[Federal Register Volume 82, Number 231 (Monday, December 4, 2017)]
[Notices]
[Pages 57306-57313]
[FR Doc No: 2017-25989]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-82161; File No. SR-OCC-2017-022]

Self-Regulatory Organizations; The Options Clearing Corporation;
Notice of Filing of Proposed Rule Change Related to The Options
Clearing Corporation's Margin Methodology

November 28, 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 13, 2017, The Options Clearing Corporation (``OCC'')
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 OCC. 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

    This proposed rule change by OCC would modify OCC's margin
methodology to move away from the existing monthly data source provided
by its current vendor and towards obtaining and incorporating daily
price and returns (adjusted for any corporate actions) data of
securities to estimate accurate margins.\3\ This would be further
supported by enhancing OCC's econometric model applied to different
risk factors; \4\ improving the sensitivity and stability of
correlation estimates between them; and enhancing OCC's methodology
around the treatment of securities with limited historical data. OCC
also proposes to make a few clarifying and clean-up changes to its
margin methodology unrelated to the proposed changes described above.
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    \3\ OCC also has filed an advance notice with the Commission in
connection with the proposed changes. See SR-OCC-2017-811.
    \4\ The use of risk factors in OCC's margin methodology is
discussed in more detail in the Background section of Item II below.
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    The proposed changes to OCC's Margins Methodology document are
contained in confidential Exhibit 5 of the filing. The proposed changes
are described in detail in Item II below. The proposed rule change does
not require any changes to the text of OCC's By-Laws or Rules. All
terms with initial capitalization that are not otherwise defined herein
have the same meaning as set forth in the OCC By-Laws and Rules.\5\
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    \5\ OCC's By-Laws and Rules can be found on OCC's public Web
site: http://optionsclearing.com/about/publications/bylaws.jsp.
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II. Clearing Agency's Statement of the Purpose of, and Statutory Basis
for, the Proposed Rule Change

    In its filing with the Commission, OCC 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. OCC has prepared summaries, set forth in sections (A),
(B), and (C) below, of the most significant aspects of these
statements.

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

(1) Purpose
Background
    OCC's margin methodology, the System for Theoretical Analysis and
Numerical Simulations (``STANS''), is OCC's proprietary risk management
system that calculates Clearing Member margin requirements.\6\ STANS
utilizes large-scale Monte Carlo simulations to forecast price and
volatility movements in determining a Clearing Member's margin
requirement.\7\ The STANS margin requirement is calculated at the
portfolio level of Clearing Member accounts with positions in
marginable securities and consists of an estimate of a 99% expected
shortfall \8\ over a two-day time horizon and an add-on margin charge
for model risk (the concentration/dependence stress test charge).\9\
The STANS methodology is used to measure the exposure of portfolios of
options and futures cleared by OCC and cash instruments in margin
collateral.
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    \6\ See Securities Exchange Act Release No. 53322 (February 15,
2006), 71 FR 9403 (February 23, 2006) (SR-OCC-2004-20).
    \7\ See OCC Rule 601.
    \8\ The expected shortfall component is established as the
estimated average of potential losses higher than the 99% value at
risk threshold. The term ``value at risk'' or ``VaR'' refers to a
statistical technique that, generally speaking, is used in risk
management to measure the potential risk of loss for a given set of
assets over a particular time horizon.
    \9\ A detailed description of the STANS methodology is available
at http://optionsclearing.com/risk-management/margins/.
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    A ``risk factor'' within OCC's margin system may be defined as a
product or attribute whose historical data is used to estimate and
simulate the risk for an associated product. The majority of risk
factors utilized in the STANS methodology are total returns on
individual equity securities. Other risk factors considered include:
Returns on equity indexes; returns on implied volatility \10\ risk
factors that are a set of nine chosen volatility pivots per product;
\11\ changes in foreign exchange rates; and changes in model parameters
that sufficiently capture the model dynamics from a larger set of data.
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    \10\ Generally speaking, the implied volatility of an option is
a measure of the expected future volatility of the value of the
option's annualized standard deviation of the price of the
underlying security, index, or future at exercise, which is
reflected in the current option premium in the market. Using the
Black-Scholes options pricing model, the implied volatility is the
standard deviation of the underlying asset price necessary to arrive
at the market price of an option of a given strike, time to
maturity, underlying asset price and given the current risk-free
rate. In effect, the implied volatility is responsible for that
portion of the premium that cannot be explained by the then-current
intrinsic value (i.e., the difference between the price of the
underlying and the exercise price of the option) of the option,
discounted to reflect its time value.
    \11\ In December 2015, the Commission approved a proposed rule
change, and issued a Notice of No Objection to an advance notice
filing, by OCC to its modify margin methodology by more broadly
incorporating variations in implied volatility within STANS. See
Securities Exchange Act Release No. 34-76781 (December 28, 2015), 81
FR 135 (January 4, 2016) (SR-OCC-2015-016) and Securities Exchange
Act Release No. 34-76548 (December 3, 2015), 80 FR 76602 (December
9, 2015) (SR-OCC-2015-804).
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    Under OCC's current margin methodology, OCC obtains monthly price
data for most of its equity-based products \12\ from a widely used
industry vendor. This data arrives around the second week of every
month in arrears and requires a maximum of about four weeks for OCC to
process the data after any clean up and reruns as may be required prior
to installing into OCC's margin system. As a result, correlations and
statistical parameters for risk factors at any point in time represent
back-dated data and therefore may not be representative of the most
recent market data. In the absence of daily updates, OCC employs an
approach where one or many identified market proxies (or ``scale-
factors'') are used to incorporate day-to-day market volatility across
all associated asset classes throughout.\13\ The scale factor approach,
however, assumes a perfect correlation of the volatilities between the
security and its scale factor, which gives little room to capture the
idiosyncratic risk of a given security and which may be different from
the broad market risk represented by the scale factor.
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    \12\ The securities underlying these products are also known as
risk factors within OCC's margin system.
    \13\ Earlier this year, the Commission approved a proposed rule
change and issued a Notice of No Objection to an advance notice
filing by OCC which, among other things: (1) Expanded the number of
scale factors used for equity-based products to more accurately
measure the relationship between current and long-run market
volatility with proxies that correlate more closely to certain
products carried within the equity asset class, and (2) applied
relevant scale factors to the greater of (i) the estimated variance
of 1-day return scenarios or (ii) the historical variance of the
daily return scenarios of a particular instrument, as a floor to
mitigate procyclicality. See Securities Exchange Act Release No.
80147 (March 3, 2017), 82 FR 13163 (March 9, 2017) (SR-OCC-2017-001)
and Securities Exchange Act Release No. 80143 (March 2, 2017), 82 FR
13036 (March 8, 2017) (SR-OCC-2017-801).
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    In risk management, it is a common practice to establish a floor
for volatility at a certain level in order to protect against
procyclicality \14\ in the model.

OCC imposes a floor on volatility estimates for its equity-based
products using a 500-day look back period. These monthly updates
coupled with the dependency of margins on scale factors and the
volatility floor can result in imprecise changes in margins charged to
Clearing Members, specifically across periods of heavy volatility when
the correlation between the risk factor and a scale factor fluctuate.
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    \14\ A quality that is positively correlated with the overall
state of the market is deemed to be ``procyclical.'' For example,
procyclicality may be evidenced by increasing margin or Clearing
Fund requirements in times of stressed market conditions and low
margin or Clearing Fund requirements when markets are calm. Hence,
anti-procyclical features in a model are measures intended to
prevent risk-based models from fluctuating too drastically in
response to changing market conditions.
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    OCC's current methodology for estimating covariance and
correlations between risk factors relies on the same monthly data
described above, resulting in a similar lag time between updates. In
addition, correlation estimates are based off historical returns
series, with estimates between a pair of risk factors being highly
sensitive to the volatility of either risk factor in the chosen pair.
The current approach therefore results in potentially less stable
correlation estimates that may not be representative of current market
conditions.
    Finally, under OCC's existing margin methodology, theoretical price
scenarios for ``defaulting securities'' \15\ are simulated using
uncorrelated return scenarios with an average zero return and a pre-
specified volatility called ``default variance.'' The default variance
is estimated as the average of the top 25 percent quantile of the
conditional variances of all securities. As a result, these default
estimates may be impacted by extremely illiquid securities with
discontinuous data. In addition, the default variance (and the
associated scale factors used to scale up volatility) is also subject
to sudden jumps with the monthly simulation installations across
successive months because it is derived from monthly data updates, as
opposed to daily updates, which are prone to wider fluctuations and are
subject to adjustments using scale factors.
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    \15\ Within the context of OCC's margin system, securities that
do not have enough historical data for calibration are classified as
``defaulting securities.''
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Proposed Changes
    OCC proposes to modify its margin methodology by: (1) Obtaining
daily price data for equity products (including daily corporate action-
adjusted returns of equities where price and thus returns of securities
are adjusted for any dividends issued, stock splits, etc.) for use in
the daily estimation of econometric model parameters; (2) enhancing its
econometric model for updating statistical parameters (e.g., parameters
concerning correlations or volatility) for all risk factors that
reflect the most recent data obtained; (3) improving the sensitivity
and stability of correlation estimates across risk factors by using de-
volatized \16\ returns (but using a 500 day look back period); and (4)
improving OCC's methodology related to the treatment of defaulting
securities that would result in stable and realistic risk estimates for
such securities.\17\
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    \16\ De-volatization is a process of normalizing historical data
with the associated volatility thus enabling any comparison between
different sets of data.
    \17\ In addition to the proposed methodology changes described
herein, OCC also would make some clarifying and clean-up changes,
unrelated to the proposed changes described above, to update its
margin methodology to reflect existing practices for the daily
calibration of seasonal and non-seasonal energy models and the
removal of methodology language for certain products that are no
longer cleared by OCC.
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    The purpose of the proposed changes is to enhance OCC's margin
methodology to mitigate the issues described above that arise from the
current monthly update and scale factor approach. Specifically, by
introducing daily (as opposed to monthly) updates for price data (and
thereby allowing for daily updates of statistical parameters in the
model) and making other proposed model enhancements described herein,
the proposed changes are designed to result in more accurate and
responsive margin requirements and a model that is more stable and
proactive during times of market volatility, with margins that are
based off of the most recent market data. In addition, the proposed
changes are intended to improve OCC's approach to estimating covariance
and correlations between risk factors in an effort to achieve more
stable and sensitive correlation estimations and improve OCC's
methodology related to the treatment of defaulting securities by
reducing the impact that illiquid securities with discontinuous data
have on default variance estimates.
    The proposed changes are described in further detail below.
1. Daily Updates of Price Data
    OCC proposes to introduce daily updates for price data for equity
products, including daily corporate action-adjusted returns of
equities, Exchange Traded Funds (``ETFs''), Exchange Traded Notes
(``ETNs'') and certain indexes. The daily price data would be obtained
from a widely used external vendor, as is the case with the current
monthly updates. The purpose of the proposed change is to ensure that
OCC's margin methodology is reliant on data that is more representative
of current market conditions, thereby resulting in more accurate and
responsive margin requirements.
    As described above, OCC currently obtains price data for all
securities on a monthly basis from a third party vendor. After
obtaining the monthly price data, additional time is required for OCC
to process the data prior to installing into OCC's margin system. As a
result, correlations and statistical parameters for risk factors at any
point in time represent back-dated data and therefore may not be
representative of the most recent market data. To mitigate pro-
cyclicality within its margin methodology in the absence of daily
updates, OCC employs the use of scale-factors to incorporate day-to-day
market volatility across all associated asset classes. While the scale
factors help to reduce procyclicality in the model, the scale factors
do not necessarily capture the idiosyncratic risks of a given security,
which may be different from the broad market risk represented by the
scale factor.
    OCC proposes to address these issues associated with its current
margin methodology by eliminating its dependency on monthly price data,
which arrives in arrears and requires additional time for OCC to
process the data prior to installing into OCC's margin system through
the introduction of daily updates for price data for equity products.
The introduction of daily price updates would enable OCC's margin
methodology to better capture both market as well idiosyncratic risk by
allowing for daily updates to the parameters associated with the
econometric model (discussed below) that capture the risk associated
with a particular product, and therefore ensure that OCC's margin
requirements are based on more current market conditions. As a result,
OCC would also reduce its reliance on the use of scale factors to
incorporate day-to-day market volatility, which, as noted above, give
little room to capture the idiosyncratic risk of a given security and
which may be different from the broad market risk represented by the
scale factor. In addition, the processing time between receipt of the
data and installation into the margin system would be reduced as the
data review and processing for daily prices would be incorporated into
OCC's daily price editing process.
2. Proposed Enhancements to the Econometric Model
    In addition to introducing daily updates for price and corporate
action-adjusted returns data, OCC is proposing enhancements to its
econometric model

for calculating statistical parameters for all qualifying risk factors
that reflect the most recent data obtained (e.g., OCC would be able to
calculate parameters such as volatility and correlations on a daily
basis using the new daily price data discussed above). Specifically,
OCC proposes to enhance its econometric model by: (i) Introducing daily
updates for statistical parameters; (ii) introducing features in its
econometric model that are designed to take into account asymmetry in
the model used to forecast volatility associated with a risk factor;
(iii) modifying the statistical distribution used to model the returns
of equity prices; (iv) introducing a second-day forecast for volatility
into the model to estimate the two-day scenario distributions for risk
factors; and (v) imposing a floor on volatility estimates using a 10-
year look back period.
    These proposed model enhancements are described in detail below.
i. Daily Updates for Statistical Parameters
    Under the proposal, the statistical parameters for the model would
be updated on a daily basis using the new daily price data obtained by
OCC (as described in section 1 above).\18\ As a result, OCC would no
longer need to rely on scale factors to approximate day-to-day market
volatility for equity-based products. Statistical parameters would be
calibrated on daily basis, allowing OCC to calculate more accurate
margin requirements that are representative of the most recent market
data.
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    \18\ OCC notes that this change would apply to most risk factors
with the exception of certain equity indexes, Treasury securities,
and energy futures products, which are already updated on a daily
basis.
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ii. Proposed Enhancements To Capture Asymmetry in Conditional Variance
    In addition to the daily update of statistical parameters, OCC
proposes to include new features in its econometric model that are
designed to take into account asymmetry in the conditional variance
process. The econometric model currently used in STANS for all risk
factors is a GARCH(1,1) with Student's t-distributed innovations of
logarithmic returns,\19\ which is a relatively straightforward and
widely used model to forecast volatility.\20\ The current approach for
forecasting the conditional variance for a given risk factor does not,
however, consider the asymmetric volatility phenomenon observed in
financial markets (also called the ``leverage effect'') where
volatility is more sensitive and reactive to market downturns. As a
result, OCC proposes to enhance its model by adding new features (i.e.,
incorporating asymmetry into its forecast volatility) designed to allow
the conditional volatility forecast to be more sensitive to market
downturns and thereby capture the most significant dynamics of the
relationship between price and volatility observed in financial
markets. OCC believes the proposed enhancement would result in more
accurate and responsive margin requirements, particularly in market
downturns.
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    \19\ The Student's t distribution is a widely used statistical
distribution to model the historical logarithmic price returns data
of a security that allows for the presence of fat tails (aka
kurtosis) or a non-zero conditional fourth moment.
    \20\ See generally Tim Bollerslev, ``Generalized Autoregressive
Conditional Heteroskedasticity,'' Journal of Econometrics, 31(3),
307-327 (1986). The acronym ``GARCH'' refers to an econometric model
that can be used to estimate volatility based on historical data.
The general distinction between the ``GARCH variance'' and the
``sample variance'' for a given time series is that the GARCH
variance uses the underlying time series data to forecast
volatility.
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iii. Proposed Change in Statistical Distribution
    OCC further proposes to change the statistical distribution used to
model the returns of equity prices. OCC's current methodology uses a
fat tailed distribution \21\ (the Student's t-distribution) to model
returns; however, price scenarios generated using very large log-return
scenarios (positive) that follow this distribution can approach
infinity and could potentially result in excessively large price jumps,
a known limitation of this distribution. OCC proposes to move to a more
defined distribution (Standardized Normal Reciprocal Inverse Gaussian
or NRIG) for modeling returns, which OCC believes would more
appropriately simulate future returns based on the historical price
data for the products in question (i.e., it has a better ``goodness of
fit'' \22\ to the historical data) and allows for more appropriate
modeling of fat tails. As a result, OCC believes that the proposed
change would lead to more consistent treatment of log returns both on
the upside as well as downside of the distribution.
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    \21\ A data set with a ``fat tail'' is one in which extreme
price returns have a higher probability of occurrence than would be
the case in a normal distribution.
    \22\ The goodness of fit of a statistical model describes the
extent to which observed data match the values generated by the
model.
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iv. Second Day Volatility Forecast
    OCC also proposes to introduce a second-day forecast for volatility
into the model to estimate the two-day scenario distributions for risk
factors.\23\ Under the current methodology, OCC typically uses a two-
day horizon to determine its risk exposure to a given portfolio. This
is done by simulating 10,000 theoretical price scenarios for the two-
day horizon using a one-day forecast conditional variance, and the
value at risk and expected shortfall components of the margin
requirement are then determined from the simulated profit/loss
distributions. These one-day and two-day returns scenarios are both
simulated using the one-day forecast conditional variance estimate.
This could lead to a risk factor's coverage differing substantially on
volatile trading days. As a result, OCC proposes to introduce a second-
day forecast variance for all equity-based risk factors. The second-day
conditional variance forecast would be estimated for each of the 10,000
Monte Carlo returns scenarios, resulting in more accurately estimated
two-day scenario distributions, and therefore more accurate and
responsive margin requirements.
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    \23\ This proposed change would not apply to STANS implied
volatility scenario risk factors. For those risk factors, OCC's
existing methodology would continue to apply. See supra note 11.
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v. Anti-Procyclical Floor for Volatility Estimates
    Additionally, OCC proposes to modify its floor for volatility
estimates. OCC currently imposes a floor on volatility estimates for
its equity-based products using a 500-day look back period. OCC
proposes to extend this look back period to 10-years (2520 days) in the
enhanced model and to apply this floor to volatility estimates for
other products (excluding implied volatility risk factor scenarios).
The proposed model described herein is calibrated from historical data,
and as a result, the level of the volatilities generated by the model
will vary from time to time. OCC is therefore proposing to establish a
volatility floor for the model using a 10-year look back period to
reduce the risk of procyclicality in its margin model. OCC believes
that using a longer 10-year look back period will ensure that OCC
captures sufficient historical events/market shocks in the calculation
of its anti-procyclical floor. The 10-year look back period also is in
line with requirements of the European Market Infrastructure Regulation
(including regulations thereunder) \24\ concerning the calibration of
risk factors.
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    \24\ Regulation (EU) No 648/2012 of the European Parliament and
of the Council of 4 July 2012 on OTC derivatives, central
counterparties and trade repositories. Specifically, the proposed
floor would be compliant with Article 28 of Commission Delegated
Regulation (EU) No. 153/2013 of 19 December 2012 Supplementing
Regulation (EU) No. 648/2012 of the European Parliament and of the
Council with regard to Regulatory Technical Standards on
Requirements for Central Counterparties (the ``Regulatory Technical
Standards'').

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3. Proposed Enhancements to Correlation Estimates
    As described above, OCC's current methodology for estimating
covariance and correlations between risk factors relies on the same
monthly price data feeding the econometric model, resulting in a
similar lag time between updates. In addition, correlation estimates
are based off historical returns series, with estimates between a pair
of risk factors being highly sensitive to the volatility of either risk
factors in the chosen pair. The current approach therefore results in
correlation estimates being sensitive to volatile historical data.
    In order to address these limitations, OCC proposes to enhance its
methodology for calculating correlation estimates by moving to a daily
process for updating correlations (with a minimum of one week's lag) to
ensure Clearing Member account margins are more current and thus more
accurate. Moreover, OCC proposes to enhance its approach to modeling
correlation estimates by de-volatizing \25\ the returns series to
estimate the correlations. Under the proposed approach, OCC would first
consider the returns excess of the mean (i.e., the average estimated
from historical data sample) and then further scale them by the
corresponding estimated conditional variances. OCC believes that by
using de-volatized returns, which is a widely suggested approach in
relevant literature, it would lead to normalizing returns across a
variety of asset classes and make the correlation estimator less
sensitive to sudden market jumps and therefore more stable.
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    \25\ See supra note 16.
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4. Defaulting Securities Methodology
    Finally, OCC proposes to enhance its methodology for estimating the
defaulting variance in its model. OCC's margin system is dependent on
market data to determine Clearing Member margin requirements.
Securities that do not have enough historical data are classified as to
be a ``defaulting security'' within OCC systems (e.g., IPO securities).
As noted above, within current STANs systems, the theoretical price
scenarios for defaulting securities are simulated using uncorrelated
return scenarios with a zero mean and a default variance, with the
default variance being estimated as the average of the top 25 percent
quantile of the conditional variances of all securities. As a result,
these default estimates may be impacted by extremely illiquid
securities with discontinuous data. In addition, the default variance
(and the associated scale factors used to scale up volatility) is also
subject to sudden jumps with the monthly simulation installations
across volatile months. To mitigate these concerns, OCC proposes to:
(i) Use only optionable equity securities to estimate the defaulting
variance; (ii) use a shorter time series to enable calibration of the
model for all securities; and (iii) simulating default correlations
with the driver Russell 2000 index (``RUT'').
i. Proposed Modifications to Securities and Quantile Used in Estimation
    OCC proposes that only optionable equity securities, which are
typically more liquid, be considered while estimating the default
variance. This limitation would eliminate from the estimation almost
all illiquid securities with discontinuous data that could contribute
to high conditional variance estimates and thus a high default
variance. In addition, OCC proposes to estimate the default variance as
the lowest estimate of the top 10% of the floored conditional variance
across the risk factors. This change in methodology is designed to
ensure that while the estimate is aggressive it is also robust to the
presence of outliers caused by a few extremely volatile securities that
influence the location parameter of a distribution. Moreover, as a
consequence of the daily updates described above, the default variances
would change daily and there would be no scale factor to amplify the
effect of the variance on risk factor coverage.
ii. Proposed Change in Time Series
    In addition, OCC proposes to use a shorter time series to enable
calibration of the model for all securities. Currently, OCC does not
calibrate parameters for defaulting securities that have historical
data of less than two years. OCC is proposing to shorten this time
period to around 6 months (180 days) to enable calibration of the model
for all securities within OCC systems. OCC believes that this shorter
time series is sufficient to produce stable calibrated parameters.
iii. Proposed Default Correlation
    Finally, OCC proposes that returns scenarios for defaulting
securities, securities with insufficient historical data, be simulated
using a default correlation with the driver RUT.\26\ The RUT Index is a
small cap index and is hence a natural choice to represent most new
issues that are small cap and deemed to be a ``defaulting security.''
The default correlation is roughly equal to the median of all
positively correlated securities with the index. Since 90% of the risk
factors in OCC systems correlate positively to the RUT index, OCC would
only consider those risk factors to determine the median. OCC believes
that the median of the correlation distribution has been steady over a
number of simulations and is therefore proposing that it replace the
current methodology of simulating uncorrelated scenarios, which OCC
believes is not a realistic approach.
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    \26\ OCC notes that, in certain limited circumstances where
there are reasonable grounds backed by the existing return history
to support an alternative approach in which the returns are strongly
correlated with those of an existing risk factor (a ``proxy'') with
a full price history, the Margins Methodology allows OCC's Financial
Risk Management staff to construct a ``conditional'' simulation to
override any default treatment that would have otherwise been
applied to the defaulting security.
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Clearing Member Outreach
    OCC has discussed the proposed changes with its Financial Risk
Advisory Council \27\ at a meeting held on October 25, 2016. OCC also
provided general updates to members at OCC Roundtable \28\ meetings on
June 20, 2017, and November 9, 2017. Clearing Members expressed
interest in seeing how reactive margin changes would be under the
proposal; however, there were no objections or significant concerns
expressed regarding the proposed changes. OCC will provide at least 30-
days of parallel reporting prior to implementation so that Clearing
Members can see the impact of the proposed changes. In addition, OCC
would publish an Information Memorandum to all Clearing Members
describing the proposed change and will provide additional periodic
Information Memoranda updates prior to the implementation date.
Additionally, OCC would perform targeted and direct outreach with
Clearing Members that would be most impacted by the proposed changes to
the margin methodology and OCC would work closely with such Clearing
Members to coordinate the implementation and associated funding for
such Clearing

Members resulting from the proposed change.\29\
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    \27\ The Financial Risk Advisory Council is a working group
consisting of representatives of Clearing Members and exchanges
formed by OCC to review and comment on various risk management
proposals.
    \28\ The OCC Roundtable was established to bring Clearing
Members, exchanges and OCC together to discuss industry and
operational issues. It is comprised of representatives of the senior
OCC staff, participant exchanges and Clearing Members, representing
the diversity of OCC's membership in industry segments, OCC-cleared
volume, business type, operational structure and geography.
    \29\ Specifically, OCC will discuss with those Clearing Members
how they plan to satisfy any increase in their margin requirements
associated with the proposed change.
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(2) Statutory Basis
    OCC believes that the proposed rule change is consistent with
Section 17A of the Securities Exchange Act of 1934, as amended (the
``Act''),\30\ and the rules thereunder applicable to OCC. Section
17A(b)(3)(F) of Act \31\ requires that the rules of a clearing agency
be designed to assure the safeguarding of securities and funds which
are in the custody or control of the clearing agency or for which it is
responsible. OCC believes the propose rule change would enhance its
margin methodology in a manner designed to safeguard the securities and
funds in its custody or control for the reasons set forth below.
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    \30\ 15 U.S.C. 78q-1.
    \31\ 15 U.S.C. 78q-1(b)(3)(F).
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    As noted above, OCC's current margin methodology relies on monthly
price data being obtained from a third party vendor. This data arrives
monthly in arrears and requires additional time for OCC to process the
data prior to installing into OCC's margin system. As a result,
correlations and statistical parameters for risk factors at any point
in time represent back-dated data and therefore may not be
representative of the most recent market data. To mitigate
procyclicality within its margin methodology in the absence of daily
updates, OCC employs a scale factor approach to incorporate day-to-day
market volatility across all associated asset classes throughout.\32\
For the reasons noted above, these monthly updates coupled with the
dependency of margins on scale factors can result in imprecise changes
in margins charged to Clearing Members, specifically across periods of
heavy volatility.
---------------------------------------------------------------------------

    \32\ See supra note 13 and accompanying text.
---------------------------------------------------------------------------

    OCC proposes to enhance its margin methodology to introduce daily
updates for equity price data, thereby allowing for daily updates of
statistical parameters in its margin model for most risk factors. In
addition, the proposed changes would introduce features to the model to
better account for the asymmetric volatility phenomenon observed in
financial markets and allow for conditional volatility forecast to be
more sensitive to market downturns. The proposed changes would also
introduce a new statistical distribution for modeling equity price
returns that OCC believes would have a better goodness of fit and would
more appropriately account for fait tails. Moreover, the proposed
changes would introduce a second-day volatility forecast into the model
to provide for more accurate and timely estimations of its two-day
scenario distributions. OCC also proposes to enhance its econometric
model by establishing a volatility floor using a 10-year look back
period to reduce procyclicality in the margin model. OCC believes the
proposed changes would result in more accurate and responsive margin
requirements and a model that is more stable and proactive during times
of market volatility, with risk charges that are based off of most
recent market data.
    In addition, the proposed rule change is intended to improve OCC's
approach to estimating covariance and correlations between risk factors
in an effort to achieve more stable and sensitive correlation
estimations and improve OCC's methodology related to the treatment of
defaulting securities by reducing the impact that illiquid securities
with discontinuous data have on default variance estimates.
    The proposed methodology changes would be used by OCC to calculate
margin requirements designed to limit its credit exposures to
participants, and OCC uses the margin it collects from a defaulting
Clearing Member to protect other Clearing Members from losses that may
result from such a default. As a result, OCC believes the proposed rule
changed is designed to assure the safeguarding of securities and funds
in its custody or control in accordance with Section 17A(b)(3)(F) of
the Act.\33\
---------------------------------------------------------------------------

    \33\ Id.
---------------------------------------------------------------------------

    Rules 17Ad-22(b)(1) and (2) \34\ require that a registered clearing
agency that performs central counterparty services establish,
implement, maintain and enforce written policies and procedures
reasonably designed to, in part: (1) Measure its credit exposures to
its participants at least once a day and limit its exposures to
potential losses from defaults by its participants under normal market
conditions so that the operations of the clearing agency would not be
disrupted and non-defaulting participants would not be exposed to
losses that they cannot anticipate or control and (2) use margin
requirements to limit its credit exposures to participants under normal
market conditions and use risk-based models and parameters to set
margin requirements.
---------------------------------------------------------------------------

    \34\ 17 CFR 240.17Ad-22(b)(1) and (2).
---------------------------------------------------------------------------

    As noted above, the proposed changes would introduce the use of
daily price updates into OCC's margin methodology, which allows for
daily updates to the statistical parameters in the model (e.g.,
parameters concerning volatility and correlation). These changes would
be supported by a number of other risk-based enhancements to OCC's
econometric model designed to: (i) More appropriately account for
asymmetry in conditional variance; (ii) more appropriately model the
statistical distribution of price returns; (iii) provide for an anti-
procyclical floor for volatility estimates based on a 10-year look back
period; and (iv) more accurately model second-day volatility forecasts.
Moreover, the proposed changes would improve OCC's approach to
estimating covariance and correlations between risk factors in an
effort to achieve more stable and sensitive correlation estimations and
improve OCC's methodology related to the treatment of defaulting
securities by reducing the impact that illiquid securities with
discontinuous data have on default variance estimates.
    OCC would use the risk-based model enhancements described herein to
measure its credit exposures to its participants on a daily basis and
determine margin requirements based on such calculations. The proposed
enhancements concerning daily price updates, daily updates of
statistical parameters, and to more appropriately account for asymmetry
in conditional variance would result in more accurate and responsive
margin requirements and a model that is more stable and proactive
during times of market volatility, with margin charges that are based
off of the most recent market data. In addition, the proposed
modifications to extend the look back period for determining volatility
estimates for equity-based products from 500 days to 10 years will help
to ensure that OCC captures sufficient historical events/market shocks
in the calculation of its anti-procyclical floor. Additionally, the
proposed changes would enhance OCC's margin methodology for calculating
correlation estimates by moving to a daily process for updating
correlations (with a minimum of one week's lag) so that Clearing Member
account margins are more current and thus more accurate and using de-
volatized returns to normalize returns across a variety of asset
classes and make the correlation estimator less sensitive to sudden
market jumps and therefore more stable. Finally, the proposed changes
to OCC's methodology for the treatment of defaulting securities is
designed to result in stable and realistic risk estimates for such
securities The proposed changes are therefore designed to ensure that
OCC sets margin

requirements, using risk-based models and parameters, that would serve
to limit OCC's exposures to potential losses from defaults by its
participants under normal market conditions so that the operations of
OCC would not be disrupted and non-defaulting participants would not be
exposed to losses that they cannot anticipate or control. Accordingly,
OCC believes the proposed changes are consistent with Rules 17Ad-
22(b)(1) and (2).\35\
---------------------------------------------------------------------------

    \35\ Id.
---------------------------------------------------------------------------

    Rule 17Ad-22(e)(6) \36\ further requires OCC to establish,
implement, maintain and enforce written policies and procedures
reasonably designed to cover its credit exposures to its participants
by establishing a risk-based margin system that, among other things:
(i) Considers, and produces margin levels commensurate with, the risks
and particular attributes of each relevant product, portfolio, and
market; (ii) calculates margin sufficient to cover its potential future
exposure to participants in the interval between the last margin
collection and the close out of positions following a participant
default; and (iii) uses reliable sources of timely price data and uses
procedures and sound valuation models for addressing circumstances in
which pricing data are not readily available or reliable.
---------------------------------------------------------------------------

    \36\ 17 CFR 240.17Ad-2(e)(6).
---------------------------------------------------------------------------

    As described in detail above, the proposed changes are designed to
ensure that, among other things, OCC's margin methodology: (i) More
appropriately accounts for asymmetry in conditional variance; (ii) more
appropriately models the statistical distribution of price returns,
(iii) more accurately models second-day volatility forecasts; (iv)
improves OCC's approach to estimating covariance and correlations
between risk factors to provide for stable and sensitive correlation
estimations; and (v) improves OCC's methodology related to the
treatment of defaulting securities by reducing the impact that illiquid
securities with discontinuous data have on default variance estimates.
These methodology enhancements would be used to calculate daily margin
requirements for OCC's Clearing Members. In this way, the proposed
changes are designed to consider, and produce margin levels
commensurate with, the risks and particular attributes of each relevant
product, portfolio, and market and to calculate margin sufficient to
cover its potential future exposure to participants in the interval
between the last margin collection and the close out of positions
following a participant default.
    Moreover, the proposed changes would introduce daily updates for
price data for equity products, including daily corporate action-
adjusted returns of equities, ETFs, ETNs, and certain indexes. This
daily price data would be obtained from a widely used and reliable
industry vendor. In this way, the proposed changes would ensure that
OCC uses reliable sources of timely price data in its margin
methodology, which better reflect current market conditions than the
current monthly updates, thereby resulting in more accurate and
responsive margin requirements.
    For these reasons, OCC believes that the proposed changes are
consistent with Rule 17Ad-22(e)(6).\37\
---------------------------------------------------------------------------

    \37\ Id.
---------------------------------------------------------------------------

    The proposed rule changes are not inconsistent with the existing
rules of OCC, including any other rules proposed to be amended.

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

    Section 17A(b)(3)(I) requires that the rules of a clearing agency
do not impose any burden on competition not necessary or appropriate in
furtherance of the purposes of Act.\38\ OCC does not believe that the
proposed rule change would impose any burden on competition. The
proposed risk model enhancements would apply to all Clearing Members
equally. While OCC expects that margin requirements may see slight
reductions in the aggregate, the individual impact of the proposed
changes will be mixed and depend on market conditions and the
composition of the portfolio in question. The proposed rule change is
primarily designed to allow OCC to determine margin requirements that
more accurately represent the risk presented by its cleared products
and that are more responsive to changes in volatility or overall market
conditions. OCC does not believe that the proposed rule change would
unfairly inhibit access to OCC's services or disadvantage or favor any
particular user in relationship to another user. Accordingly, OCC
believes that any competitive impact would be necessary and appropriate
in furtherance of the safeguarding of securities and funds which are in
the custody or control of OCC or for which it is responsible, and in
general, the protection of investors and the public interest.
---------------------------------------------------------------------------

    \38\ 15 U.S.C. 78q-1(b)(3)(I).
---------------------------------------------------------------------------

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

    Written comments on the proposed rule change were not and are not
intended to be solicited with respect to the proposed rule change and
none have been received. OCC will notify the Commission of any written
comments received by OCC.

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 the proposed rule change, or
    (B) institute proceedings to determine whether the proposed rule
change should be disapproved.

IV. Solicitation of Comments

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

Electronic Comments

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

Paper Comments

     Send paper comments in triplicate to Secretary, Securities
and Exchange Commission, 100 F Street NE., Washington, DC 20549-1090.
All submissions should refer to File Number SR-OCC-2017-022. This file
number should be included on the subject line if email is used. To help
the Commission process and review your comments more efficiently,
please use only one method. The Commission will post all comments on
the Commission's Internet 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
such filing also will be available for inspection and copying at the
principal office of OCC and on OCC's Web site at https://www.theocc.com/about/publications/bylaws.jsp.
    All comments received will be posted without change. Persons
submitting comments are cautioned that we do not redact or edit
personal identifying information from comment submissions. You should
submit only information that you wish to make available publicly. All
submissions should refer to File Number SR-OCC-2017-022 and should be
submitted on or before December 26, 2017.
---------------------------------------------------------------------------

    \39\ 17 CFR 200.30-3(a)(12).

    For the Commission, by the Division of Trading and Markets,
pursuant to delegated Authority.\39\
Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2017-25989 Filed 12-1-17; 8:45 am]
BILLING CODE 8011-01-P


[Federal Register Volume 76, Number 200 (Monday, October 17, 2011)]
[Notices]
[Pages 64171-64172]
[FR Doc No: 2011-26689]

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

DEPARTMENT OF TRANSPORTATION

Federal Motor Carrier Safety Administration

[Docket No. FMCSA-1999-6480; FMCSA-2001-9561; FMCSA-2003-15892; FMCSA-
2006-26066; FMCSA-2007-27897; FMCSA-2007-28695; FMCSA-2009-0154]

Qualification of Drivers; Exemption Applications; Vision

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

ACTION: Notice of renewal of exemptions; request for comments.

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

SUMMARY: FMCSA announces its decision to renew the exemptions from the
vision requirement in the Federal Motor Carrier Safety Regulations for
17 individuals. FMCSA has statutory authority to exempt individuals
from the vision requirement if the exemptions granted will not
compromise safety. The Agency has concluded that granting these
exemption renewals will provide a level of safety that is equivalent to
or greater than the level of safety maintained without the exemptions
for these commercial motor vehicle (CMV) drivers.

DATES: This decision is effective October 30, 2011. Comments must be
received on or before November 16, 2011.

ADDRESSES: You may submit comments bearing the Federal Docket
Management System (FDMS) numbers: FMCSA-1999-6480; FMCSA-2001-9561;
FMCSA-2003-15892; FMCSA-2006-26066; FMCSA-2007-27897; FMCSA-2007-28695;
FMCSA-2009-0154, using any of the following methods:
     Federal eRulemaking Portal: Go to http://www.regulations.gov. Follow the on-line instructions for submitting
comments.
     Mail: Docket Management Facility; U.S. Department of
Transportation, 1200 New Jersey Avenue, SE., West Building Ground
Floor, Room W12-140, Washington, DC 20590-0001.
     Hand Delivery or Courier: West Building Ground Floor, Room
W12-140, 1200 New Jersey Avenue, SE., Washington, DC, between 9 a.m.
and 5 p.m., Monday through Friday, except Federal holidays.
     Fax: 1-202-493-2251.
    Instructions: Each submission must include the Agency name and the
docket number for this notice. Note that DOT posts all comments
received without change to http://www.regulations.gov, including any
personal information included in a comment. Please see the Privacy Act
heading below.
    Docket: For access to the docket to read background documents or
comments, go to http://www.regulations.gov at any time or Room W12-140
on the ground level of the West Building, 1200 New Jersey Avenue, SE.,
Washington, DC, between 9 a.m. and 5 p.m., Monday through Friday,
except Federal holidays. The Federal Docket Management System (FDMS) is
available 24 hours each day, 365 days each year. If you want
acknowledgment that we received your comments, please include a self-
addressed, stamped envelope or postcard or print the acknowledgement
page that appears after submitting comments on-line.
    Privacy Act: Anyone may search the electronic form of all comments
received into any of our dockets by the name of the individual
submitting the comment (or of the person signing the comment, if
submitted on behalf of an association, business, labor union, etc.).
You may review DOT's Privacy Act Statement for the FDMS published in
the Federal Register on January 17, 2008 (73 FR 3316), or you may visit
http://edocket.access.gpo.gov/2008/pdf/E8-785.pdf.

FOR FURTHER INFORMATION CONTACT: Elaine M. Papp, Chief, Medical
Programs,<PHONE_NUMBER><EMAIL_ADDRESS>FMCSA, Department of
Transportation, 1200 New Jersey Avenue, SE., Room W64-224, Washington,
DC 20590-0001. Office hours are from 8:30 a.m. to 5 p.m. Monday through
Friday, except Federal holidays.

SUPPLEMENTARY INFORMATION:

Background

    Under 49 U.S.C. 31136(e) and 31315, FMCSA may renew an exemption
from the vision requirements in 49 CFR 391.41(b)(10), which applies to
drivers of CMVs in interstate commerce, for a two-year period if it
finds ``such exemption would likely achieve a level of safety that is
equivalent to or greater than the level that would be achieved absent
such exemption.'' The procedures for requesting an exemption (including
renewals) are set out in 49 CFR part 381.

Exemption Decision

    This notice addresses 17 individuals who have requested renewal of
their exemptions in accordance with FMCSA procedures. FMCSA has
evaluated these 17 applications for renewal on their merits and decided
to extend each exemption for a renewable two-year period. They are the
following:

Tracy A. Ammons
David N. Cleveland
Randy B. Combs
Robert L. Cross, Jr.
James E. Davis
Thomas E. Dixon
Edward J. Genovese
Dewayne E. Harms
David F. LeClerc
Marvin L. Motes
Stephen Pozharsky
Donald J. Snider
Jesse L. Townsend
Humberto A. Valles
James A. Welch
Edward W Yeates, Jr.
Michael E. Yount

    The exemptions are extended subject to the following conditions:
(1) That each individual has a physical examination every year (a) By
an ophthalmologist or optometrist who attests that the vision in the
better eye continues to meet the standard in 49 CFR 391.41(b)(10), and
(b) by a medical examiner who attests that the individual is otherwise
physically qualified under 49 CFR 391.41; (2) that each individual
provides a copy of the ophthalmologist's or optometrist's report to the
medical examiner at the time of the annual medical examination; and (3)
that each individual provide a copy of the annual medical certification
to the employer for retention in the driver's qualification file and
retains a copy of the certification on his/her person while driving for
presentation to a duly authorized Federal, State, or local enforcement
official. Each exemption will be valid for two years unless rescinded
earlier by FMCSA. The exemption will be rescinded if: (1) The person
fails to comply with the terms and conditions of the exemption; (2) the
exemption has resulted in a lower level of safety than was maintained
before it was granted; or (3) continuation of the exemption would not
be consistent with the goals and objectives of 49 U.S.C. 31136(e) and
31315.

Basis for Renewing Exemptions

    Under 49 U.S.C. 31315(b)(1), an exemption may be granted for no
longer than two years from its approval date and may be renewed upon
application for additional two year periods. In accordance with 49
U.S.C. 31136(e) and 31315, each of the 17 applicants has satisfied the
entry conditions for obtaining an exemption from the vision
requirements (64 FR 68195; 65 FR 20251; 66 FR 30502; 66 FR 41654; 68 FR
54775; 67 FR 17102; 68 FR 52811; 68 FR 61860; 70 FR 61165;71 FR 63379;
72 FR 1050; 72 FR 39879; 72 FR 46261; 72 FR 52419; 72 FR 53581; 72 FR
54972; 72 FR 58359 74 FR 37295; 74 FR 48343; 74 FR 53581). Each of
these 17 applicants has requested renewal of the exemption and has
submitted evidence showing that the vision in the better eye continues
to meet the standard specified at 49 CFR 391.41(b)(10) and that the
vision impairment is stable. In addition, a review of each record of
safety while driving with the respective vision deficiencies over the
past two years indicates each applicant continues to meet the vision
exemption standards. These factors provide an adequate basis for
predicting each driver's ability to continue to drive safely in
interstate commerce. Therefore, FMCSA concludes that extending the
exemption for each renewal applicant for a period of two years is
likely to achieve a level of safety equal to that existing without the
exemption.

Request for Comments

    FMCSA will review comments received at any time concerning a
particular driver's safety record and determine if the continuation of
the exemption is consistent with the requirements at 49 U.S.C. 31136(e)
and 31315. However, FMCSA requests that interested parties with
specific data concerning the safety records of these drivers submit
comments by November 16, 2011.
    FMCSA believes that the requirements for a renewal of an exemption
under 49 U.S.C. 31136(e) and 31315 can be satisfied by initially
granting the renewal and then requesting and evaluating, if needed,
subsequent comments submitted by interested parties. As indicated
above, the Agency previously published notices of final disposition
announcing its decision to exempt these 17 individuals from the vision
requirement in 49 CFR 391.41(b)(10). The final decision to grant an
exemption to each of these individuals was made on the merits of each
case and made only after careful consideration of the comments received
to its notices of applications. The notices of applications stated in
detail the qualifications, experience, and medical condition of each
applicant for an exemption from the vision requirements. That
information is available by consulting the above cited Federal Register
publications.
    Interested parties or organizations possessing information that
would otherwise show that any, or all, of these drivers are not
currently achieving the statutory level of safety should immediately
notify FMCSA. The Agency will evaluate any adverse evidence submitted
and, if safety is being compromised or if continuation of the exemption
would not be consistent with the goals and objectives of 49 U.S.C.
31136(e) and 31315, FMCSA will take immediate steps to revoke the
exemption of a driver.

    Issued on: October 6, 2011.
 Larry W. Minor,
 Associate Administrator for Policy.
[FR Doc. 2011-26689 Filed 10-14-11; 8:45 am]
BILLING CODE 4910-EX-P


[Federal Register Volume 87, Number 164 (Thursday, August 25, 2022)]
[Rules and Regulations]
[Pages 52333-52335]
[FR Doc No: 2022-18288]

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

DEPARTMENT OF TRANSPORTATION

Federal Aviation Administration

14 CFR Part 71

[Docket No. FAA-2022-0668; Airspace Docket No. 22-ASO-13]
RIN 2120-AA66

Amendment of Class D Airspace, and Revocation of Class E
Airspace; Fort Pierce, FL

AGENCY: Federal Aviation Administration (FAA), DOT.

ACTION: Final rule.

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

SUMMARY: This action amends Class D airspace and removes Class E
airspace area designated as an extension to Class D airspace in Fort
Pierce, FL, as the Fort Pierce non-directional beacon (NDB) has been
decommissioned and associated approaches into Treasure Coast
International Airport canceled. This action also updates the airport's
name and geographic coordinates. This action enhances the safety and
management of controlled airspace within the national airspace system.

DATES: Effective 0901 UTC, November 3, 2022. The Director of the
Federal Register approves this incorporation by reference action under
1 CFR part 51, subject to the annual revision of FAA Order JO 7400.11
and publication of conforming amendments.

ADDRESSES: FAA Order JO 7400.11F, Airspace Designations and Reporting
Points, and subsequent amendments can be viewed online at www.faa.gov/air_traffic/publications/. For further information, you can contact the
Airspace Policy Group, Federal Aviation Administration, 800
Independence Avenue SW, Washington, DC 20591; Telephone: (202) 267-
8783.

FOR FURTHER INFORMATION CONTACT: John Fornito, Operations Support
Group, Eastern Service Center, Federal Aviation Administration, 1701
Columbia Avenue, College Park, GA 30337; Telephone:<PHONE_NUMBER>.

SUPPLEMENTARY INFORMATION:

Authority for This Rulemaking

    The FAA's authority to issue rules regarding aviation safety is
found in Title 49 of the United States Code. Subtitle I, Section 106,
describes the authority of the FAA Administrator. Subtitle VII,
Aviation Programs, describes in more detail the scope of the agency's
authority. This rulemaking is promulgated under the authority described
in Subtitle VII, Part A, Subpart I, Section 40103. Under that section,
the FAA is charged with prescribing regulations to assign the use of
airspace necessary to ensure the safety of aircraft and the efficient
use of airspace. This regulation is within the scope of that authority
as it amends airspace in Fort Pierce, FL, to support IFR operations in
the area.

History

    The FAA published a notice of proposed rulemaking in the Federal
Register (87 FR 33082, June 1, 2022) for Docket No. FAA-2022-0668 to
amend Class D airspace and remove Class E area designated as an
extension to Class D airspace in Fort Pierce, FL, due to the
decommissioning of the Fort Pierce NDB.
    Interested parties were invited to participate in this rulemaking
effort by submitting written comments on the proposal to the FAA. No
comments were received.

Availability and Summary of Documents for Incorporation by Reference

    This document amends FAA Order JO 7400.11F, Airspace Designations
and Reporting Points, dated August 10, 2021, and became effective
September 15, 2021. FAA Order JO 7400.11F is publicly available as
listed in the ADDRESSES section of this document. FAA Order JO 7400.11F
lists Class A, B, C, D, and E airspace areas, air traffic routes, and
reporting points.

The Rule

    The FAA is amending 14 CFR part 71 by amending Class D airspace and
removing Class E airspace designated as an extension to a Class D
surface area for Treasure Coast International Airport (formerly St.
Lucie County International Airport), Fort Pierce, FL, due to the
decommissioning of the Fort Pierce NDB. The Class D airspace is
increased to a 4.6-mile radius (formerly 4.2 miles), and the surface
extensions eliminated, as the NDB approaches have been canceled.
Additionally, this action updates the airport's name, and the airport's
geographic coordinates to coincide with the FAA's database, as well as
removing the city from the airport descriptor, as per the 7400.2. Also,
this action replaces the term Airport/Facility Directory with the term
Chart Supplement in the Class D description.
    Class D and Class E airspace designations are published in
Paragraphs 5000, and 6004, respectively, of FAA Order JO 7400.11F,
dated August 10, 2021, and effective September 15, 2021, which is
incorporated by reference in 14 CFR 71.1. The Class D and E airspace
designations listed in this document will be published subsequently in
FAA Order JO 7400.11F.
    FAA Order JO 7400.11, Airspace Designations and Reporting Points,
is published yearly and effective on September 15.

Regulatory Notices and Analyses

    The FAA has determined that this regulation only involves an
established body of technical regulations for which frequent and
routine amendments are necessary to keep them operationally current.
It, therefore: (1) is not a ``significant regulatory action'' under
Executive Order 12866; (2) is not a ``significant rule'' under DOT
Regulatory Policies and Procedures (44 FR 11034; February 26, 1979);
and (3) does not warrant preparation of a regulatory evaluation as the
anticipated impact is minimal. Since this is a routine matter that only
affects air traffic procedures and air navigation, it is certified that
this rule, when promulgated, does not have a significant economic
impact on a substantial number of small entities under the criteria of
the Regulatory Flexibility Act.

Environmental Review

    The FAA has determined that this action qualifies for categorical
exclusion under the National Environmental Policy Act in accordance
with FAA Order 1050.1F, ``Environmental Impacts: Policies and
Procedures,'' paragraph 5-6.5a. This airspace action is not expected to
cause any potentially significant environmental impacts, and no
extraordinary circumstances exist that warrant preparation of an
environmental assessment.

Lists of Subjects in 14 CFR Part 71

    Airspace, Incorporation by reference, Navigation (air).

Adoption of the Amendment

    In consideration of the foregoing, the Federal Aviation
Administration amends 14 CFR part 71 as follows:

PART 71--DESIGNATION OF CLASS A, B, C, D, AND E AIRSPACE AREAS; AIR
TRAFFIC SERVICE ROUTES; AND REPORTING POINTS

0
1. The authority citation for part 71 continues to read as follows:

    Authority:  49 U.S.C. 106(f), 106(g); 40103, 40113, 40120; E.O.
10854, 24 FR 9565, 3 CFR, 1959-1963 Comp., p. 389

Sec.  71.1   [Amended]

0
2. The incorporation by reference in 14 CFR 71.1 of FAA Order 7400.11F,
Airspace Designations and Reporting Points, dated August 10, 2021, and
effective September 15, 2021, is amended as follows:

Paragraph 5000 Class D Airspace.

* * * * *

ASO FL D Fort Pierce, FL [Amended]

Treasure Coast International Airport, FL
    (Lat. 27[deg]29'51'' N, long. 80[deg]22'22'' W)

    That airspace extending upward from the surface to and including
2,500 feet MSL within a 4.6 mile radius of Treasure Coast
International Airport. This Class D airspace area is effective
during the specific days and times established in advance by a
Notice to Air Missions. The effective days and times

will thereafter be continuously published in the Chart Supplement.

Paragraph 6004 Class E Airspace Designated as an Extension to Class
D Surface Area.

* * * * *

ASO FL E4 Fort Pierce, FL [Removed]

    Issued in College Park, Georgia, on August 19, 2022.
Andreese C. Davis,
Manager, Airspace & Procedures Team South, Eastern Service Center, Air
Traffic Organization.
[FR Doc. 2022-18288 Filed 8-24-22; 8:45 am]
BILLING CODE 4910-13-P