[Federal Register: November 2, 2007 (Volume 72, Number 212)]
[Notices]
[Page 62287-62290]
[DOCID:fr02no07-88]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-56715; File No. SR-CBOE-2007-119]

Self-Regulatory Organizations; Chicago Board Options Exchange,
Incorporated; Notice of Filing and Order Granting Accelerated Approval
of Proposed Rule Change Relating to the Criteria for Securities that
Underlie Options Traded on the Exchange

October 29, 2007.
    Pursuant to section 19(b)(1) of the Securities Exchange Act of 1934
(``Act'') \1\ and Rule 19b-4 thereunder,\2\ notice is hereby given that
on October 4, 2007, Chicago Board Options Exchange, Incorporated (
``Exchange'' or ``CBOE''), filed with the Securities and Exchange
Commission (``Commission'') the proposed rule change (``Exchange
Notice'') as described in Items I and II below, which Items have been
substantially prepared by the Exchange. This order provides notice of
the proposed rule change and approves the proposed rule change on an
accelerated basis.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
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I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change

    The Exchange proposes to permit the initial and continued listing
and trading on the Exchange of options on Index Multiple Exchange
Traded Fund Shares (``Index Multiple Units'') and Index Inverse
Exchange Traded Fund Shares (``Index Inverse Units''). The text of the
proposed rule change is available on the Exchange's Web site (http://www.cboe.org/Legal
), at the Exchange's Office of the Secretary and at

the Commission.

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

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

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

1. Purpose
    The purpose of the proposed rule change is to revise Rules 5.3,
Criteria for Underlying Securities, and 5.4, Withdrawal of Approval of
Underlying Securities, to enable the listing and trading on the
Exchange of options on Index Multiple Units and Index Inverse Units.
Index Multiple Units seek to provide investment results, before fees
and expenses, that correspond to a specified multiple of the percentage
performance on a given day of a particular foreign or domestic stock
index. Index Inverse Units seek to provide investment results, before
fees and expenses, that correspond to the inverse (opposite) of the
percentage performance on a given day of a particular foreign or
domestic stock index by a specified multiple. Index Multiple Units and
Index Inverse Units differ from traditional exchange-traded fund shares
or ``Units'' in that they do not merely correspond to the performance
of a given index, but rather attempt to match a multiple or inverse of
such underlying index performance. The ProShares Ultra Funds, which
currently trades on the American Stock Exchange (``Amex'') is an
example of an Index Multiple Unit. Amex also currently lists for
trading Index Inverse Units, namely the Short Funds and the UltraShort
Funds.\3\
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    \3\ See Securities Exchange Act Release Nos. 52553 (October 3,
2005), 70 FR 59100 (October 11, 2005) (approving the listing and
trading of Ultra Funds and Short Funds) and 54040 (June 23, 2006),
71 FR 37629 (June 30, 2006) (approving the listing and trading of
the UltraShort Funds). The Ultra Funds are expected to gain, on a
percentage basis, approximately twice (200%) as much as the
underlying benchmark index and should lose approximately twice
(200%) as much as the underlying benchmark index when such prices
decline. The Short Funds are expected to achieve investment results,
before fees and expenses, that correspond to the inverse or opposite
of the daily performance (-100%) or an underlying benchmark index.
Lastly, the UltraShort Funds are expected to achieve investment
result, before fees and expenses, that correspond to twice the
inverse or opposite of the daily performance (-200%) of the
underlying benchmark index.

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    In order to achieve investment results that provide either a
positive multiple or inverse of the benchmark index, Index Multiple
Units or Index Inverse Units may hold a combination of financial
instruments, including, among other things: stock index futures
contracts; options on futures; options on securities and indexes;
equity caps, collars and floors; swap agreements; forward contracts;
repurchase agreements; and reverse repurchase agreements (the
``Financial Instruments''). The underlying portfolios of Index Multiple
Units generally will hold at least 85% of their assets in the component
securities of the underlying relevant benchmark index. The remainder of
any assets is devoted to Financial Instruments that are intended to
create the additional needed exposure to such underlying index
necessary to pursue its investment objective. Normally, 100% of the
value of the underlying portfolios of Index Inverse Units will be
devoted to Financial Instruments and money market instruments,
including U.S. government securities and repurchase agreements (the
``Money Market Instruments'').
    Currently, Interpretation and Policy .06 to Rule 5.3 provides
securities deemed appropriate for options trading shall include shares
or other securities (``Units'') that are traded on a national
securities exchange or through the facilities of a national securities
association and are defined as an NMS stock under Rule 600 of
Regulation NMS, and that (i) represent interests in registered
investment companies (or series thereof) organized as an open-end
management investment companies, unit investment trusts or similar
entities that hold portfolios of securities comprising or otherwise
based on or representing investments in indexes or portfolio of
securities (of that hold securities in one of more other registered
investment companies that themselves hold such portfolios of
securities); or (ii) represent interests in a trust or other similar
entity that holds a specified non-U.S. currency deposited with the
trust or similar entity when aggregated in some specified minimum
number may be surrendered to the trust by the beneficial owner to
receive the specified non-U.S. currency and pays the beneficial owner
interest and other distributions on deposited non-U.S. currency, if
any, declared and paid by the trust; or (iii) represent commodity pool
interests principally engaged, directly or indirectly, in holding and/
or managing portfolios or baskets of securities, commodity futures
contracts, options on commodity futures contracts, swaps, forward
contracts and/or options on physical commodities and/or non-U.S.
currency (``Commodity Pool Units'').
    The Exchange proposes to amend Interpretation and Policy .06 to
Rule 5.3 to expand the type of options to include the listing and
trading of options based on Index Multiple Units and Index Inverse
Units that may hold or invest in any combination of securities,
Financial Instruments and/or Money Market Instruments. Index Multiple
Units and Index Inverse Units will continue to otherwise satisfy the
listing standards in Rule 5.4. The Exchange also proposes to make non-
substantive, technical changes to Interpretation and Policy .06 to and
to delete duplicative rule text from Interpretation and Policy .06(ii)
to Rule 5.3. In addition, the Exchange proposes to remove the reference
to a ``national securities association'' in Interpretation and Policy
.06 to Rule 5.3.
    As set forth in proposed amended Interpretation and Policy .06 to
Rule 5.3, Index Multiple Units and Index Inverse Units must be traded
on a national securities exchange and must be an ``NMS stock'' as
defined under Rule 600 of Regulation NMS. In addition, Index Multiple
Units and Index Inverse Units must meet either: (i) The criteria and
guidelines under Interpretation and Policy .01 to Rule 5.3; or (ii) be
available for creation or redemption each business day in cash or in
kind from the investment company at a price related to net asset value.
In addition, the investment company shall provide that shares may be
created even though some or all of the securities and/or cash (in lieu
of the Financial Instruments) needed to be deposited have not been
received by the investment company, provided the authorized creation
participant has undertaken to deliver the shares and/or cash as soon as
possible and such undertaking has been secured by the delivery and
maintenance of collateral consisting of cash or cash equivalents
satisfactory to the Unit which underlies the option as described in the
prospectus.
    The Exchange's current continuing listing standards for options on
Units will continue to apply.
    The Exchange proposes to amend Interpretation and Policy .08 to
Rule 5.4 to indicate that the index or portfolio may consist of
securities, Financial Instruments and/or Money Market Instruments. The
Exchange also seeks to delete reference to ``national securities
association'' set forth in Interpretation and Policy .08(b) to Rule
5.4.
    Under the applicable continued listing criteria in Interpretation
and Policy .08 to Rule 5.4, options on Units may be subject to the
suspension of opening transactions as follows: (1) Following the
initial twelve-month period beginning upon the commencement of trading
of the Units, there are fewer than 50 record and/or beneficial holders
of the Units for 30 or more consecutive trading days; (2) the value of
the index or portfolio of securities, non-U.S. currency, or portfolio
of commodities including commodity futures contracts, options on
commodity futures contracts, swaps, forward contracts and/or options on
physical commodities and/or Financial Instruments and Money Market
Instruments on which Units are based is no longer calculated or
available; or (3) such other event occurs or condition exists that in
the opinion of the Exchange makes further dealing on the Exchange
inadvisable. Additionally, the Units shall not be deemed to meet the
requirements for continued approval, and the Exchange shall not open
for trading any additional series of option contracts of the class
covering such Index Multiple Units or Index Inverse Units, if the Units
cease to be an ``NMS stock'' as provided for in paragraph (f) of
Interpretation and Policy .01 of Rule 5.4 or the Units are halted from
trading on their primary market.
    The expansion of the types of investments that may be held by Index
Multiple Units or Index Inverse Units under Interpretation and Policy
.06 to Rule 5.3 will not have any effect on the rules pertaining to
position and exercise limits \4\ or margin.\5\
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    \4\ See Rules 4.11, Position Limits, and 4.12, Exercise Limits.
    \5\ See Rule 12.3, Margin Requirements.
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    This proposal is necessary to enable the Exchange to list and trade
options on the shares of the Ultra Fund, Short Fund and UltraShort Fund
of the ProShares Trust.\6\ The Exchange believes the ability to trade
options on Index Multiple Units and Index Inverse Units will provide
investors with greater risk management tools. The proposed amendment to
the Exchange's listing criteria for options on Units is necessary to
ensure that the Exchange will be able to list options on the Units of
the ProShares Trust as well as other Index

Multiple Units or Index Inverse Units that may be introduced in the
future.
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    \6\ See supra at Note 3.
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    The Exchange represents that its existing surveillance procedures
applicable to trading in options are adequate to properly monitor the
trading in Index Multiple Unit options and Index Inverse Unit options.
2. Statutory Basis
    The Exchange believes the proposed rule change is consistent with
the Act and the rules and regulations under the Act applicable to
national securities exchanges and, in particular, the requirements of
section 6(b) of the Act.\7\ Specifically, the Exchange believes the
proposed rule change is consistent with the section 6(b)(5) \8\
requirements that the rules of an exchange be designed to promote just
and equitable principles of trade, to prevent fraudulent and
manipulative acts, to remove impediments to and to perfect the
mechanism for a free and open market and a national market system, and,
in general, to protect investors and the public interest.
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    \7\ 15 U.S.C. 78f(b).
    \8\ 15 U.S.C. 78f(b)(5).
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B. Self-Regulatory Organization's Statement on Burden on Competition

    CBOE does not believe that the proposed rule change will result in
any burden on competition that is not necessary or appropriate in
furtherance of the purpose of the Act.

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

    The Exchange has neither solicited nor received written comments on
the proposed rule change.

III. Solicitation of Comments

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

Electronic Comments

     Use the Commission's Internet comment form (http://www.sec.gov/rules/sro.shtml.
); or     Send an e-mail to<EMAIL_ADDRESS>Please include

File Number SR-CBOE-2007-119 on the subject line.

Paper Comments

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

All submissions should refer to File Number SR-CBOE-2007-119. This file
number should be included on the subject line if e-mail is used. To
help the Commission process and review your comments more efficiently,
please use only one method. The Commission will post all comments on
the Commission's Internet Web site (http://www.sec.gov/rules/sro.shtml
). Copies of the submission, all subsequent amendments, all

written statements with respect to the proposed rule change that are
filed with the Commission, and all written communications relating to
the proposed rule change between the Commission and any person, other
than those that may be withheld from the public in accordance with the
provisions of 5 U.S.C. 552, will be available for 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. Copies of such filing also will be available for
inspection and copying at the principal offices of the Exchange. All
comments received will be posted without change; the Commission does
not edit personal identifying information from submissions. You should
submit only information that you wish to make available publicly. All
submissions should refer to File Number SR-CBOE-2007-119 and should be
submitted on or before November 23, 2007.

IV. Commission's Findings and Order Granting Accelerated Approval of
the Proposed Rule Change

    After careful consideration, the Commission finds that the proposed
rule change is consistent with the requirements of the Act and the
rules and regulations thereunder applicable to a national securities
exchange,\9\ and in particular, the requirements of section 6(b) of the
Act.\10\ Specifically, the Commission finds that the proposed rule
change is consistent with section 6(b)(5) of the Act,\11\ which
requires, among other things, that the rules of a national securities
exchange be designed to prevent fraudulent and manipulative acts and
practices, to promote just and equitable principles of trade, 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.
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    \9\ In approving this proposed rule change, the Commission has
considered the proposed rule's impact on efficiency, competition,
and capital formation. See 15 U.S.C. 78c(f).
    \10\ 15 U.S.C. 78f(b).
    \11\ 15 U.S.C. 78f(b)(5).
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Surveillance

    The Commission notes that the Exchange has represented that its
existing surveillance procedures applicable to trading options are
adequate to properly monitor trading in Index Multiple Units options
and Index Inverse Units options. In addition, the Exchange represented
that the expansion of the types of investments that may be held by
Index Multiple Units or Index Inverse Units under Interpretation and
Policy .06 to Rule 5.3 will not have any effect on the rules pertaining
to position and exercise limits \12\ or margin.\13\
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    \12\ See Rules 4.11, Position Limits, and 4.12, Exercise Limits.
    \13\ See Rule 12.3, Margin Requirements.
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Listing and Trading Options on Fund Shares

    The Commission notes that, pursuant to the proposed rule change,
the Exchange represented that the current continuing listing standards
for options on Units will continue to apply. These provisions include
requirements regarding initial and continued listing standards,
suspension of opening transactions, and trading halts. Proposed amended
Interpretation and Policy .06 to Rule 5.3, would require that Index
Multiple Units and Index Inverse Units must be traded on a national
securities exchange and must be an ``NMS stock'' as defined under Rule
600 of Regulation NMS.\14\
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    \14\ 17 CFR 242.600(b)(47).
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    The Commission believes that this proposal is necessary to enable
the Exchange to list and trade options on the shares of the Ultra Fund,
Short Fund and UltraShort Fund of the ProShares Trust.\15\ The
Commission believes that the ability to trade options on the Index
Multiple Units and Index Inverse Units will provide investors with
additional risk management tools. The Commission further believes that
the proposed amendment to the Exchange's listing criteria for options
on Exchange Traded Fund Shares will ensure that the Exchange will be
able to list options on the Funds of the ProShares Trust as well as
other Index Multiple Units and Index Inverse Units that may be
introduced in the future, thereby affording investors greater
investment choices.
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    \15\ See supra at Note 3.
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    The Commission finds good cause for approving this proposal before
the

thirtieth day after the publication of notice thereof in the Federal
Register, The Commission notes that it recently has approved a
substantially similar proposal.\16\ This proposed rule filing does not
raise any new, unique or substantive issues from those raised in the
prior filing that would preclude the trading of the options on Index
Multiple Units or Index Inverse Units on the Exchange. Therefore,
accelerating approval of this proposal should benefit investors by
creating, without undue delay, additional competition in the market for
these types of options.
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    \16\ See Securities Exchange Act Release No. 56650 (October 12,
2007), 72 FR 59123 (October 18, 2007) (approving SR-Amex-2007-35).
See also SR-ISE-2007-87 (pending rule filing proposing similar
amendment to options listing criteria).
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V. Conclusion

    It is therefore ordered, pursuant to section 19(b)(2) of the
Act,\17\ that the proposed rule change (SR-CBOE-2007-119) be, and it
hereby is, approved on an accelerated basis.
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    \17\ 15 U.S.C. 78s(b)(2).

    For the Commission, by the Division of Market Regulation,
pursuant to delegated authority.\18\
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    \18\ 17 CFR 200.30-3(a)(12).
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Florence E. Harmon,
Deputy Secretary.
 [FR Doc. E7-21567 Filed 11-1-07; 8:45 am]

BILLING CODE 8011-01-P


[Federal Register: October 6, 2006 (Volume 71, Number 194)]
[Notices]
[Page 59099]
[DOCID:fr06oc06-51]

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DEPARTMENT OF ENERGY

Federal Energy Regulatory Commission

[Docket No. RP06-506-001]

Northern Natural Gas Company; Notice of Compliance Filing

September 29, 2006.
    Take notice that on September 27, 2006, Northern Natural Gas
Company (Northern), tendered for filing as part of its FERC Gas Tariff,
Fifth Revised Volume No. 1, Fourth Substitute 41 Revised Sheet No. 66,
with an effective date of September 22, 2006.
    Northern states that copies of the filing have been provided to
each of its customers and interested state commissions.
    Any person desiring to protest this filing must file in accordance
with Rule 211 of the Commission's Rules of Practice and Procedure (18
CFR 385.211). Protests to this filing will be considered by the
Commission in determining the appropriate action to be taken, but will
not serve to make protestants parties to the proceeding. Such protests
must be filed in accordance with the provisions of Section 154.210 of
the Commission's regulations (18 CFR 154.210). Anyone filing a protest
must serve a copy of that document on all the parties to the
proceeding.
    The Commission encourages electronic submission of protests in lieu
of paper using the ``eFiling'' link at http://www.ferc.gov. Persons

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

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

TTY, call<PHONE_NUMBER>.

Magalie R. Salas,
Secretary.
[FR Doc. E6-16536 Filed 10-5-06; 8:45 am]

BILLING CODE 6717-01-P


[Federal Register: August 6, 2010 (Volume 75, Number 151)]
[Rules and Regulations]
[Page 47475-47482]
[DOCID:fr06au10-11]

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ENVIRONMENTAL PROTECTION AGENCY

40 CFR Part 180

[EPA-HQ-OPP-2005-0190; FRL-8836-7]

Acetamiprid, Mepiquat; Order Denying NRDC's Objections on Remand:
Environmental Protection Agency

AGENCY: Environmental Protection Agency (EPA).

ACTION: Final order.

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SUMMARY: In this order, EPA again denies objections by the Natural
Resources Defense Council (NRDC) to actions establishing tolerance
regulations for the pesticides acetamiprid and mepiquat under section
408 of the Federal Food, Drug, and Cosmetic Act (FFDCA). EPA's previous
denial of NRDC's objections, published in the Federal Register on
August 10, 2005, was remanded to EPA by the U.S. Court of Appeals,
Ninth Circuit, for further explanation of EPA's decision on the
application of the FFDCA's requirement concerning an additional safety
factor for the protection of infants and children to these pesticide
tolerances. On remand, EPA is denying NRDC's objections because the
objections are now either moot or not sufficient to justify the relief
requested.

DATES: This order is effective August 6, 2010.

ADDRESSES: EPA has established a docket for this action under docket
identification (ID) number EPA-HQ-OPP-2005-0190. To access the
electronic docket, go to http://www.regulations.gov, and search for the
docket number. Follow the instructions on the regulations.gov website
to view the docket index or access available documents. All documents
in the docket are listed in the docket index available in
regulations.gov. Although listed in the index, some information is not
publicly available, e.g., Confidential Business Information (CBI) or
other information whose disclosure is restricted by statute. Certain
other material, such as copyrighted material, is not placed on the
Internet and will be publicly available only in hard copy form.
Publicly available docket materials are available in the electronic
docket at http://www.regulations.gov, or, if only available in hard
copy, at the OPP Regulatory Public Docket in Rm. S-4400, One Potomac
Yard (South Bldg.), 2777 S. Crystal Dr., Arlington, VA. The Docket
Facility is open from 8:30 a.m. to 4 p.m., Monday through Friday,
excluding legal holidays. The Docket Facility telephone number is (703)
305-5805.

FOR FURTHER INFORMATION CONTACT: Meredith Laws, Registration Division
(7510P), Office of Pesticide Programs, Environmental Protection Agency,
1200 Pennsylvania Ave., NW., Washington, DC 20460-0001; telephone
number:<PHONE_NUMBER>; e-mail address<EMAIL_ADDRESS>
SUPPLEMENTARY INFORMATION:.

I. General Information

A. Does this Action Apply to Me?

    In this document EPA denies objections by the Natural Resources
Defense Council (``NRDC'') to EPA's to establishment of certain
pesticide tolerances. This action may also be of interest to
agricultural producers, food manufacturers, or pesticide manufacturers.
Potentially affected entities may include, but are not limited to those
engaged in the following activities:
     Crop production (NAICS code 111), e.g., agricultural
workers; greenhouse, nursery, and floriculture workers; farmers.
     Animal production (NAICS code 112), e.g., cattle ranchers
and farmers, dairy cattle farmers, livestock farmers.
     Food manufacturing (NAICS code 311), e.g., agricultural
workers; farmers; greenhouse, nursery, and floriculture workers;
ranchers; pesticide applicators.
     Pesticide manufacturing (NAICS code 32532), e.g.,
agricultural workers; commercial applicators; farmers; greenhouse,
nursery, and floriculture workers; residential users.
    This listing is not intended to be exhaustive, but rather to
provide a guide for readers regarding entities likely to be affected by
this action. Other types of entities not listed in this unit could also
be affected. The NAICS codes have been provided to assist you and
others in determining whether this action might apply to certain
entities. 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 Access Electronic Copies of this Document?

    In addition to accessing an electronic copy of this Federal
Register document through the electronic docket at http://
www.regulations.gov, you may access this Federal Register document
electronically through the EPA Internet under the ``Federal Register''
listings at http://www.epa.gov/fedrgstr. You may also access a
frequently updated electronic version of EPA's tolerance regulations at
40 CFR part 180 through the Government Printing Office's pilot e-CFR
site at http://www.gpoaccess.gov/ecfr.

II. Introduction

A. What Action Is the Agency Taking?

    In this order, EPA denies objections filed by the NRDC to
regulations establishing pesticide tolerances for acetamiprid and
mepiquat under section 408 of the Federal Food, Drug, and Cosmetic Act
(FFDCA), 21 U.S.C. 346a. EPA previously denied NRDC's objections in an
order dated August 10, 2005. (70 FR 46706 (August 10, 2005)). NRDC
sought judicial review of the August, 2005 order, and the U.S. Court of
Appeals, Ninth Circuit, remanded the order to EPA on the sole ground
that EPA had not provided an adequate explanation as to one aspect of
its decision. (NCAP v. EPA, 544 F.3d 1043, 1052 (9th Cir. 2008)).
Specifically, the court held that EPA did not provide ``enough
information'' on why it chose to deviate from the presumptive ten-fold
(10X) additional safety factor for the protection of infants and
children in FFDCA section 408(b)(2)(C). (Id.). In response to the
remand, EPA is again denying the objections; however, EPA has not
provided further information on its decision on the children's safety
factor because that issue is now either moot or not outcome-
determinative with regard to the challenged tolerances.

B. What Is the Agency's Authority for Taking This Action?

    EPA's authority for issuing pesticide tolerances is contained in
FFDCA section 408(d) and the statutory provisions governing the
administrative review process for tolerances is in FFDCA section
408(g)(2). (21 U.S.C. 346a(d) and (g)(2)).

III. Statutory and Regulatory Background

    In this unit, EPA provides background on the relevant statutes and
regulations governing NRDC's objections as well as on pertinent Agency
policies and practices. Unit III.A. summarizes the requirements and
procedures in section 408 of the FFDCA and applicable regulations
pertaining to pesticide tolerances. Unit III.B. provides an overview of
EPA's risk assessment process. It contains an explanation of how EPA
identifies the hazards posed by pesticides, how EPA determines the
level of exposure to pesticides that pose a concern (``level of
concern''), how EPA measures human exposure to pesticides, and how
hazard, level of concern conclusions, and human exposure estimates are
combined to evaluate risk. Further, this unit presents background
information on the EPA's policy with regard to the statutory safety
factor for the protection of infants and children.

A. FFDCA

    1. In general. EPA establishes maximum residue limits, or
``tolerances,'' for pesticide residues in food under section 408 of the
FFDCA. (21 U.S.C. 346a). Without such a tolerance or an exemption from
the requirement of a tolerance, a food containing a pesticide residue
is ``adulterated'' under section 402 of the FFDCA and may not be
legally moved in interstate commerce. (21 U.S.C. 331, 342).
    2. Safety standard for pesticide tolerances.A pesticide tolerance
may only be promulgated by EPA if the tolerance is ``safe.'' (21 U.S.C.
346a(b)(2)(A)(i)). ``Safe'' is defined by the statute to mean that
``there is a reasonable certainty that no harm will result from
aggregate exposure to the pesticide chemical residue, including all
anticipated dietary exposures and all other exposures for which there
is reliable information.'' (21 U.S.C. 346a(b)(2)(A)(ii)). In making
this safety determination, risks to infants and children are given
special consideration. Specifically, this provision creates a
presumptive additional safety factor for the protection of infants and
children. It directs that ``[i]n the case of threshold effects, ... an
additional tenfold margin of safety for the pesticide chemical residue
and other sources of exposure shall be applied for infants and children
to take into account potential pre- and post-natal toxicity and
completeness of the data with respect to exposure and toxicity to
infants and children.'' (21 U.S.C. 346a(b)(2)(C)). EPA is permitted to
``use a different margin of safety for the pesticide chemical residue
only if, on the basis of reliable data, such margin will be safe for
infants and children.'' (Id.). The additional safety margin for infants
and children is referred to throughout this Order as the ``children's
safety factor.'' These provisions on pesticide safety were a part of
major revisions to section 408 enacted by the Food Quality Protection
Act of 1996 (FQPA). (Pub. L. 104-170, 110 Stat. 1489).
    3. Procedures for establishing, amending, or revoking tolerances.
Tolerances are established, amended, or revoked by rulemaking under the
unique procedural framework set forth in the FFDCA. Generally, a
tolerance rulemaking is initiated by the party seeking to establish,
amend, or revoke a tolerance by means of filing a petition with EPA.
(See 21 U.S.C. 346a(d)(1)). EPA publishes in the Federal Register a
notice of the petition filing and requests public comment. (21 U.S.C.
346a(d)(3)). After reviewing the petition, and any comments received on
it, EPA may issue a final rule establishing, amending, or revoking the
tolerance, issue a proposed rule to do the same, or deny the petition.
(21 U.S.C. 346a(d)(4)).
    Once EPA takes final action on the petition by establishing,
amending, or revoking the tolerance or denying the petition, any person
may file objections with EPA and seek an evidentiary hearing on those
objections. (21 U.S.C. 346a(g)(2)). Objections and hearing requests
must be filed within 60 days. (Id.). EPA's final order on the
objections is subject to judicial review. (21 U.S.C. 346a(h)(1)).

B. EPA Risk Assessment for Tolerances - Policy and Practice

    1. The safety determination - risk assessment. To assess risk of a
pesticide tolerance, EPA combines information on pesticide toxicity
with information regarding the route, magnitude, and duration of
exposure to the pesticide. The risk assessment process involves four
distinct steps: Identification of the toxicological hazards posed by a
pesticide; determination of the ``level of concern'' with respect to
human exposure to the pesticide; estimation of human exposure to the
pesticide; and characterization of the risk posed to humans by the
pesticide based on comparison of human exposure to the level of
concern.
    a. Hazard identification. In evaluating toxicity or hazard, EPA
reviews toxicity studies, primarily in laboratory animals, to identify
any adverse effects on the test subjects. Animal studies typically
involve investigating a broad range of endpoints including gross and
microscopic effects on organs and tissues, functional effects on bodily
organs and systems, effects on blood parameters (such as red blood cell
count, hemoglobin concentration, hematocrit, and a measure of clotting
potential), effects on the concentrations of normal blood chemicals
(including glucose, total cholesterol, urea nitrogen, creatinine, total
protein, total bilirubin, albumin, hormones, and enzymes such as
alkaline phosphatase, alanine aminotransfersase and cholinesterases),
and behavioral or other gross effects identified through clinical
observation and measurement. EPA examines whether adverse effects are
caused by either short-term (e.g., ``acute'') or longer-term (e.g.,
``chronic'') pesticide exposure and the effects of pre-natal and post-
natal exposure in animals. EPA also considers whether the adverse
effect has a threshold - a level below which exposure has no
appreciable chance of causing the effect.
    b. Level of concern/dose-response analysis. Once a pesticide's
potential hazards are identified, EPA determines a toxicological level
of concern for evaluating the risk posed by human exposure to the
pesticide. In this step of the risk assessment process, EPA essentially
evaluates the levels of exposure to the pesticide at which effects
might occur. An important aspect of this determination is assessing the
relationship between exposure (dose) and response (often referred to as
the dose-response analysis). EPA follows differing approaches to
identifying a level of concern for threshold and non-threshold hazards.
Because this document is only concerned with pesticide hazards that
pose a hazard above a defined threshold, only such threshold effects
are discussed.
    In examining the dose-response relationship for a pesticide's
threshold effects, EPA evaluates an array of toxicity studies on the
pesticide. In each of these studies, EPA attempts to identify the
lowest observed adverse effect level (LOAEL) and the next lower dose at
which there are no observed adverse affect levels (NOAEL). Generally,
EPA will use the lowest NOAEL from the available studies as a starting
point (called ``the Point of Departure'') in estimating the level of
concern for humans. (Ref. 1 at 9 (The Point of Departure ``is simply
the toxic dose that serves as the `starting point' in extrapolating a
risk to the human population.'')). At times, however, EPA will use a
LOAEL from a study as the Point of Departure when no NOAEL is
identified in that study and the LOAEL is close to, or lower than,
other relevant NOAELs. The Point of Departure is in

turn used in choosing a level of concern. EPA will make separate
determinations as to the Points of Departure, and correspondingly
levels of concern, for both short and long exposure periods as well as
for the different routes of exposure (oral, dermal, and inhalation).
    In estimating and describing the level of concern, the Point of
Departure is at times used differently depending on whether the risk
assessment addresses dietary or non-dietary exposures. For dietary
risks, EPA uses the Point of Departure to calculate an acceptable level
of exposure or reference dose (RfD). The RfD is calculated by dividing
the Point of Departure by applicable safety or uncertainty factors.
Typically, EPA uses a baseline safety/uncertainty factor of 100X. That
value includes a factor of ten (10X) where EPA is using data from
laboratory animals to reflect potentially greater sensitivity in humans
than animals and a factor of 10X to account for potential variations in
sensitivity among members of the human population as well as other
unknowns. Additional safety factors may be added to address data
deficiencies or concerns raised by the existing data. Under the FQPA,
an additional safety factor of 10X is presumptively applied to protect
infants and children, unless reliable data support selection of a
different factor. This FQPA additional safety factor largely replaces
pre-FQPA EPA practice regarding additional safety factors. (Ref. 2 at
4-11).
    In implementing FFDCA section 408, EPA's Office of Pesticide
Programs, also calculates a variant of the RfD referred to as a
Population Adjusted Dose (PAD). A PAD is the RfD divided by any portion
of the FQPA safety factor that does not correspond to one of the
traditional additional safety factors used in general Agency risk
assessments. (Ref. 2 at 13-16). The reason for calculating PADs is so
that other parts of the Agency, which are not governed by FFDCA section
408, can, when evaluating the same or similar substances, easily
identify which aspects of a pesticide risk assessment are a function of
the particular statutory commands in FFDCA section 408. Today, RfDs and
PADs are generally calculated for both acute and chronic dietary risks
although traditionally a RfD or PAD was only calculated for chronic
dietary risks. Throughout this document general references to EPA's
calculated safe dose are denoted as a RfD/PAD.
    Because this order only addresses dietary risks, EPA's approach to
non-dietary risk assessment is not further discussed.
    c. Estimating human exposure. Risk is a function of both hazard and
exposure. Thus, equally important to the risk assessment process as
determining the hazards posed by a pesticide and the toxicological
level of concern for those hazards is estimating human exposure. Under
FFDCA section 408, EPA is concerned not only with exposure to pesticide
residues in food but also exposure resulting from pesticide
contamination of drinking water supplies and from use of pesticides in
the home or other non-occupational settings. (See 21 U.S.C.
346a(b)(2)(D)(vi)).
    i. Exposure from food. There are two critical variables in
estimating exposure in food:
     The types and amount of food that is consumed; and
     The residue level in that food.
    Consumption is estimated by EPA based on scientific surveys of
individuals' food consumption in the United States conducted by the
United States Department of Agriculture. (Ref. 1 at 12). Information on
residue values comes from a range of sources including crop field
trials, data on pesticide reduction (or concentration) due to
processing, cooking, and other practices, information on the extent of
usage of the pesticide, and monitoring of the food supply. (Id. at 17).
    In assessing exposure from pesticide residues in food, EPA, for
efficiency's sake, follows a tiered approach in which it, in the first
instance (i.e., ``Tier 1''), assesses exposure using the worst case
assumptions that 100 percent of the crops for which tolerances exist or
are proposed are treated with the pesticide and 100 percent of the food
from those crops contain pesticide residues at the tolerance level.
(Id. at 11). When such an assessment shows no risks of concern, a more
complex risk assessment is unnecessary. By avoiding a more complex risk
assessment, EPA's resources are conserved and regulated parties are
spared the cost of any additional studies that may be needed. If,
however, a Tier 1 assessment suggests there could be a risk of concern,
EPA then attempts to refine its exposure assumptions to yield a more
realistic picture of residue values through use of data on the percent
of the crop actually treated with the pesticide and data on the level
of residues that may be present on the treated crop. These latter data
are used to estimate what has been traditionally referred to by EPA as
``anticipated residues.'' More information on how EPA refines estimates
of exposure from pesticides in food can be found in U.S. EPA, A User's
Guide to Available EPA Information on Assessing Exposure to Pesticides
in Food (June 21, 2000). (See 73 FR 42683, 42687 (July 23, 2008)).
    ii. Exposure from water. EPA may use either or both field
monitoring data and mathematical water exposure models to generate
pesticide exposure estimates in drinking water. Monitoring and modeling
are both important tools for estimating pesticide concentrations in
water and can provide different types of information. Monitoring data
can provide estimates of pesticide concentrations in water that are
representative of specific agricultural or residential pesticide
practices and under environmental conditions associated with a sampling
design. Although monitoring data can provide a direct measure of the
concentration of a pesticide in water, it does not always provide a
reliable estimate of exposure because sampling may not occur in areas
with the highest pesticide use, and/or the sampling may not occur when
the pesticides are being used.
    In estimating pesticide exposure levels in drinking water, EPA most
frequently uses mathematical water exposure models. EPA's models are
based on extensive monitoring data and detailed information on soil
properties, crop characteristics, and weather patterns. (69 FR 30042,
30058-30065 (May 26, 2004)). These models calculate estimated
environmental concentrations of pesticides using laboratory data that
describe how fast the pesticide breaks down to other chemicals and how
it moves in the environment. These concentrations can be estimated
continuously over long periods of time, and for places that are of most
interest for any particular pesticide. Modeling is a useful tool for
characterizing vulnerable sites, and can be used to estimate peak
concentrations from infrequent, large storms.
    Typically EPA uses a two-tiered approach to modeling pesticide
concentrations in surface and ground water. The first tier model uses
high-end and worst-case assumptions as a screen to identify pesticides
that will not result in residues in water that pose a concern. If the
first tier model suggests that pesticide levels in water may be
unacceptably high, a more refined model is used as a second tier
assessment. Second tier models substitute more detailed information for
the high-end or worst-case assumptions used in first tier models. For
example, a second tier model may incorporate information on the maximum
percentage of acreage surrounding a drinking water reservoir that may
be devoted to agriculture instead of

assuming that 100 percent of the watershed is, in fact, farmland.
    iii. Residential exposures. Generally, in assessing residential
exposure to pesticides EPA relies on its Residential Standard Operating
Procedures (SOPs). (Ref. 3). The SOPs establish models for estimating
application and post-application exposures in a residential setting
where pesticide-specific monitoring data are not available. SOPs have
been developed for many common exposure scenarios including pesticide
treatment of lawns, garden plants, trees, swimming pools, pets, and
indoor surfaces including crack and crevice treatments. The SOPs are
based on existing monitoring and survey data including information on
activity patterns, particularly for children. Where available, EPA
relies on pesticide-specific data in estimating residential exposures.
    d. Risk characterization. The final step in the risk assessment is
risk characterization. In this step, EPA combines information from the
first three steps (hazard identification, level of concern/dose-
response analysis, and human exposure assessment) to quantitatively
estimate the risks posed by a pesticide. Separate characterizations of
risk are conducted for different durations of exposure. Additionally,
separate and, where appropriate, aggregate characterizations of risk
are conducted for the different routes of exposure (dietary and non-
dietary).
    For threshold dietary risks, EPA typically estimates risk by
expressing human exposure as a percentage of the RfD/PAD. Exposures
lower than 100 percent of the RfD/PAD are generally not of concern.
Under current procedures, EPA aggregates pesticide exposure from food
and drinking water prior to comparing exposure to the RfD/PAD.
    Prior to developing appropriate modeling techniques for combining
pesticide exposures from food and drinking water, EPA evaluated
aggregate dietary exposure and risk in two separate steps. (Ref. 4 at
3-5). First, EPA would compare pesticide exposure from food to the safe
level of exposure (i.e., the RfD/PAD). If pesticide exposure from food
was less than 100 percent of the RfD/PAD, then EPA would calculate what
was called a Drinking Water Level of Comparison (DWLOC) and compare the
pesticide exposure concentration in water to the DWLOC. The DWLOC
represented the maximum safe concentration of pesticide residue that
could be present in drinking water taking into account the level of
pesticide exposure from food. The DWLOC was calculated by subtracting
pesticide exposure in food from the RfD/PAD and dividing that amount by
the maximum water consumption level. So long as the actual pesticide
concentration in drinking water was below the DWLOC, aggregate exposure
to the pesticide (exposure from food and water) was generally regarded
as safe. A numerical example may help explicate this procedure. (To
simplify the example, units of exposure are expressed in terms of
milligrams of pesticide per day (mg/day) instead of the more standard
milligrams of pesticide per kilogram of human body weight per day (mg/
kg/day).) Suppose the safe level of exposure to a pesticide (i.e., the
RfD/PAD) is 10 mg/day and consumption of food results in exposure to
residues of this pesticide at a level of 2 mg/day. Under these facts,
exposure to the pesticide from food represents 20 percent of the RfD/
PAD. If it is assumed that a person drinks 2 liters of water per day,
the DWLOC can be calculated by subtracting pesticide exposure from food
from the RfD/PAD (10 mg/day - 2 mg/day = 8 mg/day) and dividing by 2
liters. The resulting DWLOC of 4 mg/liter is the maximum safe
concentration of pesticide in drinking water. It follows that so long
as actual water concentrations of the pesticide do not exceed 4 mg/
liter, EPA can conclude that aggregate dietary exposure to the
pesticide from food and water do not exceed the RfD/PAD. If the actual
level of the pesticide residue in drinking water were 0.1 mg/liter,
then the pesticide concentration in drinking water would be 2.5 percent
of the allowable amount or DWLOC ((0.1 mg/liter / 4 mg/liter) x 100
percent) and would represent 2 percent of the RfD/PAD (((2 liters/day
x0.1 mg/liter) / 10 mg/kg/day) x 100 percent).
    2. EPA policy on the children's safety factor. As the brief summary
of EPA's risk assessment practice in this unit indicates, the use of
safety factors plays a critical role in the process. This is true for
the use of traditional 10X safety factors to account for potential
differences between animals and humans when relying on studies in
animals (inter-species safety factor) and potential differences among
humans (intra-species safety factor) as well as the use of the FQPA's
additional 10X children's safety factor.
    In applying the children's safety factor provision, EPA has
interpreted it as imposing a presumption in favor of applying an
additional 10X safety factor. (Ref. 2 at 4, 11). Thus, EPA generally
refers to the additional 10X factor as a presumptive or default 10X
factor. EPA has also made clear, however, that this presumption or
default in favor of the additional 10X is only a presumption. The
presumption can be overcome if reliable data demonstrate that a
different factor is safe for children. (Id.). In determining whether a
different factor is safe for children, EPA focuses on the three factors
listed in section 408(b)(2)(C) - the completeness of the toxicity
database, the completeness of the exposure database, and potential pre-
and post-natal toxicity. In examining these factors, EPA strives to
make sure that its choice of a safety factor, based on a weight-of-the-
evidence evaluation, does not understate the risk to children. (Id. at
24-25, 35).

IV. Challenged Tolerance Regulations for Mepiquat and Acetamiprid

A. Mepiquat

    1. In general. NRDC challenged a January 23, 2002 action
establishing tolerances for mepiquat on cotton gin byproducts and meat
byproducts of cattle, goats, hogs, horses and sheep. (67 FR 3113
(January, 23, 2002)). Given mepiquat's exposure pattern and
toxicological characteristics, EPA determined that mepiquat potentially
presented acute and chronic risks and EPA quantitatively assessed these
risks in making its safety determination. (67 FR at 3116). All of these
risks were found to be below the Agency's level of concern. (Id.).
    2. Children's safety factor determination. For mepiquat, EPA
identified increased uncertainty regarding effects on the young because
a developmental neurotoxicity (DNT) study was outstanding. (65 FR 1790,
1794 (January 12, 2000)). EPA concluded, however, that this uncertainty
was offset by a number of factors and removed the additional 10X safety
factor. First, EPA noted that no increased sensitivity in young animals
was observed in the pre- and post-natal studies with mepiquat. (65 FR
at 1794). In fact, in two out of the three studies involving young
animals no effects were seen in the offspring at all (developmental
study in rats; 2-generation reproduction study in rats). (Ref. 5 at 2).
Further, even in the third study concerning pre- and post-natal effects
there were reasons to accord reduced weight to the pre- or post-natal
effects observed given that effects were seen in the offspring and the
parents only at the highest dose tested (developmental study in
rabbits). (Id.). Second, although neurotoxic behavioral effects in
adult animals were found (triggering the DNT study requirement), there
was no evidence reflecting special

concern for developing fetuses or the young such as ``neuropathy in
adult animals; [central nervous system] malformations following
prenatal exposure; brain weight or sexual maturation changes in
offspring; and/or functional changes in offspring.'' (65 FR at 1794).
Finally, exposure estimates were found not to understate exposure given
that the estimates for food were ``Tier 1'' conservative assumptions
which would not underestimate exposure. (65 FR at 1793).

B. Acetamiprid

    1. In general. NRDC challenged a March 27, 2002, action
establishing tolerances for acetamiprid on dried citrus pulp, the
citrus fruit crop group, cotton gin byproducts, cotton undelinted seed,
grapes, the fruiting vegetable crop group, the leafy brassica vegetable
crop group, the leafy vegetable crop group, the pome fruit group,
tomato paste, as well as various animal products. (67 FR 14649 (March
27, 2002)). Given acetamiprid 's exposure pattern and toxicological
characteristics, EPA determined that acetamiprid potentially presented
acute, chronic, short-term, and intermediate-term risks and EPA
quantitatively assessed these risks in making its safety determination.
(Id. at 14656-14657). All of these risks were found to be below the
Agency's level of concern. (Id.).
    2. Children's safety factor determination. For acetamiprid, two
factors increased uncertainty or raised concern about the impacts on
children: That a DNT study was outstanding; and that increased
sensitivity in the young was observed in the 2-generation reproduction
study. (67 FR at 14655). EPA concluded, however, that these concerns
were offset by other considerations. First, the DNT study had been
required based only on neurotoxic behavioral effects seen in adults,
and not out of a special concern for developing fetuses or the young.
Second, the increased sensitivity observed in the 2-generation
reproduction study was only qualitative. Sensitivity is considered to
be qualitative only when effects occur at the same dose levels in adult
and juvenile animals but the effects in the juvenile animals are
qualitatively more severe than the effects in the adults. Third, the
other two studies investigating pre- or post-natal effects in the young
showed either no adverse effects even at levels that showed toxicity in
parental animals, or adverse effects of the same qualitative nature at
the same dose in parental and young animals. (Id.). Finally, exposure
estimates were judged unlikely to underestimate exposure, especially
because ``highly conservative'' ``Tier 1'' assumptions were used for
exposure in food. (67 FR at 14654). Weighing all of these
considerations EPA retained a 3X additional safety factor to address
chronic risks and waived the factor entirely for acute risks. No
additional factor was deemed necessary as to acute risks because
qualitative sensitivity in the young was only observed in a study
involving chronic dosing and as to an adverse effect related to repeat
dosing.

V. Subsequent Tolerance Actions for Mepiquat and Acetamiprid

A. Mepiquat

    Since January, 2002, EPA has received no further tolerance
petitions concerning mepiquat and EPA has undertaken no tolerance
rulemakings for mepiquat.

B. Acetamiprid

    Since March, 2002, EPA has received several petitions for
additional acetamiprid tolerances and has established tolerance
regulations on four occasions. Because section 408 requires EPA in
setting a pesticide tolerance to consider aggregate exposure to the
pesticide, ``including dietary exposure under . . . all other
tolerances for the pesticide chemical residue,'' in each of these
subsequent actions EPA took into account exposure to acetamiprid under
challenged tolerances established on March 27, 2002 (dried citrus pulp,
the citrus fruit crop group, cotton gin byproducts, cotton undelinted
seed, grapes, the fruiting vegetable crop group, the leafy brassica
vegetable crop group, the leafy vegetable crop group, the pome fruit
group, tomato paste, as well as various animal products). Each of the
subsequent tolerance rulemakings is described below.
    1. 2005 - Tolerances for tuberous and corm vegetables. On April 13,
2005, EPA established tolerances for acetamiprid on tuberous and corm
vegetables. (70 FR 19283 (April 13, 2005)). EPA concluded that the
additional exposure from these new tolerances, when aggregated with
exposure under existing tolerances, was safe.
    With regard the children's safety factor, EPA relied on a revised
analysis taking into account its Children's Safety Factor Policy, which
had not been released at the time of the risk assessment for the NRDC-
challenged tolerances and recently-submitted data on acetamiprid and
other similar pesticides. EPA concluded that the presumptive 10X
children's safety factor could be removed entirely. (70 FR at 19289).
Although increased sensitivity to the young had been observed in the 2-
generation rat study and a recently-submitted DNT study had not been
fully evaluated, EPA determined that other factors outweighed these
concerns. As to the increased sensitivity, EPA noted that: ``i. There
is a clear NOAEL for [the effects seen in] the offspring, and; ii.
These effects occurred in the presence of parental toxicity and only at
the highest dose tested.'' (Id.). Further, EPA noted that either the
NOAEL for the offspring in the reproduction study or some lower NOAEL
was used in each risk assessment for acetamiprid. That meant the
standard 10X factor to account for intra-human variability (in addition
to the 10X factor for inter-species variability) was applied to the
clearly-defined NOAEL for offspring effects or to some lower NOAEL. As
to the recently-submitted DNT, EPA stated that a ``preliminary review
of the study indicates the results are not likely to have a significant
impact on risks for the currently proposed use, or on existing uses of
acetamiprid . . . [and that] developmental neurotoxicity data received
and reviewed for other compounds in this chemical class indicate that
the results of the required DNT will not likely impact the regulatory
doses selected for the proposed uses of acetamiprid.'' (Id.). Finally,
EPA relied upon the fact that the exposure assessment for acetamiprid
was conservative in that it assumed all foods with tolerances are
treated with acetamiprid and bear tolerance-level residues (i.e., a
Tier 1 assessment).
    2. 2007 - Tolerances for almond hulls, et al. On November 28, 2007,
EPA established tolerances for acetamiprid on almond, hulls; fruit,
stone, group 12, except plum, prune; nut, tree, group 14; pea and bean,
succulent shelled, subgroup 6B; pistachio; plum, prune, dried; plum,
prune, fresh; vegetable, cucurbit, group 9; and vegetable, legume,
edible podded, subgroup 6A. (72 FR 67256 (November 28, 2007)). EPA
concluded that the additional exposure from these new tolerances, when
aggregated with exposure under existing tolerances, was safe.
    With regard to the children's safety factor, EPA relied on a
revised analysis taking into account its now-completed review of the
acetamiprid DNT study. EPA again concluded that the presumptive 10X
children's safety factor could be removed entirely. Although
qualitatively increased sensitivity to the young had been observed in
the 2-generation rat study and the DNT study, EPA ``characterized the
degree of concern for the effects observed in the acetamiprid DNT and
the 2-generation

reproduction study as low, noting that there is a clear NOAEL for the
offspring effects in both studies, the toxicology database is complete,
and regulatory doses [Points of Departure] were selected to be
protective of potential offspring effects in both the DNT and the 2-
generation study.'' (72 FR at 67260). Specifically, as to the last
consideration, EPA cited the fact that the Points of Departure for
calculating the RfD/PADs were at or below the clearly-defined NOAELs
from the 2-generation reproduction and DNT studies. That means that at
least a 100-fold margin of safety was being provided with respect to
the clearly-defined NOAELs from these studies. Further, even though the
exposure assessment was more refined than in prior acetamiprid
tolerance actions, EPA still relied on conservative values from field
trial studies and drinking water modeling.
    3. 2008 - Tolerances for bushberries, et al. On January 16, 2008,
EPA established tolerances for acetamiprid on the bushberry subgroup
13-07B; the caneberry subgroup 13-07A; the low growing berry subgroup
13-07G; the onion, bulb, subgroup 3-07A; and the onion, green, subgroup
3-07B. (73 FR 2809 (January 16, 2008)). EPA concluded that the
additional exposure from these new tolerances, when aggregated with
exposure under existing tolerances, was safe. EPA relied upon its
November 28, 2007 acetamiprid rulemaking to make its safety
determination, noting that the tolerances in this action had been
included in the risk assessment performed to support the 2007 action.
(73 FR at 2811).
    4. 2010 - Tolerances for small vine climbing fruit, et al. On
February 10, 2010, EPA established tolerances for acetamiprid on the
small vine climbing fruit, except fuzzy kiwifruit, subgroup 13-07F; and
tea, dried. (75 FR 6576 (February 10, 2010)). EPA concluded that the
additional exposure from these new tolerances, when aggregated with
exposure under existing tolerances, was safe. With regard the
children's safety factor, EPA concluded that the presumptive 10X
children's safety factor could be removed entirely based on the
rationale in the 2007 acetamiprid rulemaking. (75 FR at 6581).

VI. Summary of NRDC Objections, Administrative Review of the
Objections, and Judicial Review of EPA's Order Denying the Objections

A. NRDC's Objections

    On four occasions in the first half of 2002, the NRDC and various
other parties filed objections with EPA to final rules under FFDCA
section establishing pesticide tolerances for various pesticides. (69
FR 30042 (May 26, 2004)). The objections applied to 14 pesticides and
112 separate pesticide tolerances. The challenged tolerances included
the tolerances for mepiquat and acetamiprid addressed in today's order.
The objections to the mepiquat tolerances were filed on March 19, 2002,
and grouped with objections to tolerances for imidacloprid, bifenazate,
zeta-cypermethrin, and diflubenzuron. The objections to the acetamiprid
tolerances were filed on May 21, 2002, and grouped with objections to
tolerances for isoxadifen-ethyl, propiconazole, fenhexamid, and
fluazinam.
    Although NRDC's petitions raised dozens of issues, most of the
issues related to two main claims: That EPA had not properly applied
the additional 10X safety factor for the protection of infants and
children in section 408(b)(2)(C); and that EPA had not accurately
assessed the aggregate exposure of farm children to pesticide residues.
Many of the issues were not fact-specific to the challenged tolerances
but rather represented a generic challenge to EPA's implementation of
the FQPA.
    Two specific issues raised by NRDC are worthy of greater
description because they later figured in the judicial review of EPA's
disposition of the objections. First, as to several of the pesticides,
NRDC argued that EPA had unlawfully removed the 10X children's safety
factor because EPA had required that a DNT study be submitted for the
pesticides but such study had not yet been completed. NRDC framed the
issue as follows:
     EPA has required DNT tests for imidacloprid, mepiquat, and zeta-
cypermethrin, and these studies have not been conducted. EPA, therefore
cannot argue that ``reliable data'' justifies removing the statutory
presumptive 10X FQPA safety factor.

(Ref. 6 at 9). Second, NRDC argued that EPA could not lawfully remove
the children's safety factor as to all of the challenged pesticides
because EPA relied on a drinking water exposure models to estimate
pesticide exposure levels in water instead of ``collect[ing] pesticide-
specific data on water-based exposure.'' (Ref. 6 at 6; Ref. 7 at 5).
According to NRDC, drinking water models, as a definitional matter,
could not supply the ``reliable data'' needed to choose a children's
safety factor differing from the presumptive value. (Ref. 6 at 6; Ref.
7 at 5-6).

B. EPA's Denial of the Objections

    EPA denied NRDC's objections in two separate orders. The first was
issued on May 26, 2004, and addressed only the tolerances for
imidacloprid. (69 FR 30042 (May 26, 2004). The second was released on
August 10, 2005 and addressed the tolerances for the remaining 14
pesticides. (70 FR 46706 (August 10, 2005)). The second order relied
heavily on the imidacloprid order because, in the process of resolving
the claims pertaining to imidacloprid, EPA resolved many of NRDC's
generic attacks on EPA's interpretation of the FQPA.
    As to the DNT study and the children's safety factor, EPA rejected
``NRDC's contention that an EPA finding that a DNT study is needed in
evaluating the risks posed by the pesticide is outcome-determinative as
regards to retaining the children's safety factor until such time as
the DNT study is submitted and reviewed.'' (70 FR at 46724). EPA
carefully reviewed all of the evidence cited by NRDC regarding the DNT
study and concluded that NRDC had not shown that the DNT was so
critical to the protection of children that in the absence of that
study EPA was conclusively precluded from exercising its statutory
authority to make a case-by-case determination regarding the
appropriate children's safety factor. EPA specifically did not address
the factual considerations relating to its individual children's safety
factor decisions as to mepiquat and acetamiprid (and the other
pesticides), noting that ``NRDC has offered no pesticide-specific
arguments as to the pesticides in this proceeding as to why the absence
of a DNT study requires the retention of the default 10X additional
factor.'' (Id.)
    With regard to whether reliance on drinking water models precluded
lowering of the children's safety factor, EPA exhaustively reviewed the
underlying factual basis for its models, the scientific peer review
they had received, and how the models had worked in practice. EPA
concluded that ``the models are based on reliable data and will produce
estimates that are unlikely to underestimate exposure to pesticides in
drinking water.'' (Id. at 46726). Accordingly, NRDC's claim that only
actual pesticide-specific water monitoring data could provide
``reliable data'' on the levels of pesticides in drinking water was
rejected.

C. Judicial Review

    1. NRDC's Petition for Review. In August, 2005, NRDC and the
Northwest Coalition for Alternatives to Pesticides (NCAP) filed
petitions for review of EPA's August 10, 2005 order. No challenge had
been filed to the May 26, 2004 order. The petitions were filed in the
Second and Ninth Circuits and the matter was assigned to the Ninth
Circuit. The consolidated petitions sought review as to EPA's denial of
NRDC's objections as they pertained to the tolerances of the following
seven pesticides: acetamiprid, fenhexamid, halosulfuron-methyl,
isoxadifen-ethyl, mepiquat, pymetrozine, and zeta-cypermethrin.
    NRDC/NCAP's brief argued that EPA had unlawfully removed or lowered
the children's safety factor as to these seven pesticides and that
EPA's establishment of tolerances for the seven pesticides was
arbitrary and capricious. (Ref. 8). As to the contentions regarding the
children's safety factor, NRDC/NCAP made several independent claims as
to why EPA's action was unlawful. These claims were:
     i. As to acetamiprid, halosulfuron-methyl, mepiquat, pymetrozine,
and zeta-cypermethrin, EPA had no discretion to alter the children's
safety factor because it had determined that a DNT study was
specifically needed to address concerns regarding these pesticides (DNT
studies were not required on fenhexamid and isoxadifen-ethyl);
     ii. EPA's decision on the children's safety factor could not be
upheld because EPA provided ``no pesticide-specific response to NRDC's
objections with respect to the missing DNT studies, and does not offer
any explanation or justification for the agency's departure from the
tenfold children's safety factor for these five pesticides;''
     iii. EPA lacked reliable data on pesticide exposure levels in
drinking water for each of the pesticides and such data are necessary
to justify altering the children's safety factor; and
     iv. EPA must retain the children's safety factor for each of the
pesticides because data showed that they resulted in pre- or post-natal
toxicity.

    NRDC argued EPA's decision was arbitrary and capricious because EPA
determined that additional data were needed on the pesticides but EPA
had not waited for submission of that data before establishing the
pesticide tolerances and because EPA had not offered a sufficient
explanation of its decisions on the children's safety factor.
    2. The Ninth Circuit's decision. On September 19, 2008, the Ninth
Circuit unanimously determined that:
     i. It was not arbitrary and capricious for EPA to have established
the tolerances for acetamiprid, mepiquat, and pymetrozine without
waiting for DNT studies for these pesticides;
     ii. EPA had offered a reasoned explanation for why, as a general
matter, the children's safety factor could be reduced in the absence of
a DNT study; and
     iii. It was reasonable for EPA to rely on drinking water models in
estimating pesticide levels in water in making children's safety factor
determinations.

(NCAP v. EPA, 544 F.3d 1043, 1049-1051 (9th Cir. 2008)). Additionally,
by a 2-to-1 vote, the court remanded to EPA its decision on the
children's safety factor for acetamiprid, mepiquat, and pymetrozine.
The majority found that EPA's order on NRDC's objections had not
adequately explained the pesticide-specific reasons for removing or
reducing the children's safety factor as to these pesticides in the
absence of a required DNT study. (Id. at 1052). Without elaborating,
the court dismissed all other issues raised by NRDC/NCAP. (Id. at
1053).
    Although NRDC/NCAP's petition for review concerned seven
pesticides, the court only remanded to EPA the tolerance decisions on
acetamiprid, mepiquat, and pymetrozine. The petition for review was
denied as to the other four pesticides because the remand only
pertained to pesticides for which there was a question concerning EPA's
pesticide-specific choice of a children's safety factor in the absence
of a required DNT study. As to the fenhexamid and isoxadifen-ethyl
tolerances, a DNT study had not been required by EPA. For halosulfuron-
methyl and zeta-cypermethrin tolerances a DNT study had been required
and had not been submitted at the time of the tolerance action;
however, by the time of the oral argument, the circumstances had
changed. As to zeta-cypermethrin, the DNT study had been submitted and
reviewed by EPA and EPA had established further tolerances in reliance
on the DNT study. As to halosulfuron-methyl, EPA had withdrawn the
requirement for a DNT. EPA notified the court that there was no longer
a live controversy as to the tolerances for halosulfuron-methyl and
zeta-cypermethrin and NRDC/NCAP and the court agreed the petition was
moot as to these pesticides. (544 F.3d at 1048 n.4; Refs. 9, 10).

VII. Revised Order on Remand

    On remand, EPA has determined that NRDC's objections should again
be denied. NRDC's objections to the acetamiprid tolerances are now moot
for the same reasons that the objections to the zeta-cypermethrin and
halosulfuron-methyl tolerances were found to be moot. The objections to
the mepiquat tolerance are denied because all issues which could have
affected EPA's decision on that tolerance have been resolved by the
Ninth Circuit.

A. Acetamiprid and Mepiquat

    Like zeta-cypermethrin, EPA has received a DNT study for
acetamiprid and relied on that study in establishing additional
tolerances for acetamiprid. (72 FR 67256 (November 28, 2007); 73 FR
2809 (January 16, 2008); 75 FR 6576 (February 10, 2010)). In
establishing new tolerances for acetamiprid, EPA concluded that
aggregate exposure under the new tolerances as well as all existing
tolerances (including the ones challenged in NRDC's 2002 objections) is
safe. No objections to these new acetamiprid tolerances were filed
within the 60 day statutory timeframe for objections. Accordingly, just
as the Ninth Circuit concluded (and NRDC agreed) that there was no live
controversy concerning the zeta-cypermethrin tolerances and ``EPA's
[alleged] failure to explain why it had reliable data in the absence of
[a DNT study],'' (544 F.3d at 1408), there is no live controversy as to
whether EPA provided an adequate explanation for its now-superseded
tolerance decision that it had reliable data to reduce or remove the
children's safety factor for acetamiprid in the absence of a DNT study.

B. Mepiquat

    EPA has not taken regulatory action as to mepiquat subsequent to
the challenged tolerance action and, thus, NRDC's challenge to the
mepiquat tolerance is not moot. Nonetheless, due to the circumstances
of the mepiquat tolerance, EPA does not need to address the merits of
the only remaining objection before EPA -- that EPA lacks reliable data
justifying removal of the children's safety factor for mepiquat. As EPA
ruled in a prior order, it may ``refuse to adjudicate the merits of
claims where it can be shown that the claims - even if true - do not
justify the relief requested.'' (72 FR 39318, 39323-

39324 (July 18, 2007)). That principle applies to the mepiquat
objection because, as explained below, even if EPA retains the 10X
children's safety it would not change EPA's safety determination. Thus,
NRDC's objection to the removal of the children's safety factor, even
if upheld, would not support the relief it requested - ``that EPA
refrain from establishing the new tolerances for . . .mepiquat . . .
until the pesticide tolerances have been assessed and determined to be
safe[,] consistent with the requirements of the FQPA.'' (Ref. 6 at 22).
    An EPA decision to retain the 10X children's safety factor has the
effect of decreasing the ``safe dose'' or RfD/PAD by a factor of 10.
Thus, if prior to application of the 10X children's safety factor, the
level of exposure from a particular pesticide constituted 5 percent of
the RfD/PAD, after application of the safety factor the level of
exposure to the pesticide would rise by a factor of 10 to 50 percent of
the RfD/PAD. Similarly, a pesticide which had an exposure level at 50
percent of the RfD/PAD before applying the 10X children's safety
factor, would have an exposure level of 500 percent of the RfD/PAD
after application of the factor. Only in the latter case, would
retention of the children's safety factor raise a safety concern. Thus,
for pesticides with sufficiently low risks, the decision on retention
or removal of the children's safety factor is not outcome-determinative
as to EPA's safety finding. (71 FR 43906, 43916-43917 (August 2,
2006)).
    Mepiquat is one of those low risk pesticides. As EPA noted in the
challenged tolerance document, acute exposure to mepiquat from residues
in food equaled 1.5 percent of the acute RfD/PAD and acute exposure to
mepiquat in water was an infinitesimal. (67 FR at 3115; 65 FR 1790,
1793 (January 12, 2000) (acute exposure to mepiquat in drinking water
is 0.031 percent of the allowable amount - i.e. the acute DWLOC was
6,000 ppb and estimated acute exposure level was 1.9 ppb); see Unit
III.B.1.d. (explaining how allowable amounts of pesticide residues in
drinking water were calculated)). Similarly, chronic exposure to
mepiquat from residues in food equaled 0.3 percent of the chronic RfD/
PAD and chronic exposure to mepiquat in water was also infinitesimal.
(67 FR at 3115; 65 FR at 1794 (chronic exposure to mepiquat in drinking
water is 0.018 percent of the allowable amount -- i.e. the chronic
DWLOC was 6,000 ppb and the estimated chronic exposure level was 1.1
ppb)). Retention of the 10X children's safety would raise the
percentage exposure to approximately 15 percent of the acute RfD/PAD
and 3 percent of the chronic RfD/PAD. Because these exposure levels
would still be well below the applicable RfD/PADs, they would not
change EPA's determination that the petitioned-for mepiquat tolerances
are safe. Accordingly, because NRDC's objection to removal of the
children's safety factor does not justify its request for EPA to
refrain from establishing the mepiquat tolerances, it is denied.

VIII. Regulatory Assessment Requirements

    As indicated previously, this action announces the Agency's final
order regarding objections filed under section 408 of FFDCA. The FFDCA
specifically directs that objections be resolved by ``order,'' and thus
this action is an adjudication and not a rule. (21 U.S.C.
346a(g)(2)(C)). The regulatory assessment requirements imposed on
rulemaking do not, therefore, apply to this action.

IX. Submission to Congress and the Comptroller General

    The Congressional Review Act, (5 U.S.C. 801 et seq.), as added by
the Small Business Regulatory Enforcement Fairness Act of 1996, does
not apply because this action is not a rule for purposes of 5 U.S.C.
804(3).

X. References

    1. USEPA, A User's Guide to Available EPA Information on Assessing
Exposure to Pesticides in Food (June 21, 2000).
    2. Office of Pesticide Programs, USEPA, Office of Pesticide
Programs' Policy on the Determination of the Appropriate FQPA Safety
Factor(s) For Use in the Tolerance Setting Process (February 28, 2002).
    3. Office of Pesticide Programs, USEPA, Standard Operating
Procedures (SOPs) for Residential Exposure Assessments (Draft December
19, 1997).
    4. Office of Pesticide Programs, USEPA, ``Estimating the Drinking
Water Component of a Dietary Exposure Assessment'' (November 2, 1999).
    5. Office of Prevention, Pesticides and Toxic Substances, USEPA,
Memorandum from Brenda Tarplee to Margarita Collantes, ``Mepiquat
Choloride - Report of the FQPA Safety Factor Committee'' (November 1,
1999).
    6. NRDC, Objections to the Establishment of Tolerances for
Pesticide Chemical Residues: Imidacloprid, Mepiquat, Bifenazate, Zeta-
cypermethrin, and Diflubenzuron Tolerances (filed March 19, 2002).
    7. NRDC, Objections to the Establishment of Tolerances for
Pesticide Chemical Residues: Isoxadifen-ethyl, Acetamiprid,
Propiconazole, Furilazole, Fenhexamid, and Fluazinam Tolerances (filed
May 20, 2002).
    8. Petitioners' Brief, NCAP v. EPA, Case Nos. 75255, 76807 (9th
Cir. March 6, 2006).
    9. Letter from Kent E. Hanson, U.S. Department of Justice to Cathy
Catterson, Clerk of the Court, United States Court of Appeals, Ninth
Circuit, Notice of Supplemental Authority in Northwest Coalition for
Alternatives to Pesticides v. EPA, Nos. 05-75255 & 05-76807 (May 25,
2007).
    10. Letter from Aaron Colangelo, U.S. Department of Justice to
Cathy Catterson, Clerk of the Court, United States Court of Appeals,
Ninth Circuit, Response to EPA's Notice of Supplemental Authority in
Northwest Coalition for Alternatives to Pesticides v. EPA, Nos. 05-
75255 & 05-76807 (May 29, 2007).

List of Subjects in 40 CFR Part 180

    Environmental protection, Administrative practice and procedure,
Agricultural commodities, Pesticides and pests, Reporting and
recordkeeping requirements.

    Dated: July 27, 2010.
Steven Bradbury,
Director, Office of Pesticide Programs.

 [FR Doc. 2010-19431 Filed 8-5-10; 8:45 am]
BILLING CODE 6560-50-S


[Federal Register Volume 77, Number 234 (Wednesday, December 5, 2012)]
[Notices]
[Pages 72426-72428]
[FR Doc No: 2012-29313]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-68318; File No. SR-ISE-2012-90]

Self-Regulatory Organizations; International Securities Exchange,
LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule
Change Regarding the Short Term Option Series Program

November 29, 2012.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934
(``Act'') \1\ and Rule 19b-4 thereunder,\2\ notice is hereby given
that, on November 21, 2012, the International

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

    The Exchange proposes to amend its rules to expand the number of
expirations available under the Short Term Option Series Program
(``STOS Program''), to allow for the Exchange to delist certain series
in the STOS that do not have open interest and to expand the number of
series in STOS under limited circumstances. The text of the proposed
rule change is available on the Exchange's Web site www.ise.com, at the
principal office of the Exchange, and at the Commission's Public
Reference Room.

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

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

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

1. Purpose
    The purpose of the proposal is to amend ISE rules to provide for
the ability to open up to five consecutive expirations under the Short
Term Option Series Program (``STOS Program'') for trading on the
Exchange, to allow for the Exchange to delist certain series in the
STOS that do not have open interest and to expand the number of series
in STOS under limited circumstances when there are no series at least
10% but not more than 30% away from the current price of the underlying
security.\3\
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    \3\ On July 12, 2005, the Commission approved the STOS Program
on a pilot basis. See Securities Exchange Act Release No. 52012
(July 12, 2005), 70 FR 41246 (July 19, 2005) (SR-ISE-2005-17). The
STOS Program was made permanent on July 1, 2010. See Securities
Exchange Act Release No. 62444 (July 2, 2010), 75 FR 39595 (July 9,
2010) (SR-ISE-2010-72).
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    This filing is based on filings previously submitted by NYSE Arca,
Inc. (``Arca'') and NYSE MKT LLC (``MKT''), which the Commission
recently approved.\4\
---------------------------------------------------------------------------

    \4\ See Securities Exchange Act Release Nos. 68190 (November 8,
2012)
    (SR-NYSEArca-2012-95); 68191 (November 8, 2012) (SR-NYSEMKT-
2012-42).
---------------------------------------------------------------------------

    Currently, the Exchange may select up to 30 currently listed option
classes on which STOS options may be opened in the STOS Program and the
Exchange may also match any option classes that are selected by other
securities exchanges that employ a similar program under their
respective rules.\5\ For each option class eligible for participation
in the STOS Program, the Exchange may open up to 30 Short Term Option
Series for each expiration date in that class.\6\ Under the current
rule, STOS options expire the following week.
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    \5\ See ISE Rule 504, Supplementary Material .02(a).
    \6\ See ISE Rule 504, Supplementary Material .02(c) and (d).
---------------------------------------------------------------------------

    This proposal seeks to allow the Exchange to open STOS option
series for up to five consecutive week expirations. The Exchange
intends to add a maximum of five consecutive week expirations under the
STOS Program, however it will not add a STOS expiration in the same
week that a monthly options series expires or, in the case of Quarterly
Option Series, on an expiration that coincides with an expiration of
Quarterly Option Series on the same class. In other words, the total
number of consecutive expirations will be five, including any existing
monthly or quarterly expirations.\7\ The Exchange notes that the STOS
Program has been well-received by market participants, in particular by
retail investors.\8\ The Exchange believes that the current proposed
revision to the STOS Program will permit the Exchange to meet increased
customer demand and provide market participants with the ability to
hedge in a greater number of option classes and series.
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    \7\ For example, if quarterly options expire week 1 and monthly
options expire week 3 from
    now, the proposal would allow the following expirations: week 1
quarterly, week 2 STOS, week 3 monthly, week 4 STOS, and week 5
STOS. If quarterly options expire week 3 and monthly options expire
week 5, the following expirations would be allowed: week 1 STOS,
week 2 STOS, week 3 quarterly, week 4 STOS, and week 5 monthly.
    \8\ Since the STOS Program has been adopted, it has seen rapid
acceptance among industry participants as evidenced by the expansion
of the number of classes eligible for the STOS Program. See
Securities Exchange Act Release No. 66432 (February 21, 2012), 77 FR
11614 (February 27, 2012 (SR-ISE-2012-08).
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    With regard to the impact of this proposal on system capacity, the
Exchange has analyzed its capacity and represents that it and the
Options Price Reporting Authority have the necessary systems capacity
to handle the potential additional traffic associated with trading of
an expanded number of expirations that participate in the STOS Program.
    In addition, the Exchange is proposing to add new language to
Supplementary Material .02 to ISE Rule 504 and Supplementary Material
.01 to ISE Rule 2009 to allow the Exchange, in the event that the
underlying security has moved such that there are no series that are at
least 10% above or below the current price of the underlying security,
to delist series with no open interest in both the call and the put
series having a: (i) strike higher than the highest strike price with
open interest in the put and/or call series for a given expiration
month; and (ii) strike lower than the lowest strike price with open
interest in the put and/or the call series for a given expiration
month, so as to list series that are at least 10% but not more than 30%
above or below the current price of the underlying security. Further,
in the event that all existing series have open interest and there are
no series at least 10% above or below the current price of the
underlying security, the Exchange may list additional series, in excess
of the 30 allowed currently under current ISE Rules 504 and 2009, that
are at least 10% and not more than 30% above or below the current price
of the underlying security. This change is being proposed
notwithstanding the current cap of 30 series per class under the STOS
Program.
    The Exchange believes that it is important to allow investors to
roll existing option positions and ensuring that there are always
series at least 10% but not more than 30% above or below the current
price of the underlying security will allow investors the flexibility
they need to roll existing positions.
2. Statutory Basis
    The Exchange believes the proposed rule change is consistent with
Section 6(b) of the Act \9\ in general, and furthers the objectives of
Section 6(b)(5),\10\ in particular, in that it is designed to promote
just and equitable principles of trade, remove impediments to and
perfect the mechanisms of a free and open market and a national market

system and, in general, to protect investors and the public interest.
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    \9\ 15 U.S.C. 78f (b).
    \10\ 15 U.S.C. 78f(b)(5).
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    The Exchange believes that expanding the STOS Program will result
in a continuing benefit to investors by giving them more flexibility to
closely tailor their investment decisions and hedging decisions in a
greater number of securities. The Exchange also believes that expanding
the STOS Program will provide the investing public and other market
participants with additional opportunities to hedge their investment
thus allowing these investors to better manage their risk exposure.
While the expansion of the STOS Program will generate additional quote
traffic, the Exchange does not believe that this increased traffic will
become unmanageable since the proposal remains limited to a fixed
number of expirations.
    The Exchange believes that the ability to delist certain series
with no open interest in both the call and the put series will benefit
investors by devoting the current cap in the number of series to those
series that are more closely tailored to the investment decisions and
hedging decisions of investors.

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

    ISE does not believe that this proposed rule change will impose any
burden on competition that is not necessary or appropriate in
furtherance of the purposes of the Exchange Act. In this regard and as
indicated above, the Exchange notes that the rule change is being
proposed as a competitive response to filings recently submitted by
Arca and MKT and approved by the Commission. ISE believes this proposed
rule change is necessary to permit fair competition among the options
exchanges and to establish uniform rules regarding the STOS Program.

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

    The Exchange has not solicited, and does not intend to solicit,
comments on this proposed rule change. The Exchange has not received
any unsolicited written comments from members or other interested
parties.

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

    Because the foregoing proposed rule change does not significantly
affect the protection of investors or the public interest, does not
impose any significant burden on competition, and, by its terms, does
not become operative for 30 days from the date on which it was filed,
or such shorter time as the Commission may designate, it has become
effective pursuant to Section 19(b)(3)(A) of the Act \11\ and Rule 19b-
4(f)(6) thereunder.\12\
---------------------------------------------------------------------------

    \11\ 15 U.S.C. 78s(b)(3)(A).
    \12\ 17 CFR 240.19b-4(f)(6). In addition, Rule 19b-4(f)(6)(iii)
requires the Exchange to give the Commission written notice of the
Exchange's intent to file the proposed rule change, along with a
brief description and text of the proposed rule change, at least
five business days prior to the date of filing of the proposed rule
change, or such shorter time as designated by the Commission. The
Exchange has satisfied this requirement.
---------------------------------------------------------------------------

    The Exchange has requested that the Commission waive the 30-day
operative delay. The Commission believes that waiver of the operative
delay is consistent with the protection of investors and the public
interest because the proposal is substantially similar to those of
other exchanges that have been approved by the Commission and permit
such exchanges to open up to five consecutive expirations under their
respective STOS Programs as well as allow for the exchanges to delist
any series in the STOS Programs that do not have open interest and
expand the number of series per class permitted in the STOS Programs
under limited circumstances.\13\ Therefore, the Commission designates
the proposal operative upon filing.\14\
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    \13\ See supra note 4.
    \14\ For purposes only of waiving the 30-day operative delay,
the Commission has considered the proposed rule's impact on
efficiency, competition, and capital formation. See 15 U.S.C.
78c(f).
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    At any time within 60 days of the filing of the proposed rule
change, the Commission summarily may temporarily suspend such rule
change if it appears to the Commission that such action is necessary or
appropriate in the public interest, for the protection of investors, or
otherwise in furtherance of the purposes of the Act.

IV. Solicitation of Comments

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

Electronic Comments

     Use the Commission's Internet comment form (http://www.sec.gov/rules/sro.shtml); or
     Send an email to<EMAIL_ADDRESS>Please
include File Number SR-ISE-2012-90 on the subject line.

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 SR-ISE-2012-90. This file
number should be included on the subject line if email is used. To help
the Commission process and review your comments more efficiently,
please use only one method. The Commission will post all comments on
the Commission's Internet Web site (http://www.sec.gov/rules/sro.shtml). Copies of the submission, all subsequent amendments, all
written statements with respect to the proposed rule change that are
filed with the Commission, and all written communications relating to
the proposed rule change between the Commission and any person, other
than those that may be withheld from the public in accordance with the
provisions of 5 U.S.C. 552, will be available for Web site viewing and
printing in the Commission's Public Reference Room, 100 F Street NE.,
Washington, DC 20549, on official business days between the hours of
10:00 a.m. and 3:00 p.m. Copies of the filing also will be available
for inspection and copying at the principal office of the Exchange. All
comments received will be posted without change; the Commission does
not edit personal identifying information from submissions. You should
submit only information that you wish to make available publicly. All
submissions should refer to File Number SR-ISE-2012-90 and should be
submitted on or before December 26, 2012.

    For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\15\
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    \15\ 17 CFR 200.30-3(a)(12).
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Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2012-29313 Filed 12-4-12; 8:45 am]
BILLING CODE 8011-01-P