OMB Control No. 2060-0347

Date

	Plant name as it will appear on Certificate

	Company name as it will appear on Certificate

Corporate energy manager contact information

Name

	Title

	Organization

	Address 1

Address 2

	City

	State

	Zip code

	Email

	Phone

Organization/Plant Owner’s Chief Executive Officer information:

Name

	Title

	Organization

	Address 1

Address 2

	City

	State

	Zip code

	Email

	Phone

Professional Engineer information

Name

	Title

	Organization

	Address 1

Address 2

	City

	State

	Zip code

	Email

	Phone

	License number

Plant Owner information:

Company or Parent Company Name

	Address 1

Address 2

	City

	State

	Zip code

	Web address:

	Phone

NOTE:  Unless specified otherwise, all recognition materials (the bronze plaque, the banner/flag graphic, and the letter of congratulations) will be addressed to and sent to the Corporate Energy Manager at the location specified above.  The letter of congratulations for the CEO will be sent directly to the address provided for the CEO.

Please specify any other information/requests for distribution of recognition materials in the space below.

The public reporting burden for this collection of information is estimated to range up to 15 minutes per response.  Send comments on the Agency's need for this information, the accuracy of the provided burden estimates, and any suggested methods for minimizing respondent burden, including through the use of automated collection techniques to the Director, Collection Strategies Division, U.S. Environmental Protection Agency (2822T), 1200 Pennsylvania Ave., NW, Washington, D.C. 20460.  Include the OMB control number in any correspondence.  Do not send the completed form to this address.

EPA Form 5900-265

Plant Award Specification Sheet


[Federal Register Volume 79, Number 74 (Thursday, April 17, 2014)]
[Notices]
[Pages 21768-21776]
[FR Doc No: 2014-08706]

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DEPARTMENT OF HEALTH AND HUMAN SERVICES

Food and Drug Administration

[Docket No. FDA-2014-N-0306]

Authorization of Emergency Use of an In Vitro Diagnostic Device
for Detection of Novel Influenza A (H7N9) Virus; Availability

AGENCY: Food and Drug Administration, HHS.

ACTION: Notice.

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

SUMMARY: The Food and Drug Administration (FDA) is announcing the
issuance of an Emergency Use Authorization (EUA) (the Authorization)
for an in vitro diagnostic device for detection of the novel influenza
A (H7N9) virus (detected in China in 2013). FDA is issuing this
Authorization under the Federal Food, Drug, and Cosmetic Act (the FD&C
Act), as requested by Quidel Corporation. The Authorization contains,
among other things, conditions on the emergency use of the authorized
in vitro diagnostic device. The Authorization follows the April 19,
2013, determination by the Secretary of Health and Human Services (HHS)
that there is a significant potential for a public health emergency
that has a significant potential to affect national security or the
health and security of U.S. citizens living abroad and that involves
the novel influenza A (H7N9) virus. On the basis of such determination,
the Secretary of HHS also declared on April 19, 2013, that
circumstances exist justifying the authorization of emergency use of in

vitro diagnostics for detection of the novel influenza A (H7N9) virus
subject to the terms of any authorization issued under the FD&C Act.
The Authorization, which includes an explanation of the reasons for
issuance, is reprinted in this document.

DATES: The Authorization is effective as of February 14, 2014.

ADDRESSES: Submit written requests for single copies of the EUA to the
Office of Counterterrorism and Emerging Threats, Food and Drug
Administration, 10903 New Hampshire Ave., Bldg. 32, Rm. 4121, Silver
Spring, MD 20993-0002. Send one self-addressed adhesive label to assist
that office in processing your request or include a fax number to which
the Authorization may be sent. See the SUPPLEMENTARY INFORMATION
section for electronic access to the Authorization.

FOR FURTHER INFORMATION CONTACT: Luciana Borio, Assistant Commissioner
for Counterterrorism Policy, Office of Counterterrorism and Emerging
Threats, and Acting Deputy Chief Scientist, Food and Drug
Administration, 10903 New Hampshire Ave., Bldg. 32, Rm. 4118, Silver
Spring, MD 20993-0002,<PHONE_NUMBER> (this is not a toll free number).

SUPPLEMENTARY INFORMATION:

I. Background

    Section 564 of the FD&C Act (21 U.S.C. 360bbb-3) as amended by the
Project BioShield Act of 2004 (Pub. L. 108-276) and the Pandemic and
All-Hazards Preparedness Reauthorization Act of 2013 (Pub. L. 113-5)
allows FDA to strengthen the public health protections against
biological, chemical, nuclear, and radiological agents. Among other
things, section 564 of the FD&C Act allows FDA to authorize the use of
an unapproved medical product or an unapproved use of an approved
medical product in certain situations. With this EUA authority, FDA can
help assure that medical countermeasures may be used in emergencies to
diagnose, treat, or prevent serious or life-threatening diseases or
conditions caused by biological, chemical, nuclear, or radiological
agents when there are no adequate, approved, and available
alternatives.
    Section 564(b)(1) of the FD&C Act provides that, before an EUA may
be issued, the Secretary of HHS must declare that circumstances exist
justifying the authorization based on one of the following grounds: (1)
A determination by the Secretary of Homeland Security that there is a
domestic emergency, or a significant potential for a domestic
emergency, involving a heightened risk of attack with a biological,
chemical, radiological, or nuclear agent or agents; (2) a determination
by the Secretary of Defense that there is a military emergency, or a
significant potential for a military emergency, involving a heightened
risk to U.S. military forces of attack with a biological, chemical,
radiological, or nuclear agent or agents; (3) a determination by the
Secretary of HHS that there is a public health emergency, or a
significant potential for a public health emergency, that affects, or
has a significant potential to affect, national security or the health
and security of U.S. citizens living abroad, and that involves a
biological, chemical, radiological, or nuclear agent or agents, or a
disease or condition that may be attributable to such agent or agents;
\1\ or (4) the identification of a material threat by the Secretary of
Homeland Security pursuant to section 319F-2 of the Public Health
Service (PHS) Act (42 U.S.C. 247d-6b) sufficient to affect national
security or the health and security of U.S. citizens living abroad.
---------------------------------------------------------------------------

    \1\ As amended by the Pandemic and All-Hazards Preparedness
Reauthorization Act of 2013 (Pub. L. 113-5), the Secretary of HHS
may make a determination of a public health emergency, or a
significant potential for a public health emergency, under section
564 of the FD&C Act. The Secretary is no longer required to make a
determination of a public health emergency under section 319 of the
PHS Act (42 U.S.C. 247d) to support a determination made under
section 564 of the FD&C Act.
---------------------------------------------------------------------------

    Once the Secretary of HHS has declared that circumstances exist
justifying an authorization under section 564 of the FD&C Act, FDA may
authorize the emergency use of a drug, device, or biological product if
the Agency concludes that the statutory criteria are satisfied. Under
section 564(h)(1) of the FD&C Act, FDA is required to publish in the
Federal Register a notice of each authorization, and each termination
or revocation of an authorization, and an explanation of the reasons
for the action. Section 564 of the FD&C Act permits FDA to authorize
the introduction into interstate commerce of a drug, device, or
biological product intended for use when the Secretary of HHS has
declared that circumstances exist justifying the authorization of
emergency use. Products appropriate for emergency use may include
products and uses that are not approved, cleared, or licensed under
sections 505, 510(k), or 515 of the FD&C Act (21 U.S.C. 355, 360(k),
and 360e) or section 351 of the PHS Act (42 U.S.C. 262). FDA may issue
an EUA only if, after consultation with the HHS Assistant Secretary for
Preparedness and Response, the Director of the National Institutes of
Health, and the Director of the Centers for Disease Control and
Prevention (to the extent feasible and appropriate given the applicable
circumstances), FDA \2\ concludes: (1) That an agent referred to in a
declaration of emergency or threat can cause a serious or life-
threatening disease or condition; (2) that, based on the totality of
scientific evidence available to FDA, including data from adequate and
well-controlled clinical trials, if available, it is reasonable to
believe that: (A) The product may be effective in diagnosing, treating,
or preventing (i) such disease or condition; or (ii) a serious or life-
threatening disease or condition caused by a product authorized under
section 564, approved or cleared under the FD&C Act, or licensed under
section 351 of the PHS Act, for diagnosing, treating, or preventing
such a disease or condition caused by such an agent; and (B) the known
and potential benefits of the product, when used to diagnose, prevent,
or treat such disease or condition, outweigh the known and potential
risks of the product, taking into consideration the material threat
posed by the agent or agents identified in a declaration under section
564(b)(1)(D) of the FD&C Act, if applicable; (3) that there is no
adequate, approved, and available alternative to the product for
diagnosing, preventing, or treating such disease or condition; and (4)
that such other criteria as may be prescribed by regulation are
satisfied.
---------------------------------------------------------------------------

    \2\ The Secretary of HHS has delegated the authority to issue an
EUA under section 564 of the FD&C Act to the Commissioner of Food
and Drugs.
---------------------------------------------------------------------------

    No other criteria for issuance have been prescribed by regulation
under section 564(c)(4) of the FD&C Act. Because the statute is self-
executing, regulations or guidance are not required for FDA to
implement the EUA authority.

II. EUA Request for an In Vitro Diagnostic Device for Detection of the
Novel Influenza A (H7N9) Virus

    On April 19, 2013, under section 564(b)(1)(C) of the FD&C Act (21
U.S.C. 360bbb-3(b)(1)(C)), the Secretary of HHS determined that there
is a significant potential for a public health emergency that has a
significant potential to affect national security or the health and
security of U.S. citizens living abroad and that involves the novel
influenza A (H7N9) virus. Also on April 19, 2013, under section
564(b)(1) of the FD&C Act, and on the basis of such determination, the
Secretary of HHS declared that circumstances exist justifying the
authorization of emergency use of in vitro diagnostics for detection of
the novel influenza A

(H7N9) virus, subject to the terms of any authorization issued under
section 564 of the FD&C Act. The Secretary of HHS also specified that
this declaration is a declaration of an emergency with respect to in
vitro diagnostics as defined under the Public Readiness and Emergency
Preparedness (PREP) Act Declaration for Pandemic Influenza Diagnostics,
Personal Respiratory Protection Devices, and Respiratory Support
Devices signed by then Secretary Michael Leavitt on December 17, 2008
(73 FR 78362, December 22, 2008). Notice of the determination and the
declaration of the Secretary were published in the Federal Register on
April 30, 2013 (78 FR 25273). On January 28, 2014, Quidel Corporation
requested, and on February 14, 2014, FDA issued, an EUA for the
LyraTM Influenza A Subtype H7N9 Assay subject to the terms
of this authorization.

III. Electronic Access

    An electronic version of this document and the full text of the
Authorization are available on the Internet at http://www.regulations.gov.

IV. The Authorization

    Having concluded that the criteria for issuance of the
Authorization under section 564(c) of the FD&C Act are met, FDA has
authorized the emergency use of an in vitro diagnostic device for
detection of the novel influenza A (H7N9) virus (detected in China in
2013) subject to the terms of the Authorization. The Authorization in
its entirety (not including the authorized versions of the fact sheets
and other written materials) follows and provides an explanation of the
reasons for its issuance, as required by section 564(h)(1) of the FD&C
Act.
BILLING CODE 4160-01-P

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[GRAPHIC] [TIFF OMITTED] TN17AP14.002

[GRAPHIC] [TIFF OMITTED] TN17AP14.003

[GRAPHIC] [TIFF OMITTED] TN17AP14.004

[GRAPHIC] [TIFF OMITTED] TN17AP14.005

    Dated: April 11, 2014.
Leslie Kux,
Assistant Commissioner for Policy.
[FR Doc. 2014-08706 Filed 4-16-14; 8:45 am]
BILLING CODE 4160-01-C


[Federal Register: December 4, 2008 (Volume 73, Number 234)]
[Notices]
[Page 73930-73931]
[DOCID:fr04de08-32]

=======================================================================
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ENVIRONMENTAL PROTECTION AGENCY

[FRL-8746-5; Docket ID No. EPA-HQ-ORD-2008-0663]

An Exposure Assessment of Polybrominated Diphenyl Ethers

AGENCY: Environmental Protection Agency (EPA).

ACTION: Notice of Public Comment Period.

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SUMMARY: EPA is announcing a 30-day public comment period for the draft
document titled, ``An Exposure Assessment of Polybrominated Diphenyl
Ethers'' (EPA/600/R-08/086A). The document was prepared by the National
Center for Environmental Assessment within EPA's Office of Research and
Development. The document provides a comprehensive assessment of the
exposure of Americans to polybrominated diphenyl ethers, PBDEs, a class
of brominated flame retardants. It includes chapters on use and
production of PBDEs, environmental fate, environmental and exposure
media concentrations, and an exposure assessment including background
exposures and exposures to special populations.
    EPA is releasing this draft document solely for the purpose of pre-
dissemination peer review under applicable information quality
guidelines. This document has not been formally disseminated by EPA. It
does not represent and should not be construed to represent any Agency
policy or determination. EPA will consider any public comments
submitted in accordance with this notice when revising the document.

DATES: The 30-day public comment period begins December 4, 2008, and
ends January 5, 2009. Technical comments should be in writing and must
be received by EPA by January 5, 2009.

ADDRESSES: The draft ``An Exposure Assessment of Polybrominated
Diphenyl Ethers `` is available primarily via the Internet on the
National Center for Environmental Assessment's home page under the
Recent Additions and the Data and Publications menus at http://
www.epa.gov/ncea. A limited number of paper copies are available from
the Information Management Team, NCEA; telephone:<PHONE_NUMBER>;
facsimile:<PHONE_NUMBER>. If you are requesting a paper copy, please
provide your name, your mailing address, and the document title, ``An
Exposure Assessment of Polybrominated Diphenyl Ethers''.
    Comments may be submitted electronically via http://
www.regulations.gov, by mail, by facsimile, or by hand delivery/
courier. Please follow the detailed instructions provided in the
SUPPLEMENTARY INFORMATION section of this notice.

FOR FURTHER INFORMATION CONTACT: For information on the public comment
period, contact the Office of Environmental Information Docket;
telephone:<PHONE_NUMBER>; facsimile:<PHONE_NUMBER>; or e-mail:
<EMAIL_ADDRESS>    For technical information, contact Matthew Lorber, NCEA; telephone:
703-347-8535; facsimile:<PHONE_NUMBER>; or e-mail:
<EMAIL_ADDRESS>
SUPPLEMENTARY INFORMATION:

I. Information About the Project/Document

    The United States Environmental Protection Agency (EPA) has formed
a working group comprised of individuals from several program offices
including the Offices of Pesticides, Prevention, and Toxic Substances;
the Office of Water; the Office of Research and Development; and the
Office of Policy, Economics, and Innovation, to study production, use,
alternatives, environmental fate, exposure, and health effects of
polybrominated diphenyl ethers (PBDEs). This working group issued a
project plan in 2006 that outlined projects in these areas. EPA reports
regularly on progress in completing the activities identified in the
project plan, with the most recent status report issued in March 2008.
The Web site that describes this working group, including the project
plan, is http://www.epa.gov/oppt/pbde. This draft document addresses
the exposure assessment needs identified in that project plan. It
provides a comprehensive assessment of the exposure of Americans to
this class of persistent organic pollutants. Individual chapters in
this document address: The production, use, and lifecycle of PBDEs;
environmental fate; environmental and exposure media levels; and human
exposure.

II. How To Submit Technical Comments to the Docket at http://
www.regulations.gov

    Submit your comments, identified by Docket ID No. EPA-HQ-ORD-2008-
0663, by one of the following methods:
     http://www.regulations.gov: Follow the online instructions
for submitting comments.
     E-mail<EMAIL_ADDRESS>     Fax:<PHONE_NUMBER>.
     Mail: Office of Environmental Information (OEI) Docket
(Mail Code: 2822T), U.S. Environmental Protection Agency, 1200
Pennsylvania Ave., NW., Washington, DC 20460. The phone number is 202-
566-1752.
     Hand Delivery: The OEI Docket is located in the EPA
Headquarters Docket Center, Room 3334 EPA West Building, 1301
Constitution Ave., NW., Washington, DC. The EPA Docket Center 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>. Such deliveries are only accepted during
the docket's normal hours of operation, and special arrangements should
be made for deliveries of boxed information.
    If you provide comments by mail or hand delivery, please submit
three copies of the comments. For attachments, provide an index, number
pages consecutively with the comments, and submit an unbound original
and three copies.
    Instructions: Direct your comments to Docket ID No. EPA-HQ-ORD-
2008-0663. Please ensure that your comments are submitted within the
specified comment period. Comments received after the closing date will
be marked ``late,'' and may only be considered if time permits. It is
EPA's policy to include all comments it receives in the public docket
without change and to

make the comments available online at http://www.regulations.gov,
including any personal information provided, unless a comment includes
information claimed to be Confidential Business Information (CBI) or
other information whose disclosure is restricted by statute. Do not
submit information that you consider to be CBI or otherwise protected
through http://www.regulations.gov or e-mail. The http://
www.regulations.gov Web site is an ``anonymous access'' system, which
means EPA will not know your identity or contact information unless you
provide it in the body of your comment. If you send an e-mail comment
directly to EPA without going through http://www.regulations.gov, your
e-mail address will be automatically captured and included as part of
the comment that is placed in the public docket and made available on
the Internet. If you submit an electronic comment, EPA recommends that
you include your name and other contact information in the body of your
comment and with any disk or CD-ROM you submit. If EPA cannot read your
comment due to technical difficulties and cannot contact you for
clarification, EPA may not be able to consider your comment. Electronic
files should avoid the use of special characters, any form of
encryption, and be free of any defects or viruses. For additional
information about EPA's public docket visit the EPA Docket Center
homepage at http://www.epa.gov/epahome/dockets.htm.
    Docket: Documents in the docket are listed in the http://
www.regulations.gov index. Although listed in the index, some
information is not publicly available, e.g., CBI or other information
whose disclosure is restricted by statute. Certain other materials,
such as copyrighted material, are publicly available only in hard copy.
Publicly available docket materials are available either electronically
in http://www.regulations.gov or in hard copy at the OEI Docket in the
EPA Headquarters Docket Center.

    Dated: November 19, 2008.
Rebecca Clark,
Acting Director, National Center for Environmental Assessment.
[FR Doc. E8-28713 Filed 12-3-08; 8:45 am]

BILLING CODE 6560-50-P


[Federal Register: August 5, 2010 (Volume 75, Number 150)]
[Rules and Regulations]
[Page 47212-47214]
[DOCID:fr05au10-17]

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DEPARTMENT OF HOMELAND SECURITY

Coast Guard

33 CFR Part 100

[Docket No. USCG-2010-0713]
RIN 1625-AA08

Special Local Regulation for Marine Events; Elizabeth River,
Portsmouth, VA

AGENCY: Coast Guard, DHS.

ACTION: Temporary final rule.

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SUMMARY: The Coast Guard is establishing a special local regulation
during the USCG City of Portsmouth Celebration Rowing Regatta on the
Elizabeth River. The event consists of a series of crew rowing races to
be held on the waters of the Elizabeth River, near Portsmouth,
Virginia. This special local regulation will restrict vessel traffic
and is necessary to provide for the safety of life on navigable waters
during the event.

DATES: This rule is effective from 5 p.m. to 7 p.m. on August 6, 2010.

ADDRESSES: Documents indicated in this preamble as being available in
the docket, are part of docket USCG-2010-0713 and are available online
by going to http://www.regulations.gov, inserting USCG-2010-0713 in the
``Keyword'' box, and then clicking ``Search.'' This material is also
available for inspection or copying at the Docket Management Facility
(M-30), U.S. Department of Transportation, West Building Ground Floor,
Room W12-140, 1200 New Jersey Avenue, SE., Washington, DC 20590,

between 9 a.m. and 5 p.m., Monday through Friday, except Federal
holidays.

FOR FURTHER INFORMATION CONTACT: If you have questions on this
temporary rule, call or e-mail LT Michael DiPace, Chief Waterways
Management Division, Sector Hampton Roads, Coast Guard; telephone (757)
668-5580, e-mail<EMAIL_ADDRESS>If you have questions on
viewing the docket, call Renee V. Wright, Program Manager, Docket
Operations, telephone<PHONE_NUMBER>.

SUPPLEMENTARY INFORMATION:

Regulatory Information

    The Coast Guard is issuing this temporary final rule without prior
notice and opportunity to comment pursuant to authority under section
4(a) of the Administrative Procedure Act (APA) (5 U.S.C. 553(b)). This
provision authorizes an agency to issue a rule without prior notice and
opportunity to comment when the agency for good cause finds that those
procedures are ``impracticable, unnecessary, or contrary to the public
interest.'' Under 5 U.S.C. 553(b)(B), the Coast Guard finds that good
cause exists for not publishing a notice of proposed rulemaking (NPRM)
with respect to this rule because immediate action is needed to ensure
the safety of the event participants, spectator craft, and other
vessels transiting the event area. For the same reasons, the Coast
Guard also finds, under 5 U.S.C. 553(d)(3), that good cause exists for
making this rule effective less than 30 days after publication in the
Federal Register.

Basis and Purpose

    The City of Portsmouth Ports Events will sponsor a series of crew
rowing races titled the ``USCG City of Portsmouth Celebration Rowing
Regatta.'' The crew rowing races will be held on August 6, 2010. The
races will be held on the Elizabeth River adjacent to the Portsmouth
seawall from High Street Landing to Livingston Street, located on
Norfolk Naval Shipyard in Portsmouth, Virginia. The crew rowing races
will consist of approximately 20 outrigger canoes conducting slow speed
straight line runs along the river and parallel to the shoreline. To
provide for the safety of participants, spectators and other transiting
vessels, the Coast Guard will temporarily restrict vessel traffic in
the event area during the rowing races.

Discussion of Rule

    The Coast Guard is establishing temporary special local regulations
on specified waters of the Elizabeth River adjacent to the Portsmouth
seawall in Portsmouth, Virginia. The regulated area includes a section
of the Elizabeth River approximately one half mile long and bounded in
width from shoreline to shoreline, bounded to the north by the waters
adjacent to High Street Landing located at latitude 36[deg]50'07'' N,
longitude 076[deg]17'46'' W (NAD 1983), and bounded to the south by the
waters adjacent to Livingston Street on Norfolk Naval Shipyard in
Portsmouth, Virginia located at latitude 36[deg]49'30'' N, longitude
076[deg]17'34'' W (NAD 1983). The temporary special local regulations
will be enforced from 5 p.m. to 7 p.m. on August 6, 2010, and will
restrict general navigation in the regulated area during the crew
races. Except for persons or vessels authorized by the Coast Guard
Patrol Commander, no person or vessel may enter or remain in the
regulated area during the enforcement period.

Regulatory Analyses

    We developed this rule after considering numerous statutes and
executive orders related to rulemaking. Below we summarize our analyses
based on 13 of these statutes or executive orders.

Regulatory Planning and Review

    This rule is not a significant regulatory action under section 3(f)
of Executive Order 12866, Regulatory Planning and Review, and does not
require an assessment of potential costs and benefits under section
6(a)(3) of that Order. The Office of Management and Budget has not
reviewed it under that Order. Although this regulation will prevent
traffic from transiting a portion of the Elizabeth River during the
events, the effect of this regulation will not be significant due to
its limited duration and the advance notification that will be made to
the maritime community via marine information broadcast so mariners can
adjust their plans accordingly. Additionally, the regulated area has
been designed to impose the least impact on general navigation yet
provide the necessary level of safety. Vessel traffic will be able to
transit the regulated area between races and when the Coast Guard
Patrol Commander deems it is safe to do so.

Small Entities

    Under the Regulatory Flexibility Act (5 U.S.C. 601-612), we have
considered whether this rule would have a significant economic impact
on a substantial number of small entities. The term ``small entities''
comprises small businesses, not-for-profit organizations that are
independently owned and operated and are not dominant in their fields,
and governmental jurisdictions with populations of less than 50,000.
    The Coast Guard certifies under 5 U.S.C. 605(b) that this rule will
not have a significant economic impact on a substantial number of small
entities. This rule will affect the following entities, some of which
may be small entities: Owners or operators of vessels intending to
transit this section of the Elizabeth River from 5 p.m. to 7 p.m. on
August 6, 2010. This rule would not have a significant economic impact
on a substantial number of small entities for the following reasons:
Although the regulated area will apply to a half mile segment of the
Elizabeth River, traffic may be allowed to pass through the regulated
area with the permission of the Coast Guard Patrol Commander between
races. Additionally, the Coast Guard will issue maritime advisories
prior to the enforcement period so mariners can adjust their plans
accordingly.

Assistance for Small Entities

    Under section 213(a) of the Small Business Regulatory Enforcement
Fairness Act of 1996 (Pub. L. 104-121), we offer to assist small
entities in understanding the rule so that they can better evaluate its
effects on them and participate in the rulemaking process.
    Small businesses may send comments on the actions of Federal
employees who enforce, or otherwise determine compliance with, Federal
regulations to the Small Business and Agriculture Regulatory
Enforcement Ombudsman and the Regional Small Business Regulatory
Fairness Boards. The Ombudsman evaluates these actions annually and
rates each agency's responsiveness to small business. If you wish to
comment on actions by employees of the Coast Guard, call 1-888-REG-FAIR
(1-888-734-3247). The Coast Guard will not retaliate against small
entities that question or complain about this rule or any policy or
action of the Coast Guard.

Collection of Information

    This rule calls for no new collection of information under the
Paperwork Reduction Act of 1995 (44 U.S.C. 3501-3520).

Federalism

    A rule has implications for federalism under Executive Order 13132,
Federalism, if it has a substantial direct effect on State or local
governments and would either preempt State law or impose a substantial
direct cost of compliance on them. We have analyzed this rule under
that Order and have

determined that it does not have implications for federalism.

Unfunded Mandates Reform Act

    The Unfunded Mandates Reform Act of 1995 (2 U.S.C. 1531-1538)
requires Federal agencies to assess the effects of their discretionary
regulatory actions. In particular, the Act addresses actions that may
result in the expenditure by a State, local, or tribal government, in
the aggregate, or by the private sector of $100,000,000 (adjusted for
inflation) or more in any one year. Though this rule will not result in
such an expenditure, we do discuss the effects of this rule elsewhere
in this preamble.

Taking of Private Property

    This rule will not cause a taking of private property or otherwise
have taking implications under Executive Order 12630, Governmental
Actions and Interference with Constitutionally Protected Property
Rights.

Civil Justice Reform

    This rule meets applicable standards in sections 3(a) and 3(b)(2)
of Executive Order 12988, Civil Justice Reform, to minimize litigation,
eliminate ambiguity, and reduce burden.

Protection of Children

    We have analyzed this rule under Executive Order 13045, Protection
of Children from Environmental Health Risks and Safety Risks. This rule
is not an economically significant rule and does not create an
environmental risk to health or risk to safety that may
disproportionately affect children.

Indian Tribal Governments

    This rule does not have tribal implications under Executive Order
13175, Consultation and Coordination with Indian Tribal Governments,
because it does not have a substantial direct effect on one or more
Indian tribes, on the relationship between the Federal Government and
Indian tribes, or on the distribution of power and responsibilities
between the Federal Government and Indian tribes.

Energy Effects

    We have analyzed this rule under Executive Order 13211, Actions
Concerning Regulations That Significantly Affect Energy Supply,
Distribution, or Use. We have determined that it is not a ``significant
energy action'' under that order because it is not a ``significant
regulatory action'' under Executive Order 12866 and is not likely to
have a significant adverse effect on the supply, distribution, or use
of energy. The Administrator of the Office of Information and
Regulatory Affairs has not designated it as a significant energy
action. Therefore, it does not require a Statement of Energy Effects
under Executive Order 13211.

Technical Standards

    The National Technology Transfer and Advancement Act (NTTAA) (15
U.S.C. 272 note) directs agencies to use voluntary consensus standards
in their regulatory activities unless the agency provides Congress,
through the Office of Management and Budget, with an explanation of why
using these standards would be inconsistent with applicable law or
otherwise impractical. Voluntary consensus standards are technical
standards (e.g., specifications of materials, performance, design, or
operation; test methods; sampling procedures; and related management
systems practices) that are developed or adopted by voluntary consensus
standards bodies.
    This rule does not use technical standards. Therefore, we did not
consider the use of voluntary consensus standards.

Environment

    We have analyzed this rule under Department of Homeland Security
Management Directive 023-01 and Commandant Instruction M16475.lD, which
guide the Coast Guard in complying with the National Environmental
Policy Act of 1969 (NEPA) (42 U.S.C. 4321-4370f), and have concluded
this action is one of a category of actions which do not individually
or cumulatively have a significant effect on the human environment.
This rule is categorically excluded, under figure 2-1, paragraph
(34)(h), of the Instruction. This rule involves implementation of
regulations within 33 CFR part 100 that apply to organized marine
events on the navigable waters of the United States that may have
potential for negative impact on the safety or other interest of
waterway users and shore side activities in the event area. The
category of water activities includes but is not limited to sail boat
regattas, boat parades, power boat racing, swimming events, crew
racing, and sail board racing. An environmental analysis checklist and
a categorical exclusion determination will be available in the docket
where indicated under ADDRESSES.

List of Subjects in 33 CFR Part 100

    Marine safety, Navigation (water), Reporting and recordkeeping
requirements, Waterways.

0
For the reasons discussed in the preamble, the Coast Guard amends 33
CFR part 100 as follows:

PART 100--SAFETY OF LIFE ON NAVIGABLE WATERS

0
1. The authority citation for part 100 continues to read as follows:

    Authority:  33 U.S.C. 1233.

0
2. Add temporary Sec.  100.35-T05-0713 to read as follows:

Sec.  100.35-T05-0713  Elizabeth River, Portsmouth, Virginia.

    (a) Regulated area. The following is a regulated area: All waters
of the Elizabeth River from bottom to surface and from shoreline to
shoreline, bounded to the north by the waters adjacent to High Street
Landing located at latitude 36[deg]50'07'' N, longitude 076[deg]17'46''
W, and bounded to the south by the waters adjacent to Livingston Street
on Norfolk Naval Shipyard in Portsmouth, Virginia located at latitude
36[deg]49'30'' N, longitude 076[deg]17'34'' W (NAD 1983).
    (b) Definitions. (1) Coast Guard Patrol Commander means a
commissioned, warrant or petty officer of the Coast Guard who has been
designated by the Commander, Coast Guard Sector Hampton Roads.
    (2) Official Patrol means any vessel assigned or approved by
Commander, Coast Guard Sector Hampton Roads with a commissioned,
warrant or petty officer on board and displaying a Coast Guard ensign.
    (c) Special local regulations. (1) Except for persons or vessels
authorized by the Coast Guard Patrol Commander, no person or vessel may
enter or remain in the regulated area.
    (2) The operator of any vessel in the regulated area must:
    (i) Stop the vessel immediately when directed to do so by an
Official Patrol.
    (ii) Proceed as directed by any official patrol.
    (d) Enforcement period. This regulation will be enforced from 5
p.m. to 7 p.m. on August 6, 2010.

    Dated: July 23, 2010.
M.S. Ogle,
Captain, U.S. Coast Guard, Captain of the Port Hampton Roads.
[FR Doc. 2010-19322 Filed 8-4-10; 8:45 am]
BILLING CODE 9110-04-P


[Federal Register Volume 83, Number 45 (Wednesday, March 7, 2018)]
[Notices]
[Pages 9761-9765]
[FR Doc No: 2018-04624]

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

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-82801; File No. SR-OCC-2017-022]

Self-Regulatory Organizations; The Options Clearing Corporation;
Order Instituting Proceedings To Determine Whether To Approve or
Disapprove Proposed Rule Change Related to The Options Clearing
Corporation's Margin Methodology

March 2, 2018.

I. Introduction

    On November 13, 2017, The Options Clearing Corporation (``OCC'')
filed with the Securities and Exchange Commission (``Commission'') the
proposed rule change SR-OCC-2017-022 (``Proposed Rule Change'')
pursuant to Section 19(b) of the Securities Exchange Act of 1934
(``Act''),\1\ and Rule 19b-4 thereunder.\2\ The Proposed Rule Change
was published for comment in the Federal Register on December 4,
2017.\3\ On January 18, 2018, the Commission designated a longer period
of time for Commission action on the Proposed Rule Change.\4\ As of
February 20, 2018,\5\ the Commission has received one comment letter on
the proposal contained in the Advance Notice.\6\ The Commission is

publishing this order to institute proceedings pursuant to Section
19(b)(2)(B) \7\ of the Act to determine whether to approve or
disapprove the Proposed Rule Change.
---------------------------------------------------------------------------

    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ Securities Exchange Act Release No. 82161 (Nov. 28, 2017),
82 FR 57306 (Dec. 4, 2017) (File No. SR-OCC-2017-022) (``Notice'').
On November 13, 2017, OCC also filed a related advance notice (SR-
OCC-2017-811) with the Commission pursuant to Section 806(e)(1) of
Title VIII of the Dodd-Frank Wall Street Reform and Consumer
Protection Act, entitled the Payment, Clearing, and Settlement
Supervision Act of 2010 and Rule 19b-4(n)(1)(i) under the Act
(``Advance Notice''). 12 U.S.C. 5465(e)(1) and 17 CFR 240.19b-
4(n)(1)(i), respectively. The Advance Notice was published in the
Federal Register on December 27, 2017. Securities Exchange Act
Release No. 82371 (Dec. 20, 2017), 82 FR 61354 (Dec. 27, 2017) (SR-
OCC-2017-811).
     The Financial Stability Oversight Council designated OCC a
systemically important financial market utility on July 18, 2012.
See Financial Stability Oversight Council 2012 Annual Report,
Appendix A, available at http://www.treasury.gov/initiatives/fsoc/Documents/2012%20Annual%20Report.pdf. Therefore, OCC is required to
comply with the Payment, Clearing and Settlement Supervision Act and
file advance notices with the Commission. See 12 U.S.C. 5465(e).
    \4\ Securities Exchange Act Release No. 82534 (Jan. 18, 2018),
83 FR 3376 (Jan. 24, 2018) (File No. SR-OCC-2017-022).
    \5\ The comment period closed on December 26, 2017.
    \6\ See letter from Michael Kitlas, dated November 28, 2017, to
Eduardo A. Aleman, Assistant Secretary, Commission, available at
https://www.sec.gov/comments/sr-occ-2017-022/occ2017022.htm
(``Kitlas Letter''). After reviewing the Kitlas Letter, the
Commission believes that it is nonresponsive to the Proposed Rule
Change and therefore outside the scope of the proposal.
     Since the proposal contained in the Proposed Rule Change was
also filed as an Advance Notice, the Commission considered all
public comments received on the proposal regardless of whether the
comments were submitted on the Proposed Rule Change or the Advance
Notice.
    \7\ 15 U.S.C. 78s(b)(2)(B).
---------------------------------------------------------------------------

    Institution of proceedings does not indicate that the Commission
has reached any conclusions with respect to the Proposed Rule Change,
nor does it mean that the Commission will ultimately disapprove the
Proposed Rule Change. Rather, as discussed below, the Commission seeks
additional input on the Proposed Rule Change and issues presented by
the proposal.

II. Description of the Proposed Rule Change \8\
---------------------------------------------------------------------------

    \8\ The description of the Proposed Rule Change is substantially
excerpted from the Notice. See Notice, 82 FR at 57306-57313.
---------------------------------------------------------------------------

OCC's Current Margin Methodology

    OCC's margin methodology, the System for Theoretical Analysis and
Numerical Simulations (``STANS''), calculates clearing member margin
requirements.\9\ STANS utilizes large-scale Monte Carlo simulations to
forecast price and volatility movements in determining a clearing
member's margin requirement.\10\ The STANS margin requirement is
calculated at the portfolio level of clearing member accounts with
positions in marginable securities and consists of an estimate of a 99%
expected shortfall \11\ over a two-day time horizon and an add-on
margin charge for model risk (the concentration/dependence stress test
charge).\12\ The STANS methodology is used to measure the exposure of
portfolios of options and futures cleared by OCC and cash instruments
in margin collateral.\13\
---------------------------------------------------------------------------

    \9\ See Securities Exchange Act Release No. 53322 (Feb. 15,
2006), 71 FR 9403 (Feb. 23, 2006) (File No. SR-OCC-2004-20).
    \10\ See OCC Rule 601; see also Notice, 82 FR at 57307.
    \11\ See Notice, 82 FR at 57307.
     The expected shortfall component is established as the
estimated average of potential losses higher than the 99% value at
risk threshold. See Notice, 82 FR at 57307, note 8.
    \12\ See Notice, 82 FR at 57307. A detailed description of the
STANS methodology is available at http://optionsclearing.com/risk-management/margins/. See Notice, 82 FR at 57307, note 9.
    \13\ See Notice, 82 FR at 57307.
---------------------------------------------------------------------------

    A ``risk factor'' within OCC's margin system may be defined as a
product or attribute whose historical data is used to estimate and
simulate the risk for an associated product.\14\ The majority of risk
factors utilized in the STANS methodology are total returns on
individual equity securities. Other risk factors considered include:
Returns on equity indexes; returns on implied volatility risk factors
that are a set of nine chosen volatility pivots per product; changes in
foreign exchange rates; securities underlying equity-based products;
and changes in model parameters that sufficiently capture the model
dynamics from a larger set of data.\15\
---------------------------------------------------------------------------

    \14\ Id.
    \15\ Id.
---------------------------------------------------------------------------

    Under OCC's current margin methodology, OCC obtains monthly price
data for most of its equity-based products from a third-party
vendor.\16\ These data arrive around the second week of every month in
arrears and require approximately four weeks for OCC to process prior
to installing into OCC's margin system.\17\ As a result, correlations
and statistical parameters for risk factors at any point in time
represent back-dated data and therefore may not be representative of
the most recent market data.\18\ In the absence of daily updates, OCC
employs an approach where one or more identified market proxies (or
``scale-factors'') are used to incorporate day-to-day market volatility
across all associated asset classes throughout.\19\ The scale-factor
approach, however, assumes a perfect correlation of the volatilities
between the security and its scale-factor, which gives little room to
capture the idiosyncratic risk of a given security and which may be
different from the broad market risk represented by the scale-
factor.\20\ In addition, OCC imposes a floor on volatility estimates
for its equity-based products using a 500-day look back period.\21\
---------------------------------------------------------------------------

    \16\ Id.
    \17\ Id.
    \18\ Id.
    \19\ Id.
    \20\ Id.
    \21\ See Notice, 82 FR at 57307-57308.
     In risk management, it is a common practice to establish a
floor for volatility at a certain level in order to protect against
procyclicality in the model. See Notice, 82 FR at 57307-57308, note
14.
---------------------------------------------------------------------------

    OCC believes that using monthly price data, coupled with the
dependency of margins on scale-factors and the volatility floor can
result in imprecise changes in margins charged to clearing members,
specifically across periods of heavy volatility when the correlation
between the risk factor and a scale-factor fluctuate.\22\
---------------------------------------------------------------------------

    \22\ See Notice, 82 FR at 57308.
---------------------------------------------------------------------------

    OCC's current methodology for estimating covariance and
correlations between risk factors relies on the same monthly data
described above, resulting in a similar lag time between updates.\23\
In addition, correlation estimates are based off historical returns
series, with estimates between a pair of risk factors being highly
sensitive to the volatility of either risk factor in the chosen
pair.\24\ Accordingly, OCC believes that the current approach results
in potentially less stable correlation estimates that may not be
representative of current market conditions.\25\
---------------------------------------------------------------------------

    \23\ Id.
    \24\ Id.
    \25\ Id.
---------------------------------------------------------------------------

    In addition, under OCC's existing margin methodology, theoretical
price scenarios for ``defaulting securities'' \26\ are simulated using
uncorrelated return scenarios with an average zero return and a pre-
specified volatility called ``default variance.'' \27\ The default
variance is estimated as the average of the top 25 percent quantile of
the conditional variances of all securities.\28\ As a result, OCC
believes that these default estimates may be impacted by extremely
illiquid securities with discontinuous data.\29\ In addition, OCC
believes that the default variance (and the associated scale-factors
used to scale up volatility) is also subject to sudden jumps with the
monthly simulation installations across successive months because it is
derived from monthly data updates, as opposed to daily updates, which
are prone to wider fluctuations and are subject to adjustments using
scale-factors.\30\
---------------------------------------------------------------------------

    \26\ Within the context of OCC's margin system, securities that
do not have enough historical data for calibration are classified as
``defaulting securities.'' See Notice, 82 FR at 57308, note 15.
    \27\ See Notice, 82 FR at 57308.
    \28\ Id.
    \29\ Id.
    \30\ Id.
---------------------------------------------------------------------------

Proposed Changes to Current Margin Methodology \31\
---------------------------------------------------------------------------

    \31\ In addition to the proposed methodology changes described
herein, OCC also would make some clarifying and clean-up changes,
unrelated to the proposed changes described above, to update its
margin methodology to reflect existing practices for the daily
calibration of seasonal and non-seasonal energy models and the
removal of methodology language for certain products that are no
longer cleared by OCC. See Notice, 82 FR at 57308, note 17.
---------------------------------------------------------------------------

1. Daily Updates of Price Data
    OCC proposes to introduce daily updates for price data for equity
products, including daily corporate action-adjusted returns of
equities, Exchange Traded Funds (``ETFs''), Exchange Traded Notes
(``ETNs'') and

certain indexes.\32\ OCC believes that the proposed change would help
ensure that OCC's margin methodology is reliant on data that is more
representative of current market conditions, thereby resulting in more
accurate and responsive margin requirements.\33\ In addition, OCC
believes that the introduction of daily price updates would enable
OCC's margin methodology to better capture both market and
idiosyncratic risk by allowing for daily updates to the parameters
associated with the econometric model (discussed below) that captures
the risk associated with a particular product, and therefore help
ensure that OCC's margin requirements are based on more current market
conditions.\34\ As a result, OCC would also reduce its reliance on the
use of scale-factors to incorporate day-to-day market volatility, which
OCC believes give little room to capture the idiosyncratic risk of a
given security and which may be different from the broad market risk
represented by the scale-factor.\35\
---------------------------------------------------------------------------

    \32\ See Notice, 82 FR at 57308.
    \33\ Id.
    \34\ Id.
    \35\ Id.
---------------------------------------------------------------------------

2. Proposed Enhancements to the Econometric Model
    OCC is proposing the following enhancements to its econometric
model for calculating statistical parameters for all qualifying risk
factors that reflect the most recent data obtained: \36\
---------------------------------------------------------------------------

    \36\ See Notice, 82 FR at 57308-57309.
---------------------------------------------------------------------------

i. Daily Updates for Statistical Parameters
    Under the proposal, the statistical parameters for the model would
be updated on a daily basis using the new daily price data obtained by
OCC from a reliable third-party (as described above).\37\ As a result,
OCC would no longer need to rely on scale-factors to approximate day-
to-day market volatility for equity-based products.\38\ OCC believes
that calibrating statistical parameters on a daily basis would allow
OCC to calculate more accurate margin requirements that represent the
most recent market data.\39\
---------------------------------------------------------------------------

    \37\ See Notice, 82 FR at 57309. OCC notes that this change
would apply to most risk factors with the exception of certain
equity indexes, Treasury securities, and energy futures products,
which are already updated on a daily basis. See Notice, 82 FR 57309,
at note 18.
    \38\ See Notice, 82 FR at 57309.
    \39\ Id.
---------------------------------------------------------------------------

ii. Proposed Enhancements To Capture Asymmetry in Conditional Variance
    The current approach for forecasting the conditional variance for a
given risk factor does not consider the asymmetric volatility
phenomenon observed in financial markets (also called the ``leverage
effect'') where volatility is more sensitive and reactive to market
downturns.\40\ Under the proposal, OCC would amend its econometric
model to include new features (i.e., incorporating asymmetry into its
forecast volatility) designed to allow the conditional volatility
forecast to be more sensitive to market downturns and thereby capture
the most significant dynamics of the relationship between price and
volatility observed in financial markets.\41\ OCC believes the proposed
enhancement would result in more accurate and responsive margin
requirements, particularly in market downturns.\42\
---------------------------------------------------------------------------

    \40\ Id.
    \41\ Id.
    \42\ Id.
---------------------------------------------------------------------------

iii. Proposed Change in Statistical Distribution
    OCC also proposes to change the statistical distribution used to
model the returns of equity prices. OCC's current methodology uses a
fat tailed distribution \43\ to model returns; \44\ however, price
scenarios generated using very large log-return scenarios (positive)
that follow this distribution can approach infinity and could
potentially result in excessively large price jumps, a known limitation
of this distribution.\45\ Under the proposal, OCC would adopt a more
defined distribution (Standardized Normal Reciprocal Inverse Gaussian
or NRIG) for modeling returns, which OCC believes would more
appropriately simulate future returns based on the historical price
data for the products in question and allows for more appropriate
modeling of fat tails.\46\ As a result, OCC believes that the proposed
change would lead to more consistent treatment of log returns both on
the upside as well as downside of the distribution.\47\
---------------------------------------------------------------------------

    \43\ A data set with a ``fat tail'' is one in which extreme
price returns have a higher probability of occurrence than would be
the case in a normal distribution. See Notice, 82 FR at 57309, note
21.
    \44\ See Notice, 82 FR at 57309.
    \45\ Id.
    \46\ Id.
    \47\ Id.
---------------------------------------------------------------------------

iv. Second Day Volatility Forecast
    OCC further proposes to introduce a second-day forecast for
volatility into the econometric model to estimate the two-day scenario
distributions for risk factors.\48\ Under the current methodology, OCC
typically uses a two-day horizon to determine its risk exposure to a
given portfolio.\49\ This is done by simulating 10,000 theoretical
price scenarios for the two-day horizon using a one-day forecast
conditional variance; the value at risk and expected shortfall
components of the margin requirement are then determined from the
simulated profit/loss distributions.\50\ These one-day and two-day
returns scenarios are both simulated using the one-day forecast
conditional variance estimate.\51\ OCC believes that this could lead to
a risk factor's coverage differing substantially on volatile trading
days.\52\ As a result, OCC proposes to introduce a second-day forecast
variance for all equity-based risk factors.\53\ The second-day
conditional variance forecast would be estimated for each of the 10,000
Monte Carlo returns scenarios, resulting in more accurately estimated
two-day scenario distributions, and therefore more accurate and
responsive margin requirements.\54\
---------------------------------------------------------------------------

    \48\ Id. This proposed change would not apply to STANS implied
volatility scenario risk factors. For those risk factors, OCC's
existing methodology would continue to apply. See Notice, 82 FR at
57309, note 23.
    \49\ See Notice, 82 FR at 57309.
    \50\ Id.
    \51\ Id.
    \52\ Id.
    \53\ Id.
    \54\ Id.
---------------------------------------------------------------------------

v. Anti-Procyclical Floor for Volatility Estimates
    In addition, OCC proposes to modify its floor for volatility
estimates. OCC currently imposes a floor on volatility estimates for
its equity-based products using a 500-day look back period.\55\ Under
the proposal, OCC would extend this look back period to 10 years (2520
days) in the enhanced model and apply this floor to volatility
estimates for other products (excluding implied volatility risk factor
scenarios).\56\ OCC believes that using a longer 10-year look back
period will help ensure that OCC captures sufficient historical events/
market shocks in the calculation of its anti-procyclical floor.\57\
---------------------------------------------------------------------------

    \55\ Id.
    \56\ Id.
    \57\ Id.
---------------------------------------------------------------------------

3. Proposed Enhancements to Correlation Estimates
    As described above, OCC's current methodology for estimating
covariance and correlations between risk factors relies on the same
monthly price data feeding the econometric model, resulting in a
similar lag time between

updates.\58\ In addition, correlation estimates are based off
historical returns series, with estimates between a pair of risk
factors being highly sensitive to the volatility of either risk factor
in the chosen pair.\59\ The current approach therefore results in
correlation estimates being sensitive to volatile historical data.\60\
---------------------------------------------------------------------------

    \58\ See Notice, 82 FR at 57310.
    \59\ Id.
    \60\ Id.
---------------------------------------------------------------------------

    In order to address these limitations, OCC proposes to enhance its
methodology for calculating correlation estimates by moving to a daily
process for updating correlations (with a minimum of one-week's lag) to
help ensure clearing member account margins are more current and thus
more accurate.\61\ Moreover, OCC proposes to enhance its approach to
modeling correlation estimates by de-volatizing \62\ the returns series
to estimate the correlations.\63\ Under the proposed approach, OCC
would first consider the returns excess of the mean (i.e., the average
estimated from historical data sample) and then further scale them by
the corresponding estimated conditional variances.\64\ OCC believes
that using de-volatized returns would lead to normalizing returns
across a variety of asset classes and make the correlation estimator
less sensitive to sudden market jumps and therefore more stable.\65\
---------------------------------------------------------------------------

    \61\ Id.
    \62\ Id.
    \63\ Id.
    \64\ Id.
    \65\ Id.
---------------------------------------------------------------------------

4. Defaulting Securities Methodology
    Under the proposal, OCC would enhance its methodology for
estimating the defaulting variance in its model.\66\ OCC's margin
system is dependent on market data to determine clearing member margin
requirements.\67\ Securities that do not have enough historical data
are classified as to be a ``defaulting security'' within OCC
systems.\68\ As noted above, within current STANS systems, the
theoretical price scenarios for defaulting securities are simulated
using uncorrelated return scenarios with a zero mean and a default
variance, with the default variance being estimated as the average of
the top 25 percent quantile of the conditional variances of all
securities.\69\ As a result, these default estimates may be impacted by
extremely illiquid securities with discontinuous data.\70\ In addition,
the default variance (and the associated scale-factors used to scale up
volatility) is also subject to sudden jumps with the monthly simulation
installations across volatile months.\71\ To mitigate these concerns,
OCC proposes to: (i) Use only optionable equity securities to estimate
the defaulting variance; (ii) use a shorter time series to enable
calibration of the model for all securities; and (iii) simulate default
correlations with the driver Russell 2000 index (``RUT'').\72\
---------------------------------------------------------------------------

    \66\ Id.
    \67\ Id.
    \68\ Id.
    \69\ Id.
    \70\ Id.
    \71\ Id.
    \72\ Id.
---------------------------------------------------------------------------

i. Proposed Modifications to Securities and Quantile Used in Estimation
    Under the proposal, only optionable equity securities, which are
typically more liquid, would be considered while estimating the default
variance.\73\ This limitation would eliminate from the estimation
almost all illiquid securities with discontinuous data that could
contribute to high conditional variance estimates and thus a high
default variance.\74\ In addition, OCC proposes to estimate the default
variance as the lowest estimate of the top 10 percent of the floored
conditional variance across the risk factors.\75\ OCC believes that
this change in methodology would help ensure that while the estimate is
aggressive it is also robust to the presence of outliers caused by a
few extremely volatile securities that influence the location parameter
of a distribution.\76\ Moreover, as a consequence of the daily updates
described above, the default variances would change daily and there
would be no scale-factor to amplify the effect of the variance on risk
factor coverage.\77\
---------------------------------------------------------------------------

    \73\ Id.
    \74\ Id.
    \75\ Id.
    \76\ Id.
    \77\ Id.
---------------------------------------------------------------------------

ii. Proposed Change in Time Series
    Under the proposal, OCC would use a shorter time series to enable
calibration of the model for all securities.\78\ Currently, OCC does
not calibrate parameters for defaulting securities that have historical
data of less than two years.\79\ OCC is proposing to shorten this time
period to around 6 months (180 days) to enable calibration of the model
for all securities within OCC systems.\80\ OCC believes that this
shorter time series is sufficient to produce stable calibrated
parameters.\81\
---------------------------------------------------------------------------

    \78\ Id.
    \79\ Id.
    \80\ Id.
    \81\ Id.
---------------------------------------------------------------------------

iii. Proposed Default Correlation
    Under the proposal, returns scenarios for defaulting securities
\82\ would be simulated using a default correlation with the driver
RUT.\83\ The default correlation of the RUT index is roughly equal to
the median of all positively correlated securities with the index.\84\
Since 90% of the risk factors in OCC systems correlate positively to
the RUT index, OCC would only consider those risk factors to determine
the median.\85\ OCC believes that the median of the correlation
distribution has been steady over a number of simulations and is
therefore proposing that it replace the current methodology of
simulating uncorrelated scenarios, which OCC believes is not a
realistic approach.\86\
---------------------------------------------------------------------------

    \82\ See supra note 25.
    \83\ See Notice, 82 FR at 57310. OCC notes that, in certain
limited circumstances where there are reasonable grounds backed by
the existing return history to support an alternative approach in
which the returns are strongly correlated with those of an existing
risk factor (a ``proxy'') with a full price history, the margin
methodology allows OCC's Financial Risk Management staff to
construct a ``conditional'' simulation to override any default
treatment that would have otherwise been applied to the defaulting
security. See Notice, 82 FR at 57310, note 26.
    \84\ See Notice, 82 FR at 57310.
    \85\ Id.
    \86\ Id.
---------------------------------------------------------------------------

III. Proceedings To Determine Whether To Approve or Disapprove the
Proposed Rule Change and Grounds for Disapproval Under Consideration

    The Commission is instituting proceedings pursuant to Section
19(b)(2)(B) of the Act to determine whether the Proposed Rule Change
should be approved or disapproved.\87\ Institution of proceedings is
appropriate at this time in view of the legal and policy issues raised
by the Proposed Rule Change. As noted above, institution of proceedings
does not indicate that the Commission has reached any conclusions with
respect to any of the issues involved. Rather, the Commission seeks and
encourages interested persons to comment on the Proposed Rule Change
and provide arguments to support the Commission's

analysis as to whether to approve or disapprove the proposal.
---------------------------------------------------------------------------

    \87\ 15 U.S.C. 78s(b)(2)(B) (providing that proceedings to
determine whether to disapprove a proposed rule change must be
concluded within 180 days of the date of publication of notice of
the filing of the proposed rule change. The time for conclusion of
the proceedings may be extended for up to an additional 60 days if
the Commission finds good cause for such extension and publishes its
reasons for so finding or if the self-regulatory organization
consents to the extension).
---------------------------------------------------------------------------

    Pursuant to Section 19(b)(2)(B) of the Act,\88\ the Commission is
providing notice of the grounds for disapproval under consideration.
The Commission is instituting proceedings to allow for additional
analysis of, and input from, commenters with respect to the Proposed
Rule Change's consistency with the Act and the rules thereunder.
Specifically, the Commission believes that the Proposed Rule Change
raises questions as to whether the proposal is consistent with (i)
Section 17A(b)(3)(F) of Act, which requires that the rules of a
clearing agency be designed to, among other things, assure the
safeguarding of securities and funds which are in the custody or
control of the clearing agency or for which it is responsible; \89\
(ii) Rules 17Ad-22(b)(1) and (b)(2) under the Act, which require a
registered clearing agency that performs central counterparty services
establish, implement, maintain and enforce written policies and
procedures reasonably designed to, in part: (1) Measure its credit
exposures to its participants at least once a day and limit its
exposures to potential losses from defaults by its participants under
normal market conditions so that the operations of the clearing agency
would not be disrupted and non-defaulting participants would not be
exposed to losses that they cannot anticipate or control; and (2) use
margin requirements to limit its credit exposures to participants under
normal market conditions and use risk-based models and parameters to
set margin requirements; \90\ and (iii) Rule 17Ad-22(e)(6) under the
Act, which requires OCC to establish, implement, maintain and enforce
written policies and procedures reasonably designed to cover its credit
exposures to its participants by establishing a risk-based margin
system that, among other things: (i) Considers, and produces margin
levels commensurate with, the risks and particular attributes of each
relevant product, portfolio, and market; (ii) calculates margin
sufficient to cover its potential future exposure to participants in
the interval between the last margin collection and the close out of
positions following a participant default; and (iii) uses reliable
sources of timely price data and uses procedures and sound valuation
models for addressing circumstances in which pricing data are not
readily available or reliable.\91\
---------------------------------------------------------------------------

    \88\ 15 U.S.C. 78s(b)(2)(B).
    \89\ 15 U.S.C. 78q-1(b)(3)(F).
    \90\ 17 CFR 240.17Ad-22(b)(1) and (2).
    \91\ 17 CFR 240.17Ad-22(e)(6).
---------------------------------------------------------------------------

IV. Request for Written Comments

    The Commission requests that interested persons provide written
submissions of their views, data, and arguments with respect to the
issues raised by the Proposed Rule Change. In particular, the
Commission invites the written views of interested persons concerning
whether the Proposed Rule Change is inconsistent with Section
17A(b)(3)(F) of the Act \92\ and Rules 17Ad-22(b)(1)-(2) \93\ and 17Ad-
22(e)(6) \94\ under the Act, or any other provision of the Act or rules
and regulations thereunder.
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    \92\ 15 U.S.C. 78q-1(b)(3)(F).
    \93\ 17 CFR 240.17Ad-22(b)(1)-(2).
    \94\ 17 CFR 240.17Ad-22(e)(6).
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    Although there do not appear to be any issues relevant to approval
or disapproval that would be facilitated by an oral presentation of
views, data, and arguments, the Commission will consider, pursuant to
Rule 19b-4, any request for an opportunity to make an oral
presentation.\95\
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    \95\ Section 19(b)(2) of the Act, as amended by the Securities
Acts Amendments of 1975, Public Law 94-29, 89 Stat. 97 (1975),
grants the Commission flexibility to determine what type of
proceeding--either oral or notice and opportunity for written
comments--is appropriate for consideration of a particular proposal
by a self-regulatory organization. See Securities Acts Amendments of
1975, Report of the Senate Committee on Banking, Housing and Urban
Affairs to Accompany S. 249, S. Rep. No. 75, 94th Cong., 1st Sess.
30 (1975).
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    Interested persons are invited to submit written data, views, and
arguments regarding whether the Proposed Rule Change should be approved
or disapproved on or before March 28, 2018. Any person who wishes to
file a rebuttal to any other person's submission must file that
rebuttal on or before April 11, 2018. Comments may be submitted by any
of the following methods:

Electronic Comments

     Use the Commission's internet comment form (http://www.sec.gov/rules/sro.shtml); or
     Send an email to [email protected]. Please include
File Number SR-OCC-2017-022 on the subject line.

Paper Comments

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

All submissions should refer to File Number SR-OCC-2017-022. This file
number should be included on the subject line if email is used. To help
the Commission process and review your comments more efficiently,
please use only one method. The Commission will post all comments on
the Commission's internet website (http://www.sec.gov/rules/sro.shtml).
Copies of the submission, all subsequent amendments, all written
statements with respect to the 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 website viewing and printing in
the Commission's Public Reference Room, 100 F Street NE, Washington, DC
20549, on official business days between the hours of 10:00 a.m. and
3:00 p.m. Copies of such filing also will be available for inspection
and copying at the principle office of OCC. All comments received will
be posted without change. Persons submitting comments are cautioned
that we do not redact or edit personal identifying information from
comment submissions. You should submit only information that you wish
to make available publicly.
    All submissions should refer to File Number SR-OCC-2017-022 and
should be submitted on or before March 28, 2018. If comments are
received, any rebuttal comments should be submitted on or before April
11, 2018.

    For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\96\
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    \96\ 17 CFR 200.30-3(a)(12).
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Robert W. Errett,
Deputy Secretary.
[FR Doc. 2018-04624 Filed 3-6-18; 8:45 am]
 BILLING CODE 8011-01-P