[Federal Register Volume 85, Number 179 (Tuesday, September 15, 2020)]
[Notices]
[Pages 57266-57273]
[FR Doc No: 2020-20253]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-89793; File No. SR-LCH SA-2020-003]

Self-Regulatory Organizations; LCH SA; Order Approving Proposed
Rule Change, as Modified by Amendment No. 1, Relating to LCH SA's
Governance Arrangements

September 9, 2020.

I. Introduction

    On July 23, 2020, Banque Centrale de Compensation, which conducts
business under the name LCH SA (``LCH SA''), filed with the Securities
and Exchange Commission (``Commission''), pursuant to Section 19(b)(1)
of the Securities Exchange Act of 1934 (``Act'') \1\ and Rule 19b-4,\2\
a proposed rule change to adopt certain changes to its governance
arrangements, as described below. On July 29, 2020, LCH SA filed
Amendment No. 1 to the proposed rule change.\3\ The proposed rule
change, as modified by Amendment No. 1 (hereafter the ``proposed rule
change''), was published for comment in the Federal Register on August
10, 2020.\4\ The Commission did not receive comments on the proposed
rule change. For the reasons discussed below, the Commission is
approving the proposed rule change.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ LCH SA filed Amendment No. 1 to correct the Exhibit 5 to the
original filing to reflect a change in Article 13 of the Terms of
Reference of the Board of Directors of LCH SA and to correct an
erroneous citation in the original filing.
    \4\ Self-Regulatory Organizations; LCH SA; Notice of Filing of
Proposed Rule Change, as Modified by Amendment No. 1, Relating to
LCH SA's Governance Arrangements, Exchange Act Release No. 89465
(Aug. 4, 2020), 85 FR 48295 (Aug. 10, 2020) (SR-LCH-SA-2020-003)
(``Notice'').
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II. Description of the Proposed Rule Change

A. Background

    LCH Group Holdings Limited (``LCH Group'') \5\ is the majority-
owner and parent company of LCH SA.\6\ London Stock Exchange Group PLC
(``LSEG'') is the majority-owner and parent company of LCH Group. LCH
Group is also the parent company of LCH Limited, a central counterparty
(``CCP'') authorized to offer clearing services in the European Union
and registered with the Commodity Futures Trading Commission as a
derivatives clearing organization.
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    \5\ This description is substantially excerpted from the Notice,
85 FR 48295. Capitalized terms not otherwise defined herein have the
meanings assigned to them in the LCH SA CDSClear Rule Book or the
LCH SA governing documents, as applicable.
    \6\ LCH Group currently owns 88.9 percent of LCH SA; Euronext
N.V. owns 11.1 percent of LCH SA. See Notice, 85 FR at 48295, n. 4.
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    In connection with its purchase of approximately 58 percent of LCH
Group in 2013, LSEG entered into an agreement (the ``Relationship
Agreement'') with LCH Group for the purpose of, among other things: (i)
Establishing core operating principles to be applied in managing the
business of LCH Group; (ii) protecting minority shareholders of LCH
Group by requiring the approval of 80 percent of votes on certain
matters; (iii) requiring that the Board of Directors of LCH Group and
the Boards of LCH SA and LCH Limited be comprised of a mix of
independent non-executive directors, executive directors, User
Directors (as defined below), Venue Directors (as defined below), and
LSEG representatives; and (iv) requiring LSEG, as a majority
shareholder, to consent to certain actions, such as approval of the LCH
Group budget.
    LCH SA represents that the Relationship Agreement is no longer
necessary because certain contractual provisions are provided for in
law or regulation and other provisions are historic and no longer
relevant. Notably, since 2013, LSEG has added to its shareholdings in
LCH Group and now owns approximately 83 percent of LCH Group.
Therefore, the minority protection provisions noted above are no longer
relevant as LSEG alone could approve such matters by voting its shares.
Consequently, LCH SA states that LCH Group and LESG plan to terminate
the Relationship Agreement. LCH Group also has determined to simplify
its governing arrangements and to eliminate provisions in LCH Group's
governance documents that are unnecessary and outdated. LCH SA also
represents that LCH Group has also determined to eliminate duplication
in decision-making between its Board of Directors and the Boards of LCH
SA and LCH Limited by limiting the LCH Group Board to representatives
of LSEG and LCH Group only. Further, LCH SA states that LCH Group will
amend its Articles of Association accordingly.\7\
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    \7\ See Notice, 85 FR at 48296.
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    In response to the actions of LCH Group, LCH SA has submitted the
proposed rule change to amend and simplify LCH SA's governance
arrangements to reflect changes in LCH Group's governance arrangements.
Specifically, the proposed rule change would (i) amend the Board of
Directors of LCH SA (the ``Board'') Terms of Reference (``Board TOR'');
(ii) adopt the Terms of Reference of the Nomination Committee of the
Board (``Nomination Committee TOR''); (iii) amend the Terms of
Reference of the Risk Committee of the Board (``Risk Committee TOR'');
(iv) amend the Terms of Reference of the Audit Committee of the Board
(``Audit Committee TOR''); and (v) amend the Terms of Reference of the
Remuneration Committee of the Board (``Remuneration Committee TOR'').
Independent of these amendments related to the changes at LCH Group,
the proposed rule change would also adopt the Terms of Reference of the
Technology, Security,

and Resilience Committee of the Board (``TSR Committee'' and ``TSR
Committee TOR''). Although the proposed rule change would revise LCH
SA's governance arrangements to reflect the changes that LCH Group is
making to its own governance, LCH SA represents that the proposed rule
change would not change the substance of LCH SA's current
governance.\8\
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    \8\ See Notice, 85 FR at 48296.
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B. Board TOR

    As discussed above, the proposed rule change would amend the Board
TOR in light of the planned termination of the Relationship Agreement
and the planned amendment of the LCH Group Articles of Association.
Specifically, the proposed rule would (i) remove provisions that are
now unnecessary in light of the changes discussed above; (ii) establish
consent rights for LSEG, similar to those in the Relationship
Agreement, and consultation requirements for LCH Group; (iii) update
the composition and operation of the Board and the committees of the
Board; and (iv) eliminate the inclusion of Venue Directors on the
Board.
    The proposed rule change would first remove those provisions no
longer required as a result of the planned termination of the
Relationship Agreement and the planned amendment of the LCH Group
Articles of Association. In Article 2, the proposed rule change would
remove definitions arising from the Relationship Agreement. The
proposed rule change would also remove references to the Relationship
Agreement in Article 4 and Article 12.
    The proposed rule change would also revise a number of provisions
to establish consent rights for LSEG as the indirect majority owner of
LCH SA, similar to the rights provided to LSEG in the Relationship
Agreement. For example, the proposed rule change would amend Article 3
to provide LSEG a representative on the Board unconditionally.\9\ The
proposed rule change would also amend Article 12 to require that LSEG
consent to the Board's approval of a number of matters, including among
other things, LCH SA's annual budget and material changes thereto.
Similarly, the proposed rule change would amend Article 13 to give LSEG
the right to consent to the settlement of certain litigation and to
certain investments in information technology. Finally, the proposed
rule change would add new Article 27, which would provide that the
Board TOR may be amended by the Board, provided that any changes to
LSEG's rights or any changes which would otherwise have a detrimental
effect on LSEG's rights pursuant to the Board TOR would be subject to
LSEG's consent.
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    \9\ Article 3 currently provides that LSEG is entitled to a
representative on the Board ``for so long as LSEG is entitled to
exercise or control the exercise of at least 5 percent of the votes
able to be cast on all or substantially all matters at general
meetings in LCH Group Holdings Limited.''
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    Similar to these consent rights granted to LSEG, the proposed rule
change would require that the CEO of LCH SA consult with LCH Group
prior to taking certain actions. Under amended Article 13, the CEO
would need to consult with, and obtain the approval of, the Board of
LCH Group before taking a number of actions, including among other
things, entering into any type of joint venture arrangement between LCH
SA and any third party.
    To facilitate these consent and consultation requirements, the
proposed rule change would amend a number of articles to permit LCH
SA's sharing of information with LCH Group and LSEG. The proposed rule
change would amend Article 13 to require the CEO of LCH SA to provide
to LSEG audited accounts for each financial year, along with financial
and other information as needed for reporting requirements and budget
forecasting. Moreover, Article 14 currently prohibits a director of LCH
SA that was nominated by a shareholder of LCH Group (i.e., LSEG) from
sharing information with the shareholder of LCH Group that made the
nomination without the consent of the majority of the independent of
LCH SA. The proposed rule change would amend Article 14 to provide that
this general prohibition would not prevent information from being
shared with LSEG, in its capacity as an indirect shareholder of LCH SA,
for legal, accounting, tax regulatory, or disclosure purposes. In
addition, under new Article 26, the Board must in certain cases notify
LSEG of proposed transactions, and receive LSEG's approval before
entering into such transactions, where the transactions trigger certain
requirements for LSEG as a listed company in the UK.
    Moreover, to allow further coordination and cooperation among LCH
SA, LCH Group, and LSEG, the proposed rule change would add new
provisions to resolve possible conflicts of interest among the
companies. Article 25 currently imposes certain requirements on
agreements between LCH SA and related parties, like LCH SA's directors
and shareholders. The proposed rule change would amend Article 25 to
provide that any contracts and agreements between LCH SA and LSEG or
any member of the LSEG Group,\10\ will be subject to the prior approval
of a committee of the Board consisting solely of the independent non-
executive directors of LCH SA and that approval will be given provided
that the contract or agreement is on bona fide arm's length terms.
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    \10\ LSEG Group means London Stock Exchange Group plc and its
subsidiaries from time to time other than those entities comprising
the LCH Group.
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    The proposed rule change would also make a number of changes to the
composition and operation of the Board in light of these changes. With
respect to the composition of the Board, Article 3 currently provides
that the Chief Risk Officer of LCH Group, along with the CEO of LCH SA
and the CEO of LCH Group, will be the executive directors of the Board.
The proposed rule change would amend Article 3 to provide that the
Chief Risk Officer of LCH Group may, but is not required to, be one of
the three executive directors of the Board. The proposed rule change
similarly would remove the requirement that the Chairman of LCH Group
be an independent non-executive director of the Board. Finally, the
proposed rule change would update a reference in Article 3 to refer to
the LCH SA Nomination Committee rather than the LCH Group Nomination
Committee. As discussed further below, this change is necessary because
LCH Group is disbanding its Nomination Committee.
    With respect to the operation of the Board, the proposed rule
change would first make a technical correction to Article 6, Quorum.
This proposed revision would clarify that the Board may validly
deliberate if at least half of the directors are present. LCH SA
maintains that this is the intention behind the current language of
Article 6 but that, as currently written, the language could be
misinterpreted to mean that the Board could not deliberate if more than
half of the Directors are present. As discussed above, the proposed
rule change would amend Article 12 regarding the powers of the Board to
require that LSEG consent to the Board's approval of a number of items.
In addition, Article 12(e) assigns to the Board a number of
responsibilities related to risk management. These responsibilities
include, among other things, the annual adoption of the LCH Group Risk
Governance Framework and a number of LCH SA-specific policies, such as
the Financial Resource Adequacy Policy. As currently drafted, however,
Article 12(e) does not actually require that the Board approve the
adoption of the LCH Group

Risk Governance Framework or the LCH SA-specific policies. The proposed
rule change would clarify this by amending Article 12(e) to
specifically require that the Board annually approve the adoption of
the LCH Group Risk Governance Framework and policies. Finally, Article
12(d) currently provides the Board the power to issue a report to the
LCH SA shareholders to recommend a dividend, to be decided upon at a
general meeting of the shareholders. The proposed rule change would
alter this to explicitly require that the Board take into account
certain factors prior to issuing the report. LCH SA is making this
particular change to incorporate into Article 12(d) provisions from an
existing LCH Group dividend policy which already has been adopted by
LCH SA.\11\
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    \11\ See Notice, 85 FR at 48297.
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    In line with these changes, the proposed rule change would make a
number of changes to Articles 15-20, which pertain to specific
committees of the Board. Article 15 introduces the Committees of the
Board and explains, in general terms, their duties and
responsibilities. The proposed rule change would amend Article 15 to
note the addition of the TSR Committee and to change the reference to
the LCH Group Nomination Committee to the LCH SA Nomination Committee
(as discussed below, LCH Group is disbanding its Nomination Committee).
    Article 16 describes in general terms the Audit Committee. The
proposed rule change would amend Article 16 to remove the requirement
that the Audit Committee TOR be substantially similar to the terms of
reference of the Audit Committee of LCH Group. This change is necessary
because, as discussed below, LCH Group is disbanding its Audit
Committee. Moreover, the proposed rule change would amend Article 16 to
recognize that changes in the Audit Committee TOR may be required by
LCH SA's regulators (and not LCH Group's regulators) or any applicable
law or regulation and to confirm that a Director representing LSEG and
a Director representing Euronext would be a part of the Audit
Committee.
    Article 17 describes in general terms the Risk Committee. The
proposed rule change would amend Article 17 to confirm that a Director
representing LSEG would be vice-chairman of the Risk Committee.
    Article 18 describes in general terms the Nomination Committee. The
proposed rule change would amend Article 18 to remove any reference to
the LCH Group Nomination Committee and the requirement that, in the
event LCH SA establishes its own Nomination Committee, its term of
reference must be substantially similar to the terms of reference of
the LCH Group Nomination Committee. This change is necessary because,
as discussed below, LCH Group is disbanding its Nomination Committee.
Moreover, the proposed rule change would amend Article 18 to confirm
that a director representing LSEG would be a member of LCH SA's
Nomination Committee.
    Article 19 describes in general terms the Remuneration Committee.
The proposed rule change would amend Article 19 to remove the provision
requiring that the Remuneration Committee TOR take into account the
remuneration policies and principles of the LCH Group Remuneration
Committee. This change is necessary because, as discussed below, LCH
Group is disbanding its Remuneration Committee. Moreover, the proposed
rule change would amend Article 19 to confirm that a director
representing LSEG would be a member of LCH SA's Remuneration Committee.
    The proposed rule change would add new Article 20 to describe in
general terms the TSR Committee. As discussed further below, the TSR
Committee is a new Board committee. New Article 20 would specify that
its organization and functions would be set out in the TSR Committee
TOR.
    The proposed rule would also specify the requirements for review
and approval of changes to the terms of reference of the various Board
committees. For the Risk Committee TOR, Remuneration Committee TOR, and
Audit Committee TOR, the Board must review and approve the terms of
reference annually and LSEG must consent to the terms of reference, in
respect of its rights under the terms of reference for each of these
committees. With respect to the Nomination Committee TOR, the Board
must review and approve the terms of reference annually and LSEG must
consent to the terms of reference. LSEG's consent right under the
Nomination Committee TOR is thus slightly more extensive, because that
the LCH Group Nomination Committee Terms of Reference, upon which the
Nomination Committee TOR is based, required LSEG consent for any
amendment, not just with respect to its rights under the terms of
reference.\12\ The TSR Committee TOR and changes thereto would not be
subject to the consent of LSEG because, as discussed further below, the
TSR Committee would review, recommend, and report to the Board
regarding technology matters but would not otherwise take action on
behalf of the Board.
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    \12\ See Notice, 85 FR at 48298, n.16.
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    Finally, the proposed rule change would also make amendments to the
inclusion of Venue Directors at LCH SA. Currently, the Board TOR
provides that the Board shall include Venue Directors. Venue Directors
are directors that (i) are nominated by a shareholder of LCH Group
Holdings Limited that is a Venue (meaning an exchange) or (ii) are
otherwise connected to such a shareholder by virtue of employment or
directorship. As explained in the Notice, LCH SA represents that, with
the exception of Euronext, there have been no Venue Directors on the
LCH SA Board for some time.\13\ Since 2018, there has only been one
entity (other than Euronext) that would qualify to nominate a Venue
Director and that entity has not been interested in being represented
on any LCH board.\14\ For that reason, the proposed rule change would
remove the requirement for a Venue Director and would also delete the
associated definitions in Article 2. With respect to Euronext, it is
entitled to propose a director pursuant to certain existing contractual
agreements.\15\ Thus, the Board TOR, as amended, would provide that
Euronext is entitled to propose at least one of the directors to the
Board as long as these agreements remain in force.
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    \13\ See Notice, 85 FR at 48297, n. 13.
    \14\ See Notice, 85 FR at 48297, n. 13.
    \15\ See Notice, 85 FR at 48297, n. 13.
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C. Nomination Committee TOR

    As noted above, as part of the governance changes at LCH Group, the
Board of LCH Group will be disbanding its committees, including its
Nomination Committee. The LCH Group Nomination Committee served the
functions of a nomination committee for LCH SA. Therefore, in light of
the disbanding of the LCH Group Nomination Committee, LCH SA will
establish its own Nomination Committee. Thus, the proposed rule change
would adopt the Nomination Committee TOR to establish, among other
things, the purpose, duties, powers, and procedures of the LCH SA
Nomination Committee.
    The overall purpose and background of the Nomination Committee, as
described in Articles 1 and 2, would be to make recommendations to the
Board for nominations of candidates for appointment as directors of the
Board. Under Article 2, the Nomination Committee would nominate (i) an
independent chairman of the Board (the ``Chairman''); (ii) up to four

independent directors that meet the standard for independence set out
in the Nomination Committee TOR (``Independent Directors''); (iii) up
to two directors (``User Directors'') associated with shareholders of
LCH Group (other than LSEG) or other exchanges, trading venues, or
trading facilities (``User Shareholders''); (iv) the director nominated
by LSEG; and (v) the director nominated by Euronext. Moreover, the CEO
of LCH Group, the CEO of LCH SA as proposed by the CEO of LCH Group,
and the Chief Risk Officer of LCH Group or another executive as
proposed by the CEO of LCH Group would serve on the Board (each an
``Executive Director'').
    LCH SA maintains that this structure would not change the Board's
current proportion of independent directors or number of directors
representing members and participants.\16\ This structure would,
however, eliminate from the Board Venue Directors because, as discussed
above, LCH SA has determined there is no reason to continue the
inclusion of Venue Directors on the Board.
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    \16\ See Notice, 85 FR at 48298.
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    Article 3 would provide more detail regarding the director
nominated by LSEG, including that LSEG has the right to nominate one
director to the Board and a replacement should that director retire.
Article 4 would provide more detail regarding the director nominated by
Euronext, including that Euronext has the right to nominate one
director to the Board and a replacement should that director retire.
Article 5 would specify that the LCH SA CEO would be responsible for
appointing their own management team in consultation with the LCH Group
CEO.
    Article 6 would set out the duties and powers of the Nomination
Committee. Among other duties, the Committee would be required to (i)
ensure that recommended candidates understand the responsibilities of
Board membership and are able to devote the necessary time to LCH SA
matters; (ii) ensure that recommended candidates are respected for
their competence and are of good standing in their field of business;
(iii) keep itself informed of any changes in law or regulations
applicable to the composition of the Board and other matters for which
the committee is responsible; and (iv) consult periodically with the
nomination committee of LCH Limited to ensure that there is a
coordinated process for the appointment of suitable directors to both
boards.
    Article 7 would set out the procedures that the Nomination
Committee would use to recommend candidates to be Chairman and
Independent Directors. Moreover, Article 7 would establish the
standards that the Nomination Committee would use to determine if a
person is fit for appointment as Chairman or an Independent Director,
including, among other factors, whether the person is independent in
character and judgment. Moreover, in making recommendations with regard
to Independent Directors, Article 7 would require that the Nomination
Committee take into account that the Independent Directors should
reflect: (i) A breadth of industry expertise and experience and product
knowledge; (ii) particular expertise and experience in risk management,
audit, clearing services and financial services; and (iii) diversity,
including gender, age, geographical provenance, and educational and
professional background. Finally, an Appendix to Article 7 would
provide the procedures the Nomination Committee would use to invite
User Shareholders to propose candidates to be User Directors, and the
procedures the Nomination Committee would use to approve and select
nominees from such candidates. The Appendix would further require that
the Nomination Committee receive LSEG's approval prior to recommending
a candidate's appointment to the Board as a User Director.
    Article 8 would set out the tenure for directors. Under Article 8,
each director (other than the Executive Directors and User Directors)
would have, in principle, a maximum tenure on the Board of three three-
year terms. However, the Nomination Committee would be allowed to
nominate an Independent Director for such longer period as is necessary
to ensure that not all such Independent Directors' appointments
terminate at the same time. All User Directors would have a tenure on
the Board of one three-year term, unless otherwise agreed by the Board
to ensure that not all such User Directors' appointments terminate at
the same time.
    The remaining articles of the Nomination Committee TOR would
explain the membership and operation of the Nomination Committee. Under
Article 9, the Board would appoint members to the Nomination Committee,
which would be comprised of four to six directors, including the
Chairman, at least two Independent Directors, one User Director and the
LSEG Director. The Chairman of the Board, or such other Independent
Director as the Independent Directors and LSEG may agree, would be the
Chairman of the Nomination Committee. Article 10 would explain who
would serve as secretary of the Nomination Committee, and Article 11
would explain the tenure of members of the Nomination Committee.
Articles 12 through 16 would explain the conduct of meetings of the
Nomination Committee, including notice, timing, location, attendance,
quorum, and keeping of minutes. Article 17 would require the Chairman
of the Nomination Committee to report to the Board on the discussions,
decisions, and recommendations of the Committee and further require
that the Nomination Committee furnish to the Board for approval each
year a summary of, among other things, its activities and certain of
its policies. Article 18 would provide that the Nomination Committee
TOR could be amended from time to time with Board approval, subject to
LSEG consent (as discussed above). Finally, Article 19 would set out
the requirements with respect to confidentiality and conflicts of
interest, and Article 20 would cover other miscellaneous matters, such
as access to training and resources for members of the Nomination
Committee.

D. Risk Committee TOR

    The proposed rule change would amend the Risk Committee TOR to
reflect the changes in the LCH Group governing arrangements but would
not make substantive changes to the current Risk Committee TOR. For
example, the proposed rule change would amend Article 1 to reference
the criteria for independence set out in LCH SA's Nomination Committee
TOR rather than in LCH Group's Nomination Committee terms of reference
because, as discussed above, LCH Group is disbanding its Nomination
Committee. The proposed rule change would also revise Article 16,
regarding confidentiality and conflicts of interest, to refer to rights
LSEG or its representatives have under the Risk Committee TOR rather
than rights LESG had under the Relationship Agreement.
    The proposed rule change would also amend Article 1 to remove the
provision that authorized LSEG to appoint the Vice Chairman of the
committee only for so long as LSEG is entitled to exercise or control
the exercise of at least 40 percent of the votes able to be cast on all
or substantially all matters at general meetings of LCH SA. LCH SA
considers this provision to be unnecessary because, as discussed above,
LSEG now indirectly owns more than 40 percent of LCH SA. Under Article
1 as revised, LSEG is entitled to appoint the Vice Chairman provided
that the person appointed has the skills

and experience commensurate with such a role.
    The proposed rule change would also amend Article 17 to remove
references to LCH LLC. Although LCH LLC is registered with the CFTC as
a DCO, its registration is currently dormant.\17\
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    \17\ Notice, 85 FR at 48300, n. 26.
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    Finally, the proposed rule change would amend Article 20 to specify
the provisions which the Board could only amend with LSEG's consent.

E. Audit Committee TOR

    The proposed rule change would amend the Audit Committee TOR to
reflect the changes in the LCH Group governing arrangements but would
not make substantive changes to the current Audit Committee TOR. For
example, the proposed rule change would amend Article 2 to reference
the criteria for independence set out in LCH SA's Nomination Committee
TOR rather than in LCH Group's Nomination Committee terms of reference
because, as discussed above, LCH Group is disbanding its Nomination
Committee.
    Moreover, the proposed rule change would amend Article 2 to remove
the provision that LSEG is entitled to recommend or approve a director
to the Audit Committee so long as it is entitled to exercise or control
the exercise of at least 20 percent of the votes able to be cast at
general meetings of LCH Group. As discussed above, LSEG now owns more
than 20 percent of LCH Group. Thus, LCH SA no longer considers this
provision to be necessary. Rather, under Article 2 as amended, LSEG
always would be entitled to recommend or approve a director to the
Audit Committee. The proposed rule change would also amend Article 2 to
require that the LSEG-approved director be present at a meeting to
establish quorum.
    Similarly, the proposed rule change would amend Article 3 to remove
the requirement that LCH SA's Audit Committee coordinate with the Audit
Committee of LCH Group. As discussed above, LCH Group is disbanding its
Audit Committee. For similar reasons, the proposed rule change would
remove the requirement that the Audit Committee respond to any requests
from the LCH Group Audit Committee to vary LCH SA's internal audit
program of work. Moreover, the proposed rule change would require that
the Audit Committee consider the auditor appointed by LSEG in respect
of the wider LSEG Group when making recommendations to the Board
concerning the appointment, evaluation and termination of the
engagement of the external auditors for LCH SA.
    The proposed rule change would make other updates to the
responsibilities of the Audit Committee. To take into account the new
TSR Committee, the proposed rule change would amend Article 3 to
require the Audit Committee to coordinate with the TSR Committee. In
addition, the proposed rule change would revise references in Article 3
to external ``auditors'' rather than an ``auditor'', to recognize that
LCH SA has more than one external auditor. Finally, the proposed rule
change would also amend Article 3 to provide that the Committee will
review the annual audit plan prepared by LCH SA's Internal Audit
department after approval by the LCH SA's CEO and ahead of any
submission of the plan to LCH SA's regulator, if requested by the
regulator.
    The proposed rule change would also make minor amendments to the
operation of the Audit Committee in Article 5 and Article 8. In Article
5, the proposed rule change would add language to confirm that the
Committee secretary will present all minutes of the proceedings and
resolutions of all Committee meetings to the Committee for approval at
the next following meeting. The proposed rule change would also delete
current Article 8, which provides that the Committee will arrange for
periodic reviews of its own performance and, at least annually, arrange
for independent internal review of its constitution and these Terms of
Reference. Instead, pursuant to the terms of the Board Terms of
Reference and LCH SA's representation, the Board, along with LCH SA's
executive management, would conduct this review.\18\ In place of
current Article 8, the proposed rule change would add a new article on
amendments to the Audit Committee TOR to specify the provisions which
the Board could only amend with LSEG's consent.
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    \18\ See Notice, 85 FR at 48301.
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F. Remuneration Committee TOR

    The proposed rule change would amend the Remuneration Committee TOR
to reflect the changes in the LCH Group governing arrangements and to
make other updates to the process for approving the remuneration of
certain executives of LCH SA. For example, the proposed rule change
would delete from Article 2 the provision that LSEG is entitled to
appoint a representative to the committee only for so long as LSEG is
entitled to exercise or control the exercise of at least five percent
of the votes able to be cast at general meetings of LCH Group. As
discussed above, LSEG now owns more than five percent of LCH Group.
Thus, LCH SA no longer considers this provision to be necessary. Under
Article 2 as revised, LSEG always will be entitled to appoint a
representative to the Remuneration Committee. Similarly, the proposed
rule change would revise Article 2 to authorize the LCH Group CEO to
attend committee meetings as an observer. Finally, the proposed rule
change would Article 12, Confidentiality and Conflicts of Interest, to
remove reference to any rights LSEG may have in the Relationship
Agreement and refer, instead, to rights LSEG or its representatives
have under the Remuneration Committee TOR.
    The proposed rule change would also revise the Remuneration
Committee TOR to reflect some minor changes in the remuneration
process. For example, the proposed rule change would amend Article 1,
to provide that LCH SA's remuneration policies would apply to
``Specified Executives'' rather than ``Executive Management.'' LCH SA
is making this technical change to confirm that the remuneration
policies would apply only to those executives identified in the
Remuneration Committee TOR or otherwise specified by the Board and
would not apply to other LCH SA executives who otherwise might be
deemed to fall within the category of ``Executive Management'' for
other purposes. As proposed to be revised, ``Specified Executives''
would mean, with respect to LCH SA, the Board Chairman, the CEO, the
Chief Risk Officer, the Chief Compliance Officer, and any other
personnel designated by the Board from time to time, including any
personnel with an annual remuneration package of more than
[euro]1,000,000 or equivalent.
    Moreover, the proposed rule change would simplify the process for
approval of the remuneration of the CEO or any Specified Executive.
Under the process as revised, the Remuneration Committee first would
consult with the LCH Group CEO before making a recommendation to the
Board for approval, rather than first consulting with the LCH Group CEO
and the LSEG CEO. Because the LSEG Remuneration Committee must approve
the remuneration of the CEO or any Specified Executive as the final
step in the process anyway, LCH SA does not believe it is necessary to
consult with the Chief Executive Officer of LSEG at the start of the
process.\19\ The proposed

rule change would also amend Article 1 to require the Committee to
review annually the ongoing appropriateness of any individual's
remuneration and to review and recommend for approval by the Board the
design of all incentive plans and performance related pay schemes,
including performance targets to be used, that are designed by and
received from the LSEG remuneration committee.
---------------------------------------------------------------------------

    \19\ With regard to the remuneration of directors, the proposed
rule change would also amend Article 1 to provide that the
Remuneration Committee will consult from time to time with the
remuneration committee of LSEG and the remuneration committee of LCH
Limited to ensure that there is a coordinated approach to the
remuneration of directors on the Board and the board of directors of
LCH Limited.
---------------------------------------------------------------------------

    The proposed rule change would also amend Article 9 to require that
minutes be presented to the Remuneration Committee for approval at the
next meeting and Article 10 to specify the provisions that the Board
could only amend with LSEG's consent.

G. TSR Committee TOR

    Independent of the changes that LCH SA is making to reflect the
changes to the governance of LCH Group, LCH SA has also proposed to
create the TSR Committee of the Board and adopt the TSR Committee TOR.
As set forth in the TSR Committee TOR, the overall purposes of the TSR
Committee would be to represent the interests of the Board in the sound
management of technology security and operational resilience, including
cyber security and to ensure that technology security and operational
resilience strategies, investments and outcomes support the mission,
values, and strategic goals of LCH SA. To that end, the TSR Committee
would be responsible for, among other things, review of LCH SA's
operations and technology strategy and investments in technology in
support of that strategy. To carry out its responsibilities, the TSR
Committee would have full access to management and employees, as well
as systems and records, and would be authorized to obtain independent
professional advice. The Chairman of the TSR Committee would report its
discussions and findings to the Board, but the TSR Committee would have
not executive powers other than making findings and recommendations.
    The TSR Committee TOR would also describe the composition and
operation of the TSR Committee, including the conduct and attendance of
meetings, requirements to establish quorum, and the confidentiality of
matters considered by the TSR Committee.

III. Commission Findings

    Section 19(b)(2)(C) of the Act directs the Commission to approve a
proposed rule change of a self-regulatory organization if it finds that
the proposed rule change is consistent with the requirements of the Act
and the rules and regulations thereunder applicable to the
organization.\20\ For the reasons given below, the Commission finds
that the proposed rule change is consistent with Sections 17A(b)(3)(C)
\21\ and 17A(b)(3)(F) of the Act \22\ and Rule 17Ad-22(e)(2)(i), (iv),
(v), and (vi) thereunder.\23\
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    \20\ 15 U.S.C. 78s(b)(2)(C).
    \21\ 15 U.S.C. 78q-1(b)(3)(C).
    \22\ 15 U.S.C. 78q-1(b)(3)(F).
    \23\ 17 CFR 240.17Ad-22(e)(2)(i), (iv), (v), (vi).
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A. Consistency With Section 17A(b)(3)(C) of the Act

    Section 17A(b)(3)(C) of the Act requires that the rules of LCH SA
assure a fair representation of its shareholders (or members) and
participants in the selection of its directors and administration of
its affairs.\24\ The Exchange Act does not define fair representation
or establish particular standards of representation. The Commission has
stated that, ``at a minimum, fair representation requires that the
entity responsible for nominating individuals for membership on the
board of directors should be obligated by by-law or rule to make
nominations with a view toward assuring fair representation of the
interests of shareholders and a cross-section of the community of
participants.'' \25\ The Commission believes that the proposed rule
change is consistent with the fair representation requirement.
---------------------------------------------------------------------------

    \24\ 15 U.S.C. 78q-1(b)(3)(C).
    \25\ Exchange Act Release No. 20221 (Sept. 23, 1983), 48 FR
45167, 45172 (Oct. 3, 1983).
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    First, as discussed in Part II.B above, the proposed rule change
would provide LCH SA's indirect majority shareholder, LSEG, a
representative on the Board and would require LSEG's consent prior to
the Board's approval of a number of matters, including amendments to
the Board TOR that would affect LSEG's rights. Similarly, the proposed
rule change would require that the LCH SA CEO consult with, and obtain
the approval of, the Board of LCH Group, LCH SA's direct majority
shareholder, before taking a number of actions. To facilitate these
consent and consultation requirements, the proposed rule change also
would amend the Board TOR to permit LCH SA's sharing of information
with LCH Group and LSEG and to resolve possible conflicts of interest
among the companies. Moreover, with respect to specific committees of
the Board, the proposed rule change would ensure some form of
representation for LSEG on the Nomination Committee, Risk Committee,
Audit Committee, and Remuneration Committee. Similarly, the proposed
rule change would require LSEG's consent to changes to the terms of
reference of a number of Board committees. With these changes, the
Commission believes the proposed rule change should assure a fair
representation of LCH SA's shareholders in the selection of its
directors and administration of its affairs.
    Second, as discussed in Part II.B above, the proposed rule change
would remove from the Board TOR the requirement that the Board include
a Venue Director. Based on LCH SA's representation, the Commission
understands that, with the exception of Euronext, currently only one
entity would qualify to nominate a Venue Director and that such entity
has not shown an interest in representation on the Board.\26\ With
respect to Euronext, the proposed rule change would provide that
Euronext is entitled to propose at least one of the directors to the
Board as long as certain contractual agreements remain in force.
Moreover, under the Board TOR and Nomination Committee TOR, as
discussed in the Part II.B and Part II.C above, the Board would include
up to two directors nominated by User Shareholders. Given the inclusion
of representation for Euronext as well as User Shareholders on the
Board, the Commission believes the proposed rule change should assure a
fair representation of LCH SA's participants in the selection of its
directors and administration of its affairs, even with the removal of
the requirement for specific representation of Venues other than
Euronext.
---------------------------------------------------------------------------

    \26\ See Notice, 85 FR at 48297, n. 13.
---------------------------------------------------------------------------

    Taking these reasons together, the Commission finds that the
proposed rule change is consistent with 17A(b)(3)(C) of the Act.\27\
---------------------------------------------------------------------------

    \27\ 15 U.S.C. 78q-1(b)(3)(C).
---------------------------------------------------------------------------

B. Consistency With Section 17A(b)(3)(F) of the Act

    Section 17A(b)(3)(F) of the Act requires, among other things, that
the rules of LCH SA be designed to assure the safeguarding of
securities and funds which are in the custody or control of LCH SA or
for which it is responsible.\28\
---------------------------------------------------------------------------

    \28\ 15 U.S.C. 78q-1(b)(3)(F).
---------------------------------------------------------------------------

    As discussed above, the proposed rule change would make numerous
changes to LCH SA's governance arrangements to clarify and amend those
governance arrangements in light of the anticipated termination of the
Relationship Agreement and the anticipated changes to LCH Group's
governance. The Commission believes that, as a general

matter, these changes should help ensure that LCH SA has governance
arrangements that support its ability to promptly and accurately offer
clearance and settlement services to its clearing members and the
markets LCH SA serves, and effectively manage the range of risks that
arise in the course of providing such services. Moreover, the
Commission believes that the proposed rule change should provide
greater accessibility and clarity to LCH SA shareholders and
participants to better understand LCH SA's governance arrangements. For
both of these reasons, the Commission believes that the proposed rule
change is consistent with the prompt and accurate clearance and
settlement of securities transactions, and, accordingly, with Section
17A(b)(3)(F) of the Act.\29\
---------------------------------------------------------------------------

    \29\ 15 U.S.C. 78q-1(b)(3)(F).
---------------------------------------------------------------------------

    Moreover, as discussed in Part II.B above, the proposed rule change
would clarify the wording in Article 12(e) of the Board TOR to
specifically require the Board to annually approve the adoption of the
LCH Group Risk Governance Framework and a number of LCH SA-specific
policies, such as the Financial Resource Adequacy Policy. The
Commission believes that Board approval of this framework and policies
should help to ensure that they are sufficient and kept up-to-date.
Because the LCH Group Risk Governance Framework and other LCH SA-
specific policies, such as the Financial Resource Adequacy Policy,
should collectively ensure that LCH SA is able to access and secure its
securities and funds, the Commission believes that this aspect of the
proposed rule change should help to assure the safeguarding of
securities and funds which are in the custody or control of LCH SA or
for which it is responsible, consistent with Section 17A(b)(3)(F) of
the Act.\30\
---------------------------------------------------------------------------

    \30\ 15 U.S.C. 78q-1(b)(3)(F).
---------------------------------------------------------------------------

    Taking these reasons together, the Commission finds that the
proposed rule change is consistent with 17A(b)(3)(F) of the Act.\31\
---------------------------------------------------------------------------

    \31\ 15 U.S.C. 78q-1(b)(3)(F).
---------------------------------------------------------------------------

C. Consistency With Rule 17Ad-22(e)(2)(i), (iv), (v), and (vi)

i. Rule 17Ad-22(e)(2)(i)
    Rule 17Ad-22(e)(2)(i) requires that LCH SA establish, implement,
maintain, and enforce written policies and procedures reasonably
designed to provide for governance arrangements that are clear and
transparent.\32\
---------------------------------------------------------------------------

    \32\ 17 CFR 240.17Ad-22(e)(2)(i).
---------------------------------------------------------------------------

    The Commission believes that the proposed amendments discussed
above to reflect planned changes to the LCH Group governance
arrangements and the planned termination of the Relationship Agreement
would enhance the clarity of LCH SA's governance arrangements. In
particular, the Commission believes that removing certain provisions
from, and updating references in, the terms of reference of the various
Board committees in light of the anticipated changes to the LCH Group
governance arrangements and the anticipated termination of the
Relationship Agreement, as well as removing the requirements that the
terms of reference be substantially similar to those of LCH Group (as
discussed in Parts II.B, II.D, II.E, and II.F above), should reduce the
possibility for confusion, increasing readability, and promoting
consistency. Similarly, in eliminating the requirement that LCH SA's
Audit Committee coordinate with the Audit Committee of LCH Group, as
discussed in Part II.E above, the proposed rule change should remove a
provision that if left unchanged, could cause confusion as LCH Group is
disbanding its audit committee.
    Similarly, the Commission believes that the changes discussed above
regarding the Board would bring clarity to its operation. Specifically,
in making a technical correction to Article 6 of the Board TOR to
clarify that the Board may validly deliberate if at least half of the
directors are present (as discussed in Part II.B above) the proposed
rule change should reduce the possibility of confusion regarding when
the Board has a quorum.
    Finally, the Commission believes that, in adopting and updating the
terms of reference for certain committees of the Board, the proposed
rule change should clarify the operation of these committees. In
specifying, among other things, the conduct of meetings, quorum,
powers, and confidentiality of proceedings of the Nomination Committee
(as discussed in Part II.G above); how the Audit Committee and
Remuneration Committee would keep and approve meeting minutes (as
discussed in Part II.E and Part II.F above); and how the Remuneration
Committee would approve the remuneration of the LCH SA CEO and
Specified Executives (as discussed in Part II.F above) the proposed
rule change should provide clarity to how these committees would
operate and carry out their responsibilities.
ii. Rule 17Ad-22(e)(2)(iv)
    Rule 17Ad-22(e)(2)(iv) requires that LCH SA establish, implement,
maintain, and enforce written policies and procedures reasonably
designed to provide for governance arrangements that establish that the
board of directors and senior management have appropriate experience
and skills to discharge their duties and responsibilities.\33\
---------------------------------------------------------------------------

    \33\ 17 CFR 240.17Ad-22(e)(2)(iv).
---------------------------------------------------------------------------

    The Commission believes the changes with respect to the
establishment of the Nomination Committee discussed in Part II.C above
should help to ensure consistency with this requirement. Specifically,
the Commission believes that, in establishing standards the Nomination
Committee would use in nominating candidates for appointment to the
Board, the proposed rule change should help to ensure that directors
have the experience and skills needed to comply with their
responsibilities. Similarly, the Commission believes that, in
establishing the procedures that the Nomination Committee would use to
recommend candidates to be Chairman, Independent Directors, and User
Directors, and the standards that the Nomination Committee would use to
determine to select and recommend such candidates, the proposed rule
change should help to ensure that the Chairman, Independent Directors,
and User Directors have the experience and skills needed to comply with
their responsibilities as such. Moreover, in establishing the tenure
for directors and allowing the Nomination Committee to nominate
Independent Directors and User Directors for a longer period as needed
to ensure that not all terms end at the same time, the proposed rule
change should help to prevent a sudden loss of experience that could
negatively affect the Board's ability to carry out its duties. Finally,
in specifying that the Chief Risk Officer of LCH Group may, but is not
required to, be one of the three executive directors of the Board and
removing the requirement that the Chairman of LCH Group be a non-
executive director of the Board, as discussed in Part II.B above, the
proposed rule change should clarify the composition of the Board, and
therefore the Board's potential experience and responsibilities.
iii. Rule 17Ad-22(e)(2)(v)
    Rule 17Ad-22(e)(2)(v) requires that LCH SA establish, implement,
maintain, and enforce written policies and procedures reasonably
designed to provide for governance arrangements that specify clear and
direct lines of responsibility.\34\
---------------------------------------------------------------------------

    \34\ 17 CFR 240.17Ad-22(e)(2)(v).
---------------------------------------------------------------------------

    The Commission believes a number of the changes discussed in Part
II.B above should establish clear and direct lines of responsibility
for the Board. For

example, in amending the Board TOR to specifically require the Board to
annually approve the adoption of the LCH Group Risk Governance
Framework and a number of LCH SA-specific policies, the proposed rule
change should clarify this responsibility of the Board. Similarly, by
amending the Board TOR to require that the Board take into account
certain factors from an existing LCH Group policy (which has been
adopted by LCH SA) prior to issuing a report to the LCH SA shareholders
to recommend a dividend, the proposed rule change should clarify the
factors the Board must consider when exercising this responsibility.
Finally, in making the Board responsible for reviewing and approving
the Nomination Committee TOR, Risk Committee TOR, Remuneration
Committee TOR, Audit Committee TOR, and TSR Committee TOR annually, the
proposed rule change should clarify the Board's responsibility with
respect to these terms of reference.
    The Commission likewise believes a number of the changes discussed
above should establish clear and direct lines of responsibility for
committees of the Board. In adding a reference to the TSR Committee in
the Board TOR and adopting the TSR Committee TOR, the proposed rule
change would establish the TSR Committee and should clearly assign the
TSR Committee certain responsibilities and duties, as discussed in Part
II.G above. Similarly, the proposed rule change should clearly assign
the Nomination Committee certain responsibilities and duties, as
specified in the Nomination Committee TOR discussed in Part II.C above.
Finally, the proposed rule change should clarify the Audit Committee's
responsibilities by updating references to recognize that LCH SA has
more than one external auditor, requiring consideration of the auditor
appointed by LSEG in respect of the wider LSEG Group when making
recommendations to the Board regarding external auditors for LCH SA,
and requiring review of LCH SA's annual audit plan in certain
circumstances, as discussed in Part II.E above.
iv. Rule 17Ad-22(e)(2)(vi)
    Rule 17Ad-22(e)(2)(vi) requires that LCH SA establish, implement,
maintain, and enforce written policies and procedures reasonably
designed to provide for governance arrangements that consider the
interests of participants' customers, securities issuers and holders,
and other relevant stakeholders of LCH SA.\35\
---------------------------------------------------------------------------

    \35\ 17 CFR 240.17Ad-22(e)(2)(vi).
---------------------------------------------------------------------------

    As discussed above, the proposed rule change would make a number of
changes to ensure representation of the interests of LCH Group and
LSEG. For example, the proposed rule change would establish in the
Board TOR certain representation, consent, and consultation rights
similar to what LSEG has in the Relationship Agreement, including
representation on the Board and certain Board committees and rights to
consent with respect to certain actions of the Board and amendment to
the Board TOR, as discussed in Part II.B above. Similarly, with respect
to Board committees, as discussed in Part II.C through II.F above, the
proposed rule change would grant LSEG representation and the right to
consent to certain amendments to the terms of reference. Moreover, the
proposed rule change would give the LCH Group CEO the right to attend
Remuneration Committee meetings as an observer and would require the
CEO of LCH SA to consult with LCH Group prior to taking certain
actions, as discussed in Part II.B above. The proposed rule change
would also authorize LCH SA's sharing of information with LCH Group and
LSEG and would add provisions to resolve possible conflicts of interest
among the companies, as discussed in Part II.B above. The Commission
believes that all of these changes, taken together, should help to
ensure LCH SA's consideration of the interests of LSEG and LCH Group,
which as discussed above, are LCH SA's indirect and direct majority
shareholders.
    Similarly, the Commission believes that, in providing Euronext the
right to propose at least one of the director to the Board so long as
certain contractual agreements remain in force, as discussed in Part
II.B above, the proposed rule change should help to ensure LCH SA's
consideration of the interests of Euronext, which as discussed above,
is a stakeholder in LCH SA.
    For these reasons, the Commission finds that the proposed rule
change is consistent with Rule 17Ad-22(e)(2)(i), (iv), (v), and
(vi).\36\
---------------------------------------------------------------------------

    \36\ 17 CFR 240.17Ad-22(e)(2)(i), (iv), (v), (vi).
---------------------------------------------------------------------------

IV. Conclusion

    On the basis of the foregoing, the Commission finds that the
proposed rule change is consistent with the requirements of the Act,
and in particular, with the requirements of Sections 17A(b)(3)(C) \37\
and 17A(b)(3)(F) of the Act \38\ and Rule 17Ad-22(e)(2)(i), (iv), (v),
and (vi) thereunder.\39\
---------------------------------------------------------------------------

    \37\ 15 U.S.C. 78q-1(b)(3)(C).
    \38\ 15 U.S.C. 78q-1(b)(3)(F).
    \39\ 17 CFR 240.17Ad-22(e)(2)(i), (iv), (v), (vi).
---------------------------------------------------------------------------

    It is therefore ordered pursuant to Section 19(b)(2) of the Act
\40\ that the proposed rule change, as modified by Amendment No. 1 (SR-
LCH-SA-2020-003), be, and hereby is, approved.\41\
---------------------------------------------------------------------------

    \40\ 15 U.S.C. 78s(b)(2).
    \41\ In approving the proposed rule change, the Commission
considered the proposal's impact on efficiency, competition, and
capital formation. 15 U.S.C. 78c(f).

    For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\42\
---------------------------------------------------------------------------

    \42\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------

J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2020-20253 Filed 9-14-20; 8:45 am]
BILLING CODE 8011-01-P


EPA’s Proposed Rule for Cooling Water Intake Structures at Existing
and Phase I Facilities; 316(b) Impingement Requirements

RE: The need to set a de minimis standard

Summary:

Pacific Gas & Electric Company (PG&E) urges EPA to consider including a
de minimis standard for impingement, so that facilities that
substantially minimize impingement with existing technologies are
provided an exemption.  Large affected stakeholder organizations,
including the Edison Electric Institute and the Utility Water Act Group,
have expressed support for the concept of a de minimis exemption as
well.

PG&E believes such a determination should be made based on site-specific
factors and based on criteria that are consistent and verifiable.  The
different water bodies, species of concern, and seasonal dynamics affect
impingement such that an appropriate de minimis exemption for one
facility may be too restrictive at another and too large at another
facility.  Nevertheless, we would urge EPA to provide guidance to
permitting authorities to ensure appropriate de minimis standards are
developed.  The Diablo Canyon Power Plant provides a sound example of a
facility that can be instructive to the design of a metric to apply on a
site-specific basis, or if EPA determines appropriate, could also apply
as the basis for a national standard.

Background:

The Diablo Canyon Power Plant (DCPP) is located on the Pacific coast in
San Luis Obispo County, California.  The plant has a very high capacity
factor and an intake design volume of 2,500 million gallons per day
(mgd).  The plant also demonstrates the lowest impingement biomass per
million gallons circulated of all of the coastal plants in California
that use once-through cooling.

There are 14 coastal power plants in California with 17 separate
structures that have some level of fish impingement as a result of
intake operations. The overall data from California demonstrates the
wide variation in levels of impingement at facilities - from over 32,000
pounds per year to as little as 77 pounds per year, as displayed in the
table below (See Attachment 1, Table E1-1 in August 18, 2011 PG&E
comments to EPA):

This variation in data from a single state clearly demonstrates the
importance of site-specific impingement assessments.

A facility such as DCPP, with average daily impingement of a dozen
predominately juvenile fish, makes a strong case for a de minimis
exemption.  The intake at Diablo Canyon was designed to minimize
impingement and the impingement numbers demonstrate its success – the
plant’s annual impingement losses are approximately 710 pounds per
year (2 pounds or 12 fish per day), while circulating approximately 2.5
billion gallons of water per day.  The open ocean environment means that
most species are adapted to large changes in tides, as well as
significant swells.  Additionally, the plant’s low through-screen
velocity (average centerline between 0.78 and 1.02 fps) allows most fish
to swim in and out of the bar racks.

Establishing the de miminis standard for annual losses should be based
on estimates of impingement from power plants within a region
withdrawing water from similar environments.  Such a baseline can also
help address any concerns for sensitive fish species. Further,
developing additional criteria that account for the large differences in
water intake is also appropriate.  If EPA determined it appropriate to
finalize a national de minimis standard, PG&E supports the Clean Energy
Group’s 316(b) Initiative comments filed related to the proposed rule
and suggested an annual impingement level of 2,000 pounds. Using such a
number is reasonable when one considers the wide range of impingement
levels across the country.

Conclusion:

The low impingement losses measured at DCPP and the characteristics of
fishes collected during associated studies demonstrate that the
facility’s current design achieves a level of impingement that should
qualify for a de minimis exemption.  EPA should consider a
facility-specific de minimis exemption for the impingement mortality
standard that is based on a benchmark average impingement rate (biomass
per volume of water circulated) and/or a general benchmark for annual
total impingement losses of 2,000 pounds. We would be happy to discuss
the design of such a benchmark further with EPA staff.

  PAGE   \* MERGEFORMAT  1


[Federal Register Volume 80, Number 60 (Monday, March 30, 2015)]
[Notices]
[Page 16674]
[FR Doc No: 2015-07209]

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ENVIRONMENTAL PROTECTION AGENCY

[EPA-HQ-OPP-2015-0022; FRL-9924-21]

Pesticide Product Registration; Receipt of Applications for New
Uses

AGENCY: Environmental Protection Agency (EPA).

ACTION: Notice.

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

SUMMARY: EPA has received applications to register new uses for
pesticide products containing currently registered active ingredients.
Pursuant to the Federal Insecticide, Fungicide, and Rodenticide Act
(FIFRA), EPA is hereby providing notice of receipt and opportunity to
comment on these applications.

DATES: Comments must be received on or before April 29, 2015.

ADDRESSES: Submit your comments, identified by docket identification
(ID) number and the File Symbol of interest as shown in the body of
this document, by one of the following methods:
     Federal eRulemaking Portal: http://www.regulations.gov.
Follow the online instructions for submitting comments. Do not submit
electronically any information you consider to be Confidential Business
Information (CBI) or other information whose disclosure is restricted
by statute.
     Mail: OPP Docket, Environmental Protection Agency Docket
Center (EPA/DC), (28221T), 1200 Pennsylvania Ave. NW., Washington, DC
20460-0001.
     Hand Delivery: To make special arrangements for hand
delivery or delivery of boxed information, please follow the
instructions at http://www.epa.gov/dockets/contacts.html.
    Additional instructions on commenting or visiting the docket, along
with more information about dockets generally, is available at http://www.epa.gov/dockets.

FOR FURTHER INFORMATION CONTACT: Susan Lewis, Registration Division
(RD) (7505P), main telephone number:<PHONE_NUMBER>; email address:
<EMAIL_ADDRESS>The mailing address for the contact person is:
Office of Pesticide Programs, Environmental Protection Agency, 1200
Pennsylvania Ave. NW., Washington, DC 20460-0001. As part of the
mailing address, include the contact person's name, division, and mail
code. The division to contact is listed at the end of each application
summary.

SUPPLEMENTARY INFORMATION:

I. General Information

A. Does this action apply to me?

    You may be potentially affected by this action if you are an
agricultural producer, food manufacturer, or pesticide manufacturer.
The following list of North American Industrial Classification System
(NAICS) codes is not intended to be exhaustive, but rather provides a
guide to help readers determine whether this document applies to them.
Potentially affected entities may include:
     Crop production (NAICS code 111).
     Animal production (NAICS code 112).
     Food manufacturing (NAICS code 311).
     Pesticide manufacturing (NAICS code 32532).

B. What should I consider as I prepare my comments for EPA?

    1. Submitting CBI. Do not submit this information to EPA through
regulations.gov or email. Clearly mark the part or all of the
information that you claim to be CBI. For CBI information in a disk or
CD-ROM that you mail to EPA, mark the outside of the disk or CD-ROM as
CBI and then identify electronically within the disk or CD-ROM the
specific information that is claimed as CBI. In addition to one
complete version of the comment that includes information claimed as
CBI, a copy of the comment that does not contain the information
claimed as CBI must be submitted for inclusion in the public docket.
Information so marked will not be disclosed except in accordance with
procedures set forth in 40 CFR part 2.
    2. Tips for preparing your comments. When preparing and submitting
your comments, see the commenting tips at http://www.epa.gov/dockets/comments.html.

II. Registration Applications

    EPA has received applications to register new uses for pesticide
products containing currently registered active ingredients. Pursuant
to the provisions of FIFRA section 3(c)(4) (7 U.S.C. 136a(c)(4)), EPA
is hereby providing notice of receipt and opportunity to comment on
these applications. Notice of receipt of these applications does not
imply a decision by the Agency on these applications.
    1. EPA Registration Number: 100-1254. Docket ID number: EPA-HQ-OPP-
2015 0031. Applicant: Syngenta Crop Protection, 410 Swing Road, P.O.
Box 18300, Greensboro, NC 27419. Active ingredient: Mandipropamid.
Product type: Fungicide. Proposed Use: Potato seeds. Contact: RD.
    2. EPA Registration Number: 100-1254. Docket ID number: EPA-HQ-OPP-
2015-0096. Applicant: Syngenta Crop Protection, 410 Swing Road, P.O.
Box 18300, Greensboro, NC 27419. Active ingredient: Mandipropamid.
Product type: Fungicide. Proposed Use: Non-bearing citrus. Contact: RD.
    3. EPA File Symbol: 100-RUTI. Docket ID number: EPA-HQ-OPP-2013-
0141. Applicant: Syngenta Crop Protection LLC., P.O. Box 18300,
Greensboro, NC 27419-8300. Active ingredient: Benzovindiflupyr. Product
type: Fungicide. Proposed uses: Cereals; blueberries (non-bearing);
corn; cotton; vegetables, cucurbits (crop group 9); fruiting vegetables
(crop group 8-10); small fruit climbing subgroup 13-07F (except fuzzy
kiwifruit); legume vegetables subgroup 6C; peanuts; pome fruit (crop
group 11-10); rapeseed subgroup 20A; vegetables, tuberous and corm
subgroup 1C; turf and ornamentals. Contact: RD.
    4. EPA Registration Number or File Symbol: 8033-RGR. Docket ID
number: EPA-HQ-OPP-2015-0124. Applicant: Nisso America, Inc., Nippon
Soda Co., LTD., 88 Pine Street, Fourteenth Floor, New York, NY 10005.
Active ingredients: Etofenprox, Acetamiprid, Piperonyl Butoxide, S-
Methoprene. Product type: Spot on for dogs. Proposed Use: Insecticide.
Contact: RD.

    Authority: 7 U.S.C. 136 et seq.

    Dated: March 20, 2015.
Daniel J. Rosenblatt,
Acting, Director, Registration Division, Office of Pesticide Programs.
[FR Doc. 2015-07209 Filed 3-27-15; 8:45 am]
 BILLING CODE 6560-50-P


[Federal Register Volume 77, Number 30 (Tuesday, February 14, 2012)]
[Rules and Regulations]
[Pages 8117-8119]
[FR Doc No: 2012-3398]

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DEPARTMENT OF HEALTH AND HUMAN SERVICES

Food and Drug Administration

21 CFR Part 870

[Docket No. FDA-2012-N-0091]

Medical Devices; Cardiovascular Devices; Classification of the
Endovascular Suturing System

AGENCY: Food and Drug Administration, HHS.

ACTION: Final rule.

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SUMMARY: The Food and Drug Administration (FDA) is classifying the
endovascular suturing system into class II (special controls). The
Agency is classifying the device into class II (special controls) in
order to provide a reasonable assurance of safety and effectiveness of
the device.

DATES: This rule is effective March 15, 2012. The classification was
effective on November 21, 2011.

FOR FURTHER INFORMATION CONTACT: Robert Gill, Center for Devices and
Radiological Health, Food and Drug Administration, 10903 New Hampshire
Ave., Bldg. 66, rm. 1547, Silver Spring, MD, 20993-0002,<PHONE_NUMBER>.

SUPPLEMENTARY INFORMATION:

I. Background

    In accordance with section 513(f)(1) of the Federal Food, Drug, and
Cosmetic Act (FD&C Act) (21 U.S.C. 360c(f)(1)), devices that were not
in commercial distribution before May 28, 1976 (the date of enactment
of the Medical Device Amendments of 1976), generally referred to as
postamendments devices, are classified automatically by statute into
class III without any FDA rulemaking process. These devices remain in
class III and require premarket approval, unless and until the device
is classified or reclassified into class I or II, or FDA issues an
order finding the device to be substantially equivalent, in accordance
with section 513(i) of the FD&C Act (21 U.S.C. 360c(i)), to a predicate
device that does not require premarket approval. The Agency determines
whether new devices are substantially equivalent to predicate devices
by means of premarket notification procedures in section 510(k) of the
FD&C Act (21 U.S.C. 360(k)) and part 807 of the regulations (21 CFR
part 807).
    Section 513(f)(2) of the FD&C Act provides that any person who
submits a premarket notification under section 510(k) of the FD&C Act
for a device that has not previously been classified may, within 30
days after receiving an order classifying the device into class III
under section 513(f)(1) of the FD&C Act, request FDA to classify the
device under the criteria set forth in section 513(a)(1) of the FD&C
Act. FDA will, within 60 days of receiving this request, classify the
device by written order. This classification will be the initial
classification of the device. Within 30 days after the issuance of an
order classifying the device, FDA must publish a notice in the Federal
Register announcing this classification.
    In accordance with section 513(f)(1) of the FD&C Act, FDA issued an
order on November 12, 2010, classifying the EndoStapling System into
class III, because it was not substantially equivalent to a device that
was introduced or delivered for introduction into interstate commerce
for commercial distribution before May 28, 1976, or a device which was
subsequently reclassified into class I or class II. On December 10,
2010, Aptus Endosystems, Inc. submitted a petition requesting
classification of the EndoStapling System under section 513(f)(2) of
the FD&C Act. The manufacturer recommended that the device be
classified into class II (Ref. 1).
    In accordance with section 513(f)(2) of the FD&C Act, FDA reviewed
the petition in order to classify the device under the criteria for
classification set forth in section 513(a)(1) of the FD&C Act. FDA
classifies devices into class II if general controls by themselves are
insufficient to provide reasonable assurance of safety and
effectiveness, but there is sufficient information to establish special
controls to provide reasonable assurance of the safety and
effectiveness of the device for its intended use. After review of the
information submitted in the petition, FDA determined that the device
can be classified into class II with the establishment of special
controls. FDA believes these special controls will provide reasonable
assurance of the safety and effectiveness of the device.
    The device is assigned the generic name endovascular suturing
system, and it is identified as a medical device intended to provide
fixation and sealing between an endovascular graft and the native
artery. The system is comprised of the implant device and an
endovascular delivery device used to implant the endovascular suture.
    FDA has identified the following risks to health associated with
this type of device and the measures required to mitigate these risks:

                                Identified Risks and Proposed Mitigation Measures
----------------------------------------------------------------------------------------------------------------
               Identified risk                                  Recommended mitigation measures
----------------------------------------------------------------------------------------------------------------
Adverse tissue reaction.....................  Biocompatibility Labeling
Infection...................................  Sterility and Shelf Life Testing
Incompatibility with endograft..............  Bench testing
Migration or fracture of the endovascular     Bench testing
 suture.                                      Animal testing
                                              Clinical evaluation
Imaging Incompatibility.....................  Bench testing
                                              Labeling
Electromagnetic incompatibility.............  Electromagnetic Compatibility
                                              Labeling
Electrical safety issues....................  Electrical Safety Testing
                                              Labeling
Corrosion...................................  Bench testing
Improper deployment or inability to deploy..  Bench testing
                                              Animal testing
                                              Clinical evaluation
                                              Software validation
Failure to prevent endograft migration or     Bench testing
 Type I endoleak.                             Clinical evaluation
                                              Cadaver testing
----------------------------------------------------------------------------------------------------------------

    FDA believes that the following special controls address the risks
to health and provide reasonable assurance of the safety and
effectiveness of the device: (1) The device should be demonstrated to
be biocompatible; (2) sterility and shelf life testing should
demonstrate the sterility of patient-contacting components and the
shelf-life of these components; (3) non-clinical and clinical
performance testing should demonstrate substantial equivalence in
safety and effectiveness, including durability, compatibility,
migration resistance, corrosion resistance, and delivery and
deployment; (4) non-clinical testing should evaluate the compatibility
of the device in an magnetic resonance (MR) environment; (5)
appropriate analysis and non-clinical testing should validate
electromagnetic compatibility (EMC) and electrical safety; (6) the
sale, distribution, and use of the device are restricted to
prescription use in accordance with 21 CFR 801.109 (Sec.  801.109); and
(7) labeling must bear all information required for the safe and
effective use of the device as outlined in Sec.  801.109(c), including
a detailed summary of the non-clinical and clinical evaluations
pertinent to use of the device; in addition to general controls,
address the risks to health and provide reasonable assurance of the
safety and effectiveness of the device. Therefore, on November 21,
2011, FDA issued an order to the petitioner classifying the device into
class II. FDA is codifying the classification of the device by adding
Sec.  870.3460.
    Following the effective date of this final classification rule, any
firm submitting a 510(k) premarket notification for an endovascular
suturing system will need to comply with the special controls named in
the regulation.
    Section 510(m) of the FD&C Act provides that FDA may exempt a class
II device from the premarket notification requirements under section
510(k) of the FD&C Act, if FDA determines that premarket notification
is not necessary to provide reasonable assurance of the safety and
effectiveness of the device. For this type of device, FDA has
determined that premarket notification is necessary to provide
reasonable assurance of the safety and effectiveness of the device.
Therefore, this device type is not exempt from premarket notification
requirements. Persons who intend to market this type of device must
submit to FDA a premarket notification, prior to marketing the device,
which contains information about the endovascular suturing system they
intend to market.

II. Environmental Impact

    The Agency has determined under 21 CFR 25.34(b) that this action is
of a type that does not individually or cumulatively have a significant
effect on the human environment. Therefore, neither an environmental
assessment nor an environmental impact statement is required.

III. Analysis of Impacts

    FDA has examined the impacts of the final rule under Executive
Order 12866, Executive Order 13563, the Regulatory Flexibility Act (5
U.S.C. 601-612), and the Unfunded Mandates Reform Act of 1995 (Pub. L.
104-4). Executive Orders 12866 and 13563 direct agencies to assess all
costs and benefits of available regulatory alternatives and, when
regulation is necessary, to select regulatory approaches that maximize
net benefits (including potential economic, environmental, public
health and safety, and other advantages; distributive impacts; and
equity). The Agency believes that this final rule is not a significant
regulatory action under Executive Order 12866. The Regulatory
Flexibility Act requires agencies to analyze regulatory options that
would minimize any significant impact of a rule on small entities.
Because reclassification of this device from class III to class II will
relieve manufacturers of the device of the cost of complying with the
premarket approval requirements of section 515 of the FD&C Act (21
U.S.C. 360e), and may permit small potential competitors to enter the
marketplace by lowering their costs, the Agency certifies that the
final rule will not have a significant economic impact on a substantial
number of small entities.
    Section 202(a) of the Unfunded Mandates Reform Act of 1995 requires
that agencies prepare a written statement, which includes an assessment
of anticipated costs and benefits, before proposing ``any rule that
includes any Federal mandate that may result in the expenditure by
State, local, and tribal governments, in the aggregate, or by the
private sector, of $100,000,000 or more (adjusted annually for
inflation) in any one year.'' The current threshold after adjustment
for inflation is $136 million, using the most current (2010) Implicit
Price Deflator for the Gross Domestic Product. FDA does not expect this
final rule to result in any 1-year expenditure that would meet or
exceed this amount.

IV. Federalism

    FDA has analyzed this final rule in accordance with the principles
set forth in Executive Order 13132. Section 4(a) of the Executive order
requires agencies to ``construe * * * a Federal statute to preempt
State law only where the statute contains an express preemption
provision or there is some other clear evidence that the Congress
intended preemption of State law, or where the exercise of State
authority conflicts with the exercise of Federal authority under the
Federal statute.'' Federal law includes an express preemption provision
that preempts certain state requirements ``different from or in
addition to'' certain Federal requirements applicable to devices. (See
21 U.S.C. 360(k); See Medtronic, Inc. v. Lohr, 518 U.S. 470 (1996);
Riegel v. Medtronic, Inc., 552 U.S. 312 (2008)). The special controls
established by this final rule create ``requirements'' to address each
identified risk to health presented by these specific medical devices
under 21 U.S.C. 360(k), even though product sponsors may have
flexibility in how they meet those requirements (See Papike v.
Tambrands, Inc., 107 F.3d 737, 740-42 (9th Cir. 1997)).

V. Paperwork Reduction Act of 1995

    This final rule establishes special controls that refer to
currently approved collections of information found in other FDA
regulations. These collections of information are subject to review by
the Office of Management and Budget (OMB) under the Paperwork Reduction
Act of 1995 (44 U.S.C. 32501-3520). The collections of information in
part 807 subpart E, regarding premarket notification submissions, have
been approved under OMB control no. 0910-0120; the collections of
information in 21 CFR part 801, regarding labeling, have been approved
under OMB control no. 0910-0485.

VI. Reference

    The following reference has been placed on display in the Division
of Dockets Management (HFA-305), Food and Drug Administration, 5630
Fishers Lane, rm. 1061, Rockville, MD 20852, and may be seen by
interested persons between 9 a.m. and 4 p.m., Monday through Friday.

    1. Petition: Request for Evaluation of Automatic Class III
Designation under Sec.  513(f)(2) of the Food, Drug, and Cosmetic
Act from Aptus Endosystems, Inc., December 10, 2010.

List of Subjects in 21 CFR Part 870

    Medical devices.

    Therefore, under the Federal Food, Drug, and Cosmetic Act and under

authority delegated to the Commissioner of Food and Drugs, 21 CFR part
870 is amended as follows:

PART 870--CARDIOVASCULAR DEVICES

0
1. The authority citation for 21 CFR part 870 continues to read as
follows:

    Authority:  21 U.S.C. 351, 360, 360c, 360e, 360j, 371.

0
2 Section 870.3460 is added to subpart D to read as follows:

Sec.  870.3460  Endovascular Suturing System.

    (a) Identification. An endovascular suturing system is a medical
device intended to provide fixation and sealing between an endovascular
graft and the native artery. The system is comprised of the implant
device and an endovascular delivery device used to implant the
endovascular suture.
    (b) Classification. Class II (special controls). The special
controls for this device are:
    (1) The device should be demonstrated to be biocompatible;
    (2) Sterility and shelf life testing should demonstrate the
sterility of patient-contacting components and the shelf-life of these
components;
    (3) Non-clinical and clinical performance testing should
demonstrate substantial equivalence in safety and effectiveness,
including durability, compatibility, migration resistance, corrosion
resistance, and delivery and deployment;
    (4) Non-clinical testing should evaluate the compatibility of the
device in an magnetic resonance (MR) environment;
    (5) Appropriate analysis and non-clinical testing should validate
electromagnetic compatibility (EMC) and electrical safety;
    (6) The sale, distribution, and use of the device are restricted to
prescription use in accordance with 21 CFR 801.109 of this chapter; and
    (7) Labeling must bear all information required for the safe and
effective use of the device as outlined in Sec.  801.109(c) of this
chapter, including a detailed summary of the non-clinical and clinical
evaluations pertinent to use of the device.

    Dated: February 9, 2012.
Nancy K. Stade,
Deputy Director for Policy, Center for Devices and Radiological Health.
[FR Doc. 2012-3398 Filed 2-13-12; 8:45 am]
BILLING CODE 4160-01-P