[Federal Register Volume 85, Number 111 (Tuesday, June 9, 2020)]
[Notices]
[Pages 35351-35356]
[FR Doc No: 2020-12381]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-88997; File No. SR-CBOE-2020-014]

Self-Regulatory Organizations; Cboe Exchange, Inc.; Notice of
Filing of Amendment No. 1 and Order Instituting Proceedings To
Determine Whether To Approve or Disapprove a Proposed Rule Change, as
Modified by Amendment No. 1, To Adopt a Delta-Adjusted at Close Order
Instruction

June 3, 2020.

I. Introduction

    On February 18, 2020, Cboe Exchange, Inc. (``Exchange'' or ``Cboe
Options'') filed with the Securities and Exchange Commission
(``Commission''), pursuant to Section 19(b)(1) of the Securities
Exchange Act of 1934 (``Exchange Act'') \1\ and Rule 19b-4
thereunder,\2\ a proposed rule change to introduce a Delta-Adjusted at
Close (``DAC'') Order Instruction on Cboe Options. The proposed rule
change was published for comment in the Federal Register on March 9,
2020.\3\ On April 13, 2020, the Commission designated a longer period
within which to approve the proposed rule change, disapprove the
proposed rule change, or institute proceedings to determine whether the
proposed rule change should be disapproved.\4\ On May 12, 2020, the
Exchange submitted Amendment No. 1 to the proposed rule change.\5\ The
Commission has received no comments on the proposed rule change.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ See Securities Exchange Act Release No. 88312 (March 3,
2020), 85 FR 13686 (``Notice'').
    \4\ See Securities Exchange Act Release No. 88622, 85 FR 21490
(April 17, 2020).
    \5\ See https://www.sec.gov/comments/sr-cboe-2020-014/srcboe2020014-7180918-216787.pdf
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    The Commission is publishing this notice and order to solicit
comments on the proposed rule change, as modified by Amendment No. 1,
from interested persons and to institute proceedings pursuant to
Section 19(b)(2)(B) of the Exchange Act \6\ to determine whether to
approve or disapprove the proposed rule change, as modified by
Amendment No. 1.
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    \6\ 15 U.S.C. 78s(b)(2)(B).
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II. -Exchange's Description of the Proposal, as Modified by Amendment
No. 1

    As amended, the Exchange proposes to adopt a Delta-Adjusted at
Close or DAC order instruction that a User \7\ may apply to an order
for an option on an ETP or index when entering it into the System for
execution in a FLEX electronic or open outcry auction. In particular,
if a DAC order executes during the trading day, upon receipt of the
official closing price or value for the underlying from the primary
listing exchange or index provider, respectively, the System will
adjust the original execution price of a DAC order based on a delta
value applied to the change in the underlying reference price between
the time of execution and the market close. As proposed, DAC orders
will allow Users the opportunity to incorporate into the pricing of
their FLEX Options the closing price or value of the underlying on the
transaction date based on how much the price or value changed during
the trading day.
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    \7\ The term ``User'' means any TPH or Sponsored User who is
authorized to obtain access to the System pursuant to Rule 5.5. See
Rule 1.1.
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    Near the market close, the Exchange has observed that significant
numbers of market participants interact in the equity markets, which
may substantially impact the price or value, as applicable, of the
underlying at the market close. For example, shares of exchange-traded
funds (``ETFs'') that track indexes, which are increasingly popular,
often trade at or near the market close in order to better align with
the indexes they track and attempt to align the market price of shares
of the ETF as close to the net asset value (``NAV'') \8\ per share as
possible. Further, the Exchange understands that market makers and
other liquidity providers seek to balance their books before the market
close and contribute to increased price discovery surrounding the
market close. The Exchange also believes it is common for other market
participants to seek to offset intraday positions and mitigate exposure
risks based on their predictions of the closing underlying prices or
underlying indexes (which represent the settlement prices of options on
those underlyings). The Exchange understands this substantial activity
near the market close may create wider spreads and increased price
volatility, which may attract further trading activity from those
participants seeking arbitrage opportunities and further drive prices.
In light of the significant liquidity and price/value movements in
equity shares that can occur near the market close, option closing and
settlement prices may deviate significantly from option execution
prices earlier that trading day.
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    \8\ The NAV is an ETF's total assets minus its total
liabilities. ETFs generally must calculate their NAV at least once
every business day, and typically do so after market close. See 17
CFR 270.2a-4.
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    The proposed DAC order instruction is designed to allow investors
to incorporate any upside market moves that may occur following
execution of the order up to the market close while limiting downside
risk. Additionally, the Exchange has noted that there have been a
number of managed funds that recognize the benefits to their investors
in employing certain strategies that allow for their investors to
mitigate risk at the market close while also participating in
beneficial market moves at the close. The proposed DAC order would
provide such funds with an additional method to attempt to meet their
objectives through FLEX options strategies, thereby benefitting their
investors. The Exchange understands that, for example, defined-outcome
ETF issuers \9\ often times use multi-leg strategy orders when seeding
their

funds.\10\ The goal of these strategies is to price the execution of
these orders at the close of the underlying; however, there is
operational execution risk in attempting to fill an order late in the
day to capture the underlying closing price. As such, a DAC complex
order would allow the User to execute the order prior to the close and
have its price adjusted at the close. Because multi-leg strategies
themselves have delta offsets, the User is hedged, meaning that the
User may realize a negative movement versus the initial execution on
some legs, which is offset by a positive move in other legs. The
Exchange notes that the strategies may or may not define an exact delta
offset (``delta neutrality'' occurs where the strategy defines an exact
delta offset). Given the delta neutral nature of an order with exact
offset, a User would be indifferent to any movement in the underlying
from the time of execution to the close. Whether or not a User defines
an exact delta offset, a User would anticipate a given amount of market
exposure, either partial or none, depending on the strategy and
combinations of buy/sell, call/put and quantity. A DAC complex order
allows the order to be executed anytime, eliminating the execution
risk, while realizing the objective of pricing based on the exact
underlying close for those strategies that require pricing at the close
or a defined amount of market exposure through the close.
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    \9\ The Exchange notes that defined outcome ETF issuers do not
buy stocks directly, but instead, use options contracts to deliver
the price gain or loss of an index (such as the S&P 500) over the
course of a year, up to a preset cap.
    \10\ Amendment No. 1 provides additional description regarding
DAC complex order strategies and the purpose of such orders.
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    As stated, the System will adjust the original execution price of a
DAC order based on a delta value applied to the change in the price of
the underlying from the time of order execution to the market close.
Delta is the measure of the change in the option price as it relates to
a change in the price of the underlying security or value of the
underlying index, as applicable. For example, an option with a 50 delta
(which is generally represented as 0.50) would result in the option
moving $0.50 per $1.00 move in the underlying (i.e., price move in the
underlying x delta value = anticipated price move in the option). Delta
changes as the price or value of the underlying stock or index changes
and as time changes, thus giving a User an estimate of how an option
will behave if the price of the underlying moves in either direction.
Call option deltas are positive (ranging from 0 to 1), because as the
underlying increases in price so does a call option. Conversely, put
option deltas are negative (ranging from -1 to 0), because as the
underlying increases in price the put option decreases in price. The
Exchange understands that investors use delta as an important hedging
and risk management tool in options trading. For example, by trading an
option with a lower delta, an investor's underlying position will be
exposed to more downside risk if price or value of the underlying fall.
Therefore, the Exchange believes the proposed DAC order instruction
will allow a market participant to maintain a full hedge of its
position taken upon intraday execution of a DAC order throughout the
remainder of the trading day, which ultimately reduces the market
participant's portfolio risk.
    The Exchange proposes to make the DAC pricing instruction available
for orders submitted in FLEX ETP and index options in Rule
5.70(a)(2).\11\ As proposed, Rule 5.6(c) (Order Types, Order
Instructions, and Times-in-Force) provides that a DAC order is an order
for which the System delta-adjusts its execution price after the market
close. Specifically, the delta-adjusted execution price equals the
original execution price plus the delta value times the difference
between the official closing price or value of the underlying on the
transaction date and the reference price or index value of the
underlying (``reference price''). Upon order entry for electronic
execution, a User must designate a delta value and may designate a
reference price. If no reference price is designated, the System will
include the price or value, as applicable, of the underlying at the
time of order entry as the reference price. Upon order entry for open
outcry execution, a User may designate a delta value and/or a reference
price. During the open outcry auction, in-crowd market participants
will determine the final delta value and/or reference price, which may
differ from any delta value or reference price designated by the
submitting User. The final delta value and reference price would be
reflected in the final terms of the execution.
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    \11\ Amendment No. 1 amends the Initial Rule Filing to provide
that DAC orders are available only for ETP and index options and
amends the Initial Rule Filing to remove the proposed availability
of DAC orders for entry into non-FLEX auctions (electronic and open
outcry). Thus, Amendment No. 1 removes from the proposed DAC
definitions in Rule 5.6(c) and 5.33(b)(5) that DAC may trade in an
electronic auction or in open outcry trading pursuant to specific
non-FLEX auction Rules, as well as the provision that a DAC order is
not eligible to rest in the Book (as there is no electronic book for
resting FLEX Orders), and the provision regarding bulk messages (as
bulk messages are not applicable to trading in FLEX Options). The
Exchange intends to submit a proposal at a later date to permit the
entry of DAC orders into non-FLEX auctions.
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    Likewise, the proposed definition in Rule 5.33(b)(5) (Types of
Complex Orders) provides for essentially the same definition, differing
only in that: it applies to complex orders; upon order entry for
electronic execution a User must designate a delta value per leg, and
for open outcry execution may designate a delta value for one or more
legs; a DAC complex order may only be submitted for execution in a FLEX
complex electronic auction or open outcry auction on the Exchange's
trading floor pursuant to Rule 5.72.
    Users will enter into the System all DAC orders as they would any
other FLEX Order pursuant to 5.72(b) (governing the order entry of FLEX
orders) and the applicable FLEX auction rules. As such, the Exchange
points out that FLEX DAC orders may only be submitted for series
consistent with the FLEX rules.\12\ As defined above, a User may
designate the reference price of the underlying upon submitting a DAC
order. Proposed Rule 5.34(c)(12) (Order and Quote Price Protection
Mechanisms and Risk Controls) provides that a User-designated reference
price will be subject to a reasonability check. Specifically, if a User
submits a DAC order to the System with a reference price more than an
Exchange-determined amount away from the underlying price or value at
the time of submission of the DAC order, the System cancels or rejects
the order.\13\ Moreover, if a User chooses to submit a DAC order
without a reference price, the System will automatically input the
price or value of the underlying at the time of order entry as the
reference price.
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    \12\ See Rules 5.72(b), (c), and (d).
    \13\ The System will use the most recent last sale (or
disseminated index value) as the reference price.
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    For a DAC order submitted into a FLEX electronic auction, a User
will be required to designate a delta value upon order entry (including
for each leg of a DAC complex order as set forth in proposed Rule
5.33(b)(5)).\14\ A User may designate a delta value upon entry of a DAC
order submitted into a FLEX open outcry auction. As noted above, delta
is either between 0 and 1 for calls, and 0 and -1 for puts.\15\ The
Exchange notes that 1.0000 is the equivalent of a 100 delta. Pursuant
to the general principles by which deltas function, the delta for a
call leg(s) must be greater than zero

and the delta for a put option leg(s) must be less than zero.
Additionally, the delta for call (put) legs must be less (greater) than
or equal to the delta for the adjacent call (put) leg (i.e. the leg
with the next largest strike price) of the same expiration as the
strike price increases. This is also consistent with the general manner
in which deltas function, and ensures that the deltas on the same leg
type within the same expiration trend away from zero as the strike
value increases.
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    \14\ See proposed Rule 5.72(b)(2)(A).
    \15\ Note the Exchange will permit delta values to be input up
to four decimals, as prices for the underlying securities and index
values may be expressed in four decimals. However, bids and offers
may only be input in accordance with Rule 5.4, which bids and offers
the System will use to rank and allocate orders and auction
responses.
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    Typically, a User submits an electronic complex order (including a
DAC complex order, as proposed) with a net price, and, for a FLEX
complex order, a User must include a price for each leg upon electronic
submission.\16\ Therefore, upon electronic submission a User must also
designate a delta value per leg along with the leg prices. At market
close, the System will then be able to apply the delta value per each
of the leg prices to properly calculate the DAC by adjusting the
execution price of each leg.
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    \16\ See Rule 5.72(b)(2)(A).
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    A User may apply the DAC order instruction to a FLEX order
submitted into an electronic FLEX auction,\17\ the FLEX Automated
Improvement Auction (``FLEX AIM'' or FLEX AIM Auction'') \18\ or the
FLEX Solicitation Auction Mechanism (``FLEX SAM'' or ``FLEX SAM
Auction''); \19\ or a FLEX order submitted for manual handling in an
open outcry auction on the Exchange's trading floor.\20\ A DAC order
will be handled and executed in the FLEX auctions in the same manner as
any other FLEX order pursuant to the applicable FLEX auction rules,
including pricing, priority, and allocation rules.\21\ Similarly, a
FLEX DAC order submitted for open outcry trading will execute in the
same manner as any other FLEX order executed in open outcry pursuant to
Rule 5.72(d). The Exchange also notes that DAC orders submitted to the
Exchange will have unique message characteristics, indicative that the
order is a DAC order. Therefore, contra-side interest will be aware of
the specific order type and may then choose whether or not they wish to
interact with DAC orders.\22\
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    \17\ See Rule 5.72(c).
    \18\ See Rule 5.73.
    \19\ See Rule 5.74.
    \20\ See Rule 5.72(d).
    \21\ See Rules 5.72(d).
    \22\ Amendment No. 1 provides this additional detail to the
Initial Regarding Filing regarding how a DAC order message will be
indicative that an order is DAC.
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    Pursuant to Rules 5.72, 5.73, and 5.74, FLEX Orders (including
proposed DAC orders) may only execute in a FLEX electronic or open
outcry auction. The Exchange believes it is appropriate for DAC orders
to only execute in auctions. The delta and reference price appended to
a DAC order would be based on data regarding the underlying at the time
of order entry. As those values change as the price or value of the
underlying change, the reference price and delta at the time of
submission would achieve the desired delta-adjusted price result only
if the DAC order executes almost immediately upon submission. To allow
a DAC order to potentially execute after a significant amount of time
has passed since entry, underlying price and related delta at the time
a DAC order would eventually execute would be different and thus not
achieve the User's desired result. If a DAC orders executes in an
auction, it will do so within a short time following submission.
Indeed, the Exchange's electronic and open outcry FLEX auctions last
for a brief, defined period, the length of which is currently between
three seconds to five minutes as designated by the Submitting/
Initiating FLEX Trader.\23\ As such, the Exchange believes that the
execution of DAC orders in FLEX auctions is consistent with the
intended purpose of a DAC order.
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    \23\ See Rules 5.72(c), 5.73(c)(3) and 5.74(c)(3).
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    In addition to this, the Exchange also believes that making DAC
orders available only for options on ETPs and indexes is consistent
with the intended purpose of a DAC order. As stated above, DAC orders
are intended to allow investors to incorporate any market moves that
may occur following execution of the order up to the market close while
limiting risk and to allow funds to employ certain strategies that
would enable their investors to mitigate risk at the market close while
also participating in beneficial market moves at the close. That is, a
DAC order may assist investors that participate in defined-outcome
investment strategies, including defined-outcome ETFs, other managed
funds, unit investment trusts (``UITs''), index funds, structured
annuities, and other such funds or instruments that are indexed.
Therefore, the Exchange believes it is appropriate to, at present,
limit the use of DAC orders to options on ETPs and indexes.\24\
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    \24\ The Exchange notes that if, at a later date, User demand
warrants the availability of DAC orders for equity options and non-
FLEX options, the Exchange could submit a proposal to make DAC
orders available for equity options.
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    Pursuant to the proposed definitions in Rules 5.6(c), 5.33(b)(5),
and Rule 5.72(b)(2)(B), for DAC orders submitted for execution in a
FLEX open outcry auction, a User has the option to designate a delta
value (per one or more legs for DAC complex orders) and/or a reference
price. In-crowd market participants then determine the final delta
value(s) \25\ and/or reference price during the open outcry auction.
That is, they would negotiate the delta value(s)/reference price as
terms of the order (in conjunction with their negotiation of the price
of the order) and reflect the ultimately agreed upon delta value(s)/
reference price in the final terms of the DAC order. This is consistent
with the manner that the terms (including execution price) of any other
FLEX Order are currently negotiated and ultimately reflected for open
outcry executions. For similar reasons why the Exchange believes
execution of DAC orders in FLEX auctions is appropriate, the proposed
rule change does not require a User to include a delta value or
reference price when submitting a DAC order for open outcry execution.
A floor broker may be unable to execute an order until well after it
received the order for manual handling. Given that the delta and
reference price may move during that time, the proposed rule provides
the ability of market participants to agree to appropriate terms given
the then-current underlying price or value at the time of execution.
Unlike in the electronic market, in-crowd market participants are able
to negotiate and agree to these terms as part of open outcry trading.
As a result, the delta-adjusted price may achieve the desired result of
the broker's customer.
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    \25\ The Exchange notes that in-crowd participants currently
have delta values built into their own analytics and pricing tools
and that generally such values only slightly differ across
participants.
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    For any DAC order that executes during a trading day, upon receipt
of the official closing price for the underlying from the primary
listing exchange or index provider, the System will adjust the original
execution price based on the delta applied to the absolute change in
the underlying between the time of execution and the market close. The
Exchange notes that, like the execution price of any option, a delta-
adjusted price may never be zero or negative. If this occurs as a
result of the DAC calculation, the System will set the delta-adjusted
price to the minimum permissible increment.
    The delta adjustment formula that will be applied at the close will
be as follows: \26\
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    \26\ Amendment No. 1 adds Example 3 and Example 4 below in order
to provide additional detail and clarity regarding the execution and
adjustment process in connection with complex strategies.

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    The delta-adjusted price = the original execution price + (the
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change in the underlying price x delta) or P2 = P1 + (U--R) * D, where:

 P1 = Original execution price
 P2 = Delta-adjusted price calculated at the close
 R = Reference price
 U = price of the underlying at the market close
 D = Delta
    Example 1: A DAC call order is submitted for execution in an
electronic auction or PAR and the price of the underlying increases
from the time of execution to the market close.

 P1 = $1.00
 R = $100.00
 U = $101.00
 D = .4000
Therefore, P2 = ($1.00 + (($101-$100) * .4000) = $1.40
    Example 2: A DAC put order in a penny increment is submitted for
execution in an electronic auction or PAR and the price of the
underlying increases from the time of execution to the market close.
 P1 = $1.00
 R = $100.00
 U = $103.00
 D = -.4000
    Therefore, P2 = ($1.00 + ((103-$100) * -.4000) = -$0.20. However,
because an execution price, including a delta-adjusted execution price,
may not be negative, the System would adjust P2 = $0.01 (the minimum
permissible increment).

    Example 3: A DAC complex order has two legs, where leg 1 is buy
call and leg 2 is buy put (straddle).\27\
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    \27\ The Exchange notes that the data in Example 3 is based on
actual market data pulled for SPX with: An April 30, 2020
expiration; an initial SPX index value of 2875; a closing SPX index
value of 2878; 2900 call at $18; and a 2900 put at $42.
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Leg 1

 P1 = $18.00
 R = $2875.00
 U = $2878.00
 D = .5000
Therefore, P2 = ($18.00 + (($2878-$2875) * .5000) = $19.50

Leg 2

P1 = $42.00
R = $2875.00
U = $2878.00
D = -.5000
Therefore, P2 = ($42.00 + (($2878-$2875) * -.5000) = $40.50

    As described above, the User would be indifferent to the move in
the underlying due to the offsetting nature of the two legs. The
initial execution price for the DAC complex order (P1) would be $18.00
+ $42.00 = $60.00, and the adjusted price calculated at the close (P2)
for the DAC complex order would be $19.50 + $40.50 = $60.00. As a
result, the User in this Example 3 would be able to execute a hedged
strategy earlier in the trading day and have it priced exactly in line
with the underlying close without incurring any market risk or
operational risk of trying to time the execution exactly at the close.
    Example 4: A defined outcome ETF uses a simple buffer protect
strategy in connection with a seed trade. The User buys the at the
money put and sells the 10% out of the money put while selling the 5%
out of the money call.
    Leg 1: Buy SPX May 2875 put at $69.00 with 50 delta.

 P1 = $69.00
 R = $2875.00
 U = $2878.00
 D = -.5000

Therefore, P2 = ($69.00 + (($2878-$2875) * -.5000) = $67.50
    Leg 2: Sell SPX May 2590 put at $15.00 with 12 delta.

 P1 = $15.00
 R = $2875.00
 U = $2878.00
 D = -.1200
Therefore, P2 = ($15.00 + (($2878--$2875) * -.1200) = $14.64

    Leg 3: Sell SPX May 3020 call at $11.50 with 16 Delta.

 P1 = $11.50
 R = $2875.00
 U = $2878.00
 D = -.1600
Therefore, P2 = ($11.50 + (($2878--$2875) * -.1600) = $11.98

    The initial execution price for the order would be $69.00 - $15.00
- $11.50 = $42.50. The adjusted execution price would be $67.50 -
$14.64 - $11.98 = $40.88. The strategy would have an overall delta of
-.54 (-.5000 + .1200 -.16). As a result, the fund would be seeded
exactly at the closing price with exactly the delta exposure defined by
the strategy, without incurring any operational execution risk. The
User would be able to execute a hedged strategy earlier in the trading
day and have it priced exactly in line with the underlying close
without incurring any unanticipated market risk or operational risk of
trying to time the execution exactly at the close.
    The Exchange notes a User may only apply the DAC order instruction
to a FLEX Order for a FLEX Option series with an exercise price
expressed as a fixed price in dollars and decimals. The proposed change
to Rule 5.70(a)(2) specifies that a User may not apply the DAC order
instruction to a FLEX Order for a FLEX Option series with an exercise
price formatted as a percentage of the closing value of the underlying
on the trade date, as this functionality is not compatible with the DAC
order instruction.\28\ The System will need a fixed execution price at
the time of order execution that will be delta-adjusted (which delta
value is based on dollar price movements in the underlying) following
the market close. However, a FLEX Order for a series with an exercise
price formatted as a percentage of the closing value will execute at a
percentage rather than a fixed price, which would not be determined
until the market close. Therefore, execution price of such a FLEX Order
will incorporate the closing price or value of the underlying in a
different manner, and the System would not have an execution price to
adjust. Similarly, the proposed change to Rule 5.70(a)(2) specifies a
User will not be able to designate a FLEX Order in a FLEX Option series
that is Asian- or Cliquet-settled. The settlement prices for these
options are determined by averaging a pre-set number of closing index
values or summing the monthly returns, respectively, on specified
monthly observation dates.\29\ The transaction prices for these options
reflect these terms, and delta-adjustment of those transaction prices
would be based on the movement of the underlying on only the
transaction date. These settlement types are, as a result, inconsistent
with the DAC order instruction.
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    \28\ See Rule 4.21(b)(6)(A). The Exchange notes that the
proposed language in connection with FLEX Option exercise prices as
a percentage of the closing value and Asian-/Cliquet-settled series
was originally proposed in Rules 5.83(a)(2) and (b)(2), however, the
Exchange believes that moving the proposed language to Rule
5.70(a)(2), as well as the definition of complex orders, provides
better clarity regarding the application of this proposed limitation
on proposed DAC orders submitted to FLEX auctions.
    \29\ See Rule 4.21(b)(5)(B). See also id.
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    The proposed definition of DAC orders in Rule 5.6(c) also states
that a DAC order submitted through PAR has a Time-in-Force of Day.\30\
A Time-in-force of Day for an order so designated means that the order,
if not executed, expires at RTH market close. Thus, this proposed Time-
in-Force for DAC orders submitted for execution in open outcry ensures
that such orders will execute in line with their intended purpose--

intraday and as close in time as possible to the time in which it was
submitted to achieve the desired result of the broker's customer.
Moreover, the proposed DAC definition provides that a User may not
designate a DAC order as All Sessions (i.e. eligible for Regular
Trading Hours (``RTH'') and Global Trading Hours (``GTH'')),\31\ as the
adjustment calculation for DAC orders is linked to the RTH market close
for the underlying securities and indexes. Additionally, equities are
not traded during the entire GTH session, and not all indexes have
values disseminated during GTH, so there would not be a then-current
reference price for DAC orders outside of RTH.
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    \30\ The Exchange again notes that electronically submitted DAC
orders will be submitted through the electronic auctions, and either
executed or cancelled upon the conclusion of an auction, making an
instruction regarding the time the System will hold an order
unnecessary. Therefore, a requirement to apply a Time-in-Force of
Day is not necessary for electronic DAC orders.
    \31\ See Rule 1.1.
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    The reference price and delta value, as well as the execution
price, will be provided to all transaction parties on all fill reports
at the time of the execution of a DAC order (i.e. an ``unadjusted DAC
trade''). Unadjusted DAC trade information will also be sent to the
Options Clearing Corporation (``OCC'') and disseminated to Options
Price Reporting Agency (``OPRA''). Specifically for FLEX DAC orders,
like for all FLEX Orders, trade information will be reported via a text
message to OPRA. The Exchange notes that text messages for FLEX DAC
orders will contain an indicator that the order was executed as DAC, as
well as the delta and the reference price.\32\ The Exchange also notes
that individual legs of a FLEX DAC complex order will be reported with
an identifier that they are part of a complex order just like any
complex order legs are reported today.\33\ Upon conclusion of the
delta-adjustment of the execution price following the market close,
fill restatements will be sent to all transaction parties. Matched
trades will be sent to the OCC and OPRA once the restatement process is
complete with the delta-adjusted price. The prior unadjusted trade
reported to the OCC and disseminated to OPRA will be cancelled and
replaced with a trade report with all of the same information, except
the original execution price will be replaced with the delta-adjusted
price.\34\ A new FLEX DAC order text message will be disseminated to
OPRA with the same information included in the original text plus the
closing price. The Exchange has discussed with both the OCC and OPRA of
its plans to adopt DAC orders and confirmed that adopting the proposed
restatement process is acceptable.
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    \32\ Amendment No. 1 adds detail regarding the specific
information that will be included in the FLEX text message report to
OPRA in connection with the proposed DAC orders.
    \33\ See id.
    \34\ The Exchange notes that this restatement process is the
same for an order that has been adjusted or nullified and
subsequently restated pursuant to the Exchange's obvious error
rules. See Rule 6.5.
---------------------------------------------------------------------------

    The Exchange has analyzed its capacity and represents that it
believes the Exchange and OPRA have the necessary systems capacity to
handle additional any additional order traffic, and the associated
restatements, that may result from the adoption of DAC orders. Further,
the Exchange represents it has an adequate surveillance program in
place to monitor orders with DAC pricing and that the proposed pricing
instruction will not have an adverse impact on surveillance capacity.
Finally, the Exchange does not believe the proposed order instruction
will have any impact on pricing or price discovery at or near the
market close. A DAC order will execute intraday in the same manner as
any other order, and its price will merely be automatically adjusted
following determination of the final closing price or value of the
underlying security or index, respectively.

III. Proceedings To Determine Whether To Approve or Disapprove the
Proposed Rule Change, as Modified by Amendment No. 1

    The Commission is instituting proceedings pursuant to Section
19(b)(2)(B) of the Exchange Act \35\ to determine whether the proposed
rule change, as modified by Amendment No. 1, should be approved or
disapproved. Institution of such proceedings is appropriate at this
time in view of the legal and policy issues raised by the amended
proposal. Institution of proceedings does not indicate that the
Commission has reached any conclusions with respect to any of the
issues involved. Rather, as stated below, the Commission seeks and
encourages interested persons to provide comments on the proposed rule
change, as modified by Amendment No. 1, to inform the Commission's
analysis of whether to approve or disapprove the proposal.
---------------------------------------------------------------------------

    \35\ 15 U.S.C. 78s(b)(2)(B).
---------------------------------------------------------------------------

    Pursuant to Section 19(b)(2)(B) of the Exchange Act,\36\ the
Commission is providing notice of the grounds for disapproval under
consideration. The Commission is instituting proceedings to allow for
additional analysis of the proposed rule change's consistency with
Section 6(b)(5) of the Exchange Act, which requires that the rules of
an exchange be designed to prevent fraudulent and manipulative acts and
practices, to promote just and equitable principles of trade, to foster
cooperation and coordination with persons engaged in regulating,
clearing, settling, processing information with respect to, and
facilitating transactions in securities, to remove impediments to and
perfect the mechanism of a free and open market and a national market
system, and, in general, to protect investors and the public
interest.\37\ Section 6(b)(5) of the Exchange Act also requires that
the rules of an exchange not be designed to permit unfair
discrimination between customers, issuers, brokers, or dealers.\38\
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    \36\ Id.
    \37\ 15 U.S.C. 78f(b)(5).
    \38\ Id.
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IV. Proccedure: Request for Written Comments

    The Commission requests that interested persons provide written
submissions of their views, data, and arguments with respect to the
issues identified above, as well as any other concerns they may have
with the proposal. In particular, the Commission invites the written
views of interested persons concerning the proposed rule change, as
modified by Amendment No. 1, including whether the proposal is
consistent with Sections 6(b)(5) of the Exchange Act, any other
provision of the Exchange Act, or any other rule or regulation under
the Exchange Act. Although there do not appear to be any issues
relevant to approval or disapproval that would be facilitated by an
oral presentation of views, data, and arguments, the Commission will
consider, pursuant to Rule 19b-4, any request for an opportunity to
make an oral presentation.\39\
---------------------------------------------------------------------------

    \39\ Section 19(b)(2) of the Exchange Act, as amended by the
Securities Act Amendments of 1975, Public Law 94-29 (June 4, 1975),
grants the Commission flexibility to determine what type of
proceeding--either oral or notice and opportunity for written
comments--is appropriate for consideration of a particular proposal
by a self-regulatory organization. See Securities Act Amendments of
1975, Senate Comm. on Banking, Housing & Urban Affairs, S. Rep. No.
75, 94th Cong., 1st Sess. 30 (1975).
---------------------------------------------------------------------------

    Interested persons are invited to submit written data, views, and
arguments concerning the proposed rule change, as modified by Amendment
No. 1, including whether the proposal should be approved or disapproved
by June 30, 2020. Any person who wishes to file a rebuttal to any other
person's submission must file that rebuttal by July 14, 2020. The
Commission asks that commenters address the sufficiency of the
Exchange's statements in support of the proposed rule change, as
modified by Amendment No. 1, in addition to any other comments they may
wish to submit about the proposed rule change.

Comments may be submitted by any of the following methods:

Electronic Comments

     Use the Commission's internet comment form (http://www.sec.gov/rules/sro.shtml); or
     Send an email to<EMAIL_ADDRESS>Please include
File Number SR-CBOE-2020-014 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-CBOE-2020-014. 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 these filings also will be available for inspection
and copying at the principal office of the Exchange. 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-CBOE-2020-014 and should be submitted on
or before June 30, 2020. Rebuttal comments should be submitted by July
14, 2020.

    For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\40\
---------------------------------------------------------------------------

    \40\ 17 CFR 200.30-3(a)(57).
---------------------------------------------------------------------------

J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2020-12381 Filed 6-8-20; 8:45 am]
 BILLING CODE 8011-01-P


 [ Federal Register: September 18, 2002 ( Volume 67, Number 181)] [ Notices] [ Page 58795 58797] From the Federal Register Online via GPO Access [ wais. access. gpo. gov] [ DOCID: fr18se02 77]

ENVIRONMENTAL PROTECTION AGENCY [ OPP 2002 0180; FRL 7198 7]

Chlorpropham Tolerance Reassessment Decision; Notice of Availability AGENCY: Environmental Protection Agency ( EPA).

ACTION: Notice.

SUMMARY: This notice constitutes the Agency's report on the Food Quality Protection Act ( FQPA) tolerance reassessment progress and risk management decision for chlorpropham, announces the Agency's decision, and releases the human health risk assessment and related documents supporting this decision to the public. This notice of tolerance reassessment for chlorpropham starts the 30 day public comment period during which the public is invited to submit comments on the Agency's `` Report of the FQPA Tolerance Reassessment Progress and Risk Management Decision ( TRED)'' for chlorpropham. If any comment causes the Agency to revise its decision on tolerance reassessment for chlorpropham, the Agency will publish a notice of its amendment in the Federal Register. The Agency's reassessment of dietary risk, including public exposure through food and drinking water as required by the Federal Food, Drug, and Cosmetic Act ( FFDCA), as amended by FQPA, indicate that dietary risk from stored potatoes treated with chlorpropham per se, poses no risk concerns within the limits of the reassessed tolerances associated with chlorpropham use on potatoes.

DATES: Comments must be submitted on or before October 18, 2002.

ADDRESSES: Comments may be submitted by mail, electronically, or in person. Please follow the detailed instructions for each method as provided in Unit I. of the SUPPLEMENTARY INFORMATION. To ensure proper receipt by EPA, it is imperative that you identify docket ID number OPP 2002 0180 in the subject line on the first page of your response.

FOR FURTHER INFORMATION CONTACT: Gary Mullins, Special Review and Reregistration Division ( 7508C), Office of Pesticide Programs, Environmental Protection Agency, 1200 Pennsylvania Ave., NW., Washington, DC 20460; telephone number: ( 703) 308 8044; e mail address:  mullins. gary@ epa. gov.

SUPPLEMENTARY INFORMATION:

I. General Information A. Does this Action Apply to Me?

This action is directed to the public in general. This action may, however, be of interest to those persons who are or may be required to conduct testing of chemical substances under the Federal Insecticide, Fungicide, and Rodenticide Act ( FIFRA) or the FFDCA. Since other entities may also be interested, the Agency has not attempted to describe all the specific entities that may be affected by this action. If you have any questions regarding the applicability of this action to a particular entity, consult the person listed under FOR FURTHER INFORMATION CONTACT.

B. How Can I Get Additional Information, Including Copies of this Document and Other Related Documents?

1. Electronically. You may obtain electronic copies of this document, and certain other related documents that might be available electronically, from the EPA Internet Home Page at  http:// www. epa. gov/. To access this document, on the Home Page select `` Laws and Regulations,'' `` Regulations and Proposed Rules,'' and then look up [[ Page 58796]]

the entry for this document under the `` Federal Register Environmental Documents.'' You can also go directly to the Federal Register listings at  http:// www. epa. gov/ fedrgstr/. To access TRED documents electronically, go directly to the TREDs table on the EPA Office of Pesticide Programs Home Page, at  http:// www. epa. gov/ pesticides/ reregistration/ status. htm. 2. In person. The Agency has established an official record for this action under docket ID number OPP 2002 0180. The official record consists of the documents specifically referenced in this action, any public comments received during an applicable comment period, and other information related to this action, including any information claimed as Confidential Business Information ( CBI). This official record includes the documents that are physically located in the docket, as well as the documents that are referenced in those documents. The public version of the official record does not include any information claimed as CBI. The public version of the official record, which includes printed, paper versions of any electronic comments submitted during an applicable comment period, is available for inspection in the Public Information and Records Integrity Branch ( PIRIB), Rm. 119, Crystal Mall < greek i> 2, 1921 Jefferson Davis Hwy., Arlington, VA, from 8: 30 a. m. to 4 p. m., Monday through Friday, excluding legal holidays. The PIRIB telephone number is ( 703) 305 5805.

C. How and to Whom Do I Submit Comments?

You may submit comments through the mail, in person, or electronically. To ensure proper receipt by EPA, it is imperative that you identify docket ID number OPP 2002 0180 in the subject line on the first page of your response. 1. By mail. Submit your comments to: Public Information and Records Integrity Branch ( PIRIB), Information Resources and Services Division ( 7502C), Office of Pesticide Programs ( OPP), Environmental Protection Agency, 1200 Pennsylvania Ave., NW., Washington, DC 20460. 2. In person or by courier. Deliver your comments to: Public Information and Records Integrity Branch ( PIRIB), Information Resources and Services Division ( 7502C), Office of Pesticide Programs ( OPP), Environmental Protection Agency, Rm. 119, Crystal Mall < greek i> 2, 1921 Jefferson Davis Hwy., Arlington, VA. The PIRIB is open from 8: 30 a. m. to 4 p. m., Monday through Friday, excluding legal holidays. The PIRIB telephone number is ( 703) 305 5805. 3. Electronically. You may submit your comments electronically by e mail to:  opp docket@ epa. gov, or you ca n submit a computer disk as described above. Do not submit any information electronically that you consider to be CBI. Avoid the use of special characters and any form of encryption. Electronic submissions will be accepted in WordPerfect 6.1/ 8.0/ 9.0 or ASCII file format. All comments in electronic form must be identified by docket ID number OPP 2002 0180. Electronic comments may also be  filed online at many Federal Depository Libraries.

D. How Should I Handle CBI that I Want to Submit to the Agency?

Do not submit any information electronically that you consider to be CBI. You may claim information that you submit to EPA in response to this document as CBI by marking any part or all of that information as CBI. Information so marked will not be disclosed except in accordance with procedures set forth in 40 CFR part 2. In addition to one complete version of the comment that includes any information claimed as CBI, a copy of the comment that does not contain the information claimed as CBI must be submitted for inclusion in the public version of the official record. Information not marked confidential will be included in the public version of the official record without prior notice. If you have any questions about CBI or the procedures for claiming CBI, please consult the person listed under FOR FURTHER INFORMATION CONTACT.

E. What Should I Consider as I Prepare My Comments for EPA?

You may find the following suggestions helpful for preparing your comments: 1. Explain your views as clearly as possible. 2. Describe any assumptions that you used. 3. Provide copies of any technical information and/ or data you used that support your views. 4. If you estimate potential burden or costs, explain how you arrived at the estimate that you provide. 5. Provide specific examples to illustrate your concerns. 6. Offer alternative ways to improve the notice or collection activity. 7. Make sure to submit your comments by the deadline in this notice. 8. To ensure proper receipt by EPA, be sure to identify the docket ID number assigned to this action in the subject line on the first page of your response. You may also provide the name, date, and Federal Register citation.

II. Background A. What Action is the Agency Taking?

This notice constitutes and announces the availability of the chlorpropham TRED. This decision has been developed as part of the public participation process that EPA and the U. S. Department of Agriculture ( USDA) are using to involve the public in the reassessment of pesticide tolerances under FFDCA. EPA must review tolerances and tolerance exemptions that were in effect when FQPA was enacted in August 1996, to ensure that these existing pesticide residue limits for food and feed commodities meet the safety standard of the new law. In reviewing these tolerances, the Agency must consider, among other things, aggregate risks from non occupational sources of pesticide exposure, whether there is increased susceptibility to infants and children, and the cumulative effects of pesticides with a common mechanism of toxicity. The tolerances are considered reassessed once the safety finding has been made that aggregate risks are not of concern. A reregistration eligibility decision ( RED) was completed for chlorpropham in April 1995, prior to FQPA enactment, and therefore needed an updated assessment to consider the provisions of the Act. The FQPA requires that the Agency consider `` available information'' concerning the cumulative effects of a particular pesticide's residues and `` other substances that have a common mechanism of toxicity.'' The reason for consideration of other substances is due to the possibility that low level exposures to multiple chemical substances that cause a common toxic effect by a common mechanism could lead to the same adverse health effect as would a higher level of exposure to any of the other substances individually. EPA did not perform a cumulative risk assessment as part of this reregistration review of chlorpropham, because the Agency has not determined if there are any other chemical substances that have a mechanism of toxicity common with that of chlorpropham. If EPA identifies other substances that share a common mechanism of toxicity with chlorpropham, then a cumulative risk assessment will be conducted that includes chlorpropham. Further, EPA is in the process of developing criteria for characterizing and testing endocrine disrupting chemicals and plans to implement an Endocrine Disruptor [[ Page 58797]]

Screening Program. Chlorpropham will be reevaluated at that time and additional studies may be required. Additionally, the Agency has evaluated the dietary risk associated with chlorpropham and has determined that provided the Special Local Need ( SLN) registration for Easter lily bulb use is amended to reduce the maximum rate of application from 3.99 pounds active ingredient/ acre to 2.0 pounds active ingredient/ acre, as agreed upon by stakeholders, there is a reasonable certainty that no harm to any population subgroup will result from aggregate exposure to chlorpropham when considering dietary exposure and all other non occupational sources of pesticide exposure for which there is reliable information. Therefore, with this mitigation measure in place, 15 tolerances are now considered reassessed and 9 new tolerances will be established for residues of chlorpropham in/ on raw agricultural commodities under section 408( q) of the FFDCA. All registrants of pesticide products containing the active ingredient listed in this document have been sent the appropriate TRED document, and must respond to labeling requirements within 8 months of receipt. In addition, the Agency requests a response to the generic Data Call In ( DCI) letter from technical registrants within 90 days of receipt. The reregistration program is being conducted under Congressionally mandated time frames, and EPA recognizes both the need to make timely reregistration decisions and to involve the public. All comments received within 30 days of publication of this Federal Register notice will be considered by the Agency. If any comment significantly impacts this TRED, the Agency will amend its decision by publishing a Federal Register notice.

B. What is the Agency's Authority for Taking this Action?

The legal authority for this TRED falls under FIFRA, as amended in 1988 and 1996. Section 4( g)( 2)( A) of FIFRA directs that, after submission of all data concerning a pesticide active ingredient, `` the Administrator shall determine whether pesticides containing such active ingredient are eligible for reregistration,'' and either reregistering products or taking `` other appropriate regulatory action.''

List of Subjects Environmental protection, Pesticides, Tolerances.

Dated: September 10, 2002. Lois A. Rossi, Director, Special Review and Reregistration Division, Office of Pesticide Programs. [ FR Doc.  02 23593  Filed 9 17  02; 8: 45 am] BILLING CODE 6560 50 S


to in some cases more than one million donations in at
least 10,000 pools.  Blood and plasma centers need IRB
approval for NAT screening of donors.  Informed consent
is obtained from donors and they are recruited into
follow-up studies to confirm their test results and to
resolve their infection status.
Donors are being followed up for six months
for HIV-1 and HBV and for 12 months for HCV.  A

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validated supplemental NAT that is of the same or can be
another technology is being used to confirm results and
look-back is being carried out for NAT-positive only
results.
A number of other issues have been
identified regarding implementation of NAT under IND.
For example, NAT requires several days more than
conventional antibody tests due to logistics, that is,
testing by centralized laboratories and other technology
limitations.  Consequently, certain blood products, for
example, platelets and some red cells, are expected to
be released on the basis of serology during the initial
phase of the studies under IND, that is, Phase 1.  This
is necessary to prevent shortages of those critically
needed blood products.  This phase, however, which is
expected to be of short duration, will be followed by a
phase where all components are released on the basis of
both NAT and serology and this would be in Phase 2.
This should be occurring very soon and we'll be hearing
more about this later this morning.
Recipient concerns are being managed by
local IRBs of hospitals and transfusion centers.  Cost
recovery has been permitted by the FDA under the IND due
to the high cost of NAT testing and the national scope

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of the studies.  Product labeling will be permitted.
FDA recently sent a letter to at least one of the blood
organizations and some blood banks who inquired, saying
that the units can be labeled as -- and something like
"screened by an investigational NAT test for HCV whose
performance has not yet been established," or something
to that effect.
However, no enhanced safety claims are
permitted during the study phase.  This is going to
allow a distinction between NAT screened and unscreened
units which will coexist during Phase 1.  Other issues
are that donors are counseled on the basis of confirmed
investigational test results and deferred until their
clinical status is resolved.
I already mentioned look-back.  This would
be consistent with existing guidance and would be for a
period of three months for NAT-only positives.  Other
issues that are anticipated in the future are NAT for
other viruses, for example HBV as we've heard and Parvo
B-19 and the increasing push towards single unit testing
by NAT.  Also, we've had a dialogue with various
sponsors regarding potential replacement of existing
tests such as the HIV-1 p24 antigen assay.  This last
issue was actually discussed at the Blood Products

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Advisory Committee meeting in March of this year.
So in summary, NAT for HCV, HIV and HBV has
been implemented under IND for both whole blood and
source plasma.  More than 90 percent of whole blood and
nearly all source plasma are being screened by a NAT
method for HCV and HIV.
There are several implementation issues
relating to the donor, the recipient and product
management and the move toward universal release of
products for transfusion based on NAT.  These issues
need to be addressed in the clinical trials that are
done and hopefully they'll be discussed at length during
the workshop today.
So I think I'll stop there and thank you
very much.
(Applause.)
DR. TABOR:  Thank you, Paul, for those
excellent remarks.  The next speaker is Dr. Michael
Chudy.  Dr. Chudy will be speaking on NAT
implementation, regulation in Europe.  Dr. Chudy is from
the Department of Virology, Paul-Ehrlich Institut in
Langen, Germany.
DR. CHUDY:  Mr. Chairman, ladies and
gentlemen, first, thank you for this invitation to this

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meeting.  May I have the first -- yes.
However, even in the period after
introduction of virus inactivation steps into the
manufacturing process, some episodes of virus
transmission have been occurred, so several ongoing
efforts to improve the safety of plasma products.  But
in my view, not only plasma derivatives, also all sero-
components because until now no virus inactivation steps
are implemented.
There's a development of sensitive methods
for the detection of viral genomes, the question arose
as to the application of NAT could contribute to a
further increase in the virus safety.
Now the events in Germany, you see there's
a German blood bank in Hagen, one of the greatest blood
banks in Europe with over one million donations per
year.  They have implemented pilot studies, in general,
in 1996, screening and anti-screening of all blood
donations for HCV, HBV and HIV.  In consequence, the
Paul-Ehrlich Institut initiated a phased plant
procedure.  This is the first step of exchange of
information.  And you see the next step was proposals
with written comments by the manufacturers and then in
September a hearing in Paris and later comes the

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conclusion of HCV NAT implementation for the label
concentrates, erythrocytes and platelets and later now
for the quarantined plasma.
What was the reason of this decision?  I
can do it very quickly because we have also heard in the
first talk today, we have performed in our Institut
studies with seroconversion panels and that is my
present review of the definition of seroconversion
panels.  Regarding to HBV, you can see that not all
available panels in my view are relevant to this
investigation.  I think from nearly 40 panels, only 14
were relevant.
And you can see and Michael Busch also
mentioned this in these figures that NAT can reduce the
window period is not clear over three weeks and you find
in this period very low titers of survivals.  The other
situation is for HCV, summarizing for several panels and
you see the reduced window periods of over 50 days and
a second thing is that we have found very high titer in
this period, so when we define the detection limits of
the tests regarding single donation of 5,000 units per
mL, you can see that all donations, positive donations
can be detected.
The next slide summarizes -- you'll see

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that also the detection limit for the tests, now is a
commercial test.  You know that Amplicor is a detection
and made the final copies.  The incidents that are also
pilots that reach from over three million donations in
Germany.
Now the events in Europe.  First, in 1994
the implementation for HCV NAT for plasma pools.  Later,
it comes for some other immunoglobulins.  Such
immunoglobulins would not have in their manufacturing
process an activation step for viruses and now the
regulation for all plasma pools since July this year.
You see that this paper is an addendum to
the regulation of medicinal products derived from human
plasma.  I will go in detail to this regulation.  You
see the time scale and you can see that from the
beginning, from the discussion in the biotech working
party until the date for coming into operation that took
nearly two years.
What are the contents?  The first part are
introduction of comments so it's clear the impact of the
NAT for virus safety and there is a potential to reduce
the virus load and now I think the NAT has reached a
stage that it allows to go and test for plasma pools.
The first recommendation was at the time

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that from July 1st of this year batch release only
platelets derived from plasma pools tested and found
nonreactive for HCV by NAT and there's also a regulation
for plasma- derived -- plasma products used as
excipients that means an example albumin as a product
from the fractionation of plasma and then albumin is an
additive to a recombinant Factor VIII and then the
recombinant Factor VIII for us also, under this
regulation and so the next recommendation was pretesting
of minipools.
The next three points, regulation for such
batches of products released before July and the next
point was evaluation and approval of the test
methodology and validation data by the competent
authorities and the definition of the level of the NAT,
at least 100 units per mL for the production pool.
I just show this to direct your attention
to three points regarding blood donation center
regulation and regulation for plasma derivatives.  You
can see we have no virus inactivation step for the level
components, but we have an inactivation step per
regulation for these products.  A very important
question is the time available for the tests.  You know
the platelets have a very short shelf life and so it's

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very limited to perform the NAT and there are no time-
limited principles to test plasma pools for production
of plasma derivatives.
You see also the regulation for blood
donation center.  They're referred to single donations
allow look-back evaluation.  We have regulated only the
level of production pools, but if pretesting of
minipools is recommended, also look-back is possible.
So to summarize, now available, reference
preparation of HCV calibrated in units, I think John
Saldanha will go in detail later, you see the gold
standard and some other national standards and also a
standard from the EDQM, this is the last one, prepared
and provided for the European manufacturer.  The
Paul- Erhlich Institut has also performed an all-
national standard.  In my view, it was a commitment for
the blood donation center for -- prerequisite for the
implementation of the NAT test.
Okay, until now there are no specific NAT
guidelines available.  The background was -- or the two
guidelines for analytical procedures and we see that HIV
NAT is a limit test and for validation these features
are recovered, specifically sensitivity, robustness and
also quality assurance.  I will not go in detail, but I

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will show you now the recommendations, our own
recommendations for blood donation center for the
validation and later the European OMCL network has also
prepared a paper, "Guidelines for Validation of NAT
Positive Detection of HCV RNA Plasma Pools" and I have
listed here the European Pharmacopoeia monograph.  There
is written a special point to recommendation of
implementation of an internal control for HCV entity.
That is a very important thing in my view.
Now, very briefly, some results of the
implementation in Germany, that was a frame, you know
that, and you see here that all the documents have the
prove by our institute, that was a lot of work, but was
the situation?  Nearly a hundred blood donation centers
for each validates to commence to our institutes and you
see that some blood donation centers have performed more
than one procedure.
Seventy-one centers perform the NAT on site
and 25 have external test laboratories.  These test
laboratories can be divided in external diagnostic labs,
seven, and in six blood donation centers with an
additional testing capacity for other samples, and
there's a great know-how in this field.
Some points to the use methods, you see

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most of them, 66, use the commercial test, the COBAS
Amplicor.  Eight use the modified COBAS Amplicor.  That
means that they replace the extraction procedure of the
kit by another and only ten perform in-house methods
like Taq Man, Light Cycler and others.
You can see the link between methods and
pool size.  We have Amplicor and modified Amplicor, Tax
Man, and Light Cycler, and other, and in this we have
the pool size and the red is the minimum pool size, from
single donation testing up to ten pools, and then 20 in
blue and 30, 40 is the yellow; up to 48.  And the green
one is the maximum possible pool size of 96 and you can
see that with Amplicor most of them perform single unit
testing or pool maximum of ten donations.  And this
modified Amplicor, it is possible to increase the pool
size from 48 to 96.  Only one uses the Light Cycler,
it's an important surprise for me and some also tested
with Tax Man; it spans all the pool sizes.
Okay, that is my last slide.  That's now
the situation for the regulation in Europe.  HCV
mandatory is clear is the regulation for the plasma
products.  We have in Germany the regulation also from
April of this year in Switzerland and Austria and in the
near future in the Netherlands.  There is an HBV and an

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HIV testing as a self-commitment procedure and the most
manufacturers of plasma derivatives and also in our
great blood banks in Germany.  For HIV, there is a
special situation, I think.  It's more interesting for
manufacturers as plasma derivatives.  There's an
activation step of soil and detergent and now comes into
debate Parvo B19 testing.  It's under investigation.  In
the beginning of October this year, the first hearing in
a biotech working party where all manufacturers give
their future ideas in this field.  And routinely all
great manufacturers implemented B19 testing for high-
titer donations.  The other viruses are not so
interesting, I think, because there is a question if
they're transfusion prevalent viruses.
Thank you for your attention.
(Applause.)
DR. TABOR:  Thank you very much, Dr. Chudy,
a very nice talk.  The next speaker is Dr. Masaharu
Nakajima.  Dr. Nakajima is Director of the
Pharmaceutical and Medical Safety Bureau in the Ministry
of Health in Tokyo.  Dr. Nakajima will be speaking on
NAT implementation and its regulation in Japan.
Dr. Nakajima.
DR. NAKAJIMA:  Thank you, Chairperson,

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ladies and gentlemen.  My name is Masaharu Nakajima from
Japanese Ministry of Health and Welfare.  I am very
honored to be invited here to have the opportunity to
speak about our Japanese experience on NAT
implementation for blood products.
First, I would like to introduce the
outline of our blood program.  Japan has a population of
125 million and blood donation was done 6.1 million
times last year.  The donations were totally non-
remunerated and the blood collection was done by the
Japan Red Cross, JRC alone.  Donations consisted of
about 25 percent of pheresis, 44 percent, 400 milliliter
of whole blood and 31 percent 200 milliliter whole
blood.  Plasma products,
self-sufficiency rates are 26 percent for albumin and 60
percent for globulin.  Most of import is from the United
States, I think contributing somewhat to U.S.-Japan
trade balance.
(Laughter.)
As in other countries, our blood program is
very unique, difficult and sensitive, including moral
issues in Japan and we are discussing a new framework of
blood program to include self-sufficiency and safety.
Next.  The Japanese regulatory scheme on

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blood products is mainly composed of the Blood Law and
Pharmaceutical Affairs Law.  The Blood Law regulates
blood donation conditions such as donor health and
facility requirements and give license to blood
collecting organizations.  The safety issues are
regulated basically by the Pharmaceutical Affairs Law.
The main body to discuss the issue is Center of
Pharmaceutical Affairs Council and minimum requirements
of biological and blood products dictates necessary
tests for manufacturing procedures.
A good manufacturing practice, GMP, is
required as usual and a virus validation guideline is
made to apply to evaluate virus inactivation and the
removal procedures.
Minimum requirement of biological and blood
products and viral validation guidelines are applied to
products delivered in Japan regardless of its original
country.  Therefore, products not satisfying the
requirements cannot be imported nor used in Japan.
Other requirements may arise according to
the situation as administrative guidance which is not
legally compulsive, but the strength of requirement
depends on the conditions of the cases.  A rapid
development of technology and the diversity of its

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influence requires these kinds of measures.
The next shows the history of introduction
of screening tests in Japan.  After the introduction of
these screening tests, post-transfusion infection
decreased step by step, especially after the
introduction of HBC antibody and HBS antibody tests in
1989.  Fulminant hepatitis caused by HBV-positive
transfusion has not been reported.  HCV antibody tests
decreased post-transfusion hepatitis very much.
Also, although HIV-2 antibody tests were
introduced in 1994, there has been no case of HIV-2
reported in Japan and this year, the NAT for three
viruses were introduced and window periods shortened
substantially.  But it was very sad that very recently,
just before the implementation of NAT, two cases of HIV
infection through transfusion occurred which was our
window period donation.
Next.  Recent history surrounding NAT
begins donation sample storage since September 1996
which enabled confirmation at look back in our huge deep
freezers built in northern part of Japan to keep frozen
samples for ten years.  JRC began plasma pool testing of
source plasma for fractionation in November 1997 for
three viruses, namely HIV, HBV and HCV.  And techniques

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in the system were developed, improved and stabilized.
Our source plasma in plasma for transfusion
are collected from the volunteer donors in the same
blood centers and some for transfusion are used for
source plasma later.  Central Pharmaceutical Affairs
Council decided the policy to implement three NATs for
blood products including transfusion products in October
1998.
Then finally, three NATs were implemented
to transfusion products except platelets component
because of the short shelf life of 72 hours in Japan.
As a trial in July 1999 and all donations had begun to
be screened in October 1999.
Next.  There are two NAT centers of JRC.
One is in Tokyo and the other is in Hokkaido which is a
northern island of Japan.  The samples are gathered and
transported to those NAT centers according to the area
of donated centers, blood centers.  One more center is
being built in the near future.  The NAT system extracts
and detects three viruses including both HBV DNA and HCV
and HIV RNA at the same time using a so-called multiplex
reagent system at the present situation.
Five hundred serologically screened samples
are pulled and tested.  If it turns out to be positive,

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which means that one or some of the three viruses
detected, then related samples are stopped delivering
immediately and the virus and the original sample is
pursued.
Serologically screened samples are used to
avoid cross contamination by high titer samples.  The
pool size will be reduced in the near future.  The NAT