Federal Food, Drug, and Cosmetic Act (FFDCA) Considerations for Lipochitooligosaccharide (LCO) SP104

                    Docket ID Number: EPA-HQ-OPP-2017-0080
                            Date: January 22, 2018

Section 408(c)(2)(A)(i) of FFDCA allows the U.S. Environmental Protection Agency (EPA) to establish an exemption from the requirement for a tolerance (the legal limit for a pesticide chemical residue in or on a food) only if EPA determines that the exemption is "safe." Section 408(c)(2)(A)(ii) of FFDCA defines "safe" to mean that "there is a reasonable certainty that no harm will result from aggregate exposure to the pesticide chemical residue, including all anticipated dietary exposures and all other exposures for which there is reliable information." This includes exposure through drinking water and in residential settings but does not include occupational exposure. Pursuant to FFDCA section 408(c)(2)(B), in establishing or maintaining in effect an exemption from the requirement of a tolerance, EPA must take into account the factors set forth in FFDCA section 408(b)(2)(C), which require EPA to give special consideration to exposure of infants and children to the pesticide chemical residue in establishing a tolerance or tolerance exemption and to "ensure that there is a reasonable certainty that no harm will result to infants and children from aggregate exposure to the pesticide chemical residue . . . ." Additionally, FFDCA section 408(b)(2)(D) requires that EPA consider "available information concerning the cumulative effects of [a particular pesticide's] . . . residues and other substances that have a common mechanism of toxicity."
EPA performs a number of analyses to determine the risks from aggregate exposure to pesticide residues. First, EPA assesses the toxicity of the pesticide and identifies endpoints of concern, if any. Second, EPA examines aggregate exposure to the pesticide and other related substances through food, drinking water, and other non-occupational exposures. The anticipated aggregate exposure is then compared to any relevant endpoints to assess safety of the tolerance or exemption.
I. Summary of Petitioned-for Establishment of an Exemption from the Requirement of a Tolerance
In the Federal Register of June 8, 2017 (82 FR 26641), EPA issued a document pursuant to FFDCA section 408(d)(3), 21 U.S.C. 346a(d)(3), announcing the filing of a pesticide tolerance petition (PP 6F8520) by Monsanto Company, 1300 I (Eye) St. NW., Suite 450 East, Washington, DC 20005. The petition requested that 40 CFR 180 be amended to establish an exemption from the requirement of a tolerance for residues of the plant growth regulator Lipochitooligosaccharide (LCO) SP104 in or on raw agricultural commodities and processed foods. That document referenced a summary of the petition prepared by the petitioner, Monsanto Company, LLC, which is available in Docket ID Number EPA-HQ-OPP-2017-0080 via http://www.regulations.gov.
II. Toxicological Profile
Consistent with FFDCA section 408(b)(2)(D), EPA reviewed the available scientific data and other relevant information on LCO SP104 and considered their validity, completeness, and reliability, as well as the relationship of this information to human risk. EPA also considered available information concerning the variability of the sensitivities of major identifiable subgroups of consumers, including infants and children.
A. Overview of LOCs and LCO SP104

Lipochitooligosaccharides (LCOs) are signaling molecules involved in the initiation of plant-microbe endosymbiosis (the scenario when a microbe colonizes a plant) in an estimated 70-80% of land plants. LCOs are produced by bacteria on the plant roots. LCOs act as nodulation (Nod) factors or mycorrhization (Myc) factors inducing plant root formation. Since LCOs evolved tens to hundreds of millions of years ago and today are active signal transducers in the majority of land plants, there is a history of safe use/exposure to LCOs through the consumption of plants (Gough and Cullimore, 2011).

LCO SP104 is a synthetically derived member of the LCO chemical class. The complete chemical name for LCO SP104 is D-Glucose, O - 2-deoxy-2- [[(11Z)-1-oxo-11-octadecen-1-yl] amino]- b-D-glucopyranosyl-(1-->4)-O - 2- (acetylamino)-2-deoxy-b-Dglucopyranosyl-(1-->4)-O - 2- (acetylamino)-2-deoxy-b-Dglucopyranosyl-(1-->4)-O - 2- (acetylamino)- 2-deoxy-b-Dglucopyranosyl-(1-->4)-2-(acetylamino)- 2-deoxy-. As a pesticide, LCO SP104 acts as a plant growth regulator (PGR) and is intended for use, specifically, to increase growth and decrease stress in growing crops. Typical of a PGR, LCO SP104 should be applied at low concentrations because use at high concentrations can result in detrimental effects to the plant. Humans are already exposed to LCOs as they are present in the roots of food crops and in the bacteria and fungi that are associated with the roots of these crops. Molecules identical to LCO breakdown products (such as chitin, vaccenic acid, and N-acetyl-D-glucosamine) are also present in insects, crustaceans, fungi, bacteria, and humans, and are regularly consumed by humans as part of a normal diet.

Based on the data submitted in support of this petition (summarized in Unit II. B., below) and the comprehensive risk assessment conducted by the Agency (References 1 and 2, below), EPA concludes that there is a reasonable certainty of no harm from aggregate exposures to residues of LCO SP104, including the consumption of food treated with this active ingredient in accordance with label directions and good agricultural practices. EPA has made this determination because available toxicology data indicate that the active ingredient is of low acute toxicity and is not a developmental toxicant, a mutagen, or toxic via repeat oral exposure.

1. Acute Toxicity

LCO SP104 is of low acute toxicity based on the available data. To satisfy the Tier I mammalian acute toxicology data requirements for biochemical pesticides (listed at 40 CFR 158.2050, OCSPP Guideline numbers 870.1100, 870.1200, 870.1300, 870.2400, 870.2500, and 870.2600), toxicity studies on LCO SP104 were conducted according to the EPA/OCSPP guidelines and are presented in Table 1., below. In summary, based on the available data, LCO SP104 is of low toxicity for all routes of exposure. The chemical is classified into toxicity category IV for acute oral, dermal and inhalation toxicity and dermal and eye irritation. The substance is not a dermal sensitizer.

Table 1. Acute Toxicology Data for LCO SP104
                           Study/OCSPP Guideline No.
                                    Results
                         Toxicity Category/Description
                                     MRID
Acute oral toxicity
(870.1100)
                         LD50  > 5,000 mg/kg (rat)

                                      IV
                                   49819912
Acute dermal toxicity
(870.1200)
                          LD50 > 5,000 mg/kg (rat)
                                      IV
                                   49819913
Acute inhalation toxicity
(870.1300)

                           LC50 > 5.14 mg/L (rat)

                                      IV
                                   49819914
Primary eye irritation
(870.2400)
Minimally irritating (rabbit): minimal irritation observed at one-hour post instillation of the test substance with clearance by 24 hours
                                      IV
                                   49819915
Primary dermal irritation
(870.2500)
Nonirritating (rabbit): no irritation noted at any point throughout the 72-hour study.
                                      IV
                                   49819916
Dermal sensitization (Buehler)
(870.2600)
                         Not a sensitizer (guinea pig)
                                      N/A
                                   49819917

2. Subchronic Toxicity

90-Day Oral

Based on a weight of the evidence (WOE) approach, considering all the available LCO SP104 hazard and other data on similar compounds, EPA has determined that a 90-day oral study on LCO SP104 is not required at this time, thus the data requirement has been waived. This approach included the following considerations:
(1) several oral toxicity studies conducted on similar compounds to LCO SP104 showed no adverse effects at the highest dose tested (EPA, 2017a); (2) the acute toxicology studies performed on a manufacturing-use product containing LCO SP104 demonstrate Toxicology Category IV, suggesting that the compound has low toxicity on an acute basis; (3) LCO SP104 is structurally similar to naturally occurring LCOs that have long been part of the normal diet (seafood and plants); (4) prior data waivers for all subchronic toxicity requirements were granted by the agency for use of chitin and chitosan as food additives and plant growth regulators, respectively; (5) the LCO SP104 mode of action is not relevant outside the plant kingdom; (6) there is an existing U.S. EPA tolerance exemption for chitin and chitosan; (7) similar LCO compounds are ubiquitous in the environment; (8) due to low toxicity, the EPA will be performing only a qualitative assessment; 9) LCO SP104 is proposed to be used only a very low application rates; and (10) worst-case exposure estimates for LCO SP104 fall well below generally accepted Thresholds of Toxicological Concern (TTCs) for corn and canola (the proposed LCO SP104 use sites), which is 1800 micrograms (μg)/chemical/person/day for Cramer Class I, indicating that expected dietary exposure of LCO SP104 to the general population is well below the level of concern using this metric (Dewhurst and Renwick, 2013).

90-Day Dermal

EPA has determined that a 90-day dermal study on LCO SP104 is not required at this time (the data requirement has been waived) based upon the following considerations: (1) the percent of LCO SP104 proposed to be used ranges from 0.000001% to 0.000025% in end-use formulations and (2) dermal, inhalation, and combined Margins of Exposure (MOEs) were calculated (from a structurally similar chemical) and all are well above the Agency's level of concern of 100 (ranging from 8.1 x 10[9]-7.8 x 10[14]) (EPA, 2017a).

90-Day Inhalation

EPA has determined that a 90-day inhalation study on LCO SP104 is not required at this time (the data requirement has been waived) based upon the following considerations: (1) the percent of LCO SP104 proposed to be used ranges from 0.000001% to 0.000025% in end-use formulation and (2) dermal, inhalation, and combined Margins of Exposure (MOEs) were calculated and all are well above the Agency's level of concern of 100 (ranging from 8.1 x 10[9]-7.8 x 10[14]) (EPA, 2017a).

3. Mutagenicity

Mutagenicity data are required to support food uses, but are unavailable for LCO SP104. However, EPA has determined that genetic toxicity testing on LCO SP104 is not required at this time, waiving these data requirements. This approach included the following considerations: (1) available literature studies demonstrated a lack of genotoxicity on compounds structurally similar to LCOs (EPA, 2017a); (2) structure-activity relationships of LCO SP104 demonstrate a lack of genotoxic potential; (3) prior genotoxicity data waivers were granted by the agency for use of (structurally similar) chitin and chitosan as food additives and plant growth regulators, respectively; (4) U.S. EPA has established a tolerance exemption for chitin and chitosan; (5) the ubiquitous nature of LCOs in the environment; (6) a History of Safe Use (HOSU) of LCO's; and (7) the maximum predicted exposure levels of LCO SP104 are orders of magnitude lower than generally recognized Thresholds of Toxicological Concern (TTCs).

4.  Developmental Toxicity

Based on a WOE approach, considering all the available hazard and exposure data on
LCO SP104, the HASPOC recommends that a Prenatal Developmental Study be not
required at this time. This approach included the following considerations: (1) LCO SP104 is structurally similar to naturally occurring LCOs that have long been part of the normal diet (seafood and plants); (2) the acute toxicology studies are classified as Toxicity Category IV, indicating low acute toxicity for LCO SP104; 90-day oral toxicity studies of similarly-structured compounds (chitin-glucan, chitin, N-acetylglucosamine, and oligo-N-acetylglucosamine) have found NOAEL's greater than 2000 mg/kg in rats (3) prior data waivers for all subchronic toxicity requirements were granted by the agency for use of chitin and chitosan as food additives and plant growth regulators, respectively; (4) mode of action is not relevant outside the plant kingdom; (5) there is an existing U.S. EPA tolerance exemption for the related compounds, chitin and chitosan; (6) ubiquity in the environment; (7) due to the low toxicity for this chemical, a qualitative assessment will be performed; (8) the low application rates of LCO SP104; and (9) worst-case exposures that fall well below the rabbit developmental Threshold of Toxicological Concern (TTCs) for corn and canola of 280 μg/chemical/person/day (van Ravenzwaay et al., 2012).

III. Aggregate Exposure

In examining aggregate exposure, FFDCA section 408 directs EPA to consider available information concerning exposures from the pesticide residue in food and all other non-occupational exposures, including drinking water from ground water or surface water and exposure through pesticide use in gardens, lawns, or buildings (residential and other indoor uses).

Food and Drinking Water Exposure:  An aggregate risk assessment for LCO (food and drinking water) was not conducted, as no toxicological endpoints have been identified in the toxicity database. Furthermore, residues of LCO SP104 in drinking water are not expected when products are used according to label instructions. The active ingredient is applied at low concentrations, is very soluble in water, and will dissociate within minutes once applied (EPA, 2017b).

Other Non-Occupational Exposure: As there are no residential uses for LC SP104, there are no residential exposure contributions to aggregate exposure. Therefore, aggregate risk is equivalent to the dietary (food and drinking water) risk and is not of concern, as noted above.

IV. Cumulative Effects from Substances with a Common Mechanism of Toxicity

Section 408(b)(2)(D)(v) of FFDCA requires that, when considering whether to establish, modify, or revoke a tolerance, EPA consider "available information concerning the cumulative effects of [a particular pesticide's] . . . residues and other substances that have a common mechanism of toxicity."

LC SP104 is of low toxicity and does not have a common mechanism of toxicity with other substances and cumulative effects are not expected.

V. Determination of Safety for the U.S. Population, Infants and Children

A. U.S. Population

For all of the reasons discussed previously, EPA concludes that there is reasonable certainty that no harm will result to the U.S. population, including infants and children, from aggregate exposure to residues of LCO SP104. This includes all anticipated dietary exposures and all other exposures for which there is reliable information.

B. Infants and Children

FFDCA section 408(b)(2)(C) provides that EPA shall apply an additional tenfold (10X) margin of safety for infants and children in the case of threshold effects to account for prenatal and postnatal toxicity and the completeness of the database on toxicity and exposure, unless EPA determines based on reliable data that a different margin of safety will be safe for infants and children. This additional margin of safety is commonly referred to as the Food Quality Protection Act Safety Factor. In applying this provision, EPA either retains the default value of 10X or uses a different additional safety factor when reliable data available to EPA support the choice of a different factor. As discussed above, EPA has concluded that LCO SP104 is not toxic to mammals, including infants and children. Because there are no threshold levels of concern to infants, children, and adults when LCO SP104 is used according to label directions and good agricultural practices, EPA concludes that no additional margin of safety is necessary to protect infants and children.

VI. Conclusions
EPA concludes that there is a reasonable certainty that no harm will result to the U.S. population, including infants and children, from aggregate exposure to residues of LCO SP104. Therefore, an exemption from the requirement of a tolerance is established for LCO SP104 in or on all food commodities when applied/used pre-harvest and in accordance with label directions and good agricultural practices.

VII. References

EPA, 2017a. U.S. Environmental Protection Agency (EPA). October 2, 2017. LCO (lipochitooligosaccharide) SP104: Summary of Hazard and Science Policy Council (HASPOC) Meeting on September 7, 201 7: Recommendations on the Need for Waivers for the Following Subchronic Studies: 90-Day Oral Study (OCSPP 870.3000), 90-Day Dermal Study (OCSPP 870.3250), 90-Day Inhalation Study (OCSPP 870.3465) Prenatal Developmental Study (OCSPP 870.3700), and Genetic Toxicity Testing (OCSPP 870.5100, 870.5300, 870.5375). Memorandum from Austin Wray, through Kelly Lowe, to Sadaf Shaukat.

EPA 2017b. U.S. Environmental Protection Agency (EPA). August 1, 2017. Risk Assessment in Support of the Registration of LCO SP104 MP, Containing 0.013% Lipochitooligosaccharide (LCO) SP104 as its Active Ingredient. Memorandum from Sadaf Shaukat, through Miachel Rexrode, to Gina Burnett.

Gough, C. and J. Cullimore. 2011. Lipo-chitooligosaccharide Signaling in Endosymbiotic Plant-
Microbe Interactions. Molecular Plant-Microbe Interactions 24:867-878

Dewhurst, I. and A.G. Renwick. 2013. Evaluation of the Threshold of Toxicological Concern
(TTC)  -  Challenges and approaches. Regulatory Toxicology and Pharmacology 65:168-177.

van Ravenzwaay, B., M. Dammann, R. Buesen, B. Flick and S. Schneider. 2012. The threshold of
toxicological concern for prenatal developmental toxicity in rabbits and a comparison to TTC
values in rats. Regulatory Toxicology and Pharmacology 64:1-8.


[Federal Register Volume 87, Number 248 (Wednesday, December 28, 2022)]
[Notices]
[Pages 79881-79882]
[FR Doc No: 2022-28250]

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DEPARTMENT OF ENERGY

Federal Energy Regulatory Commission

[Project No. 2570-034]

Eagle Creek Racine Hydro, LLC; Notice of Waiver Period for Water
Quality Certification Application

    On December 21, 2022, Eagle Creek Racine Hydro, LLC submitted to
the Federal Energy Regulatory Commission (Commission) a copy of its
application for a Clean Water Act section 401(a)(1) water quality
certification filed with the Ohio Environmental Protection Agency (Ohio
EPA), in conjunction with the above captioned project. Pursuant to 40
CFR 121.6 and section 5.23(b) of the Commission's regulations,\1\ we
hereby notify the Ohio EPA of the following:
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    \1\ 18 CFR 5.23(b).

Date of Receipt of the Certification Request: December 20, 2022

Reasonable Period of Time To Act on the Certification Request: One year
(December 20, 2023)

    If the Ohio EPA fails or refuses to act on the water quality
certification request on or before the above date, then the agency
certifying authority is deemed waived pursuant to section 401(a)(1) of
the Clean Water Act, 33 U.S.C. 1341(a)(1).

    Dated: December 21, 2022.
Kimberly D. Bose,
Secretary.
[FR Doc. 2022-28250 Filed 12-27-22; 8:45 am]
BILLING CODE 6717-01-P


[Federal Register Volume 79, Number 238 (Thursday, December 11, 2014)]
[Notices]
[Pages 73673-73676]
[FR Doc No: 2014-29002]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-73749; File No. SR-OCC-2014-810]

Self-Regulatory Organizations; The Options Clearing Corporation;
Notice of Filing of Advance Notice Concerning Modifications To Back
Testing Procedures in Order To Enhance Monitoring of Margin Coverage
and Model Risk Exposure

December 5, 2014.
    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 \1\ (``Payment,
Clearing and Settlement Supervision Act'') and Rule 19b-4(n)(1)(i)
under the Securities Exchange Act of 1934 \2\ notice is hereby given
that on November 13, 2014, The Options Clearing Corporation (``OCC'')
filed with the Securities and Exchange Commission (``Commission'') the
advance notice as described in Items I and II below, which Items have
been

prepared by OCC.\3\ The Commission is publishing this notice to solicit
comments on the advance notice from interested persons.
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    \1\ 12 U.S.C. 5465(e)(1).
    \2\ 17 CFR 240.19b-4(n)(1)(i).
    \3\ OCC initially filed a similar advance notice on October 31,
2014, as File No. SR-OCC-2014-808. However to correct certain errors
in that filing relating to two backtesting program tests, OCC
withdrew it and made a new filing (File No. SR-OCC-2014-810) on
November 13, 2014.
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I. Clearing Agency's Statement of the Terms of Substance of the Advance
Notice

    This advance notice is filed by OCC in connection with a proposed
change to its operations (the ``Change'') in the form of modifications
to its back testing procedures in order to enhance its monitoring of
margin coverage and model risk exposure.

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

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

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

    Written comments on the advance notice were not and are not
intended to be solicited with respect to the advance notice and none
have been received.

(B) Advance Notices Filed Pursuant to Section 806(e) of the Payment,
Clearing and Settlement Supervision Act

Description of Change
    The proposed Change would modify OCC's back testing procedures in
order to enhance its monitoring of margin coverage and model risk
exposure. Such monitoring would allow OCC to identify and make
improvements to its margin methodology and enhance OCC's ability to
manage risk.
    OCC has implemented back testing procedures in order to test its
methodology for determining the amount of margin to collect from
clearing members and validate the assumptions and mechanisms inherent
in its methodology and to make any necessary changes to the
methodology. Each trading day, OCC estimates the risk on accounts and
uses this estimate as a basis for each account's margin charge. On the
following business day, OCC's back tests compare an account's observed
profit and loss (``P&L'') with the prior day's estimated risk using a
variety of analytical and statistical tools. These daily tests measure
the performance of the account's risk measures, and therefore, also
measure the performance of OCC's underlying methodology for calculating
these measures. OCC's back testing program enables OCC to assess
performance of its margining systems and determine whether financial
risks are adequately or inadequately captured by the quantitative
models in use.
    Currently, OCC employs the ``traffic light'' test published by the
Basel Committee on Banking Supervision in 1996 (the ``Traffic Light
Test'').\4\ In conducting the Traffic Light Test, OCC determines the
actual number of instances in which the realized loss on an account
exceeded the margin, known as an ``exceedance,'' over an observation
period of one year. The number of exceedances during the observation
period is compared against the number of expected exceedances that are
independent and identically distributed over time. OCC will employ an
enhanced version of the Traffic Light Test that takes into account the
dependency of exceedances between accounts.
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    \4\ See, ``Supervisory Framework for the Use of `Backtesting' in
Conjunction with Internal Model Approach to Market Risk Capital
Requirement.'' Located at http://www.bis.org/publ/bcbs22.htm.
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    OCC has conducted daily back testing of margin accounts since 2006.
OCC's staff analyzes the exceedances and makes monthly reports to OCC's
Enterprise Risk Management Committee (``ERMC'').\5\ The reports to the
ERMC include pertinent conclusions based on results from the full set
of back tests. When back testing reveals the potential opportunity for
remediation of OCC's margin methodology, OCC undertakes a root cause
analysis to determine the cause of any issues. Any significant failures
of OCC's methodology lead to OCC undertaking a model improvement
project designed to correct the problems.
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    \5\ The Enterprise Risk Management Committee is chaired by the
Chief Risk Officer, and consists of the Executive Chairman, Chief
Operations Officer, General Counsel, Chief Information Officer,
Chief Audit Executive, the Chief Compliance Officer and other
members as determined by the Chair.
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    OCC has analyzed its back testing program and identified several
enhancements to the program. The following section details the nature
of the proposed enhancements.\6\
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    \6\ The relevant systems changes are scheduled to be installed
on December 5, 2014.
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1. Proposed Enhancement of and Increase in Statistical Tests
    The proposed changes would enhance existing statistical tests and
add three new statistical tests. The first proposed change to OCC's
back testing program is that OCC proposes to enhance the Traffic Light
Test so that it may be applied to exceedances across all of OCC's
margin accounts. Given that exceedances are not independent across
margin accounts, OCC will enhance this test so that it will produce a
single numerical output that measures aggregation across margin
accounts.
    In addition to the enhanced Traffic Light Test, OCC will implement
other industry standard tests based on exceedances in order to provide
a more comprehensive set of tests. The second proposed change to OCC's
back testing program is that OCC will add the Kupiec Test,\7\ which is
a new proportion of failures test that compares the actual number of
exceedances with the number that would be expected in light of the
confidence level associated with the calculation of margin. For
example, when calculating margin with a confidence level of 99%, the
number of exceedances is expected to be 1% of the total observations,
i.e., the P&Ls for all accounts for all days during the measurement
period. If the actual number of exceedances is near the expected
number, this is an indication that the calculated margin requirements
are accurate estimates of the accounts' estimated losses.
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    \7\ See, Kupiec, P. ``Techniques for Verifying the Accuracy of
Risk Management Models,'' Journal of Derivatives, v3, P73-84.
(1995).
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    The third proposed change to OCC's back testing program is that OCC
will add the Christoffersen Independence Test,\8\ which is a new
statistical test that measures the extent to which exceedances are
independent of each other. Specifically, if OCC's margin models are
correctly assessing risk, the probability of an exceedance occurring at
any two points in time should be the same as the probability of an
exceedance occurring at either point in time, individually, without the
exceedance occurring at the other point in time. The fourth proposed
change to OCC's back testing program is a new test, the Probtile test,
that compares the distribution of the daily observed P&L to the daily
forecasted P&L distribution. If the distribution of P&L movement ratios
approximates a uniform random distribution, this is an indication that

OCC's margin models are providing accurate forecasts of potential
losses in an account. Combined, these new statistical tests will
provide OCC with the pertinent information necessary to evaluate the
effectiveness of its models in determining margin coverage.
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    \8\ See, Christoffersen, Peter, ``Evaluating Interval
Forecasts.'' International Economic Review, 39 (4), 841-862. (1998).
Economic Review, 39 (4), 841-862. (1998).
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2. Proposed Data Set Changes
    OCC proposes to enhance the data sets being back tested to allow
for testing against various assumed portfolio and market data
scenarios, in addition to the performance of actual portfolios against
actual, current market conditions. First, OCC would back test
hypothetical portfolios, allowing for the design and monitoring of
portfolios that have magnified sensitivities to particular aspects of
the models used in the margin computations. Back testing against
hypothetical portfolios would provide a more comprehensive insight into
the adequacy of the underlying model assumptions under market
conditions prevailing in the back test observation periods.
    Under the second data set enhancement, OCC would back test current
accounts against earlier observation periods. Currently, accounts are
``frozen'' by assuming that the time to maturity and the degree to
which options are in-the-money or out-of-the-money remain constant
during the chosen observation period. The market data observed over the
observation period is used to generate the margin forecasts and P&L.
Under the enhancement, observation periods would be chosen to reflect
special market conditions, which is useful because even though margin
coverage might be adequate in the current environment, margin coverage
could be inadequate under stressed conditions, such as periods of high
volatility. The ability to select specific observation periods would
not limit the back testing to the current environments but rather would
highlight performance of margin coverage and model performance in
market scenarios other than prevailing market conditions.
3. Proposed Forecast Horizons Changes
    Currently, OCC conducts back testing using a one-day time horizon,
which means that it compares calculated margin with realized profit and
losses that occur on the business day following the calculation. OCC's
margin calculations assume that positions would be liquidated over a
two-day period. This test, therefore, compares two-day margin numbers
to a one-day profit and loss calculation. OCC's existing back testing
methodology makes adjustments in its testing to account for the
difference between the two-day liquidation period used in its margin
calculation and the one-day horizon used in the profit and loss
calculation. OCC intends to revise its back testing methodology to take
into account losses over a two-day time horizon, without such
adjustments, which would match the two-day liquidation period used in
the margin calculation. OCC therefore proposes to implement
functionality into its back testing system to conduct a two-day time
horizon back test, which will compare calculated margin against a two-
day profit and loss calculation. OCC also proposes to revise its back
testing methodology to compare one-day margin calculations against one-
day profit and loss calculations, and will implement system
functionality for such a test. Issues identified in any of these back
tests will be reported to the ERMC. OCC believes that its adoption of
the additional forecast horizons tests will allow it to have a more
accurate view of the sufficiency of its margin methodology.
4. Proposed Root Cause Analysis Changes
    The proposed Change will improve OCC's ability to conduct root
cause analyses by providing OCC's back testing staff with additional,
automated, investigation tools. Currently, and when necessary, OCC's
back test staff conducts investigations in order to identify the root
cause exceedances. The investigation itself is a manual process that is
dependent upon the facts and circumstances pertaining to a given
exceedance. OCC is now proposing to make system modifications that will
provide OCC's back testing staff with addition tools that will
facilitate such investigations. Specifically, OCC proposes to add
system functionality that will show attribution of losses due to
underlying price movements and implied volatility movements. Further,
under the improvements OCC would be able to incorporate hypothetical
accounts and positions into the tests and would be able to identify
risk factors that move above or below the projected values. These
changes will improve OCC's ability to conduct investigations that
identify the root cause of exceedances, which will in turn lead to
improving OCC's back testing methodology and its margin coverage.
Anticipated Effect on and Management of Risk
    OCC believes the proposed Change to its back testing procedures
would reduce the level of risk presented by OCC because it would
enhance OCC's back testing by providing it with more tools to identify
gaps in its margin methodology and develop corrective changes
thereto.\9\ For example, enhanced and increased statistical testing
would provide additional information about the adequacy of margin
coverage and thus strengthen the assessment of margin and model
performance. Changes to data sets would include hypothetical portfolios
and earlier observation periods would allow testing of margin coverage
under a greater variety of market conditions. Modifying the tests to
take into account losses over a two-day period would increase the
accuracy of the testing because this two-period matches the assumed
liquidation period used in the margin calculations. OCC would also be
able to more accurately determine the root cause of exceedances, while
rejecting results that incorrectly suggest a needed improvement in its
margin methodology, and then would be able to narrowly tailor solutions
to the identified root causes. Ultimately, by allowing OCC to more
readily and precisely identify gaps in its margin methodology, the
Change will reduce risk to OCC and the markets that it serves.
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    \9\ Depending on the nature of a proposed change, it may be
necessary for OCC to file a proposed rule change filing or advance
notice filing with the Commission.
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Consistency With the Payment, Clearing and Settlement Supervision Act
    The Change is consistent with Section 805(b)(1) of Payment,
Clearing and Settlement Supervision Act because it promotes robust risk
management.\10\ OCC's receipt of margin from its clearing members
protects OCC and market participants from risks presented by the
markets OCC serves. OCC uses back testing in order to evaluate the
sufficiency and adequacy of the amount of margin it collects from its
clearing members. As described above, the Change will provide OCC will
[sic] additional tools to identify gaps in its margin methodology. Such
identification process will lead to improvements to OCC margin models
thereby promoting robust risk management.
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    \10\ 12 U.S.C. 5465(b)(1).
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III. Date of Effectiveness of the Advance Notice and Timing for
Commission Action

    The proposed change may be implemented if the Commission does not
object to the proposed change within 60 days of the later of (i) the
date that the Commission receives the notice

of proposed change, or (ii) the date the Commission receives any
further information it requests for consideration of the notice. The
clearing agency shall not implement the proposed change if the
Commission has any objection to the proposed change.
    The Commission may extend the period for review by an additional 60
days if the proposed change raises novel or complex issues, subject to
the Commission providing the clearing agency with prompt written notice
of the extension. A proposed change may be implemented in less than 60
days from the date the advance noticed is filed, or the date further
information requested by the Commission is received, if the Commission
notifies the clearing agency in writing that it does not object to the
proposed change and authorizes the clearing agency to implement the
proposed change on an earlier date, subject to any conditions imposed
by the Commission.
    The clearing agency shall post notice on its Web site of proposed
changes that are implemented.

IV. Solicitation of Comments

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

Electronic Comments

     Use the Commission's Internet comment form (http://www.sec.gov/rules/sro.shtml); or
     Send an email to<EMAIL_ADDRESS>Please include
File Number SR-OCC-2014-810 on the subject line.

Paper Comments

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

All submissions should refer to File Number SR-OCC-2014-810. 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 Web site (http://www.sec.gov/rules/sro.shtml). Copies of the submission, all subsequent amendments, all
written statements with respect to the advance notice that are filed
with the Commission, and all written communications relating to the
advance notice between the Commission and any person, other than those
that may be withheld from the public in accordance with the provisions
of 5 U.S.C. 552, will be available for Web site viewing and printing in
the Commission's Public Reference Room, 100 F Street NE., Washington,
DC 20549 on official business days between the hours of 10:00 a.m. and
3:00 p.m. Copies of the filing also will be available for inspection
and copying at the principal office of OCC and on OCC's Web site http://www.theocc.com/components/docs/legal/rules_and_bylaws/sr_occ_14_810.pdf.
    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-OCC-2014-810
and should be submitted on or before January 2, 2015.

    By the Commission.
Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2014-29002 Filed 12-10-14; 8:45 am]
BILLING CODE 8011-01-P


[Federal Register Volume 88, Number 180 (Tuesday, September 19, 2023)]
[Notices]
[Page 64429]
[FR Doc No: 2023-20215]

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DEPARTMENT OF ENERGY

Federal Energy Regulatory Commission

[Project No. 14775-005]

Marine Renewable Energy Collaborative of New England; Notice of
Availability of Environmental Assessment

    In accordance with the National Environmental Policy Act of 1969
and the Federal Energy Regulatory Commission's (Commission)
regulations, 18 CFR part 380, the Office of Energy Projects has
reviewed the application for a hydrokinetic pilot project license to
construct and operate the Bourne Tidal Hydrokinetic Test Site Project
(Bourne Tidal Project, or project). The project would be located on the
Cape Cod Canal in Barnstable County, Massachusetts. Commission staff
has prepared an Environmental Assessment (EA) for the proposed project.
    The EA contains staff's analysis of the potential environmental
impacts of the project and concludes that licensing the project, with
appropriate environmental protective measures, would not constitute a
major Federal action that would significantly affect the quality of the
human environment.
    The Commission provides all interested persons with an opportunity
to view and/or print the EA via the internet through the Commission's
Home Page (http://www.ferc.gov/), using the ``eLibrary'' link. Enter
the docket number, excluding the last three digits in the docket number
field, to access the document. For assistance, contact FERC Online
Support at [email protected], or toll-free at<PHONE_NUMBER>,
or for TTY,<PHONE_NUMBER>.
    You may also register online at https://ferconline.ferc.gov/FERCOnline.aspx to be notified via email of new filings and issuances
related to this or other pending projects. For assistance, contact FERC
Online Support.
    The Commission's Office of Public Participation (OPP) supports
meaningful public engagement and participation in Commission
proceedings. OPP can help members of the public, including landowners,
environmental justice communities, Tribal members and others, access
publicly available information and navigate Commission processes. For
public inquiries and assistance with making filings such as
interventions, comments, or requests for rehearing, the public is
encouraged to contact OPP at<PHONE_NUMBER> or [email protected].
    Any comments should be filed within 45 days from the date of this
notice.
    The Commission strongly encourages electronic filing. Please file
comments using the Commission's eFiling system at http://www.ferc.gov/docs-filing/efiling.asp. Commenters can submit brief comments up to
6,000 characters, without prior registration, using the eComment system
at http://www.ferc.gov/docs-filing/ecomment.asp. You must include your
name and contact information at the end of your comments. For
assistance, please contact FERC Online Support. In lieu of electronic
filing, you may submit a paper copy. Submissions sent via the U.S.
Postal Service must be addressed to: Kimberly D. Bose, Secretary,
Federal Energy Regulatory Commission, 888 First Street NE, Room 1A,
Washington, DC 20426. Submissions sent via any other carrier must be
addressed to: Kimberly D. Bose, Secretary, Federal Energy Regulatory
Commission, 12225 Wilkins Avenue, Rockville, Maryland 20852. The first
page of any filing should include docket number P-14775-005.
    If you have process questions, contact Robert Haltner at (202) 502-
8612 or by email at [email protected].

    Dated: September 13, 2023.
Kimberly D. Bose,
Secretary.
[FR Doc. 2023-20215 Filed 9-18-23; 8:45 am]
BILLING CODE 6717-01-P