[Federal Register: January 28, 2010 (Volume 75, Number 18)]
[Notices]
[Page 4545-4546]
[DOCID:fr28ja10-38]

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DEPARTMENT OF ENERGY

Federal Energy Regulatory Commission

[Project No. 7481-145]

NYSD Limited Partnership; Notice of Application for Amendment of
License and Soliciting Comments, Motions To Intervene, and Protests

January 21, 2010.
    Take notice that the following hydroelectric application has been
filed with the Commission and is available for public inspection:
    a. Application Type: Amendment of recreation plan.
    b. Project No: 7481-145.
    c. Date Filed: October 27, 2009.
    d. Applicant: Boralex Hydro Operations, Inc., on behalf of NYSD
Limited Partnership.
    e. Name of Project: New York State Dam Hydroelectric Project.
    f. Location: Mohawk River in Albany and Saratoga Counties, NY.
    g. Filed Pursuant to: Federal Power Act, 16 U.S.C. 791a--825r.
    h. Applicant Contact: Daniel McCarty, Boralex Hydro Operations,
Inc., 39 Hudson Falls Road, South Glens Falls, New York 12803. Tel:
(518) 747-0930.
    i. FERC Contact: Mark Carter,<PHONE_NUMBER>, and e-mail
<EMAIL_ADDRESS>    j. Deadline for filing comments, motions to intervene, and
protests: February 22, 2010.
    All documents (original and eight copies) should be filed with:
Secretary, Federal Energy Regulatory Commission, 888 First Street, NE.,
Washington, DC 20426. Please include the project number (P-7481-145) on
any comments or motions filed.
    The Commission's Rules of Practice and Procedure require all
interveners filing documents with the Commission to serve a copy of
that document on each person whose name appears on the official service
list for the project. Further, if an intervener files comments or
documents with the Commission relating to the merits of an issue that
may affect the responsibilities of a particular resource agency, it
must also serve a copy of the document on that resource agency. A copy
of any motion to intervene must also be served upon each representative
of the Applicant specified in the particular application.

    k. Description of Request: The licensee filed an application to
amend the project's recreation plan. Specifically, the licensee
proposes to: (1) Relocate the access road to the South Shore recreation
facility; and (2) eliminate the gazebo, and relocate the picnic tables
at the North Shore recreation facility.
    l. Locations of the Application: A copy of the application is
available for inspection and reproduction at the Commission's Public
Reference Room, located at 888 First Street, NE., Room 2A, Washington,
DC 20426, or by calling<PHONE_NUMBER>. This filing may also be viewed
on the Commission's Web site at http://www.ferc.gov using the
``eLibrary'' link. Enter the docket number excluding the last three
digits in the docket number field (P-7481) to access the document. You
may also register online at http://www.ferc.gov/docs-filing/
esubscription.asp to be notified via e-mail of new filings and
issuances related to this or other pending projects. For assistance,
call 1-866-208-3372 or e-mail<EMAIL_ADDRESS>for TTY, call
(202) 502-8659. A copy is also available for inspection and
reproduction at the address in item (h) above.
    m. Individuals desiring to be included on the Commission's mailing
list should so indicate by writing to the Secretary of the Commission.
    n. Comments, Protests, or Motions to Intervene: Anyone may submit
comments, a protest, or a motion to intervene in accordance with the
requirements of Rules of Practice and Procedure, 18 CFR 385.210, .211,
.214. In determining the appropriate action to take, the Commission
will consider all protests or other comments filed, but only those who
file a motion to intervene in accordance with the Commission's Rules
may become a party to the proceeding. Any comments, protests, or
motions to intervene must be received on or before the specified
comment date for the particular application.
    o. Any filings must bear in all capital letters the title
``COMMENTS'', ``PROTEST'', or ``MOTION TO INTERVENE'', as applicable,
and the Project Number of the particular application to which the
filing refers.
    p. Agency Comments: Federal, state, and local agencies are invited
to file comments on the described application. A copy of the
application may be obtained by agencies directly from the Applicant. If
an agency does not file comments within the time specified for filing
comments, it will be presumed to have no comments. One copy of an
agency's comments must also be sent to the Applicant's representatives.
    q. Comments, protests and interventions may be filed electronically
via the Internet in lieu of paper. See, 18 CFR 385.2001(a)(1)(iii) and
the instructions on the Commission's Web site at http://www.ferc.gov
under the ``e-Filing'' link.

Kimberly D. Bose,
Secretary.
[FR Doc. 2010-1670 Filed 1-27-10; 8:45 am]
BILLING CODE 6717-01-P


[Federal Register Volume 76, Number 155 (Thursday, August 11, 2011)]
[Notices]
[Pages 49818-49821]
[FR Doc No: 2011-20389]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-65048; File No. SR-NYSEArca-2011-52]

Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing
and Immediate Effectiveness of Proposed Rule Change Amending NYSE Arca
Options Rule 6.90 To Permit Qualified Contingent Cross Orders To Be
Electronically Submitted to the NYSE Arca System From the Floor of the
Exchange for Potential Execution

August 5, 2011.
    Pursuant to Section 19(b)(1) \1\ of the Securities Exchange Act of
1934 (the ``Act'') \2\ and Rule 19b-4 thereunder,\3\ notice is hereby
given that on August 1, 2011, NYSE Arca, Inc. (the ``Exchange'' or
``NYSE Arca'') filed with the Securities and Exchange Commission (the
``Commission'') the proposed rule change as described in Items I and II
below, which Items have been prepared by the self-regulatory
organization. The Commission is publishing this notice to solicit
comments on the proposed rule change from interested persons.
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    \1\ 15 U.S.C.78s(b)(1).
    \2\ 15 U.S.C. 78a.
    \3\ 17 CFR 240.19b-4.
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I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change

    The Exchange proposes to amend NYSE Arca Options Rule 6.90 to
permit Qualified Contingent Cross Orders (``QCCs'') to be
electronically submitted to the NYSE Arca System from the Floor of the
Exchange for potential execution.
    The text of the proposed rule change is available at the Exchange's
Web site at http://www.nyse.com, on the Commission's Web site at http://www.sec.gov, at the Exchange's principal office, and at the
Commission's Public Reference Room.

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

    In its filing with the Commission, the self-regulatory organization
included statements concerning the purpose of, and basis for, the
proposed rule change and discussed any comments it received on the
proposed rule change. The text of those statements may be examined at
the places specified in Item IV below. The Exchange has prepared
summaries, set forth in sections A, B, and C below, of the most
significant parts of such statements.

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

1. Purpose
    The purpose of this filing is to amend Rule 6.90 to permit QCCs to
be electronically submitted to the NYSE Arca System from the Floor of
the Exchange for potential execution.\4\ This filing is modeled after a
recently approved rule change by NASDAQ OMX PHLX (``PHLX'').\5\
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    \4\ The NYSE Arca System is configured to automatically reject a
QCC entered when the order is for less than 1,000 contracts, is
entered at a price worse than the national best bid or offer
(``NBBO'') or is entered at the same price as Customer orders in the
Exchange's Consolidated Book.
    \5\ See Securities Exchange Act Release No. 64688 (June 16,
2011), 76 FR 36606 (June 22, 2011) (SR-Phlx-2011-56).
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Background
    The Exchange recently adopted rules that permit OTP Holders to
submit QCCs electronically from off the Floor through the NYSE Arca
System.\6\ The QCC permits an NYSE Arca OTP Holder to effect a
qualified contingent trade (``QCT'') in a Regulation NMS stock and
cross the options leg of the trade on the Exchange immediately upon
entry and without order exposure if the order is for at least 1,000
contracts, is part of a QCT, is executed at a price at least equal to
the NBBO and if there are no Customer Orders in the Exchange's
Consolidated Book at the same price.\7\
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    \6\ See Securities Exchange Act Release No. 64086 (March 17,
2011), 76 FR 16021 (March 22, 2011) (SR-NYSEArca-2011-09) (``NYSE
Arca Electronic QCC Filing'').
    \7\ A QCT is a transaction consisting of two or more component
orders, executed as agent or principal, where: (a) At least one
component is an NMS stock, as defined in Rule 600 of Regulation NMS
under the Exchange Act; (b) all components are effected with a
product or price contingency that either has been agreed to by all
the respective counterparties or arranged for by a broker-dealer as
principal or agent; (c) the execution of one component is contingent
upon the execution of all other components at or near the same time;
(d) the specific relationship between the component orders (e.g.,
the spread between the prices of the component orders) is determined
by the time the contingent order is placed; (e) the component orders
bear a derivative relationship to one another, represent different
classes of shares of the same issuer, or involve the securities of
participants in mergers or with intentions to merge that have been
announced or cancelled; and (f) the transaction is fully hedged
(without regard to any prior existing position) as a result of other
components of the contingent trade. See Securities Exchange Act
Release No. 57620 (April 4, 2008), 73 FR 19271 (April 9, 2008) (the
``QCT Release''). That release superseded a release initially
granting the QCT exemption. See Securities Exchange Act Release No.
54389 (August 31, 2006), 71 FR 52829 (September 7, 2006) (``Original
QCT Exemption'').
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    The NYSE Arca Electronic QCC Filing was based on an International
Securities Exchange (``ISE'') rule approved by the Commission.\8\ The
ISE QCC Proposal was controversial, attracting opposition from multiple
exchanges including NYSE Arca.\9\ The Commission, however, ultimately
approved the ISE QCC Proposal, finding it to be consistent with the
Securities Exchange Act of 1934 (the ``Act''). NYSE Arca implemented
the NYSE Arca Electronic QCC Filing, and is proposing this rule change,
as a competitive response to the approval of the PHLX floor-based QCC
filing.
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    \8\ See Securities Exchange Act Release No. 63955 (February 24,
2011), 76 FR 11533 (March 2, 2011) (SR-ISE-2010-73) (``ISE
Approval''). See also Securities Exchange Act Release No. 62523
(July 16, 2010), 75 FR 43211 (July 23, 2010) (SR-ISE-2010-73) (``ISE
QCC Proposal'').
    \9\ The Exchange notes that letters commenting on the ISE
Proposal were submitted on its behalf by the Exchange's parent
company, NYSE Euronext. See e.g., letters dated August 9, 2010 and
October 21, 2010 from Janet L. McGinness, Senior Vice President--
Legal & Corporate Secretary, Legal & Government Affairs, NYSE
Euronext.
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    Under the NYSE Arca Electronic QCC Filing, QCCs currently may only
be submitted electronically from off the Floor through the NYSE Arca
System. In this regard, OTP Holders on the Floor of the Exchange are
not allowed to enter QCCs into the NYSE Arca System, or otherwise
effect them in open outcry. To provide a mechanism for the Exchange to
surveil for whether QCCs were entered from off of the Floor, the
Exchange adopted Commentary .01 to Rule 6.90, which requires OTP
Holders to maintain books and records demonstrating that each QCC was
routed to the NYSE Arca System from off of the Floor. Presently, any
QCC that does not have a corresponding record required by this
provision would be deemed to have been entered from on the Floor in
violation of Rule 6.90. In addition, the Exchange has adopted policies
and procedures to ensure that OTP Holders use the QCC properly.\10\
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    \10\ First, the Exchange requires OTP Holders to properly mark
all QCCs as such. In addition, the Financial Industry Regulatory
Authority (``FINRA''), on behalf of the Exchange, has implemented an
examination and surveillance program to assess OTP Holder compliance
with the requirements applicable to QCCs, including the requirement
that the stock leg of the transaction be executed at or near the
same time as the options leg.
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Discussion
    QCCs permit OTP Holders to provide their customers a net price for
the entire

trade, and then allow the OTP Holder to execute the options leg of the
trade on the Exchange at a price at least equal to the NBBO while using
the QCT exemption to effect the trade in the equities leg at a price
necessary to achieve the net price.
    The Exchange hereby proposes to permit QCCs to be electronically
entered from the Floor of the Exchange by Floor Brokers and executed
immediately upon entry without exposure into the NYSE Arca System
provided that no Customer Orders exist on the Exchange's Consolidated
Book at the execution price, that the order is for at least 1,000
contracts,\11\ and that the execution price is at or between the
NBBO.\12\ QCCs entered from the Floor of the Exchange would be
electronically entered into the NYSE Arca System by a Floor Broker.\13\
The impact of this proposal, coupled with the NYSE Arca Electronic QCC
Filing, would be that OTP Holders would be able to enter QCCs both on
and off of the Floor. The Exchange therefore proposes to eliminate the
requirements from NYSE Arca Rule 6.90 that QCCs only be submitted
electronically from off the Floor to the NYSE Arca System and from
Commentary .01 to NYSE Arca Rule 6.90 that OTP Holders maintain books
and records demonstrating that each QCC was routed to the NYSE Arca
System from off of the Floor, as both will no longer be necessary if
QCCs are available for entry from the Floor.
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    \11\ In order to satisfy the 1,000-contract requirement, a QCC
must be for 1,000 contracts and could not be, for example, two 500-
contract orders or two 500-contract legs.
    \12\ The Exchange does not propose to change the definition of
``Qualified Contingent Cross Order'' in NYSE Arca Rule 6.62. Thus,
like QCCs effected pursuant to the NYSE Arca Electronic QCC Filing,
QCCs entered from the Floor would need to meet the requirements of
NYSE Arca Rule 6.62 and Commentary .02 of that rule. Additionally,
QCCs entered from the Floor by a Floor Broker would be entered
electronically into the NYSE Arca System where a systemic check
would be performed to determine whether a Customer Order is resting
on the Exchange's Consolidated Book at the same price as the QCC,
whether the order was for less than 1,000 contracts or whether the
execution price would be outside the NBBO, each of which would cause
the QCC to be rejected. If, however, the QCC is not rejected, then
the NYSE Arca System would execute the QCC and simultaneously assign
it an execution time.
    \13\ As proposed, only Floor Brokers would be permitted to enter
QCCs from on the Floor and QCCs would not be permitted in open
outcry.
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    The Commission in the ISE Approval carefully considered the
comparison between floor-based and electronic trading, including
commissioning a study by the Division of Risk, Strategy and Financial
Innovation (``RiskFin Study''). The RiskFin Study and the ISE Approval
compare electronic trading and floor trading, the similarities between
the two forms of trading, and the ability of one to replicate the
other. Additionally, the Commission received comment letters from
multiple floor-based exchanges that challenged the comparison that ISE
drew between floor-based and electronic trading.
    Despite facing direct comparisons between floor-based trading and
electronic trading by multiple commenters, as well as by its own
Division of RiskFin, the ISE Approval focuses on similarities between
the two. The Exchange believes that the ISE Approval, on its face,
draws no distinctions and identifies no material differences between
floor-based and electronic trading that would confound the comparison
between cross orders entered electronically and those entered on an
exchange floor. The Exchange believes that its proposal to permit the
entry of QCCs from the Floor is consistent with the requirements stated
in the ISE Approval and consistent with the Act. The Exchange also
believes that the Commission, in issuing the ISE Approval, assumed that
QCC orders entered on the floor of an exchange that meet the
requirements stated in the ISE Approval are equally consistent with the
Act.
    The Exchange has analyzed the application of Section 11(a) of the
Act, and the rules thereunder, to QCCs entered from the Floor. Section
11(a) and the rules thereunder generally prohibit members of an
exchange from effecting transactions on the exchange for their own
account, the account of an associated person, or an account with
respect to which it or an associated person thereof exercises
investment discretion unless an exemption applies.\14\ Section 11(a)
contains multiple exemptions, including exemptions for dealers acting
in the capacity of market makers, odd-lot dealers, and firms engaged in
stabilizing conduct; there are also rule-based exemptions such as the
``effect vs. execute'' exception under SEC Rule 11a2-2(T) under the
Act.\15\
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    \14\ See 15 U.S.C. 78k(a).
    \15\ See 17 CFR 240.11a2-2(T).
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    The Exchange has in the past analyzed the application of Section
11(a) to various Exchange systems and order types.\16\ The Exchange
believes that the entry and execution of QCCs from the Floor raises no
novel issues under Section 11(a) and the rules thereunder from a
compliance, surveillance or enforcement perspective. In other words,
OTP Holders on the Floor are currently required to comply and are
subject to review for compliance with Section 11(a), and the rules
thereunder, when using Exchange systems to effect transactions using
existing order types, and they will be required to comply with Section
11(a) and the rules thereunder when entering QCCs from the Floor.
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    \16\ See, e.g. Securities Exchange Act Release No. 54238 (July
28, 2006), 71 FR 44758 (August 7, 2006) (SR-NYSEArca-2006-13).
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    Nonetheless, out of an abundance of caution, the Exchange proposes
to amend Commentary .01 to NYSE Arca Rule 6.90 to prohibit Floor
Brokers from entering QCCs from the Floor for their own accounts, the
account of an associated person, or an account with respect to which it
or an associated person thereof exercises investment discretion (each a
``prohibited account'').\17\
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    \17\ This restriction is the same as the one found in PHLX Rule
1064(e)(2).
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    These restrictions set forth in Commentary .01 to NYSE Arca Rule
6.90 would not limit in any way the obligation of OTP Holders, on the
Floor or otherwise, to comply with Section 11(a) or the rules
thereunder. For example, Floor Brokers cannot avoid or circumvent their
obligations under Section 11(a) with respect to a QCC entered from the
Floor by transmitting that order to another OTP Holder on the Floor or
to an OTP Holder off the Floor of the Exchange. Likewise, OTP Holders
off the Floor must ensure that their QCCs comply with Section 11(a) and
the rules thereunder. In both cases, OTP Holders must ensure compliance
with Section 11(a) and the rules thereunder, including by relying upon
an exemption such as those listed above.
    Additionally, to provide a mechanism for the Exchange to review
whether QCCs have been entered properly by Floor Brokers, the Exchange
proposes to further amend Commentary .01 to NYSE Arca Rule 6.90 to
require OTP Holders on the Floor to maintain books and records
demonstrating that no QCC was entered from the Floor by the OTP Holder
in a prohibited account. Any QCC entered from the Floor that does not
have a corresponding record required by this provision would be deemed
to have been entered in violation of Commentary .01 to NYSE Arca Rule
6.90.
    The Exchange also proposes to amend Commentary .01 to NYSE Arca
Rule 6.90 to clarify that NYSE Arca Rule 6.47 does not apply when Floor
Brokers are executing QCCs. The Exchange is making this clarification
to eliminate any confusion about whether the various crossing
provisions in Rule 6.47 may apply to QCCs when they are

executed by Floor Brokers.\18\ In addition, the Exchange is moving a
recordkeeping obligation from current Commentary .01 to Commentary 02
and modifying it to require that with respect to QCCs routed to the
NYSE Arca System from off of the Floor, OTP Holders must maintain books
and records demonstrating that each such order was routed to the system
from off of the Floor.\19\ Finally, the Exchange is adding Commentary
.03 to NYSE Arca Rule 6.90 to clarify that the order exposure
requirements found in NYSE Arca Rule 6.47A do not apply to QCCs. That
rule generally provides that with respect to orders routed to the NYSE
Arca System, OTP Holders may not execute as principal orders they
represent as agent unless such orders are first exposed on the Exchange
for at least one second.
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    \18\ This change is modeled after the changes to PHLX Rule
1064(a), (b) and (c).
    \19\ The Exchange also is clarifying that Commentary .02 would
not apply to a Qualified Contingent Cross Order covered by
Commentary .01 to NYSE Arca Rule 6.90 (i.e., a Qualified Contingent
Cross Order routed to a Floor Broker for entry into the NYSE Arca
System).
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    The Exchange's proposal addresses the mechanics of executing the
stock and options components of a net-price transaction. The Exchange
believes that it is necessary that it provide OTP Holders and their
customers with the same trading capabilities available on other
exchanges with respect to QCCs, including the change proposed herein,
which would permit OTP Holders to execute the options legs of their
customers' large complex orders on the Exchange.
2. Statutory Basis
    The Exchange believes the proposed rule change is consistent with
Section 6(b) of the Act,\20\ in general, and furthers the objectives of
Section 6(b)(5) \21\ and 6(b)(8) of the Act,\22 \in particular, because
it is designed to promote just and equitable principles of trade,
remove impediments to and perfect the mechanisms of a free and open
market and a national market system and, in general, to protect
investors and the public interest and does not impose any burden on
competition not necessary or appropriate in furtherance of the purposes
of the Act. The proposed rule change is consistent with the protection
of investors in that it is designed to prevent Trade-Throughs. In
addition, the proposed rule change would promote a free and open market
by permitting the Exchange to compete with other exchanges for these
types of orders. In this regard, competition would result in benefits
to the investing public, whereas a lack of competition would serve to
limit the choices that the public has for execution of their options
business.
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    \20\ 15 U.S.C. 78f(b).
    \21\ 15 U.S.C. 78f(b)(5).
    \22\ 15 U.S.C. 78f(b)(8).
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    In addition, the proposed rule change is consistent with Section
11A(a)(1)(C) of the Act,\23\ in which Congress found that it is in the
public interest and appropriate for the protection of investors and the
maintenance of fair and orderly markets to assure, among other things,
the economically efficient execution of securities transactions. As
described in detail above, the proposed rule change is also consistent
with Section 11(a) of the Act and the rules thereunder.
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    \23\ 15 U.S.C. 78k-1(a)(1)(C).
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    The Exchange believes, similar to the Commission's basis for
finding that ISE's QCC proposal was consistent with the Act, that
permitting the entry of QCCs from the Floor ``would facilitate the
execution of qualified contingent trades, for which the Commission
found in the Original QCT Exemption to be of benefit to the market as a
whole, contributing to the efficient functioning of the securities
markets and the price discovery process.'' \24\ Further, permitting the
entry of QCCs from the Floor ``would provide assurance to parties to
stock-option [QCTs] that their hedge would be maintained by allowing
the options component to be executed as a clean cross.'' \25\ In
addition, like the ISE QCC Proposal, the Exchange's proposal to permit
the entry of QCCs from the Floor ``is narrowly drawn and establishes a
limited exception to the general principle of exposure, and retains the
general principle of customer priority in the options markets.'' \26\
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    \24\ See ISE Approval at 11540.
    \25\ Id.
    \26\ See ISE Approval at 11541.
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B. Self-Regulatory Organization's Statement on Burden on Competition

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

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

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

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

    The Exchange has filed the proposed rule change pursuant to Section
19(b)(3)(A)(iii) of the Act \27\ and Rule 19b-4(f)(6) thereunder.\28\
Because the proposed rule change does not: (i) Significantly affect the
protection of investors or the public interest; (ii) impose any
significant burden on competition; and (iii) become operative prior to
30 days from the date on which it was filed, or such shorter time as
the Commission may designate, if consistent with the protection of
investors and the public interest, the proposed rule change has become
effective pursuant to Section 19(b)(3)(A) of the Act and Rule 19b-
4(f)(6)(iii) thereunder.
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    \27\ 15 U.S.C. 78s(b)(3)(A)(iii).
    \28\ 17 CFR 240.19b-4(f)(6). In addition, Rule 19b-4(f)(6)
requires a self-regulatory organization to give the Commission
written notice of its intent to file the proposed rule change at
least five business days prior to the date of filing of the proposed
rule change, or such shorter time as designated by the Commission.
The Exchange has complied with this requirement.
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    At any time within 60 days of the filing of such proposed rule
change, the Commission summarily may temporarily suspend such rule
change if it appears to the Commission that such action is necessary or
appropriate in the public interest, for the protection of investors, or
otherwise in furtherance of the purposes of the Act.

IV. Solicitation of Comments

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

Electronic Comments

     Use the Commission's Internet comment form (http://www.sec.gov/rules/sro.shtml); or
     Send an e-mail to<EMAIL_ADDRESS>Please include
File Number SR-NYSEArca-2011-52 on the subject line.

Paper Comments

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

All submissions should refer to File Number SR-NYSEArca-2011-52. This
file number should be included on the subject line if e-mail is used.
To help the Commission process and review your

comments more efficiently, please use only one method. The Commission
will post all comments on the Commission's Internet Web site (http://www.sec.gov/rules/sro.shtml). Copies of the submission, all subsequent
amendments, all written statements with respect to the proposed rule
change that are filed with the Commission, and all written
communications relating to the proposed rule change between the
Commission and any person, other than those that may be withheld from
the public in accordance with the provisions of 5 U.S.C. 552, will be
available for Web site viewing and printing in the Commission's Public
Reference Section, 100 F Street, NE., Washington, DC 20549-1090 on
official business days between the hours of 10 a.m. and 3 p.m. Copies
of the filing will also be available for inspection and copying at the
principal office of the Exchange. All comments received will be posted
without change; the Commission does not edit personal identifying
information from submissions. You should submit only information that
you wish to make available publicly. All submissions should refer to
File Number SR-NYSEArca-2011-52 and should be submitted on or before
September 1, 2011.
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    \29\ 17 CFR 200.30-3(a)(12).

    For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\29\
Elizabeth M. Murphy,
Secretary.
[FR Doc. 2011-20389 Filed 8-10-11; 8:45 am]
BILLING CODE 8011-01-P


[Federal Register Volume 77, Number 128 (Tuesday, July 3, 2012)]
[Notices]
[Pages 39543-39545]
[FR Doc No: 2012-16220]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-67281; File No. SR-NASDAQ-2012-057]

Self-Regulatory Organizations; The NASDAQ Stock Market LLC; Order
Approving a Proposed Rule Change With Respect to the Authority of
NASDAQ or NASDAQ Execution Services To Cancel Orders When a Technical
or Systems Issue Occurs and To Describe the Operation of an Error
Account

June 27, 2012.

I. Introduction

    On April 30, 2012, The NASDAQ Stock Market LLC (``Exchange'' or
``NASDAQ'') filed with the Securities and Exchange Commission
(``Commission''), pursuant to Section 19(b)(1) of the Securities
Exchange Act of 1934 (``Act'') \1\ and Rule 19b-4 thereunder,\2\ a
proposed rule change to amend NASDAQ Equity Rule 4758 by adding a new
paragraph (d) that addresses the authority of NASDAQ or NASDAQ
Execution Services (``NES'') to cancel orders when a technical or
systems issue occurs and to describe the operation of an error account
for NES. The proposed rule change was published for comment in the
Federal Register on May 16, 2012.\3\ The Commission received no comment
letters regarding the proposed rule change. This order approves the
proposed rule change.
---------------------------------------------------------------------------

    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ Securities Exchange Act Release No. 66964 (May 10, 2012), 77
FR 28905 (May 16, 2012) (SR-NASDAQ-2012-057) (``Notice'').
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II. Description of the Proposal

    NES, a broker-dealer that is a facility and an affiliate of NASDAQ,
provides outbound routing services from NASDAQ to other market centers
pursuant to NASDAQ rules.\4\ In its proposal, NASDAQ states that a
technical or systems issue may occur at NASDAQ, NES, or a routing
destination that causes NASDAQ or NES to cancel orders, if NASDAQ or
NES determines that such action is necessary to maintain a fair and
orderly market.\5\ NASDAQ also states that a technical or systems issue
that occurs at NASDAQ, NES, a routing destination, or a non-affiliate
third-party Routing Broker \6\ may result in NES acquiring an error
position that it must resolve.\7\
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    \4\ See Notice, 77 FR at 28906, n.3 and accompanying text, and
text accompanying n.4. See also NASDAQ Equity Rule 4758.
    NASDAQ also has authority to receive equities orders routed
inbound to NASDAQ by NES from NASDAQ OMX BX and the NASDAQ OMX PSX
of NASDAQ OMX PHLX on a pilot basis. See Notice, 77 FR at 28906,
n.4. See also Securities Exchange Act Release No. 65554 (October 13,
2011), 76 FR 65311 (October 20, 2011) (SR-NASDAQ-2011-142).
    \5\ See Notice, 77 FR at 28906. For examples of some of the
circumstances in which NASDAQ or NES may decide to cancel orders,
see id.
    \6\ NASDAQ states that, from time to time, it also uses non-
affiliate third-party broker-dealers to provide outbound routing
services. In its proposal, the Exchange refers to these broker-
dealers as ``third party Routing Brokers.'' See Notice, 77 FR at
28906, n.3.
    \7\ See Notice, 77 FR at 28906. Specifically, NASDAQ Equity Rule
4758(d)(2) defines ``error positions'' as ``positions that result
from a technical or systems issue at Nasdaq Execution Services,
Nasdaq, a routing destination, or a non-affiliate third-party
Routing Broker that affects one or more orders.''
    For examples of some of the circumstances that may lead to error
positions, see Notice, 77 FR at 28906-07.
---------------------------------------------------------------------------

    New paragraph (d) to NASDAQ Equity Rule 4758 provides NASDAQ or NES
with general authority to cancel orders to maintain fair and orderly
markets when a technical or systems issue occurs at NASDAQ, NES, or a
routing destination. It also provides authority for NES to maintain an
error account for the purpose of addressing, and sets forth the
procedures for resolving, error positions. Specifically, paragraph
(d)(1) of NASDAQ Equity Rule 4758 authorizes NASDAQ or NES to cancel
orders as either deems necessary to maintain fair and orderly markets
if a technical or systems issue occurs at NASDAQ, NES, or a routing
destination. NASDAQ or NES will be required to provide notice of the
cancellation to all affected members as soon as practicable.\8\
---------------------------------------------------------------------------

    \8\ See NASDAQ Equity Rule 4758(d)(1).
---------------------------------------------------------------------------

    Paragraph (d)(2) of NASDAQ Equity Rule 4758 will allow NES to
maintain an error account for the purpose of addressing error positions
that result from a technical or systems issue at NASDAQ, NES, a routing
destination, or a non-affiliate third-party Routing Broker.
    For purposes of NASDAQ Equity Rule 4758(d), an error position will
not include any position that results from an order submitted by a
member to NASDAQ that is executed on NASDAQ and automatically processed
for clearance and settlement on a locked-in basis.\9\ NES will not be
permitted to (i) accept any positions in its error account from a
member's account or (ii) permit any member to transfer any positions
from the member's account to NES's error account.\10\ In other words,
NES may not accept from a member positions that are delivered to the
member through the clearance and settlement process, even if those
positions may have been related to a technical or systems issue at
NASDAQ, NES, a routing destination, or a non-affiliate third-party
Routing Broker.\11\ If a member receives locked-in positions in
connection with a technical or systems issue and experiences a loss in
unwinding those positions, that member may seek to rely on NASDAQ
Equity Rule 4626, which provides members with the ability to file
claims against NASDAQ ``for losses directly resulting from the [NASDAQ]
systems' actual failure to correctly process an order, Quote/Order,
message, or other data, provided the Nasdaq Market Center has
acknowledged receipt of the order, Quote/Order, message, or data.''
\12\ If, however, a technical or systems issue results in NASDAQ not
having valid clearing instructions for a member to a trade, NES may
assume that member's side of the trade so that the trade can be

automatically processed for clearance and settlement on a locked-in
basis.\13\
---------------------------------------------------------------------------

    \9\ See NASDAQ Equity Rule 4758(d)(2)(A).
    \10\ See NASDAQ Equity Rule 4758(d)(2)(B).
    \11\ See Notice, 77 FR at 28907, n.11. This provision would not
apply if NES incurred a short position to settle a member's
purchase, as the member would not have had a position in its account
as a result of the purchase at the time of NES's action. Similarly,
if a systems issue occurs that causes one member to receive an
execution for which there is not an available counterparty, action
by NES would be required for the positions to settle into that
member's account. See id.
     If error positions result in connection with NASDAQ's use of a
third-party Routing Broker for outbound routing and those positions
are delivered to NES through the clearance and settlement process,
NES would be permitted to resolve those positions. If, however, such
positions were not delivered to NES through the clearance and
settlement process, then the third-party Routing Broker would
resolve the error positions itself, and NES would not be permitted
to accept the positions. See Notice, 77 FR at 28906, n.3.
    \12\ See Notice, 77 FR at 28907, n.11.
    \13\ See NASDAQ Equity Rule 4758(d)(2)(C).
---------------------------------------------------------------------------

    Paragraph (d)(3) of NASDAQ Equity Rule 4758 permits NASDAQ or NES,
in connection with a particular technical or systems issue, to either
(i) assign all resulting error positions to members or (ii) have all
resulting error positions liquidated. Any determination to assign or
liquidate error positions, as well as any resulting assignments, will
be made in a nondiscriminatory fashion.\14\
---------------------------------------------------------------------------

    \14\ See NASDAQ Equity Rule 4758(d)(3).
---------------------------------------------------------------------------

    NASDAQ and NES will be required to assign all error positions
resulting from a particular technical or systems issue to the members
affected by that technical or systems issue if NASDAQ or NES:
    (i) Determines that it has accurate and sufficient information
(including valid clearing information) to assign the positions to all
of the members affected by that technical or systems issue;
    (ii) Determines that it has sufficient time pursuant to normal
clearance and settlement deadlines to evaluate the information
necessary to assign the positions to all of the members affected by
that technical or systems issue; and
    (iii) Has not determined to cancel all orders affected by that
technical or systems issue in accordance with NASDAQ Equity Rule
4758(d)(1).\15\
---------------------------------------------------------------------------

    \15\ See NASDAQ Equity Rule 4758(d)(3)(A)(i)-(iii).
---------------------------------------------------------------------------

    If NASDAQ or NES is unable to assign all error positions resulting
from a particular technical or systems issue to all of the affected
members, or if NASDAQ or NES determines to cancel all orders affected
by the technical or systems issue, then NES will be required to
liquidate the error positions as soon as practicable.\16\ NES will be
required to provide complete time and price discretion for the trading
to liquidate the error positions to a third-party broker-dealer, and
would be prohibited from attempting to exercise any influence or
control over the timing or methods of such trading.\17\ Further, NES
will be required to establish and enforce policies and procedures that
are reasonably designed to restrict the flow of confidential and
proprietary information between the third-party broker-dealer, on one
hand, and NASDAQ and NES, on the other, associated with the liquidation
of the error positions.\18\
---------------------------------------------------------------------------

    \16\ See NASDAQ Equity Rule 4758(d)(3)(B).
    \17\ See NASDAQ Equity Rule 4758(d)(3)(B)(i).
    \18\ See NASDAQ Equity Rule 4758(d)(3)(B)(ii).
---------------------------------------------------------------------------

    Finally, paragraph (d)(4) of NASDAQ Equity Rule 4758 requires
NASDAQ and NES to make and keep records to document all determinations
to treat positions as error positions; all determinations to assign
error positions to members or to liquidate error positions; and the
liquidation of error positions through the third-party broker-dealer.

III. Discussion and Commission's Findings

    After careful review, the Commission finds that the proposed rule
change is consistent with the requirements of Section 6(b) of the Act
\19\ and the rules and regulations thereunder applicable to a national
securities exchange.\20\ In particular, the Commission finds that the
proposed rule change is consistent with Section 6(b)(5) of the Act,\21\
which requires, among other things, that the rules of a national
securities exchange be designed to prevent fraudulent and manipulative
acts and practices, to promote just and equitable principles of trade,
to foster cooperation and coordination with persons engaged in
regulating, clearing, settling, processing information with respect to,
and facilitating transactions in securities, to remove impediments to
and perfect the mechanism of a free and open market and a national
market system, and, in general, to protect investors and the public
interest; and are not designed to permit unfair discrimination between
customers, issuers, brokers, or dealers. In addition, the Commission
believes the proposed rule change is consistent with Section
11A(a)(1)(C) of the Act \22\ in that it seeks to assure economically
efficient execution of securities transactions.
---------------------------------------------------------------------------

    \19\ 15 U.S.C. 78f(b).
    \20\ In approving this proposed rule change, the Commission has
considered the proposed rule's impact on efficiency, competition,
and capital formation. See 15 U.S.C. 78c(f).
    \21\ 15 U.S.C. 78f(b)(5).
    \22\ 15 U.S.C. 78k-1(a)(1)(C).
---------------------------------------------------------------------------

    The Commission recognizes that technical or systems issues may
occur, and believes that NASDAQ Equity Rule 4758, in allowing NASDAQ or
NES to cancel orders affected by technical or systems issues, should
provide a reasonably efficient means for NASDAQ to handle such orders,
and appears reasonably designed to permit NASDAQ to maintain fair and
orderly markets.\23\
---------------------------------------------------------------------------

    \23\ The Commission notes that NASDAQ states that the proposed
amendments to NASDAQ Equity Rule 4758 are designed to maintain fair
and orderly markets, ensure full trade certainty for market
participants, and avoid disrupting the clearance and settlement
process. See Notice, 77 FR at 28908. The Commission also notes that
NASDAQ states that a decision to cancel orders due to a technical or
systems issue is not equivalent to the Exchange declaring self-help
against a routing destination pursuant to Rule 611 of Regulation
NMS. See 17 CFR 242.611(b). See also Notice, 77 FR at 28907, n.10.
---------------------------------------------------------------------------

    The Commission also believes that allowing the Exchange to resolve
error positions through the use of an error account maintained by NES
pursuant to the procedures set forth in the rule, and as described
above, is consistent with the Act. The Commission notes that the rule
establishes criteria for determining which positions are error
positions,\24\ and that NASDAQ or NES, in connection with a particular
technical or systems issue, will be required to either (i) assign all
resulting error positions to members or (ii) have all resulting error
positions liquidated.\25\ Also, NASDAQ or NES will assign error
positions that result from a particular technical or systems issue to
members only if all such error positions can be assigned to all of the
members affected by that technical or systems issue.\26\ If NASDAQ or
NES cannot assign all error positions to all members, NES will
liquidate all of those error positions.\27\ In this regard, the
Commission believes that the new rule appears reasonably designed to
further just and equitable principles of trade and the protection of
investors and the public interest, and to help prevent unfair
discrimination, in that it should help assure the handling of error
positions will be based on clear and objective criteria, and that the
resolution of those positions will occur promptly through a transparent
process.
---------------------------------------------------------------------------

    \24\ See NASDAQ Equity Rule 4758(d)(2).
    \25\ See NASDAQ Equity Rule 4758(d)(3).
    \26\ See NASDAQ Equity Rule 4758(d)(3)(A).
    \27\ See NASDAQ Equity Rule 4758(d)(3)(B).
---------------------------------------------------------------------------

    Additionally, the Commission notes that it has previously expressed
concern about the potential for unfair competition and conflicts of
interest between an exchange's self-regulatory obligations and its
commercial interest when the exchange is affiliated with one of its
members.\28\ The Commission is also concerned about the potential for
misuse of confidential and proprietary information. The Commission
believes that the requirement that NES provide complete time and price
discretion for the liquidation of error positions to a third-party
broker-dealer, including that NES not attempt to exercise any influence
or control over the timing or methods of such trading, combined with
the requirement that NASDAQ establish and enforce policies and
procedures that are reasonably designed to restrict the flow of
confidential and proprietary information to the third-party broker-
dealer liquidating such positions, should help mitigate the
Commission's concerns. In particular, the Commission

believes that these requirements should help assure that none of
NASDAQ, NES, or the third-party broker-dealer is able to misuse
confidential or proprietary information obtained in connection with the
liquidation of error positions for its own benefit. The Commission also
notes that NASDAQ and NES would be required to make and keep records to
document all determinations to treat positions as error positions; all
determinations to assign error positions to members or liquidate error
positions; and the liquidation of error positions through the third-
party broker-dealer.\29\
---------------------------------------------------------------------------

    \28\ See, e.g., Securities Exchange Act Release No. 65455
(September 30, 2011), 76 FR 62119 (October 6, 2011) (SR-NYSEArca-
2011-61) at 62120, n.16 and accompanying text.
    \29\ See NASDAQ Equity Rule 4758(d)(4).
---------------------------------------------------------------------------

    Finally, the Commission notes that the proposed procedures for
canceling orders and the handling of error positions are consistent
with procedures the Commission has approved for other exchanges.\30\
---------------------------------------------------------------------------

    \30\ See, e.g., Securities Exchange Act Release Nos. 66963 (May
10, 2012), 77 FR 28919 (May 16, 2012) (SR-NYSEArca-2012-22); 67010
(May 17, 2012), 77 FR 30564 (May 23, 2012) (SR-EDGX-2012-08); and
67011 (May 17, 2012), 77 FR 30562 (May 23, 2012) (SR-EDGA-2012-09).
---------------------------------------------------------------------------

IV. Conclusion

    It is therefore ordered, pursuant to Section 19(b)(2) of the
Act,\31\ that the proposed rule change (SR-NASDAQ-2012-057) be, and it
hereby is, approved.
---------------------------------------------------------------------------

    \31\ 15 U.S.C. 78s(b)(2).

    For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\32\
---------------------------------------------------------------------------

    \32\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------

Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2012-16220 Filed 7-2-12; 8:45 am]
BILLING CODE 8011-01-P


                             										6560-50-P
                        ENVIRONMENTAL PROTECTION AGENCY
                            40 CFR Parts 50 and 51
                     [EPA-HQ-OAR-2010-0891, FRL-        ]
                                 RIN 2060-AQ65
Reasonable Further Progress Requirements for the 1997 8-Hour Ozone National Ambient Air Quality Standard

AGENCY: Environmental Protection Agency (EPA).

ACTION:  Proposed rulemaking.
SUMMARY:  The EPA is proposing to revise the Agency's earlier interpretation of its rule regarding requirements for Reasonable Further Progress (RFP) that allowed certain emissions reductions from outside the nonattainment area to be credited toward meeting the RFP requirements for the 1997 8-hour ozone national ambient air quality standards (NAAQS).  Specifically, EPA is proposing that states may not take credit for emission reductions from outside the nonattainment area to meet the area's RFP obligations.  EPA is also taking comment on whether it would be appropriate for states to rely on emission reductions credit from outside the nonattainment area for RFP obligations.
DATES:  Comments.  Comments must be received on or before [INSERT DATE 45 DAYS FROM DATE OF PUBLICATION IN THE FEDERAL REGISTER].
Public Hearings.  If anyone contacts us requesting a public hearing on or before [INSERT DATE 15 DAYS AFTER DATE OF PUBLICATION IN THE FEDERAL REGISTER], we will hold a public hearing.  Please refer to SUPPLEMENTARY INFORMATION for additional information on the comment period and the public hearing.
ADDRESSES:  Submit your comments, identified by Docket ID No. EPA-HQ-OAR-2010-0891, by one of the following methods:
* www.regulations.gov:  Follow the on-line instructions for submitting comments.
* E-mail<EMAIL_ADDRESS>* Mail:  Air and Radiation Docket and Information Center, Attention Docket ID No. EPA-HQ-OAR-2010-0891, Environmental Protection Agency 1301 Constitution Ave., NW, Washington, DC 20460.  Mail Code: 2822T.  Please include two copies if possible.
* Hand Delivery:  Air and Radiation Docket and Information Center, Attention Docket ID No. EPA-HQ-OAR-2010-0891, Environmental Protection Agency in the EPA Headquarters Library, Room Number 3334 in the EPA West Building, located at 1301 Constitution Ave., NW, Washington, DC.  The EPA/DC Public Reading Room hours of operation will be 8:30 a.m. to 4:30 p.m. Eastern Standard Time (EST), Monday through Friday, Air and Radiation Docket and Information Center.
      Instructions:  Direct your comments to Docket ID No. EPA-HQ-OAR-2010-0891.  The EPA's policy is that all comments received will be included in the public docket without change and may be made available on-line at www.regulations.gov, including any personal information provided, unless the comment includes information claimed to be confidential business information (CBI) or other information whose disclosure is restricted by statute.  Do not submit information that you consider to be CBI or otherwise protected through www.regulations.gov or e-mail.  The www.regulations.gov Web site is an "anonymous access" system, which means EPA will not know your identity or contact information unless you provide it in the body of your comment.  If you send an e-mail comment directly to EPA without going through www.regulations.gov, your e-mail address will be automatically captured and included as part of the comment that is placed in the public docket and made available on the Internet.  If you submit an electronic comment, EPA recommends that you include your name and other contact information in the body of your comment and with any disk or CD-ROM you submit.  If EPA cannot read your comment due to technical difficulties and cannot contact you for clarification, EPA may not be able to consider your comment.  Electronic files should avoid the use of special characters, any form of encryption, and be free of any defects or viruses.  For additional information about EPA's public docket, visit the EPA Docket Center homepage at http://www.epa.gov/epahome/dockets.htm.  For additional instructions on submitting comments, go to the SUPPLEMENTARY INFORMATION section of this document.
Docket:  All documents in the docket are listed in www.regulations.gov.  Although listed in the index, some information is not publicly available, i.e., CBI or other information whose disclosure is restricted by statute.  Certain other material, such as copyrighted material, is not placed on the Internet and will be publicly available only in hard copy form.  Publicly available docket materials are available either electronically in www.regulations.gov or in hard copy at the Air and Radiation Docket and Information Center is in the EPA Headquarters Library, Room Number 3334 in the EPA West Building, located at 1301 Constitution Ave., NW, Washington, DC.  The Public Reading Room is open from 8:30 a.m. to 4:30 p.m., Monday through Friday, excluding legal holidays.  The telephone number for the Public Reading Room is<PHONE_NUMBER>.
FOR FURTHER INFORMATION CONTACT: For further general information on this rulemaking, contact Mr. H. Lynn Dail, Office of Air Quality Planning and Standards, U.S. Environmental Protection Agency, (C539-01), Research Triangle Park, NC 27711, phone number (919) 54l-2363, fax number (919) 54l-0824 or by e-mail at<EMAIL_ADDRESS>SUPPLEMENTARY INFORMATION:
I.  General Information
A.  Does this action apply to me?
      Entities potentially affected directly by this action include state, local, and tribal governments.  Entities potentially affected indirectly by this rule include owners and operators of sources of emissions [volatile organic compounds (VOCs) and nitrogen oxides (NOx)] that contribute to ground-level ozone concentrations.
B.  What should I consider as I prepare my comments for EPA?
	1.  Submitting CBI.  Do not submit this information to EPA through www.regulations.gov or e-mail.  Clearly mark the part or all of the information that you claim to be CBI.  For CBI information in a disk or CD ROM that you mail to EPA, mark the outside of the disk or CD ROM as CBI and then identify electronically within the disk or CD ROM the specific information that is claimed as CBI.  In addition to one complete version of the comment that includes information claimed as CBI, a copy of the comment that does not contain the information claimed to be CBI must be submitted for inclusion in the public docket.  Information so marked will not be disclosed except in accordance with procedures set forth in 40 CFR part 2.
      2.  Tips for Preparing Your Comments.  When submitting comments, remember to:
* Identify the rulemaking by docket number and other identifying information (subject heading, Federal Register date and page number).
* Follow directions - The agency may ask you to respond to specific questions or organize comments by referencing a Code of Federal Regulations (CFR) part or section number.
* Explain why you agree or disagree; suggest alternatives and substitute language for your requested changes.
* Describe any assumptions and provide any technical information and/or data that you used.
* If you estimate potential costs or burdens, explain how you arrived at your estimate in sufficient detail to allow for it to be reproduced.
* Provide specific examples to illustrate your concerns, and suggest alternatives.
* Explain your views as clearly as possible, avoiding the use of profanity or personal threats.
* Make sure to submit your comments by the comment period deadline identified.
C.  Where can I get a copy of this document and other related information?
	In addition to being available in the docket, an electronic copy of this notice will be posted at http://www.epa.gov/air/ozonepollution/actions.html#impl under "recent actions."
D.  What information should I know about possible public hearing?
      EPA will hold a public hearing only if a party notifies EPA by [INSERT DATE 10 DAYS AFTER DATE OF PUBLICATION IN THE FEDERAL REGISTER].  Further details concerning a public hearing for this proposed rule will be published in a separate Federal Register notice.  For updates and additional information on a public hearing, please check EPA's Web site for this rulemaking at http://www.epa.gov/ozonepollution/actions.html#impl.
E.  How is this notice organized?
      The information presented in this notice is organized as follows:
I.	General Information
      A. Does this action apply to me?
      B. What should I consider as I prepare my comments for EPA?
      C. Where can I get a copy of this document and other related information?
      D. What information should I know about possible public hearings?
      E. How is this notice organized?
II.	Can emissions reductions from sources located outside the nonattainment area boundary be used to meet RFP requirements?
       A. Background
       B. NRDC's Petition for Reconsideration of the August 2009 RFP Rule on Credits for Outside Reductions
       C. EPA's Proposed Approach to Relying on Credits from Outside the Nonattainment Area to Meet the RFP Obligations and Response to the Request for Reconsideration
III. Statutory and Executive Order Reviews
      A.  Executive Order 12866: Regulatory Planning and Review
      B.  Paperwork Reduction Act
      C.  Regulatory Flexibility Act
      D.  Unfunded Mandates Reform Act
      E.  Executive Order 13132 - Federalism
      F.  Executive Order 13175 - Consultation and Coordination with Indian Tribal Governments
      G.  Executive Order 13045: Protection of Children from Environmental Health and Safety Risks
      H.  Executive Order 13211: Actions Concerning Regulations That Significantly Affect Energy Supply, Distribution, or Use
      I.  National Technology Transfer and Advancement Act
      J.  Executive Order 12898:  Federal Actions to Address Environmental Justice in Minority Populations and Low-Income Populations
      K.  Determination Under Section 307(d)
IV.  Statutory Authority
LIST OF SUBJECTS

II.  Can emissions reductions from sources located outside the nonattainment area boundary be used to meet RFP requirements?
A. Background
      Under EPA's Phase 2 Rule, certain emission reductions from sources located outside a nonattainment area could be credited toward meeting the 1997 ozone NAAQS RFP requirement.  In the preamble to that rule, EPA stated that credit could be taken for VOC and NOx emission reductions within 100 kilometers (km) and 200 km, respectively, outside the nonattainment area under certain circumstances.  In addition, if a regional NOx control strategy were in place in a state, NOx reductions within that state beyond 200 km could be credited toward meeting the RFP target.  In all cases, areas had to include a demonstration that the emissions from outside the nonattainment area had an impact on ozone air quality levels within the nonattainment area.  EPA explained that where data indicated that emissions reductions from sources outside a nonattainment area improved ozone air quality within the nonattainment area, it was appropriate to allow states to take RFP credit for such reductions from outside the nonattainment area.  This interpretation was consistent with the policy EPA had established under the l-hour ozone standard "Guidance for Implementing the l-Hour Ozone and Pre-Existing PMlO NAAQS," December 29, 1997.  For a more complete discussion of EPA's rationale for applying this interpretation in the Phase 2 Rule, see 70 FR at 71647-49.
      On January 27, 2006, the Natural Resources Defense Council (NRDC) filed a petition for review of EPA's Phase 2 Ozone Implementation Rule in the U.S. Court of Appeals for the District of Columbia Circuit (the Court).  NRDC challenged several aspects of the Phase 2 Rule including EPA's interpretation that formed the basis of its policy for allowing credit for reductions outside the nonattainment area, namely EPA's interpretation that the intent of section 182(c)(2)(C) is to reduce ambient ozone concentrations within an area rather than to reduce emissions within the nonattainment area.  NRDC claimed that EPA's interpretation and implementation of these provisions were both unlawful and arbitrary.  NRDC also argued that the rule was arbitrary because it allowed the state to claim credit for emission reductions from selected outside-the-nonattainment-area sources without also adding emissions from other outside sources to the RFP baseline, even where those other sources impact air quality in the nonattainment area.
      Following the conclusion of briefing in this case, EPA published a final rule implementing the NAAQS for fine particulate matter (the PM2.5 Implementation Rule) where we adopted a different approach for crediting reductions from outside nonattainment areas ("outside" reductions).  See 72 FR 20586 (April 25, 2007).  The PM2.5 Rule allows states to take credit for "outside" reductions of NOx and sulfur dioxide (SO2) emissions up to 200 km from the nonattainment area (and potentially VOC or ammonia as well) provided certain conditions are met, including that when taking RFP credit for emissions reductions achieved in "outside" areas, the baseline emissions inventory for the nonattainment area contain all, rather than a select few, sources in the outside area.  The primary objective of this policy was to reflect the net emission reductions in the "outside" area that could affect the nonattainment area rather than crediting only reductions from selected sources.
      Following publication of the PM2.5 Implementation Rule, EPA requested from the Court on July 17, 2007, a partial voluntary remand of the Phase 2 Rule to reevaluate and consider whether to revise the RFP interpretation for ozone to assure consistency with the provisions in the PM2.5 Implementation Rule.  In response to EPA's motion for a partial voluntary remand of the ozone RFP policy, NRDC asked the Court to also vacate this provision.  On November 2, 2007, the Court issued an order that vacated and remanded the portion of the Phase 2 Rule that permitted credit for reductions of VOC and NOx from outside nonattainment areas.  On August 11, 2009 (74 FR 40074), EPA issued a final rule to revise the RFP policy in the Phase 2 Rule to be consistent with the interpretation in the PM2.5 Implementation rule.
      Meanwhile on July 10, 2009, the Court issued its decision on the other issues in the Phase 2 Ozone Implementation Rule case.  NRDC v. EPA, 571 F.3d 1245 (D.C. Cir. 2009).  The Court examined the phrase "in the area" included in separate provisions relating to reductions from the application of Reasonably Available Control Technology (RACT) (CAA sections 172 (1) and 182(b)(2)).  In the Phase 2 Rule, EPA had explained that because an interstate emissions trading program [the NOx state implementation plan (SIP) call's NOx budget program] would achieve beyond RACT-level NOx reductions regionally, areas did not have to meet the RACT-level reductions required under CAA section 172 (c)(1) solely from within the nonattainment area.  The Court, however, concluded that the phrase "in the area" means that reductions must occur within the area and "reductions from outside the nonattainment area do not satisfy the requirement."  571 F.3d at 1256.  Although such region-wide reductions could potentially satisfy the statutory requirement that the reductions must be from sources within the nonattainment area, the Court found that EPA had not made a demonstration for all nonattainment areas within the SIP Call area showing that the regional emissions trading program did in fact produce sufficient reductions from inside each nonattainment area to represent RACT-level reductions.  Id.
B. NRDC's Petition for Reconsideration of the August 2009 RFP Rule on Credits for Outside Reductions
      Following the Court's decision, on October 9, 2009, NRDC filed a petition with EPA for administrative reconsideration of the August 2009 final rule revising EPA's interpretation in the Phase 2 Ozone Implementation Rule on allowing credit toward meeting the RFP requirements using emissions reductions from outside of ozone nonattainment areas.  In its petition, NRDC  based its objections to the rule on the following grounds:  1) the Court's decision on the RACT provisions in the Phase 2 Rule and its interpretation of the phrase "sources in the area" requires that RFP emission reductions also be achieved only from sources within the nonattainment area; 2) EPA presented a new rationale, i.e., there is some ambiguity in the statutory provisions because they do not prohibit credits for reductions from outside the nonattainment area, for which it did not provide an opportunity for comment; 3) EPA offered a new and arbitrary rationale for its choice of the 100 and 200 km distances for "outside" reductions; 4) EPA stated a new and arbitrary rationale, i.e., creditable "outside" reductions must be reasonably expected to provide ozone air quality benefits comparable to those from reductions in the area, for evaluating "outside" reductions; and 5) EPA relied on a new rationale when it explained that sources that are outside the nonattainment area are not necessarily "nearby" for designations purposes and certain factors would need to be considered for judging whether an area is "nearby."
      On May 13, 2010, EPA granted reconsideration of the rule based on NRDC's petition and stated it would initiate rulemaking to address the reconsideration.  EPA is addressing the reconsideration through this proposed rulemaking.  NRDC's first objection is addressed in the following section and EPA believes that the proposed action makes NRDC's other objections moot.  Therefore, EPA is not addressing any of those subsequent points here.
C.  EPA's Proposed Approach to Relying on Credits from Outside the Nonattainment Area to Meet the RFP Obligations and Response to the Request for Reconsideration
      EPA is proposing to set aside its earlier interpretation of the RFP provisions in the August 2009 final rule and no longer permit states to rely on credit for emission reductions from outside the ozone nonattainment area to meet such an area's RFP obligations.  In light of the Court's decision in NRDC discussed previously, and upon consideration of NRDC's petition for reconsideration, EPA believes that the language in the baseline emissions provision for determining the emissions reductions required for RFP purposes (CAA sections 182(b)(1)(B) and 182(c)(2)(B)) is almost identical to the language in the RACT provision (section 172(c)(1)) addressed by the Court, and thus compels a similar interpretation.  All three sections contain the phrase "in the area" and in examining the RACT provision the Court found that language compelled that the reductions must come from within the nonattainment area, and that reductions from outside the nonattainment area would not satisfy the statutory requirement for reductions "in the area."  We see no basis for interpreting that same clause in the RFP provisions in a different manner in light of the Court's decision.
      EPA is therefore proposing that for the 1997 ozone NAAQS states may not take credit for VOC or NOx reductions occurring outside the nonattainment area for purposes of meeting the section 182(b) and (c) RFP requirements.  This includes the 15 percent VOC plan requirement for Moderate and above ozone nonattainment areas in section 182(b)(1) and the additional 3 percent per year requirement for Serious and above ozone nonattainment areas in section 182(c)(2)(B).
      EPA recognizes that not allowing credit for emissions reductions outside the nonattainment area will make it more challenging for some areas, such as nonattainment areas adjacent to the South Coast Air Quality Management District, namely, Coachella Valley, West Mojave Desert and Ventura County in California, to meet the RFP requirements, and may limit the extent to which regional programs can be creditable toward RFP.  For ozone nonattainment areas that are not able to meet the 182(b)(1) and 182(c)(2)(B)(i) RFP requirements, the CAA allows for a lesser amount of RFP if certain conditions are met.  For an area to qualify for a less than the required 15 percent emissions reduction, that state must demonstrate that, in the area, New Source Review (NSR) provisions are applicable in the same manner and to the same extent as in an Extreme area, RACT is required for all existing major sources, and the RFP plan includes all feasible measures that can be implemented in light of technological achievability.  For purposes of applying this provision, a major source is defined as a source that emits or has the potential to emit at least 5 tons per year of VOC.  Similarly, for Serious and above areas to qualify for less than the required 3 percent each year of reductions in emissions to meet their RFP obligations, a state must show that the SIP includes all feasible measures that can be implemented in the area in light of technological achievability.  In both instances, the state must also demonstrate that the SIP for the area includes measures that are achieved in practice by sources in the same source category in nonattainment areas of the next higher classification.  See 182(b)(1)(A)(ii) and 182(c)(2)(B)(ii).
      Despite the Court's opinion in NRDC, there may remain valid policy reasons for giving states incentive to focus on obtaining emission reductions that are the most beneficial and cost effective for attaining the ozone standards.  Also, there may be cases where the most beneficial and cost-effective reductions are from sources located outside the nonattainment area boundaries.  In these cases, there maybe good reason to credit the emission reductions toward meeting RFP requirements.  To this end, EPA is also taking comment on allowing credit for reductions outside the nonattainment area to satisfy the RFP requirements for the 1997 and 2010 ozone NAAQS.  If EPA finalizes this proposal to provide that credit cannot be taken for emission reductions from outside the nonattainment area, states that previously submitted plans that relied on such credit will need to submit new RFP demonstrations for those areas.
      EPA requests comments on the proposal and the implications for the 1997 ozone NAAQS.
VI. Statutory and Executive Order Reviews
A.  Executive Order 12866:  Regulatory Planning and Review.
	Under Executive Order (EO) 12866 (58 FR 51735, October 4, 1993), this action is a "non-significant regulatory action" because it does not raise novel legal or policy issues arising out of legal mandates.
B.  Paperwork Reduction Act.
	This action does not impose any new information collection burden.  The CAA imposes the obligation for states to submit SIPs, including RFP, to implement the ozone NAAQS.  In this proposal, EPA is merely providing an interpretation of those requirements; thus there is no information collection burden.  However, the Office of Management and Budget (OMB) has previously approved the information collection requirements contained in the existing regulations 40 CFR parts 50 and 51 under the provisions of the Paperwork Reduction Act, 44 U.S.C. 3501 et seq. and has assigned OMB control number 2060-0594.  The OMB control numbers for EPA's regulations in 40 CFR are listed in 40 CFR part 9.
C.  Regulatory Flexibility Act.
      The Regulatory Flexibility Act (RFA) generally requires an Agency to prepare a regulatory flexibility analysis of any regulation subject to notice and comment rulemaking requirements under the Administrative Procedures Act or any other statute unless the Agency certifies the rule will not have a significant economic impact on a substantial number of small entities.  Small entities include small businesses, small organizations, and small governmental jurisdictions.
      For purposes of assessing the impacts of these proposed regulations on small entities, small entity is defined as:  (1) a small business as defined in the Small Business Administration's (SBA) regulations at 13 CFR 121.201;); (2) a small governmental jurisdiction that is a government of a city, county, town, school district or special district with a population of less than 50,000; and (3) a small organization that is any not-for-profit enterprise which is independently owned and operated and is not dominant in its field.
      After considering the economic impact of these proposed revisions to the regulations on small entities, I certify that this action will not have a significant economic impact on a substantial number of small entities.  This proposal will not impose any requirements on small entities.
       We continue to be interested in the potential impacts of the proposed rule on small entities and welcome comments on issues related to such impacts.
D.  Unfunded Mandates Reform Act
      This action contains no federal mandate under the provisions of Title II of the Unfunded Mandates Reform Act of 1995 (URMA), 2 U.S.C. 1531-1538 for state, local, and tribal governments, in the aggregate, or the private sector.  This action imposes no enforceable duty on any state, local or tribal governments or the private sector.  Therefore, this action is not subject to the requirements of section 202 and 205 of the UMRA.
      This action is also not subject to the requirements of section 203 of UMRA because it contains no regulatory requirements that might significantly or uniquely affect small governments.
E.  Executive Order 13132:  Federalism.
      Executive Order 13132, entitled "Federalism" (64 FR 43255, August 10, 1999), requires EPA to develop an accountable process to ensure "meaningful and timely input by state and local officials in the development of regulator policies that have Federalism implications."  Policies that have "Federalism implications" are defined in the Executive Order to include regulations that have "substantial direct effects 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."  This action does not have Federalism implications.  It will not have substantial direct effects 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, as specified in Executive Order 13132.  This proposed rule, if made final, would modify the rules for implementing the 1997 8-hour ozone NAAQS.  Thus, Executive Order 13132 does not apply to these proposed regulation revisions.
      In the spirit of Executive Order 13121 and consistent with EPA policy to promote communications between EPA and state and local governments, EPA is soliciting comments on this proposal from state and local officials.
F.  Executive Order 13175:  Consultation and Coordination with Indian Tribal Governments.
	Executive Order 13175, entitled "Consultation and Coordination with Indian Tribal Governments" (65 FR 67249, November 9, 2000), requires EPA to develop an accountable process to ensure "meaningful and timely input by Tribal officials in the development of regulatory policies that have Tribal implications."
      This action does not have tribal implications, as specified in Executive Order 13175 (65 FR 67249, November 9, 2000).  They do not have a substantial direct effect on one or more Indian tribes, since no tribe has to develop a SIP under these proposed regulatory revisions.  Furthermore, these proposed regulation revisions do not affect the relationship or distribution of power and responsibilities between the federal government and Indian tribes.  The CAA and the Tribal Air Rule establish the relationship of the federal government and tribes in developing plans to attain the NAAQS, and these revisions to the regulations do nothing to modify that relationship.  This proposed regulation revision does not have Tribal implications.  Thus, Executive Order 13175 does not apply to this action.
	G.  Executive Order 13045: Protection of Children from Environmental Health and Safety Risks.
      EPA interprets EO 13045 (62 FR 19885, April 23, 1997) as applying only to those regulatory actions that concern health or safety risks, such that the analysis required under section 5-501 of the EO has the potential to influence the regulation.  This action is not subject to EO 13045 because this proposed revision addresses whether allowing outside the nonattainment area emission reduction credits for purposes of RFP obligations will adequately ensure attainment and maintenance of the 1997 ozone NAAQS and meet the obligations of the CAA.  The NAAQS are promulgated to protect the health and welfare of sensitive population, including children.
H.  Executive Order 13211: Actions Concerning Regulations That Significantly Affect Energy Supply, Distribution, or Use.
 	This action is not subject to Executive Order 13211 (66 FR 28355 (May 22, 2001)), because it is not a significant regulatory action under Executive Order 12866.
I.  National Technology Transfer and Advancement Act.
      Section 12(d) of the National Technology Transfer and  Advancement Act of 1995 (NTTAA), Public Law No. 104-113, section 12(d) (15 U.S.C. 272 note) directs EPA to use voluntary consensus standards in its regulatory activities unless to do so would be inconsistent with applicable law or otherwise impractical.  The voluntary consensus standards are technical standards (e.g., materials specifications, test methods, sampling procedures, and business practices) that are developed or adopted by voluntary consensus standards bodies.  NTTAA directs EPA to provide Congress, through OMB, explanations when the Agency decides not to use available and applicable voluntary consensus standards.
      This proposed revision to the regulations does not involve technical standards.  Therefore, EPA is not considering the use of any voluntary consensus standards.
J.  Executive Order 12898:  Federal Actions to Address Environmental Justice in Minority Populations and Low-Income Populations.
      Executive Order (EO) 12898 (59 FR 7629 (Feb. 16, 1994)) establishes federal executive policy on environmental justice.  Its main provision directs federal agencies, to the greatest extent practicable and permitted by law, to make environmental justice part of their mission by identifying and addressing, as appropriate, disproportionately high and adverse human health or environmental effects of their programs, policies, and activities on minority populations and low-income populations in the United States.
      EPA has determined that this proposed rule will not have disproportionately high and adverse human health or environmental effects on minority or low-income populations because it does not affect the level of protection provided to human health or the environment.  The CAA imposes the obligation for states to submit SIPs, including RFP, to implement the ozone NAAQS.  In this proposal, EPA is merely providing an interpretation of those requirements.  The proposed interpretation, if promulgated, would no longer permit states to rely on credit for emission reductions from outside a nonattainment area to meet such an area's RFP obligations, which are designed to protect all segments of the general population.  As such, they do not adversely affect the health or safety of minority or low-income populations and are designed to protect and enhance the health and safety of these and other populations.
K.  Determination Under Section 307(d)
	Pursuant to sections 307(d)(1)(E) and 307(d)(1)(V) of the CAA, the Administrator determines that this action is subject to the provisions of section 307(d).  Section 307(d)(1)(V) provides that the provisions of section 307(d) apply to "such other actions as the Administrator may determine."
VII.  Statutory Authority

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      The statutory authority for this action is provided by sections 109; 110; 172; 181 through 185B; and 301(a)(1) of the CAA, as amended (42 U.S.C. 7409; 42 U.S.C. 7410; 42 U.S.C. 7502; 42 U.S.C. 7511-7511f; 42 U.S.C. 7601(a)(1)).  This notice is also subject to section 307(d) of the CAA (42 U.S.C. 7407(d)).
LIST OF SUBJECTS
40 CFR Part 50
Environmental protection, Air pollution control, Ozone, Particulate.
40 CFR Part 51
Air pollution control, Intergovernmental relations, Ozone, Nitrogen oxides, Volatile organic compounds.

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Dated:

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Lisa P. Jackson,
Administrator.