[Federal Register: January 22, 2009 (Volume 74, Number 13)]
[Rules and Regulations]
[Page 3967-3975]
[DOCID:fr22ja09-3]

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SECURITIES AND EXCHANGE COMMISSION

17 CFR PARTS 230, 240 and 260

[Release Nos. 33-8999; 34-59246; 39-2549; File No. S7-02-09]
RIN 3235-AK26

Temporary Exemptions for Eligible Credit Default Swaps To
Facilitate Operation of Central Counterparties To Clear and Settle
Credit Default Swaps

AGENCY: Securities and Exchange Commission.

ACTION: Interim final temporary rules; request for comments.

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SUMMARY: We are adopting interim final temporary rules providing
exemptions under the Securities Act of 1933, the Securities Exchange
Act of 1934, and the Trust Indenture Act of 1939 for certain credit
default swaps to facilitate the operation of one or more central
counterparties for those credit default swaps. The interim final
temporary rules define such credit default swaps as ``eligible credit
default swaps'' and exempt them from all provisions of the Securities
Act, other than the Section 17(a) anti-fraud provisions, as well as
from Exchange Act registration requirements and from the provisions of
the Trust Indenture Act, provided certain conditions are met. Our
interim final temporary rules also define as a ``qualified purchaser,''
for purposes of the ``covered securities'' provisions of Section 18 of
the Securities Act, any ``eligible contract participant,'' as defined
in Section 1a(12) of the Commodity Exchange Act (``CEA''), other than a
person who is an eligible contract participant under Section 1a(12)(C)
of the CEA, to whom a sale of a eligible credit default swap is made in
reliance on the interim final temporary Securities Act exemption.

DATES: Effective Date: The interim final temporary rules are effective
January 22, 2009 until September 25, 2009.
    Comment Date: Comments on the interim final temporary rules should
be received on or before March 23, 2009.

ADDRESSES: Comments may be submitted by any of the following methods:

Electronic Comments

     Use the Commission's Internet comment form (http://
www.sec.gov/rules/interim-final-temp.shtml);
     Send an e-mail to<EMAIL_ADDRESS>Please include
File Number S7-02-09 on the subject line; or
     Use the Federal Rulemaking Portal (http://
www.regulations.gov). Follow the instructions for submitting comments.

Paper Comments

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

All submissions should refer to File Number S7-02-09. This file number
should be included on the subject line if e-mail is used. To help us
process and review your comments more efficiently, please use only one
method. The Commission will post all comments on the Commission's
Internet Web site (http://www.sec.gov/rules/interim-final-temp.shtml).
Comments are also available for public inspection and copying in the
Commission's Public Reference Room, 100 F Street, NE., Washington, DC
20549, on official business days between the hours of 10 a.m. and 3
p.m. All comments received will be posted without change; we do not
edit personal identifying information from submissions. You should
submit only information that you wish to make available publicly.

FOR FURTHER INFORMATION CONTACT: Amy M. Starr, Senior Special Counsel,
or Kim McManus, Special Counsel, Office of Chief Counsel, Division of
Corporation Finance, at<PHONE_NUMBER>, U.S. Securities and Exchange
Commission, 100 F Street, NE., Washington, DC 20549-3628.

SUPPLEMENTARY INFORMATION: We are adopting interim final temporary Rule
239T and a temporary amendment to Rule 146 under the Securities Act of
1933 (``Securities Act'').\1\ We are also adopting interim final
temporary Rule 12a-10T and Rule 12h-1(h)T under the Securities Exchange
Act of 1934 (``Exchange Act'') \2\ and interim final temporary Rule 4d-
11T under the Trust Indenture Act of 1939 (``Trust Indenture Act'').\3\
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    \1\ 15 U.S.C. 77a et seq.
    \2\ 15 U.S.C. 78a et seq.
    \3\ 15 U.S.C. 77aaa et seq.
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I. Background

    In response to the recent turmoil in the financial markets, we have
taken multiple actions to protect investors and ensure the integrity of
the nation's securities markets.\4\ Today we are taking further action
designed to address concerns related to the market in credit default
swaps (``CDS''). The over-the-counter (``OTC'') market for CDS has been
a source of concerns to us and other financial regulators. These
concerns include the systemic risk posed by CDS, highlighted by the
possible inability of parties to meet their obligations as
counterparties and the potential resulting adverse effects on other
markets and the financial system.\5\ Recent credit market events have
demonstrated the seriousness of these risks in a CDS market operating
without meaningful regulation, transparency,\6\ or

central counterparties (``CCPs'').\7\ These events have emphasized the
need for CCPs as mechanisms to help control such risks.\8\ A CCP for
CDS could be an important step in reducing the counterparty risks
inherent in the CDS market, and thereby help mitigate potential
systemic impacts. In November 2008, the President's Working Group on
Financial Markets stated that the implementation of a CCP for CDS was a
top priority \9\ and, in furtherance of this recommendation, the
Commission, the FRB and the Commodity Futures Trading Commission
(``CFTC'') signed a Memorandum of Understanding \10\ that establishes a
framework for consultation and information sharing on issues related to
CCPs for CDS. Given the continued uncertainty in this market, taking
action to help foster the prompt development of CCPs, including
granting conditional exemptions from certain provisions of the federal
securities laws, is in the public interest. The interim final temporary
rules we are adopting are intended to facilitate the ability of one or
more CCPs for CDS to operate by providing exemptions from certain
regulatory provisions that might otherwise prevent them from engaging
in such activities.
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    \4\ A nonexclusive list of the Commission's actions to stabilize
financial markets during this credit crisis include: adopting a
package of measures to strengthen investor protections against naked
short selling, including rules requiring a hard T+3 close-out,
eliminating the options market maker exception of Regulation SHO,
and expressly targeting fraud in short selling transactions (See
Securities Exchange Act Release No. 58572 (September 17, 2008), 73
FR 54875 (September 23, 2008)); issuing an emergency order to
enhance protections against naked short selling in the securities of
primary dealers, Federal National Mortgage Association (``Fannie
Mae''), and Federal Home Loan Mortgage Corporation (``Freddie Mac'')
(See Securities Exchange Act Release No. 58166 (July 15, 2008), 73
FR 42379 (July 21, 2008)); taking temporary emergency action to ban
short selling in financial securities (See Securities Exchange Act
Release No. 58592 (September 18, 2008), 73 FR 55169 (September 24,
2008)); approving emergency rulemaking to ensure disclosure of short
positions by hedge funds and other institutional money managers (See
Securities Exchange Act Release No. 58591A (September 21, 2008), 73
FR 55557 (September 25, 2008)); proposing rules to strengthen the
regulation of credit rating agencies and making the limits and
purposes of credit ratings clearer to investors (See Securities
Exchange Act Release No. 57967 (June 16, 2008), 73 FR 36212 (June
25, 2008); entering into a Memorandum of Understanding with the
Board of Governors of the Federal Reserve System (``FRB'') to make
sure key federal financial regulators share information and
coordinate regulatory activities in important areas of common
interest (See Memorandum of Understanding Between the U.S.
Securities and Exchange Commission and the Board of Governors of the
Federal Reserve System Regarding Coordination and Information
Sharing in Areas of Common Regulatory and Supervisory Interest (July
7, 2008), http://www.sec.gov/news/press/2008/2008-134_mou.pdf).
    \5\ In addition to the potential systemic risks that CDS pose to
financial stability, we are concerned about other potential risks in
this market, including operational risks, risks relating to
manipulation and fraud, and regulatory arbitrage risks.
    \6\ See Policy Objectives for the OTC Derivatives Market, The
President's Working Group on Financial Markets (November 14, 2008),
http://www.ustreas.gov/press/releases/reports/policyobjectives.pdf
(``Public reporting of prices, trading volumes and aggregate open
interest should be required to increase market transparency for
participants and the public.'').
    \7\ See The Role of Credit Derivatives in the U.S. Economy
Before the H. Agric. Comm., 110th Cong. (2008) (Statement of Erik
Sirri, Director of the Division of Trading and Markets, Commission).
    \8\ See id.
    \9\ See Policy Objectives for the OTC Derivatives Market, The
President's Working Group on Financial Markets (November 14, 2008),
http://www.ustreas.gov/press/releases/reports/policyobjectives.pdf.
See also Policy Statement on Financial Market Developments, The
President's Working Group on Financial Markets (March 13, 2008),
http://www.treas.gov/press/releases/reports/
pwgpolicystatemktturmoil_03122008.pdf; Progress Update on March
Policy Statement on Financial Market Developments, The President's
Working Group on Financial Markets (October 2008),  http://
www.treas.gov/press/releases/reports/q4progress%20update.pdf.1
    \10\ See Memorandum of Understanding Between the Board of
Governors of the Federal Reserve System, the U.S. Commodity Futures
Trading Commission and the U.S. Securities and Exchange Commission
Regarding Central Counterparties for Credit Default Swaps (November
14, 2008), http://www.treas.gov/press/releases/reports/finalmou.pdf
(``MOU'').
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    A CDS is a bilateral contract between two parties, known as
counterparties. The value of this financial contract is based on
underlying obligations (``reference obligations'') of a single entity
(a ``reference entity'') or on a particular security or other debt
obligation (``reference security''), or an index of several such
entities, securities, or obligations. The obligation of a seller to
make payments under a CDS contract is triggered by a default or other
credit event as to such entity or entities or such security or
securities. Investors may use CDS for a variety of reasons, including
to offset or insure against risk in their fixed-income portfolios, to
take synthetic positions in bonds or in segments of the debt market as
represented by an index, or to capitalize on the volatility in credit
spreads during times of economic uncertainty. In recent years, CDS
market volumes have rapidly increased.\11\ This growth has coincided
with a significant rise in the types and number of entities
participating in the CDS market.\12\
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    \11\ See Semiannual OTC derivatives statistics at end-December
2007, Bank for International Settlements (``BIS''), available at
http://www.bis.org/statistics/otcder/dt1920a.pdf.
    \12\ CDS were initially created to meet the demand of banking
institutions looking to hedge and diversify the credit risk
attendant with their lending activities. However, financial
institutions such as insurance companies, pension funds, securities
firms and hedge funds have entered the CDS market.
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    The operation of a well-regulated CCP can significantly reduce
counterparty risks by preventing the failure of a single market
participant from having a disproportionate effect on the overall
market. A CCP would novate bilateral trades, which would result in the
CCP entering into separate contractual arrangements with both
counterparties--becoming buyer to one and seller to the other.\13\
Today, CDS agreements generally are negotiated and entered into
bilaterally, but both parties may agree that one party may novate the
agreement and substitute another party to take responsibility for
performance, by acting as the counterparty, under the agreement. In a
CCP arrangement, both parties entering a CDS would novate their trades
to the CCP, and the CCP would stand in as the counterparty to all
parties of the CDS it clears. Through this novation process, the
counterparty risk of a CDS would be effectively concentrated in the
CCP.
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    \13\ ``Novation'' is a ``process through which the original
obligation between a buyer and seller is discharged through the
substitution of the CCP as seller to buyer and buyer to seller,
creating two new contracts.'' Committee on Payment and Settlement
Systems, Technical Committee of the International Organization of
Securities Commissioners, Recommendations for Central Counterparties
(November 2004) at 66.
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    In companion actions to these interim final temporary rules, we are
temporarily exempting, subject to conditions, a clearing agency acting
as a CCP from the requirement to register as a clearing agency under
Section 17A of the Exchange Act \14\ solely to perform the functions of
a clearing agency for certain CDS transactions, and also certain
eligible contract participants \15\ and others from certain Exchange
Act requirements with respect to certain CDS.\16\ We also are
temporarily exempting any exchange that effects transactions in certain
CDS from the requirements under Sections 5 and 6 of the Exchange Act
\17\ to register as a national securities exchange, and any broker or
dealer that effects transactions on an exchange in certain CDS from the
requirements of Section 5 of the Exchange Act.
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    \14\ 15 U.S.C. 78q-1.
    \15\ See 7 U.S.C. 1a(12).
    \16\ See Securities Exchange Act Release Nos. 59164 and 59165
(December 24, 2008).
    \17\ 15 U.S.C. 78e and 78f.
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    In connection with these actions to facilitate the operation of
these CCPs for the CDS market, we believe that it is appropriate and
necessary to provide temporary exemptions from certain provisions of
the Securities Act, the Exchange Act and the Trust Indenture Act,
subject to certain conditions described in the companion exemptive
orders and in the exemptions themselves. We believe that these interim
final temporary rules, and the exemptive orders we are providing under
the Exchange Act, will facilitate the operation of one or more CCPs
that will clear and settle CDS transactions while enabling us to
provide oversight to the CDS market.
    We believe that the operation of one or more CCPs in accordance
with our exemptions likely would improve the efficiency and
effectiveness of the CDS market, provide for increased transparency of
exposures to particular reference entities or reference securities, and
increase available information about reference entities or reference
securities. The conditions in the companion exemptive orders will
enable us to oversee the development of CDS CCPs and exchanges as they
evolve, and to take such additional action as we may deem necessary to
promote the public interest and the protection of investors. Moreover,
the limited duration of the exemptions and the interim final temporary
rules provided today will enable one or more CCPs and CDS exchanges to
become operational while we gain useful experience with the CDS market
and evaluate the public input, including comments, we receive on the
temporary rules and exemptions.

II. Discussion of the Interim Final Temporary Rules and Amendments

    We are adopting interim final temporary rules and amendments to

existing rules (collectively, ``interim final temporary rules'') to
provide certain conditional exemptions under the Securities Act, the
Exchange Act and the Trust Indenture Act.

A. Scope of the Interim Final Temporary Rules

    Our authority over the OTC market for CDS is limited. Specifically,
Section 2A of the Securities Act and Section 3A of the Exchange Act
limit our authority over ``swap agreements'' as defined in Section 206A
of the Gramm-Leach-Bliley Act.\18\ For those CDS that are swap
agreements, the exclusion from the definition of security in Section 2A
of the Securities Act and Section 3A of the Exchange Act and related
provisions will continue to apply. Our action today does not affect
these CDS, and these interim final temporary rules do not apply to
them. For those CDS that are not swap agreements (``non-excluded
CDS''), our action today provides certain conditional exemptions from
the provisions of the Securities Act, the Exchange Act, and the Trust
Indenture Act and is designed to encourage the development and
operation of one or more CDS CCPs and CDS exchanges.\19\
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    \18\ 15 U.S.C. 77b(b)-1 and 15 U.S.C. 78c-1. Section 2A of the
Securities Act and Section 3A of the Exchange Act excludes both a
non-security-based and a security-based ``swap agreement'' from the
definition of ``security'' under Section 2(a)(1) of the Securities
Act, 15 U.S.C. 77b(a)(1) and Section 3(a)(10) of the Exchange Act,
15 U.S.C. 78c(a)(10). Section 206A of the Gramm-Leach-Bliley Act
defines a ``swap agreement'' as ``any agreement, contract, or
transaction between eligible contract participants (as defined in
section 1a(12) of the Commodity Exchange Act * * *) * * * the
material terms of which (other than price and quantity) are subject
to individual negotiation. * * *'' 15 U.S.C. 78c note.
    \19\ Section 28 of the Securities Act authorizes us to exempt
any person, security or transaction from any provision of the
Securities Act by rule or regulation to the extent that the
exemption is necessary or appropriate in the public interest and
consistent with the protection of investors. 15 U.S.C. 77z-3.
Similarly, Section 36 of the Exchange Act gives us the authority to
exempt any person, security or transaction from any Exchange Act
provision by rule, regulation or order, to the extent that the
exemption is necessary or appropriate in the public interest and
consistent with the protection of investors. 15 U.S.C. 78mm.
Finally, Section 304(d) of the Trust Indenture Act authorizes us to
exempt conditionally or unconditionally any person, security or
transaction from any Trust Indenture Act provision by rules or
regulation to the extent that the exemption is necessary or
appropriate in the public interest and consistent with the
protection of investors and the purposes fairly intended by the
Trust Indenture Act. 15 U.S.C. 77ddd(d).
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B. Securities Act Rule 239T

    We are adopting interim final temporary Securities Act Rule 239T to
exempt certain CDS (``eligible CDS'') \20\ that are being or will be
issued or cleared by a CCP satisfying the conditions set forth in the
companion exemptions, or registered as a clearing agency under Section
17A of the Exchange Act (``Registered or Exempt CCP''), to eligible
contract participants from all provisions of the Securities Act, except
the anti-fraud provisions of Section 17(a) of the Securities Act.\21\
Securities Act Rule 239T will permit the offer and sale of such
eligible CDS that are or will be issued or cleared by a Registered or
Exempt CCP without requiring compliance with Section 5 of the
Securities Act, and communications used in connection with such offers
and sales will not be subject to Section 12(a)(2) liability under the
Securities Act.
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    \20\ As we discuss below, we have included a definition of
``eligible credit default swap'' in interim final temporary
Securities Act Rule 239T.
    \21\ 15 U.S.C. Sec.  77q. This exemption is consistent with the
Securities Act exemptions for standardized options and security
futures products. See Section 3(a)(14) [15 U.S.C. Sec.  77c(a)(14)]
and Securities Act Rule 238 [17 CFR 230.238].
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    Absent this exemption, the Securities Act may require registration
of the offer and sale of eligible CDS that are or will be issued or
cleared by a Registered or Exempt CCP. We believe that the interim
final temporary rules exempting offers and sales of such eligible CDS
by a Registered or Exempt CCP will facilitate the use by eligible
contract participants of CCPs for eligible CDS. Indeed, without also
exempting the offers and sales of the eligible CDS by a Registered or
Exempt CCP from the registration requirements of the Securities Act and
the Exchange Act and the provisions of the Trust Indenture Act, we
believe that the CCPs would not be able to operate in the manner
contemplated by the Exchange Act exemptive orders. In addition, the
Securities Act, Exchange Act and Trust Indenture Act exemptions should
encourage market participants to clear their CDS through the CCPs.
    Under Securities Act Rule 239T, an eligible CDS would be exempt
from the registration requirements of the Securities Act if it is or
will be issued or cleared by a Registered or Exempt CCP, and if the
eligible CDS is offered and sold only to an ``eligible contract
participant'' (as defined in Section 1a(12) of the CEA as in effect on
the date of adoption of this rule, other than a person who is an
eligible contract participant under Section 1a(12)(C) of the CEA).\22\
We have included a definition of eligible CDS solely for purposes of
the interim final temporary rules. Under this definition, an eligible
CDS is a bilateral executory derivative contract not subject to
individual negotiation (1) in which a buyer makes payments to the
seller and, in return, receives a payout if there is a default or other
credit event involving the reference obligation(s) or reference
entity(ies) within a certain time, and (2) the agreement for which
includes the:
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    \22\ See 7 U.S.C. 1(a)(12). The exemption would be limited to
those persons defined as eligible contract participants in the
statute and would not extend to those persons that are included in
the definition through regulatory action by the CFTC. See 7 U.S.C.
1(a)(12)(C).
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     Specification of the reference obligation or obligor; or,
in the case of a reference group or index thereof, all of the reference
obligations or obligors comprising any such group or index);
     Term of the agreement;
     Notional amount upon which payment obligations are
calculated;
     Credit-related events that trigger a settlement
obligation; and
     Obligations to be delivered if there is a credit-related
event or, if it is a cash settlement, the obligations whose value is to
be used to determine the amount of settlement obligation under the
eligible credit default swap.
    Securities Act Rule 239T will permit the offer and sale of eligible
CDS that are or will be issued or cleared by a Registered or Exempt CCP
without requiring compliance with Section 5 of the Securities Act,
while assuring the availability of information to buyers and sellers of
CDS, due to certain information conditions in the companion exemptive
orders,\23\ and preserving anti-fraud liability under Section 17(a) of
the Securities Act, which currently applies to security-based swap
agreements. Securities Act Rule 239T also provides an exemption from
the liability provisions of Securities Act Section 12. Thus, oral or
written communications used in connection with the offer and sale of
eligible CDS that are or will be issued or cleared by a Registered or
Exempt CCP in reliance on the rule will not be

subject to liability under Securities Act Section 12(a)(2).
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    \23\ We note that among the conditions of the exemptions, or
representations in the exemptive requests on which we are relying,
from clearing registration are that: (1) Information is available
about the terms of the CDS, the creditworthiness of the CCP or any
guarantor, and the clearing and settlement process for the CDS; and
(2) the reference entity, the issuer of the reference security, or
the reference security is one of the following: an entity reporting
under the Exchange Act, providing Securities Act Rule 144A(d)(4)
information, or about which financial information is otherwise
publicly available; a foreign private issuer that has securities
listed outside the United States and has its principal trading
market outside the United States; a foreign sovereign debt security;
an asset-backed security, as defined in Regulation AB [17 CFR
229.1100], issued in a registered transaction with publicly
available distribution reports; an asset-backed security issued or
guaranteed by Fannie Mae, Freddie Mac or the Government National
Mortgage Association (``Ginnie Mae''); or indexes in which 80
percent or more of the index's weight is comprised of these
reference entities or reference securities.
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    The Securities Act exemption in the interim final temporary rule is
limited to offers and sales to eligible contract participants (as
defined in Section 1a(12) of the CEA as in effect on the date of
adoption of the rule, other than a person that is an eligible contract
participant under Section 1a(12)(C) of the CEA). Under Securities Act
Section 2A, a security-based swap agreement that is entered into
between eligible contract participants is not permitted to be
registered under the Securities Act, but the provisions of Securities
Act Section 17(a) continue to apply to such transactions. The operation
of one or more CCPs pursuant to the actions we are taking today will
allow such security-based swap agreements to continue to be entered
into between eligible contract participants and then be novated to the
CCP. The Securities Act exemption is intended to limit investor
involvement in eligible CDS that are issued or cleared by a Registered
or Exempt CCP to eligible contract participants, who are those persons
Congress determined were qualified to engage in activities in the
generally unregulated (other than with respect to the antifraud
provisions of the Securities Act and the Exchange Act) \24\ OTC CDS
market.
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    \24\ See Title III of the Commodity Futures Modernization Act of
2000 (Pub. L. 106-554) and the definition of eligible contract
participant in Title I of the Commodity Futures Modernization Act of
2000 [7 U.S.C. 1a(12)]. The term ``eligible contract participant''
generally includes various regulated financial institutions,
business enterprises that meet certain tests relating to total
assets or net worth, certain pension funds, state and local
governments, and certain wealthy individuals.
    In addition, the provisions of Section 16 of the Exchange Act
apply to security-based swap agreements. See 15 U.S.C. 78p(g). The
exemptions are available only with regard to non-excluded CDS
satisfying the exemption's conditions and not other types of
derivative contracts.
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    The Securities Act interim final temporary rule also provides that
any offer or sale of an eligible CDS that is or will be issued or
cleared by a Registered or Exempt CCP by or on behalf of the issuer of
a security, an affiliate of such issuer, or an underwriter, if such
security is delivered in settlement or whose value is used to determine
the amount of the settlement obligation, will constitute a ``contract
for sale of,'' ``sale of,'' ``offer for sale,'' or ``offer to sell''
such security under Section 2(a)(3) of the Securities Act. This
provision is intended to ensure that an eligible CDS that is or will be
issued or cleared by a Registered or Exempt CCP cannot be used by an
issuer, affiliate of an issuer or underwriter to circumvent the
registration requirements of Section 5 with respect to an issuer's
security for such eligible CDS.\25\ As a result, a transaction by such
persons in an eligible CDS that is or will be issued or cleared by a
Registered or Exempt CCP having such securities of the issuer also is a
transaction in the issuer's securities that must be registered under
the Securities Act, unless an exemption from registration is available.
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    \25\ This provision is similar to the condition in the
Securities Act exemption in Rule 238 for standardized options [17
CFR 230.238] and in Securities Act Section 2(a)(3) [15 U.S.C.
77b(a)(3)] relating to security futures products.
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    Further, we are adopting on an interim final temporary basis an
amendment to Securities Act Rule 146. Under the temporary amendment to
Securities Act Rule 146, eligible contract participants that are sold
eligible CDS in reliance on interim final temporary Securities Act Rule
239T will be defined as ``qualified purchasers'' under Section 18(b)(3)
of the Securities Act and thereby such eligible CDS that are or will be
issued or cleared by a Registered or Exempt CCP will be considered
``covered securities'' under Section 18 of the Securities Act and
exempt from state blue sky laws.\26\ We are adopting this amendment
because we believe that eligible contract participants are the kinds of
sophisticated investors who do not require the protections of
registration under state securities laws. In this regard, as we discuss
above, Congress determined that eligible contract participants were the
types of persons that were able to engage in activities in the OTC CDS
market unregulated by the Commission and preempted the application of
certain state laws to transactions in OTC security-based swap
agreements, including CDS.\27\ We believe that defining such eligible
contract participants as ``qualified purchasers'' for purposes of
engaging in transactions in eligible CDS in reliance on temporary
Securities Act Rule 239T would be consistent with such Congressional
intent.
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    \26\ State securities regulation of covered securities generally
is limited under Section 18(b). Under Section 18(b)(3), covered
securities are securities offered and sold to qualified purchasers,
as defined by the Commission.
    \27\ See 7 U.S.C. 16(e)(2).
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C. Exchange Act Rule 12a-10T and Rule 12h-1(h)T

    We also are adopting two interim final temporary rules relating to
Exchange Act registration of eligible CDS that are or have been issued
or cleared by a Registered or Exempt CCP. We are adopting interim final
temporary Exchange Act Rule 12a-10T to exempt eligible CDS that are or
have been issued or cleared by a Registered or Exempt CCP from the
provisions of Section 12(a) of the Exchange Act under certain
conditions.\28\ We also are adopting an interim final temporary
amendment to Exchange Act Rule 12h-1 to exempt eligible CDS that are or
have been issued or cleared by a Registered or Exempt CCP from the
provisions of Section 12(g) of the Exchange Act under certain
conditions.\29\ This exemption is the same as that available to
standardized options issued by a registered options clearing agency and
security futures products issued by a registered clearing agency, and
this temporary rule should facilitate the operation of the CCPs.
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    \28\ 15 U.S.C. 78l(a).
    \29\ 15 U.S.C. 78l(g).
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D. Trust Indenture Act Rule 4d-11T

    We are adopting a new interim final temporary rule under Section
304(d) of the Trust Indenture Act that would exempt any eligible CDS,
as defined in Securities Act Rule 239T and offered and sold in reliance
on Securities Act Rule 239T, from having to comply with the provisions
of the Trust Indenture Act.\30\ We believe an exemption from the Trust
Indenture Act is appropriate in this situation.
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    \30\ The Trust Indenture Act applies to debt securities sold
through the use of the mails or interstate commerce. Section 304 of
the Trust Indenture Act exempts from the Act a number of securities
and transactions. Section 304(a) of the Trust Indenture Act exempts
securities that are exempt under Securities Act Section 3(a) but
does not exempt from the Trust Indenture Act securities that are
exempt by Commission rule. Accordingly, while Securities Act Rule
239T would exempt the offer and sale of eligible CDS satisfying
certain conditions from all the provisions of the Securities Act
(other than Section 17(a)), the Trust Indenture Act would continue
to apply.
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    The Trust Indenture Act is aimed at addressing problems that
unregulated debt offerings posed for investors and the public,\31\ and
provides a mechanism for debtholders to protect and enforce their
rights with respect to the debt. We do not believe that the protections
contained in the Trust Indenture Act are needed at this time to protect
eligible contract participants to whom a sale of an eligible CDS is
made in reliance on interim final temporary Securities Act Rule 239T.
The identified problems that the Trust Indenture Act is intended to
address do not occur in the offer and sale of eligible CDS.\32\ For
example, eligible CDS are contracts between two parties and, as a
result, do not raise the same problem regarding the ability of parties
to enforce their rights under the instruments as would, for example, a

debt offering to the public. Moreover, through novation, the CCP
becomes the counterparty to the buyer and the seller, and each would
look directly to the CCP to satisfy the obligations under the eligible
CDS. As a consequence, enforcement of contractual rights and
obligations under the eligible CDS would occur directly between such
parties, and the Trust Indenture Act provisions would not provide any
additional meaningful substantive or procedural protections.
---------------------------------------------------------------------------

    \31\ See 15 U.S.C.77bbb(a).
    \32\ 15 U.S.C. 77bbb(a).
---------------------------------------------------------------------------

    Accordingly, due to the nature of eligible CDS as bilateral
contracts that will have been issued or cleared by Registered or Exempt
CCPs, we do not believe the protections contained in the Trust
Indenture Act are currently needed with respect to these instruments.
Therefore, we believe the exemption is necessary or appropriate in the
public interest, consistent with the protection of investors and the
purposes fairly intended by the Trust Indenture Act.

E. Request for Comment

    We request and encourage any interested person to submit comments
regarding the interim final temporary rules. In particular, we solicit
comment on the following questions:
     We are interested in understanding what type of non-
excluded CDS would not be eligible for these exemptions. Are there
credit swaps that would not be encompassed within the scope of the
exemptions and that should be covered?
     What are the amounts and types of CDS that may not satisfy
the conditions for the exemptions?
     Is the definition of eligible CDS appropriate and does it
include the types of CDS that should be within the exemptions or should
there be another definition? Does the definition of eligible CDS
include all the appropriate or relevant material terms of a CDS? Should
we require more specificity as to the terms, including final settlement
valuations?
     Each of the temporary exemptions contains particular
conditions. Should the Securities Act exemption in temporary Securities
Act Rule 239T be conditioned on the eligible CDS being issued or
cleared by a Registered or Exempt CCP? If not, why not?
     Should there be information conditions in the Securities
Act exemptions themselves regarding the reference entities or reference
securities similar to the information requirements in the CCP exemptive
orders? If so, what type of information conditions should be included
and why? Is additional or different information from that contained in
the CCP exemption orders appropriate?
     Are the Securities Act, Exchange Act and Trust Indenture
Act exemptions appropriate? If not, why not? Given the voluntary nature
of using a CCP, should we take a different approach?
     The Securities Act exemption also provides that eligible
CDS that are or will be issued or cleared by a Registered or Exempt CCP
and are entered into with an issuer of a security, or an underwriter or
affiliate of such issuer, if such security is delivered in settlement
or whose value is used to determine the amount of the settlement
obligation, will be considered an offer and sale of such security at
that time. Are there circumstances in which the application of the
Securities Act to such security of the issuer should not apply at the
time of the offer and sale of eligible CDS that are or will be issued
or cleared by a Registered or Exempt CCP? Are there securities or
obligations used in CDS transactions that are not debt obligations? If
yes, please explain.
     The Securities Act exemption is limited to offers and
sales to eligible contract participants. Should the exemption be
limited in this manner? If not, why not? Are there persons who invest
in CDS now in the OTC market that would not be able to take advantage
of the exemptions? If yes, please explain the categories of persons and
why the exemptions should include such persons.
     The definition of ``qualified purchaser'' for purposes of
the interim final temporary amendment to Securities Act Rule 146
applies only to eligible contract participants that have been sold
eligible CDS in reliance on the new interim final temporary exemption
in Securities Act Rule 239T. Is this an appropriate definition and
should eligible contract participants that are sold eligible CDS
pursuant to Securities Act Rule 239T be considered ``qualified
purchasers'' for purposes of Section 18 of the Securities Act?
     Should the Securities Act exemption be limited to an
exemption from Section 5 and Section 12 of the Securities Act? Please
explain your reasoning in detail.
     Should we exempt eligible CDS that have been issued or
cleared by a Registered or Exempt CCP from the registration
requirements of the Exchange Act? If not, why?
     The conditions of the temporary Exchange Act and Trust
Indenture Act exemptions are the same as the conditions to the
temporary Securities Act exemption. Is this appropriate or should there
be different conditions relating to the Exchange Act and Trust
Indenture Act exemptions? If yes, please explain.
     The interim final temporary rules include an exemption
from the application of the Trust Indenture Act for eligible CDS that
are offered and sold in reliance on interim final Securities Act Rule
239T. Is this exemption appropriate or are there contractual
protections in the Trust Indenture Act that should be included as
mandatory provisions of an eligible CDS contract that is or will be
issued or cleared by a Registered or Exempt CCP? If yes, please explain
in detail.

III. Transition and Expiration Date of Interim Final Temporary Rules

    We are adopting the interim final rules on a temporary basis until
September 25, 2009. We anticipate that this term of this exemption will
provide us with adequate time to evaluate the availability of the
exemptions applicable to CDS CCPs and non-excluded CDS, and whether any
conditions or provisions of such exemptions should be modified.
    Adoption of the interim final temporary rules, which will be
effective on [effective date] and will continue in effect until
September 25, 2009, will facilitate the development of one or more CCPs
as well as our review of the CDS market. We have included several
requests for comment in this release. We will consider the public
comments we receive in determining whether we should revise the interim
final temporary rules in any respect, as well as whether we should
consider extending the exemptions. The rules will expire and cease to
be effective on September 25, 2009 unless we act to extend the
effective date or revise the interim final temporary rules.

IV. Other Matters

    The Administrative Procedure Act generally requires an agency to
publish notice of a proposed rulemaking in the Federal Register.\33\
This requirement does not apply, however, if the agency ``for good
cause finds * * * that notice and public procedure are impracticable,
unnecessary, or contrary to the public interest.'' \34\ Further, the
Administrative Procedure Act also generally requires that an agency
publish an adopted rule in the Federal Register 30 days before it
becomes effective.\35\ This requirement does not apply, however, if the
agency finds good cause for making the rule effective sooner.\36\ We,
for good cause,

find that notice and solicitation of comment before adopting the new
rules is impracticable, unnecessary, or contrary to the public
interest.
---------------------------------------------------------------------------

    \33\ See 5 U.S.C. 553(b).
    \34\ Id.
    \35\ See 5 U.S.C. 553(d).
    \36\ Id.
---------------------------------------------------------------------------

    For the reasons we discussed throughout this release, we believe
that we have good cause to act immediately to adopt these rules on an
interim final temporary basis. The OTC market for CDS has been a source
of concerns to us and other financial regulators. These concerns
include the systemic risk posed by CDS, highlighted by the possible
inability of parties to meet their obligations as counterparties and
the potential resulting adverse effects on other markets and the
financial system.\37\ Recent credit market events have demonstrated the
seriousness of these risks in a CDS market operating without meaningful
regulation, transparency,\38\ or CCPs.\39\ These events have emphasized
the need for CCPs as mechanisms to help control such risks.\40\ A CCP
for CDS could be an important step in reducing the counterparty risks
inherent in the CDS market, and thereby help mitigate potential
systemic impacts. In November 2008, the President's Working Group on
Financial Markets stated that the implementation of a CCP for CDS was a
top priority \41\ and, in furtherance of this recommendation, the
Commission, the FRB and the CFTC signed a Memorandum of Understanding
\42\ that establishes a framework for consultation and information
sharing on issues related to CCPs for CDS. Given the continued
uncertainty in this market, taking action to help foster the prompt
development of CCPs, including granting conditional exemptions from
certain provisions of the federal securities laws, thus is in the
public interest. The interim final temporary rules we are adopting are
intended to facilitate the ability of one or more CCPs for CDS to
operate by providing exemptions from certain regulatory provisions that
might otherwise prevent them from engaging in such activities. Absent
an exemption, the offer and sale of eligible CDS that are or will be
issued or cleared by a Registered or Exempt CCP may have to be
registered under the Securities Act, the eligible CDS that have been so
issued or cleared may have to be registered as a class under the
Exchange Act and the provisions of the Trust Indenture Act may need to
be complied with. We believe that the interim final temporary rules
exempting the registration of eligible CDS that are or will be issued
or cleared by a Registered or Exempt CCP under certain conditions will
facilitate the use by eligible contract participants of CDS CCPs.
Without also exempting the offers and sales of the eligible CDS from
the registration requirements of the Securities Act and the Exchange
Act and the provisions of the Trust Indenture Act, we believe that the
CCPs would not be able to operate in the manner contemplated by the
exemptive orders. We emphasize that we are requesting comments on the
interim final temporary rules and will carefully consider any comments
that we receive and respond to them in a subsequent release. Moreover,
these interim final temporary rules will expire on September 25, 2009.
Setting a termination date for the interim final temporary rules will
necessitate further Commission action no later than the end of that
period if we determine to continue the same, or similar, requirements
contained in the interim final temporary rules. We find that there is
good cause to have the rules effective as interim final temporary rules
on January 22, 2009 and that notice and public procedure in advance of
effectiveness of the interim final temporary rules is impracticable,
unnecessary and contrary to the public interest.\43\
---------------------------------------------------------------------------

    \37\ In addition to the potential systemic risks that CDS pose
to financial stability, we are concerned about other potential risks
in this market, including operational risks, risks relating to
manipulation and fraud, and regulatory arbitrage risks.
    \38\ See Policy Objectives for the OTC Derivatives Market, The
President's Working Group on Financial Markets (November 14, 2008),
http://www.ustreas.gov/press/releases/reports/policyobjectives.pdf
(``Public reporting of prices, trading volumes and aggregate open
interest should be required to increase market transparency for
participants and the public.'')
    \39\ See The Role of Credit Derivatives in the U.S. Economy
Before the H. Agric. Comm., 110th Cong. (2008) (Statement of Erik
Sirri, Director of the Division of Trading and Markets, Commission).
    \40\ See id.
    \41\ See Policy Objectives for the OTC Derivatives Market, The
President's Working Group on Financial Markets (November 14, 2008),
http://www.ustreas.gov/press/releases/reports/policyobjectives.pdf.
See also Policy Statement on Financial Market Developments, The
President's Working Group on Financial Markets (March 13, 2008),
http://www.treas.gov/press/releases/reports/
pwgpolicystatemktturmoil_03122008.pdf; Progress Update on March
Policy Statement on Financial Market Developments, The President's
Working Group on Financial Markets (October 2008), http://
www.treas.gov/press/releases/reports/q4progress%20update.pdf.
    \42\ See MOU, supra note 10.
    \43\ This finding also satisfies the requirements of 5 U.S.C.
808(2), allowing the rule amendment to become effective
notwithstanding the requirement of 5 U.S.C. 801 (if a federal agency
finds that notice and public comment are ``impractical, unnecessary
or contrary to the public interest,'' a rule ``shall take effect at
such time as the federal agency promulgating the rule determines'').
---------------------------------------------------------------------------

V. Paperwork Reduction Act

    The interim final temporary rules do not impose any new
``collections of information'' within the meaning of the Paperwork
Reduction Act of 1995 (``PRA''),\44\ nor do they create any new filing,
reporting, recordkeeping, or disclosure reporting requirements for a
CCP that is or will be issuing or clearing eligible CDS. Accordingly,
we are not submitting the interim final temporary rules to the Office
of Management and Budget for review in accordance with the PRA.\45\ We
request comment on whether our conclusion that there are no collections
of information is correct.
---------------------------------------------------------------------------

    \44\ 44 U.S.C. 3501 et seq.
    \45\ 44 U.S.C. 3507(d) and 5 CFR 1320.11.
---------------------------------------------------------------------------

VI. Cost-Benefit Analysis

    We are adopting interim final temporary rules under the Securities
Act, the Exchange Act and the Trust Indenture Act that would exempt
eligible CDS that are or will be issued or cleared by a Registered or
Exempt CCP and offered and sold only to eligible contract participants
from all provisions of the Securities Act, other than the Section 17(a)
anti-fraud provision, as well as from the registration requirements
under Section 12 of the Exchange Act and from the provisions of the
Trust Indenture Act. These interim final temporary rules are intended
to facilitate the operation of one or more CCPs to act as a clearing
agency in the CDS market to reduce some of the risks in the CDS market.
    A CDS is a bilateral contract between two parties, known as
counterparties. The value of this financial contract is based on
underlying obligations of a single entity or on a particular security
or other debt obligation, or an index of several such entities,
securities, or obligations. The obligation of a seller to make payment
under a CDS contract is triggered by a default or other credit event as
to such entity or entities or such security or securities. Investors
may use CDS for a variety of reasons, including to offset or insure
against risk in their fixed-income portfolios, to take synthetic
positions in bonds or in segments of the debt market as represented by
an index, or to capitalize on the volatility in credit spreads during
times of economic uncertainty. In recent years, CDS market volumes have
rapidly increased.\46\ This growth has coincided with a significant
rise in the types and

number of entities participating in the CDS market.\47\
---------------------------------------------------------------------------

    \46\ See Semiannual OTC derivatives statistics at end-December
2007, Bank for International Settlements (``BIS''), available at
http://www.bis.org/statistics/otcder/dt1920a.pdf.
    \47\ CDSs were initially created to meet the demand of banking
institutions looking to hedge and diversify the credit risk
attendant with their lending activities. However, financial
institutions such as insurance companies, pension funds, securities
firms and hedge funds have entered the CDS market.
---------------------------------------------------------------------------

    In a CCP arrangement, both parties entering a CDS would novate
their trades to the CCP, and the CCP would stand in as the counterparty
to all parties of the CDS it clears. Through this novation process, the
counterparty risk of a CDS would be effectively concentrated in the
CCP.

A. Benefits

    We are providing exemptive orders that will facilitate the
operation of CCPs for the CDS market. In connection with these actions,
we are adopting exemptions from certain provisions of the Securities
Act, the Exchange Act and the Trust Indenture Act, subject to certain
conditions described in the companion exemptive orders and in the
exemptions themselves. The conditions and representations in the
companion exemptive orders and exemptions require that information be
available about the terms of the CDS, the creditworthiness of the CCP
or any guarantor, and the clearing and settlement process for the CDS.
Additionally, the conditions require that financial information about
the reference entity, the issuer of the reference security, or the
reference security be publicly available. We believe that these interim
final temporary rules and the exemptions we are providing under the
Exchange Act, will facilitate the operation of CCPs while enabling us
to provide oversight to the non-excluded CDS market. We believe that
the operation of one or more CCPs in accordance with our exemptions
likely would improve the efficiency and effectiveness of the CDS
market, provide clearing participants with increased transparency of
exposures to particular reference entities or reference securities, and
increase available information about reference entities or reference
securities.
    Absent an exemption, the offer and sale of eligible CDS that are or
will be issued or cleared by a Registered or Exempt CCP would have to
be registered under the Securities Act, the eligible CDS that are or
have been issued or cleared by a Registered or Exempt CCP would have to
be registered as a class under the Exchange Act, and the provisions of
the Trust Indenture Act would apply. We believe that the interim final
temporary rules exempting the registration of eligible CDS issued or
cleared by a Registered or Exempt CCP under certain conditions will
facilitate the use by eligible contract participants of CDS CCPs.
Without also exempting the offers and sales of eligible CDS issued or
cleared by a Registered or Exempt CCP from the registration
requirements of the Securities Act and the Exchange Act and the
provisions of the Trust Indenture Act, we believe that the CCPs would
not be able to operate in the manner contemplated by the exemptive
orders.
    The interim final temporary exemptions also will treat eligible CDS
issued or cleared by a Registered or Exempt CCP under the Securities
Act and the Exchange Act in the same manner as certain other types of
derivative contracts, such as security futures products and
standardized options.\48\ A Registered or Exempt CCP issuing or
clearing eligible CDS will benefit from the temporary exemptions
because it will not have to file registration statements with us
covering the offer and sale of the eligible CDS. The registration form
most applicable to a CCP is a Form S-20, which is the form that is used
by options clearing houses that do not qualify for our exemption in
Securities Act Rule 238 \49\ from registering the offer and sale of
standardized options. If a CCP is not required to register the offer
and sale of eligible CDS (on Form S-20, for example), it would not have
to incur the costs of such registration, including legal and accounting
costs. Some of these costs, of course, such as the costs of obtaining
audited financial statements, may still be incurred as a result of the
operations of the entity as a CCP and the regulatory oversight of the
central counterparty operations. In addition, if any of the CCPs are
entities that are subject to the periodic reporting requirements of the
Exchange Act, the cost of filing a registration statement covering the
eligible CDS would be lessened further as the information regarding the
CCP already would be prepared. The availability of exemptions under the
Securities Act, the Exchange Act, and the Trust Indenture Act also
would mean that CCPs would not incur the costs of preparing disclosure
documents describing eligible CDS and from preparing indentures and
arranging for the services of a trustee.
---------------------------------------------------------------------------

    \48\ See, e.g., Securities Act Section 3(a)(14) [15 U.S.C.
77c(a)(14)], Securities Act Rule 238 [17 CFR 230.238]; Exchange Act
Section 12(a) [15 U.S.C. 78l], and Exchange Act Rule 12h-1(d) and
(e) [17 CFR 240.12h-1(d) and (e)].
    \49\ 17 CFR 230.238.
---------------------------------------------------------------------------

B. Costs

    The interim final temporary rules exempting offers and sales of
eligible CDS that are or will be issued or cleared by a Registered or
Exempt CCP should facilitate the use by eligible contract participants
of CDS CCPs that are the subject of exemptive orders at minimal cost to
the CCP or investors. Because the interim final temporary rules are
self-executing, the costs of being able to rely on such exemptions, we
believe, are minimal.
    Absent an exemption, a CCP may have to file a registration
statement covering the offer and sale of the eligible CDS, may have to
satisfy the applicable provisions of the Trust Indenture Act, and may
have to register the class of eligible CDS that it has issued or
cleared under the Exchange Act, which would provide investors with
civil remedies in addition to antifraud remedies. While a CCP
registration statement covering eligible CDS (or the offer and sale of
such eligible CDS) may provide certain information about the CCP, CDS
contract terms, and the identification of reference entities or
reference securities, it would not necessarily provide the type of
information necessary to assess the credit risk of the reference entity
or reference security. Further, while a CCP registration statement
would provide information to the CDS market participants, as well as to
the market as a whole, a condition of the clearing agency exemption in
the exemptive orders is that the CCPs make their audited financial
statements and other information about themselves publicly available.
We recognize that a consequence of the exemptions would be the
unavailability of certain remedies under the Securities Act and the
Exchange Act and certain protections under the Trust Indenture Act.
While an investor would be able to pursue an antifraud action in
connection with the purchase and sale of eligible CDS under Exchange
Act Section 10(b),\50\ it would not be able to pursue civil remedies
under Sections 11 or 12 of the Securities Act.\51\ We could still
pursue an antifraud action in the offer and sale of eligible CDS issued
or cleared by a CCP.\52\
---------------------------------------------------------------------------

    \50\ 15 U.S.C. 78j(b).
    \51\ 15 U.S.C. 77k and 77l.
    \52\ See 15 U.S.C. 77q and 15 U.S.C. 78j(b).

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

VII. Consideration of Impact On the Economy, Burden On Competition and
Promotion of Efficiency, Competition and Capital Formation

    Section 23(a)(2) of the Exchange Act \53\ requires us, when
adopting rules under the Exchange Act, to consider the impact that any
new rule would have on competition. Section 23(a)(2) prohibits us from
adopting any rule that would impose a burden on competition not
necessary or appropriate in furtherance of the purposes of the Exchange
Act. In addition, Section 2(b) \54\ of the Securities Act and Section
3(f) \55\ of the Exchange Act require us, when engaging in rulemaking
where we are required to consider or determine whether an action is
necessary or appropriate in the public interest, to also consider
whether the action will promote efficiency, competition, and capital
formation.
---------------------------------------------------------------------------

    \53\ 15 U.S.C. 78w(a)(2).
    \54\ 15 U.S.C. 77b(b).
    \55\ 15 U.S.C. 78c(f).
---------------------------------------------------------------------------

    We are adopting interim final temporary rules that would exempt
eligible CDS issued or cleared by a Registered or Exempt CCP from all
provisions of the Securities Act, other than the Section 17(a)
antifraud provision, as well as from the registration requirements
under Section 12 of the Exchange Act and the provisions of the Trust
Indenture Act. Because our interim final temporary exemptions will be
available to any Registered or Exempt CCP offering and selling eligible
CDS, we do not believe that our actions today will impose a burden on
competition. We also believe that the ability to settle CDS through
CCPs will improve the transparency of the CDS market and provide
greater assurance to participants as to the capacity of the eligible
CDS counterparty to perform its obligations under the eligible CDS. We
believe that increased transparency in the CDS market could help to
decrease further market turmoil and thereby facilitate the capital
formation process.

VIII. Regulatory Flexibility Act Certification

    The Commission hereby certifies pursuant to 5 U.S.C. 605(b) that
the interim final temporary rules contained in this release will not
have a significant economic impact on a substantial number of small
entities. The interim final temporary rules exempt eligible CDS that
are or will be issued or cleared by a Registered or Exempt CCP. None of
the entities that are eligible to meet the requirements of the
exemption from registration under Section 17A is a small entity. For
this reason, the interim final temporary rules should not have a
significant economic impact on a substantial number of small entities.

IX. Statutory Authority and Text of the Rules and Amendments

    The rules and amendments described in this release are being
adopted under the authority set forth in Sections 18, 19 and 28 of the
Securities Act; Sections 12(h), 23(a) and 36 of the Exchange Act; and
Section 304(d) of the Trust Indenture Act.

List of Subjects

    17 CFR Parts 230, 240 and 260.
    Reporting and recordkeeping requirements, Securities.

Text of the Rules and Amendments

0
For the reasons set out in the preamble, the Commission amends Title
17, Chapter II, of the Code of Federal Regulations as follows:

PART 230--GENERAL RULES AND REGULATIONS, SECURITIES ACT OF 1933

0
1. The authority citation for Part 230 continues to read, in part, as
follows:

    Authority: 15 U.S.C. 77b, 77c, 77d, 77f, 77g, 77h, 77j, 77r,
77s, 77z-3, 77sss, 78c, 78d, 78j, 78l, 78m, 78n, 78o, 78t, 78w,
78ll(d), 78mm, 80a-8, 80a-24, 80a-28, 80a-29, 80a-30, and 80a-37,
unless otherwise noted.
* * * * *

0
2. Section 230.146 is amended by adding paragraph (c)T to read as
follows:

Sec.  230.146  Rules under section 18 of the Act.

* * * * *
    (c)T Temporary definition of eligible contract participant as
qualified purchaser. For purposes of Section 18(b)(3) of the Act (15
U.S.C. 77r(b)(3)), the term ``qualified purchaser'' shall mean any
eligible contract participant (as defined in Section 1a(12) of the
Commodity Exchange Act (7 U.S.C. 1a(12)) as in effect on the date of
adoption of this section, other than a person who is an eligible
contract participant under Section 1(a)(12)(C) of the Commodity
Exchange Act) that has been sold an eligible credit default swap (as
defined in Rule 239T of this Act) in reliance on Rule 239T of this Act.
This temporary rule will expire on September 25, 2009.

0
3. Section 230.239T is added to read as follows:

Sec.  230.239T  Temporary exemption for eligible credit default swaps.

    (a) Except as expressly provided in paragraph (b) and (c) of this
section, the Act does not apply to any eligible credit default swap
that is:
    (1) Issued or cleared by a clearing agency registered as a clearing
agency under Section 17A of the Securities Exchange Act of 1934 (15
U.S.C. 78q-1) or exempt from registration under Section 17A of the
Securities Exchange Act of 1934 pursuant to a rule, regulation, or
order of the Commission; and
    (2) Offered and sold only to an eligible contract participant (as
defined in Section 1a(12) of the Commodity Exchange Act (7 U.S.C.
1a(12)) as in effect on the date of adoption of this section, other
than a person who is an eligible contract participant under Section
1(a)(12)(C) of the Commodity Exchange Act).
    (b) The exemption provided in paragraph (a) of this section does
not apply to the provisions of Section 17(a) of the Act (15 U.S.C.
77q(a)).
    (c) Offers and sales. Any offer or sale of an eligible credit
default swap pursuant to this section by or on behalf of the issuer of
an identified security that is to be delivered if there is a credit-
related event or whose value is used to determine the amount of the
settlement obligation, an affiliate of such issuer, or an underwriter,
will constitute a ``contract for sale of,'' ``sale of,'' ``offer for
sale,'' or ``offer to sell'' such identified security under Section
2(a)(3) of the Act (15 U.S.C. 77b(a)(3)).
    (d) Definition of Eligible Credit Default Swap. For purposes of
this section, an eligible credit default swap is a bilateral executory
derivative contract not subject to individual negotiation:
    (1) in which a buyer makes payments to the seller and, in return,
receives a payout if there is a default or other credit event involving
identified obligation(s) or identified entity(ies) within a certain
time; and
    (2) The agreement for which includes the:
    (i) Specification of the identified obligation or obligor; or, in
the case of an identified group or index thereof, all of the identified
obligations or obligors comprising any such group or index;
    (ii) Term of the agreement;
    (iii) Notional amount upon which payment obligations are
calculated;
    (iv) Credit-related events that trigger a settlement obligation;
and
    (v) Obligations to be delivered if there is a credit-related event
or, if it is a cash settlement, the obligations whose value is to be
used to determine the amount of settlement obligation under the
eligible credit default swap.
    (e) This temporary rule will expire on September 25, 2009.

PART 240--GENERAL RULES AND REGULATIONS, SECURITIES EXCHANGE ACT OF
1934

0
4. The authority citation for Part 240 continues to read, in part, as
follows:

    Authority: 15 U.S.C. 77c, 77d, 77g, 77j, 77s, 77z-2, 77z-3,
77eee, 77ggg, 77nnn, 77sss, 77ttt, 78c, 78d, 78e, 78f, 78g, 78i,
78j, 78j-1, 78k, 78k-1, 78l, 78m, 78n, 78o, 78p, 78q, 78s, 78u-5,
78w, 78x, 78ll, 78mm, 80a-20, 80a-23, 80a-29, 80a-37, 80b-3, 80b-4,
80b-11, and 7201 et seq., and 18 U.S.C. 1350, unless otherwise
noted.
* * * * *

0
5. Section 240.12a-10T is added to read as follows:

Sec.  240.12a-10T  Temporary exemption of eligible credit default swaps
from Section 12(a) of the Act.

    (a) The provisions of Section 12(a) of the Act (15 U.S.C. 78l(a))
do not apply in respect of any eligible credit default swap, as defined
in Rule 239T of the Securities Act of 1933 (17 CFR 230.239T) issued or
cleared by a clearing agency registered as a clearing agency under
Section 17A of the Act (15 U.S.C. 78q-1) or exempt from registration
under Section 17A of the Act pursuant to a rule, regulation, or order
of the Commission, that will be purchased by or sold to an eligible
contract participant (as defined in Section 1a(12) of the Commodity
Exchange Act (7 U.S.C. 1a(12)) as in effect on the date of adoption of
this section, other than a person who is an eligible contract
participant under Section 1(a)(12)(C) of the Commodity Exchange Act.
    (b) This temporary rule will expire on September 25, 2009.

0
6. Section 240.12h-1 is amended by adding paragraph (h)T to read as
follows:

Sec.  240.12h-1  Exemptions from registration under section 12(g) of
the Act.

* * * * *
    (h)T any eligible credit default swap, as defined in Rule 239T of
the Securities Act of 1933 (17 CFR 230.239T), issued or cleared by a
clearing agency registered as a clearing agency under Section 17A of
the Act (15 U.S.C. 78q-1) or exempt from registration under Section 17A
of the Act pursuant to a rule, regulation, or order of the Commission
that will be purchased by or sold to an eligible contract participant
(as defined in Section 1a(12) of the Commodity Exchange Act (7 U.S.C.
1a(12)) as in effect on the date of adoption of this section, other
than a person who is an eligible contract participant under Section
1(a)(12)(C) of the Commodity Exchange Act. This temporary rule will
expire on September 25, 2009.

PART 260--GENERAL RULES AND REGULATIONS, TRUST INDENTURE ACT OF
1939

0
7. The authority citation for Part 260 continues to read as follows:

    Authority: 15 U.S.C. 77eee, 77ggg, 77nnn, 77sss, 78ll(d), 80b-3,
80b-4, and 80b-11.
0
8. Section 260.4d-11T is added to read as follows:

Sec.  260.4d-11T  Temporary exemption for eligible credit default swaps
offered and sold in reliance on Securities Act of 1933 Rule 239T (Sec.
230.239T).

    Any eligible credit default swap (as defined in Rule 239T of this
chapter, 17 CFR 230.239T), whether or not issued under an indenture, is
exempt from the Act if offered and sold in reliance on Rule 239T of
this chapter. This temporary rule will expire on September 25, 2009.

    By the Commission.
    Dated: January 14, 2009.
Elizabeth M. Murphy,
Secretary.
[FR Doc. E9-1123 Filed 1-21-09; 8:45 am]

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TABLE OF CONTENTS Chapter 1   Introduction ................................................................................................... 1 1 Chapter 2   Methodology and the Base Case..................................................................... 2 1 Chapter 3   SO2 and Carbon Reduction Options ............................................................... 3 1 Chapter 4   Mercury Control Options ............................................................................... 4 1 Appendix A   Mercury Concentrations in Fuels................................................................ A 1 Appendix B   Emission Modification Factors for Coal Fired Units................................... B 1 Appendix C   Preliminary Estimates of Costs of Mercury Emission Control Technologies for Electric Utility Boilers........................................................................... C 1 Appendix D   National Electric Generation Capacity and Generation ............................... D 1 Appendix E   Estimation of Consumer Investments and Savings under the High Efficiency/ Carbon Level of 515 MMT in 2008 Case .................................. E 1


Comment Info: =================

General Comment:Supplemental Materials Document Title:  Ex Parte Communication with WPI students 1 page


July 25, 2007

Karl Simon

Division Director

Compliance and Innovative Strategies Division

OTAQ

OAR

USEPA

1200 Pennsylvania Avenue, N. W.

Mail Code: 6406J

Washington, DC 20460

RE:	CAA Section 211(b) Fuels and Fuel Additives Health Effects Testing
Regulation:  TBA pharmacokinetic protocols for EPA approval

Dear Mr. Simon:

The American Petroleum Institute (API), on behalf of the Section 211(b)
Research Group (RG), is submitting the following documents for EPA
review and approval as partial fulfillment of the CAA Section 211(b)
Alternative Tier 2 requirements of the testing regulation:

Protocol for a Single Oral Dose Study in Fischer 344 Rats on the Blood
Pharmacokinetics of TBA

Protocol for a Single- and Repeated-Exposure Inhalation Study in Fischer
344 Rats on the Retained Dose, Metabolism and Distribution  of TBA

The RG requests EPA approval of the protocols.

After EPA’s approval the RG will post the final protocols to the
Research Group website.  A copy of the ratified  protocols will be
available in the study reports which will be forwarded to the  EPA
Office of Transportation and Air Quality, Transportation and Regional
Programs Division, as part of the requirements of Clean Air Act Section
211(b)(2) and 211(e) (EDocket ID #  EPA-HQ-OAR-2003-0065). If you
require further information, please contact Tom Gray by mail at this
address.

Regards,

Thomas M. Gray, M.S., D.A.B.T.

Encl (2):	TBA Protocols for PK/ADME Studies on TBA

cc:	211b RG Oversight and Technical Committees (via email)

	Joe Sopata, EPA (via email)

	Amanda Evans, EPA (via email)

	Dave Kortum, EPA (via email)

	Monica Alvarez, EPA (via email)

	Stan Durkee, EPA (via email)

	JMichael Davis, EPA (via email)

	William Boyes, EPA (via email)

	Elaina Kenyon, EPA (via email)

		An equal opportunity employer

Thomas M. Gray

211(b) Technical Manager

1220 L Street, Northwest

Washington, DC  20005-4070

Tel<PHONE_NUMBER>

Fax<PHONE_NUMBER>

E-mail<EMAIL_ADDRESS>


[Federal Register Volume 87, Number 224 (Tuesday, November 22, 2022)]
[Notices]
[Pages 71328-71329]
[FR Doc No: 2022-25170]

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

ENVIRONMENTAL PROTECTION AGENCY

[FRL-10398-01-OA]

Request for Nominations for the Science Advisory Board Inorganic
Arsenic Review Panel

AGENCY: Environmental Protection Agency (EPA).

ACTION: Notice.

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

SUMMARY: The Environmental Protection Agency (EPA) Science Advisory
Board (SAB) Staff Office requests public nominations of scientific
experts to form a Panel to review the draft EPA Integrated Risk
Information System (IRIS) Toxicological Review of Inorganic Arsenic.
Based on the publicly available systematic review protocol, EPA's draft
assessment includes a summary of the chemical properties and
pharmacokinetics; hazard identification analysis for diseases of the
circulatory system, pregnancy and birth outcomes, diabetes, and
neurodevelopmental effects; and dose-response analysis characterizing
the quantitative relationship for the noncancer outcomes listed above
as well as for bladder cancer and lung cancer. These quantitative
relationships are then used to derive cancer and non-cancer toxicity
values (e.g., oral slope factor, reference dose). The SAB Inorganic
Arsenic Review Panel will consider whether the conclusions found in the
EPA's draft assessment are clearly presented and scientifically
supported.

DATES: Nominations should be submitted by December 9, 2022 per the
instructions below.

FOR FURTHER INFORMATION CONTACT: Any member of the public wishing
further information regarding this Notice and Request for Nominations
may contact Dr. Diana Wong, Designated Federal Officer (DFO), EPA
Science Advisory Board Staff Office by telephone/voice mail (202) 564-
2049, or email at [email protected]. General information concerning
the EPA SAB can be found at the EPA SAB website at https://sab.epa.gov.

SUPPLEMENTARY INFORMATION:
    Background: The SAB (42 U.S.C. 4365) is a chartered Federal
Advisory Committee that provides independent scientific and technical
peer review, advice, and recommendations to the EPA Administrator on
the technical basis for EPA actions. As a Federal Advisory Committee,
the SAB conducts business in accordance with the Federal Advisory
Committee Act (FACA) (5 U.S.C. app. 2) and related regulations. The SAB
Staff Office is forming an expert panel, the SAB Inorganic Arsenic
Review Panel, under the auspices of the Chartered SAB. The SAB
Inorganic Arsenic Review Panel will provide advice through the
chartered SAB. The SAB and the Inorganic Arsenic Review Panel will
comply with the provisions of FACA and all appropriate SAB Staff Office
procedural policies.
    The SAB Inorganic Arsenic Review Panel will conduct a review of the
draft EPA IRIS Toxicological Review of Inorganic Arsenic. Based on the
publicly available systematic review protocol, EPA's draft assessment
includes a summary of the chemical properties and pharmacokinetics;
hazard identification analysis for diseases of the circulatory system,
pregnancy and birth outcomes, diabetes, and neurodevelopmental effects;
and dose-response analysis characterizing the quantitative relationship
for the noncancer outcomes listed above as well as for bladder cancer
and lung cancer. The SAB Inorganic Arsenic Review Panel will consider
whether the conclusions found in the EPA's draft assessment are clearly
presented and scientifically supported. The Panel will also be asked to
provide recommendations on how the assessment may be strengthened.
    Request for Nominations: The SAB Staff Office is seeking
nominations of nationally and internationally recognized scientists
with demonstrated expertise and experience in the following
disciplines: Epidemiology, including specific expertise in
carcinogenesis, cardiovascular disease, reproductive and developmental
toxicity, neurodevelopmental outcomes, and diabetes; systematic review;
physiologically-based pharmacokinetic (PBPK) modeling; risk assessment;
epidemiological dose-response analysis; and Bayesian statistics.
    Process and Deadline for Submitting Nominations: Any interested
person or organization may nominate qualified individuals in the areas
of expertise described above for possible service on the SAB Panel.
Individuals may self-nominate. Nominations should be submitted in
electronic format (preferred) using the online nomination form on the
SAB website at https://sab.epa.gov (see the ``Public Input on
Membership'' list under ``Committees, Panels, and Membership''). To be
considered, nominations should include the information requested below.
EPA values and welcomes diversity. All qualified candidates are
encouraged to apply regardless of sex, race, disability or ethnicity.
Nominations should be submitted in time to arrive no later than
December 9, 2022. The following information should be provided on the
nomination form: contact information for the person making the
nomination; contact information for the nominee; and the disciplinary
and specific areas of expertise of the nominee. Nominees will be
contacted by the SAB Staff Office and will be asked to provide a recent
curriculum vitae and a narrative biographical summary that includes
current position; educational background; research activities; sources
of research funding for the last two years; and recent service on other
national advisory committees or national professional organizations.
Persons having questions about the nomination procedures, or who are
unable to submit nominations through the SAB website, should contact
the DFO at the contact information noted above. The names and
biosketches of qualified nominees identified by respondents to this
Federal Register notice, and additional experts identified by the SAB
Staff Office, will be posted in a List of Candidates for the Panel on
the SAB website at https://sab.epa.gov. Public comments on the List of
Candidates will be accepted for 21 days. The public will be requested
to provide relevant information or other documentation on nominees that
the SAB Staff Office should consider in evaluating candidates.
    For the EPA SAB Staff Office, a balanced review panel includes
candidates who possess the necessary domains of knowledge, the relevant
scientific perspectives (which, among other factors, can be influenced
by work history and affiliation), and the collective breadth of
experience to adequately address the charge. In forming the expert
panel, the SAB Staff Office will consider public comments on the Lists
of Candidates, information provided by the candidates themselves, and
background information independently gathered by the SAB Staff Office.
Selection criteria to be used for panel membership include: (a)
scientific and/or technical expertise, knowledge, and experience
(primary factors); (b) availability and willingness to serve; (c)
absence of financial conflicts of interest; (d) absence of an
appearance of a loss of impartiality; (e) skills working in committees,
subcommittees and advisory panels; and (f) for the panel as a whole,
diversity of expertise and scientific points of view.
    The SAB Staff Office's evaluation of an absence of financial
conflicts of interest will include a review of the ``Confidential
Financial Disclosure Form for Environmental Protection Agency Special
Government Employees'' (EPA Form 3110-48). This

confidential form is required and allows government officials to
determine whether there is a statutory conflict between a person's
public responsibilities (which include membership on an EPA federal
advisory committee) and private interests and activities, or the
appearance of a loss of impartiality, as defined by federal regulation.
The form may be viewed and downloaded through the ``Ethics Requirements
for Advisors'' link on the SAB website at https://sab.epa.gov. This
form should not be submitted as part of a nomination.

V. Khanna Johnston,
Deputy Director, Science Advisory Board Staff Office.
[FR Doc. 2022-25170 Filed 11-21-22; 8:45 am]
BILLING CODE 6560-50-P