[Federal Register Volume 84, Number 184 (Monday, September 23, 2019)]
[Proposed Rules]
[Pages 49699-49704]
[FR Doc No: 2019-20425]

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ENVIRONMENTAL PROTECTION AGENCY

40 CFR Part 52

[EPA-R09-OAR-2019-0493; FRL-9999-98-Region 9]

Air Plan Conditional Approval; Arizona; Maricopa County

AGENCY: Environmental Protection Agency (EPA).

ACTION: Proposed rule.

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SUMMARY: The Environmental Protection Agency (EPA) is proposing to
conditionally approve revisions to the Maricopa County Air Quality
Department (MCAQD or the County) portion of the Arizona State
Implementation Plan (SIP). These revisions concern emissions of
volatile organic compounds (VOCs) from organic liquid and gasoline
storage and transfer operations. We are proposing to conditionally
approve local rules to regulate these emission sources under the Clean
Air Act (CAA or the Act) and conditionally approve the County's
demonstration regarding Reasonably Available Control Technology (RACT)
requirements for the 2008 8-hour ozone National Ambient Air Quality
Standards (NAAQS) in the Phoenix-Mesa ozone nonattainment area, with
respect to petroleum liquid storage and gasoline transfer and
transport. We are taking comments on this proposal and plan to follow
with a final action.

DATES: Any comments must arrive by October 23, 2019.

ADDRESSES: Submit your comments, identified by Docket ID No. EPA-R09-
OAR-2019-0493 at https://www.regulations.gov. For comments submitted at
Regulations.gov, follow the

online instructions for submitting comments. Once submitted, comments
cannot be edited or removed from Regulations.gov. The EPA may publish
any comment received to its public docket. Do not submit electronically
any information you consider to be Confidential Business Information
(CBI) or other information whose disclosure is restricted by statute.
Multimedia submissions (audio, video, etc.) must be accompanied by a
written comment. The written comment is considered the official comment
and should include discussion of all points you wish to make. The EPA
will generally not consider comments or comment contents located
outside of the primary submission (i.e., on the web, cloud, or other
file sharing system). For additional submission methods, please contact
the person identified in the FOR FURTHER INFORMATION CONTACT section.
For the full EPA public comment policy, information about CBI or
multimedia submissions, and general guidance on making effective
comments, please visit https://www.epa.gov/dockets/commenting-epa-dockets.

FOR FURTHER INFORMATION CONTACT: Rebecca Newhouse, EPA Region IX, 75
Hawthorne St., San Francisco, CA 94105,<PHONE_NUMBER>,
<EMAIL_ADDRESS>
SUPPLEMENTARY INFORMATION: Throughout this document, ``we,'' ``us'' and
``our'' refer to the EPA.

Table of Contents

I. The State's Submittal
    A. What did the State submit?
    B. Are there earlier versions of the submitted documents in the
SIP?
    C. What is the purpose of the submitted documents?
II. The EPA's Evaluation and Action
    A. How is the EPA evaluating the submitted documents?
    B. Do the submitted documents meet the evaluation criteria?
    C. What are the deficiencies?
    D. What are the commitments to remedy the deficiencies?
    E. The EPA's Recommendations To Further Improve the Submitted
Rules
    F. Public Comment and Proposed Action
III. Incorporation by Reference
IV. Statutory and Executive Order Reviews

I. The State's Submittal

A. What did the State submit?

    Table 1 lists the documents addressed by this proposal with the
dates that they were adopted by the local air agency and submitted by
the Arizona Department of Environmental Quality (ADEQ or the State).

                      Table 1--Submitted Documents
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   Local agency           Document            Revised        Submitted
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MCAQD............  Analysis of            \1\ 06/16/2017      06/22/2017
                    Reasonably Available
                    Control Technology
                    for the 2008 8-Hour
                    Ozone National
                    Ambient Air Quality
                    Standard (NAAQS)
                    State Implementation
                    Plan (RACT SIP).
MCAQD............  Rule 350: Storage and      11/02/2016      06/22/2017
                    Transfer of Organic
                    Liquids (Non-
                    Gasoline) at an
                    Organic Liquid
                    Distribution
                    Facility.
MCAQD............  Rule 351: Storage and      11/02/2016      06/22/2017
                    Loading of Gasoline
                    at Bulk Gasoline
                    Plants and Bulk
                    Gasoline Terminals.
MCAQD............  Rule 352: Gasoline         11/02/2016      06/22/2017
                    Cargo Tank Testing
                    and Use.
MCAQD............  Rule 353: Storage and      11/02/2016      06/22/2017
                    Loading of Gasoline
                    at Gasoline
                    Dispensing
                    Facilities.
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    On December 22, 2017, the submittal containing the documents listed
in Table 1 was deemed by operation of law to meet the completeness
criteria in 40 CFR part 51 Appendix V, which must be met before formal
EPA review.
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    \1\ This document is dated December 5, 2016. It was adopted by
the County on June 16, 2017.
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    In addition to these SIP submittals, the County and the ADEQ
transmitted letters to the EPA 2 3 committing to adopt and
submit specific enforceable measures within a year of our final action
that would remedy the deficiencies identified in this notice and
further described in the associated technical support documents (TSDs)
for this action.
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    \2\ Letter dated January 28, 2019, from Philip A. McNeely,
Director, MCAQD, to Misael Cabrera, Director, ADEQ.
    \3\ Letter dated February 25, 2019, from Misael Cabrera,
Director, ADEQ, to Michael Stoker, Regional Administrator, EPA,
Region IX.
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    The County's submittal states that Rules 350, 351, 352 and 353 were
submitted to regulate sources associated with the Control Techniques
Guidelines (CTGs) shown in Table 2:
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    \4\ See RACT SIP, Appendix C: CTG RACT Spreadsheet.

                 Table 2--Rules and Associated CTGs \4\
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            County rule                        Associated CTGs
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Rule 350..........................  Control of Volatile Organic
                                     Emissions from Storage of Petroleum
                                     Liquids in Fixed-Roof Tanks (EPA-
                                     450/2-77-036).
                                    Control of Volatile Organic
                                     Emissions from Petroleum Liquid
                                     Storage in External Floating Roof
                                     Tanks (EPA-450/2-78-047).
Rule 351..........................  Control of Volatile Organic
                                     Emissions from Storage of Petroleum
                                     Liquids in Fixed-Roof Tanks (EPA-
                                     450/2-77-036).
                                    Control of Volatile Organic
                                     Emissions from Petroleum Liquid
                                     Storage in External Floating Roof
                                     Tanks (EPA-450/2-78-047).
                                    Control of Hydrocarbons from Tank
                                     Truck Gasoline Loading Terminals
                                     (EPA-450/2-77-026).
                                    Control of Volatile Organic
                                     Emissions from Bulk Gasoline Plants
                                     (EPA-450/2-77-035).
Rule 352..........................  Control of Volatile Organic Compound
                                     Leaks from Gasoline Tank Trucks and
                                     Vapor Collection Systems (EPA-450/2-
                                     78-051).
Rule 353..........................  Design Criteria for Stage I Vapor
                                     Control Systems--Gasoline Service
                                     Stations (EPA-450/R-75-102).
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B. Are there earlier versions of the submitted documents in the SIP?

    We approved earlier versions of the rules listed in Table 1 into
the SIP on September 5, 1995 (Rules 350 and 352) (60 FR 46024),
February 9, 1998 (Rule 351) (63 FR 6489), and on February 1, 1996 (Rule
353) (61 FR 3578). There is no previously approved version of the RACT
SIP for the 2008 8-hour ozone standard in the MCAQD portion of the
Arizona SIP. The ADEQ previously submitted the documents in Table 1 in
a SIP revision on December 19, 2016, along with the County's RACT SIP.
However, this submittal did not include documentation that showed the
entirety of the County's SIP revision had met the public notice
requirements required for completeness under 40 CFR part 51 Appendix V.
The County's June 22, 2017 submittal was provided in response to this
feedback, and the State withdrew the December 19, 2016 submittal on May
17, 2019.\5\
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    \5\ Letter dated May 17, 2019, from Timothy S. Franquist,
Director, Air Quality Division, ADEQ, to Michael Stoker, Regional
Administrator, Region IX.
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C. What is the purpose of the submitted documents?

    Emissions of VOCs contribute to the production of ground-level
ozone, smog and particulate matter, which harm human health and the
environment. Section 110(a) of the CAA requires states to submit
regulations that control VOC emissions. Section 182(b)(2) requires that
SIPs for ozone nonattainment areas classified as Moderate or above
implement RACT for any source covered by a CTG document and for any
major sources of VOCs. The MCAQD is subject to this requirement as it
regulates a portion of the Phoenix-Mesa ozone nonattainment area, which
is classified as Moderate for the 2008 8-hr ozone NAAQS (40 CFR
81.303).
    Section III.D of the preamble to the EPA's final rule to implement
the 2008 ozone 8-hour ozone NAAQS (80 FR 12264, March 6, 2015)
discusses RACT requirements. It states in part that RACT SIPs must
contain adopted RACT regulations, certifications where appropriate that
existing provisions are RACT, and/or negative declarations that there
are no sources in the nonattainment areas covered by a specific CTG
category. The County's RACT SIP provides MCAQD's analyses of its
compliance with the CAA section 182 RACT requirements for the 2008 8-
hour ozone NAAQS. As a result of this analysis, the County revised and
submitted the rules listed in Table 1 to establish RACT-level controls
for VOC emissions from the petroleum liquid storage and gasoline
transfer and transport CTG source categories shown in Table 2.
    The EPA's TSDs have more information about the submitted rules and
RACT SIP.

II. The EPA's Evaluation and Action

A. How is the EPA evaluating the submitted documents?

    Rules in the SIP must be enforceable (see CAA section 110(a)(2)),
must not interfere with applicable requirements concerning attainment
and reasonable further progress or other CAA requirements (see CAA
section 110(l)), and must not modify certain SIP control requirements
in nonattainment areas without ensuring equivalent or greater emissions
reductions (see CAA section 193).
    Generally, SIP rules must require RACT for each category of sources
covered by a CTG document as well as each major source of VOCs in ozone
nonattainment areas classified as Moderate or above (see CAA section
182(b)(2)). The MCAQD regulates a portion of the Phoenix-Mesa ozone
nonattainment area, which is classified as Moderate for the 2008 8-hr
ozone NAAQS 40 CFR 81.303. Therefore, these rules must implement RACT.
    The County's RACT SIP explains that Rules 350, 351, 352, and 353
were revised and submitted in order to meet the RACT requirement for
the source categories listed in Table 2. Accordingly, our evaluation of
whether these rules establish RACT levels of control also constitutes
our evaluation of the approvability of the MCAQD RACT SIP, with respect
to those CTG source categories.
    Guidance and policy documents that we used to evaluate
enforceability, revision/relaxation and rule stringency requirements
for the applicable criteria pollutants include the following:
    1. ``State Implementation Plans; General Preamble for the
Implementation of Title I of the Clean Air Act Amendments of 1990,'' 57
FR 13498 (April 16, 1992); 57 FR 18070 (April 28, 1992).
    2. ``Issues Relating to VOC Regulation Cutpoints, Deficiencies, and
Deviations,'' EPA, May 25, 1988 (the Bluebook, revised January 11,
1990).
    3. ``Guidance Document for Correcting Common VOC & Other Rule
Deficiencies,'' EPA Region 9, August 21, 2001 (the Little Bluebook).
    4. ``Control of Volatile Organic Emissions from Storage of
Petroleum Liquids in Fixed-Roof Tanks,'' EPA-450/2-77-036, December
1977.
    5. ``Control of Volatile Organic Emissions from Petroleum Liquid
Storage in External Floating Roof Tanks,'' EPA-450/2-78-047, December
1978.
    6. ``Control of Volatile Organic Emissions from Bulk Gasoline
Plants,'' EPA-450/2-77-035, December 1977.
    7. ``Control of Hydrocarbons from Tank Truck Gasoline Loading
Terminals,'' EPA-450/2-77-026, October 1977.
    8. ``Control of Volatile Organic Compound Leaks from Gasoline Tank
Trucks and Vapor Collection Systems,'' EPA-450/2-78-051, December 1978.
    9. ``Design Criteria for Stage I Vapor Control Systems-Gasoline
Service Stations,'' EPA-450/R-75-102, November 1975.
    10. ``Alternative Control Techniques Document: Volatile Organic
Liquid Storage in Floating and Fixed Roof Tanks,'' EPA-453/R-94-001,
January 1994.

B. Do the submitted documents meet the evaluation criteria?

    Rules 350, 351, 352, and 353 apply to sources of VOC emissions from
organic liquid storage and gasoline transfer and storage operations in
the Phoenix-Mesa area. The four rules are generally more stringent than
the applicable CTGs, have requirements for organic liquid and gasoline
storage and transfer that are generally consistent with other local air
district rules for these source categories, and are largely consistent
with the applicable CAA requirements. However, as identified below, the
rules contain deficiencies that preclude full approval. In a letter
dated January 28, 2019 (the ``commitment letter''), the County
identified certain rule deficiencies and committed to revise those
provisions in accordance with EPA guidance, and submit the revised
rules within eleven months of a conditional approval.\6\ On February
25, 2019, the ADEQ provided its own commitment to submit the County's
revised rules to the EPA within one month after the County's action and
request for SIP revision.\7\ Because the commitments by the County and
ADEQ would remedy the identified rule deficiencies, we propose to
conditionally approve Rules 350, 351, 352, and 353, and the RACT SIP
with respect to the VOC source categories covered by Rules 350, 351,
352, 353 (as provided in Table 2). Summaries of the specific rule
deficiencies and the County's commitments to address those

deficiencies are included in the following sections.
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    \6\ Letter dated January 28, 2019, from Philip A. McNeely,
Director, MCAQD, to Misael Cabrera, Director, ADEQ.
    \7\ Letter dated February 25, 2019, from Misael Cabrera,
Director, ADEQ, to Michael Stoker, Region Administrator, EPA, Region
IX.
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    Our TSDs for Rules 350, 351, 352, and 353 provide further details
on our evaluation for these proposed conditional approvals.

C. What are the deficiencies?

    The following provisions of Rules 350, 351, 352, and 353 do not
fully satisfy the requirements of section 110 and part D of title I of
the Act and prevent full approval of the SIP revision.
    1. Rule 350 Deficiencies \8\
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    \8\ Rule deficiencies throughout this section marked with an
asterisk (*) also apply to Rule 351; those marked with a dagger
([dagger]) also apply to Rule 352.
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    (a) Rule 350 includes exemptions from rule requirements for fuel
consumed or dispensed at the facility directly to users, hazardous
waste, which is undefined, and wastewater and ballast water, none of
which are exempted from the applicable CTGs.
    (b) The rule lacks an emissions limit for bulk terminals
transferring organic liquid. The SIP-approved version requires an
emissions limit of 0.08 lbs VOCs/1000 gallons transferred.\9\
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    \9\ The 0.08 lbs VOC/1000 gallons limit is included in SIP-
approved Rule 351, which contains transfer requirements for organic
liquid and gasoline.
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    (c) The rule contains inappropriate use of director's discretion
with respect to the opening of hatches or seals on cargo tanks.*
[dagger]
    (d) Several sections do not clearly state rule prohibitions, and
instead require owners and operators with particular types of tanks to
put some amount of liquid into tanks that meet certain requirements.
Section 301.3, in particular, appears to be missing the word ``not'' in
a way that impacts the effectiveness of the requirement.*
    (e) The rule exempts roofs from the requirement that they always be
floating on liquid when the tank is being filled, instead of only while
filling after the tank has been emptied completely.*
    (f) The rule is not clear regarding which external floating roof
tanks are exempt from the rule's requirements.*
    (g) The rule does not clearly specify vapor control requirements
for internal floating roof tanks.
    (h) The rule contains an overly broad provision, allowing the
opening of hatches, vent valves, or vapor sealing devices for vacuum
relief when organic liquid is transferred from the cargo tank or
railcar into a storage tank.*
    2. Rule 351 Deficiencies \10\
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    \10\ For additional Rule 351 deficiencies, please see Rule 350
deficiencies (c)-(f) and (h).
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    (a) The rule allows the use of a less stringent compliance option
than the SIP-approved rule for controlling VOC vapors from gasoline
storage.\11\
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    \11\ The vapor loss control requirement is included in SIP-
approved Rule 350, which contains storage requirements for organic
liquid and gasoline.
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    (b) Rule 351 requirements for gasoline transfers at bulk plants are
not as strict as requirements that have been demonstrated to be
reasonably available in other air districts, as there is no emissions
limit or vapor recovery efficiency requirement when vapor balance
systems are used.
    (c) The rule exempts the loading of aviation gasoline at airports
from the rule's gasoline transfer requirements, which is not exempted
from applicable CTGs or other analogous SIP-approved district
rules.\12\
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    \12\ This deficiency also applies to Rule 352 and Rule 353.
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    3. Rule 352 Deficiencies \13\
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    \13\ For additional Rule 352 deficiencies, please see Rule 350
deficiency (c), and Rule 351 deficiency (c).
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    (a) The rule exempts cargo tanks with gasoline loads that
originated outside of Arizona, and gasoline loads delivered outside
Maricopa County, from the rule's gasoline cargo tank vapor tightness
requirements. Exemptions from vapor tightness requirements based on
where the cargo tank is initially filled or where it ultimately
delivers gasoline are not provided for in the applicable CTG.
    (b) The rule provides inappropriate discretion to unspecified
agencies to certify cargo tanks vapor tight.
    (c) The rule allows gasoline cargo tank vapor tightness tests to
remain valid for up to two years, whereas the CTG and rules from other
air districts require more frequent testing.
    (d) The rule allows inappropriate discretion for the opening of
cargo tank hatches during loading.
    (e) No test method is specified for determining compliance with the
provision requiring a 90% reduction in VOC emissions by weight when
purging cargo tank vapors.
    (f) The rule does not clearly prohibit purging of gasoline vapors
from cargo tanks, including during switch loading, and may relax
purging provisions as compared to the SIP-approved rule.
    4. Rule 353 Deficiencies \14\
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    \14\ For an additional Rule 353 deficiency, please see Rule 351
deficiency (c).
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    (a) The rule exempts an owner or operator from certain rule
requirements if the gasoline dispensing facility (GDF) is unattended or
there is only one owner or operator present. As there may be one
attendant at a GDF in many instances for a variety of reasons, this
exemption is overly broad and presents enforceability challenges.

D. What are the commitments to remedy the deficiencies?

    The County's commitment letter includes specific and enforceable
commitments, outlined below, to address the above deficiencies for
Rules 350, 351, 352, and 353.
    1. Rule 350 Commitments \15\
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    \15\ Rule commitments throughout this section marked with an
asterisk (*) also apply to Rule 351; those marked with a dagger
([dagger]) also apply to Rule 352.
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    (a) Removing the exemptions for fuel consumed or dispensed at the
facility directly to users, hazardous waste, wastewater, and ballast
water, to address section II.C.1.a, above.
    (b) Adding an emissions limit for organic liquid distribution
facilities transferring over 600,000 gallons per 30-day period of
organic liquid, based on a RACT analysis, to address II.C.1.b, above.
    (c) Deleting the provision that allows Control Officer discretion
for approval of hatch or seal opening, to address II.C.1.c, above.*
[dagger]
    (d) Rephrasing and restructuring the requirements for organic
liquid storage tanks to clarify the specified requirements without
weakening any substantive requirements, to address II.C.1.d, above.*
    (e) Clarifying that the floating roof exemption will only apply
when the tank is filled initially, after it is drained completely and
subsequently refilled, or when undergoing maintenance requiring the
roof be rested on its leg supports, to address II.C.1.e, above.*
    (f) Removing the specified exemption for external floating roof
tanks, to address II.C.1.f, above.*
    (g) Deleting the specified section, and adding requirements for
internal floating roof organic liquid storage tanks that match SIP-
approved requirements, to address II.C.1.g, above.
    (h) Limiting the conditions under which a hatch, vent valve, or
vapor sealing device may be open during the organic liquid transfer
from the cargo tank to the storage tank to those necessary to avoid
unsafe operating conditions, to address II.C.1.h, above.*
    2. Commitments for Rule 351 \16\
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    \16\ For additional Rule 351 commitments, please see Rule 350
commitments (c)-(f) and (h), above.
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    (a) Adding vapor loss control requirements that will be at least as
stringent as the SIP-approved version, to address II.C.2.a above.
    (b) Revising Rule 351 to include an emissions limit or vapor
recovery efficiency for loading at a bulk gasoline plant, based on a
RACT analysis, to address II.C.2.b, above.

    (c) Removing the exemption for aviation gasoline loading at
airports, to address II.C.2.c, above.\17\
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    \17\ This commitment also applies to Rule 352 and Rule 353.
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    3. Commitments for Rule 352 \18\
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    \18\ For additional Rule 352 commitments, please see Rule 350
commitment (c), and Rule 351 commitment (c).
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    (a) Removing the vapor tightness test exemption for cargo tanks
with gasoline loads that originated outside of Arizona and gasoline
loads delivered outside Maricopa County, to address II.C.3.a, above.
    (b) Requiring that a gasoline cargo tank tested outside Maricopa
County be tested and verified vapor tight using methods at least as
stringent as those found in the County's rule, and that testing
documentation be submitted to the MCAQD, to address II.C.3.b.
    (c) Revising vapor tightness certification expiration requirements
to shorten the maximum testing interval, to address II.C.3.c.
    (d) Revising to clarify and limit the conditions under which a
hatch, vent valve, or vapor sealing device may be open during the
transfer of gasoline from the cargo tank, to address II.C.3.d.
    (e) Including appropriate EPA-approved test methods to determine
compliance with at least a 90% reduction in VOC emissions by weight, to
address II.C.3.e.
    (f) Revising the purging requirements to include a prohibition on
purging that is at least as stringent as the SIP-approved version, to
address II.C.3.f.
    4. Commitments for Rule 353 \19\
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    \19\ For an additional Rule 353 commitment, please see Rule 351
commitment (c).
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    (a) Deleting the exemption for unattended GDFs, or GDFs where there
is only one owner or operator present, to address II.C.4.a.

E. The EPA's Recommendations To Further Improve the Submitted Rules

    The TSDs for Rule 350, 351, 352, and 353 describe additional rule
revisions that we recommend for the next time the County modifies the
rules.

F. Public Comment and Proposed Action

    Rules 350, 351, 352, and 353 largely fulfill the relevant CAA Sec.
110 and part D requirements, but the deficiencies, as discussed in
section C, preclude full SIP approval pursuant to 110(k)(3) of the Act.
Section 110(k)(4) authorizes the EPA to conditionally approve SIP
revisions based on a commitment by the state to adopt specific
enforceable measures by a date certain but not later than one year
after the date of the plan approval.\20\ Because the MCAQD and the ADEQ
have committed to provide the EPA with a SIP submission within one year
of this final action that will include specific rule revisions that
would adequately address the identified deficiencies, we are proposing
to conditionally approve Rules 350, 351, 352, and 353, pursuant to
section 110(k)(4) of the Act. We are also proposing to conditionally
approve MCAQD's RACT demonstrations for the 2008 8-hr ozone NAAQS with
respect to the VOC source categories covered by Rules 350, 351, 352,
and 353, as specified in Table 2. If the MCAQD and the ADEQ submit the
required rule revisions by the specified deadline, and the EPA approves
the submission, then the identified deficiencies will be cured.
However, if these proposed conditional approvals are finalized, and
MCAQD, through the ADEQ, fails to submit these revisions within the
required timeframe, the conditional approval would be treated as a
disapproval for those rules for which the revisions are not submitted
(and the associated RACT SIP CTG source categories). We will accept
comments from the public on this proposal until October 23, 2019. If we
take final action to approve the submitted rules, our final action will
incorporate these rules into the federally enforceable SIP.
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    \20\ 42 U.S.C. 7410(k)(4).
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III. Incorporation by Reference

    In this rule, the EPA is proposing to include in a final EPA rule,
regulatory text that includes incorporation by reference. In accordance
with requirements of 1 CFR 51.5, the EPA is proposing to incorporate by
reference the MCAQD rules described in Table 1 of this preamble. The
EPA has made, and will continue to make, these materials available
through https://www.regulations.gov and at the EPA Region IX Office
(please contact the person identified in the FOR FURTHER INFORMATION
CONTACT section of this preamble for more information).

IV. Statutory and Executive Order Reviews

    Additional information about these statutes and Executive Orders
can be found at https://www.epa.gov/laws-regulations/laws-and-executive-orders.

A. Executive Order 12866: Regulatory Planning and Review and Executive
Order 13563: Improving Regulation and Regulatory Review

    This action is not a significant regulatory action and was
therefore not submitted to the Office of Management and Budget (OMB)
for review.

B. Executive Order 13771: Reducing Regulations and Controlling
Regulatory Costs

    This action is not an Executive Order 13771 regulatory action
because actions such as SIP approvals are exempted under Executive
Order 12866.

C. Paperwork Reduction Act (PRA)

    This action does not impose an information collection burden under
the PRA, because the proposed conditional approvals, if finalized, will
not in-and-of themselves create any new information collection burdens,
but will simply conditionally approve certain State requirements for
inclusion in the SIP.

D. Regulatory Flexibility Act (RFA)

    I certify that this action will not have a significant economic
impact on a substantial number of small entities under the RFA. This
action will not impose any requirements on small entities. These
proposed conditional approvals, if finalized, will not in-and-of
themselves create any new requirements but will simply conditionally
approve certain State requirements for inclusion in the SIP.

E. Unfunded Mandates Reform Act (UMRA)

    This action does not contain any unfunded mandate as described in
UMRA, 2 U.S.C. 1531-1538, and does not significantly or uniquely affect
small governments. This action proposes to conditionally approve pre-
existing requirements under State or local law, and imposes no new
requirements. Accordingly, no additional costs to State, local, or
tribal governments, or to the private sector, result from this action.

F. Executive Order 13132: Federalism

    This action does not have federalism implications. It will not have
substantial direct effects on the states, on the relationship between
the national government and the states, or on the distribution of power
and responsibilities among the various levels of government.

G. Executive Order 13175: Coordination With Indian Tribal Governments

    This action does not have tribal implications, as specified in
Executive Order 13175, because the SIP revisions that the EPA is
proposing to conditionally approve would not apply on any Indian
reservation land or in any other area where the EPA or an Indian tribe
has demonstrated that a tribe has jurisdiction, and will not impose
substantial direct costs on tribal

governments or preempt tribal law. Thus, Executive Order 13175 does not
apply to this action.

H. Executive Order 13045: Protection of Children From Environmental
Health Risks and Safety Risks

    The EPA interprets Executive Order 13045 as applying only to those
regulatory actions that concern environmental health or safety risks
that the EPA has reason to believe may disproportionately affect
children, per the definition of ``covered regulatory action'' in
section 2-202 of the Executive Order. This action is not subject to
Executive Order 13045 because the proposed conditional approvals, if
finalized, will not in-and-of themselves create any new regulations,
but will simply conditionally approve certain State requirements for
inclusion in the SIP.

I. Executive Order 13211: Actions That Significantly Affect Energy
Supply, Distribution, or Use

    This action is not subject to Executive Order 13211, because it is
not a significant regulatory action under Executive Order 12866.

J. National Technology Transfer and Advancement Act (NTTAA)

    Section 12(d) of the NTTAA directs the EPA to use voluntary
consensus standards in its regulatory activities unless to do so would
be inconsistent with applicable law or otherwise impractical. The EPA
believes that this action is not subject to the requirements of section
12(d) of the NTTAA because application of those requirements would be
inconsistent with the CAA.

K. Executive Order 12898: Federal Actions To Address Environmental
Justice in Minority Populations and Low-Income Population

    The EPA lacks the discretionary authority to address environmental
justice in this rulemaking.

List of Subjects in 40 CFR Part 52

    Environmental protection, Air pollution control, Incorporation by
reference, Intergovernmental relations, Ozone, Reporting and
recordkeeping requirements, Volatile organic compounds.

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

    Dated: September 6, 2019.
Deborah Jordan,
Acting Regional Administrator, Region IX.
[FR Doc. 2019-20425 Filed 9-20-19; 8:45 am]
 BILLING CODE 6560-50-P


[Federal Register Volume 79, Number 89 (Thursday, May 8, 2014)]
[Notices]
[Pages 26470-26473]
[FR Doc No: 2014-10538]

=======================================================================
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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-72084; File No. SR-NYSEMKT-2014-42]

Self-Regulatory Organizations; NYSE MKT LLC; Notice of Filing and
Immediate Effectiveness of Proposed Rule Change Amending Rule 980NY To
Adopt Rules Governing an Opening Auction Process for Electronic Complex
Orders and To Amend and Reorganize Existing Rules Specifying Available
Electronic Complex Order Types and Modifiers

May 2, 2014.
    Pursuant to Section 19(b)(1) \1\ of the Securities Exchange Act of
1934 (the ``Act'') \2\ and Rule 19b-4 thereunder,\3\ notice is hereby
given that on April 28, 2014, NYSE MKT LLC (the ``Exchange'' or ``NYSE
MKT'') filed with the Securities and Exchange Commission (the
``Commission'') the proposed rule change as described in Items I and II
below, which Items have been prepared by the self-regulatory
organization. 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\ 15 U.S.C. 78a.
    \3\ 17 CFR 240.19b-4.
---------------------------------------------------------------------------

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

    The Exchange proposes to amend Rule 980NY (Electronic Complex Order
Trading) to adopt rules governing an opening auction process for
Electronic Complex Orders and to amend and reorganize existing rules
specifying available Electronic Complex Order types and modifiers. The
text of the proposed rule change is available on the Exchange's Web
site at www.nyse.com, at the principal office of the Exchange, and at
the Commission's Public Reference Room.

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

    In its filing with the Commission, the self-regulatory organization
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 those statements may be examined at
the places specified in Item IV below. The Exchange has prepared
summaries, set forth in sections A, B, and C below, of the most
significant parts of such statements.

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

1. Purpose
    The Exchange proposes to amend Rule 980NY (Electronic Complex Order
Trading) to adopt rules governing an opening auction process for
Electronic Complex Orders and to amend and reorganize existing rules
specifying order types and modifiers applicable to Electronic Complex
Orders.

Opening Auction Process for Electronic Complex Orders
    The Exchange is proposing to amend Rule 980NY(c) by establishing
subsection (i) to describe how orders would be handled by the Complex
Matching Engine (``CME'') during a new opening auction process for
Electronic Complex Orders that would allow the Exchange to offer
eligible trading interest at a single-price opening. Currently, there
is no single-price opening. Rather, the CME begins processing each
Electronic Complex Order in the Consolidated Book based on price/time
priority after all of the individual component option series that make
up a complex order strategy have opened. By adopting the proposed
opening auction process for the CME, the Exchange is seeking to
maximize both price discovery and execution opportunities for
participants utilizing Electronic Complex Orders. The Chicago Board
Options Exchange (``CBOE'') recently adopted similar rules to describe
how their Complex Order Book (``COB'') functions at the opening of
trading.\4\ The Exchange notes that the proposed changes to Rule 980NY
regarding the new opening auction process for Electronic Complex Orders
are substantially similar in all material respects to those of the
CBOE.\5\
---------------------------------------------------------------------------

    \4\ See Securities Exchange Act Release No.68844 (February 6,
2013), 78 FR 9953 (February 12, 2013) (SR-CBOE-2013-007).
    \5\ See CBOE Rule 6.53C.11(b), which provision was one of
several discussed in CBOE's recent filing (see id.). The Exchange
notes, however, that this filing differs from the CBOE's recent
filing (see id.) in that it provides specificity about the market
clearing price and cross-references existing Exchange rules
regarding auction pricing (see infra n. 6).
---------------------------------------------------------------------------

    Pursuant to proposed Rule 980NY(c)(i)(A), Electronic Complex Orders
would not participate in opening auctions for individual component
option series legs conducted pursuant to Rule 952NY(b). The Exchange
further proposes to provide that the CME would not begin processing
Electronic Complex Orders until all of the individual component option
series legs that make up a complex order strategy have opened. The
intent of this paragraph is to make clear to market participants that
an Electronic Complex Order is not eligible to trade until such time
that all option series associated with that order have opened for
trading. The CME will not execute any transactions in Electronic
Complex Orders involving un-opened option series.
    Pursuant to proposed Rule 980NY(c)(i)(B), the CME would use an
opening auction process if there are Electronic Complex Orders on both
sides of the Consolidated Book that are marketable against each other
and that are priced within the derived Complex National Best Bid and
Offer (``Complex NBBO'').\6\ The resulting execution would occur at a
market clearing price that is inside the derived Complex NBBO and that
matches Electronic Complex Orders with each other to the extent
marketable.\7\ In determining priority, the CME would give priority to
Electronic Complex Orders whose net price is better than the market
clearing price first, and then to Electronic Complex Orders at the
market clearing price.\8\
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    \6\ The derived Complex NBBO will be derived by using the best
prices for the individual leg markets comprising the Electronic
Complex Order as disseminated by OPRA, that when aggregated create a
derived NBBO for that same strategy.
    \7\ The ``market clearing price'' for Electronic Complex Orders
is similar to the ``opening price'' for an individual series as
described in Rule 952NY(c). Specifically, the market clearing price
for an Electronic Complex Order will be the price, as determined by
the System, at which the most volume can be traded at or nearest to
the midpoint of the initial uncrossed derived Complex NBBO. Midpoint
pricing will not occur if such price would result in the violation
of the limit price of the Electronic Complex Order(s) involved.
Instead, the market clearing price would be the limit price of the
order(s) at which the most volume can be traded. Because listed
options may not be priced in sub-penny increments nor will the OCC
clear options at sub-penny prices, if the calculated midpoint price
results in a sub-penny price, the market clearing price will round
down to the nearest even penny (i.e., a calculated midpoint price of
$1.005 will round to $1.00). The Exchange notes that CBOE, which is
also subject to the same restrictions on sub-penny pricing of listed
options, did not disclose in their filing (see supra n. 3) whether
it would round the market clearing price (up or down) to the nearest
whole cent if mid-point pricing resulted in a sub-penny market
clearing price.
    \8\ The Exchange notes that Electronic Complex Orders residing
in the Consolidated Book at the opening of trading that are not
marketable against other Electronic Complex Orders do not
participate in the auction process. As is the case today, these
orders will automatically execute against individual orders or
quotes residing in the Consolidated Book after the CME opens,
provided the Electronic Complex Order can be executed in full (or in
a permissible ratio) by the orders or quotes in the Consolidated
Book. See current Rule 980NY(c)(ii) which the Exchange is proposing
to renumber as Rule 980NY(c)(ii)(B). The Exchange notes that this
functionality is similar to CBOE Rule 6.53C.11(a), which the CBOE
discussed in its recent filing. See supra n. 3.
---------------------------------------------------------------------------

Example 1
    This example will show how the CME would conduct an opening auction
where the market clearing price is at the midpoint of the derived
Complex NBBO.
    Assume the derived Complex NBBO for a given complex order strategy
is $1.10-$1.20 (midpoint = 1.15). Assume there are four Electronic
Complex Orders in the Consolidated Book for the same strategy; two buy
orders and two sell orders, each order represents 100 units of the same
strategy. The first sell order is priced at $1.11 and the second sell
order is priced at $1.13. The first buy order can pay 1.19 and the
second can pay $1.17. When the CME opens, (at a market clearing price
nearest the mid-point where the most volume can trade) the $1.11 sell
order for 100 units will execute against the $1.19 buy order for 100
units and the $1.13 sell order for 100 units will execute against the
$1.17 buy order for 100 units (orders are ranked and executed based on
price priority). This would result in all volume trading at a single
market clearing price of $1.15, which in this example is the exact mid-
point price of the derived Complex NBBO.
Example 2
    This example will show how the CME would conduct an opening auction
where the market clearing price is not equal to the midpoint of the
derived Complex NBBO.
    Assume the derived Complex NBBO for a given complex order strategy
is $1.10-$1.20 (midpoint = 1.15). Assume there are three Electronic
Complex Orders in the Consolidated Book, all for the same complex order
strategy. The first order is a sell order priced at $1.19 for 20 units,
the second order is a sell order priced at $1.18 for 10 units, and the
third order is a buy order paying $1.19 for 50 units. When the CME
opens, 30 units of the buy order would trade against the two sell
orders, with the $1.18 sell order for 10 units having first priority
followed by the $1.19 sell order for 20 units (orders are ranked and
executed based on price priority). Because the market clearing price in
this example could not equal the midpoint ($1.15), as that price would
violate the limit price of both sell orders, the market clearing price
would be $1.19, as that is the price at which the most volume could
trade. This would result in the CME conducting the auction at the
market clearing price of $1.19. In this example, the remaining 20 units
of the buy order would be subject to processing under Rule 980NY (e.g.,
remain in the Consolidated Book if not marketable against the
individual orders and quotes in the Consolidated Book or other
Electronic Complex Orders in the Consolidated Book, or execute if
marketable subject to the applicable priority and price-check
parameters).
    The opening auction process of the CME as described in proposed
Rule 980NY(c)(i)(B) is consistent with the

opening auction process for Electronic Complex Orders at the CBOE.\9\
---------------------------------------------------------------------------

    \9\ See CBOE Rule 6.53C.11(b).
---------------------------------------------------------------------------

    The Exchange is proposing to adopt Rule 980NY(c)(i)(C) to explain
that Electronic Complex Orders that are not executed during the opening
auction process are eligible to trade during Core Trading against the
individual quotes and orders residing in the Consolidated Book of the
same series that comprise the complex order strategy. The processing of
Electronic Complex Orders during Core Trading is done in accordance
with Rules 980NY(c)(i)-(iii), which the Exchange is proposing to
renumber as Rules 980NY(c)(ii)(A)-(C).
    Consistent with the foregoing changes, the Exchange also proposes
to re-number the remaining subsections of Rule 980NY(c)(i)-(iii) under
a new section heading, ``Execution of Complex Orders During Core
Trading,'' with no changes to the substance of the rule text.
    Additionally, the Exchange is proposing to amend the text of Rule
980NY(c) by deleting the representation that Electronic Complex Orders
will be executed at the best available price available. Because
existing and proposed rules explain precisely how Electronic Complex
Orders are priced (i.e. at a market clearing price during an opening
auction process, or at the prices of the individual orders and quotes
in the Consolidated Book during Core Trading), the reference to ``the
best available price'' is superfluous. The proposed resulting language
of Rule 980NY(c) would be consistent with rules describing how
Electronic Complex Orders are traded on NYSE Arca.\10\
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    \10\ See NYSE Arca Rule 6.91(a)(2).
---------------------------------------------------------------------------

Order Types and Contingencies Applicable to Electronic Complex Orders
    The Exchange also proposes to amend and reorganize Rule 980NY(d),
which explains order types, contingencies and modifiers applicable to
Electronic Complex Orders, as follows:
     The CME presently accepts only Limit Orders \11\ and Limit
Orders designated as PNP Plus.\12\ The Exchange proposes to amend Rule
980NY(d) to codify this functionality. As proposed, Rule 980NY(d)(1)
would state that Limit Orders and Limit Orders designated as PNP Plus
are valid types of Electronic Complex Orders. Complex Limit Orders and
Complex Limit Orders designated as PNP Plus are processed in the same
manner as a similarly marked single-leg order.
---------------------------------------------------------------------------

    \11\ See NYSE MKT Rule 900.3NY(b).
    \12\ See NYSE MKT Rule 900.3NY(w).
---------------------------------------------------------------------------

     Proposed Rule 980NY(d)(2) would provide that Electronic
Complex Orders may be designated as Fill-or-Kill (``FOK'') \13\ and
All-or-None (``AON'').\14\ The use of FOK or AON contingency is
consistent with complex order trading at other options exchanges.\15\
Electronic Complex Orders with a FOK or AON contingency would be
processed in the same manner as a similarly marked single-leg order.
---------------------------------------------------------------------------

    \13\ See NYSE MKT Rule 900.3NY(l).
    \14\ See NYSE MKT Rule 900.3NY(d)(4).
    \15\ See CBOE Rule 6.53C(b) and NYSE Arca Rule 6.91(b).
---------------------------------------------------------------------------

     Currently, the Rule 980NY(d) provides that Electronic
Complex Orders may be entered as IOC \16\ or Day,\17\ and the Exchange
now proposes making the Good-til-Cancel (``GTC'') \18\ modifier
available for Electronic Complex Orders. As proposed, Rule 980NY(d)(3)
would provide that Electronic Complex Order may be entered as IOC, Day,
or GTC.\19\ The use of GTC as a time-in-force is consistent with
complex orders trading at other option exchanges.\20\ Electronic
Complex Orders marked IOC, Day or GTC would be processed in the same
manner as similarly marked single-leg orders.
---------------------------------------------------------------------------

    \16\ See NYSE MKT Rule 900.3NY(k).
    \17\ See NYSE MKT Rule 900.3NY(m).
    \18\ See NYSE MKT Rule 900.3NY(n).
    \19\ See NYSE MKT Rule 900.3NY(n).
    \20\ See CBOE Rule 6.53C(c)(iii) and NYSE Arca Rule 6.91(b).
---------------------------------------------------------------------------

Implementation
    The Exchange will implement the proposed rule changes described
above upon the implementation of technology updates applicable to the
CME. The Exchange will announce the implementation date of the proposed
rule change by Trader Update.
2. Statutory Basis
    The proposed rule change is consistent with Section 6(b) of the Act
\21\ in general and furthers the objectives of Section 6(b)(5) of the
Act \22\ in particular in that it should promote just and equitable
principles of trade, serve to remove impediments to and perfect the
mechanism of a free and open market and a national market system, and
protect investors and the public interest.
---------------------------------------------------------------------------

    \21\ 15 U.S.C. 78f(b).
    \22\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------

    Specifically, the Exchange believes the proposed rule governing the
opening auction process via the CME for Electronic Complex Orders
increases opportunities for all types of market participants (e.g.,
public customers, broker-dealers and market-makers) to participate in
trading with Electronic Complex Orders. This participation may promote
liquidity and result in better prices for customers throughout the
trading day, including when the CME opens, which, in turn, protects
investors and advances public interest.
    The Exchange also believes that codifying the available types of
orders eligible to be entered as Electronic Complex Orders,
reorganizing the variations of Electronic Complex Order types available
on the Exchange and listing those in a clear and precise structure,
will remove impediments to and perfect the mechanism of a free and open
market. In addition, adopting the GTC, FOK and AON designations will
further serve to remove impediments to a free an open market and a
national market system by affording market participants on NYSE Amex
Options similar investment choices to what is available at other market
centers.\23\
---------------------------------------------------------------------------

    \23\ See supra nn. 14, 19.
---------------------------------------------------------------------------

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

    The Exchange does not believe that the proposed rule change will
impose any burden on competition that is not necessary or appropriate
in furtherance of the purposes of the Act. As noted above, the Exchange
believes that expanding the variations of order types via contingencies
and modifiers will encourage more Electronic Complex Orders to the
Exchange, which is pro-competitive. Further the planned enhancement to
provide a single price open, if possible, within the CME increases
opportunities for all types of market participants (e.g., public
customers, broker-dealers and market-makers) to participate in the
trading of complex orders. This participation may promote liquidity and
result in better prices for customers throughout the trading day,
including when the CME opens. The Exchange does not believe that the
changes proposed by this filing imposes any burden on other Exchanges
as the most substantive change proposed, that being the complex order
opening auction, is similar to functionality that is already available
on at least one competing options Exchange.\24\ The Exchange has found
that when multiple Exchanges introduce similar functionality, other
Exchanges move to enhance their own systems and product offerings which
are generally beneficial to all investors.
---------------------------------------------------------------------------

    \24\ See supra nn. 3, 8.

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

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

    No written comments were solicited or received with respect to the
proposed rule change.

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

    The Exchange has filed the proposed rule change pursuant to Section
19(b)(3)(A)(iii) of the Act \25\ and Rule 19b-4(f)(6) thereunder.\26\
Because the proposed rule change does not: (i) Significantly affect the
protection of investors or the public interest; (ii) impose any
significant burden on competition; and (iii) become operative prior to
30 days from the date on which it was filed, or such shorter time as
the Commission may designate, if consistent with the protection of
investors and the public interest, the proposed rule change has become
effective pursuant to Section 19(b)(3)(A) of the Act and Rule 19b-
4(f)(6)(iii) thereunder.\27\
---------------------------------------------------------------------------

    \25\ 15 U.S.C. 78s(b)(3)(A)(iii).
    \26\ 17 CFR 240.19b-4(f)(6).
    \27\ 17 CFR 240.19b-4(f)(6)(iii). As required under Rule 19b-
4(f)(6)(iii), the Exchange provided the Commission with written
notice of its intent to file the proposed rule change, along with a
brief description and the text of the proposed rule change, at least
five business days prior to the date of filing of the proposed rule
change, or such shorter time as designated by the Commission.
---------------------------------------------------------------------------

    At any time within 60 days of the filing of such proposed rule
change, the Commission summarily may temporarily suspend such rule
change if it appears to the Commission that such action is necessary or
appropriate in the public interest, for the protection of investors, or
otherwise in furtherance of the purposes of the Act. If the Commission
takes such action, the Commission shall institute proceedings under
Section 19(b)(2)(B) \28\ of the Act to determine whether the proposed
rule change should be approved or disapproved.
---------------------------------------------------------------------------

    \28\ 15 U.S.C. 78s(b)(2)(B).
---------------------------------------------------------------------------

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 email to<EMAIL_ADDRESS>Please include
File Number SR-NYSEMKT-2014-42 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-NYSEMKT-2014-42. 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 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 at 100 F Street NE.,
Washington, DC 20549-1090 on official business days between the hours
of 10:00 a.m. and 3:00 p.m. Copies of such filing also will be
available for inspection and copying at the principal office of the
Exchange. All comments received will be posted without change; the
Commission does not edit personal identifying information from
submissions. You should submit only information that you wish to make
available publicly. All submissions should refer to File Number SR-
NYSEMKT-2014-42, and should be submitted on or before May 29, 2014.

    For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\29\
---------------------------------------------------------------------------

    \29\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------

Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2014-10538 Filed 5-7-14; 8:45 am]
BILLING CODE 8011-01-P


[Federal Register Volume 77, Number 51 (Thursday, March 15, 2012)]
[Notices]
[Pages 15409-15413]
[FR Doc No: 2012-6317]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-66569; File No. SR-Phlx-2012-28]

Self-Regulatory Organizations; NASDAQ OMX PHLX LLC; Notice of
Filing of Proposed Rule Change Relating to the MSCI EAFE Index

March 9, 2012.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934
(``Act''),\1\ and Rule 19b-4 \2\ thereunder, notice is hereby given
that on March 1, 2012, NASDAQ OMX PHLX LLC (``Phlx'' or ``Exchange'')
filed with the Securities and Exchange Commission (``SEC'' or
``Commission'') the proposed rule change as described in Items I and II
below, which Items have been prepared by the Exchange. The Commission
is publishing this notice to

solicit comments on the proposed rule change from interested persons.
---------------------------------------------------------------------------

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

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

    The Exchange proposes to amend Exchange Rules 1079, 1009A and 1101A
to list and trade new options on the MSCI EAFE Index based upon the
Full Value MSCI EAFE Index (``Full Value MSCI EAFE Index'').\3\
---------------------------------------------------------------------------

    \3\ The Exchange has entered into a license agreement with MSCI
Inc. (``MSCI'') to list this product.
---------------------------------------------------------------------------

    The Exchange also proposes to create a new Rule 1109A entitled
``MSCI EAFE Index'' which provides additional detailed information
pertaining to the index as required by the licensor.
    The text of the proposed rule change is available on the Exchange's
Web site at http://www.nasdaqtrader.com/micro.aspx?id=PHLXRulefilings,
at the principal office of the Exchange, and at the Commission's Public
Reference Room.

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

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

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

1. Purpose
    The purpose of the proposed rule change is to amend Exchange Rules
1079 (FLEX Index, Equity and Currency Options), 1009A (Designation of
the Index) and 1101A (Terms of Option Contracts) to list and trade P.M.
cash-settled, European-style options, including FLEX \4\ options and
LEAPS,\5\ on the MSCI EAFE (Europe, Australasia, and the Far East)
Index. Specifically, the Exchange proposes to list and trade long-term
options on the Full Value MSCI EAFE Index (``MSCI EAFE LEAPS'').\6\ The
Exchange also proposes to create a new Rule 1109A entitled ``MSCI EAFE
Index'' which provides additional detailed information pertaining to
the index as required by the licensor including, but not limited to,
liability and other representations on the part of MSCI Inc.
---------------------------------------------------------------------------

    \4\ FLEX options are flexible exchange-traded index, equity, or
currency option contracts that provide investors the ability to
customize basic option features including size, expiration date,
exercise style, and certain exercise prices. FLEX index options may
have expiration dates within five years. See Exchange Rules 1079 and
1101A.
    \5\ LEAPS or Long Term Equity Anticipation Securities are long
term options that generally expire from twelve to thirty-nine months
from the time they are listed.
    \6\ The MSCI EAFE ETF is one of the top ten in the United States
based on assets and trades a large volume with respect to ETFs
today.
---------------------------------------------------------------------------

    The MSCI EAFE Index is a free float-adjusted market capitalization
index \7\ that is designed to measure the equity market performance of
developed markets, excluding the U.S. and Canada. The MSCI EAFE Index
consists of component securities from the following twenty-two (22)
developed market countries: Australia, Austria, Belgium, Denmark,
Finland, France, Germany, Greece, Hong Kong, Ireland, Israel, Italy,
Japan, the Netherlands, New Zealand, Norway, Portugal, Singapore,
Spain, Sweden, Switzerland, and the United Kingdom.
---------------------------------------------------------------------------

    \7\ The free float adjusted market capitalization is used to
calculate the weights of the securities in the indices. MSCI defines
the free float of a security as the proportion of shares outstanding
that is deemed to be available for purchase in the public equity
markets by international investors.
---------------------------------------------------------------------------

Index Design and Composition
    The MSCI EAFE Index is designed to measure international equity
performance. It consists of component securities from countries that
represent developed markets outside of North America: Europe,
Australasia and the Far East. The Index is maintained by MSCI.\8\ The
Index was launched on December 31, 1969.
---------------------------------------------------------------------------

    \8\ MSCI is a provider of investment decision support tools.
---------------------------------------------------------------------------

    The MSCI EAFE Index is reviewed on a semi-annual basis. The index
review is based on MSCI's Global Investable Markets Indices
Methodology. A description of the methodology is available at http://www.msci.com/eqb/methodology/meth_docs/MSCI_May11_GIMIMethod.pdf.
The MSCI EAFE Index consists of large and midcap components from
countries classified by MSCI as developed and excludes North America.
Index Calculation and Index Maintenance
    The base index value of the MSCI EAFE Index was 100, as of December
31, 1969. On June 1, 2011, the index value of the MSCI EAFE Index was
1727.187. The MSCI EAFE Index is calculated in U.S. Dollars on a real
time basis from the open of the first market on which the components
are traded to the closing of the last market on which the components
are traded. The methodology used to calculate the value of the MSCI
EAFE Index is similar to the methodology used to calculate the value of
other well-known market-capitalization weighted indexes.\9\ The level
of the MSCI EAFE Index reflects the free float-adjusted market value of
the component stocks relative to a particular base date and is computed
by dividing the total market value of the companies in the MSCI EAFE
index by the index divisor.\10\
---------------------------------------------------------------------------

    \9\ Additional information about the methodology for calculating
the MSCI EAFE Index can be found at: http://www.msci.com/eqb/methodology/meth_docs/MSCI_May11_GIMIMethod.pdf.
    \10\ A divisor is an arbitrary number chosen at the starting
date of an index to fix the index starting value. The divisor is
adjusted periodically when capitalization amendments are made to the
constituents of the index in order to allow the index value to
remain comparable over time. Without a divisor the index value would
change when corporate actions took place and would not reflect the
true value of an underlying portfolio based upon the index.
---------------------------------------------------------------------------

    Static data is distributed daily to clients through MSCI as well as
through major quotation vendors, including Bloomberg L.P.
(``Bloomberg''), FactSet Research Systems, Inc. (``FactSet'') and
Thomson Reuters (``Reuters''). Real time data is distributed at least
every 15 seconds using MSCI's real-time calculation engine to Reuters,
Bloomberg, SIX Telekurs and FactSet.
    The MSCI EAFE Index is monitored and maintained by MSCI.
Adjustments to the MSCI EAFE Index are made on a daily basis with
respect to corporate events and dividends. The MSCI EAFE Index is
generally updated on a quarterly basis in February, May, August and
November of each year to reflect amendments to shares outstanding and
free float and full index reviews are conducted on a semi-annual basis
in May and November of each year for purposes of rebalancing the index.
Exercise and Settlement Value
    The settlement value for expiring options on the MSCI EAFE Index
would be based on the closing prices of the component stocks on the
last trading day prior to expiration, usually a Friday. The last
trading day for expiring contracts is the last business day prior to
expiration, usually the third Friday of the expiration month. The index
multiplier is $100. The Options Clearing Corporation would be the
issuer and guarantor.
Contract Specifications
    The MSCI EAFE Index is a broad-based index, as defined in Exchange

Rule 1000A. Options on the MSCI EAFE Index would be European-style and
P.M. cash-settled.\11\ The Exchange's standard trading hours for index
options (9:30 a.m. to 4:15 p.m. E.T. (Philadelphia Time)), as set forth
in Exchange Rules 101 and 1101A at Commentary .01, would apply to
options on the MSCI EAFE Index. The expiration date for this index is
the Saturday following the third Friday of the expiration month.
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    \11\ See proposed Exchange Rule 1009A(h)(i)(2).
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    The Exchange also notes that the MSCI EAFE Index is a broad-based
index as defined in Exchange Rule 1000A(b)(11).\12\ In addition, the
Exchange proposes to create specific listing and maintenance standards
for options on the MSCI EAFE Index in Exchange Rule 1009A(h).
Specifically, in proposed Rule 1009A(h)(i)(1) through (10) the Exchange
proposes to require that the following conditions are satisfied: (1)
The index is broad-based, as defined in Rule 1000A(b)(11); (2) Options
on the index are designated as P.M.-settled index options; (3) The
index is capitalization-weighted, price-weighted, modified
capitalization-weighted or equal dollar-weighted; (4) The index
consists of 500 or more component securities; (5) All of the component
securities of the index will have a market capitalization of greater
than $100 million; (6) No single component security accounts for more
than fifteen percent (15%) of the weight of the index, and the five
highest weighted component securities in the index do not, in the
aggregate, account for more than fifty percent (50%) of the weight of
the MSCI EAFE Index; (7) Non-U.S. component securities (stocks or ADRs)
that are not subject to comprehensive surveillance agreements do not,
in the aggregate, represent more than twenty percent (20%) of the
weight of the index; (8) The current index value is widely disseminated
at least once every fifteen (15) seconds by one or more major market
data vendors during the time options on the index are traded on the
Exchange; (9) The Exchange reasonably believes it has adequate system
capacity to support the trading of options on the index, based on a
calculation of the Exchange's current Independent System Capacity
Advisor (ISCA) allocation and the number of new messages per second
expected to be generated by options on such index; and (10) The
Exchange has written surveillance procedures in place with respect to
surveillance of trading of options on the index.
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    \12\ See Exchange Rule 1000A(b)(11), which defines a broad-based
index as an index designed to be representative of a stock market as
a whole or of a range of companies in unrelated industries.
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    Additionally, the Exchange proposes to require the following
maintenance requirements, as set forth in proposed Rule 1009A, for the
MSCI EAFE Index options: (1) the conditions set forth in subparagraphs
(h)(i)(1), (2), (3), (4), (7), (8), (9) and (10) must continue to be
satisfied. The conditions set forth in subparagraphs (h)(i)(5) and (6),
must be satisfied only as of the first day of January and July in each
year; and (2) the total number of component securities in the index may
not increase or decrease by more than thirty-five percent (35%) from
the number of component securities in the index at the time of its
initial listing.
    The Exchange believes that the modified initial listing
requirements are appropriate for trading options on the MSCI EAFE Index
for various reasons. The Exchange believes that a P.M. settlement \13\
is appropriate given the nature of this index, which encompasses
multiple markets around the world.\14\ Specifically, the MSCI EAFE
Index components open with the start of trading in Asia at 6 p.m. E.T.
(prior day) and closes with the end of trading in Europe at 12:30 p.m.
E.T. (the next day) as closing prices from Ireland are accounted for in
the closing calculation. The closing index level value is distributed
by MSCI between 2:00 and 2:30 p.m. E.T. each trading day.\15\ The index
has a higher market capitalization requirement than other broad based
indexes. The MSCI EAFE Index currently contains more than 900
components and no single component comprises more than 5% of the index,
making it not easily subject to market manipulation. Therefore, because
the MSCI EAFE Index has a large number of component securities,
representative of many countries, and trades a large volume with
respect to ETFs today,\16\ the Exchange believes that the initial
listing requirements are appropriate to trade options on this index. In
addition, similar to other broad based indexes, the Exchange proposes
various maintenance requirements, which require continual compliance
and periodic compliance.
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    \13\ The settlement value of a P.M. settled index option is
based on closing prices of the component securities.
    \14\ The Exchange's Gold/Silver Sector\SM\ Index (``XAU'') is a
P.M. settled capitalization-weighted index.
    \15\ NYSE Liffe futures based on the MSCI EAFE Index utilize
these P.M. closing prices.
    \16\ MSCI EAFE ETF is one of the top ten in the United States
based on assets.
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    Exchange Rules that apply to the trading of options on broad-based
indexes also would apply to options on the Full Value MSCI EAFE
Index.\17\ The trading of these options also would be subject to, among
others, Exchange Rules governing margin requirements and trading halt
procedures for index options.\18\ The Exchange would apply the same
position limits as exist today for broad-based index options, namely
25,000 contracts on the same side of the market for the MSCI EAFE Index
option.\19\ All position limit hedge exemptions will apply. The
Exchange proposes to apply existing index option margin requirements
for the purchase and sale of options on the MSCI EAFE Index.\20\ In
addition, the Exchange proposes to amend Rule 1079(d)(1) to also note
that with respect to FLEX options on the MSCI EAFE index, the same
number of contracts, 25,000, would apply with respect to the position
limit.
---------------------------------------------------------------------------

    \17\ See generally Exchange Rules 1000A through 1108A (Rules
Applicable to Trading Options on Indices) and Exchange Rules 1000
through 1094 (Rules Applicable to Trading of Options on Stocks,
Exchange-Traded Fund Shares and Foreign Currencies).
    \18\ See Exchange Rules 721 (Proper and Adequate Margin) and
1047A (Trading Rotations, Halts or Reopenings).
    \19\ The exercise limits would also be 25,000 contracts as per
Exchange Rule 1002A.
    \20\ See Exchange Rule 721.
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    The Exchange proposes to set strike price intervals for these
options at $2.50 when the strike price of Full Value MSCI EAFE Index
option is below $200, and at least $5.00 strike price intervals
otherwise. The minimum tick size for series trading below $3 would be
$0.05 and for series trading at or above $3 would be $0.10.\21\
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    \21\ See Exchange Rule 1034 and proposed rule 1101A.
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    Pursuant to Exchange Rule 1101A, the Exchange proposes to open at
least one expiration month and one series for each class of index
options open for trading on the Exchange.\22\ The Exchange may open
additional series of index options to maintain an orderly market, to
meet customer demand or when the market price of the underlying index
moves more than five strike prices from the initial exercise price or
prices. New series of options may be added until the beginning of the
month in which the options contract will expire. Additionally, due to
unusual market conditions, the Exchange, in its discretion, may add a
new series of options on the index until five (5) business days prior
to expiration. Also, the opening of a new series of options shall not
affect the series of options of the same class previously opened.
---------------------------------------------------------------------------

    \22\ See Exchange Rule 1101A.
---------------------------------------------------------------------------

    Options on the MSCI EAFE Index would be subject to the same rules
that

presently govern all Exchange index options, including sales practice
rules, margin requirements, trading rules, and position and exercise
limits. Exchange Rules are designed to protect public customer trading.
Specifically, Rule 1024 prohibits members and member organizations from
accepting a customer order to purchase or write an option unless such
customer's account has been approved in writing by a designated Options
Principal of the Member.\23\ Additionally, Exchange Rule 1026,
regarding suitability, is designed to ensure that options are only sold
to customers capable of evaluating and bearing the risks associated
with trading in this instrument.\24\ Further, Exchange Rule 1027
permits members and employees of member organizations to exercise
discretionary power with respect to trading options in a customer's
account only if the member or employee of a member organization has
received prior written authorization from the customer and the account
had been accepted in writing by a designated Options Principal.\25\
Finally, Exchange Rule 1025, Supervision of Accounts, Rule 1028,
Confirmations, and Rule 1029, Delivery of Options Disclosure Documents,
will also apply to trading in options on the MSCI EAFE Index.
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    \23\ See Exchange Rule 1024.
    \24\ See Exchange Rule 1026.
    \25\ See Exchange Rule 1027. Further, this Rule states that
discretionary accounts shall receive frequent review by a Registered
Options Principal qualified person specifically delegated such
responsibilities under Rule 1025, who is not exercising the
discretionary authority.
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Surveillance and Capacity
    The Exchange represents that it has an adequate surveillance
program in place for options on the MSCI EAFE Index and intends to
apply those same procedures that it applies to the Exchange's other
index options. Additionally, the Exchange is a member of the
Intermarket Surveillance Group (``ISG'') under the Intermarket
Surveillance Group Agreement, dated June 20, 1994. The members of the
ISG include all of the national securities exchanges. ISG members work
together to coordinate surveillance and share information regarding the
stock and options markets. In addition, the major futures exchanges are
affiliated members of the ISG, which allows for the sharing of
surveillance information for potential intermarket trading abuses. In
addition, the Exchange is an affiliate member of the International
Organization of Securities Commissions (``IOSCO''). IOSCO has members
from over 100 different countries. Each of the countries from which
there is a component security in the MSCI EAFE Index is a member of
IOSCO. These members regulate more than 90 percent of the world's
securities markets. Additionally, the Exchange has entered into various
Information Sharing Agreements and/or Memoranda of Understandings with
various stock exchanges. Given the capitalization of this index and the
deep and liquid markets for the securities underlying the MSCI EAFE
Index, the concerns for market manipulation and/or disruption in the
underlying markets are greatly reduced. The MSCI EAFE ETF is one of the
top ten in the United States based on assets and trades a large volume
with respect to ETFs today.
    The Exchange also represents that it has the necessary systems
capacity to support the new options series that would result from the
introduction of options on the Full Value MSCI EAFE Index, including
LEAPS on the Full Value MSCI EAFE Index.
    Finally, the Exchange proposes to add a new Rule 1109A entitled
``MSCI EAFE Index'' to provide additional detailed information
pertaining to the index as required by the licensor, including but not
limited to, liability and other representations on the part of MSCI
Inc.
2. Statutory Basis
    The Exchange believes that its proposal is consistent with Section
6(b) of the Act \26\ in general, and furthers the objectives of Section
6(b)(5) of the Act \27\ in particular, in that it will permit trading
in options on Full Value MSCI EAFE Index pursuant to rules designed to
prevent fraudulent and manipulative acts and practices to protect
investor and the public interest, and to promote just and equitable
principles of trade.
---------------------------------------------------------------------------

    \26\ 15 U.S.C. 78f(b).
    \27\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------

    The Exchange believes that because the MSCI EAFE Index currently
contains more than 900 components and no single component comprises
more than 5% of the index, it is not easily subject to market
manipulation. Given the capitalization of this index and the deep and
liquid markets for the securities underlying the MSCI EAFE Index, the
concerns for market manipulation and/or disruption in the underlying
markets are greatly reduced. The MSCI EAFE ETF trades a large volume
with respect to ETFs today.\28\ Therefore, because the MSCI EAFE Index
has a large number of component securities, representative of many
countries, and trades a large volume with respect to ETFs today, the
Exchange believes that the initial listing requirements are appropriate
to trade options on this index. In addition, similar to other broad
based indexes, the Exchange proposes various maintenance requirements,
which require continual compliance and periodic compliance.
---------------------------------------------------------------------------

    \28\ The MSCI EAFE ETF is one of the top ten in the United
States based on assets.
---------------------------------------------------------------------------

    Exchange Rules that apply to the trading of options on broad-based
indexes also would apply to options on the Full Value MSCI EAFE
Index.\29\ The trading of these options also would be subject to, among
others, Exchange Rules governing margin requirements and trading halt
procedures for index options.\30\ The Exchange would apply the same
position limits as exist today for broad-based index options, namely
25,000 contracts on the same side of the market for the MSCI EAFE Index
option.\31\ All position limit hedge exemptions will apply. The
Exchange proposes to apply existing index option margin requirements
for the purchase and sale of options on the MSCI EAFE Index.\32\ In
addition, the Exchange proposes to amend Rule 1079(d)(1) to also note
that with respect to FLEX options on the MSCI EAFE index, the same
number of contracts, 25,000, would apply with respect to the position
limit.
---------------------------------------------------------------------------

    \29\ See generally Exchange Rules 1000A through 1108A (Rules
Applicable to Trading Options on Indices) and Exchange Rules 1000
through 1094 (Rules Applicable to Trading of Options on Stocks,
Exchange-Traded Fund Shares and Foreign Currencies).
    \30\ See Exchange Rules 721 (Proper and Adequate Margin) and
1047A (Trading Rotations, Halts or Reopenings).
    \31\ The exercise limits would also be 25,000 contracts as per
Exchange Rule 1002A.
    \32\ See Exchange Rule 721.
---------------------------------------------------------------------------

    The Exchange represents that it has an adequate surveillance
program in place for options on the MSCI EAFE Index. The Exchange also
represents that it has the necessary systems capacity to support the
new options series. As stated in the filing, the Exchange has rules in
place designed to protect public customer trading.

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

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

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

    No written comments were either solicited or received.

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

    Within 45 days of the date of publication of this notice in the
Federal Register or within such longer period (i) as the Commission may
designate 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 such 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 email to<EMAIL_ADDRESS>Please include
File Number SR-Phlx-2012-28 on the subject line.

Paper Comments

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

All submissions should refer to File Number SR-Phlx-2012-28. 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 proposed rule change that are
filed with the Commission, and all written communications relating to
the proposed rule change between the Commission and any person, other
than those that may be withheld from the public in accordance with the
provisions of 5 U.S.C. 552, will be available for Web site viewing and
printing in the Commission's Public Reference Room, 100 F Street NE.,
Washington, DC 20549, on official business days between the hours of 10
a.m. and 3 p.m. Copies of the filing also will be available for
inspection and copying at the principal office of the Exchange. All
comments received will be posted without change; the Commission does
not edit personal identifying information from submissions. You should
submit only information that you wish to make available publicly. All
submissions should refer to File Number SR-Phlx-2012-28 and should be
submitted on or before April 5, 2012.

    For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\33\
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    \33\ 17 CFR 200.30-3(a)(12).
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Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2012-6317 Filed 3-14-12; 8:45 am]
BILLING CODE 8011-01-P