[Federal Register Volume 83, Number 183 (Thursday, September 20, 2018)]
[Notices]
[Pages 47666-47673]
[FR Doc No: 2018-20435]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-84127; File No. SR-FINRA-2018-034]

Self-Regulatory Organizations; Financial Industry Regulatory
Authority, Inc.; Notice of Filing and Immediate Effectiveness of a
Proposed Rule Change To Amend Rule 2360 (Options) To Increase Position
Limits on Options on Certain Exchange-Traded Funds

September 14, 2018.
    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 August 31, 2018, Financial Industry Regulatory Authority, Inc.
(``FINRA'') filed with the Securities and Exchange Commission (``SEC''
or ``Commission'') the proposed rule change as described in Items I and
II below, which Items have been prepared by FINRA. FINRA has designated
the proposed rule change as constituting a ``non-controversial'' rule
change under paragraph (f)(6) of Rule 19b-4 under the Act,\3\ which
renders the proposal effective upon receipt of this filing by the
Commission. 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.
    \3\ 17 CFR 240.19b-4(f)(6).
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I. Self-Regulatory Organization's Statement of the Terms of the
Substance of the Proposed Rule Change

    FINRA is proposing to amend FINRA Rule 2360 (Options) to increase
the position limit for conventional options on the following exchange-
traded funds (``ETF''): The Standard and Poor's Depositary Receipts
Trust (``SPY''), iShares Russell 2000 ETF (``IWM''), PowerShares QQQ
Trust (``QQQ''), iShares MSCI Emerging Markets ETF (``EEM''), iShares
China Large-Cap ETF (``FXI''), iShares MSCI EAFE ETF (``EFA''), iShares
MSCI Brazil Capped ETF (``EWZ''), iShares 20+ Year Treasury Bond Fund
ETF (``TLT''), and iShares MSCI Japan ETF (``EWJ'').
    Below is the text of the proposed rule change. Proposed new
language is in italics; proposed deletions are in brackets.
* * * * *

2360. Options

    (a) No Change.

(b) Requirements

    (1) through (2) No Change.

(3) Position Limits

    (A) Stock Options--
    (i) through (ii) No Change.
    (iii) Conventional Equity Options
    a. For purposes of this paragraph (b), standardized equity option
contracts of the put class and call class on the same side of the
market overlying the same security shall not be aggregated with
conventional equity option contracts or FLEX Equity Option contracts
overlying the same security on the same side of the market.
Conventional equity option contracts of the put class and call class on
the same side of the market overlying the same security shall be
subject to a position limit of:
    1. through 5. No Change.
    6. for selected conventional options on exchange-traded funds
(``ETF''), the position limits are listed in the chart below:

----------------------------------------------------------------------------------------------------------------
          Security underlying option                                     Position limit
----------------------------------------------------------------------------------------------------------------
The DIAMONDS Trust (DIA).....................  300,000 contracts.
The Standard and Poor's Depositary Receipts    [900,000]1,800,000 contracts.
 Trust (SPY).
The iShares Russell 2000 [Index Fund]ETF       [500,000]1,000,000 contracts.
 (IWM).
The PowerShares QQQ Trust (QQQ[Q])...........  [900,000]1,800,000 contracts.
The iShares MSCI Emerging Markets [Index       [500,000]1,000,000 contracts.
 Fund]ETF (EEM).
iShares China Large-Cap ETF (FXI)............  500,000 contracts.
iShares MSCI EAFE ETF (EFA)..................  500,000 contracts.
iShares MSCI Brazil Capped ETF (EWZ).........  500,000 contracts.
iShares 20+ Year Treasury Bond Fund ETF (TLT)  500,000 contracts.
iShares MSCI Japan ETF (EWJ).................  500,000 contracts.
----------------------------------------------------------------------------------------------------------------

    b. No Change.
    (B) through (D) No Change.
    (4) through (24) No Change.
    (c) No Change.

   Supplementary Material:----

    .01 through .03 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, FINRA 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. FINRA has prepared summaries, set forth in sections A,
B, and C below, of the most significant aspects of such statements.

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

1. Purpose
    FINRA Rule 2360(b)(3)(A) imposes a position limit on the number of
equity options contracts in each class on the same side of the market
that can be held or written by a member, a person associated with a
member, or a customer or a group of customers acting in concert.
Position limits are intended to prevent the establishment of options
positions that can be used to manipulate or disrupt the underlying
market or might create incentives to manipulate or disrupt the
underlying market so as to benefit the options position. In addition,
position limits serve to reduce the potential for disruption of the
options market itself, especially in illiquid options classes.\4\ This
consideration has been balanced by the concern that the limits ``not be
established at levels that are so low as to discourage participation in
the options market by institutions and other investors with substantial
hedging needs or to prevent specialists and market makers from
adequately meeting their obligations to maintain a fair and orderly
market.'' \5\
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    \4\ See Securities Exchange Act Release No. 40969 (January 22,
1999), 64 FR 4911, 4912-4913 (February 1, 1999) (Order Approving
File No. SR-CBOE-98-23) (citing H.R. No. IFC-3, 96th Cong., 1st
Sess. at 189-91 (Comm. Print 1978)).
    \5\ Id. at 4913.
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    Rule 2360(b)(3)(A)(i) does not independently establish a position
limit for standardized equity options. Rather, the position limit
established by the rules of an options exchange for a particular equity
option is the applicable position limit for purposes of Rule 2360.\6\
Rule 2360(b)(3)(A)(iii) provides that conventional equity options are
subject to a basic position limit of 25,000 contracts or a higher tier
for conventional option contracts on securities that underlie exchange-
traded options qualifying for such higher tier as determined by the
rules of the options exchanges. In addition, FINRA lists position
limits for options on securities that have higher position limits--
currently, only the ETFs listed in Rule 2360(b)(3)(A)(iii)a.6.--that
also generally mirror the options exchange position limits.\7\ At this
time, FINRA proposes to conform to the options exchanges' recent
amendments that increased (or in the case of SPY decreased from the
pilot program) the position limit options on the following ETFs: SPY,
IWM, QQQ, EEM, FXI, EFA, EWZ, TLT and EWJ.\8\
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    \6\ See e.g., CBOE Rule 4.11; ISE Rule 412; NASDAQ PHLX Rule
1001; NYSE American Rule 904; NYSE Arca Rule 6.8; MIAX Rule 307; BOX
Rule 3120 and IM-3120-2; Nasdaq Chapter III, Section 7; BX Chapter
III, Section 7; and BZX Rule 18.7.
    \7\ The options exchanges have recently revised the position
limit on SPY options to 1,800,000 contracts after expiration of a
pilot program on July 12, 2018 that eliminated position limits on
SPY options. FINRA retained its position for conventional options on
SPY at 900,000 contracts. The proposed rule change proposes to
increase the position limit on SPY to 1,800,000 consistent with the
options exchanges updating the position limit on SPY to 1,800,000
contracts. See Securities Exchange Act Release No. 83349 (May 30,
2018), 83 FR 26123 (June 5, 2018) (Notice of Filing and Immediate
Effectiveness of File No. SR-MIAX-2018-11). See also Securities
Exchange Act Release No. 83412 (June 12, 2018), 83 FR 28298 (June
18, 2018) (Notice of Filing and Immediate Effectiveness of File No.
SR-PHLX-2018-44); Securities Exchange Act Release No. 83414 (June
12, 2018), 83 FR 28296 (June 18, 2018) (Notice of Filing and
Immediate Effectiveness of File No. SR-BOX-2018-22); Securities
Exchange Act Release No. 83415 (June 12, 2018), 83 FR 28274 (June
18, 2018) (Notice of Filing and Immediate Effectiveness of File No.
SR-CBOE-2018-042); Securities Exchange Act Release No. 83413 (June
12, 2018), 83 FR 28277 (June 18, 2018) (Notice of Filing and
Immediate Effectiveness of File No. SR-NYSEArca-2018-44); and
Securities Exchange Act Release No. 83417 (June 12, 2018), 83 FR
28279 (June 18, 2018) (Notice of Filing and Immediate Effectiveness
of File No. SR-NYSEAMER-2018-26).
    \8\ See note 7 for discussion regarding position limits for
options on SPY. See also Securities Exchange Act Release No. 82770
(February 23, 2018), 83 FR 8907 (March 1, 2018) (Order Granting
Accelerated Approval of File No. SR-CBOE-2017-057). See also
Securities Exchange Act Release No. 82931 (March 22, 2018), 83 FR
13323 (March 28, 2018) (Notice of Filing and Immediate Effectiveness
of File No. SR-MIAX-2018-10); Securities Exchange Act Release No.
82930 (March 22, 2018), 83 FR 13330 (March 28, 2018) (Notice of
Filing and Immediate Effectiveness of File No. SR-BOX-2018-10);
Securities Exchange Act Release No. 82932 (March 22, 2018), 83 FR
13316 (March 28, 2018) (Notice of Filing and Immediate Effectiveness
of File No. SR-PHLX-2018-24); Securities Exchange Act Release No.
83066 (April 19, 2018), 83 FR 18099 (April 25, 2018) (Notice of
Filing and Immediate Effectiveness of File No. SR-NYSEArca-2018-23)
and Securities Exchange Act Release No. 83065 (April 19, 2018), 83
FR 18093 (April 25, 2018) (Notice of Filing and Immediate
Effectiveness of File No. SR-NYSEAMER-2018-14).
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    The proposed rule change would amend the table provided in Rule
2360(b)(3)(A)(iii)a.6. as follows:
     The position limits for options on SPY would be increased
from 900,000 contracts to 1,800,000 contracts;
     The position limit for options on IWM would be increased
from 500,000 contracts to 1,000,000 contracts;
     The position limit for options on QQQ would be increased
from 900,000 contracts to 1,800,000 contracts; and
     The position limit for options on EEM would be increased
from 500,000 contracts to 1,000,000 contracts.
    In addition, the proposed rule change would add to the table
provided in Rule 2360(b)(3)(A)(iii)a.6. as follows, with the effect of
each ETF being increased from the current position limit of 250,000
contracts:
     The position limit for options on FXI would be increased
to 500,000 contracts;
     The position limit for options on EFA would be increased
to 500,000 contracts;
     The position limit for options on EWZ would be increased
to 500,000 contracts;
     The position limit for options on TLT would be increased
to 500,000 contracts; and
     The position limit for options on EWJ would be increased
to 500,000 contracts.\9\
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    \9\ The proposed rule filing would also make certain wording
changes to the listing of the names of the ETFs and change in two
places ``Index Fund'' to ``ETF''. The proposed rule filing would
also revise the symbol of The PowerShares QQQ Trust to ``QQQ.''
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    In support of the proposed rule change, as noted by Cboe, position
limits are determined by the option exchange's requirements according
to the number of outstanding shares and the trading volume of the
underlying ETF over the past six months.\10\ The ETFs that underlie
options subject to the proposed rule change are highly liquid, and are
based on a broad set of highly liquid securities and other reference
assets. The above listed ETFs are listed on various national securities
exchanges and meet their listing standards.
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    \10\ See for example, Cboe Rule 4.11 Interpretations and
Policies: .02.
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    FXI tracks the performance of the FTSE China 50 Index, which is
composed of the 50 largest Chinese stocks.\11\ EEM tracks the
performance of

the MSCI Emerging Markets Index, which is composed of approximately 800
component securities from emerging market countries from all over the
world.\12\ IWM tracks the performance of the Russell 2000 Index, which
is composed of 2,000 small-cap domestic stocks.\13\ EFA tracks the
performance of MSCI EAFE Index, which has over 900 component
securities.\14\ The MSCI EAFE Index is designed to represent the
performance of large and mid-cap securities across 21 developed
markets, including countries in Europe, Australia and the Far East,
excluding the U.S. and Canada.\15\ EWZ tracks the performance of the
MSCI Brazil 25/50 Index, which is composed of shares of large and mid-
size companies in Brazil.\16\ TLT tracks the performance of ICE U.S.
Treasury 20+ Year Bond Index, which is composed of long-term U.S.
Treasury bonds.\17\ QQQ tracks the performance of the Nasdaq-100 Index,
which is composed of 100 of the largest domestic and international non-
financial companies listed on the Nasdaq Stock Market LLC
(``Nasdaq'').\18\ EWJ tracks the MSCI Japan Index, which tracks the
performance of large and mid-sized companies in Japan.\19\ SPY tracks
the performance of the S&P 500[supreg] Index, which is an index of
diversified large cap U.S. companies.\20\
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    \11\ See https://www.ishares.com/us/products/239536/ishares-china-largecap-etf.
    \12\ See https://www.ishares.com/us/products/239637/ishares-msci-emerging-markets-etf.
    \13\ See https://www.ishares.com/us/products/239710/ishares-russell-2000-etf.
    \14\ See https://www.ishares.com/us/products/239623/.
    \15\ See https://www.msci.com/eafe.
    \16\ See https://www.ishares.com/us/products/239612/ishares-msci-brazil-capped-etf.
    \17\ See https://www.ishares.com/us/products/239454/.
    \18\ See https://indexes.nasdaqomx.com/Index/Overview/NDX.
    \19\ See https://www.ishares.com/us/products/239665/EWJ.
    \20\ See https://us.spdrs.com/en/etf/spdr-sp-500-etf-SPY.
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    In support of this proposal, all trading and other statistics,
except SPY which were compiled by FINRA, have been compiled by Cboe as
of the dates provided by Cboe and provided in its proposed rule change
to increase the applicable positions limits: \21\
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    \21\ See note 8.

----------------------------------------------------------------------------------------------------------------
                                                                     2017 ADV         Shares
                       ETF                           2017 ADV         (option       outstanding     Fund market
                                                   (mil. shares)    contracts)        (mil.)       cap.  ($mil.)
----------------------------------------------------------------------------------------------------------------
FXI.............................................           15.08          71,944            78.6        $3,343.6
EEM.............................................           52.12         287,357           797.4        34,926.1
IWM.............................................           27.46         490,070           253.1        35,809.1
EFA.............................................           19.42          98,844          1178.4        78,870.3
EWZ.............................................           17.08          95,152           159.4         6,023.4
TLT.............................................            8.53          80,476            60.0         7,442.4
QQQ.............................................           26.25         579,404           351.6        50,359.7
EWJ.............................................            6.06           4,715           303.6        16,625.1
SPY.............................................           64.63       2,575,153          976.23       240,540.0
----------------------------------------------------------------------------------------------------------------

    FINRA agrees as proposed by Cboe that the liquidity in the
underlying ETFs, and the liquidity in the ETF options support its
request to increase the position limits for the options subject to the
proposed rule change. As to the underlying ETF shares, the average
daily trading volume across all exchanges for the period of January 1
to July 31, 2017 was: (i) FXI-15.08 million shares; (ii) EEM-52.12
million shares; (iii) IWM-27.46 million shares; (iv) EFA-19.42 million
shares; (v) EWZ-17.08 million shares; (vi) TLT-8.53 million shares;
(vii) QQQ- 26.25 million shares; (vii) EWJ-6.06 million shares; and
(viii) SPY-64.63 million shares.
    In proposing the increased position limits, FINRA considered the
availability of economically equivalent products and their respective
position limits. For instance, some of the ETFs underlying options
subject to this proposal are based on broad-based indices that underlie
cash-settled options that are economically equivalent to the ETF
options that are the subject of this proposal and have no position
limits (NDX and SPX). Other ETFs are based on broad-based indexes that
underlie cash-settled options with position limits reflecting notional
values that are larger than the current position limits for ETF
analogues (EEM and EFA). Where there was no approved index analogue,
FINRA believes, based on the liquidity, breadth and depth of the
underlying market, that the index referenced by the ETF would be
considered a broad-based index (example FXI and EWJ).\22\ FINRA
believes that if certain position limits are appropriate for the
options overlying the same index, or an analogue to the basket of
securities that the ETF tracks, then those same economically equivalent
position limits should be appropriate for the option overlying the ETF.
In addition, the market capitalization of the underlying index or
reference asset is large enough to absorb any price movements that may
be caused by an oversized trade. Also, the issuer may look to the
stocks comprising the analogous underlying index or reference asset
when seeking to create additional ETF shares which are part of the
creation/redemption process to address supply and demand or to mitigate
the price movement of the price of the ETF.
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    \22\ FINRA Rule 2360(b)(3)(B) establishes position limits for
index options by incorporating by reference the position limit
established by the options exchange on which the option trades.
Options exchanges establish rules for index options based on the
characteristic of the underlying index. See, e.g., Cboe Rule 24.4
and MIAX Rule 1804.
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    For example, the PowerShares QQQ Trust or QQQ is an ETF that tracks
the Nasdaq 100 Index or NDX, which is an index composed of 100 of the
largest non-financial securities listed on the Nasdaq Stock Market LLC
(``Nasdaq''). Options on NDX are currently subject to no position
limits but share similar trading characteristics as QQQ. Based on QQQ's
share price of $154.5422 and NDX's index level of 6,339.14,
approximately 40 contracts of QQQ equals one contract of NDX. Assume
that options on NDX are subject to the standard position limit of
25,000 contracts for broad-based index options under options exchange
rules. Based on the above comparison of notional values, this would
result in a position limit equivalent to 1,000,000 contracts for QQQ as
NDX's analogue. However, options on NDX are not subject to position
limits and has an average daily trading volume of 15,300 contracts.
Options on QQQ are currently subject to a position limit of 900,000
contracts but has a much higher average daily trading volume of 579,404
contracts. Furthermore, NDX currently has a market capitalization of
$17.2 trillion and QQQ has a market capitalization of

$50,359.7 million, and the component securities of NDX, in aggregate,
have traded an average of 440 million shares per day in 2017, both
market capitalizations being large enough to absorb any price movement
caused by a large trade in the QQQ. The Commission has also approved no
position limit for options on NDX, although it has a much lower daily
trading volume than its analogue, the QQQ. Therefore, FINRA believes it
is reasonable to increase the position limit for options on QQQ from
900,000 to 1,800,000 contracts.
    The SPDR[supreg] S&P 500[supreg] ETF Trust or SPY seeks to provide
investment results that, before expenses, correspond generally to the
price and yield performance of the S&P 500[supreg] Index or SPX, which
is an index composed of 500 large-cap U.S. companies. Options on the
SPX have no position limits and share similar trading characteristics
as SPY. Based on SPY's price of $263.15 and SPX's index level of
2640.87, approximately 10 contracts of SPY equals one contract of
SPX.\23\ Assume that options on SPX are subject to the standard
position limit of 25,000 contracts for broad-based index options under
options exchange rules. Based on the above comparison of notional
values, this would result in a position limit equivalent to 250,000
contracts for options on SPY as SPX's analogue. However, options on SPX
are not subject to position limits and has an average daily trading
volume of 1,101,185 contracts.\24\ Options on SPY were recently changed
to a position limit of 1,800,000 contracts for standardized options,
but is currently subject to a conventional option position limit of
900,000 contracts but has a much higher average daily trading volume of
2,575,153 contracts.\25\ Furthermore, as of December 29, 2017, SPX had
a market capitalization of $23.9 trillion and SPY has a market
capitalization of $277.54 billion, large enough to absorb any price
movement caused by a large trade in the SPY. The Commission has also
approved no position limit for options on SPX, although it has a much
lower daily trading volume than its analogue, the SPY, for which the
exchanges recently changed the position limit to 1,800,000 contracts.
Therefore, FINRA believes it is reasonable to increase the position
limits for options on SPY from 900,000 to 1,800,000 contracts.
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    \23\ As of March 29, 2018.
    \24\ As of July 31, 2017.
    \25\ See note 7.
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    The iShares Russell 2000 ETF or IWM, is an ETF that also tracks the
Russell 2000 index or RUT, which is an index composed of 2,000 small-
cap domestic companies in the Russell 2000 index. Options on RUT are
currently subject to no position limits but share similar trading
characteristics as IWM. Based on IWM's share price of $144.77 and RUT's
index level of 1,486.88, approximately 10 contracts of IWM equals one
contract of RUT. Assume that options on RUT are subject to the standard
position limit of 25,000 contracts for broad-based index options under
options exchange rules. Based on the above comparison of notional
values, this would result in a position limit equivalent to 250,000
contracts for options on IWM as RUT's analogue. However, options on RUT
are not subject to position limits and has an average daily trading
volume of 66,200 contracts. Options on IWM are currently subject to a
position limit of 500,000 contracts but has a much higher average daily
trading volume of 490,070 contracts. The Commission has approved no
position limit for options on RUT, although it has a much lower average
daily trading volume than its analogue, the IWM. Furthermore, RUT
currently has a market capitalization of $2.4 trillion and IWM has a
market capitalization of $35,809.1 million, and the component
securities of RUT, in aggregate, have traded an average of 270 million
shares per day in 2017, both large enough to absorb any price movement
caused by a large trade in the IWM. Therefore, FINRA believes it is
reasonable to increase the position limit for options on IWM from
500,000 to 1,000,000 contracts.
    EEM tracks the performance of the MSCI Emerging Markets Index or
MXEF, which is composed of approximately 800 component securities from
emerging market countries from all over the world. Below makes the same
notional value comparisons as made above. Based on EEM's share price of
$47.06 and MXEF's index level of 1,136.45, approximately 24 contracts
of EEM equals one contract of MXEF. Assume that options on MXEF are
subject to the standard position limit of 25,000 contracts for broad-
based index options under options exchange rules. Based on the above
comparison of notional values, this would result in a position limit
economically equivalent to 604,000 contracts for options on EEM as
MXEF's analogue. However, MXEF has an average daily trading volume of
180 contracts. Options on EEM is currently subject to a position limit
of 500,000 contracts but has a much higher average daily trading volume
of 287,357 contracts. Furthermore, MXEF currently has a market
capitalization of $5.18 trillion and EEM has a market capitalization of
$34,926.1 million, and the component securities of MXEF, in aggregate,
have traded an average of 33.6 billion shares per day in 2017, both
large enough to absorb any price movement caused by a large trade in
the EEM. Therefore, based on the comparison of average daily trading
volume, FINRA believes it is reasonable to increase the position limit
for options on EEM from 500,000 to 1,000,000 contracts.
    EFA tracks the performance of the MSCI EAFE Index or MXEA, which
has over 900 component securities designed to represent the performance
of large and mid-cap securities across 21 developed markets, including
countries in Europe, Australia and the Far East, excluding the U.S. and
Canada. Below makes the same notional value comparison as made above.
Based on EFA's share price of $69.16 and MXEA's index level of
1,986.15, approximately 29 contracts of EFA equals one contract of
MXEA. Assume options on MXEA are subject to the standard position limit
of 25,000 contracts for broad-based index options under options
exchange rules. Based on the above comparison of notional values, this
would result in a position limit economically equivalent to 721,000
contracts for EFA as MXEA's analogue. Furthermore, MXEA currently has a
market capitalization of $18.7 trillion and EFA has a market
capitalization of $78,870.3 million, and the component securities of
MXEA, in aggregate, have traded an average of 4.6 billion shares per
day in 2017, both large enough to absorb any price movement caused by a
large trade in EFA. However, MXEA has an average daily trading volume
of 270 contracts. Options on EFA is currently subject to a position
limit of 250,000 contracts but has a much higher average daily trading
volume of 98,844 contracts. Based on the above comparisons, FINRA
believes it is reasonable to increase the position limit for options on
EFA from 250,000 to 500,000 contracts.
    FXI tracks the performance of the FTSE China 50 Index, which is
composed of the 50 largest Chinese stocks. There is currently no index
analogue for FXI approved for options trading. Options on FXI are
currently subject to a position limit of 250,000 contracts but has a
much higher average daily trading volume of 15.08 million shares.
However, the FTSE China 50 Index currently has a market capitalization
of $1.7 trillion and FXI has a market capitalization of $2,623.18
million, both large enough to absorb any price movement caused by a
large trade

in FXI. The components of the FTSE China 50 Index, in aggregate, have
an average daily trading volume of 2.3 billion shares. Based on the
above comparisons, FINRA believes it is reasonable to increase the
position limit for options on FXI from 250,000 to 500,000 contracts.
    EWZ tracks the performance of the MSCI Brazil 25/50 Index, which is
composed of shares of large and mid-size companies in Brazil. There is
currently no index analogue for EWZ approved for options trading.
Options on EWZ are currently subject to a position limit of 250,000
contracts but the ETF has a much higher average daily trading volume of
17.08 million shares. However, the MSCI Brazil 25/50 Index currently
has a market capitalization of $700 billion and EWZ has a market
capitalization of $6,023.4 million, both large enough to absorb any
price movement caused by a large trade in EWZ. The components of the
MSCI Brazil 25/50 Index, in aggregate, have an average daily trading
volume of 285 million shares. Based on the above comparisons, FINRA
believes it is reasonable to increase the position limit for options on
EWZ from 250,000 to 500,000 contracts.
    TLT tracks the performance of the ICE U.S. Treasury 20+ Year Bond
Index, which is composed of long-term U.S. Treasury bonds. There is
currently no index analogue for TLT approved for options trading.
However, the U.S. Treasury market is one of the largest and most liquid
markets in the world, with over $14 trillion outstanding and turnover
of approximately $500 billion per day. TLT currently has a market
capitalization of $7,442.4 million, both large enough to absorb any
price movement caused by a large trade in TLT. Therefore, any potential
for manipulation will not increase solely due to the increase in
position limits as set forth in this proposal. Based on the above
comparisons, FINRA believes it is reasonable to increase the position
limit for options on TLT from 250,000 to 500,000 contracts.
    EWJ tracks the MSCI Japan Index, which tracks the performance of
large and mid-sized companies in Japan. There is currently no index
analogue for EWJ approved for options trading. However, the MSCI Japan
Index has a market capitalization of $3.5 trillion and EWJ has a market
capitalization of $16,625.1 million, and the component securities of
the MSCI Japan Index, in aggregate, have traded an average of 1.1
billion shares per day in 2017, both large enough to absorb any price
movement caused by a large trade in EWJ. Options on EWJ is currently
subject to a position limit of 250,000 contracts and has an average
daily trading volume of 6.6 million shares. Based on the above
comparisons, FINRA believes it is reasonable to increase the position
limit for options on EWJ from 250,000 to 500,000 contracts.
    FINRA believes that increasing the position limits for the
conventional options subject to the proposed rule change would lead to
a more liquid and competitive market environment for these options,
which will benefit customers interested in these products.
Surveillance and Reporting
    Further, FINRA believes that the increased position limits
provisions are appropriate in light of the existing surveillance
procedures and reporting requirements at FINRA,\26\ the options
exchanges, and at the several clearing firms, which are capable of
properly identifying unusual or illegal trading activity. These
procedures use daily monitoring of market movements by automated
surveillance techniques to identify unusual activity in both options
and underlying stocks.\27\
---------------------------------------------------------------------------

    \26\ See Rule 2360(b)(5) for the options reporting requirements.
    \27\ These procedures have been effective for the surveillance
of options trading and will continue to be employed.
---------------------------------------------------------------------------

    In addition, large stock holdings must be disclosed to the
Commission by way of Schedules 13D or 13G.\28\ Options positions are
part of any reportable positions and cannot legally be hidden.
Moreover, the previously noted Rule 2360(b)(5) requirement that members
must file reports with FINRA for any customer that held aggregate large
long or short positions of any single class for the previous day will
continue to serve as an important part of FINRA's surveillance efforts.
---------------------------------------------------------------------------

    \28\ 17 CFR 240.13d-1.
---------------------------------------------------------------------------

    Finally, FINRA believes that the current financial requirements
imposed by FINRA and by the Commission adequately address financial
responsibility concerns that a member or its customer will maintain an
inordinately large unhedged position in any option with a higher
position limit. Current margin and risk-based haircut methodologies
serve to limit the size of positions maintained by any one account by
increasing the margin or capital that a member must maintain for a
large position. Under Rule 4210(f)(8)(A), FINRA also may impose a
higher margin requirement upon a member when FINRA determines a higher
requirement is warranted. In addition, the Commission's net capital
rule \29\ imposes a capital charge on members to the extent of any
margin deficiency resulting from the higher margin requirement.
---------------------------------------------------------------------------

    \29\ 17 CFR 240.15c3-1.
---------------------------------------------------------------------------

    FINRA has filed the proposed rule change for immediate
effectiveness and has requested that the SEC waive the requirement that
the proposed rule change not become operative for 30 days after the
date of the filing, so FINRA can implement the proposed rule change
immediately.
2. Statutory Basis
    FINRA believes that the proposed rule change is consistent with the
provisions of Section 15A(b)(6) of the Act,\30\ which requires, among
other things, that FINRA rules must be designed to prevent fraudulent
and manipulative acts and practices, to promote just and equitable
principles of trade, and, in general, to protect investors and the
public interest. FINRA believes that the proposed rule change promotes
consistent regulation by harmonizing position limits with those of the
other self-regulatory organizations. FINRA further believes that
increasing the position limit on conventional options promotes
consistent regulation by harmonizing the position limit with its
standardized counterpart. In addition, FINRA believes the proposed rule
change will be beneficial to large market makers and institutions
(which generally have the greatest ability to provide liquidity and
depth in products that may be subject to higher position limits as has
been the case with recently approved increased position limits),\31\ as
well as retail traders and public customers, by providing them with a
more effective trading and hedging vehicle. In addition, FINRA believes
that the structure of the options subject to the proposed rule change
and the considerable liquidity of the market for those options
diminishes the opportunity to manipulate these products and disrupt the
underlying market that a lower position limit may protect against.
---------------------------------------------------------------------------

    \30\ 15 U.S.C. 78o-3(b)(6).
    \31\ See note 8.
---------------------------------------------------------------------------

    Increased position limits for select actively traded options, such
as those proposed herein, is not novel and has been previously approved
by the Commission. For example, the Commission has previously approved
a position limit of 1,800,000 contracts on options on SPY.\32\
Additionally, the Commission has approved similar proposed rule changes
by the options exchanges to increase position and exercise limits for
options on highly

liquid, actively-traded ETFs,\33\ including a proposal to permanently
eliminate the position and exercise limits for options overlaying the
S&P 500 Index, S&P 100 Index, Dow Jones Industrial Average, and Nasdaq
100 Index.\34\ In approving the permanent elimination of position and
exercise limits, the Commission relied heavily upon surveillance
capabilities, and the Commission expressed trust in the enhanced
surveillance and reporting safeguards in order to detect and deter
possible manipulative behavior, which might arise from eliminating
position and exercise limits.\35\ Furthermore, as described more fully
above, options on other ETFs have the position limits proposed herein,
but their trading volumes are significantly lower than the ETFs subject
to the proposed rule change.
---------------------------------------------------------------------------

    \32\ See note 7.
    \33\ See Securities Exchange Act Release No. 68086 (October 23,
2012), 77 FR 65600 (October 29, 2012) (Order Approving File No. SR-
CBOE-2012-66); Securities Exchange Act Release No. 68478 (December
19, 2012), 77 FR 76132 (December 26, 2012) (Notice of Filing and
Immediate Effectiveness of File No. SR-BOX-2012-23); Securities
Exchange Act Release No. 68398 (December 11, 2012), 77 FR 74700
(December 17, 2012) (Notice of Filing and Immediate Effectiveness of
File No. SR-ISE-2012-93); Securities Exchange Act Release No. 68293
(November 27, 2012), 77 FR 71644 (December 3, 2012) (Notice of
Filing and Immediate Effectiveness of File No. SR-Phlx-2012-132);
Securities Exchange Act Release No. 68358 (December 5, 2012), 77 FR
73708 (December 11, 2012) (Notice of Filing and Immediate
Effectiveness of File No. SR-NYSE MKT-2012-71); Securities Exchange
Act Release No. 68359 (December 5, 2012), 77 FR 73716 (December 11,
2012) (Notice of Filing and Immediate Effectiveness of File No. SR-
NYSE Arca-2012-132) and Securities Exchange Act Release No. 69457
(April 25, 2013), 78 FR 25502 (May 1, 2013) (Notice of Filing and
Immediate Effectiveness of File No. SR-MIAX-2013-17).
    \34\ See Securities Exchange Act Release No. 44994 (October 26,
2001), 66 FR 55722 (November 2, 2001) (Order Approving File No. SR-
CBOE-2001-22) and Securities Exchange Act Release No. 52650 (October
21, 2005), 70 FR 62147 (October 28, 2005) (Order Approving File No.
SR-CBOE-2005-41) (``NDX Approval'').
    \35\ See NDX Approval at 62149.
---------------------------------------------------------------------------

    Furthermore, the proposed position limits would continue to address
potential manipulative activity while allowing for potential hedging
activity for appropriate economic purposes. The creation and redemption
process for these ETFs also lessens the potential for manipulative
activity. When an ETF company wants to create more ETF shares, it looks
to an Authorized Participant, which is a market maker or other large
financial institution, to acquire the securities the ETF is to hold.
For instance, IWM is designed to track the performance of the Russell
2000 Index. The Authorized Participant will purchase all the Russell
2000 constituent securities in the exact same weight as the index, then
deliver those shares to the ETF provider. In exchange, the ETF provider
gives the Authorized Participant a block of equally valued ETF shares,
on a one-for-one fair value basis. The price is based on the net asset
value, not the market value at which the ETF is trading. The creation
of new ETF units can be conducted all trading day and is not subject to
position limits. This process can also work in reverse where the ETF
company seeks to decrease the number of shares that are available to
trade. The creation and redemption process, therefore, creates a direct
link to the underlying components of the ETF, and serves to mitigate
potential price impact of the ETF shares that might otherwise result
from increased position limits.
    The ETF creation and redemption process keeps ETF share prices
trading in line with the ETF's underlying net asset value. Because an
ETF trades like a stock, its price will fluctuate during the trading
day, due to simple supply and demand. If demand to buy an ETF is high,
for instance, the ETF's share price might rise above the value of its
underlying securities. When this happens, an Authorized Participant can
arbitrage this difference by buying the underlying shares that compose
the ETF and then selling the ETF shares on the open market. This drives
the ETF's share price back toward fair value. Likewise, if the ETF
starts trading at a discount to the securities it holds, the Authorized
Participant can buy shares of the ETF and redeem them for the
underlying securities. Buying undervalued ETF shares drives the price
of the ETF back toward fair value. This arbitrage process helps to keep
an ETF's price in line with the value of its underlying portfolio.
    Lastly, the Commission expressed the belief that removing position
and exercise limits may bring additional depth and liquidity without
increasing concerns regarding intermarket manipulation or disruption of
the options or the underlying securities.\36\ FINRA's existing
surveillance and reporting safeguards are designed to deter and detect
possible manipulative behavior, which might arise from eliminating
position and exercise limits.
---------------------------------------------------------------------------

    \36\ See NDX Approval at 62149.
---------------------------------------------------------------------------

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

    FINRA 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.
Economic Impact Analysis
    FINRA has undertaken an economic impact assessment, as set forth
below, to analyze the potential economic impacts, including anticipated
costs, benefits, and distributional and competitive effects transfers
of wealth, relative to the current baseline, and the alternatives FINRA
considered in assessing how to best meet its regulatory objectives.
Regulatory Objective
    FINRA is proposing to amend Rule 2360 to harmonize FINRA's position
limits for conventional options with the position limit for
standardized options.\37\
---------------------------------------------------------------------------

    \37\ See note 8.
---------------------------------------------------------------------------

Economic Baseline
    Per FINRA Rule 2360(b)(30)(A)(iii) conventional equity options are
subject to a basic position limit of 25,000 contracts or higher for
conventional option contracts on securities that underlie exchange-
traded options qualifying for a higher tier as determined by option
exchange rules. The existing position limits for conventional options
on ETFs are: 900,000 contracts for SPY or QQQ, 500,000 contracts for
IWM or EEM, and 250,000 contracts for FXI, EFA, EWZ, TLT, or EWJ.
Option exchanges have recently increased (or in the case of SPY
decreased from the pilot program) position limit options on several
ETFs such as SPY, IWM, QQQ, EEM, FXI, EFA, EWZ, TLT, and EWJ.
Economic Impact
Benefits
    As noted above, the proposed rule change would amend Rule 2360 to
harmonize FINRA's position limits for conventional options with the
position limit for standardized options.\38\ For investors that short
conventional equity options or buy them long, there is likely to be a
natural size for an executed order that minimizes fixed and variable
transaction costs, including but not limited to the bid-ask spread,
price impact, and transaction fees. If the existing position limits for
conventional equity options on select ETFs constrains the order size
such that fixed and variable transaction costs are higher than optimal,
then investors may benefit if the new position limit is no less than
the natural size. In such an event, the cost to hedge an ETF would
decline, thereby making it less costly to manage downside risk.
---------------------------------------------------------------------------

    \38\ See note 8.
---------------------------------------------------------------------------

    In addition, if the existing position limits serve as a constraint,
then an

increase in the position limit for conventional options on select ETFs
would permit investors to more easily find a counterparty. If the
number of counterparties increases, then the cost of hedging should
decline as the half-spread narrows, thereby making it less expensive to
manage downside risk.
    The extent of the constraint imposed by the current limit on
conventional options is related to the ability of an investor to
achieve similar economic exposure through other means. If there are
other securities, such as an option on a closely related index, that
exist and provide similar economic exposure less expensively, then the
value of lessening the position limit on conventional options on ETFs
is lower. Members may rely on information and data feeds from the
Options Clearing Corporation to assist in their monitoring position
limits. Because position limits on the standardized and conventional
side have traditionally been consistent, members have relied on this
feed for both standardized and conventional options. If the position
limits between standardized and conventional options are conformed,
then the cost from monitoring position limits should decline for member
firms.
Cost
    The proposed rule change may impose limited operational cost on
member firms that trade conventional options on ETFs, as these same
firms would need to revise position limits that are used in trading
systems. However, the proposed rule change should not impose additional
costs, because it is difficult to disrupt or manipulate the underlying
market, create an incentive to disrupt or manipulate the underlying
market for the purpose of profiting from the options position, or
disrupt or manipulate the options market for conventional options on
ETFs affected by this proposed rule. ETFs that underlie options subject
to the proposed rule change are highly liquid, and are based on a broad
set of highly liquid securities, which makes the market difficult to
manipulate or disrupt. In fact, options on certain broad-based security
indexes have no position limits. Furthermore, the creation and
redemption process for these ETFs reduces the potential for disruptive
or manipulative activity. New ETF units may be created at any time
during the trading day and are not subject to position limits.
Consequently, there is a direct link between the underlying components
of the ETF and the ETF, which keeps ETF share prices trading in line
with the ETF's underlying net asset value.
Alternatives
    No further alternatives are under consideration.

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

    Because the foregoing proposed rule change does not: (i)
Significantly affect the protection of investors or the public
interest; (ii) impose any significant burden on competition; and (iii)
become operative for 30 days after the date of the filing, or such
shorter time as the Commission may designate if consistent with the
protection of investors and the public interest, it has become
effective pursuant to Section 19(b)(3)(A) of the Act \39\ and Rule 19b-
4(f)(6) \40\ thereunder.
---------------------------------------------------------------------------

    \39\ 15 U.S.C. 78s(b)(3)(A).
    \40\ 17 CFR 240.19b-4(f)(6). In addition, Rule 19b-4(f)(6)(iii)
requires a self-regulatory organization to give the Commission
written notice of its intent to file the proposed rule change, along
with a brief description and the text of the proposed rule change,
at least five business days prior to the date of filing of the
proposed rule change, or such shorter time as designated by the
Commission. FINRA has satisfied this requirement.
---------------------------------------------------------------------------

    FINRA has asked the Commission to waive the 30-day operative delay
so that FINRA may immediately harmonize position limits with those of
other self-regulatory organizations to ensure consistent regulation.
For this reason, the Commission believes that waiving the 30-day
operative delay is consistent with the protection of investors and the
public interest. Therefore, the Commission hereby waives the operative
delay and designates the proposal operative upon filing.\41\
---------------------------------------------------------------------------

    \41\ For purposes only of waiving the 30-day operative delay,
the Commission has also considered the proposed rule's impact on
efficiency, competition, and capital formation. See 15 U.S.C.
78c(f).
---------------------------------------------------------------------------

    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. If the Commission
takes such action, the Commission shall institute proceedings to
determine whether the proposed rule should be approved or disapproved.

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 protected]. Please include
File Number SR-FINRA-2018-034 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-FINRA-2018-034. 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 website (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 website 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 such filing also will be available for inspection
and copying at the principal office of FINRA. All comments received
will be posted without change. Persons submitting comments are
cautioned that we do not redact or edit personal identifying
information from comment submissions. You should submit only
information that you wish to make available publicly. All submissions
should refer to File Number SR-FINRA-2018-034, and should be submitted
on or before October 11, 2018.
---------------------------------------------------------------------------

    \42\ 17 CFR 200.30-3(a)(12).

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

    For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\42\
Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2018-20435 Filed 9-19-18; 8:45 am]
 BILLING CODE 8011-01-P


[Federal Register: August 23, 2010 (Volume 75, Number 162)]
[Notices]
[Page 51837]
[DOCID:fr23au10-104]

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DEPARTMENT OF HOMELAND SECURITY

Federal Emergency Management Agency

[Internal Agency Docket No. FEMA-1909-DR; Docket ID FEMA-2010-0002]

Tennessee; Amendment No. 11 to Notice of a Major Disaster
Declaration

AGENCY: Federal Emergency Management Agency, DHS.

ACTION: Notice.

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SUMMARY: This notice amends the notice of a major disaster declaration
for the State of Tennessee (FEMA-1909-DR), dated May 4, 2010, and
related determinations.

DATES: Effective Date: July 29, 2010.

FOR FURTHER INFORMATION CONTACT: Peggy Miller, Recovery Directorate,
Federal Emergency Management Agency, 500 C Street, SW., Washington, DC
20472,<PHONE_NUMBER>.

SUPPLEMENTARY INFORMATION: Notice is hereby given that, pursuant to the
Supplemental Appropriations Act, 2010, Public Law 111-212, FEMA is
amending the cost-sharing arrangement concerning Federal funds provided
under the authority of the Robert T. Stafford Disaster Relief and
Emergency Assistance Act, 42 U.S.C. 5140b, 5172, and 5123 for the major
disaster declared on May 4, 2010, for the State of Tennessee due to the
damage resulting from severe storms, flooding, straight-line winds, and
tornadoes. The Tennessee major disaster declaration is amended as
follows:

Federal funds for all categories of Public Assistance (Categories A-
G), including direct Federal assistance, provided under this
declaration are authorized at 90 percent of total eligible costs.

(The following Catalog of Federal Domestic Assistance Numbers (CFDA)
are to be used for reporting and drawing funds: 97.030, Community
Disaster Loans; 97.031, Cora Brown Fund; 97.032, Crisis Counseling;
97.033, Disaster Legal Services; 97.034, Disaster Unemployment
Assistance (DUA); 97.046, Fire Management Assistance Grant; 97.048,
Disaster Housing Assistance to Individuals and Households in
Presidentially Declared Disaster Areas; 97.049, Presidentially
Declared Disaster Assistance--Disaster Housing Operations for
Individuals and Households; 97.050, Presidentially Declared Disaster
Assistance to Individuals and Households--Other Needs; 97.036,
Disaster Grants--Public Assistance (Presidentially Declared
Disasters); 97.039, Hazard Mitigation Grant.)

W. Craig Fugate,
Administrator, Federal Emergency Management Agency.
[FR Doc. 2010-20774 Filed 8-20-10; 8:45 am]
BILLING CODE 9111-23-P


[Federal Register Volume 79, Number 12 (Friday, January 17, 2014)]
[Rules and Regulations]
[Pages 3088-3094]
[FR Doc No: 2014-00873]

=======================================================================
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DEPARTMENT OF HEALTH AND HUMAN SERVICES

Food and Drug Administration

21 CFR Parts 876 and 892

[Docket No. FDA-2013-N-0195]

Effective Date of Requirement for Premarket Approval for
Transilluminator for Breast Evaluation and Sorbent Hemoperfusion System
(SHS) Devices for the Treatment of Hepatic Coma and Metabolic
Disturbances; Reclassification of SHS Devices for the Treatment of
Poisoning and Drug Overdose

AGENCY: Food and Drug Administration, HHS.

ACTION: Final order.

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SUMMARY: The Food and Drug Administration (FDA) is issuing a final
order to require the filing of a premarket approval application (PMA)
for the transilluminator for breast evaluation and sorbent
hemoperfusion system (SHS) devices for the treatment of hepatic coma
and metabolic disturbances and to reclassify SHS devices for the
treatment of poisoning and drug overdose, a preamendments class III
device, into class II (special controls).

DATES: This order is effective January 17, 2014.

FOR FURTHER INFORMATION CONTACT: Rebecca Nipper, Center for Devices and
Radiological Health, 10903 New Hampshire Ave., Bldg. 66, Rm. 1540,
Silver Spring, MD 20993,<PHONE_NUMBER>.

SUPPLEMENTARY INFORMATION:

I. Background--Regulatory Authorities

    The Federal Food, Drug, and Cosmetic Act (the FD&C Act), as amended
by the Medical Device Amendments of 1976 (the 1976 amendments) (Pub. L.
94-295), the Safe Medical Devices Act of 1990 (Pub. L. 101-629), the
Food and Drug Administration Modernization Act of 1997 (FDAMA) (Pub. L.
105-115), the Medical Device User Fee and Modernization Act of 2002
(Pub. L. 107-250), the Medical Devices Technical Corrections Act (Pub.
L. 108-214), the Food and Drug Administration Amendments Act of 2007
(Pub. L. 110-85), and the Food and Drug Administration Safety and
Innovation Act (FDASIA) (Pub. L. 112-144), among other amendments,
established a

comprehensive system for the regulation of medical devices intended for
human use. Section 513 of the FD&C Act (21 U.S.C. 360c) established
three categories (classes) of devices, reflecting the regulatory
controls needed to provide reasonable assurance of their safety and
effectiveness. The three categories of devices are class I (general
controls), class II (special controls), and class III (premarket
approval).
    Under section 513 of the FD&C Act, devices that were in commercial
distribution before the enactment of the 1976 amendments, May 28, 1976
(generally referred to as preamendments devices), are classified after
FDA has: (1) Received a recommendation from a device classification
panel (an FDA advisory committee); (2) published the panel's
recommendation for comment, along with a proposed regulation
classifying the device; and (3) published a final regulation
classifying the device. FDA has classified most preamendments devices
under these procedures.
    Devices that were not in commercial distribution prior to May 28,
1976 (generally referred to as postamendments devices), are
automatically classified by section 513(f) of the FD&C Act into class
III without any FDA rulemaking process. Those devices remain in class
III and require premarket approval unless, and until, the device is
reclassified into class I or II or FDA issues an order finding the
device to be substantially equivalent, in accordance with section
513(i) of the FD&C Act, to a predicate device that does not require
premarket approval. The Agency determines whether new devices are
substantially equivalent to predicate devices by means of premarket
notification procedures in section 510(k) of the FD&C Act (21 U.S.C.
360(k)) and part 807 (21 CFR part 807).
    A preamendments device that has been classified into class III and
devices found substantially equivalent by means of premarket
notification (510(k)) procedures to such a preamendments device or to a
device within that type (both the preamendments and substantially
equivalent devices are referred to as preamendments class III devices)
may be marketed without submission of a PMA until FDA issues a final
order under section 515(b) of the FD&C Act (21 U.S.C. 360e(b))
requiring premarket approval or until the device is subsequently
reclassified into class I or class II. Section 515(b)(1) of the FD&C
Act directs FDA to issue an order requiring premarket approval for a
preamendments class III device.
    Although, under the FD&C Act, the manufacturer of class III
preamendments device may respond to the call for PMAs by filing a PMA
or a notice of completion of a product development protocol (PDP), in
practice, the option of filing a notice of completion of a PDP has not
been used. For simplicity, although corresponding requirements for PDPs
remain available to manufacturers in response to a final order under
section 515(b) of the FD&C Act, this document will refer only to the
requirement for the filing and receiving approval of a PMA.
    On July 9, 2012, FDASIA was enacted. Section 608(a) of FDASIA (126
Stat. 1056) amended section 513(e) of the FD&C Act, changing the
mechanism for reclassifying a device from rulemaking to an
administrative order. Section 608(b) of FDASIA amended section 515(b)
of the FD&C Act changing the mechanism for requiring premarket approval
for a preamendments class III device from rulemaking to an
administrative order. Prior to the enactment of FDASIA, FDA published
proposed rules under section 515(b) to require PMAs for the
transilluminator for breast evaluation and sorbent hemoperfusion
devices for the treatment of hepatic coma and metabolic disturbances
(75 FR 52294 at 52299, August 25, 2010; 77 FR 9610 at 9617, February
17, 2012). FDA also published a proposed rule to reclassify sorbent
hemoperfusion for the treatment of poisoning or drug overdose under
section 513(e) of the FD&C Act prior to FDASIA (77 FR 9610 at 9617).
    Subsequent to the proposed rules, FDA issued a proposed
administrative order to comply with the new procedural requirements
created by FDASIA when requiring premarket approval for preamendments
class III devices or reclassifying preamendments class III devices (78
FR 20268 at 20276, April 4, 2013). Comments submitted to the
aforementioned proposed rules and proposed administrative order were
considered when developing this final order.

A. Requirement for Premarket Approval Application

    FDA is requiring PMAs for the transilluminator for breast
evaluation and SHS devices when indicated for the treatment of hepatic
coma and metabolic disturbances.
    Section 515(b)(1) of the FD&C Act sets forth the process for
issuing a final order. Specifically, prior to the issuance of a final
order requiring premarket approval for a preamendments class III
device, the following must occur: (1) Publication of a proposed order
in the Federal Register; (2) a meeting of a device classification panel
described in section 513(b) of the FD&C Act; and (3) consideration of
comments from all affected stakeholders, including patients, payers,
and providers. FDA published a proposed order to require PMAs for the
transilluminator for breast evaluation and sorbent hemoperfusion
devices for the treatment of hepatic coma and metabolic disturbances in
the Federal Register of April 4, 2013 (78 FR 20268 at 20276), and has
convened classification panels for the transilluminator for breast
evaluation and SHS devices when indicated for the treatment of hepatic
coma and metabolic disturbances as discussed in this document.
    Section 515(b)(3) of the FD&C Act provides that FDA shall, after
the close of the comment period on the proposed order, consideration of
any comments received, and a meeting of a device classification panel
described in section 513(b) of the FD&C Act, issue a final order to
require premarket approval or publish a document terminating the
proceeding together with the reasons for such termination.
    A preamendments class III device may be commercially distributed
without a PMA until 90 days after FDA issues a final order (a final
rule issued under section 515(b) of the FD&C Act prior to the enactment
of FDASIA is considered to be a final order for purposes of section
501(f) of the FD&C Act (21 U.S.C. 351(f))) requiring premarket approval
for the device, or 30 months after final classification of the device
under section 513 of the FD&C Act, whichever is later. For
transilluminator for breast evaluation and sorbent hemoperfusion
devices for the treatment of hepatic coma and metabolic disturbances,
the preamendments class III devices that are the subject of this
proposal, the later of these two time periods is the 90-day period.
Since these devices were classified in 1995 and 1983, respectively, the
30-month period has expired (60 FR 36639, July 18, 1995, and 48 FR
53012 at 53028, November 23, 1983). Therefore, section 501(f)(2)(B) of
the FD&C Act requires that a PMA for such devices be filed within 90
days of the date of issuance of this final order. If a PMA is not filed
for such devices within 90 days after the issuance of this final order,
the devices will be deemed adulterated under section 501(f) of the FD&C
Act.
    Also, a preamendments device subject to the order process under
section 515(b) of the FD&C Act is not required to have an approved
investigational device exemption (IDE) (see part 812 (21

CFR part 812)) contemporaneous with its interstate distribution until
the date identified by FDA in the final order requiring the filing of a
PMA for the device. At that time, an IDE is required only if a PMA has
not been filed. If the manufacturer, importer, or other sponsor of the
device submits an IDE application and FDA approves it, the device may
be distributed for investigational use. If a PMA is not filed by the
later of the two dates, and the device is not distributed for
investigational use under an IDE, the device is deemed to be
adulterated within the meaning of section 501(f)(1)(A) of the FD&C Act,
and subject to seizure and condemnation under section 304 of the FD&C
Act (21 U.S.C. 334) if its distribution continues. Other enforcement
actions include, but are not limited to, the following: Shipment of
devices in interstate commerce will be subject to injunction under
section 302 of the FD&C Act (21 U.S.C. 332), and the individuals
responsible for such shipment will be subject to prosecution under
section 303 of the FD&C Act (21 U.S.C. 333). FDA requests that
manufacturers take action to prevent the further use of devices for
which no PMA has been filed.
1. Transilluminator for Breast Evaluation
    On January 11, 1991, the Obstetrics and Gynecology Devices Panel
recommended that transilluminator devices for breast evaluation be
classified into class III and subject to premarket approval to provide
reasonable assurance of the safety and effectiveness of the device. The
panel concluded that there were no published studies or clinical data
demonstrating the safety and effectiveness of the device. The panel
indicated that the device presents a potential unreasonable risk of
illness or injury to the patient if the clinician relies on the device.
The panel found further that although the device's illumination level,
wavelength, and image quality can be controlled through tests and
specifications, insufficient evidence exists to determine that special
controls can be established to provide reasonable assurance of the
safety and effectiveness of the device for its intended use.
    In addition, the Radiologic Devices Panel considered the
classification of the transilluminator for breast evaluation on April
12, 2012, and expressed concerns regarding the effectiveness of the
device and the potential for delayed diagnosis. The panel determined
that general controls and special controls are not sufficient to
provide a reasonable assurance of safety and effectiveness of the
device for the diagnosis of cancer, other conditions, diseases, or
abnormalities. Accordingly, the panel concluded that the device should
remain in class III. FDA agreed and continues to agree with the
recommendations of both panels and is aware of no information submitted
in response to the 515(i) Order (74 FR 16214, April 9, 2009) or
otherwise available to FDA that would support a different
classification. The Agency notes that the device has fallen into disuse
and that the published data are not adequate to demonstrate the safety
and effectiveness of the device.
    FDA received and has considered two comments on this proposed
order, as well as one comment received in response to the August 25,
2010 (75 FR 52294), proposed rule as discussed in section II of this
document.
2. SHS Devices for the Treatment of Hepatic Coma and Metabolic
Disturbances
    FDA held a meeting of a device classification panel described in
section 513(b) of the FD&C Act with respect to SHS devices on July 27,
2013. The panel unanimously recommended that SHS devices for the
treatment of hepatic coma and metabolic disturbances should remain in
class III (subject to premarket approval application) because there was
insufficient information to establish special controls, and that the
application of general controls is insufficient to provide a reasonable
assurance of safety and effectiveness for SHS devices that are life-
supporting and life-sustaining and, because there is no clear benefit
from the use of these devices in these vulnerable populations, there is
a potential unreasonable risk of illness or injury when used for the
treatment of hepatic coma and metabolic disturbances. The panel also
unanimously supported FDA's conclusion that the effectiveness of SHS
when indicated for the treatment of hepatic coma and metabolic
disturbances had not been established through adequate scientific
evidence. FDA published a proposed order in the Federal Register of
April 4, 2013. FDA received and has considered two comments on this
proposed order, as well as one comment received in response to the
February 17, 2012, proposed rule as discussed in section II of this
document.

B. Reclassification

    FDA is reclassifying SHS devices when indicated for the treatment
of poisoning and drug overdose from class III to class II (special
controls). Section 513(e) of the FD&C Act governs reclassification of
classified preamendments devices. This section provides that FDA may,
by administrative order, reclassify a device based upon ``new
information.'' FDA can initiate a reclassification under section 513(e)
or an interested person may petition FDA to reclassify a preamendments
device. The term ``new information,'' as used in section 513(e) of the
FD&C Act, includes information developed as a result of a reevaluation
of the data before the Agency when the device was originally
classified, as well as information not presented, not available, or not
developed at that time. (See, e.g., Holland-Rantos Co. v. United States
Department of Health, Education, and Welfare, 587 F.2d 1173, 1174 n.1
(D.C. Cir. 1978); Upjohn v. Finch, 422 F.2d 944 (6th Cir. 1970); Bell
v. Goddard, 366 F.2d 177 (7th Cir. 1966).)
    Reevaluation of the data previously before the Agency is an
appropriate basis for subsequent action where the reevaluation is made
in light of newly available authority (see Bell, 366 F.2d at 181;
Ethicon, Inc. v. FDA, 762 F.Supp. 382, 388-391 (D.D.C. 1991)), or in
light of changes in ``medical science'' (Upjohn, 422 F.2d at 951).
Whether data before the Agency are old or new data, the ``new
information'' to support reclassification under section 513(e) must be
``valid scientific evidence,'' as defined in section 513(a)(3) of the
FD&C Act and 21 CFR 860.7(c)(2). (See, e.g., General Medical Co. v.
FDA, 770 F.2d 214 (D.C. Cir. 1985); Contact Lens Association v. FDA,
766 F.2d 592 (D.C. Cir. 1985), cert. denied, 474 U.S. 1062 (1986).)
    FDA relies upon ``valid scientific evidence'' in the classification
process to determine the level of regulation for devices. To be
considered in the reclassification process, the ``valid scientific
evidence'' upon which the Agency relies must be publicly available.
Publicly available information excludes trade secret and/or
confidential commercial information, e.g., the contents of a pending
PMA. (See section 520(c) of the FD&C Act (21 U.S.C. 360j(c)). Section
520(h)(4) of the FD&C Act, added by FDAMA, provides that FDA may use,
for reclassification of a device, certain information in a PMA 6 years
after the application has been approved. This includes information from
clinical and preclinical tests or studies that demonstrate the safety
or effectiveness of the device but does not include descriptions of
methods of manufacture or product composition and other trade secrets.
    Section 513(e)(1) of the FD&C Act sets forth the process for
issuing a final

order. Specifically, prior to the issuance of a final order
reclassifying a device, the following must occur: (1) Publication of a
proposed order in the Federal Register; (2) a meeting of a device
classification panel described in section 513(b) of the FD&C Act; and
(3) consideration of comments to the public docket. FDA published a
proposed order in the Federal Register on April 4, 2013. FDA held a
meeting of a device classification panel described in section 513(b) of
the FD&C Act with respect to SHS devices on June 27, 2013 (http://www.fda.gov/AdvisoryCommittees/CommitteesMeetingMaterials/MedicalDevices/MedicalDevicesAdvisoryCommittee/Gastroenterology-UrologyDevicesPanel/ucm358362.htm). The panel unanimously recommended
that SHS devices for the treatment of poisoning and drug overdose, a
preamendments class III device, should be reclassified into class II
because the application of general controls and special controls are
sufficient to provide reasonable assurance of safety and effectiveness
for SHS devices when intended for these uses. The panel also generally
agreed with FDA's conclusion that the available scientific evidence is
adequate to support the safety and effectiveness of SHS devices
indicated for treatment of poisoning and drug overdose, although one
member was concerned with the age of the data on which FDA's
conclusions are based. The panel further agreed that the special
controls identified by FDA were appropriate to mitigate the relevant
risks to health for this use, although there was a fairly strong
consensus for adding specificity with regard to specific elements to be
removed by this therapy and to collect further clinical data. The
identified special controls require both testing and labeling regarding
the drugs and/or poisons the device has been demonstrated to remove,
and the extent for removal/depletion of the substances. The special
controls also require that a summary of the clinical experience with
the device, including a discussion and analysis of the device safety
and performance and a list of adverse events observed during the
testing, be provided. These special controls address the panel's
recommendations.
    FDA received and has considered two comments on this proposed
order, as discussed in section II of this document, as well as one
comment on the prior proposed rule (77 FR 9610).

II. Public Comments in Response to the Proposed Rule and Proposed Order

A. Transilluminator for Breast Evaluation

    In response to the August 25, 2010, proposed rule (75 FR 52294 at
52299) and the April 4, 2013, proposed order to maintain the class III
classification and require the filing of a PMA for the transilluminator
for breast evaluation, FDA received three comments.
    Two of the comments supported the call for PMAs for this device.
The other comment suggested the transilluminator for breast evaluation
be reclassified as a class I device. FDA disagrees. FDA convened a
meeting of the Radiological Devices Panel on April 12, 2012, as
discussed in section I of this document, which was announced in a
notice in the Federal Register on February 28, 2012 (77 FR 12064), that
considered the information provided in the comment and the suggested
class I status for this device. After considering the information
provided in the comment and other available information, the panel
determined that the device presents a potential unreasonable risk of
illness or injury and that general controls and special controls are
not sufficient to provide a reasonable assurance of safety and
effectiveness of the transilluminator for breast evaluation for the
diagnosis of cancer, other conditions, diseases, or abnormalities and
recommended the device remain in class III. FDA concurs with the
panel's recommendation.

B. SHS Devices for the Treatment of Hepatic Coma and Metabolic
Disturbances

    In response to the February 17, 2012, proposed rule and the April
4, 2013, proposed order to maintain the class III classification and
require the filing of a PMA for SHS devices for the treatment of
hepatic coma and metabolic disturbances, and to reclassify sorbent
hemoperfusion devices into class II (special controls) when indicated
for the treatment of poisoning and drug overdose, FDA received three
comments.
    The first comment disagreed with FDA's intent to reclassify SHS
devices for the treatment of poisoning or drug overdose to class II,
stating: ``The Food and Drug Administration's (FDA's) proposal for
these devices raises fundamental questions about whether the Center for
Devices and Radiological Health is following the law regarding the
regulation of devices that are life-sustaining or life-supporting.''
The commenter suggested that the devices proposed to be reclassified
``are high-risk devices that can cause serious injury and death, and
therefore they should remain in class III and be reviewed through the
premarket approval process for all indications.'' FDA disagrees with
this comment. According to section 513(a)(1)(C) of the FD&C Act, a
class III device is defined as a device which (1) cannot be classified
as a class I device because insufficient information exists to
determine that the application of general controls are sufficient to
provide reasonable assurance of the safety and effectiveness of the
device, and (2) cannot be classified as a class II device because
insufficient information exists to determine that the special controls
* * * would provide reasonable assurance of its safety and
effectiveness, and (3) is purported or represented to be for a use in
supporting or sustaining human life or for a use which is of
substantial importance in preventing impairment of human health, or (4)
presents a potential unreasonable risk of illness or injury. Although
FDA considers SHS devices for the treatment of poisoning and drug
overdose to be life-supporting or life-sustaining, a viewpoint which
was supported by the panel members at the June 27, 2013, device
classification panel meeting (2013 Panel), FDA believes that based on
the available evidence, special controls, in addition to general
controls, will provide a reasonable assurance of safety and
effectiveness.
    FDA also believes that, while the risks to health posed by SHS
devices may be similar for its various uses, their severity in terms of
patient outcomes and mitigation strategies are different for the drug
overdose and poisoning uses, compared to the hepatic coma and metabolic
disturbances uses. This viewpoint was supported by the 2013 Panel, as
also described in section I.B. The panel provided the following
rationale for recommending that SHS devices, when indicated for drug
overdose and poisoning be reclassified to class II: (1) The special
controls listed would be effective in providing a reasonable assurance
of safety and effectiveness and (2) the risk/benefit data demonstrates
that SHS devices for drug overdose and poisoning do not pose a
potential unreasonable risk of illness or injury. Therefore, FDA
disagrees that SHS devices intended for the treatment of poisoning and
drug overdose should remain classified as class III devices.
    The second commenter responded to the proposed order, reiterating
the commenter's previous comments to the 2012 proposed rule. They
stated their continued support for the requirement

of PMAs for SHS devices because they pose substantial risks and the
benefits of these devices are ``unknown'' and there is ``limited
scientific evidence'' regarding their effectiveness. They also
reiterated their strong opposition to the reclassification of SHS
devices for the treatment of poisoning and drug overdose. They cited
FDA's statement that ``the device may lead to the failure to remove
drugs in the treatment of poisoning or drug overdose'' as one of the
reasons for supporting their PMA recommendation and believe that it is
inappropriate to reclassify SHS devices for any indication. FDA
continues to disagree with this comment and believes that the available
scientific evidence supports the effectiveness of SHS devices for the
treatment of poisoning and drug overdose. For drug overdose and
poisoning cases, there is typically knowledge of the substance(s) which
caused the overdose or poisoning, and SHS devices can be labeled to
identify the specific substances or types of substances with which they
can be used. Since the offending substances can often be identified in
cases of poisoning or drug overdose, the SHS devices chosen to treat
these problems can be tested with the specific substances to
demonstrate their removal capabilities and the extent of removal that
may be expected. As noted previously in response to Comment 1, the 2013
Panel agreed with the FDA's conclusion of reclassification for SHS
devices when intended for drug overdose and poisoning and further
agreed that the special controls were appropriate to mitigate the risks
to health and provide a reasonable assurance of safety and
effectiveness for these patient populations.
    The commenter also noted that SHS devices for the treatment of
hepatic coma and metabolic disturbances have a long list of health
risks including platelet loss, blood loss, hypotension, toxic
reactions, metabolic disturbances, and electrical shock, while there is
``no proof that the device provides clinical improvement in hepatic
coma and metabolic disturbances.'' Further, they ``strongly support
FDA's class III PMA recommendation, so that these products could not be
sold unless new data are provided that prove their safety and efficacy
for this indication.'' FDA agrees that SHS devices intended for the
treatment of hepatic coma or metabolic disturbances be kept as class
III devices for which a PMA is required to be filed. Although FDA has
identified the risks to health posed by these devices in hepatic coma
and metabolic disturbances uses, we believe we cannot adequately
identify mitigation strategies for these risks, as they apply to these
patient populations. Given the limited study of these devices and lack
of evidence of clinically meaningful effectiveness for their use in the
treatment of hepatic coma or metabolic disturbances, FDA does not
believe that there is sufficient evidence to determine that special
controls would provide reasonable assurance of safety and effectiveness
for these patient populations. The panel unanimously agreed that these
devices, when used for hepatic coma and metabolic disturbances, should
remain in class III. They also stated that it is appropriate to
maintain SHS devices for hepatic coma and metabolic disturbances in
class III because they are life-supporting and life-sustaining and,
because there is no clear benefit from the use of these devices in
these vulnerable populations, there is a potential unreasonable risk of
illness or injury.
    The third commenter stated that ``Premarket approvals are necessary
to establish the safety and efficacy of [the SHS devices] and prove
that [the] possible benefits outweigh these substantial known risks.''
They ``agree with the FDA's conclusion that the safety and
effectiveness of sorbent hemoperfusion devices has not been established
by adequate scientific evidence for the treatment of hepatic coma,
because only a few randomized, controlled trials have been conducted
using this device, and these were small, poorly designed, and not
adequately powered.'' They also ``agree with the FDA that `bench
testing is not adequate in establishing the devices' safety and
effectiveness, particularly since characterizing a sorbent
hemoperfusion system's performance and adsorption capabilities has not
correlated to patient outcomes, such as resolution of the patients'
hepatic coma, or improvements in mortality.' Moreover, they note that
`there is no consensus [within the scientific literature] on the
clinical endpoints necessary to adequately evaluate sorbent
hemoperfusion devices for the treatment of hepatic coma and metabolic
disturbances or on the patient populations who will benefit the most
from the use of these devices.' '' FDA agrees with this comment
regarding the intended use of hepatic come and metabolic disturbances.
    With respect to the reclassification proposal concerning SHS
devices for the treatment of poisoning and drug overdose, the commenter
stated ``The fact that quick removal of a poison or drug can generally
be expected to impact clinical outcomes does not establish that sorbent
hemoperfusion is effective in treating poisoning and drug overdose.
Several alternative mechanisms are available to remove poisons and
drugs from the body, including (1) allowing the human body to clear a
drug from the bloodstream through endogenous means (i.e. in absence of
any enhanced assistance) and (2) hemodialysis. Hemodialysis is more
effective at removing water-soluble low molecular weight compounds and
is considered preferable to hemoperfusion because it will also correct
a concurrent acid-base disturbance. It is also generally better
understood and more widely available than hemoperfusion. Hemoperfusion
treatment carries substantial risks, and death or long-term morbidity
may result due to complications from treatment. In order to assess
whether these substantial risks are outweighed by potential benefits,
the device must be compared with alternative approaches in well-
controlled clinical investigations.'' FDA disagrees with this comment
in part. While hemodialysis may be more widely used as a first line
therapy for drug overdose and poisoning, especially for water-soluble
low molecular weight compounds, not all drugs and poisons are water-
soluble. Hemoperfusion has been demonstrated to effectively remove
lipids and protein-soluble substances (e.g., barbiturates, digitalis,
carbamazepine, methotrexate, acetaminophen, and paraquat), as well as
some water-soluble substances. Sorbent hemoperfusion system devices can
be sufficiently tested on the bench for their removal capabilities
using drugs and substances typically associated with overdoses and
poisonings, and labeled to indicate which drugs or poisons are
preferentially removed by hemoperfusion and the extent of their
removal. The number of treatments required for the majority of cases of
drug overdose or poisonings would be expected to be low depending on
the degree of overdose, patient symptomatology, and the timing of the
treatment with relation to the introduction of the toxin, thus
minimizing the risks to health posed by the device. There is ample
literature to establish the safety of hemoperfusion for drug overdose
and poisoning. The published literature was presented to and discussed
with the 2013 Panel, which helped to identify the risks to health posed
by the device, and FDA believes that these known risks can be mitigated
with the special controls identified. The panel agreed with
reclassifying SHS devices for the

intended use of drug overdose and poisoning, and stated that FDA's list
of risks to health is comprehensive and that these risks should be
adequately mitigated by the special controls identified.
    The commenter also opposed reclassification of SHS devices for drug
overdose into class II on the ground that the proposed special controls
will not adequately deter off-label use of these devices for treatment
of hepatic coma and metabolic disturbances, conditions that are far
more prevalent in the general population than accidental poisonings or
drug overdoses. They state that they ``believe that there will be
substantial financial incentives for potentially harmful off-label use
of these devices, and the proposed protections will fail to adequately
deter such use.'' FDA disagrees with this comment in that we regulate
the use of a device as indicated by the party offering the device for
interstate commerce. The intended uses for SHS devices are limited by
the codified classification.

III. The Final Order

    FDA is adopting its findings as published in the preamble of the
proposed order (78 FR 20268) by issuing this final order to require the
filing of a PMA for the transilluminator for breast evaluation and SHS
devices for the treatment of hepatic coma and metabolic disturbances
under section 515(b) of the FD&C Act.
    In addition, FDA is issuing this final order under section 513(e)
of the FD&C Act to reclassify SHS devices for the treatment of
poisoning and drug overdose from class III to class II and establish
special controls. This final order will revise 21 CFR part 876.

A. Transilluminator for Breast Evaluation and SHS Devices for the
Treatment of Hepatic Coma and Metabolic Disturbances

    Under the final order, a PMA is required to be filed on or before
90 days after the date of publication of the final order in the Federal
Register, for any of these class III preamendments devices that were in
commercial distribution before May 28, 1976, or that has been found by
FDA to be substantially equivalent to such a device on or before 90
days after the date of publication of the final order in the Federal
Register. An approved PMA is required to be in effect for any such
devices on or before 180 days after FDA files the application. Any
other class III preamendments device subject to this order that was not
in commercial distribution before May 28, 1976, is required to have an
approved PMA in effect before it may be marketed.
    If a PMA for any of the class III preamendments devices is not
filed on or before the 90th day past the effective date of this final
order, that device will be deemed adulterated under section
501(f)(1)(A) of the FD&C Act, and commercial distribution of the device
must cease immediately. The device may, however, be distributed for
investigational use, if the requirements of the IDE regulations (part
812) are met.

B. SHS Devices Intended for the Treatment of Poisoning and Drug
Overdose

    Following the effective date of this final order, firms submitting
a 510(k) premarket notification for a SHS devices intended for the
treatment of poisoning and drug overdose will need either to (1) comply
with the particular mitigation measures set forth in the special
controls guideline or (2) use alternative mitigation measures, but
demonstrate to the Agency's satisfaction that those alternative
measures identified by the firm will provide at least an equivalent
assurance of safety and effectiveness.
    Section 510(m) of the FD&C Act provides that FDA may exempt a class
II device from the premarket notification requirements under section
510(k) of the FD&C Act if FDA determines that premarket notification is
not necessary to provide reasonable assurance of the safety and
effectiveness of the devices. FDA has determined that premarket
notification is necessary to provide reasonable assurance of safety and
effectiveness of sorbent hemoperfusion devices for the treatment of
poisoning and drug overdose, and therefore, this device type is not
exempt from premarket notification requirements.
    An applicant whose device was legally in commercial distribution
before May 28, 1976, or whose device has been found to be substantially
equivalent to such a device, who does not intend to market such device
for the treatment of hepatic coma, and/or metabolic disturbances may
remove such intended uses from the device's labeling by initiating a
correction within 90 days after issuance of any final order based on
this proposal. Under 21 CFR 806.10(a)(2) a device manufacturer or
importer initiating a correction to remedy a violation of the FD&C Act
which may present a risk to health is required to submit a written
report of the correction to FDA.

IV. Environmental Impact

    The Agency has determined under 21 CFR 25.30(h) and 25.34(b) that
this action is of a type that does not individually or cumulatively
have a significant effect on the human environment. Therefore, neither
an environmental assessment nor an environmental impact statement is
required.

V. Paperwork Reduction Act of 1995

    This final order refers to previously approved collections of
information found in FDA regulations. These collections of information
are subject to review by the Office of Management and Budget (OMB)
under the Paperwork Reduction Act of 1995 (44 U.S.C. 3501-3520). The
collections of information in part 812 have been approved under OMB
control number 0910-0078; the collections of information in part 807,
subpart E, have been approved under OMB control number 0910-0120; the
collections of information in 21 CFR part 814, subpart B, have been
approved under OMB control number 0910-0231; and the collections of
information under 21 CFR part 801 have been approved under OMB control
number 0910-0485.

VI. Codification of Orders

    Prior to the amendments by FDASIA, section 513(e) provided for FDA
to issue regulations to reclassify devices and section 515(b) of the
FD&C Act provided for FDA to issue regulations to require approval of
an application for premarket approval for preamendments devices or
devices found to be substantially equivalent to preamendments devices.
Sections 513(e) and 515(b) as amended require FDA to issue final orders
rather than regulations, and FDASIA provides for FDA to revoke
previously issued regulations by order. FDA will continue to codify
reclassifications and requirements for approval of an application for
premarket approval in the Code of Federal Regulations. Therefore, under
section 513(e)(1)(A)(i) of the FD&C Act, as amended by FDASIA, in this
final order, we are revoking the requirements in 21 CFR 876.5870
related to the classification of sorbent hemoperfusion system devices
for the treatment of poisoning and drug overdose as class III devices
and codifying the reclassification of these devices into class II.

List of Subjects

21 CFR Part 876

    Medical devices.

21 CFR Part 892

    Medical devices, Radiation protection, X-rays.

    Therefore, under the Federal Food, Drug, and Cosmetic Act and under

authority delegated to the Commissioner of Food and Drugs, 21 CFR parts
876 and 892 are amended as follows:

PART 876--GASTROENTEROLOGY-UROLOGY DEVICES

0
1. The authority citation for 21 CFR part 876 continues to read as
follows:

    Authority: 21 U.S.C. 351, 360, 360c, 360e, 360j, 360l, 371.

0
2. Revise Sec.  876.5870 to read as follows:

Sec.  876.5870  Sorbent hemoperfusion system.

    (a) Identification. A sorbent hemoperfusion system is a
prescription device that consists of an extracorporeal blood system
similar to that identified in the hemodialysis system and accessories
(Sec.  876.5820) and a container filled with adsorbent material that
removes a wide range of substances, both toxic and normal, from blood
flowing through it. The adsorbent materials are usually activated-
carbon or resins which may be coated or immobilized to prevent fine
particles entering the patient's blood. The generic type of device may
include lines and filters specifically designed to connect the device
to the extracorporeal blood system. The device is used in the treatment
of poisoning, drug overdose, hepatic coma, or metabolic disturbances.
    (b) Classification. (1) Class II (special controls) when the device
is intended for the treatment of poisoning and drug overdose. The
special controls for this device are:
    (i) The device must be demonstrated to be biocompatible;
    (ii) Performance data must demonstrate the mechanical integrity of
the device (e.g., tensile, flexural, and structural strength),
including testing for the possibility of leaks, ruptures, release of
particles, and/or disconnections under anticipated conditions of use;
    (iii) Performance data must demonstrate device sterility and shelf
life;
    (iv) Bench performance testing must demonstrate device
functionality in terms of substances, toxins, and drugs removed by the
device, and the extent that these are removed when the device is used
according to its labeling, and to validate the device's safeguards;
    (v) A summary of clinical experience with the device that discusses
and analyzes device safety and performance, including a list of adverse
events observed during the testing, must be provided;
    (vi) Labeling must include the following:
    (A) A detailed summary of the device-related and procedure-related
complications pertinent to the use of the device;
    (B) A summary of the performance data provided for the device,
including a list of the drugs and/or poisons the device has been
demonstrated to remove, and the extent for removal/depletion; and
    (vii) For those devices that incorporate electrical components,
appropriate analysis and testing must be conducted to verify electrical
safety and electromagnetic compatibility of the device.
    (2) Class III (premarket approval) when the device is intended for
the treatment of hepatic coma and metabolic disturbances.
    (c) Date premarket approval application (PMA) or notice of
completion of product development protocol (PDP) is required. A PMA or
notice of completion of a PDP is required to be filed with FDA by April
17, 2014, for any sorbent hemoperfusion system indicated for treatment
of hepatic coma or metabolic disturbances that was in commercial
distribution before May 28, 1976, or that has, by April 17, 2014, been
found to be substantially equivalent to any sorbent hemoperfusion
device indicated for treatment of hepatic coma or metabolic
disturbances that was in commercial distribution before May 28, 1976.
Any other sorbent hemoperfusion system device indicated for treatment
of hepatic coma or metabolic disturbances shall have an approved PMA or
declared completed PDP in effect before being placed in commercial
distribution.

PART 892--RADIOLOGY DEVICES

0
3. The authority citation for 21 CFR part 892 continues to read as
follows:

    Authority: 21 U.S.C. 351, 360, 360c, 360e, 360j, 371.

0
4. Revise Sec.  892.1990(c) to read as follows:

Sec.  892.1990  Transilluminator for breast evaluation.

* * * * *
    (c) Date premarket approval (PMA) or notice of completion of
product development protocol (PDP) is required. A PMA or notice of
completion of a PDP is required to be filed with FDA by April 17, 2014,
for any transilluminator for breast evaluation that was in commercial
distribution before May 28, 1976, or that has, by April 17, 2014, been
found to be substantially equivalent to any transilluminator for breast
evaluation that was in commercial distribution before May 28, 1976. Any
other transilluminator for breast evaluation shall have an approved PMA
or declared completed PDP in effect before being placed in commercial
distribution.

    Dated: January 13, 2014.
Leslie Kux,
Assistant Commissioner for Policy.
[FR Doc. 2014-00873 Filed 1-16-14; 8:45 am]
BILLING CODE 4160-01-P