[Federal Register: September 16, 2010 (Volume 75, Number 179)]
[Notices]
[Page 56613-56618]
[DOCID:fr16se10-105]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-62886; File Nos. SR-BATS-2010-016; SR-BX-2010-040; SR-
CBOE-2010-056; SR-CHX-2010-13; SR-EDGA-2010-03; SR-EDGX-2010-03; SR-
ISE-2010-62; SR-NASDAQ-2010-076; SR-NSX-2010-07; SR-NYSE-2010-47; SR-
NYSEAmex-2010-60; SR-NYSEArca-2010-58]

Self-Regulatory Organizations; BATS Exchange, Inc.; NASDAQ OMX
BX, Inc.; Chicago Board Options Exchange, Incorporated; Chicago Stock
Exchange, Inc.; EDGA Exchange, Inc.; EDGX Exchange, Inc.; International
Securities Exchange LLC; The NASDAQ Stock Market LLC; National Stock
Exchange, Inc.; New York Stock Exchange LLC; NYSE Amex LLC; NYSE Arca,
Inc.; Order Granting Approval of Proposed Rule Changes Relating to
Clearly Erroneous Transactions

September 10, 2010.

I. Introduction

    On June 17, 2010, each of BATS Exchange, Inc. (``BATS''), NASDAQ
OMX BX, Inc. (``BX''), Chicago Board Options Exchange, Incorporated
(``CBOE''), Chicago Stock Exchange, Inc. (``CHX''), EDGA Exchange, Inc.
(``EDGA''), EDGX Exchange, Inc. (``EDGX''), International Securities
Exchange LLC (``ISE''), The NASDAQ Stock Market LLC (``Nasdaq''),
National Stock Exchange, Inc. (``NSX''), New York Stock Exchange LLC
(``NYSE''), NYSE Amex LLC (``NYSE Amex''), and NYSE Arca, Inc. (``NYSE
Arca'') (collectively, the ``Exchanges'') filed with the Securities and
Exchange Commission (``Commission''), pursuant to Section 19(b)(1) of
the Securities Exchange Act of 1934 (``Act''), and Rule 19b-4
thereunder, proposed rule changes to amend certain of their respective
rules to set forth clearer standards and curtail their discretion with
respect to breaking erroneous trades.\1\ On June 18, 2010, BX, EDGA,
EDGX, ISE, Nasdaq, NSX, and NYSE Arca submitted amendments to their
respective proposed rule changes. On June 21, 2010, CHX submitted an
amendment to its proposed rule change. The proposed rule changes, as
amended, submitted by BATS, BX, CBOE, CHX, EDGA, EDGX, ISE, Nasdaq,
NYSE, and NYSE Amex, were published for comment in the Federal Register
on June 28, 2010.\2\ The proposed rule change, as amended, submitted by
NYSE Arca was published for public comment in the Federal Register on
June 29, 2010.\3\ On June 30, 2010, CHX submitted an additional
amendment to its proposed rule changes.\4\ The Commission received nine
comment letters on the proposals.\5\

BATS responded to the comments in a letter dated August 16, 2010.\6\
This order approves the proposed rule changes, as amended.
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    \1\ Also, on June 17, 2010, Financial Industry Regulatory
Authority, Inc. (``FINRA'') filed a similar proposed rule change
with respect to breaking erroneous trades. See Securities Exchange
Act Release No. 62341 (June 21, 2010), 75 FR 36756 (June 28, 2010).
The FINRA proposal also was approved today. See Securities Exchange
Act Release No. 62885 (Sept. 10, 2010).
    \2\ See Securities Exchange Act Release Nos. 62330 (June 21,
2010), 75 FR 36725; 62331 (June 21, 2010), 75 FR 36746; 62332 (June
21, 2010), 75 FR 36749; 62333 (June 21, 2010), 75 FR 36759; 62334
(June 21, 2010), 75 FR 36732; 62336 (June 21, 2010), 75 FR 36743;
62337 (June 21, 2010), 75 FR 36739; 62338 (June 21, 2010), 75 FR
36762; 62339 (June 21, 2010), 75 FR 36765; 62340 (June 21, 2010), 75
FR 36768; and 62342 (June 21, 2010), 75 FR 36752.
    \3\ See Securities Exchange Act Release No. 62335 (June 21,
2010), 75 FR 37494.
    \4\ In Amendment No. 2, CHX amended its proposed rule change to
conform defined terms in its proposed rule text to defined terms
used in the remainder of its rule. This is a technical amendment.
    \5\ See letter from Peter Ianello, Partner, CSS, LLC, to
Elizabeth Murphy, Secretary, Commission, dated July 15, 2010 (``CSS
Letter''); letter from Gary DeWaal, Senior Managing Director and
Group General Counsel, Newedge USA, LLC, to Elizabeth M. Murphy,
Secretary, Commission, dated July 19, 2010 (``Newedge Letter'');
letter from Karrie McMillan, General Counsel, Investment Company
Institute, to Elizabeth M. Murphy, Secretary, Commission, dated July
19, 2010 (``ICI Letter''); David C. Cushing, Director of Global
Equity Trading, Wellington Management Company, LLP, to Elizabeth M.
Murphy, Secretary, Commission, dated July 19, 2010 (``Wellington
Letter''); letter from John A. McCarthy, General Counsel, GETCO, to
Elizabeth Murphy, Secretary, Commission, dated July 20, 2010
(``GETCO Letter''); letter from Ira P. Shapiro, Managing Director,
BlackRock, Inc., to Elizabeth M. Murphy, Secretary, Commission,
dated July 20, 2010 (``BlackRock Letter''); and letter from Manisha
Kimmel, Executive Director, Financial Information Forum, On behalf
of the FIF Front Office Committee, to Elizabeth M. Murphy,
Secretary, Commission, dated July 21, 2010 (``FIF Letter''); letter
from Ann Vlcek, Managing Director and Associate General Counsel,
Securities Industry and Financial Markets Association, to Elizabeth
M. Murphy, Secretary, Commission, dated July 26, 2010 (``SIFMA
Letter''); and letter from Leonard J. Amoruso, General Counsel,
Knight Capital Group, Inc., to Elizabeth M. Murphy, Secretary,
Commission, dated July 27, 2010 (``Knight Letter'').
    \6\ See letter from Eric J. Swanson, SVP and General Counsel,
BATS, to Elizabeth M. Murphy, Secretary, Commission, dated August
16, 2010 (``BATS Letter'').
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II. Background and Description of the Proposals

    On May 6, 2010, the U.S. equity markets experienced a severe
disruption.\7\ Among other things, the prices of a large number of
individual securities suddenly declined by significant amounts in a
very short time period, before suddenly reversing to prices consistent
with their pre-decline levels. This severe price volatility led to a
large number of trades being executed at temporarily depressed prices,
including many that occurred at prices dramatically away from pre-
decline levels. In response, the Exchanges and FINRA exercised their
authority under their clearly erroneous execution rules to break trades
that were effected at prices 60% or more away from pre-decline prices,
using a process that was not sufficiently clear or transparent to
market participants. There are reports that the lack of clear
guidelines for dealing with clearly erroneous transactions under
circumstances such as occurred on May 6, and the lack of transparency
surrounding the Exchanges' and FINRA's decision to break only trades at
least 60% away from the market, added to the confusion and uncertainty
faced by investors on May 6.\8\
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    \7\ The events of May 6 are described more fully in the report
of the staffs of the Commodity Futures Trading Commission (``CFTC'')
and the Commission, titled Report of the CFTC and SEC to the Joint
Advisory Committee on Emerging Regulatory Issues, ``Preliminary
Findings Regarding the Market Events of May 6, 2010,'' dated May 18,
2010.
    \8\ See, e.g., Written Statement of Leonard J. Amoruso, Senior
Managing Director and General Counsel, Knight Capital Group, Inc.,
Submitted before the CFTC-SEC Advisory Committee on Emerging
Regulatory Issues, Panel Discussion, ``The events of May 6--views
and observations regarding liquidity, trading and the apparent
breakdown of an orderly market,'' dated June 22, 2010.
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    The Commission is concerned that events such as those that occurred
on May 6 can undermine the integrity of the U.S. securities markets.
Accordingly, it is working on a variety of fronts to assess the causes
and contributing factors of the May 6 market disruption and to fashion
policy responses that will help prevent a recurrence. The Commission
also recognizes the importance of moving quickly to implement steps
that could help limit potential harm from extreme price volatility. On
June 10, 2010, the Commission approved rules, on a pilot basis, that
require the Exchanges to pause trading in securities included in the
S&P 500 Index if the price moves 10% or more in a five-minute
period.\9\ By establishing circuit breakers that uniformly pause
trading in these securities across all markets, the new rules are
designed to facilitate coordinated price discovery and provide time for
investors to trade at rational prices. In addition to the individual
stock trading pause rules, the Exchanges and FINRA worked together to
develop proposed amendments to their clearly erroneous execution rules
to provide greater transparency and certainty to the process of
breaking trades.
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    \9\ See Securities Exchange Act Release Nos. 62251; 75 FR 34183
(June 10, 2010); and 62252, 75 FR 34186 (June 16, 2010).
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    The current clearly erroneous execution rules set forth procedures
the Exchanges must use to break trades. Specifically, the current rules
provide that the Exchanges will break trades in Exchange-listed stocks
only if the price of the trades exceeds a specified ``Reference
Price''--usually the consolidated last sale--by an amount that equals
or exceeds specified ``Numerical Guidelines.'' The Numerical Guidelines
vary depending on the price of the stock and during the regular trading
session are 10% if the consolidated last sale is $25.00 or less, 5% if
the consolidated last sale is more than $25 and up to and including
$50, and 3% if the consolidated last sale is more than $50. These
percentages double during pre-open and post-close trading sessions. For
events involving five or more securities, the Numerical Guidelines
currently are 10% during pre-open, regular, and post-close trading
sessions.
    While the current rules do not give the Exchanges discretion to
break trades that do not exceed the Numerical Guidelines, they do
permit the Exchanges discretion to select a percentage threshold at
which trades will be broken that is higher than the Numerical
Guidelines. As noted above, on May 6 the Exchanges selected 60% as the
threshold for breaking trades in a process that, from the perspective
of market participants, was not clear or transparent, and led to
further uncertainty and confusion in the market. Thus, the events of
May 6 highlight the need to clarify the clearly erroneous execution
review process across all markets, and reduce the discretion of the
Exchanges to deviate from the objective standards in their respective
rules when dealing with clearly erroneous transactions.
    Under the proposed rule changes, the Exchanges will no longer have
the discretion to deviate from the specified percentage threshold at
which trades will be broken in many situations, including those where
the single-stock circuit breakers are applicable and in other larger
``Multi-Stock Events'' involving five or more securities. Under the
proposed rules, a Multi-Stock Event is determined by looking at the
number of securities with potentially erroneous executions occurring
within a period of five minutes or less.
    When an individual stock trading pause is triggered, transactions
could occur before the trading pause is fully implemented on all of the
Exchanges and in the over-the-counter (OTC) market. In such event, the
Exchanges propose to review, on their own motion, all transactions
triggering an individual stock trading pause and subsequent
transactions that may occur before the trading pause is in effect.\10\
The Exchanges would use the price that triggered the trading pause (the
``Trading Pause Trigger Price'') \11\ as the Reference Price and break
trades that are 10% or more away from the Reference Price for stocks
priced $25 or less, 5% or more away from the Reference Price for stocks
priced from $25 to $50, and 3% or more away from the Reference Price
for stocks priced more than $50. If the security is a leveraged
exchange-traded fund (ETF) or exchange-traded note (ETN), these
percentage thresholds would be multiplied by the leverage multiplier.
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    \10\ Such reviews would be limited to transactions that executed
at a price lower than the Trading Pause Trigger Price in the event
of a price decline and higher than the Trading Pause Trigger Price
in the event of a price rise.
    \11\ The Exchanges propose to use the Trading Pause Trigger
Price as the Reference Price for such clearly erroneous execution
reviews of a transaction triggering a trading pause and the
transactions that occur immediately after such transactions but
before the trading pause is in effect. The Trading Pause Trigger
Price reflects a price calculated by the primary listing market over
a rolling five-minute period and may differ from the execution price
of a transaction that triggered a trading pause. The primary listing
market that issued an individual stock trading pause will determine
and communicate to the Exchanges the Trading Pause Trigger Price for
such stock.

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    For situations in which a stock is not subject to an individual
stock trading pause (e.g., because the stock is not in the circuit
breaker pilot program, or when the stock is part of the pilot program
but the circuit breaker does not apply because it is the beginning or
end of the day), the trade break rules will differ based on the number
of stocks involved. In the event of Multi-Stock Events involving 20 or
more securities, the Exchanges propose to review on their own motion
and break all transactions at prices equal to or greater than 30% away
from the Reference Price in each affected security during the review
period selected. In such event, the Exchanges may use a Reference Price
other than the consolidated last sale. To ensure consistent application
across markets, the Exchanges will consult to determine the appropriate
review period, which may be greater than the period (of five minutes or
less) that triggered the application of this provision, as well as
select one or more specific points in time prior to the transactions in
question and use transaction prices at or immediately prior to the
time(s) selected as the Reference Price(s).
    Similarly, in the event of Multi-Stock Events involving five or
more, but less than twenty, securities, the Exchanges propose to review
on their own motion and break all transactions at prices equal to or
greater than 10% away from the Reference Price. In such event, the
Reference Price will generally be the consolidated last sale
immediately prior to the execution(s) under review. However, if there
is relevant news impacting a security, periods of extreme volatility,
sustained illiquidity, or widespread systems issues, the Exchanges may
use a different Reference Price, where necessary for the maintenance of
a fair and orderly market and the protection of investors, and where it
is in the public interest.
    The current rules provide that the Exchanges may consider
``Additional Factors'' \12\ in determining whether to break trades. The
proposed rule changes limit the circumstances during which the
Exchanges may consider those Additional Factors. Specifically, under
the proposed rules, the Exchanges would only be permitted to consider
Additional Factors in the context of clearly erroneous reviews that do
not involve Multi-Stock Events involving five or more securities or
individual stock trading pauses, as described above. In such event, the
Exchanges would consider the Additional Factors with a view toward
maintaining a fair and orderly market and the protection of investors
and the public interest.
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    \12\ Additional Factors that the Exchanges may consider include
but are not limited to: system malfunctions or disruptions, volume
and volatility for the security, derivative securities products that
correspond to greater than 100% in the direction of a tracking
index, news released for the security, whether trading in the
security was recently halted or resumed, whether the security is an
IPO, whether the security was subject to a stock split,
reorganization, or other corporate action, overall market
conditions, pre-opening and post-closing session executions,
validity of consolidated tapes trades and quotes, consideration of
primary market indications, and executions inconsistent with the
trading pattern in the stock.
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    Finally, the proposed rule changes limit the discretion of the
Exchanges to deviate from the Numerical Guidelines in the event of
system disruptions or malfunctions. The proposed rules make clear that
this provision only applies to a disruption or malfunction of an
Exchange system, not to that of a user of an Exchange system. The
proposed rules also remove the language ``extraordinary market
conditions or other circumstances'' as a basis for nullifying trades
outside of the Numerical Guidelines, further limiting the discretion of
the Exchanges. The proposed rules also retain the current requirement
that, absent extraordinary circumstances, an action taken in connection
with a review of a potentially erroneous transaction must be taken in a
timely fashion, generally within thirty (30) minutes of detection of
the erroneous transaction.
    The Exchanges have proposed that these rule changes be implemented
as a pilot that would end on December 10, 2010.

III. Discussion of Comment Letters and Commission Findings

    The Commission received nine comment letters on the proposed rule
changes filed by the Exchanges and FINRA. Five commenters were
generally supportive of the principles underlying the proposed rule
changes, to provide greater transparency and certainty to investors,
market participants, and the public regarding the handling of clearly
erroneous transactions.\13\ However, these commenters also believed
that the proposed rule changes should go further, and offered a number
of suggestions as discussed below. Two commenters generally did not
oppose the proposed rule changes, but believed they were ``overly
complex and opaque'' \14\ and ``do not adequately address the most
significant flaws in the current rules.'' \15\ One commenter believed
that trades should only be cancelled in extraordinary circumstances,
stating that the Commission and the SROs should instead consider
alternatives that would prevent the execution of erroneous trades
rather than canceling them after the fact.\16\ Another commenter
supported a ``principles-based approach'' to handling clearly erroneous
trades instead of numerical thresholds, particularly with respect to
transactions involving illiquid stocks and the dissemination of news or
a fundamental change that requires a significant reevaluation of
underlying business conditions.\17\ Additionally, BATS responded to the
comments.\18\ These comments are discussed in greater detail below.
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    \13\ See ICI Letter, at 1, FIF Letter, at 1, Newedge Letter, at
1-2, GETCO Letter, at 2, and SIFMA Letter, at 1-2 (also stating its
belief that it is ``critical for the options markets to achieve
consistency in their existing clearly erroneous execution rules
before additional rule changes are implemented * * *''). See also
BlackRock Letter at 1 (supporting amendments to rules that
contribute to market volatility).
    \14\ See CSS Letter, at 1.
    \15\ See BlackRock Letter, at 1.
    \16\ See Wellington Letter, at 3-4. See also FIF Letter, at 1-2
(supporting trade validation and rejection mechanisms) and GETCO
Letter, at 3 (supporting protections designed to reject clearly
erroneous orders that reach market centers).
    \17\ See Knight Letter, at 3.
    \18\ See BATS Letter.
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A. Comments Recommending Other Comprehensive Approaches

    Some commenters believed that the Exchanges' rules relating to
clearly erroneous trades should be more definitive, and expressed the
view that the proposed rule changes were not sufficiently clear in all
cases when trades would actually be cancelled.\19\ For example, one
commenter noted that the Exchanges ``appear to be able to cancel trades
for many reasons other than significant price discrepancies--including,
for example, systems malfunctions, news released regarding a security,
whether a security was subject to a stock split or reorganization.''
\20\ This commenter believed the Exchanges should adopt ``no-bust''
zones for transactions executed within specified price ranges, and
cancel trades outside of the ``no-bust'' zones absent a compelling
public interest to the contrary.\21\
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    \19\ See Newedge Letter, at 4-5, and BlackRock Letter, at 2.
    \20\ See Newedge Letter, at 4.
    \21\ Id.
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    Two commenters questioned whether the proposed rule changes would
achieve their stated goals of making the erroneous trade execution
review process more transparent and less arbitrary.\22\ Specifically,
these

commenters were concerned that the proposed rule changes did not
clearly establish a reference price upon which the Numerical Guidelines
would be based.\23\ They noted that the Exchanges retain the
flexibility in certain circumstances to use a Reference Price other
than the consolidated last sale, as well as to determine the review
period for Multi-Stock Events involving twenty or more securities.\24\
These commenters believed that if the Exchanges retained discretion in
these areas, the proposed rule changes may not achieve the goal of
making the trade break process more transparent and less arbitrary,\25\
or could create mass confusion.\26\
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    \22\ See BlackRock Letter, at 2, and CSS Letter, at 1-2.
    \23\ Id.
    \24\ Id.
    \25\ See BlackRock Letter, at 2.
    \26\ See CSS Letter, at 1-2.
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    In response, BATS acknowledged that the proposals do not ``in all
circumstances provide 100% advanced certainty with respect to whether a
particular execution will be deemed to be clearly erroneous,'' but
stated its belief that ``its proposal reflects a significant
improvement * * * over its existing rule.'' \27\ Specifically, BATS
noted that its discretion to utilize ``additional factors'' would now
be limited to instances involving less than five securities under
review and further limited to securities that are not subject to a
single stock circuit breaker.\28\ BATS believed its limited discretion
in this regard is necessary and appropriate for maintaining fair and
orderly markets.\29\
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    \27\ See BATS Letter, at 1.
    \28\ Id. at 5.
    \29\ Id.
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    With respect to the concern expressed by some commenters that the
proposed rule changes do not clearly establish a reference price upon
which the Numerical Guidelines would be based, BATS stated that it is
``critical'' for it to retain some limited discretion to use a
different reference price when applying the clearly erroneous
thresholds because ``there are circumstances under which last sale
would be an inappropriate reference price * * * .'' \30\ BATS noted,
however, that this discretion is limited because its ``rule is designed
to generally guide BATS to look at the last sale as the reference
price'' for those securities not subject to a circuit breaker and its
proposal tries to be ``abundantly clear and objective that if a
security is subject to a single stock circuit breaker, the reference
price will be the circuit breaker trigger price.'' \31\ BATS also noted
that the determination of the point in time from which to derive the
reference price on May 6 had ``nothing to do'' with the delay in
announcing which trades would be broken on May 6; rather, the delay was
attributable to the time it took the Exchanges to determine the
appropriate percentage at which trades would be broken.\32\
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    \30\ Id. at 3-4.
    \31\ Id.
    \32\ Id.
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    The Commission appreciates the suggestions and responses offered by
these commenters to make the process by which the Exchanges address
clearly erroneous executions more certain and transparent by reducing
their discretion. The Commission intends to continue working with the
Exchanges to further clarify, as appropriate, their processes for
breaking erroneous trades that arise in contexts not covered by the
proposed rule changes, as well as to continue to evaluate the
operations of and potential refinements to such processes in contexts
covered by the proposed rule changes. Nevertheless, the Commission
believes that the proposed rule changes represent a productive first
step by the Exchanges in bringing greater clarity and transparency to
the process for breaking clearly erroneous trades, and that these
improvements should not be delayed pending consideration of further
changes.

B. Comments Recommending Alternative Approaches

    Four commenters were of the view that, rather than breaking
erroneous trades, the Exchanges should allow the trades to stand and
adjust the price in line with the market.\33\ These commenters were
particularly concerned about the risk, when trades are broken, that
market participants suddenly may find themselves exposed on one side of
the market when they thought they had a hedged position.\34\ As one
commenter stated, ``[t]his uncertainty is even more problematic during
periods of heightened volatility in the markets, when liquidity may be
reduced as some market participants limit their trading until they are
able to determine their positions, or volatility may increase further
because of speculative hedging in an attempt to protect unknown
positions.'' \35\ These commenters believed that a price adjustment
process would substantially reduce the uncertainty created by the
potential for broken trades, and thus would be a better way to address
erroneous executions.\36\
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    \33\ See GETCO Letter, at 3, Newedge Letter, at 5, BlackRock
Letter, at 2, and Knight Letter, at 2.
    \34\ Id.
    \35\ See GETCO Letter, at 3.
    \36\ See GETCO Letter, at 3, Newedge Letter, at 5, BlackRock
Letter, at 2, and Knight Letter, at 2.
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    Other commenters urged alternatives to clearly erroneous execution
rules. For example, one commenter believed that the proposed rules
would ``provide market participants more certainty as to whether or not
their trades will stand in the event of market volatility,'' but urged
the Commission to move to a ``futures-style limit up/down
functionality'' as a better alternative to the circuit breaker trading
halt approach.\37\ This commenter argued that the limit up/limit down
approach ``would virtually eliminate clearly erroneous trades.'' \38\
Another commenter also believed that the Commission should consider a
``limit up/limit down approach or hybrid approach.'' \39\ Other
commenters suggested alternative procedures, systems or rules to
prevent erroneous trades from occurring, such as by rejecting orders
that are materially away from the market.\40\
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    \37\ See GETCO Letter, at 2-3.
    \38\ See GETCO Letter, at 3.
    \39\ See SIFMA Letter, at 2.
    \40\ See FIF Letter, at 2, Wellington Letter, at 2-4, and SIFMA
Letter, at 2. See also CSS Letter, at 2 (suggesting that circuit
breakers for individual stocks based off of a percentage change from
the previous day's closing price (or the opening price to allow for
the dissemination of overnight news) would eliminate the need for
erroneous trade rules).
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    The Commission appreciates the suggestions offered by these
commenters to make more fundamental changes to the way in which the
Exchanges address clearly erroneous executions. In the coming months,
the Commission expects to continue to work with the markets and market
participants on ways to reduce the occurrence of erroneous trades and
improve the method by which they are resolved, as well as on
enhancements to the mechanisms for addressing excessive market
volatility, such as those that currently are reflected in the single-
stock circuit breaker pilot. As noted above, however, the Commission
believes that the proposed rule changes represent a productive first
step by the Exchanges in bringing greater clarity and transparency to
the process for breaking clearly erroneous trades, and that these
improvements should not be delayed pending consideration of more far-
reaching initiatives.

C. Other Comments

    One commenter was concerned that the proposed rule changes were not
clear as to how news or information regarding the review and
cancellation of clearly erroneous trades would be disseminated to the
markets.\41\ This commenter believed that the proposed rules should
require the Exchanges to disseminate this information quickly and in a
non-discriminatory fashion to

market participants in order to minimize the market impact and not
favor any one group of market participants over another.\42\ In its
response letter, BATS stated that it e-mails members with respect to
clearly erroneous reviews and determinations according to a consistent
and well established protocol that, according to BATS, strikes an
appropriate balance between notifying members of significant market
events and avoiding notifications every time a transaction is reviewed
as potentially clearly erroneous.\43\ In addition, BATS believes that
the existing requirement that an SRO promptly notify affected members
of clearly erroneous reviews and determinations is sufficient.\44\ BATS
also stated that communication between the exchanges and members should
remain flexible as such methods are constantly changing.\45\ BATS
indicated that it is not aware of discrimination amongst participants
with respect to the dissemination of information in relation to clearly
erroneous reviews and believes that the ``anti-discrimination
requirements of the Act would sufficiently restrain''
discrimination.\46\
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    \41\ See Newedge Letter, at 6.
    \42\ Id.
    \43\ See BATS Letter, at 2.
    \44\ Id.
    \45\ Id.
    \46\ Id.
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    Another commenter believed that the Commission should require the
Exchanges to clarify the application of the clearly erroneous execution
rules when an event causes the price to cross to a different specified
percentage threshold for breaking trades. Specifically, the commenter
asked, ``if a market decline triggers the CEE rules intra-day with
respect to a stock that was priced at $25.01, so the CEE price is below
$25, the proposed amendments do not explain at what price trading would
be calculated for the next application of the CEE rules. Would it be at
5 percent for stocks between $25 and $50 or 10 percent for stocks
priced less than $25?'' \47\ That commenter also expressed concern that
the proposed rule changes might provide an opportunity for market
participants to manipulate events involving multiple stocks that are
not subject to the single-stock circuit breakers. This might occur, for
example, when an event subject to a 10% threshold (e.g., involving 20
securities) could be forced into the 30% threshold category (e.g., by
manipulating the 21st security and causing an erroneous trade), by a
market participant seeking the flexibility to trade at wider spreads
with respect to all impacted securities.\48\
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    \47\ See ICI Letter, at 3.
    \48\ Id.
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    Another commenter noted that, when an individual stock trading
pause is triggered, trades will be broken at specified percentages away
from the Trading Pause Trigger Price.\49\ According to this commenter,
this calculation ``has the practical effect of doubling the clearly
erroneous price window for most U.S. equity securities and is a
significant expansion of the window for certain securities.'' \50\ This
commenter suggested using more conservative parameters such as the
greater of 2% or $0.05 from the Trading Pause Trigger Price or,
alternatively, using the Trading Pause Trigger Price, in addition to a
comparison to the last sale, as part of an analysis for clearly
erroneous trades.'' \51\ This commenter also favored providing the
Exchanges discretion to break trades after the deadlines specified in
their rules in extraordinary circumstances.\52\
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    \49\ See SIFMA Letter, at 2-3.
    \50\ Id.
    \51\ Id.
    \52\ Id.
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    With respect to the dissemination of information regarding the
review and resolution of clearly erroneous trades, the Commission
understands that the practice of the Exchanges is to promptly notify
participants that specified trades are under review and, once that
review is complete, to describe the resolution thereof. Although the
Commission believes prompt communication by e-mail, phone, Web site or
otherwise concerning erroneous trade reviews should generally assure
dissemination in a non-discriminatory fashion, as noted above, it
intends to continue to work with the Exchanges on additional ways to
improve the transparency of this process.
    With respect to an event that causes the price to cross to a
different specified percentage threshold for breaking trades, the
Commission believes that the proposals are sufficiently clear regarding
the applicability of the new rules. As to the specific example provided
by the commenter, under the proposed rules, if a stock triggers a
trading pause, the Trading Pause Trigger Price would be used as the
Reference Price. The Trading Pause Trigger Price is calculated by the
listing market over a rolling five-minute period. If the Trading Pause
Trigger Price is calculated at a level below $25.00, as identified in
the example, then the 10% threshold would apply to clearly erroneous
execution reviews of the Trigger Trade and other transactions that
occur immediately after a Trigger Trade but before the trading pause is
fully implemented across markets. If another series of transactions
trigger a second trading pause, the review process set forth in the
rules would be repeated and a new Reference Price would be calculated
to determine the appropriate percentage threshold.
    With respect to the potential for market participants to engage in
manipulation in order to achieve a higher trade break percentage
threshold, the Commission emphasizes that it will vigorously pursue
instances of illegal market manipulation. In addition, during the pilot
period, the Commission will work with the Exchanges to review the
operation of the amended rules, and make improvements as warranted,
including if it appears the selected percentage thresholds create
distortions or incent improper or illegal behavior.
    With respect to the chosen parameters, the Commission notes that
the parameters that were selected were the product of a coordinated and
deliberate effort by the Exchanges and FINRA to improve the handling of
clearly erroneous trades. Regarding the specific comment expressing
concern that breaking trades only when they are 10%, 5% or 3% away from
the Trading Pause Trigger Price has the practical effect of doubling
the trading pause parameters, the Commission notes that, as an initial
matter, implementation of the individual stock trading pause should
prevent most trades from occurring at prices outside of the Trading
Pause Trigger Price. To the extent trades occur outside of such price
before the trading pause is fully applied across all markets, the
Commission believes that it is appropriate to break these ``leakage''
trades only when they are a meaningful percentage away from the Trading
Pause Trigger Price. This is consistent with the traditional approach
of the Exchanges and FINRA to take the more extreme step of breaking a
trade only in cases where it occurs at a price sufficiently away from
the current market price that the parties should have been on notice it
may be ``clearly erroneous.'' Of course, the pilot program may indicate
that different parameters are better to accomplish the stated goals. If
so, the parameters could be changed as part of the overall initiative.
The Commission will further study and consider the examples and
suggestions offered by the commenters during the pilot period.

D. Commission Findings

    The Commission finds that the proposed rule changes are consistent
with the requirements of the Act and the

rules and regulations thereunder applicable to national securities
exchanges. In particular, the Commission finds that the proposed rule
changes submitted by the Exchanges are consistent with the requirements
of Section 6(b) of the Act \53\ and with Section 6(b)(5) of the Act
\54\ which, among other things, requires that the rules of national
securities exchanges be designed to prevent fraudulent and manipulative
acts and practices, to promote just and equitable principles of trade,
to remove impediments to and perfect the mechanism of a free and open
market and a national market system, and in general, to protect
investors and the public interest.
---------------------------------------------------------------------------

    \53\ 15 U.S.C. 78f(b).
    \54\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------

    In the Commission's view, the proposed rule changes will help
assure that the determination of whether a clearly erroneous trade has
occurred will be based on clear and objective criteria, and that the
resolution of the incident will occur promptly through a transparent
process. The proposed rule changes also should help assure consistent
results in handling erroneous trades across the U.S. markets, thus
furthering fair and orderly markets, the protection of investors and
the public interest. Finally, the Commission notes that the proposed
rule changes are being implemented on a pilot basis so that the
Commission and the Exchanges can monitor the effects of the pilot on
the markets and investors, and consider appropriate adjustments, as
necessary.

IV. Conclusion

    It is therefore ordered, pursuant to Section 19(b)(2) of the
Act,\55\ that the proposed rule changes (SR-BATS-2010-016; SR-BX-2010-
040; SR-CBOE-2010-056; SR-CHX-2010-13; SR-EDGA-2010-03; SR-EDGX-2010-
03; SR-ISE-2010-62; SR-NASDAQ-2010-076; SR-NSX-2010-07; SR-NYSE-2010-
47; SR-NYSEAmex-2010-60; SR-NYSEArca-2010-58), be, and hereby are,
approved.
---------------------------------------------------------------------------

    \55\ 15 U.S.C. 78s(b)(2).

    By the Commission.
Elizabeth M. Murphy,
Secretary.
[FR Doc. 2010-23076 Filed 9-15-10; 8:45 am]
BILLING CODE 8010-01-P


[Federal Register Volume 85, Number 36 (Monday, February 24, 2020)]
[Rules and Regulations]
[Pages 10295-10301]
[FR Doc No: 2020-02006]

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ENVIRONMENTAL PROTECTION AGENCY

40 CFR Part 52

[EPA-R03-OAR-2019-0207; FRL-10004-84-Region 3]

Approval and Promulgation of Air Quality Implementation Plans;
District of Columbia; Reasonably Available Control Technology State
Implementation Plan for Nitrogen Oxides Under the 2008 Ozone National
Ambient Air Quality Standard

AGENCY: Environmental Protection Agency (EPA).

ACTION: Final rule.

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SUMMARY: The Environmental Protection Agency (EPA) is approving a state
implementation plan (SIP) revision submitted by the District of
Columbia. This revision satisfies the nitrogen oxides (NOX)
reasonably available control technology (RACT) requirements under the
2008 8-hour ozone national ambient air quality standard (2008 ozone
NAAQS). The District of Columbia's NOX RACT submittal for
the 2008 ozone NAAQS: Amends existing regulatory provisions to add new
or more stringent regulations or controls that represent RACT control
levels for combustion turbines and associated heat recovery steam
generators and duct burners, amends the applicability provisions of
these regulations to include all combustion turbines and associated
heat recovery steam generators and duct burners, and adds conforming
definitions; includes a source specific NOX RACT
determination for four specific emissions units at one major stationary
source of NOX; includes a certification that, for other
categories of sources, controls already approved by EPA into the
District of Columbia's SIP to meet NOX RACT for previous
ozone NAAQS are based on technically and economically feasible controls
and continue to represent NOX RACT for 2008 8-hour ozone
NAAQS implementation purposes; and in an effort to clean-up its SIP,
removes carbon monoxide (CO) emissions limits for combustion turbines
that no longer exist in the District of Columbia. This action is being
taken under the Clean Air Act (CAA).

DATES: This final rule is effective on March 25, 2020.

ADDRESSES: EPA has established a docket for this action under Docket ID
Number EPA-R03-OAR-2019-0207. All documents in the docket are listed on
the https://www.regulations.gov website. Although listed in the index,
some information is not publicly available, e.g., confidential business
information (CBI) or other information whose disclosure is restricted
by statute. Certain other material, such as copyrighted material, is
not placed on the internet and will be publicly available only in hard
copy form. Publicly available docket materials are available through
https://www.regulations.gov, or please contact the person identified in
the FOR FURTHER INFORMATION CONTACT section for additional availability
information.

FOR FURTHER INFORMATION CONTACT: Mr. Gregory Becoat, Planning &
Implementation Branch (3AD30), Air & Radiation Division, U.S.
Environmental Protection Agency, Region III, 1650 Arch Street,
Philadelphia, Pennsylvania 19103. The telephone number is (215) 814-
2036. Mr. Becoat can also be reached via electronic mail at
<EMAIL_ADDRESS>
SUPPLEMENTARY INFORMATION: On August 29, 2018, and as supplemented on
December 19, 2018, the District of Columbia's Department of Energy and
Environment (DOEE) submitted a SIP revision to address all of the RACT
requirements for NOX set forth by the CAA under the 2008
ozone NAAQS. The SIP revision also included amendments to its
NOX control regulations and an operating permit setting RACT
for certain specific emissions units at one major stationary source of
NOX (hereafter 2008 NOX RACT Submission).\1\
---------------------------------------------------------------------------

    \1\ Also, on August 29, 2018 the District of Columbia submitted
a separate SIP revision to address all the volatile organic compound
(VOC) RACT requirements under the 2008 ozone NAAQS both for VOC
sources covered by a control techniques guideline (CTG) and for
other major stationary sources of VOC. This VOC RACT SIP revision is
the subject of a separate rulemaking action. See 84 FR 54507,
October 10, 2019.
---------------------------------------------------------------------------

I. Background

    On August 29, 2018 and supplemented on December 19, 2018, DOEE
submitted a SIP revision to address all the requirements of
NOX RACT set forth by the CAA under the 2008 ozone NAAQS
(the 2008 NOX RACT Submission). On September 11, 2019, EPA
published a notice of proposed rulemaking (NPRM) for the District of
Columbia's SIP revision. (84 FR 47914). Detailed information on the
District's 2008 NOX RACT Submission and EPA's review of the
submission, can be found in the NPRM, which is also available on line
at www.regulations.gov, Docket number EPA-R03-OAR-2019-0207.

II. Summary of the District of Columbia's SIP Revision and EPA's
Proposed Actions

A. New Emissions Limits for Combustion Turbines and Conforming
Amendments

    The District of Columbia's NOX RACT SIP revision
contained a final rule amending Title 20 of the District of Columbia
Municipal Regulations (20 DCMR), Chapter 8, section 805.4 to amend the
District of Columbia's NOX emission limits for combustion
turbines and for any duct burners or associated heat recovery steam
generators.
    The amendments also included the addition of conforming definitions
and abbreviations to the applicability provisions of section 805.1 to
clarify that any associated heat recovery steam generators and duct
burners were subject to section 805. Further, the amendments amend
section 199 ``Definitions And Abbreviations'' to add definitions for
new terms found in section 805.4.
    After evaluating the SIP revision submittal, EPA proposed finding
that the District's SIP revision satisfied the 2008 8-hour ozone NAAQS
RACT requirements for NOX. EPA found that the RACT
determination provided by the District of Columbia is reasonable and
appropriately considered technically and economically feasible controls
while setting lowest achievable limits to adequately meet RACT under
the 2008 8-hour ozone NAAQS for the categories of combustion turbines.
EPA found that the District of Columbia has set presumptive RACT
emissions limits for stationary combustion turbines for existing major
stationary sources of NOX in the District of Columbia. EPA
found that revising section 805.4 with the regulatory changes of the
2008 NOX RACT Submission strengthens the SIP with respect to
oil-fired stationary combustion turbines of greater than 100 million
British Thermal Units per hour (mmBTU per hour) heat input capacity and
can be approved.

B. District of Columbia Water Blue Plains Advanced Wastewater Treatment
Plant Source Specific NOX RACT

    The District of Columbia's NOX RACT SIP Submission
included an evaluation of a permit issued by the DOEE to District of
Columbia Water and Sewer Authority (DC Water) to construct and operate
new biosolids handling facilities located at the Blue Plains Advanced
Wastewater Treatment Plant (BPAWTP), which included four sources that
are subject to the NOX RACT source specific determination
requirements.

    After evaluating the SIP revision submittal, EPA proposed finding
that the RACT determination provided by the District of Columbia is
reasonable and appropriately considered technically and economically
feasible controls while setting lowest achievable limits to adequately
meet RACT on a source specific basis under the 2008 8-hour ozone NAAQS
for the BPAWTP emissions units. EPA concluded that source specific
limits for the digester gas-fired auxiliary boiler and three flares are
appropriate because the source category, related to municipal
wastewater treatment, is unique within the District of Columbia. These
limits were set on technology consistent with lowest achievable
emission rate (LAER) which essentially reflects the lowest rate in any
SIP or achieved in practice and are based upon the actual performance
of the emissions units.

C. Certification of Other Provisions in Section 805

    The District of Columbia's NOX RACT SIP Submission
included a certification that the NOX RACT controls as
amended in 2004 for implementation and approval into the District of
Columbia SIP under the 1-hour and the 1997 ozone NAAQS are still RACT
for purposes of meeting requirements for the 2008 8-hour ozone NAAQS,
except for those sources for which the District of Columbia submitted
new NOX RACT emissions limits in the 2008 NOX
RACT Submission. These sources are: (1) Combustion turbines; and (2)
the digester gas equipment at one major NOX source regarding
the BPAWTP.
    After evaluating the SIP revision submittal, EPA proposed finding
that the previously adopted RACT controls continue to represent
NOX RACT for the 2008 ozone NAAQS as required under sections
184(b)(2) and 182(f) except for the combustion turbine source-category
and the source-specific limits at the BPAWTP.

D. Setting Stricter NOX Emissions Limits for Combustion Turbines and
Removing CO Emissions Limits for Combustion Turbines Over 100 mmBTU per
Hour

    As explained in more detail in the NPRM, since 1990, the District
of Columbia implemented numerous RACT requirements under the 1-hour and
the 1997 ozone standards. Many of those requirements are contained in
section 805 of Title 20 of the DCMR. The District of Columbia's current
NOX RACT SIP Submission included an amendment to section
805.4 to remove a NOX emissions limit for oil-fired,
combustion turbines with a heat input over 100 mmBTU per hour and
replace it with a lower NOX limit for any combustion turbine
with heat input rating greater than 50 mmBTU per hour burning any
combination of liquid fuels. As detailed in the NPRM, the revised
section 805.4 sets a lower NOX emissions limits for a
greater universe of combustion turbines by lowering the capacity
threshold of eligible units and expanding coverage of the types of fuel
burned by those units. The revised section 805.4 also removes the
exemption for low utilization turbines--those operated for less than
500 hours per year. Thus, the NOX limits set in section
805.4 now apply to these sources.
    The NPRM also explained that the revised section 805.4, in an
effort to clean-up its SIP, removed CO emissions limits for combustion
turbines of over 100 mmBTU heat input burning fuel oil because there
are no longer any units over 100 mmBTU per hour heat input in the
District of Columbia. The subject CO limits were initially included in
the ozone RACT to ensure optimum combustion to reduce NOX
emissions. See 64 FR 9272 (February 25, 1999) and 65 FR 81369 (December
26, 2000). As there are no longer any sources in the District of
Columbia subject to the CO limits at issue, the revised section 805.4
will not result in relaxing an existing emissions limitation applicable
to any existing emissions unit at a major stationary source.
    On the potential impact on NOX emissions due to the
removal of the subject CO limits and the siting of any new combustion
turbines of over 100 mmBTU heat input burning fuel oil in the District
of Columbia, the NPRM went on to note that for any such combustion
turbines with a potential to emit increase over 25 tons per year (tpy)
of NOX, the District of Colombia's SIP major source
permitting program would require LAER and offsetting NOX
emissions at a ratio of 1.3:1. See 20 DCMR Chapter 2, section 204
(Permit Requirements for Sources Affecting Non-attainment Areas), which
is approved into the SIP at 40 CFR 52.470(c).
    For the reasons detailed in the NPRM, EPA proposed finding that the
lower NOX limits applicable to stationary combustion
turbines burning any combination of liquid fuels along with the lower
regulatory threshold and the removal of the CO limits for combustion
turbines of over 100 mmBTU heat input burning fuel oil will be as
protective of the ozone and NOX NAAQS and not hinder or
impede attainment or maintenance of the those NAAQS in the District of
Columbia as required by section 110(l) of the CAA.
    Finally, the NPRM addressed the removal of the CO limits for
combustion turbines of over 100 mmBTU heat input burning fuel oil in
relationship to the CO NAAQS. The NPRM detailed that there are no
longer any such units in the District of Columbia and that the CO
levels in the Washington-Arlington-Alexandria (DC-VA-MD) area are well
below the CO NAAQS. Further, in the event that any new stationary
combustion turbine or turbines are located within the District of
Columbia in the future that are a major stationary source of CO or
would constitute a significant net emissions increase at an existing
major stationary source of CO (or nitrogen dioxide), the new major
stationary combustion turbine would be required to obtain a prevention
of significant deterioration (PSD) permit under 40 CFR 52.21 and
52.499. The PSD permit would require best available control technology.
    For the reasons detailed in the NPRM, EPA proposed finding that
removal of the CO limits will not hinder or impede attainment or
maintenance of the CO NAAQS in the District of Columbia as required by
section 110(l) of the CAA.

E. Conclusion

    In the NPRM, EPA proposed finding that the District of Columbia's
2008 NOX RACT Submission was reasonable and demonstrated
that the District had adopted air pollution control strategies that
represent RACT for the purposes of compliance with the 2008 8-hour
ozone standard for all major stationary sources of NOX in
the District in accordance with CAA requirements and the 2008 Ozone SIP
Requirements Rule (80 FR 12264), and the latest available information.
EPA proposed finding that the District of Columbia's SIP implements
RACT for purposes of the 2008 ozone NAAQS with respect to all existing
major stationary sources of NOX.
    EPA also proposed finding that the revisions to previously SIP
approved RACT requirements would result in equivalent or additional
reductions in NOX emissions and should not interfere with
any applicable requirement or reasonable further progress with the
NAAQS or interfere with other applicable CAA requirements as required
by section 110(l) of the CAA. EPA received comments which are addressed
in Section III of this rulemaking action.

III. Response to Comments

    EPA received comments from two anonymous commenters during the
comment period for the proposed rulemaking action.

    Comment 1: A commenter stated: ``No! We do not want weakening of
air control standards, which are detrimental to human health and
survival of the human race. EPA's job is ENVIRONMENTAL PROTECTION, as
your name says. Why are you commenting on COSTS TO THE PUBLIC? Your
name is not ECONOMIC PROTECTION AGENCY. We do not care what your
organization thinks about SAVING PEOPLE MONEY. Your job is to do what
is best for our ENVIRONMENT. We are tired of hearing about how you are
involved in protecting our pocketbooks. I am demanding that you do your
job, and protect our air, water and land. I am demanding that you stop
letting our President damage our country. Do your duty to live up to
the NAME ON YOUR DOOR.''
    Response 1: Portions of this comment are not relevant to EPA's
rulemaking action regarding the District of Columbia's 2008
NOX RACT Submission and need not be addressed. The
Administrative Procedures Act requires that ``that the agency . . .
respond to `relevant' and `significant' public comments.'' City of
Portland v. E.P.A., 507 F.3d 706 (D.C. Cir. 2007). While we recognize
the commenter's concern for environmental protection, it is important
to note that EPA's approval of the District of Columbia's 2008
NOX RACT Submission is controlled by statutory and
regulatory requirements. Among those requirements is the definition of
RACT that requires an analysis of technical and economic feasibility.
40 CFR 51.100(o). It is also important to note that the approved 2008
NOX RACT SIP Revision does not weaken any existing
environmental standard. By approving this SIP submittal, the required
pollution controls for NOX from certain sources in the
District of Columbia will remain the same or become more stringent, and
consequently, approval of this SIP submittal should not interfere with
any applicable requirement or reasonable further progress with the
NAAQS or interfere with other applicable CAA requirements.
    Comment 2: A commenter stated: ``While DC has successfully, through
its state implementation plan (SIP), achieved marginal attainment of
Nitrogen Oxides (NOX) under the 2008 8-hour Ozone standard
in 2019, the issue being raised is that with the implementation of
Reasonably Available Control Technology (RACT), Washington DC was only
just now able to achieve a standard of Ozone levels that was set eleven
years ago. According to the EPA, in November of 2017, 2,646 counties
across the United States were in attainment of the 70 parts per billion
ozone level specified in the 2015 NAAQS (Govinfo 2018). This provides
proof that attainment is achievable through available means and any
other course of action knowingly puts American citizens health at risk.
Though the U.S. has made great strides in reducing gasses to blame for
ground level ozone such as nitrogen oxides, the health effects will
remain a detriment to American citizens as long as it remains in the
air. By not holding Washington DC to the 2015 8-hour ozone NAAQS
standards, the government, in specific, the EPA is allowing at least 75
parts per billion of ground level ozone to damage the lungs of children
resulting in aggravated asthma, which leads to a lower attendance in
schools, and even premature deaths, which occur [more] in infants and
the elderly (EPA 2018). RACT is available that will allow less Nitrogen
Oxides to be emitted into the air, resulting in lower levels of ground
level Ozone. Retrofitting the largest emitters of NOX will
cost money, but the result would be clearer skies and healthier
citizens who can then contribute to American society and its economy.''
    Response 2: While EPA agrees that the District of Columbia must
continue to take efforts in attaining and maintaining all ozone NAAQS
(including the 2015 ozone NAAQS), it is important to note that District
of Columbia is addressing only requirements related to the 2008 ozone
NAAQS in this SIP revision, and that EPA has concluded that the
District is currently meeting all requirements for NOX RACT
set forth by the CAA under the 2008 ozone NAAQS. As previously
discussed, the District of Columbia's 2008 NOX RACT
Submission demonstrated that the District has adopted air pollution
control strategies that represent RACT for the purposes of compliance
with the 2008 8-hour ozone standard for all major stationary sources of
NOX in the District in accordance with the CAA, the 2008
Ozone SIP Requirements Rule, and the latest available information.
    Comment 3: A commenter stated: ``Although emissions limits are tied
to power plant combustion turbines that are no longer in use and
relevant, that should not end the EPA's push to lower CO emissions. The
combustion turbines that the CO emission limits in this amendment refer
to are ones that burn fuel oil at 100mmBTU per hour or more, compared
to those in use which burn at 50mmBTU (Federal Register 2019). Turbine
combustion and cogeneration technology has advanced to the point where
we have reached previous emission limit goals. While this
accomplishment is promising, halting CO limits because the emission
output is lower should not be an option. CO emission limits should be
seriously considered for stationary sources with turbine combustion and
cogeneration technology that utilizes turbines burning 50mmBTU of oil
fuel per hour. The emissions may be less than what 100mmBTU turbines
produce, but the lowest achievable emission rate (LAER) should be
considered and emission limits implemented once more (EPA 2007). By not
striving for the lowest available emission rates for both Nitrogen
Oxides and Carbon Monoxide the EPA is allowing citizens to be exposed
to an invisible threat that leads to higher rates of asthma, upper
respiratory infections, cardiovascular diseases, and weighs heavily on
the economic output of a plethora of Americans The cons far outweigh
the pros in regards to the two issues presented above, and should be
amended in a new rendition of Washington DCs State Implementation
Plan.''
    Response 3: As noted in the comment, there are no longer any
combustion turbine units over 100 mmBTU per hour heat input in the
District of Columbia, thus the deletion of CO emissions limits for such
sources will not result in relaxing an existing emissions limitation
applicable to any existing emissions unit at a major stationary source.
As explained in the NPRM, the current CO levels in the Washington-
Arlington-Alexandria, DC-VA-MD area are well below the CO NAAQS
specified in 40 CFR 50.8. The maximum value recorded at any ambient air
quality monitor in the Washington-Arlington-Alexandria, DC-VA-MD core
based statistical area is only 27 percent (2.6 ppm CO) of the 9.5 ppm
(8-hour average) CO NAAQS and less than 8 percent of the 35 ppm (1-hour
average) CO NAAQS. It is, however, important to note that although
there are no longer any units over 100 mmBTU per hour heat input in the
District of Columbia, the CO NAAQS must continue to be met even with
the removal of CO limits from section 805. In the event that the
District of Columbia is found to be no longer attaining the CO NAAQS, a
process would begin such that the District would implement SIP-approved
contingency measures outlined in the Carbon Monoxide Maintenance Plan
for the Metropolitan Washington, DC Area. See 70 FR 16958 (April 4,
2005).
    Additionally, in the event that any new stationary combustion
turbine or turbines are located within the District in the future that
are a major stationary

source of CO or would constitute a significant net emissions increase
at an existing major stationary source of CO (or nitrogen dioxide), the
new major stationary combustion turbine would be required to obtain a
prevention of significant deterioration (PSD) permit under 40 CFR 52.21
and 52.499. The PSD permit would require best available control
technology. EPA finds that removal of the CO limits will not hinder or
impede attainment or maintenance of the CO NAAQS in the District of
Columbia.
    In response to the commenter's concern that the area is not
striving for the lowest available emission rates for nitrogen oxides,
we note that as a nonattainment area for ozone, the District of
Columbia is required to follow nonattainment new source review
requirements for new major stationary sources of NOX or
volatile organic compounds, which includes a LAER requirement.

IV. Final Action

    EPA is approving the District of Columbia's 2008 RACT Submission on
the basis that the District of Columbia has met the NOX RACT
requirements for the 2008 8-hour ozone NAAQS per CAA sections 182(f)
and 184(b)(2). EPA is also approving source-specific NOX
RACT determinations for the BPAWTP and the amendments to sections
199.1, 199.2, 805.1 and 805.4 of 20 DCMR.
    The District of Columbia's SIP revision is based on: (1)
Certification that for certain categories of sources, previously
adopted RACT controls in the District of Columbia's SIP that were
approved by EPA under the 1-hour ozone NAAQS and 1997 ozone NAAQS
continue to be technically and economically feasible controls, and
continue to represent RACT for the 2008 ozone NAAQS implementation
purposes; (2) the adoption of new or more stringent regulations or
controls into the District of Columbia's SIP that represent presumptive
RACT control levels for certain categories of sources; (3) source
specific emissions limits set for flares and an auxiliary boiler
serving the BPAWTP and (4) the removal of CO emission limits for
combustion turbines of over 100 mmBTU heat input burning fuel oil. EPA
is approving the removal, in accordance with section 110 of the CAA, of
provisions setting carbon monoxide emission limits for a category of
stationary combustion turbines.

V. Incorporation by Reference

    In this document, EPA is finalizing regulatory text that includes
incorporation by reference. In accordance with requirements of 1 CFR
51.5, EPA is finalizing for certain categories of NOX
emissions at major stationary sources of NOX emissions to
incorporate by reference both regulations adopted by the District of
Columbia and source-specific RACT determinations under the 2008 8-hour
ozone NAAQS found within a preconstruction permit. The amendments to
and revision of 20 DCMR Chapters 1 and 8 are specified in Section V.A.
of this preamble; the source specific information is provided in
Section V.B. of this preamble.
    EPA has made, and will continue to make, these materials generally
available through https://www.regulations.gov and at the EPA Region III
Office (please contact the person identified in the FOR FURTHER
INFORMATION CONTACT section of this preamble for more information).

A. Amendments to 20 District of Columbia Municipal Regulations (20
DCMR)

    1. Specifically, EPA is incorporating by reference into 40 CFR
52.470(c): Amendments to 20 District of Columbia Municipal Regulations,
Chapter 1, sections 199.1 and 199.2. These amendments include adding
definitions in section 199.1 for ``Duct burner,'' ``Gaseous fuel,''
Heat recovery steam generator,'' ``Liquid fuel,'' ``Natural gas,'' and
``Stationary combustion turbine,'' and include an amendment to section
199.2 to define the abbreviation ``ppmvd.''
    2. Amendments to 20 District of Columbia Municipal Regulations,
Chapter 8, sections 805.1 and 805.4. These amendments would include:
    a. Revising sections 805.1(a) and (a)(1);
    b. Revising section 805.1(a)(1) to remove NOX emissions
limits for stationary combustion turbines which have an energy input
capacity of one hundred million (100,000,000) BTU and adding
NOX emissions limitations for any stationary combustion
turbine which commenced construction, modification, or reconstruction
after February 18, 2005 and has a heat input rating greater than fifty
million (50,000,000) BTU per hour;
    c. Revising Section 805.1(a)(2) to remove CO emissions limits for
stationary combustion turbines which have an energy input capacity of
one hundred million (100,000,000) BTU per hour and adding
NOX emissions limitations for any stationary combustion
turbine which commenced construction, modification, or reconstruction
on or before February 18, 2005 and has a heat input rating greater than
fifty million (50,000,000) BTU per hour;
    d. Adding a new section 805.1(a)(3) to set NOX emission
limitations for any stationary combustion turbines with a heat input
rating less than or equal to fifty million (50,000,000) BTU per hour;
    e. Adding a new section 805.1(a)(4) to set NOX emission
limitations for certain stationary combustion turbines with a heat
input rating less than or equal to ten million (10,000,000) BTU per
hour;
    f. Adding new sections 805.1(a)(5) through (7) to add new
restrictions on stationary combustion turbines;
    g. Amending section 805.4(b) to replace requirements for stationary
combustion turbines with an energy input capacity of one hundred
million (100,000,000) BTU per hour or greater which is operated for
less than five hundred (500) hours per year with testing and continuous
monitoring requirements for any person required to comply with section
805.4.
    These regulatory changes to sections 199 and 805 were adopted on
November 27, 2018 and effective on the date of publication, December
14, 2018, in the District of Columbia Register (Vol. 65, Number 51,
page 013499, December 14, 2018).

B. Source Specific Provisions for the BPAWTP

    Specifically, EPA is incorporating by reference into 40 CFR
52.470(d) certain portions of Permit (No. 6372-C2/O) to Construct and
Operate New Biosolids Handling Facilities issued to District of
Columbia Water and Sewer Authority as redacted by the District of
Columbia:
    1. The first paragraph citing the pertinent permitting regulations
and listing (redacted) the following significant components: One (1)
Auxiliary Boiler (AB) rated at 62.52 mmBTU per hour (HHV) heat input,
firing DG, One (1) Siloxane Destruction Flare (SF) rated at 6.14 MMBTU
per hour heal input, firing DG; and Two (2) Emergency Flares rated at
126 mmBTU per hour heat input each, firing DG.
    2. The NOX emissions limits listed in the table found in
permit condition ``j.'' for the Auxiliary Boiler (AB), Siloxane
Destruction Flare (SF) and Two (2) Emergency Flares. The hourly
NOX emission limits for the Auxiliary Boiler (AB), Siloxane
Destruction Flare (SF) and Two (2) Emergency Flares listed in Table 2
(as redacted) found under Condition III.
    3. Conditions III.b.1.A.; III.b.3. A. and B.; III.b.3. C.i., iii
and iv.; III.b.3.D.; III.b.3.E. except that relating to carbon
monoxide/CO; III.b.3.F. except ``and CO''; III.b.3.G, iv. and v. except
the provision ``Failure to demonstrate

compliance through the testing may result in enforcement action.'';
III.b.4.A.; III.b.4.B. iv. and v.; III.b.5. as redacted to strike ``in
addition to complying with Condition II(f)''; III.d., III.d.1.A;
III.d.2.D; III.d.3.A. only the portion ``Within 60 days of initial
startup and once every five years thereafter, the Permittee shall
conduct a Department- approved compliance source test at multiple loads
of EF-l, EF-2, and SF in accordance with 40 CFR 60.8 or a similar
protocol acceptable to the Department, to demonstrate compliance with
the emissions limitations contained in Condition III(d)(1) of this
permit;'' III.d.3.B as redacted to exclude ``though additional testing
may be required at other times pursuant to Condition II(d)(2)'';
III.d.3.C. (i), (iii) and (iv); III.d.3.D.; III.d.3.H.(iv);
III.d.3.H.(v) except ``Failure to demonstrate compliance through the
test may result in enforcement action.''; III.d.4.A. except ``including
records of visual inspections,''; III.d.4.B. (ii) except ``and CO'';
III.d.4.B. (iv); and, III.d.5.A. as redacted to exclude ``in addition
to complying with Condition II(f).''
    4. This permit was issued April 20, 2018.

VI. Statutory and Executive Order Reviews

A. General Requirements

    Under the CAA, the Administrator is required to approve a SIP
submission that complies with the provisions of the CAA and applicable
Federal regulations. 42 U.S.C. 7410(k); 40 CFR 52.02(a). Thus, in
reviewing SIP submissions, EPA's role is to approve state choices,
provided that they meet the criteria of the CAA. Accordingly, this
action merely approves state law as meeting Federal requirements and
does not impose additional requirements beyond those imposed by state
law. For that reason, this action:
     Is not a ``significant regulatory action'' subject to
review by the Office of Management and Budget under Executive Orders
12866 (58 FR 51735, October 4, 1993) and 13563 (76 FR 3821, January 21,
2011);
     Is not an Executive Order 13771 (82 FR 9339, February 2,
2017) regulatory action because it is not a significant action under
Executive Order 12866.
     Does not impose an information collection burden under the
provisions of the Paperwork Reduction Act (44 U.S.C. 3501 et seq.);
     Is certified as not having a significant economic impact
on a substantial number of small entities under the Regulatory
Flexibility Act (5 U.S.C. 601 et seq.);
     Does not contain any unfunded mandate or significantly or
uniquely affect small governments, as described in the Unfunded
Mandates Reform Act of 1995 (Pub. L. 104-4);
     Does not have federalism implications as specified in
Executive Order 13132 (64 FR 43255, August 10, 1999);
     Is not an economically significant regulatory action based
on health or safety risks subject to Executive Order 13045 (62 FR
19885, April 23, 1997);
     Is not a significant regulatory action subject to
Executive Order 13211 (66 FR 28355, May 22, 2001);
     Is not subject to requirements of Section 12(d) of the
National Technology Transfer and Advancement Act of 1995 (15 U.S.C. 272
note) because application of those requirements would be inconsistent
with the CAA; and
     Does not provide EPA with the discretionary authority to
address, as appropriate, disproportionate human health or environmental
effects, using practicable and legally permissible methods, under
Executive Order 12898 (59 FR 7629, February 16, 1994).
    In addition, this rule does not have tribal implications as
specified by Executive Order 13175 (65 FR 67249, November 9, 2000),
because the SIP is not approved to apply in Indian country located in
the state, and EPA notes that it will not impose substantial direct
costs on tribal governments or preempt tribal law.

B. Submission to Congress and the Comptroller General

    The Congressional Review Act, 5 U.S.C. 801 et seq., as added by the
Small Business Regulatory Enforcement Fairness Act of 1996, generally
provides that before a rule may take effect, the agency promulgating
the rule must submit a rule report, which includes a copy of the rule,
to each House of the Congress and to the Comptroller General of the
United States. EPA will submit a report containing this action and
other required information to the U.S. Senate, the U.S. House of
Representatives, and the Comptroller General of the United States prior
to publication of the rule in the Federal Register. A major rule cannot
take effect until 60 days after it is published in the Federal
Register. This action is not a ``major rule'' as defined by 5 U.S.C.
804(2).

C. Petitions for Judicial Review

    Under section 307(b)(1) of the CAA, petitions for judicial review
of this action must be filed in the United States Court of Appeals for
the appropriate circuit by April 24, 2020. Filing a petition for
reconsideration by the Administrator of this final rule does not affect
the finality of this action for the purposes of judicial review nor
does it extend the time within which a petition for judicial review may
be filed and shall not postpone the effectiveness of such rule or
action. This action, regarding the NOX RACT SIP for the
District of Columbia under the 2008 ozone NAAQS, may not be challenged
later in proceedings to enforce its requirements (See section
307(b)(2)).

List of Subjects in 40 CFR Part 52

    Environmental protection, Air pollution control, Carbon monoxide,
Incorporation by reference, Intergovernmental relations, Nitrogen
dioxide, Ozone, Reporting and recordkeeping requirements.

    Dated: January 21, 2020.
Cosmo Servidio,
Regional Administrator, Region III.
    40 CFR part 52 is amended as follows:

PART 52--APPROVAL AND PROMULGATION OF IMPLEMENTATION PLANS

0
1. The authority citation for part 52 continues to read as follows:

    Authority: 42 U.S.C. 7401 et seq.

Subpart J--District of Columbia

0
2. Amend Sec.  52.470 by:
0
 a. In paragraph (c) table, revising the entries ``Section 199'' and
``Section 805''; and
0
b. In paragraph (d), adding an entry for ``Blue Plains Advanced
Wastewater Treatment'' at the end of the table.
    The revisions and addition read as follows:

Sec.  52.470  Identification of plan.

* * * * *
    (c)* * *

                      EPA-Approved Regulations and Statutes in the District of Columbia SIP
----------------------------------------------------------------------------------------------------------------
                                                          State
         State citation              Title/subject      effective    EPA approval date    Additional explanation
                                                           date
----------------------------------------------------------------------------------------------------------------
                    District of Columbia Municipal Regulations (DCMR), Title 20--Environment
----------------------------------------------------------------------------------------------------------------
                                                Chapter 1 General
----------------------------------------------------------------------------------------------------------------

                                                  * * * * * * *
Section 199.....................  Definitions and         12/14/18  2/24/20 [Insert      Revised Sections 199.1
                                   Abbreviations.                    Federal Register     and 199.2. Added six
                                                                     citation].           definitions to Section
                                                                                199.1 and an
                                                                                abbreviation for
                                                                                ``ppmvd'' to read
                                                                                ``(Parts Per Million
                                                                                by Volume Dry Basis)''
                                                                                to Section 199.2.
                                                                                Prior Approval was 5/1/
                                                                                17.

                                                  * * * * * * *
----------------------------------------------------------------------------------------------------------------
                                 Chapter 8 Asbestos, Sulfur and Nitrogen Oxides
----------------------------------------------------------------------------------------------------------------

                                                  * * * * * * *
Section 805.....................  Reasonably              12/14/18  2/24/20 [Insert      Revised paragraphs
                                   Available Control                 Federal Register     805.1(a), 805.1(a)(1),
                                   Technology for                    citation].           805.1(a)(2) and
                                   Major Stationary                                       805.4(b).
                                   Sources of Oxides                                     Added paragraphs
                                   of Nitrogen.                                           805.1(a)(3) through
                                                                                (7).

                                                  * * * * * * *
----------------------------------------------------------------------------------------------------------------

    (d) * * *

                         EPA-Approved District of Columbia Source-Specific Requirements
----------------------------------------------------------------------------------------------------------------
                                                          State
         Name of source                Permit No.       effective    EPA approval date    Additional explanation
                                                           date
----------------------------------------------------------------------------------------------------------------

                                                  * * * * * * *
Blue Plains Advanced Wastewater   No. 6372-C2/O......     04/20/18  2/24/20 [Insert      See Sec.   52.479(a)
 Treatment Plant.                                                    Federal Register     for further
                                                                     citation].           explanation.
----------------------------------------------------------------------------------------------------------------

* * * * *

0
3. Add Sec.  52.479 to read as follows:

Sec.  52.479  Source-specific requirements.

    (a) Approval of source-specific requirements for the Blue Plains
Advanced Wastewater Treatment Plant includes EPA incorporating by
reference into Sec.  52.470(d) certain redacted portions of Permit No.
6372-C2/0 approved by the District of Columbia on April 20, 2018 to
Construct and Operate New Biosolids Handling Facilities issued to the
District of Columbia Water and Sewer Authority and as approved on March
25, 2020.
    (1) Specifically, EPA is incorporating by reference into Sec.
52.470(d) certain portions of Permit No. 6372-C2/O to Construct and
Operate New Biosolids Handling Facilities issued to District of
Columbia Water and Sewer Authority as redacted by the District of
Columbia:
    (i) The first paragraph citing the pertinent permitting regulations
and listing (redacted) the following significant components: One (1)
Auxiliary Boiler (AB) rated at 62.52 mmBTU per hour (HHV) heat input,
firing DG, One (1) Siloxane Destruction Flare (SF) rated at 6.14 MMBTU
per hour heal input, firing DG; and Two (2) Emergency Flares rated at
126 mmBTU per hour heat input each, firing DG.
    (ii) The NOX emissions limits listed in the table found
in permit condition ``j.'' for the Auxiliary Boiler (AB), Siloxane
Destruction Flare (SF) and Two (2) Emergency Flares. The hourly
NOX emission limits for the Auxiliary Boiler (AB), Siloxane
Destruction Flare (SF) and Two (2) Emergency Flares listed in Table 2
(as redacted) found under Condition III.
    (iii) Conditions III.b.1.A.; III.b.3. A. and B.; III.b.3. C.i., iii
and iv.; III.b.3.D.; III.b.3.E. except that relating to carbon
monoxide/CO; III.b.3.F. except ``and CO''; III.b.3.G, iv. and v. except
the provision ``Failure to demonstrate compliance through the testing
may result in enforcement action.''; III.b.4.A.; III.b.4.B. iv. and v.;
III.b.5. as redacted to strike ``in addition to complying with
Condition II(f)''; III.d., III.d.1.A; III.d.2.D; III.d.3.A. only the
portion ``Within 60 days of initial startup and once every five years
thereafter, the Permittee shall conduct a Department- approved
compliance source test at multiple loads of EF-l, EF-2, and SF in
accordance with 40 CFR 60.8 or a similar protocol acceptable to the
Department, to demonstrate compliance with the emissions limitations
contained in Condition III(d)(1) of this permit;'' III.d.3.B as
redacted to exclude ``though additional testing may be required at
other times pursuant to Condition II(d)(2)''; III.d.3.C. (i), (iii) and
(iv); III.d.3.D.; III.d.3.H.(iv); III.d.3.H.(v)

except ``Failure to demonstrate compliance through the test may result
in enforcement action.''; III.d.4.A. except ``including records of
visual inspections,''; III.d.4.B. (ii) except ``and CO''; III.d.4.B.
(iv); and, III.d.5.A. as redacted to exclude ``in addition to complying
with Condition II(f)''.
    (2) This permit was issued April 20, 2018.
    (b) [Reserved]

[FR Doc. 2020-02006 Filed 2-21-20; 8:45 am]
BILLING CODE 6560-50-P