[Federal Register Volume 86, Number 184 (Monday, September 27, 2021)]
[Rules and Regulations]
[Pages 53192-53195]
[FR Doc No: 2021-20828]

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DEPARTMENT OF TRANSPORTATION

Federal Aviation Administration

14 CFR Part 39

[Docket No. FAA-2021-0721; Project Identifier MCAI-2020-00616-R;
Amendment 39-21713; AD 2021-18-12]
RIN 2120-AA64

Airworthiness Directives; PZL Swidnik S.A. Helicopters

AGENCY: Federal Aviation Administration (FAA), DOT.

ACTION: Final rule; request for comments.

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SUMMARY: The FAA is adopting a new airworthiness directive (AD) for
certain PZL Swidnik S.A. Model PZL W-3A helicopters. This AD was
prompted by a report of fractured hoist carrying assembly bracket
(bracket) bolts. This AD requires repetitively inspecting the sealing
compound of certain part-numbered brackets, and depending on the
results, removing the hoist or removing the hardware from service and
installing new hardware. As an option to replacing the bolts, this AD
allows deactivating the hoist, turning the circuit breaker panel
switches to the OFF position, installing inoperative placards on the
circuit breaker panel switches, and before each flight, inspecting the
sealing compound. This AD also establishes a life limit for the bracket
bolts, and prohibits installing an affected hoist or an affected
bracket and hoist unless the actions required by this AD have been
accomplished. The FAA is issuing this AD to address the unsafe
condition on these products.

DATES: This AD becomes effective October 12, 2021.
    The Director of the Federal Register approved the incorporation by
reference of a certain document listed in this AD as of October 12,
2021.
    The FAA must receive comments on this AD by November 12, 2021.

ADDRESSES: You may send comments, using the procedures found in 14 CFR
11.43 and 11.45, by any of the following methods:
     Federal eRulemaking Portal: Go to https://www.regulations.gov. Follow the instructions for submitting comments.
     Fax:<PHONE_NUMBER>.
     Mail: U.S. Department of Transportation, Docket
Operations, M-30, West Building, Ground Floor, Room W12-140, 1200 New
Jersey Avenue SE, Washington, DC 20590.
     Hand Delivery: Deliver to Mail address above between 9
a.m. and 5 p.m., Monday through Friday, except Federal holidays.
    For service information identified in this final rule, contact WSK
``PZL-[Sacute]widnik'' S.A., Al. Lotnik[oacute]w Polskich 1, 21-045
[Sacute]widnik, Poland; telephone (+48) 81722 5716; fax (+48) 81722
5625; email<EMAIL_ADDRESS>or at https://www.pzlswidnik.pl/en/home. You may view this service information at the
FAA, Office of the Regional Counsel, Southwest Region, 10101 Hillwood
Pkwy., Room 6N-321, Fort Worth, TX 76177. For information on the
availability of this material at the FAA, call<PHONE_NUMBER>. It is
also available at https://www.regulations.gov by searching for and
locating Docket No. FAA-2021-0721.

Examining the AD Docket

    You may examine the AD docket at https://www.regulations.gov by
searching for and locating Docket No. FAA-2021-0721; or in person at
Docket Operations between 9 a.m. and 5 p.m., Monday through Friday,
except Federal holidays. The AD docket contains this final rule, the
European Union Aviation Safety Agency (EASA) AD, any comments received,
and other information. The street address for Docket Operations is
listed above.

FOR FURTHER INFORMATION CONTACT: Fred Guerin, Aerospace Engineer,
General Aviation & Rotorcraft Section, International Validation Branch,
Compliance & Airworthiness Division, FAA, 2200 S 216th St., Des Moines,
WA 98198; telephone<PHONE_NUMBER>; email<EMAIL_ADDRESS>
SUPPLEMENTARY INFORMATION:

Background

    EASA, which is the Technical Agent for the Member States of the
European Union, has issued EASA Emergency AD 2019-0191-E, dated July
31, 2019 (EASA Emergency AD 2019-0191-E), to correct an unsafe
condition for Wytw[oacute]rnia Sprz[eogon]tu Komunikacyjnego (WSK)
``PZL-[Sacute]widnik'' Sp[oacute][lstrok]ka Akcyjna (S.A.) Model PZL W-
3A helicopters. EASA advises of a report of fractured bracket bolts.
This condition, if not addressed, could result in detachment of the
bracket resulting in movement of the hoist carrying assembly around the
axis of the remaining two lower brackets, and subsequent damage to the
helicopter and loss of hoisted load or person(s).
    Accordingly, EASA Emergency AD 2019-0191-E requires repetitive
inspections of the sealing compound around the affected brackets and,
depending on the findings, accomplishing applicable corrective actions.
EASA Emergency AD 2019-

0191-E also requires repetitive replacement of the affected bolts. EASA
considers its AD an interim action and states that further AD action
may follow.

FAA's Determination

    These helicopters have been approved by EASA and are approved for
operation in the United States. Pursuant to the FAA's bilateral
agreement with the European Union, EASA has notified the FAA about the
unsafe condition described in its AD. The FAA is issuing this AD after
evaluating all known relevant information and determining that the
unsafe condition described previously is likely to exist or develop on
other helicopters of the same type design.

Related Service Information Under 1 CFR Part 51

    The FAA reviewed WYTW[Oacute]RNIA SPRZ[Eogon]TU KOMUNIKACYJNEGO
``PZL-[Sacute]widnik'' Sp[oacute][lstrok]ka Akcyjna Mandatory Bulletin
No. BO-37-19-296, dated July 30, 2019. This service information
specifies procedures for repetitively inspecting the sealing compound
along the edges of bracket part number (P/N) <IP_ADDRESS>.01 and
<IP_ADDRESS>.00. If there is any cracked sealing compound, this service
information specifies procedures for removing the hoist and prohibits
installing and using the hoist until corrective action is available. If
no cracks are found in the sealing compound, this service information
specifies procedures for replacing the bolts with new bolts if the
hoist is intended to be used and procedures for deactivating the hoist
if the hoist is not intended to be used. This service information also
specifies a life limit for the bracket bolts.
    This service information is reasonably available because the
interested parties have access to it through their normal course of
business or by the means identified in the ADDRESSES section.

AD Requirements

    For helicopters with a hoist type 76378 installed, this AD requires
repetitively cleaning and inspecting the sealing compound around the
bracket edges and near each nut for cracked sealing compound. If there
is any cracked sealing compound, this AD requires removing the hoist
from service. If there is not any cracked sealing compound, this AD
requires removing the bolts from service and installing new bolts. As
an option to replacing the bolts, this AD allows deactivating the
hoist, turning the circuit breaker panel switches to the OFF position,
installing inoperative placards on the circuit breaker panel switches,
and before each flight, inspecting the sealing compound. This AD also
establishes a life limit for the bolts. Lastly, this AD prohibits
installing an affected hoist or an affected bracket and hoist unless
the actions required by this AD have been accomplished.

Differences Between This AD and the EASA AD

    EASA Emergency AD 2019-0191-E requires using extraction naphtha,
whereas this proposed AD would allow using aliphatic naphtha or
extraction naphtha. This proposed AD would require removing each
previously-installed bracket bolt, nut, washer, and cotter pin from
service, whereas EASA AD 2019-0191-E does not. This proposed AD would
count a cycle anytime the cable is extended and then retracted during
flight or on the ground, whereas EASA Emergency AD 2019-0191-E does not
clarify the conditions used for cycle counting. EASA Emergency AD 2019-
0191-E allows, in lieu of replacing bolts or removing the hoist,
operation of a helicopter with the hoist installed, provided the hoist
is deactivated and its use is prohibited and the sealing compound of
the affected bracket is inspected before each flight. This AD allows
that provision only if there is not any cracked sealing compound.

Interim Action

    The FAA considers this AD to be an interim action. If final action
is later identified, the FAA might consider further rulemaking.

Justification for Immediate Adoption and Determination of the Effective
Date

    Section 553(b)(3)(B) of the Administrative Procedure Act (APA) (5
U.S.C. 551 et seq.) authorizes agencies to dispense with notice and
comment procedures for rules when the agency, for ``good cause,'' finds
that those procedures are ``impracticable, unnecessary, or contrary to
the public interest.'' Under this section, an agency, upon finding good
cause, may issue a final rule without providing notice and seeking
comment prior to issuance. Further, section 553(d) of the APA
authorizes agencies to make rules effective in less than thirty days,
upon a finding of good cause.
    There are no helicopters with this type certificate on the U.S.
Registry. Accordingly, notice and opportunity for prior public comment
are unnecessary, pursuant to 5 U.S.C. 553(b)(3)(B). In addition, for
the foregoing reason, the FAA finds that good cause exists pursuant to
5 U.S.C. 553(d) for making this amendment effective in less than 30
days.

Comments Invited

    The FAA invites you to send any written data, views, or arguments
about this final rule. Send your comments to an address listed under
ADDRESSES. Include ``Docket No. FAA-2021-0721; Project Identifier MCAI-
2020-00616-R'' at the beginning of your comments. The most helpful
comments reference a specific portion of the final rule, explain the
reason for any recommended change, and include supporting data. The FAA
will consider all comments received by the closing date and may amend
this final rule because of those comments.
    Except for Confidential Business Information (CBI) as described in
the following paragraph, and other information as described in 14 CFR
11.35, the FAA will post all comments received, without change, to
https://www.regulations.gov, including any personal information you
provide. The agency will also post a report summarizing each
substantive verbal contact received about this final rule.

Confidential Business Information

    CBI is commercial or financial information that is both customarily
and actually treated as private by its owner. Under the Freedom of
Information Act (FOIA) (5 U.S.C. 552), CBI is exempt from public
disclosure. If your comments responsive to this AD contain commercial
or financial information that is customarily treated as private, that
you actually treat as private, and that is relevant or responsive to
this AD, it is important that you clearly designate the submitted
comments as CBI. Please mark each page of your submission containing
CBI as ``PROPIN.'' The FAA will treat such marked submissions as
confidential under the FOIA, and they will not be placed in the public
docket of this AD. Submissions containing CBI should be sent to Fred
Guerin, Aerospace Engineer, General Aviation & Rotorcraft Section,
International Validation Branch, Compliance & Airworthiness Division,
FAA, 2200 S 216th St., Des Moines, WA 98198; telephone<PHONE_NUMBER>;
email<EMAIL_ADDRESS>Any commentary that the FAA receives which
is not specifically designated as CBI will be placed in the public
docket for this rulemaking.

Regulatory Flexibility Act

    The requirements of the Regulatory Flexibility Act (RFA) do not
apply when an agency finds good cause pursuant to 5 U.S.C. 553 to adopt
a rule without

prior notice and comment. Because the FAA has determined that it has
good cause to adopt this rule without prior notice and comment, RFA
analysis is not required.

Costs of Compliance

    There are no costs of compliance with this AD because there are no
helicopters with this type certificate on the U.S. Registry.

Authority for This Rulemaking

    Title 49 of the United States Code specifies the FAA's authority to
issue rules on aviation safety. Subtitle I, section 106, describes the
authority of the FAA Administrator. Subtitle VII: Aviation Programs,
describes in more detail the scope of the Agency's authority.
    The FAA is issuing this rulemaking under the authority described in
Subtitle VII, Part A, Subpart III, Section 44701: General requirements.
Under that section, Congress charges the FAA with promoting safe flight
of civil aircraft in air commerce by prescribing regulations for
practices, methods, and procedures the Administrator finds necessary
for safety in air commerce. This regulation is within the scope of that
authority because it addresses an unsafe condition that is likely to
exist or develop on products identified in this rulemaking action.

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, I certify that this AD:
    (1) Is not a ``significant regulatory action'' under Executive
Order 12866, and
    (2) Will not affect intrastate aviation in Alaska.

List of Subjects in 14 CFR Part 39

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

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:

2021-18-12 PZL Swidnik S.A.: Amendment 39-21713; Docket No. FAA-
2021-0721; Project Identifier MCAI-2020-00616-R.

(a) Effective Date

    This airworthiness directive (AD) is effective October 12, 2021.

(b) Affected ADs

    None.

(c) Applicability

    This AD applies to PZL Swidnik S.A. Model PZL W-3A helicopters,
certificated in any category, with hoist type 76378 or hoist
carrying assembly bracket (bracket) part number (P/N)
<IP_ADDRESS>.01 or <IP_ADDRESS>.00 installed.

(d) Subject

    Joint Aircraft Service Component (JASC) Code: 2500, Cabin
Equipment/Furnishings.

(e) Unsafe Condition

    This AD was prompted by a report of fractured bracket bolts. The
FAA is issuing this AD to prevent detachment of the bracket
resulting in movement of the hoist carrying assembly around the axis
of the remaining two lower brackets. The unsafe condition, if not
addressed, could result in damage to the helicopter and loss of
hoisted load or person(s).

(f) Compliance

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

(g) Required Actions

    (1) For helicopters with a hoist type 76378 installed, before
further flight after the effective date of this AD:
    (i) Clean the area where bracket P/N <IP_ADDRESS>.01 or
<IP_ADDRESS>.00 is installed to the fuselage structure using
extraction or aliphatic naphtha. Using a flashlight and a magnifying
glass with a minimum x5 magnification, inspect around the bracket
edge and near each nut for cracked sealing compound. Refer to Figure
1 of WYTW[Oacute]RNIA SPRZ[Eogon]TU KOMUNIKACYJNEGO ``PZL-
[Sacute]widnik'' Sp[oacute][lstrok]ka Akcyjna Mandatory Bulletin No.
BO-37-19-296, dated July 30, 2019 (MB BO-37-19-296), for an example
of cracked sealing compound.
    (A) If there is any cracked sealing compound, before further
flight, remove the hoist from service. Reinstallation of a hoist
type 76378 (that has not been removed from service) is allowed,
provided that, before installation, the helicopter is modified in
accordance with a method approved by the Manager, General Aviation
and Rotorcraft Section, International Validation Branch, FAA; or
EASA; or PZL Swidnik S.A.'s EASA Design Organization Approval (DOA).
If approved by the DOA, the approval must include the DOA-authorized
signature. Following modification, all repetitive inspections,
replacements, and applicable corrective actions must be done as
specified in this AD.
    (B) If there are no cracks in the sealing compound, before
further flight, replace each bracket bolt one-by-one by following
Chapter II, paragraphs A.4.b. through i., of MB BO-37-19-296, except
where it states to use extraction naphtha, you may substitute
aliphatic naphtha. Remove each previously-installed bracket bolt,
nut, washer, and cotter pin from service.
    (C) As an option to the actions required by paragraph
(g)(1)(i)(B) of this AD, deactivate the hoist by following Chapter
II, paragraph 3.2.2., of MB BO-37-19-296; and thereafter, before
each flight, inspect the sealing compound by accomplishing the
actions required by paragraph (g)(1)(i) of this AD.
    (ii) If there are no cracks in the sealing compound, within 25
hours time-in-service (TIS) after the replacement required by
paragraph (g)(1)(i)(B) of this AD, and thereafter at intervals not
to exceed 25 hours TIS, accomplish the actions required by paragraph
(g)(1)(i) of this AD.
    (iii) Within 800 hoist cycles after the replacement required by
paragraph (g)(1)(i)(B) of this AD, and thereafter at intervals not
to exceed 800 hoist cycles, replace each bracket bolt by
accomplishing the actions required by paragraph (g)(1)(i)(B) of this
AD. For the purposes of this AD, a cycle is counted anytime the
cable is extended and then retracted during flight or on the ground,
for any cable length extended and retracted and with or without
load.
    (2) For helicopters with a bracket P/N <IP_ADDRESS>.01 or
<IP_ADDRESS>.00 installed, but no hoist installed, as of the
effective date of this AD, do not install a hoist type 76378 unless
the actions required by paragraph (g)(1) of this AD have been
accomplished.
    (3) As of the effective date of this AD, do not install bracket
P/N <IP_ADDRESS>.01 or <IP_ADDRESS>.00 and hoist type 76378 on any
helicopter unless the actions required by paragraph (g)(1) of this
AD have been accomplished.

(h) Alternative Methods of Compliance (AMOCs)

    (1) The Manager, International Validation Branch, FAA, has the
authority to approve AMOCs for this AD, if requested using the
procedures found in 14 CFR 39.19. In accordance with 14 CFR 39.19,
send your request to your principal inspector or local Flight
Standards District Office, as appropriate. If sending information
directly to the manager of the International Validation Branch, send
it to the attention of the person identified in paragraph (i)(1) of
this AD. Information may be emailed to<EMAIL_ADDRESS>    (2) Before using any approved AMOC, notify your appropriate
principal inspector, or lacking a principal inspector, the manager

of the local flight standards district office/certificate holding
district office.

(i) Related Information

    (1) For more information about this AD, contact Fred Guerin,
Aerospace Engineer, General Aviation & Rotorcraft Section,
International Validation Branch, Compliance & Airworthiness
Division, FAA, 2200 S 216th St., Des Moines, WA 98198; telephone
(202) 267-7457; email<EMAIL_ADDRESS>    (2) The subject of this AD is addressed in European Union
Aviation Safety Agency (EASA) Emergency AD 2019-0191-E, dated July
31, 2019. You may view the EASA AD at https://www.regulations.gov in
Docket No. FAA-2021-0721.

(j) Material Incorporated by Reference

    (1) The Director of the Federal Register approved the
incorporation by reference of the service information listed in this
paragraph under 5 U.S.C. 552(a) and 1 CFR part 51.
    (2) You must use this service information as applicable to do
the actions required by this AD, unless the AD specifies otherwise.
    (i) WYTW[Oacute]RNIA SPRZ[Eogon]TU KOMUNIKACYJNEGO ``PZL-
[Sacute]widnik'' Sp[oacute][lstrok]ka Akcyjna Mandatory Bulletin No.
BO-37-19-296, dated July 30, 2019.
    (ii) [Reserved]
    (3) For service information identified in this AD, contact WSK
``PZL-[Sacute]widnik'' S.A., Al. Lotnik[oacute]w Polskich 1, 21-045
[Sacute]widnik, Poland; telephone (+48) 81722 5716; fax (+48) 81722
5625; email<EMAIL_ADDRESS>or at
https://www.pzlswidnik.pl/en/home.
    (4) You may view this service information at the FAA, Office of
the Regional Counsel, Southwest Region, 10101 Hillwood Pkwy., Room
6N-321, Fort Worth, TX 76177. For information on the availability of
this material at the FAA, call<PHONE_NUMBER>.
    (5) You may view this service information that is incorporated
by reference at the National Archives and Records Administration
(NARA). For information on the availability of this material at
NARA, email<EMAIL_ADDRESS>or go to: https://www.archives.gov/federal-register/cfr/ibr-locations.html.

    Issued on August 26, 2021.
Lance T. Gant,
Director, Compliance & Airworthiness Division, Aircraft Certification
Service.
[FR Doc. 2021-20828 Filed 9-24-21; 8:45 am]
BILLING CODE 4910-13-P


[Federal Register Volume 76, Number 74 (Monday, April 18, 2011)]
[Notices]
[Page 21728]
[FR Doc No: 2011-9309]

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DEPARTMENT OF ENERGY

Federal Energy Regulatory Commission

Combined Notice of Filings No. 2

    Take notice that the Commission has received the following Natural
Gas Pipeline Rate and Refund Report filings:

    Docket Numbers: RP08-350-005.
    Applicants: Southern Star Central Gas Pipeline, Inc.
    Description: Southern Star Central Gas Pipeline, Inc. Annual
Report--Non-HCA Pipeline and Storage Lateral Integrity Expenses.
    Filed Date: 03/31/2011.
    Accession Number: 20110331-5067.
    Comment Date: 5 p.m. Eastern Time on Tuesday, April 12, 2011.

    Docket Numbers: RP11-1907-001.
    Applicants: Gulf South Pipeline Company, LP.
    Description: Gulf South Pipeline Company, LP submits tariff filing
per 154.205(b): Amendment to RP11-1907-000 (QEP 37657-3) to be
effective 4/1/2011.
    Filed Date: 03/31/2011.
    Accession Number: 20110331-5312.
    Comment Date: 5 p.m. Eastern Time on Tuesday, April 12, 2011.

    Docket Numbers: RP11-1908-001.
    Applicants: Columbia Gulf Transmission Company.
    Description: Columbia Gulf Transmission Company submits tariff
filing per 154.205(b): Negotiated Rate Service Agreement Errata--PXP to
be effective 5/1/2011.
    Filed Date: 03/31/2011.
    Accession Number: 20110331-5322.
    Comment Date: 5 p.m. Eastern Time on Tuesday, April 12, 2011.

    Docket Numbers: RP11-1916-001.
    Applicants: Gulf South Pipeline Company, LP.
    Description: Gulf South Pipeline Company, LP submits tariff filing
per 154.205(b): Amendment to RP11-1916-000 (QEP 36601-4) to be
effective 4/1/2011.
    Filed Date: 03/31/2011.
    Accession Number: 20110331-5313.
    Comment Date: 5 p.m. Eastern Time on Tuesday, April 12, 2011.
    Any person desiring to protest this filing must file in accordance
with Rule 211 of the Commission's Rules of Practice and Procedure (18
CFR 385.211). Protests to this filing will be considered by the
Commission in determining the appropriate action to be taken, but will
not serve to make protestants parties to the proceeding. Such protests
must be filed on or before 5 p.m. Eastern time on the specified comment
date. Anyone filing a protest must serve a copy of that document on all
the parties to the proceeding.
    The Commission encourages electronic submission of protests in lieu
of paper using the ``eFiling'' link at http://www.ferc.gov. Persons
unable to file electronically should submit an original and 14 copies
of the protest to the Federal Energy Regulatory Commission, 888 First
Street, NE., Washington, DC 20426.
    This filing is accessible on-line at http://www.ferc.gov, using the
``eLibrary'' link and is available for review in the Commission's
Public Reference Room in Washington, DC. There is an ``eSubscription''
link on the Web site that enables subscribers to receive e-mail
notification when a document is added to a subscribed docket(s). For
assistance with any FERC Online service, please e-mail
<EMAIL_ADDRESS>or call<PHONE_NUMBER> (toll free). For
TTY, call<PHONE_NUMBER>.

    Dated: April 1, 2011.
Nathaniel J. Davis, Sr.,
Deputy Secretary.
[FR Doc. 2011-9309 Filed 4-15-11; 8:45 am]
BILLING CODE 6717-01-P


[Federal Register: November 9, 2009 (Volume 74, Number 215)]
[Rules and Regulations]
[Page 57581-57585]
[DOCID:fr09no09-9]

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DEPARTMENT OF COMMERCE

Bureau of Industry and Security

15 CFR Part 774

[Docket No. 090126060-91251-01]
RIN 0694-AE53

Revisions to the Export Administration Regulations Based on the
2008 Missile Technology Control Regime Plenary Additions

AGENCY: Bureau of Industry and Security, Commerce.

ACTION: Final rule.

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SUMMARY: The Bureau of Industry and Security (BIS) is amending the
Export Administration Regulations (EAR) to reflect changes to the
Missile Technology Control Regime (MTCR) Annex that were accepted by
MTCR member countries at the November 2008 Plenary in Canberra,
Australia. In addition, this rule also clarifies certain EAR controls
to properly reflect the intent of changes to items that were previously
accepted by MTCR members at past MTCR Plenary meetings.

DATES: Effective Date: This rule is effective November 9, 2009.
Although there is no formal comment period, public comments on this
regulation are welcome on a continuing basis.

ADDRESSES: You may submit comments, identified by RIN 0694-AE53, by any
of the following methods:
    E-mail<EMAIL_ADDRESS>Include ``RIN 0694-AE53'' in the
subject line of the message.
    Fax:<PHONE_NUMBER>. Please alert the Regulatory Policy Division,
by calling<PHONE_NUMBER>, if you are faxing comments.
    Mail or Hand Delivery/Courier: Timothy Mooney, U.S. Department of
Commerce, Bureau of Industry and Security, Regulatory Policy Division,
14th St. & Pennsylvania Avenue, NW., Room 2705, Washington, DC 20230,
Attn: RIN 0694-AE53.
    Send comments regarding the collection of information associated
with this rule, including suggestions for reducing the burden, to
Jasmeet Seehra, Office of Management and Budget (OMB), by e-mail to
<EMAIL_ADDRESS>or by fax to<PHONE_NUMBER>; and to
the U.S. Department of Commerce, Bureau of Industry and Security,
Regulatory Policy Division, 14th St. & Pennsylvania Avenue, NW., Room
2705, Washington, DC 20230. Comments on this collection of information
should be submitted separately from comments on the final rule (i.e.
RIN 0694-AE53)--all comments on the latter should be submitted by one
of the three methods outlined above.

FOR FURTHER INFORMATION CONTACT: Dennis L. Krepp, Nuclear and Missile
Technology Controls Division, Bureau of Industry and Security,
Telephone:<PHONE_NUMBER>.

SUPPLEMENTARY INFORMATION:

Background

    The Missile Technology Control Regime (MTCR) is an export control
arrangement among 34 nations, including most of the world's advanced
suppliers of ballistic missiles and missile-related materials and
equipment. The regime establishes a common export control policy based
on a list of controlled items (the Annex) and on guidelines (the
Guidelines) that member countries implement in accordance with their
national export controls. The goal of maintaining the Annex and the
Guidelines is to stem the flow of missile systems capable of delivering
weapons of mass destruction to the global marketplace.
    While the MTCR was originally created to prevent the spread of
missiles capable of carrying a nuclear warhead, it was expanded in
January 1993 to also address threats associated with delivery systems
for chemical and biological weapons. MTCR members voluntarily pledge to
adopt the regime's export Guidelines and to restrict the export of
items contained in the regime's Annex. The implementation of the
regime's Guidelines is effectuated through the national export control
laws and policies of the regime members.
    In January 1993, complete rocket systems and unmanned aerial
vehicle systems that were capable of a ``range'' equal to or greater
than 300 km, regardless of the payload, were added to the MTCR Annex
(Category II, Item 19). This was based on concerns of MTCR members that
rocket systems and unmanned aerial vehicle systems that were capable of
a ``range'' equal to or greater than 300 km, but that did not meet the
500 kg ``payload'' parameter from Category I of the MTCR Annex, were a
proliferation concern. ``Missiles'' are defined in Sec.  772.1 of the
EAR as being capable of delivering at least 500 kilograms payload to a
range of at least 300 kilometers. To supplement the change made in
1993, the MTCR members decided at the 2008 Plenary to clarify the
controls applicable to ECCN 2B116 by making it clear that the items in
this ECCN were controlled when used in systems that were capable of a
range of at least 300 km, regardless of the payload capacity. For
consistency with the MTCR Annex, this same language also needed to be
added to ECCN 1B101. Therefore, this rule clarifies the scope of these
ECCNs by adding the new language ``capable of a range of at least 300
km'' to these ECCNs.

Amendments to the Export Administration Regulations

    This final rule revises the Export Administration Regulations (EAR)
to reflect changes to the MTCR Annex accepted at the November 2008
Plenary in Canberra, Australia. In addition, this rule also clarifies
certain EAR controls to properly reflect the intent of changes to items
previously accepted by MTCR members at past MTCR Plenary meetings.
Corresponding MTCR Annex references are provided below for the MTCR
Annex changes accepted at the November 2008 Plenary.
    This rule amends the Commerce Control List (CCL) (Supplement No. 1
to

Part 774 of the EAR) to reflect changes to the MTCR Annex.
Specifically, the following Export Control Classification Numbers
(ECCNs) are affected:
    The heading of ECCN 1B101 is amended by revising the heading to add
the text ``usable for rockets, missiles, or unmanned aerial vehicles
capable of achieving a ``range'' equal to or greater than 300 km and
their subsystems''. This change makes it clear that this ECCN controls
this type of equipment only if it is usable for these types of systems
and their subsystems. This change is expected to have a minimal impact
on license applications.
    Also under ECCN 1B101, paragraph (a) is amended by adding
additional text to expand the scope of equipment controlled in this
entry (MTCR Annex Change Category II: Item 6.B.1.a). Paragraph (a) is
amended to add certain fiber placement machines to the types of
equipment controlled under paragraph (a). This change is being made
because a determination was made by the MTCR members that in addition
to certain filament winding machines, certain fiber placement machines
are also a concern for missile proliferation. BIS expects this change
to result in a slight increase in the number of license applications
submitted.
    The License Requirements and ``items'' paragraph of ECCN 1C011 are
amended to correct the text by deleting the reference to boron carbide
and replacing it with boron alloy in the MT control section of this
ECCN, and by making conforming changes to the MT and NS License
Requirements for this ECCN. This is a change made to conform to the
MTCR Annex. The correct language from the MTCR Annex is boron alloy,
but because 1C001.b is also a National Security (NS) controlled
paragraph that correctly uses the text boron carbide for the NS portion
of the control, this rule needed to add the correct text for the MT
controlled boron alloy. To effect this change, reference to boron alloy
was included in a new ``items'' paragraph in this ECCN (1C011.e), but
reference to boron carbide is retained in the NS control section of
this ECCN. Paragraph 1C011.b still controls boron for MT reasons, and
therefore, to conform with the text of the MTCR Annex, this rule
clarifies the MT control to make it clear what portion of paragraph
1C011.b is MT controlled. This rule also revises the NS control section
of 1C011 to specify that the NS control applies to the entire entry,
with the exception of 1C011.e. This change is expected to have no
impact on license applications.
    The heading of ECCN 2B116 is amended by including the text ``usable
for rockets, missiles, or unmanned aerial vehicles capable of achieving
a ``range'' equal to or greater than 300 km and their subsystems''
(MTCR Annex Change Category II: Item 15.B.1). This change makes it
clear that this ECCN controls these vibration test systems and
equipment only if they are usable for these types of systems and their
subsystems. This change is expected to have a minimal impact on license
applications.
    Also under ECCN 2B116, paragraph (b) is amended by adding text to
clarify the scope of the entry (MTCR Annex Change Category II: Item
15.B.1.b). Specifically, this rule adds the word ``control'' after the
word ``real-time'' to clarify that the bandwidth that is within the
scope of this ECCN entry is `real-time control bandwidth'. This change
is being made for consistency with the MTCR Annex and to provide better
guidance to the public regarding the intent of this control. BIS
expects this change to have a minimal impact on license applications.
    Also under ECCN 2B116, this rule adds a new technical note to the
``items'' paragraph to provide an ECCN-specific definition of `real-
time control bandwidth', which is now defined as, ``the maximum rate at
which a controller can execute complete cycles of sampling, processing
data and transmitting control signals'' (MTCR Annex Change Category II:
Technical note to Item 15.B.1.b) This new definition will assist the
public in understanding the scope of this revised control parameter.
BIS expects this change to have a minimal impact on license
applications.
    Paragraph (b) of ECCN 2B120 is amended by adding text to clarify
the types of motion simulators/rate tables classified under this entry.
Specifically, this rule clarifies that the motion simulators/rate
tables controlled under this ECCN entry include motion simulators/rate
tables designed or modified to incorporate sliprings or integrated non-
contact devices capable of transferring electrical power, signal
information or both (MTCR Annex Change Category II: Item 9.B.2.c.2).
This change is being made to provide for consistency with the MTCR
Annex and to provide better guidance to the public regarding the intent
of this control. Specifically, the additional text on sliprings is
added for greater clarity regarding intent of the control, and the text
on non-contact devices is added to reflect accepted provisions by the
MTCR members. BIS expects this change to have a minimal impact on
license applications.
    Also, in paragraph (c)(3) of ECCN 2B120, this rule adds quotation
marks around the term ``accuracy'' to indicate that this CCL term is a
defined term in Sec.  772.1 of the EAR (MTCR Annex Change Category II:
Item 9.B.c.3.c). BIS expects this change to have no impact on license
applications, as BIS has always interpreted this term according to the
definition in Sec.  772.1.
    Paragraph (b) of ECCN 2B121 is amended by adding quotation marks
around the term ``accuracy'' to indicate that this CCL term is a
defined term in Sec.  772.1 of the EAR (MTCR Annex Change Category II:
Item 9.B.2.d.2). BIS expects this change to have no impact on license
applications, as BIS has always interpreted this term according to the
definition in Sec.  772.1.
    The heading of ECCN 2B122 is amended by adding text to clarify the
types of centrifuges classified under this entry. Specifically, this
rule clarifies that the centrifuges controlled under this ECCN heading
include centrifuges designed or modified to incorporate sliprings or
integrated non-contact devices capable of transferring electrical
power, signal information or both (MTCR Annex Change Category II: Item
9.B.2.e). This change is being made for consistency with the MTCR Annex
and to provide better guidance to the public regarding the intent of
this control. Specifically, the additional text on sliprings is added
for greater clarity regarding intent of the control and the text on
non-contact devices is added to reflect accepted provisions by the MTCR
members. BIS expects this change to have a minimal impact on license
applications.
    Paragraph (b)(2)(a) of ECCN 6A108 is amended by revising the
control parameter for milliradians from 3 to 1.5 milliradians (MTCR
Annex Change Category II: Item 12.A.5.b.1). BIS is changing this
milliradian control threshold because the current text was based on an
erroneous conversion factor and the MTCR members accepted that using
1.5 milliradians would be sufficient to capture systems of concern for
missile proliferation. BIS expects this change to have no impact on
license applications.
    The MT ``control(s)'' paragraph in the License Requirements section
of ECCN 7A003 is amended to clarify that the MT control applies to
commodities in 7A003.d that meet or exceed the parameters of 7A103.
Prior to the publication of this rule, the MT control applied to
``items'' paragraphs a, b, c, and d of this ECCN entry. However, there
is no corresponding control text in the MTCR Annex for ECCN 7A003
``items'' paragraphs a, b and c. The

corresponding control text in the MTCR Annex for ECCN 7A003 only
applies to ``items'' paragraph d of this ECCN entry, which this change
clarifies. BIS expects this change to have no impact on license
applications because the rule makes no change to the commodities
controlled under this ECCN entry; the rule is limited to clarifying
what portions of this ECCN entry are subject to MT controls.
    Paragraph (b) of ECCN 7A101 is amended to add text to clarify the
scope of this ECCN entry (MTCR Annex Change Category II: Item 9.A.5).
Specifically, this rule modifies the control parameter to clarify that
only accelerometers that are designed for use in inertial navigation
systems or in guidance systems of all types fall within the scope of
this ECCN entry. Paragraph (b) of ECCN 7A101 is also amended to add a
note to further clarify that the ECCN does not include accelerometers
that are designed to measure vibration or shock (MTCR Annex Change
Category II: Item 9.A.5). This change is being made to clarify what
types of accelerometers are within the scope of this ECCN. This more
precise text will clearly indicate to the public what accelerometers
are within the scope of this ECCN. BIS expects these two changes to
have no impact on license applications as BIS has always interpreted
this ECCN in this manner.
    The heading of ECCN 7A102 is amended and new ``items'' paragraphs
(a) and (b) are added to clarify the scope of this ECCN entry as it
relates to gyros (MTCR Annex Change Category II: Item 9.A.5).
Specifically this rule modifies the control parameter to clarify that
only gyros that are designed for use in inertial navigation systems or
in guidance systems of all types fall within the scope of this ECCN
entry. BIS expects this change to have no impact on license
applications as BIS has always interpreted this ECCN in this manner.
    Paragraph (a) of ECCN 7A103 is amended by redesignating the
existing Note to paragraph (a) as Note 1 and adding a new Note 2 to
clarify what ECCN 7A001 and 7A002 commodities are within the scope of
``items'' paragraph (a) of ECCN 7A103. This new note clarifies that
``items'' paragraph (a) does not control inertial or other equipment
using accelerometers or gyros controlled by 7A001 or 7A002 that are
only NS controlled.

Savings Clause

    Shipments of items removed from eligibility for a License Exception
or export or reexport without a license (NLR) as a result of this
regulatory action that were on dock for loading, on lighter, laden
aboard an exporting or reexporting carrier, or en route aboard a
carrier to a port of export or reexport, on November 9, 2009, pursuant
to actual orders for export or reexport to a foreign destination, may
proceed to that destination under the previous eligibility for a
License Exception or export or reexport without a license (NLR) so long
as they are exported or reexported before December 9, 2009. Any such
items not actually exported or reexported before midnight, on December
9, 2009, require a license in accordance with this rule.
    Although the Export Administration Act expired on August 20, 2001,
the President, through Executive Order 13222 of August 17, 2001, 3 CFR,
2001 Comp., p. 783 (2002), as extended by the Notice of August 13, 2009
(74 FR 41325 (August 14, 2009)), has continued the Export
Administration Regulations in effect under the International Emergency
Economic Powers Act.

Rulemaking Requirements

    1. This final rule has been determined to be significant for
purposes of E.O. 12866.
    2. Notwithstanding any other provision of law, no person is
required to respond to, nor shall any person be subject to a penalty
for failure to comply with a collection of information, subject to the
requirements of the Paperwork Reduction Act, unless that collection of
information displays a currently valid Office of Management and Budget
Control Number. This rule contains a collection of information subject
to the Paperwork Reduction Act of 1980 (44 U.S.C. 3501 et seq.). This
collection has been approved by the Office of Management and Budget
under control number 0694-0088, ``Multi-Purpose Application,'' which
carries a burden hour estimate of 58 minutes for a manual or electronic
submission.
    3. This rule does not contain policies with Federalism implications
as that term is defined under E.O. 13132.
    4. The provisions of the Administrative Procedure Act (5 U.S.C.
553) requiring notice of proposed rulemaking, the opportunity for
public participation, and a delay in effective date, are inapplicable
because this regulation involves a military and foreign affairs
function of the United States (5 U.S.C. 553(a)(1)). Further, no other
law requires that a notice of proposed rulemaking and an opportunity
for public comment be given for this final rule. Because a notice of
proposed rulemaking and an opportunity for public comment are not
required to be given for this rule under the Administrative Procedure
Act or by any other law, the analytical requirements of the Regulatory
Flexibility Act (5 U.S.C. 601 et seq.) are not applicable. Therefore,
this regulation is issued in final form.

List of Subjects in 15 CFR Part 774

    Exports, Reporting and recordkeeping requirements.

0
Accordingly, part 774 of the Export Administration Regulations (15 CFR
parts 730-774) is amended as follows:

PART 774--[AMENDED]

0
1. The authority citation for 15 CFR part 774 continues to read as
follows:

    Authority:  50 U.S.C. app. 2401 et seq.; 50 U.S.C. 1701 et seq.;
10 U.S.C. 7420; 10 U.S.C. 7430(e); 22 U.S.C. 287c, 22 U.S.C. 3201 et
seq., 22 U.S.C. 6004; 30 U.S.C. 185(s), 185(u); 42 U.S.C. 2139a; 42
U.S.C. 6212; 43 U.S.C. 1354; 46 U.S.C. app. 466c; 50 U.S.C. app. 5;
22 U.S.C. 7201 et seq.; 22 U.S.C. 7210; E.O. 13026, 61 FR 58767, 3
CFR, 1996 Comp., p. 228; E.O. 13222, 66 FR 44025, 3 CFR, 2001 Comp.,
p. 783; Notice of August 13, 2009, 74 Fed. Reg. 41325 (August 14,
2009).

0
2. In Supplement No. 1 to part 774 (the Commerce Control List),
Category 1--Materials, Chemicals, ``Microorganisms'' & ``Toxins'',
Export Control Classification Number (ECCN) 1B101 is amended by
revising the Heading and paragraph (a) of the ``items'' paragraph in
the List of Items Controlled section, to read as follows:

Supplement No. 1 to Part 774--The Commerce Control List

* * * * *
    1B101 Equipment, other than that controlled by 1B001, for the
``production'' of structural composites, fibers, prepregs or
preforms, usable for rockets, missiles, or unmanned aerial vehicles
capable of achieving a ``range'' equal to or greater than 300 km and
their subsystems, as follows (see List of Items Controlled); and
specially designed components, and accessories therefor.
* * * * *

List of Items Controlled

    Unit: * * *
    Related Controls: * * *
    Related Definitions: * * *
    Items:
    a. Filament winding machines or fiber placement machines, of
which the motions for positioning, wrapping and winding fibers can
be coordinated and programmed in three or more axes, designed to
fabricate composite structures or laminates from fibrous or
filamentary materials, and coordinating and programming controls;
* * * * *

0
3. In Supplement No. 1 to part 774 (the Commerce Control List),
Category 1--Materials, Chemicals,

``Microorganisms'' & ``Toxins'', Export Control Classification Number
(ECCN) 1C011 is amended:
0
a. By revising the License Requirements section;
0
b. By revising paragraph (d) of the ``items'' paragraph in the List of
Items Controlled section; and
0
c. By adding paragraph (e) at the end of the ``items'' paragraph in the
List of Items Controlled section, to read as follows:

    1C011 Metals and compounds, as follows (see List of Items
Controlled). License Requirements.
    Reason for Control: NS, MT, AT

               Control(s)                          Country chart

NS applies to entire entry, except        NS Column 1.
 1C011.e.
MT applies to 1C011.a and .b (for boron)  MT Column 1.
 and .e.
AT applies to entire entry..............  AT Column 1.

* * * * *

List of Items Controlled

    Unit: * * *
    Related Controls: * * *
    Related Definitions: * * *
    Items:
* * * * *
    d. Nitroguanidine (NQ) (CAS 556-88-7);
    e. Boron alloys of 85% purity or higher and a particle size of
60 [mu]m or less.

0
4. In Supplement No. 1 to part 774 (the Commerce Control List),
Category 2--Materials Processing, Export Control Classification Number
(ECCN) 2B116 is amended:
0
a. By revising the Heading;
0
b. By revising paragraph (b) of the ``items'' paragraph in the List of
Items Controlled section; and
0
c. By revising the Technical Notes at the end of the ``items''
paragraph in the List of Items Controlled section, to read as follows:

    2B116 Vibration test systems and equipment, usable for rockets,
missiles, or unmanned aerial vehicles capable of achieving a
``range'' equal to or greater than 300 km and their subsystems, and
components therefor, as follows (see List of Items Controlled).
* * * * *

List of Items Controlled

    Unit: * * *
    Related Controls: * * *
    Related Definitions: * * *
    Items:
* * * * *
    b. Digital controllers, combined with specially designed
vibration test ``software'', with a `real-time control bandwidth'
greater than 5 kHz and designed for use with vibration test systems
described in 2B116.a;
    c. * * *
    d. * * *

    Technical Notes:
    (1) `Bare table' means a flat table, or surface, with no fixture
or fitting.
    (2) `Real-time control bandwidth' is defined as the maximum rate
at which a controller can execute complete cycles of sampling,
processing data and transmitting control signals.

0
5. In Supplement No. 1 to part 774 (the Commerce Control List),
Category 2--Materials Processing, Export Control Classification Number
(ECCN) 2B120 is amended by revising paragraphs (b) and (c)(3) of the
``items'' paragraph in the List of Items Controlled section, to read as
follows:

    2B120 Motion simulators or rate tables (equipment capable of
simulating motion), having all of the following characteristics (see
List of Items Controlled).
* * * * *

List of Items Controlled

    Unit: * * *
    Related Controls: * * *
    Related Definitions: * * *
    Items:
* * * * *
    b. Designed or modified to incorporate sliprings or integrated
non-contact devices capable of transferring electrical power, signal
information, or both; and
    c. Having any of the following characteristics:
* * * * *
    c.3. A positioning ``accuracy'' equal to or better than 5 arc-
second.
* * * * *

0
6. In Supplement No. 1 to part 774 (the Commerce Control List),
Category 2--Materials Processing, Export Control Classification Number
(ECCN) 2B121 is amended by revising paragraph (b) of the ``items''
paragraph in the List of Items Controlled section, to read as follows:

    2B121 Positioning tables (equipment capable of precise rotary
position in any axis), other than those controlled in 2B120, having
all the following characteristics (See List of Items Controlled).
* * * * *

List of Items Controlled

    Unit: * * *
    Related Controls: * * *
    Related Definitions: * * *
    Items:
* * * * *
    b. A positioning ``accuracy'' equal to or better than 5 arc-
second.
* * * * *

0
7. In Supplement No. 1 to part 774 (the Commerce Control List),
Category 2--Materials Processing, Export Control Classification Number
(ECCN) 2B122 is amended by revising the Heading, to read as follows:

    2B122 Centrifuges capable of imparting accelerations above 100 g
and designed or modified to incorporate sliprings or integrated non-
contact devices capable of transferring electrical power, signal
information, or both.
* * * * *

0
8. In Supplement No. 1 to part 774 (the Commerce Control List),
Category 6--Sensors and Lasers, Export Control Classification Number
(ECCN) 6A108 is amended by revising paragraph (b)(2)(a) of the
``items'' paragraph in the List of Items Controlled section, to read as
follows:

    6A108 Radar systems and tracking systems, other than those
controlled by 6A008, as follows (see List of Items Controlled).
* * * * *

List of Items Controlled

    Unit: * * *
    Related Controls: * * *
    Related Definitions: * * *
    Items:
* * * * *
    b.2. * * *
    b.2.a. Angular resolution better than 1.5 milliradians;
* * * * *

0
9. In Supplement No. 1 to part 774 (the Commerce Control List),
Category 7--Navigation and Avionics, Export Control Classification
Number (ECCN) 7A003 is amended by revising the MT ``Control(s)''
paragraph in the License Requirements section, to read as follows:

    7A003 Inertial Systems and specially designed components
therefor. License Requirements.
    Reason for Control: * * *

                Control(s)                         Country chart

                                * * * * *
MT applies to commodities in 7A003.d that  MT Column 1.
 meet or exceed the parameters of 7A103.

* * * * *

0
10. In Supplement No. 1 to part 774 (the Commerce Control List),
Category 7--Navigation and Avionics, Export Control Classification
Number (ECCN) 7A101 is amended:
0
a. By revising paragraph (b) of the ``items'' paragraph in the List of
Items Controlled section, and
0
b. By adding a new ``Note to paragraph (b)'' at the end of paragraph
(b) of the ``items'' paragraph in the List of Items Controlled section,
to read as follows:

    7A101 Accelerometers, other than those controlled by 7A001 (see
List of Items Controlled), and specially designed components
therefor.
* * * * *

List of Items Controlled

    Unit: * * *
    Related Controls: * * *
    Related Definitions: * * *
    Items:
* * * * *
    b. Accelerometers of any type, designed for use in inertial
navigation systems or in guidance systems of all types, specified to
function at acceleration levels greater than 100 g.

    Note to paragraph (b):  This paragraph (b) does not include
accelerometers that are designed to measure vibration or shock.

0
11. In Supplement No. 1 to part 774 (the Commerce Control List),
Category 7--Navigation and Avionics, Export Control Classification
Number (ECCN) 7A102 is amended:
0
a. By revising the Heading, and
0
b. By revising the ``items'' paragraph in the List of Items Controlled
section, to read as follows:

    7A102 Gyros, other than those controlled by 7A002 (see List of
Items Controlled), and specially designed components therefor.
* * * * *

List of Items Controlled

    Unit: * * *
    Related Controls: * * *
    Related Definitions: * * *
    Items:
    a. All types of gyros, usable in rockets, missiles, or unmanned
aerial vehicles capable of achieving a ``range'' equal to or greater
than 300 km, with a rated ``drift rate'' `stability' of less than
0.5 degrees (1 sigma or rms) per hour in a 1 g environment.
    b. Gyros of any type, designed for use in inertial navigation
systems or in guidance systems of all types, specified to function
at acceleration levels greater than 100 g.

    Technical Note:  In this entry, the term `stability' is defined
as a measure of the ability of a specific mechanism or performance
coefficient to remain invariant when continuously exposed to a fixed
operating condition. (This definition does not refer to dynamic or
servo stability.) (IEEE STD 528-2001 paragraph 2.247).

0
12. In Supplement No. 1 to part 774 (the Commerce Control List),
Category 7--Navigation and Avionics, Export Control Classification
Number (ECCN) 7A103 is amended by redesignating the Note as Note 1 and
adding a Note 2 at the end of paragraph (a) of the ``items'' paragraph
in the List of Items Controlled section, to read as follows:

    7A103 Instrumentation, navigation equipment and systems, other
than those controlled by 7A003, and specially designed components
therefor.
* * * * *

List of Items Controlled

    Unit: * * *
    Related Controls: * * *
    Related Definitions: * * *
    Items:
    a. * * *

    Note 1:  7A103.a does not control equipment containing
accelerometers specially designed and developed as MWD (Measurement
While Drilling) sensors for use in down-hole well services
operations.

    Note 2:  7A103.a does not control inertial or other equipment
using accelerometers or gyros controlled by 7A001 or 7A002 that are
only NS controlled.

* * * * *

    Dated: November 4, 2009.
Matthew S. Borman,
Acting Assistant Secretary for Export Administration.
[FR Doc. E9-26961 Filed 11-6-09; 8:45 am]

BILLING CODE 3510-33-P


[Federal Register Volume 77, Number 123 (Tuesday, June 26, 2012)]
[Notices]
[Page 38128]
[FR Doc No: 2012-15668]

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DEPARTMENT OF TRANSPORTATION

Federal Motor Carrier Safety Administration

[Docket No. FMCSA-2012-0154]

Qualification of Drivers; Application for Exemptions; National
Association of the Deaf

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

ACTION: Notice of applications for exemptions; extension of comment
period.

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

SUMMARY: FMCSA announces an extension of the comment period on its May
25, 2012, notice requesting public comments on the National Association
of the Deaf's (NAD) application for exemptions on behalf of 45
individuals from the hearing requirement in the Federal Motor Carrier
Safety Regulations (FMCSRs). On June 6, 2012, NAD formally requested
that the Agency extend the comment period. The Agency grants the
request for an extension.

DATES: Comments must be received on or before July 25, 2012.

ADDRESSES: You may submit comments bearing the Federal Docket
Management System (FDMS) Docket No. FMCSA-2012-0154 using any of the
following methods:
     Federal eRulemaking Portal: Go to http://www.regulations.gov. Follow the on-line instructions for submitting
comments.
     Mail: Docket Management Facility; U.S. Department of
Transportation, 1200 New Jersey Avenue SE., West Building Ground Floor,
Room W12-140, Washington, DC 20590-0001.
     Hand Delivery: West Building Ground Floor, Room W12-140,
1200 New Jersey Avenue SE., Washington, DC, between 9 a.m. and 5 p.m.,
ET, Monday through Friday, except Federal Holidays.
     Fax: 1-202-493-2251.
    Instructions: Each submission must include the Agency name and the
docket numbers for this notice. Note that all comments received will be
posted without change to http://www.regulations.gov, including any
personal information provided. Please see the Privacy Act heading below
for further information.
    Docket: For access to the docket to read background documents or
comments, go to http://www.regulations.gov at any time or Room W12-140
on the ground level of the West Building, 1200 New Jersey Avenue SE.,
Washington, DC, between 9 a.m. and 5 p.m., ET, Monday through Friday,
except Federal holidays. The FDMS is available 24 hours each day, 365
days each year. If you want acknowledgment that we received your
comments, please include a self-addressed, stamped envelope or postcard
or print the acknowledgment page that appears after submitting comments
on-line.
    Privacy Act: Anyone may search the electronic form of all comments
received into any of our dockets by the name of the individual
submitting the comment (or of the person signing the comment, if
submitted on behalf of an association, business, labor union, etc.).
You may review DOT's Privacy Act Statement for the FDMS published in
the Federal Register on January 17, 2008 (73 FR 3316), or you may visit
http://edocket.access.gpo.gov/2008/pdf/E8-785.pdf.

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

SUPPLEMENTARY INFORMATION:

Background

    FMCSA published a notice in the Federal Register with a request for
comments on May 25, 2012 (77 FR 31423), announcing that NAD had applied
for exemptions on behalf of 45 individuals from the hearing requirement
in the FMCSRs. The comment period was scheduled to end on June 25.
However, on June 6, NAD formally requested an extension of the comment
period. After reviewing the request, FMCSA has decided to grant the
request. The Agency extends the comment period for an additional 30
days to July 25, 2012.

    Issued on: June 20, 2012.
Larry W. Minor,
Associate Administrator for Policy.
[FR Doc. 2012-15668 Filed 6-22-12; 11:15 am]
BILLING CODE P


[Federal Register Volume 87, Number 168 (Wednesday, August 31, 2022)]
[Notices]
[Pages 53522-53526]
[FR Doc No: 2022-18768]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-95605; File No. SR-FICC-2022-005]

Self-Regulatory Organizations; Fixed Income Clearing Corporation;
Order Approving Proposed Rule Change To Revise the Formula Used To
Calculate the VaR Charge for Repo Interest Volatility

August 25, 2022.

I. Introduction

    On June 29, 2022, Fixed Income Clearing Corporation (``FICC'')
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\ proposed rule change SR-
FICC-2022-005. The proposed rule change was published for comment in
the Federal Register on July 15, 2022.\3\ The Commission did not
receive any comment letters on the proposed rule change. For the
reasons discussed below, the Commission is approving the proposed rule
change.
---------------------------------------------------------------------------

    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ Securities Exchange Act Release No. 95256 (July 12, 2022),
87 FR 42524 (July 15, 2022) (SR-FICC-2022-005) (``Notice'').
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II. Description of the Proposed Rule Change

    FICC proposes to amend its Government Securities Division (``GSD'')
\4\ Quantitative Risk Management (``QRM'') Methodology Document--GSD
Initial Market Risk Margin Model (``QRM Methodology Document'') \5\ in
order to (i) revise the formula FICC uses to calculate the Value at
Risk charge (``VaR Charge'') \6\ margin component for repurchase
agreement (``repo'') interest volatility, and (ii) make certain
technical and conforming changes.
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    \4\ FICC operates two divisions, GSD and the Mortgage Backed
Securities Division (``MBSD''). GSD provides trade comparison,
netting, risk management, settlement, and central counterparty
(``CCP'') services for the U.S. Government securities market,
including repos. MBSD provides the same services for the U.S.
mortgage-backed securities market. GSD and MBSD maintain separate
sets of rules, margin models, and clearing funds. The proposed rule
change relates solely to GSD.
    \5\ FICC filed an excerpt of the QRM Methodology Document
showing the proposed changes as a confidential exhibit to this
proposed rule change, pursuant to 17 CFR 240.24-b2. FICC originally
filed the QRM Methodology Document confidentially as part of a
previous proposed rule change and advance notice approved by the
Commission regarding FICC's GSD sensitivity VaR. See Securities
Exchange Act Release Nos. 83362 (June 1, 2018), 83 FR 26514 (June 7,
2018) (SR-FICC-2018-001) and 83223 (May 11, 2018), 83 FR 23020 (May
17, 2018) (SR-FICC-2018-801).
    \6\ Capitalized terms not defined herein are defined in FICC's
GSD Rulebook, available at https://www.dtcc.com/~/media/Files/
Downloads/legal/rules/ficc_gov_rules.pdf (``Rules'').
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A. Background

    Repos involve a pair of transactions between two parties. The first
transaction consists of the sale of securities, in which one party (the
``cash borrower'') delivers securities in exchange for the other
party's (the ``cash lender'') delivery of cash. The second transaction
occurs on a date after that of the first transaction and consists of a
repurchase of the securities, in which the obligations to deliver cash
and securities are reversed. FICC's members submit repos to FICC for
matching, comparison, risk management, and ultimately, net settlement.
FICC guarantees that the cash borrower receives its repo collateral
back at the close of a repo transaction, while the cash lender receives
the amount paid at the repo's start, plus interest. Interest on a repo
transaction is the difference between the repurchase settlement amount
and the start amount paid on the repo inception date.
    A key tool that FICC uses to manage its credit exposures to its
members is the daily collection of margin from each member. The
aggregated amount of all members' margin constitutes the Clearing
Fund,\7\ which FICC would be able to access should a defaulted member's
own margin be insufficient to satisfy losses to FICC caused by the
liquidation of that member's portfolio. Each member's margin consists
of a number of applicable components, including the VaR Charge which is
designed to capture the potential market price risk associated with the
securities in a member's portfolio.\8\ The VaR Charge is typically the
largest component of a member's margin requirement. FICC designed the
VaR Charge to cover FICC's projected liquidation losses with respect to
a defaulted member's portfolio at a 99 percent confidence level.
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    \7\ See Rule 4 of the Rules, supra note 6.
    \8\ See Rule 1 of the Rules, supra note 6.
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    The VaR Charge includes, among other things, a component that
addresses repo interest volatility (the ``repo interest volatility
charge'').\9\ The QRM Methodology Document describes FICC's formula for
calculating the repo interest volatility charge. The market value of
interest payments for the duration of a repo transaction are subject to
the risk of movements of the market repo interest rates. Since FICC
guarantees the repo interest payment to the cash lenders, FICC must
mitigate the risk arising out of fluctuations in market repo interest
rates for a specified period of time after a member default.\10\
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    \9\ Currently, the repo interest volatility constitutes
approximately 3 percent of the total GSD margin (at the CCP level).
See Notice, supra note 3, at 42524.
    \10\ This time period is currently set at three days, which
represents the duration of time that FICC would be subject to market
risk after a member default, starting from the time of the last
successful margin collection to the time the market risk exposure is
effectively mitigated. See Notice, supra note 3, at 42524.
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    Under the current formula, the repo interest positions for a given
member portfolio are put into different risk buckets based on (i)
whether the underlying repo trade is a generic repo trade or a special
repo trade,\11\ and (ii) the time to settlement of the underlying repo
trade. FICC assesses the repo interest volatility charge by applying a
haircut schedule to the different risk buckets, with a single haircut
rate applied to each risk bucket after netting the short and long repo
interest positions within the relevant bucket. The total net amount of
each risk bucket equals the sum of the products of the repo start
amount and the time to settlement of each repo interest position in
that risk bucket. If the total net amount is positive (i.e., long),
FICC applies a long repo haircut rate to the total net amount for that
risk bucket to calculate the repo interest volatility charge for that
risk bucket. If the total net amount is negative (i.e., short), FICC
applies a short repo haircut rate to the absolute value of the total
net amount for that risk bucket to calculate the repo interest
volatility charge for that risk bucket. The total repo interest
volatility charge for a member's portfolio is the sum of the repo
interest volatility charges of all of the risk buckets in the
portfolio. Accordingly, the current formula reflects a repo interest
rate

index \12\ driven approach where a single repo haircut rate is applied
to the absolute value of the total net amount of each risk bucket of
repo interest positions.\13\ The QRM Methodology Document, which was
filed confidentially, contains a detailed description of the repo
haircut rate calculation for all risk buckets.
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    \11\ FICC designates repo trades as either generic or special
depending on how the repo rate of the trade's particular collateral
compares to the prevailing market rates of similar repo
transactions.
    \12\ FICC has developed its repo interest rate indices using its
delivery-versus-payment repo transactions. See Notice, supra note 3,
at 42525.
    \13\ For a detailed example of the current repo interest
volatility charge calculation, please refer to the Notice, supra
note 3, at 42525.
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    Based on FICC's 2020 and 2021 annual model validation reports,\14\
the rolling 12-month backtesting coverage on members' repo interest
positions were below the 99 percent coverage target from June 2019 to
September 2020. Additionally, FICC conducted an impact study for the
period of January 2018 to February 2022 (``Impact Study''),\15\ which
demonstrated a backtesting coverage ratio of 98.7 percent for the repo
interest volatility charge during that time period. To address these
deficiencies, FICC proposes to change the formula for calculating the
repo interest volatility charge to improve backtesting coverage and
provide FICC with greater flexibility than the current formula to
calculate the repo interest volatility charge in a manner that is more
responsive to rapidly changing market conditions.
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    \14\ Pursuant to 17 CFR 240.24-b2, FICC filed excerpts of (1)
the GSD Initial Market Risk Margin Models: Model Validation Report,
July 2021, and (2) the Depository Trust and Clearing Corporation
(``DTCC'') Model Validation Report/GSD Initial Market Risk Margin
Models, July 2020, in a confidential Exhibit 3 to this proposed rule
change.
    \15\ Pursuant to 17 CFR 240.24-b2, FICC filed a summary of the
Impact Study in a confidential Exhibit 3 to this proposed rule
change. The Impact Study
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B. Proposed Rule Change

1. New Formula for Calculating Repo Interest Volatility Charge
    The proposed formula is similar to the current formula in certain
respects. For example, the proposed formula would continue to rely upon
repo interest rate indices and would use a similar mathematical
calculation as the current formula. In addition, under the proposed
formula, the repo interest positions for a given member portfolio would
continue to be placed into risk buckets based on the same criteria used
currently, that is, (i) whether the underlying repo trade is a generic
repo trade or a special repo trade, and (ii) the time to settlement of
the underlying repo trade. Finally, the total repo interest volatility
charge for the portfolio would continue to be the sum of the repo
interest volatility charges of all of the risk buckets in the
portfolio.
    However, unlike the current formula, the proposed formula provides
FICC with the flexibility to apply more than one repo haircut rate to
each risk bucket because FICC would no longer apply the repo haircut
rate based on whether the total net amount for a specific risk bucket
is long or short. Instead, FICC proposes to apply a specific repo
haircut rate based on whether the individual repo interest position in
a given risk bucket is either long or short. That is, FICC would apply
a long repo haircut rate to all long positions and a short repo haircut
rate to all short positions, in each risk bucket. The long positions
and the short positions could offset each other within the same risk
bucket, but could not offset each other across different risk buckets.
The repo interest volatility charge for a specific risk bucket would be
the absolute value \16\ of the sum of the products of repo start
amount, time to settlement, and repo haircut rate of the individual
repo interest positions in the risk bucket. Thus, by allowing FICC to
use two haircuts for each risk bucket, one for long positions and the
other for short positions,\17\ the proposal would enable FICC to
respond to rapidly changing market conditions more quickly and
timely.\18\
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    \16\ The repo interest volatility charge would always be a
positive number because the calculation is based on the absolute
value of the sum of the relevant amounts.
    \17\ As an initial matter, FICC would set the repo haircut rates
for long positions and short positions to be the same rate, i.e.,
the larger of the two rates, so that the long and short positions in
a specific risk bucket would be subject to the same repo haircut
rate.
    \18\ See Notice, supra note 3, at 42525.
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2. Add Bid-Ask Spread To Repo Haircut Rates
    FICC also proposes to add a repo bid/ask spread to each repo
haircut rate (one for long positions and one for short positions)
within the same risk bucket. FICC would calculate the repo bid/ask
spread based on the historical percentile movements of FICC's
internally constructed repo interest rate indices. FICC states that
this change would account for the difference observed in the repo
market between the highest rate a repo participant is willing to pay to
borrow money in a repo trade and the lowest rate a repo participant is
willing to accept to lend money in a repo trade. FICC believes that
adding the repo bid/ask spread to each of the repo haircut rates would
improve backtesting coverage, particularly with respect to sub-
portfolios of repo interest only positions.\19\
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    \19\ Id.
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    Based on the Impact Study, had the proposed new formula and repo
bid-ask spread been in place during the period of January 2018 to
February 2022, the CCP-level backtesting coverage ratio for the repo
interest volatility charge would have increased from approximately 98.7
percent to 99.2 percent.\20\
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    \20\ See Notice, supra note 3, at 42526.
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3. Remove Description of Repo Haircut Rate Calculations
    As stated above, the QRM Methodology Document currently contains a
detailed description of the repo haircut rate calculation for all risk
buckets. FICC proposes to eliminate this detailed description from the
QRM Methodology Document and replace it with a more general description
of the repo haircut rate calculation. FICC proposes to describe the
detailed calculations of the repo haircut rates in an internal
standalone document.
    FICC believes a more general description of the repo haircut rate
calculation would be sufficient for the QRM Methodology Document, and
would provide FICC with greater flexibility to respond to rapidly
changing market conditions more quickly and timely by enabling FICC to
adjust the calculation.\21\ Nonetheless, FICC acknowledges that any
future changes to the repo haircut rate calculations would continue to
follow DTCC's internal model governance procedure as described in the
Clearing Agency Model Risk Management Framework.\22\ Moreover, pursuant
to Section 806(e)(1) of Title VIII of the Dodd-Frank Wall Street Reform
and

Consumer Protection Act (``Dodd-Frank Act'') and Rule 19b-4(n)(1)(i)
under the Act, FICC would be required to file an advance notice with
the Commission for any proposed change to the repo haircut rate
calculation that would materially affect the nature or level of risks
presented by FICC.\23\ Additionally, FICC tracks the repo haircut rates
in a monthly model parameter report, which is provided to the
Commission in its supervisory capacity.\24\
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    \21\ See Notice, supra note 3, at 42526. Specifically, FICC
states that the more general description would allow it to adjust
the calculation without needing to submit a proposed rule change
pursuant to Rule 19b-4, 17 CFR 240.19b-4. Id.
    \22\ Id. The Clearing Agency Model Risk Management Framework
(``Framework'') sets forth the model risk management practices that
FICC and its affiliates, The Depository Trust Company and National
Securities Clearing Corporation, follows to identify, measure,
monitor, and manage the risks associated with the design,
development, implementation, use, and validation of quantitative
models. See Securities Exchange Act Release Nos. 81485 (August 25,
2017), 82 FR 41433 (August 31, 2017) (File Nos. SR-DTC-2017-008; SR-
FICC-2017-014; SR-NSCC-2017-008), 88911 (May 20, 2020), 85 FR 31828
(May 27, 2020) (File Nos. SR-DTC-2020-008; SR-FICC-2020-004; SR-
NSCC-2020-008), 92380 (July 13, 2021), 86 FR 38140 (July 19, 2021)
(File No. SR-FICC-2021-006), 92381 (July 13, 2021), 86 FR 38163
(July 19, 2021) (File No. SR-NSCC-2021-008) and 92379 (July 13,
2021), 86 FR 38143 (July 19, 2021) (File No. SR-DTC-2021-003).
Consistent with this obligation, FICC proposes to specifically state
in the QRM Methodology Document that any changes or adjustments to
the repo haircut rate calculation would need to go through this
model governance process.
    \23\ 12 U.S.C. 5465(e)(1) and 17 CFR 240.19b-4(n)(1)(i).
    \24\ See Notice, supra note 3, at 42526.
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    FICC believes that enhancing its ability to quickly adjust the repo
haircut rate calculation would better enable FICC to manage the risks
of its members' repo interest positions.\25\ Specifically, FICC
believes the proposed change would enable FICC to make appropriate and
timely adjustments to the repo haircut rates based on an evaluation of
a number of factors, including, but not limited to, repo interest rate
volatility outlook and backtesting coverage results.\26\ Furthermore,
FICC has identified certain known data availability limitations with
respect to the current repo interest rate index.\27\ Specifically, the
current repo interest rate index is missing data for a volatile period,
such that repo haircut rates calibrated based on the current repo
interest rate index might not calculate sufficient margin amounts
during periods of heightened repo market volatility.\28\ FICC believes
that the ability to quickly adjust the repo haircut rate calculation in
response to rapidly changing market conditions would help mitigate the
effects of such potential data availability limitations.\29\
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    \25\ Id.
    \26\ Id.
    \27\ Id.
    \28\ Id.
    \29\ Id.
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4. Technical and Conforming Changes
    FICC proposes to make certain technical and conforming changes to
the QRM Methodology Document for clarity.\30\
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    \30\ FICC's proposed technical and conforming changes are
designed to use more precise language, remove obsolete items,
clarify and address substantive changes discussed in the proposal,
and otherwise enhance the QRM Methodology Document's readability.
For a detailed description of FICC's proposed technical and
conforming changes, please refer to the Notice, supra note 3, at
42526-27.
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III. Discussion and Commission Findings

    Section 19(b)(2)(C) of the Act \31\ directs the Commission to
approve a proposed rule change of a self-regulatory organization if it
finds that such proposed rule change is consistent with the
requirements of the Act and the rules and regulations thereunder
applicable to such organization. After careful consideration, the
Commission finds that the proposed rule change is consistent with the
requirements of the Act and the rules and regulations thereunder
applicable to FICC. In particular, the Commission finds that the
proposed rule change is consistent with Section 17A(b)(3)(F) of the Act
\32\ and Rules 17Ad-22(e)(4) \33\ and (e)(6) \34\ thereunder.
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    \31\ 15 U.S.C. 78s(b)(2)(C).
    \32\ 15 U.S.C. 78q-1(b)(3)(F).
    \33\ 17 CFR 240.17Ad-22(e)(4)(i).
    \34\ 17 CFR 240.17Ad-22(e)(6)(i) and (v).
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A. Consistency With Section 17A(b)(3)(F) of the Act

    Section 17A(b)(3)(F) of the Act requires, among other things, that
the rules of a clearing agency, such as FICC, be designed to promote
the prompt and accurate clearance and settlement of securities
transactions and to assure the safeguarding of securities and funds
which are in the custody or control of the clearing agency or for which
it is responsible.\35\
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    \35\ 15 U.S.C. 78q-1(b)(3)(F).
---------------------------------------------------------------------------

    As described in Section II.B.1 above, FICC proposes to change its
formula for calculating the repo interest volatility charge.
Specifically, FICC would no longer apply the repo haircut rate based on
whether the total net amount of a portfolio's positions in a specific
risk bucket is long or short, as does the currently formula. Instead,
FICC proposes to apply a specific repo haircut rate based on whether
the individual repo interest positions in a given risk bucket are
either long or short, specifically, enabling FICC to use two haircuts
for each risk bucket, one for long positions and the other for short
positions. The repo interest volatility charge for a specific risk
bucket would be the absolute value of the sum of the products of repo
start amount, time to settlement, and repo haircut rate of the
individual repo interest positions in the risk bucket. The total repo
interest volatility charge for the portfolio would be the sum of the
repo interest volatility charges of all of the risk buckets in the
portfolio. By allowing FICC to use two haircuts for each risk bucket,
the proposed formula should better facilitate FICC's collection of
sufficient margin by enabling FICC to respond to rapidly changing
market conditions more quickly and effectively, particularly when the
long and short repo interest positions exhibit very different risk
profiles.
    As described in Section II.B.2 above, FICC proposes to add a repo
bid/ask spread to each repo haircut rate within the same risk bucket,
based on the historical percentile movements of FICC's internally
constructed repo interest rate indices. Adding the bid/ask spread would
generate margin amounts not currently accounted for in the current repo
interest volatility charge formula. Specifically, the proposed bid/ask
spread component would account for the difference observed in the repo
market between the highest rate a repo participant is willing to pay to
borrow money in a repo trade and the lowest rate a repo participant is
willing to accept to lend money in a repo trade.
    Based on the Impact Study,\36\ had FICC used the proposed formula
(i.e., two haircuts for each risk bucket) and the proposed bid/ask
spread component, the CCP-level backtesting coverage ratio for the repo
interest volatility charge would have increased from approximately 98.7
percent to 99.2 during the period of January 2018 to February 2022. The
Commission believes that the results of the Impact Study demonstrate
that these proposed changes would have enabled FICC to generate margin
amounts that more effectively cover FICC's relevant credit exposures
than the current formula.
---------------------------------------------------------------------------

    \36\ See supra note 15.
---------------------------------------------------------------------------

    Additionally, as described in Section II.B.3 above, FICC proposes
to move the detailed description of the repo haircut rate calculation
for all risk buckets from the QRM Methodology Document to an internal
standalone document, which FICC would not consider to be a ``rule'' for
purposes of Rule 19b-4 \37\ under the Act. As such, the proposed change
would provide FICC with greater flexibility to respond to rapidly
changing market conditions more quickly, which in turn, would better
enable FICC to risk manage its members' repo interest positions and
effectively cover FICC's applicable credit exposures.
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    \37\ 17 CFR 240.19b-4. A stated policy, practice, or
interpretation of a self-regulatory organization is not a ``rule''
that would be subject to the Rule 19b-4 filing requirements if, for
example, it is reasonably and fairly implied by an existing rule of
the self-regulatory organization. See 17 CFR 240.19b-4(c). However,
any future changes to the repo haircut rate calculations would be
subject to DTCC's internal model governance procedure as described
in the Clearing Agency Model Risk Management Framework. See supra
note 22. Moreover, any future changes to the repo haircut rate
calculations that would materially affect the nature or level of
risks presented by FICC would be subject to the advance notice
filing requirements of the Dodd-Frank Act. See supra note 23.
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    Accordingly, the Commission believes that implementing the changes
set forth in Sections II.B.1, II.B.2, and II.B.3

should help ensure that, in the event of a member default, FICC's
operation of its critical clearance and settlement services would not
be disrupted because of insufficient financial resources. The
Commission, therefore, finds that FICC's proposals to change the repo
interest volatility charge formula, add the bid/ask spread component,
and remove the details of the repo haircut rate calculations from the
QRM Methodology Document should help FICC to continue providing prompt
and accurate clearance and settlement of securities transactions in the
event of a member default, consistent with Section 17A(b)(3)(F) of the
Act.\38\
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    \38\ Id.
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    Moreover, as described in Section II.A above, FICC would access the
mutualized Clearing Fund should a defaulted member's own margin be
insufficient to satisfy losses to FICC caused by the liquidation of
that member's portfolio. Because FICC's proposals to change the repo
interest volatility charge formula, add the bid/ask spread component,
and remove the details of the repo haircut rate calculations from the
QRM Methodology Document, should help ensure that FICC has collected
sufficient margin from members, the proposed changes would also help
minimize the likelihood that FICC would have to access the Clearing
Fund, thereby limiting non-defaulting members' exposure to mutualized
losses. The Commission believes that by helping to limit the exposure
of FICC's non-defaulting members to mutualized losses, the proposed
changes should help FICC assure the safeguarding of securities and
funds which are in its custody or control, consistent with Section
17A(b)(3)(F) of the Act.\39\
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    \39\ Id.
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    Finally, as described in Section II.B.4 above, FICC proposes
several technical and conforming changes to the QRM Methodology
Document to improve accuracy and clarity. The Commission believes that
greater accuracy and clarity of the QRM Methodology Document should
better enable FICC to effectively implement the document's provisions.
Accordingly, the Commission believes that FICC's proposed technical and
conforming changes should better enable FICC to assess and collect
sufficient margin from its members with respect to the repo interest
volatility charge, thereby promoting prompt and accurate clearance and
settlement, and assuring the safeguarding of security and funds which
are in FICC's custody or control, consistent with Section 17A(b)(3)(F)
of the Act.\40\
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    \40\ Id.
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B. Consistency With Rule 17Ad-22(e)(4) Under the Act

    Rule 17Ad-22(e)(4)(i) \41\ under the Act requires a covered
clearing agency to establish, implement, maintain and enforce written
policies and procedures reasonably designed to effectively identify,
measure, monitor, and manage its credit exposures to participants and
those exposures arising from its payment, clearing, and settlement
processes by maintaining sufficient financial resources to cover its
credit exposure to each participant fully with a high degree of
confidence.
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    \41\ 17 CFR 240.17Ad-22(e)(4)(i).
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    As described in Section III.A above, FICC's proposals to: (i) apply
a specific repo haircut rate based on whether individual repo interest
positions in a given risk bucket are either long or short; and (ii) add
a bid/ask spread component to the repo interest volatility charge
should improve FICC's ability to calculate and collect sufficient
margin from its members. The results of FICC's Impact Study demonstrate
that during the period of January 2018 to February 2022, the proposed
changes would have enabled FICC to achieve its 99 percent coverage
target more effectively than the current formula. Additionally, FICC's
proposal to move the detailed description of the repo haircut rate
calculation for all risk buckets from the QRM Methodology Document to
an internal standalone document would enable FICC to quickly adjust the
calculation in response to rapidly changing market conditions, which in
turn, should better enable FICC to risk manage its members' repo
interest positions and thereby collect sufficient margin to effectively
cover FICC's credit exposures.
    Because the foregoing proposed changes should better enable FICC to
collect sufficient margin in connection with member portfolios subject
to the repo interest volatility charge, the Commission believes that
the proposed changes should enhance FICC's ability to maintain
sufficient financial resources to cover its credit exposures to
applicable member portfolios fully with a high degree of confidence,
consistent with Rule 17Ad-22(e)(4)(i) under the Act.\42\
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    \42\ Id.
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C. Consistency With Rule 17Ad-22(e)(6) Under the Act

    Rule 17Ad-22(e)(6)(i) \43\ under the Act requires a clearing agency
establish, implement, maintain, and enforce written policies and
procedures reasonably designed to cover its credit exposures to its
participants by establishing a risk-based margin system that, at a
minimum, considers, and produces margin levels commensurate with, the
risks and particular attributes of each relevant product, portfolio,
and market. Rule 17Ad-22(e)(6)(v) \44\ under the Act requires a
clearing agency to establish, implement, maintain and enforce written
policies and procedures reasonably designed to cover its credit
exposures to its participants by establishing a risk-based margin
system that, at a minimum, uses an appropriate method for measuring
credit exposure that accounts for relevant product risk factors and
portfolio effects across products.
---------------------------------------------------------------------------

    \43\ 17 CFR 240.17Ad-22(e)(6)(i).
    \44\ 17 CFR 240.17Ad-22(e)(6)(v).
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    FICC's proposal to change its formula for calculating the repo
interest volatility charge by applying a specific repo haircut rate
based on whether individual repo interest positions in a given risk
bucket are either long or short would provide FICC the flexibility to
apply two separate repo haircut rates (for long and short positions,
respectively) within the same risk bucket. As a result, the proposed
change would enhance FICC's ability to respond quickly to rapidly
changing market conditions, particularly when long and short repo
interest positions exhibit very different risk profiles.\45\
Additionally, FICC's proposal to add a bid/ask spread component to the
repo interest volatility charge would account for the difference
observed in the repo market between the highest rate a repo participant
is willing to pay to borrow money and the lowest rate a repo
participant is willing to accept to lend money. Finally, based on its
review of the Proposed Rule Change, including confidential Exhibit 3
thereto,\46\ the Commission understands that the proposed changes
generate sufficient margin amounts more effectively than

the current repo interest volatility charge formula.
---------------------------------------------------------------------------

    \45\ FICC's proposal to move the detailed description of the
repo haircut rate calculation for all risk buckets from the QRM
Methodology Document to an internal standalone document would enable
FICC to quickly adjust the calculation in response to rapidly
changing market conditions, which in turn, should enable FICC to
better risk manage its members' repo interest positions.
    \46\ See supra notes 14 and 15, describing the information
submitted confidentially.
---------------------------------------------------------------------------

    For these reasons, the Commission believes that the proposed
changes should help ensure that FICC produces margin levels
commensurate with the risks and particular attributes of its member
portfolios containing repo interest positions by (i) enabling FICC to
adjust the repo interest volatility charge formula in response to
rapidly changing market conditions, and (ii) accounting for the bid/ask
spread, which is not addressed in the current repo interest volatility
charge formula. Accordingly, the Commission believes that the proposed
changes would enhance FICC's risk-based margin system to better enable
FICC to cover its credit exposures to its members' repo interest
positions because the proposed changes consider the risks and
particular attributes of the relevant products, portfolios, and
markets, consistent with the requirements of Rule 17Ad-22(e)(6)(i).\47\
Similarly, the Commission believes that the proposed changes are
reasonably designed to cover FICC's credit exposures to its members'
repo interest positions because the proposed changes would enhance
FICC's risk-based margin system using appropriate methods for measuring
credit exposures that account for relevant product risk factors and
portfolio effects, consistent with the requirements of Rule 17Ad-
22(e)(6)(v).\48\
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    \47\ 17 CFR 240.17Ad-22(e)(6)(i).
    \48\ 17 CFR 240.17Ad-22(e)(6)(v).
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IV. Conclusion

    On the basis of the foregoing, the Commission finds that the
proposed rule change is consistent with the requirements of the Act
and, in particular, with the requirements of Section 17A of the Act
\49\ and the rules and regulations promulgated thereunder.
---------------------------------------------------------------------------

    \49\ 15 U.S.C. 78q-1.
---------------------------------------------------------------------------

    It is therefore ordered, pursuant to Section 19(b)(2) of the Act
\50\ that proposed rule change SR-FICC-2022-005, be, and hereby is,
APPROVED.\51\
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    \50\ 15 U.S.C. 78s(b)(2).
    \51\ In approving the proposed rule change, the Commission
considered the proposals' impact on efficiency, competition, and
capital formation. 15 U.S.C. 78c(f).

    For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\52\
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    \52\ 17 CFR 200.30-3(a)(12).
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J. Matthew DeLesDernier,
Deputy Secretary.
[FR Doc. 2022-18768 Filed 8-30-22; 8:45 am]
BILLING CODE 8011-01-P