[Federal Register: August 16, 2010 (Volume 75, Number 157)]
[Notices]
[Page 50021-50029]
[DOCID:fr16au10-126]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-62678; File No. SR-Phlx-2010-108]

Self-Regulatory Organizations; Notice of Filing of Proposed Rule
Change by NASDAQ OMX PHLX, Inc. Relating to a Proposed Price
Improvement System, Price Improvement XL (PIXL\SM\)

August 10, 2010.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934
(``Act'') \1\, and Rule 19b-4 \2\ thereunder, notice is hereby given
that on July 30, 2010, NASDAQ OMX PHLX, Inc. (``Phlx'' or ``Exchange'')
filed with the Securities and Exchange Commission (``SEC'' or
``Commission'') the proposed rule change as described in Items I and II
below, which Items have been prepared by the Exchange. The Commission
is publishing this notice to solicit comments on the proposed rule
change from interested persons.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
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I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change

    The Exchange, pursuant to Section 19(b)(1) of the Act \3\ and Rule
19b-4 thereunder,\4\ proposes to adopt new Rule 1080(n), Price
Improvement XL (PIXL\SM\), to establish a price-improvement mechanism
on the Exchange.
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    \3\ 15 U.S.C. 78s(b)(1).
    \4\ 17 CFR 240.19b-4.
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    The text of the proposed rule change is available on the Exchange's
Web site at http://www.nasdaqtrader.com/micro.aspx?id=PHLXRulefilings,
at the principal office of the Exchange, and at the Commission's Public
Reference Room.

II. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change

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

A. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change

1. Purpose
    The purpose of the proposed rule change is to establish a price-
improvement mechanism, PIXL, on the Exchange, which includes auto-match
functionality in which a member (an ``Initiating Member'') may
electronically submit for execution an order it represents as agent on
behalf of a public customer, broker dealer, or any other entity (``PIXL
Order'') against principal interest or against any other order it
represents as agent (an ``Initiating Order'') provided it submits the
PIXL Order for electronic execution into the PIXL Auction (``Auction'')
pursuant to the proposed Rule.

Auction Eligibility Requirements

    All options traded on the Exchange are eligible for PIXL. Proposed
Rule 1080(n)(i) describes the circumstances under which an Initiating
Member may initiate an Auction.
    If the PIXL Order is for the account of a public customer and is
for a size of 50 contracts or more, the Initiating Member must stop the
entire PIXL Order at a price that is equal to or better than the
National Best Bid/Offer (``NBBO'') on the opposite side of the market
from the PIXL Order, provided that such price must be at least one
minimum price improvement increment (as determined by the Exchange but
not smaller than one cent) better than any limit order on the limit
order book on the same side of the market as the PIXL Order. The
purpose of this provision is to ensure that public customer PIXL Orders
for 50 contracts or more are guaranteed at least the NBBO but do not
trade ahead of other limit orders already on the Exchange's limit order
book at the existing limit order's limit price.
    For example, assume the Exchange's disseminated market (the
``PBBO'') in the affected series is the NBBO and is 1.00 bid for 10
contracts, 1.01 offered for 20 contracts and the existing disseminated
1.00 bid is a public customer limit order. If an initiating Member
submits a public customer PIXL Order to buy 100 contracts @ the market
together with a contra-side Initiating Order to sell 100 contracts, the
entire PIXL Order must be stopped at a price of 1.01 because the public
customer limit order on the limit order book has time priority at 1.00
over the public customer PIXL order.
    If the PIXL Order is for the account of a public customer and is
for a size of less than 50 contracts, the Initiating Member must stop
the entire PIXL Order at a price that is the better of: (i) The PBBO
price on the opposite side of the market from the PIXL Order improved
by at least one minimum price improvement increment, or (ii) the PIXL
Order's limit price (if the order is a limit order), provided in either
case that such price is at or better than the NBBO, and at least one
minimum price improvement increment better than any limit order on the
book on the same side of the market as the PIXL Order. The purpose of
this provision is to ensure that smaller PIXL Orders will be guaranteed
price improvement by establishing a size under which a PIXL Order must
be submitted at a price better than the PBBO. The Exchange believes
this should especially benefit public customers.\5\ The provision
concerning PIXL Orders for a size of less than 50 contracts will be
effective for a pilot period scheduled to expire August 31, 2011.\6\
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    \5\ The Exchange notes that Chicago Board Options Exchange, Inc.
(``CBOE'') Rule 6.74A(a)(3) provides that any AIM Agency Order (the
equivalent of a PIXL Order) for less than 50 contracts that is
entered into the CBOE's Automated Improvement Mechanism (``AIM'') is
guaranteed an execution at the NBBO price improved by one minimum
price improvement increment or at the AIM Agency Order's limit price
(if the order is a limit order). See Securities Exchange Act Release
No. 53222 (February 3, 2006), 71 FR 7089 (February 10, 2006) (SR-
CBOE-2005-60).
    \6\ The Exchange proposes the one-year pilot in order to
ascertain the level of price improvement attained for such smaller-
sized orders during the pilot period.
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    For example, assume the PBBO in the affected series is 1.00 bid--
1.03 offer and the NBBO is 1.00--1.03. If an initiating Member submits
a public customer PIXL Order to buy 25 contracts @ the market together
with a contra-side Initiating Order to sell 25 contracts, the public
customer PIXL Order must be stopped at least one minimum improvement
increment better than the PBBO offer of 1.03 to guarantee price
improvement. Therefore, in this example, the PIXL

Order could be stopped at 1.00, 1.01 or 1.02, but not at 1.03. If,
however, the 1.00 bid price on PHLX represents a limit order resting on
the book, the PIXL Order must be stopped at a price that is at least
one minimum price improvement increment better than any limit order on
the limit order book on the same side of the market as the PIXL Order.
Therefore, in this circumstance the PIXL Order could be stopped at 1.01
or 1.02, but not at 1.00 and not at 1.03.
    If the PIXL Order is for the account of a broker dealer or any
other person or entity that is not a public customer, and is for a size
of 50 contracts or more, the Initiating Member must stop the entire
PIXL Order at a price that is the better of: (i) the PBBO price
improved by at least one minimum price improvement increment on the
same side of the market as the PIXL Order, or (ii) the PIXL Order's
limit price (if the order is a limit order), provided in either case
that such price is at or better than the NBBO.
    If the PIXL Order is for the account of a broker dealer or any
other person or entity that is not a public customer and is for a size
of less than 50 contracts, the Initiating Member must stop the entire
PIXL Order at a price that is the better of: (i) the PBBO price
improved by at least one minimum price improvement increment on the
same side of the market as the PIXL Order, or (ii) the PIXL Order's
limit price (if the order is a limit order), provided in either case
that such price is at or better than the NBBO and at least one minimum
improvement increment better than the PBBO on the opposite side of the
market from the PIXL Order. The provision concerning PIXL Orders for a
size of less than 50 contracts will be effective for a pilot period
scheduled to expire August 31, 2011.
    Broker dealers generally do not have priority over market maker
quotes or orders and the Exchange believes that they should not be
afforded such priority in the PIXL mechanism. The Exchange proposes to
adopt proposed Rule 1080(n)(i)(B)(2), concerning such orders that are
submitted with a size of less than 50 contracts, on a pilot basis
scheduled to expire August 31, 2011, in order to ascertain the level of
price improvement attained for such smaller-sized orders during the
pilot period.
    For example, if the PBBO and the NBBO are both .97-1.03 with no
public customer orders on the book, the proposed rule would permit stop
prices for a PIXL Order as follows:
    A public customer PIXL Order to buy 50 contracts or more may be
stopped at prices equal to or within a range of .97-1.03. A public
customer PIXL Order of less than 50 contracts may be stopped at prices
equal to or within a range of .97-1.02.\7\ A PIXL order of 50 contracts
or more for the account of a broker dealer may be stopped at prices
equal to or within a range of .98-1.03. A PIXL order of less than 50
contracts for the account of a broker dealer may be stopped equal to or
within a price range of .98-1.02.\8\
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    \7\ This example assumes that there is no limit order on the
book at a price of .97. If there were, the rule requires that the
order must be stopped at a price of .98 or better (at least one
minimum price improvement increment better than the PBBO).
    \8\ This is at least one minimum price improvement increment
better than the PBBO.
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    PIXL Orders submitted at or before the opening of trading are not
eligible to initiate an Auction and will be rejected. Because a PIXL
Auction must last for one second, PIXL Orders submitted during the
final second of the trading session in the affected series are not
eligible to initiate an Auction and will be rejected.
    Finally, an Initiating Order may not be a solicited order for the
account of any Exchange specialist, SQT, RSQT or non-streaming ROT
assigned in the affected series. The Exchange believes that in order to
maintain fair and orderly markets, a market maker assigned in an option
should not be solicited for participation in an Auction by an
Initiating Member. The Exchange believes that market makers interested
in participating in transactions on the Exchange should do so by way of
his/her quotations, and is able to respond to PIXL Auction
Notifications, not create them by having an Initiating Member
submitting Initiating Orders on his/her behalf.
Auction Process
    An Initiating Member may initiate a PIXL Auction by submitting a
PIXL Order in one of three ways. First, the Initiating Member could
submit a PIXL Order specifying a single price at which it seeks to
execute the PIXL Order (a ``stop price'').
    Second, an Initiating Member could submit a PIXL Order specifying
that it is willing to automatically match as principal or as agent on
behalf of an Initiating Order the price and size of all trading
interest \9\ and responses to the PIXL Auction Notification (``PAN,''
as described below) (``auto-match''), in which case the PIXL Order will
be stopped at the NBBO on the Initiating Order side of the market (if
50 contracts or greater) or, if less than 50 contracts, the better of:
(i) the PBBO price on the opposite side of the market from the PIXL
Order improved by at least one minimum price improvement increment, or
(ii) the PIXL Order's limit price (if the order is a limit order),
provided in either case that such price is at or better than the NBBO
and at least one increment better than the limit of an order on the
book on the same side as the PIXL Order.
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    \9\ ``Trading interest'' refers to unrelated orders received
during the Auction, booked orders, and quotes that are considered
for execution and allocation against the PIXL Order following the
Auction.
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    Third, an Initiating Member could submit a PIXL Order specifying
that it is willing to either: (i) Stop the entire order at a single
stop price and auto-match PAN responses, as described below, together
with trading interest, at a price or prices that improve the stop price
to a specified price above or below which the Initiating Member will
not trade (a ``Not Worse Than'' or ``NWT'' price); (ii) stop the entire
order at a single stop price and auto-match all PAN responses and
trading interest at or better than the stop price; or (iii) stop the
entire order at the NBBO on the Initiating Order side (if 50 contracts
or greater) or the better of: (A) the PBBO price on the opposite side
of the market from the PIXL Order improved by one minimum price
improvement increment, or (B) the PIXL Order's limit price (if the
order is a limit order) on the Initiating Order side (if for less than
50 contracts), and auto-match PAN responses and trading interest at a
price or prices that improve the stop price up to the NWT price. In all
cases, if the PBBO on the same side of the market as the PIXL Order
represents a limit order on the book, the stop price must be at least
one minimum price improvement increment better than the booked limit
order's limit price.
    For example, assume the PBBO and the NBBO are .97 bid-1.03 offer.
An Initiating Member may submit a PIXL Order to buy 100 contracts for
1.01 together with a contra-side Initiating Order to sell 100 contracts
at 1.01 with a NWT price of .99. In this example the Initiating Member
has stopped the PIXL Order at 1.01 (two increments better than the
NBBO) and will auto-match responses and trading interest down to the
NWT price of .99.
    Once the Initiating Member has submitted a PIXL Order for
processing, such PIXL Order may not be modified or cancelled. Under any
of these circumstances, the stop price or NWT price may be improved to
the benefit of the PIXL Order during the Auction, but may not be
cancelled. The purpose of this provision is to ensure that an
Initiating Member guarantees the stop or NWT price or better (by way of
improvement of the stop and/or NWT price to the PIXL Order's benefit
during

the Auction), without ``backing away'' from that guarantee.\10\
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    \10\ The Exchange notes that Boston Options Exchange Group LLC
(``BOX'') Rules prohibit a BOX ``Initiating Participant'' from
cancelling or modifying the BOX ``Max Improvement Primary
Improvement Order,'' the equivalent of the proposed NWT price,
during the BOX PIP. See BOX Rules, Chapter V, Section 18(e)(ii). The
Exchange believes that permitting the Initiating Member to improve
the NWT price during the Auction adds another opportunity for price
improvement for the PIXL Order, and that this proposed treatment of
the NWT price simply expands upon the BOX's existing treatment of
the Max Improvement Primary Improvement Order to the benefit of the
PIXL Order. In this regard, the Exchange believes that there are no
new regulatory concerns that are raised by its proposed treatment of
the NWT price.
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PIXL Auction Notification (``PAN'')
    When the Exchange receives a PIXL Order for Auction processing, a
PAN detailing the side, size and the stop price of the PIXL Order will
be sent over the Exchange's TOPO Plus Orders data feed.\11\ An updated
PAN will also be sent over the Exchange's TOPO Plus Orders data feed
when the Initiating Member improves the stop price of the PIXL Order.
The updated PAN will include the side, size, and improved stop price of
the PIXL Order. This information would be used by PAN respondents
wishing to participate at better price levels to improve their price
when they are alerted that a stop price has been improved.
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    \11\ For a description of TOPO Plus Orders, see Securities
Exchange Act Release No. 60877 (October 26, 2009), 74 FR 56255
(October 30, 2009) (SR-Phlx-2009-92). See also, Securities Exchange
Act Release No. 62194 (May 28, 2010), 75 FR 31830 (June 4, 2010)
(SR-Phlx-2010-48) (Order Approving Market Data Fees for TOPO Plus
Orders). Members who are ``Professional Subscribers'' to the TOPO
Plus Orders data feed are subject to lower fees than the ``External
Distributors'' from whom they receive TOPO Plus Orders.
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PIXL Auction
    The PIXL Auction will last for one second,\12\ unless it is
concluded as the result of any of the circumstances described below.
Any person or entity may submit PAN responses provided such response is
properly marked specifying price, size and side of the market. The
Exchange believes that permitting any person or entity to submit
responses to the PAN should attract PAN responses from all sources,
maximizing the potential for liquidity in the Auction and thus
affording the PIXL Order the best opportunity for price
improvement.\13\ PAN responses will not be visible to Auction
participants, and will not be disseminated to the Options Price
Reporting Authority (``OPRA'').\14\ The minimum price increment for PAN
responses and for an Initiating Member's stop price and/or NWT price
will be the minimum price improvement increment as set forth above.\15\
A PAN response size at any given price point may not exceed the size of
the PIXL Order.\16\ A PAN response with a size greater than the size of
the PIXL Order will be rejected. A PAN response must be equal to or
better than the NBBO at the time of receipt of the PAN response. A PAN
response with a price that is outside the NBBO will be rejected. This
is because the Exchange does not want to encourage a large number of
PAN responses that are outside of the NBBO that will be unexecuted (and
subsequently cancelled) unless the NBBO moves to make them eligible.
PAN responses may be modified or cancelled during the Auction.\17\ The
Exchange believes that any PAN response on the same side of the market
as the PIXL Order would be the result of an error, and therefore such a
response will be rejected. Multiple PAN responses from the same member
may be submitted during the Auction. Multiple orders at a particular
price level submitted by a member in response to a PAN may not exceed,
in the aggregate, the size of the PIXL Order.
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    \12\ The Exchange notes that the one-second Auction period is
currently in place on other options exchanges. See CBOE Rule
7.74A(b)(1)(C). See also, BOX Rules, Chapter V, Section 18(e)(i).
    \13\ While the CBOE permits members appointed in the affected
series to respond (CBOE Rule 6.74A(b)(1)(D)) and also permits
members representing limit orders at the top of the CBOE limit order
book opposite the Agency Order to respond (CBOE Rule
6.74A(b)(1)(E)), the instant proposal would permit PAN responses
from any person or entity. The Exchange believes that this deviation
from other exchanges' practices is not substantial, and does not
raise any new regulatory concerns. In fact, it should afford greater
opportunities for price improvement for the PIXL Order.
    \14\ This is consistent with CBOE Rule 6.74A(b)(1)(F).
    \15\ This is consistent with CBOE Rule 6.74A(b)(1)(G).
    \16\ This is consistent with CBOE Rule 6.74A(b)(1)(H).
    \17\ This is consistent with CBOE Rule 6.74A(b)(1)(I).
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    Conclusion of the PIXL Auction
    There are a number of circumstances that will cause the Auction to
conclude. The Auction will conclude at the end of the one-second
Auction period,\18\ except that it may conclude before the expiration
of one second: (i) any time the PBBO crosses the PIXL Order stop price
on the same side of the market as the PIXL Order (since further price
improvement will be unlikely and any responses offering improvement are
likely to be cancelled), or (ii) any time there is a trading halt on
the Exchange in the affected series. The proposed rules concerning the
early conclusion of the Auction will be effective for a pilot period
scheduled to expire August 31, 2011.
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    \18\ This is consistent with CBOE Rule 6.74A(b)(2)(A).
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    If the Auction concludes before the expiration of one second as the
result of the PBBO crossing the stop price, the entire PIXL Order will
be executed at the best response price(s) or, if the stop price is the
best price in the Auction, at the stop price, unless the best response
price is equal to the price of a limit order resting on the PHLX book
on the same side of the market as the PIXL Order, in which case the
PIXL Order will be executed against that response, but at a price that
is at least one minimum price improvement increment better than the
price of such limit order at the time of the conclusion of the Auction.
    For example, assume the PBBO and NBBO are both .97-1.03, and the
.97 bid represents an order on the limit order book. A PIXL Order to
buy 100 contracts is submitted with a contra-side Initiating Order to
stop the PIXL Order at 1.00. Assume a PAN response is submitted to sell
10 contracts at .97 and another to sell 10 contracts at .99. Due to a
change in the price of the underlying security, a PHLX specialist or
market maker submits a bid price of 1.02, crossing the 1.00 stop price
and concluding the Auction prior to the expiration of one second. 10
contracts from the PIXL Order will be executed at .98 (representing the
.97 response price re-priced to .98, which is one minimum price
improvement increment better than the .97 bid represented by the limit
order on the book). 10 contracts will be executed at .99 (the next best
response price after the execution at .98) and the remaining 80
contracts will be executed at 1.00 (the stop price) against the
Initiating Order.
    If the Auction concludes before the expiration of one second as the
result of a trading halt on the Exchange in the affected series, the
entire PIXL Order will be executed at the stop price against the
Initiating Order. Since the Initiating Member has guaranteed that an
execution will occur at the stop price (or better) prior to the trading
halt, and PAN responses offer no such guarantee, the stop price is the
only valid price at which to execute the PIXL Order, and the Initiating
Member is the appropriate contra-side.\19\
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    \19\ The Exchange notes that trading on the Exchange in any
option contract will be halted whenever trading in the underlying
security has been paused or halted by the primary listing market.
See Exchange Rule 1047(e). See also, Securities Exchange Act Release
No. 62269 (June 10, 2010), 75 FR 34491 (June 17, 2010) (SR-Phlx-
2010-82). Any executions that occur during any latency between the
pause or halt in the underlying security and the processing of the
halt on the Exchange will be nullified pursuant to Exchange Rule
1092(c)(iv)(B).

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    An unrelated market or marketable limit order on the opposite side
of the market from the PIXL Order received during the Auction will not
cause the Auction to end early and will execute against interest
outside of the Auction. If contracts remain from such unrelated order
at the time the Auction ends, they will be considered for participation
in the order allocation process described below. The Exchange believes
that this should increase the number of contracts against which a PIXL
Order could be executed, and should create more opportunities for the
PIXL Order to be executed at each price level. This provision will be
effective for a pilot period scheduled to expire on August 31, 2011.
    For example, assume the PBBO is .97 (size of 10)-1.03 (size of 50),
and the NBBO is 97-1.03. If an Initiating Member submits a PIXL Order
to buy 100 contracts @1.00 together with an Initiating Order to sell
100 @1.00, the PIXL Order will be stopped @ 1.00. During the Auction, a
PAN response arrives to sell 20 @.99 and the PBBO moves to .97 (size of
10)--1.00 (size of 50-the offer is 2 market makers @1.00 with 25 each).
While the Auction is taking place, an unrelated order to sell 50
contracts @ .98 is submitted. The PBBO is now .97 (size of 10)-.98
(size of 50) (the offer is the result of the unrelated order to sell 50
contracts at .98). Once the Auction ends after one second, even though
the unrelated order is not part of the Auction, 50 contracts from the
PIXL Order will be executed at .98 against the unrelated order.
Thereafter, 20 contracts from the PIXL Order will be executed at .99
(PIXL order buys from PAN responder), and 30 contracts from the PIXL
Order will be executed at 1.00 (the PIXL order buys 12 contracts from
the Initiating Order (40% of the 30) and 18 from market makers quoting
at 1.00). The Exchange believes that this functionality provides
maximum price improvement to the PIXL order by including limit orders
and quotes in the execution price of the PIXL Order that are priced
better than PAN responses.

Order Allocation

    At the conclusion of the Auction, the PIXL Order will be allocated
at the best price(s). As stated above, in order to maximize liquidity
available to be executed against the PIXL Order, such best prices may
include non-Auction quotes and orders that may be present at each price
level. Public customer orders will have priority at each price level.
After public customer interest at a particular price level has been
satisfied, contracts will be allocated among all Exchange quotes,
orders and PAN responses.

Single Price Submission Option

    If the Initiating Member selected the single stop price option of
the PIXL Auction, PIXL executions will occur at prices that improve the
stop price, and then at the stop price with up to 40% of the remaining
contracts after public customer interest is satisfied being allocated
to the Initiating Member at the stop price. However, if only one
specialist, SQT or RSQT matches the stop price, then the Initiating
Member may be allocated up to 50% of the contracts executed at such
price. Remaining contracts will be allocated pursuant to the algorithm
set forth in Exchange Rules 1014(g)(vii)(B)(1)(b) and (d) among
remaining quotes, orders and PAN responses at the stop price.\20\
Thereafter, remaining contracts, if any, shall be allocated to the
Initiating Member. The Exchange respectfully submits that this is
identical to functionality currently in place on CBOE.
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    \20\ Under the proposed Rule, the specialist will not be
entitled to receive orders for 5 contracts or fewer. If a price
point has a size of 5 contracts or fewer and the specialist has
submitted a quote, order or PAN response at that price point,
contracts at that price point will nonetheless be allocated pursuant
to Exchange Rules 1014(g)(vii)(B)(1)(b) and (d).
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Auto-Match Option

    If the Initiating Member selected the auto-match option of the PIXL
Auction, the Initiating Member will be allocated an equal number of
contracts as the aggregate size of all other quotes, orders and PAN
responses at each price point until a price point is reached where the
balance of the order can be fully executed, except that the Initiating
Member shall be entitled to receive up to 40% of the contracts
remaining at the final price point (including situations where the
final price point is the stop price). If there are other quotes, orders
and PAN responses at the final price point, the contracts will be
allocated to such interest pursuant to the algorithm set forth in
Exchange Rules 1014(g)(vii)(B)(1)(b) and (d). Any remaining contracts
will be allocated to the Initiating Member.
    For example, if the PIXL Order is to buy 1,000 contracts and there
are three price points to be allocated, and quotes, orders and PAN
responses with an aggregate size at each price point as follows:

--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                  Total size                              Total
                                                                  of quotes,                            contracts   Total contracts quotes,     Total
                Price                          Responses         orders, and     Initiating member      initiating   orders, and responses    contracts
                                                                   auction          entitlement         member is          allocated           trading
                                                                  responses                             allocated
--------------------------------------------------------------------------------------------------------------------------------------------------------
1.01.................................  MM 1 = 100..............          100  Auto-match size........          100  100....................          200
1.02.................................  MM 1 = 100..............          150  Auto-match size........          150  150....................          300
                                       MM 2 = 50...............
1.03.................................  Customer = 100..........          400  40% after customer               160  Customer = 100.........          500
                                       MM 1 = 150..............                filled + residual                    MM 1 = 120.............
                                       MM 2 = 150..............                after all participants               MM 2 = 120.............
                                                                               are satisfied.
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    In this example, the Initiating Member is entitled to receive 100
contracts at 1.01 (matching the 100 contracts that are allocated among
quotes, orders and PAN responses at 1.01), and the Initiating Member is
entitled to receive 150 contracts at 1.02 (matching the 150 contracts
allocated among quotes, orders and PAN responses at 1.02). Because 1.03
is the final price point, the customer is allocated 100 contracts and
the Initiating Member is entitled to receive 160 contracts at 1.03 (40%
of the remaining 400 contracts), with the remaining 240 contracts
allocated among quotes, orders and PAN responses at 1.03. The residual
PAN responses at 1.03 are cancelled.

Stop and NWT Option

    If the Initiating Member selected the ``stop and NWT'' option of
the PIXL Auction, after public customer interest is satisfied,
contracts will be allocated first to quotes, orders and PAN responses
at prices better than the NWT price (if any), beginning with the best
price, pursuant to the algorithm set forth in Exchange Rules
1014(g)(vii)(B)(1)(b) and (d) at each price point.
    Next, contracts will be allocated among quotes, orders and PAN
responses at prices equal to the Initiating Member's NWT price and
better than the Initiating Member's stop price, beginning with the NWT
price. The Initiating Member shall be allocated an equal number of
contracts as the aggregate size of all other quotes, orders and PAN
responses at each price point, except that the Initiating Member will
be entitled to receive up to 40% of the contracts remaining at the
final price point (including situations where the final price point is
the stop price). In the case of an Initiating Order with a NWT price at
the market, the Initiating Member shall be allocated an equal number of
contracts as the aggregate size of all other quotes, orders and PAN
responses at all price points, except that the Initiating Member shall
be entitled to receive up to 40% of the contracts remaining at the
final price point (including situations where the final price is the
stop price).
    If there are other quotes, orders and PAN responses at the final
price point the contracts will be allocated to such interest pursuant
to the algorithm set forth in Exchange Rules 1014(g)(vii)(B)(1)(b) and
(d). Any remaining contracts shall be allocated to the Initiating
Member.
    Assume, for example, that the PIXL Order is to buy 1,000 contracts.
The Initiating Member submits a stop price of 1.03, and a NWT price of
1.02. There are quotes, orders and PAN responses with an aggregate size
at each price point as follows:

--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                  Total size                              Total
                                                                  of quotes,                            contracts   Total contracts quotes,     Total
                Price                          Responses         orders, and     Initiating member      initiating   orders, and responses    contracts
                                                                   auction          entitlement         member is          allocated           trading
                                                                  responses                             allocated
--------------------------------------------------------------------------------------------------------------------------------------------------------
1.01.................................  MM 1 = 100..............          100  Zero--Price is below               0  100....................          100
                                                                               NWT level.
1.02.................................  MM 1 = 100..............          150  Auto-match size........          150  150....................          300
                                       MM 2 = 50...............
1.03.................................  Customer = 100..........          400  40% after customer               200  Customer = 100.........          600
                                       MM 1 = 150..............                filled + residual                    MM 1 = 150.............
                                       MM 2 = 150..............                after all participants               MM 2 = 150.............
                                                                               are satisfied.
--------------------------------------------------------------------------------------------------------------------------------------------------------

    In this example, the Initiating Member is not entitled to receive
any contracts at 1.01. All 100 contracts at 1.01 will be allocated
among quotes, orders and PAN responses at 1.01 in accordance with Rule
1014(g)(vii)(B)(1 )(b) and (d). The Initiating Member will receive 150
contracts at 1.02, with 150 contracts allocated among quotes, orders
and PAN responses at 1.02. Because 1.03, the stop price, is the final
price point, the customer interest will be allocated 100 contracts with
the Initiating Member entitled to receive 200 contracts at 1.03 (40% of
500), with the remaining 300 contracts allocated among quotes, orders
and PAN responses at 1.03.
    A ``stop and NWT'' submission with a NWT price at the market will
be treated in the same manner as a submission under the ``auto-match''
option except that the order may be stopped at any price level provided
such level meets the criterion set forth above for a single stop price.

Professionals

    In March, 2010, the Exchange amended its priority rules to give
certain non-broker-dealer orders the same priority as broker-dealer
orders.\21\ In so doing, the Exchange adopted a new term for certain
persons or entities, the ``professional.'' A professional is defined in
Rule 1000(b)14 as a person or entity that (i) is not a broker or dealer
in securities, and (ii) places more than 390 orders in listed options
per day on average during a calendar month for its own beneficial
account(s). A professional account is treated in the same manner as an
off-floor broker-dealer for purposes of Phlx Rule 1014(g), to which the
trade allocation algorithms described in proposed Rule 1080(n)(ii)(E)
refer.
---------------------------------------------------------------------------

    \21\ See Securities Exchange Act Release No. 61802 (March 30,
2010), 75 FR 17193 (April 5, 2010) (SR-Phlx-2010-05).
---------------------------------------------------------------------------

    Additionally, Rule 1000(b)14 states that all-or-none orders will be
treated like customer orders. PIXL Orders are inherently all-or-none
orders because the Initiating Member guarantees that the PIXL Order
will be filled in its entirety. If a PIXL Order happens to be submitted
for the beneficial account of a professional with the redundant
designation of all-or-none, such PIXL Order will not be rejected, but
will be treated as any other PIXL Order, including for trade allocation
purposes, under proposed Rule 1080(n)(ii)(E).
    Accordingly, the Exchange proposes to amend Rule 1000(b)14 by: (i)
clarifying that orders submitted pursuant to Rule 1080(n) for the
beneficial accounts of professionals with an all-or-none designation
will be treated in the same manner as off-floor broker-dealer orders,
and (ii) adding proposed Rule 1080(n) to the list of rules to which the
term ``professional'' applies. The effect of this is that professionals
will not receive the same priority that is afforded to public
customers, and instead will be treated as broker-dealers in this
regard.

Miscellaneous Provisions

    Proposed Rules 1080(n)(ii)(F) through (H) address the handling of
the PIXL Order and other orders, quotes and PAN responses when certain
conditions are present.
    Specifically, if there are PAN responses that cross the then-
existing NBBO (provided such NBBO is not crossed) at the time of the
conclusion of the Auction, such PAN responses will be executed, if
possible, at their limit price(s).
    If the final PIXL Auction price is the same as an order on the
limit order book on the same side of the market as the PIXL Order, the
PIXL Order may only be executed at a price that is at least one minimum
price improvement increment better than the resting order's limit price
or, if such resting order's limit price crosses the stop price, then
the entire PIXL Order will trade at the stop price with all better
priced interest being considered for execution at the stop price.

    For example, assume the PBBO is .97-1.03, and the Exchange receives
a PIXL Order to buy with a stop price of 1.00. During the Auction a PAN
response to sell @ .98 is received, and an unrelated order to buy 10
contracts @ .99 is received, crossing the PAN response price. In this
situation, the PAN response to sell @.98 will be considered for
execution at a price that is .01 better than the order on the PHLX book
to buy at .99 so that it does not trade through the unrelated order to
buy @.99. Therefore in this case the PAN response to sell at .98 will
be executed and included for allocation at 1.00.
    Finally, any unexecuted PAN responses will be cancelled.

Regulatory Issues

    The proposed rule change contains several paragraphs that describe
prohibited practices when participants use PIXL. Proposed Rule
1080(n)(iii) states that the PIXL Auction may be used only where there
is a genuine intention to execute a bona fide transaction. It will be
considered a violation of Rule 1080(n) and will be deemed conduct
inconsistent with just and equitable principles of trade and a
violation of Exchange Rule 707 if an Initiating Member submits a PIXL
Order (initiating an Auction) and also submits its own PAN response in
the same Auction. The purpose of this provision is to prevent
Initiating Members from submitting an inaccurate or misleading stop
price or trying to improve their allocation entitlement by
participating with multiple expressions of interest.
    Proposed Rule 1080(n)(iv) states that a pattern or practice of
submitting multiple orders in response to a PAN at a particular price
point that exceed, in the aggregate, the size of the PIXL Order, will
be deemed conduct inconsistent with just and equitable principles of
trade and a violation of Rule 707. This is to prevent a member
submitting orders in response to a PAN from artificially inflating its
response size in order to gain a higher allocation than the percentage
the member would have otherwise received.
    Proposed Rule 1080(n)(v) states that a pattern or practice of
submitting unrelated orders or quotes that cross the stop price,
causing a PIXL Auction to conclude before the end of the PIXL Auction
period will be deemed conduct inconsistent with just and equitable
principles of trade and a violation of Rule 707. It will also be deemed
conduct inconsistent with just and equitable principles of trade and a
violation of Rule 707 to engage in a pattern of conduct where the
Initiating Member breaks up a PIXL Order into separate orders for the
purpose of gaining a higher allocation percentage than the Initiating
Member would have otherwise received in accordance with the allocation
procedures described above.

Crossing Public Customer Orders On PIXL

    Proposed Rule 1080(n)(v) addresses the situation where an
Initiating Member holds public customer orders on both sides of the
market in the same option series. Instead of initiating a PIXL Auction,
an Initiating Member may enter a PIXL Order for the account of a public
customer paired with an order for the account of a public customer and
such paired orders will be automatically executed without a PIXL
Auction. The execution price must be expressed in the minimum quoting
increment applicable to the affected series. Such an execution may not
trade through the NBBO or at the same price as any resting customer
order. The Exchange believes that permitting such executions will
benefit public customers on both sides of the crossing transaction by
providing speedy and efficient executions to public customer orders in
this circumstance.
    Rule 1080(c)(ii)(C) prevents an Order Entry Firm from executing
agency orders to increase its economic gain from trading against the
order without first giving other trading interests on the Exchange an
opportunity to either trade with the agency order or to trade at the
execution price when the member was already bidding or offering on the
book. However, the Exchange recognizes that it may be possible for a
firm to establish a relationship with a customer or other person to
deny agency orders the opportunity to interact on the Exchange and to
realize similar economic benefits as it would achieve by executing
agency orders as principal. It would be a violation of Rule
1080(c)(ii)(C) for a firm to circumvent Rule 1080(c)(ii)(C) by
providing an opportunity for (i) a customer affiliated with the firm,
or (ii) a customer with whom the firm has an arrangement that allows
the firm to realize similar economic benefits from the transaction as
the firm would achieve by executing agency orders as principal, to
regularly execute against agency orders handled by the firm immediately
upon their entry as PIXL customer-to-customer immediate crosses.

Pilot Program Information to the Commission

    The Exchange represents that, in support of its proposed pilot
programs concerning (i) the early conclusion of the Auction, and (ii)
permitting orders of fewer than 50 contracts into the Auction, it will
provide the following information each month during the pilot period:
\22\
---------------------------------------------------------------------------

    \22\ The Exchange will provide the information for a particular
month not later than the last business day of the subsequent month.
For example, information for the month of September would be
provided to the Commission no later than the last business day of
October. Information for the month of October would be provided no
later than the last business day of November, etc.
---------------------------------------------------------------------------

    Regarding the early conclusion of the Auction due to the PBBO
crossing the PIXL Order stop price on the same side of the market as
the PIXL order, or due to a trading halt, the Exchange will provide the
following monthly information:
    (1) The number of times that the PBBO crossed the PIXL Order stop
price on the same side of the market as the PIXL Order and prematurely
ended the PIXL Auction, and at what time the PIXL Auction ended;
    (2) The number of times that a trading halt prematurely ended the
PIXL auction and at what time the trading halt ended the PIXL Auction;
    (3) Of the Auctions terminated early due to the PBBO crossing the
PIXL order stop price, the number that resulted in price improvement
over the PIXL Order stop price, and the average amount of price
improvement provided to the PIXL Order;
    (4) In the Auctions terminated early due to the PBBO crossing the
PIXL order stop price, the percentage of contracts that received price
improvement over the PIXL order stop price;
    (5) Of the Auctions terminated early due to a trading halt, the
number that resulted in price improvement over the PIXL Order stop
price, and the average amount of price improvement provided to the PIXL
Order;
    (6) In the auctions terminated early due to a trading halt, the
percentage of contracts that received price improvement over the PIXL
order stop price; and
    (7) The average amount of price improvement provided to the PIXL
Order when the PIXL Auction is not terminated early (i.e., runs the
full one second).
    (8) The number of times an unrelated market or marketable limit
order (against the PBBO) on the opposite side of the PIXL Order is
received during the Auction Period;
    (9) The price(s) at which an unrelated market or marketable limit
order (against the PBBO) on the opposite side of the PIXL Order that is
received during the Auction Period is executed, compared to the
execution price of the PIXL Order.

    Regarding PIXL Orders of fewer than 50 contracts, the Exchange will
provide the following monthly information:
    (1) The number of orders of fewer than 50 contracts entered into
the PIXL Auction;
    (2) The percentage of all orders of fewer than 50 contracts sent to
Phlx that are entered into the PIXL Auction;
    (3) The percentage of all Phlx trades represented by orders of
fewer than 50 contracts;
    (4) The percentage of all Phlx trades effected through the PIXL
Auction represented by orders of fewer than 50 contracts;
    (5) The percentage of all contracts traded on Phlx represented by
orders of fewer than 50 contracts;
    (6) The percentage of all contracts effected through the PIXL
Auction represented by orders of fewer than 50 contracts;
    (7) The spread in the option, at the time an order of fewer than 50
contracts is submitted to the PIXL Auction;
    (8) The number of orders of 50 contracts or greater entered into
the PIXL Auction;
    (9) The percentage of all orders of 50 contracts or greater sent to
PHLX that are entered into the PIXL Auction;
    (10) The spread in the option, at the time an order of 50 contracts
or greater is submitted to the PIXL Auction;
    (11) Of PIXL trades where the PIXL Order is for the account of a
public customer, and is for a size of fewer than 50 contracts, the
percentage done at the NBBO plus $.01, plus $.02, plus $.03, etc.;
    (12) Of PIXL trades where the PIXL Order is for the account of a
public customer, and is for a size of 50 contracts or greater, the
percentage done at the NBBO plus $.01, plus $.02, plus $.03, etc.; and
    (13) Of PIXL trades where the PIXL Order is for the account of a
broker dealer or any other person or entity that is not a public
customer, and is for a size of fewer than 50 contracts, the percentage
done at the NBBO plus $.01, plus $.02, plus $.03, etc.
    (14) Of PIXL trades where the PIXL Order is for the account of a
broker dealer or any other person or entity that is not a public
customer, and is for a size of 50 contracts or greater, the percentage
done at the NBBO plus $.01, plus $.02, plus $.03, etc.;
    (15) The number of orders submitted by Initiating Members when the
spread was $.05, $.10, $.15, etc. For each spread, specify the
percentage of contracts in orders of fewer than 50 contracts submitted
to the PIXL Auction that were traded by: (a) The Initiating Member that
submitted the order to the PIXL; (b) PHLX Market Makers assigned to the
class; (c) other PHLX members; (d) Public Customer Orders; and (e)
unrelated orders (orders in standard increments entered during the PIXL
Auction). For each spread, also specify the percentage of contracts in
orders of 50 contracts or greater submitted to the PIXL Auction that
were traded by: (a) the Initiating Member that submitted the order to
the PIXL Auction; (b) PHLX market makers assigned to the class; (c)
other PHLX members; (d) Public Customer Orders; and (e) unrelated
orders (orders in standard increments entered during the PIXL Auction);
    Regarding PIXL auto-match, the Exchange will provide the following
monthly information:
    (1) The percentage of all PHLX trades effected through the PIXL
Auction in which the Initiating Member has chosen the auto-match
feature, and the average amount of price improvement provided to the
PIXL Order when the Initiating Member has chosen the auto-match feature
vs. the average amount of price improvement provided to the PIXL Order
when the Initiating Member has chosen a stop price submission.
    Regarding competition, the Exchange will provide the following
monthly information:
    (1) For the first Wednesday of each month: (a) The total number of
PIXL auctions on that date; (b) the number of PIXL auctions where the
order submitted to the PIXL was fewer than 50 contracts; (c) the number
of PIXL auctions where the order submitted to the PIXL was 50 contracts
or greater; (d) the number of PIXL auctions (for orders of fewer than
50 contracts) with 0 participants (excluding the initiating
participant), 1 participant (excluding the initiating participant), 2
participants (excluding the initiating participant), 3 participants
(excluding the initiating participant), 4 participants (excluding the
initiating participant), etc., and (e) the number of PIXL auctions (for
orders of 50 contracts or greater) with 0 participants (excluding the
initiating participant), 1 participant (excluding the initiating
participant), 2 participants (excluding the initiating participant), 3
participants (excluding the initiating participant), 4 participants
(excluding the initiating participant), etc.; and
    (2) For the third Wednesday of each month: (a) The total number of
PIXL auctions on that date; (b) the number of PIXL auctions where the
order submitted to the PIXL was fewer than 50 contracts; (c) the number
of PIXL auctions where the order submitted to the PIXL was 50 contracts
or greater; (d) the number of PIXL auctions (for orders of fewer than
50 contracts) with 0 participants (excluding the initiating
participant), 1 participant (excluding the initiating participant), 2
participants (excluding the initiating participant), 3 participants
(excluding the initiating participant), 4 participants (excluding the
initiating participant), etc., and (e) the number of PIXL auctions (for
orders of 50 contracts or greater) with 0 participants (excluding the
initiating participant), 1 participant (excluding the initiating
participant), 2 participants (excluding the initiating participant), 3
participants (excluding the initiating participant), 4 participants
(excluding the initiating participant), etc.

Deployment

    The Exchange anticipates that it will deploy PIXL floor-wide at or
before the end of August 2010. Members will be notified of the
deployment date by way of an Options Trader Alert posted on the
Exchange's Web site.
2. Statutory Basis
    The Exchange believes that the proposed rule change is consistent
with the provisions of Section 6 of the Act,\23\ in general and with
Section 6(b)(5) of the Act,\24\ in that it is designed to promote just
and equitable principles of trade, to foster cooperation and
coordination with persons engaged in regulating, clearing, settling,
processing information with respect to, and facilitating transactions
in securities, to remove impediments to and perfect the mechanism of a
free and open market and a national market system, and, in general, to
protect investors and the public interest; and is not designed to
permit unfair discrimination between customers, issuers, brokers, or
dealers, or to regulate by virtue of any authority conferred by the Act
matters not related to the purposes of the Act or the administration of
the Exchange.
---------------------------------------------------------------------------

    \23\ 15 U.S.C. 78f.
    \24\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------

    The Exchange believes that the proposed rule change is also
consistent with Section 6(b)(8) of the Act \25\ in that it does not
impose any burden on competition not necessary or appropriate in
furtherance of the purposes of the Act.
---------------------------------------------------------------------------

    \25\ 15 U.S.C. 78f(b)(8).
---------------------------------------------------------------------------

    Specifically, the Exchange believes that the proposal will result
in increased liquidity available at improved prices, with competitive
final pricing out of the Initiating Member's complete control. PIXL
should promote and foster competition and provide more options
contracts with the opportunity for price improvement. As a result of
the increased opportunities for price

improvement, the Exchange believes that participants will use PIXL to
increase the number of customer orders that are provided with the
opportunity to receive price improvement over the NBBO.
    The Exchange further believes that the proposal is consistent with
the requirements of Section 11(a) of the Act \26\ and Rule 11a2-2(T)
\27\ thereunder.
---------------------------------------------------------------------------

    \26\ 15 U.S.C. 78k(a).
    \27\ 17 CFR 240.11a2-2(T).
---------------------------------------------------------------------------

    Section 11(a) prohibits a member of a national securities exchange
from effecting transactions on the exchange for its own account, the
account of an associated person, or an account in which it or an
associated person exercises investment discretion, unless an exception
applies. In enacting this provision, Congress was concerned about
members benefiting in their principal transactions from special ``time
and place'' advantages associated with floor trading--such as the
ability to ``execute decisions faster than public investors.'' The
Commission, however, has adopted a number of exceptions to the general
statutory prohibition for situations in which the principal
transactions contribute to the fairness and orderliness of exchange
markets or do not reflect any time and place trading advantages.\28\
---------------------------------------------------------------------------

    \28\ See Securities Exchange Act Release No. 14563 (March 14,
1978), 43 FR 11542 (March 17, 1978); Securities Exchange Act Release
No. 14713 (April 28, 1978), 43 FR 18557 (May 1, 1978); Securities
Exchange Act Release No. 15533 (January 29, 1979), 44 FR 6093 (Jan.
31, 1979). The 1978 and 1979 Releases cite the House Report at 54-
57.
---------------------------------------------------------------------------

    One such exception is Rule 11a2-2(T) under the Act, known as the
``Effect Versus Execute Rule.'' Rule 11a2-2(T) permits an exchange
member, subject to certain conditions, to effect a transaction for such
accounts, utilizing an unaffiliated member to execute transactions on
an exchange floor. The Rule requires that: (1) The order must be
transmitted from off the exchange floor; (2) once the order has been
transmitted, the exchange member that transmitted the order may not
participate in the execution; (3) the transmitting member may not be
affiliated with the executing member; and (4) neither the member or the
associated person may retain any compensation in connection with
effecting such a transaction respecting accounts over which either has
investment discretion without the express written consent of the person
authorized to transact business in the account.
    The Exchange believes that the instant proposal is consistent with
Rule 11a2-2(T), and that therefore the exception should apply in this
case.
    First, there is no mechanism or system that would enable an
Exchange member to transmit a PIXL Order from on the floor of the
Exchange. All PIXL Orders will be transmitted from off the floor of the
Exchange.
    Second, once the PIXL Order has been transmitted, the Exchange
Initiating Member that transmitted the order will not participate in
the execution of the PIXL Order. Initiating Members submitting PIXL
Orders will relinquish control of their PIXL Orders upon transmission
to the Exchange's automated options trading platform, PHLX XL,\29\ and
will not be able to influence or guide the execution of their PIXL
Orders.
---------------------------------------------------------------------------

    \29\ See Securities Exchange Act Release No. 59995 (May 28,
2009), 74 FR 26750 (June 3, 2009) (SR-Phlx-2009-32). For branding
purposes, references to ``PHLX XL'' are synonymous with references
to ``Phlx XL II'' in other filings.
---------------------------------------------------------------------------

    Third, although Rule 11a2-2T contemplates having an order executed
by an exchange member who is unaffiliated with the member initiating
the order, the Commission has recognized that the requirement is not
applicable when automated exchange facilities are used. Because the
design of these systems (such as PHLX XL) ensures that members do not
possess any special or unique trading advantages in handling orders
after transmitting them to exchange floors, the commission has stated
that executions obtained through these systems satisfy the independent
execution requirement of Rule 11a2-2T.\30\ The Exchange believes that
the design of PHLX XL ensures that members do not possess any special
or unique trading advantages in the handling of their orders.
---------------------------------------------------------------------------

    \30\ See, e.g., Securities Exchange Act Release No. 15533
(January 29, 1979), 44 FR 6084 (January 31, 1979).
---------------------------------------------------------------------------

    Finally, respecting non-retention of compensation for discretionary
accounts, the Exchange represents that members who intend to rely on
Rule 11a2-2(T) in connection with transactions in PIXL Orders must
comply with the requirements of Section (a)(2)(iv) of the rule.

B. Self-Regulatory Organization's Statement on Burden on Competition

    The Exchange does not believe that the proposed rule change will
impose any burden on competition not necessary or appropriate in
furtherance of the purposes of the Act.

C. Self-Regulatory Organization's Statement on Comments on the Proposed
Rule Change Received From Members, Participants, or Others

    No written comments were either solicited or received.

III. Date of Effectiveness of the Proposed Rule Change and Timing for
Commission Action

    Within 45 days of the date of publication of this notice in the
Federal Register or within such longer period (i) as the Commission may
designate if it finds such longer period to be appropriate and
publishes its reasons for so finding or (ii) as to which the self-
regulatory organization consents, the Commission will:
    (A) By order approve or disapprove the proposed rule change, or
    (B) Institute proceedings to determine whether the proposed rule
change should be disapproved.

IV. Solicitation of Comments

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

Electronic Comments

     Use the Commission's Internet comment form (http://www/
sec/gov/rules/wro.shtml); or
     Send an e-mail to<EMAIL_ADDRESS>Please include
File Number SR-Phlx-2010-108 on the subject line.

Paper Comments

     Send paper comments in triplicate to Elizabeth M. Murphy,
Secretary, Securities and Exchange Commission, 100 F Street, NE.,
Washington, DC 20549-1090.

All submissions should refer to File Number SR-Phlx-2010-108. This file
number should be included on the subject line if e-mail is used. To
help the Commission process and review your comments more efficiently,
please use only one method. The Commission will post all comments on
the Commission's Internet Web site (http://www.sec.gov/rules/
sro.shtml). Copies of the submission, all subsequent amendments, all
written statements with respect to the proposed rule change that are
filed with the Commission, and all written communications relating to
the proposed rule change between the Commission and any person, other
than those that may be withheld from the

public in accordance with the provisions of 5 U.S.C. 552, will be
available for Web site viewing and printing in the Commission's Public
Reference Room, 100 F Street, NE., Washington, DC 20549-1090 on
official business days between the hours of 10 a.m. and 3 p.m. Copies
of the filing also will be available for inspection and copying at the
principal office of the Exchange. All comments received will be posted
without change; the Commission does not edit personal identifying
information from submissions. You should submit only information that
you wish to make available publicly. All submissions should refer to
File Number SR-Phlx-2010-108 and should be submitted on or before
September 7, 2010.

    For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\31\
---------------------------------------------------------------------------

    \31\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------

Florence E. Harmon,
Deputy Secretary.
[FR Doc. 2010-20100 Filed 8-13-10; 8:45 am]
BILLING CODE 8011-01-P


[Federal Register Volume 78, Number 244 (Thursday, December 19, 2013)]
[Notices]
[Pages 76827-76828]
[FR Doc No: 2013-30184]

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

DEPARTMENT OF ENERGY

Federal Energy Regulatory Commission

[Docket No. CP14-26-000]

Midwestern Gas Transmission Company; Prior Notice of Activity
Under Blanket Certificate

    On December 4, 2013, Midwestern Gas Transmission Company
(Midwestern) filed with the Federal Energy Regulatory Commission
(Commission) an application under section 7 of the Natural Gas Act and
Sections 157.205 and 157.208 the Commission's regulations and
Midwestern's blanket authorization in CP82-414, 20 FERC 62,411 (1982).
Midwestern requests authorization to construct 1.1 miles of 30-inch
natural gas pipeline, abandon in place 1.0 mile of 30-inch pipeline and
remove 300 feet of 30-inch pipeline located in Will County, Illinois.
The facility changes are needed to accommodate the widening of a new
highway interchange.
    Questions regarding this application may be directed to Denise
Adams, Manager Rates and Regulatory Analysis, Midwestern Gas
Transmission Company, 100 West 5th Street, ONEOK Plaza, Tulsa,
Oklahoma, by calling<PHONE_NUMBER>, via fax at<PHONE_NUMBER> or Email:
<EMAIL_ADDRESS>    Pursuant to Section 157.9 of the Commission's rules, 18 CFR 157.9,
within 90 days of this Notice the Commission staff will either:
complete its environmental assessment (EA) and place it into the
Commission's public record (eLibrary) for this proceeding; or issue a
Notice of Schedule for Environmental Review (NSER). If a Notice of
Schedule for Environmental Review is issued, it will indicate, among
other milestones, the anticipated date for the Commission staff's
issuance of the final environmental impact statement (FEIS) or EA for
this proposal. The filing of the EA in the Commission's public record
for this proceeding or the issuance of a NSER will serve to notify
federal and state agencies of the timing for the completion of all
necessary reviews, and the subsequent need to complete all federal
authorizations within 90 days of

the date of issuance of the Commission staff's FEIS or EA.
    Any person or the Commission's staff may, within 60 days after
issuance of the instant notice by the Commission, file pursuant to Rule
214 of the Commission's Procedural Rules (18 CFR 385.214) a motion to
intervene or notice of intervention and pursuant to Section 157.205 of
the regulations under the NGA (18 CFR 157.205), a protest to the
request. If no protest is filed within the time allowed therefore, the
proposed activity shall be deemed to be authorized effective the day
after the time allowed for filing a protest. If a protest is filed and
not withdrawn within 30 days after the allowed time for filing a
protest, the instant request shall be treated as an application for
authorization pursuant to Section 7 of the NGA.
    Protests will be considered by the Commission in determining the
appropriate action to be taken, but will not serve to make protestants
parties to the proceeding. Any person wishing to become a party must
file a notice of intervention or motion to intervene, as appropriate.
Such motions or protests must be filed on or before the comment date.
Anyone filing a motion to intervene or protest must serve a copy of
that document on the Applicant, on or before the comment date. It is
not necessary to serve motions to intervene or protests on persons
other than the Applicant.
    The Commission encourages electronic submission of comments,
protests and interventions in lieu of paper using the ``eFiling'' link
at http://www.ferc.gov. Persons unable to file electronically should
submit an original and seven copies of the protest or intervention to
the Federal Energy Regulatory Commission, 888 First Street NE.,
Washington, DC 20426.
    This filing is accessible on-line at http://www.ferc.gov. using the
``eLibrary'' link and is available for review in the Commission's
Public Reference Room in Washington, DC. There is an ``eSubscription''
link on the Web site that enables subscribers to receive email
notification when a document is added to a subscribed docket(s). For
assistance with any FERC Online service, please email
<EMAIL_ADDRESS>or call<PHONE_NUMBER> (toll free). For
TTY, call<PHONE_NUMBER>.

    Dated: December 12, 2013.
Kimberly D. Bose,
Secretary.
[FR Doc. 2013-30184 Filed 12-18-13; 8:45 am]
BILLING CODE 6717-01-P


[Federal Register Volume 84, Number 131 (Tuesday, July 9, 2019)]
[Rules and Regulations]
[Pages 32626-32628]
[FR Doc No: 2019-14521]

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ENVIRONMENTAL PROTECTION AGENCY

40 CFR Part 180

[EPA-HQ-OPP-2018-0736; FRL-9995-51]

2-Propenoic Acid, Methyl Ester, Polymer With Ethene and 2,5-
Furandione; Tolerance Exemption

AGENCY: Environmental Protection Agency (EPA).

ACTION: Final rule.

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SUMMARY: This regulation establishes an exemption from the requirement
of a tolerance for residues of 2-propenoic acid, methyl ester, polymer
with ethene and 2,5-furandione when used as an inert ingredient in a
pesticide chemical formulation. Lewis & Harrison, on behalf of Arkema
Inc., submitted a petition to EPA under the Federal Food, Drug, and
Cosmetic Act (FFDCA), requesting an exemption from the requirement of a
tolerance. This regulation eliminates the need to establish a maximum
permissible level for residues of 2-propenoic acid, methyl ester,
polymer with ethene and 2,5-furandione on food or feed commodities.

DATES: This regulation is effective July 9, 2019. Objections and
requests for hearings must be received on or before September 9, 2019,
and must be filed in accordance with the instructions provided in 40
CFR part 178 (see also Unit I.C. of the SUPPLEMENTARY INFORMATION).

ADDRESSES: The docket for this action, identified by docket
identification (ID) number EPA-HQ-OPP-2018-0736, is available at http://www.regulations.gov or at the Office of Pesticide Programs Regulatory
Public Docket (OPP Docket) in the Environmental Protection Agency
Docket Center (EPA/DC), West William Jefferson Clinton Bldg., Rm. 3334,
1301 Constitution Ave. NW, Washington, DC 20460-0001. The Public
Reading Room is open from 8:30 a.m. to 4:30 p.m., Monday through
Friday, excluding legal holidays. The telephone number for the Public
Reading Room is<PHONE_NUMBER>, and the telephone number for the OPP
Docket is<PHONE_NUMBER>. Please review the visitor instructions and
additional information about the docket available at http://www.epa.gov/dockets.

FOR FURTHER INFORMATION CONTACT: Michael Goodis, Registration Division
(7505P), Office of Pesticide Programs, Environmental Protection Agency,
1200 Pennsylvania Ave. NW, Washington, DC 20460-0001; main telephone
number:<PHONE_NUMBER>; email address<EMAIL_ADDRESS>
SUPPLEMENTARY INFORMATION:

I. General Information

A. Does this action apply to me?

    You may be potentially affected by this action if you are an
agricultural producer, food manufacturer, or pesticide manufacturer.
The following list of North American Industrial Classification System
(NAICS) codes is not intended to be exhaustive, but rather provides a
guide to help readers determine whether this document applies to them.
Potentially affected entities may include:
     Crop production (NAICS code 111).
     Animal production (NAICS code 112).
     Food manufacturing (NAICS code 311).
     Pesticide manufacturing (NAICS code 32532).

B. How can I get electronic access to other related information?

    You may access a frequently updated electronic version of 40 CFR
part 180 through the Government Publishing Office's e-CFR site at
http://www.ecfr.gov/cgi-bin/text-idx?&c=ecfr&tpl=/ecfrbrowse/Title40/40tab_02.tpl.

C. Can I file an objection or hearing request?

    Under FFDCA section 408(g), 21 U.S.C. 346a, any person may file an
objection to any aspect of this regulation and may also request a
hearing on those objections. You must file your objection or request a
hearing on this regulation in accordance with the instructions provided
in 40 CFR part 178. To ensure proper receipt by EPA, you must identify
docket ID number EPA-HQ-OPP-2018-0736 in the subject line on the first
page of your submission. All objections and requests for a hearing must
be in writing and must be received by the Hearing Clerk on or before
September 9, 2019. Addresses for mail and hand delivery of objections
and hearing requests are provided in 40 CFR 178.25(b).
    In addition to filing an objection or hearing request with the
Hearing Clerk as described in 40 CFR part 178, please submit a copy of
the filing (excluding any Confidential Business Information (CBI)) for
inclusion in the public docket. Information not marked confidential
pursuant to 40 CFR part 2 may be disclosed publicly by EPA without
prior notice. Submit the non-CBI copy of your objection or hearing
request, identified by docket ID number EPA-HQ-OPP-2018-0736, by one of
the following methods.
     Federal eRulemaking Portal: http://www.regulations.gov.
Follow the online instructions for submitting comments. Do not submit
electronically any information you consider to be CBI or other
information whose disclosure is restricted by statute.
     Mail: OPP Docket, Environmental Protection Agency Docket
Center (EPA/DC), (28221T), 1200 Pennsylvania Ave. NW, Washington, DC
20460-0001.
     Hand Delivery: To make special arrangements for hand
delivery or delivery of boxed information, please follow the
instructions at http://www.epa.gov/dockets/contacts.html.
    Additional instructions on commenting or visiting the docket, along
with more information about dockets generally, is available at http://www.epa.gov/dockets.

II. Background and Statutory Findings

    In the Federal Register of May 13, 2019 (84 FR 20843) (FRL-9991-
99), EPA issued a document pursuant to FFDCA section 408, 21 U.S.C.
346a, announcing the receipt of a pesticide petition (PP IN-11242)
filed by Arkema Inc. c/o Lewis & Harrison, 2461 South Clark Street,
Arlington, VA 22202. The petition requested that 40 CFR 180.960 be
amended by establishing an exemption from the requirement of a
tolerance for residues of 2-propenoic acid, methyl ester, polymer with
ethene and 2,5-furandione (CAS Reg. No. 88450-35-5). That document
included a summary of the petition prepared by the petitioner and
solicited comments on the petitioner's request. The Agency received one
comment in response to the Notice of Filing associated with this
action; however, the comment was unrelated to 2-propenoic acid, methyl
ester, polymer with ethene and 2,5-furandione and is not relevant to
this action.
    Section 408(c)(2)(A)(i) of FFDCA allows EPA to establish an
exemption from the requirement for a tolerance (the legal limit for a
pesticide chemical residue in or on a food) only if EPA determines that
the exemption is ``safe.'' Section 408(c)(2)(A)(ii) of FFDCA defines
``safe'' to mean that ``there is a reasonable certainty that no harm
will result from aggregate exposure to the pesticide chemical residue,
including all anticipated dietary exposures and all other exposures for
which there is reliable information.'' This includes exposure through
drinking water and use in residential settings, but does not include
occupational exposure. Section

408(b)(2)(C) of FFDCA requires EPA to give special consideration to
exposure of infants and children to the pesticide chemical residue in
establishing an exemption from the requirement of a tolerance and to
``ensure that there is a reasonable certainty that no harm will result
to infants and children from aggregate exposure to the pesticide
chemical residue . . .'' and specifies factors EPA is to consider in
establishing an exemption.

III. Risk Assessment and Statutory Findings

    EPA establishes exemptions from the requirement of a tolerance only
in those cases where it can be shown that the risks from aggregate
exposure to pesticide chemical residues under reasonably foreseeable
circumstances will pose no appreciable risks to human health. In order
to determine the risks from aggregate exposure to pesticide inert
ingredients, the Agency considers the toxicity of the inert in
conjunction with possible exposure to residues of the inert ingredient
through food, drinking water, and through other exposures that occur as
a result of pesticide use in residential settings. If EPA is able to
determine that a finite tolerance is not necessary to ensure that there
is a reasonable certainty that no harm will result from aggregate
exposure to the inert ingredient, an exemption from the requirement of
a tolerance may be established.
    Consistent with FFDCA section 408(b)(2)(D), EPA has reviewed the
available scientific data and other relevant information in support of
this action and considered its validity, completeness and reliability
and the relationship of this information to human risk. EPA has also
considered available information concerning the variability of the
sensitivities of major identifiable subgroups of consumers, including
infants and children. In the case of certain chemical substances that
are defined as polymers, the Agency has established a set of criteria
to identify categories of polymers expected to present minimal or no
risk. The definition of a polymer is given in 40 CFR 723.250(b) and the
exclusion criteria for identifying these low-risk polymers are
described in 40 CFR 723.250(d). 2-Propenoic acid, methyl ester, polymer
with ethene and 2,5-furandione conforms to the definition of a polymer
given in 40 CFR 723.250(b) and meets the following criteria that are
used to identify low-risk polymers.
    1. The polymer is not a cationic polymer nor is it reasonably
anticipated to become a cationic polymer in a natural aquatic
environment.
    2. The polymer does contain as an integral part of its composition
at least two of the atomic elements carbon, hydrogen, nitrogen, oxygen,
silicon, and sulfur.
    3. The polymer does not contain as an integral part of its
composition, except as impurities, any element other than those listed
in 40 CFR 723.250(d)(2)(ii).
    4. The polymer is neither designed nor can it be reasonably
anticipated to substantially degrade, decompose, or depolymerize.
    5. The polymer is manufactured or imported from monomers and/or
reactants that are already included on the TSCA Chemical Substance
Inventory or manufactured under an applicable TSCA section 5 exemption.
    6. The polymer is not a water absorbing polymer with a number
average molecular weight (MW) greater than or equal to 10,000 daltons.
    7. The polymer does not contain certain perfluoroalkyl moieties
consisting of a CF3- or longer chain length as listed in 40
CFR 723.250(d)(6).
    Additionally, the polymer also meets as required the following
exemption criteria specified in 40 CFR 723.250(e).
    8. The polymer's number average MW of 10,500 is greater than or
equal to 10,000 daltons. The polymer contains less than 2% oligomeric
material below MW 500 and less than 5% oligomeric material below MW
1,000.
    Thus, 2-propenoic acid, methyl ester, polymer with ethene and 2,5-
furandione meets the criteria for a polymer to be considered low risk
under 40 CFR 723.250. Based on its conformance to the criteria in this
unit, no mammalian toxicity is anticipated from dietary, inhalation, or
dermal exposure to 2-propenoic acid, methyl ester, polymer with ethene
and 2,5-furandione.

IV. Aggregate Exposures

    For the purposes of assessing potential exposure under this
exemption, EPA considered that 2-propenoic acid, methyl ester, polymer
with ethene and 2,5-furandione could be present in all raw and
processed agricultural commodities and drinking water, and that non-
occupational non-dietary exposure was possible. The number average MW
of 2-propenoic acid, methyl ester, polymer with ethene and 2,5-
furandione is 10,500 daltons. Generally, a polymer of this size would
be poorly absorbed through the intact gastrointestinal tract or through
intact human skin. Since 2-propenoic acid, methyl ester, polymer with
ethene and 2,5-furandione conform to the criteria that identify a low-
risk polymer, there are no concerns for risks associated with any
potential exposure scenarios that are reasonably foreseeable. The
Agency has determined that a tolerance is not necessary to protect the
public health.

V. Cumulative Effects From Substances With a Common Mechanism of
Toxicity

    Section 408(b)(2)(D)(v) of FFDCA requires that, when considering
whether to establish, modify, or revoke a tolerance, the Agency
consider ``available information'' concerning the cumulative effects of
a particular pesticide's residues and ``other substances that have a
common mechanism of toxicity.''
    EPA has not found 2-propenoic acid, methyl ester, polymer with
ethene and 2,5-furandione to share a common mechanism of toxicity with
any other substances, and 2-propenoic acid, methyl ester, polymer with
ethene and 2,5-furandione does not appear to produce a toxic metabolite
produced by other substances. For the purposes of this tolerance
action, therefore, EPA has assumed that 2-propenoic acid, methyl ester,
polymer with ethene and 2,5-furandione does not have a common mechanism
of toxicity with other substances. For information regarding EPA's
efforts to determine which chemicals have a common mechanism of
toxicity and to evaluate the cumulative effects of such chemicals, see
EPA's website at http://www.epa.gov/pesticides/cumulative.

VI. Additional Safety Factor for the Protection of Infants and Children

    Section 408(b)(2)(C) of FFDCA provides that EPA shall apply an
additional tenfold margin of safety for infants and children in the
case of threshold effects to account for prenatal and postnatal
toxicity and the completeness of the data base unless EPA concludes
that a different margin of safety will be safe for infants and
children. Due to the expected low toxicity of 2-propenoic acid, methyl
ester, polymer with ethene and 2,5-furandione, EPA has not used a
safety factor analysis to assess the risk. For the same reasons the
additional tenfold safety factor is unnecessary.

VII. Determination of Safety

    Based on the conformance to the criteria used to identify a low-
risk polymer, EPA concludes that there is a reasonable certainty of no
harm to the U.S. population, including infants and children, from
aggregate exposure to residues of 2-propenoic acid, methyl ester,
polymer with ethene and 2,5-furandione.

VIII. Other Considerations

Analytical Enforcement Methodology

    An analytical method is not required for enforcement purposes since
the Agency is establishing an exemption from the requirement of a
tolerance without any numerical limitation.

IX. Conclusion

    Accordingly, EPA finds that exempting residues of 2-propenoic acid,
methyl ester, polymer with ethene and 2,5-furandione from the
requirement of a tolerance will be safe.

X. Statutory and Executive Order Reviews

    This action establishes a tolerance under FFDCA section 408(d) in
response to a petition submitted to the Agency. The Office of
Management and Budget (OMB) has exempted these types of actions from
review under Executive Order 12866, entitled ``Regulatory Planning and
Review'' (58 FR 51735, October 4, 1993). Because this action has been
exempted from review under Executive Order 12866, this action is not
subject to Executive Order 13211, entitled ``Actions Concerning
Regulations That Significantly Affect Energy Supply, Distribution, or
Use'' (66 FR 28355, May 22, 2001) or Executive Order 13045, entitled
``Protection of Children from Environmental Health Risks and Safety
Risks'' (62 FR 19885, April 23, 1997). This action does not contain any
information collections subject to OMB approval under the Paperwork
Reduction Act (PRA) (44 U.S.C. 3501 et seq.), nor does it require any
special considerations under Executive Order 12898, entitled ``Federal
Actions to Address Environmental Justice in Minority Populations and
Low-Income Populations'' (59 FR 7629, February 16, 1994).
    Since tolerances and exemptions that are established on the basis
of a petition under FFDCA section 408(d), such as the tolerance in this
final rule, do not require the issuance of a proposed rule, the
requirements of the Regulatory Flexibility Act (RFA) (5 U.S.C. 601 et
seq.), do not apply.
    This action directly regulates growers, food processors, food
handlers, and food retailers, not States or tribes, nor does this
action alter the relationships or distribution of power and
responsibilities established by Congress in the preemption provisions
of FFDCA section 408(n)(4). As such, the Agency has determined that
this action will not have a substantial direct effect on States or
tribal governments, on the relationship between the national government
and the States or tribal governments, or on the distribution of power
and responsibilities among the various levels of government or between
the Federal Government and Indian tribes. Thus, the Agency has
determined that Executive Order 13132, entitled ``Federalism'' (64 FR
43255, August 10, 1999) and Executive Order 13175, entitled
``Consultation and Coordination with Indian Tribal Governments'' (65 FR
67249, November 9, 2000) do not apply to this action. In addition, this
action does not impose any enforceable duty or contain any unfunded
mandate as described under Title II of the Unfunded Mandates Reform Act
(UMRA) (2 U.S.C. 1501 et seq.).
    This action does not involve any technical standards that would
require Agency consideration of voluntary consensus standards pursuant
to section 12(d) of the National Technology Transfer and Advancement
Act (NTTAA) (15 U.S.C. 272 note).

XI. Congressional Review Act

    Pursuant to the Congressional Review Act (5 U.S.C. 801 et seq.),
EPA will submit a report containing this rule and other required
information to the U.S. Senate, the U.S. House of Representatives, and
the Comptroller General of the United States prior to publication of
the rule in the Federal Register. This action is not a ``major rule''
as defined by 5 U.S.C. 804(2).

List of Subjects in 40 CFR Part 180

    Environmental protection, Administrative practice and procedure,
Agricultural commodities, Pesticides and pests, Reporting and
recordkeeping requirements.

    Dated: June 27, 2019.
Donna Davis,
Acting Director, Registration Division, Office of Pesticide Programs.

    Therefore, 40 CFR chapter I is amended as follows:

PART 180--[AMENDED]

0
1. The authority citation for part 180 continues to read as follows:

    Authority: 21 U.S.C. 321(q), 346a and 371.

0
2. In Sec.  180.960, add alphabetically the polymer ``2-Propenoic acid,
methyl ester, polymer with ethene and 2,5-furandione, minimum number
average molecular weight (in amu), 10,500'' to the table to read as
follows:

Sec.  180.960   Polymers; exemptions from the requirement of a
tolerance.

* * * * *

------------------------------------------------------------------------
                         Polymer                              CAS No.
------------------------------------------------------------------------

                                * * * * *
2-Propenoic acid, methyl ester, polymer with ethene and       88450-35-5
 2,5-furandione, minimum number average molecular weight
 (in amu), 10,500.......................................

                                * * * * *
------------------------------------------------------------------------

[FR Doc. 2019-14521 Filed 7-8-19; 8:45 am]
BILLING CODE 6560-50-P


[Federal Register: June 25, 2008 (Volume 73, Number 123)]
[Notices]
[Page 36094-36095]
[DOCID:fr25jn08-95]

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DEPARTMENT OF HOMELAND SECURITY

Coast Guard

[Docket No. USCG-2008-0035]

Proposed Expansion of the Cove Point Facility, Cove Point, MD:
Final Supplemental Environmental Assessment and Finding of No
Significant Impact

AGENCY: Coast Guard, DHS.

ACTION: Notice of Availability of Final Supplemental Environmental
Assessment and Finding of No Significant Impact.

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SUMMARY: The Coast Guard announces the availability of the Final
Supplemental Environmental Assessment (EA) and the Finding of No
Significant Impact (FONSI) that evaluated the potential environmental
impacts resulting from the proposed issuance of a Letter of
Recommendation (LOR) on the suitability of the waterway for the
expansion of the Cove Point LNG facility for Dominion Cove Point LNG,
LP, in Cove Point, MD.

ADDRESSES: Comments and material received from the public as well as
documents mentioned in this notice as being available in the docket,
are part of the Coast Guard docket number USCG-2008-0035 and are
available for inspection or copying at the Docket Management Facility,
U.S. Department of Transportation, room PL-401, 400 Seventh Street,
SW., between 9 a.m. and 5 p.m., Monday through Friday, except for
Federal Holidays. You may also find this docket on the internet at
http://www.regulations.gov.

FOR FURTHER INFORMATION CONTACT: If you have questions on this notice,
call Lieutenant Commander Rogers Henderson, Coast Guard, telephone 202-
372-1411 or Mr. Ken Smith, Coast Guard, telephone<PHONE_NUMBER>. If you
have any questions on viewing material on the docket, call Renee V.
Wright, Program Manager, Docket Operations, telephone<PHONE_NUMBER>.

SUPPLEMENTARY INFORMATION: In accordance with the National
Environmental Policy Act of 1969 (Section 102(2)(c)), as implemented by
the Council of Environmental Quality regulations (40 CFR parts 1500-
1508), the applicant prepared a Final Supplemental EA and the Coast
Guard prepared the FONSI for the Proposed Expansion of the Cove Point
Facility, Cove Point, MD.

Response to Comments

    The Coast Guard requested comments on the Draft Supplemental EA
when the Notice of Availability for the Draft Supplemental EA was
published on March 13, 2008 (73 FR 13551). The Coast Guard received
nine comments on the draft Supplemental EA.
    Two commenters agreed with the Coast Guard that the proposed action
will not have a significant impact on the State of Maryland's
environment or historic properties.
    One commenter stated the current security measures for the facility
and during tanker loading/unloading operations are insufficient. The
Coast Guard disagrees because the facility is regulated under the
Maritime Transportation Security Act (MTSA) of 2002 and as a result
must comply with a Coast Guard approved Facility Security Plan. Foreign
vessels which make LNG deliveries to the terminal must have a valid
International Ship Security Certificate on board attesting to the
vessel's compliance with the International Convention for Safety of
Life at Sea and the Ship and Port Facility Security (ISPS) Code. The
ISPS Code is the foreign equivalent to MTSA requirements. In addition,
Cove Point has been receiving LNG shipments and operating in compliance
with the safety and security provisions and operating restrictions of
the Letter of Recommendation (LOR) issued by the Coast Guard to Cove
Point in 2002.
    One commenter discussed the applicability of the Sandia 2005 risk
assessment to the proposed Expansion Project. The Coast Guard disagrees
that this is applicable since the Sandia 2005 assessment referenced by
the commenter is apparently the Sandia Report SAND2005-7339: ``Review
of the Independent Risk Assessment of the Proposed Cabrillo Liquefied
Natural Gas Deepwater Port project.'' This report is not applicable to
this proposed project because it addresses a deepwater project with a a
Floating Storage and Regasification Unit (FSRU), and not the waterway
for an LNG terminal. Instead, the applicable Sandia report for Cove
Point is the 2004 Sandia Report, SAND2004-6258: ``Guidance on Risk
Analysis and Safety Implications of a Large Liquefied Natural Gas Spill
on Water.'' This report identifies three ``Zones of Concerns''. The
Sandia 2004 report shows the conservative maximum hazard distance is
defined as Zone 3, which would occur in the unlikely event of a LNG
vapor cloud release but would only create a hazard within a distance of
about 2.2 miles from the point of the release.
    One commenter suggested a major LNG spill would affect the cooling
towers of the Calvert Cliffs Nuclear Power Plant. The Coast Guard
disagrees with this comment since the plant is well outside the
furthest potential impact zone, Zone 3, i.e. the distance of 2.2 miles,
per the applicable Sandia report.
    One commenter stated that the air pollutants from LNG tankers,
marine escorts, and traffic specifically related to LNG were not
addressed since the Maryland Department of the Environment covers only
stationary equipment. The Coast Guard disagrees with this comment.
These air pollutants were addressed in the April 2006 FERC FEIS,
Appendix H, ``General Conformity Determination for the Proposed Cove
Point Expansion Project'' which the Supplemental EA adopted. The
General Conformity Rule, found in 40 CFR Part 51, Subpart W and 40 CFR
Part 93, Subpart B, applies to proposed actions in a nonattainment or
maintenance area that are not otherwise regulated under the New Source
Review (NSR) programs or Operating Permit Program. Consequently, the
General Conformity Rule applies to direct emissions, such as
construction and vessel activity emissions, which are not long-term
stationary source operations. As part of the General Conformity
Determination, LNG ships and tugs emissions were estimated based on
roundtrip operation in state waters.
    One commenter declared that uncontrolled toxic air pollutants from
the proposed project are expected to form toxic particulates matter
hazardous to human health. The Coast Guard disagrees with this comment.
As the Supplemental EA and FONSI discuss, we found that there will be
no significant adverse impact from the toxic air pollutants and
disagreed that these pollutants are uncontrolled. These pollutants are
subject to the U.S. EPA Clean Air Act's National Emission Standards for
Hazardous Air Pollutants (HAP). Under the HAP permitting process, it
was established the proposed project's total potential HAP emission
rate, 11 tons per year (tpy), was well below the threshold for
facilities subject to HAP regulations which is 25 tpy.
    One commenter expressed concern regarding the volume of ballast
water intake from the increase of LNG tankers resulting in an increase
of salinity of the Chesapeake Bay. The Coast Guard

disagrees with this comment. The volume of water removed by each LNG
ship as a percentage of the total amount of the Bay is negligible and
would not increase salinity in the Chesapeake Bay.
    One commenter stated the impact of seawater intake for ballast from
the increase in LNG tankers did not address the impact to aquatic
organisms. The Coast Guard disagrees with this comment. The potential
impacts to the aquatic organisms were addressed in Section 7 of the
Supplemental EA. The calculated seawater intake on the LNG vessels is
0.6 feet per second. This velocity is similar to the 0.5 feet per
second identified by the National Marine Fisheries Service as
minimizing entrainment and impingement of aquatic organisms.

Supplemental Environmental Assessment

    We prepared a Supplemental EA to identify and examine the
reasonable alternatives and assess their potential environmental
impacts. The Supplemental EA examined the potential effects associated
with the incremental increase in LNG ship traffic within U.S.
territorial waters on natural, cultural, and human resources.
    Our preferred alternative is to issue a LOR with conditions. This
action will assure that the waterway is suitable, safe, and
environmentally sound for the increased LNG vessel traffic resulting
from the Cove Point Expansion Project. This preferred alternative as
well as other alternatives are further described in the supplemental
EA.
    The Coast Guard determined the Supplemental EA adequately discusses
the environmental issues and impacts of the proposed action. It
provides sufficient evidence and analysis for determining that an
environmental impact statement is not required. Therefore, a Finding of
No Significant Impact was issued for the preferred alternative of the
proposed action.

    Dated: June 17, 2008.
Capt. M.L. Blair,
Acting Director of Commercial Regulations and Standards.
[FR Doc. E8-14288 Filed 6-24-08; 8:45 am]

BILLING CODE 4910-15-P