[Federal Register Volume 78, Number 204 (Tuesday, October 22, 2013)]
[Notices]
[Pages 62788-62791]
[FR Doc No: 2013-24680]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-70691; File No. SR-FINRA-2013-043]

Self-Regulatory Organizations; Financial Industry Regulatory
Authority, Inc.; Notice of Filing and Immediate Effectiveness of a
Proposed Rule Change Relating to TRACE Fees for Securities Act Rule
144A Transaction Data

October 16, 2013.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934
(the ``Act'') \1\ and Rule 19b-4 thereunder,\2\ notice is hereby given
that on October 2, 2013, Financial Industry Regulatory Authority, Inc.
(``FINRA'') filed with the Securities and Exchange Commission

(the ``Commission'') the proposed rule change as described in Items I,
II, and III below, which Items have been prepared by FINRA. FINRA has
designated the proposed rule change as ``establishing or changing a
due, fee or other charge'' under Section 19(b)(3)(A)(ii) of the Act \3\
and Rule 19b-4(f)(2) thereunder,\4\ which renders the proposal
effective upon receipt of this filing by the Commission. 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.
    \3\ 15 U.S.C. 78s(b)(3)(A)(ii).
    \4\ 17 CFR 240.19b-4(f)(2).
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I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change

    FINRA is proposing to amend FINRA Rule 7730 to: (1) Provide for
Trade Reporting and Compliance Engine (``TRACE'') data fees for real-
time and historic data sets of transactions in TRACE-Eligible
Securities \5\ that are effected pursuant to Rule 144A \6\ under the
Securities Act of 1933 \7\ (``Rule 144A transactions''); \8\ (2)
clarify Level II Full Service Web Browser fee rates in light of the
availability of additional data sets; and (3) make other technical
amendments.
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    \5\ The term TRACE-Eligible Security is defined in FINRA Rule
6710(a).
    \6\ 17 CFR 230.144A.
    \7\ 15 U.S.C. 77a et seq. (hereinafter ``Securities Act'').
    \8\ See Securities Exchange Act Release No. 70345 (September 6,
2013), 78 FR 56251 (September 12, 2013) (Order Granting Approval of
Proposed Rule Change Relating to the Dissemination of Transactions
in TRACE-Eligible Securities that are Effected Pursuant to
Securities Act Rule 144A; File No. SR-FINRA-2013-029) (``Rule 144A
Dissemination Rule Change''). The Rule 144A Dissemination Rule
Change amends FINRA Rule 6750, FINRA Rule 7730 and the TRACE
dissemination protocols to provide for the dissemination of Rule
144A transactions and to establish real-time and historic data sets
for Rule 144A transactions. The effective date for the Rule 144A
Dissemination Rule Change will be established in a Regulatory
Notice.
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    The text of the proposed rule change is available on FINRA's Web
site at http://www.finra.org, at the principal office of FINRA and at
the Commission's Public Reference Room.\9\
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    \9\ As part of the proposed rule change, FINRA submitted an
Exhibit 4 and an Exhibit 5. The Exhibit 4 shows the text of the
proposed rule change marked to show the proposed changes as compared
to FINRA Rule 7730 including amendments approved by the SEC as if
such amendments were effective. See note 8. The Exhibit 5 shows the
text of the proposed rule change marked to show the proposed changes
as compared to the current rule text of FINRA Rule 7730 in
accordance with the requirements of Form 19b-4.
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II. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change

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

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

1. Purpose
    Recently, FINRA amended FINRA Rule 6750, FINRA Rule 7730 and TRACE
dissemination protocols to provide greater transparency in Rule 144A
transactions in TRACE-Eligible Securities.\10\ In the Rule 144A
Dissemination Rule Change, FINRA included amendments to FINRA Rule 7730
to establish data sets for real-time and historic Rule 144A transaction
data.
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    \10\ See note 8. FINRA Rule 6750 will provide for the
dissemination of Rule 144A transactions, provided the asset type
(e.g., corporate bonds) currently is subject to dissemination under
FINRA Rule 6750. The Rule 144A Dissemination Rule Change does not
extend to equity transactions effected pursuant to Securities Act
Rule 144A (17 CFR 230.144A).
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    In this proposed rule change, FINRA proposes to establish fees for
the real-time disseminated Rule 144A transaction data and the Historic
TRACE Data for Rule 144A transactions, clarify Level II Full Service
Web Browser fee rates in light of the availability of additional data
sets, and incorporate other technical amendments in FINRA Rule 7730.
Rule 144A Data Sets
    In the Rule 144A Dissemination Rule Change, FINRA amended FINRA
Rule 7730(c) to establish the Rule 144A transaction data set (``Rule
144A Data Set''), which is similar to the data sets established for
corporate bonds (``Corporate Bond Data Set''), Agency Debt Securities
(``Agency Data Set'') and Asset-Backed Securities (``ABS Data
Set'').\11\ The Rule 144A Data Set will consist of information
disseminated immediately upon receipt of a transaction report for a
Rule 144A transaction. FINRA proposes to extend the market data fees
currently in effect for similar real-time TRACE market data sets (i.e.,
the Corporate Bond Data Set, the Agency Data Set and the ABS Data Set)
to the Rule 144A Data Set. The proposed rule change would amend FINRA
Rule 7730(c)(1), FINRA Rule 7730(c)(2) and the preceding table to
provide that each data set is available at the same rate and eliminate
redundant text.\12\
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    \11\ The terms Agency Debt Security and Asset-Backed Security
are defined in FINRA Rule 6710(l) and FINRA Rule 6710(m),
respectively.
    \12\ See Exhibit 4 to the Form 19b-4, which is available on
FINRA's Web site.
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    In addition, in the Rule 144A Dissemination Rule Change, FINRA
amended FINRA Rule 7730(d) to establish a historic data set for Rule
144A transactions (``Historic Rule 144A Data Set''), which is similar
to the data sets established for corporate bonds (``Historic Corporate
Bond Data Set''), Agency Debt Securities (``Historic Agency Data Set'')
and Asset-Backed Securities (``Historic ABS Data Set'') referenced in
the rule.\13\ FINRA proposes to establish fees for the Historic Rule
144A Data Set at the same rates currently in effect in FINRA Rule
7730(d) for the existing historic data sets. The proposed rule change
would amend FINRA Rule 7730(d)(1), FINRA Rule 7730(d)(2) and the
preceding table to provide that each data set is available at the same
rate and eliminate redundant text.\14\ In connection with the fees for
the Historic Rule 144A Data Set, FINRA proposes to clarify in FINRA
Rule 7730(d)(1)(A)(ii) and FINRA Rule 7730(d)(1)(B)(ii) that the 2003
Historic Rule 144A Data Set includes the 2002 Historic Rule 144A Data
Set, and in FINRA Rules 7730(d)(1)(A)(i) and 7730(d)(1)(B)(i) that the
set-up fee to receive Historic TRACE data is paid only one time,
instead of per data set.\15\
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    \13\ As noted in the Rule 144A Dissemination Rule Change, the
Historic Rule 144A Data Set would include Rule 144A transactions in
TRACE-Eligible Securities subject to dissemination, effected as of
or after July 1, 2002, and, among other things, would include
uncapped volume information. However, like all other Historic TRACE
Data, Rule 144A transaction data included in the Historic Rule 144A
Data Set would be released subject to a delay of approximately 18
months from the date of the transaction.
    \14\ See Exhibit 4 to the Form 19b-4 on FINRA's Web site.
    \15\ FINRA Rule 7730(d) specifies: ``Historic TRACE Data fees,
except the Set-Up Fee, are charged for each Data Set.'' See Exhibit
4 to the Form 19b-4 on FINRA's Web site.
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    FINRA also proposes two clarifying amendments to other provisions
of Rule 7730 as discussed below.
Level II Full Service Web Browser Fee
    FINRA proposes to clarify in FINRA Rule 7730(a)(1) applicable fees
when a firm uses a TRACE web browser that includes access to real-time
TRACE transaction data. The subscription rate

for the Level II Full Service Web Browser includes the fees for a
subscription to one or two data sets, which were established when there
were only two data sets. When the Rule 144A Dissemination Rule Change
becomes effective, there will be four available real-time data sets:
Corporate Bond Data Set, Agency Data Set, ABS Data Set and Rule 144A
Data Set. FINRA would extend the subscription rates currently
applicable to first and second data sets (i.e., a discounted rate of
$30 per data set for a single user ID and $60 per data set for
additional user IDs) to the third and fourth data sets in two similar
provisions. Specifically, in FINRA Rule 7730(a)(1)(B)(i), for a Level
II Full Service Web Browser subscription for a single user ID or the
first user ID, the current fee is $50 per month \16\ (including one
data set), and $80 per month (including two data sets). As amended, the
Level II Full Service Web Browser subscription fee would be $110 per
month (for subscribers to three data sets), or $140 per month (for
subscribers to four data sets). For Level II Full Service Web Browser
subscriptions for additional user IDs, in FINRA Rule 7730(a)(1)(B)(ii),
the current fee is $80 per month per user ID (including one data set)
and $140 per month per user ID (including two data sets).\17\ FINRA
would extend the same fee rate per data set to the third and fourth
data sets, so that the Level II Full Service Web Browser subscription
fee (applicable to additional users IDs) would be $200 per month per
user ID (for subscribers to three data sets), and $260 per month per
user ID (for subscribers to four data sets).
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    \16\ Each fee includes the $20 per month fee per user ID for
Level I Trade Report Only Web Browser Access as specified in FINRA
Rule 7730(a)(1)(A).
    \17\ Again, each fee includes the $20 per month fee per user ID
for Level I Trade Report Only Web Browser Access. See note 16.
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TBA Transaction Reporting Fee
    The trade reporting fees for transactions in TRACE-Eligible
Securities are set forth in FINRA Rule 7730(b)(1). For Agency Pass-
Through Mortgage-Backed Securities, as defined in FINRA Rule 6710(v),
traded to be announced (``TBA''), as defined in FINRA Rule 6710(u), the
trade reporting fee is $1.50 per transaction. At the time the TBA
reporting fee was established, FINRA had not defined TBA transactions
to include those involving SBA-Backed ABS; however, FINRA intended the
TBA reporting fee to apply to all TBA transactions. Accordingly, FINRA
proposes to clarify that SBA-Backed ABS, as defined in FINRA Rule
6710(bb), traded TBA are subject to the $1.50 per transaction trade
reporting fee.
    FINRA has filed the proposed rule change for immediate
effectiveness. The implementation date of the proposed rule change will
be the same as the effective date of the Rule 144A Dissemination Rule
Change.
2. Statutory Basis
    FINRA believes that the proposed rule change is consistent with the
provisions of Section 15A(b)(5) of the Exchange Act,\18\ which
requires, among other things, that FINRA rules provide for the
equitable allocation of reasonable dues, fees and other charges among
members and issuers and other persons using any facility or system that
FINRA operates or controls.
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    \18\ 15 U.S.C. 78o-3(b)(5).
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    FINRA believes that the proposed fees for the Rule 144A Data Set
and Historic Rule 144A Data Set that are an extension of the fee rates
that are assessed currently for existing real-time and historic data
sets are reasonable, equitably allocated and not unfairly
discriminatory. FINRA believes that the proposed fees are reasonable in
light of FINRA's regulatory and operational costs, including personnel,
technology and storage costs to collect and provide real-time and
historic Rule 144A transaction data and the increase in such costs
incurred by FINRA over time. FINRA proposes fees at the rates that have
been in effect for several years for similar data bases, and such fees
are designed to defray a portion of such costs.
    FINRA believes that the proposed rule change provides for the
equitable allocation of the proposed fees among member firms and other
market participants and data users, and is not unfairly discriminatory.
The Rule 144A Data Set and Historic Rule 144A Data Set would be
accessible by all member firms and other market participants and data
users, subject to the same fee rates that are in effect for the real-
time and historic Corporate Bond, Agency and ABS data sets. As with
fees for other data sets (real-time and historic) provided by FINRA,
the proposed fees would be charged only to those member firms and other
market participants and data users that opt to receive a subscription
to the applicable data set. FINRA proposes to charge qualifying Tax-
Exempt Organizations \19\ reduced fees for the Rule 144A Data Set and
Historic Rule 144A Data Set, which are the same reduced fee rates that
FINRA currently charges such organizations to access other data sets.
The proposed reduced data fees for qualifying Tax-Exempt Organizations
are an equitable allocation of fees in that the lower rate provides
greater access to TRACE information to organizations that are formed
exclusively for a charitable purpose. FINRA also believes that the Rule
144A Data Set and Historic Rule 144A Data Set fees are not unfairly
discriminatory because the data sets would be available to all
similarly situated members and other data users on an equal basis at
the same rates, except for the proposed lower rates for qualifying Tax-
Exempt Organizations.
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    \19\ Tax-Exempt Organization is defined in FINRA Rule 7730(f)(2)
and means an organization that is described in Section 501(c) of the
Internal Revenue Code (26 U.S.C. Sec.  501(c)) and has received
recognition of the exemption from federal income taxes from the
Internal Revenue Service.
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    FINRA believes that the proposed amendments regarding the Level II
Full Service Web Browser subscription fees are reasonable in light of
FINRA's regulatory and operational costs, including personnel,
technology and storage costs to collect and provide real-time
transaction data and the increase in such costs incurred by FINRA over
time. FINRA proposes amendments to allow members to access additional
data bases at the same fee rate that has been in effect for several
years, and such fees are designed to defray a portion of such costs.
FINRA also believes that such amendments provide for the equitable
allocation of fees among member firms in that the combined service/
market data product, which allows members to report and review the
member's transactions and to access market data, is available to all
firms that wish to subscribe at the same rate. In addition, FINRA
believes that the additional proposed fees for access to additional
data sets as part of the Level II Full Service Web Browser are not
unfairly discriminatory because the Level II Full Service Web Browser
service is available to all members.
    Finally, FINRA believes that applying the TBA reporting fee that
currently applies to almost all TBA transactions to an additional small
number of TBA transactions is a reasonable and fair fee assessment, and
results in a fee that is equitably allocated among members engaged in
similar transactions. Also, the proposed fee is not unfairly
discriminatory in that all members engaged in such TBA transactions
will be subject to the same fee.

B. Self-Regulatory Organization's Statement on Burden on Competition

    FINRA does not believe that the proposed rule change will result in
any burden on competition that is not necessary or appropriate in
furtherance of the purposes of the Exchange Act.

The proposed fees for the Rule 144A Data Set and Historic Rule 144A
Data Set, which are consistent with current rates for subscriptions to
similar TRACE data sets, are reasonable, equitably allocated and not
unfairly discriminatory, and will permit a broad spectrum of members,
data vendors and other market participants, including qualifying Tax
Exempt Organizations, to obtain and use the data in furtherance of
market integrity and the protection of investors in such securities.
Similarly, FINRA does not believe that the proposed amendments to the
Level II Full Service Web Browser subscription, providing a member
access to multiple data sets as part of such service, will result in
any burden on competition that is not necessary or appropriate in
furtherance of the purposes of the Exchange Act. Access to the Rule
144A Data Set and Historic Rule 144A Data Set as well as the Level II
Full Service Browser subscription may facilitate competition in the
market for such securities in that access to such data will assist
members and customers in: (1) Determining the quality of their
executions; (2) price discovery; and (3) assessing the accuracy and
integrity of the valuation of positions.

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

    Written comments were neither solicited nor received.

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

    The foregoing rule change has become effective pursuant to Section
19(b)(3)(A) of the Act \20\ and paragraph (f) of Rule 19b-4\21\
thereunder. At any time within 60 days of the filing of the proposed
rule change, the Commission summarily may temporarily suspend such rule
change if it appears to the Commission that such action is necessary or
appropriate in the public interest, for the protection of investors, or
otherwise in furtherance of the purposes of the Act. If the Commission
takes such action, the Commission will institute proceedings to
determine whether the proposed rule change should be approved or
disapproved.
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    \20\ 15 U.S.C. 78s(b)(3)(A).
    \21\ 17 CFR 240.19b-4(f).
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IV. Solicitation of Comments

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

Electronic Comments

     Use the Commission's Internet comment form (http://www.sec.gov/rules/sro.shtml); or
     Send an email to<EMAIL_ADDRESS>Please include
File Number SR-FINRA-2013-043 on the subject line.

Paper Comments

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

All submissions should refer to File Number SR-FINRA-2013-043. This
file number should be included on the subject line if email is used. To
help the Commission process and review your comments more efficiently,
please use only one method. The Commission will post all comments on
the Commission's Internet Web site (http://www.sec.gov/rules/sro.shtml). Copies of the submission, all subsequent amendments, all
written statements with respect to the proposed rule change that are
filed with the Commission, and all written communications relating to
the proposed rule change between the Commission and any person, other
than those that may be withheld from the public in accordance with the
provisions of 5 U.S.C. 552, will be available for Web site viewing and
printing in the Commission's Public Reference Room, 100 F Street NE.,
Washington, DC 20549 on official business days between the hours of
10:00 a.m. and 3:00 p.m. Copies of the filing also will be available
for inspection and copying at the principal office of FINRA. All
comments received will be posted without change; the Commission does
not edit personal identifying information from submissions. You should
submit only information that you wish to make available publicly. All
submissions should refer to File Number SR-FINRA-2013-043 and should be
submitted on or before November 12, 2013.

    For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\22\
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    \22\ 17 CFR 200.30-3(a)(12).
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Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2013-24680 Filed 10-21-13; 8:45 am]
BILLING CODE 8011-01-P


[Federal Register Volume 81, Number 96 (Wednesday, May 18, 2016)]
[Notices]
[Page 31272]
[FR Doc No: 2016-11643]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-77820; File No. SR-NYSEArca-2016-44]

Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of
Designation of a Longer Period for Commission Action on a Proposed Rule
Change Amending NYSE Arca Equities Rule 7.31P(h) To Add a New
Discretionary Pegged Order

May 12, 2016.
    On March 11, 2016, NYSE Arca, Inc. (``Exchange'') filed with the
Securities and Exchange Commission (``Commission''), pursuant to
Section 19(b)(1) of the Securities Exchange Act of 1934 (``Act'') \1\
and Rule 19b-4 thereunder,\2\ a proposed rule change to amend Exchange
Rule 7.31P(h) to add a new Discretionary Pegged Order. The proposed
rule change was published for comment in the Federal Register on March
30, 2016.\3\ The Commission received two comment letters on the
proposed rule change,\4\ as well as a response from the Exchange.\5\
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ See Securities Exchange Act Release No. 77441 (March 24,
2016), 81 FR 17749.
    \4\ See Letter from Sophia Lee, General Counsel, IEX Group,
Inc., to Brent J. Fields, Secretary, Commission, dated April 15,
2016; Letter from John C. Nagel, Managing Director and Senior Deputy
General Counsel, Citadel LLC, to Brent J. Fields, Secretary,
Commission, dated April 20, 2016.
    \5\ See Letter from Elizabeth K. King, General Counsel and
Corporate Secretary, New York Stock Exchange, to Brent J. Fields,
Secretary, Commission, dated April 27, 2016.
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    Section 19(b)(2) of the Act \6\ provides that, within 45 days of
the publication of notice of the filing of a proposed rule change, or
within such longer period up to 90 days as the Commission may designate
if it finds such longer period to be appropriate and publishes its
reasons for so finding or as to which the self-regulatory organization
consents, the Commission shall either approve the proposed rule change,
disapprove the proposed rule change, or institute proceedings to
determine whether the proposed rule change should be disapproved. The
45th day after publication of the notice for this proposed rule change
is May 14, 2016. The Commission is extending this 45-day time period.
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    \6\ 15 U.S.C. 78s(b)(2).
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    The Commission finds that it is appropriate to designate a longer
period within which to take action on the proposed rule change so that
it has sufficient time to consider the proposed rule change.
Accordingly, the Commission, pursuant to Section 19(b)(2) of the
Act,\7\ designates June 28, 2016, as the date by which the Commission
should either approve or disapprove or institute proceedings to
determine whether to disapprove the proposed rule change (File Number
SR-NYSEArca-2016-44).
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    \7\ 15 U.S.C. 78s(b)(2).

    For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\8\
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    \8\ 17 CFR 200.30-3(a)(31).
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Robert W. Errett,
Deputy Secretary.
[FR Doc. 2016-11643 Filed 5-17-16; 8:45 am]
 BILLING CODE 8011-01-P


[Federal Register Volume 82, Number 24 (Tuesday, February 7, 2017)]
[Notices]
[Pages 9613-9617]
[FR Doc No: 2017-02443]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-79915; File No. SR-OCC-2017-801]

Self-Regulatory Organizations; The Options Clearing Corporation;
Notice of Filing of Advance Notice Concerning The Options Clearing
Corporation's Margin Coverage During Times of Increased Volatility

February 1, 2016.
    Pursuant to Section 806(e)(1) of Title VIII of the Dodd-Frank Wall
Street Reform and Consumer Protection Act, entitled the Payment,
Clearing, and Settlement Supervision Act of 2010 (``Payment, Clearing
and Settlement Supervision Act'') \1\ and Rule 19b-4(n)(1)(i) under the
Securities Exchange Act of 1934 (``Act''),\2\ notice is hereby given
that on January 4, 2017, The Options Clearing Corporation (``OCC'')
filed with the Securities and Exchange Commission (``Commission'') an
advance notice 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 advance notice from interested persons.
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    \1\ 12 U.S.C. 5465(e)(1).
    \2\ 17 CFR 240.19b-4(n)(1)(i).
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I. Clearing Agency's Statement of the Terms of Substance of the Advance
Notice

    This proposed change by OCC would modify the current process for
systematically monitoring market conditions and performing adjustments
to its margin coverage when current market volatility increases beyond
historically observed levels.

II. Clearing Agency's Statement of the Purpose of, and Statutory Basis
for, the Advance Notice

    In its filing with the Commission, OCC included statements
concerning the purpose of and basis for the advance notice and
discussed any comments it received on the advance notice. 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 and B below,
of the most significant aspects of these statements.

(A) Clearing Agency's Statement on Comments on the Advance Notice
Received From Members, Participants or Others

    Written comments were not and are not intended to be solicited with
respect to the proposed change and none have been received.

(B) Advance Notices Filed Pursuant to Section 806(e) of the Payment,
Clearing, and Settlement Supervision Act

Purpose of the Proposed Change
    OCC's margin methodology, the System for Theoretical Analysis and
Numerical Simulations (``STANS''), is OCC's proprietary risk management
system that calculates Clearing Members' \3\ margin requirements.\4\
STANS utilizes large-scale Monte Carlo simulations to forecast price
movement and correlations in determining a Clearing Member's margin
requirement.\5\ The STANS margin requirement is a portfolio calculation
at the 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 99% 2-day expected shortfall and an add-on
for model risk (the concentration/dependence stress test charge)
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    \3\ See OCC By-Laws Article 1(C)(14).
    \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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    The majority of risk factors utilized in the STANS methodology are
total returns on individual equity securities. Other risk factors
considered include: Returns on equity indices; changes in the
calibrated coefficients of a model describing the yield curve for U.S.
government securities; ``returns'' on the nearest-to-expiration futures
contracts of various kinds; and changes in foreign exchange rates. For
the volatility of each risk factor, the Monte Carlo simulations use the
greater of: (i) The short-term volatility level predicted by the model;
and (ii) an estimate of its longer-run level. In between the monthly
re-estimations of all the models, volatilities are automatically re-
scaled to the greater of the short-term or the longer-run levels to
mitigate pro-cyclicality \6\ in the margin levels. (This daily
volatility measure is called the ``uniform scale factor.'') The uniform
scale factor is a multiplier used in connection with STANS calculations
to account for, among other things, the difference between short-term
and long-term volatility forecasts for equities. It is specifically
defined as the ratio of long-run volatility (10Y+) over short-run
volatility (2Y). It is used to ``scale up'' the short-run volatility of
the securities (e.g., IBM) that are subject to monthly update, in order
to estimate long-run volatility. It is also used to capture data gaps
between monthly updates.
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    \6\ A quality that is positively correlated with the overall
state of the economy is deemed to be pro-cyclical.
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    An approach employed by OCC to mitigate pro-cyclicality within
STANS is to estimate market volatility based on current market
conditions (``current market estimate'') and compare this current
market estimate to a long-run estimate of market volatility (``long-run
market estimate''). This comparison utilizes certain market benchmarks
(or factors), which serve as proxies for the overall volatility of an
asset class or group of products. If the long-run market estimate for a
factor is found to be greater than the current market estimate, the
volatility estimates for all products tied to that factor are adjusted
(or scaled) up in a manner proportionate to the relationship between
the current market volatility and the long-run market volatility for
that factor.
    Current STANS includes a single factor (``uniform scale factor''),
which serves as the proxy for the equity asset class. This uniform
scale factor is calibrated based on changes in the volatility of the
Standard & Poor's 500[supreg] Index (``SPX'') and applied to all
``equity-based products'' in the manner described above. Currently, the
uniform scale factor is the only scale factor used in STANS. The
proposed change is intended to enhance the STANS margin calculations by
providing for the capability to increase the number of scale factors
used within STANS in cases where a more appropriate proxy has been
identified for a particular asset class or group of products to measure
the relationship between current vs. long-run market volatility.
Summary of the Proposed Change
    OCC proposes a number of enhancements to its STANS margin
methodology that are designed to more accurately compute Clearing
Member margin requirements to reflect the risk of Clearing Member
portfolios. Specifically, OCC proposes to: (1) Adjust the longer-run
volatility forecast used in OCC's computation of the uniform scale
factor so that it would rely only on post-1957 price information (i.e.,
price information since the introduction of the SPX) in order to more
accurately account for the behavior of SPX returns only since the
inception of the index; (2) expand the number of scale factors used for
equity-based products to more accurately measure the relationship
between current and long-run market volatility with proxies that
correlate more closely to certain products carried within the equity
asset class; (3) apply relevant scale factors to the greater of (i) the
estimated variance of 1-day return scenarios or (ii) the historical
variance of the daily return scenarios of a particular instrument, as a
floor to mitigate procyclicality; and (4) implement processing changes
that would update the statistical models for common factors related to
Treasury securities on a daily basis. The proposed changes are
discussed in more detail below.
    OCC believes that the current approach to scale factors in STANS
would be improved by providing the functionality to establish multiple
scale factors intended to more accurately measure the relationship
between current and long-run market volatility with proxies that
correlate more closely to groups of products within an asset class
(e.g., Russell 1000 Index and Russell 1000 ETFs), which would enhance
the accuracy of the margin requirements in STANS.\7\ By

incorporating this process to scale margin coverages when current
market volatility exceeds historically heightened levels that have been
established to mitigate pro-cyclicality, OCC's margin methodology is
able to expeditiously respond to severe changes in market volatility
and thus better protect the integrity of our financial markets.
---------------------------------------------------------------------------

    \7\ In this case, accuracy is measured against backtesting
results. Pursuant to OCC's Model Risk Management Policy, an accurate
99% value-at-risk model should expect exceedances at a rate of 1%
per independent trial. If the exceedance rate is too high, the model
is missing key risks; if the exceedance rate is too low, the model
is not consistent with the organization's risk appetite. To the
extent that the conditional variances of not all relevant risk
factors move in lock-step to the conditional variance of SPX,
multiple scale factors offers the opportunity to be more accurate.
---------------------------------------------------------------------------

Scale Factor for Equity-Based Products
Current Uniform Scale Factor for Equity-Based Products
    The uniform scale factor for the SPX roughly represents the ratio
of OCC's estimates of the long-run market volatility to the forecast
market volatility determined by most recent 24-month daily historical
returns.\8\ To determine the estimate of current market volatility, OCC
relies on daily pricing information for equity securities and exchange-
traded funds over a twenty-four month period ending with the last day
of the immediately preceding month. To populate this twenty-four month
time series, OCC relies on external vendors, with which it maintains
redundant relationships for resiliency,\9\ to adjust the daily pricing
information to account for corporate actions involving these
securities. This daily pricing information is received from its
vendor(s) after the close of each month, at which time OCC updates its
twenty-four month time series adding the new month and dropping the
last month of data. This process of updating the time series on a
monthly basis is referred to as a ``pending'' time series due to the
batch process used to update the time series. The long-run time series
used by the uniform scale factor is updated on a daily basis (i.e.,
non-pending update) with pricing information for the SPX dating back to
January 1, 1946. OCC calculates the uniform scale factor each business
day by comparing the current market volatility, using pending price
updates to the long-run time series using non-pending, or current,
market prices.
---------------------------------------------------------------------------

    \8\ The uniform scale factor has been a part of STANS since it
was installed in 2006. See Securities Exchange Act Release No. 53322
(February 15, 2006), 71 FR 9403 (February 23, 2006) (SR-OCC-2004-
20).
    \9\ Specifically, OCC maintains both a primary and backup data
center that receive live price feeds from multiple price vendors. In
the event of service disruption OCC is able to transition to an
alternate data center and/or pricing vendor, as applicable.
---------------------------------------------------------------------------

    The uniform scale factor is applied to all equity products and is
used to adjust individual equity current market volatility estimates on
a daily basis based on the comparison of the current market volatility
and the long-run volatility estimate, which is updated daily. Should it
be observed that the current market volatility is less than the long-
run volatility, all products tied to the uniform scale factor will be
adjusted higher based on the ratio of the long-run volatility estimate
to the current market volatility estimate to account for the observed
change in volatility. In addition, the uniform scale factor is also
used to account for the fact that the distribution of returns for the
SPX has a ``fat tail'' \10\ because the scale factor seeks to match
estimates of expected margin shortfalls under the scenarios in STANS
for a hypothetical long position in the SPX.
---------------------------------------------------------------------------

    \10\ A fat-tailed distribution is a probability distribution
that exhibits large skewness or kurtosis. Compared with a standard
normal distribution or bell curve, it has a higher probability of
occurrence of extreme events.
---------------------------------------------------------------------------

    The uniform scale factor resulting from the calculations described
above is applied as a multiplier to hypothetical returns on a long
portfolio of equities produced during the Monte Carlo market scenarios
run within STANS. By ``scaling up'' hypothetical returns in this way,
the uniform scale factor relies on an assumption that more recent
behavior of SPX returns will provide an appropriate proxy for the
volatility in equity price returns that occur between monthly updates
of price data for the pending short-run time series. Accordingly, the
uniform scale factor helps OCC set margin requirements that account for
this proxy to ensure that Clearing Members maintain margin assets that
would be sufficient in light of historical volatility of the SPX.
Proposed Changes to the Uniform Scale Factor for Equity-Based Products
    The average longer-run volatility forecast used in OCC's
computation of the uniform scale factor currently relies on daily
pricing information for component securities of the SPX dating back to
January of 1946. This time series predates, however, the 1957
introduction of the SPX. To accurately account for the behavior of SPX
returns only since the inception of the index, OCC proposes to adjust
the longer-run volatility forecast so that it would rely only on the
post-1957 information. OCC believes that this approach would reduce
model risk \11\ and improve the quality of the data by avoiding the
need to make assumptions related to the composition of the index before
its actual development.\12\
---------------------------------------------------------------------------

    \11\ OCC defines ``model risk'' as the potential for adverse
consequences of incorrect or misused model outputs and reports.
    \12\ As defined in OCC's Model Risk Management Policy, Model
Risk, in the sense of material exposure to the consequences of poor
assumptions, is reduced by making models adhere accurately to
observed phenomena. In this case, by reducing the role of the
uniform scale factor as a proxy between monthly updates of
univariate models for risk factors and by allowing certain risk
factors to bypass the monthly update process, as described below,
OCC believes that this proposed change would reduce model risk.
---------------------------------------------------------------------------

Proposed New Scale Factors for Equity-Based Products
    To more accurately measure the relationship between current and
long-run market volatility with proxies that correlate more closely to
certain products carried within the equity asset class, OCC proposes to
expand the number of scale factors to include: (1) Russell 2000[supreg]
Index (12/29/1978); (2) Dow Jones Industrial Average Index (9/23/1997);
(3) NASDAQ-100 Index (2/4/1985) and (4) S&P 100 Index (1/2/1976).\13\
While the SPX scale factor will continue to serve as the default scale
factor for most equity products, the index options, futures and ETFs
which map to these indexes will be assigned to these scale factors and
whose current volatility estimates will be adjusted based on the
aforementioned methodology.
---------------------------------------------------------------------------

    \13\ The dates in parentheticals are the dates from which OCC
has historical data on the specified index.
---------------------------------------------------------------------------

    Consistent with OCC's existing Margin Policy,\14\ OCC will evaluate
the performance and use of these scale factors and determine if changes
to the mapping of products to scale factors or the addition of new
scale factors are warranted. Prior to any changes being implemented OCC
would present its findings to the Enterprise Risk Management Committee
and obtain approval to make the recommended enhancements.
---------------------------------------------------------------------------

    \14\ OCC's Margin Policy describes OCC's approach to prudently
managing market and credit exposures presented by its Clearing
Members.
---------------------------------------------------------------------------

Proposed Anti-Procyclical Measure for Equity-Based Scale Factors
    In order to mitigate against pro-cyclicality, OCC intends to apply
the relevant scale factor to the greater of (i) the estimated variance
of the 1-day return scenarios or (ii) the historical variance of the
daily return scenarios of a particular instrument, as a floor. OCC
believes this floor would mitigate pro-cyclicality in the relevant
return scenarios because it would result in a higher estimate of
volatility during periods of relatively lower market volatility than if
only the estimated variance in (i) above was used.

Proposed Daily Statistical Updates for the Treasury Yield Curve Model
    In addition to implementing the scale factors described above, OCC
is also proposing to implement processing changes that would update the
statistical models for common factors related to Treasury securities on
a daily basis. These model changes would allow OCC to monitor and
respond to material changes in the volatility of Treasury securities
while also mitigating pro-cyclicality without implementing a scale
factor specific to Treasury securities. OCC believes that updating its
Treasury securities models on a daily basis is a more appropriate way
to monitor and respond to material changes in the volatility of
Treasury securities while also mitigating pro-cyclicality since the
Treasury yield curve model is relatively less complex, with only three
factors, and the structure of the Treasuries securities model does not
lend itself to a returns-based scale factor (as is used with equity and
volatility derivatives, as described above).
    Specifically, OCC is proposing to enhance its existing yield curve
model that OCC uses to project U.S. Treasury security returns, which is
updated monthly. The model contains underlying data set and time series
information for Treasury securities, which run from February 4, 2008
(based on available historical data) and, after implementing the
proposed enhancements, the model would be updated on a daily basis as
new data and time series information becomes available. The proposed
enhancements would promote a more accurate approach to margining within
STANS, as it relates to Treasury securities, particularly when markets
are volatile because the daily statistical updates would prevent the
model from becoming stale between monthly updates.
Impact Analysis and Outreach
    Based on simulation testing for the period from January 14, 2015,
to March 6, 2015, risk margins (i.e., expected shortfall plus the
concentration/dependence add-on) would have been approximately 5.2%
higher in aggregate as a consequence of these changes. This is mostly
due to higher coverage for the Russell 2000 Index and index ETF
products under the new methodology.
    In order to inform Clearing Members of the proposed change, OCC
provided a general update at a recent OCC Roundtable \15\ meeting and
would continue to provide updates at Roundtable meetings on a quarterly
basis going forward. In addition, OCC would publish an Information
Memorandum to all Clearing Members describing the proposed change and
will provide additional periodic Information Memoranda updates prior to
the implementation date. OCC would also provide at least thirty days
prior notice to Clearing Members before implementing the change.
Additionally, OCC would perform targeted and direct outreach with
Clearing Members that would be most impacted by the proposed change and
OCC would work closely with such Clearing Members to coordinate the
implementation and associated funding for such Clearing Members
resulting from the proposed change.\16\ Finally, OCC would discuss the
proposed change with its cross-margin clearing house partners to ensure
they are aware of the proposed change.\17\
---------------------------------------------------------------------------

    \15\ 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.
    \16\ Specifically, OCC will discuss with those Clearing Members
how they plan to satisfy any increase in their margin requirements
associated with the proposed change.
    \17\ Cross-margin accounts are not uniquely affected by the
proposed change and would be affected by the proposed change in the
same manner as any other type of OCC account.
---------------------------------------------------------------------------

Consistency With the Payment, Clearing and Settlement Supervision Act
    OCC believes that the proposed change concerning scale factors
described above is consistent with Section 805(b)(1) of the Payment,
Clearing and Settlement Supervision Act \18\ because the proposed
change would promote robust risk management.
---------------------------------------------------------------------------

    \18\ 12 U.S.C. 5464(b)(1).
---------------------------------------------------------------------------

    The proposed model changes described above would enhance the manner
in which OCC computes margin requirements for Clearing Members.
Specifically, the proposed changes to the uniform scale factor for
equity-based products to rely only on post-1957 information would
reduce model risk and improve the quality of data by avoiding
unnecessary assumptions related to the composition of the SPX before
its inception. The proposed four new scale factors for equity-based
products would more accurately measure the relationship between current
and long-run market volatility with proxies that are correlated more
closely to certain products within the equity asset class. The proposed
daily statistical updates for the Treasury yield curve model would
allow OCC to monitor and response to material changes in the volatility
of Treasury securities while also mitigating pro-cyclicality. Taken
together, the changes to the uniform scale factor, the addition of new
equity based scale factors, and the introduction of daily statistical
updates for the Treasury yield curve model would cause STANS to more
accurately compute Clearing Member margin requirements to reflect the
risk of Clearing Member portfolios thereby promoting robust risk
management in that the risk that Clearing Member margin assets would be
insufficient should OCC need to use such assets to close-out the
positions of a defaulted Clearing Member would be reduced. Further, the
proposed changes would promote robust risk management by making it less
likely that the default of a Clearing Member would stress the financial
resources available to OCC, which include mutualized resource funds
deposited by non-defaulting Clearing Members as Clearing Fund.
Anticipated Effect on and Management of Risk
    OCC believes that the proposed changes would reduce the nature and
level of risk presented to OCC because, in several respects, the
modification of the uniform scale factor used in STANS and the
introduction of new scale factors would increase the accuracy of OCC's
margin calculations. First, OCC would simplify its process for
establishing the uniform scale factor by basing it on the one-day
variances \19\ of the SPX returns, rather than an approximation of the
margin coverage on a hypothetical position in the SPX. OCC believes
that this simplified approach would mitigate operational and regulatory
risks by making the approach to the uniform scale factor less complex
and more readily understood by OCC's staff, regulators and other
parties interested in OCC's risk management framework.
---------------------------------------------------------------------------

    \19\ The one-day conditional variance of a risk factor is the
variance of the one-day innovation (typically a log-return) one day
into the future in the sense of random variables (i.e., based on an
indexed filtration and a probability measure).
---------------------------------------------------------------------------

    For use with certain exchange-traded funds, OCC proposes to
implement in STANS four new scale factors that would be based on the
Russell 2000[supreg] Index, Dow Jones Industrial Average Index, NASDAQ-
100 Index and S&P 100 Index. The separately forecasted volatility for
each of these indexes would be represented in the resulting scale
factor. OCC believes applying a scale factor based on an index to which
certain exchange-traded funds are more

closely correlated than the SPX would mitigate risk because it would
enhance the accuracy of margin requirements in STANS.
    Under the proposed change, a floor of the sample variance would be
introduced with respect to each scale factor. The sample variance floor
would mitigate pro-cyclicality risk in the relevant return scenarios
because it would potentially result in the collection of more margin
during periods of relatively lower market volatility. In the absence of
using the sample variance as a floor, the margin collected could drop
significantly during periods of low volatility and then dramatically
increase when, between monthly updates to a pending time series, market
events cause increases in the variance of the underlying data set for
the scale factor.
    OCC would also implement processing changes that would update the
statistical models for common factors related to Treasury securities on
a daily basis. These model changes would allow OCC to monitor and
respond to material changes in the volatility of Treasury securities
while also mitigating pro-cyclicality. The proposed enhancements would
promote a more accurate approach to margining within STANS, as it
relates to Treasury securities, particularly when markets are volatile
because the daily statistical updates would mitigate the risk that the
model would become stale between monthly updates.
    For the foregoing reasons, OCC believes that the proposed change
would enhance OCC's management of risk and reduce the nature or level
of risk presented to OCC.

III. Date of Effectiveness of the Advance Notice and Timing for
Commission Action

    The proposed change may be implemented if the Commission does not
object to the proposed change within 60 days of the later of (i) the
date the proposed change was filed with the Commission or (ii) the date
any additional information requested by the Commission is received. OCC
shall not implement the proposed change if the Commission has any
objection to the proposed change.
    The Commission may extend the period for review by an additional 60
days if the proposed change raises novel or complex issues, subject to
the Commission or the Board of Governors of the Federal Reserve System
providing the clearing agency with prompt written notice of the
extension. A proposed change may be implemented in less than 60 days
from the date the advance notice is filed, or the date further
information requested by the Commission is received, if the Commission
notifies the clearing agency in writing that it does not object to the
proposed change and authorizes the clearing agency to implement the
proposed change on an earlier date, subject to any conditions imposed
by the Commission.
    OCC shall post notice on its Web site of proposed changes that are
implemented.
    The proposal shall not take effect until all regulatory actions
required with respect to the proposal are completed.

IV. Solicitation of Comments

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

Electronic Comments

     Use the Commission's Internet comment form (http://www.sec.gov/rules/sro.shtml); or
     Send an email to<EMAIL_ADDRESS>Please include
File Number SR-OCC-2017-801 on the subject line.

Paper Comments

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

All submissions should refer to File Number SR-OCC-2017-801. This file
number should be included on the subject line if email is used. To help
the Commission process and review your comments more efficiently,
please use only one method. The Commission will post all comments on
the Commission's Internet Web site (http://www.sec.gov/rules/sro.shtml). Copies of the submission, all subsequent amendments, all
written statements with respect to the advance notice that are filed
with the Commission, and all written communications relating to the
advance notice between the Commission and any person, other than those
that may be withheld from the public in accordance with the provisions
of 5 U.S.C. 552, will be available for Web site viewing and printing in
the Commission's Public Reference Room, 100 F Street NE., Washington,
DC 20549 on official business days between the hours of 10:00 a.m. and
3:00 p.m. Copies of the filing also will be available for inspection
and copying at the principal office of OCC and on OCC's Web site at
http://www.theocc.com/components/docs/legal/rules_and_bylaws/sr_occ_17_801.pdf.
    All comments received will be posted without change; the Commission
does not edit personal identifying information from submissions. You
should submit only information that you wish to make available
publicly.
    All submissions should refer to File Number SR-OCC-2017-801 and
should be submitted on or before February 28, 2017.

    By the Commission.
Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2017-02443 Filed 2-6-17; 8:45 am]
 BILLING CODE 8011-01-P


[Federal Register Volume 77, Number 2 (Wednesday, January 4, 2012)]
[Notices]
[Page 278]
[FR Doc No: 2011-33736]

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DEPARTMENT OF ENERGY

Federal Energy Regulatory Commission

[Docket No. PR09-11-003]

Southcross Mississippi Pipeline, L.P. Notice of Extension of Time

    On December 13, 2011, Southcross Mississippi Pipeline, L.P.
(Southcross) filed a request to extend the date for filing its next
rate case pursuant to sections 284.224 and 284.123 (2011) of the
Commission's regulations.\1\ In support of this request, Southcross
states that in Order No. 735 the Commission modified its policy
concerning periodic reviews of rates charges by section 311 and Hinshaw
pipelines to extend the cycle for such reviews from three to five
years.\2\ Therefore, Southcross requests that the date for its next
rate filing be extended to February 1, 2014, which is five years from
the date of Southcross' most recent rate filing with this Commission.
---------------------------------------------------------------------------

    \1\ 18 CFR 284.123 and 284.224 (2011).
    \2\ Contract Reporting Requirements of Intrastate Natural Gas
Companies, Order No. 735, 131 FERC ] 61,150 (May 20, 2010).
---------------------------------------------------------------------------

    Upon consideration, notice is hereby given that an extension of
time for Southcross to file its section 284.123 rate petition is
granted to and including February 1, 2014.

    Dated: December 28, 2011.
Kimberly D. Bose,
Secretary.
[FR Doc. 2011-33736 Filed 1-3-12; 8:45 am]
BILLING CODE 6717-01-P


[Federal Register Volume 79, Number 86 (Monday, May 5, 2014)]
[Notices]
[Pages 25631-25633]
[FR Doc No: 2014-10171]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-72042; File No. SR-CFE-2014-001]

Self-Regulatory Organizations; CBOE Futures Exchange, LLC; Notice
of Filing and Immediate Effectiveness of a Proposed Rule Change To
Adopt and Amend Certain Customer Protection and Financial Rules

April 29, 2014.
    Pursuant to Section 19(b)(7) of the Securities Exchange Act of 1934
(``Act''),\1\ notice is hereby given that on April 11, 2014, CBOE
Futures Exchange, LLC (``CFE'' or ``Exchange'') filed with the
Securities and Exchange Commission (``SEC'' or ``Commission'') the
proposed rule change described in Items I, II, and III below, which
Items have been prepared by CFE. The Commission is publishing this
notice to solicit comments on the proposed rule change from interested
persons. CFE also has filed this proposed rule change with the
Commodity Futures Trading Commission (``CFTC''). CFE filed a written
certification with the CFTC under Section 5c(c) of the Commodity
Exchange Act (``CEA'') \2\ on April 11, 2014.
---------------------------------------------------------------------------

    \1\ 15 U.S.C. 78s(b)(7).
    \2\ 7 U.S.C. 7a-2(c).
---------------------------------------------------------------------------

I. Self-Regulatory Organization's Description of the Proposed Rule
Change

    The Exchange proposes to adopt and amend certain customer
protection and financial rules that are applicable to security futures
traded on CFE. The only security futures currently traded on CFE are
traded under Chapter 16 of CFE's Rulebook which is applicable to
Individual Stock Based and Exchange-Traded Fund Based Volatility Index
security futures. The rule amendments included as part of this rule
change relate generally to amending CFE Rules to incorporate new and
amended CFTC regulations concerning customer protection and the
financial surveillance of futures commission merchants (``FCMs''). The
text of the proposed rule change is attached as Exhibit 4.\3\
---------------------------------------------------------------------------

    \3\ The Commission notes that the Exhibit 4 is attached to the
filing, but is not attached to the publication of this notice.
---------------------------------------------------------------------------

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

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

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

1. Purpose
    The purpose of the proposed CFE rule amendments included as part of
this rule change is to amend CFE rules (i) to incorporate the final
regulations adopted by the CFTC under the caption Enhancing Protections
Afforded Customers and Customer Funds Held by Futures Commission
Merchants and Derivatives Clearing Organizations (``CFTC Rulemaking'')
\4\ and (ii) to enhance the financial surveillance of FCMs that are
Trading Privilege Holders (``TPHs''). The rule amendments included as
part of this rule change are to apply to all products traded on CFE,
including both non-security futures and security futures. CFE is making
these rule amendments in conjunction with other rule amendments being
made by CFE consistent with the CFTC Rulemaking that are not required
to be submitted to the Commission pursuant to Section 19(b)(7) of the
Act \5\ and thus are not included as part of this rule change.
---------------------------------------------------------------------------

    \4\ 78 FR 68506 (Nov. 14, 2013).
    \5\ 15 U.S.C. 78s(b)(7).
---------------------------------------------------------------------------

    CFE has incorporated into Appendix to Chapter 5 of its Rulebook
certain CFTC regulations relating to customer protection,
recordkeeping, and reporting and has provided that a violation of any
of those regulations shall be deemed a violation of a specific CFE
Rule. With the exception of the amendments to CFE Rule 503A, all other
amendments to CFE Rules contained in this filing are proposed to change
the CFE Rules in the Appendix to Chapter 5 of the CFE Rulebook to make
their language consistent with the language in the CFTC regulations
that was amended by the CFTC Rulemaking.
    CFE already requires that its FCMs that are TPHs comply with all
CFTC regulations. For example, CFE Rule 604 prohibits TPHs and their
Related Parties from engaging in conduct in violation of Applicable Law
(which includes, among other things, the CEA \6\ and CFTC regulations).
CFE Rule 505 specifically requires TPHs to comply with CFTC regulations
relating to the treatment of customer funds and the maintenance of
related books and records. CFE Rule 518 specifically requires TPHs to
comply with CFTC regulations relating to minimum financial
requirements, financial reporting requirements, and protection of
customer funds that are set forth in the Appendix to Chapter 5 of the
CFE Rulebook. The purpose of these proposed rule amendments is to make
the CFTC regulations that were added or amended by the CFTC Rulemaking
even more explicit.
---------------------------------------------------------------------------

    \6\ 7 U.S.C. 1 et seq.
---------------------------------------------------------------------------

Risk Management Program for FCMs
    CFE is proposing to add to its Rules new Rule 520 (and renumber all
subsequent Rules in the Chapter) to require that FCMs comply with the
risk management requirements set forth in CFTC Regulation 1.11: Risk
Management Program for futures commission merchants.\7\ As a result of
the CFTC Rulemaking, CFTC Regulation 1.52(b)(2) requires that all self-
regulatory organizations (``SROs'') (defined as designated contract
markets and registered futures associations in CFTC Regulation
1.52(a)(2)) adopt rules prescribing risk management requirements for
FCM member registrants that are at least as stringent as the
requirements contained in CFTC Regulation 1.11.\8\ CFTC Regulation 1.11
imposes, among other things, both recordkeeping and reporting
requirements on FCMs. Specifically, FCMs must maintain their risk
management policies and procedures, all written approvals, and all
records and reports required under the Regulation.\9\ In addition, FCMs
must furnish a copy of their risk management policies and procedures to
the CFTC and its designated SRO upon application for registration and
thereafter upon request, as well as furnish copies of Risk Exposure
Reports

to the CFTC.\10\ Although all FCMs that are TPHs must already comply
with all CFTC Regulations, new CFE Rule 520 is proposed specifically to
follow the CFTC Rulemaking's directive with respect to CFTC Regulation
1.11.
---------------------------------------------------------------------------

    \7\ 17 CFR 1.11.
    \8\ 17 CFR 1.52.
    \9\ 17 CFR 1.11(c)(2), (h).
    \10\ 17 CFR 1.11(c)(4), (e)(2)(ii).
---------------------------------------------------------------------------

Recordkeeping
    The recordkeeping amendments proposed to be included in the
Appendix to Chapter 5 of the CFE Rulebook would impose requirements
that generally already exist under CFE Rules 505, 518, and 604, which,
as discussed, require adherence to CFTC regulations. The amendments to
certain CFTC regulations by the CFTC Rulemaking will now be
specifically incorporated into CFE's rules. In particular, CFE is
proposing to amend CFE Rule 521 which incorporates into CFE's Rulebook
CFTC Regulation 1.18 (Minimum Financial Requirements for Futures
Commission Merchants and Introducing Brokers),\11\ CFE Rule 523 which
incorporates into CFE's Rulebook CFTC Regulation 1.20 (Futures Customer
Funds to be Segregated and Separately Accounted for),\12\ CFE Rule 526
which incorporates into CFE's Rulebook CFTC Regulation 1.23 (Interest
of Futures Commission Merchants in Segregated Futures Customer Funds;
Additions and Withdrawals),\13\ CFE Rule 528 which incorporates into
CFE's Rulebook CFTC Regulation 1.25 (Investment of Customer Funds),\14\
CFE Rule 529 which incorporates into CFE's Rulebook CFTC Regulation
1.26 (Deposit of Instruments Purchased with Futures Customer
Funds),\15\ and CFE Rule 535 which incorporates into CFE's Rulebook
CFTC Regulation 1.32 (Reporting of Segregated Account Computation and
Details Regarding the Holding of Futures Customer Funds).\16\
---------------------------------------------------------------------------

    \11\ 17 CFR 1.18.
    \12\ 17 CFR 1.20.
    \13\ 17 CFR 1.23.
    \14\ 17 CFR 1.25.
    \15\ 17 CFR 1.26.
    \16\ 17 CFR 1.32. CFE notes that certain of these amendments
relate to both recordkeeping and reporting (discussed in the next
section) but is only including discussion of them in this section to
avoid duplicative mention.
---------------------------------------------------------------------------

Reporting
    As CFE is proposing to do with various recordkeeping requirements,
CFE is also proposing to specifically incorporate into the Appendix to
Chapter 5 of its Rulebook the CFTC Rulemaking's amendments to CFTC
regulations relating to reporting. Like with the foregoing amended
recordkeeping requirements, the reporting amendments to this regulation
would impose requirements that generally already exist under CFE Rules
505, 518, and 604, which, as discussed, require adherence to CFTC
regulations. These amendments by the CFTC Rulemaking will now be
specifically incorporated into CFE's rules. In particular, CFE is
proposing to amend CFE Rule 519 which incorporates into CFE's Rulebook
CFTC Regulation 1.10 (Financial Reports of Futures Commission Merchants
and Introducing Brokers) \17\ and CFE Rule 520 which incorporates into
CFE's Rulebook CFTC Regulation 1.12 (Maintenance of Minimum Financial
Requirements by Futures Commission Merchants and Introducing
Brokers).\18\
---------------------------------------------------------------------------

    \17\ 17 CFR 1.10.
    \18\ 17 CFR 1.12.
---------------------------------------------------------------------------

    In addition to the foregoing amendments that incorporate the CFTC
Rulemaking, CFE is proposing amendments to CFE Rule 503A, which relate
to reporting obligations on FCMs and are not related to the CFTC
Rulemaking. CFE Rule 503A, which presently imposes reporting
obligations on FCMs that are TPHs, is proposed to be amended to require
these FCMs to file financial documentation with CFE in addition to the
documentation the Rule already requires. First, each TPH that is an FCM
would be required, in a form and manner prescribed by the Exchange, to
concurrently file with the Exchange all FOCUS Report Part III
submissions as well as any attachments or related submissions to all
Form 1-FR-FCM, Form 1-FR-IB, or FOCUS Report Part II, Part IIA or Part
II CSE and Part III submissions. Second, each TPH that is an FCM would
be required, in a form and manner prescribed by the Exchange, to
concurrently file with the Exchange a copy of any daily Statement of
Segregation Requirements and Funds in Segregation for Customers Trading
on U.S. Commodity Exchanges filed with the CFTC pursuant to CFTC
Regulation 1.32. Third, each TPH that is an FCM would be required, in a
form and manner prescribed by the Exchange, to concurrently file with
the Exchange a copy of any daily net capital filings submitted by the
TPH to its Designated Self-Regulatory Organization. Fourth, each TPH
that is an FCM would be required, in a form and manner prescribed by
the Exchange, to concurrently file with the Exchange a copy of any
notice that is filed with the CFTC pursuant to CFTC Regulation 1.23.
The receipt of this information will enhance CFE's financial
surveillance of FCMs.
2. Statutory Basis
    The Exchange believes that the proposed rule change is consistent
with Section 6(b) of the Act,\19\ in general, and furthers the
objectives of Section 6(b)(5) \20\ in particular in that it is designed
to prevent fraudulent and manipulative acts and practices, to promote
just and equitable principles of trade, to foster cooperation and
coordination with persons engaged in facilitating transactions in
securities, and to remove impediments to and perfect the mechanism of a
free and open market and a national market system, and in general, to
protect investors and the public interest.
---------------------------------------------------------------------------

    \19\ 15 U.S.C. 78f(b).
    \20\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------

    The addition of new CFE Rule 520, which requires FCMs to establish
risk management programs that comply with CFTC Regulation 1.11, will
enhance CFE's ability to protect investors and the public interest and
to enforce CFE Rules that prohibit fraudulent and manipulative acts and
conduct inconsistent with just and equitable principles of trade. By
specifically requiring that FCMs that are TPHs establish risk
management programs that comply with CFTC Regulation 1.11, CFE further
protects FCM customers.
    The recordkeeping amendments to CFE Rules 521, 523, 526, 528, 529,
and 535 and the reporting amendments to CFE Rules 503A, 519, and 520
will also enhance CFE's ability to protect investors and the public
interest and to enforce CFE Rules that prohibit fraudulent and
manipulative acts and conduct inconsistent with just and equitable
principles of trade. These recordkeeping requirements are designed to
ensure that TPHs maintain records that enable CFE and/or other
regulators to investigate whether TPHs are complying with applicable
rules and regulations by requiring the maintenance of information that
may be reviewed to determine whether or not a TPH is complying with
applicable regulatory requirements. Similarly, these reporting
requirements are designed to enable CFE to receive and request
information that allows CFE to monitor for compliance with rules and
regulations, to investigate for noncompliance when appropriate, and to
conduct financial monitoring with regard to TPHs that are FCMs.

B. Self-Regulatory Organization's Statement on Burden on Competition

    CFE does not believe that the proposed rule change will impose any
burden on competition not necessary or appropriate in furtherance of
the

purposes of the Act, in that the rule change makes enhancements to
CFE's financial surveillance of FCMs and requires TPHs to comply with
the amendments set forth in the CFTC Rulemaking. The Exchange believes
that the proposed rule change is equitable and not unfairly
discriminatory because all of the amended Rules would apply equally to
all TPHs that are subject to the applicable requirements, and the
Amendment is expressly consistent with the CFTC Rulemaking.

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

    No written comments were solicited or received with respect to the
proposed rule change.

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

    The proposed rule change will become effective on April 28, 2014.
    At any time within 60 days of the date of effectiveness of the
proposed rule change, the Commission, after consultation with the CFTC,
may summarily abrogate the proposed rule change and require that the
proposed rule change be refiled in accordance with the provisions of
Section 19(b)(1) of the Act.\21\
---------------------------------------------------------------------------

    \21\ 15 U.S.C. 78s(b)(1).
---------------------------------------------------------------------------

IV. Solicitation of Comments

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

Electronic Comments

     Use the Commission's Internet comment form (http://www.sec.gov/rules/sro.shtml); or
     Send an email to<EMAIL_ADDRESS>Please include
File Number SR-CFE-2014-001 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-CFE-2014-001. This file
number should be included on the subject line if email is used. To help
the Commission process and review your comments more efficiently,
please use only one method. The Commission will post all comments on
the Commission's Internet Web site (http://www.sec.gov/rules/sro.shtml). Copies of the submission, all subsequent amendments, all
written statements with respect to the proposed rule change that are
filed with the Commission, and all written communications relating to
the proposed rule change between the Commission and any person, other
than those that may be withheld from the public in accordance with the
provisions of 5 U.S.C. 552, will be available for Web site viewing and
printing in the Commission's Public Reference Room, 100 F Street NE.,
Washington, DC 20549, on official business days between the hours of
10:00 a.m. and 3:00 p.m. Copies of such filing also will be available
for inspection and copying at the principal offices of the Exchange.
All comments received will be posted without change; the Commission
does not edit personal identifying information from submissions. You
should submit only information that you wish to make available
publicly. All submissions should refer to File Number SR-CFE-2014-001,
and should be submitted on or before May 27, 2014.
---------------------------------------------------------------------------

    \22\ 17 CFR 200.30-3(a)(12).

    For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\22\
Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2014-10171 Filed 5-2-14; 8:45 am]
BILLING CODE 8011-01-P


[Federal Register Volume 78, Number 79 (Wednesday, April 24, 2013)]
[Rules and Regulations]
[Pages 24037-24040]
[FR Doc No: 2013-09432]

=======================================================================
-----------------------------------------------------------------------

DEPARTMENT OF TRANSPORTATION

Federal Aviation Administration

14 CFR Part 39

[Docket No. FAA-2012-0413; Directorate Identifier 2011-NM-257-AD;
Amendment 39-17441; AD 2013-08-23]
RIN 2120-AA64

Airworthiness Directives; The Boeing Company Airplanes

AGENCY: Federal Aviation Administration (FAA), DOT.

ACTION: Final rule.

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

SUMMARY: We are adopting a new airworthiness directive (AD) for all The
Boeing Company Model DC-10-10, DC-10-10F, DC-10-15, DC-10-30, DC-10-30F
(KC-10A and KDC-10), DC-10-40, DC-10-40F, MD-10-10F, MD-10-30F, MD-11,
and MD-11F airplanes. This

AD was prompted by fuel system reviews conducted by the manufacturer.
This AD requires adding design features to detect electrical faults and
to detect a pump running in an empty fuel tank. We are issuing this AD
to reduce the potential of ignition sources inside fuel tanks, which,
in combination with flammable fuel vapors, could result in fuel tank
explosions and consequent loss of the airplane.

DATES: This AD is effective May 29, 2013.

Examining the AD Docket

    You may examine the AD docket on the Internet at http://www.regulations.gov; or in person at the Docket Management Facility
between 9 a.m. and 5 p.m., Monday through Friday, except Federal
holidays. The AD docket contains this AD, the regulatory evaluation,
any comments received, and other information. The address for the
Docket Office (phone:<PHONE_NUMBER>) is Document Management Facility,
U.S. Department of Transportation, Docket Operations, M-30, West
Building Ground Floor, Room W12-140, 1200 New Jersey Avenue SE.,
Washington, DC 20590.

FOR FURTHER INFORMATION CONTACT: Serj Harutunian, Aerospace Engineer,
Propulsion Branch, ANM-140L, FAA, Los Angeles Aircraft Certification
Office (ACO), 3960 Paramount Boulevard, Lakewood, California 90712-
4137; phone:<PHONE_NUMBER>; fax:<PHONE_NUMBER>; email:
<EMAIL_ADDRESS>
SUPPLEMENTARY INFORMATION:

Discussion

    We issued a notice of proposed rulemaking (NPRM) to amend 14 CFR
part 39 to include an AD that would apply to the specified products.
That NPRM published in the Federal Register on April 18, 2012 (77 FR
23166). That NPRM proposed to require adding design features to detect
electrical faults, to detect a pump running in an empty fuel tank, and
to ensure that a fuel pump's operation is not affected by certain
conditions.

Comments

    We gave the public the opportunity to participate in developing
this AD. The following presents the comments received on the proposal
(77 FR 23166, April 18, 2012) and the FAA's response to each comment.

Support for NPRM (77 FR 23166, April 18, 2012)

    Airline Pilots Association International (ALPA) supports the
language and intent of the NPRM (77 FR 23166, April 18, 2012), and
agreed that the proposed actions will enhance safety.

Request To Delay AD Pending Release of Service Information

    Two commenters requested that we delay issuing the AD until Boeing
has released service information. (Specific modifications and solutions
were not included in the NPRM (77 FR 23166, April 18, 2012).)
    Noting that Boeing had planned to issue several service bulletins
to prevent the identified unsafe condition, FedEx requested that we
delay issuing the AD until Boeing has released relevant service
information. FedEx recommended that we coordinate with Boeing on
recommendations to address the unsafe condition.
    UPS requested that we extend the comment period until a minimum of
45 days after publication of all associated service bulletins to
provide operators sufficient information to make the design changes.
    We do not agree to delay issuance of this AD. We have identified a
potential unsafe condition that needs to be corrected; however, Boeing
has not finalized service information to address that condition. In
light of the unsafe condition, we have determined that we cannot delay
issuance of this AD, and must proceed without service information. We
find that the 60-month time frame specified in paragraph (g) of this AD
will provide adequate time for issuance and implementation of service
information. We have not changed this final rule regarding this issue.

Request To Revise Applicability

    FedEx and Boeing requested that we revise the applicability to
specifically exclude airplanes on which the auxiliary fuel tanks have
been removed. FedEx reported that it has modified several MD-11s and
MD-10s by removing the forward auxiliary tanks or center auxiliary
tanks, as well as the fuel pumps and related hardware.
    We agree that removal of the auxiliary fuel tank eliminates the
identified unsafe condition. We have changed paragraph (g) in this
final rule to exclude airplanes when Boeing-installed auxiliary fuel
tanks are removed.

Request To Clarify Intent of Proposed Actions

    FedEx stated that certain language in the NPRM (77 FR 23166, April
18, 2012) may be too broad. By way of example, FedEx cited the
requirement to add design features ``to detect electrical faults.''
Inferring that this required detecting all electrical faults, FedEx
asserted that, even if a device could detect all electrical faults, the
cost of its installation would be prohibitive. FedEx recommended
limiting the requirement to specify detecting ``certain'' electrical
faults.
    We disagree that it is necessary to change the AD. The NPRM (77 FR
23166, April 18, 2012) intentionally described certain failure
conditions in broad terms. The intent was to provide operators
unrestricted options to define design changes based on individual
safety assessments. Certain electrical faults may be single failures or
a combination of failures such as phase-to-phase shorts, phase-to-
ground shorts, and over-voltage or over-current electrical failure
conditions.

Request To Revise Cost Estimate

    FedEx questioned how the FAA determined the estimated cost of the
modification, since the NPRM (77 FR 23166, April 18, 2012) provided no
information about specific proposed modifications or required parts.
FedEx suggested that the estimated cost would be different for each
fleet type. UPS questioned the accuracy of the cost estimates in the
NPRM, given the lack of technical data.
    Based on current efforts developing service information, Boeing
estimated that modification labor costs could vary from 111 to 280
hours depending on the number of pumps on an airplane. Boeing also
reported that the AD affects about 341 U.S.-registered airplanes (not
180 airplanes, as stated in the NPRM (77 FR 23166, April 18, 2012)).
Boeing requested that we revise the costs of compliance accordingly.
    The estimated costs in the NPRM (77 FR 23166, April 18, 2012) were
based on recent design change solutions installed on similar center
wing tanks on transport category airplanes. We have revised the cost
estimate in this final rule to reflect Boeing's updated figures,
including increased work hours (152 hours) and parts costs ($137,500),
based on an average of 10 pumps per airplane. No single cost figure
will be accurate for all operators, however, since labor and parts
costs will vary depending on the type of certified design change
solutions provided by the operators.

Request for Terminating Action

    UPS stated that overall safety would be better met if protective
devices (fault current detectors) were installed for all 17 pumps on
its Model MD-11 airplanes--regardless of tank location. UPS requested
that we revise the NPRM (77 FR 23166, April 18, 2012) to specify that
installing fault current detectors

terminates the 18-month repetitive inspection requirement on the
``epocast'' fuel pump connector, part number (P/N) 60-84351, as
mandated by AD 2002-13-10, Amendment 39-12798 (67 FR 45053, July 8,
2002), or AD 2011-11-05, Amendment 39-16704 (76 FR 31462, June 1,
2011). (Those ADs address the same unsafe condition identified in this
AD, on the same affected airplanes.)
    We agree that compliance with the requirements of this AD is
considered terminating action for the two referenced ADs. Physical
inspection of all pumps every 18 months would be labor intensive and
time consuming. Further, Boeing has not provided service information to
otherwise preclude use of any other pumps during flight. We have
changed paragraph (g)(1) in this final rule to require protective
devices on electrically powered alternate current (AC) fuel pumps
installed in fuel tanks that normally empty during flight. (This
proposed requirement in the NPRM (77 FR 23166, April 18, 2012) extended
to any electrically powered fuel pump in those tanks.) We have added
new paragraph (h) in this final rule to terminate the 18-month
repetitive inspections for all pumps, regardless whether they are
installed in a tank that normally empties, affected by AD 2002-13-10,
Amendment 39-12798 (67 FR 45053, July 8, 2002), or AD 2011-11-05,
Amendment 39-16704 (76 FR 31462, June 1, 2011), after accomplishment of
paragraph (g)(1) of this AD.

Request To Expand or Remove Automatic Shutoff Limits

    Paragraph (g)(2) of the NPRM (77 FR 23166, April 18, 2012) would
require additional design features that will automatically shut off a
dry-running pump in an empty tank within 60 seconds if the flight crew
does not shut it off. FedEx and UPS stated that their Model MD-11 and
MD-10 airplanes already have design features installed by the original
equipment manufacturer (OEM) that shut off the affected pumps
automatically, but will not meet the prescribed 60-second time limit.
The commenters asserted that a system design change is not necessary.
    We agree. Model MD-11 and MD-10 airplanes with two-person flight
crews already have OEM-installed equipment designed to shut off the
fuel pumps automatically. We agree that the automatic shut-off time for
two-person flight-crew airplanes, which have design features that were
originally installed by the airplane manufacturer, may exceed 60
seconds. But for airplanes with three-person flight crews, such as
Model DC-10 airplanes that do not have OEM-installed equipment, any
fuel pump running in an empty tank must be manually shut off by a
flight crew within 60 seconds. In either case, regardless of the number
of flight crew, all airplanes must be in compliance with the
requirements of paragraph (g)(4) of this AD.

Request To Require Airworthiness Limitations

    Boeing commented that the proposed rule does not mandate any
airworthiness limitations instructions (ALIs) or critical design
configuration control limitations (CDCCLs) regarding repetitive
inspections or functional checks applicable to the proposed changes.
Boeing recommended that we add a requirement to ``incorporate and
comply with any related Airworthiness Limitations.''
    We agree to provide clarification. Paragraph (g) in this final rule
requires that the design changes be compliant with 14 CFR Section
25.981(a) and (b) at amendment level 25-125. These design changes
including any associated ALIs or CDCCLs must be approved by the Manager
of the Los Angeles Aircraft Certification Office.

Additional Changes to NPRM (77 FR 23166, April 18, 2012)

    In response to requests by Boeing, we have revised paragraphs
(g)(2) and (g)(3) in this final rule to clarify the requirements
associated with the airplane flight manual supplement (AFMS), and we
have revised paragraph (g)(4) in this final rule to clarify that the
requirement is limited to airplanes with tanks that normally empty
during flight.
    We have revised the description of the required actions in the
preamble of this final rule to remove the requirement to ``ensure that
a fuel pump's operation is not affected by certain conditions,''
because those requirements will be incorporated by compliance to 14 CFR
Section 25.981(a) and (b) at amendment level 25-125. We disagree with
the request to define certain conditions because the AD must allow for
a broader interpretation for all airplanes affected by this AD. We have
not changed the final rule regarding this issue.

Conclusion

    We reviewed the relevant data, considered the comments received,
and determined that air safety and the public interest require adopting
the AD with the changes described previously. We also determined that
these changes will not increase the economic burden on any operator or
increase the scope of the AD.

Costs of Compliance

    We estimate that this AD affects 341 airplanes of U.S. registry. We
estimate the following costs to comply with this AD, based on the costs
of similar supplemental type certificate (STC) installations, and
considering an average of 10 pumps per airplane:

                                                 Estimated Costs
----------------------------------------------------------------------------------------------------------------
                                                                                Cost per       Cost on U.S.
               Action                        Labor cost           Parts cost        product         operators
----------------------------------------------------------------------------------------------------------------
Installing design features..........  152 work-hours x $85           $137,500         $150,420      $51,293,220
                                       per hour = $12,920.
----------------------------------------------------------------------------------------------------------------

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.
    We are 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.

Regulatory Findings

    This AD will not have federalism implications under Executive Order
13132. This AD will 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 that this AD:
    (1) Is not a ``significant regulatory action'' under Executive
Order 12866,
    (2) Is not a ``significant rule'' under DOT Regulatory Policies and
Procedures (44 FR 11034, February 26, 1979),
    (3) Will not affect intrastate aviation in Alaska, and
    (4) 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.

Adoption of the Amendment

    Accordingly, under the authority delegated to me by the
Administrator, the FAA amends 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):

2013-08-23 The Boeing Company: Amendment 39-17441; Docket No. FAA-
2012-0413; Directorate Identifier 2011-NM-257-AD.

(a) Effective Date

    This AD is effective May 29, 2013.

(b) Affected ADs

    Accomplishment of the requirements of this AD terminates certain
requirements of AD 2002-13-10, Amendment 39-12798 (67 FR 45053, July
8, 2002), and AD 2011-11-05, Amendment 39-16704 (76 FR 31462, June
1, 2011).

(c) Applicability

    This AD applies to all The Boeing Company Model DC-10-10, DC-10-
10F, DC-10-15, DC-10-30, DC-10-30F (KC-10A and KDC-10), DC-10-40,
DC-10-40F, MD-10-10F, MD-10-30F, MD-11, and MD-11F airplanes;
certificated in any category.

(d) Subject

    Joint Aircraft System Component (JASC)/Air Transport Association
(ATA) of America Code 28, Fuel.

(e) Unsafe Condition

    This AD was prompted by fuel system reviews conducted by the
manufacturer. We are issuing this AD to reduce the potential of
ignition sources inside fuel tanks, which, in combination with
flammable fuel vapors, could result in fuel tank explosions and
consequent loss of the airplane.

(f) Compliance

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

(g) Criteria for Operation

    As of 60 months after the effective date of this AD, no person
may operate any airplane affected by this AD unless an amended type
certificate or supplemental type certificate that incorporates the
design features and requirements described in paragraphs (g)(1)
through (g)(4) of this AD has been approved by the Manager, Los
Angeles Aircraft Certification Office (ACO), FAA, and those design
features are installed on the airplane to meet the criteria
specified in 14 CFR Section 25.981(a) and (d), at amendment level
25-125. For airplanes on which Boeing-installed auxiliary fuel tanks
are removed, the actions specified in this AD are not required.
    (1) For all airplanes: Each electrically powered alternate
current (AC) fuel pump installed in any fuel tank that normally
empties during flight--such as center wing tanks, auxiliary fuel
tanks installed by the airplane manufacturer, and tail tanks--must
have a protective device installed to detect electrical faults that
can cause arcing and burn through of the fuel pump housing and pump
electrical connector. The same device must shut off the pump by
automatically removing electrical power from the pump when such
faults are detected. When a fuel pump is shut off resulting from
detection of an electrical fault, the device must stay latched off,
until the fault is cleared through maintenance action and the pump
is verified safe for operation.
    (2) For airplanes with a 2-person flight crew: Additional design
features, if not originally installed by the airplane manufacturer,
must be installed to meet 3 criteria: To detect a running fuel pump
in a tank that is normally emptied during flight, to provide an
indication to the flight crew that the tank is empty, and to
automatically shut off that fuel pump. The prospective pump
indication and shutoff system must automatically shut off each pump
in case the flight crew does not shut off a pump running dry in an
empty tank within 60 seconds after each fuel tank is emptied. An
airplane flight manual supplement (AFMS) that includes flight crew
manual pump shutoff procedures in the Limitations Section of the
AFMS must be submitted to the Los Angeles ACO, FAA, for approval.
    (3) For airplanes with a 3-person flight crew: Additional design
features, if not originally installed by the airplane manufacturer,
must be installed to detect when a fuel pump in a tank that is
normally emptied during flight is running in an empty fuel tank, and
provide an indication to the flight crew that the tank is empty. The
flight engineer must manually shut off each pump running dry in an
empty tank within 60 seconds after the tank is emptied. The AFMS
Limitations section must be revised to specify that this pump
shutoff must be done by the flight engineer.
    (4) For all airplanes with tanks that normally empty during
flight: Separate means must be provided to detect and shut off a
pump that was previously commanded to be shut off automatically or
manually but remained running in an empty tank during flight.

(h) Terminating Action in Related ADs

    Accomplishment of the actions required by paragraph (g)(1) of
this AD terminates the 18-month repetitive inspections and tests
required by paragraph (a) of AD 2002-13-10, Amendment 39-12798 (67
FR 45053, July 8, 2002), and the 18-month repetitive inspections
required by paragraph (j) of AD 2011-11-05, Amendment 39-16704 (76
FR 31462, June 1, 2011), for pumps affected by those ADs, regardless
whether the pump is installed in a tank that normally empties,
provided the remaining actions required by those two ADs have been
accomplished.

(i) Alternative Methods of Compliance (AMOCs)

    (1) The Manager, Los Angeles Aircraft Certification Office
(ACO), 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 ACO, send it to the
attention of the person identified in the Related Information
section of this AD.
    (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.

(j) Related Information

    For more information about this AD, contact Serj Harutunian,
Aerospace Engineer, Propulsion Branch, ANM-140L, FAA, Los Angeles
ACO, 3960 Paramount Boulevard, Lakewood, California 90712-4137;
phone:<PHONE_NUMBER>; fax:<PHONE_NUMBER>; email:
<EMAIL_ADDRESS>
(k) Material Incorporated by Reference

    None.

    Issued in Renton, Washington, on April 10, 2013.
Jeffrey E. Duven,
Acting Manager, Transport Airplane Directorate, Aircraft Certification
Service.
[FR Doc. 2013-09432 Filed 4-23-13; 8:45 am]
BILLING CODE 4910-13-P