[Federal Register Volume 77, Number 139 (Thursday, July 19, 2012)]
[Rules and Regulations]
[Pages 42433-42439]
[FR Doc No: 2012-17628]

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ENVIRONMENTAL PROTECTION AGENCY

40 CFR Part 180

[EPA-HQ-OPP-2011-0300; FRL-9354-9]

Difenoconazole; Pesticide Tolerances

AGENCY: Environmental Protection Agency (EPA).

ACTION: Final rule.

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SUMMARY: This regulation establishes tolerances for residues of
difenoconazole in or on multiple commodities identified and discussed
in this document and amends the established tolerances in or on
vegetable, tuberous and corm, subgroup 1C and potato, processed waste.
In addition, this regulation removes established tolerances for certain
commodities/groups superseded by this action. The Interregional
Research Project Number 4 (IR-4) requested these tolerances under the
Federal Food, Drug, and Cosmetic Act (FFDCA).

DATES: This regulation is effective July 19, 2012. Objections and
requests for hearings must be received on or before September 17, 2012,
and must be filed in accordance with the instructions provided in 40
CFR part 178 (see also Unit I.C. of the SUPPLEMENTARY INFORMATION).

ADDRESSES: The docket for this action, identified by docket
identification (ID) number EPA-HQ-OPP-2011-0300, is available at http://www.regulations.gov or at the OPP Docket in the Environmental
Protection Agency Docket Center (EPA/DC), located in EPA

West, Rm. 3334, 1301 Constitution Ave. NW., Washington, DC 20460-0001.
The Public Reading Room is open from 8:30 a.m. to 4:30 p.m., Monday
through Friday, excluding legal holidays. The telephone number for the
Public Reading Room is<PHONE_NUMBER>, and the telephone number for the
OPP Docket is<PHONE_NUMBER>. Please review the visitor instructions
and additional information about the docket available at http://www.epa.gov/dockets.

FOR FURTHER INFORMATION CONTACT: Sidney Jackson, Registration Division
(7505P), Office of Pesticide Programs, Environmental Protection Agency,
1200 Pennsylvania Ave. NW., Washington, DC 20460-0001; telephone
number:<PHONE_NUMBER>; email address<EMAIL_ADDRESS>
SUPPLEMENTARY INFORMATION:

I. General Information

A. Does this action apply to me?

    You may be potentially affected by this action if you are an
agricultural producer, food manufacturer, or pesticide manufacturer.
Potentially affected entities may include, but are not limited to those
engaged in the following activities:
     Crop production (NAICS code 111).
     Animal production (NAICS code 112).
     Food manufacturing (NAICS code 311).
     Pesticide manufacturing (NAICS code 32532).
    This listing is not intended to be exhaustive, but rather to
provide a guide for readers regarding entities likely to be affected by
this action. Other types of entities not listed in this unit could also
be affected. The North American Industrial Classification System
(NAICS) codes have been provided to assist you and others in
determining whether this action might apply to certain entities. If you
have any questions regarding the applicability of this action to a
particular entity, consult the person listed under FOR FURTHER
INFORMATION CONTACT.

B. How can I get electronic access to other related information?

    You may access a frequently updated electronic version of EPA's
tolerance regulations at 40 CFR part 180 through the Government
Printing Office's e-CFR site at http://ecfr.gpoaccess.gov/cgi/t/text/text-idx?&c=ecfr&tpl=/ecfrbrowse/Title40/40tab_02.tpl.

C. How can I file an objection or hearing request?

    Under FFDCA section 408(g), 21 U.S.C. 346a, any person may file an
objection to any aspect of this regulation and may also request a
hearing on those objections. You must file your objection or request a
hearing on this regulation in accordance with the instructions provided
in 40 CFR part 178. To ensure proper receipt by EPA, you must identify
docket ID number EPA-HQ-OPP-2011-0300 in the subject line on the first
page of your submission. All objections and requests for a hearing must
be in writing, and must be received by the Hearing Clerk on or before
September 17, 2012. Addresses for mail and hand delivery of objections
and hearing requests are provided in 40 CFR 178.25(b).
    In addition to filing an objection or hearing request with the
Hearing Clerk as described in 40 CFR part 178, please submit a copy of
the filing that does not contain any CBI for inclusion in the public
docket. Information not marked confidential pursuant to 40 CFR part 2
may be disclosed publicly by EPA without prior notice. Submit a copy of
your non-CBI objection or hearing request, identified by docket ID
number EPA-HQ-OPP-2011-0300, by one of the following methods:
     Federal eRulemaking Portal: http://www.regulations.gov. Follow the online instructions for submitting
comments. Do not submit electronically any information you consider to
be Confidential Business Information (CBI) or other information whose
disclosure is restricted by statute.
     Mail: OPP Docket, Environmental Protection
Agency Docket Center (EPA/DC), Mail Code: 28221T, 1200 Pennsylvania
Ave. NW., Washington, DC 20460-0001.
     Hand Delivery: To make special arrangements for
hand delivery or delivery of boxed information, please follow the
instructions at http://www.epa.gov/dockets/contacts.htm. Additional
instructions on commenting or visiting the docket, along with more
information about dockets generally, is available at http://www.epa.gov/dockets.

II. Summary of Petitioned-For Tolerance

    In the Federal Register of July 20, 2011 (76 FR 43231) (FRL-8880-
1), EPA issued a notice pursuant to FFDCA section 408(d)(3), 21 U.S.C.
346a(d)(3), announcing the filing of a pesticide petition (PP 1E7852)
by Interregional Research Project Number 4 (IR-4), IR-4 Headquarters,
500 College Road East, Suite 201 W, Princeton, NJ 08540. The petition
requested that 40 CFR 180.475 be amended by establishing tolerances for
residues of the fungicide, difenoconazole, 1-[2-[2-chloro-4-(4-
chlorophenoxy)phenyl]-4-methyl-1,3-dioxolan-2-ylmethyl]-1H-1,2,4,-
triazole, including its metabolites and degradates in or on vegetable,
fruiting, group 8-10 at 0.6 ppm; fruit, citrus, group 10-10 at 0.6 ppm;
fruit, pome, group 11-10 at 1.0 ppm; and berry, low growing, subgroup
13-07G, except cranberry at 2.5 ppm; and by amending the established
tolerance in or on vegetable, tuberous and corm, subgroup 1C at 0.01
ppm to raise to 4.0 ppm. In addition, the petition proposes to remove
established tolerances in or on the raw agricultural commodities:
Potato, processed waste at 0.04 ppm; vegetables, fruiting, group 8 at
0.6 ppm; fruit, citrus, group 10 at 0.6 ppm; fruit, pome, group 11 at
1.0 ppm; and strawberry at 2.5 ppm. That notice referenced a summary of
the petition prepared by Syngenta Crop Protection, Inc., the
registrant, which is available in the docket, http://www.regulations.gov. There were no comments received in response to the
notice of filing.
    Based upon review of the data supporting this petition, EPA denied
the Petitioner's request to remove the established tolerance on potato,
processed waste at 0.04 ppm. Moreover, the Agency determined that the
tolerance needs to be raised and the commodity terminology changed to
potato, wet peel at 7.3 ppm. The Agency's rationale for these decisions
is outlined in Unit IV.C.

III. Aggregate Risk Assessment and Determination of Safety

    Section 408(b)(2)(A)(i) of FFDCA allows EPA to establish a
tolerance (the legal limit for a pesticide chemical residue in or on a
food) only if EPA determines that the tolerance is ``safe.'' Section
408(b)(2)(A)(ii) of FFDCA defines ``safe'' to mean that ``there is a
reasonable certainty that no harm will result from aggregate exposure
to the pesticide chemical residue, including all anticipated dietary
exposures and all other exposures for which there is reliable
information.'' This includes exposure through drinking water and in
residential settings, but does not include occupational exposure.
Section 408(b)(2)(C) of FFDCA requires EPA to give special
consideration to exposure of infants and children to the pesticide
chemical residue in establishing a tolerance and to ``ensure that there
is a reasonable certainty that no harm will result to infants and
children from aggregate exposure to the pesticide chemical residue. * *
*''
    Consistent with FFDCA section 408(b)(2)(D), and the factors
specified in FFDCA section 408(b)(2)(D), EPA has reviewed the available
scientific data and other relevant information in

support of this action. EPA has sufficient data to assess the hazards
of and to make a determination on aggregate exposure for difenoconazole
including exposure resulting from the tolerances established by this
action. EPA's assessment of exposures and risks associated with
difenoconazole follows.

A. Toxicological Profile

    EPA has evaluated the available toxicity data and considered their
validity, completeness, and reliability as well as the relationship of
the results of the studies to human risk. EPA has also considered
available information concerning the variability of the sensitivities
of major identifiable subgroups of consumers, including infants and
children.
    Difenoconazole possesses low acute toxicity by the oral, dermal and
inhalation routes of exposure. It is not an eye or skin irritant and is
not a sensitizer. Subchronic and chronic studies with difenoconazole in
mice and rats showed decreased body weights, decreased body weight
gains and effects on the liver. In an acute neurotoxicity study in
rats, reduced fore-limb grip strength was observed on day 1 in males
and clinical signs of neurotoxicity were observed in females at the
limit dose of 2,000 milligrams/kilograms (mg/kg). In a subchronic
neurotoxicity study in rats, decreased hind limb strength was observed
in males only at the mid- and high-doses. However, the effects observed
in acute and subchronic neurotoxicity studies are transient, and the
dose-response is well characterized with identified no-observed-
adverse-effects-levels (NOAELs). No systemic toxicity was observed at
the limit dose in the most recently submitted 28-day rat dermal
toxicity study.
    There is no concern for increased qualitative and/or quantitative
susceptibility after exposure to difenoconazole in developmental
toxicity studies in rats and rabbits, and a reproduction study in rats
as fetal/offspring effects occurred in the presence of maternal
toxicity. There are no indications in the available studies that organs
associated with immune function, such as the thymus and spleen, are
affected by difenoconazole.
    EPA is using the non-linear (Reference Dose) approach to assess
cancer risk. Difenoconazole is not mutagenic, and no evidence of
carcinogenicity was seen in rats. Evidence for carcinogenicity was seen
in mice (liver tumors), but statistically significant carcinomas tumors
were only induced at excessively-high doses. Adenomas (benign tumors)
and liver necrosis only were seen at 300 parts per million (ppm) (46
and 58 mg/kg/day in males and females, respectively). Based on
excessive toxicity observed at the two highest doses in the study, the
presence of only benign tumors and necrosis at the mid-dose, the
absence of tumors at the study's lower doses, and the absence of
genotoxic effects, EPA has concluded that the chronic point of
departure (POD) from the chronic mouse study will be protective of any
cancer effects. The POD from this study is the NOAEL of 30 ppm (4.7 and
5.6 mg/kg/day in males and females, respectively) which was chosen
based upon only those biological endpoints which were relevant to tumor
development (i.e., hepatocellular hypertrophy, liver necrosis, fatty
changes in the liver and bile stasis).
    Specific information on the studies received and the nature of the
adverse effects caused by difenoconazole as well as the no-observed-
adverse-effect-level (NOAEL) and the lowest-observed-adverse-effect-
level (LOAEL) from the toxicity studies can be found at http://www.regulations.gov in document ``Difenoconazole. Human Health Risk
Assessment for Postharvest Use on Tuberous and Corm Vegetables Subgroup
1C. and Low growing Berry Subgroup 13-07G, Except Cranberry,'' dated
May 30, 2012 at p. 34 in docket ID number EPA-HQ-OPP-2011-0300.

B. Toxicological POD/Levels of Concern

    Once a pesticide's toxicological profile is determined, EPA
identifies toxicological POD and levels of concern (LOC) to use in
evaluating the risk posed by human exposure to the pesticide. For
hazards that have a threshold below which there is no appreciable risk,
the toxicological POD is used as the basis for derivation of reference
values for risk assessment. PODs are developed based on a careful
analysis of the doses in each toxicological study to determine the dose
at which no adverse effects are observed (the NOAEL) and the lowest
dose at which adverse effects of concern are identified (the LOAEL).
Uncertainty/safety factors are used in conjunction with the POD to
calculate a safe exposure level--generally referred to as a population-
adjusted dose (PAD) or a reference dose (RfD)--and a safe margin of
exposure (MOE). For non-threshold risks, the Agency assumes that any
amount of exposure will lead to some degree of risk. Thus, the Agency
estimates risk in terms of the probability of an occurrence of the
adverse effect expected in a lifetime. For more information on the
general principles EPA uses in risk characterization and a complete
description of the risk assessment process, see http://www.epa.gov/pesticides/factsheets/riskassess.htm.
    A summary of the toxicological endpoints for difenoconazole used
for human risk assessment is discussed in Unit III. B. of the final
rule published in the Federal Register of June 15, 2011 (76 FR 34877)
(FRL-8876-4).

C. Exposure Assessment

    1. Dietary exposure from food and feed uses. In evaluating dietary
exposure to difenoconazole, EPA considered exposure under the
petitioned-for tolerances as well as all existing difenoconazole
tolerances in 40 CFR 180.475. EPA assessed dietary exposures from
difenoconazole in food as follows:
    i. Acute exposure. Quantitative acute dietary exposure and risk
assessments are performed for a food-use pesticide, if a toxicological
study has indicated the possibility of an effect of concern occurring
as a result of a 1-day or single exposure.
    Such effects were identified for difenoconazole. In estimating
acute dietary exposure, EPA used food consumption information from the
United States Department of Agriculture (USDA) 1994-1996 and 1998
Nationwide Continuing Surveys of Food Intake by Individuals (CSFII). As
to residue levels in food, EPA used an unrefined acute analysis for
food and water that assumed tolerance-level residues, 100 percent crop
treated (PCT), and the available empirical or dietary exposure
evaluation model (DEEM\TM\ version 7.81) default processing factors.
    ii. Chronic exposure. In conducting the chronic dietary exposure
assessment EPA used the food consumption data from the USDA 1994-1996
and 1998 CSFII. As to residue levels in food, a refined chronic
analysis for food and water assumed tolerance-level residues for some
commodities, average field trial residues for the majority of
commodities, the available empirical or DEEM\TM\ version 7.81 default
processing factors, and 100 PCT.
    iii. Cancer. Based on the data summarized in Unit III.A., EPA has
concluded that a nonlinear RfD approach is appropriate for assessing
cancer risk to difenoconazole. A separate quantitative cancer exposure
assessment is unnecessary since the NOAEL (4.7 and 5.6 mg/kg/day in
males and females, respectively) to assess cancer risk is higher than
the NOAEL (0.96 and 1.27 mg/kg/day in males and females, respectively)
to assess chronic risks and exposure for the purpose of assessing
cancer risk would be no

higher than chronic exposure. Therefore, the chronic dietary risk
estimate will be protective of potential cancer risk.
    iv. Anticipated residue and PCT information. EPA did not use PCT
information in the dietary assessment for difenoconazole and assumed
100 PCT. EPA used anticipated residues in the form of average field
trial residues for the majority of commodities in the chronic dietary
exposure assessment.
    Section 408(b)(2)(E) of FFDCA authorizes EPA to use available data
and information on the anticipated residue levels of pesticide residues
in food and the actual levels of pesticide residues that have been
measured in food. If EPA relies on such information, EPA must require
pursuant to FFDCA section 408(f)(1) that data be provided 5 years after
the tolerance is established, modified, or left in effect,
demonstrating that the levels in food are not above the levels
anticipated. For the present action, EPA will issue such data call-ins
as are required by FFDCA section 408(b)(2)(E) and authorized under
FFDCA section 408(f)(1). Data will be required to be submitted no later
than 5 years from the date of issuance of these tolerances.
    2. Dietary exposure from drinking water. The Agency used screening
level water exposure models in the dietary exposure analysis and risk
assessment for difenoconazole in drinking water. These simulation
models take into account data on the physical, chemical, and fate/
transport characteristics of difenoconazole. Further information
regarding EPA drinking water models used in pesticide exposure
assessment can be found at http://www.epa.gov/oppefed1/models/water/index.htm.
    Based on the Pesticide Root Zone Model/Exposure Analysis Modeling
System (PRZM/EXAMS) for registered and proposed new uses and Screening
Concentration in Ground Water (SCI-GROW) models, the estimated drinking
water concentrations (EDWCs) of difenoconazole for acute exposures are
estimated to be 17.4 parts per billion (ppb) for surface water and
0.0128 ppb for ground water.
    For chronic exposures for non-cancer assessments are estimated to
be 11.8 ppb for surface water and 0.0128 ppb for ground water.
    Modeled estimates of drinking water concentrations were directly
entered into the dietary exposure model.
    For acute dietary risk assessment, the water concentration value of
17.4 ppb was used to assess the contribution to drinking water.
    For chronic dietary risk assessment, the water concentration of
value 11.8 ppb was used to assess the contribution to drinking water.
    3. From non-dietary exposure. The term ``residential exposure'' is
used in this document to refer to non-occupational, non-dietary
exposure (e.g., for lawn and garden pest control, indoor pest control,
termiticides, and flea and tick control on pets).
    Difenoconazole is currently registered for the following uses that
could result in residential exposures: Ornamentals/golf course turf.
EPA assessed residential exposure using the following assumptions:
Adults may be exposed to difenoconazole from its currently registered
use on ornamentals. Residential pesticide handlers may be exposed to
short-term duration (1-30 days) only. The dermal and inhalation (short-
term) residential exposure was assessed for homeowners mixer/loader/
applicator wearing short pants and short-sleeved shirts as well as
shoes plus socks using garden hose-end sprayer, pump-up compressed air
sprayer, and backpack sprayer.
    Residential post-application exposure may occur from use of
difenoconozole on golf course turf. Short-term dermal exposure was
assessed for post-application exposure to golf course turf. Further
information regarding EPA standard assumptions and generic inputs for
residential exposures may be found at http://www.epa.gov/pesticides/trac/science/trac6a05.pdf.
    4. Cumulative effects from substances with a common mechanism of
toxicity. Section 408(b)(2)(D)(v) of FFDCA requires that, when
considering whether to establish, modify, or revoke a tolerance, the
Agency consider ``available information'' concerning the cumulative
effects of a particular pesticide's residues and ``other substances
that have a common mechanism of toxicity.''
    Difenoconazole is a member of the triazole-containing class of
pesticides. Although conazoles act similarly in plants (fungi) by
inhibiting ergosterol biosynthesis, there is not necessarily a
relationship between their pesticidal activity and their mechanism of
toxicity in mammals. Structural similarities do not constitute a common
mechanism of toxicity. Evidence is needed to establish that the
chemicals operate by the same, or essentially the same, sequence of
major biochemical events (EPA, 2002). In conazoles, however, a variable
pattern of toxicological responses is found. Some events are
hepatotoxic and hepatocarcinogenic in mice. Some induce thyroid tumors
in rats. Some induce developmental, reproductive, and neurological
effects in rodents. Furthermore, the conazoles produce a diverse range
of biochemical events including altered cholesterol levels, stress
responses, and altered DNA methylation. It is not clearly understood
whether these biochemical events are directly connected to their
toxicological outcomes. Thus, there is currently no evidence to
indicate that conazoles share common mechanisms of toxicity and EPA is
not following a cumulative risk approach based on a common mechanism of
toxicity for the conazoles. For information regarding EPA's procedures
for cumulating effects from substances found to have a common mechanism
of toxicity, see EPA's Web sites at: http://www.epa.gov/pesticides/cumulative and http://www.epa.gov/fedrgstr/EPA_PEST/2002/January/Day_16/.
    Difenoconazole is a triazole-derived pesticide. This class of
compounds can form the common metabolite 1,2,4-triazole and two
triazole conjugates (triazolylalanine and triazolylacetic acid). To
support existing tolerances and to establish new tolerances for
triazole-derivative pesticides, including difenoconazole, EPA conducted
a human health risk assessment for exposure to 1,2,4-triazole,
triazolylalanine, and triazolylacetic acid resulting from the use of
all current and pending uses of any triazole-derived fungicide. The
risk assessment is a highly conservative, screening-level evaluation in
terms of hazards associated with common metabolites (e.g., use of a
maximum combination of uncertainty factors) and potential dietary and
non-dietary exposures (i.e., high end estimates of both dietary and
non-dietary exposures). In addition, the Agency retained the additional
10x Food Quality Protection Act (FQPA) safety factor (SF) for the
protection of infants and children. The assessment includes evaluations
of risks for various subgroups, including those comprised of infants
and children. The Agency's risk assessment is found in the
propiconazole reregistration docket at http://www.regulations.gov,
Docket Identification (ID) Number EPA-HQ-OPP-2005-0497. The requested
amended uses of difenoconazole resulted in an increase in dietary
exposure estimates for free triazole or conjugated triazoles.
Therefore, updated dietary exposure analyses were conducted. The most
recent update for triazoles may be found in docket ID number EPA-HQ-
OPP-2011-0300.

D. Safety Factor for Infants and Children

    1. In general. Section 408(b)(2)(C) of FFDCA provides that EPA
shall apply an additional tenfold (10x) margin of

safety for infants and children in the case of threshold effects to
account for prenatal and postnatal toxicity and the completeness of the
database on toxicity and exposure unless EPA determines based on
reliable data that a different margin of safety will be safe for
infants and children. This additional margin of safety is commonly
referred to as the FQPA SF. In applying this provision, EPA either
retains the default value of 10x, or uses a different additional SF
when reliable data available to EPA support the choice of a different
factor.
    2. Prenatal and postnatal sensitivity. EPA determined that the
available data indicated no increased susceptibility of rats or rabbits
to in utero and/or postnatal exposure to difenoconazole. In the
prenatal developmental toxicity studies in rats and rabbits and the 2-
generation reproduction study in rats, toxicity to the fetuses/
offspring, when observed, occurred at equivalent or higher doses than
in the maternal/parental animals. In the prenatal developmental
toxicity study in rats, maternal toxicity was manifested as decreased
body weight gain and food consumption at the LOAEL of 85 mg/kg/day; the
NOAEL was 16 mg/kg/day. Developmental toxicity in this study was
manifested as alterations in fetal ossifications at 171 mg/kg/day; the
developmental NOAEL was 85 mg/kg/day. In a developmental toxicity study
in rabbits, maternal and developmental toxicity were seen at the same
dose level (75 mg/kg/day). Maternal toxicity in rabbits was manifested
as decreased body weight gain and decreased food consumption, while
developmental toxicity was manifested as decreased fetal weight. In a
2-generation reproduction study in rats, there were decreases in
maternal body weight gain and decreases in body weights of
F1 males at the LOAEL of 12.5 mg/kg/day; the parental
systemic and off spring toxicity NOAEL was 1.25 mg/kg/day.
    3. Conclusion. EPA has determined that reliable data show the
safety of infants and children would be adequately protected if the
FQPA SF were reduced to 1x. That decision is based on the following
findings:
    i. The toxicity database is complete except for results of a
recently submitted immunotoxicity study required as a part of new data
requirements in the 40 CFR part 158 for conventional pesticide
registration. However, the existing toxicology database for
difenoconazole does not show any evidence of treatment-related effects
on the immune system. The overall weight of evidence suggests that this
chemical does not directly target the immune system. Accordingly, the
Agency does not believe that findings from the ongoing review of the
immunotoxicity study will result in a lower POD than that currently in
use for overall risk assessment, and therefore, a database uncertainty
factor is not needed to account for lack of this study.
    ii. The acute and subchronic neurotoxicity studies in rats are
available. These data show that difenoconazole exhibits some evidence
of neurotoxicity, but the effects are transient or occur at the limit
dose. EPA concluded that difenoconazole is not a neurotoxic compound.
Based on the toxicity profile, and lack of neurotoxicity, a
developmental neurotoxicity study in rats is not required.
    iii. There is no evidence that difenoconazole results in increased
susceptibility of rats or rabbit fetuses to in utero and/or postnatal
exposure in the developmental and reproductive toxicity data.
    iv. There are no residual uncertainties identified in the exposure
databases. A conservative dietary food exposure assessment was
conducted. Acute dietary food exposure assessments were performed based
on tolerance-level residues, 100 PCT, and the available empirical or
(DEEMTM version 7.81) default processing factors.
    Chronic dietary exposure assessments were based on tolerance-level
residues for some commodities, average field trial residues for the
majority of commodities, the available empirical or (DEEMTM
version 7.81) default processing factors, and 100 PCT. These are
conservative approaches and are unlikely to understate the residues in
food commodities.
    EPA also made conservative (protective) assumptions in the ground
water and surface water modeling used to assess exposure to
difenoconazole in drinking water. Post-application residential exposure
of children is not expected. These assessments will not underestimate
the exposure and risks posed by difenoconazole.

E. Aggregate Risks and Determination of Safety

    EPA determines whether acute and chronic dietary pesticide
exposures are safe by comparing aggregate exposure estimates to the
acute PAD (aPAD) and chronic PAD (cPAD). For linear cancer risks, EPA
calculates the lifetime probability of acquiring cancer given the
estimated aggregate exposure. Short-, intermediate-, and chronic-term
risks are evaluated by comparing the estimated aggregate food, water,
and residential exposure to the appropriate PODs to ensure that an
adequate MOE exists.
    1. Acute risk. Using the exposure assumptions discussed in this
unit for acute exposure, the acute dietary exposure from food and water
to difenoconazole will occupy 27% of the aPAD for children 1 to 2 years
old, the population group receiving the greatest exposure.
    2. Chronic risk. Using the exposure assumptions described in this
unit for chronic exposure, EPA has concluded that chronic exposure to
difenoconazole from food and water will utilize 75% of the cPAD for
children 1 to 2 years old, the population group receiving the greatest
exposure. Based on the explanation in Unit III.C.3., regarding
residential use patterns, chronic residential exposure to residues of
difenoconazole is not expected.
    3. Short-term risk. Short-term aggregate exposure takes into
account short-term residential exposure plus chronic exposure to food
and water (considered to be a background exposure level).
    Difenoconazole is currently registered for uses that could result
in short-term residential exposure, and the Agency has determined that
it is appropriate to aggregate chronic exposure through food and water
with short-term residential exposures to difenoconazole.
    Using the exposure assumptions described in this unit for short-
term exposures, EPA has concluded the combined short-term food, water,
and residential exposures result in aggregate MOEs of 200 or greater.
Because EPA's level of concern for difenoconazole is a MOE of 100 or
below, these MOEs are not of concern.
    4. Intermediate-term risk. Intermediate-term aggregate exposure
takes into account intermediate-term residential exposure plus chronic
exposure to food and water (considered to be a background exposure
level).
    An intermediate-term adverse effect was identified; however,
difenoconazole is not registered for any use patterns that would result
in intermediate-term residential exposure. Intermediate-term risk is
assessed based on intermediate-term residential exposure plus chronic
dietary exposure. Because there is no intermediate-term residential
exposure and chronic dietary exposure has already been assessed under
the appropriately protective cPAD (which is at least as protective as
the POD used to assess intermediate-term risk), no further assessment
of intermediate-term risk is necessary, and EPA relies on the chronic
dietary risk assessment for evaluating intermediate-term risk for
difenoconazole.

    5. Aggregate cancer risk for U.S. population. As discussed in Unit
III.A., the chronic dietary risk assessment is protective of any
potential cancer effects.
    6. Determination of safety. Based on these risk assessments, EPA
concludes that there is a reasonable certainty that no harm will result
to the general population, or to infants and children from aggregate
exposure to difenoconazole residues.

IV. Other Considerations

A. Analytical Enforcement Methodology

    Adequate enforcement methodology, gas chromatography with nitrogen/
phosphorus detection (GC/NPD) method AG-575B, is available to enforce
the tolerance expression for residues of difenoconazole in/on plant
commodities. An adequate enforcement method, liquid chromatography
coupled with tandem mass spectrometry (LC/MS/MS) method REM 147.07b, is
available for the determination of residues of difenoconazole and CGA-
205375 in livestock commodities. Adequate confirmatory methods are also
available.
    The methods may be requested from: Chief, Analytical Chemistry
Branch, Environmental Science Center, 701 Mapes Rd., Ft. Meade, MD
20755-5350; telephone number:<PHONE_NUMBER>; email address:
<EMAIL_ADDRESS>
B. International Residue Limits

    In making its tolerance decisions, EPA seeks to harmonize U.S.
tolerances with international standards whenever possible, consistent
with U.S. food safety standards and agricultural practices. EPA
considers the international maximum residue limits (MRLs) established
by the Codex Alimentarius Commission (Codex), as required by FFDCA
section 408(b)(4). The Codex Alimentarius is a joint United Nations
Food and Agriculture Organization/World Health Organization food
standards program, and it is recognized as an international food safety
standards-setting organization in trade agreements to which the United
States is a party. EPA may establish a tolerance that is different from
a Codex MRL; however, FFDCA section 408(b)(4) requires that EPA explain
the reasons for departing from the Codex level.
    Codex maximum residue levels (MRLs) for residues of difenoconazole
per se have been established at 0.5 ppm for tomato; 0.5 ppm for pome
fruits; and 0.02 ppm for potato. Based on the available magnitude of
the residue data, harmonization with these established Codex MRLs is
not possible because, the Codex MRLs are too low to adequately cover
residues resulting from the proposed use rates in the United States.
Canadian MRLs for residues of difenoconazole have been established at
0.6 ppm for a number of fruiting vegetables and 1.0 ppm for a number of
pome fruit, and are in agreement with proposed U.S. tolerances. The
data for vegetable, tuberous and corm, subgroup 1C at 4.0 ppm was a
joint review between EPA and the Health Canada Pest Management
Regulatory Agency (PMRA). The two agencies are in agreement regarding
tolerance level for subgroup 1C.

C. Revisions to Petitioned-For Tolerances

    The Petitioner proposed removal of the established tolerance in or
on potato, processed waste at 0.04 ppm. However, the Agency has
determined that this tolerance needs to be retained and raised to 7.3
ppm. Further, the commodity definition should be changed to potato, wet
peel. The potato processing data indicate that residues of
difenoconazole do not concentrate in flakes and chips but do
concentrate in wet peel. Based on the highest-average-field-trial value
for residues in/on potatoes (2.34 ppm) and the average processing
factor (3.1x), expected residues could be as high as 7.3 ppm in potato,
wet peel. Because this value is higher than the recommended 4.0 ppm
tolerance for vegetable, tuberous and corm, subgroup 1C, a separate
tolerance is needed in potato, wet peel at 7.3 ppm.
    The Petitioner's proposed commodity terminology for berry, low
growing, subgroup 13-07G, except cranberry was corrected to comply with
current crop terminology policy.

V. Conclusion

    Therefore, tolerances are established for residues of
difenoconazole, 1-[2-[2-chloro-4-(4-chlorophenoxy)phenyl]-4-methyl-1,3-
dioxolan-2-ylmethyl]-1H-1,2,4,-triazole, including its metabolites and
degradates, in or on Berry, low growing, subgroup 13-07G, except
cranberry at 2.5 ppm, Fruit, citrus, group 10-10 at 0.60 ppm, Fruit,
pome, group 11-10 at 1.0 ppm, and Vegetable, fruiting, group 8-10 at
0.60 ppm; and by revising the established tolerance in or on Vegetable,
tuberous and corm, subgroup 1C at 0.01 ppm by increasing the residue
level to 4.0 ppm. The difenoconazole tolerances are further amended by
correcting the commodity terminology for Potato, processed waste to
read Potato, wet peel and increasing the tolerance level from 0.04 ppm
to 7.3 ppm. In addition, this regulation removes established tolerances
in or on Vegetables, fruiting, group 8, Fruit, citrus, group 10, Fruit,
pome, group 11 and Strawberry, as these commodities are included in new
crop groups or subgroups for which tolerances are established by this
action.

VI. Statutory and Executive Order Reviews

    This final rule establishes tolerances under FFDCA section 408(d)
in response to a petition submitted to the Agency. The Office of
Management and Budget (OMB) has exempted these types of actions from
review under Executive Order 12866, entitled ``Regulatory Planning and
Review'' (58 FR 51735, October 4, 1993). Because this final rule has
been exempted from review under Executive Order 12866, this final rule
is not subject to Executive Order 13211, entitled ``Actions Concerning
Regulations That Significantly Affect Energy Supply, Distribution, or
Use'' (66 FR 28355, May 22, 2001) or Executive Order 13045, entitled
``Protection of Children from Environmental Health Risks and Safety
Risks'' (62 FR 19885, April 23, 1997). This final rule does not contain
any information collections subject to OMB approval under the Paperwork
Reduction Act (PRA), 44 U.S.C. 3501 et seq., nor does it require any
special considerations under Executive Order 12898, entitled ``Federal
Actions to Address Environmental Justice in Minority Populations and
Low-Income Populations'' (59 FR 7629, February 16, 1994).
    Since tolerances and exemptions that are established on the basis
of a petition under FFDCA section 408(d), such as the tolerance in this
final rule, do not require the issuance of a proposed rule, the
requirements of the Regulatory Flexibility Act (RFA) (5 U.S.C. 601 et
seq.) do not apply.
    This final rule directly regulates growers, food processors, food
handlers, and food retailers, not States or tribes, nor does this
action alter the relationships or distribution of power and
responsibilities established by Congress in the preemption provisions
of FFDCA section 408(n)(4). As such, the Agency has determined that
this action will not have a substantial direct effect on States or
tribal governments, on the relationship between the national government
and the States or tribal governments, or on the distribution of power
and responsibilities among the various levels of government or between
the Federal Government and Indian tribes. Thus, the Agency has
determined that Executive Order 13132, entitled

``Federalism'' (64 FR 43255, August 10, 1999) and Executive Order
13175, entitled ``Consultation and Coordination with Indian Tribal
Governments'' (65 FR 67249, November 9, 2000) do not apply to this
final rule. In addition, this final rule does not impose any
enforceable duty or contain any unfunded mandate as described under
Title II of the Unfunded Mandates Reform Act of 1995 (UMRA) (Pub. L.
104-4).
    This action does not involve any technical standards that would
require Agency consideration of voluntary consensus standards pursuant
to section 12(d) of the National Technology Transfer and Advancement
Act of 1995 (NTTAA), Public Law 104-113, section 12(d) (15 U.S.C. 272
note).

VII. Congressional Review Act

    The Congressional Review Act, 5 U.S.C. 801 et seq., generally
provides that before a rule may take effect, the agency promulgating
the rule must submit a rule report to each House of the Congress and to
the Comptroller General of the United States. EPA will submit a report
containing this rule and other required information to the U.S. Senate,
the U.S. House of Representatives, and the Comptroller General of the
United States prior to publication of this final rule in the Federal
Register. This final rule is not a ``major rule'' as defined by 5
U.S.C. 804(2).

List of Subjects in 40 CFR Part 180

    Environmental protection, Administrative practice and procedure,
Agricultural commodities, Pesticides and pests, Reporting and
recordkeeping requirements.

    Dated: July 11, 2012.
Lois Rossi,
Director, Registration Division, Office of Pesticide Programs.

    Therefore, 40 CFR chapter I is amended as follows:

PART 180--[AMENDED]

0
1. The authority citation for part 180 continues to read as follows:

    Authority: 21 U.S.C. 321(q), 346a and 371.

0
2. Section 180.475, the table to paragraph (a)(1) is amended as
follows:
0
i. Remove the entries for ``Fruit, citrus, group 10,'' ``Fruit, pome,
group 11,'' ``Potato, processed waste,'' ``Strawberry,'' and
``Vegetables, fruiting, group 8.''
0
ii. Add alphabetically new entries for Berry, low growing, subgroup 13-
07G, except cranberry; Fruit, citrus, group 10-10; Fruit, pome, group
11-10; Potato, wet peel; and Vegetable, fruiting, group 8-10, as shown
below.
0
iii. Revise the entry in the table to paragraph (a)(1) for ``Vegetable,
tuberous and corm, subgroup 1C''.
    The added and revised text read as follows:

Sec.  180.475  Difenconazole, tolerances for residues.

    (a) * * *
    (1) * * *

------------------------------------------------------------------------
                                                              Parts per
                         Commodity                             million
------------------------------------------------------------------------

                                * * * * *
Berry, low growing, subgroup 13-07G, except cranberry......         2.5

                                * * * * *
Fruit, citrus, group 10-10.................................         0.60
Fruit, pome, group 11-10...................................         1.0

                                * * * * *
Potato, wet peel...........................................         7.3

                                * * * * *
Vegetable, fruiting, group 8-10............................         0.60
Vegetable, tuberous and corm, subgroup 1C..................         4.0
------------------------------------------------------------------------

* * * * *
[FR Doc. 2012-17628 Filed 7-18-12; 8:45 am]
BILLING CODE 6560-50-P


[Federal Register Volume 84, Number 192 (Thursday, October 3, 2019)]
[Notices]
[Pages 52922-52925]
[FR Doc No: 2019-21473]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-87143; File No. SR-CboeEDGA-2019-014]

Self-Regulatory Organizations; Cboe EDGA Exchange, Inc.;
Suspension of and Order Instituting Proceedings To Determine Whether To
Approve or Disapprove a Proposed Rule Change Amending the Fee Schedule
Assessed on Members To Establish a Monthly Trading Rights Fee

September 27, 2019.

I. Introduction

    On August 1, 2019, Cboe EDGA Exchange, Inc. (``EDGA'' or the
``Exchange'') filed with the Securities and Exchange Commission
(``Commission''), pursuant to Section 19(b)(1) of the Securities
Exchange Act of 1934 (``Act''),\1\ and Rule 19b-4 thereunder,\2\ a
proposed rule change (File Number SR-CboeEDGA-2019-014) to amend the
EDGA fee schedule to establish a monthly Trading Rights Fee to be
assessed on Members. The proposed rule change was immediately effective
upon filing with the Commission pursuant to Section 19(b)(3)(A) of the
Act.\3\ The proposed rule change was published for comment in the
Federal Register on August 20, 2019.\4\ The Commission has received one
comment letter on the proposal, and one response letter from the
Exchange.\5\ Under Section 19(b)(3)(C) of the Act,\6\ the Commission is
hereby: (i) Temporarily suspending the proposed rule change; and (ii)
instituting proceedings to determine whether to approve or disapprove
the proposed rule change.
---------------------------------------------------------------------------

    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ 15 U.S.C. 78s(b)(3)(A).
    \4\ See Securities Exchange Act Release No. 86684 (August 14,
2019), 84 FR 43242 (``Notice'').
    \5\ See Letters from: Theodore R. Lazo, Managing Director and
Associate General Counsel, SIFMA, dated September 12, 2019 (``SIFMA
Letter''); Adrian Griffiths, Assistant General Counsel, Cboe, dated
September 25, 2019 (``Exchange Response Letter''). Comment letters
are available on the Commission's website at: https://www.sec.gov/comments/sr-cboeedga-2019-014/srcboeedga2019014.htm.
    \6\ 15 U.S.C. 78s(b)(3)(C).
---------------------------------------------------------------------------

II. Description of the Proposed Rule Change

    The Exchange proposes to amend the Membership Fees section of the
EDGA fee schedule to establish a monthly Trading Rights Fee, which
would be assessed on Members that trade more than a specified volume in
U.S. equities.\7\ Specifically, the Exchange proposes to charge Members
a Trading Rights Fee of $250 per month for the ability to trade on the
Exchange.\8\ A Member would not be charged the monthly Trading Rights
Fee if it qualifies for one of the following waivers: (1) The Member
has a monthly ADV \9\ of less than 100,000 shares, or (2) a new Member
is within the first three months of their membership.\10\
---------------------------------------------------------------------------

    \7\ See Notice, supra note 4, at 43242. The Commission notes
that the Exchange's affiliates, Cboe BYX Exchange, Inc., Cboe BZX
Exchange, Inc., and Cboe EDGX Exchange, Inc., each also filed a
proposed rule change to amend their fee schedules to establish a
monthly Trading Rights Fee to be assessed on Members: CboeBYX-2019-
013, CboeBZX-2019-072, and CboeEDGX-2019-050, respectively.
    \8\ See id.
    \9\ See id. ``ADV'' means average daily volume calculated as the
number of shares added or removed, combined, per day. ADV is
calculated on a monthly basis. See id. at n.5.
    \10\ See id. at 43242. For any month in which a firm is approved
for Membership with the Exchange, the monthly Trading Rights Fee
would be pro-rated in accordance with the date on which Membership
is approved. See id. at 43243.
---------------------------------------------------------------------------

III. Suspension of the Proposed Rule Change

    Pursuant to Section 19(b)(3)(C) of the Act,\11\ at any time within
60 days of the date of filing of a proposed rule change pursuant to
Section 19(b)(1) of the Act,\12\ the Commission summarily may
temporarily suspend the change in the rules of a self-regulatory
organization (''SRO'') if it appears to the Commission that such action
is necessary or appropriate in the public interest, for the protection
of investors, or otherwise in furtherance of the purposes of the Act.
As discussed below, the Commission believes a temporary suspension of
the proposed rule change is necessary and appropriate to allow for
additional analysis of the proposed rule change's consistency with the
Act and the rules thereunder.
---------------------------------------------------------------------------

    \11\ 15 U.S.C. 78s(b)(3)(C).
    \12\ 15 U.S.C. 78s(b)(1).
---------------------------------------------------------------------------

    The Exchange asserts that the proposed Trading Rights Fee ``is
reasonable because it will assist in funding the overall regulation and
maintenance of the Exchange'' and will contribute to ``ensuring that
adequate resources are devoted to regulation.'' \13\ The Exchange also
believes the proposed fee is reasonable because it ``represents a
modest charge'' applied to firms that ``have chosen to become members
of the Exchange,'' and such firms consume more regulatory resources and
``benefit from the Exchange's regulatory efforts by having access to a
well-regulated market.'' \14\ The Exchange notes that its Regulatory
Services Agreement (``RSA'') costs, which cover regulatory services in
connection with market and financial surveillance, examinations,
investigations, and disciplinary procedure, have increased 18.9%, while
the Exchange's overall regulatory costs have grown 115.1%, from 2016 to
2019.\15\ The Exchange also asserts that the proposed Trading Rights
Fee is reasonable because the ``cost of this membership fee is
generally less than the analogous membership fees of other markets''
and that a number of national securities exchanges currently charge
similar Trading Rights fees to assist in funding their regulatory
efforts.\16\
---------------------------------------------------------------------------

    \13\ See Notice, supra note 4, at 43243-44.
    \14\ See id. at 43244.
    \15\ See id.
    \16\ See id. The Exchange notes, for example, that the
Exchange's proposed Trading Rights Fee of $250 a month is
``substantially lower'' than the monthly $1,250 Trading Rights Fee
that Nasdaq assesses on its members. Id.
---------------------------------------------------------------------------

    The Exchange states that it believes the proposed Trading Rights
Fee is equitable and not unfairly discriminatory because it will apply
equally to all Members that do not qualify for a waiver.\17\ The
Exchange further asserts that the proposed fee is equitable and not
unfairly discriminatory because it will ``contribute to a portion of
the costs incurred by the Exchange in providing its Members with an
efficient and well-regulated market, which benefits all Members.'' \18\
---------------------------------------------------------------------------

    \17\ See id. at 43244.
    \18\ See id.
---------------------------------------------------------------------------

    In regard to the proposed waivers pursuant to which Members would
not be charged the Trading Rights Fee, the Exchange states that it
believes that such waivers are reasonable.\19\ Specifically, the
Exchange states that the proposed waiver for Members that trade less
than a monthly ADV of 100,000 shares is reasonable because it would
allow such smaller Members to continue to trade at a lower cost.\20\ In
addition, the Exchange states the waiver is reasonable because such
firms consume fewer regulatory resources.\21\ The Exchange also asserts
that the proposed ADV threshold of 100,000 is

reasonable because the median ADV per firm per month on the Exchange is
243,595; therefore, the proposed ADV threshold would serve to capture
``smaller volume firm outliers as compared to the overall ADV across
all firms.'' \22\
---------------------------------------------------------------------------

    \19\ See id. The Exchange also asserts that the waivers are
equitable and not unfairly discriminatory in the Notice. See id.
    \20\ See id.
    \21\ See id.
    \22\ See id.
---------------------------------------------------------------------------

    The Exchange also states that it believes that not charging a
Trading Rights Fee for new Members is reasonable because it would
incentivize firms to become Members of the Exchange and bring
additional liquidity to the market to the benefit of all market
participants.\23\ The Exchange asserts that the proposed waiver for new
Members is also reasonable because ``it will allow new firms the
flexibility in resources needed to initially adjust to the Exchange's
market-model and functionality.'' \24\
---------------------------------------------------------------------------

    \23\ See id.
    \24\ See id.
---------------------------------------------------------------------------

    Regarding competition, the Exchange states that it believes the
proposed rule change does not impose any burden on either intramarket
or intermarket competition that is not necessary or appropriate in
furtherance of the purposes of the Act.\25\ The Exchange notes that,
with regard to intramarket competition, the proposed rule change would
apply equally to all Members that reach an ADV of 100,000 shares traded
or greater, and those that are not within their first three months of
new Membership on the Exchange.\26\ In regard to intermarket
competition, the Exchange states that it operates in a highly
competitive market, and that this includes competition for exchange
memberships.\27\ The Exchange explains that Members have numerous
venues on which they can participate, including other equities
exchanges and off-exchange venues such as alternative trading
systems.\28\ The Exchange asserts that while trade-through and best
execution obligations may require a firm to access the Exchange, no
firm is compelled to be a Member of the Exchange in order to
participate on the Exchange, and accordingly firms may freely choose to
participate on the Exchange without holding a Membership.\29\ The
Exchange believes that if the proposed fee is unattractive to members,
the Exchange is likely to lose membership and market share as a
result.\30\
---------------------------------------------------------------------------

    \25\ See id. at 43244-45.
    \26\ See id.
    \27\ See id. at 43245.
    \28\ See id. The Exchange states that it represents a small
percentage of the overall market, and based on publicly available
information, no single equities exchange has more than 20% market
share, and no exchange group has more than 22% market share. See id.
The Exchange references the Cboe Global Markets U.S. Equities Market
Volume Summary (July 31, 2019), available at https://markets.cboe.com/us/equities/market_share. See id. at n.14.
    \29\ See id. at 43245.
    \30\ See id.
---------------------------------------------------------------------------

    As noted above, the Commission received one comment letter on the
proposed rule change.\31\ SIFMA notes that the Exchange previously
filed a proposed rule change to institute a trading rights fee, and the
Commission suspended that filing.\32\ SIFMA argues that, like the prior
proposal, the Exchange did not provide sufficient information in the
filing to support a finding that the proposal is consistent with the
Act.\33\ Specifically, SIFMA asserts that the Exchange should provide
quantitative data showing its anticipated revenues, costs and
profitability, as well as describe its methodology for estimating the
baseline and expected costs and revenues.\34\ Further, SIFMA argues
that the Exchange should provide specific detail regarding the amount
of its regulatory costs rather than information about broad percentage
increases in such costs.\35\ In addition, SIFMA believes the Exchange
should provide specific detail about the amount of revenue it would
expect to receive from the Trading Rights Fee, as well as the amount of
revenue it receives from other sources that are intended to fund
regulation, such as registration and licensing fees.\36\
---------------------------------------------------------------------------

    \31\ See supra note 5.
    \32\ See SIFMA Letter, supra note 5, at 1.
    \33\ See id.
    \34\ See id. at 2.
    \35\ See id.
    \36\ See id.
---------------------------------------------------------------------------

    SIFMA also asserts the Exchange's Trading Rights Fee would not be
constrained by competition because broker-dealers must pay this fee
prior to being able to satisfy their regulatory obligations and
deciding where to route orders.\37\ SIFMA notes that trade-through
requirements under Regulation NMS, as well as broker-dealers' best
execution obligations, effectively require direct or indirect access
and connection to all registered exchanges, and each exchange remains
the exclusive purveyor of those services.\38\
---------------------------------------------------------------------------

    \37\ See id.
    \38\ See id.
---------------------------------------------------------------------------

    In response, the Exchange reiterated several of the arguments for
the proposed rule change that were provided in the Notice. In addition,
the Exchange states that contrary to SIFMA's assertions, the instant
filing contains significantly more information and analysis in regard
to the proposed fee, including information related to increases in
regulatory costs.\39\ The Exchange indicates that the proposed fee
would defray only a portion of these increasing costs.\40\ The Exchange
also asserts that in regard to competition, broker-dealers are not
compelled to become members of any particular exchange, and a number of
broker-dealers are able to meet their business and compliance needs by
trading via other arrangements.\41\
---------------------------------------------------------------------------

    \39\ See Exchange Response Letter, supra note 5, at 2.
    \40\ See id.
    \41\ See id.
---------------------------------------------------------------------------

    The Exchange originally filed a proposal to implement a Trading
Rights Fee on May 2, 2019.\42\ That proposal, CboeEDGA-2019-011, was
published for comment in the Federal Register on May 16, 2019.\43\ On
June 28, 2019, pursuant to Section 19(b)(3)(C) of the Act, the
Commission: (i) Temporarily suspended the proposed rule change; and
(ii) instituted proceedings to determine whether to approve or
disapprove the proposed rule change.\44\ The instant filing proposes an
identical Trading Rights Fee and raises similar concerns as to whether
it is consistent with the Act.\45\
---------------------------------------------------------------------------

    \42\ See Securities Exchange Act Release No. 85842 (May 10,
2019), 84 FR 22212.
    \43\ See id.
    \44\ See Securities Exchange Act Release No. 86236 (June 28,
2019), 84 FR 32235 (July 5, 2019).
    \45\ See id.
---------------------------------------------------------------------------

    When exchanges file their proposed rule changes with the
Commission, including fee filings like the Exchange's present proposal,
they are required to provide a statement supporting the proposal's
basis under the Act and the rules and regulations thereunder applicable
to the exchange.\46\ The instructions to Form 19b-4, on which exchanges
file their proposed rule changes, specify that such statement ``should
be sufficiently detailed and specific to support a finding that the
proposed rule change is consistent with [those] requirements.'' \47\
---------------------------------------------------------------------------

    \46\ See 17 CFR 240.19b-4 (Item 3 entitled ``Self-Regulatory
Organization's Statement of the Purpose of, and Statutory Basis for,
the Proposed Rule Change'').
    \47\ See id.
---------------------------------------------------------------------------

    Among other things, exchange proposed rule changes are subject to
Section 6 of the Act, including Sections 6(b)(4), (5), and (8), which
requires the rules of an exchange to: (1) Provide for the equitable
allocation of reasonable fees among members, issuers, and other persons
using the exchange's facilities; \48\ (2) perfect the mechanism of a
free and open market and a national market system, protect investors
and the public interest, and not be designed to

permit unfair discrimination between customers, issuers, brokers, or
dealers; \49\ and (3) not impose any burden on competition not
necessary or appropriate in furtherance of the purposes of the Act.\50\
---------------------------------------------------------------------------

    \48\ 15 U.S.C. 78f(b)(4).
    \49\ 15 U.S.C. 78f(b)(5).
    \50\ 15 U.S.C. 78f(b)(8).
---------------------------------------------------------------------------

    In temporarily suspending the Exchange's fee change, the Commission
intends to further consider whether assessing the proposed monthly
Trading Rights Fee on certain Members is consistent with the statutory
requirements applicable to a national securities exchange under the
Act. In particular, the Commission will consider whether the proposed
rule change satisfies the standards under the Act and the rules
thereunder requiring, among other things, that an exchange's rules
provide for the equitable allocation of reasonable fees among members,
issuers, and other persons using its facilities; not permit unfair
discrimination between customers, issuers, brokers or dealers; and do
not impose any burden on competition not necessary or appropriate in
furtherance of the purposes of the Act.\51\
---------------------------------------------------------------------------

    \51\ See 15 U.S.C. 78f(b)(4), (5), and (8), respectively.
---------------------------------------------------------------------------

    Therefore, the Commission finds that it is appropriate in the
public interest, for the protection of investors, and otherwise in
furtherance of the purposes of the Act, to temporarily suspend the
proposed rule changes.\52\
---------------------------------------------------------------------------

    \52\ For purposes of temporarily suspending the proposed rule
change, the Commission has considered the proposed rule's impact on
efficiency, competition, and capital formation. See 15 U.S.C.
78c(f).
---------------------------------------------------------------------------

IV. Proceedings To Determine Whether To Approve or Disapprove the
Proposed Rule Change

    The Commission is instituting proceedings pursuant to Sections
19(b)(3)(C) \53\ and 19(b)(2)(B) of the Act \54\ to determine whether
the proposed rule change should be approved or disapproved. Institution
of proceedings does not indicate that the Commission has reached any
conclusions with respect to any of the issues involved. Rather, the
Commission seeks and encourages interested persons to provide
additional comment on the proposed rule change to inform the
Commission's analysis of whether to disapprove the proposed rule
change.
---------------------------------------------------------------------------

    \53\ 15 U.S.C. 78s(b)(3)(C). Once the Commission temporarily
suspends a proposed rule change, Section 19(b)(3)(C) of the Act
requires that the Commission institute proceedings under Section
19(b)(2)(B) to determine whether a proposed rule change should be
approved or disapproved.
    \54\ 15 U.S.C. 78s(b)(2)(B).
---------------------------------------------------------------------------

    Pursuant to Section 19(b)(2)(B) of the Act,\55\ the Commission is
providing notice of the grounds for possible disapproval under
consideration:
---------------------------------------------------------------------------

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

     Section 6(b)(4) of the Act, which requires that the rules
of a national securities exchange ``provide for the equitable
allocation of reasonable dues, fees, and other charges among its
members and issuers and other persons using its facilities,'' \56\
---------------------------------------------------------------------------

    \56\ 15 U.S.C. 78f(b)(4).
---------------------------------------------------------------------------

     Section 6(b)(5) of the Act, which requires, among other
things, that the rules of a national securities exchange be ``designed
to perfect the operation of a free and open market and a national
market system'' and ``protect investors and the public interest,'' and
not be ``designed to permit unfair discrimination between customers,
issuers, brokers, or dealers,'' \57\ and
---------------------------------------------------------------------------

    \57\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------

     Section 6(b)(8) of the Act, which requires that the rules
of a national securities exchange ``not impose any burden on
competition not necessary or appropriate in furtherance of the purposes
of [the Act].'' \58\
---------------------------------------------------------------------------

    \58\ 15 U.S.C. 78f(b)(8).
---------------------------------------------------------------------------

    As noted above, the proposal imposes a new monthly Trading Rights
Fee on certain Members. The Commission notes that the Exchange's
statements in support of the proposed rule change are general in nature
and lack detail and specificity. For example, while the Exchange
asserts that the proposed fee will fund overall regulation and
maintenance of the Exchange and provides broad figures illustrating the
percentage by which RSA and regulatory costs have increased from 2016
to 2019, the Exchange has not described how the proposed fee would
address these regulatory increases.\59\ Further, the rationale provided
does not address how the proposed fee is an equitable allocation of
fees beyond noting that it applies to all Members who do not qualify
for a waiver, and broadly asserting that the proposed fee should
benefit ``all Members'' by contributing to the provision of ``an
efficient and well-regulated market'' for Members.\60\
---------------------------------------------------------------------------

    \59\ See Notice, supra note 4, at 43243-44.
    \60\ See id. at 43244.
---------------------------------------------------------------------------

    As discussed above, one commenter asserts, among other concerns,
that the Exchange's cost-based discussion is not sufficiently detailed
to support its claims that the proposed Trading Rights Fee is
consistent with the requirements of the Act, and that the Exchange has
not offered sufficient detail to establish that the proposed fee would
be constrained by significant competitive forces.\61\ The commenter
indicates that, among other things, additional information addressing
both revenues and costs is lacking in the Exchange's proposal.
---------------------------------------------------------------------------

    \61\ See SIFMA Letter, supra note Error! Bookmark not defined.,
at 1-2
---------------------------------------------------------------------------

    Under the Commission's Rules of Practice, the ``burden to
demonstrate that a proposed rule change is consistent with the [Act]
and the rules and regulations issued thereunder . . . is on the [SRO]
that proposed the rule change.'' \62\ The description of a proposed
rule change, its purpose and operation, its effect, and a legal
analysis of its consistency with applicable requirements must all be
sufficiently detailed and specific to support an affirmative Commission
finding,\63\ and any failure of an SRO to provide this information may
result in the Commission not having a sufficient basis to make an
affirmative finding that a proposed rule change is consistent with the
Act and the applicable rules and regulations.\64\
---------------------------------------------------------------------------

    \62\ Rule 700(b)(3), Commission Rules of Practice, 17 CFR
201.700(b)(3).
    \63\ See id.
    \64\ See id.
---------------------------------------------------------------------------

    The Commission is instituting proceedings to allow for additional
consideration and comment on the issues raised herein, including as to
whether the proposed fees are consistent with the Act, and
specifically, with its requirements that exchange fees be reasonable
and equitably allocated; be designed to perfect the mechanism of a free
and open market and the national market system, protect investors and
the public interest, and not be unfairly discriminatory; or not impose
an unnecessary or inappropriate burden on competition.\65\
---------------------------------------------------------------------------

    \65\ See 15 U.S.C. 78f(b)(4), (5), and (8).
---------------------------------------------------------------------------

V. Commission's Solicitation of Comments

    The Commission requests written views, data, and arguments with
respect to the concerns identified above as well as any other relevant
concerns. Such comments should be submitted by October 24, 2019.
Rebuttal comments should be submitted by November 7, 2019. Although
there do not appear to be any issues relevant to approval or
disapproval which would be facilitated by an oral presentation of
views, data, and arguments, the Commission will consider, pursuant to
Rule 19b-4, any request for an opportunity to make an oral
presentation.\66\
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    \66\ 15 U.S.C. 78s(b)(2). Section 19(b)(2) of the Act grants the
Commission flexibility to determine what type of proceeding--either
oral or notice and opportunity for written comments--is appropriate
for consideration of a particular proposal by an SRO. See Securities
Acts Amendments of 1975, Report of the Senate Committee on Banking,
Housing and Urban Affairs to Accompany S. 249, S. Rep. No. 75, 94th
Cong., 1st Sess. 30 (1975).

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    The Commission asks that commenters address the sufficiency and
merit of the Exchange's statements in support of the proposal, in
addition to any other comments they may wish to submit about the
proposed rule change.
    Interested persons are invited to submit written data, views, and
arguments concerning the proposed rule change, including whether the
proposed rule change is consistent with the Act. Comments may be
submitted by any of the following methods:

Electronic Comments

     Use the Commission's internet comment form (http://www.sec.gov/rules/sro.shtml); or
exception occurred on : 2019-21473.htm
exception occurred on : 2019-21473.htm
     Send an email to r[email protected]. Please include
File Number SR-CboeEDGA-2019-014 on the subject line.

Paper Comments

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

All submissions should refer to File Number SR-CboeEDGA-2019-014. This
file number should be included on the subject line if email is used. To
help the Commission process and review your comments more efficiently,
please use only one method. The Commission will post all comments on
the Commission's internet website (http://www.sec.gov/rules/sro.shtml).
Copies of the submission, all subsequent amendments, all written
statements with respect to the proposed rule change that are filed with
the Commission, and all written communications relating to the proposed
rule change between the Commission and any person, other than those
that may be withheld from the public in accordance with the provisions
of 5 U.S.C. 552, will be available for website viewing and printing in
the Commission's Public Reference Room, 100 F Street NE, Washington, DC
20549 on official business days between the hours of 10:00 a.m. and
3:00 p.m. Copies of the filing also will be available for inspection
and copying at the principal office of the Exchange. All comments
received will be posted without change. Persons submitting comments are
cautioned that we do not redact or edit personal identifying
information from comment submissions. You should submit only
information that you wish to make available publicly. All submissions
should refer to File Number SR-CboeEDGA-2019-014 and should be
submitted on or before October 24, 2019. Rebuttal comments should be
submitted by November 6, 2019.

VI. Conclusion

    It is therefore ordered, pursuant to Section 19(b)(3)(C) of the
Act,\67\ that File Number SR-CboeEDGA-2019-014 be and hereby is,
temporarily suspended. In addition, the Commission is instituting
proceedings to determine whether the proposed rule change should be
approved or disapproved.
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    \67\ 15 U.S.C. 78s(b)(3)(C).

    For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\68\
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    \68\ 17 CFR 200.30-3(a)(57) and (58).
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Eduardo A. Aleman,
Deputy Secretary.
[FR Doc. 2019-21473 Filed 10-2-19; 8:45 am]
BILLING CODE 8011-01-P