Commission's Internet comment form (
• Send an email to
• Send paper comments in triplicate to Secretary, Securities and Exchange Commission, 100 F Street NE., Washington, DC 20549-1090.
For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.
Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 (“Act”),
The Exchange proposes to list and trade under Nasdaq Rule 5745 (Exchange-Traded Managed Fund Shares (“NextShares”)) the common shares (“Shares”) of the exchange-traded managed funds described herein (each, a “Fund,” and collectively, the “Funds”).
In its filing with the Commission, the Exchange included statements concerning the purpose of and basis for the proposed rule change and discussed any comments it received on the proposed rule change. The text of these statements may be examined at the places specified in Item IV below. The Exchange has prepared summaries, set forth in sections A, B, and C below, of the most significant aspects of such statements.
The Exchange proposes to list and trade the Shares of each Fund under Nasdaq Rule 5745, which governs the listing and trading of exchange-traded managed fund shares, as defined in Nasdaq Rule 5745(c)(1), on the Exchange.
Ivy NextShares
Ivy Investment Management Company (“IICO” or the “Adviser”) will be the adviser to the Funds. IICO is not a registered broker-dealer, although it is affiliated with a broker-dealer. IICO has implemented a fire wall with respect to its affiliated broker-dealer regarding access to information concerning the composition and/or changes to each Fund's portfolio.
ALPS Distributors, Inc. will be the principal underwriter and distributor of each Fund's Shares. Waddell & Reed Services Company, doing business as WI Services Company (“WISC”), will act as the administrator and accounting agent to the Funds. State Street Bank and Trust Company (“State Street”) will act as the custodian and transfer agent to the Funds. In addition, it has entered into agreements with WISC pursuant to which State Street will serve as sub-administrator and sub-accounting agent to the Funds.
The investment objective of this Fund is to provide growth of capital. The Fund normally will invest primarily in a portfolio of common stocks issued by large-capitalization, growth-oriented companies with above-average levels of profitability and that IICO believes have the ability to sustain growth over the long term. Although the Fund primarily will invest in securities issued by large-capitalization companies (defined as companies with market capitalizations of at least $10 billion at the time of acquisition), it may invest in securities issued by companies of any size.
The investment objective of this Fund is to provide capital appreciation, with a secondary objective of providing current income. The Fund normally will invest in the common stocks of companies that IICO believes are undervalued, trading at a significant discount relative to the intrinsic value of the company as estimated by IICO and/or are out of favor in the financial markets but have a favorable outlook for capital appreciation. Although the Fund will often invest in securities issued by large-capitalization companies (defined as companies with market capitalizations of at least $10 billion at the time of acquisition), it may invest in securities issued by companies of any size.
The investment objective of this Fund is to provide capital growth and appreciation. The Fund will invest, under normal circumstances, at least 80% of its net assets in the common stock of companies within the energy sector, which includes all aspects of the energy industry, such as exploration, discovery, production, distribution or infrastructure of energy and/or alternative energy sources.
Shares will be issued and redeemed on a daily basis for each Fund at the Fund's next-determined net asset value (“NAV”)
The creation and redemption process for Funds may be effected “in kind,” in cash, or in a combination of securities and cash. Creation “in kind” means that an Authorized Participant—usually a brokerage house or large institutional investor—purchases the Creation Unit with a basket of securities equal in value to the aggregate NAV of the Shares in the Creation Unit. When an Authorized Participant redeems a Creation Unit in kind, it receives a basket of securities equal in value to the aggregate NAV of the Shares in the Creation Unit.
As defined in Nasdaq Rule 5745(c)(3), the Composition File is the specified portfolio of securities and/or cash that a Fund will accept as a deposit in issuing a Creation Unit of Shares, and the specified portfolio of securities and/or cash that a Fund will deliver in a redemption of a Creation Unit of Shares. The Composition File will be disseminated through the NSCC once each business day before the open of trading in Shares on such day and also will be made available to the public each day on a free Web site.
All persons purchasing or redeeming Creation Units of a Fund are expected to incur a transaction fee to cover the estimated cost to that Fund of processing the transaction, including the costs of clearance and settlement charged to it by NSCC or DTC, and the estimated trading costs (
Because Shares will be listed and traded on the Exchange, Shares will be available for purchase and sale on an intraday basis. Shares will be purchased and sold in the secondary market at prices directly linked to a Fund's next-determined NAV using a new trading protocol called “NAV-Based Trading.”
Bid and offer prices for Shares will be quoted throughout the day relative to NAV. The premium or discount to NAV at which Share prices are quoted and transactions are executed will vary depending on market factors, including the balance of supply and demand for Shares among investors, transaction fees and other costs in connection with creating and redeeming Creation Units of Shares, the cost and availability of borrowing Shares, competition among market makers, the Share inventory positions and inventory strategies of market makers, the profitability requirements and business objectives of market makers, and the volume of Share trading. Reflecting such market factors, prices for Shares in the secondary market may be above, at or below NAV. Funds with higher transaction fees may trade at wider premiums or discounts to NAV than other Funds with lower transaction fees, reflecting the added costs to market makers of managing their Share inventory positions through purchases and redemptions of Creation Units.
Because making markets in Shares will be simple to manage and low risk, competition among market makers seeking to earn reliable, low-risk profits should enable the Shares to routinely trade at tight bid-ask spreads and narrow premiums/discounts to NAV. As noted below, the Funds will maintain a public Web site that will be updated on a daily basis to show current and historical trading spreads and premiums/discounts of Shares trading in the secondary market.
Member firms will utilize certain existing order types and interfaces to transmit Share bids and offers to Nasdaq, which will process Share trades like trades in shares of other listed securities.
To avoid potential investor confusion, Nasdaq will work with member firms and providers of market data services to seek to ensure that representations of intraday bids, offers and execution prices of Shares that are made available to the investing public follow the “NAV-$0.01/NAV+$0.01” (or similar) display format. All Shares listed on the Exchange will have a unique identifier associated with their ticker symbols, which would indicate that the Shares are traded using NAV-Based Trading. Nasdaq makes available to member firms and market data services certain proprietary data feeds that are designed to supplement the market information disseminated through the consolidated tape (“Consolidated Tape”). Specifically, the Exchange will use the NASDAQ Basic and NASDAQ Last Sale data feeds to disseminate intraday price and quote data for Shares in real time in the “NAV-$0.01/NAV+$0.01” (or similar) display format. Member firms could use the NASDAQ Basic and NASDAQ Last Sale data feeds to source intraday Share prices for presentation to the investing public in the “NAV-$0.01/
All bids and offers for Shares and all Share trade executions will be reported intraday in real time by the Exchange to the Consolidated Tape
All executed Share trades will be recorded and stored intraday by Nasdaq to await the calculation of such Fund's end-of-day NAV and the determination of final trade pricing. After a Fund's NAV is calculated and provided to the Exchange, Nasdaq will price each Share trade entered into during the day at the Fund's NAV plus/minus the trade's executed premium/discount. Using the final trade price, each executed Share trade will then be disseminated to member firms and market data services via an FTP file to be created for exchange-traded managed funds and confirmed to the member firms participating in the trade to supplement the previously provided information to include final pricing.
Prior to the commencement of market trading in Shares, the Funds will be required to establish and maintain a public Web site through which the current prospectus for each Fund may be downloaded.
The Composition File will be disseminated through the NSCC before the open of trading in Shares on each business day and also will be made available to the public each day on a free Web site as noted above.
Reports of Share transactions will be disseminated to the market and delivered to the member firms participating in the trade contemporaneous with execution. Once a Fund's daily NAV has been calculated and disseminated, Nasdaq will price each Share trade entered into during the day at the Fund's NAV plus/minus the trade's executed premium/discount. Using the final trade price, each executed Share trade will then be disseminated to member firms and market data services via an FTP file to be created for exchange-traded managed funds and confirmed to the member firms participating in the trade to supplement the previously provided information to include final pricing.
Information regarding NAV-based trading prices, best bids and offers for Shares, and volume of Shares traded will be continuously available on a real-time basis throughout each trading day on brokers' computer screens and other electronic services.
Shares will conform to the initial and continued listing criteria as set forth under Nasdaq Rule 5745. A minimum of 50,000 Shares and no less than two Creation Units of each Fund will be outstanding at the commencement of trading on the Exchange. The Exchange will obtain a representation from the issuer of the Shares that the NAV per Share will be calculated daily (on each business day that the New York Stock Exchange is open for trading) and provided to Nasdaq via the Mutual Fund Quotation Service (“MFQS”) by the fund accounting agent. As soon as the NAV is entered into MFQS, Nasdaq will disseminate the value to market participants and market data vendors via the Mutual Fund Dissemination Service (“MFDS”) so all firms will receive the NAV per share at the same time. The Reporting Authority
For each Fund, an estimated value of an individual Share, defined in Nasdaq Rule 5745(c)(2) as the “Intraday Indicative Value,” will be calculated and disseminated at intervals of not more than 15 minutes throughout the Regular Market Session
The Adviser is not a registered broker-dealer, although it is affiliated with a broker-dealer. The Adviser has implemented a fire wall with respect to its broker-dealer affiliate regarding access to information concerning the composition and/or changes to each Fund's portfolio. In the future event that (a) the Adviser registers as a broker-dealer or becomes newly affiliated with a broker-dealer, or (b) any new adviser or a sub-adviser to a Fund is a registered broker-dealer or becomes affiliated with a broker-dealer, it will implement a fire wall with respect to its relevant personnel and/or such broker-dealer affiliate, if applicable, regarding access to information concerning the composition and/or changes to the relevant Fund's portfolio and will be subject to procedures designed to prevent the use and dissemination of material non-public information regarding such portfolio.
The Exchange may consider all relevant factors in exercising its discretion to halt or suspend trading in Shares. Nasdaq will halt trading in Shares under the conditions specified in Nasdaq Rule 4120 and in Nasdaq Rule 5745(d)(2)(C). Additionally, Nasdaq may cease trading Shares if other unusual conditions or circumstances exist which, in the opinion of Nasdaq, make further dealings on Nasdaq detrimental to the maintenance of a fair and orderly market. To manage the risk of a non-regulatory Share trading halt, Nasdaq has in place back-up processes and procedures to ensure orderly trading. Because, in NAV-Based Trading, all trade execution prices are linked to end-of-day NAV, buyers and sellers of Shares should be less exposed to risk of loss due to intraday trading halts than buyers and sellers of conventional exchange-traded funds (“ETFs”) and other exchange-traded securities.
Nasdaq deems Shares to be equity securities, thus rendering trading in Shares to be subject to Nasdaq's existing rules governing the trading of equity securities. Nasdaq will allow trading in Shares from 9:30 a.m. until 4:00 p.m. E.T.
Every order to trade Shares of the Funds is subject to the proxy price protection threshold of plus/minus $1.00, which determines the lower and upper threshold for the life of the order and whereby the order will be cancelled at any point if it exceeds $101.00 or falls below $99.00, the established thresholds.
The Exchange represents that trading in Shares will be subject to the existing trading surveillances, administered by both Nasdaq and the Financial Industry Regulatory Authority, Inc. (“FINRA”) on behalf of the Exchange, which are designed to detect violations of Exchange rules and applicable federal securities laws.
The surveillances referred to above generally focus on detecting securities trading outside their normal patterns, which could be indicative of manipulative or other violative activity. When such situations are detected, surveillance analysis follows and investigations are opened, where appropriate, to review the behavior of all relevant parties for all relevant trading violations.
FINRA, on behalf of the Exchange, will communicate as needed with other markets and other entities that are members of the Intermarket Surveillance Group (“ISG”)
In addition, the Exchange also has a general policy prohibiting the distribution of material non-public information by its employees.
Prior to the commencement of trading in a Fund, the Exchange will inform its members in an Information Circular of the special characteristics and risks associated with trading the Shares. Specifically, the Information Circular will discuss the following: (1) The procedures for purchases and redemptions of Shares in Creation Units (and noting that Shares are not individually redeemable); (2) Nasdaq Rule 2111A, which imposes suitability obligations on Nasdaq members with respect to recommending transactions in Shares to customers; (3) how information regarding the IIV and Composition File is disseminated; (4) the requirement that members deliver a prospectus to investors purchasing Shares prior to or concurrently with the confirmation of a transaction; and (5) information regarding NAV-Based Trading protocols.
As noted above, all orders to buy or sell Shares that are not executed on the day the order is submitted will be automatically cancelled as of the close of trading on such day. The Information Circular will discuss the effect of this characteristic on existing order types. The Information Circular also will
In addition, the Information Circular will advise members, prior to the commencement of trading, of the prospectus delivery requirements applicable to the Funds. Members purchasing Shares from a Fund for resale to investors will deliver a summary prospectus to such investors. The Information Circular will also discuss any exemptive, no-action and interpretive relief granted by the Commission from any rules under the Act.
The Information Circular also will reference that the Funds are subject to various fees and expenses described in the Registration Statements. The Information Circular will also disclose the trading hours of the Shares and the applicable NAV calculation time for the Shares. The Information Circular will disclose that information about the Shares will be publicly available at
Information regarding Fund trading protocols will be disseminated to Nasdaq members in accordance with current processes for newly listed products. Nasdaq intends to provide its members with a detailed explanation of NAV-Based Trading through a Trading Alert issued prior to the commencement of trading in Shares on the Exchange.
All statements and representations made in this filing regarding (a) the description of the Funds' portfolios, (b) limitations on portfolio holdings or reference assets, or (c) the applicability of Exchange rules and surveillance procedures shall constitute continued listing requirements for listing the Shares of the Funds on the Exchange. The issuer has represented to the Exchange that it will advise the Exchange of any failure by any Fund to comply with the continued listing requirements, and, pursuant to its obligations under Section 19(g)(1) of the Act, the Exchange will monitor for compliance with the continued listing requirements. If a Fund is not in compliance with the applicable listing requirements, the Exchange will commence delisting procedures under Nasdaq Rule 5800,
Nasdaq believes that the proposal is consistent with Section 6(b) of the Act
The Exchange believes that the proposed rule change is designed to prevent fraudulent and manipulative acts and practices in that the Shares would be listed and traded on the Exchange pursuant to the initial and continued listing criteria in Nasdaq Rule 5745. The Exchange believes that its surveillance procedures are adequate to properly monitor the trading of Shares on Nasdaq and to deter and detect violations of Exchange rules and the applicable federal securities laws. The Adviser is not registered as a broker-dealer, but it is affiliated with a broker-dealer. The Adviser has implemented a “fire wall” between the Adviser and its broker-dealer affiliate with respect to access to information concerning the composition and/or changes to the Funds' portfolio holdings. The Exchange may obtain information via ISG from other exchanges that are members of ISG or with which the Exchange has entered into a comprehensive surveillance sharing agreement, to the extent necessary.
The proposed rule change is designed to promote just and equitable principles of trade and to protect investors and the public interest. The Exchange will obtain a representation from each issuer of Shares that the NAV per Share will be calculated on each business day that the New York Stock Exchange is open for trading and that the NAV will be made available to all market participants at the same time. In addition, a large amount of information would be publicly available regarding the Funds and the Shares, thereby promoting market transparency.
Prior to the commencement of market trading in Shares, the Funds will be required to establish and maintain a public Web site through which the current prospectus for each Fund may be downloaded.
The Composition File will be disseminated through the NSCC before the open of trading in Shares on each business day and also will be made available to the public each day on a free Web site.
Transactions in Shares will be reported to the Consolidated Tape at the time of execution in proxy price format and will be disseminated to member firms and market data services through Nasdaq's trading service and market data interfaces, as defined above. Once each Fund's daily NAV has been calculated and the final price of its intraday Share trades has been determined, Nasdaq will deliver a confirmation with final pricing to the transacting parties. At the end of the day, Nasdaq will also post a newly created FTP file with the final transaction data for the trading and market data services. The Exchange expects that information regarding NAV-based trading prices and volumes of Shares traded will be continuously available on a real-time basis throughout each trading day on brokers' computer screens and other electronic services. Because Shares will trade at prices based on the next-determined NAV, investors will be able to buy and sell individual Shares at a known premium or discount to NAV that they can limit by transacting using limit orders at the time of order entry. Trading in Shares will be subject to Nasdaq Rules 5745(d)(2)(B) and (C), which provide for the suspension of trading or trading halts under certain circumstances, including if, in the view of the Exchange, trading in Shares becomes inadvisable.
The proposed rule change is designed to perfect the mechanism of a free and open market and, in general, to protect
For the above reasons, Nasdaq believes the proposed rule change is consistent with the requirements of Section 6(b)(5) of the Act.
The Exchange does not believe that the proposed rule change will result in any burden on competition that is not necessary or appropriate in furtherance of the purposes of the Act. In fact, the Exchange believes that the introduction of the Funds would promote competition by making available to investors a broad range of actively managed investment strategies in a structure that offers the cost and tax efficiencies and shareholder protections of ETFs, while removing the requirement for daily portfolio holdings disclosure to ensure a tight relationship between market trading prices and NAV. Moreover, the Exchange believes that the proposed method of Share trading would provide investors with transparency of trading costs, and the ability to control trading costs using limit orders, that is not available for conventionally traded ETFs.
These developments could significantly enhance competition to the benefit of the markets and investors.
No written comments were either solicited or received.
Within 45 days of the date of publication of this notice in the
Interested persons are invited to submit written data, views, and arguments concerning the foregoing, including whether the proposed rule change is consistent with the Act. Comments may be submitted by any of the following methods:
• Use the Commission's Internet comment form (
• Send an email to
• Send paper comments in triplicate to Secretary, Securities and Exchange Commission, 100 F Street NE., Washington, DC 20549-1090.
For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.
Notice is hereby given that, pursuant to the Paperwork Reduction Act of 1995 (“PRA”) (44 U.S.C. 3501
Rule 19b-5 provides a temporary exemption from the rule-filing requirements of Section 19(b) of the Act (15 U.S.C. 78s(b)) to self-regulatory organizations (“SROs”) wishing to establish and operate pilot trading systems. Rule 19b-5 permits an SRO to develop a pilot trading system and to begin operation of such system shortly after submitting an initial report on Form PILOT to the Commission. During operation of any such pilot trading system, the SRO must submit quarterly reports of the system's operation to the Commission, as well as timely amendments describing any material changes to the system. Within two years of operating such pilot trading system under the exemption afforded by Rule 19b-5, the SRO must submit a rule filing pursuant to Section 19(b)(2) of the Act (15 U.S.C. 78s(b)(2)) to obtain permanent approval of the pilot trading system from the Commission.
The collection of information is designed to allow the Commission to maintain an accurate record of all new pilot trading systems operated by SROs and to determine whether an SRO has properly availed itself of the exemption afforded by Rule 19b-5, is operating a
The respondents to the collection of information are national securities exchanges and national securities associations.
While there are 20 national securities exchanges and national securities associations that may avail themselves of the exemption under Rule 19b-5 and the use of Form PILOT, it is estimated that approximately three respondents will file a total of 3 initial reports (for an estimated annual burden of 72 hours total), 12 quarterly reports (for an estimated annual burden of 36 hours total), and 6 amendments (for an estimated annual burden of 18 hours total) on Form PILOT per year, with an estimated total annual response burden of 126 hours and an estimated total annual cost burden of $10,047. At an average hourly cost of $272.33, the aggregate related internal cost of compliance pertaining to Rule 19b-5 for all respondents is $34,314 per year (126 burden hours multiplied by $272.33/hour = $34,314).
Although Rule 19b-5 does not in itself impose recordkeeping burdens on SROs, it relies on existing requirements imposed by Rule 17a-1 under the Act (17 CFR 240.17a-1) to require SROs to retain all the rules and procedures relating to each pilot trading system operating pursuant to Rule 19b-5, and to make such records available for Commission inspection for a period of not less than five years, the first two years in an easily accessible place.
The filing of a Form PILOT is mandatory for any SRO seeking a temporary exemption under Rule 19b-5 from the rule filing requirements of Section 19(b) of the Act in connection with the operation of a pilot trading system. It is also mandatory that an SRO operating a pilot trading system file with the Commission notices of material systems changes and quarterly transaction reports on Form PILOT. Information provided on Form PILOT is deemed confidential and shall be available only for examination by the Commission, other agencies of the Federal Government, and state securities authorities.
An agency may not conduct or sponsor, and a person is not required to respond to, a collection of information under the PRA unless it displays a currently valid OMB control number.
The public may view background documentation for this information collection at the following Web site,
Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 (the “Act”)
The Exchange filed a proposal to amend Exchange Rule 11.26 to implement the quoting and trading provisions of the Regulation NMS Plan to Implement a Tick Size Pilot Program (the “Plan”).
The text of the proposed rule change is available at the Exchange's Web site at
In its filing with the Commission, the Exchange included statements concerning the purpose of and basis for the proposed rule change and discussed any comments it received on the proposed rule change. The text of these statements may be examined at the places specified in Item IV below. The Exchange has prepared summaries, set forth in Sections A, B, and C below, of the most significant parts of such statements.
The Exchange proposes to establish rules to require its ETP Holders
On August 25, 2014, NYSE Group, Inc., on behalf of Bats BZX Exchange, Inc. (f/k/a BATS Exchange, Inc.), Bats BYX Exchange, Inc. (f/k/a BATS Y-Exchange, Inc.), Chicago Stock Exchange, Inc., EDGA Exchange, Inc., EDGX Exchange, Inc., Financial Industry Regulatory Authority, Inc. (“FINRA”), NASDAQ OMX BX, Inc., NASDAQ OMX PHLX LLC, the Nasdaq Stock Market LLC, New York Stock Exchange LLC, the NYSE MKT, LLC (“NYSE MKT”), and NYSE Arca, Inc. (collectively “Participants”), filed the Plan with the Commission, pursuant to Section 11A of the Act
The Plan is designed to allow the Commission, market participants, and the public to study and assess the impact of increment conventions on the liquidity and trading of the common stocks of small capitalization companies. The Commission plans to use the Plan to assess whether wider tick sizes enhance the market quality of Pilot Securities for the benefit of issuers and investors. Each Participant is required to comply with, and to enforce compliance by its members, as applicable, with the provisions of the Plan.
The Plan will include stocks of companies with $3 billion or less in market capitalization, an average daily trading volume of one million shares or less, and a volume weighted average price of at least $2.00 for every trading day. The Plan will consist of a control group of approximately 1,400 Pilot Securities and three test groups with 400 Pilot Securities in each, selected by a stratified sampling.
The Plan also contains requirements for the collection and transmission of data to the Commission and the public. A variety of data generated during the Plan will be released publicly on an aggregated basis to assist in analyzing the impact of wider tick sizes on smaller capitalization stocks.
The Plan requires the Exchange to establish, maintain, and enforce written policies and procedures that are reasonably designed to comply with applicable quoting and trading requirements specified in the Plan.
Proposed paragraph (a)(1) of Rule 11.26 would establish the following defined terms:
• “Plan” means the Tick Size Pilot Plan submitted to the Commission pursuant to Rule 608(a)(3) of Regulation NMS under the Act;
• “Pilot Test Groups” means the three test groups established under the Plan, consisting of 400 Pilot Securities each, which satisfy the respective criteria established by the Plan for each such test group.
• “Trade-at Intermarket Sweep Order”
The Plan allows (i) an order that is identified as an ISO to be executed at the price of a Protected Quotation (
• When routed to a Trading Center, the limit order is identified as a Trade-at Intermarket Sweep Order; and
• Simultaneously with the routing of the limit order identified as a Trade-at
Paragraph (a)(1)(E) of Rule 11.26 would provide that all capitalized terms not otherwise defined in this rule shall have the meanings set forth in the Plan, Regulation NMS under the Act, or Exchange rules, as applicable.
Proposed Paragraph (a)(2) would state that the Exchange is a Participant in, and subject to the applicable requirements of, the Plan; proposed Paragraph (a)(3) would require ETP Holders to establish, maintain and enforce written policies and procedures that are reasonably designed to comply with the applicable requirements of the Plan, which would allow the Exchange to enforce compliance by its ETP Holders with the provisions of the Plan, as required pursuant to Section II(B) of the Plan.
In addition, Paragraph (a)(4) would provide that the NSX's trading system (the “System”)
The Exchange also proposes to add Rule 11.26(a)(5) to provide for the treatment of Pilot Securities that drop below a $1.00 value during the Pilot Period.
However, if the Closing Price of a Pilot Security on any given business day is below $1.00, such Pilot Security would be moved out of its respective Pilot Test Group into the control group (which consists of Pilot Securities not placed into a Pilot Test Group), and may then be quoted and traded at any price increment that is currently permitted by Exchange rules for the remainder of the Pilot Period. Notwithstanding anything contained herein to the contrary, the Exchange proposes that, at all times during the Pilot Period, Pilot Securities (whether in the control group or any Pilot Test Group) would continue to be subject to the data collection rules, which are enumerated in Rule 11.26(b).
The Exchange proposes Rules 11.26(c)(1) through (3), which would require ETP Holders to comply with the specific quoting and trading obligations for each Pilot Test Group under the Plan. With regard to Pilot Securities in Test Group One, proposed 11.26(c)(1) would provide that no ETP Holder may display, rank, or accept from any person any displayable or non-displayable bids or offers, orders, or indications of interest in increments other than $0.05. However, orders priced to trade at the midpoint of the National Best Bid and National Best Offer (“NBBO”) or Best Protected Bid and Best Protect Offer (“PBBO”) and orders entered in a Participant-operated retail liquidity program may be ranked and accepted in increments of less than $0.05.
With regard to Pilot Securities in Test Group Two, proposed Rule 11.26(c)(2) would provide that such Pilot Securities would be subject to all of the same quoting requirements as described above for Pilot Securities in Test Group One, along with the applicable quoting exceptions. In addition, proposed Rule 11.26(c)(2)(B) would provide that, absent one of the listed exceptions in proposed Rule 11.26(c)(2)(C) enumerated below, no ETP Holder may execute orders in any Pilot Security in Test Group Two in price increments other than $0.05. The $0.05 trading increment would apply to all trades, including Brokered Cross Trades.
Paragraph (c)(2)(C) would set forth further requirements for Pilot Securities in Test Group Two. Specifically, ETP Holders trading Pilot Securities in Test Group Two would be allowed to trade in increments less than $0.05 under the following circumstances:
(i) Trading may occur at the midpoint between the NBBO or PBBO;
(ii) Retail Investor Orders may be provided with price improvement that is at least $0.005 better than the PBBO;
(ii) Negotiated Trades may trade in increments less than $0.05; and
(iii) Execution of a customer order to comply with Rule 12.6 following the execution of a proprietary trade by the member organization at an increment other than $0.05, where such proprietary trade was permissible pursuant to an exception under the Plan.
Paragraph (c)(3)(A)-(c)(3)(C) would set forth the requirements for Pilot Securities in Test Group Three. ETP Holders quoting or trading such Pilot Securities would be subject to all of the same quoting and trading requirements as described above for Pilot Securities in Test Group Two, including the quoting and trading exceptions applicable to Test Group Two Pilot Securities. In addition, proposed Paragraph (c)(3)(D) would provide for an additional prohibition on Pilot Securities in Test Group Three referred to as the “Trade-at Prohibition.”
Proposed Rule 11.26(c)(3)(D)(iii) would allow ETP Holders to execute a sell order for a Pilot Security in Test Group Three at the price of a Protected Bid or execute a buy order for a Pilot Security in Test Group Three at the price of a Protected Offer if any of the following circumstances exist:
a. The order is executed as agent or riskless principal by an independent trading unit, as defined under Rule 200(f) of Regulation SHO,
Independent trading unit aggregation is available if traders in an aggregation unit pursue only the particular trading objective(s) or strategy(s) of that aggregation unit and do not coordinate that strategy with any other aggregation unit. Therefore, a Trading Center cannot rely on quotations displayed by that broker dealer from a different independent trading unit. As an example, an agency desk of a broker-dealer cannot rely on the quotation of a proprietary desk in a separate independent trading unit at that same broker-dealer.
b. The order is executed by an independent trading unit, as defined under Rule 200(f) of Regulation SHO, of a Trading Center within an ETP Holder's organization that has a displayed quotation for the account of that Trading Center on a principal (excluding riskless principal
c. The order is of Block Size
A. an aggregation of non-block orders; or
B. broken into orders smaller than Block Size prior to submitting the order to a Trading Center for execution.
d. The order is a Retail Investor Order executed with at least $0.005 price improvement;
e. The order is executed when the Trading Center displaying the Protected Quotation that was traded at was experiencing a failure, material delay, or malfunction of its systems or equipment;
f. The order is executed as part of a transaction that was not a “regular way” contract;
g. The order is executed as part of a single-priced opening, reopening, or closing transaction on the Exchange;
h. The order is executed when a Protected Bid was priced higher than a Protected Offer in the Pilot Security in Test Group Three;
i. The order is identified as a Trade-at Intermarket Sweep Order;
j. The order is executed by a Trading Center that simultaneously routed Trade-at Intermarket Sweep Orders or Intermarket Sweep Orders as defined in Rule 600(b)(3) of Regulation NMS under the Act
k. The order is executed as part of a Negotiated Trade;
l. The order is executed when the Trading Center displaying the Protected Quotation that was traded at had displayed, within one second prior to execution of the transaction that constituted the Trade-at, a Best Protected Bid or Best Protected Offer, as applicable, for the Pilot Security in Test Group Three with a price that was inferior to the price of the Trade-at transaction;
m. The order is executed by a Trading Center which, at the time of order receipt, the Trading Center had guaranteed an execution at no worse than a specified price (a “stopped order”), where:
A. The stopped order was for the account of a customer;
B. The customer agreed to the specified price on an order-by-order basis; and
C. The price of the Trade-at transaction was, for a stopped buy order, equal to or less than the National Best Bid in the Pilot Security in Test Group Three at the time of execution or, for a stopped sell order, equal to or greater than the National Best Offer in the Pilot Security in Test Group Three at the time of execution, as long as such order is priced at an acceptable increment;
To illustrate the application of the stopped order exemption as it currently operates under Rule 611 of Regulation NMS and as it is currently proposed for Trade-at, assume the National Best Bid is $10.00 and another protected quote is at $9.95. Under Rule 611 of Regulation NMS, a stopped order to buy can be filled at $9.95 and the firm does not have to send an ISO to access the protected quote at $10.00 since the price of the stopped order must be lower than the National Best Bid. For the stopped order to also be executed at $9.95 and satisfy the Trade-at requirements, the Trade-at exception would have to be revised to allow an order to execute at the price of a protected quote which, in this case, could be $9.95.
Based on the fact that a stopped order would be treated differently under the Rule 611 of Regulation NMS exception than under the Trade-at exception in the Plan, the Exchange believes that it is appropriate to amend the Trade-at stopped order exception in the Plan to ensure that the application of this exception would produce a consistent result under both Regulation NMS and the Plan. Therefore, the Exchange proposes in this proposed 11.26(c)(3)(D)(iii)m. to allow a transaction to satisfy the Trade-at requirement if the stopped order price, for a stopped buy order, is equal to or less than the National Best Bid, and for a stopped sell order, is equal to or greater than the National Best Offer, as long as such order is priced at an acceptable increment. The Commission granted New York Stock Exchange LLC an exemption from Rule 608(c) related to this provision.
n. The order is for a fractional share of a Pilot Security in Test Group Three, provided that such fractional share order was not the result of breaking an order for one or more whole shares of a Pilot Security in Test Group Three into orders for fractional shares or was not otherwise effected to evade the requirements of the Trade-at Prohibition or any other provisions of the Plan; or
o. The order is to correct a bona fide error, which is recorded by the Trading Center in its error account.
Accordingly, the Exchange is proposing to exempt certain transactions to correct bona fide errors in the execution of customer orders from the Trade-at Prohibition, subject to the conditions set forth by the SEC's order exempting these transactions from Rule 611 of Regulation NMS. The Commission granted New York Stock Exchange LLC an exemption from Rule 608(c) related to this provision.
As with the corresponding exception under Rule 611 of Regulation NMS, the bona fide error would have to be evidenced by objective facts and circumstances, the Trading Center would have to maintain documentation of such facts and circumstances and record the transaction in its error account. To avail itself of the exemption, the Trading Center would be required to establish, maintain, and enforce written policies and procedures reasonably designed to address the occurrence of errors and, in the event of an error, the use and terms of a transaction to correct the error in compliance with this exemption. Finally, the Trading Center would have to regularly surveil to ascertain the effectiveness of its policies and procedures to address errors and transactions to correct errors and take prompt action to remedy deficiencies in such policies and procedures.
A. The inaccurate conveyance or execution of any term of an order including, but not limited to, price, number of shares or other unit of trading; identification of the security; identification of the account for which securities are purchased or sold; lost or otherwise misplaced order tickets; short sales that were instead sold long or vice versa; or the execution of an order on the wrong side of a market;
B. The unauthorized or unintended purchase, sale, or allocation of securities, or the failure to follow specific client instructions;
C. The incorrect entry of data into relevant systems, including reliance on incorrect cash positions, withdrawals, or securities positions reflected in an account; or
D. A delay, outage, or failure of a communication system used to transmit market data prices or to facilitate the delivery or execution of an order.
Finally, Proposed Rule 11.26(c)(3)(D)(iv) would prevent member organizations from breaking an order into smaller orders or otherwise effecting or executing an order to evade the requirements of the Trade-at Prohibition or any other provisions of the Plan.
The Exchange believes that its proposal is consistent with Section 6(b) of the Act,
Furthermore, the Exchange is a Participant under the Plan and subject, itself, to the provisions of the Plan. The proposed rule change ensures that the Exchange's systems would not display or execute trading interests outside the requirements specified in such Plan. The proposal would also help allow market participants to continue to trade NMS Stocks within quoting and trading requirements that are in compliance with the Plan, with certainty on how certain orders and trading interests would be treated. This, in turn, will help encourage market participants to continue to provide liquidity in the marketplace.
Because the Plan supports further examination and analysis on the impact of tick sizes on the trading and liquidity of the securities of small capitalization companies, and the Commission believes that altering tick sizes could result in significant market-wide benefits and improvements to liquidity and capital formation, adopting rules that enforce compliance by its member organizations with the provisions of the Plan would help promote liquidity in the marketplace and perfect the mechanism of a free and open market and national market system.
The Exchange does not believe that the proposed rule change will impose any burden on competition that is not necessary or appropriate in furtherance of the purposes of the Act. The proposed changes are being made to establish, maintain, and enforce written policies and procedures that are reasonably designed to comply with the trading and quoting requirements specified in the Plan, of which other equities exchanges are also Participants. Other competing national securities exchanges are subject to the same trading and quoting requirements specified in the Plan. Therefore, the proposed changes would not impose any burden on competition, while providing certainty of treatment and execution of trading interests on the Exchange to market participants in NMS Stocks that are acting in compliance with the requirements specified in the Plan.
The Exchange has neither solicited nor received comments on the proposed rule change.
Because the foregoing proposed rule change does not:
A. significantly affect the protection of investors or the public interest;
B. impose any significant burden on competition; and
C. become operative for 30 days from the date on which it was filed, or such shorter time as the Commission may designate,
At any time within 60 days of the filing of the proposed rule change, the Commission summarily may temporarily suspend such rule change if it appears to the Commission that such action is: (i) necessary or appropriate in the public interest; (ii) for the protection of investors; or (iii) otherwise in furtherance of the purposes of the Act. If the Commission takes such action, the Commission shall institute proceedings to determine whether the proposed rule should be approved or disapproved.
Interested persons are invited to submit written data, views, and arguments concerning the foregoing, including whether the proposed rule change is consistent with the Act. Comments may be submitted by any of the following methods:
• Use the Commission's Internet comment form (
• Send an email to
• Send paper comments in triplicate to Secretary, Securities and Exchange Commission, 100 F Street NE., Washington, DC 20549-1090.
For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.
Office of the United States Trade Representative.
Notice; request for comments.
The Office of the United States Trade Representative (“USTR”) is providing notice that on May 27, 2016, the United States requested the establishment of a dispute settlement panel under the
Although USTR will accept any comments received during the course of the dispute settlement proceedings, comments should be submitted on or before August 15, 2016, to be assured of timely consideration by USTR.
Public comments should be submitted electronically to
If you are unable to provide submissions at
Mayur R. Patel, Associate General Counsel, or Nathaniel J. Halvorson, Assistant General Counsel, Office of the United States Trade Representative, 600 17th Street NW., Washington, DC 20508, (202) 395-3150.
Section 127(b)(1) of the Uruguay Round Agreements Act (“URAA”) (19 U.S.C. 3537(b)(1)) requires that notice and opportunity for comment be provided after the United States submits or receives a request for the establishment of a World Trade Organization (“WTO”) dispute settlement panel. Pursuant to this provision, USTR is providing notice that the United States has requested a panel pursuant to Article 21.5 of the WTO
On September 25, 2013, the WTO Dispute Settlement Body (“DSB”) adopted its recommendations and rulings in the dispute
On October 22, 2013, China announced its intention to implement the DSB recommendations and rulings in this dispute and stated that it would need a reasonable period of time (“RPT”) in which to do so. On December 19, 2013, China and the United States informed the DSB that they had reached agreement that the RPT for China to implement the DSB recommendations and rulings shall be 9 months and 14 days from the adoption of the Panel Report, expiring on July 9, 2014. China's Ministry of Commerce (“MOFCOM”) subsequently issued a redetermination that continues the imposition of antidumping and countervailing duties on imports of chicken broiler products from the United States. The redetermination, which is set forth in MOFCOM's Announcement No. 44 [2014], including its annexes, states that it came into force as of July 9, 2014.
The United States considers that China has failed to bring its measures into conformity with the covered agreements. As there is “disagreement as to the existence or consistency with a covered agreement of measures taken to comply with the recommendations and rulings” of the DSB, the United States is seeking recourse to Article 21.5 of the DSU. Specifically, the United States considers that China's measures continuing to impose antidumping and countervailing duties on chicken broiler products from the United States, as set forth by MOFCOM in Announcement No. 44 [2014], Announcement No. 56 [2013], Announcement No. 52 [2010], Announcement No. 51 [2010], Announcement No. 26 [2010], Announcement No. 8 [2010], and the annexes to the foregoing documents are inconsistent with Articles 1, 2.2, 2.2.1.1, 3.1, 3.2, 3.4, 3.5, 6.1, 6.4, 6.5, 6.8, 6.9, 9.4, 12.2, 12.2.2, and Annex II of the AD Agreement; Articles 10, 12.1, 12.3, 12.4, 12.8, 15.1, 15.2, 15.4, 15.5, 22.3, and 22.5 of the SCM Agreement; and Article VI of the GATT 1994.
Pursuant to an understanding on procedures under Articles 21 and 22 of the DSU, the United States requested consultations with China on May 17, 2016. That request may be found at
Interested persons are invited to submit written comments concerning the issues raised in this dispute. Persons may submit public comments electronically to
To submit comments via
The
USTR may determine that information or advice contained in a comment submitted, other than business confidential information, is confidential in accordance with section 135(g)(2) of the Trade Act of 1974 (19 U.S.C. 2155(g)(2)). If the submitter believes that information or advice may qualify as such, the submitter—
(1) Must clearly so designate the information or advice;
(2) Must clearly mark the material as “SUBMITTED IN CONFIDENCE”at the top and bottom of the cover page and each succeeding page; and
(3) Must provide a non-confidential summary of the information or advice.
Any comment containing confidential information must be submitted by fax. A non-confidential summary of the confidential information must be submitted to
Pursuant to section 127(e) of the Uruguay Round Agreements Act (19 U.S.C. 3537(e)), USTR will maintain a docket on this dispute settlement proceeding accessible to the public at
The public file will include non-confidential comments received by USTR from the public with respect to the dispute, which may be viewed on the
Federal Aviation Administration (FAA), U.S. Department of Transportation (DOT).
EUROCAE WG-99 PLENARY #8/RTCA SC-234 Plenary #5—Calling Notice “Portable Electronic Devices (PEDs)”.
The FAA is issuing this notice to advise the public of a meeting of EUROCAE WG-99 PLENARY #8/RTCA SC-234 Plenary #5—Calling Notice “Portable Electronic Devices (PEDs)”.
The meeting will be held August 23-25, 2016, 9:00 a.m. to 5:00 p.m. Tuesday-Wednesday, 9:00 a.m. to 12:00 p.m. Thursday.
The meeting will be held at: RTCA, Inc., 1150 18th Street NW., Suite 450, Washington, DC 20036. Individuals wishing for WebEx/Audio information should contact the person listed in the
Karan Hofmann at
Pursuant to section 10(a)(2) of the Federal Advisory Committee Act (Pub. L. 92-463, 5 U.S.C., App.), notice is hereby given for a meeting of the EUROCAE WG-99 PLENARY #8/RTCA SC-234 Plenary #5—Calling Notice “Portable Electronic Devices (PEDs)”. The agenda will include the following:
Attendance is open to the interested public but limited to space availability. With the approval of the chairman, members of the public may present oral statements at the meeting. Persons wishing to present statements or obtain information should contact the person listed in the
Federal Aviation Administration (FAA), DOT.
Notice.
This notice contains a summary of a petition seeking relief from specified requirements of Title 14 of the Code of Federal Regulations. The purpose of this notice is to improve the public's awareness of, and participation in, the FAA's exemption process. Neither publication of this notice nor the inclusion or omission of information in the summary is intended to affect the legal status of the petition or its final disposition.
Comments on this petition must identify the petition docket number and must be received on or before August 8, 2016.
Send comments identified by docket number FAA-2016-8718 using any of the following methods:
•
•
•
•
For technical questions concerning this action, contact Nancy Lauck Claussen, Air Transportation Division, AFS-200, Federal Aviation Administration, 800 Independence Avenue SW., Washington, DC 20591; telephone 202-267-8166; email:
This notice is published pursuant to 14 CFR 11.85.
Office of the Comptroller of the Currency (OCC), Treasury.
Notice and request for comment.
The OCC, as part of its continuing effort to reduce paperwork and respondent burden, invites the general public and other Federal agencies to comment on the renewal of an information collection as required by the Paperwork Reduction Act of 1995 (PRA).
An agency may not conduct or sponsor, and a respondent is not required to respond to, an information collection unless it displays a currently valid Office of Management and Budget (OMB) control number.
The OCC is soliciting comment concerning renewal of an information collection titled, “Guidance on Sound Incentive Compensation Practices.”
Written comments should be submitted by September 26, 2016.
Because paper mail in the Washington, DC area and at the OCC is subject to delay, commenters are encouraged to submit comments by email, if possible. Comments may be sent to: Legislative and Regulatory Activities Division, Office of the Comptroller of the Currency, Attention: 1557-0245, 400 7th Street SW., Suite 3E-218, Mail Stop 9W-11, Washington, DC 20219. In addition, comments may be sent by fax to (571) 465-4326 or by electronic mail to
All comments received, including attachments and other supporting materials, are part of the public record and subject to public disclosure. Do not include any information in your comment or supporting materials that you consider confidential or inappropriate for public disclosure.
Shaquita Merritt, OCC Clearance Officer, (202) 649-5490 or, for persons who are deaf or hard of hearing, TTY, (202) 649-5597, Legislative and Regulatory Activities Division, Office of the Comptroller of the Currency, 400 7th Street SW., Washington, DC 20219.
Under the PRA (44 U.S.C. 3501-3520), Federal agencies must obtain approval from OMB for each collection of information that they conduct or sponsor. “Collection of information” is defined in 44 U.S.C. 3502(3) and 5 CFR 1320.3(c) to include agency requests or requirements that members of the public submit reports, keep records, or provide information to a third party. Section 3506(c)(2)(A) of the PRA (44 U.S.C. 3506(c)(2)(A)) requires Federal agencies
All comments will be considered in formulating the subsequent submission and become a matter of public record. Comments are invited on:
(a) Whether the collection of information is necessary for the proper performance of the functions of the OCC, including whether the information has practical utility;
(b) The accuracy of the OCC's estimate of the information collection burden;
(c) Ways to enhance the quality, utility, and clarity of the information to be collected;
(d) Ways to minimize the burden of the collection on respondents, including through the use of automated collection techniques or other forms of information technology; and
(e) Estimates of capital or startup costs and costs of operation, maintenance, and purchase of services to provide information.
Internal Revenue Service (IRS), Treasury.
Notice and request for comments.
The Department of the Treasury, as part of its continuing effort to reduce paperwork and respondent burden, invites the general public and other Federal agencies to take this opportunity to comment on proposed and/or continuing information collections, as required by the Paperwork Reduction Act of 1995, Public Law 104-13 (44 U.S.C. 3506(c)(2)(A)). Currently, the IRS is soliciting comments concerning Form 5500-EZ, Annual Return of One-Participant (Owners and Their Spouses) Retirement Plan.
Written comments should be received on or before September 26, 2016 to be assured of consideration.
Direct all written comments to Tuawana Pinkston, Internal Revenue Service, Room 6526, 1111 Constitution Avenue NW., Washington, DC 20224.
Requests for additional information or copies of the form and instructions should be directed to Allan Hopkins, at Internal Revenue Service, Room 6129, 1111 Constitution Avenue NW., Washington, DC 20224, or through the Internet at
The following paragraph applies to all of the collections of information covered by this notice:
An agency may not conduct or sponsor, and a person is not required to respond to, a collection of information unless the collection of information displays a valid OMB control number. Books or records relating to a collection of information must be retained as long as their contents may become material in the administration of any internal revenue law. Generally, tax returns and tax return information are confidential, as required by 26 U.S.C. 6103.
Internal Revenue Service (IRS), Treasury.
Notice and request for comments.
The Department of the Treasury, as part of its continuing effort to reduce paperwork and respondent burden, invites the general public and other Federal agencies to take this opportunity to comment on this continuing information collections, as required by the Paperwork Reduction Act of 1995, Public Law 104-13 (44 U.S.C. 3506(c)(2)(A)). Currently, the IRS is soliciting comments concerning Compensation Deferred Under Eligible Deferred Compensation Plans.
Written comments should be received on or before September 26, 2016 to be assured of consideration.
Direct all written comments to Tuawana Pinkston, Internal Revenue Service, Room 6526, 1111 Constitution Avenue NW., Washington, DC 20224.
Requests for additional information or copies of the regulations should be directed to Allan Hopkins, at Internal Revenue Service, Room 6129, 1111 Constitution Avenue NW., Washington, DC 20224, or through the Internet at
The following paragraph applies to all of the collections of information covered by this notice:
An agency may not conduct or sponsor, and a person is not required to respond to, a collection of information unless the collection of information displays a valid OMB control number. Books or records relating to a collection of information must be retained as long as their contents may become material in the administration of any internal revenue law. Generally, tax returns and tax return information are confidential, as required by 26 U.S.C. 6103.
Internal Revenue Service (IRS), Treasury.
Notice of meeting.
An open meeting of the Taxpayer Advocacy Panel Joint Committee will be conducted. The Taxpayer Advocacy Panel is soliciting public comments, ideas, and suggestions on improving customer service at the Internal Revenue Service.
The meetings will be held August 16, 2016, August 17, 2016, August 18, 2016 and August 19, 2016.
Kim Vinci at 1-888-912-1227 or 916-974-5086.
Notice is hereby given pursuant to Section 10(a)(2) of the Federal Advisory Committee Act, 5 U.S.C. App. (1988) that an open meeting of the Taxpayer Advocacy Panel Joint Committee will be held Tuesday, August 16, 2016, from 10:30 a.m. to 12:30 p.m. and 2:30 p.m. to 4:30 p.m. Eastern Standard Time via teleconference; Wednesday, August 17, 2016, from 10:30 a.m. to 12:30 p.m. and 2:30.m. to 4:30 p.m. Eastern Standard Time via teleconference; and Thursday, August 18, 2016, from 10:30 a.m. to 12:30 p.m. and 2:30.m. to 4:30 p.m. Eastern Standard Time via teleconference and Friday, August 19, 2016, from 10:30 a.m. to 12:30 p.m. Eastern Standard Time via teleconference. The public is invited to make oral comments or submit written statements for consideration. Notification of intent to participate must be made with Kim Vinci. For more information please contact: Kim Vinci at 1-888-912-1227 or 916-974-5086, TAP Office, 4330 Watt Ave., Sacramento, CA 95821, or contact us at the Web site:
The agenda will include various committee issues for submission to the IRS and other TAP related topics. Public input is welcomed.
Securities and Exchange Commission.
Final rule.
We are adopting Rule 13q-1 and an amendment to Form SD to implement Section 1504 of the Dodd-Frank Wall Street Reform and Consumer Protection Act relating to the disclosure of payments by resource extraction issuers. Rule 13q-1 was initially adopted by the Commission on August 22, 2012, but it was subsequently vacated by the U.S. District Court for the District of Columbia. Section 1504 of the Dodd-Frank Act added Section 13(q) to the Securities Exchange Act of 1934, which directs the Commission to issue rules requiring resource extraction issuers to include in an annual report information relating to any payment made by the issuer, a subsidiary of the issuer, or an entity under the control of the issuer, to a foreign government or the Federal Government for the purpose of the commercial development of oil, natural gas, or minerals. Section 13(q) requires a resource extraction issuer to provide information about the type and total amount of such payments made for each project related to the commercial development of oil, natural gas, or minerals, and the type and total amount of payments made to each government. In addition, Section 13(q) requires a resource extraction issuer to provide information about those payments in an interactive data format.
Shehzad K. Niazi, Special Counsel; Office of Rulemaking, Division of Corporation Finance, at (202) 551-3430; or Elliot Staffin, Special Counsel; Office of International Corporate Finance, Division of Corporation Finance, at (202) 551-3450, U.S. Securities and Exchange Commission, 100 F Street NE., Washington, DC 20549.
We are adopting Rule 13q-1
On December 11, 2015, we re-proposed a rule and form amendments-
Section 13(q) was added in 2010 by Section 1504 of the Dodd-Frank Wall Street Reform and Consumer Protection Act (“the Act”).
Based on the statutory text and the legislative history, we understand that Congress enacted Section 1504 to increase the transparency of payments made by oil, natural gas, and mining companies to governments for the purpose of the commercial development of their oil, natural gas, and minerals. As discussed in more detail below, the legislation reflects U.S. foreign policy interests in supporting global efforts to improve transparency in the extractive industries.
Section 13(q) provides that “[t]o the extent practicable, the rules . . . shall support the commitment of the Federal Government to international transparency promotion efforts relating to the commercial development of oil, natural gas, or minerals.”
Pursuant to Section 13(q), the rules we adopt must require a resource extraction issuer to submit the payment information included in an annual report in an electronic data format in which the information is identified using a standardized list of electronic tags.
Section 13(q) further requires, to the extent practicable, that the Commission make publicly available online a compilation of the information required to be submitted by resource extraction issuers under the new rules.
Finally, Section 13(q) provides that the final rules “shall take effect on the date on which the resource extraction issuer is required to submit an annual report relating to the fiscal year . . . that ends not earlier than one year after the date on which the Commission issues final rules . . . .”
We adopted final rules implementing Section 13(q) on August 22, 2012.
As discussed at length in the Proposing Release, Section 13(q) reflects the U.S. foreign policy interest in supporting global efforts to improve the transparency of payments made in the extractive industries in order to help combat global corruption and promote accountability.
Other commenters, including individuals and non-governmental organizations, supported the view that Section 13(q) was enacted to further the U.S. Government's interest in improving transparency in an effort to help combat global corruption and promote accountability.
To determine how best to achieve the policy objectives of Section 13(q) and to meet the statutory directive to “support the commitment of the Federal Government to international transparency promotion efforts” to the extent practicable, we also have considered the current state of international transparency efforts. The following discussion addresses the global transparency initiatives that have developed since the 2012 Adopting Release was issued, including in the European Union, Canada, and through the EITI.
The European Parliament and Council of the European Union adopted two directives that include payment disclosure rules.
The EU Directives generally cover the following activities: “exploration, prospection, discovery, development, and extraction of minerals, oil, natural gas deposits or other materials.”
Disclosure of payments is made on a per project and per government basis. “Project” is defined as “the operational activities that are governed by a single contract, license, lease, concession or similar legal agreements and form the basis for payment liabilities with a government.”
The EU Directives require public disclosure of the payment information, including the issuer's identity.
Member states are granted some leeway for when the report is due and what penalties will result from violations of the regulations.
Canada also adopted a federal resource extraction disclosure law, the Extractive Sector Transparency Measures Act (“ESTMA”) after the 2012 Adopting Release was issued.
ESTMA defines “commercial development of oil, gas or minerals” as the exploration or extraction of oil, gas, or minerals; the acquisition of a permit, license, lease, or any other authorization to carry out the exploration or extraction of oil, gas, or minerals; or any other prescribed activities in relation to oil, gas, or minerals.
Canada's regulations capture the following payment types: Taxes (other than consumption taxes and personal income taxes); royalties; fees (including rental fees, entry fees and regulatory charges, as well as fees or other consideration for licenses, permits or concessions); production entitlements; bonuses (including signature, discovery and production bonuses); dividends (other than dividends paid to payees as ordinary shareholders); and infrastructure improvement payments.
Unlike the EU Directives, which do not provide for any exemptions unique to resource extraction payment disclosure, ESTMA authorizes the adoption of regulations respecting, among other matters, “the circumstances in which any provisions of this Act do not apply to entities, payments or payees.”
Canada has adopted project-level reporting, and the definition of “project” used in the ESTMA Specifications is identical to the definition of that term in the EU Directives.
Like the EU Directives, ESTMA allows for the Minister of Natural Resources Canada to determine that the requirements of another jurisdiction are an acceptable substitute for the domestic requirements.
The EITI is a voluntary coalition of oil, natural gas, and mining companies, foreign governments, investor groups, and other international organizations. The coalition was formed to foster and improve transparency and accountability in resource-rich countries through the publication and verification of company payments and government revenues from oil, natural gas, and mining.
At a minimum, the EITI requires the disclosure of material payment and revenue information related to the upstream activities of exploration and production, but permits each country's multi-stakeholder group to broaden the scope of the EITI report to include revenue streams (
The EITI has long required the disclosure of the particular type of revenue stream and government entity that received each payment in the EITI Report.
Currently each implementing country's multi-stakeholder group determines which companies should be included in the EITI Report. Out of concern that developing countries have lost significant revenues “as a result of corrupt or illegal deals” involving “anonymous companies” that have “hidden behind a structure of complex and secret company ownership,”
The final rules, which are described in more detail in Part II below, are being adopted mostly as proposed, with a few significant changes based on feedback from commenters and other developments since the Proposing Release was issued. The final rules require resource extraction issuers to file a Form SD on an annual basis that includes information about payments related to the commercial development of oil, natural gas, or minerals that are made to governments. The following are key provisions of the final rules:
• The term “resource extraction issuer” means all U.S. companies and foreign companies that are required to file annual reports pursuant to Section 13 or 15(d) of the Exchange Act
• The term “commercial development of oil, natural gas, or minerals” means, consistent with Section 13(q), exploration, extraction, processing, and export, or the acquisition of a license for any such activity.
• The term “payment” means payments that are made to further the commercial development of oil, natural gas, or minerals, are “not de minimis,” and includes taxes, royalties, fees (including license fees), production entitlements, and bonuses, consistent with Section 13(q), as well as community and social responsibility payments (“CSR payments”) that are required by law or contract, dividends, and payments for infrastructure improvements.
• “Not de minimis” means any payment, whether a single payment or a series of related payments, that equals or exceeds $100,000 during the most recent fiscal year.
• A resource extraction issuer is required to disclose payments made by its subsidiaries and other entities under its control. Under the final rules, an issuer must disclose the payments made by entities that are consolidated, or its proportionate amount of the payments made by entities or operations that are proportionately consolidated, in its consolidated financial statements as determined by applicable accounting principles.
• The term “project” means operational activities that are governed by a single contract, license, lease, concession, or similar legal agreement, which form the basis for payment liabilities with a government. Agreements that are both operationally and geographically interconnected may be treated by the resource extraction issuer as a single project.
• The term “foreign government” means a foreign government, a department, agency, or instrumentality of a foreign government, or a company at least majority owned by a foreign government. It includes a foreign national government as well as a foreign subnational government, such as the government of a state, province, county, district, municipality, or territory under a foreign national government.
• The term “Federal Government” means the United States Federal Government.
• A resource extraction issuer must file its payment disclosure on Form SD using the Commission's Electronic Data Gathering, Analysis, and Retrieval System (“EDGAR”), no later than 150 days after the end of its fiscal year. In addition to this EDGAR compilation of Form SD filings, a separate public compilation of the payment information submitted in the Form SD filings will be made available online by the Commission's staff.
• A resource extraction issuer must disclose the payment information and its identity publicly.
• The final rules include two exemptions that provide for transitional relief or delayed reporting in limited circumstances. These exemptions provide a longer transition period for recently acquired companies that were not previously subject to reporting under the final rules and a one-year delay in reporting payments related to exploratory activities. In addition, resource extraction issuers may apply for, and the Commission will consider, exemptive relief for other situations on a case-by-case basis pursuant to Rule 0-12 of the Exchange Act.
• Resource extraction issuers may use alternative reports to comply with the final rules if the Commission determines that the requirements applicable to those reports are substantially similar to our own.
• The Commission has determined that the current reporting requirements of the EU Directives, Canada's ESTMA, and the USEITI are substantially similar to the final rules, subject to the conditions specified below in Section II.J. Applications for additional alternative reporting determinations may be submitted under Rule 0-13 by issuers, governments, industry groups, and trade associations.
• Resource extraction issuers, including those using alternative reports, must present the payment disclosure using the eXtensible Business Reporting Language (“XBRL”) electronic format and the electronic tags identified in Form SD. The tags listed in Form SD include those specified in Section 13(q), as well as tags for the type and total amount of payments made for each project, the type and total amount of payments made to each government, the particular resource that is the subject of commercial development, and the subnational geographic location of the project.
• Resource extraction issuers are required to comply with the rules starting with their fiscal year ending no earlier than September 30, 2018.
As we discuss more fully throughout the remainder of this release, in developing the final rules we have sought to balance the various statutory interests at issue in this rulemaking: On the one hand, providing transparency to help combat corruption and promote accountability, and on the other hand, doing so in ways that reflect a consideration of competition, efficiency, capital formation, and costs.
Section 13(q) defines a “resource extraction issuer” as an issuer that is “required to file an annual report with the Commission” and “engages in the commercial development of oil, natural gas, or minerals.”
We proposed to cover only issuers filing annual reports on Forms 10-K, 20-F, or 40-F.
In the Proposing Release we solicited comment on whether certain categories of issuers should be exempt from the rules, such as smaller reporting companies, emerging growth companies, or foreign private issuers.
Only one commenter on the Proposing Release recommended changing the scope of the definition of resource extraction issuer to add an exemption based on the type of issuer.
Of the commenters that expressed support for the proposed definition, several indicated that the proposed rules did not present unique challenges for particular categories of issuers and thus no exemptions were necessary.
We are adopting the proposed definition of “resource extraction issuer.” Under the final rules, resource extraction issuers are issuers that are required to file an annual report with the Commission pursuant to Section 13 or 15(d) of the Exchange Act and engage in the commercial development of oil, natural gas, or minerals.
As discussed above, almost all of the commenters on the Proposing Release supported the proposed definition or called for the rules to cover all companies without exemptions. We disagree with the commenter that suggested foreign private issuers should be excluded from the definition of “resource extraction issuer.”
No commenters on the Proposing Release specifically requested that the Commission extend the disclosure requirements to foreign private issuers that are exempt from Exchange Act registration and reporting obligations
Although, as we stated in the Proposing Release, we believe that the statutory language could reasonably be read either to cover or to exclude issuers that file annual reports on forms other than Forms 10-K, 20-F, and 40-F, we also continue to believe that covering other issuers would do little to further the transparency objectives of Section 13(q). It would, however, add costs and burdens to the existing disclosure regimes governing those categories of issuers. For example, and as noted in the Proposing Release, none of the Regulation A issuers with qualified offering statements between 2009 and 2014 appear to have been resource extraction issuers at the time of those filings.
Section 13(q) defines “commercial development of oil, natural gas, or minerals.” Consistent with the statute, we proposed defining “commercial development of oil, natural gas, or minerals” as exploration, extraction, processing, and export of oil, natural gas, or minerals, or the acquisition of a license for any such activity. Although we have discretionary authority to include other significant activities relating to oil, natural gas, or minerals,
As discussed in the Proposing Release, the proposed definition of “commercial development” was intended to capture only activities that are directly related to the commercial development of oil, natural gas, or minerals, and not activities ancillary or preparatory to such commercial development.
In the Proposing Release we solicited comment on how we should define “commercial development of oil, natural gas, or minerals.” For example, we asked whether the definition should include any activities that were not expressly identified in the statute and what definition would further the U.S. Government's foreign policy objective of battling corruption through improved transparency. In light of the Commission's general exemptive authority, we solicited comment on whether certain activities listed in the statute should be excluded from the definition. We also sought input on whether activities that are ancillary or preparatory to resource extraction should be included in the activities covered by the rules and whether the Commission should provide additional guidance on the types of activities that would be considered “directly related” to the “commercial development of oil, natural gas, or minerals.”
All but one of the commenters that addressed this aspect of the Proposing Release supported the proposed definition,
In the Proposing Release we solicited comment on whether additional guidance should be provided on the activities covered by the terms “extraction,” “processing,” or “export” and whether the proposed definitions and guidance were too narrow or too broad. For the term “export,” we specifically asked whether the definition should be broadened to include all transportation from one country to another, regardless of ownership interest or whether the resource originated in the country from which it is being transported.
Several commenters supported the proposed definition of “extraction” and the proposed guidance on “processing.”
As for the definition of “export,” one commenter requested clarification on whether that term covers commodity trading-related activities and situations such as when an issuer exports oil, natural gas, or minerals purchased from a government or from a state-owned company.
We are adopting the proposed definition of “commercial development of oil, natural gas, or minerals” but with additional guidance on its application. Although commenters pointed out that both the statutory definition and the proposed definition are broader than the activities typically covered by the EITI
Despite one commenter's recommendation that the final rules exclude “processing” and “export,” both terms are expressly included in the statutory definition, and we believe that these are important aspects of the commercial development of oil, natural gas, or minerals.
Although we are adopting the general definition of “commercial development of oil, natural gas, or minerals” as proposed, as well as reiterating much of the related guidance, we are revising certain key terms found in that definition in response to commenters' concerns. We note, however, that whether an issuer is a resource extraction issuer ultimately depends on the specific facts and circumstances. We are adopting the definition of “extraction” as proposed. Thus, “extraction” means the production of oil and natural gas as well as the extraction of minerals.
The final rules define “export” as the transportation of a resource from its country of origin to another country by an issuer with an ownership interest in the resource, with certain exceptions described below.
Contrary to the recommendation of one commenter, we have not defined “minerals” in the final rules.
The definition of “commercial development of oil, natural gas, or minerals” in the final rules does not capture activities that are ancillary or preparatory to such commercial development.
Section 13(q) defines “payment” to mean a payment that:
• Is made to further the commercial development of oil, natural gas, or minerals;
• is not de minimis; and
• includes taxes, royalties, fees (including license fees), production entitlements, bonuses, and other material benefits, that the Commission, consistent with the EITI's guidelines (to the extent practicable), determines are part of the commonly recognized revenue stream for the commercial development of oil, natural gas, or minerals.
The proposed definition of “payment” included the specific types of payments identified in the statute, as well as payments of certain dividends and infrastructure payments.
Consistent with Section 13(q), the proposed rules required a resource extraction issuer to disclose taxes. In addition, the proposed rules included an instruction stating that a resource extraction issuer would be required to disclose payments for taxes levied on corporate profits, corporate income, and production, but would not be required to disclose payments for taxes levied on consumption, such as value added taxes, personal income taxes, or sales taxes.
Also consistent with Section 13(q), the proposed rules required a resource extraction issuer to disclose fees, including license fees, and bonuses paid to further the commercial development of oil, natural gas, or minerals. The proposed rules included an instruction stating that fees include rental fees, entry fees, and concession fees, and that bonuses include signature, discovery, and production bonuses.
For payments of dividends, which, along with infrastructure payments, is not specified in the statute, an instruction in the proposed rules stated that an issuer generally would not need to disclose dividends paid to a government as a common or ordinary shareholder of the issuer as long as the dividend is paid to the government under the same terms as other shareholders.
The proposed rules defined a “not de minimis” payment as one that equals or exceeds $100,000, or its equivalent in the issuer's reporting currency, whether made as a single payment or series of related payments.
In the Proposing Release we solicited comment on whether we should add other payment types, such as CSR payments, or remove certain payment types from the proposed list. In particular, we asked whether other types of payments should be considered part of the commonly recognized revenue stream for the commercial development of oil, natural gas, or minerals. We also asked whether the Commission should provide additional guidance on how to interpret the proposed list of covered payment types, particularly whether additional guidance should be provided on the types of fees or bonuses that would be covered by the rules and how to distinguish CSR payments from infrastructure payments. Finally, we also included a request for comment on whether the rules should prescribe a specific method for determining the fair market value of in-kind payments.
Several commenters supported the proposed definition of “payment,”
Several commenters recommended adding commodity trading-related payments to the definition of “payment.”
Beyond CSR payments and commodity trading-related payments, commenters recommended that the rules cover other types of payments, such as when an issuer covers government expenses, provides jobs to persons related to government officials, or invests in companies created by officials or related persons.
Commenters supported the proposed requirement for issuers to disclose the method they used to calculate the value of in-kind payments.
A number of commenters also requested additional guidance on the types of payments covered by the rules.
A key component of the definition of “payment” is how “not de minimis” should be defined. In the Proposing Release, we solicited comment on various aspects of this definition. For example, we requested comment on whether a $100,000 threshold is too low or too high, whether a different threshold should apply to smaller reporting companies or other categories of issuers, and whether we should provide additional guidance on how and when an issuer would have to aggregate a series of related payments. If commenters thought a different threshold should apply, we asked for their input on how that threshold would interact with the thresholds established by other countries. We also asked whether the final rules should include a mechanism to adjust periodically the de minimis threshold to reflect the effects of inflation.
Most commenters supported the proposed definition of “not de minimis.”
In the Proposing Release we also solicited comment on whether the proposed anti-evasion provision would promote compliance with the disclosure requirements and whether we should provide additional guidance on when the anti-evasion provision would apply. Several commenters supported this provision.
We are adopting the proposed definition of “payment” with certain changes to the rule and related guidance. The definition we are adopting includes the specific types of payments identified in the statute as well as CSR payments that are required by law or contract, payments of certain dividends, and payments for infrastructure. As we noted in the Proposing Release, the statute and the EITI guidelines include most of the types of payments included in the definition.
In addition to the types of payments expressly included in the definition of payment in the statute, Section 13(q) provides that the Commission include within the definition “other material benefits” that it determines are “part of the commonly recognized revenue stream for the commercial development of oil, natural gas, or minerals.” According to Section 13(q), these “other material benefits” must be consistent with the EITI's guidelines “to the extent practicable.”
Unlike with the 2012 Proposing Release, none of the commenters on the Proposing Release suggested a broad, non-exhaustive list of payment types or a category of “other material benefits.” In light of this, and because we continue to believe that Section 13(q) directs us to make an affirmative determination that the other “material benefits” are part of the commonly recognized revenue stream, we are not adopting such a non-exclusive list or category. Accordingly, under the final rules, resource extraction issuers will be required to disclose only those payments that fall within the specified list of payment types in the rules.
We have determined that the payment types specified in the rules represent material benefits that are part of the commonly recognized revenue stream and that otherwise meet the definition of “payment.” In support of this determination, we note that the EU Directives and ESTMA also require most of these payment types to be disclosed.
The proposed rules did not require the disclosure of CSR payments. We noted in the Proposing Release that other recently enacted international transparency promotion efforts, such as the EU Directives and ESTMA, do not include CSR payments as a specified covered payment type. Although we noted that the EITI includes the disclosure of material “social expenditures” in an EITI report when those expenditures are required by law or contract,
Upon further consideration of our approach in the proposed rules and taking into account the comments discussed above, we believe that CSR payments that are required by law or contract are part of the commonly recognized revenue stream for the commercial development of oil, natural gas, or minerals.
We do not believe it is appropriate to add the other payment types recommended by some commenters because we have not determined that they are material benefits that are part of the commonly recognized revenue stream for the commercial development of oil, natural gas, or minerals. With respect to commodity trading-related payments, we believe that our definition of “export” and the categories of payments in the final rules, particularly in-kind payments, accurately reflect the commonly recognized revenue stream for the commercial development of oil, natural gas, or minerals. We acknowledge that significant payments may be made by buying/trading companies and others to purchase the commodities covered by the final rules. Nevertheless, we do not believe that purchasing or trading oil, natural gas, or minerals, even at a level above the de minimis threshold, is on its own sufficiently related to the “commercial development” of those resources to be covered by the rules, particularly when the rules already require disclosure of in-kind payments of production entitlements. We have, however, addressed below how such production entitlements must be valued when initially made in-kind but subsequently purchased by the same issuer from the recipient government.
We are also not specifically requiring disclosure of payments for government expenses, providing jobs or tuition to persons related to government officials, investing in companies created by officials or related persons, or other similar payments that could reasonably raise corruption concerns. We find it unnecessary to do so because, when these payments are made to further the commercial development of oil, natural gas or minerals (in connection with or in lieu of the identified payments), they will already be covered by the anti-evasion provision we are adopting.
With respect to payments for fines and penalties, we do not believe they relate sufficiently to the commercial development of natural resources to warrant inclusion. Although we acknowledge that the USEITI multi-stakeholder group has included penalties, we also note that the EITI Standard does not address the reporting of penalties or fines. In this regard, we understand that actual practice in countries applying the EITI Standard appears to vary depending on the particular interpretations of a country's multi-stakeholder group.
We are adopting the proposed approach to in-kind payments with one modification. In the past, many commenters supported the inclusion of in-kind payments, particularly in connection with production entitlements and none of the commenters on the Proposing Release objected to their inclusion in the rules.
We have also considered whether to require issuers to report the volume of in-kind payments. As discussed above, commenters were divided on this suggestion.
We are adopting as proposed an instruction setting forth a non-exclusive list of fees (rental fees, entry fees, and concession fees) and bonuses (signature, discovery, and production bonuses). As discussed in the Proposing Release, the EITI specifically mentions these types of fees and bonuses as payments that should be disclosed by EITI participants.
In response to commenters' concerns about compliance costs, we noted in the Proposing Release that issuers would not be required to have the payment information audited or reported on an accrual basis.
We are adopting the proposed definition of “not de minimis” for the reasons stated in the Proposing Release. A “not de minimis” payment is one that equals or exceeds $100,000, or its equivalent in the issuer's reporting currency,
Finally, despite the changes recommended by commenters, we are adopting the anti-evasion provision as proposed. Thus, the final rules require disclosure with respect to an activity (or payment) that, although not within the categories included in the proposed rules, is part of a plan or scheme to evade the disclosure required under Section 13(q).
In addition to requiring an issuer to disclose its own payments, Section 13(q) also requires a resource extraction issuer to disclose payments by a subsidiary or an entity under the control of the issuer made to a foreign government or the Federal Government relating to the commercial development of oil, natural gas, or minerals. The proposed rules defined the terms “subsidiary” and “control” using accounting principles rather than other alternatives, such as using the definitions of those terms provided in Rule 12b-2.
Within the context of the proposed rules, a resource extraction issuer would have “control” of another entity if the issuer consolidated that entity or proportionately consolidated an interest in an entity or operation under the accounting principles applicable to the financial statements it includes in periodic reports filed pursuant to Section 13(a) or 15(d) of the Exchange Act. Thus, for determining the eligible payments, or portions thereof, that must be disclosed, the resource extraction issuer would follow the consolidation requirements under generally accepted accounting principles in the United States (“U.S. GAAP”) or under the International Financial Reporting Standards as issued by the International Accounting Standards Board (“IFRS”), as applicable.
In the Proposing Release we solicited comment on how the term “control” should be defined. For example, we asked whether it was preferable to base the definition of “control” on applicable accounting principles, rather than using Rule 12b-2 of the Exchange Act, and whether there would be significant differences between these approaches. We also asked whether we should allow resource extraction issuers to report eligible payments made by proportionately consolidated entities on a proportionate basis. Finally, we solicited comment on whether there were any aspects of other international transparency initiatives or differences between U.S. GAAP and IFRS that we should address so as to promote the comparability of this type of disclosure.
All of the commenters addressing this aspect of the proposal generally supported using accounting consolidation principles instead of Rule 12b-2.
Several of the commenters that otherwise supported the proposed approach had concerns about using proportional consolidation to determine control.
Several of the commenters who had concerns with proportional consolidation for determining “control” recommended that when the payments relate to joint ventures the rules should only require disclosure of payments by the operator of the joint venture.
We are adopting the proposed definitions of “subsidiary” and “control.” We continue to believe that using accounting principles to determine control, rather than Rule 12b-2, is appropriate in light of the significant international developments since the 2012 Rules were vacated. Specifically, this approach, although not identical, complements two major international transparency regimes, the EU Directives and ESTMA, and should therefore support international transparency promotion efforts by fostering consistency and comparability of disclosed payments.
We believe that the definition we are adopting today better balances transparency for users of the payment disclosure and the burden on issuers than the use of the Rule 12b-2 definition of “control” or alternatives recommended by commenters. Issuers already apply the concept of control for financial reporting purposes, which should facilitate compliance. Assuming a reporting issuer consolidates the entity making the eligible payment,
We considered the recommendation of some commenters to include a “significant influence” test for determining control in addition to the accounting consolidation principles we proposed. We do not believe, however, that we should define control such that significant influence by itself would constitute control.
The final rules also require disclosure of the proportionate amount of the eligible payments made by a resource extraction issuer's proportionately consolidated entities or operations. We believe this approach is consistent with using accounting principles to determine control because, when proportionate consolidation is applied, an entity has an undivided interest in or contractual rights and obligations in specified assets, liabilities and operations. Under this approach, the proportionate amount of eligible payments reported by the issuer reflects the underlying interest in the economics associated with the specified assets, liabilities, and operations. Although we acknowledge commenters' concerns about the ability of an issuer to obtain sufficiently detailed payment information from proportionately consolidated entities or operations when it is not the operator of that venture, we note that the delayed compliance date in the final rules will provide issuers two years to make arrangements with joint venture operators to obtain the required payment information. If, after reasonable effort, the issuer is unable to obtain such information, it would be able to rely on Exchange Act Rule 12b-21 to omit the information if the information is unknown and not reasonably available.
We proposed requiring a resource extraction issuer to disclose payments made to governments relating to the commercial development of oil, natural gas, or minerals by type and total
Similar to the EU Directives and the ESTMA Specifications, we proposed to define “project” as operational activities that are governed by a single contract, license, lease, concession, or similar legal agreement, which form the basis for payment liabilities with a government.
In order to assist resource extraction issuers in determining whether two or more agreements may be treated as a single project, we proposed an instruction that provided a non-exclusive list of factors to consider when determining whether agreements are “operationally and geographically interconnected” for purposes of the definition of project. No single factor was necessarily determinative. Those factors included: Whether the agreements related to the same resource and the same or contiguous part of a field, mineral district, or other geographic area; whether they were performed by shared key personnel or with shared equipment; and whether they were part of the same operating budget.
In the Proposing Release we solicited comment on many possible approaches to defining the term “project,” as well as the broader question of whether we should define “project” at all. We sought public comment on how best to craft a definition that advanced the U.S. governmental interest in combatting global corruption and promoting public accountability with respect to extractive resources. Specifically, we asked about alternative definitions found in other jurisdictions, such as the European Union and Canada, as well as the API's proposed definition. We asked commenters to consider how alternative definitions might enhance transparency and the comparability of data. For example, we asked whether we should align our definition more closely with the EU Directives and ESTMA and whether there was an alternative to a contract-based definition of “project” that would be preferable. We also asked commenters about specific aspects of the proposed rules, such as under what circumstances should the rules allow for multiple agreements to be aggregated as a single project.
Numerous commenters supported the statute's directive to require disclosure at the project level.
Of the commenters supporting the proposed definition of “project,” one supported the proposed non-exclusive list of factors to consider when determining whether agreements are “operationally and geographically interconnected.”
Several other commenters opposed the proposed definition of “project.”
Several of the commenters that supported the proposed definition also specifically criticized the API Proposal for not providing a sufficiently granular level of information to meet the statute's transparency goals and for being inconsistent with international transparency promotion efforts.
After considering commenters' recommendations and international developments
Commenters continue to express strong disagreement over the level of granularity that should be adopted for the definition of “project.” After carefully considering the comments received, we remain persuaded that the definition of project that we proposed is necessary and appropriate to achieve a level of transparency that will help advance the important anti-corruption and accountability objectives underlying Section 13(q).
• Such disaggregated information may help local communities and various levels of subnational government combat corruption by enabling them to verify that they are receiving the resource extraction revenue allocations from their national governments that they may be entitled to under law. In this way, project-level disclosure could help reduce instances where government officials are depriving subnational governments and local communities of revenue allocations to which they are entitled.
• Project-level reporting at the contract level could potentially allow for comparisons of revenue flow among different projects, and the potential to engage in cross-project revenue comparisons may allow citizens, civil society groups, and others to identify payment discrepancies that reflect potential corruption and other inappropriate financial discounts.
• To the extent that a company's contractual or legal obligations to make resource extraction payments to a foreign government are known, company-specific, project-level disclosure may help assist citizens, civil society groups, and others to monitor individual companies' contributions to the public finances and ensure firms are meeting their payment obligations.
• Company-specific, project-level data may also act as a strong deterrent to companies underpaying royalties or other monies owed.
• Such disaggregated reporting may help local communities and civil society groups to weigh the costs and benefits of an individual project. Where the net benefits of a project are small or non-existent, this may be an indication that the foreign government's decision to authorize the project is based on corruption or other inappropriate motivations.
In advancing these potential uses for the granular transparency that our
We acknowledge that some commenters, in particular the API and certain industry-affiliated commenters, challenged the appropriateness of the contract-based definition of project that we are adopting.
We also believe that, in advancing its view, the API appears to have an unduly narrow understanding of Section 13(q)'s purpose. The API stated that Section 13(q) is limited “to provid[ing] the public with information about the overall revenue that national governments receive from natural resources, so that the public can seek to hold the government accountable for how much it is receiving and how it spends that money.”
For the reasons discussed above, and for the reasons set forth in the Proposing Release, we believe that the definition of project that we are adopting will provide the type of granular transparency that is necessary to advance in a meaningful way the statute's anti-corruption and accountability objectives.
We continue to believe that the reasons advanced in the Proposing Release demonstrating why the API Proposal's definition of project is not appropriate remain valid and persuasive.
• We do not agree that engaging in similar extraction activities across the territory comprising the first-level subnational political jurisdictions of countries provides the type of defining feature to justify aggregating those various activities together as a solitary project.
• Separately, the API Proposal in our view would not generate the level of transparency that, as discussed above, we believe would be necessary or appropriate to help meaningfully achieve the U.S. Government's anti-corruption and accountability goals. By permitting companies to aggregate their oil, natural gas, and other extraction activities over large territories, the API's definition would not provide local communities with payment information at the level of granularity necessary to enable them to know what funds are being generated from the extraction activities in their particular areas.
We also note that the API asserts that the contract-level approach to project may, “at times, cover a broad geographic area.” Letter from API 1. While we acknowledge that this may occur, we believe (as the discussion above demonstrates) that the potentially broad geographic areas that our definition may in some instances apply to are still much smaller than the geographic areas that the API's proposed definition of project would cover. Moreover, as we explained in the Proposing Release, all of the alternative approaches to defining project that were recommended would likely result in disclosure that is more aggregated (and therefore less detailed) on a geographical basis and would thus potentially be less useful for purposes of realizing the statute's objectives of increasing payment transparency to combat global corruption and promote accountability.
Beyond these considerations, our own experience in implementing the Foreign Corrupt Practices Act leads us to believe that the granular disclosures that our definition will produce will better help combat corruption than the aggregated (and anonymized) disclosures that the API Proposal would yield. We have found that requiring issuers to maintain detailed, disaggregated records of payments to government officials significantly decreases the potential for issuers and others to hide improper payments and as such their willingness to make such payments. This experience has led us to believe that, where corruption is involved, detailed, disaggregated disclosures of payments minimizes the potential to engage in corruption undiscovered. We thus believe that the more granular the disclosure in connection with the transactions between governments and extractive corporations, the less room there will be for hidden or opaque behavior.
We acknowledge that the API Proposal's definition of “project” could lower the potential for competitive harm when compared to our proposed approach, which requires public disclosure of contract-level data. Nevertheless, we continue to believe that the potential for competitive harm resulting from the final rules is significantly reduced, although not eliminated, by the adoption of a similar definition of “project” in the European Union and Canada.
• Royal Dutch Shell plc,
• Total,
• Tullow Oil plc,
• Statoil,
• Kosmos Energy,
We are also adopting the proposed approach to aggregating multiple agreements. Despite the concerns of some commenters that the standards in the proposed rule for aggregating multiple projects could result in a
In Section 13(q), Congress defined “foreign government” to mean a foreign government, a department, agency, or instrumentality of a foreign government, or a company owned by a foreign government, while granting the Commission the authority to determine the scope of the definition.
The Proposing Release solicited comment on the scope of the definitions of “foreign government” and “Federal Government.” For example, we asked whether the definition of “foreign government” should include a foreign government, a department, agency, or instrumentality of a foreign government, a company owned by a foreign government, or anything else. We also asked about the level of ownership that would be appropriate for a company to be considered owned by a foreign government. With respect to “Federal Government,” we requested comment on whether we should provide additional guidance on its meaning.
We received few comments on this aspect of the proposal. Several commenters generally supported the proposed definition of “foreign government.”
We are adopting the definitions of “foreign government” and “Federal Government” as proposed. Under the final rules, a “foreign government” is defined as a foreign government, a department, agency, or instrumentality of a foreign government, or a company at least majority owned by a foreign government. Foreign government includes a foreign national government as well as a foreign subnational government, such as the government of a state, province, county, district, municipality, or territory under a foreign national government.
As we discussed in the Proposing Release, for purposes of identifying the foreign governments that received the payments, an issuer must identify the administrative or political level of subnational government that is entitled to a payment under the relevant contract or foreign law. Also, if a third party makes a payment on a resource extraction issuer's behalf, disclosure of that payment is covered under the final rules. Additionally, as proposed, a company owned by a foreign government means a company that is at least majority-owned by a foreign government.
We proposed requiring issuers to make their resource extraction payment disclosure annually on Form SD. The proposed amendments to Form SD required issuers to include a brief statement in the body of the form directing readers to the detailed payment information provided in the exhibits to the form. Consistent with the approach under ESTMA, the proposed rules also required resource extraction issuers to file Form SD on EDGAR no later than 150 days after the end of the issuer's most recent fiscal year.
The Proposing Release solicited comment on whether issuers should provide the payment disclosure mandated under Section 13(q) on Form SD or whether that information should be provided on Forms 10-K, 20-F, or 40-F or a different form. We also asked whether the proposed disclosure should be subject to the officer certifications required by Exchange Act Rules 13a-14 and 15d-14 or a similar requirement.
Several commenters specifically supported using Form SD, and no commenters suggested an alternative approach.
No commenters suggested requiring officer certifications. Some commenters stated that certifications were unnecessary in light of the possibility for Exchange Act Section 18 liability.
Some commenters specifically supported the proposed approach of using an issuer's fiscal year as the reporting period.
We are adopting the final rules as proposed, with two new targeted exemptions that provide for transitional relief or delayed reporting in limited circumstances. These exemptions provide a longer transition period for recently acquired companies that were not previously subject to reporting under the final rules and a one-year delay in reporting payments related to exploratory activities.
Section 13(q) requires a resource extraction issuer to provide the required payment disclosure in an annual report but otherwise does not specify the location of the disclosure. We believe Form SD is an appropriate form since it is already used for specialized disclosure not included within an issuer's periodic or current reports, such as the disclosure required by the rule implementing Section 1502 of the Act.
While Section 13(q) mandates that a resource extraction issuer include the relevant payment disclosure in an “annual report,” it does not specifically mandate the time period in which a resource extraction issuer must provide the disclosure. We continue to believe that the fiscal year is the more appropriate reporting period for the payment disclosure. Despite the USEITI's use of calendar year reporting, we believe fiscal year reporting would reduce resource extraction issuers' compliance costs by allowing them to use their existing tracking and reporting systems for their public reports to also track and report payments under Section 13(q). Finally, we note that ESTMA and the EU Directives also require reporting based on the fiscal year, with ESTMA using the same deadline contained in the proposed rules.
We are also adopting the proposed 150 day deadline. As discussed above, none of the commenters on the Proposing Release suggested a different deadline, and we continue to believe that it is reasonable to provide a filing deadline that is later than the deadline for an issuer's annual report under the Exchange Act. Although certain commenters discussed above supported allowing issuers to rely on Rule 12b-25 to request an extension to the filing deadline, we do not believe that is necessary. In this regard, we note that none of the potential issuers that provided comments recommended including an extension process. Moreover, we believe 150 days is sufficient time to prepare timely disclosure regarding the prior fiscal year.
Nevertheless, we do believe it is appropriate to provide transitional relief for recently acquired companies where such companies were not previously subject to the rules, as recommended by certain commenters.
Recognizing the purposes of Section 13(q) and the discretion provided by the statute, and taking into account the views expressed by various commenters,
In the Proposing Release we solicited comment on whether issuers should be permitted to submit the required payment disclosure on a confidential basis. We also asked whether issuers should be required to file certain aggregate information publicly if we allow them to file certain disaggregated information with us confidentially.
Numerous commenters supported, as a general policy matter, the concept of publicly disclosing payment information.
On the other hand, several commenters recommended allowing for confidential submission of the detailed payment information, which would then be aggregated in an anonymized format by the Commission before being publicly released.
Section 13(q) provides the Commission with the discretion to require public disclosure of payments by resource extraction issuers or to permit confidential filings.
As discussed in the Proposing Release, several factors continue to influence our approach.
Second, the United States is currently a candidate country under the EITI, which requires it to provide a framework for public, company-by-company disclosure in the EITI report. At least with respect to reporting of payments to the Federal Government, requiring issuers to provide their annual reports publicly on Form SD is consistent with the U.S. Government's policy commitments under the USEITI. As noted above, the Department of Interior has stated that permitting confidential disclosure would contravene USEITI implementation.
Third, we continue to believe that exercising our discretion to require public disclosure of the information required to be submitted under the statute is supported by the text, structure, and legislative history of Section 13(q).
More fundamentally, we believe that the public release of issuers' annual reports is necessary to achieve the U.S. interest in providing a level of payment transparency that will help combat corruption and promote accountability in resource-rich countries, as Section 13(q) was intended to do. The comments that we have received, as well as our own consideration of the record and the views that we have received from other U.S. and foreign governmental agencies with expertise in this area, persuade us of this.
We have carefully considered the API's assertion that the “purpose of enabling people to hold their governments accountable for the revenues generated from resource development is achieved as long as citizens know the amount of money the government receives, not the companies that make each individual payment.”
We believe that disclosing an issuer's identity is important to help achieve the objectives of Section 13(q). In this regard, we note that one of the proponents of the API's approach stated that “[f]or the API model to work,” each payer's identity must be revealed.
Furthermore, as we explained in the Proposing Release, the record supports a number of specific ways in which company-specific public disclosures can facilitate the twin goals of helping to reduce corruption in the extractives sector and promoting governmental accountability. For example, public disclosure of company-specific, project-level payment information may help assist citizens, civil society groups, and others to monitor individual issuer's contributions to the public finances and ensure firms are meeting their payment obligations. We explained that such data may also help various actors ensure that the government is properly collecting and accounting for payments.
We note that the API asserts that “Section 13(q) was passed to increase the accountability of governments, not to force public companies to pay more to develop natural resources, or to expose them to activism by special interest groups.”
[T]ransparency about corporate payments to governments is a prerequisite to the effective engagement of citizens to ensure that such revenues are managed responsibly and for the benefit of a country's citizens. Such engagement is only possible if the citizens know which company is paying what kind of payment to which government entity relating to which project in which location. Aggregate data about multiple resources, projects, or geographic locations does not allow citizens of a particular[ ] region to speak up and insist that the revenues associated with the project impacting them be used for their benefit, rather than to personally benefit potentially corrupt government officials.
In addition, we believe that providing an issuer's Form SD filings to the public through the searchable, online EDGAR system, which will enable users of the information to produce their own up-to-date compilations in real time, is both consistent with the goals of the statute and the Commission's obligation, to the extent practicable, to “make available online, to the public, a compilation of the information required to be submitted” by issuers.
In sum, we believe that public disclosure of each issuer's Form SD is important to further Section 13(q)'s foreign policy objectives of helping to reduce corruption and enhance the ability of citizens to hold their governments accountable for the management of the natural resources in their country and the use of the revenues generated by those resources.
In the Proposing Release, we noted that many commenters previously had requested exemption from Section 13(q)'s disclosure requirements, in particular in cases where the required payment disclosure is prohibited under the host country's laws. We noted that some commenters had identified specific countries that they claimed prohibit disclosure while other commenters challenged those statements. Given commenters' conflicting positions and representations, and consistent with the EU Directives and ESTMA, we did not propose any blanket or per se exemptions. Instead, we indicated that we would consider using our existing authority under the Exchange Act to provide exemptive relief at the request of issuers, if and when warranted.
In the Proposing Release we solicited comment on whether a case-by-case exemptive process was a better alternative than providing a rule-based blanket exemption for specific countries or other circumstances, or providing no exemptions. We also asked whether any foreign laws prohibit the disclosure that would be required by the proposed rules, or if there was any information that had not been previously provided by commenters that supports an assertion that such prohibitions exist and are not limited in application. We also asked whether the EU Directives' and ESTMA's lack of an exemption for situations when disclosure is prohibited under host country law had presented any problems for resource extraction issuers subject to those reporting regimes.
A number of commenters supported the proposed approach.
Many other commenters supported the proposed approach, but preferred not providing any exemptions.
Numerous commenters recommended not providing any exemptions.
Several commenters supported blanket exemptions instead of the proposed case-by-case approach.
The API and certain other industry commenters sought various blanket exemptions.
As for disclosure that would reveal commercially sensitive information, these commenters recommended allowing issuers to redact payment information temporarily until a later time when the disclosure would be less harmful (
In addition to these broader recommendations about the types of exemptions that should be included in the rules, commenters also made recommendations with respect to the process for granting exemptions. A few commenters were concerned that the exemption requests would be considered in a public forum, which could result in disclosure of competitively sensitive information or violate host country law.
Numerous commenters recommended a public process for exemption applications.
A number of commenters made specific recommendations for the types of supporting documentation the rules should require from those seeking an exemption due to a foreign law prohibition on disclosure.
While we continue to believe, for the reasons discussed below, that a case-by-case approach to providing exemptions under our existing authority is generally preferable in this context, we are also including a targeted exemption for payments related to exploratory activities.
With respect to the request for a blanket exemption in countries where the law may prohibit the disclosure, however, we believe that there continues to be sufficient uncertainty in the record such that this approach is not necessary or appropriate at this time. For example, while the API initially identified four countries whose laws would prohibit Section 13(q) disclosures, its most recent comment letter listed only two of those countries as currently prohibiting such disclosures.
Separately, we also believe that the case-by-case exemptive approach is significantly less likely than a blanket approach to encourage foreign governments to enact laws prohibiting the Section 13(q) disclosures. A blanket exemption could lead a foreign government contemplating such a law to conclude that enactment of the law would have its intended effect of preventing the disclosures. With a case-by-case exemptive approach, however, that foreign government would not be able to reach that conclusion, as it would face a number of uncertainties concerning the potential results of enacting such a law. Specifically, the foreign government would not have any basis to assume that the Commission would grant exemptive relief, and, even if it did so, whether such relief would apply on a permanent basis or in a more limited fashion (such as a grandfathering provision or a time-limit to allow issuers to divest their interests in the country in an orderly manner). This uncertainty about whether the law would have its intended effect, in our view, should help to discourage foreign governments from adopting such a law. Relatedly, we note that one commentator opposed the case-by-case exemptive approach because of the uncertainty that it may cause issuers.
With respect to the request for an exemption to prevent the disclosure of
For purposes of this exemption, we consider payments to be related to exploratory activities if they are made as part of the process of identifying areas that may warrant examination or examining specific areas that are considered to have prospects of containing oil and gas reserves, or as part of a mineral exploration program. In all cases, however, exploratory activities are limited to activities conducted prior to the development or extraction of the oil and gas or minerals that are the subject of the exploratory activities. Furthermore, this targeted exemption is not permitted for payments related to exploratory activities on the property or any adjacent property once the issuer has commenced development or extraction activities anywhere on the property, on any adjacent property, or on any property that is part of the same project.
In providing this exemption, we also considered the fact that the total payment streams from the first year of exploration that would be covered by the exemption should often be relatively small compared to, for example, the annual payment streams that would likely occur once an issuer commences development and production. Given this likelihood, we believe, on balance, that any diminished transparency as a result of the one-year delay in reporting of such payments that we are permitting is justified by the potential competitive harms that we anticipate may be avoided as a result of this exemptive relief. Nevertheless, we have limited the exemption to one year because we believe that the likelihood of competitive harm related to a new discovery from disclosing the payment information diminishes over time once exploratory activities on the property or any adjacent property have begun.
Beyond these accommodations for exploratory activities and certain recently acquired companies, we are not persuaded that we should adopt exemptions for other purposes in the final rules. As a threshold matter, we note that many commenters advanced credible arguments challenging the claims raised by industry commenters for broad exemptive relief in these areas.
A separate but related consideration is that developing objective criteria for exemptive relief for potential competitive harm (beyond the exploratory phase) or safety that could be uniformly applied would be difficult. In our view, issues related to such competitive and safety concerns are inherently case-specific, requiring an analysis of the underlying facts and circumstances. We are therefore concerned that adopting a broad exemption with respect to competitive concerns (beyond the exploratory phase) or safety concerns could result in issuers applying the exemption in an overly broad way. Specifically, the effective and appropriate utilization of broad exemptions in these areas would be dependent on the independent assessment and good faith implementation by issuers, potentially producing inconsistent application, if not overuse.
Finally, we are not persuaded that there is a need for an exemption in the final rules for contracts that may prohibit the disclosure. We note that various commenters opposing such an exemption provided evidence indicating that many contracts allow for disclosure of payment information where it is required by law.
Commenters were also divided about whether the exemptive application process should be public (with notice and comment) or confidential. We agree that public input can be beneficial in understanding the complexities of the resource extraction industry. Accordingly, Rule 0-12 allows the Commission to provide notice in the
Finally, we note that Rule 0-12 requires an application to be made in writing, including “any supporting documents necessary to make the application complete.” Commenters were divided on whether the Commission should require certain specified documentation as part of the application or whether we should follow a more flexible, non-prescriptive approach, where the registrant would initially determine what supporting information is appropriate. We believe a non-prescriptive, flexible process is more appropriate given that we are adopting a case-by-case approach to exemptions that is driven by particular facts and circumstances. We do note, however, that the Commission, through the Division of Corporation Finance, may request, as appropriate, supporting documentation such as a legal opinion, the text of applicable foreign laws (translated as necessary), representations as to the public availability of the information in question, or a description of the steps taken by the issuer to obtain permission to disclose.
As noted in the Proposing Release, several jurisdictions have implemented resource extraction payment disclosure laws since the 2012 Rules.
We proposed requiring resource extraction issuers to file the substantially similar report as an exhibit to Form SD with a statement in the body of its filing that it was relying on the accommodation and identifying the alternative reporting regime for which the report was prepared (
In the Proposing Release we solicited comment on whether we should include an alternative reporting process that would allow for an issuer that is subject to the reporting requirements of a foreign jurisdiction or the USEITI to submit those reports in satisfaction of our requirements. In addition, we solicited comment on whether a “substantially similar” standard was appropriate and which criteria should apply when evaluating the similarity of another jurisdiction's reporting requirements. We also solicited comment on various aspects of the procedures surrounding an alternative reporting process, such as whether the Commission should unilaterally make the determination, what types of parties should be allowed to submit an application for alternative reporting, what supporting evidence should be required, and what application procedures should be implemented. For example, we requested comment on whether Exchange Act Rule 0-13 would provide appropriate procedures for requesting alternative reporting. We also solicited comment on whether the Commission should recognize certain foreign reporting requirements or the USEITI reporting framework as substantially similar when the final rule is adopted.
All of the commenters that addressed this aspect of the Proposing Release supported the concept of alternative reporting in some form.
One commenter recommended that the Commission not require issuers to convert data into a different interactive data format as a condition to alternative reporting.
Other commenters made specific recommendations on the procedures that the Commission should follow when making an alternative reporting determination. For example, several commenters supported using the procedures set forth in Exchange Act Rule 0-13,
A number of commenters called for the Commission to recognize substantially similar alternative reporting regimes in the adopting release.
We are adopting an alternative reporting mechanism similar to what we proposed whereby issuers will be able to meet the requirements of the final rules by providing disclosure that complies with a foreign jurisdiction's or the USEITI's resource extraction payment disclosure requirements if they are deemed “substantially similar” by the Commission.
We note that the alternative reporting provision is generally consistent with the approach taken in the EU Directives and ESTMA and should promote international transparency efforts by incentivizing foreign countries that are considering adoption of resource extraction payment disclosure laws to provide a level of disclosure that is consistent with our rules and the other major international transparency regimes. Under the final rules, an issuer may only use an alternative report for an approved foreign jurisdiction or regime if the issuer is subject to the resource extraction payment disclosure requirements of that jurisdiction or regime and has made the report prepared in accordance with that jurisdiction's requirements publicly available prior to filing it with the Commission.
In addition, the alternative reports must be tagged using XBRL.
An issuer relying on the alternative reporting accommodation must also provide a fair and accurate English
As noted in the Proposing Release, the “substantially similar” standard would not require the alternative reporting regime to be equivalent or identical. Under the final rules, the Commission could consider the following criteria, among others, to make its determination that another reporting regime is substantially similar: (1) The types of activities that trigger disclosure; (2) the types of payments that are required to be disclosed; (3) whether project-level disclosure is required and, if so, the definition of “project;” (4) whether the disclosure must be publicly filed and whether it includes the identity of the issuer; and (5) whether the disclosure must be provided using an interactive data format that includes electronic tags. When considering whether to allow alternative reporting based on a foreign jurisdiction's reporting requirements, the Commission will likely also consider whether disclosure of payments to subnational governments is required and whether there are any exemptions allowed and, if so, whether there are any conditions that would limit the grant or scope of the exemptions. This non-exclusive list of factors does not preclude the Commission from considering other factors, such as those recommended in the comments described above.
As discussed above in Section I.C.2, Canada allows for substituted reports to be filed according to the approved substitute jurisdiction's deadline if the Department of Natural Resources Canada is notified by email prior to the expiration of ESTMA's 150 day deadline.
In conjunction with our adoption of the final rules, we are issuing an order recognizing the EU Directives, Canada's ESTMA, and the USEITI in their current forms as substantially similar disclosure regimes for purposes of alternative reporting under the final rules, subject to certain conditions. We have determined that these three disclosure regimes are substantially similar to the final rules.
Although we are recognizing the USEITI's requirements as substantially similar, we are mindful of the more limited scope of those requirements. For example, the USEITI does not cover payments to foreign governments and currently uses calendar year reporting instead of fiscal year reporting.
With respect to applications to request recognition of other jurisdictions' payment transparency rules as substantially similar, applicants should follow the procedures set forth in Rule 0-13 of the Exchange Act, which permits an application to be filed with the Commission to request a “substituted compliance order” under the Exchange Act. Although applicants should follow the procedures set forth in Rule 0-13(b) through (i), applications may be submitted by issuers, governments, industry groups, and trade associations.
The proposed rules required a resource extraction issuer to file the required disclosure on EDGAR in an XBRL exhibit to Form SD. Consistent with Section 13(q), the proposed rules required issuers to submit the payment information using electronic tags—a taxonomy of defined reporting elements—that identify, for any payment required to be disclosed:
• The total amounts of the payments, by category;
• the currency used to make the payments;
• the financial period in which the payments were made;
• the business segment of the resource extraction issuer that made the payments;
• the government that received the payments and the country in which the government is located; and
• the project of the resource extraction issuer to which the payments relate.
In addition to the electronic tags specifically required by the statute, we proposed requiring issuers to provide and tag:
• The type and total amount of payments made for each project,
• the type and total amount of payments for all projects made to each government;
• the particular resource that is the subject of commercial development, and
• the subnational geographic location of the project.
For purposes of identifying the subnational geographic location of the project, we proposed an instruction specifying that issuers must provide information regarding the location of the project that is sufficiently detailed to permit a reasonable user of the information to identify the project's specific, subnational location.
We also proposed an instruction to Form SD that would have required issuers to report the amount of payments made for each payment type and the total amount of payments made for each project and to each government in U.S. dollars or in the issuer's reporting currency if not U.S. dollars.
Consistent with the statute, the proposed rules required a resource extraction issuer to include an electronic tag that identified the business segment of the resource extraction issuer that made the payments. We proposed defining “business segment” as the reportable segments used by the resource extraction issuer for purposes of financial reporting.
We also proposed that to the extent payments, such as corporate income taxes and dividends, are made for obligations levied at the entity level, issuers could omit certain tags that may be inapplicable (
Finally, we noted that Section 13(q)(3) directs the Commission, to the extent practicable, to provide a compilation of the disclosure made by resource extraction issuers. To satisfy this requirement, the proposed rules required the disclosures to be filed on EDGAR in an XBRL exhibit, which would allow the data to be searched and extracted by users.
In the Proposing Release we solicited comment on a variety of matters related to the format of the disclosure, the proposed tags, and the related
All of the commenters that addressed the proposed interactive data format supported using XBRL.
One commenter specifically supported the proposed approach to describing the geographic location of projects.
Several commenters requested changes or clarifications to the data tagging requirements.
Another commenter, noting our guidance on entity-level disclosure, requested clarification of whether it could omit the project tag with respect to its export activities, which it stated were not project-specific.
Another commenter recommended adopting the AICPA Audit Data Standards within the new XBRL taxonomy. This commenter stated that using these standards would enable issuers and their auditors to share “business operational, business and accounting data,” creating potential cost savings by reducing duplicative data standards used by issuers and thereby leveraging the cost of complying with the rule for a range of purposes including internal and external use in the audit function.
Another commenter recommended incorporating in EDGAR robust validation of the data submitted in the XBRL exhibits for both technical structure as well as content.
One commenter stated that the three proposed methods for calculating the currency conversion when payments are made in multiple currencies provides issuers with sufficient options to address any possible concerns about compliance costs and comparability of the disclosure among issuers.
Finally, several commenters specifically supported the proposed approach as meeting the statutory requirements to provide a compilation.
We are adopting the proposed requirements regarding interactive data
Commenters were divided on how issuers should tag the subnational geographic location of the project.
With respect to the requirement to provide and tag the type and total amount of payments made for each project and to each government, we are adopting the three currency conversion methods as proposed.
With respect to the required business segment tag, despite the concerns of one commenter, we are adopting the proposed definition of “business segment.”
The statutory language of Section 13(q) does not specify that the information about resource extraction payments must be “filed.” Rather, it states that the information must be “include[d] in an annual report[.]”
In the Proposing Release we solicited comment on whether the payment disclosure should be filed or furnished. We also asked whether certain officers, such as the resource extraction issuer's principal executive officer, principal financial officer, or principal accounting officer, should certify the Form SD filing's compliance with the requirements of Section 13(q) of the Exchange Act or that the filing fairly presents the information required to be disclosed under Rule 13q-1.
Commenters were divided on whether the disclosure should be filed as proposed, thus incurring Section 18 liability, or whether it should be furnished.
One commenter recommended allowing foreign private issuers to furnish Form SD,
Another commenter recommended that to the extent an issuer wishes to include additional, voluntary disclosures in its Form SD, it should be permitted to furnish rather than file that information.
The rules we are adopting today require the disclosure to be filed on Form SD. Section 13(q) does not state how the information should be submitted and instead leaves that question to the Commission to determine. We believe that the Form SD disclosure, including any voluntary disclosure, will benefit from potential Section 18 liability by providing issuers with further incentive to submit complete and accurate information. Although several commenters argued that the information is not material to investors and should therefore be furnished, we note that other commenters, including a number of large institutional investors who have expressed an intention to use the Section 13(q) disclosures, continue to argue that the information is material or important to investors.
Although a commenter stated that in certain other contexts issuers may furnish, rather than file, disclosure prepared in accordance with a foreign jurisdiction's requirements, we note that the disclosure furnished on Form 6-K, such as quarterly reports, is not required by the Commission's reporting requirements.
Section 13(q) provides that, with respect to each resource extraction issuer, the final rules issued under that section shall take effect on the date on which the resource extraction issuer is required to submit an annual report relating to the issuer's fiscal year that ends not earlier than one year after the date on which the Commission issues the final rules under Section 13(q).
In the Proposing Release we asked whether we should provide a compliance date linked to the end of the nearest commonly used quarterly period following the effective date or whether we should adopt a shorter or longer transition period. We also solicited comment on whether the rules should provide for a longer transition period for certain categories of resource extraction issuers, such as smaller reporting companies or emerging growth companies.
Several commenters opposed a longer transition period for any category of issuer, including smaller reporting companies.
Some commenters recommended delaying the effective date for all issuers.
The final rules require a resource extraction issuer to comply with Rule 13q-1 and Form SD for fiscal years ending no earlier than two years after the effective date of the adopted rules. We believe that this phase-in period is appropriate to provide all issuers with sufficient time to establish the necessary systems and procedures to capture and track all the required payment information before the fiscal year covered by their first Form SD filing starts. It also should afford issuers an appropriate opportunity to make any other necessary arrangements (such as obtaining modifications to existing contracts or seeking exemptive relief where warranted) to comply with Section 13(q) and these rules. This compliance date should also provide issuers with more time to consider the experience of companies reporting under similar payment transparency regimes, such as the EU Directives and ESTMA, which should reduce compliance costs.
As proposed, we are also selecting a specific compliance date that corresponds to the end of the nearest calendar quarter following the effective date. Thus, under the final rules, the initial Form SD filing for resource extraction issuers would cover the first fiscal year ending on or after September 30, 2018 and would not be due until 150 days later. Since most issuers use a December 31 fiscal year end, the filing deadline would not be until May 30, 2019 for most issuers. Given the length of time between the adoption of these rules and the start of the first fiscal year that must be reported, we do not believe any additional accommodations are necessary for smaller reporting companies, emerging growth companies, or other categories of issuers. We note that not providing longer phase-in periods for specific categories of issuers is consistent with the EITI and, for public companies, with the EU Directives and ESTMA.
We are adopting Rule 13q-1 and an amendment to Form SD to implement Section 13(q), which was added to the Exchange Act by Section 1504 of the Act. Section 13(q) directs the Commission to issue rules that require a resource extraction issuer to disclose in an annual report filed with the Commission certain information relating to payments made by the issuer (including a subsidiary of the issuer or an entity under the issuer's control) to a foreign government or the U.S. Federal Government for the purpose of the commercial development of oil, natural gas, or minerals.
As discussed above, Congress intended that the rules issued pursuant to Section 13(q) would help advance the important U.S. foreign policy objectives of combatting global corruption and helping to promote accountability, thereby potentially improving governance in resource-rich countries around the world.
We are sensitive to the costs and benefits of the rules we adopt, and Exchange Act Section 23(a)(2) requires us, when adopting rules, to consider the impact that any new rule would have on competition. In addition, Section 3(f) of the Exchange Act directs us, when engaging in rulemaking that requires us to consider or determine whether an action is necessary or appropriate in the public interest, to consider, in addition to the protection of investors, whether the action will promote efficiency, competition, and capital formation.
As part of our analysis, we have quantified the potential economic effects of the final rules wherever possible. Given both the nature of the statute's intended benefits and the lack of data regarding the benefits and the costs, in some cases we have been unable to provide a quantified estimate. Nevertheless, as described more fully below, we provide both a qualitative assessment of the potential effects and a quantified estimate of the potential aggregate initial and aggregate ongoing compliance costs. We reach our estimates by carefully considering comments we received on potential costs and taking into account additional data and information, including recent global developments in connection with resource extraction payment transparency. We rely particularly on those comment letters that provided quantified estimates and were transparent about their methodologies. As discussed in more detail below, after considering the comment letters, we
The baseline the Commission uses to analyze the potential effects of the final rules is the current set of legal requirements and market practices.
To estimate the number of potentially affected issuers, we use data from Exchange Act annual reports for 2015, the latest full calendar year. We consider all Forms 10-K, 20-F, and 40-F filed in 2015 by issuers with oil, natural gas, and mining Standard Industrial Classification (“SIC”) codes
In the following economic analysis, we discuss the potential benefits and costs and likely effects on efficiency, competition, and capital formation that might result from both the new reporting requirement mandated by Congress and from the specific implementation choices that we have made in formulating the final rules.
As noted above, we understand that Section 13(q) and the rules required thereunder are intended to advance the important U.S. foreign policy objective of combatting global corruption and helping to promote accountability, thereby potentially improving governance in resource-rich countries around the world.
We received several comments on quantifying the potential economic benefits of the final rules that are discussed in detail below.
It is also important to note, however, that Congress has directed us to promulgate this disclosure rule. Thus, we believe it reasonable to rely on Congress's determination that the rule will produce the foreign policy and other benefits that Congress sought in imposing this mandate. Because of the important foreign policy interests at stake, we believe that Congress' determination that the potential benefits of disclosure justify such a rule is a decision that is owed considerable deference, and we do not believe that Congress intended that we second-guess its determination.
Moreover, as noted above, we concur with Congress' judgment that resource extraction payment disclosures could help to achieve a critical foreign policy objective of the U.S. Government. In reaching this conclusion, we are particularly mindful that a broad international consensus has developed on the potential benefits of revenue transparency.
Notably, none of the industry commenters expressed the view that the disclosures required by Section 13(q) would fail to help produce these anti-corruption and accountability benefits. Indeed, several commenters expressly acknowledged that transparency produces such benefits (notwithstanding the inability to reliably quantify those benefits). For example, one industry commenter stated that “[t]ransparency by governments and companies alike regarding revenue flows from the extraction of natural resources in a manner which is meaningful, practical and easily understood by stakeholders reduces the opportunity for corruption.”
While there is no conclusive empirical evidence that would confirm whether the project-level, public disclosure that we are adopting will in fact reduce corruption, in forming our conclusion that payment transparency will further the identified U.S. foreign policy goals, we find persuasive the arguments and evidence advanced by several commenters throughout this rulemaking that have emphasized the potential benefits to civil society of such public disclosure.
To support their claims, these commenters provided numerous examples of ways in which disaggregated payment information can be effective in helping to reduce corruption and promote accountability, and no commenters disputed these
As a threshold matter, we think it is important to observe that the EITI and other global transparency efforts are relatively new, which makes it difficult at this time to draw any firm empirical conclusions about the potential long-term benefits that such transparency regimes may produce for resource-rich countries. The causal mechanisms involved are complex (impacted by myriad factors) and it may take several decades before those mechanisms yield empirically verifiable social gains.
A few commenters on the Proposing Release argued that the rules implementing Section 13(q) would generate societal benefits and cited studies that attempt to measure those benefits for countries that join the EITI.
One commenter presented a study that found a significant increase in GDP when a resource-rich country joins the EITI.
Another commenter cited two studies that examined the effect of a country joining the EITI on net foreign direct investment (“FDI”).
Another commenter presented two single country-based case studies of conflict and unrest, which the commenter attributed to corruption and lack of transparency. The studies measured the economic impact of such conflict and unrest on U.S. oil companies and used the avoidance of such economic costs as a means of quantifying the societal benefits of transparency.
One commenter cited its own study suggesting that high levels of corruption (measured by bribery) correspond to lower levels of economic development.
To the extent that the final rules increase transparency and thus reduce corruption, they would increase efficiency and capital formation. While the objectives of Section 13(q) may not appear to be ones that would necessarily generate measurable, direct economic benefits to investors or issuers, investors and issuers might benefit from the final rules' indirect effects. In the following paragraphs, we discuss existing theoretical arguments and empirical evidence that reduced corruption and better governance could have longer term positive impacts on economic growth and investment in certain countries where the affected issuers operate, which could in turn benefit issuers and their shareholders.
Although the research and data available at this time does not allow us to draw any firm conclusions, we have considered several theoretical causal explanations for why reductions in corruption may increase economic growth and political stability, which in turn may reduce investor risk.
A number of empirical studies have also shown that reducing corruption might result in an increase in the level of GDP and a higher rate of economic growth through more private investments, better deployment of human capital, and political stability.
There also could be positive externalities from increased investor confidence to the extent that improved economic growth and investment climate could benefit other issuers working in those countries. Although we believe the evidence is presently too inconclusive to allow us to predict the likelihood that such a result would occur, we note that there is some empirical evidence suggesting that lower levels of corruption might reduce the cost of capital and improve valuations for some issuers.
One commenter asserted that the studies cited above discuss primarily a single form of corruption—bribery—that in the commenter's view is not subject to the disclosures required by Section 13(q) and hence the commenter contended that these studies do not support our view that the required disclosures might achieve economic benefits resulting from reduced corruption.
We also note that some commenters on the Proposing Release
One of these commenters identified several benefits that project-level reporting would generate for investors.
A second benefit for investors, according to the commenter, is that project-level reporting would help adjust assumptions on a major cost to the project: the effective tax rate of the host government, the total taxes and other payments to governments. The commenter provided a hypothetical example in which information on the effective tax rate paid increases the estimate of the value of the company by three percent. While the benefit of having accurate tax information when valuing a project or a company is indisputable, it is unlikely, as we indicated above, that an investor or analyst will have accurate information for other components (
A third benefit for investors, according to the commenter, is that the project-level disclosure would help investors assess the issuer's exposure to commodity price downturns by analyzing industry cost curves to forecast commodity prices. As noted above, such benefit assumes that all other relevant costs (
A fourth benefit for investors, according to the commenter, is that project-level disclosure would result in lower cost of capital because it makes firms more transparent and thus creates trust with investors. The commenter cites two studies that find a positive link between transparency and cost of capital. The studies, however, do not provide evidence that resource extraction transparency in particular leads to lower cost of capital; rather, the studies conclude more generally that earnings transparency and the strength of the country's securities regulations can have a major impact on cost of capital. Transparency regarding key company financial and accounting information will likely have a stronger effect on cost of capital than transparency regarding the company's resource payments.
A fifth benefit for investors, according to the commenter, is that increased transparency may lead to lower political risk. Such a benefit, however, depends not only on resource extraction payment disclosure, but also on other types of disclosure and the quality of the governance of the host country. Disclosure under Section 13(q) by itself may not result in lower political risk.
While we acknowledge all these comments, we believe that the direct incremental benefit to investors from this information may be limited given that most impacted issuers, other than smaller reporting companies,
In response to the Proposing Release, one commenter suggested an additional approach to quantify the rule's benefits to investors.
We carefully considered each of these studies, but note that there are a number of potential limitations in the analysis: certain of the events used in these studies may be confounded by other events;
We received a number of comments on the compliance costs that would be imposed by the proposed rules. We first summarize these comments in the subsection immediately below and then, in the following subsections, we assess these comments as part of our discussion of the final rules' potential direct and indirect compliance costs and their potential effects on competition.
Many commenters stated that the reporting regime mandated by Section 13(q) would impose significant compliance costs on issuers. During the comment period after the 2010 Proposing Release, several commenters specifically addressed the cost estimates presented in the Paperwork Reduction Act (“PRA”) section of that release.
Some commenters on the 2010 Proposing Release disagreed with our industry-wide estimate of the total annual increase in the collection of information burden and argued that it underestimated the actual costs that would be associated with the rules.
Commenters on the 2010 Proposing Release also stated that modifications to issuers' core enterprise resource planning systems and financial reporting systems would be necessary to capture and report payment data at the project level, for each type of payment, government payee, and currency of payment.
These commenters added that these estimated costs could be significantly greater depending on the scope of the final rules.
Two commenters stated that arriving at a reliable estimate for the ongoing annual costs of complying with the rules would be difficult because the rules were not yet fully defined but suggested that a “more realistic” estimate than the estimate included in the 2010 Proposing Release is hundreds of hours per year for each large issuer that has many foreign locations.
One commenter on the 2010 Proposing Release estimated that ongoing compliance with the rules implementing Section 13(q) would require 100-200 hours of work at the head office, an additional 100-200 hours of work providing support to its business units, and 40-80 hours of work each year by each of its 120 business units, resulting in an approximate yearly total of 4,800-9,600 hours and $2,000,000-$4,000,000.
In response to the Proposing Release, only one commenter suggested an alternative quantitative estimate of the direct compliance costs.
Although commenters on the Proposing Release did not address whether compliance costs have been overstated, commenters on the 2010 Proposing Release expressed that view.
Another commenter stated that, in addition to issuers already collecting the majority of information required to be made public under Section 13(q) for internal record-keeping and audits, U.S. issuers already report such information to tax authorities at the lease and license level.
One commenter, while not providing competing estimates, questioned the accuracy of the assertions relating to costs from industry participants,
In the Proposing Release, we presented a quantitative estimate of the compliance costs associated with the proposed rules. No commenters specifically addressed this quantitative estimate or provided additional data that we could use to update or refine this estimate. Because we have not received quantitative estimates using the same or similar approaches that take into account the differences between the rules proposed in 2010 and those proposed in the Proposing Release, we use the approach presented in the Proposing Release and the quantitative information supplied by commenters in response to the 2010 Proposing Release to assess the initial and ongoing compliance costs of the final rules.
To address the first consideration, we searched the filed annual forms and forms' metadata for issuers that have a business address, are incorporated, or are listed on markets in the EEA or Canada. For purposes of our analysis, we assume that those issuers will already be subject to similar resource extraction payment disclosure rules in those jurisdictions by the time the final rules become effective and, thus, that the additional costs to comply with the final rules will be much lower than costs for other issuers.
Second, among the remaining 563 issuers (
Taking these estimates of the number of excluded issuers together, we estimate that approximately 425 issuers (
To establish an upper and lower bound for the initial compliance costs estimates, we use the initial compliance cost estimates from Barrick Gold and ExxonMobil referenced above. We note, however, that these cost estimates were provided by the commenters during the comment period after the 2010 Proposing Release and were based on policy choices made in that proposal and reflected the other international regulatory regimes in place at that time.
Our methodology to estimate initial compliance costs applies the specific issuer cost estimates from Barrick Gold and ExxonMobil, $500,000 and $50,000,000, respectively,
We calculate the average total assets of the 425 potentially affected issuers to be approximately $6.4 billion.
We also recognize that it is possible that some compliance costs may not scale by issuer size and as a result smaller issuers may be subject to certain fixed costs that do not vary with the size of the issuers' operations. While commenters did not provide any information on what fraction of the initial compliance costs would be fixed versus variable, we assume that fixed costs are equal to $500,000—the lower of the two compliance cost estimates provided by commenters.
The table below summarizes the upper and lower bound of total initial compliance costs under two fixed costs assumptions.
We acknowledge significant limitations on our analysis that may result in the actual costs being significantly lower. First, the analysis is limited to two large issuers' estimates from two different industries, mining and oil and gas, and the estimates may not accurately reflect the initial compliance costs of all affected issuers. Second, the commenters' estimates were generated based on our initial proposal and they do not reflect the final rules or the international transparency regimes that subsequently have been adopted by other jurisdictions.
We also acknowledge certain limitations on our analysis that could potentially cause the cost to be higher than our estimates. First, we assume that the variable part of the compliance costs is a constant fraction of total assets, but the dependence of costs on issuer size might not be linear (
In spite of these limitations, we consider our quantitative approach to estimate compliance costs to be appropriate and supported by the limited data we have. During the comment period after the Proposing Release, no commenters specifically critiqued this method or the derived quantitative estimates or provided additional data that we could use to update or refine these estimates. Only one commenter supplied an alternative approach and its point estimates are within the range of our estimates for both initial and ongoing direct compliance costs.
We estimate ongoing compliance costs using the same method under the assumptions of no fixed costs and fixed costs of $200,000 per year (as explained below). In response to the 2010 Proposing Release, we received quantitative information from three commenters—Rio Tinto, National Mining Association, and Barrick Gold—that we used in the analysis.
Similar to our estimates of the initial costs, we then consider fixed costs equal to the lowest of three estimates given by the commenters, the Barrick Gold estimate of $200,000 per year.
As noted above, we expect that the initial and ongoing compliance costs associated with the final rules are likely to be greater for larger, multinational issuers as compared to smaller, single country based issuers, as larger issuers would likely need more complex systems to track and report the required information. However, to the extent there is a significant fixed component to the final rules' overall compliance costs, such costs could be disproportionately burdensome for smaller reporting companies. In this case, the final rules could give rise to competitive disadvantages for these smaller issuers and could provide incentive for these issuers to consider exiting public capital markets to avoid reporting requirements (possibly incurring a higher cost of capital and potentially limited access to capital in the future). We estimate that approximately 43% of affected issuers are smaller reporting companies.
In addition to direct compliance costs, we anticipate that the statutory reporting requirements could result in significant indirect effects. Issuers that have a reporting obligation under Section 13(q) could be at a competitive disadvantage compared to private companies and foreign companies that are not subject to the reporting requirements of the U.S. federal securities laws and therefore do not have such an obligation. For example, such competitive disadvantage could result from, among other things, any preference by the government of the host country to avoid disclosure of covered payment information, or any ability of market participants to use the information disclosed by reporting issuers to derive contract terms, reserve data, or other confidential information. The Commission lacks sufficient data or a sufficiently reliable methodology to compare quantitatively total benefits against total costs, and no commenter has provided us with data regarding competitive effects or suggested a methodology that would allow us to engage in an empirical evaluation.
Industry commenters on the 2010 Proposing Release stated that confidential production and reserve data can be derived by competitors or other interested persons with industry knowledge by extrapolating from the payment information required to be disclosed.
To the extent that the requirement to disclose payment information does impose a competitive disadvantage on an issuer, the issuer could be motivated to sell assets affected by such competitive disadvantage at a price that does not fully reflect the value of such assets absent such competitive impact.
Addressing other potential costs, one commenter on the 2010 Proposing Release referred to a potential economic loss borne by shareholders, without quantifying such loss, which the commenter believed could result from highly disaggregated public disclosure of competitively sensitive information causing competitive harm.
Some commenters on the 2010 Proposing Release suggested that we permit issuers to submit payment data confidentially to the Commission and make public only an aggregated compilation of the information.
As noted above, the cost of compliance with this provision would be primarily borne by the issuer thus potentially diverting capital away from other productive opportunities and resulting in a loss of allocative efficiency.
As discussed in detail in Section II, the Proposing Release specifically addressed matters identified in the U.S. District Court for the District of Columbia's decision in the API Lawsuit. In developing the final rules, in addition to those matters, we have also considered relevant international developments, input from staff consultations with other U.S. Government agencies, and the public comments that we have received. We discuss below the significant choices that we are making to implement the statute and the associated benefits and costs of those choices. We are unable to quantify the impact of each of the choices discussed below with precision because reliable, empirical evidence about the effects is not readily available to the Commission and commenters have not provided us with empirical evidence relating to these various choices.
Absent potential exemptive relief, resource extraction issuers operating in countries that prohibit, or may in the future prohibit, the disclosure required under Section 13(q) could bear substantial costs.
To the extent that such prohibitions exist and are enforced without any type of waiver, affected issuers could suffer substantial losses if they have to terminate their operations and redeploy or dispose of their assets in the particular foreign jurisdiction. These losses would be magnified if an issuer cannot redeploy the assets in question easily, or if it has to sell them at a steep discount (a fire sale). Even if the assets could be easily redeployed, an issuer could suffer opportunity costs if they are redeployed to projects with inferior rates of return. In the 2012 Adopting Release we estimated that such losses could amount to billions of dollars. One commenter on the Proposing Release also asserted that such losses could be in the tens of billions of dollars.
In addition to the costs described above, a foreign private issuer with operations in a country that prohibits disclosure of covered payments, or a foreign issuer that is domiciled in such country, might face different types of costs. For example, in these circumstances, an issuer might decide it is necessary to delist from an exchange in the United States, deregister, and cease reporting with the Commission,
We believe that there are a number of factors that may serve to diminish the likelihood that, to the extent that there are or will be foreign laws that prohibit the required disclosures, such laws would be retained or adopted or, if retained or adopted, may serve to mitigate the costs and competitive burdens arising from their impact. For example, the widening global influence of the EITI and the recent trend of other jurisdictions to promote transparency, including listing requirements adopted by the Hong Kong Stock Exchange
In addition, these potential costs could be substantially mitigated under the final rules. We intend to consider using our existing authority under the Exchange Act to provide exemptive relief on a case-by-case basis, if and when warranted, upon the request of a resource extraction issuer.
An alternative to using our exemptive authority on a case-by-case basis would be to provide an exemption where specific countries have a law prohibiting the required disclosure. Although a blanket exemption could reduce potential economic costs (
As discussed above, host country laws that prohibit the type of disclosure required under the final rules could lead to significant additional economic costs that are not captured by the compliance cost estimates in Section III.B.2.b. We believe that considering exemptive relief from the disclosure requirements on a case-by-case basis, as circumstances warrant, may substantially mitigate such costs. However, we acknowledge that, if this relief is not provided, issuers could potentially incur costs associated with the conflict between our requirements and those foreign law prohibitions. Below, we have attempted, to the extent possible, to assess the magnitude of the potential costs if such laws exist and if exemptive relief is not granted. Although we discuss the potential costs below for completeness, it is not clear that these costs, in fact, will be incurred by issuers in light of the present uncertainty regarding the existence and scope of such foreign laws and the fact that we intend to consider the use of our exemptive authority where investor interests would be jeopardized with little accompanying benefit from the specific disclosure.
We base our analysis on the two countries that some commenters continue to assert have versions of such laws.
We can, however, assess if the costs of withdrawing from these two countries are in line with some commenters' estimates of tens of billions of dollars provided on the Proposing Release.
One commenter suggested that our valuation analysis is flawed because it is based on a book value metric instead of a market value metric.
As we discuss above, we were able to identify a total of 53 issuers that indicated they are active in these countries (some operate in more than one country). The table below provides information from the 16 issuers, out of the 53 described above, that provide geographic segment data at the country level and that specifically identify the value of assets in one of these two countries.
The magnitude of potential total loss of assets in the host countries is represented in the last column of the table, the estimated market value of country assets. For the eight issuers domiciled in the United States that have assets in one of these two host countries, the estimated total loss range is between $1.7 million and $3.1 billion, with a median loss of $291.4 million. The aggregate fraction of total assets that might be affected is 2.7%.
As shown in the table above, eight issuers have a foreign address associated with their Form 10-K or 20-F filing. As we discussed above, issuers that are domiciled in foreign countries might face different types of costs than U.S.-based issuers. For example, they are more likely to decide it is necessary to delist from an exchange in the United States, deregister, and cease reporting with the Commission, thus incurring a higher cost of capital and potentially limited access to capital in the future, rather than to sell their assets abroad. Due to limited data availability, we cannot reliably quantify these costs.
Even though our analysis was limited to less than half of issuers that are active in these two countries, these estimates suggest that commenters' concerns about such host country laws potentially imposing billions of dollars of costs on affected issuers could be warranted, if such prohibitions exist, are not waived by the host country, and no exemptive relief from our rules is provided. Additional costs at that scale could have a significant impact on resource extraction issuers' profitability and competitive position. The analysis above assumes that a total loss of assets located in the host countries would occur. In a similar vein, one commenter suggested that any action by an issuer to obtain an exemption would likely
While we do not have data on fire sale prices for the industries of the affected issuers, economic studies on fire sales of real assets in other industries provide some estimates that may allow us to quantify the potential costs to affected issuers from having to sell assets at fire sale prices. For example, a study on the airline industry finds that planes sold by financially distressed airlines bring 10 to 20 percent lower prices than those sold by undistressed airlines.
Commenters did not provide any numerical estimates of the fire sale discounts that resource extraction issuers could potentially face. One commenter asserted that the range of fire sale discounts that the Commission presented in the Proposing Release was incorrect because it was based on industries that were very different from the resource extraction industry.
Despite the assertion by the same commenter that in the event of disclosure the issuers' assets are likely to be seized by locally-owned or government-owned enterprises, we believe such asset seizures may be unlikely given the negative effect on the country's reputation as a place to do business that they could generate as well as the fact that locally-owned or government-owned enterprises may not have the expertise and the technological know-how to efficiently manage these assets. Another commenter suggested that some resource extraction issuers sell whole or partial stakes in their ventures as a matter of course without violating a host country law or contractual provision.
To understand how relevant these discounts are to the resource extraction issuers affected by the final rules, we examine the ease with which real assets could be disposed of in different industries. If the forced disposal of real assets is more easily facilitated in the resource extraction industries compared to other industries (
We note, however, that the index, as constructed, will also reflect the industry's typical financial leverage, not just the liquidity of its assets. To the extent that different industries have different leverages, these differences in leverage could explain some of the cross-industry variation of the index. Additionally, the index measures the ease with which ownership of assets is changed over the time period under consideration. Hence, the index is expected to adjust to intertemporal changes in the ease with which assets in a certain industry can be disposed of, which is important because it is well-established that control transactions tend to be cyclical in nature.
We construct the index for all industries, identified by three-digit SIC codes. For each industry, after estimating the value of the index in each year during the period 2010-2014, we calculate the average over the five-year period. Several industries have a liquidity index greater than 1; in those cases we cap the index level at 1.
The table below presents summary statistics for the liquidity index for all industries and the resource extraction industries during the period 2010-2014.
The results in the table show that the liquidity of real assets in the resource extraction industries is low (an average liquidity index of 0.02) compared with the liquidity in other industries (an average liquidity index of 0.11). That is, it is harder to dispose of assets in the extractive industries relative to other industries. In fact, the liquidity index of resource extraction industries is in the lowest quartile of the distribution of the index for all industries. As mentioned above, this could reflect the fact that resource extraction issuers have higher financial leverage than other industries. All other things being equal, higher financial leverage will result in a lower liquidity index. To control for the effects of financial leverage, we compare the liquidity index of resource extraction industries to that of industries with similar leverage.
One commenter criticized our use of the liquidity index based on the argument that it is constructed using U.S. data, with the U.S. being one of the most liquid markets in the world.
Because we lack data to construct the liquidity index at the country level, we cannot quantify the liquidity of the single-country market for real assets. The table below lists the number of corporate control transactions in each of the two countries under consideration from the period 2010-2014, broken down by type of industry.
Given the lower liquidity of the market for the real assets of resource extraction issuers, we believe that the upper limit of the fire sale discount range would be more appropriate when
Alternatively, an issuer could redeploy these assets to other projects that would generate cash flows. If an issuer could redeploy these assets relatively quickly and without a significant cost to projects that generate similar rates of returns as those in the above-mentioned countries, then the issuer's loss from the presence of such host country laws would be minimal. The more difficult and costly it is for an issuer to do so, and the more difficult it is to find other projects with similar rates of return, the larger the issuer's losses would be. However, we do not have sufficient data to quantify more precisely the potential losses of issuers under those various circumstances. Likewise, if there are multiple potential buyers (
Overall, the results of our analysis are consistent with commenters' assertions that the presence of host country laws that prohibit the type of disclosure required under the final rules could be costly, although, as mentioned in the preceding paragraph, in some instances there may be mitigating factors that could decrease those costs. It is also possible that under certain circumstances affected issuers could lose 100 percent of their assets in a given country. The size of the potential loss to issuers would depend on the presence of other similar opportunities, third parties willing to buy the assets at fair-market values in the above-mentioned host countries, and the ability of issuers to avoid fire sales of these assets. Finally, as discussed at the beginning of this section, it is not clear that these costs, in fact, will be incurred by issuers in light of the present uncertainty over the existence and scope of such foreign law prohibitions and our intent to consider exemptive relief on a case-by-case basis.
The final rules allow resource extraction issuers subject to a foreign jurisdiction's resource extraction payment disclosure requirements that we have determined are substantially similar to our own requirements to satisfy their submitting obligations by filing the report required by that foreign jurisdiction with the Commission. At the same time, we are recognizing the EU Directives, ESTMA, and the USEITI as “substantially similar” reporting regimes for purposes of this alternative reporting provision. This approach will significantly decrease compliance costs for issuers that are cross-listed or incorporated in these foreign jurisdictions. We estimated above that approximately 192 issuers will be subject to other regulatory regimes that may allow them to utilize this provision.
As an alternative, we could have decided not to adopt such a provision. Such an alternative would have increased the compliance costs for issuers that are subject to substantially similar foreign disclosure requirements. These issuers would have to comply with multiple disclosure regimes and bear compliance costs for each regime, although it is possible that the marginal costs for complying with an additional disclosure regime would not be high given the potential similarities that may exist between these reporting regimes and the final rules.
Section 13(q) requires resource extraction issuers to disclose payments made by a subsidiary or entity under the control of the issuer. As discussed in Section II.D above, we are adopting rules that define the term “control” based on accounting principles. Alternatively, we could have used a definition based on Exchange Act Rule 12b-2 as in the 2012 Rules.
Using a definition based on Rule 12b-2 would require issuers to undertake additional steps beyond those currently required for financial reporting purposes.
In addition, there are several other benefits from using a definition based on accounting principles. There will be audited financial statement disclosure of an issuer's significant consolidation accounting policies in the footnotes to its audited financial statements contained in its Exchange Act annual reports, and an issuer's determination of control under the final rules will be subject to the audit process as well as subject to the internal accounting controls that issuers are required to have in place with respect to audited financial statements filed with the Commission.
As in the Proposing Release, the final rules define “commercial development of oil, natural gas, or minerals” to include exploration, extraction, processing, and export, or the acquisition of a license for any such activity. As described above, the rules that we are adopting generally track the language in the statute. We are sensitive to the fact that a broader definition of “commercial development of oil, natural gas, or minerals” could increase issuers' costs. We are also sensitive to the fact that expanding the definition in a way that is broader than other reporting regimes could potentially lead to a competitive disadvantage for those issuers covered only by our rules. Further, we recognize that limiting the definition to these specified activities could adversely affect those using the payment information if disclosure about payments made for activities not included in the list of specified activities, such as refining, smelting, marketing, or stand-alone transportation services (
As noted above, the final rules include an anti-evasion provision that requires disclosure with respect to an activity or payment that, although not in form or characterization one of the categories specified under the final rules, is part of a plan or scheme to evade the disclosure required under Section 13(q).
As in the Proposing Release, the final rules add two categories of payments to the list of payment types identified in the statute that must be disclosed: Dividends and payments for infrastructure improvements. We include these payment types in the final rules because, based on the comments we have received, we believe they are part of the commonly recognized revenue stream. For example, payments for infrastructure improvements have been required under the EITI since 2011. Additionally, we note that the EU Directives and ESTMA also require these payment types to be disclosed. Thus, including dividends and payments for infrastructure improvements (
In a change from the Proposing Release, we are adding CSR payments that are required by law or contract to the list of covered payment types. Some commenters argued that these payments are of material benefit in resource-dependent countries to both governments and local communities.
As discussed earlier, under the final rules resource extraction issuers would incur costs to provide the payment disclosure for the required payment types. For example, there will be costs to modify the issuers' core enterprise resource planning systems and financial reporting systems so that they can capture and report payment data at the project level, for each type of payment, government payee, and currency of payment.
Under the final rules, issuers may disclose payments that are made for obligations levied at the entity level, such as corporate income taxes, at the entity level rather than the project level. This accommodation also should help reduce compliance costs for issuers without significantly interfering with the goal of achieving increased payment transparency.
Under the final rules, issuers must disclose payments made in-kind. The EU Directives and ESTMA also require disclosure of in-kind payments, as does the EITI. Consequently, this requirement should help further the goal of supporting international transparency promotion efforts and enhance the effectiveness of the payment disclosure. At the same time, this requirement could impose costs if issuers have not previously had to value their in-kind payments. To minimize the potential additional costs, the final rules provide issuers with the flexibility of reporting in-kind payments at cost, or if cost is not determinable, at fair market value. We believe this approach should lower the overall compliance costs associated with our decision to include the disclosure of in-kind payments.
Section 13(q) requires the disclosure of payments that are “not de minimis,” leaving that term undefined. Consistent with the proposed rules, the final rules define “not de minimis” to mean any payment, whether made as a single payment or a series of related payments, that equals or exceeds $100,000, or its equivalent in the issuer's reporting currency.
We considered adopting a definition of “not de minimis” that was based on a qualitative principle or a relative quantitative measure rather than an absolute quantitative standard. We chose the absolute quantitative approach for several reasons. An absolute quantitative approach should promote consistency of disclosure and, in addition, would be easier for issuers to apply than a definition based on either a qualitative principle or relative quantitative measure. Moreover, using an absolute dollar amount threshold for
In choosing the $100,000 “de minimis” threshold, we selected an amount that we believe strikes an appropriate balance in light of varied commenters' concerns and the purpose of the statute. Although commenters on the 2010 Proposing Release suggested various thresholds, no commenter provided data to assist us in determining an appropriate threshold amount.
Section 13(q) requires a resource extraction issuer to disclose information about the type and total amount of payments made to a foreign government or the Federal Government for each project relating to the commercial development of oil, natural gas, or minerals, but it does not define the term “project.” The final rules define “project” as operational activities governed by a single contract license, lease, concession, or similar legal agreement, which forms the basis for payment liabilities with a government. This definition is based on the definition in the EU Directives and the ESTMA Specifications, but allows for greater flexibility when operational activities governed by multiple legal agreements may be deemed a project.
The definition of “project” that we are adopting should have the benefit of providing a granular transparency that citizens, civil society groups, and others can use to assess revenue flows from projects in their local communities. As we discuss above in Section II.E, this should have a number of potential benefits for information users seeking to prevent corruption and promote accountability. The definition of project may also reduce costs for issuers that are subject to both the final rules and either the EU Directives or ESTMA by not requiring different disaggregation of project-related costs due to different definitions of the term. It also likely will reduce the competitive disadvantage for issuers that could be required to make more granular disclosure of information than their competitors under a narrower definition. The definition also will provide more flexibility in, and reduce the burdens associated with, disaggregating payments made for activities that relate to multiple agreements that are both operationally and geographically interconnected.
The definition may, however, increase the compliance costs for issuers that will be required to implement systems to track payments at a different level of granularity than what they currently track. In a similar vein, it may increase the risk of sensitive contract information being released, thus increasing the likelihood of competitive harm for some affected issuers. At the same time, this risk could be mitigated by the ability of issuers to treat operationally and geographically interconnected agreements as a single “project” notwithstanding that they do not have substantially similar terms.
Several commenters on the Proposing Release suggested that the contract-based definition of “project” would result in the loss of trade secrets and intellectual property more generally.
Commenters on the Proposing Release also asserted that the definition of “project” would reveal sensitive and proprietary commercial information to competitors, thus resulting in competitive harm for resource extraction issuers.
According to industry commenters, the contract-based definition of “project” would allow competitors to derive important information about the new areas under exploration for potential resource development, the value the company places on such resources, and the costs associated with acquiring the right to develop these new resources. This would in turn enable competitors to evaluate the new resources more precisely, and as a result, structure their bids for additional opportunities in the areas with new resources more effectively. We are mindful of these concerns and believe that the targeted exemption for payments related to exploratory activities included in the final rules, which permits registrants to delay the disclosure of these payments for an additional year, should help to mitigate these potential competitive harms. In this regard, we view the disclosure of payment information from the exploratory period as perhaps the most likely to reveal competitively sensitive information regarding a company's activities and expectations about the
We do not think the same potential for competitive harm exists after a resource find occurs. To the extent that exploratory activities lead to a new discovery, we note that industry commenters have not explained why a contract-based definition of “project” will lead to the public disclosure of more information about new areas of development and their value than would otherwise be publicly disclosed by analysts, industry consultants, media, and the issuers themselves. In this regard, we note that issuers have an incentive to disclose new developments and their value because this can often have a positive effect on their stock price. Additionally, the issuer's presence in a new area, irrespective of any other disclosure, will often provide information to its competitors that the area may have favorable prospects. Thus, regardless of any disclosures made pursuant to these rules, it is likely that an issuer's new resource discovery would eventually be disclosed by any of several methods, which should attract potential competitors and over time erode the first mover's advantage.
To the extent that the contract-based definition of “project” provides detailed information on the costs of newer projects, it could be advantageous to potential competitors at the expense of the affected issuer. We note, however, that the payments required by the final rules will be only part of the costs of a new project. Unless competitors are able to observe the total costs of a new project, which we are skeptical they could do based just on the required disclosures, they may be unlikely to gain important competitive advantages. Additionally, a commenter's contention that requiring payment disclosure from an issuer in one country will help another country demand more from that same issuer and thus affect the issuer's competitive position does not take into account the fact that differences in geology, risk factors, and various other project characteristics will likely complicate such a strategy.
With respect to those projects that are older or more established, we think it is particularly unlikely that our contract-based definition of “project” will result in the public disclosure of competitively sensitive information. According to the API, the general terms of older projects are typically already available irrespective of whether the contracts have technically been made public.
Commenters also stated that the contract-based definition of “project” would allow competitors to reverse-engineer proprietary commercial information: For example, to determine the commercial and fiscal terms of the agreements, get a better understanding of an issuer's strategic approach to bidding and contracting, and identify rate of return criteria.
We note that several commenters on the Proposing Release disputed the assertion that the contract-based definition of “project” would create any competitive disadvantages to affected issuers.
Relatedly, we acknowledge the potential that our definition of “project” could provide competitive advantages to state-owned oil companies, which are not covered by the final rules. We note that such companies could enjoy an advantage to the extent that they do business in countries other than their own. In this regard, however, it is important to clarify that state-owned oil and gas companies across the globe “differ on a number of very important variables, including the level of competition in the market in which they operate” and “their degree of commercial orientation and internationalization.”
One commenter also suggested that foreign issuers may decide to delist from U.S. exchanges because of the competitive advantage they would gain over reporting issuers.
One commenter argued that the direct compliance costs associated with the definition of “project” that we are adopting are not justified because we have no data to show any benefits of requiring the disclosure at such a granular level.
Although we lack sufficient data to quantify the potential economic losses that could result from our choice of a contract-based definition of “project,” based on the qualitative analysis above, we find that the Section 13(q) disclosure requirements and the definition of “project” that we are adopting are not likely to cause significant competitive harms or result in significant losses.
As an alternative, we could have not defined the term “project.” Taking this approach could have provided issuers more flexibility in applying the term to different business contexts depending on factors such as the particular industry or business in which the issuer operates or the issuer's size. Under such an approach, however, resource extraction issuers could have incurred costs in determining their “projects.” Moreover, not defining “project” could result in higher costs for some resource extraction issuers than others if an issuer's determination of what constitutes a “project” would result in more granular information being disclosed than another issuer's determination of what constitutes a “project.” In addition, not defining “project” may not be as effective in achieving the anticorruption objectives contemplated by the statute because resource extraction issuers' determinations of what constitutes a “project” may differ, which could reduce the comparability of disclosure across issuers.
Finally, we could have adopted the API Proposal, which would allow issuers to combine as one “project” all of the similar extraction activities within a major subnational political jurisdiction. We acknowledge that this aggregated disclosure could potentially impose fewer competitive burdens on resource extraction issuers—particularly those issuers with many similar resource extraction activities occurring within a subnational jurisdiction—as the API suggested definition would not require issuers to expend the time and resources necessary to achieve the type of granular reporting that our proposed rules would require. As discussed above in Section II.E, however, we believe that such a high-level definition, as opposed to the definition we are adopting, would not appropriately serve the anticorruption objectives that Congress intended when it enacted Section 13(q).
Section 13(q) provides that the resource extraction payment disclosure must be “include[d] in an annual report.” The final rules require an issuer to file the payment disclosure in an annual report on new Form SD. Form SD will be due no later than 150 days after the end of the issuer's most recent fiscal year. This should lessen the burden of compliance with Section 13(q) and the related rules because issuers generally will not have to incur the burden and cost of providing the payment disclosure at the same time that they must fulfill their disclosure obligations with respect to Exchange
In a change from the proposed rules, the final rules will allow for a longer transition period for newly acquired companies that were not previously subject to reporting under the final rules.
In another change from the proposed rules, the final rules will require a resource extraction issuer to comply with Rule 13q-1 and Form SD for fiscal years ending no earlier than two years, rather than one year, after the effective date of the adopted rules. This longer phase-in period should provide issuers with sufficient time to establish the necessary systems and procedures to capture and track all the required payment information before the fiscal year covered by their first Form SD filing starts. The extended compliance date will also provide issuers with additional time to address potential legal barriers to making the required disclosure, such as by amending existing contracts to permit disclosure or, when warranted, seeking appropriate exemptive relief from the Commission.
Resource extraction issuers will incur costs associated with preparing and filing each Form SD. We do not believe, however, that the costs associated with filing each Form SD instead of providing the disclosure in an existing form would be significant. We also acknowledge that requiring covered issuers to file, rather than furnish, the payment information in Form SD may create an incremental risk of liability in litigation under Section 18 of the Exchange Act. This incremental risk of legal liability could be a benefit to users of the information to the extent that issuers will be more attentive to the information they file, thereby increasing the quality of the reported information. We note however that Section 18 does not create strict liability for “filed” information.
Finally, the final rules do not require the resource extraction payment information to be audited or provided on an accrual basis. Not requiring the payment information to be audited or provided on an accrual basis may result in lower compliance costs than otherwise would be the case.
Section 13(q) requires the payment disclosure to be electronically formatted using an interactive data format. Consistent with the proposed rules, the final rules will require a resource extraction issuer to provide the required payment disclosure in an XBRL exhibit to Form SD that includes all of the electronic tags required by Section 13(q) and the final rules.
Our choice of XBRL as the required interactive data format may increase compliance costs for some issuers. The electronic formatting costs will vary depending upon a variety of factors, including the amount of payment data disclosed and an issuer's prior experience with XBRL. While most issuers are already familiar with XBRL because they use it to tag financial information in their annual and quarterly reports filed with the Commission, issuers that are not already filing reports using XBRL (
Consistent with the statute, the final rules require a resource extraction issuer to include an electronic tag that identifies the currency used to make the payments. Under the final rules, if multiple currencies are used to make
Certain provisions of the final rules contain “collection of information” requirements within the meaning of the Paperwork Reduction Act of 1995 (“PRA”).
An agency may not conduct or sponsor, and a person is not required to respond to, a collection of information unless it displays a currently valid OMB control number. The title for the collection of information is:
• “Form SD” (OMB Control No. 3235-0697).
Form SD is currently used to file Conflict Minerals Reports pursuant to Rule 13p-1 of the Exchange Act. We are adopting amendments to Form SD to accommodate disclosures required by Rule 13q-1, which requires resource extraction issuers to disclose information about payments made by the issuer, a subsidiary of the issuer, or an entity under the control of the issuer to foreign governments or the U.S. Federal Government for the purpose of the commercial development of oil, natural gas, or minerals. Form SD is filed on EDGAR with the Commission.
The final rules and amendment to the form implement Section 13(q) of the Exchange Act, which was added by Section 1504 of the Act. Section 13(q) requires the Commission to “issue final rules that require each resource extraction issuer to include in an annual report of the resource extraction issuer information relating to any payment made by the resource extraction issuer, a subsidiary of the resource extraction issuer, or an entity under the control of the resource extraction issuer to a foreign government or the Federal Government for the purpose of the commercial development of oil, natural gas, or minerals, including—(i) the type and total amount of such payments made for each project of the resource extraction issuer relating to the commercial development of oil, natural gas, or minerals, and (ii) the type and total amount of such payments made to each government.”
Compliance with the rules by affected issuers is mandatory. Responses to the information collections are generally not kept confidential and there would be no mandatory retention period for the collection of information.
The number, type, and size of the issuers that are required to file the payment information required in Form SD, as amended, is uncertain, but, as discussed in the economic analysis above, we estimate that the number of potentially affected issuers is 755.
After considering the comments and international developments,
When determining the estimates described below, we have assumed that 75% of the burden of preparation is carried by the issuer internally and 25% of the burden of preparation is carried by outside professionals retained by the issuer at an average cost of $400 per hour.
The portion of the burden carried by outside professionals is reflected as a cost, while the portion of the burden carried by the issuer internally is reflected in hours. In connection with the 2010 Proposing Release, we received estimates from some commenters expressed in burden hours and estimates from other commenters expressed in dollar costs.
In connection with the 2010 Proposing Release, some commenters estimated implementation costs of tens of millions of dollars for large filers and millions of dollars for smaller filers.
Generally, we note that some of the estimates we received may reflect the burden to a particular commenter, and may not represent the burden for other resource extraction issuers.
As discussed above, we estimate that 425 issuers would bear the full costs of compliance and 192 issuers are subject to similar resource extraction payment disclosure rules, such that the additional costs to comply with our rules will be much lower than costs for other issuers. We also estimate that 138 smaller issuers, including shell companies, will bear no compliance costs because it is likely that any payments they make for the purpose of the commercial development of oil, natural gas, or minerals will be considered de minimis under the proposed rules. We have used the cost estimates provided by commenters to estimate the compliance burden for affected issuers for PRA purposes. To distinguish between the burden faced by the two groups of affected issuers described above, we have assumed that the issuers who may already be complying with a similar foreign disclosure regime would have compliance costs of approximately five percent of the issuers that bear the full costs of compliance.
We believe that the burden associated with this collection of information will be greatest during the implementation period to account for initial set up costs, but that ongoing compliance costs would be less because companies would have already made any necessary
Thus, using the three-year average of the expected burden during the first year and the expected ongoing burden during the next two years, we estimate that the incremental collection of information burden associated with the rules would be 667 burden hours per fully affected respondent (1000 + 500 + 500)/3 years). We estimate that the rules would result in an internal burden of approximately 212,606.25 hours (425 responses × 667 hours/response × .75) for issuers bearing the full costs and 4,802.4 hours (192 responses × 33.35 hours/response × .75) for issuers that are subject to similar resource extraction payment disclosure rules in other jurisdictions, amounting to a total incremental company burden of 217,408.65 hours (212,606.25 + 4,802.4).
Outside professional costs would be $28,347,500 (425 responses × 667 hours/response × .25 × $400) for issuers bearing the full costs and $640,320 (192 responses × 33.35 hours/response × .25 × $400) for issuers that are subject to similar resource extraction payment disclosure rules in other jurisdictions, amounting to total outside professional costs of $28,987,820 ($28,347,500 + $640,320). Barrick Gold also indicated that its initial compliance costs would include $100,000 for IT consulting, training, and travel costs. Again, we believe this to be a conservative estimate given the size of Barrick Gold compared to our estimate of the average resource extraction issuer's size. We do not, however, believe that these initial IT costs would apply to the issuers that are already subject to similar resource extraction payment disclosure rules, since those issuers should already have such IT systems in place to comply with a foreign regime. Thus, we estimate total IT compliance costs to be $42,500,000 (425 issuers × $100,000). We have added the estimated IT compliance costs to the cost estimates for other professional costs discussed above to derive total professional costs for PRA purposes of $71,487,820 ($28,987,820 + $42,500,000) for all issuers.
This Final Regulatory Flexibility Act Analysis (“FRFA”) has been prepared in accordance with the Regulatory Flexibility Act.
The rule and form amendments are designed to implement the requirements of Section 13(q), which was added by Section 1504 of the Act. Specifically, the rule and form amendments will require a resource extraction issuer to disclose in an annual report certain information relating to any payment made by the issuer, a subsidiary of the issuer, or an entity under the issuer's control to a foreign government or the U.S. Federal Government for the purpose of the commercial development of oil, natural gas, or minerals. An issuer will be required to include that information in an exhibit to Form SD. The exhibit must be formatted in XBRL.
In the Proposing Release, we requested comment on every aspect of the IRFA, including the number of small entities that would be affected by the proposed rule and form amendments, the existence or nature of the potential impact of the proposals on small entities discussed in the analysis, and how to quantify the impact of the proposed rules. We did not receive any comments specifically addressing the IRFA. We did, however, receive one comment recommending that smaller reporting companies be given more time before being required to comply with the final rules.
The final rules will affect small entities that are required to file an annual report with the Commission
The final rule and form amendments add to the annual disclosure requirements of companies meeting the definition of resource extraction issuer, including small entities, by requiring them to provide the payment disclosure mandated by Section 13(q) in Form SD. That information must include:
• The type and total amount of payments made for each project of the issuer relating to the commercial development of oil, natural gas, or minerals; and
• the type and total amount of those payments made to each government.
A resource extraction issuer must provide the required disclosure in an exhibit to Form SD formatted in XBRL. Consistent with the statute, the final rules require an issuer to submit the payment information using electronic tags that identify, for any not de minimis payment made by a resource extraction issuer to a foreign government or the U.S. Federal Government:
• The type and total amount of such payments made for each project of the resource extraction issuer relating to the commercial development of oil, natural gas, or minerals;
• The type and total amount of such payments for all projects made to each government;
• The total amounts of the payments, by payment type;
• The currency used to make the payments;
• The fiscal year in which the payments were made;
• The business segment of the resource extraction issuer that made the payments;
• The governments (including any foreign government or the Federal Government) that received the payments and the country in which each such government is located;
• The project of the resource extraction issuer to which the payments relate;
• The particular resource that is the subject of commercial development; and
• The subnational geographic location of the project.
The same payment disclosure requirements will apply to U.S. and foreign resource extraction issuers.
The Regulatory Flexibility Act directs us to consider significant alternatives that would accomplish the stated objectives, while minimizing any significant adverse impact on small entities. In connection with adopting the final rule and form amendments, we considered, as alternatives, establishing different compliance or reporting requirements which take into account the resources available to smaller entities; exempting smaller entities from coverage of the disclosure requirements, or any part thereof; clarifying, consolidating, or simplifying the disclosure for small entities; and using performance standards rather than design standards.
Section 13(q) is designed to enhance the transparency of payments by resource extraction issuers to governments and providing different disclosure requirements for small entities or exempting them from the coverage of the requirements may undermine the intended benefits of the disclosure mandated by Section 13(q). As discussed above, we estimate that a significant number (43%) of affected issuers are smaller reporting companies; therefore, exempting such issuers from the final rules could create a significant gap in the intended transparency. Furthermore, no commenters supported an exemption or different reporting requirements for small entities in response to the Proposing Release. Only one commenter specifically called for an extended transition period for such entities. In response to that comment and other concerns, we have provided a longer transition period prior to the application of the rules to all resource extraction issuers, rather than only small entities.
We have used design rather than performance standards in connection with the final rule and form amendments because the statutory language, which requires electronic tagging of specific items, contemplates specific disclosure requirements and no commenters objected to this approach. We also believe that the rules would be more useful to users of the information if there are specific disclosure requirements that promote transparent and consistent disclosure among all resource extraction issuers. Such requirements should help further the statutory goal of supporting international transparency promotion efforts. For this reason, we have not used consolidated or simplified disclosure requirements for small entities.
We are adopting the rule and form amendments contained in this document under the authority set forth in Sections 3(b), 12, 13, 15, 23(a), and 36 of the Exchange Act.
Reporting and recordkeeping requirements, Securities.
In accordance with the foregoing, we are amending title 17, chapter II of the Code of Federal Regulations as follows:
15 U.S.C. 77c, 77d, 77g, 77j, 77s, 77z-2, 77z-3, 77eee, 77ggg, 77nnn, 77sss, 77ttt, 78c, 78c-3, 78c-5, 78d, 78e, 78f, 78g, 78i, 78j, 78j-1, 78k, 78k-1, 78
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PART 249b—FURTHER FORMS, SECURITIES EXCHANGE ACT OF 1934
15 U.S.C. 78a
Section 249b.400 is also issued under secs. 1502 and 1504, Pub. L. 111-203, 124 Stat. 2213 and 2220.
The addition and revision read as follows:
This Form shall be used for a report pursuant to Rule 13p-1 (17 CFR 240.13p-1) and Rule 13q-1 (17 CFR 240.13q-1) under the Securities Exchange Act of 1934 (the “Exchange Act”).
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3. If the deadline for filing this Form occurs on a Saturday, Sunday or holiday on which the Commission is not open for business, then the deadline shall be the next business day.
4. The information and documents filed in this report shall not be deemed to be incorporated by reference into any filing under the Securities Act or the Exchange Act, unless the registrant specifically incorporates it by reference into such filing.
(1) The type and total amount of such payments, by payment type listed in paragraph (d)(8)(iii) of this Item, made for each project of the resource extraction issuer relating to the commercial development of oil, natural gas, or minerals;
(2) The type and total amount of such payments, by payment type listed in paragraph (d)(8)(iii) of this Item, for all projects made to each government;
(3) The total amounts of the payments, by payment type listed in paragraph (d)(8)(iii) of this Item;
(4) The currency used to make the payments;
(5) The fiscal year in which the payments were made;
(6) The business segment of the resource extraction issuer that made the payments;
(7) The governments (including any foreign government or the Federal Government) that received the payments and the country in which each such government is located;
(8) The project of the resource extraction issuer to which the payments relate;
(9) The particular resource that is the subject of commercial development; and
(10) The subnational geographic location of the project.
(2) A resource extraction issuer that has acquired (or otherwise obtains control over) an entity that has not been obligated to provide disclosure pursuant to Rule 13q-1 or another “substantially similar” jurisdiction's requirements in such entity's last full fiscal year is not required to commence reporting payment information for such acquired entity until the Form SD filed for the fiscal year immediately following the effective date of the acquisition. A resource extraction issuer must disclose that it is relying on this accommodation in the body of its Form SD filing.
(2) The alternative report must be the same as the one prepared and made publicly available pursuant to the requirements of the approved alternative reporting regime, subject to changes necessary to comply with any conditions to alternative reporting set forth by the Commission.
(3) The resource extraction issuer must: (i) State in the body of the Form SD that it is relying on the alternative reporting provision; (ii) identify the alternative reporting regime for which the report was prepared; (iii) describe how to access the publicly filed report in the alternative jurisdiction; and (iv) specify that the payment disclosure required by this Form is included in an exhibit to this Form SD.
(4) The alternative report must be provided in XBRL format.
(5) A fair and accurate English translation of the entire report must be filed if the report is in a foreign language. Project names may be presented in their original language, in addition to the English translation of the project name, if the resource extraction issuer believes that such an approach would facilitate identification of the project by users of the disclosure.
(6) Unless the Commission provides otherwise in an exemptive order, a resource extraction issuer may follow the submission deadline of an approved alternative jurisdiction if it files a notice on Form SD-N on or before the due date of its Form SD indicating its intent to file the alternative report using the alternative jurisdiction's deadline. If a resource extraction issuer fails to file such notice on a timely basis, or files such a notice but fails to file the alternative report within two business days of the alternative jurisdiction's deadline, it may not rely on this Item 2.01(c) for the following fiscal year.
(7) Resource extraction issuers must also comply with any additional requirements that are provided by the Commission upon granting an alternative reporting accommodation, as well as subsequent changes in such requirements.
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(i) Is made to further the commercial development of oil, natural gas, or minerals;
(ii) Is not de minimis; and
(iii) Is one or more of the following:
(A) Taxes;
(B) Royalties;
(C) Fees;
(D) Production entitlements;
(E) Bonuses;
(F) Dividends;
(G) Payments for infrastructure improvements; and
(H) Community and social responsibility payments that are required by law or contract.
(9)
(10)
(i) Is required to file an annual report with the Commission pursuant to Section 13 or 15(d) of the Exchange Act (15 U.S.C. 78m or 78o(d)); and
(ii) Engages in the commercial development of oil, natural gas, or minerals.
(11)
(1) If a resource extraction issuer is controlled by another resource extraction issuer that has filed a Form SD disclosing the information required by Item 2.01 for the controlled entity, then such controlled entity is not required to file the disclosure required by Item 2.01 separately. In such circumstances, the controlled entity must file a notice on Form SD indicating that the required disclosure was filed on Form SD by the controlling entity, identifying the controlling entity and the date it filed the disclosure. The reporting controlling entity must note that it is filing the required disclosure for a controlled entity and must identify the controlled entity on its Form SD filing.
(2) A resource extraction issuer must report the amount of payments made for each payment type, and the total amount of payments made for each project and to each government, during the reporting period in either U.S. dollars or the resource extraction issuer's reporting currency. If a resource extraction issuer has made payments in currencies other than U.S. dollars or its reporting currency, it may choose to calculate the currency conversion between the currency in which the payment was made and U.S. dollars or the resource extraction issuer's reporting currency, as applicable, in one of three ways: (a) By translating the expenses at the exchange rate existing at the time the payment is made; (b) using a weighted average of the exchange rates during the period; or (c) based on the exchange rate as of the resource extraction issuer's fiscal year end. When calculating whether the de minimis threshold has been exceeded, a resource extraction issuer may be required to convert the payment to U.S. dollars, even though it is not required to disclose those payments in U.S. dollars. For example, this may occur when the resource extraction issuer is using a non-U.S. dollar reporting currency. In these instances, the resource extraction issuer may use any of the three methods described above for calculating the currency conversion. In all cases a resource extraction issuer must disclose the method used to calculate the currency conversion and must choose a consistent method for all such currency conversions within a particular Form SD filing.
(3) When identifying the country in which a government is located, a resource extraction issuer must use the code provided in ISO 3166 if available. When identifying the “subnational geographic location of the project,” as used in Item 2.01(a)(10), a resource extraction issuer must include the subdivision code provided in ISO 3166 if available and must also include sufficiently detailed additional information to permit a reasonable user of the information to identify the project's specific, subnational, geographic location. In identifying the project's specific location, resource extraction issuers may use subnational jurisdiction(s) (
(4) If a government levies a payment obligation, such as a tax or a requirement to pay a dividend, at the entity level rather than on a particular project, a resource extraction issuer may disclose that payment at the entity level. To the extent that payments, such as corporate income taxes and dividends, are made for obligations levied at the entity level, a resource extraction issuer may omit certain tags that may be inapplicable (
(5) When a resource extraction issuer proportionately consolidates an entity or operation under U.S. GAAP or IFRS, as applicable, the resource extraction issuer must disclose its proportionate amount of the payments made by such entity or operation pursuant to this Item and must indicate the proportionate interest.
(6) Although an entity providing only services to a resource extraction issuer to assist with exploration, extraction, processing or export would generally not be considered a resource extraction issuer, where such a service provider makes a payment that falls within the definition of “payment” to a government on behalf of a resource extraction issuer, the resource extraction issuer must disclose such payment.
(7) “Processing,” as used in Item 2.01, would include, but is not limited to, midstream activities such as the processing of gas to remove liquid hydrocarbons, the removal of impurities from natural gas prior to its transport through a pipeline, and the upgrading of bitumen and heavy oil, through the earlier of the point at which oil, gas, or gas liquids (natural or synthetic) are either sold to an unrelated third party or delivered to a main pipeline, a common carrier, or a marine terminal. It would also include the crushing and processing of raw ore prior to the smelting phase. It would not include the downstream activities of refining or smelting.
(8) A resource extraction issuer must disclose payments made for taxes on corporate profits, corporate income, and production. Disclosure of payments made for taxes levied on consumption, such as value added taxes, personal income taxes, or sales taxes, is not required.
(9) Royalties include unit-based, value-based, and profit-based royalties. Fees include license fees, rental fees,
(10) Dividends paid to a government as a common or ordinary shareholder of the resource extraction issuer that are paid to the government under the same terms as other shareholders need not be disclosed. The resource extraction issuer, however, must disclose any dividends paid in lieu of production entitlements or royalties.
(11) If a resource extraction issuer makes an in-kind payment of the types of payments required to be disclosed, the resource extraction issuer must disclose the payment. When reporting an in-kind payment, a resource extraction issuer must determine the monetary value of the in-kind payment and tag the information as “in-kind” for purposes of the currency. For purposes of the disclosure, a resource extraction issuer must report the payment at cost, or if cost is not determinable, fair market value and must provide a brief description of how the monetary value was calculated. If a resource extraction issuer makes an in-kind production entitlement payment under the rules and then repurchases the resources associated with the production entitlement within the same fiscal year, the resource extraction issuer must report the payment using the purchase price (rather than at cost, or if cost is not determinable, fair market value). If the in-kind production entitlement payment and the subsequent repurchase are made in different fiscal years and the purchase price is greater than the previously reported value of the in-kind payment, the resource extraction issuer must report the difference in values in the latter fiscal year (assuming the amount of that difference exceeds the de minimis threshold). In other situations, such as when the purchase price in a subsequent fiscal year is less than the in-kind value already reported, no disclosure relating to the purchase price is required.
(12) The following is a non-exclusive list of factors to consider when determining whether agreements are “operationally and geographically interconnected” for purposes of the definition of “project”: (a) whether the agreements relate to the same resource and the same or contiguous part of a field, mineral district, or other geographic area; (b) whether the agreements will be performed by shared key personnel or with shared equipment; and (c) whether they are part of the same operating budget.
Exhibit 1.01—Conflict Minerals Report as required by Items 1.01 and 1.02 of this Form.
Exhibit 2.01—Resource Extraction Payment Report as required by Item 2.01 of this Form.
By the Commission.
Securities and Exchange Commission.
Proposed rule.
The Securities and Exchange Commission (“Commission” or “SEC”) is proposing to amend Rules 600 and 606 of Regulation National Market System (“Regulation NMS”) under the Securities Exchange Act of 1934 (“Exchange Act”) to require additional disclosures by broker-dealers to customers about the routing of their orders. Specifically, with respect to institutional orders, the Commission is proposing to amend Rule 606 of Regulation NMS to require a broker-dealer, upon request of its customer, to provide specific disclosures related to the routing and execution of the customer's institutional orders for the prior six months. The Commission also is proposing to amend Rule 606 of Regulation NMS to require a broker-dealer to make publicly available aggregated information with respect to its handling of customers' institutional orders for each calendar quarter. With respect to retail orders, the Commission is proposing to make targeted enhancements to current order routing disclosures under Rule 606 by requiring limit order information to be broken down into marketable and non-marketable categories, requiring the disclosure of the net aggregate amount of any payment for order flow received, payment from any profit-sharing relationship received, transaction fees paid, and transaction rebates received by a broker-dealer from certain venues, requiring broker-dealers to describe any terms of payment for order flow arrangements and profit-sharing relationships with certain venues that may influence their order routing decisions, and eliminating the requirement to divide retail order routing information by listing market. In connection with these new requirements, the Commission is proposing to amend Rule 600 of Regulation NMS to include a number of newly defined terms which are used in the proposed amendments to Rule 606. The Commission is also proposing to amend Rules 605 and 606 of Regulation NMS to require that the public order execution and order routing reports be kept publicly available for a period of three years and to make conforming changes to Rule 607. Finally, the Commission is proposing to amend Rule 3a51-1(a) under the Exchange Act; Rule 13h-1(a)(5) of Regulation 13D-G; Rule 105(b)(1) of Regulation M; Rules 201(a) and 204(g) of Regulation SHO; Rules 600(b), 602(a)(5), 607(a)(1), and 611(c) of Regulation NMS; and Rule 1000 of Regulation SCI, to update cross-references as a result of this proposed rule.
Comments should be received on or before September 26, 2016.
Comments may be submitted by any of the following methods:
• Use the Commission's Internet comment form (
• Send an email to
• Use the Federal eRulemaking Portal (
• Send paper comments to Brent J. Fields, Secretary, Securities and Exchange Commission, 100 F Street, NE., Washington, DC 20549-1090.
Studies, memoranda, or other substantive items may be added by the Commission or staff to the comment file during this rulemaking. A notification of the inclusion in the comment file of any materials will be made available on the Commission's Web site. To ensure direct electronic receipt of such notifications, sign up through the “Stay Connected” option at
Theodore S. Venuti, Assistant Director, at (202) 551-5658, Arisa Tinaves Kettig, Senior Special Counsel, at (202) 551-5676, Steve Kuan, Special Counsel, at (202) 551-5624, Amir Katz, Special Counsel, at (202) 551-7653, Chris Grobbel, Special Counsel, at (202) 551-5491, or Andrew Sioson, Attorney-Advisor, at (202) 551-7186 Division of Trading and Markets, Securities and Exchange Commission, 100 F Street, NE., Washington, DC 20549.
The Commission is proposing: (1) Amendments to Rules 600 and 606 under the Exchange Act [17 CFR 242.600 and 202.606] to require additional disclosures by broker-dealers to customers about the routing of their orders; (2) amendments to Rule 605 [17 CFR 242.605] to require that the public order execution and order routing reports be kept publicly available for a period of three years; and (3) conforming changes and updating cross-references in Rule 3a51-1(a) under the Exchange Act [17 CFR 240.3a51-1(a)], Rule 13h-1(a)(5) of Regulation 13D-G [17 CFR 240.13h-1(a)(5)], Rule 105(b)(1) of Regulation M [17 CFR 242.105(b)(1)] Rules 201(a) and 204(g) of Regulation SHO [17 CFR 242.201(a) and 242.204(g)], Rules 600(b), 602(a)(5), 605, 607(a)(1), and 611(c) of Regulation NMS [17 CFR 242.600(b), 242.602(a)(5), 242.605, 242.607(a)(1), and 242.611(c)], and Rule 1000 of Regulation SCI [17 CFR 242.1000].
Institutional customers have a compelling interest in the order handling decisions of their executing brokers as they monitor the execution quality of their orders, both from the standpoint of the price received and to evaluate the potential negative effects of information leakage and conflicts of interest.
Changes to market structure and routing practices have led many institutional customers to demand more specific and detailed institutional order handling information from their broker-dealers. The Commission notes that for
The Commission understands that institutional customer requests range from detailed information about the handling of specific institutional orders to more generic data about the order routing strategies pursued by the broker-dealer for institutional customers and the venues to which their orders are routed and executed. The level of detail of the information provided tends to vary by broker-dealer, as well as the particular institutional customer, some of whom may have the wherewithal and desire to digest and evaluate voluminous order handling information and some of whom may not.
The Commission preliminarily believes that market-based efforts to provide institutional order handling transparency may not be sufficient insofar as smaller institutional customers may lack the bargaining power or the resources to demand relevant order handling information from their broker-dealers. In addition, while many institutional customers regularly conduct, directly or through a third-party vendor, transaction cost analysis (“TCA”) of their orders to assess execution quality against various benchmarks, the Commission preliminarily believes that the comprehensiveness of such analysis could be enhanced with more granular order handling information. The Commission also preliminarily believes that standardizing the baseline information provided by broker-dealers could help ensure the wide availability of meaningful order handling information that may be produced in an efficient and cost-effective manner.
In light of the foregoing, the Commission preliminarily believes that standardized baseline institutional order handling information should be required to be made available to the institutional customer upon request so that the institutional customer can more effectively assess the impact of order routing decisions on the quality of their executions, including the risks of information leakage and potential conflicts of interest.
The changes to market structure have impacted the market for customer order routing and execution services. Currently, a “customer order” means an order to buy or sell an NMS security that is not for the account of a broker-dealer, but shall not include any order for a quantity of a security having a market value of at least $50,000 for an NMS security that is an option contract and a market value of at least $200,000 for any other NMS security.
As discussed below, the rise in the number of trading centers and the introduction of new fee models for execution services have intensified competition for retail order flow and created new potential conflicts of interest for broker-dealers. The Commission preliminarily believes that simplified and enhanced disclosures for retail orders, particularly with respect to financial inducements from trading centers, should assist retail customers in evaluating better the order routing services of their broker-dealers. Additionally, public transparency of retail orders should drive competition as broker-dealers seek to compete on the basis of the quality of their order routing and execution services as well as their ability to manage conflicts of interest.
The Commission therefore is proposing amendments to Rules 600
Further, with respect to retail orders, the Commission preliminarily believes that the existing Rule 606 disclosures should be updated to require that more relevant routing information is provided
Finally, consistent with the proposed amendments to Rule 606, the Commission is proposing to amend Rule 605 to require market centers
The release first provides relevant background on Rule 606 and then discusses the technological advances and regulatory changes that have prompted the proposal. The release then discusses, in detail, the proposed amendments to Rules 600, 605, 606, and 607 including the new institutional order handling disclosures that would be required from broker-dealers.
The Commission proposed and adopted Rule 11Ac1-6,
In adopting Rule 606, the Commission limited its scope to smaller orders.
Thus, in its current form, Rule 606(a) applies only to retail-sized orders, and requires every broker-dealer to publicly provide a quarterly report on its routing of non-directed orders
Rule 606(b) currently requires every broker-dealer to provide customers, upon request, specific information about the routing of their orders. Specifically, upon request, every broker-dealer shall: (1) Disclose to its customer the identity of the venue to which the customer's orders were routed for execution in the six months prior to the request, whether the orders were directed orders or non-directed orders, and the time of the transactions, if any, that resulted from such orders; and (2) notify customers in writing at least annually of the availability of this information upon request.
U.S. equity market structure has changed significantly since the adoption of Rule 606. Today it is highly automated, dispersed among myriad trading centers, and more complex than it was in 2000.
According to a staff report published in 1994, prior to the emergence and growth of electronic markets, institutional customers would rely primarily on exchange floor brokers or upstairs block positioners to execute their large orders.
In today's electronic markets, however, the manual handling of institutional orders is increasingly rare, and has been replaced by sophisticated institutional order execution algorithms and smart order routing systems. These sophisticated algorithms and systems decide the timing, pricing, and quantity of orders routed to the various trading centers.
Institutional customers have long focused on the execution quality of their large orders, and the potential impacts from information leakage and conflicts of interest faced by their broker-dealers. While there is some indication that enhancements to electronic order routing systems and processes generally have led to improved execution quality in many cases,
As noted above, at the time of adoption of Rule 606, institutional orders generally were handled by an exchange floor broker or upstairs block positioner. The risks of information leakage and broker-dealer conflicts of interest existed with manual order handling, but because the execution alternatives were fewer and simpler, less data was necessary for institutional customers to evaluate those risks and evaluate broker-dealer performance. Now, however, because of the complexity of order execution algorithms and smart order routing systems, and the wide variety of venues to which broker-dealers may route institutional orders or send actionable indications of interest, access to data is important for institutional customers to assess the impact a broker-dealer's order routing strategies may have on the quality of their executions and the risks presented by any resulting information leakage or broker-dealer conflicts of interest.
Institutional customers increasingly have been expressing concerns regarding the difficulty in obtaining and comparing certain information across broker-dealers and venues, and understanding how their institutional orders are handled by broker-dealers, and have called for enhanced order handling disclosures.
In the absence of a Commission rule, some institutional customers today have taken steps to acquire more information about the nature and number of venues to which their orders are routed or exposed.
Broker-dealers have a variety of types of institutional customers that use their order routing services, including pension funds, mutual funds, investment advisers, insurance companies, investment banks, and hedge funds.
Some institutional customers have direct relationships with their broker-dealers, whereas other institutional customers, such as mutual funds and pension funds, often employ investment advisers to buy and sell securities on their behalf. Investment advisers are fiduciaries to their clients (
Today, broker-dealers are not required by rule to disclose specific order handling information regarding institutional orders. Instead, as noted above, the order handling information obtained by institutional customers is the subject of individualized negotiations with their broker-dealers, with the result that only a subset of institutional customers obtain order handling information and the scope of the information received varies widely. Accordingly, institutional customers and their advisers today monitor broker-dealers for best execution with substantially different levels of information, and potentially with varying degrees of effectiveness. For example, larger institutional customers may be better able to leverage their market size and position to obtain more detailed and complete disclosures from their broker-dealers, whereas smaller institutional customers may lack sufficient bargaining power to do so.
The Commission preliminarily believes that requiring enhanced order handling disclosures for all institutional orders would not only place small institutional customers on a more level playing field with large institutional customers, but also would create a uniform baseline for all institutional customers to obtain information on how large orders are handled. Widespread institutional access to standardized information could help institutional customers to more effectively assess the performance of their broker-dealers in handling their orders. This, in turn, could help improve the quality of broker-dealer routing practices, by, among other things, introducing more competitive forces so that broker-dealers are actively competing with each other to offer routing services that minimize information leakage and mitigate conflicts of interest.
The Commission has recognized that in a market structure with many competing trading centers, broker-dealers play a critical role in deciding where to route a customer's non-directed orders.
There are a number of potential conflicts of interest that arise for broker-dealers in the handling of institutional orders that may influence their order routing practices. One potential conflict of interest a broker-dealer may face in the handling of institutional orders involves the different pricing structures of trading centers. A prevalent pricing model in the current market structure is the so-called “maker-taker” model, which involves the use of access fees and rebates.
Broker-dealers that are members of an exchange or participants of an ATS with a maker-taker model pay fees to, and receive rebates from, the venue for each order, including an institutional order, that is executed on it, but generally do not directly pass those fees or rebates back to their institutional customers.
For example, with respect to non-marketable orders, the trading centers that pay the highest rebate for providing liquidity generally charge the highest fee for removing liquidity.
A similar conflict of interest may exist for marketable orders.
Another potential conflict of interest may arise when a broker-dealer internalizes order flow,
As discussed further below, the Commission preliminarily believes
The Commission has acknowledged “the need of investors executing large size trades to control the information flow concerning their transactions.”
Each time an order is routed to a venue, and each time an actionable indication of interest is sent to a market participant, information is revealed about that order and the potential existence of a larger institutional order from which it may be derived. Accordingly, broker-dealers must balance the need to sufficiently expose the customer's trading interest to achieve execution, with the risk that such exposure might cause prices to move in a less favorable direction to the detriment of execution quality. Indeed, institutional customers have expressed concern that excessive routing
The Commission preliminarily believes that the amendments to Rule 606 it is proposing today would help institutional customers more efficiently and effectively operate in the current equity market structure. As discussed in more detail below, the required disclosures would provide standardized information for institutional customers so that they can better: (1) Discern where their orders are exposed, routed, and executed; (2) assess their broker-dealers for best execution by examining order execution statistics; (3) monitor conflicts of interest of their broker-dealers with the additional financial incentives disclosures; and (4) assess information leakage with the routing of their orders.
As discussed above, there are no legal requirements for a broker-dealer to disclose institutional order handling information to its customers, either privately or publicly. The Commission preliminarily believes that the dearth of public information about each broker-dealer's institutional order handling practices may make efficient and effective comparisons about the nature and quality of services offered by broker-dealers more difficult. Without required public disclosure of aggregated institutional order handling information, institutional customers do not have information that could be used to evaluate, among other things, the venues to which broker-dealers route orders, the execution quality achieved at such venues, and the overall fees paid and rebates received for such executions. Public information on a broker-dealer's institutional order handling practices could both assist institutional customers in selecting one or more broker-dealers for order routing services and foster increased competition among broker-dealers to provide order routing services. Indeed, if institutional order handling information were publicly available to review and analyze, the Commission preliminarily believes that additional competitive forces could be brought to bear on broker-dealer institutional order routing services, thereby potentially enhancing the quality of such services.
As discussed above, the U.S. equity markets have evolved in recent years to become more automated, dispersed, and complex, and the resulting competition among trading centers has intensified practices to attract order flow, including retail order flow. Historically, trading centers have offered payment for order flow or other financial inducements to broker-dealers based upon whether the retail order flow is marketable or non-marketable. As a result, broker-dealers generally handle marketable and non-marketable retail orders differently. Indeed, whether a retail order is marketable or non-marketable will often determine where the broker-dealer routes the order. Certain broker-dealers route a large portion of marketable retail orders to OTC market makers with whom they have payment for order flow or other arrangements.
Currently, Rule 606(a) does not require broker-dealers to segment their quarterly disclosures for limit orders between marketable and non-marketable orders. By only showing
In addition, financial inducements to attract order flow from broker-dealers that handle retail orders have become more prevalent and for some broker-dealers such inducements may be a significant source of revenue.
Under the quarterly disclosure obligations in current Rule 606(a), broker-dealers are required to discuss the material aspects of their relationship with each Specified Venue, including a description of any arrangement for payment for order flow or profit-sharing relationship. The current disclosure informs the market participants of a potential conflict of interest the broker-dealer may face, but the current rule does not require the broker-dealer to disclose specifics on the conflict, including financial inducements received from each Specified Venue, or transaction rebates received from exchanges and other trading centers.
Accordingly, the Commission preliminarily believes that requiring broker-dealers to report more detailed disclosure on the payments received and fees paid for marketable limit orders, non-marketable limit orders, and other order types at each Specified Venue would enable market participants to better assess the extent to which the broker-dealer is effectively managing the potential conflicts of interest, as well as the quality of their broker-dealer's retail order routing and execution services. The Commission also preliminarily believes that the description of any payment for order flow arrangements and profit-sharing relationships required to be disclosed in the quarterly report should be more comprehensive. As such, the Commission preliminarily believes that it would be appropriate to require broker-dealers to describe in their quarterly disclosure any terms of payment for order flow arrangements and profit-sharing relationships with each Specified Venue that may influence their order routing decisions.
Separately, in adopting Rule 606, the Commission required that retail routing reports be divided into three separate sections for NMS stocks listed on: NYSE, NASDAQ, and American Stock Exchange LLC.
The Commission periodically has examined the regulatory regime for order routing disclosure. The Commission published the Concept Release on Equity Market Structure in 2010, which requested comment on a wide range of issues. Among the issues specifically highlighted for comment were: (1) Whether Rule 606 should be updated and, if so, in what respects; (2) whether Rule 606 reports continue to provide useful information for investors and their broker-dealers in assessing the quality of order execution and routing practices; (3) whether Rule 606 should be updated to address the interests of institutional customers in efficiently executing large orders and, if so, what metrics would be useful; (4) whether institutional customers have sufficient information about the smart order routing services and order execution algorithms offered by their broker-dealers; and (5) whether a regulatory initiative to improve disclosure of these broker-dealer services would be useful
The Commission received twenty-eight comment letters
A few commenters referred generally to existing drawbacks in Rule 606 and the need for improvements to Rule 606 without making specific recommendations. These commenters raised concerns regarding certain conflicts of interest present in order routing practices and the sufficiency of current disclosures under Rule 606, and stated that improvements to Rule 606 would provide more insight to investors and that the utility of Rule 606 was limited by a lack of disclosure.
Many commenters cited technological changes in market structure as the basis for updating Rule 606.
Most commenters identified specific metrics that broker-dealers should disclose, proposed model templates for disclosure, or called for disclosures to be made in a standardized fashion. Commenters generally requested additional information regarding order type usage and fill rates, marketable and non-marketable limit orders, and the use of indications of interest (“IOI”). Many commenters also requested more detailed disclosure of payment for order flow, including fees paid and rebates received.
Some commenters expressed concern regarding information leakage and identified various metrics that could help customers determine whether a broker-dealer's routing strategy leaves orders vulnerable to information leakage.
A number of commenters recommended specific order routing disclosures for institutional customers or questioned the usefulness of the current disclosure requirements to retail or institutional customers given that large orders are excluded from the rule.
As noted above, some comments on the Concept Release on Equity Market Structure called for the disclosure of information relating to a broker-dealer's use of IOIs.
As discussed below, the Commission proposes to define the term “actionable
The Commission has considered these comments discussed in this Section II.F., and, for the reasons set forth throughout this release, is proposing the amendments to Rules 600, 605, 606, and 607 as described herein. Moreover, as noted earlier, the Commission is proposing amendments to other rules to update cross-references as a result of this proposal.
The Commission proposes to amend Rule 606 to require a broker-dealer that receives institutional orders in NMS stocks to, upon request, provide customer-specific reports regarding the venues to which the institutional orders are either routed or exposed through an actionable IOI.
Currently, Rule 606 of Regulation NMS limits the required public disclosure of a broker-dealer's order routing information to non-directed orders in NMS securities that are in amounts less than (i) $200,000 for NMS stocks, and (ii) $50,000 for option contracts.
To facilitate enhanced transparency around the handling of larger orders in NMS stocks, the Commission is proposing to amend Rule 600 to include a definition of “institutional order.”
The proposed definition of “institutional order” is intended to complement the current definition of “customer order.”
The Commission preliminarily believes that defining institutional order in relation to the dollar amount of the order is an appropriate means to differentiate between small orders that are typically characterized as orders of $200,000 or less and larger-sized orders that are generally categorized as orders of $200,000 or more.
The Commission requests comment on the expansion of Rule 606 to include institutional orders and the definition of “institutional order” in proposed Rule 600(b)(31). In particular, the Commission solicits comment on the following:
1. Do commenters believe Rule 606 should be expanded to include institutional orders? Why or why not? Should the Commission consider an alternative approach? Why or why not?
2. Do commenters believe it is useful or necessary to define an institutional order? Do commenters believe that the proposed definition of institutional order should include securities other than NMS stocks? For example, should NMS securities that are options contracts be included? Why or why not? Should non-NMS securities, such as securities traded only in the OTC market, be included? Why or why not? Would including these types of securities in the definition of institutional order be useful to institutional customers? If so, how? Please explain and provide support for your view.
3. Do commenters believe that dollar value is the proper criterion for defining an institutional order? If so, is $200,000 the appropriate amount? Why or why not? If not, should it be higher or lower? If so, what amount? Are there other order characteristics the Commission should consider to distinguish between retail and institutional orders, in addition to, or instead of, a dollar threshold? Should the criteria be different for different types of stocks? For example, would $200,000 capture large-sized orders for liquid or illiquid stocks, high-priced or low-priced stocks, large capitalization or small capitalization stocks? Please explain and provide data to support your argument.
4. Should the Commission define an institutional order based on the number of shares instead of a market value? Why or why not? For example, would 10,000 shares be an appropriate criterion for defining an institutional order, regardless of dollar value? Should it be more or less? Please explain and provide data.
5. Should the Commission require broker-dealers to make the disclosures proposed in Rule 606(b)-(c) for all orders, irrespective of dollar amount? Why or why not? Please explain.
6. Should the definition of institutional order reflect a different threshold, such as order size or market value, for various types of NMS stocks, such as common stock and exchange-traded products? If so, what thresholds are appropriate and for which NMS stocks? If possible, please provide data and analysis to support your view.
7. Should the definition of institutional order incorporate multiple metrics, such as a certain market value of the order plus a certain number of shares for the order? If possible, please provide data and analysis to support your view.
8. Do commenters believe that customers should be able to designate which orders qualify as an institutional order? For example, should a customer be able to designate smaller orders sent to a broker-dealer as an institutional order? If so, how would that be done? Should institutional order be defined as a combination of customers designating institutional orders and a threshold,
9. Do commenters have alternative definitions for an institutional order, or modifications to the proposed definition? Please explain and provide supporting data, if possible.
10. Instead of defining institutional order, do commenters believe that there are alternative approaches that the Commission should consider in structuring order handling disclosures for large orders? If so, please explain the approach in detail, including the benefits and costs of the approach.
To further facilitate the institutional order disclosure regime, the Commission proposes to amend Rule 600 to include a definition of “actionable indication of interest.”
Under proposed Rule 600(b)(1) of Regulation NMS, an actionable IOI would be defined as “any indication of interest that explicitly or implicitly conveys all of the following information with respect to any order available at the venue sending the indication of interest: (1) Symbol; (2) side (buy or sell); (3) a price that is equal to or better than the national best bid for buy orders and the national best offer for sell orders; and (4) a size that is at least equal to one round lot.”
A determination of whether an IOI implicitly conveys information—and thus contains each of the four elements to make such IOI actionable—involves a consideration of all of the facts and circumstances, including the course of dealing between the IOI sender and the recipient. For example, a message that alerts the recipient that there is trading interest in a particular symbol and side at the venue sending the IOI generally would be considered “actionable” even though it does not explicitly specify the price and size if, through the course of dealings, the recipient could expect to respond and receive an execution equal to or better than the applicable national best bid or offer for at least one round lot. The Commission notes that the proposed definition is substantively similar to the Commission's description of actionable IOIs in the Regulation of Non-Public Trading Release in 2009.
When used in the context of the proposed institutional order handling report, the proposed definition of actionable IOI would require a broker-dealer to disclose its activity that communicates to external liquidity providers to send an order to the broker-dealer in response to a customer's institutional order. The Commission preliminarily believes information about a broker-dealer's use of actionable IOIs in executing institutional orders will be useful to customers assessing the broker-dealer's order handling decisions, particularly in regards to analyzing information leakage because, when “actionable IOIs are intended to attract immediately executable order flow to the trading venue,”
One purpose of the proposed amendments to Rule 606 is to reflect how large orders are handled and how information is shared and dispersed among the marketplace. The Commission has previously noted that because actionable IOIs convey similar information as an order, a response to an actionable IOI may result in an execution at the venue of the IOI sender.
Separately, the Commission notes that as a result of the Commission proposing both the definitions of institutional order and actionable indications of
The Commission requests comment on the proposed definition of “actionable indication of interest,” as well as the other proposed changes to Rule 600(b) noted above. In particular, the Commission solicits comment on the following:
11. Do commenters believe that a symbol is a necessary element to include in the definition of actionable IOI? Is the side (buy or sell) a necessary element to include in the definition of actionable IOI? Should price be an element in the definition of actionable IOI or is it assumed that it would be equal to or better than the applicable national best bid or offer? Is size a necessary element to define an actionable IOI? Should an actionable IOI be defined to require only a subset of these elements, or should any of the proposed elements be modified? If so, which elements and why? Are there alternative definitions that would capture the activity of a broker-dealer communicating to external liquidity providers that should be included as part of the required disclosure? Are there other elements or factors that the Commission should consider in the definition of actionable IOI? Should any of the proposed elements be omitted? Why or why not?
12. Do commenters believe that an IOI can be “actionable” even if a subset of the elements (symbol, side, price, and size) is conveyed implicitly? Should broker-dealers be required to disclose information about actionable IOIs where one, some, or all of the elements are conveyed implicitly? Why or why not? Would broker-dealers be able to program automated systems to identify as actionable IOIs instances in which information is being conveyed implicitly, such as through a course of dealing between a liquidity provider and the broker-dealer?
13. Do commenters believe there are other types of indications of interest that should be required to be disclosed? If so, what types and how would they be defined?
14. Do commenters believe actionable IOIs are linked to specific orders at the broker-dealer, such that when the external liquidity provider responds to an actionable IOI with a contra-side order, the broker-dealer will be able to match both sides of the trade?
15. Do commenters believe that there are alternative approaches to defining an actionable IOI? If so, please explain each approach in detail, including the benefits and costs of the approach.
The Commission understands that customers increasingly are requesting institutional order handling information to better understand and assess order routing strategies, best execution, potential conflicts of interest, and the risk of information leakage. The Commission understands that many broker-dealers currently respond to such requests by providing reports on their institutional order handling to customers. However, the Commission understands that these reports often contain non-standardized terms, and often are not presented in a uniform manner to allow for effective comparison across different broker-dealers and trading centers.
The Commission preliminarily believes that requiring broker-dealers to disclose standardized customer-specific institutional order handling information to their customers would facilitate the ability for such customers to assess broker-dealers' order handling practices and how such practices affect best execution, potential conflicts of interest, the potential for information leakage, and execution quality generally. The proposed disclosures described below effectively would set a baseline for disclosure of customer-specific institutional order handling information that all customers, regardless of size, could receive from their broker-dealers upon request. The Commission preliminarily believes that the proposed disclosures would provide needed transparency into broker-dealer institutional order handling practices, and would promote discussions between broker-dealers and customers regarding the broker-dealer's institutional order handling practices and the effect such practices have on execution quality. In addition, the Commission preliminarily believes that the proposed disclosures would allow customers to better compare institutional order handling practices across multiple broker-dealers, which should provide a basis for more informed decision making when customers engage the order routing services of broker-dealers.
Specifically, the Commission is proposing to amend Rule 606(b) of Regulation NMS to require that a broker-dealer, on request of a customer that places, directly or indirectly, an institutional order with it, disclose to such customer within seven business days of receiving the request, a report on its handling of institutional orders for that customer that contains information for the prior six months, broken down by calendar month.
The proposed report would cover instances where an institutional order is handled either directly by the broker-dealer or indirectly through systems provided by the broker-dealer. For example, an institutional order would have been placed with a broker-dealer if a broker-dealer receives an institutional order directly from a customer and works to execute the order itself, as well as if a broker-dealer receives an institutional order indirectly from a customer, where the customer self-directs its institutional order by entering it into a routing system or execution algorithm provided by the broker-dealer.
The Commission notes that the proposal would require a broker-dealer to provide a report “on request of a customer that places, directly or
Separately, the Commission notes that while the proposed rule would allow a customer that places, directly or indirectly, an institutional order with a broker-dealer to request and receive its institutional order handling report, it would not limit the number of times a customer could place a request. The proposed rule also would not preclude a customer from making a standing request to its broker-dealer, whereby the customer would automatically receive a recurring report on an periodic basis without the need to make repeated requests for its institutional order handling reports. However, the Commission does not intend for the proposed rule to duplicate information the broker-dealer has previously provided the customer pursuant to a prior request under the proposed rule. For example, if a broker-dealer provides a report to a customer for the prior six months, and that customer requests an additional report the following month, the broker-dealer would only need to provide a report for the latest month. In addition, the Commission acknowledges that broker-dealers may need to configure their systems to capture the information necessary to produce the proposed institutional order handling reports and, therefore, may not have the ability to produce historical reports about the routing of orders and executions that occurred before such systems are updated. Accordingly, the Commission would not require broker-dealers to produce institutional handling reports containing information to cover months before broker-dealers are required to comply with such rule, if adopted.
For purposes of the report, the handling of an institutional order would include the handling of all smaller orders derived from the institutional orders.
The Commission is further proposing to require that the report be made available using an eXtensible Markup Language (XML) schema and associated PDF renderer to be published on the Commission's Web site.
The Commission seeks comment generally on the report format proposed in Rule 606(b)(3). In particular, the Commission solicits comment on the following:
16. Do commenters believe the proposed scope of the institutional order handling report is practicable and appropriate? Why or why not? Please explain and provide data, if possible.
17. Do commenters believe that it is appropriate to view the customer placing the order with the broker-dealer, whether the account holder or an investment adviser or other fiduciary, as the “customer” for purposes of the proposed amendments to Rule 606? Should entities other than the customer placing the order with the broker-dealer be entitled to receive the report? For example, if an investment adviser represents multiple underlying clients, should each underlying client be entitled to receive the report? Please explain.
18. Do commenters believe that broker-dealers should be required to provide the customer-specific report on institutional order handling in the proposed format? Why or why not? Do commenters believe broker-dealers should be required to provide the report in a structured XML format? Would such a format facilitate comparison of the data across broker-dealers? If not, why not? Do commenters believe broker-dealers should be required to also provide the report in an instantly readable PDF format? If not, why not? Are there other formats or alternative methods to provide the customer-specific reports that the Commission should consider? If so, please explain and provide data.
19. Do commenters believe that seven business days is a reasonable amount of time for a broker-dealer to respond to a customer request for institutional order handling information? If not, what would be a reasonable amount of time?
20. The Commission notes that Rule 606(b)(2) requires that broker-dealers notify their customers annually, in writing, of the availability of a report on the routing of retail orders. Should the Commission include a similar requirement for a report on the handling of institutional orders?
21. Do commenters believe that the rule should include a de minimis exemption for broker-dealers that receive, in the aggregate, less than a certain threshold number or dollar value of institutional orders? Why or why not? If so, what would be the appropriate threshold number or dollar value of institutional orders a broker-dealer should need to receive from all customers in the aggregate before it would be required to provide customer-specific order handling disclosures to any customer? Please explain and provide data, if possible.
22. Do commenters believe that the rule should be applicable, with respect to disclosures to any particular customer, only if a broker-dealer receives greater than a certain threshold number or dollar value of institutional orders from that customer? Why or why not? What would be the appropriate threshold number or dollar value of institutional orders from a particular customer before a broker-dealer should be required to provide customer-specific order handling disclosures to the particular customer? Please explain and provide data, if possible.
23. Do commenters believe that the required disclosure regarding the handling of an institutional order should include the handling of all smaller (child) orders derived from the institutional order? Why or why not?
24. Do commenters believe that the rule should cover institutional orders placed both directly and indirectly with a broker-dealer? Should the rule only cover orders placed directly with a broker-dealer? Why or why not?
25. Do commenters believe that the rule should specify the number of times a broker-dealer is required by the rule to respond to a customer request for a report on the handling of its institutional orders? Why or why not? If yes, what should the number of times be? Alternatively, do commenters believe that broker-dealers should be required to provide customers with institutional orders ongoing access to order handling reports through a secure portal on their Web sites? Why or why not? How would this impact broker-dealers' compliance costs, or the accessibility to customers of order handling reports? Please explain.
26. As noted above, the proposed rule would not preclude customers from making standing requests for their broker-dealers to provide them order handling reports on a specified regular basis. Do commenters believe broker-dealers should be required to automatically provide reports to customers with respect to their institutional orders, without the customer making a specific request? If so, how frequently should this information be provided (
As noted above, the Commission is proposing to require that the institutional order handling reports be broken down by calendar month.
For example, if a change in a trading center's pricing structure occurs at the beginning of a calendar month, and the report on a customer's institutional order handling reflected aggregated data for the past six months, then any change in broker-dealer routing behavior as a result of the change in trading center pricing would be harder to detect as the change in data would be diluted and averaged over a period of months. The Commission preliminarily believes that by requiring the reports to be broken down by calendar month would enable
As proposed, Rule 606(b)(3) requires that the broker-dealer's report reflect aggregated information regarding the handling of a customer's institutional orders for the prior six months, broken down by calendar month. Additionally, the Commission preliminarily believes that, if a customer places an institutional order that identifies the particular account for which the order was submitted, the broker-dealer would be well-positioned to provide the customer, upon request, a report broken down by account. The Commission preliminarily believes that, because the proposed disclosures will aggregate information to be disclosed to a specific customer across all of the customer's institutional orders, the risk that such disclosures would reveal sensitive, proprietary information about broker-dealers' order handling techniques should be minimal. The Commission is cognizant of the concerns broker-dealers would have if such disclosures revealed proprietary order handling techniques, and preliminarily believes that aggregated customer-specific order handling information would not enable a customer to reverse-engineer proprietary order handling techniques.
The Commission requests comment on this proposed requirement. In particular, the Commission solicits comment on the following:
27. Is six months an appropriate timeframe for the reporting period for customer-specific order handling information? Would a longer or shorter time period (
28. Do commenters believe that aggregated information, broken down by calendar month, is a useful format for the customer? Should the data be required to be provided in a more granular or broader manner? For example, would it be more useful for institutional customers to receive data about the handling of their institutional orders on a stock-by-stock basis rather than aggregated? Please provide support for your arguments and describe any costs and benefits associated with an alternative format.
29. Does aggregating of all of a customer's institutional orders into a single report adequately prevent sensitive, proprietary information from being revealed? If not, why not? Could aggregated institutional order disclosures allow a customer or competitors to reverse engineer a broker-dealer's order handling techniques?
30. As noted above, the Commission preliminarily believes that, if a customer places an institutional order that identifies the particular account for which the order was submitted, the broker-dealer would be well-positioned to provide the customer, upon request, a report broken down by account. Do commenters believe that the rule should require a broker-dealer to provide, upon request, a report broken down by account, if the customer identifies the particular account for which the order was submitted? Why or why not? Please discuss the benefits and costs with such an account-by-account approach.
Finally, to provide a standardized format for the proposed institutional order handling report, the Commission proposes that the disclosures regarding institutional orders a broker-dealer executes internally or routes to other venues be made in chart form with certain rows and columns of required information.
The Commission preliminarily believes it is important for customers to understand the venues where their institutional orders are exposed and executed,
The Commission also proposes to require that the institutional order handling report be categorized by order routing strategy category for institutional orders for each venue.
The Commission acknowledges that categorization of order routing strategies for institutional orders would be an internal process for a broker-dealer, and, therefore, the methodologies for such process would likely not be entirely consistent
The Commission recognizes that customers may have different investment strategies and provide specific order handling instructions that will affect how a broker-dealer handles an institutional order and utilizes various venues. The Commission preliminarily believes that if it were to require that the disclosures be categorized only by venue, the disclosures would contain aggregated order routing strategy data that might be less useful in analyzing how a broker-dealer implements the customer's trading decisions. The Commission preliminarily believes that disclosing the proposed institutional order handling information by category of order routing strategy should allow customers to better evaluate a broker-dealer's order handling practices for orders that are handled using similar strategies.
In addition, a customer's order handling instructions may vary at particular points in time depending on a number of different factors. For instance, at certain times a customer may need to quickly liquidate or acquire a position, in which case an aggressive order routing strategy may be appropriate. At other times, speed may not be a primary concern and thus a passive order routing strategy may be appropriate. Because these types of order routing strategies use different methods to liquidate or acquire a position, the order routing strategies may use venues for different purposes. The Commission preliminarily believes that disclosing the required institutional order handling information by passive, neutral, and aggressive strategy for each venue will provide more transparency to customers and a means to understand better which venues are being used as part of a particular strategy. Moreover, the Commission preliminarily believes that the three broad categories should provide a means for customers to ascertain whether a broker-dealer in the aggregate is handling its institutional orders pursuant to its instructions. For example, if a customer instructs its broker-dealer to use mostly passive order routing strategies, the customer could use the institutional order handling report to monitor the use of passive, neutral and aggressive order routing strategies during the reporting period. Finally, the Commission preliminarily believes that, notwithstanding the limitations on comparisons described above, categorizing the proposed institutional order handling information by these three strategies would allow a customer to compare order routing strategies across its broker-dealers.
The Commission acknowledges that broker-dealers may want to prevent other market participants from reverse engineering their proprietary order routing strategies. Thus, the Commission is not proposing to require broker-dealers to disclose detailed methodologies of their order routing strategies. Rather, the Commission is proposing to require broker-dealers to group their various order routing strategies for institutional orders into three categories
The Commission requests comment on its proposal that the customer-specific institutional order handling report be categorized by venue and order routing strategy category. In particular, the Commission solicits comment on the following:
31. Do commenters believe that disclosure by venues and order routing strategies would be useful to customers placing institutional orders? Are there other ways to categorize the disclosures than by venue and order routing strategies that would be more useful to institutional customers? If so, please explain. Should the Commission consider other methods in providing customer-specific institutional order handling reports? If so, please explain the alternative approach and provide data, if possible.
32. Do commenters believe that disclosure of order routing strategies categorized by passive, neutral, and aggressive would be useful? Should any of these proposed categories be modified or deleted? Are there other categories of strategies that would be more meaningful? Please explain and provide data to support your arguments.
33. Are broker-dealers able to classify their order routing strategies into the three proposed strategy categories? Are there other strategy categories that should be considered?
34. Do commenters believe that customers would have sufficient information to meaningfully compare how their institutional orders were handled by different broker-dealers in light of the fact that each broker-dealer would establish its own categorization of routing strategies?
35. Do commenters agree that potential inconsistencies of categorization will only occur at the margins and grouping order routing strategies by the three broad categories would still allow for meaningful comparison of order handling practices across broker-dealers?
36. Do commenters believe that broker-dealers would be able to produce their order handling statistics in such a manner to favor one strategy over another in an effort to enhance the perception of the services provided? If so, should modifications or additions be made to address this? Further, please explain and provide data, if possible.
37. Should the Commission further define the three order routing strategies, and if so, how? Should routing strategies be defined at all? If not, how should order handling practices be expressed to allow for an effective comparison? Do commenters believe that there is benefit in having the strategies listed if there is no common definition among broker-dealers? Would the report still be useful to customers placing institutional orders in
38. Are there other methodologies that the Commission should consider that would allow institutional customers to meaningfully compare order handling practices across broker-dealers? If so, please explain and provide support, if possible.
39. Would the lack of a more precise definition for the three order routing strategies affect the ability of broker-dealers to produce automated reports?
40. Would the lack of a more precise definition impact the ability of customers to compare order handling practices across broker-dealers?
41. Would disclosing information about the use of the three order routing strategies potentially reveal broker-dealers' sensitive proprietary information? Please be specific about what information and the impact of disclosure.
42. Under the proposal, broker-dealers would be required to document the specific methodologies they rely upon for making assignments of institutional orders to the three order routing strategies. Should these methodologies be made available, in the normal course or upon request, to customers and/or the public? Would disclosure of this information be useful to customers? When a broker-dealer changes its methodology, should it be required to notify its customers or the public of the change, and/or should it be required to restate prior reports “as if” such new methodology had been in place? Would such restatements be useful to customers or potential customers? If so, how? Should such restatements be required for certain material changes in methodology? If so, for which prior reports should restatements be made (
43. Do commenters believe that the Commission should specify how broker-dealers would address a misclassification of a particular order routing strategy? If so, how should broker-dealers be required to address the misclassification? For example, do commenters believe that broker-dealers should be required to promptly provide corrected reports to customers and the public? Similarly, should the Commission specify how a broker-dealer would address situations in which it determines that any data in a previously provided order handling report is inaccurate? For example, do commenters believe that broker-dealers should be required to promptly furnish corrected reports to customers and/or promptly correct any publicly available reports? Why or why not? Would the dissemination of corrected reports be useful to customers placing institutional orders, and if so for which prior reports would it be useful? Separately, do commenters believe that there should be a materiality threshold for corrections to either the misclassification of order routing strategies or any other inaccuracy in data provided? If so, what would be an appropriate threshold? Please explain and provide data to support your arguments, if possible. As an alternative to a materiality standard, are there other measures that should determine whether a misclassification or other inaccuracy would necessitate a corrected report? For example, if the misclassification or other inaccuracy could impede trend analysis, should that necessitate a corrected report? Please explain.
The Commission also proposes that the report include information on the customer's order flow with the broker-dealer. Specifically, the Commission proposes to require disclosure of: (1) Total number of shares of institutional orders sent to the broker-dealer by the customer during the reporting period; (2) total number of shares executed by the broker-dealer as principal for its own account; (3) total number of institutional orders exposed by the broker-dealer through an actionable IOI; and (4) venue or venues to which institutional orders were exposed by the broker-dealer through an actionable IOI.
The Commission preliminarily believes that it is important to require disclosure of the total number of shares of institutional orders sent to the broker-dealer by the customer during the reporting period to allow the customer to more easily compare the number of shares sent to the broker-dealer versus the number of shares routed by the broker-dealer. As noted above, a broker-dealer often will route orders numerous times, such that the aggregate order total may exceed the total size of the customer's original order flow. Although the information concerning institutional orders sent by the customer to the broker-dealer should be known by the customer, providing the customer with the amount of shares for the customer that the broker-dealer received over the period covered by the report should put in context other data provided in the institutional order handling report. Thus, the Commission preliminarily believes that a broker-dealer should be required to disclose the total number of shares of institutional orders sent by the customer to the broker-dealer. Moreover, because many customers use multiple broker-dealers to execute their institutional orders, requiring each broker-dealer to disclose the total number of shares of institutional orders sent by each customer would allow customers to more readily understand how much of their order flow was handled by a broker-dealer during the reporting period, which should help customers in comparing the order handling reports of their various broker-dealers.
The Commission further proposes that the report disclose the total number of shares executed by the broker-dealer as principal.
The Commission also proposes to require disclosure of the total number of institutional orders exposed by the broker-dealer through actionable IOIs as well as the venue or venues to which such orders were exposed. The Commission preliminarily believes that transparency into the method of exposing an institutional order through the use of actionable IOIs would provide useful information to customers. As discussed above, the Commission understands that broker-dealers may use actionable IOIs to attract trading interest from external liquidity providers. For example, before a broker-dealer routes an institutional order to another trading center, the broker-dealer may send an actionable IOI to select external liquidity providers to communicate to such liquidity providers to send orders to the broker-dealer to trade with the institutional order that is represented by the actionable IOI at the broker-dealer. While the use of actionable IOIs in this manner by broker-dealers may be beneficial in executing institutional orders, actionable IOIs also may reveal information that could be detrimental to the execution quality of the institutional order. The Commission preliminarily believes that identifying the total number of institutional orders exposed by a broker-dealer though actionable IOIs in the order handling disclosures
The Commission also proposes that broker-dealers disclose the venue or venues that were sent actionable IOIs. Venues that receive the actionable IOIs, such as external liquidity providers that trade proprietarily, could, but are not required to, respond to the actionable IOI by sending an order to the broker-dealer to execute against the trading interest represented by the actionable IOI. The Commission preliminarily believes that disclosure of institutional orders routed to a venue would not, alone, adequately capture a broker-dealer's order handling practices. As such, the Commission preliminarily believes that disclosure of the specific venue or venues that a broker-dealer exposed an institutional order by an actionable IOI would be useful for the customer to further assess the extent, if any, of information leakage of their orders and potential conflicts of interest facing their broker-dealers. Specifically, the Commission preliminarily believes that such information will enable customers to assess whether their broker-dealers are exposing their institutional orders to select market participants with affiliations, business relationships, or other incentives.
The Commission seeks comment on the disclosure of the reporting broker-dealer's information. In particular, the Commission solicits comment on the following:
44. Do commenters believe that disclosing the total number shares sent to a broker-dealer would be useful to customers placing institutional orders? Why or why not?
45. Do commenters believe that disclosure of the total number of shares executed by the broker-dealer as principal would facilitate understanding the broker-dealer's ability to manage its best execution obligations? Should additional or different information be required regarding institutional orders that are executed by the broker-dealer as principal? Please explain whether and how such additional or different information would be useful.
46. Do commenters believe that disclosure of the total number of shares executed by the broker-dealer as principal would be useful to customers for purposes of evaluating conflicts of interest? Why or why not?
47. Do commenters believe that the institutional order handling report should disclose the total number of institutional orders exposed through an actionable IOI? Is this data useful for customers to evaluate their broker-dealers' institutional order handling practices? Why or why not? Would such disclosure guide customers in better understanding the potential of information leakage of their institutional orders?
48. Do commenters believe that broker-dealers should disclose the venues to which it sends actionable IOIs? Would this information help customers understand how financial incentives or business relationships might impact their orders? Would this information help customers evaluate the risk of information leakage?
49. Do commenters believe there are other data points that would be useful to customers that should be disclosed on institutional order handling reports? If yes, please explain how such data would be useful to customers.
Within the venue and order routing strategy segmentations described above, the Commission proposes to require disclosure of information with respect to order routing.
Disclosing total shares routed
The proposed rule would also require disclosure of the total number of shares routed marked IOC,
In addition, requiring the total shares routed that were further routable would allow the customer to understand whether the broker-dealer allows its orders to be routed by the venue to other venues. Such “re-routing” of orders creates the potential for information leakage every time an order is routed on to another venue. Moreover, customers would be able to determine whether their broker-dealers are in control of the routing of their orders or are relinquishing control of order routing to another entity. In addition, disclosure by order routing strategy would highlight how the broker-dealer utilizes routable orders in its various order routing strategies. For example, a customer could assess the rate at which a broker-dealer uses routable orders by order routing strategy and determine if such rate is consistent with its trading objectives.
Finally, the report would require the disclosure of average order size routed.
The Commission requests comment generally on the order routing information proposed in Rule 606(b)(3)(i). In particular, the Commission solicits comment on the following:
50. Do commenters believe that disclosure of the four data points (total shares routed, total shares routed marked immediate or cancel, total shares routed that were further routable, and average order size routed) as proposed in Rule 606(b)(3)(i)(A)-(D) by both venue and strategy is useful? Should the four data points be defined? Are there other factors or order life cycle audit trail information that should be included in order routing information? Should some of the proposed factors be modified or eliminated? If so, which one(s) and why?
51. Do commenters believe it is useful to customers to know the total shares marked IOC and that were routed? Would the cancellation rate of orders be useful to customers placing institutional orders? Are there other order types for which disclosure should be required? If so, which types and why? Should broker-dealers be required to disclose all order types used to execute customer orders? Please explain.
52. Do commenters believe that orders that are not only routable, but are in fact routed on should also be required to be disclosed? Would such re-routing information be useful to customers in determining whether their broker-dealers are in control of the routing of their orders or are relinquishing control of order routing to another entity? Do commenters believe that such re-rerouting information is retrievable for broker-dealers? Why or why not?
Within the venue and order routing strategy segmentations described above, the Commission also proposes to require disclosure of information with respect to order execution.
Disclosing the total shares executed
The Commission preliminarily believes that disclosure of the fill rate
The Commission notes that providing customers' fill rate and average fill size
As proposed, the report would provide data on the average net execution fee or rebate (cents per 100 shares, specified to four decimal places).
The Commission acknowledges that, depending on the arrangement between a broker-dealer and its institutional customer, a broker-dealer may directly pass on execution fees and rebates to its institutional customer. In such instance, any economic incentives to route orders to certain trading centers would not present a potential conflict of interest, as the broker-dealer would not be benefiting from receipt of fees or rebates. The Commission preliminarily believes that a broker-dealer that directly passes on execution fees or rebates to its customers should nonetheless provide the average net execution fee or rebate in the report so that, among other things, the customer has a means to verify that no conflict of interest existed between the broker-dealer and a particular trading center through comparing the execution fees and rebates it received directly through its broker-dealer to the average net execution fee or rebate disclosed in the report.
Moreover, broker-dealers would be required to disclose the average net execution fee or rebate by order routing strategy. Such disclosure would allow customers to assess whether there are conflicts of interest in the broker-dealer's routing decision. For example, if in connection with an aggressive order routing strategy, the broker-dealer routinely routes orders that remove liquidity to venues with rebates for removing liquidity but a low fill rate, it may indicate to the customer that the broker-dealer may not be acting consistent with the customer's trading objectives.
The report would further disclose the total number of shares executed at the midpoint and the percentage of shares executed at the midpoint.
The report would also require disclosure of the total number and percentage of shares executed that were priced on the side of the spread more favorable to the institutional order and the total number and percentage of shares executed that were priced on the side of the spread less favorable to the institutional order.
Comment is generally requested on order execution information as proposed in Rule 606(b)(3)(ii). In particular, the Commission solicits comment on the following:
53. Should any of the terms in proposed Rule 606(b)(3)(ii) be defined? Should the information proposed to be required be modified in any way, should additional information related to order execution be required, or should any proposed requirement be omitted? Please explain.
54. Do commenters believe that the required order execution information would be useful to institutional customers? Please explain with respect to each of the proposed institutional order disclosure categories.
55. Do commenters believe that disclosures regarding fill rates and average fill size would assist institutional customers in understanding how much of their orders are executed at a venue versus routed on to another venue? Are there other data that would be useful in analyzing order execution?
56. Would disclosures related to execution fees and rebates be useful to institutional customers? Would this information support an evaluation of a broker-dealer's potential economic incentives and/or conflicts of interest to route and/or execute orders at a particular venue? Please provide support for your arguments.
57. Do commenters believe that the total number and percentage of shares executed at the midpoint indicate higher quality executions? Would this information be useful to customers interested in examining their institutional order execution quality? Please explain.
58. Do commenters believe that information on the shares executed on the side of the spread favorable or less favorable to the institutional order would be useful to institutional customers in analyzing their broker-dealer's order handling practices? What other order execution data, if any, would be useful to customers? Would information on shares executed against displayed or undisplayed liquidity be useful? Should any of the proposed requirements be modified or eliminated? If so, which ones and why? Please provide support for your arguments.
59. Do commenters believe that the proposed data points outlined above would provide customers with meaningful information? Would the proposed disclosures allow customers to better assess the execution quality of their broker-dealer? Would the report further permit customers to compare execution quality among multiple broker-dealers across the market? Would the report, as proposed, allow customers to more easily monitor for best execution?
In addition to the order routing and execution data detailed above, the Commission proposes to require disclosure of information on institutional orders that provided liquidity within the venue and order routing strategy segmentations described above.
The Commission preliminarily believes that disclosure of information on institutional orders that provided liquidity is important for customers to better understand to which venues the broker-dealer routes liquidity providing orders, how long it takes to execute such orders at each venue, and the fees paid to or rebates received by the broker-dealer at each venue for liquidity providing orders. The Commission proposes to require disclosure of: (1) Total number of shares executed of orders providing liquidity; (2) percentage of shares executed of orders providing liquidity; (3) average time between order entry and execution or cancellation for orders providing liquidity (in milliseconds); and (4) the average net execution rebate or fee for shares of orders providing liquidity (cents per 100 shares, specified to four decimal places).
The information on orders that provided liquidity would include the total number of shares executed of orders providing liquidity and the
The institutional order handling report also would require data on the average time between order entry and execution or cancellation for orders that provided liquidity prior to execution or cancellation.
The report would also contain the average net execution rebate or fee for shares of orders providing liquidity.
The Commission requests comment on the disclosure requirements pertaining to institutional orders that provide liquidity as proposed in Rule 606(b)(3)(iii). In particular, the Commission solicits comment on the following:
60. The Commission proposes to define “orders providing liquidity.” Do commenters believe that this term should be defined? Is the proposed definition useful to broker-dealers in categorizing an order for reporting purposes? Should it be modified in any way, including adding additional criteria? Why or why not?
61. Do commenters believe that the total number of shares executed of orders providing liquidity is the appropriate data to inform customers how much of its order flow provided liquidity? Are there other data factors that the Commission should consider?
62. Does the percentage of shares executed of orders providing liquidity provide information customers could use to evaluate how a broker-dealer is implementing its order execution and routing strategies and at what venues? Would this information be useful to customers in analyzing and potentially modifying their trading instructions or choosing a broker-dealer for order routing and execution services?
63. Do commenters believe that the average time between order entry and execution or cancellation (measured in milliseconds) for orders providing liquidity will be an appropriate measure of whether the broker-dealer is implementing a customer's order instructions? If not, why not? Do commenters believe that the “average” is the appropriate measure to gauge the amount of time an order is resting on the book? What are alternative data points or measurements that would achieve the same goal? Separately, is milliseconds an appropriate measure? If not, what would be more appropriate? Are there other time measures and/or data that would be useful to institutional customers in evaluating
64. Do commenters believe that disclosing the average net execution rebate or fee for shares of orders providing liquidity at each venue and by order routing strategy would be useful in assessing potential conflicts of interest broker-dealers may face with regard to routing venues and the order routing strategies that use those venues?
65. Do commenters believe that specifying the average net execution fee or rebate to four decimal places is appropriate? If not, to what level of precision should the fee or rebate be specified? Please explain and provide data for your argument.
Similarly to orders that provided liquidity, the Commission proposes to require the disclosure of information on institutional orders that removed liquidity within the venue and order routing strategy segmentations described above.
The Commission preliminarily believes that disclosure of information on institutional orders that removed liquidity will be useful for customers to understand which venues their broker-dealers route liquidity removing orders to and the fees paid or rebates received at each venue for such orders. The Commission proposes to require disclosure of: (1) Total number of shares executed of orders removing liquidity; (2) percentage of shares executed of orders removing liquidity; and (3) average net execution fee or rebate for shares of orders removing liquidity (cents per 100 shares, specified to four decimal places).
As proposed, the report would require data on the total number of shares executed and the percentage of shares executed of orders removing liquidity.
The institutional order handling report also would require disclosure of the average net execution fee or rebate for shares of orders that removed liquidity. Parallel to the information on orders providing liquidity, the average net execution fee or rebate for orders removing liquidity would be calculated in cents per 100 shares, specified to four decimal places, to correspond to current industry practice and to ensure consistency in reporting among broker-dealers.
The Commission requests comment on disclosures for institutional orders that remove liquidity as proposed in Rule 606(b)(3)(iv). In particular, the Commission solicits comment on the following:
66. The Commission proposes to define “orders removing liquidity.” Do commenters believe that this term should be defined? Is the proposed definition useful to broker-dealers in categorizing an order for reporting purposes? Should it be modified in any way, including adding additional criteria? Why or why not?
67. Do commenters believe that the total number of shares executed of orders removing liquidity is the appropriate data to inform customers how much of its order flow removed liquidity? Are there other data factors that the Commission should consider?
68. Does the percentage of shares executed of orders removing liquidity provide information customers could use to evaluate how a broker-dealer is implementing its order execution and routing strategies and at what venues? Would this information be useful to customers in analyzing and potentially modifying their order instructions and/or choosing a broker-dealer for order routing and execution services?
69. Do commenters believe that the average net execution fee or rebate for shares of orders removing liquidity at each venue and by order routing strategy would be useful in assessing potential conflicts of interest broker-dealers may face with regard to routing venues and the order routing strategies that use those venues?
70. Do commenters believe that specifying the average net execution fee or rebate to four decimal places is appropriate? To what level of precision should the fee or rebate be specified? Please explain and provide data for your argument.
The institutional order handling disclosures, described above, would provide detailed information to a requesting customer with regard to how all of its institutional orders were handled by a broker-dealer, broken down by calendar month. The Commission preliminarily believes that a publicly disclosed aggregated report (aggregating all customer information) could provide additional transparency into the broader institutional order
The Commission preliminarily believes that aggregated public disclosure of the information contained in the customer-specific institutional order handling reports, described above, would be useful to institutional customers and other market participants to determine whether to engage the services of a broker-dealer as well as the ability to gauge the adequacy of the services performed by a broker-dealer. The public disclosure by broker-dealers of aggregated institutional order handling information should promote competition as broker-dealers may seek to differentiate their services and expertise in an effort to retain current customers and attract the business of prospective customers. Indeed, the Commission preliminarily believes that public disclosure of institutional order handling information by each broker-dealer would provide market participants with useful information and could bring competitive forces to bear on broker-dealer institutional order handling services. Accordingly, the Commission preliminarily believes that aggregated public institutional order handling reports would increase the overall transparency of institutional order handling practices to the benefit of customers and the marketplace as a whole.
The Commission proposes to require a broker-dealer that receives institutional orders to make publicly available
Similar to the customer-specific institutional order handling reports required under proposed Rule 606(b), the public aggregated institutional order handling report would be made available using an XML schema and associated PDF renderer to be published on the Commission's Web site.
In addition, the Commission proposes to require that broker-dealers keep such public aggregated institutional order handling reports posted on an Internet Web site that is free and readily accessible to the public for a period of three years from the initial date of posting on the Internet Web site.
The Commission recognizes that broker-dealers have proprietary methods for order handling, and is cognizant of the sensitive nature of such business practices and intellectual property. The Commission preliminarily believes that the risk of exposing sensitive proprietary information on the broker-dealers' order handling techniques would be minimal due to the structure of the proposed report and by aggregating the information to be publicly disclosed. Like the proposed customer-specific institutional order handling reports, the proposed public aggregated institutional order handling report would aggregate a broker-dealer's order handling information for all NMS stocks for the reporting period, and, therefore, the Commission preliminarily believes other market participants would not be able to ascertain which particular securities were routed during the reporting period. Additionally, as routing decisions are generally dependent on the market for the particular security at the time of routing, the Commission preliminarily believes that public aggregated institutional order handling reports for the prior calendar quarter would not provide other market participants, including a broker-dealer's competitors, sensitive information about a broker-dealer's order handling techniques.
Further, while the public aggregated institutional order handling report would provide information on the venues to which a broker-dealer routed its institutional order flow as well as the three categories of order routing strategies used to route those orders, the report would not provide any information about the manner or sequence in which those orders were routed to the venues. For example, the report would not disclose whether the broker-dealer routed orders sequentially or simultaneously to multiple trading centers in order to fully execute an institutional order, or the sequence in which such orders were routed to trading centers. Because such information is essential to effectively reverse engineer an order routing algorithm, the Commission preliminarily believes that the proposed public aggregated institutional order handling information would not provide other market participants with the information to reverse engineer a broker-dealer's proprietary order handling techniques, regardless of the number of orders a broker-dealer routes or the number of institutional customers for which a broker-dealer routes orders during the reporting period. Accordingly, the Commission preliminarily believes that information contained in the proposed public aggregated institutional order handling report should provide appropriate safeguards for broker-dealers' current business practices, while, at the same time, providing meaningful information for customers and others to compare broker-dealers' order routing services.
The Commission also preliminarily believes that the risk of exposing sensitive customer-specific information would be minimal due to the structure of the proposed report and by aggregating the information to be
The Commission understands that many customers currently request information about a broker-dealer's order handling practices before engaging its services.
Moreover, the public disclosure of aggregated institutional order handling information would provide academics and others, including third-party vendors offering analytical services, access to order routing and execution information that would not otherwise be available.
Finally, the Commission notes that the proposed public aggregated institutional order handling reports differ from the current reports on retail order routing required pursuant to Rule 606(a).
The Commission requests comments on information contained in the public aggregated institutional order handling reports by broker-dealers. In particular, the Commission solicits comment on the following:
71. Do commenters believe that aggregated institutional order handling information being publicly disclosed would be useful to institutional customers and other market participants? Who would it be useful to and in what ways?
72. Do commenters believe that the aggregated institutional order handling information proposed by Rule 606(c) should be disclosed for both retail and institutional orders, rather than only for institutional orders as proposed? Why or why not? Please provide support for your argument.
73. Should the public aggregated institutional order handling report include all the data points enumerated in proposed Rule 606(b)(3)(i)-(iv)? Why or why not? If not, which data points should be excluded or modified? Are there other data points the Commission should consider that would be useful to customers and the public? Please explain and provide data, if possible.
74. Do commenters believe that broker-dealers should be required to provide the public aggregated institutional order handling report in the proposed format? Why or why not? Do commenters believe that providing the report in a structured XML format will facilitate comparison of the data across broker-dealers? If not, why not? Do commenters believe that a structured XML format would be useful to customers and other market participants, and if so how? What incremental costs or savings would broker-dealers incur in providing the report in a structured XML format? Should the Commission consider alternative formats? If so, please explain the alternative formats and associated benefits and costs. Do commenters believe that it would be useful for broker-dealers to also provide the report in an instantly readable PDF format? If not, why not? Are there other formats
75. Do commenters believe that the rule should include a de minimis exemption for broker-dealers that receive, in the aggregate, less than a certain threshold number or dollar value of institutional orders? Why or why not? If so, what would be the appropriate threshold number or dollar value of institutional orders a broker-dealer should need to receive from all customers in the aggregate before it would be required to provide the public order handling reports? Please explain. Separately, are there alternative approaches to reduce the compliance costs on broker-dealers with few institutional customers? Please provide data to support your arguments.
76. Regarding broker-dealers with a small number of institutional customers, do commenters believe there is a potential risk of exposing the customer's sensitive, proprietary information in an aggregated report? Should the Commission make any modifications to the proposed disclosures or eliminate any or all of the proposed requirements under certain circumstances? If so, what is the appropriate measure? Please provide support for your argument.
77. Do commenters believe that a broker-dealer that routes less than a certain number of orders should be exempt from the public disclosure requirement? Why or why not? What is an appropriate threshold for this potential exemption? Separately, are there alternative approaches to reduce the compliance costs on broker-dealers who route and execute few institutional orders? Please provide data to support your arguments. What information, if any, should the broker-dealer be required to provide to customers and/or the public if it relies on the potential exemption?
78. Do commenters believe that the public reports would be useful to customers and the public in comparing the quality of services offered by broker-dealers? Do commenters believe that public disclosure of aggregated institutional order handling information will enhance competition among broker-dealers?
79. Do commenters believe that publicly releasing aggregated institutional order handling reports on a quarterly basis is appropriate? Should the report be publicly disclosed at a different interval, such as monthly? Please explain.
80. Do commenters believe that the requirement that the reports be broken down by calendar month is useful? Should the report be broken down with a different interval(s)? Please explain.
81. Do commenters believe that the aggregated institutional order handling information will be stale if published one month after the end of the quarter? Should the disclosures be available earlier or later? Please explain.
82. Will aggregating the information being publicly disclosed mitigate the risk that the disclosure will reveal sensitive, proprietary information about the broker-dealer's order handling practices? Will it mitigate the risk that the disclosure will reveal sensitive proprietary information about customers' trading strategies? Why or why not? Are there alternative approaches to protecting such information while still requiring the public disclosure of meaningful order handling information? Are there other benefits or risks associated with publicly disclosing aggregated institutional order handling information?
83. Should the Commission require that each quarterly report be publicly available for a designated amount of time? If so, is three years a reasonable amount of time that the reports should be available? Would a shorter or longer period be more appropriate? How, if at all, would a shorter or longer disclosure period impact investors placing orders or broker-dealers? Please explain.
84. Should the Commission require all broker-dealers to make their aggregated institutional order handling reports available on one centralized Web site? For example, should all broker-dealer reports be available on the SEC's Web site? Alternatively, should the SEC's Web site have hyperlinks to the Web sites of broker-dealers where they display their aggregated reports? Why or why not?
85. As proposed, broker-dealers would be required to “make publicly available,” as defined in Rule 600(b)(36) of Regulation NMS, their aggregated public institutional order handling reports, which means, among other things, that such reports must be posted on an Internet Web site that is free and readily accessible to the public. Do commenters believe that broker-dealers might place restrictions on or impediments to obtaining the reports from their own Web sites, such as requiring agreement with certain terms, conditions, or provisions prior to being provided access to the reports? If so, what would be the costs and benefits of those restrictions or impediments? Please explain.
86. Should the Commission require that the aggregated institutional order handling reports be filed with or furnished to the SEC? Should the Commission require that the individual order handling reports provided to customers with institutional orders be filed with or furnished to the SEC? Why or why not?
As noted above, changes to market structure and order routing practices have led the Commission to analyze the current requirements for retail orders under Rule 606. Currently, Rule 606 reports allow customers to assess order routing and execution services of broker-dealers with respect to retail orders. Additionally, the Rule 606 reports are used by broker-dealers as a means to compare their order routing and execution services to that of other firms.
To preserve the benefits of Rule 606 reports and keep pace with market developments, the Commission preliminarily believes that it is appropriate to update Rule 606 to provide customers with enhanced disclosure regarding a broker-dealer's retail order handling practices. As discussed above in detail, currently, Rule 606 requires, among other things, broker-dealers that route “retail” orders to publicly disclose, on a quarterly and
Currently, with respect to what would be defined as “retail” orders by this proposal, Rule 606 distinguishes broadly between “market orders” and “limit orders.” Limit orders, however, fall into two categories: (1) Marketable limit orders, which are priced at or above the lowest offer in the market for a buy order or at or below the highest bid in the market for a sell order; and (2) non-marketable limit orders, which are priced to not execute immediately and seek to provide liquidity.
The Commission preliminarily believes that, under the current rule, customers and other market participants cannot fully evaluate a broker-dealer's limit order routing practice if both marketable and non-marketable limit orders are combined into a single order category. The Commission preliminarily believes that classifying limit orders into marketable and non-marketable limit orders would allow customers and other market participants to more fully assess a broker-dealer's routing decisions for both types of orders and the potential impact on execution quality. The Commission also preliminarily believes that greater transparency between the routing practices of marketable and non-marketable limit orders would allow customers and other market participants to better assess whether broker-dealers are effectively managing their potential conflicts of interest. For example, the Commission understands that broker-dealers may be incentivized to route marketable and non-marketable limit orders to certain venues based on their fee or rebate schedule to the benefit of the broker-dealer. Providing greater public transparency between the routing practices of marketable and non-marketable limit orders could increase competition among broker-dealers and minimize the potential conflicts of interest between maximizing revenue and the duty of best execution.
Currently, Rule 606(a)(1)(i) requires every broker-dealer's quarterly retail order routing report to include the percentage of total orders that were non-directed orders and the percentages of total non-directed orders that were market orders, limit orders, and other orders. In addition, Rule 606(a)(1)(ii) requires every broker-dealer's quarterly report on retail order routing to include the identity of the ten venues to which the largest number of non-directed orders were routed for execution, as well as any venue to which five percent or more of non-directed orders were routed (
The Commission requests comment on the proposed amendments to Rules 600 and 606(a)(1)(i) and (ii). In particular, the Commission solicits comment on the following:
87. Do commenters believe that broker-dealers use Rule 606 reports as a means to assess how their order routing and execution services compare to other firms? Do commenters believe that the reports encourage competition among broker-dealers? Why or why not? If so, do investors in turn benefit from such increased competition? Please provide data to support your arguments.
88. Do commenters believe that Rule 606 quarterly reports continue to provide useful information for customers placing retail orders in assessing the quality of order execution and the routing practices of their broker-dealers? Why or why not? If not, how could the reports be improved to provide more useful information to retail customers? Please explain.
89. Do commenters believe that the proposed definition of non-marketable limit order is appropriate to distinguish the types of limit orders? Why or why not? Should the proposed definition be modified in any way? If so, please explain how.
90. Do commenters believe that separately reporting limit orders by marketable and non-marketable will enable customers placing retail orders to better understand broker-dealers' routing decisions and impact on best execution? Are there other ways in which that information might be useful to customers? Do commenters believe that the separate disclosure of marketable and non-marketable limit orders will be useful to broker-dealers, and if so, how? Do commenters believe it will promote competition among broker-dealers? Please provide data to support your arguments.
91. Do commenters believe that market orders and marketable limit orders should be combined in the quarterly retail order routing report? Would such combination be useful to customers? If so, how? Please explain and provide support, if possible.
92. Should the Commission require the same disclosures for retail orders that it is proposing to require for institutional orders? Why or why not? Would any or all of the disclosures proposed above for institutional orders be appropriate or useful for evaluating order routing of retail orders? If so, would the proposed disclosures need to be modified in any way to be applied to retail orders? Please explain.
93. Are the venues that are required to be included on retail order routing reports appropriate? Should the requirement cover more or fewer venues than are currently included (
Currently, Rule 606 requires that a broker-dealer's quarterly retail order routing report describe the material aspects of the broker-dealer's relationship with each Specified Venue, including a description of any arrangement for payment for order flow or profit-sharing relationship.
As noted above, financial inducements to attract order flow have become more varied and may be a substantial source of revenue.
While Rule 606 currently requires public reports on order routing percentages to Specified Venues and a discussion of the broker-dealer's relationship with each Specified Venue, it does not require detailed disclosure of payment for order flow received, payment from any profit-sharing relationship received, or access fees or transaction rebates. As a result, the Commission preliminarily believes that customers have not received as complete a picture of a broker-dealer's activities to fully evaluate its broker-dealer's management of any potential conflicts of interest and the quality of their broker-dealers' retail order routing practices. The Commission further preliminarily believes that providing such data for specific order types would further enhance a customer's ability to assess their broker-dealers' retail order routing practices.
As such, the Commission proposes to amend Rule 606(a)(1) to include new subparagraph (iii) to require that, for each Specified Venue, the broker-dealer must report the net aggregate amount of any payment for order flow received, payment from any profit-sharing relationship received, transaction fees paid, and transaction rebates received, both as a total dollar amount and on a per share basis, for each of the following non-directed order types: (1) Market orders; (2) marketable limit orders; (3) non-marketable limit orders; and (4) other orders.
The Commission preliminarily believes identifying specific payment information received for each category of order type by Specified Venue would provide customers with useful information to more completely evaluate their broker-dealers' services. Specifically, the Commission preliminarily believes that providing the aggregate amount of payments and fees received is important to give investors and others a comprehensive overview of their broker-dealer. Additionally, the Commission preliminarily believes that payments and fees received in total dollar amounts per share for each order type would allow customers to have a stronger grasp on a broker-dealer's motivation to route to a particular Specified Venue, the management of any potential conflicts of interest, and provide more insight into their retail order routing practices. The Commission preliminarily believes that the greater transparency achieved by such detailed information would be useful to retail customers when selecting or re-evaluating a broker-dealer.
The Commission requests comment on the proposed detailed disclosure of payments received and fees paid for market, marketable limit, non-marketable limit, and other order types at each Specified Venue. In particular, the Commission solicits comment on the following:
94. Do commenters believe that requiring broker-dealers to disclose, for each Specified Venue, payment for order flow received, payment from any profit-sharing relationship received, transaction fees paid, and transaction rebates received would enable customers placing retail orders to better assess their broker-dealers' management of potential conflicts of interest and quality of routing and execution services? Should the Commission require such information to be disclosed? Is there additional information that a customer could use to better assess their broker-dealer's conflicts of interest and quality of routing and execution services? Would requiring such disclosure affect broker-dealers' routing decisions? Please explain and provide support for your argument.
95. Do commenters believe that the proposal will permit customers placing retail orders to be able to better assess whether financial inducements impact their broker-dealer's order routing decisions for different types of orders and the execution quality of those orders? Why or why not?
96. Do commenters believe there are other specific categories of orders in addition to market orders, marketable limit orders, and non-marketable limit orders that should be included in the disclosure that would aid investors placing retail orders in assessing the quality of their order routing? Please provide support for your arguments.
97. Do commenters believe that broker-dealers should disclose the information required by proposed Rule 606(a)(1)(iii) for all orders, not just retail orders?
As noted above, Rule 606(a)(1)(iv) currently requires that a broker-dealer, in its quarterly Rule 606 report, provide a discussion of the material aspects of its relationship with a Specified Venue, including a description of any arrangement for payment for order flow and any profit-sharing relationship. In adopting the rule, the Commission stated that the description of a payment for order flow arrangement must include disclosure of the material aspects of the arrangement.
The Commission acknowledges that payment for order flow arrangements are intensively fact-based in nature and may vary across broker-dealers, nevertheless, the Commission preliminarily believes that disclosing the terms of such arrangements will provide more complete information for customers to better understand and evaluate a broker-dealer's retail order routing decision. In this regard, the Commission preliminarily believes that requiring broker-dealers to describe the terms of such arrangements with a Specified Venue that may influence their decision of where to route a retail order should serve to provide additional clarity to customers in evaluating a broker-dealer's retail order routing practices. The Commission preliminarily believes that the following are a non-exclusive list of terms of a payment for order flow arrangement or profit-sharing relationships that may influence a broker-dealer's order routing decision and would be required to be disclosed under the proposal: (1) Incentives for equaling or exceeding an agreed upon order flow volume threshold, such as additional payments or a higher rate of payment; (2) disincentives for failing to meet an agreed upon minimum order flow threshold, such as lower payments or the requirement to pay a fee; (3) volume-based tiered payment schedules; and (4) agreements regarding the minimum amount of order flow that the broker-dealer would send to a venue.
The Commission is proposing to require broker-dealers to disclose when a Specified Venue provides incentives for equaling or exceeding a volume threshold by offering additional payments or a higher rate of payment, or conversely, disincentives for failing to meet an agreed upon minimum retail order flow threshold, such as a lower payment or charging a fee. The Commission understands that such arrangements may vary among venues, as well as for each broker-dealer sending orders to those venues, and some venues provide higher rebates for meeting or exceeding order flow quotas or charge financial penalties for failing to meet order flow quotas. The Commission preliminarily believes that such incentives and disincentives influence a broker-dealer's decision to either meet or route additional retail order flow to exceed the threshold, and should be disclosed to inform customers of their broker-dealer's conflicts of interest.
Further, the Commission is proposing to require broker-dealers to disclose any volume-based tiered payment schedules with a Specified Venue. Venues that offer these payment schedules typically offer incrementally higher rebates or lower fees to broker-dealers for additional retail order flow volume. The Commission preliminarily believes that these payment schedules can encourage a broker-dealer to route additional retail order flow to such venue in an effort to reap a financial benefit and should be disclosed. Additionally, the Commission is proposing to require broker-dealers to disclose agreements regarding the minimum amount of retail order flow that a broker-dealer would be required to send to a Specified Venue. These types of agreements typically specify that a broker-dealer must send a minimum number of orders or shares to a venue during a particular time period. The Commission preliminarily believes that such commitments for retail order flow may present conflicts of interest and should be disclosed. Finally, the Commission acknowledges that as market structure evolves, new types of arrangements not specifically listed may come about. The four arrangements referenced in Rule 606(a)(1)(iv) are not an exhaustive list of terms of payment for order flow arrangements or profit-sharing relationships that may influence a broker-dealer's retail order routing decision that would be required to be disclosed under the proposed rule. The proposed rule would require disclosure of
As described above, because certain terms of payment for order flow arrangements or profit-sharing relationships may encourage broker-dealers to direct their orders to a specific venue in order to achieve an economic benefit or avoid an economic loss, potential conflicts of interest may arise. The Commission preliminarily believes that disclosure of such information would be useful for customers to assess the extent to which a broker-dealer's payment for order flow arrangements and profit-sharing relationships may potentially affect or distort the way in which retail orders are routed. The Commission further preliminarily believes that providing customers a comprehensive description of such quantifiable terms of a broker-dealer's relationship with a Specified Venue would allow them to fully appreciate the nature and extent of potential conflicts of interest facing their broker-dealers and assist them in evaluating the broker-dealers' management of such potential conflicts of interest.
The Commission requests comment on requiring broker-dealers to describe any terms of payment for order flow arrangements and profit-sharing relationships with a Specified Venue that may influence their retail order routing decisions. In particular, the Commission solicits comment on the following:
98. Do commenters believe that disclosure of any terms of payment for order flow arrangements and profit-sharing relationships that may influence order routing decisions is relevant for retail customers to understand and evaluate a broker-dealer's routing practices and handling of potential conflicts of interest? If so, do commenters believe that the Commission should require a description of these terms to be disclosed in the retail order routing reports? Why or why not? Please explain. Would requiring such disclosure affect broker-dealers' routing decisions?
99. Do commenters believe that broker-dealers should disclose the information required by proposed Rule 606(a)(1)(iv) for all orders, not just retail orders?
100. Do commenters believe that the four enumerated examples in proposed Rule 606(a)(1)(iv) reflect the types of payment for order flow arrangements and other profit-sharing relationships currently in practice? If not, how should their descriptions be modified and what other types of arrangements, if any, should be specified in the rule text?
101. Do commenters believe that there are other identifiable factors, beyond the four included in the proposed rule, that may influence a broker-dealer's order routing decisions for retail orders? If yes, what are the factors and should the rule specify those factors?
102. Do commenters believe that incentives for equaling or exceeding an agreed upon order flow volume threshold influence a broker-dealer's order routing decision for retail orders? Why or why not? Please explain.
103. Do commenters believe that disincentives for failing to meet an agreed upon minimum order flow threshold influence a broker-dealer's order routing decision for retail orders? Why or why not? Please explain.
104. Do commenters believe that volume-based tiered payment schedules influence a broker-dealer's order routing decision for retail orders? Why or why not? Please explain.
105. Do commenters believe that agreements regarding the minimum amount of order flow that a broker-dealer would send to a venue influence a broker-dealer's order routing decision for retail orders? Why or why not? Please explain.
106. Do comments believe that both written and oral terms that may influence a broker-dealer's order routing decision should be required to be disclosed? Why or why not? Please explain.
The Commission is further proposing amendments to remove the requirement that Rule 606(a)(1) report be divided into three separate sections for securities listed on the NYSE, securities that are qualified for inclusion in NASDAQ, and securities listed on the American Stock Exchange.
The Commission is proposing that the public retail order routing reports required by Rule 606(a)(1) be broken down by calendar month.
In addition, the Commission is proposing that the public retail order routing reports required by Rule 606(a)(1) and customer-specific retail order routing report required by Rule 606(b)(1) be made available using an XML schema and associated PDF renderer to be published on the Commission's Web site.
The Commission is also proposing to amend Rule 606(a)(1) to require every broker- dealer to keep the reports required pursuant to Rule 606(a)(1) posted on an Internet Web site that is free of charge and readily accessible to the public for a period of three years from the initial date of posting on the Internet Web site. Similar to the identical requirement proposed for the public aggregated institutional order handling report under proposed Rule 606(c), the Commission preliminarily believes that making this historical data available to customers and the public generally will be useful to those seeking to analyze past routing behavior of broker-dealers. Should the proposal be adopted, the requirement to post and maintain reports on an Internet Web site that is free and readily accessible to the public would begin at that time and apply going forward. Affected entities would not be required to post past reports created prior to the proposed Rule's effectiveness, but such entities would be neither prevented nor discouraged from posting such reports.
Finally, the Commission proposes to insert the term “retail” in the heading of Rule 606(a),
The Commission seeks comment on the proposed amendments to retail order routing disclosures. In particular, the Commission solicits comment on the following:
107. Do commenters believe that it continues to be useful for options to be included in disclosures for retail orders pursuant to Rule 606, in light of the fact that the proposal with respect to institutional orders would exclude options?
108. Should the Commission require retail order routing reports, both customer-specific and public, to be made available using an XML schema and associated PDF renderer? Why or why not?
109. Do commenters believe that broker-dealers should be required to provide the customer-specific and aggregated reports on retail order routing in the proposed format? Why or why not? Do commenters believe that it is useful to customers for broker-dealers to provide the reports in a structured XML format that would facilitate comparison of the data across broker-dealers? If not, why not? Should only the customer-specific report be provided in a structured XML format? Should only the aggregated report be provided in a structured XML format? Do commenters believe that it is useful to customers for broker-dealers to also provide the reports in an instantly readable PDF format? If not, why not? Are there other formats that would be more appropriate?
110. Do commenters believe that it is appropriate to remove the requirement to report retail order routing information by listing market (NYSE, NASDAQ, and the American Stock Exchange (n/k/a NYSE MKT LLC))? Why or why not?
111. Do commenters believe that the retail order routing report divided by the three listing markets continues to be relevant and useful to customers placing retail orders and/or analyzing their broker-dealer's routing practices? Why or why not?
112. Do commenters believe that alternative or additional criterion should be required in reports regarding retail order routing such as market capitalization or security type (
113. Do commenters believe that retail order routing information organized by stocks included in the S&P 500 Index and stocks not included in the S&P 500 Index versus by listing market or by NMS stocks would be useful to customers? Why or why not? Please explain.
114. Do commenters believe that it is reasonable and appropriate to require that the retail order routing reports be broken down by calendar month? Should the Commission require the retail order routing reports be produced on a different frequency than quarterly (
115. Do commenters believe that the Commission should require each retail order routing report be publicly available for a designated amount of time, as proposed? If so, is three years a reasonable amount of time that the reports should be available? Would a shorter or longer disclosure period be useful to investors and/or onerous to broker-dealers? Please explain.
116. Broker-dealers currently are required to make publicly available for each calendar quarter their quarterly reports on retail order routing and retain such reports for a period of not less than three years. Generally, broker-dealers will remove the previous quarterly report from their Web site and replace it with their most recent quarterly report. Since past quarterly reports are already required to be retained by broker-dealers, should the Commission require broker-dealers to make publicly available the prior three years' worth of quarterly reports from the effective date of the rule? Why or why not?
117. Should the Commission require all broker-dealers to make their public retail order routing reports available on one centralized Web site? For example, should all broker-dealer reports be available on the SEC's or an SRO's Web site? Why or why not?
Finally, the Commission proposes to amend Rule 600(b)(18) to rename the defined term “customer order” to “retail order,” and to amend Rules 600(b)(19), 600(b)(23), 600(b)(48), 605, 606, and 607 to reflect such change. “Customer order” is currently defined in Rule 600(b)(18) to include smaller-sized orders in NMS securities.
The Commission requests comment on the proposal to rename the defined term “customer order” to “retail order.” In particular, the Commission solicits comment on the following:
118. Do commenters believe that the proposed change is appropriate? Do commenters believe that such change would provide clarity to market participants? Are there alternative ways to distinguish small and large-sized orders? Please provide support for your arguments.
The Commission is proposing to amend Rule 605(a)(2) to require market centers to keep reports required pursuant to Rule 605(a)(1) posted on an Internet Web site that is free of charge and readily accessible to the public for a period of three years from the initial date of posting on the Internet Web site. Similar to the analogous requirements proposed in Rules 606(a) and 606(c) described above, the Commission preliminarily believes that making past order execution information available to customers and the public generally for a specified period of time will be beneficial to those seeking to analyze historical order execution information at various market centers. Should the proposal be adopted, the requirement to post and maintain reports on an Internet Web site that is free of charge and readily accessible to the public would begin at that time and apply going forward. Affected entities would not be required to post reports covering periods prior to the proposed Rule's effectiveness.
The Commission requests comment on the proposed amendments to the disclosure of order execution
119. Do commenters believe that the monthly electronic reports required by Rule 605(a) should be publicly available for a designated amount of time? If so, is three years a reasonable amount of time that the reports should be available? Would a shorter or longer disclosure period be useful to investors placing institutional orders and/or onerous to broker-dealers? Please explain.
Certain provisions of these proposed amendments contain “collection of information requirements” within the meaning of the Paperwork Reduction Act of 1995 (“PRA”).
The proposed amendments to Rule 606 would include a collection of information within the meaning of the PRA for broker-dealers who receive and route retail and institutional orders.
As detailed above, proposed Rule 606(b)(3) of Regulation NMS would require a broker-dealer, on request of a customer that places, directly or indirectly, an institutional order with the broker-dealer, to electronically disclose to such customer within seven business days of receiving the request, a report on the broker-dealer's handling of institutional orders for that customer for the prior six months, broken down by calendar month. Specifically, the report would contain certain information on the customer's order flow with the reporting broker-dealer as well as certain columns of information on institutional orders handled by the broker-dealer, as described below, categorized by venue and by order routing strategy category—passive, neutral, and aggressive—for each venue. The required columns of information include four groups of information: (1) Information on institutional order routing; (2) information on institutional order execution; (3) information on institutional orders that provided liquidity; and (4) information on institutional orders that removed liquidity.
With regard to information about the customer's order flow with the reporting broker-dealer, the Commission is proposing to require disclosure of: (1) Total number of shares of institutional orders sent to the broker-dealer by the customer during the reporting period; (2) total number of shares executed by the broker-dealer as principal for its own account; (3) total number of institutional orders exposed by the broker-dealer through an actionable indication of interest; and (4) venue or venues to which institutional orders were exposed by the broker- dealer through an actionable indication of interest.
With regard to information on institutional order routing, the Commission is proposing to require disclosure of: (1) Total shares routed; (2) total shares routed marked immediate or cancel; (3) total shares routed that were further routable; (4) average order size routed.
With regard to information on institutional order execution, the Commission is proposing to require disclosure of: (1) Total shares executed; (2) fill rate;
With regard to information on institutional orders that provided liquidity, the Commission is proposing to require disclosure of: (1) Total number of shares executed of orders providing liquidity; (2) percentage of shares executed of orders providing liquidity; (3) average time between order entry and execution or cancellation for orders providing liquidity (in milliseconds); and (4) average net execution rebate or fee for shares of orders providing liquidity (cents per 100 shares, specified to four decimal places).
Finally, with regard to information on institutional orders that removed liquidity, the Commission is proposing to require disclosure of: (1) Total number of shares executed of orders removing liquidity; (2) percentage of shares executed of orders removing liquidity; and (3) average net execution fee or rebate for shares of orders removing liquidity (cents per 100 shares, specified to four decimal places).
Proposed Rule 606(c) of Regulation NMS would require a broker-dealer that receives institutional orders to make publicly available a report that aggregates the information required for customer-specific reports pursuant to proposed Rule 606(b)(3) for all institutional orders the broker-dealer receives, regardless of whether the information was requested by a customer and that such report would be broken down by calendar month. A broker-dealer would be required to make such report publicly available for each calendar quarter within one month after the end of the quarter. Broker-dealers would also be required to keep such reports posted on an Internet Web site that is free and readily accessible to the public for a period of three years from the initial date of posting on the Internet Web site.
Proposed Rule 606(b)(3)(v) would require broker-dealers to provide the required information for each venue broken down and classified by the
The proposed amendments to Rule 606(a) of Regulation NMS would: (1) Break down the existing limit order disclosure into separate categories of marketable limit orders and non-marketable limit orders; (2) require that for each Specified Venue, the broker-dealer must report the net aggregate amount of any payment for order flow received, payment from any profit-sharing relationship received, transaction fees paid, and transaction rebates received, both as a total dollar amount and on a per share basis, for each of the following order types: (i) Market orders; (ii) marketable limit orders; (iii) non-marketable limit orders; and (iv) other orders; (3) require broker-dealers to describe specific aspects of any terms of payment for order flow arrangements and profit-sharing relationships, whether written or oral, with a Specified Venue that may influence their order routing decisions, including: (i) Incentives for equaling or exceeding an agreed upon order flow volume threshold, such as additional payments or a higher rate of payment; (ii) disincentives for failing to meet an agreed upon minimum order flow threshold, such as lower payments or the requirement to pay a fee; (iii) volume-based tiered payment schedules; and (iv) agreements regarding the minimum amount of order flow that the broker-dealer would send to a venue; (4) require that such reports be broken down by calendar month; (5) require that such reports be kept posted on an Internet Web site that is free and readily accessible to the public for a period of three years from the initial date of posting on the Internet Web site; and (6) remove the requirement that the Rule 606(a)(1) report be divided into three separate categories by listing market. Instead, the information required under Rule 606(a)(1) would be aggregated for all NMS stocks. The proposed amendments would require reports produced pursuant to Rules 606(a) and 606(b)(1) to be formatted in the most recent versions of the XML schema and the associated PDF renderer as published on the Commission's Web site.
The Commission is proposing to amend Rule 605(a)(2) to require market centers to keep reports required pursuant to the Rule 605(a)(1) posted on an Internet Web site that is free of charge and readily accessible to the public for a period of three years from the initial date of posting on the Internet Web site.
Generally, the order routing disclosures required under the proposed amendments to Rule 606 would provide detailed information to both institutional and retail customers that would enable them to evaluate how their orders were routed by their broker-dealers, assess conflicts of interest facing their broker-dealers in providing order routing services, and have the ability to engage in informed discussions with their broker-dealers about the broker-dealer's order routing practices. The proposed order routing disclosures could inform future decisions on whether to retain a broker-dealer's order routing services or engage the order routing services of a new broker-dealer. In addition, broker-dealers may use the public disclosures to compete on the basis of order routing services, and academics and others may use the public disclosures pursuant to Rules 605 and 606 to review and analyze broker-dealer routing practices and trading center order executions.
The order handling disclosures proposed under Rule 606(b)(3) would provide detailed order routing and execution information to a customer regarding its specific institutional orders during the reporting period. Generally, the five groups of information contained in the institutional order handling report would enable customers to understand where and how their institutional orders were routed or exposed as well as where their orders were executed during the reporting period. Customers could use the information contained in an institutional order handling report to assess any considerations a broker-dealer may have faced when routing its orders to various venues, whether those considerations may have affected how a broker-dealer routed its orders, and whether those considerations may have affected its execution equality.
Specifically, customers would be able to review each venue to which their institutional orders were routed and identify potential conflicts of interest, affiliations, or business arrangements between their broker-dealer and the venue and assess whether large volumes of orders or certain order types were directed to venues from which the broker-dealer may receive significant economic benefit. The information provided in the institutional order handling report could further be used by customers to assess whether a broker-dealer's order routing practices may have led to risks of information leakage. In addition, the information contained in the institutional order handling report would enable investors to assess, monitor, and generally determine the overall execution quality received from a broker-dealer. As noted above, customers could use the proposed order handling disclosures to inform future decisions on whether to retain a broker-dealer's order routing services or engage the order routing services of a new broker-dealer.
Proposed Rule 606(c) would require a broker-dealer that receives institutional orders to make publicly available a report that aggregates the information enumerated in proposed Rule 606(b)(3), even if not requested by a customer. The proposed public aggregated institutional order handling reports would enable customers to use a standardized set of information to compare how broker-dealers handle institutional orders and use such information in determining whether to retain the services of a broker-dealer or engage the services of a new broker-dealer. Broker-dealers could use the aggregated information to compare its order handling services against other broker-dealers, which
Broker-dealers would assign order routing strategies into passive, neutral, and aggressive categories, applying consistent classification of their order routing strategies for purposes of producing customer-specific and public aggregated institutional order handling reports, and promptly update the assignments any time an existing strategy is amended or a new strategy is created that would change such assignments. Regulators, including the Commission, could use the documented methodologies as a reference in determining whether a broker-dealer is consistently classifying and applying its order routing strategies for reporting purposes.
The proposed amendment to Rule 606(a) to break down the existing limit order disclosure in the retail order routing reports into separate categories of marketable limit orders and non-marketable limit orders could be used by customers to assess the differences in the ways broker-dealers route these specific order types. Customers could use the information contained in the retail order routing reports to assess potential conflicts of interest its broker-dealers face with respect to routing these distinct order types, particularly with respect to the economic incentives received from trading centers. Customers could use this information to determine whether to retain a broker-dealer's services or engage the services of a new broker-dealer, which could foster competition among broker-dealers on the basis of quality of order routing and execution. In addition, academic researchers and others could use this information for research and analysis.
The proposed requirement that a broker-dealer disclose the net aggregate amount of any payment for order flow received, payment from any profit-sharing relationship received, transaction fees paid, and transaction rebates received, both as a total dollar amount an on a per share basis, for specified non-directed order types for each Specified Venue could allow customers to determine how broker-dealers route different types of orders relative to any economic benefit or consequence to the broker-dealer. Customers could use this information to further assess whether their broker-dealers' routing decisions may be influenced by conflicts of interest. The requirement in proposed Rule 606(a)(1) that the quarterly reports be broken down by calendar month could allow customers to determine whether and how their broker-dealer's routing decisions changed in response to changing fee and rebate structures in the marketplace, which often change at the beginning of a calendar month. The proposed requirement that such reports be kept posted on an Internet Web site for three years could allow customers and others, such as researchers, to analyze historical routing behavior of particular broker-dealers. In addition, the proposed requirement for broker-dealers to describe any terms of payment for order flow arrangements and profit-sharing relationships with a Specified Venue that may influence their order routing decisions, including information relating to specific incentives or volume minimums, could allow customers to understand how their broker-dealers route retail orders and whether and how such routing is influenced by payment for order flow and/or a profit-sharing relationship.
The requirement that reports required under Rule 605 be kept posted on an Internet Web site that is free of charge and readily accessible to the public for a period of three years from the initial date of posting on the Internet Web site could allow customers and others, such as researchers, to analyze historical order execution quality at various market centers. The three years of data could be useful to those seeking to analyze how execution quality has changed over time, in addition to changes in response to regulatory or other developments.
The respondents to these proposed amendments would be broker-dealers that route retail or institutional orders and market centers that create reports pursuant to Rule 605. As of December 2015, the Commission estimates that there were approximately 4,156 total registered broker-dealers.
The Commission preliminarily believes that many broker-dealers that route institutional orders already create and retain the order handling information required by the proposed changes to Rule 606(b)(3). In such cases, the initial burden to comply with the requirement would be significantly lower than for a broker-dealer whose systems do not already create and retain the required information. In addition, the Commission preliminarily believes that many broker-dealers who do not have proprietary systems which create and retain order handling information use third-party service providers to allow them to create and retain the information required by the proposed changes to Rule 606(b)(3). For this reason, the Commission is providing two estimates below, one for broker-dealers that route institutional orders whose systems do not currently support creating and retaining the information required by Rule 606(b)(3) who will upgrade their systems either in-house or via a third-party service provider, and another for broker-dealers that route institutional orders whose systems currently do create and retain such information, including those that use a third-party service provider whose systems currently obtain such information.
The Commission preliminarily believes that most broker-dealers either have systems that currently obtain the
Based on discussions with industry sources, the Commission estimates that the average one-time, initial burden for broker-dealers that route institutional orders that do not currently create and retain the proposed order handling information to program systems in-house to implement the requirements of the proposed amendments to Rule 606(b)(3) in-house would be 200 hours
A broker-dealer that routes institutional orders whose systems already capture the data required by the proposed rule would need to format its systems to produce a report that complies with the proposed rule. The Commission estimates the average burden for a broker-dealer who already captures information required by the proposed rule to format its systems to produce a report to comply with the proposed rule would be 40 hours.
The Commission requests comment regarding the accuracy of its estimate as to how many broker-dealers that route institutional orders are currently able to obtain the information required by the proposed rules and the estimated burden hours necessary to comply with the proposal.
Proposed Rule 606(b)(3) requires broker-dealers to respond to individual customer requests for information on institutional orders. The Commission estimates that 135 of the 200 broker-dealers that route institutional orders would respond to proposed Rule 606(b)(3) requests in-house.
For the 65 broker-dealers that route institutional orders who are anticipated to use a third-party service provider to respond to requests pursuant to Rule 606(b)(3), the Commission estimates the burden to be 1 hour
Therefore, the total annual burden for all 200 broker-dealers that route institutional orders to comply with the customer response requirement in proposed Rule 606(b)(3) is estimated to be 67,000 hours
Once a broker-dealer that routes institutional orders has systems in place to record and report the information required by proposed Rule 606(b)(3) to individual customers, the broker-dealer creating the quarterly public aggregated institutional order handling reports in-house will need to configure its systems to aggregate the information required by proposed Rule 606(c) or use a third-party service provider to create such reports. Once the systems to obtain such information are in place, the Commission estimates that broker-dealers or their third-party service providers would incur a modest additional burden or cost to format such data into an aggregated report. The Commission estimates that some broker-dealers will format these reports themselves in-house while others will use a third-party service provider to format the reports. The Commission estimates that a broker-dealer who routes institutional orders which formats and creates the required reports itself would incur an initial burden of 20 hours to comply with the quarterly reporting requirement of proposed Rule 606(c).
The Commission estimates that each broker-dealer that routes institutional orders who prepares its reports in-house will incur an average burden of 10 hours
The Commission estimates that each broker-dealer that routes institutional orders that uses a third-party service provider to prepare the report will incur an average burden of 2 hours
Therefore, the total annual burden for all 200 broker-dealers who route institutional orders to comply with the quarterly reporting requirement in proposed Rule 606(c) is estimated to be 5,920 hours
The Commission estimates that broker-dealers that route institutional orders already have descriptions for their order routing strategies (or employ third-party vendors who have descriptions for such strategies) and will need to assign each order routing strategy for institutional orders to comply with the passive, neutral, and aggressive categories. Thus, the Commission estimates that the one-time, initial burden for a broker-dealer that routes institutional orders to assign its own current strategies and establish and document its specific methodologies for assigning order routing strategies as required by Rule 606(b)(3)(v) to be 40 hours.
The Commission estimates that the one-time, initial burden for the 65 broker-dealers that route institutional orders who will work with a third-party service provider to assign each order routing strategy for institutional orders into passive, neutral, and aggressive categories and establish and document its specific methodologies for assigning order routing strategies as required by Rule 606(b)(3)(v) to be 10 hours
Therefore, the total initial burden for all 200 broker-dealers who route institutional orders to comply with the requirement to document the methodologies for categorizing order routing strategies in proposed Rule 606(b)(3)(v) is estimated to be 6,050 hours
Once established, broker-dealers that route institutional orders would be required to maintain the documentation of their order routing strategies. After a broker-dealer's strategies are initially assigned to one of the three categories in a consistent manner, the broker-dealer would be required to promptly update such assignments any time an existing strategy is amended or a new strategy is created that would change such assignment. The Commission estimates that the annual burden for a broker-dealer who will perform the work in-house to assign the descriptions of order routing strategies and promptly update the assignments any time an existing strategy is amended or a new strategy is created that would change such assignments to comply with Rule 606(b)(3)(v) will be 15 hours.
The Commission estimates that the annual burden for a broker-dealer who routes institutional orders who engages a third-party service provider to comply with Rule 606(b)(3)(v) will be 5 hours
Therefore, the total annual burden for all 200 broker-dealers who route institutional orders to comply with the requirement to document the
Any broker-dealer that routes retail orders is subject to the collection of information in Rule 606(a) and the proposed amendments thereto. The Commission notes that there are differences among the estimated 266 broker-dealers that are subject to retail order routing disclosure requirements.
Rule 606(a)(1) currently requires that broker-dealers make publicly available quarterly reports on retail order routing. While the proposed rule does not alter this requirement; it does modify the content of the report. As noted above, broker-dealers will be required to account for the proportion of non-directed marketable limit and non-marketable limit orders as a percentage of total retail orders as well as the percentage of such orders broken down by Specified Venue. In addition, for each Specified Venue, broker-dealers would be required to provide information about net payment for order flow received per share, payment from any profit-sharing relationship received, transaction fees paid, and transaction rebates received per share and in the aggregate broken down by order type. The proposed rule would require that such reports be broken down by calendar month. The proposed rule also eliminates a requirement that the order routing information contained in the customer reports be broken down by listing market, which simplifies presentation of information required under the rule.
To comply with the proposed requirements, broker-dealers who do not have systems that currently obtain information required by the rule will have to alter their current systems to obtain, record, and retain the information required by the proposed changes. The Commission preliminarily believes that broker-dealers would not encounter capital expenditures to comply with this requirement. The Commission estimates that most broker-dealers that route retail orders already obtain the information required by the proposed rule and that 50 broker-dealers do not currently obtain such information.
The Commission estimates that the initial burden for a broker-dealer that routes retail orders whose systems do not currently capture all of the information required by the rule to update its systems to capture the information required by proposed Rule 606(a) and format that information into a report to comply with the rule will be 80 hours.
The Commission estimates that the initial burden for a broker-dealer that routes retail orders to engage a third-party to program the necessary system updates to comply with proposed Rule 606(a) will be 20 hours
For the remaining 216 broker-dealers whom the Commission estimates currently capture the data required by the proposed modifications to Rule 606(a), such broker-dealers would need to only format their reports to incorporate such data. The Commission estimates that 108 of such broker-dealers currently engage a third-party service provider to provide reports pursuant to existing Rule 606(a) and such broker-dealers would continue to use third-party service providers to format reports to comply with proposed Rule 606(a), as described further below. The Commission estimates that the remaining 108 broker-dealers who already capture information required by the proposed rule would prepare and format a report to comply with the proposed rule in-house. The Commission estimates for a broker-dealer who already captures such data, the burden to format that data into its existing reports on its own would be 20 hours.
The Commission estimates the initial burden for the 108 broker-dealers who engage a third-party service provider to format reports to comply with proposed Rule 606(a) would be 8 hours
Therefore, the Commission estimates that the total initial burden to comply with the proposed modifications to Rule 606(a) for all 266 broker-dealers which the Commission estimates route retail orders is 5,524 hours
Finally, the Commission proposes to amend Rule 606(a)(1)(iv)
Rule 606(a) currently requires brokers-dealers that route retail orders to make available reports on the routing of all non-directed orders. The proposed changes to Rule 606(a)(1) will: (1) Eliminate the requirement that such reports be divided based on primary listing market and instead aggregate all NMS stocks into a single section; (2) add requirements that the reports contain information relating to the routing of marketable and non-marketable orders, as well as average payment for order flow for different types of orders; (3) require broker-dealers to describe any terms of payment for order flow arrangements and profit-sharing relationships with a Specified Venue that may influence their order routing decisions; and (4) require that such reports be made available using the most recent versions of the XML schema and the associated PDF renderer as published on the Commission's Web site.
Proposed Rule 606(a)(1)(iv) would require broker-dealers to describe any terms of payment for order flow arrangements and profit-sharing relationships with a Specified Venue that may influence their order routing decisions. Current Rule 606(a)(1)(iii), being renumbered as proposed Rule 606(a)(iv), requires broker-dealers to provide a discussion of the material aspects of the broker-dealer's relationship with each Specified Venue, including a description of any arrangement for payment for order flow and any profit-sharing relationship. Therefore, the proposed changes would require broker-dealers to describe any terms of payment for order flow arrangements and profit-sharing relationships with a Specified Venue that may influence their order routing decisions, in addition to the material aspects of the broker-dealer's relationship with each Specified Venue. Additionally, the costs noted in this section include the impact of posting the required reports in the specified format to an internet Web site. Once a report is posted on an internet Web site, the Commission estimates that there would not be an additional burden to allow the report to remain posted for the period of time specified in the rule. The Commission estimates that the average annual burden for a broker-dealer that handles retail orders to describe and update any terms of payment for order flow arrangements and profit-sharing relationships with a Specified Venue that may influence their order routing decisions to be 15 hours.
Currently, Rule 605 requires market centers make available standardized, monthly reports of statistical information concerning their order executions. Further, the Rule requires that such reports be in electronic form and be made available for downloading from an Internet Web site that is free and readily accessible to the public. The proposed amendment to Rule 605 would require that such reports be kept posted on an Internet Web site that is free of charge and readily accessible to the public for a period of three years from the initial date of posting on the Internet Web site. Because reports are already posted to an internet Web site pursuant to current Rule 605, the Commission estimates the proposed amendment to Rule 605 would not impose an additional burden. The proposed amendment prescribes a minimum period of time for which such reports that are already required to be posted on an Internet Web site shall remain posted.
All of the collection of information would be mandatory.
To the extent that the Commission receives confidential information pursuant to the collection of information, such information will be kept confidential, subject to the provisions of applicable law.
The quarterly order routing reports prepared and disseminated by broker-dealers pursuant to Rules 606(a) and 606(c), as proposed, would be available to the public. The individual responses by broker-dealers to customer requests for order routing information required by Rules 606(b)(1) and (b)(3), as proposed, would be made available the customer. The Commission, SROs, and
Pursuant to proposed Rule 606(a), broker-dealers shall be required to keep quarterly retail order routing reports posted on an Internet Web site that is free and readily accessible to the public for a period of three years from the initial date of posting on the Internet Web site.
For Rule 606(b), broker-dealers shall be required to preserve all communications required under these proposed amendments pursuant to Rule 17a-4, as applicable.
Pursuant to proposed Rule 606(c), broker-dealers shall be required to keep public aggregated institutional order handling reports posted on an Internet Web site that is free and readily accessible to the public for a period of three years from the initial date of posting on the Internet Web site.
Pursuant to the proposed amendments to Rule 605, market centers shall be required to keep order execution reports posted on an Internet Web site that is free and readily accessible to the public for a period of three years from the initial date of posting on the Internet Web site.
Pursuant to 44 U.S.C. 3506(c)(2)(B), the Commission solicits comments to:
120. Evaluate whether the proposed collections of information are necessary for the proper performance of the functions of the agency, including whether the information shall have practical utility;
121. Evaluate the accuracy of our estimates of the burden of the proposed collection of information;
122. Determine whether there are ways to enhance the quality, utility, and clarity of the information to be collected; and
123. Evaluate whether there are ways to minimize the burden of collection of information on those who are to respond, including through the use of automated collection techniques or other forms of information technology.
Persons submitting comments on the collection of information requirements should direct them to the Office of Management and Budget, Attention: Desk Officer for the Securities and Exchange Commission, Office of Information and Regulatory Affairs, Washington, DC 20503, and should also send a copy of their comments to Brent J. Fields, Secretary, Securities and Exchange Commission, 100 F Street NE., Washington, DC 20549-1090, with reference to File Number S7-14-16. Requests for materials submitted to OMB by the Commission with regard to this collection of information should be in writing, with reference to File Number S7-14-16 and be submitted to the Securities and Exchange Commission, Office of FOIA/PA Services, 100 F Street NE., Washington, DC 20549-2736. As OMB is required to make a decision concerning the collection of information between 30 and 60 days after publication, a comment to OMB is best assured of having its full effect if OMB receives it within 30 days of publication.
The Commission is sensitive to the economic consequences and effects, including costs and benefits, of its rules. The following economic analysis identifies and considers the costs and benefits—including the effects on efficiency, competition, and capital formation—that may result from the proposed amendments to Rules 600, 605, and 606.
Among the primary economic considerations for the proposed amendments to Rule 600, Rule 605, and Rule 606 are transparency for customers placing institutional orders, enhanced transparency for customers placing retail orders, and enhanced access to order handling reports.
The Commission proposes to amend Rule 600 to include a definition of “institutional order” and to amend Rule 606 to require broker-dealers to (1) disclose standardized customer-specific institutional order handling information to their customers, including the use of actionable IOIs in executing institutional orders and (2) make publicly available for each calendar quarter a report that aggregates the information required for customer-specific institutional order handling reports for all institutional orders they receive.
In short, and as discussed earlier, the Commission preliminarily believes that standardizing customer-specific institutional order handling disclosures, as would be required by proposed Rule 606(b)(3), would provide information to customers to enable them to: (1) Assess the potential for information leakage with the routing of their orders; (2) assess the conflicts of interest that may influence the broker-dealer's order handling practices; and (3) compare institutional order handling practices across multiple broker-dealers. The Commission also preliminarily believes that requiring broker-dealers to disclose their use of actionable IOIs in executing institutional orders will be useful to customers assessing broker-dealers' order handling decisions, particularly in regards to analyzing information leakage.
In addition, the Commission preliminarily believes that public disclosure by each broker-dealer of aggregated information about its institutional order handling, as would be required by proposed Rule 606(c), would, among other things, (1) assist market participants, including customers, in comparing the order handling services of all broker-dealers; (2) facilitate customers' ability to make informed decisions when engaging a broker-dealer's services; (3) provide academics and other members of the public with access to additional data for conducting research on institutional order routing and market execution quality; (4) allow broker-dealers to better compare their own services against other broker-dealers; and (5) permit trading centers to better compare their execution statistics against other trading centers.
The Commission preliminarily believes that the customer-specific as well as the public aggregated institutional order handling reports may further incentivize broker-dealers to provide customers with higher-quality routing services when executing their institutional orders, thereby mitigating the potential for information leakage,
With respect to retail orders, the Commission proposes to amend Rule 606(a)(1) to include new subparagraph (iii) to require that, for each Specified Venue, the broker-dealer must report the net aggregate amount of any payment for order flow received, payment from any profit-sharing relationship received, transaction fees paid, and transaction rebates received, both as a total dollar amount and on a per share basis, for each of the following non-directed order types: (1) Market orders; (2) marketable limit orders; (3) non-marketable limit orders; and (4) other orders.
In addition, the Commission preliminarily believes that the proposed amendments would allow customers to better assess the retail order routing and execution quality offered by their broker-dealers. As a result, the Commission preliminarily believes that these additional disclosures may provide broker-dealers further incentives to improve execution quality for their customers and better manage any potential for conflicts of interest the broker-dealers may face. In addition, the ability of customers to better assess routing and execution quality could also lead to increased competition among broker-dealers with respect to execution quality, which could, in turn, result in broker-dealers providing even higher-quality retail order routing and execution services.
The Commission is further proposing to require that all reports on institutional order handling and retail order routing be provided in a consistent, structured format. The Commission preliminarily believes that requiring the reports be provided in this format would be useful to customers as it would allow them to more easily analyze and compare data across broker-dealers.
Finally, the Commission is proposing to amend Rules 605 and 606 of Regulation NMS to require that the public order execution and order routing reports be kept publicly available for a period of three years. The Commission preliminarily believes that this would allow the public to more efficiently evaluate the services of broker-dealers because it would be easier for the public to access historic reports and analyze the data over an extended time period. For example, at a minimum, the public would have access to three years of historic data and may choose to download the reports periodically to analyze data over a time period of more than three years.
The discussion below presents an overview of the current practices with regards to the reporting and disclosure of order routing and execution quality for institutional as well as retail orders, a consideration of the costs and benefits of the proposed new reporting requirements for institutional orders and of the proposed amendments to the reporting requirements for retail orders, and a discussion of the potential effects of the proposed amendments to Rule 606 on efficiency, competition, and capital formation. This discussion will also describe the Commission's proposal to amend Rule 605 by requiring market centers to keep public execution reports posted on an Internet Web site that is accessible to the public for a period of three years.
The baseline for considering the economic impact of amending Rule 606 to require reporting for institutional orders consists of: (1) Information that customers currently receive from their broker-dealers regarding how their institutional orders are handled; (2) the format in which such information is currently provided to customers; (3) conflicts of interest broker-dealers currently face; (4) the current use of actionable IOIs; and (5) the ability to assess order routing and execution quality currently provided by different broker-dealers and execution quality currently provided by different trading centers.
The baseline for considering the economic impact of amending Rule 606 for retail orders and of amending Rule 605 consists of: (1) Information that customers currently receive under current Rules 605 and 606 or information that customers currently receive from their broker-dealers that is not required by current Rules 605 and 606; (2) the format in which information required by current Rule 606 for retail orders is provided to customers; (3) conflicts of interest broker-dealers currently face; (4) how long reports required by current Rules 605 and 606 are available to the public; and (5) the ability to assess order routing and execution quality currently provided by different broker-dealers and execution quality currently provided by different trading centers.
Further, the baseline for considering the economic impact of amending Rule 606 for institutional and retail orders and Rule 605 comprises the current competitive landscape in the markets for brokerage services and for execution services and any current limitations on efficiency or capital formation relevant to the proposed amendments. These various baseline factors are discussed in further detail below.
Currently, broker-dealers may voluntarily provide some information on routing and execution quality of institutional orders to individual customers in response to requests by these customers. Customers may also use third-party vendors for TCA (
The Commission further understands that reports that institutional customers currently receive upon request from their broker-dealers may not provide the consistent and standardized information needed to fully assess the performance of their broker-dealers. In particular, the Commission understands that these reports are not prepared or presented in a uniform manner that allows for easy comparison of institutional order handling across different broker-dealers, and there is no uniformity in the current disclosure of execution fees charged or rebates paid by the trading centers to the broker-dealers. The reports contain what the broker-dealers provide upon the requests of customers or what the customers specifically request from the broker-dealers. As a result, a broker-dealer will often supply reports containing different information to different customers, and more importantly, a customer may receive reports containing different information from different broker-dealers. Further, even if the reports contain the same data elements, those data elements may not be computed in the same way or use the same terminology across different broker-dealers or over time for the same broker-dealer. These differences make it more difficult for institutional customers to compare broker-dealers or to examine one broker-dealer's performance over time. In addition, as these reports are not standardized and vary by broker-dealer or by customer, the Commission understands that some of these reports group order routing strategies by their aggressiveness,
Even if a broker-dealer voluntarily provides information about institutional orders upon request, it may not do so with respect to all customers. Whether a given customer receives a report and how responsive the report is to the request likely depends on the customer's current or potential business relationship with the broker-dealer. A broker-dealer may be more accommodating towards customers that send, or may send in the near future, substantial order flow. To the extent that some customers receive reports from broker-dealers while other customers do not or that some customers receive higher-quality reports than other customers, the playing field may not be level with respect to institutional order handling information.
Moreover, the public currently does not have access to information on the performance of broker-dealers relating to institutional orders. Under current Rule 606, a broker-dealer is not required to provide public reports for orders having a market value of $200,000 or more. While an institutional customer can request ad-hoc reports from broker-dealers about the handling of its orders, the lack of public reports relating to institutional orders makes it infeasible for an institutional customer to compare handling of institutional orders by broker-dealers that the customer does not have a business relationship with. For the broker-dealers that the customer does send orders to, the customer is not able to compare these broker-dealers more generally based on all orders those broker-dealers handle rather than only the orders the customer sends to the broker-dealers.
Currently, Rule 605 does not specify the minimum length of time that market centers need to post publicly the order execution reports and Rule 606 does not specify a minimum length of time that broker-dealers need to post publicly the order routing reports. The Commission understands that generally, when reports are posted, market centers and broker-dealers will remove the previous report from their Web site and replace it with their most recent report,
Current Rule 606 requires for retail orders, among other things, a description of any arrangement for payment for order flow
Under the quarterly disclosure obligations in current Rule 606(a), a broker-dealer is required to discuss the material aspects of the broker-dealer's relationship with each Specified Venue (which is determined based on retail order routing), including a description of any arrangement for payment for order flow, but broker-dealers are not required to provide information on the net amount of payment for order flow per share or by order type nor payment received for any profit-sharing relationship. Further, current Rule 606(a) does not require broker-dealers to disclose rebates received and access fees paid per share or by order type nor does it require a description of the terms of a payment for order flow arrangement or profit-sharing relationship that may influence a broker-dealer's order routing decision. The current information required by Rule 606(a) can be used by customers to assess order routing and execution services of broker-dealers as well as the potential conflicts of interest faced by broker-dealers in providing such services and determine whether to retain the services of broker-dealers or to discontinue the use of such services. In addition, broker-dealers could use the current information required by Rule 606(a) as a means to evaluate and enhance their order routing and execution services, compare their order routing and execution services to that of other firms, and use such comparisons in selling their services to customers.
Moreover, current Rule 606(a) does not specify a minimum length of time that reports must be made available from broker-dealers. As a result, customers placing retail orders may not be able to compare the order routing decisions of a broker-dealer through time, if past quarterly reports are not available. Instead, customers may need to rely on third-party vendors to provide and/or analyze past quarterly reports.
As noted above, conflicts of interest may affect institutional orders in ways similar to effects on retail orders. The ad hoc nature of the current order handling disclosures of institutional orders is not conducive to providing institutions with information they can use efficiently to assess conflicts of interest. In particular, a broker-dealer for which conflicts of interest influence routing decisions may have the incentive to obscure the conflicts of interest in the ad hoc reports.
The Commission preliminarily believes that broker-dealers are incentivized to provide their customers with information about the quality of services they offer as they may lose business if their competitors provide reports and they do not. However, as described above, under current rules, broker-dealers are not required to provide customers standardized reports about the handling of their institutional orders and instead customers may receive ad-hoc reports from broker-dealers upon request. Additionally, a broker-dealer may have an incentive to structure its reports and provide data in a way that is advantageous to the broker-dealer. Specifically, broker-dealers may want to design the ad hoc reports to highlight areas where the broker-dealer believes it compares well to others and obscure areas where the broker-dealer may not compare well or where customers are likely to have concerns. Separately, there are no public reports about the handling of institutional orders for independent research and analysis, by academic researchers, the public at large, or third-party vendors. Due to the limitations noted above, the Commission preliminarily believes that customers may not be able to compare the institutional order handling performance of broker-dealers reliably and as a result, broker-dealers may have less incentive to compete on the quality of their institutional order handling, which may result in broker-dealer routing practices that are suboptimal for customers,
For customers placing retail orders, current Rule 606 requires quarterly public reports on retail order routing and disclosure of retail order routing information upon request, but the reports do not require information on payment for order flow received, payment from any profit-sharing relationship received, or transaction rebates and access fees, and they are not required to separate limit orders into marketable and non-marketable limit orders. As a result, it may be difficult for customers to use the information provided in the reports to evaluate the quality of their broker-dealers' retail order routing. Customers may therefore not be well informed as to how their broker-dealers manage any potential conflicts of interest they may face. The Commission preliminarily believes providing payment for order flow data in the quarterly public reports, broken down by calendar month, separately for marketable and non-marketable limit orders would create an opportunity for more detailed analysis.
As noted above, the current information on retail order routing required by Rule 606(a) may spur competition between broker-dealers on the basis of order routing services and execution quality.
As discussed above, broker-dealers currently may provide some information on routing and execution quality of institutional orders to individual customers in response to requests by these customers. The Commission understands that broker-dealers provide these reports in a variety of formats and a given broker-dealer may use different formats for different customers and/or may modify their formats over time. The formats of these reports vary from unstructured to structured formats, such as unstructured text and PDF files to structured XML files. The Commission is soliciting comment on whether broker-dealers currently provide their reports in a structured or unstructured format, and which format the broker-dealers use for these reports. For those broker-dealers that provide their reports
Under current Rule 606(a), broker-dealers are required to provide public quarterly reports on retail order routing. The current Rule 606(a) does not specify a format for these reports. The Commission understands that broker-dealers currently provide these reports on a Web site or downloadable as a PDF file. The reports typically are presented as tables with one line for each listing exchange for NMS stocks and exchange-listed options, where each row represents metrics for a particular routing venue, but they are not in a structured format.
The Commission does not have data to gauge the current level of quality of broker-dealer routing practices for institutional orders, as current Rule 606 only covers retail orders and not institutional orders.
Some broker-dealers use actionable IOIs to communicate to external liquidity providers to send an order to the broker-dealer in response to liquidity at the broker-dealer, generally a customer's institutional order. As noted above, because actionable IOIs convey similar information as an order, a response to an actionable IOI may result in an execution at the venue of the IOI sender. Accordingly, a broker-dealer's use of actionable IOIs creates potential information leakage similar to the routing of orders. The Commission does not have data to gauge the current level of use of actionable IOIs by broker-dealers to attract orders to execute against institutional orders represented by such actionable IOIs. In addition, current Rule 606 for retail orders does not require the inclusion of actionable IOIs in the reports.
The proposed amendments are likely to affect competition among broker-dealers that route institutional and retail orders. These broker-dealers compete in a segment of the market for broker-dealer services. The market for broker-dealer services is highly competitive, with most business concentrated among a small set of large broker-dealers and thousands of small broker-dealers competing for niche or regional segments of the market.
As discussed in Section IV.C., as of December 2015, there were approximately 4,156 registered broker-dealers.
Among other factors, broker-dealers may compete for retail and institutional customers by trying to offer them better terms for trading, such as better execution quality. The emergence of discount brokerages has encouraged full-service brokers to compete on price and led to the unbundling of research from execution services.
The market for trading services, which is served by trading centers, relies on competition among these market centers to supply investors with execution services at efficient prices. These market centers, which compete to, among other things, match traders with counterparties, provide a framework for price negotiation, and provide liquidity to those seeking to trade. As discussed in Section IV.C., the Commission preliminarily estimates that there are 380 market centers to which Rule 605 applies.
These market centers compete with each other for order flow on a number of dimensions, including execution quality. Their primary clients are the broker-dealers who route their own or their customers' orders for execution at the trading center. One way to attract order flow is to offer payment for order flow. The Commission understands that a large portion of retail order flow is sent to internalizers who pay for retail order flow. Trading centers also may innovate to differentiate themselves from other trading centers to attract more order flow. For example, several exchanges recently started pilots intended to provide better execution quality for retail orders to attract more retail order flow.
Transaction costs reflect the level of efficiency in the trading process, with higher transaction costs reflecting less efficiency.
As a result of the inefficiencies discussed above, a potential increase in transaction costs in particular, may cause customers not to rebalance their portfolios as often as might otherwise be optimal and security prices may less fully reflect true underlying values. This, in turn, may limit efficient allocation and capital formation, as those issuers that have the best ideas may not get the capital needed to fund them. In particular, the less perfectly efficient prices are, the less able customers are to identify the issuers with the most profitable projects and thus the demand for the stock of those issuers may not fully reflect these opportunities. Less demand could result in a lower stock price, which would make it harder for these issuers to raise capital and result in less favorable conditions for the capital they raise.
The Commission requests comments on its baseline analysis. In particular, the Commission solicits comment on the following:
124. Do customers currently request institutional order handling reports from their broker-dealers? Are those reports generally provided and if so, what information do they generally contain? Are there differences in the responsiveness of broker-dealers to requests from different customers and/or over time? Are there differences in the quality or detail of the reports by different broker-dealers? If so, what impact do the differences have on the costs and benefits of the reports? If possible, please provide specific estimates and data.
125. Do broker-dealers already have systems in place to produce order handling reports?
126. Do customers currently receive institutional order handling reports that are comparable to the public reports as proposed by Rule 606(c)? If so, what information is contained in such reports and how, if at all, do those reports differ from the proposed public reports? How do the costs and benefits of those reports compare to the reports as proposed by Rule 606(c)? Please be specific and, if possible, provide specific estimates or data.
127. Do commenters believe that the Commission's assessment of the baseline for the economic analysis is correct? Why or why not? Please be specific.
128. Do commenters believe that the baseline discussion provides a fair representation of current practices under Rules 600, 605, and 606?
129. Do commenters believe that the Commission's description of the competitive landscape for broker-dealers is accurate?
130. Do commenters believe that the market participants identified by the Commission as being affected by the proposed amendments to Rules 600, 605, and 606 is correct?
131. Do commenters believe that the Commission's description of what information market participants currently receive is accurate?
132. Do commenters believe that the Commission's description of the potential conflicts of interest broker-dealers face when routing institutional or retail orders is accurate? Why or why not? Please be specific in your response.
133. Do commenters believe that the Commission's description of the current quality of broker-dealer order routing practices for institutional orders is accurate? Why or why not? Please be specific in your response.
134. Do commenters believe that the Commission's description of the current use of actionable IOIs is accurate? Why or why not? Please be specific in your response.
135. Do commenters believe that the Commission's description of the current level of competition, efficiency, and innovation is accurate? Why or why not? Please be specific in your response.
The Commission preliminarily identified costs and benefits associated with the proposed amendments to Rules 600, 605, and 606, which are discussed in this section. Many of these costs and benefits are difficult to quantify, especially as the practices of market participants are expected to evolve and may change due to the information on order routing and execution quality that is required to be reported under the proposed amendments to Rules 600, 605, and 606. Therefore, much of the discussion is qualitative in nature but, where possible, the Commission quantifies the costs.
Many, but not all, of the costs of the proposed amendments to Rules 600, 605, and 606 involve a collection of information, and these costs and burdens are discussed in the Paperwork Reduction Act Section above, with those preliminary estimates being used in the economic analysis below.
Proposed Rule 600(b)(31) defines an institutional order as an order to buy or sell an NMS stock that is not for the account of a broker-dealer and is an order for a quantity of an NMS stock having a market value of at least $200,000. The $200,000 threshold determines the number of institutional orders included in the proposed reporting requirements of Rule 606, as orders less than $200,000 in market value are excluded from Rules 606(b)(3) and (c) for reporting purposes. The Commission preliminarily estimates that at least 5% of the total executed volume in NMS securities would meet this threshold.
As noted above, the same threshold would be applied to all NMS stocks independent of a stock's liquidity. This uniform standard may, however, result in orders submitted by institutions that are quite large when considering a stock's activity level not meeting the definition of institutional order. For example, an order for $200,000 in a small-cap stock that is illiquid is very different from an order for $200,000 in a large-cap stock that is very liquid.
To determine the extent of institutional orders that would not meet this threshold, the Commission staff examined a set of orders from institutions and found that 83.2% of the total number of orders are smaller than $200,000.
The Commission notes that using any fixed threshold may have another drawback. For example, market participants may change their behavior or stock prices may change over time. Fixed thresholds generally provide an incentive for those affected by the threshold to alter their actions to control whether the action is above or below the threshold. With respect to the threshold in the definition of institutional order, customers may have an incentive to increase their order sizes to exceed the threshold if they can get better information about routing and execution quality for orders exceeding the threshold.
Conversely, if changes in market participants' behavior or stock prices resulted in a decrease in the size of orders submitted by institutional customers, such that fewer orders meet the $200,000 threshold for “institutional orders,” then the proposed disclosure amendments to Rule 606 pertaining to institutional order handling would apply to a smaller proportion of all orders by institutional customers. This would lead to the public receiving order handling information for a smaller proportion of all orders submitted by institutional customers and therefore would reduce the benefits of the proposed amendments to Rule 606. Still, a decrease in the size of orders submitted by institutional customers could also decrease the costs associated with the institutional order handling disclosure required by the proposed amendments to Rule 606 (since fewer orders would qualify as “institutional orders”). The Commission preliminarily believes, however, that this potential decrease in costs would be negligible since the marginal cost of providing additional information on institutional orders once systems were in place to produce such reports would be negligible. Moreover, under this scenario, the Commission notes that while there may be a decrease in costs associated with institutional order handling disclosures, broker-dealers may experience an increase in the number of orders covered in retail order routing disclosure reports (because the orders that do not qualify as “institutional orders” would nonetheless qualify as “retail orders” based on size). However, the Commission preliminarily believes that any increase in the number of orders in retail order routing reports would result in minimal costs as retail reports do not require extensive order routing information, the system to generate the reports would already be in place, and the marginal costs of adding additional orders would require little computing time.
The Commission seeks comment on the definition of institutional order as proposed in Rule 600(b)(31) and its analysis of the costs and benefits. In particular, the Commission solicits comment on the following:
136. Do commenters believe that the Commission's proposed definition of institutional order is appropriate from a costs and benefits perspective? If not, please provide alternative definitions with a detailed discussion of what the advantages and costs of those alternatives would be. For example, should the threshold be different for different stocks? If yes, how? Should the threshold be a fixed dollar amount or should it be variable over time or defined differently,
The proposed amendments to Rule 606 would provide transparency about order routing and execution quality for institutional orders. Proposed Rule 606(b)(3) would require standardized reports on institutional order handling, which would be made available to customers upon request.
Competition in the market for brokerage services could be further promoted by more transparent order routing practices and execution quality. The disclosures proposed in Rule 606(b)(3) would provide customers who submit institutional orders, including investment fund managers, standardized information regarding their broker-dealers' order routing practices and execution quality. To the extent that the reports required by proposed Rule 606(b)(3) increase the transparency of institutional order routing and execution quality, broker-dealers would be better able to compete along the execution quality dimensions provided in the reports, such as the fill rate, percentage of shares executed at the midpoint and priced at the near or far side of the quote, and average time between order entry and execution or cancellation for orders posted to the limit order book, in addition to commissions and other considerations that they currently compete on. The Commission preliminarily believes that broker-dealers would have an additional incentive to improve their order routing decisions as customers submitting institutional orders could use the reports required by the proposed amendments to Rule 606 to compare broker-dealers, which in turn could lead to better execution quality for institutional orders.
There could also be an effect on the competition between trading centers. If broker-dealers improve their order routing decisions for institutional orders, thereby routing orders to the trading centers that are more beneficial for their customers, this could further promote competition between trading centers and spur innovation on execution quality. To illustrate, if broker-dealers change their institutional order routing decisions to focus more on execution quality and route fewer orders to a given trading center, that trading center would have an incentive to take measures to attract and gain back order flow by innovating on execution quality.
In addition to comparing broker-dealers based on the reports, customers may also initiate a dialogue with their broker-dealers, or broker-dealers they are considering to use, about their institutional order routing practices to better match the needs of the customers with the order routing practices of the broker-dealers to whom they send orders.
As discussed in Section II.C., some customers currently request and receive reports about order routing and execution quality of their institutional
However, for customers who already receive reports from their broker-dealers on the handling of their institutional orders, the benefits of the reports required by proposed Rule 606(b)(3) may be modest or even non-existent, depending on the information the customers currently receive. For example, the reports that customers already receive may be more detailed and tailored to the particular customer. The reports also may provide different and potentially more information than what proposed Rule 606(b)(3) requires. Therefore, the proposed disclosure's benefits to customers who may continue to receive detailed tailored reports is preliminarily estimated to be minimal. Nevertheless, these customers would be able to more readily compare broker-dealers due to the proposed requirement that the disclosures be standardized.
Additionally, proposed Rule 606(b)(3) requires that a broker-dealer assign its order routing strategies to one of three categories and that the reports contain information grouped by those order routing strategies: Passive, neutral, and aggressive. Proposed Rule 606(b)(3)(v) defines “passive order routing strategy” as “one that emphasizes minimization of price impact over the speed of execution”; “neutral order routing strategy” as one “that is relatively neutral between minimization of price impact and the speed of execution of the entire institutional order”; and “aggressive order routing strategy” as “one that emphasizes the speed of execution of the entire institutional order over minimization of price impact.” The Commission preliminarily believes that the requirement to group information by specified order routing strategy categories should make comparisons among broker-dealers by customers placing institutional orders as well as by the public possible because it would allow customers to control for the fact that broker-dealers may get different types of order flow. For example, to satisfy customer order instructions one broker-dealer may tend to use an aggressive order routing strategy and another broker-dealer may tend to use a passive order routing strategy, and simply comparing these two broker-dealers without considering the order routing strategy category may lead to incorrect or misleading conclusions.
Customers preferring passive order routing strategies may be willing to wait longer for an execution but may want to limit price impact. Customers preferring aggressive order routing strategies, however, may endure some price impact to trade quickly. Therefore, a broker-dealer implementing a passive order routing strategy may, compared to an aggressive order routing strategy, tend to route to a dark pool where execution may be less certain, but likely at a better price.
The requirement to differentiate the proposed disclosures into the three order routing strategy categories should help mitigate the possibility that the reports could be interpreted incorrectly. However, there could still be differences among broker-dealers in how they classify orders into the three strategy categories, which could make straight comparisons between broker-dealers difficult. Proposed Rule 606(b)(3)(v) requires broker-dealers to “assign each order routing strategy that it uses for institutional orders to one of [the] three categories in a consistent manner for each report it prepares,” to “promptly update the assignments any time an existing strategy is amended or a new strategy is created that would change such assignments,” and to “document the specific methodologies it relies upon for making such assignments.” The proposed Rule defines the general characteristics of the three order routing strategies in terms of the trade-off between the minimization of price impact and the speed of execution of the entire institutional order. However, the proposed Rule does not prescribe how this trade-off should be taken into consideration. Broker-dealers would have discretion to determine how to do this when establishing their methodologies to assign categories in a consistent manner and when applying the methodologies to assign into categories the routing strategies and, as a result, broker-dealers might not have the exact same definitions for the three order routing strategy categories.
Under proposed Rule 606(b)(3), customers can obtain detailed information on the broker-dealer internalization rate and payment for order flow received. Currently, broker-dealers may prefer to internalize uninformed order flow.
Proposed Rule 606(b)(3) requires the inclusion of actionable IOIs in institutional order handling disclosures. Proposed Rule 600(b)(1) defines an actionable IOI as “any indication of interest that explicitly or implicitly conveys all of the following information with respect to any order available at the venue sending the indication of interest: (1) Symbol; (2) side (buy or sell); (3) a price that is equal to or better than the national best bid for buy orders and the national best offer for sell orders; and (4) a size that is at least equal to one round lot.”
The inclusion of actionable IOIs in the proposed reporting requirements of broker-dealers should provide customers a more complete picture of how their institutional orders are handled. Since actionable IOIs can convey similar information as an order, a response to an actionable IOI may result in an execution at the venue of the IOI sender and thus can represent a portion of the liquidity available at a given price and time. The Commission therefore preliminarily believes that actionable IOIs should be included in the required disclosure of how institutional orders are handled. In addition, because an actionable IOI can convey similar information as an order, the use of actionable IOIs may contribute to information leakage in a similar way as the use of orders.
The proposed definition of actionable IOI in Rule 600(b)(1), however, may limit the benefits achieved. Specifically, the proposed definition is substantively similar to the description of actionable IOI in the Regulation of Non-Public Trading Interest Release. Comments received on the Regulation of Non-Public Trading Interest Release indicated that some commenters are concerned that the discussion of actionable IOIs in that release was too stringent.
An additional benefit of having the institutional order handling information available upon request is that institutional customers could combine the order handling information with existing TCA or enhance their TCA. As noted above, institutional customers often work with independent third-party vendors to perform TCA as a means of evaluating the cost and quality of brokerage services. Institutional customers can also conduct their own TCA in-house. TCA, whether conducted in-house or by a third-party, generally analyzes data on the parent orders, but typically cannot analyze data on the child orders because of the lack of standardization of the current ad hoc order handling information. As a consequence, existing TCA typically does not incorporate information on how many child orders exist, a broker-dealer's institutional order routing strategy, nor cost, routing, and execution quality for individual child orders. The disclosures required by proposed Rule 606(b)(3) would close this informational gap, so that customers would have more information on how broker-dealers handle and execute parent and child institutional orders.
With this additional information, institutional customers or their third-party vendors could combine the routing information with execution information to conduct a more thorough TCA than they can currently. In particular, the information in proposed Rule 606(b)(3) may be a factor that can explain transaction cost variations and thus, the reports from the proposed amendments could be combined with TCA to help explain differences in transaction costs and in performance as measured by TCA across broker-dealers. For example, TCA often includes transaction cost measures such as implementation shortfall, but proposed Rule 606(b)(3) would not.
Finally, proposed Rule 606(b)(3) would require reports to be made available using an XML schema and associated PDF renderer to be published on the Commission's Web site.
As discussed above, some customers currently request reports about the handling of their institutional orders from their broker-dealers and those reports may be less or more detailed and provide different and potentially less or potentially more information than proposed Rule 606(b)(3) would require. If the reports broker-dealers currently provide to a customer more or different information, proposed Rule 606(b)(3)
In addition, the greater transparency provided as a result of the new reports required under proposed Rule 606(b)(3) might lead broker-dealers to change how they handle institutional orders. Given that broker-dealers would be aware of the metrics to be used a priori, they might route institutional orders in a manner that promotes a positive reflection on their respective services but which may be suboptimal for their customers. Any changes to broker-dealers' order routing decisions due to proposed Rule 606(b)(3) may be intended to benefit customers placing institutional orders, but if broker-dealers and customers focus exclusively on the metrics in the reports required by proposed Rule 606(b)(3), the order routing decisions could also be viewed as suboptimal for some customers.
For example, suppose a broker-dealer routes institutional orders so that the orders execute at lower cost with a higher fill rate, shorter duration, and more price improvement than the broker-dealer's competitors. However, it could be the case that, in order to achieve these objectives, the broker-dealer routes the majority of non-marketable limit order shares to the trading center offering the highest rebate. An institutional customer that reviews the proposed routing reports might suspect that the broker-dealer acted in its self-interest by selecting the highest rebate venue in order to maximize rebates when in fact, the broker-dealer made the decision based on other variables, which might not be completely reflected in the proposed reports. Under the proposed amendments to Rule 606, the broker-dealer may be concerned about the perception of acting on a conflict of interest, when the broker-dealer is in fact acting in the customers' interests. As a result, a broker-dealer may be incentivized to route fewer non-marketable limit order shares to the trading center offering the highest rebate, even if this imposes additional costs on the broker-dealer's customers, in an effort to ensure that a customer does not misconstrue the intent behind the broker-dealer's routing decisions. Such a potential outcome could reduce the intensity of competition between broker-dealers on the dimension of execution quality.
In addition, as noted above, proposed Rule 606(b)(3) requires the inclusion of actionable IOIs in the reports on institutional order handling broker-dealers would provide to their customers. The Commission expects that broker-dealers will incur costs from the inclusion of actionable IOIs in the reports as a result of having to process additional data and run additional calculations. The estimated cost of including actionable IOIs in the proposed reports is included in the aggregate costs described in the discussion below and in greater detail in Section IV.D.1.
The disclosure requirements of proposed Rule 606(b)(3) would also impose a monetary cost, as the required disclosures could entail some reprogramming by broker-dealers that execute or route institutional orders. These costs may be low for a given broker-dealer if the broker-dealer already supplies similar reports on institutional order handling upon requests by their customers. In addition to reprogramming, receiving and processing customer requests as well as preparing and transmitting the data to customers on request would impose costs.
As discussed in Section IV.D.1., the Commission preliminarily estimates that the one-time, initial burden for a broker-dealer that routes institutional orders that does not currently retain the proposed order handling information to program systems in-house to implement the requirements imposed by the proposed amendments to Rule 606 would be 200 hours resulting in a monetized cost burden of $60,420 per broker-dealer.
As discussed in Section IV.D.1., the Commission preliminarily estimates the average cost for a broker-dealer who routes institutional orders who already retains information required by the proposed rule to format its systems to produce a report to comply with the proposed rule to be 40 hours resulting in a monetized cost burden of $12,084.
As discussed in Section IV.D.1, the Commission preliminarily estimates that an average response to a Rule 606(b)(3) request for a broker-dealer who handles its own responses will take approximately 2 hours per response resulting in a monetized cost burden of $380.
Further, as a result of proposed Rule 606(b)(3), broker-dealers that route institutional orders would likely re-evaluate their best execution methodologies to take into account the availability of new statistics and other information that may be relevant to their decision making. This may impose a cost only to the extent that broker-dealers choose to build the proposed statistics into their best execution methodologies. In addition, they may only choose to do so if the benefits justify the costs.
Another potential cost of proposed Rule 606(b)(3) is that the reports could be viewed as a replacement of TCA and therefore have a negative impact on the market for TCA. Specifying a minimum length of time for making the Rule 606 reports publicly available may further impose a cost on third-party vendors that aggregate the time series of the reports. For example, suppose that a customer chooses to no longer purchase TCA once reports from proposed Rule 606(b)(3) become available, because the customer decides that the information contained in proposed Rule 606(b)(3) reports is sufficient. If fewer customers purchase TCA, it would have a negative impact on third-party providers of TCA as well as third-party data vendors,
As discussed in Section V.C.1.b.i, proposed Rule 606(b)(3) would require differentiating order routing strategies for institutional orders into three types: Passive, neutral, and aggressive order routing strategies. The Commission preliminarily believes that broker-dealers would incur costs associated with creating their methodologies, assigning each order routing strategy for institutional orders into one of these three categories according to the methodologies, promptly updating the assignments any time an existing strategy is amended or a new strategy is created that would change such assignments, and documenting the specific methodologies it relies upon for making such assignments. The Commission preliminarily estimates the one-time, initial burden for a broker-dealer that routes institutional orders to establish and document in-house its specific methodologies for assigning order routing strategies as required by proposed Rule 606(b)(3)(v) to be 40 hours resulting in a monetized cost burden of $12,620.
Once the methodologies are established and documented, broker-dealers that route institutional orders would be required to assign each order routing strategy for institutional orders into one of these three categories according to the methodologies in a consistent manner and promptly update the assignments any time an existing strategy is amended or a new strategy is created that would change such assignments.
The Commission requests comment on the Commission's analysis of the costs and benefits of the proposed amendments in Rule 606(b)(3). In particular, the Commission solicits comment on the following:
137. Are the assumptions underlying the Commission's estimates for the costs of implementation and ongoing costs to comply with the proposal appropriate? Please provide data and analysis to support your view.
138. Do commenters believe that broker-dealers currently have systems that contain the data that would be used in the reports? What data would be incremental to that already maintained by broker-dealers? What incremental costs would be necessary to modify and maintain information systems architecture?
139. Do commenters believe there are additional costs or benefits that could be quantified or otherwise monetized? If so, please identify these costs and benefits. Please explain and provide specific data and estimates.
140. Do commenters believe there are any additional costs or benefits that may arise from the proposal? Are there costs and benefits described that would likely not result from the proposed amendments? Are there any unintended consequences that have not been discussed that may result from the proposal?
141. Do commenters believe that there are methods by which the Commission could reduce the costs imposed by the proposal, while still achieving its stated goals? Please explain in detail.
The Commission also seeks comment on the analysis of the costs and benefits for the definition of an actionable IOI in proposed Rule 600(b)(1). In particular, the Commission solicits comment on the following:
142. Do commenters believe that the Commission's proposed definition of actionable IOI is appropriate in light of the estimated costs and benefits? If not, please provide alternative definitions with a detailed discussion of what the benefits and costs of those alternatives would be. Please provide data and analysis to support your view.
Proposed Rule 606(c) would require public quarterly reports broken down by calendar month on the order routing and execution quality of institutional orders by each broker-dealer. As a result, proposed Rule 606(c) would provide the public with standardized information regarding all broker-dealers' institutional order routing practices and execution quality aggregated across each broker-dealer's customers.
While these reports would be aggregated across all customers a broker-dealer serves, the reports would allow current and prospective customers to compare broker-dealers' institutional order routing practices and execution quality and ultimately, to inform their choice of broker-dealers. For example, customers may use the quarterly public reports broken down by calendar month to decide whether they should enter into a business relationship with broker-dealers to whom they do not currently send orders. Additionally, the reports may allow customers to compare the execution services of their current broker-dealers with other competitors, who might offer the same execution quality at lower costs, improved execution quality at the same costs, or lower cost services and better execution quality.
As discussed in Section V.C.1.b.i, greater transparency about order routing practices and execution quality may promote competition in the market for brokerage services and between trading centers. The Commission preliminarily believes that public aggregated institutional order handling reports required by proposed Rule 606(c) would increase the transparency of institutional order routing and execution quality and provide additional information to customers beyond that provided by customer-specific reports required by proposed Rule 606(b)(3). Customers would be able to compare their broker-dealers not just based on the orders they send to the broker-dealers, but also based on all institutional orders handled by the broker-dealers. In addition, customers would be able to evaluate the order routing and execution quality of broker-dealers they do not send orders to and could determine whether to send orders to a given broker-dealer based on such evaluation.
Broker-dealers, in turn, might be able to adjust their business practices to compete better, specifically along the dimensions of order routing and execution quality and, through the public aggregated institutional order handling reports, try to attract orders from customers with whom they do not yet have a business relationship. The Commission preliminarily believes that the broker-dealers would have greater incentive to route institutional orders in a manner beneficial to a customer in order to attract additional order flow from those customers who may use the public aggregated institutional order
As discussed in Section V.C.1.b.i, if broker-dealers change their institutional order routing decisions, it might promote competition among trading centers. The public aggregated institutional order handling reports required by proposed Rule 606(c) would allow trading centers to compare the execution quality of orders on different trading centers as well as the routing behavior of broker-dealers. The trading centers would have a further incentive to improve execution quality to attract order flow and the public aggregated institutional order handling reports that are broken down by month would allow them to see the effects of any changes they implement. In addition, this may lead to innovation by existing trading centers and it may attract new entrants and the formation of new trading centers.
As discussed for the customer-specific reports required by proposed Rule 606(b)(3) in Section V.C.1.b.i, customers may also initiate a dialogue with their broker-dealers, or broker-dealers they are considering to use, based on the public aggregated institutional order handling reports required by proposed Rule 606(c). This dialogue may include discussions about conflicts of interest
Further, third-party vendors offering analytical services may use the information in the public aggregated institutional order handling reports in an attempt to sell customized reporting tools and services. These types of consulting services may allow customers and the public to better identify the potential conflicts of interest that broker-dealers face with directing order flow to trading centers offering liquidity rebates and fees.
Greater transparency of institutional order routing and execution could help shed light on the effect of today's dispersed and complex market structure on order routing decisions and related execution quality. The Commission preliminarily believes that the requirement in proposed Rule 606(c) for quarterly disclosure on order routing, order execution, and orders that provide and remove liquidity for each venue broken down by order routing strategy should provide the public with a better understanding of the operating procedures of broker-dealers and how their decisions are affected by the current market structure. In addition, the information on rebates and fees broker-dealers receive or incur would allow the public to assess how broker-dealers manage potential conflicts of interest they face when routing institutional orders.
As discussed for the customer-specific reports required by proposed Rule 606(b)(3) in Section V.C.1.b.i., the public aggregated institutional order handling reports broken down by calendar month required by proposed Rule 606(c) would also give customers information about broker-dealer internalization rates and the rebates received and fees paid by broker-dealers. As described above, the public aggregated institutional order handling reports would require the disclosure of information by all broker-dealers that receive institutional orders. Customers would be able to compare internalization rates of their broker-dealers and rebates received and fees paid by their broker-dealers to those of broker-dealers they do not send orders to. As such, the information about broker-dealer internalization rates, rebates, and fees in the public aggregated institutional order handling reports required by proposed Rule 606(c) would be complementary to the customer-specific reports required by proposed Rule 606(b)(3), which would provide customers only information about their orders rather than all orders a given broker-dealer receives.
In addition, proposed Rule 606(c) would require the public aggregated institutional order handling reports to be posted on an Internet Web site that is free and readily accessible to the public for a period of three years from the initial date of posting on the Internet Web site. This requirement would allow customers and the public to readily access historical data for at least three years without the need to download the reports frequently,
Further, the public aggregated institutional order handling reports required by proposed Rule 606(c) could improve the extent and quality of information available to the Commission and other regulatory agencies, thereby assisting in the regulatory oversight of broker-dealers' operations.
Finally, proposed Rule 606(c) would require the public aggregated institutional order handling reports be made available using an XML schema and associated PDF renderer to be published on the Commission's Web site.
The Commission considered whether the public aggregated institutional order handling reports that would be required pursuant to proposed Rule 606(c) may disclose information about specific institutional orders that currently is not publicly available, and preliminarily believes that the possibility of such disclosure and associated costs are small. First, the reports required by proposed Rule 606(c) would be quarterly reports broken down by calendar month made public within one month after the end of the quarter. As a result, it is very unlikely that the reports would contain any information about orders that are being worked by broker-dealers at the time of publication. Second, the reports would be aggregated across all customers a broker-dealer serves. To the extent that a broker-dealer serves multiple customers placing institutional orders, it would be difficult to identify the orders of a particular customer in the proposed reports. However, it is possible that, for example, a smaller broker-dealer may have one customer placing institutional orders that represents the majority of its business and this may be known to other market participants. In this case, it may be possible to learn from the reports some information about the order flow of that customer, particularly the order flow given to the specific broker-dealer. This information would not be about active orders but could provide historical information about the general characteristics of the customer's order flow,
Proposed Rule 606(c) would require each broker-dealer to post the public aggregated institutional order handling report for a period of three years from the initial date of posting on the Internet Web site. As noted above, the Commission preliminarily believes that, once the report is posted, maintaining the report on the Web site will not impose any additional burden on broker-dealers, and thus any additional costs to maintain the report on the Web site would be negligible.
The disclosure requirements of proposed Rule 606(c) would impose a cost, as they would require some reprogramming by broker-dealers that handle institutional orders. In addition, preparing and disseminating the data to the public in the form required by proposed Rule 606(c) would impose costs on such broker-dealers. However, a broker-dealer could use the infrastructure and processes they put in place for the customer-specific reports required by proposed Rule 606(b)(3) such that the additional cost to comply with proposed Rule 606(c) may be low. The Commission preliminarily estimates that a broker-dealer who handles institutional orders and formats and creates public aggregated institutional order handling reports itself will incur an initial burden of 20 hours resulting in a monetized cost burden of $4,990 to comply with the quarterly reporting requirement of proposed Rule 606(c).
Further, the Commission preliminarily estimates that each broker-dealer that routes institutional orders who prepares its own reports will incur an average burden of 10 hours resulting in a monetized cost burden of $1,600
The Commission preliminarily estimates that each broker-dealer that routes institutional orders that uses a third-party service provider to prepare the reports required under proposed Rule 606(c) will incur an average burden of 2 hours resulting in a monetized cost burden of $443 plus an additional third-party service provider fee of $500
The Commission requests comment on the Commission's analysis of the costs and benefits of the proposed amendments in Rule 606(c). In particular, the Commission solicits comment on the following:
143. Do commenters believe that the assumptions underlying the Commission's estimates for the costs of implementation and ongoing costs to comply with the proposal are appropriate? Please provide data and analysis to support your view.
144. Do commenters believe there are additional costs or benefits that could be quantified or otherwise monetized? If so, please identify these costs and benefits. Please explain and provide specific data and estimates.
145. Do commenters believe there are any additional costs or benefits that may arise from the proposal? Are there costs and benefits described that would likely not result from the proposed amendments? Are there any unintended consequences not discussed above that may result from the proposal?
146. Do commenters believe that there are methods by which the Commission could reduce the costs imposed by the proposal, while still achieving its stated goals? Please explain in detail.
Rule 606(a) requires each broker-dealer to make publicly available quarterly reports on its routing of non-directed orders in NMS securities. The Commission preliminarily believes that the proposed amendments to Rule 606(a) would increase the level of transparency about order routing and execution quality for retail orders through the enhanced disclosure of data regarding order routing and execution. The proposed amendments to Rule 606(a) require that the public quarterly reports be broken down by calendar month and differentiate between marketable and non-marketable limit orders. The proposed amendments also would remove the requirement that the quarterly reports be divided into three separate sections for securities that are listed on the NYSE, Nasdaq, and Amex. The proposed amendments to Rule 606(a)(1)(iii) also require that the reports include for Specified Venues the net aggregate amount of any payment for order flow, payment from any profit-sharing relationship received, transaction fees paid, and transaction rebates received, both as a total dollar amount and on a per share basis, for specified types of orders. The proposed amendment to Rule 606(a)(1)(iv) would add the requirement that broker-dealers describe any terms of payment for order flow arrangements and profit-sharing relationships with Specified Venues that may influence their order routing decisions, including, among other things: (1) Incentives for equaling or
The benefits and costs of each of these proposed amendments are discussed below. Wherever possible, we quantify cost estimates for a given amendment. For the remaining amendments concerning retail orders, we provide total quantitative cost estimates for these amendments in Section V.C.2.e.
The proposed amendments to Rule 606(a), which applies to retail orders, would require broker-dealers to differentiate between marketable and non-marketable limit orders. Marketable and non-marketable limit orders generally are handled differently,
The proposed amendments could allow the public, including customers placing retail orders, to better understand the potential for conflicts of interest broker-dealers face when routing retail orders. For example, if a broker-dealer routes all non-marketable limit orders to the trading centers that pay the highest rebate for orders providing liquidity, the broker-dealer may be maximizing its revenue potentially to the detriment of execution quality. Recent academic research has identified indications of such routing behavior for retail orders.
In addition, if the additional proposed disclosure results in broker-dealers improving their order routing for retail orders, which, in turn, may change which trading centers the broker-dealers route retail orders to, the proposed disclosure could further promote competition among trading centers. The new information that would be in the public reports required by proposed Rule 606(a)(1) would allow trading centers to compare the order routing decisions of broker-dealers and the trading centers retail orders are routed to, which could then inform how the trading centers attempt to attract retail order flow. The quarterly public reports, which would be broken down by month, would allow trading centers to see effects of any adjustments they implement in response to broker-dealers changing their order routing strategies. In addition, this proposed new disclosure may lead to innovation by existing trading centers and it may attract new entrants and the formation of new trading centers.
The proposed amendments to Rule 606(a) to require broker-dealers to differentiate between marketable and non-marketable limit orders would impose costs on broker-dealers. Preliminary estimates for compliance costs are contained in the estimates for the costs of producing the reports discussed in Section V.C.2.e.
The Commission requests comment on the Commission's analysis of the costs and benefits of the proposed amendments in Rule 606(a). In particular, the Commission solicits comment on the following:
147. Do commenters believe that the assumptions underlying the Commission's estimates for the costs of implementation and ongoing costs to comply with the proposal are appropriate? Please provide data and analysis to support your view.
148. Do commenters believe there are additional costs or benefits that could be quantified or otherwise monetized? If so, please identify these costs and benefits. Please explain and provide specific data and estimates.
149. Do commenters believe there are any additional costs or benefits that may arise from the proposal? Are there costs and benefits described that would likely not result from the proposed amendments? Are there any unintended consequences not discussed above that may result from the proposal?
150. Do commenters believe that there are methods by which the Commission could reduce the costs imposed by the proposal, while still achieving its stated goals? Please explain in detail.
Under the proposed amendments to Rule 606(a)(1)(iii), for retail orders, broker-dealers would be required to publicly report the net aggregate amount of any payment for order flow, payment from any profit-sharing relationship received, the transaction fees paid, and transaction rebates received, both as a total dollar amount and on a per share basis, for each of the following order types: market orders, marketable limit orders, non-marketable limit orders, and other orders.
Similarly to differentiating marketable and non-marketable limit orders discussed in Section V.C.2.a.i, the information required by proposed Rule 606(a)(1)(iii) could also allow the public, including customers placing retail orders, to better understand the potential conflicts of interest broker-dealers face when routing retail orders.
Under proposed Rule 606(a)(1)(iii), broker-dealers would be required to disclose on a quarterly basis more detailed information on net payment for order flow, payment from any profit-sharing relationship received, transaction fees paid, and transaction rebates received per share and in total. Customers and the public could use this information to gauge whether payments for order flow or maker-taker fees affect the order routing decisions of broker-dealers. For example, if a customer pays a flat-rate commission to its broker-dealer, and any rebate received, or any fraction thereof, is retained by the broker-dealer, then the broker-dealer may have a financial incentive to route the retail order to the trading center offering the highest rebate or lowest fee.
In addition, as discussed in Section V.C.2.a.i, if broker-dealers improve their order routing for retail orders, which may result in changes to which trading centers they route retail orders to, it could promote competition between trading centers. The trading centers could gauge, like customers, whether payment for order flow or maker-taker fees affect the order routing decision of broker-dealers. The trading centers may change their fees or attempt otherwise to attract retail order flow and the quarterly public reports that are broken down by calendar month would allow them to see effects of any changes they implement. In addition, this may lead to innovation by existing trading centers and it may attract new entrants and the formation of new trading centers.
Proposed Rule 606(a)(1)(iii) would impose initial costs on broker-dealers in creating a new process to complete the reports and increase ongoing costs related to incorporating additional information into the reports. Preliminary estimates for the compliance costs are contained in the estimates for the costs of producing the reports discussed in Section V.C.2.e. It is possible that increased transparency about the net aggregate amount of any payment for order flow, payment from any profit-sharing relationship, transaction fees paid, and transaction rebates received, and subsequent scrutiny by retail customers, the public, academics, regulators, and the financial media, may lead broker-dealers to decrease the degree to which they internalize orders and route orders to high rebate or low fee exchanges to avoid the perception of conflicts of interest. Broker-dealers might do this if they perceive the potential costs from increased public scrutiny that would result from the enhanced disclosures to be relatively high compared to the benefit from sending retail orders to internalizers or routing retail orders to high rebate and low fee trading centers. If this were to occur then these retail orders might be more likely to be routed to trading centers other than internalizers, such as exchanges or alternative trading systems,
It is possible that increased transparency about net payment for order flow and payments from profit-sharing relationships, and subsequent scrutiny by retail customers, the public, academics, regulators, and the financial media, might lead broker-dealers to alter their payment for order flow or profit-sharing relationships or not enter such relationships. Broker-dealers might do this if they perceive the potential costs from increased public scrutiny to be relatively high compared to a broker-dealer's benefit from such relationships. This could lead to lower payments received from such relationships. The affected broker-dealers might offset these lower revenues or higher costs by increasing brokerage commissions or other fees for retail customers.
The Commission requests comment on the Commission's analysis of the costs and benefits of the proposed amendments in Rule 606(a)(1)(iii). In particular, the Commission solicits comment on the following:
151. Do commenters believe that the assumptions underlying the Commission's estimates for the costs of implementation and ongoing costs to comply with the proposal are appropriate? Please provide data and analysis to support your view.
152. Do commenters believe there are additional costs or benefits that could be quantified or otherwise monetized? If so, please identify these costs and benefits. Please explain and provide specific data and estimates.
153. Do commenters believe there are any additional costs or benefits that may arise from the proposal? Are there costs and benefits described that would likely not result from the proposed amendments? Are there any unintended consequences not discussed above that may result from the proposal?
154. Do commenters believe that there are methods by which the Commission could reduce the costs imposed by the proposal, while still achieving its stated goals? Please explain in detail.
As discussed in Section III.B.3., the proposed amendment to Rule
The disclosures required by proposed Rule 606(a)(1)(iv) could allow the public, including customers placing retail orders, to better understand the potential conflicts of interest broker-dealers face when routing retail orders.
In addition, as discussed in Section V.C.2.a.i, if broker-dealers improve their order routing for retail orders, which may result in changes to which trading centers they route retail orders to, it could promote competition between trading centers. The trading centers could gauge, like customers, whether payment for order flow arrangements and profit-sharing relationships between broker-dealers and Specified Venues affect the order routing decisions of broker-dealers. The trading centers may change their payment for order flow arrangements and profit-sharing relationships with broker-dealers or attempt otherwise to attract retail order flow and the quarterly public reports that are broken down by calendar month would allow them to see effects of any changes they implement. In addition, this may lead to innovation by existing trading centers and it may attract new entrants and the formation of new trading centers.
Given that the proposed changes to Rule 606(a)(1)(iv) constitute an amendment to an existing disclosure, the Commission preliminarily estimates the initial paperwork burden for a broker-dealer that handles retail orders to review and assess its payment for order flow arrangements and profit-sharing relationships, whether written or oral, with a Specified Venue that may influence their order routing decisions, and describe terms of such arrangements to be 10 hours resulting in a monetized cost burden of $3,155.
Increased disclosure about payment for order flow arrangements and profit-sharing relationships may lead broker-dealers to decrease the amount of internalization used in the execution of market and marketable limit orders and to alter such arrangements and relationships. Section V.C.2.b.ii. discusses this in detail and the associated costs and other effects.
The Commission requests comment on the Commission's analysis of the costs and benefits of the proposed amendments in Rule 606(a)(1)(iv). In particular, the Commission solicits comment on the following:
155. Do commenters believe that the assumptions underlying the Commission's estimates for the costs of implementation and ongoing costs to comply with the proposal are appropriate? Please provide data and analysis to support your view.
156. Do commenters believe there are additional costs or benefits that could be quantified or otherwise monetized? If so, please identify these costs and benefits. Please explain and provide specific data and estimates.
157. Do commenters believe there are any additional costs or benefits that may arise from the proposal? Are there costs and benefits described that would likely not result from the proposed amendments? Are there any unintended not discussed above consequences that may result from the proposal?
158. Do commenters believe that there are methods by which the Commission could reduce the costs imposed by the proposal, while still achieving its stated goals? Please explain in detail.
In addition to the amendments discussed above, the Commission is proposing to amend disclosures for retail orders by aggregating reports across listing exchanges, requiring quarterly reports to be broken down by month, and providing reports in a specific format that are available for a minimum length of time. The benefits and costs of these additional amendments are discussed below.
The proposed amendment to Rule 606(a)(1) that requires reports on retail orders be aggregated across all securities may reduce the ongoing costs of the Rule 606(a) reports. Current Rule 606(a)(1) requires that NMS stocks be “divided into three separate sections for securities that are listed on the New York Stock Exchange, Inc., securities that are qualified for inclusion in The Nasdaq Stock Market, Inc., and securities that are listed on the American Stock Exchange LLC or any other national securities exchange.” To satisfy this requirement, broker-dealers have to determine the primary listing of all NMS stocks and incur a cost on an ongoing basis in doing so. Eliminating this requirement would save broker-dealers this cost. In addition, new broker-dealers currently have to create the initial report format for the three groups of NMS stocks, which also imposes a one-time cost.
The Commission's proposal to aggregate reports on retail order routing across listing exchanges would also impose costs, according to a staff analysis.
The staff's analysis focuses on whether customers or others can use the market-specific routing information to assess the execution quality they get from their broker-dealers. Specifically, if the order routing decisions by broker-dealers differ for stocks listed on different exchanges,
While the staff's analysis is not a direct test of whether order routing differs for stocks with different primary listing exchanges,
Table 1 presents the results of the staff's analysis of effective spreads for common stocks listed on the NYSE, NASDAQ, and NYSE MKT. Columns 1 through 3 report the results for each of these primary listing exchanges.
Table 1 indicates that the average effective spreads vary significantly by the market center where the orders were executed. Table 1 shows that most market center effective spreads are significantly different than those of the listing exchange. For example, Column 1 shows that, for NYSE-listed stocks, the average effective spread on Bats BZX is 7.04 basis points less than on the NYSE itself, and the average effective spread on NASDAQ is 1.63 basis points higher than on the NYSE. In addition, some differences in effective spreads are also economically meaningful. For example, Column 2 reports that the average effective spread for orders in NASDAQ-listed stocks that are executed on NASDAQ is 92.01 basis points and the average effective spread for such orders that are executed on NYSE Arca is 36.71 basis points lower, which corresponds to a 55.3 basis point difference and represents a reduction of almost 40%.
Table 1 also indicates that the average effective spreads vary significantly by listing exchange. The staff's analysis suggests that NASDAQ-listed stocks tend to have higher average effective spreads than NYSE-listed stocks because the intercept estimates are much larger in Column 2 compared to Column 1.
However, a deeper analysis of Table 1 can inform on these costs. Specifically, the results in the table suggest that because the relative ranking of each market center changes depending on the listing exchange, the proposed amendment to aggregate routing information across listing exchanges could reduce the usefulness of Rule 606 reports. Commission staff compared the effective spreads across the various market centers for stocks listed on each of the primary listing exchanges, as indicated by Table 1.
If the ranking of the effective spreads on each market center were the same across the three primary listing exchanges, where a stock is listed would have little or no relationship to whether order routing information informs on execution quality. Such a result would imply that aggregating the reports across primary listing exchanges would not reduce the amount of information in the reports. However, upon examination, Table 1 shows that the ranking of the market centers by effective spreads is different depending on the primary listing exchange. For example, the coefficient estimates in Table 1 suggest that for NYSE-listed stocks, Bats EDGX Exchange, Inc. (“EDGX”) has lower execution costs than Bats BYX, but for NASDAQ-listed stocks, EDGX has higher execution costs than Bats BYX. In Column 1 for NYSE-listed stocks, the differential cost of trading a stock on EDGX versus Bats BYX is small, 0.17 basis points, but statistically significant. However, in Column 2 for NASDAQ-listed stocks, the stocks differ in cost by a statistically significant 8.14 basis points between the same two exchanges. This indicates that there seem to be differences between market centers in terms of effective spreads for stocks with different primary listings that, together with routing information by listing exchange, may inform customers in assessing the execution quality their broker-dealers provide. Therefore, the staff's analysis indicates that aggregating the reports, as in the proposed amendment, could result in an informational cost to customers and the public.
As noted above in Section III.B.4., while the Commission recognizes that eliminating the division of reports by the three distinct listing markets may potentially cause some reduction in informational content, as indicated in the analysis above, the Commission preliminarily believes that any diminution in granular listing market data is appropriate in light of the proposed requirement to provide retail customers with pertinent order routing data that reflects today's multiple trading centers and practices. The Commission solicits comment on the foregoing.
The Commission is also proposing to require that the quarterly public retail order routing reports required by Rule 606(a)(1) be broken down by calendar month. Current Rule 606(a)(1) requires broker-dealers to make retail order routing reports publicly available for each calendar quarter, and such reports contain aggregate quarterly information on the routing of retail orders. As noted above, the Commission understands that trading centers frequently change their fee structures, including the amount of fees and rebates, in order to attract order flow, and these changes typically occur at the beginning of a calendar month. The changes in fee structures at trading centers likely will affect a broker-dealer's routing decisions. Disclosing retail order routing information on an aggregated quarterly basis can mask changes in routing behavior in response to changes in a trading center's fee structure. The Commission preliminarily believes that disclosing the information contained in the public retail routing reports by calendar month would allow customers to better assess whether their broker-dealers' routing decisions are affected by changes in fee structures and the extent to which such changes affect execution quality. This proposed amendment would, however, require an initial cost to change the process for completing the reports. The Commission preliminarily believes this cost to be small because broker-dealers typically process data daily and reporting the data broken down by month would only be a change in the aggregation of the data, from quarterly to monthly.
In addition, the Commission is proposing that the public retail order routing report required by Rule 606(a)(1) and customer-specific order routing report required by Rule 606(b)(1) be made available using an XML schema and associated PDF renderer to be published on the Commission's Web site. The benefits and costs associated with this requirement are discussed in Section V.C.4. The Commission preliminarily believes that requiring both the public and customer-specific retail order routing reports to be provided in this format should be useful to customers as it would allow them to more easily analyze and compare the data provided in both types of reports across broker-dealers, for the reasons discussed above.
Finally, the Commission is proposing to amend Rules 605(a)(2) and 606(a)(1) to require market centers and broker-dealers to keep the reports posted on an Internet Web site that is free of charge and readily accessible to the public for a period of three years. Requiring that data be available to customers and the public for three years could be useful to those seeking to analyze past execution quality by market center and routing behavior of broker-dealers. Such analysis may lead to increased transparency with regards to execution quality and may lead broker-dealers to compete along this dimension through routing decisions, resulting in a higher probability of execution and improved execution in terms of costs. Current Rules 605 and 606 do not specify the minimum length of time that market centers need to publish the order execution reports and broker-dealers need to publish the retail order routing reports, respectively. As a result, the public may not be able to examine the order execution of a market center and the routing of retail orders by a broker-dealer through time if past reports are not currently available or they have to rely on third-party vendors to supply past reports.
The requirement to make the reports available for three years may also produce costs. As noted above, however, the Commission preliminarily believes that, once the report is posted, maintaining the reports on the Web site will not pose any additional burden on broker-dealers, and thus any additional costs to maintain the report on the Web site would be negligible. Any costs of maintaining the report are included in the Commission's estimates of the costs broker-dealers will incur to produce the reports, as explained above.
The Commission requests comment on the Commission's analysis of the costs and benefits of the proposed amendments in Rule 605(a)(2), 606(a)(1) and 606(b)(1). In particular, the Commission solicits comment on the following:
159. Do commenters believe that the assumptions underlying the Commission's estimates for the costs of implementation and ongoing costs to comply with the proposal are appropriate? Please provide data and analysis to support your view.
160. Do commenters believe there are additional costs or benefits that could be quantified or otherwise monetized? If so, please identify these costs and benefits. Please explain and provide specific data and estimates.
161. Do commenters believe there are any additional costs or benefits that may arise from the proposal? Are there costs and benefits described that would likely not result from the proposed amendments? Are there any unintended consequences that may result from the proposal?
162. Do commenters believe that there are methods by which the Commission could reduce the costs imposed by the proposal, while still achieving its stated goals? Please explain in detail.
As discussed in more detail in Section IV.D.4., the Commission preliminarily estimates the costs to comply with the proposed amendments to Rule 606(a) that require broker-dealers to distinguish between marketable and non-marketable limit orders and with proposed Rule 606(a)(1)(iii) that requires disclosure of net payment for order flow and transaction fees and rebates by Specified Venue as follows. The Commission preliminarily estimates that most of the 266 broker-dealers that route retail orders already obtain the information required by the proposed rule and that 50 broker-dealers do not currently obtain such information. The Commission preliminarily estimates that the initial burden for a broker-dealer who routes retail orders to update its systems to capture the information required by proposed Rule 606(a) and format that information into a report to comply with the rule will be 80 hours resulting in a cost of $22,648.
For the remaining 216 broker-dealers who the Commission preliminarily estimates currently capture the data required by the proposed modifications to Rule 606(a), such broker-dealers would need only to format their reports to incorporate such data. The Commission preliminarily estimates for broker-dealers that already capture such data, 108 would format the reports in-house. The cost to format that data into its existing reports in-house is preliminarily estimated to be 20 hours resulting in a monetized cost burden of $4,975.
The Commission preliminarily believes that once the initial costs, described above, have been incurred to allow a broker-dealer to obtain the required information, the cost to produce a quarterly report would remain the same compared to a quarterly report required under current Rule 606(a).
The Commission requests comment on the Commission's discussion of implementation considerations of the proposed amendments in Rules 606(a)(1) and 606(b)(1). In particular, the Commission solicits comment on the following:
163. Do commenters agree with the Commission's estimates of the costs to comply with the proposed amendments in Rules 606(a)(1) and 606(b)(1) for retail orders? Specifically, do commenters agree with the Commission's estimates for initial costs and for ongoing costs? Please be specific in your response and provide data to support your response.
The proposed amendment to Rule 605(a)(2) requires market centers to keep reports required pursuant to Rule
Similar to the analogous requirements proposed in Rules 606(a) and 606(c) described above, the Commission preliminarily believes that requiring the previous three years of past order execution information to be available to customers and the public generally should be useful to those seeking to analyze historical order execution information at various market centers. Currently, customers and the public who want to analyze historical order execution information have to either download the data every quarter or they have to rely on third-party vendors to get access to such data. The proposed requirement to make the data readily accessible to the public for three years would allow customers and the public to access and analyze historical order execution information more easily by requiring that historical data are kept posted by the market centers. The public includes other market participants. For example, the proposed requirement to make the data readily accessible to the public for three years would benefit broker-dealers, market centers, and third-party vendors in that it would allow them to access and analyze historical order execution information more easily. This would allow broker-dealers to compare different market centers more easily, market centers to compare themselves to other market centers more easily, and third-party vendors to provide their services based on the data more easily.
The Commission preliminarily believes that the costs to market centers for making the order execution reports readily accessible to the public for a period of three years from the date of initial publication are negligible as it amounts to posting the currently-required reports for the three-year time period. In addition, some market centers may already make their reports available to the public for an extended period of time. The requirement to post and maintain reports on an Internet Web site that is free of charge and readily accessible to the public for a period of three years would begin at the adoption of the proposed amendments to Rule 605(a)(2) and apply going forward. Affected entities (the market centers) would not be required to post reports created and posted prior to the proposed Rule's effectiveness.
The Commission notes that specifying a minimum length of time for making the Rule 605 reports available may make the data owned by third-party vendors aggregating the time series of 605 reports less useful because, for three years, the data would be publicly available and more easily accessible.
The Commission requests comment on the Commission's analysis of the costs and benefits of the proposed amendments in Rule 605(a)(2). In particular, the Commission solicits comment on the following:
164. Do commenters believe that there are benefits to making order execution reports readily available for three years? If so, please explain.
165. Do commenters agree with the Commission's analysis that the costs are negligible? Why or why not?
The Commission is proposing to require that the retail order routing and institutional order handling reports be made available using the Commission's XML schema and associated PDF renderer. As discussed earlier, the Commission preliminarily believes that requiring the reports to be made available in an XML format will facilitate enhanced search capabilities, and statistical and comparative analyses across broker-dealers and date ranges.
The Commission understands that there are varying costs associated with varying degrees of structuring. Most, if not all, broker-dealers already have experience applying the XML format to their data. For example, all FINRA members must use FINRA's Web EFT system, which requires that all data be submitted in XML.
The Commission also preliminarily believes that if the reports are provided in a structured format, users could avoid costs associated with third-party sources who might otherwise extract and structure the data, and then charge for access to that structured data. Users could also avoid the additional time it would take for them to manually review and individually structure the data if they wanted to conduct large-scale analysis, comparison, or aggregation.
The XML schema would also incorporate certain validations to help ensure consistent formatting among all reports, in other words, to help ensure data quality. Validations are restrictions placed on the formatting for each data element so that comparable data is presented comparably. However, these validations would not be designed to ensure the underlying accuracy of the data. Any reports made available by broker-dealers pursuant to the proposal would have to comply with validations that are incorporated within the XML schema, otherwise the reports would not be considered to have been made available using the most recent version of the Commission's XML schema.
XML is an open standard that is maintained by an organization other than the Commission and undergoes constant review. As updates to XML or industry practice develop, the Commission's XML schema may also have to be updated to reflect the updates in technology. In those cases, the supported version of the XML schema would be made available on the Commission's Web site and the outdated version of the schema would be removed in order to maintain data quality and consistency with the standard.
The Commission considered alternative formats to XML, such as comma-separated values (“CSV”) and XBRL. The Commission does not believe the CSV format is suitable because it does not lend itself to validations. As a result, the data quality of the reports would likely be diminished as compared to XML, impairing comparability, aggregation, and large-scale analysis. While the XBRL format enables users to capture the rich complexity of financial information presented in accordance with U.S. Generally Accepted Accounting Principles, XBRL is not necessary to accurately capture the information for the proposed reports. The Commission preliminarily believes the simpler characteristics of the information in the required reports are better suited for XML.
The Commission requests comment on the Commission's analysis of the proposed structured format for the
166. Should the Commission require a structured format other than XML? If so, please identify the other format; identify how the other format could be used for aggregation, comparison, and large-scale analysis; and identify how the Commission can similarly ensure data quality.
167. As proposed, the public reports will be made available on each broker-dealers' Web site. Are there any benefits to the public or to broker-dealers if the reports were also submitted to the Commission's EDGAR system? If so, please identify those benefits and any associated costs.
168. How and in what format do broker-dealers currently provide their reports for retail orders required by Rule 606(a)(2)?
169. Broker-dealers currently provide reports about order routing and execution quality to institutional customers upon request on a voluntary basis. How and in what format do broker-dealers currently provide those ad-hoc reports?
170. Market centers publish current Rule 605(a) reports in a pipe-delimited ASCII format. Should the Commission require a different structured format for the reports required by Rule 605(a)? Why or why not? If yes, should the Commission require that the reports required by Rule 605(a) be made available using an XML schema and associated PDF renderer published on the Commission's Web site? Why or why not? Please be specific in your response. If commenters believe another format would be more appropriate, please identify the other format and identify how the other format can also be used for aggregation, comparison, and large-scale analysis; and identify how the Commission can similarly ensure data quality. Please identify any benefits and associated costs.
Proposed Rule 600(b)(51) defines a non-marketable limit order to mean any limit order other than a marketable limit order. The Commission preliminarily believes that proposed Rule 600(b)(51) would ensure consistent and correct interpretation and application of the proposed amendments to Rule 606(a)(1) for retail orders. The Commission also preliminarily believes that there are no costs associated with proposed Rule 600(b)(51) because it is a definition that is widely used by market participants.
Proposed Rule 600(b)(55) defines “orders providing liquidity” to mean orders that were executed against after resting at a trading center. Proposed Rule 600(b)(56) defines “orders removing liquidity” to mean orders that were executed against resting trading interest at a trading center. The Commission preliminarily believes that proposed Rules 600(b)(55) and (56) would ensure consistent and correct interpretation and application of proposed Rule 606(b)(3) for institutional orders. The Commission also preliminarily believes that there are no costs associated with proposed Rules 600(b)(55) and (56) because the Commission understands that the two definitions are widely used by market participants.
The Commission requests comment on the Commission's analysis of the proposed definitions. In particular, the Commission solicits comment on the following:
171. Do commenters agree with the definitions? If not, please provide alternative definitions and describe the benefits and costs of those alternatives as compared to the proposed definitions. Please be specific.
172. Do commenters agree with benefits and costs of the proposed definitions as described by the Commission? Please be specific.
173. Do commenters believe that the proposed definitions are widely used and accepted by market participants? Please be specific.
The Commission considered one alternative to the proposed definition of institutional order in Rule 600(b)(31) that would specify different thresholds for NMS stocks based on trading volume. This alternative would more finely tailor the definition for different types of NMS stocks, as described in Section V.C.1.a.ii. However, this alternative approach would add complexity to the proposed definition, and analysis of data on orders from institutions does not indicate any natural breakpoints.
In addition to the concern that the threshold of a market value of at least $200,000 may not capture large (measured by shares) orders in illiquid NMS stocks, Section V.C.1.a.ii. also discusses the incentives that market participants may have to change their behavior as stock prices may change over time, which may affect the proportion of orders that fall under the proposed definition of institutional order.
The Commission considered another alternative to the definition in proposed Rule 600(b)(31) that would address both concerns. The alternative would be to have customers identify their orders as institutional orders subject to Rule 606. This alternative approach would address the issue of having the same thresholds for all NMS stocks, independent of the trading volume of the stocks. Since this approach would require each customer to identify institutional orders, there would be a risk that customers may apply different criteria in identifying institutional orders. To the extent broker-dealers receive institutional orders that take different approaches, the usefulness of the reports for the purpose of comparing broker-dealers would be lower than with a consistently applied definition. However, the Commission notes that the alternative of allowing institutions to identify their orders as institutional orders would not reduce the usefulness of the information if the public reports contained specified thresholds as in the proposal. This alternative may not be significantly more costly for broker-dealers to implement than the proposal. After identifying the orders to be included in the calculations, all calculations would be the same for the alternative as for the proposal. On the other hand, if the alternative requires a specified threshold for disclosure on public reports, the public reports would require separate processing because they would involve calculations on different underlying orders. In this case, the alternative would be more costly than the proposal.
The Commission considered requiring broker-dealers to make publicly available only a subset of the information on institutional order handling required by proposed Rule 606(c). For instance, order routing and execution could be disclosed, but not
The Commission also considered not requiring broker-dealers to make publicly available any of the information required by proposed Rule 606(c) (but still proposing to require disclosure pursuant to the amendments to Rule 606(b)(3) regarding customer requests for institutional order handling information). As for limited public disclosure just discussed, this alternative would improve the quality of the disclosure provided by broker-dealers relative to the disclosure under current Rule 606, but it would shed even less light on how order routing affects execution quality and thus provide even less information on the potential for conflicts of interest relative to proposed Rule 606(c). As such, the benefits that would be achieved by this alternative would not only be smaller relative to the benefits proposed Rule 606(c) would offer, but also smaller relative to the benefits of the alternative of limited public disclosure. The alternative of no public disclosure would result in cost savings compared to proposed Rule 606(c) because the process to create the public report would not be required under this alternative.
The Commission considered requiring broker-dealers to make the aggregated public disclosure of their institutional order routing and execution information available on a more frequent basis than in proposed Rule 606(c) (
The Commission preliminarily estimates that each broker-dealer that routes institutional orders will incur an average burden of 10 hours resulting in a cost of $1,600
More frequent reports compared to the proposed quarterly frequency, although broken down by month, would have the benefit of providing the public with information that is more timely. However, the Commission preliminarily believes that the value of having monthly rather than quarterly reports is small because the Commission understands that analysis of order handling data generally is based on data comprising more than one month. While this may be, at least partially, due to the fact that current Rule 606 requires quarterly reports, staff experience suggests that the analysis of order handling data would be based on more than one month of data even if data were available at a higher frequency. This is because order handling data are inherently noisy and a large sample size is necessary to ensure a robust analysis. To that extent, from staff experience, the Commission understands that data spanning several months or even years are used in the analysis of order handling data. The Commission notes that using data spanning several months or even years does not preclude analyzing the data for trends, especially recent trends.
In addition, more frequent disclosure could allow sensitive trading information to be disclosed. For example, as discussed earlier, if a customer placing large institutional orders primarily engages one broker-dealer and that broker-dealer has few, if any, other customers placing significantly sized institutional orders, then other market participants may be able to decipher the customer's trading interest, particularly if the customer is building up or selling off a large position over a longer period of time. The risk of such disclosure of sensitive trading information is greater for monthly reporting frequency compared to the proposed quarterly frequency because, by construction, quarterly reporting provides the data for the first two months in the quarter with a delay compared to if the data for those two months were to be released monthly. As a result, it is less likely that data for those two months contain information about a customer's current and ongoing trading interests.
The Commission considered an alternative to proposed Rule 606(b)(3)
With respect to the costs to broker-dealers, the alternative would impose additional initial costs compared to the baseline, as the broker-dealers would be required to automatically provide reports to all customers, not just those that request reports, and would have to build infrastructure to generate these reports. The Commission preliminarily believes, however, that the alternative would involve slight modifications to the systems that produce the institutional order handling reports and thus preliminarily believes that these initial costs likely would be minimal.
The effect of this alternative on the costs to broker-dealers, compared to the proposal, is unclear. On the one hand, the Commission preliminarily believes the alternative could impose additional, albeit minimal, initial costs associated with developing systems to automatically generate the reports compared to the proposal as well as to the baseline, as described above. On the other hand, the Commission preliminarily believes the alternative could avoid the initial costs associated with the proposed rule for those broker-dealers who do not currently have systems in place to receive and respond to requests because they would not have to develop and deploy such systems under this alternative, as they would under the proposal. Any related initial or ongoing cost savings compared to the proposal may be minimal, as, in either case, such broker-dealers would need to develop systems to generate customer-specific reports and broker-dealers could add the customer requests to a list for individual report generation under the proposal just as they add customers to a list for automated reports under the alternative. The alternative may reduce ongoing personnel costs compared to the proposal because under the proposal, broker-dealers would have to answer emails, phone calls, or other forms of requests for ad-hoc reports. However, the brokerage industry is a relationship business and the Commission understands that broker-dealers communicate frequently with their customers, especially their larger customers. Further, the alternative may also result in additional ongoing personnel costs compared to the proposal if customers who would not have requested reports contact the broker-dealers to discuss reports they would receive automatically under the alternative. In addition, the Commission notes that, even under the proposal, broker-dealers could choose to provide reports automatically to their customers if this is more cost effective for them.
The Commission considered an alternative to proposed Rules 606(b)(3) and 606(c) that would require the customer-specific institutional order handling reports and the public aggregated institutional order handling reports to be submitted to the Commission. While Commission staff may be able to replicate much of the information in the reports were the proposed Consolidated Audit Trail to be approved,
While providing some benefits, this alternative would also impose additional costs to broker-dealers to submit their reports to the Commission. For example, under this alternative, broker-dealers would incur additional costs to transmit the reports directly to the Commission including any initial costs of setting up the connection to the Commission's repository, though the Commission preliminarily believes that these costs will not be significant. Further, the Commission preliminarily believes that acquiring the reports from each broker-dealer may impose burdens on Commission resources,
The Commission considered an alternative to current Rule 606(a) that would not require reports for retail orders be aggregated across all NMS stocks, but rather would require that those reports be divided into categories,
For example, one such alternative could require that broker-dealers
Because some ETPs trade differently than non-ETP NMS stocks, broker-dealers may route them differently. To the extent that broker-dealers vary their order routing decisions for ETP and non-ETP stocks, broker-dealer customers may benefit from the more targeted information that would be provided for each type of stock under this alternative compared to the proposed amendments to Rule 606(a). Specifically, the additional information concerning each type of stock contained in the divided reports would allow customers, broker-dealers, trading centers, and the public more generally to better evaluate and compare the order routing of retail orders for each type stock, whereas under the proposed rule information on order routing is provided for both ETPs and non-ETPs in the aggregate. While the consumers of such reports would benefit from the reports being more informative with respect to the order routing for each type of stock, broker-dealers would incur higher costs in processing the additional information provided by the reports. To use the additional information, customers, broker-dealers, trading centers, and the public more generally would have to process the additional information and incorporate it in their analyses and models when evaluating and comparing the order routing of retail orders, which could result in higher costs compared to the proposed amended Rule 606(a).
The Commission considered requiring additional information to be disclosed to customers and the public relating to institutional order routing and execution quality. The Commission considered requiring additional measures to be included in proposed Rule 606(b)(3) and proposed Rule 606(c) reports for institutional orders. For example, the Commission considered requiring that proposed Rule 606(b)(3) and proposed Rule 606(c) reports contain time to execution, or implementation shortfall, which are dimensions of execution quality. In addition, the Commission considered making the reports more detailed by requiring segmentation of the data along additional dimensions, not only on order routing strategy.
In general, transaction costs of institutional orders depend on, among other factors, stock characteristics, order characteristics, and market conditions at the time of order arrival and during order execution. The reports could be segmented by any of these factors. Examples of stock characteristics are liquidity or volatility of a stock.
For some data items, the computation costs would be larger than for others. For example, computing the implementation shortfall for an order is more involved than computing the time to execution and thus would result in larger computational costs. Further, unlike the proposed amendments, implementation shortfall and time to execution could involve running calculations on data received on other systems and from others who handle orders later in their lifecycle. This may make these fields more computationally costly than those proposed. However, with the addition of other relevant information, the reports under this alternative might be more useful than the proposed reports.
In addition, determining categories by metrics such as trading volume or volatility would add complex definitions to the reports and the Commission is not aware of any natural breakpoints that would simplify the identification of appropriate thresholds to classify stocks into groups of varying trading volume or volatility. Setting thresholds at levels that do not meaningfully distinguish routing activity or execution quality would be more costly than the proposed amendments without providing greater benefits.
The Commission could later evaluate data that would be disclosed pursuant to proposed Rules 606(b)(3) and 606(c), if adopted, to inform any decision as to whether additional data items or other changes might be appropriate.
The Commission also considered requiring the institutional order handling information required by proposed Rule 606(b)(3) to be reported at the individual stock level rather than aggregated across stocks. This alternative would enhance transparency to customers relative to proposed Rule 606(b)(3) because the reports would be more detailed. Specifically, order handling information calculated at the stock level may be more informative than aggregated data because trading centers may not charge the same maker-taker fee for all stocks. It is possible for a given trading center to use inverted and non-inverted fees for different stocks at the same time. If this is the case, the reports as proposed by Rule 606(b)(3) could potentially mask conflicts of interest because routing decisions may be different for different stocks on the same trading center due to differing maker-taker fees across the stocks, particularly if some stocks have inverted and other stocks have non-inverted fees on the same trading center.
Because the reports would be more detailed, however, this alternative would increase the costs of producing the reports as well as the costs of using the reports relative to proposed Rule 606(b)(3). The Commission preliminarily believes that any potential
The Commission considered requiring broker-dealers and market centers to make both institutional and retail reports available for a minimum length of time less than three years or more than three years. If public reports are available for less than three years, then historical data may not be as readily available to customers and the public who are seeking to analyze past routing behavior of broker-dealers or past execution quality of market centers as it would be under the proposal of a three-year posting period. Customers and the public would either have to download the data more often or have to rely on third-party vendors who download and aggregate the data. For example, if a broker-dealer or market center posted the reports for only one quarter, customers and the public would have to download the data every quarter if they wanted access to data that is older than three months. Third-party vendors also would have to download the data with sufficient frequency to capture historical data without gaps. This would have the effect of reducing the transparency of broker-dealer routing decisions for customers placing both retail and institutional orders and of the execution quality of market centers compared to the proposal of a three-year posting period. The benefit of a shorter minimum length of time would be that any costs broker-dealers incurred associated with posting reports would be less than under the proposal of a three-year posting period. However, as discussed above, the Commission preliminarily believes these incremental costs to be small and that the cost savings associated with a shorter minimum length of time would not justify the costs of historical data potentially being less readily available to customers and the public.
If public reports are available for more than three years, the historical data would be even more readily available to customers and the public who are seeking to analyze past routing behavior of broker-dealers or past execution quality of market centers as it would be under the proposal of a three-year posting period. Customers and the public would have to download the data less frequently to have access to historical data that is older than the minimum length of time required. However, the Commission preliminarily believes that the additional benefit of a minimum length of time of more than three years would be small because three years is a meaningful time period considering the rapid changes in financial markets and customers and the public would only need to download data every three years to be able to access historical data older than three years. The Commission understands that maintaining public reports for more than three years may represent a burden and result in an additional cost to broker-dealers. However, as discussed above, the Commission preliminarily believes the additional cost to be small. Nevertheless, the Commission preliminarily believes that a minimum length of time of three years is appropriate.
The Commission requests comment on the Commission's analysis of potential alternatives as described above and the costs and benefits associated with such alternatives. In particular, the Commission solicits comment on the following:
174. Do commenters believe that the alternatives that the Commission considered are appropriate? Do commenters believe that the analysis of the associated costs and benefits of the alternatives is accurate? If not, please provide alternative costs and benefits, including any data or statistics that supports those costs and benefits.
175. Are there other alternatives that the Commission should consider? If so, please provide additional alternatives and how their costs and benefits would compare to the proposal.
176. Do commenters believe the reports for retail orders should contain information required by proposed Rule 606(b)(3) for institutional orders that is not currently required by Rules 606(a)(1) and 606(b)(1) for retail orders? Why or why not? If yes, what additional information should be required? Please be specific in your response.
177. Do commenters believe the Commission should require that the reports for institutional orders required by proposed Rule 606(b)(3) include information about payment for order flow and payment from profit-sharing relationships as would be required by proposed Rule 606(a)(1)(iii) for retail orders? Why or why not? Similarly, do commenters believe the Commission should require that the reports for institutional orders required by proposed Rule 606(b)(3) include a discussion of the material aspects of the broker-dealer's relationship with each venue as would be required by amended Rule 606(a)(1)(iv) for retail orders? Why or why not? Please be specific in your response.
178. Do commenters have information on the costs and benefits of any of these alternatives? If so, please provide any data or statistics to support the estimates.
Section 23(a)(2) of the Exchange Act requires the Commission, when making rules under the Exchange Act, to consider the anti-competitive effects of any rules it adopts.
As a result of the proposed amendments to Rule 606(a)(1), broker-dealers that route retail orders would be required to make public enhanced aggregated reports detailing retail order routing practices and information regarding marketable and non-marketable limit orders in addition to information on payment for order flow arrangements, payment from any profit-sharing relationship received, and transaction fees paid and rebates received per share and in aggregate for such orders.
First, per the discussion above, the additional information required by the amendments relative to the information required by current Rule 606(a)(1) would allow customers to better assess the order routing and execution quality provided by their broker-dealers,
Further, to the extent that the proposed amendments to Rule 606(a) lead to better execution quality provided by broker-dealers and trading centers, the Commission preliminarily believes that the proposed amendments would lead to lower transaction costs for customers. Because transaction costs can be viewed as a measure for efficiency in the trading process, lower transaction costs would indicate enhanced efficiency in the trading process. In addition, to the extent that the proposed amendments to Rule 606(a) make the trading process more efficient by lowering trading costs, the Commission preliminarily believes the proposed amendments would reduce market friction and therefore have a positive effect on the efficiency of prices.
As discussed above, however, the proposed amendments to Rule 606(a)(1) could result in costs that may have an effect on efficiency and competition. For example, the proposed amendments would impose certain costs on broker-dealers who currently route retail orders, as well as on broker-dealers who would like to start routing retail orders and will also have to comply with the proposed amendments to Rule 606(a)(1). To the extent that the costs for a broker-dealer entering the market for retail orders are higher under the proposed amended Rule 606(a)(1) than under the current Rule 606(a)(1), these higher costs could lead to a higher barrier to entry and thereby reduce competition. However, the Commission preliminarily believes that any difference in costs under the proposed amended Rule 606(a)(1) and the current Rule 606(a)(1) to be relatively small as to not alone deter broker-dealers from entering the market for retail brokerage.
Under the proposed amendments to Rule 606, the broker-dealer may be concerned about the perception of acting on a conflict of interest. As a result, a broker-dealer may be incentivized to route fewer non-marketable limit orders to the trading center offering the highest rebate, even if this affects execution quality, in an effort to ensure that a customer does not misconstrue the intent behind the broker-dealer's routing decisions. Such a potential outcome could reduce to some degree the intensity of competition between broker-dealers on the dimension of execution quality. However, the Commission preliminarily believes that such a scenario is not likely as customers are likely to review the 606 reports in conjunction with execution quality statistics currently required pursuant to Rule 605 and can discuss with their broker-dealers the order routing and execution quality the broker-dealer provides.
For institutional orders, proposed Rules 606(b)(3) and (c) would require broker-dealers that route institutional orders to provide detailed reports to customers who submit such orders upon the request of the customer, and to make public on a quarterly basis broken down by calendar month, a report that
First, the disclosures required by the proposal, both on an individualized and aggregated basis, would inform customers as to the institutional order routing practices of and the execution quality provided by a particular broker-dealer, as described in further detail above. As a result, customers would be able to use that information to compare the institutional order routing and execution quality of their broker-dealers based on the institutional orders submitted to those broker-dealers as reported in the customer-specific reports required by proposed Rule 606(b)(3). In addition, a customer placing institutional orders would be able to compare the order routing practices and execution quality of each broker-dealer based on the public aggregated institutional order handling reports required under proposed Rule 606(c), independent of whether the customer submits orders to a specific broker-dealer. Further, a customer would be able to compare the order routing and execution quality of its institutional orders submitted to a specific broker-dealer as reflected in the customer-specific reports required by proposed Rule 606(b)(3) to the order routing and execution quality of all orders that the broker-dealer handled contained in the public aggregated institutional order handling reports required by proposed Rule 606(c).
These enhanced disclosures would better enable customers to analyze institutional order routing and execution quality provided by broker-dealers, which would allow customers to more efficiently monitor, evaluate, and select broker-dealers. In addition, customers and broker-dealers would be able to evaluate execution quality of institutional orders on different trading centers more efficiently.
Further, the Commission preliminarily believes that proposed Rules 606(b)(3) and (c) might enhance competition between trading centers. First, if broker-dealers change their routing decisions in response to the reports required by proposed Rules 606(b)(3) and (c), trading centers would have an additional incentive to compete for institutional order flow. Second, the reports required by proposed Rules 606(b)(3) and (c) are structured by trading center, so that the execution quality at each trading center would be clearly visible. This may lead broker-dealers to change their routing behavior, but also, more directly, trading centers could compare the execution quality of all trading centers, which may again lead to enhanced competition among trading centers. The Commission preliminarily believes that the enhanced competition between trading centers could lead to innovation by existing and new trading centers, resulting in better execution quality for customers placing institutional orders. As discussed in Section V.D.1.a if a trading center were to lose order flow to other trading centers due to lower execution quality it would have the incentive to innovate to improve its execution quality.
To the extent that proposed Rules 606(b)(3) and (c) lead to better execution quality being provided by broker-dealers and trading centers, the Commission preliminarily believes that the proposed amendments might lead to lower transaction costs for institutional orders. As discussed above, lower transaction costs indicate enhanced efficiency in the trading process and the Commission preliminarily believes as a result, the proposed rules would reduce market friction and therefore have a positive effect on the efficiency of prices.
In addition, the Commission preliminarily believes that the requirement of standardized customer-specific and standardized public aggregated institutional order handling reports in proposed Rules 606(b)(3) and (c) would enhance efficiency for customers and the public in processing the information contained in the reports, as compared to the ad-hoc reports customers may currently receive from their broker-dealers.
In addition, as discussed above, the Commission understands that many broker-dealers that handle institutional orders currently voluntarily provide reports to institutional customers upon request. However, the Commission understands that how willing a broker-dealer is to provide such reports and how detailed the reports are might depend on the size of an institutional customer. To that extent, larger institutional customers have an advantage over smaller institutional customers. Proposed Rules 606(b)(3) and (c) would provide access to reports on institutional order handling to all institutional customers, regardless of their size.
The Commission notes that, even without the proposed rule amendments, institutional customers can still request customized reports from their broker-dealers and broker-dealers would have an incentive to provide such reports in order to attract institutional order flow. As is currently the case, broker-dealers might be more willing to provide such customized reports to larger institutional customers and the customized reports might provide more detailed information for larger institutional customers. While the Commission preliminarily believes that proposed Rules 606(b)(3) and (c) mitigate the advantage of larger institutional customers in that respect, the Commission preliminarily believes that larger institutional customers are likely to continue to have an advantage over smaller institutional customers to the extent that they are able to obtain customized reports more easily and that those customized reports contain information not contained in the reports required by proposed Rules 606(b)(3) and (c). The Commission preliminarily believes that by reducing the informational advantage of larger institutional customers over smaller institutional customers, proposed Rules 606(b)(3) and (c) would improve fairness between institutional customers. Smaller institutional customers would be able to evaluate and
As discussed above, however, proposed Rules 606(b)(3) and (c) could result in certain costs to broker-dealers who currently route institutional orders, as well as those who would like to start routing institutional orders and thus would have to comply with proposed Rules 606(b)(3) and (c). These costs could lead to a higher barrier to entry and thereby reduce competition. However, the Commission preliminarily believes that the costs associated with proposed Rules 606(b)(3) and (c) are not large enough to meaningfully affect the barriers to entry and the level of competition due to potential new entrants into the market for institutional orders. In addition, the Commission preliminarily believes that any negative effect on competition due to heightened barriers to entry are justified by the expected positive effect on competition of the disclosures required by proposed Rules 606(b)(3) and (c).
In addition, the proposed amendments may cause broker-dealers to change how they handle institutional orders. Given that broker-dealers would be aware of the metrics to be used a priori, they may handle institutional orders in a manner that promotes a positive reflection on their respective services but customers could erroneously view a broker-dealer's handling as suboptimal.
For example, suppose a broker-dealer routes institutional orders so that the orders execute at lower cost with a higher fill rate, shorter duration, and more price improvement than the broker-dealer's competitors. However, it could be the case that, in order to achieve these objectives, the broker-dealer routes the majority of non-marketable limit order shares to the trading center offering the highest rebate. An institutional customer that reviews the proposed order handling reports might suspect that the broker-dealer acted in its self-interest by selecting the highest rebate venue in order to maximize rebates when in fact, the broker-dealer made the decision based on factors that might not be completely reflected in the proposed reports.
The Commission preliminarily believes that the proposed amendments to Rules 600, 605, and 606 might have positive effects on capital formation, but the Commission notes that predicting the magnitude of such effects is difficult as the effects likely would be indirect rather than directly resulting from the proposed amendments.
As discussed, the Commission preliminarily believes the proposed amendments to Rules 600, 605, and 606 would enhance competition among broker-dealers and trading centers resulting in better execution quality for customers that place retail and institutional orders and to the extent that better execution quality would lead to lower friction in the trading process, the proposed amendments would increase market efficiency in both the trading process and asset pricing. This could lead to more efficient asset allocation because better execution quality and greater market efficiency leads to more efficient investment decisions by customers that place retail and institutional orders.
In addition, there is a relation between liquidity of an asset and the required rate of return for that asset.
In sum, the Commission preliminarily believes that as a result of the disclosures required by the proposal bringing competitive forces to bear on the market, the proposed amendments should enhance competition among broker-dealers as well as trading centers to provide customers placing both retail and institutional orders with enhanced quality of execution. The Commission preliminarily believes that this enhanced quality of execution should promote efficiency in the trading process as well as pricing, which should also have a positive impact on capital formation.
The Commission requests comment on its analysis of the proposal's economic effects and effects on efficiency, competition, and capital formation. In particular, the Commission solicits comment on the following:
179. Do commenters believe that the Commission's analysis of the potential economic effects of the proposal, including potential effects on efficiency, competition, and capital formation is accurate? Why or why not? Please provide analysis and empirical data to support your views.
180. Are there other effects of the proposal that the Commission should consider? If so, please explain and provide support for your views.
181. Do commenters believe there are alternative mechanisms for achieving the Commission's goal of enhancing transparency for order routing practices while promoting efficiency, competition and capital formation? If so, what would be the potential impacts on promotion of efficiency, competition, and capital formation? For example, what would be the effect of requiring broker-dealers to provide the public reports for retail orders, on a monthly basis, rather than
182. Do commenters believe that market participants would change their behavior in response to the proposal? If so, which market participants and how? What would be the costs and benefits of these changes? How would such changes affect efficiency, competition, and capital formation? Would these changes affect market quality and market efficiency? Please explain.
For purposes of the Small Business Regulatory Enforcement Fairness Act of 1996 (“SBREFA”),
The Regulatory Flexibility Act (“RFA”)
For purposes of the Commission rulemaking in connection with the RFA
Based on the Commission's analysis of existing information relating to broker-dealers that would be subject to the proposed amendments to Rule 606, the Commission preliminarily believes that such broker-dealers do not fall within the definition of “small entity,” as defined above.
The Commission requests comment regarding this certification. In particular, the Commission solicits comment on the following:
183. Do commenters agree with the Commission's certification? If not, please describe the nature of any impact on small entities and provide empirical data to illustrate the extent of the impact.
Pursuant to the Exchange Act, and particularly Sections 3(b), 5, 6, 11A, 15, 17, and 23(a) thereof, 15 U.S.C. 78c, 78e, 78f, 78k-1, 78o, 78q, and 78w(a), the Commission proposes to amend Sections 240.3a51-1, 240.13h-1, 242.105, 242.201, 242.204, 242.600, 242.602, 242.605, 242.606, 242.607, 242.611, and 242.1000 of Chapter II of Title 17 of the Code of Federal Regulations in the manner set forth below.
Brokers, Dealers, Registration, Securities.
Brokers, Reporting and recordkeeping requirements, Securities.
For the reasons stated in the preamble, the Commission is proposing to amend Title 17, Chapter II of the Code of Federal Regulations as follows:
15 U.S.C. 77c, 77d, 77g, 77j, 77s, 77z-2, 77z-3, 77eee, 77ggg, 77nnn, 77sss, 77ttt, 78c, 78c-3, 78c-5, 78d, 78e, 78f, 78g, 78i, 78j, 78j-1, 78k, 78k-1, 78
15 U.S.C. 77g, 77q(a), 77s(a), 78b, 78c, 78g(c)(2), 78i(a), 78j, 78k-1(c), 78
The additions read as follows:
(b) * * *
(1)
(i) Symbol;
(ii) Side (buy or sell);
(iii) A price that is equal to or better than the national best bid for buy orders and the national best offer for sell orders; and
(iv) A size that is at least equal to one round lot.
(31)
(51)
(55)
(56)
The addition reads as follows:
This section requires market centers to make available standardized, monthly reports of statistical information concerning their order executions. This information is presented in accordance with uniform standards that are based on broad assumptions about order execution and routing practices. The information will provide a starting point to promote visibility and competition on the part of market centers and broker-dealers, particularly on the factors of execution price and speed. The disclosures required by this section do not encompass all of the factors that may be important to investors in evaluating the order routing services of a broker-dealer. In addition, any particular market center's statistics will encompass varying types of orders routed by different broker-dealers on behalf of customers with a wide range of objectives. Accordingly, the statistical information required by this section alone does not create a reliable basis to address whether any particular broker-dealer failed to obtain the most favorable terms reasonably available under the circumstances for retail orders.
(a) * * *
(2) * * * Every market center shall keep such reports posted on an Internet Web site that is free and readily accessible to the public for a period of three years from the initial date of posting on the Internet Web site.
(a)
(i) The percentage of total retail orders for the section that were non-directed orders, and the percentages of total non-directed orders for the section that were market orders, marketable limit orders, non-marketable limit orders, and other orders;
(ii) The identity of the ten venues to which the largest number of total non-directed orders for the section were routed for execution and of any venue to which five percent or more of non-directed orders were routed for execution, the percentage of total non-directed orders for the section routed to the venue, and the percentages of total non-directed market orders, total non-
(iii) For each venue identified pursuant to paragraph (a)(1)(ii) of this section, the net aggregate amount of any payment for order flow received, payment from any profit-sharing relationship received, transaction fees paid, and transaction rebates received, both as a total dollar amount and per share, for each of the following non-directed order types:
(A) Market orders;
(B) Marketable limit orders;
(C) Non-marketable limit orders; and
(D) Other orders.
(iv) A discussion of the material aspects of the broker's or dealer's relationship with each venue identified pursuant to paragraph (a)(1)(ii) of this section, including a description of any arrangement for payment for order flow and any profit-sharing relationship and a description of any terms of such arrangements, written or oral, that may influence a broker's or dealer's order routing decision including, among other things:
(A) Incentives for equaling or exceeding an agreed upon order flow volume threshold, such as additional payments or a higher rate of payment;
(B) Disincentives for failing to meet an agreed upon minimum order flow threshold, such as lower payments or the requirement to pay a fee;
(C) Volume-based tiered payment schedules; and
(D) Agreements regarding the minimum amount of order flow that the broker-dealer would send to a venue.
(2) A broker or dealer shall make the report required by paragraph (a)(1) of this section publicly available within one month after the end of the quarter addressed in the report.
(b)
(2) A broker or dealer shall notify customers in writing at least annually of the availability on request of the information specified in paragraph (b)(1) of this section.
(3) Every broker or dealer shall, on request of a customer that places, directly or indirectly, an institutional order with the broker or dealer, disclose to such customer within seven business days of receiving the request, a report on its handling of institutional orders for that customer for the prior six months by calendar month. Such report shall be made available using the most recent versions of the XML schema and the associated PDF renderer as published on the Commission's Web site for all reports required by this section. For purposes of such report, the handling of an institutional order includes the handling of all smaller orders derived from the institutional order. Such report shall include, with respect to the order flow sent by the customer to the broker or dealer, the total number of shares of institutional orders sent to the broker or dealer by the customer during the relevant period; the total number of shares executed by the broker or dealer as principal for its own account; the total number of institutional orders exposed by the broker or dealer through an actionable indication of interest; and the venue or venues to which institutional orders were exposed by the broker or dealer through an actionable indication of interest. Such report also shall include the following columns of information for each venue to which the broker or dealer routed institutional orders for the customer, in the aggregate and broken down by passive, neutral, and aggressive order routing strategies as defined in paragraph (b)(3)(v) of this section:
(i)
(B) Total shares routed marked immediate or cancel;
(C) Total shares routed that were further routable; and
(D) Average order size routed.
(ii)
(B) Fill rate (shares executed divided by the shares routed);
(C) Average fill size;
(D) Average net execution fee or rebate (cents per 100 shares, specified to four decimal places);
(E) Total number of shares executed at the midpoint;
(F) Percentage of shares executed at the midpoint;
(G) Total number of shares executed that were priced on the side of the spread more favorable to the institutional order;
(H) Percentage of total shares executed that were priced at the side of the spread more favorable to the institutional order;
(I) Total number of shares executed that were priced on the side of the spread less favorable to the institutional order; and
(J) Percentage of total shares executed that were priced on the side of the spread less favorable to the institutional order.
(iii)
(B) Percentage of shares executed of orders providing liquidity;
(C) Average time between order entry and execution or cancellation, for orders providing liquidity (in milliseconds); and
(D) Average net execution rebate or fee for shares of orders providing liquidity (cents per 100 shares, specified to four decimal places).
(iv)
(B) Percentage of shares executed of orders removing liquidity; and
(C) Average net execution fee or rebate for shares of orders removing liquidity (cents per 100 shares, specified to four decimal places).
(v) For the purposes of paragraph (b)(3) of this section:
(A) A
(B) A
(C) An
The broker or dealer shall assign each order routing strategy that it uses for institutional orders to one of these three categories in a consistent manner for each report it prepares pursuant to paragraph (b)(3) of this section, promptly update the assignments any time an existing strategy is amended or a new strategy is created that would change such assignment, and document the specific methodologies it relies upon for making such assignments. Every broker or dealer shall preserve a copy of the methodologies used to assign its order routing strategies and maintain such copy as part of its books and records in a manner consistent with § 240.17a-4(b) of this chapter.
(c)
(d)
By the Commission.
(b) The functions of the President under section 909(d) of the Act are assigned to the Secretary of State, in consultation with other relevant Federal agencies.
(c) The functions of the President under section 915(d) of the Act are assigned to the Administrator of the United States Agency for International Development, in consultation with the Secretary of State and the United States Trade Representative (U.S. Trade Representative).
(d) The functions of the President under section 915(e) of the Act are assigned to the U.S. Trade Representative, in consultation with the Secretary of State.
(b) In exercising the functions under section 701(b)(2)(A) of the Act, the Secretary of the Treasury shall consult with the Secretary of State in making any determination that commencing enhanced bilateral engagement with a country would cause serious harm to the national security of the United States.
(c) If the Secretary of the Treasury determines, pursuant to section 701(c)(1) of the Act, that a country has failed to adopt appropriate policies to correct the undervaluation and surpluses described in section 701(b)(1)(A) of the Act with respect to that country, the Assistant to the President for Economic Policy, in consultation with the Secretary of the Treasury, the U.S. Trade Representative, the Secretary of State, and the Secretary of Commerce, shall make a recommendation to the President regarding which of the actions set forth in sections 701(c)(1)(A) through (D) of the Act the President should take, or whether the President should waive, pursuant to section 701(c)(2) of the Act, the requirement to take remedial action.
(b) This order shall be implemented consistent with applicable law and subject to the availability of appropriations.
(c) This order is not intended to, and does not, create any right or benefit, substantive or procedural, enforceable at law or in equity by any party against the United States, its departments, agencies, or entities, its officers, employees, or agents, or any other person.
Category | Regulatory Information | |
Collection | Federal Register | |
sudoc Class | AE 2.7: GS 4.107: AE 2.106: | |
Publisher | Office of the Federal Register, National Archives and Records Administration |