[Federal Register Volume 79, Number 140 (Tuesday, July 22, 2014)]
[Notices]
[Pages 42572-42578]
[FR Doc No: 2014-17144]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-72620; File No. SR-NASDAQ-2014-070]

Self-Regulatory Organizations; The NASDAQ Stock Market LLC;
Notice of Filing and Immediate Effectiveness of Proposed Rule Change To
Modify Fees for NASDAQ Basic and To Correct an Error in the Text of
Rule 7023

July 16, 2014.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934
(the ``Act''),\1\ and Rule 19b-4 thereunder,\2\ notice is hereby given
that on July 1, 2014, The NASDAQ Stock Market LLC (``NASDAQ'' or the
``Exchange'') filed with the Securities and Exchange Commission
(``Commission'') the proposed rule change as described in Items I and
II below, which Items have been prepared by the Exchange. The
Commission is publishing this notice to solicit comments on the
proposed rule change from interested persons.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
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I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change

    NASDAQ is filing a proposed rule change to modify fees for the
NASDAQ Basic data product under Rule 7047 and to correct an error in
the text of Rule 7023 (governing NASDAQ Depth-of-Book data). The
proposal is immediately effective and will be implemented as of July 1,
2014.
    The text of the proposed rule change is below. Proposed new
language is italicized; proposed deletions are in brackets.
* * * * *

7023. NASDAQ Depth-of-Book Data

    (a)-(b) No change.
    (c) Enterprise License Fees
    (1) A Distributor that is also a broker-dealer pays a monthly fee
of $25,000 for the right to provide NASDAQ TotalView and NASDAQ
OpenView for Display Usage for Internal Distribution [to Non-
Professional Subscribers for Internal Distribution], or for External
Distribution to Non-Professional Subscribers with whom the firm has a
brokerage relationship. This Enterprise License shall not apply to
relevant Level 1 and NASDAQ Level 2 fees.
    (2) A Distributor that is also a broker-dealer pays a monthly fee
of $100,000 for the right to provide NASDAQ TotalView and NASDAQ
OpenView for Display Usage [by Professional and Non-Professional
Subscribers] for Internal Distribution, or for External Distribution to
both Professional and Non-Professional Subscribers with whom the firm
has a brokerage relationship. This Enterprise License shall not apply
to relevant Level 1 and NASDAQ Level 2 fees.
    (3) No change.
    (d)-(e) No change.
* * * * *

7047. Nasdaq Basic

    (a) No change.
    (b) User Fees
    (1)-(4) No change.
    (5) As an alternative to (b)(1) and (b)(2), a broker-dealer may
purchase an enterprise license at a rate of [$100,000]$350,000 per
month for distribution through an electronic system approved by NASDAQ
to an unlimited number of Professional and Non-Professional Subscribers
with whom the broker-dealer has a brokerage relationship. A separate
license would be required for each discrete electronic system used by
the broker-dealer. [The enterprise license entitles a Distributor to
provide Nasdaq Basic to an unlimited number of Non-Professional
Subscribers with whom the firm has a brokerage relationship.] The
enterprise license would allow distribution to the broker-dealer's
employees through the approved electronic system, but would not cover
distribution through any Distributor other than the broker-dealer
obtaining the license and its approved system. In order to qualify for
the enterprise license, the broker-dealer must also (i) distribute
NASDAQ Last Sale for NASDAQ and/or NASDAQ Last Sale for NYSE/NYSE MKT
via an internet-based electronic system approved by NASDAQ pursuant to
Rule 7039(b)(2)(B), at a level that allows it to qualify for the fee
cap provided for in Rule 7039(b), (ii) distribute NASDAQ TotalView and/
or NASDAQ OpenView data under an enterprise license pursuant to Rule
7023(c)(1), and (iii) pay [The enterprise license is in addition to]
the Distributor Fee for NASDAQ Basic [listed in] under paragraph (c)(1)
or for NASDAQ Last Sale under Rule 7039(c). The broker-dealer must also
report the number of Subscribers receiving NASDAQ Basic under the
license to NASDAQ at least once per calendar year.
    (6) No change.
    (c)-(d) No change.
* * * * *

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
Statutory Basis for, the Proposed Rule Change

1. Purpose
    NASDAQ Basic is a proprietary data product that provides best bid
and offer information from the NASDAQ Market Center and last sale
transaction reports from the NASDAQ Market Center and from the FINRA/
NASDAQ Trade Reporting Facility (``FINRA/NASDAQ TRF''). As such, NASDAQ
Basic is a ``non-core'' product that provides a subset of the ``core''
quotation and last sale data provided by securities information
processors (``SIPs'') under the CQ/CT Plan and the NASDAQ UTP Plan. In
this filing, NASDAQ is proposing to modify the existing enterprise
license for a broker-dealer (``BD'') to provide NASDAQ Basic to Non-
Professional Subscribers with whom it has a brokerage relationship so
that it covers distribution through the BD's approved electronic system
to both Professional and Non-Professional Subscribers with whom it has
a brokerage relationship, subject to certain other conditions described
below and in the proposed rule.
    NASDAQ Basic contains three separate components, which may be
purchased individually or in combination: (i) NASDAQ Basic for NASDAQ,
which contains the best bid and offer on the NASDAQ Market Center and
last sale transaction reports for NASDAQ and the FINRA/NASDAQ TRF for
NASDAQ-listed stocks, (ii) NASDAQ Basic for NYSE, which contains the
best bid and offer on the NASDAQ Market Center and last sale
transaction reports for NASDAQ and the FINRA/NASDAQ TRF for NYSE-listed

stocks, and (iii) NASDAQ Basic for NYSE MKT, which contains the best
bid and offer on the NASDAQ Market Center and last sale transaction
reports for NASDAQ and the FINRA/NASDAQ TRF for stocks listed on NYSE
MKT and other listing venues whose quotes and trade reports are
disseminated on Tape B.
    The fee structure for NASDAQ Basic features a fee for Professional
Subscribers and a reduced fee for Non-Professional Subscribers.\3\ The
current monthly fees for Non-Professional Subscribers are $0.50 per
Subscriber for NASDAQ Basic for NASDAQ, $0.25 per Subscriber for NASDAQ
Basic for NYSE, and $0.25 per Subscriber for NASDAQ Basic for NYSE MKT.
The current monthly fees for Professional Subscribers are $13 per
Subscriber for NASDAQ Basic for NASDAQ, $6.50 per Subscriber for NASDAQ
Basic for NYSE, and $6.50 per Subscriber for NASDAQ Basic for NYSE MKT.
For use cases that do not require a monthly subscription for unlimited
usage, there is a Per Query option, with a fee of $0.0025 for NASDAQ
Basic for NASDAQ, $0.0015 for NASDAQ Basic for NYSE, and $0.0015 for
NASDAQ Basic for NYSE MKT.
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    \3\ A ``Non-Professional Subscriber'' is ``a natural person who
is not (i) registered or qualified in any capacity with the
Commission, the Commodity Futures Trading Commission, any state
securities agency, any securities exchange or association, or any
commodities or futures contract market or association; (ii) engaged
as an ``investment adviser'' as that term is defined in Section
201(11) of the Investment Advisers Act of 1940 (whether or not
registered or qualified under that Act); or (iii) employed by a bank
or other organization exempt from registration under federal or
state securities laws to perform functions that would require
registration or qualification if such functions were performed for
an organization not so exempt.'' A ``Professional Subscriber'' is
``any Subscriber other than a Non-Professional Subscriber.'' Thus,
the term includes both natural persons that do not fit within the
definition of Non-Professional Subscriber, as well as Subscribers
that are not natural persons.
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    Distributors \4\ of NASDAQ Basic may also be assessed a monthly
Distributor Fee. The fee is $1,500 per month for either internal or
external distribution; however, a credit for Subscriber or Per Query
fees may be applied against the Distributor Fee at the Distributor's
request. A Distributor of data derived from NASDAQ Basic (but that is
not distributing raw NASDAQ Basic content itself) may pay a fee of
$1,500 per month (plus the applicable monthly Distributor fee) to
distribute the derived data to an unlimited number of Non-Professional
Subscribers. This type of Distributor will typically distribute data to
a large number of downstream customers through web-based applications.
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    \4\ The definition of the term ``Distributor'' is ``any entity
that receives NASDAQ Basic data directly from NASDAQ or indirectly
through another entity and then distributes it to one or more
Subscribers.'' Distributors may either be ``Internal Distributors'',
which are ``Distributors that receive NASDAQ Basic data and then
distribute that data to one or more Subscribers within the
Distributor's own entity,'' or ``External Distributors'', which are
``Distributors that receive NASDAQ Basic data and then distribute
that data to one or more Subscribers outside the Distributor's own
entity.''
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    As an alternative to monthly Subscriber fees for Non-Professional
Subscribers, NASDAQ currently offers an enterprise license under which
a BD may distribute NASDAQ Basic to an unlimited number of Non-
Professional Subscribers with whom the BD has a brokerage relationship
at a rate of $100,000 per month (as well as the applicable monthly
Distributor fee).\5\ NASDAQ is proposing to modify the license
provision to focus its availability on BD Distributors that achieve
wide distribution of a variety of NASDAQ data to a range of investors,
including both Non-Professional and Professional Subscribers. Under the
proposed modification, the enterprise license fee will increase to
$350,000 per month, but the license will allow distribution of NASDAQ
Basic to an unlimited number of Professional or Non-Professional
Subscribers with whom the BD has a brokerage relationship, through an
electronic system approved by NASDAQ (such as a password-protected Web
site for customers to access their accounts and submit orders to the
BD). A separate enterprise license with a separate fee would be
required for each discrete electronic system used by the broker-dealer.
The enterprise license would allow Internal Distribution to the BD's
employees, but only through the approved system. The license would not
cover distribution through any Distributor other than the BD obtaining
the license through its approved system. Thus, a BD could not use the
license to eliminate fees payable with respect to the distribution of
data to its customers or employees through a third-party data provider.
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    \5\ NASDAQ also offers an enterprise license for BDs to
distribute to internal Professional Subscribers (i.e., employees of
the BD).
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    Because the focus of the license is to achieve the broad
distribution of data to many investors by providing a volume discount,
the licensee is also required to distribute NASDAQ Last Sale for NASDAQ
and/or NASDAQ Last Sale for NYSE/NYSE MKT (``NLS'') via the internet
pursuant to Rule 7039(b)(2)(B), at a level that allows it to qualify
for the $50,000 fee cap provided for in Rule 7039(b). The NLS data
feeds contain last sale activity in U.S. equities within the NASDAQ
Market Center and reported to the FINRA/NASDAQ TRF. In certain
instances, NLS is distributed under a per Subscriber or per query
model, under which a fee is charged for each person that receives the
data or for each instance in which a user accesses last sale
information about a particular stock. In order to achieve broad
distribution of the information to investors, NASDAQ also offers fee
models for NLS for distribution via the internet or television, with
fees based on the number of Web site visitors or the estimated number
of households reached via television. In all instances, the fee payable
for NLS is capped at $50,000 per month (plus applicable distributor
fees, as discussed below). Although the information included in NLS is
also included in NASDAQ Basic, the requirement for internet
distribution of NLS would accomplish different transparency goals than
distribution of NASDAQ Basic under the license. Specifically, while
NASDAQ Basic would be distributed to BD customers via an electronic
system for account access, NLS would be distributed broadly via the
BD's public Web site, to allow for broad distribution of the
information to current customers, potential customers, and interested
members of the public and retail investment community.
    The licensee would also be required to distribute NASDAQ TotalView
and/or NASDAQ OpenView under an enterprise license pursuant to Rule
7023(c)(1). NASDAQ TotalView provides, for NASDAQ-listed securities,
all orders and quotes from all NASDAQ members displayed in the NASDAQ
Market Center as well as the aggregate size of such orders and quotes
at each price level in the execution functionality of the NASDAQ Market
Center. NASDAQ OpenView provides the same information as NASDAQ
TotalView with respect to stocks listed on exchanges other than NASDAQ.
Under the applicable enterprise license, a Distributor that is also a
BD pays a monthly fee of $25,000 for the right to provide NASDAQ
TotalView and NASDAQ OpenView for distribution to an unlimited number
of Non-Professional Subscribers with whom the BD has a brokerage
relationship.\6\ Thus,

similar to the NASDAQ Basic license, the applicable TotalView/OpenView
license is designed to allow wide distribution of data to brokerage
customers to facilitate informed trading decisions.
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    \6\ NASDAQ is also proposing to correct several obvious errors
in the text of Rule 7023. In Securities Exchange Act Release No.
66740 (April 4, 2012), 77 FR 21609 (April 10, 2012) (SR-NASDAQ-2012-
042), NASDAQ reorganized the text of Rule 7023, stating that
``[s]ubsections (c)(1), (c)(2), and (c)(4) [of Rule 7023] reflect
the enterprise licenses currently set forth in NASDAQ Rule (a)(1)(C)
and (D).'' NASDAQ further stated that the proposed changes were
``technical and administrative changes that will not impact the fees
assessed to any Subscriber.'' Rule 7023(A)(1)(C) had formerly
provided for ``an enterprise license at a rate of $25,000 for non-
professional subscribers or $100,000 per month for both professional
and non-professional subscribers.'' The license further stated that
it applied to ``an unlimited number of internal users . . . and
external uses with whom the firm has a brokerage relationship.''
Employees of a BD that receive market data in connection with their
employment do not subscribe as individuals; rather the BD subscribes
on their behalf, such that all such subscriptions are Professional.
However, in adopting Rule 7023(c)(1) and (c)(2), which are derived
from former Rule 7023(a)(1)(C), SR-NASDAQ-2012-042 construed the
language ``unlimited number of internal users'' as allowing
distribution to ``Non-Professional Subscribers for Internal
Distribution.'' Because all Internal Distribution by a BD would, by
definition, constitute Professional usage, the language is clearly
erroneous and not in accordance with the stated intention of SR-
NASDAQ-2014-042 to make no substantive changes. Accordingly, NASDAQ
is amending Rule 7023 to eliminate the erroneous language, and make
it clear that with respect to both 7023(c)(1) and (c)(2), the
applicable licenses permit Internal Distribution for Display Usage
(i.e., display of the data on a screen or other visualization
mechanism for access or use by a natural person or persons).
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    The licensee must also pay Distributor Fees for NASDAQ Basic, under
Rule 7047(c)(1), or for NASDAQ Last Sale under Rule 7039(c). The
applicable fees are $1,500 per month for each product, but the licensee
is required to pay the fee only with respect to one of the products.
Thus, if a prospective distributor of NASDAQ Basic under the license is
already distributing NASDAQ Last Sale and paying the fee with respect
to that product, it is not required to pay an additional Distributor
Fee.
    The existing license for distribution of NASDAQ Basic to Non-
Professional Subscribers is not currently being used by any customer.
Therefore, the change will neither advantage nor disadvantage current
Subscribers. Based on input from the retail investment community and
members, NASDAQ has determined that the lack of demand for the license
may be attributable to the reluctance of BDs to distinguish among their
customers in the manner required to ensure that the data is not
distributed to Professional Subscribers. Accordingly, by widening the
scope of the license to any Subscriber that is a brokerage customer,
NASDAQ believes that the license may allow BDs to achieve wide
distribution of NASDAQ Basic, NASDAQ Last Sale, and NASDAQ TotalView/
OpenView without the need to distinguish Professional and Non-
Professional Subscribers or to pay individual fees for any single
Subscriber. Accordingly, although the modified license may reflect a
price increase in comparison with the existing license, NASDAQ believes
that demand for the license will increase because of the associated
reduction of administrative costs and the cost certainty provided by an
enterprise license. The proposed Enterprise License will, however,
require firms to report the number of Subscribers receiving NASDAQ
Basic a minimum of once per calendar year to provide NASDAQ with
accurate information to understand the scope of distribution.
2. Statutory Basis
    NASDAQ believes that the proposed rule change is consistent with
the provisions of Section 6 of the Act \7\ in general, and with
Sections 6(b)(4) and (5) of the Act \8\ in particular, in that it
provides for the equitable allocation of reasonable dues, fees and
other charges among recipients of NASDAQ data and is not designed to
permit unfair discrimination between them. In adopting Regulation NMS,
the Commission granted self-regulatory organizations (``SROs'') and BDs
increased authority and flexibility to offer new and unique market data
to the public. It was believed that this authority would expand the
amount of data available to consumers, and also spur innovation and
competition for the provision of market data. NASDAQ believes that its
NASDAQ Basic market data product is precisely the sort of market data
product that the Commission envisioned when it adopted Regulation NMS.
The Commission concluded that Regulation NMS--by deregulating the
market in proprietary data--would itself further the Act's goals of
facilitating efficiency and competition:
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    \7\ 15 U.S.C. 78f.
    \8\ 15 U.S.C. 78f(b)(4), (5).

    [E]fficiency is promoted when broker-dealers who do not need the
data beyond the prices, sizes, market center identifications of the
NBBO and consolidated last sale information are not required to
receive (and pay for) such data. The Commission also believes that
efficiency is promoted when broker-dealers may choose to receive
(and pay for) additional market data based on their own internal
analysis of the need for such data.\9\
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    \9\ Securities Exchange Act Release No. 51808 (June 9, 2005), 70
FR 37496 (June 29, 2005).

    By removing unnecessary regulatory restrictions on the ability of
exchanges to sell their own data, Regulation NMS advanced the goals of
the Act and the principles reflected in its legislative history. If the
free market should determine whether proprietary data is sold at all,
it follows that the price at which such data is sold should be set by
the market as well. NASDAQ Basic exemplifies the optional nature of
proprietary data, since, depending on a customer's specific goals, it
may opt to purchase core SIP data or only the subset provided through
NASDAQ Basic. Moreover, as discussed in more detail below, the price
that NASDAQ is able to charge is constrained by the existence of
substitutes in the form of SIP data and competitive products offered by
other SROs.
    The decision of the United States Court of Appeals for the District
of Columbia Circuit in NetCoalition v. SEC, 615 F.3d 525 (D.C. Cir.
2010) (``NetCoalition I''), upheld the Commission's reliance upon
competitive markets to set reasonable and equitably allocated fees for
market data. ``In fact, the legislative history indicates that the
Congress intended that the market system `evolve through the interplay
of competitive forces as unnecessary regulatory restrictions are
removed' and that the SEC wield its regulatory power `in those
situations where competition may not be sufficient,' such as in the
creation of a `consolidated transactional reporting system.'
NetCoalition I, at 535 (quoting H.R. Rep. No. 94-229, at 92 (1975), as
reprinted in 1975 U.S.C.C.A.N. 321, 323). The court agreed with the
Commission's conclusion that ``Congress intended that `competitive
forces should dictate the services and practices that constitute the
U.S. national market system for trading equity securities.' '' \10\
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    \10\ NetCoalition I, at 535.
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    The Court in NetCoalition I, while upholding the Commission's
conclusion that competitive forces may be relied upon to establish the
fairness of prices, nevertheless concluded that the record in that case
did not adequately support the Commission's conclusions as to the
competitive nature of the market for NYSE Arca's data product at issue
in that case. As explained below in NASDAQ's Statement on Burden on
Competition, however, NASDAQ believes that there is substantial
evidence of competition in the marketplace for data that was not in the
record in the NetCoalition I case, and that the Commission is entitled
to rely upon such evidence in concluding fees are the product of
competition, and therefore in accordance with the relevant statutory
standards.\11\

Moreover, NASDAQ further notes that the product at issue in this
filing--a NASDAQ quotation and last sale data product that replicates a
subset of the information available through ``core'' data products
whose fees have been reviewed and approved by the SEC--is quite
different from the NYSE Arca depth-of-book data product at issue in
NetCoalition I. Accordingly, any findings of the court with respect to
that product may not be relevant to the product at issue in this
filing. As the Commission noted in approving the initial pilot for
NASDAQ Basic, all of the information available in NASDAQ Basic is
included in the core data feeds made available pursuant to the joint-
SRO plans.\12\ As the Commission further determined, ``the availability
of alternatives to NASDAQ Basic significantly affect the terms on which
NASDAQ can distribute this market data. In setting the fees for its
NASDAQ Basic service, NASDAQ must consider the extent to which market
participants would choose one or more alternatives instead of
purchasing the exchange's data.'' \13\ Thus, to the extent that the
fees for core data have been established as reasonable under the Act,
it follows that the fees for NASDAQ Basic are also reasonable, since
charging unreasonably high fees would cause market participants to rely
solely on core data or purchase proprietary products offered by other
exchanges rather than purchasing NASDAQ Basic.
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    \11\ It should also be noted that Section 916 of the Dodd-Frank
Wall Street Reform and Consumer Protection Act of 2010 (``Dodd-Frank
Act'') has amended paragraph (A) of Section 19(b)(3) of the Act, 15
U.S.C. 78s(b)(3), to make it clear that all exchange fees, including
fees for market data, may be filed by exchanges on an immediately
effective basis. See also NetCoalition v. SEC, 715 F.3d 342 (D.C.
Cir. 2013) (``NetCoalition II'') (finding no jurisdiction to review
Commission's non-suspension of immediately effective fee changes).
    \12\ Securities Exchange Act Release No. 12425 (March 16, 2009),
74 FR 12423, 12425 (March 24, 2009) (SR-NASDAQ-2008-102).
    \13\ Id. at 12425.
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    Moreover, as discussed in the order approving the initial pilot,
and as further discussed below in NASDAQ's Statement on Burden on
Competition, data products such as NASDAQ Basic are a means by which
exchanges compete to attract order flow. To the extent that exchanges
are successful in such competition, they earn trading revenues and also
enhance the value of their data products by increasing the amount of
data they are able to provide. Conversely, to the extent that exchanges
are unsuccessful, the inputs needed to add value to data products are
diminished. Accordingly, the need to compete for order flow places
substantial pressure upon exchanges to keep their fees for both
executions and data reasonable.
    The proposed changes do not alter the reasonableness of the fees
for NASDAQ Basic. Although the enterprise license will be modified to
increase the applicable fee, the modified license will also broaden the
range of customers to which a BD can distribute the data, to include
Professional Subscribers for which the fees for individual distribution
are higher. In addition, the modified fee will reduce the associated
administrative cost of the license by eliminating the need for a BD to
distinguish between Professionals and Non-Professionals within its
customer base. NASDAQ also notes that the individual fees associated
with Professional use of both NASDAQ Basic and SIP data recently
increased.\14\ As a result, it is also reasonable that an enterprise
license to allow unlimited distribution to Professional Subscribers
would also be higher than the fees for the current license.
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    \14\ Securities Exchange Act Release No. 71507 (February 7,
2014), 79 FR 8763 (February 13, 2014) (SR-NASDAQ-2014-011);
Securities Exchange Act Release No. 70953 (November 27, 2013), 78 FR
72932 (December 4, 2014) (File No. S7-24-89).
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    The changed license fee also continues to reflect an equitable
allocation and continues not to be unfairly discriminatory, because
NASDAQ Basic is a voluntary product for which market participants can
readily substitute core data feeds that provide additional quotation
and last sale information not available through NASDAQ Basic.
Accordingly, NASDAQ is constrained from pricing the product in a manner
that would be inequitable or unfairly discriminatory. Moreover, the
broadening of the license to allow distribution to both Professional
and Non-Professional Subscribers reflects an equitable allocation of
fees because it increases the usefulness of the license to member firms
and thereby has the potential to broaden the distribution of NASDAQ
Basic to customers. Similarly, the requirements for licensees also to
distribute NLS and NASDAQ TotalView and/or NASDAQ OpenView are
reasonable because an enterprise license is in essence a volume
discount for BDs that distribute data to a wide extent. Because the
goal of the license is to encourage wide distribution at a fee that is
more reasonable than per Subscriber fees, NASDAQ believes that is
reasonable to offer this fee reduction to members that are, in fact,
achieving wide distribution of data to customers and the public.
Similarly, NASDAQ believes that the requirements are consistent with an
equitable allocation of fees and not unreasonably discriminatory
because they limit the volume discount to those members that can both
benefit from a fee cap due to their scope of distribution and that are
achieving the goal of providing customers and the public with a range
of market data.
    The proposed changes to the text of Rule 7023 are consistent with
the Act because they are intended solely to correct clearly erroneous
language in the text of the rule, and therefore do not modify the fees
payable by BDs that obtain subscriptions through the applicable
enterprise licenses thereunder. Accordingly, the changes are
reasonable, equitable, and not unfairly discriminatory because they
serve to promote clarity but do not alter the rights or obligations of
Subscribers.

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

    NASDAQ does not believe that the proposed rule change will result
in any burden on competition that is not necessary or appropriate in
furtherance of the purposes of the Act, as amended. NASDAQ's ability to
price NASDAQ Basic is constrained by (1) competition among exchanges,
other trading platforms, and TRFs that compete with each other in a
variety of dimensions; (2) the existence of inexpensive real-time
consolidated data and market-specific data and free delayed
consolidated data; and (3) the inherent contestability of the market
for proprietary data.
    The market for proprietary data products is currently competitive
and inherently contestable because there is fierce competition for the
inputs necessary to the creation of proprietary data and strict pricing
discipline for the proprietary products themselves. Numerous exchanges
compete with each other for listings, trades, and market data itself,
providing virtually limitless opportunities for entrepreneurs who wish
to produce and distribute their own market data. This proprietary data
is produced by each individual exchange, as well as other entities, in
a vigorously competitive market. Similarly, with respect to the TRF
data component of NASDAQ Basic, allowing exchanges to operate TRFs has
permitted them to earn revenues by providing technology and data in
support of the non-exchange segment of the market. This revenue
opportunity has also resulted in fierce competition between the two
current TRF operators, with both TRFs charging extremely low trade
reporting fees and rebating the majority of the revenues they receive
from core market data to the parties reporting trades.
    Transaction executions and proprietary data products are
complementary in that market data is

both an input and a byproduct of the execution service. In fact, market
data and trade execution are a paradigmatic example of joint products
with joint costs.\15\ The decision whether and on which platform to
post an order will depend on the attributes of the platform where the
order can be posted, including the execution fees, data quality and
price, and distribution of its data products. Without trade executions,
exchange data products cannot exist. Moreover, data products are
valuable to many end users only insofar as they provide information
that end users expect will assist them or their customers in making
trading decisions.
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    \15\ A complete explanation of the pricing dynamics associated
with joint products is presented in a study that NASDAQ originally
submitted to the Commission in SR-NASDAQ-2011-010. See Statement of
Janusz Ordover and Gustavo Bamberger at 2-17 (December 29, 2010)
(available at http://nasdaq.cchwallstreet.com/NASDAQ/pdf/nasdaq-filings/2011/SR-NASDAQ-2011-010.pdf).
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    The costs of producing market data include not only the costs of
the data distribution infrastructure, but also the costs of designing,
maintaining, and operating the exchange's transaction execution
platform and the cost of regulating the exchange to ensure its fair
operation and maintain investor confidence. The total return that a
trading platform earns reflects the revenues it receives from both
products and the joint costs it incurs. Moreover, the operation of the
exchange is characterized by high fixed costs and low marginal costs.
This cost structure is common in content and content distribution
industries such as software, where developing new software typically
requires a large initial investment (and continuing large investments
to upgrade the software), but once the software is developed, the
incremental cost of providing that software to an additional user is
typically small, or even zero (e.g., if the software can be downloaded
over the internet after being purchased).\16\ In NASDAQ's case, it is
costly to build and maintain a trading platform, but the incremental
cost of trading each additional share on an existing platform, or
distributing an additional instance of data, is very low. Market
information and executions are each produced jointly (in the sense that
the activities of trading and placing orders are the source of the
information that is distributed) and are each subject to significant
scale economies. In such cases, marginal cost pricing is not feasible
because if all sales were priced at the margin, NASDAQ would be unable
to defray its platform costs of providing the joint products.
Similarly, data products cannot make use of TRF trade reports without
the raw material of the trade reports themselves, and therefore
necessitate the costs of operating, regulating,\17\ and maintaining a
trade reporting system, costs that must be covered through the fees
charged for use of the facility and sales of associated data.
---------------------------------------------------------------------------

    \16\ See William J. Baumol and Daniel G. Swanson, ``The New
Economy and Ubiquitous Competitive Price Discrimination: Identifying
Defensible Criteria of Market Power,'' Antitrust Law Journal, Vol.
70, No. 3 (2003).
    \17\ It should be noted that the costs of operating the FINRA/
NASDAQ TRF borne by NASDAQ include regulatory charges paid by NASDAQ
to FINRA.
---------------------------------------------------------------------------

    An exchange's BD customers view the costs of transaction executions
and of data as a unified cost of doing business with the exchange. A BD
will direct orders to a particular exchange only if the expected
revenues from executing trades on the exchange exceed net transaction
execution costs and the cost of data that the BD chooses to buy to
support its trading decisions (or those of its customers). The choice
of data products is, in turn, a product of the value of the products in
making profitable trading decisions. If the cost of the product exceeds
its expected value, the BD will choose not to buy it. Moreover, as a BD
chooses to direct fewer orders to a particular exchange, the value of
the product to that BD decreases, for two reasons. First, the product
will contain less information, because executions of the BD's trading
activity will not be reflected in it. Second, and perhaps more
important, the product will be less valuable to that BD because it does
not provide information about the venue to which it is directing its
orders. Data from the competing venue to which the BD is directing
orders will become correspondingly more valuable.
    Similarly, in the case of products such as NASDAQ Basic that may be
distributed through market data vendors, the vendors provide price
discipline for proprietary data products because they control a means
of access to end users. Vendors impose price restraints based upon
their business models. For example, vendors such as Bloomberg and
Thomson Reuters that assess a surcharge on data they sell may refuse to
offer proprietary products that end users will not purchase in
sufficient numbers. Internet portals, such as Google, impose a
discipline by providing only data that will enable them to attract
``eyeballs'' that contribute to their advertising revenue. Retail BDs,
such as Charles Schwab and Fidelity, offer their customers proprietary
data only if it promotes trading and generates sufficient commission
revenue. Although the business models may differ, these vendors'
pricing discipline is the same: they can simply refuse to purchase any
proprietary data product that fails to provide sufficient value.
Exchanges, TRFs, and other producers of proprietary data products must
understand and respond to these varying business models and pricing
disciplines in order to market proprietary data products successfully.
Moreover, NASDAQ believes that products such as NASDAQ Basic can
enhance order flow to NASDAQ by providing more widespread distribution
of information about transactions in real time, thereby encouraging
wider participation in the market by investors with access to the data
through their brokerage firm or other distribution sources. Conversely,
the value of such products to distributors and investors decreases if
order flow falls, because the products contain less content.
    Analyzing the cost of market data distribution in isolation from
the cost of all of the inputs supporting the creation of market data
will inevitably underestimate the cost of the data. Thus, because it is
impossible to create exchange data without a fast, technologically
robust, and well-regulated execution system, system costs and
regulatory costs affect the price of market data. It would be equally
misleading, however, to attribute all of the exchange's costs to the
market data portion of an exchange's joint product. Rather, all of the
exchange's costs are incurred for the unified purposes of attracting
order flow, executing and/or routing orders, and generating and selling
data about market activity. The total return that an exchange earns
reflects the revenues it receives from the joint products and the total
costs of the joint products. Similarly, the inclusion of trade
reporting data in a product such as NASDAQ Basic may assist in
attracting customers to the product, thereby assisting in covering the
additional costs associated with operating and regulating a TRF.
    Competition among trading platforms can be expected to constrain
the aggregate return each platform earns from the sale of its joint
products, but different platforms may choose from a range of possible,
and equally reasonable, pricing strategies as the means of recovering
total costs. NASDAQ pays rebates to attract orders, charges relatively
low prices for market information and charges relatively high

prices for accessing posted liquidity. Other platforms may choose a
strategy of paying lower liquidity rebates to attract orders, setting
relatively low prices for accessing posted liquidity, and setting
relatively high prices for market information. Still others may provide
most data free of charge and rely exclusively on transaction fees to
recover their costs. Finally, some platforms may incentivize use by
providing opportunities for equity ownership, which may allow them to
charge lower direct fees for executions and data.
    In this environment, there is no economic basis for regulating
maximum prices for one of the joint products in an industry in which
suppliers face competitive constraints with regard to the joint
offering. Such regulation is unnecessary because an ``excessive'' price
for one of the joint products will ultimately have to be reflected in
lower prices for other products sold by the firm, or otherwise the firm
will experience a loss in the volume of its sales that will be adverse
to its overall profitability. In other words, an unreasonable increase
in the price of data will ultimately have to be accompanied by a
decrease in the cost of executions, or the volume of both data and
executions will fall.
    The level of competition and contestability in the market is
evident in the numerous alternative venues that compete for order flow,
including eleven SRO markets, as well as internalizing BDs and various
forms of alternative trading systems (``ATSs''), including dark pools
and electronic communication networks (``ECNs''). Each SRO market
competes to produce transaction reports via trade executions, and two
FINRA-regulated TRFs compete to attract internalized transaction
reports. It is common for BDs to further and exploit this competition
by sending their order flow and transaction reports to multiple
markets, rather than providing them all to a single market. Competitive
markets for order flow, executions, and transaction reports provide
pricing discipline for the inputs of proprietary data products.
    The large number of SROs, TRFs, BDs, and ATSs that currently
produce proprietary data or are currently capable of producing it
provides further pricing discipline for proprietary data products. Each
SRO, TRF, ATS, and BD is currently permitted to produce proprietary
data products, and many currently do or have announced plans to do so,
including NASDAQ, NYSE, NYSE MKT, NYSE Arca, BATS, and Direct Edge.
    Any ATS or BD can combine with any other ATS, BD, or multiple ATSs
or BDs to produce joint proprietary data products. Additionally, order
routers and market data vendors can facilitate single or multiple BDs'
production of proprietary data products. The potential sources of
proprietary products are virtually limitless. Notably, the potential
sources of data include the BDs that submit trade reports to TRFs and
that have the ability to consolidate and distribute their data without
the involvement of FINRA or an exchange-operated TRF.
    The fact that proprietary data from ATSs, BDs, and vendors can by-
pass SROs is significant in two respects. First, non-SROs can compete
directly with SROs for the production and sale of proprietary data
products, as BATS and Arca did before registering as exchanges by
publishing proprietary book data on the internet. Second, because a
single order or transaction report can appear in a core data product,
an SRO proprietary product, and/or a non-SRO proprietary product, the
data available in proprietary products is exponentially greater than
the actual number of orders and transaction reports that exist in the
marketplace. Indeed, in the case of NASDAQ Basic, the data provided
through that product appears both in (i) real-time core data products
offered by the SIPs for a fee, and (ii) free SIP data products with a
15-minute time delay, and finds a close substitute in similar products
of competing venues.
    In addition to the competition and price discipline described
above, the market for proprietary data products is also highly
contestable because market entry is rapid, inexpensive, and profitable.
The history of electronic trading is replete with examples of entrants
that swiftly grew into some of the largest electronic trading platforms
and proprietary data producers: Archipelago, Bloomberg Tradebook,
Island, RediBook, Attain, TracECN, BATS Trading and Direct Edge. A
proliferation of dark pools and other ATSs operate profitably with
fragmentary shares of consolidated market volume.
    Regulation NMS, by deregulating the market for proprietary data,
has increased the contestability of that market. While BDs have
previously published their proprietary data individually, Regulation
NMS encourages market data vendors and BDs to produce proprietary
products cooperatively in a manner never before possible. Multiple
market data vendors already have the capability to aggregate data and
disseminate it on a profitable scale, including Bloomberg and Thomson
Reuters. In Europe, Markit aggregates and disseminates data from over
50 brokers and multilateral trading facilities.\18\
---------------------------------------------------------------------------

    \18\ http://www.markit.com/en/products/data/boat/boat-boat-data.page.
---------------------------------------------------------------------------

    In the case of TRFs, the rapid entry of several exchanges into this
space in 2006-2007 following the development and Commission approval of
the TRF structure demonstrates the contestability of this aspect of the
market.\19\ Given the demand for trade reporting services that is
itself a by-product of the fierce competition for transaction
executions--characterized notably by a proliferation of ATSs and BDs
offering internalization--any supra-competitive increase in the fees
associated with trade reporting or TRF data would shift trade report
volumes from one of the existing TRFs to the other \20\ and create
incentives for other TRF operators to enter the space. Alternatively,
because BDs reporting to TRFs are themselves free to consolidate the
market data that they report, the market for over-the-counter data
itself, separate and apart from the markets for execution and trade
reporting services--is fully contestable.
---------------------------------------------------------------------------

    \19\ The low cost exit of two TRFs from the market is also
evidence of a contestible market, because new entrants are reluctant
to enter a market where exit may involve substantial shut-down
costs.
    \20\ It should be noted that the FINRA/NYSE TRF has, in recent
weeks, received reports for over 8% of all over-the-counter volume
in NMS stocks.
---------------------------------------------------------------------------

    Moreover, consolidated data provides substantial pricing discipline
for proprietary data products that are a subset of the consolidated
data stream. Because consolidated data contains marketwide information,
it effectively places a cap on the fees assessed for proprietary data
(such as quotation and last sale data) that is simply a subset of the
consolidated data. The availability provides a powerful form of pricing
discipline for proprietary data products that contain data elements
that are a subset of the consolidated data, by highlighting the
optional nature of proprietary products.
    The competitive nature of the market for non-core ``sub-set''
products such as NASDAQ Basic is borne out by the performance of the
market. In May 2008, the internet portal Yahoo! began offering its Web
site viewers real-time last sale data (as well as best quote data)
provided by BATS. In June 2008, NASDAQ launched NLS, which was
initially subject to an ``enterprise cap'' of $100,000 for customers
receiving only one of the NLS products, and $150,000 for customers
receiving both products. The majority of NASDAQ's sales were at

the capped level. In early 2009, BATS expanded its offering of free
data to include depth-of-book data. Also in early 2009, NYSE Arca
announced the launch of a competitive last sale product with an
enterprise price of $30,000 per month. In response, NASDAQ combined the
enterprise cap for the NLS products and reduced the cap to $50,000
(i.e., a reduction of $100,000 per month). Similarly, the enterprise
license being offered for NASDAQ Basic through this proposed rule
change reflects a means by which the overall cost of the product is
limited in accordance with the existence of competitive alternatives,
including both core and proprietary data.
    In this environment, a super-competitive increase in the fees
charged for either transactions or data has the potential to impair
revenues from both products. ``No one disputes that competition for
order flow is `fierce'.'' NetCoalition I at 539. The existence of
fierce competition for order flow implies a high degree of price
sensitivity on the part of BDs with order flow, since they may readily
reduce costs by directing orders toward the lowest-cost trading venues.
A BD that shifted its order flow from one platform to another in
response to order execution price differentials would both reduce the
value of that platform's market data and reduce its own need to consume
data from the disfavored platform. If a platform increases its market
data fees, the change will affect the overall cost of doing business
with the platform, and affected BDs will assess whether they can lower
their trading costs by directing orders elsewhere and thereby lessening
the need for the more expensive data. Similarly, increases in the cost
of NASDAQ Basic would impair the willingness of distributors to take a
product for which there are numerous alternatives, impacting NASDAQ
Basic data revenues, the value of NASDAQ Basic as a tool for attracting
order flow, and ultimately, the volume of orders routed to NASDAQ and
reported to the FINRA/NASDAQ TRF and the value of its other data
products.
    Competition has also driven NASDAQ continually to improve its data
offerings and to cater to customers' data needs. The NASDAQ Basic
product itself is a product of this competition, offering a subset of
core data to users that may not wish to receive or pay for all
consolidated data. The existence of numerous alternatives to NASDAQ
Basic, including real-time consolidated data, free delayed consolidated
data, and proprietary data from other sources ensures that NASDAQ
cannot set unreasonable fees, or fees that are unreasonably
discriminatory, without losing business to these alternatives.
Accordingly, NASDAQ believes that the acceptance of the NASDAQ Basic
product in the marketplace demonstrates the consistency of these fees
with applicable statutory standards. Likewise, the fee changes proposed
herein will be subject to these same competitive forces. If the
proposed change is deemed to result in an excessive fee, only NASDAQ
will suffer, since its customers will merely migrate to competitive
alternatives.

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

    Written comments were neither solicited nor received.

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

    The foregoing rule change has become effective pursuant to Section
19(b)(3)(A) of the Act \21\ and paragraph (f) of Rule 19b-4
thereunder.\22\ At any time within 60 days of the filing of the
proposed rule change, the Commission summarily may temporarily suspend
such rule change if it appears to the Commission that such action is
necessary or appropriate in the public interest, for the protection of
investors, or otherwise in furtherance of the purposes of the Act.
---------------------------------------------------------------------------

    \21\ 15 U.S.C. 78s(b)(3)(A).
    \22\ 17 CFR 240.19b-4(f).
---------------------------------------------------------------------------

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-NASDAQ-2014-070 on the subject line.

Paper Comments

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

All submissions should refer to File Number SR-NASDAQ-2014-070. 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 Nasdaq. 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-NASDAQ-2014-070 and should
be submitted on or before August 12, 2014.

    For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\23\
Kevin M. O'Neill,
Deputy Secretary.
---------------------------------------------------------------------------

    \23\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------

[FR Doc. 2014-17144 Filed 7-21-14; 8:45 am]
BILLING CODE 8011-01-P


ENVIRONMENTAL PROTECTION AGENCY 40 CFR Part 52 [ EPA R03 OAR 2005 0502; FRL ]

Approval and Promulgation of Air Quality Implementation Plans; Pennsylvania; VOC and NOx RACT Determinations for Six Individual Sources AGENCY: Environmental Protection Agency ( EPA).

ACTION: Proposed rule.

SUMMARY: EPA proposes to approve revisions to the Pennsylvania State Implementation Plan ( SIP). The revisions were submitted by the Pennsylvania Department of Environmental Protection ( PADEP) to establish and require reasonably available control technology ( RACT) for six major sources of volatile organic compounds ( VOC) and nitrogen oxides ( NOx) pursuant to the Commonwealth of Pennsylvania's ( Pennsylvania or the Commonwealth) SIP approved generic RACT regulations. EPA is proposing to approve these revisions in accordance with the Clean Air Act ( CAA).

DATES: Written comments must be received on or before [ insert date 30 days from date of publication].

ADDRESSES: Submit your comments, identified by Docket ID Number EPA R03 OAR 2005

0502 by one of the following methods:

A. www. regulations. gov. Follow the on line instructions for submitting comments.

B. E mail: morris. makeba@ epa. gov.

C. Mail: EPA R03 OAR 2005 0502, Makeba Morris, Chief, Air Quality Planning 2 Branch, Mailcode 3AP21, U. S. Environmental Protection Agency, Region III, 1650 Arch Street, Philadelphia, Pennsylvania 19103.

E. Hand Delivery: At the previously listed EPA Region III address. Such deliveries are only accepted during the Docket's normal hours of operation, and special arrangements should be made for deliveries of boxed information.

Instructions: Direct your comments to Docket ID No. EPA R03 OAR 2005 0502. EPA's policy is that all comments received will be included in the public docket without change, and may be made available online 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 website 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 email 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. 3 Docket: All documents in the electronic docket are listed in the www. regulations. gov index.

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 during normal business hours at the Air Protection Division, U. S. Environmental Protection Agency, Region III, 1650 Arch Street, Philadelphia, Pennsylvania 19103. Copies of the State submittal are available at the Pennsylvania Department of Environmental Protection,

Bureau of Air Quality, P. O. Box 8468, 400 Market Street, Harrisburg, Pennsylvania 17105.

FOR FURTHER INFORMATION CONTACT: Rose Quinto, ( 215) 814 2182, or by e mail at quinto. rose@ epa. gov.

SUPPLEMENTARY INFORMATION: On November 21, 2005, PADEP submitted revisions to the Pennsylvania SIP. These SIP revisions consist of source specific operating permits,

consent orders, and/ or plan approvals issued by PADEP to establish and require RACT for sixteen individual sources pursuant to Pennsylvania's SIP approved generic RACT regulations.

This proposed rulemaking covers the Commonwealth's source specific RACT determinations for six of those sources. The remaining RACT determinations submitted by PADEP on November 21, 2005 will be the subject of separate rulemakings. 4 I. Background Pursuant to sections 182( b)( 2) and 182( f) of the CAA, Pennsylvania is required to establish and implement RACT for all major VOC and NOx sources. The major source size is determined by its location, the classification of that area and whether it is located in the ozone transport region ( OTR). Under section 184 of the CAA, RACT as specified in sections 182( b)( 2) and 182( f)

applies throughout the OTR. The entire Commonwealth is located within the OTR. Therefore,

RACT is applicable statewide in Pennsylvania.

State implementation plan revisions imposing RACT for three classes of VOC sources are required under section 182( b)( 2). The categories are:

( 1) All sources covered by a Control Technique Guideline ( CTG) document issued between November 15, 1990 and the date of attainment;

( 2) All sources covered by a CTG issued prior to November 15, 1990; and ( 3) All major non CTG sources.

The Pennsylvania SIP already has approved RACT regulations and requirements for all sources and source categories covered by the CTGs. The Pennsylvania SIP also has approved regulations to require major sources of NOx and additional major sources of VOC emissions ( not covered by a CTG) to implement RACT. These regulations are commonly termed the " generic RACT regulations". A generic RACT regulation is one that does not, itself, specifically define RACT for a source or source categories but instead establishes procedures for imposing case by case RACT determinations. The Commonwealth's SIP approved generic RACT regulations consist of the 5 procedures PADEP uses to establish and impose RACT for subject sources of VOC and NOx.

Pursuant to the SIP approved generic RACT rules, PADEP imposes RACT on each subject source in an enforceable document, usually a Plan Approval ( PA), Consent Order ( CO), or Operating Permit ( OP). The Commonwealth then submits these PAs, COs, or OPs to EPA for approval as source specific SIP revisions. EPA reviews these SIP revisions to ensure that the PADEP has determined and imposed RACT in accordance with the provisions of the SIPapproved generic RACT rules.

It must be noted that the Commonwealth has adopted and is implementing additional " post RACT requirements" to reduce seasonal NOx emissions in the form of a NOx cap and trade regulation,

25 Pa Code Chapters 121 and 123, based upon a model rule developed by the States in the OTR.

That regulation was approved as a SIP revision on June 6, 2000 ( 65 FR 35842). Pennsylvania has also adopted 25 Pa Code Chapter 145 to satisfy Phase I of the NOx SIP call. That regulation was approved as a SIP revision on August 21, 2001 ( 66 FR 43795). Federal approval of a sourcespecific RACT determination for a major source of NOx in no way relieves that source from any applicable requirements found in 25 PA Code Chapters 121, 123 and 145.

II. Summary of the SIP Revisions The following table identifies the sources and the individual consent orders ( COs) and operating permits ( OPs) which are the subject of this rulemaking. 6 PENNSYLVANIA  VOC AND NOx RACT DETERMINATIONS FOR INDIVIDUAL SOURCES SOURCE'S NAME COUNTY Operating Permit ( OP #) Consent Order ( CO#) SOURCE TYPE " MAJOR SOURCE" POLLUTANT DLM Foods ( formerly Heinz USA) Allegheny CO 211 Food Processing NOx NRG Energy Center ( formerly Pittsburgh Thermal Limited Partnership) Allegheny CO 220 Steam Generation NOx Tasty Baking Oxford, Inc. Chester OP 15 0104 Bakery Operations VOC Siberline Manufacturing Company Carbon OP 13 0014 Paint and Lacquers Production VOC Adhesives Research, Inc. York OP 67 2007 Surface Coating VOC Mohawk Flush Doors, Inc. Northumberland OP 49 0001 Surface Coating VOC 7 Interested parties are advised that copies of Pennsylvania's SIP submittals for these sources,

including the actual COs and OPs imposing RACT, PADEP's evaluation memoranda and the sources' RACT proposals ( referenced in PADEP's evaluation memoranda) are included and may be viewed in their entirety in both the electronic and hard copy versions of the docket for this final rule.

As previously stated, all documents in the electronic docket are listed in the www. regulations. gov index. Publicly available docket materials are available either electronically in www. regulations. gov or in hard copy during normal business hours at the Air Protection Division, U. S. Environmental Protection Agency, Region III, 1650 Arch Street, Philadelphia, Pennsylvania 19103. Copies of the State submittal are available at the Pennsylvania Department of Environmental Protection, Bureau of Air Quality, P. O. Box 8468, 400 Market Street, Harrisburg, Pennsylvania 17105.

EPA is approving these RACT SIP submittals because PADEP established and imposed these RACT requirements in accordance with the criteria set forth in its SIP approved generic RACT regulations applicable to these sources. In accordance with its SIP approved generic RACT rule, the Commonwealth has also imposed record keeping, monitoring, and testing requirements on these sources sufficient to determine compliance with the applicable RACT determinations.

III. Proposed Action EPA is approving the revisions to the Pennsylvania SIP submitted by PADEP on November 21,

2005 to establish and require VOC and NOx RACT for six individual sources pursuant to the Commonwealth's SIP approved generic RACT regulations. EPA is soliciting public comments on this proposed rule to approve these source specific RACT determinations established and imposed 8 by PADEP in accordance with the criteria set forth in its SIP approved generic RACT regulations applicable to these sources. These comments will be considered before taking final action.

IV. Statutory and Executive Order Reviews Under Executive Order 12866 ( 58 FR 51735, October 4, 1993), this proposed action is not a " significant regulatory action" and therefore is not subject to review by the Office of Management and Budget. For this reason, this action is also not subject to Executive Order 13211, " Actions Concerning Regulations That Significantly Affect Energy Supply, Distribution, or Use" ( 66 Fed.

Reg. 28355 ( May 22, 2001)). This action merely proposes to approve state law as meeting Federal requirements and imposes no additional requirements beyond those imposed by state law.

Accordingly, the Administrator certifies that this proposed rule will not have a significant economic impact on a substantial number of small entities under the Regulatory Flexibility Act ( 5 U. S. C. 601 et seq.). Because this rule proposes to approve pre existing requirements under state law and does not impose any additional enforceable duty beyond that required by state law, it does not contain any unfunded mandate or significantly or uniquely affect small governments, as described in the Unfunded Mandates Reform Act of 1995 ( Public Law 104 4). This proposed rule also does not have a substantial direct effect on one or more Indian tribes, on the relationship between the Federal Government and Indian tribes, or on the distribution of power and responsibilities between the Federal Government and Indian tribes, as specified by Executive Order 13175 ( 65 FR 67249,

November 9, 2000), nor will it 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 ( 64 FR 43255, 9 August 10, 1999), because it merely proposes to approve a state rule implementing a Federal standard, and does not alter the relationship or the distribution of power and responsibilities established in the Clean Air Act. This proposed rule also is not subject to Executive Order 13045 ( 62 FR 19885, April 23, 1997), because it is not economically significant.

In reviewing SIP submissions, EPA's role is to approve state choices, provided that they meet the criteria of the Clean Air Act. In this context, in the absence of a prior existing requirement for the State to use voluntary consensus standards ( VCS), EPA has no authority to disapprove a SIP submission for failure to use VCS. It would thus be inconsistent with applicable law for EPA, when it reviews a SIP submission, to use VCS in place of a SIP submission that otherwise satisfies the provisions of the Clean Air Act. Thus, the requirements of section 12( d) of the National Technology Transfer and Advancement Act of 1995 ( 15 U. S. C. 272 note) do not apply. As required by section 3 of Executive Order 12988 ( 61 FR 4729, February 7, 1996), in issuing this proposed rule, EPA has taken the necessary steps to eliminate drafting errors and ambiguity, minimize potential litigation,

and provide a clear legal standard for affected conduct. EPA has complied with Executive Order 12630 ( 53 FR 8859, March 15, 1988) by examining the takings implications of the rule in accordance with the " Attorney General's Supplemental Guidelines for the Evaluation of Risk and Avoidance of Unanticipated Takings" issued under the executive order. 10 This proposed rule to approve six source specific RACT determinations established and imposed by the Commonwealth of Pennsylvania pursuant to its SIP approved generic RACT regulations does not impose an information collection burden under the provisions of the Paperwork Reduction Act of 1995 ( 44 U. S. C. 3501 et seq.).

List of Subjects in 40 CFR Part 52 Environmental protection, Air pollution control, Nitrogen dioxide, Ozone, Reporting and recordkeeping requirements, Volatile organic compounds.

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

/ s/ ___________________________ ____________________________ Dated: February 22, 2006 William Early, Acting Regional Administrator, Region III.