[Federal Register Volume 76, Number 246 (Thursday, December 22, 2011)]
[Notices]
[Pages 79676-79677]
[FR Doc No: 2011-32765]

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

DEPARTMENT OF ENERGY

Federal Energy Regulatory Commission

[Docket No. ER11-4580-000]

California Independent System Operator Corporation; Supplemental
Notice of Agenda and Discussion Topics for Staff Technical Conference

    This notice establishes the agenda and topics for discussion at the
technical conference to be held on February 2, 2012 to discuss issues
related to the California Independent System Operator Corporation's
(CAISO) proposal to eliminate convergence bidding at intertie
scheduling points.\1\ The technical conference will be held from 9 a.m.
to 4:30 p.m. (Eastern Time) in Hearing Room 1 at the Commission's
headquarters, 888 First Street NE., Washington, DC. The technical
conference will be led by Commission staff.
---------------------------------------------------------------------------

    \1\ Cal. Indep. Sys. Operator Corp., 137 FERC ] 61,157 (November
25, 2011 Order).
---------------------------------------------------------------------------

    The topics and related questions to be discussed during this
conference are attached. The purpose of the technical conference is to
provide Commission staff and interested parties an opportunity to
discuss CAISO's proposal to eliminate convergence bidding at intertie
scheduling points in detail. No formal presentations will be made other
than an opening presentation by CAISO; however, parties will be
encouraged to participate in the discussion along with Commission
staff. All interested parties may file written comments following the
technical conference.
    The technical conference will be open for the public to attend, and
advance registration is not required. The conference will be accessible
via telephone on a listen-only basis. For information regarding
telephone access to the conference and to specify whether you will be
dialing into the conference, please email<EMAIL_ADDRESS>no
later than 5 p.m. (Eastern Time) on Monday, January 30, 2012. You will
then receive a confirmation email containing a dial-in number and a
password. Staff requests that, to the extent possible, individuals
calling from the same location share a single telephone line.
    FERC conferences are accessible under section 508 of the
Rehabilitation Act of 1973. For accessibility accommodations please
send an email to<EMAIL_ADDRESS>or call toll free 1-(866) 208-
3372 (voice) or<PHONE_NUMBER> (TTY), or send a fax to<PHONE_NUMBER>
with the required accommodations.
    For more information on this conference, please contact Moon Athwal
at<EMAIL_ADDRESS>or<PHONE_NUMBER> or Colleen Farrell at
<EMAIL_ADDRESS>or<PHONE_NUMBER>.

    Dated: December 16, 2011.
Kimberly D. Bose,
Secretary.

Agenda for the Technical Conference Discussing CAISO's Proposal To
Eliminate Convergence Bidding at Intertie Scheduling Points February 2,
2012

Opening Remarks

9 a.m.-9:15 a.m.--Greeting and Opening Remarks.
9:15 a.m.-10 a.m.--Opening Presentation by CAISO.

Discussion

    Discussion on the following issues will be led by Commission staff,
with questions on each topic to be raised by staff and interested
parties in attendance. Commission staff and CAISO will be seated at
tables located at the front of the hearing room. Staff does not
anticipate any formal presentations during these discussions; however,
parties should plan to participate in topics of specific interest to
them. The objective of the technical conference is to obtain new
information on and discuss these topics, including information on
alternative proposals. Please note that although specified time periods
have been allotted to discussion topics, we will continue to move
forward to discussion topics as soon as discussion on the prior topic
has concluded. There will be a lunch break.

Discussion of the Performance of Convergence Bidding at Intertie
Scheduling Points and Internal Nodes

--What have the total aggregate monthly values of the real-time
imbalance energy offset been since April 2009?
--CAISO claims that, out of approximately $102 million total real-time
imbalance energy offset costs, the offsetting convergence supply bids
at intertie scheduling points and convergence demand bids at the
internal nodes have contributed a total of $53 million since February
2011.\2\ Meanwhile, SESCO Enterprises LLC, West Oaks Energy, LLC, and
XO Energy CAL, LP (collectively, Financial Marketers) argue that when
the offsetting bids are removed convergence bidding contributes only
$34.9 million of the $53 million to the total real-time imbalance
energy offset, and they argue that this value is declining.\3\ What has
been the monthly contribution of convergence bidding at intertie
scheduling points to the real-time imbalance energy offset since
February 2011? What has been the monthly contribution to the total
real-time imbalance energy offset of convergence bidding when
offsetting bids submitted within the same scheduling coordinator are
isolated since February 2011?
---------------------------------------------------------------------------

    \2\ CAISO Filing at 14.
    \3\ Financial Marketers Protest at 7.
---------------------------------------------------------------------------

--What has been the impact of the elimination of convergence bidding at
intertie scheduling points, pursuant to the November 25 Order, in terms
of the real-time imbalance energy offset and convergence/divergence of
prices?
--CAISO argues that convergence bidding at the interties has led to
divergence between day-ahead and real-time prices.\4\ Western Power
Trading Forum (WPTF) argues that there has been convergence between
day-ahead and real-time prices (hour ahead scheduling process prices
and real-time dispatch prices).\5\ Please explain in greater detail the
effects of convergence bidding at the internal nodes and interties. For
example, under the current market design:

    \4\ CAISO Filing at 3.
    \5\ WPTF at 14.
---------------------------------------------------------------------------

    [cir] Has there been convergence or divergence of day-ahead and
real-time prices on the internal nodes? Please explain whether there is
convergence or divergence based on daily data, monthly data, or other.
How do these metrics differ?

    [cir] Has there been convergence or divergence of day-ahead and
hour-ahead scheduling process prices on the interties? Please explain
whether there is convergence or divergence based on daily data, monthly
data, or other. How do these metrics differ?

--What are the total aggregate monthly values representing the impact
of the price inconsistencies that result from the dual intertie
constraint? \6\ What has the monthly trend been, and what is the driver
of the trend?
---------------------------------------------------------------------------

    \6\ The dual intertie constraint refers to the fact that, on the
interties, CAISO only considers physical transactions when
determining unit commitment, but considers both physical and virtual
transactions to establish prices.
---------------------------------------------------------------------------

--Does implicit convergence bidding cause problems (i.e., reliability
concerns)? Has convergence bidding at intertie scheduling points aided
in limiting or eliminating implicit convergence bidding (i.e.,
cancelling

physical import or export schedules)? If so, how has the elimination of
explicit convergence bidding at intertie locations impacted the
occurrence of implicit convergence bidding?
--Have there been any reliability impacts, price spikes, or price
divergence from eliminating explicit convergence bidding at intertie
scheduling points?
--Have there been benefits observed from permitting convergence bidding
at intertie scheduling points? What evidence has there been of the
benefits?
--How has convergence bidding been used to hedge congestion on intertie
scheduling points?
--How has convergence bidding been used to hedge delivery risk on
intertie scheduling points? What are physical resources losing by not
being able to hedge their physical positions using virtual bidding at
intertie scheduling points? Please provide examples of any other
practices that are impacted by not being able to submit convergence
bids at intertie scheduling points.
--CAISO states that a rule prohibiting offsetting internal and external
virtual bids would be ``easily undermined by collusive transactions.''
\7\ In order to understand the motivation for ``collusive
transactions,'' please provide aggregate values that represent the
maximum actual monthly profit of a virtual bidder submitting offsetting
virtual supply bids at the interties and virtual demand bids at the
internal nodes.
---------------------------------------------------------------------------

    \7\ CAISO Filing at 17.
---------------------------------------------------------------------------

Discussion of the Dual Real-Time Market Structure (Scheduling and
Pricing Interties in the Hour-Ahead Scheduling Process, and Scheduling
and Pricing Internal Nodes in Real-Time Dispatch)

--Has the hour-ahead scheduling process price been consistently below
the day ahead price since April 2009? Has there been a predictable
pattern of price difference in certain hours? How has that pattern been
affected, if at all, since convergence bidding was allowed?
--What are the contributing factors to the real-time dispatch price
being higher than hour-ahead scheduling process price (i.e.,
forecasting errors, operator biasing, ramping flexibility procurement,
hourly interchange scheduling)? How do these factors impact the ability
of convergence bidding to result in price convergence on internal nodes
and intertie scheduling points?
--WPTF states that on July 6, 2011, the loss of an external resource
contributed to an increased number of market participants declining
hour-ahead scheduling process awarded schedules to import power. WPTF
states that, instead of considering whether resources within CAISO
could replace the lost energy at cost-effective prices, CAISO continued
to dispatch increasing quantities of imports, inflating the hour-ahead
scheduling process price.\8\ Is this an accurate representation of the
events on July 6, 2011? In general, what impact does the dual real-time
market structure have on CAISO's operations and pricing trends? How
does scheduling in the hour-ahead scheduling process based on
forecasted conditions impact prices and scheduling at the internal
nodes in real-time dispatch?
---------------------------------------------------------------------------

    \8\ WPTF Protest at 18.
---------------------------------------------------------------------------

--What are the disadvantages and advantages of settling imports and
exports at the real-time dispatch price?

    Discussion of alternative proposals: Please evaluate the
alternatives proposed by protestors and discussed by CAISO in its
filing as described below, as well as any others, to eliminating
convergence bidding indefinitely at intertie scheduling points. Please
be prepared to discuss whether these alternatives could be implemented
and how the alternatives will address the costs identified by CAISO
that are attributed to convergence bidding at intertie scheduling
points.

--Prohibit offsetting internal and external virtual bids.
--Implement a settlement rule that would neutralize the price arbitrage
of the hour-ahead scheduling process and real-time dispatch.
--Modify the timing of convergence bidding liquidation and settlement.
For instance, CAISO states that it considered keeping day-ahead awarded
virtual supply and demand positions in the hour ahead scheduling
process.
--Modify the existing allocation of the real-time imbalance energy
offset to measured demand, to more accurately reflect cost causation.
--The approach utilized in the New York Independent System Operator to
settle the interties.\9\
---------------------------------------------------------------------------

    \9\ NYISO is a net importer and schedules imports and exports in
the hour-ahead process, similar to CAISO's hour-ahead scheduling
process. Where there is no congestion on external interfaces, NYISO
will settle imports and exports at the time-weighted average of the
real-time price at the relevant proxy bus. Imports receive a bid
production cost guarantee if the real-time price is lower than their
offer price. CAISO Filing at 18.
---------------------------------------------------------------------------

--Pay as bid or pay the greater of the bid or the real-time dispatch
price.

4:15 p.m.-4:30 p.m.--Closing Remarks.

[FR Doc. 2011-32765 Filed 12-21-11; 8:45 am]
BILLING CODE 6717-01-P


[Federal Register Volume 76, Number 160 (Thursday, August 18, 2011)]
[Notices]
[Pages 51453-51457]
[FR Doc No: 2011-21034]

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

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-65125; File No. SR-NASDAQ-2011-105]

Self-Regulatory Organizations; The NASDAQ Stock Market LLC;
Notice of Filing of Proposed Rule Change To Establish an Acceptable
Trade Range for Quotes and Orders Entered on the NASDAQ Options Market

August 12, 2011.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934
(``Act''),\1\ and Rule 19b-4 thereunder,\2\ notice is hereby given that
on August 2, 2011, The NASDAQ Stock Market LLC (``NASDAQ'') filed with
the Securities and Exchange Commission (``Commission'') the proposed
rule change as described in Items I and II below, which Items have been
prepared by NASDAQ. The Commission is publishing this notice to solicit
comments on the proposed rule change from interested persons.
---------------------------------------------------------------------------

    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
---------------------------------------------------------------------------

I. Self-Regulatory Organization's Statement of the Terms of the
Substance of the Proposed Rule Change

    NASDAQ proposes to establish an Acceptable Trade Range for quotes
and orders entered on the NASDAQ Options Market (``NOM''). Similar
mechanisms are used successfully on other exchanges to protect
investors and members by limiting volatility and obvious errors.
    The text of the proposed rule change is available at http://NASDAQ.cchwallstreet.com/, at NASDAQ's principal office, 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, NASDAQ 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. NASDAQ 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
    Background. In the current high-speed electronic market
environment, various trading centers grapple with issues associated
with thinly traded securities such as price dislocations, wide quotes,
and erroneous executions that can result in trade cancellations. Though
these situations are not overly prevalent, they can produce confusion
and frustration among market participants. As a custodian and operator
of several U.S. exchanges, NASDAQ believes that it is always prudent
and appropriate to consider system enhancements that will preclude
potential future issues with or unforeseen gaps in the existing
structure of its trading systems.
    Accordingly, NASDAQ is proposing to adopt a mechanism that will
prevent the NOM trading system (``System'') from experiencing dramatic
price swings. This circumstance can exist if, for example, a market
order or aggressively priced limit order is entered that is larger than
the total volume of contracts quoted at the top-of-book across all U.S.
options exchanges. Currently, without any protections in place, this
could result in options executing at prices that have little or no
relation to the theoretical price of the option.
    For example, in a thinly traded option:
    Away Exchange Quotes:

----------------------------------------------------------------------------------------------------------------
                    Exchange                         Bid size        Bid price      Offer price     Offer size
----------------------------------------------------------------------------------------------------------------
PHLX............................................              10           $1.00           $1.05              10
NYSE Arca.......................................              10            1.00            1.05              10
NYSE Amex.......................................              10            1.00            1.10              10
BOX.............................................              10            1.00            1.15              10
----------------------------------------------------------------------------------------------------------------

    NOM Price Levels:

----------------------------------------------------------------------------------------------------------------
                    Exchange                         Bid size        Bid price      Offer price     Offer size
----------------------------------------------------------------------------------------------------------------
NOM.............................................              10           $1.00           $1.05              10

NOM.............................................  ..............  ..............            1.10              10
NOM.............................................  ..............  ..............            1.40              10
NOM.............................................  ..............  ..............            5.00              10
----------------------------------------------------------------------------------------------------------------

    If NOM receives a routable market order to buy 80 contracts, the
System will respond as described below:

--10 contracts will be executed at $1.05 against NOM
--10 contracts will be executed at $1.05 against PHLX
--10 contracts will be executed at $1.05 against NYSE Arca.
--10 contracts will be executed at $1.10 against NOM
--10 contracts will be executed at $1.10 against NYSE AMEX
--10 contracts will be executed at $1.15 against BOX
    After these executions, there are no other known valid away
exchange quotes. The NBBO is therefore comprised of the remaining
interest on the NOM book, specifically 10 contracts at $1.40 and 10
contracts at $5.00. In the absence of an Acceptable Trade Range
mechanism, the order would execute against the remaining interest at
$1.40 and $5.00, resulting in potential harm to investors.
    To bolster the normal resilience and market behavior that
persistently produces robust reference prices, NOM is proposing to
create a level of protection that prevents the market from moving
beyond set thresholds. The thresholds consist of a reference price plus
(minus) set dollar amounts based on the nature of the option and the
premium of the option. The exchange is not introducing a new concept.
In fact, The NASDAQ Stock Market, NASDAQ OMX PSX, and NASDAQ OMX BX all
place a limit on the prices at which market orders will be allowed to
execute.\3\
---------------------------------------------------------------------------

    \3\ NASDAQ believes that the proposed Acceptable Trade Range
mechanism is superior to the market collar orders currently used in
equity markets because the Acceptable Trade Range will apply to all
orders rather than just unpriced orders. Additionally, rather than
immediately cancelling the order, the market would continue to work
the order for execution. See NASDAQ Stock Market rule 4751(f)(13),
NASDAQ OMX BX 4751(f)(10), and NASDAQ OMX PSX 3301(f)(9).
---------------------------------------------------------------------------

    System Operation. The proposed Acceptable Trade Range would work as
follows: Prior to executing orders received by the exchange, an
Acceptable Trade Range is calculated to determine the range of prices
at which orders may be executed. When an order is initially received,
the threshold is calculated by adding (for buy orders) or subtracting
(for sell orders) a value,\4\ as discussed below, to the National Best
Offer for buy orders or the National Best Bid for sell orders to
determine the range of prices that are valid for execution. A buy
(sell) order will be allowed to execute up (down) to and including the
maximum (minimum) price within the Acceptable Trade Range. The
Acceptable Trade Range threshold becomes the reference price for the
next Acceptable Trade Range calculation. If an order cannot be
completely executed within the Acceptable Trade Range, and the limit
price of the order is greater (for buy orders) or less (for sell
orders) than the Acceptable Trade Range threshold, the unexecuted
portion of the original order will be posted at the Acceptable Trade
Range threshold. The order will remain posted for a brief period, not
to exceed one second, to allow the market to refresh and to determine
whether or not more liquidity will become available (on NOM or any
other exchange if the order is designated as routable) within the
posted price of the order before moving on to a new Threshold Price.
The Acceptable Trade Range threshold, at which the order is posted,
then becomes the new reference price \5\ and a new threshold is
calculated. Once the brief pause has expired, if the order has not been
fully executed, it will be allowed to execute up to and including the
new Acceptable Trade Range Threshold Price.
---------------------------------------------------------------------------

    \4\ The value that is to be added to the reference price will be
set by the exchange and posted on the exchange Web site: http://www.nasdasqtrader.com.
    \5\ If a new NBB is received that is greater than a buy order
posted at the Acceptable Trade Range threshold, or a new NBO is
received that is lower than a sell order posted at the Acceptable
Trade Range threshold, the new NBB (for buy orders) or NBO (for sell
orders) will be the new reference price.
---------------------------------------------------------------------------

    During the brief pause, NOM will display the Acceptable Trade Range
Threshold Price on one side of the market and the best available price
on the opposite side of the market using a ``non-firm'' indicator.\6\
This allows the order setting the Acceptable Trade Range Threshold
Price to retain price/time priority in the NOM book and also prevents
any later-entered order from accessing liquidity ahead of it. If NOM
were to display trading interest available on the opposite side of the
market, that trading interest would be automatically accessible to
later-entered orders during the period when the order triggering the
Acceptable Trade Range is paused. Following the Posting Period, the
Exchange will return to a normal trading state and disseminate its best
bid and offer.
---------------------------------------------------------------------------

    \6\ Non-firm quote indication values are described on page 18 of
the specifications disseminated by the Options Price Regulatory
Authority. See http://www.opradata.com/specs/participant_interface_specification.pdf.
---------------------------------------------------------------------------

    NASDAQ believes that disseminating a non-firm quotation message as
described above is consistent with its obligations under the SEC Quote
Rule.\7\ The fact that NASDAQ is experiencing volatility that is strong
enough to trigger the Acceptable Trade Range mechanism qualifies as an
unusual market condition. NASDAQ expects such situations to be rare,
and as described below it will set the parameters of the mechanism at
levels that will ensure that it is triggered quite infrequently. In
addition, the Acceptable Trade Range mechanism will cause the market to
pause for no more than one second, a briefer pause than occurs in other
markets that are experiencing and attempting to dampen volatility.\8\
Importantly, the brief pause only occurs after the Exchange has already
executed transactions--potentially at multiple price levels--rather
than pausing before executing any transactions in the hopes of
attracting initial liquidity.
---------------------------------------------------------------------------

    \7\ 17 CFR 242.602.
    \8\ For example, the NASDAQ Acceptable Trade Range mechanism
will pause for a briefer period than the Liquidity Replenishment
Point or ``LRP'' employed by the New York Stock Exchange. The LRP
resembles the Acceptable Trade Range in that it also is designed to
dampen volatility under similar circumstances, it pauses the market
in the affected security, and it disseminates to the network
processor a non-firm quote condition during the resulting pause. See
NYSE Rules 1000(a)(iv) and 60(e)(ii). Unlike the Acceptable Trade
Range mechanism, the LRP can exceed one second in duration.
---------------------------------------------------------------------------

    Importantly, the Acceptable Trade Range is neutral with respect to
away markets. The order may route to other destinations to access
liquidity priced within the Acceptable Trade Range provided the order
is designated as routable. If the order still remains unexecuted, this
process will repeat until the order is executed, cancelled, or posted
at its limit price. If after an order is routed to the full size of an
away exchange and additional size remains available, the remaining
contracts will be posted on NOM at a price that

assumes the away market has executed the routed order. This practice of
routing and then posting is consistent with the national market system
plan governing trading and routing of options orders and the NOM
policies and procedures that implement that plan.\9\
---------------------------------------------------------------------------

    \9\ See Options Order Protection and Locked/Crossed Markets
Plan; Securities Exchange Act Release No. 60405 (July 30, 2009), 74
FR 39362 (August 6, 2009); NOM Rules Chapter VI, Section 7(b)(3)(C).
Section 5(b)(v) of the Plan provides an exception from trade through
prevention when: ``[t]he transaction that constituted the Trade-
Through was effected by a Participant that simultaneously routed an
Intermarket Sweep Order to execute against the full displayed size
of any Protected Quotation that was traded through;'' [sic]
---------------------------------------------------------------------------

    For example, assume that the Acceptable Trade Range is set for
$0.05 and the following quotations are posted in all markets:
    Away Exchange Quotes:

----------------------------------------------------------------------------------------------------------------
                    Exchange                         Bid size        Bid price      Offer price     Offer size
----------------------------------------------------------------------------------------------------------------
ISE.............................................              10           $0.75           $0.90              10
AMEX............................................              10            0.75            0.92              10
PHLX............................................              10            0.75            0.94              10
----------------------------------------------------------------------------------------------------------------

    NOM Price Levels:

----------------------------------------------------------------------------------------------------------------
                    Exchange                         Bid size        Bid price      Offer price     Offer size
----------------------------------------------------------------------------------------------------------------
NOM.............................................              10           $0.75           $0.90              10
NOM.............................................  ..............  ..............            0.95              10
NOM.............................................  ..............  ..............            0.97              10
NOM.............................................  ..............  ..............            1.00              20
----------------------------------------------------------------------------------------------------------------

    NOM receives a routable order to buy 70 contracts at $1.10. The
Acceptable Trade Range is $0.05 and the reference price is the National
Best Offer--$0.90. The Acceptable Trade Range threshold is then $0.90 +
$0.05 = $0.95. The order is allowed to execute up to and including
$0.95. The System then pauses for a brief period not to exceed one
second to allow the market (including other exchanges) to refresh and
to determine whether additional liquidity will become available within
the order's posted price. If additional liquidity becomes available on
NOM or any away market, that liquidity will be accessed and executed.
     10 contracts will be executed at $0.90 against NOM
     10 contracts will be executed at $0.90 against ISE
     10 contracts will be executed at $0.92 against AMEX
     10 contracts will be executed at $0.94 against PHLX
     10 contracts will be executed at $0.95 against NOM
     Then, after executing at multiple price levels, the order
is posted at $0.95 for a brief period not to exceed one second to
determine whether additional liquidity will become available.
     A new Acceptable Trade Range Threshold Price of $1.00 is
determined (new reference price of $0.95 + $0.05 = $1.00)
     If, during the brief pause not to exceed 1 second, no
liquidity becomes available within the order's posted price of $0.95,
the System will then execute 10 contracts at $0.97, and 10 contracts at
$1.00 \10\
---------------------------------------------------------------------------

    \10\ The brief pause described above will not disadvantage
customers seeking the best price in any market. For example, if in
the example above an NYSE ARCA quote of $0.75 x $0.96 with size of
10 x 10 is received, a routable order would first route to NYSE ARCA
at $0.96, then execute against NOM at $0.97.
---------------------------------------------------------------------------

    Similarly, if a new order is received when a previous order has
reached the Acceptable Trade Range threshold, the Threshold Price will
be used as the reference price for the new Acceptable Trade Range
threshold. Both orders would then be allowed to execute up (down) to
the new Threshold Price.
    For example:
    Away Exchange Quotes:

----------------------------------------------------------------------------------------------------------------
                    Exchange                         Bid size        Bid price      Offer price     Offer size
----------------------------------------------------------------------------------------------------------------
ISE.............................................              10           $0.75           $0.90              10
AMEX............................................              10           $0.75           $0.92              10
PHLX............................................              10           $0.75           $0.94              10
----------------------------------------------------------------------------------------------------------------

    NOM Price Levels:

----------------------------------------------------------------------------------------------------------------
                    Exchange                         Bid size        Bid price      Offer price     Offer size
----------------------------------------------------------------------------------------------------------------
NOM.............................................              10           $0.75           $0.90              10
NOM.............................................  ..............  ..............           $0.95              10
NOM.............................................  ..............  ..............           $1.05              20
----------------------------------------------------------------------------------------------------------------

     NOM receives a routable order to buy 60 contracts at
$1.10. The Acceptable Trade Range is $0.05 and the reference price is
the National Best Offer--$0.90. The Acceptable Trade Range threshold is
then $0.90 + $0.05 = $0.95. The order is allowed to execute up to and
including $0.95.
     10 contracts will be executed at $0.90 against NOM
     10 contracts will be executed at $0.90 against ISE

     10 contracts will be executed at $0.92 against AMEX
     10 contracts will be executed at $0.94 against PHLX
     10 contracts will be executed at $0.95 against NOM
     Then, after executing at multiple price levels, the order
is posted at $0.95 for a brief period not to exceed one second to
determine whether additional liquidity will become available.
     A new Acceptable Trade Range Threshold Price of $1.00 is
determined (new reference price of $0.95 + $0.05 = $1.00)
     If, during the brief period not to exceed one second, a
second order is received to buy 10 contracts at $1.25, the two orders
would then post at the new Acceptable Trade Range Threshold price of
$1.00 for a brief period not to exceed one second to determine whether
additional liquidity will become available.
     A new Acceptable Trade Range threshold of $1.05 will be
calculated.
     If no additional liquidity becomes available within the
posted price of the orders ($1.00) during the brief period not to
exceed one, the orders would execute 10 contracts each against the
order on the NOM book at $1.05
    Setting Acceptable Range Values. The options class premium will be
the dominant factor in determining the Acceptable Trade Range.
Generally, options with lower premiums tend to be more liquid and have
tighter bid/ask spreads; options with higher premiums have wider
spreads and less liquidity. Accordingly, a table consisting of several
steps based on the premium of the option will be used to determine how
far the market for a given option will be allowed to move. This table
or tables would be listed on the NASDAQTrader.com Web site and any
periodic updates to the table would be announced via an Options Trader
Alert.
    For example, looking at some SPY January 2011 Call options on
December 27th of 2010:
    Bid/Offer of SPY Jan 126 Call (at or near-the-money): $1.78 x $1.79
(several hundred contracts on bid and offer)
    Bid/Offer of SPY Jan 80 Call (deep in-the-money): $45.61 x $45.87
(20 contracts on each side)
    The deep in-the-money calls (Jan 80 calls) have a wider spread
($45.87-$45.61 = $0.26) compared to a spread of $0.01 for the at-the-
money calls (Jan 126 calls). Therefore, it is appropriate to have
different thresholds for the two options. For instance, it may make
sense to have a $0.05 threshold for the at-the-money strikes (Premium <
$2) and a $0.50 threshold for the deep in-the-money strikes (Premium >
$10).
    To consider another example, the January 2011 CSCO put options on
December 27th of 2010:
    Bid/Offer of CSCO 20 Jan Put (at or near-the-money): $0.11 x $0.12
(300x550)
    Bid/Offer of CSCO 35 Jan Put (deep in-the-money): $14.35 x $15.20
(48x18)
    Even though CSCO has a much lower share price than SPY, and is a
different type of security (it is a common stock of a technology
company whereas SPY is an ETF based on the S&P 500 Index), the pattern
is the same. The option with the lower premium has a very narrow spread
of $0.01 with significant size displayed whereas the higher premium
option has a wide spread ($0.85) and less size displayed.
    The Acceptable Trade Range settings will be tied to the option
premium. However, other factors will be considered when determining the
exact settings. For example, Acceptable Ranges may change if market-
wide volatility is as high as it was during the financial crisis in
2008 and 2009, or if overall liquidity is low based on historical
trends. These different market conditions may present the need to
adjust the threshold amounts from time to time to ensure a well-
functioning market. Without adjustments, the market may become too
constrained or conversely, prone to wide price swings. As stated above,
the Exchange would publish the Acceptable Trade Range table or tables
on the NASDAQTrader.com Web site. The Exchange does not foresee
updating the table(s) often or intraday. The Exchange will provide
sufficient advanced notice of changes to the Acceptable Trade Range
table to its membership via Options Trader Alerts.
    The Acceptable Trade Range settings would generally be the same
across all options traded on NOM, although NASDAQ proposes to maintain
flexibility to set them separately based on characteristics of the
underlying security. For instance, Google is a stock with a high share
price ($602.38 closing price on December 27th). Google options
therefore may require special settings due to the risk involved in
actively quoting options on such a high-priced stock. Option spreads on
Google are wider and the size available at the best bid and offer is
smaller. Google could potentially need a wider threshold setting
compared to other lower-priced stocks. There are other options that fit
into this category (e.g. AAPL) which makes it necessary to have
threshold settings that have flexibility based on the underlying
security. Additionally, it is generally observed that options subject
to the Penny Pilot program quote with tighter spreads than options not
subject to the Penny Pilot. Currently, NASDAQ expects to set Acceptable
Trade Ranges for three categories of options: Standard Penny Pilot,
Special Penny Pilot (IWM, QQQQ, SPY), and Non-Penny Pilot.\11\
---------------------------------------------------------------------------

    \11\ NASDAQ notes that the Acceptable Range Test in place at
NASDAQ OMX PHLX--PHLX Rule 1082(a)(ii)(B)(3)(f)--currently provides
for this flexibility.
---------------------------------------------------------------------------

2. Statutory Basis
    NASDAQ believes the proposed rule change is consistent with the
provisions of Section 6 of the Act,\12\ in general and with Section
6(b)(5) of the Act,\13\ in particular, which requires that the rules of
an exchange be designed to prevent fraudulent and manipulative acts and
practices, promote just and equitable principles of trade, foster
cooperation and coordination with persons engaged in regulating,
clearing, settling, processing information with respect to, and
facilitating transactions in securities, remove impediments to and
perfect the mechanism of a free and open market and a national market
system, and, in general, protect investors and the public interest. The
proposed rule change is consistent with these requirements in that it
will reduce the negative impacts of sudden, unanticipated volatility in
individual NOM options, and serve to preserve an orderly market in a
transparent and uniform manner, enhance the price-discovery process,
increase overall market confidence, and promote fair and orderly
markets and the protection of investors.
---------------------------------------------------------------------------

    \12\ 15 U.S.C. 78f.
    \13\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------

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

    NASDAQ does not believe that the proposed rule change will result
in any burden on competition that is not necessary or appropriate in
furtherance of the purposes of the Act, as amended.

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

    Written comments were neither solicited nor 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 up to 90 days of such date 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/sro.shtml); or
     Send an e-mail to<EMAIL_ADDRESS>Please include
File Number SR-NASDAQ-2011-105 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-NASDAQ-2011-105. 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 on
official business days between the hours of 10 a.m. and 3 p.m. Copies
of such filing also will be available for inspection and copying at the
principal office of NASDAQ. 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-NASDAQ-2011-105 and should be submitted on or before
September 8, 2011.

    For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\14\
---------------------------------------------------------------------------

    \14\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------

Elizabeth M. Murphy,
Secretary.
[FR Doc. 2011-21034 Filed 8-17-11; 8:45 am]
BILLING CODE 8011-01-P


[Federal Register Volume 79, Number 132 (Thursday, July 10, 2014)]
[Rules and Regulations]
[Pages 39342-39343]
[FR Doc No: 2014-15951]

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

DEPARTMENT OF TRANSPORTATION

Federal Motor Carrier Safety Administration

49 CFR Part 395

Hours of Service for Commercial Motor Vehicle Drivers; Regulatory
Guidance Concerning Records of Duty Status Generated by Logging
Software Programs

AGENCY: Federal Motor Carrier Safety Administration (FMCSA), DOT.

ACTION: Notice of regulatory guidance.

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

SUMMARY: FMCSA revises its regulatory guidance concerning records of
duty status (RODS) generated by logging software programs on laptop
computers, tablets, and smartphones. These logging software programs
are used by certain drivers to help them prepare RODS, but the
computers, tablets, and smartphones with such software do not meet
FMCSA's requirements for automatic on-board recording devices (AOBRDs).
The revision of the guidance clarifies the relationship between the
Agency's policy concerning the use of logging software programs and the
Agency's January 4, 2011, regulatory guidance concerning electronic
signatures by removing the requirement that drivers print and sign
paper copies of RODS generated through such logging software, provided
the driver is able to sign the RODS electronically at the end of each
work day and display the electronic record at the roadside. This
guidance provides the motor carrier industry, and Federal, State, and
local motor carrier enforcement officials with uniform information
regarding computer software and devices used by drivers to assist them
with hours-of-service (HOS) recordkeeping. All prior Agency
interpretations and regulatory guidance, including memoranda and
letters, are rescinded to the extent they are inconsistent with this
guidance.

DATES: This regulatory guidance is effective July 10, 2014.

FOR FURTHER INFORMATION CONTACT: Thomas L. Yager, Chief, Driver and
Carrier Operations Division, Federal Motor Carrier Safety
Administration, 1200 New Jersey Avenue SE., Washington, DC 20590;
telephone<PHONE_NUMBER>; email<EMAIL_ADDRESS>
SUPPLEMENTARY INFORMATION:

Legal Basis

    The Motor Carrier Safety Act of 1984 (Pub. L. 98-554, Title II, 98
Stat. 2832, October 30, 1984) (the 1984 Act) authorizes the Secretary
of Transportation to regulate commercial motor vehicles (CMVs) and
equipment, and the drivers and motor carriers that operate them.
Section 211 of the 1984 Act also gives the Secretary broad power to
``prescribe recordkeeping and reporting requirements'' and to ``perform
other acts the Secretary considers appropriate.'' (49 U.S.C.
31133(a)(8) and (10)). The Administrator of FMCSA has been delegated
authority under 49 CFR 1.87(f) to carry out the functions vested in the
Secretary by 49 U.S.C. chapter 311, subchapters I and III, relating to
CMV programs and safety regulation.

Background

    On January 4, 2011, FMCSA published regulatory guidance for Sec.
390.31 of the Federal Motor Carrier Safety Regulations (FMCSRs)
concerning electronic signatures and documents (76 FR 411). The
guidance explained how electronic signatures could be used under the
existing regulations while the Agency considers a notice-and-comment
rulemaking to amend the FMCSRs to explicitly allow electronic
signatures on documents required by the safety regulations. The
guidance provides a short-term solution for allowing the use of
electronic signatures, to the greatest extent possible under the
existing regulations, consistent with the requirements of the
Government Paperwork Elimination Act of 1998 (GPEA) and the Electronic
Signatures in Global and National Commerce Act of 2000 (E-SIGN). The
purpose of GPEA is to improve customer service and governmental
efficiency through the use of information technology. The purpose of E-
SIGN is to promote the use of electronic recordkeeping in private
commerce by establishing legal equivalence between traditional paper-
based methods and electronic methods.
    On April 28, 2014, FMCSA published a notice of proposed rulemaking
concerning ``Electronic Documents and Signatures'' (79 FR 23306). The
proposed regulatory amendments would permit the use of electronic
methods to sign, certify, generate, exchange or maintain records so
long as the documents accurately reflect the information in the record
and can be used for their intended purpose.

Records of Duty Status

    Generally, drivers of CMVs as defined in 49 CFR 390.5 who are
subject to the Federal hours-of-service requirements must record their
duty status for each 24-hour period. However, the rules provide limited
exemptions to the RODS requirements, including an exemption for the
following drivers:
     CMV drivers (whether the vehicles require a commercial
driver's license (CDL) or not) who operate within 100 air-miles of
their normal work reporting location and satisfy the time limitations
and recordkeeping requirements of Sec.  395.1(e)(1).
     Drivers of property-carrying CMVs for which a CDL is not
required and who operate within a 150 air-mile radius of the location
where the driver reports for duty and satisfy the time limitations and
recordkeeping requirements of Sec.  395.1(e)(2).\1\
---------------------------------------------------------------------------

    \1\ A driver who qualifies for this exception is not eligible
for the 100 air-mile exception under 49 CFR 395.1(e)(1).
---------------------------------------------------------------------------

    For drivers that must prepare RODS, 49 CFR 395.8 specifies a
particular ``grid'' or type of form that must be used to document the
driver's activities during the 24-hour period.
    As an alternative to written RODS, 49 CFR 395.15 allows the use of
AOBRDs. The AOBRD regulation was adopted in 1988. To be considered a
compliant device, an AOBRD must be integrally synchronized with
specific operations of the CMV in which it is installed (see 49 CFR
395.2, Definitions, AOBRD). Use of AOBRDs is voluntary.
    Several vendors market software products to assist the driver in
recording and storing RODS information electronically. Laptop
computers, tablets, and smartphones running driver logging software
should not be confused with AOBRDs because the devices are not
integrally synchronized with the specific operations of the CMV on
which they are being used. Drivers must manually input their duty
status information (e.g., driving time, on-duty not driving, etc.)
directly into the computer, tablet or smartphone.
    Although FMCSA has allowed CMV drivers to use driver logging
software, the Agency's regulatory guidance explains that drivers must
print and sign the RODS that these devices generate, for each 24-hour
period, just as the driver would with any handwritten RODS. The
existing Questions 27 and 28 for Sec.  395.8 (available through
www.fmcsa.dot.gov) read as follows:
    ``Question 27: Would a driver who prepares his/her log on a
computer, `digitally' signs the log, and then transmits it directly to
the carrier, be in compliance with 49 CFR 395.8(f)(2)?
    Guidance: No. The driver's activities must be recorded in
accordance with the provisions of Sec.  395.8(f)(2). This section
requires that all entries relating to driver's duty status must be
legible and in the driver's own handwriting.''
    ``Question 28: May a driver use a computer to generate his or her
record

of duty status (log book) and then manually sign the computer printouts
in lieu of handwritten logs?
    Guidance: A driver may use a computer to generate the graph grid
and entries for the record of duty status or log books, provided the
computer-generated output includes the minimum information required by
Sec.  395.8 and is formatted in accordance with the rules. In addition,
the driver must:
    1. Be capable of printing the record of duty status for the current
24-hour period at the request of an enforcement officer.
    2. Print the record of duty status at the end of each 24-hour
period, and sign it in his or her handwriting to certify that all
entries required by this section are true and correct.
    3. Maintain a copy of printed and signed records of duty status for
the previous 7 consecutive days and make it available for inspection at
the request of an enforcement officer.''

Electronic Signatures and Hours-of-Service Records

    Question 11 from the January 2011 regulatory guidance notice for
Sec.  390.31 advises motor carriers and other parties that they may use
electronic methods to generate, sign, maintain and/or exchange any
document that is generated and maintained or exchanged by private
parties, regardless of whether FMCSA subsequently requires them to be
produced or displayed to Federal and State enforcement personnel. The
list of examples of documents includes RODS.
    The Regulatory Guidance for Sec.  390.31 was originally developed
to allow motor carriers to store documents in electronic format. The
January 2011 revisions to the Guidance expand the scope to allow
documents to be created, maintained, and generated in electronic
format. Specifically, as stated in the January 2011 Notice:
     Any electronic record or signature is considered the legal
equivalent of a paper document or signature if it is the functional
equivalent with respect to integrity, accuracy, and accessibility.
     [This revised] guidance establishes parity between paper
and electronic records and signatures, greatly expanding interested
parties' ability to use electronic records.
    The January 2011 regulatory guidance is consistent with the
Agency's previous policy concerning RODS prepared using logging
software in that it continues to accept them as equivalent to paper
documents. Signatures may be electronically embedded on printed copies
or may be manually added to printed copies of the records.
    Guidance Question 9 to Sec.  390.31 provides that documents stored
electronically must be capable of being reproduced in the same time
frame as the original document. A paper RODS must be presented to an
enforcement official upon request. Therefore, the electronically-stored
RODS must also be printed for an enforcement official upon request
during a roadside inspection.
    Today's guidance harmonizes the January 2011 guidance interpreting
Sec.  390.31 with the previously issued guidance interpreting 49 CFR
395.8. FMCSA withdraws Question 27 for Sec.  395.8, which currently
states that a driver who prepares his/her log on a computer,
`digitally' signs the log, and then transmits it directly to the
carrier, would not be in compliance with 49 CFR 395.8(f)(2). In
addition, FMCSA revises the response to Question 28 for Sec.  395.8 to
make clear that a driver may create, sign and store electronic RODS if
certain conditions are met.

Hours of Service for Commercial Motor Vehicle Drivers Regulatory
Guidance for 49 CFR 395.8, Driver's Record of Duty Status

    Question 28: May a driver use a computer, tablet, or smartphone
(that is not an Automatic On-Board Recording Device) to create,
electronically sign, and store the record of duty status (RODS)?
    Guidance: Yes. A driver may make manual duty-status entries to a
computer, tablet, or smartphone program that is used to generate the
graph grid and entries for the record of duty status (RODS) or log
book, provided the electronically-generated display (if any) and output
includes the minimum information required by Sec.  395.8 and is
formatted in accordance with that section. The driver must sign the
RODS (manually or electronically) at the end of each 24-hour period to
certify that all required entries are true and correct.
    (A) If electronic signatures are not used:
     The driver must print and manually sign the RODS daily.
     The driver must have in his or her possession the printed
and signed RODS for the prior seven consecutive days (if required on
those days).
     The driver should be given an opportunity to print and
manually sign the current day's RODS at the time of the inspection.
    (B) If RODS have been electronically signed:
     At the time of an inspection of records by an enforcement
official, the driver may display the current and prior seven days RODS
to the official on the device's screen.
     If the enforcement official requests printed copies of the
RODS, the driver must be given an opportunity to print the current and
prior seven days RODS (if required on those days) at the time of
inspection.

    Issued on: June 17, 2014.
Anne S. Ferro,
Administrator.
[FR Doc. 2014-15951 Filed 7-9-14; 8:45 am]
BILLING CODE 4910-EX-P


IEc DRAFT: May 2005 8 1 COMPARISONS OF COSTS, BENEFITS, AND OTHER IMPACTS CHAPTER 8 _________________________________________________________________________________

A final component of this assessment of the hazardous waste combustion ( HWC) maximum achievable control technology ( MACT) replacement standards is a comparison of the costs and benefits of the rule. This chapter uses two approaches for this comparison. We first consider costeffectiveness measures which provide estimates of expenditures per unit reduction of emissions for each air pollutant and estimates of the cost per unit of benefit achieved by the rule. We then compare the social costs of the replacement standards with the total monetized benefits of the rule. Costbenefit analysis is a central feature of virtually all economic assessments and evaluates the economic efficiency of environmental policies by measuring their costs and benefits, and hence their net impacts on society. From an economic viewpoint, the standards would enhance economic efficiency if those who gain from the rule could compensate those who experience a welfare loss because of the standards and still remain better off. Cost benefit and cost effectiveness analyses, however, should not be the only tools used in the establishment of any final regulatory action. The HWC MACT replacement standards are expected to provide other benefits that are not expressed in monetary terms. When these benefits are taken into account, along with equity enhancing effects such as environmental justice and impacts on children's health, the benefit cost comparison becomes more complex. Consequently, the final regulatory decision becomes a policy judgement that takes into account efficiency as well as equity concerns.

COST EFFECTIVENESS ANALYSIS Overview We developed two types of cost effectiveness measures:

° cost per unit reduction of emissions for each air pollutant; and IEc DRAFT: May 2005 1 Martineau, Robert J. and David P. Novello, eds. 1998. The Clean Air Act Handbook, American Bar Association Publishing, Chicago, as cited in U. S. EPA, Assessment of the Potential Costs, Benefits, and Other Impacts of the Hazardous Waste Combustion MACT Standards: Final Rule, Office of Solid Waste, July 1999.

2 While this presents a high end estimate of costs ( i. e., there are no market adjustments), it is consistent with the method used to estimate emissions reductions ( e. g., all facilities operate in compliance with the HWC MACT replacement standards). This is a conservative estimate of cost effectiveness, because it does not take into account either the market adjusted costs or reduced emissions ( e. g., increased benefits) associated with systems that stop burning hazardous waste in response to the standards.

8 2 ° cost per unit of benefit ( e. g., benefits in the form of health and ecological improvements).

The first cost effectiveness measure is useful for comparing the resources required to reduce emissions under different air pollution policies. Moreover, EPA has typically used this costeffectiveness measure ( defined as " dollar per ton of pollutant removed") to assess the decision to go beyond the floor ( BTF) for MACT standards. 1 The second measure, cost per unit benefit, provides insight into how efficiently policies achieve specific environmental or health improvements ( e. g., cost per avoided premature death). However, because this measure only includes monetized benefits, it overestimates costs per unit benefit and is therefore of value primarily in comparing rules with similar non monetized benefits.

Cost Effectiveness: Dollar per Unit of Reduced Emissions There are several ways to assess the cost effectiveness of the HWC MACT replacement standards. One approach is to divide the total costs of the standards by the total emissions reductions achieved across all pollutants. Aggregate cost effectiveness figures, however, are misleading because they do not account for differences in the cost effectiveness of reducing emissions of different pollutants or reflect differences in the toxicity of different pollutants. To assess cost effectiveness more appropriately, we disaggregate emissions reductions and control costs by pollutant. The development of these pollutant specific cost effectiveness estimates helps EPA compare alternative emissions standards for individual pollutants. The two analytic components of pollutant specific costeffectiveness measures are as follows:

° emission control expenditures per air pollutant for each regulatory option; and ° emission reductions by pollutant under each regulatory option.

To estimate cost effectiveness by pollutant, we use engineering cost information for various pollution control measures as described in Chapter 4.2 Within each source category ( cement kilns, incinerators, and LWAKs), we sum pollutant specific costs and emissions reductions across individual IEc DRAFT: May 2005 3 We evaluate the cost effectiveness of the Agency Preferred Approach incremental to the Option A Floor to ascertain the marginal cost effectiveness of going beyond the Option A Floor.

8 3 systems. When calculating these values, we make adjustments for control equipment that simultaneously reduces emissions for more than one air pollutant. For example, carbon injection or carbon beds can control both mercury and dioxins/ furans. In addition, a fabric filter that may be required as part of a carbon injection system will also reduce emissions of particulate matter, semivolatile metals, and low volatile metals. In the case of carbon injection ( CI), we assign costs to individual pollutants based on the emissions reduction required for each pollutant. For example, if the installation of carbon injection equipment is expected at a combustion system that requires a 40 percent reduction in dioxin emissions and an 80 percent reduction in mercury emissions, the individual cost calculations for this system are:

Cost for Mercury control = [ 80/( 80+ 40) x CI cost]

Cost for Dioxin control = [ 40/( 80+ 40) x CI cost]

These calculations split the costs of the carbon injection system proportionately between dioxin and mercury.

The emissions reductions for the Option A Floor, the Option C Floor, and the Option D Floor are calculated as the difference between baseline emissions ( e. g., emissions under the 2002 Interim Standards) and the emissions allowed under each option. Emissions reductions associated with the Agency Preferred Approach, which is a beyond the floor version of Option A, are calculated twice: incremental to baseline emissions and also incremental to the Option A Floor. 3 Exhibit 8 1 indicates the regulatory options under which emission reductions are expected for each pollutant. Where there is no value in the table, no reduction in emissions is expected. For example, in the baseline all LWAKs and incinerators meet the mercury standards specified under the Option A Floor. Since none of the controls these systems are expected to implement for other pollutants under the Option A Floor are likely to control mercury emissions, incinerators and LWAKs are unlikely to reduce mercury emissions under the Option A Floor. In addition, combustion systems that are required to reduce emissions of just one air pollutant may reduce emissions of other pollutants as they implement pollution control measures for the former. Whether these ancillary reductions are realized depends on which pollution control measures facilities decide to implement. IEc DRAFT: May 2005 8 4 Exhibit 8 1 EXPECTED AGGREGATE ANNUAL EMISSION REDUCTIONS Source Options Pollutant Dioxin ( TEQ), g Hg, Tons SVM, Tons LVM, Tons PM, Tons TCl, Tons LWAK Baseline to Agency Preferred Approach   0.01

Option A Floor to Agency Preferred Approach

Baseline to Option A Floor   0.01

Baseline to Option C Floor   0.01

Baseline to Option D Floor

Incinerators Baseline to Agency Preferred Approach 0.20  0.15 0.04 10.62

Option A Floor to Agency Preferred Approach

Baseline to Option A Floor 0.20  0.15 0.04 10.62

Baseline to Option C Floor 0.20  0.49 0.23 10.62

Baseline to Option D Floor 0.20  0.86 0.26 129.35

Cement Kilns Baseline to Agency Preferred Approach  0.09 0.46 0.11 38.40

Option A Floor to Agency Preferred Approach

Baseline to Option A Floor  0.09 0.46 0.11 38.40

Baseline to Option C Floor  0.09 1.95 0.12 38.39

Baseline to Option D Floor  0.39 3.15 0.19 479.90

Liquid Boilers Baseline to Agency Preferred Approach 0.20 0.14 1.66 8.35 1,581.66

Option A Floor to Agency Preferred Approach 0.06

Baseline to Option A Floor 0.14 0.14 1.66 8.35 1,581.66

Baseline to Option C Floor 0.14 0.14 1.66 6.80 1,581.66

Baseline to Option D Floor 0.14 0.22 1.83 11.66 2,356.91  IEc DRAFT: May 2005 Exhibit 8 1 EXPECTED AGGREGATE ANNUAL EMISSION REDUCTIONS Source Options Pollutant Dioxin ( TEQ), g Hg, Tons SVM, Tons LVM, Tons PM, Tons TCl, Tons 8 5 Coal Boilers Baseline to Agency Preferred Approach  0.01 0.66 0.88 507.00

Option A Floor to Agency Preferred Approach   0.45 0.39 468.42

Baseline to Option A Floor  0.01 0.20 0.49 38.59

Baseline to Option C Floor  0.01 0.20 0.49 38.59

Baseline to Option D Floor  0.01 0.20 0.49 38.59

HCl Production Furnaces Baseline to Agency Preferred Approach      106.94 Option A Floor to Agency Preferred Approach

Baseline to Option A Floor      106.94 Baseline to Option C Floor      106.94 Baseline to Option D Floor      126.78 We develop individual cost effectiveness ( CE) measures for each MACT standard as follows:

° Cost Effectiveness Measures for the Option A Floor, the Option C Floor, and the Option D Floor   Costs and emission reductions are incremental to the baseline ( e. g., compliance with the 2002 Interim Standards).

° Cost Effectiveness Measures for Agency Preferred Approach   Costs and emission reductions are incremental to the baseline and to the Option A MACT Floor.

Cost Effectiveness Results We summarize the cost effectiveness results in Exhibit 8 2 by pollutant, source category, and IEc DRAFT: May 2005 8 6 regulatory option. Cost effectiveness results are measured in $ 1,000 per reduced ton of emissions for all pollutants except dioxins. Cost effectiveness for dioxins is expressed as $ 1,000 per reduced gram of toxicity equivalent. In some cases, we do not present cost effectiveness figures because facilities are not required to achieve emissions reduction under a specific standard. For example, all incinerators currently meet the Option A Floor standards for mercury emissions; therefore, we do not report incinerator cost effectiveness results for the mercury standard under the Option A Floor. Below, we summarize key findings from the results:

Exhibit 8 2 COST EFFECTIVENESS RESULTSa Pollutant Source Options Dioxin ( TEQ), $ 1,000/ gram Hg, $ 1,000/ ton SVM, $ 1,000/ ton LVM, $ 1,000/ ton PM, $ 1,000/ ton TCl, $ 1,000/ ton LWAKs Baseline to Agency Preferred Approach   $ 1,788 $ 5,850

Option A Floor to Agency Preferred Approach

Baseline to Floor Option A   $ 1,788 $ 5,850

Baseline to Floor Option C   $ 1,788 $ 5,850

Baseline to Floor Option C  $ 117,743  $ 10,368

Incinerators Baseline to Agency Preferred Approach $ 4,258  $ 1,021 $ 760 $ 90.44

Option A Floor to Agency Preferred Approach

Baseline to Floor Option A $ 4,258  $ 1,021 $ 760 $ 90.44

Baseline to Floor Option C $ 4,258  $ 4,942 $ 9,116 $ 90.44

Baseline to Floor Option D $ 4,258  $ 2,360 $ 4,052 $ 18.17

Cement Kilns Baseline to Agency Preferred Approach  $ 10,002 $ 209 $ 11,433 $ 15.81

Option A Floor to Agency Preferred Approach

Baseline to Floor Option A  $ 10,002 $ 209 $ 11,433 $ 15.81

Baseline to Floor Option C  $ 10,002 $ 1,394 $ 17,200 $ 15.81

Baseline to Floor Option D  $ 24,342 $ 442 $ 5,156 $ 5.60  IEc DRAFT: May 2005 Exhibit 8 2 COST EFFECTIVENESS RESULTSa Pollutant Source Options Dioxin ( TEQ), $ 1,000/ gram Hg, $ 1,000/ ton SVM, $ 1,000/ ton LVM, $ 1,000/ ton PM, $ 1,000/ ton TCl, $ 1,000/ ton 8 7 Liquid Boilers Baseline to Agency Preferred Approach $ 447 $ 51,829 $ 3,241 $ 429 $ 8.53

Option A Floor to Agency Preferred Approach $ 647

Baseline to Floor Option A $ 364 $ 51,829 $ 3,241 $ 429 $ 8.53

Baseline to Floor Option C $ 364 $ 52,407 $ 3,676 $ 231 $ 8.53

Baseline to Floor Option D $ 364 $ 62,753 $ 1,369 $ 261 $ 9.37

Coal Boilers Baseline to Agency Preferred Approach  $ 23,250 $ 223b $ 204b $ 2.82

Option A Floor to Agency Preferred Approach     $ 2.57

Baseline to Floor Option A  $ 23,250 $ 715 $ 368 $ 5.92

Baseline to Floor Option C  $ 23,250 $ 715 $ 368 $ 5.92

Baseline to Floor Option D  $ 23,250 $ 715 $ 368 $ 5.92

HCl Production Furnaces Baseline to Agency Preferred Approach      $ 1.56 Option A Floor to Agency Preferred Approach

Baseline to Floor Option A      $ 1.56 Baseline to Floor Option C      $ 1.56 Baseline to Floor Option D      $ 2.47 Notes: a. This table includes pollutants where more than one option was under consideration. b. Although the SVM and LVM standards for coal boilers are the same under the Agency Preferred Approach and the Option A Floor, the PM controls required under the Agency Preferred Approach have the ancillary effect of reducing SVM and LVM emissions. We incorporate these additional emissions reductions into our costeffectiveness estimates. Because the Agency Preferred Approach does not require coal boilers to achieve SVM or LVM emissions reductions beyond those associated with the Option A Floor, we do not estimate the incremental cost effectiveness of coal boilers complying with the Agency Preferred Approach for SVM and LVM incremental to the Option A Floor.

° Across options and combustion sectors, cost effectiveness measures exhibit wide variability. As shown in Exhibit 8 2, the cost effectiveness of the HWC MACT replacement standard options ranges from $ 1,600 per ton of reduced IEc DRAFT: May 2005 4 " Less cost effective" means that the emissions reduction is achieved at a higher cost per ton.

8 8 total chlorine emissions from HCl production furnaces to $ 118 million per ton of reduced mercury emissions from LWAKs. Dioxin control ranges from $ 364,000 to $ 4.3 million per gram reduced.

° The most cost effective reductions in PM emissions under the Agency Preferred Approach occur at coal boilers, where the cost effectiveness of reducing PM emissions is approximately $ 2,800 per ton. In contrast, the costeffectiveness of reducing PM emissions at incinerators under the Agency Preferred Approach is approximately $ 90,400 per ton.

° The reduction in dioxin emissions from liquid boilers under the Agency Preferred Approach incremental to the Option A Floor is less cost effective than the reduction achieved under the Option A Floor. 4 In contrast, the PM emissions reductions achieved by coal boilers under the Agency Preferred Approach incremental to the Option A Floor are more cost effective that the reductions achieved under the Option A Floor.

Cost Effectiveness: Dollar per Health and Ecological Benefit This section evaluates cost effectiveness per unit benefit ( e. g., cost per health case avoided). EPA developed this second cost effectiveness analysis to analyze and understand the relative costs of achieving specific benefits as standards become increasingly more stringent. The two components of this benefit cost effectiveness measure are as follows:

° pollutant specific health and ecological benefits associated with the replacement standards; and ° control expenditures associated with the pollutant specific emissions reductions responsible for these benefits.

Approach for Calculating Cost Effectiveness per Unit Benefit In order to relate costs to specific benefits, we identify the pollutants associated with specific benefits and determine the costs of controlling emissions of these pollutants. To determine the costs associated with pollutant specific emissions reductions, we do not use estimates of social costs, but instead use the direct compliance ( engineering cost) estimates presented in Chapter 4, similar to our IEc DRAFT: May 2005 5 Following this, all caveats regarding the cost methodology discussed in the dollar per unit of reduced pollutant section are also relevant to this benefits cost effectiveness analysis. As stated below, the analysis does not incorporate toxicity metrics into emissions estimates. In addition, the cost effectiveness analysis assumes that all systems will decide to comply with the standards. Costs may also be overestimated for some pollutants since the feed control cost measures represent a high end estimates of costs. Moreover, the analysis does not account for several technological issues, such as the relative ease with which a device can control one pollutant versus another. Finally, the quantified benefits included in this assessment, and therefore the cost effectiveness estimates, do not capture all of the benefits associated with the HWC MACT replacement standards.

8 9 analysis of costs per unit emissions reduction. 5 Because estimates of social costs include costs for some facilities that send waste offsite instead of complying with the standards, it is not possible to identify the pollutant( s) associated with these costs. Based on this engineering cost information, we estimate the cost effectiveness per unit benefit by dividing the costs associated with reducing emissions of a specific pollutant by the benefits resulting from these emissions reductions. For example, we calculate the cost effectiveness of PM related mortality benefits as follows:

Cost Effectiveness = Cost of controlling PM emissions Number of avoided PM related mortality cases = $ 16.8 million ÷ 0.46 avoided cases = $ 36.6 million per life saved.

We follow a similar procedure for calculating cost effectiveness with respect to morbidity and ecological benefits, using the total costs of control for each pollutant associated with specific morbidity, visibility, and ecological effects. It is worth noting that our cost effectiveness per unit benefit measures may be somewhat misleading because each measure reflects all of the costs associated with a pollutant but just one type of benefit. For example, the cost effectiveness measure associated with avoided PM related mortality accounts for all of the costs associated with controlling PM but reflects only the mortality related benefits, ignoring the benefits associated with reduced morbidity. Therefore, when comparing the cost effectiveness of different regulatory options with respect to a specific pollutant, it is important to examine cost effectiveness estimates for all benefits associated with the pollutant.

Results of Cost Effectiveness per Unit Benefit Analysis The primary health and ecological benefits of the HWC MACT replacement standards include avoided cases of premature mortality ( cancer and non cancer), reduced morbidity, improvements in visibility, and reduced pollution to aquatic and terrestrial ecosystems. Exhibit 8 3 presents the costeffectiveness of achieving these benefits. Below, we summarize the results.

° Cost per avoided case of mortality: We expect that the cost per avoided case of PM related mortality under the Agency Preferred Approach will be approximately $ 36.6 million. This estimate is significantly higher than most estimates of the value of a statistical life ( VSL) found in the economic IEc DRAFT: May 2005 6 More information on the value of a statistical life is presented in Chapter 6.

7 U. S. EPA, The Benefits and Costs of the Clean Air Act: 1990 to 2010, November 1999.

8 10 valuation literature. 6 Similarly, we estimate that the cost associated with avoiding dioxin related cancer deaths under the replacement standards is approximately $ 199.9 million per case, which is also greater than the value of a statistical life, as estimated in the VSL literature.

° Cost per avoided case of morbidity: For avoided morbidity impacts caused by PM emissions, we estimate cost effectiveness of approximately $ 2,900 per avoided morbidity case. Morbidity impacts reflected in this estimate include chronic bronchitis, acute bronchitis, hospital admissions associated with respiratory or cardiovascular disease, upper and lower respiratory symptoms, minor restricted activity days, and work loss days. We lack adequate information to estimate the cost effectiveness of avoided morbidity associated with reduced lead emissions under the replacement standards. The results of the 1999 Assessment suggest that the replacement standards will reduce blood levels from above levels of concern ( e. g., above 10

g/ dL) to below levels of concern for fewer than two children per year. We are also unable to assess the cost effectiveness of avoided morbidity impacts associated with reduced mercury emissions. These reductions may reduce the risk of developmental abnormalities in children.

° Cost per visibility benefit: Adequate data are not available on the visibility benefits of the HWC MACT replacement standards to estimate the costeffectiveness of such benefits. Although we estimate the monetary value of these benefits in Chapter 6 based on the results of EPA's 1999 analysis of the Clean Air Act, we do not estimate the physical changes in visibility likely to result from the replacement standards. 7 Such estimates would be necessary to evaluate the cost effectiveness of the visibility benefits associated with the rule.

° Cost per ecological benefit: We are unable to evaluate the cost effectiveness of ecological benefits that may result from the replacement standards. Based on information presented in the 1999 Assessment, we surmise that hazard quotients will fall from above to below levels of concern ( i. e., less than one) for less than 185 square kilometers of land and surface water, but this estimate is highly uncertain. The replacement standards may also lead to improvements in forest health or enhance the productivity of agricultural land, although we are unable to quantify these impacts. IEc DRAFT: May 2005 8 11 Exhibit 8 3 COST EFFECTIVENESS PER UNIT HEALTH AND ECOLOGICAL IMPROVEMENT ( 2002 dollars per unit benefit)

Benefit Type Pollutant Agency Preferred Approach Floor Option A Floor Option C Floor Option D Cost of Controla Benefit Cost Effectivenessb Cost of Controla Benefit Cost Effectivenessb Cost of Controla Benefit Cost Effectivenessb Cost of Controla Benefit Cost Effectivenessb Health Benefits Avoided Premature Mortality Casesc, d PM $ 16.8 million 0.46 avoided cases $ 36.6 million per life saved $ 15.3 million 0.45 avoided cases $ 33.6 million per life saved $ 15.3 million 0.45 avoided cases $ 33.6 million per life saved $ 27.3 million 0.75 avoided cases $ 36.7 million per life saved Avoided Morbiditye PM $ 16.8 million 5,832 avoided cases $ 2,900 per avoided case $ 15.3 million 5,789 avoided cases $ 2,600 per avoided case $ 15.3 million 5,789 avoided cases $ 2,600 per avoided case $ 27.3 million 9,519 avoided cases $ 2,900 per avoided case Avoided Cancer Deaths Dioxin $ 1.0 million 0.005 avoided cases $ 199.9 million per life saved $ 0.9 million 0.004 avoided cases $ 215.2 million per life saved $ 0.9 million 0.004 avoided cases $ 215.2 million per life saved $ 0.9 million 0.004 avoided cases $ 215.2 million per life saved Avoided Morbidity ( lead) f SVM $ 5.6 million fewer than 2 avoided cases Unknown $ 5.7 million fewer than 2 avoided cases Unknown $ 11.3 million fewer than 2 avoided cases Unknown $ 5.3 million fewer than 2 avoided cases Unknown Visibility Benefits Improvements in Recreational Visibility PM $ 16.8 million $ 0.2  $ 6.6 million in visibility benefits Unknown $ 15.3 million $ 0.2

$ 5.2 million in visibility benefits Unknown $ 15.3 million $ 0.2  $ 5.2 million in visibility benefits Unknown $ 27.3 million $ 0.3  $ 9.3 million in visibility benefits Unknown IEc DRAFT: May 2005 Exhibit 8 3 COST EFFECTIVENESS PER UNIT HEALTH AND ECOLOGICAL IMPROVEMENT ( 2002 dollars per unit benefit)

Benefit Type Pollutant Agency Preferred Approach Floor Option A Floor Option C Floor Option D Cost of Controla Benefit Cost Effectivenessb Cost of Controla Benefit Cost Effectivenessb Cost of Controla Benefit Cost Effectivenessb Cost of Controla Benefit Cost Effectivenessb 8 12 Ecological Benefits Area of Land and Water with Reduced Ecological Risk Dioxin, Mercury,

and Leadh $ 15.2 million less than 185 km2 Unknown $ 15.3 million less than 185 km2 Unknown $ 20.8 million less than 185 km2 Unknown $ 30.7 million less than 185 km2 Unknown Notes:

a. Engineering costs.

b. Costs per unit benefit.

c. These cost effectiveness per unit benefit measures are upper bound estimates that apply the full costs of control ( by pollutant) to a single type of benefit ( e. g., lives saved). The cost per unit benefit measures should not be reported in isolation from other benefit estimates; they should only be used as relative measures to compare across MACT standards.

d. All figures are incremental from the baseline to the HWC MACT replacement standards.

e. Pm morbidity includes hospital admissions from respiratory illness and cardiovascular disease, chronic bronchitis, acute bronchitis, upper and lower respiratory symptoms, minor restricted activity days, and work loss days.

f. Avoided morbidity associated with lead exposure is represented as the number of children whose blood lead levels fall below the critial level of 10 ug/ dL.

g. Although we estimate monetized visibility benefits, we do not estimate specific visibility impacts ( e. g., changes in visibility index values). Therefore, we are unable to calculate the costeffectiveness of the visibility improvements associated with the HWC MACT replacement standards.

h. Costs for lead were estimated together with costs for cadmium, the other semi volatile metal considered in this analysis. Therefore, we use total SVM costs as a proxy for lead costs. IEc DRAFT: May 2005 8 13 Caveats and Limitations Our methods for calculating cost effectiveness are limited in several ways. First, with the exception of dioxin/ furans, our estimates of costs per unit of reduced emissions do not incorporate any measure of relative toxicity. Therefore, comparing the cost effectiveness of emissions reductions across pollutants is misleading. For example, the cost effectiveness of reducing incinerator emissions of dioxins/ furans is approximately $ 4,258,000 per gram reduced under the Agency Preferred Approach. In contrast, the cost effectiveness of reducing LVM emissions from incinerators is just $ 760,000 per metric ton reduced. The stark difference between dioxin/ furans and LVM cost effectiveness would suggest that it is not cost effective to regulate incinerator emissions of dioxins/ furans. However, these cost effectiveness figures do not reflect differences in the toxicity of dioxin and LVM emissions. Although the cost of achieving a one ton reduction in LVM emissions is less than the cost of reducing dioxin emissions by one gram, it is important to consider the benefits associated with these emissions reductions rather than the magnitude of the reductions themselves.

The second limitation of our analysis is our assumption that all facilities continue to burn hazardous waste and implement emissions controls to comply with the replacement standards. As discussed in earlier chapters of this Assessment, facilities may stop burning hazardous waste rather than make the upgrades necessary to comply with the standards. For those facilities that send waste offsite, it is difficult to assign disposal, transport, and ( for boilers) alternative fuel costs to specific pollutants. Additional limitations of our cost effectiveness analysis include the following:

° The feed control costing approach overestimates expenditures per pollutant. Feed control costs are high end estimates based on pollution control equipment costs and/ or costs associated with changes in the design, operation, and maintenance of existing pollution control equipment. Combustion facilities may in fact be able to implement waste feed control at lower cost.

° In cases where a single pollution control device limits emissions of more than one pollutant, costs are distributed across pollutants in direct proportion to the percentage reduction in emissions required for each pollutant. We recognize, however, that this approach does not reflect the relative efficiency with which a technology controls emissions of one pollutant versus another. In addition, because this approach allocates costs based on the percent reduction in emissions required for individual pollutants, it does not reflect the absolute magnitude of the reductions for each pollutant.

° The benefits included in the cost effectiveness estimates presented in this chapter do not reflect the total benefits associated with the replacement standards. We were unable to quantify many of the benefits likely to result from the standards. IEc DRAFT: May 2005 8 14 COST BENEFIT COMPARISON A comparison of the costs and benefits of the HWC MACT replacement standards provides an assessment of the rule's overall efficiency and impact on society. In this section, we compare the total social costs of the rule with the total monetized and non monetized benefits of the standards. The total social costs and monetized benefits of the Agency Preferred Approach and three different Floor options are summarized in Exhibit 8 4. The social costs in the exhibit represent the market adjusted costs of the rule and also include government administrative costs. The benefits presented in Exhibit 8 4 include only those benefits that we were able to monetize.

Across all four regulatory options considered in this analysis, social costs significantly exceed monetized benefits. However, the HWC MACT standards are expected to yield other benefits that are not expressed in monetary terms. These include health benefits associated with reduced lead, mercury, and chlorine emissions and ecological improvements to terrestrial and aquatic ecosystems. The full range of impacts associated with the replacement standards also include equity enhancing effects such as environmental justice and impacts on children's health. Consequently, EPA's final regulatory decision with respect to the replacement standards reflects policy judgments about efficiency as well as equity concerns. IEc DRAFT: May 2005 8 15 Exhibit 8 4 BENEFIT AND SOCIAL COST SUMMARY ( millions of 2002 dollars)

Facility Type Agency Preferred Approach Floor Option A Floor Option C Floor Option D Human Health Benefits PM induced mortality $ 2.87 $ 2.84 $ 2.84 $ 4.66 PM induced morbidity $ 3.43 $ 3.40 $ 3.40 $ 5.58 Dioxin related cancer deaths $ 0.03 $ 0.03 $ 0.03 $ 0.03 Visibility Benefits Improvements in recreational visibility $ 0.18  $ 6.63 $ 0.18  $ 5.18 $ 0.18  $ 5.18 $ 0.29  $ 9.32 Social Costs Costs to Facilities $ 27.03 $ 25.79 $ 32.83 $ 51.53 Government Costs $ 0.46 $ 0.46 $ 0.46 $ 0.45 Total Monetized Benefitsa $ 6.50  $ 12.95 $ 6.45  $ 11.45 $ 6.45  $ 11.45 $ 10.55  $ 19.58 Total Social Costsa $ 27.49 $ 26.25 $ 33.29 $ 51.98 Notes: a. Totals may not add due to rounding.