[Federal Register: January 23, 2006 (Volume 71, Number 14)]
[Notices]
[Page 3586-3595]
[DOCID:fr23ja06-107]

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

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-53126; File No. SR-NYSE-2005-93]

Self-Regulatory Organizations; New York Stock Exchange, Inc;
Notice of Filing of Proposed Rule Change to Rule 431 (``Margin
Requirements'') and Rule 726 (``Delivery of Options Disclosure Document
and Prospectus'') To Expand the Products Eligible for Customer
Portfolio Margining and Cross-Margining

January 13, 2006.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934
(the ``Exchange Act''),\1\ and Rule 19b-4 thereunder,\2\ notice is
hereby given that on December 29, 2005, the New York Stock Exchange,
Inc. (``NYSE'' or the ``Exchange'') filed with the Securities and
Exchange Commission (the ``Commission'') the proposed rule change as
described in Items I, II, and III 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.
---------------------------------------------------------------------------

    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
---------------------------------------------------------------------------

I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change

    The NYSE is filing with the Commission proposed amendments to NYSE
Rule 431 (``Margin Requirements'') that would expand the scope of
products that are eligible for treatment as part of the Commission's
approved Portfolio Margin Pilot Program (the ``Pilot'').\3\ Amendments
to Rule 726 (``Options Disclosure Document'') also are proposed to
include the Commission approved products on the disclosure document
required to be furnished to customers pursuant to this rule. The text
of the proposed rule change is below. Additions are in italics.
Deletions are in brackets.
---------------------------------------------------------------------------

    \3\ See Securities Exchange Act Release No. 52031 (July 14,
2005), 70 FR 42130 (July 21, 2005), (SR-NYSE-2002-19). On July 14,
2005, the Commission approved on a Pilot Basis expiring July 31,
2007, amendments to Exchange Rule 431 to permit the use of a
prescribed risk-based margin requirement (``portfolio margin'') for
certain specified products as an alternative to the strategy based
margin requirements currently required in section (a) through (f) of
the Rule. Amendments to Rule 726 were also approved to require
disclosure to, and written acknowledgement from, customers in
connection with the use of portfolio margin. See NYSE Information
Memo 05-56, dated August 18, 2005 for additional information.
---------------------------------------------------------------------------

* * * * *
Margin Requirements
    Rule 431. (a) through (f) unchanged.

Portfolio Margin and Cross-Margin [for Index Options]

    (g) As an alternative to the [``strategy'' based] ``strategy-
based'' margin requirements set forth in sections [paragraphs] (a)
through (f) of this Rule, member organizations may elect to apply the
portfolio margin requirements set forth in this section (g) to [margin
for] (1) listed, broad-based U.S. index options, index warrants and
underlying instruments and (2) listed security futures contracts \4\
and listed single stock options, (See section (g)(6)(C)(1)). [(as
defined below) in accordance with the portfolio margin requirements set
forth in this Rule.]
---------------------------------------------------------------------------

    \4\ For purposes of this section of the Rule, the term
``security future'' utilizes the definition at section 3(a)(55) of
the Exchange Act, excluding narrow-based security indices.
---------------------------------------------------------------------------

    In addition, member organizations, provided they are a Futures
Commission Merchant (``FCM'') and are either a clearing member of a
futures clearing organization or have an affiliate that is a clearing
member of a futures clearing organization, are permitted under this
section (g) to combine an eligible participant's [a customer's] related
instruments [(] as defined in section (g)(2)(C), [below) and] with
listed, broad-based U.S. index options, index warrants and underlying
instruments and compute a margin requirement for such combined products
[(``cross margin'')] on a portfolio margin basis[.](``cross-margin'').
Member organizations must confine cross-margin positions to a portfolio
margin account dedicated exclusively to cross-margining.
    The portfolio margin and cross-margining provisions of this Rule
shall not apply to Individual Retirement Accounts (``IRAs'').
    (1) Member organizations must [will be expected to] monitor the
risk of portfolio margin accounts and maintain a written risk analysis
methodology for assessing the potential risk to the member
organization's capital over a specified range of possible market
movements of positions maintained in such accounts. The risk analysis
methodology shall specify the computations to be made, the frequency of
computations, the records to be reviewed and maintained, and the
person(s) [position(s)] within the organization responsible for the
risk function. This risk analysis methodology shall be made available
to the Exchange upon request. In performing the risk analysis of
portfolio margin accounts required by this Rule, each member
organization shall include the following in the written risk analysis
methodology:
    (A) Procedures and guidelines for the determination, review and
approval of credit limits to each eligible participant, [customer,] and
across all eligible participants, [customers,] utilizing a portfolio
margin account.
    (B) Procedures and guidelines for monitoring credit risk exposure
to the member organization, including intra-day credit risk, related to
portfolio margin accounts.
    (C) Procedures and guidelines for the use of stress testing of
portfolio margin accounts in order to monitor market risk exposure from
individual accounts and in the aggregate.
    (D) Procedures providing for the regular review and testing of
these risk analysis procedures by an independent unit such as internal
audit or other comparable group.
    (2) Definitions.--For purposes of this section [paragraph] (g), the
following terms shall have the meanings specified below:
    (A) The term ``listed option'' [shall] means any option traded on a
registered national securities exchange or

automated facility of a registered national securities association.
    (B) [(F)] The term ``underlying instrument'' means long and short
positions in an exchange traded fund or other fund product registered
under the Investment Company Act of 1940, that holds the same
securities, and in the same proportion, as contained in a broad-based
index on which options are listed. The term ``underlying instrument''
shall not be deemed to include[,] futures contracts, options on futures
contracts, underlying stock baskets, or unlisted instruments.
    (C) [(E]) The term ``related instrument'' within an option class or
product group means futures contracts and options on futures contracts
covering the same underlying instrument.
    (D) [(B)] The term ``options class'' refers to all options
contracts covering the same underlying instrument.
    (E) [(C)] The term ``portfolio'' means any eligible product, as
defined in section (g)(6)(C)(1), [options of the same options class]
grouped with their underlying instruments and related instruments.
    (F) [(D)] The term ``option series'' relates to listed options and
means all option contracts of the same type (either a call or a put)
and exercise style, covering the same underlying instrument with the
same exercise price, expiration date, and number of underlying units.
    (G) The term ``product group'' means two or more portfolios of the
same type (see table in section [sub-paragraph] (g)(2) [(H)] (I) below)
for which it has been determined by Rule 15c3-1a under the Securities
Exchange Act of 1934 that a percentage of offsetting profits may be
applied to losses at the same valuation point.
    (H) For purposes of portfolio margin and cross-margin the term
``equity'', as defined in section (a)(4) of this Rule, includes the
market value of any long or short option positions held in an eligible
participant's account.
    (I) [(H)] The term ``theoretical gains and losses'' means the gain
and loss in the value of individual eligible products [option series]
and related instruments at 10 equidistant intervals (valuation points)
ranging from an assumed movement (both up and down) in the current
market value of the underlying instrument. The magnitude of the
valuation point range shall be as follows: \5\ \6\
---------------------------------------------------------------------------

    \5\ In accordance with section [sub-paragraph] (b)(1)(i)(B) of
Rule 15c3-1a (Appendix A to Rule 15c3-1) under the Securities
Exchange Act of 1934, 17 CFR 240.15c3-1a(b)(1)(i)(B).
    \6\ See footnote above.

------------------------------------------------------------------------
                                                               Up/down
                                                             market move
                       Portfolio type                        (high & low
                                                              valuation
                                                               points)
------------------------------------------------------------------------
Listed Security Futures Contract and Listed Single Stock          +/-15%
 Option....................................................
Non-High Capitalization, Broad-based U.S. Market Index            +/-10%
 Option....................................................
High Capitalization, Broad-based U.S. Market Index Option..      +6%/-8%
------------------------------------------------------------------------

    (3) Approved Theoretical Pricing Models.--Theoretical pricing
models must be approved by a Designated Examining Authority and
reviewed by the Securities and Exchange Commission (``The Commission'')
in order to qualify. Currently, the theoretical model utilized by [The]
the Options Clearing Corporation (``[The] OCC'')[,] is the only model
qualified pursuant to [The] the Commission's Net Capital Rule. All
member organizations [participating in the pilot program] shall obtain
their theoretical values from [The] the OCC.
    (4) Eligible Participants.--The application of the portfolio margin
provisions of this section [paragraph] (g), including cross-margining,
is limited to the following:
    (A) any broker or dealer registered pursuant to Section 15 of the
Securities Exchange Act of 1934;
    (B) any member of a national futures exchange to the extent that
listed index options hedge the member's index futures; and
    (C) any other person or entity not included in sections (g)(4)(A)
and [through] (g)(4)(B) above that has or establishes, and maintains,
equity of at least five [5] million dollars. For purposes of this
equity requirement, all securities and futures accounts carried by the
member organization for the same eligible participant [customer] may be
combined provided ownership across the accounts is identical. A
guarantee pursuant to section [paragraph] (f)(4) of this Rule is not
permitted for purposes of the minimum equity requirement. For those
accounts that are solely limited to listed security futures contracts
and listed single stock options, the five million dollar equity
requirement shall be waived.
    (5) Opening of Accounts.
    (A) Member organizations must notify and receive approval from the
Exchange prior to establishing a portfolio margin or cross-margin
methodology for eligible participants.
    (B) [(A)] Only eligible participants [customers] that have been
approved for options transactions and approved to engage in uncovered
short option contracts pursuant to Exchange Rule 721, are permitted to
utilize a portfolio margin account.
    (C) [(B)] On or before the date of the initial transaction in a
portfolio margin account, a member organization shall:
    (1) [(i)] furnish the eligible participant [customer] with a
special written disclosure statement describing the nature and risks of
portfolio margining and cross-margining which includes an
acknowledgement for all portfolio margin account owners to sign, and an
additional acknowledgement for owners that also engage in cross-
margining to sign, attesting that they have read and understood the
disclosure statement, and agree to the terms under which a portfolio
margin account and the cross-margin account respectively, are provided
(see Exchange Rule 726 (d)), and (2) [(ii)] obtain the signed
acknowledgement(s) noted above from the eligible participant [customer]
(both of which are required for cross-margining eligible participants
[customers]) and record the date of receipt.
    (6) Establishing Account and Eligible Positions.
    (A) [(1)] Portfolio Margin Account. For purposes of applying the
portfolio margin requirements [provided] prescribed in this [paragraph]
section (g), member organizations are to establish and utilize a
specific securities margin account, or sub-account of a margin account,
clearly identified as a portfolio margin account that is separate from
any other securities account carried for an eligible participant [a
customer].
    (B) [(2)] Cross-Margin Account. For purposes of combining related
instruments [and] with listed, broad-based U.S. index options, index
warrants, and underlying instruments, and applying the portfolio margin
requirements, member[s] organizations are to establish [and utilize a
portfolio margin account, clearly identified as] a cross-margin
account[,] that is separate from any other securities account or
portfolio margin account carried for an eligible participant. [a
customer.]

    A margin deficit in either the portfolio margin account or the
cross-margin account of an eligible participant [a customer] may not be
considered as satisfied by excess equity in the other account. Funds
and/or securities must be transferred to the deficient account and a
written record created and maintained.
    (C) [(A)] Portfolio Margin Account--Eligible [Positions] Products
    (1) For eligible participants as described in sections (g)(4)(A)
through (g)(4)(C), [(i) A] a transaction in, or transfer of, [a listed,
broad-based U.S. index option or index warrant] an eligible product may
be effected in the portfolio margin account. Eligible products under
this section consist of:
    (i) a listed, broad-based U.S. index option or index warrant and
underlying instrument.
    (ii) a listed security futures contract or listed single stock
option.
    (2) [(ii)] A transaction in, or transfer of, an underlying
instrument may be effected in the portfolio margin account provided a
position in an offsetting listed, broad-based U.S. index option or
index warrant is in the account or is established in the account on the
same day.
    (3) A transaction in, or transfer of, a listed security futures
contract or listed single stock option may also be effected in the
portfolio margin account.
    (4) Any long position or any short position in any eligible product
that is no longer part of a hedge strategy must be transferred from the
portfolio margin account to the appropriate securities account within
ten business days, subject to any applicable margin requirement, unless
the position becomes part of a hedge strategy again. Member
organizations must monitor portfolio margin accounts for possible abuse
of this provision.
    [(iii) If, in the portfolio margin account, the listed, broad-based
U.S. index option or index warrant position offsetting an underlying
instrument position ceases to exist and is not replaced within ten
business days, the underlying instrument position must be transferred
to a regular margin account, subject to initial Regulation T and
margined according to the other provisions of this Rule. Member
organizations will be expected to monitor portfolio margin accounts for
possible abuse of this provision.
    (iv) In the event that fully paid for long options and/or index
warrants are the only positions contained within a portfolio margin
account, such long positions must be transferred to a securities
account other than a portfolio margin account or cross-margin account
within 10 business days, subject to the margin required, unless the
status of the account changes such that it is no longer composed solely
of fully paid for long options and/or index warrants.]
    (D)[(B)] Cross-Margin Account--Eligible [Positions] Products
    (1) For eligible participants, as described in sections (g)(4)(A)
through (g)(4)(C), a transaction in, or transfer of, an eligible
product may be effected in the cross-margin account.
    (2) [(i)] A transaction in, or transfer of, a related instrument
may be effected in the cross-margin account provided a position in an
offsetting eligible product [listed, U.S. broad-based index option,
index warrant or underlying instrument] is in the account or is
established in the account on the same day.
    (3) Any long position or any short position in any eligible product
that is no longer part of a hedge strategy must be transferred from the
cross-margin account to the appropriate securities account or futures
account within ten business days, subject to any applicable margin
requirement, unless the position becomes part of a hedge strategy
again. Member organizations must monitor cross-margin accounts for
possible abuse of this provision.
    [(ii) If the listed, U.S. broad-based index option, index warrant
or underlying instrument position offsetting a related instrument
ceases to exist and is not replaced within ten business days, the
related instrument position must be transferred to a futures account
and margined accordingly. Member organizations will be expected to
monitor cross-margin accounts for possible abuse of this provision.
    (iii) In the event that fully paid for long options and/or index
warrants (securities) are the only positions contained within a cross-
margin account, such long positions must be transferred to a securities
account other than a portfolio margin account or cross margin account
within 10 business days, subject to the margin required, unless the
status of the account changes such that it is no longer composed solely
of fully paid for long options and/or index warrants.]
    (7) Initial and Maintenance Margin Required.--The amount of margin
required under this section [paragraph] (g) for each portfolio shall be
the greater of:
    (A) the amount for any of the 10 equidistant valuation points
representing the largest theoretical loss as calculated pursuant to
section [paragraph] (g)(8) below, or
    (B) $.375 for each contract [listed index option] and related
instrument multiplied by the contract's or instrument's multiplier, not
to exceed the market value in the case of long positions in eligible
products. [listed options and options on futures contracts.]
    (C) Account guarantees pursuant to section [paragraph] (f)(4) of
this Rule are not permitted for purposes of meeting initial and
maintenance margin requirements.
    (8) Method of Calculation.
    (A) Long and short contracts, [positions in listed options,]
including underlying instruments and related instruments, are to be
grouped [by option class; each option class group being] as a
``portfolio.''[.] Each portfolio is categorized as one of the portfolio
types specified in section [sub-paragraph] (g)(2)(I) [(H)] above.
    (B) For each portfolio, theoretical gains and losses are calculated
for each position as specified in section [sub-paragraph] (g)(2)(I)
[(H)] above. For purposes of determining the theoretical gains and
losses at each valuation point, member organizations shall obtain and
utilize the theoretical values of eligible products as described in
this section [a listed index option, underlying instrument or related
instrument] rendered by an approved [a] theoretical pricing model.
[that, in accordance with sub-paragraph (b)(1)(i)(B) of Rule 15c3-1a
under the Securities Exchange Act of 1934, qualifies for purposes of
determining the amount to be deducted in computing net capital under a
portfolio based methodology.]
    (C) Offsets. Within each portfolio, theoretical gains and losses
may be netted fully at each valuation point.
    Offsets between portfolios within eligible product groups, as
described in section (g)(2)(I), [the High Capitalization, Broad-based
Index Option product group and the Non-High Capitalization, Broad-based
Index Option product group] may then be applied as permitted by Rule
15c3-1a under the Securities Exchange Act of 1934.
    (D) After applying the [Offsets] offsets above, the sum of the
greatest loss from each portfolio is computed to arrive at the total
margin required for the account (subject to the per contract minimum).
    (9) Portfolio Margin Minimum Equity Call [Equity Deficiency .--]
    (A) If, at any time, the equity in the portfolio margin or cross-
margin account of an eligible participant, as described in section
(g)(4)(C), declines below the [5] five million dollar minimum equity
required, [under sub-paragraph (4)(D) of this paragraph (g)] and is not
restored to at least [5] five million dollars within three [(3)]
business days (T+3) by a deposit of

funds and/or securities, [;] member organizations are prohibited from
accepting opening orders starting on T+4, except that opening orders
entered for the purpose of hedging existing positions may be accepted
if the result would be to lower margin requirements. This prohibition
shall remain in effect until equity of five [5] million dollars is
established. For those accounts that are solely limited to security
futures contracts and single stock options, the five million dollar
equity requirement shall be waived.
    (B) Member organizations will not be permitted to deduct any
portfolio margin minimum equity call amount from Net Capital in lieu of
collecting the minimum equity required.
    (10) [(11)] Portfolio Margin Maintenance Call [Additional Margin.
--]
    (A) If at any time, the equity in the [any] portfolio margin or
cross-margin account of an eligible participant, as described in
sections (g)(4)(A) through (g)(4)(C), is less than the margin required,
the eligible participant [customer] may deposit additional margin or
establish a hedge to meet the margin requirement within [one] three
business days [(T+1)] (T+3). During the three business day period,
member organizations are prohibited from accepting opening orders,
except that opening orders entered for the purpose of hedging existing
positions may be accepted if the result would be to lower margin
requirements. In the event an eligible participant [a customer] fails
to hedge existing positions or deposit additional margin within [one]
three business days, the member organization must liquidate positions
in an amount sufficient to, at a minimum, lower the total margin
required to an amount less than or equal to the account equity.
[Paragraph (f)(7) of this Rule--Practice of Meeting Regulation T Margin
Calls by Liquidation Prohibited shall not apply to portfolio margin
accounts. However, member organizations will be expected to monitor
portfolio margin and cross-margin accounts for possible abuse of this
provision.]
    (B) If the portfolio margin maintenance call is not met by the
close of business T+1, member organizations will be required to deduct
from Net Capital the amount of the call until such time the call is
satisfied.
    (C) Member organizations will not be permitted to deduct any
portfolio margin maintenance call amount from Net Capital in lieu of
collecting the margin required.
    (11) [(10)] Determination of Value for Margin Purposes.--For the
purposes of this section [paragraph] (g), all eligible products [listed
index options] and related instrument positions shall be valued at
current market prices. Account equity for the purposes of this section
[paragraph] (g) shall be calculated separately for each portfolio
margin or cross-margin account. [by adding the current market value of
all long positions, subtracting the current market value of all short
positions, and adding the credit (or subtracting the debit) balance in
the account.]
    (12) Net Capital Treatment of Portfolio Margin and Cross-Margin
Accounts.
    (A) No member organization that requires margin in any eligible
participant [customer] account pursuant to section [paragraph] (g) of
this Rule shall permit [gross] the aggregate eligible participant
[customer] portfolio margin and cross-margin initial and maintenance
requirements to exceed [1,000 percent] ten times [of] its net capital
for any period exceeding three business days. The member organization
shall, beginning on the fourth business day, cease opening new
portfolio margin and cross-margin accounts until compliance is
achieved.
    (B) If, at any time, a member organization's [gross] aggregate
eligible participant [customer] portfolio margin and cross-margin
requirements exceed [1,000 percent] ten times [of] its net capital, the
member organization shall immediately transmit telegraphic or facsimile
notice of such deficiency to the principal office of the Securities and
Exchange Commission in Washington, DC, [450 Fifth Street, NW.,
Washington, DC 20549; to] the district or regional office of the
Securities and Exchange Commission for the district or region in which
the member organization maintains its principal place of business; and
to the New York Stock Exchange. [its Designated Examining Authority.]
    (13) Day Trading Requirements.--The requirements of section [sub-
paragraph] (f)(8)(B) of this Rule--Day-Trading shall not apply to
portfolio margin accounts or [including] cross-margin accounts.
    (14) Cross-Margin Accounts--Requirements to Liquidate
    (A) A member is required immediately either to liquidate, or
transfer to another broker-dealer eligible to carry cross-margin
accounts, all eligible participant [customer] cross-margin accounts
that contain positions eligible for cross-margining [in futures and/or
options on futures] if the member is:
    (1) [(i)] insolvent as defined in section 101 of title 11 of the
United States Code, or is unable to meet its obligations as they
mature;
    (2) [(ii)] the subject of a proceeding pending in any court or
before any agency of the United States or any State in which a
receiver, trustee, or liquidator for such debtor has been appointed;
    (3) [(iii)] not in compliance with applicable requirements under
the Securities Exchange Act of 1934 or rules of the Securities and
Exchange Commission or any self-regulatory organization with respect to
financial responsibility or hypothecation of eligible participant's
[customer's] securities; or
    (4) [(iv)] unable to make such computations as may be necessary to
establish compliance with such financial responsibility or
hypothecation rules.
    (B) Nothing in this section [paragraph] (14) shall be construed as
limiting or restricting in any way the exercise of any right of a
registered clearing agency to liquidate or cause the liquidation of
positions in accordance with its by-laws and rules.
* * * * *

Delivery of Options Disclosure Document and Prospectus

    Rule 726 (a) through (c) unchanged.
Portfolio Margining and Cross-Margining Disclosure Statement and
Acknowledgement
    (d) The special written disclosure statement describing the nature
and risks of portfolio margining and cross-margining, and
acknowledgement for an eligible participant [customer] signature,
required by Rule 431(g)(5)(B) shall be in a format prescribed by the
Exchange or in a format developed by the member organization, provided
it contains substantially similar information as in the prescribed
Exchange format and has received the prior written approval of the
Exchange.

Sample Portfolio Margining and Cross-Margining Risk Disclosure
Statement To Satisfy Requirements of Exchange Rule 431(g)

Overview of Portfolio Margining
    1. Portfolio margining is a margin methodology that sets margin
requirements for an account based on the greatest projected net loss of
all positions in a ``product class'' or ``product group'' as determined
by an options pricing model using multiple pricing scenarios. These
pricing scenarios are designed to measure the theoretical loss of the
positions given changes in both the underlying price and implied
volatility inputs to the model. Portfolio margining is currently

limited to product classes and groups of index products relating to
listed, broad-based market indexes, listed security futures contracts
and listed single stock options.
    2. The goal of portfolio margining is to set levels of margin that
more precisely reflects actual net risk. The eligible participant
[customer] benefits from portfolio margining in that margin
requirements calculated on net risk are generally lower than
alternative ``position'' or ``strategy'' based methodologies for
determining margin requirements. Lower margin requirements allow the
customer more leverage in an account.
Customers Eligible for Portfolio Margining
    3. To be eligible for portfolio margining, customers (other than
broker-dealers) must meet the basic standards for having an options
account that is approved for uncovered writing and must have and
maintain at all times account net equity of not less than [$5] five
million dollars, aggregated across all accounts under identical
ownership at the clearing broker. [The] This identical ownership
requirement excludes accounts held by the same customer in different
capacities (e.g., as a trustee and as an individual) and accounts where
ownership is overlapping but not identical (e.g., individual accounts
and joint accounts). For those accounts that are solely limited to
listed security futures contracts and listed single stock options, the
five million dollar equity requirement shall be waived.
Positions Eligible for a Portfolio Margin Account
    4. All positions in listed security futures contracts, listed
single stock options, listed, broad-based U.S. market index options
[and] or index warrants, [listed on a national securities exchange,
and] exchange traded funds and other products registered under the
Investment Company Act of 1940 that are managed to track the same index
that underlies permitted index options, are eligible for a portfolio
margin account.
Special Rules for Portfolio Margin Accounts
    5. A portfolio margin account may be either a separate account or a
sub-account of a customer's standard [regular] margin account. In the
case of a sub-account, equity in the standard [regular] account will be
available to satisfy any margin requirement in the portfolio margin
sub-account without transfer to the sub-account.
    6. A portfolio margin account or sub-account will be subject to a
minimum margin requirement of $.375 multiplied by the contract's
[index] multiplier for every contract [option contract or index
warrant] carried long or short in the account. No minimum margin is
required in the case of eligible exchange traded funds or other
eligible fund products.
    7. Margin calls in the portfolio margin account or sub-account,
regardless of whether due to new commitments or the effect of adverse
market [moves] movements on existing positions, must be met within
[one] three business days. Any shortfall in aggregate net equity across
accounts must be met within three business days. Failure to meet a
portfolio margin maintenance call when due will result in immediate
liquidation of positions to the extent necessary to reduce the margin
requirement. Failure to meet [an] a minimum equity call prior to the
end of the third business day will result in a prohibition on entering
any opening orders, with the exception of opening orders that hedge
existing positions, beginning on the fourth business day and continuing
until such time as the minimum equity requirement is satisfied.
    8. A position in an exchange traded index fund or other eligible
fund product may not be established in a portfolio margin account
unless there exists, or there is established on the same day, an
offsetting position in securities options, or other eligible
securities. The position(s) [Exchange traded index funds and/or other
eligible funds] will be transferred out of the portfolio margin account
and into a standard [regular] securities account subject to any
applicable margin requirement [initial Regulation T and NYSE Rule 431
margin] if the offsetting securities options, other eligible securities
and/or related instruments no longer remain in the account for ten
business days.
    9. When a broker-dealer carries a standard [regular] cash account
or margin account for a customer, the broker-dealer is limited by rules
of the Securities and Exchange Commission and of The Options Clearing
Corporation (``OCC'') to the extent to which the broker-dealer may
permit OCC to have a lien against long option positions in those
accounts. In contrast, OCC will have a lien against all long option
positions that are carried by a broker-dealer in a portfolio margin
account, and this could, under certain circumstances, result in greater
losses to a customer having long option positions in such an account in
the event of the insolvency of the customer's broker. Accordingly, to
the extent that a customer does not borrow against long option
positions in a portfolio margin account or have margin requirements in
the account against which the long option can be credited, there is no
advantage to carrying the long options in a portfolio margin account
and the customer should consider carrying them in an account other than
a portfolio margin account.
Special Risks of Portfolio Margin Accounts
    10. Portfolio margining generally permits greater leverage in an
account, and greater leverage creates greater losses in the event of
adverse market movements.
    11. Because the time limit for meeting margin calls is shorter than
in a standard [regular] margin account, there is increased risk that a
customer's portfolio margin account will be liquidated involuntarily,
possibly causing losses to the customer.
    12. Because portfolio margin requirements are determined using
sophisticated mathematical calculations and theoretical values that
must be calculated from market data, it may be more difficult for
customers to predict the size of future margin calls in a portfolio
margin account. This is particularly true in the case of customers who
do not have access to specialized software necessary to make such
calculations or who do not receive theoretical values calculated and
distributed periodically by The Options Clearing Corporation.
    13. For the reasons noted above, a customer that carries long
options positions in a portfolio margin account could, under certain
circumstances, be less likely to recover the full value of those
positions in the event of the insolvency of the carrying broker.
    14. Trading of securities index products in a portfolio margin
account is generally subject to all the risks of trading those same
products in a standard [regular] securities margin account. Customers
should be thoroughly familiar with the risk disclosure materials
applicable to those products, including the booklet entitled
``Characteristics and Risks of Standardized Options''.
    15. Customers should consult with their tax advisers to be certain
that they are familiar with the tax treatment of transactions in
securities options [index] and futures products.
    16. The descriptions in this disclosure statement relating to
eligibility requirements for portfolio margin accounts, and minimum
equity and margin requirements for those accounts,

are minimums imposed under Exchange rules. Time frames within which
margin and equity calls must be met are maximums imposed under Exchange
rules. Broker-dealers may impose their own more stringent requirements.

Overview Of Cross-Margining

    17. In a cross-margin account, [With cross-margining,] index
futures, [and] options on index futures are combined with offsetting
positions in securities index options and underlying instruments, for
the purpose of computing a margin requirement based on the net risk.
This generally produces lower margin requirements than if the related
instruments \7\ and securities products are viewed separately, thus
providing more leverage in the account.
---------------------------------------------------------------------------

    \7\ For purposes of this Rule, the term ``related instruments,''
within an option class or product means futures contracts and
options on futures contracts covering the same underlying
instrument.
---------------------------------------------------------------------------

    18. Cross-margining must be effected [done] in a portfolio margin
account type. A separate portfolio margin account must be established
exclusively for cross-margining.
    19. Cross-margining is achieved when [When] index futures and
options on futures are combined with offsetting positions in index
options and underlying instruments in a dedicated account, and a
portfolio margining methodology is applied to them. [, cross-margining
is achieved.]
Customers Eligible for Cross-Margining
    20. The eligibility requirements for cross-margining are generally
the same as for portfolio margining. [,] Accordingly, [and] any
customer eligible for portfolio margining is eligible for cross-
margining.
    21. Members of futures exchanges on which cross-margining eligible
index contracts are traded are also permitted to carry positions in
cross-margin accounts without regard to the minimum aggregate account
equity.
Positions Eligible for Cross-Margining
    22. All securities products eligible for portfolio margining are
also eligible for cross-margining.
    23. All broad-based U.S. listed market index futures and options on
index futures traded on a designated contract market subject to the
jurisdiction of the Commodity Futures Trading Commission (``CFTC'') are
eligible for cross-margining.
Special Rules for Cross-Margining
    24. Cross-margining must be conducted in a portfolio margin account
type. A separate portfolio margin account must be established
exclusively for cross-margining. A cross-margin account is a securities
account, and must be maintained separately from all other securities
account.
    25. Cross-margining is automatically accomplished with the
portfolio margining methodology. Cross-margin positions are subject to
the same minimum margin requirement for every contract, including
futures contracts.
    26. Margin calls arising in a cross-margin account, and any
shortfall in aggregate net equity across accounts, must be satisfied
within the same timeframe, and subject to the same consequences, as in
a portfolio margin account.
    27. A position in a futures product may not be established in a
cross-margin account unless there exists, or there is established on
the same day, an offsetting position in securities options and/or other
eligible securities. Related instruments will be transferred out of the
cross-margin account and into a futures account if, for more than ten
business days and for any reason, the offsetting securities options
and/or other eligible securities no longer remain in the account. If
the transfer of related instruments to a futures account causes the
futures account to be undermargined, a margin call will be issued or
positions will be liquidated to the extent necessary to eliminate the
deficit.
    28. Customers participating in cross-margining will be required to
sign an agreement acknowledging that their positions and property in
the cross-margin account will be subject to the customer protection
provisions of Rule 15c3-3 under the Securities Exchange Act of 1934 and
the Securities Investor Protection Act, and will not be subject to the
provisions of the Commodity Exchange Act, including segregation of
funds.
    29. According to the rules of the exchanges, a broker-dealer is
required to immediately liquidate[,] or, if feasible, transfer to
another broker-dealer eligible to carry cross-margin accounts, all
customer cross-margin accounts that contain positions in futures and/or
options on futures in the event that the carrying broker-dealer becomes
insolvent.
    30. In signing the agreement referred to in paragraph 28 above, a
customer also acknowledges that a cross-margin account that contains
positions in futures and/or options on futures will be immediately
liquidated, or, if feasible, transferred to another broker-dealer
eligible to carry cross-margin accounts, in the event that the carrying
broker-dealer becomes insolvent.
Special Risks of Cross-Margining
    31. Cross-margining must be conducted in a portfolio margin account
type. Generally, cross-margining and the portfolio margining
methodology both contribute to provide greater leverage than a standard
[regular] margin account, and greater leverage creates greater losses
in the event of adverse market movements.
    32. Since cross-margining must be conducted in a portfolio margin
account type, the time required for meeting margin calls is shorter
than in a standard [regular] securities margin account and may be
shorter than the time ordinarily required by a futures commission
merchant for meeting margin calls in a futures account. Consequently,
there is increased risk that a customer's cross-margin positions will
be liquidated involuntarily, causing possible loss to the customer.
    33. As noted above, cross-margin accounts are securities accounts
and are subject to the customer protections set-forth in Rule 15c3-3
under the Securities Exchange Act of 1934 and the Securities Investor
Protection Act. Cross-margin positions are not subject to the customer
protection rules under the segregation provisions of the Commodity
Exchange Act and the rules of the CFTC adopted pursuant to the
Commodity Exchange Act.
    34. Trading of index options and futures contracts in a cross-
margin account is generally subject to all the risks of trading those
same products in a futures account or a standard [regular] securities
margin account. Customers should be thoroughly familiar with the risk
disclosure materials applicable to those products, including the
booklet entitled Characteristics and Risks of Standardized Options and
the risk disclosure document required by the CFTC to be delivered to
futures customers. Because this disclosure statement does not disclose
the risks and other significant aspects of trading in futures and
options, customers should review those materials carefully before
trading in a cross-margin account.
    35. Customers should bear in mind that the discrepancies in the
cash flow characteristics of futures and certain options are still
present even when those products are carried together in a cross-margin
account. Both futures and options contracts are generally marked to the
market at least once each business day, but the marks may take place
with different frequency and at different times within the day. When a
futures contract is marked to the market, the gain or loss is
immediately credited to

or debited from[, respectively,] the customer's account in cash. While
an increase in the value of a long option contract may increase the
equity in the account, the gain is not realized until the option is
sold or exercised. Accordingly, a customer may be required to deposit
cash in the account in order to meet a variation payment on a futures
contract even though the customer is in a hedged position and has
experienced a corresponding (but yet unrealized) gain on a long option.
Alternatively, a customer who is in a hedged position and would
otherwise be entitled to receive a variation payment on a futures
contract may find that the cash is required to be held in the account
as margin collateral on an offsetting option position.
    36. Customers should consult with their tax advisers to be certain
that they are familiar with the tax treatment of transactions in index
products, including tax consequences of trading strategies involving
both futures and option contracts.
    37. The descriptions in this disclosure statement relating to
eligibility requirements for cross-margining, and minimum equity and
margin requirements for cross margin accounts, are minimums imposed
under Exchange rules. Time frames within which margin and equity calls
must be met are maximums imposed under Exchange rules. The broker-
dealer carrying a customer's portfolio margin account, including any
cross-margin account, may impose [its own] more stringent requirements.
* * * * *

Sample Portfolio Margining and Cross-Margining Acknowledgements

Acknowledgement for Customers Utilizing a Portfolio Margin Account--
Cross-Margining And Non-Cross-Margining--
    Rule 15c3-3 under the Securities Exchange Act of 1934 requires that
a broker or dealer promptly obtain and maintain physical possession or
control of all fully-paid securities and excess margin securities of a
customer. Fully-paid securities are securities carried in a cash
account and margin equity securities carried in a margin or special
account (other than a cash account) that have been fully paid for.
Excess margin securities are a customer's margin securities having a
market value in excess of 140% of the total of the debit balances in
the customer's non-cash accounts. For the purposes of Rule 15c3-3,
securities held subject to a lien to secure obligations of the broker-
dealer are not within the broker-dealer's physical possession or
control. The Commission staff has taken the position that all long
option positions in a customer's portfolio[-]margining account
(including any cross-margin account) may be subject to such a lien by
OCC and will not be deemed fully-paid or excess margin securities under
Rule 15c3-3.
    The hypothecation rules under the Securities Exchange Act of 1934
(Rules 8c-1 and 15c2-1)[,] prohibit broker-dealers from permitting the
hypothecation of customer securities in a manner that allows those
securities to be subject to any lien or liens in an amount that exceeds
the customer's aggregate indebtedness. However, all long option
positions in a portfolio[-]margining account (including any cross-
margining account) will be subject to OCC's lien, including any
positions that exceed the customer's aggregate indebtedness. The
Commission staff has taken a position that would [to] allow customers
to carry positions in portfolio[-]margining accounts[,] (including any
cross-margining account) even when those positions exceed the
customer's aggregate indebtedness. Accordingly, within a portfolio
margin account or cross-margin account, to the extent that you have
long option positions that do not operate to offset your aggregate
indebtedness and thereby reduce your margin requirement, you receive no
benefit from carrying those positions in your portfolio[-]margin
account or cross-margin account and incur the additional risk of OCC's
lien on your long option position(s).
    By signing below the customer affirms that the customer has read
and understood the foregoing disclosure statement and acknowledges and
agrees that long option positions in portfolio[-]margining accounts,
and cross-margining accounts, will be exempted from certain customer
protection rules of the Securities and Exchange Commission as described
above and will be subject to a lien by the options clearing corporation
without regard to such rules.

Customer Name:---------------------------------------------------------

By:--------------------------------------------------------------------

Date:------------------------------------------------------------------

    (Signature/title)
Acknowledgement for Customers Engaged in Cross-Margining
    As disclosed above, futures contracts and other property carried in
customer accounts with Futures Commission Merchants (``FCM'') are
normally subject to special protection afforded under the customer
segregation provisions of the Commodity Exchange Act (``CEA'') and the
rules of the Commodity Futures Trading Commission adopted pursuant to
the CEA. These rules require that customer funds be segregated from the
accounts of financial intermediaries and be accounted for separately.
However, they do not provide for, and standard [regular] futures
accounts do not enjoy the benefit of, insurance protecting customer
accounts against loss in the event of the insolvency of the
intermediary carrying the accounts.
    As discussed above, cross-margining must be conducted in a
portfolio margin account, dedicated exclusively to cross-margining and
cross-margin accounts are not treated as a futures account with an FCM.
Instead, cross-margin accounts are treated as securities accounts
carried with broker-dealers. As such, cross-margin accounts are covered
by Rule 15c3-3 under the Securities Exchange Act of 1934, which
protects customer accounts. Rule 15c3-3, among other things, requires a
broker-dealer to maintain physical possession or control of all fully-
paid and excess margin securities and maintain a special reserve
account for the benefit of their customers. However, with regard to
cross-margin accounts, there is an exception to the possession or
control requirement of Rule 15c3-3 that permits The Options Clearing
Corporation to have a lien on long positions. This exception is
outlined in a separate acknowledgement form that must be signed prior
to or concurrent with this form. Additionally, the Securities Investor
Protection Corporation (``SIPC'') insures customer accounts against the
financial insolvency of a broker-dealer in the amount of up to $500,000
to protect against the loss of registered securities and cash
maintained in the account for purchasing securities or as proceeds from
selling securities (although the limit on cash claims is $100,000).
According to the rules of the exchanges, a broker-dealer is required to
immediately liquidate[,] or, if feasible, transfer to another broker-
dealer eligible to carry cross-margin accounts, all customer cross-
margin accounts that contain positions in futures and/or options on
futures in the event that the carrying broker-dealer becomes insolvent.
    By signing below the customer affirms that the customer has read
and understood the foregoing disclosure statement and acknowledges and
agrees that: (1) Positions and property in cross-margining accounts,
will not be subject to the customer protection rules under the customer
segregation provisions of the Commodity Exchange Act and the

rules of the Commodity Futures Trading Commission adopted pursuant to
the CEA and (2) cross-margining accounts that contain positions in
futures and/or options on futures will be immediately liquidated, or if
feasible, transferred to another broker-dealer eligible to carry cross-
margin accounts in the event that the carrying broker-dealer becomes
insolvent.

Customer Name:---------------------------------------------------------

By:--------------------------------------------------------------------
Date:------------------------------------------------------------------

     (Signature/title)

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 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
    Amendments to NYSE Rule 431 (``Margin Requirements'') are proposed
that would include security futures \8\ and single stock options as
products eligible for treatment under portfolio margin requirements as
part of the Portfolio Margin Pilot Program recently approved by the
Commission. Amendments to Rule 726 (``Delivery of Options Disclosure
Document and Prospectus'') also are proposed to include the SEC
approved products on the disclosure document required to be furnished
to customers pursuant to this rule.
---------------------------------------------------------------------------

    \8\ For purposes of this filing term ``security futures''
utilizes the definition at Section 3(a)(55) of the Exchange Act,
excluding narrow-based security indices.
---------------------------------------------------------------------------

a. Background
    Section 7(a) \9\ of the Exchange Act of 1934 \10\ empowers the
Board of Governors of the Federal Reserve System to prescribe the rules
and regulations regarding credit that may be extended by broker-dealers
on securities (Regulation T) to their customers. NYSE Rule 431
prescribes specific margin requirements that must be maintained in all
customer accounts, based on the type of securities products held in
such accounts.
---------------------------------------------------------------------------

    \9\ 15 U.S.C. 78g.
    \10\ 15 U.S.C. 78a et seq.
---------------------------------------------------------------------------

    In April 1996, the Exchange established a Rule 431 Committee (the
``Committee'') to assess the adequacy of Rule 431 on an ongoing basis,
review margin requirements, and make recommendations for change. A
number of proposed amendments resulting from the Committee's
recommendations have been approved by the Exchange's Board of Directors
since the Committee was established. Similarly, the Committee has
endorsed the proposed amendments discussed below.\11\
---------------------------------------------------------------------------

    \11\ The Committee is composed of several member organizations,
including Goldman, Sachs & Co., Morgan Stanley & Co., Inc., Merrill
Lynch, Pierce, Fenner and Smith, Inc., Bear Stearns Corp. and Credit
Suisse First Boston Corp. and several self-regulatory organizations,
including: the NYSE, the Chicago Board Options Exchange, the
Options, Clearing Corporation, the American Stock Exchange, the
Chicago Board of Trade, the Chicago Mercantile Exchange, and the
National Association of Securities Dealers.
---------------------------------------------------------------------------

b. The Pilot
    The Board of Governors of the Federal Reserve System in its
amendments to Regulation T in 1998 permitted SROs to implement
portfolio margin rules, subject to SEC approval.\12\ As noted above, on
July 14, 2005 the Commission approved amendments to Exchange Rules 431
and 726 to permit, on a two year pilot basis, the use of a prescribed
risk-based methodology (``Portfolio Margin'') \13\ for certain products
as an alternative to the strategy or position based margin requirements
currently required in Rule 431(a) through (f). Exchange member
organizations may utilize portfolio margin for listed, broad-based U.S.
index options and index warrants, along with any underlying
instruments.\14\ These positions are to be margined (either for initial
or maintenance) in a separate portfolio margin account dedicated
exclusively for such margin computation.
---------------------------------------------------------------------------

    \12\ See Federal Reserve System, ``Securities Credit
Transactions; Borrowing by Broker and Dealers;'' Regulations G, T, U
and X; Docket Nos. R-0905, R-0923 and R-0944, 63 FR 2806 (January
16, 1998).
    \13\ As a pre-condition to permitting portfolio margining,
member organization are required to establish procedures and
guidelines to monitor credit risk to the member organization's
capital, including intra-day credit risk and stress testing of
portfolio margin accounts. Further, member organizations must
establish procedures for regular review and testing of these
required risk analysis procedures (see Rule 431(g)(1)).
    \14\ For purposes of these amendments, the term ``underlying
instrument,'' means long and short positions in an exchange traded
fund of other fund product registered under the Investment Company
Act of 1940, that holds the same securities, and in the same
proportion, as contained in a broad-based index on which options are
listed. The term ``underlying instrument'' shall not be deemed to
include futures contracts, options on futures contracts, underlying
stock baskets, or unlisted instruments.
---------------------------------------------------------------------------

c. Strategy or Positioned-Based Margin Requirements
    Prior to the Pilot, member organizations were subject, pursuant to
NYSE Rule 431, to strategy or positioned-based margin requirements.
This methodology applied specific margin percentage requirements as
prescribed in Rule 431 to each security position and/or strategy,
either long or short, held in a customer's account, irrespective of the
fact that all security (e.g., options) prices do not change equally (in
percentage terms) with a change in the price of the underlying
security. As discussed in more detail below, when utilizing a portfolio
margin methodology, offsets are fully realized, whereas under strategy
or position-based methodology, positions and or groups of positions
comprising a single strategy are margined independently of each other
and offsets between them do not efficiently impact the total margin
requirement.
d. Portfolio Margin Requirements
    Portfolio margining is a margin methodology that sets margin
requirements for an account based on the greatest projected net loss of
all positions in a product class or group. The Pilot utilizes a
Commission approved theoretical options pricing model using multiple
pricing scenarios to set or determine the risk level.\15\ These
scenarios are designed to measure the theoretical loss of the positions
given changes in both the underlying price and implied volatility
inputs to the model. Accordingly, the margin required is based on the
greatest loss that would be incurred in a portfolio if the value of its
components move up or down by a predetermined amount.
---------------------------------------------------------------------------

    \15\ The theoretical options pricing model is used to derive
position values at each valuation point for the purpose of
determining the gain or loss. The amount of initial and maintenance
margin required with respect to a portfolio would be the larger of:
(1) The greatest loss amount among the valuation calculations; or
(2) the sum of $.375 for each option and security future in the
portfolio multiplied by the contract's (e.g. 100 shares per
contract) or instrument's multiplier. This computation establishes a
minimum margin requirement to ensure that a certain level of margin
is required from a customer.
---------------------------------------------------------------------------

    Generally, the purpose and benefit of portfolio margining is to
efficiently set levels of margin that reflect historical moves that
more precisely reflects actual net risk of all positions in the
account. A customer benefits from portfolio margining in that margin
requirements calculated on net position

risk are generally lower than strategy-based margin methodologies
currently in place. In permitting margin computation based on actual
net risk, member organizations are no longer required to compute a
margin requirement for each individual position or strategy in a
customer's account (see NYSE Rule 431).
    As discussed in more detail below, utilizing portfolio margin for
options portfolios and any related instruments enables the portfolio to
be subjected to certain preset market volatility parameters that
reflect historical moves in the underlying security thereby assessing
potential loss in the portfolio in the aggregate. Accordingly, such a
methodology provides an accurate and realistic assessment of reasonable
margin requirements.
e. Proposed Amendments
    The Exchange and CBOE received letters in late September 2005 from
Commission Chairman Christopher Cox asking the SROs to consider
expanding portfolio margining to a broader universe of products. The
Commission encouraged the Exchanges to file a rule proposal before
year-end.\16\ Accordingly, the Exchange is proposing the amendments
discussed below.
---------------------------------------------------------------------------

    \16\ Chairman of the Commission, Christopher Cox, in a letter
dated September 27, 2005, to William J. Brodsky and John A. Thain,
the Chief Executive Offices of CBOE and NYSE, respectively,
encouraged each SRO to file a rule proposal to make portfolio margin
available to equity options and security futures with the Commission
by year-end 2005.
---------------------------------------------------------------------------

f. Eligible Products/Minimum Equity Requirements
    The proposed amendments to Rule 431 seek to expand the eligible
products previously approved, provided all products can be priced
within a prescribed risk-based theoretical pricing methodology.
Specifically, the proposed amendments will expand the eligible products
to include security futures as well as listed single stock options. The
proposed amendments will also permit customers effecting transactions
in security futures and listed single stock options to do so without
maintaining the $5 million equity requirement, which is currently
required under the Pilot for all other eligible products.
g. Valuation Points
    Further, the proposed amendments will establish theoretical prices
at 10 equidistant valuation points within a range consisting of an
increase or a decrease of +/-15% \17\ (i.e., +/-3%, 6%, 9%, 12%, and
15%) in the current market value of the underlying instrument. As
proposed, the price range for computing a portfolio margin requirement
is the same parameter required under Appendix A of Rule 15c3-1a \18\
under the Exchange Act for computing deductions to a firm's net capital
for proprietary positions. Currently the only theoretical model
qualified pursuant to Rule 15c3-1a under the Exchange Act is the
Theoretical Intermarket Margin System (``TIMS'') administered by The
Options Clearing Corporation.
---------------------------------------------------------------------------

    \17\ The Pilot established valuation points for the following
eligible products: Non-High Capitalization/Broad-based U.S. Market
Index Options (+/-10%) and High Capitalization/Broad-based U.S.
Market Index Options (+6%/-8%).
    \18\ 17 CFR 240.15c3-1a(b)(1)(i)(B). The requirements of this
rule include, among other things, that any model be non-proprietary,
approved by a Designated Examining Authority (``DEA'') and available
on the same terms to all broker-dealers. Referencing to the SEC's
net capital coupled with DEA approval and SEC review assures
uniformity across pricing models and that portfolio and cross-margin
requirements will not vary significantly from firm to firm.
---------------------------------------------------------------------------

h. Margin Deficiency
    In addition, the proposed amendments will require a member
organization to deduct from its net capital the amount of any portfolio
margin maintenance call which is not met by the close of business of
trade date plus one (T+1).\19\ Member organizations will not be
permitted to deduct any portfolio margin maintenance call amount from
net capital in lieu of collecting the required margin.
---------------------------------------------------------------------------

    \19\ Several paragraphs in the proposed rule amendments use the
term ``portfolio margin maintenance call'' rather than the term
``portfolio margin maintenance deficiency.'' The proposed rule text
was intended to measure the time period for a customer to meet a
margin call or a member to make a deduction in calculating net
capital from the time of the margin deficiency, not the time of the
margin call. The Exchange has represented that it will amend the
proposed rule changes to clarify this technical non-substantive
change prior to any Commission approval of the proposed rule change.
Telephone conversation between William Jannace, Director, Rule and
Interpretive Standards, Member Firm Regulation, NYSE and Randall
Roy, Branch Chief, and Sheila Swartz, Special Counsel, Division of
Market Regulation, Commission, on January 13, 2006.
---------------------------------------------------------------------------

i. Definitions
    The proposed amendments expand upon the core definition of the term
``equity'' as defined in section (a)(4) of Rule 431 (see proposed Rule
431(g)(2)(H) for purposes of portfolio margin and cross-margin to
include the market value of any long or short option positions held in
an eligible participant's account. In addition, other non-substantive
changes and/or modification to other definitions in Rule 431 were made
in light of the proposed amendments.
j. Disclosure Document and Customer Attestation
    Exchange Rule 726 prescribes requirements for the delivery of
options disclosure documents concerning the opening of customer
accounts. As part of the Pilot amendments, members and member
organizations are required to provide every portfolio margin customer
with a written risk disclosure statement at or prior to the initial
opening of a portfolio margin account. The disclosure statement is
divided into two sections, one dealing with portfolio margining and the
other with cross-margining. The statement discloses the special risk
and operation of portfolio margin accounts, including cross-margining,
and the differences between portfolio margin and strategy-based margin
requirements. The disclosure statement also addresses who is eligible
to open a portfolio margin account, the instruments that are allowed,
and when deposits to meet margin and minimum equity are required.
    In addition, at or prior to the time a portfolio margin account is
initially opened, members and member organizations are required to
obtain a signed acknowledgement regarding certain implications of
portfolio margining (e.g. treatment under Exchange Act Rules 8c-1,
15c2-1 and 15c3-3) from the customer. Further, prior to providing
cross-margining, members and member organizations are required to
obtain a second signed customer acknowledgement relative to the
segregation treatment for futures contracts and Securities Investor
Protection Corporation coverage. As proposed, the disclosure document
required by Rule 726 is being amended to incorporate the approved
Commission products.
    Finally, the filing includes several minor technical amendments to
the rules for purposes of clarity and consistency.
2. Statutory Basis
    The statutory basis for this proposed rule change is Section
6(b)(5) \20\ of the Exchange Act which requires, among other things,
that the rules of the Exchange are designed to prevent fraudulent and
manipulative acts and practices, to promote just and equitable
principles of trade, to foster cooperation and coordination with
persons engaged in regulating, clearing, settling, processing
information with respect to, and facilitating transactions in
securities, to remove impediments to perfect the mechanism of a free
and

open market and national market system, and in general to protect
investors and the public interest. The proposed amendments are
consistent with this section in that they will better align margin
requirements with the actual risk of hedged products, will also
potentially alleviate excess margin calls and potentially reduce the
risk of forced liquidations of positions in customer accounts.
---------------------------------------------------------------------------

    \20\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------

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

    The Exchange does not believe that the proposed rule change will
impose any burden on competition not necessary or appropriate in
furtherance of the purposes of the Exchange 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. Date of Effectiveness of the Proposed Rule Change and Timing for
Commission Action

    Within 35 days of the date of publication of this notice in the
Federal Register or within such longer period (i) as the Commission may
designate up to 90 days of such date if it finds such longer period to
be appropriate and publishes its reasons for so finding, or (ii) as to
which the Exchange consents, the Commission will:
    (A) By order approve such proposed rule change, as amended; or
    (B) Institute proceedings to determine whether the proposed rule
change should be disapproved.

IV. Solicitation of Comments

    Interested persons are invited to submit written data, views, and
arguments concerning the foregoing, including whether the proposed rule
change is consistent with the Exchange 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 e-mail to<EMAIL_ADDRESS>Please include File

Number SR-NYSE-2005-93 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 20549-9303.

All submissions should refer to File Number SR-NYSE-2005-93. 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. Copies of such
filing also will be available for inspection and copying at the
principal office of the NYSE. 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 submission should refer to
File Number SR-NYSE-2005-93 and should be submitted on or before
February 13, 2006.

    For the Commission, by the Division of Market Regulation,
pursuant to delegated authority.\21\
---------------------------------------------------------------------------

    \21\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------

Nancy M. Morris,
Secretary.
 [FR Doc. E6-668 Filed 1-20-06; 8:45 am]

BILLING CODE 8010-01-P


[Federal Register Volume 78, Number 65 (Thursday, April 4, 2013)]
[Notices]
[Page 20313]
[FR Doc No: 2013-07820]

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

DEPARTMENT OF ENERGY

Federal Energy Regulatory Commission

[Docket Nos. EL13-55-000; EL13-56-000]

American Municipal Power, Inc.; Michigan Public Power Agency;
Notice of Filing

    Take notice that on March 29, 2013, American Municipal Power, Inc.
and Michigan Public Power Agency filed its proposed revenue requirement
for reactive supply and voltage control from generation or other
sources service (Fremont Energy Center), pursuant to Schedule 2 of the
PJM Interconnection, L.L.C. Open Access Transmission Tariff.
    Any person desiring to intervene or to protest this filing must
file in accordance with Rules 211 and 214 of the Commission's Rules of
Practice and Procedure (18 CFR 385.211, 385.214). Protests 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. Any person wishing to become a party must file a notice of
intervention or motion to intervene, as appropriate. Such notices,
motions, or protests must be filed on or before the comment date. On or
before the comment date, it is not necessary to serve motions to
intervene or protests on persons other than the Applicant.
    The Commission encourages electronic submission of protests and
interventions in lieu of paper using the ``eFiling'' link at http://www.ferc.gov. Persons unable to file electronically should submit an
original and 5 copies of the protest or intervention 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 email
notification when a document is added to a subscribed docket(s). For
assistance with any FERC Online service, please email
<EMAIL_ADDRESS>or call<PHONE_NUMBER> (toll free). For
TTY, call<PHONE_NUMBER>.
    Comment Date: 5:00 p.m. Eastern Time on April 19, 2013.

    Dated: March 29, 2013.
Kimberly D. Bose,
Secretary.
[FR Doc. 2013-07820 Filed 4-3-13; 8:45 am]
BILLING CODE 6717-01-P


[Federal Register: July 27, 2010 (Volume 75, Number 143)]
[Notices]
[Page 43990-43992]
[DOCID:fr27jy10-100]

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

DEPARTMENT OF HEALTH AND HUMAN SERVICES

Food and Drug Administration

[Docket No. 2010-N-0368]

Agency Information Collection Activities; Proposed Collection;
Comment Request; Pet Event Tracking Network--State, Federal Cooperation
to Prevent Spread of Pet Food Related Diseases

AGENCY:  Food and Drug Administration, HHS.

ACTION:  Notice.

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

SUMMARY:  The Food and Drug Administration (FDA) is announcing an
opportunity for public comment on the proposed collection of certain
information by the agency. Under the Paperwork Reduction Act of 1995
(the PRA), Federal agencies are required to publish notice in the
Federal Register concerning each proposed collection of information and
to allow 60 days for public comment in response to the notice. This
notice solicits comments on the paperwork requirements for the proposed
Pet Event Tracking Network (PETNet) cooperative Federal and State
initiative.

DATES:  Submit either electronic or written comments on the collection
of information by September 27, 2010.

ADDRESSES:  Submit electronic comments on the collection of information
to http://www.regulations.gov. Submit written comments on the
collection of information to the Division of Dockets Management (HFA-
305), Food and Drug Administration, 5630 Fishers Lane, rm. 1061,
Rockville, MD 20852. All comments should be identified with the docket
number found in brackets in the heading of this document.

FOR FURTHER INFORMATION CONTACT: Denver Presley, Office of Information
Management, Food and Drug Administration, 1350 Piccard Dr., PI50-400B,
Rockville, MD 20850,<PHONE_NUMBER><EMAIL_ADDRESS>
SUPPLEMENTARY INFORMATION: Under the PRA (44 U.S.C. 3501-3520), Federal
agencies must obtain approval from the Office of Management and Budget
(OMB) for each collection of information they conduct or sponsor.
``Collection of information'' is defined in 44 U.S.C. 3502(3) and 5 CFR
1320.3(c) and includes agency requests or requirements that members of
the public submit reports, keep records, or provide information to a
third party. Section

3506(c)(2)(A) of the PRA (44 U.S.C. 3506(c)(2)(A)) requires Federal
agencies to provide a 60-day notice in the Federal Register concerning
each proposed collection of information before submitting the
collection to OMB for approval. To comply with this requirement, FDA is
publishing notice of the proposed collection of information set forth
in this document.
    With respect to the following collection of information, FDA
invites comments on these topics: (1) Whether the proposed collection
of information is necessary for the proper performance of FDA's
functions, including whether the information will have practical
utility; (2) the accuracy of FDA's estimate of the burden of the
proposed collection of information, including the validity of the
methodology and assumptions used; (3) ways to enhance the quality,
utility, and clarity of the information to be collected; and (4) ways
to minimize the burden of the collection of information on respondents,
including through the use of automated collection techniques, when
appropriate, and other forms of information technology.

Pet Event Tracking Network--State, Federal Cooperation to Prevent
Spread of Pet Food Related Diseases--21 U.S.C. 342 and 343, Section
1002(b) of the FDA Amendments Act of 2007. Stat. 823 (2007) (OMB
Control No. 0910-NEW)

    In August, 2008, FDA sponsored the ``Gateway to Food Protection''
meeting, also known as the ``50-State'' meeting. The meeting included
representatives from other Federal agencies, the States, localities,
territories, and tribal partners, and was held to address the
challenges necessary to ensure the safety of the U.S. food supply. Work
groups were formed during the meeting which met and produced
recommendations in specific topic areas. One of the workgroups, the
Outbreaks/Food-Borne and Feed-Borne Investigations Workgroup, created a
subgroup consisting of veterinarians, animal feed regulators, and
others involved with animal health issues. This subgroup developed an
ambitious proposal for an early warning system to identify, track and
report disease outbreaks in companion animals or contamination
incidents concerning pet food or animals feed, which they named PETNet.
The PETNet proposal was developed in response to the 2007 outbreak that
occurred in companion animals that was associated with the deliberate
adulteration of pet food components, such as wheat gluten, with
melamine. As envisioned by the subgroup at that time, PETNet would
include a system for reporting outbreaks and would be supported by
adequate diagnostic laboratory facilities and an established mechanism
for conducting national epidemiological investigations.
    The PETNet subgroup subsequently met twice in face-to-face
meetings, in May and November, 2009, during which time the proposed
scope of PETNet was streamlined to focus the program on information
sharing, rather than epidemiology or other aspects. One of the main
concerns of FDA's State regulatory partners regarding FDA's handling of
the melamine incident was that many States provided information to FDA,
but the information reported by the States to FDA and other information
in the possession of FDA was not shared by FDA with the States. States
believed that if they had received more information about what was
going on in a timely manner, they could perhaps have taken appropriate
action to safeguard animal and the public health by using their own
regulatory authorities and resources. The agency agreed with the
States, and thus decided to focus PETNet on being a system for sharing
information between FDA, other Federal agencies, and the States about
food-borne illness outbreaks in companion animals. By the end of the
November, 2009, meeting, this revised vision of PETNet was firmly
established with many of the details about the system in place.
    FDA is planning to implement an initiative called ``The Pet Event
Tracking Network'' (PETNet) that will allow FDA and its State partners
to quickly and effectively exchange information about outbreaks of
illness in companion animals associated with pet food. FDA has worked
closely with its Federal and State partners to develop the PETNet, and
believes that it will serve an important function in protecting the
public and animal health.
    PETNet will be a secure, internet-based network comprised of the
FDA, other Federal agencies, and State regulatory agencies/officials
that have authority over pet food. The Network will provide timely and
relevant information about pet food-related incidents to FDA, the
States, and other Federal Government agencies charged with protecting
animal and public health. FDA intends to identify and invite State
participants from all 50 States to participate in PETNet. Members of
the network will be able to both receive alerts about pet food
incidents, as well as create alerts when they are aware of a pet food
incident within their jurisdiction. The information will be used to
help State and Federal regulators determine how best to use
inspectional and other resources to either prevent or quickly limit the
adverse events caused by adulterated pet food. Many states have
regulatory authority beyond that of the FDA and often can be in a
position to act independently of FDA with the information they will
receive from the Pet Event Tracking Network.
    Use of the system, including the reporting of incidents by States
to the FDA, will be entirely voluntary. The PETNet system will be
housed in Food Shield, a proprietary software system, and will be
accessible only to members via password. The system will make use of a
standardized electronic form housed on FoodShield to collect and
distribute basic information about pet food-related incidents. The form
contains the following data elements, almost all of which are drop down
menu choices: The species involved, clinical signs, number of animals
exposed, number of animals affected, animal ages, date of onset, name
and type of pet food involved, the manufacturer and distributor of the
pet food (if known), the State where the incident occurred, the origin
of the information, whether there are supporting laboratory results,
and contact information for the reporting PETNet member (i.e. name,
telephone number). The form would be filled out and submitted by a
PETNet member on FoodShield, at which time it will be available to
other PETNet members. Thus, the information will be entered and
received by PETNet members in as close to real time as possible. FDA
has designed the form itself to contain only the essential information
necessary to alert PETNet members about pet food-related incidents. For
further information, such as laboratory results, PETNet members can
contact the reporting PETNet member.
    FDA estimates the burden of this collection of information as
follows:

                                                          Table 1.--Estimated Reporting Burden
--------------------------------------------------------------------------------------------------------------------------------------------------------
   21 U.S.C. Section 342 & 343/Section 1002(b) 2007           No. of         Annual Frequency       Total Annual        Hours per
                 Amendments / Form FDA                     Respondents         per Response          Responses           Response         Total Hours
--------------------------------------------------------------------------------------------------------------------------------------------------------
Form FDA 3756                                                          50                    10                500              20/60                167
--------------------------------------------------------------------------------------------------------------------------------------------------------
\1\ There are no capital costs or operating and maintenance costs associated with this collection of information.

    FDA estimates that each State will report (i.e., fill out the
PETNet form to alert other PETNet members about a pet food-related
incident) approximately 10 times per year. This estimate represents the
maximum number of reports that FDA expects a State to submit in a year,
and in many cases the number of reports submitted by a State will
probably be far less. FDA believes that, given the form only has 11
items and most are drop down fields, 20 minutes is a sufficient amount
of time to complete the form. State regulatory officials responsible
for pet food already possess computer systems and have the internet
access necessary to participate in PETNet, and thus there are no
capital expenditures associated with the reporting.
    Regarding recordkeeping, State regulatory officials who report on
PETNet receive the reportable information from consumers in their
States in the course of their customary and regular duties. Further,
these individuals already maintain records of such consumer complaints
in the course of their duties which are sufficient for the purposes of
reporting on PETNet. Therefore, FDA believes that the proposed
collection of information does not have additional recordkeeping
requirements.

    Dated: July 21, 2010.
Leslie Kux,
Acting Assistant Commissioner for Policy.
[FR Doc. 2010-18303 Filed 7-26-10; 8:45 am]
BILLING CODE 4160-01-S


[Federal Register Volume 78, Number 111 (Monday, June 10, 2013)]
[Rules and Regulations]
[Pages 34550-34552]
[FR Doc No: 2013-13012]

=======================================================================
-----------------------------------------------------------------------

DEPARTMENT OF TRANSPORTATION

Federal Aviation Administration

14 CFR Part 39

[Docket No. FAA-2012-1331; Directorate Identifier 2012-NE-44-AD;
Amendment 39-17473; AD 2013-11-13]
RIN 2120-AA64

Airworthiness Directives; Rolls-Royce plc Turbojet Engines

AGENCY: Federal Aviation Administration (FAA), DOT.

ACTION: Final rule.

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

SUMMARY: We are adopting a new airworthiness directive (AD) for all
Rolls-Royce plc (RR) Viper Mk. 601-22 turbojet engines. This AD
requires reducing the life of certain critical parts. This AD was
prompted by a review carried out by RR of the lives of these parts. We
are issuing this AD to prevent failure of life-limited parts, damage to
the engine, and damage to the airplane.

DATES: This AD becomes effective July 15, 2013.

ADDRESSES: For service information identified in this AD, contact
Defence Aerospace Communications at Rolls-Royce plc, P.O. Box 3, Gypsy
Patch Lane, Filton, Bristol, BS347QE, United Kingdom; phone: 011-44-
117-9791234; or email: http://www.rolls-royce.com/contact/defence_team.jsp. You may view this service information at the FAA, Engine &
Propeller Directorate, 12 New England Executive Park, Burlington, MA
01803. For information on the availability of this material at the FAA,
call<PHONE_NUMBER>.

Examining the AD Docket

    You may examine the AD docket on the Internet at http://www.regulations.gov; or in person at the Docket Operations office
between 9 a.m. and 5 p.m., Monday through Friday, except Federal
holidays. The AD docket contains this AD, the regulatory evaluation,
any comments received, and other information. The street address for

the Docket Operations office (phone:<PHONE_NUMBER>) is Document
Management Facility, U.S. Department of Transportation, Docket
Operations, M-30, West Building Ground Floor, Room W12-140, 1200 New
Jersey Avenue SE., Washington, DC 20590.

FOR FURTHER INFORMATION CONTACT: Robert Green, Aerospace Engineer,
Engine Certification Office, FAA, Engine & Propeller Directorate, 12
New England Executive Park, Burlington, MA 01803; phone:<PHONE_NUMBER>;
fax:<PHONE_NUMBER>; email<EMAIL_ADDRESS>
SUPPLEMENTARY INFORMATION:

Discussion

    We issued a notice of proposed rulemaking (NPRM) to amend 14 CFR
part 39 to include an AD that would apply to the specified products.
That NPRM was published in the Federal Register on February 22, 2013
(78 FR 12255). That NPRM proposed to correct an unsafe condition for
the specified products. The mandatory continuing airworthiness
information states:

    A review, carried out by Rolls-Royce, of the lives of critical
parts of the Viper Mk. 601-22 engine, has resulted in reduced cyclic
life limits for certain critical parts.
    Operation of critical parts beyond these reduced cyclic life
limits may result in part failure, possibly resulting in the release
of high-energy debris, which may cause damage to the aeroplane and/
or injury to the occupants.
    For the reasons described above, this AD requires implementation
of the reduced cyclic life limits for the affected critical parts,
i.e., replacement of each part before the applicable reduced life
limit is exceeded, and replacement of those critical parts that have
already exceeded the reduced cyclic life limits.

    We are issuing this AD to prevent failure of life-limited parts,
damage to the engine, and damage to the airplane.

Comments

    We gave the public the opportunity to participate in developing
this AD. We considered the comments received.

Request To Change the Identity of the Type Certificate (TC) Holder

    Roll-Royce plc requested that we identify the TC holder as Rolls-
Royce plc rather than Rolls-Royce (1971) Limited, Bristol Engine
Division.
    We agree. We changed the AD to identify the TC holder as Rolls-
Royce plc.

Request To Change the Contact Information for the TC Holder

    Rolls-Royce plc requested that we change the contact information
used to request service information for Viper Mk. 601-22 turbojet
engines.
    We agree. We changed the contact information for requesting service
information related to this AD to: Defence Aerospace Communications at
Rolls-Royce plc, P.O. Box 3, Gypsy Patch Lane, Filton, Bristol,
BS347QE, United Kingdom; phone: 011-44-117-9791234; or email: http://www.rolls-royce.com/contact/defence_team.jsp.

Conclusion

    We reviewed the available data, including the comments received,
and determined that air safety and the public interest require adopting
the AD with the changes described previously. We determined that these
changes will not increase the economic burden on any operator or
increase the scope of the AD.

Costs of Compliance

    We estimate that this AD will affect about 32 engines installed on
airplanes of U.S. registry. We also estimate that it will take 0 hours
per product to comply with this AD. The average labor rate is $85 per
hour. We are not requiring parts replacement, so parts cost is $0.
Based on these figures, we estimate the cost of the AD on U.S.
operators to be $0.

Authority for This Rulemaking

    Title 49 of the United States Code specifies the FAA's authority to
issue rules on aviation safety. Subtitle I, section 106, describes the
authority of the FAA Administrator. ``Subtitle VII: Aviation
Programs,'' describes in more detail the scope of the Agency's
authority.
    We are issuing this rulemaking under the authority described in
``Subtitle VII, Part A, Subpart III, Section 44701: General
requirements.'' Under that section, Congress charges the FAA with
promoting safe flight of civil aircraft in air commerce by prescribing
regulations for practices, methods, and procedures the Administrator
finds necessary for safety in air commerce. This regulation is within
the scope of that authority because it addresses an unsafe condition
that is likely to exist or develop on products identified in this
rulemaking action.

Regulatory Findings

    We determined that this AD will not have federalism implications
under Executive Order 13132. This AD will not have a substantial direct
effect on the States, on the relationship between the national
government and the States, or on the distribution of power and
responsibilities among the various levels of government.
    For the reasons discussed above, I certify this AD:
    (1) Is not a ``significant regulatory action'' under Executive
Order 12866;
    (2) Is not a ``significant rule'' under the DOT Regulatory Policies
and Procedures (44 FR 11034, February 26, 1979); and
    (3) Will not affect intrastate aviation in Alaska to the extent
that it justifies making a regulatory distinction, and
    (4) Will not have a significant economic impact, positive or
negative, on a substantial number of small entities under the criteria
of the Regulatory Flexibility Act.
    We prepared a regulatory evaluation of the estimated costs to
comply with this proposed AD and placed it in the AD docket.

List of Subjects in 14 CFR Part 39

    Air transportation, Aircraft, Aviation safety, Incorporation by
reference, Safety.

Adoption of the Amendment

    Accordingly, under the authority delegated to me by the
Administrator, the FAA amends 14 CFR part 39 as follows:

PART 39--AIRWORTHINESS DIRECTIVES

0
1. The authority citation for part 39 continues to read as follows:

    Authority:  49 U.S.C. 106(g), 40113, 44701.

Sec.  39.13  [Amended]

0
2. The FAA amends Sec.  39.13 by adding the following new AD:

2013-11-13 Rolls-Royce plc (formerly Rolls-Royce (1971) Limited,
Bristol Engine Division): Amendment 39-17473; Docket No. FAA-2012-
1331; Directorate Identifier 2012-NE-44-AD.

(a) Effective Date

    This airworthiness directive (AD) becomes effective July 15,
2013.

(b) Affected ADs

    None.

(c) Applicability

    This AD applies to all Rolls-Royce plc (RR) Viper Mk. 601-22
turbojet engines.

(d) Reason

    This AD was prompted by a review carried out by RR of the lives
of certain critical parts. We are issuing this AD to prevent failure
of life-limited parts, damage to the engine, and damage to the
airplane.

(e) Actions and Compliance

    Unless already done, do the following actions.
    (1) After the effective date of this AD, remove the following
parts before they reach their specified new, lower, life limits:
compressor shaft, part number (P/N) V900766: 20,720 flight cycles
since new

(CSN); compressor rear stubshaft (center bearing hub), P/Ns V900007
and V900994: 9,600 flight CSN; combustion chamber outer casing, P/Ns
V950013 and V950331: 32,000 flight CSN.
    (2) After the effective date of this AD, do not install any part
identified in paragraph (e)(1) of this AD into any engine, nor
return any engine to service with the parts identified in paragraph
(e)(1) of this AD installed, if the part exceeds the new, lower,
life limit specified in paragraph (e)(1) of this AD.

(f) Alternative Methods of Compliance (AMOCs)

    The Manager, Engine Certification Office, FAA, may approve AMOCs
for this AD. Use the procedures found in 14 CFR 39.19 to make your
request.

(g) Related Information

    (1) For more information about this AD, contact Robert Green,
Aerospace Engineer, Engine Certification Office, FAA, Engine &
Propeller Directorate, 12 New England Executive Park, Burlington, MA
01803; phone:<PHONE_NUMBER>; fax:<PHONE_NUMBER>; email:
<EMAIL_ADDRESS>    (2) Refer to European Aviation Safety Agency Airworthiness
Directive 2012-0243 (Correction: November 13, 2012), dated November
12, 2012, and RR Alert Service Bulletin 72-A206, dated November
2012, for related information.
    (3) For service information identified in this AD, contact
Defence Aerospace Communications at Rolls-Royce plc, P.O. Box 3,
Gypsy Patch Lane, Filton, Bristol, BS347QE, United Kingdom; phone:
011-44-117-9791234; or email: http://www.rolls-royce.com/contact/defence_team.jsp. You may view this service information at the FAA,
Engine & Propeller Directorate, 12 New England Executive Park,
Burlington, MA 01803. For information on the availability of this
material at the FAA, call<PHONE_NUMBER>.

(h) Material Incorporated by Reference

    None.

    Issued in Burlington, Massachusetts, on May 28, 2013.
Colleen M. D'Alessandro,
Assistant Manager, Engine & Propeller Directorate, Aircraft
Certification Service.
[FR Doc. 2013-13012 Filed 6-7-13; 8:45 am]
BILLING CODE 4910-13-P