[Federal Register Volume 77, Number 245 (Thursday, December 20, 2012)]
[Notices]
[Pages 75454-75459]
[FR Doc No: 2012-30648]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-68441; File No. SR-CME-2012-26]

 Self-Regulatory Organizations; Chicago Mercantile Exchange Inc.;
Order Approving Proposed Rule Change To Amend Rules in Connection With
Status as a ``Deemed Registered'' Clearing Agency

December 14, 2012.

I. Introduction

    On October 15, 2012, Chicago Mercantile Exchange Inc. (``CME'')
filed with the Securities and Exchange Commission (``Commission'') the
proposed rule change (SR-CME-2012-26) pursuant to Section 19(b)(1) of
the Securities Exchange Act of 1934 (``Act'') \1\ and Rule 19b-4
thereunder.\2\ The proposed rule change was published for comment in
the Federal Register on November 2, 2012.\3\ The Commission received no
comment letters regarding the proposal. For the reasons discussed
below, the Commission is granting approval of the proposed rule change.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ Securities Exchange Act Release No. 68121 (Oct. 29, 2012),
77 FR 66211 (Nov. 2, 2012).
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II. Description

A. Background--CME's Credit Default Swap Business and ``Deemed
Registered'' Status

    CME began clearing credit default swaps prior to the passage of the
Dodd-Frank Act.\4\ These activities were facilitated by temporary
exemptive relief granted by the Commission to

CME.\5\ Upon the passage of the Dodd-Frank Act, on July 16, 2011, this
temporary relief expired.\6\ To ensure that entities that were clearing
credit default swaps prior to the passage of Dodd-Frank based on
exemptions granted by the Commission could continue to do so without
interruption, Section 763(b) of the Dodd-Frank Act \7\ provided that
(i) a depository institution registered with the Commodities Futures
Trading Commission (``CFTC'') that cleared swaps as a multilateral
clearing organization prior to the date of enactment of the Dodd-Frank
Act and (ii) a derivatives clearing organization (``DCO'') registered
with the CFTC that cleared swaps pursuant to an exemption from
registration as a clearing agency prior to the date of enactment of the
Dodd-Frank Act will be deemed registered with the Commission as a
clearing agency solely for the purpose of clearing security-based swaps
(``Deemed Registered Provision'').\8\ On July 16, 2011, the Deemed
Registered Provision, along with other general provisions under Title
VII of the Dodd-Frank Act, became effective,\9\ thereby requiring each
affected clearing agency, including CME, to comply with all
requirements of the Act and the rules and regulations thereunder
applicable to clearing agencies registered with the Commission under
the Act.
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    \4\ The Dodd-Frank Wall Street Reform and Consumer Protection
Act, Public Law 111-203, 124 Stat.1376 (2010).
    \5\ See generally Securities Exchange Act Release Nos. 59578
(Mar. 13, 2009), 74 FR 11781 (Mar. 19, 2009), 61164 (Dec. 14, 2009),
74 FR 67258 (Dec. 18, 2009), and 61803 (Mar. 30, 2010), 75 FR 17181
(Apr. 5, 2010) (temporary exemptions in connection with CDS clearing
by Chicago Mercantile Exchange Inc.). In addition, the Commission
issued interim final temporary rules that provide exemptions under
the Securities Act of 1933 and the Securities Exchange Act of 1934
for CDS to facilitate the operation of central counterparties for
the CDS market. See Securities Act Release Nos. 8999 (Jan. 14,
2009), 74 FR 3967 (Jan. 22, 2009) (initial approval), 9063 (Sep. 14,
2009), 74 FR 47719 (Sep. 17, 2009) (extension until Nov. 30, 2010),
and 9158 (Nov. 30, 2010) (extension until Jul. 16, 2011).
    \6\ Securities Exchange Act Release No. 61803 (Mar. 30, 2010),
75 FR 17181 (Apr. 5, 2010).
    \7\ The Dodd-Frank Wall Street Reform and Consumer Protection
Act, Public Law 111-203, 124 Stat.1376 (2010).
    \8\ See Section 763(b) of the Dodd-Frank Act (adding new Section
17A(l) to the Exchange Act, 15 U.S.C. 78q-1(1)). Under this Deemed
Registered Provision, CME became a registered clearing agency solely
for the purpose of clearing security-based swaps.
    \9\ Section 774 of the Dodd-Frank Act states, ``[u]nless
otherwise provided, the provisions of this subtitle shall take
effect on the later of 360 days after the date of the enactment of
this subtitle or, to the extent a provision of this subtitle
requires a rulemaking, not less than 60 days after publication of
the final rule or regulation implementing such provision of this
subtitle.''
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B. Proposed Changes in Furtherance of Compliance With the Act

    In light of CME's requirement to comply with the Act and the rules
and regulations thereunder, CME proposed rule changes concerning
membership participation standards, administrative practices, and
financial safety, and provided a description of CME's governance
arrangements in the context of the fair representation requirement in
Section 17A(b)(3)(C) of the Act, as they relate to the CDS portion of
CME's clearing activities. The proposed changes are found within
Chapter 8H of the CME Rulebook and are summarized and discussed in
detail below. The text of the proposed changes is available on the
CME's Web site at http://www.cmegroup.com, at the principal office of
CME, and at the Commission's Public Reference Room.

III. Discussion

A. Statutory Standard

    Section 19(b)(2)(C) of the Act directs the Commission to approve a
proposed rule change of a self-regulatory organization if it finds that
such proposed rule change is consistent with the requirements of the
Act and the rules and regulations thereunder applicable to such
organization.\10\ In particular, Section 17A(b) of the Act requires
that, among other things, the rules of a clearing agency:
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    \10\ 15 U.S.C. 78s(b)(2)(C).

     Subject to the provisions of Section 17A(b)(4) of the
Act,\11\ provide that any (i) registered broker or dealer, (ii)
other registered clearing agency, (iii) registered investment
company, (iv) bank, (v) insurance company, or (vi) other person or
class of persons as the Commission, by rule, may from time to time
designate as appropriate to the development of a national system for
the prompt and accurate clearance and settlement of securities
transactions may become a participant in such clearing agency; \12\
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    \11\ 15 U.S.C. 78q-1(b)(4).
    \12\ 15 U.S.C. 78q-1(b)(3)(B).
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     Provide for fair representation of the clearing
agency's shareholders (or members) and participants in the selection
of its directors and administration of its affairs; \13\
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    \13\ 15 U.S.C. 78q-1(b)(3)(C).
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     Are designed to promote the prompt and accurate
clearance and settlement of securities transactions and, to the
extent applicable, derivative agreements, contracts, and
transactions, to assure the safeguarding of securities and funds
which are in the custody or control of the clearing agency and for
which it is responsible, to foster cooperation and coordination with
persons engaged in the clearance and settlement of securities
transactions, to remove impediments to and perfect the mechanism of
a national system for the prompt and accurate clearance and
settlement of securities transactions, and, in general, to protect
investors and the public interest; and are not designed to permit
unfair discrimination in the admission of participants or among
participants in the use of the clearing agency, or to regulate by
virtue of any authority conferred by the Act matters not related to
the purposes of this section or the administration of the clearing
agency; \14\
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    \14\ 15 U.S.C. 78q-1(b)(3)(F).
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     Provide that (subject to any rule or order of the
Commission pursuant to section 17(d) or 19(g)(2) of the Act) its
participants shall be appropriately disciplined for violation of any
provision of the rules of the clearing agency by expulsion,
suspension, limitation of activities, functions, and operations,
fine, censure, or any other fitting sanction; \15\ and
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    \15\ 15 U.S.C. 78q-1(b)(4)(G).
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     Are in accordance with the provisions of Section
17A(b)(5) of the Act,\16\ and, in general, provide a fair procedure
with respect to the disciplining of participants, the denial of
participation to any persons seeking participation therein, and the
prohibition or limitation by the clearing agency of any person with
respect to access to services offered by the clearing agency.\17\
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    \16\ 15 U.S.C. 78q-1(b)(5).
    \17\ 15 U.S.C. 78q-1(b)(4)(H).
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B. Summary of Proposed Rule Changes

1. Membership Participation Standards
    CME Rule 8H04, CDS Clearing Member Obligations and Qualifications.
CME Rule 8H04 sets forth CDS Clearing Member obligations and
qualifications. CME has proposed changes to this rule to provide
specifically that CME may approve an application for CDS Clearing
Membership to permit the clearing of security-based swaps submitted by
any corporation, partnership, limited liability company, or any other
type of entity, provided that CME determines such applicant satisfies
applicable requirements. CME has also proposed to state in this rule
that applicants within one of the enumerated categories of participants
in Section 17A(b)(3)(B) of the Act \18\ are specifically eligible to
become CDS Clearing Members for the purpose of clearing security-based
swaps. Further, additional revisions to CME Rule 8H04 would make clear
that CME may, and in cases in which the Commission by order directs,
shall, deny an application for CDS Clearing Membership to any person
subject to a statutory disqualification, as such term is defined by the
Act.
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    \18\ 15 U.S.C. 78q-1(b)(3)(B).
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    The Commission believes that these proposed changes to CME Rule
8H04 are consistent with Sections 17A(b)(3)(B) \19\ and 17A(b)(4)(B)
\20\ of the Act, which provide that a registered clearing agency shall
provide in its rules that the

categories of applicants enumerated in Section 17A(b)(3)(B) of the Act
\21\ may become a participant in the registered clearing agency,
subject to meeting the standards of financial responsibility,
operational capability, experience, and competence prescribed by the
rules of the clearing agency, among other things.\22\ The Commission
believes the proposed changes relating to CME's authority and
obligation to restrict the membership and activities of persons subject
to a statutory disqualification are consistent with Section
17A(b)(4)(A),\23\ which provides, among other things, that a registered
clearing agency may, and in cases in which the Commission, by order,
directs as appropriate in the public interest shall, deny participation
to any person subject to a statutory disqualification. In addition, the
Commission finds that these proposed changes are consistent with
Section 17A(b)(3)(F) of the Act,\24\ which requires, among other
things, that a registered clearing agency's rules not be designed to
permit unfair discrimination in the admission of participants or among
participants in the use of the clearing agency.
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    \19\ 15 U.S.C. 78s(b)(2)(B).
    \20\ 15 U.S.C. 78s(b)(4).
    \21\ 15 U.S.C. 78s(b)(2)(B).
    \22\ The Commission is not making a determination whether this
proposed rule change or any other proposed rule change discussed in
this Order is sufficient for full compliance with the statute, rule,
or regulation with which they are consistent.
    \23\ 15 U.S.C. 78s(b)(4)(A).
    \24\ 15 U.S.C. 78s(b)(3)(F).
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2. Administrative Practices
    New CME Rule 8H931. CME has proposed to add new CME Rule 8H931,
which would state that rules that relate to CME's activities as a
clearing agency clearing security-based swaps will be adopted, altered,
amended or repealed in accordance with the applicable requirements of
Section 19(b) of the Act. Under this rule, CME would promptly notify
all CDS Clearing Members of any proposal it has made to change, revise,
add or repeal any rule that relates to its activities as a securities
clearing agency. Such notice would include the text or a brief
description of any such proposed rule change, along with its purpose
and effect, in accordance with the requirements of the Act. CDS
Clearing Members would have the opportunity to submit comments with
respect to any such proposal in accordance with the applicable
Commission rules. The Commission believes that proposed CME Rule 8H931
is consistent with CME's obligations as a clearing agency registered
under the Act to file its proposed rule changes pursuant to Section
19(b) of the Act and Rule 19b-4 thereunder.\25\
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    \25\ The Commission is not making a determination whether this
proposed rule change or any other proposed rule change discussed in
this Order is sufficient for full compliance with the statute, rule,
or regulation with which they are consistent.
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    New CME Rule 8H932, Records Relating to Disciplinary Proceedings
and Security-Based Swaps. Proposed CME Rule 8H932 would require CME to
maintain records of any disciplinary proceeding related to the
activities of a CDS Clearing Member involving security-based swaps in
accordance with the requirements of the Act and Rule 17a-1 thereunder.
The Commission believes that proposed CME Rule 8H932 is consistent with
CME's obligation as a clearing agency under Section 17(a) \26\ and Rule
17a-1 thereunder \27\ to maintain records made or received by it in the
course of its business as such and in the conduct of its self-
regulatory activity.\28\
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    \26\ 15 U.S.C. 78q(a).
    \27\ 17 CFR 240.17a-1.
    \28\ The Commission is not making a determination whether this
proposed rule change or any other proposed rule change discussed in
this Order is sufficient for full compliance with the statute, rule,
or regulation with which they are consistent.
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    New CME Rule 8H933, Notice Regarding Certain Disciplinary Matters
Related to Security-Based Swaps. Proposed CME Rule 8H933 would add
language to Chapter 8H that would require CME to notify the Commission
and any appropriate regulatory agency, as such term is defined by
Section 3(a)(34) of the Act, regarding any final disciplinary sanction,
denial of participation, prohibition or limitation with respect to
access, and/or summary suspension taken against a CDS Clearing Member
relating to activities involving security-based swaps. The Commission
believes that proposed CME Rule 8H933 is consistent with Section
19(d)(1) of the Act, which requires a self-regulatory organization that
imposes any final disciplinary sanction on any of its members or
participants, denies membership or participation to any applicant, or
prohibits or limits any person in respect to access to services it
offers, promptly to file notice with the appropriate regulatory agency
for the self-regulatory organization and (if other than the appropriate
regulatory agency for the self-regulatory organization) the appropriate
regulatory agency for such member, participant, applicant, or other
person.\29\ The Commission also believes that proposed CME Rule 8H933
is consistent with Section 17A(b)(3)(H) of the Act,\30\ which requires
that the rules of a clearing agency provide a fair procedure with
respect to the disciplining of participants, the denial of
participation to any persons seeking participation therein, and the
prohibition or limitation by the clearing agency of any person with
respect to access to services offered by the clearing agency.\31\
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    \29\ 15 U.S.C. 78s(d)(1).
    \30\ 15 U.S.C. 78q-1(b)(3)(H).
    \31\ The Commission is not making a determination whether this
proposed rule change or any other proposed rule change discussed in
this Order is sufficient for full compliance with the statute, rule,
or regulation with which they are consistent.
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    New CME Rule 8H938, Summary Suspensions Relating to Security-Based
Swap Activities. Under proposed CME Rule 8H938, CME would only
summarily suspend and close the accounts of a CDS Clearing Member
engaged in security-based swap clearing activities that (i) has been
and is expelled or suspended from any self-regulatory organization,
(ii) is in default of any delivery of funds or securities to the
clearing agency, or (iii) is in such financial operating difficulty
that the clearing agency determines and so notifies the appropriate
regulatory agency for the member that such suspension and closing of
accounts are necessary for the protection of the clearing agency, its
members, creditors, or investors.
    The Commission views summary suspensions, as discussed in Section
17A(b)(5)(C) of the Act,\32\ as an exception to the general provisions
Sections 17A(b)(5)(A) \33\ and 17A(b)(5)(B) \34\ of the Act, which
require a clearing agency to adhere to specific processes prior to
certain disciplinary actions taking place. The effect of the exception
of Section 17A(b)(5)(C) is to allow registered clearing agencies to
summarily suspend and close a participant's accounts only in the
limited circumstances and in accordance with the minimum procedural
requirements set forth in Section 17A(b)(5)(C). Thus, the Commission
believes that proposed CME Rule 8H938 is consistent with Section
17A(b)(5)(C) of the Act, as well as Sections 17A(b)(3)(G) \35\ and (H)
\36\ of the Act, which require the rules of the clearing agency provide
that its participants shall be appropriately disciplined for violations
of any provisions of those rules and to provide fair procedures for
disciplining participants, denying participation in the clearing agency
to any person, and prohibiting or limiting access to the

clearing agency's services, among other things.
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    \32\ 15 U.S.C. 78q-1(b)(5)(C).
    \33\ 15 U.S.C. 78q-1(b)(5)(A).
    \34\ 15 U.S.C. 78q-1(b)(5)(B).
    \35\ 15 U.S.C. 78q-1(b)(3)(G).
    \36\ 15 U.S.C. 78q-1(b)(3)(H).
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3. Financial Safety
    Change to CME Rule 8H07, CDS Financial Safeguards and Guaranty Fund
Deposit, and 8H802.B, Satisfaction of Clearing House Obligations. CME
has proposed changes to CME Rule 8H07, governing CDS financial
safeguards and Guaranty Fund deposit matters, that would require CME to
notify CDS Clearing Members regarding both the amount of and reasons
for any charges to the CDS Guaranty Fund (``CDS Guaranty Fund,'' or
``Guaranty Fund'') for any reason other than to satisfy a clearing loss
attributable to a CDS Clearing Member solely from that Clearing
Member's Guaranty Fund deposit. CME has proposed changes to Rule
8H802.B that would specify that CME would provide notice to CDS
Clearing Members as required by the Act regarding any amounts charged
to the CDS Guaranty Fund due to losses incurred. By providing
additional transparency to CDS Clearing Members regarding the use of
the CDS Guaranty Fund, these proposed changes facilitate CDS Clearing
Member monitoring of CME's financial condition as well as CME's
accountability with regard to the CDS Guaranty Fund. The Commission
thus believes that these proposed changes to CME Rule 8H07 and 8H802.B
are consistent with Section 17A(b)(3)(F) of the Act,\37\ which requires
that the rules of a registered clearing agency be designed, among other
things, 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.
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    \37\ 15 U.S.C. 78s(b)(3)(F).
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    Further, additional proposed changes would also clarify that CME
would apply CME Rule 8H07 on a uniform and non-discriminatory basis
when determining minimum Guaranty Fund deposits. The Commission finds
these changes to CME Rule 8H07 are consistent with Section 17A(b)(3)(F)
of the Act, which, among other things, requires that a clearing
agency's rules not be designed to permit unfair discrimination among
participants in the use of the clearing agency.\38\
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    \38\ 15 U.S.C. 78s(b)(3)(F).
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    New CME Rule 8H820, Performance Bond for Security-Based Swaps, and
Changes to CME Rule 8H930, CDS Performance Bond Requirements. Proposed
CME Rule 8H820 would specify that CDS performance bond requirements
will be as determined by CME staff from time to time and as set forth
in CME Rule 820. Further, the proposed rule would provide that, with
respect to performance bond requirements that apply to security-based
swap clearing activities, CME would be required under new CME Rule 8H20
to determine that each item that is enumerated as being acceptable
performance bond pursuant to CME Rule 820 has been determined to assure
the safety and liquidity of the clearing agency. New language in CME
Rule 8H930 also would explain that (i) acceptable performance bond
assets for security-based swaps and the applicable haircuts related to
such assets will be set forth on a public Web site and that CME will
have discretion to make adjustments to asset haircuts at any time; (ii)
any such adjustment to the applicable asset haircut will be promptly
communicated to CDS Clearing Members; (iii) any adjustments to the
applicable asset haircut schedule for security-based swap clearing
activities must be based on an analysis of appropriate factors
including, for example, historical and implied price volatilities,
market composition, current and anticipated market conditions, and
other relevant information; and (iv) the Clearing House will conduct
regular reviews of its then-current haircut schedules and make any
necessary adjustments. CME also has proposed to revise CME Rule 8H930
to provide that CME will apply CME Rule 8H930 on a uniform and non-
discriminatory basis when determining performance bond requirements.
    By providing additional transparency concerning CME's process for
determining CDS performance bond requirements as described above, the
Commission believes that CME Rule 8H820 and the revisions to CME Rule
8H930 should provide guidance and an increased level of predictability
to CME's CDS Clearing Members concerning performance bond requirements
without compromising CME's ability to adjust them as market conditions
warrant. CME Rule 8H975 continues to permit CME to require additional
performance bond to be deposited to CME and/or to take any other action
necessary to protect the financial integrity of CME in emergency
situations as defined under CME Rule 8H975. With increased transparency
and predictability concerning performance bond requirements, CDS
Clearing Members should be better able to anticipate and manage amounts
due to CME, which may translate into less risk that CME would not be
able to collect on such requirements and ultimately, improved financial
stability for CME as well as its CDS Clearing Members. In addition, the
requirement in CME Rule 820 that each item enumerated as being
acceptable performance bond has been determined by CME to assure the
safety and liquidity of the clearing agency should also provide
additional assurance to Clearing Members that CME performs the
diligence necessary to select appropriate performance bond assets in
support of the CME's CDS clearing activities. Thus, the Commission
believes the addition of CME Rule 820 and the revisions to CME Rule
H930 described above to be consistent with Section 17A(b)(3)(F),\39\
which requires that a clearing agency's rules be designed, among other
things, 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, and to promote the prompt and accurate clearance and
settlement of securities transactions and, to the extent applicable,
derivative agreements, contracts, and transactions. The Commission also
believes the changes to CME Rule 8H930 providing that CME will
determine performance bond requirements in a uniform and non-
discriminatory manner among members are consistent with Section
17A(b)(3)(F) of the Act,\40\ which, among other things, requires that a
clearing agency's rules not be designed to permit unfair discrimination
among participants in the use of the clearing agency.
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    \39\ Id.
    \40\ Id.
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    New CME Rule 8H934, Reports to CDS Clearing Members. Proposed CME
Rule 8H934 would obligate CME to, as soon as practicable after the end
of each calendar year, make available financial statements audited by
independent public accountants to all CDS Clearing Members engaged in
security-based swap clearing activities. CME would also be required
under this rule to make available to CDS Clearing Members clearing
security-based swaps a report by independent public accountants
regarding the system of internal accounting control of CME Group Inc.
(``CME Group''), CME's parent company, in describing any material
weaknesses discovered and any corrective action taken or proposed to be
taken.
    The financial statements would, at a minimum include: (i) The
balance of the Guaranty Fund, and the breakdown of the fund balance
between the various forms of contributions to the fund, e.g., cash and
secured open account indebtedness; (ii) the types and amounts of
investments made with respect to the cash balance; (iii) the amounts
charged

to the Guaranty Fund during the year in excess of a defaulting CDS
Clearing Member's Guaranty Fund contribution; and (iv) any other
charges to the fund during the year not directly related and chargeable
to a specific CDS Clearing Member's Guaranty Fund contribution. CME
also would make available to CDS Clearing Members clearing security-
based swaps a report of CME Group by independent public accountant
regarding its system of internal accounting control, describing any
material weaknesses discovered and any corrective action taken or
proposed to be taken.
    CME would also furnish to all CDS Clearing Members engaged in
security-based swap clearing activities, within 40 days following the
close of each fiscal quarter, unaudited quarterly financial statements.
These unaudited quarterly financial statements shall at a minimum
consist of: (i) A statement of financial position as of the end of the
most recent fiscal quarter and as of the end of the corresponding
period of the preceding fiscal year; (ii) a statement of changes in
financial position for the period between the end of the last fiscal
year and the end of the most recent fiscal quarter and for the
corresponding period of the preceding fiscal year; and (iii) a
statement of results of operations, which may be condensed, for the
most recent fiscal quarter and for the period between the end of the
last fiscal year and the end of the most recent fiscal quarter and for
the corresponding periods of the preceding fiscal year.
    The Commission believes that CME Rule 8H934, requiring CME to
provide to all CDS Clearing Members engaged in security-based swap
activities financial statements of CME and reports regarding CME
Group's system of internal accounting control, as described above, is
consistent with Section 17A(b)(3)(F) of the Act,\41\ which provides
that the rules of a registered clearing agency should be designed to
promote the prompt and accurate clearance and settlement of securities
transactions and, to the extent applicable, derivative agreements,
contracts, and transactions, 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.
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    \41\ Id.
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    New CME Rule 8H935, Use of Assets. Proposed CME Rule 8H935 would
limit CME's ability to invest the cash portion of the CDS Guaranty Fund
and CDS Clearing Member performance bond contributions by only allowing
investments in accordance with the requirements of CFTC Regulation
1.25, including U.S. Government obligations or such other investments
as the rules of CME may provide which assure safety and liquidity. CME
would also be required to limit its use of CDS Guaranty Fund and
performance bond contributions related to security-based swap
activities to the purposes permitted by the Act under the proposed rule
language. CDS Guaranty Fund and performance bond contributions shall
not be permitted to be used to account for clearing agency losses
attributable to day-to-day operating expenses.
    The Commission expects that proposed CME Rule 8H935 should provide
additional assurance as to the safety and liquidity of acceptable
performance bond for security-based swaps positions. Thus, the
Commission believes CME Rule 8H935 is consistent with Section
17A(b)(3)(F) of the Act,\42\ which provides that the rules of a
registered clearing agency should be designed to promote the prompt and
accurate clearance and settlement of securities transactions and, to
the extent applicable, derivative agreements, contracts, and
transactions, 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.\43\
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    \42\ Id.
    \43\ The Commission is not making a determination whether this
proposed rule change or any other proposed rule change discussed in
this Order is sufficient for full compliance with the statute, rule,
or regulation with which they are consistent.
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    New CME Rule 8H936, Capacity Reviews. Proposed CME Rule 8H936 would
specify that CME would perform periodic risk assessments of CME's
operations and its data processing systems and facilities, and provide
CME's Board of Directors or its designee, such as a Board Committee,
with such reports, and supervise the establishment, maintenance, and
updating of operations and data processing safeguards while reporting
periodically to the Board or its designee concerning strengths and
weaknesses in CME's system of safeguards. In addition, Rule 8H936 would
make clear that CME is obligated to consider, and advise the Board of,
the impact that new or expanded service or volume increases would have
on CME's processing capacity, both physical, including personnel, and
systemic risk.
    The Commission believes that proposed CME Rule 8H936 is consistent
with Section 17A(b)(3)(F) of the Act,\44\ which provides that the rules
of a registered clearing agency should be designed to promote the
prompt and accurate clearance and settlement of securities transactions
and, to the extent applicable, derivative agreements, contracts, and
transactions, 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.
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    \44\ Id.
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4. Fair Representation Requirement
    Commission staff asked CME to provide an explanation of how CME's
current governance arrangements relating to its CDS clearing offering
should be viewed in light of the requirements of Section 17A(b)(3)(C)
of the Act.\45\ This provision requires that the rules of a clearing
agency provide for fair representation of the clearing agency's
shareholders (or members) and participants in the selection of its
directors and administration of its affairs.
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    \45\ 15 U.S.C. 78q-1(b)(3)(C).
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    CME responded that the Board of Directors of the CME Group, the
parent company of CME, also serves as the Board of Directors of CME.
CME Group is a public company whose stock is listed on the Nasdaq Stock
Market (``Nasdaq'') and thus is subject to board composition
requirements under Nasdaq listing standards. In addition, any member of
the public is afforded the opportunity to purchase shares in CME Group
and influence the selection of directors and administration of its
affairs on that basis, subject to applicable law. CME cited Commission
staff guidance in asserting that the Commission may find fair
representation with respect to clearing agency participants if such
participants are afforded an opportunity to acquire voting stock of the
clearing agency in proportion to their use of its facilities.\46\
---------------------------------------------------------------------------

    \46\ See Regulation of Clearing Agencies, supra note 10. Rather
than prescribing a single method, Commission staff guidance has
stated that the Commission will evaluate a clearing agency's
procedures with regard to the fair representation requirement on a
case-by-case basis. Id.
---------------------------------------------------------------------------

    In addition, CME noted that it is also subject to governance and
conflict of interest provisions under the core principles set out in
the CEA for a DCO. The CFTC reviews CME for compliance with these
principles. For example, Section 5b(c)(2)(O) of the CEA sets out
governance fitness standards that apply to DCOs, including transparent
governance arrangements, that are designed to ensure the consideration
of views of owners and participants. Further, Section 5b(c)(2)(Q) of
the CEA requires a DCO's board to include market participants. CFTC
regulations also require a DCO's governance arrangements to be clear
and transparent

and ``to support the objectives of relevant stakeholders.'' \47\
---------------------------------------------------------------------------

    \47\ The Commission notes that compliance with the requirements
of other regulatory authorities does not necessarily substitute for
compliance with the Exchange Act and the rules and regulations
thereunder.
---------------------------------------------------------------------------

    CME also stated that it believes CDS participants will have a
meaningful input into decisions affecting the clearing operations for
CDS through participation on the CME CDS Risk Committee. CME noted that
the CDS Risk Committee was formed under CME Rule 8H27 to provide
guidance and oversight to CME on matters relating to CDS products. The
CDS Risk Committee, among other things, is responsible for reviewing
CDS-related financial safeguards, clearing member requirements, risk
management policies and practices, and rule changes, among other
things.
    CME noted that the Charter of the CDS Risk Committee sets forth
certain composition requirements that ensure the perspectives of CDS
Clearing Members are represented. More specifically, the Charter
requires that at all times the CDS Risk Committee is populated with up
to nine and no fewer than five individuals who are representative of
CDS Clearing Members. Because of these composition requirements of the
CDS Risk Committee, and the scope of its responsibilities, CME stated
that it believed the Commission could find that its current governance
arrangements meet the fair representation requirement of the Act.
    Further, CME also noted that the Charter of the CDS Risk Committee
specifically provides that its Chairman shall be a member of the CME
Board of Directors. In this capacity, the Chairman of the CDS Risk
Committee serves as a liaison to the full Board of Directors of CME. He
or she can relay any concerns addressed by the CDS Risk Committee to
the full CME Board of Directors. CME noted that the CDS Risk Committee
is required to reassess the adequacy of this Charter on an annual basis
and submit any recommended changes to the full CME Board of Directors
for approval. CME believes these features provide a concrete nexus
between the activities of the CDS Risk Committee and the full CME Board
of Directors and ensure that there will be a fair representation of CDS
Clearing Members in accordance with the spirit and letter of the Act.
    Based on the representations made by CME, as described above, the
Commission believes that CME's governance structure could accommodate
fair representation of the clearing agency's shareholders (or members)
and participants in the selection of CME's directors and administration
of its affairs, consistent with Section 17A(b)(3)(C) of the Act.\48\
The Commission intends to monitor these governance arrangements over
time for consistency with fair representation requirement, taking into
consideration the interaction between the CDS Risk Committee, including
its Chairman, with the CME Board of Directors, any changes to the
composition of the CDS Risk Committee relative to that of the CME Board
of Directors, the scope and proportion of CME's CDS clearing relative
to its other activities, and other facts and circumstances as
appropriate.
---------------------------------------------------------------------------

    \48\ 15 U.S.C. 78q-1(b)(3)(C).
---------------------------------------------------------------------------

IV. Conclusion

    On the basis of the foregoing, the Commission finds that the
proposal 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 thereunder. It is therefore ordered, pursuant to
Section 19(b)(2) of the Act,\50\ that the proposed rule change (File
No. SR-CME-2012-26) be, and hereby is, approved.\51\
---------------------------------------------------------------------------

    \49\ 15 U.S.C. 78q-1.
    \50\ 15 U.S.C. 78s(b)(2).
    \51\ In approving the proposed rule change, the Commission
considered the proposal's impact on efficiency, competition and
capital formation. 15 U.S.C. 78c(f).
    \52\ 17 CFR 200.30-3(a)(12).

    For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\52\
Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2012-30648 Filed 12-19-12; 8:45 am]
BILLING CODE 8011-01-P


[Federal Register Volume 88, Number 43 (Monday, March 6, 2023)]
[Rules and Regulations]
[Pages 13668-13671]
[FR Doc No: 2023-04464]

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DEPARTMENT OF TRANSPORTATION

Federal Aviation Administration

14 CFR Part 39

[Docket No. FAA-2022-1578; Project Identifier MCAI-2022-00858-T;
Amendment 39-22352; AD 2023-04-05]
RIN 2120-AA64

Airworthiness Directives; Airbus SAS Airplanes

AGENCY: Federal Aviation Administration (FAA), DOT.

ACTION: Final rule.

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

SUMMARY: The FAA is superseding Airworthiness Directive (AD) 2022-09-
11, which applied to certain Airbus SAS Model A350-941 and -1041
airplanes. AD 2022-09-11 required revising the existing maintenance or
inspection program, as applicable, to incorporate new or more
restrictive airworthiness limitations. This AD was prompted by a
determination that new or more restrictive airworthiness limitations
are necessary. This AD continues to require the actions in AD 2022-09-
11 and requires revising the existing maintenance or inspection
program, as applicable, to incorporate new or more restrictive
airworthiness limitations, as specified in a European Union Aviation
Safety Agency (EASA) AD, which is incorporated by reference. The FAA is
issuing this AD to address the unsafe condition on these products.

DATES: This AD is effective April 10, 2023.
    The Director of the Federal Register approved the incorporation by
reference of a certain publication listed in this AD as of April 10,
2023.
    The Director of the Federal Register approved the incorporation by
reference of a certain other publication listed in this AD as of June
21, 2022 (87 FR 29819, May 17, 2022).

ADDRESSES:
    AD Docket: You may examine the AD docket at regulations.gov under
Docket No. FAA-2022-1578; 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 mandatory continuing airworthiness
information (MCAI), any comments received, and

other information. The address for Docket Operations is U.S. Department
of Transportation, Docket Operations, M-30, West Building Ground Floor,
Room W12-140, 1200 New Jersey Avenue SE, Washington, DC 20590.
    Material Incorporated by Reference:
     For material incorporated by reference in this AD, contact
EASA, Konrad-Adenauer-Ufer 3, 50668 Cologne, Germany; telephone +49 221
8999 000; email [email protected]; website easa.europa.eu. You may
find this material on the EASA website at ad.easa.europa.eu.
     You may view this material at the FAA, Airworthiness
Products Section, Operational Safety Branch, 2200 South 216th St., Des
Moines, WA. For information on the availability of this material at the
FAA, call<PHONE_NUMBER>. It is also available in the AD docket at
regulations.gov under Docket No. FAA-2022-1578.

FOR FURTHER INFORMATION CONTACT: Dat Le, Aerospace Engineer, Large
Aircraft Section, FAA, International Validation Branch, 2200 South
216th St., Des Moines, WA 98198; telephone<PHONE_NUMBER>; email
[email protected].

SUPPLEMENTARY INFORMATION:

Background

    The FAA issued a notice of proposed rulemaking (NPRM) to amend 14
CFR part 39 to supersede AD 2022-09-11, Amendment 39-22031 (87 FR
29819, May 17, 2022) (AD 2022-09-11). AD 2022-09-11 applied to certain
Airbus SAS Model A350-941 and -1041 airplanes. AD 2022-09-11 required
revising the existing maintenance or inspection program, as applicable,
to incorporate new or more restrictive airworthiness limitations. The
FAA issued AD 2022-09-11 to address reduced structural integrity of the
airplane.
    The NPRM published in the Federal Register on December 13, 2022 (87
FR 76162). The NPRM was prompted by AD 2022-0125, dated June 28, 2022,
issued by EASA, which is the Technical Agent for the Member States of
the European Union (EASA AD 2022-0125) (referred to after this as the
MCAI). The MCAI states that new or more restrictive airworthiness
limitations have been developed.
    You may examine the MCAI in the AD docket at regulations.gov under
Docket No. FAA-2022-1578.
    In the NPRM, the FAA proposed to continue to require the actions in
AD 2022-09-11 and to require revising the existing maintenance or
inspection program, as applicable, to incorporate new or more
restrictive airworthiness limitations, as specified in EASA AD 2022-
0125. The FAA is issuing this AD to address reduced structural
integrity of the airplane.

Discussion of Final Airworthiness Directive

Comments

    The FAA received a comment from The Air Line Pilots Association,
International (ALPA), who supported the NPRM without change.

Conclusion

    This product has been approved by the aviation authority of another
country and is approved for operation in the United States. Pursuant to
the FAA's bilateral agreement with this State of Design Authority, it
has notified the FAA of the unsafe condition described in the MCAI
referenced above. The FAA reviewed the relevant data and determined
that air safety requires adopting this AD as proposed. Accordingly, the
FAA is issuing this AD to address the unsafe condition on this product.
Except for minor editorial changes, this AD is adopted as proposed in
the NPRM. None of the changes will increase the economic burden on any
operator.

Related Service Information Under 1 CFR Part 51

    EASA AD 2022-0125 specifies new or more restrictive airworthiness
limitations for airplane structures and safe life limits.
    This AD also requires EASA AD 2021-0207, dated September 15, 2021,
which the Director of the Federal Register approved for incorporation
by reference as of June 21, 2022 (87 FR 29819, May 17, 2022).
    This material 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.

Costs of Compliance

    The FAA estimates that this AD affects 30 airplanes of U.S.
registry. The FAA estimates the following costs to comply with this AD:
    The FAA estimates the total cost per operator for the retained
actions from AD 2022-09-11 to be $7,650 (90 work-hours x $85 per work-
hour).
    The FAA has determined that revising the existing maintenance or
inspection program takes an average of 90 work-hours per operator,
although the agency recognizes that this number may vary from operator
to operator. Since operators incorporate maintenance or inspection
program changes for their affected fleet(s), the FAA has determined
that a per-operator estimate is more accurate than a per-airplane
estimate.
    The FAA estimates the total cost per operator for the new actions
to be $7,650 (90 work-hours x $85 per work-hour).

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 above, I certify that this AD:
    (1) Is not a ``significant regulatory action'' under Executive
Order 12866,
    (2) Will not affect intrastate aviation in Alaska, and
    (3) Will not have a significant economic impact, positive or
negative, on a substantial number of small entities under the criteria
of the Regulatory Flexibility Act.

List of Subjects in 14 CFR Part 39

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

The 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:
0
a. Removing Airworthiness Directive (AD) 2022-09-11, Amendment 39-22031
(87 FR 29819, May 17, 2022); and
0
b. Adding the following new AD:

2023-04-05 Airbus SAS: Amendment 39-22352; Docket No. FAA-2022-1578;
Project Identifier MCAI-2022-00858-T.

(a) Effective Date

    This airworthiness directive (AD) is effective April 10, 2023.

(b) Affected ADs

    This AD replaces AD 2022-09-11, Amendment 39-22031 (87 FR 29819,
May 17, 2022) (AD 2022-09-11).

(c) Applicability

    This AD applies to Airbus SAS Model A350-941 and -1041
airplanes, certificated in any category, with an original
airworthiness certificate or original export certificate of
airworthiness issued on or before May 2, 2022.

(d) Subject

    Air Transport Association (ATA) of America Code 05, Time Limits/
Maintenance Checks.

(e) Unsafe Condition

    This AD was prompted by a determination that new or more
restrictive airworthiness limitations are necessary. The FAA is
issuing this AD to address reduced structural integrity of the
airplane.

(f) Compliance

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

(g) Retained Maintenance or Inspection Program Revision, With No
Changes

    This paragraph restates the requirements of paragraph (j) of AD
2022-09-11, with no changes. For airplanes with an original
airworthiness certificate or original export certificate of
airworthiness issued on or before June 30, 2021: Except as specified
in paragraph (h) of this AD, comply with all required actions and
compliance times specified in, and in accordance with, European
Union Aviation Safety Agency (EASA) AD 2021-0207, dated September
15, 2021 (EASA AD 2021-0207). Accomplishing the revision of the
existing maintenance or inspection program required by paragraph (j)
of this AD terminates the requirements of this paragraph.

(h) Retained Exceptions to EASA AD 2021-0207, With No Changes

    This paragraph restates the requirements of paragraph (k) of AD
2022-09-11, with no changes.
    (1) Where EASA AD 2021-0207 refers to its effective date, this
AD requires using June 21, 2022 (the effective date of AD 2022-09-
11).
    (2) The requirements specified in paragraphs (1) and (2) of EASA
AD 2021-0207 do not apply to this AD.
    (3) Paragraph (3) of EASA AD 2021-0207 specifies revising ``the
approved AMP'' within 12 months after its effective date, but this
AD requires revising the existing maintenance or inspection program,
as applicable, within 90 days after June 21, 2022 (the effective
date of AD 2022-09-11).
    (4) The initial compliance time for doing the tasks specified in
paragraph (3) of EASA 2021-0207 is at the ``applicable thresholds''
as incorporated by the requirements of paragraph (3) of EASA AD
2021-0207, or within 90 days after June 21, 2022 (the effective date
of AD 2022-09-11), whichever occurs later.
    (5) The provisions specified in paragraphs (4) and (5) of EASA
AD 2021-0207 do not apply to this AD.
    (6) The ``Remarks'' section of EASA AD 2021-0207 does not apply
to this AD.

(i) Retained Provisions for Alternative Actions or Intervals, With a
New Exception

    This paragraph restates the requirements of paragraph (l) of AD
2022-09-11, with a new exception. Except as required by paragraph
(j) of this AD, after the existing maintenance or inspection program
has been revised as required by paragraph (g) of this AD, no
alternative actions (e.g., inspections) or intervals are allowed
unless they are approved as specified in the provisions of the
``Ref. Publications'' section of EASA AD 2021-0207.

(j) New Revision of the Existing Maintenance or Inspection Program

    Except as specified in paragraph (k) of this AD: Comply with all
required actions and compliance times specified in, and in
accordance with, EASA AD 2022-0125, dated June 28, 2022 (EASA AD
2022-0125). Accomplishing the revision of the existing maintenance
or inspection program required by this paragraph terminates the
requirements of paragraph (g) of this AD.

(k) Exceptions to EASA AD 2022-0125

    (1) Where EASA AD 2022-0125 refers to its effective date, this
AD requires using the effective date of this AD.
    (2) The requirements specified in paragraphs (1) and (2) of EASA
AD 2022-0125 do not apply to this AD.
    (3) Paragraph (3) of EASA AD 2022-0125 specifies revising ``the
approved AMP'' within 12 months after its effective date, but this
AD requires revising the existing maintenance or inspection program,
as applicable, within 90 days after the effective date of this AD.
    (4) The initial compliance time for doing the tasks specified in
paragraph (3) of EASA AD 2022-0125 is at the applicable
``thresholds'' as incorporated by the requirements of paragraph (3)
of EASA AD 2022-0125, or within 90 days after the effective date of
this AD, whichever occurs later.
    (5) The provisions specified in paragraphs (4) and (5) of EASA
AD 2022-0125 do not apply to this AD.
    (6) The ``Remarks'' section of EASA AD 2022-0125 does not apply
to this AD.

(l) New Provisions for Alternative Actions and Intervals

    After the existing maintenance or inspection program has been
revised as required by paragraph (j) of this AD, no alternative
actions (e.g., inspections) and intervals are allowed unless they
are approved as specified in the provisions of the ``Ref.
Publications'' section of EASA AD 2022-0125.

(m) Additional FAA AD Provisions

    The following provisions also apply to this AD:
    (1) Alternative Methods of Compliance (AMOCs): 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 responsible Flight Standards Office, as
appropriate. If sending information directly to the International
Validation Branch, send it to the attention of the person identified
in paragraph (n) of this AD. Information may be emailed to: [email protected]. Before using any approved AMOC, notify your
appropriate principal inspector, or lacking a principal inspector,
the manager of the responsible Flight Standards Office.
    (2) Contacting the Manufacturer: For any requirement in this AD
to obtain instructions from a manufacturer, the instructions must be
accomplished using a method approved by the Manager, International
Validation Branch, FAA; or EASA; or Airbus SAS's EASA Design
Organization Approval (DOA). If approved by the DOA, the approval
must include the DOA-authorized signature.

(n) Additional Information

    For more information about this AD, contact Dat Le, Aerospace
Engineer, Large Aircraft Section, FAA, International Validation
Branch, 2200 South 216th St., Des Moines, WA 98198; telephone 516-
228-7317; email [email protected].

(o) Material Incorporated by Reference

    (1) The Director of the Federal Register approved the
incorporation by reference (IBR) 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 this AD specifies otherwise.
    (3) The following service information was approved for IBR on
April 10, 2023.
    (i) European Union Aviation Safety Agency (EASA) AD 2022-0125,
dated June 28, 2022.
    (ii) [Reserved]
    (4) The following service information was approved for IBR on
June 21, 2022 (87 FR 29819, May 17, 2022).
    (i) European Union Aviation Safety Agency (EASA) AD 2021-0207,
dated September 15, 2021.
    (ii) [Reserved]

    (5) For EASA AD 2022-0125 and AD 2021-0207, contact EASA,
Konrad-Adenauer-Ufer 3, 50668 Cologne, Germany; telephone +49 221
8999 000; email [email protected]; website easa.europa.eu. You may
find these EASA ADs on the EASA website at ad.easa.europa.eu.
    (6) You may view this material at the FAA, Airworthiness
Products Section, Operational Safety Branch, 2200 South 216th St.,
Des Moines, WA. For information on the availability of this material
at the FAA, call<PHONE_NUMBER>.
    (7) You may view this material 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 protected], or go to: www.archives.gov/federal-register/cfr/ibr-locations.html.

    Issued on February 15, 2023.
Christina Underwood,
Acting Director, Compliance & Airworthiness Division, Aircraft
Certification Service.
[FR Doc. 2023-04464 Filed 3-3-23; 8:45 am]
BILLING CODE 4910-13-P


[Federal Register Volume 81, Number 204 (Friday, October 21, 2016)]
[Rules and Regulations]
[Pages 72720-72724]
[FR Doc No: 2016-25295]

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ENVIRONMENTAL PROTECTION AGENCY

40 CFR Part 52

[EPA-R08-OAR-2016-0016; FRL-9954-16-Region 8]

Approval and Promulgation of Air Quality Implementation Plans;
State of Colorado; Motor Vehicle Inspection and Maintenance, Clean
Screen Program and the Low Emitter Index, On-Board Diagnostics, and
Associated Revisions

AGENCY: Environmental Protection Agency.

ACTION: Final rule.

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

SUMMARY: The Environmental Protection Agency (EPA) is approving three
State Implementation Plan (SIP) revisions submitted by the State of
Colorado. The revisions involve amendments to Colorado's Regulation
Number 11 ``Motor Vehicle Emissions Inspection Program.'' The revisions
address the implementation of the Low Emitter Index (LEI) component of
Regulation No. 11's Clean Screen Program, the implementation of the On-
Board Diagnostics (OBD) component of Regulation No. 11, and several
other associated revisions. The EPA is approving these SIP revisions in
accordance with the requirements of section 110 of the Clean Air Act
(CAA).

DATES: This final rule is effective on November 21, 2016.

ADDRESSES: EPA has established a docket for this action under Docket
Identification Number EPA-R08-OAR-2016-0016. All documents in the
docket are listed on the http://www.regulations.gov index. Although
listed in the index, some information may not be publicly available,
e.g., Confidential Business Information or other information whose
disclosure is restricted by statute. Certain other material, such as
copyrighted material, will be publicly available only in hard copy.
Publicly available docket materials are available either electronically
through http://www.regulations.gov or in hard copy at the Air Program,
Environmental Protection Agency (EPA), Region 8, 1595 Wynkoop Street,
Denver, Colorado, 80202-1129. EPA requests that you contact the
individual listed in the FOR FURTHER INFORMATION CONTACT section to
view the hard copy of the docket. You may view the hard copy of the
docket Monday through Friday, 8 a.m. to 4 p.m., excluding federal
holidays.

FOR FURTHER INFORMATION CONTACT: Tim Russ, Air Program, EPA, Region 8,
Mailcode 8P-AR, 1595 Wynkoop, Denver, Colorado 80202-1129, (303) 312-
6479<EMAIL_ADDRESS>
SUPPLEMENTARY INFORMATION:

I. Background

    In this action, the EPA is approving SIP revisions to Colorado's
Regulation No. 11 (hereafter ``Reg. No. 11'') contained in three
submittals from Colorado. The State's submittals were dated June 11,
2008, March 15, 2013, and March 3, 2014. Much of the content of the
revisions involved minor updates to several sections of Reg. No. 11 and
deletion of obsolete language. Those revisions of greater significance
involved: (1) Colorado's 2007 revisions to Reg. No. 11 for the
implementation of the LEI portion of the Clean Screen Program contained
in Reg. No. 11; (2) Colorado's 2012 revisions to Reg. No. 11 for the
implementation of the OBD test requirements contained in Reg. No. 11
along with the Seven Model Year Emissions Test Exemption provisions;
and (3) Colorado's 2013 revisions to Reg. No. 11, Appendix A,
Incorporation by Reference of Technical Materials, the addition of new
Technical Information/Requirements, and minor revisions to Appendix B.
    On August 12, 2016, the EPA published a notice of proposed
rulemaking (NPR) which proposed to approve the State's three Reg. No.
11 SIP revision requests and in addition, provided a thorough
evaluation of the changes, additions, and deletions to Reg. No. 11
contained in each of the three SIP revision submittals. See 81 FR
53370. The details of Colorado's three SIP submittals and the rationale
for the EPA's proposed action to approve the SIP revision materials are
explained in the NPR and will not be restated here. The EPA notes that
the NPR's public comment period closed on September 12, 2016 and we did
not receive any comments.

II. Final Action

    The EPA is taking final action to approve the following revisions
to Reg. No. 11 that were discussed in our August 12, 2016 NPR (81 FR
53370) and as provided below:
    a.) The sections of Reg. No. 11 that were revised with the State's
June 11, 2008 submittal:
    1.) Part A, section II: Modify definition number 15 ``Clean
Screened Vehicle'' to reflect the addition of the LEI; modify
definition number 17 ``Colorado `94'' to clarify the use of the BAR 90
test analyzer systems for use after 1994; and add a new definition
``Low Emitting Vehicle Index.'' Renumber definitions number 18 and
higher.
    2.) Part C, section XII: Modify section XIIA.3 regarding the
requirements and procedures to clean screen an eligible vehicle and add
section XIIE.4 regarding low emitting vehicles and the LEI.
    3.) Part F, section VI: Renumber section VI.B as VI.C; add new
section VI.B.1 which requires the development of the LEI each year; add
new section VI.B.2 which establishes the 98% minimum passing criteria
for the LEI; and add new section VI.B.3 which allows the Colorado
Department of Public Health and Environment (CDPHE) to use a greater
than 98% passing criteria if needed to equate to a second remote
sensing device reading.
    4.) Appendix A, Technical Specifications, Attachment 1: Sections of
Attachment 1 of the Technical Specifications contain the specifications
for the PDF 1000 Scanner; some sections were unreadable and a full,
retyped PDF 1000 Scanner section was provided.
    5.) Appendix A, Technical Specifications, Attachment 2: Sections of
Attachment 2 of the Technical Specifications contain the specifications
for the Thermal Transfer Printer; some sections were unreadable and a
full, retyped Thermal Transfer Printer section was provided.
    The EPA notes that Part F, section III.A.2 of Reg. No. 11 was also
provided with the State's June 11, 2008 submittal. This section
contains IM240 \1\ test light duty vehicle emissions cutpoints for 1996
and newer vehicles (all in grams per mile). The carbon monoxide (CO),
hydrocarbon (HC), and nitrogen oxides (NOX) entries for
calendar year 2006 are incorrect as the State had previously provided
an August 8, 2006 SIP revision submittal to remove these 2006 cutpoints
(i.e., HC 0.6, CO 10.0, and NOX 1.5). The EPA approved the
removal of these 2006 cutpoints on December 20, 2012 (77 FR 75388).
---------------------------------------------------------------------------

    \1\ See 40 CFR part 51, subpart S for a complete description of
EPA's IM240 test. The IM240 test is essentially an enhanced motor
vehicle emissions test to measure mass tailpipe emissions while the
vehicle follows a computer generated driving cycle trace for 240
seconds and while the vehicle is on a dynamometer.

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

    b.) The sections of Reg. No. 11 that were revised with the State's
March 15, 2013 submittal:
    1.) Part A, section I: Minor wording changes to add new language
and remove obsolete language in sections I.B, I.C.3, I.C.3.a, I.C.3.b,
I.C.3.c, I.C.4, I.C.7, I.C.7.c, I.C.8, and I.C.9.b.
    2.) Part A, section II: A new definition number 20 was added
entitled ``Colorado On-Board Diagnostic (OBD) Test Analyzer System;'' a
new definition number 22 was added entitled ``Diagnostic Trouble Code
(DTC);'' and definitions number 23 to 43 were renumbered. A new
definition number 44 was added and entitled ``On-Board Diagnostics II
(OBD or OBDII) Test'' and definitions numbered 45 to 52 were
renumbered.
    3.) Part A, section IV: Section IV.D was removed which involved
obsolete language and section IV.E was renumbered IV.D and also had
obsolete language removed.
    4.) Part B, section IX: Section IX was added and is entitled
``Approval of the Colorado On-Board Diagnostic (OBD) Test Analyzer
System.'' Also, Part B, section X was added and is entitled ``The
Colorado On-Board Diagnostic (OBD) Test Analyzer System.''
    5.) Part C, title: The title was modified by removing
``Chlorofluorocarbon Leak Detection'' and adding ``On-Board Diagnostics
(OBD).''
    6.) Part C, section I.C.3: This involved minor language changes to
clarify data transmission and analyzer requirements.
    7.) Part C, section II.A: This section was renumbered from II.A
through II.F to instead become II.A.1 through II.A.11. Minor
clarification language was added along with revised references to
sections in Part C.
    8.) Part C, section II.G: This section was renumbered to II.B and
clarifying language was added regarding OBD testing. Sections II.G.1
through II.G.6 were renumbered II.B.1 through II.B.6. Section II.B.4
had clarifying language added regarding applicable vehicles that were
unable to be tested with the IM240 test would then be OBD tested.
    9.) Part C, section II.C: A new section II.C (II.C 1 through
II.C.9) was added which specifies which vehicles are to be OBD tested
and the requirements and testing procedures for an OBD test.
    10.) Part C, section III.A: This section had clarifying language
added and sections III.B and III.C were removed as they addressed the
model year 1996 and newer visual inspection procedures. The remaining
applicable portions of section III.C were then renumbered III.B.
Sections III.D and III.E were renumbered to III.C and III.D.
    11.) Part C, section IV: The prior section IV was renumbered
section V and the provisions of the existing section V were deleted.
The new section IV addressed the requirements for applicable vehicles
(1996 through those vehicles that had reached their 11th model year of
age) to be evaluated with and OBD test.
    12.) Part C, prior section IV: The existing section IV was
renumbered section V and also modified with clarifying language
regarding the requirement for a full retest of vehicles which
previously had a missing or malfunctioning gas cap.
    13.) Part C, section VIII.A.2: A new section VIII.A.2 was added
which states that vehicles in their model years seven through ten need
to meet the OBD passing criteria in Part F, section VII. Sections
VIII.A.2 through VIII.A.4 were renumbered VIII.A.3 through VIII.A.5.
    14.) Part C, sections VIII.B.1, VIII.B.2, and VIII.B.3: These
sections had minor wording changes and deletion of obsolete language.
    15.) Part C, sections VIII.D.A through VIII.D.E: These sections
were renumbered VIII.D.1 through VIII.D.5.
    16.) Part C, sections IX.G and X.A: These sections had minor
clarifying language added.
    17.) Part F, section V: This section was retitled ``Visible
Smoke.''
    18.) Part F, section VII: A new section VII was added (sections
VII.A through VII.F) which stated the required OBD diagnostic
inspection test passing criteria.
    19.) Part G: This part had previously contained obsolete high-
emitting vehicle identification pilot project language which was
removed and Part G was retitled ``Reserved.''
    c.) The sections of Reg. No. 11 that were revised with the State's
March 3, 2014 submittal:
    1.) Part A, section I.C.3.c: This section was revised to clarify
that the seven year new vehicle exemption, which excused vehicles from
an emissions test for seven years and was previously adopted by the
Colorado Air Quality Control Commission (AQCC) in December 2012, would
take effect on January 1, 2015. Also, this exemption would apply
retroactively to existing vehicles in their fourth, fifth, and sixth
years of service.
    2.) Part A, sections I.C.8, I.C.9, and I.C.10: These sections were
revised to clarify ambiguous, contradictory and obsolete Reg. No. 11
language concerning the issuance of and duration periods for
``Verification of Emissions Test'' exemption windshield stickers issued
by motor vehicle dealers. Part A, section I.C.8 was further clarified
to note that vehicles in their fourth, fifth, and sixth years of
service would have the seven year exemption applied retroactively.
    3.) Part A, section I.C.3 and Part C, sections III and IV: These
sections were revised to clarify that the seven-year new vehicle
exemption from emissions testing, OBD testing requirements and
procedures, and other changes made to Reg. No. 11 by the AQCC in
December 2012, would go into effect January 1, 2015. In addition, the
visual inspection procedures for 1996 and newer vehicles would be
retained through December 2014.
    4.) Part C, section C VIII.B.3: This section was revised to codify
in Reg. No. 11 the vehicle emissions repair cost waiver amount of $715.
The AQCC has previously directed the CDPHE to change the amount from
$450 to $715 in November 2002, which was done. However, at that time,
the AQCC had declined to note the changed repair amount in the text of
Reg. No. 11.
    5.) Part C, section VIII.D.4: This section was revised regarding
the qualifying criteria for an economic hardship waiver for a vehicle
failing its emissions test. Section VIII.D.4 was further revised to
allow the economic hardship waiver to apply to households owning two
vehicles rather than restricting hardship waivers to households owning
only one vehicle.
    6.) Appendix A of Reg. No. 11 was revised as follows:
    a.) Appendix A was revised to remove the text of three technical
document attachments and to note that the documents are available at
CDPHE's Emissions Technical Center Procedures Manual. The technical
documents are incorporated by reference into Reg. No. 11. Appendix A.
The technical documents that are incorporated by reference into Reg.
No. 11 are: Attachment I ``PDF 1000 Scanner,'' Attachment II ``Thermal
Transfer Printer,'' and Attachment III ``Colorado Automobile Dealers
Transient Mode Test Analyzer System.''
    b.) Updated Attachment IV, entitled ``Colorado Department of Public
Health and Environment Specification for Colorado 97 Analyzer,'' to
reflect technological changes to data specifications, communications
protocols, and forms generation.
    c.) To include a new Attachment V ``Test Analyzer Specification for
On-board Diagnostics'' for licensed fleets who self-inspect their own
vehicles. Note: Part B section X required this Test Analyzer
Specification to be in place by December 31, 2013.
    7.) Appendix B of Reg. No. 11 was revised as follows: Attachment
II; the ``Calibration Span Gas'' labels were

updated to reflect the current version of the State-official labels.
    8.) Overall revised formatting and other non-substantive changes
were made throughout Reg. No. 11.

III. Incorporation by Reference

    In this rule, the EPA is finalizing regulatory text that includes
incorporation by reference. In accordance with requirements of 1 CFR
51.5, the EPA is finalizing the incorporation by reference of the
Colorado Air Quality Control Commission, Regulation Number 11 revisions
as discussed in section II, Final Action, of this preamble. Therefore,
these materials have been approved by the EPA for inclusion in the
State Implementation Plan, have been incorporated by reference by the
EPA into that plan, are fully federally enforceable under sections 110
and 113 of the CAA as of the effective date of the final rulemaking of
the EPA's approval, and will be incorporated by reference by the
Director of the Federal Register in the next update to the SIP
compilation. The EPA has made, and will continue to make, these
materials generally available through www.regulations.gov and/or at the
EPA Region 8 Office (please contact the person identified in the ``For
Further Information Contact'' section of this preamble for more
information).

IV. Statutory and Executive Order Reviews

    Under the CAA, the Administrator is required to approve a SIP
submission that complies with the provisions of the Act and applicable
federal regulations (42 U.S.C. 7410(k), 40 CFR 52.02(a)). Thus, in
reviewing SIP submissions, the EPA's role is to approve state choices,
provided that they meet the criteria of the CAA. Accordingly, this
final action merely approves some state law as meeting federal
requirements; this final action does not impose additional requirements
beyond those imposed by state law. For that reason, this final action:
     Is not a ``significant regulatory action'' subject to
review by the Office of Management and Budget under Executive Order
12866 (58 FR 51735, Oct. 4, 1993);
     Does not impose an information collection burden under the
provisions of the Paperwork Reduction Act (44 U.S.C. 3501 et seq.);
     Is certified as not having a significant economic impact
on a substantial number of small entities under the Regulatory
Flexibility Act (5 U.S.C. 601 et seq.);
     Does not contain any unfunded mandate or significantly or
uniquely affect small governments, as described in the Unfunded
Mandates Reform Act of 1995 (Public Law 104-4);
     Does not have federalism implications as specified in
Executive Order 13132 (64 FR 43255, Aug. 10, 1999);
     Is not an economically significant regulatory action based
on health or safety risks subject to Executive Order 13045 (62 FR
19885, April 23, 1997);
     Is not a significant regulatory action subject to
Executive Order 13211 (66 FR 28355, May 22, 2001);
     Is not subject to requirements of section 12(d) of the
National Technology Transfer and Advancement Act of 1995 (15 U.S.C. 272
note) because application of those requirements would be inconsistent
with the CAA; and,
     Does not provide the EPA with the discretionary authority
to address, as appropriate, disproportionate human health or
environmental effects, using practicable and legally permissible
methods, under Executive Order 12898 (59 FR 7629, Feb. 16, 1994).
    The SIP is not approved to apply on any Indian reservation land or
in any other area where the EPA or an Indian tribe has demonstrated
that a tribe has jurisdiction. In those areas of Indian Country, the
rule does not have tribal implications and will not impose substantial
direct costs on tribal governments or preempt tribal law as specified
by Executive Order 13175 (65 FR 67249, November 9, 2000).
    The Congressional Review Act, 5 U.S.C. 801 et seq., as added by the
Small Business Regulatory Enforcement Fairness Act of 1996, generally
provides that before a rule may take effect, the agency promulgating
the rule must submit a rule report, which includes a copy of the rule,
to each House of the Congress and to the Comptroller General of the
United States. The EPA will submit a report containing this action and
other required information to the U.S. Senate, the U.S. House of
Representatives, and the Comptroller General of the United States prior
to publication of the rule in the Federal Register. A major rule cannot
take effect until 60 days after it is published in the Federal
Register. This action is not a ``major rule'' as defined by 5 U.S.C.
804(2).
    Under section 307(b)(1) of the Clean Air Act, petitions for
judicial review of this action must be filed in the United States Court
of Appeals for the appropriate circuit by December 20, 2016. Filing a
petition for reconsideration by the Administrator of this final rule
does not affect the finality of this action for the purposes of
judicial review nor does it extend the time within which a petition for
judicial review may be filed, and shall not postpone the effectiveness
of such rule or action. This action may not be challenged later in
proceedings to enforce its requirements. (See CAA section 307(b)(2).)

List of Subjects in 40 CFR Part 52

    Environmental protection, Air pollution control, Carbon monoxide,
Incorporation by reference, Intergovernmental relations, Nitrogen
dioxide, Ozone, Particulate matter, Reporting and recordkeeping
requirements, and Volatile organic compounds.

    Authority: 42 U.S.C. 7401 et seq.

    Dated: September 21, 2016.
Shaun L. McGrath,
Regional Administrator, Region 8.

    40 CFR part 52 is amended to read as follows:

PART 52--APPROVAL AND PROMULGATION OF IMPLEMENTATION PLANS

0
1. The authority citation for part 52 continues to read as follows:

    Authority: 42 U.S.C. 7401 et seq.

Subpart G--Colorado

0
2. In Sec.  52.320, the table in paragraph (c) is amended by:
0
a. Revising the entries ``I. Applicability''; ``II. Definitions'';
``IV. Clean Screen/Remote Emissions Sensing''; and ``IX. Approval of
the Colorado On-Board Diagnostic (OBD) Test Analyzer System''.
0
b. Adding the entry ``X. The Colorado On-Board Diagnostic (OBD) Test
Analyzer System'' in numerical order.
0
c. Revising the center heading to ``5 CCR 1001-13, Regulation Number
11, Motor Vehicle Emissions Inspection Program--Part C, Inspection
Procedures and Requirements for Exhaust Emissions, Fuel Evaporation
Control, Visible Smoke Emissions, Emissions Control Systems, On-Board
Diagnostics (OBD); and Practices to Ensure Proper Emissions Related
Adjustments and Repairs'' and the entries ``I. Pre-inspection
Requirements''; ``II. Exhaust Emissions Inspection Procedures''; ``III.
Emissions Control Systems Inspection Procedures''; ``IV. On-Board
Diagnostic Inspection Procedures''; ``V. Evaporative Fuel Control
Inspection Procedures''; ``VIII. Certification of Emissions Control'';
``IX. Adjustment Procedures''; ``X. Emissions Related Repairs''; and

``XII. Clean Screen Inspection Program Procedures''.
0
d. Revising the entries ``V. Visible Smoke'' and ``VI. Clean Screen
Program Maximum Allowable Emissions Limits''.
0
e. Adding the entry ``VII. On-Board Diagnostic Inspection Passing
Criteria'' in numerical order.
0
f. Revising the entries ``Appendix A, Specifications for Colorado 94
Analyzer'' and ``Appendix B, Standards and Specifications for the
Suppliers of Span and Calibration Gases''.
    The additions and revisions read as follows:

Sec.  52.320  Identification of plan.

* * * * *
    (c) * * *

--------------------------------------------------------------------------------------------------------------------------------------------------------
                                           State       EPA effective
                Title                 effective date       date               Final rule citation/date                          Comments
--------------------------------------------------------------------------------------------------------------------------------------------------------

                                                                      * * * * * * *
--------------------------------------------------------------------------------------------------------------------------------------------------------
    5 CCR 1001-13, Regulation Number 11, Motor Vehicle Emissions Inspection Program--Part A, General Provisions, Area of Applicability, Schedules for
                        Obtaining Certification of Emissions Control, Definitions, Exemptions, and Clean Screening/Remote Sensing
--------------------------------------------------------------------------------------------------------------------------------------------------------
I. Applicability....................       2/15/2013      11/21/2016  [Insert Federal Register citation], 10/   ........................................
                                          12/30/2013                   21/2016.
II. Definitions.....................       8/30/2007      11/21/2016  [Insert Federal Register citation], 10/   ........................................
                                           2/15/2013                   21/2016.
--------------------------------------------------------------------------------------------------------------------------------------------------------

                                                                      * * * * * * *
--------------------------------------------------------------------------------------------------------------------------------------------------------
IV. Clean Screen/Remote Emissions          2/15/2013      11/21/2016  [Insert Federal Register citation], 10/   ........................................
 Sensing.                                                              21/2016.
--------------------------------------------------------------------------------------------------------------------------------------------------------
 5 CCR 1001-13, Regulation Number 11, Motor Vehicle Emissions Inspection Program--Part B, Standards and Procedures for the Approval, Operation, Gas Span
   Adjustment, Calibration and Certification of the Division Approved Test Analyzer Systems for Use in the Basic and Enhanced Areas and Test Analyzer
                                                    Systems for Licensed Dealers in the Enhanced Area
--------------------------------------------------------------------------------------------------------------------------------------------------------

                                                                      * * * * * * *
--------------------------------------------------------------------------------------------------------------------------------------------------------
IX. Approval of the Colorado On-           2/15/2013      11/21/2016  [Insert Federal Register citation], 10/   ........................................
 Board Diagnostic (OBD) Test                                           21/2016.
 Analyzer System.
X. The Colorado On-Board Diagnostics       2/15/2013      11/21/2016  [Insert Federal Register citation], 10/   ........................................
 (OBD) Test Analyzer System.                                           21/2016.
--------------------------------------------------------------------------------------------------------------------------------------------------------
 5 CCR 1001-13, Regulation Number 11, Motor Vehicle Emissions Inspection Program--Part C, Inspection Procedures and Requirements for Exhaust Emissions,
   Fuel Evaporation Control, Visible Smoke Emissions, Emissions Control Systems, On-Board Diagnostics (OBD); and Practices to Ensure Proper Emissions
                                                             Related Adjustments and Repairs
--------------------------------------------------------------------------------------------------------------------------------------------------------
I. Pre-inspection Requirements......       2/15/2013      11/21/2016  [Insert Federal Register citation], 10/   ........................................
                                                                       21/2016.
II. Exhaust Emissions Inspection           2/15/2013      11/21/2016  [Insert Federal Register citation], 10/   ........................................
 Procedures.                                                           21/2016.
III. Emissions Control Systems             2/15/2013      11/21/2016  [Insert Federal Register citation], 10/   ........................................
 Inspection Procedures.                                                21/2016.
IV. On-Board Diagnostic II                 2/15/2013      11/21/2016  [Insert Federal Register citation], 10/   ........................................
 Inspection Procedures.                                                21/2016.
V. Evaporative Fuel Control                2/15/2013      11/21/2016  [Insert Federal Register citation], 10/   ........................................
 Inspection Procedures.                                                21/2016.
--------------------------------------------------------------------------------------------------------------------------------------------------------

                                                                      * * * * * * *
--------------------------------------------------------------------------------------------------------------------------------------------------------
VIII. Certification of Emissions           2/15/2013      11/21/2016  [Insert Federal Register citation], 10/   ........................................
 Control.                                 12/30/2013                   21/2016.
IX. Adjustment Procedures...........       2/15/2013      11/21/2016  [Insert Federal Register citation], 10/   ........................................
                                                                       21/2016.
X. Emissions Related Repairs........       2/15/2013      11/21/2016  [Insert Federal Register citation], 10/   ........................................
                                                                       21/2016.
--------------------------------------------------------------------------------------------------------------------------------------------------------

                                                                      * * * * * * *
--------------------------------------------------------------------------------------------------------------------------------------------------------
XII. Clean Screen Inspection Program       8/30/2007      11/21/2016  [Insert Federal Register citation], 10/   ........................................
 Procedures.                                                           21/2016.
--------------------------------------------------------------------------------------------------------------------------------------------------------

                                                                      * * * * * * *
--------------------------------------------------------------------------------------------------------------------------------------------------------
 5 CCR 1001-13, Regulation Number 11, Motor Vehicle Emissions Inspection Program--Part F, Maximum Allowable Emissions Limits for Motor Vehicle Exhaust,
                                        Evaporative and Visible Emissions for Light-Duty and Heavy-Duty Vehicles
--------------------------------------------------------------------------------------------------------------------------------------------------------

                                                                      * * * * * * *
--------------------------------------------------------------------------------------------------------------------------------------------------------
V. Visible Smoke....................       2/15/2013      11/21/2016  [Insert Federal Register citation], 10/   ........................................
                                                                       21/2016.
VI. Clean Screen Program Maximum           8/30/2007      11/21/2016  [Insert Federal Register citation], 10/   ........................................
 Allowable Emissions Limits.                                           21/2016.
VII. On-Board Diagnostic Inspection        2/15/2013      11/21/2016  [Insert Federal Register citation], 10/   ........................................
 Passing Criteria.                                                     21/2016.
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                     5 CCR 1001-13, Regulation Number 11, Appendices
--------------------------------------------------------------------------------------------------------------------------------------------------------
Appendix A, Specifications for             8/30/2007      11/21/2016  [Insert Federal Register citation], 10/   ........................................
 Colorado 94 Analyzer.                    12/30/2013                   21/2016.
Appendix B, Standards and                 12/30/2013      11/21/2016  [Insert Federal Register citation], 10/   ........................................
 Specifications for the Suppliers of                                   21/2016.
 Span and Calibration Gases.
--------------------------------------------------------------------------------------------------------------------------------------------------------

                                                                      * * * * * * *
--------------------------------------------------------------------------------------------------------------------------------------------------------

* * * * *
[FR Doc. 2016-25295 Filed 10-20-16; 8:45 am]
 BILLING CODE 6560-50-P