MEMORANDUM

SUBJECT:	Approach for Applying the Upper Prediction Limit to Limited Datasets

DATE:	May 1, 2023

FROM:	Donna Lee Jones, U.S. Environmental Protection Agency, Office of Air Quality Planning and Standards, Research Triangle Park, North Carolina 		 TO:		Docket ID No. EPA-HQ-OAR-2002-0085

What is Our Approach for Applying the Upper Prediction Limit to Limited Datasets?

The UPL approach addresses variability of emissions data from the best performing source or sources in setting MACT standards. The UPL also accounts for uncertainty associated with emission values in a dataset, which can be influenced by components such as the number of samples available for developing MACT standards and the number of samples that will be collected to assess compliance with the emission limit. The UPL approach has been used in many environmental science applications.[,][,][,][,][,] As explained in more detail in memorandum entitled "Use of the Upper Prediction Limit for Calculating MACT Floors", which is located in the docket for this action, the EPA uses the UPL approach to reasonably estimate the emissions performance of the best performing source or sources to establish MACT floor standards.

Sample size (the number of values in a particular dataset) is an important component of the UPL approach. First, the use of the UPL approach requires us to identify the distribution of the data, that is, whether a particular dataset is normally or non-normally distributed (see the memorandum entitled "Use of the Upper Prediction Limit for Calculating MACT Floors", which is located in the docket for this action). To determine the distribution of the data, we use well-established tests (kurtosis and skewness tests), and these tests require at least three data points. In prior rulemakings, we used the kurtosis equation that is a built-in function in Excel software, but that equation requires at least 4 values in order to avoid dividing by zero, which precluded its use for datasets of 3. However, we recently further reviewed the application of the UPL where data are limited, and concluded that it is appropriate to use another kurtosis estimator that provides a meaningful result with just 3 values. The use of this estimator is important, as many, if not most, of our new source emissions limits are based on 3 samples collected during an emissions test.

Once we determine the data distribution, the appropriate equation to be used in the UPL approach is selected based on the data distribution. We recognize that the use of the UPL approach for limited datasets introduces some amount of uncertainty in the calculation of MACT standards, and, therefore, we are taking additional steps, discussed in this document, to ensure that the level of the MACT standards is reasonable. We also note that after MACT standards are promulgated, we are required to review those standards periodically, and for such reviews, we typically have significant additional HAP emissions data from the intervening years of compliance with which to further assess the actual performance of the various emission sources.

Regardless of the distribution of the data, UPL equations have three well-defined components: an average, the t-score and a measure of variability that includes the actual variability of the data, the sample size, and the number of data points that are averaged together to determine compliance with a particular emission limit. A t-score is a value that estimates the uncertainty and variability for a certain confidence level associated with a specific number of data points. For a constant confidence level, t-scores decrease as the number of samples increase. This means that, if the mean and variance remain constant, UPL values for a particular confidence level decrease as the number of samples increase. Figure 1 and Table 1 show the t-scores for various sample sizes, and demonstrate that the t-score is highly variable at the smallest sample sizes and becomes relatively constant once the sample size is larger than a few data points. Consequently, we recognize that we need to take special care when smaller, limited sample sizes are used to establish emission limits, as the t-scores can have a disproportionate effect, overwhelming the other components of the emission limit calculation. In addition, we recognize that for a sample size of fewer than three data points, which has a very large t-score and precludes the appropriate selection of a distribution, we should not develop emission limits using the UPL. In other words, if fewer than 3 data points are available for use in determining an emission limit for a particular source, and no other data from sources in the subcategory are available, we would have to establish a different procedure for establishing the MACT floor that does not rely on the UPL.

Figure 1. Sample sizes versus one-sided, 99 percent confidence interval t-scores for normal distributions

Table 1. Degrees of Freedom, T-Score for a One-Tailed, 99 Percent Confidence Interval, and Percent Difference in T-Score for Each Sample Size

                                Sample Size (n)                            Degrees of Freedom (n-1)                              t-score (99 percent)                         Relative Percent Difference[a]                                        2                                        1                                      31.82

                                       3                                        2                                      6.96                                       78                                        4                                        3                                      4.54                                       35                                        5                                        4                                      3.75                                       17                                        6                                        5                                      3.36                                       10                                        7                                        6                                      3.14                                        7                                        8                                        7                                      3.00                                        5                                        9                                        8                                      2.90                                        3 [a]The relative percent difference between the t-score and the t-score shown on the preceding row

In the case of a dataset with a normal distribution, the equation to calculate the UPL is as follows: UPL=x+t[n-1,1-α]s21n+1m

where 	x = average or mean of test run data;       t[n-1,1-α] = t score, the one-tailed t value of the Student's t distribution for a specific degree of freedom (n-1) and confidence level (1- α); 	       α = level of significance expressed as a decimal (e.g., 1% significance = 0.01), note that confidence level = 100-αx100; 	s2 = variance of the dataset (test run);       n = number of values (test runs) in the dataset; and 	m = number of values used to calculate the test average (generally 3).

As shown in the equation, the sample size (n) directly affects the UPL calculations in two ways. First, as mentioned earlier, the t-score is selected based on the sample size. Second, the sample size is a separate variable in the equation, and as with the t-score, as the sample size gets larger (all other variables being held constant), the UPL gets smaller (i.e., approaches the mean value). The sample size also influences both the mean (x) and variance (s[2]) in that larger sample sizes provide better estimates of the population mean and variance. The confidence level also influences the t-score, and is represented in the UPL equation by the subscript "1- α." As noted in the memorandum entitled "Use of the Upper Prediction Limit for Calculating MACT Floors", which is located in the docket for this action, we typically choose the 99 percent UPL, which is another way of saying that α equals 0.01.

Note that the UPL equation for a lognormal distribution uses a z-score, instead of a t-score. As with the normal UPL equation, the lognormal UPL equation is affected by sample size and the variance of the data, and the basic concepts outlined in this discussion apply to datasets regardless of the distribution.

In summary, sample size is important for UPL calculations, as it is a key component of the t-score value and the calculation of the mean and variance of the sample. For the reasons presented above, for datasets below a certain size, further evaluation is warranted to ensure that the results are a valid representation of the performance of the emission sources whose data are included in the dataset. The remainder of this document provides our assessment of what constitutes a limited dataset and what additional analyses are appropriate for ensuring that the UPL calculations are valid representations of the performance of units as reflected in the available data.

What is a limited dataset?

While there are different options for choosing the number of samples that represents a limited dataset (or small sample size), we can use distinctions based on our observations in Figure 1 and Table 1 as an aid in defining what constitutes a limited dataset. As discussed earlier, the t-score is an influential parameter that can have a particularly large influence on an emission limit developed from a limited dataset. As such, the t-score is a key parameter for identifying what constitutes a limited dataset for purposes of MACT analyses. As shown in Figure 1 and Table 1, above, at the 99 percent confidence level there is a clear distinction between t-score values for sample sizes of 3 and fewer when compared to t-score values for sample sizes of more than 6. As Figure 1 and Table 1 show, the t-score changes drastically from sample size equal to 2 to sample size equal to 3. The changes in the t-score are considerably less dramatic as the sample size approaches 9 data points and larger.

As noted earlier, we will not use the UPL approach for datasets with fewer than 3 values because of the high degree of uncertainty that results from the size of the dataset and the related t-score. In fact, the t-score (see Figure 1 and table 1) for a dataset of 3 is 78 percent lower than a t-score for a dataset of 2, meaning that given an equal variance, the component of the UPL that includes the t-score and variance would be more than 78 percent less when evaluating a 3-point dataset compared to a 2-point dataset. The table and figure also show that the relative change of the t-score for each additional data point decreases as the sample size gets larger. As sample size increases, uncertainty decreases, but there is always some amount of uncertainty. The discussion that follows presents our examination of the t-score at various sample sizes. We rely on this examination to help identify a sample size below which we would further evaluate the data and the application of the UPL to ensure that the amount of uncertainty is within a reasonable range. Based on Table 1, the lower bound of the sample size where such further evaluation is needed is 3 values, and a reasonable value (where the size of the t-statistic has much less influence on the eventual emission limit) lies between 4 and 9 values.

An additional factor to consider is that, in the context of MACT analyses, emission tests typically include 3 test runs (independent data points), and, therefore, our MACT floor dataset size typically is a multiple of 3. For this reason, we first considered sample sizes that are multiples of 3 when identifying the size below which further scrutiny is needed. As can be calculated from the t-scores shown in Table 1, the relative difference between the t-score for 6 data points and the t-score for 9 data points is about 14 percent ((3.36-2.90)/3.36). The relative difference between the t-scores for 7 and 9 data points is about 8 percent ((3.14-2.90)/3.14). Given that the test methods that are used to generate the data typically are accurate to within 10 to 20 percent , this difference in t-score (between datasets with 7 and 9 runs) is less than the uncertainty in the test methods and would not have a large influence on the magnitude of an emission limit. Conversely, comparing the t-score for 3 runs to that for 7 runs, the relative difference in the t-score is 55 percent ((6.96-3.14)/6.96), indicating that there is a possibility, especially if the variance is high, that the t-score for 3 test runs may introduce a large amount of uncertainty in an emission limit, and, therefore, additional analysis of a dataset of this size is warranted. We also conducted the same type of evaluation on datasets between 4 and 6 points, and while the change in t-score for datasets of these sizes could be considered to be sufficiently small, to be conservative, we conclude that a limited dataset, for purposes of MACT analyses, is a dataset that includes at least 3 test runs and fewer than 7 test runs. Because of the uncertainty associated with datasets at or below this size, further evaluation is warranted, and the types of additional analyses that we may choose to conduct are explained below.

What approach will the EPA follow for MACT floors based on limited datasets?

When a MACT floor for either existing or new sources is based on fewer than 7 data points, we will further evaluate each individual dataset in order to ensure that the uncertainty associated with a limited dataset does not cause the calculated emission limit to be so high that it does not reflect the average performance of the units upon which the limit is based after accounting for variability in the emissions of those units. The evaluation will include one or more of the following, depending on the specific dataset: confirming that the data distribution was selected correctly; after confirming the data distribution, ensuring that we use the most appropriate UPL equation; and, as necessary, comparing UPL equation components for the individual unit upon which a new source floor is based with those of the units in the existing source floor to determine if our identification of the best unit is reasonable. Each of the additional evaluations are discussed below.

Confirming the data distribution is important because UPL equations and the emission limits derived from those UPL equations depend on the distribution. In prior rulemakings, we had not identified a way of ascertaining the data distribution for units with three samples, so we either assumed a normal or lognormal distribution. This particularly affected new source emissions limits, many of which were based on three samples. However, we have since identified and adopted an established technique that compares the ratio of skewness to the standard error of the skewness for both the raw and log transformed data. The lower of the two ratios identifies the data distribution that best represents the sample set. This ability to more precisely ascertain the data distribution enables us to select the best option for the UPL equation given the small sample size.

After confirming that we selected the best distribution based on the available data and ensuring that we used the correct equation to calculate a MACT floor value, we then examine key variables that factor into the calculated floor values. The variables that are factored into the emission limit include the following: average, t-score, confidence level, variance, number of test runs (i.e., sample size), and number of runs in each test (i.e., the number of data points that are averaged together to determine compliance with a particular emission limit). The considerations related to each variable are discussed below.

The average, which typically is calculated as the mean value of a dataset, does not require additional consideration. Once it is calculated, it is used to rank the performance of units, and also is the key value upon which each emission limit is based. As such, average values have already been compared within a particular dataset, and additional assessment is not necessary. However, in the overall assessment of variables, when multiple best performing units have emission averages that are similar, we may look to other variables like the variance to help to inform our decision as to which unit is the single best performer.

As discussed earlier, the t-score is dependent on the sample size, and, therefore, we discuss these two variables together. As shown earlier in Figure 1, as the sample size decreases, the t-statistic increases. This is important because the t-statistic is multiplied by the variance and a factor that involves the sample size and the number of test runs used for compliance (i.e., the "m" term in the UPL equation). For the smallest datasets (3 data points) that we consider under the UPL approach, a large variance coupled with a t-score that is significantly greater than the t-score for a dataset of 7 or more can create a situation where the emission limit includes a large amount of uncertainty. In such cases, we use our technical expertise to assess what level of emissions could realistically be expected from the type of unit, controls, and other relevant factors, and would ensure that the emission limit is reasonable.

The variance is another key variable that we would evaluate. Generally speaking, if our evaluation showed a very small amount of variability (e.g., a small variance), the emission limit would not contain an unacceptable amount of uncertainty and variability because a small variance would result in an emission limit that would be reasonably close to the mean of the data. With larger datasets, it is more likely that the demonstrated variance is truly representative of the variation in the source's emissions simply because there is more evidence of the source's emissions over time. On the other hand, when a limited dataset includes a large amount of variability (e.g., a large variance), we would need to carefully evaluate the data. For instance, consider the case where the pool of best performing units all have similar averages and the unit identified as the single best performer (based on average emissions only) has a limited dataset and a variance that greatly exceeds the variance of the other similarly-controlled best-performing units. In such a case, the MACT floor analysis may yield an emission limit for that unit (i.e., the new source MACT floor) that is higher than the existing source MACT floor, which is an indicator that further analysis is warranted. Careful consideration of variance will allow us to better ascertain which unit should be considered the best performer.

Another tool that could be used to adjust unreasonable emission limits is the selection of the confidence level. In certain instances, we may determine that a limited dataset includes such a high degree of variability that the 99 percent confidence level results in an emission limit that our experience suggests is higher than the average emissions limitation achieved by the best performing source or sources after accounting for variability. In such cases, we may choose to select a confidence level of 95 percent or 90 percent. As an example, consider a unit identified as the best performing new source with a specific process or control device that has been demonstrated to operate far more efficiently (thus having the potential to lower emissions) in similar units, processes, or control devices. Under these conditions, we may choose to acknowledge the better operation by lowering the confidence level (which lowers the emissions limit).

Establishing and using this approach on a case-by-case basis for limited datasets will ensure consistent application of emissions limit development procedures, which will mitigate the additional uncertainty that could otherwise result from calculating MACT floor standards with limited data.

How did we apply the approach for limited datasets to limited datasets in the National Emission Standards for Hazardous Air Pollutants (NESHAP) for Coke Ovens: Pushing, Quenching, and Battery Stacks (PQBS) (40 CFR part 63, subpart CCCCC) source category?

For the Coke Ovens PQBS source category, Table 1 lists the limited datasets per coke oven process type per pollutant. We evaluated these specific datasets to determine whether it is appropriate to make any modifications to the approach used to calculate MACT floors for each of these datasets.

                  Table 1.  Coke Ovens PQBS Limited Datasets Process ID Type HAP Existing and/or New Source No. Data Points in MACT Floor Pool (n) Pushing Hg New 3

AG New 3

HCN New 3

PAH New 3 ByP Battery Combustion Hg New 3

PM New 3

AG New 3

HCN New 3 HNR HRSG Main Stack Hg New 3

AG New 3 HNR HRSG Bypass/waste heat stack Hg Existing 6

New 3

PM Existing 6

New 3

AG Existing 6

New 3

PAH Existing & New 3

Formaldehyde Existing 5

New 3 AG=Total Acid Gas (Hydrogen Fluoride and Hydrogen Chloride)  HCN=Hydrogen Cyanide PM=Filterable Particulate Matter PAH= Total Polycyclic Aromatic Hydrocarbons Hg=Mercury

For each dataset, we performed the steps outlined above, including: ensuring that we selected the data distribution that best represents each dataset; ensuring that the correct equation for the distribution was then applied to the data; comparing individual components of each limited dataset to determine if the standards based on limited datasets reasonably represent the performance of the units included in the dataset; and comparing the calculated UPL to the representative detection limit (3xRDL) value ensuring the final MACT limit is at a measurable value. The results of each analysis are presented below.

The MACT floor dataset for Hg from new pushing sources includes 3 test runs from a single unit that we identified as the best performing unit based on average emissions performance. We evaluated the variance of the best performing unit and our analysis showed that this unit, which was identified as the best unit based on average emissions, also had the lowest variance. We determined that the dataset is best represented by a normal distribution, ensuring that we used the correct equation for the distribution. A comparison of the UPL to the 3xRDL confirmed the greater Hg value was the 3xRDL value. Therefore, we determined to be the final floor value was at a measurable limit. As such, we are proposing that the MACT floor is 3.4E-07 lb/ton coke for Hg from pushing sources, based on the 3xRDLvalue.

The MACT floor dataset for AG from new pushing sources includes 3 test runs from a single unit that we identified as the best performing unit based on average emissions performance. We evaluated the variance of the best performing unit and our analysis showed that this unit, which was identified as the best unit based on average emissions, also had the lowest variance. We determined that the dataset is best represented by a normal distribution, ensuring that we used the correct equation for the distribution. A comparison of the UPL to the 3xRDL confirmed the greater AG value was the UPL. Therefore, we determined that the emission limit would reasonably account for variability, as well as measurability, and that no changes to the standard floor calculation procedure were warranted for this pollutant and category, and we are proposing that the MACT floor is 5.1E-04 lb/ton coke for AG from pushing sources.

The MACT floor dataset for HCN from new pushing sources includes 3 test runs from a single unit that we identified as the best performing unit based on average emissions performance. We evaluated the variance of the best performing unit and our analysis showed that this unit, which was identified as the best unit based on average emissions, also had the lowest variance. We determined that the dataset is best represented by a normal distribution, ensuring that we used the correct equation for the distribution. Therefore, we determined that the emission limit would reasonably account for variability, as well as measurability, and that no changes to the standard floor calculation procedure were warranted for this pollutant and category, and we are proposing that the MACT floor is 3.8E-05 lb/ton coke for HCN from pushing sources.

The MACT floor dataset for PAH from new pushing sources includes 3 test runs from a single unit that we identified as the best performing unit based on average emissions performance. We evaluated the variance of the best performing unit and our analysis showed that this unit, which was identified as the best unit based on average emissions, also had the lowest variance. We determined that the dataset is best represented by a normal distribution, ensuring that we used the correct equation for the distribution. Therefore, we determined that the emission limit would reasonably account for variability, as well as measurability,  and that no changes to the standard floor calculation procedure were warranted for this pollutant and category, and we are proposing that the MACT floor is 1.4E-05 lb/ton coke for PAH from pushing sources.

The MACT floor dataset for Hg from new ByP battery combustion sources includes 3 test runs from a single unit that we identified as the best performing unit based on average emissions performance. We evaluated the variance of the best performing unit and our analysis showed that this unit, which was identified as the best unit based on average emissions, also had the lowest variance. We determined that the dataset is best represented by a normal distribution, ensuring that we used the correct equation for the distribution. A comparison of the UPL to the 3xRDL confirmed the greater Hg value was the UPL. Therefore, we determined that the emission limit would reasonably account for variability, as well as measurability,  and that no changes to the standard floor calculation procedure were warranted for this pollutant and category, and we are proposing that the MACT floor is 7.1E-06 lb/ton coke for Hg from ByP battery combustion sources.

The MACT floor dataset for PM from new ByP battery combustion sources includes 3 test runs from a single unit that we identified as the best performing unit based on average emissions performance. We evaluated the variance of the best performing unit and our analysis showed that this unit, which was identified as the best unit based on average emissions, also had the lowest variance. We determined that the dataset is best represented by a normal distribution, ensuring that we used the correct equation for the distribution. A comparison of the UPL to the 3xRDL confirmed the greater PM value was the UPL. Therefore, we determined that the emission limit would reasonably account for variability, as well as measurability,  and that no changes to the standard floor calculation procedure were warranted for this pollutant and category, and we are proposing that the MACT floor is 0.014 gr/dscf for PM from ByP battery combustion sources.

The MACT floor dataset for AG from new ByP battery combustion sources includes 3 test runs from a single unit that we identified as the best performing unit based on average emissions performance. We evaluated the variance of the best performing unit and our analysis showed that this unit, which was identified as the best unit based on average emissions, also had the lowest variance. We determined that the dataset is best represented by a lognormal distribution, ensuring that we used the correct equation for the distribution. A comparison of the UPL to the 3xRDL confirmed the greater AG value was the UPL. Therefore, we determined that the emission limit would reasonably account for variability, as well as measurability,  and that no changes to the standard floor calculation procedure were warranted for this pollutant and category, and we are proposing that the MACT floor is 0.013 lb/ton coke for AG from ByP battery combustion sources.

The MACT floor dataset for HCN from new ByP battery combustion sources includes 3 test runs from a single unit that we identified as the best performing unit based on average emissions performance. We evaluated the variance of the best performing unit and our analysis showed that this unit, which was identified as the best unit based on average emissions, had the second lowest variance. Note, the source with the lowest variance is the third ranked unit based on average emissions, and would result in a less stringent UPL. We determined that the dataset is best represented by a normal distribution, ensuring that we used the correct equation for the distribution. Therefore, we determined that the emission limit would reasonably account for variability, as well as measurability, and that no changes to the standard floor calculation procedure were warranted for this pollutant and category, and we are proposing that the MACT floor is 7.4E-04 lb/ton coke for HCN from ByP battery combustion sources.

The MACT floor dataset for Hg from new HNR HRSG main stack sources includes 3 test runs from a single unit that we identified as the best performing unit based on average emissions performance. We evaluated the variance of the best performing unit and our analysis showed that this unit, which was identified as the best unit based on average emissions, had the lowest variance. We determined that the dataset is best represented by a lognormal distribution, ensuring that we used the correct equation for the distribution. Therefore, we determined that the emission limit would reasonably account for variability, as well as measurability, and that no changes to the standard floor calculation procedure were warranted for this pollutant and category, and we are proposing that the MACT floor is 1.5E-06 gr/dscf for Hg from new HNR HRSG main stack sources.

The MACT floor dataset for AG from new HNR HRSG main stack sources includes 3 test runs from a single unit that we identified as the best performing unit based on average emissions performance. We evaluated the variance of the best performing unit and our analysis showed that this unit, which was identified as the best unit based on average emissions, had the lowest variance. We determined that the dataset is best represented by a normal distribution, ensuring that we used the correct equation for the distribution. Therefore, we determined that the emission limit would reasonably account for variability, as well as measurability, and that no changes to the standard floor calculation procedure were warranted for this pollutant and category, and we are proposing that the MACT floor is 0.0029 gr/dscf for AG from new HNR HRSG main stack sources.

The HNR HRSG bypass/waste heat stack category only had one source with available data, including 3 test runs for Hg, PM, AG, PAH, and Formaldehyde. As such the existing and new source limits were set at the same value with no changes to the standard floor calculation procedure. We are proposing that the MACT floor is 5.2E-06 gr/dscf for Hg, 0.013 gr/dscf for PM, 0.058 gr/dscf for AG, 6.5E-07 gr/dscf for PAH, and 4.7E-03 gr/dscf for Formaldehyde from HNR HRSG bypass/waste heat stacks.

The MACT floor dataset for Hg from existing heat recovery (HR) HRSG bypass/waste heat stack sources includes 6 test runs from two units that we identified as the top 5 best performing units with available information based on average emissions performance. We determined that the dataset is best represented by a skewed distribution, ensuring that we used the correct equation for the distribution. Therefore, we determined that the emission limit would reasonably account for variability, as well as measurability, and that no changes to the standard floor calculation procedure were warranted for this pollutant and category, and we are proposing that the MACT floor is 1.7E-05 gr/dscf for Hg from existing HR HRSG bypass/waste heat stack sources.

The MACT floor dataset for Hg from new HR HRSG bypass/waste heat stack sources includes 3 test runs from a single unit that we identified as the best performing unit based on average emissions performance. We evaluated the variance of the best performing unit and our analysis showed that this unit, which was identified as the best unit based on average emissions, had the lowest variance. We determined that the dataset is best represented by a normal distribution, ensuring that we used the correct equation for the distribution. Therefore, we determined that the emission limit would reasonably account for variability, as well as measurability, and that no changes to the standard floor calculation procedure were warranted for this pollutant and category, and we are proposing that the MACT floor is 7.8E-06 gr/dscf for Hg from new HR HRSG bypass/waste heat stack sources.

The MACT floor dataset for PM from existing HR HRSG bypass/waste heat stack sources includes 6 test runs from two units that we identified as the top 5 best performing units with available information based on average emissions performance. We determined that the dataset is best represented by a lognormal distribution, ensuring that we used the correct equation for the distribution. Therefore, we determined that the emission limit would reasonably account for variability, as well as measurability, and that no changes to the standard floor calculation procedure were warranted for this pollutant and category, and we are proposing that the MACT floor is 0.034 gr/dscf for PM from existing HR HRSG bypass/waste heat stack sources.

The MACT floor dataset for PM from new HNR HRSG bypass/waste heat stack sources includes 3 test runs from a single unit that we identified as the best performing unit based on average emissions performance. We evaluated the variance of the best performing unit and our analysis showed that this unit, which was identified as the best unit based on average emissions, had the lowest variance. We determined that the dataset is best represented by a lognormal distribution, ensuring that we used the correct equation for the distribution. Therefore, we determined that the emission limit would reasonably account for variability, as well as measurability, and that no changes to the standard floor calculation procedure were warranted for this pollutant and category, and we are proposing that the MACT floor is 0.025 gr/dscf for PM from new HR HRSG bypass/waste heat stack sources.

The MACT floor dataset for AG from existing HNR HRSG bypass/waste heat stack sources includes 6 test runs from two units that we identified as the top 5 best performing units with available information based on average emissions performance. We determined that the dataset is best represented by a lognormal distribution, ensuring that we used the correct equation for the distribution. Therefore, we determined that the emission limit would reasonably account for variability, as well as measurability, and that no changes to the standard floor calculation procedure were warranted for this pollutant and category, and we are proposing that the MACT floor is 0.13 gr/dscf for AG from existing HNR HRSG bypass/waste heat stack sources.

The MACT floor dataset for AG from new HNR HRSG bypass/waste heat stack sources includes 3 test runs from a single unit that we identified as the best performing unit based on average emissions performance. We evaluated the variance of the best performing unit and our analysis showed that this unit, which was identified as the best unit based on average emissions, had the lowest variance. We determined that the dataset is best represented by a normal distribution, ensuring that we used the correct equation for the distribution. Therefore, we determined that the emission limit would reasonably account for variability, as well as measurability, and that no changes to the standard floor calculation procedure were warranted for this pollutant and category, and we are proposing that the MACT floor is 0.070 gr/dscf for AG from new HNR HRSG bypass/waste heat stack sources.

The HNR HRSG bypass/waste heat stack category only had one source with available data, including 3 test runs for PAH. As such the existing and new source limits were set at the same value with no changes to the standard floor calculation procedure. We are proposing that the MACT floor is 6.5E-07 gr/dscf for PAH from existing and new HNR HRSG bypass/waste heat stacks sources.

The MACT floor dataset for formaldehyde from existing HNR HRSG bypass/waste heat stack sources includes 5 test runs from two units that we identified as the top 5 best performing units with available information based on average emissions performance. We determined that the dataset is best represented by a lognormal distribution, ensuring that we used the correct equation for the distribution. Therefore, we determined that the emission limit would reasonably account for variability, as well as measurability, and that no changes to the standard floor calculation procedure were warranted for this pollutant and category, and we are proposing that the MACT floor is 0.0011 gr/dscf for formaldehyde from existing HNR HRSG bypass/waste heat stack sources.

The MACT floor dataset for formaldehyde from new HNR HRSG bypass/waste heat stack sources includes 3 test runs from a single unit that we identified as the best performing unit based on average emissions performance. We evaluated the variance of the best performing unit and our analysis showed that this unit, which was identified as the best unit based on average emissions, had the lowest variance. We determined that the dataset is best represented by a lognormal distribution, ensuring that we used the correct equation for the distribution. Therefore, we determined that the emission limit would reasonably account for variability, as well as measurability, and that no changes to the standard floor calculation procedure were warranted for this pollutant and category, and we are proposing that the MACT floor is 1.9E-05 gr/dscf for formaldehyde from new HNR HRSG bypass/waste heat stack sources.


[Federal Register Volume 77, Number 129 (Thursday, July 5, 2012)]
[Notices]
[Pages 39700-39701]
[FR Doc No: 2012-16391]

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1200 Pennsylvania Ave. NW., Washington, DC 20460; and (2) OMB, by mail
to: Office of Information and Regulatory Affairs, Office of Management
and Budget (OMB), Attention: Desk Officer for EPA, 725 17th Street NW.,
Washington, DC 20503.

FOR FURTHER INFORMATION CONTACT: Kristen Fitzgerald, (Mail Code 5304P),
Environmental Protection Agency, 1200 Pennsylvania Ave. NW.,
Washington, DC 20460; telephone number:<PHONE_NUMBER>; fax number: 703-
308-8827; email address<EMAIL_ADDRESS>
SUPPLEMENTARY INFORMATION: EPA has submitted the following ICR to OMB
for review and approval according to the procedures prescribed in 5 CFR
1320.12. On March 20, 2012 (77 FR 16222), EPA sought comments on this
ICR pursuant to 5 CFR 1320.8(d). EPA received no comments. Any
additional comments on this ICR should be submitted to EPA and OMB
within 30 days of this notice.
    EPA has established a public docket for this ICR under Docket ID No
EPA-HQ-RCRA-2012-0163, which is available for online viewing at
www.regulations.gov, or in person viewing at the Resource Conservation
and Recovery Act (RCRA) Docket in the

EPA Docket Center (EPA/DC), EPA West, Room 3334, 1301 Constitution Ave.
NW., Washington, DC. The EPA/DC Public Reading Room is open from 8:30
a.m. to 4:30 p.m., Monday through Friday, excluding legal holidays. The
telephone number for the Reading Room is<PHONE_NUMBER>, and the
telephone number for the RCRA Docket is<PHONE_NUMBER>.
    Use EPA's electronic docket and comment system at
www.regulations.gov, to submit or view public comments, access the
index listing of the contents of the docket, and to access those
documents in the docket that are available electronically. Once in the
system, select ``docket search,'' then key in the docket ID number
identified above. Please note that EPA's policy is that public
comments, whether submitted electronically or in paper, will be made
available for public viewing at www.regulations.gov as EPA receives
them and without change, unless the comment contains copyrighted
material, Confidential Business Information (CBI), or other information
whose public disclosure is restricted by statute. For further
information about the electronic docket, go to www.regulations.gov.
    Title: Generator Standards Applicable to Laboratories Owned by
Eligible Academic Entities (Renewal).
    ICR numbers: EPA ICR No. 2317.02, OMB Control No. 2050-0204.
    ICR Status: This ICR is scheduled to expire on July 31, 2012. Under
OMB regulations, the Agency may continue to conduct or sponsor the
collection of information while this submission is pending at OMB. An
Agency may not conduct or sponsor, and a person is not required to
respond to, a collection of information, unless it displays a currently
valid OMB control number. The OMB control numbers for EPA's regulations
in title 40 of the CFR, after appearing in the Federal Register when
approved, are listed in 40 CFR part 9, are displayed either by
publication in the Federal Register or by other appropriate means, such
as on the related collection instrument or form, if applicable. The
display of OMB control numbers in certain EPA regulations is
consolidated in 40 CFR part 9.
    Abstract: The EPA has finalized an alternative set of generator
requirements applicable to laboratories owned by eligible academic
entities, as defined in the final rule. The rule, which established a
new Subpart K within 40 CFR part 262, provides a flexible and
protective set of regulations that address the specific nature of
hazardous waste generation and accumulation in laboratories owned by
colleges and universities, and teaching hospitals and non-profit
research institutes that are either owned by or formally affiliated
with a college or university. In addition, the final rule allows
colleges and universities and these other eligible academic entities
formally affiliated with a college or university the discretion to
determine the most appropriate and effective method of compliance with
these requirements by allowing them the choice of managing their
hazardous wastes in accordance with the new alternative regulations as
set forth in Subpart K or remaining subject to the existing generator
regulations. The rule requires that an eligible academic entity
choosing to manage its unwanted materials will submit a Site
Identification Form on a one-time basis to the appropriate EPA Regional
Administrator or, when appropriate, State Director in authorized States
that have adopted the final rule. EPA and States will use this
information to identify the entities and sites subject to the Subpart K
requirements and ensure that all of these sites are managing their
unwanted materials in a manner that is protective of human health and
the environment.
    When submitting the Site Identification Form, the eligible academic
entity must, at a minimum, fill out the fields on the form that are
specified at section 262.203(b)(1)-(11). Section 262.203(c) provides
that an eligible academic entity must keep a copy of the notification
on file at the eligible academic entity while its laboratories are
subject to Subpart K. Section 262.203(d) provides that a teaching
hospital that is not owned by a college or university must keep a copy
of its formal written affiliation agreement with a college or
university on file at the teaching hospital while its laboratories are
subject to Subpart K. Section 262.203(e) provides that a non-profit
research institute that is not owned by a college or university must
keep a copy of its formal written affiliation agreement with a college
or university on file at the non-profit research institute while its
laboratories are subject to Subpart K. An eligible academic entity must
submit a separate notification of withdrawal (Site Identification Form)
for each EPA Identification Number (or site, for conditionally exempt
small quantity generators) that is withdrawing from the requirements of
Subpart K.
    Burden Statement: The annual public reporting and recordkeeping
burden for this collection of information is estimated to average .04
hours per response. The hourly reporting burden associated with Subpart
K is estimated to be 10 minutes per respondent. This includes time for
preparing and submitting a Site Identification Form to opt into Subpart
K. The hourly recordkeeping burden associated with Subpart K is
estimated to be approximately 280 hours per respondent. This includes
time for reading the regulations, labeling containers, and preparing
and maintaining specified documents (e.g., Laboratory Management Plan).
    Burden means the total time, effort, or financial resources
expended by persons to generate, maintain, retain, or disclose or
provide information to or for a Federal agency. This includes the time
needed to review instructions; develop, acquire, install, and utilize
technology and systems for the purposes of collecting, validating, and
verifying information, processing and maintaining information, and
disclosing and providing information; adjust the existing ways to
comply with any previously applicable instructions and requirements
which have subsequently changed; train personnel to be able to respond
to a collection of information; search data sources; complete and
review the collection of information; and transmit or otherwise
disclose the information.
    Respondents/Affected Entities: Private sector; State, Local, or
Tribal Governments.
    Estimated Number of Respondents: 99.
    Frequency of Response: Yearly, Once, On occasion.
    Estimated Total Annual Hour Burden: 27,719 hours.
    Estimated Total Annual Cost: $1,322,414, which includes $1,218,694
annualized labor costs and $103,720 annualized capital or O&M costs.
    Changes in the Estimates: There is an increase of 13,260 hours in
the total estimated burden currently identified in the OMB Inventory of
Approved ICR Burdens. This increase is an adjustment to the existing
estimates based on data gathered through industry consultations and
review of the Resource Conservation and Recovery Act Information
(RCRAInfo) national database, not due to program changes.

John Moses,
Director, Collection Strategies Division.
[FR Doc. 2012-16391 Filed 7-3-12; 8:45 am]
BILLING CODE 6560-50-P


[Federal Register Volume 81, Number 14 (Friday, January 22, 2016)]
[Notices]
[Pages 3847-3850]
[FR Doc No: 2016-01230]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. IC-31958; File No. 812-14449]

The Guardian Insurance & Annuity Company, Inc., et al; Notice of
Application

January 15, 2016.
AGENCY: Securities and Exchange Commission (``Commission'').

ACTION: Notice of application for an order approving the substitution
of certain securities pursuant to Section 26(c) of the Investment
Company Act of 1940, as amended (the ``1940 Act'').

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APPLICANTS: The Guardian Insurance & Annuity Company (the ``Company''),
The Guardian Separate Account K, The Guardian Separate Account M, The
Guardian Separate Account N (each, a ``Life Account'') and The Guardian
Separate Account R (the ``Annuity Account'' and together with the Life
Accounts, the ``Accounts'') (together, the ``Applicants'').

SUMMARY OF APPLICATION: The Applicants seek an order pursuant to
Section 26(c) of the 1940 Act approving the substitution of shares
issued by certain investment portfolios (the ``Existing Funds'') of
registered investment companies with shares of certain investment
portfolios (the ``Replacement Funds'') of registered investment
companies, under certain variable life insurance policies and variable
annuity contracts issued by the Company (the ``Contracts''), each
funded through the Accounts.

FILING DATE: The application was filed on April 24, 2015, and amended
on September 4, 2015, and November 10, 2015.

HEARING OR NOTIFICATION OF HEARING: An order granting the requested
relief will be issued unless the Commission orders a hearing.
Interested persons may request a hearing by writing to the Commission's
Secretary and serving applicants with a copy of the request, personally
or by mail. Hearing requests should be received by the Commission by
5:30 p.m. on February 9, 2016, and should be accompanied by proof of
service on applicants, in the form of an affidavit or, for lawyers, a
certificate of service. Pursuant to Rule 0-5 under the 1940 Act,
hearing requests should state the nature of the writer's interest, any
facts bearing upon the desirability of a hearing on the matter, the
reason for the request, and the issues contested. Persons who wish to
be notified of a hearing may request notification by writing to the
Commission's Secretary.

ADDRESSES: Secretary, U.S. Securities and Exchange Commission, 100 F
Street NE., Washington, DC 20549-1090; Applicants: Richard T. Potter,
The Guardian Insurance & Annuity Company, Inc., 7 Hanover Square, New
York, New York 10004.

FOR FURTHER INFORMATION CONTACT: Elizabeth G. Miller, Senior Counsel,
at<PHONE_NUMBER>, or Holly L. Hunter-Ceci, Branch Chief, at (202) 551-
6825 (Division of Investment Management, Chief Counsel's Office).

SUPPLEMENTARY INFORMATION: The following is a summary of the
application. The complete application may be obtained via the
Commission's Web site by searching for the file number, or an applicant
using the Company name box, at http://www.sec.gov/search/search.htm or
by calling<PHONE_NUMBER>.

Applicants' Representations

    1. The Company is a stock life insurance company incorporated in
the State of Delaware. The Company is wholly owned by The Guardian Life
Insurance Company of America, a mutual life insurance company organized
in the State of New York (``Guardian Life''). Guardian Life does not
issue the Contracts and does not guarantee any benefits provided under
the Contracts.
    2. Each Account is a ``separate account'' as defined in Rule 0-1(e)
under the 1940 Act and is registered with the Commission as a unit
investment trust under the 1940 Act. The interests in each Account
offered through the Contracts have been registered under the Securities
Act of 1933 on Form N-4 for the variable annuity Contracts offered
under the Annuity Account, and on Form N-6 for the variable life
insurance Contracts offered under the Life Accounts. The application
sets forth the registration statement file numbers for the Accounts.
Each Account was established by the board of directors of the Company
under the laws of the State of Delaware as follows:

------------------------------------------------------------------------
           Separate account                     Date established
------------------------------------------------------------------------
The Guardian Separate Account K.......  November 18, 1993.
The Guardian Separate Account M.......  February 27, 1997.
The Guardian Separate Account N.......  September 23, 1999.
The Guardian Separate Account R.......  March 12, 2003.
------------------------------------------------------------------------

    3. Each Account supports certain Contracts issued by the Company.
Each Account consists of investment divisions, each corresponding to a
registered open-end management investment company or series of a
registered open-end management investment company in which the Account
invests. The assets of each Account equal to its reserves and other
liabilities are not chargeable with the Company's obligations except
those under Contracts issued through such Account. Income, gains and
losses, whether or not realized, of each Account are kept separate from
other income, gains or losses of the Company and other separate
accounts. The income and capital gains or capital losses of each
investment division, whether realized or unrealized, are credited to or
charged against the assets held in that division according to the terms
of the applicable Contract, without regard to the income, capital gains
or capital losses of the other investment divisions of the Company.
    4. The Contracts are flexible premium or modified scheduled premium
variable life insurance policies and variable annuity contracts. For so
long as a variable life insurance Contract remains in force or a
variable annuity Contract has not yet been annuitized, a Contract owner
may transfer all or part of their accumulation values among the
variable investment options under the

Contracts, subject to certain limits as described in the applicable
Contract prospectus, or to a fixed or indexed account in the case of
some of the Contracts. The terms and conditions, including charges and
expenses, applicable to each Contract are described in the prospectus
relating to such Contract.
    5. The Applicants state that under the Contracts, the Company
reserves the right, subject to Commission approval and compliance with
applicable law, to substitute shares of one registered open-end
management investment company available as a variable investment option
for shares of another registered open-end management investment
company.
    6. The Applicants propose the substitution of shares of Existing
Funds currently held by the Life Accounts and the Annuity Account to
support variable life insurance policies and variable annuity contracts
issued by the Company for shares of the Replacement Funds
(``Substitutions''):

------------------------------------------------------------------------
       Substitution             Existing fund         Replacement fund
------------------------------------------------------------------------
1.........................  Pioneer Disciplined    AB VPS Growth and
                             Value VCT Portfolio--  Income Portfolio--
                             Class II Shares.       Class B Shares.
2.........................  Columbia Variable      Janus Aspen Series--
                             Portfolio--Seligman    Global Technology
                             Global Technology      Portfolio--Service
                             Fund--Class 2 Shares.  Shares.
3.........................  Dreyfus Variable       Putnam VT Investors
                             Investment Fund:       Fund--Class IB
                             Appreciation           Shares.
                             Portfolio--Service
                             Class Shares.
4.........................  AB VPS International   Templeton Foreign VIP
                             Value Portfolio--      Fund--Class 2
                             Class B Shares.        Shares.
------------------------------------------------------------------------

    7. Applicants represent that under the proposed Substitutions, each
Existing Fund's shares will be redeemed for cash, and the cash from the
redemption will be used to purchase shares of the respective
Replacement Fund.
    8. The Applicants represent that the proposed Substitutions and the
selection of the Replacement Funds were not motivated by any financial
consideration paid or to be paid to the Company or its affiliates by
the respective Replacement Fund, its adviser or underwriter, or their
affiliates.
    9. The Applicants represent that each proposed Substitution is
appropriate given the substantial similarity between the stated
investment objectives and principal investment strategies of each
Existing Fund as compared to each corresponding Replacement Fund, which
would offer Contract owners continuity of their investment strategies
and risks. The Applicants state that the proposed Substitutions are
expected to provide competitive long-term returns as compared to the
Existing Funds. Additional information for each Existing Fund and the
corresponding Replacement Fund, including investment objectives,
principal investment strategies, principal risks, and performance can
be found in the application.
    10. The Applicants represent that the proposed Substitutions will
be described to the applicable prospectuses for the Contracts filed
with the Commission or in other supplemental disclosure documents for
the Contracts (collectively, the ``Supplements''). The Supplements
will: (a) Give Contract owners notice of the Company's intention to
take the necessary actions to substitute shares of the Existing Funds
on the Substitution Date (defined herein); (b) advise Contract owners
of their pre- and post-Substitution transfer rights; (c) instruct
Contract owners how to submit transfer requests in light of the
proposed Substitutions; and (d) advise Contract owners that any
Contract value remaining in an Existing Fund Subaccount on the
Substitution Date will be transferred to a subaccount investing in the
corresponding Replacement Fund, and that the Substitutions will take
place at relative net asset value. From the date of the Supplements
(which will be at least 30 days prior to the Substitution Date) until
the Substitution Date, Contract owners will have a pre-Substitution
transfer right, the specifics of which will be determined by whether
they have selected an optional living benefit rider, as discussed in
more detail in the application.\1\
---------------------------------------------------------------------------

    \1\ Certain Contract owners have selected a Contract rider that
provides a living benefit rider. The terms of the living benefit
riders offered by the Company limit the available investment options
to identified allocation models consisting of a specified selection
of registered open-end management investment companies available as
variable investment options under the applicable Contract. Each
allocation model sets forth a specific allocation percentage for
each variable investment option within the model. For Contract
owners who have selected a living benefit rider, all transfers,
including the transfers contemplated by condition 6 of this Notice,
are limited to transfers of the entire Contract value to one of the
other allocation models available under the applicable living
benefit rider. On the Substitution Date, assets in a living benefit
rider allocation model that are held in an Existing Fund Subaccount
will be transferred to the applicable Replacement Fund Subaccount.
---------------------------------------------------------------------------

    11. The Supplement will also inform Contract owners that, except as
described in the market timing limitations section or limitations
imposed by any living benefit riders of the relevant prospectus or
disclosure document, the Company will not exercise any rights reserved
by it under the Contracts to impose additional restrictions on
transfers out of a Replacement Fund Subaccount from the date of the
Supplements (which will be at least 30 days prior to the Substitution
Date) until at least 30 days after the Substitution Date.
    12. The Company will send affected Contract owners a written
confirmation of the completed proposed Substitutions in accordance with
Rule 10b-10 under the Securities Exchange Act of 1934. The Company will
deliver to each affected Contract owner within five business days of
the date of the proposed Substitutions (the ``Substitution Date'') a
written confirmation which will include: (a) A confirmation that the
proposed Substitutions were carried out as previously notified; (b) a
restatement of the information set forth in the Supplements; and (c)
before and after account values. The confirmation statement will also
include or be accompanied by a statement that reiterates the free
transfer rights disclosed in the Supplements. The Company will also
send each Contract owner a current prospectus for each Replacement Fund
involved in the proposed Substitutions to the extent that such Contract
owners have not previously received a copy.
    13. Each Substitution will take place at the relative net asset
value determined on the Substitution Date pursuant to Section 22(c) of
the 1940 Act and Rule 22c-1 thereunder, with no change in the amount of
any Contract owner's Contract value or death benefit or in the dollar
value of his or her investments in any of the subaccounts. The rights
or obligations of the Company under the Contracts will not be altered
in any way. The proposed Substitutions will take place with no change
to the Contract owner's Contract value, cash value and accumulation
value.

    14. Applicants will effectuate the Substitutions after the issuance
of the requested order by the Commission. As of the Substitution Date,
shares of the Existing Fund will be redeemed for cash. The Company, on
behalf of the Accounts, will simultaneously place a redemption request
with the Existing Fund and a purchase order with the Replacement Fund
so that the purchase of the Replacement Fund shares will be for the
exact amount of the redemption proceeds.
    15. The Company or its affiliates will pay all expenses and
transaction costs of the proposed Substitutions, including legal and
accounting expenses, any applicable brokerage expenses and other fees
and expenses. No fees or charges will be assessed to the Contract
owners to effect the proposed Substitutions. The proposed Substitutions
will not result in an increase in Contract fees and expenses, including
mortality and expense risk fees and administration and distribution
fees charged by the Separate Accounts. The proposed Substitutions will
not result in adverse tax consequences to Contract owners and will not
alter any tax benefits associated with the Contracts. No costs of the
proposed Substitutions will be borne directly or indirectly by Contract
owners.
    16. Applicants will not receive, for three years from the
Substitution Date any direct or indirect benefits from the applicable
Replacement Fund, its adviser or underwriter (or their affiliates), in
connection with assets attributable to Contracts affected by the
proposed Substitutions, at a higher rate than they had received from
the Existing Fund, its adviser or underwriter (or their affiliates),
including without limitation 12b-1 fees, shareholder service,
administrative or other service fees, revenue sharing, or other
arrangements.

Legal Analysis

    1. Applicants request that the Commission issue an order pursuant
to Section 26(c) of the 1940 Act approving the proposed Substitution by
the Company of shares of each Replacement Fund for shares of the
corresponding Existing Fund. Section 26(c) of the 1940 Act requires the
depositor of a registered unit investment trust holding securities of a
single issuer to receive Commission approval before substituting the
securities held by the trust. Section 26(c) provides that such approval
shall be granted by order of the Commission if the evidence establishes
that the substitution is consistent with the protection of investors
and the purposes of the 1940 Act.
    2. The Applicants submit that the proposed Substitutions meet the
standards set forth in Section 26(c) and that, if implemented, the
Substitutions would not raise any of the concerns that Congress
intended to address when the 1940 Act was amended to include this
provision. As described in the application, Applicants represent that
each Replacement Fund and its corresponding Existing Fund have
substantially similar investment objectives and principal investment
strategies, which would offer Contract owners continuity of their
investment strategies and risks, and that Existing Funds will have
lower net operating expenses immediately after the proposed
Substitutions.
    3. The Contracts will offer Contract owners the opportunity to make
at least one transfer of Contract value from the subaccount investing
in the Existing Fund (for at least 30 days before the Substitution
Date), or the Replacement Fund (for at least 30 days after the
Substitution Date) to any other available investment option under the
Contract without any cost or limitation other than those disclosed in
the applicable prospectuses previously provided to Contract owners.

Applicants' Conditions

    Applicants agree that any order granting the requested relief will
be subject to the following conditions:
    1. The proposed Substitutions will not be effected unless the
Company determines that: (a) The Contracts allow the substitution of
shares of registered open-end investment companies in the manner
contemplated by the application; (b) the proposed Substitutions can be
consummated as described in the application under applicable insurance
laws; and (c) any regulatory requirements in each jurisdiction where
the Contracts are qualified for sale have been complied with to the
extent necessary to complete the proposed Substitutions.
    2. The Company or its affiliates will pay all expenses and
transaction costs of the Substitutions, including legal and accounting
expenses, any applicable brokerage expenses and other fees and
expenses. No fees or charges will be assessed to the Contract owners to
effect the proposed Substitutions.
    3. The proposed Substitutions will be effected at the relative net
asset values of the respective shares in conformity with Section 22(c)
of the 1940 Act and Rule 22c-1 thereunder without the imposition of any
transfer or similar charges by Applicants. The proposed Substitutions
will be effected without change in the amount or value of any Contracts
held by affected Contract owners.
    4. The proposed Substitutions will in no way alter the tax
treatment of affected Contract owners in connection with their
Contracts, and no tax liability will arise for Contract owners as a
result of the proposed Substitutions.
    5. The rights or obligations of the Company under the Contracts of
affected Contract owners will not be altered in any way. The proposed
Substitutions will not adversely affect any riders under the Contracts
since each Replacement Fund is an allowable investment option for use
with such riders.
    6. Affected Contract owners will be permitted to make at least one
transfer of Contract value from the subaccount investing in the
Existing Fund (before the Substitution Date) or the Replacement Fund
(after the Substitution Date) to any other available investment option
under the Contract without charge for a period beginning at least 30
days before the Substitution Date through at least 30 days following
the Substitution Date. Except as described in any market timing/short-
term trading provisions of the relevant prospectus, the Company will
not exercise any right it may have under the Contract to impose
restrictions on transfers between the subaccounts under the Contracts,
including limitations on the future number of transfers, for a period
beginning at least 30 days before the Substitution Date through at
least 30 days following the Substitution Date.
    7. All affected Contract owners will be notified, at least 30 days
before the Substitution Date about: (a) The intended substitution of
the Existing Funds with the Replacement Funds; (b) The intended
Substitution Date; and (c) information with respect to transfers as set
forth in Condition 6 above. In addition, the Company will deliver to
all affected Contract owners, at least 30 days before the Substitution
Date, a prospectus for each applicable Replacement Fund.
    8. The Company will deliver to each affected Contract owner within
five (5) business days of the Substitution Date a written confirmation
which will include: (a) A confirmation that the proposed Substitutions
were carried out as previously notified; (b) a restatement of the
information set forth in the Supplements; and (c) before and after
account values.
    9. Applicants will not receive, for three years from the
Substitution Date, any direct or indirect benefits from the applicable
Replacement Fund, its adviser or underwriter (or their

affiliates), in connection with assets attributable to Contracts
affected by the proposed Substitutions, at a higher rate than they had
received from the Existing Fund, its adviser or underwriter (or their
affiliates), including without limitation 12b-1 fees, shareholder
service, administrative or other service fees, revenue sharing, or
other arrangements.

    For the Commission, by the Division of Investment Management,
under delegated authority.
Robert W. Errett,
Deputy Secretary.
[FR Doc. 2016-01230 Filed 1-21-16; 8:45 am]
 BILLING CODE 8011-01-P


[Federal Register Volume 83, Number 127 (Monday, July 2, 2018)]
[Notices]
[Pages 31009-31011]
[FR Doc No: 2018-14110]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-83524; File No. SR-NYSEAMER-2018-29]

Self-Regulatory Organizations; NYSE American LLC; Notice of
Filing and Immediate Effectiveness of Proposed Change To Modify the
NYSE American Options Fee Schedule

June 26, 2018
    Pursuant to Section 19(b)(1) \1\ of the Securities Exchange Act of
1934 (``Act'') \2\ and Rule 19b-4 thereunder,\3\ notice is hereby given
that, on June 11, 2018, NYSE American LLC (``Exchange'' or ``NYSE
American'') filed with the Securities and Exchange Commission
(``Commission'') the proposed rule change as described in Items I, II,
and III below, which Items have been prepared by the self-regulatory
organization. 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\ 15 U.S.C. 78a.
    \3\ 17 CFR 240.19b-4.
---------------------------------------------------------------------------

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

    The Exchange proposes to modify the NYSE American Options Fee
Schedule (``Fee Schedule''). The Exchange proposes to implement the fee
change effective June 11, 2018.\4\ The proposed change is available on
the Exchange's website at www.nyse.com, at the principal office of the
Exchange, and at the Commission's Public Reference Room.
---------------------------------------------------------------------------

    \4\ The Exchange originally filed to amend the Fee Schedule on
June 1, 2018 (SR-NYSEAmer-2018-25) and withdrew such filing on June
11, 2018.
---------------------------------------------------------------------------

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 self-regulatory organization
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 those 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 parts of such statements.

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

1. Purpose
    The purpose of this filing is to modify the Fee Schedule, effective
June 11, 2018. Specifically, the Exchange proposes to modify certain
transaction fees.
Rates To Incentivize Non-Customer, Non-Market Maker Volume
    First, the Exchange proposes to eliminate the reduced rates
available to ATP Holders that transact a certain amount of Electronic
volume as ``Non-Customer, Non-Market Maker'' (i.e., Electronic volume
as a Broker-Dealer, Firm, Non-NYSE American Market Maker, or
Professional Customer). Currently, an ATP Holder that transacts
Electronic volume as a Non-Customer, Non-Market Maker at least 0.05%
above that ATP Holder's 2nd Quarter 2017 Non-Customer, Non-Market Maker
Electronic volume is charged $0.36 per contract (as opposed to $0.50)
for Penny Pilot Issues and $0.60 (as opposed to $0.75) per contract in
Non-Penny Pilot Issues.\5\ The Exchange proposes to

eliminate these reduced rates and references thereto from the Fee
Schedule.\6\
---------------------------------------------------------------------------

    \5\ Such calculations exclude volume in CUBE, QCC, Strategy
Executions, or volume attributable to orders routed to another
exchange in connection with the Options Order Protection and Locked/
Crossed Market Plan referenced in Rule 991NY. See Fee Schedule,
I.A., note 7, available here, https://www.nyse.com/publicdocs/nyse/markets/american-options/NYSE_American_Options_Fee_Schedule.pdf.
    \6\ See proposed Fee Schedule, Section I.A. The Exchange notes
that rather than delete note 7 to Section I.A. it is replacing the
now deleted text with the reduced Manual rate proposed herein. See,
e.g., infra n. 10.
---------------------------------------------------------------------------

Rates for Manual Transaction (i.e., Executed in Open Outcry)
    Next, the Exchange proposes to modify the fees for Manual
transactions assessed on NYSE American Options Market Makers (``Market
Makers'') and Specialists and e-Specialists (collectively,
``Specialists'').\7\ The Exchange proposes to charge Market Makers
$0.25 per contract (up from $0.20) and to charge Specialists $0.18 per
contract (up from $0.13).\8\
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    \7\ Specialists and e-Specialist must be registered as Market
Makers on the Exchange and are subject to heightened quoting
obligations. See, e.g., Fee Schedule, Key Terms and Definitions; see
also Rules 920NY, 927NY and 927.4NY.
    \8\ See proposed Fee Schedule, Section I.A.
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    The Exchange also proposes to charge a reduced rate for Manual
transactions to those Market Makers or Specialists that participate in
the Prepayment Program, as outlined in the Fee Schedule.\9\
Specifically, participating Market Makers would be charged $0.23 per
contract and participating Specialists would be charged $0.17 per
contract, and such changes and references thereto would be set forth in
the Fee Schedule.\10\ For additional clarity, the Exchange also
proposes to modify Section I.D. (Prepayment Program) to make clear that
participation in such program would entitle participants to these
proposed reduced manual rates.\11\
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    \9\ See Fee Schedule, Section I.D. (describing Prepayment
Program).
    \10\ See proposed Fee Schedule, Section I.A., note 7.
    \11\ See proposed Fee Schedule, Section I.D.
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Complex Surcharge for Non-Customer Complex Orders
    Currently, the exchange applies a $0.10 per contract surcharge to
any Electronic Non-Customer Complex Order that executes against a
Customer Complex Order, regardless of whether the execution occurs in a
Complex Order Auction (the ``Surcharge'').\12\ The Exchange offers a
reduced per contract Surcharge (of $0.07) to those ATP Holders that
achieve at least 0.20% of TCADV of Electronic Non-Customer Complex
Orders in a month. The Exchange proposes to increase the Surcharge to
$0.12. In addition, for ATP Holders that continue to qualify for the
reduced Surcharge, the Exchange proposes to increase this reduced
Surcharge to $0.10 per contract.\13\
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    \12\ See Fee Schedule, Section I.A, note 6. The Surcharge does
not apply to executions in CUBE Auctions.
    \13\ See proposed Fee Schedule, Section I.A, note 6. As is the
case today, the Surcharge would not apply to executions in CUBE
Auctions.
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2. Statutory Basis
    The Exchange believes that the proposed rule change is consistent
with Section 6(b) of the Act,\14\ in general, and furthers the
objectives of Sections 6(b)(4) and (5) of the Act,\15\ in particular,
because it provides for the equitable allocation of reasonable dues,
fees, and other charges among its members, issuers and other persons
using its facilities and does not unfairly discriminate between
customers, issuers, brokers or dealers.
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    \14\ 15 U.S.C. 78f(b).
    \15\ 15 U.S.C. 78f(b)(4) and (5).
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    The Exchange also believes that eliminating the reduced rates for
certain Non-Customer/Non-Market Maker volume is reasonable, equitable,
and non-discriminatory as it applies to all similarly situated
participants. The Exchange notes that the reduced rate did not generate
the desired result of Non-Customer/Non-Market Maker volume being
directed to the Exchange, and therefore the Exchange believes it is
reasonable to eliminate this incentive fee.
    The Exchange believes that the proposed modifications to the fees
charged to Market Makers for Manual transactions are reasonable,
equitable, and not unfairly discriminatory because the proposed rates
are consistent with rates charged for other Non-Customer volume (i.e.,
volume executed as Broker-Dealer, Firm, Non-NYSE American Market Maker,
or Professional Customer). The Exchange likewise believes that the
proposed (more favorable) rates charged to Specialists for Manual
transactions are reasonable, equitable, and non-discriminatory, because
Specialists have a heightened quoting obligations and higher overhead
costs related to such obligations. The Exchange also notes that the
proposed rates for Manual transactions are consistent with rates
charged on other options markets.\16\
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    \16\ See, e.g., NYSE Arca Options fee schedule, available here,
https://www.nyse.com/publicdocs/nyse/markets/arca-options/NYSE_Arca_Options_Fee_Schedule.pdf (charging NYSE Arca Market Makers
$0.25 per contract executed manually and charging Lead Market Makers
(or LMMs) $0.18 per contract executed manually); BOX options fee
schedule, available here, https://boxoptions.com/regulatory/fee-schedule/ (charging market makers $0.25 per contract to transact
manually); and NASDAQ PHLX (``PHLX'') pricing schedule, available
here, http://www.nasdaqtrader.com/Micro.aspx?id=phlxpricing
(charging specialists and market makers $0.35 per contract to
transact manually).
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    The Exchange also believes the reduced Manual transaction rates for
ATP Holders that are participating in the Prepayment Program are
reasonable, equitable, and non-discriminatory, as it is available to
all similarly situated participants, and is designed to incent ATP
Holders to participate in the Prepayment Program. Any NYSE American
Options Market Makers may elect to participate (or elect not to
participate) in any of the Prepayment Programs. The Prepayment Programs
are designed to incent Market Makers to commit to directing their order
flow to the Exchange, which would benefit all market participants by
expanding liquidity, providing more trading opportunities and tighter
spreads, even to those market participants that are not eligible for
the Programs. Thus, the Exchange believes that introducing additional
incentives to encourage participation in the Prepayment Programs is
reasonable, equitable and not unfairly discriminatory to other market
participants because non-Market Makers and other market participants
will benefit from the anticipated greater capital commitment and
resulting liquidity on the Exchange. To the extent that participation
in the Prepayment Program is increased, all market participants would
benefit from increased liquidity on the Exchange by providing tighter
quoting and better prices, all of which perfects the mechanism for a
free and open market and national market system.
    The Exchange further believes the increase in the Complex Order
Surcharge is reasonable, equitable, and non-discriminatory, as it is
similar to charges on other exchanges, and is charged to all similarly
situated non-Customers.\17\ Applying the Surcharge to all market
participant orders except Customer orders is equitable and not unfairly
discriminatory because Customer order flow enhances liquidity on the
Exchange for the benefit of all market participants. Specifically,
Customer liquidity benefits all market participants by providing more
trading opportunities, which attracts Market Makers. An increase in the
activity of Specialists and Market Makers in turn

facilitates tighter spreads, which may cause an additional
corresponding increase in order flow from other market participants.
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    \17\ See id., PHLX pricing schedule (imposing a $0.12 surcharge
on certain complex orders); and Cboe fee schedule, available here,
http://www.cboe.com/publish/feeschedule/CBOEFeeSchedule.pdf (same).
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B. Self-Regulatory Organization's Statement on Burden on Competition

    In accordance with Section 6(b)(8) of the Act,\18\ the Exchange
does not believe that the proposed rule change would impose any burden
on competition that is not necessary or appropriate in furtherance of
the purposes of the Act. The Exchange believes the proposed changes,
particularly the elimination of the incentive for Non-Customer/Non-
Market Maker volume and the modification to Manual transaction rates,
would not place an unfair burden on competition as it would apply to
all similarly-situated market participants. The Exchange also notes
that the proposed rates for Manual transactions, as well as the
proposed modifications to the Surcharge, are competitive with rates
charges by other options exchanges.\19\ To the extent that the proposed
reduced Manual rates for certain participants in the Prepayment Program
make the Exchange a more attractive marketplace for market participants
at other exchanges, such market participants are welcome to become NYSE
American Options ATP Holders.
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    \18\ 15 U.S.C. 78f(b)(8).
    \19\ See supra notes 16 and 17.
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    The Exchange notes that it operates in a highly competitive market
in which market participants can readily favor competing venues. In
such an environment, the Exchange must continually review, and consider
adjusting, its fees and credits to remain competitive with other
exchanges. For the reasons described above, the Exchange believes that
the proposed rule change reflects this competitive environment.

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

    No written comments were solicited or received with respect to the
proposed rule change.

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

    The foregoing rule change is effective upon filing pursuant to
Section 19(b)(3)(A) \20\ of the Act and subparagraph (f)(2) of Rule
19b-4 \21\ thereunder, because it establishes a due, fee, or other
charge imposed by the Exchange.
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    \20\ 15 U.S.C. 78s(b)(3)(A).
    \21\ 17 CFR 240.19b-4(f)(2).
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    At any time within 60 days of the filing of such proposed rule
change, the Commission summarily may temporarily suspend such rule
change if it appears to the Commission that such action is necessary or
appropriate in the public interest, for the protection of investors, or
otherwise in furtherance of the purposes of the Act. If the Commission
takes such action, the Commission shall institute proceedings under
Section 19(b)(2)(B) \22\ of the Act to determine whether the proposed
rule change should be approved or disapproved.
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    \22\ 15 U.S.C. 78s(b)(2)(B).
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IV. Solicitation of Comments

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

Electronic Comments

     Use the Commission's internet comment form (http://www.sec.gov/rules/sro.shtml); or
     Send an email to [email protected]. Please include
File Number SR-NYSEAMER-2018-29 on the subject line.

Paper Comments

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

All submissions should refer to File Number SR-NYSEAMER-2018-29. This
file number should be included on the subject line if email is used. To
help the Commission process and review your comments more efficiently,
please use only one method. The Commission will post all comments on
the Commission's internet website (http://www.sec.gov/rules/sro.shtml).
Copies of the submission, all subsequent amendments, all written
statements with respect to the proposed rule change that are filed with
the Commission, and all written communications relating to the proposed
rule change between the Commission and any person, other than those
that may be withheld from the public in accordance with the provisions
of 5 U.S.C. 552, will be available for website viewing and printing in
the Commission's Public Reference Room, 100 F Street NE, Washington, DC
20549 on official business days between the hours of 10:00 a.m. and
3:00 p.m. Copies of the filing also will be available for inspection
and copying at the principal office of the Exchange. All comments
received will be posted without change. Persons submitting comments are
cautioned that we do not redact or edit personal identifying
information from comment submissions. You should submit only
information that you wish to make available publicly. All submissions
should refer to File Number SR-NYSEAMER-2018-29 and should be submitted
on or before July 23, 2018.

    For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\23\
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    \23\ 17 CFR 200.30-3(a)(12).
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Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2018-14110 Filed 6-29-18; 8:45 am]
 BILLING CODE 8011-01-P