[Federal Register Volume 78, Number 129 (Friday, July 5, 2013)]
[Notices]
[Pages 40531-40538]
[FR Doc No: 2013-16089]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-69889; File No. SR-BATS-2013-035]

Self-Regulatory Organizations; BATS Exchange, Inc.; Notice of
Filing of a Proposed Rule Change, as Modified by Amendment No. 1
Thereto, To Amend the Competitive Liquidity Provider Program

June 28, 2013.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934
(the ``Act''),\1\ and Rule 19b-4 thereunder,\2\ notice is hereby given
that on June 17, 2013, BATS Exchange, Inc. (``Exchange'' or ``BATS'')
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 Exchange. On June 24, 2013, the
Exchange submitted Amendment No. 1 to the proposed rule change.\3\ The
Commission is publishing this notice to solicit comments on the
proposed rule change, as modified by Amendment No. 1 thereto, from
interested persons.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ In Amendment No. 1, the Exchange made technical corrections
and amended the proposed rule text to clarify that any CLP Security
listed on the Exchange shall be eligible for the CLP Program for the
first six months that it is listed on the Exchange, regardless of
the ETP's CADV (as such terms are defined below).
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I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change

    The Exchange filed a proposal to add an Interpretation and Policy
.03 to Rule 11.8 entitled ``Competitive Liquidity Provider Program for
Exchange Traded Products'' to incentivize competitive and aggressive
quoting by market makers registered with the Exchange (``Market
Makers'') \4\ in Exchange-listed ETPs.\5\ The Exchange is also
proposing to make a corresponding amendment to Interpretation and
Policy .02 to Rule 11.8, entitled ``Competitive Liquidity Provider
Program'' in order to reflect the proposal to remove ETPs listed on the
Exchange from the existing Competitive Liquidity Provider Program.
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    \4\ As defined in BATS Rules, the term ``Market Maker'' means a
Member that acts as a market maker pursuant to Chapter XI of BATS
Rules.
    \5\ As proposed in Interpretation and Policy .03 (b)(4) to Rule
11.8, the term ``ETP'' includes Portfolio Depository Receipts, Index
Fund Shares, Trust Issued Receipts, and Managed Fund Shares, which
are defined in Rule 14.11(b), 14.11(c), 14.11(f), and 14.11(i),
respectively, which the Exchange may propose to expand in the future
as it adds products which may be listed on the Exchange. Any such
expansion would require the Exchange to file a proposal with the
Commission under Rule 19b-4 of the Act.
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    As proposed, the Competitive Liquidity Provider Program for
Exchange Traded Products (the ``Program'') set forth in Interpretation
and Policy .03 to Rule 11.8 will be effective for a one year pilot
period beginning from the date of implementation of the program. During
the pilot, the Exchange will periodically provide information to the
Commission about market quality with respect to the Program.
    The text of the proposed rule change is available at the Exchange's
Web site at http://www.batstrading.com, at the principal office of the
Exchange, and at the Commission's Public Reference Room.

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

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

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

1. Purpose
Background
    On August 30, 2011, the Exchange received approval of rules
applicable to the qualification, listing and delisting of securities of
issuers on the Exchange.\6\ More recently, the Exchange received
approval to operate a program that is designed to incentivize certain
Market Makers registered with the Exchange as Competitive Liquidity
Providers to enhance liquidity on the Exchange in all Exchange-listed
securities (the ``CLP Program'').\7\ The Exchange subsequently adopted
financial incentives for the CLP Program \8\ and thereafter amended
certain components of the CLP Program, including financial incentives
and quoting requirements for Competitive Liquidity Providers in the CLP
Program.\9\
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    \6\ See Securities Exchange Act Release No. 65225 (August 30,
2011), 76 FR 55148 (September 6, 2011) (SR-BATS-2011-018).
    \7\ See Securities Exchange Act Release No. 66307 (February 2,
2012), 77 FR 6608 (February 8, 2012) (SR-BATS-2011-051).
    \8\ See Securities Exchange Act Release No. 66427 (February 21,
2012), 77 FR 11608 (February 27, 2012) (SR-BATS-2012-011).
    \9\ See Securities Exchange Act Release Nos. 67854 (September
13, 2012), 77 FR 58198 (September 19, 2012) (SR-BATS-2012-036) and
69190 (March 20, 2013), 78 FR 18384 (March 26, 2013) (SR-BATS-2013-
005).
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    The purpose of this filing is to propose new Interpretation and
Policy .03 to Rule 11.8, which is based substantially on the CLP
Program, that seeks to incentivize certain market makers registered
with the Exchange as Competitive Liquidity Providers (``CLPs'') to
enhance liquidity on the Exchange in certain ETPs listed on the
Exchange and thereby qualify to receive part of a daily rebate pursuant
to the Program (a ``CLP Rebate''). The Exchange is also proposing to
make several related amendments to existing Interpretation and Policy
.02 to Rule 11.8 in order to remove ETPs from the CLP Program so that
it applies only to corporate issues.
    Proposed Interpretation and Policy .03 to Rule 11.8 will be
effective for a one year pilot period. The pilot period will commence
when the Program is implemented by the Exchange and a CLP Company,\10\
on behalf of a CLP

Security,\11\ and one or more related market makers are accepted into
the Program in respect of a security listed pursuant to the Program.
The pilot program will, unless extended, end one year after
implementation. During the pilot, the Exchange will submit monthly
reports to the Commission about market quality with respect to the
Program. The monthly reports will endeavor to compare, to the extent
practicable, securities before and after they are in the Program,
including those securities that ``graduate'' from the Program, and will
include information regarding the Program which will enable the
Exchange and the Commission to better analyze the effectiveness of the
Program, such as: (1) Rule 605 metrics; \12\ (2) volume metrics; (3)
number of CLPs in target securities; (4) spread size; and (5)
availability of shares at the NBBO. The Exchange will endeavor to
provide similar data to the Commission about comparable ETPs that are
listed on the Exchange that are not in the Program; and any other
Program related data requested by the Commission for the purpose of
evaluating the efficacy of the Program. The Exchange will post the
monthly reports on its Web site. The first report will be submitted
within sixty days after the Program becomes operative.
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    \10\ As defined in proposed Interpretation and Policy .03(b)(2)
to Rule 11.8, the term ``CLP Company'' means the trust or company
housing the ETP or, if the ETP is not a series of a trust or
company, then the ETP itself.
    \11\ As defined in proposed Interpretation and Policy .03(b)(3)
to Rule 11.8, the term ``CLP Security'' means an issue of or series
of ETP securities issued by a CLP Company that meets all of the
requirements to be listed on the Exchange pursuant to Rule 14.11.
    \12\ 17 CFR 242.605.
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Competitive Liquidity Provider Program for Exchange Traded Products
    The Exchange is proposing to adopt a new rule titled ``Competitive
Liquidity Provider Program for Exchange Traded Products'' as
Interpretation and Policy .03 to Rule 11.8. The Program is designed to
promote market quality in CLP Securities \13\ by allowing a CLP Company
to list an eligible CLP Security on the Exchange and, in addition to
paying the standard (non-CLP) listing fee as set forth in the fee
schedule, a Sponsor \14\ may pay a fee (a ``CLP Fee'') in order for the
CLP Company, on behalf of a CLP Security, to participate in the
Program, which will be credited to the BATS General Fund. The Exchange
will then pay the CLP Rebate out of the BATS General Fund in order to
incentivize CLPs in the CLP Security to quote aggressively in the CLP
Security by providing a CLP Rebate to one or more CLPs that make a
quality market in the CLP Security pursuant to the Program.\15\
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    \13\ The Exchange notes that CLP Securities do not encompass
derivatives on such securities.
    \14\ As defined in proposed Interpretation and Policy .03(b)(5)
to Rule 11.8, Sponsor means the registered investment adviser that
provides investment management services to a CLP Company or any of
such adviser's parents or subsidiaries.
    \15\ The enhanced market quality (e.g. liquidity) would, as
discussed below, be identical to the existing CLP Quoting
Requirements in Interpretation and Policy .02(g) to Rule 11.8. These
standards include, for example, posting at least five round lots in
a CLP Security at the NBB or NBO at the time of a SET in order to
have a Winning Bid SET or Winning Offer SET, respectively, as well
as requiring that a CLP is quoting at least a round lot at a price
at or within 1.2% of the CLP's bid (offer) at the time of the SET in
order to have a Winning Bid (Offer) Set. The two CLPs that have the
most Winning Bid SETs and the two Eligible CLPs with the most
Winning Offer SETs in a given CLP Security will split the CLP Credit
on a pro-rata basis. Proposed Interpretation and Policy .03(i) to
Rule 11.8.
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    The Exchange believes that the Program will be beneficial to the
financial markets, to market participants including traders and
investors, and to the economy in general. First, the Program will
encourage narrow spreads and liquid markets in securities that
generally have not been, or may not be, conducive to naturally having
such narrow spreads and liquidity. These securities may include less
actively traded or less well known ETPs that are made up of securities
of less well known or start-up companies as components.\16\ Second, in
rewarding market makers that are willing to help to develop liquid
markets for CLP Securities subject to the Program,\17\ the Program
would benefit traders and investors by encouraging more quote
competition, narrower spreads, and greater liquidity. Third, the
Program will lower transaction costs and enhance liquidity in both ETPs
and their components, making those securities more attractive to a
broader range of investors. In so doing, the Program will help
companies access capital to invest and grow.
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    \16\ These small companies and their securities (whether
components of listed products like ETPs or direct listings) have
been widely recognized as essential to job growth and creation and,
by extension, the health of the economy. Being included in a
successful ETP can provide the stocks of these companies with
enhanced liquidity and exposure, enabling them to attract investors
and access capital markets to fund investment and growth.
    \17\ By imposing quality quoting requirements to enhance the
quality of the market for CLP Securities, the Program will directly
impact one of the ways that market makers manage risk in lower tier
or less liquid securities (e.g. the width of bid and offer pricing).
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Securities Eligible for the Program
    The Exchange is proposing that any CLP Company, on behalf of a CLP
Security, shall be eligible for the Program, as long as: (i) The
Exchange has accepted the Program application of the CLP Company with
respect to the CLP Security and the Exchange has accepted the Program
application of at least one CLP in the CLP Security; (ii) the CLP
Security meets all requirements to be listed on the Exchange as an ETP;
(iii) the CLP Security meets all Exchange requirements for continued
listing at all times the CLP Security participates in the Program; (iv)
while the CLP Security is participating in the Program, on a product-
specific Web site, the CLP Company is indicating that the product is in
the Program and provides a link to the Exchange's Program Web site; and
(v) the security has a consolidated average daily volume (``CADV'') of
less than 1 million shares for at least one of the past three calendar
months, however, any CLP Security listed on the Exchange shall be
eligible for the Program for the first six months that it is listed on
the Exchange, regardless of the ETP's CADV.\18\
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    \18\ Proposed Interpretation and Policy .03(d)(1) and (d)(3) to
Rule 11.8.
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Application
    The Exchange is proposing that any entity that wishes to
participate in the Program must submit an application in the form
prescribed by the Exchange, which includes both CLP Companies on behalf
of a CLP Security and CLPs.\19\
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    \19\ Proposed Interpretation and Policy .03(c)(1) to Rule 11.8.
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CLPs
    To become a CLP, a Member must submit a CLP application form with
all supporting documentation to the Exchange. As is currently the case
for membership applications to join the Exchange and applications to
register as market makers on the Exchange, Exchange personnel in the
Exchange's membership department will process such applications.
Exchange personnel will determine whether an applicant is qualified to
become a CLP based on the qualifications described below. After an
applicant submits a CLP application to the Exchange, with supporting
documentation, the Exchange shall notify the applicant Member of its
decision. If an applicant is approved by the Exchange to receive CLP
status, such applicant must establish connectivity with relevant
Exchange systems before such applicant will be permitted to trade as a
CLP on the Exchange. In the event an applicant is disapproved by the
Exchange, such applicant may seek review under Chapter X of the
Exchange's Rules governing adverse action and/or reapply for CLP status
at least three (3) calendar months following the month in which the

applicant received the disapproval notice from the Exchange. Chapter X
of the Exchange's Rules provides any persons who are or are about to be
aggrieved by an adverse action taken by the Exchange with a process to
apply for an opportunity to be heard and to have the complained of
action reviewed.\20\
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    \20\ Proposed Interpretation and Policy .03(g) to Rule 11.8.
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    To qualify as a CLP, a Member will be required to be a registered
Market Maker in good standing with the Exchange consistent with Rules
11.5 through 11.8. Further, the Exchange will require each Member
seeking to qualify as a CLP to have and maintain: (1) Adequate
technology to support electronic trading through the systems and
facilities of the Exchange; (2) one or more unique identifiers that
identify to the Exchange CLP trading activity in assigned CLP
Securities; \21\ (3) adequate trading infrastructure to support CLP
trading activity, which includes support staff to maintain operational
efficiencies in the Program and adequate administrative staff to manage
the Member's participation in the Program; (4) quoting and volume
performance that demonstrates an ability to meet the CLP quoting
requirement in each assigned CLP Security on a daily and monthly basis;
(5) a disciplinary history that is consistent with just and equitable
business practices; and (6) the business unit of the Member acting as a
CLP must have in place adequate information barriers between the CLP
unit and the Member's customer, research and investment banking
business.\22\ These requirements are identical to those of the existing
CLP Program.\23\
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    \21\ As proposed, a Member may not use such unique identifiers
for trading activity at the Exchange in assigned CLP securities that
is not CLP trading activity, but may use the same unique identifiers
for trading activity in securities not assigned to a CLP. If a
Member does not identify to the Exchange the unique identifier to be
used for CLP trading activity, the Member will not receive credit
for such CLP trading.
    \22\ Proposed Interpretation and Policy .03(f) to Rule 11.8.
    \23\ See Interpretation and Policy .02(c) and (e) to Rule 11.8.
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Withdrawal and Renewal
    The Exchange is proposing that any entity that wishes to withdraw
from the Program must provide written notice to the Exchange, however,
the requirements for CLPs and CLP Companies on behalf of CLP Securities
are different, as further explained below.
CLPs
    A CLP may withdraw from the status of a CLP by providing written
notice to the Exchange. Such withdrawal shall become effective when
those CLP Securities assigned to the withdrawing CLP are reassigned to
another CLP. After the Exchange receives the notice of withdrawal from
the withdrawing CLP, the Exchange will reassign such CLP Securities as
soon as practicable but no later than thirty (30) days after the date
said notice is received by the Exchange. In the event the reassignment
of CLP Securities takes longer than the 30-day period, the withdrawing
CLP will have no obligations under this Interpretation and Policy .03
and will not be held responsible for any matters concerning its
previously assigned CLP Securities upon termination of this 30-day
period.\24\
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    \24\ Proposed Interpretation and Policy .03(h) to Rule 11.8.
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CLP Securities
    A CLP Company may, on behalf of a CLP Security, after being in the
Program for not less than two consecutive quarters, but less than one
year, voluntarily withdraw from the Program on a quarterly basis. The
CLP Company must notify the Exchange in writing, not less than one
month prior to withdrawing from the Program. The Exchange, however,
does retain discretion to allow a CLP Company to withdraw from the
Program earlier than required above. In making such decision, the
Exchange may take into account the volume and price movements in the
CLP Security; the liquidity, size quoted, and quality of the market in
the CLP Security; and any other relevant factors. After a CLP Security
is in the Program for one year or more, the CLP Company may voluntarily
withdraw from the Program on a monthly basis, so long as the CLP
Company notifies the Exchange in writing not less than one month prior
to withdrawing from the Program.\25\
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    \25\ Proposed Interpretation and Policy .03(c)(2) to Rule 11.8.
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    After a CLP Company, on behalf of a CLP Security, is in the Program
for one year, the Program and all obligations and requirements of the
Program will automatically continue on an annual basis unless: (1) The
Exchange terminates the Program by providing not less than one month
prior notice of intent to terminate or the pilot Program is not
extended or made permanent pursuant to a proposed rule change subject
to filing with or approval by the Commission; (2) the CLP Company
withdraws from the Program pursuant to the withdrawal rules described
above; or (3) the CLP Company is terminated from the Program pursuant
to subsection (n) of the proposal.\26\
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    \26\ Interpretation and Policy .03(n) to Rule 11.8 states that
the Program will terminate with respect to a CLP Security under the
following circumstances: (A) A CLP Security sustains a CADV of one
million shares or more for three consecutive months, however, any
CLP Security listed on the Exchange shall be eligible for the
Program for the first six months that it is listed on the Exchange,
regardless of the ETP's CADV; (B) A CLP Company, on behalf of a CLP
Security, withdraws from the Program, is no longer eligible to be in
the Program pursuant to this rule, or its Sponsor ceases to make CLP
Fee payments to the Exchange; (C) A CLP Security is delisted or is
no longer eligible for the Program; or (D) A CLP Security does not,
for two consecutive quarters, have at least one CLP that is eligible
for CLP Rebate. It should be noted, however, that termination of a
CLP Company, CLP Security, or CLP does not preclude the Exchange
from allowing re-entry into the Program where the Exchange deems
such re-entry as proper.
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CLP Company Fees
    A CLP Company seeking to participate in the Program shall incur an
annual basic CLP Fee of $30,000 per CLP Security. The basic CLP Fee
must be paid to the Exchange prospectively on a quarterly basis.\27\
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    \27\ Proposed Interpretation and Policy .03(d)(2)(A) to Rule
11.8.
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    A CLP Company may also incur an annual supplemental CLP Fee per CLP
Security. The basic CLP Fee and supplemental CLP Fee, when combined,
may not exceed $100,000 per year. The supplemental CLP Fee is a fee
selected by a CLP Company on an annual basis, if at all. The
supplemental CLP Fee must be paid to the Exchange prospectively on a
quarterly basis. The amount of the supplemental CLP Fee, if any, will
be determined by the CLP Company initially per CLP Security and will
remain the same for the period of a year. The Exchange will provide
notification on its Web site regarding the amount, if any, of any
supplemental CLP Fee determined by a CLP Company per CLP Security.\28\
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    \28\ Proposed Interpretation and Policy .03(d)(2)(B) to Rule
11.8.
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    The CLP Fee is in addition to the standard (non-CLP) Exchange
listing fee applicable to the CLP Security and does not offset such
standard listing fee.\29\ For a CLP Security housed by a CLP Company
that has a Sponsor or Sponsors, the CLP Fee with respect to the CLP
Security shall be paid by the Sponsor or Sponsors of such CLP Security.
The Exchange will prospectively bill each CLP Company for the quarterly
CLP Fee for each CLP Security.\30\ CLP Fees (both basic and

supplemental) will be credited to the BATS General Fund.
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    \29\ Proposed Interpretation and Policy .03(d)(2)(C) to Rule
11.8. The CLP Fee with respect to an ETP shall be paid by the
Sponsor(s) of such ETP.
    \30\ Proposed Interpretation and Policy .03(d)(2)(D) to Rule
11.8.
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CLP Quoting Requirements
    CLPs are subject to both a daily quoting requirement in order to be
eligible to receive financial incentives and a monthly quoting
requirement in order to remain qualified as a CLP. These quoting
requirements are identical to the quoting requirements of the
Exchange's existing CLP Program.\31\ Any CLP that meets the daily
quoting requirement set forth below will be eligible to receive a
portion of the CLP Rebate for each day's quoting activity. A CLP that
does not meet the CLP monthly quoting requirement is subject to the
non-regulatory penalties described below.
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    \31\ See Interpretation and Policy .02(g) to Rule 11.8.
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    The Exchange will continue to measure the performance of a CLP in
CLP Securities by calculating Size Event Tests (``SETs'') between 9:25
a.m. and 4:05 p.m. on every day on which the Exchange is open for
business. The Exchange will measure each CLP's quoted size, excluding
odd lots, at the NBB and NBO at least once per second to determine
SETs. The CLP with the greatest aggregate size at the NBB at each SET
(a ``Bid SET'') will be considered to have a winning Bid SET (a
``Winning Bid SET''). Separately, the CLP with the greatest aggregate
size at the NBO at each SET (an ``Offer SET'') will be considered to
have a winning Offer SET (a ``Winning Offer SET'').\32\
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    \32\ Proposed Interpretation and Policy .03(i)(1) to Rule 11.8.
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    In order to meet the daily quoting requirement, a CLP must have
Winning Bid SETs or Winning Offer SETs equal to at least 10% of the
total Bid SETs or total Offer SETs, respectively, on any trading day in
order to be eligible for any CLP Rebate (each such CLP, an ``Eligible
CLP'') for a CLP Security, as is also required under the existing CLP
Program.\33\ Eligible CLPs will be ranked according to the number of
Winning Bid SETs and Winning Offer SETs each trading day, and only the
Eligible CLP or Eligible CLPs ranked number one and the Eligible CLP or
Eligible CLPs ranked number two in each of the Winning Bid SETs and
Winning Offer SETs will receive the CLP Rebate.\34\
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    \33\ See Interpretation and Policy .02(g)(1)(A) to Rule 11.8.
    \34\ Proposed Interpretation and Policy .03(i)(1)(A) to Rule
11.8.
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    In order to meet the monthly quoting requirements, a CLP must be
quoting at the NBB or the NBO 10% of the time that the Exchange
calculates SETs.\35\
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    \35\ Proposed Interpretation and Policy .03 (i)(1)(B) to Rule
11.8.
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    As is also required under the Exchange's existing CLP Program, a
CLP must be quoting, at a minimum, five round lots (usually 500
shares), excluding odd lots, of the CLP Security, at the NBB or NBO,
respectively, at the time of a SET in order to have a Winning Bid SET
or a Winning Offer SET. Such quoting requirements will be measured by
utilizing the unique identifiers that the Member has identified for CLP
trading activity.\36\ In addition, during Regular Trading Hours\37\ a
CLP must also be quoting at least a displayed round lot offer,
excluding odd lots, at a price at or within 1.2% of the CLP's bid at
the time of the SET in order to have a Winning Bid SET.\38\ Similarly,
during Regular Trading Hours, a CLP must be quoting at least a
displayed round lot offer, excluding odd lots, at a price at or within
1.2% of the CLP's offer at the time of the SET in order to have a
Winning Offer Set.\39\
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    \36\ Proposed Interpretation and Policy .03(i)(4) to Rule 11.8.
    \37\ As defined in BATS Rule 1.5(w), the term ``Regular Trading
Hours'' means the time between 9:30 a.m. and 4:00 p.m. Eastern Time.
    \38\ Proposed Interpretation and Policy .03(i)(5) to Rule 11.8.
    \39\ Id.
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    For purposes of calculating whether a CLP is in compliance with its
CLP quoting requirements, the CLP must post displayed liquidity in
round lots in its assigned CLP Securities at the NBB or the NBO.\40\ A
CLP may post non-displayed liquidity; however, such liquidity will not
be counted as credit towards the CLP quoting requirements. The CLP
shall not be subject to any minimum or maximum quoting size requirement
in assigned CLP Securities apart from the requirement that an order be
for at least one round lot. The CLP quoting requirements will be
measured by utilizing the unique identifiers that the Member has
identified for CLP trading activity. CLPs may only enter orders
electronically directly into Exchange systems and facilities designated
for this purpose. All CLP orders must only be for the proprietary
account of the CLP Member.
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    \40\ Proposed Interpretation and Policy .03(i)(2) to Rule 11.8.
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CLP Rebate
    As described above, pursuant to the Program, the Exchange will
measure the performance of CLPs in CLP Securities by calculating SETs
between 9:25 a.m. and 4:05 p.m. on every day on which the Exchange is
open for business. Each day, one quarter of the total annual CLP Fees
(basic and supplemental combined) for the CLP Security divided by the
number of trading days in the current quarter will constitute the total
CLP Rebate for the CLP Security. For instance, where the total CLP Fees
for a CLP Security is $64,000 and there are 64 trading days in the
current quarter, the total CLP Rebate for the CLP Security would be
$250 [($64,000/4)/64].\41\
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    \41\ Proposed Interpretation and Policy .03(m)(1) to Rule 11.8.
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    Accordingly, the two Eligible CLPs with the most Winning Bid SETs
will split half of the daily CLP Rebate for the CLP Security on a pro
rata basis and the two Eligible CLPs with the most Winning Offer SETs
will split half of the daily CLP Rebate for the CLP Security on a pro
rata basis.\42\ Specifically, the Exchange is proposing to determine
the portion of the CLP Rebate that a CLP receives based on the number
of each CLP's Winning Bid (Offer) SETs as a percentage of total Winning
Bid (Offer) SETs between the two CLPs with the most Winning Bid (Offer)
SETs. For instance, where CLP1 has 6,000 Winning Bid (Offer) SETs, CLP2
has 4,000 Winning Bid (Offer) SETS, and CLP3 has 3,000 Winning Bid
(Offer) SETs, CLP1 would be allocated 60% of half of the daily CLP
Rebate [6,000/(6000+4000)] and CLP2 would be allocated 40% of the half
of the daily CLP Rebate [4,000/(6,000+4,000)]. Using the example above,
CLP1 would receive $75 [($250/2)x.6)] and CLP2 would receive $50
[($250/2)x.4]. In the event that there is only one Eligible CLP for the
bid (offer) portion of the CLP Rebate for a CLP Security, such Eligible
CLP will receive 100% of the bid (offer) half of the CLP Rebate. In the
event that multiple CLPs have an equal number of winning SETs, the CLP
with the highest executed volume in the CLP Security will be awarded
the applicable portion of the CLP Rebate. Where no CLPs are eligible
for the bid or offer portion of the CLP Rebate, no CLP Rebate will be
awarded to any CLP and no refund will be provided.\43\
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    \42\ Id.
    \43\ Id.
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Assignment of CLP Securities
    The Exchange, in its discretion, will assign to the CLP one or more
CLP Securities for CLP trading purposes. The Exchange shall determine
the number of CLP Securities assigned to each CLP. The Exchange, in its
discretion, will assign one (1) or more CLPs to each CLP Security
subject to the Program,

depending upon the trading activity of the CLP Security.\44\
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    \44\ Proposed Interpretation and Policy .03 (j)(1) to Rule 11.8.
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Non-Regulatory Penalties
    If a CLP fails to meet the CLP quoting requirements, the Exchange
may impose certain non-regulatory penalties. First, if, between 9:25
a.m. and 4:05 p.m. on any day on which the Exchange is open for
business, a CLP fails to meet its daily quoting requirement by failing
to have at least 10% of the winning SETs for that trading day, the CLP
will not be eligible to receive the CLP Rebate for that day's quoting
activity in that particular assigned CLP Security. Second, if a CLP
fails to meet its monthly quoting requirement for three (3) consecutive
months in any assigned CLP Security, the CLP will be at risk of losing
its CLP status. Thus, the Exchange may, in its discretion, take the
following non-regulatory actions: (i) revoke the assignment of the
affected CLP Security(ies) and/or one or more additional unaffected CLP
Securities; or (ii) disqualify a Member's status as a CLP.\45\
---------------------------------------------------------------------------

    \45\ Proposed Interpretation and Policy .03 (l)(1) to Rule 11.8.
---------------------------------------------------------------------------

    The Exchange shall determine if and when a Member is disqualified
from its status as a CLP. One (1) calendar month prior to any such
determination, the Exchange will notify the CLP of such impending
disqualification in writing. If the CLP fails to meet the monthly
quoting requirements as described above for a third consecutive month
in a particular CLP Security, the CLP may be disqualified from CLP
status. When disqualification determinations are made, the Exchange
will provide a disqualification notice to the Member informing such
Member that it has been disqualified as a CLP.\46\ In the event a
Member is disqualified from its status as a CLP, such Member may re-
apply for CLP status. Such application process shall occur at least
three (3) calendar months following the month in which such Member
received its disapproval or disqualification notice. Further, in the
event a Member is determined to be ineligible for the CLP Rebate for
failure to meet its daily quoting obligation or is disqualified from
its status as a CLP, such Member may seek review under Chapter X of the
Exchange's Rules governing adverse action.\47\ As noted above, Chapter
X of the Exchange's Rules provides any persons who are or are about to
be aggrieved by an adverse action taken by the Exchange with a process
to apply for an opportunity to be heard and to have the complained of
action reviewed.
---------------------------------------------------------------------------

    \46\ Proposed Interpretation and Policy .03(l)(2) to Rule 11.8.
    \47\ Proposed Interpretation and Policy .03(l)(3) to Rule 11.8.
---------------------------------------------------------------------------

Web Site Disclosures
    In order to provide transparency into the Program, including CLPs,
CLP Companies, and the CLP Securities that are listed on the Exchange,
the Exchange proposes to provide notification on its Web site regarding
the following: (i) acceptance of a CLP Company, on behalf of a CLP
Security, and a CLP into the Program; (ii) the total number of CLP
Securities that any one CLP Company may have in the Program; (iii) the
names of CLP Securities and the CLP(s) in each CLP Security, the dates
that a CLP Company, on behalf of a CLP Security, commences
participation in and withdraws or is terminated from the Program, and
the name of each CLP Company and its associated CLP Security or
Securities; (iv) a statement about the Program that sets forth a
general description of the Program as implemented on a pilot basis and
a fair and balanced summation of the potentially positive aspects of
the Program as well as the potentially negative aspects and risks of
the Program, and indicates how interested parties can get additional
information about products in the Program; and (v) the intent of a CLP
Company, on behalf of a CLP Security, or CLP to withdraw from the
Program, and the date of actual withdrawal or termination from the
Program.\48\
---------------------------------------------------------------------------

    \48\ Proposed Interpretation and Policy .03(o) to Rule 11.8.
---------------------------------------------------------------------------

    In addition, a CLP Company that, on behalf of a CLP Security, is
approved to participate in the Program shall issue a press release to
the public when the CLP Company, on behalf of a CLP Security, commences
or ceases participation in the Program. The press release shall be in a
form and manner prescribed by the Exchange, and, if practicable, shall
be issued at least two days before commencing or ceasing participation
in the Program. The CLP Company shall dedicate space on its Web site,
or, if it does not have a Web site, on the Web site of the Sponsor of
the CLP Security, that (i) includes any such press releases, and (ii)
provides a hyperlink to the dedicated page on the Exchange's Web site
that describes the Program.
Consistency With Regulation M
    Rule 102 of Regulation M prohibits an issuer from directly or
indirectly attempting ``to induce any person to bid for or purchase, a
covered security during the applicable restricted period'' unless an
exemption is available.\49\ For the reasons discussed below, the
Exchange believes that exemptive relief from Rule 102 should be granted
for the Program.
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    \49\ Rule 102 provides that ``[i]n connection with a
distribution of securities effected by or on behalf of an issuer or
selling security holder, it shall be unlawful for such person, or
any affiliated purchaser of such person, directly or indirectly, to
bid for, purchase, or attempt to induce any person to bid for or
purchase, a covered security during the applicable restricted
period'' unless an exception is available. See 17 CFR 242.102.
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    First, the Exchange notes that the Commission and its staff have
previously granted relief from Rule 102 to a number of exchange traded
products (``Existing Relief'') in order to permit the ordinary
operation of such exchange traded products.\50\ In granting the
Existing Relief, the Commission has relied in part on the exclusion
from the provisions of Rule 102 provided by paragraph (d)(4) of Rule
102 for securities issued by an open-end management investment company
or unit investment trust. In granting the Existing Relief from Rule 102
to other types of exchange traded products, for which the (d)(4)
exception is not available, the staff has relied on (i) representations
that the fund in question would continuously redeem exchange traded
product shares in basket-size aggregations at their NAV and that there
should be little disparity between the market price of an exchange
traded product share and the NAV per share and (ii) a finding that
``[t]he creation, redemption, and secondary market transactions in
[shares] do not appear to result in the abuses that Rules 101 and 102
of Regulation M were designed to prevent.'' \51\ The crux of the
Commission's findings in granting the Existing Relief rests on the
premise that the prices of exchange traded product shares closely track
their per-share NAVs. Given that the Program neither alters the
derivative pricing nature of ETPs nor impacts the arbitrage
opportunities inherent therein, the conclusion on which the Existing
Relief is based remains unaffected by the Incentive Program. In this
regard, most ETPs that would be eligible to participate in the Program
would have previously been granted relief from Rule 102.
---------------------------------------------------------------------------

    \50\ See, e.g., Letter from James A. Brigagliano, Acting
Associate Director, Division of Market Regulation, to Stuart M.
Strauss, Esq., Clifford Chance US LLP (October 24, 2006) (regarding
class relief for exchange traded index funds).
    \51\ See Rydex Specialized Products LLC, SEC No-Action Letter
(June 21, 2006).
---------------------------------------------------------------------------

    Second, the Program requires, among other things, that a CLP make
two-sided quotes during Regular Trading Hours in

order to have a winning set. The Program is not intended to raise ETP
prices, but rather to improve market quality. In light of the
derivative nature of ETPs, the Exchange does not expect that CLPs will
quote outside of the normal quoting ranges for these products as a
result of the CLP Rebate, but rather would quote within their normal
ranges as determined by market factors. Indeed, the Program would not
create any incentive for a CLP to quote outside such ranges.
    Finally, the staff of the Exchange, which is a self-regulatory
organization, would be interposed between the issuer and the CLP,
administering a rules-based program with numerous structural safeguards
described in the previous sections. Specifically, both CLPs and CLP
Companies would be required to apply to participate in the Program and
to meet certain standards. CLP Companies could not cause any fee to be
paid to a CLP under the Program. The Exchange would collect the CLP
Fees and credit them to the Exchange's General Fund. A CLP would be
eligible to receive a CLP Rebate, again, from the Exchange's General
Fund, only after it qualified for the CLP Rebate, as described above.
Such qualification standards are set and monitored by the Exchange.
Application to, continuation in, and withdrawal from the Program would
be governed by published Exchange rules and policies, and there would
be extensive public notice regarding the Program and payments
thereunder on both the Exchange's and the CLP Company's Web sites.
Given these structural safeguards, the Exchange believes that payments
under the Program are appropriate for exemptive relief from Rule 102.
    In summary, the Exchange believes that exemptive relief from Rule
102 should be granted for the Program because, for example: (1) The
Program would not create any incentive for a CLP to quote outside of
the normal quoting ranges for the ETPs included therein; (2) the
Program has numerous structural safeguards, such as the application
process for CLP Companies and CLPs, the interpositioning of the
Exchange between CLP Companies and CLPs, and significant public
disclosure surrounding the Program; and (3) the Program does not alter
the basis on which Existing Relief is based and, furthermore, most ETPs
that would be eligible to participate in the Program would have
previously been granted relief from Rule 102.\52\
---------------------------------------------------------------------------

    \52\ The Exchange notes that the Commission granted a limited
exemption from Rule 102 of Regulation M to The NASDAQ Stock Market
LLC (``Nasdaq'') for a program similar to the Exchange's proposed
Program. See Securities Exchange Act Release No. 69196 (March 20,
2013), 78 FR 18410 (March 26, 2013) (Order Granting a Limited
Exemption From Rule 102 of Regulation M Concerning the NASDAQ Market
Quality Program Pilot Pursuant to Regulation M Rule 102(A)) (the
``Nasdaq Exemption''). The Nasdaq Exemption includes certain
conditions related to, among other things, notices to the public and
disclosures with respect to Nasdaq's program. The Exchange notes
that if the Commission were to provide exemptive relief from Rule
102 of Regulation M for the Program, it may include similar
conditions.
---------------------------------------------------------------------------

Surveillance
    The Exchange believes that its surveillance procedures are adequate
to properly monitor the trading of all securities trading on the
Exchange, including ETPs participating in the Program, during all
trading sessions, and to detect and deter violations of Exchange rules
and applicable federal securities laws. The Exchange may obtain
information via the Intermarket Surveillance Group (``ISG'') from other
exchanges who are members or affiliates of the ISG or with which the
Exchange has entered into a comprehensive surveillance sharing
agreement,\53\ and from listed CLP Companies and public and non-public
data sources such as, for example, Bloomberg.
---------------------------------------------------------------------------

    \53\ For a list of the current members and affiliate member of
ISG, see www.isgportal.com.
---------------------------------------------------------------------------

Changes to Interpretation and Policy .02 to Rule 11.8
    The Exchange is also proposing to make certain changes to
Interpretation and Policy .02 to Rule 11.8 that correspond with the
addition of Interpretation and Policy .03. These changes are designed
to remove any part of the CLP Program described in Interpretation and
Policy .02 that relates directly to ETPs and to make clear that ETPs
are not covered by Interpretation and Policy .02 to Rule 11.8.
Specifically, the Exchange is proposing to: (i) Change the title from
``Competitive Liquidity Provider Program'' to ``Competitive Liquidity
Provider Program for Corporate Issues''; (ii) delete section (d)(2) in
order to make clear that ETPs are not eligible for the CLP Program;
(iii) delete the last two sentences of section (h)(2) that relate
specifically to the assignment of CLPs to ETPs participating in the CLP
Program; and (iv) delete text in section (k)(1) related to financial
incentives for ETPs.
2. Statutory Basis
    The Exchange believes that its proposal is consistent with the
requirements of the Act and the rules and regulations thereunder that
are applicable to a national securities exchange, and, in particular,
with the requirements of Section 6(b) of the Act.\54\ In particular,
the proposal is consistent with Section 6(b)(4) and 6(b)(5) of the
Act,\55\ because it would provide for the equitable allocation of
reasonable dues, fees, and other charges among Members and issuers and
other persons using any facility or system which the Exchange operates
or controls, and it is designed to promote just and equitable
principles of trade, remove impediments to, and perfect the mechanism
of, a free and open market and a national market system, and in
general, to protect investors and the public interest.
---------------------------------------------------------------------------

    \54\ 15 U.S.C. 78f(b).
    \55\ 15 U.S.C. 78f(b)(4) and (5).
---------------------------------------------------------------------------

    The goal of the Program is to incentivize Members to make high-
quality, liquid markets, which supports the primary goal of the Act to
promote the development of a resilient and efficient national market
system. The Program will enhance quote competition, improve liquidity
on the Exchange, support the quality of price discovery, promote market
transparency, and increase competition for listings and trade
executions, while reducing spreads and transaction costs. Maintaining
and increasing liquidity in Exchange-listed securities will help raise
investors' confidence in the fairness of the market and their
transactions.
    Each aspect of the Program adheres to and supports the Act. First,
the Program promotes the equitable allocation of fees and dues among
issuers. The Program is completely voluntary in that it will provide an
additional means by which issuers may relate to the Exchange, while not
eliminating the ability to list ETPs without participation in the
Program. Issuers can supplement the standard listing fees with those of
the Program, which the Exchange believes to be consistent with the Act.
While the Program will result in higher fees for issuers that choose to
participate, the issuers receive significant benefits for
participating, including greater liquidity, tighter spreads, and lower
transaction costs for their investors. Additionally, issuers will have
the ability to withdraw from the Program after an initial commitment if
they determine that participation is not beneficial. In that case, the
withdrawing issuers will automatically revert to the basic listing fee
for ETPs.
    The Program also represents an equitable allocation of fees and
dues among Market Makers. Again, the Program is completely voluntary
with respect to Market Maker participation in that it will provide an
additional means

by which members may qualify for a CLP Rebate in a manner nearly
identical to the existing CLP Program, without eliminating any of the
existing means of qualifying for incentives on the Exchange. Currently,
the Exchange employs multiple fee arrangements, including the CLP
Program, to incentivize Market Makers to maintain high quality markets
or to improve the quality of executions. Market Makers that choose to
undertake increased burdens under the Program will be rewarded with
increased rebates, while those that do not undertake such burdens will
receive no added benefit. Where a CLP determines that the burdens
imposed by the Program outweigh the benefits provided, the CLP may
provide the Exchange with notice of withdrawal and will be withdrawn
from the program in no longer than thirty days.
    Additionally, the Program establishes an equitable allocation of
CLP Rebates among Market Makers that choose to participate and fulfill
the obligations imposed by the rule. If one Market Maker fulfills the
bid (offer) obligations, bid (offer) portion of the CLP Rebate will be
distributed to that CLP; if multiple CLPs satisfy the standard, the CLP
Rebate will be distributed pro rata to the two CLPs with the most
Winning Bid (Offer) SETs, as described above. In other words, all of
the benefit of the CLP Rebate will flow to the highest-performing
Market Makers, provided that at least one Market Maker fulfills the
obligations under the proposed rule.
    The Program is designed to avoid unfair discrimination among Market
Makers and issuers. The proposed rule contains objective, measurable
standards that the Exchange will apply with care. These standards will
be applied equally to ensure that similarly situated parties are
treated similarly. This is equally true for inclusion of issuers and
Market Makers, withdrawal of issuers and Market Makers, and termination
of eligibility for the Program. The standards are carefully constructed
to protect the rights of all parties wishing to participate in the
Program by providing notice of requirements and a description of the
process. The Exchange will apply these standards with the same care and
experience with which it applies the many similar rules and standards
in the Exchange's rules.
    In contrast to the extensive benefits of the Program, the
participation of a CLP Company in the Program is substantially limited,
by design. In this regard, a CLP Company is limited to making only the
following determinations regarding the Program: Whether to participate
in the Program; what CLP Security should be in the Program; what firms
will participate in developing and funding the CLP Security; when the
CLP Security should exit the Program; and the level of Supplemental
Fees, if any, that should be applied. The CLP can never influence how,
when, or the specific amount that a CLP receives as credit for making a
market in a CLP Security. These functions are performed solely by the
Exchange according to standards set forth in the Program.
    The Exchange notes that it operates in a highly competitive market
in which market participants can readily favor competing venues if they
deem fee levels at a particular venue to be excessive, or rebate
opportunities available at other venues to be more favorable.
Accordingly, the listing fees and rebates are constrained by the active
competition for listings in ETPs and for market making. If a particular
exchange charges excessive fees for listing, ETPs will choose to list
elsewhere. Similarly, if an exchange fails to incent market makers to
provide sufficient liquidity, participants will likely shift their
order flow to other venues. Accordingly, the exchange charging
excessive listing fees or providing insufficient rebates for market
maker would likely not accomplish the goals of the Program. As such,
the Exchange believes that this competitive dynamic imposes powerful
restraints on the ability of any exchange to charge unreasonable fees
for listing or provide insufficient rebates for market making activity.
    The Exchange also notes that the Program, as proposed, is
substantially similar to the existing functionality provided under the
CLP Program. The Exchange believes that the CLP Program has been very
beneficial to market participants, including investors, issuers, and
Market Makers, by providing increased market quality in the form of
tighter spreads and deeper liquidity. The Exchange believes that the
proposed Program will enjoy similarly positive results to the benefit
of issuers, investors in CLP Securities, and the financial markets as a
whole.

(B) Self-Regulatory Organization's Statement on Burden on Competition

    Exchange does not believe that the proposed rule change will result
in any burden on competition that is not necessary or appropriate in
furtherance of the purposes of the Act, as amended. To the contrary,
the Exchange believes that the proposal will increase competition in
both the listings market and in competition for market makers. The
Program will promote competition in the listings market by providing
issuers with a vehicle for paying the Exchange additional fees in
exchange for incentivizing tighter spreads and deeper liquidity in
listed securities. While the Program closely resembles the existing CLP
Program, the proposed modifications are a response to the competition
from other markets that either have or are developing similar programs,
including Nasdaq \56\ and NYSE Arca Equities, Inc.\57\
---------------------------------------------------------------------------

    \56\ See Securities Exchange Act Release No. 69195 (March 20,
2013), 78 FR 18393 (March 26, 2013) (SR-NASDAQ-2012-137).
    \57\ See Securities Exchange Act Release No. 69335 (April 5,
2013), SR-NYSEARCA-2013-34 (March 21, 2013).
---------------------------------------------------------------------------

    The Exchange also believes that the proposed changes will enhance
competition among participants by creating incentives for market makers
to compete to make better quality markets. By requiring both that
market makers meet the quoting requirements and also to compete for the
CLP Rebate, the quality of quotes on the Exchange will improve. This,
in turn, will attract more liquidity to the Exchange and further
improve the quality of trading in CLP Securities, which will also act
to bolster the Exchange's listing business. As mentioned above, this
proposal is in response to similar programs at or in development at
other markets.

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

    The Exchange has neither solicited nor received written comments on
the proposed rule change.

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

    Within 45 days of the date of publication of this notice in the
Federal Register or within such longer period (i) as the Commission may
designate up to 90 days of such date if it finds such longer period to
be appropriate and publishes its reasons for so finding or (ii) as to
which the self-regulatory organization consents, the Commission will:
    (A) By order approve or disapprove the proposed rule change, or
    (B) institute proceedings to determine whether the proposed rule
change should be disapproved.

IV. Solicitation of Comments

    Interested persons are invited to submit written data, views and
arguments concerning the foregoing, including whether the proposal, as
modified by Amendment No. 1 thereto, is consistent with the Act.
Comments

may be submitted by any of the following methods:

Electronic Comments

     Use the Commission's Internet comment form (http://www.sec.gov/rules/sro.shtml); or
     Send an email to<EMAIL_ADDRESS>Please include
File No. SR-BATS-2013-035 on the subject line.

Paper Comments

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

All submissions should refer to File No. SR-BATS-2013-035. 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 will also be available
for inspection and copying at the principal office of the Exchange. All
comments received will be posted without change; the Commission does
not edit personal identifying information from submissions. You should
submit only information that you wish to make available publicly. All
submissions should refer to File No. SR-BATS-2013-035 and should be
submitted on or before July 26, 2013.
---------------------------------------------------------------------------

    \58\ 17 CFR 200.30-3(a)(12).

    For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\58\
Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2013-16089 Filed 7-3-13; 8:45 am]
BILLING CODE 8011-01-P


[Federal Register: May 5, 2010 (Volume 75, Number 86)]
[Notices]
[Page 24728-24730]
[DOCID:fr05my10-113]

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DEPARTMENT OF HOMELAND SECURITY

Federal Emergency Management Agency

[Docket ID: FEMA-2010-0016]

Agency Information Collection Activities: Proposed Collection;
Comment Request, 1660-0005; National Flood Insurance Program--Claim
Forms

AGENCY: Federal Emergency Management Agency, DHS.

ACTION: Notice; 60-day notice and request for comments; revision of a
currently approved information collection; OMB No. 1660-0005; FEMA Form
086-0-6 (formerly 81-40) National Flood Insurance Program Worksheet-
Contents-Personal Property; 086-0-7 (formerly 81-41) Worksheet--
Building; 086-0-8 (formerly 81-41A) Worksheet--Building (Continued);
086-0-9 (formerly 81-42) Proof of Loss; 086-0-10 (formerly 81-42A)
Increased Cost of Compliance Proof of Loss; 086-0-11 (formerly 81-43)
Notice of Loss; 086-0-12 (formerly 81-44) Statement as to Full Cost of
Repair or Replacement under the Replacement Cost Coverage, Subject to
the Terms and Conditions of this Policy; 086-0-13 (formerly 81-57)
National Flood Insurance Program Preliminary Report; 086-0-14 (formerly
81-58) National Flood Insurance Program Final Report; 086-0-15
(formerly 81-59) National Flood Insurance Program Narrative Report;
086-0-16 (formerly 81-63) Cause of Loss and Subrogation Report; 086-0-
17 (formerly 81-96) Manufactured (Mobile) Home/Travel Trailer
Worksheet; 086-0-18 (formerly 81-96A) Manufactured (Mobile) Home/Travel
Trailer Worksheet (Continued); 086-0-19 (formerly 81-98) Increased Cost
of Compliance (ICC) Adjuster Report; 086-0-20 (formerly 81-109)
Adjuster Preliminary Damage Assessment; 086-0-21(formerly 81-110)
Adjuster Certification Application.

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SUMMARY: The Federal Emergency Management Agency, as part of its
continuing effort to reduce paperwork and respondent burden, invites
the general public and other Federal agencies to take this opportunity
to comment on a proposed revision of a currently approved information
collection. In accordance with the Paperwork Reduction Act of 1995,
this Notice seeks comments concerning the collection of information
related to the flood insurance claims process.

DATES: Comments must be submitted on or before July 6, 2010.

ADDRESSES: To avoid duplicate submissions to the docket, please use
only one of the following means to submit comments:
    (1) Online. Submit comments at http://www.regulations.gov under
Docket ID FEMA-2010-0016. Follow the instructions for submitting
comments.
    (2) Mail. Submit written comments to Office of Chief Counsel,
Regulation and Policy Team, DHS/FEMA, 500 C Street, SW., Room 835,
Washington, DC 20472-3100.
    (3) Facsimile. Submit comments to<PHONE_NUMBER>.
    (4) E-mail. Submit comments to<EMAIL_ADDRESS>Include Docket
ID FEMA-2010-0016 in the subject line.
    All submissions received must include the agency name and Docket
ID. Regardless of the method used for submitting comments or material,
all submissions will be posted, without change, to the Federal
eRulemaking Portal at http://www.regulations.gov, and will include any
personal information you provide. Therefore, submitting this
information makes it public. You may wish to read the Privacy Act
notice that is available on the Privacy and Use Notice link on the
Administration Navigation Bar of http://www.regulations.gov.

FOR FURTHER INFORMATION CONTACT: Contact Donald Waters, Insurance
Examiner, FEMA<PHONE_NUMBER> for additional information. You may contact
the Records Management Division for copies of the proposed collection
of information at facsimile number<PHONE_NUMBER> or e-mail address:
<EMAIL_ADDRESS>
SUPPLEMENTARY INFORMATION: The National Flood Insurance Program (NFIP)
is codified at 42 U.S.C. 4001, et seq. and is authorized by Public Law
90-448 (1968) and expanded by Public Law 93-234 (1973). The National
Flood Insurance Act of 1968 requires that the Federal Emergency
Management Agency (FEMA) provide flood insurance at full actuarial
rates reflecting the complete flood risk to structures built or
substantially improved on or after the effective date for the initial
Flood Insurance Rate Map (FIRM) for the community, or after December
31, 1974, whichever is later, so that the risk associated with
buildings in flood-prone areas are borne by those located in such areas
and not by the taxpayers at large. In accordance with Public Law 93-
234, the purchase of flood insurance is mandatory when Federal or
federally related financial assistance is being provided for
acquisition or construction of buildings located, or to be located,
within FEMA-identified special flood hazard areas of communities that
are participating in the NFIP. When flood damage occurs to insured
property, information is collected to report, investigate, negotiate,
and settle the claim.

Collection of Information

    Title: National Flood Insurance Program--Claim Forms.
    Type of Information Collection: Revision of a currently approved
information collection.
    OMB Number: 1660-0005.
    Form Titles and Numbers: FEMA Form 086-0-6 (formerly 81-40)
National Flood Insurance Program Worksheet-Contents-Personal Property;
086-0-7 (formerly 81-41) Worksheet--Building; 086-0-8 (formerly 81-41A)
Worksheet--Building (Continued); 086-0-9 (formerly 81-42) Proof of
Loss; 086-0-10 (formerly 81-42A) Increased Cost of Compliance Proof of
Loss; 086-0-11 (formerly 81-43) Notice of Loss; 086-0-12 (formerly 81-
44) Statement as to Full Cost of Repair or Replacement under the
Replacement Cost Coverage, Subject to the Terms and Conditions of this
Policy; 086-0-13 (formerly 81-57) National Flood Insurance Program
Preliminary Report; 086-0-14 (formerly 81-58) National Flood Insurance
Program Final Report; 086-0-15 (formerly 81-59) National Flood
Insurance Program Narrative Report; 086-0-16 (formerly 81-63) Cause of
Loss and Subrogation Report; 086-0-17 (formerly 81-96) Manufactured
(Mobile) Home/Travel Trailer Worksheet; 086-0-18 (formerly 81-96A)
Manufactured (Mobile) Home/Travel Trailer Worksheet (Continued); 086-0-
19 (formerly 81-98) Increased Cost of Compliance (ICC) Adjuster Report;
086-0-20 (formerly 81-109) Adjuster Preliminary Damage Assessment; 086-
0-21(formerly 81-110) Adjuster Certification Application.
    Abstract: The claims forms used for the National Flood Insurance
Program are used by policyholders and adjusters to collect the
information needed to investigate, document, evaluate, and settle
claims against National Flood Insurance Program policies for flood
damage to their insured property or qualification for benefits under
Increased Cost of Compliance coverage.
    Affected Public: Individuals or households; Business or other for-
profit; Not for-profit institutions; farms; Federal Government; State,
local or Tribal government.
    Estimated Total Annual Burden Hours: 20,841.6 Hours.

                                                                           Estimated Annualized Burden Hours and Costs
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                Number of                      Avg. burden    Total annual                    Total annual
              Type of respondent                       Form name/form No.            Number of     responses per   Total Number    per response     burden (in      Avg. hourly     respondent
                                                                                respondents     respondent     of responses     (in hours)        hours)         wage rate         cost
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Business or other for-profit..................  National Flood Insurance Program           2,184               1           2,184            2.5          5,460.0          $38.74        $211,520
                                                 Worksheet-Contents-Personal
                                                 Property/FEMA Form 86-0-06.
Business or other for-profit..................  Worksheet--Building/FEMA Form              3,640               1           3,640            2.5          9,100.0           38.74         352,534
                                                 086-0-07.
Business or other for-profit..................  Worksheet--Building (Continued)/           3,640               1           3,640            1            3,640.0           38.74         141,014
                                                 FEMA Form 086-0-08.
Business or other for-profit..................  Proof of Loss/FEMA Form 086-0-09           3,640               1           3,640            0.08           291.2           38.74          11,281
Business or other for-profit..................  Increased Cost of Compliance                 260               1             260            2              520.0           38.74          20,145
                                                 Proof of Loss/FEMA Form 086-0-
                                                 10.
Business or other for-profit..................  Notice of Loss/FEMA Form 086-0-            3,640               1           3,640            0.07           254.8           40.68          10,365
                                                 11.
Business or other for-profit..................   Statement as to Full Cost of              1,040               1           1,040            0.1            104.0           38.74           4,029
                                                 Repair or Replacement under the
                                                 Replacement Cost Coverage,
                                                 Subject to the Terms and
                                                 Conditions of this Policy/FEMA
                                                 Form 086-0-12.
Business or other for-profit..................   National Flood Insurance                  3,640               1           3,640            0.07           254.8           38.74           9,871
                                                 Program Preliminary Report/FEMA
                                                 Form 086-0-13.
Business or other for-profit..................  National Flood Insurance Program           3,640               1           3,640            0.07           254.8           38.74           9,871
                                                 Final Report/FEMA Form 086-0-14.
Business or other for-profit..................  National Flood Insurance Program           2,080               1           2,080            0.08           166.4           38.74           6,446
                                                 Narrative Report/FEMA Form 086-
                                                 0-15.
Business or other for-profit..................  Cause of Loss and Subrogation                364               1             364            1              364.0           38.74          14,101
                                                 Report/FEMA Form 086-0-16.
Business or other for-profit..................  Manufactured (Mobile) Home/                  208               1             208            0.05            10.4           38.74             403
                                                 Travel Trailer Worksheet/FEMA
                                                 Form 086-0-17.
Business or other for-profit..................  Manufactured (Mobile) Home/                  208               1             208            0.25            52.0           38.74           2,014
                                                 Travel Trailer Worksheet
                                                 (Continued)/FEMA Form 086-0-18.
Business or other for-profit..................  Increased Cost of Compliance                 260               1             260            0.42           109.2           38.74           4,230
                                                 (ICC) Adjuster Report/FEMA Form
                                                 086-0-19.
Business or other for-profit..................  Adjuster Preliminary Damage                  520               1             520            0.25           130.0           38.74           5,036
                                                 Assessment/FEMA Form 086-0-20.
Business or other for-profit..................  Adjuster Certification                       520               1             520            0.25           130.0           38.74           5,036
                                                 Application/FEMA Form 086-0-21.
                                               -------------------------------------------------------------------------------------------------------------------------------------------------
    Total.....................................  ................................           3,640  ..............          29,484  ..............         20841.6  ..............         807,898
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

    Estimated Cost: There are no operation and maintenance, or capital
and start-up costs associated with this collection of information.

Comments

    Comments may be submitted as indicated in the ADDRESSES caption
above. Comments are solicited to (a) Evaluate whether the proposed data
collection is necessary for the proper performance of the agency,
including whether the information shall have practical utility; (b)
evaluate the accuracy of the agency's estimate of the burden of the
proposed collection of information, including the validity of the
methodology and assumptions used; (c) enhance the quality, utility, and
clarity of the information to be collected; and (d) minimize the burden
of the collection of information on those who are to respond, including
through the use of appropriate automated, electronic, mechanical, or
other technological collection techniques or other forms of information
technology, e.g., permitting electronic submission of responses.

    Dated: April 28, 2010.
Samuel C. Smith,
Acting Director, Records Management Division, Mission Support Bureau,
Federal Emergency Management Agency, Department of Homeland Security.
[FR Doc. 2010-10526 Filed 5-4-10; 8:45 am]
BILLING CODE 9110-11-P


<EPA REGISTRATION DIVISION COMPANY NOTICE OF FILING FOR PESTICIDE
PETITIONS PUBLISHED IN THE FEDERAL REGISTER  >

Docket ID No.: EPA-HQ-OPP-2008-0556

<EPA Registration Division contact: Sidney Jackson<PHONE_NUMBER>) >

<Interregional Research Project Number 4(IR-4) >

<[Pesticide Petition # 8E7365]>

<	EPA has received a pesticide petition (PP# 8E7365) from Interregional
Research Project Number 4  (IR-4) 500 College Road East, Suite 201 W,
Princeton, NJ 08540,  proposing, pursuant to section 408(d) of the
Federal Food, Drug, and Cosmetic Act (FFDCA), 21 U.S.C. 346a(d), to
amend 40 CFR part 180 by establishing a tolerance for residues residues
of the insecticide fenpyroximate, (E)-1,1-dimethylethyl
4-[[[[(1,3-dimethyl-  5-phenoxy-1H-pyrazol-4-yl)  methylene]
amino]oxy]methyl]  benzoate and its Z-isomer, (Z)-1,1-dimethylethyl
4-[[[[(1,3-dimethyl-5-
phenoxy-1H-  pyrazol-4-yl)methylene]  amino]oxy]  methyl]benzoate
in or on the following raw agricultural commodities:  vegetables,
fruiting, group 8 at 0.20 parts per million (ppm), okra at 0.20 ppm,
melon subgroup 9A 0.03 ppm, and cucumber at 0.05 ppm. EPA has determined
that the petition contains data or information regarding the elements
set forth in section 408 (d)(2) of  FDDCA; however, EPA has not fully
evaluated the sufficiency of the submitted data at this time or whether
the data support granting of the petition. Additional data may be needed
before EPA rules on the petition.  This summary has been prepared by
Nichino America, Inc., Wilmington, DE 19808, the registrant.>

<A. Residue Chemistry>

<	1. Plant metabolism. The metabolism of fenpyroximate and z-isomer has
been studied in cotton, apples, grapes, and citrus and is well
understood. The major residue in plants is fenpyroximate and z-isomer,
with very low levels of several degradates. Metabolism in plants
involves hydrolysis of the ester and methyleneamino ether links,
N-demethylation, oxidation, and conjugation of the polar metabolites.

	2. Analytical method. Based upon the metabolism of fenpyroximate in
plants and the toxicology of the parent and metabolites, quantification
of the parent, fenpyroximate and the z-isomer, combined as fenpyroximate
is sufficient to determine toxic residues in plants. As a result an
enforcement method has been developed which involves extraction of
fenpyroximate from crops with acetone, filtration, partitioning and
cleanup, and analysis by gas chromatography using a nitrogen/phosphorous
detector. The method has undergone independent laboratory validation as
required by PR Notice 88-5 and 96-1.

>

<	3. Magnitude of residues. Magnitude of residues in crops-

Field residue trials meeting EPA study requirements have been conducted
at the maximum label rate for tomato, peppers, and melons.  Residue
analysis from cucumbers growing in the polytunnels/greenhouse from
several locations have been conducted at the maximum label rate and
requested PHI.  Results from these trials demonstrate that the highest
fenpyroximate and z-isomer residues found will not exceed the proposed
tolerances when the product is applied following the proposed use
directions.

	4. Magnitude of the residue in animals--a. Ruminants. Maximum residues
of fenpyroximate, z-isomer, and acid metabolite in a cattle feeding
study demonstrate that the highest fenpyroximate, z-isomer, and acid
metabolite, combined as fenpyroximate will not exceed the proposed
tolerances in or on milk 0.01ppm; meat 0.02 ppm, fat 0.8 ppm, kidneys
and liver 0.5 ppm, and meat by-products 0.01 ppm in cattle, goats, hogs,
horses, sheep. After work-up, analysis of tissue and milk samples was by
GC/NPD. Additionally, liver and kidney extracts were analyzed by
LC/MS/MS.  GC/NPD Limits of Quantitation (LOQ) were 0.005 ppm in milk
and 0.01 ppm in other tissues.  LC/MS/MS limits of detection (LOD) were
0.003 ppm.   >

<B. Toxicological Profile>

<Acute toxicity.   “NA-Remove”>

<	2. Genotoxicity. “NA-Remove”>

<	3. Reproductive and developmental toxicity. “NA-Remove”>

<	4. Subchronic toxicity. “NA-Remove”>

<	5. Chronic toxicity. “NA-Remove”>

1.  An extensive battery of toxicology studies has been conducted with
fenpyroximate.  EPA has evaluated the available toxicity data and
considered its validity, completeness, and reliability as well as the
relationship of the results of the studies to human risk  The nature of
the toxic effects caused by fenpyroximate is discussed in Unit III.A. of
the Final Rule on Fenpyroximate Pesticide Tolerance published in the
Federal Register on April 10, 2001 (66 FR 18561) (FRL-6773-2).   An
assessment of toxic effects caused by fenpyroximate including the
toxicological endpoints of concern is also discussed in Unit III.A. and
Unit III B. of the Federal Register dated June 10, 2004   (FRL-7362-9)
(89 FR 32457).

<	6. Animal metabolism. The qualitative nature of the residues of
fenpyroximate and its z-isomer, in animals is adequately understood.
Fenpyroximate was not metabolized to volatiles to any significant
degree.  The majority of either benzyl or pyrazole labels (approximately
70 % to 92 %) is excreted in the feces. Urinary excretion accounts for
less (approximately 9 % to 18 %) of the label.  Thus, feces and urine
are the major routes of excretion for fenpyroximate.  Tissue did not
accumulate fenpyroximate or its metabolites to any great extent.  The
greatest levels of label were in liver, kidneys, adrenals, and fat (to a
lesser degree).  In blood, nearly all of the label is in the plasma.

	7. Metabolite toxicology. No toxicologically significant

metabolites were detected in plant or animal metabolism studies for

cotton, apples, or or grapes.

8. Endocrine disruption. Chronic, lifespan, and multigenerational
bioassays in mammals and acute and subchronic studies on aquatic
organisms and wildlife did not reveal any endocrine effects for
fenpyroximate.  Any endocrine related effects would have been detected
in this comprehensive series of required tests.  The probability of any
such effect due to agricultural uses of fenpyroximate is negligible.

>

<C. Aggregate Exposure>

using LifeLine™ version 4.3.  Residue estimates for water consumption
were based on PRZM3/EXAMs and SCIGROW models and exposure assessments
using LifeLineTM version 4.3.

	i. Food. The acute dietary exposure was based on the following
assumptions: residues at tolerance levels, 100% crop treated, and
DEEM™ (ver. 7.76) default processing factors for all
registered/proposed commodities (Tier 1).  The acute dietary aPAD (acute
population adjusted dose) was set at 0.05 mg/kg/day for females aged
13-50 years old based on a developmental toxicity study in rats that had
an oral NOEL of 5 mg/kg/day.  The chronic dietary exposure was based on
the following assumptions:  Residues at tolerance levels, 100% crop
treated, and using UDDA survey data where available.  The chronic
dietary cPAD (chronic Population Adjusted Dose) was determined to be
0.01 mg/kg/day for the general population, based on an oral NOAEL of
0.97 mg/kg/day in the two-year rat chronic/oncogenicity study.  An
additional 10x database uncertainty factor was applied.  The resultant
safety factor used to establish the cPAD was 100.  There was not likely
any evidence of carcinogenicity.

Using tolerance values for exposure and a default value of 100% crop
treated, the resulting food exposure estimate for females 13-49 years
old was 11.3% of the acute RfD. No acute endpoint was identified for the
remaining population subgroups.

	ii. Drinking water. The residue of concern in drinking water was
determined to be fenpyroximate and its z-isomer.  There are no
established maximum contaminant levels or health advisory levels for
residues of fenpyroximate in drinking water.  In the absence of
comprehensive water monitoring data, the Agency uses the FQPA Index
Reservoir Screening Tool or the Pesticide Root ZoneModel/Exposure
Analysis Modeling System (PRZM/EXAMS) to produce estimates of pesticide
concentrations in an index resevoir.   The SCI-GROW model is used to
predict pesticide concentrations in shallow ground water. For a
screening-level assessment for surface water EPA will use FIRST (a tier
1 model) before using PRZM/EXAMS (a tier 2 model). The FIRST model is a
subset of the PRZM/EXAMS model that uses a specific high-end runoff
scenario for pesticides. Both FIRST and PRZM/EXAMS incorporate an index
reservoir environment, and both models include a percent crop area
factor as an adjustment to account for the maximum percent crop coverage
within a watershed or drainage basin.

None of these models include consideration of the impact processing
(mixing, dilution, or treatment) of raw water for distribution as
drinking water would likely have on the removal of pesticides from the
source water. The primary use of these models by the Agency at this
stage is to provide a screen for sorting out pesticides for which it is
unlikely that drinking water concentrations would exceed human health
levels of concern.

The estimated drinking water concentrations (EDWCs) in surface water
were determined using the Tier II PRZM (Pesticide Root Zone Model) and
EXAMS (Exposure Analysis Modeling System (PE4-PL, version 01).  PRZM is
used to simulate pesticide transport as a result of runoff and erosion
and spray drift from an agricultural field and EXAMS estimates
environmental fate and transport of pesticides in surface water.  The
EPA estimated that based on the maximum use pattern of two applications
to Georgia pecans for the acute and the chronic and long-term estimates.
 The acute EDWCs are 12.9 ppb, and for chronic 1.8 ppb.  In ground
water, using Tier I SCI-GROW, the acute level and chronic level is 0.059
ppb. Concentrations in actual drinking water would be much lower than
the levels predicted in the hypothetical, small, stagnant farm pond
model since drinking water derived from surface water would normally be
treated before consumption. Based on these analyses, the contribution of
water to the dietary risk estimate is negligible. Therefore, based on
the dietary and drinking water assessments, aggregate exposure to
residues of fenpyroximate and its z-isomer in food and water can be
considered to be negligible.

 >

<	2. Non-dietary exposure.  The term residential exposure is used in
this document to refer to non-occupational, non-dietary exposure (e.g.
for lawn and garden pest control, indoor pest control, termiticides, and
flea and tick control on pets). Fenpyroximate is not registered for use
on any sites that would result in residential exposure.

>

<D. Cumulative Effects

Fenpyroximate is a mitochondrial electron transport inhibitor acting at
Site I, which is similar to pyridaben, but quite different than other
established acaricides.  All relevant toxicological data has been
provided to the EPA.  A determination has not been made that
fenpyroximate has a common mechanism of toxicity with other substances.
Fenpyroximate does not appear to produce a common toxic metabolite with
other substances. Therefore, for the purposes of this notice of filing,
there should be no consideration of cumulative risk that would require
assessment.

>

<E. Safety Determination>

<	1. U.S. population.

 i. Acute risk.  Using the conservative assumptions discussed above,
based on the completeness and reliability of the toxicity data, it is
concluded that aggregate exposure to the proposed uses of fenpyroximate
are estimated at 0.007 mg/kg/day and will utilize at most 11.3% of the
acute reference dose of females (13-49).  This estimate is likely to be
much less, as more realistic data and models are developed.  Drinking
water and other water consumption (EDWC of 12.9 ppb) scenarios were
included in the dietary risk assessment modeling.

>

ii. Chronic Risk.  Based on the toxicology data base and available
information on anticipated residues, the chronic dietary exposure to the
U.S. Population (total) was estimated to be 0.00168 mg/kg/day and was
16.8 % of the estimated chronic population adjusted dose (cPAD).
Drinking water and other potential water consumption scenarios (EDWC of
1.8 ppb) were included in the dietary risk assessment modeling. Based on
these assessments, it can be concluded that there is reasonable
certainty of no harm to the U.S. Population or any population subgroup
from exposure to fenpyroximate.

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o be protective of infants and children.  EPA generally has no concern
for exposures below 100% of the cPAD. The Agency has considered the
potential aggregate exposure from food, water and non-occupational
exposure routes and has concluded aggregate exposure is not expected to
exceed 100% of the chronic reference dose, and consequently, has
determined there is a reasonable certainty that no harm will occur to
infants and children from aggregate exposure to residues of
fenpyroximate.

>

<F. International Tolerances>

<Canada, Codex, and Mexico do not have maximum residue limits for
residues of fenpyroximate in/on the proposed crops.  Therefore,
harmonization is not an issue. >

 PAGE

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