[Federal Register Volume 84, Number 31 (Thursday, February 14, 2019)]
[Proposed Rules]
[Pages 4019-4021]
[FR Doc No: 2019-02216]

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ENVIRONMENTAL PROTECTION AGENCY

40 CFR Part 52

[EPA-R04-OAR-2017-0454; FRL-9989-39-Region 4]

Air Plan Approval; NC; Permitting Revisions

AGENCY: Environmental Protection Agency (EPA).

ACTION: Proposed rule.

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SUMMARY: The Environmental Protection Agency (EPA) is proposing to
approve a portion of a revision to the North Carolina State
Implementation Plan (SIP) submitted by the State of North Carolina
through the North Carolina Department of Environmental Quality
(formerly the North Carolina Department of Environment and Natural
Resources (NCDENR)), Division of Air Quality, through a letter dated
March 24, 2006. The revision includes changes to permitting
regulations. The revision is part of North Carolina's strategy to meet
and maintain the national ambient air quality standards (NAAQS). This
action is being taken pursuant to the Clean Air Act (CAA or Act) and
its implementing regulations.

DATES: Comments must be received on or before March 18, 2019.

ADDRESSES: Submit your comments, identified by Docket ID No. EPA-R04-
OAR-2017-0454 at http://www.regulations.gov. Follow the online
instructions for submitting comments. Once submitted, comments cannot
be edited or removed from Regulations.gov. EPA may publish any comment
received to its public docket. Do not submit electronically any
information you consider to be Confidential Business Information (CBI)
or other information whose disclosure is restricted by statute.
Multimedia submissions (audio, video, etc.) must be accompanied by a
written comment. The written comment is considered the official comment
and should include discussion of all points you wish to make. EPA will
generally not consider comments or comment contents located outside of
the primary submission (i.e. on the web, cloud, or other file sharing
system). For additional submission methods, the full EPA public comment
policy, information about CBI or multimedia submissions, and general
guidance on making effective comments, please visit http://www2.epa.gov/dockets/commenting-epa-dockets.

FOR FURTHER INFORMATION CONTACT: Nacosta C. Ward, Air Regulatory
Management Section, Air Planning and

Implementation Branch, Air, Pesticides and Toxics Management Division,
U.S. Environmental Protection Agency, Region 4, 61 Forsyth Street SW,
Atlanta, Georgia 30303-8960. Ms. Ward can be reached via telephone at
(404) 562-9140, or via electronic mail at<EMAIL_ADDRESS>
SUPPLEMENTARY INFORMATION:

I. Background

    Through a letter dated March 24, 2006, the State of North Carolina,
through NCDENR, submitted several changes to the North Carolina SIP for
EPA approval. EPA is proposing to approve changes to the following
regulations: 15A North Carolina Administrative Code (NCAC) 02Q Sections
.0101, Required Air Quality Permits, and .0301,
Applicability.1 2 EPA has taken, will take, or will not take
separate action on all other changes submitted on March 24, 2006.\3\
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    \1\ EPA received this SIP submittal on April 4, 2006.
    \2\ In the table of North Carolina regulations federally
approved into the SIP at 40 CFR 52.1770(c), 15A NCAC 02D is referred
to as ``Subchapter 2D Air Pollution Control Requirements.''
    \3\ On July 18, 2017, EPA took direct final action on changes to
15A NCAC 02D Sections .0101, .0103, .0810, .1902, .1903, and 15A
NCAC 2Q Sections .0103, .0105, .0304, .0305, .0808 and .0810. See 82
FR 32767. EPA will be taking separate action on changes to 15A NCAC
02D Sections .1904 and .2001. EPA did not take action on changes to
15A NCAC 2D Section .1201. because this rule pertains to
incinerators and addresses emission guidelines under CAA sections
111(d) and 129 and 40 CFR part 60 and is not a part of the
federally-approved SIP. A change to Regulation 15A NCAC 02D Section
.1401 was withdrawn by NCDEQ on June 5, 2017. Changes to two
regulations, 15A NCAC 02Q Sections .0508 and 0523, were not acted on
because these rules are part of North Carolina's title V permitting
program and are not a part of the SIP.
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II. Analysis of the State Submittal

    The revision that is the subject of this proposed rulemaking
pertains to changes to air quality permitting regulations related to
minor source construction activities under Subchapter 2Q, Air Quality
Permit Procedures. Detailed descriptions of the changes are below:
    2Q Sections .0101, Required Air Quality Permits, and .0301,
Applicability, have been amended to reflect the changes to the North
Carolina General Statutes regarding construction to allow additional
preconstruction activities for minor sources. With respect to
requirements regarding stationary source permits, in both 2Q Sections
.0101 and .0301, an exception has been added to allow certain
preconstruction activities prior to obtaining a final minor
construction permit. Those activities are clearing and grading;
construction of access roads, driveways, and parking lots; construction
and installation of underground pipe work, including water, sewer,
electric, and telecommunications utilities; and construction of
ancillary structures, including fences and office buildings that are
not a necessary component of an air contaminant source, equipment, or
associated air cleaning device. 2Q Section .0101 has been revised to
remove a prohibition on entering into irrevocable contracts for the
construction, operation, or modification of air cleaning devices. EPA
has preliminarily determined that allowing the foregoing
preconstruction activities is consistent with the requirements of CAA
sections 110(a)(2)(C) and 110(l) and federal regulations at 40 CFR
51.160-51.164.
    Section 110(a)(2)(C) of the CAA requires that SIPs include a
program for regulating the construction and modification of stationary
sources as necessary to ensure that the NAAQS are maintained. The basic
purpose of new source review (NSR) permitting is set forth in 40 CFR
51.160(a), requiring NSR SIPs to set forth legally enforceable
procedures that enable the State or local agency to determine whether
the construction or modification of a stationary source would result in
a violation of applicable portions of the control strategy, or would
interfere with attainment or maintenance of a NAAQS. Under 40 CFR
51.160, states have discretion in conducting the minor sources
permitting programs to exempt certain small or de minimis sources.
Congress directed the states to exercise the primary responsibility
under the CAA to tailor air quality control measures, including minor
source permitting programs, to the state's needs. See Train v. NRDC,
421 U.S. 60, 79 (1975) (States make the primary decisions over how to
achieve CAA requirements); Union Electric Co. v. EPA, 427 U.S. 246
(1976); Greenbaum v. EPA, 370 F.3d 527 (6th Cir. 2006).
    Federal regulations limit the types of allowed preconstruction
activities for new and modified major sources, see 40 CFR
51.165(a)(1)(xv) and 51.166(b)(11), and North Carolina has adopted
these regulations into its SIP. But Federal regulations do not impose a
corresponding limitation on preconstruction activities for minor
sources. The exception for certain preconstruction activities found in
both 2Q Sections .0101 and .0301 explicitly applies to facilities
subject to 2Q Section .0300 (i.e., minor sources), whereas, as stated
in both 2Q Sections .0101(b) and .0301(a), title V facilities (i.e.,
major sources) are subject to the title V procedures under 2Q Section
.0500. Furthermore, the North Carolina statutory provision to which the
regulatory exception for certain preconstruction activities refers in
both 2Q Sections .0101 and .0301 explicitly provides that the exception
``does not relieve any person from any preconstruction or construction
prohibition imposed by any federal requirement, federal delegation,
federally approved requirement in any State Implementation Plan, or
federally approved requirement under the title V permitting program''
and ``does not apply to any construction, alteration, or expansion that
is subject to requirements for prevention of significant deterioration
or federal nonattainment new source review. . . . '' N.C.G.S. 143-
215.108A.
    With these proposed changes, North Carolina's SIP would continue to
prohibit the construction of emission units prior to issuance of
construction permits. Therefore, there are no stationary-source
emissions increases associated with any of the preconstruction
activities allowed at 2Q Sections .0101 and .0301. Additionally, North
Carolina has legally enforceable procedures to prevent construction or
modification of a source if it would violate SIP control strategies or
interfere with attainment or maintenance of the NAAQS, as required by
40 CFR 51.160(b).
    The changes to North Carolina's minor source permitting
requirements, as contained in Subchapter 2Q of the North Carolina SIP,
are not inconsistent with the requirements of the CAA and EPA's
regulations, and are thus approvable as part of the SIP. EPA is
therefore proposing action to approve the aforementioned changes
pursuant to the CAA and 40 CFR 51.160-164.

III. Incorporation by Reference

    In this document, EPA is proposing to include in a final EPA rule
regulatory text that includes incorporation by reference. In accordance
with requirements of 1 CFR 51.5, EPA is proposing to incorporate by
reference regulations under Subchapter 2Q, Air Quality Permits,
Sections .0101, Required Air Quality Permits, and .0301, Applicability,
which have a state effective date of November 11, 2005. EPA has made,
and will continue to make, these materials generally available through
www.regulations.gov and at the EPA Region 4 office (please contact the
person identified in the For Further Information Contact section of
this preamble for more information).

IV. Proposed Action

    EPA is proposing to approve the aforementioned revisions to the
North Carolina SIP submitted by the State of North Carolina on March
24, 2006, pursuant to section 110 because these changes are not
inconsistent with the CAA and EPA's regulations. Changes to the other
sections in these submissions have been or will be processed in a
separate action, as appropriate, for approval into the North Carolina
SIP.

V. Statutory and Executive Order Reviews

    Under the CAA, the Administrator is required to approve a SIP
submission that complies with the provisions of the Act and applicable
Federal regulations. See 42 U.S.C. 7410(k); 40 CFR 52.02(a). Thus, in
reviewing SIP submissions, EPA's role is to approve state choices,
provided that they meet the criteria of the CAA. This 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 et seq.);
     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 et seq.);
     Does not contain any unfunded mandate or significantly or
uniquely affect small governments, as described in the Unfunded
Mandates Reform Act of 1995 (Pub. L. 104-4);
     Does not have Federalism implications as specified in
Executive Order 13132 (64 FR 43255, August 10, 1999);
     Is not an economically significant regulatory action based
on health or safety risks subject to Executive Order 13045 (62 FR
19885, April 23, 1997);
     Is not a significant regulatory action subject to
Executive Order 13211 (66 FR 28355, May 22, 2001);
     Is not subject to requirements of section 12(d) of the
National Technology Transfer and Advancement Act of 1995 (15 U.S.C. 272
note) because application of those requirements would be inconsistent
with the CAA; and
     Does not provide EPA with the discretionary authority to
address, as appropriate, disproportionate human health or environmental
effects, using practicable and legally permissible methods, under
Executive Order 12898 (59 FR 7629, February 16, 1994).
    The SIP is not approved to apply on any Indian reservation land or
in any other area where EPA or an Indian tribe has demonstrated that a
tribe has jurisdiction. In those areas of Indian country, the rule does
not have tribal implications as specified by Executive Order 13175 (65
FR 67249, November 9, 2000), nor will it impose substantial direct
costs on tribal governments or preempt tribal law.

List of Subjects in 40 CFR Part 52

    Environmental protection, Air pollution control, Carbon monoxide,
Incorporation by reference, Intergovernmental relations, Lead, Nitrogen
dioxide, Ozone, Particulate matter, Reporting and recordkeeping
requirements, Sulfur oxides, Volatile organic compounds.

    Authority:  42 U.S.C. 7401 et seq.

    Dated: December 21, 2018.
Mary S. Walker,
Acting Regional Administrator, Region 4.
[FR Doc. 2019-02216 Filed 2-13-19; 8:45 am]
 BILLING CODE 6560-50-P


1 SF 83 SUPPORTING STATEMENT ENVIRONMENTAL PROTECTION AGENCY STANDARDS OF PERFORMANCE NATIONAL EMISSION STANDARDS FOR HAZARDOUS AIR POLLUTANTS FOR EPOXY RESIN PRODUCTION AND NON NYLON POLYAMIDE RESIN PRODUCTION, SUBPART W 1. Identification of the Information Collection 1( a) Title of the Information Collection ICR for NESHAP, Subpart W, Epoxy Resin Production and Non nylon Polyamide Resin Production 1( b) Short Characterization/ Abstract In general, all NESHAP standards require initial notifications, performance tests, and periodic reports. Owners or operators are also required to maintain records of the occurrence and duration of any startup, shutdown, or malfunction in the operation of an affected facility, or any period during which the monitoring system is inoperative. These notifications, reports, and records are essential in determining compliance, and are required of all sources subject to NESHAP.

Any owner or operator subject to the provisions of this part shall maintain a file of these measurements, and retain the file for at least five years following the date of such measurements, maintenance reports, and records. All reports are sent to the delegated State or Local authority. In the event that there is no such delegated authority, the reports are sent directly to the EPA Regional Office.

The National Emission Standards for Hazardous Air Pollutants ( NESHAP), for Epoxy Resin Production and Non nylon Polyamide Resin Production were promulgated on March 8, 1995. These standards apply to the following facilities in Subpart W. This information is being collected to assure compliance with 40 CFR Part 63 Subpart W.

Approximately 13 sources are currently subject to the standard, and, the growth rate for this industry is estimated to be very low, so no new sources are likely to become subject to the standard in the next three years. This low growth rate was projected in the original ICR and is borne out by a review of current information. The cost of this ICR will be $ 247250. per year. All reports are sent to the delegated State or local authority. In the event that there is no such delegated authority, the reports are sent directly to the EPA Regional Office.

2. Need for and Use of the Collection 2( a) Need/ Authority for the Collection The EPA is charged under Section 112 of the Clean Air Act, as Amended, to establish standards of 2 performance for each category or subcategory of major sources and area sources of hazardous air pollutants. These standards are applicable to new or existing sources of hazardous air pollutants and shall require the maximum degree of emission reduction. In addition, Section 114( a) states that the Administrator may require any owner or operator subject to any requirement of this Act to:

"( A) Establish and maintain such records; ( B) make such reports; ( C) install, use, and maintain such monitoring equipment, and use such audit procedures, or methods; ( D) sample such emissions ( in accordance with such procedures or methods, at such locations, at such intervals, during such periods, and in such manner as the Administrator shall prescribe); ( E) keep records on control equipment parameters, production variables or other indirect data when direct monitoring of emissions is impractical; ( F) submit compliance certifications in accordance with Section 114( a)( 3); and ( G) provide such other information as the Administrator may reasonably require."

In the Administrator's judgment, hazardous air pollutant emissions, including epichlorohydrin, methanol and hydrochloric acid from epoxy resin and non nylon polyamide resin production, regulated by this National Emission Standard for Hazardous Air Pollutants cause or contribute to air pollution that may reasonably be anticipated to endanger public health or welfare. Therefore, Maximum Achievable Control Technologies ( MACT) were promulgated for this source category at 40 CFR Part 63, Subpart W.

2( b) Practical Utility/ Users of the Data The control of emissions of hazardous air pollutants including epichlorohydrin from epoxy resin and non nylon polyamide production requires not only the installation of properly designed equipment, but also the operation and maintenance of that equipment. Emissions of hazardous air pollutants ( HAP) from manufacture of basic liquid epoxy resin ( BLR) and wet strength resins ( WSR) are the result of operation of the those facilities including all HAP emission points within a facility that are related to the production of BLR or WSR, including process vents, storage tanks, wastewater systems and equipment leaks. These standards rely on the reduction of HAP emissions by limiting the total emissions of HAP from all process vents, storage tanks, and wastewater systems to the production based parameters set in the rule, ( or, as an option for WSR, by complying with requirements of Subpart H to control emissions from equipments leaks). The required notifications are used to inform the Agency or delegated authority when a source becomes subject to the standard. The reviewing authority may then inspect the source to check if the standard is being met. Performance test reports are needed as these are the Agency's record of a source's initial capability to comply with the emission standard, and to note the operating conditions under which compliance was achieved. The semiannual and quarterly reports are used for problem identification, as a check on source operation and maintenance, and for compliance determinations. The information generated by the monitoring, recordkeeping and reporting requirements described in this ICR is used by the Agency to ensure that facilities affected by the MACT continue to operate the control equipment used to achieve compliance with the MACT. Adequate monitoring, recordkeeping, and reporting is necessary to ensure compliance with these standards, as required by the Clean Air Act. The information collected from recordkeeping and reporting requirements is also used for targeting inspections, and is of sufficient quality to be used as evidence in court. 3 3. Nonduplication, Consultations, and Other Collection Criteria The recordkeeping and reporting requested is required under 40 CFR Part 63, Subpart W.

3( a) Nonduplication If the standard has not been delegated, the information is sent to the appropriate EPA Regional Office. Otherwise, the information is sent directly to the delegated State or Local Agency. If a State or Local Agency has adopted their own similar regulation to implement the Federal Regulation, a copy of the report submitted to the State or Local agency can be sent to the Administrator in lieu of the report required by the Federal Standard. Therefore, no duplication exists.

3( b) Public Notice Required Prior to ICR Submission to OMB An announcement of a public comment period for the renewal of this ICR was published in the Federal Register on February 1, 2001 ( i. e., the first Federal Register notice). No comments were received as a result of this notice. However, comments were received from a major manufacturer subject to the requirements of the rule after the publication of the second Federal Register notice. The comments focused primarily on the general provision requirements at 40 CFR Part 63, Subpart A rather than at the requirements at 40 CFR Part 63, Subpart W ( the rule addressed by this ICR). EPA has drafted amendments to Subpart A and published a notice in the Federal Register asking for comments. The manufacturer provided essentially the same comments to this notice as to the notice for this ICR renewal. EPA is addressing those comments in conjunction with the Subpart A revisions. It should be noted that any changes that would occur would be due to any revisions of Subpart A would not affect this ICR renewal.

3( c) Consultations No comments were received on the burden published in the Federal Register. However, the Society of the Plastics Industries ( SPI), a trade association representing this industry, was contacted regarding information in this ICR.

3( d) Effects of Less Frequent Collection Less frequent information collection would decrease the margin of assurance that facilities are continuing to meet the required standards. Requirements for information gathering and recordkeeping are useful techniques to ensure that good operation and maintenance practices are applied and emission limitations are met. If the information required by these standards was collected less frequently, the likelihood of detecting poor operation and maintenance of control equipment and noncompliance would decrease.

3( e) General Guidelines 4 None of these reporting or recordkeeping requirements violate any of the regulations established by OMB in 5 CFR 1320.6.

3( f) Confidentiality The required information consists of emissions data and other information that have been determined not to be private. However, any information submitted to the Agency for which a claim of confidentiality is made will be safeguarded according to the Agency policies set forth in Title 40, Chapter 1, Part 2, Subpart B  Confidentiality of Business Information ( see 40 CFR 2; 41 FR 36902, September 1, 1976; amended by 43 FR 40000, September 8, 1978; 43 FR 42251, September 20, 1978; 44 FR 17674, March 23, 1979).

3( g) Sensitive Questions None of the reporting or recordkeeping requirements contain sensitive questions.

4. The Respondents and the Information Requested 4( a) Respondents/ SIC Codes The respondents of the recordkeeping and reporting requirements are owners or operators of new, reconstructed, and existing facilities at a plant site that is a major source as defined in section 112( a) of the Clean Air Act, that manufacture basic liquid epoxy resins ( BLR) and wet strength resins ( WSR) since promulgation of this MACT ( a subset of SIC Code 2821 or NAICS Code 325211).

4( b) INFORMATION REQUESTED ( i) Data Items All data in this ICR that is recorded and/ or reported is required by 40 CFR Part 63 Subpart W, National Emission Standards for Hazardous Air Pollutants for Epoxy Resin Production and Non nylon Polyamide Resin Production A source must make the following notifications/ reports:

Reports for NESHAP SUBPART W Startup, construction or modification 63.520, 63.6( e), ( 63.5( b) & ( d), 63.10( d)( 5)

Initial notifications 63.9( b)

Initial performance test and results 63.7( b), 63.10( d)( 2), 63.9( e) Reports for NESHAP SUBPART W 5 Emissions tests and results 63.520, 63.9( e) & ( g), 63.10( d)( 2)

Monitoring exceedances & excess emissions 63.520, 63.10( d) & ( e), 63.528( a)

Production capacity and exceedances 63.520, 63.9( b) & ( h)

No excess emissions 63.520, 63.10( d) & ( e)

Continuous monitoring system performance and summary report 63.520, 63.10( e)( 3), 63.9( g)

Compliance status 63.9( h)

Physical or operational change 63.520, 63.5( b)( 6)

Waiver applications 63.520, 63.7( h)

Periodic startup, shutdown, malfunction reports 63.10( d)( 5)( I)

Values of monitored parameters when average values are outside approved ranges 63.528, 63.10( e)

Duration of periods when monitoring data is not collected for each excursion caused by insufficient monitoring data 63.528, 63.10( e)

A source must maintain the following records Recordkeeping for NESHAP SUBPART W Startups, shutdowns, malfunctions & malfunction plan, excursions, and periods where the continuous monitoring system is inoperative 63.10( b)( 2), 63.6, 63.527, 63.528 Emission test results , engineering assessments, and other data needed to determine emissions 63.524, 63.526, 63.527, 63.10( b)( 2)

All reports and notifications 63.10( b)

Record of applicability 63.10( b)( 3)

Records for sources with continuous monitoring systems 63.10( 3) Recordkeeping for NESHAP SUBPART W 6 Records are required to be retained for 5 of Years. ( All MACT standards require five years of record retention). The first two years of records must be kept onsite. 63.10( b)( 1)

Reports of process changes which change the status of de minimis emission points 63.528, 63.10( e)

Equipment leaks   monitoring, equipment modification and repair records 63.526 ii. Respondent Activities Respondent Activities Read instructions.

Install, calibrate, maintain, and operate CMS Perform initial performance test, Reference Method 1 or 1A, 2, 2A, 2C, or 2D, of 40 CFR part 60 appendix A, as appropriate, or Method 25A and or Methods 18 and 25A of 40 CFR Part 60, appendix A, if applicable, and repeat performance tests if necessary.

Write the notifications and reports listed above.

Enter information required to be recorded above.

Submit the required reports developing, acquiring, installing, and utilizing technology and systems for the purpose of collecting, validating, and verifying information.

Develop, acquire, install, and utilize technology and systems for the purpose of processing and maintaining information.

Develop, acquire, install, and utilize technology and systems for the purpose of disclosing and providing information.

Adjust the existing ways to comply with any previously applicable instructions and requirements.

Train personnel to be able to respond to a collection of information.

Transmit, or otherwise disclose the information.

5. The Information Collected  Agency Activities, Collection Methodology, and Information Management 7 5( a) Agency Activities EPA conducts the following activities in connection with the acquisition, analysis, storage, and distribution of the required information.

Agency Activities Observe initial performance tests and repeat performance tests if necessary.

Review notifications and reports, including performance test reports, and excess emissions reports, required to be submitted by industry.

Audit facility records.

Input, analyze, and maintain data in the Aerometric Information Retrieval System ( AIRS) database.

5( b) Collection Methodology and Management Following notification of startup, the reviewing authority might inspect the source to determine whether the pollution control devices are properly installed and operated. Performance test reports are used by the Agency to discern a source's initial capability to comply with the emission standard, and note the operating conditions under which compliance was achieved. Data and records maintained by the respondents are tabulated and published for use in compliance and enforcement programs. The semiannual reports are used for problem identification, as a check on source operation and maintenance, and for compliance determinations.

Information contained in the reports is entered into AIRS which is operated and maintained by EPA's Office of Air Quality Planning and Standards. AIRS is EPA's database for the collection, maintenance, and retrieval of compliance and annual emission inventory data for over 100,000 industrial and government owned facilities. EPA uses AIRS for tracking air pollution compliance and enforcement by Local and State regulatory agencies, and EPA Regional Offices and Headquarters. EPA and its delegated Authorities can edit, store, retrieve and analyze the data.

The records required by this regulation must be retained by the owner or operator for five years.

5( c) Small Entity Flexibility There are no small businesses affected by this standard. As an alternative to implementing the standards for process vents, storage tanks, and wastewater, WSR facilities may elect to comply with the requirements of 40 CFR 63, Subpart H ( a leak detection and repair program) for equipment leaks. In addition, for affected BLR sources, uncontrolled emission points emitting less than one pound per year of HAP are not subject to the monitoring requires in CFR63.526( a)( 2) through ( a)( 6).

5( d) Collection Schedule 8 The specific frequency for each information collection activity within this request is shown in Table 2: Industry Burden.

6. Estimating the Burden and Cost of the Collection Table 2 documents the computation of individual burdens for the recordkeeping and reporting requirements applicable to the industry for each Subpart included in this ICR. The individual burdens are expressed under standardized headings believed to be consistent with the concept of burden under the Paperwork Reduction Act. Where appropriate, specific tasks and major assumptions have been identified. Responses to this information collection are mandatory ( Section 112, CAAA; 40 CFR PART 63, Subpart W). The Agency may not conduct or sponsor, and a person is not required to respond to, a collection of information unless it displays a currently valid OMB control number.

6( a) Estimating Respondent Burden The average annual burden to industry over the next three years from these recordkeeping and reporting requirements is estimated at 4525 person hours. These hours are based on Agency studies and background documents from the development of the standards or test methods, Agency knowledge and experience with the NESHAP program, the previously approved ICR, and any comments received.

6( b) Estimating Respondent Costs ( i) Estimating Labor Costs This ICR uses Technical labor rates of $ 55.34 per hour; $ 78.54 per hour for Executive, Administrative, and Managerial; and $ 35.64 per hour for Clerical. These rates are from the United States Department of Commerce Bureau of Labor Statistics, March 2000, Table 10: Employment Costs for Private Industry by Occupational and Industry Group. The rates are from column 1: Total compensation. The wage rates have been loaded by adding 110% overhead: Executive, Administrative, and Managerial $ 78.54 ($ 37.40 + 110%) Technical $ 55.34 ($ 26.35 + 110%) Clerical $ 35.64 ($ 16.97 + 110%))

( ii) Estimating Capital and Operations and Maintenance Costs The capital start up costs are one time costs when a facility becomes subject to the standard. Because the growth rate for this industry is so low, the capital start up costs for this regulation is zero dollars. The annual operations and maintenance costs are $ 9000. dollars. This is based on only 3 existing sources which have continuous monitoring equipment multiplied by $ 3,000 per year for upkeep of the computer equipment and monitoring devices and calibration costs. ( Only the three BLR facilities are expected to have continuous emissions monitoring because it is optional for WSR facilities). The total respondent costs have been calculated on the addition of the capital start up costs and the annual operations and maintenance costs. The average annual burden for capital and 9 operations and maintenance costs to industry over the next three years of the ICR is estimated to be $ 9,000. The type of industry costs associated with the information collection activity in the standards are labor and CEMs.. The capital start up costs are one time costs when a facility becomes subject to the standard. The annual operations and maintenance costs are the ongoing costs to maintain the monitor. Total respondent costs have been calculated on the addition of the capital start up costs and the annual operations and maintenance costs.

( iii) Capital/ Start up vs. Operating and Maintenance ( O& M) Costs Capital/ Start up vs. Operating and Maintenance ( O& M) Costs ( A)

Continuous Monitoring device ( B)

Start up cost ($) for 1 affected facility ( C)

# of new affected facilities to start up ( D)

Total start up ( B X C) ( E)

Annual O& M costs ($) for 1 affected facility ( F)

# of affected facilities with O& M ( G)

Total O& M ( E X F)

Computer, software, & monitoring devices $ 3,000 0 $ 0 $ 3,000 3 $ 9,000 The total capital/ start up costs for this ICR are $ 0. This is the total of column D. This cost is shown on the OMB 83 I form in block 14 letter a: Total annualized capital/ startup costs. The numbers in block 14 of the OMB 83 I form are truncated to show the cost in thousands of dollars.

The total operating and maintenance ( O& M) costs for this ICR are $ 9,000. This is the total of column G. This cost is shown on the OMB 83 I form in block 14 letter b: Total annual costs ( O& M). The numbers in block 14 of the OMB 83 I form are truncated to show the cost in thousands of dollars.

The total respondent costs have been calculated on the addition of the capital start up costs and the annual operations and maintenance costs. The average annual cost for capital and operations and maintenance costs to industry over the next three years of the ICR is estimated to be $ 9,000 . This cost is shown on the OMB 83 I form in block 14 letter c: Total annualized cost requested. The numbers in block 14 of the OMB 83 I form are truncated to show the cost in thousands of dollars.

6( c) Estimating Agency Burden and Cost 10 The only Federal costs are user costs associated with analysis of the reported information. Publication and distribution of the information are part of the AIRS program. Examination of records to be maintained by the respondents will occur as part of the periodic inspection of sources, which is part of EPA's overall compliance and enforcement program.

The average annual Federal Government cost during the 3 years of the ICR is estimated to be $ 14131. ( from table 1). This cost is based on an hourly labor rate plus 110% overhead of $ 68.19 for managerial staff, $ 36.86 for technical staff, and $ 27.36 for administrative/ clerical staff. These rates are from OPM's 2001 General Schedule ( GS) base annual salary data, excluding locality pay, basic rates, and travel associated with compliance activities. Details appear in Table 1: Agency Burden.

6( d) Estimating the Respondent Universe and Total Burden and Costs Respondent Universe Regulation Title ( A) # new sources per year ( B) # of initial reports for new sources ( C) # existing sources ( D) # of reports for existing sources ( E) total annual responses ( A. xB.)+( CxD)

NESHAP for HAPs for Epoxy Resin & Non nylon Polyamide Production, Subpart W 0 0 13 2.2 29 The number of total respondents is 13. This number is the sum of Column A and Column C of the Respondent Universe table. It is shown on the OMB 83 I form in block 13 a. This is the number of existing sources plus the number of new sources anticipated in one year.

The total annual responses is 29. This number is in column E of the Respondent Universe table. It is shown on the OMB 83 I form in block 13 b. The total annual labor hours are 4525 . This number is shown on the OMB 83 I form in block 13 c. Details upon which this estimate is based 11 appear in Table 2: Industry Burden.

The total annual capital and O& M costs to the regulated entity are $ 9,000. This number is shown on the OMB 83 I form in block 14 c. These costs are detailed in section 6 b ( iii) Capital/ Startup vs. Operating and Maintenance ( O& M) Costs.

6( e) Bottom Line Burden Hours And Cost Tables See attachments.

6( f) Reasons for Change in Burden There is no change in burden.

6( g) Burden Statement Burden means the total time, effort, or financial resources expended by persons to generate, maintain, retain, or disclose or provide information to or for a Federal agency. This includes the time needed to review instructions; develop, acquire, install, and utilize technology and systems for the purposes of collecting, validating, and verifying information, processing and maintaining information, and disclosing and providing information; adjust the existing ways to comply with any previously applicable instructions and requirements; train personnel to be able to respond to a collection of information; search data sources; complete and review the collection of information; and transmit or otherwise disclose the information. An agency may not conduct or sponsor, and a person is not required to respond to, a collection of information unless it displays a currently valid OMB control number. The OMB control numbers for EPA's regulations are listed in 40 CFR Part 9 and 48 CFR Chapter 15.

Send comments on the Agency's need for this information, the accuracy of the provided burden estimates, and any suggested methods for minimizing respondent burden, including through the use of automated collection techniques to the Director, Collection Strategies Division, Office of Environmental Information ( OEI), U. S. Environmental Protection Agency, Mail code 2822, 1200 Pennsylvania Avenue, Washington, D. C. 20460 0001; and to the Office of Information and Regulatory Affairs, Office of Management and Budget ( OMB), 725 17th Street, NW, Washington, DC 20503, Attention: Desk Officer for EPA. Include the EPA ICR No. 1681.04 and OMB Control No. 2060 0290 in any correspondence. Attachments Table 1. ESTIMATE OF ANNUAL BURDEN AND COST TO THE FEDERAL GOVERNMENT TO IMPLEMENT REPORTING AND RECORDKEEPING REQUIREMENTS Activity ( A)

EPAHours Per Operation ( B) Operations Per Year ( C) Technical Personhours Per Year ( C= AxB) ( D) Management Person Hours Per Year ( D= Cx0.05) ( E)

Clerical Person

Hours Per Year ( E= Cx0.1) ( F) Cost ($)

Initial performance test d, e 60 0 0 0 0 0 Repeat initial performance test d, e 60 0 0 0 0 0 1. Retesting preparation 16 0 0 0 0 0 2. Retesting 60 0 0 0 0 0 Report review Notification of constr./ reconstr./ startup 2 1 2 .1 0.2 108 Notification of Phys./ oper. Changes f 2 1 2 0.1 0.2 108 Notification of anticipated startup d 2 0 0 0 0 0 Actual Startup Notification d 2 0 0 0 0 0 Notification of applicability of the standard

existing sources d 200 0 00 Notification of applicability of the standard new sources d 2 0 0 0 0 0 Notification of initial performance test d, e, 2 0 0 0 0 0 Report of initial test d, e 8 0 0 0 0 0 Startup, shutdown, malfunction ( SSM) plan d, e 4 0 0 0 0 0 Quality control plan for CMS d, e 4 0 0 0 0 0 Semiannual SSM reports g,, h, j, l 4 15 60 3.0 6.0 5900 CMS Summary report for HAP g, j, k 4 3 12 0.6 1.2 516 Compliance status information report c, g, j 4 1 4 0.2 0.4 172 Report of monitoring exceedances j, l and periods of noncompliance 8 4 32 1.6 3.2 2358 Report of no excess emissions j, l 2 56 112 2.8 11.2 4625 Waiver application c, j 8 1 8 0.4 0.8 344 TOTAL BURDEN AND COST ( SALARY) 232 8.8 23.2 $ 14131 TABLE 2. ESTIMATED ANNUAL BURDEN AND COST TO INDUSTRY TO IMPLEMENT REPORTING AND RECORDKEEPING Burden Item ( A)

Person Hours Per Occurrence ( B) Number of Occurrences Per Year ( C) Personhours Per Respondent Per Year ( C= AxB) ( D) Respondents Per Year ( E) Technica l Person

Hours Per Year ( E= CxD) ( F) Management Person Hours Per Year ( F= Ex0.05) ( G) Clerical Person

Hours Per Year ( G= Ex0.1) ( H) Cost ($)

1. Applications N/ A 2. Surveys and studies N/ A 3. Reporting Requirements ( Initial Performance Tests  all, d, e) )

A. Read instructions 1 1 1 0 0 0 0 0 B.. Required activities Basic liquid resins ( BLR) 1050 1 1050 0 0 0 0 0 Repeat of initial performance test

process vents 1050 1 1050 0 0 0 0 0 Initial performance test wastewater 270 1 270 0 0 0 0 0 Repeat of initial performance test

wastewater 270 1 270 0 0 0 0 0 Wet strength resins( WSR) k 270 1 270 0 0 0 0 0 C. Create information included in 3B, 4D, 4E included in 3B and 4E D. Gather existing information included in 3B, 4D, 4E included in 3B and 4E E. Write report Notification of constr./ reconstr./ startup d, e 2 1 2 1 2 0.1 0.2 126 Notification of phys./ oper. changes f 2 1 2 1 2 0.1 0.2 126 Notification of anticipated startup d, e 2 1 2 0 0 0 0 0 Actual start up notification d, e 2 1 2 0 0 0 0 0 Notification of applicability of the Standard existing sources e 2 1 2 0 0 0 0 0 Notification of applicability of the standard new sources d, e 2 1 2 0 0 0 0 0 Notification of initial performance test d, e 2 1 2 0 0 0 0 0 Report of initial test ( including CMS performance evaluation and results) 6 1 6 0 0 0 0 0 Submit quality control plan for continuous monitoring systems d, e, l 2 1 2 0 0 0 0 0 Submit startup, shutdown, malfunction plan ( SSM) d, e 2 1 2 1 2 0.1 .2 126 Compliance status information report b, c, d, e 4 1 4 0 0 0 0 0 Report of monitoring exceedances and periods of noncompliance g 16 4 64 1 64 3.2 6.4 4020 Report of no excess emissions g 8 4 32 13 416 21 42 26167 Report of area source becoming major h 6 1 6 0 0 0.0 0.0 0 Waiver application e, i 6 1 6 1 6 0.3 0.6 376 4. Recordkeeping Requirements A. Read instructions included in 3A B. Plan Activities N/ A C. Implement activities included in 4D, 4E D. Develop record system d, e 40 1 40 0 0 0 0 0 E. Time to enter information  Records of startup, shutdown,

malfunction etc. 2 1 2 1 2 0.1 0.2 126  Records of control device monitoring parameters:

  Continuously monitored parameters j 12 52 624 3 1872 93.6 187 117612  LDAR program recordkeeping &

reporting BLR b 311 1 311 3 933 46.7 93.3 58624  LDAR program recordkeeping &

reporting  WSR c, d, k 11 1 11 10 110 5.5 11 6910  Wastewater parameters b, k, o 2 12 24 3 72 3.6 7.2 4523 F. Other recordkeeping activities Maintain records of occurrence and duration of each SSM of process and control equipment b, c, m 2 8 16 13 208 10.4 20.8 13067 Maintain records of all maintenance performed on air pollution control equipment b, c 2 4 8 13 104 5.2 10.4 6533 Maintain records of all actions taken during periods of SSM that differ from the sources' SSM plan b, c, n 2 1 1 13 13 0.65 1.3 871 Maintain records of each period during which a CMS is malfunctioning or inoperative b, k 2 1 2 3 6 0.3 0.6 376 Maintain records of results of all performance tests and performance evaluations b, c, k 2 1 2 13 26 1.3 2.6 1632 Maintain all initial notification and compliance status notifications b, c 1 1 1 13 13 0.65 1.3 871 Submit semiannual SSM reports b, c, d 2 2 4 13 52 2.5 5.2 3258 Submit immediate reports of inconsistent procedures monitored at each affected source b, c 2 1 2 13 26 1.3 2.6 1632 Submit a CMS summary report for HAP monitored at each affected source b, k 2 1 2 3 6 0.3 0.6 376 G. Time to train personnel N/ A H. Time for audits N/ A TOTAL BURDEN AND COST ( SALARY) NATIONWIDE 3935 196.9 393 247250 Costs assume a rate for industry of $ 55.34/ hour for technical, $ 78.54/ hour for management and $ 35.64/ hour for clerical labor. For Government, costs assume a rate of $ 36.86/ hour for technical, $ 68.19 for management, and $ 27.36 for clerical.

b Assumes there are 3 BLR ( basic liquid resins) manufacturing facilities.

c Assumes there are 10 WSR ( wet strength resins) facilities that are major sources.

d Because growth rate for industry is so low, assumes no new facilities on an annual basis.

e One time only costs f Assumes physical/ operational change at one facility g It is assumed that one facility will have excess emissions h No area sources are expected to become major sources i Assumes 10% of subject facilities will request a waiver j These parameters will be automatically recorded with a data logger k For WSR facilities, as an alternative to implementing the standards for process vents, storage tanks, and wastewater, facilities may elect to comply with the requirements of 40 CFR 63, Subpart H ( a leak detection and repair program) for equipment leaks). Because it is more cost effective than the emission limit, it is assumed that all WSR facilities will choose to comply with the alternative standard. These facilities will not have continuous monitoring systems ( CMS).

l One test each for wastewater and process vents m Assumes 8 startup, shutdown, and/ or malfunction ( SSM) events per facility n Assumes 1 deviation from SSM plan per year per facility o Assumes 2 hours to record parameters, monthly monitoring


[Federal Register Volume 85, Number 173 (Friday, September 4, 2020)]
[Notices]
[Pages 55332-55337]
[FR Doc No: 2020-19656]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-89719; File No. SR-NSCC-2020-804]

Self-Regulatory Organizations; National Securities Clearing
Corporation; Notice of Filing of Advance Notice, as Modified by
Amendment No. 1, To Introduce the Margin Liquidity Adjustment Charge
and Include a Bid-Ask Risk Charge in the VaR Charge

September 1, 2020.
    Pursuant to Section 806(e)(1) of Title VIII of the Dodd-Frank Wall
Street Reform and Consumer Protection Act entitled the Payment,
Clearing, and Settlement Supervision Act of 2010 (``Clearing
Supervision Act'') \1\ and Rule 19b-4(n)(1)(i) under the Securities
Exchange Act of 1934 (``Act''),\2\ notice is hereby given that on July
30, 2020, National Securities Clearing Corporation (``NSCC'') filed
with the Securities and Exchange Commission (``Commission'') the
advance notice SR-NSCC-2020-804. On August 13, 2020, NSCC filed
Amendment No. 1 to the advance notice, to make clarifications and
corrections to the advance notice.\3\ The advance notice, as modified
by Amendment No. 1 (hereinafter, the ``Advance Notice''), is described
in Items I, II and III below, which Items have been prepared by the
clearing agency.\4\ The Commission is publishing this notice to solicit
comments on the Advance Notice from interested persons.
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    \1\ 12 U.S.C. 5465(e)(1).
    \2\ 17 CFR 240.19b-4(n)(1)(i).
    \3\ Amendment No. 1 made clarifications and corrections to the
description of the advance notice and Exhibits 3 and 5 of the
filing, and these clarifications and corrections have been
incorporated, as appropriate, into the description of the advance
notice in Item I below.
    \4\ On July 30, 2020, NSCC filed this Advance Notice as a
proposed rule change (SR-NSCC-2020-016) with the Commission pursuant
to Section 19(b)(1) of the Act, 15 U.S.C. 78s(b)(1), and Rule 19b-4
thereunder, 17 CFR 240.19b-4. On August 13, 2020, NSCC filed
Amendment No. 1 to the proposed rule change to make similar
clarifications and corrections to the proposed rule change. A copy
of the proposed rule change, as modified by Amendment No. 1, is
available at http://www.dtcc.com/legal/sec-rule-filings.aspx.
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I. Clearing Agency's Statement of the Terms of Substance of the Advance
Notice

    This Advance Notice consists of modifications to NSCC's Rules &
Procedures (``Rules'') to (1) introduce a new component of the Clearing
Fund, the Margin Liquidity Adjustment (``MLA'') charge, and (2) enhance
the calculation of the volatility component of the Clearing Fund
formula that utilizes a parametric Value-at-Risk (``VaR'') model
(defined for purposes of this filing as the ``VaR Charge,'' and
described in more detail in Item II(B)(i) below) by including a bid-ask
spread risk charge, as described in greater detail below.\5\
---------------------------------------------------------------------------

    \5\ Capitalized terms not defined herein are defined in the
Rules, available at http://dtcc.com/~/media/Files/Downloads/legal/
rules/nscc_rules.pdf.
---------------------------------------------------------------------------

II. Clearing Agency's Statement of the Purpose of, and Statutory Basis
for, the Advance Notice

    In its filing with the Commission, the clearing agency included
statements concerning the purpose of and basis for the Advance Notice
and discussed any comments it received on the Advance Notice. The text
of these statements may be examined at the places specified in Item IV
below. The clearing agency has prepared summaries, set forth in
sections A and B below, of the most significant aspects of such
statements.

(A) Clearing Agency's Statement on Comments on the Advance Notice
Received From Members, Participants, or Others

    NSCC has not received or solicited any written comments relating to
this proposal. NSCC will notify the Commission of any written comments
received by NSCC.

(B) Advance Notice Filed Pursuant to Section 806(e) of the Clearing
Supervision Act

Description of Proposed Change
    NSCC is proposing to enhance its Clearing Fund methodology by (1)
introducing a new component, the MLA charge, which would be calculated
to address the risk presented to NSCC when a Member's portfolio
contains large Net Unsettled Positions \6\ in a particular group of
securities with a similar risk profile or in a particular asset type
(referred to as ``asset groups''), and (2) enhancing the calculation of
the VaR Charge by including a bid-ask spread risk charge, as described
in more detail below.\7\
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    \6\ ``Net Unsettled Positions'' and ``Net Balance Order
Unsettled Positions'' refer to net positions that have not yet
passed their settlement date or did not settle on their settlement
date, and are referred to collectively in this filing as Net
Unsettled Positions. See Procedure XV (Clearing Fund Formula and
Other Matters) of the Rules, id.
    \7\ The results of a study of the potential impact of adopting
the proposed changes have been provided to the Commission.
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(i) Overview of the Required Fund Deposit and NSCC's Clearing Fund
    As part of its market risk management strategy, NSCC manages its
credit exposure to Members by determining the appropriate Required Fund
Deposits to the Clearing Fund and monitoring its sufficiency, as
provided for in the Rules.\8\ The Required Fund Deposit serves as each
Member's margin.
---------------------------------------------------------------------------

    \8\ See Rule 4 (Clearing Fund) and Procedure XV (Clearing Fund
Formula and Other Matters), supra note 4. NSCC's market risk
management strategy is designed to comply with Rule 17Ad-22(e)(4)
under the Act, where these risks are referred to as ``credit
risks.'' 17 CFR 240.17Ad-22(e)(4).
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    The objective of a Member's Required Fund Deposit is to mitigate
potential losses to NSCC associated with liquidating a Member's
portfolio in the event NSCC ceases to act for that Member (hereinafter
referred to as a ``default'').\9\ The aggregate of all Members'
Required Fund Deposits constitutes the Clearing Fund of NSCC. NSCC
would access its Clearing Fund should a defaulting Member's own
Required Fund Deposit be insufficient to satisfy losses to NSCC caused
by the liquidation of that Member's portfolio.
---------------------------------------------------------------------------

    \9\ The Rules identify when NSCC may cease to act for a Member
and the types of actions NSCC may take. For example, NSCC may
suspend a firm's membership with NSCC or prohibit or limit a
Member's access to NSCC's services in the event that Member defaults
on a financial or other obligation to NSCC. See Rule 46
(Restrictions on Access to Services) of the Rules, supra note 4.
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    Pursuant to the Rules, each Member's Required Fund Deposit amount
consists of a number of applicable components, each of which is
calculated to address specific risks faced by NSCC, as identified
within Procedure XV of the Rules.\10\ The volatility component of each
Member's Required Fund Deposit is designed to measure market price
volatility and is calculated for Members' Net Unsettled Positions. The
volatility component is designed to capture the market price risk
associated with each Member's portfolio at a 99th percentile level of
confidence. The VaR Charge is the volatility component applicable to
most Net Unsettled Positions,\11\ and usually comprises the largest
portion of a Member's Required Fund Deposit. Procedure XV of the Rules
currently provides that the VaR Charge shall be calculated in
accordance with a generally accepted portfolio volatility margin model
utilizing assumptions based on historical data as NSCC deems reasonable
and a volatility range that NSCC deems appropriate.\12\
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    \10\ Supra note 4.
    \11\ As described in Procedure XV, Section I(A)(1)(a)(ii), (iii)
and (iv), and Section I(A)(2)(a)(ii), (iii) and (iv) of the Rules,
Net Unsettled Positions in certain securities are excluded from the
VaR Charge and instead charged a volatility component that is
calculated by multiplying the absolute value of those Net Unsettled
Positions by a percentage. Supra note 4.
    \12\ Procedure XV, Section I(A)(1)(a)(i) and Section
I(A)(2)(a)(i) of the Rules, supra note 4.

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    NSCC regularly assesses market and liquidity risks as such risks
relate to its margining methodologies to evaluate whether margin levels
are commensurate with the particular risk attributes of each relevant
product, portfolio, and market. The proposed changes to include the MLA
charge to its Clearing Fund methodology and to enhance the VaR Charge
by including a bid-ask spread risk charge, as described below, are the
result of NSCC's regular review of the effectiveness of its margining
methodology.
(ii) Overview of Liquidation Transaction Costs and Proposed Changes
    Each of the proposed changes addresses a similar, but separate,
risk that NSCC faces increased transaction costs when it liquidates the
Net Unsettled Positions of a defaulted Member due to the unique
characteristics of that Member's portfolio. The transaction costs to
NSCC to liquidate a defaulted Member's portfolio include both market
impact costs and fixed costs. Market impact costs are the costs due to
the marketability of a security, and generally increase when a
portfolio contains large Net Unsettled Positions in a particular group
of securities with a similar risk profile or in a particular asset
type, as described more below. Fixed costs are the costs that generally
do not fluctuate and may be caused by the bid-ask spread of a
particular security. The bid-ask spread of a security accounts for the
difference between the observed market price that a buyer is willing to
pay for that security and the observed market price that a seller is
willing to sell that security.
    The transaction cost to liquidate a defaulted Member's portfolio is
currently captured by the measurement of market risk through the
calculation of the applicable volatility charge.\13\ The proposed
changes would supplement and enhance the current measurement of this
market risk to address situations where the characteristics of the
defaulted Member's portfolio could cause these costs to be higher than
the amount collected for the applicable volatility charge.
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    \13\ The calculation of the VaR Charge and the haircut-based
volatility charge are described in Sections I.(A)(1)(a) and
I.(A)(2)(a) of Procedure XV of the Rules. Supra note 4. The
methodologies for these calculations and how they are designed to
address risks faced by NSCC have been described in recent proposed
rule change and advance notice filings. See Securities Exchange Act
Release Nos. 82780 (February 26, 2018), 82 FR 9035 (March 2, 2018)
(File No. SR-NSCC-2017-808); 82781 (February 26, 2018), 82 FR 9042
(March 2, 2018) (File No. SR-NSCC-2017-020).
---------------------------------------------------------------------------

    First, as described in more detail below, the MLA charge is
designed to address the market impact costs of liquidating a defaulted
Member's portfolio that may increase when that portfolio includes large
Net Unsettled Positions in a particular group of securities with a
similar risk profile or in a particular asset type. These positions may
be more difficult to liquidate because a large number of securities
with similar risk profiles could reduce the marketability of those
large Net Unsettled Positions, increasing the market impact costs to
NSCC. As described below, the MLA charge would supplement the
applicable volatility charge.
    Second, as described in more detail below, the bid-ask spread risk
charge would address the risk that the transaction costs of liquidating
a defaulted Member's Net Unsettled Positions may increase due to the
fixed costs related to the bid-ask spread. As described below, this
proposed change would be incorporated into, and, thereby, enhance the
current measure of transaction costs through, the VaR Charge.
(iii) Proposed Margin Liquidity Adjustment Charge
    In order to address the risks of an increased market impact cost
presented by portfolios that contain large Net Unsettled Positions in
the same asset group, NSCC is proposing to introduce a new component to
the Clearing Fund formula, the MLA charge.
    As noted above, a Member portfolio with large Net Unsettled
Positions in a particular group of securities with a similar risk
profile or in a particular asset type may be more difficult to
liquidate in the market in the event the Member defaults because a
concentration in that group of securities or in an asset type could
reduce the marketability of those large Net Unsettled Positions.
Therefore, such portfolios create a risk that NSCC may face increased
market impact cost to liquidate that portfolio in the assumed margin
period of risk of three business days at market prices.
    The proposed MLA charge would be calculated to address this
increased market impact cost by assessing sufficient margin to mitigate
this risk. As described below, the proposed MLA charge would be
calculated for different asset groups, and subgroups for the equities
asset group. Essentially, the calculation is designed to compare the
total market value of a Net Unsettled Position in a particular asset
group or subgroup, which NSCC would be required to liquidate in the
event of a Member default, to the available trading volume of that
asset group or equities subgroup in the market.\14\ If the market value
of the Net Unsettled Position is large, as compared to the available
trading volume of that asset group or subgroup, then there is an
increased risk that NSCC would face additional market impact costs in
liquidating that position in the event of a Member default. Therefore,
the proposed calculation would provide NSCC with a measurement of the
possible increased market impact cost that NSCC could face when it
liquidates a large Net Unsettled Position in a particular asset group
or subgroup.
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    \14\ NSCC would determine average daily trading volume by
reviewing data that is made publicly available by the Securities
Industry and Financial Markets Association (``SIFMA''), at https://www.sifma.org/resources/archive/research/statistics.
---------------------------------------------------------------------------

    Rather than calculate the market impact cost for each CUSIP, NSCC's
MLA charge would estimate market impact cost at the portfolio-level
using aggregated volume data. For example, as described in greater
detail below, the calculation of market impact cost would include a
measurement of the gross market value of the portfolio. Given the vast
number of CUSIPs processed by NSCC, this approach is simpler and is
expected to result in more predicable calculations of the MLA charge.
    To calculate the MLA charge, NSCC would categorize securities into
separate asset groups, which have similar risk profiles--(1) equities
\15\ (excluding equities defined as Illiquid Securities pursuant to the
Rules \16\), (2) Illiquid Securities, (3) unit investment trusts, or
UITs, (4) municipal bonds (including municipal bond exchange-traded
products, or ``ETPs''), and (5) corporate bonds (including corporate
bond ETPs). NSCC would then further segment the equities asset group
into the following subgroups: (i) Micro-capitalization equities, (ii)
small capitalization equities, (iii) medium capitalization equities,
(iv) large capitalization equities, (v) treasury ETPs, and (vi) all
other ETPs.\17\
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    \15\ NSCC would exclude long positions in Family-Issued
Securities, as defined in Rule 1 (Definitions) of the Rules, from
the MLA charge. NSCC believes the margin charge applicable to long
Net Unsettled Positions in Family-Issued Securities pursuant to
Sections I.(A)(1)(a)(iv) and (2)(a)(iv) of Procedure XV of the Rules
provides adequate mitigation of the risks presented by those Net
Unsettled Positions, such that an MLA charge would not be triggered.
Supra note 4.
    \16\ See Rule 1 (Definitions), supra note 4.
    \17\ Initially, the market capitalization categorizations would
be: (i) Micro-capitalization equities would be less than $300
million, (ii) small capitalization equities would be equal to or
greater than $300 million and less than $2 billion, (iii) medium
capitalization equities would be equal to or greater than $2 billion
and less than $10 billion, and (iv) large capitalization equities
would be equal to or greater than $10 billion. In determining the
range of these market capitalization categorizations, NSCC would
consult publications issued by sources it deems appropriate. NSCC
would review these categories annually and any changes that NSCC
deems appropriate would be subject to NSCC's model risk management
governance procedures set forth in the Clearing Agency Model Risk
Management Framework (``Model Risk Management Framework''). See
Securities Exchange Act Release Nos. 81485 (August 25, 2017), 82 FR
41433 (August 31, 2017) (File No. SR-NSCC-2017-008); 84458 (October
19, 2018), 83 FR 53925 (October 25, 2018) (File No. SR-NSCC-2018-
009); 88911 (May 20, 2020), 85 FR 31828 (May 27, 2020) (File No. SR-
NSCC-2020-008).

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    NSCC would first calculate a measurement of market impact cost for
each asset group and equities subgroup for which a Member has Net
Unsettled Positions in its portfolio. As described above, the
calculation of an MLA charge is designed to measure the potential
additional market impact cost to NSCC of closing out a large Net
Unsettled Position in that particular asset group or equities subgroup.
Market Impact Cost Calculation for Market Capitalization Subgroups of
Equities Asset Group
    The market impact cost for each Net Unsettled Position in a market
capitalization subgroup of the equities asset group would be calculated
by multiplying four components: (1) An impact cost coefficient that is
a multiple of the one-day market volatility of that subgroup and is
designed to measure impact costs, (2) the gross market value of the Net
Unsettled Position in that subgroup, (3) the square root of the gross
market value of the Net Unsettled Position in that subgroup in the
portfolio divided by an assumed percentage of the average daily trading
volume of that subgroup, and (4) a measurement of the concentration of
the Net Unsettled Position in that subgroup in the portfolio (as
described in greater detail below).\18\
---------------------------------------------------------------------------

    \18\ See supra note 13.
---------------------------------------------------------------------------

    NSCC also represents that its measurement of the concentration of
the Net Unsettled Position in the portfolio would include aggregating
the relative weight of each CUSIP in that Net Unsettled Position
relative to the weight of that CUSIP in the subgroup, such that a
portfolio with fewer positions in a subgroup would have a higher
measure of concentration for that subgroup.\19\
---------------------------------------------------------------------------

    \19\ The relative weight would be calculated by dividing the
absolute market value of a single CUSIP in the Member's portfolio by
the total absolute market value of that portfolio.
---------------------------------------------------------------------------

Market Impact Cost Calculation for the Other Asset Groups and Equities
Subgroups
    The market impact cost for Net Unsettled Positions in the municipal
bond, corporate bond, Illiquid Securities and UIT asset groups and for
Net Unsettled Positions in the treasury ETP and other ETP subgroups of
the equities asset group would be calculated by multiplying three
components: (1) An impact cost coefficient that is a multiple of the
one-day market volatility of that asset group or subgroup, (2) the
gross market value of the Net Unsettled Position in that asset group or
subgroup, and (3) the square root of the gross market value of the Net
Unsettled Position in that asset group or subgroup in the portfolio
divided by an assumed percentage of the average daily trading volume of
that subgroup.\20\
---------------------------------------------------------------------------

    \20\ See supra note 13.
---------------------------------------------------------------------------

Total MLA Charge Calculation for Each Portfolio
    For each asset group or subgroup, NSCC would compare the calculated
market impact cost to a portion of the volatility charge that is
allocated to Net Unsettled Positions in that asset group or subgroup
(as determined by Sections I.(A)(1)(a) and I.(A)(2)(a) of Procedure XV
of the Rules).\21\ If the ratio of the calculated market impact cost to
the applicable 1-day volatility charge is greater than a threshold, an
MLA charge would be applied to that asset group or subgroup.\22\ If the
ratio of these two amounts is equal to or less than this threshold, an
MLA charge would not be applied to that asset group or subgroup. The
threshold would be based on an estimate of the market impact cost that
is incorporated into the calculation of the applicable 1-day volatility
charge, such that an MLA charge would apply only when the calculated
market impact cost exceeds this threshold.
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    \21\ Supra note 4. NSCC's margining methodology uses a three-day
assumed period of risk. For purposes of this calculation, NSCC would
use a portion of the applicable volatility charge that is based on
one-day assumed period of risk and calculated by applying a simple
square-root of time scaling, referred to in this proposed rule
change as ``1-day volatility charge.'' Any changes that NSCC deems
appropriate to this assumed period of risk would be subject to
NSCC's model risk management governance procedures set forth in the
Model Risk Management Framework. See supra note 16.
    \22\ Initially, the threshold would be 0.4, because, currently,
approximately 40 percent of the 1-day volatility charge addresses
market impact costs. NSCC would review this threshold from time to
time and any changes that NSCC deems appropriate would be subject to
NSCC's model risk management governance procedures set forth in the
Model Risk Management Framework. See id.
---------------------------------------------------------------------------

    When applicable, an MLA charge for each asset group or subgroup
would be calculated as a proportion of the product of (1) the amount by
which the ratio of the calculated market impact cost to the applicable
1-day volatility charge exceeds the threshold, and (2) the 1-day
volatility charge allocated to that asset group or subgroup.
    For each Member portfolio, NSCC would add the MLA charges for Net
Unsettled Positions in each of the subgroups of the equities asset
group to determine an MLA charge for the Net Unsettled Positions in the
equities asset group. NSCC would then add the MLA charge for Net
Unsettled Positions in the equities asset group with each of the MLA
charges for Net Unsettled Positions in the other asset groups to
determine a total MLA charge for a Member.
    The ratio of the calculated market impact cost to the 1-day
volatility charge would also determine if NSCC would apply a downward
adjustment, based on a scaling factor, to the total MLA charge, and the
size of any adjustment. For Net Unsettled Positions that have a higher
ratio of calculated market impact cost to the 1-day volatility charge,
NSCC would apply a larger adjustment to the MLA charge by assuming that
it would liquidate that position on a different timeframe than the
assumed margin period of risk of three business days. For example, NSCC
may be able to mitigate potential losses associated with liquidating a
Member's portfolio by liquidating a Net Unsettled Position with a
larger volatility charge over a longer timeframe. Therefore, when
applicable, NSCC would apply a multiplier to the calculated MLA charge.
When the ratio of calculated market impact cost to the 1-day volatility
charge is lower, the multiplier would be one, and no adjustment would
be applied; as the ratio gets higher the multiplier decreases and the
MLA charge is adjusted downward.
    The final MLA charge would be calculated daily and, when the charge
is applicable, as described above, would be included as a component of
Members' Required Fund Deposit.
Proposed Changes to NSCC Rules
    The proposal described above would be implemented into Procedure XV
of the NSCC Rules. Specifically, the proposed changes to Procedure XV
would describe the calculation of the MLA charge in a new subsection
(i) of Section I(A)(1) and a new subsection (g) of Section I(A)(2).
    These new subsections would first identify each of the asset groups
and subgroups. The proposed new subsections would then separately
describe the two calculations of market

impact cost for these asset groups and subgroups by identifying the
components of these calculations. The new subsections would state that
NSCC would compare the calculated market impact cost to a portion of
that Member's volatility charge, to determine if an MLA charge would be
applied to an asset group or subgroup. The new subsections would then
state that NSCC would add each of the applicable MLA charges calculated
for each asset group together. Finally, the new subsections would state
that NSCC may apply a downward adjusting scaling factor to result in a
final MLA charge.
    NSCC would also amend Section I(B)(2) of Procedure VX, which
describes the Excess Capital Premium charge, to add the MLA charge to
the list of Clearing Fund components that are excluded from the
calculation of the Excess Capital Premium charge.\23\ The Excess
Capital Premium is imposed on a Member when the Member's Required Fund
Deposit exceeds its excess net capital. NSCC believes that including
the MLA charge in the calculation of the Excess Capital Premium could
lead to more frequent and unnecessary Excess Capital Premium charges.
This is not the intended purpose of the Excess Capital Premium charge
and could place an unnecessary burden on Members.
---------------------------------------------------------------------------

    \23\ See Section I.(B)(2) of Procedure XV of the Rules. Supra
note 4.
---------------------------------------------------------------------------

(iv) Proposed Bid-Ask Spread Risk Charge
    NSCC has identified potential risk that its margining methodologies
do not account for the transaction costs related to bid-ask spread in
the market that could be incurred when liquidating a portfolio. Bid-ask
spreads account for the difference between the observed market price
that a buyer is willing to pay for a security and the observed market
price that a seller is willing to sell that security. Therefore, NSCC
is proposing to include a bid-ask spread risk charge in the VaR Charge
to address this risk.
    In order to calculate this charge, NSCC would segment Member's
portfolios into four bid-ask spread risk classes: (i) Large and medium
capitalization equities, (ii) small capitalization equities, (iii)
micro capitalization equities, and (iv) ETPs.\24\
---------------------------------------------------------------------------

    \24\ See supra note 16.
---------------------------------------------------------------------------

    Each risk class would be assigned a specific bid-ask spread haircut
rate in the form of a basis point charge that would be applied to the
gross market value in that particular risk class. The applicable bid-
ask spread risk charge would be the product of the gross market value
in a particular risk class in the Member's portfolio and the applicable
basis point charge. The bid-ask spread risk charge would be calculated
at the portfolio level, such that NSCC would aggregate the bid-ask
spread risk charges of the applicable risk classes for the Member's
portfolio.
    NSCC proposes to review the haircut rates annually based on either
the analysis of liquidation transaction costs related to the bid-ask
spread that is conducted in connection with its annual simulation of a
Member default or market data that is sourced from a third-party data
vendor. Based on the analyses from recent years' simulation exercises,
NSCC does not anticipate that these haircut rates would change
significantly year over year. NSCC may also adjust the haircut rates
following its annual model validation review, to the extent the results
of that review indicate the current haircut rates are not adequate to
address the risk presented by transaction costs from a bid-ask
spread.\25\
---------------------------------------------------------------------------

    \25\ All proposed changes to the haircuts would be subject to
NSCC's model risk management governance procedures set forth in the
Model Risk Management Framework. See id.
---------------------------------------------------------------------------

    The proposed initial haircuts are based on the analysis from the
most recent annual default simulation and market data sourced from a
third-party data vendor, and are listed in the table below:

------------------------------------------------------------------------
                                                               Haircut
                           Class                                (bps)
------------------------------------------------------------------------
Large and Medium Capitalization Equities...................          5.0
Small Capitalization Equities..............................         12.3
Micro Capitalization Equities..............................         23.1
ETPs.......................................................          1.5
------------------------------------------------------------------------

Proposed Changes to NSCC Rules
    The proposal described above would be implemented into Procedure XV
of the NSCC Rules. Specifically, NSCC would amend subsection (a)(i)(I)
of Sections I(A)(1) and I(A)(2) of Procedure XV by stating that the
calculations of the estimations of volatility described in these
Sections shall include an additional bid-ask spread risk charge
measured by multiplying the gross market value of each Net Unsettled
Position by a basis point charge. The proposed change to this
subsection would also state that the basis point charge would be based
on four risk classes and would identify those risk classes.
(v) Implementation Timeframe
    NSCC would implement the proposed changes no later than 10 Business
Days after the later of the no objection to the Advance Notice and
approval of the related proposed rule change \26\ by the Commission.
NSCC would announce the effective date of the proposed changes by
Important Notice posted to its website.
---------------------------------------------------------------------------

    \26\ Supra note 3.
---------------------------------------------------------------------------

Anticipated Effect on and Management of Risk
    NSCC believes that the proposed changes to enhance the margining
methodology as described above would enable NSCC to better limit its
risk exposures to Members arising out of their Net Unsettled Positions.
    As stated above, the proposed MLA charge is designed to help limit
NSCC's exposures to the risks presented by a Member portfolio that
contains large Net Unsettled Positions in securities of the same asset
group, and would enhance NSCC's ability to address risks related to
liquidating such positions in the event of a Member default. The
proposed MLA charge would allow NSCC to collect sufficient financial
resources to cover its exposure that it may face increased market
impact costs in liquidating Net Unsettled Positions that is not
captured by the applicable volatility charge.
    The proposal to enhance the VaR Charge by including a bid-ask
spread risk charge is also designed to help limit NSCC's exposures to
the risks related to increased transaction costs due to the bid-ask
spread in the market that could be incurred when liquidating a
portfolio. Therefore, this proposed change would also help address
NSCC's risks related to its ability to liquidate such positions in the
event of a Member default.
    By providing NSCC with a more effective measurement of its
exposures, the proposed changes would also mitigate risk for Members
because lowering the risk profile for NSCC would in turn lower the risk
exposure that Members may have with respect to NSCC in its role as a
central counterparty.
Consistency With Clearing Supervision Act
    NSCC believes that the proposals are consistent with the Clearing
Supervision Act, specifically with the risk management objectives and
principles of Section 802(b), and with certain of the risk management
standards adopted by the Commission pursuant to Section 805(a)(2), for
the reasons described below.\27\
---------------------------------------------------------------------------

    \27\ 12 U.S.C. 5464(a)(2) and (b)(1).

---------------------------------------------------------------------------

(i) Consistency With Section 805(b) of the Clearing Supervision Act
    Although the Clearing Supervision Act does not specify a standard
of review for an advance notice, its stated purpose is instructive: To
mitigate systemic risk in the financial system and promote financial
stability by, among other things, promoting uniform risk management
standards for systemically important financial market utilities and
strengthening the liquidity of systemically important financial market
utilities.\28\
---------------------------------------------------------------------------

    \28\ 12 U.S.C. 5464(b)(1).
---------------------------------------------------------------------------

    NSCC believes the proposals are consistent with the objectives and
principles of these risk management standards as described in Section
805(b) of the Clearing Supervision Act and in the Covered Clearing
Agency Standards.
    First, the proposal would include the MLA charge as an additional
component to the Clearing Fund. As described above, this new margin
charge is designed to address the market impact costs of liquidating a
defaulted Member's portfolio that may increase when that portfolio
includes large Net Unsettled Positions in a particular group of
securities with a similar risk profile or in a particular asset type.
These positions may be more difficult to liquidate in the market
because a concentrating in that group of securities or in an asset type
could reduce the marketability of those large Net Unsettled Positions,
increasing the market impact costs to NSCC. The proposed MLA charge
would allow NSCC to collect sufficient financial resources to cover its
exposure that it may face increased market impact costs in liquidating
Net Unsettled Positions that is not captured by the applicable
volatility charge.
    Second, the proposed bid-ask spread risk charge is designed to help
limit NSCC's exposures to the risks related to increased transaction
costs due to the bid-ask spread in the market that could be incurred
when liquidating a portfolio. As stated above, this proposal would also
help address NSCC's risks related to its ability to liquidate such
positions in the event of a Member default.
    Therefore, because the proposals are designed to enable NSCC to
better limit its exposure to Members in the event of a Member default,
NSCC believes they are consistent with promoting robust risk
management. The proposals would also strengthen the liquidity of NSCC
by requiring deposits to the Clearing Fund that are calculated to
address the potential risks NSCC may face, which is one of NSCC's
default liquidity resources.
    As a result, NSCC believes the proposals would be consistent with
the objectives and principles of Section 805(b) of the Clearing
Supervision Act, which specify the promotion of robust risk management,
promotion of safety and soundness, reduction of systemic risks and
support of the stability of the broader financial system by, among
other things, strengthening the liquidity of systemically important
financial market utilities, such as NSCC.
(ii) Consistency With Rule 17Ad-22(e)(4)(i) and (6)(i) Under the Act
    Section 805(a)(2) of the Clearing Supervision Act authorizes the
Commission to prescribe risk management standards for the payment,
clearing and settlement activities of designated clearing entities,
like NSCC, and financial institutions engaged in designated activities
for which the Commission is the supervisory agency or the appropriate
financial regulator.\29\ The Commission has accordingly adopted risk
management standards under Section 805(a)(2) of the Clearing
Supervision Act \30\ and Section 17A of the Act (``Covered Clearing
Agency Standards'').\31\ The Covered Clearing Agency Standards require
covered clearing agencies to establish, implement, maintain, and
enforce written policies and procedures that are reasonably designed to
meet certain minimum requirements for their operations and risk
management practices on an ongoing basis.\32\
---------------------------------------------------------------------------

    \29\ 12 U.S.C. 5464(a)(2).
    \30\ Id.
    \31\ 17 CFR 240.17Ad-22(e).
    \32\ Id.
---------------------------------------------------------------------------

    NSCC believes that the proposed changes are consistent with Rules
17Ad-22(e)(4)(i) and (e)(6)(i) of the Covered Clearing Agency Standards
\33\ for the reasons described below.
---------------------------------------------------------------------------

    \33\ 17 CFR 240.17Ad-22(e)(4)(i), (e)(6)(i).
---------------------------------------------------------------------------

    Rule 17Ad-22(e)(4)(i) under the Act requires, in part, that NSCC
establish, implement, maintain and enforce written policies and
procedures reasonably designed to effectively identify, measure,
monitor, and manage its credit exposures to participants and those
arising from its payment, clearing, and settlement processes, including
by maintaining sufficient financial resources to cover its credit
exposure to each participant fully with a high degree of
confidence.\34\
---------------------------------------------------------------------------

    \34\ 17 CFR 240.17Ad-22(e)(4)(i).
---------------------------------------------------------------------------

    As described above, NSCC believes that both of the proposed changes
would enable it to better identify, measure, monitor, and, through the
collection of Members' Required Fund Deposits, manage its credit
exposures to Members by maintaining sufficient resources to cover those
credit exposures fully with a high degree of confidence.
    Specifically, NSCC believes that the proposed MLA charge would
effectively mitigate the risks related to large Net Unsettled Positions
of securities in the same asset group within a portfolio and would
address the potential increased risks NSCC may face related to its
ability to liquidate such positions in the event of a Member default.
    Therefore, NSCC believes that the proposal would enhance NSCC's
ability to effectively identify, measure and monitor its credit
exposures and would enhance its ability to maintain sufficient
financial resources to cover its credit exposure to each participant
fully with a high degree of confidence. As such, NSCC believes the
proposed changes are consistent with Rule 17Ad-22(e)(4)(i) under the
Act.\35\
---------------------------------------------------------------------------

    \35\ Id.
---------------------------------------------------------------------------

    Additionally, NSCC believes that the proposed bid-ask spread risk
charge would enhance NSCC's ability to identify, measure, monitor and
manage its credit exposures to Members and those exposures arising from
its payment, clearing, and settlement processes because the proposed
changes would better ensure that NSCC maintains sufficient financial
resources to cover its credit exposure to each Member with a high
degree of confidence. NSCC believes that the proposed change would
enable NSCC to more effectively identify, measure, monitor and manage
its exposures to risks related to market price, and enable it to better
limit its exposure to potential losses from Member defaults by
providing a more effective measure of the risks related to market
price. As described above, due to the bid-ask spread in the market,
there is an observable transaction cost to liquidate a portfolio. The
proposed bid-ask spread risk charge is designed to manage the risk
related to this transaction cost in the event a Member's portfolio is
liquidated. As such, NSCC believes that the proposed change would
better address the potential risks that NSCC may face that are related
to its ability liquidate a Member's Net Unsettled Positions in the
event of that firm's default, and thereby enhance NSCC's ability to
effectively identify, measure and monitor its credit exposures and
would enhance its ability to maintain sufficient financial resources to
cover its credit exposure to each participant fully

with a high degree of confidence. In this way, NSCC believes this
proposed change is also consistent with Rule 17Ad-22(e)(4)(i) under the
Act.\36\
---------------------------------------------------------------------------

    \36\ Id.
---------------------------------------------------------------------------

    Rule 17Ad-22(e)(6)(i) under the Act requires, in part, that NSCC
establish, implement, maintain and enforce written policies and
procedures reasonably designed to cover its credit exposures to its
participants by establishing a risk-based margin system that, at a
minimum, considers, and produces margin levels commensurate with, the
risks and particular attributes of each relevant product, portfolio,
and market.\37\
---------------------------------------------------------------------------

    \37\ 17 CFR 240.17Ad-22(e)(6)(i).
---------------------------------------------------------------------------

    The Required Fund Deposits are made up of risk-based components (as
margin) that are calculated and assessed daily to limit NSCC's credit
exposures to Members, including the VaR Charge. NSCC's proposed change
to introduce an MLA charge is designed to more effectively address the
risks presented by large Net Unsettled Positions in the same asset
group. NSCC believes the addition of the MLA charge would enable NSCC
to assess a more appropriate level of margin that accounts for these
risks. This proposed change is designed to assist NSCC in maintaining a
risk-based margin system that considers, and produces margin levels
commensurate with, the risks and particular attributes of portfolios
that contain large Net Unsettled Positions in the same asset group and
may be more difficult to liquidate in the event of a Member default.
Therefore, NSCC believes the proposed change is consistent with Rule
17Ad-22(e)(6)(i) under the Act.\38\
---------------------------------------------------------------------------

    \38\ Id.
---------------------------------------------------------------------------

    Furthermore, NSCC believes that including the bid-ask spread risk
charge within the calculation of the final VaR Charge would provide
NSCC with a better assessment of its risks related to market price.
This proposed change would enable NSCC to assess a more appropriate
level of margin that accounts for this risk at the portfolio level. As
such, each Member portfolio would be subject to a risk-based margining
system that, at minimum, considers, and produces margin levels
commensurate with, the risks and particular attributes of each relevant
product, portfolio, and market, consistent with Rule 17Ad-22(e)(6)(i)
under the Act.\39\
---------------------------------------------------------------------------

    \39\ Id.
---------------------------------------------------------------------------

III. Date of Effectiveness of the Advance Notice, and Timing for
Commission Action

    The proposed change may be implemented if the Commission does not
object to the proposed change within 60 days of the later of (i) the
date that the proposed change was filed with the Commission or (ii) the
date that any additional information requested by the Commission is
received. The clearing agency shall not implement the proposed change
if the Commission has any objection to the proposed change.
    The Commission may extend the period for review by an additional 60
days if the proposed change raises novel or complex issues, subject to
the Commission providing the clearing agency with prompt written notice
of the extension. A proposed change may be implemented in less than 60
days from the date the advance notice is filed, or the date further
information requested by the Commission is received, if the Commission
notifies the clearing agency in writing that it does not object to the
proposed change and authorizes the clearing agency to implement the
proposed change on an earlier date, subject to any conditions imposed
by the Commission.
    The clearing agency shall post notice on its website of proposed
changes that are implemented.
    The proposal shall not take effect until all regulatory actions
required with respect to the proposal are completed.

IV. Solicitation of Comments

    Interested persons are invited to submit written data, views and
arguments concerning the foregoing, including whether the Advance
Notice is consistent with the Clearing Supervision Act. Comments may be
submitted by any of the following methods:

Electronic Comments

     Use the Commission's internet comment form (http://www.sec.gov/rules/sro.shtml); or
     Send an email to<EMAIL_ADDRESS>Please include
File Number SR-NSCC-2020-804 on the subject line.

Paper Comments

     Send paper comments in triplicate to Secretary, Securities
and Exchange Commission, 100 F Street NE, Washington, DC 20549.

All submissions should refer to File Number SR-NSCC-2020-804. This file
number should be included on the subject line if email is used. To help
the Commission process and review your comments more efficiently,
please use only one method. The Commission will post all comments on
the Commission's internet website (http://www.sec.gov/rules/sro.shtml).
Copies of the submission, all subsequent amendments, all written
statements with respect to the Advance Notice that are filed with the
Commission, and all written communications relating to the Advance
Notice between the Commission and any person, other than those that may
be withheld from the public in accordance with the provisions of 5
U.S.C. 552, will be available for website viewing and printing in the
Commission's Public Reference Room, 100 F Street NE, Washington, DC
20549 on official business days between the hours of 10:00 a.m. and
3:00 p.m. Copies of the filing also will be available for inspection
and copying at the principal office of NSCC and on DTCC's website
(http://dtcc.com/legal/sec-rule-filings.aspx). All comments received
will be posted without change. Persons submitting comments are
cautioned that we do not redact or edit personal identifying
information from comment submissions. You should submit only
information that you wish to make available publicly. All submissions
should refer to File Number SR-NSCC-2020-804 and should be submitted on
or before September 21, 2020.

    By the Commission.
J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2020-19656 Filed 9-3-20; 8:45 am]
BILLING CODE 8011-01-P


[Federal Register Volume 84, Number 173 (Friday, September 6, 2019)]
[Notices]
[Page 46979]
[FR Doc No: 2019-19239]

=======================================================================
-----------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION

Submission for OMB Review; Comment Request

Upon Written Request, Copies Available From: Securities and Exchange
Commission, Office of FOIA Services, 100 F Street NE, Washington, DC
20549-2736

Extension:
    Rule 204A-1, SEC File No. 270-536, OMB Control No. 3235-0596

    Notice is hereby given that, pursuant to the Paperwork Reduction
Act of 1995 (44 U.S.C. 3501 et seq.), the Securities and Exchange
Commission (the ``Commission'') has submitted to the Office of
Management and Budget a request for extension of the previously
approved collection of information discussed below.
    The title for the collection of information is ``Rule 204A-1 (17
CFR 275.204A-1) under the Investment Advisers Act of 1940.'' (15 U.S.C.
80b-1 et seq.) Rule 204A-1 (the ``Code of Ethics Rule'') requires
investment advisers registered with the SEC to (i) set forth standards
of conduct expected of advisory personnel (including compliance with
the federal securities laws); (ii) safeguard material nonpublic
information about client transactions; and (iii) require the adviser's
``access persons'' to report their personal securities transactions,
including transactions in any mutual fund managed by the adviser. The
Code of Ethics Rule requires access persons to obtain the adviser's
approval before investing in an initial public offering (``IPO'') or
private placement. The Code of Ethics Rule also requires prompt
reporting, to the adviser's chief compliance officer or another person
designated in the code of ethics, of any violations of the code.
Finally, the Code of Ethics Rule requires the adviser to provide each
supervised person with a copy of the code of ethics and any amendments,
and require the supervised persons to acknowledge, in writing, their
receipt of these copies. The purposes of the information collection
requirements are to (i) ensure that advisers maintain codes of ethics
applicable to their supervised persons; (ii) provide advisers with
information about the personal securities transactions of their access
persons for purposes of monitoring such transactions; (iii) provide
advisory clients with information with which to evaluate advisers'
codes of ethics; and (iv) assist the Commission's examination staff in
assessing the adequacy of advisers' codes of ethics and assessing
personal trading activity by advisers' supervised persons.
    The respondents to this information collection are investment
advisers registered with the Commission. The Commission has estimated
that compliance with rule 204A-1 imposes a burden of approximately 91
hours per adviser annually based on an average adviser having 63 access
persons. Our latest data indicate that there were 13,173 advisers
registered with the Commission. Based on this figure, the Commission
estimates a total annual burden of 1,194,133 hours for this collection
of information.
    Rule 204A-1 does not require recordkeeping or record retention. The
collection of information requirements under the rule is mandatory. The
information collected pursuant to the rule is not filed with the
Commission, but rather takes the form of communications between
advisers and their supervised persons. Investment advisers use the
information collected to control and assess the personal trading
activities of their supervised persons. Responses to the reporting
requirements will be kept confidential to the extent each investment
adviser provides confidentiality under its particular practices and
procedures. An agency may not conduct or sponsor, and a person is not
required to respond to, a collection of information unless it displays
a currently valid control number.
    The public may view the background documentation for this
information collection at the following website, www.reginfo.gov.
Comments should be directed to: (i) Desk Officer for the Securities and
Exchange Commission, Office of Information and Regulatory Affairs,
Office of Management and Budget, Room 10102, New Executive Office
Building, Washington, DC 20503, or by sending an email to:
<EMAIL_ADDRESS>and (ii) Charles Riddle, Acting Director/
Chief Information Officer, Securities and Exchange Commission, c/o
Candace Kenner, 100 F Street NE, Washington, DC 20549 or send an email
to<EMAIL_ADDRESS>Comments must be submitted to OMB within 30
days of this notice.

    Dated: September 3, 2019.
Jill M. Peterson,
Assistant Secretary.
[FR Doc. 2019-19239 Filed 9-5-19; 8:45 am]
 BILLING CODE 8011-01-P