[Federal Register Volume 82, Number 26 (Thursday, February 9, 2017)]
[Notices]
[Pages 10117-10123]
[FR Doc No: 2017-02649]

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

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-79958; File No. SR-FICC-2017-001]

Self-Regulatory Organizations; Fixed Income Clearing Corporation;
Notice of Filing of Proposed Rule Change To (1) Implement the Margin
Proxy, (2) Modify the Calculation of the Coverage Charge in
Circumstances Where the Margin Proxy Applies, and (3) Make Certain
Technical Corrections

February 3, 2017.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934
(``Act''),\1\ and Rule 19b-4 thereunder,\2\ notice is hereby given that
on February 2, 2017, Fixed Income Clearing Corporation (``FICC'') filed
with the Securities and Exchange Commission (``Commission'') the
proposed rule change as described in Items I, II and III below, which
Items have been prepared by the clearing agency.\3\ The Commission is
publishing this notice to solicit comments on the proposed rule change
from interested persons.
---------------------------------------------------------------------------

    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ On February 2, 2017, FICC filed this proposed rule change as
an advance notice (SR-FICC-2017-801) with the Commission pursuant to
Section 806(e)(1) of the Dodd-Frank Wall Street Reform and Consumer
Protection Act entitled the Payment, Clearing, and Settlement
Supervision Act of 2010, 12 U.S.C. 5465(e)(1), and Rule 19b-
4(n)(1)(i) of the Act, 17 CFR 240.19b-4(n)(1)(i). A copy of the
advance notice is available at http://www.dtcc.com/legal/sec-rule-filings.aspx.

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

I. Clearing Agency's Statement of the Terms of Substance of the
Proposed Rule Change

    The proposed rule change consists of amendments to the FICC
Government Securities Division (``GSD'') Rulebook (``GSD Rules'') \4\
in order to include a minimum volatility calculation called the
``Margin Proxy.'' Under the proposed rule change, FICC would apply the
greater of the amount calculated by the current model-based volatility
calculation (``Current Volatility Calculation'') and the Margin Proxy
when determining a GSD Netting Member's (``Netting Member's'') daily
VaR Charge,\5\ as further described below. In addition, FICC would
modify the calculation of the Coverage Charge \6\ in circumstances
where the Margin Proxy applies, as further described below.
---------------------------------------------------------------------------

    \4\ Capitalized terms used herein and not defined shall have the
meaning assigned to such terms in the GSD Rules available at http://www.dtcc.com/legal/rules-and-procedures.aspx.
    \5\ The Margin Proxy would be calculated as part of the
determination of the VaR Charge that occurs twice daily, based on
start-of-day positions and noon positions.
    \6\ See description of Coverage Charge in GSD Rule 1,
Definitions, supra note 4.
---------------------------------------------------------------------------

    In order to effectuate the proposed rule changes described above,
FICC proposes to (1) add a new defined term for Margin Proxy in Rule 1
(Definitions); (2) amend the definition of VaR Charge in Rule 1 to
reference the Margin Proxy; and (3) amend Section 1b of Rule 4
(Clearing Fund and Loss Allocation) to modify the calculation of the
Coverage Charge when the Margin Proxy is applied.
    In addition, FICC proposes to make certain technical corrections to
Rule 1 and Rule 4, as further described below.

II. Clearing Agency's Statement of the Purpose of, and Statutory Basis
for, the Proposed Rule Change

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

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

1. Purpose
    FICC is proposing to introduce the Margin Proxy, which would
constitute a Netting Member's daily VaR Charge in circumstances where
the Margin Proxy would be greater than the Current Volatility
Calculation. In circumstances where the Margin Proxy is applied by
FICC, FICC also proposes to reduce the Coverage Charge by the amount
that the Margin Proxy exceeds the sum of the Current Volatility
Calculation and Coverage Charge, but not by an amount greater than the
total Coverage Charge, as further described below.
A. Overview of the Required Fund Deposit and Clearing Fund Calculation
    A key tool that FICC uses to manage market risk is the daily
calculation and collection of Required Fund Deposits from Netting
Members. The objective of a Netting Member's Required Fund Deposit is
to mitigate potential losses to FICC associated with liquidation of
such Netting Member's Margin Portfolio in the event that FICC ceases to
act for such Netting Member (hereinafter referred to as a
``default'').\7\
---------------------------------------------------------------------------

    \7\ GSD Rule 22A.
---------------------------------------------------------------------------

    A Netting Member's Required Fund Deposit consists of several
components, including the VaR Charge and Coverage Charge. The VaR
Charge comprises the largest portion of a Netting Member's Required
Fund Deposit amount. The VaR Charge is calculated using a risk-based
margin methodology that is intended to cover the market price risk
associated with the securities in a Netting Member's Margin Portfolio.
    The Coverage Charge is calculated based on the Netting Member's
daily backtesting results. FICC employs daily backtesting to determine
the adequacy of each Netting Member's Required Fund Deposit. The
backtesting compares the Required Fund Deposit for each Netting Member
with actual price changes in the Netting Member's Margin Portfolio. The
Margin Portfolio values are calculated using the actual positions in
such Netting Member's Margin Portfolio on a given day and the observed
security price changes over the following three days. These backtesting
results are reviewed as part of FICC's VaR model performance monitoring
and assessment of the adequacy of each Netting Member's Required Fund
Deposit.
    The Coverage Charge is incorporated in the Required Fund Deposit
for each Netting Member to increase the Required Fund Deposit so that
the Netting Member's backtesting coverage may achieve the 99 percent
confidence level (i.e., greater than two backtesting deficiency days in
a rolling twelve-month period).
B. Proposed Change to the Existing VaR Charge Calculation
    During the fourth quarter of 2016, FICC's Current Volatility
Calculation did not respond effectively to the level of market
volatility at that time, and the VaR Charge amounts that were
calculated using the profit and loss scenarios generated by the Current
Volatility Calculation did not achieve backtesting coverage at a 99
percent confidence level. As a result, the Required Fund Deposit
yielded backtesting deficiencies beyond FICC's risk tolerance.
Therefore, FICC proposes to use the Margin Proxy as the VaR Charge when
the Margin Proxy calculation would exceed the Current Volatility
Calculation.
    The Margin Proxy would cover circumstances where the Current
Volatility Calculation is lower than market price volatility from
corresponding U.S. Treasury and to-be-announced (``TBA'') \8\
securities benchmarks.
---------------------------------------------------------------------------

    \8\ Specified pool trades are mapped to the corresponding
positions in TBA securities for determining the VaR Charge.
---------------------------------------------------------------------------

    More specifically, the Margin Proxy would reflect separate
calculations for U.S. Treasury securities and agency pass-through
mortgage backed securities (``MBS''). The purpose of the separate
calculations would be to cover the historical market prices of each of
those asset classes to a 99 percent confidence level, on a standalone
basis, because the historical price changes of the two asset classes
are different due to market factors, such as credit spreads and
prepayment risk. This separate calculation would also allow FICC to
monitor the performance of each of those asset classes individually.
    The Margin Proxy would be calculated per Netting Member. Each
security in a Netting Member's Margin Portfolio would be mapped to a
respective benchmark based on the security's asset class and
maturity.\9\ All securities within each benchmark would be aggregated
into a net exposure.\10\ Next, FICC would apply an applicable haircut
\11\ to the net exposure per benchmark to determine the net price risk
for each benchmark (``Net Price Risk''). Finally, FICC would

determine the asset class price risk (``Asset Class Price Risk'') for
U.S. Treasury and MBS benchmarks separately by aggregating the
respective Net Price Risk, and for the U.S. Treasury benchmarks, the
calculation includes a correlation adjustment, to provide risk
diversification across tenor buckets, that has been historically
observed across the U.S. Treasury benchmarks. The Margin Proxy would
represent the sum of the U.S. Treasury and MBS Asset Class Price Risk.
FICC would compare the Margin Proxy to the Current Volatility
Calculation. FICC would apply the greater of the Margin Proxy or the
Current Volatility Calculation for each asset class as the VaR Charge
for each Netting Member's Margin Portfolio.
---------------------------------------------------------------------------

    \9\ U.S. Treasury and agency securities would be mapped to a
U.S. Treasury benchmark security/index. Mortgage-backed securities
would be mapped to a TBA security/index.
    \10\ Net exposure is the aggregate market value of securities to
be purchased by the Netting Member minus the aggregate market value
of securities to be sold by the Netting Member.
    \11\ The haircut is calculated using historical market price
changes of the respective benchmark to cover the expected market
price volatility at 99 percent confidence level.
---------------------------------------------------------------------------

    FICC believes that this proposal would provide the adequate
Required Fund Deposit per Netting Member because the backtesting
coverage including the Margin Proxy has been above the 99 percent
confidence level for the past four years. Additionally, the Margin
Proxy would be transparent to Netting Members because it would use
industry standard benchmarks that can be observed by Netting Members.
    The Margin Proxy methodology would be subject to performance
reviews by FICC. Specifically, FICC would monitor each Netting Member's
Required Fund Deposit and the aggregate Clearing Fund requirements
versus the requirements calculated by the Margin Proxy. Consistent with
the current GSD Rules,\12\ FICC would review the robustness of the
Margin Proxy by comparing the results versus the three-day profit and
loss of each Netting Member's Margin Portfolio based on actual market
price moves. If the Margin Proxy's backtesting results do not meet
FICC's 99 percent confidence level, FICC would consider adjustments to
the Margin Proxy, including increasing the look-back period and/or
applying a historical stressed period to the Margin Proxy calibration,
as appropriate.
---------------------------------------------------------------------------

    \12\ See definition of VaR Charge in GSD Rule 1, Definitions,
supra note 4.
---------------------------------------------------------------------------

C. Proposed Modification to the Coverage Charge When the Margin Proxy
Is Applied
    FICC also proposes to modify the calculation of the Coverage Charge
when the Margin Proxy is applied as the VaR Charge. Specifically, FICC
would reduce the Coverage Charge by the amount that the Margin Proxy
exceeds the sum of the Current Volatility Calculation and Coverage
Charge, but not by an amount greater than the total Coverage. FICC's
backtesting analysis demonstrates that the proposed Margin Proxy would
provide sufficient margin coverage without the addition of the Coverage
Charge because FICC backtest results inclusive of the Margin Proxy
achieve the 99 percent confidence level without the inclusion of the
Coverage Charge.
    FICC would not modify the Coverage Charge if the Margin Proxy is
not applied as the VaR Charge.
D. Technical Corrections
    FICC also proposes technical corrections to the GSD Rules.
Specifically, FICC proposes to: (1) Capitalize certain words in the
definition of VaR Charge in Rule 1 in order to reflect existing defined
terms, (2) add ``Netting'' before ``Member'' in the definition of VaR
Charge to reflect the application of the VaR Charge on Netting Members,
and (3) correct typographical errors in Section 1b(a) of Rule 4.
2. Statutory Basis
    Section 17A(b)(3)(F) of the Act requires, in part, that the rules
of a clearing agency be designed to assure the safeguarding of
securities and funds which are in the custody or control of the
clearing agency or for which it is responsible.\13\ The proposal would
increase FICC's collection of margin when its Margin Proxy calculation
exceeds the Current Volatility Calculation. As such, this proposal
would help ensure that the Required Fund Deposit that FICC collects
from Netting Members is sufficient to mitigate the credit exposure
presented by the Netting Members. Therefore, FICC believes that the
proposed rule changes associated with the Margin Proxy and Coverage
Charge would help assure the safeguarding of securities and funds which
are in the custody or control of FICC, consistent with Section
17A(b)(3)(F) of the Act.
---------------------------------------------------------------------------

    \13\ See 15 U.S.C. 78q-1(b)(3)(F).
---------------------------------------------------------------------------

    Section 17A(b)(3)(F) of the Act also requires, in part, that the
GSD Rules promote the prompt and accurate clearance and settlement of
securities transactions.\14\ The proposed rule changes that constitute
technical corrections would correct typographical errors and capitalize
terms so that existing defined terms are accurately referenced and used
in the applicable rule provisions. As such, the proposed technical rule
changes would help ensure that the GSD Rules remain accurate and clear,
which helps to avoid potential interpretation differences and possible
disputes between FICC and its Netting Members. Thus, FICC believes that
the proposed technical rule changes would promote the prompt and
accurate clearance and settlement of securities transactions,
consistent with Section 17A(b)(3)(F) of the Act.
---------------------------------------------------------------------------

    \14\ Id.
---------------------------------------------------------------------------

    In addition, FICC believes that the proposed rule changes
associated with the Margin Proxy and Coverage Charge are consistent
with the requirements of Rules 17Ad-22(b)(1) and (b)(2) under the
Act.\15\ Rule 17Ad-22(b)(1) requires a registered clearing agency that
performs central counterparty services to establish, implement,
maintain and enforce written policies and procedures reasonably
designed to measure its credit exposures to its participants at least
once a day and limit its exposures to potential losses from defaults by
its participants under normal market conditions so that the operations
of the clearing agency would not be disrupted and non-defaulting
participants would not be exposed to losses that they cannot anticipate
or control.\16\ The proposed rule changes associated with the Margin
Proxy and Coverage Charge would continue FICC's practice of measuring
its credit exposures at least once a day and would enhance GSD's risk-
based margining framework, the objective of which is to calculate each
Netting Member's Required Fund Deposit such that, in the event of a
Netting Member's default, the defaulting Netting Member's own Required
Fund Deposit would mitigate potential losses to FICC and non-defaulting
Netting Members associated with the liquidation of such defaulted
Netting Member's portfolio. Therefore, FICC believes that these
proposed changes are consistent with Rule 17Ad-22(b)(1) under the Act.
---------------------------------------------------------------------------

    \15\ See 17 CFR 240.17Ad-22(b)(1) and (b)(2).
    \16\ See 17 CFR 240.17Ad-22(b)(1).
---------------------------------------------------------------------------

    Rule 17Ad-22(b)(2) under the Act requires a registered clearing
agency that performs central counterparty services to establish,
implement, maintain and enforce written policies and procedures
reasonably designed to use margin requirements to limit its credit
exposures to participants under normal market conditions and use risk-
based models and parameters to set margin requirements and review such
margin requirements and the related risk-based models and parameters at
least monthly.\17\ The proposed rule changes associated with the Margin
Proxy and Coverage Charge would enhance the risk-based model and
parameters that establish margin requirements for Netting Members. This
enhancement to the risk-based model

and parameters would use margin requirements to limit FICC's credit
exposure to its Netting Members. Since the proposed changes are
designed to calculate each Netting Member's Required Fund Deposit at a
99 percent confidence level, FICC believes each Netting Member's
Required Fund Deposit could mitigate its own losses in the event that
such Netting Member defaults under normal market conditions. Therefore,
FICC believes that these proposed changes are consistent with Rule
17Ad-22(b)(2) under the Act.
---------------------------------------------------------------------------

    \17\ See 17 CFR 240.17Ad-22(b)(2).
---------------------------------------------------------------------------

    FICC also believes that the proposed changes are consistent with
Rules 17Ad-22(e)(4) and (e)(6) of the Act, which were recently adopted
by the Commission.\18\ Rule 17Ad-22(e)(4) will require FICC to
establish, implement, maintain and enforce written policies and
procedures reasonably designed to effectively identify, measure,
monitor, and manage its credit exposures to participants and those
exposures arising from its payment, clearing, and settlement
processes.\19\ The Margin Proxy methodology would be subject to
performance reviews by FICC. If the Margin Proxy's backtesting results
do not meet FICC's 99 percent confidence level, FICC would consider
adjustments to the Margin Proxy, including increasing the look-back
period and/or applying a historical stressed period to the Margin Proxy
calibration, as appropriate. Therefore, the proposed rule changes
associated with the Margin Proxy and Coverage Charge would enhance
FICC's ability to identify, measure, monitor and manage its credit
exposures to Netting Members and those exposures arising from its
payment, clearing, and settlement processes by maintaining financial
resources to cover a wide range of foreseeable price moves under both
normal and stressed market conditions. Therefore, FICC believes the
proposed changes are consistent with the requirements of Rule 17Ad-
22(e)(4), promulgated under the Act.
---------------------------------------------------------------------------

    \18\ The Commission adopted amendments to Rule 17Ad-22,
including the addition of new section 17Ad-22(e), on September 28,
2016. The amendments to Rule 17Ad-22 became effective on December
12, 2016. FICC is a ``covered clearing agency'' as defined in Rule
17Ad-22(a)(5) and must comply with new section (e) of Rule 17Ad-22
by April 11, 2017. See Securities Exchange Act Release No. 78961
(September 28, 2016), 81 FR 70786 (October 13, 2016) (S7-03-14).
    \19\ Id.
---------------------------------------------------------------------------

    Rule 17Ad-22(e)(6) will require FICC to establish, implement,
maintain and enforce written policies and procedures reasonably
designed to cover its credit exposures to its participants by
establishing a risk-based margin system that is monitored by management
on an ongoing basis and regularly reviewed, tested, and verified.\20\
The proposed rule changes associated with the Margin Proxy enhance
GSD's risk-based margin system that would continue to be monitored by
FICC management on an ongoing basis and regularly reviewed, tested, and
verified. Therefore, FICC believes that the proposed changes are
consistent with the requirements of Rule 17Ad-22(e)(6), promulgated
under the Act.
---------------------------------------------------------------------------

    \20\ Id.
---------------------------------------------------------------------------

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

    FICC believes that the proposed rule changes associated with the
Margin Proxy and the Coverage Charge could have an impact upon
competition. Specifically, FICC believes that those proposed changes
could burden competition because they would result in larger Required
Fund Deposit amounts for Netting Members when the Margin Proxy
calculates a VaR Charge that is greater than the amount calculated
pursuant to the Current Volatility Calculation. When application of the
Margin Proxy increases Required Fund Deposits for Netting Members that
have lower operating margins or higher costs of capital compared to
other Netting Members, the proposed rule changes could burden
competition. However, FICC does not believe that the proposed rule
changes associated with the Margin Proxy and Coverage Charge would
impose a significant burden on competition because the increase in the
Required Fund Deposit would be in direct relation to the market risk
presented by each Netting Member's Margin Portfolio. Moreover, the
Required Fund Deposit would be calculated with the same parameters and
at the confidence level for all Netting Members. Therefore, Netting
Members that present similar Margin Portfolios would have similar
impacts on their Required Fund Deposit amounts.
    FICC believes that the above described burden on competition that
may be created by the proposed rule changes associated with the Margin
Proxy and Coverage Charge would be necessary in furtherance of the Act,
specifically Section 17A(b)(3)(F) of the Act, because, as described
above, the GSD Rules must be designed to assure the safeguarding of
securities and funds that are in FICC's custody or control or for which
it is responsible.\21\ FICC believes that the proposed rule changes
associated with the Margin Proxy also would support FICC's compliance
with Rules 17Ad-22(b)(1) and (2) under the Act, which require FICC to
employ policies and procedures reasonably designed to limit its credit
exposures to participants and use risk-based models and parameters to
set margin requirements.\22\ FICC believes that the proposed rule
changes would also support FICC's compliance with Rules 17Ad-22(e)(4)
and (e)(6) under the Act, which will require FICC to employ policies
and procedures reasonably designed to (x) effectively identify,
measure, monitor, and manage its credit exposures to participants and
those arising from its payment, clearing, and settlement processes, and
(y) cover its credit exposures to its participants by establishing a
risk-based margin system that is monitored by management on an ongoing
basis and regularly reviewed, tested, and verified.\23\ Implementing
the proposed Margin Proxy would improve the risk-based model that FICC
employs to set margin requirements and would better limit FICC's credit
exposures to participants.
---------------------------------------------------------------------------

    \21\ See 15 U.S.C. 78q-1(b)(3)(F).
    \22\ See 17 CFR 240.17Ad-22(b)(1) and (2).
    \23\ Supra note 18.
---------------------------------------------------------------------------

    FICC believes that the above described burden on competition that
could be created by the proposed rule changes associated with the
Margin Proxy and Coverage Charge would be appropriate in furtherance of
the Act because such changes have been appropriately designed to assure
the safeguarding of securities and funds which are in the custody or
control of FICC or for which it is responsible, as described above.\24\
Such proposed changes were designed so that: (i) No particular category
of Netting Member would be expected to experience materially greater
increases than any other category of Netting Members; (ii) the Net
Price Risk will vary by benchmark, so there would be opportunities for
Netting Members to limit the impact of the Margin Proxy if they can
adjust their Margin Portfolio to securities with lower Net Price Risk;
and (iii) the reduction of the Coverage Charge would alleviate the
impact on the Required Fund Deposit from the Margin Proxy.
---------------------------------------------------------------------------

    \24\ See 15 U.S.C. 78q-1(b)(3)(F).
---------------------------------------------------------------------------

    Therefore, FICC believes that it has designed the proposed changes
in a reasonable and appropriate way in order to meet compliance with
its obligations under the Act. Specifically, implementing the proposed
changes would improve the risk-based model that FICC employs to set
margin requirements and better limit FICC's credit exposures to its
Netting Members. Therefore, FICC believes the proposed

changes are necessary and appropriate in furtherance of FICC's
obligations under the Act, specifically Section 17A(b)(3)(F) \25\ and
Rule 17Ad-22(b).\26\
---------------------------------------------------------------------------

    \25\ Id.
    \26\ See 17 CFR 240.17Ad-22(b).
---------------------------------------------------------------------------

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

    In connection with this proposed rule change, FICC received a
written letter from Ronin Capital LLC (``Ronin Capital'').\27\ A copy
of this letter is attached as Exhibit 2. The aspects of this letter
that relate to the proposed rule change are described below.
---------------------------------------------------------------------------

    \27\ See Letter from Ronin Capital LLC to Messrs. Murray
Pozmanter and Timothy Cuddihy dated January 20, 2017. This letter
expressed a wide range of concerns, which FICC has and will continue
to consider. The aspects of this letter which do not relate to the
proposed rule change will be addressed by FICC outside of the
context of this filing.
---------------------------------------------------------------------------

Abbreviated Rule Approval Process
    A. The New Backup Model Is Being Rushed Into Production
    Ronin Capital has questioned whether the risk to FICC from the
current full evaluation approach is so dire that a new backup model is
required to be rushed into production.
    FICC believes that the Current Volatility Calculation did not
respond effectively to volatile market conditions and that it must
implement the proposed Margin Proxy as described in this proposed rule
change as soon as possible to effectively mitigate the market price
risk of each Netting Member's Margin Portfolio. As described in Item
II(A)1. above, FICC believes that the proposed changes associated with
the Margin Proxy and the Coverage Charge would help to ensure that each
Netting Member's Required Fund Deposit achieves a 99 percent confidence
level and the proposed changes would mitigate potential losses to FICC
and non-defaulting Netting Members associated with the liquidation of a
defaulted Netting Member's portfolio. As described in Item II(A)2.
above, the proposed changes would support FICC's compliance with Rule
17Ad-22(e)(4) because the Margin Proxy is designed to effectively
identify, measure, monitor, and manage FICC's credit exposures to
participants and those exposures arising from its payment, clearing,
and settlement processes.\28\
---------------------------------------------------------------------------

    \28\ Supra note 18.
---------------------------------------------------------------------------

B. An Abbreviated Rule Approval Process May Not Be Appropriate When
There Are Known Flaws With the Margin Proxy
    Ronin Capital has questioned whether an abbreviated rule approval
process is appropriate when there are known flaws with the Margin
Proxy. Ronin Capital notes that an example of a flaw is the inability
of the Margin Proxy to reflect risk offsets among portfolio positions.
    As described in Item II(A)1. above, FICC has identified a
deficiency in the Current Volatility Calculation and FICC believes that
it has a responsibility to rectify this deficiency as soon as possible.
With this in mind, FICC is requesting that the Commission accelerate
the effectiveness of the proposed rule change pursuant to Section
19(b)(2) of the Act \29\ in order to address the impact that market
volatility has had on the GSD VaR Charge. FICC believes that this
request is appropriate because the proposed changes associated with the
Margin Proxy and the Coverage Charge would help to protect FICC and its
Netting Members by ensuring that FICC collects sufficient Required Fund
Deposits in the event that the Current Volatility Calculation does not
perform as expected during volatile market conditions.
---------------------------------------------------------------------------

    \29\ See 15 U.S.C. 78s(b)(2).
---------------------------------------------------------------------------

    Ronin Capital's assertion that the Margin Proxy does not provide
for risk offsets is incorrect. As described in Item II(A)1. above, the
proposed Margin Proxy accounts for risk offsets by including a
correlation adjustment to provide risk diversification across tenor
buckets that have been historically observed across the U.S. Treasury
benchmarks. The VaR Charge would preserve the same diversification
between U.S. Treasury and MBS asset classes that is provided by the
Current Volatility Calculation. FICC is not aware of any flaws with the
proposed Margin Proxy and thus FICC believes that it is prudent to
request that the Commission accelerate the effectiveness of the
proposed change associated with the Margin Proxy and Coverage Charge.
C. The deployment of the Margin Proxy for an Extended Time May Further
Burden Competition
    Ronin Capital has expressed concern that GSD's expedited need for a
new VaR model may result in the deployment of the backup Margin Proxy
methodology for an extended amount of time which may burden
competition.
    FICC acknowledges that the proposed rule change associated with the
Margin Proxy and Coverage Charge may burden competition, however, FICC
believes that this burden would be necessary and appropriate in
furtherance of the Act.
    As described in Item II(B) above, the proposed rule change
associated with the Margin Proxy and the Coverage Charge could burden
competition because the proposed change would result in larger Required
Fund Deposit amounts for Netting Members when the Margin Proxy
calculates a VaR Charge that is greater than the amount calculated
pursuant to the Current Volatility Calculation. When application of the
Margin Proxy increases Required Fund Deposits for Netting Members that
have lower operating margins or higher costs of capital compared to
other Netting Members, the proposed rule change could burden
competition. However, FICC does not believe that the proposed rule
change associated with the Margin Proxy and Coverage Charge would
impose a significant burden on competition because the increase in the
Required Fund Deposit would be in direct relation to the market risk
presented by each Netting Member's Margin Portfolio. Moreover, the
Required Fund Deposit would be calculated with the same parameters and
at the confidence level for all Netting Members. Therefore, Netting
Members that present similar Margin Portfolios would have similar
impacts on their Required Fund Deposit amounts.
    FICC believes that the burden on competition would be necessary and
appropriate in furtherance of the Act, specifically Section
17A(b)(3)(F).\30\ As described in Items II(A)2. and II(B) above, the
proposed changes associated with the Margin Proxy and the Coverage
Charge would be consistent with Section 17A(b)(3)(F) because the
changes would help assure the safeguarding of securities and funds
which are in the custody or control of FICC.\31\ In addition, the
proposed changes would support FICC's compliance with Rule 17Ad-
22(b)(1) under the Act because the proposed changes would be reasonably
designed to (x) measure FICC's credit exposures to its participants at
least once a day and (y) limit FICC's exposures to potential losses
from defaults by its participants under normal market conditions.\32\
The proposed changes would also support FICC's compliance with Rule
17Ad-22(b)(2) under the Act because the proposed changes would reflect
FICC's use of risk-based models and parameters to set margin

requirements which would be reviewed monthly.\33\ The proposed Margin
Proxy would also support FICC's compliance with Rule 17Ad-22(e)(4) and
(e)(6) under the Act because the Margin Proxy would be subject to a
performance review by FICC and the Margin Proxy is a risk based margin
system that would be monitored, regularly reviewed, tested and verified
on an ongoing basis.\34\
---------------------------------------------------------------------------

    \30\ See 15 U.S.C. 78q-1(b)(3)(F).
    \31\ Id.
    \32\ See 17 CFR 240.17Ad-22(b)(1).
    \33\ See 17 CFR 240.17Ad-22(b)(2).
    \34\ Supra note 18.
---------------------------------------------------------------------------

    For these reasons, FICC believes that any burden on competition as
a result of the proposed changes associated with the Margin Proxy and
Coverage Charge would be necessary and appropriate in furtherance in
further of the Act as cited above.
D. The Margin Proxy Should Be Tested Before Filing a Rule Change and
Netting Members Should Have the Opportunity to Prepare for the
Temporary Model
    Ronin Capital expressed concern about whether FICC conducted a
study of the Margin Proxy's impact prior to filing a rule change. Ronin
Capital also noted that Netting Members have experience with the
idiosyncrasies of the current model and that it does not make sense to
rush to a new temporary model without giving Netting Members any length
of time to prepare.
    FICC believes that it conducted sufficient analysis prior to the
submission of this proposed rule change to the Commission. FICC
evaluated the sufficiency of the proposed changes for a period that
exceeded 2 months. FICC's study included historical analysis of the
backtesting sufficiency of the Margin Proxy. In addition, FICC reviewed
the impact that the Margin Proxy would have on each Netting Member's
Required Fund Deposit. In an effort to help Netting Members prepare for
this proposed rule change, FICC outlined the rationale for the Margin
Proxy and provided each Netting Member with reports that reflect the
impact that the proposed change would have on such Netting Member's
Required Fund Deposit. Thus, FICC believes that it has provided Netting
Members with sufficient information and advance notice regarding the
proposed changes. FICC recognizes that Netting Members may have
experience with the idiosyncrasies of the Current Volatility
Calculation. Nonetheless, FICC believes that the proposed rule change
must be employed to help ensure that FICC collects sufficient Required
Fund Deposit amounts at all times, particularly during volatile market
conditions.
Lack of Transparency
A. Netting Members Should Have Access to Prospective Rule Changes
Before Rules Are Filed
    Ronin Capital acknowledged that it appreciates FICC's communication
with Netting Members about sensitive topics before submitting rules for
commentary; however, Ronin Capital also noted that it is important for
Netting Members to have access to prospective rules changes before such
rules are filed with regulatory authorities.
    FICC notes that it has and continues to engage in ongoing
discussion with Netting Members about how proposals would impact them.
With respect to this proposed change, FICC's outreach to Netting
Members included discussions regarding GSD's Clearing Fund calculation
as well as the VaR Charge methodology. As described above, in an effort
to help Netting Members prepare for this proposed rule change, FICC
outlined the rationale for the Margin Proxy and provided each Netting
Member with reports that reflect the impact that the proposed change
would have on such Netting Member's Required Fund Deposit. FICC staff
has always made itself available to answer all questions or concerns
raised by Netting Members. FICC believes that it has provided Netting
Members with an appropriate level of disclosure regarding this proposed
rule change and such disclosure gives Netting Members the ability to
manage their obligations under the proposed rule change.
B. FICC Should Provide Netting Members With the Ability To Conduct
Scenario Analysis and FICC's Inability To Do So Could Be
Anticompetitive
    Ronin Capital noted that FICC should give Netting Members the
ability to conduct margin based scenario analysis. Ronan Capital also
noted that given the differing costs of capital across the membership,
FICC's inability to provide Netting Members with the ability to conduct
such analysis could be anticompetitive.
    FICC does not have technology that would allow Netting Members to
conduct margin based scenario analysis. While FICC recognizes that that
there may be additional benefits that Netting Members could derive from
the provision of such technology by FICC, FICC does not believe that
the lack of availability of such technology is anticompetitive. FICC
has provided sufficient disclosure regarding the proposed change to its
Netting Members and each Netting Member has been provided with the same
level of disclosure. In addition, FICC staff has made itself available
to answer all questions regarding the proposed change. Thus, FICC
believes that all Netting Members have the ability to manage their
obligations based on the information that FICC has provided in
connection with this proposed change. FICC recognizes there may be
additional benefits that Netting Members could derive from margin based
scenario analysis thus FICC will endeavor to explore the development of
this technology in the future.

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

    Within 45 days of the date of publication of this notice in the
Federal Register or within such longer period up to 90 days (i) as the
Commission may designate if it finds such longer period to be
appropriate and publishes its reasons for so finding or (ii) as to
which the self-regulatory organization consents, the Commission will:
    (A) By order approve or disapprove such proposed rule change, or
    (B) institute proceedings to determine whether the proposed rule
change should be disapproved.
    The proposal shall not take effect until all regulatory actions
required with respect to the proposal are completed.

IV. Solicitation of Comments

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

Electronic Comments

     Use the Commission's Internet comment form (http://www.sec.gov/rules/sro.shtml); or
     Send an email to<EMAIL_ADDRESS>Please include
File Number SR-FICC-2017-001 on the subject line.

Paper Comments

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

All submissions should refer to File Number SR-FICC-2017-001. This file
number should be included on the subject line if email is used. To help
the Commission process and review your comments more efficiently,
please use only one method. The Commission will post all comments on
the Commission's Internet Web site (http://www.sec.gov/rules/sro.shtml). Copies of the submission, all subsequent

amendments, all written statements with respect to the proposed rule
change that are filed with the Commission, and all written
communications relating to the proposed rule change between the
Commission and any person, other than those that may be withheld from
the public in accordance with the provisions of 5 U.S.C. 552, will be
available for Web site viewing and printing in the Commission's Public
Reference Room, 100 F Street NE., Washington, DC 20549 on official
business days between the hours of 10:00 a.m. and 3:00 p.m. Copies of
the filing also will be available for inspection and copying at the
principal office of FICC and on DTCC's Web site (http://dtcc.com/legal/sec-rule-filings.aspx). 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-FICC-2017-001 and should be submitted on or before February 24,
2017.

    For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\35\
---------------------------------------------------------------------------

    \35\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------

Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2017-02649 Filed 2-8-17; 8:45 am]
 BILLING CODE 8011-01-P


[Federal Register Volume 80, Number 172 (Friday, September 4, 2015)]
[Notices]
[Pages 53512-53513]
[FR Doc No: 2015-22029]

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

ENVIRONMENTAL PROTECTION AGENCY

[FRL-9933-59-Region 5]

Proposed Prospective Purchaser Agreement for the Delco Chassis
Industrial Land I & II Site in Livonia, Michigan

AGENCY: Environmental Protection Agency (EPA).

ACTION: Notice; request for public comment.

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

SUMMARY: In accordance with the Prospective Purchaser Agreement, notice
is hereby given of a proposed administrative settlement concerning a
portion of the Delco Chassis Industrial Land I & II Site in Livonia,
Michigan with the following settling party: Livonia West Commerce
Center, LLC. The settlement requires the Settling Party to provide
access to the Property, exercise due care with respect to existing
contamination, and, if necessary, execute and record a Declaration of
Restrictive Covenant. The settlement includes a covenant not to sue the
Settling Party pursuant to the Comprehensive Environmental Response,
Compensation, and Liability Act or the Resource Conservation and
Recovery Act with respect to the Existing Contamination. Existing
Contamination is defined as any hazardous substances, pollutants, or
contaminants or Waste Material present or existing on or under the
Property as of the Effective Date of the Settlement Agreement; any
hazardous substances, pollutants, or contaminants or Waste Material
that migrated from the Property prior to the Effective Date of the
Settlement Agreement; and any hazardous substances, pollutants, or
contaminants or Waste Material presently at the Site that migrates
onto, on, under, or from the Property after the Effective Date of the
Settlement Agreement.
    For thirty (30) days following the date of publication of this
notice, the Agency will receive written comments relating to the
settlement. The Agency will consider all comments received and may
modify or withdraw its consent to the settlement if comments received
disclose facts or considerations which indicate that the settlement is
inappropriate, improper, or inadequate. The Agency's response to any
comments received will be available for public inspection at the EPA,
Region 5, Records Center, 77 W. Jackson Blvd., 7th Fl., Chicago,
Illinois 60604.

DATES: Comments must be submitted on or before October 5, 2015.

ADDRESSES: The proposed settlement is available for public inspection
at the EPA, Region 5, Records Center, 77 W. Jackson Blvd., 7th Fl.,
Chicago, Illinois 60604. A copy of the proposed settlement may be
obtained from Peter Felitti, Assoc. Regional Counsel, EPA, Office of
Regional Counsel, Region 5, 77 W. Jackson Blvd., Mail Code: C-14J,
Chicago, Illinois 60604. Comments should reference the Delco Chassis
Industrial Land I & II Site, Livonia, Michigan and EPA Docket No. V-W-
15-C-024 and should be addressed to Peter Felitti, Assoc. Regional
Counsel, EPA, Office of Regional Counsel, Region 5, 77 W. Jackson
Blvd., Mail Code: C-14J, Chicago, Illinois 60604.

FOR FURTHER INFORMATION CONTACT: Peter Felitti, Assoc. Regional
Counsel, EPA, Office of Regional Counsel, Region 5, 77 W. Jackson
Blvd., Mail Code: C-14J, Chicago, Illinois 60604.

SUPPLEMENTARY INFORMATION: The Settling Party proposes to acquire
ownership of a portion of the former

General Motors Corporation North American operation, at 12950 and 13000
Eckles Road, Livonia, Michigan. The EPA identification number for the
RCRA corrective action responsibilities at the Delco Chassis Industrial
Land I & II Site is # MID005356621. The Site is one of the 89 sites
that were placed into an Environmental Response Trust (the ``Trust'')
as a result of the resolution of the 2009 GM bankruptcy. The Trust is
administrated by Revitalizing Auto Communities Environmental Response.

    Dated: August 17, 2015.
Samuel Borries,
Acting Director, Superfund Division.
[FR Doc. 2015-22029 Filed 9-3-15; 8:45 am]
BILLING CODE 6560-50-P


[Federal Register Volume 76, Number 131 (Friday, July 8, 2011)]
[Notices]
[Pages 40355-40359]
[FR Doc No: 2011-17244]

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

ENVIRONMENTAL PROTECTION AGENCY

[FRL-9431-1; EPA-HQ-OW-2008-0238]

Modification to 2008 National Pollutant Discharge Elimination
System (NPDES) General Permit for Stormwater Discharges Associated With
Construction Activities

AGENCY: Environmental Protection Agency (EPA).

ACTION: Notice.

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

SUMMARY: EPA Regions 1, 2, 3, 5, 6, 7, 8, 9, and 10 are modifying the
2008 National Pollutant Discharge Elimination System (NPDES) general
permits for stormwater discharges associated with construction activity
in order to extend until February 15, 2012 the expiration date of the
permit. Hereinafter, these NPDES general permits will be referred to as
``permit'' or ``2008 construction general permit'' or ``2008 CGP.''
This modification will extend the three-year permit so that it expires
on February 15, 2012 instead of June 30, 2011. Prior to this extension,
EPA modified the 2008 CGP in January 2010 to extend the permit by one
year, thus making it a three-year permit. By Federal law, no NPDES
permit may be issued for a period that exceeds five years.

DATES: EPA is finalizing a modification to its 2008 CGP that extends
the permit until February 15, 2012. The 2008 CGP will now expire on
midnight, February 15, 2012, instead of June 30, 2011.

FOR FURTHER INFORMATION CONTACT: Greg Schaner, Water Permits Division,
Office of Wastewater Management (Mail Code: 4203M), Environmental
Protection Agency, 1200 Pennsylvania Avenue, NW., EPA East, Washington,
DC 20460; telephone number:<PHONE_NUMBER>; fax number:<PHONE_NUMBER>;
e-mail address<EMAIL_ADDRESS>
SUPPLEMENTARY INFORMATION:

I. General Information

A. Does this action apply to me?

    If a discharger chooses to apply for coverage under the 2008 CGP,
the permit provides specific requirements for preventing contamination
of waterbodies from stormwater discharges from the following
construction activities:

------------------------------------------------------------------------
                                                         North American
                                                            Industry
           Category              Examples of affected    Classification
                                       entities          System (NAICS)
                                                              Code
------------------------------------------------------------------------
Industry......................  Construction site operators disturbing 1
                                 or more acres of land, or less than 1
                                 acre but part of a larger common plan
                                 of development or sale if the larger
                                 common plan will ultimately disturb 1
                                 acre or more, and performing the
                                 following activities:
                               -----------------------------------------
                                Building, Developing                 236
                                 and General
                                 Contracting.
                                Heavy Construction...                237
------------------------------------------------------------------------

    EPA does not intend the preceding table to be exhaustive, but
provides it as a guide for readers regarding entities likely to be
regulated by this action. This table lists the types of activities that
EPA is now aware of that could

potentially be affected by this action. Other types of entities not
listed in the table could also be affected. To determine whether your
facility is affected by this action, you should carefully examine the
definition of ``construction activity'' and ``small construction
activity'' in existing EPA regulations at 40 CFR 122.26(b)(14)(x) and
122.26(b)(15), respectively. If you have questions regarding the
applicability of this action to a particular entity, consult the person
listed for technical information in the preceding FOR FURTHER
INFORMATION CONTACT section.
    Eligibility for coverage under the 2008 CGP is limited to operators
of ``new projects'' or ``unpermitted ongoing projects.'' A ``new
project'' is one that commences after the effective date of the 2008
CGP. An ``unpermitted ongoing project'' is one that commenced prior to
the effective date of the 2008 CGP, yet never received authorization to
discharge under the 2003 CGP or any other NPDES permit covering its
construction-related stormwater discharges. Construction sites that
originally obtained permit coverage under the 2003 CGP will continue to
be covered under that permit. The 2008 CGP is effective only in those
areas where EPA is the permitting authority. A list of eligible areas
is included in Appendix B of the 2008 CGP.

B. How can I get copies of this document and other related information?

    1. Docket. EPA has established an official public docket for this
action under Docket ID No. EPA-HQ-OW-2008-0238. The official public
docket is the collection of materials that is available for public
viewing at the Water Docket in the EPA Docket Center, (EPA/DC) EPA
West, Room 3334, 1301 Constitution Ave., NW., Washington, DC 20460.
Although all documents in the docket are listed in an index, some
information is not publicly available, i.e., Confidential Business
Information (CBI) or other information whose disclosure is restricted
by statute. Publicly available docket materials are available
electronically through http://www.regulations.gov and in hard copy at
the EPA Docket Center Public Reading Room, open from 8:30 a.m. to 4:30
p.m., Monday through Friday, excluding legal holidays. The telephone
number for the Public Reading Room is<PHONE_NUMBER> and the telephone
number for the Water Docket is<PHONE_NUMBER>.
    2. Electronic Access. You may access this Federal Register document
electronically through the EPA Internet under the ``Federal Register''
listings at http://www.epa.gov/fedrgstr/. Electronic versions of the
final permit and fact sheet are available at EPA's stormwater Web site
http://www.epa.gov/npdes/stormwater.
    An electronic version of the public docket is available through
EPA's electronic public docket and comment system, EPA Dockets. You may
use EPA Dockets at http://www.regulations.gov/fdmspublic/component/main
to view public comments, access the index listing of the contents of
the official public docket, and to access those documents in the public
docket that are available electronically. Once in the system, select
``search'', then key in the appropriate docket identification number.
    Certain types of information will not be placed in the EPA Dockets.
Information claimed as CBI and other information whose disclosure is
restricted by statute, which is not included in the official public
docket, will not be available for public viewing in EPA's electronic
public docket. EPA policy is that copyrighted material will not be
placed in EPA's electronic public docket but will be available only in
printed, paper form in the official public docket. Although not all
docket materials may be available electronically, you may still access
any of the publicly available docket materials through the docket
facility identified in Section I.B.1.

C. Who are the EPA regional contacts for this permit?

    For EPA Region 1, contact Jessica Hing at tel.:<PHONE_NUMBER> or
e-mail at<EMAIL_ADDRESS>    For EPA Region 2, contact Stephen Venezia at tel.:<PHONE_NUMBER>
or e-mail at<EMAIL_ADDRESS>or for Puerto Rico, contact
Sergio Bosques at tel.:<PHONE_NUMBER> or e-mail at
<EMAIL_ADDRESS>    For EPA Region 3, contact Chuck Schadel at tel.:<PHONE_NUMBER> or
e-mail at<EMAIL_ADDRESS>    For EPA Region 5, contact Brian Bell at tel.:<PHONE_NUMBER> or e-
mail at<EMAIL_ADDRESS>    For EPA Region 6, contact Suzanna Perea at tel.:<PHONE_NUMBER> or
e-mail at<EMAIL_ADDRESS>    For EPA Region 7, contact Tanya Nix at tel.:<PHONE_NUMBER> or e-
mail at<EMAIL_ADDRESS>    For EPA Region 8, contact Amy Clark at tel.:<PHONE_NUMBER> or e-
mail at<EMAIL_ADDRESS>    For EPA Region 9, contact Eugene Bromley at tel.:<PHONE_NUMBER> or
e-mail at<EMAIL_ADDRESS>    For EPA Region 10, contact Misha Vakoc at tel.:<PHONE_NUMBER> or
e-mail at<EMAIL_ADDRESS>
II. Background of Permit

A. Statutory and Regulatory History

    Section 402(p) of the Clean Water Act (CWA) directs EPA to develop
a phased approach to regulate stormwater discharges under the National
Pollutant Discharge Elimination System (NPDES) program. 33 U.S.C.
1342(p). EPA published two regulations, on November 16, 1990 (the
``Phase I rule'', see 55 FR 47990) and on December 8, 1999 (the ``Phase
II rule'', see 64 FR 68722), which resulted in requiring NPDES permits
for discharges from construction sites disturbing at least one acre,
including sites that are less than one acre but are part of a larger
common plan of development or sale that will ultimately disturb at
least one acre. See 40 CFR 122.26(b)(14)(x) and 122.26(b)(15)(i).

B. The Relevance of EPA's ``C&D Rule'' to the 2008 CGP

    NPDES permits issued for construction stormwater discharges are
required under Section 402(a)(1) of the CWA to include conditions for
meeting technology-based effluent limits established under Section 301
and, where applicable, Section 306 of the CWA. Once an effluent
limitations guideline or new source performance standard is promulgated
in accordance with these sections, NPDES permits issued by the NPDES
permitting authorities must incorporate requirements based on such
limitations and standards. See 40 CFR 122.44(a)(1). Prior to the
promulgation of national effluent limitations guidelines or new source
performance standards, permitting authorities incorporate technology-
based effluent limitations on a best professional judgment basis. CWA
section 402(a)(1)(B); 40 CFR 125.3(a)(2)(ii)(B).
    On December 1, 2009, EPA published final regulations establishing
technology-based Effluent Limitations Guidelines (ELGs) and New Source
Performance Standards (NSPS) for the Construction & Development (C&D)
point source category. See 40 CFR Part 450, and 74 FR 62996 (December
1, 2009). The Construction & Development Rule, or ``C&D rule'', became
effective on February 1, 2010; therefore, all NPDES construction
permits issued by EPA or states after this date must incorporate the
C&D rule requirements.
    Because EPA issued the 2008 CGP prior to the effective date of the
C&D rule, the Agency is not required by the

CWA and 40 CFR 122.44(a)(1) to incorporate the C&D rule requirements
into the current permit. However, EPA is required to incorporate the
C&D rule requirements into the next, reissued CGP, which the Agency
expects to issue by February 15, 2012. EPA published for public comment
on April 25, 2011 a draft of the new CGP, which includes new
requirements implementing the C&D rule. For more information, see 76 FR
22882.

C. Stay of the C&D Rule Numeric Limit

    The C&D rule included non-numeric requirements for erosion and
sediment control, stabilization, and pollution prevention (see 40 CFR
450.21(a) thru (f)), and, for the first time, a numeric limitation on
the discharge of turbidity from active construction sites (see 40 CFR
450.22). Since its promulgation, EPA discovered that the data used to
calculate the numeric limit for turbidity were misinterpreted, and that
it was necessary to recalculate the numeric limit.
    On August 12, 2010, EPA filed a motion with the U.S. Court of
Appeals for the Seventh Circuit, requesting that the court issue an
order vacating and remanding to the Agency limited portions of the
final C&D rule. On August 24, 2010, the U.S. Court of Appeals for the
Seventh Circuit remanded the matter to EPA but did not vacate the
numeric limit. On September 9, 2010, the National Association of Home
Builders (NAHB) filed a motion for clarification (which EPA did not
oppose) asking the court to (1) vacate the limit and (2) hold the case
in abeyance until February 15, 2012 instead of remanding the matter to
EPA. On September 20, 2010, the court granted the motion in part by
ruling to hold the matter in abeyance pending EPA consideration of the
numeric limit and the other remand issues, but the court did not vacate
the numeric limit. Instead, the court stated that ``EPA may make any
changes to the limit it deems appropriate, as authorized by law.''
    EPA issued a direct final rule staying the numeric limit and a
companion proposed rule proposing a stay, and the stay took effect on
January 4, 2011, resulting in an indefinite postponement of the
implementation of the 280 NTU limit. The Agency is currently developing
a proposed rule proposing the recalculated limit. If the numeric limit
becomes effective prior to the issuance of the final CGP, EPA must by
law incorporate the applicable numeric limit into the final CGP.

D. Summary of 2008 CGP

    EPA announced the issuance of the 2008 CGP on July 14, 2008. See 73
FR 40338. Construction operators choosing to be covered by the 2008 CGP
must certify in their notice of intent (NOI) that they meet the
requisite eligibility requirements described in Part 1.3 of the permit.
If eligible, operators are authorized to discharge under this permit in
accordance with Part 2. Permittees must install and implement control
measures to meet the effluent limits applicable to all dischargers in
Part 3, and must inspect such stormwater controls and repair or modify
them in accordance with Part 4. The permit in Part 5 requires all
construction operators to prepare a stormwater pollution prevention
plan (SWPPP) that identifies all sources of pollution, and describes
control measures used to minimize pollutants discharged from the
construction site. Part 6 details the requirements for terminating
coverage under the permit.
    The 2008 CGP permit provides coverage for discharges from
construction sites in areas where EPA is the permitting authority. The
geographic coverage and scope of the 2008 CGP is listed in Appendix B
of the permit.

III. Extension of 2008 CGP Expiration Date

A. What Is EPA's rationale for the modification of the 2008 CGP for an
extension of the expiration date?

    As stated above, EPA is modifying the 2008 CGP by extending to
February 15, 2012, the expiration date of the permit. This extension is
necessary in order to provide sufficient time to finalize the new CGP,
which will incorporate for the first time new effluent limitations
guidelines and new source performance standards, which EPA promulgated
in December 2009. Additional time beyond the previous June 30, 2011
expiration date of the 2008 CGP is necessary in order to make up for a
delay of several months in the permit issuance process caused by the
initial uncertainty surrounding the error in calculating the 280 NTU
limit and the appropriate way for EPA to address it. This delay made it
a near certainty that, given even the most optimistic timeframe for
finalizing the new CGP, EPA would not have been able to finalize the
new CGP by the June 30, 2011 expiration date of the 2008 CGP.
    EPA was unaware of the need to extend the expiration date of the
2008 CGP when it first modified the 2008 CGP's expiration date in
January 2010 by one year to June 30, 2011. At that time, EPA was under
the impression that the June 30, 2011 date provided sufficient time to
finalize a new permit incorporating all of the new C&D rule
requirements. However, with the setback of time related to the stay of
the 280 NTU limit, EPA now needs additional time to complete the permit
issuance process as explained above. EPA believes that the proposed
extension of the current permit to February 15, 2012 will provide the
Agency with sufficient time to finalize the new CGP.
    EPA believes it is imperative that EPA has sufficient time to
incorporate the C&D rule requirements into the new CGP and issue the
new CGP prior to the existing permit's expiration date. If EPA does not
issue the new CGP before expiration of the existing permit, no new
construction projects may be permitted under the CGP, leaving
individual NPDES permits as the only available option for permitting
new projects. The sole reliance on individual permits would mean that
discharge authorizations would almost certainly be delayed due to the
greater amount of time and Agency resources that are required for
developing and issuing individual permits. In turn, construction
projects that need to begin construction activity on or after midnight
June 30, 2011 would be delayed for an uncertain amount of time until
EPA could review their individual permit applications and issue the
necessary permits. Rather than risk detrimental delays to new
construction projects, EPA has decided that it is advisable to instead
propose a modification to the 2008 CGP to extend the expiration date
until February 15, 2012.
    In addition, EPA notes that the February 15, 2012 expiration date
is a modification from the proposal to extend the date to January 31,
2012. See 79 FR 22891 (April 25, 2011). As discussed below in Section
III.C, commenters pointed out that EPA had earlier requested that the
Seventh Circuit Court of Appeals hold in abeyance until February 15,
2012 any further court proceedings in the challenge to the C&D rule's
numeric turbidity limit. Changing the expiration date of the 2008 CGP
to February 15, 2012 date is consistent with its motion to the court.

B. EPA's Authority to Modify NPDES Permits

    EPA regulations establish when the permitting authority may make
modifications to existing NPDES permits. In relevant part, EPA
regulations state that ``[w]hen the Director receives any information *
* * he or she may determine whether or not

one or more of the causes listed in paragraph (a) * * * of this section
for modification * * * exist. If cause exists, the Director may modify
* * * the permit accordingly, subject to the limitations of 40 CFR
124.5(c).'' 40 CFR 122.62. For the purposes of this Federal Register
notice, the relevant cause for modification is at 40 CFR 122.62(a)(2),
which states that a permit may be modified when ``[t]he Director has
received new information'' and that information ``was not available at
the time of permit issuance * * * and would have justified the
application of different permit conditions at the time of issuance.''
Pursuant to EPA regulations, ``[w]hen a permit is modified, only the
conditions subject to the modification are reopened.'' 40 CFR 122.62.
    In the case of the 2008 CGP, a permit modification is justified
based on the new information EPA received since it issued the 2008 CGP,
and more specifically, since it modified the 2008 CGP in January 2010,
in terms of the delay to the permit process associated with the
discovery of the error in the numeric turbidity limit and the Agency's
decision to stay to the numeric turbidity limit. If this information
was available at the time of issuance of the 2008 CGP, and more
specifically in January 2010 when EPA extended the expiration date to
June 30, 2011, it would have supported establishing an expiration date
for the 2008 CGP that was later than June 30, 2011. As a result, cause
exists under EPA regulations to justify modification of the 2008 CGP to
extend the expiration date of the permit from midnight June 30, 2011 to
midnight February 15, 2012.
    EPA notes that, by law, NPDES permits cannot be extended beyond 5
years. 40 CFR 122.46. The proposed extension of the 2008 CGP complies
with this restriction. The 2008 CGP was first issued on June 30, 2008.
With the new expiration date set as February 15, 2012, the permit will
still have been in effect for less than the 5-year limit.

C. Response to Comments

    EPA received 4 comments in response to the proposed extension of
the 2008 CGP expiration date. All of the commenters were supportive of
an extension to the expiration date of the 2008 CGP, however, each
comment stated that the proposed extension period was inadequate.
Several of the commenters recommended extending the permit to June 30,
2013, making it a full 5-year permit. The following is a summary of the
concerns raised by the commenters and EPA's responses:
     EPA requires additional time to streamline the permitting
process. According to one commenter, EPA should take the period of time
remaining in the 5-year permit term to focus on ways to streamline the
existing permitting process under the CGP. This commenter specifically
recommended that the Agency consider the development of a ``Single Lot
Permit'' for small residential construction projects, with streamlined
authorization procedures and best management practice (BMP)
requirements, either within the new CGP or as a stand-alone permit. The
commenter also urged EPA to modify the draft CGP to incorporate
``Qualified Local Program'' (QLP) provisions.
    EPA appreciates the suggestion by the commenter that the Agency
take the time to adequately consider ways to streamline the permitting
process so that it better accommodates small-scale, single lot
construction projects. EPA invites the commenter and other members of
the public to provide more specific suggestions in their comments on
the draft new CGP as to how the permit can be streamlined to better
address the types of requirements that are appropriate for single-lot
residential construction sites. At the same time, however, EPA does not
agree that additional time beyond February 15, 2012 is needed to
address this issue, and is confident that it can consider such
streamlining recommendations within this timeframe.
    Similarly, EPA does not agree that additional time is needed to
incorporate QLP provisions into the permit. For background, the NPDES
regulations at 40 CFR 122.44(s) enable EPA to incorporate by reference
qualifying State, Tribal, or local program requirements applicable to
small construction sites so that these requirements replace
corresponding provisions in the CGP. To effectuate QLP requirements in
the CGP, EPA would need to propose the addition of the QLP provisions
for public comment. To date, EPA has not been approached by a State,
Tribe, or local program to include any such requirements in the CGP,
despite previous encouragement by the Agency to do so. For that reason,
EPA does not find it necessary to further delay the issuance of the new
CGP to address the inclusion of QLP requirements. Having said this, EPA
notes that it will consider any request by affected states, Tribes, or
local governments to include QLP requirements in the CGP.
     The proposed extension does not account for the amount of
time needed to complete the rulemaking process to correct the numeric
turbidity limit. Some commenters questioned how EPA could issue a new
permit by the proposed January 31, 2012 expiration date incorporating
both the (future) numeric and non-numeric requirements of the C&D rule
given the realistic amount of time that is needed to complete the
rulemaking for correcting the C&D rule's numeric turbidity limit. These
commenters noted that since EPA has not yet proposed a correction to
the numeric limit, and because the Agency will need to allow for an
adequate public comment period and sufficient time to review and
respond to comments it receives, it appears unlikely that the
correction rule will be completed prior to the proposed expiration date
of the 2008 CGP. The commenters also noted that the public should be
given an opportunity to review the draft CGP's sampling protocols with
the final turbidity limit in mind. In addition, a few of the commenters
remarked that the proposed January 31, 2012 date is out of step with
the Agency's own request to the Seventh Circuit Court of Appeals to
hold the lawsuit challenging the validity of the numeric turbidity
limit in abeyance until February 15, 2012. For these reasons, these
commenters requested that EPA modify the proposed extension so that the
2008 CGP would instead expire on June 30, 2013, making it a full 5-year
permit.
    The commenters are correct that EPA asked the Seventh Circuit Court
of Appeals to hold the litigation challenging the numeric turbidity
limit (Wisconsin Builders Association et. al. v. U.S. EPA, No. 09-4113)
in abeyance until February 15, 2012. See EPA's Unopposed Motion for
Partial Vacature of the Final Rule, Remand of the Record, To Vacate
Briefing Schedule, and to Hold Case in Abeyance, No. 09-4113
(consolidated with Nos. 10-1247 and 10-1876) (August 12, 2010). EPA
agrees that, in retrospect, the use of February 15, 2012 would have
been an appropriate date for the expiration of the current permit since
it is consistent with the timeframe that was presented to the court.
For this reason, EPA has decided to further extend the 2008 CGP so that
it expires on February 15, 2012 instead of January 31, 2012.
    EPA does not agree with the commenter that a longer extension of
the 2008 CGP is needed or appropriate. If the final numeric effluent
limit is completed prior to the February 15, 2012 expiration date of
the 2008 CGP, EPA intends to include the final, corrected turbidity
limit in the new permit. As the commenters noted, the Agency proposed
in the draft permit a

placeholder for the final turbidity limit along with a draft set of
sampling requirements (see Part 3.3 of the draft CGP), so that if the
numeric limit is finalized by February 15, 2012, the numeric limit and
the final sampling requirements would be included in the final permit.
EPA believes that providing a draft permit with all of the provisions
necessary to implement the final limit, even though the final numeric
limit is not yet known, provides the public with an adequate
opportunity to review and provide comment on sampling requirements that
the Agency believes are appropriate for implementing a numeric
turbidity limit.
    EPA also does not agree with the commenter's suggestion that
additional time is needed so that the public may review the draft CGP's
sampling requirements with the specific turbidity limit in mind. The
specific turbidity limit value will undergo a separate Agency
rulemaking effort, including a public notice and comment process
dedicated to that rulemaking, which is the proper venue for conducting
public review of that limit. As stated previously, EPA would be
required to incorporate the final numeric limit in its new permit if it
is finalized before EPA's new CGP is issued. See 40 CFR 122.44(a)(1).
EPA anticipates that the final value of the turbidity limit can be
directly inserted into the CGP without the need to translate the limit
further, thus making it unnecessary to have a specific public review of
the use of the limit in the permit.
    Furthermore, in developing the new CGP's draft sampling
requirements, EPA put forward for comment provisions for conducting
turbidity monitoring that the Agency views as workable regardless of
the value of the final numeric turbidity limit. The sampling
requirements in the draft permit reflect EPA's research into the types
of requirements that will likely result in measurements that are
``representative of the monitored activity'' (see 40 CFR 122.41(j)),
are reflective of the types of requirements imposed in other similar
permits, and were envisioned by EPA in the C&D rule. See III.XIX.A of
the preamble to the C&D rule, 74 FR 63047 (December 1, 2009). Although
the draft requirements are still undergoing public review, it is
important to note that it was EPA's judgment when it issued the draft
permit that the draft sampling provisions are appropriate regardless of
the final effluent limit. Through the public comment process, EPA will
revisit these sampling requirements, as well as the Agency's initial
assumptions discussed above, based on comments received. However, at
this time, EPA does not believe that additional time is necessary for
the public to review the draft sampling requirements based on the as
yet unknown final value of the numeric turbidity limit.
     The 2008 CGP should be extended further to allow for the
Seventh Circuit litigation to play out in full prior to implementing
the C&D rule in the new permit. A few of the commenters suggested that
EPA provide for an extension of the 2008 CGP to June 30, 2013 in order
to allow for the litigation to come to a final outcome so that the new
CGP would presumably reflect any final decision regarding the C&D rule.
    EPA does not agree that it is necessary or appropriate to extend
the 2008 CGP further to account for the timeline of litigation on the
C&D rule. It is difficult to anticipate with any degree of certainty
how long this litigation will take, and what the outcome will be, and
EPA does not agree that it is appropriate to base its permitting
timeline on such a process. EPA believes it is important to issue the
new CGP as quickly as possible independent of any litigation schedule.
Among other reasons, EPA is interested in issuing the permit in a
timely manner so that regulated construction sites, state permitting
authorities, and the general public are given the opportunity to see in
the near term how the Agency intends to implement its own rule. In
EPA's judgment, the February 15, 2012 date for the expiration of the
2008 CGP provides EPA with a sufficient window of time within which to
issue the new permit and accomplish this objective.

    Authority:  Clean Water Act, 33 U.S.C. 1251 et seq.

    Dated: June 28, 2011.
H. Curtis Spalding,
Regional Administrator, EPA Region 1.

    Dated: June 29, 2011.
Kevin Bricke,
Acting Director, Division of Environmental Planning & Protection, EPA
Region 2.

    Dated: June 28, 2011.
Carl-Axel P. Soderberg,
Division Director, Caribbean Environmental Protection Division, EPA
Region 2.

    Dated: June 28, 2011.
Jon M. Capacasa,
Director, Water Protection Division, EPA Region 3.

    Dated: June 28, 2011.
Tinka G. Hyde,
Director, Water Division, EPA Region 5.

    Dated: June 28, 2011.
Miguel I. Flores,
Director, Water Quality Protection Division, EPA Region 6.

    Dated: June 27, 2011.
Karen Flournoy,
Acting Director, Water, Wetlands and Pesticides Division, EPA Region 7.

    Dated: June 28, 2011.
Stephen S. Tuber,
Assistant Regional Administrator, EPA Region 8.

    Dated: June 27, 2011.
Alexis Strauss,
Director, Water Division, EPA Region 9.

    Dated: June 28, 2011.
Christine Psyk,
Associate Director, Office of Water and Watersheds, EPA Region 10.
[FR Doc. 2011-17244 Filed 7-7-11; 8:45 am]
BILLING CODE 6560-50-P


[Federal Register: March 23, 2007 (Volume 72, Number 56)]
[Notices]
[Page 13781]
[DOCID:fr23mr07-65]

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

DEPARTMENT OF ENERGY

Federal Energy Regulatory Commission

[Docket No. RP07-351-000]

Columbia Gas Transmission Corporation; Notice of Proposed Changes
in FERC Gas Tariff

March 19, 2007.
    Take notice that on March 14, 2007 Columbia Gas Transmission
Corporation (Columbia) tendered for filing to become part of its FERC
Gas Tariff, Second Revised Volume No. 1, the tariff sheets listed on
Appendix A to the filing, with a proposed effective date of April 13,
2007.
    Columbia states that it is making this filing to incorporate the
policies stated in the Commission's June 16, 2005, Policy Statement on
Creditworthiness Issues for Interstate Natural Gas Pipelines and Order
Withdrawing Rulemaking Proceeding in Docket Nos. PL05-8-000 and RM04-4-
000.
    Any person desiring to intervene or to protest this filing must
file in accordance with Rules 211 and 214 of the Commission's Rules of
Practice and Procedure (18 CFR 385.211 and 385.214). Protests will be
considered by the Commission in determining the appropriate action to
be taken, but will not serve to make protestants parties to the
proceeding. Any person wishing to become a party must file a notice of
intervention or motion to intervene, as appropriate. Such notices,
motions, or protests must be filed in accordance with the provisions of
Section 154.210 of the Commission's regulations (18 CFR 154.210).
Anyone filing an intervention or protest must serve a copy of that
document on the Applicant. Anyone filing an intervention or protest on
or before the intervention or protest date need not serve motions to
intervene or protests on persons other than the Applicant.
    The Commission encourages electronic submission of protests and
interventions in lieu of paper using the ``eFiling'' link at http://www.ferc.gov.
 Persons unable to file electronically should submit an

original and 14 copies of the protest or intervention to the Federal
Energy Regulatory Commission, 888 First Street, NE., Washington, DC
20426.
    This filing is accessible on-line at http://www.ferc.gov, using the

``eLibrary'' link and is available for review in the Commission's
Public Reference Room in Washington, DC. There is an ``eSubscription''
link on the Web site that enables subscribers to receive e-mail
notification when a document is added to a subscribed docket(s). For
assistance with any FERC Online service, please e-mail
<EMAIL_ADDRESS>or call<PHONE_NUMBER> (toll free). For

TTY, call<PHONE_NUMBER>.

Philis J. Posey,
Acting Secretary.
[FR Doc. E7-5326 Filed 3-22-07; 8:45 am]

BILLING CODE 6717-01-P