[Federal Register Volume 78, Number 96 (Friday, May 17, 2013)]
[Notices]
[Pages 29193-29199]
[FR Doc No: 2013-11775]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-69566; File No. SR-NASDAQ-2013-075]

Self-Regulatory Organizations; The NASDAQ Stock Market LLC;
Notice of Filing and Immediate Effectiveness of a Proposed Rule Change
To Remove Pilot Restrictions From NASDAQ's Qualified Market Maker and
NBBO Setter Incentive Programs, and To Make Other Changes to NASDAQ's
Schedule of Fees and Credits

May 13, 2013.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934
(``Act''),\1\ and Rule 19b-4 \2\ thereunder, notice is hereby given
that on May 1, 2013, The NASDAQ Stock Market LLC (``NASDAQ'' or
``Exchange'') filed with the Securities and Exchange Commission
(``SEC'' or ``Commission'') the proposed rule change as described in
Items I, II and III, below, which Items have been prepared by NASDAQ.
The Commission is publishing this notice to solicit comments on the
proposed rule change from interested persons.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
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I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change

    NASDAQ is proposing to remove the pilot period restriction from its
Qualified Market Maker (``QMM'') and NBBO Setter Incentive pricing
incentive programs under Rule 7014, to make a minor modification to the
QMM program, and to make other changes to NASDAQ's schedule of fees and
credits applicable to execution and routing of orders in securities
priced at $1 or more per share. The changes pursuant to this proposal
are effective upon filing, and the Exchange will implement the proposed
rule changes on May 1, 2013.
    The text of the proposed rule change is available on the Exchange's
Web site at http://nasdaq.cchwallstreet.com, at the principal office of
the Exchange, and at the Commission's Public Reference Room.

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

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

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

1. Purpose
QMM and NBBO Setter Incentive Programs
    In November 2012,\3\ NASDAQ introduced two new pricing programs
designed to create incentives for members to improve market quality.
The programs have been in effect on a pilot basis from November 1, 2012
until April 30, 2013. Effective April 1, 2013, NASDAQ filed several
changes to the programs.\4\ NASDAQ is now filing to remove the pilot
limitation from the programs, while making a minor modification to the
QMM Program.
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    \3\ Securities Exchange Act Release No. 68209 (November 9,
2012), 77 FR 69519 (November 19, 2012) (SR-NASDAQ-2012-126).
    \4\ Securities Exchange Act Release No. 69376 (April 15, 2013),
78 FR 23611 (April 15, 2013) (SR-NASDAQ-2013-063).
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    Under the QMM Program, a member may be designated as a QMM with
respect to one or more of its MPIDs if:
     The member is not assessed any ``Excess Order Fee'' under
Rule 7018 during the month; \5\ and
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    \5\ Rule 7018(m). Last year, NASDAQ introduced an Excess Order
Fee, aimed at reducing inefficient order entry practices of certain
market participants that place excessive burdens on the systems of
NASDAQ and its members and that may negatively impact the usefulness
and life cycle cost of market data. In general, the determination of
whether to impose the fee on a particular MPID is made by
calculating the ratio between (i) entered orders, weighted by the
distance of the order from the NBBO, and (ii) orders that execute in
whole or in part. The fee is imposed on MPIDs that have an ``Order
Entry Ratio'' of more than 100.
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     Through such MPID the member quotes at the national best
bid or best offer (``NBBO'') at least 25% of the time during regular
market hours \6\ in an average of at least 1,000 securities per day
during the month.\7\
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    \6\ Defined as 9:30 a.m. through 4:00 p.m., or such shorter
period as may be designated by NASDAQ on a day when the securities
markets close early (such as the day after Thanksgiving).
    \7\ A member MPID is considered to be quoting at the NBBO if it
has a displayed order at either the national best bid or the
national best offer or both the national best bid and offer. On a
daily basis, NASDAQ will determine the number of securities in which
the member satisfied the 25% NBBO requirement. To qualify for QMM
designation, the MPID must meet the requirement for an average of
1,000 securities per day over the course of the month. Thus, if a
member MPID satisfied the 25% NBBO requirement in 900 securities for
half the days in the month, and satisfied the requirement for 1,100
securities for the other days in the month, it would meet the
requirement for an average of 1,000 securities.
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    A member that is a QMM with respect to a particular MPID (a ``QMM
MPID'') is eligible to receive certain financial benefits, as described
below:
     The QMM may receive an NBBO Setter Incentive credit of
$0.0005 with respect to orders that qualify for the NBBO Setter
Incentive Program (i.e., displayed orders with a size of at least one
round lot that set the NBBO or join another trading center at the NBBO)
\8\ and that are entered through the QMM MPID; provided that the QMM
also has a volume of liquidity provided through the QMM MPID (as a
percentage of Consolidated Volume \9\) that exceeds the lesser of the
volume of liquidity provided through such QMM MPID during the first
month in which the MPID qualified as a QMM MPID (as a percentage of
Consolidated Volume) or 1.0% of Consolidated Volume.\10\ If a QMM does
not satisfy these volume requirements, it will receive an NBBO Setter
Incentive credit of $0.0002 per share executed with respect to orders
that qualify for the NBBO Setter Incentive Program.\11\
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    \8\ The NBBO Setter Incentive program is described in more
detail below.
    \9\ ``Consolidated Volume'' means the consolidated volume
reported to all consolidated transaction reporting plans by all
exchanges and trade reporting facilities during a month.
    \10\ The QMM will also receive the $0.0005 per share rate during
the first month in which an MPID becomes a QMM MPID.
    \11\ Orders designated as Designated Retail Orders under Rule
7018(a) are not eligible to receive an NBBO Setter Incentive credit
in addition to the credit provided with respect to such orders under
Rule 7018(a).
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     The QMM receives a credit of $0.0001 per share executed
with respect to all other displayed orders in securities priced at $1
or more per share that provide liquidity and that are entered through a
QMM MPID (in addition to any credit payable under Rule 7018).\12\
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    \12\ If the QMM also participates in NASDAQ Investor Support
Program (the ``ISP'') NASDAQ will pay the greater of any applicable
credit under the ISP or the QMM program, but not a credit under both
programs. However, Designated Retail Orders are not eligible to
receive an NBBO Setter Incentive credit in addition to the credit
provided with respect to such orders under Rule 7018(a).
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     The QMM may receive a discount on fees for ports used for
entering orders for that MPID, equal to the lesser of the QMM's total
fees for such ports or $5,000.\13\ As provided in Rule 7015, the
specific fees subject to this discount are: (i) all ports using the
NASDAQ Information Exchange (``QIX'') protocol,\14\ (ii) Financial
Information Exchange (``FIX'') trading ports,\15\ and (iii) ports using
other trading telecommunications protocols.\16\
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    \13\ The ports subject to the discount are not used for receipt
of market data.
    \14\ The applicable undiscounted fees are $1,200 per month for a
port pair or ECN direct connection port pair, and $1,000 per month
for an unsolicited message port. See Rule 7015(a).
    \15\ The applicable undiscounted fee is $500 per port per month.
See Rule 7015(b).
    \16\ The applicable undiscounted fee is $500 per port pair per
month. See Rule 7015(g).
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     For a number of shares not to exceed the lower of the
number of shares of liquidity provided through a QMM MPID or 20 million
shares per trading day (the ``Numerical Cap''), NASDAQ charges a fee of
$0.0028 per share executed for orders in securities priced at $1 or
more per share that access liquidity on the NASDAQ Market Center and
that are entered through the same QMM MPID; provided, however, that
orders that would otherwise be charged $0.0028 per share executed under
Rule 7018 do not count toward the Numerical Cap. For shares above the
Numerical Cap, NASDAQ charges the rate otherwise applicable under Rule
7018. Moreover, in order to be charged the execution rate of $0.0028
per share executed, the QMM's volume of liquidity added, provided, and/
or routed through the QMM MPID during the month (as a percentage of
Consolidated Volume) must be not less than 0.05% lower than the volume
of liquidity added, provided, and/or routed through such QMM MPID
during the first month in which the MPID qualified as a QMM MPID (as a
percentage of Consolidated Volume).\17\
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    \17\ This limitation will not apply during the first month in
which an MPID becomes a QMM MPID.
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    NASDAQ believes that the QMM pilot program has been successful in
achieving its goals of improving market quality. Since the inception of
the program, thirteen MPIDs have qualified. During April 2013, twelve
MPIDs have qualified and have met the 25% quoting requirements of the
program in over 4,700 securities. In recent months, NASDAQ's time at
the NBBO has increased, with recent data showing NASDAQ at the inside
25% of the time in approximately 5,700 securities, 50% of the time in
approximately 4,100 securities, and 75% of the time in approximately
2,100 securities. Moreover, the presence of even one QMM in a stock
appears to decrease dramatically the average effective

spread in a security, with multiple QMMs increasing the effect.
Specifically, the average effective spread of securities with no QMMs
was approximately $0.0825 over the pilot period, decreasing to
approximately $0.065 for securities with one QMM, approximately $0.0425
for securities with two QMMs, approximately $0.0325 for securities with
three QMMs, approximately $0.020 for securities with four QMMs, and
approximately $0.015 for securities with five or more QMMs.
    In addition to removing the pilot limitation from the QMM Program,
NASDAQ proposes to modify the requirement that a QMM must quote at the
NBBO at least 25% of the time during regular marker hours in an average
of at least 1,000 securities per day during the month. Beginning May 1,
2013, Designated Retail Orders will not be counted in determining
whether a member satisfies this requirement. Under the terms of another
NASDAQ financial incentive program, a Designated Retail Order is
defined as an ``agency or riskless principal order that originates from
a natural person and is submitted to Nasdaq by a member that designates
it . . . , provided that no change is made to the terms of the order
with respect to price or side of market and the order does not
originate from a trading algorithm or any other computerized
methodology.'' \18\ The Designated Retail Order Program is aimed at
encouraging market participants that make routing decisions with
respect to retail orders to send them to NASDAQ. Because of the origin
of such orders, they do not represent market-making activity and the
submitting member is not in a position to influence their price. The
QMM Program, however, is aimed at encouraging members that submit
quotes/orders as market makers or as proprietary traders to adhere to
market quality standards by quoting at the NBBO. Accordingly, NASDAQ
does not believe that the program's purposes are served by including
Designated Retail Orders in the calculations to determine whether a
member has satisfied these quoting standards.
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    \18\ See Rule 7018.
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    Under the NBBO Setter Incentive program, NASDAQ provides an
enhanced liquidity provider rebate with respect to displayed liquidity-
providing orders that set the NBBO or cause NASDAQ to join another
trading center with a protected quotation at the NBBO. The NBBO Setter
Incentive credit is paid on a monthly basis, and the amount is
determined by multiplying the applicable rate by the number of shares
of displayed liquidity provided to which a particular rate applies.\19\
A member receives an NBBO Setter Incentive credit at the $0.0001 rate
with respect to all shares of displayed liquidity that are executed at
a price of $1 or more in the Nasdaq Market Center during a given month
if posted through an order that:
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    \19\ A member is not eligible to receive an NBBO Setter
Incentive credit with respect to a Designated Retail Order.
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     displayed a quantity of at least one round lot at the time
of execution; and
     either established the NBBO or was the first order posted
on NASDAQ that had the same price as an order posted at another trading
center with a protected quotation that established the NBBO.

If the member also provides a daily average volume of at least 5
million shares of liquidity through orders that satisfy the foregoing
criteria (i.e., that qualify for an NBBO Setter Incentive credit), it
will receive a credit at the $0.0002 rate. Alternatively, a member may
receive a credit at the $0.0002 per share executed rate if it is a QMM
but does not satisfy certain volume criteria required for a QMM to
receive a credit at the $0.0005 per share executed rate.
    A member receives an NBBO Setter Incentive credit at the $0.0005
rate with respect to all shares of displayed liquidity that are
executed at a price of $1 or more in the NASDAQ Market Center during a
given month if posted through an order that:
     displayed a quantity of at least one round lot at the time
of execution;
     either established the NBBO or was the first order posted
on Nasdaq that had the same price as an order posted at another trading
center with a protected quotation that established the NBBO;
     was entered through a QMM MPID; and
     the QMM has a volume of liquidity provided through the QMM
MPID (as a percentage of Consolidated Volume) that exceeds the lesser
of the volume of liquidity provided through such QMM MPID during the
first month in which the MPID qualified as a QMM MPID (as a percentage
of Consolidated Volume) or 1.0% of Consolidated Volume.
    NASDAQ believes that the NBBO Setter incentive program has achieved
its goal of increasing the extent to which NASDAQ sets the NBBO or
joins another market that has set the NBBO. Specifically, while the
results are subject to daily fluctuation, NASDAQ has seen an upward
trend in the extent of quoting and executions at the NBBO as the
program has gained traction. Thus, shares of liquidity that set or join
the NBBO have increased from a range of approximately 325-400 million
in January 2013, to a range of approximately 500-650 million in April
2013. Similarly, shares executed at the NBBO have increased from a
range of approximately 105-130 million in January 2013, to a range of
approximately 120-180 million in April 2013.
Pricing for Midpoint Orders and Other Non-Displayed Orders
    NASDAQ is proposing to adopt a new pricing tier for midpoint pegged
and midpoint post only orders (``midpoint orders''). Currently, NASDAQ
pays a credit of $0.0017 per share executed for midpoint orders if the
member provides an average daily volume of more than 3 million shares
through midpoint order during the month and $0.0015 per share executed
for midpoint orders if the member provides an average daily volume of 3
million or fewer shares through midpoint orders during the month. While
modifying the text of the existing tiers slightly but without making
substantive changes to them,\20\ NASDAQ is proposing a new tier for
members that provide an average daily volume of 5 million or more
shares of liquidity through midpoint orders during the month, provided,
however, that the member's average daily volume of liquidity provided
through midpoint orders during the month is at least 2 million shares
more than in April 2013. Thus, the tier includes a requirement for both
absolute volume and an increase in volume over a past level. In this
respect, the proposed tier is similar to the ``Step-Up'' pricing tier
offered by NYSEArca, which requires market participants to exceed
volumes during a specified benchmark month.\21\
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    \20\ Specifically, NASDAQ is rearranging the location of pricing
for midpoint orders and other forms of non-displayed orders to
minimize repetition in the fee rule. In addition, NASDAQ is making
the $0.0017 per share executed tier apply to members providing a
daily average of ``3 million or more shares,'' rather than ``more
than 3 million shares.'' NASDAQ does not view this change as
substantive since the likelihood of a member providing exactly 3
million share of liquidity per day and thereby being affected by the
change is extremely remote. Rather, the change is designed to
provide for consistent drafting for all pricing tiers applicable to
midpoint orders, including the newly introduced tier for members
providing a daily average of 5 million or more shares of liquidity
through midpoint orders.
    \21\ http://usequities.nyx.com/markets/nyse-arca-equities/trading-fees.
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    With respect to non-displayed orders other than midpoint orders,
NASDAQ currently provides a credit of $0.0010 per share executed.
NASDAQ is proposing to require that members

receiving this credit provide an average daily volume of 1 million or
more shares per day through non-displayed orders (including midpoint
orders) in order to receive the $0.0010 per share credit. Members not
meeting this volume requirement will receive a credit of $0.0005 per
share executed for non-displayed orders.\22\
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    \22\ NASDAQ is also modifying the rule language pertaining to
credits for non-displayed orders to remove references to a ``quote/
order,'' since all quotes are displayed.
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Routing Fees
    NASDAQ is proposing selected increases in its fees for routing
orders to other trading venues. These changes are intended to ensure
that NASDAQ's trading revenues are not unduly impacted by continued low
volumes in the cash equities markets, and will primarily have the
effect of making fees associated with routing to NASDAQ OMX BX (``BX'')
and NASDAQ OMX PSX (``PSX''), NASDAQ's affiliated exchanges, somewhat
higher than is currently the case. Specifically:
     NASDAQ currently provides a credit of $0.0005 per share
executed for directed orders \23\ routed to BX, which NASDAQ proposes
to eliminate, such that no charge or credit will apply. Depending on
volumes and the nature of the order accessed, BX provides a rebate of
$0, $0.0004, $0.0010, or $0.0014 per share executed with respect to
orders that access liquidity from its book.
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    \23\ Directed Orders are orders that are directed to an exchange
other than NASDAQ, as directed by the entering party, without
checking the NASDAQ book. If unexecuted, the order (or unexecuted
portion thereof) is returned to the entering party.
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     NASDAQ currently pays a credit of $0.0014 per share
executed for TFTY, SOLV, CART, or SAVE \24\ orders that execute at BX.
NASDAQ proposes to reduce the applicable credit to $0.0004 per share
executed.
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    \24\ TFTY is a routing option under which orders check the
NASDAQ System for available shares only if so instructed by the
entering firm and are thereafter routed to destinations on the
applicable routing table. If shares remain un-executed after
routing, they are posted to the book. Once on the book, if the order
subsequently is locked or crossed by another market center, the
System will not route the order to the locking or crossing market
center. SOLV is a routing option under which orders may either (i)
route to BX and PSX, check the NASDAQ System, and then route to
other destinations on the applicable routing table, or (ii) may
check the NASDAQ System first and then route to destinations on the
applicable routing table. If shares remain un-executed after
routing, they are posted to the book. Once on the book, if the order
subsequently is locked or crossed by another accessible market
center, the System routes the order to the locking or crossing
market center. CART is a routing option under which orders route to
BX and PSX and then check the NASDAQ System. If shares remain un-
executed, they are posted to the book or cancelled. Once on the
book, if the order subsequently is locked or crossed by another
market center, the System will not route the order to the locking or
crossing market center. SAVE is a routing option under which orders
may either (i) route to BX and PSX, check the NASDAQ System, and
then route to other destinations on the applicable routing table, or
(ii) may check the NASDAQ System first and then route to
destinations on the applicable routing table. If shares remain un-
executed after routing, they are posted to the book. Once on the
book, if the order subsequently is locked or crossed by another
market center, the System will not route the order to the locking or
crossing market center.
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     NASDAQ current charges $0.0029 per share executed with
respect to directed orders that access liquidity at PSX. NASDAQ
proposes to increase the charge to $0.0035 per share executed, a fee
equal to NASDAQ's existing charge for directed orders that access
liquidity on venues other than BX, PSX, or the New York Stock Exchange
(``NYSE''). PSX currently charges of a fee of $0.0028 or $0.0030 per
share executed with respect to orders that access liquidity on its
book.
     NASDAQ currently charges $0.0029 per share executed for
SAVE or SOLV orders that execute at venues other than BX, PSX, or NYSE.
NASDAQ proposes to increase the applicable charge to $0.0030 per share
executed.
     NASDAQ currently charges $0.0027 per share executed for
directed orders that are designated as Intermarket Sweep Orders and
that execute at NYSE. NASDAQ proposes raising the applicable fee to
$0.0029 per share executed. NYSE currently charges NASDAQ $0.0025 per
share executed for orders that access liquidity on its book, so the
change increases the extent of the markup charged by NASDAQ for routing
such orders to NYSE.
     For other directed orders that execute at NYSE, NASDAQ
currently charges $0.0026 per share executed for a member that provides
an average daily volume of more than 35 million shares of liquidity,
and $0.0027 per share executed for other members. NASDAQ proposes
raising the applicable fees to $0.0028 and $0.0029 per share executed,
respectively.
     For TFTY orders that execute at NYSE, NASDAQ currently
charges $0.0024 per share executed. NASDAQ proposes increasing the fee
to $0.0025 per share executed.
    For DOTI orders that execute at BX,\25\ NASDAQ currently passes
through applicable fees and/or credits. (As noted above, applicable
credits currently range from $0 to $0.0014 per share executed.) NASDAQ
proposes to pay a fixed credit of $0.0004 per share executed with
respect to such orders.\26\
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    \25\ DOTI is a routing option for orders that the entering firm
wishes to direct to the NYSE or NYSE MKT without returning to
NASDAQ. DOTI orders check the NASDAQ System for available shares and
then are sent to destinations on the applicable routing table before
being sent to NYSE or NYSE MKT, as appropriate. DOTI orders do not
return to the NASDAQ book after routing. The entering firm may
alternatively elect to have DOTI orders check the NASDAQ System for
available shares and thereafter be directly sent to NYSE or NYSE MKT
as appropriate.
    \26\ NASDAQ is also adding some clarifying language to the rule
text relating to fees for DOTI orders.
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2. Statutory Basis
    NASDAQ believes that the proposed rule change is consistent with
the provisions of Section 6 of the Act,\27\ in general, and with
Sections 6(b)(4) and 6(b)(5) of the Act,\28\ in particular, in that it
provides for the equitable allocation of reasonable dues, fees and
other charges among members and issuers and other persons using any
facility or system which NASDAQ operates or controls, and is not
designed to permit unfair discrimination between customers, issuers,
brokers, or dealers.
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    \27\ 15 U.S.C. 78f.
    \28\ 15 U.S.C. 78f(b)(4) and (5).
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    NASDAQ believes that the NBBO Setter Incentive program has been
successful in encouraging members to add liquidity at prices that
benefit all NASDAQ market participants and the NASDAQ market itself,
and enhance price discovery, by establishing a new NBBO or allowing
NASDAQ to join the NBBO established by another trading center. NASDAQ
further believes that the proposal to remove the pilot limitation from
the program is reasonable, consistent with an equitable allocation of
fees, and not unfairly discriminatory. Specifically, NASDAQ believes
that the level of the credits available through the program--$0.0001,
$0.0002, or $0.0005 per share executed--is reasonable, in that it does
not reflect a disproportionate increase above the rebates provided to
all members with respect to the provision of displayed liquidity under
Rule 7018. NASDAQ further notes that through the program, NASDAQ
reduces fees for members that set the NBBO or join another market at
the NBBO. The program is consistent with the Act's requirement for an
equitable allocation of fees because members that establish the NBBO or
cause NASDAQ to join another market at the NBBO benefit all investors
by promoting price discovery and increasing the depth of liquidity
available at the inside market. Such members also benefit NASDAQ itself
by enhancing its competitiveness as a market that attracts marketable
orders. Accordingly, NASDAQ believes that it is consistent with an
equitable allocation of fees to pay an enhanced

rebate in recognition of these benefits to NASDAQ and its market
participants. NASDAQ further notes that the program is consistent with
an equitable allocation of fees because it is immediately available to
all market participants that allow NASDAQ to set or join the NBBO,
regardless of the size of the firm or its trading volumes. Finally,
NASDAQ believes that the program and the payment of a higher rebate
with respect to qualifying orders is not unfairly discriminatory
because it is intended to promote the benefits described above, and
because the magnitude of the additional rebate is not unreasonably high
in comparison to the rebate paid with respect to other displayed
liquidity-providing orders.
    NASDAQ further believes that the QMM program has been successful at
encouraging members to promote price discovery and market quality by
quoting at the NBBO for a significant portion of each day in a large
number of securities, thereby benefitting NASDAQ and other investors by
committing capital to support the execution of orders. With respect to
the enhanced NBBO Setter Incentive rebate provided to QMMs, NASDAQ
believes that the rebate itself is reasonable, equitable, and not
unfairly discriminatory for the reasons discussed above with regard to
the NBBO Setter Incentive program. In addition, NASDAQ believes that it
is reasonable to pay a higher rebate under that program to QMMs because
of the additional commitment to market quality reflected in the quoting
requirements associated with being a QMM. Similarly, NASDAQ believes
that the higher rebate is consistent with an equitable allocation of
fees because a QMM that sets the NBBO is demonstrating both a specific
commitment to the market through the NBBO-setting order and a broad
commitment through its quoting activity throughout the month.
Accordingly, NASDAQ believes that it is consistent with an equitable
allocation to pay a higher rebate in comparison with the rebate for
other NBBO-setting orders. Finally, NASDAQ believes that this higher
rebate is not unfairly discriminatory because it is consistent with the
market quality and competitiveness benefits associated with the program
and because the magnitude of the additional rebate is not unreasonably
high in comparison to the rebate paid with respect to other displayed
liquidity-providing orders. NASDAQ further believes that reserving the
highest NBBO Setter Incentive Credit of $0.0005 per share executed for
QMMs that increase their participation in NASDAQ above a prior
benchmark level (or 1.0% of Consolidated Volume) is reasonable because
it provides a greater incentive for QMMs to benefit the Exchange and
other market participants through high levels of liquidity provision.
This aspect of the program is consistent with an equitable allocation
of fees because members that contribute significantly to market quality
by satisfying the requirements of both the QMM and the NBBO Setter
Incentive program while participating actively in the NASDAQ Market
Center justifiably earn the higher credit of $0.0005 per share
executed. This aspect of the program is not unfairly discriminatory
because a QMM that does not achieve the higher requirements may still
receive a credit of $0.0002 for orders that set the NBBO, as well as a
credit of $0.0001 for other displayed orders (excluding Designated
Retail Orders).
    NASDAQ believes that the port fee discount for QMMs is consistent
with an equitable allocation of fees because the fees for connectivity,
such as the ports used for order entry, are a significant component of
the overall cost of trading on NASDAQ and other trading venues.
Accordingly, to the extent that a member maintains a significant
presence in the NASDAQ market through the extent of its quoting at the
NBBO, NASDAQ believes that it is equitable to provide the member a
discount on this component of its trading costs. NASDAQ further
believes that the discount is not unfairly discriminatory, because it
is subject to a monthly cap, such that the disparity between the
monthly costs of a QMM and another market participant with a similar
configuration of order entry ports may not exceed $5,000. Finally,
NASDAQ believes that the discount is reasonable because it will result
in a fee reduction for members that provide the market quality benefits
associated with QMM status.
    The aspect of the QMM program that features a $0.0028 per share
executed pricing tier for QMMs is reasonable because it provides an
incentive for QMMs to maintain their participation in NASDAQ near or
above a prior benchmark level. The tier is consistent with an equitable
allocation of fees because members that contribute significantly to
market quality by satisfying the requirements of the QMM program while
participating actively in the NASDAQ Market Center justifiably may be
charged a lower fee with respect to order executions. The tier is not
unfairly discriminatory because a QMM that does not achieve the higher
requirements would pay a fee that is only slightly higher ($0.0029 or
$0.0030 per share executed, depending on other aspects of its
participation in NASDAQ).
    The proposed change to provide that Designated Retail Orders will
not be considered when determining whether a QMM has met the NBBO
requirements of the program is reasonable because the program is
designed to increase the extent to which market makers and other market
participants with proprietary trading interest choose to commit capital
to support executions at the NBBO; accordingly, the program's goals are
not supported by Designated Retail Orders, which do not reflect such
trading interest. Moreover, the change is consistent with an equitable
allocation of fees and is not unfairly discriminatory because
Designated Retail Orders already benefit from a targeted financial
incentive program designed to encourage them to be posted in NASDAQ.
    The proposed changes with respect to the introduction of a new
pricing tier for midpoint orders is reasonable because it will result
in a fee reduction for members using these orders to the required
extent. As such, it is consistent with pricing tiers established at a
range of national securities exchanges under which discounts are
dependent on achieving stipulated volume requirements. NASDAQ believes
that the proposed tier is consistent with an equitable allocation of
fees because use of such orders benefits other market participants to
the extent that they execute at the midpoint between the national best
bid and best offer and thereby offer price improvement. Accordingly,
while NASDAQ's fee schedule reflects incentives for the use of
displayed orders, which aid in price discovery, it also reflects a
preference for midpoint orders over other forms of non-displayed orders
because of these price improvement benefits. The change is not unfairly
discriminatory because NASDAQ offers other means by which a member
might earn a comparable rebate, including the basic rebate of $0.0020
per share executed paid with respect to displayed orders.
    The proposed introduction of a volume-based requirement for members
to receive the current credit of $0.0010 per share executed for non-
displayed orders, and the proposed reduction in the credit for members
not meeting the volume-based requirement, is reasonable because the
volume requirement is modest, requiring members to provide an average
daily volume of 1 million or more shares using non-displayed orders.
Moreover, the changes are reasonable because members are able to
receive much

higher rebates using midpoint orders or displayed orders. The changes
are consistent with an equitable allocation of fees and not unfairly
discriminatory because they are consistent with NASDAQ's stated policy
of encouraging the use of displayed orders and midpoint orders, which
promote price discovery and price improvement, respectively, rather
than non-displayed orders. Accordingly, while NASDAQ offers non-
displayed orders to provide members with an option to conceal trading
interest when they believe that doing so is to their advantage,
nevertheless NASDAQ believes that it is equitable and not unfairly
discriminatory for its fees to encourage usage of other order types.
    The changes with respect to TFTY, SOLV, CART, SAVE, DOTI and
directed orders that execute at BX are reasonable because they will
result in members using these routing strategies to access BX receiving
a consistent credit of $0.0004 per share executed, which is equivalent
to the basic credit paid by BX with respect to orders that access
liquidity on BX but that do not achieve BX's volume tiers, or no credit
for directed orders, which is consistent with NASDAQ's practice of
charging a higher markup for directed orders. Thus, while the change
will result in a reduction of credits paid to members using these
routing strategies, such members will continue to receive a credit
equivalent to that received by many BX members.\29\ The change is
consistent with an equitable allocation of fees because use of NASDAQ's
router and the affected routing strategies is voluntary and members may
use other methods to route orders to other execution venues.
Accordingly, the change is allocated solely to members that opt to use
NASDAQ's router to access BX and that opt to use the routing strategies
to which the change applies. In addition, the change is consistent with
an equitable allocation and is not unfairly discriminatory because it
is consistent with NASDAQ's practice of charging a markup for use of
routing services above the fee charged to NASDAQ by the destination
market, which allows NASDAQ to cover other costs of operation and to
earn a profit.
---------------------------------------------------------------------------

    \29\ Depending on routed volumes, NASDAQ may receive a credit of
$0.0014 per share executed with respect to these orders. However, to
the extent that the credit provided to members is lower, it reflects
a charge for the use of NASDAQ's routing service, designed to cover
other costs of operation and to allow a profit. To this extent, the
change is consistent with other existing routing fees that are set
in excess of the charges assessed to NASDAQ's router by the
destination market.
---------------------------------------------------------------------------

    The change with respect to directed orders that execute at PSX is
reasonable because it will make the charge for such orders equal to the
charge for directed orders that access liquidity at numerous other
venues. The change is consistent with an equitable allocation of fees
because use of NASDAQ's router and the use of directed orders is
voluntary and members may use other methods to route orders to other
execution venues. Accordingly, the change is allocated solely to
members that opt to use NASDAQ's router to access PSX using directed
orders. In addition, the change is consistent with an equitable
allocation and is not unfairly discriminatory because the difference
between the fee charged by PSX ($0.0030 per share executed) and the
routing fee charged by NASDAQ will be generally consistent with the
markup applicable to orders routed to other venues, allowing NASDAQ to
cover other costs of operation and to earn a profit.
    The change with respect to SAVE or SOLV orders that execute at
venues other than BX, PSX, or NYSE is reasonable because it is a small
increase of only $0.0001 per share executed. Moreover, depending on the
execution venue to which an order is routed, the fee of $0.0030 may be
equal to the access fee charged by the recipient market or may reflect
a markup. The change is consistent with an equitable allocation of fees
because use of NASDAQ's router and the affected routing strategies is
voluntary and members may use other methods to route orders to other
execution venues. Accordingly, the change is allocated solely to
members that opt to use NASDAQ's router and that opt to use the routing
strategies in question. In addition, the change is consistent with an
equitable allocation and not unfairly discriminatory because it relates
to a wide range of trading venues to which NASDAQ may route orders
under the SAVE and SOLV strategies. To the extent that the fee reflects
a markup above the fees charged by destination venues, it allows NASDAQ
to cover other costs of operation and to earn a profit.
    The changes with respect to directed orders and TFTY orders routed
to NYSE are reasonable because they reflect modest increases of $0.0001
or $0.0002 per share executed to the applicable fees. The modified fees
reflect markups of $0.0003 or $0.0004 above the fee of $0.0025 per
share executed charged to NASDAQ by NYSE with respect to routed orders,
but such markups allow NASDAQ not only to cover the access fees charged
to it, but also to cover other costs of operation and to allow a
profit. The changes are consistent with an equitable allocation of fees
because use of NASDAQ's router and the affected routing strategies is
voluntary and members may use other methods to route orders to NYSE.
Accordingly, the change is allocated solely to members that opt to use
NASDAQ's router to access NYSE using directed orders or the TFTY
strategy. The change is not unfairly discriminatory because the
difference between the fee charged by NYSE ($0.0025 per share executed)
and the routing fee charged by NASDAQ will continue to be lower than
the markup applicable to other routed orders, including directed orders
sent to certain other trading venues, but will be made more consistent
by the change. In addition, the change is consistent with an equitable
allocation and not unfairly discriminatory because it is consistent
with NASDAQ's practice of charging a markup for use of routing services
above the fee charged to NASDAQ by the destination market, which allows
NASDAQ to cover other costs of operation and to allow a profit.

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

    NASDAQ does not believe that the proposed rule change will result
in any burden on competition that is not necessary or appropriate in
furtherance of the purposes of the Act, as amended. NASDAQ notes that
it operates in a highly competitive market in which market participants
can readily favor competing venues if they deem fee levels at a
particular venue to be excessive, or rebate opportunities available at
other venues to be more favorable. In such an environment, NASDAQ must
continually adjust its fees to remain competitive with other exchanges
and with alternative trading systems that have been exempted from
compliance with the statutory standards applicable to exchanges.
Because competitors are free to modify their own fees in response, and
because market participants may readily adjust their order routing
practices, NASDAQ believes that the degree to which fee changes in this
market may impose any burden on competition is extremely limited. In
this instance, although some of the proposed changes impose conditions
on the availability of certain previously introduced pricing
incentives, the incentive programs in question remain in place and are
themselves reflective of the need for exchanges to offer significant
financial incentives to attract order flow. Similarly, although the
proposed rule change includes increases in routing fees and decreases
with respect to rebates for non-displayed orders, the

impact of these changes is limited to voluntary aspects of NASDAQ's
services for which numerous alternatives exist. Accordingly, if the
changes are unattractive to market participants, it is likely that
NASDAQ will lose market share as a result. As a result, NASDAQ does not
believe that the proposed changes will impair the ability of members or
competing order execution venues to maintain their competitive standing
in the financial markets.

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

    No written comments were either solicited or received.

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

    The foregoing rule change has become effective pursuant to Section
19(b)(3)(A) of the Act \30\ and paragraph (f)(2) of Rule 19b-4
thereunder.\31\ At any time within 60 days of the filing of the
proposed rule change, the Commission summarily may temporarily suspend
such rule change if it appears to the Commission that such action is
necessary or appropriate in the public interest, for the protection of
investors, or otherwise in furtherance of the purposes of the Act.
---------------------------------------------------------------------------

    \30\ 15 U.S.C. 78s(b)(3)(A).
    \31\ 17 CFR 240.19b-4(f)(2).
---------------------------------------------------------------------------

IV. Solicitation of Comments

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

Electronic Comments

     Use the Commission's Internet comment form (http://www.sec.gov/rules/sro.shtml); or
     Send an email to<EMAIL_ADDRESS>Please
include File Number SR-NASDAQ-2013-075 on the subject line.

Paper Comments

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

All submissions should refer to File Number SR-NASDAQ-2013-075. This
file number should be included on the subject line if email is used. To
help the Commission process and review your comments more efficiently,
please use only one method. The Commission will post all comments on
the Commission's Internet Web site (http://www.sec.gov/rules/sro.shtml). Copies of the submission, all subsequent amendments, all
written statements with respect to the proposed rule change that are
filed with the Commission, and all written communications relating to
the proposed rule change between the Commission and any person, other
than those that may be withheld from the public in accordance with the
provisions of 5 U.S.C. 552, will be available for Web site viewing and
printing in the Commission's Public Reference Room, 100 F Street NE.,
Washington, DC 20549, on official business days between the hours of
10:00 a.m. and 3:00 p.m. Copies of the filing also will be available
for inspection and copying at the principal office of the Exchange. All
comments received will be posted without change; the Commission does
not edit personal identifying information from submissions. You should
submit only information that you wish to make available publicly. All
submissions should refer to File Number SR-NASDAQ-2013-075 and should
be submitted on or before June 7, 2013.

    For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\32\
---------------------------------------------------------------------------

    \32\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------

Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2013-11775 Filed 5-16-13; 8:45 am]
BILLING CODE 8011-01-P


[Federal Register Volume 85, Number 125 (Monday, June 29, 2020)]
[Proposed Rules]
[Pages 38831-38836]
[FR Doc No: 2020-13508]

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ENVIRONMENTAL PROTECTION AGENCY

40 CFR Part 52

[EPA-R03-OAR-2020-0198; FRL 10010-71-Region 3]

Air Plan Approval; West Virginia; 1997 8-Hour Ozone Standard
Second Maintenance Plan for the West Virginia Portion of the Wheeling,
WV-OH Area Comprising Marshall and Ohio Counties

AGENCY: Environmental Protection Agency (EPA).

ACTION: Proposed rule.

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

SUMMARY: The Environmental Protection Agency (EPA) is proposing to
approve a state implementation plan (SIP) revision submitted by the
State of West Virginia. This revision pertains to the West Virginia
Department of Environmental Protection's (WVDEP) plan for maintaining
the 1997 8-hour ozone national ambient air quality standards (NAAQS)
for the West Virginia portion of the Wheeling, WV-OH area (Wheeling
Area), comprising Marshall and Ohio Counties). This action is being
taken under the Clean Air Act (CAA).

DATES: Written comments must be received on or before July 29, 2020.

ADDRESSES: Submit your comments, identified by Docket ID No. EPA-R03-
OAR-2020-0198 at https://www.regulations.gov, or via email to
<EMAIL_ADDRESS>For comments submitted at Regulations.gov,
follow the online instructions for submitting comments. Once submitted,
comments cannot be edited or removed from Regulations.gov. For either
manner of submission, EPA may publish any comment received to its
public docket. Do not submit electronically any information you
consider to be confidential business information (CBI) or other
information whose disclosure is restricted by statute. Multimedia
submissions (audio, video, etc.) must be accompanied by a written
comment. The written comment is considered the official comment and
should include discussion of all points you wish to make. EPA will
generally not consider comments or comment contents located outside of
the primary submission (i.e. on the web, cloud, or other file sharing
system). For additional submission methods, please contact the person
identified in the For Further Information Contact section. For the full
EPA public comment policy, information about CBI or multimedia
submissions, and general guidance on making effective comments, please
visit

https://www.epa.gov/dockets/commenting-epa-dockets.

FOR FURTHER INFORMATION CONTACT: 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 December 10, 2019, WVDEP submitted a
revision to the West Virginia SIP to incorporate a plan for maintaining
the 1997 ozone NAAQS through June 14, 2027, in accordance with CAA
section 175A.\1\
---------------------------------------------------------------------------

    \1\ In its December 10, 2019 submittal, the State consistently
refers to the Wheeling Area, rather than referring to the West
Virginia portion of the Wheeling, WV-OH area. While the state's
terminology is technically incorrect, it is clear that what the
State refers to as the Wheeling Area is identical to the West
Virginia portion of the Wheeling, WV-OH area designated by EPA
pursuant to the 1997 8-Hour ozone NAAQS. See 40 CFR 81.349.
---------------------------------------------------------------------------

I. Background

    In 1979, under section 109 of the CAA, EPA established primary and
secondary NAAQS for ozone at 0.12 parts per million (ppm), averaged
over a 1-hour period. 44 FR 8202 (February 8, 1979). On July 18, 1997
(62 FR 38856),\2\ EPA revised the primary and secondary NAAQS for ozone
to set the acceptable level of ozone in the ambient air at 0.08 ppm,
averaged over an 8-hour period. EPA set the 8-hour ozone NAAQS based on
scientific evidence demonstrating that ozone causes adverse health
effects at lower concentrations and over longer periods of time than
was understood when the pre-existing 1-hour ozone NAAQS was set.
Following promulgation of a new or revised NAAQS, EPA is required by
the CAA to designate areas throughout the nation as attaining or not
attaining the NAAQS. On April 30, 2004 (69 FR 23858), EPA designated
Wheeling Area, West Virginia-Ohio (WV-OH), as nonattainment for the
1997 8-hr ozone NAAQS. The Wheeling Area, WV-OH nonattainment area
consists of Marshall and Ohio Counties, WV and Belmont County, OH.
---------------------------------------------------------------------------

    \2\ In March 2008, EPA completed another review of the primary
and secondary ozone standards and tightened them further by lowering
the level for both to 0.075 ppm. 73 FR 16436 (March 27, 2008).
Additionally, in October 2015, EPA completed a review of the primary
and secondary ozone standards and tightened them by lowering the
level for both to 0.70 ppm. 80 FR 65292 (October 26, 2015).
---------------------------------------------------------------------------

    Once a nonattainment area has three years of complete, certified
air quality data that has been determined to attain the NAAQS, and the
area has met the other criteria outlined in CAA section
107(d)(3)(E),\3\ the state can submit a request to EPA to redesignate
the area to attainment. Areas that have been redesignated by EPA from
nonattainment to attainment are referred to as ``maintenance areas.''
One of the criteria for redesignation is to have an approved
maintenance plan under CAA section 175A. The maintenance plan must
demonstrate that the area will continue to maintain the standard for
the period extending 10 years after redesignation, and it must contain
such additional measures as necessary to ensure maintenance as well
contingency measures as necessary to assure that violations of the
standard will be promptly corrected.
---------------------------------------------------------------------------

    \3\ The requirements of CAA section 107(d)(3)(E) include
attainment of the NAAQS, full approval under section 110(k) of the
applicable SIP, determination that improvement in air quality is a
result of permanent and enforceable reductions in emissions,
demonstration that the state has met all applicable section 110 and
part D requirements, and a fully approved maintenance plan under CAA
section 175A.
---------------------------------------------------------------------------

    On May 15, 2007 (72 FR 27247, effective June 14, 2007), EPA
approved a redesignation request (and maintenance plan) from WVDEP for
the Wheeling Area. In accordance with section 175A(b), at the end of
the eighth year after the effective date of the redesignation, the
state must also submit a second maintenance plan to ensure ongoing
maintenance of the standard for an additional 10 years.
    EPA's final implementation rule for the 2008 ozone NAAQS revoked
the 1997 ozone NAAQS and provided that one consequence of revocation
was that areas that had been redesignated to attainment (i.e.,
maintenance areas) for the 1997 NAAQS no longer needed to submit second
10-year maintenance plans under CAA section 175A(b).\4\ However, in
South Coast Air Quality Management District v. EPA \5\ (South Coast
II), the United States Court of Appeals for the District of Columbia
(D.C. Circuit) vacated EPA's interpretation that, because of the
revocation of the 1997 ozone standard, second maintenance plans were
not required for ``orphan maintenance areas,'' (i.e., areas like
Marshall and Ohio Counties) that had been redesignated to attainment
for the 1997 NAAQS and were designated attainment for the 2008 ozone
NAAQS. Thus, states with these ``orphan maintenance areas'' under the
1997 ozone NAAQS must submit maintenance plans for the second
maintenance period.
---------------------------------------------------------------------------

    \4\ See 80 FR 12315 (March 6, 2015).
    \5\ 882 F.3d 1138 (D.C. Cir. 2018).
---------------------------------------------------------------------------

    As previously discussed, CAA section 175A sets forth the criteria
for adequate maintenance plans. In addition, EPA has published
longstanding guidance that provides further insight on the content of
an approvable maintenance plan, explaining that a maintenance plan
should address five elements: (1) An attainment emissions inventory;
(2) a maintenance demonstration; (3) a commitment for continued air
quality monitoring; (4) a process for verification of continued
attainment; and (5) a contingency plan. The Calcagni memo \6\ provides
that states may generally demonstrate maintenance by either performing
air quality modeling to show the future mix of sources and emission
rates will not cause a violation of the NAAQS or by showing that future
emissions of a pollutant and its precursors will not exceed the level
of emissions during a year when the area was attaining the NAAQS (i.e.,
attainment year inventory). See Calcagni memo at 9. EPA further
clarified in three subsequent guidance memos describing ``limited
maintenance plans'' (LMPs) \7\ that the requirements of CAA section
175A could be met by demonstrating that the area's design value \8\ was
well below the NAAQS and that the historical stability of the area's
air quality levels showed that the area was unlikely to violate the
NAAQS in the future. Specifically, EPA believes that if the most recent
air quality design value for the area is at a level that is below 85%
of the standard, or in this case below 0.071 ppm, then EPA considers
the state to have met the section 175A requirement for a demonstration
that the area will maintain the NAAQS for the requisite period.
Accordingly, on December 10, 2019, WVDEP submitted a second maintenance
plan LMP for the Wheeling Area, following EPA's LMP guidance and
demonstrating that the area will

maintain the 1997 ozone NAAQS through June 14, 2027, i.e., through the
end of the 20-year maintenance period.
---------------------------------------------------------------------------

    \6\ ``Procedures for Processing Requests to Redesignate Areas to
Attainment,'' Memorandum from John Calcagni, Director, Air Quality
Management Division, September 4, 1992 (Calcagni Memo).
    \7\ See ``Limited Maintenance Plan Option for Nonclassifiable
Ozone Nonattainment Areas'' from Sally L. Shaver, Office of Air
Quality Planning and Standards (OAQPS), dated November 16, 1994;
``Limited Maintenance Plan Option for Nonclassifiable CO
Nonattainment Areas'' from Joseph Paisie, OAQPS, dated October 6,
1995; and ``Limited Maintenance Plan Option for Moderate
PM10 Nonattainment Areas'' from Lydia Wegman, OAQPS,
dated August 9, 2001.
    \8\ The ozone design value for a monitoring site is the 3-year
average of the annual fourth-highest daily maximum 8-hour average
ozone concentrations. The design value for an ozone nonattainment
area is the highest design value of any monitoring site in the area.
---------------------------------------------------------------------------

II. Summary of SIP Revision and EPA Analysis

    WVDEP's December 10, 2019 SIP submittal outlines a plan for
continued maintenance of the 1997 ozone NAAQS which addresses the
criteria set forth in the Calcagni memo as follows.

A. Attainment Emissions Inventory

    A state should develop a comprehensive and accurate inventory of
actual emissions for an attainment year which identifies the level of
emissions in the area which is sufficient to maintain the NAAQS. The
inventory should be developed consistent with EPA's most recent
guidance. For ozone, the inventory should be based on typical summer
day's emissions of oxides of nitrogen (NOX) and volatile
organic compounds (VOC), the precursors to ozone formation. In the
first maintenance plan for the Wheeling Area, WVDEP used 2004 for the
attainment year inventory, because 2004 was one of the years in the
2002-2004 three-year period when the area first attained the 1997 8-
hour ozone NAAQS. The Wheeling Area continued to monitor attainment of
the 1997 8-hour ozone NAAQS in 2014. Therefore, the emissions inventory
from 2014 represents emissions levels conducive to continued attainment
(i.e., maintenance) of the NAAQS. Thus, WVDEP is using 2014 as
representing attainment level emissions for its second maintenance
plan. WVDEP used 2014 summer day emissions from EPA's 2014 version 7.0
modeling platform as the basis for the 2014 inventory presented in
Table 1.\9\
---------------------------------------------------------------------------

    \9\ On April 22, 2020, WVDEP submitted a clarifying letter to
EPA noting that the headings in Table 4 of its submittal were
inadvertently titled, ``2014 Summertime Daily NOX
Emissions (tpd)'' instead of ``2014 Summertime Daily VOC Emissions
(tpd).'' EPA does not believe that this mislabeling negatively
impacts proposed approval of this SIP revision.

                             Table 1--2014 Typical Summer Day VOC and NOX Emissions
                                                 [tons/day] \10\
----------------------------------------------------------------------------------------------------------------
                     Area                                Source category                VOC             NOX
----------------------------------------------------------------------------------------------------------------
Marshall County, WV...........................  Fire............................             0.5             0.0
                                                Nonpoint........................            19.1             3.2
                                                Nonroad.........................             0.4             0.5
                                                Onroad..........................             0.6             4.1
                                                Point...........................             1.0             0.0
                                                                                -------------------------------
                                                   Subtotal.....................            21.6             7.9
                                                                                ===============================
Ohio County, WV...............................  Fire............................             0.0             0.0
                                                Nonpoint........................             1.8             2.1
                                                Nonroad.........................             1.0             0.3
                                                Onroad..........................             1.7             1.0
                                                Point...........................             0.1            24.4
                                                                                -------------------------------
                                                   Subtotal.....................             4.7            27.9
                                                                                ===============================
Belmont County, OH............................  Fire............................             0.0             0.0
                                                Nonpoint........................             6.2             0.6
                                                Nonroad.........................             1.3             0.4
                                                Onroad..........................             2.0             3.4
                                                Point...........................             0.2             0.2
                                                                                -------------------------------
                                                   Subtotal.....................             9.7             4.6
                                                                                ===============================
Wheeling Area, WV-OH..........................     Totals.......................            35.9            40.4
----------------------------------------------------------------------------------------------------------------

    The 2014 emissions inventory was prepared by WVDEP and uploaded
into EPA's Emissions Inventory System (EIS) for inclusion in EPA's
National Emission Inventory (NEI). The inventory addresses four
anthropogenic emission source categories: Stationary (point) sources,
stationary nonpoint (area) sources, nonroad mobile, and on-road mobile
sources. Point sources are stationary sources that have the potential
to emit (PTE) more than 100 tons per year (tpy) of VOC, or more than 50
tpy of NOX, and which are required to obtain an operating
permit. Data are collected for each source at a facility and reported
to WVDEP.
---------------------------------------------------------------------------

    \10\ Data in Table 1 only includes tons/day. See Tables 3 and 4
of WVDEP's December 10, 2019 submittal for data in tons/year.
---------------------------------------------------------------------------

    The fire emissions sector includes emissions from agricultural
burning, prescribed fires, wildfires, and other types of fires. The
nonpoint emissions sector includes emissions from equipment,
operations, and activities that are numerous and in total have
significant emissions. Examples include emissions from commercial and
consumer products, portable fuel containers, home heating, repair and
refinishing operations, and crematories. The non-road emissions sector
includes emissions from engines that are not primarily used to propel
transportation equipment, such as generators, forklifts, and marine
pleasure craft. The on-road emissions sector includes emissions from
engines used primarily to propel equipment on highways and other roads,
including passenger vehicles, motorcycles, and heavy-duty diesel
trucks. The point source sector includes large industrial operations
that are relatively few in number but have large emissions, such as
kraft mills, electrical generating units, and pharmaceutical factories.
On-road mobile emissions are modelled by WVDEP using EPA's Motor
Vehicle Emission Simulator (MOVES). WVDEP generates nonroad mobile
source emissions data through use of EPA's NONROAD2014a model. EPA
reviewed the supporting documentation

submitted by WVDEP \11\ and proposes to conclude that the plan's
inventory is acceptable for the purposes of a subsequent maintenance
plan under CAA section 175A(b).\12\
---------------------------------------------------------------------------

    \11\ See Appendix C of WVDEP's December 10, 2019 submittal.
    \12\ The daily emissions data for 2014 typical summer day VOC
and NOX emissions in Table 1 were excerpted from: https://www.epa.gov/sites/production/files/2018-11/ozone_1997_naaqs_emiss_inv_data_nov_19_2018_0.xlsx (``2014 2028 area
emiss by sector'' tab) posted at https://www.epa.gov/ground-level-ozone-pollution/1997-ozonenational-ambient-air-quality-standards-naaqs-nonattainment.
---------------------------------------------------------------------------

B. Maintenance Demonstration

    In order to attain the 1997 ozone NAAQS, the three-year average of
the fourth-highest daily average ozone concentrations (design value,
DV) at each monitor within an area must not exceed 0.08 ppm. Based on
the rounding convention described in 40 CFR part 50, appendix I, the
standard is attained if the DV is 0.084 or below. CAA section 175A
requires a demonstration that the area will continue to maintain the
NAAQS throughout the duration of the requisite maintenance period.
Consistent with the prior guidance documents discussed previously in
this document, EPA believes that if the most recent DV for the area is
well below the NAAQS (e.g. below 85%, or in this case below 0.071 ppm),
the section 175A demonstration requirement has been met, provided that
Prevention of Significant Deterioration (PSD) requirements, any control
measures already in the SIP, and any Federal measures remain in place
through the end of the second 10-year maintenance period (absent a
showing consistent with section 110(l) that such measures are not
necessary to assure maintenance).
    For the purposes of demonstrating a stable or improving air quality
trend, West Virginia used a weighted design value of the most recent
five design values. The five most recent design values available cover
the 2012-2018 ambient air monitoring data. This includes 3-year design
values for 2012-2014, 2013-2015, 2014-2016, 2015-2017, and 2016-2018.
Data from 2014, 2015, and 2016 was included in three out of five design
values. Table 2 of this document shows the most recent five years of
ambient ozone air quality 3-year design values. These design values are
from EPA's Air Quality System (AQS). The 7th column is a calculated 5-
year weighted design value calculated by West Virginia. This 5-year
weighted design value was calculated by averaging all the 4th Max Ozone
values from the years 2012-2018. The 8th column is the 5-year design
value average calculated by EPA. The 5-year design value average is
calculated by averaging the design values for 2012-2014, 2013-2015,
2014-2016, 2015-2017, and 2016-2018. The 5-year weighted design value
calculated by West Virginia is 0.067 ppm, and the 5-year design value
calculated by EPA is 0.066 p.m., for the Wheeling Area, both of which
are below the 0.071 ppm threshold level and 79% of the NAAQS. Table 2
shows that the most recent five years of ambient ozone air quality 3-
year average DVs for the Wheeling Area continue to be below 85% of the
1997 ozone NAAQS. It demonstrates that 8-hour ozone air quality levels
are significantly below the level of the standard.

                                          Table 2--Wheeling Area 8-Hour Ozone Design Values in Part per Million
                                                                          [ppm]
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                5-Year
                                                                                design
                      Site                         2012-2014    2013-2015    2014-2016    2015-2017    2016-2018      5-Year       value      Projected
                                                                                weighted     average        2023
                                                                                (ppm)
--------------------------------------------------------------------------------------------------------------------------------------------------------
Wheeling, WV....................................       0.067        0.066        0.068        0.067        0.066        0.067        0.066        0.060
--------------------------------------------------------------------------------------------------------------------------------------------------------

    For the 2023 projections shown in Table 2, EPA used a 2011-based
air quality modeling platform, which includes emissions, meteorology,
and other inputs for 2011 as the base year and emissions for 2023 as
the future analytic year base case. Specifically, the modeling platform
included a variety of data that contained information pertaining to the
modeling domain and simulation period. These include gridded, hourly
emissions estimates and meteorological data, and boundary
concentrations. Separate emissions inventories were prepared for the
2011 base year and the 2023 base case. All other inputs (i.e.
meteorological fields, initial concentrations, and boundary
concentrations) were specified for the 2011 base year model application
and remained unchanged for the future-year model simulations. The 2011
modeling platform and projected 2023 emissions were used to drive the
2011 base year and 2023 future case air quality model simulations. The
2023 projected DV for the Wheeling Area is 0.060 ppm, well below the
level of the 1997 8-hour ozone NAAQS, 0.08 ppm. Therefore, EPA proposes
to determine that that future violations of the NAAQS in this area are
unlikely.

C. Continued Air Quality Monitoring and Verification of Continued
Attainment

    Once an area has been redesignated to attainment, the state remains
obligated to maintain an air quality network in accordance with 40 CFR
part 58, in order to verify the area's attainment status. In the
December 10, 2019 submittal, West Virginia committed to maintaining an
appropriate air quality monitoring network, in accordance with 40 CFR
part 58. West Virginia will continue to conduct ambient ozone air
quality monitoring in the area throughout the term of the maintenance
plan to verify continued attainment with the 1997 8-hour ozone NAAQS
and to protect any applicable PSD increments. WVDEP states that air
quality measurements will be performed in accordance with appropriate
regulations and guidance documents along with EPA quality assurance
requirements, and monitoring procedures will be determined in
accordance with 40 CFR part 58. WVDEP commits to submitting quality-
assured ozone data to EPA through the AQS and ultimately certified by
the WVDEP. EPA has analyzed the commitments in the plan and determined
that they meet the requirements.

D. Contingency Plan

    The contingency plan provisions are designed to promptly correct or
prevent a violation of the NAAQS that might occur after redesignation
of an area to attainment. Section 175A of the CAA requires that a
maintenance plan

include such contingency measures as EPA deems necessary to assure that
the state will promptly correct a violation of the NAAQS that occurs
after redesignation. The maintenance plan should identify the
contingency measures to be adopted, a schedule and procedure for
adoption and implementation of the contingency measures, and a time
limit for action by the state. The state should also identify specific
indicators to be used to determine when the contingency measures need
to be adopted and implemented. The maintenance plan must include a
requirement that the state will implement all pollution control
measures that were contained in the SIP before redesignation of the
area to attainment. See section 175A(d) of the CAA. WVDEP's December
10, 2019 submittal outlines its adopted permanent and Federally
enforceable control measures in order to regulate emission growth. The
Wheeling Area's control measures include the permitting regulations and
PSD measures, which will remain in effect through the maintenance plan
period. Air permits issued will incorporate applicable PSD, New Source
Performance Standard, and National Emission Standards for Hazardous Air
Pollutant requirements.
    WVDEP's December 10, 2019 submittal included the required
contingency plan, to be implemented in the event of NAAQS violations in
the future. WVDEP has committed to adopting and implementing one or
more of the following control measures within three months after
verification of a monitored ozone standard violation in the Wheeling
Area: (1) Extend the applicability of the VOC reasonably available
control technology (RACT) rule to include source categories previously
excluded (e.g., wastewater treatment facilities); (2) revise permitting
requirements establishing more stringent emissions control measures
and/or emissions offsets; (3) implement NOx RACT requirements if
necessary; (4) develop regulations to establish plant-wide emission
caps; (5) implement Stage II Vapor Recovery regulations; (6) establish
a program focusing on increasing the public's understanding of air
quality issues and increasing support for actions to improve the air
quality; and (7) initiate voluntary local control measures (e.g.,
bicycle/pedestrian measures, engine idling reduction, partnership with
ground freight industry, increase compliance with open burning
restrictions, and school bus engine retrofit program).
    If there is indeed a violation and the DV exceeds the NAAQS, the
contingency plan will be ``triggered,'' based on the following
schedule: (1) Quality assurance procedures must confirm the monitored
violation within 45 days of occurrence; (2) a draft rule would be
developed by the WVDEP for any regulation chosen, (3) WVDEP will adopt
the selected control measure(s) as emergency rule(s) which will be
implemented within six months after adoption and will file the rule(s)
as legislative rule(s) for permanent authorization by the legislature;
and (4) for each voluntary measure selected, the WVDEP will initiate
program development with local governments within the area by the start
of the following ozone season.
    Furthermore, if the triennial inventories indicate emissions growth
in excess of 10% of the 2011 base-year inventory or if a monitored
ozone air quality exceedance pattern indicates that an ozone NAAQS
violation may be imminent, WVDEP will evaluate existing control
measures to ascertain if additional regulatory revisions are necessary
to maintain the ozone standards.
    EPA finds that West Virginia's contingency measures, as well as the
commitment to continue implementing any SIP requirements, satisfy the
pertinent requirements of section 175A. Importantly, while EPA notes
that West Virginia's contingency measures option six (increasing public
understanding) and seven (voluntary local control measures), are not
enforceable measures that standing alone are likely to lead to
reductions in emissions that could promptly correct a violation of the
NAAQS, their inclusion among other measures that meet that criterion,
is overall SIP-strengthening, and their inclusion does not alter EPA's
proposal to find the LMP is fully approvable.

E. Transportation Conformity

    Transportation conformity is required by section 176(c) of the CAA.
Conformity to a SIP means that transportation activities will not
produce new air quality violations, worsen existing violations, or
delay timely attainment of the NAAQS (CAA 176(c)(1)(B)). EPA's
conformity rule at 40 CFR part 93 requires that transportation plans,
programs and projects conform to SIPs and establish the criteria and
procedures for determining whether or not they conform. The conformity
rule generally requires a demonstration that emissions from the
Regional Transportation Plan (RTP) and the Transportation Improvement
Program (TIP) are consistent with the motor vehicle emissions budget
(MVEB) contained in the control strategy SIP revision or maintenance
plan (40 CFR 93.101, 93.118, and 93.124). An MVEB is defined as ``that
portion of the total allowable emissions defined in the submitted or
approved control strategy implementation plan revision or maintenance
plan for a certain date for the purpose of meeting reasonable further
progress milestones or demonstrating attainment or maintenance of the
NAAQS, for any criteria pollutant or its precursors, allocated to
highway and transit vehicle use and emissions (40 CFR 93.101).''
    Under the conformity rule, LMP areas may demonstrate conformity
without a regional emission analysis (40 CFR 93.109(e)). However,
because LMP areas are still maintenance areas, certain aspects of
transportation conformity determinations still will be required for
transportation plans, programs and projects. Specifically, for such
determinations, RTPs, TIPs and transportation projects still will have
to demonstrate that they are fiscally constrained (40 CFR 93.108), meet
the criteria for consultation (40 CFR 93.105 and 93.112) and
Transportation Control Measure implementation in the conformity rule
provisions (40 CFR 93.113). Additionally, conformity determinations for
RTPs and TIPs must be determined no less frequently than every four
years, and conformity of plan and TIP amendments and transportation
projects is demonstrated in accordance with the timing requirements
specified in 40 CFR 93.104. In addition, for projects to be approved
they must come from a currently conforming RTP and TIP (40 CFR 93.114
and 93.115). The Wheeling Area remains under the obligation to meet the
applicable conformity requirements for the 1997 8-hour ozone NAAQS.

III. Proposed Action

    EPA's review of WVDEP's December 10, 2019 submittal indicates it
meets CAA section 175A and all applicable CAA requirements. EPA is
proposing to approve the LMP for the 1997 8-hour ozone NAAQS for the
Wheeling Area (comprising Marshall and Ohio Counties), as a revision to
the West Virginia SIP. EPA is soliciting public comments on the issues
discussed in this document. These comments will be considered before
taking final action.

IV. Statutory and Executive Order Reviews

    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 proposed 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 SIP approvals are exempted 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 (Public Law 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 proposed rule, pertaining to West Virginia's
second maintenance plan for Marshall and Ohio Counties, 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.

List of Subjects in 40 CFR Part 52

    Environmental protection, Air pollution control, Incorporation by
reference, Nitrogen dioxide, Ozone, Volatile organic compounds.

    Dated: June 17, 2020.
Cosmo Servidio,
Regional Administrator, Region III.
[FR Doc. 2020-13508 Filed 6-26-20; 8:45 am]
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