sufficient information to reasonably estimate each SCI entity's current
level

of compliance with the substantive requirements underlying the policies
and procedures, the Commission preliminarily estimates a range of
average initial costs for each SCI entity to comply with the
substantive requirements underlying the policies and procedures
required by proposed Rules 1000(b)(1) and (2). Based on the estimates
of the initial costs, Commission estimates a range of average ongoing
cost for each SCI entity to comply with the requirements using two-
thirds of the initial cost. The Commission preliminarily believes that
a two-thirds estimate is appropriate because although proposed Rules
1000(b)(1) and (2) would require SCI entities to comply with certain
systems requirements including, for example, establishing reasonable
current and future capacity planning estimates on an ongoing basis, as
well as conducting tests and reviews of their systems on an going
basis, the Commission preliminarily believes that SCI entities would
incur an additional initial cost to, for example, revise the underlying
software code of their systems to the extent needed to bring those
systems into compliance with the requirements of the proposed rules.
Therefore, the Commission preliminarily estimates that, to comply with
the substantive requirements that are the subject of the policies and
procedures required by proposed Rules 1000(b)(1) and (2), including
consistency with SCI industry standards in connection with proposed
Rule 1000(b)(1), on average, each SCI entity would incur an ongoing
annual cost of between approximately $267,000 \637\ and $2
million.\638\ Based on this estimated range, the Commission
preliminarily estimates that SCI entities would incur a total ongoing
cost of between approximately $11.7 million \639\ and $88 million.\640\
The Commission seeks comment on the estimated average ongoing cost
range for SCI entities to comply with the substantive requirements
underlying the policies and procedures required by proposed Rules
1000(b)(1) and (2).
---------------------------------------------------------------------------

    \637\ $266,667 = $400,000 (estimated initial cost to comply with
the substantive requirements) x (\2/3\).
    \638\ $2 million = $3 million (estimated initial cost to comply
with the substantive requirements) x (\2/3\).
    \639\ $11.7 million = ($266,667) x (44 SCI entities).
    \640\ $88 million = ($2 million) x (44 SCI entities).
---------------------------------------------------------------------------

    The mandatory testing of SCI entity business continuity and
disaster recovery plans, including backup systems, as proposed to be
required under proposed Rule 1000(b)(9), would place an additional
burden on SCI entities. The Commission believes that some SCI entities
require some or all of their members or participants to connect to
their backup systems \641\ and that most, if not all, SCI entities
already offer their members or participants the opportunity to test
such plans, although they do not currently mandate participation by all
members or participants in such testing. In addition, market
participants, including SCI entities, already coordinate certain
business continuity plan testing to some extent. Thus, the Commission
preliminarily believes that additional costs of proposed Rule
1000(b)(9) to SCI entities would be minimal. However, for SCI entity
members or participants, additional costs could be significant, and
highly variable depending on the business continuity and disaster
recovery plans being tested. However, based on discussions with market
participants, the Commission preliminarily estimates the cost of the
testing of such plans to range from immaterial administrative costs
(for SCI entity members and participants that currently maintain
connections to SCI entity backup systems) to a range of $24,000 to
$60,000 per year per member or participant in connection with each SCI
entity. Costs at the higher end of this range would accrue for members
or participants who would need to invest in additional infrastructure
and to maintain connectivity with an SCI entity's backup systems in
order to participate in testing.\642\ The Commission is unable at this
time to provide a precise cost estimate for the total aggregate cost to
SCI entity members and participants of the requirements relating to
proposed Rule 1000(b)(9), as it does not know how each SCI entity will
determine its standards for designating members or participants that it
would require to participate in the testing required by proposed Rule
1000(b)(9)(i), and thus does not know the number of members or
participants at each SCI entity that would be designated as required to
participate in testing, and whether such designated members and
participants are those that already maintain connections to SCI entity
backup systems. However, the Commission preliminarily believes that an
aggregate annual cost of approximately $66 million to designated
members and participants is a reasonable estimate.\643\ The Commission
requests comment on these estimates and the assumptions underlying
them.
---------------------------------------------------------------------------

    \641\ See, e.g., CBOE Rule 6.18 (requiring Trading Permit
Holders to take appropriate actions as instructed by CBOE to
accommodate CBOE's ability to trade options via the back-up data
center); CBOE Regulatory Circular RG12-163 (stating that Trading
Permit Holders are required to maintain connectivity with the back-
up data center and have the ability to operate in the back-up data
center should circumstances arise that require it to be used); NYSE
Rule 49(b)(2)(iii) (requiring NYSE members to have contingency plans
to accommodate the use of the systems and facilities of NYSE Arca,
NYSE's designated backup facility). See also Securities Exchange Act
Release No. 52446 (September 15, 2005), 70 FR 55435 (September 21,
2005) (approving a proposed rule change by each of DTC, FICC, and
NSCC imposing fines on ``top tier'' members that fail to conduct
required connectivity testing for business continuity purposes, as
reflected, e.g., in NSCC Rules and Procedures, Addendum P, available
at: http://www.dtcc.com/legal/rules_proc/nscc_rules.pdf). See
also, e.g., BATS Rule 18.38, Nasdaq Options Rule 13, and BOX Rule
3180 (permitting each exchange to require members to participate in
computer systems testing in the manner and frequency prescribed by
such exchange).
    \642\ Based on industry sources, the Commission understands that
most of the larger members or participants of SCI entities already
maintain connectivity with the backup systems of SCI entities while,
among smaller members or participants of SCI entities, there is a
lower incidence of members or participants maintaining such
connectivity. The Commission requests comment on the accuracy of
this understanding.
    \643\ This estimate assumes that 44 SCI entities would each
designate an average of 150 members or participants to participate
in the necessary testing. Based on industry sources, the Commission
understands that many SCI entities have between 200 and 400 members
or participants, though some have more and some have fewer. In
addition, the Commission preliminarily believes that is reasonable
to estimate that the members or participants of SCI entities that
are most likely to be designated to be required participate in
testing are those that conduct a high level of activity with the SCI
entity, or that play an important role for the SCI entity (such as
market makers) and that such members or participants currently are
likely to already maintain connectivity with an SCI entity's backup
systems. Therefore, the Commission estimates the average cost for
each member or participant of an SCI entity to be $10,000, which
takes into account the fact that the Commission preliminarily
believes that many members or participants of SCI entities that
would be required to participate in such testing would already have
such connectivity, and thus have minimal cost. Based on these
assumptions, the Commission estimates that the total aggregate cost
to all members or participants of all SCI entities to be
approximately $66 million (44 SCI entities x 150 members or
participants x $10,000 = $66 million).
---------------------------------------------------------------------------

    The Commission preliminarily believes that the corrective action to
mitigate harm resulting from SCI events would impose modest incremental
costs on SCI entities because in the usual course of business, SCI
entities already take corrective actions in response to systems issues.
Proposed Rule 1000(b)(3) supplements the existing incentives of SCI
entities to correct an SCI event quickly by focusing on potential harm
to investors and market integrity and by requiring SCI entities to
devote adequate resources to begin to take corrective action as soon as
reasonably practicable. Based on its experience with the ARP Inspection
Program, the Commission believes that entities currently participating
in the ARP Inspection Program already take

corrective actions in response to a systems issue, and believes that
other SCI entities also take corrective actions in response to a
systems issue. Nevertheless, the Commission preliminarily believes that
proposed Rule 1000(b)(3) could result in modestly increased costs for
SCI entities per SCI event for corrective action relative to current
practice for SCI entities, as a result of undertaking corrective action
sooner than they might have otherwise and/or increasing investment in
newer more updated systems earlier than they might have otherwise. If,
however, proposed Regulation SCI reduces the frequency and severity of
SCI events, the overall costs to SCI entities of corrective action may
not increase significantly from the costs incurred without proposed
Regulation SCI. However, the degree to which proposed Regulation SCI
will reduce the frequency and severity of SCI events is unknown. Thus,
the Commission is, at this time, unable to estimate the precise impact
of proposed Regulation SCI due to an SCI entity's corrective action.
Thus, the Commission requests comment regarding the costs associated
with proposed Regulation SCI's corrective action requirements,
including what such costs would be on an annualized basis.\644\
---------------------------------------------------------------------------

    \644\ See also supra Section IV.D.3 (estimating paperwork
burdens associated with SCI entities developing a process for
ensuring that they are prepared to take corrective action as
required by proposed Rule 1000(b)(3), and reviewing that process on
an ongoing basis).
---------------------------------------------------------------------------

    When an SCI event occurs, an SCI entity needs to determine whether
the event is an immediate notification SCI event or dissemination SCI
event because the proposed rule would impose different obligations on
SCI entities for such events. Identifying these types of SCI events may
impose one-time implementation costs on SCI entities associated with
developing a process for ensuring that they are able to quickly and
correctly make such determinations, as well as periodic costs in
reviewing the adopted process.\645\
---------------------------------------------------------------------------

    \645\ The initial and ongoing burden associated with making
these determinations are discussed in the Paperwork Reduction Act
Section above. See supra Section IV.D.3 (estimating burdens
resulting from SCI entities determining whether an SCI event is an
immediate notification SCI event or dissemination SCI event).
---------------------------------------------------------------------------

    The Commission notes that proposed Rule 1000(d) would require that
any written notification, review, description, analysis, or report to
the Commission (except any written notification submitted pursuant to
proposed Rule 1000(b)(4)(i)) be submitted electronically and contain an
electronic signature. This proposed rule would require that every SCI
entity have the ability to submit forms electronically with an
electronic signature. The Commission believes that most, if not all,
SCI entities currently have the ability to access and submit an
electronic form such that the requirement to submit Form SCI
electronically will not impose new implementation costs. The initial
and ongoing costs associated with various electronic submissions of
Form SCI are discussed in the Paperwork Reduction Act Section
above.\646\
---------------------------------------------------------------------------

    \646\ See supra Section IV.D.2 (estimating burdens resulting
from notice, dissemination, and reporting requirements for SCI
entities).
---------------------------------------------------------------------------

    The Commission recognizes that some of the costs imposed by
proposed Regulation SCI may ultimately be transferred to
intermediaries, such as market participants that access national
securities exchanges or clearing agencies, for example, in the form of
higher fees. The Commission recognizes that, if costs relating to
compliance with proposed Regulation SCI are passed on in the form of
increased prices to users of SCI entities, there may be a loss of
efficiency as a result of the net increase in costs to SCI entity
customers. The Commission also preliminarily believes that, for some
SCI entities, the cost estimates may be lower than the actual costs to
be incurred, such as for entities that are not currently part of the
ARP Inspection Program or that have complex automated systems. However,
on balance, the Commission preliminarily believes that the incremental
direct cost estimates above are appropriate.
b. Other Costs
    The Commission recognizes that proposed Regulation SCI could have
other potential costs that cannot be quantified at this time. For
example, entities covered by the proposed rule frequently make systems
changes to comply with new and amended rules and regulations such as
rules and regulations under federal securities laws and SRO rules. The
Commission recognizes that, for entities that meet the definition of
SCI entities, because they must continue to comply with proposed
Regulation SCI when they make systems changes, proposed Regulation SCI
could increase the costs and time needed to make systems changes to
comply with new and amended rules and regulations. The Commission
requests comment on the nature of such additional costs and time.
    The Commission also considered whether proposed Regulation SCI
would impact innovation in ATSs or raise barriers to entry. The
Commission recognizes that, if proposed Regulation SCI were to cause
SCI entities, including ATSs, to allocate resources towards ensuring
they have robust systems and the personnel necessary to comply with
proposed Regulation SCI's requirements and away from new features for
their systems, or investing in research and development, proposed
Regulation SCI may have a negative impact on innovation among such
entities and thus impact competition. Similarly, if the costs of
proposed Regulation SCI were to be viewed by persons considering
forming new ATSs to be so onerous so as to dissuade them from starting
new ATSs, competition would also be negatively impacted. To balance any
concern about discouraging innovation and raising barriers to entry
against the need for regulation, the Commission proposes thresholds for
SCI ATSs that are designed to include only the ATSs that are most
likely to have a significant impact on markets due to an SCI event, and
requests comment on the thresholds.\647\ The tradeoffs associated with
these thresholds are discussed in more detail below.
---------------------------------------------------------------------------

    \647\ See supra Section III.B.1 and supra notes 100-123 and
accompanying text.
---------------------------------------------------------------------------

    Finally, by specifying the timing, type, and format of information
to be submitted to the Commission and by requiring electronic
submission of Form SCI, Commission staff should be able to more
efficiently review and analyze the information submitted. It is
particularly important for the Commission to be able to review and
analyze filings on Form SCI efficiently because proposed Regulation SCI
would require all SCI events to be reported to the Commission. The
Commission is not proposing at this time to require the data to be
submitted in a tagged data format (e.g., XML, XBRL, or another
structured data format that may be tagged), although it has requested
specific comment as to whether it should, and the costs and benefits of
doing so.\648\ The Commission recognizes that it could more readily
analyze filings submitted in a tagged data format than in PDF format,
and the subsequent potential benefits to investors may be greater.
However, these benefits are balanced against the costs to the SCI
entities of submitting filings in a tagged format.
---------------------------------------------------------------------------

    \648\ See, e.g., request for comment in supra Section III.D.1.
---------------------------------------------------------------------------

c. Scaling
    The Commission recognizes that the benefits of every provision of
proposed Regulation SCI may not justify the costs

of the provision if every requirement applied to every SCI entity and
SCI event. In particular, the Commission recognizes that applying each
requirement to every SCI entity and every SCI event could adversely
affect competition and efficiency. Therefore, the Commission has
proposed that not all SCI events be subject to the same requirements as
immediate notification SCI events and dissemination SCI events and that
ATSs that do not meet the definition of SCI ATS, and broker-dealers who
are not ATSs, should not be subject to same requirements as SCI
entities. The discussion that follows lays out the tradeoffs associated
with determining the appropriate cutoffs for determining which events
are immediate notification SCI events or dissemination SCI events, and
which ATSs are SCI ATSs. In sum, the Commission believes that the
requirements balance the need for regulation against the potential
efficiency, competition, and capital formation concerns of the
regulation. In the Commission's judgment, the cost of complying with
the proposed rules would not be so large as to significantly raise
barriers to entry or otherwise alter the competitive landscape of the
entities involved.
    As defined in proposed Rule 1000(a), a dissemination SCI event is
an SCI event that is a: systems compliance issue; systems intrusion; or
system disruption that results, or the SCI entity reasonably estimate
would result, in a significant harm or loss to market participants. If
the criteria for dissemination SCI events is set too low, the member or
participant dissemination requirements under proposed Regulation SCI
could be very costly.\649\ Therefore, the Commission carefully
considered tradeoffs in defining the term dissemination SCI event. On
the one hand, the definition should ensure that SCI events that have
significant impacts on the markets are captured as dissemination SCI
events.\650\ On the other hand, not every SCI event should be included.
There are higher costs associated with dealing with dissemination SCI
events as compared to SCI events that are not dissemination SCI events
due to the additional requirements relating to dissemination of
information to members or participants. Second, SCI entity members or
participants may be provided with unnecessary information if
information about too many SCI events that do not have significant
impact on the markets is disseminated to members or participants. If
there is excessive dissemination of insignificant events, truly
important events may get hidden among others that do not have the same
degree of significance or impact on the securities markets.\651\ SCI
entity members or participants also may not pay attention to
disseminated SCI events if an excessive number of insignificant events
are disseminated and notifications about SCI events may become routine.
The proposed definition of dissemination SCI event is an attempt to
balance these concerns.
---------------------------------------------------------------------------

    \649\ As noted above, an immediate notification SCI event
includes any systems disruption that the SCI entity reasonably
estimates would have a material impact on its operations or on
market participants, any systems compliance issue, or any systems
intrusion. See supra Section III.C.3.b. As with dissemination SCI
events, if the criteria for immediate notification SCI events is set
too low, SCI entities would incur additional costs in providing
immediate notification to the Commission.
    \650\ With respect to immediate Commission notification, the
Commission should be immediately notified of any systems disruption
that the SCI entity reasonably estimates would have a material
impact on its operations or on market participants, any systems
compliance issue, or any systems intrusion.
    \651\ Similarly, immediate Commission notification of only
immediate notification SCI events should help the Commission focus
its attention on SCI events that may potentially impact an SCI
entity's operations or market participants.
---------------------------------------------------------------------------

    Section III.B.1 discusses the definition of ``SCI ATS'' in proposed
Rule 1000(a). The proposal would replace the threshold for NMS stocks
of 20 percent or more of the average daily volume in any NMS stock. The
proposal bases the definition of SCI ATS on average daily dollar volume
and sets the threshold at five percent or more in any single NMS stock
and one-quarter percent of more in all NMS stocks, or one percent or
more in all NMS stocks. The proposal changes the threshold for non-NMS
stocks to at least five percent of the aggregate average daily dollar
volume from twenty percent of the average daily share volume. These
proposed thresholds reflect developments in equities markets that
resulted in a higher number of trading venues and less concentrated
trading, and are designed to ensure that the proposed rule is applied
to all ATSs that trade more than a limited amount of securities and for
which SCI events may cause significant impact on the overall market.
The main benefit of the proposed thresholds is to bring more ATSs into
the SCI ATS definition than currently subject to the systems safeguard
provisions of Rule 301(b)(6) of Regulation ATS, which in turn would
make them SCI entities. This would help ensure that SCI ATSs that trade
a certain amount of securities are covered by the proposed regulation.
The Commission recognizes the potential for a low threshold to
discourage automation and innovation but, as noted below, the
Commission has balanced the concerns regarding discouraging automation
and innovation against the need for regulation, and preliminarily
believes that innovation is unlikely to be hampered and automation is
likely to continue to increase. To that extent, the proposed rule uses
a two-prong approach for NMS stocks. The threshold is based on market
share in individual stocks. However, it is also required that the ATS
has a certain market share of the overall market in all NMS stocks to
prevent an ATS from being subject to proposed Regulation SCI for
meeting the five percent threshold in any single NMS stock for a micro-
cap stock, but not having significant market share in all NMS stocks.
As discussed above, the Commission believes that approximately 10 NMS
stock ATSs and two non-NMS stock ATSs would fall within the definition
of SCI ATS.\652\
---------------------------------------------------------------------------

    \652\ See supra Section III.B.1.
---------------------------------------------------------------------------

    For municipal and corporate debt securities, the proposal would
lower the threshold from 20 percent or more to five percent or more.
However, the proposal contemplates a two-prong approach considering
either average daily dollar volume or average daily transaction volume,
and exceeding the threshold in either one would qualify an ATS as an
SCI ATS. The use of the two metrics is intended to take into account
the fact that ATSs in the debt securities markets may handle primarily
retail trades (i.e., large transaction volume but small dollar volume)
or institutional-sized trades (i.e., large dollar volume but small
transaction volume).
    The proposed thresholds for municipal and corporate debt securities
are different from the proposed thresholds for NMS stocks. This
difference reflects the fact that, in the debt securities markets
(i.e., municipal securities and corporate debt securities), the degree
of automation and electronic trading is much lower than in the markets
for NMS stocks, which the Commission preliminarily believes may reduce
the need for more stringent rules and regulations. In addition, the
Commission preliminarily believes that the imposition of a threshold
lower than five percent on the current debt securities markets could
have the unintended effect of discouraging automation in these markets
and discouraging new entrants into these markets. Also, due to the
large number of issues outstanding in these debt securities markets,
trading volume may be extremely low in a given issue, but also may
fluctuate significantly from

day to day and issue to issue. Therefore, the thresholds for debt
securities consider aggregate volume instead of volume in an individual
issue. As discussed above, the Commission preliminarily believes that
three municipal securities and corporate debt securities ATSs would
fall within the definition of SCI ATS.\653\
---------------------------------------------------------------------------

    \653\ See id.
---------------------------------------------------------------------------

D. Request for Comment on Economic Analysis

    219. The Commission is sensitive to the potential economic effects,
including the costs and benefits, of proposed Regulation SCI. The
Commission has identified above certain costs and benefits associated
with the proposal and requests comment on all aspects of its
preliminary economic analysis.\654\ The Commission encourages
commenters to identify, discuss, analyze, and supply relevant data,
information, or statistics regarding any such costs or benefits. In
particular, the Commission seeks comment on the following:
---------------------------------------------------------------------------

    \654\ The Commission has also considered the views expressed in
comment letters submitted in connection with the Roundtable, as well
as the views expressed by Roundtable participants. See supra Section
I.C.
---------------------------------------------------------------------------

    220. Do commenters agree that the release provides a fair
representation of current practices and how those current practices
would change under proposed Regulation SCI? Why or why not? Please be
specific in your response regarding current practices and how they
would change under proposed Regulation SCI.
    221. Do commenters agree with the Commission's characterization of
the relevant markets in which SCI entities participate, as well as the
market failures identified with respect to each of the relevant
markets? Why or why not? Specifically, do commenters agree with the
identified level of competition in each of the relevant markets? Why or
why not?
    222. What is a typical market participant's general level of
expectation of how well the market operates? Do market participants
currently have all the information they need to make informed decisions
that manage their exposure to SCI events? If not, would proposed
Regulation SCI provide the needed information? Why or why not?
    223. Do commenters agree with the Commission's analysis of the
costs and benefits of each provision of proposed Regulation SCI,
including the definitions under proposed Rule 1000(a)? Why or why not?
    224. Do commenters believe that there are additional benefits or
costs that could be quantified or otherwise monetized? If so, please
identify these categories and, if possible, provide specific estimates
or data.
    225. Are there any additional benefits that may arise from proposed
Regulation SCI? Or are there benefits described above that would not
likely result from proposed Regulation SCI? If so, please explain these
benefits or lack of benefits in detail.
    226. Are there any additional costs that may arise from proposed
Regulation SCI? Are there any potential unintended consequences of
proposed Regulation SCI? Or are there costs described above that would
not likely result from proposed Regulation SCI? If so, please explain
these costs or lack of costs in detail.
    227. Do the types or extent of any anticipated benefits or costs
from proposed Regulation SCI differ between the different types of SCI
entities? For example, do potential benefits or costs differ with
respect to SCI SROs as compared to SCI ATSs? Please explain.
    228. Are there methods (including any suggested by Roundtable
panelists or commenters) by which the Commission could reduce the costs
imposed by Regulation SCI while still achieving the goals? Please
explain.
    229. Does the release appropriately describe the potential impacts
of proposed Regulation SCI on the promotion of efficiency, competition,
and capital formation? Why or why not?
    230. To the extent that there are reasonable alternatives to any of
the rules under proposed Regulation SCI, what are the potential costs
and benefits of those reasonable alternatives relative to the proposed
rules? What are the potential impacts on the promotion of efficiency,
competition, and capital formation of those reasonable alternatives?
For example, what would be the effect on the economic analysis of
requiring SCI entities to conduct an SCI review that requires
penetration testing annually? What would be the effect on the economic
analysis of requiring SCI entities to inform members and participants
of all SCI events? What would be the effect on the economic analysis of
requiring filing in a tagged data format (e.g., XML, XBRL, or another
structured data format that may be tagged)? What would be the effect on
the economic analysis of including broker-dealers, or a subset thereof,
in the definition of SCI entities?
    231. In addition, as noted above, the proposed requirement that an
SCI entity disseminate information relating to dissemination SCI events
to its members or participants is focused on disseminating information
to those who need, want, and can act on the information disseminated.
The Commission also preliminarily believes that this proposed
requirement could promote competition and capital formation. Are there
alternative mechanisms for achieving the Commission's goals while
promoting competition and capital formation? Are there costs associated
with this proposed approach that have not been considered? For example,
would the requirement to disseminate information to members or
participants about dissemination SCI events increase an SCI entity's
litigation costs, or cause an SCI entity to lose business (e.g., if
market participants misjudge the meaning of information disseminated
about dissemination SCI events)? Would the benefits of the proposed
information dissemination outweigh the costs? Why or why not? Please
explain.
    232. The Commission also generally requests comment on the
competitive or anticompetitive effects, as well as the efficiency and
capital formation effects, of proposed Regulation SCI on market
participants if the proposed rules are adopted as proposed. Commenters
should provide analysis and empirical data to support their views on
the competitive or anticompetitive effects, as well as the efficiency
and capital formation effects, of proposed Regulation SCI.
    233. Finally, as stated above, proposed Rule 1000(b)(1) would
require SCI entities to establish, maintain, and enforce written
policies and procedures, reasonably designed to ensure that their SCI
systems and, for purposes of security standards, SCI security systems,
have levels of capacity, integrity, resiliency, availability, and
security, adequate to maintain the SCI entity's operational capability
and promote the maintenance of fair and orderly markets. As discussed
above, the Commission is proposing that an SCI entity's policies and
procedures required by proposed Rule 1000(b)(1) be deemed to be
reasonably designed if they are consistent with current SCI industry
standards.\655\ However, the costs identified above may not fully
incorporate all of the costs of adhering to initial or future SCI
industry standards. For example, if a SCI industry standard is based on
the standards of NIST (which issues a number of the publications listed
in Table A), it could include additional requirements not otherwise
required in proposed Regulation SCI such as establishment of assurance-
related

controls (including, for example, conduct of integrity checks on
software and firmware components, or monitoring of established secure
configuration settings). Any additional requirements would likely
impose costs on SCI entities. Therefore, the Commission requests
comment on what benefits or costs, quantifiable or otherwise, could
potentially be imposed by the identification of SCI industry standards.
What are market participants' current level of compliance with the
industry standards contained in the publications listed in Table A?
What would be the costs to SCI entities (in addition to the cost of
adhering to current practice) of the Commission identifying examples of
industry standards? What would be the benefits? Please explain.
---------------------------------------------------------------------------

    \655\ Proposed SCI industry standards are contained in the
publications identified in Table A. See supra Section III.C.1.b.
---------------------------------------------------------------------------

VI. Consideration of Impact on the Economy

    For purposes of the Small Business Regulatory Enforcement Fairness
Act of 1996, or ``SBREFA,'' \656\ the Commission must advise OMB as to
whether proposed Regulation SCI constitutes a ``major'' rule. Under
SBREFA, a rule is considered ``major'' where, if adopted, it results or
is likely to result in: (1) An annual effect on the economy of $100
million or more (either in the form of an increase or decrease); (2) a
major increase in costs or prices for consumers or individual
industries; or (3) a significant adverse effect on competition,
investment or innovation.
---------------------------------------------------------------------------

    \656\ Public Law 104-121, Title II, 110 Stat. 857 (1996)
(codified in various sections of 5 U.S.C., 15 U.S.C. and as a note
to 5 U.S.C. 601).
---------------------------------------------------------------------------

    234. The Commission requests comment on the potential impact of
proposed Regulation SCI on the economy on an annual basis, on the costs
or prices for consumers or individual industries, and any potential
effect on competition, investment, or innovation. Commenters are
requested to provide empirical data and other factual support for their
views to the extent possible.

VII. Regulatory Flexibility Act Certification

    The Regulatory Flexibility Act (``RFA'') \657\ requires Federal
agencies, in promulgating rules, to consider the impact of those rules
on small entities. Section 603(a) \658\ of the Administrative Procedure
Act,\659\ as amended by the RFA, generally requires the Commission to
undertake a regulatory flexibility analysis of all proposed rules, or
proposed rule amendments, to determine the impact of such rulemaking on
``small entities.'' \660\ Section 605(b) of the RFA states that this
requirement shall not apply to any proposed rule or proposed rule
amendment, which if adopted, would not have significant economic impact
on a substantial number of small entities.
---------------------------------------------------------------------------

    \657\ 5 U.S.C. 601 et seq.
    \658\ 5 U.S.C. 603(a).
    \659\ 5 U.S.C. 551 et seq.
    \660\ Although Section 601(b) of the RFA defines the term
``small entity,'' the statute permits agencies to formulate their
own definitions. The Commission has adopted definitions for the term
``small entity'' for purposes of Commission rulemaking in accordance
with the RFA. Those definitions, as relevant to this proposed
rulemaking, are set forth in Rule 0-10, 17 CFR 240.0-10. See
Securities Exchange Act Release No. 18451 (January 28, 1982), 47 FR
5215 (February 4, 1982) (File No. AS-305).
---------------------------------------------------------------------------

A. SCI Entities

    Paragraph (a) of Rule 0-10 provides that for purposes of the RFA, a
small entity when used with reference to a ``person'' other than an
investment company means a person that, on the last day of its most
recent fiscal year, had total assets of $5 million or less.\661\ With
regard to broker-dealers, small entity means a broker or dealer that
had total capital of less than $500,000 on the date in the prior fiscal
year as of which its audited financial statements were prepared
pursuant to Rule 17a-5(d) under the Exchange Act, or, if not required
to file such statements, total capital of less than $500,000 on the
last business day of the preceding fiscal year (or in the time that it
has been in business, if shorter), and that is not affiliated with any
person that is not a small business or small organization.\662\ With
regard to clearing agencies, small entity means a clearing agency that
compared, cleared, and settled less than $500 million in securities
transactions during the preceding fiscal year (or in the time that it
has been in business, if shorter), had less than $200 million of funds
and securities in its custody or control at all times during the
preceding fiscal year (or in the time that it has been in business, if
shorter), and is not affiliated with any person (other than a natural
person) that is not a small business or small organization.\663\ With
regard to exchanges, a small entity is an exchange that has been exempt
from the reporting requirements of Rule 601 under Regulation NMS, and
is not affiliated with any person (other than a natural person) that is
not a small business or small organization.\664\ With regard to
securities information processors, a small entity is a securities
information processor that had gross revenue of less than $10 million
during the preceding year (or in the time it has been in business, if
shorter), provided service to fewer than 100 interrogation devices or
moving tickers at all times during the preceding fiscal year (or in the
time it has been in business, if shorter), and is not affiliated with
any person (that is not a natural person) that is not a small business
or small organization.\665\ Under the standards adopted by the Small
Business Administration (``SBA''), entities engaged in financial
investments and related activities are considered small entities if
they have $7 million or less in annual receipts.\666\
---------------------------------------------------------------------------

    \661\ See 17 CFR 240.0-10(a).
    \662\ See 17 CFR 240.0-10(c).
    \663\ See 17 CFR 240.0-10(d).
    \664\ See 17 CFR 240.0-10(e).
    \665\ See 17 CFR 240.0-10(g).
    \666\ See SBA's Table of Small Business Size Standards,
Subsector 523 and 13 CFR 121.201. Such entities include firms
engaged in investment banking and securities dealing, securities
brokerage, commodity contracts dealing, commodity contracts
brokerage, securities and commodity exchanges, miscellaneous
intermediation, portfolio management, investment advice, trust,
fiduciary and custody activities, and miscellaneous financial
investment activities.
---------------------------------------------------------------------------

    Based on the Commission's existing information about the entities
that will be subject to proposed Regulation SCI, the Commission
preliminarily believes that SCI entities that are self-regulatory
organizations (national securities exchanges, national securities
associations, registered clearing agencies, and the MSRB) or exempt
clearing agencies subject to ARP would not fall within the definition
of ``small entity'' as described above. With regard to plan processors,
which are defined under Rule 600(b)(55) of Regulation NMS to mean a
self-regulatory organization or securities information processor acting
as an exclusive processor in connection with the development,
implementation and/or operation of any facility contemplated by an
effective NMS plan,\667\ the Commission's definition of ``small
entity'' as it relates to self-regulatory organizations and securities
information processors would apply. The Commission preliminarily does
not believe that any plan processor would be a ``small entity'' as
defined above. With regard to SCI ATSs, because they are registered as
broker-dealers, the Commission's definition of ``small entity'' as it
relates to broker-dealers would apply. As stated above, the Commission
preliminarily believes that approximately 15 ATSs would satisfy the
definition of SCI ATSs and would be impacted by proposed Regulation
SCI.\668\ The Commission preliminarily does not believe that any of
these 15 SCI

ATSs would be a ``small entity'' as defined above.
---------------------------------------------------------------------------

    \667\ See 17 CFR 242.600(b)(55).
    \668\ See supra Section III.B.1, discussing the proposed
definition of SCI entity.
---------------------------------------------------------------------------

B. Certification

    For the foregoing reasons, the Commission certifies that proposed
Regulation SCI would not have a significant economic impact on a
substantial number of small entities for the purposes of the RFA.
    235. The Commission requests comment regarding this certification.
The Commission requests that commenters describe the nature of any
impact on small entities and provide empirical data to illustrate the
extent of the impact.

VIII. Statutory Authority and Text of Proposed Amendments

    Pursuant to the Exchange Act, 15 U.S.C. 78a et seq., and
particularly, Sections 2, 3, 5, 6, 11A, 15, 15A, 17, 17A, and 23(a)
thereof, 15 U.S.C. 78b, 78c, 78e, 78f, 78k-1, 78o, 78o-3, 78q, 78q-1,
and 78w(a), the Commission proposes to adopt Regulation SCI under the
Exchange Act and Form SCI under the Exchange Act, and to amend
Regulation ATS under the Exchange Act.

List of Subjects in 17 CFR Parts 242 and 249

    Securities, brokers, reporting and recordkeeping requirements.

    For the reasons stated in the preamble, the Commission is proposing
to amend title 17, chapter II of the Code of Federal Regulations as
follows:

PART 242--REGULATIONS M, SHO, ATS, AC, NMS AND SCI AND CUSTOMER
MARGIN REQUIREMENTS FOR SECURITY FUTURES

0
1a. The authority citation for part 242 continues to read as follows:

    Authority: 15 U.S.C. 77g, 77q(a), 77s(a), 78b, 78c, 78g(c)(2),
78i(a), 78j, 78k-1(c), 78l, 78m, 78n, 78o(b), 78o(c), 78o(g),
78q(a), 78q(b), 78q(h), 78w(a), 78dd-1, 78mm, 80a23, 80a-29, and
80a-37.

0
1b. The heading of part 242 is revised to read as set forth above.

Sec.  242.301--[Amended]

0
2. In Sec.  242.301, remove and reserve paragraph (b)(6).
0
3. Add an undesignated center heading and Sec.  242.1000 to read as
follows:

Regulation SCI--Systems Compliance and Integrity

Sec.  242.1000  Definitions and requirements for SCI entities

    (a) Definitions. For purposes of this section, the following
definitions shall apply:
    Dissemination SCI event means an SCI event that is a:
    (1) Systems compliance issue;
    (2) Systems intrusion; or
    (3) Systems disruption that results, or the SCI entity reasonably
estimates would result, in significant harm or loss to market
participants.
    Electronic signature has the meaning set forth in Sec.  240.19b-
4(j) of this chapter.
    Exempt clearing agency subject to ARP means an entity that has
received from the Commission an exemption from registration as a
clearing agency under Section 17A of the Act, and whose exemption
contains conditions that relate to the Commission's Automation Review
Policies (ARP), or any Commission regulation that supersedes or
replaces such policies.
    Material systems change means a change to one or more:
    (1) SCI systems of an SCI entity that:
    (i) Materially affects the existing capacity, integrity,
resiliency, availability, or security of such systems;
    (ii) Relies upon materially new or different technology;
    (iii) Provides a new material service or material function; or
    (iv) Otherwise materially affects the operations of the SCI entity;
or
    (2) SCI security systems of an SCI entity that materially affects
the existing security of such systems.
    Plan processor has the meaning set forth in Sec.  242.600(b)(55).
    Responsible SCI personnel means, for a particular SCI system or SCI
security system impacted by an SCI event, any personnel, whether an
employee or agent, of the SCI entity having responsibility for such
system.
    SCI alternative trading system or SCI ATS means an alternative
trading system, as defined in Sec.  242.300(a), which during at least
four of the preceding six calendar months, had:
    (1) With respect to NMS stocks:
    (i) Five percent (5%) or more in any single NMS stock, and one-
quarter percent (0.25%) or more in all NMS stocks, of the average daily
dollar volume reported by an effective transaction reporting plan; or
    (ii) One percent (1%) or more in all NMS stocks of the average
daily dollar volume reported by an effective transaction reporting
plan;
    (2) With respect to equity securities that are not NMS stocks and
for which transactions are reported to a self-regulatory organization,
five percent (5%) or more of the average daily dollar volume as
calculated by the self-regulatory organization to which such
transactions are reported;
    (3) With respect to municipal securities, five percent (5%) or more
of either:
    (i) The average daily dollar volume traded in the United States; or
    (ii) The average daily transaction volume traded in the United
States; or
    (4) With respect to corporate debt securities, five percent (5%) or
more of either:
    (i) The average daily dollar volume traded in the United States; or
    (ii) The average daily transaction volume traded in the United
States.
    SCI entity means an SCI self-regulatory organization, SCI
alternative trading system, plan processor, or exempt clearing agency
subject to ARP.
    SCI event means an event at an SCI entity that constitutes:
    (1) A systems disruption;
    (2) A systems compliance issue; or
    (3) A systems intrusion.
    SCI review means a review, following established procedures and
standards, that is performed by objective personnel having appropriate
experience in conducting reviews of SCI systems and SCI security
systems, and which review contains:
    (1) A risk assessment with respect to such systems of an SCI
entity; and
    (2) An assessment of internal control design and effectiveness to
include logical and physical security controls, development processes,
and information technology governance, consistent with industry
standards; provided however, that such review shall include penetration
test reviews of the network, firewalls, development, testing, and
production systems at a frequency of not less than once every three
years.
    SCI security systems means any systems that share network resources
with SCI systems that, if breached, would be reasonably likely to pose
a security threat to SCI systems.
    SCI self-regulatory organization or SCI SRO means any national
securities exchange, registered securities association, or registered
clearing agency, or the Municipal Securities Rulemaking Board; provided
however, that for purposes of this section, the term SCI self-
regulatory organization shall not include an exchange that is notice
registered with the Commission pursuant to 15 U.S.C. 78f(g) or a
limited purpose national securities association registered with the
Commission pursuant to 15 U.S.C. 78o-3(k).
    SCI systems means all computer, network, electronic, technical,
automated, or similar systems of, or operated by or on behalf of, an
SCI entity, whether in production, development, or testing, that
directly support trading, clearance and

settlement, order routing, market data, regulation, or surveillance.
    Systems compliance issue means an event at an SCI entity that has
caused any SCI system of such entity to operate in a manner that does
not comply with the federal securities laws and rules and regulations
thereunder or the entity's rules or governing documents, as applicable.
    Systems disruption means an event in an SCI entity's SCI systems
that results in:
    (1) A failure to maintain service level agreements or constraints;
    (2) A disruption of normal operations, including switchover to
back-up equipment with near-term recovery of primary hardware unlikely;
    (3) A loss of use of any such system;
    (4) A loss of transaction or clearance and settlement data;
    (5) Significant back-ups or delays in processing;
    (6) A significant diminution of ability to disseminate timely and
accurate market data; or
    (7) A queuing of data between system components or queuing of
messages to or from customers of such duration that normal service
delivery is affected.
    Systems intrusion means any unauthorized entry into the SCI systems
or SCI security systems of an SCI entity.
    (b) Requirements for SCI entities. Each SCI entity shall:
    (1) Capacity, Integrity, Resiliency, Availability, and Security.
Establish, maintain, and enforce written policies and procedures
reasonably designed to ensure that its SCI systems and, for purposes of
security standards, SCI security systems, have levels of capacity,
integrity, resiliency, availability, and security, adequate to maintain
the SCI entity's operational capability and promote the maintenance of
fair and orderly markets.
    (i) Such policies and procedures shall include, at a minimum:
    (A) The establishment of reasonable current and future capacity
planning estimates;
    (B) Periodic capacity stress tests of such systems to determine
their ability to process transactions in an accurate, timely, and
efficient manner;
    (C) A program to review and keep current systems development and
testing methodology for such systems;
    (D) Regular reviews and testing of such systems, including backup
systems, to identify vulnerabilities pertaining to internal and
external threats, physical hazards, and natural or manmade disasters;
    (E) Business continuity and disaster recovery plans that include
maintaining backup and recovery capabilities sufficiently resilient and
geographically diverse to ensure next business day resumption of
trading and two-hour resumption of clearance and settlement services
following a wide-scale disruption; and
    (F) Standards that result in such systems being designed,
developed, tested, maintained, operated, and surveilled in a manner
that facilitates the successful collection, processing, and
dissemination of market data; and
    (ii) For purposes of this paragraph (b)(1), such policies and
procedures shall be deemed to be reasonably designed if they are
consistent with current SCI industry standards, which shall be:
    (A) Comprised of information technology practices that are widely
available for free to information technology professionals in the
financial sector; and
    (B) Issued by an authoritative body that is a U.S. governmental
entity or agency, association of U.S. governmental entities or
agencies, or widely recognized organization. Compliance with such
current SCI industry standards, however, shall not be the exclusive
means to comply with the requirements of this paragraph (b)(1).
    (2) Systems Compliance. (i) Establish, maintain, and enforce
written policies and procedures reasonably designed to ensure that its
SCI systems operate in the manner intended, including in a manner that
complies with the federal securities laws and rules and regulations
thereunder and the entity's rules and governing documents, as
applicable.
    (ii) Safe harbor from liability for SCI entities. An SCI entity
shall be deemed not to have violated paragraph (b)(2)(i) of this
section if:
    (A) The SCI entity has established and maintained policies and
procedures reasonably designed to provide for:
    (1) Testing of all such systems and any changes to such systems
prior to implementation;
    (2) Periodic testing of all such systems and any changes to such
systems after their implementation;
    (3) A system of internal controls over changes to such systems;
    (4) Ongoing monitoring of the functionality of such systems to
detect whether they are operating in the manner intended;
    (5) Assessments of SCI systems compliance performed by personnel
familiar with applicable federal securities laws and rules and
regulations thereunder and the SCI entity's rules and governing
documents, as applicable; and
    (6) Review by regulatory personnel of SCI systems design, changes,
testing, and controls to prevent, detect, and address actions that do
not comply with applicable federal securities laws and rules and
regulations thereunder and the SCI entity's rules and governing
documents, as applicable;
    (B) The SCI entity has established and maintained a system for
applying such policies and procedures which would reasonably be
expected to prevent and detect, insofar as practicable, any violations
of such policies and procedures by the SCI entity or any person
employed by the SCI entity, and
    (C) The SCI entity:
    (1) Has reasonably discharged the duties and obligations incumbent
upon the SCI entity by such policies and procedures; and
    (2) Was without reasonable cause to believe that such policies and
procedures were not being complied with in any material respect.
    (iii) Safe harbor from liability for individuals. A person employed
by an SCI entity shall be deemed not to have aided, abetted, counseled,
commanded, caused, induced, or procured the violation by any other
person of paragraph (b)(2)(i) of this section if the person employed by
the SCI entity:
    (A) Has reasonably discharged the duties and obligations incumbent
upon such person by such policies and procedures; and
    (B) Was without reasonable cause to believe that such policies and
procedures were not being complied with in any material respect.
    (3) Corrective Action. Upon any responsible SCI personnel becoming
aware of an SCI event, begin to take appropriate corrective action
which shall include, at a minimum, mitigating potential harm to
investors and market integrity resulting from the SCI event and
devoting adequate resources to remedy the SCI event as soon as
reasonably practicable.
    (4) Commission Notification. (i) Upon any responsible SCI personnel
becoming aware of a systems disruption that the SCI entity reasonably
estimates would have a material impact on its operations or on market
participants, any systems compliance issue, or any systems intrusion,
notify the Commission of such SCI event.
    (ii) Within 24 hours of any responsible SCI personnel becoming
aware of any SCI event, submit a written notification pertaining to
such SCI event to the Commission.
    (iii) Until such time as the SCI event is resolved, submit written
updates pertaining to such SCI event to the Commission on a regular
basis, or at

such frequency as reasonably requested by a representative of the
Commission.
    (iv) Any written notification to the Commission made pursuant to
paragraphs (b)(4)(ii) or (b)(4)(iii) of this section shall be made
electronically on Form SCI (Sec.  249.1900 of this chapter), and shall
include all information as prescribed in Form SCI and the instructions
thereto, including:
    (A) For a notification made pursuant to paragraph (b)(4)(ii) of
this section:
    (1) All pertinent information known about an SCI event, including:
a detailed description of the SCI event; the SCI entity's current
assessment of the types and number of market participants potentially
affected by the SCI event; the potential impact of the SCI event on the
market; and the SCI entity's current assessment of the SCI event,
including a discussion of the determination of whether the SCI event is
a dissemination SCI event or not; and
    (2) To the extent available as of the time of the notification: A
description of the steps the SCI entity is taking, or plans to take,
with respect to the SCI event; the time the SCI event was resolved or
timeframe within which the SCI event is expected to be resolved; a
description of the SCI entity's rule(s) and/or governing document(s),
as applicable, that relate to the SCI event; and an analysis of parties
that may have experienced a loss, whether monetary or otherwise, due to
the SCI event, the number of such parties, and an estimate of the
aggregate amount of such loss.
    (B) For a notification made pursuant to paragraph (b)(4)(iii) of
this section, an update of any information previously provided
regarding the SCI event, including any information required by
paragraph (b)(4)(iv)(A)(2) of this section which was not available at
the time of submission of the notification made pursuant to paragraph
(b)(4)(ii) of this section. Subsequent updates shall update any
information provided regarding the SCI event until the SCI event is
resolved.
    (C) For notifications made pursuant to paragraphs (b)(4)(ii) or
(b)(4)(iii) of this section, attach a copy of any information
disseminated to date regarding the SCI event to its members or
participants or on the SCI entity's publicly available Web site.
    (5) Dissemination of information to members or participants. (i)(A)
Promptly after any responsible SCI personnel becomes aware of a
dissemination SCI event other than a systems intrusion, disseminate to
its members or participants the following information about such SCI
event:
    (1) The systems affected by the SCI event; and
    (2) A summary description of the SCI event; and
    (B) When known, further disseminate to its members or participants:
    (1) A detailed description of the SCI event;
    (2) The SCI entity's current assessment of the types and number of
market participants potentially affected by the SCI event; and
    (3) A description of the progress of its corrective action for the
SCI event and when the SCI event has been or is expected to be
resolved; and
    (C) Provide regular updates to members or participants of any
information required to be disseminated under paragraphs (b)(5)(i)(A)
and (b)(5)(i)(B) of this section.
    (ii) Promptly after any responsible SCI personnel becomes aware of
a systems intrusion, disseminate to its members or participants a
summary description of the systems intrusion, including a description
of the corrective action taken by the SCI entity and when the systems
intrusion has been or is expected to be resolved, unless the SCI entity
determines that dissemination of such information would likely
compromise the security of the SCI entity's SCI systems or SCI security
systems, or an investigation of the systems intrusion, and documents
the reasons for such determination.
    (6) Material Systems Changes. (i) Absent exigent circumstances,
notify the Commission in writing at least 30 calendar days before
implementation of any planned material systems change, including a
description of the planned material systems change as well as the
expected dates of commencement and completion of implementation of such
changes.
    (ii) If exigent circumstances exist, or if the information
previously provided to the Commission regarding any planned material
systems change has become materially inaccurate, notify the Commission,
either orally or in writing, with any oral notification to be
memorialized within 24 hours after such oral notification by a written
notification, as early as reasonably practicable.
    (iii) A written notification to the Commission made pursuant to
this paragraph (b)(6) shall be made electronically on Form SCI (Sec.
249.1900 of this chapter), and shall include all information as
prescribed in Form SCI and the instructions thereto.
    (7) SCI Review. Conduct an SCI review of the SCI entity's
compliance with Regulation SCI not less than once each calendar year,
and submit a report of the SCI review to senior management of the SCI
entity for review no more than 30 calendar days after completion of
such SCI review.
    (8) Reports. Submit to the Commission:
    (i) A report of the SCI review required by paragraph (b)(7) of this
section, together with any response by senior management, within 60
calendar days after its submission to senior management of the SCI
entity;
    (ii) A report, within 30 calendar days after the end of June and
December of each year, containing a summary description of the progress
of any material systems change during the six-month period ending on
June 30 or December 31, as the case may be, and the date, or expected
date, of completion of implementation of such changes; and
    (iii) Any reports to be filed with the Commission pursuant to this
paragraph (b)(8) shall be filed electronically on Form SCI (Sec.
249.1900 of this chapter), and shall include all information as
prescribed in Form SCI and the instructions thereto.
    (9) SCI Entity Business Continuity and Disaster Recovery Plans
Testing Requirements for Members or Participants. With respect to an
SCI entity's business continuity and disaster recovery plans, including
its backup systems:
    (i) Require participation by designated members or participants in
scheduled functional and performance testing of the operation of such
plans, in the manner and frequency as specified by the SCI entity, at
least once every 12 months; and
    (ii) Coordinate the testing of such plans on an industry- or
sector-wide basis with other SCI entities.
    (iii) Each SCI entity shall designate those members or participants
it deems necessary, for the maintenance of fair and orderly markets in
the event of the activation of its business continuity and disaster
recovery plans, to participate in the testing of such plans pursuant to
paragraph (i) of this section. Each SCI entity shall notify the
Commission of such designations and its standards for designation, and
promptly update such notification after any changes to its designations
or standards. A written notification made pursuant to this paragraph
(b)(9)(iii) shall be made electronically on Form SCI (Sec.  249.1900 of
this chapter), and shall include all information as prescribed in Form
SCI and the instructions thereto.
    (c) Recordkeeping Requirements Related to Compliance with
Regulation SCI. (1) An SCI SRO shall make, keep, and preserve all
documents relating to its compliance with Regulation SCI as

prescribed in Sec.  240.17a-1 of this chapter.
    (2) An SCI entity that is not an SCI SRO shall:
    (i) Make, keep, and preserve at least one copy of all documents,
including correspondence, memoranda, papers, books, notices, accounts,
and other such records, relating to its compliance with Regulation SCI,
including, but not limited to, records relating to any changes to its
SCI systems and SCI security systems;
    (ii) Keep all such documents for a period of not less than five
years, the first two years in a place that is readily accessible to the
Commission or its representatives for inspection and examination; and
    (iii) Upon request of any representative of the Commission,
promptly furnish to the possession of such representative copies of any
documents required to be kept and preserved by it pursuant to
paragraphs (c)(2)(i) and (c)(2)(ii) of this section.
    (3) Upon or immediately prior to ceasing to do business or ceasing
to be registered under the Securities Exchange Act of 1934, an SCI
entity shall take all necessary action to ensure that the records
required to be made, kept, and preserved by this section shall be
accessible to the Commission and its representatives in the manner
required by this section and for the remainder of the period required
by this section.
    (d) Electronic Submission. (1) Except with respect to notifications
to the Commission made pursuant to paragraph (b)(4)(i) of this section
or oral notifications to the Commission made pursuant to paragraph
(b)(6)(ii) of this section, any notification, review, description,
analysis, or report to the Commission required under this rule shall be
submitted electronically on Form SCI (Sec.  249.1900 of this chapter)
and shall contain an electronic signature; and
    (2) The signatory to an electronically submitted Form SCI shall
manually sign a signature page or document, in the manner prescribed by
Form SCI, authenticating, acknowledging, or otherwise adopting his or
her signature that appears in typed form within the electronic filing.
Such document shall be executed before or at the time Form SCI is
electronically submitted and shall be retained by the SCI entity in
accordance with paragraph (c) of this section.
    (e) Requirements for Service Bureaus. If records required to be
filed or kept by an SCI entity under this rule are prepared or
maintained by a service bureau or other recordkeeping service on behalf
of the SCI entity, the SCI entity shall ensure that the records are
available for review by the Commission and its representatives by
submitting a written undertaking, in a form acceptable to the
Commission, by such service bureau or other recordkeeping service,
signed by a duly authorized person at such service bureau or other
recordkeeping service. Such a written undertaking shall include an
agreement by the service bureau to permit the Commission and its
representatives to examine such records at any time or from time to
time during business hours, and to promptly furnish to the Commission
and its representatives true, correct, and current electronic files in
a form acceptable to the Commission or its representatives or hard
copies of any or all or any part of such records, upon request,
periodically, or continuously and, in any case, within the same time
periods as would apply to the SCI entity for such records. The
preparation or maintenance of records by a service bureau or other
recordkeeping service shall not relieve an SCI entity from its
obligation to prepare, maintain, and provide the Commission and its
representatives access to such records.
    (f) Access. Each SCI entity shall provide Commission
representatives reasonable access to its SCI systems and SCI security
systems to allow Commission representatives to assess the SCI entity's
compliance with this rule.

PART 249--FORMS, SECURITIES EXCHANGE ACT OF 1934

0
4. The general authority citation for part 249 continues to read in
part as follows:

    Authority: 15 U.S.C. 78a et seq. and 7201 et seq.; 12 U.S.C.
5461 et seq.; and 18 U.S.C. 1350, unless otherwise noted.
* * * * *
0
5. Add subpart T, consisting of Sec.  249.1900, to read as follows:

Subpart T--Form SCI, for filing notices and reports as required by
Regulation SCI.

Sec.  249.1900  Form SCI, for filing notices and reports as required by
Regulation SCI.

    Form SCI shall be used to file notice and reports as required by
Sec.  242.1000 of this chapter.

    Note: The text of Form SCI does not, and the amendments will
not, appear in the Code of Federal Regulations.

General Instructions for Form SCI

A. Use of the Form

    Except with respect to notifications to the Commission made
pursuant to proposed Rule 1000(b)(4)(i) or oral notifications to the
Commission made pursuant to proposed Rule 1000(b)(6)(ii), all
notifications and reports required to be submitted pursuant to Rule
1000 of Regulation SCI under the Securities Exchange Act of 1934
(``Act'') shall be filed in an electronic format through an electronic
form filing system (``EFFS''), a secure Web site operated by the
Securities and Exchange Commission (``Commission'').

B. Need for Careful Preparation of the Completed Form, Including
Exhibits

    This form, including the exhibits, is intended to elicit
information necessary for Commission staff to work with SCI self-
regulatory organizations, SCI alternative trading systems, plan
processors, and exempt clearing agencies subject to ARP (collectively,
``SCI entities'') to ensure the capacity, integrity, resiliency,
availability, and security of their automated systems. An SCI entity
must provide all the information required by the form, including the
exhibits, and must present the information in a clear and
comprehensible manner. Form SCI shall not be considered filed unless it
complies with applicable requirements.

C. When To Use the Form

    Form SCI is comprised of five distinct types of filings to the
Commission required by Rule 1000(b). The first type of filings is
``(b)(4)'' filings for notifications regarding systems disruptions,
systems compliance issues, or systems intrusions (collectively, ``SCI
events''). The other four types of filings are: ``(b)(6)'' filings for
notifications of planned material systems changes; ``(b)(8)(i)''
filings for reports of SCI reviews; ``(b)(8)(ii)'' filings for semi-
annual reports of material systems changes; and ``(b)(9)(iii)'' filings
for notifications of designations and standards under Rule 1000(b)(9).
In filling out Form SCI, an SCI entity shall select the type of filing
and provide all information required under Rule 1000(b) specific to
that type of filing.
Notifications for SCI Events
    For (b)(4) filings, an SCI entity must notify the Commission using
Form SCI by selecting the appropriate box in Section 1 and filling out
all information required by the form. Initial notifications of an SCI
event require the inclusion of an Exhibit 1 and must be submitted no
later than 24 hours after any responsible SCI personnel becomes aware
of the SCI event. For the initial notification of an SCI event, the SCI
entity must include the information required by each item under Part 1
of

Exhibit 1. To the extent available as of the time of the initial
notification, the SCI entity must also include the information listed
under the items under Part 2 of Exhibit 1.
    If the SCI entity has not provided all the information required by
Part 2 of Exhibit 1, any information required by Exhibit 1 requires
updating, or the SCI event has not been resolved, the SCI entity must
file one or more updates regarding the SCI event by attaching an
Exhibit 2. Such updates must be submitted on a regular basis, or at
such frequency as reasonably requested by a representative of the
Commission. The notification to the Commission regarding an SCI event
is not considered complete until all information required by Exhibit 1,
including all information required by Part 2 of Exhibit 1, has been
submitted to the Commission.
    For each SCI event, an SCI entity must also attach an Exhibit 3
(which may be included with an Exhibit 1 or Exhibit 2, as the case may
be) for any information disseminated regarding the SCI event to its
members or participants or on the SCI entity's publicly available Web
site.
Other Notifications and Reports
    For (b)(6) filings, absent exigent circumstances, an SCI entity
must notify the Commission using Form SCI at least 30 calendar days
before implementation of any planned material systems change. If
exigent circumstances exist, or if the information previously provided
to the Commission regarding any planned material systems change has
become materially inaccurate, an SCI entity must notify the Commission,
either orally or in writing, with any oral notification to be
memorialized within 24 hours after such oral notification by a written
notification, as early as reasonably practicable. For (b)(6) filings,
the SCI entity must select the appropriate box in Section 2 and fill
out all information required by the form, including Exhibit 4. Exhibit
4 must include a description of the planned material systems change as
well as the expected dates of commencement and completion of
implementation of such change.
    For (b)(8)(i) filings, an SCI entity must submit its report of its
SCI review to the Commission using Form SCI. A (b)(8)(i) filing must be
submitted to the Commission within 60 calendar days after the SCI
review has been submitted to senior management of the SCI entity. The
SCI entity must select the appropriate box in Section 2 and fill out
all information required by the form, including Exhibit 5. Exhibit 5
must include the report of the SCI review, together with any response
by senior management.
    For (b)(8)(ii) filings, an SCI entity must submit its semi-annual
report of material systems changes to the Commission using Form SCI. A
(b)(8)(ii) filing must be submitted to the Commission within 30
calendar days after the end of June and December of each year. The SCI
entity must select the appropriate box in Section 2 and fill out all
information required by the form, including Exhibit 6. Exhibit 6 must
include a report with a summary description of the progress of any
material systems change during the six-month period ending on June 30
or December 31, as the case may be, and the date, or expected date, of
completion of implementation of such changes.
    For (b)(9) filings, an SCI entity must notify the Commission of its
designations and standards under Rule 1000(b)(9). The SCI entity must
select the appropriate box in Section 2 and fill out all information
required by the form, including Exhibit 7. Exhibit 7 must include the
SCI entity's standards for designating members or participants that it
deems necessary, for the maintenance of fair and orderly markets in the
event of activation of its business continuity and disaster recovery
plans, to participate in the testing of such plans pursuant to Rule
1000(b)(9)(i), as well as the SCI entity's list of designated members
or participants. If an SCI entity changes its designations or
standards, it must promptly notify the Commission of such changes on
Exhibit 7.

D. Documents Comprising the Completed Form

    The completed form filed with the Commission shall consist of Form
SCI, responses to all applicable items, and any exhibits required in
connection with the filing. Each filing shall be marked on Form SCI
with the initials of the SCI entity, the four-digit year, and the
number of the filing for the year.

E. Contact Information; Signature; and Filing of the Completed Form

    Each time an SCI entity submits a filing to the Commission on Form
SCI, the SCI entity must provide the contact information required by
Section 4 of Form SCI. The contact information for systems personnel,
regulatory personnel, and a senior officer is required. Space for
additional contact information, if appropriate, is also provided.
    All notifications and reports required to be submitted through Form
SCI shall be filed through the EFFS. In order to file Form SCI through
the EFFS, SCI entities must request access to the Commission's External
Application Server by completing a request for an external account user
ID and password. Initial requests will be received by contacting (202)
551-5777. An email will be sent to the requestor that will provide a
link to a secure Web site where basic profile information will be
requested.
    A duly authorized individual of the SCI entity shall electronically
sign the completed Form SCI as indicated in Section 5 of the form. In
addition, a duly authorized individual of the SCI entity shall manually
sign one copy of the completed Form SCI, and the manually signed
signature page shall be preserved pursuant to the requirements of Rule
1000(c).

F. Paperwork Reduction Act Disclosure

    This collection of information will be reviewed by the Office of
Management and Budget in accordance with the clearance requirements of
44 U.S.C. 3507. An agency may not conduct or sponsor, and a person is
not required to respond to, a collection of information unless it
displays a currently valid control number. The Commission estimates
that the average burden to respond to Form SCI will be between one and
sixty hours depending upon the purpose for which the form is being
filed. Any member of the public may direct to the Commission any
comments concerning the accuracy of this burden estimate and any
suggestions for reducing this burden.
    Except with respect to notifications to the Commission made
pursuant to proposed Rule 1000(b)(4)(i) or oral notifications to the
Commission made pursuant to proposed Rule 1000(b)(6)(ii), it is
mandatory that an SCI entity file all notifications, updates, and
reports required by Regulation SCI using Form SCI. The Commission will
treat as confidential all information collected pursuant to Form SCI.
Subject to the provisions of the Freedom of Information Act, 5 U.S.C.
522 (``FOIA''), and the Commission's rules thereunder (17 CFR
200.80(b)(4)(iii)), the Commission does not generally publish or make
available information contained in any reports, summaries, analyses,
letters, or memoranda arising out of, in anticipation of, or in
connection with an examination or inspection of the books and records
of any person or any other investigation.

G. Exhibits

    List of exhibits to be filed, as applicable:
    Exhibit 1. Notification of SCI Event. The SCI entity shall include:

    Part 1: All pertinent information known about the SCI event,
including: (1) A detailed description of the SCI event; (2) the SCI
entity's current assessment of the types and number of market
participants potentially affected by the SCI event; (3) the potential
impact of the SCI event on the market; and (4) the SCI entity's current
assessment of the SCI event, including a discussion of the
determination of whether the SCI event is a dissemination SCI event or
not.
    Part 2: To the extent available as of the time of the notification:
(1) A description of the steps the SCI entity is taking, or plans to
take, with respect to the SCI event; (2) the time the SCI event was
resolved or timeframe within which the SCI event is expected to be
resolved; (3) a description of the SCI entity's rule(s) and/or
governing document(s), as applicable, that relate to the SCI event; and
(4) an analysis of parties that may have experienced a loss, whether
monetary or otherwise, due to the SCI event, the number of such
parties, and an estimate of the aggregate amount of such loss.
    Exhibit 2. Update Notification of SCI Event. The SCI entity shall
provide an update of any information previously provided regarding an
SCI event on Exhibit 1, including any information under Part 2 of
Exhibit 1 which was not available at the time of submission of Exhibit
1. Subsequent updates shall update any information provided regarding
the SCI event until the SCI event is resolved.
    Exhibit 3. Information Disseminated. The SCI entity shall attach a
copy in pdf or html format of any information disseminated to date
regarding the SCI event to its members or participants or on the SCI
entity's publicly available Web site.
    Exhibit 4. Notification of Planned Material Systems Change. The SCI
entity shall, absent exigent circumstances, notify the Commission in
writing at least 30 calendar days before implementation of any planned
material systems change, including a description of the planned
material systems change as well as the expected dates of commencement
and completion of implementation of such changes. If exigent
circumstances exist, or if the information previously provided to the
Commission regarding any planned material systems change has become
materially inaccurate, the SCI entity shall notify the Commission,
either orally or in writing, with any oral notification to be
memorialized within 24 hours after such oral notification by a written
notification on Form SCI, as early as reasonably practicable.
    Exhibit 5. Report of SCI Review. Within 60 calendars days after its
submission to senior management of the SCI entity, the SCI entity shall
attach the report of the SCI review of the SCI entity's compliance with
Regulation SCI, together with any response by senior management.
    Exhibit 6. Semi-Annual Report of Material Systems Changes. Within
30 calendar days after the end June and December of each year, the SCI
entity shall attach the report containing a summary description of the
progress of any material systems change during the six-month period
ending on June 30 or December 31, as the case may be, and the date, or
expected date, of completion of implementation of such changes.
    Exhibit 7. Notification of Designations and Standards under Rule
1000(b)(9). The SCI entity shall attach: (1) Its standards for
designating members or participants it deems necessary, for the
maintenance of fair and orderly markets in the event of the activation
of its business continuity and disaster recovery plans, to participate
in the testing of such plans pursuant to Rule 1000(b)(9)(i); and (2) a
list of the designated members or participants, including the name and
address of such members or participants.

H. Explanation of Terms

Dissemination SCI Event means an SCI event that is a: (1) Systems
compliance issue; (2) systems intrusion; or (3) systems disruption that
results, or the SCI entity reasonably estimates would result, in
significant harm or loss to market participants.
Material Systems Change means a change to one or more: (1) SCI systems
of an SCI entity that: (i) Materially affects the existing capacity,
integrity, resiliency, availability, or security of such systems; (ii)
relies upon materially new or different technology; (iii) provides a
new material service or material function; or (iv) otherwise materially
affects the operations of the SCI entity; or (2) SCI security systems
of an SCI entity that materially affects the existing security of such
systems.
Responsible SCI personnel means, for a particular SCI system or SCI
security system impacted by an SCI event, any personnel, whether an
employee or agent, of the SCI entity having responsibility for such
system.
SCI entity means an SCI self-regulatory organization, SCI alternative
trading system, plan processor, or exempt clearing agency subject to
ARP.
SCI event means an event at an SCI entity that constitutes: (1) A
systems disruption; (2) a systems compliance issue; or (3) a systems
intrusion.
Systems Compliance Issue means an event at an SCI entity that has
caused any SCI system of such entity to operate in a manner that does
not comply with the federal securities laws and rules and regulations
thereunder or the entity's rules or governing documents, as applicable.
Systems Disruption means an event in an SCI entity's SCI systems or
procedures that results in: (1) A failure to maintain service level
agreements or constraints; (2) a disruption of normal operations,
including switchover to back-up equipment with near-term recovery of
primary hardware unlikely; (3) a loss of use of any such system; (4) a
loss of transaction or clearance and settlement data; (5) significant
back-ups or delays in processing; (6) a significant diminution of
ability to disseminate timely and accurate market data; or (7) a
queuing of data between system components or queuing of messages to or
from customers of such duration that normal service delivery is
affected.
Systems Intrusion means any unauthorized entry into the SCI systems or
SCI security systems of the SCI entity.
[See attachment--proposed Form SCI]
BILLING CODE P

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    Dated: March 8, 2013.

    By the Commission.
Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2013-05888 Filed 3-22-13; 8:45 am]
BILLING CODE C


Stakeholder Meeting with The Sherwin-Williams Company, for Industrial Surface Coating of Plastic Parts for Business Machines (NSPS Subpart TTT)
Date
December 7, 2021
Subject
Data collection
Stakeholder
Steve Kerr, of The Sherwin-Williams Company.
EPA in attendance
Lisa Sutton
ERG in attendance
Bryan Lange

Mission:
The Clean Air Act (CAA) section 111(b)(1)(B) requires the EPA to "at least every 8 years review and, if appropriate, revise" New Source Performance Standards (NSPS). We are asking for your help as we comply with this CAA requirement for the NSPS Subpart TTT (Surface Coating of Plastic Parts for Business Machines). Our goal is to improve the 1988 rule and look for information on developments in VOC pollution control (e.g., new add-on control technologies, new work practices or operational procedure). Just as important is understanding the business trends, specifically is a population of facilities in the U.S. that are actively painting plastic parts for business machines or has molding improved such that it rarely done.
First note, is that the reg. text defines a business machine in 40 CFR 60.721 as a device that uses electronic or mechanical methods to process information, perform calculations, print or copy information, or convert sound into electrical impulses for transmission and six (6) SIC codes are listed. It is an open question what equipment should be included in today's definition of business machines (e.g., grocery store scanners, ATM machines).
3572  -  Typewriters
3573  -  Electronic computing devices
3574  -  Calculating and accounting machines
3661  -  Telephone and telegraph equipment
3579  -  Office machines, not elsewhere classified
3861  -  Photocopy machines, a subcategory of products classified as photographic equipment

The original NSPS Subpart TTT evaluated what controls were available and then did an environmental benefit analysis to determine if control costs were reasonable. Those costs did not represent a particular plant but were based on models.
This NSPS Subpart TTT review will address business machine coating lines that come on-line after June 1, 2022 (i.e., the target proposal date specified in the consent decree). EPA will identify the best performer among the existing facilities that are currently subject to the NSPS (promulgated in 1988). EPA will also look at other available controls and costs to determine if tighter standards are appropriate. Cost calculations will likely be based on new business machine coating lines at model facilities.
NSPSs apply to all sources regardless of size. Conversely, NESHAPs (e.g., Part 63 Subpart PPPP for plastic parts) apply only to major HAP sources. Preliminary research shows the Subpart TTT source category mainly includes facilities that are area (non-major) sources of HAP.
The schedule is set by the consent decree. Specifically, the proposal must be signed by June 1, 2022. EPA hopes to identify the population of existing facilities by the end of 2021.
Data collection, to date:
EPA got your name and number from Frank Bumgarner with Mack Molding in Statesville, NC--a job shop with NSPS subpart TTT included in their air permit.
Legitimacy:
Steve Kerr has been with Sherwin-Williams (by way of Valspar) for 22 years, starting in a health safety & environmental role and then in a product stewardship role for the performance coating group (e.g., general industrial coating, electronic).
Sherwin-Williams staff were largely unaware of this NSPS Subpart TTT regulation.
EPA Questions:
 Frank Bumgarner said that in the 1980s, all plastic parts of business machines were painted. It's our understanding that today, there is more sophistication with colored and textured materials (e.g., plastic molding) so that paint is not needed.
 Does Sherwin-Williams have firsthand knowledge of business machine manufacturing surface coating trends?
   b.	Can you confirm that trend or transition and provide any insights?
   c.	Is surface coating still a necessary process for business machine manufacturing?
Over the past 30-years, much of manufacturing has gone outside of the US. There is still a market for the plastic parts (e.g., medical equipment, game consoles, consumer electronics, appliances), and the coatings sold for plastic parts represent an important market for Sherwin-Williams. Most of this coating application is done at job-shops (i.e., not the original equipment manufacturer). These job shops are not specialized to businesses equipment coatings, they may be specialized to plastic parts, but likely coating multiple materials (e.g., metal, plastic). Overall, the market has declined.

 Does Sherwin-Williams sell pigments or dyes or provide other support for colored plastic molding?
Sherwin-Williams does not sell pigments or dyes that would be an input in plastic molding. Sherwin-Williams can corroborate your findings. First, in the 1980's, the quality of extruded parts was lower, and coatings were used to cover up imperfections and surface defects. Second, plastic parts are now commonly molded in the end color.
 Does Sherwin-Williams sell powder or electrostatic surface coating materials?
   a.	What is the current state of the technology for powder coating plastic parts, such as the use of UV cured powder coating?
   b.	Besides electrodeposition coating, are there other similar ways to improve transfer efficiency for coated plastic? Are there no spray application methods feasible, e.g., dip or curtain coating?

Sherwin-Williams is heavy into powder coatings, but we don't sell powder coatings for the plastic parts end use.
For plastic parts, our products are mostly spray applied. Dip coating may be used by OEMs, for large runs. Dip coating by our customers, is uncommon because although it has a high transfer efficiency, it's color specific and the customer (i.e., job shop) couldn't easily switch colors. Steve was not aware of a job shop trade group.
 We met with David Darling (Vice President of Health, Safety and Environmental Affairs for American Coatings Association) to learn more about business trends related to business machines. He conducted an informal survey of his members and said that the manufacturing of cell phones and computers now occurs overseas, and the only domestic computer manufacturing activity is assembly.
   a.	Can you corroborate this observation?
   b.	Are you aware of any U.S. companies that are coating plastic parts for business machines?

 Are there specialty coatings that have an application specific to business machines? E.g., conductive lacquers and "Teflon" finishes, chemical and stain resistance coatings, or coatings designed to shield from electromagnetic interference (EMI) and radio frequency interference (RFI).
 Do these specialty coatings have distinct composition (e.g., high solids, high VOCs, metals)?
The products Sherwin-Williams is selling to the business machine market are formulated for broad application to plastic parts. Some of those plastic parts happen to be business machines. Sherwin-Williams does not sell coatings that are uniquely formulated for business machines.
Sherwin-Williams does not sell specialty coatings with the attributes you listed; our competitors might. Further, coatings for business machines do not require unique qualities such as anti-fingerprint or anti-conductive coatings.
Sherwin-Williams has both waterborne and solvent borne coatings for this end use.
 The NSPS limit restricts VOC content to 1.5 and 2.3 kg of VOC per liter of coating solids applied. Our data collection shows states with VOC limits lower than the NSPS (e.g., NY limits are 0.26 and 0.35 kg of VOC per liter of "coating (minus water and excluded compounds) at application," or approximately 25% of the NSPS limits--but likely lower, depending on assumption of volume solids content). Attached. Do you sell coatings (intended for use on plastic parts for business machines) that exceed the NSPS (or NY) VOC limits?
In Steve's opinion, the TTT unit of measure is difficult for the regulated community because it's based on volume of coating solids applied. The vernacular of our industry is, e.g., 2.8 pounds of VOC per gallon of coating (applied, less water and exempts). To convert from that and the NSPS format, one must know (or assume) the coating's volume solids content. For example, Sherwin-Williams had to apply an assumption of 60% solids by volume to calculate that the NSPS limit of 1.5 kg VOC per liter of coating solids applied (for prime coat or color coat) is comparable to 7.5 pounds of VOC per gallon of coating applied.
The products we sell to this market are generally at or below 2.8 pounds of VOC per gallon of coating applied. Our customers follow the limits that are in their jurisdiction (e.g., NY) when those are more stringent. Sherwin-Williams says there is no application (end use) that required a higher VOC coating.
Lisa: Well, we realize it is hard to compare the TTT emission limits (in mass of VOC per volume of coating solids applied) with the those of the plastic parts NESHAP (in mass of VOC per mass of coating solids used), because doing so requires knowing (or assuming) solids density as well as transfer efficiency. The intent of the original TTT was to encourage more efficient transfer of coatings. Do you know of any subset of customers that has some specific need we should consider? For example, are there certain applications that require a higher solvent content? Is there a price premium on a coating that meets the NY requirements vs. the NSPS standards? Could you give us a range of VOC content that is offered?
Steve: Our staff didn't identify any applications that require a high solvent content. There may be competitors that provide specialized coatings with high solvent requirements. From a manufacturer's standpoint, the larger the batch the lower the costs (i.e., we try to minimize the number of product options we offer). Therefore, we would prefer a national not regional product line.
To see the "menu" of VOC coatings, go to the Sherwin-Williams general industrial website: https://industrial.sherwin-williams.com/na/us/en/general-industrial/catalog/category/products-by-industry/electronics/business-machines.10656533.html. When you apply a product filter for "Plastic Substrate," you'll find four liquid products and they are in the range of 2.3  -  2.8 pounds of VOC per gallon of coating (as applied). Having the flexibility to manufacture coatings with a higher VOC content is better and our customers might say the same. Some applications, such as for use as an adhesion promoter (primer), might justify a coating with a higher VOC content like 3.5 pounds per gallon of coating applied (which is an option for one of the four products).
One of the key attributes to our products is color matching, the color on the other components (e.g., metal case for a computer) needs to be the same color on the coated plastic face.

 If EPA does not modify the NSPS VOC limits, then sources can continue to meet the "old" limits and incur zero "new" costs. EPA is also considering VOC limits that are consistent with NY. Do you have any information that would help us quantify the new costs to a facility (e.g., dollar per gallon, dollars per year with any assumptions on coating consumption)?
Follow-up:
EPA requested information on cost and transfer efficiency.