Page Range | 705-969 | |
FR Document |
Page and Subject | |
---|---|
83 FR 969 - Termination of Presidential Advisory Commission on Election Integrity | |
83 FR 871 - Sunshine Act Meeting | |
83 FR 813 - Sunshine Act Meeting | |
83 FR 816 - Agency Forms Undergoing Paperwork Reduction Act Review | |
83 FR 814 - Agency Forms Undergoing Paperwork Reduction Act Review | |
83 FR 815 - Agency Forms Undergoing Paperwork Reduction Act Review | |
83 FR 784 - Notice of National Advisory Council on Innovation and Entrepreneurship Meeting | |
83 FR 936 - CSX Transportation, Inc.-Abandonment Exemption-in Clark, Floyd, Lawrence, Orange, & Washington Counties, Ind. | |
83 FR 793 - Fishing Capacity Reduction Program for the Longline Catcher Processor Subsector of the Bering Sea and Aleutian Islands Non Pollock Groundfish Fishery | |
83 FR 757 - Magnuson-Stevens Act Provisions; Fisheries Off West Coast States; Pacific Coast Groundfish Fishery; Pacific Whiting; Pacific Coast Groundfish Fishery Management Plan; Amendment 21-3; Trawl Rationalization Program | |
83 FR 787 - Citric Acid and Certain Citrate Salts From Belgium: Preliminary Affirmative Determination of Sales at Less Than Fair Value, Postponement of Final Determination, and Extension of Provisional Measures | |
83 FR 784 - Citric Acid and Certain Citrate Salts From Thailand: Preliminary Affirmative Determination of Sales at Less Than Fair Value, Preliminary Affirmative Critical Circumstances Determination, in Part, and Postponement of Final Determination and Extension of Provisional Measures | |
83 FR 791 - Citric Acid and Certain Citrate Salts From Colombia: Preliminary Affirmative Determination of Sales at Less Than Fair Value, Preliminary Negative Critical Circumstances Determination Postponement of Final Determination, and Extension of Provisional Measures | |
83 FR 938 - Notice of Intent of Waiver With Respect to Land; Akron-Canton Airport, North Canton, OH | |
83 FR 937 - Notice of Intent of Waiver With Respect to Land; Akron-Canton Airport, North Canton, OH | |
83 FR 804 - Notice of Intent To File License Application, Filing of Pre-Application Document (Pad), Commencement of Pre-Filing Process, and Scoping; Request for Comments on the Pad and Scoping Document, and Identification of Issues and Associated Study Requests; Washington Electric Cooperative, Inc. | |
83 FR 798 - Notice of Tribal Consultation Meetings; PacifiCorp, Klamath River Renewal Corporation | |
83 FR 799 - Combined Notice of Filings | |
83 FR 802 - Combined Notice of Filings #1 | |
83 FR 966 - List of Countries Requiring Cooperation With an International Boycott | |
83 FR 939 - Agency Information Collection Activities: Submission for OMB Review; Joint Comment Request | |
83 FR 822 - Government-Owned Inventions; Availability for Licensing | |
83 FR 823 - Interagency Coordinating Committee on the Validation of Alternative Methods Communities of Practice Webinar on Machine Learning in Toxicology: Fundamentals of Application and Interpretation; Notice of Public Webinar; Registration Information | |
83 FR 836 - Importer of Controlled Substances Registration | |
83 FR 768 - Approval and Promulgation of State Plans for Designated Facilities and Pollutants; Colorado; Control of Emissions From Existing Commercial and Industrial Solid Waste Incineration Units | |
83 FR 789 - Magnesium Metal from the People's Republic of China: Preliminary Results of Antidumping Duty Administrative Review; 2016-2017 | |
83 FR 794 - Market Risk Advisory Committee | |
83 FR 795 - Agency Information Collection Activities; Comment Request; Impact Evaluation of Departmentalized Instruction in Elementary Schools | |
83 FR 834 - Certain Mobile Electronic Devices and Radio Frequency and Processing Components Thereof (II); Institution of Investigation | |
83 FR 835 - Certain Self-Anchoring Beverage Containers; Institution of Investigation | |
83 FR 794 - Lake Eufaula Advisory Committee Meeting Notice | |
83 FR 770 - Advanced Methods To Target and Eliminate Unlawful Robocalls | |
83 FR 797 - Combined Notice of Filings | |
83 FR 796 - Combined Notice of Filings #1 | |
83 FR 822 - National Advisory Council on Migrant Health | |
83 FR 819 - Agency Information Collection Activities; Submission for Office of Management and Budget Review; Adverse Experience Reporting for Licensed Biological Products; and General Records | |
83 FR 837 - Committee on Equal Opportunities in Science and Engineering; Notice of Meeting | |
83 FR 799 - Notice of Institution of Section 206 Proceeding and Refund Effective Date; Southern California Edison Company | |
83 FR 800 - Notice of Intent To Prepare an Environmental Assessment for the Transcontinental Gas Pipe Line Company LLC Proposed Gateway Expansion Project, and Request for Comments on Environmental Issues | |
83 FR 801 - Notice of Application; Florida Gas Transmission Company, LLC | |
83 FR 805 - Notice of Intent To Prepare an Environmental Assessment for the Natural Gas Pipeline Company of America LLC Proposed Herscher Northwest Storage Field Abandonment Project and Request for Comments on Environmental Issues | |
83 FR 836 - Proposal Review Panel for Ocean Sciences; Notice of Meeting | |
83 FR 837 - Notice of Permits Issued Under the Antarctic Conservation Act of 1978 | |
83 FR 819 - Agency Information Collection Activities: Proposed Collection; Comment Request | |
83 FR 783 - Submission for OMB Review; Comment Request | |
83 FR 829 - Notice of Availability of the 2019-2024 Draft Proposed Outer Continental Shelf Oil and Gas Leasing Program and Notice of Intent To Prepare a Programmatic Environmental Impact Statement | |
83 FR 839 - FY 2017 Annual Compliance Report | |
83 FR 927 - Self-Regulatory Organizations; The Depository Trust Company; Notice of Filing of a Proposed Rule Change To Restore the Timeframe for Processing Credit Post-Payable Adjustments | |
83 FR 884 - Self-Regulatory Organizations; The Depository Trust Company; Notice of Filing of a Proposed Rule Change To Adopt a Recovery & Wind-Down Plan and Related Rules | |
83 FR 871 - Self-Regulatory Organizations; Fixed Income Clearing Corporation; Notice of Filing of a Proposed Rule Change To Adopt a Recovery & Wind-Down Plan and Related Rules | |
83 FR 841 - Self-Regulatory Organizations; National Securities Clearing Corporation; Notice of Filing of a Proposed Rule Change To Adopt a Recovery & Wind-down Plan and Related Rules | |
83 FR 929 - Self-Regulatory Organizations; Cboe BZX Exchange, Inc.; Notice of Filing of a Proposed Rule Change To List and Trade Shares of the First Trust Bitcoin Strategy ETF and the First Trust Inverse Bitcoin Strategy ETF, Each a Series of the First Trust Exchange-Traded Fund VII, Under Rule 14.11(i), Managed Fund Shares | |
83 FR 897 - Self-Regulatory Organizations; National Securities Clearing Corporation; Notice of Filing of a Proposed Rule Change To Amend the Loss Allocation Rules and Make Other Changes | |
83 FR 854 - Self-Regulatory Organizations; Fixed Income Clearing Corporation; Notice of Filing of a Proposed Rule Change To Amend the Loss Allocation Rules and Make Other Changes | |
83 FR 913 - Self-Regulatory Organizations; The Depository Trust Company; Notice of Filing of a Proposed Rule Change To Amend the Loss Allocation Rules and Make Other Changes | |
83 FR 841 - Self-Regulatory Organizations; Nasdaq PHLX LLC; Notice of Withdrawal of a Proposed Rule Change To Introduce the Intellicator Analytic Tool | |
83 FR 825 - Agency Information Collection Activities: Crew's Effects Declaration | |
83 FR 824 - Agency Information Collection Activities: Application for Allowance in Duties | |
83 FR 828 - Agency Information Collection Activities: Application for Identification Card | |
83 FR 827 - Agency Information Collection Activities: Declaration for Free Entry of Returned American Products | |
83 FR 827 - Agency Information Collection Activities: Crew Member's Declaration | |
83 FR 826 - Agency Information Collection Activities: Petition for Remission or Mitigation of Forfeitures and Penalties Incurred | |
83 FR 824 - Agency Information Collection Activities: Guarantee of Payment | |
83 FR 780 - Fisheries of the Northeastern United States; Black Sea Bass Fishery; 2018 February Recreational Management Measures | |
83 FR 814 - Change in Bank Control Notices; Acquisitions of Shares of a Bank or Bank Holding Company | |
83 FR 813 - Formations of, Acquisitions by, and Mergers of Bank Holding Companies | |
83 FR 705 - Regulatory Capital Rules; Correction | |
83 FR 937 - Thirty Seventh RTCA SC-213 Enhanced Flight Vision Systems/Synthetic Vision Systems (EFVS/SVS) Plenary Joint With EUROCAE WG-79 | |
83 FR 818 - CDC Sex-Specific Body Mass Index (BMI)-For-Age Growth Charts | |
83 FR 709 - Revisions, Clarifications, and Technical Corrections to the Export Administration Regulations; Correction | |
83 FR 711 - Extension of Sunset Date for Attorney Advisor Program | |
83 FR 966 - Interest Rate Paid on Cash Deposited To Secure U.S. Immigration and Customs Enforcement Immigration Bonds | |
83 FR 838 - Southern Nuclear Operating Company, Inc., Vogtle Electric Generating Plant, Units 3 and 4; Slab Thickness Changes between Column Lines I to J-1 and 2 to 4 at Elevation 153′-0″ | |
83 FR 764 - Approval of California Air Plan Revisions, Yolo-Solano Air Quality Management District | |
83 FR 732 - Expansion of Intergovernmental Advisory Committee | |
83 FR 733 - 2014 Quadrennial Regulatory Review | |
83 FR 774 - Rules and Policies To Promote New Entry and Ownership Diversity in the Broadcasting Services | |
83 FR 706 - Civil Monetary Penalty Adjustments for Inflation | |
83 FR 807 - Proposed Statement of Policy for Participation in the Conduct of the Affairs of an Insured Depository Institution by Persons Who Have Been Convicted or Have Entered a Pretrial Diversion or Similar Program for Certain Offenses Pursuant to Section 19 of the Federal Deposit Insurance Act | |
83 FR 712 - Public Notification Requirements for Combined Sewer Overflows to the Great Lakes Basin |
Economic Development Administration
Industry and Security Bureau
International Trade Administration
National Oceanic and Atmospheric Administration
Army Department
Federal Energy Regulatory Commission
Agency for Toxic Substances and Disease Registry
Centers for Disease Control and Prevention
Centers for Medicare & Medicaid Services
Food and Drug Administration
Health Resources and Services Administration
National Institutes of Health
U.S. Customs and Border Protection
Ocean Energy Management Bureau
Drug Enforcement Administration
Federal Aviation Administration
Comptroller of the Currency
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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Board of Governors of the Federal Reserve System.
Final rule; correcting amendments.
The Board of Governors of the Federal Reserve System (Board) published a final rule in the
These correcting amendments are effective January 8, 2018.
Benjamin McDonough, Assistant General Counsel, (202) 452-2036, or Mark Buresh, Senior Attorney, (202) 452-5270, Legal Division, Board of Governors of the Federal Reserve System, 20th Street and Constitution Avenue NW, Washington, DC 20551. Telecommunications Device for the Deaf (TDD) users may contact (202) 263-4869.
The Board is correcting an error in the final rule that was published in the
The Board is also correcting conflicting amendments in final rules published in the
Administrative practice and procedure, Banks, Banking, Holding companies, Reporting and recordkeeping requirements, Securities.
For the reasons set forth in the preamble, chapter II of title 12 of the Code of Federal Regulations is amended by the following correcting amendments.
12 U.S.C. 248(a), 321-338a, 481-486, 1462a, 1467a, 1818, 1828, 1831n, 1831o, 1831p-l, 1831w, 1835, 1844(b), 1851, 3904, 3906-3909, 4808, 5365, 5368, 5371.
(a) * * *
(4) * * *
(ii) A Board-regulated institution with a capital conservation buffer that is greater than 2.5 percent plus 100 percent of its applicable countercyclical capital buffer in accordance with paragraph (b) of this section, and 100 percent of its applicable GSIB surcharge, in accordance with paragraph (c) of this section, and, if applicable, that has a leverage buffer that is greater than 2.0 percent, in accordance with paragraph (d) of this section, is not subject to a maximum payout amount under this section.
(c) * * *
(1) * * *
(i) A depository institution holding company of $15 billion or more may include in tier 1 and tier 2 capital non-qualifying capital instruments up to the applicable percentage set forth in Table 8 to § 217.300 of the aggregate outstanding principal amounts of non-qualifying tier 1 and tier 2 capital instruments, respectively, that are outstanding as of January 1, 2014, beginning January 1, 2014, for a depository institution holding company of $15 billion or more that is an advanced approaches Board-regulated institution that is not a savings and loan holding company, and beginning January 1, 2015, for all other depository institution holding companies of $15 billion or more.
(ii) A depository institution holding company of $15 billion or more must apply the applicable percentages set forth in Table 8 to § 217.300 separately to the aggregate amounts of its tier 1 and tier 2 non-qualifying capital instruments.
(iii) The amount of non-qualifying capital instruments that must be excluded from additional tier 1 capital
(iv) Non-qualifying capital instruments that do not meet the criteria for tier 2 capital set forth in § 217.20(d) may be included in tier 2 capital as follows:
(A) A depository institution holding company of $15 billion or more that is not an advanced approaches Board-regulated institution may include non-qualifying capital instruments that have been phased-out of tier 1 capital in tier 2 capital, and
(B) During calendar years 2014 and 2015, a depository institution holding company of $15 billion or more that is an advanced approaches Board-regulated institution may include non-qualifying capital instruments in tier 2 capital that have been phased out of tier 1 capital in accordance with Table 8 to § 217.300. Beginning January 1, 2016, a depository institution holding company of $15 billion or more that is an advanced approaches Board-regulated institution may include non-qualifying capital instruments in tier 2 capital that have been phased out of tier 1 capital in accordance with Table 8, up to the applicable percentages set forth in Table 9 to § 217.300.
Office of the Chief Financial Officer and Assistant Secretary for Administration, Department of Commerce.
Final rule.
This final rule is being issued to adjust for inflation each civil monetary penalty (CMP) provided by law within the jurisdiction of the United States Department of Commerce (Department of Commerce). The Federal Civil Penalties Inflation Adjustment Act of 1990, as amended by the Debt Collection Improvement Act of 1996 and the Federal Civil Penalties Inflation Adjustment Act Improvements Act of 2015, required the head of each agency to adjust for inflation its CMP levels in effect as of November 2, 2015, under a revised methodology that was effective for 2016 which provided for initial catch up adjustments for inflation in 2016, and requires adjustments for inflation to CMPs under a revised methodology for each year thereafter. The 2017 adjustments for inflation to CMPs to the Department of Commerce's CMPs were published in the
This rule is effective January 15, 2018.
Stephen Kunze, Deputy Chief Financial Officer and Director for Financial Management, Office of Financial Management, at (202) 482-1207, Department of Commerce, 1401 Constitution Avenue NW, Room D200, Washington, DC 20230. The Department of Commerce's Civil Monetary Penalty Adjustments for Inflation are available for downloading from the Department of Commerce, Office of Financial Management's website at the following address:
The Federal Civil Penalties Inflation Adjustment Act of 1990 (Pub. L. 101-410; 28 U.S.C. 2461), as amended by the Debt Collection Improvement Act of 1996 (Pub. L. 104-134), provided for agencies' adjustments for inflation to CMPs to ensure that CMPs continue to maintain their deterrent value and that CMPs due to the Federal Government were properly accounted for and collected. On October 24, 1996, November 1, 2000, December 14, 2004, December 11, 2008, and December 7, 2012, the Department of Commerce published in the
A CMP is defined as any penalty, fine, or other sanction that:
1. Is for a specific monetary amount as provided by Federal law, or has a maximum amount provided for by Federal law; and,
2. Is assessed or enforced by an agency pursuant to Federal law; and,
3. Is assessed or enforced pursuant to an administrative proceeding or a civil action in the Federal courts.
On November 2, 2015, the Federal Civil Penalties Inflation Adjustment Act Improvements Act of 2015 (Section 701 of Pub. L. 114-74) further amended the Federal Civil Penalties Inflation Adjustment Act of 1990 to improve the effectiveness of CMPs and to maintain their deterrent effect. This amendment (1) required agencies to adjust the CMP levels in effect as of November 2, 2015, with initial catch up adjustments for inflation through a final rulemaking to take effect no later than August 1, 2016; and (2) requires agencies to make subsequent annual adjustments for inflation to CMPs that shall take effect not later than January 15.
The Department of Commerce's initial catch up adjustments for inflation to CMPs were published in the
The Department of Commerce's 2018 adjustments for inflation to CMPs apply only to CMPs with a dollar amount, and will not apply to CMPs written as functions of violations. These 2018 adjustments for inflation to CMPs apply only to those CMPs, including those whose associated violation predated such adjustment, which are assessed by the Department of Commerce after the effective date of the new CMP level.
This regulation adjusts for inflation CMPs that are provided by law within the jurisdiction of the Department of Commerce. The actual CMP assessed for a particular violation is dependent upon a variety of factors. For example, the National Oceanic and Atmospheric Administration's (NOAA) Policy for the Assessment of Civil Administrative Penalties and Permit Sanctions (Penalty Policy), a compilation of NOAA internal guidelines that are used when assessing
The Department of Commerce's 2018 adjustments for inflation to CMPs set forth in this regulation were determined pursuant to the methodology prescribed by the Federal Civil Penalties Inflation Adjustment Act Improvements Act of 2015, which requires the maximum CMP, or the minimum and maximum CMP, as applicable, to be increased by the cost-of-living adjustment. The term “cost-of-living adjustment” is defined by the Federal Civil Penalties Inflation Adjustment Act Improvements Act of 2015. For the 2018 adjustments for inflation to CMPs, the cost-of-living adjustment is the percentage for each CMP by which the Consumer Price Index for the month of October 2017 exceeds the Consumer Price Index for the month of October 2016.
Pursuant to 5 U.S.C. 553(b)B, there is good cause to issue this rule without prior public notice or opportunity for public comment because it would be impracticable and unnecessary. The Federal Civil Penalties Inflation Adjustment Act Improvements Act of 2015 (Section 701(b)) requires agencies to make annual adjustments for inflation to CMPs notwithstanding section 553 of title 5, United States Code. Additionally, the methodology used for adjusting CMPs for inflation is given by statute, with no discretion provided to agencies regarding the substance of the adjustments for inflation to CMPs. The Department of Commerce is charged only with performing ministerial computations to determine the dollar amounts of adjustments for inflation to CMPs. Accordingly, prior public notice and an opportunity for public comment are not required for this rule.
The provisions of the Paperwork Reduction Act of 1995, Public Law 104-13, 44 U.S.C. Chapter 35, and its implementing regulations, 5 CFR part 1320, do not apply to this rule because there are no new or revised recordkeeping or reporting requirements.
This rule is not a significant regulatory action as that term is defined in Executive Order 12866.
Because notice of proposed rulemaking and opportunity for comment are not required pursuant to 5 U.S.C. 553, or any other law, the analytical requirements of the Regulatory Flexibility act (5 U.S.C. 601,
Law enforcement, Civil monetary penalties.
Pub. L. 101-410, 104 Stat. 890 (28 U.S.C. 2461 note); Pub. L. 104-134, 110 Stat. 1321 (31 U.S.C. 3701 note); Sec. 701 of Pub. L. 114-74, 129 Stat. 599 (28 U.S.C. 1 note; 28 U.S.C. 2461 note).
(a) The
(b)
(1) Is for a specific monetary amount as provided by Federal law, or has a maximum amount provided for by Federal law; and
(2) Is assessed or enforced by an agency pursuant to Federal law; and
(3) Is assessed or enforced pursuant to an administrative proceeding or a civil action in the Federal courts.
The purpose of this part is to make adjustments for inflation to civil monetary penalties, as required by the Federal Civil Penalties Inflation Adjustment Act of 1990 (Pub. L. 101-410; 28 U.S.C. 2461), as amended by the Debt Collection Improvement Act of 1996 (Pub. L. 104-134) and the Federal Civil Penalties Inflation Adjustment Act Improvements Act of 2015 (Section 701 of Pub. L. 114-74), of each civil monetary penalty provided by law within the jurisdiction of the United States Department of Commerce (Department of Commerce).
The civil monetary penalties provided by law within the jurisdiction of the Department of Commerce, as set forth in paragraphs (a) through (f) of this section, are hereby adjusted for inflation in 2018 in accordance with the Federal Civil Penalties Inflation Adjustment Act of 1990, as amended, from the amounts of such civil monetary penalties that were in effect as of January 15, 2017, to the amounts of such civil monetary penalties, as thus adjusted. The year stated in parenthesis represents the year that the civil monetary penalty was last set by law or adjusted by law (excluding adjustments for inflation).
(a)
(2) 31 U.S.C. 3802(a)(2), Program Fraud Civil Remedies Act of 1986 (1986), violation, maximum from $10,957 to $11,181.
(3) 31 U.S.C. 3729(a)(1)(G), False Claims Act (1986); violation, minimum from $10,957 to $11,181; maximum from $21,916 to $22,363.
(b)
(2) 22 U.S.C. 6761(a)(1)(A), Chemical Weapons Convention Implementation Act (1998), violation, maximum from $36,849 to $37,601.
(3) 22 U.S.C. 6761(a)(l)(B), Chemical Weapons Convention Implementation Act (1998), violation, maximum from $7,370 to $7,520.
(4) 50 U.S.C. 1705(b), International Emergency Economic Powers Act (2007), violation, maximum from $289,238 to $295,141.
(5) 22 U.S.C. 8142(a), United States Additional Protocol Implementation Act (2006), violation, maximum from $29,946 to $30,557.
(c)
(2) 13 U.S.C. 305(b), Collection of Foreign Trade Statistics (2002), violation, maximum from $13,333 to $13,605.
(d)
(e)
(2) 19 U.S.C. 1677f(f)(4), U.S.-Canada FTA Protective Order (1988), violation, maximum from $201,106 to $205,211.
(f)
(2) 51 U.S.C. 60148(c), Land Remote Sensing Policy Act of 2010 (2010), violation, maximum from $11,052 to $11,278.
(3) 16 U.S.C. 773f(a), Northern Pacific Halibut Act of 1982 (2007), violation, maximum from $231,391 to $236,114.
(4) 16 U.S.C. 783, Sponge Act (1914), violation, maximum from $1,652 to $1,686.
(5) 16 U.S.C. 957(d), (e), and (f), Tuna Conventions Act of 1950 (1962):
(i) Violation of 16 U.S.C. 957(a), maximum from $82,579 to $84,264.
(ii) Subsequent violation of 16 U.S.C. 957(a), maximum from $177,863 to $181,493.
(iii) Violation of 16 U.S.C. 957(b), maximum from $2,795 to $2,852.
(iv) Subsequent violation of 16 U.S.C. 957(b), maximum from $16,516 to $16,853.
(v) Violation of 16 U.S.C. 957(c), maximum from $355,726 to $362,986.
(6) 16 U.S.C. 957(i), Tuna Conventions Act of 1950,
(7) 16 U.S.C. 959, Tuna Conventions Act of 1950,
(8) 16 U.S.C. 971f(a), Atlantic Tunas Convention Act of 1975,
(9) 16 U.S.C. 973f(a), South Pacific Tuna Act of 1988 (1988), violation, maximum from $502,765 to $513,026.
(10) 16 U.S.C. 1174(b), Fur Seal Act Amendments of 1983 (1983), violation, maximum from $23,933 to $24,421.
(11) 16 U.S.C. 1375(a)(1), Marine Mammal Protection Act of 1972 (1972), violation, maximum from $27,950 to $28,520.
(12) 16 U.S.C. 1385(e), Dolphin Protection Consumer Information Act,
(13) 16 U.S.C. 1437(d)(1), National Marine Sanctuaries Act (1992), violation, maximum from $170,472 to $173,951.
(14) 16 U.S.C. 1540(a)(1), Endangered Species Act of 1973:
(i) Violation as specified (1988), maximum from $50,276 to $51,302.
(ii) Violation as specified (1988), maximum from $24,132 to $24,625.
(iii) Otherwise violation (1978), maximum from $1,652 to $1,686.
(15) 16 U.S.C. 1858(a), Magnuson-Stevens Fishery Conservation and Management Act (1990), violation, maximum from $181,071 to $184,767.
(16) 16 U.S.C. 2437(a), Antarctic Marine Living Resources Convention Act of 1984,
(17) 16 U.S.C. 2465(a), Antarctic Protection Act of 1990,
(18) 16 U.S.C. 3373(a), Lacey Act Amendments of 1981 (1981):
(i) 16 U.S.C. 3373(a)(1), violation, maximum from $25,881 to $26,409.
(ii) 16 U.S.C. 3373(a)(2), violation, maximum from $647 to $660.
(19) 16 U.S.C. 3606(b)(1), Atlantic Salmon Convention Act of 1982,
(20) 16 U.S.C. 3637(b), Pacific Salmon Treaty Act of 1985,
(21) 16 U.S.C. 4016(b)(1)(B), Fish and Seafood Promotion Act of 1986 (1986); violation, minimum from $1,096 to $1,118; maximum from $10,957 to $11,181.
(22) 16 U.S.C. 5010, North Pacific Anadromous Stocks Act of 1992,
(23) 16 U.S.C. 5103(b)(2), Atlantic Coastal Fisheries Cooperative Management Act,
(24) 16 U.S.C. 5154(c)(1), Atlantic Striped Bass Conservation Act,
(25) 16 U.S.C. 5507(a), High Seas Fishing Compliance Act of 1995 (1995), violation, maximum from $157,274 to $160,484.
(26) 16 U.S.C. 5606(b), Northwest Atlantic Fisheries Convention Act of 1995,
(27) 16 U.S.C. 6905(c), Western and Central Pacific Fisheries Convention Implementation Act,
(28) 16 U.S.C. 7009(c) and (d), Pacific Whiting Act of 2006,
(29) 22 U.S.C. 1978(e), Fishermen's Protective Act of 1967 (1971):
(i) Violation, maximum from $27,950 to $28,520.
(ii) Subsequent violation, maximum from $82,579 to $84,264.
(30) 30 U.S.C. 1462(a), Deep Seabed Hard Mineral Resources Act (1980), violation, maximum, from $71,264 to $72,718.
(31) 42 U.S.C. 9152(c), Ocean Thermal Energy Conversion Act of 1980 (1980), violation, maximum from $71,264 to $72,718.
(32) 16 U.S.C. 1827a, Billfish Conservation Act of 2012,
(33) 16 U.S.C. 7407(b), Port State Measures Agreement Act of 2015,
(34) 16 U.S.C. 1826g(f), High Seas Driftnet Fishing Moratorium Protection Act,
(35) 16 U.S.C. 7705, Ensuring Access to Pacific Fisheries Act,
(36) 16 U.S.C. 7805, Ensuring Access to Pacific Fisheries Act,
The Department of Commerce's 2018 adjustments for inflation made by § 6.3, of the civil monetary penalties there specified, are effective on January 15, 2018, and said civil monetary penalties, as thus adjusted by the adjustments for inflation made by § 6.3, apply only to those civil monetary penalties, including those whose associated
The Secretary of Commerce or his or her designee by regulation shall make subsequent adjustments for inflation to the Department of Commerce's civil monetary penalties annually, which shall take effect not later than January 15, notwithstanding section 553 of title 5, United States Code.
Bureau of Industry and Security, Commerce.
Final rule; correcting amendments.
In this final rule, the Bureau of Industry and Security corrects an error in the text of Export Control Classification Numbers (ECCNs) 0D606, 0E606, and 8A609.
This rule is effective January 8, 2018.
Ivan Mogensen, Office of Exporter Services, Bureau of Industry and Security, by telephone: (202) 482-2440 or email:
On December 27, 2017, BIS published a final rule, Revisions, Clarifications, and Technical Corrections to the Export Administration Regulations (82 FR 61153) (the December 27 rule), which made corrections to certain provisions of the Export Administration Regulations (EAR), including the Commerce Control List (part 774 of the EAR) (CCL). The corrections were editorial in nature and did not affect license requirements. In this final rule, BIS is amending ECCNs 0D606 and 0E606 by reinstating original text that was erroneously replaced with the text for ECCNs 0D614 and 0E614, respectively, in the December 27 rule. In addition, this rule reinstates paragraph (2) of the Special Conditions for STA in ECCN 8A609.
Since August 21, 2001, the Export Administration Act of 1979, as amended, has been in lapse. However, the President, through Executive Order 13222 of August 17, 2001, 3 CFR, 2001 Comp., p. 783 (2002), as amended by Executive Order 13637 of March 8, 2013, 78 FR 16129 (March 13, 2013), and as extended by the Notice of August 15, 2017, 82 FR 39005 (August 16, 2017) has continued the EAR in effect under the International Emergency Economic Powers Act (50 U.S.C. 1701
1. Executive Orders 13563 and 12866 direct agencies to assess all costs and benefits of available regulatory alternatives and, if regulation is necessary, to select regulatory approaches that maximize net benefits (including potential economic, environmental, public health and safety effects, distributive impacts, and equity). Executive Order 13563 emphasizes the importance of quantifying both costs and benefits, of reducing costs, of harmonizing rules, and of promoting flexibility. This rule does not impose any regulatory burden on the public and is consistent with the goals of Executive Order 13563. This rule has been designated not significant for purposes of Executive Order 12866. This rule is not an Executive Order 13771 regulatory action because this rule is not significant under Executive Order 12866.
2. This final rule does not contain information collections subject to the requirements of the Paperwork Reduction Act of 1995 (44 U.S.C. 3501
3. This rule does not contain policies with Federalism implications as that term is defined in Executive Order 13132.
4. The Department of Commerce finds that there is good cause under 5 U.S.C. 553(b)(B) to waive the provisions of the Administrative Procedure Act otherwise requiring prior notice and the opportunity for public comment because they are unnecessary. The revisions made by this rule are administrative in nature and do not affect the privileges and obligations of the public. Additionally, it is important that the edits and clarifications are added as soon as possible to prevent improper interpretation of the EAR. The Department also finds that there is good cause under 5 U.S.C. 553(b)(A) to waive the provisions of the Administrative Procedure Act requiring notice and comment because these changes are limited to providing guidance on existing interpretations of current EAR provisions. Because these revisions are not substantive changes to the EAR, the 30-day delay in effectiveness otherwise required by 5 U.S.C. 553(d) is not applicable. No other law requires that a notice of proposed rulemaking and opportunity for public comment be given for this rule. The analytical requirements of the Regulatory Flexibility Act (5 U.S.C. 601
Exports, Reporting and recordkeeping requirements.
Accordingly, part 774 of the Export Administration Regulations (15 CFR part 774) is amended as follows:
50 U.S.C. 4601
a. “Software” “specially designed” for the “development,” “production,” operation, or maintenance of commodities controlled by ECCNs 0A606 (except for ECCNs 0A606.b or 0A606.y), 0B606, or 0C606.
b. through x. [RESERVED]
y. “Specific software” “specially designed” for the “production,” “development,” operation, or maintenance of commodities described in ECCN 0A606.y.
a. “Technology” “required” for the “development,” “production,” operation, installation, maintenance, repair, overhaul, or refurbishing of commodities enumerated or otherwise described in ECCN 0A606 (except for ECCNs 0A606.b or 0A606.y), 0B606, or 0C606.
b. through x. [RESERVED]
y. Specific “technology” “required” for the “development,” “production,” operation, installation, maintenance, repair, overhaul or refurbishing of commodities or software in ECCN 0A606.y or 0D606.y.
a. Surface vessels of war “specially designed” for a military use and not enumerated or otherwise described in the USML.
b. Non-magnetic diesel engines with a power output of 50 hp or more and either of the following:
b.1. Non-magnetic content exceeding 25% of total weight; or
b.2. Non-magnetic parts other than crankcase, block, head, pistons, covers, end plates, valve facings, gaskets, and fuel, lubrication and other supply lines.
c. through w. [RESERVED]
x. “Parts,” “components,” “accessories” and “attachments” that are “specially designed” for a commodity enumerated or otherwise described in ECCN 8A609 (except for 8A609.y) or a defense article enumerated or otherwise described in USML Category VI and not specified elsewhere on the USML, in 8A609.y or 3A611.y.
y. Specific “parts,” “components,” “accessories” and “attachments” “specially designed” for a commodity subject to control in this ECCN or for a defense article in USML Category VI and not elsewhere specified in the USML, as follows, and “parts,” “components,” “accessories,” and “attachments” “specially designed” therefor:
y.1. Public address (PA) systems;
y.2. Filters and filter assemblies, hoses, lines, fittings, couplings, and brackets for pneumatic, hydraulic, oil and fuel systems;
y.3. Galleys;
y.4. Lavatories;
y.5. Magnetic compass, magnetic azimuth detector;
y.6. Medical facilities;
y.7. Potable water tanks, filters, valves, hoses, lines, fittings, couplings, and brackets;
y.8. Panel knobs, indicators, switches, buttons, and dials whether unfiltered or filtered for use with night vision imaging systems;
y.9. Emergency lighting;
y.10. Gauges and indicators;
y.11. Audio selector panels.
Social Security Administration.
Final rule.
We are extending for six months our rule authorizing attorney advisors to conduct certain prehearing proceedings and to issue fully favorable decisions. The current rule is scheduled to expire on February 5, 2018. In this final rule, we are extending the sunset date to August 3, 2018. We are making no other substantive changes.
This final rule is effective January 8, 2018.
Susan Swansiger, Office of Hearings Operations, Social Security Administration, 5107 Leesburg Pike, Falls Church, VA 22041, (703) 605-8500. For information on eligibility or filing for benefits, call our national toll-free number, 800-772-1213 or TTY 800-325-0778, or visit our internet site, Social Security Online, at
On August 9, 2007, we issued an interim final rule permitting some attorney advisors to conduct certain prehearing proceedings and issue fully favorable decisions when the documentary record warrants doing so. 72 FR 44763. We instituted this practice to provide more timely service to the increasing number of applicants for Social Security disability benefits and Supplemental Security Income payments based on disability. We considered the public comments we received on the interim final rule, and on March 3, 2008, we issued a final rule without change. 73 FR 11349. Under this rule, some attorney advisors may develop claims and, in appropriate cases, issue fully favorable decisions before a hearing.
We originally intended the attorney advisor program to be a temporary modification to our procedures. Therefore, we included in sections 404.942(g) and 416.1442(g) of the interim final rule a provision that the program would end on August 10, 2009, unless we decided to either terminate the rule earlier or extend it beyond that date by publication of a final rule in the
We published the final rule to adopt without change the interim final rule that we published on August 9, 2007. We stated our intent to monitor the program closely and to modify it if it did not meet our expectations. 73 FR 11349.
We explained in the 2008 final rule that the number of requests for hearings had increased significantly in recent years. From 2008 to the present, the number of pending hearing requests has continued to remain at a high level, and we anticipate that we will receive several hundred thousand hearing requests in fiscal year 2018.
To preserve the maximum degree of flexibility we need to manage our hearings-level workloads effectively, we have decided to extend the attorney advisor rule for six months until August 3, 2018. As before, we reserve the authority to end the program earlier, to
We follow the Administrative Procedure Act (APA) rulemaking procedures specified in 5 U.S.C. 553 when developing regulations. Section 702(a)(5) of the Social Security Act, 42 U.S.C. 902(a)(5). The APA provides exceptions to its notice and public comment procedures when an agency finds there is good cause for dispensing with such procedures because they are impracticable, unnecessary, or contrary to the public interest. We have determined that good cause exists for dispensing with the notice and public comment procedures for this rule. 5 U.S.C. 553(b)(B). Good cause exists because this final rule only extends the expiration date of an existing rule. It makes no substantive changes to the rule. The current regulations expressly provide that we may extend or terminate this rule. Therefore, we have determined that opportunity for prior comment is unnecessary, and we are issuing this rule as a final rule.
In addition, because we are not making any substantive changes to the existing rule, we find that there is good cause for dispensing with the 30-day delay in the effective date of a substantive rule provided by 5 U.S.C. 553(d)(3). To ensure that we have uninterrupted authority to use attorney advisors to address the number of pending cases at the hearing level, we find that it is in the public interest to make this final rule effective on the date of publication.
We consulted with the Office of Management and Budget (OMB) and although we do not believe that this will be a significant regulatory action under Executive Order (E.O.) 12866, as supplemented by E.O. 13563, OMB has reviewed this final rule.
We certify that this final rule will not have a significant economic impact on a substantial number of small entities because it affects individuals only. Therefore, the Regulatory Flexibility Act, as amended, does not require us to prepare a regulatory flexibility analysis.
This final rule does not create any new or affect any existing collections and, therefore, does not require OMB approval under the Paperwork Reduction Act.
Administrative practice and procedure, Blind, Disability benefits, Old-age, Survivors and Disability Insurance, Reporting and recordkeeping requirements, Social security.
Administrative practice and procedure, Reporting and recordkeeping requirements, Supplemental Security Income (SSI).
For the reasons stated in the preamble, we are amending subpart J of part 404 and subpart N of part 416 of Chapter III of title 20 of the Code of Federal Regulations as set forth below:
Secs. 201(j), 204(f), 205(a)-(b), (d)-(h), and (j), 221, 223(i), 225, and 702(a)(5) of the Social Security Act (42 U.S.C. 401(j), 404(f), 405(a)-(b), (d)-(h), and (j), 421, 423(i), 425, and 902(a)(5)); sec. 5, Pub. L. 97-455, 96 Stat. 2500 (42 U.S.C. 405 note); secs. 5, 6(c)-(e), and 15, Pub. L. 98-460, 98 Stat. 1802 (42 U.S.C. 421 note); sec. 202, Pub. L. 108-203, 118 Stat. 509 (42 U.S.C. 902 note).
(g)
Secs. 702(a)(5), 1631, and 1633 of the Social Security Act (42 U.S.C. 902(a)(5), 1383, and 1383b); sec. 202, Pub. L. 108-203, 118 Stat. 509 (42 U.S.C. 902 note).
(g)
Environmental Protection Agency (EPA).
Final rule.
The Environmental Protection Agency (EPA) is finalizing a rule to implement section 425 of the Consolidated Appropriations Act of 2016, which requires EPA to work with the Great Lakes States to establish public notification requirements for combined sewer overflow (CSO) discharges to the Great Lakes. The requirements address signage, notification of local public health departments and other potentially affected public entities, notification to the public, and annual notice. The rule includes a two-stage approach with requirements that apply directly to existing National Pollutant Discharge Elimination System (NPDES) permittees authorized to discharge from a CSO to the Great Lakes Basin, beginning on August 7, 2018 and a requirement that the public notification provisions be incorporated into NPDES permits when these permits are issued or reissued after February 7, 2018, unless the permit has been proposed prior to February 7, 2018 in which case the requirements would be incorporated into the next permit renewal. This rule protects public health by ensuring timely notification to the public and to public health departments, public drinking
The final rule is effective on February 7, 2018. In accordance with 40 CFR part 23, this regulation shall be considered issued for purposes of judicial review at 1 p.m. Eastern time on January 22, 2018. Under section 509(b) of the Clean Water Act, judicial review of this regulation can only be had by filing a petition for review in the U.S. Court of Appeals within 120 days after the regulation is considered issued for purposes of judicial review.
EPA has established a docket for this action under Docket ID No. EPA-HQ-OW-2016-0376. All documents in the docket are listed on the
Jenelle Hill, Office of Wastewater Management, Water Permits Division (MC4203), Environmental Protection Agency, 1200 Pennsylvania Ave. NW, Washington, DC 20460; telephone number: (202) 566-1893; email address:
The
Section 425 of the Consolidated Appropriations Act of 2016 (Pub. L. 114-113) (hereafter referred to as “Section 425”) specifies in Sub-Section (a)(4) that the term “Great Lakes” means “any of the waters as defined in the Section 118(a)(3) of the Federal Water Pollution Control Act (33 U.S.C. 1292).” This, therefore, includes Section 118(a)(3)(B), which defines “Great Lakes” as “Lake Ontario, Lake Erie, Lake Huron (including Lake St. Clair), Lake Michigan, and Lake Superior, and the connecting channels (Saint Mary's River, Saint Clair River, Detroit River, Niagara River, and Saint Lawrence River to the Canadian Border);” and Section 118(a)(3)(C), which defines “Great Lakes System” as “all the streams, rivers, lakes, and other bodies of water within the drainage basin of the Great Lakes.” Collectively, EPA is referring to the Great Lakes and the Great Lakes System as the “Great Lakes Basin.” Entities within the Great Lakes Basin potentially regulated by this action are shown in Table 1.
This table is not intended to be exhaustive, but rather provides a guide for readers regarding entities likely to be regulated by this action. This table lists the types of entities that EPA is now aware could potentially be regulated or otherwise affected by this action. Other types of entities not listed in the table could also be regulated. In addition, this rule is not intended to change the conditions under which a NPDES permit is required but, rather, modify a specific requirement applicable to certain permittees. To determine whether your entity is regulated by this action, you should carefully examine the applicability criteria described above and found in § 122.32, and the discussion in the preamble. As Section II.B explains, States in the Great Lakes Basin include New York, Pennsylvania, Ohio, Michigan, Illinois, Indiana, Wisconsin, and Minnesota. As of September 2015, all but one of those States (Minnesota) had active NPDES permits for CSO discharges within the Great Lakes Basin subject to the requirements of this rule. EPA has included a list of Great Lakes Basin CSO permittees, which was compiled in concert with state permitting authorities in 2017, in the rulemaking docket (see “Table of Great Lakes Basin CSO Permittees (as of 2017)”). If you have questions regarding the applicability of this action to a particular entity, consult the person listed in the
EPA is issuing a final rule to establish public notification requirements for CSOs to the Great Lakes Basin. The rule implements Section 425, which requires EPA to “work with the affected States having publicly owned treatment works that discharge to the Great Lakes to create public notice requirements for a combined sewer overflow discharge to the Great Lakes” and prescribes minimum requirements for such notice. EPA incorporated existing State approaches for public notification in developing these requirements. EPA sought and considered Great Lakes States and public input during the development of the rule.
This rule requires CSO permittees
In addition, the rule includes requirements for Great Lakes Basin CSO permittees to develop a public notification plan that reflects community-specific details (
This rule protects public health by:
• Ensuring
• Ensuring
• Providing the community and interested stakeholders with
The public notification requirements, including the requirement to develop a public notification plan, are implemented through two regulatory mechanisms: Requirements that apply directly to existing NPDES permittees and conditions for permits renewed or issued in the future. This two-stage implementation approach ensures that the requirements of Section 425 are implemented promptly as the Appropriations Act directed EPA to do and also ensures that the benefits of the rule can begin to accrue as quickly as possible, rather than delaying these public health benefits until future permit renewals, which for some permittees could be as long as five or more years away.
First, EPA is adding a new section to the NPDES permit regulations, codified at § 122.38, establishing the public notification requirements for Great Lakes Basin CSO permittees. The requirements in § 122.38 apply directly to existing Great Lakes Basin CSO permittees until their NPDES permits are next reissued after February 7, 2018, unless the permit has been proposed prior to February 7, 2018, in which case the requirements would be incorporated into the next permit renewal.
The public notification plan requirements apply directly to CSO permittees discharging to the Great Lakes Basin beginning August 7, 2018 and the notification methods (other than the annual notice) apply directly beginning November 7, 2018. The annual notice requirements apply beginning in February 7, 2019 (or an alternative date specified by the Director), which allows permittees time to collect data for the first year.
Second, the public notification requirements for CSO discharges to the Great Lakes Basin shall be implemented as a condition in NPDES permits when they are next reissued after February 7,
This rule is authorized by Section 425 of the Consolidated Appropriations Act of 2016 (Pub. L. 114-113) and the Federal Water Pollution Control Act, 33 U.S.C. 1251
Municipal wastewater collection systems collect domestic sewage and other wastewater from homes and other buildings and convey it to wastewater treatment plants for treatment and disposal. The collection and treatment of municipal sewage and wastewater is vital to the public health in our cities and towns. In the United States, municipalities historically have used two major types of sewer systems—separate sanitary sewer systems and CSSs.
Municipalities with separate sanitary sewer systems use that system solely to collect domestic sewage and convey it to a publicly owned treatment works (POTW) treatment plant for treatment. These municipalities also have separate sewer systems to collect surface drainage and stormwater, known as “municipal separate storm sewer systems” (MS4s). Separate sanitary sewer systems are not designed to collect large amounts of runoff from rain or snowmelt or provide widespread surface drainage, although they typically are built with additional allowance for some amount of stormwater or groundwater that enters the system as a result of storm events.
The other type of sewer system, CSSs, is designed to collect both sanitary sewage and stormwater runoff in a single-pipe system. This type of sewer system provides the primary means of surface drainage by carrying rain and snowmelt away from streets, roofs, and other impervious surfaces. CSSs were among the earliest sewer systems constructed in the United States and were built until the first part of the 20th century. While some municipalities have undertaken projects to replace CSSs with separate sanitary sewer systems, such projects can be very expensive so many CSSs still exist in the United States.
Under normal, dry weather conditions, combined sewers transport all of the wastewater collected to a sewage treatment plant for treatment. However, under wet weather conditions, when the volume of wastewater and stormwater exceeds the capacity of the CSS or treatment plant, these systems are designed to divert some of the combined flow prior to reaching the POTW treatment plant and to discharge combined stormwater and sewage directly to nearby streams, rivers and other water bodies. These discharges of sewage from a CSS that occur prior to the POTW treatment plant are referred to as combined sewer overflows or CSOs. Depending on the CSS infrastructure design, CSO discharges may be untreated or may receive some level of treatment, such as solids settling in a retention basin and disinfection, prior to discharge.
CSO discharges contain human and industrial waste, toxic materials, and debris as well as stormwater. CSO discharges can be harmful to human health and the environment because they introduce pathogens (
CSSs serve a total population of about 40 million people nationwide. Most communities with CSSs are located in the Northeast and Great Lakes regions, particularly in Illinois, Indiana, Maine, Michigan, New York, Ohio, Pennsylvania, and West Virginia. Although large cities like Chicago, Cleveland, and Detroit have CSSs, most communities with CSSs have fewer than 50,000 people. Most CSSs have multiple CSO discharge locations (also referred to as outfalls), with some larger communities with CSSs having hundreds of CSO discharge locations.
As of September 2015, 859 active NPDES permits for CSO discharges had been issued in 30 States plus the District of Columbia and Puerto Rico. Of these 859 permits, 162 permits
The majority of the CSO discharges in the Great Lakes Basin are into waterbodies that are tributary to one of the Great Lakes, while a small number of those discharges are directly into one of the Great Lakes. In compiling the list of permittees subject to the requirements of this rule included in the rulemaking docket (“Table of Great Lakes Basin CSO Permittees (as of 2017)”), EPA consulted with State permitting authorities and drainage basin maps for the Great Lakes to confirm that these discharges have the potential to impact the Great Lakes. Because the water in streams and rivers within the drainage basin for a Great Lake has the potential to reach the Great Lakes, EPA has concluded that this rulemaking should apply to all permittees authorized to discharge CSOs in the Great Lakes Basin, consistent with the goal of providing public notification of CSO discharges affecting the Great Lakes.
EPA recently summarized available information on the occurrence and volume of discharges from CSOs to the Great Lakes Basin during 2014 (see EPA-HQ-OW-2016-0376-0043), contained in the public docket for this rulemaking. As summarized in this report, seven States reported 1,482 events where untreated sewage was discharged from CSOs to the Great Lakes Basin in 2014 and an additional 187 CSO events where partially treated sewage was discharged. For the purposes of the Report, partially treated discharges referred to CSO discharges that received a minimum of:
• Primary clarification (removal of floatables and settleable solids may be achieved by any combination of treatment technologies or methods that are shown to be equivalent to primary clarification);
• Solids and floatable disposal; and
• Disinfection of effluent, if necessary to meet water quality standards and protect human health, including removal of harmful disinfection chemical residuals, where necessary.
Additional information regarding CSO discharges to the Great Lakes Basin, including the Report to Congress, is available at
As stated above, CSOs can cause human health and environmental impacts (see EPA-HQ-OW-2016-0376-0043, -0056, -0057, and -0070). CSOs often discharge simultaneously with other wet weather sources of water pollution, including stormwater discharges from various sources including municipal separate storm sewers, wet weather sanitary sewer overflows (SSOs) from separate sanitary sewer systems, and nonpoint sources of pollution. The cumulative effects of wet weather pollution from point and nonpoint sources can make it difficult to identify and assign specific cause-and-effect relationships between CSOs and observed water quality problems. The environmental impacts of CSOs are most apparent at the local level (see EPA-HQ-OW-2016-0376-0043, -0056, -0057, and -0070).
The CWA establishes national goals and requirements for maintaining and restoring the nation's waters. CSO discharges are point sources subject to the technology-based and water quality-based requirements of the CWA under NPDES permits. Technology-based effluent limitations for CSO discharges are based on the application of best available technology economically achievable (BAT) for toxic and nonconventional pollutants and best conventional pollutant control technology (BCT) for conventional pollutants. BAT and BCT effluent limitations for CSO discharges are determined based on “best professional judgment.” CSO discharges are not subject to permit limits based on secondary treatment requirements that are applicable to discharges from POTWs.
EPA issued the CSO Control Policy on April 19, 1994 (59 FR 18688). The CSO Control Policy “represents a comprehensive national strategy to ensure that municipalities, permitting authorities, water quality standards authorities, and the public engage in a comprehensive and coordinated effort to achieve cost-effective CSO controls that ultimately meet appropriate health and environmental objectives.” (59 FR 18688). The policy assigns primary responsibility for implementation and enforcement to NPDES permitting authorities (generally referred to as the “Director” in the NPDES regulations) and water quality standards authorities.
The policy also established objectives for CSO permittees to: (1) Implement “nine minimum controls” and submit documentation on their implementation; and (2) develop and implement a long-term CSO control plan (LTCP) to ultimately result in compliance with the CWA, including water quality-based requirements. In describing NPDES permit requirements for CSO discharges, the CSO Control Policy states that the BAT/BCT technology-based effluent limitations “at a minimum include the nine minimum controls” (59 FR 18696). One of the nine minimum controls is “Public notification to ensure that the public receives adequate notification of CSO occurrences and CSO impacts.”
In December 2000, as part of the Consolidated Appropriations Act for Fiscal Year 2001 (Pub. L. 106-554), Congress amended the CWA by adding Section 402(q). This amendment is commonly referred to as the “Wet Weather Water Quality Act of 2000.” It requires that each permit, order, or decree issued pursuant to the CWA after the date of enactment for a discharge from a municipal combined sewer system shall conform to the CSO Control Policy.
The NPDES regulations require NPDES permits to include requirements for monitoring discharges, including CSO discharges, and reporting the results to the permitting authority with a reporting frequency dependent on the nature and effect of the discharge, but in no case less than once a year. See § 122.44(i)(2). In addition, NPDES permits must require permittees to report noncompliance, including CSO discharges, to their permitting authority. Permit noncompliance that may endanger health or the environment must be reported by the permittee to their permitting authority both orally and through a report submission. See § 122.41(l)(6). All other noncompliance must be reported when other monitoring reports are submitted (
Section 425 was enacted as part of the 2016 Consolidated Appropriations Act and did not amend the CWA. Section 425(b)(1) requires EPA to work with the Great Lakes States to establish public notice requirements for CSO discharges to the Great Lakes Basin. Section 425(b)(2) provides that the notice requirements are to address the method of the notice, the contents of the notice, and requirements for public availability of the notice. Section 425(b)(3)(A) provides that, at a minimum, the contents of the notice are to include the dates and times of the applicable discharge; the volume of the discharge; and a description of any public access areas impacted by the discharge. Section 425(b)(3)(B) provides that the minimum content requirements are to be consistent for all affected States.
Section 425(b)(4)(A) calls for follow-up notice requirements that provide a description of each applicable discharge; the cause of the discharge; and plans to prevent a reoccurrence of a CSO discharge to the Great Lakes Basin consistent with section 402 of the Federal Water Pollution Control Act (33 U.S.C. 1342) or an administrative order or consent decree under such Act. Section 425(b)(4)(B) provides for annual publication requirements that list each treatment works from which the Administrator or the affected State receive a follow-up notice.
Section 425(b)(5) requires that the notice and publication requirements described in Section 425 shall be implemented within two years. The
As called for in the legislation, EPA worked with the Great Lakes States in developing the rule to implement section 425 of the 2016 Consolidated Appropriations Act. In discussions with EPA, NPDES program officials in each State with CSO discharges to the Great Lakes Basin described existing State notification requirements, shared insights on implementation issues and provided individual perspectives during the development of the proposed rule.
On August 1, 2016, EPA published a notice in the
On January 13, 2017, EPA published the proposed rule requesting comments on Public Notification Requirements for Combined Sewer Overflows to the Great Lakes Basin (82 FR 4236). The comment period for the proposed rule closed on March 14, 2017. EPA received a total of 1,300 written comments, which were submitted to the docket (see EPA-HQ-OW-2016-0376-0129 through EPA-HQ-OW-2016-0376-0176). EPA briefed NPDES program officials in the Great Lakes States on the comments EPA received, and the officials engaged in discussions with EPA about possible revisions to the proposed rule to address the public comments. Comments received on the proposed rule are discussed further in Section III.
The proposed requirements to implement Section 425 were based on an evaluation of current notification requirements and practices in the Great Lakes Basin and elsewhere, and input from officials in the Great Lakes States and the public, including input received in response to EPA's August 1, 2016 request. The proposal explained EPA's expectations for CSO permittees discharging to the Great Lakes Basin to ensure that the public receives adequate notification of CSO occurrences and CSO impacts. The proposed requirements aligned with the CSO Control Policy, which includes public notification as one of the nine minimum controls for CSO permittees.
The
EPA further proposed to require NPDES permittees authorized to discharge CSOs to the Great Lakes Basin to develop a public notification plan that would provide community-specific details as to how they would implement the notification requirements. Under the proposal, CSO permittees in the Great Lakes Basin would seek and consider input from local public health departments, any potentially affected public entities and Indian tribes whose waters may be impacted by the permittee's CSO discharges in developing the public notification plan that would be submitted to the Director. Under the proposed rule, the plan would be made available to the public and submitted to the Director within six months of the publication date of the final rule.
Under the proposed rule, the requirement to provide public notice of CSO discharges would initially apply by regulation to all existing CSO permittees. Then, as the NPDES permit for each CSO permittee is reissued, the proposed rule at § 122.42(f) would require that the public notice condition be incorporated into all such permits.
EPA received about 45 unique comments on the proposed rule from States, municipalities, environmental stakeholders, trade associations, and other members of the public. Many commenters expressed support for required public notification of CSO discharges in the Great Lakes Basin, while other commenters suggested that aspects of the proposed rule were too burdensome. Many commenters supported some aspects of the proposed rule while suggesting revisions to other parts. Below is a summary of some of the key topics on which EPA received comments. For a full account of comments received, see the rulemaking docket.
• “Great Lakes” versus “Great Lakes Basin”—Several commenters asserted that Section 425 was only intended to address CSO discharges directly into the Great Lakes, rather than CSO discharges into waters in the Great Lakes Basin as proposed while others supported the scope of the proposed rule. For discussion of EPA's rationale for retaining the scope of the rulemaking to cover the Great Lakes Basin see Section II.B. EPA also received comments which recommended that the rulemaking should be applied nationally and not just limited to the Great Lakes region. Given the short two-year implementation timeframe in Section 425 and the specific statutory intent, EPA chose to limit the scope of this rulemaking to the Great Lakes region.
• Untreated CSOs versus All CSOs (untreated and partially treated)—Some commenters suggested that the requirements of the rule should only apply to untreated CSOs, while several others agreed with the approach in the proposed rule. For discussion of EPA's decision to apply the requirements to all CSO discharges see Sections II.B and V.B.3.
• Initial notice timing—Some commenters suggested that the proposed time window of four hours for the initial notice was too long, while some felt it was an appropriate length, and others suggested longer time windows. For discussion of EPA's decision to retain
• Supplemental notice timing—Many commenters suggested that the time period in which the supplemental notice must be provided should be longer than the proposed 24 hours. Many commenters suggested timeframes of five or seven days. For discussion of changes EPA has made to the supplemental notice timing see Section IV.C.
• Annual notice requirements—Some commenters supported the annual notice requirements in the proposed rule. Others said the annual notice is duplicative of other requirements (
• Implementation timeline—Many commenters agreed with the implementation timeline and two-stage approach with the flexibility for the Director to extend the compliance dates on a case-by-case basis. Some commenters preferred that EPA delay implementation of the requirements until the next permit renewal. Other commenters suggested 12 months rather than 6 months be allowed for some or all communities to initially implement the new requirements. For discussion of EPA's rationale for the final rule compliance timeline, two-stage approach, as well as the flexibility in the final rule for the Director to extend that timeline, see Sections II.E, IV.H, V.B.7, and VI.A.
The next section (Summary of Revisions Made in the Final Rule) includes an explanation of all of the revisions EPA has made in the final rule in response to the public comments received on the proposed rule. In addition, EPA has prepared a response to comments document, which can be found in the docket for this rulemaking.
EPA reviewed and considered public comments received on the proposed rule and made several modifications to the regulatory requirements in response to those comments. Below is a summary of those revisions, some of which involve clarifying language to better convey the intent of the requirement, while others address the substance of the requirement. The list of regulatory changes in each sub-section below is organized by references to the proposed rule (see 82 FR 4233) sections and numbering, references within the summary of the change include citations to the final rule. The revisions EPA has made are intended to respond to the comments, increase flexibility for States, and ease implementation.
Edits were made to the following proposed regulatory text to improve clarity and consistency of language used:
• § 122.21(j)(8)(iii)—“Each applicant that discharges” revised to “Each permittee authorized to discharge.” Edit made to be consistent with terminology in: § 122.38(a) and (b).
• § 122.38(d)(4)—“that may be affected” revised to “that may be impacted.” Edit made to be consistent with terminology in: § 122.38(a)(1)(i) and (iii), (a)(2)(i)(B), (a)(3)(ii)(B), and (b)(5).
○ Conforming edits were also made at: § 122.38 (a)(2)(i), (c)(6), and (d)(2) (from “whose waters may be affected” to “whose waters may be impacted”).
• § 122.38(b)(6)—“public access areas impacted by each CSO discharge” revised to “public access areas potentially impacted by each CSO discharge.” This ensures consistency with the above mentioned sections where the word “potentially” is used with “impacted” to make clear that the permittee does not need to verify if the area was impacted, but rather to consider if there is potential for the area to be impacted by the CSO discharge.
• § 122.42(f)—“Any permit issued for combined sewer overflow (CSO) discharges to the Great Lakes Basin” revised to “Any permit issued authorizing the discharge of a combined sewer overflow (CSO) to the Great Lakes Basin.” Edit made to be consistent with terminology in: § 122.38(a) and (b), as well as the revision to § 122.21(j)(8)(iii) above.
• § 122.38(a)(1)(i)(A)—Revisions to replace the word “outfall” with “discharge point,” to use consistent terminology with the CSO Policy.
○ Conforming edits were also made at §§ 122.38(a)(1)(ii)(C), (a)(1)(iv), (a)(3)(i), (b) introductory text, (b)(1), and (c)(1), (8), and (9) and 122.42(f)(2) and (3).
It is EPA's intention that if multiple CSO discharges occur on the same water body from multiple CSO discharge locations during the same precipitation event, that the permittee has the flexibility to provide one public notification to cover the multiple discharges. Some commenters pointed out that the wording EPA used in the proposed rule, “at the same time,” was unclear and might imply that the discharges had to occur simultaneously, rather than simply as a result of the same storm event. Because of this potential lack of clarity, some commenters raised questions as to whether multiple CSO discharges that start and stop during the same precipitation event would require multiple, separate public notices. EPA intends that only one notification be required under these circumstances. In addition, EPA has included a provision in the rule that allows permittees to provide one notice when there are discharges from multiple CSO discharge points as a result of the same precipitation event. These notices can describe broader areas likely to be impacted by discharges during the precipitation event, eliminating the need to provide separate initial notifications every time the permittee becomes aware of a new discharge associated with the same event. Some commenters questioned whether these discharges had to have occurred at exactly the same time in order to be grouped together. EPA intends that multiple discharges that result from the same precipitation event, even if they are not occurring at exactly the same time, may be grouped together in one public notification. EPA has revised the wording in the final rule to make this clearer by changing the proposed rule's description of discharges occurring “at the same time” to discharges occurring “during the same precipitation-related event.” It is EPA's expectation that the initial notification would be made within four hours of the permittee becoming aware of the first CSO discharge in the group of discharges that are being reported together; therefore, grouping multiple discharges into one notification is intended to reduce burden but would not provide a community additional time beyond the four-hour period.
EPA is using the terminology “precipitation-related” to include rainfall, snowfall, and snowmelt. This is consistent with the CSO Policy, which states that it applies “to all CSSs that overflow as a result of storm water flow, including snow melt runoff (40 CFR Section 122.26(b)(13)).”
EPA has made the following revisions to the wording in the final rule to address this:
• § 122.38(a)(2)(i)(B)—revised “Where CSO discharges from the same system occur at multiple locations at the same time” to “Where CSO discharges from the same system occur at multiple locations during the same precipitation-related event.”
○ Conforming edits were also made at: § 122.38(a)(2)(ii)(A), (a)(3)(ii)(B), (a)(3)(iii)(A), and (b)(2).
The final rule requires supplemental information to be provided to the public, public health department and other affected public entities and Indian Tribes within seven days of the permittee becoming aware that the CSO discharge(s) has ended. The proposed rule would have required this information to be provided within 24 hours. Many commenters indicated that this was too short of a timeframe, and suggested that a longer window of five or seven days would be more appropriate. Some commenters pointed out that running models and validating the estimated discharge volume and duration takes time and resources that are not available on nights, weekends, and holidays. Other commenters also noted that CSO discharges can be discontinuous, so communities need more than 24-hours to determine if the discharge has actually ended. In response to these concerns, EPA contemplated revising the timeframe to either five or seven days. Some of the State permit writers pointed out that five days is consistent with other requirements that CSO communities already have, so aligning the timeframe would reduce confusion and burden that could be caused by multiple reporting requirements.
• § 122.38(a)(2)(ii)—revised “Within twenty-four (24) hours” to “Within seven (7) days.”
○ Conforming edits were also made at: § 122.38(a)(3)(iii).
EPA received several comments regarding the burden of the signage requirement in the proposed rule. Specifically, commenters indicated that the burden estimate did not adequately account for the high replacement rate that would occur if the signs need to be replaced when they were next reset. EPA's intention was that signs would be updated to reflect the required information when they need to be replaced due to normal wear or damage. Based on this reasoning, EPA estimated that signs would need to be replaced once every 10 years. It is now EPA's understanding that in some communities' signs are reset at a much higher rate (for example some signs are located in an area where they fall down regularly and the community frequently stands the sign back up and re-secures it in the ground (
• § 122.38(a)(1)(iii)—deleted “or reset” from “the sign is not required to meet the minimum requirements specified in paragraph (i) until the sign is replaced or reset.”
Some commenters also indicated that there are certain circumstances under which signage at a CSO discharge point is not warranted because there is no means for public access of the receiving water in the vicinity of the discharge point. Because one of the drivers behind this rulemaking is to reduce the public's exposure to CSO discharges, EPA has decided to add some flexibility for those instances where it is not expected that the public will be able to access the area or come into contact with the receiving water and therefore would not benefit from the notification that the signage would have provided. EPA has added language to the final rule to allow the Director to waive the signage requirement if such conditions have been demonstrated by the permittee to the Director's satisfaction. EPA has made the following change to the final rule to reflect this:
• § 122.38(a)(1)(i)—added “(unless the permittee demonstrates to the Director that no public access of, or public contact with, the receiving water is expected)” after CSO discharge point. EPA has also made some minor formatting edits to this part of the provision to improve clarity.
EPA received several comments on the annual notice requirements in the proposed rule. Some commenters suggested that the requirements were redundant of other current reporting requirements in CSO permits. Some commenters asserted that the annual notice requirements were overly burdensome. The annual notice requirements are intended to ensure that the statutory requirements in Section 425 are addressed by the rule, including requirements outlined in Section 425(b)(4) for: Follow-up notice that provides a “description of each applicable discharge,” “the cause of the discharge,” and “plans to prevent a reoccurrence of a combined sewer overflow discharge to the Great Lakes”; as well as annual publication “that list each treatment works from which the Administrator or the affected State receive a follow-up notice.”
The final rule is responsive to these components of Section 425 by requiring:
• A description of each applicable discharge, including: Location, receiving water, any treatment provided (if applicable), date, location, duration, volume, and a description of any public access areas that were potentially impacted by the CSO discharge, and a summary of any monitoring data for CSO discharges (if available).
• Information on the cause of each discharge, and when that cause is precipitation, information on the amount of precipitation that caused the discharge.
• Information on plans to prevent a reoccurrence of CSO discharges in the form of a concise summary of implementation of the nine minimum controls and the status of implementation of the CSO long-term control plan (or a similar plan that explains how the permittee is addressing CSO discharges).
Providing annual notice improves transparency and accountability to the public about the presence and magnitude of CSO discharges in their community. It also highlights progress that is being made by permittees to reduce CSO discharges and highlights the value of investments that are being made in the infrastructure.
The final rule also includes several revisions to the annual notice requirements to improve clarity and allow more flexibility. The added flexibilities are intended to allow Great Lakes Basin CSO permittees that are already subject to existing State or local reporting requirements, which contain
• § 122.38(b)—Revised “(or an earlier date specified by the Director)” to “(or an alternative date specified by the Director)” to allow the Director the flexibility to specify an alternative due date for the annual notice to be made available to the public. This allows the Director to specify an alternative due date to coincide with an existing reporting requirement, where one exists.
• § 122.38(b)—Added a sentence to the end of the introductory text of § 122.38(b) pertaining to permittees whose State permitting authority has published or will publish an annual report containing all of the required minimum information about the Permittee, that allows the Permittee to make available the State-issued annual report in order to meet this requirement. This addresses scenarios like that in Michigan, described in Section V.B.2 below.
• § 122.38(b)—Added a sentence to the end of the introductory text of § 122.38(b) to allow permittees that have existing report(s) that are written annually that collectively contain all of the required minimum information to make that/those report(s) publicly available in order to meet the requirement. This gives Permittees the flexibility to use existing CSO reports, if they contain all of the minimum information required by the final rule, to meet the annual notice requirement.
• § 122.38(b)(1) and (d)(11)—Deleted the minimum requirement to include “Information on the availability of the permittee's public notification plan and a summary of significant modifications to the plan that were made in the past year.” EPA concluded that this proposed requirement was somewhat duplicative of another requirement in the rule, under the public notification plan requirements at final rule § 122.38(c). In addition, to ensure that a summary of significant
• § 122.38(b)(2)—Revised from “A description of the location, treatment provided and receiving water for each CSO outfall” to “A description of the location and receiving water for each CSO discharge point, and, if applicable, any treatment provided.” This change is intended to make clear that treatment information does not have to be provided if the CSO discharge does not receive treatment. This revision also includes replacing the word “outfall” with “discharge point,” which is explained above in Section IV.A.
• § 122.38(b)(3)—Revised “The date, location, duration, and volume of each wet weather CSO discharge” to “The date, location, approximate duration, measured or estimated volume, and cause (
○ By adding the words “approximate” and “measured or estimated,” the rule now clarifies that the same level of accuracy needed for the supplemental notice will suffice for the annual notice. It is EPA's expectation that the permittee will be able to simply summarize the date, location, duration, and volume information from the initial and supplemental notice in the annual notice.
○ This edit also includes the addition of the “cause” of the discharge to the information required for the annual notice. EPA intended that the requirement of Section 425(b)(4)(A)(ii) to describe the cause of the discharge would be addressed by the requirement to include rainfall data for each CSO discharge listed in the annual notice. However, commenters pointed out that wet weather CSO discharges may also be caused by snowmelt, and the inclusion of daily precipitation data would not explain the cause of those discharges. EPA has therefore added “cause (
• § 122.38(b)(4)—Added “cause” to the list of required information for each dry weather CSO discharge. Similar to the explanation above, this revision ensures the final rule is consistent with the requirement of Section 425(b)(4)(A)(ii) to describe the cause of the discharge.
• § 122.38(b)(7)—Revised from “Representative rain gauge data in total inches to the nearest 0.1 inch that resulted in a CSO discharge” to “Representative precipitation data in total inches to the nearest 0.1 inch that resulted in a CSO discharge, if precipitation was the cause of the discharge identified in (§ 122.38(b)(2)).”
○ EPA replaced “rain gauge data” with “precipitation data” because commenters pointed out that rain gauge data may not be available for every CSO discharge, or in every community. By using broader terminology, EPA intends to allow communities the flexibility to use various data sources to meet this requirement. For example, some communities may choose to simply download daily precipitation data for their area from a publicly available source (
○ As discussed above, one commenter pointed out that wet weather CSO discharges may be caused by snowmelt, and in those circumstances it would not be appropriate to be required to report on rainfall data since it was not affiliated with the discharge. EPA, therefore, added the qualifier at the end of the sentence “if precipitation was the cause of the discharge.”
• § 122.38(b)(8)—Revised from “A point of contact” to “Permittee contact information, if not listed elsewhere on the website where this annual notice is provided.” Some commenters pointed out that the term “A point of contact” sounded like an individual person's name and contact information, and that that information changes too frequently to be appropriate. This was reworded to be clear that the contact information requirement is not for an individual person's contact information, but rather the permittee's contact information, so that the public has the information necessary to call the municipality with questions about the annual notice information. EPA added the latter part of the requirement to provide permittees the flexibility to provide this information elsewhere on their website, if it is not already included in an existing annual report that is being used to meet this annual notice requirement.
In addition to the above revisions, EPA made one additional revision to the
• § 122.38(b)—Revised “and shall provide the Director with notice of how the annual notice is available” to “and shall provide the Director and EPA with notice of how the annual notice is available.” Also added a new sentence to follow that phrase in order to provide an email address by which the permittee may provide the notice to EPA.
• § 122.38(c)—Deleted the proposed rule electronic reporting requirement in full.
The proposed public notification plan requirements required larger communities (permittees with a population of 75,000 or more) that were using a model to estimate discharge volumes and durations to calibrate their models at least once every five years. Some commenters raised concern about the burden of requiring calibration of models at least once every five years. Since models do not necessarily require calibration if nothing changes in the system, the final rule will instead require that permittees with a population of 75,000 or more assess whether recalibration is necessary at least once every 5 years, and to recalibrate if it is determined that it is necessary. It is important for models to be accurately calibrated in order to determine when overflows are happening. However, EPA does not intend to unnecessarily burden municipalities if their models do not need to be calibrated every five years. EPA has therefore made the following revision:
• § 122.38(d)(9)—Revised “must calibrate their model at least once every 5 years” to “must assess whether re-calibration of their model is necessary, and recalibrate if necessary, at least once every 5 years” in final rule § 122.38(c)(9).
In the final rule, EPA is requiring permittees to seek input from the public health department on what areas would be considered “potentially impacted public access areas” prior to submitting the public notification plan. This requirement addresses comments on the proposal suggesting that EPA define “potentially affected public access areas.” This terminology is used in rule sections on signage, notification of local public health department and other potentially affected public entities, notification of the public, and annual notice. Public access area types vary between communities and may depend on factors such as local ordinances, local culture, and geographic features. For instance, in one community, the public access areas may be defined to include swimming beaches and boat launches, while in another community they may include fishing streams, campgrounds, or marinas. Given this potential variability, it is more appropriate for each community to evaluate its own local circumstances and determine how best to define these public access areas for their CSO public notification plan, rather than for EPA to prescribe a general definition in the final rule to apply to all the Great Lakes Basin CSO communities. This is the type of information EPA expected would be discussed with public health departments when consulting with them on the public notification plan development (as would have been required in the proposed rule, and is required in the final rule), and this change explicitly calls this out to ensure it is discussed. The final rule provides:
• § 122.38(e)(1)(iii)—“Develop recommendations for areas that would be considered “potentially impacted public access areas” as referenced in 122.38(a)(1), (2), and (3).”
In the final rule, EPA is requiring the public notification plan to be completed within six months and that the notification requirements be implemented within nine months. The three-month window between plan completion and implementation of the notification requirements allows communities time to ramp up for implementation of their notification plans after the plans have been fully developed, which includes all the outreach to seek input on the plan from local public health departments and other potentially affected public entities and Indian Tribes. In the proposed rule, plan implementation would have begun immediately at six months, when the plan was completed. Commenters indicated that additional time may be needed to ramp up implementation after plan completion, therefore EPA has made these changes in the final rule. EPA also added clarifying language to the annual notice provision to ensure the compliance date (which is the year following the effective date of the rule) is clear. EPA has therefore made the following revision:
• § 122.38(a)—Changed the implementation language from “provide public notification of CSO discharges as described in this paragraph after August 7, 2018” to “provide public notification of CSO discharges as described in this paragraph after November 7, 2018.”
• § 122.38(b)—Inserted “Starting in February 7, 2019,” prior to “By May 1 of each calendar year”.
EPA received comments identifying circumstances under which actions in small communities, to limit the impacts of the actual CSO discharge, may consume all available staff resources. Under these circumstances EPA wants to provide clarity that the permittee may take the necessary actions to address the CSO discharge prior to initiating the start of the four-hour notification window. To allow for such circumstances, EPA has revised the requirements as follows:
• § 122.38(a)(3)(i)—At the end of the provision, inserted a sentence that allows a permittee to identify in its public notification plan circumstances and physical action needed to limit the
• § 122.38(c)(8)—Inserted, at the end of the provision, language that the plan shall include a description of circumstances under which the initial notification of the public may be delayed beyond four hours of the permittee becoming aware of the discharge, if the circumstances described above are met.
The public notification provisions are directly required regulatory requirements (independent of being implemented by permit conditions) until these conditions are incorporated into the NPDES permit of the Great Lakes Basin CSO permittee. EPA is using these two regulatory mechanisms to respond to Section 425(b)(5) of the 2016 Consolidated Appropriations Act direction that the notice and publication requirements described in the Act are to be implemented by “not later than 2 years after the date of enactment” of the Act.
The requirements of § 122.38(a) (signage and notification requirements) and § 122.38(b) (annual notice) are enforceable under the CWA prior to incorporation into a permit under CWA section 308 by operation of this rule. The requirement to develop a public notification plan consistent with § 122.38(c) and (d) is enforceable under CWA section 308. Once public notification requirements are incorporated into an NPDES permit, they are enforceable as a permit condition issued under CWA section 402.
The details and content of the public notification plan, however, are not enforceable under § 122.38(c) or as effluent limitations of the permit, unless the document or the specific details of the plan are specifically incorporated into the permit. Under the final rule, the contents of the public notification plan are instead intended to provide a road map for how the permittee would comply with the requirements of the permit (or with the requirements of § 122.38(a) and (b) prior to inclusion in the permit as a permit condition). Once the public notification requirements are incorporated into the permit as a permit condition, the plan may be changed based on adaptions made during the course of the permit term, thereby allowing the permittee to react to new technologies, circumstances and experiences gained during implementation and to make adjustments to its program as necessary to provide better public notification and better comply with the permit. This approach will allow the CSO permittee to modify and continually improve its approach during the course of the permit term without requiring the permitting authority to review each change as a permit modification.
As discussed in detail above, § 122.38 sets forth requirements that apply to all permittees with CSO discharges to the Great Lakes Basin. Under this rule, Great Lakes Basin CSO permittees are required to develop a public notification plan, after seeking and considering input from public health departments and other potentially affected public entities. The plan must be submitted to the Director and made available to the public by August 7, 2018. Section 122.38 also requires implementation of the signage requirements and notice to affected public entities and the public by November 7, 2018. The annual notice requirements apply beginning in February 7, 2019 (or an alternative date specified by the Director), which allows permittees time to collect data for the first year. As described in Section V.B.7, the Director may extend the compliance dates for notification and/or submittal of the public notification plan for individual communities if the Director determines the community needs additional time to comply in order to avoid undue economic hardship.
EPA's rule will require the incorporation of public notice requirements into NPDES permits for CSO discharges to the Great Lakes Basin over time as they are issued and renewed. To effectuate this requirement, EPA is revising the permit application regulation requirements in § 122.21(j). EPA is adding § 122.21(j)(8)(iii), which requires the CSO permittees in the Great Lakes Basin to submit a public notification plan to the Director with its permit application (and any updates to its plan that may have occurred since the last plan submission). EPA is also adding a new standard condition at § 122.42(f) that applies to CSO permits, ensuring that CSO public notification requirements are incorporated into the NPDES permits for discharges to the Great Lakes Basin and updated over time as appropriate with each permit cycle. Public notification plans, submitted with subsequent permit applications, will reflect changes in collection systems and technology, as well as public notice practices. By requiring the Great Lakes Basin CSO permittee to include its updated public notice plan with its permit application, the Director will have the information he/she needs for including requirements for public notification in the permit when it is reissued.
While the rule requires that permits for CSO discharges to the Great Lakes Basin henceforth include public notification requirements, it also provides flexibility to allow NPDES permit writers to address the particular circumstances of each community (
• Require implementation of the public notification requirements in § 122.38(a);
• Specify the information that must be included on discharge point signage;
• Specify discharge points and public access areas where signs are required;
• Specify the timing and minimum information for providing initial notification to local public health departments and other potentially affected entities, and the public;
• Specify the location of CSO discharges that must be monitored for volume and discharge duration and the location of CSO discharges where CSO volume and duration may be estimated;
• Require submittal of an annual notice in accordance with § 122.38(b); and
• Specify protocols for making the annual notice available to the public.
Section 402(q) of the CWA requires NPDES permits for discharges from combined sewers to “conform” to the 1994 CSO Control Policy. One of the “Nine Minimum Controls” identified in the Policy is that NPDES permits for CSO discharges require public notification to ensure that the public receives adequate notification of CSO occurrences and CSO impacts. The permit condition required by this rule conforms to the 1994 CSO Control Policy's minimum control to provide the public with “adequate notification” and further provides specificity to better implement the public notification provision identified in the Policy. Including this provision in permits gives the Great Lakes States an opportunity to update and fine-tune public notice requirements to reflect continued development of the permittee's public notice approach, ensure consistency with State legislative and regulatory requirements for public notification, consider new technologies and be informed by public input. In addition, when public notification becomes a permit condition, the public will have the opportunity to comment on the public notification requirements during the permit process.
The final rule requires that Great Lakes Basin CSO permittees develop and submit to the Director a public notification plan by August 7, 2018 and again subsequently when the permittee files an application for permit renewal. In addition, prior to submitting the public notification plan, CSO permittees must seek and consider input from the local public health department (or if there is no local health department, the State health department) and potentially affected public entities and Indian tribes whose waters may be impacted by CSO discharges.
The public notification plans are intended to provide system-specific detail (
Section 425(b)(3)(A)(iii) of the 2016 Consolidated Appropriations Act provides that public notice for CSO discharges is to include a description of any public access areas impacted by the discharge. This rule requires that public notification plans identify which municipalities and other public entities may be affected by the permittee's CSO discharges. Potentially affected public entities whose waters may be impacted by the CSO discharge could include adjoining municipalities, public drinking water utilities, State and county parks and recreation departments. Such areas may have already been identified in the CSO permittee's LTCP, which should identify CSO discharges to sensitive areas.
• The location of the CSO discharge point and what users of that waterbody may exist in the surrounding region;
• The direction of flow in the receiving water and uses of that waterbody, or connected waterbodies, downstream of the CSO discharge point;
• The presence of public access areas near, or downstream of, the discharge point;
• The presence of drinking water supply systems near, or downstream of, the discharge point; and
• The presence of municipal entities, Indian tribes, and/or parks and recreation department lands near, or downstream of, the discharge point.
Local public health departments, public entities, and Indian tribes whose waters may be impacted by a CSO discharge are in a unique position to provide input on the timing, means and content of the public notification requirements addressed in this rule. Seeking input from these entities allows the permittee to reflect in the public notification plan the needs and preferences of these entities. Also, these groups can help inform decisions regarding the most appropriate means of communicating information to the public, taking into consideration specific populations in the community and their access to various electronic communication methods and social media. For example, if there is a segment of the population without access to cell phones or computers, or that would incur costs by receiving text notifications, the consulted entities may suggest other methods of communication that would be more appropriate to reach these groups (
The plan will also describe how the volume and duration of CSO discharges will be either measured or estimated. If the Great Lakes Basin CSO permittee intends to use a model to estimate discharge volumes and durations, the plan is required to summarize the model and describe how the model was or would be calibrated. CSO permittees that are a municipality or sewer district with a population of 75,000 or more are required to assess whether re-calibration of their model is necessary, and recalibrate if necessary, at least once every 5 years.
The final rule includes revisions to improve clarity and allow more flexibility regarding the annual notice requirements. The added flexibilities are intended to allow Great Lakes Basin CSO permittees that are already subject to existing State or local reporting requirements, which contain the same information as required in this rule's annual notice requirement, to use these reports to meet this rule's requirements. For example, New York State requires a Combined Sewer Overflow Annual Report which contains several of the components in the rule's annual notice requirements. Great Lakes Basin CSO permittees in New York may choose to provide a copy of this Annual Report along with a supplemental report or appendix that addresses the remaining components.
The flexibilities also allow a permittee, whose State permitting authority publishes an annual CSO report that contains the same information for a Great Lakes Basin CSO permittee as is required in this rule's annual notice requirement, to use the
The rule includes definitions of “Combined Sewer System” and “Combined Sewer Overflows” at § 122.2. The definition of combined sewer system is based on the description of combined sewer system found in the 1994 CSO Policy. The Policy provides that “A combined sewer system (CSS) is a wastewater collection system owned by a State or municipality (as defined by § 502(4) of the CWA) which conveys sanitary wastewaters (domestic, commercial and industrial wastewaters) and storm water through a single-pipe system to a Publicly Owned Treatment Works (POTW) Treatment Plant (as defined in § 403.3(p)).” (59 FR 18689) The definition of combined sewer overflow also conforms to the description of CSO in the CSO Policy, which specifies that a “CSO is the discharge from a CSS at a point prior to the POTW Treatment Plant.”
In the proposed rule preamble, EPA requested comment on whether it would be appropriate to establish alternative public notice requirements for CSO discharges that are treated to a specified level (
EPA intends that multiple discharges that result from the same precipitation-related event, even if they are not occurring at exactly the same time, may be grouped together in one public notification. EPA has revised the wording in the final rule to make this clearer, as is described in Section IV.B. EPA also revised the wording in the final rule to clarify that snowfall and snowmelt may also be the cause of a wet weather CSO discharge by changing “precipitation event” to “precipitation-related event”, as described in Section IV.B.
EPA has not further defined “event” in this rule. Because permittees have been tracking and reporting CSO discharge data for many years to meet permit requirements and commitments made in long-term control plan and related documents, EPA expects that the Director and the permittee have already established what constitutes separate CSO events and precipitation events for reporting purposes. It is not EPA's intention to change that approach with this rulemaking; rather, the purpose of this rulemaking is to ensure information about CSO discharges is provided to the public, public health departments, and other affected entities.
The rule requires that an initial notice be provided to the local public health departments and other potentially affected entities as well as the public “as soon as possible, but no later than four (4) hours after becoming aware by monitoring, modeling or other means that a CSO discharge has occurred.” EPA selected four hours because it is prompt enough to allow the public to make informed decisions regarding areas where they would visit and recreate before doing so; while it is also a long enough amount of time to allow permittees to initiate notification processes.
By using language that combines a definitive deadline (
In consideration of circumstances in which a small community has limited staff (
EPA expects that most permittees already have a system in place by which they monitor, model, or otherwise estimate when CSO discharges have occurred. This approach is often established in the LTCP or other planning or operational document. EPA expects that most communities would use that same approach and/or data to inform the notification provided in response to this rule. The rule does not specifically require additional monitoring beyond what the CSO permittee already has in place for compliance with the current CSO Policy and other existing regulations; therefore, permittees would not need to purchase additional monitoring equipment or establish an expensive model.
As noted in the preamble to the proposed rule (82 FR 4233), EPA anticipates that some communities may choose to estimate when CSO discharges may occur based on weather forecasts and provide notification in advance of a precipitation-related event. From a review of State-issued permits and additional State requirements pertaining to CSOs, EPA found that all seven States within the Great Lakes Basin require permittees to report the occurrence of a CSO discharge. Some States also require permittees to report CSO discharge duration, CSO discharge start and end times, and precipitation data associated with each CSO discharge. By using historic CSO discharge and precipitation data, along with certain system and service area characteristics that are already known and readily available, a predictive approach provides a simplified method to estimate a precipitation threshold that can be expected to cause a CSO discharge on a per discharge point basis. This method can be used to provide timely notification to the public, local public health departments, and other potentially affected public entities. EPA considered that there may be smaller communities that would like to provide public notification using a predictive approach, but they may not know the precipitation threshold at which they should trigger the advanced notice. For these communities, EPA has included a memo to the record describing how one might establish a precipitation threshold that can be used to meet the initial public notification requirements of the rule (see the “Predictive Approach Memo for the Great Lakes Basin” in the rulemaking docket). EPA's memo suggests correlating historic CSO occurrence data with precipitation data obtained from rain gauges near CSO discharge points, if available, or readily available data from the National Oceanic and Atmospheric Administration's National Centers for Environmental Information Climate Data Online Search (
Section 425(b)(5)(A) of the 2016 Appropriations Act provides that the notice and publication requirements of the provision must be implemented within two years, unless the EPA Administrator determines the community needs additional time to comply in order to avoid undue economic hardship. All of the Great Lakes States are authorized to administer the NPDES program. Because EPA is implementing Section 425 as part of the NPDES permit program, this determination may be made by the Director or by the Administrator. In EPA's view, the State as the NPDES authority is in a better position to evaluate the economic conditions and financial capability of the permittee as they have worked with individual communities to ensure implementation of their LTCPs.
The rule requires that the Great Lakes Basin CSO permittee must submit a public notification plan to the Director of the NPDES program by August 7, 2018. The Great Lakes Basin CSO permittee is required to comply with the public notice requirements of § 122.38 within nine months, and in the next calendar year in the case of annual notification, unless the Director specifies a later date to avoid economic hardship. Under § 122.38(e), the Director may extend the compliance dates for public notification under § 122.38(a), annual notice under § 122.38(b), and/or public notification plan submittal under § 122.38(c) for individual communities if the Director determines the community needs additional time to comply in order to avoid undue economic hardship. The rule requires the Director to notify the Regional Administrator of the extension and the reason for the extension. In addition, the Director is required to post on its website a notice that includes the name of the community and the new compliance date(s).
The requirement to post this information on the Director's website provides the public with information on any exceptions that have been made to the compliance date. Because financial resources will vary among communities due to community size, annual revenue, staffing and consultant resources, other program expenses (
EPA anticipates there will likely be public health benefits from decreased bodily exposure to sewer overflows but did not quantify these benefits. EPA views these new notification requirements as a minimal increase in existing costs that permittees are already incurring due to existing permit requirements that conform to the CSO Control Policy codified in CWA 402(q).
This rule is expected to protect public health by ensuring timely notification to the public and to public health departments, public drinking water facilities and other potentially affected public entities, including Indian tribes. It provides additional specificity beyond existing public notification requirements to ensure timely and consistent communication to the public regarding combined sewer overflows in the Great Lakes Basin. It also acknowledges the significant technology changes that have occurred since the original requirements were developed in 1994 which allow direct public access to real-time information. Timely notice may allow the public and affected public entities to take steps to reduce the public's potential exposure to pathogens associated with human sewage, which can cause a wide variety of health effects, including gastrointestinal, skin, ear, respiratory, eye, neurologic, and wound infections. Although EPA has not quantified these benefits, the expected reduction in human exposure to pathogens may provide a net public health benefit from this rule. See “Benefits of Abating
Because of these expected public health benefits, EPA has chosen to implement the requirements with a two-stage approach which ensures that the benefits of the rule can begin to accrue as quickly as possible, rather than delaying these public health benefits until future permit renewals which for some permittees could be as long as five years away (or even more if a permit is administratively continued by the permitting authority).
The rule also improves transparency and accountability to the public about the presence and magnitude of CSO discharges in their community. Many permittees already report to their Director on the occurrence, duration, volume, and cause of CSO discharges; however, that information is often difficult for communities to find and interpret. Through a complete, consistent, and easily accessible annual notice that is shared with the public, community members can gain perspective on this important water pollution issue and they are able to see progress that is being made to reduce discharges.
The “Analysis of Costs and Executive Orders” (available in the rulemaking docket) estimates the incremental costs of requiring CSO permittees that discharge to the Great Lakes Basin to provide public notification of CSO discharges. Table 3 summarizes the estimated incremental costs for the rule.
The average incremental cost per CSO permittee is about $2,850 per year and the total annual incremental cost on all CSO permittees is about $450,000.
The cost analysis assumes that costs will be borne by Great Lakes Basin CSO permittees in the form of one-time implementation activities that would occur within one to two years, once-per-year activities including an annual notice, and ongoing activities that would occur during and after CSO discharges. The cost analysis also accounts for costs to State agencies, mainly in the review of CSO permittee plans and reports.
Additional information about these statutes and Executive Orders can be found at
This action is a significant regulatory action that was submitted to the Office of Management and Budget (OMB) for review. Any revisions made in response to interagency review have been documented in the docket for this action. In addition, EPA prepared an analysis of the potential costs associated with this action. This analysis, “Analysis of Costs and Executive Orders,” is summarized in Section VI and is available in the docket.
This action is considered an Executive Order 13771 regulatory action. Details on the estimated costs of this final rule can be found in EPA's “Analysis of Costs and Executive Orders,” which is available in the docket. Also see Section VI.
The information collection activities in this rule have been submitted for approval to the Office of Management and Budget (OMB) under the PRA. The Information Collection Request (ICR) document that the EPA prepared has been assigned EPA ICR number 2562.01. The ICR is summarized here; a complete copy can be found in the docket. The information collection requirements are not enforceable until OMB approves them.
As discussed in section V.A of this document, NPDES permits for CSO discharges to the Great Lakes Basin will require permittees to provide public notification to ensure that the public receives adequate notice of CSO occurrences and CSO impacts. The information burden associated with this provision is approved in “Information Collection Request for NPDES Program (Renewal),” OMB Control No. 2040-0004, EPA ICR No. 0229.21. EPA has developed an additional analysis to provide a better, updated estimate of the public notification requirements. The analysis used to develop these estimates is described in “ICR Supporting Statement, Information Collection Request: Public Notification Requirements for CSOs in the Great Lakes Basin,” EPA ICR number 2562.01. Key estimates and assumptions in the analysis include:
• 69% percent of existing discharge points (outfalls) for all CSO permittees have already installed signs and they are being maintained;
• Over 60% of the CSO permittees already have a system for developing estimates of the occurrence and volume of discharges from CSO discharge points;
• Each Great Lakes Basin CSO permittee already operates a website that can be modified to provide the public with notification of a CSO event;
• Larger CSO communities may have access to listserv technology;
• Electronic technology significantly reduces the burden of providing initial and supplemental notification to the public and to local public health departments and other affected public entities;
• Much of the effort in developing public notification plans is included in burden estimates for the individual public notification components in the proposal. The activities attributed to the
• The burdens on the NPDES authority for permit renewals are applied to one-fifth of all Great Lakes Basin CSO permits within each State beginning in year 2 of the ICR to account for the five year permit term.
The public notification requirements in this rule are designed to alert the public and public health departments, and other potentially affected entities of CSO discharges in a more wide-spread and timely manner than is currently practiced. The notification requirements which involve distribution of CSO discharge related information (
EPA may not conduct or sponsor, and a person is not required to respond to, a collection of information unless it displays a currently valid OMB control number. The OMB control numbers for the EPA's regulations in 40 CFR are listed in 40 CFR part 9. When OMB approves this ICR, the Agency will announce that approval in the
I certify that this action will not have a significant economic impact on a substantial number of small entities under the RFA. The small entities subject to the requirements of this action are small governmental jurisdictions. The Agency has determined that 123 (78%) of the 158 communities discharging CSOs to the Great Lakes Basin are governmental jurisdictions with a population of less than 50,000 and thus can be classified as small entities. EPA evaluated the potential impact on annual revenue that these small entities may experience. Nearly all of the small communities (121 of 123 communities) are expected to experience an impact of less than 1% of annual revenue. Two communities may experience an impact of greater than 1% of annual revenue (one potentially experiencing an impact slightly over 1% and the other approximately 2%). Details of this analysis are presented in the Analysis of Costs and Executive Orders which is available in the docket.
This action does not contain an unfunded mandate of $100 million or more as described in UMRA, 2 U.S.C. 1531-1538. EPA has conducted a cost analysis examining the potential burden to State, tribal and local governments. Details of this analysis are presented in the Analysis of Costs and Executive Orders which is available in the docket. EPA estimates that the costs of the rule to States, tribes and local governments will be well below $100 million per year. In addition, EPA compared the estimated annualized cost of the rule and revenue estimates for small local governments using four estimates of revenue data. The annualized compliance cost as a percentage of annual government revenues is below 1%. EPA concludes that the impact of the rule is very unlikely to reach or exceed 1% of small local government revenue.
This action does not have federalism implications. It will not have substantial direct effects on the States, on the relationship between the national government and the States, or on the distribution of power and responsibilities among the various levels of government.
The rule includes a requirement for CSO permittees to notify the public of CSO discharges. This requirement includes the development of a public notification plan and the release of an annual notice that includes monitoring data. The incremental impact to State permitting authorities is estimated to be approximately $1,000 annually per State. The incremental impact to local permittees may range from a total of $1,000 to $4,000 annually per CSO permittee, depending on the number of CSO events and preparation time for the annual notice. Details of this analysis are presented in “Analysis of Costs and Executive Orders,” which is available in the docket (Docket ID No. EPA-HQ-OW-2016-0376
Keeping with the spirit of E.O. 13132 and consistent with EPA's policy to promote communications between EPA and State and local governments, and Section 425's direction to work with the States, EPA met with State and local officials throughout the process of developing the proposed rule and received feedback on how potential new regulatory requirements would affect them. EPA engaged in extensive outreach via conference calls to affected States to enable officials of affected States to have meaningful and timely input into the development of the proposed and final rule. EPA also held a public listening session and solicited written comments from the public and impacted stakeholder groups, including affected municipalities, to inform the development of the public notice proposed requirements. See Docket ID No. EPA-HQ-OW-2016-0376 to the
This action does not have tribal implications as specified in Executive Order 13175 since it does not have a direct substantial impact on one or more federally recognized tribes. No tribal governments are authorized NPDES permitting authorities and none of the combined sewer systems subject to this rule are located on Indian nation lands.
The rule would address the way in which municipalities share information with the public, public health departments, and potentially impacted communities (including Indian tribes) about CSOs in the Great Lakes Basin. EPA therefore evaluated the proximity of CSSs that would be subject to the rule in relation to Indian lands. EPA identified six CSO permittees with the potential to affect waters near four Indian nations in New York State:
• Seneca Nation of Indians (SNI): The Dunkirk WWTP is located south of the Cattaraugus Reservation. The Buffalo Sewer Authority and Niagara Falls WWTP are located close to SNI lands within the city of Niagara Falls, NY and Buffalo, NY (where the Seneca casinos are located).
• Tuscarora Nation (TN): The Tuscarora Nation lands are located directly between the Niagara Falls WWTP and Lockport WWTP but not on the Niagara River or Eighteen Mile Creek.
• Tonawanda Seneca Nation (TSN): The Medina WWTP is located 10 miles north of the Tonawanda Seneca Nation lands.
• St. Regis Mohawk Tribe (SRMT): Any of the three WWTP plants along the St. Lawrence River would be of concern to the Mohawks at Akwesasne. SRMT is directly impacted by the Massena WWTP as the St. Lawrence River goes directly thru the heart of Akwesasne, the St. Regis Mohawk Tribe's reservation lands.
Consistent with the EPA Policy on
This action is not subject to Executive Order 13045 because it is not economically significant as defined in Executive Order 12866, and because the EPA does not believe the environmental health or safety risks addressed by this action present a disproportionate risk to children. The rule would, in some cases, increase public awareness of CSO discharges to the Great Lakes Basin, including information about public use areas such as beaches that may be impacted by contaminated CSO discharges, and by doing so could decrease health risks for children, infants, and adults.
This action is not a “significant energy action” because it is not likely to have a significant adverse effect on the supply, distribution or use of energy. The rule requires CSO permittees to notify the public of CSO discharges.
This rulemaking does not involve technical standards.
EPA determined that the human health or environmental risk addressed by this action would not have potential disproportionately high and adverse human health or environmental effects on minority, low-income, or indigenous populations, as specified in Executive Order 12898 (59 FR 7629, February 16, 1994). This action affects the way in which Great Lakes Basin CSO permittees communicate information regarding CSO discharges to the public. It does not change any current human health or environmental risk standards.
However, because the rule would address the way in which information about CSO discharges is communicated to the public, EPA did reach out to environmental justice organizations to specifically solicit input on what may be the best approaches to reaching environmental justice communities with this information. Prior to the public listening session on September 14, 2016, EPA contacted over 800 environmental justice stakeholders through the Office of Environmental Justice Listserv, to ensure they were aware of the listening session and the opportunity to provide written input to the Agency through the public docket. EPA again reached out via this Listserv to ensure environmental justice stakeholders were aware of the public comment period for the proposed rule.
In addition, the rule requires the Great Lakes Basin CSO permittee to consult with local public health departments and potentially affected public entities when developing the public notification plan. These consultations may alert the Great Lakes Basin CSO permittee to specific environmental justice community considerations regarding the best ways to effectively communicate this information.
This action is subject to the CRA, and EPA will submit a rule report to each House of the Congress and to the Comptroller General of the United States. This action is not a “major rule” as defined by 5 U.S.C. 804(2).
Environmental protection, Combined sewer overflow, Public notification, Reporting, Water pollution.
Environmental protection, Combined sewer overflow, Public notification, Reporting, Water pollution.
For the reasons set forth in the preamble, EPA amends 40 CFR parts 122 and 123 as follows:
The Clean Water Act, 33 U.S.C. 1251
(j) * * *
(8) * * *
(iii)
(a) All permittees authorized to discharge a combined sewer overflow (CSO) to the Great Lakes Basin (“Great Lakes Basin CSO permittee”) must provide public notification of CSO discharges as described in this paragraph (a) after November 7, 2018. Public notification shall consist of:
(1)
(A) CSO discharge points (unless the permittee demonstrates to the Director that no public access of, or public contact with, the receiving water is expected); and
(B) Potentially impacted public access areas.
(ii) At a minimum, signs shall include:
(A) The name of the Great Lakes Basin CSO permittee;
(B) A description of the discharge (
(C) The Great Lakes Basin CSO permittee contact information, including a telephone number, NPDES permit number and CSO discharge point number as identified in the NPDES permit.
(iii) The Great Lakes Basin CSO permittee shall perform periodic maintenance of signs to ensure that they are legible, visible and factually correct.
(iv) Where a permittee has before August 7, 2018 installed a sign at a CSO discharge point or potentially impacted public access area that is consistent with State requirements, the sign is not required to meet the minimum requirements specified in paragraph (a)(1)(ii) of this section until the sign is replaced.
(2)
(A) The water body that received the discharge(s);
(B) The location of the discharge(s) and identification of the public access areas potentially impacted by the discharge. Where CSO discharges from the same system occur at multiple locations during the same precipitation-related event, the Great Lakes Basin CSO permittee may provide a description of the area in the waterbody where discharges are occurring and identification of the public access areas potentially impacted by the discharge, and the permittee is not required to identify the specific location of each discharge;
(C) The date(s) and time(s) that the discharge(s) commenced or the time the permittee became aware of the discharge(s) or when discharges are expected to occur;
(D) Whether, at the time of the notification, the discharge(s) is continuing or has ended. If the discharge(s) has ended, the approximate time that the discharge ended; and
(E) A point of contact for the CSO permittee.
(ii) Within seven (7) days after becoming aware by monitoring, modeling or other means that the CSO discharge(s) has ended, the Great Lakes Basin CSO permittee shall provide the following supplemental information to the public health department and affected public entities and Indian Tribes receiving the initial notice under paragraph (a)(2)(i) of this section unless the information had been provided in an earlier notice:
(A) The measured or estimated volume of the discharge(s). Where CSO discharges from the same system occur at multiple locations during the same precipitation-related event, the Great Lakes Basin CSO permittee may provide an estimate of the cumulative volume discharged to a given waterbody; and
(B) The approximate time that the discharge(s) ended.
(3)
(ii) At a minimum, the notice shall include:
(A) The water body that received the discharge(s);
(B) The location of the discharge(s) and identification of the public access areas potentially impacted by the discharge. Where CSO discharges from the same system occur at multiple locations during the same precipitation-related event, the Great Lakes Basin CSO permittee may provide a description of the area in the waterbody where discharges are occurring and identification of the public access areas potentially impacted by the discharge, and the permittee is not required to identify the specific location of each discharge;
(C) The date(s) and time(s) that the discharge(s) commenced or the time the permittee became aware of the discharge(s); and
(D) Whether, at the time of the notification, the discharge(s) is continuing or has ended. If the discharge(s) has ended, the approximate time that the discharge(s) ended.
(iii) Within seven (7) days after becoming aware by monitoring, modeling or other means that the CSO discharge(s) has ended, the Great Lakes Basin CSO permittee shall update the electronic notice with the following information unless the information had been provided in an earlier notice:
(A) The measured or estimated volume of the discharge(s). Where CSO discharges from the same system occur at multiple locations during the same precipitation-related event, the Great Lakes Basin CSO permittee may provide an estimate of the cumulative volume discharged to a given waterbody; and
(B) The approximate time that the discharge(s) ended, unless this information was provided in an earlier notice.
(b)
(1) A description of the location and receiving water for each CSO discharge point, and, if applicable, any treatment provided;
(2) The date, location, approximate duration, measured or estimated volume, and cause (
(3) The date, location, duration, volume, and cause of each dry weather CSO discharge that occurred during the past calendar year;
(4) A summary of available monitoring data for CSO discharges from the past calendar year;
(5) A description of any public access areas potentially impacted by each CSO discharge;
(6) Representative precipitation data in total inches to the nearest 0.1 inch that resulted in a CSO discharge, if precipitation was the cause of the discharge identified in (§ 122.38(b)(2));
(7) Permittee contact information, if not listed elsewhere on the website where this annual notice is provided; and
(8) A concise summary of implementation of the nine minimum controls and the status of implementation of the long-term CSO control plan (or other plans to reduce or prevent CSO discharges), including:
(i) A description of key milestones remaining to complete implementation of the plan; and
(ii) A description of the average annual number of CSO discharges anticipated after implementation of the long-term control plan (or other plan relevant to reduction of CSO overflows) is completed.
(c)
(1) Identify the location of signs required under paragraph (a)(1) of this section and the location of any CSO discharge point where a sign is not provided. Where a sign has not been provided at a CSO discharge point, the plan shall explain why a sign at that location is not feasible or was otherwise determined to not be necessary.
(2) Describe the message used on signs required under paragraph (a)(1) of this section;
(3) Describe protocols for maintaining signage (
(4) Identify (with points of contact) the municipalities, public drinking water supplies, public parks with water access, Indian Tribe(s), and describe other sensitive area(s) identified in the permittee's long-term CSO control plan, that may be impacted by the permittee's CSO discharges;
(5) Summarize significant comments and recommendations raised by the local public health department under paragraph (d) of this section;
(6) Identify other affected public entities and Indian Tribes whose waters may be impacted by a CSO discharge that were contacted under paragraph (d) of this section and provide a summary of their significant comments and recommendations;
(7) Describe protocols for the initial and supplemental notice to public health departments and other public entities;
(8) Describe protocols for the initial and supplemental notice to the public;
(9) Describe, for each CSO discharge point, how the volume and duration of CSO discharges shall be either measured or estimated for the purposes of complying with paragraphs (a)(2)(ii)(A), (a)(3)(iii)(A) and (b)(2) and (3) of this section. If the Great Lakes Basin CSO permittee intends to use a model to estimate discharge volumes and durations, the plan must summarize the model and describe how the model was or will be calibrated. CSO permittees that are a municipality or sewer district with a population of 75,000 or more must assess whether re-calibration of their model is necessary, and recalibrate if necessary, at least once every 5 years;
(10) Describe protocols for making the annual notice described in paragraph (b) of this section available to the public and to the Director; and
(11) Describe significant modifications to the plan that were made since it was last updated.
(d)
(1) Seek input from the local public health department (or if there is no local health department, the State health department), to:
(i) Develop recommended protocols for providing notification of CSO discharges to the public health department. The protocols will specify which CSO discharges are subject to notification, the means of notification, timing of notification and other relevant factors.
(ii) Develop recommendations for providing notice to the general public of CSO discharges electronically and by other appropriate means.
(iii) Develop recommendations for areas that would be considered “potentially impacted public access areas” as referenced in § 122.38(a)(1), (2), and (3).
(2) Seek input from other potentially affected public entities and Indian Tribes whose waters may be impacted by a CSO discharge.
(3) Consider the recommendations of the public health department and other potentially affected entities in developing protocols in its public notification plan for providing notification of CSO discharges to the public health department and potentially affected public entities and Indian Tribes.
(e)
(f)
(1) Require implementation of the public notification requirements in § 122.38(a);
(2) Specify the information that must be included on discharge point signage, which, at a minimum, must include those elements in § 122.38(a)(1)(ii);
(3) Specify discharge points and public access areas where signs are required pursuant to § 122.38(a)(1)(i);
(4) Specify the timing and minimum information required for providing initial and supplemental notification to:
(i) Local public health department and other potentially affected entities under § 122.38(a)(2); and
(ii) The public under § 122.38(a)(3).
(5) Specify the location of CSO discharges that must be monitored for volume and discharge duration and the location of CSO discharges where CSO volume and duration may be estimated; and
(6) Require submittal of an annual notice in accordance with § 122.38(b);
(7) Specify protocols for making the annual notice under § 122.38(b) available to the public.
Clean Water Act, 33 U.S.C. 1251
(a) * * *
(47) For a Great Lakes State, § 122.38.
Federal Communications Commission.
Final rule.
In this document, the Commission adopts revisions to its rules governing the Intergovernmental Advisory Committee (Committee or IAC), which advises the Commission on a range of telecommunications issues affecting local, county, state, and Tribal interests, to expand it from 15 members to 30 members. The IAC has been an important source of information and guidance to the Commission over the past 20 years. The rule change will enhance the IAC's role by allowing for a greater diversity of viewpoints representing our municipal, county, state, and Tribal partners throughout the country.
Effective January 8, 2018.
Carmen Scanlon, Consumer and Governmental Affairs Bureau, at: (202) 418-0544; email:
This is a summary of the Commission's Order, FCC 17-172, adopted December 13, 2017, released December 20, 2017. The full text of this document will be available for public inspection and copying via ECFS, and during regular business hours at the FCC Reference
The Order does not contain any new or modified information collection requirements subject to the Paperwork Reduction Act of 1995, 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,
The Commission sent a copy of the Order to Congress and the Government Accountability Office pursuant to the Congressional Review Act,
1. The IAC, formerly known as the Local and State Government Advisory Committee (LSGAC), was created in 1997 to provide guidance to the Commission on issues of importance to state, local, county, and Tribal governments, as well as to the Commission. The Committee is currently composed of 15 elected and appointed officials of those governmental entities.
2. The Committee has provided ongoing advice and information to the Commission on a broad range of telecommunications issues in which state, local, county, and Tribal governments share “intergovernmental responsibilities or administration” with the Commission, including cable and local franchising, public rights-of-way, facilities siting, universal service, barriers to competitive entry, and public safety communications.
3. The Commission has often found over the years that an IAC membership of just 15 does not often capture the varied perspectives of our regulatory partners across the country. The IAC works best and its advice helps the Commission the most when it fully represents perspectives of rural, urban, and suburban jurisdictions from various geographic areas throughout the United States.
4. By expanding its membership to 30, the Commission better enable the IAC's ability to represent perspectives and viewpoints from all relevant governmental entities and sectors, and to further promote valuable, comprehensive, and balanced input that more comprehensively reflects the views and expertise of our regulatory partners. The Commission's experience with other advisory committees of similar size shows this to be the case.
5. The Commission continue to believe that IAC representation from each category of state, local, county, and Tribal government is important. Thus, the number of members from each category set forth in our current rules shall now serve as a minimum threshold. The Committee will now consist of 30 members, of which at least four shall be elected municipal officials, at least two shall be elected county officials, at least one shall be a local government attorney, at least one shall be an elected state executive, at least three shall be elected state legislators, at least one shall be a public utilities or public service commissioner, and at least three shall be Native American Tribal representatives. The Commission's approach will give the Commission flexibility to expand the number and diversity of viewpoints from these sectors while ensuring none is under-represented.
6. The rule modifications adopted constitute rules of agency organization, procedure and practice. Therefore, the modification of § 0.701 of the Commission's rules is not subject to the notice and comment and effective date provisions of the Administrative Procedure Act.
7. Pursuant to sections 4(i), 4(j), and 303(r) of the Communications Act of 1934, as amended, 47 U.S.C. 154(i), 154(j), and 303(r), subpart G, § 0.701 of the Commission's rules, 47 CFR 0.701, modified as set forth in the Order, is adopted.
Organization and functions (Government agencies).
For the reasons discussed in the preamble, the Federal Communications Commission amends 47 CFR part 0 as follows:
Secs. 5, 48 Stat. 1068, as amended; 47 U.S.C. 155, unless otherwise noted.
(b)
Federal Communications Commission.
Final rule.
In this document, an
Effective February 7, 2018 except for the amendment to § 73.3613, which contains information collection requirements that are not effective until approved by the Office of Management and Budget (OMB). The Commission will publish a document in the
Benjamin Arden, Industry Analysis Division, Media Bureau, FCC, (202) 418-2605. For additional information concerning the PRA information collection requirements contained in the
This is a summary of the Commission's
1. In this
2. Congress requires the Commission to review its broadcast ownership rules every four years to determine whether they are necessary in the public interest as the result of competition and to repeal or modify any regulation the Commission determines to be no longer in the public interest. On August 10, 2016, the Commission adopted the
3. The
4. Nexstar also challenged the Local Television Ownership Rule and the attribution of television JSAs, while Connoisseur challenged an aspect of the Local Radio Ownership Rule related to embedded markets.
5. Upon reconsideration, the Commission repeals the Newspaper/
6. In the
7. The Commission finds that the NBCO Rule must be repealed because it is not necessary to promote the Commission's policy goals of viewpoint diversity, localism, and competition, and therefore does not serve the public interest. Because the Commission is repealing the NBCO Rule on other grounds, it is unnecessary to address arguments that the rule should be repealed on competition grounds. Similarly, it is unnecessary to reach arguments that ownership does not influence viewpoint because the Commission is eliminating the rule on the ground that, even if ownership might influence viewpoint in certain circumstances, the NBCO Rule is not necessary to foster viewpoint diversity (nor to promote localism or competition). The parties that support reconsideration of the NBCO Rule argue that the modifications adopted in the
8.
9. That same obligation now requires the Commission to eliminate the NBCO Rule. Not only have the means of accessing content changed dramatically, but the media marketplace has seen an explosion in the number and variety of sources of local news and information since the Commission adopted the NBCO Rule in 1975. Opponents of the rule point to this increase and argue that the NBCO Rule has become obsolete as a result.
10. From the 6,197 full-power radio stations and 851 full-power television stations that existed in the late 1960s, the Commission's latest broadcast totals place the number of full-power radio stations at 15,512 and full-power television stations at 1,775. Contrary to the Commission's conclusion in the
11. Equally, if not more significantly, NAB cites evidence of the growing prevalence of independent digital-only news outlets with no print or broadcast affiliation, many with a local or hyperlocal focus. Thirteen years ago, the Third Circuit agreed with the Commission that the record suggested that cable and the internet contribute to viewpoint diversity; the panel members simply disagreed about the degree and importance of this trend at that time. Since then, however, the picture has changed significantly. Even the U.S. Supreme Court recently recognized the importance of the internet and social media as sources of news and information for many Americans. As this trend continues to gain momentum and new voices proliferate, the dominance of traditional news outlets diminishes. Although the record contains some evidence that local television stations and newspapers may still be consumers' primary sources of local news and information, the Commission finds that it improperly discounted the role of non-traditional news outlets, including internet and digital-only, in the local media marketplace.
12. The Commission concluded in the
13. Numerous studies cited in the record establish the emergence and growth of alternative sources of local news and information, including digital-only local news outlets as well as other online sources of local news and information. For example, according to a 2014 Pew Research study, out of 438 digital news sites examined, more than half had a local focus, with the typical outlet described as focused on coverage of local or even neighborhood-level news. Even by 2011, a Pew study confirmed that while newspapers remain popular sources for some such information, 69 percent of those surveyed said that if their local newspaper no longer existed, it would not have a major impact on their ability to keep up with information and news about their community. By 2016, Pew reported that just 20 percent of U.S. adults often get news from print newspapers, with even steeper declines in particular demographics—only 5 percent of those aged 18 through 29, and only 10 percent of those aged 30 through 49. According to the earlier Pew study, for the 79 percent of Americans who are online, the internet is the first or second most important source for 15 of the 16 local topics examined. Nearly half of adults (47 percent) use mobile devices to get local news and information, and for none of Pew's topics did more than 6 percent of respondents say they depended on the website of a legacy news organization. Among adults under age 40, the web ranks first or ties for first for 12 of the 16 local topics asked about. Furthermore, in the
14. On reconsideration, the Commission finds that the record clearly demonstrates that the wealth of additional information sources available in the media marketplace today, apart from traditional newspapers and broadcasters, strongly supports repealing the NBCO Rule. These dramatic and ongoing changes in the media industry negate concerns that repealing the NBCO Rule will harm viewpoint diversity. The Commission does not perceive a need for the rule in light of the current trends toward greater consumer reliance on these alternative sources of local news and information. The Commission's failure to account properly for the multiplicity of news and information sources available in the current media marketplace factored heavily in its unjustified retention of the NBCO Rule.
15.
16. In light of the long decline of the newspaper industry, the loss of an independent daily newspaper voice in a community will have a much smaller impact on viewpoint diversity than would have been the case in 1975. In addition, as discussed below, repeal of the NBCO Rule will permit newspaper/broadcast combinations that can strengthen local voices and thus enable the combined outlets to better serve their communities.
17.
18. There is ample evidence in the record that eliminating the rule will help facilitate such investment and enable both broadcasters and newspapers to better serve the public. For example, Cox Media Group, LLC (Cox) asserts that collaboration and cost-sharing between its television station and its newspaper in Dayton, Ohio, helped them be the first to report on what became a national story about the failures of the Veterans Administration to provide adequate medical services. In addition, Cox previously provided several examples showing how the combination of resources across its commonly owned newspaper, television, and radio properties in both Dayton and Atlanta, Georgia, allowed them to report on breaking news stories more quickly and accurately and to also provide more thorough coverage of events, such as political elections, that involve numerous interviews and in-depth issue reporting. Cox asserts that the common ownership of multiple outlets has enabled its media properties “to vastly improve service at a time when the economics of the newspaper and broadcast business would seem to dictate the opposite.” In addition, the News Media Alliance (NMA) provided numerous examples of the benefits to local programming involving cross-owned media outlets in various markets. For example, a cross-owned newspaper/television combination in Phoenix combined resources to report on stories such as the shooting of Congresswoman Gabrielle Giffords and 18 others in Tucson, the Yarnell Hill fire that killed 19 firefighters and destroyed more than 100 homes, and a massive dust storm. In South Bend, Indiana, a commonly owned local newspaper, television station, and two radio stations regularly worked together on issues of local significance, such as uncovering harmful substances in drinking water, hosting town-hall meetings for political candidates and local officials, sending a reporter to Iraq, commemorating the 150th anniversary of the local Studebaker factory, providing weather information, and covering Notre Dame sports. NMA also cited prior Commission studies for the proposition that, on average, a cross-owned television station produces more local news and more coverage of local and state political candidates than comparable non-cross-owned television stations. NMA pointed to the finding in one Commission study that cross-owned television stations, on average, air 50 percent more local news than non-cross-owned stations. The Commission's Media Ownership Study 4 also found that the total amount of local news aired by all television stations in the market may be negatively correlated with newspaper/broadcast cross-ownership. As noted in the
19. In light of the well-documented and continuing struggles of the newspaper industry, the efficiencies produced by newspaper/broadcast combinations are more important than ever. A report in February 2017 examining the health of small newspapers was cautiously optimistic about the future of publications with a community or hyperlocal focus but acknowledged that their battle for survival will not be easy and will require new approaches and strategies that take advantage of their niche position. Removing the regulatory obstacle of this outdated rule will help financially troubled newspapers carry on their important work. While the Commission recognizes that cost-savings gained from common ownership will not necessarily be invested in the production of local news, by allowing newspapers and broadcasters to collaborate and combine resources, the Commission's action in this
20.
21. Indeed, even to the extent that eliminating the rule would permit transactions that would reduce the number of outlets for news and information in local markets, the markets will continue to have far more voices than when the rule was enacted. The modern media marketplace abounds with new, non-traditional voices, the number of local broadcasters has increased dramatically, and the strength of local newspapers relative to other media has diminished as a result of the difficulties facing the industry and the rise of new voices. And the Commission expects the number of
22. The Commission consistently has recognized that changing circumstances in the marketplace warrant a retreat from a total ban; accordingly, the Commission has attempted to impose various limits on the rule through the years. The Commission's overall direction has been toward a growing acknowledgment that the rule is not always necessary to promote viewpoint diversity and should be modified to reflect changes in the marketplace. The Commission's action in this
23. As noted in the
24. The newspaper industry had not recovered when the Commission began its 2010/2014 ownership review and, indeed, the hardships continued to mount. In its 2010
25. The Commission recognized in the
26. On reconsideration, the Commission finds that its modifications to the NBCO Rule in the
27. In addition, the modified rule inexplicably left in place a definition of daily newspaper that is outdated and illogical in that it applies only to newspapers printed at least four days a week. The distinction between print newspapers and digital outlets has become blurred as some newspapers reduce the number of days a week they publish in print and rely more heavily on their online distribution. Indeed, many publishers today continuously update the content of the online versions of their newspapers as they compete with bloggers and social media that rapidly produce and update their own content. Applying the NBCO Rule to newspapers only if they are printed in hardcopy at least four days per week ignores the reality that what defines a newspaper has changed and that many consumers access the paper's news and information over the internet throughout the day. A newspaper's influence should no longer be measured by how many mornings a week it is delivered to the doorstep. Doing so would exacerbate the perverse incentive for a newspaper seeking to combine with a broadcaster to reduce its print editions in order to avoid triggering the rule. Given the current media marketplace and the way consumers access content, the rule's reliance on a newspaper's printing schedule makes no sense.
28. As the modified rule adopted in the
29. The Commission finds also that the NBCO Rule should be eliminated rather than relaxed. The Commission's previous attempts to relax the rule demonstrate the difficulty in designing an approach that works effectively for the range of market circumstances across the country. Paradoxically, previous attempts at relaxing the rule arguably threatened the greatest harm in small markets where cross-ownership may be needed most to sustain local news outlets. The record does not provide an adequate basis for distinguishing areas where application of the rule could serve the public interest from those where it would not. There was significant opposition to the modified rule proposed by the Commission in this proceeding, and only one commenter proposed a
30. In light of the significantly expanded media marketplace and the overall state of the newspaper industry, and the Commission's conclusion that the rule is not necessary to promote viewpoint diversity, competition, or localism, and may hinder localism, the Commission concludes that immediate repeal is required by Section 202(h) and will permit combinations that would benefit consumers. The Commission's decision will enable all broadcasters and newspapers to attract new investment in order to preserve and expand their local news output.
31. In addition, though the Commission finds that the entire NBCO Rule must be eliminated, the Commission finds that the record provides an additional and independent justification for eliminating the restriction on newspaper/radio combinations. Opponents of this aspect of the rule argue that evidence in the record does not provide adequate support for the Commission's conclusion that radio is a sufficiently meaningful source of local news and public interest programming such that allowing newspaper/radio combinations could harm viewpoint diversity. The Commission agrees. As discussed in the following section, the Commission is eliminating the Radio/Television Cross-Ownership Rule based on its finding that the diminished contributions of local broadcast radio stations to viewpoint diversity, together with increasing contributions from new media outlets and the public interest benefits of radio/television combinations, no longer justify continued radio/television cross-ownership regulation. For the same reasons relating to viewpoint diversity contributions of radio and the proliferation of alternative media voices, as well as the countervailing public interest benefits of newspaper/radio combinations, the Commission concludes that the restriction on newspaper/radio combinations is not in the public interest and must be eliminated pursuant to Section 202(h).
32.
33. The Commission agrees with comments stating that lifting the ban on newspaper/radio combinations is unlikely to have a significant effect on minority and female ownership in the radio market given that the thousands of radio stations across the country offer plenty of purchasing opportunities for minorities and women and at lower cost than most other forms of traditional media. In addition, the Commission does not anticipate that lifting the ban on newspaper/television combinations will lead to a meaningful decrease in the number of minority-owned television stations. Some groups previously expressed concern that minority-owned television stations would be targeted for acquisition if the ban were relaxed to favor waiver requests for certain newspaper/television combinations with stations ranked below the top four television stations in a market—a category that includes many minority-owned stations. Removing the ban across-the-board will ensure that no artificial incentives are created, and the record provides no evidence that minority- and female-owned stations will be singled out for acquisition, as some commenters have speculated. To the contrary, record evidence demonstrates that previous relaxations of other ownership rules have not resulted in an overall decline in minority and female ownership of broadcast stations, and the Commission sees no evidence to suggest that eliminating the NBCO Rule will produce a different result and precipitate such a decline. Ultimately, given the state of the newspaper industry, the Commission expects that broadcasters may be better positioned to be the buyer, rather than the seller, in most transactions that flow from the rule's repeal. Furthermore, submissions in the record suggest that some minority media owners may be poised to pursue cross-ownership acquisition and investment opportunities. Therefore, eliminating the rule potentially could increase minority ownership of newspapers and broadcast stations.
34. In addition, the Commission rejects assertions that
35. Finally, in the
36. The Commission grants the request for reconsideration of the Commission's decision in the
37. In the
38. On reconsideration, the Commission eliminates the Radio/Television Cross-Ownership Rule, concluding that it is no longer necessary to promote viewpoint diversity in local markets. The Commission concludes that the Commission erred in finding in the
39. Contrary to the Commission's findings in the
40. The Commission also discussed broadcast radio's contributions to viewpoint diversity in the NBCO rule section of the
41. NAB argues that the Commission failed to justify its departure from its position in the
42. For example, the Commission itself acknowledged that consumers' reliance on radio for some local news and information has declined significantly over time—falling from 54 percent to 34 percent over the last two decades—as has the number of all-news commercial radio stations—down to 30 stations from (the already low) 50 stations in the mid-1980s out of over 11,000 commercial radio stations. Moreover, the overwhelming majority of programming on news-talk stations is nationally syndicated, rather than locally produced. Comments in the record, which the
43. In addition, the Commission finds that, as NAB contends, the Commission's decision to retain the rule did not properly acknowledge the realities of the digital media marketplace, in which consumers now have access to a multitude of information sources that contribute to viewpoint diversity in local markets. In the
44. The decline of radio's role in providing local news and information, together with the rise of online sources, marks a change from the circumstances the Commission faced when it upheld the rule in the
45. Importantly, the Commission does not mean to suggest that broadcast radio stations make no contribution to viewpoint diversity in local markets—they do. In order to continue to justify the radio/television cross-ownership limits under Section 202(h), however, the Commission is compelled to consider these contributions in the context of the broader marketplace as it exists today, in which broadcast television, print, cable, and online sources all contribute to viewpoint diversity. Broadcast radio's contributions notwithstanding, the wide selection of sources now available renders the Radio/Television Cross-Ownership Rule obsolete in today's vibrant media marketplace.
46. Moreover, the Commission finds that because the rule already permits significant cross-ownership in local markets, eliminating it will have only a minimal impact on common ownership, as parties will continue to be constrained by the applicable ownership limits in the Local Television and Local Radio Ownership Rules. For example, pursuant to the Radio/Television Cross-Ownership Rule, in the largest markets, entities are permitted to own, in combination, either two television stations and six radio stations or one television station and seven radio stations. The Local Radio Ownership Rule permits an entity to own a maximum of eight radio stations in a single market. Therefore, in the largest markets, absent the Radio/Television Cross-Ownership Rule, an entity approaching the limits of the existing cap will be permitted to acquire only one additional radio station and remain in compliance with the Local Radio Ownership Rule. Likewise, an entity with one television station already could acquire only one additional station in these large markets under the Local Television Ownership Rule. Thus, the effect of eliminating the radio/television cross-ownership rule will be small and, as discussed above, mitigated by contributions to viewpoint diversity from other media outlets. In addition, the local ownership limits for television and radio, while intended primarily to promote competition, will continue to prevent an undue concentration of broadcast facilities, thereby preserving opportunities for diverse local ownership, and are therefore adequate to serve the goals the Radio/Television Cross-Ownership Rule was intended to promote.
47. In light of its limited benefits, the Commission finds that the Radio/Television Cross-Ownership Rule no longer strikes an appropriate balance between the protection of viewpoint diversity and the potential public interest benefits that could result from the efficiencies gained by common ownership of radio and television stations in a local market, efficiencies that the Commission has previously recognized. For example, NAB cites numerous Commission studies that found that radio/television cross-ownership produces public interest benefits, including increased news and public affairs programming. The Tribune Company also provides examples of how its co-owned radio/television combinations have been able to improve outreach to their local community and work collaboratively to improve coverage of issues of local concern. The current rule prevents localism benefits from accruing more broadly, without providing meaningful offsetting benefits to viewpoint diversity. As such, the Commission can no longer justify retention of the Radio/Television Cross-Ownership Rule under Section 202(h). In light of the significant common ownership already allowed under the rule, it is not appropriate to modify and retain the rule, which the Commission has found is no longer in the public interest under Section 202(h). Indeed, the record demonstrates that there is no policy justification—competition, localism, or viewpoint diversity—upon which to base such a revised rule. Because the Commission is eliminating the Radio/Television Cross-Ownership Rule on the grounds discussed herein, it is not necessary to reach alternative arguments involving the impact of ownership on viewpoint diversity.
48.
49. In the
50. Upon reconsideration, the Commission finds that the Local Television Ownership Rule adopted in the
51. The
52. On reconsideration, the Commission adopts a revised Local Television Ownership Rule, finding that the rule adopted in the
53. The Commission rejects the argument that reconsideration is inappropriate because petitioners rely on arguments that have been fully considered and rejected by the Commission within the same proceeding. Neither the Communications Act nor the Commission's rules preclude granting petitions for reconsideration that fail to rely on new arguments. Likewise, the Commission rejects UCC's claim that reconsideration is not warranted unless petitioners present new evidence. UCC's reliance on section 1.429(b) of the Commission's rules is misplaced, as this section does not
54.
55. The Commission's finding does not mean, however, that changes outside the local broadcast television market should not factor into the Commission's assessment of the rule under Section 202(h) or that the Commission is free to retain its existing rule without any adjustments that take into account marketplace changes. Indeed, television broadcasters' important role makes it critical for the
56.
57. Despite the fact that the Commission has spent years seeking comment regarding the local ownership rule, the record lacks evidence sufficient to support the Commission's decision to retain the Eight-Voices Test. In the
58. The Commission also failed to explain adequately why the number of independent television stations must be equal to the number of top-performing stations in a market. The Commission stated that a significant gap in audience share persists between the top-four rated stations in a market and the remaining stations in most markets, but it offered no justification for the notion that the dominance of four top-performing stations must be balanced by an equal number of independent, lower-performing stations. The Commission provided no precedent, record evidence, or economic theory to support this notion. Moreover, a significant gap in audience share between the top-four stations and the other stations in a market could also logically justify permitting the common ownership of non-top-four stations to form a stronger competitor to the top-four stations and thus promote competition, even if fewer than eight independent voices remain.
59. Instead, the Commission's primary justification for retaining the Eight-Voices Test apparently stems from the historical use of the number eight as the proper number of voices when the rule was revised in 1999 to permit duopoly ownership in certain circumstances. Notably, that decision relied on viewpoint diversity grounds to determine the appropriate numerical limit. The Commission subsequently determined that the rule was no longer necessary to promote viewpoint diversity and instead relied on competition to support its adoption of the exact same voices limit in the
60. The record fails to support the adoption of a different voice test,
61. The Commission not only failed to provide a reasoned basis for retaining the Eight-Voices Test; it also ignored evidence in the record demonstrating that the Eight-Voices Test lacks any economic support, is inconsistent with the realities of the television marketplace, and prevents combinations that would likely produce significant public interest benefits. Indeed, no commenter has produced evidence of any other industry where the government employs an eight-competitor test. In multiple instances, the Commission acknowledged the potential public interest benefits of common ownership, which potentially allow a local broadcast station to invest more resources in news or other public interest programming that meets the needs of its local community. The Commission finds that the Eight-Voices Test denies the public interest benefits produced by common ownership without any evidence of countervailing benefits to competition from preserving the requirement. Furthermore, these markets—including many small and mid-sized markets that have less advertising revenue to fund local programming—are the places where the efficiencies of common ownership can often yield the greatest benefits. The Commission's action in repealing the Eight-Voices Test will enable local television broadcasters to realize these benefits and better serve their local markets. In particular, the record suggests that local news programming is
62.
63. The ratings data in the record generally supported the Commission's line drawing, and the potential harms associated with top-four combinations find support in the record. The Commission has repeatedly concluded that the Top-Four Prohibition is necessary to promote competition in the local television marketplace. As the Commission has consistently found, there is generally a significant cushion of audience share percentage points that separates the top four stations from the fifth-ranked stations. In the
64. In particular, the Commission takes steps to mitigate the potentially detrimental impacts of applying the Top-Four Prohibition in certain circumstances. In the
65. Instead of relying solely on the bright-line application of the Top-Four Prohibition, the Commission is adopting a hybrid approach that will allow applicants to request a case-by-case examination of a proposed combination that would otherwise be prohibited by the Top-Four Prohibition. Under a hybrid approach, a rule includes both bright-line provisions and a case-by-case element to allow for consideration of market-specific factors. Such an approach provides certainty and flexibility when determining whether a particular transaction should be granted. Though no party commented on this issue, the Commission finds that the record supports its approach. As discussed in this
66. As the Commission has just discussed, the record demonstrates the need for flexibility in the application of the Top-Four Prohibition. Given the variations in local markets and specific transactions, however, the Commission does not believe that applicants would be well served by a rigid set of criteria for its case-by-case analysis. The record
67. The Commission disagrees with the contention that affording licensees a case-by-case opportunity to seek approval of top-four combinations cannot be squared with the bright-line rule adopted in the Commission's
68. Similarly, the Commission rejects the recommendation of Independent Television Group (ITG) that the Commission adopt a presumption in favor of top-four combinations in small and mid-sized markets. ITG provides no evidence sufficient to support such a presumption. ITG simply relies on NAB's assertion in its 2014 comments that in some markets, there may have been significant disparities in audience share among some of the top-four rated stations. The case-by-case analysis is not weighted in favor of transactions in any particular market, and applicants in small and mid-sized markets will be able to provide market-specific evidence supporting their requests.
69. Gray Television, Inc. proposes that, at least in smaller markets, two stations be permitted to combine ownership if one of the stations has not produced a local newscast in the previous two years. The Commission finds, however, that market characteristics and the state of local programming, including local news offerings, are better considered in its case-by-case analysis at this time. The Commission anticipates that any transactions processed under this case-by-case approach will help inform any consideration of specific criteria that could be included in any future revision of the Local Television Ownership Rule, which will be reviewed again in the forthcoming 2018 Quadrennial Review proceeding.
70.
71. In the
72.
73. The Commission denies in part and grants in part Connoisseur's petition for reconsideration of the Commission's decision in the
74. Connoisseur seeks reconsideration of the decision in the
75. The Commission denies in part and grants in part Connoisseur's petition for reconsideration. First, the Commission finds that its decision to not adopt a blanket change to the current methodology was supported by a reasoned explanation. Second, the Commission finds that its decision to adopt a contour-overlap methodology for the Puerto Rico market is not at odds with the approach the Commission took regarding embedded markets. Finally, the Commission grants Connoisseur's alternative request to adopt a presumptive waiver approach for existing parent markets with multiple embedded markets.
76. The Commission finds that it provided a reasoned explanation for its decision in the
77. The Commission also finds that its decision in the
78. For these reasons, the Commission continues to find that, rather than adopting Connoisseur's proposal for an across-the-board change to the Commission's embedded market methodology, entertaining a market-specific waiver is the appropriate approach at this time. In the
79. Accordingly, the Commission finds Connoisseur's argument regarding a presumptive waiver approach to be persuasive. While a bright-line rule codifying Connoisseur's preferred approach to embedded markets would no doubt provide greater certainty, as discussed in this
80. Adoption of this presumption will give Connoisseur—and other parties—sufficient confidence with which to assess possible future actions. Further, the Commission anticipates that any such transactions will help inform its subsequent review of the Local Radio Ownership Rule—and, in particular, the treatment of embedded market transactions.
81. On reconsideration, the Commission finds that it erred in its decision to adopt the Television JSA Attribution Rule and eliminates the Television JSA Attribution Rule. The petitioners also argue that the attribution decision must be reversed on the grounds that (1) the decision had the effect of tightening the media ownership rules, and that the Commission failed to properly analyze the impact of the attribution decision as required under Section 202(h) of the 1996 Telecommunications Act; and (2) the decision was inconsistent with the Commission's repeal of the wireless attributable material relationship (AMR) rule. Because the Commission is reversing its decision to adopt the Television JSA Attribution Rule on other grounds, it does not need to reach these arguments.
82. The Commission first considered whether to attribute television JSAs in 1999. It declined to do so, finding that JSAs did not convey a sufficient degree of influence or control over station programming or core operations to warrant attribution and that JSAs helped produce public interest benefits. The Commission sought additional comment on this conclusion in a 2004 notice of proposed rulemaking after attributing radio JSAs in the
83. In the
84. The Commission finds that Petitioners provide valid reasons to reconsider the Commission's decision to adopt the Television JSA Attribution Rule. The Commission's attribution analysis was deficient and failed to adequately consider the record, which does not support the Commission's conclusion that television JSAs confer on the brokering station a sufficient degree of influence or control over the core operating functions of the brokered station to warrant attribution. In addition, the record contains ample evidence of the public interest benefits that these JSAs provide. Even if the Commission had correctly determined that television JSAs involving more than 15 percent of the brokered station's weekly advertising time confer sufficient influence to warrant attribution, the Commission concludes that the potential benefits of television JSAs outweigh the public interest in attributing such JSAs. Accordingly, the Commission grants the NAB Petition and the Nexstar Petition with respect to this issue. As a result of the Commission's decision, 47 CFR 73.3613(d)(2) and the notes to 47 CFR 73.3555 will be amended to reflect the fact that television JSAs are no longer attributable. Additionally, various Commission rules will need to be revised to reflect the other rule changes and decisions adopted in this
85. The Commission failed to demonstrate that television JSAs confer a sufficient degree of influence or control so as to be considered an attributable ownership interest under the Commission's ownership rules. While the Commission pointed out that the attribution analysis traditionally seeks to identify interests that provide the holder with the incentive and ability to influence or control the programming or other core operational decisions of the licensees—an inquiry that often relies on the Commission's predictive judgement—the Commission may not ignore the record or the realities of the marketplace when making this determination.
86. Here, the Commission's theory of attribution—a reversal of its earlier decision that television JSAs should not be attributable—was belied by its own extensive experience reviewing and approving television JSAs. Between 2008 and the decision to attribute television JSAs in 2014, the Commission's Media Bureau reviewed and approved 85 television JSAs in the context of transaction reviews. Given the Commission's extensive history reviewing specific television JSAs, it is telling that the record was devoid of any evidence that any JSA allowed a brokering station to influence even a single programming decision of a brokered station.
87. As Nexstar points out, the Commission's only citation in support of the theory that television JSAs might provide some measure of influence or control was inapposite. In
88. The Commission attempted to sidestep the lack of evidence to support its theory of attribution by relying on the decision in the
89. The Commission also failed to consider sufficiently other distinctions between the television market and the radio market that undermined its reliance on the radio JSA attribution precedent. For example, unlike radio stations, television stations typically have network affiliations, which limits the amount of programming that a brokering station could potentially influence and the amount of available advertising time for sale. In the Commission's experience reviewing
90. The Commission similarly brushed aside evidence that television stations rely less on local advertising revenue than radio stations, which would reduce the amount of advertising time sold by the broker. Accordingly, the broker would control less of the television station's advertising revenue, which would limit the ability and incentive of the broker to exert significant influence or control over the brokered station's core operating procedures. The Commission summarily concluded that because both radio JSAs and television JSAs involve the sale of advertising time, both must be treated the same for attribution purposes. But this one-size-fits-all attribution analysis is not supported by the record and cannot be sustained.
91. The lack of evidence supporting the Commission's determination that television JSAs confer a significant degree of influence or control over the core operating functions of the brokered station provides sufficient reason for the Commission to eliminate the Television JSA Attribution Rule. But even if the Commission had appropriately determined that television JSAs meet the attribution criteria, it still should have evaluated whether the public interest would be served by making the agreements attributable. While the Commission did acknowledge the potential for benefits flowing from the use of television JSAs in the
92. The Commission was correct that the potential public interest benefits of television JSAs are not relevant to whether these agreements satisfy the Commission's general attribution criteria (
93. Additionally, in the
94. On reconsideration, the Commission concludes that the record demonstrates that television JSAs can promote the public interest, and that this provides an independent reason for eliminating the Television JSA Attribution Rule. Indeed, the record demonstrates that television JSAs have created efficiencies that benefit local broadcasters—particularly in small- and medium-sized markets—and have enabled these stations to better serve their communities. The video marketplace is changing rapidly, and television JSAs can help reduce costs and attract vital revenue at a time of increasing competition for viewership. Broadcasters can turn these efficiencies into increased services for local communities. For example, a JSA between two stations in Kansas helped create cost savings that, in turn, allowed the stations to fund weather emergency-related crawls in Spanish, a service vital to the tornado-prone area. Other stations have been able to increase their local news programming and further invest in investigative reporting due to their JSAs. Additionally, certain JSAs have helped spur minority ownership. As noted in the record, a station owned by Tougaloo College, a historically African-American college, has credited its JSA for providing the resources necessary to upgrade to HD, to produce content relevant to its community, and to cover local sporting events. This is just a sampling of the many examples in the record in which JSAs have benefited local stations and communities.
95. Furthermore, the Commission failed to cite any evidence of actual harm associated with television JSAs. The Commission's analysis here under the public interest standard does not
96. The Commission stated that JSAs could,
97. The Commission finds that, on balance, the public interest is best served by
98. Similarly, even if some television JSAs were to provide the brokering station some ability to influence the operations of the brokered station, the Commission finds that attribution is not warranted here in light of the significant public interest benefits produced by these agreements. Television JSAs can help promote diverse ownership and improve program offerings, including local news and public interest programming, in local markets. While the Commission agrees that it is important that its attribution rules reflect accurately the competitive conditions of local markets, particularly in the context of the Commission's local broadcast ownership rules, the analysis cannot end there. The Commission must ensure that its attribution decisions do not harm the very markets that the attribution rules are designed to protect by preventing the accrual of significant public interest benefits. As discussed in this
99. The Commission also finds that its decision to eliminate the Television JSA Attribution Rule is appropriate, even in light of its decision to relax the Local Television Ownership Rule. As discussed above, the Commission finds that it failed to establish that television JSAs confer significant influence warranting treating JSAs as attributable ownership interests, so the existence of television JSAs in the marketplace does not have an impact on the Commission's public interest analysis in the Local Television Ownership Rule context. Indeed, television JSAs have been utilized by many broadcasters with increasing prevalence for well over a decade. The record in this proceeding lacks any evidence of public interest harm, and there is evidence that these agreements have produced and can produce meaningful public interest benefits. As such, the Commission does not believe that the Local Television Ownership Rule should be made more restrictive due to the presence of television JSAs.
100. And while there may be fewer television JSAs executed moving forward because of the Commission's relaxation of the Local Television Ownership Rule, that does not diminish the public interest benefits associated with these agreements in the television context. The television ownership limits are still much more restrictive than the radio ownership limits, so there may be a continuing need for JSAs to help create economies of scale and improve program offerings, particularly for small or independent station owners. By preserving the ability to enter into a JSA, some station owners may be able to maintain independent operations instead of exiting the marketplace, and these agreements will continue to be available to help new entrants and small businesses acquire and operate new stations. Thus, the Commission is not persuaded that repeal of the eight-voices requirement and the Television JSA Attribution Rule will deter new entry based on consolidation of advertising sales.
101. The Commission upholds its decision in the
102. SSAs allow stations in a local market to combine certain operations, personnel, and/or facilities, with one station effectively performing functions for multiple, independently owned stations. The
103. The Commission declines to reconsider the SSA definition and disclosure requirements adopted in the
104. Contrary to NAB's claim, the
105. The Commission also finds that the
106. While the Commission is upholding the decision in the
107. The Commission grants in part and denies in part NAB's request for reconsideration regarding the Commission's decision in the
108. As explained in greater detail in the accompanying Notice of Proposed Rulemaking, an incubator program would provide an ownership rule waiver or similar benefits to a company that establishes a program to help facilitate station ownership for a certain class of new owners. The concept of an incubator program has been discussed since at least the early 1990s. Yet, despite general support for the concept, the Commission has never undertaken the creation of a comprehensive incubator program. The Commission has adopted a limited program that provides a duopoly preference to parties that agree to incubate or finance an eligible entity. In adopting this general policy preference, however, the Commission did not provide details regarding the structure and operation of the incubation activities. As such, the Commission does not believe that this limited policy preference serves as an effective basis upon which to design a comprehensive incubator program.
109. Most recently, the Commission sought comment in the
110. On reconsideration, the Commission agrees with NAB that it should adopt an incubator program and decides here that it will do so. There is support for an incubator program from many industry participants and advocacy groups. And the Commission agrees with supporters that adopting an incubator program would promote new entry and ownership diversity in the broadcast industry by helping address barriers to station ownership, such as lack of access to capital and the need for technical/operational experience. In this proceeding, however, the Commission has identified various, specific concerns regarding how to structure and monitor such a program. The Commission finds that the comments and recommendations in the record fail to adequately address all of these issues. While certain suggestions may have merit in regards to specific aspects of the program, the Commission is not yet at the point where it can finalize the overall structure and method for implementation of the program. Therefore, the Commission requires additional comment on how to structure the incubator program.
111. The Commission is initiating a new proceeding in the accompanying Notice of Proposed Rulemaking that will seek additional comment on how best to implement the Commission's incubator program. Initiating a dedicated proceeding will allow the Commission to focus its efforts on getting this program up and running, and the Commission anticipates that its consideration of this issue will be assisted by the newly established Advisory Committee on Diversity and Digital Empowerment.
112. In compliance with the Regulatory Flexibility Act (RFA), this Supplemental Final Regulatory Flexibility Analysis (Supplemental FRFA) supplements the Final Regulatory Flexibility Analysis (FRFA) included in the
113.
114.
115.
116. The Commission has estimated the number of licensed commercial television stations to be 1,382. Of this total, 1,262 stations (or about 91 percent) had revenues of $38.5 million or less, according to Commission staff review of the BIA Kelsey Inc. Media Access Pro Television Database (BIA) on May 9, 2017, and therefore these licensees qualify as small entities under the SBA definition. In addition, the Commission has estimated the number of licensed noncommercial educational television stations to be 393. Notwithstanding, the Commission does not compile and otherwise does not have access to information on the revenue of NCE stations that would permit it to determine how many such stations would qualify as small entities.
117. The Commission notes, however, that, in assessing whether a business concern qualifies as small under the above definition, business (control) affiliations must be included. The Commission's estimate, therefore, likely overstates the number of small entities that might be affected by its action, because the revenue figure on which it is based does not include or aggregate revenues from affiliated companies. In addition, another element of the definition of small business is that the entity not be dominant in its field of operation. The Commission is unable at
118.
119. According to Commission staff review of the BIA/Kelsey, LLC's Media Access Pro Radio Database on May 9, 2017, about 11,392 (or about 99.9 percent) of 11,401 of commercial radio stations had revenues of $38.5 million or less and thus qualify as small entities under the SBA definition. The Commission has estimated the number of licensed commercial radio stations to be 11,401. The Commission notes it has also estimated the number of licensed noncommercial radio stations to be 4,111. Nevertheless, the Commission does not compile and otherwise does not have access to information on the revenue of NCE stations that would permit it to determine how many such stations would qualify as small entities.
120. The Commission also notes, that in assessing whether a business concern qualifies as small under the above definition, business (control) affiliations must be included. The Commission's estimate, therefore, likely overstates the number of small entities that might be affected by its action, because the revenue figure on which it is based does not include or aggregate revenues from affiliated companies. In addition, an element of the definition of small business is that the entity not be dominant in its field of operation. The Commission further notes, that it is difficult at times to assess these criteria in the context of media entities, and the estimate of small businesses to which these rules may apply does not exclude any radio station from the definition of a small business on these basis, thus the Commission's estimate of small businesses may therefore be over-inclusive. Also, as noted above, an additional element of the definition of small business is that the entity must be independently owned and operated. The Commission notes that it is difficult at times to assess these criteria in the context of media entities and the estimates of small businesses to which they apply may be over-inclusive to this extent.
121.
122.
123.
124. In conducting the quadrennial review, the Commission has three chief alternatives available for each of the Commission's media ownership rules—eliminate the rule, modify it, or, if the Commission determines that the rule is necessary in the public interest, retain it. The Commission finds that the modification and elimination of the rules in the
125.
126.
127.
128. The modifications to the Local Television Ownership Rule are not expected to create additional burdens for small entities. Conversely, the economic impact of the rule modification may benefit small entities by enabling them to achieve operational efficiencies through common ownership. The
129.
130. This
131. The Commission will send a copy of this
132. Accordingly,
133.
134.
135.
136.
Radio, Reporting and recordkeeping requirements, Television.
For the reasons discussed in the preamble, the Federal Communications Commission amends 47 CFR part 73 as follows:
47 U.S.C. 154, 303, 309, 310, 334, 336 and 339.
The revisions read as follows:
(b)
(i) The digital noise limited service contours of the stations (computed in accordance with § 73.622(e)) do not overlap; or
(ii) At the time the application to acquire or construct the station(s) is filed, at least one of the stations is not ranked among the top four stations in the DMA, based on the most recent all-day (9 a.m.-midnight) audience share, as measured by Nielsen Media Research or by any comparable professional, accepted audience ratings service.
(2) Paragraph (b)(1)(ii) (Top-Four Prohibition) of this section shall not apply in cases where, at the request of the applicant, the Commission makes a finding that permitting an entity to directly or indirectly own, operate, or control two television stations licensed in the same DMA would serve the public interest, convenience, and necessity. The Commission will consider showings that the Top-Four Prohibition should not apply due to specific circumstances in a local market or with respect to a specific transaction on a case-by-case basis.
In applying the provisions of this section, ownership and other interests in broadcast licensees will be attributed to their holders and deemed cognizable pursuant to the following criteria:
a. Except as otherwise provided herein, partnership and direct ownership interests and any voting stock interest amounting to 5% or more of the outstanding voting stock of a corporate broadcast licensee will be cognizable;
b. Investment companies, as defined in 15 U.S.C. 80a-3, insurance companies and banks holding stock through their trust departments in trust accounts will be considered to have a cognizable interest only if they hold 20% or more of the outstanding voting stock of a corporate broadcast licensee, or if any of the officers or directors of the broadcast licensee are representatives of the investment company, insurance company or bank concerned. Holdings by a bank or insurance company will be aggregated if the bank or insurance company has any right to determine how the stock will be voted. Holdings by investment companies will be aggregated if under common management.
c. Attribution of ownership interests in a broadcast licensee that are held indirectly by any party through one or more intervening corporations will be determined by successive multiplication of the ownership percentages for each link in the vertical ownership chain and application of the relevant attribution benchmark to the resulting product, except that wherever the ownership percentage for any link in the chain exceeds 50%, it shall not be included for purposes of this multiplication. For purposes of paragraph i. of this note, attribution of ownership interests in a broadcast licensee that are held indirectly by any party through one or more intervening organizations will be determined by successive multiplication of the ownership percentages for each link in the vertical ownership chain and application of the relevant attribution benchmark to the resulting product, and the ownership percentage for any link in the chain that exceeds 50% shall be included for purposes of this multiplication. [For example, except for purposes of paragraph i. of this note, if A owns 10% of company X, which owns 60% of company Y, which owns 25% of “Licensee,” then X's interest in “Licensee” would be 25% (the same as Y's interest because X's interest in Y exceeds 50%), and A's interest in “Licensee” would be 2.5% (0.1 × 0.25). Under the 5% attribution benchmark, X's interest in “Licensee” would be cognizable, while A's interest would not be cognizable. For purposes of paragraph i. of this note, X's interest in “Licensee” would be 15% (0.6 × 0.25) and A's interest in “Licensee” would be 1.5% (0.1 × 0.6 × 0.25). Neither interest would be attributed under paragraph i. of this note.]
d. Voting stock interests held in trust shall be attributed to any person who holds or shares the power to vote such stock, to any person who has the sole power to sell such stock, and to any person who has the right to revoke the trust at will or to replace the trustee at will. If the trustee has a familial, personal or extra-trust business relationship to the grantor or the beneficiary, the grantor or beneficiary, as appropriate, will be attributed with the stock interests held in trust. An otherwise qualified trust will be ineffective to insulate the grantor or beneficiary from attribution with the trust's assets unless all voting stock interests held by the grantor or beneficiary in the relevant broadcast licensee are subject to said trust.
g. Officers and directors of a broadcast licensee are considered to have a cognizable interest in the entity with which they are so associated. If any such entity engages in businesses in
h. Discrete ownership interests will be aggregated in determining whether or not an interest is cognizable under this section. An individual or entity will be deemed to have a cognizable investment if:
1. The sum of the interests held by or through “passive investors” is equal to or exceeds 20 percent; or
2. The sum of the interests other than those held by or through “passive investors” is equal to or exceeds 5 percent; or
3. The sum of the interests computed under paragraph h. 1. of this note plus the sum of the interests computed under paragraph h. 2. of this note is equal to or exceeds 20 percent.
i.1. Notwithstanding paragraphs e. and f. of this Note, the holder of an equity or debt interest or interests in a broadcast licensee subject to the broadcast multiple ownership rules (“interest holder”) shall have that interest attributed if:
A. The equity (including all stockholdings, whether voting or nonvoting, common or preferred) and debt interest or interests, in the aggregate, exceed 33 percent of the total asset value, defined as the aggregate of all equity plus all debt, of that broadcast licensee; and
B.(i) The interest holder also holds an interest in a broadcast licensee in the same market that is subject to the broadcast multiple ownership rules and is attributable under paragraphs of this note other than this paragraph i.; or
(ii) The interest holder supplies over fifteen percent of the total weekly broadcast programming hours of the station in which the interest is held. For purposes of applying this paragraph, the term, “market,” will be defined as it is defined under the specific multiple ownership rule that is being applied, except that for television stations, the term “market” will be defined by reference to the definition contained in the local television multiple ownership rule contained in paragraph (b) of this section.
2. Notwithstanding paragraph i.1. of this Note, the interest holder may exceed the 33 percent threshold therein without triggering attribution where holding such interest would enable an eligible entity to acquire a broadcast station, provided that:
i. The combined equity and debt of the interest holder in the eligible entity is less than 50 percent, or
ii. The total debt of the interest holder in the eligible entity does not exceed 80 percent of the asset value of the station being acquired by the eligible entity and the interest holder does not hold any equity interest, option, or promise to acquire an equity interest in the eligible entity or any related entity. For purposes of this paragraph i.2, an “eligible entity” shall include any entity that qualifies as a small business under the Small Business Administration's size standards for its industry grouping, as set forth in 13 CFR 121.201, at the time the transaction is approved by the FCC, and holds:
A. 30 percent or more of the stock or partnership interests and more than 50 percent of the voting power of the corporation or partnership that will own the media outlet; or
B. 15 percent or more of the stock or partnership interests and more than 50 percent of the voting power of the corporation or partnership that will own the media outlet, provided that no other person or entity owns or controls more than 25 percent of the outstanding stock or partnership interests; or
C. More than 50 percent of the voting power of the corporation that will own the media outlet if such corporation is a publicly traded company.
j. “Time brokerage” (also known as “local marketing”) is the sale by a licensee of discrete blocks of time to a “broker” that supplies the programming to fill that time and sells the commercial spot announcements in it.
1. Where two radio stations are both located in the same market, as defined for purposes of the local radio ownership rule contained in paragraph (a) of this section, and a party (including all parties under common control) with a cognizable interest in one such station brokers more than 15 percent of the broadcast time per week of the other such station, that party shall be treated as if it has an interest in the brokered station subject to the limitations set forth in paragraph (a) of this section. This limitation shall apply regardless of the source of the brokered programming supplied by the party to the brokered station.
2. Where two television stations are both located in the same market, as defined in the local television ownership rule contained in paragraph (b) of this section, and a party (including all parties under common control) with a cognizable interest in one such station brokers more than 15 percent of the broadcast time per week of the other such station, that party shall be treated as if it has an interest in the brokered station subject to the limitations set forth in paragraphs (b) and (e) of this section. This limitation shall apply regardless of the source of the brokered programming supplied by the party to the brokered station.
3. Every time brokerage agreement of the type described in this Note shall be undertaken only pursuant to a signed written agreement that shall contain a certification by the licensee or permittee of the brokered station verifying that it maintains ultimate control over the station's facilities including, specifically, control over station finances, personnel and programming, and by the brokering station that the agreement complies with the provisions of paragraph (b) of this section if the brokering station is a television station or with paragraph (a) of this section if the brokering station is a radio station.
k. “Joint Sales Agreement” is an agreement with a licensee of a “brokered station” that authorizes a “broker” to sell advertising time for the “brokered station.”
1. Where two radio stations are both located in the same market, as defined for purposes of the local radio ownership rule contained in paragraph (a) of this section, and a party (including all parties under common control) with a cognizable interest in one such station sells more than 15 percent of the advertising time per week of the other such station, that party shall be treated as if it has an interest in the brokered station subject to the limitations set forth in paragraph (a) of this section.
2. Every joint sales agreement of the type described in this Note shall be undertaken only pursuant to a signed written agreement that shall contain a certification by the licensee or permittee of the brokered station verifying that it maintains ultimate control over the station's facilities, including, specifically, control over station finances, personnel and programming, and by the brokering station that the agreement complies with the limitations set forth in paragraph (a) of this section if the brokering station is a radio station.
Paragraphs (a) and (b) of this section will not be applied so as to require divestiture, by any licensee, of existing facilities, and will not apply to applications for assignment of license or transfer of control filed in accordance with § 73.3540(f) or § 73.3541(b), or to applications for assignment of license or transfer of control to heirs or legatees by will or intestacy, or to FM or AM broadcast minor modification applications for intra-market community of license changes, if no new or increased concentration of ownership would be created among commonly owned, operated or controlled broadcast stations. Paragraphs (a) and (b) of this section will apply to all applications for new stations, to all other applications for assignment or transfer, to all applications for major changes to existing stations, and to all other applications for minor changes to existing stations that seek a change in an FM or AM radio station's community of license or create new or increased concentration of ownership among commonly owned, operated or controlled broadcast stations. Commonly owned, operated or controlled broadcast stations that do not comply with paragraphs (a) and (b) of this section may not be assigned or transferred to a single person, group or entity, except as provided in this Note, the Report and Order in Docket No. 02-277, released July 2, 2003 (FCC 02-127), or the Second Report and Order in MB Docket No. 14-50, FCC 16-107 (released August 25, 2016).
Paragraphs (b) and (e) of this section will not be applied to cases involving television stations that are “satellite” operations. Such cases will be considered in accordance with the analysis set forth in the Report and Order in MM Docket No. 87-8, FCC 91-182 (released July 8, 1991), in order to determine whether common ownership, operation, or control of the stations in question would be in the public interest. An authorized and operating “satellite” television station, the digital noise limited service contour of which overlaps that of a commonly owned, operated, or controlled “non-satellite” parent television broadcast station may subsequently become a “non-satellite” station under the circumstances described in the aforementioned Report and Order in MM Docket No. 87-8. However, such commonly owned, operated, or controlled “non-satellite” television stations may not be transferred or assigned to a single person, group, or entity except as provided in Note 4 of this section.
Requests submitted pursuant to paragraph (b)(2) of this section will be considered in accordance with the analysis set forth in the Order on Reconsideration in MB Docket Nos. 14-50, et al. (FCC 17-156).
The Commission will entertain applications to waive the restrictions in paragraph (b) of this section (the local television ownership rule) on a case-by-case basis. In each case, we will require a showing that the in-market buyer is the only entity ready, willing, and able to operate the station, that sale to an out-of-market applicant would result in an artificially depressed price, and that the waiver applicant does not already directly or indirectly own, operate, or control interest in two television stations within the relevant DMA. One way to satisfy these criteria would be to provide an affidavit from an independent broker affirming that active and serious efforts have been made to sell the permit, and that no reasonable offer from an entity outside the market has been received.
We will entertain waiver requests as follows:
1. If one of the broadcast stations involved is a “failed” station that has not been in operation due to financial distress for at least four consecutive months immediately prior to the application, or is a debtor in an involuntary bankruptcy or insolvency proceeding at the time of the application.
2. If one of the television stations involved is a “failing” station that has an all-day audience share of no more than four per cent; the station has had negative cash flow for three consecutive years immediately prior to the application; and consolidation of the two stations would result in tangible and verifiable public interest benefits that outweigh any harm to competition and diversity.
3. If the combination will result in the construction of an unbuilt station. The permittee of the unbuilt station must demonstrate that it has made reasonable efforts to construct but has been unable to do so.
Paragraph (a)(1) of this section will not apply to an application for an AM station license in the 1605-1705 kHz band where grant of such application will result in the overlap of the 5 mV/m groundwave contours of the proposed station and that of another AM station in the 535-1605 kHz band that is commonly owned, operated or controlled.
(d) * * *
(2)
National Marine Fisheries Service (NMFS), National Oceanic and Atmospheric Administration (NOAA), Commerce.
Final rule.
NMFS issues this final rule to change the management of the Pacific whiting at-sea sectors' (
Effective February 7, 2018.
Frank Lockhart (West Coast Region, NMFS), phone: 206-526-6140 and email:
This final rule is accessible via the internet at the Office of the Federal Register website at
Background information and documents are available at the NMFS West Coast Region website at
Bycatch of rockfish species in the Pacific whiting fishery occurs at very low rates, but sporadically and unpredictably. Regulations at 50 CFR 660.55 address the allocation of these rockfish. Darkblotched rockfish and POP are caught almost exclusively by vessels in the shorebased Individual Fishing Quota (IFQ) and at-sea Pacific whiting sectors of the groundfish fishery. NMFS declared both species overfished in 2000 and 1999, respectively, and both stocks have been managed under rebuilding plans as a result. Populations of both species have shown dramatic improvement in recent years. Darkblotched rockfish and POP were both declared rebuilt in 2017. Darkblotched rockfish and POP are both currently managed as allocations, and NMFS automatically closes a fishery sector when it has reached its allocation of either species.
In recent years, both at-sea sectors of the Pacific whiting fishery have exceeded their initial annual allocation of darkblotched rockfish (C/P sector in 2011, and the MS sector in 2014). The latter resulted in an emergency Pacific Fishery Management Council (Council) meeting in order to re-open the fishery. Without implementation of this rule, the risk of an inseason closure of these sectors remains high, although the ACLs of these rockfish are far from being reached. For example, the most recent fishing mortality estimates by NMFS' Northwest Fisheries Science Center indicate that 42 percent of both the darkblotched rockfish and POP ACLs were caught in 2016. While harvest of these species at a level below the ACL may have helped to rebuild stocks more quickly, there is a negative socioeconomic impact from preventing harvest of Pacific whiting, as intended in the FMP.
The Council established allocations of darkblotched rockfish and POP for the Pacific whiting at-sea sectors in Amendment 21 to the FMP. When the Council considered allocation of these species, the analysis only incorporated data on catch through 2005, and took the overfished status of the species into account. Ten years of additional data on bycatch in the at-sea sectors are now available. Additionally, six full years of the Shorebased IFQ Program (which was implemented in 2011, 75 FR 60868) fishery information is available. This new information indicates that the stocks of both species are currently much healthier than they were at the time Amendment 21 was implemented, and they are no longer overfished.
The Council's Amendment 21 allocation recommendation was based, in part, on the idea that the C/P and MS sectors could avoid early closures by moving to areas of lower rockfish encounter rates if they were approaching a bycatch allocation. However, experience has shown that this assumption was likely too simplistic. Despite the mitigating measures enacted by the C/P and MS coops, darkblotched rockfish bycatch remains particularly variable, with the potential for rapid accumulation. The 2014 closure of the MS sector provides an illustration: Closure occurred after six hauls caught 4.5 mt of darkblotched rockfish, which was nearly 75 percent of their 2014 allocation, with the most of that catch coming from three of the hauls. Some of the largest hauls were delivered to motherships so closely in time that feedback on the size of the catches from observers came too late for the MS coop to effectively respond. Prior to this “lightning strike” event, the sector had made 969 hauls and caught only 2.5 mt of darkblotched rockfish. After the sector was re-opened by an emergency meeting of the Council, the sector made 330 additional hauls that brought in over 14,500 mt of Pacific whiting and only 0.1 mt of additional darkblotched rockfish. The C/P sector has experienced even more rapid accumulations of darkblotched rockfish bycatch, and would have been closed late in the 2011 season if unused allocation had not been available from the MS sector, which had already completed fishing for the year. These events indicate that the current management structure may be adversely impacting the at-sea sectors to a greater degree than was anticipated when the Council adopted the current allocation structure under Amendment 21, due to unpredictability and high volume of bycatch events.
The Council has discussed a variety of solutions to reduce the risk of closure of the Pacific whiting at-sea sectors prior to attainment of their Pacific whiting allocations, such as allowing the transfer of rockfish quota between sectors, but it determined that those solutions were too complex to be analyzed and implemented in a timely manner. At its September 2016 meeting, the Council recommended the interim measure of amending the FMP and implementing revised regulations, so that the amounts of darkblotched rockfish and POP allocated to the C/P and MS sectors are managed as set-asides rather than as total catch limits. The Council also recommended giving NMFS inseason authority to automatically close one or both of the C/P and MS sectors in the event the species-specific set-aside amounts plus
This action does not revise allocations between sectors, which were set by Amendment 21 to the FMP, and is intended to be an interim solution to address the immediate needs of the C/P and MS sectors. Long-term solutions are being reviewed by the Council as part of the 5-year review of the trawl rationalization program. A long-term solution to address the needs of the Pacific whiting at-sea sectors should focus specifically on fairly and equitably revising the allocation between the trawl sectors, and among all the groundfish fishery sectors, while leaving any applicable stock rebuilding plans unaffected.
This action is intended to substantially reduce the risk of the Pacific whiting at-sea sectors not attaining their respective Pacific whiting allocations based on the incidental catch of darkblotched rockfish or POP, when allowing the sector(s) to remain open would not exceed ACLs for these rebuilding stocks. It revises regulations so that higher than anticipated harvest of darkblotched rockfish or POP that exceeds the initial distribution of those species to the at-sea sectors will not require automatic closure of one or more of the at-sea sectors.
The rule also allows NMFS to close one or both of the C/P and MS sectors of the Pacific whiting fishery via automatic action when the set-aside for that sector, plus the available reserve for unforeseen catch events, is reached or is expected to be reached for either darkblotched rockfish or POP. Because of near real-time monitoring by the C/P and MS Coop Programs, and the ability of those programs to respond quickly to changing fishery conditions, closures will occur before allocations to other fisheries or the ACLs are reached, thus limiting the potential effects and precluding potential negative biological and socioeconomic impacts of this action.
NMFS published a notice of availability of Amendment 21-3 to the FMP (82 FR 44984) on September 27, 2017, and a proposed rule for this action (82 FR 50106) on October 30, 2017. The comment periods for the FMP amendment and the proposed rule closed on November 27, 2017. NMFS received one public comment in support of the proposed action. No changes were made from the proposed rule or proposed FMP amendment based on public comments.
The Administrator, West Coast Region Region, NMFS, determined that FMP Amendment 21-3 is necessary for the conservation and management of the West Coast Groundfish fishery and that it is consistent with the Magnuson-Stevens Act and other applicable laws.
This final rule has been determined to be not significant for purposes of Executive Order 12866.
The Chief Counsel for Regulation of the Department of Commerce certified to the Chief Counsel for Advocacy of the Small Business Administration during the proposed rule stage that this action would not have a significant economic impact on a substantial number of small entities. The factual basis for the certification was published in the proposed rule and is not repeated here. No comments were received regarding this certification. As a result, a regulatory flexibility analysis was not required and none was prepared.
NMFS determined that this rule will be implemented in a manner that is consistent, to the maximum extent practicable, with the enforceable policies of the approved coastal management programs of Washington, Oregon, and California programs. This determination was submitted for review by the responsible state agencies under section 307 of the CZMA. The state agencies agreed with this determination.
There are no reporting or recordkeeping requirements associated with this final rule. No Federal rules have been identified that duplicate, overlap, or conflict with this action.
Pursuant to Executive Order 13175, this final rule was developed after meaningful collaboration with tribal officials from the area covered by the FMP. Consistent with the Magnuson-Stevens Act at 16 U.S.C. 1852(b)(5), one of the voting members of the Council is a representative of an Indian tribe with federally recognized fishing rights from the area of the Council's jurisdiction.
Fisheries, Fishing, Reporting and recordkeeping requirements.
For the reasons set out in the preamble, 50 CFR part 660 is amended as follows:
16 U.S.C. 1801
(c) * * *
(1) * * *
(i)
(A)
(B)
(d) * * *
(1) * * *
(vii) Close one or both the MS or C/P sector when the set-aside for that sector, described in Table 2d, subpart C, plus the available reserve for unforeseen catch events, described in Table 2a, subpart C, combined, is reached or is expected to be reached for either darkblotched rockfish or Pacific ocean perch.
(c) * * *
(1) * * *
(i) Species with formal allocations to the MS Coop Program are Pacific whiting, canary rockfish, and widow rockfish;
(ii) Species with set-asides for the MS and C/P Coop Programs, as described in Table 2d, subpart C.
(c) * * *
(1) * * *
(i) Species with formal allocations to the C/P Coop Program are Pacific whiting, canary rockfish, and widow rockfish;
(ii) Species with set-asides for the MS and C/P Programs, as described in Table 2d, subpart C.
Environmental Protection Agency (EPA).
Proposed rule.
The Environmental Protection Agency (EPA) is proposing to approve a revision to the Yolo-Solano Air Quality Management District (YSAQMD) portion of the California State Implementation Plan (SIP). This revision concerns the District's demonstration regarding Reasonably Available Control Technology (RACT) requirements for the 1997 8-hour ozone National Ambient Air Quality Standard (NAAQS). The EPA previously proposed to disapprove YSAQMD's 2006 RACT SIP submittal for the 1997 8-hour ozone NAAQS because we found that existing District rules implemented RACT for many but not all applicable sources. The YSAQMD has since addressed these deficiencies by adopting approvable rules that implement RACT and by adopting negative declarations where the District concluded it had no sources subject to RACT requirements. Therefore, we withdraw our previous proposed disapproval of YSAQMD's 2006 RACT SIP and now propose to approve it into the California SIP. The EPA is also proposing to approve YSAQMD's negative declarations into the SIP for the 1997 8-hour ozone NAAQS.
We are proposing to approve local SIP revisions under the Clean Air Act (CAA or Act). We are taking comments on this proposal and plan to follow with a final action.
Any comments must arrive by February 7, 2018.
Submit your comments, identified by Docket ID No. EPA-R09-OAR-2008-0612 at
Stanley Tong, EPA Region IX, (415) 947-4122,
Throughout this document, “we,” “us” and “our” refer to the EPA.
On September 13, 2006, the YSAQMD adopted its “Reasonably Available Control Technology (RACT) State Implementation Plan (SIP)” (“2006 RACT SIP”) analysis to demonstrate its stationary sources are subject to RACT rules for the 1997 8-hour ozone standard. On January 31, 2007, the California Air Resources Board (CARB) submitted it to the EPA for approval as a revision to the California SIP. On July 31, 2007, the submittal was deemed complete by operation of law. On August 18, 2008, the EPA proposed action on YSAQMD's 2006 RACT SIP and stated that four deficiencies prevented full approval of the submittal.
On December 22, 2017, CARB transmitted the District's public draft version of negative declarations for four Control Techniques Guidelines (CTG) documents along with a request for parallel processing.
There are no previous versions of the documents described above in the YSAQMD portion of the California SIP for the 1997 8-hour ozone NAAQS.
Volatile Organic Compounds (VOCs) and Nitrogen Oxides (NO
Section IV.G of the preamble to the EPA's final rule to implement the 1997 8-hour ozone NAAQS (70 FR 71612, November 29, 2005) discusses RACT requirements. It states in part that where a RACT SIP is required, states implementing the 8-hour standard generally must assure that RACT is met, either through a certification that previously required RACT controls still represent RACT for 8-hour implementation purposes or through a new RACT determination. The submitted documents provide YSAQMD's analyses of its compliance with the CAA section 182 RACT requirements for the 1997 8-hour ozone NAAQS. The EPA's technical support documents (TSDs)
SIP rules must require RACT for each category of sources covered by a CTG document as well as each major source of VOCs or NO
States should also submit for SIP approval negative declarations for those source categories for which they are not adopting CTG-based regulations (because they have no sources above the CTG recommended applicability threshold) regardless of whether such negative declarations were made for an earlier SIP.
The District's analysis must demonstrate that each major source of NO
1. “Final Rule to Implement the 8-hour Ozone National Ambient Air Quality Standard—Phase 2”: (70 FR 71612; November 29, 2005).
2. “State Implementation Plans; General Preamble for the Implementation of Title I of the Clean Air Act Amendments of 1990,” 57 FR 13498 (April 16, 1992); 57 FR 18070 (April 28, 1992).
3. “Issues Relating to VOC Regulation Cutpoints, Deficiencies, and Deviations,” EPA, May 25, 1988 (the Bluebook, revised January 11, 1990).
4. “Guidance Document for Correcting Common VOC & Other Rule Deficiencies,” EPA Region 9, August 21, 2001 (the Little Bluebook).
5. “State Implementation Plans; Nitrogen Oxides Supplement to the General Preamble; Clean Air Act Amendments of 1990 Implementation of Title I; Proposed Rule,” (the NO
6. Memorandum from William T. Harnett to Regional Air Division Directors, (May 18, 2006), “RACT Qs & As—Reasonably Available Control Technology (RACT) Questions and Answers.”
7. RACT SIPs, Letter dated March 9, 2006 from EPA Region IX (Andrew Steckel) to CARB (Kurt Karperos) describing Region IX's understanding of what constitutes a minimally acceptable RACT SIP.
8. RACT SIPs, Letter dated April 4, 2006 from EPA Region IX (Andrew Steckel) to CARB (Kurt Karperos) listing EPA's current CTGs, Alternative Control Techniques (ACTs), and other documents which may help to establish RACT.
With respect to major stationary sources, the Sacramento Metro ozone nonattainment area was classified as “Serious” nonattainment for the 19978-hour ozone NAAQS at the time that California submitted the YSAQMD 2006 RACT SIP to the EPA. The Sacramento Metro ozone nonattainment area was subsequently reclassified to “Severe” ozone nonattainment. YSAQMD's 2006 RACT SIP lists major stationary sources within its jurisdiction that emit or have the potential to emit at least 25 tpy of VOC or NO
Our August 18, 2008 proposed disapproval rulemaking and associated 2008 RACT SIP TSD provide an extensive evaluation of YSAQMD's 2006 RACT SIP and negative declarations. See 73 FR 48166. The August 18, 2008 proposal found that the District's
1. YSAQMD identified three major non-CTG sources in the District that were not covered by RACT rules or SIP approved permits. Such rules or permits should be submitted to the EPA for approval.
Rule 2.41 Expandable Polystyrene Manufacturing Operations (adopted September 10, 2008); SIP approved September 8, 2011 (76 FR 55581).
Rule 2.42 Nitric Acid Production (adopted May 13, 2009); SIP approved on May 10, 2010 (75 FR 25778).
Rule 2.43 Biomass Boilers (adopted November 10, 2010); SIP approved July 2, 2012.
2. YSAQMD's pharmaceutical manufacturing rule may be less stringent than the CTG. Rule 2.35 Pharmaceutical Manufacturing Operations should be revised and submitted to the EPA for approval.
3. On May 14, 2008, YSAQMD amended the solvent cleaning provisions in several rules to address RACT requirements. These rules need to be submitted to, and approved by, the EPA.
4. YSAQMD should submit a negative declaration for the Wood Furniture CTG or submit Rule 2.39 Wood Products Coatings Operations for SIP approval.
The EPA concludes that YSAQMD has effectively taken actions to address each of the four deficiencies identified in our August 18, 2008 proposal.
Where there are no existing sources covered by a particular CTG document, states may, in lieu of adopting RACT requirements for those sources, adopt negative declarations certifying that there are no such sources in the relevant ozone nonattainment area. YSAQMD plans to adopt, at its January 10, 2018 Board hearing, negative declarations for the following CTGs:
The EPA has searched the CARB emissions inventory database and verified that there do not appear to be facilities in the YSAQMD that might be subject to these CTGs. We believe that these negative declarations are consistent with the relevant policy and guidance regarding RACT.
Our analysis of the remainder of YSAQMD's 2006 RACT SIP for the 1997 8-hour ozone NAAQS remains unchanged, and we propose to find that the District's RACT SIP submission is consistent with CAA requirements and relevant guidance regarding RACT, and SIP revisions.
Our August 18, 2008 proposed action also listed 13 CTG categories for which the YSAQMD states it has no sources in the District subject to the CTGs and no District rules covering those categories. These categories are repeated in Table 1 below. Table 2 lists the additional negative declarations that YSAQMD is adopting and for which it has requested parallel processing.
Our
As authorized in section 110(k)(3) of the Act, and based on the rationale discussed above, the EPA proposes to approve YSAQMD's 2006 RACT SIP and four negative declarations because they fulfill the RACT SIP requirements under CAA sections 182(b) and (f) and 40 CFR 51.912 for the 1997 8-hour ozone NAAQS. As noted above, our proposed action also relies upon our evaluation of the public draft version of the four negative declarations planned for adoption by the YSAQMD in January 2018 and we will not take final action until these negative declarations are adopted and submitted to us as a revision to the California SIP. If the negative declarations that we have evaluated were to be revised significantly prior to adoption and submittal, we would need to reconsider our proposed action accordingly. We are simultaneously withdrawing our previous proposal (73 FR 48166, August 18, 2008) to disapprove the YSAQMD 2006 RACT SIP because the YSAQMD has corrected the identified RACT deficiencies for the 1997 8-hour ozone standard and are now proposing full approval as meeting the relevant CAA requirements.
We will accept comments from the public on this proposal until February 7, 2018. If we take final action to approve the submitted documents, our final action will incorporate them into the federally enforceable SIP.
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, the EPA's role is to approve state choices, provided that they meet the criteria of the Clean Air Act. Accordingly, this proposed action merely proposes to approve state law as meeting federal requirements and does not impose additional requirements beyond those imposed by state law. For that reason, this proposed action:
• 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);
• is not an Executive Order 13771 (82 FR 9339, February 2, 2017) regulatory action because SIP approvals are exempted under Executive Order 12866;
• 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 the EPA with the discretionary authority to address disproportionate human health or environmental effects with practical, appropriate, and legally permissible
In addition, the SIP is not approved to apply on any Indian reservation land or in any other area where the 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 and will not impose substantial direct costs on tribal governments or preempt tribal law as specified by Executive Order 13175 (65 FR 67249, November 9, 2000).
Environmental protection, Air pollution control, Incorporation by reference, Intergovernmental relations, Nitrogen dioxide, Ozone, Particulate matter, Reporting and recordkeeping requirements, Volatile organic compounds.
42 U.S.C. 7401
Environmental Protection Agency (EPA).
Proposed rule.
The Environmental Protection Agency (EPA) is proposing to approve a Clean Air Act (CAA) section 111(d)/129 plan (the “plan”) submitted by the Colorado Department of Public Health and Environment (CDPHE) on July 14, 2017. The plan would allow for the implementation of emissions guidelines for existing commercial and industrial solid waste incineration (CISWI) units within the jurisdiction of the State of Colorado. The plan creates new enforceable emissions limits and operating procedures for existing CISWI units within the State of Colorado in accordance with the requirements established by the revised CISWI new source performance standards (NSPS) and emission guidelines (EG), promulgated by the EPA on March 21, 2011, with subsequent final amendments to the rule promulgated on February 7, 2013. This proposed plan approval rulemaking is being taken in accordance with the requirements of sections 111(d) and 129 of the CAA and the relevant parts and subparts of the Code of Federal Regulations (CFR).
Written comments must be received on or before February 7, 2018.
Submit your comments, identified by Docket ID No. EPA-R08-OAR-2017-0552 at
Gregory Lohrke, Air Program, U.S. Environmental Protection Agency (EPA), Region 8, Mail Code 8P-AR, 1595 Wynkoop Street, Denver, Colorado 80202-1129, (303) 312-6396,
1.
2.
• Identify the rulemaking by docket number and other identifying information (subject heading,
• Follow directions and organize your comments;
• 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 your estimate in sufficient detail to allow for it to be reproduced;
• 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; and,
• Make sure to submit your comments by the comment period deadline identified.
Sections 111 and 129 of the CAA outline the EPA's statutory authority for regulating new and existing solid waste incineration units. Section 111(b) directs the EPA Administrator to publish and periodically revise a list of source categories which significantly cause or contribute to air pollution. This subsection also directs the Administrator to establish federal standards of performance for new sources within these categories. Section 111(d) grants the EPA statutory authority to require states to submit to the agency implementation plans for establishing performance standards applicable to existing sources belonging to those categories established in section 111(b). Section 129 specifically addresses solid waste combustion and requires that the EPA regulate new and existing waste incineration units pursuant to section 111 of the Act, including the requirement that a state in which existing designated facilities operate submit for approval a state plan for each category of regulated waste incineration units. Section 129(b)(3) requires the EPA to promulgate a federal plan for existing waste incineration units of any designated category located
State plan submittals under CAA sections 111(d) and 129 must be consistent with the relevant new or revised EG. Section 129(a)(1)(D) of the Act requires the EPA to develop and periodically revise operating standards for new and existing CISWI units. The NSPS and EG for CISWI units were promulgated on December 1, 2000, at 40 CFR part 60, subparts CCCC and DDDD, respectively. Revisions to the CISWI NSPS and EG were subsequently promulgated by the EPA on March 21, 2011 (76 FR 15704), with final actions on reconsideration of the rule published on February 7, 2013 (78 FR 9112), and June 23, 2016 (81 FR 40956). State plan requirements specific to CISWI units, along with a model rule to ease adoption of the EG, are found in subpart DDDD, while more general state plan requirements are found in 40 CFR part 60, subpart B, and part 62, subpart A. The guidelines found in subpart DDDD require that states impose emission limits on designated facilities for those pollutants regulated under section 129, including: Dioxins/furans, carbon monoxide, metals (cadmium, lead and mercury), hydrogen chloride, sulfur dioxide, oxides of nitrogen, opacity and particulate matter. The EG also requires state plans include essential elements pursuant to section 129 requirements, including: Monitoring, operator training and facility permitting requirements.
On July 14, 2017, the CDPHE submitted to the EPA a new section 111(d)/129 state plan for existing CISWI units in the State of Colorado. The current state plan is a negative declaration letter certifying the absence of any known designated facilities regulated under the CISWI rule. The negative declaration was approved and promulgated by the EPA on September 17, 2003 (68 FR 54373), at 40 CFR part 62, subpart G. Since the revision of the CISWI rule, the State of Colorado has identified at least one operational designated facility which would be regulated under the revised rule, and has submitted a new state plan, summarized in the following section, to comply with CAA section 111/129 requirements.
The EPA has completed a review of the new Colorado section 111(d)/129 plan submittal in the context of the requirements of 40 CFR part 60, subparts B and DDDD, and part 62, subpart A. The EPA has determined that the plan submittal meets the requirements found in the above-cited subparts. Accordingly, the EPA proposes to approve the submitted state plan. The EPA's proposed approval action is limited to the new CISWI state plan and the subpart DDDD “Model Rule” addressing CISWI units as they are incorporated by the State of Colorado in the Code of Colorado Regulations (CCR) at 5 CCR 1001-8 Regulation No. 6, part A, subpart DDDD. A detailed summary of the submittal's compliance with the requirements found in the CFR is available in the technical support document (TSD) associated with this rulemaking action. The TSD will be available in the docket for this rulemaking action and may be found at the
The EPA is proposing approval of the Colorado 111(d)/129 state plan for existing CISWI units because the plan requirements are at least as stringent as the requirements for existing CISWI units found in 40 CFR part 60, subpart DDDD. The state plan was submitted pursuant to 40 CFR part 60, subparts DDDD and B, and part 62, subpart A. Accordingly, the EPA proposes to amend 40 CFR part 62, subpart G to reflect the acceptability of the state plan submittal. This proposed approval is limited to the provisions of 40 CFR parts 60 and 62 for existing CISWI units, as found in the emission guidelines of Part 60, subpart DDDD. The EPA Administrator will retain the authorities listed under §§ 60.2542 and 60.2030(c).
Under the CAA, the Administrator is required to approve a section 111(d)/129 plan submission that complies with the provisions of the Act and applicable federal regulations at 40 CFR 62.04. Thus, in reviewing section 111(d)/129 plan submissions, the EPA's role is to approve state choices, provided that they meet the criteria of the CAA. Accordingly, this action merely approves state law as meeting federal requirements and does not impose additional requirements beyond those imposed by state law. For that reason, this action:
• Is not a “significant regulatory action” subject to review by the Office of Management and Budget under Executive Orders 12866 (58 FR 51735, October 4, 1993) and 13563 (76 FR 3821, January 21, 2011);
• Is not expected to be an Executive Order 13771 regulatory action because this action is not significant under Executive Order 12866;
• 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,
• Is not subject to Executive Order 12898 (59 FR 7629, February 16, 1994) because it does not establish an environmental health or safety standard.
In addition, this proposed rule is not approved to apply on any Indian reservation land or in any other area where the 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 and will not impose substantial direct costs on tribal governments or preempt tribal law as specified by Executive Order 13175 (65 FR 67249, November 9, 2000).
Environmental protection, Air pollution control, Commercial and industrial solid waste incineration, Intergovernmental relations, Reporting and recordkeeping requirements.
Federal Communications Commission.
Proposed rule.
In this document, the Commission invites comment on proposed changes to its rules. The Commission proposes rules regarding mechanisms to ensure that erroneously blocked calls can be unblocked as quickly as possible and without undue harm to callers and consumers. It also seeks comment on ways to measure the effectiveness of the Commission's robocalling efforts, as well as those of industry.
Comments are due on January 23, 2018. Reply Comments are due on February 22, 2018.
You may submit comments identified by CG Docket No. 17-59 and/or FCC Number 17-151, by any of the following methods:
•
•
For detailed instructions for submitting comments and additional information on the rulemaking process, see the
Jerusha Burnett, Consumer Policy Division, Consumer and Governmental Affairs Bureau (CGB), at (202) 418- 0526, email:
This is a summary of the Commission's Further Notice of Proposed Rulemaking (
• All hand-delivered or messenger-delivered paper filings for the Commission's Secretary must be delivered to FCC Headquarters at 445 12th Street SW, Room TW-A325, Washington, DC 20554. All hand deliveries must be held together with rubber bands or fasteners. Any envelopes must be disposed of before entering the building.
• Commercial Mail sent by overnight mail (other than U.S. Postal Service Express Mail and Priority Mail) must be sent to 9050 Junction Drive, Annapolis Junction, MD 20701.
• U.S. Postal Service first-class, Express, and Priority mail should be addressed to 445 12th Street SW, Washington, DC 20554.
Pursuant to § 1.1200 of the Commission's rules, 47 CFR 1.1200, this matter shall be treated as a “permit-but-disclose” proceeding in accordance with the Commission's ex parte rules. Persons making oral ex parte presentations are reminded that memoranda summarizing the presentations must contain summaries of the substances of the presentations and not merely a listing of the subjects discussed. More than a one or two sentence description of the views and arguments presented is generally required.
To request materials in accessible formats for people with disabilities (Braille, large print, electronic files, audio format), send an email to:
The
1. The Commission takes another important step in combatting illegal robocalls by enabling voice service providers to block certain calls before they reach consumers' phones. In the
2. The Commission seeks comment on two discrete issues related to the rules adopted in the
3. Once a caller is aware of erroneous blocking, how can the Commission best ensure their calls are unblocked? Should providers cease blocking calls as soon as is practicable upon a credible claim by the caller that its calls are being blocked in error? Should the Commission establish specific timeframes and requirements for making a credible claim of erroneous blocking? How can the Commission mitigate the risk that makers of illegal robocalls will exploit such a process? Commenters should address the balance between quickly identifying and rectifying erroneous blocking against imposing unduly onerous burdens on providers that might disincent helpful call blocking. In this light, the Commission seeks comment on call blocking models voice providers or third parties may have developed to address erroneous call blocking.
4.
5. As required by the Regulatory Flexibility Act of 1980, as amended, (RFA) the Commission has prepared this Initial Regulatory Flexibility Analysis (IRFA) of the possible significant economic impact on a substantial number of small entities by the policies and rules proposed in the
6. The
7. First, the
8. Second, the
9. The proposed and anticipated rules are authorized under sections 201, 202, 222, 251(e) and 403 of the Communications Act of 1934, as amended, 47 U.S.C. 201, 202, 222, 251(e), 403.
10. The RFA directs agencies to provide a description of, and where feasible, an estimate of the number of small entities that may be affected by the rules adopted herein. The RFA generally defines the term “small entity” as having the same meaning as the terms “small business,” “small organization,” and “small governmental jurisdiction.” In addition, the term “small business” has the same meaning as the term “small-business concern” under the Small Business Act. A “small-business concern” is one which: (1) Is independently owned and operated; (2) is not dominant in its field of operation; and (3) satisfies any additional criteria established by the SBA.
11.
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13.
14.
15. The Commission has included small incumbent LECs in this present RFA analysis. As noted above, a “small business” under the RFA is one that,
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19.
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23.
24.
25. As indicated above, the
26. Under the proposed rules, providers may need to establish procedures to respond to and evaluate complaints of erroneous call blocking, and quickly cease blocking that it determined to have been initiated in error. In addition, providers may need to retain records of calls blocked and report that information on a periodic basis.
27. The RFA requires an agency to describe any significant alternatives that it has considered in reaching its proposed approach, which may include the following four alternatives (among others): (1) The establishment of differing compliance or reporting requirements or timetables that take into account the resources available to small entities; (2) the clarification, consolidation, or simplification of compliance or reporting requirements under the rule for small entities; (3) the use of performance, rather than design, standards; and (4) an exemption from coverage of the rule, or any part thereof, for small entities.
28. The challenge mechanism and reporting on which the Commission seeks comment could apply to all providers that block calls under the permissive rules in the
29. The Commission will consider ways to reduce the impact on small businesses, such as establishment of different compliance or reporting requirements or timetables that take into account the resources available to small entities based on the record in response to the
30. The Commission expects to consider the economic impact on small entities, as identified in comments filed in response to the
31. None.
Federal Communications Commission.
Proposed rule.
This document solicits comment on how to design and implement an incubator program to support the entry of new and diverse voices in the broadcast industry. It seeks comment on the structure, review, and oversight of such a program in order to help create new sources of financial, technical, operational, and managerial support for eligible broadcasters, thereby creating ownership opportunities for new entrants and small businesses and promoting competition and new voices in the broadcast industry.
Comments are due on or before March 9, 2018 and reply comments are
You may submit comments, identified by MB Docket No. 17-289, by any of the following methods:
•
•
For detailed instructions for submitting comments and additional information on the rulemaking process, see the
Benjamin Arden, Industry Analysis Division, Media Bureau, FCC, (202) 418-2330. For additional information concerning the PRA proposed information collection requirements contained in the Notice of Proposed Rulemaking, contact Cathy Williams at (202) 418-2918, or via the internet at
This is a summary of the Commission's Notice of Proposed Rulemaking (NPRM), in MB Docket No. 17-289; FCC 17-156, was adopted on November 16, 2017, and released on November 20, 2017. The complete text of this document is available electronically via the search function on the FCC's Electronic Document Management System (EDOCS) web page at
The NPRM proposes a new or revised information collection requirement. The Commission, as part of its continuing effort to reduce paperwork burdens, invites the general public and the OMB to comment on the information collection requirements contained in this document, as required by the Paperwork Reduction Act of 1995, Public Law 104-13. Public and agency comments are due March 9, 2018. Comments should address: (a) Whether the proposed collection of information is necessary for the proper performance of the functions of the Commission, including whether the information shall have practical utility; (b) the accuracy of the Commission's burden estimates; (c) ways to enhance the quality, utility, and clarity of the information collected; (d) ways to minimize the burden of the collection of information on the respondents, including the use of automated collection techniques or other forms of information technology; and (e) way to further reduce the information collection burden on small business concerns with fewer than 25 employees. In addition, pursuant to the Small Business Paperwork Relief Act of 2002, Public Law 107-198, see 44 U.S.C. 3506(c)(4), the Commission seeks specific comment on how it might further reduce the information collection burden for small business concerns with fewer than 25 employees.
1. With the NPRM, the Commission seeks comment on how to design and implement an incubator program to support the entry of new and diverse voices in the broadcast industry. Specifically, the Commission seeks comment on the structure, review, and oversight of a comprehensive incubator program that will help create new sources of financial, technical, operational, and managerial support for eligible broadcasters. The Commission believes that such a program can create ownership opportunities for new entrants and small businesses, thus promoting competition and new voices in the broadcast industry.
2. The Commission has long considered whether to adopt an incubator program to help provide new sources of capital and support to entities that may otherwise lack operational experience or access to financing. Generally, an incubator program would provide an ownership rule waiver or similar benefits to a company that establishes a program to help facilitate station ownership for a certain class of prospective or existing station owners. For example, in exchange for a defined benefit, such as waiver of a broadcast ownership rule, an established company could assist a new owner by providing financial, management, technical, training, and/or business planning assistance. Over the years, a number of parties have proposed or supported recommendations for some type of an incubator program, but the Commission has never developed a comprehensive incubator program. The Commission has adopted a limited program that provides a duopoly preference to parties that agree to incubate or finance an eligible entity, but this limited policy preference does not serve as an effective basis upon which to design a comprehensive incubator program.
3. The history of this issue dates back at least to the early 1990s, but the Commission's goal is to build on its most recent efforts. Notably, in 2010 the Commission's Advisory Committee on Diversity for Communications in the Digital Age recommended that the Commission commence a rulemaking to pursue an incubator program in order to help promote ownership diversity. The committee provided various recommendations on how to structure such a program. Subsequently, the Commission sought comment during its 2010/2014 quadrennial reviews of its media ownership rules on whether to adopt an incubator program and, if so, how to structure such a program. The Commission highlighted administrative concerns and structural issues that needed to be addressed before such a program could be adopted. The record built in response to the Commission's requests for comment contained continued support for the concept of an incubator program and some suggestions on how to structure certain aspects of such a program. Some commenters, however, expressed concern that an incubator program would create a loophole in the Commission's ownership limits that could potentially harm small and independent station owners. The Commission found that the record failed to address those specific concerns and declined to adopt an incubator program. A couple of commenters urged the Commission to continue its consideration of an incubator program and suggested that additional public comment could help resolve the remaining administrative and structural issues. In an Order on Reconsideration adopted in conjunction with this NPRM,
4. In addition, on July 5, 2017, the Commission commissioned the Advisory Committee on Diversity and Digital Empowerment, which held its first meeting on September 25, 2017. The Commission anticipates that the committee's work will help inform its efforts to create an incubator program.
5. As stated above, the Commission decided to adopt an incubator program to help address the lack of access to capital and technical expertise faced by potential new entrants and small businesses. But while there is general support for an incubator program to help address these issues, there is little consensus regarding the structure or details of such a program. The Commission anticipates that this NPRM, devoted exclusively to an incubator program, can help generate solutions to these technical and administrative issues. Accordingly, as detailed below, the Commission seeks comment on eligibility criteria for the incubated entity; appropriate incubating activities; benefits to the incubating entity; how such a program would be reviewed, monitored, and enforced; and the attendant costs and benefits. The Commission anticipates that the record will reveal innovative strategies for partnerships between established broadcasters and new entrants.
6. The Commission seeks comment on how to determine eligibility for participation in the incubator program. Options include:
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•
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•
7. The Commission seeks comment on these various standards, including any modifications that would be appropriate in the incubator context. In particular, are there any changes to these standards that would help address previous concerns expressed by the Commission? Which of these standards most closely aligns with the Commission's goal to help facilitate ownership opportunities for entities that lack access to capital and operational experience and thereby promote competition and viewpoint diversity in local markets? In addition, the Commission seeks comment on any other standards that would effectively promote its objectives. Any commenters proposing or supporting a race- and/or gender-specific standard should also provide analysis regarding how such a standard could withstand a constitutional challenge. The Commission also seeks comment on the relative advantages of the various standards. Certain standards are more difficult to define and administer and may raise constitutional concerns. What are the offsetting benefits of these approaches relative to standards that are easier to apply and/or do not raise constitutional concerns?
8. The Commission also seeks comment on the activities that would qualify as incubation. Such activities would need to provide the incubated entity with support that it otherwise lacks and that is essential to its operation and ability to serve its community. As traditionally conceived, a comprehensive program could include management or technical assistance, loan guarantees, direct financial assistance through loans or equity investment, and training and business planning assistance. Should the Commission consider other activities, such as donating stations to certain organizations or arrangements whereby the new entrant gains operational experience without first acquiring a station, such as programming a station and selling advertising time under a local marketing agreement?
9. What combination of activities (financial and operational) should be required to qualify as an incubation relationship? Should there be any conditions on the financial aspects of the relationship? For example, should there be any limitations on the incubating entity holding an option to acquire the incubated station? Should the Commission adopt time limitations on technical assistance? For example, should the Commission impose a minimum amount of time to ensure that the incubated station acquires sufficient technical expertise to operate the station independently of the established broadcaster? Should the Commission impose a maximum amount of time to ensure that the incubated station actually does become independent? What role should sharing agreements (
10. How can the Commission ensure that use of the incubation program is
11. While the Commission's rules already prohibit unauthorized transfers of control, including
12. In order to encourage an established broadcaster to engage in incubating activities, the incubation program must provide a meaningful benefit to the incubating entity. In general, the potential benefit suggested has been a waiver of the Commission's local broadcast ownership rules. How should the Commission structure the waiver program? For example, should the waiver be limited to the market in which the incubating activity is occurring? Alternatively, should waiver be permissible in any similarly sized market? How would the Commission determine which markets are similar in size? Should the Commission review these waivers in the future to determine whether they continue to be justified? On what grounds would the Commission evaluate the waivers? Should the waiver be tied to the success of the incubation relationship? Should the waiver continue even if the incubator program ends and, if so, for how long? What should be considered a successful relationship? Should the waiver be transferrable if the incubating entity sells a cluster of stations that does not comply with the ownership limits at the time?
13. Instead of a waiver to acquire a different station in the market (or a similarly sized market), should the Commission allow the incubating entity to obtain an otherwise impermissible non-controlling, attributable interest in the incubated station? This would allow the incubating entity to obtain financial benefits that accrue from successful operation of the incubated station and would limit the impact on competition, both by ensuring that the incubated entity retains control of the station and by tying the ownership waiver to the period of time the incubated entity owns the station. Would such an approach dilute the contributions of the incubated station as an independent market participant?
14. Should the Commission limit any incubator program to radio, as the proposal was initially conceived, or should the program apply to both radio and television? Should the Commission adopt a phased approach, whereby it institutes the program on a trial basis in radio and then evaluate its success and operation before expanding to television, and if so, how long should such a trial period last? What steps should the Commission take to evaluate the trial period and whether to expand the program?
15. The Commission seeks comment on the review process for incubation proposals. It expects that most incubation proposals will accompany an assignment or transfer of control application. These applications would be subject to petitions to deny and informal comments under the Commission's rules. Does this provide the public with sufficient opportunity to comment on the proposal? What public concerns should the Commission consider in its evaluation? Are there other situations beyond an assignment or transfer of control application in which an incubator proposal could be applied, and if so, how should the review process work in such circumstances?
16. If the program is extended to incubation opportunities for existing station owners that are facing financial and/or technical difficulties, how should the parties submit the proposal to the Commission for review and approval? For example, should the Commission require electronic filing of such requests in the Commission's Electronic Comment Filing System? Should these filings then be subject to the same public comment requirements as those filed as part of an assignment or transfer of control application?
17. The Commission notes that so long as the arrangement is permissible under existing Commission rules, parties do not need prior approval to enter into agreements regarding finances or station operations. However, for the arrangement to count as incubation, such that the incubating entity is entitled to the benefits of the program (
18. As evidenced by the foregoing, an incubation relationship may involve complex agreements between the parties regarding financing, programming, and operations. How should the Commission monitor compliance with the terms of incubation? Should the Commission require periodic reports to be filed by one or both parties or placed in their online public files? If so, how frequently should the reports be filed? Should these reports be available to the public? What information should the reports contain? Should the Commission instead conduct its own periodic review of the incubation activities and compliance with the relevant agreements? What other compliance measures should the Commission consider?
19. If compliance lapses, for any reason, what are the consequences? Should the incubating party be required to divest itself of the benefits it received for engaging in incubation activities? For example, if the incubating party was granted a waiver of a local broadcast ownership rule, should it be forced to come into compliance with the relevant ownership limit if it does not fulfill the terms of the incubation program? Should the Commission allow the incubating party to seek to be relieved of its obligations and retain the benefits (
20. The Commission seeks comment on the costs and benefits associated with the proposals in this NPRM. In particular, the Commission encourages broadcasters and other industry participants to submit any relevant data regarding the potential costs associated with the various application, recordkeeping, and compliance requirements proposed herein. Are there
21. The proceeding for the NPRM shall be treated as a “permit-but-disclose” proceeding in accordance with the Commission's
22. Pursuant to sections 1.415 and 1.419 of the Commission's rules, 47 CFR 1.415, 1.419, interested parties may file comments and reply comments on or before the dates indicated on the first page of this document. Comments may be filed using the Commission's Electronic Comment Filing System (ECFS).
Commenting parties may file comments in response to this NPRM in MB Docket No. 17-289; interested parties are not required to file duplicate copies in the additional dockets associated with the Order on Reconsideration adopted at the same time as the NPRM.
Filings can be sent by hand or messenger delivery, by commercial overnight courier, or by first-class or overnight U.S. Postal Service mail. All filings must be addressed to the Commission's Secretary, Office of the Secretary, Federal Communications Commission.
All hand-delivered or messenger-delivered paper filings for the Commission's Secretary must be delivered to FCC Headquarters at 445 12th St. SW, Room TW-A325, Washington, DC 20554. The filing hours are 8:00 a.m. to 7:00 p.m. All hand deliveries must be held together with rubber bands or fasteners. Any envelopes and boxes must be disposed of
Commercial overnight mail (other than U.S. Postal Service Express Mail and Priority Mail) must be sent to 9050 Junction Drive, Annapolis Junction, MD 20701.
U.S. Postal Service first-class, Express, and Priority mail must be addressed to 445 12th Street SW, Washington, DC 20554.
23. As required by the Regulatory Flexibility Act of 1980, as amended (RFA), the Commission has prepared this present Initial Regulatory Flexibility Act Analysis (IRFA) of the possible significant economic impact on small entities by the policies and rules proposed in this NPRM. Written public comments are requested on this IRFA. Comments must be identified as responses to the IRFA and must be filed by the deadlines for comments provided on the first page of the NPRM. The Commission will send a copy of the NPRM, including this IRFA, to the Chief Counsel for Advocacy of the Small Business Administration (SBA). In addition, the NPRM and IRFA (or summaries thereof) will be published in the
24. In the NPRM, the Commission seeks comment on the structure and implementation of an incubator program. Broadly speaking, an incubator program would provide an ownership rule waiver or similar benefits to a company that establishes a program to help facilitate station ownership for a certain class of new owners. Under such a program, an established company could assist a new owner by providing financial, management, technical, training, and/or business planning assistance. The primary purpose of such a program would be to help provide new sources of capital and support to entities that may otherwise lack operational experience or access to financing and thereby promote diversity. Over the years, a number of parties have proposed or supported recommendations for some type of an incubator program; however, substantive and administrative issues need to be resolved before an incubator program can be adopted. This NPRM seeks comment on these issues.
25. The proposed action is authorized pursuant to sections 1, 2(a), 4(i), 257, 303, 307, 309, 310, and 403 of the Communications Act of 1934, as amended, 47 U.S.C. 151, 152(a), 154(i), 257, 303, 307, 309, 310, and 403.
26. The RFA directs agencies to provide a description of, and where feasible, an estimate of the number of small entities that may be affected by the proposed rules, if adopted. The RFA generally defines the term “small entity” as having the same meaning as the terms “small business,” “small organization,” and “small governmental jurisdiction.” In addition, the term “small business” has the same meaning as the term “small business concern” under the Small Business Act. A small business concern is one which: (1) Is independently owned and operated; (2) is not dominant in its field of operation; and (3) satisfies any additional criteria
27.
28. The Commission has estimated the number of licensed commercial television stations to be 1,382. Of this total, 1,262 stations (or about 91 percent) had revenues of $38.5 million or less, according to Commission staff review of the BIA Kelsey Inc. Media Access Pro Television Database (BIA) on May 9, 2017, and therefore these licensees qualify as small entities under the SBA definition. In addition, the Commission has estimated the number of licensed noncommercial educational television stations to be 393. Notwithstanding, the Commission does not compile and otherwise does not have access to information on the revenue of NCE stations that would permit it to determine how many such stations would qualify as small entities.
29. It is important to note, however, that, in assessing whether a business concern qualifies as small under the above definition, business (control) affiliations must be included. The Commission's estimate, therefore, likely overstates the number of small entities that might be affected by its action, because the revenue figure on which it is based does not include or aggregate revenues from affiliated companies. In addition, another element of the definition of “small business” is that the entity not be dominant in its field of operation. The Commission is unable at this time to define or quantify the criteria that would establish whether a specific television broadcast station is dominant in its field of operation. Accordingly, the estimate of small businesses to which rules may apply do not exclude any television broadcast station from the definition of a small business on this basis and are therefore possibly over-inclusive. Also, as noted above, an additional element of the definition of “small business” is that the entity must be independently owned and operated. It is difficult at times to assess these criteria in the context of media entities and the Commission's estimates of small businesses to which they apply may be over-inclusive to this extent.
30.
31. According to Commission staff review of the BIA/Kelsey, LLC's Media Access Pro Radio Database on May 9, 2017, about 11,392 (or about 99.9 percent) of 11,401 of commercial radio stations had revenues of $38.5 million or less and thus qualify as small entities under the SBA definition. The Commission has estimated the number of licensed commercial radio stations to be 11,401. It is important to note that the Commission has also estimated the number of licensed noncommercial radio stations to be 4,111. Nevertheless, the Commission does not compile and otherwise does not have access to information on the revenue of NCE stations that would permit it to determine how many such stations would qualify as small entities.
32. It is important to note, that in assessing whether a business concern qualifies as small under the above definition, business (control) affiliations must be included. The Commission's estimate, therefore, likely overstates the number of small entities that might be affected by its action, because the revenue figure on which it is based does not include or aggregate revenues from affiliated companies. In addition, an element of the definition of “small business” is that the entity not be dominant in its field of operation. It is difficult at times to assess these criteria in the context of media entities, and the estimate of small businesses to which these rules may apply does not exclude any radio station from the definition of a small business on these basis. The Commission's estimate of small businesses may therefore be over-inclusive. Also, as noted above, an additional element of the definition of “small business” is that the entity must be independently owned and operated. The Commission notes that it is difficult at times to assess these criteria in the context of media entities and the estimates of small businesses to which they apply may be over-inclusive to this extent.
33. Certain options, if adopted, may result in new reporting, recordkeeping, and compliance obligations for those broadcasters that participate in an incubator program. For example, parties could be required to submit the incubation proposal to the Commission for approval, file periodic compliance reports with the Commission or place the reports in their online public files, or submit requests for relief if the terms of the incubator proposal are not adhered to. In order to evaluate any new or modified reporting, recordkeeping or other compliance requirements that may result from the actions proposed in this NPRM, the Commission has sought input from the parties on various matters. The NPRM seeks comment on how to structure an incubation program, including a requirement that the parties file the incubation proposal with the Commission for the purpose of seeking the Commission's approval of the arrangement. The Commission seeks comment on the method for filing the agreement in circumstances in which the parties seek Commission approval of the incubation relationship, such as whether it should be filed as part of an application for assignment or transfer of control of a broadcast license or, in the absence of such an application, via the Commission's Electronic Comment Filing System. The NPRM also seeks comment on how to structure reporting, recordkeeping, and compliance requirements, which could also result in increased requirements for parties to an incubation arrangement. For example, the NPRM seeks comment on whether to
34. The RFA requires an agency to describe any significant alternatives that it has considered in reaching its proposed approach, which may include the following four alternatives (among others): (1) The establishment of differing compliance or reporting requirements or timetables that take into account the resources available to small entities; (2) the clarification, consolidation, or simplification of compliance or reporting requirements under the rule for small entities; (3) the use of performance, rather than design, standard; and (4) an exemption from coverage of the rule, or any part thereof, for small entities.
35. To evaluate options and alternatives should there be a significant economic impact on small entities as a result of actions that have been proposed in this NPRM, the Commission has sought comment from the parties. The NPRM seeks comment on the costs and benefits associated with various proposals and alternatives such as how to structure the administration and oversight of an incubator program and specifically seeks comment on ways to reduce the burdens on small entities. Overall, however, the Commission believes that small entities will benefit from their participation in an incubator arrangement by getting access to capital and/or operational assistance that they may otherwise lack, which may minimize any economic impact that may be incurred by small entities.
36. None.
37. Accordingly,
38.
39.
National Marine Fisheries Service (NMFS), National Oceanic and Atmospheric Administration (NOAA), Commerce.
Proposed rule; request for comments.
NMFS proposes recreational management measures for a February 2018 black sea bass fishery. The proposed action is intended to provide additional recreational black sea bass fishing opportunities while maintaining management measures to prevent overfishing. This action is also intended to inform the public of these proposed measures and to provide an opportunity for comment.
Comments must be received by 5 p.m. local time, on January 23, 2018.
You may submit comments on this document, identified by NOAA-NMFS-2017-0151, by either of the following methods:
1. Go to
2. Click the “Comment Now!” icon, complete the required fields, and
3. Enter or attach your comments.
A draft environmental assessment (EA) has been prepared for this action that describes the proposed measures and other considered alternatives, as well as provides an analysis of the impacts of the proposed measures and alternatives. Copies of this draft EA, including the Regulatory Flexibility Act Analysis (RFAA) and Regulatory Impact Review (RIR), are available online at
Cynthia Hanson, Fishery Management Specialist, (978) 281-9180.
The Mid-Atlantic Fishery Management Council and the Atlantic States Marine Fisheries Commission jointly manage the summer flounder, scup, and black sea bass fisheries under the provisions of the Summer Flounder, Scup, and Black Sea Bass Fishery Management Plan (FMP). The management unit specified in the FMP for black sea bass (
In 2017, the results of the 2016 benchmark assessment showed that the black sea bass stock is not overfished, overfishing is not occurring, and biomass is 2.3 times higher than the biomass target. These findings led both the Council and Commission to reconsider reopening a recreational Wave 1 (January and February) black sea bass fishery in 2018 as a way to increase access and recreational fishing opportunity while still constraining landings within the recreational harvest limit. The current Federal recreational black sea fishing seasons are May 15 through September 21 and October 22 through December 31, and the last time this fishery was open during Wave 1 was in 2013.
In October 2017, both the Council and Commission approved the addition of a February-only black sea bass recreational season for 2018, with the continued recreational measures of a 15-fish per-angler possession limit, and a 12.5-inch (31.75-cm) minimum size. The Council also agreed to work on the implementation of a winter recreational Letter of Authorization (LOA) program for 2019 and beyond. The LOA program would provide more robust monitoring and reporting for a limited winter recreational fishery; however, changes of this magnitude require a framework adjustment to the FMP and cannot be developed in time for 2018.
This action proposes to revise the current 2018 Federal recreational management measures for black sea bass to include an additional 28-day fishing season during the month of February. The current recreational management measures of a 12.5-inch (31.75-cm) minimum fish size and 15-fish possession limit would also apply. To account for expected harvest during this February season, the Council and Commission calculated a catch estimate of 100,000 lb (45.36 mt). Because there are no Marine Recreational Information Program survey data for Wave 1 in the black sea bass fishery, this catch estimate is based on 2013 vessel trip report (VTR) data from federally permitted for-hire vessels that was expanded to account for potential effort from the private/rental and shore modes. We propose to reduce the 2018 black sea bass recreational harvest limit (3.66 million lb, 1,661 mt) by the estimated catch of 100,000 lb (45.36 mt), consistent with the Council and Commission recommendation. However, only states that participate in the proposed February fishery will be accountable for this estimated catch. Participating states would be required to adjust measures for the remainder of 2018, developed through the Commission process, to account for the estimated February catch.
This action is only intended to be in place for the 2018 fishing year. The intent of this proposed action is to allow for some recreational fishing access during Wave 1 in 2018 while the long-term framework adjustment is developed. The Council and Commission will develop and make recommendations on management measures for the remainder of the 2018 recreational fishery, including those to accommodate this additional winter season, throughout the spring of 2018.
Pursuant to section 304(b)(1)(A) of the Magnuson Stevens Fishery Conservation and Management Act (Magnuson-Stevens Act), the NMFS Assistant Administrator has determined that this proposed rule is consistent with the Summer Flounder, Scup, and Black Sea Bass FMP, other provisions of the Magnuson-Stevens Act, and other applicable law, subject to further consideration after public comment.
This proposed rule has been determined to be not significant for purposes of Executive Order 12866.
NMFS prepared an initial regulatory flexibility analysis (IRFA), as required by section 603 of the Regulatory Flexibility Act (RFA), to examine the impacts of this proposed rule on small business entities, if adopted. A description of the management measures, why they are being considered, and the legal basis for this action are contained at the beginning of this section and in the preamble to this proposed rule. A copy of the RFA analysis is available from NMFS (see
This action proposes a revision to the 2018 Federal recreational management measures for black sea bass to include an additional 28-day fishing season during the month of February. The proposed measures would increase recreational fishing access and opportunity while still constraining landings within the recreational harvest limit.
The legal basis and objectives for this action are contained in the preamble to this proposed rule, and are not repeated here.
The North American Industry Classification System (NAICS) is the standard used by Federal statistical agencies in classifying business establishments for the purpose of collecting, analyzing, and publishing statistical data related to the U.S. business economy. A business primarily engaged in for-hire fishing activity is classified as a small business if it has combined annual receipts not in excess of $7.5 million (NAICS 11411) for RFA compliance purposes only.
This proposed rule affects recreational fish harvesting entities engaged in the black sea bass fishery. Individually permitted vessels may hold permits for several fisheries, harvesting species of fish that are regulated by several different FMPs, even beyond those affected by the proposed action. Furthermore, multiple-permitted vessels and/or permits may be owned by entities affiliated by stock ownership, common management, identity of interest, contractual relationships, or economic dependency. For the purposes of RFA analysis, the ownership entities, not the individual vessels, are considered to be the regulated entities.
Ownership entities (firms) are defined as those entities with common ownership personnel as listed on the permit application. Only permits with identical ownership personnel are categorized as an ownership entity. For example, if five permits have the same seven persons listed as co-owners on their permit applications, those seven persons would form one ownership entity that holds those five permits. If two of those seven owners also co-own additional vessels, that ownership arrangement would be considered a separate ownership entity for the purpose of this analysis.
The current ownership data set used for this analysis is based on calendar year 2016 (the most recent complete year available) and contains average gross sales associated with those
There are no new reporting or recordkeeping requirements contained in any of the alternatives considered for this action.
NMFS is not aware of any relevant Federal rules that may duplicate, overlap, or conflict with this proposed rule.
The proposed measures to open a February season are designed to increase fishing opportunity in the 2018 recreational black sea bass fishery while maintaining harvest within the recreational harvest limit and annual catch limit. Business entities that hold charter/party permits and are active participants in the fishery may benefit if they decide to participate in this new fishing season. This action would allow recreational access to black sea bass in Federal waters during the month of February, when there are fewer other species available to target. This adds to the revenue potential for charter/party entities in this “off” season. Even accounting for some level of reduced black sea bass catch in the later, peak summer and fall seasons to balance out harvest from this extra season, charter/party entities should be able to continue to generate revenue and book trips by supplementing business with other available target species during the peak fishing seasons. Therefore, the economic impacts of this action are expected to be minimally positive. Because the exact number of participants in this fishery are unknown at this time, it is not possible to quantify the degree of potential economic benefit that the Federal fishery may have. Similarly, because the full 2018 fishing year measures will not be developed until spring of 2018, we cannot determine how substantial the changes may be that are required for participating states. It is expected that entities could offset the effects of potential reductions during peak black sea bass seasons by targeting other species. The earlier we gain an understanding of the level of interest and potential participation in this February season, the better we can accurately analyze the potential impacts of this action on small entities.
There were two alternatives (status quo and opening during both January and February) to the proposed action that were also considered. The status quo alternative maintains the current recreational seasons for black sea bass (May 15 through September 21, and October 22 through December 31), with no additional seasons or changes to the projected measures. This alternative is not preferred, as it does not take advantage of the favorable stock assessment report; nor increase any access or opportunity in the recreational black sea bass fishery.
The Council also considered opening an additional recreational black sea bass season in 2018 for the entirety of Wave 1 (January and February). This alternative is similar to the preferred alternative, and would create more recreational fishing opportunity in winter 2018 with a longer additional season. However, given the lack of recreational data available during Wave 1, the time constraints involved with developing and implementing a specifications rule by January, and the potential disproportionate impacts to state recreational fisheries later in the year because higher estimated catch would likely occur in a longer winter fishery, the Council preferred a shorter 2018 winter fishery.
The Council recommended, and we are proposing, a February recreational fishery to satisfy the Magnuson-Stevens Act requirements to ensure fish stocks are not subject to overfishing, while allowing the greatest access to the fishery, and opportunity to achieve optimum yield.
Fisheries, Fishing, Reporting and recordkeeping requirements.
For the reasons set out in the preamble, 50 CFR part 648 is proposed to be amended as follows:
16 U.S.C. 1801
Vessels that are not eligible for a moratorium permit under § 648.4(a)(7), and fishermen subject to the possession limit specified in § 648.145(a), may only possess black sea bass from February 1 through February 28, May 15 through September 21, and October 22 through December 31, unless this time period is adjusted pursuant to the procedures in § 648.142.
The Department of Commerce will submit to the Office of Management and Budget (OMB) for clearance the following proposal for collection of information under the provisions of the Paperwork Reduction Act.
The American Community Survey (ACS) collects detailed socioeconomic data from about 3.5 million housing units in the United States and 36,000 in Puerto Rico each year. The ACS also collects detailed socioeconomic data from about 195,000 residents living in Group Quarter (GQ) facilities. An ongoing data collection effort with an annual sample of this magnitude requires that the ACS continue research, testing, and evaluations aimed at reducing respondent burden, improving data quality, achieving survey cost efficiencies, and improving ACS questionnaire content and related data collection materials. The ACS Methods Panel is a research program designed to address and respond to issues and survey needs.
Residents of sampled housing units are invited to self-respond to the ACS through a series of up to five mailings. Some respondents call the Census Bureau with questions or concerns about the survey after receiving the mail invitation. One common reason for calling is to verify that the ACS is a real survey. Respondents are hesitant to provide information about their household online or on a paper questionnaire without knowing that the survey is legitimate. Additionally, respondents want to understand how the data are used. To address these concerns, in addition to potentially improving the self-response rate, the Census Bureau seeks to test the inclusion of a data slide (also known as a slide chart) with the current ACS mail materials. The primary goals of the data slide are to help legitimize the survey and to present statistics of interest. The data slide could also potentially serve as a reminder to complete the survey. Promoting survey legitimacy and respondent trust may ultimately reduce respondent burden and increase self-response. The data slide will contain information on selected statistics from the ACS for each state, the District of Columbia, and Puerto Rico.
Two experimental treatments are proposed. This test will involve the initial package (the first mailing) and the paper questionnaire package (the third mailing); some experimental cases will receive a data slide in the initial package and other experimental cases will receive it in the paper questionnaire package (if a response is not received prior to the third mailing).
This test will study the impact on self-response and cost of including the data slide in the mail materials. To field this test, the Census Bureau plans to use the ACS production sample (clearance number: 0607-0810, expires 06/30/2018). Thus, there is no increase in burden from this test since each treatment will result in the same burden estimate per interview (40 minutes). The ACS sample design consists of randomly assigning each monthly sample panel into 24 groups of approximately 12,000 addresses each. Each group, called a methods panel group, within a monthly sample is representative of the full monthly sample. Each monthly sample is a representative subsample of the entire annual sample and is representative of the sampling frame.
The Census Bureau proposes to test the data slide as part of the ACS May 2018 panel, adhering to the same data collection protocols as production ACS. The Census Bureau proposes to use two randomly selected methods panel groups for each treatment. Hence, each treatment will have a sample size of approximately 24,000 addresses. In total, approximately 48,000 addresses will be used for the two experimental treatments. Additionally, 24,000 addresses will receive the current production mail materials, but will be sorted and mailed at the same time as the other treatment materials and serve as the control for statistical comparison. The remaining sample will receive production materials.
The Census Bureau proposes to evaluate treatment comparisons by comparing self-response rates at various points in the mailing schedule and by comparing the final response rates. For each comparison a two-tailed test will be used so that the Census Bureau can measure the impact on the evaluation measure in either direction with 80 percent power, at the α=0.1 level. The effective samples were calculated based on the previous year's data for the May panel. The sample size will be able to detect differences of approximately 1.25 percentage points between the self-response return rates of the control and experimental treatments. Additionally, a cost analysis will also be conducted.
Written comments and recommendations for the proposed information collection should be sent within 30 days of publication of this notice to
Economic Development Administration, Department of Commerce.
Notice of an open meeting.
The National Advisory Council on Innovation and Entrepreneurship (NACIE) will hold a public meeting on Thursday, February 1, 2018, from 1:00 p.m.-4:00 p.m. Eastern Time (ET) and Friday, February 2, 2018, from 9:00 a.m.-12:00 p.m. ET. During this time, members will hear from Federal innovation and entrepreneurship policymakers and program executives and discuss potential policies that would foster innovation, increase the rate of technology commercialization, and catalyze the creation of jobs in the United States. Topics to be covered include increasing early-stage high-growth company exports, increased economic dynamism through innovation and entrepreneurship, apprenticeships in entrepreneurship and high-growth technology sectors, and alignment of federal innovation and entrepreneurship policies and programs.
Herbert Clark Hoover Building (HCHB), 1401 Constitution Ave. NW, Washington, DC 20230, Room 72015. The entrance to HCHB is located on the west side of 14th St. NW between D St. NW and Constitution Ave. NW, and a valid government-issued ID is required to enter the building. Please note that pre-clearance is required in order to both attend the meeting in person and make a statement during the public comment portion of the meeting. Please limit comments to five minutes or less and submit a brief statement summarizing your comments to Craig Buerstatte (see contact information below) no later than 11:59 p.m. ET on Friday, January 26, 2018.
Teleconference and/or web conference connection information will be published prior to the meeting along with the agenda on the NACIE website at
NACIE, established by Section 25(c) of the Stevenson-Wydler Technology Innovation Act of 1980, as amended (15 U.S.C. 3720(c)), and managed by EDA's Office of Innovation and Entrepreneurship (OIE), is a Federal Advisory Committee Act (FACA) committee that provides advice directly to the Secretary of Commerce. NACIE's advice focuses on transformational policies and programs that aim to accelerate innovation and increase the rate at which research is translated into companies and jobs, including through entrepreneurship and the development of an increasingly skilled, globally competitive workforce. Comprised of successful entrepreneurs, innovators, angel investors, venture capitalists, and leaders from the nonprofit and academic sectors, NACIE has presented to the Secretary recommendations from throughout the research-to-jobs continuum regarding topics including improving access to capital, growing and connecting entrepreneurial ecosystems, increasing small business-driven research and development, and understanding the workforce of the future. In its advisory capacity, NACIE also serves as a vehicle for ongoing dialogue with the innovation, entrepreneurship, and workforce development communities.
The final agenda for the meeting will be posted on the NACIE website at
Craig Buerstatte, Office of Innovation and Entrepreneurship, Room 78018, 1401 Constitution Avenue NW, Washington, DC 20230; email:
Enforcement and Compliance, International Trade Administration, Department of Commerce.
The Department of Commerce (Commerce) preliminarily determines that citric acid and certain citrate salts (citric acid) from Thailand are being, or are likely to be, sold in the United States at less than fair value (LTFV). The period of investigation (POI) is April 1, 2016, through March 31, 2017.
Applicable: January 8, 2018.
Joy Zhang (COFCO), George McMahon (Niran), or Cindy Robinson (Sunshine), AD/CVD Operations, Office III, Enforcement and Compliance, International Trade Administration, U.S. Department of Commerce, 1401 Constitution Avenue NW, Washington, DC 20230; telephone: (202) 482-1168, (202) 482-1167, or (202) 482-3797, respectively.
This preliminary determination is made in accordance with section 733(b) of the Tariff Act of 1930, as amended (the Act). Commerce published the notice of initiation of this investigation on June 30, 2017.
The product covered by this investigation is citric acid from Thailand. For a complete discussion of the scope of this investigation,
In accordance with the preamble to Commerce's regulations,
Commerce is conducting this investigation in accordance with section 731 of the Act. Commerce has also calculated export and constructed export prices in accordance with section 772 of the Act. Normal value (NV) is calculated in accordance with section 773 of the Act. For a full description of the methodology underlying the preliminary determination,
In accordance with section 733(e) of the Act and 19 CFR 351.206, Commerce preliminarily finds that critical circumstances exist for one of the mandatory respondents, Niran, but do not exist for COFCO, Sunshine and all-other producers and/or exporters. For a full description of the methodology and results of Commerce's critical circumstances analysis,
Sections 733(d)(1)(ii) and 735(c)(5)(A) of the Act provide that in the preliminary determination Commerce shall determine an estimated all-others rate for all exporters and producers not individually examined. This rate shall be an amount equal to the weighted average of the estimated weighted-average dumping margins established for exporters and producers individually investigated, excluding any zero and
In this investigation, Commerce calculated the all-others rate based on a weighted average of the estimated weighted-average dumping margins calculated for the three mandatory respondents: COFCO, Niran, and Sunshine, none of which are zero,
Commerce preliminarily determines that the following estimated weighted-average dumping margins exist:
In accordance with section 733(d)(2) of the Act, Commerce will direct U.S. Customs and Border Protection (CBP) to suspend liquidation of entries of subject merchandise, as described in Appendix I, entered, or withdrawn from warehouse, for consumption on or after the date of publication of this notice in the
Section 733(e)(2) of the Act provides that, given an affirmative determination of critical circumstances, any suspension of liquidation shall apply to unliquidated entries of subject merchandise entered, or withdrawn from warehouse, for consumption on or after the later of (a) the date which is 90 days before the date on which the suspension of liquidation was first ordered, or (b) the date on which notice of initiation of the investigation was published. Commerce preliminarily finds that critical circumstances exist for imports of subject merchandise produced or exported by Niran. In accordance with section 733(e)(2)(A) of the Act, the suspension of liquidation shall apply to unliquidated entries of shipments of subject merchandise from Niran that were entered, or withdrawn from warehouse, for consumption on or after the date which is 90 days before the publication of this notice.
Commerce normally adjusts cash deposits for estimated antidumping duties by the amount of export subsidies countervailed in a companion countervailing duty (CVD) proceeding, when CVD provisional measures are in effect. Accordingly, where Commerce preliminarily made an affirmative determination for countervailable export subsidies, Commerce has offset the estimated weighted-average dumping margin by the appropriate CVD rate.
Commerce intends to disclose its calculations and analysis performed to interested parties in this preliminary determination within five days of any public announcement or, if there is no public announcement, within five days of the date of publication of this notice in accordance with 19 CFR 351.224(b).
As provided in section 782(i)(1) of the Act, Commerce intends to verify the information relied upon in making its final determination.
Case briefs or other written comments may be submitted to the Assistant Secretary for Enforcement and Compliance no later than seven days after the date on which the last verification report is issued in this investigation. Rebuttal briefs, limited to issues raised in case briefs, may be submitted no later than five days after the deadline date for case briefs.
Pursuant to 19 CFR 351.310(c), interested parties who wish to request a hearing, limited to issues raised in the case and rebuttal briefs, must submit a written request to the Assistant Secretary for Enforcement and Compliance, U.S. Department of Commerce, within 30 days after the date of publication of this notice. Requests should contain the party's name, address, and telephone number, the number of participants, whether any participant is a foreign national, and a list of the issues to be discussed. If a request for a hearing is made, Commerce intends to hold the hearing at the U.S. Department of Commerce, 1401 Constitution Avenue NW, Washington, DC 20230, at a time and date to be determined. Parties should confirm by telephone the date, time, and location of the hearing two days before the scheduled date.
Section 735(a)(2) of the Act provides that a final determination may be postponed until not later than 135 days after the date of the publication of the preliminary determination if, in the event of an affirmative preliminary determination, a request for such postponement is made by exporters who account for a significant proportion of exports of the subject merchandise, or in the event of a negative preliminary determination, a request for such postponement is made by the petitioner. Section 351.210(e)(2) of Commerce's regulations requires that a request by exporters for postponement of the final determination be accompanied by a request for extension of provisional measures from a four-month period to a period not more than six months in duration.
On November 29, 2017, pursuant to section 735(a)(2) of the Act and 19 CFR 351.210(e)(1), the petitioners requested that, if the preliminary determination in the above-referenced investigation is negative, Commerce postpone the final determination in accordance with 19 CFR 351.210(b)(2)(i).
In accordance with section 735(a)(2)(A) of the Act and 19 CFR 351.210(b)(2)(ii) and (e)(2), because (1) our preliminary determination is affirmative, (2) the requesting exporters account for a significant proportion of exports of the subject merchandise, and (3) no compelling reasons for denial exist, we are granting the respondents' request and are postponing the final determination until no later than 135 days after the publication of the preliminary determination notice in the
In accordance with section 733(f) of the Act, Commerce will notify the International Trade Commission (ITC) of its affirmative preliminary determination. If the final determination is affirmative, the ITC will determine before the later of 120 days after the date of this preliminary determination or 45 days after Commerce's final determination whether these imports are materially injuring, or threaten material injury to, the U.S. industry.
This determination is issued and published in accordance with sections 733(f) and 777(i)(1) of the Act and 19 CFR 351.205(c).
The merchandise covered by this investigation includes all grades and granulation sizes of citric acid, sodium citrate, and potassium citrate in their unblended forms, whether dry or in solution, and regardless of packaging type. The scope also includes blends of citric acid, sodium citrate, and potassium citrate; as well as blends with other ingredients, such as sugar, where the unblended form(s) of citric acid, sodium citrate, and potassium citrate constitute 40 percent or more, by weight, of the blend.
The scope also includes all forms of crude calcium citrate, including dicalcium citrate monohydrate, and tricalcium citrate tetrahydrate, which are intermediate products in the production of citric acid, sodium citrate, and potassium citrate.
The scope includes the hydrous and anhydrous forms of citric acid, the dihydrate and anhydrous forms of sodium citrate, otherwise known as citric acid sodium salt, and the monohydrate and monopotassium forms of potassium citrate. Sodium citrate also includes both trisodium citrate and monosodium citrate which are also known as citric acid trisodium salt and citric acid monosodium salt, respectively.
The scope does not include calcium citrate that satisfies the standards set forth in the United States Pharmacopeia and has been mixed with a functional excipient, such as dextrose or starch, where the excipient constitutes at least 2 percent, by weight, of the product.
Citric acid and sodium citrate are classifiable under 2918.14.0000 and 2918.15.1000 of the Harmonized Tariff Schedule of the United States (HTSUS), respectively. Potassium citrate and crude calcium citrate are classifiable under 2918.15.5000 and, if included in a mixture or blend, 3824.99.9295 of the HTSUS. Blends that include citric acid, sodium citrate, and potassium citrate are classifiable under 3824.99.9295 of the HTSUS. Although the HTSUS subheadings are provided for convenience and customs purposes, the written description of the merchandise is dispositive.
Enforcement and Compliance, International Trade Administration, Department of Commerce.
The Department of Commerce (Commerce) preliminarily determines that citric acid and certain citrate salts (citric acid) from Belgium are being, or are likely to be, sold in the United States at less than fair value (LTFV). The period of investigation (POI) is April 1, 2016, through March 31, 2017.
Applicable: January 8, 2018.
Paul Stolz, AD/CVD Operations, Office III, Enforcement and Compliance, International Trade Administration, U.S. Department of Commerce, 1401 Constitution Avenue NW, Washington, DC 20230; telephone: (202) 482-4474.
This preliminary determination is made in accordance with section 733(b) of the Tariff Act of 1930, as amended (the Act). Commerce published the notice of initiation of this investigation on June 30, 2017.
The product covered by this investigation is citric acid from Belgium. For a complete description of the scope of this investigation,
In accordance with the preamble to Commerce's regulations,
Commerce is conducting this investigation in accordance with section 731 of the Act. Commerce has calculated export prices in accordance with section 772(a) of the Act. Normal value (NV) is calculated in accordance with section 773 of the Act. For a full description of the methodology underlying the preliminary determination,
Sections 733(d)(1)(ii) and 735(c)(5)(A) of the Act provide that in the preliminary determination Commerce shall determine an estimated all-others
Commerce calculated an individual estimated weighted-average dumping margin for S.A. Citrique Belge N.V. (Citrique Belge), the only individually examined exporter/producer in this investigation. Because the only individually calculated dumping margin is not zero,
Commerce preliminarily determines that the following estimated weighted-average dumping margins exist:
In accordance with section 733(d)(2) of the Act, Commerce will direct U.S. Customs and Border Protection (CBP) to suspend liquidation of entries of subject merchandise, as described in Appendix I, entered, or withdrawn from warehouse, for consumption on or after the date of publication of this notice in the
Commerce intends to disclose its calculations and analysis performed to interested parties in this preliminary determination within five days of any public announcement or, if there is no public announcement, within five days of the date of publication of this notice in accordance with 19 CFR 351.224(b).
As provided in section 782(i)(1) of the Act, Commerce intends to verify the information relied upon in making its final determination.
Case briefs or other written comments may be submitted to the Assistant Secretary for Enforcement and Compliance no later than seven days after the date on which the last verification report is issued in this investigation. Rebuttal briefs, limited to issues raised in case briefs, may be submitted no later than five days after the deadline date for case briefs.
Pursuant to 19 CFR 351.310(c), interested parties who wish to request a hearing, limited to issues raised in the case and rebuttal briefs, must submit a written request to the Assistant Secretary for Enforcement and Compliance, U.S. Department of Commerce, within 30 days after the date of publication of this notice. Requests should contain the party's name, address, and telephone number, the number of participants, whether any participant is a foreign national, and a list of the issues to be discussed. If a request for a hearing is made, Commerce intends to hold the hearing at the U.S. Department of Commerce, 1401 Constitution Avenue NW, Washington, DC 20230, at a time and date to be determined. Parties should confirm by telephone the date, time, and location of the hearing two days before the scheduled date.
Section 735(a)(2) of the Act provides that a final determination may be postponed until not later than 135 days after the date of the publication of the preliminary determination if, in the event of an affirmative preliminary determination, a request for such postponement is made by exporters who account for a significant proportion of exports of the subject merchandise, or in the event of a negative preliminary determination, a request for such postponement is made by the petitioner. Section 351.210(e)(2) of Commerce's regulations requires that a request by exporters for postponement of the final determination be accompanied by a request for extension of provisional measures from a four-month period to a period not more than six months in duration.
On November 30, 2017, Citrique Belge requested that Commerce postpone the final determination in the event of an affirmative preliminary determination, and on December 1, 2017, Citrique Belge re-submitted its request to postpone the final determination to also request that provisional measures be extended from a four-month period to a six-month period, pursuant to section 733(d) of the Act.
In accordance with section 733(f) of the Act, Commerce will notify the International Trade Commission (ITC) of its preliminary determination. If the final determination is affirmative, the ITC will determine before the later of 120 days after the date of this preliminary determination or 45 days after the final determination whether these imports are materially injuring, or threaten material injury to, the U.S. industry.
This determination is issued and published in accordance with sections 733(f) and 777(i)(1) of the Act and 19 CFR 351.205(c).
The merchandise covered by this investigation includes all grades and granulation sizes of citric acid, sodium citrate, and potassium citrate in their unblended forms, whether dry or in solution, and regardless of packaging type. The scope also includes blends of citric acid, sodium citrate, and potassium citrate; as well as blends with other ingredients, such as sugar, where the unblended form(s) of citric acid, sodium citrate, and potassium citrate constitute 40 percent or more, by weight, of the blend.
The scope also includes all forms of crude calcium citrate, including dicalcium citrate monohydrate, and tricalcium citrate tetrahydrate, which are intermediate products in the production of citric acid, sodium citrate, and potassium citrate.
The scope includes the hydrous and anhydrous forms of citric acid, the dihydrate and anhydrous forms of sodium citrate, otherwise known as citric acid sodium salt, and the monohydrate and monopotassium forms of potassium citrate. Sodium citrate also includes both trisodium citrate and monosodium citrate which are also known as citric acid trisodium salt and citric acid monosodium salt, respectively.
The scope does not include calcium citrate that satisfies the standards set forth in the United States Pharmacopeia and has been mixed with a functional excipient, such as dextrose or starch, where the excipient constitutes at least 2 percent, by weight, of the product.
Citric acid and sodium citrate are classifiable under 2918.14.0000 and 2918.15.1000 of the Harmonized Tariff Schedule of the United States (HTSUS), respectively. Potassium citrate and crude calcium citrate are classifiable under 2918.15.5000 and, if included in a mixture or blend, 3824.99.9295 of the HTSUS. Blends that include citric acid, sodium citrate, and potassium citrate are classifiable under 3824.99.9295 of the HTSUS. Although the HTSUS subheadings are provided for convenience and customs purposes, the written description of the merchandise is dispositive.
Enforcement and Compliance, International Trade Administration, Department of Commerce.
The Department of Commerce (Commerce) is conducting the administrative review of the antidumping duty order on magnesium metal from the People's Republic of China (China), covering the period April 1, 2016, through March 31, 2017. Commerce preliminarily determines that Tianjin Magnesium International, Co., Ltd. (TMI) and Tianjin Magnesium Metal, Co., Ltd. (TMM) did not have reviewable entries during the period of review (POR). We invite interested parties to comment on these preliminary results.
Applicable January 8, 2018.
James Terpstra, AD/CVD Operations, Office III, Enforcement and Compliance, International Trade Administration, U.S. Department of Commerce, 1401 Constitution Avenue NW, Washington DC 20230; telephone: (202) 482-3965.
On April 3, 2017, Commerce published a notice of opportunity to request an administrative review of the antidumping duty order on magnesium metal from China for the POR.
The product covered by this antidumping duty order is magnesium metal from China, which includes primary and secondary alloy magnesium metal, regardless of chemistry, raw material source, form, shape, or size. Magnesium is a metal or alloy containing by weight primarily the element magnesium. Primary magnesium is produced by decomposing raw materials into magnesium metal. Secondary magnesium is produced by recycling magnesium-based scrap into magnesium metal. The magnesium covered by this order includes blends of primary and secondary magnesium.
The subject merchandise includes the following alloy magnesium metal products made from primary and/or secondary magnesium including, without limitation, magnesium cast into ingots, slabs, rounds, billets, and other shapes; magnesium ground, chipped, crushed, or machined into rasping, granules, turnings, chips, powder, briquettes, and other shapes; and products that contain 50 percent or greater, but less than 99.8 percent, magnesium, by weight, and that have been entered into the United States as conforming to an “ASTM Specification for Magnesium Alloy”
The scope of this order excludes: (1) All forms of pure magnesium, including chemical combinations of magnesium and other material(s) in which the pure magnesium content is 50 percent or greater, but less than 99.8 percent, by weight, that do not conform to an “ASTM Specification for Magnesium Alloy”
The merchandise subject to this order is classifiable under items 8104.19.00, and 8104.30.00 of the Harmonized Tariff Schedule of the United States (HTSUS). Although the HTSUS items are provided for convenience and customs purposes, the written description of the merchandise is dispositive.
We received timely submissions from TMI and TMM certifying that they did not have sales, shipments, or exports of subject merchandise to the United States during the POR.
Because we have not received information to the contrary from CBP, consistent with our practice, we preliminarily determine that TMI and TMM had no shipments and, therefore, no reviewable entries during the POR. In addition, we find it is not appropriate to rescind the review with respect to these companies but, rather, to complete the review with respect to TMI and TMM and issue appropriate instructions to CBP based on the final results of the review, consistent with our practice in non-market economy (NME) cases.
Interested parties may submit case briefs no later than 30 days after the date of publication of this notice in the
Pursuant to 19 CFR 351.310(c), interested parties who wish to request a hearing must submit a written request to the Assistant Secretary for Enforcement and Compliance, U.S. Department of Commerce within 30 days of the date of publication of this notice. Hearing requests should contain the following information: (1) The party's name, address, and telephone number; (2) the number of participants; and (3) a list of the issues parties intend to discuss. Issues raised in the hearing will be limited to those raised in the respective case and rebuttal briefs. If a request for a hearing is made, parties will be notified of the time and date of the hearing which will be held at the U.S. Department of Commerce, 1401 Constitution Avenue NW, Washington, DC 20230.
Unless extended, we intend to issue the final results of this administrative review, including our analysis of all issues raised in any written brief, within 120 days of publication of this notice in the
Upon issuance of the final results, Commerce will determine, and CBP shall assess, antidumping duties on all appropriate entries covered by this review.
The following cash deposit requirements will be effective upon publication of the final results of this administrative review for all shipments of the subject merchandise entered, or withdrawn from warehouse, for consumption on or after the publication date of the final results of review, as provided for by section 751(a)(2)(C) of the Act: (1) For TMI, which claimed no shipments, the cash deposit rate will remain unchanged from the rate assigned to TMI in the most recently completed review of the company; (2) for previously investigated or reviewed Chinese and non-Chinese exporters who are not under review in this segment of the proceeding but who have separate rates, the cash deposit rate will continue to be the exporter-specific rate published for the most recent period; (3) for all Chinese exporters of subject merchandise that have not been found to be entitled to a separate rate (including TMM, which claimed no shipments, but has not been found to be
This notice also serves as a preliminary reminder to importers of their responsibility under 19 CFR 351.402(f)(2) to file a certificate regarding the reimbursement of antidumping duties prior to liquidation of the relevant entries during this period. Failure to comply with this requirement may result in the Secretary's presumption that reimbursement of antidumping duties occurred and the subsequent assessment of double antidumping duties.
This notice is issued in accordance with sections 751(a)(1) and 777(i)(1) of the Act, and 19 CFR 351.221(b)(4).
Enforcement and Compliance, International Trade Administration, Department of Commerce.
The Department of Commerce (Commerce) preliminarily determines that citric acid and certain citrate salts (citric acid) from Colombia are being, or are likely to be, sold in the United States at less than fair value (LTFV). The period of investigation (POI) is April 1, 2016, through March 31, 2017.
Applicable: January 8, 2018.
Stephanie Moore, AD/CVD Operations, Office III, Enforcement and Compliance, International Trade Administration, U.S. Department of Commerce, 1401 Constitution Avenue NW, Washington, DC 20230; telephone: (202) 482-3692.
This preliminary determination is made in accordance with section 733(b) of the Tariff Act of 1930, as amended (the Act). Commerce published the notice of initiation of this investigation on June 30, 2017.
The products covered by this investigation are citric acid and certain citrate salts (citric acid) from Colombia. For a complete description of the scope of this investigation,
In accordance with the preamble to Commerce's regulations,
Commerce is conducting this investigation in accordance with section 731 of the Act. Export prices are calculated in accordance with section 772(a) of the Act. Normal value (NV) is calculated in accordance with section 773 of the Act. For a full description of the methodology underlying the preliminary determination,
In accordance with section 733(e) of the Act and 19 CFR 351.206, Commerce preliminary determines that critical circumstances do not exist for the mandatory respondent, Sucroal S.A. (Sucroal), or for exporters and producers not individually examined (
Sections 733(d)(1)(ii) and 735(c)(5)(A) of the Act provide that in the preliminary determination Commerce shall determine an estimated all-others rate for all exporters and producers not individually examined. This rate shall be an amount equal to the weighted average of the estimated weighted-average dumping margins established for exporters and producers
Commerce calculated an individual estimated weighted-average dumping margin for Sucroal, the only individually examined exporter/producer in this investigation. Because the only individually calculated dumping margin is not zero,
Commerce preliminarily determines that the following estimated weighted-average dumping margins exist:
In accordance with section 733(d)(2) of the Act, Commerce will direct U.S. Customs and Border Protection (CBP) to suspend liquidation of entries of subject merchandise, as described in the scope of the investigation section,
Commerce intends to disclose its calculations and analysis performed to interested parties in this preliminary determination within five days of any public announcement or, if there is no public announcement, within five days of the date of publication of this notice in accordance with 19 CFR 351.224(b).
As provided in section 782(i)(1) of the Act, Commerce intends to verify the information relied upon in making its final determination.
Case briefs or other written comments may be submitted to the Assistant Secretary for Enforcement and Compliance no later than seven days after the date on which the last verification report is issued in this investigation. Rebuttal briefs, limited to issues raised in case briefs, may be submitted no later than five days after the deadline date for case briefs.
Pursuant to 19 CFR 351.310(c), interested parties who wish to request a hearing, limited to issues raised in the case and rebuttal briefs, must submit a written request to the Assistant Secretary for Enforcement and Compliance, U.S. Department of Commerce, within 30 days after the date of publication of this notice. Requests should contain the party's name, address, and telephone number, the number of participants, whether any participant is a foreign national, and a list of the issues to be discussed. If a request for a hearing is made, Commerce intends to hold the hearing at the U.S. Department of Commerce, 1401 Constitution Avenue NW, Washington, DC 20230, at a time and date to be determined. Parties should confirm by telephone the date, time, and location of the hearing two days before the scheduled date.
Section 735(a)(2) of the Act provides that a final determination may be postponed until not later than 135 days after the date of the publication of the preliminary determination if, in the event of an affirmative preliminary determination, a request for such postponement is made by exporters who account for a significant proportion of exports of the subject merchandise, or in the event of a negative preliminary determination, a request for such postponement is made by the petitioners. Section 351.210(e)(2) of Commerce's regulations requires that a request by exporters for postponement of the final determination be accompanied by a request for extension of provisional measures from a four-month period to a period not more than six months in duration.
On November 29, 2017, the petitioners, Archer Daniels Midland Company, Cargill, Incorporated, and Tate & Lyle Ingredients Americas LLC, requested that, if the preliminary determination in this investigation was negative, Commerce postpone the final determination pursuant to 19 CFR 351.210(b)(2)(i).
In accordance with section 735(a)(2)(A) of the Act and 19 CFR 351.210(b)(2)(ii), because: (1) The preliminary determination is affirmative; (2) the requesting exporter accounts for a significant proportion of exports of the subject merchandise; and (3) no compelling reasons for denial exist, Commerce is postponing the final determination and extending the provisional measures from a four-month period to a six-month period. Accordingly, Commerce will make its final determination no later than 135 days after the date of publication of this preliminary determination.
In accordance with section 733(f) of the Act, Commerce will notify the International Trade Commission (ITC) of its preliminary determination. If the final determination is affirmative, the ITC will determine before the later of 120 days after the date of this preliminary determination or 45 days after the final determination whether these imports are materially injuring, or threaten material injury to, the U.S. industry.
This determination is issued and published in accordance with sections 733(f) and 777(i)(1) of the Act and 19 CFR 351.205(c).
The merchandise covered by this investigation includes all grades and granulation sizes of citric acid, sodium citrate, and potassium citrate in their unblended forms, whether dry or in solution, and regardless of packaging type. The scope also includes blends of citric acid, sodium citrate, and potassium citrate; as well as blends with other ingredients, such as sugar, where the unblended form(s) of citric acid, sodium citrate, and potassium citrate constitute 40 percent or more, by weight, of the blend.
The scope also includes all forms of crude calcium citrate, including dicalcium citrate monohydrate, and tricalcium citrate tetrahydrate, which are intermediate products in the production of citric acid, sodium citrate, and potassium citrate.
The scope includes the hydrous and anhydrous forms of citric acid, the dihydrate and anhydrous forms of sodium citrate, otherwise known as citric acid sodium salt, and the monohydrate and monopotassium forms of potassium citrate. Sodium citrate also includes both trisodium citrate and monosodium citrate which are also known as citric acid trisodium salt and citric acid monosodium salt, respectively.
The scope does not include calcium citrate that satisfies the standards set forth in the United States Pharmacopeia and has been mixed with a functional excipient, such as dextrose or starch, where the excipient constitutes at least 2 percent, by weight, of the product.
Citric acid and sodium citrate are classifiable under 2918.14.0000 and 2918.15.1000 of the Harmonized Tariff Schedule of the United States (HTSUS), respectively. Potassium citrate and crude calcium citrate are classifiable under 2918.15.5000 and, if included in a mixture or blend, 3824.99.9295 of the HTSUS. Blends that include citric acid, sodium citrate, and potassium citrate are classifiable under 3824.99.9295 of the HTSUS. Although the HTSUS subheadings are provided for convenience and customs purposes, the written description of the merchandise is dispositive.
National Marine Fisheries Service (NMFS), National Oceanic and Atmospheric Administration (NOAA), Commerce.
Notice of fee rate adjustment.
NMFS issues this notice to increase the fee rate for the non-pollock groundfish fishery to repay the $35,000,000 reduction loan to finance the non-pollock groundfish fishing capacity reduction program.
The non-pollock groundfish program fee rate increase will begin on January 1, 2018. The first due date for fee payments with the increased rate will be February 15, 2018.
Send questions about this notice to Paul Marx, Chief, Financial Services Division, National Marine Fisheries Service, 1315 East-West Highway, Silver Spring, MD 20910-3282.
Paul Marx, (301) 427-8799.
Sections 312(b)-(e) of the Magnuson-Stevens Fishery Conservation and Management Act (16 U.S.C. 1861a (b) through e) generally authorizes fishing capacity reduction programs. In particular, section 312(d) authorizes industry fee systems for repaying reduction loans, which finance reduction program costs. Subpart L of 50 CFR part 600 is the framework rule generally implementing section 312(b)-(e). Sections 1111 and 1112 of the Merchant Marine Act, 1936 (46 App. U.S.C. 1279f and 1279g) generally authorize reduction loans.
Enacted on December 8, 2004, section 219, Title II, of FY 2005 Appropriations Act, Public Law 104-447 (Act) authorizes a fishing capacity reduction program implementing capacity reduction plans submitted to NMFS by catcher processor subsectors of the Bering Sea and Aleutian Islands (“BSAI”)
The longline catcher processor subsector (the “Longline Subsector”) is among the catcher processor subsectors eligible to submit to NMFS a capacity reduction plan under the terms of the Act.
The longline subsector non-pollock groundfish reduction program's objective was to reduce the number of vessels and permits endorsed for longline subsector of the non-pollock groundfish fishery.
All post-reduction fish landings from the reduction fishery are subject to the longline subsector non-pollock groundfish program's fee.
NMFS proposed the implementing notice on August 11, 2006 (71 FR 46364), and published the final notice on September 29, 2006 (71 FR 57696).
NMFS allocated the $35,000,000 reduction loan (A Loan) to the reduction fishery and this loan is repayable by fees from the fishery.
On September 24, 2007, NMFS published in the
NMFS published, in the
NMFS published a final rule to implement a second $2,700,000 reduction loan (B Loan) for this fishery in the
The purpose of this notice is to adjust the fee rate for the reduction fishery in accordance with the framework rule's § 600.1013(b). Section 600.1013(b) directs NMFS to recalculate the fee rate that will be reasonably necessary to ensure reduction loan repayment within the specified 30-year term.
NMFS has determined for the reduction fishery that the current fee rate of $0.0111 per pound is less than that needed to service the A Loan. Therefore, NMFS is increasing the A Loan fee rate to $0.013 per pound, which NMFS has determined is sufficient to ensure timely loan repayment. The fee rate for the B Loan will remain $0.001 per pound.
Subsector members may continue to use
Please visit the NMFS website for additional information at:
The new fee rate for the non-pollock Groundfish fishery will begin on January 1, 2018.
From and after this date, all subsector members paying fees on the non-pollock groundfish fishery shall begin paying non-pollock groundfish fishery program fees at the revised rate.
Fee collection and submission shall follow previously established methods in § 600.1013 of the framework rule and in the final fee rule published in the
Commodity Futures Trading Commission.
Notice of meeting.
The Commodity Futures Trading Commission (CFTC) announces that on January 31, 2018, from 10:00 a.m. to 4:00 p.m., the Market Risk Advisory Committee (MRAC) will hold a public meeting in the Conference Center at the CFTC's Washington, DC, headquarters. At this meeting, the MRAC will: (1) Discuss the self-certification process for listing new products on CFTC-regulated Designated Contract Markets and Swap Execution Facilities and (2) explore how new and novel products are considered and analyzed by CFTC staff from a risk perspective.
The meeting will be held on January 31, 2018, from 10:00 a.m. to 4:00 p.m. Members of the public who wish to submit written statements in connection with the meeting should submit them by February 7, 2018.
The meeting will take place in the Conference Center at the CFTC's headquarters, Three Lafayette Centre, 1155 21st Street NW, Washington, DC 20581. Written statements should be submitted by mail to: Commodity Futures Trading Commission, Three Lafayette Centre, 1155 21st Street NW, Washington, DC 20581, attention: Office of the Secretary; or by electronic mail to:
Alicia L. Lewis, MRAC Designated Federal Officer, Commodity Futures Trading Commission, Three Lafayette Centre, 1155 21st Street NW, Washington, DC 20581; (202) 418-5862.
The meeting will be open to the public with seating on a first-come, first-served basis. Members of the public may also listen to the meeting by telephone by calling a domestic toll-free telephone or international toll or toll-free number to connect to a live, listen-only audio feed. Call-in participants should be prepared to provide their first name, last name, and affiliation.
The meeting agenda may change to accommodate other MRAC priorities. For agenda updates, please visit the MRAC committee site at:
After the meeting, a transcript of the meeting will be published through a link on the CFTC's website,
5 U.S.C. app. 2 sec. 10(a)(2).
Department of the Army, DoD.
Notice of open committee meeting.
The Department of the Army is publishing this notice to announce the following Federal advisory committee meeting of the Lake Eufaula Advisory Committee (LEAC). The meeting is open to the public.
The Committee will meet from 10:00 a.m.-12:00 p.m. on Monday, January 29, 2018.
Legacy on Main Street, 224 North Main Street, Eufaula, OK 74432.
Mr. Jeff Knack; Designated Federal Officer (DFO) for the Committee, in writing at Eufaula Lake Office, 102 E BK 200 Rd, Stigler, OK 74462-1829, or by email at
This meeting is being held under the provisions of the Federal Advisory Committee Act of 1972 (5 U.S.C., Appendix, as amended), the Sunshine in the Government Act of 1976 (U.S.C. 552b, as amended) and 41 Code of the Federal Regulations (41 CFR 102-3.150).
Pursuant to 41 CFR 102-3.140d, the Committee is not obligated to allow a member of the public to speak or otherwise address the Committee during the meeting. Members of the public will be permitted to make verbal comments during the Committee meeting only at the time and in the manner described below. If a member of the public is interested in making a verbal comment at the open meeting, that individual must submit a request, with a brief statement of the subject matter to be addressed by the comment, at least three (3) days in advance to the Committee's Designated Federal Officer, via electronic mail, the preferred mode of submission, at the addresses listed in the
Institute of Education Sciences (IES), Department of Education (ED).
Notice.
In accordance with the Paperwork Reduction Act of 1995, ED is proposing a new information collection.
Interested persons are invited to submit comments on or before March 9, 2018.
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 Thomas Wei, 202-341-0626.
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
One potential strategy that has recently become more popular in upper elementary school grades is to departmentalize instruction, where each teacher specializes in teaching one subject to multiple classes of students instead of teaching all subjects to a single class of students (self-contained instruction). However, virtually no evidence exists on its effectiveness relative to the more traditional self-contained approach. This evaluation will help to fill the gap by examining whether departmentalizing fourth and fifth grade teachers improves teacher and student outcomes. The evaluation will focus on math and reading, with an emphasis on low-performing schools that serve a high percentage of disadvantaged students.
The evaluation will include implementation and impact analyses. The implementation analysis will describe schools' approaches to departmentalization and benefits and challenges encountered. The analysis will be based on information from schools' study agreement form; meetings to design each school's approach to departmentalization; monitoring and support calls with schools; a principal interview; and a teacher survey. The impact analysis will draw on data from a teacher survey, videos of classroom instruction, a principal interview, and district administrative records to estimate the impact of departmentalized instruction on various outcomes. The outcomes include the quality of instruction and student-teacher relationships, teacher satisfaction and retention, and student achievement and behavior. These various data collection activities will be carried out between spring 2018 and fall 2020, although most of the activities with the exception of the administrative data will take place only once during the first year treatment schools implement departmentalized instruction (2018-2019 school year).
Take notice that the Commission received the following electric corporate filings:
Take notice that the Commission received the following exempt wholesale generator filings:
Take notice that the Commission received the following electric rate filings:
Take notice that the Commission received the following electric securities filings:
The filings are accessible in the Commission's eLibrary system by clicking on the links or querying the docket number.
Any person desiring to intervene or protest in any of the above proceedings must file in accordance with Rules 211 and 214 of the Commission's Regulations (18 CFR 385.211 and 385.214) on or before 5:00 p.m. Eastern time on the specified comment date. Protests may be considered, but intervention is necessary to become a party to the proceeding.
eFiling is encouraged. More detailed information relating to filing requirements, interventions, protests, service, and qualifying facilities filings can be found at:
Take notice that the Commission has received the following Natural Gas Pipeline Rate and Refund Report filings:
The filings are accessible in the Commission's eLibrary system by clicking on the links or querying the docket number.
Any person desiring to intervene or protest in any of the above proceedings must file in accordance with Rules 211 and 214 of the Commission's Regulations (18 CFR 385.211 and 385.214) on or before 5:00 p.m. Eastern time on the specified comment date. Protests may be considered, but intervention is necessary to become a party to the proceeding.
eFiling is encouraged. More detailed information relating to filing requirements, interventions, protests, service, and qualifying facilities filings can be found at:
On September 23, 2016, and supplemented on March 1, 2017, and June 23, 2017, PacifiCorp and the Klamath River Renewal Corporation (Renewal Corporation) filed an application to amend the existing Klamath Project No. 2082 to administratively remove the J.C. Boyle, Copco No. 1, Copco No. 2, and Iron Gate developments from the license and create a new project, the Lower Klamath Project No. 14803, for those developments. The applicants also request the Lower Klamath Project be transferred to the Renewal Corporation which, if the Commission were to approve its surrender application in a separate proceeding, would then surrender the project license and remove the above four developments.
The Commission will hold meetings with representatives of the Hoopa Valley Tribe, Karuk Tribe, Quartz Valley Indian Community, Klamath Tribes, and Yurok Tribe. Meetings will be held at the following locations and will begin at the times shown below:
Members of the public and intervenors in the referenced proceedings may attend these meetings; however, participation will be limited to tribal representatives and the Commission's representatives. If any tribe decides to disclose information about a specific location which could create a risk or harm to an archaeological site or Native American cultural resource, the public will be excused for that portion of the meeting when such information is disclosed. Each tribal meeting will be transcribed by a court reporter and the transcript will be placed in the public record of these proceedings.
To register for attendance at any of the above meetings, please contact Jennifer Polardino at the Federal Energy Regulatory Commission at (202) 502-6437 or
Take notice that the Commission has received the following Natural Gas Pipeline Rate and Refund Report filings:
The filings are accessible in the Commission's eLibrary system by clicking on the links or querying the docket number.
Any person desiring to intervene or protest in any of the above proceedings must file in accordance with Rules 211 and 214 of the Commission's Regulations (18 CFR 385.211 and 385.214) on or before 5:00 p.m. Eastern time on the specified comment date. Protests may be considered, but intervention is necessary to become a party to the proceeding.
eFiling is encouraged. More detailed information relating to filing requirements, interventions, protests, service, and qualifying facilities filings can be found at:
On December 29, 2017, the Commission issued an order in Docket No. EL18-44-000, pursuant to section 206 of the Federal Power Act (FPA), 16 U.S.C. 824e (2012), instituting an investigation into whether the Proposed Formula Rates of Southern California Edison Company may be unjust and unreasonable.
The refund effective date in Docket No. EL18-44-000, established pursuant to section 206(b) of the FPA, will be the date of publication of this notice in the
Any interested person desiring to be heard in Docket No. EL18-44-000 must file a notice of intervention or motion to intervene, as appropriate, with the Federal Energy Regulatory Commission, 888 First Street NE, Washington, DC
The staff of the Federal Energy Regulatory Commission (FERC or Commission) will prepare an environmental assessment (EA) that will discuss the environmental impacts of the Gateway Expansion Project involving construction and operation of facilities Transcontinental Gas Pipe Line Company (Transco) in Essex and Passaic Counties, New Jersey. The Commission will use this EA in its decision-making process to determine whether the project is in the public convenience and necessity.
This notice announces the opening of the scoping process the Commission will use to gather input from the public and interested agencies on the project. You can make a difference by providing us with your specific comments or concerns about the project. Your comments should focus on the potential environmental effects, reasonable alternatives, and measures to avoid or lessen environmental impacts. Your input will help the Commission staff determine what issues they need to evaluate in the EA. To ensure that your comments are timely and properly recorded, please send your comments so that the Commission receives them in Washington, DC on or before February 2, 2018.
If you sent comments on this project to the Commission before the opening of this docket on November 16, 2017, you will need to file those comments in Docket No. CP18-18-000 to ensure they are considered as part of this proceeding.
This notice is being sent to the Commission's current environmental mailing list for this project. State and local government representatives should notify their constituents of this proposed project and encourage them to comment on their areas of concern.
If you are a landowner receiving this notice, a pipeline company representative may contact you about the acquisition of an easement to construct, operate, and maintain the proposed facilities. The company would seek to negotiate a mutually acceptable agreement. However, if the Commission approves the project, that approval conveys with it the right of eminent domain. Therefore, if easement negotiations fail to produce an agreement, the pipeline company could initiate condemnation proceedings where compensation would be determined in accordance with state law.
Transco provided landowners with a fact sheet prepared by the FERC entitled An Interstate Natural Gas Facility On My Land? What Do I Need To Know? This fact sheet addresses a number of typically asked questions, including the use of eminent domain and how to participate in the Commission's proceedings. It is also available for viewing on the FERC website (
For your convenience, there are three methods you can use to submit your comments to the Commission. The Commission encourages electronic filing of comments and has expert staff available to assist you at (202) 502-8258 or
(1) You can file your comments electronically using the
(2) You can file your comments electronically by using the
(3) You can file a paper copy of your comments by mailing them to the following address. Be sure to reference the project docket number CP18-18-000 with your submission: Kimberly D. Bose, Secretary, Federal Energy Regulatory Commission, 888 First Street NE, Room 1A, Washington, DC 20426.
Transco proposes to perform the following activities for construction of the project.
• Expansion of the existing building to include one new 33,000 horsepower (hp) electric-motor driven compression unit and ancillary equipment;
• Install gas cooling equipment;
• Extend existing security fencing to encompass new equipment; and
• A new driveway to connect the new gas cooler location with CS 303.
• One new 36-inch ML block valve with automation controls; and
• Actuator modification on existing ML block valve.
• Remove existing 12-inch headers, meter skid, building, and associated equipment;
• Install a meter skid with two 6-inch ultrasonic meters with 12-inch inlet and outlet headers;
• Install a new M&R building;
• Install new remote terminal unit (RTU)/gas chromatograph building;
• Install new flow computer, radio, and an antenna/pole; and
• Install a new condensate tank.
The general location of the project facilities is shown in appendix 1.
Construction of the proposed facilities would disturb 9.43 acres of land, with 9.06 acres being utilized for the CS 303 site and the remaining 0.37 acres utilized for the Paterson M&R site. All proposed land affected is currently in use as Transco existing property. No new land would need to be acquired for operational use.
The National Environmental Policy Act (NEPA) requires the Commission to take into account the environmental impacts that could result from an action whenever it considers the issuance of a
In the EA we will discuss impacts that could occur as a result of the construction and operation of the proposed project under these general headings:
• Geology and soils;
• land use;
• water resources, fisheries, and wetlands;
• cultural resources;
• vegetation and wildlife;
• air quality and noise;
• endangered and threatened species;
• public safety; and
• cumulative impacts
We will also evaluate reasonable alternatives to the proposed project or portions of the project, and make recommendations on how to lessen or avoid impacts on the various resource areas.
The EA will present our independent analysis of the issues. The EA will be available in the public record through eLibrary. We will consider all comments on the EA before making our recommendations to the Commission. To ensure we have the opportunity to consider and address your comments, please carefully follow the instructions in the Public Participation section, beginning on page 2.
With this notice, we are asking agencies with jurisdiction by law and/or special expertise with respect to the environmental issues of this project to formally cooperate with us in the preparation of the EA.
In accordance with the Advisory Council on Historic Preservation's implementing regulations for section 106 of the National Historic Preservation Act, we are using this notice to initiate consultation with the applicable State Historic Preservation Office (SHPO), and to solicit their views and those of other government agencies, interested Indian tribes, and the public on the project's potential effects on historic properties.
The environmental mailing list includes federal, state, and local government representatives and agencies; elected officials; environmental and public interest groups; Native American Tribes; other interested parties; and local libraries and newspapers. This list also includes all affected landowners (as defined in the Commission's regulations) who are potential right-of-way grantors, whose property may be used temporarily for project purposes, or who own homes within certain distances of aboveground facilities, and anyone who submits comments on the project. We will update the environmental mailing list as the analysis proceeds to ensure that we send the information related to this environmental review to all individuals, organizations, and government entities interested in and/or potentially affected by the proposed project.
If we publish and distribute the EA, copies will be sent to the environmental mailing list for public review and comment. If you would prefer to receive a paper copy of the document instead of the CD version or would like to remove your name from the mailing list, please return the attached Information Request (appendix 2).
In addition to involvement in the EA scoping process, you may want to become an “intervenor” which is an official party to the Commission's proceeding. Intervenors play a more formal role in the process and are able to file briefs, appear at hearings, and be heard by the courts if they choose to appeal the Commission's final ruling. An intervenor formally participates in the proceeding by filing a request to intervene. Instructions for becoming an intervenor are in the “Document-less Intervention Guide” under the “e-filing” link on the Commission's website. Motions to intervene are more fully described at
Additional information about the project is available from the Commission's Office of External Affairs, at (866) 208-FERC, or on the FERC website at
In addition, the Commission offers a free service called eSubscription which allows you to keep track of all formal issuances and submittals in specific dockets. This can reduce the amount of time you spend researching proceedings by automatically providing you with notification of these filings, document summaries, and direct links to the documents. Go to
Take notice that on December 18, 2017, Florida Gas Transmission Company, LLC (Florida Gas), 1300 Main Street, Houston, Texas 77002, filed in Docket No. CP18-33-000 an application
The filing may also be viewed on the web at
Any questions concerning this application may be directed to Marg Camardello, Regulatory Analyst, Lead, (713) 215-3380, P.O. Box 1396, Houston, Texas 77251; and Ben Carranza, Manager, Rates & Regulatory, (713) 420-5535, 1001 Louisiana Street, Suite 1000, Houston Texas 77002.
Specifically, Florida Gas states that the mainline segment proposed for abandonment spans from Mile Post (MP) 923.6 to the mainline terminus at MP 924.9 and is in direct conflict with Miami-Dade County road construction project including a bridge replacement. Florida Gas also states that there are no firm contracts associated with the facilities to be abandoned and that there were no deliveries of gas through this segment of its mainline in more than three years. The project cost is estimated at $450,000.
Pursuant to section 157.9 of the Commission's rules, 18 CFR 157.9, within 90 days of this Notice the Commission staff will either: complete its environmental assessment (EA) and place it into the Commission's public record (eLibrary) for this proceeding; or issue a Notice of Schedule for Environmental Review. If a Notice of Schedule for Environmental Review is issued, it will indicate, among other milestones, the anticipated date for the Commission staff's issuance of the EA for this proposal. The filing of the EA in the Commission's public record for this proceeding or the issuance of a Notice of Schedule for Environmental Review will serve to notify federal and state agencies of the timing for the completion of all necessary reviews, and the subsequent need to complete all federal authorizations within 90 days of the date of issuance of the Commission staff's EA.
There are two ways to become involved in the Commission's review of this project. First, any person wishing to obtain legal status by becoming a party to the proceedings for this project should, on or before the comment date stated below, file with the Federal Energy Regulatory Commission, 888 First Street, NE, Washington, DC 20426, a motion to intervene in accordance with the requirements of the Commission's Rules of Practice and Procedure (18 CFR 385.214 or 385.211) and the Regulations under the NGA (18 CFR 157.10). A person obtaining party status will be placed on the service list maintained by the Secretary of the Commission and will receive copies of all documents filed by the applicant and by all other parties. A party must submit five copies of filings made with the Commission and must mail a copy to the applicant and to every other party in the proceeding. Only parties to the proceeding can ask for court review of Commission orders in the proceeding.
However, a person does not have to intervene in order to have comments considered. The second way to participate is by filing with the Secretary of the Commission, as soon as possible, an original and two copies of comments in support of or in opposition to this project. The Commission will consider these comments in determining the appropriate action to be taken, but the filing of a comment alone will not serve to make the filer a party to the proceeding. The Commission's rules require that persons filing comments in opposition to the project provide copies of their protests only to the party or parties directly involved in the protest.
Persons who wish to comment only on the environmental review of this project should submit an original and two copies of their comments to the Secretary of the Commission. Environmental commenters will be placed on the Commission's environmental mailing list, will receive copies of the environmental documents, and will be notified of meetings associated with the Commission's environmental review process. Environmental commenters will not be required to serve copies of filed documents on all other parties. However, the non-party commenters will not receive copies of all documents filed by other parties or issued by the Commission (except for the mailing of environmental documents issued by the Commission) and will not have the right to seek court review of the Commission's final order.
The Commission strongly encourages electronic filings of comments, protests and interventions in lieu of paper using the eFiling link at
Take notice that the Commission received the following electric rate filings:
The filings are accessible in the Commission's eLibrary system by clicking on the links or querying the docket number.
Any person desiring to intervene or protest in any of the above proceedings must file in accordance with Rules 211 and 214 of the Commission's Regulations (18 CFR 385.211 and 385.214) on or before 5:00 p.m. Eastern time on the specified comment date. Protests may be considered, but intervention is necessary to become a party to the proceeding.
eFiling is encouraged. More detailed information relating to filing requirements, interventions, protests, service, and qualifying facilities filings can be found at:
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k. With this notice, we are initiating informal consultation with: (a) The U.S. Fish and Wildlife Service and/or NOAA Fisheries under section 7 of the Endangered Species Act and the joint agency regulations thereunder at 50 CFR, Part 402 and (b) the State Historic Preservation Officer, as required by section 106, National Historic Preservation Act, and the implementing regulations of the Advisory Council on Historic Preservation at 36 CFR 800.2.
l. With this notice, we are designating Washington Electric Cooperative, Inc. (WEC) as the Commission's non-federal representatives for carrying out informal consultation, pursuant to section 7 of the Endangered Species Act and section 106 of the National Historic Preservation Act.
m. WEC filed a Pre-Application Document (PAD; including a proposed process plan and schedule) with the Commission, pursuant to 18 CFR 5.6 of the Commission's regulations.
n. A copy of the PAD is available for review at the Commission in the Public Reference Room or may be viewed on the Commission's website (
Register online at
o. With this notice, we are soliciting comments on the PAD and Commission's staff Scoping Document 1 (SD1), as well as study requests. All comments on the PAD and SD1, and study requests should be sent to the address above in paragraph h. In addition, all comments on the PAD and SD1, study requests, requests for cooperating agency status, and all communications to and from Commission staff related to the merits of the potential application must be filed with the Commission.
The Commission strongly encourages electronic filing. Please file all documents using the Commission's eFiling system at
All filings with the Commission must bear the appropriate heading: Comments on Pre-Application Document, Study Requests, Comments on Scoping Document 1, Request for Cooperating Agency Status, or Communications to and from Commission Staff. Any individual or entity interested in submitting study requests, commenting on the PAD or SD1, and any agency requesting cooperating status must do so 60 days following the date of issuance of this notice.
p. Although our current intent is to prepare an environmental assessment (EA), there is the possibility that an Environmental Impact Statement (EIS) will be required. Nevertheless, this meeting will satisfy the NEPA scoping requirements, irrespective of whether an EA or EIS is issued by the Commission.
Commission staff will hold two scoping meetings in the vicinity of the project at the times and places noted below. The daytime meeting will focus on resource agency, Indian tribes, and non-governmental organization concerns, while the evening meeting is primarily for receiving input from the public. We invite all interested individuals, organizations, and agencies to attend one or both of the meetings, and to assist staff in identifying particular study needs, as well as the scope of environmental issues to be addressed in the environmental document. The times and locations of these meetings are as follows:
Scoping Document 1 (SD1), which outlines the subject areas to be addressed in the environmental document, was mailed to the individuals and entities on the Commission's mailing list. Copies of SD1 will be available at the scoping meetings, or may be viewed on the web at
The potential applicant and Commission staff will conduct an Environmental Site Review (site visit) of the project on Wednesday, January 24, 2018, starting at 1:00 p.m. and ending at or about 3:00 p.m. All participants should meet at the base of Wrightsville Dam near the intersection of Mill Road and Corry Road in Montpelier, Vermont 05602. Participants are responsible for their own transportation. Persons with questions about the site visit should contact Dan Weston (802-223-5245;
At the scoping meetings, staff will: (1) Initiate scoping of the issues; (2) review and discuss existing conditions and resource management objectives; (3) review and discuss existing information and identify preliminary information and study needs; (4) review and discuss the process plan and schedule for pre-filing activity that incorporates the time frames provided for in Part 5 of the Commission's regulations and, to the extent possible, maximizes coordination of federal, state, and tribal permitting and certification processes; and (5) discuss the appropriateness of any federal or state agency or Indian tribe acting as a cooperating agency for development of an environmental document.
Meeting participants should come prepared to discuss their issues and/or concerns. Please review the PAD in preparation for the scoping meetings. Directions on how to obtain a copy of the PAD and SD1 are included in item n. of this document.
The meetings will be recorded by a stenographer and will be placed in the public records of the project.
The staff of the Federal Energy Regulatory Commission (FERC or Commission) will prepare an environmental assessment (EA) that will discuss the environmental impacts of the Herscher Northwest Storage Field Abandonment Project involving construction and operation of facilities by Natural Gas Pipeline Company of America LLC (Natural) in Kankakee County, Illinois. The Commission will use this EA in its decision-making process to determine whether the project is in the public convenience and necessity.
This notice announces the opening of the scoping process the Commission will use to gather input from the public and interested agencies on the project. You can make a difference by providing us with your specific comments or concerns about the project. Your comments should focus on the potential environmental effects, reasonable alternatives, and measures to avoid or lessen environmental impacts. Your input will help the Commission staff determine what issues they need to evaluate in the EA. To ensure that your comments are timely and properly recorded, please send your comments so that the Commission receives them in Washington, DC on or before February 1, 2018.
If you sent comments on this project to the Commission before the opening of this docket on October 31, 2017, you will need to file those comments in Docket No. CP18-12-000 to ensure they are considered as part of this proceeding.
This notice is being sent to the Commission's current environmental mailing list for this project. State and local government representatives should notify their constituents of this proposed project and encourage them to comment on their areas of concern.
Natural Gas Pipeline Company of America LLC provided landowners with a fact sheet prepared by the FERC entitled “An Interstate Natural Gas Facility On My Land? What Do I Need To Know?” This fact sheet addresses a number of typically asked questions, including the use of eminent domain and how to participate in the Commission's proceedings. It is also available for viewing on the FERC website (
For your convenience, there are three methods you can use to submit your comments to the Commission. The Commission encourages electronic filing of comments and has expert staff available to assist you at (202) 502-8258 or
(1) You can file your comments electronically using the
(2) You can file your comments electronically by using the
(3) You can file a paper copy of your comments by mailing them to the following address. Be sure to reference the project docket number (C18-12-000) with your submission: Kimberly D. Bose, Secretary, Federal Energy Regulatory Commission, 888 First Street NE, Room 1A, Washington, DC 20426.
Natural proposes to abandon the Herscher Northwest Storage Field with its certificated maximum inventory of 18.5 billion cubic feet (Bcf) located in Kankakee County, Illinois. Natural concludes that in light of the marginal well performance over the years, geologic uncertainty, and new Pipeline and Hazardous Materials Safety Administration Regulations, it is no longer practicable to operate the storage field.
Natural proposes to abandon:
• In place 19 injection/withdrawal wells by permanently plugging and capping;
• In place 16.15 miles of 4- to 16-inch-diameter associated pipeline laterals in the storage field by grouting and capping;
• in place 13 non-jurisdictional observation wells by plugging;
• in place one non-jurisdictional salt water disposal well by plugging;
• in place approximately 15.3 Bcf of non-recoverable cushion gas;
• by removal the 330-horsepower Compressor Station 202 including its building, compressor unit, concrete piers and concrete foundation; and
• by removal all storage field auxiliary surface facilities including, but not limited to, aboveground well head piping, slug catchers, the water gathering system and methanol distribution systems, corrosion monitors, rectifiers and ground beds.
Natural requests certification by May, 2018, and expects to perform its abandonment activities over a four-year period (2018-2021).
The general location of the project facilities is shown in appendix 1.
Natural would limit is construction activities to 54 acres of its existing rights-of-way and would restore all workspace to pre-abandonment conditions. Approximately 14 acres would be retained as permanent easements to permit Natural to maintain the abandoned facilities.
The National Environmental Policy Act (NEPA) requires the Commission to take into account the environmental impacts that could result from an action whenever it considers the issuance of a Certificate of Public Convenience and Necessity. NEPA also requires us
In the EA we will discuss impacts that could occur as a result of the construction and operation of the proposed project under these general headings:
• Geology and soils;
• land use;
• water resources, fisheries, and wetlands;
• cultural resources;
• vegetation and wildlife;
• air quality and noise;
• endangered and threatened species;
• public safety; and
• cumulative impacts.
We will also evaluate reasonable alternatives to the proposed project or portions of the project, and make recommendations on how to lessen or avoid impacts on the various resource areas.
The EA will present our independent analysis of the issues. The EA will be available in the public record through eLibrary. Depending on the comments received during the scoping process, we may also publish and distribute the EA to the public for an allotted comment period. We will consider all comments on the EA before making our recommendations to the Commission. To ensure we have the opportunity to consider and address your comments, please carefully follow the instructions in the Public Participation section, beginning on page 2.
With this notice, we are asking agencies with jurisdiction by law and/or special expertise with respect to the environmental issues of this project to formally cooperate with us in the preparation of the EA.
In accordance with the Advisory Council on Historic Preservation's implementing regulations for section 106 of the National Historic Preservation Act, we are using this notice to initiate consultation with the applicable State Historic Preservation Office (SHPO), and to solicit their views and those of other government agencies, interested Indian tribes, and the public on the project's potential effects on historic properties.
The environmental mailing list includes federal, state, and local government representatives and agencies; elected officials; environmental and public interest groups; Native American Tribes; other interested parties; and local libraries and newspapers. This list also includes all affected landowners (as defined in the Commission's regulations) who are potential right-of-way grantors, whose property may be used temporarily for project purposes, or who own homes within certain distances of aboveground facilities, and anyone who submits comments on the project. We will update the environmental mailing list as the analysis proceeds to ensure that we
If we publish and distribute the EA, copies of the EA will be sent to the environmental mailing list for public review and comment. If you would prefer to receive a paper copy of the document instead of the CD version or would like to remove your name from the mailing list, please return the attached Information Request (appendix 2).
In addition to involvement in the EA scoping process, you may want to become an “intervenor” which is an official party to the Commission's proceeding. Intervenors play a more formal role in the process and are able to file briefs, appear at hearings, and be heard by the courts if they choose to appeal the Commission's final ruling. An intervenor formally participates in the proceeding by filing a request to intervene. Instructions for becoming an intervenor are in the Document-less Intervention Guide under the e-filing link on the Commission's website. Motions to intervene are more fully described at
Additional information about the project is available from the Commission's Office of External Affairs, at (866) 208-FERC, or on the FERC website at
In addition, the Commission offers a free service called eSubscription which allows you to keep track of all formal issuances and submittals in specific dockets. This can reduce the amount of time you spend researching proceedings by automatically providing you with notification of these filings, document summaries, and direct links to the documents. Go to
Finally, public sessions or site visits will be posted on the Commission's calendar located at
Federal Deposit Insurance Corporation (FDIC).
Notice.
The FDIC seeks to update its Statement of Policy (SOP), which is issued pursuant to Section 19 of the Federal Deposit Insurance Act (FDI Act) (Section 19). Section 19 prohibits, without the prior written consent of the FDIC, any person from participating in banking who has been convicted of a crime of dishonesty or breach of trust or money laundering, or who has entered a pretrial diversion or similar program in connection with the prosecution for such an offense.
Based upon its experience with the application of the SOP since 1998, the FDIC is now proposing to revise and issue an updated SOP and rescind the current SOP, and is seeking comments on the proposed revisions by issuing this
Comments must be received on or before March 9, 2018.
You may submit comments, identified by Section 19, by any of the following methods:
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Brian Zeller, Review Examiner, (319) 395-7394 x4125, or Larisa Collado, Section Chief, (202) 898-8509, in the Division of Risk Management Supervision; or Michael P. Condon, Counsel, (202) 898-6536, or Andrea Winkler, Supervisory Counsel, (202) 898-3727 in the Legal Division.
Section 19 of the FDI Act (12 U.S.C. 1829) prohibits, without the prior written consent of the FDIC, a person convicted of any criminal offense involving dishonesty or breach of trust or money laundering (covered offenses), or who has agreed to enter into a pretrial diversion or similar program in connection with a prosecution for such offense, from becoming or continuing as an institution-affiliated party (IAP), owning or controlling, directly or indirectly an insured depository institution (insured institution), or otherwise participating, directly or indirectly, in the conduct of the affairs of an insured institution. Further, the law forbids an insured institution from permitting such a person to engage in any conduct or to continue any relationship prohibited by Section 19. It also imposes a ten-year ban against the FDIC's consent for a person convicted of certain crimes enumerated in Title 18 of the United States Code, absent a motion by the FDIC and approval by the sentencing court.
The FDIC issued, after notice and comment, the current SOP for Section
A clarification to the SOP was issued in 2007, based on the 2006 amendment to Section 19 of the FDI Act by the Financial Services Regulatory Relief Act of 2006, Public Law 109-351, § 710, which modified Section 19 to include coverage of institution-affiliated parties (IAPs) participating in the affairs of bank holding companies, or savings and loan holding companies, and gave supervisory authority over such entities to the Board of Governors of the Federal Reserve System (Federal Reserve Board) and the Office of Thrift Supervision (OTS), respectively.
The FDIC is again proposing to amend the SOP as more fully set forth below, and seeks comments on a number of the proposed changes as set out forth Section II of this
When final, the revised SOP, after consideration of any comments received, will be published in the
The SOP will be revised in the following areas:
In addition to some minor grammatical and format changes, the introductory section includes language that would allow an FDIC-supervised insured institution, in the case of a prospective employee or other person seeking to participate in the affairs of the institution, to make a conditional offer of employment to such a person, contingent on the completion of a background check satisfactory to the institution and a determination that the person is not barred by the provisions of Section 19. In such a case, the SOP makes clear that the prospective employee or person seeking to participate in the affairs of the institution will not be permitted to work at or participate in the affairs of, the institution unless the applicant's background check is completed to the satisfaction of the institution and a determination is made that the applicant's employment or participation at the institution is not barred by Section 19. Related to this change is an alteration of the language that limits the FDIC's determination whether an institution's inquiry as to whether Section 19 applies is reasonable.
The FDIC is seeking to clarify its supervisory role regarding Section 19 and seeks comments whether the use of a conditional offer of employment is a practice that is helpful to FDIC-supervised institutions in their hiring practices and in their determination whether Section 19 bars an applicant from being employed at, or participating in, the affairs of the institution.
In addition to some minor grammatical and format changes, the FDIC is proposing to provide a more consistent view of the application of Section 19 to certain persons who are not employees, officers, directors or shareholders of an insured institution. The definition of persons covered by Section 19 includes “institution affiliated parties” (a term which is defined in 12 U.S.C. 1813(u) and that is broader than employees, officers, directors or shareholders). The FDIC believes that the key concern under Section 19 is whether a person participates directly or indirectly in the affairs of an insured institution, regardless of their formal relationship with the institution. Therefore, the example currently set out in the SOP regarding employees of the insured institution's holding company has been changed to be more consistent with the language of Section 19 and the definition contained in 12 U.S.C. 1813(u), to focus on the ability of employees to define and direct the management or affairs of the insured institution. Similarly, the concept of participating in the affairs of an insured institution has been added to the example of directors and officers of affiliates, subsidiaries or joint ventures to more accurately reflect the concerns of Section 19.
In addition, the inclusion of the definition of independent contractors, as contained in 12 U.S.C. 1813(u), has been deleted as unnecessary in determining whether Section 19 would apply at the time the person commenced work for, or participated in the affairs of, the insured institution.
Further, the FDIC deleted language referencing the change that expanded Section 19's application to bank and savings and loan holding companies. The language now simply notes that if a person also seeks to participate in the affairs of a bank or savings and loan holding company, they may be required to comply with any requirements of the Federal Reserve Board under 12 U.S.C. 1829(d) & (e).
The FDIC seeks comments on the consistency of the application of Section 19 to officers and directors of bank and savings and loan holding companies, affiliates, subsidiaries and joint ventures as well as independent contractors.
In addition to some minor grammatical and format changes, the FDIC is proposing a number of changes in this section of the SOP which pertains to determining whether an application under Section 19 is required. In the introductory paragraph of this section, the FDIC has included language addressing when an application will be considered by the FDIC which states that the FDIC will not consider an application unless all of the sentencing requirements associated with the conviction, or the conditions imposed by a pretrial diversion or similar program, are completed, and the court's decision must be considered final under the procedures of the applicable jurisdiction.
The FDIC seeks comments on whether the requirement that an applicant completes the sentencing requirements of a conviction, or the conditions imposed by a program entry, and that the case is considered final are relevant
In subsection B(1) “Convictions”, the FDIC has added additional language to address questions regarding expungements. Previously, the FDIC simply stated that an expungement was considered a complete expungement only when the conviction of record was no longer accessible even by court order. However, it is clear that in recent times, the existence of such records cannot always be completely sealed or destroyed. If the expungement is intended to be complete under the law of the jurisdiction that issues the expungement, and the jurisdiction intends that no governmental body or court can use the prior conviction or program entry for any subsequent purpose, then the SOP makes clear that the fact that the records have not been timely destroyed, or that there exist copies of the records that are not covered by the order sealing or destroying them, will not prevent the expungement from being considered complete for the purposes of Section 19.
The FDIC seeks comment on whether this interpretation would aid in determining if an expungement is complete.
In this section, the FDIC also proposes language that treats certain convictions that have been set aside or reversed after the sentencing requirements have been completed the same as pretrial diversion or similar programs are treated, unless the reason that the conviction was set aside or reversed is based on a finding on the merits that the conviction was wrongful.
Given the wide range or pretrial diversion and similar programs, the FDIC seeks comments on whether this language serves to properly include as pretrial diversion or similar programs, programs in jurisdictions that set aside or reverse convictions in a manner that, in effect, operates as a pretrial diversion or similar program.
In subsection B(2) “Pretrial Diversion or Similar Program”, the FDIC is also clarifying that whether a program constitutes a pretrial diversion or similar program is determined by relevant Federal, state or local law, and if that program is not so designated under applicable law, then the determination will be made by the FDIC on a case-by-case basis.
The FDIC is seeking comments whether using some or all of the elements of a pretrial diversion program as cited in the SOP are appropriate for determining on a case-by-case basis whether a procedure is a similar program for the purposes of Section 19, and whether a determination that considers such elements is required under the statute.
In subsection B(3) “Dishonesty or Breach of Trust”, the FDIC proposes language that would allow certain minor drug convictions or program entries which currently require an application to fall within the
The FDIC seeks comments whether allowing the
In subsection B(4) “Youthful Offender Adjudgments”, the FDIC has added language confirming that an adjudication under “youthful offender” statutes is not covered by Section 19 at all and, therefore, is not a matter covered under the
In subsection B(5) “
The FDIC is seeking comments as to whether this clarification of what constitutes jail time for the purposes of the SOP is useful and levels the playing field among those who are convicted.
A second part of subsection (5), (b) “Additional Applications of the
A second new
The FDIC also proposes to modify the current
Lastly, the FDIC proposes to add qualifying language that no conviction for a violation of certain Title 18 provisions, as set out in 12 U.S.C. 1829(a)(2), can qualify under any of the
The FDIC is seeking comments regarding whether these expansions of the
The FDIC has added language to this subsection clarifying that individual applicants file their application with the FDIC Regional Office covering the state where the person lives.
The FDIC has redrafted some of the factors set forth in the SOP for considering a Section 19 application to more closely follow the provisions for considering applications set forth in the FDIC's rules at 12 CFR 308.157. Additionally, the FDIC has noted that under the provision that allows the FDIC to consider other appropriate factors, the FDIC may contact the primary Federal and/or state regulator to aid in the evaluation of an application.
The FDIC seeks comment on whether there remains a material inconsistency between the factors used in the proposed SOP and the regulation.
Additionally, in this section, the FDIC has added clarifying language that states that the utilization of the evaluation factors related to the ten-year ban provision refers to the restriction in 12 U.S.C. 1829(a)(2).
Lastly, the FDIC is proposing to add clarifying language related to bank-sponsored applications that makes clear that changes in an individual's duties at the insured institution which filed a previously approved Section 19 application on that individual's behalf will require a new application. There is also a clarification that a new application will be required if an individual covered by a previously approved bank-sponsored application desires to participate in the affairs of another insured depository institution.
The FDIC seeks comments on whether the changes to this subsection sufficiently clarify the requirement for previously approved bank-sponsored applications—first, that the bank seek additional approval of the FDIC when the duties previously approved by the FDIC change and second, that a new application must be filed when the individual covered by the previous bank sponsored application wishes to work at a different insured institution.
In accordance with section 3512 of the Paperwork Reduction Act of 1995, 44 U.S.C. 3501
Comments are invited on:
(a) Whether this collection of information is necessary for the proper performance of the FDIC's functions, including whether the information has practical utility;
(b) the accuracy of the estimates of the burden of the information collection, including the validity of the methodologies and assumptions used;
(c) ways to enhance the quality, utility, and clarity of the information to be collected;
(d) ways to minimize the burden of the information collection on respondents, including through the use of automated collection techniques or other forms of information technology; and
All comments will become a matter of public record. Comments may be submitted to the FDIC by any of the following methods:
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A copy of the comment may also be submitted to the OMB Desk Officer for the FDIC, Office of Information and Regulatory Affairs, Office of Management and Budget, 725 17th Street NW, #10235, Washington, DC 20503; by facsimile to (202) 395-5806; or by email to:
For the reasons set forth above, the entire text of the proposed FDIC Statement of Policy for Section 19 is stated as follows.
Section 19 of the Federal Deposit Insurance Act (
Section 19 imposes a duty upon an insured institution to make a reasonable inquiry regarding an applicant's history, which consists of taking steps appropriate under the circumstances, consistent with applicable law, to avoid hiring or permitting participation in its affairs by a person who has a conviction or program entry for a covered offense. The FDIC believes that at a minimum, each insured institution should establish a screening process that provides the insured institution with information concerning any convictions or program entry pertaining to a job applicant. This would include, for example, the completion of a written employment application that requires a listing of all convictions and program entries. In the alternative, for the purposes of Section 19, an FDIC-supervised institution may extend a conditional offer of employment contingent on the completion of a background check satisfactory to the institution and to determine if the applicant is barred by Section 19. In such a case, the job applicant may not work for or be employed by the insured institution until such time that the applicant is determined to not be barred under Section 19. The FDIC will look to the circumstances of each situation for FDIC-supervised institutions to determine whether the inquiry is reasonable.
Section 19 applies, by operation of law, as a statutory bar to participation absent the written consent of the FDIC. Upon notice of a conviction or program entry, an application must be filed seeking the FDIC's consent prior to the person's participation. The purpose of an application is to provide the applicant an opportunity to demonstrate that, notwithstanding the bar, a person is fit to participate in the conduct of the affairs of an insured institution without posing a risk to its safety and soundness or impairing public confidence in that institution. The burden is upon the applicant to establish that the application warrants approval.
Section 19 covers institution-affiliated parties, as defined by
Individuals who file an application with the FDIC under the provisions of Section 19 who also seek to participate in the affairs of a bank or savings and loan holding company may have to comply with any filing requirements of the Board of the Governors of the Federal Reserve System under 12 U.S.C. 1819(d) & (e).
Section 19 specifically prohibits a person subject to its coverage from owning or controlling an insured institution. For purposes of defining “control” and “ownership” under Section 19, the FDIC has adopted the definition of “control” set forth in the Change in Bank Control Act (
Except as indicated in paragraph (5), below, an application must be filed where there is present a conviction by a court of competent jurisdiction for a covered offense by any adult or minor treated as an adult, or where such person has entered a pretrial diversion or similar program regarding that offense. Before an application is considered by the FDIC, all of the sentencing requirements associated with a conviction or conditions imposed by the pretrial diversion, or similar program, including but not limited to, imprisonment, fines, condition of rehabilitation, and probation requirements, must be completed, and the case must be considered final by the procedures of the applicable jurisdiction.
Whether a crime involves dishonesty or breach of trust will be determined from the statutory elements of the crime itself. All convictions or program entries for offenses concerning the illegal manufacture, sale, distribution of, or trafficking in controlled substances shall require an application unless they fall within the provisions for de minimis offenses set out in (5) below.
Approval is automatically granted and an application will not be required where the covered offense is considered
• There is only one conviction or program entry of record for a covered offense;
• The offense was punishable by imprisonment for a term of one year or less and/or a fine of $2,500 or less, and the individual served three (3) days or less of jail time. The FDIC considers jail time to include any significant restraint on an individual's freedom of movement which includes, as part of the restriction, confinement where the person may leave temporarily only to perform specific functions or during specified times periods or both.
• The conviction or program was entered at least five years prior to the date an application would otherwise be required; and
• The offense did not involve an insured depository institution or insured credit union.
• A covered conviction or program entry of record that occurred when the individual was 21 years of age or younger at the time of conviction or program entry that otherwise meets the general
• Convictions or program entries of record based on the writing of “bad” or insufficient funds check(s) shall be considered a
• There is no other conviction or program entry subject to Section 19 and the aggregate total face value of all “bad” or insufficient funds check(s) cited across all the conviction(s) or program entry(ies) for bad or insufficient funds checks is $1,000 or less and;
• No insured depository institution or insured credit union was a payee on any of the “bad” or insufficient funds checks that were the basis of the conviction(s) or program entry(ies).
• A conviction or program entry based on a simple theft of goods, services and/or currency (or other monetary instrument) where the aggregate value of the currency, goods and/or services taken was $500 or less at the time of conviction or program entry, where the person has no other conviction or program entry under Section 19, and where it has been five years since the conviction or program entry (30 months in the case of a person 21 or younger at the time of the conviction or program entry) is considered
Any person who meets the criteria under (5) above shall be covered by a fidelity bond to the same extent as others in similar positions, and shall disclose the presence of the conviction or program entry to all insured institutions in the affairs of which he or she intends to participate.
Further, no conviction or program entry for a violation of the Title 18 sections set out in 12 U.S.C. 1829(a)(2) can qualify under any of the
When an application is required, forms and instructions should be obtained from, and the application filed with, the appropriate FDIC Regional Director. The application must be filed by an insured institution on behalf of a person (bank-sponsored) unless the FDIC grants a waiver of that requirement (individual waiver). Such waivers will be considered on a case-by-case basis where substantial good cause for granting a waiver is shown. The appropriate Regional Office for an individual filing for a waiver of the institution filing requirement is the office covering the state where the person resides.
The essential criteria in assessing an application are whether the person has demonstrated his or her fitness to participate in the conduct of the affairs of an insured institution, and whether the affiliation, ownership, control, or participation by the person in the conduct of the affairs of the insured institution may constitute a threat to the safety and soundness of the insured institution or the interests of its depositors or threaten to impair public confidence in the insured institution. In determining the degree of risk, the FDIC
(1) Whether the conviction or program entry and the specific nature and circumstances of the covered offense are a criminal offense under Section 19;
(2) Whether the participation directly or indirectly by the person in any manner in the conduct of the affairs of the insured institution constitutes a threat to the safety and soundness of the insured institution or the interests of its depositors or threatens to impair public confidence in the insured institution;
(3) Evidence of rehabilitation including the person's reputation since the conviction or program entry, the person's age at the time of conviction or program entry, and the time that has elapsed since the conviction or program entry;
(4) The position to be held or the level of participation by the person at an insured institution;
(5) The amount of influence and control the person will be able to exercise over the management or affairs of an insured institution;
(6) The ability of management of the insured institution to supervise and control the person's activities;
(7) The level of ownership the person will have of the insured institution;
(8) The applicability of the insured institution's fidelity bond coverage to the person; and
(9) Any additional factors in the specific case that appear relevant including but not limited to the opinion or position of the primary Federal and/or state regulator.
The foregoing criteria will also be applied by the FDIC to determine whether the interests of justice are served in seeking an exception in the appropriate court when an application is made to terminate the ten-year ban under 12 U.S.C. 1829(a)(2) for certain Federal offenses, prior to its expiration date.
Some applications can be approved without an extensive review because the person will not be in a position to constitute any substantial risk to the safety and soundness of the insured institution. Persons who will occupy clerical, maintenance, service, or purely administrative positions generally fall into this category. A more detailed analysis will be performed in the case of persons who will be in a position to influence or control the management or affairs of the insured institution. All approvals and orders will be subject to the condition that the person shall be covered by a fidelity bond to the same extent as others in similar positions. In cases in which a waiver of the institution filing requirement has been granted to an individual, approval of the application will also be conditioned upon that person disclosing the presence of the conviction(s) or program entry(ies) to all insured institutions in the affairs of which he or she wishes to participate. When deemed appropriate, bank sponsored applications are to allow the person to work in a specific job at a specific bank and may also be subject to the condition that the prior consent of the FDIC will be required for any proposed significant changes in the person's duties and/or responsibilities. In the case of bank applications such proposed changes may, in the discretion of the Regional Director, require a new application. In situations in which an approval has been granted for a person to participate in the affairs of a particular insured institution and who subsequently seeks to participate at another insured depository institution, another application must be submitted.
By Order of the Board of Directors.
Thursday, January 11, 2018 at 10:00 a.m.
999 E Street NW, Washington, DC (Ninth Floor)
This meeting will be open to the public.
REG 2014-02: Draft Notice of Proposed Rulemaking on Independent Expenditures by Authorized Committees; Reporting Multistate Independent Expenditures and Electioneering Communications
Judith Ingram, Press Officer, Telephone: (202) 694-1220.
Individuals who plan to attend and require special assistance, such as sign language interpretation or other reasonable accommodations, should contact Dayna C. Brown, Secretary and Clerk, at (202)694-1040, at least 72 hours prior to the meeting date.
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 January 29, 2018.
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 January 22, 2018.
1. Robert J. Arnold Family Living Trust, and Robert J. Arnold and Margie E. Arnold as co-trustees, all of McPherson, Kansas, and Larry G. Arnold, Castle Rock, Colorado; to retain voting shares of Ramona Bankshares, Inc. and thereby indirectly retain shares of Hillsboro State Bank, both of Hillsboro, Kansas.
In accordance with the Paperwork Reduction Act of 1995, the Agency for Toxic Substances and Disease Registry (ATSDR) has submitted the information collection request titled Assessment of Chemical Exposures (ACE) Investigations to the Office of Management and Budget (OMB) for review and approval. ATSDR previously published a “Proposed Data Collection Submitted for Public Comment and Recommendations” notice on August 30, 2017 to obtain comments from the public and affected agencies. ATSDR did not receive comments related to the previous notice. This notice serves to allow an additional 30 days for public and affected agency comments.
ATSDR will accept all comments for this proposed information collection project. The Office of Management and Budget is particularly interested in comments that:
(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,
(e) Assess information collection costs.
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
Assessment of Chemical Exposures (ACE) Investigations OMB Control No: 0923-0051 (Expiration Date: 03/31/2018)—Revision—Agency for Toxic Substances and Disease Registry (ATSDR).
The Agency for Toxic Substances and Disease Registry (ATSDR) is requesting a three-year Paperwork Reduction Act (PRA) revision of generic clearance information collection request 0923-0051 titled “Assessment of Chemical Exposures (ACE) Investigations” to assist state and local health departments after toxic substance spills or chemical incidents. The PRA clearance for this information collection request expires 3/31/2018. In this revision, we are renaming the form previously titled the Rapid Response Registry Form as the ACE Short Form. This revision better describes the use of the ACE Short Form in time-limited investigations where longer surveys are not possible. We do not use the form to establish registries. In addition, we are removing two insurance questions from the ACE Short Form, as they are not currently asked in the longer surveys. There are no changes to the requested burden hours.
ATSDR has successfully completed three investigations to date using this PRA clearance and would like to continue this impactful information collection. Briefly summarized below are the accomplishments of this information collection:
• During 2015, in U.S. Virgin Islands there was a methyl bromide exposure at a condominium resort. Under this ACE investigation, awareness was raised among pest control companies that methyl bromide was prohibited for use in homes and other residential settings. Additionally, awareness was raised for clinicians about the toxicologic syndrome caused by exposure to methyl bromide and the importance of notifying first responders immediately when they have encountered contaminated patients.
• During 2016, ACE team conducted a rash investigation in Flint, Michigan. Persons who were exposed to Flint municipal water and had current or worsening rashes were surveyed and referred to free dermatologist screening if desired. Findings revealed that when the city was using water from the Flint River, there were large swings in chorine, pH, and hardness, which could be one possible explanation for the eczema-related rashes.
• During 2016, ACE team also conducted a follow-up investigation for people who were exposed to the Flint municipal water and sought care from the free dermatologists. Data analysis for this project is in process and results are pending. However, the follow-up interviews resulted in improving the exam and referral processes that were still on going at the time.
The ACE investigations focus on performing rapid epidemiological assessments to assist state, regional, local, or tribal health departments (the requesting agencies) to respond to or prepare for acute chemical releases.
The main objectives for performing these rapid assessments are to:
1. Characterize exposure and acute health effects of respondents exposed to toxic substances from discrete, chemical
2. Identify needs (
3. Assess the impact of the incidents on health services use and share lessons learned for use in hospital, local, and state planning for chemical incidents.
Because each chemical incident is different, it is not possible to predict in advance exactly what type of and how many respondents will need to be consented and interviewed to effectively evaluate the incident. Respondents typically include, but are not limited to emergency responders such as police, fire, hazardous material technicians, emergency medical services, and personnel at hospitals where patients from the incident were treated. Incidents may occur at businesses or in the community setting; therefore, respondents may also include business owners, managers, workers, customers, community residents, pet owners, and those passing through the affected area.
Data will be collected by the multidisciplinary ACE team consisting of staff from ATSDR, the Centers for Disease Control and Prevention (CDC), and the requesting agencies. ATSDR has developed a series of draft survey forms that can be quickly tailored in the field to collect data that will meet the goals of the investigation. They will be administered based on time permitted and urgency. For example, it is preferable to administer the General Survey to as many respondents as possible. However, if there are time constraints, the shorter Household Survey or the ACE Short Form may be administered instead. The individual surveys collect information about exposure, acute health effects, health services use, medical history, needs resulting from the incident, communication during the release, health impact on children and pets, and demographic data. Hospital personnel are asked about the surge, response and communication, decontamination, and lessons learned.
Depending on the situation, data may be collected by face-to-face interviews, telephone interviews, written surveys, mailed surveys, or on-line surveys. Medical and veterinary charts may also be reviewed. In rare situations, an investigation might involve collection of clinical specimens.
ATSDR anticipates up to four ACE investigations per year. The number of participants has ranged from 30-715, averaging about 300 per year. Therefore, the total annualized estimated burden will be 591 hours per year. Participation in ACE investigations is voluntary and there are no anticipated costs to respondents other than their time.
In accordance with the Paperwork Reduction Act of 1995, the Centers for Disease Control and Prevention (CDC) has submitted the information collection request titled
CDC will accept all comments for this proposed information collection project. The Office of Management and Budget is particularly interested in comments that:
(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,
(e) Assess information collection costs.
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
Mobile Proximity Initial User Feedback—NEW—National Institute for Occupational Safety and Health (NIOSH), Centers for Disease Control and Prevention (CDC).
The mission of the National Institute for Occupational Safety and Health (NIOSH) is to promote safety and health at work for all people through research and prevention. The study will be conducted by NIOSH under the Federal Mine Safety and Health Act of 1977, Public Law 91-173 as amended by Public Law 95-164. Title V, Section 501 (a) states NIOSH has the responsibility to conduct research “to improve working conditions and practices in coal or others mines, and to prevent accidents and occupational diseases originating in the coal or other mining industry (Federal Mine and Safety and Health Act, 1977, Title V, Sec. 501).”
Striking, pinning and crushing injuries are serious concerns in underground coal mining, especially around mobile equipment. Between 2010 and 2014 powered haulage accounted for 24 of the 110 underground coal fatalities. During that same time period, the Mine Safety and Health Administration (MSHA) determined that up to nine of these fatalities were striking, pinning, or crushing accidents, which may have been prevented by proximity detection systems on coal haulage machines or scoops. Following the final rule requiring proximity detection systems on continuous mining machines, on September 2, 2015, MSHA published a proposed rule requiring proximity systems on mobile machines in underground coal mines. Though it is still under development, MSHA reported that by June of 2015, 155 of approximately 2,116 coal haulage machines and scoops had been equipped with proximity detection systems. However, in recent discussions with NIOSH personnel, some mine operators have disclosed suspending the use of proximity detection systems on mobile equipment due to challenges integrating the systems into daily operations. This has further prompted concerns about how proximity detection systems are being utilized.
The goal of this study is to reduce the risk of traumatic injuries and fatalities among mine workers through assessing the current state of proximity systems for underground mobile equipment. NIOSH is seeking a one-year OMB approval in order to collect information to address two key questions: (1) In which situations do proximity detection systems on mobile haulage hinder normal operation? (2) In which situations do proximity detection systems on mobile haulage endanger miners? Data will be used to inform the development of technologies, engineering controls, administrative controls, best practices, and training approaches that eliminate striking fatalities and injuries caused by mobile mining equipment.
The study population includes mine workers in various maintenance and production roles that work in underground coal mines in the United States. Total annual time burden for this study is 45 hours, including recruitment of mines and 250 semi-formal interviews. Since workers will continue to perform their assigned duties during the optional group observations, a burden estimate was not calculated for this activity.
In accordance with the Paperwork Reduction Act of 1995, the Centers for Disease Control and Prevention (CDC) has submitted the information collection request titled Behavioral Risk Factor Surveillance System (BRFSS) to the Office of Management and Budget (OMB) for review and approval. CDC previously published a “Proposed Data Collection Submitted for Public Comment and Recommendations” notice on October 16, 2017 to obtain comments from the public and affected agencies. CDC received one comment related to the previous notice. This notice serves to allow an additional 30 days for public and affected agency comments.
CDC will accept all comments for this proposed information collection project. The Office of Management and Budget is particularly interested in comments that:
(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,
(e) Assess information collection costs.
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
Behavioral Risk Factor Surveillance System (BRFSS) (OMB Control Number 0920-1061, Expiration Date 3/31/
CDC is requesting Office of Management and Budget (OMB) approval to continue information collection for the Behavioral Risk Factor Surveillance System (BRFSS) for the period of 2018-2021. The BRFSS is a nationwide system of cross-sectional telephone health surveys administered by health departments in states, territories, and the District of Columbia (collectively referred to here as states) in collaboration with CDC.
The BRFSS produces state-level information primarily on health risk behaviors, health conditions, and preventive health practices that are associated with chronic diseases, infectious diseases, and injury. Designed to meet the data needs of individual states and territories, the CDC sponsors the BRFSS information collection project under a cooperative agreement with states and territories. Under this partnership, BRFSS state coordinators determine questionnaire content with technical and methodological assistance provided by CDC. For most states and territories, the BRFSS provides the only sources of data amenable to state and local level health and health risk indicator uses. Over time, it has also developed into an important data collection system that federal agencies rely on for state and local health information and to track national health objectives such as Healthy People.
CDC bases the BRFSS questionnaire on modular design principles to accommodate a variety of state-specific needs within a common framework. All participating states are required to administer a standardized core questionnaire, which provides a set of shared health indicators for all BRFSS partners. The BRFSS core questionnaire consists of fixed core, rotating core, and emerging core questions. Fixed core questions are asked every year. Rotating core questions cycle on and off the core questionnaire during even or odd years, depending on the question. Emerging core questions are included in the core questionnaire as needed to collect data on urgent or emerging health topics such as influenza.
In addition, the BRFSS includes a series of optional modules on a variety of topics. In off years, when the rotating questions are not included in the core questionnaire, they are offered to states as an optional module. This framework allows each state to produce a customized BRFSS survey by appending selected optional modules to the core survey. States may select which, if any, optional modules to administer. As needed, CDC provides technical and methodological assistance to state BRFSS coordinators in the construction of their state-specific surveys. The CDC and BRFSS partners produce a new set of state-specific BRFSS questionnaires each calendar year (
The current estimated average burden for the core BRFSS interview is 15 minutes. For the optional modules, the estimated average burden per response varies by state and year, but is currently estimated at an additional 15 minutes. Finally, the BRFSS allows states to customize some portions of the questionnaire through the addition of state-added questions, which CDC does not review nor approve. State-added questions are not included in CDC's burden estimates.
CDC periodically updates the BRFSS core survey and optional modules as new modules or adopt emerging core questions. The purpose of this Revision request is to extend the information collection period for three years and to incorporate field-testing into the approved information collection plan.
Field-testing is the final check of changes in the questionnaire, which have occurred in the preceding year. Researchers conduct field-testing in a manner that mimics the full-scale project protocol, to the degree that is feasible. Field-testing allows for necessary changes in data collection methods and data collection software. Researchers use field tests to identify problems with instrument documentation or instructions, problems with conditional logic (
The public comment received to date requested that BRFSS be modified to include more questions about tobacco use, including use of newer nicotine-delivery devices. Because BRFSS follows the design and development process described above, CDC cannot unilaterally change the topical content of BRFSS and no change has been made to the 2018 questionnaire.
Centers for Disease Control and Prevention (CDC), Department of Health and Human Services (HHS).
Notice with comment period.
The National Center for Health Statistics (NCHS), Centers for Disease Control and Prevention (CDC) in the Department of Health and Human Services (HHS) announces the opening of a docket to obtain public comment on the production of sex-specific body mass index (BMI)-for-age growth charts for children and adolescents aged 2-19 years specifically designed for tracking extremely high values of BMI. The 2000 CDC growth charts include sex-specific BMI-for-age percentile charts based on data representative of the United States (US) population from the National Health Examination Survey (NHES) and National Health and Nutrition Examination Survey (NHANES). In US children and adolescents, obesity is defined as at or above the sex-specific 95th percentile on the CDC BMI-for-age growth charts. Severe obesity is often defined as at or above 120% of the sex-specific 95th percentile on the CDC BMI-for-age growth charts. Currently, the highest percentile displayed is the 97th percentile. Therefore, it is difficult to assess changes in weight status in children with very high BMIs that exceed this level. The new charts will provide additional lines representing 120%, 130%, 140%, and 150% of the 95th percentile. The intent of these charts is to provide a mechanism for documenting BMI percentiles for children and adolescents with severe obesity in both clinical and research settings.
Written comments must be received on or before March 9, 2018.
You may submit comments, identified by Docket No. CDC-2018-0001 by any of the following methods:
•
•
Cynthia Ogden, Ph.D., Division of Health and Nutrition Examination Survey, National Center for Health Statistics, 3311 Toledo Road, MS-P08, Hyattsville, MD 20782-2064, phone: (301) 458-4405.
The National Center for Health Statistics (NCHS) is congressionally mandated by the National Health Survey Act of 1956 to monitor the health of the nation. The National Health and Nutrition Examination Survey (NHANES), part of NCHS, is a nationally representative health survey designed to assess the health and nutritional status of adults and children in the United States. The survey is unique in that it combines interviews with physical examinations and laboratory studies. NHANES data are used throughout Department of Health and Human Services (HHS) agencies in addition to public health researchers world-wide. NHANES data have been used to determine national obesity estimates, produce pediatric growth and BMI charts, and monitor prevalence of infectious diseases such as the human papillomavirus (HPV).
Body mass index (BMI) is calculated as weight in kilograms divided by height in meters squared and is used in the diagnosis, clinical management, and estimation of population prevalence of obesity and severe obesity. Among adults, obesity is defined by an absolute BMI value (≥30). Among children, BMI varies with age as well as sex. Therefore, to classify obesity among children and adolescents aged 2-19 years, measurements are standardized by age and sex using BMI-for-age growth charts. The 2000 CDC growth charts include smoothed percentiles of BMI-for-age based on data representative of the US population. In the US, obesity is defined as at or above the sex-specific 95th percentile for BMI-for-age. However, categorizing severe obesity (defined in adults as BMI≥40) is problematic given specific measures are not available in standard CDC growth charts for values beyond the 97th percentile. Researchers have proposed using percent of the 95th percentile as a flexible, stable measure for extreme BMI values. Consequently, severe obesity in children is often defined as a BMI at or above 120% of the sex-specific 95th percentile of BMI-for-age.
Prevalence of severe obesity has increased among children and adolescents and very high BMI has been shown to increase risk for obesity in adulthood in addition to adverse health outcomes such as diabetes, abnormal cholesterol levels, and high blood pressure and behavioral health and social victimization impacts. Recent research has focused on effective management and treatment of children and adolescents with severe obesity, but researchers and clinicians lack a tool to determine BMI percentiles for these individuals. Specialized growth charts with lines reflecting 120%, 130%, 140% and 150% will provide an improved tool for documenting BMI in the clinical and research settings. Please see the draft example chart for boys (Attachment 1) and girls (Attachment 2).
Centers for Medicare & Medicaid Services, HHS.
Notice.
The Centers for Medicare & Medicaid Services (CMS) is announcing an opportunity for the public to comment on CMS' intention to collect information from the public. Under the Paperwork Reduction Act of 1995 (the PRA), federal agencies are required to publish notice in the
Comments must be received by March 9, 2018.
When commenting, please reference the document identifier or OMB control number. To be assured consideration, comments and recommendations must be submitted in any one of the following ways:
1.
2.
To obtain copies of a supporting statement and any related forms for the proposed collection(s) summarized in this notice, you may make your request using one of following:
1. Access CMS' website address at
2. Email your request, including your address, phone number, OMB number, and CMS document identifier, to
3. Call the Reports Clearance Office at (410) 786-1326.
William Parham at (410) 786-4669.
This notice sets out a summary of the use and burden associated with the following information collections. More detailed information can be found in each collection's supporting statement and associated materials (see
Under the PRA (44 U.S.C. 3501-3520), federal agencies must obtain approval from the Office of Management and Budget (OMB) for each collection of information they conduct or sponsor. The term “collection of information” is defined in 44 U.S.C. 3502(3) and 5 CFR 1320.3(c) and includes agency requests or requirements that members of the public submit reports, keep records, or provide information to a third party. Section 3506(c)(2)(A) of the PRA requires federal agencies to publish a 60-day notice in the
1.
Food and Drug Administration, HHS.
Notice.
The Food and Drug Administration (FDA or we) is announcing that a proposed collection of information has been submitted to the Office of Management and Budget (OMB) for review and clearance under the Paperwork Reduction Act of 1995.
Fax written comments on the collection of information by February 7, 2018.
To ensure that comments on the information collection are received, OMB recommends that written comments be faxed to the Office of Information and Regulatory Affairs,
Ila S. Mizrachi, Office of Operations, Food and Drug Administration, Three White Flint North, 10A-12M, 11601 Landsdown St., North Bethesda, MD 20852, 301-796-7726,
In compliance with 44 U.S.C. 3507, FDA has submitted the following proposed collection of information to OMB for review and clearance.
Under the Public Health Service Act (42 U.S.C. 262), FDA may only approve a biologics license application for a biological product that is safe, pure, and potent. When a biological product is approved and enters the market, the product is introduced to a larger patient population in settings different from clinical trials. New information generated during the postmarketing period offers further insight into the benefits and risks of the product, and evaluation of this information is important to ensure its safe use. FDA issued the Adverse Experience Reporting (AER) requirements in part 600 (21 CFR part 600) to enable FDA to take actions necessary for the protection of the public health in response to reports of adverse experiences related to licensed biological products. The primary purpose of FDA's AERS is to identify potentially serious safety problems with licensed biological products. Although premarket testing discloses a general safety profile of a biological product's comparatively common adverse effects, the larger and more diverse patient populations exposed to the licensed biological product provides the opportunity to collect information on rare, latent, and long-term effects. In addition, production and/or distribution problems have contaminated biological products in the past. AER reports are obtained from a variety of sources, including manufacturers, patients, physicians, foreign regulatory agencies, and clinical investigators. Identification of new and unexpected safety issues through the analysis of the data in AERS contributes directly to increased public health protection. For example, evaluation of these safety issues enables FDA to take focused regulatory action. Such action may include, but is not limited to, important changes to the product's labeling (such as adding a new warning), coordination with manufacturers to ensure adequate corrective action is taken, and removal of a biological product from the market when necessary.
Section 600.80(c)(1) requires licensed manufacturers or any person whose name appears on the label of a licensed biological product to report each adverse experience that is both serious and unexpected, whether foreign or domestic, as soon as possible but in no case later than 15 calendar days of initial receipt of the information by the licensed manufacturer. These reports are known as postmarketing 15-day Alert reports. This section also requires licensed manufacturers to submit any followup reports within 15 calendar days of receipt of new information or as requested by FDA, and if additional information is not obtainable, to maintain records of the unsuccessful steps taken to seek additional information. In addition, this section requires that a person who submits an adverse action report to the licensed manufacturer rather than to FDA, maintain a record of this action. Section 600.80(e) requires licensed manufacturers to submit a 15-day Alert report for an adverse experience obtained from a postmarketing clinical study only if the licensed manufacturer concludes that there is a reasonable possibility that the product caused the adverse experience. Section 600.80(c)(2) requires licensed manufacturers to report each adverse experience not reported in a postmarketing 15-day Alert report at quarterly intervals, for 3 years from the date of issuance of the biologics license, and then at annual intervals. The majority of these periodic reports are submitted annually, since a large percentage of currently licensed biological products have been licensed longer than 3 years. Section 600.80(k) requires licensed manufacturers to maintain for a period of 10 years records of all adverse experiences known to the licensed manufacturer, including raw data and any correspondence relating to the adverse experiences. Section 600.81 requires licensed manufacturers to submit, at an interval of every 6 months, information about the quantity of the product distributed under the biologics license, including the quantity distributed to distributors. These distribution reports provide FDA with important information about products distributed under biologics licenses, including the quantity, certain lot numbers, labeled date of expiration, the fill lot numbers for the total number of dosage units of each strength or potency distributed (
Manufacturers of biological products for human use must keep records of each step in the manufacture and distribution of a product, including any recalls. These recordkeeping requirements serve preventative and remedial purposes by establishing accountability and traceability in the manufacture and distribution of products. These requirements also enable FDA to perform meaningful inspections. Section 600.12 requires, among other things, that records be made concurrently with the performance of each step in the manufacture and distribution of products. These records must be retained for no less than 5 years after the records of manufacture have been completed or 6 months after the latest expiration date for the individual product, whichever represents a later date. In addition, under § 600.12, manufacturers must maintain records relating to the sterilization of equipment and supplies, animal necropsy records, and records in cases of divided manufacturing responsibility with respect to a product. Under § 600.12(b)(2), manufacturers are also required to maintain complete records pertaining to the recall from distribution of any product. Furthermore, § 610.18(b) (21 CFR 610.18(b)) requires, in part, that the results of all periodic tests for verification of cultures and determination of freedom from extraneous organisms be recorded and
Respondents to this collection of information include manufacturers of biological products (including blood and blood components) and any person whose name appears on the label of a licensed biological product. In table 1, the number of respondents is based on the estimated number of manufacturers that are subject to those regulations or that submitted the required information to the Center for Biologics Evaluation and Research and Center for Drugs Evaluation and Research, FDA, in fiscal year (FY) 2016. Based on information obtained from the FDA's database system, there were 93 manufacturers of biological products. This number excludes those manufacturers who produce Whole Blood, components of Whole Blood, or in-vitro diagnostic licensed products, because of the exemption under § 600.80(m). The total annual responses are based on the number of submissions received by FDA in FY 2016. There were an estimated 125,371 15-day Alert reports, 180,580 periodic reports, and 677 lot distribution reports submitted to FDA. The number of 15-day Alert reports for postmarketing studies under § 600.80(e) is included in the total number of 15-day Alert reports. FDA received 81 requests from 40 manufacturers for waivers under § 600.90 (including §§ 600.80(h)(2) and 600.81(b)(2)), of which 79 were granted. The hours per response are based on FDA experience. The burden hours required to complete the MedWatch Form (Form FDA 3500A) for § 600.80(c)(1), (e), and (f) are reported under OMB control number 0910-0291.
In the
FDA estimates the burden of this collection of information as follows:
In table 2 the number of respondents is based on the number of manufacturers subject to those regulations. Based on information obtained from FDA's database system, there were 263 licensed manufacturers of biological products in FY 2016. However, the number of recordkeepers listed for § 600.12(a) through (e) excluding (b)(2) is estimated to be 114. This number excludes manufacturers of blood and blood components because their burden hours for recordkeeping have been reported under § 606.160 in OMB control number 0910-0116. The total annual records is based on the annual average of lots released in FY 2016 (7,198), number of recalls made (575), and total number of adverse experience reports received (305,951) in FY 2016. The hours per record are based on FDA experience.
FDA estimates the burden of this recordkeeping as follows:
The burden for this information collection has changed since the last OMB approval. Because of an increase in the number of AER reports we have received during the past 3years, we have increased our reporting and recordkeeping burden estimates.
Health Resources and Services Administration (HRSA), Department of Health and Human Services (HHS).
Notice of request for nominations for voting members.
HRSA is requesting nominations to fill vacancies on the National Advisory Council on Migrant Health (NACMH). The NACMH is authorized and governed under the Public Health Service (PHS) Act, as amended.
The agency will receive nominations on a continuous basis.
All nominations must be submitted in hardcopy to the Designated Federal Official (DFO), NACMH, Strategic Initiatives and Planning Division, Office of Policy and Program Development, Bureau of Primary Health Care, HRSA, 16N38B, 5600 Fishers Lane, Rockville, Maryland 20857.
All requests for information regarding the NACMH nominations should be sent to Esther Paul, DFO, NACMH, HRSA, in one of three ways: (1) Send a request to the following address: Esther Paul, Office of Policy and Program Development, Bureau of Primary Health Care, HRSA, 5600 Fishers Lane, 16N38B, Rockville, Maryland 20857; (2) call (301) 594-4300; or (3) send an email to
As authorized under section 217 of the PHS Act, as amended (42 U.S.C. 218), the Secretary established the NACMH. The NACMH is governed by the Federal Advisory Committee Act (5 U.S.C. Appendix 2), which sets forth standards for the formation and use of advisory committees.
The NACMH consults with and makes recommendations to the HHS Secretary and the HRSA Administrator concerning the organization, operation, selection, and funding of migrant health centers and other entities under grants and contracts under section 330 of the PHS Act (42 U.S.C. 254b).
The authorizing statute and the NACMH Charter require that the Council consist of 15 members, each serving a 4-year term. Twelve Council members are required by statute to be governing board members of migrant health centers or other entities assisted under section 254b of the PHS Act. Of these 12, at least nine must be patient members of health center governing boards who are familiar with the delivery of health care to migratory and seasonal agricultural workers. The remaining three Council members must be individuals qualified by training and experience in the medical sciences or in the administration of health programs. New members filling a vacancy that occurred prior to expiration of a term may serve only for the remainder of such term.
Specifically, HRSA is requesting nominations for:
Nominees
A complete nomination package should include the following information for each nominee: (1) A NACMH nomination form; (2) three letters of reference; (3) a statement of prior service on the NACMH; and (4) a biographical sketch of the nominee or a copy of his/her curriculum vitae. The nomination package must also state that the nominee is willing to serve as a member of the NACMH and appears to have no conflict of interest that would preclude membership. An ethics review is conducted for each selected nominee. Please contact Esther Paul at
HHS strives to ensure that the membership of HHS federal advisory committees is balanced in terms of points of view represented, consistent with the committee's authorizing statute and charter. Appointment to the NACMH shall be made without discrimination on the basis of age, race, ethnicity, gender, sexual orientation, disability, and cultural, religious, or socioeconomic status. The Department encourages nominations of qualified candidates from all groups and locations.
National Institutes of Health, HHS.
Notice.
The invention listed below is owned by an agency of the U.S. Government and is available for licensing to achieve expeditious commercialization of results of federally-funded research and development. Foreign patent applications are filed on selected inventions to extend market coverage for companies and may also be available for licensing.
Peter Tung, 240-669-5483;
Technology description follows.
P47 protein expressed by
Immunization with the P47 protein variants of this technology provides a candidate for a potential, effective, transmission blocking malaria vaccine against
This technology is available for licensing for commercial development in accordance with 35 U.S.C. 209 and 37 CFR part 404, as well as for further development and evaluation under a research collaboration.
National Institutes of Health, HHS.
Notice.
The Interagency Coordinating Committee on the Validation of Alternative Methods (ICCVAM) announces a public webinar “Machine Learning in Toxicology: Fundamentals of Application and Interpretation.” The webinar is organized on behalf of ICCVAM by the National Toxicology Program Interagency Center for the Evaluation of Alternative Toxicological Methods (NICEATM). Interested persons may participate via WebEx. Time will be allotted for questions from the audience.
Webinar: January 23, 2018, 1:00 p.m. to approximately 2:30 p.m. Eastern Standard Time (EST). Registration for the Webinar: December 18, 2017, until 2:30 p.m. on January 23, 2018.
Webinar web page:
Dr. Warren Casey, Director, NICEATM; telephone: (984) 287-3118; email:
The ICCVAM webinar will explore the fundamentals of machine learning approaches, including how they work, how they are interpreted, and precautions that should be taken when evaluating their output. It will feature presentations by two experts in use of machine learning in toxicity texting applications that will address issues specific to use of machine learning approaches in a regulatory context. Case studies will be presented to highlight where such techniques have been successfully applied both nationally and internationally. The preliminary agenda and additional information about presentations will be posted at
Individuals with disabilities who need accommodation to participate in this event should contact Elizabeth Maull at phone: (984) 287-3157 or email:
The ICCVAM Authorization Act of 2000 (42 U.S.C. 285
NICEATM administers ICCVAM, provides scientific and operational support for ICCVAM-related activities, and conducts and publishes analyses and evaluations of data from new, revised, and alternative testing approaches. NICEATM and ICCVAM work collaboratively to evaluate new and improved testing approaches applicable to the needs of U.S. federal agencies. NICEATM and ICCVAM welcome the public nomination of new, revised, and alternative test methods and strategies for validation studies and technical evaluations. Additional information about NICEATM can be found at
U.S. Customs and Border Protection (CBP), Department of Homeland Security.
60-Day notice and request for comments; extension of an existing collection of information.
The Department of Homeland Security, U.S. Customs and Border Protection will be submitting 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 (PRA). The information collection is published in the
Written comments and/or suggestions regarding the item(s) contained in this notice must include the OMB Control Number 1651-0007 in the subject line and the agency name. To avoid duplicate submissions, please use only
(1)
(2)
Requests for additional PRA information should be directed to Seth Renkema, Chief, Economic Impact Analysis Branch, U.S. Customs and Border Protection, Office of Trade, Regulations and Rulings, 90 K Street NE, 10th Floor, Washington, DC 20229-1177, Telephone number (202) 325-0056 or via email
CBP invites the general public and other Federal agencies to comment on the proposed and/or continuing information collections pursuant to the Paperwork Reduction Act of 1995 (44 U.S.C. 3501
U.S. Customs and Border Protection (CBP), Department of Homeland Security.
60-Day notice and request for comments; extension of an existing collection of information.
The Department of Homeland Security, U.S. Customs and Border Protection will be submitting the following information collection request to the Office of Management and Budget (OMB) for review and approval in accordance with the Paperwork
Written comments and/or suggestions regarding the item(s) contained in this notice must include the OMB Control Number 1651-0127 in the subject line and the agency name. To avoid duplicate submissions, please use only
(1)
(2)
Requests for additional PRA information should be directed to Seth Renkema, Chief, Economic Impact Analysis Branch, U.S. Customs and Border Protection, Office of Trade, Regulations and Rulings, 90 K Street NE, 10th Floor, Washington, DC 20229-1177, Telephone number (202) 325-0056 or via email
CBP invites the general public and other Federal agencies to comment on the proposed and/or continuing information collections pursuant to the Paperwork Reduction Act of 1995 (44 U.S.C. 3501
U.S. Customs and Border Protection (CBP), Department of Homeland Security.
60-Day notice and request for comments; extension of an existing collection of information.
The Department of Homeland Security, U.S. Customs and Border Protection will be submitting 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 (PRA). The information collection is published in the
Written comments and/or suggestions regarding the item(s) contained in this notice must include the OMB Control Number 1651-0020 in the subject line and the agency name. To avoid duplicate submissions, please use only
(1)
(2)
Requests for additional PRA information should be directed to Seth Renkema, Chief, Economic Impact Analysis Branch, U.S. Customs and Border Protection, Office of Trade, Regulations and Rulings, 90 K Street NE, 10th Floor, Washington, DC 20229-1177, telephone number (202) 325-0056 or via email
CBP invites the general public and other
U.S. Customs and Border Protection (CBP), Department of Homeland Security.
60-Day Notice and request for comments; extension of an existing collection of information.
The Department of Homeland Security, U.S. Customs and Border Protection will be submitting 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 (PRA). The information collection is published in the
Written comments and/or suggestions regarding the item(s) contained in this notice must include the OMB Control Number 1651-0100 in the subject line and the agency name. To avoid duplicate submissions, please use only
(1) Email. Submit comments to:
(2) Mail. Submit written comments to CBP Paperwork Reduction Act Officer, U.S. Customs and Border Protection, Office of Trade, Regulations and Rulings, Economic Impact Analysis Branch, 90 K Street NE, 10th Floor, Washington, DC 20229-1177.
Requests for additional PRA information should be directed to CBP Paperwork Reduction Act Officer, U.S. Customs and Border Protection, Office of Trade, Regulations and Rulings, Economic Impact Analysis Branch, 90 K Street NE, 10th Floor, Washington, DC 20229-1177, or via email
CBP invites the general public and other Federal agencies to comment on the proposed and/or continuing information collections pursuant to the Paperwork Reduction Act of 1995 (44 U.S.C. 3501
U.S. Customs and Border Protection (CBP), Department of Homeland Security.
60-Day Notice and request for comments; extension of an existing collection of information.
The Department of Homeland Security, U.S. Customs and Border Protection will be submitting 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 (PRA). The information collection is published in the
Written comments and/or suggestions regarding the item(s) contained in this notice must include the OMB Control Number 1651-0021 in the subject line and the agency name. To avoid duplicate submissions, please use only
(1) Email. Submit comments to:
(2) Mail. Submit written comments to CBP Paperwork Reduction Act Officer, U.S. Customs and Border Protection, Office of Trade, Regulations and Rulings, Economic Impact Analysis Branch, 90 K Street NE, 10th Floor, Washington, DC 20229-1177.
Requests for additional PRA information should be directed to CBP Paperwork Reduction Act Officer, U.S. Customs and Border Protection, Office of Trade, Regulations and Rulings, Economic Impact Analysis Branch, 90 K Street NE, 10th Floor, Washington, DC 20229-1177, or via email
CBP invites the general public and other Federal agencies to comment on the proposed and/or continuing information collections pursuant to the Paperwork Reduction Act of 1995 (44 U.S.C. 3501
U.S. Customs and Border Protection (CBP), Department of Homeland Security.
30-Day notice and request for comments; Extension of an existing collection of information.
The Department of Homeland Security, U.S. Customs and Border Protection will be submitting the following information collection request to the Office of Management and Budget (OMB) for review and approval in accordance with the Paperwork
Interested persons are invited to submit written comments on this proposed information collection to the Office of Information and Regulatory Affairs, Office of Management and Budget. Comments should be addressed to the OMB Desk Officer for Customs and Border Protection, Department of Homeland Security, and sent via electronic mail to
Requests for additional PRA information should be directed to Seth Renkema, Chief, Economic Impact Analysis Branch, U.S. Customs and Border Protection, Office of Trade, Regulations and Rulings, 90 K Street NE, 10th Floor, Washington, DC 20229-1177, Telephone number (202) 325-0056 or via email
CBP invites the general public and other Federal agencies to comment on the proposed and/or continuing information collections pursuant to the Paperwork Reduction Act of 1995 (44 U.S.C. 3501
U.S. Customs and Border Protection (CBP), Department of Homeland Security.
30-Day notice and request for comments; Extension of an existing collection of information.
The Department of Homeland Security, U.S. Customs and Border Protection will be submitting 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 (PRA). The information collection is published in the
Interested persons are invited to submit written comments on this proposed information collection to the Office of Information and Regulatory Affairs, Office of Management and Budget. Comments should be addressed to the OMB Desk Officer for Customs and Border Protection, Department of Homeland Security, and sent via electronic mail to
Requests for additional PRA information should be directed to Seth Renkema, Chief, Economic Impact Analysis Branch, U.S. Customs and Border Protection, Office of Trade, Regulations and Rulings, 90 K Street NE, 10th Floor, Washington, DC 20229-1177, telephone number (202) 325-0056 or via email
CBP invites the general public and other Federal agencies to comment on the proposed and/or continuing information collections pursuant to the Paperwork Reduction Act of 1995 (44 U.S.C. 3501
Bureau of Ocean Energy Management (BOEM), Interior.
Notice; request for comments.
BOEM is announcing the availability of, and requests comments on, the Draft Proposed Program (DPP) for the 2019-2024 Outer Continental Shelf Oil and Gas Leasing Program (2019-2024 Program or Program). BOEM is also announcing its decision to prepare a Programmatic Environmental Impact Statement for the 2019-2024 Program (Programmatic EIS) and the initiation of the formal scoping process.
Comments should be submitted by March 9, 2018 to the address specified in the
Comments on the DPP or Programmatic EIS may be submitted in one of the following ways:
1. Mailed in an envelope labeled “Comments for the 2019-2024 Draft Proposed National Oil and Gas Leasing Program” and mailed (or hand delivered) to Ms. Kelly Hammerle, Chief, National Oil and Gas Leasing Program Development and Coordination Branch, Leasing Division, Office of Strategic Resources, Bureau of Ocean Energy Management (VAM-LD), 45600 Woodland Road, Sterling, VA 20166-9216, telephone (703) 787-1613. Written comments may also be hand delivered at a public meeting to the BOEM official in charge.
2. Through the
For information on the 2019-2024 Program process or BOEM's policies associated with this notice, please contact Ms. Kelly Hammerle, Chief, National Oil and Gas Leasing Program Development and Coordination Branch at (703) 787-1613. For information on the 2019-2024 Programmatic EIS, submission of comments related to potential environmental impacts, or Cooperating Agency status, please contact Dr. Jill Lewandowski, Chief, Division of Environmental Assessment, at (703) 787-1703.
On April 28, 2017, Presidential Executive Order 13795: Implementing an America First Offshore Energy Strategy (E.O. 13795), directed the Secretary of the Interior (Secretary) to give full consideration to revising the schedule of proposed oil and gas lease sales adopted in the 2017-2022 Outer Continental Shelf Oil and Gas Leasing Program, which was approved on January 17, 2017. The Secretary issued Secretarial Order 3350 on May 1, 2017, which further directed BOEM to develop a new National Outer Continental Shelf Oil and Gas Leasing Program. As directed by the Secretary, BOEM initiated the development of the 2019-2024 Program by issuing a request for information and comments (RFI) on July 3, 2017 (82 FR 30886). The Program development process required by section 18 of the Outer Continental Shelf Lands Act (OCSLA), 43 U.S.C. 1344, and its implementing regulations, includes the development of a DPP, a Proposed Program, a Proposed Final Program (PFP), and Secretarial approval of the 2019-2024 Program.
This notice serves as the NOA for the DPP and the NOI for the preparation of a Programmatic EIS. The DPP includes the section 18 analysis for the OCS areas of potential interest to the Secretary and his initial proposed schedule of lease sales for the 2019-2024 Program. The
The DPP for the 2019-2024 Program would make more than 98 percent of the OCS resources available to consider for oil and gas leasing during the 2019-2024 period. Including at this stage nearly the entire OCS for potential oil and gas discovery is consistent with advancing the goal of moving the United States from simply aspiring to energy independence to attaining energy dominance. This DPP would allow for unprecedented increases in access to America's extensive offshore oil and gas resources, a critical component of the Nation's energy portfolio, and emphasizes the importance of producing American energy in America.
The DPP will enable the Secretary to receive information necessary to conduct a thorough consideration of the Section 18(a)(2) factors in order to perform the balancing analysis required by Section 18(a)(3) of the OCS Lands Act. Including areas in the 2019-2024 Program will incentivize industry to employ their world-class geological and technical expertise to assess and evaluate America's potential offshore oil and gas resources. By not prematurely restricting or narrowing OCS areas under consideration, this DPP will allow industry the opportunity to further inform the Secretary of their interest in leasing frontier areas and to collect data in areas that have not been explored in decades, if ever. This will, in turn, further our understanding of the resources available on the OCS to meet national energy needs. The Secretary's approach to the DPP lease sale schedule does not prematurely foreclose exploration planning, but fosters it, to allow for potential for the discovery of oil and gas on the OCS.
Allowing for the potential discovery of new oil and gas reserves on the OCS is consistent with the Administration's America-First Energy Strategy, which seeks to achieve energy security and resilience by reducing U.S. reliance on imported energy. Additionally, OCS oil and gas production benefits the United States by helping to reinvigorate American manufacturing and job growth, and contributes to the gross domestic product. Many of the jobs in the oil and gas industry earn a significant wage premium; these employees have more purchasing power and can consume more goods and services, increasing their standard of living, and contributing more to the economy.
Grounded in the above principles, and after careful consideration of public input and the OCS Lands Act Section 18(a)(2) factors, the DPP proposes a lease sale schedule of 47 lease sales in all four OCS regions and includes 25 of the 26 planning areas: 19 lease sales in the Alaska Region (3 in the Chukchi Sea, 3 in the Beaufort Sea, 2 in Cook Inlet, and 1 sale each in the 11 other available planning areas in Alaska), 7 lease sales in the Pacific Region (2 each for Northern California, Central California, and Southern California, and 1 for Washington/Oregon), 12 lease sales in the Gulf of Mexico (GOM) Region (10 regionwide lease sales for the portions of the Central, Western, and Eastern GOM planning areas that are not currently under moratorium, and 2 sales for the portions of the Central and Eastern GOM planning areas that will no longer be under moratorium in 2022), and 9 lease sales in the Atlantic Region (3 sales each for the Mid- and South Atlantic, 2 for the North Atlantic, and 1 for the Straits of Florida).
The DPP does not include a sale in the North Aleutian Basin Planning Area. This area was withdrawn on December 16, 2014, from consideration for any oil and gas leasing for a time period without specific expiration.
Including 25 of the 26 planning areas in the DPP allows for maximum flexibility in the future stages of the process, as well as the opportunity to seek additional input and further coordinate with key stakeholders on those areas. The Secretary is committed to enhancing coordination and collaboration with other governmental entities to discover solutions to multiple use challenges so that oil and gas resources can be extracted, critical military and other ocean uses can continue, and our sensitive physical and biological resources can be protected. The Secretary's goal is to increase access to America's energy resources and to provide environmental stewardship based upon the most up to date environmental information and analysis.
The DPP serves as the basis for the proposed action to be evaluated in the Programmatic EIS. This NOI starts the formal scoping process for the Programmatic EIS under 40 CFR 1501.7 of the Council on Environmental Quality (CEQ) National Environmental Policy Act (NEPA) regulations and solicits input from the public regarding alternatives, impacting factors, and environmental resources and issues of concern in the DPP areas that should be evaluated in the Programmatic EIS. The purpose of scoping for the Programmatic EIS is to determine the appropriate content and scope for a focused and balanced programmatic environmental analysis by ensuring significant issues are identified early and properly studied during development of the Programmatic EIS. BOEM expects to consider environmentally sensitive areas in the Programmatic EIS that could be considered for exclusion as part of the Section 18 winnowing process.
Please go to
BOEM will protect privileged or proprietary information that you submit in accordance with the Freedom of Information Act (FOIA) and OCSLA requirements. To avoid inadvertent release of such information, interested parties should mark all documents and every page containing such information with “Confidential—Contains Proprietary Information.” To the extent a document contains a mix of proprietary and nonproprietary information, interested parties should mark clearly which portion of the document is proprietary and which is not. Exemption 4 of FOIA applies to trade secrets and commercial or financial information that you submit that is privileged or confidential. The OCSLA states that the “Secretary shall maintain the confidentiality of all privileged or proprietary data or information for such period of time as is provided for in this subchapter, established by regulation, or agreed to by the parties” (43 U.S.C. 1344(g)). BOEM considers each interested party's nominations of specific blocks to be proprietary, and therefore BOEM will not release information that identifies any particular nomination, so as not to compromise the competitive position of any participants in the process of indicating interest.
However, please be aware that BOEM's practice is to make all other public comments, including the names and addresses of individuals, available for public inspection. Before including your address, phone number, email address, or other personal identifying information in your comment, please be advised that your entire comment, including your personal identifying information, may be made publicly available at any time. While you can ask us in your comment to withhold from public review your personal identifying information, we cannot guarantee that we will be able to do so. In order for BOEM to consider withholding from disclosure your personal identifying information, you must identify any information contained in the submittal of your comments that, if released, would constitute a clearly unwarranted invasion of your personal privacy. You must also briefly describe any possible harmful consequence(s) of the disclosure of information, such as embarrassment, injury or other harm. Note that BOEM will make available for public inspection, in their entirety, all comments submitted by organizations and businesses, or by individuals identifying themselves as representatives of organizations or businesses.
Public meetings will be held between now and March 9, 2018 to receive scoping comments on the Programmatic EIS. Meetings are being planned for, but are not necessarily limited to the following cities:
Specific dates, times, and venues will be posted on
This NOA for the DPP for the 2019-2024 Program is published in accordance with section 18 of OCSLA and its implementing regulations (30 CFR part 556). This NOI to prepare the 2019-2024 Programmatic EIS is published pursuant to the regulations (40 CFR 1501.7 and 43 CFR 46.235) implementing the provisions of NEPA.
U.S. International Trade Commission.
Notice.
Notice is hereby given that a complaint was filed with the U.S. International Trade Commission on November 30, 2017, under section 337 of the Tariff Act of 1930, as amended, on behalf of Qualcomm Incorporated of San Diego, California. The complaint alleges violations of section 337 based upon the importation into the United States, the sale for importation, and the sale within the United States after importation of certain mobile electronic devices and radio frequency and processing components thereof by reason of infringement of certain claims of U.S. Patent No. 9,154,356 (“the '356 patent”); U.S. Patent No. 9,473,336 (“the '336 patent”); U.S. Patent No. 8,063,674 (“the '674 patent”); U.S. Patent No. 7,693,002 (“the '002 patent”); and U.S. Patent No. 9,552,633 (“the '633 patent”). The complaint further alleges that an industry in the United States exists as required by the applicable Federal Statute.
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
Pathenia M. Proctor, 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)(B) of section 337 in the importation into the United States, the sale for importation, or the sale within the United States after
(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 or other interested persons with respect to the public interest in his 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 complainant is:
(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:
(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 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 notice of investigation. Extensions of time for submitting responses to the complaint and the notice of investigation will not be granted unless good cause therefor is shown.
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.
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 October 31, 2017, under section 337 of the Tariff Act of 1930, as amended, on behalf of Mighty Mug, Inc. of Rahway, New Jersey. An amended complaint was filed on December 1, 2017, on behalf of Alfay Designs, Inc., of Rahway, New Jersey, Mighty Mug, Inc., of Rahway, New Jersey, and Harry Zimmerman of Los Angeles, California. Supplements to the amended complaint were filed on December 4, 8, 19, and 22, 2017. The amended complaint alleges violations of section 337 based upon the importation into the United States, the sale for importation, and the sale within the United States after importation of self-anchoring beverage containers by reason of infringement of (1) certain claims of U.S. Patent No. 8,028,850 (“the '850 patent”) and U.S. Patent No. 8,757,418 (“the '418 patent”); and (2) U.S. Trademark Registration No. 4,191,803 (“the '803 trademark”). The amended complaint further alleges that an industry in the United States exists or is in the process of being established as required by the applicable Federal Statute.
The complainants request that the Commission institute an investigation and, after the investigation, issue a general exclusion order and cease and desist orders.
The amended 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
Pathenia M. Proctor, 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:
(a) Whether there is a violation of subsection (a)(1)(B) of section 337 in the importation into the United States, the sale for importation, or the sale within the United States after importation of certain self-anchoring beverage containers by reason of infringement of one or more of claim 1 of the '850 patent and claim 1 of the '418 patent; and whether an industry in the United States exists or is in the process of being established as required by subsection (a)(2) of section 337;
(b) whether there is a violation of subsection (a)(1)(C) of section 337 in the importation into the United States, the sale for importation, or the sale within the United States after importation of certain self-anchoring beverage containers by reason of infringement of
(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 complainants are:
(b) The respondents are the following entities alleged to be in violation of section 337, and are the parties upon which the amended 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
(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 amended 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 amended complaint and the notice of investigation. Extensions of time for submitting responses to the amended complaint and the notice of investigation will not be granted unless good cause therefor is shown.
Failure of a respondent to file a timely response to each allegation in the amended complaint and in this notice may be deemed to constitute a waiver of the right to appear and contest the allegations of the amended 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 amended 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.
Notice of registration.
Registrants listed below have applied for and been granted registration by-the Drug Enforcement Administration as importers of various classes of schedule I or II controlled substances.
The companies listed below applied to be registered as importers of various basic classes of controlled substances. Information on previously published notices is listed in the table below. No comments or objections were submitted and no requests for hearing were submitted for these notices.
The Drug Enforcement Administration (DEA) has considered the factors in 21 U.S.C. 823, 952(a) and 958(a) and determined that the registration of the listed registrants to import the applicable basic classes of schedule I or II controlled substances is consistent with the public interest and with United States obligations under international treaties, conventions, or protocols in effect on May 1, 1971. The DEA investigated each company's maintenance of effective controls against diversion by inspecting and testing each company's physical security systems, verifying each company's compliance with state and local laws, and reviewing each company's background and history.
Therefore, pursuant to 21 U.S.C. 952(a) and 958(a), and in accordance with 21 CFR 1301.34, the DEA has granted a registration as an importer for schedule I or II controlled substances to the above listed persons.
In accordance with the Federal Advisory Committee Act (Pub. L. 92-463, as amended), the National Science Foundation (NSF) announces the following meeting:
In accordance with the Federal Advisory Committee Act (Pub. L. 92-463, as amended), the National Science Foundation (NSF) announces the following meeting:
National Science Foundation.
Notice of permits issued.
The National Science Foundation (NSF) is required to publish notice of permits issued under the Antarctic Conservation Act of 1978. This is the required notice.
Nature McGinn, ACA Permit Officer, Office of Polar Programs, National Science Foundation, 2415 Eisenhower Avenue, Alexandria, VA 22314; 703-292-8030; email:
On December 1, 2017, the National Science Foundation published a notice in the
Nuclear Regulatory Commission.
Exemption and combined license amendment; issuance.
The U.S. Nuclear Regulatory Commission (NRC) is granting an exemption to allow a departure from the Design Certification Rule for AP1000 Design Control Document (DCD). The Tier 1 information for which a plant-specific departure and exemption is being requested includes a change to the thickness of one floor in the auxiliary building located between Column Lines I to J-1 and Column Lines 2 to 4 at elevation 153′-0″. The NRC is issuing License Amendment Nos. 89 and 88 to Combined Licenses (COL), NPF-91 and NPF-92. The COLs were issued to Southern Nuclear Operating Company, Inc., and Georgia Power Company, Oglethorpe Power Corporation, MEAG Power SPVM, LLC, MEAG Power SPVJ, LLC, MEAG Power SPVP, LLC, Authority of Georgia, and the City of Dalton, Georgia (the licensee); for construction and operation of the Vogtle Electric Generating Plant (VEGP) Units 3 and 4, located in Burke County, Georgia.
The granting of the exemption allows the changes to Tier 1 information asked for in the amendment. Because the acceptability of the exemption was determined in part by the acceptability of the amendment, the exemption and amendment are being issued concurrently.
The exemption and amendment were issued on October 6, 2017.
Please refer to Docket ID NRC-2008-0252 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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Chandu Patel, Office of New Reactors, U.S. Nuclear Regulatory Commission, Washington, DC 20555-0001; telephone: 301-415-3025; email:
The NRC is granting an exemption from paragraph B of section III, “Scope and Contents,” of appendix D, “Design Certification Rule for the AP1000,” to part 52 of title 10 of the
Part of the justification for granting the exemption was provided by the review of the amendment. Because the exemption is necessary in order to issue the requested license amendment, the NRC granted the exemption and issued the amendment concurrently, rather than in sequence. This included issuing a combined safety evaluation containing the NRC staff's review of both the exemption request and the license amendment. The exemption met all applicable regulatory criteria set forth in §§ 50.12, 52.7, and section VIII.A.4 of appendix D to 10 CFR part 52. The license amendment was found to be acceptable as well. The combined safety evaluation is available in ADAMS under Accession No. ML17254A129.
Identical exemption documents (except for referenced unit numbers and license numbers) were issued to the licensee for VEGP Units 3 and 4 (COLs NPF-91 and NPF-92). The exemption documents for VEGP Units 3 and 4 can be found in ADAMS under Accession Nos. ML17254A131 and ML17254A132, respectively. The exemption is reproduced (with the exception of abbreviated titles and additional citations) in Section II of this document. The amendment documents for COLs NPF-91 and NPF-92 are available in ADAMS under Accession Nos. ML17254A127 and ML17254A128, respectively. A summary of the amendment documents is provided in Section III of this document.
Reproduced below is the exemption document issued to VEGP Units 3 and Unit 4. It makes reference to the combined safety evaluation that provides the reasoning for the findings made by the NRC (and listed under Item 1) in order to grant the exemption:
1. In a letter dated August 30, 2016, as supplemented by letter dated March 14, 2017, Southern Nuclear Operating Company, Inc., (licensee) requested from the Nuclear Regulatory Commission (NRC or Commission) an exemption to allow departures from Tier 1 information in the certified Design Control Document (DCD) incorporated by reference in 10 CFR part 52, appendix D, “Design Certification Rule for AP1000 Design,” as part of license amendment request (LAR) 16-019, “Slab Thickness Changes between Column Lines I to J-1 and 2 to 4 at Elevation 153′-0″.”
For the reasons set forth in Section 3.1 of the NRC staff's Safety Evaluation that supports this license amendment, which can be found at ADAMS Accession Number ML17254A129, the Commission finds that:
A. The exemption is authorized by law;
B. the exemption presents no undue risk to public health and safety;
C. the exemption is consistent with the common defense and security;
D. special circumstances are present in that the application of the rule in this circumstance is not necessary to serve the underlying purpose of the rule;
E. the special circumstances outweigh any decrease in safety that may result from the reduction in standardization caused by the exemption; and
F. the exemption will not result in a significant decrease in the level of safety otherwise provided by the design.
2. Accordingly, the licensee is granted an exemption from the certified DCD Tier 1 information, as described in the licensee's request dated August 30, 2016, as supplemented by letter dated March 14, 2017. This exemption is related to, and necessary for, the granting of License Amendments No. 89 and 88, which is being issued concurrently with this exemption.
3. As explained in Section 5 of the NRC staff's Safety Evaluation that supports this license amendment (ADAMS Accession Number ML17254A129), this exemption meets the eligibility criteria for categorical exclusion set forth in 10 CFR 51.22(c)(9). Therefore, pursuant to 10 CFR 51.22(b), no environmental impact statement or environmental assessment needs to be prepared in connection with the issuance of the exemption.
4. This exemption is effective as of the date of its issuance.
By letter dated August 30, 2016, as supplemented by letter dated March 14, 2017 (ADAMS Accession Nos. ML16243A373 and ML17007A159, respectively), the licensee requested that the NRC amend the COLs for VEGP, Units 3 and 4, COLs NPF-91 and NPF-92. The proposed amendment is described in Section I of this
The Commission has determined for these amendments that the application complies with the standards and requirements of the Atomic Energy Act of 1954, as amended (the Act), and the Commission's rules and regulations. The Commission has made appropriate findings as required by the Act and the Commission's rules and regulations in 10 CFR Chapter I, which are set forth in the license amendment.
A notice of consideration of issuance of amendment to facility operating license or COL, as applicable, proposed no significant hazards consideration determination, and opportunity for a hearing in connection with these actions, was published in the
The Commission has determined that these amendments satisfy the criteria for categorical exclusion in accordance with 10 CFR 51.22. Therefore, pursuant to 10 CFR 51.22(b), no environmental impact statement or environmental assessment need be prepared for these amendments.
Using the reasons set forth in the combined safety evaluation, the staff granted the exemption and issued the amendment that the licensee requested on August 30, 2016, and supplemented by letter dated March 14, 2017. The exemption and amendment were issued on October 6, 2017, as part of a combined package to the licensee (ADAMS Accession No. ML17254A125).
For the Nuclear Regulatory Commission.
Postal Regulatory Commission.
Notice.
The Postal Service has filed an Annual Compliance Report on the costs, revenues, rates, and quality of service associated with its products in fiscal year 2017. Within 90 days, the Commission must evaluate that information and issue its determination as to whether rates were in compliance, and whether service standards in effect were met. To assist in this, the Commission seeks public comments on the Postal Service's Annual Compliance Report.
Submit comments electronically via the Commission's Filing Online system at
David A. Trissell, General Counsel, at 202-789-6820.
On December 29, 2017, the United States Postal Service (Postal Service) filed with the Commission its Annual Compliance Report (ACR) for fiscal year (FY) 2017, pursuant to 39 U.S.C. 3652.
The filing begins a review process that results in an Annual Compliance Determination (ACD) issued by the Commission to determine whether Postal Service products offered during FY 2017 were in compliance with applicable title 39 requirements.
The FY 2017 ACR includes a discussion by class of each market dominant product, including costs, revenues, and volumes, workshare discounts, and passthroughs responsive to 39 U.S.C. 3652(b), and FY 2017 incentive programs.
In response to the Commission's FY 2010 ACD directives,
The Commission also invites public comment on the cost coverage matters the Postal Service addresses in its filing; service performance results; levels of customer satisfaction achieved; and such other matters that may be relevant to the Commission's review.
1. The Commission establishes Docket No. ACR2017 to consider matters raised by the United States Postal Service's FY 2017 Annual Compliance Report.
2. Pursuant to 39 U.S.C. 505, the Commission appoints Mallory L. Smith as an officer of the Commission (Public Representative) in this proceeding to represent the interests of the general public.
3. Comments on the United States Postal Service's FY 2017 Annual Compliance Report to the Commission are due on or before February 1, 2018.
4. Reply comments are due on or before February 12, 2018.
5. The Secretary shall arrange for publication of this order in the
By the Commission.
On September 20, 2017, Nasdaq PHLX LLC (“Phlx” or “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 15, 2017, pursuant to Section 19(b)(2) of the Act,
On December 22, 2017, the Exchange withdrew the proposed rule change (SR-PHLX-2017-74).
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 proposed rule change would (1) adopt the Recovery & Wind-down Plan of NSCC (“R&W Plan” or “Plan”); and (2) amend NSCC's Rules & Procedures (“Rules”)
The R&W Plan would be maintained by NSCC in compliance with Rule 17Ad-22(e)(3)(ii) under the Act, by providing plans for the recovery and orderly wind-down of NSCC necessitated by credit losses, liquidity shortfalls, losses from general business risk, or any other losses, as described below.
In its filing with the Commission, the clearing agency included statements concerning the purpose of and basis for
NSCC is proposing to adopt the R&W Plan to be used by the Board and management of NSCC in the event NSCC encounters scenarios that could potentially prevent it from being able to provide its critical services as a going concern. The R&W Plan would identify (i) the recovery tools available to NSCC to address the risks of (a) uncovered losses or liquidity shortfalls resulting from the default of one or more Members, and (b) losses arising from non-default events, such as damage to its physical assets, a cyber-attack, or custody and investment losses, and (ii) the strategy for implementation of such tools. The R&W Plan would also establish the strategy and framework for the orderly wind-down of NSCC and the transfer of its business in the remote event the implementation of the available recovery tools does not successfully return NSCC to financial viability.
As discussed in greater detail below, the R&W Plan would provide, among other matters, (i) an overview of the business of NSCC and its parent, The Depository Trust & Clearing Corporation (“DTCC”); (ii) an analysis of NSCC's intercompany arrangements and critical links to other financial market infrastructures (“FMIs”); (iii) a description of NSCC's services, and the criteria used to determine which services are considered critical; (iv) a description of the NSCC and DTCC governance structure; (v) a description of the governance around the overall recovery and wind-down program; (vi) a discussion of tools available to NSCC to mitigate credit/market and liquidity risks, including recovery indicators and triggers, and the governance around management of a stress event along a “Crisis Continuum” timeline; (vii) a discussion of potential non-default losses and the resources available to NSCC to address such losses, including recovery triggers and tools to mitigate such losses; (viii) an analysis of the recovery tools' characteristics, including how they are comprehensive, effective, and transparent, how the tools provide appropriate incentives to Members to, among other things, control and monitor the risks they may present to NSCC, and how NSCC seeks to minimize the negative consequences of executing its recovery tools; and (ix) the framework and approach for the orderly wind-down and transfer of NSCC's business, including an estimate of the time and costs to effect a recovery or orderly wind-down of NSCC.
The R&W Plan would be structured as a roadmap, and would identify and describe the tools that NSCC may use to effect a recovery from the events and scenarios described therein. Certain recovery tools that would be identified in the R&W Plan are based in the Rules (including the Proposed Rules) and, as such, descriptions of those tools would include descriptions of, and reference to, the applicable Rules and any related internal policies and procedures. Other recovery tools that would be identified in the R&W Plan are based in contractual arrangements to which NSCC is a party, including, for example, existing committed or pre-arranged liquidity arrangements. Further, the R&W Plan would state that NSCC may develop further supporting internal guidelines and materials that may provide operationally for matters described in the Plan, and that such documents would be supplemental and subordinate to the Plan.
Key factors considered in developing the R&W Plan and the types of tools available to NSCC were its governance structure and the nature of the markets within which NSCC operates. As a result of these considerations, many of the tools available to NSCC that would be described in the R&W Plan are NSCC's existing, business-as-usual risk management and default management tools, which would continue to be applied in scenarios of increasing stress. In addition to these existing, business-as-usual tools, the R&W Plan would describe NSCC's other principal recovery tools, which include, for example, (i) identifying, monitoring and managing general business risk and holding sufficient liquid net assets funded by equity (“LNA”) to cover potential general business losses pursuant to the Clearing Agency Policy on Capital Requirements (“Capital Policy”),
The development of the R&W Plan is facilitated by the Office of Recovery & Resolution Planning (“R&R Team”) of DTCC.
As discussed in greater detail below, the Proposed Rules would define the procedures that may be employed in the event of NSCC's default and its wind-down, and would provide for NSCC's authority to take certain actions on the occurrence of a “Market Disruption Event,” as defined therein. Significantly, the Proposed Rules would provide Members and Limited Members with transparency and certainty with respect to these matters. The Proposed Rules would facilitate the implementation of the R&W Plan, particularly NSCC's strategy for winding down and transferring its business, and would provide NSCC with the legal basis to implement those aspects of the R&W Plan.
The R&W Plan is intended to be used by the Board and NSCC's management in the event NSCC encounters scenarios that could potentially prevent it from
The introduction to the R&W Plan would identify the document's purpose and its regulatory background, and would outline a summary of the Plan. The stated purpose of the R&W Plan is that it is to be used by the Board and NSCC management in the event NSCC encounters scenarios that could potentially prevent it from being able to provide its critical services as a going concern. The R&W Plan would be maintained by NSCC in compliance with Rule 17Ad-22(e)(3)(ii) under the Act
The R&W Plan would describe DTCC's business profile, provide a summary of NSCC's services, and identify the intercompany arrangements and links between NSCC and other entities, including other FMIs. This overview section would provide a context for the R&W Plan by describing NSCC's business, organizational structure and critical links to other entities. By providing this context, this section would facilitate the analysis of the potential impact of utilizing the recovery tools set forth in later sections of the Recovery Plan, and the analysis of the factors that would be addressed in implementing the Wind-down Plan.
DTCC is a user-owned and user-governed holding company and is the parent company of NSCC and its affiliates, The Depository Trust Company (“DTC”) and Fixed Income Clearing Corporation (“FICC”, and, together with NSCC and DTC, the “Clearing Agencies”). The Plan would describe how corporate support services are provided to NSCC from DTCC and DTCC's other subsidiaries through intercompany agreements under a shared services model.
The Plan would provide a description of established links between NSCC and other FMIs, including The Options Clearing Corporation (“OCC”), CDS Clearing and Depository Services Inc. (“CDS”), and DTC. For example, the arrangement between NSCC and OCC governs the process by which OCC submits transactions to NSCC for settlement, and sets the time when the settlement obligations and the central counterparty trade guaranty shifts from OCC to NSCC with respect to these transactions.
The Plan would define the criteria for classifying certain of NSCC's services as “critical,” and would identify those critical services and the rationale for their classification. This section would provide an analysis of the potential systemic impact from a service disruption, and is important for evaluating how the recovery tools and the wind-down strategy would facilitate and provide for the continuation of NSCC's critical services to the markets it serves. The criteria that would be used to identify an NSCC service or function as critical would include consideration as to (1) whether there is a lack of alternative providers or products; (2) whether failure of the service could impact NSCC's ability to perform its central counterparty services; (3) whether failure of the service could impact NSCC's ability to perform its netting services, and, as such, the availability of market liquidity; and (4) whether the service is interconnected with other participants and processes within the U.S. financial system, for example, with other FMIs, settlement banks, broker-dealers, and exchanges. The Plan would then list each of those services, functions or activities that NSCC has identified as “critical” based on the applicability of these four criteria. Such critical services would include, for example, trade capture and recording through the Universal Trade Capture system,
The evaluation of which services provided by NSCC are deemed critical is important for purposes of determining how the R&W Plan would facilitate the continuity of those services. As discussed further below, while NSCC's Wind-down Plan would provide for the transfer of all critical services to a transferee in the event NSCC's wind-down is implemented, it would anticipate that any non-critical services that are ancillary and beneficial to a critical service, or that otherwise have substantial user demand from the continuing membership, would also be transferred.
The Plan would describe the governance structure of both DTCC and NSCC. This section of the Plan would identify the ownership and governance model of these entities at both the Board of Directors and management levels. The Plan would state that the stages of escalation required to manage recovery under the Recovery Plan or to invoke NSCC's wind-down under the Wind-down Plan would range from relevant business line managers up to the Board through NSCC's governance structure. The Plan would then identify the parties
The Plan would describe the governance of recovery efforts in response to both default losses and non-default losses under the Recovery Plan, identifying the groups responsible for those recovery efforts. Specifically, the Plan would state that the Management Risk Committee provides oversight of actions relating to the default of a Member, which would be reported and escalated to it through the GCRO, and the Management Committee provides oversight of actions relating to non-default events that could result in a loss, which would be reported and escalated to it from the DTCC Chief Financial Officer (“CFO”) and the DTCC Treasury group that reports to the CFO, and from other relevant subject matter experts based on the nature and circumstances of the non-default event.
Finally, the Plan would describe the role of the R&R Team in managing the overall recovery and wind-down program and plans for each of the Clearing Agencies.
The Recovery Plan is intended to be a roadmap of those actions that NSCC may employ to monitor and, as needed, stabilize its financial condition. As each event that could lead to a financial loss could be unique in its circumstances, the Recovery Plan would not be prescriptive and would permit NSCC to maintain flexibility in its use of identified tools and in the sequence in which such tools are used, subject to any conditions in the Rules or the contractual arrangement on which such tool is based. NSCC's Recovery Plan would consist of (1) a description of the risk management surveillance, tools, and governance that NSCC would employ across evolving stress scenarios that it may face as it transitions through a “Crisis Continuum,” described below; (2) a description of NSCC's risk of losses that may result from non-default events, and the financial resources and recovery tools available to NSCC to manage those risks and any resulting losses; and (3) an evaluation of the characteristics of the recovery tools that may be used in response to either default losses or non-default losses, as described in greater detail below. In all cases, NSCC would act in accordance with the Rules, within the governance structure described in the R&W Plan, and in accordance with applicable regulatory oversight to address each situation in order to best protect NSCC, Members, and the markets in which it operates.
The Recovery Plan would provide context to its roadmap through this Crisis Continuum by describing NSCC's ongoing management of credit, market and liquidity risk, and its existing process for measuring and reporting its risks as they align with established thresholds for its tolerance of those risks. The Recovery Plan would discuss the management of credit/market risk and liquidity exposures together, because the tools that address these risks can be deployed either separately or in a coordinated approach in order to address both exposures. NSCC manages these risk exposures collectively to limit their overall impact on NSCC and its membership. As part of its market risk management strategy, NSCC manages its credit exposure to Members by determining the appropriate Required Deposits to the Clearing Fund and monitoring its sufficiency, as provided for in the Rules.
The Recovery Plan would outline the metrics and indicators that NSCC has developed to evaluate a stress situation against established risk tolerance thresholds. Each risk mitigation tool identified in the Recovery Plan would include a description of the escalation thresholds that allow for effective and timely reporting to the appropriate internal management staff and committees, or to the Board. The Recovery Plan would make clear that these tools and escalation protocols would be calibrated across each phase of the Crisis Continuum. The Recovery Plan would also establish that NSCC would retain the flexibility to deploy such tools either separately or in a coordinated approach, and to use other alternatives to these actions and tools as necessitated by the circumstances of a particular Member default, in accordance with the Rules. Therefore, the Recovery Plan would both provide NSCC with a roadmap to follow within each phase of the Crisis Continuum, and would permit it to adjust its risk management measures to address the unique circumstances of each event.
The Recovery Plan would describe the conditions that mark each phase of the Crisis Continuum, and would identify actions that NSCC could take as it transitions through each phase in order to both prevent losses from materializing through active risk management, and to restore the financial health of NSCC during a period of stress.
The “stable market phase” of the Crisis Continuum would describe active risk management activities in the normal course of business. These activities would include (1) routine monitoring of margin adequacy through daily review of back testing and stress testing results that review the adequacy of NSCC's margin calculations, and escalation of those results to internal and Board committees;
The Recovery Plan would describe some of the indicators of the “stressed market phase” of the Crisis Continuum, which would include, for example, volatility in market prices of certain assets where there is increased uncertainty among market participants about the fundamental value of those assets. This phase would involve general market stresses, when no Member default would be imminent. Within the description of this phase, the Recovery Plan would provide that NSCC may take targeted, routine risk management measures as necessary and as permitted by the Rules.
Within the “Member default phase” of the Crisis Continuum, the Recovery Plan would provide a roadmap for the existing procedures that NSCC would follow in the event of a Member default and any decision by NSCC to cease to act for that Member.
The Recovery Plan would also identify financial resources available to NSCC, pursuant to the Rules, to address losses arising out of a Member default. Specifically, Rule 4, as proposed to be amended by the Loss Allocation Filing, would provide that losses be satisfied first by applying a “Corporate Contribution,” and then, if necessary, by allocating remaining losses to non-defaulting Members.
The “recovery phase” of the Crisis Continuum would describe actions that NSCC may take to avoid entering into a wind-down of its business. In order to provide for an effective and timely recovery, the Recovery Plan would describe two stages of this phase: (1) A recovery corridor, during which NSCC may experience stress events or observe early warning indicators that allow it to evaluate its options and prepare for the recovery phase; and (2) the recovery phase, which would begin on the date that NSCC issues the first Loss Allocation Notice of the second loss allocation round with respect to a given “Event Period.”
NSCC expects that significant deterioration of liquidity resources would cause it to enter the recovery corridor stage of this phase, and, as such, the actions it may take at this stage would be aimed at replenishing those resources. Circumstances that could cause it to enter the recovery corridor may include, for example, a rapid and material change in market prices or substantial intraday activity volume by the defaulting Member, neither of which are mitigated by intraday margin calls, or subsequent defaults by other Members or Affiliated Families during a compressed time
The majority of the Corridor Indicators, as identified in the Recovery Plan, relate directly to conditions that may require NSCC to adjust its strategy for hedging and liquidating a defaulting Member's portfolio, and any such changes would include an assessment of the status of the Corridor Indicators. Corridor Indicators would include, for example, effectiveness and speed of NSCC's efforts to close out the portfolio of the defaulting Member, and an impediment to the availability of its financial resources. For each Corridor Indicator, the Recovery Plan would identify (1) measures of the indicator, (2) evaluations of the status of the indicator, (3) metrics for determining the status of the deterioration or improvement of the indicator, and (4) “Corridor Actions,” which are steps that may be taken to improve the status of the indicator,
The Recovery Plan would also describe the reporting and escalation of the status of the Corridor Indicators throughout the recovery corridor. Significant deterioration of a Corridor Indicator, as measured by the metrics set out in the Recovery Plan, would be escalated to the Board. NSCC management would review the Corridor Indicators and the related metrics at least annually, and would modify these metrics as necessary in light of observations from simulations of Member defaults and other analyses. Any proposed modifications would be reviewed by the Management Risk Committee and the Board Risk Committee. The Recovery Plan would estimate that NSCC may remain in the recovery corridor stage between one day and two weeks. This estimate is based on historical data observed in past Member defaults, the results of simulations of Member defaults, and periodic liquidity analyses conducted by NSCC. The actual length of a recovery corridor would vary based on actual market conditions observed on the date and time NSCC enters the recovery corridor stage of the Crisis Continuum, and NSCC would expect the recovery corridor to be shorter in market conditions of increased stress.
The Recovery Plan would outline steps by which NSCC may allocate its losses, and would state that the available tools related to allocation of losses would only be used in this and subsequent phases of the Crisis Continuum.
As stated above, the Recovery Plan would state that NSCC will have entered the recovery phase on the date that it issues the first Loss Allocation Notice of the second loss allocation round with respect to a given Event Period. The Recovery Plan would provide that, during the recovery phase, NSCC would continue and, as needed, enhance, the monitoring and remedial actions already described in connection with previous phases of the Crisis Continuum, and would remain in the recovery phase until its financial resources are expected to be or are fully replenished, or until the Wind-down Plan is triggered, as described below.
The Recovery Plan would describe governance for the actions and tools that may be employed within the Crisis Continuum, which would be dictated by the facts and circumstances applicable to the situation being addressed. Such facts and circumstances would be measured by the Corridor Indicators applicable to that phase of the Crisis Continuum, and, in most cases, by the measures and metrics that are assigned to those Corridor Indicators, as described above. Each of these indicators would have a defined review period and escalation protocol that would be described in the Recovery Plan. The Recovery Plan would also describe the governance procedures around a decision to cease to act for a Member, pursuant to the Rules, and around the management and oversight of the subsequent liquidation of the defaulting Member's portfolio. The Recovery Plan would state that, overall, NSCC would retain flexibility in accordance with the Rules, its governance structure, and its regulatory oversight, to address a particular situation in order to best protect NSCC and the Members, and to meet the primary objectives, throughout the Crisis Continuum, of minimizing losses and, where consistent and practicable, minimizing disturbance to affected markets.
The Plan would identify the two categories of financial resources NSCC maintains to cover losses and expenses arising from non-default risks or events as (1) LNA, maintained, monitored, and managed pursuant to the Capital Policy, which include (a) amounts held in satisfaction of the General Business Risk Capital Requirement,
The Plan would address the process by which the CFO and the DTCC Treasury group would determine which available LNA resources are most appropriate to cover a loss that is caused by a non-default event. This determination involves an evaluation of a number of factors, including the current and expected size of the loss, the expected time horizon over when the loss or additional expenses would materialize, the current and projected available LNA, and the likelihood LNA could be successfully replenished pursuant to the Replenishment Plan, if triggered.
The Plan would also describe proposed Rule 60 (Market Disruption and Force Majeure), which NSCC is proposing to adopt in the Rules. This Proposed Rule would provide transparency around how NSCC would address extraordinary events that may occur outside its control. Specifically, the Proposed Rule would define a “Market Disruption Event” and the governance around a determination that such an event has occurred. The Proposed Rule would also describe NSCC's authority to take actions during the pendency of a Market Disruption Event that it deems appropriate to address such an event and facilitate the continuation of its services, if practicable, as described in greater detail below.
The Plan would describe the interaction between the Proposed Rule and NSCC's existing processes and procedures addressing business continuity management and disaster recovery (generally, the “BCM/DR procedures”), making clear that the Proposed Rule is designed to support those BCM/DR procedures and to address circumstances that may be exogenous to NSCC and not necessarily addressed by the BCM/DR procedures. Finally, the Plan would describe that, because the operation of the Proposed Rule is specific to each applicable Market Disruption Event, the Proposed Rule does not define a time limit on its application. However, the Plan would note that actions authorized by the Proposed Rule would be limited to the pendency of the applicable Market Disruption Event, as made clear in the Proposed Rule. Overall, the Proposed Rule is designed to mitigate risks caused by Market Disruption Events and, thereby, minimize the risk of financial loss that may result from such events.
The Wind-down Plan would provide the framework and strategy for the orderly wind-down of NSCC if the use of the recovery tools described in the Recovery Plan do not successfully return NSCC to financial viability. While NSCC believes that, given the comprehensive nature of the recovery tools, such event is extremely unlikely, as described in greater detail below, NSCC is proposing a wind-down strategy that provides for (1) the transfer of NSCC's business, assets and membership to another legal entity, (2) such transfer being effected in connection with proceedings under Chapter 11 of the U.S. Federal Bankruptcy Code,
In describing the transfer approach to NSCC's Wind-down Plan, the Plan would identify the factors that NSCC considered in developing this approach, including the fact that NSCC does not own material assets that are unrelated to its clearance and settlement activities. As such, a business reorganization or “bail-in” of debt approach would be unlikely to mitigate significant losses. Additionally, NSCC's approach was developed in consideration of its critical and unique position in the U.S. markets, which precludes any approach that would cause NSCC's critical services to no longer be available.
First, the Wind-down Plan would describe the potential scenarios that could lead to the wind-down of NSCC, and the likelihood of such scenarios. The Wind-down Plan would identify the time period leading up to a decision to wind-down NSCC as the “Runway Period.” This period would follow the implementation of any recovery tools, as it may take a period of time, depending on the severity of the market stress at that time, for these tools to be effective or for NSCC to realize a loss sufficient to cause it to be unable to effectuate settlements and repay its obligations.
The trigger for implementing the Wind-down Plan would be a determination by the Board that recovery efforts have not been, or are unlikely to be, successful in returning NSCC to viability as a going concern. As described in the Plan, NSCC believes this is an appropriate trigger because it is both broad and flexible enough to cover a variety of scenarios, and would align incentives of NSCC and the Members to avoid actions that might undermine NSCC's recovery efforts. Additionally, this approach takes into account the characteristics of NSCC's recovery tools and enables the Board to consider (1) the presence of indicators of a successful or unsuccessful recovery, and (2) potential for knock-on effects of continued iterative application of NSCC's recovery tools.
The Wind-down Plan would describe the general objectives of the transfer strategy, and would address assumptions regarding the transfer of NSCC's critical services, business, assets and membership, and the assignment of NSCC's links with other FMIs, to another legal entity that is legally, financially, and operationally able to provide NSCC's critical services to entities that wish to continue their membership following the transfer (“Transferee”). The Wind-down Plan would provide that the Transferee would be either (1) a third party legal entity, which may be an existing or newly established legal entity or a bridge entity formed to operate the business on an interim basis to enable the business to be transferred subsequently (“Third Party Transferee”); or (2) an existing, debt-free failover legal entity established ex-ante by DTCC (“Failover Transferee”) to be used as an alternative Transferee in the event that no viable or preferable Third Party Transferee timely commits to acquire NSCC's business. NSCC would seek to identify the proposed Transferee, and negotiate and enter into transfer arrangements during the Runway Period and prior to making any filings under Chapter 11 of the U.S. Federal Bankruptcy Code.
In order to effect a timely transfer of its services and minimize the market and operational disruption of such transfer, NSCC would expect to transfer all of its critical services and any non-critical services that are ancillary and beneficial to a critical service, or that otherwise have substantial user demand from the continuing membership. Following the transfer, the Wind-down Plan would anticipate that the Transferee and its continuing membership would determine whether to continue to provide any transferred non-critical service on an ongoing basis, or terminate the non-critical service following some transition period. NSCC's Wind-down Plan would anticipate that the Transferee would enter into a transition services agreement with DTCC so that DTCC would continue to provide the shared services it currently provides to NSCC, including staffing, infrastructure and operational support. The Wind-down Plan would also anticipate the assignment of NSCC's link arrangements, including those with DTC, CDS and OCC, described above, to the Transferee.
The Wind-down Plan would provide that, following the effectiveness of the transfer to the Transferee, the wind-down of NSCC would involve addressing any residual claims against NSCC through the bankruptcy process and liquidating the legal entity. As such, and as stated above, the Wind-down Plan does not contemplate NSCC continuing to provide services in any capacity following the transfer time, and any services not transferred would be terminated. The Wind-down Plan would also identify the key dependencies for the effectiveness of the transfer, which include regulatory approvals that would permit the Transferee to be legally qualified to provide the transferred services from and after the transfer, and approval by the applicable bankruptcy court of, among other things, the proposed sale, assignments, and transfers to the Transferee.
The Wind-down Plan would address governance matters related to the execution of the transfer of NSCC's business and its wind-down. The Wind-down Plan would address the duties of the Board to execute the wind-down of NSCC in conformity with (1) the Rules, (2) the Board's fiduciary duties, which mandate that it exercise reasonable business judgment in performing these duties, and (3) NSCC's regulatory obligations under the Act as a registered clearing agency. The Wind-down Plan would also identify certain factors the Board may consider in making these decisions, which would include, for example, whether NSCC could safely stabilize the business and protect its value without seeking bankruptcy protection, and NSCC's ability to continue to meet its regulatory requirements.
The Wind-down Plan would describe (1) actions NSCC or DTCC may take to prepare for wind-down in the period
Finally, the Wind-down Plan would include an analysis of the estimated time and costs to effectuate the plan, and would provide that this estimate be reviewed and approved by the Board annually. In order to estimate the length of time it might take to achieve a recovery or orderly wind-down of NSCC's critical operations, as contemplated by the R&W Plan, the Wind-down Plan would include an analysis of the possible sequencing and length of time it might take to complete an orderly wind-down and transfer of critical operations, as described in earlier sections of the R&W Plan. The Wind-down Plan would also include in this analysis consideration of other factors, including the time it might take to complete any further attempts at recovery under the Recovery Plan. The Wind-down Plan would then multiply this estimated length of time by NSCC's average monthly operating expenses, including adjustments to account for changes to NSCC's profit and expense profile during these circumstances, over the previous twelve months to determine the amount of LNA that it should hold to achieve a recovery or orderly wind-down of NSCC's critical operations. The estimated wind-down costs would constitute the “Recovery/Wind-down Capital Requirement” under the Capital Policy.
The R&W Plan is designed as a roadmap, and the types of actions that may be taken both leading up to and in connection with implementation of the Wind-down Plan would be primarily addressed in other supporting documentation referred to therein.
The Wind-down Plan would address proposed Rule 41 (Corporation Default) and proposed Rule 42 (Wind-down of the Corporation), which would be adopted to facilitate the implementation of the Wind-down Plan, and are discussed below.
In connection with the adoption of the R&W Plan, NSCC is proposing to adopt the Proposed Rules, each described below. The Proposed Rules would facilitate the execution of the R&W Plan and would provide Members and Limited Members with transparency as to critical aspects of the Plan, particularly as they relate to the rights and responsibilities of both NSCC and Members. The Proposed Rules also provide a legal basis to these aspects of the Plan.
The proposed Rule 41 (“Corporation Default Rule”) would provide a mechanism for the termination, valuation and netting of unsettled, guaranteed CNS transactions in the event NSCC is unable to perform its obligations or otherwise suffers a defined event of default, such as entering insolvency proceedings. The proposed Corporation Default Rule would provide Members with transparency and certainty regarding what would happen if NSCC were to fail (defined in the proposed Rule as a “Corporation Default”).
The proposed rule would define the events that would constitute a Corporation Default, which would generally include (1) the failure of NSCC to make any undisputed payment or delivery to a Member if such failure is not remedied within seven days after notice of such failure is given to NSCC; (2) NSCC is dissolved; (3) NSCC institutes a proceeding seeking a judgment of insolvency or bankruptcy, or a proceeding is instituted against it seeking a judgment of bankruptcy or insolvency and such judgment is entered; or (4) NSCC seeks or becomes subject to the appointment of a receiver, trustee or similar official pursuant to the federal securities laws or Title II of the Dodd-Frank Wall Street Reform and Consumer Protection Act
Upon a Corporation Default, the proposed Corporation Default Rule would provide that all unsettled, guaranteed CNS transactions would be terminated and, no later than forty-five days from the date on which the event that constitutes a Corporation Default occurred (or “Default Date”), the Board would determine a single net amount owed by or to each Member with respect to such transactions pursuant to the valuation procedures set forth in the Proposed Rule. Essentially, for each affected position in a CNS Security, the “CNS Market Value” would be determined by using the Current Market Price for that security as determined in the CNS System as of the close of business on the next Business Day following the Default Date. NSCC would determine a “Net Contract Value” for each Member's net unsettled long or short position in a CNS Security by netting the Member's (i) contract price for such net position that, as of the Default Date, has not yet passed the Settlement Date, and (ii) the Current Market Price in the CNS System on the Default Date for its fail positions. To determine each Member's “CNS Close-out Value,” (i) the Net Contract Value for each CUSIP would be subtracted from the CNS Market Value for such CUSIP, and (ii) the resulting difference for all CUSIPS in which the Member had a net long or short position would be summed, and would be netted and offset against any other amounts that may be due to or owing from the Member under the Rules. The proposed Corporation Default Rule would provide for notification to each Member of its CNS Close-out Value, and would also address interpretation of the Rules in relation to certain terms that are defined in the Federal Deposit Insurance Corporation Improvement Act of 1991 (“FDICIA”).
NSCC believes this valuation approach, which is comparable to the approach adopted by other central counterparties, is appropriate for NSCC given the market in which NSCC operates and the volumes of transactions it processes in CNS, because it would provide for a common, clear and transparent valuation methodology and price per CUSIP applicable to all affected Members.
The proposed Rule 42 (“Wind-down Rule”) would be adopted to facilitate the execution of the Wind-down Plan. The Wind-down Rule would include a proposed set of defined terms that would be applicable only to the provisions of this Proposed Rule. The Wind-down Rule would make clear that a wind-down of NSCC's business would occur (1) after a decision is made by the Board, and (2) in connection with the transfer of NSCC's services to a Transferee, as described therein. Generally, the proposed Wind-down Rule is designed to create clear mechanisms for the transfer of Eligible Members, Eligible Limited Members, and Settling Banks (as these terms would be defined in the Wind-down
The Proposed Rule would make clear, however, that NSCC would not accept any transactions for processing after the Last Transaction Acceptance Date or which are designated to settle after the Last Settlement Date. Any transactions to be processed and/or settled after the Transfer Time would be required to be submitted to the Transferee, and would not be NSCC's responsibility.
The proposed Wind-down Rule would address other ex-ante matters including provisions providing that Members, Limited Members and Settling Banks (1) will assist and cooperate with NSCC to effectuate the transfer of NSCC's business to a Transferee, (2) consent to the provisions of the rule, and (3) grant NSCC power of attorney to execute and deliver on their behalf documents and instruments that may be requested by the Transferee. Finally, the Proposed Rule would include a limitation of liability for any actions taken or omitted to be taken by NSCC pursuant to the Proposed Rule.
The proposed Rule 60 (“Force Majeure Rule”) would address NSCC's authority to take certain actions upon the occurrence, and during the pendency, of a “Market Disruption Event,” as defined therein. The Proposed Rule is designed to clarify NSCC's ability to take actions to address extraordinary events outside of the control of NSCC and of its membership, and to mitigate the effect of such events by facilitating the continuity of services (or, if deemed necessary, the temporary suspension of services). To that end, under the proposed Force Majeure Rule, NSCC would be entitled, during the pendency of a Market Disruption Event, to (1) suspend the provision of any or all services, and (2) take, or refrain from taking, or require Members and Limited Members to take, or refrain from taking, any actions it considers appropriate to address, alleviate, or mitigate the event and facilitate the continuation of NSCC's services as may be practicable.
The proposed Force Majeure Rule would identify the events or circumstances that would be considered a “Market Disruption Event,” including, for example, events that lead to the suspension or limitation of trading or banking in the markets in which NSCC operates, or the unavailability or failure of any material payment, bank transfer, wire or securities settlement systems. The proposed Force Majeure Rule would define the governance procedures for how NSCC would determine whether, and how, to implement the provisions of the rule. A determination that a Market Disruption Event has occurred would generally be made by the Board, but the Proposed Rule would provide for limited, interim delegation of authority to a specified officer or management committee if the Board would not be able to take timely action. In the event such delegated authority is exercised, the proposed Force Majeure Rule would require that the Board be convened as promptly as practicable, no later than five Business Days after such determination has been made, to ratify, modify, or rescind the action. The proposed Force Majeure Rule would also provide for prompt notification to the Commission, and advance consultation with Commission staff, when practicable. The Proposed Rule would require Members and Limited Members to notify NSCC immediately upon becoming aware of a Market Disruption Event, and, likewise, would require NSCC to notify Members and Limited Members if it has triggered the Proposed Rule.
Finally, the Proposed Rule would address other related matters, including a limitation of liability for any failure or delay in performance, in whole or in part, arising out of the Market Disruption Event.
In order to align the order of the Proposed Rules with the order of comparable rules in the rulebooks of the other Clearing Agencies, NSCC is also proposing to re-number the current Rule 42 (Wind-down of a Member, Fund Member or Insurance Carrier/Retirement Services Member) to Rule 40, which is currently reserved for future use, as shown on Exhibit 5b, hereto.
NSCC believes that the proposal is consistent with the requirements of the Act and the rules and regulations thereunder applicable to a registered clearing agency. In particular, NSCC believes that the R&W Plan, each of the Proposed Rules, and the proposed change to Rule numbers are consistent with Section 17A(b)(3)(F) of the Act,
Section 17A(b)(3)(F) of the Act requires, in part, that the rules of NSCC be designed to promote the prompt and accurate clearance and settlement of securities transactions, and to assure the safeguarding of securities and funds which are in the custody or control of NSCC or for which it is responsible.
The Wind-down Plan and the proposed Corporation Default Rule and Wind-down Rule, which would both facilitate the implementation of the Wind-down Plan, would also promote the prompt and accurate clearance and settlement of securities transactions and assure the safeguarding of securities and funds which are in the custody or control of NSCC or for which it is responsible. The Wind-down Plan and the proposed Corporation Default Rule and Wind-down Rule would collectively establish a framework for the transfer and orderly wind-down of NSCC's business. These proposals would establish clear mechanisms for the transfer of NSCC's critical services and membership, and for the treatment of open, guaranteed CNS transactions in the event of NSCC's default. By doing so, the Wind-down Plan and these Proposed Rules are designed to facilitate the continuity of NSCC's critical services and enable Members and Limited Members to maintain access to NSCC's services through the transfer of its membership in the event NSCC defaults or the Wind-down Plan is triggered by the Board. Therefore, by facilitating the continuity of NSCC's critical clearance and settlement services, NSCC believes the proposals would promote the prompt and accurate clearance and settlement of securities transactions. Further, by creating a framework for the transfer and orderly wind-down of NSCC's business, NSCC believes the proposals would enhance the safeguarding of securities and funds which are in the custody or control of NSCC or for which it is responsible.
Finally, the proposed change to the Rule numbers would align the order of the Proposed Rules with the order of comparable rules in the rulebooks of the other Clearing Agencies. Therefore, NSCC believes the proposed change would create ease of reference, particularly for Members that are also participants of the other Clearing Agencies, and, as such, would assist in promoting the prompt and accurate clearance and settlement of securities transactions.
Therefore, NSCC believes the R&W Plan, each of the Proposed Rules, and the proposed change to Rule numbers are consistent with the requirements of Section 17A(b)(3)(F) of the Act.
Rule 17Ad-22(e)(3)(ii) under the Act requires NSCC to establish, implement, maintain and enforce written policies and procedures reasonably designed to maintain a sound risk management framework for comprehensively managing legal, credit, liquidity, operational, general business, investment, custody, and other risks that arise in or are borne by the covered clearing agency, which includes plans for the recovery and orderly wind-down of the covered clearing agency necessitated by credit losses, liquidity shortfalls, losses from general business risk, or any other losses.
The R&W Plan would be maintained by NSCC in compliance with Rule 17Ad-22(e)(3)(ii) in that it provides plans for the recovery and orderly wind-down of NSCC necessitated by credit losses, liquidity shortfalls, losses from general business risk, or any other losses, as described above.
The Wind-down Plan would be triggered by a determination by the Board that recovery efforts have not been, or are unlikely to be, successful in returning NSCC to viability as a going concern. Once triggered, the Wind-down Plan would set forth clear mechanisms for the transfer of NSCC's membership and business, and would be designed to facilitate continued access to NSCC's critical services and to minimize market impact of the transfer. By establishing the framework and strategy for the execution of the transfer and wind-down of NSCC in order to facilitate continuous access to NSCC's critical services, the Wind-down Plan establishes a plan for the orderly wind-down of NSCC. Therefore, NSCC believes the R&W Plan would provide plans for the recovery and orderly wind-down of the covered clearing agency necessitated by credit losses, liquidity shortfalls, losses from general business risk, or any other losses, and, as such, meets the requirements of Rule 17Ad-22(e)(3)(ii).
As described in greater detail above, the Proposed Rules are designed to facilitate the execution of the R&W Plan, provide Members and Limited Members with transparency regarding the material provisions of the Plan, and provide NSCC with a legal basis for implementation of those provisions. As such, NSCC also believes the Proposed Rules meet the requirements of Rule 17Ad-22(e)(3)(ii).
NSCC has evaluated the recovery tools that would be identified in the Recovery Plan and has determined that these tools are comprehensive, effective, and transparent, and that such tools provide appropriate incentives to NSCC's Members to manage the risks they present. The recovery tools, as outlined in the Recovery Plan and in the proposed Force Majeure Rule, provide NSCC with a comprehensive set of options to address its material risks and support the resiliency of its critical services under a range of stress scenarios. NSCC also believes the recovery tools are effective, as NSCC has both legal basis and operational capability to execute these tools in a timely and reliable manner. Many of the recovery tools are provided for in the Rules; Members are bound by the Rules through their membership agreements with NSCC, and the Rules are adopted pursuant to a framework established by Rule 19b-4 under the Act,
The majority of the recovery tools are also transparent, as they are, or are proposed to be, included in the Rules, which are publicly available. NSCC believes the recovery tools also provide appropriate incentives to the Members, as they are designed to control the amount of risk they present to NSCC's
Therefore, NSCC believes the R&W Plan and each of the Proposed Rules are consistent with Rule 17Ad-22(e)(3)(ii).
Rule 17Ad-22(e)(15)(ii) under the Act requires NSCC to establish, implement, maintain and enforce written policies and procedures reasonably designed to identify, monitor, and manage its general business risk and hold sufficient LNA to cover potential general business losses so that NSCC can continue operations and services as a going concern if those losses materialize, including by holding LNA equal to the greater of either (x) six months of the covered clearing agency's current operating expenses, or (y) the amount determined by the board of directors to be sufficient to ensure a recovery or orderly wind-down of critical operations and services of the covered clearing agency.
NSCC does not believe the proposal would have any impact, or impose any burden, on competition not necessary or appropriate in furtherance of the purpose of the Act.
The R&W Plan and each of the Proposed Rules have been developed and documented in order to satisfy applicable regulatory requirements, as discussed above.
With respect to the Recovery Plan, the proposal generally reflects NSCC's existing tools and existing internal procedures. Existing tools that would have a direct impact on the rights, responsibilities or obligations of Members are reflected in the existing Rules or are proposed to be included in the Rules. Accordingly, the Recovery Plan and the proposed Force Majeure Rule are intended to provide a roadmap, define the strategy and identify the tools available to NSCC in connection with its recovery efforts. By proposing to enhance NSCC's existing internal management and its regulatory compliance related to its recovery efforts, NSCC does not believe the Recovery Plan or the proposed Force Majeure Rule would have any impact, or impose any burden, on competition.
With respect to the Wind-down Plan, the proposed Corporation Default Rule, and the proposed Wind-down Rule, which facilitate the execution of the Wind-down Plan, the proposal would operate to effect the transfer of all eligible Members and Limited Members to the Transferee, and would not prohibit any market participant from either bidding to become the Transferee or from applying for membership with the Transferee. The proposal also would not prohibit any Member or Limited Member from withdrawing from NSCC prior to the Transfer Time, as is permitted under the Rules today, or from applying for membership with the Transferee. Therefore, as the proposal would treat each similarly situated Member identically under the Wind-down Plan and under these Proposed Rules, NSCC does not believe the Wind-down Plan, the proposed Corporation Default Rule, or the proposed Wind-down Rule would have any impact, or impose any burden, on competition.
NSCC does not believe that the proposed change to the Rule numbers would have any impact on competition because this proposed change is technical in nature and would not change NSCC's current practices or the rights or obligations of Members.
While NSCC has not solicited or received any written comments relating to this proposal, NSCC has conducted outreach to Members in order to provide them with notice of the proposal. NSCC will notify the Commission of any written comments received by NSCC.
Within 45 days of the date of publication of this notice in the
(A) by order approve or disapprove such proposed rule change, or
(B) institute proceedings to determine whether the proposed rule change should be disapproved.
The proposal shall not take effect until all regulatory actions required with respect to the proposal are completed.
Interested persons are invited to submit written data, views and arguments concerning the foregoing, including whether the 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 proposed rule change consists of modifications to FICC's Government Securities Division (“GSD”) Rulebook (“GSD Rules”) and Mortgage-Backed Securities Division (“MBSD” and, together with GSD, the “Divisions” and, each, a “Division”) Clearing Rules (“MBSD Rules,” and collectively with the GSD Rules, the “Rules”) in order to amend provisions in the Rules regarding loss allocation as well as make other changes, as described in greater detail below.
In its filing with the Commission, the clearing agency 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 clearing agency has prepared summaries, set forth in sections A, B, and C below, of the most significant aspects of such statements.
The primary purpose of this proposed rule change is to amend GSD's and MBSD's loss allocation rules in order to enhance the resiliency of the Divisions' loss allocation processes so that each Division can take timely action to address multiple loss events that occur in succession during a short period of time (defined and explained in detail below). In connection therewith, the proposed rule change would (i) align the loss allocation rules of the three clearing agencies of The Depository Trust & Clearing Corporation (“DTCC”), namely The Depository Trust Company, National Securities Clearing Corporation (“NSCC”), and FICC (collectively, the “DTCC Clearing Agencies”), so as to provide consistent treatment, to the extent practicable and appropriate, especially for firms that are participants of two or more DTCC Clearing Agencies, (ii) increase transparency and accessibility of the loss allocation rules by enhancing their readability and clarity, (iii) amend language regarding FICC's use of MBSD Clearing Fund, and (iv) make conforming and technical changes.
Central counterparties (“CCPs”) play a key role in financial markets by mitigating counterparty credit risk on transactions between market participants. CCPs achieve this by providing guaranties to participants and, as a consequence, are typically exposed to credit risks that could lead to default losses. In addition, in performing its critical functions, a CCP could be exposed to non-default losses that are otherwise incident to the CCP's clearance and settlement business.
A CCP's rulebook should provide a complete description of how losses would be allocated to participants if the size of the losses exceeded the CCP's pre-funded resources. Doing so provides for an orderly allocation of losses, and potentially allows the CCP to continue providing critical services to the market and thereby results in significant financial stability benefits. In addition, a clear description of the loss allocation process offers transparency and accessibility to the CCP's participants.
As CCPs, FICC's Divisions' loss allocation processes are key components of their respective risk management processes. Risk management is the foundation of FICC's ability to guarantee settlement in each Division, as well as the means by which FICC protects itself and its members from the risks inherent in the clearance and settlement process. FICC's risk management processes must account for the fact that, in certain extreme circumstances, the collateral and other financial resources that secure FICC's risk exposures may not be sufficient to fully cover losses resulting from the liquidation of the portfolio of a member for whom a Division has ceased to act.
The GSD Rules and the MBSD Rules each currently provide for a loss allocation process through which both FICC (by applying up to 25% of its retained earnings in accordance with Section 7(b) of GSD Rule 4 and Section 7(c) of MBSD Rule 4) and its members would share in the allocation of a loss resulting from the default of a member for whom a Division has ceased to act pursuant to the Rules. The GSD Rules and the MBSD Rules also recognize that FICC may incur losses outside the context of a defaulting member that are otherwise incident to each Division's clearance and settlement business.
The current GSD and MBSD loss allocation rules provide that, in the event the Division ceases to act for a member, the amounts on deposit to the Clearing Fund from the defaulting member, along with any other resources of, or attributable to, the defaulting member that FICC may access under the GSD Rules or the MBSD Rules (
First, as provided in the current Section 7(b) of GSD Rule 4 and Section 7(c) of MBSD Rule 4, FICC's corporate contribution of up to 25 percent of FICC's retained earnings existing at the time of the failure of a defaulting member to fulfill its obligations to FICC, or such greater amount as the Board of Directors may determine; and
Second, if a loss still remains, use of the Clearing Fund of the Division and assessing the Division's Members in the manner provided in GSD Rule 4 and MBSD Rule 4, as the case may be. Specifically, FICC will divide the loss ratably between Tier One Netting Members and Tier Two Members with respect to GSD, or between Tier One Members and Tier Two Members with respect to MBSD, based on original counterparty activity with the defaulting member. Then the loss allocation process applicable to Tier One Netting Members or Tier One Members, as applicable, and Tier Two Members will proceed in the manner provided in GSD Rule 4 and MBSD Rule 4, as the case may be.
Specifically, the applicable Division will first assess each Tier One Netting Member or Tier One Member, as applicable, an amount up to $50,000, in an equal basis per such member. If a loss remains, the Division will allocate the remaining loss ratably among Tier One Netting Members or Tier One Members, as applicable, in accordance with the amount of each Tier One Netting Member's or Tier One Member's, as applicable, respective average daily Required Fund Deposit over the prior twelve (12) months. If a Tier One Netting Member or Tier One Member, as applicable, did not maintain a Required Fund Deposit for twelve (12) months, its loss allocation amount will be based on its average daily Required Fund Deposit over the time period during which such member did maintain a Required Fund Deposit.
Pursuant to current Section 7(g) of GSD Rule 4 and MBSD Rule 4, if, as a result of the Division's application of the Required Fund Deposit of a member, a member's actual Clearing Fund deposit is less than its Required Fund Deposit, it will be required to eliminate such deficiency in order to satisfy its Required Fund Deposit amount. In addition to losses that may result from the closeout of the defaulting member's guaranteed positions, Tier One Netting Members or Tier One Members, as applicable, can also be assessed for non-default losses incident to each Division's clearance and settlement business, pursuant to current Section 7(f) of GSD Rule 4 and MBSD Rule 4.
The Rules of both Divisions currently provide that Tier Two Members are only subject to loss allocation to the extent they traded with the defaulting member and their trades resulted in a liquidation loss. FICC will assess Tier Two Members ratably based on their loss as a percentage of the entire remaining loss attributable to Tier Two Members.
In order to enhance the resiliency of GSD's and MBSD's loss allocation processes, FICC proposes to change the manner in which each of the aspects of the loss allocation waterfall described above would be employed. GSD and MBSD would retain the current core loss allocation process following the application of the defaulting member's resources,
Accordingly, FICC is proposing five (5) key changes to enhance each Division's loss allocation process:
(1) Changing the calculation and application of FICC's corporate contribution.
As stated above, Section 7(b) of GSD Rule 4 and Section 7(c) of MBSD Rule 4 currently provide that FICC will contribute up to 25% of its retained earnings (or such higher amount as the Board of Directors shall determine) to a loss or liability that is not satisfied by the defaulting member's Clearing Fund deposit. Under the proposal, FICC would amend the calculation of its corporate contribution from a percentage of its retained earnings to a mandatory amount equal to 50% of the FICC General Business Risk Capital Requirement.
Currently, the Rules do not require FICC to contribute its retained earnings to losses and liabilities other than those from member defaults. Under the proposal, FICC would apply its corporate contribution to non-default losses as well. The proposed Corporate Contribution would apply to losses arising from Defaulting Member Events and Declared Non-Default Loss Events (as such terms are defined below and in the proposed rule change), and would be a mandatory contribution by FICC prior to any allocation of the loss among the applicable Division's members.
As compared to the current approach of applying “up to” a percentage of retained earnings to defaulting member losses, the proposed Corporate Contribution would be a fixed percentage of FICC's General Business Risk Capital Requirement, which would provide greater transparency and accessibility to members. The proposed Corporate Contribution would apply not only towards losses and liabilities arising out of or relating to Defaulting Member Events but also those arising out of or relating to Declared Non-Default Loss Events, which is consistent with the current industry guidance that “a CCP should identify the amount of its own resources to be applied towards losses arising from custody and investment risk, to bolster confidence that participants' assets are prudently safeguarded.”
Under current Section 7(b) of GSD Rule 4 and Section 7(c) of MBSD Rule 4, FICC has the discretion to contribute amounts higher than the specified percentage of retained earnings, as determined by the Board of Directors, to any loss or liability incurred by FICC as result of the failure of a Defaulting Member to fulfill its obligations to FICC. This option would be retained and expanded under the proposal so that it would be clear that FICC can voluntarily apply amounts greater than the Corporate Contribution against any loss or liability (including non-default losses) of the Divisions, if the Board of Directors, in its sole discretion, believes such to be appropriate under the factual situation existing at the time.
The proposed rule changes relating to the calculation and application of Corporate Contribution are set forth in proposed Sections 7 and 7a of GSD Rule 4 and Sections 7 and 7a of MBSD Rule 4, as further described below.
(2) Introducing an Event Period.
In order to clearly define the obligations of each Division and its respective Members regarding loss allocation and to balance the need to manage the risk of sequential loss events against members' need for certainty concerning their maximum loss allocation exposures, FICC is proposing to introduce the concept of an “Event Period” to the GSD Rules and the MBSD Rules to address the losses and
The amount of losses that may be allocated by each Division, subject to the required Corporate Contribution, and to which a Loss Allocation Cap (as defined below and in the proposed rule change) would apply for any withdrawing member, would include any and all losses from any Defaulting Member Events and any Declared Non-Default Loss Events during the Event Period, regardless of the amount of time, during or after the Event Period, required for such losses to be crystallized and allocated.
The proposed rule changes relating to the implementation of an Event Period are set forth in proposed Section 7 of GSD Rule 4 and Section 7 of MBSD Rule 4, as further described below.
(3) Introducing the concept of “rounds” and Loss Allocation Notice.
Pursuant to the proposed rule change, a loss allocation “round” would mean a series of loss allocations relating to an Event Period, the aggregate amount of which is limited by the sum of the Loss Allocation Caps of affected Tier One Netting Members or Tier One Members, as applicable (a “round cap”). When the aggregate amount of losses allocated in a round equals the round cap, any additional losses relating to the applicable Event Period would be allocated in one or more subsequent rounds, in each case subject to a round cap for that round. FICC may continue the loss allocation process in successive rounds until all losses from the Event Period are allocated among Tier One Netting Members or Tier One Members, as applicable, that have not submitted a Loss Allocation Withdrawal Notice (as defined below and in the proposed rule change) in accordance with proposed Section 7b of GSD Rule 4 or MBSDRule 4.
Each loss allocation would be communicated to Tier One Netting Members or Tier One Members, as applicable, by the issuance of a Loss Allocation Notice (as defined below and in the proposed rule change). Each Loss Allocation Notice would specify the relevant Event Period and the round to which it relates. The first Loss Allocation Notice in any first, second, or subsequent round would expressly state that such Loss Allocation Notice reflects the beginning of the first, second, or subsequent round, as the case may be, and that each Tier One Netting Member or Tier One Member, as applicable, in that round has five (5) Business Days from the issuance of such first Loss Allocation Notice for the round to notify FICC of its election to withdraw from membership with GSD or MBSD, as applicable, pursuant to proposed Section 7b of GSD Rule 4 or MBSD Rule 4, as applicable, and thereby benefit from its Loss Allocation Cap.
FICC believes that it is appropriate to shorten such time period from 10 days to five (5) Business Days because FICC needs timely notice of which Tier One Netting Members or Tier One Members, as applicable, would remain in its membership for purpose of calculating the loss allocation for any subsequent round. FICC believes that five (5) Business Days would provide Tier One Netting Members or Tier One Members, as applicable, with sufficient time to decide whether to cap their loss allocation obligations by withdrawing from their membership in GSD or MBSD, as applicable.
The amount of any second or subsequent round cap may differ from the first or preceding round cap because there may be fewer Tier One Netting Members or Tier One Members, as applicable, in a second or subsequent round if Tier One Netting Members or Tier One Members, as applicable, elect to withdraw from membership with GSD or MBSD, as applicable, as provided in proposed Section 7b of GSD Rule 4 or MBSD Rule 4, as applicable, following the first Loss Allocation Notice in any round.
For example, for illustrative purposes only, after the required Corporate Contribution, if FICC has a $5 billion loss determined with respect to an Event Period and the sum of Loss Allocation Caps for all Tier One Netting Members or Tier One Members, as applicable, subject to the loss allocation is $4 billion, the first round would begin when FICC issues the first Loss Allocation Notice for that Event Period. FICC could issue one or more Loss Allocation Notices for the first round until the sum of losses allocated equals $4 billion. Once the $4 billion is allocated, the first round would end and FICC would need a second round in order to allocate the remaining $1 billion of loss. FICC would then issue a Loss Allocation Notice for the $1 billion and this notice would be the first Loss Allocation Notice for the second round. The issuance of the Loss Allocation Notice for the $1 billion would begin the second round.
The proposed rule change would link the Loss Allocation Cap to a round in order to provide Tier One Netting Members or Tier One Members, as applicable, the option to limit their loss allocation exposure at the beginning of
The proposed rule changes relating to the implementation of “rounds” and Loss Allocation Notices are set forth in proposed Section 7 of GSD Rule 4 and Section 7 of MBSD Rule 4, as further described below.
(4) Implementing a revised “look-back” period to calculate a member's loss allocation pro rata share and its Loss Allocation Cap.
Currently, the GSD Rules and the MBSD Rules calculate a Tier One Netting Member's or a Tier One Member's pro rata share for purposes of loss allocation based on the member's average daily Required Fund Deposit over the prior twelve (12) months (or such shorter period as may be available in the case of a member which has not maintained a deposit over such time period). The Rules currently do not anticipate the possibility of more than one Defaulting Member Event or Declared Non-Default Loss Event in quick succession.
GSD and MBSD are proposing to calculate each Tier One Netting Member's or Tier One Member's, as applicable, pro rata share of losses and liabilities to be allocated in any round (as described below and in the proposed rule change) to be equal to (i) the average of a member's Required Fund Deposit for the seventy (70) Business Days prior to the first day of the applicable Event Period (or such shorter period of time that the member has been a member) (“Average RFD”) divided by (ii) the sum of Average RFD amounts for all members that are subject to loss allocation in such round.
Additionally, GSD and MBSD are proposing that each member's maximum payment obligation with respect to any loss allocation round (the member's Loss Allocation Cap) be equal to the greater of (i) its Required Fund Deposit on the first day of the applicable Event Period or (ii) its Average RFD.
FICC believes that employing a revised look-back period of seventy (70) Business Days instead of twelve (12) months to calculate a Tier One Netting Member's or a Tier One Member's, as applicable, loss allocation pro rata share and Loss Allocation Cap is appropriate, because FICC recognizes that the current look-back period of twelve (12) months is a very long period during which a member's business strategy and outlook could have shifted significantly, resulting in material changes to the size of its portfolios. A look-back period of seventy (70) Business Days would minimize that issue yet still would be long enough to enable FICC to capture a full calendar quarter of such members' activities and smooth out the impact from any abnormalities and/or arbitrariness that may have occurred.
The proposed rule changes relating to the implementation of the revised look-back period are set forth in proposed Section 7 of GSD Rule 4 and Section 7 of MBSD Rule 4, as further described below.
(5) Capping withdrawing members' loss allocation exposure and related changes.
Currently, pursuant to Section 7(g) of GSD Rule 4 and MBSD Rule 4, a member can withdraw from membership in order to avail itself of a cap on loss allocation if the member notifies FICC via a written notice, in accordance with Section 13 of GSD Rule 3 or MBSD Rule 3, as applicable, of its election to terminate its membership. Such notice must be provided by the Close of Business on the Business Day on which the loss allocation payment is due to FICC and, if properly provided to FICC, would limit the member's liability for a loss allocation to its Required Fund Deposit for the Business Day on which the notification of allocation is provided to the member.
As proposed, if a member provides notice of its withdrawal from membership, the maximum amount of losses it would be responsible for would be its Loss Allocation Cap,
Currently, pursuant to Section 7(g) of GSD Rule 4 and MBSD Rule 4, if notification is provided to a member that an allocation has been made against the member pursuant to GSD Rule 4 or MBSD Rule 4, as applicable, and that application of the member's Required Fund Deposit is not sufficient to satisfy such obligation to make payment to FICC, the member is required to deliver to FICC by the Close of Business on the next Business Day, or by the Close of Business on the Business Day of issuance of the notification if so determined by FICC, that amount which is necessary to eliminate any such deficiency, unless the member elects to terminate its membership in FICC. To increase transparency of the timeframe under which FICC would require funds from members to satisfy their loss allocation obligations, FICC is proposing that members would receive two (2) Business Days' notice of a loss allocation, and members would be required to pay the requisite amount no later than the second Business Day following issuance of such notice.
Each round would allow a Tier One Netting Member or Tier One Member, as applicable, the opportunity to notify FICC of its election to withdraw from membership after satisfaction of the losses allocated in such round. Multiple Loss Allocation Notices may be issued with respect to each round to allocate losses up to the round cap.
Specifically, the first round and each subsequent round of loss allocation would allocate losses up to a round cap of the aggregate of all Loss Allocation Caps of those Tier One Netting Members or Tier One Members, as applicable, included in the round. If a Tier One Netting Member or Tier One Member, as applicable, provides notice of its election to withdraw from membership, it would be subject to loss allocation in that round, up to its Loss Allocation Cap. If the first round of loss allocation does not fully cover FICC's losses, a second round will be noticed to those members that did not elect to withdraw from membership in the previous round; however, as noted above, the amount of any second or subsequent
Pursuant to the proposed rule change, in order to avail itself of its Loss Allocation Cap, a Tier One Netting Member or Tier One Member, as applicable, would need to follow the requirements in proposed Section 7b of GSD Rule 4 or MBSD Rule 4, as applicable, which would provide that the Tier One Netting Member or Tier One Member, as applicable, must: (i) Specify in its Loss Allocation Withdrawal Notice an effective date of withdrawal, which date shall not be prior to the scheduled final settlement date of any remaining obligations owed by the member to FICC, unless otherwise approved by FICC, and (ii) as of the time of such member's submission of the Loss Allocation Withdrawal Notice, cease submitting transactions to FICC for processing, clearance or settlement, unless otherwise approved by FICC.
The proposed rule changes are designed to enable FICC to continue the loss allocation process in successive rounds until all of FICC's losses are allocated. To the extent that the Loss Allocation Cap of a Tier One Netting Member or Tier One Member, as applicable, exceeds such member's Required Fund Deposit on the first day of an Event Period, FICC may in its discretion retain any excess amounts on deposit from the member, up to the Loss Allocation Cap of a Tier One Netting Member or Tier One Member, as applicable.
The proposed rule changes relating to capping withdrawing members' loss allocation exposure and related changes to the withdrawal process are set forth in proposed Sections 7 and 7b of GSD Rule 4 and Sections 7 and 7b of MBSD Rule 4, as further described below.
The proposed rule changes would align the loss allocation rules, to the extent practicable and appropriate, of the three DTCC Clearing Agencies so as to provide consistent treatment, especially for firms that are participants of two or more DTCC Clearing Agencies. As proposed, the loss allocation waterfall and certain related provisions,
The proposed rule changes are intended to make the provisions in the Rules governing loss allocation more transparent and accessible to members. In particular, FICC is proposing the following changes relating to loss allocation to clarify members' obligations for Declared Non-Default Loss Events.
Aside from losses that FICC might face as a result of a Defaulting Member Event, FICC could incur non-default losses incident to each Division's clearance and settlement business.
Section 5 of MBSD Rule 4 provides that “The use of the Clearing Fund deposits and assets and property on which the Corporation has a lien on shall be limited to satisfaction of losses or liabilities of the Corporation . . . otherwise incident to the clearance and settlement business of the Corporation with respect to losses and liabilities to meet unexpected or unusual requirements for funds that represent a small percentage of the Clearing Fund . . .”
Section 7(f) of MBSD Rule 4 provides that “Any loss or liability incurred by the Corporation incident to its clearance and settlement business . . . arising other than from a Remaining Loss (hereinafter, an “Other Loss”), shall be allocated among Tier One Members, ratably, in accordance with the respective amounts of their Average Required Clearing Fund Deposits.
If there is a failure of FICC following a non-default loss, such occurrence would affect members in much the same way as a failure of FICC following a Defaulting Member Event. Accordingly, FICC is proposing rule changes to enhance the provisions relating to non-default losses by clarifying members' obligations for such losses and aligning the non-default loss provisions in the GSD Rules and the MBSD Rules.
Specifically, for both the GSD Rules and the MBSD Rules, FICC is proposing enhancement of the governance around non-default losses that would trigger loss allocation to Tier One Netting Members or Tier One Members, as applicable, by specifying that the Board of Directors would have to determine that there is a non-default loss that may be a significant and substantial loss or liability that may materially impair the ability of FICC to provide clearance and settlement services in an orderly manner and will potentially generate losses to be mutualized among the Tier One Netting Members or Tier One Members, as applicable, in order to ensure that FICC may continue to offer clearance and settlement services in an orderly manner. The proposed rule change would provide that FICC would then be required to promptly notify members of this determination (a “Declared Non-Default Loss Event”). In addition, FICC is proposing to better align the interest of FICC with those of its members by stipulating a mandatory Corporate Contribution apply to a Declared Non-Default Loss Event prior to any allocation of the loss among members, as described above. Additionally, FICC is proposing language to clarify members' obligations for Declared Non-Default Loss Events.
Under the proposal, FICC would clarify the Rules of both Divisions to make clear that Tier One Netting Members or Tier One Members, as
The proposed rule changes relating to Declared Non-Default Loss Events and members' obligations for such events are set forth in proposed Section 7 of GSD Rule 4 and Section 7 of MBSD Rule 4, as further described below.
The proposed rule change would delete language currently in Section 5 of MBSD Rule 4 that limits certain uses by FICC of the MBSD Clearing Fund to “unexpected or unusual” requirements for funds that represent a “small percentage” of the MBSD Clearing Fund. FICC believes that these limiting phrases (which appear in connection with FICC's use of MBSD Clearing Fund to cover losses and liabilities incident to its clearance and settlement business outside the context of an MBSD Defaulting Member Event as well as to cover certain liquidity needs) are vague and imprecise, and should be replaced in their entirety. Specifically, FICC is proposing to delete the limiting language with respect to FICC's use of MBSD Clearing Fund to cover losses and liabilities incident to its clearance and settlement business outside the context of an MBSD Defaulting Member Event so as to not have such language be interpreted as impairing FICC's ability to access the MBSD Clearing Fund in order to manage non-default losses. FICC is also proposing to delete the limiting language with respect to FICC's use of MBSD Clearing Fund to cover certain liquidity needs because the effect of the limitation in this context is confusing and unclear.
The proposed rule changes relating to FICC's use of MBSD Clearing Fund are set forth in proposed Section 5 of MBSD Rule 4, as further described below.
The foregoing changes as well as other changes (including a number of conforming and technical changes) that FICC is proposing in order to improve the transparency and accessibility of the Rules are described in detail below.
GSD Rule 4 and MBSD Rule 4 currently address Clearing Fund requirements and loss allocation obligations, as well as permissible uses of the Clearing Fund. These Rules address the various Clearing Fund calculations for each Division's Clearing Fund and set forth rights, obligations and other aspects associated with each Division's Clearing Fund, as well as each Division's loss allocation process. GSD Rule 4 and MBSD Rule 4 are each currently organized into 12 sections. Sections of these Rules that FICC is proposing to change are described below.
Currently, Section 1 of GSD Rule 4 and MBSD Rule 4 set forth the requirement that each GSD Netting Member and each MBSD Clearing Member make and maintain a deposit to the Clearing Fund at the minimum level set forth in the respective Rule 4 and note that the timing of such payment is set forth in another section of the respective Rule 4. Current Section 1 of the respective rule also provides that the deposits to the Clearing Fund will be held by FICC or its designated agents. Current Section 1 of MBSD Rule 4 also defines the term “Transaction” for purposes of MBSD Rule 4 and references a Member's obligation to replenish the deficit in its Required Fund Deposit if it is charged by FICC under certain circumstances.
FICC is proposing to rename the subheading of Section 1 of Rule 4 in both the GSD Rules and MBSD Rules from “General” to “Required Fund Deposits” and to restructure the wording of the provisions for clarity and readability.
Under the proposed rule change, Section 1 of GSD Rule 4 and Section 1 of MBSD Rule 4 would continue to have the same provisions as they relate to Netting Members or Clearing Members, as applicable, except for the following: (i) The language throughout the sections would be reorganized, streamlined and clarified, and (ii) language would be added regarding additional deposits maintained by the Netting Members or Clearing Members, as applicable, at FICC, and highlight for members that such additional deposits would be deemed to be part of the Clearing Fund and the member's Actual Deposit (as discussed below and as defined in the proposed rule change) but would not be deemed to be part of the member's Required Fund Deposit.
The proposed language regarding maintenance of a member's Actual Deposit would also make it clear that FICC will not be required to segregate such deposit, but shall maintain books and records concerning the assets that constitute each member's Actual Deposit.
In addition, FICC proposes a technical change to update a cross reference in Section 1 of GSD Rule 4 and MBSD Rule 4.
Furthermore, in Section 1 of MBSD Rule 4, FICC is proposing to move the definition of “Transactions” to proposed Section 2(a) of MBSD Rule 4, where the first usage of “Transactions” in MBSD Rule 4 appears. FICC is also proposing to delete the last sentence in Section 1 of MBSD Rule 4, which references a Member's obligation to replenish the deficit in its Required Fund Deposit if it is charged by FICC under certain circumstances, because it would no longer be relevant under the proposed rule change to Section 7 of MBSD Rule 4, as FICC would require members to pay their loss allocation amounts instead of charging their Required Fund Deposits for Clearing Fund losses.
Current Section 2 of GSD Rule 4 and MBSD Rule 4 set forth more detailed requirements pertaining to members' Required Fund Deposits. FICC is proposing to rename the subheadings in these sections from “Required Fund Deposit” to “Required Fund Deposit Requirements” in order to better reflect the purpose of this section.
In addition, FICC is proposing to expand the definition of “Legal Risk” in both the GSD and MBSD provisions (current Section 2(e) of GSD Rule 4 and Section 2(f) of MBSD Rule 4) by deleting references to Legal Risk being defined only in reference to a member's insolvency or bankruptcy, as FICC believes that Legal Risk may arise outside the context of an insolvency or bankruptcy event regarding a member, and FICC should be permitted to adequately protect itself in those non- insolvency/bankruptcy circumstances as well.
For better organization of Rule 4, FICC is also proposing to relocate the provision on minimum Clearing Fund cash requirements (current Section 2(b)
FICC is proposing technical changes to correct typographical errors in current Section 2 of GSD Rule 4.
Currently, Sections 3, 3a and 3b of GSD Rule 4 and MBSD Rule 4 address the permissible form of Clearing Fund deposits and contain detailed requirements regarding each form. FICC is proposing changes to improve the readability of these sections.
In addition, for better organization of the subject matter, FICC is proposing to move certain paragraphs from one section to another, including (i) moving clauses (b) and (d) in current Section 2 of GSD Rule 4 and MBSD Rule 4, respectively, to proposed Section 3 of GSD Rule 4 and MBSD Rule 4 and (ii) moving the last paragraph of current Section 3 in GSD Rule 4 and MBSD Rule 4 to proposed Section 3b of GSD Rule 4 and MBSD Rule 4.
Under the proposed rule change, FICC is also proposing to update the cash investment provision in Section 3a of GSD Rule 4 and MBSD Rule 4 to reflect the Clearing Agency Investment Policy adopted by FICC
Currently, Section 4 of GSD Rule 4 and MBSD Rule 4 address the granting of a first priority perfected security interest by each Netting Member or Clearing Member, as applicable, in all assets and property placed by the member in the possession of FICC (or its agents acting on its behalf). FICC is not proposing any substantive changes to these sections except for streamlining the provisions for readability and clarity, and adding “Actual Deposit” as a defined term to refer to Eligible Clearing Fund Securities, funds and assets pledged to FICC to secure any and all obligations and liabilities of a Netting Member or a Clearing Member, as applicable, to FICC.
Currently, Section 5 of GSD Rule 4 and MBSD Rule 4 describe the use of each Division's Clearing Fund. FICC is proposing to rename the subheading of this section from “Use of Deposits and Payments” to “Use of Clearing Fund” to better reflect the purpose of the section.
Under the proposed rule change, FICC is also proposing changes to streamline this section for clarity and readability and to align the GSD Rules and MBSD Rules. Specifically, FICC is proposing to delete the first paragraph of current Section 5 of GSD Rule 4 and MBSD Rule 4 and replace it with clearer language that sets forth the permitted uses of each Division's Clearing Fund. Specifically, the proposed Section 5 of GSD Rule 4 and MBSD Rule 4 provides that each Division's Clearing Fund would only be used by FICC (i) to secure each member's performance of obligations to FICC, including, without limitation, each member's obligations with respect to any loss allocations as set forth in proposed Section 7 of GSD Rule 4 and MBSD Rule 4 and any obligations arising from a Cross-Guaranty Agreement pursuant to GSD Rule 41 or MBSD Rule 32, as applicable, or a Cross-Margining Agreement pursuant to GSD Rule 43, (ii) to provide liquidity to FICC to meet its settlement obligations, including, without limitation, through the direct use of cash in the GSD Clearing Fund or MBSD Clearing Fund, as applicable, or through the pledge or rehypothecation of pledged Eligible Clearing Fund Securities in order to secure liquidity, and (iii) for investment as set forth in proposed Section 3a of GSD Rule 4 and MBSD Rule 4.
The current first paragraph of Section 5 of GSD Rule 4 and MBSD Rule 4 provides that if FICC pledges, hypothecates, encumbers, borrows, or applies any part of the respective Division's Clearing Fund deposits to satisfy any liability, obligation, or liquidity requirements for more than thirty (30) days, FICC, at the Close of Business on the 30th day (or on the first Business Day thereafter) will consider the amount used as an actual loss to the respective Division's Clearing Fund and immediately allocate such loss in accordance with Section 7 of GSD Rule 4 or MBSD Rule 4, as applicable. As proposed, FICC would retain this provision conceptually but replace it with clearer and streamlined language that provides that each time FICC uses any part of the respective Division's Clearing Fund for more than 30 calendar days to provide liquidity to FICC to meet its settlement obligations, including, without limitation, through the direct use of cash in the Clearing Fund or through the pledge or rehypothecation of pledged Eligible Clearing Fund Securities in order to secure liquidity, FICC, at the Close of Business on the 30th calendar day (or on the first Business Day thereafter) from the day of such use, would consider the amount used but not yet repaid as a loss to the Clearing Fund incurred as a result of a Defaulting Member Event and immediately allocate such loss in accordance with proposed Section 7 of GSD Rule 4 or MBSD Rule 4, as applicable.
The proposed rule change also includes deleting language currently in Section 5 of MBSD Rule 4 that limits certain uses by FICC of the MBSD Clearing Fund to “unexpected or unusual” requirements for funds that represent a “small percentage” of the MBSD Clearing Fund. FICC believes that these limiting phrases (which appear in connection with FICC's use of MBSD Clearing Fund to cover losses and liabilities incident to its clearance and settlement business outside the context of an MBSD Defaulting Member Event as well as to cover certain liquidity needs) are vague and imprecise, and should be replaced in their entirety. Specifically, FICC is proposing to delete the limiting language with respect to FICC's use of MBSD Clearing Fund to cover losses and liabilities incident to its clearance and settlement business outside of an MBSD Defaulting Member Event so as to not have such language be interpreted as impairing FICC's ability to access the MBSD Clearing Fund in order to manage non-default losses. FICC is also proposing to delete the limiting language with respect to FICC's use of MBSD Clearing Fund to cover certain liquidity needs because
In addition, FICC is proposing to delete the last paragraph in current Section 5 of GSD Rule 4 and MBSD Rule 4 because these paragraphs address the application of a member's deposits to the applicable Clearing Fund to cover the allocation of a loss or liability incurred by FICC. These paragraphs would no longer be relevant, because, under the proposed Section 7 of GSD Rule 4 and MBSD Rule 4 (discussed below), FICC would not apply the member's deposit to the Clearing Fund unless the member does not satisfy payment of its allocated loss amount within the required timeframe. These paragraphs also currently include provisions regarding other agreements, such as a Cross-Guaranty Agreement, that pertain to a Defaulting Member, and such provisions would now be covered by proposed Section 6 of GSD Rule 4 and MBSD Rule 4.
Currently, Section 6 of GSD Rule 4 and MBSD Rule 4 are reserved for future use. FICC is proposing to use this section for provisions relating to the application of deposits to the respective Division's Clearing Fund and other amounts held by FICC to a Defaulting Member's obligations.
FICC is proposing to add a subheading of “Application of Clearing Fund Deposits and Other Amounts to Defaulting Members' Obligations” to Section 6 of GSD Rule 4 and MBSD Rule 4. Under the proposed rule change, for better organization by subject matter, FICC is also proposing to relocate certain provisions to these sections from the respective current Section 7 of GSD Rule 4 and MBSD Rule 4, which addresses FICC's application of Clearing Fund deposits and other assets held by FICC securing a Defaulting Member's obligations to FICC.
For additional clarity and for consistency with the loss allocation rules of the other DTCC Clearing Agencies, FICC proposes to add a provision which makes it clear that, if FICC applies a Defaulting Member's Clearing Fund deposits, FICC may take any and all actions with respect to the Defaulting Member's Actual Deposits, including assignment, transfer, and sale of any Eligible Clearing Fund Securities, that FICC determines is appropriate.
Current Section 7 of GSD Rule 4 and MBSD Rule 4 contains FICC's current loss allocation waterfall for losses or liabilities incurred by FICC. With respect to any loss or liability incurred by FICC as the result of the failure of a Defaulting Member to fulfill its obligations to FICC, the loss allocation waterfall for each Division currently provides:
(i) Application of any Clearing Fund deposits and other collateral held by FICC securing a Defaulting Member's obligations to FICC and additional resources as are applicable to the Defaulting Member.
(ii) If a loss or liability remains after the application of the Defaulting Member's collateral and resources, FICC would apply up to 25% of FICC's existing retained earnings, or such higher amount as the Board of Directors determines.
(iii) If a loss or liability still remains after the application of the retained earnings, FICC would apply the loss or liability to members as follows:
(a) If the remaining loss or liability is attributable to Tier One Netting Members or Tier One Members, as applicable, then FICC will allocate such loss or liability to Tier One Netting Members or Tier One Members, as applicable, by assessing the Required Fund Deposit maintained by each such member an amount up to $50,000, in an equal basis per Tier One Netting Member or Tier One Member, as applicable.
(b) If the remaining loss or liability is attributable to Tier Two Members, then FICC will allocate such loss or liability to Tier Two Members based upon their trading activity with the Defaulting Member that resulted in a loss.
(iv) If there is any loss or liability that still remains after the application of (ii) and (iii) above that is attributable to Tier One Netting Members or Tier One Members, as applicable, then FICC will allocate such loss or liability among Tier One Netting Members or Tier One Members, as applicable, ratably based on the amount of each Tier One Netting Member's or Tier One Member's Required Fund Deposit and based on the average daily level of such deposit over the prior twelve (12) months (or such shorter period as may be available if the member has not maintained a deposit over such time period).
Current Section 7(f) of GSD Rule 4 and MBSD Rule 4 also provides that Other Losses shall be allocated among Tier One Netting Members or Tier One Members, as applicable, ratably in accordance with the respective amounts of each Tier One Netting Member's or Tier One Member's Required Fund Deposit and based on the average daily level of such deposit over the prior twelve (12) months (or such shorter period as may be available if the member has not maintained a deposit over such time period).
Currently, pursuant to Section 7(e) of GSD Rule 4, an Inter-Dealer Broker Netting Member, or a Non-IDB Broker with respect to activity in its Segregated Broker Account, will not be subject to an aggregate allocation loss for any single loss-allocation event that exceeds $5 million. FICC believes that it is appropriate for GSD to retain this cap under the proposed rule change because the Inter-Dealer Broker Netting Members are required to limit their business as provided in Section 8(e) of GSD Rule 3, which would in turn minimize the potential losses or liabilities that could be incurred by FICC from Inter-Dealer Broker Netting Members.
Current Section 7(g) of GSD Rule 4 and MBSD Rule 4 further provides that if the Required Fund Deposit of the member being allocated the loss is not sufficient to satisfy its loss allocation obligation, the member is required to deliver to FICC an amount that is necessary to eliminate the deficiency by the Close of Business on the next Business Day, or by the Close of Business on the Business Day of issuance of the notification if so determined by FICC. Under the current Rules, a member may elect to terminate its membership, which would limit its loss allocation to the amount of its Required Fund Deposit for the Business Day on which the notification of such loss allocation is provided to the member. If the member does not elect to terminate its membership and fails to satisfy its Required Fund Deposit within the timeframe specified in the Rules, FICC will cease to act generally with regard to such member pursuant to GSD Rules 21 and 22A or MBSD Rules 14
Current Section 7(h) of GSD Rule 4 and MBSD Rule 4 requires FICC to promptly notify members and the Commission of the amount involved and the causes if a Remaining Loss or Other Loss occurs. In addition, current Section 7(i) of GSD Rule 4 and MBSD Rule 4 also provides that any increase in Clearing Fund deposit as required by subsection (f) of current Section 2 of GSD Rule 4 or provisions of MBSD Rule 4 regarding special charges or other premiums will not be taken into account when calculating loss allocation based on a GSD Member's Average Required FICC Clearing Fund Deposit amount or an MBSD Member's Average Required Fund Deposit amount, as applicable, under current Section 7 of GSD Rule 4 and MBSD Rule 4.
Under the proposed rule change, FICC is proposing to rename the subheading of Section 7 of GSD Rule 4 and MBSD Rule 4 to “Loss Allocation Waterfall, Off-the-Market Transactions.” In addition, FICC is proposing to restructure its loss allocation waterfall as described below.
For better organization of the subject matter, FICC is proposing to move certain paragraphs from one section to another, including (i) relocating the last sentence of current Section 7(h) of GSD Rule 4 and MBSD Rule 4 regarding recovery of allocated losses or liabilities by FICC to the fifth paragraph of proposed Section 7 of GSD Rule 4 and MBSD Rule 4, (ii) relocating from current Section 7(a) of GSD Rule 4 and MBSD Rule 4 provisions which address FICC's application of Clearing Fund deposits and other assets held by FICC securing a Defaulting Member's obligations to FICC to proposed Section 6 of GSD Rule 4 and MBSD Rule 4, (iii) relocating from current Section 7 of GSD Rule 4 to proposed Section 6 of GSD Rule 4 the provision regarding FICC's right to treat certain payments to an FCO under a Cross-Margining Guaranty as a loss to be allocated, (iv) relocating the provisions in current Section 7(i) of GSD Rule 4 and MBSD Rule 4 regarding certain increases in Clearing Fund deposits not being taken into account when calculating loss allocation so that such provisions would come right after the loss allocation calculation provision, with an updated reference to proposed renumbered Sections 2(d) and 2(e) in GSD Rule 4 and MBSD Rule 4, respectively, and (v) relocating the provision regarding withdrawing members reapplying to become members in the second paragraph of current Section 7(g) of GSD Rule 4 and MBSD Rule 4 to come right after the paragraph regarding the election of a Tier One Netting Member or Tier One Member, as applicable, to withdraw from membership in proposed Section 7 of GSD Rule 4 and MBSD Rule 4. Furthermore, in order to enhance readability and clarity, FICC is proposing a number of changes to streamline the language in these provisions.
Under the proposal, Section 7 of GSD Rule 4 and MBSD Rule 4 would make clear that the loss allocation waterfall applies to losses and liabilities (i) relating to or arising out of a default of a member or (ii) otherwise incident to the clearance and settlement business of FICC (
Under proposed Section 7 of GSD Rule 4 and MBSD Rule 4, the loss allocation waterfall would begin with a corporate contribution from FICC (“Corporate Contribution”), as is the case under the current Rules, but in a different form than under the current Section 7 of GSD Rule 4 and MBSD Rule 4 described above. Today, Section 7(b) of GSD Rule 4 and Section 7(c) of MBSD Rule 4 provide that, if FICC incurs any loss or liability as the result of the failure of a Defaulting Member to fulfill its obligations to FICC, FICC will contribute up to 25% of its existing retained earnings (or such higher amount as the Board of Directors shall determine), to such loss or liability; however, no corporate contribution from FICC is currently required for losses resulting other than those from Member impairments. Under the proposal, FICC would add a proposed new Section 7a to GSD Rule 4 and MBSD Rule 4 with a subheading of “Corporate Contribution” and define FICC's Corporate Contribution with respect to any loss allocation pursuant to proposed Section 7 of GSD Rule 4 or MBSD Rule 4, whether arising out of or relating to a Defaulting Member Event or a Declared Non-Default Loss Event, as an amount that is equal to fifty (50) percent of the amount calculated by FICC in respect of its General Business Risk Capital Requirement as of the end of the calendar quarter immediately preceding the Event Period.
As proposed, if FICC applies the Corporate Contribution to a loss or liability arising out of or relating to one or more Defaulting Member Events or Declared Non-Default Loss Events relating to an Event Period, then for any subsequent Event Periods that occur during the two hundred fifty (250) Business Days thereafter,
Proposed Section 7a to GSD Rule 4 and MBSD Rule 4 would also make clear that there would be one FICC Corporate Contribution, the amount of which would be available to both Divisions and would be applied against a loss or liability in either Division in the order in which such loss or liability occurs,
Currently, the Rules do not require FICC to contribute its retained earnings to losses and liabilities other than those from member defaults. Under the proposal, FICC would expand the application of its corporate contribution
Current Section 7(b) of GSD Rule 4 and Section 7(c) of MBSD Rule 4 provide FICC the option to contribute amounts higher than the specified percentage of retained earnings as determined by the Board of Directors, to any loss or liability incurred by FICC as the result of the failure of a Defaulting Member to fulfill its obligations to FICC. This option would be retained and expanded under the proposal to also cover non-default losses. Proposed Section 7a of GSD Rule 4 and MBSD Rule 4 would provide that nothing in the Rules would prevent FICC from voluntarily applying amounts greater than the Corporate Contribution against any FICC loss or liability, whether a Defaulting Member Event or a Declared Non-Default Loss Event, if the Board of Directors, in its sole discretion, believes such to be appropriate under the factual situation existing at the time.
Proposed Section 7 of GSD Rule 4 and MBSD Rule 4 would provide that FICC shall apply the Corporate Contribution to losses and liabilities that arise out of or relate to one or more Defaulting Member Events and/or (ii) Declared Non-Default Loss Events that occur within an Event Period. The proposed rule change also provides that if losses and liabilities with respect to such Event Period remain unsatisfied following application of the Corporate Contribution, FICC would allocate such losses and liabilities to members, as described below.
As proposed, Section 7 of GSD Rule 4 and MBSD Rule 4 would retain the differentiation in allocating losses to Tier One Netting Members or Tier One Members, as applicable, and Tier Two Members. Specifically, as is the case today, losses or liabilities that arise out of or relate to one or more Defaulting Member Events would be attributable to Tier One Netting Members or Tier One Members, as applicable, and Tier Two Members, while losses or liabilities that arise out of or relate to one or more Declared Non-Default Loss Events would only be attributable to Tier One Netting Members or Tier One Members, as applicable. Tier Two Members would not be subject to loss allocation with respect to Declared Non-Default Loss Events.
Under the proposal, FICC would delete the provision in current Section 7(h) of GSD Rule 4 and MBSD Rule 4 that requires FICC to promptly notify members and the Commission of the amounts involved and the causes if a Remaining Loss or Other Loss occurs because such notification would no longer be necessary under the proposed rule change. Under the proposed rule change, FICC would notify members subject to loss allocation of the amounts being allocated to them in one or more Loss Allocation Notices for both Defaulting Member Events and Declared Non-Default Loss Events. As such, in order to conform to the proposed rule change, FICC is proposing to eliminate the notification to members regarding the amounts involved and the causes if a Remaining Loss or Other Loss occurs that is required under current Section 7(h) of GSD Rule 4 and MBSD Rule 4. FICC is also proposing to delete the notification to the Commission regarding the amounts involved and the causes if a Remaining Loss or Other Loss occurs as required in the same section. While as a practical matter, FICC would notify the Commission of a decision to loss allocate, FICC does not believe such notification needs to be specified in the Rules.
In addition, FICC is proposing to clarify the provision related to Off-the-Market Transactions so that it is clear that loss or liability of FICC in connection with the close-out or liquidation of an Off-the-Market Transaction in the portfolio of a Defaulting Member would be allocated to the Member that was the counterparty to such transaction.
For Tier One Netting Members or Tier One Members, as applicable, proposed Section 7 of GSD Rule 4 and MBSD Rule 4 would establish the concept of an “Event Period” to provide for a clear and transparent way of handling multiple loss events occurring in a period of ten (10) Business Days, which would be grouped into an Event Period.
Under the proposal, an Event Period with respect to a Defaulting Member Event would begin on the day FICC notifies members that it has ceased to act for a Defaulting Member (or the next Business Day, if such day is not a Business Day). In the case of a Declared Non-Default Loss Event, an Event Period would begin on the day that FICC notifies members of the determination by the Board of Directors that the applicable loss or liability incident to the clearance and settlement business of FICC may be a significant and substantial loss or liability that may materially impair the ability of FICC to provide clearance and settlement services in an orderly manner and will potentially generate losses to be mutualized among Tier One Netting Members or Tier One Members, as applicable, in order to ensure that FICC may continue to offer clearance and settlement services in an orderly manner (or the next Business Day, if such day is not a Business Day). If a subsequent Defaulting Member Event or Declared Non-Default Loss Event occurs during an Event Period, any losses or liabilities arising out of or relating to any such subsequent event would be resolved as losses or liabilities that are part of the same Event Period, without extending the duration of such Event Period.
The proposed rule change to Section 7 of GSD Rule 4 and MBSD Rule 4 would clarify that all Tier One Netting Members or Tier One Members, as applicable, would be subject to loss allocation for losses and liabilities relating to or arising out of a Declared Non-Default Loss Event; however, in the case of losses and liabilities relating to or arising out of a Defaulting Member Event, only non-defaulting Tier One Netting Members or Tier One Members, as applicable, would be subject to loss allocation. In addition, FICC is proposing to clarify that after a first round of loss allocations with respect to an Event Period, only Tier One Netting Members or Tier One Members, as applicable, that have not submitted a Loss Allocation Withdrawal Notice in accordance with proposed Section 7b of GSD Rule 4 or MBSD Rule 4, as applicable, would be subject to further loss allocations with respect to that Event Period. FICC is also proposing that FICC would notify Tier One Netting Members or Tier One Members, as applicable, subject to loss allocation of the amounts being allocated to them (“Loss Allocation Notice”) in successive rounds of loss allocations.
Under the proposed rule change, a loss allocation “round” would mean a series of loss allocations relating to an Event Period, the aggregate amount of which is limited by the round cap. When the aggregate amount of losses allocated in a round equals the round cap, any additional losses relating to the applicable Event Period would be allocated in one or more subsequent rounds, in each case subject to a round cap for that round. FICC may continue
As proposed, each loss allocation would be communicated to the Tier One Netting Members or Tier One Members, as applicable, by the issuance of a Loss Allocation Notice. Each Loss Allocation Notice would specify the relevant Event Period and the round to which it relates. The first Loss Allocation Notice in any first, second, or subsequent round would expressly state that such Loss Allocation Notice reflects the beginning of the first, second, or subsequent round, as the case may be, and that each Tier One Netting Member or Tier One Member, as applicable, in that round has five (5) Business Days from the issuance of such first Loss Allocation Notice for the round to notify FICC of its election to withdraw from membership with GSD or MBSD, as applicable, pursuant to proposed Section 7b of GSD Rule 4 or MBSD Rule 4, as applicable, and thereby benefit from its Loss Allocation Cap.
Proposed Section 7 of GSD Rule 4 and MBSD Rule 4 would also retain the requirement of loss allocation among Tier One Netting Members or Tier One Members, as applicable, if a loss or liability remains after the application of the Corporate Contribution, as described above. In contrast to the current Section 7 where FICC would assess the Required Fund Deposits of Tier One Netting Members or Tier One Members, as applicable, to allocate losses, under the proposal, FICC would require Tier One Netting Members or Tier One Members, as applicable, to pay their loss allocation amounts (leaving their Required Fund Deposits intact).
As proposed, each such member's pro rata share of losses and liabilities to be allocated in any round would be equal to (i) the member's Average RFD, divided by (ii) the sum of the Average RFD amounts of all members subject to loss allocation in such round. Each such member would have a maximum payment obligation with respect to any loss allocation round that would be equal to the greater of (x) its Required Fund Deposit on the first day of the applicable Event Period or (y) its Average RFD (such amount would be each member's “Loss Allocation Cap”). Therefore, the sum of the Loss Allocation Caps of the members subject to loss allocation would constitute the maximum amount that FICC would be permitted to allocate in each round. FICC would retain the loss allocation limit of $5 million for Inter-Dealer Broker Netting Members, or Non-IDB Brokers with respect to activities in their Segregated Broker Accounts, as discussed above.
As proposed, Section 7 of GSD Rule 4 and MBSD Rule 4, would also provide that, to the extent that a Tier One Netting Member's or Tier One Member's, as applicable, Loss Allocation Cap exceeds such member's Required Fund Deposit on the first day of the applicable Event Period, FICC may, in its discretion, retain any excess amounts on deposit from the member, up to the Loss Allocation Cap of the Tier One Netting Member or Tier One Member, as applicable.
As proposed, Tier One Netting Members or Tier One Members, as applicable, would have two (2) Business Days after FICC issues a first round Loss Allocation Notice to pay the amount specified in any such notice.
Under the proposal, if a Tier One Netting Member or Tier One Member, as applicable, fails to make its required payment in respect of a Loss Allocation Notice by the time such payment is due, FICC would have the right to proceed against such member as a Defaulting Member that has failed to satisfy an obligation in accordance with proposed Section 6 of GSD Rule 4 or MBSD Rule 4 described above. Members who wish to withdraw from membership would be required to comply with the requirements in proposed Section 7b of GSD Rule 4 and MBSD Rule 4, described further below. Specifically, proposed Section 7 of GSD Rule 4 and MBSD Rule 4 would provide that if, after notifying FICC of its election to withdraw from membership pursuant to proposed Section 7b of GSD Rule 4 or MBSD Rule 4, as applicable, the Tier One Netting Member or Tier One Member, as applicable, fails to comply with the provisions of proposed Section 7b of GSD Rule 4 or MBSD Rule 4, as applicable, its notice of withdrawal would be deemed void and any further losses resulting from the applicable Event Period may be allocated against it as if it had not given such notice.
FICC is proposing to delete the provisions in the current GSD Rule 4 and MBSD Rule 4 that require FICC to assess the Required Fund Deposit maintained by each Tier One Netting Member or Tier One Member, as applicable, an amount up to $50,000, in an equal basis per such member, before allocating losses to Tier One Netting Members or Tier One Members, as applicable, ratably, in accordance with each such member's Required Fund Deposit and Average Required FICC Clearing Fund Deposit or Average Required Clearing Fund Deposit, as applicable. FICC believes that in the event of a loss or liability, this assessment is unlikely to alleviate the need for loss mutualization and creates an unnecessary administrative burden for each Division. FICC believes that moving straight to the loss mutualization described herein would be more practical. This proposed change would also streamline each Division's loss allocation waterfall processes and align such processes with those of the other DTCC Clearing Agencies.
FICC is not proposing any substantive change to the provisions regarding Tier Two Members in current Section 7 of GSD Rule 4 and MBSD Rule 4, except to (i) add a subheading of “Tier Two Members” in the beginning of these provisions for ease of identification and (ii) add a paragraph that makes it clear that if a Tier Two Member fails to make
Proposed Section 7b of GSD Rule 4 and MBSD Rule 4 would include the provisions regarding withdrawal from membership currently covered by Section 7(g) of GSD Rule 4 and MBSD Rule 4. FICC believes that relocating the provisions on withdrawal from membership as it pertains to loss allocation, so that it comes right after the section on the loss allocation waterfall, would provide for the better organization of GSD Rule 4 and MBSD Rule 4. As proposed, the subheading for Section 7b of GSD Rule 4 and MBSD Rule 4 would read “Withdrawal Following Loss Allocation.”
Currently, Section 7(g) of GSD Rule 4 and MBSD Rule 4 provides that a member may, pursuant to current Section 13 of GSD Rule 3 or MBSD Rule 3, notify FICC by the Close of Business on the Business Day on which a payment in an amount necessary to cover losses allocated to such member after the application of its Required Fund Deposit is due, of its election to terminate its membership and thereby avail itself of a cap on loss allocation, which is currently its Required Fund Deposit as fixed on the Business Day the pro rata charge loss allocation notification is provided to such member.
As stated above, under the proposed rule change, Section 7 of GSD Rule 4 and MBSD Rule 4 would provide that a Tier One Netting Member or a Tier One Member, as applicable, who wishes to withdraw from membership in respect of a loss allocation must provide notice of its election to withdraw (“Loss Allocation Withdrawal Notice”) within five (5) Business Days from the issuance of the first Loss Allocation Notice in any round.
FICC is proposing to include a sentence in proposed Section 7b of GSD Rule 4 and MBSD Rule 4 to make it clear that if the Tier One Netting Member or Tier One Member, as applicable, fails to comply with the requirements set forth in that section, its Loss Allocation Withdrawal Notice will be deemed void, and such member will remain subject to further loss allocations pursuant to proposed Section 7 of GSD Rule 4 and MBSD Rule 4 as if it had not given such notice.
For better organization of the subject matter, FICC is also proposing to move the provision that covers members' obligations to eliminate any deficiency in their Required Fund Deposits from the last sentence in the first paragraph of current Section 7(g) of GSD Rule 4 and MBSD Rule 4 to proposed Section 9 of GSD Rule 4 and MBSD Rule 4.
As proposed, Section 8 of GSD Rule 4 and MBSD Rule 4 would cover the provisions on the return of a member's Clearing Fund deposit that are currently covered by Section 10 of GSD Rule 4 and MBSD Rule 4. Proposed Section 8's subheading would be “Return of Members' Clearing Fund Deposits.”
FICC is proposing changes to streamline and enhance the clarity and readability of this section, including adding language to clarify that a member's obligations to FICC would include both matured as well as contingent obligations, but is otherwise retaining the substantive provisions of this section.
FICC is proposing to renumber Section 8 of GSD Rule 4 and MBSD Rule 4, which addresses the timing of members' payment of the respective Division's Clearing Fund. Under the proposal, this section would be renumbered as Section 9 of GSD Rule 4 and MBSD Rule 4 and retitled to “Initial Required Fund Deposit and Changes in Members' Required Fund Deposits” to better reflect the subject matter of this section.
Currently, Section 8 of GSD Rule 4 and MBSD Rule 4 requires members to satisfy any increase in their Required Fund Deposit requirement within such time as FICC requires. FICC is proposing to clarify that at the time the increase becomes effective, the member's obligations to FICC will be determined in accordance with the increased Required Fund Deposit whether or not the member has satisfied such increased amount. FICC is also proposing to add language to clarify that (i) if FICC applies a GSD Netting Member's or an MBSD Clearing Member's Clearing Fund deposits as permitted pursuant to GSD Rule 4 or MBSD Rule 4, as applicable, FICC may take any and all actions with respect to the GSD Netting Member's or MBSD Clearing Member's Actual Deposit, including assignment, transfer, and sale of any Eligible Clearing Fund Securities, that FICC determines is appropriate, and (ii) if such application results in any deficiency in the GSD Netting Member's or MBSD Clearing Member's, as applicable, Required Fund Deposit, such member shall immediately replenish it. These clarifications are consistent with the Divisions' rights as set forth in current Sections 4 and 11 of GSD Rule 4 and current Sections 4 and 11 of MBSD Rule 4. In addition, the provisions in clause (ii) of the previous sentence is consistent with the requirements in current Section 1 of GSD Rule 4 and MBSD Rule 4 that a member must maintain its Required Fund Deposit.
As discussed above, for better organization of the subject matter, FICC is proposing to move the provision that covers members' obligations to eliminate any deficiency in their Required Fund Deposits from the last sentence in the first paragraph of current Section 7(g) of GSD Rule 4 and MBSD Rule 4 to proposed Section 9 of GSD Rule 4 and MBSD Rule 4.
Currently, Section 9 of GSD Rule 4 and MBSD Rule 4 addresses situations where a member has excess on deposit in the Clearing Fund (
FICC is proposing to renumber Section 9 as Section 10 for both GSD Rule 4 and MBSD Rule 4 and to retitle its subheading to “Excess Clearing Fund Deposits” to better reflect the subject matter of the provisions. FICC is not proposing any changes to this section except to streamline and clarify the provisions as well as to align GSD Rule 4 and MBSD Rule 4, including adding a sentence to clarify that nothing in this section limits FICC's rights under Section 7 of GSD Rule 3 or Section 6 of MBSD Rule 3, as applicable.
Current Section 11 of GSD Rule 4 and MBSD Rule 4 provides that FICC has certain rights with respect to the Clearing Fund. FICC is proposing to add a sentence which would make it clear that GSD Rule 4 or MBSD Rule 4, as applicable, would govern in the event of any conflict or inconsistency between such rule and any agreement between FICC and any member. FICC believes that this proposed change would facilitate members' understanding of the Rules and their obligations thereunder. It would also align the Rules with the Rules and Procedures of NSCC so as to provide consistent treatment for firms that are members of both FICC and NSCC.
FICC is proposing changes to GSD Rule 1 (Definitions), GSD Rule 3 (Ongoing Membership Requirements), GSD Rule 3A (Sponsoring Members and Sponsored Members), GSD Rule 3B (Centrally Cleared Institutional Triparty Service), GSD Rule 13 (Funds-Only Settlement), GSD Rule 18 (Special Provisions for Repo Transactions), GSD Rule 21A (Wind-Down of a Netting Member), GSD Rule 22B (Corporation Default), GSD Rule 41 (Cross Guaranty Agreements), GSD Rule 43 (Cross-Margining Arrangements), GSD Board Interpretations and Statements of Policy, and GSD Interpretive Guidance with Respect to Watch List Consequences. FICC is also proposing changes to MBSD Rule 1 (Definitions), MBSD Rule 3 (Ongoing Membership Requirements), MBSD Rule 5 (Trade Comparison), MBSD Rule 11 (Cash Settlement), MBSD Rule 17A (Corporation Default), MBSD Rule 32 (Cross Guaranty Agreements), and MBSD Interpretive Guidance with Respect to Watch List Consequences. FICC is proposing changes to these Rules in order to conform them with the proposed changes to GSD Rule 4 and MBSD Rule 4, as applicable, as well as to make certain technical changes to these Rules, as further described below.
Specifically, FICC is proposing to add the following defined terms to GSD Rule 1, in alphabetical order: Actual Deposit, Average RFD, CCIT Member Termination Date, CCIT Member Voluntary Termination Notice, Clearing Fund Cash, Corporate Contribution, Declared Non-Default Loss Event, Defaulting Member Event, Event Period, Excess Clearing Fund Deposit, Former Sponsored Members, Lender, Loss Allocation Cap, Loss Allocation Notice, Loss Allocation Withdrawal Notice, Sponsored Member Termination Date, Sponsored Member Voluntary Termination Notice, Sponsoring Member Termination Date, Sponsoring Member Voluntary Termination Notice, Termination Date, and Voluntary Termination Notice.
FICC is also proposing to add the following defined terms to MBSD Rule 1, in alphabetical order: Actual Deposit, Average RFD, Clearing Fund Cash, Corporate Contribution, Declared Non-Default Loss Event, Defaulting Member Event, Event Period, Excess Clearing Fund Deposit, Lender, Loss Allocation Cap, Loss Allocation Notice, Loss Allocation Withdrawal Notice, Termination Date, and Voluntary Termination Notice.
In addition, FICC is proposing technical changes (i) to delete the defined term “The Corporation” in GSD Rule 1 and replace it with “Corporation” in GSD Rule 1, (ii) to correct cross-references in Section 8 of MBSD Rule 5 and the definition of “Legal Risk” in GSD Rule 1, (iii) to update references to sections that would be changed under this proposal in Section 12 of GSD Rule 3, Sections 10 and 12(a) of GSD Rule 3A, Section 3(f) of GSD Rule 18, GSD Rule 21A, Sections 3(a), 3(b) and 4 of GSD Rule 41, Section 6 of GSD Rule 43, GSD Interpretive Guidance with Respect to Watch List Consequences, Sections 11, 14, and 15 of MBSD Rule 3, Section 3(b) of MBSD Rule 32, and MBSD Interpretive Guidance with Respect to Watch List Consequences, (iv) to update the reference to a subheading that would be changed under this proposal in Section 7 of GSD Rule 3B, and (v) to delete a reference to the Cross-Margining Agreement between FICC and NYPC that is no longer in effect. FICC believes that these proposed technical changes would ensure the Rules remain clear and accurate, which would in turn allow Members to readily understand their obligations under the Rules.
FICC is also proposing changes to the voluntary termination provisions in GSD Rule 3, GSD Rule 3A, GSD Rule 3B, and MBSD Rule 3 in order to ensure that termination provisions in the GSD Rules and MBSD Rules, whether voluntary or in response to a loss allocation, are consistent with one another to the extent appropriate.
Currently, the voluntary termination provisions in GSD Rule 3, GSD Rule 3A, GSD Rule 3B, and MBSD Rule 3 generally provide that a member may elect to terminate its membership by providing FICC with 10 days written notice of such termination. Such termination will not be effective until accepted by FICC, which shall be evidenced by a notice to FICC's members announcing the member's termination and the effective date of the termination, and that the terminating member will no longer be eligible to submit transactions to FICC as of the date of termination. This provision also provides that a member's voluntary termination of membership shall not affect its obligations to FICC.
Where appropriate, FICC is proposing changes to align the voluntary termination provisions in Section 13 of GSD Rule 3, Sections 2(i) and 3(e) of GSD Rule 3A, Section 6 of GSD Rule 3B, and Section 14 of MBSD Rule 3 with the proposed new Section 7b of GSD Rule 4 and MBSD Rule 4, given that they all address termination of membership. Specifically, in Section 13 of GSD Rule 3, FICC is proposing that when a GSD
The proposed change to Section 13 of GSD Rule 3 would also provide that if any trade is submitted to FICC either by the withdrawing GSD Member or its authorized submitter that is scheduled to settle on or after the Termination Date, the GSD Member's Voluntary Termination Notice would be deemed void and the GSD Member would remain subject to the GSD Rules as if it had not given such notice. Furthermore, FICC is proposing to add a sentence to Section 13 of GSD Rule 3 to refer GSD Members to Section 8 of GSD Rule 4 regarding provisions on the return of a GSD Member's Clearing Fund deposit and to specify that if an Event Period were to occur after a Tier One Netting Member has submitted its Voluntary Termination Notice but prior to the Termination Date, in order for such Tier One Netting Member to benefit from its Loss Allocation Cap pursuant to Section 7 of GSD Rule 4, the Tier One Netting Member would need to comply with the provisions of Section 7b of GSD Rule 4 and submit a Loss Allocation Withdrawal Notice, which notice, upon submission, would supersede and void any pending Voluntary Termination Notice previously submitted by the Tier One Netting Member.
Parallel changes are also being proposed to Section 2(i) of GSD Rule 3A and Section 14 of MBSD Rule 3 with additional language in Section 2(i) of GSD Rule 3A and Section 14 of MBSD Rule 3 making it clear that the acceptance by FICC of a member's Voluntary Termination Notice shall be no later than ten (10) Business Days after the receipt of such notice from the member, in order to provide certainty to members as well as to align these sections with the current Section 13 of GSD Rule 3.
With respect to Section 3(e) of GSD Rule 3A and Section 6 of GSD Rule 3B, changes similar to the ones described above in the previous paragraph are also being proposed for Sponsored Members and CCIT Members, except there would be no references to the return of a member's Clearing Fund deposits and to Loss Allocation Caps because they would not apply to these member types. In addition, FICC is proposing a technical change in Section 6 of GSD Rule 3B to reflect a defined term that would be changed under this proposal.
FICC is proposing to delete Section 15 of MBSD Rule 3 because FICC believes that this section is akin to a loss allocation provision and therefore would no longer be necessary under the proposed rule change, as the scenarios envisioned by Section 15 of MBSD Rule 3 would be governed by the proposed loss allocation provisions in MBSD Rule 4.
Under the proposal, Section 12(c) of GSD Rule 3A would also be revised to incorporate the concept of the Loss Allocation Cap and to reference the applicable proposed sections in GSD Rule 4 that would apply when a Sponsoring Member elects to terminate its status as a Sponsoring Member.
FICC is also proposing to delete an Interpretation of the Board of Directors of the Government Securities Clearing Corporation (the predecessor to GSD), which currently clarifies certain provisions of GSD Rule 4 and the extent to which the GSD Clearing Fund and other required deposits of GSD Netting Members may be applied to a loss or liability incurred by FICC. FICC is proposing this deletion because this interpretation would no longer be necessary following the proposed rule change. This is because the proposed rule change to GSD Rule 4 would cover the extent to which the GSD Clearing Fund and other collateral or assets of GSD Netting Members would be applied to a loss or liability incurred by FICC.
FICC is proposing changes to Section 11 of GSD Rule 4 and MBSD Rule 4. Specifically, FICC is proposing to replace “letters of credit” with “Eligible Letters of Credit,” which is already a defined term in the Rules. In addition, FICC is proposing to specify that a reference to 30 days means 30 calendar days.
FICC is proposing to delete “Remaining Loss” and “Other Loss” in Sections 12(a) and 12(b) of GSD Rule 3A, Section 5 of GSD Rule 13, Section 4 of GSD Rule 41, Section 6 of GSD Rule 43, Section 9(o) of MBSD Rule 11, and Section 4 of MBSD Rule 32 because these terms would no longer be used under the proposed GSD Rule 4 and MBSD Rule 4, and to add clarifying language that conforms to the proposed changes to GSD Rule 4 and MBSD Rule 4.
In addition, FICC is proposing changes to GSD Rule 22B (Corporation Default) and MBSD Rule 17A (Corporation Default). FICC is proposing to relocate the interpretational parenthetical in each rule to come right after the reference to GSD Rule 22A and MBSD Rule 17. FICC is proposing this change because, in the event of a Corporation Default, the portfolio of each GSD Member or MBSD Member, as applicable, would be closed out in the same way as the portfolio of a GSD Defaulting Member or MBSD Defaulting Member,
Beginning in August 2017, FICC conducted outreach to Members in order to provide them with advance notice of the proposed changes. As of the date of this filing, no written comments relating to the proposed changes have been received in response to this outreach. The Commission will be notified of any written comments received.
Pending Commission approval, FICC expects to implement this proposal promptly. Members would be advised of the implementation date of this proposal through issuance of a FICC Important Notice.
FICC believes that the proposed rule change is consistent with the requirements of the Act, and the rules and regulations thereunder applicable to a registered clearing agency. Specifically, FICC believes that the proposed rule change is consistent with Section 17A(b)(3)(F) of the Act
Section 17A(b)(3)(F) of the Act requires that the Rules be designed to promote the prompt and accurate clearance and settlement of securities transactions and to assure the safeguarding of securities and funds which are in the custody or control of each Division or for which it is responsible.
By modifying the calculation of FICC's corporate contribution, FICC would apply a mandatory fixed percentage of its General Business Risk Capital Requirements (as compared to the current Rules which provide for “up to” a percentage of retained earnings), which would provide greater transparency and accessibility to members as to how much FICC would contribute in the event of a loss or liability. By modifying the application of FICC's corporate contribution to apply to Declared Non-Default Loss Events, in addition to Defaulting Member Events, on a mandatory basis, FICC would expand the application of its corporate contribution beyond losses and liabilities from member defaults, which would better align the interests of FICC with those of its respective Division's members by stipulating a mandatory application of the Corporate Contribution to a Declared Non-Default Loss Event prior to any allocation of the loss among Tier One Netting Members or Tier One Members, as applicable. Taken together, these proposed rule changes would enhance the overall resiliency of each Division's loss allocation process by enhancing the calculation and application of FICC's Corporate Contribution, which is one of the key elements of each Division's loss allocation process. Moreover, by providing greater transparency and accessibility to members, as stated above, the proposed rule changes regarding the Corporate Contribution, including the proposed replenishment period and proposed allocation of FICC Corporate Contribution between Divisions, would allow members to better assess the adequacy of each Division's loss allocation process.
By introducing the concept of an Event Period, FICC would be able to group Defaulting Member Events and Declared Non-Default Loss Events occurring in a period of ten (10) Business Days for purposes of allocating losses to members. FICC believes that the Event Period would provide a defined structure for the loss allocation process to encompass potential sequential Defaulting Member Events or Declared Non-Default Loss Events that are likely to be closely linked to an initial event and/or market dislocation episode. Having this structure would enhance the overall resiliency of FICC's loss allocation process because FICC would be better equipped to address losses that may arise from multiple Defaulting Member Events and/or Declared Non-Default Loss Events that arise in quick succession. Moreover, the proposed Event Period structure would provide certainty for members concerning their maximum exposure to mutualized losses with respect to such events.
By introducing the concept of “rounds” (and accompanying Loss Allocation Notices) and applying this concept to the timing of loss allocation payments and the member withdrawal process in connection with the loss allocation process, FICC would (i) set forth a defined amount that it would allocate to members during each round (
By implementing a revised “look-back” period to calculate a member's loss allocation obligations and its Loss Allocation Cap, FICC would be able to capture a full calendar quarter of the member's activities and smooth out the impact from any abnormalities and/or arbitrariness that may have occurred. By determining a member's loss allocation obligations and its Loss Allocation Cap based on the greater of its Required Fund Deposit or the average thereof over a look-back period, FICC would be able to calculate a member's pro rata share of losses and liabilities based on the amount of risk that the member brings to FICC. These proposed rule changes would enhance the overall resiliency of each Division's loss allocation process because they would align a member's loss allocation obligation and its Loss Allocation Cap with the amount of risk that the member brings to FICC.
Taken together, the foregoing proposed rule changes would establish a stronger (for all the reasons discussed above) and clearer loss allocation process for each Division, which FICC believes would allow each Division to take timely action to address losses. The ability to timely address losses would allow each Division to continue to meet its clearance and settlement obligations, especially in circumstances that may involve a series of substantially contemporaneous loss events. Therefore, FICC believes that these proposed rule changes would promote the prompt and accurate clearance and settlement of securities transactions, consistent with Section 17A(b)(3)(F) of the Act.
By deleting certain vague and imprecise limiting language that could be interpreted as impairing FICC's ability to access the MBSD Clearing Fund to cover losses and liabilities incident to its clearance and settlement business outside the context of an MBSD Defaulting Member Event, as well as to cover certain liquidity needs, the proposed rule change to amend FICC's permitted use of MBSD Clearing Fund would enhance FICC's ability to ensure that it can continue its operations and clearance settlement services in an orderly manner in the event that it would be necessary or appropriate for FICC to access MBSD Clearing Fund deposits to address losses, liabilities or liquidity needs to meet its settlement obligations. Therefore, FICC believes that this proposed rule change would promote the prompt and accurate clearance and settlement of securities transactions, consistent with Section 17A(b)(3)(F) of the Act.
Rule 17Ad-22(e)(13) under the Act requires, in part, that FICC establish, implement, maintain and enforce written policies and procedures reasonably designed to ensure each
Rule 17Ad-22(e)(23)(i) under the Act requires FICC to establish, implement, maintain and enforce written policies and procedures reasonably designed to publicly disclose all relevant rules and material procedures, including key aspects of each Division's default rules and procedures.
FICC does not believe that the proposed rule changes to enhance the resiliency of each Division's loss allocation process would impact competition.
FICC does not believe the proposed rule change to delete certain vague and imprecise limiting language regarding FICC's use of MBSD Clearing Fund would impact competition.
FICC also does not believe that the proposed rule changes to (i) align the
Written comments relating to this proposed rule change have not been solicited or received. FICC will notify the Commission of any written comments received by FICC.
Within 45 days of the date of publication of this notice in the
(A) By order approve or disapprove such proposed rule change, or
(B) institute proceedings to determine whether the proposed rule change should be disapproved.
The proposal shall not take effect until all regulatory actions required with respect to the proposal are completed.
Interested persons are invited to submit written data, views and arguments concerning the foregoing, including whether the 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, pursuant to the provisions of the Government in the Sunshine Act, Pub. L. 94-409, that the Securities and Exchange Commission Fixed Income Market Structure Advisory Committee will hold a public meeting on Thursday, January 11, 2018 at 9:30 a.m.
The meeting will be held in Multi-Purpose Room LL-006 at the Commission's headquarters, 100 F Street NE, Washington, DC.
The meeting will begin at 9:30 a.m. and will be open to the public. Seating will be on a first-come, first-served basis. Doors will open at 9:00 a.m. Visitors will be subject to security checks. The meeting will be webcast on the Commission's website at
On December 15, 2017, the Commission published notice of the Committee meeting (Release No. 34-82338) indicating that the meeting is open to the public (except during that portion of the meeting reserved for an administrative work session during lunch) and inviting the public to submit written comments to the Committee. This Sunshine Act notice is being issued because a majority of the Commission may attend the meeting.
The agenda for the meeting will focus on liquidity in the bond markets as well as various administrative items.
For further information, please contact Brent J. Fields from the Office of the Secretary at (202) 551-5400.
Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934
The proposed rule change of FICC would adopt the Recovery & Wind-down Plan of FICC (“R&W Plan” or “Plan”). The R&W Plan would be maintained by FICC in compliance with Rule 17Ad-22(e)(3)(ii) under the Act by providing plans for the recovery and orderly wind-down of FICC necessitated by credit losses, liquidity shortfalls, losses from general business risk, or any other losses, as described below.
The proposed rule change would also (1) amend FICC's Government Securities Division (“GSD”) Rulebook (“GSD Rules”) in order to (a) adopt Rule 22D (Wind-down of the Corporation) and Rule 50 (Market Disruption and Force Majeure), and (b) make conforming changes to Rule 3A (Sponsoring Members and Sponsored Members), Rule 3B (Centrally Cleared Institutional Triparty Service) and Rule 13 (Funds-Only Settlement) related to the adoption of these Proposed Rules to the GSD Rules; (2) amend FICC's Mortgage-Backed Securities Division (“MBSD,” and, together with GSD, the “Divisions”) Clearing Rules (“MBSD Rules”) in order to (a) adopt Rule 17B (Wind-down of the Corporation) and Rule 40 (Market Disruption and Force Majeure); and (b) make conforming changes to Rule 3A (Cash Settlement Bank Members) related to the adoption of these Proposed Rules to the MBSD Rules; and (3) amend Rule 1 of the Electronic Pool Netting (“EPN”) Rules of MBSD (“EPN Rules”) in order to provide that EPN Users, as defined therein, are bound by proposed Rule 17B (Wind-down of the Corporation) and proposed Rule 40 (Market Disruption and Force Majeure) to be adopted to the MBSD Rules.
The Proposed Rules are designed to (1) facilitate the implementation of the R&W Plan when necessary and, in particular, allow FICC to effectuate its strategy for winding down and transferring its business; (2) provide Members and Limited Members with transparency around critical provisions of the R&W Plan that relate to their rights, responsibilities and obligations;
In its filing with the Commission, the clearing agency 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 clearing agency has prepared summaries, set forth in sections A, B, and C below, of the most significant aspects of such statements.
FICC is proposing to adopt the R&W Plan to be used by the Board and management of FICC in the event FICC encounters scenarios that could potentially prevent it from being able to provide its critical services as a going concern. The R&W Plan would identify (i) the recovery tools available to FICC to address the risks of (a) uncovered losses or liquidity shortfalls resulting from the default of one or more Members, and (b) losses arising from non-default events, such as damage to its physical assets, a cyber-attack, or custody and investment losses, and (ii) the strategy for implementation of such tools. The R&W Plan would also establish the strategy and framework for the orderly wind-down of FICC and the transfer of its business in the remote event the implementation of the available recovery tools does not successfully return FICC to financial viability.
As discussed in greater detail below, the R&W Plan would provide, among other matters, (i) an overview of the business of FICC and its parent, The Depository Trust & Clearing Corporation (“DTCC”); (ii) an analysis of FICC's intercompany arrangements and an existing link to another financial market infrastructures (“FMIs”); (iii) a description of FICC's services, and the criteria used to determine which services are considered critical; (iv) a description of the FICC and DTCC governance structure; (v) a description of the governance around the overall recovery and wind-down program; (vi) a discussion of tools available to FICC to mitigate credit/market and liquidity risks, including recovery indicators and triggers, and the governance around management of a stress event along a “Crisis Continuum” timeline; (vii) a discussion of potential non-default losses and the resources available to FICC to address such losses, including recovery triggers and tools to mitigate such losses; (viii) an analysis of the recovery tools' characteristics, including how they are comprehensive, effective, and transparent, how the tools provide appropriate incentives to Members to, among other things, control and monitor the risks they may present to FICC, and how FICC seeks to minimize the negative consequences of executing its recovery tools; and (ix) the framework and approach for the orderly wind-down and transfer of FICC's business, including an estimate of the time and costs to effect a recovery or orderly wind-down of FICC.
The R&W Plan would be structured as a roadmap, and would identify and describe the tools that FICC may use to effect a recovery from the events and scenarios described therein. Certain recovery tools that would be identified in the R&W Plan are based in the Rules (including the Proposed Rules) and, as such, descriptions of those tools would include descriptions of, and reference to, the applicable Rules and any related internal policies and procedures. Other recovery tools that would be identified in the R&W Plan are based in contractual arrangements to which FICC is a party, including, for example, existing committed or pre-arranged liquidity arrangements. Further, the R&W Plan would state that FICC may
Key factors considered in developing the R&W Plan and the types of tools available to FICC were its governance structure and the nature of the markets within which FICC operates. As a result of these considerations, many of the tools available to FICC that would be described in the R&W Plan are FICC's existing, business-as-usual risk management and default management tools, which would continue to be applied in scenarios of increasing stress. In addition to these existing, business-as-usual tools, the R&W Plan would describe FICC's other principal recovery tools, which include, for example, (i) identifying, monitoring and managing general business risk and holding sufficient liquid net assets funded by equity (“LNA”) to cover potential general business losses pursuant to the Clearing Agency Policy on Capital Requirements (“Capital Policy”),
The development of the R&W Plan is facilitated by the Office of Recovery & Resolution Planning (“R&R Team”) of DTCC.
As discussed in greater detail below, the Proposed Rules would define the procedures that may be employed in the event of FICC's wind-down and would provide for FICC's authority to take certain actions on the occurrence of a “Market Disruption Event,” as defined therein. Significantly, the Proposed Rules would provide Members and Limited Members with transparency and certainty with respect to these matters. The Proposed Rules would facilitate the implementation of the R&W Plan, particularly FICC's strategy for winding down and transferring its business, and would provide FICC with the legal basis to implement those aspects of the R&W Plan.
The R&W Plan is intended to be used by the Board and FICC's management in the event FICC encounters scenarios that could potentially prevent it from being able to provide its critical services as a going concern. The R&W Plan would be structured to provide a roadmap, define the strategy, and identify the tools available to FICC to either (i) recover in the event it experiences losses that exceed its prefunded resources (such strategies and tools referred to herein as the “Recovery Plan”) or (ii) wind-down its business in a manner designed to permit the continuation of its critical services in the event that such recovery efforts are not successful (such strategies and tools referred to herein as the “Wind-down Plan”). The description of the R&W Plan below is intended to highlight the purpose and expected effects of the material aspects of the R&W Plan, and to provide Members and Limited Members with appropriate transparency into these features.
The introduction to the R&W Plan would identify the document's purpose and its regulatory background, and would outline a summary of the Plan. The stated purpose of the R&W Plan is that it is to be used by the Board and FICC management in the event FICC encounters scenarios that could potentially prevent it from being able to provide its critical services as a going concern. The R&W Plan would be maintained by FICC in compliance with Rule 17Ad-22(e)(3)(ii) under the Act
The R&W Plan would describe DTCC's business profile, provide a summary of the services of FICC as offered by each of the Divisions, and identify the intercompany arrangements and links between FICC and other entities, most notably a link between GSD and Chicago Mercantile Exchange Inc. (“CME”), which is also an FMI. This overview section would provide a context for the R&W Plan by describing FICC's business, organizational structure and critical links to other entities. By providing this context, this section would facilitate the analysis of the potential impact of utilizing the recovery tools set forth in later sections of the Recovery Plan, and the analysis of the factors that would be addressed in implementing the Wind-down Plan.
DTCC is a user-owned and user-governed holding company and is the parent company of FICC and its affiliates, The Depository Trust Company (“DTC”) and National Securities Clearing Corporation (“NSCC”, and, together with FICC and DTC, the “Clearing Agencies”). The Plan would describe how corporate support services are provided to FICC from DTCC and DTCC's other subsidiaries through intercompany agreements under a shared services model.
The Plan would provide a description of the critical contractual and operational arrangements between FICC and other legal entities, including the cross-margining agreement between GSD and CME, which is also an FMI.
The Plan would define the criteria for classifying certain of FICC's services as “critical,” and would identify those critical services and the rationale for their classification. This section would provide an analysis of the potential systemic impact from a service disruption, and is important for evaluating how the recovery tools and the wind-down strategy would facilitate and provide for the continuation of FICC's critical services to the markets it serves. The criteria that would be used to identify an FICC service or function as critical would include consideration as to (1) whether there is a lack of alternative providers or products; (2) whether failure of the service could impact FICC's ability to perform its central counterparty services through either Division; (3) whether failure of the service could impact FICC's ability to perform its multilateral netting services through either Division and, as such, could impact the volume of transactions; (4) whether failure of the service could impact FICC's ability to perform its book-entry delivery and settlement services through either Division and, as such, could impact transaction costs; (5) whether failure of the service could impact FICC's ability to perform its cash payment processing services through either Division and, as such, could impact the flow of liquidity in the U.S. financial markets; and (6) whether the service is interconnected with other participants and processes within the U.S. financial system, for example, with other FMIs, settlement banks, and broker-dealers. The Plan would then list each of those services, functions or activities that FICC has identified as “critical” based on the applicability of these six criteria. GSD's critical services would include, for example, its Real-Time Trade Matching (“RTTM®”) service,
The evaluation of which services provided by FICC are deemed critical is important for purposes of determining how the R&W Plan would facilitate the continuity of those services. As discussed further below, while FICC's Wind-down Plan would provide for the transfer of all critical services to a transferee in the event FICC's wind-down is implemented, it would anticipate that any non-critical services that are ancillary and beneficial to a critical service, or that otherwise have substantial user demand from the continuing membership, would also be transferred.
The Plan would describe the governance structure of both DTCC and FICC. This section of the Plan would identify the ownership and governance model of these entities at both the Board of Directors and management levels. The Plan would state that the stages of escalation required to manage recovery under the Recovery Plan or to invoke FICC's wind-down under the Wind-down Plan would range from relevant business line managers up to the Board through FICC's governance structure. The Plan would then identify the parties responsible for certain activities under both the Recovery Plan and the Wind-down Plan, and would describe their respective roles. The Plan would identify the Risk Committee of the Board (“Board Risk Committee”) as being responsible for oversight of risk management activities at FICC, which include focusing on both oversight of risk management systems and processes designed to identify and manage various risks faced by FICC, and, due to FICC's critical role in the markets in which it operates, oversight of FICC's efforts to mitigate systemic risks that could impact those markets and the broader financial system.
The Plan would describe the governance of recovery efforts in response to both default losses and non-default losses under the Recovery Plan, identifying the groups responsible for those recovery efforts. Specifically, the Plan would state that the Management Risk Committee provides oversight of actions relating to the default of a Member, which would be reported and escalated to it through the GCRO, and the Management Committee provides oversight of actions relating to non-default events that could result in a loss, which would be reported and escalated to it from the DTCC Chief Financial Officer (“CFO”) and the DTCC Treasury group that reports to the CFO, and from other relevant subject matter experts based on the nature and circumstances of the non-default event.
Finally, the Plan would describe the role of the R&R Team in managing the overall recovery and wind-down program and plans for each of the Clearing Agencies.
The Recovery Plan is intended to be a roadmap of those actions that FICC may employ across both Divisions to monitor and, as needed, stabilize its financial condition. As each event that could lead to a financial loss could be unique in its circumstances, the Recovery Plan would not be prescriptive and would permit FICC to maintain flexibility in its use of identified tools and in the sequence in which such tools are used, subject to any conditions in the Rules or the contractual arrangement on which such tool is based. FICC's Recovery Plan would consist of (1) a description of the risk management surveillance, tools, and governance that FICC would employ across evolving stress scenarios that it may face as it transitions through a “Crisis Continuum,” described below; (2) a description of FICC's risk of losses that may result from non-default events, and the financial resources and recovery tools available to FICC to manage those risks and any resulting losses; and (3) an evaluation of the characteristics of the recovery tools that may be used in response to either default losses or non-default losses, as described in greater detail below. In all cases, FICC would act in accordance with the Rules, within the governance structure described in the R&W Plan, and in accordance with applicable regulatory oversight to address each situation in order to best protect FICC, the Members, and the markets in which it operates.
The Recovery Plan would provide context to its roadmap through this Crisis Continuum by describing FICC's ongoing management of credit, market and liquidity risk across the Divisions, and its existing process for measuring and reporting its risks as they align with established thresholds for its tolerance of those risks. The Recovery Plan would discuss the management of credit/market risk and liquidity exposures together, because the tools that address these risks can be deployed either separately or in a coordinated approach in order to address both exposures. FICC manages these risk exposures collectively to limit their overall impact on FICC and the memberships of the Divisions. As part of its market risk management strategy, FICC manages its credit exposure to Members by determining the appropriate required deposits to the GSD and MBSD Clearing Fund and monitoring its sufficiency, as provided for in the applicable Rules.
The Recovery Plan would outline the metrics and indicators that FICC has developed to evaluate a stress situation against established risk tolerance thresholds. Each risk mitigation tool identified in the Recovery Plan would include a description of the escalation thresholds that allow for effective and timely reporting to the appropriate internal management staff and committees, or to the Board. The Recovery Plan would make clear that these tools and escalation protocols would be calibrated across each phase of the Crisis Continuum. The Recovery Plan would also establish that FICC would retain the flexibility to deploy such tools either separately or in a coordinated approach, and to use other alternatives to these actions and tools as necessitated by the circumstances of a particular Member default in accordance with the applicable Rules. Therefore, the Recovery Plan would both provide FICC with a roadmap to follow within each phase of the Crisis Continuum, and would permit it to adjust its risk management measures to address the unique circumstances of each event.
The Recovery Plan would describe the conditions that mark each phase of the Crisis Continuum, and would identify actions that FICC could take as it transitions through each phase in order to both prevent losses from materializing through active risk management, and to restore the financial health of FICC during a period of stress.
The “stable market phase” of the Crisis Continuum would describe active risk management activities in the normal course of business. These activities would include (1) routine monitoring of margin adequacy through daily review of back testing and stress testing results that review the adequacy of the margin calculations for each of GSD and MBSD, and escalation of those results to internal and Board committees;
The Recovery Plan would describe some of the indicators of the “stressed market phase” of the Crisis Continuum, which would include, for example, volatility in market prices of certain assets where there is increased uncertainty among market participants about the fundamental value of those
Within the “Member default phase” of the Crisis Continuum, the Recovery Plan would provide a roadmap for the existing procedures that FICC would follow in the event of a Member default and any decision by FICC to cease to act for that Member.
The Recovery Plan would also identify financial resources available to FICC, pursuant to the Rules, to address losses arising out of a Member default. Specifically, GSD Rule 4 and MBSD Rule 4, as each are proposed to be amended by the Loss Allocation Filing, would provide that losses be satisfied first by applying a “Corporate Contribution,” and then, if necessary, by allocating remaining losses to non-defaulting Members.
The “recovery phase” of the Crisis Continuum would describe actions that FICC may take to avoid entering into a wind-down of its business. In order to provide for an effective and timely recovery, the Recovery Plan would describe two stages of this phase: (1) A recovery corridor, during which FICC may experience stress events or observe early warning indicators that allow it to evaluate its options and prepare for the recovery phase; and (2) the recovery phase, which would begin on the date that FICC issues the first Loss Allocation Notice of the second loss allocation round with respect to a given “Event Period.”
FICC expects that significant deterioration of liquidity resources would cause it to enter the recovery corridor stage of this phase, and, as such, the actions it may take at this stage would be aimed at replenishing those resources. Circumstances that could cause it to enter the recovery corridor may include, for example, a rapid and material change in market prices or substantial intraday activity volume by the defaulting Member, neither of which are mitigated by intraday margin calls, or subsequent defaults by other Members or Affiliated Families during a compressed time period. Throughout the recovery corridor, FICC would monitor the adequacy of the Divisions' respective resources and the expected timing of replenishment of those resources, and would do so through the monitoring of certain metrics referred to as “Corridor Indicators.”
The majority of the Corridor Indicators, as identified in the Recovery Plan, relate directly to conditions that may require either Division to adjust its strategy for hedging and liquidating a defaulting Member's portfolio, and any such changes would include an assessment of the status of the Corridor Indicators. Corridor Indicators would include, for example, effectiveness and speed of FICC's efforts to close out the portfolio of the defaulting Member, and an impediment to the availability of its financial resources. For each Corridor Indicator, the Recovery Plan would identify (1) measures of the indicator, (2) evaluations of the status of the indicator, (3) metrics for determining the status of the deterioration or improvement of the indicator, and (4) “Corridor Actions,” which are steps that may be taken to improve the status of the indicator,
The Recovery Plan would also describe the reporting and escalation of the status of the Corridor Indicators throughout the recovery corridor. Significant deterioration of a Corridor Indicator, as measured by the metrics set out in the Recovery Plan, would be escalated to the Board. FICC management would review the Corridor Indicators and the related metrics at least annually, and would modify these metrics as necessary in light of observations from simulations of Member defaults and other analyses. Any proposed modifications would be reviewed by the Management Risk Committee and the Board Risk Committee. The Recovery Plan would estimate that FICC may remain in the recovery corridor stage between one day and two weeks. This estimate is based on historical data observed in past
The Recovery Plan would outline steps by which FICC may allocate its losses, and would state that the available tools related to allocation of losses would only be used in this and subsequent phases of the Crisis Continuum.
As stated above, the Recovery Plan would state that FICC will have entered the recovery phase on the date that it issues the first Loss Allocation Notice of the second loss allocation round with respect to a given Event Period. The Recovery Plan would provide that, during the recovery phase, FICC would continue and, as needed, enhance, the monitoring and remedial actions already described in connection with previous phases of the Crisis Continuum, and would remain in the recovery phase until its financial resources are expected to be or are fully replenished, or until the Wind-down Plan is triggered, as described below.
The Recovery Plan would describe governance for the actions and tools that may be employed within the Crisis Continuum, which would be dictated by the facts and circumstances applicable to the situation being addressed. Such facts and circumstances would be measured by the Corridor Indicators applicable to that phase of the Crisis Continuum, and, in most cases, by the measures and metrics that are assigned to those Corridor Indicators, as described above. Each of these indicators would have a defined review period and escalation protocol that would be described in the Recovery Plan. The Recovery Plan would also describe the governance procedures around a decision to cease to act for a Member, pursuant to the applicable Division's Rules, and around the management and oversight of the subsequent liquidation of the defaulting Member's portfolio. The Recovery Plan would state that, overall, FICC would retain flexibility in accordance with each Division's Rules, its governance structure, and its regulatory oversight, to address a particular situation in order to best protect FICC and the Members, and to meet the primary objectives, throughout the Crisis Continuum, of minimizing losses and, where consistent and practicable, minimizing disturbance to affected markets.
The Plan would identify the two categories of financial resources FICC maintains to cover losses and expenses arising from non-default risks or events as (1) LNA, maintained, monitored, and managed pursuant to the Capital Policy, which include (a) amounts held in satisfaction of the General Business Risk Capital Requirement,
The Plan would address the process by which the CFO and the DTCC Treasury group would determine which available LNA resources are most appropriate to cover a loss that is caused by a non-default event. This determination involves an evaluation of a number of factors, including the current and expected size of the loss, the expected time horizon over when the loss or additional expenses would materialize, the current and projected available LNA, and the likelihood LNA could be successfully replenished pursuant to the Replenishment Plan, if triggered.
The Plan would also describe proposed GSD Rule 50 (Market Disruption and Force Majeure) and proposed MBSD Rule 40 (Market Disruption and Force Majeure), which FICC is proposing to adopt in the GSD Rule and MBSD Rules, respectively. This Proposed Rule would provide transparency around how FICC would address extraordinary events that may occur outside its control. Specifically, the Proposed Rule would define a “Market Disruption Event” and the governance around a determination that such an event has occurred. The Proposed Rule would also describe FICC's authority to take actions during the pendency of a Market Disruption Event that it deems appropriate to address such an event and facilitate the continuation of its services, if practicable, as described in greater detail below.
The Plan would describe the interaction between the Proposed Rule and FICC's existing processes and procedures addressing business continuity management and disaster recovery (generally, the “BCM/DR procedures”), making clear that the Proposed Rule is designed to support those BCM/DR procedures and to address circumstances that may be exogenous to FICC and not necessarily addressed by the BCM/DR procedures. Finally, the Plan would describe that, because the operation of the Proposed Rule is specific to each applicable Market Disruption Event, the Proposed Rule does not define a time limit on its application. However, the Plan would note that actions authorized by the Proposed Rule would be limited to the pendency of the applicable Market Disruption Event, as made clear in the Proposed Rule. Overall, the Proposed Rule is designed to mitigate risks caused by Market Disruption Events and, thereby, minimize the risk of financial loss that may result from such events.
The Wind-down Plan would provide the framework and strategy for the orderly wind-down of FICC if the use of the recovery tools described in the Recovery Plan do not successfully return FICC to financial viability. While FICC believes that, given the comprehensive nature of the recovery tools, such event is extremely unlikely, as described in greater detail below, FICC is proposing a wind-down strategy that provides for (1) the transfer of FICC's business, assets and memberships of both Divisions to another legal entity, (2) such transfer being effected in connection with proceedings under Chapter 11 of the U.S. Federal Bankruptcy Code,
In describing the transfer approach to FICC's Wind-down Plan, the Plan would identify the factors that FICC considered in developing this approach, including the fact that FICC does not own material assets that are unrelated to its clearance and settlement activities. As such, a business reorganization or “bail-in” of debt approach would be unlikely to mitigate significant losses. Additionally, FICC's approach was developed in consideration of its critical and unique position in the U.S. markets, which precludes any approach that would cause FICC's critical services to no longer be available.
First, the Wind-down Plan would describe the potential scenarios that could lead to the wind-down of FICC, and the likelihood of such scenarios. The Wind-down Plan would identify the time period leading up to a decision to wind-down FICC as the “Runway Period.” This period would follow the implementation of any recovery tools, as it may take a period of time, depending on the severity of the market stress at that time, for these tools to be effective or for FICC to realize a loss sufficient to cause it to be unable to effectuate settlements and repay its obligations.
The trigger for implementing the Wind-down Plan would be a determination by the Board that recovery efforts have not been, or are unlikely to be, successful in returning FICC to viability as a going concern. As described in the Plan, FICC believes this is an appropriate trigger because it is both broad and flexible enough to cover a variety of scenarios, and would align incentives of FICC and the Members to avoid actions that might undermine FICC's recovery efforts. Additionally, this approach takes into account the characteristics of FICC's recovery tools and enables the Board to consider (1) the presence of indicators of a successful or unsuccessful recovery, and (2) potential for knock-on effects of continued iterative application of FICC's recovery tools.
The Wind-down Plan would describe the general objectives of the transfer strategy, and would address assumptions regarding the transfer of FICC's critical services, business, assets and membership, and the assignment of GSD's link with another FMI, to another legal entity that is legally, financially, and operationally able to provide FICC's critical services to entities that wish to continue their membership following the transfer (“Transferee”). The Wind-down Plan would provide that the Transferee would be either (1) a third party legal entity, which may be an existing or newly established legal entity or a bridge entity formed to operate the business on an interim basis to enable the business to be transferred subsequently (“Third Party Transferee”); or (2) an existing, debt-free failover legal entity established ex-ante
In order to effect a timely transfer of its services and minimize the market and operational disruption of such transfer, FICC would expect to transfer all of its critical services and any non-critical services that are ancillary and beneficial to a critical service, or that otherwise have substantial user demand from the continuing membership. Following the transfer, the Wind-down Plan would anticipate that the Transferee and its continuing membership would determine whether to continue to provide any transferred non-critical service on an ongoing basis, or terminate the non-critical service following some transition period. FICC's Wind-down Plan would anticipate that the Transferee would enter into a transition services agreement with DTCC so that DTCC would continue to provide the shared services it currently provides to FICC, including staffing, infrastructure and operational support. The Wind-down Plan would also anticipate the assignment of FICC's link arrangements, including its arrangements with clearing banks and GSD's cross-margining arrangement with CME, described above, to the Transferee.
The Wind-down Plan would provide that, following the effectiveness of the transfer to the Transferee, the wind-down of FICC would involve addressing any residual claims against FICC through the bankruptcy process and liquidating the legal entity. As such, and as stated above, the Wind-down Plan does not contemplate FICC continuing to provide services in any capacity following the transfer time, and any services not transferred would be terminated. The Wind-down Plan would also identify the key dependencies for the effectiveness of the transfer, which include regulatory approvals that would permit the Transferee to be legally qualified to provide the transferred services from and after the transfer, and approval by the applicable bankruptcy court of, among other things, the proposed sale, assignments, and transfers to the Transferee.
The Wind-down Plan would address governance matters related to the execution of the transfer of FICC's business and its wind-down. The Wind-down Plan would address the duties of the Board to execute the wind-down of FICC in conformity with (1) the Rules, (2) the Board's fiduciary duties, which mandate that it exercise reasonable business judgment in performing these duties, and (3) FICC's regulatory obligations under the Act as a registered clearing agency. The Wind-down Plan would also identify certain factors the Board may consider in making these decisions, which would include, for example, whether FICC could safely stabilize the business and protect its value without seeking bankruptcy protection, and FICC's ability to continue to meet its regulatory requirements.
The Wind-down Plan would describe (1) actions FICC or DTCC may take to prepare for wind-down in the period before FICC experiences any financial distress, (2) actions FICC would take both during the recovery phase and the Runway Period to prepare for the execution of the Wind-down Plan, and (3) actions FICC would take upon commencement of bankruptcy proceedings to effectuate the Wind-down Plan.
Finally, the Wind-down Plan would include an analysis of the estimated time and costs to effectuate the plan, and would provide that this estimate be reviewed and approved by the Board annually. In order to estimate the length of time it might take to achieve a recovery or orderly wind-down of FICC's critical operations, as contemplated by the R&W Plan, the Wind-down Plan would include an analysis of the possible sequencing and length of time it might take to complete an orderly wind-down and transfer of critical operations, as described in earlier sections of the R&W Plan. The Wind-down Plan would also include in this analysis consideration of other factors, including the time it might take to complete any further attempts at recovery under the Recovery Plan. The Wind-down Plan would then multiply this estimated length of time by FICC's average monthly operating expenses, including adjustments to account for changes to FICC's profit and expense profile during these circumstances, over the previous twelve months to determine the amount of LNA that it should hold to achieve a recovery or orderly wind-down of FICC's critical operations. The estimated wind-down costs would constitute the “Recovery/Wind-down Capital Requirement” under the Capital Policy.
The R&W Plan is designed as a roadmap, and the types of actions that may be taken both leading up to and in connection with implementation of the Wind-down Plan would be primarily addressed in other supporting documentation referred to therein.
The Wind-down Plan would address proposed GSD Rule 22D and MBSD Rule 17B (Wind-down of the Corporation), which would be adopted to facilitate the implementation of the Wind-down Plan, and are discussed below.
In connection with the adoption of the R&W Plan, FICC is proposing to adopt the Proposed Rules, each described below. The Proposed Rules
The proposed GSD Rule 22D and MBSD Rule 17B (collectively, “Wind-down Rule”) would be adopted by both Divisions to facilitate the execution of the Wind-down Plan. The Wind-down Rule would include a proposed set of defined terms that would be applicable only to the provisions of this Proposed Rule. The Wind-down Rule would make clear that a wind-down of FICC's business would occur (1) after a decision is made by the Board, and (2) in connection with the transfer of FICC's services to a Transferee, as described therein. Because GSD and MBSD are both divisions of FICC, the individual Wind-down Rules are designed to work together. A decision by the Board to initiate the Wind-down Plan would be pursuant to, and trigger the provisions of, the Wind-down Rule of each Division simultaneously. Generally, the proposed Wind-down Rule is designed to create clear mechanisms for the transfer of Eligible Members, Eligible Limited Members, and Settling Banks (as these terms would be defined in the Wind-down Rule), and FICC's business in order to provide for continued access to critical services and to minimize disruption to the markets in the event the Wind-down Plan is initiated.
The Proposed Rule would make clear, however, that neither Division would accept any transactions for processing after the Last Transaction Acceptance Date or which are designated to settle after the Last Settlement Date for such Division. Any transactions to be processed and/or settled after the Transfer Time would be required to be submitted to the Transferee, and would not be FICC's responsibility.
The proposed Wind-down Rule would address other ex-ante matters, including provisions providing that its Members, Limited Members and Settling Banks (1) will assist and cooperate with FICC to effectuate the transfer of FICC's business to a Transferee, (2) consent to the provisions of the rule, and (3) grant FICC power of attorney to execute and deliver on their behalf documents and instruments that may be requested by the Transferee. Finally, the Proposed Rule would include a limitation of liability for any actions taken or omitted to be taken by FICC pursuant to the Proposed Rule.
The proposed GSD Rule 50 and MBSD Rule 40 (Market Disruption and Force Majeure) (collectively, “Force Majeure Rule”) would address FICC's authority to take certain actions upon the occurrence, and during the pendency, of a “Market Disruption Event,” as defined therein. Because GSD and MBSD are both divisions of FICC, the individual Force Majeure Rules are designed to work together. A decision by the Board or management of FICC that a Market Disruption Event has occurred in accordance with the Force Majeure Rule would trigger the provisions of the Force Majeure Rule of each Division simultaneously. The Proposed Rule is designed to clarify FICC's ability to take actions to address extraordinary events outside of the control of FICC and of the memberships of the Divisions, and to mitigate the effect of such events by facilitating the continuity of services (or, if deemed necessary, the temporary suspension of services). To that end, under the proposed Force Majeure Rule, FICC would be entitled, during the pendency of a Market Disruption Event, to (1) suspend the provision of any or all services, and (2) take, or refrain from taking, or require its Members and Limited Members to take, or refrain from taking, any actions it considers appropriate to address, alleviate, or mitigate the event and facilitate the continuation of FICC's services as may be practicable.
The proposed Force Majeure Rule would identify the events or circumstances that would be considered a “Market Disruption Event,” including, for example, events that lead to the suspension or limitation of trading or banking in the markets in which FICC operates, or the unavailability or failure of any material payment, bank transfer, wire or securities settlement systems. The proposed Force Majeure Rule would define the governance procedures for how FICC would determine whether, and how, to implement the provisions of the rule. A determination that a Market Disruption Event has occurred would generally be made by the Board, but the Proposed Rule would provide for limited, interim delegation of authority to a specified officer or management committee if the Board would not be able to take timely action. In the event such delegated authority is exercised, the proposed Force Majeure Rule would require that the Board be convened as promptly as practicable, no later than five Business Days after such determination has been made, to ratify, modify, or rescind the action. The proposed Force Majeure Rule would also provide for prompt notification to the Commission, and advance consultation with Commission staff, when practicable. The Proposed Rule would require Members and Limited Members to notify FICC immediately upon becoming aware of a Market Disruption Event, and, likewise, would require FICC to notify Members and Limited Members if it has triggered the Proposed Rule.
Finally, the Proposed Rule would address other related matters, including a limitation of liability for any failure or delay in performance, in whole or in part, arising out of the Market Disruption Event.
In order to incorporate the Proposed Rules into the Rules and the EPN Rules,
FICC believes that the proposal is consistent with the requirements of the Act and the rules and regulations thereunder applicable to a registered clearing agency. In particular, FICC believes that the R&W Plan, each of the Proposed Rules and the other proposed changes to the Rules and the EPN Rules are consistent with Section 17A(b)(3)(F) of the Act,
Section 17A(b)(3)(F) of the Act requires, in part, that the rules of FICC be designed to promote the prompt and accurate clearance and settlement of securities transactions, and to assure the safeguarding of securities and funds which are in the custody or control of FICC or for which it is responsible.
The Wind-down Plan and the proposed Wind-down Rule, which would facilitate the implementation of the Wind-down Plan, would also promote the prompt and accurate clearance and settlement of securities transactions and assure the safeguarding of securities and funds which are in the custody or control of FICC or for which it is responsible. The Wind-down Plan and the proposed Wind-down Rule would collectively establish a framework for the transfer and orderly wind-down of FICC's business. These proposals would establish clear mechanisms for the transfer of FICC's critical services and membership. By doing so, the Wind-down Plan and this Proposed Rule are designed to facilitate the continuity of FICC's critical services and enable Members and Limited Members to maintain access to FICC's services through the transfer of the Divisions' memberships in the event the Wind-down Plan is triggered by the Board. Therefore, by facilitating the continuity of FICC's critical clearance and settlement services, FICC believes the proposals would promote the prompt and accurate clearance and settlement of securities transactions. Further, by creating a framework for the transfer and orderly wind-down of FICC's business, FICC believes the proposals would enhance the safeguarding of securities and funds which are in the custody or control of FICC or for which it is responsible.
Finally, the other proposed changes to the Rules and the EPN Rules would clarify the application of the Proposed Rules to certain types of Limited Members and would enable these Limited Members to readily understand their rights and obligations. As such, FICC believes these proposed changes would enable Limited Members that are governed by the applicable rules to have a better understanding of those rules and, thereby, would assist in promoting the prompt and accurate clearance and settlement of securities transactions.
Therefore, FICC believes the R&W Plan, each of the Proposed Rules, and the other proposed changes are consistent with the requirements of Section 17A(b)(3)(F) of the Act.
Rule 17Ad-22(e)(3)(ii) under the Act requires FICC to establish, implement, maintain and enforce written policies and procedures reasonably designed to maintain a sound risk management framework for comprehensively managing legal, credit, liquidity, operational, general business, investment, custody, and other risks that arise in or are borne by the covered clearing agency, which includes plans for the recovery and orderly wind-down of the covered clearing agency necessitated by credit losses, liquidity shortfalls, losses from general business risk, or any other losses.
The R&W Plan would be maintained by FICC in compliance with Rule 17Ad-22(e)(3)(ii) in that it provides plans for the recovery and orderly wind-down of FICC necessitated by credit losses, liquidity shortfalls, losses from general business risk, or any other losses, as described above.
The Wind-down Plan would be triggered by a determination by the Board that recovery efforts have not been, or are unlikely to be, successful in returning FICC to viability as a going concern. Once triggered, the Wind-down Plan would set forth clear mechanisms for the transfer of the memberships of both Divisions and FICC's business, and would be designed to facilitate continued access to FICC's critical services and to minimize market impact of the transfer. By establishing the framework and strategy for the execution of the transfer and wind-down of FICC in order to facilitate continuous access to FICC's critical services, the Wind-down Plan establishes a plan for the orderly wind-down of FICC. Therefore, FICC believes the R&W Plan would provide plans for the recovery and orderly wind-down of the covered clearing agency necessitated by credit losses, liquidity shortfalls, losses from general business risk, or any other losses, and, as such, meets the
As described in greater detail above, the Proposed Rules are designed to facilitate the execution of the R&W Plan, provide Members and Limited Members with transparency regarding the material provisions of the Plan, and provide FICC with a legal basis for implementation of those provisions. As such, FICC also believes the Proposed Rules meet the requirements of Rule 17Ad-22(e)(3)(ii).
FICC has evaluated the recovery tools that would be identified in the Recovery Plan and has determined that these tools are comprehensive, effective, and transparent, and that such tools provide appropriate incentives to Members to manage the risks they present. The recovery tools, as outlined in the Recovery Plan and in the proposed Force Majeure Rule, provide FICC with a comprehensive set of options to address its material risks and support the resiliency of its critical services under a range of stress scenarios. FICC also believes the recovery tools are effective, as FICC has both legal basis and operational capability to execute these tools in a timely and reliable manner. Many of the recovery tools are provided for in the Rules; Members are bound by the Rules through their membership agreements with FICC, and the Rules are adopted pursuant to a framework established by Rule 19b-4 under the Act,
The majority of the recovery tools are also transparent, as they are, or are proposed to be, included in the Rules, which are publicly available. FICC believes the recovery tools also provide appropriate incentives to Members, as they are designed to control the amount of risk they present to FICC's clearance and settlement system. Members' financial obligations to FICC, particularly their required deposits to the applicable Division's Clearing Fund, are measured by the risk posed by the Members' activity in FICC's systems, which incentivizes them to manage that risk which would correspond to lower financial obligations. Finally, FICC's Recovery Plan provides for a continuous evaluation of the systemic consequences of executing its recovery tools, with the goal of minimizing their negative impact. The Recovery Plan would outline various indicators over a timeline of increasing stress, the Crisis Continuum, with escalation triggers to FICC management or the Board, as appropriate. This approach would allow for timely evaluation of the situation and the possible impacts of the use of a recovery tool in order to minimize the negative effects of the stress scenario. Therefore, FICC believes that the recovery tools that would be identified and described in its Recovery Plan, including the authority provided to it in the proposed Force Majeure Rule, would meet the criteria identified within guidance published by the Commission in connection with the adoption of Rule 17Ad-22(e)(3)(ii).
Therefore, FICC believes the R&W Plan and each of the Proposed Rules are consistent with Rule 17Ad-22(e)(3)(ii).
Rule 17Ad-22(e)(15)(ii) under the Act requires FICC to establish, implement, maintain and enforce written policies and procedures reasonably designed to identify, monitor, and manage its general business risk and hold sufficient LNA to cover potential general business losses so that FICC can continue operations and services as a going concern if those losses materialize, including by holding LNA equal to the greater of either (x) six months of the covered clearing agency's current operating expenses, or (y) the amount determined by the board of directors to be sufficient to ensure a recovery or orderly wind-down of critical operations and services of the covered clearing agency.
FICC does not believe the proposal would have any impact, or impose any burden, on competition not necessary or appropriate in furtherance of the purpose of the Act.
The R&W Plan and each of the Proposed Rules have been developed and documented in order to satisfy applicable regulatory requirements, as discussed above.
With respect to the Recovery Plan, the proposal generally reflects FICC's existing tools and existing internal procedures. Existing tools that would have a direct impact on the rights, responsibilities or obligations of Members are reflected in the existing Rules or are proposed to be included in the Rules. Accordingly, the Recovery Plan and the proposed Force Majeure Rule are intended to provide a roadmap, define the strategy and identify the tools available to FICC in connection with its recovery efforts. By proposing to enhance FICC's existing internal management and its regulatory compliance related to its recovery efforts, FICC does not believe the Recovery Plan or the proposed Force
With respect to the Wind-down Plan and the proposed Wind-down Rule, which facilitate the execution of the Wind-down Plan, the proposal would operate to effect the transfer of all eligible Members and Limited Members of both Divisions to the Transferee, and would not prohibit any market participant from either bidding to become the Transferee or from applying for membership with the Transferee. The proposal also would not prohibit any Member or Limited Member from withdrawing from FICC prior to the Transfer Time, as is permitted under the Rules today, or from applying for membership with the Transferee. Therefore, as the proposal would treat each similarly situated Member identically under the Wind-down Plan and this Proposed Rule, FICC does not believe the Wind-down Plan or the proposed Wind-down Rule would have any impact, or impose any burden, on competition.
FICC does not believe that the other proposed changes to the Rules and the EPN Rules would have any impact on competition because these proposed changes to incorporate the Proposed Rules into the Rules and the EPN Rules are technical clarifications, which would not, on their own, change FICC's current practices or the rights or obligations of the Members or EPN Users.
While FICC has not solicited or received any written comments relating to this proposal, FICC has conducted outreach to its Members in order to provide them with notice of the proposal. FICC will notify the Commission of any written comments received by FICC.
Within 45 days of the date of publication of this notice in the
(A) By order approve or disapprove such proposed rule change, or
(B) institute proceedings to determine whether the proposed rule change should be disapproved.
The proposal shall not take effect until all regulatory actions required with respect to the proposal are completed.
Interested persons are invited to submit written data, views and arguments concerning the foregoing, including whether the 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 proposed rule change of DTC would (1) adopt the Recovery & Wind-down Plan of DTC (“R&W Plan” or “Plan”); and (2) amend the Rules, By-Laws and Organization Certificate of DTC (“Rules”)
The R&W Plan would be maintained by DTC in compliance with Rule 17Ad-22(e)(3)(ii) under the Act by providing
In its filing with the Commission, the clearing agency 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 clearing agency has prepared summaries, set forth in sections A, B, and C below, of the most significant aspects of such statements.
DTC is proposing to adopt the R&W Plan to be used by the Board and management in the event DTC encounters scenarios that could potentially prevent it from being able to provide its critical services as a going concern. The R&W Plan would identify (i) the recovery tools available to DTC to address the risks of (a) uncovered losses or liquidity shortfalls resulting from the default of one or more of its Participants, and (b) losses arising from non-default events, such as damage to its physical assets, a cyber-attack, or custody and investment losses, and (ii) the strategy for implementation of such tools. The R&W Plan would also establish the strategy and framework for the orderly wind-down of DTC and the transfer of its business in the remote event the implementation of the available recovery tools does not successfully return DTC to financial viability.
As discussed in greater detail below, the R&W Plan would provide, among other matters, (i) an overview of the business of DTC and its parent, The Depository Trust & Clearing Corporation (“DTCC”); (ii) an analysis of DTC's intercompany arrangements and critical links to other financial market infrastructures (“FMIs”); (iii) a description of DTC's services, and the criteria used to determine which services are considered critical; (iv) a description of the DTC and DTCC governance structure; (v) a description of the governance around the overall recovery and wind-down program; (vi) a discussion of tools available to DTC to mitigate credit/market and liquidity risks, including recovery indicators and triggers, and the governance around management of a stress event along a “Crisis Continuum” timeline; (vii) a discussion of potential non-default losses and the resources available to DTC to address such losses, including recovery triggers and tools to mitigate such losses; (viii) an analysis of the recovery tools' characteristics, including how they are comprehensive, effective, and transparent, how the tools provide appropriate incentives to Participants to, among other things, control and monitor the risks they may present to DTC, and how DTC seeks to minimize the negative consequences of executing its recovery tools; and (ix) the framework and approach for the orderly wind-down and transfer of DTC's business, including an estimate of the time and costs to effect a recovery or orderly wind-down of DTC.
The R&W Plan would be structured as a roadmap, and would identify and describe the tools that DTC may use to effect a recovery from the events and scenarios described therein. Certain recovery tools that would be identified in the R&W Plan are based in the Rules (including the Proposed Rules) and, as such, descriptions of those tools would include descriptions of, and reference to, the applicable Rules and any related internal policies and procedures. Other recovery tools that would be identified in the R&W Plan are based in contractual arrangements to which DTC is a party, including, for example, existing committed or pre-arranged liquidity arrangements. Further, the R&W Plan would state that DTC may develop further supporting internal guidelines and materials that may provide operationally for matters described in the Plan, and that such documents would be supplemental and subordinate to the Plan.
Key factors considered in developing the R&W Plan and the types of tools available to DTC were its governance structure and the nature of the markets within which DTC operates. As a result of these considerations, many of the tools available to DTC that would be described in the R&W Plan are DTC's existing, business-as-usual risk management and default management tools, which would continue to be applied in scenarios of increasing stress. In addition to these existing, business-as-usual tools, the R&W Plan would describe DTC's other principal recovery tools, which include, for example, (i) identifying, monitoring and managing general business risk and holding sufficient liquid net assets funded by equity (“LNA”) to cover potential general business losses pursuant to the Clearing Agency Policy on Capital Requirements (“Capital Policy”),
The development of the R&W Plan is facilitated by the Office of Recovery & Resolution Planning (“R&R Team”) of DTCC.
As discussed in greater detail below, the Proposed Rules would define the procedures that may be employed in the event of a DTC wind-down, and would provide for DTC's authority to take certain actions on the occurrence of a “Market Disruption Event,” as defined therein. Significantly, the Proposed Rules would provide Participants with transparency and certainty with respect to these matters. The Proposed Rules would facilitate the implementation of the R&W Plan, particularly DTC's strategy for winding down and transferring its business, and would provide DTC with the legal basis to implement those aspects of the R&W Plan.
The R&W Plan is intended to be used by the Board and DTC's management in the event DTC encounters scenarios that could potentially prevent it from being able to provide its critical services as a going concern. The R&W Plan would be structured to provide a roadmap, define the strategy, and identify the tools available to DTC to either (i) recover, in the event it experiences losses that exceed its prefunded resources (such strategies and tools referred to herein as the “Recovery Plan”) or (ii) wind-down its business in a manner designed to permit the continuation of its critical services in the event that such recovery efforts are not successful (such strategies and tools referred to herein as the “Wind-down Plan”). The description of the R&W Plan below is intended to highlight the purpose and expected effects of the material aspects of the R&W Plan, and to provide Participants with appropriate transparency into these features.
The introduction to the R&W Plan would identify the document's purpose and its regulatory background, and would outline a summary of the Plan. The stated purpose of the R&W Plan is that it is to be used by the Board and DTC management in the event DTC encounters scenarios that could potentially prevent it from being able to provide its critical services as a going concern. The R&W Plan would be maintained by DTC in compliance with Rule 17Ad-22(e)(3)(ii) under the Act
The R&W Plan would describe DTCC's business profile, provide a summary of DTC's services, and identify the intercompany arrangements and critical links between DTC and other FMIs. This overview section would provide a context for the R&W Plan by describing DTC's business, organizational structure and critical links to other entities. By providing this context, this section would facilitate the analysis of the potential impact of utilizing the recovery tools set forth in later sections of the Recovery Plan, and the analysis of the factors that would be addressed in implementing the Wind-down Plan.
DTCC is a user-owned and user-governed holding company and is the parent company of DTC and its affiliates, National Securities Clearing Corporation (“NSCC”) and Fixed Income Clearing Corporation (“FICC,” and, together with NSCC and DTC, the “Clearing Agencies”). The Plan would describe how corporate support services are provided to DTC from DTCC and DTCC's other subsidiaries through intercompany agreements under a shared services model.
The Plan would provide a description of established links between DTC and other FMIs, both domestic and foreign, including central securities depositories (“CSDs”) and central counterparties (“CCPs”), as well as the twelve U.S. Federal Reserve Banks. In general, these links are either “inbound” or “issuer” links, in which the other FMI is a Participant and/or a Pledgee and maintains one or more accounts at DTC, or “outbound” or “investor” links in which DTC maintains one or more accounts at another FMI. Key FMIs with which DTC maintains critical links include CDS Clearing and Depository Services Inc. (“CDS”), the Canadian CSD, with participant links in both directions; Euroclear Bank SA/NV (“EB”) for cross-border collateral management services; and The Options Clearing Corporation (“OCC”) and the Federal Reserve Bank of New York (“FRBNY”), each of which is both a Participant and a Pledgee. The critical link for the U.S. marketplace is the relationship between DTC and NSCC, through which continuous net settlement (“CNS”) transactions are completed by settlement at DTC, and DTC acts as settlement agent for NSCC for end-of-day funds settlement.
The Plan would define the criteria for classifying certain of DTC's services as “critical,” and would identify those critical services and the rationale for their classification. This section would provide an analysis of the potential systemic impact from a service disruption, and is important for evaluating how the recovery tools and the wind-down strategy would facilitate and provide for the continuation of DTC's critical services to the markets it serves. The criteria that would be used to identify a DTC service or function as critical would include consideration as to (1) whether there is a lack of alternative providers or products; (2) whether failure of the service could impact DTC's ability to perform its book-entry and settlement services; (3) whether failure of the service could impact DTC's ability to perform its payment system functions; and (4) whether the service is interconnected with other participants and processes within the U.S. financial system, for example, with other FMIs, settlement banks and broker-dealers. The Plan would then list each of those services, functions or activities that DTC has identified as “critical” based on the applicability of these four criteria. Such critical services would include, for example, MMIs and Commercial Paper Processing,
The evaluation of which services provided by DTC are deemed critical is important for purposes of determining how the R&W Plan would facilitate the continuity of those services. As discussed further below, while DTC's Wind-down Plan would provide for the transfer of all critical services to a transferee in the event DTC's wind-down is implemented, it would anticipate that any non-critical services that are ancillary and beneficial to a critical service, or that otherwise have
The Plan would describe the governance structure of both DTCC and DTC. This section of the Plan would identify the ownership and governance model of these entities at both the Board of Directors and management levels. The Plan would state that the stages of escalation required to manage recovery under the Recovery Plan or to invoke DTC's wind-down under the Wind-down Plan would range from relevant business line managers up to the Board through DTC's governance structure. The Plan would then identify the parties responsible for certain activities under both the Recovery Plan and the Wind-down Plan, and would describe their respective roles. The Plan would identify the Risk Committee of the Board (“Board Risk Committee”) as being responsible for oversight of risk management activities at DTC, which include focusing on both oversight of risk management systems and processes designed to identify and manage various risks faced by DTC, and, due to DTC's critical role in the markets in which it operates, oversight of DTC's efforts to mitigate systemic risks that could impact those markets and the broader financial system.
The Plan would describe the governance of recovery efforts in response to both default losses and non-default losses under the Recovery Plan, identifying the groups responsible for those recovery efforts. Specifically, the Plan would state that the Management Risk Committee provides oversight of actions relating to the default of a Participant, which would be reported and escalated to it through the GCRO, and the Management Committee provides oversight of actions relating to non-default events that could result in a loss, which would be reported and escalated to it from the DTCC Chief Financial Officer (“CFO”) and the DTCC Treasury group that reports to the CFO, and from other relevant subject matter experts based on the nature and circumstances of the non-default event.
Finally, the Plan would describe the role of the R&R Team in managing the overall recovery and wind-down program and plans for each of the Clearing Agencies.
The Recovery Plan is intended to be a roadmap of those actions that DTC may employ to monitor and, as needed, stabilize its financial condition. As each event that could lead to a financial loss could be unique in its circumstances, the Recovery Plan would not be prescriptive and would permit DTC to maintain flexibility in its use of identified tools and in the sequence in which such tools are used, subject to any conditions in the Rules or the contractual arrangement on which such tool is based. DTC's Recovery Plan would consist of (1) a description of the risk management surveillance, tools, and governance that DTC would employ across evolving stress scenarios that it may face as it transitions through a “Crisis Continuum,” described below; (2) a description of DTC's risk of losses that may result from non-default events, and the financial resources and recovery tools available to DTC to manage those risks and any resulting losses; and (3) an evaluation of the characteristics of the recovery tools that may be used in response to either losses arising out of a Participant Default (as defined below) or non-default losses, as described in greater detail below. In all cases, DTC would act in accordance with the Rules, within the governance structure described in the R&W Plan, and in accordance with applicable regulatory oversight to address each situation in order to best protect DTC, its Participants and the markets in which it operates.
The Recovery Plan would provide context to its roadmap through this Crisis Continuum by describing DTC's ongoing management of credit, market and liquidity risk, and its existing process for measuring and reporting its risks as they align with established thresholds for its tolerance of those risks. The Recovery Plan would discuss the management of credit/market risk and liquidity exposures together, because the tools that address these risks can be deployed either separately or in a coordinated approach in order to address both exposures. DTC manages these risk exposures collectively to limit their overall impact on DTC and its Participants. DTC has built-in mechanisms to limit exposures and
The Recovery Plan would outline the metrics and indicators that DTC has developed to evaluate a stress situation against established risk tolerance thresholds. Each risk mitigation tool identified in the Recovery Plan would include a description of the escalation thresholds that allow for effective and timely reporting to the appropriate internal management staff and committees, or to the Board. The Recovery Plan would make clear that these tools and escalation protocols would be calibrated across each phase of the Crisis Continuum. The Recovery Plan would also establish that DTC would retain the flexibility to deploy such tools either separately or in a coordinated approach, and to use other alternatives to these actions and tools as necessitated by the circumstances of a particular Participant Default event, in accordance with the Rules. Therefore, the Recovery Plan would both provide DTC with a roadmap to follow within each phase of the Crisis Continuum, and would permit it to adjust its risk management measures to address the unique circumstances of each event.
The Recovery Plan would describe the conditions that mark each phase of the Crisis Continuum, and would identify actions that DTC could take as it transitions through each phase in order to both prevent losses from materializing through active risk management, and to restore the financial health of DTC during a period of stress.
The “stable market phase” of the Crisis Continuum would describe active risk management activities in the normal course of business. These activities would include performing (1) backtests to evaluate the adequacy of the collateral level and the haircut sufficiency for covering market price volatility and (2) stress testing to cover market price moves under real historical and hypothetical scenarios to assess the haircut adequacy under extreme but plausible market conditions. The backtesting and stress testing results are escalated, as necessary, to internal and Board committees.
The Recovery Plan would describe some of the indicators of the “stressed market phase” of the Crisis Continuum, which would include, for example, volatility in market prices of certain assets where there is increased uncertainty among market participants about the fundamental value of those assets. This phase would involve general market stresses, when no Participant Default would be imminent. Within the description of this phase, the Recovery Plan would provide that DTC may take targeted, routine risk management measures as necessary and as permitted by the Rules.
Within the “Participant Default phase” of the Crisis Continuum, the Recovery Plan would provide a roadmap for the existing procedures that DTC would follow in the event of a Participant Default and any decision by DTC to cease to act for that Participant.
The Recovery Plan would also identify financial resources available to DTC, pursuant to the Rules, to address losses arising out of a Participant Default. Specifically, Rule 4, as proposed to be amended by the Loss Allocation Filing, would provide that losses be satisfied first by applying a “Corporate Contribution,” and then, if necessary, by allocating remaining losses to non-defaulting Participants.
The “recovery phase” of the Crisis Continuum would describe actions that DTC may take to avoid entering into a wind-down of its business. In order to provide for an effective and timely recovery, the Recovery Plan would describe two stages of this phase: (1) A recovery corridor, during which DTC may experience stress events or observe early warning indicators that allow it to evaluate its options and prepare for the recovery phase; and (2) the recovery phase, which would begin on the date that DTC issues the first Loss Allocation Notice of the second loss allocation round with respect to a given “Event Period.”
DTC expects that significant deterioration of liquidity resources would cause it to enter the recovery corridor stage of this phase, and, as such, the actions it may take at this stage would be aimed at replenishing those resources. Circumstances that could cause it to enter the recovery corridor may include, for example, a rapid and material increase in market prices or sequential or simultaneous failures of multiple Participants or Affiliated Families of Participants over a compressed time period. Throughout the recovery corridor, DTC would monitor the adequacy of its resources and the expected timing of replenishment of those resources, and would do so through the monitoring of certain metrics referred to as “Corridor Indicators.”
The majority of the Corridor Indicators, as identified in the Recovery Plan, relate directly to conditions that may require DTC to adjust its strategy for hedging and liquidating Collateral securities, and any such changes would include an assessment of the status of the Corridor Indicators. Corridor Indicators would include, for example, effectiveness and speed of DTC's efforts to liquidate Collateral securities, and an impediment to the availability of its resources to repay any borrowings due to any Participant Default. For each Corridor Indicator, the Recovery Plan would identify (1) measures of the indicator, (2) evaluations of the status of the indicator, (3) metrics for determining the status of the deterioration or improvement of the indicator, and (4) “Corridor Actions,” which are steps that may be taken to improve the status of the indicator,
The Recovery Plan would also describe the reporting and escalation of the status of the Corridor Indicators throughout the recovery corridor. Significant deterioration of a Corridor Indicator, as measured by the metrics set out in the Recovery Plan, would be escalated to the Board. DTC management would review the Corridor Indicators and the related metrics at least annually, and would modify these metrics as necessary in light of observations from simulations of Participant defaults and other analyses. Any proposed modifications would be reviewed by the Management Risk Committee and the Board Risk Committee. The Recovery Plan would estimate that DTC may remain in the recovery corridor stage between one day and two weeks. This estimate is based on historical data observed in past Participant default events, the results of simulations of Participant defaults, and periodic liquidity analyses conducted by DTC. The actual length of a recovery corridor would vary based on actual market conditions observed on the date and time DTC enters the recovery corridor stage of the Crisis Continuum, and DTC would expect the recovery corridor to be shorter in market conditions of increased stress.
The Recovery Plan would outline steps by which DTC may allocate its losses, and would state that the available tools related to allocation of losses would only be used in this and subsequent phases of the Crisis Continuum.
As stated above, the Recovery Plan would state that DTC will have entered the recovery phase on the date that it issues the first Loss Allocation Notice of the second loss allocation round with respect to a given Event Period. The Recovery Plan would provide that, during the recovery phase, DTC would continue and, as needed, enhance, the monitoring and remedial actions already described in connection with previous phases of the Crisis Continuum, and would remain in the recovery phase until its financial resources are expected to be or are fully replenished, or until the Wind-down Plan is triggered, as described below.
The Recovery Plan would describe governance for the actions and tools that may be employed within the Crisis Continuum, which would be dictated by the facts and circumstances applicable to the situation being addressed. Such facts and circumstances would be measured by the Corridor Indicators applicable to that phase of the Crisis Continuum, and, in most cases, by the measures and metrics that are assigned to those Corridor Indicators, as described above. Each of these indicators would have a defined review period and escalation protocol that would be described in the Recovery Plan. The Recovery Plan would also describe the governance procedures around a decision to cease to act for a Participant, pursuant to the Rules, and around the management and oversight of the subsequent liquidation of Collateral securities. The Recovery Plan would state that, overall, DTC would retain flexibility in accordance with the Rules, its governance structure, and its regulatory oversight, to address a particular situation in order to best
The Plan would identify the two categories of financial resources DTC maintains to cover losses and expenses arising from non-default risks or events as (1) LNA, maintained, monitored, and managed pursuant to the Capital Policy, which include (a) amounts held in satisfaction of the General Business Risk Capital Requirement,
The Plan would address the process by which the CFO and the DTCC Treasury group would determine which available LNA resources are most appropriate to cover a loss that is caused by a non-default event. This determination involves an evaluation of a number of factors, including the current and expected size of the loss, the expected time horizon over when the loss or additional expenses would materialize, the current and projected available LNA, and the likelihood LNA could be successfully replenished pursuant to the Replenishment Plan, if triggered.
The Plan would also describe proposed Rule 38 (Market Disruption and Force Majeure), which DTC is proposing to adopt in its Rules. This Proposed Rule would provide transparency around how DTC would address extraordinary events that may occur outside its control. Specifically, the Proposed Rule would define a “Market Disruption Event” and the governance around a determination that such an event has occurred. The Proposed Rule would also describe DTC's authority to take actions during the pendency of a Market Disruption Event that it deems appropriate to address such an event and facilitate the continuation of its services, if practicable, as described in greater detail below.
The Plan would describe the interaction between the Proposed Rule and DTC's existing processes and procedures addressing business continuity management and disaster recovery (generally, the “BCM/DR procedures”), making clear that the Proposed Rule is designed to support those BCM/DR procedures and to address circumstances that may be exogenous to DTC and not necessarily addressed by the BCM/DR procedures. Finally, the Plan would describe that, because the operation of the Proposed Rule is specific to each applicable Market Disruption Event, the Proposed Rule does not define a time limit on its application. However, the Plan would note that actions authorized by the Proposed Rule would be limited to the pendency of the applicable Market Disruption Event, as made clear in the Proposed Rule. Overall, the Proposed Rule is designed to mitigate risks caused by Market Disruption Events and, thereby, minimize the risk of financial loss that may result from such events.
The Wind-down Plan would provide the framework and strategy for the orderly wind-down of DTC if the use of the recovery tools described in the Recovery Plan do not successfully return DTC to financial viability. While DTC believes that, given the comprehensive nature of the recovery tools, such event is extremely unlikely, as described in greater detail below, DTC is proposing a wind-down strategy that provides for (1) the transfer of DTC's business, assets, securities inventory, and membership to another legal entity, (2) such transfer being effected in connection with proceedings under Chapter 11 of the U.S. Federal Bankruptcy Code,
In describing the transfer approach to DTC's Wind-down Plan, the Plan would identify the factors that DTC considered in developing this approach, including the fact that DTC does not own material assets that are unrelated to its clearance and settlement activities. As such, a business reorganization or “bail-in” of debt approach would be unlikely to mitigate significant losses. Additionally, DTC's approach was developed in consideration of its critical and unique position in the U.S. markets, which precludes any approach that would cause DTC's critical services to no longer be available.
First, the Wind-down Plan would describe the potential scenarios that could lead to the wind-down of DTC, and the likelihood of such scenarios. The Wind-down Plan would identify the time period leading up to a decision to wind-down DTC as the “Runway Period.” This period would follow the implementation of any recovery tools, as it may take a period of time, depending on the severity of the market stress at that time, for these tools to be effective or for DTC to realize a loss sufficient to cause it to be unable to borrow to complete settlement and to repay such borrowings.
The trigger for implementing the Wind-down Plan would be a determination by the Board that recovery efforts have not been, or are unlikely to be, successful in returning DTC to viability as a going concern. As described in the Plan, DTC believes this is an appropriate trigger because it is both broad and flexible enough to cover a variety of scenarios, and would align incentives of DTC and Participants to avoid actions that might undermine DTC's recovery efforts. Additionally, this approach takes into account the characteristics of DTC's recovery tools and enables the Board to consider (1) the presence of indicators of a successful or unsuccessful recovery, and (2) potential for knock-on effects of continued iterative application of DTC's recovery tools.
The Wind-down Plan would describe the general objectives of the transfer strategy, and would address assumptions regarding the transfer of DTC's critical services, business, assets, securities inventory, and membership
In order to effect a timely transfer of its services and minimize the market and operational disruption of such transfer, DTC would expect to transfer all of its critical services and any non-critical services that are ancillary and beneficial to a critical service, or that otherwise have substantial user demand from the continuing membership. Given the transfer of the securities inventory and the establishment on the books of the Transferee Participant and Pledgee securities accounts, DTC anticipates that, following the transfer, it would not itself continue to provide any services, critical or not. Following the transfer, the Wind-down Plan would anticipate that the Transferee and its continuing membership would determine whether to continue to provide any transferred non-critical service on an ongoing basis, or terminate the non-critical service following some transition period. DTC's Wind-down Plan would anticipate that the Transferee would enter into a transition services agreement with DTCC so that DTCC would continue to provide the shared services it currently provides to DTC, including staffing, infrastructure and operational support. The Wind-down Plan would also anticipate the assignment of DTC's “inbound” link arrangements to the Transferee. The Wind-down Plan would provide that in the case of “outbound” links, DTC would seek to have the linked FMIs agree, at a minimum, to accept the Transferee as a link party for a transition period.
The Wind-down Plan would provide that, following the effectiveness of the transfer to the Transferee, the wind-down of DTC would involve addressing any residual claims against DTC through the bankruptcy process and liquidating the legal entity. As such, and as stated above, the Wind-down Plan does not contemplate DTC continuing to provide services in any capacity following the transfer time, and any services not transferred would be terminated. The Wind-down Plan would also identify the key dependencies for the effectiveness of the transfer, which include regulatory approvals that would permit the Transferee to be legally qualified to provide the transferred services from and after the transfer, and approval by the applicable bankruptcy court of, among other things, the proposed sale, assignments, and transfers to the Transferee.
The Wind-down Plan would address governance matters related to the execution of the transfer of DTC's business and its wind-down. The Wind-
The Wind-down Plan would describe (1) actions DTC or DTCC may take to prepare for wind-down in the period before DTC experiences any financial distress, (2) actions DTC would take both during the recovery phase and the Runway Period to prepare for the execution of the Wind-down Plan, and (3) actions DTC would take upon commencement of bankruptcy proceedings to effectuate the Wind-down Plan.
Finally, the Wind-down Plan would include an analysis of the estimated time and costs to effectuate the plan, and would provide that this estimate be reviewed and approved by the Board annually. In order to estimate the length of time it might take to achieve a recovery or orderly wind-down of DTC's critical operations, as contemplated by the R&W Plan, the Wind-down Plan would include an analysis of the possible sequencing and length of time it might take to complete an orderly wind-down and transfer of critical operations, as described in earlier sections of the R&W Plan. The Wind-down Plan would also include in this analysis consideration of other factors, including the time it might take to complete any further attempts at recovery under the Recovery Plan. The Wind-down Plan would then multiply this estimated length of time by DTC's average monthly operating expenses, including adjustments to account for changes to DTC's profit and expense profile during these circumstances, over the previous twelve months to determine the amount of LNA that it should hold to achieve a recovery or orderly wind-down of DTC's critical operations. The estimated wind-down costs would constitute the “Recovery/Wind-down Capital Requirement” under the Capital Policy.
The R&W Plan is designed as a roadmap, and the types of actions that may be taken both leading up to and in connection with implementation of the Wind-down Plan would be primarily addressed in other supporting documentation referred to therein.
The Wind-down Plan would address proposed Rule 32(A) (Wind-down of the Corporation) and proposed Rule 38 (Force Majeure and Market Disruption)), which would be adopted to facilitate the implementation of the Wind-down Plan, as discussed below.
In connection with the adoption of the R&W Plan, DTC is proposing to adopt the Proposed Rules, each described below. The Proposed Rules would facilitate the execution of the R&W Plan and would provide Participants with transparency as to critical aspects of the Plan, particularly as they relate to the rights and responsibilities of both DTC and its Participants. The Proposed Rules also provide a legal basis to these aspects of the Plan.
The proposed Rule 32(A) (“Wind-down Rule”) would be adopted to facilitate the execution of the Wind-down Plan. The Wind-down Rule would include a proposed set of defined terms that would be applicable only to the provisions of this Proposed Rule. The Wind-down Rule would make clear that a wind-down of DTC's business would occur (1) after a decision is made by the Board, and (2) in connection with the transfer of DTC's services to a Transferee, as described therein. Generally, the proposed Wind-down Rule is designed to create clear mechanisms for the transfer of Eligible Participants and Pledgees, Settling Banks, DRS Agents, and FAST Agents (as these terms would be defined in the Wind-down Rule), and DTC's inventory of financial assets in order to provide for continued access to critical services and to minimize disruption to the markets in the event the Wind-down Plan is initiated.
(1) Each Eligible Participant would become (i) a Participant of the Transferee and (ii) a party to a Participants agreement with the Transferee;
(2) each Participant that is delinquent in the performance of any obligation to DTC or that has provided notice of its election to withdraw as a Participant (a “Non-Eligible Participant”) as of the Transfer Time would become (i) the holder of a transition period securities account maintained by the Transferee on its books (“Transition Period Securities Account”) and (ii) a party to a Transition Period Securities Account agreement of the Transferee;
(3) each Pledgee would become (i) a Pledgee of the Transferee and (ii) a party to a Pledgee agreement with the Transferee;
(4) each DRS Agent would become (i) a DRS Agent of the Transferee and (ii) a party to a DRS Agent agreement with the Transferee;
(5) each FAST Agent would become (i) a FAST Agent of the Transferee and (ii) a party to a FAST Agent agreement with the Transferee; and
(6) each Settling Bank for Participants and Pledgees would become (i) a Settling Bank for Participants and Pledgees of the Transferee and (ii) a party to a Settling Bank Agreement with the Transferee.
Further, the Proposed Rule would make clear that it would not prohibit (1) Non-Eligible Participants from applying for membership with the Transferee, (2) Non-Eligible Participants that have become holders of Transition Period Securities Accounts (“Transition Period Securities Account Holders”) of the Transferee from withdrawing as a Transition Period Securities Account Holder from the Transferee, subject to the rules and procedures of the Transferee, and (3) Participants, Pledgees, DRS Agents, FAST Agents, and Settling Banks that would be transferred to the Transferee from withdrawing from membership with the Transferee, subject to the rules and procedures of the Transferee. Under the Proposed Rule, Non-Eligible Participants that have become Transition Period Securities Account Holders of the Transferee shall have the rights and be subject to the obligations of Transition Period Securities Account Holders set forth in special provisions of the rules and procedures of the Transferee applicable to such Transition Period Securities Account Holder. Specifically, Non-Eligible Participants that become Transition Period Securities Account Holders must, within the Transition Period (as defined in the Proposed Rule), instruct the Transferee to transfer the financial assets credited to its Transition Period Securities Account (i) to a Participant of the Transferee through the facilities of the Transferee or (ii) to a recipient outside the facilities of the Transferee, and no additional financial assets may be delivered versus payment to a Transition Period Securities Account during the Transition Period.
(1) DTC would transfer to the Transferee (i) its rights with respect to its nominee Cede & Co. (“Cede”) (and thereby its rights with respect to the financial assets owned of record by Cede), (ii) the financial assets held by it at the FRBNY, (iii) the financial assets held by it at other CSDs, (iv) the financial assets held in custody for it with FAST Agents, (v) the financial assets held in custody for it with other custodians and (vi) the financial assets it holds in physical custody.
(2) The Transferee would establish security entitlements on its books for Eligible Participants of DTC that become Participants of the Transferee that replicate the security entitlements that DTC maintained on its books immediately prior to the Transfer Time for such Eligible Participants, and DTC would simultaneously eliminate such security entitlements from its books.
(3) The Transferee would establish security entitlements on its books for Non-Eligible Participants of DTC that become Transition Period Securities Account Holders of the Transferee that replicate the security entitlements that DTC maintained on its books immediately prior to the Transfer Time for such Non-Eligible Participants, and DTC would simultaneously eliminate such security entitlements from its books.
(4) The Transferee would establish pledges on its books in favor of Pledgees that become Pledgees of the Transferee that replicate the pledges that DTC maintained on its books immediately prior to the Transfer Time in favor of such Pledgees, and DTC shall simultaneously eliminate such pledges from its books.
The purpose of these provisions and the intended effect of the proposed Wind-down Rule is to facilitate a smooth transition of DTC's business to a Transferee and to provide that, for at least the Comparability Period, the
The proposed Wind-down Rule would address other ex-ante matters, including provisions providing that its Participants, Pledgees, DRS Agents, FAST Agents and Settling Banks (1) will assist and cooperate with DTC to effectuate the transfer of DTC's business to a Transferee, (2) consent to the provisions of the rule, and (3) grant DTC power of attorney to execute and deliver on their behalf documents and instruments that may be requested by the Transferee. Finally, the Proposed Rule would include a limitation of liability for any actions taken or omitted to be taken by DTC pursuant to the Proposed Rule.
The proposed Rule 38 (“Force Majeure Rule”) would address DTC's authority to take certain actions upon the occurrence, and during the pendency, of a “Market Disruption Event,” as defined therein. The Proposed Rule is designed to clarify DTC's ability to take actions to address extraordinary events outside of the control of DTC and of its membership, and to mitigate the effect of such events by facilitating the continuity of services (or, if deemed necessary, the temporary suspension of services). To that end, under the proposed Force Majeure Rule, DTC would be entitled, during the pendency of a Market Disruption Event, to (1) suspend the provision of any or all services, and (2) take, or refrain from taking, or require its Participants and Pledgees to take, or refrain from taking, any actions it considers appropriate to address, alleviate, or mitigate the event and facilitate the continuation of DTC's services as may be practicable.
The proposed Force Majeure Rule would identify the events or circumstances that would be considered a “Market Disruption Event,” including, for example, events that lead to the suspension or limitation of trading or banking in the markets in which DTC operates, or the unavailability or failure of any material payment, bank transfer, wire or securities settlement systems. The proposed Force Majeure Rule would define the governance procedures for how DTC would determine whether, and how, to implement the provisions of the rule. A determination that a Market Disruption Event has occurred would generally be made by the Board, but the Proposed Rule would provide for limited, interim delegation of authority to a specified officer or management committee if the Board would not be able to take timely action. In the event such delegated authority is exercised, the proposed Force Majeure Rule would require that the Board be convened as promptly as practicable, no later than five Business Days after such determination has been made, to ratify, modify, or rescind the action. The proposed Force Majeure Rule would also provide for prompt notification to the Commission, and advance consultation with Commission staff, when practicable. The Proposed Rule would require Participants and Pledgees to notify DTC immediately upon becoming aware of a Market Disruption Event, and, likewise, would require DTC to notify its Participants and Pledgees if it has triggered the Proposed Rule.
Finally, the Proposed Rule would address other related matters, including a limitation of liability for any failure or delay in performance, in whole or in part, arising out of the Market Disruption Event.
DTC believes that the proposal is consistent with the requirements of the Act and the rules and regulations thereunder applicable to a registered clearing agency. In particular, DTC believes that the R&W Plan and each of the Proposed Rules are consistent with Section 17A(b)(3)(F) of the Act,
Section 17A(b)(3)(F) of the Act requires, in part, that the rules of DTC be designed to promote the prompt and accurate clearance and settlement of securities transactions, and to assure the safeguarding of securities and funds which are in the custody or control of DTC or for which it is responsible.
The Wind-down Plan and the proposed Wind-down Rule, which would facilitate the implementation of the Wind-down Plan, would also promote the prompt and accurate clearance and settlement of securities transactions and assure the safeguarding of securities and funds which are in the custody or control of DTC or for which it is responsible. The Wind-down Plan and the proposed Wind-down Rule would collectively establish a framework for the transfer and orderly wind-down of DTC's business. These proposals would establish clear mechanisms for the transfer of DTC's critical services and membership as well as clear provision for the transfer of the securities inventory it holds in fungible bulk for Participants. By doing so, the
Therefore, DTC believes the R&W Plan and each of the Proposed Rules are consistent with the requirements of Section 17A(b)(3)(F) of the Act.
Rule 17Ad-22(e)(3)(ii) under the Act requires DTC to establish, implement, maintain and enforce written policies and procedures reasonably designed to maintain a sound risk management framework for comprehensively managing legal, credit, liquidity, operational, general business, investment, custody, and other risks that arise in or are borne by the covered clearing agency, which includes plans for the recovery and orderly wind-down of the covered clearing agency necessitated by credit losses, liquidity shortfalls, losses from general business risk, or any other losses.
The R&W Plan would be maintained by DTC in compliance with Rule 17Ad-22(e)(3)(ii) in that it provides plans for the recovery and orderly wind-down of DTC necessitated by credit losses, liquidity shortfalls, losses from general business risk, or any other losses, as described above.
The Wind-down Plan would be triggered by a determination by the Board that recovery efforts have not been, or are unlikely to be, successful in returning DTC to viability as a going concern. Once triggered, the Wind-down Plan would set forth clear mechanisms for the transfer of DTC's membership and business, and would be designed to facilitate continued access to DTC's critical services and to minimize market impact of the transfer. By establishing the framework and strategy for the execution of the transfer and wind-down of DTC in order to facilitate continuous access to DTC's critical services, the Wind-down Plan establishes a plan for the orderly wind-down of DTC. Therefore, DTC believes the R&W Plan would provide plans for the recovery and orderly wind-down of the covered clearing agency necessitated by credit losses, liquidity shortfalls, losses from general business risk, or any other losses, and, as such, meets the requirements of Rule 17Ad-22(e)(3)(ii).
As described in greater detail above, the Proposed Rules are designed to facilitate the execution of the R&W Plan, provide Participants with transparency regarding the material provisions of the Plan, and provide DTC with a legal basis for implementation of those provisions. As such, DTC also believes the Proposed Rules meet the requirements of Rule 17Ad-22(e)(3)(ii).
DTC has evaluated the recovery tools that would be identified in the Recovery Plan and has determined that these tools are comprehensive, effective, and transparent, and that such tools provide appropriate incentives to DTC's Participants to manage the risks they present. The recovery tools, as outlined in the Recovery Plan and in the proposed Force Majeure Rule, provide DTC with a comprehensive set of options to address its material risks and support the resiliency of its critical services under a range of stress scenarios. DTC also believes the recovery tools are effective, as DTC has both legal basis and operational capability to execute these tools in a timely and reliable manner. Many of the recovery tools are provided for in the Rules; Participants are bound by the Rules through their Participants Agreements with DTC, and the Rules are adopted pursuant to a framework established by Rule 19b-4 under the Act,
The majority of the recovery tools are also transparent, as they are or are proposed to be included in the Rules, which are publicly available. DTC believes the recovery tools also provide appropriate incentives to its owners and Participants, as they are designed to control the amount of risk they present to DTC's clearance and settlement system. Finally, DTC's Recovery Plan provides for a continuous evaluation of the systemic consequences of executing its recovery tools, with the goal of minimizing their negative impact. The Recovery Plan would outline various indicators over a timeline of increasing stress, the Crisis Continuum, with escalation triggers to DTC management or the Board, as appropriate. This approach would allow for timely evaluation of the situation and the possible impacts of the use of a recovery tool in order to minimize the negative effects of the stress scenario. Therefore, DTC believes that the recovery tools that would be identified and described in its Recovery Plan, including the authority provided to it in the proposed Force Majeure Rule, would meet the criteria identified within guidance published by the Commission in connection with the adoption of Rule 17Ad-22(e)(3)(ii).
Therefore, DTC believes the R&W Plan and each of the Proposed Rules are consistent with Rule 17Ad-22(e)(3)(ii).
Rule 17Ad-22(e)(15)(ii) under the Act requires DTC to establish, implement, maintain and enforce written policies and procedures reasonably designed to identify, monitor, and manage its general business risk and hold sufficient LNA to cover potential general business losses so that DTC can continue operations and services as a going concern if those losses materialize, including by holding LNA equal to the greater of either (x) six months of the covered clearing agency's current operating expenses, or (y) the amount determined by the board of directors to be sufficient to ensure a recovery or
DTC does not believe the proposal would have any impact, or impose any burden, on competition not necessary or appropriate in furtherance of the purpose of the Act.
The R&W Plan and each of the Proposed Rules have been developed and documented in order to satisfy applicable regulatory requirements, as discussed above.
With respect to the Recovery Plan, the proposal generally reflects DTC's existing tools and existing internal procedures. Existing tools that would have a direct impact on the rights, responsibilities or obligations of Participants are reflected in the existing Rules or are proposed to be included in the Rules. Accordingly, the Recovery Plan and the proposed Force Majeure Rule are intended to provide a roadmap, define the strategy and identify the tools available to DTC in connection with its recovery efforts. By proposing to enhance DTC's existing internal management and its regulatory compliance related to its recovery efforts, DTC does not believe the Recovery Plan or the proposed Force Majeure Rule would have any impact, or impose any burden, on competition.
With respect to the Wind-down Plan and the proposed Wind-down Rule, which facilitate the execution of the Wind-down Plan, the proposal would operate to effect the transfer of all eligible Participants and Pledgees to the Transferee, and would not prohibit any market participant from either bidding to become the Transferee or from applying for membership with the Transferee. The proposal also would not prohibit any Participant or Pledgee from withdrawing from DTC prior to the Transfer Time, as is permitted under the Rules today, or from applying for membership with the Transferee. Therefore, as the proposal would treat each similarly situated Participant and Pledgee identically under the Wind-down Plan and under the Proposed Wind-down Rule, DTC does not believe the Wind-down Plan or the proposed Wind-down Rule would have any impact, or impose any burden, on competition.
While DTC has not solicited or received any written comments relating to this proposal, DTC has conducted outreach to its Members in order to provide them with notice of the proposal. DTC will notify the Commission of any written comments received by DTC.
Within 45 days of the date of publication of this notice in the
(A) By order approve or disapprove such proposed rule change, or
(B) institute proceedings to determine whether the proposed rule change should be disapproved.
The proposal shall not take effect until all regulatory actions required with respect to the proposal are completed.
Interested persons are invited to submit written data, views and arguments concerning the foregoing, including whether the 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 proposed rule change consists of modifications to NSCC's Rules and Procedures (“Rules”) in order to amend provisions in the Rules regarding loss allocation as well as make other changes, as described in greater detail below.
In its filing with the Commission, the clearing agency 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 clearing agency has prepared summaries, set forth in sections A, B, and C below, of the most significant aspects of such statements.
The primary purpose of this proposed rule change is to amend NSCC's loss allocation rules in order to enhance the resiliency of NSCC's loss allocation process so that NSCC can take timely action to address multiple loss events that occur in succession during a short period of time (defined and explained in detail below). In connection therewith, the proposed rule change would (i) align the loss allocation rules of the three clearing agencies of The Depository Trust & Clearing Corporation (“DTCC”), namely The Depository Trust Company (“DTC”), Fixed Income Clearing Corporation (“FICC”) (including the Government Securities Division (“FICC/GSD”) and the Mortgage-Backed Securities Division (“FICC/MBSD”)), and NSCC (collectively, the “DTCC Clearing Agencies”), so as to provide consistent treatment, to the extent practicable and appropriate, especially for firms that are participants of two or more DTCC Clearing Agencies, (ii) increase transparency and accessibility of the loss allocation rules by enhancing their readability and clarity, (iii) reduce the time within which NSCC is required to return a former Member's Clearing Fund deposit, and (iv) make conforming and technical changes.
Central counterparties (“CCPs”) play a key role in financial markets by mitigating counterparty credit risk on transactions between market participants. CCPs achieve this by providing guaranties to participants and, as a consequence, are typically exposed to credit risks that could lead to default losses. In addition, in performing its critical functions, a CCP could be exposed to non-default losses that are otherwise incident to the CCP's clearance and settlement business.
A CCP's rulebook should provide a complete description of how losses would be allocated to participants if the size of the losses exceeded the CCP's pre-funded resources. Doing so provides for an orderly allocation of losses, and potentially allows the CCP to continue providing critical services to the market and thereby results in significant financial stability benefits. In addition, a clear description of the loss allocation process offers transparency and accessibility to the CCP's participants.
As a CCP, NSCC's loss allocation process is a key component of its risk management process. Risk management is the foundation of NSCC's ability to guarantee settlement, as well as the means by which NSCC protects itself and its Members from the risks inherent in the clearance and settlement process. NSCC's risk management process must account for the fact that, in certain extreme circumstances, the collateral and other financial resources that secure NSCC's risk exposures may not be sufficient to fully cover losses resulting from the liquidation of the portfolio of a Member for whom NSCC has ceased to act.
The Rules currently provide for a loss allocation process through which both NSCC (by applying no less than 25% of its retained earnings in accordance with Addendum E) and its Members would share in the allocation of a loss resulting from the default of a Member for whom NSCC has ceased to act pursuant to the Rules. The Rules also recognize that NSCC may incur losses outside the context of a defaulting Member that are otherwise incident to NSCC's clearance and settlement business.
NSCC's loss allocation rules currently provide that in the event NSCC ceases to act for a Member, the amounts on deposit to the Clearing Fund from the defaulting Member, along with any other resources of, or attributable to, the defaulting Member that NSCC may access under the Rules (
First, as provided in Addendum E, NSCC's corporate contribution of at least 25 percent of NSCC's retained earnings existing at the time of a Member impairment, or such greater amount as the Board of Directors may determine; and
Second, if a loss still remains, as and in the manner provided in Rule 4, the required Clearing Fund deposits of Members who are non-defaulting Members on the date of default.
Pursuant to current Section 5 of Rule 4, if, as a result of applying the Clearing Fund deposit of a Member, the Member's actual Clearing Fund deposit is less than its Required Deposit, it will be required to eliminate such deficiency in order to satisfy its Required Deposit amount. Pursuant to current Section 4 of Rule 4, Members can also be assessed for non-default losses incident to the operation of the clearance and settlement business of NSCC. Pursuant to current Section 8 of Rule 4, Members may withdraw from membership within specified timeframes after a loss allocation charge to limit their obligation for future assessments.
In order to enhance the resiliency of NSCC's loss allocation process, NSCC proposes to change the manner in which each of the aspects of the loss allocation waterfall described above would be employed. NSCC would retain the current core loss allocation process following the application of the defaulting Member's resources,
Accordingly, NSCC is proposing five (5) key changes to enhance NSCC's loss allocation process:
As stated above, Addendum E currently provides that NSCC will contribute no less than 25% of its retained earnings (or such higher amount as the Board of Directors shall determine) to a loss or liability that is not satisfied by the impaired Member's Clearing Fund deposit. Under the proposal, NSCC would amend the calculation of its corporate contribution from a percentage of its retained earnings to a mandatory amount equal to 50% of the NSCC General Business Risk Capital Requirement.
Currently, the Rules do not require NSCC to contribute its retained earnings to losses and liabilities other than those from Member impairments. Under the proposal, NSCC would apply its corporate contribution to non-default losses as well. The proposed Corporate Contribution would apply to losses arising from Defaulting Member Events and Declared Non-Default Loss Events (as such terms are defined below and in the proposed rule change), and would be a mandatory contribution by NSCC prior to any allocation of the loss among NSCC's Members.
As compared to the current approach of applying “no less than” a percentage of retained earnings to defaulting Member losses, the proposed Corporate Contribution would be a fixed percentage of NSCC's General Business Risk Capital Requirement, which would provide greater transparency and accessibility to Members. The proposed Corporate Contribution would apply not only towards losses and liabilities arising out of or relating to Defaulting Member Events but also those arising out of or relating to Declared Non-Default Loss Events, which is consistent with the current industry guidance that “a CCP should identify the amount of its own resources to be applied towards losses arising from custody and investment risk, to bolster confidence that participants' assets are prudently safeguarded.”
Under the current Addendum E, NSCC has the discretion to contribute amounts higher than the specified percentage of retained earnings, as determined by the Board of Directors, to any loss or liability incurred by NSCC as result of a Member's impairment. This option would be retained and expanded under the proposal so that it would be clear that NSCC can voluntarily apply amounts greater than the Corporate Contribution against any loss or liability (including non-default losses) of NSCC, if the Board of Directors, in its sole discretion, believes such to be appropriate under the factual situation existing at the time.
The proposed rule changes relating to the calculation and application of the Corporate Contribution are set forth in proposed Sections 4 and 5 of Rule 4, as further described below.
In order to clearly define the obligations of NSCC and its Members regarding loss allocation and to balance the need to manage the risk of sequential loss events against Members' need for certainty concerning their maximum loss allocation exposures, NSCC is proposing to introduce the concept of an “Event Period” to the Rules to address the losses and liabilities that may arise from or relate to multiple Defaulting Member Events and/or Declared Non-Default Loss Events that arise in quick succession. Specifically, the proposal would group Defaulting Member Events and Declared Non-Default Loss Events occurring in a period of ten (10) business days (“Event Period”) for purposes of allocating losses to Members in one or more rounds (as described below), subject to the limitations of loss allocation set forth in the proposed rule change and as explained below.
The amount of losses that may be allocated by NSCC, subject to the required Corporate Contribution, and to which a Loss Allocation Cap (as defined below and in the proposed rule change) would apply for any withdrawing Member, would include any and all losses from any Defaulting Member Events and any Declared Non-Default Loss Events during the Event Period, regardless of the amount of time, during or after the Event Period, required for such losses to be crystallized and allocated.
The proposed rule changes relating to the implementation of an Event Period are set forth in proposed Section 4 of Rule 4, as further described below.
Pursuant to the proposed rule change, a loss allocation “round” would mean a series of loss allocations relating to an Event Period, the aggregate amount of which is limited by the sum of the Loss Allocation Caps of affected Members (a “round cap”). When the aggregate amount of losses allocated in a round equals the round cap, any additional losses relating to the applicable Event Period would be allocated in one or more subsequent rounds, in each case subject to a round cap for that round. NSCC may continue the loss allocation process in successive rounds until all losses from the Event Period are allocated among Members that have not submitted a Loss Allocation Withdrawal Notice in accordance with proposed Section 6 of Rule 4.
Each loss allocation would be communicated to Members by the issuance of a Loss Allocation Notice (as defined below and in the proposed rule change). Each Loss Allocation Notice would specify the relevant Event Period and the round to which it relates. The first Loss Allocation Notice in any first, second, or subsequent round would expressly state that such Loss Allocation Notice reflects the beginning of the first, second, or subsequent round, as the case may be, and that each Member in that round has five (5) business days from the issuance of such first Loss Allocation Notice for the round to notify NSCC of its election to withdraw from membership with NSCC pursuant to proposed Section 6 of Rule 4, and thereby benefit from its Loss Allocation Cap.
NSCC believes that it is appropriate to shorten such time period from ten (10) business days to five (5) business days because NSCC needs timely notice of which Members would remain in its membership for purposes of calculating the loss allocation for any subsequent round. NSCC believes that five (5) business days would provide Members with sufficient time to decide whether to cap their loss allocation obligations by withdrawing from their membership in NSCC.
The amount of any second or subsequent round cap may differ from the first or preceding round cap because there may be fewer Members in a second or subsequent round if Members elect to withdraw from membership with NSCC as provided in proposed Section 6 of Rule 4 following the first Loss Allocation Notice in any round.
For example, for illustrative purposes only, after the required Corporate Contribution, if NSCC has a $5 billion loss determined with respect to an Event Period and the sum of Loss Allocation Caps for all Members subject to the loss allocation is $4 billion, the first round would begin when NSCC issues the first Loss Allocation Notice for that Event Period. NSCC could issue one or more Loss Allocation Notices for the first round until the sum of losses allocated equals $4 billion. Once the $4 billion is allocated, the first round would end and NSCC would need a second round in order to allocate the remaining $1 billion of loss. NSCC would then issue a Loss Allocation Notice for the $1 billion and this notice would be the first Loss Allocation Notice for the second round. The issuance of the Loss Allocation Notice for the $1 billion would begin the second round.
The proposed rule change would link the Loss Allocation Cap to a round in order to provide Members the option to limit their loss allocation exposure at the beginning of each round. As proposed and as described further below, a Member could limit its loss allocation exposure to its Loss Allocation Cap by providing notice of its election to withdraw from membership within five (5) business days after the issuance of the first Loss Allocation Notice in any round.
The proposed rule changes relating to the implementation of “rounds” and Loss Allocation Notices are set forth in proposed Section 4 of Rule 4, as further described below.
Currently, the Rules calculate a Member's pro rata share for purposes of loss allocation based on the Member's “allocation for a System,” which in turn is based on settlement dollar amounts. Therefore, a Member's loss allocation obligations are currently based on the Member's activity in each of the various services or “Systems” offered by NSCC.
Given NSCC's risk-based margining methodology, NSCC believes that it would be more appropriate to determine a Member's pro rata share of losses and liabilities based on the amount of risk that the Member brings to NSCC, which is represented by the Member's Required Deposit (NSCC is proposing that “Required Deposits” be renamed “Required Fund Deposits,” as described below). Accordingly, NSCC is proposing to calculate each Member's pro rata share of losses and liabilities to be allocated in any round (as described below and in the proposed rule change) to be equal to (i) the average of a Member's Required Fund Deposit for the seventy (70) business days prior to the first day of the applicable Event Period (or such shorter period of time that the Member has been a Member) (“Average RFD”) divided by (ii) the sum of Average RFD amounts for all Members that are subject to loss allocation in such round.
Additionally, NSCC is proposing that each Member's maximum payment obligation with respect to any loss allocation round (the Member's Loss Allocation Cap) be equal to the greater of (i) its Required Fund Deposit on the first day of the applicable Event Period or (ii) its Average RFD.
NSCC believes that employing a backward-looking average to calculate a Member's loss allocation pro rata share and Loss Allocation Cap would disincentivize Member behavior that could heighten volatility or reduce liquidity in markets in the midst of a financial crisis. Specifically, the proposed look-back period would discourage a Member from reducing its settlement activity during a time of stress primarily to limit its loss allocation pro rata share, which, as proposed, would now be based on the Member's average settlement activity over the look-back period rather than its settlement activity at a point in time that the Member may not be able to estimate. Similarly, NSCC believes that taking a backward-looking average into consideration when determining a Member's Loss Allocation Cap would also deter a Member from reducing its settlement activity during a time of stress primarily to limit its Loss Allocation Cap.
NSCC believes that having a look-back period of seventy (70) business days is appropriate, because it would be long enough to enable NSCC to capture a full calendar quarter of a Member's activities, including quarterly option expirations, and smooth out the impact from any abnormalities and/or arbitrariness that may have occurred, but not too long that the Member's business strategy and outlook could have shifted significantly, resulting in material changes to the size of its portfolios.
The proposed rule changes relating to the implementation of a look-back period are set forth in proposed Section 4 of Rule 4, as further described below.
NSCC's current loss allocation rules allow a Member to withdraw if the Member notifies NSCC, within ten (10) business days after receipt of notice of a pro rata charge, of its election to terminate its membership and thereby avail itself of a cap on loss allocation, which is its Required Deposit as fixed immediately prior to the time of the pro rata charge. As discussed above, the proposed rule change would continue providing Members the opportunity to limit their loss allocation exposure by offering withdrawal options; however, the cap on loss allocation would be calculated differently and the associated withdrawal process would also be modified as it relates to withdrawals associated with the loss allocation process. In particular, the proposed rule change would shorten the withdrawal notification period from ten (10) business days to five (5) business days, and would also change the beginning of such notification period from the receipt of the notice of a pro rata charge to the issuance of the notice, as further described below.
As proposed, if a Member provides notice of its withdrawal from membership, the maximum amount of losses it would be responsible for would be its Loss Allocation Cap,
Currently, NSCC's loss allocation provisions provide that if a pro rata charge is made against a Member's actual Clearing Fund deposit, and as result thereof the Member's deposit is less than its Required Deposit, the Member will, upon demand by NSCC, be required to replenish its deposit to eliminate the deficiency within such time as NSCC shall require. To increase transparency of the timeframe under which NSCC would require funds from Members to satisfy their loss allocation obligations, NSCC is proposing that Members would receive two (2) business days' notice of a loss allocation, and Members would be required to pay the requisite amount no later than the second business day following issuance of such notice.
Each round would allow a Member the opportunity to notify NSCC of its election to withdraw from membership after satisfaction of the losses allocated in such round. Multiple Loss Allocation Notices may be issued with respect to each round to allocate losses up to the round cap.
Specifically, the first round and each subsequent round of loss allocation would allocate losses up to a round cap of the aggregate of all Loss Allocation Caps of those Members included in the round. If a Member provides notice of its election to withdraw from membership, it would be subject to loss allocation in that round, up to its Loss Allocation Cap. If the first round of loss allocation does not fully cover NSCC's losses, a second round will be noticed to those Members that did not elect to
Pursuant to the proposed rule change, in order to avail itself of its Loss Allocation Cap, a Member would need to follow the requirements in proposed Section 6 of Rule 4, which would provide that the Member must: (i) Specify in its Loss Allocation Withdrawal Notice (as defined below and in the proposed rule change) an effective date of withdrawal, which date shall be no later than ten (10) business days following the last day of the applicable Loss Allocation Withdrawal Notification Period (as defined below and in the proposed rule change) (
The proposed rule changes are designed to enable NSCC to continue the loss allocation process in successive rounds until all of NSCC's losses are allocated. To the extent that a Member's Loss Allocation Cap exceeds the Member's Required Fund Deposit on the first day of the applicable Event Period, NSCC may in its discretion retain any excess amounts on deposit from the Member, up to the Member's Loss Allocation Cap.
The proposed rule changes relating to capping withdrawing Members' loss allocation exposure and related changes to the withdrawal process are set forth in proposed Sections 4 and 6 of Rule 4, as further described below.
The proposed rule changes would align the loss allocation rules, to the extent practicable and appropriate, of the three DTCC Clearing Agencies so as to provide consistent treatment, especially for firms that are participants of two or more DTCC Clearing Agencies. As proposed, the loss allocation waterfall and certain related provisions,
The proposed rule changes are intended to make the provisions in the Rules governing loss allocation more transparent and accessible to Members. In particular, NSCC is proposing the following changes relating to loss allocation to clarify Members' obligations for Declared Non-Default Loss Events.
Aside from losses that NSCC might face as a result of a Defaulting Member Event, NSCC could incur non-default losses incident to its clearance and settlement business.
If there is a failure of NSCC following a non-default loss, such occurrence would affect Members in much the same way as a failure of NSCC following a Defaulting Member Event. Accordingly, NSCC is proposing rule changes to enhance the provisions relating to non-default losses by clarifying Members' obligations for such losses.
Specifically, NSCC is proposing enhancement of the governance around non-default losses that would trigger loss allocation to Members by specifying that the Board of Directors would have to determine that there is a non-default loss that may be a significant and substantial loss or liability that may materially impair the ability of NSCC to provide clearance and settlement services in an orderly manner and will potentially generate losses to be mutualized among the Members in order to ensure that NSCC may continue to offer clearance and settlement services in an orderly manner. The proposed rule change would provide that NSCC would then be required to promptly notify Members of this determination, which is referred to in the proposed rule as a Declared Non-Default Loss Event. In addition, NSCC is proposing to better align the interests of NSCC with those of its Members by stipulating a mandatory Corporate Contribution apply to a Declared Non-Default Loss Event prior to any allocation of the loss among Members, as described above. Additionally, NSCC is proposing language to clarify Members' obligations for Declared Non-Default Loss Events.
The proposed rule changes relating to Declared Non-Default Loss Events and Members' obligations for such events are set forth in proposed Section 4 of Rule 4, as further described below.
The proposed rule change would reduce the time period in which NSCC may retain a Member's Clearing Fund deposit. Specifically, NSCC proposes that if a Member gives notice to NSCC of its election to withdraw from membership, NSCC will return the Member's Actual Deposit in the form of (i) cash or securities within thirty (30) calendar days and (ii) Eligible Letters of Credit within ninety (90) calendar days, after all of the Member's transactions have settled and all matured and contingent obligations to NSCC for which the Member was responsible while a Member have been satisfied, except NSCC may retain for up to two (2) years the Actual Deposits from Members who have Sponsored Accounts at DTC.
NSCC believes that shortening the time period for the return of a Member's Clearing Fund deposit would be helpful to firms who have exited NSCC so that they could have use of the deposits sooner than under the current Rules while at the same time protecting NSCC because such return would only occur if
The proposed rule changes relating to the reduced time period in which NSCC is required to return the Clearing Fund deposit of a former Member are set forth in proposed Section 7 of Rule 4, as further described below.
The foregoing changes as well as other changes (including a number of conforming and technical changes) that NSCC is proposing in order to improve the transparency and accessibility of the Rules are described in detail below.
Rule 4 currently addresses Clearing Fund requirements and loss allocation obligations. While Procedure XV addresses the various Clearing Fund calculations, Rule 4 sets forth rights, obligations and other aspects associated with the Clearing Fund, as well as the loss allocation process. Rule 4 is currently organized into 12 sections. NSCC is proposing changes to each section, and consolidating provisions in Rule 4 relating to Mutual Fund Services and Insurance and Retirement Processing Services into new sections, as described below.
Section 1 of Rule 4 currently sets forth the requirement that each Member and Mutual Fund/Insurance Services Member shall, and each Fund Member and Insurance Carrier/Retirement Services Member may, be required to make a deposit to the Clearing Fund. Section 1 currently provides that each participant's Required Deposit is based on one or more formulas specified by NSCC's Board of Directors. The basis of each such formula is participants' usage of NSCC's facilities. Section 1 also currently sets forth the minimum amount of each participant category's Required Deposit.
Current Section 1 allows a portion of a participant's Clearing Fund deposit to be evidenced by an open account indebtedness secured by Eligible Clearing Fund Securities, subject to certain limitations set forth in Procedure XV, and sets forth the various requirements associated with the deposit of Eligible Clearing Fund Securities. Current Section 1 also permits NSCC to require participants to post a letter of credit where NSCC believes the participants present legal risk.
Current Section 1 also provides that NSCC allocate the Clearing Fund by types of service (
Under the proposed rule change, NSCC is proposing to add a subheading of “Required Fund Deposits” to Section 1 and restructure Section 1 so that it applies to Members only and delete references to Mutual Fund/Insurance Services Members, Fund Members and Insurance Carrier/Retirement Services Members from Section 1.
Under the proposed rule change, Section 1 would continue to have the same provisions as they relate to Members except for the following: (i) The language throughout the section would be reorganized, streamlined and clarified, (ii) “Required Deposits” would be renamed “Required Fund Deposits,”
The proposed sentence regarding additional deposits to the Clearing Fund would permit Members to post such additional deposits at their discretion and would make clear that such additional deposits would be deemed to be part of the Clearing Fund and the Member's Actual Deposit (as discussed below and as defined in the proposed rule change) but would not be deemed to be part of the Member's Required Fund Deposit.
NSCC proposes to add language in Section 1 to make it clear that each Member would grant NSCC a first priority perfected security interest in its right, title and interest in and to any Eligible Clearing Fund Securities, funds and assets pledged to NSCC to secure the Member's open account indebtedness or placed by the Member in NSCC's possession (or its agents acting on its behalf) to secure all such Member's obligations to NSCC, and that NSCC would be entitled to exercise the rights of a pledgee under common law and a secured party under Articles 8 and 9 of the New York Uniform Commercial Code with respect to such assets. The additional language would further harmonize the Rules with language used in the FICC/GSD Rules and FICC/MBSD Rules,
NSCC proposes to clarify the language in footnote 2 of Section 1. In addition, NSCC proposes to add “Eligible Letter of Credit” as a defined term to refer to letters of credit posted by participants if required by NSCC,
Similarly, NSCC proposes to add “Actual Deposit” as a defined term in Section 1 to refer to Eligible Clearing Fund Securities, funds and assets pledged to NSCC to secure a Member's open account indebtedness or placed by a Member in the possession of NSCC (or its agents acting on its behalf) and any Eligible Letters of Credit issued on behalf of a Member in favor of NSCC.
Instead of requiring participants to pledge Eligible Clearing Fund Securities to NSCC's account at a Qualified Securities Depository designated by the participants, NSCC proposes to clarify and streamline Section 1 of proposed Rule 4 to provide that Eligible Clearing
NSCC would delete the provision regarding allocation of the Clearing Fund by Systems and services, as this provision is no longer relevant under the proposed rule change. Provisions relating to Mutual Fund Services and Insurance and Retirement Processing Services in Section 1 (as well as other sections in Rule 4) would be consolidated in the proposed new Sections 13 and 14, entitled “Mutual Fund Deposits” and “Insurance Deposits,” respectively.
To consolidate provisions regarding the maintenance, investment and permitted use of Clearing Fund, NSCC would move the last paragraph of Section 1 about segregation and maintenance of Clearing Fund (again, in terms of “Fund,” “System,” and “Allocation,” as discussed above) to Section 2.
In addition, NSCC proposes to correct a typographical error in the reference to a footnote in Section 1 of Rule 4. Specifically, there is an incorrect reference to footnote 22 in the second paragraph of Section 1 in current Rule 4. NSCC is proposing to change this reference to reflect the correct footnote, which is footnote 2.
Section 2 of Rule 4 currently covers the permitted uses of the Clearing Fund (again by “Fund” and “Allocation,” as set forth in current Section 1), including the investment of Clearing Fund Cash and Cash Receipts, as well as participants' rights to any interest earned or paid on pledged Eligible Clearing Fund Securities or cash deposits.
NSCC is proposing to add a subheading of “Permitted Use, Investment, and Maintenance of Clearing Fund Assets” to Section 2 and restructure Section 2 so that it applies to Members only. NSCC is also proposing to restructure Section 2 so that the permitted use of Clearing Fund appears first, then the investment of Clearing Fund, followed by maintenance of Clearing Fund.
Under the proposed rule change, the permitted use of Clearing Fund paragraph would continue to have the same provisions as they relate to how the Clearing Fund can be used by NSCC, except the provisions would be streamlined and clarified. Specifically, in order to be consistent with the proposed change in Section 4 (as described below) regarding NSCC requiring Members to pay their loss allocation amounts (leaving their Required Fund Deposits intact), NSCC is proposing to modify the permitted use of Clearing Fund to make it clear that the Clearing Fund can be used by NSCC to secure each Member's performance of obligations to NSCC, including each Member's obligations with respect to any loss allocations as set forth in Section 4 of Rule 4. NSCC is also proposing to delete the defined term of Cash Receipts and related provisions from Rule 4 because, unlike the Clearing Fund, Cash Receipts are money payments received from participants and payable to others; therefore, NSCC believes that continuing to include Cash Receipts in Rule 4 is no longer necessary and may cause confusion among Members.
NSCC is proposing to add a paragraph that provides that each time NSCC uses any part of the Clearing Fund to provide liquidity to NSCC to meet its settlement obligations, including, without limitation, through the direct use of cash in the Clearing Fund or through the pledge or rehypothecation of pledged Eligible Clearing Fund Securities in order to secure liquidity for more than thirty (30) calendar days, NSCC, at the close of business on the 30th calendar day (or on the first business day thereafter) from the day of such use, would consider the amount used but not yet repaid as a loss to the Clearing Fund incurred as a result of a Defaulting Member Event and immediately allocate such loss in accordance with proposed Section 4 of Rule 4. NSCC believes that this proposed change would increase transparency and accessibility of the Rules for Members by specifying a point in time by which NSCC would need to replenish the Clearing Fund through loss allocation if NSCC uses the Clearing Fund to provide or secure liquidity to NSCC to meet its settlement obligations. NSCC believes that a period of thirty (30) calendar days would be appropriate because it would provide sufficient time for NSCC to determine whether it would be able to obtain the necessary funds from liquidation of the portfolio of the Defaulting Member to repay the used Clearing Fund amount. In addition, this proposed change would also harmonize this section with the comparable section in the FICC/GSD Rules and FICC/MBSD Rules,
Proposed Section 2 would continue to have the same provisions concerning the investment and maintenance of the Clearing Fund, except these provisions would also be streamlined and clarified. Specifically, NSCC is proposing language to make it clear that it may invest cash in the Clearing Fund in accordance with the Clearing Agency Investment Policy adopted by NSCC.
Under the proposed rule change, Members would continue to be entitled to any interest earned or paid on Clearing Fund cash deposits and pledged Eligible Clearing Fund Securities; however, NSCC is proposing additional language to make it clear that interest on pledged Eligible Clearing Fund Securities that is received by NSCC would be credited to a Member's cash deposits to the Clearing Fund, except in the event of a default by such Member on any obligations to NSCC, in which case NSCC may exercise its rights under proposed Section 3 of Rule 4.
Section 3 of Rule 4 currently provides that NSCC may apply a participant's actual deposit to any obligation the participant has to NSCC that the participant has failed to satisfy and to any Cross-Guaranty Obligation. Participants are required to eliminate any resulting deficiencies in their Required Deposits within such time as NSCC requires. Section 3 also currently provides for the manner in which loss allocation would apply with respect to Off-the-Market Transactions.
Under the proposed rule change, NSCC is proposing to add a subheading of “Application of Clearing Fund Deposits and Other Amounts to Members' Obligations” and to delete provisions that do not apply to Members and/or that reference the Clearing Fund being allocated into Funds/Allocations by Systems and services. Under the proposed rule change, NSCC would retain the provisions in Section 3 regarding applying the Member's Actual Deposit to satisfy an obligation to NSCC
Under the proposed rule change, NSCC would move the provision regarding allocation of losses from Off-the-Market Transactions to proposed Section 4 of Rule 4, which addresses allocation of losses to Members. NSCC would streamline and clarify the remaining provisions for transparency and accessibility.
Current Section 4 of Rule 4 contains NSCC's current loss allocation waterfall, which would be initiated if NSCC incurs a loss or liability in a System that is not satisfied pursuant to current Section 3. Section 4 currently provides for the following loss allocation waterfall:
(i) Application of NSCC's existing retained earnings or such lesser part
(ii) If a loss or liability remains after the application of the retained earnings, NSCC would apply the Clearing Fund (this application is subject to the current structure where the Rules provide that the Clearing Fund is allocated to different Systems/services).
a. NSCC is required to provide participants and the Commission with 5 business days' prior notice before applying the Clearing Fund.
b. Participants (other than those responsible for causing the loss or liability) would be charged pro rata based upon their allocation to the applicable Fund, less any amounts that participants were required to deposit pursuant to Rule 15.
Section 5 of Rule 4 currently states that if a pro rata charge is made pursuant to Rule 4 against a participant's actual Clearing Fund deposit, and as a consequence thereof the participant's remaining deposit is less than its Required Deposit, the participant would, upon demand by NSCC, be required to replenish its deposit to eliminate the deficiency within such time as NSCC shall require. Current Section 5 further provides that if the participant does not take this required action, NSCC may take disciplinary action against the participant, and any disciplinary action taken against the participant or the voluntary or involuntary termination of the participant's membership will not affect the obligations of the participant to NSCC or any remedy to which NSCC may be entitled under applicable law.
Under the proposed rule change, NSCC is proposing to add a subheading of “Loss Allocation Waterfall, Off-the-Market Transactions” to Section 4 and delete provisions that do not apply to Members and/or that reference the Clearing Fund being allocated into Funds/Allocations by System or service. In addition, NSCC is proposing to restructure its loss allocation waterfall as described below.
Under the proposal, Section 4 would make clear that the loss allocation waterfall applies to losses and liabilities (i) relating to or arising out of a default of a Member for whom NSCC has ceased to act pursuant to Rule 46 (such Member being referred to as a “Defaulting Member”) that is not satisfied pursuant to proposed Sections 3, 13 or 14 of Rule 4 (a “Defaulting Member Event” or (ii) otherwise incident to the clearance and settlement business of NSCC, as determined below (a “Declared Non-Default Loss Event”).
Proposed Section 4 would establish the concept of an “Event Period” to provide for a clear and transparent way of handling multiple loss events occurring in a period of ten (10) business days, which would be grouped into an Event Period.
Under the proposal, an Event Period with respect to a Defaulting Member Event would begin on the day NSCC notifies participants that it has ceased to act for a Defaulting Member (or the next business day, if such day is not a business day). In the case of a Declared Non-Default Loss Event, an Event Period would begin on the day that NSCC notifies Members of the determination by the Board of Directors that the applicable loss or liability incident to the clearance and settlement business of NSCC may be a significant and substantial loss or liability that may materially impair the ability of NSCC to provide clearance and settlement services in an orderly manner and will potentially generate losses to be mutualized among Members in order to ensure that NSCC may continue to offer clearance and settlement services in an orderly manner (or the next business day, if such day is not a business day). If a subsequent Defaulting Member Event or Declared Non-Default Loss Event occurs during an Event Period, any losses or liabilities arising out of or relating to any such subsequent event would be resolved as losses or liabilities that are part of the same Event Period, without extending the duration of such Event Period.
Under proposed Section 4, the loss allocation waterfall would begin with a corporate contribution from NSCC (“Corporate Contribution”), as is the case under the current Rules, but in a different form than under the current Section 4 of Rule 4. Today, pursuant to Addendum E, in the event of a Member impairment, NSCC is required to apply at least 25% of its retained earnings existing at the time of a Member impairment; however, no corporate contribution from NSCC is currently required for losses resulting other than those from Member impairments. Under the proposal, NSCC would amend Section 5 to add a subheading of “Corporate Contribution” and define NSCC's Corporate Contribution with respect to any loss allocation pursuant to proposed Section 4 of Rule 4, whether arising out of or relating to a Defaulting Member Event or a Declared Non-Default Loss Event, as an amount that is equal to fifty (50) percent of the amount calculated by NSCC in respect of its General Business Risk Capital Requirement as of the end of the calendar quarter immediately preceding the Event Period.
As proposed, if NSCC applies the Corporate Contribution to a loss or liability arising out of or relating to one or more Defaulting Member Events or Declared Non-Default Loss Events relating to an Event Period, then for any subsequent Event Periods that occur
Currently, the Rules do not require NSCC to contribute its retained earnings to losses and liabilities other than from Member impairments. Under the proposal, NSCC would expand the application of its corporate contribution beyond losses and liabilities from Member impairments. The proposed Corporate Contribution would apply to losses or liabilities relating to or arising out of Defaulting Member Events and Declared Non-Default Loss Events, and would be a mandatory loss contribution by NSCC prior to any allocation of the loss among Members.
Addendum E currently provides NSCC the option to contribute amounts higher than the specified percentage of retained earnings, as determined by the Board of Directors, to any loss or liability incurred by NSCC as the result of a Member's impairment. This option would be retained and expanded under the proposal to also cover non-default losses. Proposed Section 5 would provide that nothing in the Rules would prevent NSCC from voluntarily applying amounts greater than the Corporate Contribution against any NSCC loss or liability, whether a Defaulting Member Event or a Declared Non-Default Loss Event, if the Board of Directors, in its sole discretion, believes such to be appropriate under the factual situation existing at the time.
Proposed Section 4 of Rule 4 would provide that NSCC shall apply the Corporate Contribution to losses and liabilities that arise out of or relate to one or more Defaulting Member Events and/or Declared Non-Default Loss Events that occur within an Event Period. The proposed rule change also provides that if losses and liabilities with respect to such Event Period remain unsatisfied following application of the Corporate Contribution, NSCC would allocate such losses and liabilities to Members, as described below.
The proposed rule change to Section 4 of Rule 4 would clarify that all Members would be subject to loss allocation for losses and liabilities relating to or arising out of a Declared Non-Default Loss Event; however, in the case of losses and liabilities relating to or arising out of a Defaulting Member Event, only non-defaulting Members would be subject to loss allocation. In addition, NSCC is proposing to clarify that after a first round of loss allocations with respect to an Event Period, only Members that have not submitted a Loss Allocation Withdrawal Notice in accordance with proposed Section 6 of Rule 4 would be subject to further loss allocations with respect to that Event Period. NSCC is also proposing that NSCC would notify Members subject to loss allocation of the amounts being allocated to them (“Loss Allocation Notice”) in successive rounds of loss allocations.
Under the proposed rule change, a loss allocation “round” would mean a series of loss allocations relating to an Event Period, the aggregate amount of which is limited by the round cap. When the aggregate amount of losses allocated in a round equals the round cap, any additional losses relating to the applicable Event Period would be allocated in one or more subsequent rounds, in each case subject to a round cap for that round. NSCC may continue the loss allocation process in successive rounds until all losses from the Event Period are allocated among Members that have not submitted a Loss Allocation Withdrawal Notice in accordance with proposed Section 6 of Rule 4.
As proposed, each loss allocation would be communicated to Members by the issuance of a Loss Allocation Notice. Each Loss Allocation Notice would specify the relevant Event Period and the round to which it relates. The first Loss Allocation Notice in any first, second, or subsequent round would expressly state that such Loss Allocation Notice reflects the beginning of the first, second, or subsequent round, as the case may be, and that each Member in that round has five (5) business days from the issuance of such first Loss Allocation Notice for the round (such period, a “Loss Allocation Withdrawal Notification Period”) to notify NSCC of its election to withdraw from membership with NSCC pursuant to proposed Section 6 of Rule 4, and thereby benefit from its Loss Allocation Cap.
Proposed Section 4 of Rule 4 would also retain the requirement of loss allocation among Members if a loss or liability remains after the application of the Corporate Contribution, as described above. In contrast to the current Section 4 where NSCC would apply Members' Required Deposits to the mutualized loss allocation amounts, under the proposal, NSCC would require Members to pay their loss allocation amounts (leaving their Required Fund Deposits intact).
As proposed, each Member's pro rata share of losses and liabilities to be allocated in any round would be equal to (i) the Member's Average RFD, divided by (ii) the sum of the Average RFD amounts of all Members subject to loss allocation in such round. Each Member would have a maximum payment obligation with respect to any loss allocation round that would be equal to the greater of (x) its Required Fund Deposit on the first day of the applicable Event Period or (y) its Average RFD (such amount would be each Member's “Loss Allocation Cap”). Therefore, the sum of the Loss Allocation Caps of the Members subject to loss allocation would constitute the maximum amount that NSCC would be permitted to allocate in each round.
As proposed, Members would have two (2) business days after NSCC issues a first round Loss Allocation Notice to pay the amount specified in any such notice.
As proposed, Section 4 would also provide that, to the extent that a Member's Loss Allocation Cap exceeds
Under the proposal, if a Member fails to make its required payment in respect of a Loss Allocation Notice by the time such payment is due, NSCC would have the right to proceed against such Member as a Member that has failed to satisfy an obligation in accordance with proposed Section 3 of Rule 4 described above. Members who wish to withdraw would be required to comply with the requirements in proposed Section 6 of Rule 4, described further below. Specifically, proposed Section 4 of Rule 4 would provide that if, after notifying NSCC of its election to withdraw from membership pursuant to proposed Section 6 of Rule 4, the Member fails to comply with the provisions of proposed Section 6 of Rule 4, its notice of withdrawal would be deemed void and any further losses resulting from the applicable Event Period may be allocated against it as if it had not given such notice.
Under the proposal, NSCC would delete the provision in current Section 4 of Rule 4 that requires NSCC to provide Members and the Commission with 5 business days' prior notice before applying the Clearing Fund to a loss or liability because such requirement would no longer be relevant under the proposed rule change. Under the proposed rule change, NSCC would notify Members subject to loss allocation of the amounts being allocated to them in one or more Loss Allocation Notices. As proposed, instead of applying the Clearing Fund, NSCC would require Members to pay their loss allocation amounts (leaving their Clearing Fund deposits intact). In order to conform to these proposed rule changes, NSCC is proposing to eliminate the required notification to Members regarding the application of Clearing Fund in current Section 4 of Rule 4. NSCC is also proposing to delete the required notification to the Commission regarding the application of Clearing Fund in the same section. While as a practical matter, NSCC would notify the Commission of a decision to loss allocate, NSCC does not believe such notification needs to be specified in the Rules.
Under the proposed rule change, NSCC would move the provision related to Off-the-Market Transactions from current Section 3 of Rule 4 to proposed Section 4 of Rule 4 and clarify that (i) a loss or liability of NSCC in connection with the close-out or liquidation of an Off-the-Market Transaction would be allocated to the Member that was the counterparty to such transaction and (ii) no allocation would be made if the Defaulting Member satisfied all applicable intraday mark-to-market margin charges assessed by NSCC with respect to the Off-the-Market Transaction prior to its default.
Proposed Section 6 of Rule 4 would include the provisions regarding withdrawal from membership currently covered by Section 8 of Rule 4. NSCC believes that relocating the provisions on withdrawal from membership as it pertains to loss allocation, so that it comes right after the section on the loss allocation waterfall, would provide for the better organization of Rule 4. As proposed, the subheading for Section 6 would read “Withdrawal Following Loss Allocation.”
Currently, Section 8 of Rule 4 provides that participants may notify NSCC within ten (10) business days after receipt of notice of a pro rata charge that they have elected to terminate their membership and thereby avail themselves of a cap on loss allocation, which is currently their Required Deposit as fixed immediately prior to the time of the pro rata charge.
As stated above, under the proposed rule change, a Member who wishes to withdraw from membership in respect of a loss allocation must provide notice of its election to withdraw (“Loss Allocation Withdrawal Notice”) within five (5) business days from the issuance of the first Loss Allocation Notice in any round.
NSCC is proposing to include a sentence in proposed Section 6 of Rule 4 to make it clear that if the Member fails to comply with the requirements set forth in that section, its Loss Allocation Withdrawal Notice will be deemed void, and the Member will remain subject to further loss allocations pursuant to proposed Section 4 of Rule 4 as if it had not given such notice.
Currently, Section 8 also contains provisions regarding additional pro rata charges that may be made by NSCC for the same loss or liability under the existing loss allocation process and the applicable caps that participants wishing to voluntarily terminate their membership after such additional pro rata charges are noticed may avail themselves of. These provisions would be replaced by the loss allocation process contained in proposed Section 4 described above.
As proposed, Section 7 would cover the provisions on the return of a Member's Clearing Fund deposit that are currently covered by Section 6 of Rule 4. Proposed Section 7's subheading would be “Return of Members' Clearing Fund Deposits” and would apply only to Members.
Currently, with respect to the return of Clearing Fund deposits, Section 6 of Rule 4 states that NSCC will return a participant's Clearing Fund deposit 90 days after 3 conditions are met: (i) The participant ceases to be a participant, (ii) all transactions open at the time the participant ceases to be a participant which could result in a charge to the Clearing Fund have been closed, and (iii) all obligations of the participant to NSCC have been satisfied or have been deducted from the participant's Clearing Fund deposit by NSCC, provided that the participant has provided NSCC with satisfactory indemnities or guarantees or another participant has been substituted on all transactions and obligations of the participant.
Current Section 6 provides further that in the absence of an acceptable guarantee, indemnity or substitution, NSCC will retain the entire Clearing Fund deposit of a participant if such deposit is less than $100,000 for two (2)
Current Section 6 states that if a participant made a deposit with respect to the Mutual Fund Services or Insurance and Retirement Processing Services, the participant will be entitled to the return of this deposit ninety (90) days after all associated transactions in these services have been satisfied.
Finally, Section 6 currently provides that any obligation of a participant to NSCC unsatisfied at the time the participant ceases to be a participant will not be affected by such cessation of membership.
Proposed Section 7 would reduce the period in which NSCC may retain a Member's Clearing Fund deposit. Specifically, NSCC proposes that if a Member gives notice to NSCC of its election to withdraw from membership, NSCC will return the Member's Actual Deposit in the form of (i) cash or securities within thirty (30) calendar days and (ii) Eligible Letters of Credit within ninety (90) calendar days, after all of the Member's transactions have settled and all matured and contingent obligations to NSCC for which the Member was responsible while a Member have been satisfied, except NSCC may retain for up to two (2) years the Actual Deposits from Members who have Sponsored Accounts at DTC. NSCC believes that shortening the time periods for the return of a Member's Clearing Fund deposit would be helpful to firms who have exited NSCC so that they could have use of the deposits sooner than under the current Rules, while at the same time protecting NSCC because such return would only occur if all obligations of the terminating Member to NSCC have been satisfied. Proposed Section 7 would also harmonize the retention period for a Member's deposits to the Clearing Fund with the FICC/GSD Rules,
Proposed Section 8 of Rule 4 would cover the subject matter currently covered in Section 7 of Rule 4. Proposed Section 8's subheading would be “Changes in Members' Required Fund Deposits” and would apply only to Members.
Currently, Section 7 of Rule 4 requires participants to satisfy any increase in their Required Deposit within such time as NSCC requires. At the time the increase becomes effective, the participant's obligations to NSCC will be determined in accordance with the increased Required Deposit whether or not the Member has so increased its deposit. NSCC is not proposing any substantive changes to this provision, which will be renumbered as Section 8 of Rule 4 under the proposed rule change, except for streamlining the provision and limiting its application to Members as stated above.
Currently, Section 9 of Rule 4 addresses situations where a participant has excess deposits in the Clearing Fund (
Proposed Section 9 would add a subheading “Excess Clearing Fund Deposits” and would apply only to Members. NSCC is not proposing any substantive changes to this provision, except for streamlining the provisions in this section and eliminating the condition described in clause (i) of the paragraph above that limits participants' ability to request the return of excess amounts on deposit in the Clearing Fund and replacing clause (ii) of the paragraph above with a clause that provides NSCC may, in its discretion, withhold any or all of a participant's excess deposit if NSCC determines that the Member's anticipated activities in NSCC in the near future may reasonably be expected to be materially different than its activities of the recent past. NSCC believes that the proposed additional clause would protect NSCC and its participants because the clause would allow NSCC to retain excess deposits to cover an expected near-term increase in a Member's Required Fund Deposit amount due to the anticipated change in the Member's activities. The proposed additional clause would also align NSCC's Rules with that of FICC/GSD and FICC/MBSD,
Current Section 10 of Rule 4 provides for crediting persons against whom losses are charged pursuant to Rule 4 if there is a subsequent recovery of such losses by NSCC. NSCC is not proposing any changes to this section other than adding a subheading “Subsequent Recovery Against Loss Amounts” and replacing “persons” with “Persons,” which is currently defined in Rule 1 (Definitions and Descriptions) to mean “a partnership, corporation, limited liability corporation or other organization, entity or an individual.” Given that NSCC is a corporation, NSCC believes that the term “Person” already includes NSCC; however, for increased clarity, NSCC is proposing to add “including the Corporation” to make it clear to Members that if there is a subsequent recovery of losses charged pursuant to Rule 4, the net amount of the recovery would be credited to Persons, including NSCC, against whom the loss was charged in proportion to the amounts charged against them.
Current Section 11 of Rule 4 provides that a participant may withdraw Eligible Clearing Fund Securities from pledge, provided that the participant has deposited cash with, or pledged additional Eligible Clearing Fund Securities to, NSCC that, in the aggregate, secure the open account indebtedness of the participant and/or satisfy the participant's Required Deposit. Proposed Section 11 would add a subheading “Substitution or Withdrawal of Pledged Securities” and would apply only to Members. NSCC is not proposing any substantive changes to this provision, except for changes to improve the transparency and accessibility of this section.
Current Section 12 of Rule 4 makes it clear that NSCC has certain rights with respect to the Clearing Fund. Proposed Section 12 would add a subheading “Authority of Corporation” and would apply only to Members. NSCC is not proposing any substantive changes to this provision, except to clarify that a reference to 30 days in current Section 12 would mean 30 calendar days.
NSCC is proposing to add a new Section 13 to Rule 4 that would be entitled “Mutual Fund Deposits.” Under the proposal, NSCC would consolidate provisions from various sections in the current Rule 4 concerning Mutual Fund/Insurance Services Members and Fund Members and group them into proposed Section 13. Aside from the consolidation, NSCC is not proposing any substantive changes to these provisions, except for changes to (i) reduce NSCC's retention period of Mutual Fund Deposits when a Mutual Fund Participant (as defined below and in the proposed rule change) elects to withdraw from membership, in order to harmonize it with the proposed change in Section 7, as described above, and (ii) improve the transparency and accessibility of the provisions.
Proposed Section 13 would provide that each Member that uses the Mutual Fund Services to submit mutual fund purchases, redemptions, or exchanges to any Fund Member or another Member and each Mutual Fund/Insurance Services Member would, and each Fund Member (collectively with such Members and Mutual Fund/Insurance Services Members, “Mutual Fund Participants”) may, be required to make a cash deposit to the Clearing Fund in the amounts determined in accordance with Procedure XV and other applicable Rules (its “Mutual Fund Deposit” and, unless specified otherwise, for the purposes of the Rules, Required Fund Deposits shall include Mutual Fund Deposits). In the case of a Member, its Mutual Fund Deposit would be a separate and additional component of such Member's deposit to the Clearing Fund but not part of the Member's Required Fund Deposit for purposes of calculating pro rata loss allocations pursuant to proposed Section 4 of Rule 4.
As in the current Rules, proposed Section 13 would also provide that if any Mutual Fund Participant fails to satisfy any obligation to NSCC relating to Mutual Fund Services, notwithstanding NSCC's right to reverse in whole or in part any credit previously given to the contra side to any outstanding Mutual Fund Services transaction of the Mutual Fund/Insurance Services Member, NSCC would first apply such Mutual Fund Participant's Mutual Fund Deposit. If after such application any loss or liability remains and if such Mutual Fund Participant is a Member that is not otherwise obligated to NSCC, NSCC would apply such Member's Actual Deposit in accordance with proposed Section 3 of Rule 4. NSCC would next allocate any further remaining loss or liability to the other Mutual Fund Participants in successive rounds of loss allocations in each case up to the aggregate of Mutual Fund Deposits from non-defaulting Mutual Fund Participants, and after the first such round, Mutual Fund Participants that have not submitted a Loss Allocation Withdrawal Notice in accordance with proposed Section 6 of Rule 4, following the procedures and timeframes set forth in proposed Sections 4 and 6 of Rule 4 as if such Mutual Fund Participants are Members. If any loss or liability remains thereafter and there are no continuing Mutual Fund Participants, NSCC would proceed with loss allocations to Members for a Defaulting Member Event in accordance with proposed Section 4 of Rule 4.
As proposed, Section 13 would reduce NSCC's retention period of Mutual Fund Deposits from ninety (90) days under the current Section 6 of Rule 4 to thirty (30) calendar days. Specifically, NSCC is proposing that a Mutual Fund Participant that elects to withdraw from membership would be entitled to the return of its Mutual Fund Deposit no later than thirty (30) calendar days after all of its transactions have settled and it has satisfied all of its matured and contingent obligations to NSCC for which such Mutual Fund Participant was responsible while a Mutual Fund Participant. NSCC is proposing this change in order to harmonize the retention period of Mutual Fund Deposit with the proposed Clearing Fund retention period in proposed Section 7 of Rule 4, as described above.
As proposed, Section 13 would make it clear that NSCC's rights, authority and obligations with respect to deposits to the Clearing Fund as set forth in Rule 4 would apply to Mutual Fund Deposits.
NSCC is proposing to add a new Section 14 to Rule 4 that would be entitled “Insurance Deposits.” Under the proposal, NSCC would consolidate provisions from various sections in current Rule 4 concerning Insurance Carrier/Retirement Services Members and group them into proposed Section 14. Aside from the consolidation, NSCC is not proposing any substantive changes to these provisions, except for changes to (i) reduce NSCC's retention period of Insurance Deposits when an Insurance Participant (as defined below and in the proposed rule change) elects to withdraw from membership, in order to harmonize it with proposed Section 7, as described above, and (ii) improve the transparency and accessibility of the provisions.
As in the current Rules, proposed Section 14 would provide that each Mutual Fund/Insurance Services Member that uses the Insurance and Retirement Processing Services and each Insurance Carrier/Retirement Services Member (collectively, “Insurance Participants”) may be
As proposed, Section 14 would reduce NSCC's retention period of Insurance Deposits from ninety (90) days under the current Section 6 of Rule 4 to thirty (30) calendar days. Specifically, NSCC is proposing that an Insurance Participant that elects to withdraw from membership would be entitled to the return of its Insurance Deposit no later than thirty (30) calendar days after all of its transactions have settled and it has satisfied all of its matured and contingent obligations to NSCC for which such Insurance Participant was responsible while an Insurance Participant. NSCC is proposing this change in order to harmonize the retention period of Insurance Deposit with the proposed Clearing Fund retention period in proposed Section 7 of Rule 4, as described above.
As proposed, Section 14 would make it clear that NSCC's rights, authority and obligations with respect to deposits to the Clearing Fund as set forth in Rule 4 would apply to Insurance Deposits.
Addendum E is a statement of policy that currently provides that NSCC will apply no less than twenty-five (25) percent of its retained earnings to cover losses or liabilities from a Member's impairment that is not otherwise satisfied by the impaired Member's Clearing Fund deposit. NSCC is proposing to delete Addendum E in its entirety because it would no longer be relevant given the proposed rule change relating to the Corporate Contribution discussed above.
NSCC is proposing to modify Addendum K to delete all provisions associated with loss allocation and application of the Clearing Fund in connection with a loss or liability incurred by NSCC, including modifying the title of Addendum K. These provisions would no longer be necessary under the proposed rule change because the loss allocation process in its entirety would be governed by Rule 4. In addition, the current language in Addendum K regarding allocation by System would no longer be applicable under the proposed rule change as described above. NSCC would retain the provisions in Addendum K that pertain to NSCC's guaranty and rename Addendum K “The Corporation's Guaranty.”
NSCC is proposing changes to Rule 1 (Definitions and Descriptions), Rule 2B (Ongoing Membership Requirements and Monitoring), Rule 4(A) (Supplemental Liquidity Deposits), Rule 13 (Exception Processing), Rule 15 (Assurances of Financial Responsibility and Operational Capability), Rule 42 (Wind-Down of a Member, Fund Member or Insurance Carrier/Retirement Services Member), Procedure III (Trade Recording Service (Interface with Qualified Clearing Agencies)), Procedure XV (Clearing Fund Formula and Other Matters), and Addendum O (Admission of Non-US Entities as Direct NSCC Members). NSCC is proposing changes to these Rules in order to conform them with the proposed changes to Rule 4 as well as to make certain technical changes to these Rules.
Specifically, NSCC is proposing to add the following defined terms to Rule 1, in alphabetical order: Actual Deposit, Average RFD, Clearing Fund Cash, Corporate Contribution, Declared Non-Default Loss Event, Defaulting Member, Defaulting Member Event, Eligible Letter of Credit, Event Period, Insurance Deposit, Insurance Participant, Issuer, Lender, Loss Allocation Cap, Loss Allocation Notice, Loss Allocation Withdrawal Notice, Loss Allocation Withdrawal Notification Period, Mutual Fund Deposit, Mutual Fund Participant, Required Fund Deposit, Termination Date, and Voluntary Termination Notice.
NSCC is proposing to delete the defined term “The Corporation” in Rule 1 and replace it with “Corporation” in Rule 1. NSCC is proposing to replace “Required Deposits” with “Required Fund Deposits” in Rule 2B, Rule 4(A), Rule 15, Rule 42, Procedure III, and Procedure XV. NSCC is also proposing to replace “Letter of Credit” with “Eligible Letter of Credit” in Rule 42 and Addendum O.
In addition, in Section 5 of Rule 2B, NSCC proposes to change the reference to Section 8 of Rule 4 to reflect the updated section number, which would be to Section 4 of Rule 4. NSCC is also proposing conforming changes to this section to ensure that termination provisions in the Rules, whether voluntary or in response to a loss allocation, are consistent with one another to the extent appropriate.
Currently, Section 5 of Rule 2B provides that participants may elect to voluntarily retire their membership by providing NSCC with written notice of such termination. Such termination will not be effective until accepted by NSCC, which shall be evidenced by a notice to NSCC's participants announcing the participant's retirement and the effective date of the retirement. This section also provides that a participant's voluntary termination of membership shall not affect its obligations to NSCC.
Where appropriate, NSCC is proposing changes to align Section 5 of Rule 2B with the proposed new Section 6 of Rule 4, both of which address termination of membership. Specifically, NSCC is proposing to rename the subheading of Section 5 of Rule 2B to “Voluntary Termination” and to provide that when a participant elects to voluntarily terminate its membership by providing NSCC a written notice of such termination (“Voluntary Termination Notice”), the participant must specify in its Voluntary Termination Notice an effective date for its withdrawal (“Termination Date”), provided such Termination Date shall not be prior to the scheduled final settlement date of any remaining obligation owed by the participant to NSCC as of the time such Voluntary
In Rule 4(A), NSCC proposes to amend Section 11 to update a cross-reference to the time period for the refund of deposits to the Clearing Fund when a Member ceases to be a participant in order to align it with proposed Section 7 of Rule 4, which would reduce the time period from 90 days to 30 calendar days. NSCC is also proposing to add a reference to Section 13 of Rule 4 in clause (c) of Section 13 of Rule 4(A) in order to specify that a Special Activity Supplemental Deposit of a Member may be used to satisfy a loss or liability as provided in such new proposed Section 13. NSCC is also proposing technical changes in Sections 2 and 13 of Rule 4(A) to reflect new proposed defined terms in the Rules.
In Rule 13, NSCC would replace “System” with “system” to reflect the proposed deletion of “System” as a defined term from Rule 4 and Addendum K. In Procedure XV, NSCC would replace “Qualified Securities Depository” with “DTC” to be consistent with the proposed change in Section 1 of Rule 4.
Beginning in August 2017, NSCC conducted outreach to Members in order to provide them with advance notice of the proposed changes. As of the date of this filing, no written comments relating to the proposed changes have been received in response to this outreach. The Commission will be notified of any written comments received.
Pending Commission approval, NSCC expects to implement this proposal promptly. Members would be advised of the implementation date of this proposal through issuance of an NSCC Important Notice.
NSCC believes that the proposed rule change is consistent with the requirements of the Act, and the rules and regulations thereunder applicable to a registered clearing agency. Specifically, NSCC believes that the proposed rule change is consistent with Section 17A(b)(3)(F) of the Act
Section 17A(b)(3)(F) of the Act requires that the Rules be designed to promote the prompt and accurate clearance and settlement of securities transactions and to assure the safeguarding of securities and funds which are in the custody or control of NSCC or for which it is responsible.
By modifying the calculation of NSCC's corporate contribution, NSCC would apply a mandatory fixed percentage of its General Business Risk Capital Requirement (as compared to the current Rules which provide for “no less than” a percentage of retained earnings), which would provide greater transparency and accessibility to Members as to how much NSCC would contribute in the event of a loss or liability. By modifying the application of NSCC's corporate contribution to apply to Declared Non-Default Loss Events, in addition to Defaulting Member Events, on a mandatory basis, NSCC would expand the application of its corporate contribution beyond losses and liabilities from Member impairments, which would better align the interests of NSCC with those of its Members by stipulating a mandatory application of the Corporate Contribution to a Declared Non-Default Loss Event prior to any allocation of the loss among Members. Taken together, these proposed rule changes would enhance the overall resiliency of NSCC's loss allocation process by enhancing the calculation and application of NSCC's Corporate Contribution, which is one of the key elements of NSCC's loss allocation process. Moreover, by providing greater transparency and accessibility to Members, as stated above, the proposed rule changes regarding the Corporate Contribution, including the proposed replenishment period, would allow Members to better assess the adequacy of NSCC's loss allocation process.
By introducing the concept of an Event Period, NSCC would be able to group Defaulting Member Events and Declared Non-Default Loss Events occurring in a period of ten (10) business days for purposes of allocating losses to Members. NSCC believes that the Event Period would provide a defined structure for the loss allocation process to encompass potential sequential Defaulting Member Events or Declared Non-Default Loss Events that are likely to be closely linked to an initial event and/or market dislocation episode. Having this structure would enhance the overall resiliency of NSCC's loss allocation process because NSCC would be better equipped to address losses that may arise from multiple Defaulting Member Events and/or Declared Non-Default Loss Events that arise in quick succession. Moreover, the proposed Event Period structure would provide certainty for Members concerning their maximum exposure to
By introducing the concept of “rounds” (and accompanying Loss Allocation Notices) and applying this concept to the timing of loss allocation payments and the Member withdrawal process in connection with the loss allocation process, NSCC would (i) set forth a defined amount that it would allocate to Members during each round (
By implementing a “look-back” period to calculate a Member's loss allocation obligations and its Loss Allocation Cap, NSCC would discourage Members from reducing their settlement activity during a time of stress primarily to limit their loss allocation obligations. By determining a Member's loss allocation obligations and its Loss Allocation Cap based on the greater of its Required Fund Deposit or the average thereof over a look-back period, NSCC would be able to calculate a Member's pro rata share of losses and liabilities based on the amount of risk that the Member brings to NSCC. These proposed rule changes would enhance the overall resiliency of NSCC's loss allocation process because they would deter Members from reducing their settlement activity during a time of stress primarily to limit their Loss Allocation Caps.
Taken together, the foregoing proposed rule changes would establish a stronger (for all the reasons discussed above) and clearer loss allocation process for NSCC, which NSCC believes would allow it to take timely action to address losses. The ability to timely address losses would allow NSCC to continue to meet its clearance and settlement obligations, especially in circumstances that may involve a series of substantially contemporaneous loss events. Therefore, NSCC believes that these proposed rule changes would promote the prompt and accurate clearance and settlement of securities transactions, consistent with Section 17A(b)(3)(F) of the Act.
By reducing the time within which NSCC is required to return a former Member's Clearing Fund deposit, NSCC would enable firms that have exited NSCC to have access to their funds sooner than under the current Rules while at the same time protecting NSCC and its provision of clearance and settlement services because such return would only occur if all obligations of the terminating Member to NSCC have been satisfied. As such, NSCC would maintain the requisite level of Clearing Fund deposit to ensure that it can continue to meet its clearance and settlement obligations. Therefore, NSCC believes that this proposed rule change would promote the prompt and accurate clearance and settlement of securities transactions, consistent with Section 17A(b)(3)(F) of the Act.
Rule 17Ad-22(e)(13) under the Act requires, in part, that NSCC establish, implement, maintain and enforce written policies and procedures reasonably designed to ensure NSCC has the authority and operational capacity to take timely action to contain losses and continue to meet its obligations.
Rule 17Ad-22(e)(23)(i) under the Act requires NSCC to establish, implement, maintain and enforce written policies and procedures reasonably designed to publicly disclose all relevant rules and material procedures, including key aspects of NSCC's default rules and procedures.
NSCC does not believe that the proposed rule changes to enhance the resiliency of NSCC's loss allocation process would impact competition.
NSCC does not believe the proposed rule change to reduce the time within which NSCC is required to return a former Member's Clearing Fund deposit would impact competition.
NSCC also does not believe that the proposed rule changes to (i) align the loss allocation rules of the DTCC Clearing Agencies, (ii) increase the transparency and accessibility of provisions in the Rules governing loss allocation, and (iii) make conforming and technical changes, would impact competition.
Written comments relating to this proposed rule change have not been solicited or received. NSCC will notify the Commission of any written comments received by NSCC.
Within 45 days of the date of publication of this notice in the
(A) By order approve or disapprove such proposed rule change, or
(B) institute proceedings to determine whether the proposed rule change should be disapproved.
The proposal shall not take effect until all regulatory actions required with respect to the proposal are completed.
Interested persons are invited to submit written data, views and arguments concerning the foregoing, including whether the 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 proposed rule change would revise Rule 4 (Participants Fund and Participants Investment) to (i) provide separate sections for (x) the use of the Participants Fund as a liquidity resource for settlement and (y) loss allocation among Participants of losses and liabilities arising out of Participant defaults or due to non-default events; and (ii) enhance the resiliency of DTC's loss allocation process so that DTC can take timely action to contain multiple loss events that occur in succession during a short period of time.
In its filing with the Commission, the clearing agency 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 clearing agency has prepared summaries, set forth in sections A, B, and C below, of the most significant aspects of such statements.
The proposed rule change would revise Rule 4 (Participants Fund and Participants Investment) to (i) provide separate sections for (x) the use of the Participants Fund as a liquidity resource for settlement and (y) loss allocation among Participants of losses and liabilities arising out of Participant defaults or due to non-default events; and (ii) enhance the resiliency of DTC's loss allocation process so that DTC can take timely action to contain multiple loss events that occur in succession during a short period of time. In connection therewith, the proposed rule change would (i) align the loss allocation rules of the DTCC Clearing Agencies, so as to provide consistent treatment, to the extent practicable and appropriate, especially for firms that are participants of two or more DTCC Clearing Agencies, (ii) increase transparency and accessibility of the provisions relating to the use of the Participants Fund as a liquidity resource for settlement and the loss allocation provisions, by enhancing their readability and clarity, (iii) require a defined corporate contribution to losses and liabilities that are incurred by DTC prior to any allocation among Participants, whether such losses and liabilities arise out of Participant defaults or due to non-default events, (iv) reduce the time within which DTC is required to return a former Participant's Actual Participants Fund Deposit, and (v) make conforming and technical changes. The proposed rule change would also amend Rule 1 (Definitions; Governing Law) to add cross-references to terms that would be defined in proposed Rule 4, as discussed below.
Current Rule 4 provides a single set of tools and a common process for the use of the Participants Fund for both liquidity purposes to complete settlement among non-defaulting Participants, if one or more Participants fails to settle,
The proposed rule change would retain the core principles of current Rule 4 for both application of the Participants Fund as a liquidity resource to complete settlement and for loss allocation, while clarifying or refining certain provisions and introducing certain new concepts relating to loss allocation. In connection with the use of the Participants Fund as a liquidity resource to complete settlement when a Participant fails to settle, the proposed rule would introduce the term “pro rata settlement charge,” for the use of the Participants Fund to complete settlement as apportioned among non-defaulting Participants. The existing term generically applied to such a use or to a loss allocation is simply a “pro rata charge.”
For loss allocation, the proposed rule change, like current Rule 4, would continue to apply to both default and non-default losses and liabilities, and, to the extent allocated among Participants, would be charged ratably in accordance with their Required Participants Fund Deposits.
Current Rule 4 addresses the Participants Fund and Participants Investment requirements and, among other things, the permitted uses of the Participants Fund and Participants Investment.
After the Participants Fund is applied pursuant to current Section 4, DTC must promptly notify each Participant and the Commission of the amount applied and the reasons therefor.
Current Rule 4 further requires Participants whose Actual Participants Fund Deposits have been ratably charged to restore their Required Participants Fund Deposits, if such charges create a deficiency. Such payments are due upon demand. Iterative pro rata charges relating to the same loss or liability are permitted in order to satisfy the loss or liability.
Rule 4 currently provides that a Participant may, within ten (10) Business Days after receipt of notice of any pro rata charge, notify DTC of its election to terminate its business with DTC, and the exposure of the terminating Participant for pro rata charges would be capped at the greater of (a) the amount of its Aggregate Required Deposit and Investment, as fixed immediately prior to the time of the first pro rata charge, plus 100% of the amount thereof, or (b) the amount of all prior pro rata charges attributable to the same loss or liability with respect to which the Participant has not timely exercised its right to terminate.
Proposed Section 3 of Rule 4 would retain the concept that when a Participant is obligated to DTC and fails to satisfy such obligation, which would be defined as a “Participant Default,” DTC may apply the Actual Participants Fund Deposit of the Participant to such obligation to satisfy the Participant Default. The proposed definition of “Participant Default” is for drafting clarity and use in related provisions.
Proposed Section 4 would address the situation of a Participant failure to settle (which is one type of Participant Default) if the application of the Actual Participants Fund Deposit of that Participant, pursuant to proposed Section 3, is not sufficient to complete settlement among non-defaulting Participants.
Proposed Section 4 would expressly state that the Participants Fund may be applied by DTC, in such amounts as it may determine, in its sole discretion, to fund settlement among non-defaulting Participants in the event of the failure of a Participant to satisfy its settlement obligation on any Business Day. Such an application of the Participants Fund would be charged ratably to the Actual Participants Fund Deposits of the non-defaulting Participants on that Business Day. The pro rata charge per non-defaulting Participant would be based on the ratio of its Required Participants Fund Deposit to the sum of the Required Participants Fund Deposits of all such Participants on that Business Day (excluding any Additional Participants Fund Deposits in both the numerator and denominator of such ratio). The proposed rule change would identify this as a “pro rata settlement charge,” in order to distinguish application of the Participants Fund to fund settlement from pro rata loss allocation charges that would be established in proposed Section 5 of Rule 4.
The calculation of each non-defaulting Participant's pro rata settlement charge would be similar to the current Section 4 calculation of a pro rata charge except that, for greater simplicity, it would not include the current distinction for common members of another clearing agency pursuant to a Clearing Agency Agreement.
The proposed rule change would retain the concept that requires DTC, following the application of the Participants Fund to complete settlement, to notify each Participant and the Commission of the charge and the reasons therefor (“Settlement Charge Notice”).
The proposed rule change also would retain the concept of providing each non-defaulting Participant an opportunity to elect to terminate its business with DTC and thereby cap its exposure to further pro rata settlement charges. The proposed rule change would shorten the notification period for the election to terminate from ten (10) Business Days to five (5) Business Days,
The pro rata application of the Actual Participants Fund Deposits of non-defaulting Participants to complete settlement when there is a Participant Default is not the allocation of a loss. A pro rata settlement charge would relate solely to the completion of settlement. New proposed loss allocation concepts described below, including, but not limited to, a “round,” “Event Period,” and “Corporate Contribution,” would not apply to pro rata settlement charges.
A principal type of Participant Default is a failure to settle. A Participant's obligation to pay any amount due in settlement is secured by Collateral of the Participant. When the Participant fails to pay its settlement obligation, under Rule 9(B), Section 2, DTC has the right to Pledge or sell such Collateral to satisfy the obligation.
In order to enhance the resiliency of DTC's loss allocation process and to align, to the extent practicable and appropriate, its loss allocation approach to that of the other DTCC Clearing Agencies, DTC proposes to introduce certain new concepts and to modify other aspects of its loss allocation waterfall. The proposed rule change would adopt an enhanced allocation approach for losses, whether arising from Default Loss Events or Declared Non-Default Loss Events (as defined below). In addition, the proposed rule change would clarify the loss allocation process as it relates to losses arising from or relating to multiple default or non-default events in a short period of time.
Accordingly, DTC is proposing four (4) key changes to enhance DTC's loss allocation process:
Section 4 of current Rule 4 provides that if there is an unsatisfied loss or
Under the proposed rule change, DTC would replace the discretionary application of an unspecified amount of retained earnings and undivided profits with a mandatory, defined Corporate Contribution (as defined below and in the proposed rule change). The Corporate Contribution would be used for losses and liabilities that are incurred by DTC with respect to an Event Period (as defined below and in the proposed rule change), whether arising from a Default Loss Event or Declared Non-Default Loss Event, before the allocation of losses to Participants.
The proposed “Corporate Contribution” would be defined to be an amount equal to fifty percent (50%) of DTC's General Business Risk Capital Requirement as of the end of the calendar quarter immediately preceding the Event Period.
The proposed Corporate Contribution would apply to losses arising from Default Loss Events and Declared Non-Default Loss Events, and would be a mandatory contribution of DTC prior to any allocation among Participants.
By requiring a defined contribution of DTC corporate funds towards losses and liabilities arising from Default Loss Events and Declared Non-Default Loss Events, the proposed rule change would limit Participant obligations to the extent of such Corporate Contribution and thereby provide greater clarity and transparency to Participants as to the calculation of their exposure to losses and liabilities.
Proposed Rule 4 would also further clarify that DTC can voluntarily apply amounts greater than the Corporate Contribution against any loss or liability (including non-default losses) of DTC, if the Board of Directors, in its sole discretion, believes such to be appropriate under the factual situation existing at the time.
The proposed rule changes relating to the calculation and mandatory application of the Corporate Contribution are set forth in proposed Section 5 of Rule 4.
The proposed rule change would clearly define the obligations of DTC and its Participants regarding the allocation of losses or liabilities (i) relating to or arising out of a Participant Default which is not satisfied pursuant to proposed Section 3 of Rule 4 and DTC has ceased to act for such Participant (a “Default Loss Event”) and/or (ii) otherwise incident to the business of DTC,
The amount of losses that may be allocated by DTC, subject to the required Corporate Contribution, and to which a Loss Allocation Cap (as defined below and in the proposed rule change) would apply for any terminating Participant, would include any and all losses from any Default Loss Events and any Declared Non-Default Loss Events during the Event Period, regardless of the amount of time, during or after the
The proposed rule changes relating to the implementation of an Event Period are set forth in proposed Section 5 of Rule 4.
Pursuant to the proposed rule change, a loss allocation “round” would mean a series of loss allocations relating to an Event Period, the aggregate amount of which is limited by the sum of the Loss Allocation Caps of affected Participants (a “round cap”). When the aggregate amount of losses allocated in a round equals the round cap, any additional losses relating to the applicable Event Period would be allocated in one or more subsequent rounds, in each case subject to a round cap for that round. DTC would continue the loss allocation process in successive rounds until all losses from the Event Period are allocated among Participants that have not submitted a Termination Notice (as defined below and in the proposed rule change) in accordance with proposed Section 6(b) of Rule 4.
The calculation of each Participant's pro rata allocation charge would be similar to the current Section 4 calculation of a pro rata charge except that, for greater simplicity, it would not include the current distinction for common members of another clearing agency pursuant to a Clearing Agency Agreement.
DTC would notify Participants subject to loss allocation of the amounts being allocated to them (“Loss Allocation Notice”) in successive rounds of loss allocations. Each Loss Allocation Notice would specify the relevant Event Period and the round to which it relates. Participants would receive two (2) Business Days' notice of a loss allocation,
The first Loss Allocation Notice in any first, second, or subsequent round would expressly state that such Loss Allocation Notice reflects the beginning of the first, second, or subsequent round, as the case may be, and that each Participant in that round has five (5) Business Days
The round cap of any second or subsequent round may differ from the first or preceding round cap because there may be fewer Participants in a second or subsequent round if Participants elect to terminate their business with DTC as provided in proposed Section 8(b) of Rule 4 following the first Loss Allocation Notice in any round.
For example, for illustrative purposes only, after the required Corporate Contribution, if DTC has a $4 billion loss determined with respect to an Event Period and the sum of Loss Allocation Caps for all Participants subject to the loss allocation is $3 billion, the first round would begin when DTC issues the first Loss Allocation Notice for that Event Period. DTC could issue one or more Loss Allocation Notices for the first round until the sum of losses allocated equals $3 billion. Once the $3 billion is allocated, the first round would end and DTC would need a second round in order to allocate the remaining $1 billion of loss. DTC would then issue a Loss Allocation Notice for the $1 billion and this notice would be the first Loss Allocation Notice for the second round. The issuance of the Loss Allocation Notice for the $1 billion would begin the second round.
The proposed rule change would link the Loss Allocation Cap to a round in order to provide Participants the option to limit their loss allocation exposure at the beginning of each round. As proposed, a Participant could limit its loss allocation exposure to its Loss Allocation Cap by providing notice of its election to terminate its business with DTC within five (5) Business Days after the issuance of the first Loss Allocation Notice in any round.
The proposed rule changes relating to the implementation of “rounds” and Loss Allocation Notices are set forth in proposed Section 5 of Rule 4.
As discussed above, the proposed rule change would continue to provide Participants the opportunity to limit their loss allocation exposure by offering a termination option; however, the associated withdrawal process would be modified.
As proposed, if a Participant provides notice of its election to terminate its business with DTC as provided in proposed Section 8(b) of Rule 4, its maximum payment obligation with respect to any loss allocation round would be the amount of its Aggregate Required Deposit and Investment, as fixed on the first day of the Event Period, plus 100% of the amount thereof (“Loss Allocation Cap”),
As proposed, Participants would have five (5) Business Days from the issuance of the first Loss Allocation Notice in any round to decide whether to terminate its business with DTC, and thereby benefit from its Loss Allocation Cap. The start of each round
Specifically, the first round and each subsequent round of loss allocation would allocate losses up to a round cap of the aggregate of all Loss Allocation Caps of those Participants included in the round. If a Participant provides notice of its election to terminate its business with DTC, it would be subject to loss allocation in that round, up to its Loss Allocation Cap. If the first round of loss allocation does not fully cover DTC's losses, a second round will be noticed to those Participants that did not elect to terminate in the previous round. As noted above, the amount of any second or subsequent round cap may differ from the first or preceding round cap because there may be fewer Participants in a second or subsequent round if Participants elect to terminate their business with DTC as provided in proposed Section 8(b) of Rule 4 following the first Loss Allocation Notice in any round.
Pursuant to the proposed rule change, in order to avail itself of its Loss Allocation Cap, the Participant would need to follow the requirements in proposed Section 6 of Rule 4. In addition to retaining the substance of the existing requirements for any termination that are set forth in Section 6 of current Rule 4, proposed Section 6 also would provide that a Participant that provides a termination notice in connection with a loss allocation must: (1) Specify in the termination notice an effective date of termination (“Participant Termination Date”), which date shall be no later than ten (10) Business Days following the last day of the applicable Loss Allocation Termination Notification Period; (2) cease all activity that would result in transactions being submitted to DTC for clearance and settlement after the Participant Termination Date; and (3) ensure that all activities and use of DTC services for which such Participant may have any obligation to DTC cease prior to the Participant Termination Date.
The proposed rule changes are designed to enable DTC to continue the loss allocation process in successive rounds until all of DTC's losses are allocated. Until all losses related to an Event Period are allocated and paid, DTC may retain the entire Actual Participants Fund Deposit of a Participant subject to loss allocation, up to the Participant's Loss Allocation Cap.
The proposed rule changes relating to capping terminating Participants' loss allocation exposure and related changes to the termination process are set forth in proposed Sections 5, 6, and 8 of Rule 4.
The proposed rule changes are intended to make the provisions in the Rules governing loss allocation more transparent and accessible to Participants. In particular, DTC is proposing the following change relating to loss allocation to provide clarity around the governance for the allocation of losses arising from a non-default event.
Currently, DTC can use the Participants Fund to satisfy losses and liabilities arising from a Participant Default or arising from an event that is not due to a Participant Default (
DTC is proposing to clarify the governance around non-default losses that would trigger loss allocation to Participants by specifying that the Board of Directors would have to determine that there is a non-default loss that may be a significant and substantial loss or liability that may materially impair the ability of DTC to provide clearance and settlement services in an orderly manner and will potentially generate losses to be mutualized among the Participants in order to ensure that DTC may continue to offer clearance and settlement services in an orderly manner. The proposed rule change would provide that DTC would then be required to promptly notify Participants of this determination, which is referred to in the proposed rule as a Declared Non-Default Loss Event, as discussed above.
Finally, as previously discussed, pursuant to the proposed rule change, proposed Rule 4 would include language to clarify that (i) the Corporate Contribution would apply to losses or liabilities arising from a Default Loss Event or a Declared Non-Default Loss Event, and (ii) the loss allocation waterfall would be applied in the same manner regardless of whether a loss arises from a Default Loss Event or a Declared Non-Default Loss Event.
The proposed rule changes relating to Declared Non-Default Loss Events and Participants' obligations for such events are set forth in proposed Section 5 of Rule 4.
Current Rule 4 provides that after three months from when a Person has ceased to be a Participant, DTC shall return to such Person (or its successor in interest or legal representative) the amount of the Actual Participants Fund Deposit of the former Participant plus accrued and unpaid interest to the date of such payment (including any amount added to the Actual Participants Fund Deposit of the former Participant through the sale of the Participant's Preferred Stock), provided that DTC receives such indemnities and guarantees as DTC deems satisfactory with respect to the matured and contingent obligations of the former Participant to DTC. Otherwise, within four years after a Person has ceased to be a Participant, DTC shall return to such Person (or its successor in interest or legal representative) the amount of the Actual Participants Fund Deposit of the former Participant plus accrued and unpaid interest to the date of such payment, except that DTC may offset against such payment the amount of any known loss or liability to DTC arising out of or related to the obligations of the former Participant to DTC.
DTC is proposing to reduce the time, after a Participant ceases to be a Participant, at which DTC would be required to return the amount of the Actual Participants Fund Deposit of the former Participant plus accrued and unpaid interest, whether the Participant ceases to be such because it elected to terminate its business with DTC in response to a Settlement Charge Notice or Loss Allocation Notice or otherwise. Pursuant to the proposed rule change, the time period would be reduced from four (4) years to two (2) years. All other requirements relating to the return of the Actual Participants Fund Deposit would remain the same.
The four (4) year retention period was implemented at a time when there were more deposits and processing of physical certificates, as well as added risks related to manual processing, and related claims could surface many years
The foregoing changes as well as other changes (including a number of technical and conforming changes) that DTC is proposing in order to improve the transparency and accessibility of Rule 4 are described in detail below.
As discussed above, DTC is proposing to replace “four” years with “two” years, in order to reduce the time within which DTC would be required to return the Actual Participants Fund Deposit of a former Participant. In addition, DTC is proposing to (i) add the heading “Return of Participants Fund Deposits to Participants” to proposed Section 1(g), (ii) update a cross reference, and (iii) correct two typographical errors.
As discussed above, Section 3 of current Rule 4 provides that, if a Participant fails to satisfy an obligation to DTC, DTC may, in such order and in such amounts as DTC determines, apply the Actual Participants Fund Deposit of the defaulting Participant, Pledge the shares of Preferred Stock of the defaulting Participant to its lenders as collateral security for a loan, and/or sell the shares of Preferred Stock of the defaulting Participant to other Participants. Pursuant to the proposed rule change, Section 3 would retain most of these provisions, with the following modifications:
DTC proposes to add the term “Participant Default” in proposed Section 3 as a defined term for the failure of a Participant to satisfy an obligation to DTC, for drafting clarity and use in related provisions. In addition, the proposed rule change clarifies that, in the case of a Participant Default, DTC would first apply the Actual Participants Fund Deposit of the Participant to any unsatisfied obligations, before taking any other actions. This proposed clarification would reflect the current practice of DTC, and would provide Participants with enhanced transparency into the actions DTC would take with respect to the Participants Fund deposits and Participants Investment of a Participant that has failed to satisfy its obligations to DTC.
DTC proposes to correct the term “End-of-Day Facility,” to the existing defined term “End-of-Day Credit Facility.” DTC further proposes to clarify that, if DTC Pledges some or all of the shares of Preferred Stock of a Participant to its lenders as collateral security for a loan under the End-of-Day Credit Facility, DTC would apply the proceeds of such loan to the obligation the Participant had failed to satisfy, which is not expressly stated in Section 3 of current Rule 4.
In addition, DTC is proposing to make three ministerial changes to enhance readability by: (i) Removing the duplicative “in,” in the phrase “in such order and in such amounts,” (ii) replacing the word “eliminate” with “satisfy,” and (iii) to conform to proposed changes, renumbering the list of actions that DTC may take when there is a Participant Default.
DTC is also proposing to add the heading “Application of Participants Fund Deposits and Preferred Stock Investments to Participant Default” to Section 3.
As noted above, Section 4 of current Rule 4 provides that if DTC incurs a loss or liability which is not satisfied by charging the Participant responsible for the loss pursuant to Section 3 of Rule 4, then DTC may, in any order and in any amount as DTC may determine, in its sole discretion, to the extent necessary to satisfy such loss or liability, ratably apply some or all of the Actual Participants Fund Deposits of all other Participants to such loss or liability and/or charge the existing retained earnings and undivided profits of DTC. This provision relates to losses and liabilities that may be due to the failure of a Participant to satisfy obligations to DTC, if the Actual Participants Fund Deposit of that Participant does not fully satisfy the obligation, or to losses and liabilities for which no single Participant is obligated,
As discussed above, current Rule 4 currently provides a single set of tools and common processes for using the Participants Fund as both a liquidity resource and for the satisfaction of other losses and liabilities. The proposed rule change would provide separate liquidity and loss allocation provisions. More specifically, proposed Section 4 of Rule 4 would reflect the process for a “pro rata settlement charge,” the application of the Actual Participants Fund Deposits of non-defaulting Participants for liquidity purposes in order to complete settlement, when a Participant fails to satisfy its settlement obligation and the amount charged to its Actual Participants Fund Deposit by DTC pursuant to Section 3 of Rule 4 is insufficient to complete settlement. Proposed Section 5 of Rule 4 would contain the proposed loss allocation provisions.
Pursuant to the proposed rule change, current Section 4 would be replaced in its entirety by proposed Section 4, and titled “Application of Participants Fund Deposits of Non-Defaulting Participants.” First, for clarity, proposed Section 4 would expressly state that “The Participants Fund shall constitute a liquidity resource which may be applied by the Corporation in such amounts as the Corporation shall determine, in its sole discretion, to fund settlement among non-defaulting Participants in the event of the failure of a Participant to satisfy its settlement obligation on any Business Day. If the amount charged to the Actual Participants Fund Deposit of a Participant pursuant to Section 3 of this Rule is not sufficient to complete settlement among non-defaulting Participants on that Business Day, the Corporation may apply the Actual Participants Fund Deposits of non-defaulting Participants as provided in this Section and/or apply such other liquidity resources as may be available to the Corporation from time to time, including the End-of-Day Credit Facility.”
Proposed Section 4 would retain the current principle that DTC must notify Participants and the Commission when it applies the Participants Fund deposits of non-defaulting Participants, by stating that if the Actual Participants Fund Deposits of non-defaulting Participants are applied to complete settlement, DTC must promptly notify each Participant and the Commission of the amount of the charge and the reasons therefor, and would define such notice as a Settlement Charge Notice.
Proposed Section 4 would retain the current calculation of pro rata charges by providing that each non-defaulting
Proposed Section 4 would also provide a period of time within which a Participant could notify DTC of its election to terminate its business with DTC and thereby cap its liability, by providing that a Participant shall have a period of five (5) Business Days following the issuance of a Settlement Charge Notice (“Settlement Charge Termination Notification Period”) to notify DTC of its election to terminate its business with DTC pursuant to proposed Section 8(a), and thereby benefit from its Settlement Charge Cap, as set forth in proposed Section 8(a).
Proposed Section 4 would further provide that DTC may retain the entire amount of the Actual Participants Fund Deposit of a Participant subject to a pro rata settlement charge, up to the amount of the Participant's Settlement Charge Cap in accordance with proposed Section 8(a) of Rule 4.
Section 5 of current Rule 4 provides that “Except as provided in Section 8 of this Rule, if a pro rata charge is made pursuant to Section 4 of the current Rule against the Required Participants Fund Deposit of a Participant, and, as a consequence, the Actual Participants Fund Deposit of such Participant is less than its Required Participants Fund Deposit, the Participant shall, upon the demand of the Corporation, within such time as the Corporation shall require, Deposit to the Participants Fund the amount in cash needed to eliminate any resulting deficiency in its Required Participants Fund Deposit. If the Participant shall fail to make such deposit to the Participants Fund, the Corporation may take disciplinary action against the Participant pursuant to these Rules. Any disciplinary action which the Corporation takes pursuant to these Rules, or the voluntary or involuntary cessation of participation by the Participant, shall not affect the obligations of the Participant to the Corporation or any remedy to which the Corporation may be entitled under applicable law.”
Proposed Section 4 would incorporate Section 5 of current Rule 4, modified as follows: (i) Conformed to reflect the consolidation of Section 5 into proposed Section 4, (ii) replacement of “Except as provided in” with “Subject to,” to harmonize with language used elsewhere in proposed Rule 4, and (iii) corrections of two typographical errors, in order to accurately reflect that the Actual Participants Fund Deposit of a Participant would be applied, and not the Required Participants Fund Deposit, and to capitalize the word “deposit” because it is a defined term.
Proposed Section 5 of Rule 4 would address the substantially new and revised proposed loss allocation, which would apply to losses and liabilities relating to or arising out of a Default Loss Event or a Declared Non-Default Loss Event. Pursuant to the proposed rule change, DTC would restructure and modify its existing loss allocation waterfall as described below. The heading “Loss Allocation Waterfall” would be added to proposed Section 5.
Proposed Section 5 would establish the concept of an “Event Period” to provide for a clear and transparent way of handling multiple loss events occurring in a period of ten (10) Business Days, which would be grouped into an Event Period. As stated above, both Default Loss Events and Declared Non-Default Loss Events could occur within the same Event Period.
The Event Period with respect to a Default Loss Event would begin on the day on which DTC notifies Participants that it has ceased to act for the Participant (or the next Business Day, if such day is not a Business Day). In the case of a Declared Non-Default Loss Event, the Event Period would begin on the day that DTC notifies Participants of the determination by the Board of Directors that the applicable loss or liability incident to the business of DTC may be a significant and substantial loss or liability that may materially impair the ability of DTC to provide clearance and settlement services in an orderly manner and will potentially generate losses to be mutualized among Participants in order to ensure that DTC may continue to offer clearance and settlement services in an orderly manner. Proposed Section 5 would provide that if a subsequent Default Loss Event or Declared Non-Default Loss Event occurs during an Event Period, any losses or liabilities arising out of or relating to any such subsequent event would be resolved as losses or liabilities that are part of the same Event Period, without extending the duration of such Event Period.
Under proposed Section 5, the loss allocation waterfall would begin with a new mandatory Corporate Contribution from DTC. Rule 4 currently provides that the use of any retained earnings and undivided profits by DTC is a voluntary contribution of a discretionary amount of its retained earnings. Proposed Section 5 of Rule 4 would, instead, require a defined corporate contribution to losses and liabilities that are incurred by DTC with respect to an Event Period. As proposed, the Corporate Contribution to losses or liabilities that are incurred by DTC with respect to an Event Period would be defined as an amount that is equal to fifty percent (50%) of the amount calculated by DTC in respect of its General Business Risk Capital Requirement as of the end of the calendar quarter immediately preceding the Event Period.
If DTC applies the Corporate Contribution to a loss or liability arising out of or relating to one or more Default Loss Events or Declared Non-Default Loss Events relating to an Event Period, then for any subsequent Event Periods that occur during the next two hundred fifty (250) Business Days, the Corporate Contribution would be reduced to the remaining unused portion of the Corporate Contribution amount that was applied for the first Event Period.
Proposed Section 5 of Rule 4 would provide that nothing in the Rules would prevent DTC from voluntarily applying amounts greater than the Corporate Contribution against any DTC loss or liability, if the Board of Directors, in its sole discretion, believes such to be
Proposed Section 5 of Rule 4 would provide that DTC shall apply the Corporate Contribution to losses and liabilities that arise out of or relate to one or more Default Loss Events and/or Declared Non-Default Loss Events that occur within an Event Period. The proposed rule change also provides that if losses and liabilities with respect to such Event Period remain unsatisfied following application of the Corporate Contribution, DTC would allocate such losses and liabilities to Participants, as described below.
Proposed Section 5 of Rule 4 would state that all Participants would be subject to loss allocation for losses and liabilities arising out of or relating to a Declared Non-Default Loss Event; however, in the case of losses and liabilities arising out of or relating to a Default Loss Event, only non-defaulting Participants would be subject to loss allocation. In addition, DTC is proposing to clarify that after a first round of loss allocations with respect to an Event Period, only Participants that have not submitted a Termination Notice in accordance with proposed Section 6(b) of Rule 4 would be subject to loss allocations with respect to subsequent rounds relating to that Event Period. The proposed change would also provide that DTC may retain the entire Actual Participants Fund Deposit of a Participant subject to loss allocation, up to the Participant's Loss Allocation Cap in accordance with proposed Section 8(b) of Rule 4.
Pursuant to the proposed rule change, DTC would notify Participants subject to loss allocation of the amounts being allocated to them by a Loss Allocation Notice in successive rounds of loss allocations. Proposed Section 5 would state that a loss allocation “round” would mean a series of loss allocations relating to an Event Period, the aggregate amount of which is limited by the sum of the Loss Allocation Caps of affected Participants (a “round cap”). When the aggregate amount of losses allocated in a round equals the round cap, any additional losses relating to the applicable Event Period would be allocated in one or more subsequent rounds, in each case subject to a round cap for that round. DTC may continue the loss allocation process in successive rounds until all losses from the Event Period are allocated among Participants that have not submitted a Termination Notice in accordance with proposed Section 6(b) of Rule 4.
Each loss allocation would be communicated to Participants by issuance of a Loss Allocation Notice. Each Loss Allocation Notice would specify the relevant Event Period and the round to which it relates. The first Loss Allocation Notice in any first, second, or subsequent round would expressly state that such Loss Allocation Notice reflects the beginning of the first, second, or subsequent round, as the case may be, and that each Participant in that round has five (5) Business Days from the issuance of such first Loss Allocation Notice for the round
Loss allocation obligations would continue to be calculated based upon a Participant's pro rata share of the loss.
As proposed, Participants would have two (2) Business Days after DTC issues a first round Loss Allocation Notice to pay the amount specified in any such notice. In contrast to the current Section 4, under which DTC may apply the Actual Participants Fund Deposits of Participants directly to the satisfaction of loss allocation amounts, under proposed Section 5, DTC would require Participants to pay their loss allocation amounts (leaving their Actual Participants Fund Deposits intact).
Under the proposal, if a Participant fails to make its required payment in respect of a Loss Allocation Notice by the time such payment is due, DTC would have the right to proceed against such Participant as a Participant that has failed to satisfy an obligation in accordance with proposed Section 3 of Rule 4 described above. Participants who wish to terminate their business with DTC would be required to comply with the requirements in proposed Section 6 of Rule 4, described further below. Specifically, proposed Section 5 would provide that if, after notifying DTC of its election to terminate its business with DTC pursuant to proposed Section 8(b) of Rule 4, the Participant fails to comply with the provisions of proposed Section 6 of Rule 4, its notice of termination would be deemed void and any further losses resulting from the applicable Event Period may be allocated against it as if it had not given such notice.
Section 6 of Rule 4 currently provides that whenever a Participant ceases to be such, it continues to be obligated (a) to satisfy any deficiency in the amount of its Required Participants Fund Deposit and/or Required Preferred Stock Investment that it did not satisfy prior to such time, including (i) any deficiency resulting from a pro rata charge with respect to which the Participant has given notice to DTC of its election to terminate its business with DTC pursuant to Section 8 of Rule 4 and (ii) any deficiency the Participant is required to satisfy pursuant to Sections 3 (an obligation that a Participant failed to satisfy) or 5 (the requirement of a Participant to eliminate the deficiency in its Required Participants Fund Deposit) of Rule 4 and (b) to discharge any liability of the Participant to DTC resulting from the transactions of the Participant open at the time it ceases to be a Participant or on account of transactions occurring while it was a Participant.
Proposed Section 6 of Rule 4, titled “Obligations of Participant Upon Termination,” would consolidate the termination requirements from Section 6 of current Rule 4 into proposed Section 6(a), titled “Upon Any Termination,” and would modify them to conform to other proposed rule changes. Specifically, proposed Section 6(a) would state that, subject to proposed Section 8 of the Rule, whenever a Participant ceases to be
Proposed Section 6(b), titled “Upon Termination Following Settlement Charge or Loss Allocation,” would state that if a Participant timely notifies DTC of its election to terminate its business with DTC in respect of a pro rata settlement charge as set forth in proposed Section 4 of Rule 4 or a loss allocation as set forth in proposed Section 5 of Rule 4 (“Termination Notice”), the Participant would be required to: (1) Specify in the Termination Notice a Participant Termination Date, which date shall be no later than ten Business Days following the last day of the applicable Settlement Charge Termination Notification Period or Loss Allocation Termination Notification Period; (2) cease all activity that would result in transactions being submitted to DTC for clearance and settlement after the Participant Termination Date; and (3) ensure that all activities and use of DTC services for which such Participant may have any obligation to DTC cease prior to the Participant Termination Date.
DTC is proposing to include a sentence in proposed Section 6(b) to make it clear that if the Participant fails to comply with the requirements set forth in this section, its Termination Notice will be deemed void, and the Participant will remain subject to further pro rata settlement charges pursuant to proposed Section 4 of Rule 4 or loss allocations pursuant to proposed Section 5 of Rule 4, as applicable, as if it had not given such notice.
Pursuant to the proposed rule change, Section 8 would be titled “Termination; Obligation for Pro Rata Settlement Charges and Loss Allocations,” and would be divided among proposed Section 8(a) “Settlement Charges,” proposed Section 8(b) “Loss Allocations,” proposed Section 8(c) “Maximum Obligation,” and proposed Section 8(d) “Obligation to Replenish Deposit.”
Pursuant to proposed Section 8(a), if a Participant, within five (5) Business Days after issuance of a Settlement Charge Notice pursuant to proposed Section 4 of Rule 4, gives notice to DTC of its election to terminate its business with DTC, the Participant would remain obligated for (i) its pro rata settlement charge that was the subject of such Settlement Charge Notice and (ii) all other pro rata settlement charges made by DTC until the Participant Termination Date. Proposed Section 8(a) would provide that the terminating Participant's obligation would be limited to the amount of its Aggregate Required Deposit and Investment, as fixed on the day of the pro rata settlement charge that was the subject of the Settlement Charge Notice, plus 100% of the amount thereof, which is substantively the same limitation as provided for pro rata charges in Section 8 of current Rule 4.
Pursuant to proposed Section 8(b), if a Participant, within five (5) Business Days after the issuance of a first Loss Allocation Notice for any round pursuant to proposed Section 5 of Rule 4 gives notice to DTC of its election to terminate its business with DTC, the Participant shall remain liable for (i) the loss allocation that was the subject of such notice and (ii) all other loss allocations made by DTC with respect to the same Event Period. The obligation of a Participant which elects to terminate its business with DTC would be limited to the amount of its Aggregate Required Deposit and Investment, as fixed on the first day of the Event Period, plus 100% of the amount thereof, which is substantively the same limitation as provided for pro rata charges in Section 8 of current Rule 4.
Proposed Section 8(c) would provide that under no circumstances would the aggregate obligation of a Participant under proposed Section 8(a) and proposed Section 8(b) exceed the amount of its Aggregate Required Deposit and Investment, as fixed on the earlier of the (i) day of the pro rata settlement charge that was the subject of the Settlement Charge Notice giving rise to a Termination Notice, and (ii) first day of the Event Period that was the subject of the first Loss Allocation Notice in a round giving rise to a Termination Notice, plus 100% of the amount thereof. The purpose of proposed Section 8(c) is to address a situation where a Participant could otherwise be subject to both a Settlement Charge Cap and Loss Allocation Cap.
Proposed Section 8(d) would retain the last paragraph in Section 8 of current Rule 4, replacing “pro rata charge” with “pro rata settlement charge” and” loss allocation.”
Pursuant to the proposed rule change, proposed Section 9 of Rule 4 would provide that the recovery and repayment provisions in current Rule 4 apply to both pro rata settlement charges and loss allocations.
DTC further proposes to add the heading “Recovery and Repayment” to proposed Section 9.
Pursuant to the proposed rule change, Section 2 of Rule 4 would be titled “Participants Investment.”
DTC is proposing to amend Rule 1 (Definitions; Governing Law) to add cross-references to proposed terms that would be defined in Rule 4, and to delete one defined term. The defined terms to be added are: “Additional Participants Fund Deposit,” “Corporate Contribution,” “Declared Non-Default Loss Event,” “Default Loss Event,” “Event Period,” “Loss Allocation Cap,” “Loss Allocation Notice,” “Loss Allocation Termination Notification Period,” “Participant Default,” “Participant Termination Date,” “Settlement Charge Cap,” “Settlement Charge Notice,” “Settlement Charge Termination Notification Period,” and “Termination Notice”. The term “Section 8 Pro Rata Charge” would be deleted from Rule 1, because it would be deleted from proposed Rule 4 as no longer necessary.
Beginning in August 2017, DTC has conducted outreach to Participants in order to provide them with advance notice of the proposed changes. As of the date of this filing, no written comments relating to the proposed changes have been received in response to this outreach. The Commission will be notified of any written comments received.
Pending Commission approval, DTC expects to implement this proposal promptly. Participants would be advised of the implementation date of this proposal through issuance of a DTC Important Notice.
DTC believes that the proposed rule change is consistent with the requirements of the Act and the rules and regulations thereunder applicable to a registered clearing agency. Specifically, DTC believes that the proposed rule change is consistent with Section 17A(b)(3)(F) of the Act
Section 17A(b)(3)(F) of the Act requires that the Rules be designed to promote the prompt and accurate clearance and settlement of securities transactions and to assure the safeguarding of securities and funds which are in the custody or control of DTC or for which it is responsible.
By replacing the discretionary application of DTC retained earnings to losses and liabilities with a mandatory and defined amount of the Corporate Contribution, the proposed rule change is designed to provide enhanced transparency and accessibility to Participants as to how much DTC would contribute in the event of a loss or liability. The proposed rule change also clarifies that the Corporate Contribution applies to both Default Loss Events and Declared Non-Default Loss Events. The proposed rule change would provide greater transparency as to the proposed replenishment period for the Corporate Contribution, which would allow Participants to better assess the adequacy of DTC's loss allocation process. Taken together, the proposed rule changes with respect to the Corporate Contribution would enhance the overall resiliency of DTC's loss allocation process by specifying the calculation and application of DTC's Corporate Contribution, including the proposed replenishment period, and would allow Participants to better assess the adequacy of DTC's loss allocation process.
By introducing the concept of an Event Period, DTC would be able to group Default Loss Events and Declared Non-Default Loss Events occurring within a period of ten (10) Business Days for purposes of allocating losses to Participants. DTC believes that the Event Period would provide a defined structure for the loss allocation process to encompass potential sequential Default Loss Events or Declared Non-Default Loss Events that may or may not be closely linked to an initial event and/or a market dislocation episode. Having this structure would enhance the overall resiliency of DTC's loss allocation process because the proposed rule would expressly address losses that may arise from multiple Default Loss Events and/or Declared Non-Default Loss Events that arise in quick succession. Moreover, the proposed Event Period structure would provide certainty for Participants concerning their maximum exposure to mutualized loss allocation with respect to such events.
By introducing the concept of “rounds” (and accompanying Loss Allocation Notices) and applying this concept to the timing of loss allocation payments and the Participant termination process in connection with the loss allocation process, DTC would (i) set forth a defined amount that it would allocate to Participants during each round (
Taken together, the foregoing proposed rule changes would establish a stronger (for all the reasons discussed above) and clearer loss allocation process for DTC, which DTC believes would allow it to take timely action to address losses. The ability to timely address losses would allow DTC to continue to meet its clearance and settlement obligations, especially in circumstances that may involve a series of substantially contemporaneous loss events. Therefore, DTC believes that these proposed rule changes would promote the prompt and accurate clearance and settlement of securities transactions, consistent with Section 17A(b)(3)(F) of the Act.
By reducing the time within which DTC is required to return the Actual Participants Fund Deposit of a former Participant, DTC would enable firms that have exited DTC to have access to their funds sooner than under current Rule 4 while maintaining the protection of DTC and its provision of clearance and settlement services. DTC would continue to be protected under the proposed rule change, which will maintain the provision that DTC may
Rule 17Ad-22(e)(7)(i) under the Act requires, in part, that DTC establish, implement, maintain and enforce written policies and procedures reasonably designed to effectively measure, monitor, and manage the liquidity risk that arises in or is borne by DTC, including measuring, monitoring, and managing its settlement and funding flows on an ongoing and timely basis, and its use of intraday liquidity, by maintaining sufficient liquid resources to effect same-day settlement of payment obligations with a high degree of confidence under a wide range of foreseeable stress scenarios.
Rule 17Ad-22(e)(13) under the Act requires, in part, that DTC establish, implement, maintain and enforce written policies and procedures reasonably designed to ensure DTC has the authority and operational capacity to take timely action to contain losses and liquidity demands and continue to meet its obligations.
Rule 17Ad-22(e)(23)(i) under the Act requires DTC to establish, implement, maintain and enforce written policies and procedures reasonably designed to publicly disclose all relevant rules and material procedures, including key aspects of DTC's default rules and procedures.
DTC does not believe that the proposed rule changes to clarify the remedies available to DTC with respect to a Participant Default, including the application of the Participants Fund as a liquidity resource, and to clarify and provide the related processes, would impact competition.
DTC believes that the proposed rule change to replace the discretionary application of DTC retained earnings to losses and liabilities with a mandatory and defined Corporate Contribution would impact competition, but would not impose a burden on competition.
DTC does not believe that the proposed rule changes to enhance the resiliency of DTC's loss allocation process would impact competition.
DTC believes that the proposed rule change to reduce the time after a Participant ceases to be a Participant within which DTC would be required to return the amount of the Actual Participants Fund Deposit of the former Participant may have an impact on competition, but would not impose a burden on competition.
DTC also does not believe that the proposed rule changes to (i) further align the loss allocation rules of the DTCC Clearing Agencies, (ii) increase the transparency and accessibility of provisions in the Rules governing loss allocation, and (iii) make technical and conforming changes, would impact competition.
Written comments relating to this proposed rule change have not been solicited or received. DTC will notify the Commission of any written comments received by DTC.
Within 45 days of the date of publication of this notice in the
(A) By order approve or disapprove such proposed rule change, or
(B) institute proceedings to determine whether the proposed rule change should be disapproved.
The proposal shall not take effect until all regulatory actions required with respect to the proposal are completed.
Interested persons are invited to submit written data, views and arguments concerning the foregoing, including whether the 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 proposed rule change by DTC would amend the Distributions Service Guide (“Guide”)
In its filing with the Commission, the clearing agency 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 clearing agency has prepared summaries, set forth in sections A, B, and C below, of the most significant aspects of such statements.
The proposed rule change by DTC would amend the Guide to (i) restore a practice of DTC relating to the timeframe for accepting a request from a Paying Agent for a Credit PPA, and (ii) make technical changes to the Guide, as more fully described below.
One of the core asset services provided by DTC is the daily collection and allocation of funds distributions on Securities held by DTC. Commonly referred to as P&I, these funds include dividend, interest, periodic principal, redemption, and maturity payments arising from the servicing of Securities held by DTC. DTC provides centralized processing to facilitate this service, and, on each Business Day, communicates with Paying Agents regarding the P&I due that day, collects payments, and allocates entitlements to Participants.
Occasionally, a Paying Agent may request a PPA at DTC due to an error on the part of the Paying Agent, trustee, issuer, or a change in the principle factor or rate. A PPA can result in debits (“Debit PPA”) and/or credits to Settlement Accounts of the affected Participants.
When DTC receives a request for a PPA from a Paying Agent,
Debit PPAs carry particular risks. When DTC processes a Debit PPA, it will automatically debit the Settlement Accounts of the affected Participants, which in turn must seek to collect the funds from their customers, which in turn may need to recover from end investors. This recovery process gets more difficult as time passes and creates significant credit exposure, as customers and the end investors may no longer have the funds to debit, or may have closed or moved their accounts.
Historically, DTC accommodated Paying Agent adjustment requests by processing PPAs (whether a Debit PPA, a Credit PPA, or both) up to one year after the initial payment was made (“One Year Cutoff”). In 2012, the Commission approved a DTC rule filing that implemented a practice whereby DTC would not accept a request for a PPA from a Paying Agent beyond ninety calendar days after the initial payment date (“Ninety-Day Cutoff”).
Under the current practice, if a Paying Agent wants to effectuate a PPA beyond the Ninety-Day Cutoff, it cannot be processed through DTC. The Paying Agent must request from DTC an allocation register listing all affected Participants and positions. Using the allocation register, the Paying Agent must then attempt to contact each affected Participant to make direct adjustments and/or payment arrangements outside of DTC.
After the Ninety-Day Cutoff became effective on January 1, 2015, a post-payable adjustment task force (“Task Force”), formed by DTC and comprised of Paying Agents and representative members of the Association of Global Custodians (“AGC”), the American Bankers Association, and the Corporate Actions division of the Securities Industry and Financial Market Association (“SIFMA”), monitored the PPA landscape. From that review, the Task Force determined that all parties—Paying Agents, issuers, Participants, investors—would benefit from restoring the timeframe for the processing of Credit PPAs (but not Debit PPAs) from the Ninety-Day Cutoff back to the original One Year Cutoff. The restoration of the PPA timeframe back to a One Year Cutoff for Credit PPAs would allow Paying Agents more time to make correct allocations to Participants efficiently through DTC, rather than requiring the Paying Agent to make the adjustments bilaterally with each Participant, outside of DTC. This efficiency would allow Participants, their customers, and end investors to receive their funds more quickly.
DTC and the Task Force determined to preserve the Ninety-Day Cutoff for
For the reasons set forth above, DTC proposes to restore the timeframe for the processing of Credit PPAs from the Ninety-Day Cutoff back to a One Year Cutoff.
DTC is also proposing to modify language in the Guide to (i) remove the statement that PPA adjustments will appear on Participant Statements, as adjustments can only be viewed using CA Web, ISO 20022 messages and CCF Files, (ii) for consistency with the term “P&I”, add the word “principal” to the list of payments that may be subject to a PPA, and (iii) remove an incorrect reference to CMO/ABS securities.
DTC discussed the Task Force's recommendation to restore the timeframe for the processing of Credit PPAs to a One Year Cutoff with the SIFMA Corporate Action Section and AGC, which have agreed with the recommendation.
DTC will implement the proposed rule change upon approval of this filing by the Commission.
DTC believes that the proposed rule change is consistent with the requirements of Section 17A(b)(3)(F) of the Act.
Section 17A(b)(3)(F) of the Act requires that the rules of the clearing agency be designed,
DTC does not believe that the proposed rule change with respect to the Ninety-Day Cutoff for Credit PPAs would have any impact on competition because it would apply to all Paying Agents and would allow all Participants to receive their correct P&I credit allocations in a more efficient manner, and therefore would not disproportionately impact any Paying Agent or Participant.
DTC does not believe that the proposed rule change with respect to technical changes to the Guide would have any impact on competition because it would merely update the Guide to make changes for accuracy and consistency and therefore would not affect the rights and obligations of any Participant or other interested party.
Written comments relating to the proposed rule change have not been solicited or received. DTC will notify the Commission of any written comments received by DTC.
Within 45 days of the date of publication of this notice in the
(A) By order approve or disapprove such proposed rule change, or
(B) institute proceedings to determine whether the proposed rule change should be disapproved.
Interested persons are invited to submit written data, views and arguments concerning the foregoing, including whether the proposed rule change is consistent with the Act. Comments may be submitted by any of the following methods:
• Use the Commission's internet comment form (
• Send an email to
• Send paper comments in triplicate to Secretary, Securities and Exchange Commission, 100 F Street NE, Washington, DC 20549.
For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.
Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 (the “Act”),
The Exchange filed a proposal to list and trade shares of the First Trust Bitcoin Strategy ETF and the First Trust Inverse Bitcoin Strategy ETF (each a “Fund” and, collectively, the “Funds”), each a series of the First Trust Exchange-Traded Fund VII (the “Trust”), under Rule 14.11(i) (“Managed Fund Shares”). The shares of the Funds are referred to herein as the “Shares.”
The text of the proposed rule change is available at the Exchange's website at
In its filing with the Commission, the Exchange included statements concerning the purpose of and basis for the proposed rule change and discussed any comments it received on the proposed rule change. The text of these statements may be examined at the places specified in Item IV below. The Exchange has prepared summaries, set forth in Sections A, B, and C below, of the most significant parts of such statements.
The Exchange proposes to list and trade shares of the First Trust Bitcoin Strategy ETF (the “Long Bitcoin Fund”) and the First Trust Inverse Bitcoin Strategy ETF (the “Inverse Bitcoin Fund”) under Rule 14.11(i), which governs the listing and trading of Managed Fund Shares on the Exchange.
The Shares will be offered by the Trust, which was organized as a Massachusetts business trust on November 6, 2012. The Trust is registered with the Commission as an open-end investment company and has filed a registration statement on behalf of the Funds on Form N-1A (“Registration Statement”) with the Commission.
First Trust Advisors L.P. is the investment adviser (the “Adviser”) to the Funds and a commodity pool operator (“CPO”). The Funds will be operated in accordance with applicable Commodity Futures Trading Commission (“CFTC”) rules, as well as the regulatory scheme applicable to registered investment companies. Registration as a CPO imposes additional compliance obligations on the Adviser and the Funds related to additional laws, regulations, and enforcement policies.
Rule 14.11(i)(7) provides that, if the investment adviser to the investment company issuing Managed Fund Shares is affiliated with a broker-dealer, such investment adviser shall erect a “fire wall” between the investment adviser and the broker-dealer with respect to access to information concerning the composition and/or changes to such investment company portfolio.
Prior to listing a new commodity futures contract, a designated contract market must either submit a self-certification to the CFTC that the contract complies with the Commodity Exchange Act (“CEA”) and CFTC regulations or voluntarily submit the contract for CFTC approval. This process applies to all futures contracts and all commodities underlying the futures contracts, whether the new futures contracts are related to oil, gold, or any other commodity.
The Exchange proposes to list the Funds pursuant to Rule 14.11(i), however there are two ways in which the Funds will not necessarily meet the listing standards included in that Rule. As such, the Exchange submits this proposal in order to allow each Fund to hold: (i) Listed derivatives in a manner that does not comply with Rule 14.11(i)(4)(C)(iv)(b);
According to the Registration Statement, the Long Bitcoin Fund is an actively managed fund that seeks to provide investors with long exposure to the price movements of bitcoin instruments. Under Normal Market Conditions,
According to the Registration Statement, the Inverse Bitcoin Fund seeks to provide investors with short exposure to the price movements of bitcoin instruments. Under Normal Market Conditions, the Inverse Bitcoin Fund seeks to achieve its investment objective by investing in a portfolio of financial instruments that provide short exposure to movements in the value of bitcoin.
Each Fund may hold up to an aggregate amount of 15% of its net assets in illiquid assets (calculated at the time of investment) deemed illiquid by the Adviser
Under Normal Market Conditions, each Fund's investments will be consistent with the Fund's investment objective and will not be used to enhance leverage (although certain derivatives and other investments may result in leverage).
Each Fund's holdings will meet the Generic Listing Standards with two exceptions, and, as such, the Exchange submits this proposal in order to allow each Fund to hold: (i) listed derivatives in a manner that does not comply with Rule 14.11(i)(4)(C)(iv)(b);
First, the policy concerns underlying all three rules are mitigated by the fact that the Exchange believes that the underlying reference asset is not susceptible to manipulation because the nature of the bitcoin ecosystem makes manipulation of bitcoin difficult. The geographically diverse and continuous nature of bitcoin trading makes it difficult and prohibitively costly to manipulate the price of bitcoin and, in many instances, the bitcoin market is generally less susceptible to manipulation than the equity, fixed income, and commodity futures markets. There are a number of reasons this is the case, including that there is not inside information about revenue, earnings, corporate activities, or sources of supply; manipulation of the price on any single venue would require manipulation of the global bitcoin price in order to be effective; a substantial over-the-counter market provides liquidity and shock-absorbing capacity; bitcoin's 24/7/365 nature provides constant arbitrage opportunities across all trading venues; and it is unlikely that any one actor could obtain a dominant market share.
Further, bitcoin is arguably less susceptible to manipulation than other commodities that underlie ETPs; there may be inside information relating to the supply of the physical commodity such as the discovery of new sources of supply or significant disruptions at mining facilities that supply the commodity that simply are inapplicable as it relates to bitcoin. Further, the Exchange believes that the fragmentation across bitcoin exchanges, the relatively slow speed of transactions, and the capital necessary to maintain a significant presence on each exchange make manipulation of bitcoin prices through continuous trading activity unlikely. Moreover, the linkage between the bitcoin markets and the presence of arbitrageurs in those markets means that the manipulation of the price of bitcoin price on any single venue would require manipulation of the global bitcoin price in order to be effective. Arbitrageurs must have funds distributed across multiple bitcoin exchanges in order to take advantage of temporary price dislocations, thereby making it unlikely that there will be strong concentration of funds on any particular bitcoin exchange. As a result, the potential for manipulation on a particular bitcoin exchange would require overcoming the liquidity supply of such arbitrageurs who are effectively eliminating any cross-market pricing differences. For all of these reasons, bitcoin is not particularly susceptible to manipulation, especially as compared to other approved ETP reference assets.
Second, the Exchange believes that the concerns on which Rule 14.11(i)(4)(C)(iv)(b) are based related to ensuring that no single listed derivative and underlying reference asset that is susceptible to manipulation constitutes greater than 35% of the weight of the portfolio are further mitigated by the liquidity that the Exchange expects to exist in the market for Listed Bitcoin Derivatives. This belief is based on numerous conversations with market participants, issuers, and discussions with personnel of CFE. This expected liquidity in the market for Bitcoin Futures Contracts, the surveillance programs of the futures exchanges listing such Bitcoin Futures Contracts, Exchange surveillance procedures related to trading in the Shares, and CFTC oversight of the Bitcoin Futures Contracts, all combined with the difficulty in manipulating the bitcoin market described above will mitigate the concerns that Rule 14.11(i)(4)(C)(iv)(b) was designed to protect against and further prevent trading in the Shares from being susceptible to manipulation.
Third, the Exchange believes that the market cap and liquidity of the Non-U.S. Component Stocks held by the Funds along with a cap at 25% of each Fund's total assets that can be allocated to Non-U.S. Component Stocks would mitigate the concerns which Rules 14.11(i)(4)(C)(i)(b)(3) and (4) are intended to address. Any Non-U.S. Component Stock held by the Funds will have at least $100 million in market cap and will have a minimum global monthly trading volume of 250,000 shares, or a minimum global notional volume traded per month of $25 million, averaged over the last six months. This combination of large market cap with significant trading volume reduces the likelihood of manipulation of any particular security and the cap of 25% of the Fund's total assets assures that, while the Non-U.S. Component Stock holdings may not meet the concentration and diversity requirements of Rules 14.11(i)(4)(C)(i)(b)(3) and (4), respectively, such diversity and concentration requirements will not be met only for a limited portion of the portfolio.
The Exchange represents that, except for the diversification requirements for listed derivatives in Rule 14.11(i)(4)(C)(iv)(b) and the concentration and diversification requirements for Non-U.S. Component Stocks in Rules 14.11(i)(4)(C)(i)(b)(3) and (4), the Funds' proposed investments will satisfy, on an initial and continued listing basis, all of the Generic Listing Standards and all other applicable requirements for Managed Fund Shares under Rule 14.11(i). The Trust is required to comply with Rule 10A-3 under the Act for the initial and continued listing of the Shares of the Funds. A minimum of 100,000 Shares will be outstanding at the commencement of trading on the Exchange. In addition, the Exchange represents that the Shares of the Funds will comply with all other requirements applicable to Managed Fund Shares, which includes the dissemination of key information such as the Disclosed Portfolio,
The Exchange believes that its surveillance procedures are adequate to properly monitor the trading of the Shares on the Exchange during all trading sessions and to deter and detect violations of Exchange rules and the applicable federal securities laws. Additionally, the Listed Bitcoin Derivatives will be subject to the rules and surveillance programs of their respective listing venue and the CFTC.
The Exchange believes that the proposal is consistent with Section 6(b) of the Act
The Exchange believes that the proposed rule change is designed to prevent fraudulent and manipulative acts and practices in that the Shares will meet each of the initial and continued listing criteria in BZX Rule 14.11(i) except that each Fund may hold: (i) Listed derivatives in a manner that does not comply with Rule 14.11(i)(4)(C)(iv)(b);
First, the policy concerns underlying all three rules are mitigated by the fact that the Exchange believes that the underlying reference asset is not susceptible to manipulation because the nature of the bitcoin ecosystem makes manipulation of bitcoin difficult. The geographically diverse and continuous nature of bitcoin trading makes it difficult and prohibitively costly to manipulate the price of bitcoin and, in many instances, the bitcoin market is generally less susceptible to manipulation than the equity, fixed income, and commodity futures markets. There are a number of reasons this is the case, including that there is not inside information about revenue, earnings, corporate activities, or sources of supply; manipulation of the price on any single venue would require manipulation of the global bitcoin price in order to be effective; a substantial over-the-counter market provides liquidity and shock-absorbing capacity; bitcoin's 24/7/365 nature provides constant arbitrage opportunities across all trading venues; and it is unlikely that any one actor could obtain a dominant market share.
Further, bitcoin is arguably less susceptible to manipulation than other commodities that underlie ETPs; there may be inside information relating to the supply of the physical commodity such as the discovery of new sources of supply or significant disruptions at mining facilities that supply the commodity that simply are inapplicable as it relates to bitcoin. Further, the Exchange believes that the fragmentation across bitcoin exchanges, the relatively slow speed of transactions, and the capital necessary to maintain a significant presence on each exchange make manipulation of bitcoin prices through continuous trading activity unlikely. Moreover, the linkage between the bitcoin markets and the presence of arbitrageurs in those markets means that the manipulation of the price of bitcoin price on any single venue would require manipulation of the global bitcoin price in order to be effective. Arbitrageurs must have funds distributed across multiple bitcoin exchanges in order to take advantage of temporary price dislocations, thereby
Second, the Exchange believes that the concerns on which Rule 14.11(i)(4)(C)(iv)(b) are based related to ensuring that no single listed derivative and underlying reference asset that is susceptible to manipulation constitutes greater than 35% of the weight of the portfolio are further mitigated by the liquidity that the Exchange expects to exist in the market for Listed Bitcoin Derivatives. This belief is based on numerous conversations with market participants, issuers, and discussions with personnel of CFE. This expected liquidity in the market for Bitcoin Futures Contracts, the surveillance programs of the futures exchanges listing such Bitcoin Futures Contracts, Exchange surveillance procedures related to trading in the Shares, and CFTC oversight of the Bitcoin Futures Contracts, all combined with the difficulty in manipulating the bitcoin market described above will mitigate the concerns that Rule 14.11(i)(4)(C)(iv)(b) was designed to protect against and further prevent trading in the Shares from being susceptible to manipulation.
Third, the Exchange believes that the market cap and liquidity of the Non-U.S. Component Stocks held by the Funds along with a cap at 25% of each Fund's total assets that can be allocated to Non-U.S. Component Stocks would mitigate the concerns which Rules 14.11(i)(4)(C)(i)(b)(3) and (4) are intended to address. Any Non-U.S. Component Stock held by the Funds will have at least $100 million in market cap and will have a minimum global monthly trading volume of 250,000 shares, or a minimum global notional volume traded per month of $25 million, averaged over the last six months. This combination of large market cap with significant trading volume reduces the likelihood of manipulation of any particular security and the cap of 25% of the Fund's total assets assures that, while the Non-U.S. Component Stock holdings may not meet the concentration and diversity requirements of Rules 14.11(i)(4)(C)(i)(b)(3) and (4), respectively, such diversity and concentration requirements will not be met only for a limited portion of the portfolio.
The Exchange believes that its surveillance procedures are adequate to properly monitor the trading of the Shares on the Exchange during all trading sessions and to deter and detect violations of Exchange rules and the applicable federal securities laws. Additionally, the Listed Bitcoin Derivatives will be subject to the rules and surveillance programs of their respective listing venue and the CFTC.
The Exchange further believes that the proposal is designed to prevent fraudulent and manipulative acts and practices in that the Exchange expects that the market for Bitcoin Futures Contracts will be sufficiently liquid to support numerous ETPs shortly after launch. This belief is based on numerous conversations with market participants, issuers, and discussions with personnel of CFE. As such, the Exchange believes that the expected liquidity in the market for Listed Bitcoin Derivatives combined with the Exchange surveillance procedures related to the Shares and the broader regulatory structure will prevent trading in the Shares from being susceptible to manipulation.
Because of its innovative features as a cryptoasset, bitcoin has gained wide acceptance as a secure means of exchange in the commercial marketplace and has generated significant interest among investors. In less than a decade since its creation in 2008, bitcoin has achieved significant market penetration, with payments giant PayPal and thousands of merchants and businesses accepting it as a form of commercial payment, as well as receiving official recognition from several governments, including Japan and Australia. Accordingly, investor interest in gaining exposure to bitcoin is increasing exponentially as well. As expected, the total volume of bitcoin transactions in the market continues to grow exponentially.
Despite the growing investor interest in bitcoin, the primary means for investors to gain access to bitcoin exposure remains either through the Listed Bitcoin Derivatives or direct investment through bitcoin exchanges or over-the-counter trading. For regular investors simply wishing to express an investment viewpoint in bitcoin, investment through the Listed Bitcoin Derivatives is complex and requires active management and direct investment in bitcoin brings with it significant inconvenience, complexity, expense and risk. The Shares would therefore represent a significant innovation in the bitcoin market by providing an inexpensive and simple vehicle for investors to gain long or short exposure to bitcoin in a secure and easily accessible product that is familiar and transparent to investors. Such an innovation would help to perfect the mechanism of a free and open market and, in general, to protect investors and the public interest by improving investor access to bitcoin exposure
In addition to improved convenience, efficiency and transparency, the Funds will also help to prevent fraudulent and manipulative acts and practices by enhancing the security afforded to investors as compared to a direct investment in bitcoin. Despite the extensive security mechanisms built into the Bitcoin Network, a remaining risk to owning bitcoin directly is the need for the holder to retain and protect the “private key” required to spend or sell bitcoin after purchase. If a holder's private key is compromised or simply lost, their bitcoin can be rendered unavailable—
Additionally, the Funds may each hold up to an aggregate amount of 15% of its net assets in illiquid assets (calculated at the time of investment). Each Fund will monitor its portfolio liquidity on an ongoing basis to determine whether, in light of current circumstances, an adequate level of liquidity is being maintained, and will consider taking appropriate steps in order to maintain adequate liquidity if, through a change in values, net assets, or other circumstances, more than 15% of the Fund's net assets are held in illiquid assets. Illiquid assets include assets subject to contractual or other restrictions on resale and other instruments that lack readily available markets as determined in accordance with Commission staff guidance.
The proposed rule change is designed to promote just and equitable principles of trade and to protect investors and the public interest in that the Exchange will obtain a representation from the issuer of the Shares that the NAV will be calculated daily and that the NAV and the Disclosed Portfolio will be made available to all market participants at the same time. In addition, a large amount of information is publicly available regarding the Funds and the Shares, thereby promoting market transparency. Moreover, the Intraday Indicative Value will be disseminated by one or more major market data vendors at least every 15 seconds during Regular Trading Hours. On each business day, before commencement of trading in Shares during Regular Trading Hours, each Fund will disclose on its website the Disclosed Portfolio that will form the basis for the Fund's calculation of NAV at the end of the business day. Pricing information will be available on each Fund's website including: (1) The prior business day's reported NAV, the Bid/Ask Price of the Fund, and a calculation of the premium and discount of the Bid/Ask Price against the NAV; and (2) data in chart format displaying the frequency distribution of discounts and premiums of the daily Bid/Ask Price against the NAV, within appropriate ranges, for each of the four previous calendar quarters. Additionally, information regarding market price and trading of the Shares will be continually available on a real-time basis throughout the day on brokers' computer screens and other electronic services, and quotation and last sale information for the Shares will be available on the facilities of the CTA. The website for the Funds will include a form of the prospectus for the Funds and additional data relating to NAV and other applicable quantitative information. Trading in Shares of the Funds will be halted under the conditions specified in BZX Rule 11.18. Trading may also be halted because of market conditions or for reasons that, in the view of the Exchange, make trading in the Shares inadvisable. Finally, trading in the Shares will be subject to BZX Rule 14.11(i)(4)(B)(iv), which sets forth circumstances under which the Shares of each Fund may be halted. In addition, as noted above, investors will have ready access to information regarding the Fund's holdings, the Intraday Indicative Value, the Disclosed Portfolio, and quotation and last sale information for the Shares.
Information regarding market price and trading volume of the Shares will be continually available on a real-time basis throughout the day on brokers' computer screens and other electronic services, and quotation and last sale information will be available via the CTA high-speed line. Quotation, intra-day, closing and settlement prices of Listed Bitcoin Derivatives will be readily available from their respective exchange or swap execution facility, as applicable, as well as through automated quotation systems, published or other public sources, or online information services such as Bloomberg or Reuters. Quotation, intra-day, closing and settlement prices of U.S. exchange-listed ETPs will be readily available from the listing exchange, automated quotation systems, published or other public sources, or online information services such as Bloomberg or Reuters. Quotation information for OTC Bitcoin Derivatives may be obtained from brokers and dealers who make markets in such instruments. Quotation, intra-day, closing and settlement prices of Non-U.S. Component Stocks will be readily available from automated quotation systems, published or other public sources, or online information services such as Bloomberg or Reuters. Price information on Cash Equivalents and GSE Securities is available from major broker-dealer firms or market data vendors, as well as from automated quotation systems, published or other public sources, or online information services.
The proposed rule change is designed to perfect the mechanism of a free and open market and, in general, to protect investors and the public interest in that it will facilitate the listing and trading of additional types of actively-managed exchange-traded product [sic] that will enhance competition among market participants, to the benefit of investors and the marketplace. As noted above, the Exchange has in place surveillance procedures relating to trading in the Shares and may obtain information via ISG from other exchanges that are members of ISG or affiliated with a member of ISG or with which the Exchange has entered into a comprehensive surveillance sharing agreement as well as trade information for certain fixed income instruments as reported to FINRA's TRACE. At least 90% of the weight of the Listed Bitcoin Derivatives held by each Fund will consist of instruments that will trade on markets that are a member of ISG or affiliated with a member of ISG or with which the Exchange has in place a comprehensive surveillance sharing agreement. In addition, as noted above, investors will have ready access to information regarding the Fund's holdings, the Intraday Indicative Value, the Disclosed Portfolio, and quotation and last sale information for the Shares.
For the above reasons, the Exchange believes that the proposed rule change is consistent with the requirements of Section 6(b)(5) of the Act.
The Exchange does not believe that the proposed rule change will impose any burden on competition that is not necessary or appropriate in furtherance of the purpose of the Act. The Exchange notes that the proposed rule change, rather will facilitate the listing and trading of additional actively-managed exchange-traded products that will enhance competition among both market participants and listing venues, to the benefit of investors and the marketplace.
The Exchange has neither solicited nor received written comments on the proposed rule change.
Within 45 days of the date of publication of this notice in the
A. By order approve or disapprove 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.
CSX Transportation, Inc. (CSXT), has filed a verified notice of exemption under 49 CFR pt. 1152 subpart F-
CSXT has certified that: (1) No local freight traffic has moved over the Line for at least two years; (2) any overhead traffic on the Line can be rerouted over other lines; (3) no formal complaint filed by a user of rail service on the Line (or by a state or local government entity acting on behalf of such user) regarding cessation of service over the Line either is pending with the Surface Transportation Board (Board) or with any U.S. District Court or has been decided in favor of a complainant within the two-year period; and (4) the requirements at 49 CFR 1105.7(c) (environmental report), 49 CFR 1105.12 (newspaper publication), and 49 CFR 1152.50(d)(1) (notice to governmental agencies) have been met.
As a condition to this exemption, any employee adversely affected by the abandonment shall be protected under
Provided no formal expression of intent to file an offer of financial assistance (OFA) has been received, this exemption will be effective on February 7, 2018, unless stayed pending reconsideration. Petitions to stay that do not involve environmental issues,
A copy of any petition filed with the Board should be sent to Louis E. Gitomer, Law Offices of Louis E. Gitomer, LLC, 600 Baltimore Avenue, Suite 301, Towson, MD 21204.
If the verified notice contains false or misleading information, the exemption is void ab initio.
CSXT has filed a combined environmental and historic report that addresses the effects, if any, of the abandonment on the environment and historic resources. OEA will issue an environmental assessment (EA) by January 12, 2018. Interested persons may obtain a copy of the EA by writing to OEA (Room 1100, Surface Transportation Board, Washington, DC 20423-0001) or by calling OEA at (202) 245-0305. Assistance for the hearing impaired is available through the Federal Information Relay Service at (800) 877-8339. Comments on environmental and historic preservation matters must be filed within 15 days after the EA becomes available to the public.
Environmental, historic preservation, public use, or trail use/rail banking conditions will be imposed, where appropriate, in a subsequent decision.
Pursuant to 49 CFR 1152.29(e)(2), CSXT shall file a notice of consummation with the Board to signify that it has exercised the authority granted and fully abandoned the Line. If consummation has not been affected by CSXT's filing of a notice of consummation by January 8, 2019, and there are no legal or regulatory barriers to consummation, the authority to abandon will automatically expire.
Board decisions and notices are available on our website at
By the Board, Scott M. Zimmerman, Acting Director, Office of Proceedings.
Federal Aviation Administration (FAA), U.S. Department of Transportation (DOT).
Thirty Seventh RTCA SC-213 Enhanced Flight Vision Systems/Synthetic Vision Systems (EFVS/SVS) Plenary Joint with EUROCAE WG-79.
The FAA is issuing this notice to advise the public of a meeting of Thirty Seventh RTCA SC-213 Enhanced Flight Vision Systems/Synthetic Vision Systems (EFVS/SVS) Plenary Joint with EUROCAE WG-79.
The meeting will be held January 29, 2018, 10:00 a.m.-12:00 p.m.
The meeting will be held at: RTCA Headquarters, 1150 18th Street NW, Suite 910, Washington, DC 20036 and with virtual participation.
Rebecca Morrison 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 Thirty Seventh RTCA SC-213 Enhanced Flight Vision Systems/Synthetic Vision Systems (EFVS/SVS) Plenary Joint with EUROCAE WG-79. The agenda will include the following:
Attendance is open to the interested public but limited to space availability. Webex connection information can be provided. 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.
The FAA is considering a proposal to change 13.3 acres of airport land from aeronautical use to non-aeronautical use and to authorize the lease of airport property located at Akron-Canton Airport, North Canton, OH. The aforementioned land is not needed for aeronautical use. The parcel is located in the Northwest quadrant of the airport, immediately west of the Runway 19 approach surface with a property address of 2767 Greensburg Road, North Canton, OH. The parcel identification number is #2811553. The property is currently designated as aeronautical use for compatible land use in support of the airfield approach. The proposed non-aeronautical use is for commercial/general industrial development.
Comments must be received on or before February 7, 2018.
Documents are available for review by appointment at the FAA Detroit Airports District Office, Evonne M. McBurrows, 11677 South Wayne Road, Suite 107, Romulus, MI 48174. Telephone: (734) 229-2900/Fax: (734) 229-2950 and Akron-Canton Airport, 5400 Lauby Road NW #9, North Canton, OH. Telephone: (330) 499-4059.
Evonne M. McBurrows, Program Manager, Federal Aviation Administration, Detroit Airports District Office, 11677 South Wayne Road, Suite 107, Romulus, MI 48174. Telephone Number: (734) 229-2900/FAX Number: (734) 229-2950.
In accordance with section 47107(h) of Title 49, United States Code, this notice is required to be published in the
The property is currently designated as aeronautical use for compatible land use. This parcel of land (13.3 acres) was acquired with Passenger Facility Charge Program funds under PFC project number 99-04-C-00-CAK. Akron-Canton Regional Airport Authority (AA) proposed non-aeronautical use is for commercial/general industrial
The disposition of proceeds from the lease of the airport property will be in accordance with FAA's Policy and Procedures Concerning the Use of Airport Revenue, published in the
This notice announces that the FAA is considering the release of the subject airport property at the Akron-Canton Airport, North Canton, OH from its obligations to be maintained for aeronautical purposes. Approval does not constitute a commitment by the FAA to financially assist in the change in use of the subject airport property nor a determination of eligibility for grant-in-aid funding from the FAA.
Situated in the City of Green, County of Summit and State of Ohio:
Known as being part of the Northeast Quarter of Section 26 in Original Green Township, bounded and described as follows:
Beginning at an iron spike found at the intersection of the centerline of Greensburg Road (C.H. 133) width varies, and the west line of Northeast Quarter of Section 26;
Thence, N 82°38′36″ E, along the centerline of said Greensburg Road, a distance of 332.37 feet to the southeasterly comer of parcel number 28-11552 owned by A.K.C. Development Co., as recorded in document number 56194537 of Summit County records, said point being the Principal Point of Beginning;
Thence, N 01°01′04″ E, along the easterly line of said A.K.C. Property, a distance of 930.21 feet to a
Thence, S 89°34′34″ E, creating a new line, a distance of 650.60 feet to a
Thence, S 00°24′54″ W, along the westerly line of said Akron-Canton Regional Airport Authority, a distance of 839.93 feet to a
Thence, S 82°38′36″ W, along the centerline of said Greensburg Road, a distance of 666.51 feet to the Principal Place of Beginning and containing 13.3132 acres of land including area in the public right of way and 12.8436 acres of land excluding area in the public right of way, based on a survey conducted in January of 2017 by John R. Alban Professional Surveyor 7651.
Bearings are based upon an assumed meridian and are to be used for reference only.
All pins set are
Federal Aviation Administration (FAA), DOT.
Notice.
The FAA is considering a proposal to change 7 acres of airport land from aeronautical use to non-aeronautical use and to authorize the lease of airport property located at Akron-Canton Airport, North Canton, OH. The aforementioned land is not needed for aeronautical use. The parcel is located in the Northeast quadrant of the airport, immediately east of the Runway 19 approach surface. The parcel identification number is #2815572. The property is currently designated as aeronautical use for compatible land use in support of the airfield approach area. The proposed non-aeronautical use is for recreational vehicle storage and sales facility.
Comments must be received on or before February 7, 2018.
Documents are available for review by appointment at the FAA Detroit Airports District Office, Evonne M. McBurrows, 11677 South Wayne Road, Suite 107, Romulus, MI 48174. Telephone: (734) 229-2900/Fax: (734) 229-2950 and Akron-Canton Airport, 5400 Lauby Road NW #9, North Canton, Ohio. Telephone: (330) 499-4059.
Evonne M. McBurrows, Program Manager, Federal Aviation Administration, Detroit Airports District Office, 11677 South Wayne Road, Suite 107, Romulus, MI 48174. Telephone Number: (734) 229-2900/FAX Number: (734) 229-2950.
In accordance with section 47107(h) of Title 49, United States Code, this notice is required to be published in the
The property is currently designated as aeronautical use for compatible land use. This parcel of land (7 acres) was acquired with Airport Improvement Program (AIP) federal funds under AIP Grant #6-39-0001-08. Akron-Canton Regional Airport Authority (AA) proposed non-aeronautical use is for recreational vehicle storage and sales facility. AA will lease the land and receive fair market value.
The disposition of proceeds from the lease of the airport property will be in accordance with FAA's Policy and Procedures Concerning the Use of Airport Revenue, published in the
This notice announces that the FAA is considering the release of the subject airport property at the Akron-Canton Airport, North Canton, OH from its obligations to be maintained for aeronautical purposes. Approval does not constitute a commitment by the FAA to financially assist in the change in use of the subject airport property nor a determination of eligibility for grant-in-aid funding from the FAA.
Situated in the City of Green, County of Summit, State of Ohio and being part of the Northwest Quarter of Section 25, of former Green Township, and being part of a 130.389 acre tract as conveyed to Akron-Canton Regional Airport Authority as recorded in Reception Number 55559106 of the Summit County Fiscal Office;
Commencing at a 1 inch bar in a monument box found at the intersection of the centerline of Mayfair Road (T.R. 244) with the centerline of Greensburg Road (C.H. 133);
Thence N 88°27′43′ W along the south line of said Northwest Quarter of Section 25 and the centerline of said Greensburg Road, a distance of 2602.75 feet to a point at the southwesterly corner of a 2.08 acre parcel conveyed to Overhead Door Corporation by Reception Number 55669449 of the
Thence N 01°37′33″ E along the easterly line of said Akron-Canton Regional Airport Authority parcel and the westerly line of said Overhead Door Corporation parcel, a distance of 499.21 feet to a
1. Thence N 01°37′33″ E on a new lease line and along the northerly extension of said westerly line of said Overhead Door Corporation parcel, a distance of 489.57 feet to a point on the easterly line of an area designated by said Akron-Canton Regional Airport Authority as “RUNWAY 19 APPROACH AND PROTECTION ZONE (19 RPZ)”;
2. Thence N 10°18′22″ E on a new lease line and along the easterly line of said “19 RPZ”, a distance of S 10.67 feet to a point on the southwesterly existing limited-access right of way line of Interstate 77 and the northeasterly line of said Akron-Canton Regional Airport Authority parcel;
3. Thence S 33°57′37″ E along the northeasterly line of said Akron-Canton Regional Airport Authority parcel and said limited access right of way line of Interstate 77, a distance of 554.65 feet to a
4. Thence S 01°37′33″ W along the easterly line of said Akron-Canton Regional Airport Authority parcel the westerly line of said Canton Green, LLC parcel, a distance of 542.51 feet to a
5. Thence N 88°29′31″ W along the northerly line of said 1.04 acre Akron-Canton Regional Airport Authority parcel and the northerly line of said Overhead Door Corporation parcel, a distance of 399.84 feet (passing over a
The basis of bearings for this description the Ohio State Plane Coordinate System, Ohio North Zone, NAD83 (2011), Geoid 12A.
Office of the Comptroller of the Currency (OCC), Treasury; Board of Governors of the Federal Reserve System (Board); and Federal Deposit Insurance Corporation (FDIC).
Joint notice and request for comment.
In accordance with the requirements of the Paperwork Reduction Act (PRA) of 1995, the OCC, the Board, and the FDIC (the “agencies”) may not conduct or sponsor, and the respondent is not required to respond to, an information collection unless it displays a currently valid Office of Management and Budget (OMB) control number. On June 27, 2017, the agencies, under the auspices of the Federal Financial Institutions Examination Council (FFIEC), requested public comment for 60 days on a proposal to revise the Consolidated Reports of Condition and Income for a Bank with Domestic and Foreign Offices (FFIEC 031), the Consolidated Reports of Condition and Income for a Bank with Domestic Offices Only (FFIEC 041), and the Consolidated Reports of Condition and Income for a Bank with Domestic Offices Only and Total Assets Less than $1 Billion (FFIEC 051), which are currently approved collections of information. The Consolidated Reports of Condition and Income are commonly referred to as the Call Report. The proposed revisions to the FFIEC 031, FFIEC 041, and FFIEC 051 Call Reports would result in an overall reduction in burden.
The comment period for the June 2017 notice ended on August 28, 2017. As described in the
In addition, the agencies will proceed with the revisions to address the changes in the accounting for equity investments, with some modifications to the proposal in response to comments received. The effective date for these revisions would be the March 31, 2018, report date, as originally proposed, to coincide with the first reporting period in which the accounting changes will be adopted under U.S. generally accepted accounting principles (GAAP) by certain reporting institutions. Finally, because of concerns raised by commenters regarding the proposed revisions to the definition of “past due” assets for regulatory reporting purposes, the agencies are giving further consideration to this proposal, including its effect on and relationship to other regulatory reporting requirements, and are not proceeding with this proposed revision at this time.
The agencies are giving notice that they have sent the collection to OMB for review.
Comments must be submitted on or before February 7, 2018.
Interested parties are invited to submit written comments to any or all of the agencies. All comments,
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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.
You may personally inspect and photocopy comments at the OCC, 400 7th Street SW, Washington, DC 20219. For security reasons, the OCC requires that visitors make an appointment to inspect comments. You may do so by calling (202) 649-6700 or, for persons who are deaf or hearing impaired, TTY, (202) 649-5597. Upon arrival, visitors will be required to present valid government-issued photo identification and submit to security screening in order to inspect and photocopy comments.
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All public comments are available from the Board's website at
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Additionally, commenters may send a copy of their comments to the OMB desk officer for the agencies by mail to the Office of Information and Regulatory Affairs, U.S. Office of Management and Budget, New Executive Office Building, Room 10235, 725 17th Street NW, Washington, DC 20503; by fax to (202) 395-6974; or by email to
For further information about the proposed revisions to the Call Report discussed in this notice, please contact any of the agency staff whose names appear below. In addition, copies of the Call Report forms can be obtained at the FFIEC's website (
The agencies propose revisions to data items reported on the FFIEC 031, FFIEC 041, and FFIEC 051 Call Reports.
The proposed burden-reducing revisions to the Call Reports are the result of an ongoing effort by the agencies to reduce the burden associated with their preparation and filing and, as detailed in Appendices B, C, and D, achieve burden reductions by the removal or consolidation of numerous items, the raising of certain reporting thresholds, and a reduction in reporting frequency for certain items. The proposed revisions to the reporting of equity investments are consistent with changes in the accounting
The estimated average burden hours collectively reflect the estimates for the FFIEC 031, the FFIEC 041, and the FFIEC 051 reports. When the estimates are calculated by type of report across the agencies, the estimated average burden hours per quarter are 123.06 (FFIEC 031), 57.71 (FFIEC 041), and 39.38 (FFIEC 051). The burden hours for the currently approved reports are 128.05 (FFIEC 031), 74.88 (FFIEC 041), and 44.94 (FFIEC 051),
These information collections are mandatory pursuant to 12 U.S.C. 161 (for national banks), 12 U.S.C. 324 (for state member banks), 12 U.S.C. 1817 (for insured state nonmember commercial and savings banks), and 12 U.S.C. 1464 (for federal and state savings associations). At present, except for selected data items and text, these information collections are not given confidential treatment.
Institutions submit Call Report data to the agencies each quarter for the agencies' use in monitoring the condition, performance, and risk profile of individual institutions and the industry as a whole. Call Report data serve a regulatory or public policy purpose by assisting the agencies in fulfilling their missions of ensuring the safety and soundness of financial institutions and the financial system and the protection of consumer financial rights, as well as agency-specific missions affecting federal and state-chartered institutions,
On June 27, 2017, the agencies requested comment for 60 days on a proposal to revise the existing Call Report requirements (FFIEC 031, FFIEC 041, and FFIEC 051).
The comment period for the June 2017 notice ended on August 28, 2017. General comments on the notice are summarized in Section II. In Section III, the agencies provide more details on the comments received and any changes the agencies are making in response to those comments. Section IV discusses the timing for implementing the proposed revisions to the Call Report.
The agencies collectively received comments on the proposal from 13 entities, including banking organizations, bankers' associations, and a government entity. General comments and recommendations on the FFIEC 031, FFIEC 041, and FFIEC 051 Call Reports are included in this section. The agencies provide information regarding comments on specific aspects of the proposed revisions to the Call Reports in more detail in Section III.
Commenters expressed mixed opinions on the June 2017 notice and the agencies' Call Report burden-reduction initiatives to date. Seven commenters representing banking organizations and bankers' associations supported the effort put forth by the agencies. One bankers' association stated that it “appreciates the time and effort the FFIEC has devoted to identifying opportunities to reduce the burdens associated with the Call Report requirements.” The commenter went on to say that the removal or change in reporting frequency of line items or increase to reporting thresholds “serves as needed clean-up of the Call Report.” Three banking organizations also “appreciate” the agencies' initiatives focused on reducing the burden associated with the Call Reports. The government entity stated it uses certain data items in the Call Report in preparing national economic reports, and encouraged the agencies to continue collecting those items.
On the other hand, the majority of the comment letters asserted that the proposed revisions to the Call Reports would provide no real savings in effort or cost for smaller institutions and that the overall reduction in burden is of limited value to such institutions. One of the banking organizations and two of the bankers' associations further indicated that reducing reporting frequency would provide only “limited relief.” These commenters noted that regardless of whether cumulative data is reported every quarter or every six months, institutions would still need to gather the data on a quarterly basis in order to produce the reported data on a semiannual basis. Two bankers' associations responded that combining data items also would not provide any relief to institutions, because processes are already in place to gather the information separately. One banking organization and one bankers' association stated that the proposed revisions would increase burden due to the system changes that would be necessary to modify the processes currently in place, such as deactivating or reactivating each quarter the reporting of data items that would
The agencies recognize that not all institutions would see an immediate and large reduction in burden from the proposed revisions in the June 2017 notice. However, reducing the frequency of collection for certain data items or consolidating existing data items into fewer data items would result in institutions spending less time completing the Call Report since there would be fewer items to review prior to each quarterly submission. Also, an institution would have fewer instructions to review to determine whether it has reportable (nonzero) amounts. To the extent that an institution currently tracks granular data items that are proposed to be consolidated, there may be limited burden relief from consolidating the items. However, institutions that currently track data at an aggregate level and then must allocate that amount to the existing subcategories every quarter would see additional burden relief. Accordingly, these changes represent meaningful Call Report burden relief to institutions that do not engage in complex activities.
Furthermore, as previously mentioned, internal surveys of users of Call Report data at FFIEC member entities, including staff of the agencies, were one of the significant actions under the FFIEC's community bank Call Report burden-reduction initiative. The survey responses have been the foundation for the statutorily mandated review of the existing Call Report data items
Finally, in an effort to address the concerns of institutions relating to the proposed reductions in frequency from quarterly to semiannual, the agencies note that the FFIEC's Central Data Repository (CDR)
Three commenters suggested the agencies adopt a “short-form” Call Report to be filed for at least two quarters of the year. The short-form Call Report recommended by two of these commenters would consist only of an institution's balance sheet, income statement, and statement of changes in equity capital. The institution would file a full Call Report including all supporting schedules in the second and fourth quarters, and the short-form Call Report in the first and third quarters. The third commenter recommended including a limited number of additional schedules in the first and third quarters to report more detailed information on loans and regulatory capital, with additional schedules filed in the second and fourth quarters.
While the agencies understand the commenters' desire for a short-form Call Report, the agencies did not adopt this suggestion for the reasons noted in response to the comment letters received on the August 2016 proposal for a streamlined Call Report for small institutions.
One commenter recommended that the FFIEC establish an industry advisory committee to develop advice and guidance on the Call Report and establish a regular forum to address technical questions and new changes to the Call Report. In response, the agencies plan to continue to offer outreach in connection with significant revisions to the Call Report, as they did with the adoption of the revised Schedule RC-R, Regulatory Capital, and with the implementation of the FFIEC 051. The agencies also receive and respond to a number of questions from individual institutions each quarter. Issues that could affect multiple institutions are often addressed through the Call Report Supplemental Instructions published quarterly or updates to the Call Report instruction book published as needed. Consistent with the PRA, the agencies also offer an opportunity for members of the banking industry to comment on proposed changes to the Call Report or to make any additional suggestions for improving, streamlining, or clarifying the Call Report.
One commenter recommended that the agencies align the proposed revisions in the Call Report with revisions to the FR Y-9C report for holding companies.
One commenter recommended that the agencies increase the asset-size threshold for filing the FFIEC 051 Call Report from the current $1 billion to at least $10 billion, indexed for inflation. Raising the threshold to $10 billion or higher at this time could result in a significant loss of data necessary for supervisory or other purposes from institutions with assets above $1 billion.
The agencies received three comment letters from banking organizations that highlighted the burden required for their institutions to prepare Schedule RC-R, Regulatory Capital. Reporting on Schedule RC-R is directly tied to the requirements in the agencies' regulatory capital rules.
The agencies recently issued a proposal for modifications to simplify the regulatory capital rules.
One commenter stated that Schedule RC-C, Part II, is particularly burdensome to complete and should be eliminated. The agencies previously reduced the frequency of this schedule from quarterly to semiannual for institutions filing the FFIEC 051.
The agencies proposed to revise the scope of the FFIEC 031 Call Report to require all institutions with consolidated total assets of $100 billion or more to file this form, regardless of whether an institution has any foreign offices. The agencies proposed this change because institutions with consolidated total assets of $100 billion or more without foreign offices are considered to have a similar degree of complexity in their activities as institutions of this size with foreign offices that currently file the FFIEC 031.
The agencies received two comments opposing the proposed scope revision. One bankers' association stated that the proposal could be viewed as creating three Call Reports for larger banks, which could create a problem if the reports evolve and do not remain aligned in the future. Another bankers' association opposed the agencies' use of a size-based threshold alone (
The agencies are proceeding with the proposed scope revision of the FFIEC 031 to include all institutions with foreign offices and all institutions with consolidated total assets of $100 billion or more. The agencies note that this revision would affect only five institutions, as the majority of institutions with assets of $100 billion or more also have foreign offices and currently file the FFIEC 031. Currently, the FFIEC 031 and FFIEC 041 collect the same information on an institution's domestic office activities. When preparing the FFIEC 031, institutions with no foreign offices would not need to report items that request information on foreign offices, including the entirety of Schedules RI-D; RC-E, Part II; and RC-I; nor would they need to complete Schedule RC-H, which collects certain domestic office data. These institutions also would report the same amounts for “domestic offices” and “consolidated bank” in other schedules that request this breakout, which would not require these institutions to compile additional information. In addition, there is currently a single set of Call Report instructions for both the FFIEC 031 and FFIEC 041, which helps promote consistency in reporting between those versions of the Call Report and should reduce the burden of a transition for the affected institutions. As noted in the June 2017 notice, the agencies consider all institutions with $100 billion or more in total assets to be of similar complexity. Institutions of this size typically have similar business activities and risk profiles for their domestic operations, and the agencies' examiners review these domestic operations in a similar manner. Receiving information from all institutions in this size category on the same Call Report form will improve the agencies' ability to perform comparisons among these institutions' domestic operations. This proposed scope revision also has enabled the agencies to propose removing items from, or consolidating a significant number of items in, the FFIEC 041 form,
The agencies received two comments from banking organizations on the proposed revisions to Schedule RI-E to reduce the reporting frequency of the data items for significant components of “other noninterest income” and “other noninterest expense” from quarterly to annual in the FFIEC 051 and increase the percentage threshold for reporting individual components in all three versions of the Call Report. One commenter noted this revision would actually reduce burden in preparing the reports. The other commenter stated that his organization does not meet the existing thresholds to separately report noninterest income and expense components on that schedule, so the reporting burden would not change.
After considering these specific comments, as well as the comments received on the overall proposal and the burden-reduction initiative that were discussed in Section II.A. above, the agencies will proceed with the proposed burden-reducing changes to Schedule RI-E, along with all other burden-reducing changes to Call Report schedules proposed in the June 2017 notice. The agencies recognize that not every proposed change will reduce burden for every institution. However, the agencies believe that the proposed changes will reduce burden in the Call Reports as a whole, which is also reflected in a reduction in the estimated burden hours per quarter for the Call Reports.
Under the current Call Report instructions, closed-end installment loans, amortizing loans secured by real estate, and other loans and lease financing receivables with payments scheduled monthly are to be reported as past due in Schedule RC-N, Past Due and Nonaccrual Loans, Leases, and Other Assets, when the borrower is in arrears two or more monthly payments. This means that a loan is to be reported as past due if two monthly payments have not been received by the close of business on the due date of the second monthly payment. Similarly, the Call Report instructions provide that open-end credit such as credit cards, check credit, and other revolving credit plans are to be reported as past due when the customer has not made the minimum payment for two or more billing cycles. The instructions also provide that, at an institution's option, loans and leases with payments scheduled monthly may
The agencies note there is an existing widely used industry standard, known as the Mortgage Bankers Association (MBA) method, which provides that loans with payments scheduled monthly become 30 days past due if a monthly payment is not received by the end of the day immediately preceding the loan's next due date. The agencies understand that the MBA method is used by most major mortgage data repositories, including the three major credit bureaus and two major mortgage loan data processing service bureaus used by institutions. The MBA method is also used by reporting forums such as the MBA, McDash Analytics, and the OCC Mortgage Metrics Reports.
Therefore, to promote the use of a consistent standard in the industry and reduce the burden for certain institutions calculating past-due loans under two methods (
The agencies received comments from two bankers' associations and three banking organizations regarding the proposed instructional revision to the definition of “past due.” These commenters generally opposed the proposed revision. All commenters cited increased burden related to operational difficulties to implement the change as well as concerns about how this definitional change would flow through to or affect other reporting requirements. Operational challenges cited by commenters include substantial processing system changes; the need to modify contracts with third-party vendors, loan securitization agreements, and other legal agreements; communication issues with loan servicing customers; and coordination issues with third-party vendors to implement the proposed revision. Other related reporting concerns include possible restatements of audited financial statements and filings with the Securities and Exchange Commission; the effect on the calculation of the allowance for loan and lease losses; the impact on the risk weighting associated with delinquent and nonaccrual loans as reported on Schedule RC-R, Regulatory Capital; the use of performing loans as inputs for stress testing and recovery and resolution planning purposes; the impact on liquidity reporting; and the impact on the calculation of surcharge scores assessed to global systemically important banks (G-SIBs). Additionally, one bankers' association stated that the proposed instructional change would remove the current reporting flexibility for institutions to use a combination of actual-day count, the MBA method, and the current Call Report method based on the institutions' particular portfolios.
Based on the issues raised in the comments received on the proposed instructional revision to the definition of past due, the agencies are giving further consideration to this proposal, including its effect on and relationship to other regulatory reporting requirements. Accordingly, the agencies are not proceeding with this proposed instructional revision and the existing instructions for the definition of past due will remain in effect.
In January 2016, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No. 2016-01, “Recognition and Measurement of Financial Assets and Financial Liabilities.” As one of its main provisions, the ASU requires certain investments in equity securities (including other ownership interests, such as interests in partnerships, unincorporated joint ventures, and limited liability companies) to be measured at fair value with changes in fair value recognized in net income (fair value through net income).
Section 37(a) of the Federal Deposit Insurance Act (12 U.S.C. 1831n(a)) states that, in general, the accounting principles applicable to the Call Report “shall be uniform and consistent with generally accepted accounting principles.” The agencies are maintaining consistency with U.S. GAAP by implementing the provisions of ASU 2016-01 in the Call Report in accordance with the effective dates set forth in the ASU. For institutions that are public business entities, as defined in U.S. GAAP, ASU 2016-01 is effective for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years. For all other institutions, the ASU is effective for fiscal years beginning after December 15, 2018, and interim periods within fiscal years beginning after December 15, 2019.
Based on their consideration of the changes in the accounting for equity investments under ASU 2016-01 and the effect of these changes on the manner in which data on equity securities and other equity investments are currently reported in the Call Report, the agencies proposed to revise the reporting of information on equity securities and other equity investments in Call Report Schedules RI, Income Statement; RI-D, Income from Foreign Offices (on the FFIEC 031); RC, Balance Sheet; RC-B, Securities; RC-F, Other Assets; RC-H, Selected Balance Sheet Items for Domestic Offices (on the FFIEC 031); RC-K, Quarterly Averages; RC-Q, Assets and Liabilities Measured at Fair Value on a Recurring Basis (on the FFIEC 041 and FFIEC 031); and RC-R, Regulatory Capital.
In developing the proposed revisions to these Call Report schedules, the agencies sought to limit the number of data items being added to the Call Report to address the changes in accounting for equity securities and other equity investments.
Furthermore, because of the different effective dates for ASU 2016-01 for public business entities and all other entities, as well as the varying fiscal years across the population of institutions that file Call Reports, the period over which institutions will be implementing this ASU ranges from the first quarter of 2018 through the fourth quarter of 2020. As a result, the agencies proposed to introduce the revisions to the reporting of information on equity securities and other equity investments in response to the ASU in the Call Report effective March 31, 2018.
The agencies received comments from two banking organizations and two bankers' associations addressing the proposed Call Report revisions related to equity securities. Both bankers' associations expressed general support for the proposed changes to reporting of information on equity securities and other equity investments. However, for an institution that has adopted the new accounting standard, the associations sought clarification of the appropriate categorization on the proposed revised Call Report balance sheet (Schedule RC)
Trading activities typically include (a) regularly underwriting or dealing in securities; interest rate, foreign exchange rate, commodity, equity, and credit derivative contracts; other financial instruments; and other assets for resale, (b) acquiring or taking positions in such items principally for the purpose of selling in the near term or otherwise with the intent to resell in order to profit from short-term price movements, and (c) acquiring or taking positions in such items as an accommodation to customers or for other trading purposes.
Thus, when an institution's holdings of equity securities with readily determinable fair values fall within the scope of the preceding description of trading activities, the equity securities should be reported as trading assets in Schedule RC, item 5. Otherwise, the equity securities should be reported in new item 2.c, “Equity securities with readily determinable fair values not held for trading.” The agencies will modify the Call Report instructions to make this distinction more clear.
One banking organization noted that the proposal aligns the Call Report with the new accounting standard for equity investments, but it requested clarification of the balance sheet categorization of money market mutual funds following the adoption of the accounting standard. This organization observed that the Securities and Exchange Commission's rules permit such funds to be categorized as cash equivalents in financial statements filed with the Commission if appropriate criteria are met. The organization asked whether the agencies intended to permit a similar categorization for Call Report purposes. The Call Report does not recognize cash equivalents as part of “Cash and balances due from depository institutions,” as described in the instructions for Schedule RC, item 1. Thus, for Call Report purposes, an institution that has adopted ASU 2016-01 should report its investments in money market mutual funds with readily determinable fair values, which are considered equity securities for accounting purposes,
The other banking organization supported the proposed changes to the income statement for reporting unrealized holding gains (losses) on equity securities not held for trading, but recommended excluding unrealized gains on equity securities from tier 1 capital for regulatory capital purposes as is currently the case under today's accounting standards. The manner in which unrealized gains on equity securities are reported for regulatory capital purposes in Call Report Schedule RC-R depends entirely on how these unrealized gains are treated under the agencies' regulatory capital rules. After an institution adopts ASU 2016-01, unrealized gains on the institution's investments in equity securities with readily determinable fair values not held for trading will be recognized in net income and, hence, retained earnings. Because retained earnings is a common equity tier 1 (CET1) capital element under the agencies' regulatory capital rules, the operation of these rules will automatically result in the inclusion of all unrealized gains on such equity securities in CET1 capital after an institution's adoption of ASU 2016-01. Continuing to exclude unrealized gains on equity securities with readily determinable fair values not held for trading from CET1 capital after the adoption of ASU 2016-01 would require revisions to the agencies' regulatory capital rules and is outside the scope of the proposed equity securities reporting changes in the Call Report.
This banking organization also recommended retaining the existing regulatory framework governing investments in stock set forth in section 362.3 of the FDIC's regulations (12 CFR 362.3) and the related information on equity securities currently reported in Call Report Schedule RC-B, Securities. More specifically, under section 362.3(a) of the FDIC's regulations, an insured state bank may not “directly or indirectly acquire or retain as principal any equity investment of a type that is not permissible for a national bank.” However, this regulation provides for the grandfathering of certain investments in equity securities by insured state banks if certain conditions are met, including approval by the FDIC. The equity investments that are authorized to be grandfathered are common and preferred stock listed on a national securities exchange and shares of an investment company registered under the Investment Company Act of 1940.
After considering this banking organization's recommendation as well as the provisions of section 362.3(a) of the FDIC's regulations, the agencies agree that, after its adoption of ASU 2016-01, an insured state bank that has been approved to hold authorized investments should continue to report the cost of their holdings of equity securities with readily determinable fair values not held for trading, which such an institution currently reports as available-for-sale securities in column C of Schedule RC-B, item 7. The continued collection of this cost information from insured state banks with grandfathered equity investments serves a long-term regulatory purpose by aiding the supervisory staffs of the agencies that supervise these insured state banks in performing their ongoing assessments of compliance with the aggregate limit on such investments. Accordingly, in place of Schedule RC-B, item 7, column C, which would no longer be applicable to institutions after their adoption of ASU 2016-01, and which would ultimately be removed effective December 31, 2020, the agencies would add a new item 4, “Cost of equity securities with readily determinable fair values not held for trading,” to Schedule RC-M effective March 31, 2018. The new Schedule RC-M item would be completed only by insured state banks that have adopted ASU 2016-01 and have been approved to hold grandfathered equity investments. All other institutions would leave new Schedule RC-M, item 4, blank. The equity securities for which the cost would be reported in Schedule RC-M, item 4, would be the same equity securities for which institutions that have adopted ASU 2016-01 would report the fair value in new Schedule RC, item 2.c.
In addition, as previously mentioned, the agencies also received three comments from banking organizations regarding the burden associated with Schedule RC-R, Regulatory Capital, which is one of the schedules for which several revisions related to equity securities were proposed. In this regard, a proposed change to this schedule was to add a new item 2.c, “Equity securities with readily determinable fair values not held for trading,” to Schedule RC-R, Part II, Risk-Weighted Assets, effective March 31, 2018. As proposed, this new item would be completed only by institutions that had adopted ASU 2016-01 and, for such institutions, Schedule RC-R, Part II, item 2.b, “Available-for-sale securities,” should include only debt securities. Effective December 31, 2020, which is the quarter-end report date as of which all institutions would be required to have adopted ASU 2016-01, the caption for item 2.b would be revised to “Available-for-sale debt securities.” These proposed revisions correspond to the changes the agencies proposed to make to the categories of securities reported on Schedule RC, Balance Sheet.
The commenters who addressed Schedule RC-R recommended simplifying and shortening the schedule to reduce burden. After considering the concerns expressed by commenters about the burden of Schedule RC-R in relation to the proposed revisions to this schedule for equity securities, the agencies have decided against adding a new item 2.c to Part II of Schedule RC-R. Instead, the agencies would retain the existing risk-weighting reporting process under which those equity securities with readily determinable fair values and debt securities currently categorized as available-for-sale securities are reported together in item 2.b of Schedule RC-R, Part II. To clarify the scope of item 2.b for institutions that have and have not adopted ASU 2016-01, the agencies would change the caption for item 2.b to “Available-for-sale debt securities and equity securities with readily determinable fair values not held for trading” effective March 31, 2018.
All the other revisions to the reporting of information on equity securities and other equity investments proposed by the agencies in response to the changes in the accounting requirements for these types of assets would be implemented as described in Section III.D.2 of the June 2017 proposal and would take effect beginning as of March 31, 2018.
Subject to OMB approval, the effective date for the implementation of the revisions to the FFIEC 031, FFIEC 041, and FFIEC 051 to address the change in accounting for equity investments would be March 31, 2018. However, the effective date for the implementation of all other revisions described in this notice would be June 30, 2018.
The agencies originally proposed to implement the revisions proposed in the June 2017 notice, as well as those they expected to propose based on their evaluation of the responses to the third and final portion of user surveys, as of March 31, 2018. However, on November 8, 2017, the agencies proposed that the effective date for the latter set of changes would be the June 30, 2018, report date.
When implementing the burden-reducing Call Report revisions as of the June 30, 2018, report date, institutions may provide reasonable estimates for any new or revised Call Report data item initially required to be reported as of that date for which the requested information is not readily available. In addition, as of the March 31, 2018, report date or a subsequent report date as of which an institution is required to, or early elects to, initially report in accordance with ASU 2016-01, the institution may provide reasonable estimates for any new or revised Call Report data item affected by the equity securities reporting changes for which the requested information is not readily available. The specific wording of the captions for the new or revised Call Report data items discussed in this proposal and the numbering of these data items is subject to change.
Public comment is requested on all aspects of this joint notice. Comment is specifically invited on:
(a) Whether the proposed revisions to the collections of information that are the subject of this notice are necessary for the proper performance of the agencies' functions, including whether the information has practical utility;
(b) The accuracy of the agencies' estimates of the burden of the information collections as they are proposed to be revised, including the validity of the methodology and assumptions used;
(c) Ways to enhance the quality, utility, and clarity of the information to be collected;
(d) Ways to minimize the burden of information collections on respondents, including through the use of automated collection techniques or other forms of information technology; and
(e) Estimates of capital or start-up costs and costs of operation, maintenance, and purchase of services to provide information.
Comments submitted in response to this joint notice will be shared among the agencies. All comments will become a matter of public record.
Schedule RI-D collects data on income from foreign offices. Collectively, the data are used in country and currency risk analyses to monitor the level, trend, quality and sustainability of the income component of foreign offices. These data help support a variety of examination activities that include, but are not limited to, earnings and yield analysis, asset securitizations, core assessment, price risk, and trading. Quarterly data also improve the off-site monitoring of trading and asset management activities. Data on investment banking, advisory, brokerage, and underwriting fees and commissions are used to track the global asset management activities of institutions with foreign offices. The global presence of these activities adds to the complexity of the asset management business conducted by financial institutions and this information is continually monitored to detect potential shifts in business models. It also serves as one component of measurement of the degree of global interconnectedness and systemic risk.
Schedule RI-E collects explanations for items that significantly contribute to the total amounts reported for other noninterest income and other noninterest expense. Since other noninterest income makes up almost half of total noninterest income and other noninterest expense makes up approximately 40 percent of noninterest expense on an aggregate basis for all filers of the Call Report, data on the composition of each of these income statement data items is essential to understanding what is driving the level of and changes over time in these data items at individual institutions. The stratification of the information in this schedule allows for identification of potential unusual sources of changes in earnings that affect trend analyses. This information is particularly important for identifying losses of an unusual or nonrecurring nature when an institution is in a stressed condition, which was evident during the recent financial crisis. This stratified noninterest income and expense information continues to be critical in understanding the causes of swings in an institution's profitability.
Schedule RI-E also collects descriptive information on discontinued operations, significant adjustments to the allowance for loan and lease losses (ALLL), accounting changes and error corrections, and certain capital transactions with stockholders. These data items provide the agencies and their examiners better insight on factors driving changes in net income and the ALLL (due to sources other than provisions, charge-offs, and recoveries), along with nonrecurring types of changes in institutions' equity capital.
The detailed breakdown of components of other noninterest income in excess of the Schedule RI-E reporting threshold is essential to the Consumer Financial Protection Bureau's (CFPB) understanding of the viability of institutions' offerings of consumer services regulated by the CFPB. This information provides unique insights into institutions' reliance on key revenue streams that can impact consumer access to and the availability of services. These streams include bank and credit card interchange, income and fees from automated teller machines, and institution-described components of other noninterest income. This information also helps the CFPB monitor trends in the consumer marketplace. Similarly, the detailed breakdown of other noninterest expense facilitates the CFPB's ability to conduct statutorily-required cost analyses for rulemakings and other policy endeavors.
Information collected on Schedule RC-B is essential for assessment of liquidity risk, market risk, interest rate risk, and credit risk. Specifically, information on held-to-maturity, available-for-sale, and pledged securities is critical for analysis of the institution's ability to manage short-term financial obligations without negatively impacting capital or income (liquidity risk), and risk of loss due to market movements (market risk). Maturity and repricing information on debt securities collected in the Memorandum items on Schedule RC-B, together with the maturity and repricing information collected in other schedules for other types of assets and liabilities, is critical for the assessment of the risk to an institution from changes in interest rates (interest rate risk), and also contributes to the evaluation of liquidity. Thus, the maturity and repricing information collected throughout the Call Report also aids in evaluating the strategies institutions take to mitigate liquidity and interest rate risks. Liquidity and interest rate risk indicators that are calculated by agency models from an institution's Call Report data and exceed specified parameters or change significantly between examinations are red flags that call for timely examiner off-site review.
In this regard, the reported amount of debt securities with a remaining maturity of one year or less is a key input into the calculation of an institution's short-term assets that, when analyzed in conjunction with non-core funding data, can indicate the extent to which the institution is relying on short-term funding to fund longer-term assets, which presents an exposure to liquidity risk. Further, liquidity risk inputs into agency models that vary by type of security provide examiners the ability to customize and apply liquidity stress tests. Extensive back testing has shown that the liquidity risk inputs for securities contain substantial forward-looking information by which to ascertain the likelihood that an institution would be able to avoid significant liquidity problems in a stressed environment.
As another example, agency models that consider both the amortized cost and fair value of held-to-maturity and available-for-sale securities reported in Schedule RC-B are used for off-site monitoring of interest rate risk to identify individual institutions that may be significantly exposed to rising interest rates. Individual types of securities from Schedule RC-B are grouped into major categories for purposes of performing duration-based analyses of potential investment portfolio depreciation for both severe and more moderate interest rate increases. The Schedule RC-B data for these groupings of securities, together with Call Report data for other types of balance sheet assets and liabilities, also serve as inputs to quarterly duration-based estimates of potential changes in fair values for the overall balance sheet in response to various forecasted interest rate changes. Outlier institutions identified by these models are the subject of prompt supervisory follow-up to address their interest rate risk exposure.
The institution's risk profile in these areas is considered during pre-examination planning to determine the appropriate scoping and staffing for examinations. For example, the quarterly reporting of the Call Report information on held-to-maturity and available-for-sale securities also aids in the identification of low-risk areas prior to on-site examinations, allowing the agencies to improve the allocation of their supervisory resources and increase the efficiency of supervisory assessments, which reduces the scope of examinations in these areas, thereby reducing regulatory burden.
Information on the amortized cost and fair value of the securities portfolio allows for measurement of depreciation/appreciation, which is important for assessing the potential impact that unrealized gains and losses may have on earnings and liquidity. Unrealized gains and losses on available-for-sale equity securities and, for certain institutions,
Data showing significant depreciation in specific types of securities not issued or guaranteed by the U.S. government or its agencies can signal an institution's failure to properly evaluate the existence of other-than-temporary impairments arising from credit losses and other factors. Similarly, data on year-to-date sales and transfers of held-to-maturity securities is a basis for off-site or on-site follow-up by examiners to determine whether the reasons for these transactions are acceptable under U.S. GAAP or have resulted in the tainting of this securities portfolio. In addition, the reporting of debt securities by security type is important to identify concentrations in higher risk types of investments, which may have greater liquidity and/or credit risk than other types of securities. Information on investments in securities issued by states and political subdivisions in the United States is used by many state regulatory agencies as a starting point for monitoring compliance with certain state municipal investment regulations. The amortized cost and fair value of held-to-maturity and available-for-sale debt securities, respectively, for certain types of securities as well as the fair value of all U.S. Treasury and U.S. Government agency securities are used in the risk-based premium deposit insurance pricing methodology for large institutions and highly complex institutions.
Schedule RC-D collects information on trading activity from institutions with more than a limited amount of trading assets in recent quarters. Trading assets are segmented into detailed securities and loan categories. Trading liabilities separately cover liability for short positions and other trading liabilities. The schedule's Memorandum items request additional information, including the unpaid principal balance of loans and the fair value of structured financial products and asset-backed securities held for trading purposes.
The information contained in Schedule RC-D is used to assess the overall composition of the institution's trading portfolio and also provides detailed information to evaluate the liquidity, credit, and interest rate risk within the trading portfolio, which impacts the overall risk profile of the institution. Data on the types of trading assets held by an institution—such as U.S. Treasury securities versus structured financial products versus commercial and industrial loans, for example—serve as a barometer of the relative levels of these risks in the trading portfolio. Regarding liquidity risk, the higher the level of more liquid assets an institution has within its trading portfolio, the more financial flexibility it has if faced with uncertainties or unfavorable market conditions. If an institution has a low level of liquid assets within its trading portfolio, this impacts its ability to rapidly adjust its holdings in response to adverse market movements. Information on the volume and composition of trading assets and how it has changed over recent quarters also can provide insight into an institution's trading strategies and its views on market trends. The assessment of trading portfolio composition and risks enters into pre-examination planning to determine the appropriate scoping and staffing for examinations of institutions engaged in trading activities.
Furthermore, data on securities and loans held for trading are combined with data on securities and loans held for investment, as reported in Schedule RC-B and Schedule RC-C, Part I, to benchmark weekly loan and security data collected by the Board from a sample of both small and large institutions. These weekly data are used to estimate weekly measures of extension of credit for the banking sector as a whole to provide a more timely input for purposes of monitoring the macroeconomy.
Information on mortgage-backed securities and mortgage loans held for trading assisted the CFPB's efforts to develop required estimates for various Title XIV mortgage reform rulemakings under the Dodd-Frank Wall Street Reform and Consumer Protection Act (Pub. L. 111-203). Going forward, data items from this schedule and Schedules RC-B and RC-C, Part I, are critical for continuous monitoring of the mortgage market. The CFPB uses these items to understand the intricacies of the mortgage market that are essential to assessing institutional participation in regulated consumer financial services markets and to assess regulatory impact associated with recent and proposed policies, as required by that agency's statutory mandate.
Average quarterly asset and liability information is essential to the ability of the FFIEC member entities to more appropriately evaluate the performance of individual institutions. Quarterly average data from Schedule RC-K also provide important information at the industry level for policy review at FFIEC member entities.
The average data reported in Schedule RC-K are used in conjunction with income and expense information from Schedule RI to calculate yields and costs for the corresponding categories of assets and liabilities. These ratios are presented in the Uniform Bank Performance Report (UBPR) where they are used as a tool by examiners, both on- and off-site, to monitor and evaluate trends related to an institution's earnings and capital. These ratios also help the agencies identify trends across the banking industry. Important ratios derived from quarterly average data include, but are not limited to, earnings ratios (
The granularity of the data in Schedule RC-K assists in analyzing performance within a bank's asset and liability portfolios. Quarterly average balances allow for better analyses of trends in the composition of an institution's assets and liabilities than is possible from comparisons of quarter-end data, which may be affected by fluctuations related to seasonality or abnormal levels of activity at period-end. The detailed average data used to calculate the yield on specific types of interest-earning assets helps examination teams understand the impact of credit quality on the earnings performance of particular loan portfolios. Where an institution's yields on particular types of loans exceed those of its peers, this warrants examiner scrutiny to determine whether this outcome is a result of the institution's origination or purchase of lower credit quality loans. In addition, the data on the cost of funds by funding type is important in assessing the funding mix at the institution level for oversight purposes. Higher costs for particular types of deposits or other liabilities compared to these costs at an institution's peers also warrants examiner review to determine whether the institution is making greater use of more volatile non-core funding sources. The yield on interest-earning assets and cost of funds also gives insight into the effectiveness of an institution's plans and initiatives related to asset/liability mix, liquidity, and interest rate risk strategies and their resulting impact on earnings. These performance ratios are essential to the consideration of an institution's earnings during pre-examination planning to determine the appropriate scoping of this area, particularly because earnings is evaluated and rated as part of the CAMELS rating system.
Schedule RC-L provides data on off-balance sheet assets and liabilities as well as derivatives contracts. The quarterly reporting of all off-balance sheet items in the Call Report is required by law (12 U.S.C. 1831n(a)(3)(C)). The most recent financial crisis emphasized the importance of identifying and monitoring significant exposures arising from any contingent or off-balance sheet liabilities and the effect of these exposures on an institution's overall risk profile. The granular data on components of off-balance sheet items, as well as derivatives data, assist the banking agencies in ensuring the safety and soundness of financial institutions through both off-site and on-site monitoring of a variety of potential risks. These risks include, but are not limited to, liquidity risk, credit risk, interest rate risk, and foreign exchange risk. The data on Schedule RC-L also is essential for the examination scoping process, which begins during pre-examination planning. The data offer insight into outliers and exceptions, which provide information to examiners on areas on which to focus during their on-site examinations.
The data on Schedule RC-L on the FFIEC 031 and FFIEC 041 are useful in determining
The unused commitments information on Schedule RC-L is essential to examiners, especially during periods of financial distress when borrowers rely increasingly on drawing down their lines of credit and unused commitments as a source of funding. The unused commitments data enable examiners to identify whether growth in unused commitments over time is at a manageable level and permit assessments of the potential impact, if such commitments are funded, on the credit quality of the related loan categories, as well as on the liquidity and on the capital position of an institution. Also, institutions may have a concentration in a particular loan category, which may not be readily apparent from balance sheet data until unused commitments to borrowers in this category are actually funded, which dictates that examiners consider the reported amounts on unused commitments by loan category to ensure they identify and assess the concentration risk. Financial and performance standby letters of credit also present liquidity and credit risk considerations for examiners, which also may be greater during periods of financial distress when the counterparties may be more likely to fail to perform as required under the terms of the underlying contract.
The derivatives information on Schedule RC-L is also one of the primary sources that feeds into a derivatives quarterly report that is used to report on bank trading and derivatives activities. This public report issued by the OCC helps the banking agencies' on-site examiners at the largest banks to continuously evaluate the credit, market, operational, reputation, and compliance risks of bank derivatives activities.
Schedule RC-M collects various types of information. Section 7(k) of the Federal Deposit Insurance Act (12 U.S.C. 1817(k)) authorizes the federal banking agencies to require the reporting and public disclosure of information concerning extensions of credit by an institution to its executive officers and principal shareholders and their related interests. The Board's Regulation O (12 CFR 215), which has been made applicable to all institutions, imposes an aggregate lending limit on extensions of credit to insiders (executive officers, directors, principal shareholders, and their related interests) and, in general, requires an institution to make available the names of its executive officers and principal shareholders to whom the institution had outstanding as of the end of the latest previous quarter aggregate extensions of credit that, when aggregated with all other outstanding extensions of credit to such person and their related interests, equaled or exceeded the lesser of 5 percent of capital and unimpaired surplus or $500,000. The data collected in Schedule RC-M on extensions of credit to the reporting institution's insiders generally align with these requirements and assist the agencies in monitoring compliance with the insider lending regulations between examinations and determining whether supervisory follow-up is warranted when material increases in insider lending are identified.
Because identifiable intangible assets are deducted from regulatory capital or are subject to regulatory capital limits and deducted amounts are not risk weighted, the reporting of these amounts aids in validating an institution's regulatory capital calculations in Schedule RC-R. In addition to their treatment under the regulatory capital rules, mortgage servicing assets in particular are complex in nature and present liquidity risk and interest rate risk and their value is affected by the credit risk of the underlying serviced assets. Mortgage servicing assets also contribute to the level of an institution's mortgage prepayment exposure. When the level of this exposure rises above a specified benchmark at an individual institution, this exposure may warrant additional attention by examiners between examinations and necessitate greater scrutiny of management's prepayment assumptions in its own interest rate risk model during examinations or visitations.
The components of other real estate owned are needed to monitor asset quality trends at individual institutions and industry-wide, including when coupled with the past due and nonaccrual data for loans secured by the same type of property from Schedule RC-N. The component information may provide insight into the market conditions affecting the segments of the real estate market in the institution's trade area, including possible deteriorating conditions.
Maturity and repricing information on other borrowed money, together with the maturity and repricing information collected in other schedules for other types of assets and liabilities, is needed to evaluate liquidity and interest rate risk to the institution, and to aid in evaluating the strategies institutions take to mitigate these risks. Liquidity and interest rate risk indicators that are calculated by agency models from an institution's Call Report data and exceed specified parameters or change significantly between examinations are red flags that call for timely examiner attention. Data on certain secured liabilities also are used in the assessment of institutions' liquidity positions. Increases in the relative volume of secured versus unsecured liabilities may signal that an institution is encountering difficulties in rolling over unsecured borrowings due to deterioration in its condition, which would call for supervisory follow-up when identified between examinations.
Information on mutual funds and annuities, bank websites with transactional capability, certain trustee and custodial activities, and captive insurance subsidiaries, is used to identify institutions engaged in these activities, some of which are not typical activities for community banks. If an institution begins to report that it engages in one or more of these activities or reports a significant increase in assets tied to an activity between examinations, this may indicate the need for examiner follow-up to assess the institution's expertise and management of these activities. An institution's involvement in these activities may also affect the staffing and scoping of examinations, particularly for activities for which compliance with applicable laws and regulations must be evaluated during examinations. The reporting of an institution's internet websites and trade names supports the FDIC's ability to serve as an information resource for insured institutions by responding to inquiries from the public with the most current information concerning the insured status of the institution behind an internet website or a physical branch office that uses a trade name.
For Qualified Thrift Lenders (QTL) subject to 12 U.S.C. 1467a(c), reporting of QTL test information assists the agencies in timely identifying thrift institutions that need to take action to remain in compliance, or that fail to comply and become subject to certain restrictions. International remittance transfers data by type are needed annually to monitor compliance with regulatory requirements (12 CFR 1005.30,
Schedule RC-R collects information about an institution's capital. Part I (Regulatory Capital Components and Ratios) collects information about the types and amounts of capital instruments and the leverage and risk-based capital ratios. Part II (Risk-Weighted Assets) collects additional information about types of assets on an institution's balance sheet and certain off-balance sheet items to use in computing the risk-based capital ratios.
Each federal banking agency is required to establish a leverage limit and risk-based capital requirement for insured depository
In addition to using the resulting capital ratios to determine an institution's status under 12 U.S.C. 1831o and the banking agencies' prompt corrective action regulations, the FFIEC member entities use the regulatory capital information for other purposes. The calculation of Tier 1 capital at quarter-end flows into the amount of average tangible equity for the calendar quarter that institutions report in Schedule RC-O, which is used in the measurement of institutions' assessment bases for deposit insurance purposes. The Tier 1 leverage ratio is one of the inputs into the calculation of deposit insurance assessment rates for small institutions and Tier 1 capital is a commonly used input when calculating these rates for large and highly complex institutions. Capital adequacy is rated in an institution's on-site examination as the C of the CAMELS component ratings, and the information provided on Schedule RC-R helps examiners evaluate and rate that component. It is also used in the off-site monitoring process, and is important in reviewing the risk profile and viability of a financial institution. For example, the ratio of risk-weighted assets to unweighted assets has been found to provide an informative forward-looking signal regarding an institution's risk posture. The information provided on Schedule RC-R also is used in deciding whether to approve an 18-month examination cycle for a specific institution and in reviewing merger applications.
Information on specific sub-components of regulatory capital is useful as well. For example, the amounts of unrealized gains and losses on securities that flow into regulatory capital provide an indication of an institution's interest rate and market risk. Information on the risk weighting of assets and off-balance sheet items provides insight into management's risk tolerance and the institution's risk to the deposit insurance fund. The risk-weighted asset composition information and risk-based capital ratios that flow into the UBPR are helpful to examiners when reviewing Reports of Examination and to establish a peer group average for comparison when evaluating changes in these items. The risk-weighted asset composition information also assists examiners in evaluating the reasons for changes in total risk-weighted assets over time at individual institutions. The derivatives exposure items reported in the Memoranda section of Schedule RC-R, Part II, provide a key insight into the notional principal amounts of both cleared and over-the-counter derivatives in the banking system, in addition to being inputs into the calculation for risk-weighted assets.
Schedule RC-D is to be completed by banks that reported total trading assets of
Schedule RI-D is to be completed by banks with foreign offices (including Edge or Agreement subsidiaries and International Banking Facilities)
Schedule RC-D is to be completed by banks that reported total trading assets of
Departmental Offices, Treasury.
Notice.
For the period beginning January 1, 2018, and ending on March 31, 2018, the U.S. Immigration and Customs Enforcement Immigration Bond interest rate is 1.24 per centum per annum.
Rates are applicable January 1, 2018 to March 31, 2018.
Comments or inquiries may be mailed to Sam Doak, Reporting Team Leader, Federal Borrowings Branch, Division of Accounting Operations, Office of Public Debt Accounting, Bureau of the Fiscal Service, Parkersburg, West Virginia, 26106-1328. You can download this notice at the following internet addresses:
Adam Charlton, Manager, Federal Borrowings Branch, Office of Public Debt Accounting, Bureau of the Fiscal Service, Parkersburg, West Virginia, 26106-1328, (304) 480-5248; Sam Doak, Reporting Team Leader, Federal Borrowings Branch, Division of Accounting Operations, Office of Public Debt Accounting, Bureau of the Fiscal Service, Parkersburg, West Virginia, 26106-1328, (304) 480-5117.
Federal law requires that interest payments on cash deposited to secure immigration bonds shall be “at a rate determined by the Secretary of the Treasury, except that in no case shall the interest rate exceed 3 per centum per annum.” 8 U.S.C. 1363(a). Related Federal regulations state that “Interest on cash deposited to secure immigration bonds will be at the rate as determined by the Secretary of the Treasury, but in no case will exceed 3 per centum per annum or be less than zero.” 8 CFR 293.2. Treasury has determined that interest on the bonds will vary quarterly and will accrue during each calendar quarter at a rate equal to the lesser of the average of the bond equivalent rates on 91-day Treasury bills auctioned during the preceding calendar quarter, or 3 per centum per annum, but in no case less than zero. [FR Doc. 2015-18545] In addition to this Notice, Treasury posts the current quarterly rate in Table 2b—Interest Rates for Specific Legislation on the TreasuryDirect website.
In accordance with section 999(a)(3) of the Internal Revenue Code of 1986, the Department of the Treasury is publishing a current list of countries which require or may require participation in, or cooperation with, an international boycott (within the meaning of section 999(b)(3) of the Internal Revenue Code of 1986).
On the basis of the best information currently available to the Department of the Treasury, the following countries require or may require participation in, or cooperation with, an international boycott (within the meaning of section 999(b)(3) of the Internal Revenue Code of 1986).
(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 (other than by the United States) 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 |