[Federal Register Volume 82, Number 234 (Thursday, December 7, 2017)]
[Notices]
[Pages 57791-57799]
[FR Doc No: 2017-26319]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-82193; File No. SR-NSCC-2017-019]

Self-Regulatory Organizations; National Securities Clearing
Corporation; Notice of Filing of Proposed Rule Change To Enhance the
Process for Submitting and Accepting ETF Creations and Redemptions

December 1, 2017.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934
(``Act''),\1\ and Rule 19b-4 thereunder,\2\ notice is hereby given that
on November 29, 2017, National Securities Clearing Corporation
(``NSCC'') filed with the Securities and Exchange Commission
(``Commission'') the proposed rule change as described in Items I, II
and III below, which Items have been prepared by the clearing agency.
The Commission is publishing this notice to solicit comments on the
proposed rule change from interested persons.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
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I. Clearing Agency's Statement of the Terms of Substance of the
Proposed Rule Change

    The proposed rule change consists of modifications to the Rules &
Procedures (``Rules'') \3\ of NSCC to introduce two additional cycles
(referred to herein as the ``intraday cycle'' and the ``supplemental
cycle'') during which exchange-traded fund (``ETF'') agents \4\ could
submit creation and redemption instructions, as described in greater
detail below. The intraday cycle would span from 12:30 a.m. ET to 2:00
p.m. ET. The supplemental cycle would span from 9:00 p.m. ET to 11:30
p.m. ET. The introduction of the intraday cycle would enable NSCC to
receive, on an intraday basis, creation and redemption instructions
that are marked as-of a prior trade date. Furthermore, with the
introduction of the intraday cycle, NSCC would be able to receive
creation and redemption instructions for same-day settlement until the
designated cut-off time of 11:30 a.m. ET. The introduction of the
supplemental cycle would enable ETF agents to submit any creation and
redemption instructions later than the current established cut-off time
designated by NSCC of 8:00 p.m. ET. With the introduction of the
additional cycles, NSCC would also revise the current input file and
output files to include additional information, such as a reversal/
correction indicator and the time of the transaction, as further
described below.
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    \3\ Capitalized terms not defined herein are defined in the
Rules, available at http://www.dtcc.com/~/media/Files/Downloads/
legal/rules/nscc_rules.pdf.
    \4\ ETF agents are referred to as ``Index Receipt Agents'' in
the Rules. Section 4 of Rule 7 states that, for purposes of the
Rules, an Index Receipt Agent shall be a Member which has entered
into an Index Receipt Authorization Agreement as required by NSCC
from time to time. See Rule 1 and Rule 7, Sec. 4, supra note 3.
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    In addition, NSCC proposes to make a technical correction to
clarify that next-day settling creation and redemption instructions are
no longer processed differently than other instructions when they are
submitted to NSCC, as further described below.
    NSCC also proposes to introduce an automated threshold value
reasonability check that would pend submissions of creation and
redemption instructions on clearing-eligible ETFs that exceed certain
thresholds versus the most recent closing price, as further described
below.

II. Clearing Agency's Statement of the Purpose of, and Statutory Basis
for, the Proposed Rule Change

    In its filing with the Commission, the clearing agency 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 clearing agency has prepared summaries,
set forth in sections A, B, and C below, of the most significant
aspects of such statements.

(A) Clearing Agency's Statement of the Purpose of, and Statutory Basis
for, the Proposed Rule Change

1. Purpose
(i) Current Processes
    Outside of NSCC, ETF sponsors \5\ have processes and/or technology
platforms that allow them to bilaterally agree to create or redeem ETF
shares with ETF authorized participants \6\ intraday and these results
are recorded by ETF agents on the ETF agents' technology platforms.
These processes are not uniformly automated and may involve users
manually entering data that is eventually submitted to NSCC within the
standardized create-and-redeem input file. As is the case with any
manually entered data, there is the risk

that incorrectly calculated figures may be entered into the transaction
fields. Furthermore, errors made in certain ETF eligibility reference
data (e.g., creation unit size) could also result in incorrectly valued
contracts if the incorrect ETF eligibility reference data was used to
calculate the creation or redemption orders. As such, if there are
incorrect values in certain ETF eligibility reference data or if there
are incorrect figures in the transaction fields, then NSCC members
(``Members'') may be impacted as their Clearing Fund requirement is
calculated using these mis-valued transactions.
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    \5\ ETF sponsors are issuers of ETFs.
    \6\ ETF authorized participants are (1) broker/dealers that have
authorized participant agreements with ETF sponsors and/or (2)
broker/dealers that are full-service Members pursuant to Rule 2 with
an established ETF trading relationship with an ETF agent that is
representing the ETF. See Rule 2, supra note 3.
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    Currently, there is one cycle during which ETF agents can submit
the input file to NSCC. This cycle is known as the primary cycle and it
spans from 2:00 p.m. ET until 8:00 p.m. ET. Errors that are made within
an ETF sponsor's or ETF agent's processes and subsequently submitted to
NSCC each business evening (by the cut-off time designated by NSCC of
8:00 p.m. ET) may pass undetected by NSCC's ETF processes. As a result,
the Universal Trade Capture system \7\ will record a contract value to
settle versus the ETF shares that may be materially different than the
value upon which the ETF sponsor and ETF authorized participant had
intended to settle. Upon receipt of the order instruction to create and
redeem shares each evening, NSCC risk management's systems will
calculate a mark-to-market charge for both the ETF agent's and the ETF
authorized participant's daily Clearing Fund requirement.\8\ All debit
mark-to-market charges must be satisfied in accordance with the process
outlined below.
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    \7\ See Rule 7 (Comparison and Trade Recording Operation) and
Procedure II (Trade Comparison and Recording Service), supra note 3.
    \8\ NSCC's Clearing Fund addresses potential Member exposure
through a number of risk-based component charges (such as margin)
calculated and assessed daily. Each of the component charges
collectively constitute a Member's Required Deposit. The objective
of the Required Deposit is to mitigate potential losses to NSCC
associated with liquidation of the Member's portfolio in the event
that NSCC ceases to act for a Member (hereinafter referred to as a
``default''). The aggregate of all Members' Required Deposits
constitutes the Clearing Fund, which NSCC would be able to access
should a defaulting Member's own Required Deposit be insufficient to
satisfy losses to NSCC caused by the liquidation of that Member's
portfolio.
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    Each morning (no later than 7:05 a.m. ET), the daily Clearing Fund
requirement is calculated and distributed to Members. Members,
including ETF agents and ETF authorized participants, must satisfy
their daily Clearing Fund requirement deficits (if any) to NSCC by
10:00 a.m. ET. As described above, if erroneous transactions were
submitted to NSCC the previous day, then the daily Clearing Fund
requirement deficit (which is due the next morning) may be impacted by
these erroneous transactions. The daily Clearing Fund requirement
deficit may be impacted because, today, ETF agents can only submit
instructions, including any instructions that are intended to correct
erroneous instructions, during the primary cycle. In other words, ETF
agents currently do not have an opportunity to submit correcting orders
to NSCC until the next primary cycle (from 2:00 p.m. ET until 8:00 p.m.
ET), which is after the time at which Members must satisfy their daily
Clearing Fund requirement deficits. As such, today, a Member that is
impacted by a mis-valued creation or redemption order is required to
post its Clearing Fund requirement (which would be based on the mis-
valued order) to NSCC prior to the point when ETF agents can submit an
offsetting instruction to NSCC. This offsetting instruction would
otherwise have relieved the Member of such requirement because it would
have corrected the mis-valued order.
(ii) Overview of Proposal
    As described in more detail below, NSCC is proposing to enhance the
process for submitting and accepting ETF creations and redemptions.
NSCC is proposing to introduce two cycles (the intraday cycle and the
supplemental cycle) during which ETF agents would be able to submit
creations and redemptions, including as-of instructions, reversals, and
corrections.\9\
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    \9\ An as-of instruction is an instruction that is submitted
with a trade date as of an earlier trade date. As-of reversal
instructions and as-of corrections are types of as-of instructions.
An as-of reversal instruction is an instruction that is submitted
with a trade date as of an earlier trade date that reverses an
instruction that has already been processed by NSCC. Reversals and
corrections are submitted on the same business day as the incorrect
instruction whereas as-of reversal instructions and as-of correction
instructions are submitted on a business day after the date on which
the incorrect instruction was submitted (but they would have the
same trade date as the incorrect instruction).
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    As described above, the intraday cycle would span from 12:30 a.m.
ET to 2:00 p.m. ET. and the supplemental cycle would span from 9:00
p.m. ET to 11:30 p.m. ET. NSCC would inform Members by Important Notice
of any changes to the times of any cycle. The introduction of the
intraday cycle would enable NSCC, on an intraday basis, to receive
creation and redemption instructions that are marked as-of a prior
trade date. Furthermore, with the introduction of the intraday cycle,
NSCC would be able to receive creation and redemption instructions for
same-day settlement until the designated cut-off time of 11:30 a.m. ET.
The introduction of the supplemental cycle would enable ETF agents to
submit any creation and redemption instructions later than the current
established cut-off time designated by NSCC of 8:00 p.m. ET. With the
introduction of the additional cycles, NSCC would include additional
information, such as a reversal/correction indicator and the time of
transaction, within its existing input file and output files (clearing
records and reports) identifying submissions processed during the two
new cycles. As further described below, the additional cycles proposed
herein would provide ETF sponsors and ETF agents with an opportunity
and the flexibility to address mis-valued creation and redemption
orders prior to the time by which Members would be required to satisfy
any daily Clearing Fund requirement deficits.
    In addition, NSCC proposes to make a technical correction to
clarify that next-day settling instructions are no longer processed
differently than other instructions when they are submitted to NSCC.
The purpose of this technical correction is to remove repetitive
language regarding next-day settling instructions. NSCC believes that
simplifying this provision would help Members better understand the
processing of next-day settling creates and redeems as well as enhance
accuracy and clarity, as further described below.
    NSCC also proposes to introduce an automated threshold value
reasonability check that would pend submissions of creation and
redemption instructions on clearing-eligible ETFs that exceed certain
thresholds versus the most recent closing price. NSCC believes it would
be beneficial for ETF agents to have an opportunity to review and
confirm certain potentially mis-valued transactions that have been
submitted to NSCC before such transactions are processed by NSCC (i.e.,
before the potentially mis-valued transactions would be able to have an
impact on Members' daily Clearing Fund requirements), as further
described below.
    Details regarding the foregoing proposed rule changes are included
in sections (iii) to (v) below.
(iii) Additional Cycles
    Currently, ETF agents are only able to submit ETF creation and
redemption instructions in the standardized input file during one cycle
(the primary cycle) each day. As described above, NSCC is proposing to
add two cycles: (1) The

intraday cycle, which would span from 12:30 a.m. ET to 2:00 p.m. ET and
(2) the supplemental cycle, which would span from 9:00 p.m. ET to 11:30
p.m. ET. With the introduction of the additional cycles, NSCC would
continue to maintain its current deadline of 8:00 p.m. ET for the
submission of the input file during the primary cycle on trade date.
NSCC believes that maintaining the same deadline that it does today
would help ensure that the existing end of day reconciliation processes
conducted by ETF agents and ETF authorized participants continue to be
conducted in a timely manner and would also help prevent unnecessary
delays to the end of day reconciliation processes. Any late
instructions that are submitted to NSCC between 8:00 p.m. ET and 9:00
p.m. ET would be held until 9:00 p.m. ET and then processed at 9:00
p.m. ET (during the supplemental cycle). Therefore, upon
implementation, NSCC's ETF primary market clearing process could
receive any type of creation and redemption instructions (such as
reversals, corrections, and as-of instructions) in the standardized
input file from ETF agents from 12:30 a.m. ET to 11:30 p.m. ET each
business day. Furthermore, Members would have the option, but would not
be required, to submit creation and redemption instructions in the
standardized input file during the two additional cycles.
    As described above, the introduction of the intraday cycle would
enable NSCC to receive, on an intraday basis, creation and redemption
instructions that are marked as-of a prior trade date. Furthermore,
with the introduction of the intraday cycle, NSCC would be able to
receive creation and redemption instructions for same-day settlement
until the designated cut-off time of 11:30 a.m. ET. Today, if an ETF
agent submits a creation and redemption instruction for same-day
settlement during the existing primary cycle to NSCC, it would be
rejected because NSCC is unable to process such instructions; there is
no functionality today to support this. The cut-off time of 11:30 a.m.
ET would align the deadline for same-day settling creation and
redemption instructions with the 11:30 a.m. ET deadline for other same-
day settling non-ETF activity.\10\ NSCC believes aligning these
deadlines would streamline the processing of same-day settling items
for NSCC and its Members. ETF agents and ETF sponsors (and any third
party service providers they use) may have to make coding changes in
order for an ETF agent to submit a same-day settling instruction, and
these potential coding changes would be different than the coding
changes related to the enhanced input and output files described below.
Under the proposal, NSCC would reject any creation and redemption
instructions for same-day settlement that are not received by NSCC by
the designated cut-off time instead of assigning them a new settlement
date. This would preserve the option to settle such same-day settling
creation and redemption instructions outside of NSCC, which is an
option that ETF agents currently have.
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    \10\ For example, same-day settling corporate bond trades and
transactions in municipal securities are subject to the 11:30 a.m.
ET deadline.
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    In addition, as described above, the introduction of the
supplemental cycle would allow late submissions (i.e., instructions
received by NSCC after the designated deadline of 8:00 p.m. ET for the
primary cycle) to be processed without delaying the existing ETF
agents' and ETF authorized participants' end-of-day reconciliation
processes. Furthermore, today, any extensions for the submission of
late instructions are done manually. The introduction of the
supplemental cycle would remove the need for manual extensions to the
existing deadline of 8:00 p.m. ET for the primary cycle because
instructions received by NSCC after such deadline of 8:00 p.m. ET would
be held and processed during the proposed supplemental cycle, which
would begin at 9:00 p.m. ET.
    NSCC believes the introduction of the intraday cycle and the
supplemental cycle would provide ETF agents with the flexibility and
opportunity to submit (i) creation and redemption instructions that
would either reverse or correct erroneous creation and redemption
instructions that have been previously processed by NSCC (i.e.,
reversals and corrections) or (ii) as-of instructions (e.g., as-of
reversal instructions and as-of correction instructions) that would be
intended to correct erroneous creation and redemption instructions that
have been previously processed by NSCC, in both cases, earlier than
they are able to today.\11\ Specifically, ETF agents would have an
opportunity to submit these reversals, corrections, and as-of
instructions prior to the time by which Members would be required to
satisfy any Clearing Fund requirement deficits. This would help ensure
that their Clearing Fund requirement has been calculated based on
transactions that they intended to submit.
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    \11\ Supra note 9.
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    For example, assume an ETF agent submits a creation and redemption
instruction today (on trade date (``T'')) with a settlement date in 2
days (``T+2'') and this instruction has been accepted by NSCC. Assume
that, on the next day (``T+1''), the ETF agent realizes the creation
and redemption instruction that it submitted on T is incorrect. With
this proposal, generally, the ETF agent would be able to submit an as-
of reversal instruction on T+1, during the intraday cycle, prior to the
point when the Members would be required to post margin. As described
above, Members must satisfy their daily Clearing Fund requirement
deficits (if any) to NSCC by 10:00 a.m. ET. Because this as-of reversal
instruction was received by NSCC during the intraday cycle on T+1 by
the designated cut-off time in this scenario, it would offset the
incorrect instruction submitted on T, and thus the incorrect
instruction would no longer have an impact on Members' daily Clearing
Fund requirement. Furthermore, this as-of reversal would have a trade
date of T (not T+1). As such, Members would avoid posting margin that
would have been inclusive of the erroneous transaction because they
would now have an earlier opportunity to correct such erroneous
transactions. The ETF agent could then also submit on T+1 an as-of
correction instruction (which would also have a trade date as of T
rather than T+1) in order for NSCC to receive the correct instruction
that the ETF agent had intended to submit on T.
    NSCC believes that subdividing the day into multiple cycles (i.e.,
the intraday cycle, the primary cycle, and the supplemental cycle), as
proposed, would prevent unnecessary coding changes to the existing
standardized input file that ETF agents submit to NSCC and the output
files distributed by NSCC to ETF agents and ETF authorized
participants. ETF agents currently submit creation and redemption
instructions to NSCC using a standardized electronic input file. As
described above, NSCC would add additional information, such as the
reversal/correction indicator and the time of transaction, to the input
file. The format of the input file would be revised to accommodate the
additional information. Because the format of the input file would be
changed, ETF agents, ETF sponsors and any third party service providers
they may use would be required to make coding changes to their systems
to submit the standardized input file during any of the cycles.
Although ETF agents would not be required to submit input files during
all of the cycles, they would still be required to make coding changes
to

their systems because one standardized input file would be submitted to
NSCC.
    To avoid changing the format of the output files (and thereby
minimizing the coding changes that ETF agents, ETF authorized
participants and any third service providers that they use may have to
make to their systems), the additional information that would be
included in the output files, such as the reversal/correction indicator
and the time of transaction, would either be appended to the output
files or would appear in fields in the output files that are currently
reserved and do not contain any information. NSCC expects that the
coding changes (if any) would be minimal. ETF agents would be
responsible for communicating these changes to their clients (ETF
sponsors) or any third party service providers that they utilize.
Furthermore, NSCC would continue to distribute all existing output
files during the primary cycle and would also distribute output files
during the additional cycles. NSCC believes this proposal would enhance
efficiency because NSCC would be able to distribute the output files
multiple times per day and Members would have the option to submit the
input file multiple times per day.
    As described above, while these proposed changes to the input file
would require that ETF agents and ETF sponsors (and any third party
service providers that they utilize) make coding changes to their
systems and the proposed changes to the output files may require ETF
agents and ETF authorized participants (and any third party service
providers that they utilize) to make some coding changes, NSCC believes
that the changes to the input file and output files would be beneficial
to ETF agents and ETF authorized participants. As described above, the
current standardized input file does not contain a field that would
indicate whether an instruction is a reversal or a correction. In
addition, the output files that NSCC distributes to ETF agents and ETF
authorized participants do not indicate whether an instruction is a
reversal or a correction. ETF authorized participants are locked in to
the creation or redemption order by the submitting ETF agent upon
receipt and validation by NSCC. While the ETF authorized participant
will have agreed to the creation or redemption on trade date, the
submitting ETF agent may issue a reversal and/or correction
automatically in certain circumstances, thereby locking the ETF
authorized participant into the reversal and/or correction. ETF
authorized participants have requested that they have the ability to
differentiate new orders from reversals or corrections in the output
files that they receive from NSCC. With this proposal, as described
above, NSCC would provide the functionality to enable the submitting
ETF agent to indicate whether an instruction is a reversal or
correction as well as the time of the transaction in the input file and
this additional information would appear in the output files
distributed by NSCC. NSCC believes the additional information that
would be provided in these files could help Members and any of their
third party service providers with reconciliation of their transactions
by enabling ETF agents and ETF authorized participants to easily
understand if an instruction is a new instruction, a reversal or a
correction.
    To implement the proposed changes described above, NSCC proposes to
revise Section F.2 of Procedure II (Trade Comparison and Recording
Service) of the Rules. Section F.2 of Procedure II (Trade Comparison
and Recording Service) of the Rules currently provides that, on trade
date, by such time as established by NSCC from time to time, an ETF
agent may submit index creation and redemption instructions along with
other specified information. To enhance clarity, NSCC would add
``during the additional cycles'' to the provision stating that, on T,
by such time as established by NSCC from time to time, an Index Receipt
agent may submit to NSCC, index receipt creation and redemption
instructions and their scheduled settlement date. Furthermore, NSCC
would add that from time to time, NSCC will inform Members of the time
period for each cycle (the intraday cycle, the primary cycle, and the
supplemental cycle) applicable to creation/redemption input.
    NSCC would inform Members of the designated cut-off times by
Important Notice. Under the proposed rule change, Section F.2 of
Procedure II (Trade Comparison and Recording Service) of the Rules
would be revised to state that an ETF agent may submit as-of index
creation and redemption instructions, but only if such as-of data is
received (instead of submitted) by the cut-off time designated by NSCC
from time to time. As described above, the introduction of the intraday
cycle would enable NSCC to receive, on an intraday basis, creation and
redemption instructions that are marked as-of a prior trade date.
Furthermore, Section F.2 of Procedure II (Trade Comparison and
Recording Service) of the Rules would be revised to state that same-day
settling creates and redeems are required to be received by such cut-
off time on Settlement Date. In addition, Section F.2 of Procedure II
(Trade Comparison and Recording Service) of the Rules would be revised
to specifically include that as-of index creation and redemption
instructions for same-day settlement received by NSCC after the cut-off
time, designated by NSCC from time to time, will be rejected. As
described above, creation and redemption instructions for same-day
settlement must be received by NSCC by the designated cut-off time of
11:30 a.m. ET.
    In addition, NSCC is proposing to revise Section G of Procedure II
(Trade Recording and Comparison Service) and Section B of Procedure VII
(CNS Accounting Operation) of the Rules to expressly state that any
Index Receipts for same-day settlement that are received by NSCC after
the applicable cut-off time will not be assigned a new settlement date
and will be rejected. Section G of Procedure II (Trade Recording and
Comparison Service) and Section B of Procedure VII (CNS Accounting
Operation) of the Rules currently provide that trades that are received
after the established cut-off time will be assigned a new settlement
date. As such, NSCC believes these proposed rule changes would clarify
that, in the case of Index Receipts for same-day settlement, any
creation and redemption instructions for same-day settlement that are
received after the applicable cut-off time will not be assigned a new
settlement date and will be rejected.
(iv) Technical Correction for ETF Next-Day Settling Create and Redeems
    NSCC is also proposing to make a technical correction to clarify
that next-day settling instructions are no longer processed differently
when they are submitted to NSCC, as further described below. The
purpose of this technical correction is to remove repetitive language
regarding next-day settling instructions. NSCC believes that
simplifying this provision would help Members better understand the
processing of next-day settling creates and redeems as well as enhance
accuracy and clarity.
    Today, post-implementation of the accelerated trade guaranty,\12\
NSCC no longer processes next-day settling instructions differently
than other instructions when they are submitted to NSCC.\13\ The
accelerated trade guaranty rule filing, among other things, accelerated
NSCC's trade guaranty from midnight of T+1 to the point of trade

comparison and validation for bilateral submissions or to the point of
trade validation for locked-in submissions. In addition, it also
removed language that permitted NSCC to delay processing and reporting
of next day settling index receipts until the applicable margin on
these transactions is paid. The risk associated with next-day settling
index receipts (i.e., NSCC attaches a guaranty to them at the time of
validation, prior to the collection of margin reflecting such trades),
which was previously mitigated with the delay in processing, is now,
with the approval of the accelerated trade guaranty rule filing,
mitigated by the addition of certain components to NSCC's Clearing Fund
formula (as described in greater detail in the accelerated trade
guaranty rule filing).\14\ As such, with the implementation of the
accelerated trade guaranty, next-day settling index receipts (with a
Settlement Date of T+1) are no longer treated differently than regular-
way instructions (i.e., those with a Settlement Date of T+2), and
therefore, NSCC believes the language stating ``next day settling
creates and redeems required to be submitted by such cut-off time on
T'' in Section F.2 of Procedure II of the Rules is repetitive and
proposes to delete it. NSCC believes this proposed change to remove
repetitive language regarding next-day settling creates and redeems
would enhance clarity and accuracy as well as help Members better
understand the processing of next-day settling creates and redeems.
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    \12\ See Securities Exchange Act Release No. 79598 (December 19,
2016), 81 FR 94462 (December 23, 2016) (SR-NSCC-2016-005).
    \13\ Id.
    \14\ Id.
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(v) Automated Threshold Value Reasonability Check
    NSCC is proposing to introduce an automated threshold value
reasonability check that would pend certain potentially mis-valued
transactions (whether due to mistakes in manual entry or otherwise)
that exceed thresholds established by NSCC. As described above, the
additional cycles proposed herein would provide ETF sponsors and ETF
agents with an opportunity and the flexibility to address mis-valued
creation and redemption orders prior to the time by which Members would
be required to satisfy any daily Clearing Fund requirement deficits.
However, as further described below, NSCC believes it would also be
beneficial for ETF agents to have an opportunity to review and confirm
certain transactions that they have submitted to NSCC before such
transactions are processed by NSCC (i.e., before they are processed and
therefore before they would be able to have an impact on Members' daily
Clearing Fund requirements).
    The proposal would introduce an automated threshold value
reasonability check, which would enable NSCC to assign a status of
pended to certain potentially mis-valued transactions while preserving
them for reinstatement. If the automated threshold value reasonability
check identifies an out-of-bound transaction (as described in detail
below), it would assign the transaction a status of pended. NSCC would
send notifications to the submitting ETF agent by email and through the
output files on an automated basis. Internal NSCC operations would also
be notified. If the submitting ETF agent would like the pended
transaction to continue through NSCC processing, then the submitting
ETF agent would be required to confirm that such transaction should be
released. Such confirmation must be received by NSCC by a specified
time (i.e., by the end of the supplemental cycle). If the submitting
ETF agent does not respond by the specified time or responds that the
transaction should be rejected, then NSCC would reject the transaction
and it would not continue through to processing.
    This automated threshold value reasonability check would apply to
all submissions of creation and redemption instructions on clearing-
eligible ETFs. Automated threshold value reasonability checks would be
performed using the most recently available closing price from the
primary listing marketplace as compared to the per-share value for
every individual creation or redemption instruction that is submitted.
Per-share values that exceed established thresholds as compared to the
most recently available closing price would be marked as pended by NSCC
and would be assigned a pended status while awaiting confirmation for
reinstatement (or rejection) by the submitting ETF agent.
    NSCC believes this proposed enhancement to the ETF clearing process
(in concert with existing controls \15\ and expanded processing with
respect to as-of instructions (including as-of reversal instructions
and as-of correction instructions), reversals, and corrections) would
mitigate the risks associated with potentially mis-valued transactions
described above. As an example, assume an in-kind ETF creation
instruction \16\ is received by NSCC from an ETF agent versus a
component-based basket at 8:00 p.m. on T. Currently, NSCC assigns
contract values on the underlying components based on (1) the basket
components previously provided on T-1 or intraday on T, (2) customized
instructions received on the order instruction on T (if any), and (3)
the closing market prices on the component securities. Then, NSCC takes
the total settlement value of the underlying components and adds the
cash component value specified on the order instruction (received on
T). When added to the cash component, NSCC determines that the total
settlement value of the ETF ``ABC'' equals $100,000,000 to settle
versus 1,000,000 shares of ETF ticker ``ABC'' to be created. With this
proposal, the automated threshold value reasonability check would
determine that the derived price per share of this creation order on
``ABC'' equals $100 ($100,000,000/1,000,000 = $100). The reasonability
check would compare this derived ``contract price'' to the most
recently available closing market price from the primary listing
marketplace for ``ABC'' for the trade date specified on the
instruction. It would determine that the last close for ``ABC'' was
$48.50 per share.
---------------------------------------------------------------------------

    \15\ For example, one of the existing controls will reject an
order if the total settlement value is negative.
    \16\ As used herein, in-kind creation or redemption instruction
refers to an ETF create or redeem order that is placed versus a
component-based basket rather than a cash-based basket. An
instruction on a component-based basket results in contracts on the
ETF as well as the underlying securities (the underlying components)
that comprise the basket. An instruction on a cash-based basket
results in a contract on the ETF versus a cash settlement; the cash
settlement represents the value of the underlying securities, and
contracts are not issued on the underlying components.
---------------------------------------------------------------------------

    The reasonability check would recognize that the creation order
derived ``contract price'' represents a greater than 100% variance from
the most recent market close. The reasonability check would flag the
order instruction prior to any contracts being generated, segregating
it from all of the other orders received by the submitting ETF agent.
This order would be assigned a status of pended. The submitting ETF
agent would be notified by NSCC of the pended status via email
notification and outputs generated by the ETF process. The email
notification would be sent to the designated contact(s) specified in
the ETF application by the submitting ETF agent and would provide
explicit instructions of what has occurred, what actions must be taken,
and what would occur if no action is taken. NSCC anticipates that one
of the following scenarios would then ensue: (1) The submitting ETF
agent would do nothing and allow the instruction to be rejected

by the end of the supplemental cycle, (2) the submitting ETF agent
would formally instruct NSCC via email to reinstate the pended order
instruction and allow it to continue processing, or (3) the submitting
ETF agent would provide NSCC with instructions to reject the pended
order instruction. If NSCC does not receive instructions from the
submitting ETF agent by the end of the supplemental cycle (11:30 p.m.
ET), then NSCC would permanently assign the order instruction a status
of rejected. In any case, the submitting ETF agent would receive
confirmation, on the final supplemental cycle ETF clearing outputs,
that the order instruction has either been marked as accepted or
rejected.
    Regarding the automated threshold value reasonability check, NSCC
proposes to establish the following threshold values initially:
     For ETFs with a Current Market Price equal to or greater
than $3.00: ETF contract value/calculated effective price per share is
greater than or equal to a 98% variance from the market closing price
from the trade date provided on the order.
     For ETFs with a Current Market Price less than $3.00: ETF
contract value/calculated effective price per share is greater than or
equal to a 98% variance from the market closing price from the trade
date provided on the order.
    Initially, NSCC would set the same price range for the threshold
band of equal to or greater than $3.00 and the threshold band of less
than $3.00. NSCC is proposing to establish these initial threshold
values as shown above because NSCC believes these initial threshold
values would only flag the most extreme value differences, whether
overvalued or undervalued, and therefore, would likely avoid excessive
manual trade reconciliation efforts by ETF agents. NSCC believes that
setting the initial threshold value at 98% would capture overvalued and
undervalued transactions while not being an excessively narrow control.
Setting controls that are excessively narrow versus the closing market
price on the trade date that is specified on the instruction would
likely result in excessive manual trade reconciliation efforts. In
other words, NSCC believes that this would result in a greater number
of transactions that would be pended and therefore would need to be
confirmed by ETF agents. NSCC believes excessive manual trade
reconciliation efforts would be undesirable, especially if many
transactions were pended in the evening on trade date after the ETF
agent trading applications have closed for the day. NSCC believes that
it is likely that some ETF agents would have to escalate internally to
determine whether the flagged transactions should be accepted or
rejected.
    NSCC would retain the flexibility and discretion to adjust the
price range and the threshold values described above. NSCC may consider
market conditions and feedback from Members and internal stakeholders
when determining whether and what adjustments would be made. NSCC
believes that adjustments to price ranges or threshold values may be
needed in two cases: (1) If requested by Members and/or NSCC internal
stakeholders and (2) in response to a future market event. In the first
possible use case, NSCC may make such adjustments if Members and/or
NSCC internal stakeholders request that the thresholds be re-
established so that they are closer to the ETF's closing market price
than the initial setting. Adjusting the thresholds to make them
narrower versus the ETF's closing market price (so that the threshold
check would be triggered at smaller value differences) may prevent
unnecessary reversals and margining on orders that contain errors.
Internal NSCC stakeholders consisting of product management, risk
management and operations management would collectively determine if an
adjustment to price ranges or threshold values is needed. NSCC product
management would make the final decision as to whether and what
adjustment would be made. Operations would effectuate the actual
adjustments because they would have the entitlements to do so. In the
second possible use case, NSCC may make such adjustments in response to
a future market event that results in a significant number of ETFs
trading at market prices below the initial price range setting of
$3.00. This could result in the need to update the threshold setting.
NSCC would notify Members of any adjustment via Important Notice. NSCC
expects that changes to either setting would be rare.
    NSCC proposes to revise Procedure II, Section F.2 of the Rules to
reflect the introduction of this automated threshold value
reasonability check. It would provide that NSCC would perform
reasonability checks on creation and redemption transaction data
submitted by ETF agents to NSCC on each business day and that any
transaction data that exceeds thresholds established by NSCC would be
pended. It would also provide that NSCC would notify ETF agents of any
pended transactions. ETF agents would then be required to confirm if
such pended transactions should be accepted and such confirmation must
be provided in the form and within the timeframe required by NSCC. In
addition, if ETF agents fail to provide such confirmation, the pended
transaction data would be rejected. The proposed rule change would also
provide that NSCC may, in its sole discretion, adjust the thresholds
and that NSCC may consider feedback from Members and market conditions.
2. Statutory Basis
    NSCC believes that the proposed rule change is consistent with
Section 17A(b)(3)(F) of the Act.\17\ Section 17A(b)(3)(F) of the Act
requires, in part, that the Rules be designed to promote the prompt and
accurate clearance and settlement of securities transactions.\18\ NSCC
believes the proposed enhancements to the process for submitting and
accepting ETF creation and redemption transactions (i.e., introduction
of the additional cycles, enabling NSCC to receive same-day settling
creation and redemption instructions until the applicable cut-off time,
and introduction of the automated threshold value reasonability check)
would promote the prompt and accurate clearance and settlement of
securities transactions by providing ETF agents with an opportunity to
address transactions with errors prior to the point at which they would
be required to post their Clearing Fund requirement, as further
described below. In addition, NSCC believes that removing the
repetitive language regarding next-day settling creates and redeems in
Procedure II, Section F.2 of the Rules would also promote the prompt
and accurate clearance and settlement of securities transactions by
clarifying the Rules, which NSCC believes would enable stakeholders to
better understand their rights and obligations regarding next-day
settling creates and redeems, as further described below.
---------------------------------------------------------------------------

    \17\ 15 U.S.C. 78q-1(b)(3)(F).
    \18\ Id.
---------------------------------------------------------------------------

    Specifically, with the introduction of the additional cycles, even
in circumstances where an erroneous transaction proceeds through NSCC's
processes, ETF agents would have an opportunity to address the
erroneous transactions before Members would be required to satisfy any
Clearing Fund requirement deficits that would be due to those erroneous
transactions. Specifically, the introduction of the additional cycles
would enable NSCC to receive offsetting corrections from ETF agents
intraday that would relieve the Member of the related Clearing Fund
requirement deficit, which is not

possible today. Today, there is only one cycle of submission of such
activity (the primary cycle which runs from 2:00 p.m. ET until 8:00
p.m. ET) and Members are required to satisfy their daily Clearing Fund
requirement by the next morning (10:00 a.m. ET). The proposed
enhancements described above would enable ETF agents to confirm whether
or not potentially erroneous transactions should proceed through NSCC's
processes and NSCC to receive offsetting corrections intraday in
circumstances where erroneous transactions have been submitted, thereby
minimizing the potential impact that such erroneous transactions may
have to Members' daily Clearing Fund requirement deficit. Therefore,
NSCC believes the introduction of the additional cycles would promote
the prompt and accurate clearance and settlement of securities
transactions, consistent with the requirements of Section 17A(b)(3)(F)
of the Act.\19\
---------------------------------------------------------------------------

    \19\ Id.
---------------------------------------------------------------------------

    Furthermore, NSCC believes that the proposed change enabling NSCC
to receive creation and redemption instructions for same-day settlement
until the applicable cut-off time of 11:30 a.m. ET would promote the
prompt and accurate clearance and settlement of securities
transactions, consistent with the requirements of Section 17A(b)(3)(F)
of the Act \20\ because it would allow transactions that cannot be
processed by NSCC today to be processed. This proposed change would
enable these same-day settling instructions to receive the benefits of
NSCC processing. Specifically, NSCC would be able to receive same-day
settling instructions by the designated cut-off time to correct an
erroneous instruction that has already been processed. This would
enable Members to receive the benefit of offsetting their erroneous
transactions (which today, they would have to do outside of NSCC) and
thereby address any potential impact to their Clearing Fund requirement
prior to the time by which they would be required to satisfy any
Clearing Fund requirement deficit. Furthermore, these same-day settling
instructions, whether intended to be corrections or otherwise, would
also receive the benefit of being guaranteed by NSCC. In addition, they
would receive the benefit of netting reversals and corrections with
other primary and secondary market activity. NSCC believes that by
allowing the foregoing transactions that cannot be processed by NSCC
today to be processed and thereby allowing Members to address erroneous
transactions along with the other benefits of NSCC processing described
above, the proposed change would promote the prompt and accurate
clearance and settlement of securities transactions, consistent with
the requirements of Section 17A(b)(3)(F) of the Act.\21\
---------------------------------------------------------------------------

    \20\ Id.
    \21\ Id.
---------------------------------------------------------------------------

    In addition, NSCC believes that by pending potentially erroneous
transactions with the automated threshold value reasonability check
before they would be allowed to proceed through NSCC's processes, the
potential impact to Members' daily Clearing Fund requirement deficit
would be minimized. It would also help to ensure that Members are
subject to Clearing Fund requirements for intended activity and not
erroneous activity because Members would be required to confirm that
such activity should proceed through the NSCC's systems. Therefore,
NSCC believes the introduction of the automated threshold value
reasonability check would promote the prompt and accurate clearance and
settlement of securities transactions, consistent with the requirements
of Section 17A(b)(3)(F) of the Act.\22\
---------------------------------------------------------------------------

    \22\ Id.
---------------------------------------------------------------------------

    NSCC also believes the proposed change to remove the repetitive
language regarding next-day settling creates and redeems in Procedure
II, Section F.2 of the Rules would promote the prompt and accurate
clearance and settlement of securities transactions, consistent with
the requirements of Section 17A(b)(3)(F) of the Act \23\ because it
would ensure that the Rules remain accurate and clear. NSCC believes
that maintaining accurate and clear Rules would enable all stakeholders
to continue to readily understand their respective rights and
obligations regarding NSCC's clearance and settlement of securities
transactions. When stakeholders better understand their rights and
obligations regarding NSCC's clearance and settlement of securities
transactions, then they can act in accordance with the Rules, which
NSCC believes would promote the prompt and accurate clearance and
settlement of securities transactions by NSCC. Post-implementation of
the accelerated trade guaranty,\24\ NSCC no longer processes next-day
settling instructions differently than other instructions when they are
submitted to NSCC. As such, NSCC believes that simplifying Procedure
II, Section F.2 of the Rules (by removing the repetitive language
described above) would enable all stakeholders to better understand
their respective rights and obligations regarding NSCC's clearance and
settlement of securities transactions (specifically, of next-day
settling creates and redeems) and thus would enable them to continue to
act in accordance with the Rules. Therefore, NSCC believes this
proposed rule change would promote the prompt and accurate clearance
and settlement of securities transactions by NSCC, consistent with the
requirements Section 17A(b)(3)(F) of the Act.\25\
---------------------------------------------------------------------------

    \23\ Id.
    \24\ Supra note 12.
    \25\ 15 U.S.C. 78q-1(b)(3)(F).
---------------------------------------------------------------------------

(B) Clearing Agency's Statement on Burden on Competition

    NSCC believes that the proposed changes to introduce additional
cycles (i.e., the intraday cycle and the supplemental cycle) may impose
a burden on competition by requiring ETF agents, ETF sponsors, and
potentially, third party service providers utilized by ETF agents or
ETF sponsors to make enhancements to their processes (e.g., coding
changes) in order to send the enhanced input file to NSCC during any of
the cycles, including the current primary cycle. The format of the
input file would be revised to incorporate additional information,
namely, a reversal/correction indicator and the time of the
transaction. The format of the output files would not change, but the
output files would be revised to reflect this additional information
(which would either be appended or appear in current fields that do not
contain any information). ETF agents, ETF sponsors and any third party
service providers might need to make some enhancements (e.g., coding
changes) to process the output files. However, NSCC believes that any
burden on competition that may result from the proposed change to
introduce additional cycles would not be significant and would be
necessary and appropriate in furtherance of the purposes of the Act for
the reasons described below.\26\
---------------------------------------------------------------------------

    \26\ 15 U.S.C. 78q-1(b)(3)(I).
---------------------------------------------------------------------------

    NSCC believes that any burden on competition that may result from
the proposed change to introduce additional cycles is necessary in
furtherance of the Act because it would enable Members to better manage
mis-valued transactions due to operational errors and thereby minimize
any potential impact to their daily Clearing Fund requirement. NSCC
also believes that any related burden on competition would be necessary
in furtherance of the Act because NSCC would be able to receive as-of
instructions, reversals and corrections

during the additional cycles, thereby enabling ETF agents to address
erroneous transactions prior to the point at which Members would be
required to post their Clearing Fund requirement (which they are unable
to do today). This would help ensure that Members would be subject to
Clearing Fund requirements for intended activity and not erroneous
activity. Furthermore, ETF agents would be able to provide additional
information, such as whether a transaction is a reversal or a
correction and the time of the transaction, in the enhanced input file.
NSCC believes the enhancements to the input file are required because
the format of the input file would be changed in order to incorporate
additional information, such as the reversal/correction indicator. The
enhanced output files would also contain this additional information.
As such, NSCC believes that the enhanced input and output files would
increase clarity and transparency and thus help with reconciliation of
transactions because Members would have more details regarding their
transactions.
    NSCC believes that any related burden on competition from the
introduction of the additional cycles would be appropriate in
furtherance of the Act because subdividing the day into multiple cycles
would minimize the functional changes to the existing input and output
files. NSCC would revise the input file and the output files in a
manner that would minimize the potential enhancements (e.g., coding
changes) that ETF agents, ETF authorized participants, ETF sponsors,
and any third party service providers would be required to make. The
additional information would be included in the output files--either by
appending the information or having it appear in fields that are
currently reserved and do not contain any information--which would
prevent any unnecessary functional changes. NSCC believes the changes
that would be made to the input file and output files described above
would result in the least amount of coding changes or other
enhancements that ETF agents, ETF authorized participants, ETF
sponsors, and third service party providers would be required to make
and therefore, any burden on competition from the introduction of the
additional cycles would be appropriate in furtherance of the Act.
    NSCC also believes that any related burden on competition from the
introduction of the additional cycles would not be significant because
any enhancements that would be required to submit the input file and
the enhancements that may be needed to process the output files would
be minimal, as further described above. As such, NSCC believes that any
burden on competition derived from these proposed change to introduce
additional cycles would be necessary and appropriate, as permitted by
Section 17A(b)(3)(I) of the Act for the reasons described above.\27\
---------------------------------------------------------------------------

    \27\ Id.
---------------------------------------------------------------------------

    Similarly, NSCC believes the proposed change to introduce the
automated threshold value reasonability check may impose a burden on
competition by potentially adding an additional step for the submitting
ETF agents once a transaction is submitted to NSCC for processing.
Specifically, NSCC would pend certain potentially mis-valued
transactions and then submitting ETF agents would have to confirm
whether or not the pended transaction should be processed by NSCC. NSCC
believes that any burden on competition that may result from the
proposed change to introduce an automated threshold value reasonability
check would not be significant and would be necessary and appropriate
in furtherance of the Act. NSCC believes that any related burden on
competition from the introduction of the automated threshold value
reasonability check would not be significant because NSCC believes the
burden of reconciliation described above would be minimal. Furthermore,
as described above, the initial values of the automated threshold value
reasonability check would be set to only flag the most extreme value
differences and therefore, avoid excessive manual reconciliation
efforts. NSCC believes that any related burden on competition is
necessary in furtherance of the Act because the automated threshold
reasonability check would help ensure that Members are subject to
Clearing Fund requirements for intended activity and not erroneous
activity by enabling NSCC to pend certain potentially mis-valued
transactions that could have an impact on a Member's Clearing Fund
requirement. NSCC believes any related burden on competition is
appropriate in furtherance of the Act because NSCC would establish the
initial threshold values so that NSCC would only flag the most extreme
value differences, thereby avoiding excessive manual trade
reconciliation. Furthermore, submitting ETF agents would have an
opportunity to confirm whether or not any pended transactions should
proceed to processing, and if they do not respond by the established
deadline, then the pended transactions would be rejected. As such, NSCC
believes that any burden on competition derived from the proposed
change to introduce an automated threshold value reasonability check
would not be significant and would be necessary and appropriate, as
permitted by Section 17A(b)(3)(I) of the Act for the reasons described
above.\28\
---------------------------------------------------------------------------

    \28\ Id.
---------------------------------------------------------------------------

    At the same time, NSCC also believes that the proposed changes to
introduce additional cycles and the automated threshold value
reasonability check may relieve any burden on, or otherwise promote
competition, by providing Members with a more efficient system for
discovering and addressing potentially erroneous transactions before
such transactions can impact Members' Clearing Fund requirement. By
discovering and addressing potentially mis-valued transactions earlier,
Members may be able to avoid posting additional Clearing Fund for
unintended transactions. Furthermore, the introduction of the
additional cycles means that Members would have more opportunities than
during the current primary cycle (from 2:00 p.m. ET to 8:00 p.m. ET) to
enter into and submit create and redeem instructions to NSCC as well as
submit reversals or corrections. NSCC believes these improvements may
encourage Members to submit more instructions to NSCC for processing or
submit instructions that they would have otherwise settled outside of
NSCC. Therefore, NSCC believes that the proposed changes to introduce
additional cycles and the automated threshold reasonability check may
also relieve any burden on, or otherwise promote competition.
    Similarly, NSCC believes that the proposed change to allow
instructions for same-day settlement that are received by NSCC by the
designated cut-off time may relieve any burden on, or otherwise promote
competition by providing Members with a means to address erroneous
transactions intraday, prior to the point where they would have to
satisfy any Clearing Fund requirement deficits that may be due to such
erroneous transactions. This proposed change would increase the
efficiency of the systems for addressing erroneous transactions because
it would allow NSCC to receive reversals or corrections earlier than
NSCC is able to receive today. NSCC believes this improvement may also
encourage Members to submit more instructions to NSCC for processing or
submit instructions that they would have otherwise settled outside of
NSCC. Furthermore, as described below, it would also allow NSCC to
align the

deadline for same-day settling instructions with the deadline for other
same-day settling non-ETF activity and streamline the processing of
same-day settling items for NSCC and its Members.
    At the same time, NSCC believes that allowing instructions for
same-day settlement that are received by NSCC by the designated cut-off
time may impose a burden on competition because ETF agents and ETF
sponsors (and third party service providers they use) may have to make
coding changes; these potential coding changes would be different than
the coding changes related to the enhanced input and output files
described above. However, NSCC believes that any burden on competition
that may result from this proposed change would be necessary and
appropriate in furtherance of the Act.\29\ As described above, under
the proposal, NSCC would be able to receive creation and redemption
instructions for same-day settlement until the designated cut-off time
of 11:30 a.m. ET. NSCC believes this proposed change would be necessary
in furtherance of the Act because it would allow NSCC to align this
deadline for same-day settling instructions with the deadline for other
same-day settling non-ETF activity and would streamline the processing
of same-day settling items for both NSCC and its Members.\30\
Furthermore, NSCC believes this proposed change would be appropriate in
furtherance of the Act because any same-day settling instructions that
are not received by the designated cut-off time could still be settled
outside of NSCC (which is what happens today). Because same-day
settling instructions that are received after the deadline would not be
assigned a new settlement date under the proposal, Members would still
be able to settle these same-day settling instructions that day,
outside of NSCC. Therefore, NSCC believes that any burden on
competition derived from the proposed change to allow instructions for
same-day settlement that are received by NSCC by the designated cut-off
time would be necessary and appropriate as permitted by Section
17A(b)(3)(I) of the Act.\31\
---------------------------------------------------------------------------

    \29\ 15 U.S.C. 78q-1(b)(3)(I).
    \30\ Supra note 10.
    \31\ 15 U.S.C. 78q-1(b)(3)(I).
---------------------------------------------------------------------------

    In addition, regarding next-day settling creates and redeems, NSCC
believes that the proposed technical correction to remove the language
stating that next-day settling creates and redeems are required to be
submitted by such cut-off time on T would not have any impact or impose
any burden on competition. Post-implementation of the accelerated trade
guaranty,\32\ NSCC no longer processes next-day settling instructions
differently than other instructions when they are submitted to NSCC. As
such, NSCC believes that deleting this repetitive language would
promote clarity and accuracy and enable Members to readily understand
how such instructions are processed when submitted to NSCC.
---------------------------------------------------------------------------

    \32\ Supra note 12.
---------------------------------------------------------------------------

(C) Clearing Agency's Statement on Comments on the Proposed Rule Change
Received From Members, Participants, or Others

    NSCC has not received or solicited any written comments relating to
this proposal. NSCC will notify the Commission of any written comments
received by NSCC.

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 up to 90 days (i) as the
Commission may designate if it finds such longer period to be
appropriate and publishes its reasons for so finding or (ii) as to
which the self-regulatory organization consents, the Commission will:
    (A) By order approve or disapprove 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 protected]. Please include
File Number SR-NSCC-2017-019 on the subject line.

Paper Comments

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

All submissions should refer to File Number SR-NSCC-2017-019. 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
10:00 a.m. and 3:00 p.m. Copies of the filing also will be available
for inspection and copying at the principal office of NSCC and on
DTCC's Web site (http://dtcc.com/legal/sec-rule-filings.aspx). All
comments received will be posted without change. Persons submitting
comments are cautioned that we do not redact or edit personal
identifying information from comment submissions. You should submit
only information that you wish to make available publicly. All
submissions should refer to File Number SR-NSCC-2017-019 and should be
submitted on or before December 28, 2017.

    For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\33\
---------------------------------------------------------------------------

    \33\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------

Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2017-26319 Filed 12-6-17; 8:45 am]
BILLING CODE 8011-01-P


[Federal Register Volume 83, Number 63 (Monday, April 2, 2018)]
[Rules and Regulations]
[Page 13867]
[FR Doc No: 2018-06534]

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DEPARTMENT OF HOMELAND SECURITY

Coast Guard

33 CFR Part 117

[Docket No. USCG-2018-0200]

Drawbridge Operation Regulation; Willamette River, Portland, OR

AGENCY: Coast Guard, DHS.

ACTION: Notice of deviation from drawbridge regulation.

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

SUMMARY: The Coast Guard has issued a temporary deviation from the
operating schedule that governs the lower deck of the Steel Bridge
across the Willamette River, mile 12.1, in Portland, OR. The deviation
is necessary to support the Bridge to Brews run event. This deviation
allows the upper lift span of the bridge to remain in the closed-to-
navigation position to ensure the safety of event participants.

DATES: This deviation is effective from 8:30 a.m. to 10:45 a.m. on
April 15, 2018.

ADDRESSES: The docket for this deviation, USCG-2018-0200, is available
at http://www.regulations.gov. Type the docket number in the ``SEARCH''
box and click ``SEARCH.'' Click on Open Docket Folder on the line
associated with this deviation.

FOR FURTHER INFORMATION CONTACT: If you have questions on this
temporary deviation, call or email Mr. Steven Fischer, Bridge
Administrator, Thirteenth Coast Guard District; telephone<PHONE_NUMBER>,
email [email protected].

SUPPLEMENTARY INFORMATION: Union Pacific Railroad Company (UPRR) owns
and operates the Steel Bridge across the Willamette River, at mile
12.1, in Portland, OR. UPRR has requested a temporary deviation from
the operating schedule for the Steel Bridge upper lift span. The
deviation is necessary to accommodate the annual Bridge to Brews run
event. The Steel Bridge is a double-deck lift bridge, and the lower
lift span operates independent of the upper lift span. To facilitate
this temporary deviation request, the upper lift span is authorized to
remain in the closed-to-navigation position, and need not open to
marine vessels from 8:30 a.m. to 10:45 a.m. on April 15, 2018. When the
lower span is in the closed-to-navigation position, the bridge provides
26 feet of vertical clearance above Columbia River Datum 0.0. When the
upper span is in the closed-to-navigation position, and the lower span
is in the open-to-navigation position, the vertical clearance is 71
feet above Columbia River Datum 0.0. The lower lift span of the Steel
Bridge operates in accordance with 33 CFR 117.5.
    Waterway usage on this part of the Willamette River includes
vessels ranging from commercial tug and barge to small pleasure craft.
Vessels able to pass through the subject bridge with the lower deck in
the closed-to-navigation position, or in the open-to-navigation
position may do so at any time. The lower and upper lift of the Steel
Bridge will be able to open for emergencies, and there is no immediate
alternate route for vessels to pass. The Coast Guard requested
objections to this deviation be submitted to the Local Notice to
Mariners. We have not received any objections to this temporary
deviation from the operating schedule. The Coast Guard will also inform
the users of the waterway through our Local and Broadcast Notices to
Mariners of the change in operating schedule for the subject bridge so
that vessel operators can arrange their transits to minimize any impact
caused by the temporary deviation.
    In accordance with 33 CFR 117.35(e), the drawbridge must return to
its regular operating schedule immediately at the end of the designated
time period. This deviation from the operating regulations is
authorized under 33 CFR 117.35.

    Dated: March 13, 2018.
Steven M. Fischer,
Bridge Administrator, Thirteenth Coast Guard District.
[FR Doc. 2018-06534 Filed 3-30-18; 8:45 am]
 BILLING CODE 9110-04-P


[Federal Register Volume 83, Number 123 (Tuesday, June 26, 2018)]
[Notices]
[Page 29782]
[FR Doc No: 2018-13652]

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

[FRL-9979-09-Region 6]

Clean Air Act Operating Permit Program; Petitions for Objection
to State Operating Permit for South Louisiana Methanol L.P., St. James
Methanol Plant in St. James Parish, Louisiana

AGENCY: Environmental Protection Agency (EPA).

ACTION: Notice of final Order on Petitions for objection to Clean Air
Act title V operating permit.

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SUMMARY: The Environmental Protection Agency (EPA) Administrator signed
an Order dated May 29, 2018 denying a Petition dated December 29, 2016
and a Petition dated August 10, 2017 from the Louisiana Environmental
Action Network and the Sierra Club (collectively, the Petitions and
Petitioners, respectively). The Petitions requested that the EPA object
to the Clean Air Act (CAA) title V operating permit 1560-00292-V1
issued on June 30, 2017 by the Louisiana Department of Environmental
Quality (LDEQ) to South Louisiana Methanol, L.P. (SLM) for its Methanol
Plant located in St. James, St. James Parish, Louisiana.

ADDRESSES: The EPA requests that you contact the individual listed in
the FOR FURTHER INFORMATION CONTACT section to view copies of the final
Order, the Petition, and other supporting information. You may review
copies of the final Order, the Petition, and other supporting
information at the EPA Region 6 Office, 1445 Ross Avenue, Suite 700,
Dallas, TX 75202. You may view the hard copies Monday through Friday,
from 9 a.m. to 3 p.m., excluding federal holidays. If you wish to
examine these documents, you should make an appointment at least 24
hours before the visiting day. Additionally, the final Order and
Petition are available electronically at: https://www.epa.gov/title-v-operating-permits/title-v-petition-database.

FOR FURTHER INFORMATION CONTACT: Brad Toups, EPA Region 6, by phone
(214) 665-7258, or email at [email protected].

SUPPLEMENTARY INFORMATION: The CAA affords the EPA a 45-day period to
review and object to, as appropriate, operating permits proposed by
state permitting authorities under title V of the CAA. Section
505(b)(2) of the CAA authorizes any person to petition the EPA
Administrator to object to a title V operating permit within 60 days
after the expiration of the EPA's 45-day review period if the EPA has
not objected on its own initiative. Petitions must be based only on
objections to the permit that were raised with reasonable specificity
during the public comment period provided by the state, unless the
petitioner demonstrates that it was impracticable to raise these issues
during the comment period or unless the grounds for the issues arose
after this period.
    EPA received a first petition from the Petitioners on December 29,
2016 and a second petition from the same Petitioners on August 10, 2017
for the operating permit issued on June 30, 2017 to SLM for its
Methanol Facility located in St. James Parish, Louisiana. The
Petitioners requested that the Administrator object to the proposed
operating permit issued by the LDEQ to SLM based on eight primary
claims in the Petition. The claims are described in detail in Section
IV of the Order. In summary, the issues raised include: Matters
properly addressable through preconstruction permit requirements, such
as the establishment of proper preconstruction emission limits and
standards (various claims, introduction to Order Section IV); claims
concerning the failure to require Best Available Control Technology
(Claim IV); claims of permit condition unenforceability (Claim V);
claims of unenforceability of emissions limits that apply to the boiler
(Claim V.A), the Reformer Vent (Claim V.B), the flare (Claim V.D), the
crude methanol tank (Claim V.E), the cooling towers (Claim V. G), from
miscellaneous fired sources (Claim V.F), including CO2e
emissions from such fired sources (Claim V.C). On May 29, 2018, the EPA
Administrator issued an Order denying the Petitions. The Order explains
the basis for EPA's decision.
    Sections 307(b) and 505(b)(2) of the CAA provide that a petitioner
may request judicial review of those portions of an order that deny
issues in a petition. Any petition for review shall be filed in the
United States Court of Appeals for the appropriate circuit no later
than August 27, 2018.

    Dated: June 15, 2018.
Anne Idsal,
Regional Administrator, Region 6.
[FR Doc. 2018-13652 Filed 6-25-18; 8:45 am]
 BILLING CODE 6560-50-P


6/ 20/ 2006 6/ 20/ 2006 1 Fuel Hose Design in Fuel Hose Design in Relation to the Design and Relation to the Design and Operation of Handheld Operation of Handheld Power Equipment Power Equipment 6/ 21/ 05 6/ 21/ 05 Design Considerations Design Considerations ° The potential for fire due to fuel leakage is one of the important safety concerns of HH products. Fuel hoses are an important part of the hazard analysis of every product.

° Engine and other supporting structure vibrations ( often housing the fuel tank itself) require flexible fuel hoses due to dynamic elongation during engine operation ( often the engine/ carburetor may be vibrating or displacing in a different mode than the fuel tank itself).

  Longer lines result in higher permeation areas but become less sensitive to bending/ torsion as the forces can be applied over greater distances   Shorter lines reduce exposure to permeation but increase importance of material properties due to increases in dynamic loads and reactions. Design Considerations Design Considerations ( continued)

( continued)

° Space and weight requirements of the highly integrated handheld products determines the complex geometry of the fuel hoses.

  Increased demands to reduce weight of HH products to improve operator comfort and safety   Increased engine complexity from exhaust emission requirements has added weight which must be constantly compensated for in the overall design ° Due to the fact that conventional extruded fuel lines ( purchased in bulk rolls) are much lower in price, the industry has an inherent interest in not using complex geometries. Still the number of complex geometries has increased because the customer wants a small and light weight product. Examples of Complex Examples of Complex Geometries Geometries Trimmer Trimmer As lines become shorter, flexibility is more important. The line shape must be modified to improve flexibility without increasing stress. FEA of Torsion and Elongation FEA of Torsion and Elongation to Optimize Hose Geometry to Optimize Hose Geometry NBR vs. FKM ( Considering NBR vs. FKM ( Considering Machine Design Requirements)

Machine Design Requirements)

° HH products must be capable of usage in environments from  25 ° C ( 15 ° F) to 50 ° C ( 122 ° F). Storage temperatures can exceed both of these values.

  NBR shows significant advantages at low temperatures compared to FKM. NBR can be used down to  35 ° C ( 31 ° F). FKM material looses much of its flexibility by  15 ° C (+ 5 ° F)

  FKM material has excellent high temperature stability ° Use of HH machines at extremes ( often flexing them to the limits of AV systems) requires material to be high in tear resistance at all temperatures.

  NBR materials show a higher tear resistance compared to FKM.

° Compared to FKM, NBR has higher wear stability ( Less likely to score or tear) Partial Crystallization points NBR vs. FKM ( Considering NBR vs. FKM ( Considering Machine Design Requirements)

Machine Design Requirements)

° Fuel hoses may be used to connect the fuel tank ( at one side of the anti vibration system) with carburetor ( at the other side of the AV system). Because of different movements at the connection points due to vibration, elongation properties of the material is important.

  The elongation of NBR is better as compared to FKM ° Due to the material characteristics, more complex geometries can be molded using NBR compared to FKM. Complex geometries are needed due to highly integrated engine structures and the tiny remaining space for fuel hoses.

  FKM is more difficult to mold into complex shapes required in injection molded parts ° The price of FKM parts are 7 10 times higher compared to NBR parts. For complex geometries, the tooling costs are much higher and demolding is critical. NBR vs. FKM ( Considering NBR vs. FKM ( Considering Machine Design Requirements)

Machine Design Requirements)

° Viton ( FKM) has lower permeability.

  Better from a regulator's standpoint ° Oxidation and deterioration from UV are important factors in machine design. Lines must hold up for the product life.

  FKM has excellent aging stability   NBR aging stability is equally stable depending on the additives ° Exposure to fuels and lubricant and their additives requires lines to be chemically resistive   FKM has excellent media stability except for increased swelling from oxygen containing compounds such as aldehydes and alcohols   Industry changed fuel lines to NBR material over 20 years ago to improve resistance to oxygenated fuels Proposal to EPA from the HHPC Proposal to EPA from the HHPC ° Due to the environmental and design considerations of HH products the use of NBR for short fuel hoses is recommended.

° EPA should not regulate lines less than 6" in length because:

  Based on OPEI HHPC inventory numbers, lines longer than 6" account for about 30% of the products   Fuel lines need material properties NBR offers   Fuel lines require higher flexibility which cannot be obtained from FKM at all temperatures   Emission reduction benefit considering all fuel lines is insignificant compared to non road SI ( See OPEI data)

  Cost increases 7 10 times with FKM for 70% of the products


[Federal Register Volume 83, Number 175 (Monday, September 10, 2018)]
[Notices]
[Page 45620]
[FR Doc No: 2018-19555]

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DEPARTMENT OF ENERGY

Federal Energy Regulatory Commission

Notice of Commission Staff Attendance

    The Federal Energy Regulatory Commission (Commission) hereby gives
notice that members of the Commission's staff may attend the following
meetings related to the transmission planning activities of the New
York Independent System Operator, Inc. (NYISO):

NYISO Electric System Planning Working Group and Transmission Planning
Advisory Meeting

September 6, 2018, 10:30 a.m.-2:00 p.m. (EST)

    The above-referenced meeting will be via web conference and
teleconference.
    The above-referenced meeting is open to stakeholders.
    Further information may be found at: http://www.nyiso.com/public/committees/documents.jsp?com=oc_tpas&directory=2018-09-06.

NYISO Business Issues Committee Meeting

September 12, 2018, 10:00 a.m.-1:00 p.m. (EST)

    The above-referenced meeting will be via web conference and
teleconference.
    The above-referenced meeting is open to stakeholders.
    Further information may be found at: http://www.nyiso.com/public/committees/documents.jsp?com=bic&directory=2018-09-12.

NYISO Operating Committee Meeting

September 12, 2018, 1:00 p.m.-4:00 p.m. (EST)

    The above-referenced meeting will be via web conference and
teleconference.
    The above-referenced meeting is open to stakeholders.
    Further information may be found at: http://www.nyiso.com/public/committees/documents.jsp?com=oc&directory=2018-09-12.

NYISO Electric System Planning Working Group Meeting

September 25, 2018, 10:00 a.m.-4:00 p.m. (EST)

    The above-referenced meeting will be via web conference and
teleconference.
    The above-referenced meeting is open to stakeholders.
    Further information may be found at: http://www.nyiso.com/public/committees/documents.jsp?com=bic_espwg&directory=2018-09-25.

NYISO Management Committee Meeting

September 26, 2018, 10:00 a.m.-2:00 p.m. (EST)

    The above-referenced meeting will be via web conference and
teleconference.
    The above-referenced meeting is open to stakeholders.
    Further information may be found at: http://www.nyiso.com/public/committees/documents.jsp?com=mc&directory=2018-09-26.
    The discussions at the meetings described above may address matters
at issue in the following proceedings:
    New York Independent System Operator, Inc., Docket No. ER15-2059.
    New York Independent System Operator, Inc., Docket No. ER17-2327.
    For more information, contact James Eason, Office of Energy Market
Regulation, Federal Energy Regulatory Commission at<PHONE_NUMBER> or
[email protected].

    Dated: September 4, 2018.
Kimberly D. Bose,
Secretary.
[FR Doc. 2018-19555 Filed 9-7-18; 8:45 am]
 BILLING CODE 6717-01-P