[Federal Register Volume 81, Number 212 (Wednesday, November 2, 2016)]
[Notices]
[Pages 76343-76344]
[FR Doc No: 2016-26442]

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DEPARTMENT OF ENERGY

Federal Energy Regulatory Commission

Combined Notice of Filings #1

    Take notice that the Commission received the following exempt
wholesale generator filings:

    Docket Numbers: EG17-16-000.
    Applicants: 96WI 8me LLC.
    Description: Notice of Self-Certification of Exempt Wholesale
Generator Status of 96WI 8me LLC.
    Filed Date: 10/26/16.
    Accession Number: 20161026-5183.
    Comments Due: 5 p.m. ET 11/16/16.

    Take notice that the Commission received the following electric
rate filings:

    Docket Numbers: ER12-959-000.
    Applicants: Southwest Power Pool, Inc.
    Description: Report Filing: Tri-County Electric Cooperative Formula
Rate Second Refund Report in ER12-959 to be effective N/A.
    Filed Date: 10/26/16.
    Accession Number: 20161026-5118.
    Comments Due: 5 p.m. ET 11/16/16.

    Docket Numbers: ER16-2234-001.
    Applicants: EF Kenilworth LLC.
    Description: Report Filing: Refund Report to be effective N/A.
    Filed Date: 10/27/16.
    Accession Number: 20161027-5099.
    Comments Due: 5 p.m. ET 11/17/16.

    Docket Numbers: ER16-2402-000; ER16-2403-000; ER16-2404-000.
    Applicants: UGI Utilities Inc.
    Description: Supplement to August 11, 2016 UGI Utilities Inc., et
al. Triennial Market Power Analyses, et al.
    Filed Date: 10/25/16.
    Accession Number: 20161025-5055.
    Comments Due: 5 p.m. ET 11/15/16.

    Docket Numbers: ER16-2532-001.
    Applicants: Midcontinent Independent System Operator, Inc.
    Description: Tariff Amendment: 2016-10-27_Amendment to filing to
revise RPU Att O and Protocols to be effective 11/1/2016.
    Filed Date: 10/27/16.
    Accession Number: 20161027-5104.
    Comments Due: 5 p.m. ET 11/17/16.

    Docket Numbers: ER16-2558-001.
    Applicants: Pacific Gas and Electric Company.
    Description: Tariff Amendment: Errata Filing to the E&P Agreements
for Alamo Springs Solar 1 and 2 to be effective 9/8/2016.
    Filed Date: 10/27/16.
    Accession Number: 20161027-5003.
    Comments Due: 5 p.m. ET 11/17/16.

    Docket Numbers: ER16-2569-001.
    Applicants: The Dayton Power and Light Company.
    Description: Tariff Amendment: DP&L Supplemental Filing Response to
Deficiency Letter to be effective 11/8/2016.
    Filed Date: 10/27/16.
    Accession Number: 20161027-5089.
    Comments Due: 5 p.m. ET 11/17/16.

    Docket Numbers: ER16-2570-001.
    Applicants: AES Ohio Generation, LLC.
    Description: Tariff Amendment: AES Ohio Supplemental Filing
Response to Deficiency Letter to be effective 11/8/2016.
    Filed Date: 10/27/16.
    Accession Number: 20161027-5095.
    Comments Due: 5 p.m. ET 11/17/16.

    Docket Numbers: ER17-135-001.
    Applicants: DesertLink, LLC.
    Description: Tariff Amendment: Amendment to 1 to be effective 12/
19/2016.
    Filed Date: 10/27/16.
    Accession Number: 20161027-5169.
    Comments Due: 5 p.m. ET 11/17/16.

    Docket Numbers: ER17-190-000.
    Applicants: Wisconsin Public Service Corporation.
    Description: Sec.  205(d) Rate Filing: WPS Corp and Alger Delta
Agreement for Wholesale Distribution Service to be effective 1/1/2017.
    Filed Date: 10/27/16.
    Accession Number: 20161027-5058.
    Comments Due: 5 p.m. ET 11/17/16.

    Docket Numbers: ER17-191-000.
    Applicants: Midcontinent Independent System Operator, Inc.
    Description: Sec.  205(d) Rate Filing: 2016-10-27_ATC Request for
Updated Depreciation Rates to be effective 1/1/2017.
    Filed Date: 10/27/16.
    Accession Number: 20161027-5068.
    Comments Due: 5 p.m. ET 11/17/16.

    Docket Numbers: ER17-192-000.
    Applicants: Northern Maine Independent System Administrator, Inc.
    Description: Sec.  205(d) Rate Filing: Normal Filing NMMR #10
to be effective 11/1/2016.
    Filed Date: 10/27/16.
    Accession Number: 20161027-5088.
    Comments Due: 5 p.m. ET 11/17/16.

    Docket Numbers: ER17-193-000.
    Applicants: Midcontinent Independent System Operator, Inc.
    Description: Sec.  205(d) Rate Filing: 2016-10-27_SA 2856
MidAmerican-MidAmerican 1st Rev GIA (J411) to be effective 10/28/2016.
    Filed Date: 10/27/16.
    Accession Number: 20161027-5105.
    Comments Due: 5 p.m. ET 11/17/16.

    Docket Numbers: ER17-194-000.
    Applicants: Hartree Partners, LP.
    Description: Baseline eTariff Filing: Administrative eTariff Filing
to be effective 10/28/2016.
    Filed Date: 10/27/16.
    Accession Number: 20161027-5120.
    Comments Due: 5 p.m. ET 11/17/16.

    Docket Numbers: ER17-195-000.
    Applicants: Midcontinent Independent System Operator, Inc.
    Description: Sec.  205(d) Rate Filing: 2016-10-27 SA 1756 METC-
Consumers Energy 10th Rev. GIA (G479B) to be effective 10/1/2016.
    Filed Date: 10/27/16.
    Accession Number: 20161027-5121.
    Comments Due: 5 p.m. ET 11/17/16.

    Docket Numbers: ER17-196-000.
    Applicants: Pima Energy Storage System, LLC.
    Description: Baseline eTariff Filing: Pima Energy Storage System,
LLC Application for Market-Based Rates to be effective 10/28/2016.
    Filed Date: 10/27/16.
    Accession Number: 20161027-5141.
    Comments Due: 5 p.m. ET 11/17/16.
    Docket Numbers: ER17-197-000.
    Applicants: Midcontinent Independent System Operator, Inc.
    Description: Sec.  205(d) Rate Filing: 2016-10-27_SA 2966 ATC-Upper
Michigan Energy Resources CFA to be effective 12/27/2016.
    Filed Date: 10/27/16.
    Accession Number: 20161027-5142.
    Comments Due: 5 p.m. ET 11/17/16.

    Docket Numbers: ER17-198-000.
    Applicants: Midcontinent Independent System Operator, Inc.
    Description: Sec.  205(d) Rate Filing: 2016-10-27_SA 2967 ATC-Upper
Michigan Energy Resources D-TIA to be effective 12/27/2016.
    Filed Date: 10/27/16.
    Accession Number: 20161027-5143.
    Comments Due: 5 p.m. ET 11/17/16.

    Docket Numbers: ER17-199-000.
    Applicants: Midcontinent Independent System Operator, Inc.
    Description: Sec.  205(d) Rate Filing: 2016-10-27_SA 2968 ATC-Upper
Michigan Energy Resources PSA to be effective 12/27/2016.
    Filed Date: 10/27/16.
    Accession Number: 20161027-5145.
    Comments Due: 5 p.m. ET 11/17/16.

    Docket Numbers: ER17-200-000.
    Applicants: PJM Interconnection, L.L.C.

    Description: Sec.  205(d) Rate Filing: 3rd Quarter 2016 Update to
OA and RAA Member Lists to be effective 9/30/2016.
    Filed Date: 10/27/16.
    Accession Number: 20161027-5153.
    Comments Due: 5 p.m. ET 11/17/16.

    Docket Numbers: ER17-201-000.
    Applicants: Shell Energy North America (US), L.P.
    Description: Sec.  205(d) Rate Filing: Category 1 Seller Notice to
be effective 10/28/2016.
    Filed Date: 10/27/16.
    Accession Number: 20161027-5158.
    Comments Due: 5 p.m. ET 11/17/16.

    The filings are accessible in the Commission's eLibrary system by
clicking on the links or querying the docket number.
    Any person desiring to intervene or protest in any of the above
proceedings must file in accordance with Rules 211 and 214 of the
Commission's Regulations (18 CFR 385.211 and 385.214) on or before 5:00
p.m. Eastern time on the specified comment date. Protests may be
considered, but intervention is necessary to become a party to the
proceeding.
    eFiling is encouraged. More detailed information relating to filing
requirements, interventions, protests, service, and qualifying
facilities filings can be found at: http://www.ferc.gov/docs-filing/efiling/filing-req.pdf. For other information, call<PHONE_NUMBER>
(toll free). For TTY, call<PHONE_NUMBER>.

    Dated: October 27, 2016.
Nathaniel J. Davis, Sr.,
Deputy Secretary.
[FR Doc. 2016-26442 Filed 11-1-16; 8:45 am]
 BILLING CODE 6717-01-P


[Federal Register Volume 77, Number 236 (Friday, December 7, 2012)]
[Notices]
[Pages 73029-73031]
[FR Doc No: 2012-29687]

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ENVIRONMENTAL PROTECTION AGENCY

[FRL-9759-2]

Proposed Consent Decree, Clean Air Act Citizen Suit

AGENCY: Environmental Protection Agency (EPA).

ACTION: Notice of proposed consent decree; request for public comment.

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SUMMARY: In accordance with section 113(g) of the Clean Air Act, as
amended (``CAA'' or the ``Act''), notice is hereby given of a proposed
consent decree to address a lawsuit filed by Sierra Club in the United
States District Court for the District of Columbia: Sierra Club v.
Jackson, No. 1:08-cv-00424 RWR (D. DC). Sierra Club filed a complaint
alleging that EPA failed to meet its obligations under section
112(e)(1)(E) of

the CAA to promulgate emission standards for hazardous air pollutant
emissions from brick and structural clay products manufacturing
facilities and clay ceramics manufacturing facilities located at major
sources by November 15, 2000. The proposed consent decree establishes
deadlines for EPA's proposed and final actions for meeting these
obligations.

DATES: Written comments on the proposed consent decree must be received
by January 7, 2013.

ADDRESSES: Submit your comments, identified by Docket ID number EPA-HQ-
OGC-2012-0905, online at www.regulations.gov (EPA's preferred method);
by email to<EMAIL_ADDRESS>by mail to EPA Docket Center,
Environmental Protection Agency, Mailcode: 2822T, 1200 Pennsylvania
Ave. NW., Washington, DC 20460-0001; or by hand delivery or courier to
EPA Docket Center, EPA West, Room 3334, 1301 Constitution Ave. NW.,
Washington, DC, between 8:30 a.m. and 4:30 p.m. Monday through Friday,
excluding legal holidays. Comments on a disk or CD-ROM should be
formatted in Word or ASCII file, avoiding the use of special characters
and any form of encryption, and may be mailed to the mailing address
above.

FOR FURTHER INFORMATION CONTACT: Scott Jordan, Air and Radiation Law
Office (2344A), Office of General Counsel, U.S. Environmental
Protection Agency, 1200 Pennsylvania Ave. NW., Washington, DC 20460;
telephone:<PHONE_NUMBER>; fax number<PHONE_NUMBER>; email address:
<EMAIL_ADDRESS>
SUPPLEMENTARY INFORMATION:

I. Additional Information About the Proposed Consent Decree

    The proposed consent decree would resolve a lawsuit filed by Sierra
Club seeking to compel EPA to promulgate emission standards for
hazardous air pollutant emissions from brick and structural clay
products manufacturing facilities and clay ceramics manufacturing
facilities located at major sources under section 112(e)(1)(E) of the
CAA. Under the proposed consent decree, EPA shall no later than August
30, 2013, sign a notice of proposed rulemaking to set national emission
standards for hazardous air pollutants (``NESHAP'') pursuant to section
112(d) of the CAA, 42 U.S.C. 7412(d), for brick and structural clay
products manufacturing facilities and clay ceramics manufacturing
facilities located at major sources. In addition, under the proposed
consent decree, EPA shall no later than July 31, 2014, sign a notice of
final rulemaking to set NESHAP for the source categories covered by the
proposed rule.
    The proposed consent decree further requires that, within 10
business days of signing a proposed or final rule, EPA shall deliver a
notice of such action to the Office of the Federal Register for
publication and that once EPA fulfills its obligations under the decree
it may move to have the decree terminated.
    For a period of thirty (30) days following the date of publication
of this notice, the Agency will accept written comments relating to the
proposed consent decree from persons who were not named as parties or
intervenors to the litigation in question. EPA or the Department of
Justice may withdraw or withhold consent to the proposed consent decree
if the comments disclose facts or considerations that indicate that
such consent is inappropriate, improper, inadequate, or inconsistent
with the requirements of the Act. Unless EPA or the Department of
Justice determines, based on any comment submitted, that consent to
this consent decree should be withdrawn, the terms of the decree will
be affirmed.

II. Additional Information About Commenting on the Proposed Consent
Decree

A. How can I get a copy of the consent decree?

    The official public docket for this action (identified by Docket ID
No. EPA-HQ-OGC-2012-0905) contains a copy of the proposed consent
decree. The official public docket is available for public viewing at
the Office of Environmental Information (OEI) Docket in the EPA Docket
Center, EPA West, Room 3334, 1301 Constitution Ave. NW., Washington,
DC. The EPA Docket Center Public Reading Room is open from 8:30 a.m. to
4:30 p.m., Monday through Friday, excluding legal holidays. The
telephone number for the Public Reading Room is<PHONE_NUMBER>, and the
telephone number for the OEI Docket is<PHONE_NUMBER>.
    An electronic version of the public docket is available through
www.regulations.gov. You may use www.regulations.gov to submit or view
public comments, access the index listing of the contents of the
official public docket, and to access those documents in the public
docket that are available electronically. Once in the system, key in
the appropriate docket identification number then select ``search''.
    It is important to note that EPA's policy is that public comments,
whether submitted electronically or on paper, will be made available
for public viewing online at www.regulations.gov without change, unless
the comment contains copyrighted material, CBI, or other information
whose disclosure is restricted by statute. Information claimed as CBI
and other information whose disclosure is restricted by statute is not
included in the official public docket or in the electronic public
docket. EPA's policy is that copyrighted material, including
copyrighted material contained in a public comment, will not be placed
in EPA's electronic public docket but will be available only in
printed, paper form in the official public docket. Although not all
docket materials may be available electronically, you may still access
any of the publicly available docket materials through the EPA Docket
Center.

B. How and to whom do I submit comments?

    You may submit comments as provided in the ADDRESSES section.
Please ensure that your comments are submitted within the specified
comment period. Comments received after the close of the comment period
will be marked ``late.'' EPA is not required to consider these late
comments.
    If you submit an electronic comment, EPA recommends that you
include your name, mailing address, and an email address or other
contact information in the body of your comment and with any disk or
CD-ROM you submit. This ensures that you can be identified as the
submitter of the comment and allows EPA to contact you in case EPA
cannot read your comment due to technical difficulties or needs further
information on the substance of your comment. Any identifying or
contact information provided in the body of a comment will be included
as part of the comment that is placed in the official public docket,
and made available in EPA's electronic public docket. If EPA cannot
read your comment due to technical difficulties and cannot contact you
for clarification, EPA may not be able to consider your comment.
    Use of the www.regulations.gov Web site to submit comments to EPA
electronically is EPA's preferred method for receiving comments. The
electronic public docket system is an ``anonymous access'' system,
which means EPA will not know your identity, email address, or other
contact information unless you provide it in the body of your comment.
In contrast to EPA's electronic public docket, EPA's electronic mail
(email) system is not an ``anonymous access'' system. If you send an
email comment directly to the Docket without going

through www.regulations.gov, your email address is automatically
captured and included as part of the comment that is placed in the
official public docket, and made available in EPA's electronic public
docket.

    Dated: November 29, 2012.
Lorie J. Schmidt,
Associate General Counsel.
[FR Doc. 2012-29687 Filed 12-6-12; 8:45 am]
BILLING CODE 6560-50-P


[Federal Register Volume 84, Number 131 (Tuesday, July 9, 2019)]
[Notices]
[Pages 32816-32821]
[FR Doc No: 2019-14627]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-86296; File No. SR-OCC-2019-005]

Self-Regulatory Organizations; The Options Clearing Corporation;
Notice of Filing of Proposed Rule Change Related to the Options
Clearing Corporation's Vanilla Option Model and Smoothing Algorithm

July 3, 2019.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934
(``Exchange Act'' or ``Act''),\1\ and Rule 19b-4 thereunder,\2\ notice
is hereby given that on June 28, 2019, the Options Clearing Corporation
(``OCC'') filed with the Securities and Exchange Commission
(``Commission'') the proposed rule change as described in Items I, II,
and III below, which Items have been prepared by OCC. The Commission is
publishing this notice to solicit comments on the proposed rule change
from interested persons.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
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I. Clearing Agency's Statement of the Terms of Substance of the
Proposed Rule Change

    The proposed rule change is filed in connection with proposed
changes to formalize and update OCC's models for: (1) Generating
theoretical values, implied volatilities and certain risk sensitivities
for plain vanilla listed options (``Vanilla Option Model'') and (2)
estimating fair or ``smoothed'' prices of plain vanilla listed options
based on their bid and ask price quotes (``Smoothing Algorithm''). The
proposed changes are discussed in detail in Item II below.
    The proposed changes to Chapter 17 (Vanilla Option Model) and
Chapter 18 (Smoothing Algorithm) of OCC's Margins Methodology are
contained in confidential Exhibits 5A and 5B of the filing. Material
proposed to be added is marked by underlining and material proposed to
be deleted is marked by strikethrough text. OCC also has included
backtesting and impact analysis of the proposed model changes in
confidential Exhibit 3.
    The proposed rule change is available on OCC's website at https://www.theocc.com/about/publications/bylaws.jsp. All terms with initial
capitalization that are not otherwise defined herein have the same
meaning as set forth in the OCC By-Laws and Rules.\3\
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    \3\ OCC's By-Laws and Rules can be found on OCC's public
website: http://optionsclearing.com/about/publications/bylaws.jsp.
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II. Clearing Agency's Statement of the Purpose of, and Statutory Basis
for, the Proposed Rule Change

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

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

(1) Purpose
    The purpose of the proposed rule change is to introduce
enhancements to OCC's Vanilla Option Model, which is used to generate
theoretical values, implied volatilities and risk sensitives for plain
vanilla listed options, and to the Smoothing Algorithm, which is used
to estimate fair prices of listed option contracts cased on their bid
and ask price quotes. Specifically, the proposed methodology
enhancements to the Vanilla Option Model would include: (1) Replacing
use of an interest rate yield curve with constant interest rates; (2)
replacing use of the last paid dividends with a schedule of forecasted
dividends; (3) using borrowing costs as an input in valuations; (4)
replacing the binomial tree used to price American-style options with a
binomial tree that has a higher rate of convergence; and (5) using
additional ``Greeks'' as inputs in valuations. Proposed enhancements to
the Smoothing Algorithm would include: (1) Aligning the binomial tree
using in the Vanilla Option Model with the binomial tree used in the
Smoothing Algorithm; (2) using basis futures prices which close at the
same time as the underlying indices to prevent price discrepancies; (3)
capping unacceptably high volatilities in out-of-the-money regions more
gradually to make convexity in pricing changes more continuous and
eliminate associated arbitrage opportunities; (4) using current market
prices of plain vanilla listed options to generate prices for short-
dated FLEX options; and (5) using borrowing costs as an independent
input in the pricing of plain vanilla listed options.
Background
    OCC's margin methodology, the System for Theoretical Analysis and
Numerical Simulations (``STANS''), is OCC's proprietary risk management
system that calculates Clearing Member margin requirements.\4\ STANS
utilizes large-scale Monte Carlo simulations to forecast price and
volatility movements in determining a Clearing Member's margin
requirement.\5\ The STANS margin requirement is calculated at the
portfolio level of Clearing Member legal entity marginable net
positions tier account (tiers can be customer, firm, or market marker)
and consists of an estimate of a 99% two-day expected shortfall (``99%
Expected Shortfall'') and an add-on for model risk (the concentration/
dependence stress test charge). The STANS methodology is used to
measure the exposure of portfolios of options and futures cleared by
OCC and cash instruments in margin collateral.
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    \4\ See Securities Exchange Act Release No. 53322 (February 15,
2006), 71 FR 9403 (February 23, 2006) (SR-OCC-2004-20). A detailed
description of the STANS methodology is available at http://optionsclearing.com/risk-management/margins/.
    \5\ See OCC Rule 601.
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    STANS margin requirements are comprised of the sum of several
components, each reflecting a different

aspect of risk. The base component of the STANS margin requirement for
each account is obtained using a risk measure known as 99% Expected
Shortfall. Under the 99% Expected Shortfall calculation, an account has
a base margin excess (deficit) if its positions in cleared products,
plus all existing collateral--whether of types included in the Monte
Carlo simulation or of types subjected to traditional ``haircuts'' --
would have a positive (negative) net worth after incurring a loss equal
to the average of all losses beyond the 99% value at risk (or ``VaR'')
point. This base component is then adjusted by the addition of a stress
test component, which is obtained from consideration of the increases
in 99% Expected Shortfall that would arise from market movements that
are especially large and/or in which various kinds of risk factors
exhibit perfect or zero correlations in place of their correlations
estimated from historical data, or from extreme adverse idiosyncratic
movements in individual risk factors to which the account is
particularly exposed.\6\
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    \6\ STANS margins may also include other add on charges, which
are considerably smaller than the base and stress test components,
and many of which affect only a minority of accounts.
---------------------------------------------------------------------------

    Two primary components of STANS are the Vanilla Option Model, which
is used to generate theoretical values, implied volatilities and
certain risk sensitivities for plain vanilla listed options, and the
Smoothing Algorithm, which is used to estimate fair prices of listed
option contracts based on their bid and ask price quotes. OCC's current
Vanilla Option Model and Smoothing Algorithm and proposed changes
thereto are discussed in detail below.
Vanilla Option Model
    The Vanilla Option Model is OCC's model for generating theoretical
values, implied volatilities and certain risk sensitivities for plain
vanilla listed options.\7\ The theoretical values generated by OCC's
Vanilla Option Model are the estimated values (as opposed to current
market prices) of plain vanilla options derived from algorithms that
use a series of predetermined inputs, such as the price of the stock or
index underlying the option, the option's exercise price, the risk-free
interest rate, the amount of time until the option's expiration and the
volatility of the option. For European options (including FLEX
options), the Vanilla Option Model generates theoretical values using a
pricing algorithm that is based on the Black-Scholes formula. For
American options, the Vanilla Option Model generates theoretical values
using a modified Jarrow-Rudd (``JR'') binomial tree.\8\
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    \7\ With respect to the Vanilla Option Model, ``plain vanilla
listed options'' are (1) all listed vanilla European and American
options on equities, exchange traded funds and exchange traded notes
(collectively, ``ETPs''), equity indices, futures on equity indices,
currencies or commodities, and (2) vanilla flexible exchange options
(``vanilla FLEX options''). Collectively, these plain vanilla
options account for about 95 percent of the total contracts cleared
by OCC.
    \8\ OCC uses a modified JR binomial tree for American options
because the algorithm based on the Black-Scholes formula does not
work for valuing American options, due to their early exercise
feature.
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    The implied volatility of an option is a measure of the expected
future volatility of the option's underlying security at expiration,
which is reflected in the current option premium in the market. The
implied volatilities are used in STANS to generate price scenarios for
estimating potential losses of clearing members' portfolios. Given the
current market price for a plain vanilla option, the aforementioned
pricing algorithms for European and American options will generate the
implied volatility of the price of the option's underlying asset.
    The risk sensitivities calculated by the Vanilla Option Model are
certain values--namely, Delta, Gamma and Vega--that measure the risk of
a plain vanilla option in relation to underlying variables.\9\
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    \9\ ``Delta'' measures the change in the option value with
respect to a change in the price of an underlying asset. ``Gamma''
measures the change in Delta in response to a 1% change in the price
of the underlying asset. ``Vega'' measures the change in the option
value corresponding to a 1% change in the underlying asset's
volatility.
---------------------------------------------------------------------------

Smoothing Algorithm
    In the absence of OCC's Smoothing Algorithm, the end-of-day ``fair
price'' of a plain vanilla listed option contract would simply be the
closing mid-point price (i.e., the mid-point between the bid and ask
prices) for such contract. However, there often is a wide difference
between the closing bid and ask price quotes for option contracts,
which could result in a closing mid-point price that may contain
arbitrage opportunities. Closing bid and ask price quotes also tend to
be ``noisy,'' meaning that quotes can fluctuate randomly in a way that
is not reflective of the contract's fair value, which similarly could
result in a closing mid-point price that may contain arbitrage
opportunities. Therefore, OCC uses its Smoothing Algorithm in an
attempt to minimize the impact of wide and/or noisy closing price
quotes on individual plain vanilla listed option contracts, thereby
producing a more fair or ``smoothed'' price. The Smoothing Algorithm
works by attempting to simultaneously estimate fair values for put and
call prices on all plain vanilla listed options included in the Vanilla
Option Model, as well as options on non-equity securities,\10\ with the
same underlying and expiration date.
---------------------------------------------------------------------------

    \10\ E.g., the Cboe Volatility (VIX) Index.
---------------------------------------------------------------------------

    The Smoothing Algorithm consists of four steps. The first step is a
preprocessing procedure, which is used to filter out ``bad'' price
quotes.\11\ The second step is an implied forward price calculation,
which estimates the forward prices of securities underlying the options
by using the prices from the near-the-money options on the same
securities at all tenors or expiration dates. The third step \12\
performs the smoothing, in which theoretical prices are generated for
all plain vanilla listed options at all strikes by using corresponding
bid and ask price quotes and forward prices (which were calculated in
step two).\13\ The fourth step consists of constructing a volatility
surface \14\ based on linear interpolation \15\ of total variance \16\
among the smoothed prices and

performing any necessary post-processing.\17\
---------------------------------------------------------------------------

    \11\ The Smoothing Algorithm filters out certain poor-quality
price quotes. The price quotes are excluded from the algorithm if
they meet one or more of the following conditions: (i) Prices for
options that expired or have a remaining maturity of less than a
certain number of days, where that number is specified by a control
parameter; (ii) prices for options that have only ``one-sided
contracts'' (i.e., contracts for which prices exist only for either
the call or the put, but not for both); (iii) prices for options
whose ask prices are zero; (iv) prices for options with negative bid
and ask spreads; or (v) prices for any American options if the ask
price is less than the intrinsic value of the option.
    \12\ The third step as described applies to European options.
For American options, the Smoothing Algorithm first extracts the
European option prices from the American prices (or ``de-
Americanizes'' the prices) using the Vanilla Option Model, then
performs smoothing on the resultant European prices, and finally
converts the smoothed European prices into American prices (or ``re-
Americanizes'' the prices) using the Vanilla Option Model.
    \13\ The theoretical prices in step three are generated by
solving an optimization problem, which ensures that the theoretical
prices generated satisfy both arbitrage-free conditions and bid and
ask spread constraints.
    \14\ A ``volatility surface'' is a three-dimensional graph
showing the levels of the implied volatilities for all the options
listed on the same underlying security with different strikes or
maturity dates.
    \15\ ``Linear interpolation'' is a mathematical method of curve
fitting by using linear polynomials to construct new data points
within the range of a discrete set of known data points.
    \16\ The ``total variance'' of a random variable is defined as
the sum of the variances over a given period of time. If the
variance is a constant, the total variance is a simple product of
its value and length of the time period.
    \17\ Post-processing addresses contracts that are filtered out
of the smoothing process during pre-processing due to either bad or
missing price quotes. In post-processing, the theoretical prices for
these contracts are approximated from the implied volatility data
that are already obtained by the smoothing algorithm.
---------------------------------------------------------------------------

    OCC's Smoothing Algorithm is intended to ensure that the option
prices generated are smooth, free of arbitrage opportunities and within
bid and ask price spreads. The fair value prices that result from the
Smoothing Algorithm are used by OCC in calculating margin requirements,
risk sensitivities, stress testing and calculation of the Clearing
Fund. In addition, the end-of-day fair value prices of options
contracts produced by the Smoothing Algorithm are published to all
Clearing Members, as well as to other market participants.
Proposed Changes
    OCC is proposing to enhance its margin methodology by addressing a
series of limitations that presently exist in each of the Vanilla
Option Model and the Smoothing Algorithm, as described below.
Vanilla Option Model Proposed Changes
    The Vanilla Option Model has five limitations that would be
addressed by the proposed changes. First, the Vanilla Option Model uses
constant interest rates--the published London Inter-bank Offered Rate
(``LIBOR'') for maturities up to 12 months and published swap rates
from maturities two to ten years--as opposed to an interest rate yield
curve.\18\ By using constant interest rates, the Vanilla Option Model
assumes that interest rates remain constant during the lifetime of an
option (i.e., the interest rates remain constant at each time-step or
node in the JR binomial tree). To address this limitation, OCC proposes
to change the Vanilla Option Model to instead use an interest rate
curve generated by using OCC's chosen benchmark rate(s) (currently
LIBOR), Eurodollar futures prices and swap rates. The use of an
interest rate curve will allow the Vanilla Option Model to assume
variable interest rates over the lifetime of an option (i.e., interest
rates can vary at each time-step or node in the binomial tree).
---------------------------------------------------------------------------

    \18\ The ``swap rate'' is the fixed interest rate that a swap
counterparty demands in exchange for the uncertainty of having to
pay the short-term floating rate over time.
---------------------------------------------------------------------------

    Second, the Vanilla Option Model uses either a constant yield (for
index options for all tenors) or a constant projection (for single-name
stock options for all tenors) determined by the issuer's last paid or
announced dividend. However, an issuer's last paid or announced
dividend is not always an accurate prediction of an issuer's future
dividends, whereas forecasted dividends are the result of a more
comprehensive analysis of the issuer's fundamentals, resulting in a
dividend projection that is more sensitive to the particular issuer's
circumstances. To address this limitation, OCC proposes to change the
Vanilla Option Model to use a schedule of forecasted dividends,
received from an established industry data service provider, instead of
relying on the issuer's last paid or announced dividend.\19\
---------------------------------------------------------------------------

    \19\ In the event the primary data source for these dividends is
unavailable, OCC has a backup data provider for forecasted
dividends.
---------------------------------------------------------------------------

    Third, the Vanilla Option Model currently does not use borrowing
costs,\20\ which could allow for potential inconsistencies in implied
volatilities for calls and puts in options with the same strike and
tenor. To address this limitation, OCC proposes to modify the Vanilla
Option Model to use borrowing costs as an input in the valuation of
plain vanilla options.\21\
---------------------------------------------------------------------------

    \20\ Borrowing costs are the costs that may be incurred by an
option buyer or seller to borrow the underlying security of the
option.
    \21\ The borrowing costs used by the Vanilla Option Model would
be calculate from market prices of options or futures.
---------------------------------------------------------------------------

    Fourth, as stated above, for pricing American options the Vanilla
Option Model is based on a 49-step modified JR binomial tree; however,
the fixed number of steps is not large enough for accurately evaluating
long-dated options (e.g., FLEX options). To address this limitation,
OCC proposes that the Vanilla Option Model instead price American
options using a variable number of steps \22\ that increases linearly
with the expiration of the option. In addition, OCC proposes to replace
the JR binomial tree with the Leisen-Reimer (``LR'') binomial tree,
which has a higher rate of convergence than the JR binomial tree.
---------------------------------------------------------------------------

    \22\ The number of LR tree steps would vary between minimum and
maximum parameters, depending on an option's tenor. OCC would
initially set these minimum and maximum parameters at 51 and 501,
respectively, and they would be subject to change based on OCC's
determination. OCC would modify the minimum and maximum parameters
to achieve a balance between pricing accuracy and speed of pricing
calculations. The larger the number of the steps, the more accurate
the pricing, but the longer the calculation time. For example, OCC's
initial choice of a maximum 1001 steps did not result in an optimal
balance between accuracy and speed; therefore, OCC reduced the
maximum number of steps to 501.
---------------------------------------------------------------------------

    Fifth, the Vanilla Option Model only calculates a limited number of
risk sensitivities for the price of options (i.e., Delta, Gamma and
Vega) with respect to market variables; the model, however, is limited
in that it does not calculate Theta and Rho.\23\ The proposed
enhancements to the Vanilla Option Model would enable the model to
calculate Theta and Rho, in addition to Delta, Gamma and Vega.\24\
---------------------------------------------------------------------------

    \23\ ``Theta'' measures the change in the option value for a one
day change in the time to expiration of the option. ``Rho'' measures
the change in the option value with respect to a 1 basis point
change in the interest rate.
    The Vanilla Option Model has a further limitation in that it
relies on a perturbation method of calculating Delta and Gamma,
which is less efficient than calculating Delta and Gamma from the
same tree.
    \24\ The Vanilla Option Model presently calculates Delta and
Gamma using the perturbation method. The perturbation method
requires the use of two binomial trees, which introduces instability
issues. The proposed changes would result in Delta and Gamma being
calculated from a single binomial tree, which results in improved
stability.
---------------------------------------------------------------------------

Smoothing Algorithm Enhancements
    Presently, the Smoothing Algorithm has five limitations that would
be addressed by the proposed enhancements. First, though the Smoothing
Algorithm uses the Vanilla Option Model as a component for generating
smoothed prices, the Smoothing Algorithm uses a LR binomial tree,
whereas the Vanilla Option Model uses a JR binomial tree. The JR
binomial tree used in the current Vanilla Option Model does not account
for implied forward prices as generated in the Smoothing Algorithm.
This inconsistency in binomial trees allows for unequal put and call
volatilities and thus for potential violations of put and call parity
in margin calculations. The proposed change to the Vanilla Option Model
to use a LR binomial tree, as previously described, would not only
enhance the Vanilla Option Model but would eliminate the current
inconsistency between the Vanilla Option Model and Smoothing Algorithm
by using a LR binomial tree for both models.
    Second, the Smoothing Algorithm uses index futures to approximate
theoretical spot prices for the plain vanilla listed options on certain
indices, but this method suffers from the absence of synchronization
between the futures market and the market for the underlying
indices.\25\ Trading in the underlying indices closes at 3:00 p.m.
Central Time, but trading in the index futures and plain vanilla listed
options on those indices closes at 3:15 p.m. The

difference in closing times could result in poorly smoothed prices
whenever the options trading between 3:00 p.m. and 3:15 p.m. is
volatile. Poorly smoothed prices could result in implied volatilities
of poorer quality, and this could create problems in OCC's margin and
risk calculations. In order to address this limitation, the Smoothing
Algorithm would use basis futures on the same indices to approximate
theoretical spot prices. Trading in basis futures has the benefit of
closing at 3:00 p.m., which would allow OCC to use a reported closing
price.\26\ Basis futures prices represent the spreads between the
futures prices and the underlying price; these spreads are relatively
stable throughout the day, including between their closing at 3:00 p.m.
and the closing of the index options market at 3:15 p.m., thereby
providing a better approximation of the theoretical sport prices in the
plain vanilla options at 3:15 p.m.
---------------------------------------------------------------------------

    \25\ Using the 3:00 p.m. index futures price suffers from
another shortcoming in that the 3:00 p.m. price is not an official
closing price, but rather it is the last trade price before 3:00
p.m. (as observed in a manual process by OCC employees).
    \26\ By using the reported closing price for basis futures, the
proposed changes to the Smoothing Algorithm also would eliminates
the algorithm's reliance on a manual process to observe pre-close
futures prices.
---------------------------------------------------------------------------

    Third, the Smoothing Algorithm deals with unacceptably high
volatilities that are sometimes generated in the out-of-the-money
regions by capping these volatilities to a lower value. This leads to a
jump in the rate of change of the volatility with respect to the strike
and may create negative convexity of the option prices versus strike,
i.e., butterfly arbitrage opportunities. The proposed changes to the
Smoothing Algorithm would still cap unacceptably high volatilities
generated in out-of-the-money regions to a lower value, but the capping
would be done in a more gradual manner. By capping unacceptable high
volatilities in a more gradual manner, changes in the convexity of
prices would not be as discontinuous as in the current Smoothing
Algorithm, which would eliminate the opportunities for butterfly
arbitrage.
    Fourth, to generate prices for short-dated FLEX options, the
Smoothing Algorithm combines the prices calculated from the prior day's
implied volatilities for all FLEX options with current market prices.
By combining the prior day's implied volatilities with current market
prices, the Smoothing Algorithm may not generate prices that are
consistent with then-current market prices.\27\ In order to address
this limitation, OCC proposes to change the Smoothing Algorithm to use
volatilities implied from current market prices of plain vanilla listed
options to price short-dated FLEX options.\28\
---------------------------------------------------------------------------

    \27\ The reason that the Smoothing Algorithm uses the prior
day's implied volatilities is that the implied volatilities are
received from a third-party data service provider; the provider's
quotes are delayed by one day.
    \28\ The Smoothing Algorithm for long-dated FLEX options would
remain unchanged.
---------------------------------------------------------------------------

    Fifth, the Smoothing Algorithm currently does not have the ability
to use borrowing costs as an independent input.\29\ To address this
limitation, OCC proposes to modify the Smoothing Algorithm to provide
for the ability to use borrowing costs as an independent input in the
pricing of plain vanilla listed options. Under the proposed changes,
the borrowing costs for each underlying security would be implied from
at-the-money (or near at-the-money) options listed on such security.
---------------------------------------------------------------------------

    \29\ The Smoothing Algorithm currently combines borrowing costs
and dividends into a single input, referred to as ``implied
dividends,'' which is then used to price plain vanilla listed
options. However, the combined ``implied dividends'' input can
differ from the actual dividend, and this difference can result in
potential mispricing of certain types of options.
---------------------------------------------------------------------------

Clearing Member Outreach
    To inform Clearing Members of the proposed change, OCC has provided
overviews of the proposed changes to its Financial Risk Advisory
Council \30\ and, prior to implementing the proposed rule change, will
provide overviews to the OCC Roundtable,\31\ as well as through
Information Memoranda to all Clearing Members describing the proposed
change.
---------------------------------------------------------------------------

    \30\ The Financial Risk Advisory Council is a working group
comprised of exchanges, Clearing Members and indirect participants
of OCC.
    \31\ The OCC Roundtable was established to bring Clearing
Members, exchanges and OCC together to discuss industry and
operational issues. It is comprised of representatives of the senior
OCC staff, participant exchanges and Clearing Members, representing
the diversity of OCC's membership in industry segments, OCC-cleared
volume, business type, operational structure and geography.
---------------------------------------------------------------------------

    Given that changes in margins are expected,\32\ OCC expects to
conduct an extended parallel implementation for Clearing Members prior
to implementation. Additionally, OCC will perform targeted and direct
outreach with Clearing Members that would be most impacted by the
proposed change and would work closely with such Clearing Members to
coordinate the implementation and associated funding for such Clearing
Members resulting from the proposed change.\33\
---------------------------------------------------------------------------

    \32\ OCC expects that the proposed changes, in aggregate, would
reduce total margins by a small amount. In particular, margin
reductions are expected for Clearing Members who hold risk
offsetting positions. However, the ultimate impact on any particular
Clearing Member's margin requirements would necessarily vary based
on trading strategies and market conditions. More specifically,
backtesting results for the period from March 2018 through February
2019 showed small reductions to total margins, in aggregate, with an
average difference of 1.3% between the proposed model and the
production model. At the Clearing Member level, the difference in
margin requirements between the proposed model and the production
model for Clearing Members comprising 99% of OCC's total daily
margin (such Clearing Members, the ``top Clearing Members'') on most
days of the backtesting period was less than 10%. The largest
increase and decrease to daily margin requirements observed within
top Clearing Members during the backtesting period was 42% and 30%,
respectively. On average, only 5% of the top Clearing Members
experienced a daily margin decrease or increase of 10% or greater
under the proposed model over the same period.
    \33\ Specifically, OCC will discuss with those Clearing Members
how they plan to satisfy any increase in their margin requirements
associated with the proposed change.
---------------------------------------------------------------------------

Implementation Timeframe
    OCC expects to implement the proposed changes to the Vanilla Option
Model and Smoothing Algorithm no sooner than August 1, 2019 and no
later than one hundred eighty (180) days from the date OCC receives all
necessary regulatory approvals for the filings. OCC will announce the
implementation date of the proposed change by an Information Memo
posted to its public website no less than 6 weeks prior to
implementation.
(2) Statutory Basis
    OCC believes that the proposed rule change is consistent with
Section 17A of the Act \34\ and the rules thereunder applicable to OCC.
Section 17A(b)(3)(F) of Act \35\ requires that the rules of a clearing
agency be designed to assure the safeguarding of securities and funds
which are in the custody or control of the clearing agency or for which
it is responsible. The proposed rule change would enhance two of the
primary components of OCC's STANS methodology by addressing five
limitations of the Vanilla Option Model and five limitations of the
Smoothing Algorithm.
---------------------------------------------------------------------------

    \34\ 15 U.S.C. 78q-1.
    \35\ 15 U.S.C. 78q-1(b)(3)(F).
---------------------------------------------------------------------------

    With respect to the Vanilla Option Model, the proposed rule change
would incorporate interest rate yield curves, forecasted dividends and
borrowing costs into the theoretical pricing of plain vanilla listed
options. Including these three inputs improves the Vanilla Option
Model's theoretical pricing and helps to preserve the consistency
between implied call volatility and implied put volatility in options
at the same strike price and same maturity. The proposed rule change
also would introduce the LR binomial tree to replace the fixed, 49-step
JR binomial tree for pricing of American options. The LR binomial tree
would use a

variable number of steps that increases linearly with the expiration of
an option, to more accurately price long-dated American options. The LR
binomial tree also converges at a considerably higher rate than the JR
binomial tree. The proposed rule change would also enable OCC to
calculate two additional risk sensitivities--namely, Theta and Rho--for
plain vanilla listed options.
    With respect to the Smoothing Algorithm, the proposed rule change
would improve implied volatility smoothing by eliminating the
inconsistency between the binomial trees used by the Vanilla Option
Model and the Smoothing Algorithm and by eliminating the
synchronization issue from using the 3:00 p.m. index futures price to
approximate theoretical spot prices for plain vanilla listed options on
certain indices. The proposed rule change also would improve the
Smoothing Algorithm by more gradually capping unacceptably high
volatilities sometimes generated in the out-of-the-money regions, which
would eliminate the opportunities for butterfly arbitrage, and by using
borrowing costs in the pricing of plain vanilla listed options.
    Each of the aforementioned enhancements is expected to produce
margin requirements that are more accurate and commensurate with the
risks presented by Clearing Members, thereby improving OCC's margins
for plain vanilla listed options. Because OCC uses the margin it
collects from a defaulting Clearing Member to protect other Clearing
Members from losses resulting from the default, OCC believes the
proposed rule changed is designed to assure the safeguarding of
securities and funds in its custody or control in accordance with
Section 17A(b)(3)(F) of the Act.\36\
---------------------------------------------------------------------------

    \36\ Id.
---------------------------------------------------------------------------

    Rule 17Ad-22(b)(2) \37\ requires, in part, that a registered
clearing agency that performs central counterparty services establish,
implement, maintain and enforce written policies and procedures
reasonably designed use margin requirements to limit its credit
exposures to participants under normal market conditions and use risk-
based models and parameters to set margin requirements. As noted above,
OCC uses STANS as its risk-based margin methodology. The proposed rule
change would enhance STANS by addressing several limitations in two of
the primary components of STANS: The Vanilla Option Model and the
Smoothing Algorithm. With respect to the Vanilla Option Model, OCC
believes the proposed changes would enable the model to produce more
accurate theoretical valuations of plain vanilla listed options, and
for American options, would enable the mode to more accurately evaluate
long-dates options. With respect to the Smoothing Algorithm, OCC
believes the proposed rule change will enhance the model's implied
volatility smoothing by improving the approximate theoretical spot
prices for plain vanilla listed options on certain indices and by
eliminating opportunities for butterfly arbitrage. Accordingly, OCC
believes the proposed rule change would improve the methodology used to
calculate margin requirements designed to limit OCC's credit exposures
to participants under normal market conditions in a manner consistent
with Rule 17Ad-22(b)(2).\38\
---------------------------------------------------------------------------

    \37\ 17 CFR 240.17Ad-22(b)(2).
    \38\ Id.
---------------------------------------------------------------------------

    Rule 17Ad-22(e)(6)(i) and (iii) \39\ further requires OCC to
establish, implement, maintain and enforce written policies and
procedures reasonably designed to cover its credit exposures to its
participants by establishing a risk-based margin system that: (1)
Considers, and produces margin levels commensurate with, the risks and
particular attributes of each relevant product, portfolio, and market
and (2) calculates margin sufficient to cover its potential future
exposure to participants in the interval between the last margin
collection and the close out of positions following a participant
default. As noted above, the proposed rule change would address certain
existing limitations in the Vanilla Option Model and the Smoothing
Algorithm, each of which is a primary component of OCC's STANS
methodology. By addressing the aforementioned limitations of the
Vanilla Option Model, OCC believes that the model will produce more
accurate theoretical valuations of plain vanilla listed options,
including improved theoretical valuations for long-dated American
options. By addressing the aforementioned limitations of the Smoothing
Algorithm, OCC believes that the proposed rule change will enhance
implied volatility smoothing, improve the approximate theoretical spot
prices for plain vanilla listed options on certain indices and
eliminate opportunities for butterfly arbitrage. Accordingly, OCC
believes the proposed changes are consistent with Rule 17Ad-22(e)(6)(i)
and (iii).\40\
---------------------------------------------------------------------------

    \39\ 17 CFR 240.17Ad-22(e)(6)(i) and (iii).
    \40\ Id.
---------------------------------------------------------------------------

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

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

    Section 17A(b)(3)(I) of the Act requires that the rules of a
clearing agency do not impose any burden on competition not necessary
or appropriate in furtherance of the purposes of Act.\41\ OCC believes
that any competitive impact imposed by the proposed model changes would
be necessary and appropriate in furtherance of the purposes of Act.\42\
The proposed changes are primarily designed to enhance two primary
components of OCC's STANS margin methodology. As described above, the
proposed model changes are necessary to produce margin results that are
more commensurate with the risks associated with clearing plain vanilla
listed options. Therefore, any competitive impact imposed by the
changes would be necessary in further of the purposes of the Act.
---------------------------------------------------------------------------

    \41\ 15 U.S.C. 78q-1(b)(3)(I).
    \42\ Id.
---------------------------------------------------------------------------

    Furthermore, the proposed enhancements to the margin methodology
would apply to all Clearing Members clearing plain vanilla listed
options at OCC. The overall impact of the proposed rule change on
margins will depend on the composition of the portfolio in question,
but any fluctuations in margin requirements would be the same for any
Clearing Members with identical portfolios. Similarly, the enhancements
to the Smoothing Algorithm would result in improved end-of-day fair
value prices of options contracts, which would be published to all
Clearing Members, as well as to other market participants. Therefore,
OCC does not believe that the proposed rule change would unfairly
inhibit access to OCC's services or disadvantage or favor any
particular user in relationship to another user. Accordingly, OCC
believes that any competitive impact would be appropriate in
furtherance of the safeguarding of securities and funds which are in
the custody or control of OCC or for which it is responsible, and in
general, the protection of investors and the public interest; and,
therefore, appropriate in furtherance of the purposes of the Act.

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

    Written comments on the proposed rule change were not and are not

intended to be solicited with respect to the proposed rule change and
none have been received.

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

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

IV. Solicitation of Comments

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

Electronic Comments

     Use the Commission's internet comment form (http://www.sec.gov/rules/sro.shtml); or
     Send an email to<EMAIL_ADDRESS>Please include
File Number SR-OCC-2019-005 on the subject line.

Paper Comments

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

All submissions should refer to File Number SR-OCC-2019-005. 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 website (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 website viewing and printing in
the Commission's Public Reference Room, 100 F Street NE, Washington, DC
20549, on official business days between the hours of 10:00 a.m. and
3:00 p.m. Copies of such filing also will be available for inspection
and copying at the principal office of OCC and on OCC's website at
https://www.theocc.com/about/publications/bylaws.jsp.
    All comments received will be posted without change. Persons
submitting comments are cautioned that we do not redact or edit
personal identifying information from comment submissions. You should
submit only information that you wish to make available publicly.
    All submissions should refer to File Number SR-OCC-2019-005 and
should be submitted on or before July 30, 2019.
---------------------------------------------------------------------------

    \43\ 17 CFR 200.30-3(a)(12).

    For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\43\
Eduardo A. Aleman,
Deputy Secretary.
[FR Doc. 2019-14627 Filed 7-8-19; 8:45 am]
 BILLING CODE 8011-01-P


[Federal Register Volume 85, Number 46 (Monday, March 9, 2020)]
[Notices]
[Pages 13700-13703]
[FR Doc No: 2020-04734]

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

DEPARTMENT OF TRANSPORTATION

Pipeline and Hazardous Materials Safety Administration

[Docket No. PHMSA-2019-0141]

Pipeline Safety: Information Collection Activities

AGENCY: Pipeline and Hazardous Materials Safety Administration (PHMSA),
DOT.

ACTION: Notice and request for comments.

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

SUMMARY: In accordance with the Paperwork Reduction Act of 1995, PHMSA
invites comments on proposed revisions to the hazardous liquid accident
report form and its associated instructions. Revisions are being
proposed to PHMSA F 7000-1 Accident Report--Hazardous Liquid Pipeline
Systems under OMB Control No. 2137-0047.

DATES: Interested persons are invited to submit comments on or before
May 8, 2020.

ADDRESSES: Comments may be submitted in the following ways:
    E-Gov website: http://www.regulations.gov. This site allows the
public to enter comments on any Federal Register notice issued by any
agency.
    Fax: 1-202-493-2251.
    Mail: Docket Management Facility; U.S. Department of Transportation
(DOT), 1200 New Jersey Avenue SE, West Building, Room W12-140,
Washington, DC 20590-0001.
    Hand Delivery: Room W12-140 on the ground level of DOT, West
Building, 1200 New Jersey Avenue SE, Washington, DC, between 9:00 a.m.
and 5:00 p.m., Monday through Friday, except Federal holidays.
    Instructions: Identify the docket number, PHMSA-2019-0141 at the
beginning of your comments. Note that all comments received will be
posted without change to http://www.regulations.gov, including any
personal information provided. You should know that anyone is able to
search the electronic form of all comments received into any of our
dockets by the name of the individual

submitting the comment (or signing the comment, if submitted on behalf
of an association, business, labor union, etc.). Therefore, you may
want to review DOT's complete Privacy Act Statement in the Federal
Register published on April 11, 2000, (65 FR 19477) or visit http://www.regulations.gov, before submitting any such comments.
    Docket: For access to the docket or to read background documents or
comments, go to http://www.regulations.gov, at any time or to Room W12-
140 on the ground level of DOT, West Building, 1200 New Jersey Avenue
SE, Washington, DC, between 9:00 a.m. and 5:00 p.m., Monday through
Friday, except federal holidays. If you wish to receive confirmation of
receipt of your written comments, please include a self-addressed,
stamped postcard with the following statement: ``Comments on: PHMSA-
2019-0141.'' The Docket Clerk will date stamp the postcard prior to
returning it to you via the U.S. mail. Please note that due to delays
in the delivery of U.S. mail to federal offices in Washington, DC, we
recommend that persons consider an alternative method (internet, fax,
or professional delivery service) of submitting comments to the docket
and ensuring their timely receipt at DOT.

Confidential Business Information

    Confidential Business Information (CBI) is commercial or financial
information that is both customarily and actually treated as private by
its owner. Under the Freedom of Information Act (FOIA) (5 U.S.C. 552),
CBI is exempt from public disclosure. If your comments responsive to
this notice contain commercial or financial information that is
customarily treated as private, that you actually treat as private, and
that is relevant or responsive to this notice, it is important that you
clearly designate the submitted comments as CBI. Pursuant to 49 CFR
190.343, you may ask PHMSA to give confidential treatment to
information you give to the agency by taking the following steps: (1)
Mark each page of the original document submission containing CBI as
``Confidential''; (2) send PHMSA, along with the original document, a
second copy of the original document with the CBI deleted; and (3)
explain why the information you are submitting is CBI. Unless you are
notified otherwise, PHMSA will treat such marked submissions as
confidential under the FOIA, and they will not be placed in the public
docket of this notice. Submissions containing CBI should be sent to
Angela Hill, DOT, PHMSA, 1200 New Jersey Avenue SE, PHP-30, Washington,
DC 20590-0001. Any commentary PHMSA receives that is not specifically
designated as CBI will be placed in the public docket for this matter.

FOR FURTHER INFORMATION CONTACT: For general information, contact
Angela Hill by telephone at<PHONE_NUMBER>, by email at
<EMAIL_ADDRESS>by fax at<PHONE_NUMBER>, or by mail at DOT, PHMSA,
1200 New Jersey Avenue SE, PHP-30, Washington, DC 20590-0001.

SUPPLEMENTARY INFORMATION:

I. Background

    Section 1320.8(d), Title 5, Code of Federal Regulations, requires
PHMSA to provide interested members of the public and affected entities
an opportunity to comment on information collection and recordkeeping
requests. This notice identifies changes to information collections
that PHMSA will be submitting to OMB.

PHMSA F 7000-1 Accident Report--Hazardous Liquid Pipeline Systems

    PHMSA proposes to reorganize the existing questions and add more
detailed questions about accident response, accident consequences,
operating conditions, cause, and contributing factors.

1. Change Form Name

    PHMSA proposes changing the name of the form to ``Accident Report--
Hazardous Liquid and Carbon Dioxide Systems''. This change would more
accurately describe the types of pipelines for which this form should
be used.

2. Time Zone and Daylight Savings

    PHMSA proposes adding the time zone and daylight savings status at
the location and time of the accident. This data would help PHMSA
correlate our accident investigation findings with the form.

3. Operational Status

    PHMSA proposes collecting the operational status of the pipeline
system at the time the operator identified the failure. On the current
form, there is an assumption that the pipeline was in service at the
time the operator identified the failure, but this is often not the
case. This change would help stakeholders understand the status of the
pipeline and clarify the pipeline shutdown data.

4. Part A Reorganization and Detailed Questions About Accident Response

    PHMSA proposes reorganizing existing questions to help detail the
sequence of operator actions and interactions as the accident proceeds.
For example, how the operator first learned of the pipeline failure is
currently collected in part E. PHMSA proposes to move this item to Part
A. PHMSA also proposes adding new items to build a complete timeline
including interactions with emergency responders, spill response
resources, and details about ignition. This data would help
stakeholders develop a more thorough understanding of the accident.

5. Multiple National Response Center Reports

    During response to accidents, pipeline operators often submit
multiple reports to the National Response Center (NRC). In these
instances, PHMSA proposes to collect each NRC report number. This
change would help PHMSA correlate our accident investigation findings
with the form.

6. Flow Control and Valve Closures

    PHMSA proposes adding questions about initial actions the operator
took to control the flow of products to the failure location. When
valves are used, PHMSA proposes collecting the date and time of the
valve closure. This change would implement a Government Accountability
Office (GAO) recommendation from GAO-13-168 ``Pipeline Safety: Better
Data and Guidance needed to Improve Pipeline Operator Accident
Response.'' This change would allow stakeholders to understand the
actions taken by the operator to control the flow of products during
accident response and collect data about the elapsed time to valve
closure.

7. Area of Accident

    PHMSA proposes adding ``exposed due to loss of cover'' as a
selection for the area of accident when ``Underground'' is selected.
For pipelines installed underground and eventually exposed, the current
form is not clear about whether ``Underground'' or ``Aboveground''
should be selected. Adding ``Exposed due to loss of cover'' as an
underground option clarifies how to report the accident. This change
would improve the consistency of reports.

8. Date of Water Crossing Evaluation

    PHMSA proposes adding a question to collect the date of the most
recent evaluation of the water crossing. These formal evaluations can
provide information critical to protecting the integrity of water
crossings. This change would provide stakeholders with visibility of
this critical information.

9. Outer Continental Shelf Regions

    PHMSA proposes collecting the Outer Continental Shelf (OCS) region
when an accident occurs on the OCS. This change would provide
stakeholders with a more precise location of the accident.

10. Item Involved and Age of Failed Item

    PHMSA proposes modifying the selections for the item that failed.
These modifications would reduce the number of times ``Other'' is
selected and allow a more meaningful analysis of the data.
    PHMSA proposes collecting both the date of manufacture and the date
of installation for the failed item. This would allow stakeholders to
understand both the age of the failed item and how long it had been in
service.

11. Details About Consequences

    Departmental guidelines for determining the benefit of proposed
regulations (http://www.transportation.gov/sites/dot.dev/files/docs/VSL%20Guidance%202013.pdf) include a table of relative values based on
the severity of injury. PHMSA's forms currently collect the number of
injured persons requiring in-patient overnight hospitalization. PHMSA
proposes adding two less severe categories to the forms; injuries
treated in a medical facility and injuries treated on-site. This data
would enable a more thorough determination of the benefit of proposed
regulations.
    PHMSA proposes to collect information on the volume of product
consumed by fire. PHMSA already collects data about the volume of
product released and whether ignition occurred. However, PHMSA cannot
identify the volume of product burned. This data would allow PHMSA to
more accurately determine the social cost of carbon and benefit of
future proposed regulations.
    PHMSA proposes to collect data on the number of buildings affected
by the accident. On the current forms, the property damage values do
not include any details about the type of property damaged. This data
would provide more details about the consequences of the accident and
enable a more thorough determination of the benefit of future proposed
regulations.

12. Establishing Maximum Pressure and Flow Reversals

    PHMSA proposes adding the method used by the operator to establish
the maximum pressure for the pipeline system and the date the maximum
pressure was established. Operators would choose from the six methods
listed in 49 CFR 195.406. While each of the methods for establishing
the maximum pressure meet the regulatory requirement, safety factors
may differ between the methods. This data would help stakeholders
identify the pipeline's maximum pressure methods with the specific
safety factor.
    PHMSA also proposes adding a question about flow reversals. This
data would help stakeholders have a better understanding of whether a
flow reversal may have impacted the maximum pressure.

13. Length of Segment Isolated

    PHMSA proposes modifying the question about the length of pipeline
isolated during accident response. In the current form, an assumption
is made that valve closures will always be used to initially control
flow to the failure location. This change would clarify the length to
be reported when valves are not used to initially control flow to the
failure location.

14. External Corrosion and Stray Current

    PHMSA proposes collecting additional details when stray current is
the cause of external corrosion. PHMSA also proposes to clarify the
conditions under which external corrosion cathodic protection is
expected. This data would help stakeholders better understand the cause
of external corrosion.

15. Natural Force Damage Additional Sub-Cause

    PHMSA proposes adding tree root damage as a sub-cause in the
natural force damage cause category. This addition would reduce the
number of accidents reported with a cause of ``Other.''

16. Excavation Details For All Excavation Damage

    In the current form, when a third party causes the excavation
damage, PHMSA collects details about the excavation work. PHMSA
proposes collecting details about the excavation work when the cause of
the damage is first, second, or third party. When pipeline operator
employees are excavating, and damage their own pipeline, the damage is
considered first party. When an excavator is working under contract for
the pipeline operator and damages the operator's pipeline, they are
considered a second party. First and second party excavation details
would allow stakeholders to understand the type of excavation work
being performed by any party causing the excavation damage.
    The Common Ground Alliance recently changed the data structure for
its Damage Information Reporting Tool (DIRT). PHMSA proposes updating
the PHMSA accident report to match the revised DIRT data structure.

17. State Damage Prevention Law Exemptions

    PHMSA proposes adding information about exemptions from state
damage prevention laws when the cause of the accident is excavation
damage. This data would help stakeholders identify states in which
damage prevention law exemptions may be associated with more frequent
excavation damage to pipelines.

18. Material Failure Cause Changes

    When material failure of a pipe or weld causes the accident, a sub-
cause must be chosen. Errors in the design of pipeline facilities cause
some accidents, but currently, design is not included in any sub-cause.
PHMSA proposes adding design to the ``Construction-, Installation-, or
Fabrication-related'' sub-cause. This change would reduce the number of
reports with a cause of ``Other.''
    PHMSA proposes adding ``Hard Spot'' as another environmental
cracking option. This is another type of environmental cracking that
should be available for selection. This change would reduce the number
of reports with a cause of ``Other.''
    PHMSA proposes adding a question to collect the post-construction
pressure test value. When the pipe or a weld fails, the value of the
post-construction pressure test is important to determining if the
cause of the failure might have been present since original
construction. This change would provide additional data to determine
the cause of the pipe or weld failure.

19. Additional Integrity Inspection Data

    PHMSA proposes collecting two sets of in-line inspection (ILI)
results. Under PHMSA regulations, operators conduct multiple rounds of
integrity inspections. This change would provide a history of ILIs
rather than just the most recent. The additional inspection data may
provide insights into the effectiveness of the various types of ILIs.
    Also, in the current form, the same set of integrity inspection
questions appear in four different cause sections. Only one cause can
be selected so three sets of these questions are redundant. PHMSA
proposes having the questions appear once. PHMSA would also adjust
existing reports to have the questions appear only once. This change
would

simplify the form by reducing the number of distinct data fields.
    PHMSA proposes collecting the type of direct assessment when this
inspection method has been implemented. The additional inspection data
may provide insights about the effectiveness of the various types of
direct assessments.

20. Contributing Factors

    Pipeline operators currently select only one cause on the form.
Factors contributing to, but not causing, an accident are often
relevant to preventing future accidents. PHMSA proposes collecting data
about contributing factors. The proposal is similar to a recommendation
made by the National Transportation Safety Board (NTSB) in a January
2015 safety study report which can be viewed at http://www.ntsb.gov/safety/safety-studies/Documents/SS1501.pdf. Collection of information
on contributing factors in addition to the apparent cause would help
stakeholders develop a more thorough understanding of the accident and
ways to prevent future accidents.

II. Summary of Impacted Collection

    Section 1320.8(d), Title 5, Code of Federal Regulations, requires
PHMSA to provide interested members of the public and affected agencies
an opportunity to comment on information collection and recordkeeping
requests. This notice identifies an information collection request that
PHMSA will submit to OMB for renewal. PHMSA expects many of the new
data elements are already known by the operator and no report requires
the completion of all fields on the forms. PHMSA has estimated the
burdens below by adding 20% to the previous burdens--12 hours instead
of 10.
    The following information is provided for this information
collection: (1) Title of the information collection; (2) OMB control
number; (3) Current expiration date; (4) Type of request; (5) Abstract
of the information collection activity; (6) Description of affected
public; (7) Estimate of total annual reporting and recordkeeping
burden; and (8) Frequency of collection. PHMSA will request a three-
year term of approval for this information collection activity. PHMSA
requests comments on the following information:
    1. Title: Transportation of Hazardous Liquids by Pipeline:
Recordkeeping and Accident Reporting.
    OMB Control Number: 2137-0047.
    Current Expiration Date: 01/31/2023.
    Type of Request: Revision.
    Abstract: This information collection covers recordkeeping and
accident reporting by hazardous liquid pipeline operators who are
subject to 49 CFR part 195. Section 195.50 specifies the definition of
an ``accident'' that must be reported to PHMSA and the reporting
criteria for submitting a Hazardous Liquid Accident Report (form PHMSA
F 7000-1) is detailed in Sec.  195.54. PHMSA is proposing to revise the
form and instructions for PHMSA F 7000-1 for editorial and
clarification purposes.
    Affected Public: Hazardous liquid pipeline operators.
    Annual Reporting and Recordkeeping Burden:
    Annual Responses: 1,232.
    Annual Burden Hours: 53,229.
    Comments are invited on:
    (a) The need for the renewal and revision of these collections of
information for the proper performance of the functions of the agency,
including whether the information will have practical utility;
    (b) 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) Ways to enhance the quality, utility, and clarity of the
information to be collected; and
    (d) Ways to minimize the burden of the collection of information on
those who are to respond, including the use of appropriate automated,
electronic, mechanical, or other technological collection techniques.

    Authority: Authority: The Paperwork Reduction Act of 1995; 44
U.S.C. Chapter 35, as amended; and 49 CFR 1.48.

    Issued in Washington, DC, on March 3, 2020, under authority
delegated in 49 CFR 1.97.
Alan K. Mayberry,
Associate Administrator for Pipeline Safety.
[FR Doc. 2020-04734 Filed 3-6-20; 8:45 am]
 BILLING CODE 4910-60-P


                                                                                MEMORANDUM

DATE:		February 9, 2010

SUBJECT:	Existing Population of Stationary RICE - Attachments

FROM:	Tanya Parise, EC/R, Inc. 		 TO:		Melanie King, EPA OAQPS/SPPD/ESG --------------------------------------------------------------------------------

             The purpose of this memorandum is to document the information used to estimate the  population of existing stationary engines used to estimate the national impacts associated with the National Emission Standards for Hazardous Air Pollutants for Existing Stationary Reciprocating Internal Combustion Engines (RICE) in 40 CFR part 63, subpart ZZZZ.  Provided in the Attachments to this memorandum are several tables illustrating the Power Systems Research information that was used to estimate the population and projection of stationary spark ignition and compression ignition (CI) engines.  This memorandum contains information supporting the memorandum entitled "Existing Population of Stationary RICE," which is available from the rulemaking docket as Document ID Number EPA-HQ-OAR-2005-0029-0014.  This information supports the population estimates developed to estimate impacts from stationary existing RICE less than or equal to 500 horsepower (HP) that are located at major sources, stationary existing RICE that are located at area sources, and stationary existing non-emergency CI RICE greater than 500 HP located at major sources that are subject to 40 CFR part 63, subpart ZZZZ.                                    Attachments                    Spreadsheet Tables with PSR Information                  Used to Estimate the Population and Projection                               of Stationary Engines


[Federal Register Volume 84, Number 190 (Tuesday, October 1, 2019)]
[Proposed Rules]
[Pages 52047-52049]
[FR Doc No: 2019-21187]

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

DEPARTMENT OF TRANSPORTATION

Federal Aviation Administration

14 CFR Part 39

[Docket No. FAA-2019-0705; Product Identifier 2019-NM-098-AD]
RIN 2120-AA64

Airworthiness Directives; The Boeing Company Airplanes

AGENCY: Federal Aviation Administration (FAA), DOT.

ACTION: Notice of proposed rulemaking (NPRM).

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

SUMMARY: The FAA proposes to adopt a new airworthiness directive (AD)
for certain The Boeing Company Model 737-600, -700, -700C, -800, and -
900 series airplanes. This proposed AD was prompted by reports of
cracks in the bear strap between certain stations, sometimes common to
fasteners in the gap cover and emanating from rough sanding marks found
on the surface of the bear strap. This proposed AD would require
inspections of the fuselage skin and bear strap at the forward galley
door between certain stations for cracks, and applicable on-condition
actions. The FAA is proposing this AD to address the unsafe condition
on these products.

DATES: The FAA must receive comments on this proposed AD by November
15, 2019.

ADDRESSES: You may send comments, using the procedures found in 14 CFR
11.43 and 11.45, by any of the following methods:
     Federal eRulemaking Portal: Go to http://www.regulations.gov. Follow the instructions for submitting comments.
     Fax:<PHONE_NUMBER>.
     Mail: U.S. Department of Transportation, Docket
Operations, M-30, West Building Ground Floor, Room W12-140, 1200 New
Jersey Avenue SE, Washington, DC 20590.
     Hand Delivery: Deliver to Mail address above between 9
a.m. and 5 p.m., Monday through Friday, except Federal holidays.
    For service information identified in this NPRM, contact Boeing
Commercial Airplanes, Attention: Contractual & Data Services (C&DS),
2600 Westminster Blvd., MC 110-SK57, Seal Beach, CA 90740-5600;
telephone<PHONE_NUMBER>; internet https://www.myboeingfleet.com. You may
view this referenced service information at the FAA, Transport
Standards Branch, 2200 South 216th St., Des Moines, WA. For information
on the availability of this material at the FAA, call<PHONE_NUMBER>. It
is also available on the internet at http://www.regulations.gov by
searching for and locating Docket No. FAA-2019-0705.

Examining the AD Docket

    You may examine the AD docket on the internet at http://www.regulations.gov by searching for and locating Docket No. FAA-2019-
0705; or in person at Docket Operations between 9 a.m. and 5 p.m.,
Monday through Friday, except Federal holidays. The AD docket contains
this NPRM, the regulatory evaluation, any comments received, and other
information. The street address for Docket Operations is listed above.
Comments will be available in the AD docket shortly after receipt.

FOR FURTHER INFORMATION CONTACT: Michael Bumbaugh, Aerospace Engineer,
Airframe Section, FAA, Seattle ACO Branch, 2200 South 216th St., Des
Moines, WA 98198; phone and fax:<PHONE_NUMBER>; email:
<EMAIL_ADDRESS>
SUPPLEMENTARY INFORMATION:

Comments Invited

    The FAA invites you to send any written relevant data, views, or
arguments about this proposal. Send your comments to an address listed
under the ADDRESSES section. Include ``Docket No. FAA-2019-0705 Product
Identifier 2019-NM-098-AD'' at the beginning of your comments. The FAA
specifically invites comments on the overall regulatory, economic,
environmental, and energy aspects of this NPRM. The FAA will consider
all comments received by the closing date and may amend this NPRM
because of those comments.
    The FAA will post all comments received, without change, to http://www.regulations.gov, including any personal information you provide.
The FAA will also post a report summarizing each substantive verbal
contact received about this proposed AD.

Discussion

    The FAA has received reports of cracks in the bear strap from
station (STA) 290 to STA 296, and between S-8R and S-9R, sometimes
common to fasteners in the gap cover and emanating from rough sanding
marks found on the surface of the bear strap. Bear strap cracking is
the result of poor workmanship during production after the skin and
bear strap hot bond process. The FAA has determined that the cracking
is occurring in the bear strap, where the adhesive bond flash removal
was performed with an abrasive material. Cracking of the bear strap, if
not addressed, could result in severing of the bear strap, possibly
leading to uncontrolled decompression of the airplane and loss of
structural integrity of the airplane.

Related Service Information Under 1 CFR Part 51

    The FAA reviewed Boeing Alert Requirements Bulletin 737-53A1383 RB,
dated May 9, 2019. This service information describes procedures for
inspecting for cracks of the fuselage skin and bear strap at the
forward galley door between certain stations, through the use of two
alternative inspection methods: (1) Internal and external general
visual inspections and internal surface high frequency eddy current
(HFEC) inspections, and (2) external general visual and external eddy
current inspections, and applicable on-condition actions. On-condition
actions include inspections for cracks, HFEC inspections for cracks,
low frequency eddy current (LFEC) inspections for cracks, and repair,
depending on the inspection method selected. This service information
is reasonably available because the interested parties have access to
it through their normal course of business or by the means identified
in the ADDRESSES section.

FAA's Determination

    The FAA is proposing this AD because the agency evaluated all the
relevant information and determined the unsafe condition described
previously is likely to exist or develop in other products of the same
type design.

Proposed AD Requirements

    This proposed AD would require accomplishment of the actions
identified in Boeing Alert Requirements Bulletin 737-53A1383 RB, dated
May 9, 2019, described previously, except for any differences
identified as exceptions in the regulatory text of this proposed AD.
    For information on the procedures and compliance times, see this
service information at http://www.regulations.gov by searching for and
locating Docket No. FAA-2019-0705.

Costs of Compliance

    The FAA estimates that this proposed AD affects 752 airplanes of
U.S. registry. The FAA estimates the following costs to comply with
this proposed AD:

                                 Estimated Costs for Required Actions: Option 1
----------------------------------------------------------------------------------------------------------------
                                                                                Cost on U.S.
             Action                     Labor cost          Parts cost     Cost per product        operators
----------------------------------------------------------------------------------------------------------------
Internal general visual          11 work-hours x $85 per              $0  $935..............  $703,120.
 inspection.                      hour = $935.
External general visual          1 work-hour x $85 per                 0  $85...............  $63,920.
 inspection.                      hour = $85.
Internal Surface HFEC            3 work-hours x $85 per                0  $255 per            $191,760 per
 inspections.                     hour = $255 per                          inspection cycle.   inspection cycle.
                                  inspection cycle.
----------------------------------------------------------------------------------------------------------------

                                 Estimated Costs for Required Actions: Option 2
----------------------------------------------------------------------------------------------------------------
                                                                                Cost on U.S.
             Action                     Labor cost          Parts cost     Cost per product        operators
----------------------------------------------------------------------------------------------------------------
External general visual          1 work-hour x $85 per                $0  $85...............  $63,920.
 inspection.                      hour = $85.
External LFEC and HFEC           18 work-hours x $85 per               0  $1,530 per          $1,150,560 per
 inspections.                     hour = $1,530 per                        inspection cycle.   inspection cycle.
                                  inspection cycle.
----------------------------------------------------------------------------------------------------------------

    The FAA has received no definitive data that would enable the
agency to provide cost estimates for the on-condition actions specified
in this proposed AD.

Authority for This Rulemaking

    Title 49 of the United States Code specifies the FAA's authority to
issue rules on aviation safety. Subtitle I, section 106, describes the
authority of the FAA Administrator. Subtitle VII: Aviation Programs,
describes in more detail the scope of the Agency's authority.
    The FAA is issuing this rulemaking under the authority described in
Subtitle VII, Part A, Subpart III, Section 44701: ``General
requirements.'' Under that section, Congress charges the FAA with
promoting safe flight of civil aircraft in air commerce by prescribing
regulations for practices, methods, and procedures the Administrator
finds necessary for safety in air commerce. This regulation is within
the scope of that authority because it addresses an unsafe condition
that is likely to exist or develop on products identified in this
rulemaking action.
    This proposed AD is issued in accordance with authority delegated
by the Executive Director, Aircraft Certification Service, as
authorized by FAA Order 8000.51C. In accordance with that order,
issuance of ADs is normally a function of the Compliance and
Airworthiness Division, but during this transition period, the
Executive Director has delegated the authority to issue ADs applicable
to transport category airplanes and associated appliances to the
Director of the System Oversight Division.

Regulatory Findings

    The FAA determined that this proposed AD would not have federalism
implications under Executive Order 13132. This proposed AD would not
have a substantial direct effect on the States, on the relationship
between the national Government and the States, or on the distribution
of power and responsibilities among the various levels of government.
    For the reasons discussed above, I certify this proposed
regulation:
    (1) Is not a ``significant regulatory action'' under Executive
Order 12866,
    (2) Will not affect intrastate aviation in Alaska, and
    (3) Will not have a significant economic impact, positive or
negative, on a substantial number of small entities under the criteria
of the Regulatory Flexibility Act.

List of Subjects in 14 CFR Part 39

    Air transportation, Aircraft, Aviation safety, Incorporation by
reference, Safety.

The Proposed Amendment

    Accordingly, under the authority delegated to me by the
Administrator, the FAA proposes to amend 14 CFR part 39 as follows:

PART 39--AIRWORTHINESS DIRECTIVES

0
1. The authority citation for part 39 continues to read as follows:

    Authority: 49 U.S.C. 106(g), 40113, 44701.

Sec.  39.13  [Amended]

0
2. The FAA amends Sec.  39.13 by adding the following new airworthiness
directive (AD):

The Boeing Company: Docket No. FAA-2019-0705 Product Identifier
2019-NM-098-AD.

(a) Comments Due Date

    The FAA must receive comments by November 15, 2019.

(b) Affected ADs

    None.

(c) Applicability

    This AD applies to The Boeing Company Model 737-600, -700, -
700C, -800, and -900 series airplanes, certificated in any category,
as identified in Boeing Alert Requirements Bulletin 737-53A1383 RB,
dated May 9, 2019.

(d) Subject

    Air Transport Association (ATA) of America Code 53, Fuselage.

(e) Unsafe Condition

    This AD was prompted by reports of cracks in the bear strap from
station (STA) 290 to STA 296, and between S-8R and S-9R, sometimes
common to fasteners in the gap cover and emanating from rough
sanding marks found on the surface of the bear strap. The FAA is
issuing this AD to address cracking of the bear strap, which could
result in severing of the bear strap, possibly leading to
uncontrolled decompression of the airplane and loss of structural
integrity of the airplane.

(f) Compliance

    Comply with this AD within the compliance times specified,
unless already done.

(g) Required Actions

    Except as specified by paragraph (h) of this AD: At the
applicable times specified in the ``Compliance'' paragraph of Boeing
Alert Requirements Bulletin 737-53A1383 RB, dated May 9, 2019, do
all applicable actions identified in, and in accordance with, the
Accomplishment Instructions of Boeing Alert

Requirements Bulletin 737-53A1383 RB, dated May 9, 2019.

    Note 1 to paragraph (g) of this AD: Guidance for accomplishing
the actions required by this AD can be found in Boeing Alert Service
Bulletin 737-53A1383, dated May 9, 2019, which is referred to in
Boeing Alert Requirements Bulletin 737-53A1383 RB, dated May 9,
2019.

(h) Exceptions to Service Information Specifications

    (1) For purposes of determining compliance with the requirements
of this AD: Where Boeing Alert Requirements Bulletin 737-53A1383 RB,
dated May 9, 2019, uses the phrase ``the original issue date of
Requirements Bulletin 737-53A1383 RB,'' this AD requires using ``the
effective date of this AD,'' except where Boeing Alert Requirements
Bulletin 737-53A1383 RB, dated May 9, 2019, uses the phrase ``the
original issue date of Requirements Bulletin 737-53A1383 RB'' in a
note or flag note.
    (2) Where Boeing Alert Requirements Bulletin 737-53A1383 RB,
dated May 9, 2019, specifies contacting Boeing for repair
instructions or for alternative inspections: This AD requires doing
the repair, or doing the alternative inspections and applicable on-
condition actions, using a method approved in accordance with the
procedures specified in paragraph (i) of this AD.

(i) Alternative Methods of Compliance (AMOCs)

    (1) The Manager, Seattle ACO Branch, FAA, has the authority to
approve AMOCs for this AD, if requested using the procedures found
in 14 CFR 39.19. In accordance with 14 CFR 39.19, send your request
to your principal inspector or local Flight Standards District
Office, as appropriate. If sending information directly to the
manager of the certification office, send it to the attention of the
person identified in paragraph (j)(1) of this AD. Information may be
emailed to<EMAIL_ADDRESS>    (2) Before using any approved AMOC, notify your appropriate
principal inspector, or lacking a principal inspector, the manager
of the local flight standards district office/certificate holding
district office.
    (3) An AMOC that provides an acceptable level of safety may be
used for any repair, modification, or alteration required by this AD
if it is approved by The Boeing Company Organization Designation
Authorization (ODA) that has been authorized by the Manager, Seattle
ACO Branch, FAA, to make those findings. To be approved, the repair
method, modification deviation, or alteration deviation must meet
the certification basis of the airplane, and the approval must
specifically refer to this AD.

(j) Related Information

    (1) For more information about this AD, contact Michael
Bumbaugh, Aerospace Engineer, Airframe Section, FAA, Seattle ACO
Branch, 2200 South 216th St., Des Moines, WA 98198; phone and fax:
206-231-3522; email<EMAIL_ADDRESS>    (2) For service information identified in this AD, contact
Boeing Commercial Airplanes, Attention: Contractual & Data Services
(C&DS), 2600 Westminster Blvd., MC 110-SK57, Seal Beach, CA 90740-
5600; telephone<PHONE_NUMBER>; internet https://www.myboeingfleet.com. You may view this referenced service
information at the FAA, Transport Standards Branch, 2200 South 216th
St., Des Moines, WA. For information on the availability of this
material at the FAA, call<PHONE_NUMBER>.

    Issued in Des Moines, Washington, on September 16, 2019.
Suzanne Masterson,
Acting Director, System Oversight Division, Aircraft Certification
Service.
[FR Doc. 2019-21187 Filed 9-30-19; 8:45 am]
BILLING CODE 4910-13-P