[Federal Register: December 24, 2009 (Volume 74, Number 246)]
[Rules and Regulations]
[Page 68372-68376]
[DOCID:fr24de09-3]

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DEPARTMENT OF ENERGY

Federal Energy Regulatory Commission

18 CFR Part 40

[Docket No. RM09-8-000; Order No. 730]

Revised Mandatory Reliability Standards for Interchange
Scheduling and Coordination

Issued December 17, 2009.
AGENCY: Federal Energy Regulatory Commission, DOE.

ACTION: Final rule.

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SUMMARY: Pursuant to section 215 of the Federal Power Act, the Federal
Energy Regulatory Commission hereby approves the North American
Electric Reliability Corporation's revision of three Commission-
approved Reliability Standards, designated INT-005-3, Interchange
Authority Distributes Arranged Interchange; INT-006-3, Response to
Interchange Authority; and INT-008-3, Interchange Authority Distributes
Status.

DATES: Effective Date: The Final Rule will become effective January 25,
2010.

FOR FURTHER INFORMATION CONTACT:
Danny Johnson (Technical Information), Office of Electric Reliability,
Division of Reliability Standards, Federal Energy Regulatory
Commission, 888 First Street, NE., Washington, DC 20426, Telephone:
(202) 502-8892.
Rheta Johnson (Technical Information), Office of Electric Reliability,
Division of Reliability Standards, Federal Energy Regulatory
Commission, 888 First Street, NE., Washington, DC 20426, Telephone:
(202) 502-6503.
Richard M. Wartchow (Legal Information), Office of the General Counsel,
Federal Energy Regulatory Commission, 888 First Street, NE.,
Washington, DC 20426, Telephone:<PHONE_NUMBER>.

SUPPLEMENTARY INFORMATION:
    Before Commissioners: Jon Wellinghoff, Chairman; Suedeen G. Kelly,
Marc Spitzer, and Philip D. Moeller.

Order No. 730

Final Rule

Issued December 17, 2009

    1. Pursuant to section 215 of the Federal Power Act (FPA), the
Commission hereby approves three revised Interchange Scheduling and
Coordination (INT) Reliability Standards developed by the North
American Electric Reliability Corporation (NERC): INT-005-3,
Interchange Authority Distributes Arranged Interchange; INT-006-3,
Response to Interchange Authority; and INT-008-3, Interchange Authority
Distribution of Information.\1\ The approved changes provide
consistency in responding to interchange requests by clarifying timing
requirements for all affected entities, and facilitate the reliable
operation of the Bulk-Power System by providing Western Electricity
Coordinating Council (WECC) entities sufficient time to assess and
respond to requests for interchange service.
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    \1\ 16 U.S.C. 824o. The Commission is not adding any new or
modified text to its regulations.
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I. Background

A. EPAct 2005 and Mandatory Reliability Standards

    2. Section 215 of the FPA requires a Commission-certified Electric
Reliability Organization (ERO) to develop mandatory and enforceable
Reliability Standards, which are subject to Commission review and
approval. Section 215(d)(2) of the FPA states that the Commission may
approve, by rule or order, a proposed Reliability Standard or
modification to a Reliability Standard if it determines that the
Standard is just, reasonable, not unduly discriminatory or
preferential, and in the public interest.\2\ If the Commission
disapproves of the proposed Standard in whole or in part, it must
remand the proposed Standard to the ERO for further consideration.\3\
Section 215(d)(5) grants the Commission authority, upon its own motion
or upon complaint, to order the ERO to submit to the Commission a
proposed Reliability Standard or a modification to a Reliability
Standard that addresses a specific matter if the Commission considers
such a modified Reliability Standard appropriate to carry out section
215. Once approved, the Reliability Standards may be enforced by the
ERO, subject to Commission oversight, or by the Commission
independently.\4\
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    \2\ 16 U.S.C. 824o(d)(2).
    \3\ 16 U.S.C. 824o(d)(4).
    \4\ See 16 U.S.C. 824o(e)(3).
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    3. Pursuant to section 215 of the FPA, the Commission established a
process to select and certify an ERO \5\ and, subsequently, certified
NERC as the ERO.\6\ On April 4, 2006, as modified on August 28, 2006,
NERC submitted to the Commission a petition seeking approval of 107
proposed Reliability Standards. On March 16, 2007, the Commission
issued a Final Rule, Order No. 693, approving 83 of these 107
Reliability Standards and directing other action related to these
Reliability Standards.\7\ In addition, pursuant to section 215(d)(5) of
the FPA, the Commission directed NERC to develop modifications to 56 of
the 83 approved Reliability Standards.\8\
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    \5\ Rules Concerning Certification of the Electric Reliability
Organization; and Procedures for the Establishment, Approval and
Enforcement of Electric Reliability Standards, Order No. 672, FERC
Stats. & Regs. ] 31,204, order on reh'g, Order No. 672-A, FERC
Stats. & Regs. ] 31,212 (2006).
    \6\ North American Electric Reliability Corp., 116 FERC ]
61,062, order on reh'g & compliance, 117 FERC ] 61,126 (2006), aff'd
Alcoa, Inc. v. FERC, 564 F.3d 1342 (D.C. Cir. 2009).
    \7\ Mandatory Reliability Standards for the Bulk-Power System,
Order No. 693, FERC Stats. & Regs. ] 31,242, order on reh'g, Order
No. 693-A, 120 FERC ] 61,053 (2007).
    \8\ 16 U.S.C. 824o(d)(5).
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B. Order No. 713

    4. In response to a February 7, 2007 urgent action request from
WECC, NERC developed the version 2 INT Reliability Standards, which
were approved by the

Commission in Order No. 713.\9\ The version 2 changes increased from
five to ten minutes the time for entities in the Western
Interconnection to assess interchange requests submitted from 30 to 60
minutes before the requested start time.\10\ The approved version 2
Reliability Standards responded to a problem that balancing authorities
and transmission service providers in WECC were unable to review
certain interchange service requests during the then universal five
minute assessment time.\11\ This inability caused the e-Tag requests to
be denied, requiring resubmission and creating both frustration and
inefficiencies.\12\
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    \9\ Modification of Interchange and Transmission Loading Relief
Reliability Standards; and Electric Reliability Organization
Interpretation of Specific Requirements of Four Reliability
Standards, Order No. 713, 124 FERC ] 61,071, at P 58-67 (2008).
    \10\ Interchange service refers to requests for energy transfers
that cross balancing authority boundaries. See NERC Glossary of
Terms Used in Reliability Standards (as revised) (glossary),
Interchange (2009). The glossary was originally filed with NERC's
April 4, 2006 Request for Approval of Reliability Standards in
Docket No. RM06-16-000 and was affirmed in Order No. 693, FERC
Stats. and Regs. ] 31,242. The glossary is appended to the
Reliability Standards and is available on the NERC Web site, http://
www.nerc.com.
    \11\ It was originally anticipated that different practices in
the Western Interconnection would be reflected in a regional
difference. However the regional difference was withdrawn, making
WECC entities subject to the same practices in effect for the
Eastern Interconnection. See NERC, Compliance Filing, RM08-16-000
(Jun. 14, 2007) (responding to Commission directive in Order No.
693, FERC Stats. and Regs. ] 31,242 at P 825, and withdrawing
request for approval of regional difference for the Western
Interconnection).
    \12\ Order No. 713, 124 FERC ] 61,071 at P 63.
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    5. NERC's action in response to an urgent action request must be
made permanent, through a full vetting in the regular standards-
development process. Shortly after receiving the urgent action request,
WECC and a joint NERC/NAESB \13\ work group submitted a Standards
Authorization Request to NERC seeking permanent revisions to the INT
Reliability Standards to accommodate the expanded WECC timing
requirements. In response, NERC developed the permanent revisions
embodied in the version 2 INT Reliability Standards, along with new
glossary terms, discussed more fully below.\14\
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    \13\ North American Energy Standards Board.
    \14\ As with Reliability Standards, the Commission also reviews
and approves revisions to the NERC glossary pursuant to FPA section
215(d)(2). Further, the Commission may direct a modification to
address a specific matter identified by the Commission pursuant to
section 215(d)(5). See, e.g., Order No. 693, FERC Stats. and Regs. ]
31,242 at P 1893-98.
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C. NERC Filing

    6. On February 5, 2009, NERC filed a petition for Commission
approval of the version 3 INT Reliability Standards, INT-005-3; INT-
006-3; and INT-008-3.\15\ Reliability Standard INT-005-3 applies to
interchange authorities and is intended to ``ensure that the
implementation of Interchange between Source and Sink Balancing
Authorities is distributed by an Interchange Authority such that
Interchange information is available for reliability assessments.''
\16\ Reliability Standard INT-006-3 applies to balancing authorities
and transmission service providers and is intended to ``ensure that
each Arranged Interchange is checked for reliability before it is
implemented.'' \17\ Reliability Standard INT-008-3 applies to
interchange authorities and is intended to ``ensure that the
implementation of Interchange between Source and Sink Balancing
Authorities is coordinated by an Interchange Authority.'' \18\ Thus,
INT-008-3 contains requirements establishing an interchange authority's
responsibilities to oversee and coordinate the interchange of
electricity from one balancing authority to another.
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    \15\ The revised INT Reliability Standards are provided in the
petition and are available on the Commission's eLibrary document
retrieval system in Docket No. RM09-8-000 and also on NERC's Web
site, http://www.nerc.com.
    \16\ INT-005-3, Purpose Statement.
    \17\ INT-006-3, Purpose Statement.
    \18\ INT-008-3, Purpose Statement.
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    7. The revised INT Reliability Standards incorporate separate
timing tables for the Western Interconnection and the Eastern
Interconnections, which includes Electric Reliability Council of Texas
(ERCOT) and Hydro-Quebec. Consistent with Order No. 713, these tables
affirm and clarify the increase in the reliability assessment times for
WECC from five minutes to ten minutes for requests submitted less than
60 minutes and no less than 15 minutes prior to ramp start time. The
tables specify Western Interconnection response times and clarify that
balancing authorities and transmission service providers may submit on-
time e-Tags \19\ up to 20 minutes prior to the operating hour. NERC
also makes minor textual modifications to clarify that all entities
subject to the INT Reliability Standards must respond to ``on-time''
requests, as well as to all requests for emergency and reliability
adjustment interchange service.\20\ NERC revises the version 3 tables
to accommodate regions in which a response to arranged interchange is
required, and clarifies INT-006-3, Measure M1 to correspond more
closely to Requirement R1.
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    \19\ Electronic Tagging, or e-Tag, is a request to implement a
new interchange transaction as a physical energy flow, i.e., an RFI.
The e-Tag documents the requested physical interchange transaction
and identifies participants. E-Tags include expected flows, and the
information provided may be used in mitigating constraints, when
needed. See NERC's Joint Interchange Scheduling Work Group,
Electronic Tagging Functional Specification Version 1.8.0 (Nov. 7,
2007); see also Order No. 693, FERC Stats. & Regs. ] 31,242 at P
795.
    \20\ INT-006-003, Requirement R1.
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    8. Revised Requirement R1 of INT-006-003 clarifies that balancing
authorities and transmission service providers in all interconnections
must respond to ``on-time'' requests for interchange service, as well
as to each request for Emergency and Reliability Adjustment interchange
services. To implement these requirements, NERC proposes three related
definitions for its glossary: ``After the Fact,'' ``Emergency Request
for Interchange (RFI),'' and ``Reliability Adjustment RFI,'' and
specifies appropriate responses for ``Late,'' ``On-time'' and ``After
the Fact'' requests for service referenced in the timing tables:

    After the Fact: A time classification assigned to a Request for
Interchange (RFI) when the submittal time is greater than one hour
after the start time of the RFI.
    Emergency Request for Interchange: RFI to be initiated [for]
Emergency or Energy Emergency conditions.
    Reliability Adjustment RFI: Request to modify an Implemented
Interchange Schedule for reliability purposes.

    9. NERC states that the version 3 INT Reliability Standards (INT-
005-3, INT-006-3, and INT-008-3) ensure the safe and reliable operation
of the Bulk-Power System. According to NERC, the Reliability Standards
improve Bulk-Power System reliability by providing WECC entities
sufficient time to assess and respond to requests for interchange
service. In addition, establishing a separate timing table for WECC
clarifies the timing requirements for the Western Interconnection. The
timing requirements for the Eastern Interconnections (including ERCOT
and Hydro-Quebec) are also modified by adopting the on-time, late, and
after-the-fact classifications and proposing appropriate responses
under the Reliability Standards. NERC reports that the new terms
incorporated in the timing tables are consistent with existing industry
e-Tag specifications, which are used to request and arrange interchange
service, and use of these terms will ensure uniform treatment for all
entities subject to the INT Reliability Standards.
    10. Consistent with the NERC Rules, a NERC-assembled ballot body,
consisting of industry stakeholders, developed the revisions using the
NERC Reliability Standards Development

Procedure.\21\ The NERC Board of Trustees (Board) approved the
revisions.\22\ NERC requests that the revised INT Reliability Standards
be effective on the first day of the quarter, three months after
regulatory approval is granted.\23\
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    \21\ See NERC's Rules of Procedures, Appendix 3A.
    \22\ NERC petition at 3.
    \23\ The petition makes no modification to the violation risk
factors or violation severity levels for the revised INT Reliability
Standards. Therefore, the currently effective violation risk factors
and violation severity levels will continue to apply.
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D. Notice of Proposed Rulemaking (NOPR) and Comment

    11. On June 18, 2009, the Commission issued a NOPR seeking comment
on its proposal to approve NERC's revisions to Reliability Standards
INT-005-3, INT-006-3 and INT-008-3.\24\
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    \24\ Electric Reliability Organization Revised Mandatory
Reliability Standards for Interchange Scheduling and Coordination,
Notice of Proposed Rulemaking, 74 FR 30027 (Jun. 24, 2009), FERC
Stats. & Regs. ] 32,643 (2009) (NOPR).
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    12. No participant filed comments opposing the Commission's
proposal to approve NERC's revised INT Reliability Standards. In fact,
Ameren Services Co. filed the sole comment, requesting clarification
that a NOPR reference to ``transmission operators'' was not intended to
modify the Reliability Standard requirements, which apply to
transmission service providers. The reference is corrected to refer to
``transmission service providers'' in the discussion in this order.

II. Discussion

    13. Pursuant to section 215(d) of the FPA, the Commission approves
Reliability Standards INT-005-3, INT-006-3 and INT-008-3 and the
related glossary terms as mandatory and enforceable. The revised INT
Reliability Standards facilitate the reliable operation of the Bulk-
Power System by providing WECC entities sufficient time to assess and
respond to requests for interchange service before the underlying e-
Tags for these requests expire, and by clarifying timing requirements
for all affected entities.
    14. These version 3 INT Reliability Standards finalize and improve
upon the version 2 changes approved in Order No. 713. The Commission
agrees that separating the WECC- and Eastern-Interconnection/ERCOT
requirements in the timing tables adds clarity for entities operating
in the WECC system. In addition, retaining the slightly modified
versions of the prior timing tables for the Eastern Interconnection and
ERCOT helps to ensure consistency in responding to interchange requests
in those areas.
    15. Accordingly, the Commission finds that the ERO's revisions are
just, reasonable, not unduly discriminatory or preferential, and in the
public interest. Therefore, the Commission approves the revised INT
Reliability Standards as mandatory and enforceable, effective as
requested.\25\ While we are accepting the revised INT Reliability
Standards, the Commission will discuss below specific issues, in
particular the changes to Reliability Standard INT-006-3 to highlight
the effect on reliability.
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    \25\ The petition makes no modification to the violation risk
factors or violation severity levels for the revised INT Reliability
Standards. Therefore, the currently effective violation risk factors
and violation severity levels will continue to apply.
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Specific Issues

    16. INT-006-3, Requirement R1 requires communication between
balancing authorities, transmission service providers, and an
interchange authority regarding when to respond to a request for
interchange service:

    Requirement R1: Prior to the expiration of the reliability
assessment period defined in the timing requirements tables in this
standard, Column B, the Balancing Authority and the Transmission
Service Provider shall respond to each On-time Request for
Interchange (RFI), and to each Emergency RFI and Reliability
Adjustment RFI from an Interchange Authority to transition an
Arranged Interchange to a Confirmed Interchange.

    17. Balancing authorities and transmission service providers must
review proposed interchange transactions to ensure that transmission
service is available and system limits are not violated and must inform
the interchange authority whether a request may be confirmed.\26\
Reliability coordinators and transmission service providers must review
composite energy interchange transaction information to ensure that
their systems can accommodate the energy, generation is available based
on start-up characteristics, and the scheduling path is available on
both local and adjacent systems.
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    \26\ See INT-005-3, Requirement R1; INT-006-3, Requirement R1
(Response to Interchange Authority).
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    18. NERC's proposal incorporates one important change from the
version 2 requirements. The prior revision, reflected in version 2,
requires responsible entities to ``respond to a request from an
Interchange Authority to transition an Arranged Interchange to a
Confirmed Interchange.'' This language suggests that a response is
required for requests within the designated time periods. In version 3,
Requirement R1 is clarified, directing the applicable entity to respond
to ``on-time'' requests for interchange service within a given time
period, and also to all Emergency and Reliability Adjustment requests
for interchange service.\27\ Entities are required to respond to each
of these latter two requests regardless of the timelines identified in
the timing tables, with paperwork to follow later. Time classifications
and deadlines apply to both initial arranged interchange submittals and
any subsequent modifications to the arranged interchange.
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    \27\ See INT-006-3, Measure M1.
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    19. The Commission finds the clarification to INT-006-3,
Requirement R1 acceptable. Responsible entities are still required to
respond to all on-time requests for interchange service, as well as all
requests for Emergency interchange service and Reliability Adjustment
interchange service.
    20. In Order No. 713, the Commission approved version 2 of the INT
Reliability Standards, noting that NERC's compliance with the Order No.
693 directive to modify Reliability Standard INT-006-1 is ongoing.\28\
While we accept the current changes, in light of NERC's efforts to
modify the Reliability Standards, we remind NERC to ensure the
Commission's outstanding directives are addressed in future changes to
the INT Reliability Standards.
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    \28\ Order No. 713, 124 FERC ] 61,071 at P 67 (citing Order No.
693, FERC Stats. & Regs. ] 31,242 at P 866).
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    21. Consistent with the NOPR, the Commission finds the revisions to
the three revised INT Reliability Standards, INT-005-3, INT-006-3 and
INT-008-3, and the associated glossary terms reasonable in providing
consistent and clear rules for responding to interchange service
requests. The Commission accepts the revised INT Reliability Standards
as mandatory and enforceable and the related glossary terms, as
discussed.

III. Information Collection Statement

    22. The Office of Management and Budget (OMB) regulations require
that OMB approve certain reporting and recordkeeping (collections of
information) imposed by an agency.\29\ The information contained here
is also subject to review under section 3507(d) of the Paperwork
Reduction Act of 1995.\30\
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    \29\ 5 CFR 1320.11.
    \30\ 44 U.S.C. 3507(d).
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    23. As stated above, the Commission previously approved, in Order
No. 693, each of the Reliability Standards that are

the subject of the current rulemaking. This Final Rule approves
revisions to three previously approved Reliability Standards (as
revised) developed by NERC as the ERO. The approved revisions relate to
existing Reliability Standards and do not substantially change the
requirements or reporting obligations established by these standards;
therefore, they do not add to or otherwise increase entities' current
reporting burden. Thus, the Final Rule does not materially and
adversely affect the burden estimates relating to the currently
effective version of the Reliability Standards presented in Order No.
693.
    24. Reliability Standards INT-005-3, INT-006-3, and INT-008-3 that
are the subject of the approved revisions were approved in Order No.
693, and the related information collection requirements were reviewed
and approved, accordingly.\31\ The approved revisions do not modify or
otherwise affect the collection of information already in place. With
respect to the INT Reliability Standards, the revisions are mainly
concerned with the timing of responses to requests for service rather
than the required documentation.\32\ Under the existing requirements,
affected entities were required to respond to all requests for service
covered by the INT Reliability Standards, while the approved revisions
clarify that entities need not respond to late requests for service
(with exceptions for services needed for emergency or reliability
purposes). As we noted above, the revisions continue to be consistent
with existing industry e-Tag specifications used to request and arrange
interchange service and will ensure uniform treatment for all entities
subject to the INT Reliability Standards. The revised provisions apply
to processing requests for service in the next hour, typically for
economy energy exchanges, and should not result in a noticeable change
in the e-Tagging practices for power sales or in the fulfillment of
exchanges or ability to attain cost savings. In fact, the revisions
should facilitate cost saving by affirming that utilities must respond
to all emergency or reliability exchange services requests, providing
parties submitting late requests with an opportunity to correct their
error.
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    \31\ See Order No. 693, FERC Stats. & Regs. ] 31,242 at P 1901-
07.
    \32\ The OMB control number used in this analysis was issued in
Docket No. RM06-16-000, Order No. 693, FERC Stats. and Regs. ]
31,242 at P 1907 and incorporated to support the information
collection statement in Order No. 713, 124 FERC ] 61,071 at P 69.
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    25. Finally, the revisions do not establish any significant
reporting obligations. The Commission does not consider this a
significant burden. We did not receive any comments on our
determination in the NOPR with respect to the reporting burden. We will
submit this Final Rule to OMB for informational purposes.
    Title: FERC-725A, Electric Reliability Organization Revised
Mandatory Reliability Standards for Interchange Scheduling and
Coordination.
    Action: Final Rule.
    OMB Control No.: 1902-0244.
    Respondents: Businesses or other for-profit institutions; not-for-
profit institutions.
    Frequency of Responses: On Occasion.
    Necessity of the Information: This Final Rule approves revisions of
three Commission-approved Reliability Standards. The Final Rule finds
that the revisions promote reliable operation of the Bulk-Power System;
are just, reasonable, not unduly discriminatory or preferential; and in
the public interest.
    26. Interested persons may obtain information on the reporting
requirements by contacting the following: Federal Energy Regulatory
Commission, 888 First Street, NE. Washington, DC 20426 [Attention:
Michael Miller, Office of the Executive Director, Phone: (202) 502-
8415, fax:<PHONE_NUMBER>, e-mail<EMAIL_ADDRESS>    27. For submitting comments concerning the collection(s) of
information and the associated burden estimate(s), please send your
comments to the contact listed above and to the Office of Information
and Regulatory Affairs, Office of Information and Regulatory Affairs,
Washington, DC 20503 [Attention: Desk Officer for the Federal Energy
Regulatory Commission, phone<PHONE_NUMBER>, fax:<PHONE_NUMBER>, e-
mail<EMAIL_ADDRESS>
IV. Environmental Analysis

    28. The Commission is required to prepare an Environmental
Assessment or an Environmental Impact Statement for any action that may
have a significant adverse effect on the human environment.\33\ The
Commission has categorically excluded certain actions from this
requirement as not having a significant effect on the human
environment. Included in the exclusion are rules that are clarifying,
corrective, or procedural or that do not substantially change the
effect of the regulations being amended.\34\ The actions proposed
herein fall within this categorical exclusion in the Commission's
regulations.
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    \33\ Regulations Implementing National Environmental Policy Act
of 1969, Order No. 486, FERC Stats. & Regs. ] 30,783 (1987).
    \34\ 18 CFR 380.4(a)(2)(ii).
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V. Regulatory Flexibility Act Analysis

    29. The Regulatory Flexibility Act of 1980 (RFA) \35\ generally
requires a description and analysis of final rules that will have
significant economic impact on a substantial number of small entities.
The RFA mandates consideration of regulatory alternatives that
accomplish the stated objectives of a proposed rule and that minimize
any significant economic impact on a substantial number of small
entities. The Small Business Administration's Office of Size Standards
develops the numerical definition of a small business.\36\ For electric
utilities, a firm is small if, including its affiliates, it is
primarily engaged in the transmission, generation and/or distribution
of electric energy for sale and its total electric output for the
preceding twelve months did not exceed four million megawatt hours. The
RFA is not implicated by this Final Rule because the revisions
discussed herein will not have a significant economic impact on a
substantial number of small entities.
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    \35\ 5 U.S.C. 601-12.
    \36\ See 13 CFR 121.201.
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    30. In Order No. 693, the Commission adopted policies to minimize
the burden on small entities, including approving the ERO compliance
registry process to identify those entities responsible for complying
with mandatory and enforceable Reliability Standards. The ERO registers
only those distribution providers or load serving entities that have a
peak load of 25 MW or greater and are directly connected to the bulk
electric system or are designated as a responsible entity as part of a
required under-frequency load shedding program or a required under-
voltage load shedding program. Similarly, for generators, the ERO
registers only individual units of 20 MVA or greater that are directly
connected to the bulk electric system, generating plants with an
aggregate rating of 75 MVA or greater, any blackstart unit material to
a restoration plan, or any generator that is material to the
reliability of the Bulk-Power System. Further, the ERO will not
register an entity that meets the above criteria if it has transferred
responsibility for compliance with mandatory Reliability Standards to a
joint action agency or other organization. The Commission

estimated that the Reliability Standards approved in Order No. 693
would apply to approximately 682 small entities (excluding entities in
Alaska and Hawaii), but also pointed out that the ERO's Compliance
Registry Criteria allow for a joint action agency, generation and
transmission (G&T) cooperative or similar organization to accept
compliance responsibility on behalf of its members. Once these
organizations register with the ERO, the number of small entities
registered with the ERO will diminish and, thus, significantly reduce
the impact on small entities.\37\
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    \37\ To be included in the compliance registry, the ERO
determines whether a specific small entity has a material impact on
the Bulk-Power System. If these small entities should have such an
impact then their compliance is justifiable as necessary for Bulk-
Power System reliability.
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    31. Finally, as noted above, this Final Rule addresses revisions of
the INT Reliability Standards, which were already approved in Order No.
693, and, therefore, do not create an additional regulatory impact on
small entities.

VI. Document Availability

    32. In addition to publishing the full text of this document in the
Federal Register, the Commission provides all interested persons an
opportunity to view and/or print the contents of this document via the
Internet through the Commission's Home Page (http://www.ferc.gov) and
in the Commission's Public Reference Room during normal business hours
(8:30 a.m. to 5 p.m. Eastern time) at 888 First Street, NE., Room 2A,
Washington, DC 20426.
    33. From the Commission's Home Page on the Internet, this
information is available on eLibrary. The full text of this document is
available on eLibrary in PDF and Microsoft Word format for viewing,
printing, and/or downloading. To access this document in eLibrary, type
the docket number excluding the last three digits of this document in
the docket number field.
    34. User assistance is available for eLibrary and the Commission's
Web site during normal business hours from FERC Online Support at (202)
502-6652 (toll free at 1-866-208-3676) or e-mail at
<EMAIL_ADDRESS>or the Public Reference Room at (202) 502-
8371, TTY<PHONE_NUMBER>. E-mail the Public Reference Room at
<EMAIL_ADDRESS>
VII. Effective Date and Congressional Notification

    35. These regulations are effective January 25, 2010. The
Commission has determined, with the concurrence of the Administrator of
the Office of Information and Regulatory Affairs of OMB, that this rule
is not a ``major rule'' as defined in section 351 of the Small Business
Regulatory Enforcement Fairness Act of 1996.

List of Subjects in 18 CFR Part 40

    Electric power, Electric utilities, Reporting and recordkeeping
requirements.

    By the Commission.
Nathaniel J. Davis, Sr.,
Deputy Secretary.
[FR Doc. E9-30587 Filed 12-23-09; 8:45 am]

BILLING CODE 6717-01-P


2. Are there additional alternative processes to implement section
205 of the Dodd-Frank Act that the Commission and the Corporation
should consider? If so, what are they and what would be the associated
costs or benefits of these alternative approaches?

VI. Regulatory Analysis and Procedures

A. Regulatory Flexibility Act Analysis

    The Regulatory Flexibility Act (``RFA'') \201\ requires an agency
publishing a notice of proposed rulemaking to prepare and make
available for public comment a regulatory flexibility analysis that
describes the impact of the proposed rule on small entities.\202\ The
RFA provides that an agency is not required to prepare and publish a
regulatory flexibility analysis if the agency certifies that the
proposed rule will not have a significant economic impact on a
substantial number of small entities.\203\
---------------------------------------------------------------------------

    \201\ 5 U.S.C. 601 et seq.
    \202\ 5 U.S.C. 603(a).
    \203\ 5 U.S.C. 605(b).
---------------------------------------------------------------------------

    Pursuant to section 605(b) of the RFA, the Agencies certify that
the proposed rule, if adopted, will not have a significant economic
impact on a substantial number of small entities. Under Small Business
Administration size standards defining small entities, broker-dealers
are generally considered small entities if their annual receipts do not
exceed $38.5 million.\204\ If adopted, the proposed rule will clarify
rules and procedures for the orderly liquidation of a covered broker-
dealer under Title II of the Dodd-Frank Act. A covered broker-dealer is
a broker-dealer that is subject to a systemic risk determination by the
Secretary pursuant to section 203 of the Dodd-Frank Act, 12 U.S.C.
5383, and thereafter is to be liquidated under Title II of the Dodd-
Frank Act. The Agencies do not believe that a broker-dealer that would
be considered a small entity for purposes of the RFA would ever be the
subject of a systemic risk determination by the Secretary. Therefore,
the Agencies are not aware of any small entities that would be affected
by the proposed rule. As such, the proposed rule, if adopted, would not
affect, and would impose no burdens on, small entities.
---------------------------------------------------------------------------

    \204\ 13 CFR 121.201.
---------------------------------------------------------------------------

B. The Treasury and General Government Appropriations Act, 1999--
Assessment of Federal Regulations and Policies on Families

    The FDIC has determined that the proposed rule will not affect
family well-being within the meaning of section 654 of the Treasury and
General Government Appropriations Act, enacted as part of the Omnibus
Consolidated and Emergency Supplemental Appropriations Act of
1999.\205\
---------------------------------------------------------------------------

    \205\ Public Law 105-277, 112 Stat. 2681.
---------------------------------------------------------------------------

C. Plain Language

    Section 722 of the Gramm-Leach-Bliley Act \206\ requires federal
banking agencies to use plain language in all proposed and final rules
published after January 1, 2000. The FDIC has sought to present the
proposed rule in a simple and straightforward manner but nevertheless
invites comment on whether the proposal is clearly stated and
effectively organized, and how the Agencies might make the proposed
text easier to understand.
---------------------------------------------------------------------------

    \206\ Public Law 106-102, 113 Stat. 1338, 1471.
---------------------------------------------------------------------------

VII. Consideration of Impact on the Economy

    For purposes of the Small Business Regulatory Enforcement Fairness
Act of 1996 (``SBREFA''), the Commission and the Corporation request
comment on the potential effect of the proposed rule on the United
States economy on an annual basis. The Commission and the Corporation
also request comment on any potential increases in costs or prices for
consumers or individual industries, and any potential effect on
competition, investment, or innovation based on the proposed rule.
Commenters are requested to provide empirical data and other factual
support for their views to the extent possible.

VIII. Statutory Authority

    The proposed rule is being promulgated pursuant to section 205(h)
of the Dodd-Frank Act. Section 205(h) of the Act requires the
Corporation and the Commission, in consultation with SIPC, jointly to
issue rules to implement section 205 of the Act concerning the orderly
liquidation of covered broker-dealers.

List of Subjects

12 CFR Part 380

    Bankruptcy, Brokers, Claims, Customers, Dealers, Financial
companies, Orderly liquidation.

17 CFR Part 302

    Brokers, Claims, Customers, Dealers, Financial companies, Orderly
liquidation.

Federal Deposit Insurance Corporation

12 CFR Part 380

Authority and Issuance

    For the reasons stated in the preamble, the Federal Deposit
Insurance Corporation proposes to amend 12 CFR part 380 as follows:

PART 380--ORDERLY LIQUIDATION AUTHORITY

0
1. The authority citation for part 380 is revised to read as follows:

    Authority: 12 U.S.C. 5385(h); 12 U.S.C. 5389; 12 U.S.C.
5390(s)(3); 12 U.S.C. 5390(b)(1)(C); 12 U.S.C. 5390(a)(7)(D); 12
U.S.C. 5381(b), 12 U.S.C. 5390(r).

0
2. Add subpart D to read as follows:

Subpart D--Orderly Liquidation of Covered Brokers or Dealers

Sec.
380.60 Definitions.
380.61 Appointment of receiver and trustee for covered broker or
dealer.
380.62 Notice and application for protective decree for covered
broker or dealer.
380.63 Bridge broker or dealer.
380.64 Claims of customers and other creditors of a covered broker
or dealer.
380.65 Priorities for unsecured claims against a covered broker or
dealer.
380.66 Administrative expenses of SIPC.
380.67 Qualified financial contracts.

Sec.  380.60  Definitions.

    For purposes of this subpart D, the following terms shall have the
following meanings:
    (a) Appointment date. The term appointment date means the date of
the appointment of the Corporation as receiver for a covered financial
company that is a covered broker or dealer. This date shall constitute
the filing date as that term is used in SIPA.
    (b) Bridge broker or dealer. The term bridge broker or dealer means
a new financial company organized by the Corporation in accordance with
12 U.S.C. 5390(h) for the purpose of resolving a covered broker or
dealer.
    (c) Commission. The term Commission means the Securities and
Exchange Commission.
    (d) Covered broker or dealer. The term covered broker or dealer
means a covered financial company that is a qualified broker or dealer.
    (e) Customer. The term customer of a covered broker or dealer shall
have the same meaning as in 15 U.S.C. 78lll(2) provided that the
references therein to debtor shall mean the covered broker or dealer.
    (f) Customer name securities. The term customer name securities
shall have the same meaning as in 15 U.S.C. 78lll(3) provided that the
references therein to debtor shall mean the covered broker or dealer
and the references therein to filing date shall mean the appointment
date.
    (g) Customer property. The term customer property shall have the
same meaning as in 15 U.S.C. 78lll(4) provided that the references
therein to debtor shall mean the covered broker or dealer.
    (h) Net equity. The term net equity shall have the same meaning as
in 15 U.S.C. 78lll(11) provided that the references therein to debtor
shall mean the covered broker or dealer and the references therein to
filing date shall mean the appointment date.
    (i) Qualified broker or dealer. The term qualified broker or dealer
means a broker or dealer that:
    (1) Is registered with the Commission under section 15(b) of the
Securities Exchange Act of 1934 (15 U.S.C. 78o(b)); and
    (2) Is a member of SIPC.
    (j) SIPA. The term SIPA means the Securities Investor Protection
Act of 1970, 15 U.S.C. 78aaa-lll.
    (k) SIPC. The term SIPC means the Securities Investor Protection
Corporation.

Sec.  380.61  Appointment of receiver and trustee for covered broker or
dealer.

    Upon the appointment of the Corporation as receiver for a covered
broker or dealer, the Corporation shall appoint SIPC to act as trustee
for the covered broker or dealer.

Sec.  380.62  Notice and application for protective decree for covered
broker or dealer.

    (a) SIPC and the Corporation, upon consultation with the
Commission, shall jointly determine the terms of a notice and
application for a protective decree that will be filed promptly with
the Federal district court for the district within which the principal
place of business of the covered broker or dealer is located; provided
that if a case or proceeding under SIPA with respect to such covered
broker or dealer is then pending, then such notice and application for
a protective decree will be filed promptly with the Federal district
court in which such case or proceeding under SIPA is pending. If such
notice and application for a protective decree is filed on a date other
than the appointment date, such filing shall be deemed to have occurred
on the appointment date for the purposes of this subpart D.
    (b) A notice and application for a protective decree may, among
other things, provide for notice--
    (1) Of the appointment of the Corporation as receiver and the
appointment of SIPC as trustee for the covered broker or dealer; and
    (2) That the provisions of Title II of the Dodd-Frank Act and any
regulations promulgated thereunder may apply, including without
limitation the following:
    (i) Any existing case or proceeding with respect to a covered
broker or dealer under the Bankruptcy Code or SIPA shall be dismissed
effective as of the appointment date and no such case or proceeding may
be commenced with respect to a covered broker or dealer at any time
while the Corporation is receiver for such covered broker or dealer;
    (ii) The revesting of assets in a covered broker or dealer to the
extent that they have vested in any entity other than the covered
broker or dealer as a result of any case or proceeding commenced with
respect to the covered broker or dealer under the Bankruptcy Code,
SIPA, or any similar provision of State liquidation or insolvency law
applicable to the covered broker or dealer; provided that any such
revesting shall not apply to assets held by the covered broker or
dealer, including customer property, transferred prior to the
appointment date pursuant to an order entered by the bankruptcy court
presiding over the case or proceeding with respect to the covered
broker or dealer;
    (iii) The request of the Corporation as receiver for a stay in any
judicial action or proceeding (other than actions dismissed in
accordance with paragraph (b)(2)(i) of this section) in which the
covered broker or dealer is or becomes a party for a period of up to 90
days from the appointment date;
    (iv) Except as provided in paragraph (b)(2)(v) of this section with
respect to qualified financial contracts, no person may exercise any
right or power to terminate, accelerate or declare a default under any
contract to which the covered broker or dealer is a party (and no
provision in any such contract providing for such default, termination
or acceleration shall be enforceable), or to obtain possession of or
exercise control over any property of the covered broker or dealer or
affect any contractual rights of the covered broker or dealer without
the consent of the Corporation as receiver of the covered broker or
dealer upon consultation with SIPC during the 90-day period beginning
from the appointment date; and
    (v) The exercise of rights and the performance of obligations by
parties to qualified financial contracts with the covered broker or
dealer may be affected, stayed, or delayed pursuant to the provisions
of Title II of the Dodd-Frank Act (including 12 U.S.C. 5390(c)) and the
regulations promulgated thereunder.

Sec.  380.63  Bridge broker or dealer.

    (a) The Corporation, as receiver for one or more covered brokers or
dealers or in anticipation of being appointed receiver for one or more
covered broker or dealers, may organize one or more bridge brokers or
dealers with respect to a covered broker or dealer.
    (b) If the Corporation establishes one or more bridge brokers or
dealers with respect to a covered broker or dealer, then, subject to
paragraph (d) of this section, the Corporation as receiver for such
covered broker or dealer shall transfer all customer accounts and all
associated customer name securities and customer property to such
bridge brokers or dealers unless the Corporation determines, after
consultation with the Commission and SIPC, that:
    (1) The customer accounts, customer name securities, and customer
property are likely to be promptly transferred to one or more qualified
brokers or dealers such that the use of a bridge broker or dealer would
not facilitate such transfer to one or more qualified brokers or
dealers; or

    (2) The transfer of such customer accounts to a bridge broker or
dealer would materially interfere with the ability of the Corporation
to avoid or mitigate serious adverse effects on financial stability or
economic conditions in the United States.
    (c) The Corporation, as receiver for such covered broker or dealer,
also may transfer any other assets and liabilities of the covered
broker or dealer (including non-customer accounts and any associated
property and any assets and liabilities associated with any trust or
custody business) to such bridge brokers or dealers as the Corporation
may, in its discretion, determine to be appropriate in accordance with,
and subject to the requirements of, 12 U.S.C. 5390(h), including 12
U.S.C. 5390(h)(1) and 5390(h)(5), and any regulations promulgated
thereunder.
    (d) In connection with customer accounts transferred to the bridge
broker or dealer pursuant to paragraph (b) of this section, claims for
net equity shall not be transferred but shall remain with the covered
broker or dealer. Customer property transferred from the covered broker
or dealer, along with advances from SIPC, shall be allocated to
customer accounts at the bridge broker or dealer in accordance with
Sec.  380.64(a)(3). Such allocations initially may be based upon
estimates, and such estimates may be based upon the books and records
of the covered broker or dealer or any other information deemed
relevant in the discretion of the Corporation as receiver, in
consultation with SIPC, as trustee. Such estimates may be adjusted from
time to time as additional information becomes available. With respect
to each account transferred to the bridge broker or dealer pursuant to
paragraph (b) or (c) of this section, the bridge broker or dealer shall
undertake the obligations of a broker or dealer only with respect to
property transferred to and held by the bridge broker or dealer, and
allocated to the account as provided in Sec.  380.64(a)(3), including
any customer property and any advances from SIPC. The bridge broker or
dealer shall have no obligations with respect to any customer property
or other property that is not transferred from the covered broker or
dealer to the bridge broker or dealer. The transfer of customer
property to such an account shall have no effect on calculation of the
amount of the affected account holder's net equity, but the value, as
of the appointment date, of the customer property and advances from
SIPC so transferred shall be deemed to satisfy any such claim, in whole
or in part.
    (e) The transfer of assets or liabilities held by a covered broker
or dealer, including customer accounts and all associated customer name
securities and customer property, assets and liabilities held by a
covered broker or dealer for any non-customer creditor, and assets and
liabilities associated with any trust or custody business, to a bridge
broker or dealer, shall be effective without any consent,
authorization, or approval of any person or entity, including but not
limited to, any customer, contract party, governmental authority, or
court.
    (f) Any succession to or assumption by a bridge broker or dealer of
rights, powers, authorities, or privileges of a covered broker or
dealer shall be effective without any consent, authorization, or
approval of any person or entity, including but not limited to, any
customer, contract party, governmental authority, or court, and any
such bridge broker or dealer shall upon its organization by the
Corporation immediately and by operation of law--
    (1) Be established and deemed registered with the Commission under
the Securities Exchange Act of 1934;
    (2) Be deemed to be a member of SIPC; and
    (3) Succeed to any and all registrations and memberships of the
covered broker or dealer with or in any self-regulatory organizations.
    (g) Except as provided in paragraph (f) of this section, the bridge
broker or dealer shall be subject to applicable Federal securities laws
and all requirements with respect to being a member of a self-
regulatory organization and shall operate in accordance with all such
laws and requirements and in accordance with its articles of
association; provided, however, that the Commission may, in its
discretion, exempt the bridge broker or dealer from any such
requirements if the Commission deems such exemption to be necessary or
appropriate in the public interest or for the protection of investors.
    (h) At the end of the term of existence of a bridge broker or
dealer, any proceeds that remain after payment of all administrative
expenses of such bridge broker or dealer and all other claims against
such bridge broker or dealer shall be distributed to the receiver for
the related covered broker or dealer.

Sec.  380.64  Claims of customers and other creditors of a covered
broker or dealer.

    (a) Trustee's role. (1) SIPC, as trustee for a covered broker or
dealer, shall determine customer status, claims for net equity, claims
for customer name securities, and whether property of the covered
broker or dealer qualifies as customer property. SIPC, as trustee for a
covered broker or dealer, shall make claims determinations in
accordance with SIPA and with paragraph (a)(3) of this section, but
such determinations, and any claims related thereto, shall be governed
by the procedures set forth in paragraph (b) of this section.
    (2) SIPC shall make advances in accordance with, and subject to the
limitations imposed by, 15 U.S.C. 78fff-3. Where appropriate, SIPC
shall make such advances by delivering cash or securities to the
customer accounts established at the bridge broker or dealer.
    (3) Customer property held by a covered broker or dealer shall be
allocated as follows:
    (i) First, to SIPC in repayment of advances made by SIPC pursuant
to 12 U.S.C. 5385(f) and 15 U.S.C. 78fff-3(c)(1), to the extent such
advances effected the release of securities which then were apportioned
to customer property pursuant to 15 U.S.C. 78fff(d);
    (ii) Second, to customers of such covered broker or dealer, or in
the case that customer accounts are transferred to a bridge broker or
dealer, then to such customer accounts at a bridge broker or dealer,
who shall share ratably in such customer property on the basis and to
the extent of their respective net equities;
    (iii) Third, to SIPC as subrogee for the claims of customers; and
    (iv) Fourth, to SIPC in repayment of advances made by SIPC pursuant
to 15 U.S.C. 78fff-3(c)(2).
    (4) The determinations and advances made by SIPC as trustee for a
covered broker or dealer under this subpart D shall be made in a manner
consistent with SIPC's customary practices under SIPA. The allocation
of customer property, advances from SIPC, and delivery of customer name
securities to each customer or to its customer account at a bridge
broker or dealer, in partial or complete satisfaction of such
customer's net equity claims as of the close of business on the
appointment date, shall be in a manner, including form and timing, and
in an amount at least as beneficial to such customer as would have been
the case had the covered broker or dealer been liquidated under SIPA.
Any claims related to determinations made by SIPC as trustee for a
covered broker or dealer shall be governed by the procedures set forth
in paragraph (b) of this section.
    (b) Receiver's role. Any claim shall be determined in accordance
with the procedures set forth in 12 U.S.C. 5390(a)(2) through (5) and
the

regulations promulgated by the Corporation thereunder, provided
however, that--
    (1) Notice requirements. The notice of the appointment of the
Corporation as receiver for a covered broker or dealer shall also
include notice of the appointment of SIPC as trustee. The Corporation
as receiver shall coordinate with SIPC as trustee to post the notice on
SIPC's public Web site in addition to the publication procedures set
forth in Sec.  380.33.
    (2) Procedures for filing a claim. The Corporation as receiver
shall consult with SIPC, as trustee, regarding a claim form and filing
instructions with respect to claims against the Corporation as receiver
for a covered broker or dealer, and such information shall be provided
on SIPC's public Web site in addition to the Corporation's public Web
site. Any such claim form shall contain a provision permitting a
claimant to claim status as a customer of the broker or dealer, if
applicable.
    (3) Claims bar date. The Corporation as receiver shall establish a
claims bar date in accordance with 12 U.S.C. 5390(a)(2)(B)(i) and any
regulations promulgated thereunder by which date creditors of a covered
broker or dealer, including all customers of the covered broker or
dealer, shall present their claims, together with proof. The claims bar
date for a covered broker or dealer shall be the date following the
expiration of the six-month period beginning on the date a notice to
creditors to file their claims is first published in accordance with 12
U.S.C. 5390(a)(2)(B)(i) and any regulations promulgated thereunder. Any
claim filed after the claims bar date shall be disallowed, and such
disallowance shall be final, as provided by 12 U.S.C. 5390(a)(3)(C)(i)
and any regulations promulgated thereunder, except that a claim filed
after the claims bar date shall be considered by the receiver as
provided by 12 U.S.C. 5390(a)(3)(C)(ii) and any regulations promulgated
thereunder. In accordance with section 8(a)(3) of SIPA, 15 U.S.C.
78fff-2(a)(3), any claim for net equity filed more than sixty days
after the date the notice to creditors to file claims is first
published need not be paid or satisfied in whole or in part out of
customer property and, to the extent such claim is paid by funds
advanced by SIPC, it shall be satisfied in cash or securities, or both,
as SIPC, as trustee, determines is most economical to the receivership
estate.
    (c) Decision period. The Corporation as receiver of a covered
broker or dealer shall notify a claimant whether it allows or disallows
the claim, or any portion of a claim or any claim of a security,
preference, set-off, or priority, within the 180-day period set forth
in 12 U.S.C. 5390(a)(3)(A) and any regulations promulgated thereunder
(as such 180-day period may be extended by written agreement as
provided therein) or within the 90-day period set forth in 12 U.S.C.
5390(a)(5)(B) and any regulations promulgated thereunder, whichever is
applicable. In accordance with paragraph (a) of this section, the
Corporation, as receiver, shall issue the notice required by this
paragraph (c), which shall utilize the determination made by SIPC, as
trustee, in a manner consistent with SIPC's customary practices in a
liquidation under SIPA, with respect to any claim for net equity or
customer name securities. The process established herein for the
determination, within the 180-day period set forth in 12 U.S.C.
5390(a)(3)(A) and any regulations promulgated thereunder (as such 180-
day period may be extended by written agreement as provided therein),
of claims by customers of a covered broker or dealer for customer
property or customer name securities shall constitute the exclusive
process for the determination of such claims, and any procedure for
expedited relief established pursuant to 12 U.S.C. 5390(a)(5) and any
regulations promulgated thereunder shall be inapplicable to such
claims.
    (d) Judicial review. The claimant may seek a judicial determination
of any claim disallowed, in whole or in part, by the Corporation as
receiver, including any claim disallowed based upon any
determination(s) of SIPC as trustee made pursuant to Sec.  380.64(a),
by the appropriate district or territorial court of the United States
in accordance with 12 U.S.C. 5390(a)(4) or (5), whichever is
applicable, and any regulations promulgated thereunder.

Sec.  380.65  Priorities for unsecured claims against a covered broker
or dealer.

    Allowed claims not satisfied pursuant to Sec.  380.63(d), including
allowed claims for net equity to the extent not satisfied after final
allocation of customer property in accordance with Sec.  380.64(a)(3),
shall be paid in accordance with the order of priority set forth in
Sec.  380.21 subject to the following adjustments:
    (a) Administrative expenses of SIPC incurred in performing its
responsibilities as trustee for a covered broker or dealer shall be
included as administrative expenses of the receiver as defined in Sec.
380.22 and shall be paid pro rata with such expenses in accordance with
Sec.  380.21(c).
    (b) Amounts paid by the Corporation to customers or SIPC shall be
included as amounts owed to the United States as defined in Sec.
380.23 and shall be paid pro rata with such amounts in accordance with
Sec.  380.21(c).
    (c) Amounts advanced by SIPC for the purpose of satisfying customer
claims for net equity shall be paid following the payment of all
amounts owed to the United States pursuant to Sec.  380.21(a)(3) but
prior to the payment of any other class or priority of claims described
in Sec.  380.21(a)(4) through (11).

Sec.  380.66  Administrative expenses of SIPC.

    (a) In carrying out its responsibilities, SIPC, as trustee for a
covered broker or dealer, may utilize the services of third parties,
including private attorneys, accountants, consultants, advisors,
outside experts, and other third party professionals. SIPC shall have
an allowed claim for administrative expenses for any amounts paid by
SIPC for such services to the extent that such services are available
in the private sector, and utilization of such services is practicable,
efficient, and cost effective. The term administrative expenses of SIPC
includes the costs and expenses of such attorneys, accountants,
consultants, advisors, outside experts, and other third party
professionals, and other expenses that would be allowable to a third
party trustee under 15 U.S.C. 78eee(b)(5)(A), including the costs and
expenses of SIPC employees that would be allowable pursuant to 15
U.S.C. 78fff(e).
    (b) The term administrative expenses of SIPC shall not include
advances from SIPC to satisfy customer claims for net equity.

Sec.  380.67  Qualified financial contracts.

    The rights and obligations of any party to a qualified financial
contract to which a covered broker or dealer is a party shall be
governed exclusively by 12 U.S.C. 5390, including the limitations and
restrictions contained in 12 U.S.C. 5390(c)(10)(B), and any regulations
promulgated thereunder.

Securities and Exchange Commission

17 CFR Part 302

Authority and Issuance

    For the reasons stated in the proposing release, the Securities and
Exchange Commission proposes to amend 17 CFR 302 as follows:
0
3. Add part 302 to read as follows:

PART 302--ORDERLY LIQUIDATION OF COVERED BROKERS OR DEALERS

Sec.

302.100 Definitions.
302.101 Appointment of receiver and trustee for covered broker or
dealer.
302.102 Notice and application for protective decree for covered
broker or dealer.
302.103 Bridge broker or dealer.
302.104 Claims of customers and other creditors of a covered broker
or dealer.
302.105 Priorities for unsecured claims against a covered broker or
dealer.
302.106 Administrative expenses of SIPC.
302.107 Qualified financial contracts.

    Authority: 12 U.S.C. 5385(h).

Sec.  302.100  Definitions.

    For purposes of Sec. Sec.  302.100 through 302.107, the following
terms shall have the following meanings:
    (a) Appointment date. The term appointment date means the date of
the appointment of the Corporation as receiver for a covered financial
company that is a covered broker or dealer. This date shall constitute
the filing date as that term is used in SIPA.
    (b) Bridge broker or dealer. The term bridge broker or dealer means
a new financial company organized by the Corporation in accordance with
12 U.S.C. 5390(h) for the purpose of resolving a covered broker or
dealer.
    (c) Commission. The term Commission means the Securities and
Exchange Commission.
    (d) Covered broker or dealer. The term covered broker or dealer
means a covered financial company that is a qualified broker or dealer.
    (e) Customer. The term customer of a covered broker or dealer shall
have the same meaning as in 15 U.S.C. 78lll(2) provided that the
references therein to debtor shall mean the covered broker or dealer.
    (f) Customer name securities. The term customer name securities
shall have the same meaning as in 15 U.S.C. 78lll(3) provided that the
references therein to debtor shall mean the covered broker or dealer
and the references therein to filing date shall mean the appointment
date.
    (g) Customer property. The term customer property shall have the
same meaning as in 15 U.S.C. 78lll(4) provided that the references
therein to debtor shall mean the covered broker or dealer.
    (h) Net equity. The term net equity shall have the same meaning as
in 15 U.S.C. 78lll(11) provided that the references therein to debtor
shall mean the covered broker or dealer and the references therein to
filing date shall mean the appointment date.
    (i) Qualified broker or dealer. The term qualified broker or dealer
means a broker or dealer that:
    (1) Is registered with the Commission under section 15(b) of the
Securities Exchange Act of 1934 (15 U.S.C. 78o(b)); and
    (2) Is a member of SIPC.
    (j) SIPA. The term SIPA means the Securities Investor Protection
Act of 1970, 15 U.S.C. 78aaa-lll.
    (k) SIPC. The term SIPC means the Securities Investor Protection
Corporation.
    (l) Corporation. The term Corporation means the Federal Deposit
Insurance Corporation.
    (m) Dodd-Frank Act. The term Dodd-Frank Act means the Dodd-Frank
Wall Street Reform and Consumer Protection Act, Public Law 111-203, 124
Stat. 1376, enacted July 21, 2010.

Sec.  302.101  Appointment of receiver and trustee for covered broker
or dealer.

    Upon the appointment of the Corporation as receiver for a covered
broker or dealer, the Corporation shall appoint SIPC to act as trustee
for the covered broker or dealer.

Sec.  302.102  Notice and application for protective decree for covered
broker or dealer.

    (a) SIPC and the Corporation, upon consultation with the
Commission, shall jointly determine the terms of a notice and
application for a protective decree that will be filed promptly with
the Federal district court for the district within which the principal
place of business of the covered broker or dealer is located; provided
that if a case or proceeding under SIPA with respect to such covered
broker or dealer is then pending, then such notice and application for
a protective decree will be filed promptly with the Federal district
court in which such case or proceeding under SIPA is pending. If such
notice and application for a protective decree is filed on a date other
than the appointment date, such filing shall be deemed to have occurred
on the appointment date for the purposes of Sec. Sec.  302.100 through
302.107.
    (b) A notice and application for a protective decree may, among
other things, provide for notice--
    (1) Of the appointment of the Corporation as receiver and the
appointment of SIPC as trustee for the covered broker or dealer; and
    (2) That the provisions of Title II of the Dodd-Frank Act and any
regulations promulgated thereunder may apply, including without
limitation the following:
    (i) Any existing case or proceeding with respect to a covered
broker or dealer under the Bankruptcy Code or SIPA shall be dismissed
effective as of the appointment date and no such case or proceeding may
be commenced with respect to a covered broker or dealer at any time
while the Corporation is receiver for such covered broker or dealer;
    (ii) The revesting of assets in a covered broker or dealer to the
extent that they have vested in any entity other than the covered
broker or dealer as a result of any case or proceeding commenced with
respect to the covered broker or dealer under the Bankruptcy Code,
SIPA, or any similar provision of State liquidation or insolvency law
applicable to the covered broker or dealer; provided that any such
revesting shall not apply to assets held by the covered broker or
dealer, including customer property, transferred prior to the
appointment date pursuant to an order entered by the bankruptcy court
presiding over the case or proceeding with respect to the covered
broker or dealer;
    (iii) The request of the Corporation as receiver for a stay in any
judicial action or proceeding (other than actions dismissed in
accordance with paragraph (b)(2)(i) of this section) in which the
covered broker or dealer is or becomes a party for a period of up to 90
days from the appointment date;
    (iv) Except as provided in paragraph (b)(2)(v) of this section with
respect to qualified financial contracts, no person may exercise any
right or power to terminate, accelerate or declare a default under any
contract to which the covered broker or dealer is a party (and no
provision in any such contract providing for such default, termination
or acceleration shall be enforceable), or to obtain possession of or
exercise control over any property of the covered broker or dealer or
affect any contractual rights of the covered broker or dealer without
the consent of the Corporation as receiver of the covered broker or
dealer upon consultation with SIPC during the 90-day period beginning
from the appointment date; and
    (v) The exercise of rights and the performance of obligations by
parties to qualified financial contracts with the covered broker or
dealer may be affected, stayed, or delayed pursuant to the provisions
of Title II of the Dodd-Frank Act (including 12 U.S.C. 5390(c)) and the
regulations promulgated thereunder.

Sec.  302.103  Bridge broker or dealer.

    (a) The Corporation, as receiver for one or more covered brokers or
dealers or in anticipation of being appointed receiver for one or more
covered broker or dealers, may organize one or more bridge brokers or
dealers with respect to a covered broker or dealer.

    (b) If the Corporation establishes one or more bridge brokers or
dealers with respect to a covered broker or dealer, then, subject to
paragraph (d) of this section, the Corporation as receiver for such
covered broker or dealer shall transfer all customer accounts and all
associated customer name securities and customer property to such
bridge brokers or dealers unless the Corporation determines, after
consultation with the Commission and SIPC, that:
    (1) The customer accounts, customer name securities, and customer
property are likely to be promptly transferred to one or more qualified
brokers or dealers such that the use of a bridge broker or dealer would
not facilitate such transfer to one or more qualified brokers or
dealers; or
    (2) The transfer of such customer accounts to a bridge broker or
dealer would materially interfere with the ability of the Corporation
to avoid or mitigate serious adverse effects on financial stability or
economic conditions in the United States.
    (c) The Corporation, as receiver for such covered broker or dealer,
also may transfer any other assets and liabilities of the covered
broker or dealer (including non-customer accounts and any associated
property and any assets and liabilities associated with any trust or
custody business) to such bridge brokers or dealers as the Corporation
may, in its discretion, determine to be appropriate in accordance with,
and subject to the requirements of, 12 U.S.C. 5390(h), including 12
U.S.C. 5390(h)(1) and 5390(h)(5), and any regulations promulgated
thereunder.
    (d) In connection with customer accounts transferred to the bridge
broker or dealer pursuant to paragraph (b) of this section, claims for
net equity shall not be transferred but shall remain with the covered
broker or dealer. Customer property transferred from the covered broker
or dealer, along with advances from SIPC, shall be allocated to
customer accounts at the bridge broker or dealer in accordance with
Sec.  302.104(a)(3). Such allocations initially may be based upon
estimates, and such estimates may be based upon the books and records
of the covered broker or dealer or any other information deemed
relevant in the discretion of the Corporation as receiver, in
consultation with SIPC, as trustee. Such estimates may be adjusted from
time to time as additional information becomes available. With respect
to each account transferred to the bridge broker or dealer pursuant to
paragraph (b) or (c) of this section, the bridge broker or dealer shall
undertake the obligations of a broker or dealer only with respect to
property transferred to and held by the bridge broker or dealer, and
allocated to the account as provided in Sec.  302.104(a)(3), including
any customer property and any advances from SIPC. The bridge broker or
dealer shall have no obligations with respect to any customer property
or other property that is not transferred from the covered broker or
dealer to the bridge broker or dealer. The transfer of customer
property to such an account shall have no effect on calculation of the
amount of the affected accountholder's net equity, but the value, as of
the appointment date, of the customer property and advances from SIPC
so transferred shall be deemed to satisfy any such claim, in whole or
in part.
    (e) The transfer of assets or liabilities held by a covered broker
or dealer, including customer accounts and all associated customer name
securities and customer property, assets and liabilities held by a
covered broker or dealer for any non-customer creditor, and assets and
liabilities associated with any trust or custody business, to a bridge
broker or dealer, shall be effective without any consent,
authorization, or approval of any person or entity, including but not
limited to, any customer, contract party, governmental authority, or
court.
    (f) Any succession to or assumption by a bridge broker or dealer of
rights, powers, authorities, or privileges of a covered broker or
dealer shall be effective without any consent, authorization, or
approval of any person or entity, including but not limited to, any
customer, contract party, governmental authority, or court, and any
such bridge broker or dealer shall upon its organization by the
Corporation immediately and by operation of law--
    (1) Be established and deemed registered with the Commission under
the Securities Exchange Act of 1934;
    (2) Be deemed to be a member of SIPC; and
    (3) Succeed to any and all registrations and memberships of the
covered broker or dealer with or in any self-regulatory organizations.
    (g) Except as provided in paragraph (f) of this section, the bridge
broker or dealer shall be subject to applicable Federal securities laws
and all requirements with respect to being a member of a self-
regulatory organization and shall operate in accordance with all such
laws and requirements and in accordance with its articles of
association; provided, however, that the Commission may, in its
discretion, exempt the bridge broker or dealer from any such
requirements if the Commission deems such exemption to be necessary or
appropriate in the public interest or for the protection of investors.
    (h) At the end of the term of existence of a bridge broker or
dealer, any proceeds that remain after payment of all administrative
expenses of such bridge broker or dealer and all other claims against
such bridge broker or dealer shall be distributed to the receiver for
the related covered broker or dealer.

Sec.  302.104  Claims of customers and other creditors of a covered
broker or dealer.

    (a) Trustee's role. (1) SIPC, as trustee for a covered broker or
dealer, shall determine customer status, claims for net equity, claims
for customer name securities, and whether property of the covered
broker or dealer qualifies as customer property. SIPC, as trustee for a
covered broker or dealer, shall make claims determinations in
accordance with SIPA and with paragraph (a)(3) of this section, but
such determinations, and any claims related thereto, shall be governed
by the procedures set forth in paragraph (b) of this section.
    (2) SIPC shall make advances in accordance with, and subject to the
limitations imposed by, 15 U.S.C. 78fff-3. Where appropriate, SIPC
shall make such advances by delivering cash or securities to the
customer accounts established at the bridge broker or dealer.
    (3) Customer property held by a covered broker or dealer shall be
allocated as follows:
    (i) First, to SIPC in repayment of advances made by SIPC pursuant
to 12 U.S.C. 5385(f) and 15 U.S.C. 78fff-3(c)(1), to the extent such
advances effected the release of securities which then were apportioned
to customer property pursuant to 15 U.S.C. 78fff(d);
    (ii) Second, to customers of such covered broker or dealer, or in
the case that customer accounts are transferred to a bridge broker or
dealer, then to such customer accounts at a bridge broker or dealer,
who shall share ratably in such customer property on the basis and to
the extent of their respective net equities;
    (iii) Third, to SIPC as subrogee for the claims of customers; and
    (iv) Fourth, to SIPC in repayment of advances made by SIPC pursuant
to 15 U.S.C. 78fff-3(c)(2).
    (4) The determinations and advances made by SIPC as trustee for a
covered broker or dealer under Sec. Sec.  302.100 through 302.107 shall
be made in a manner consistent with SIPC's customary practices under
SIPA. The allocation of customer property, advances from SIPC, and
delivery of

customer name securities to each customer or to its customer account at
a bridge broker or dealer, in partial or complete satisfaction of such
customer's net equity claims as of the close of business on the
appointment date, shall be in a manner, including form and timing, and
in an amount at least as beneficial to such customer as would have been
the case had the covered broker or dealer been liquidated under SIPA.
Any claims related to determinations made by SIPC as trustee for a
covered broker or dealer shall be governed by the procedures set forth
in paragraph (b) of this section.
    (b) Receiver's role. Any claim shall be determined in accordance
with the procedures set forth in 12 U.S.C. 5390(a)(2) through (5) and
the regulations promulgated by the Corporation thereunder, provided
however, that--
    (1) Notice requirements. The notice of the appointment of the
Corporation as receiver for a covered broker or dealer shall also
include notice of the appointment of SIPC as trustee. The Corporation
as receiver shall coordinate with SIPC as trustee to post the notice on
SIPC's public Web site in addition to the publication procedures set
forth in 12 CFR 380.33.
    (2) Procedures for filing a claim. The Corporation as receiver
shall consult with SIPC, as trustee, regarding a claim form and filing
instructions with respect to claims against the Corporation as receiver
for a covered broker or dealer, and such information shall be provided
on SIPC's public Web site in addition to the Corporation's public Web
site. Any such claim form shall contain a provision permitting a
claimant to claim status as a customer of the broker or dealer, if
applicable.
    (3) Claims bar date. The Corporation as receiver shall establish a
claims bar date in accordance with 12 U.S.C. 5390(a)(2)(B)(i) and any
regulations promulgated thereunder by which date creditors of a covered
broker or dealer, including all customers of the covered broker or
dealer, shall present their claims, together with proof. The claims bar
date for a covered broker or dealer shall be the date following the
expiration of the six-month period beginning on the date a notice to
creditors to file their claims is first published in accordance with 12
U.S.C. 5390(a)(2)(B)(i) and any regulations promulgated thereunder. Any
claim filed after the claims bar date shall be disallowed, and such
disallowance shall be final, as provided by 12 U.S.C. 5390(a)(3)(C)(i)
and any regulations promulgated thereunder, except that a claim filed
after the claims bar date shall be considered by the receiver as
provided by 12 U.S.C. 5390(a)(3)(C)(ii) and any regulations promulgated
thereunder. In accordance with section 8(a)(3) of SIPA, 15 U.S.C.
78fff-2(a)(3), any claim for net equity filed more than sixty days
after the date the notice to creditors to file claims is first
published need not be paid or satisfied in whole or in part out of
customer property and, to the extent such claim is paid by funds
advanced by SIPC, it shall be satisfied in cash or securities, or both,
as SIPC, as trustee, determines is most economical to the receivership
estate.
    (c) Decision period. The Corporation as receiver of a covered
broker or dealer shall notify a claimant whether it allows or disallows
the claim, or any portion of a claim or any claim of a security,
preference, set-off, or priority, within the 180-day period set forth
in 12 U.S.C. 5390(a)(3)(A) and any regulations promulgated thereunder
(as such 180-day period may be extended by written agreement as
provided therein) or within the 90-day period set forth in 12 U.S.C.
5390(a)(5)(B) and any regulations promulgated thereunder, whichever is
applicable. In accordance with paragraph (a) of this section, the
Corporation, as receiver, shall issue the notice required by this
paragraph (c), which shall utilize the determination made by SIPC, as
trustee, in a manner consistent with SIPC's customary practices in a
liquidation under SIPA, with respect to any claim for net equity or
customer name securities. The process established herein for the
determination, within the 180-day period set forth in 12 U.S.C.
5390(a)(3)(A) and any regulations promulgated thereunder (as such 180-
day period may be extended by written agreement as provided therein),
of claims by customers of a covered broker or dealer for customer
property or customer name securities shall constitute the exclusive
process for the determination of such claims, and any procedure for
expedited relief established pursuant to 12 U.S.C. 5390(a)(5) and any
regulations promulgated thereunder shall be inapplicable to such
claims.
    (d) Judicial review. The claimant may seek a judicial determination
of any claim disallowed, in whole or in part, by the Corporation as
receiver, including any claim disallowed based upon any
determination(s) of SIPC as trustee made pursuant to Sec.  302.104(a),
by the appropriate district or territorial court of the United States
in accordance with 12 U.S.C. 5390(a)(4) or (5), whichever is
applicable, and any regulations promulgated thereunder.

Sec.  302.105  Priorities for unsecured claims against a covered broker
or dealer.

    Allowed claims not satisfied pursuant to Sec.  302.103(d),
including allowed claims for net equity to the extent not satisfied
after final allocation of customer property in accordance with Sec.
302.104(a)(3), shall be paid in accordance with the order of priority
set forth in 12 CFR 380.21 subject to the following adjustments:
    (a) Administrative expenses of SIPC incurred in performing its
responsibilities as trustee for a covered broker or dealer shall be
included as administrative expenses of the receiver as defined in 12
CFR 380.22 and shall be paid pro rata with such expenses in accordance
with 12 CFR 380.21(c).
    (b) Amounts paid by the Corporation to customers or SIPC shall be
included as amounts owed to the United States as defined in 12 CFR
380.23 and shall be paid pro rata with such amounts in accordance with
12 CFR 380.21(c).
    (c) Amounts advanced by SIPC for the purpose of satisfying customer
claims for net equity shall be paid following the payment of all
amounts owed to the United States pursuant to 12 CFR 380.21(a)(3) but
prior to the payment of any other class or priority of claims described
in 12 CFR 380.21(a)(4) through (11).

Sec.  302.106  Administrative expenses of SIPC.

    (a) In carrying out its responsibilities, SIPC, as trustee for a
covered broker or dealer, may utilize the services of third parties,
including private attorneys, accountants, consultants, advisors,
outside experts, and other third party professionals. SIPC shall have
an allowed claim for administrative expenses for any amounts paid by
SIPC for such services to the extent that such services are available
in the private sector, and utilization of such services is practicable,
efficient, and cost effective. The term administrative expenses of SIPC
includes the costs and expenses of such attorneys, accountants,
consultants, advisors, outside experts, and other third party
professionals, and other expenses that would be allowable to a third
party trustee under 15 U.S.C. 78eee(b)(5)(A), including the costs and
expenses of SIPC employees that would be allowable pursuant to 15
U.S.C. 78fff(e).
    (b) The term administrative expenses of SIPC shall not include
advances from SIPC to satisfy customer claims for net equity.

Sec.  302.107  Qualified financial contracts.

    The rights and obligations of any party to a qualified financial
contract to

which a covered broker or dealer is a party shall be governed
exclusively by 12 U.S.C. 5390, including the limitations and
restrictions contained in 12 U.S.C. 5390(c)(10)(B), and any regulations
promulgated thereunder.

    Dated: February 17, 2016.

    By the Securities and Exchange Commission.
Brent J. Fields,
Secretary.
    Dated this 17th day of February, 2016.

    By order of the Board of Directors.

Federal Deposit Insurance Corporation.
Robert E. Feldman,
Executive Secretary.
[FR Doc. 2016-03874 Filed 3-1-16; 8:45 am]
 BILLING CODE 8011-01-P; 6714-01-P