Data Requirement:PMRA Data Code {............}                         EPA DP Barcode420874                         OECD Data Point{............}                         EPA MRID 49307519                         EPA Guideline850.1010

Test material:Tetrachloroterephthalic Acid (TPA) (Metabolite of DCPA)   Purity: 99.94% Common name: Chemical name:IUPAC:              CAS name:              CAS No.: 2136-79-0             Synonyms: Primary Reviewer:Teresa NelisSignature:   Environmental Scientist, CDM Smith/CSS-Dynamac JVDate:   10/11/2016 Secondary Reviewer: Moncie V. WrightSignature:   Environmental Scientist, CDM Smith/CSS-Dynamac JVDate:   10/28/2016

Primary Reviewer:Christina M. WendelSignature:  EPA/OPP/EFED/ERB2/Biologist Date: 10/25/2021

Secondary Reviewer(s): Michael WagmanSignature:  EPA/OPP/EFED/ERB2/Senior ScientistDate: 11/12/2021

Reference/Submission No.:  {.....................}

Company Code {............}[For PMRA] Active Code{............}[For PMRA]  Use Site Category:{............}[For PMRA] EPA PC Code 078701

Date Evaluation Completed: 12-11-2021

CITATION: Wood, J. 2014. Tetrachloroterephthalic Acid (TPA): Acute Toxicity to Daphnia Magna (Revised per PRN 11-03 and 86-5). Study performed by Covance Laboratories Ltd, North Yorkshire, England. Laboratory Study Number: 1708/021. Study sponsored by AMVAC Chemical UK Ltd, Surrey, England. Study completed November 24, 2003.

This Data Evaluation Record may have been altered by the Environmental Fate and Effects Division subsequent to signing by CDM/CSS-Dynamac JV personnel.

EXECUTIVE SUMMARY:

The 48-hour acute toxicity of Tetrachloroterephthalic Acid (TPA) (metabolite of DCPA) to Daphnia magna was studied under static conditions. Daphnids were exposed to TPA at nominal concentrations of 0 (negative control) and 100 mg a.i./L for 48 hours. The mean-measured concentrations were <LOD (<0.002, control) and 103 mg a.i./L.

Mortality and sublethal effects were observed daily. No mortality or sublethal effects were observed in this experiment. The 48-hour EC50 was >103 mg a.i./L, and the observed NOAEC was 103 mg a.i./L based on the mean-measured concentrations.

Based on the results of this study, TPA (metabolite of DCPA) would be classified as practically non-toxic to Daphnia magna in accordance with the classification system of the U.S. EPA.

This study is scientifically sound and is classified as acceptable.

   Results Synopsis

   Test Organism Age (e.g., 1st instar): <24 hours old    Test Type (Flow-through, Static, Static Renewal):  Static

   48-hour EC50: >103 mg a.i./L95% C.I.:  N/A    Probit Slope:  N/A95% C.I.:  N/A    Observational NOAEC: 103 mg a.i./L     Endpoint(s) Affected:  None I. MATERIALS AND METHODS

   GUIDELINE FOLLOWED:This study was conducted according to a protocol that meets the testing requirements of the U.S. Environmental Protection Agency's Ecological Effects Test Guideline OCSPP (form. OPPTS) 850.1010: Aquatic Invertebrate Acute Toxicity Test, Freshwater Daphnids, OECD Guideline for the testing of Chemicals No 202 Part 1 Daphnia sp., Acute Immobilisation Test, and JMAFF Guideline 2-7-2.  The reviewer assessed the study methods and results according to U.S. EPA OCSPP 850.1010. The following deficiencies were noted:     Health of the parental daphnids (e.g., number of broods, presence of ephippia) was not described. This is an uncertainty and considered a study deficiency for both the draft OPPTS and final OCSPP 850.1010 guideline. However, this is considered a minor deficiency with the information provided in Appendix 1 in the study report, although not complete it provides some insight into the health and maintenance of the laboratory cultures of D. magna that were used in the study. Juveniles for use in acute toxicity tests were collected from the third brood onwards from adults aged between 14 and 42 days. OPPTS guidance recommends that juveniles are collected from the fourth brood onward. However, OECD guidance and the final OCSPP 850.1010 guideline only recommends that juveniles used for testing are not first brood progeny. This is considered a minor deficiency. Light intensity measurements were not reported, nor was the use of a transition period. It was only reported that a 16L:8D hour photoperiod was utilized (Appendix 1; pg. 25-26). Both sets of guidelines suggest that light intensity be reported. Both draft and final OPPTS and OCSPP 850.1010 guidelines recommends 30-minute transition periods between light and dark conditions, while OECD guidance does not address the use of transition period. This would be considered a minor deficiency. The TOC, particulate matter, pesticides, metals, and residual chlorine content of the test water were not reported. Both draft and final OPPTS and OCSPP 850.1010 guidelines recommends specific maximum concentrations for each of these categories, while OECD guidance does not. However, this is considered a minor deficiency as the solubility (175.4 mg/L) of TPA in water would not result in an underestimation of toxicity; and the full preparation details of the dilution water were presented in Appendix 1 of the study report (pg. 25-26).

These deficiencies do not have an impact on the scientific integrity of this experiment.

   COMPLIANCE:Signed and dated GLP, Quality Assurance, and Data Confidentiality statements were provided.  This study was conducted in compliance with U.S. EPA Good Laboratory Practice regulations (40 CFR, Part 160), UK Statutory Instrument 1999 No. 3106, the OECD Principles on GLP ENV/MC/CHEM (98)17, and GLP Standards for Agricultural Chemicals 14-Seisan-7739, with no exceptions indicated.

   A. MATERIALS:

   1. Test material:  Tetrachloroterephthalic Acid (TPA) (metabolite of DCPA)

      Description: White powder

      Lot No./Batch No.: 021101

      Purity: 99.94%              Stability of compound        under test conditions:Analytical verification performed at time 0 yielded a recovery of 107%. At 48 hours (test termination), recoveries averaged 104% of the nominal concentration, indicating the test material was stable.

      Storage conditions of        test chemicals: The test material was stored at room temperature (20oC +- 10).        Physicochemical properties of TPA. Parameter Values Comments Water solubility at 20°C Not reported.

Vapor pressure Not reported.

UV absorption Not reported.

pKa Not reported.

Kow Not reported.

      (OECD recommends water solubility, stability in water and light, pKa, Pow, and vapor pressure of test compound)

   2. Test organism:

Species: Daphnia magna (Strain not reported) (EPA preferred species is Daphnia magna; OECD preferred species is Daphnia magna or any other suitable Daphnia species) Age at test initiation:<24 hours old (EPA recommends that Daphnids are in their first instar (#24 hrs old) and that all organisms are approximately the same size and age; OECD requires age <24 hrs old) Source: In-house laboratory cultures maintained at Covance Laboratories, Ltd., originally obtained from Sheffield University, Sheffield, UK, from the third or later brood of a given parent. (EPA requires that all organisms are from the same source. Daphnids from ephippia-producing cultures should not be used; Daphnids should be from the fourth or later brood of a given parent)        B.  STUDY DESIGN:

      1. Experimental Conditions

         a. Range-finding study A 48-hour static range-finding study was conducted with a negative control and concentrations of 0.1, 1.0, 10 and 100 mg a.i./L. Twenty daphnids (four replicates, five daphnids per replicate, <24 hours old) were exposed to each control and treatment group. After 48 hours of exposure, immobilization was 0% in the control and in all the treatment groups. One daphnia that was floating on the surface at 24 hours in the 100 mg a.i./L nominal treatment group re-submerged by 48 hours.                     b. Definitive Study

Table 1:  Experimental Parameters Parameter Details Remarks

Criteria Acclimation Period:

Conditions: (same as test or not)

Feeding:

Health: (any mortality observed)

Daphnids were cultured for 14 to 42 days prior to testing under similar conditions to those used for testing.

Similar to test: ASTM standard hard water (prepared with analysis grade reagents and reverse-osmosis water), 16L:8D photoperiod, dissolved oxygen ranged from 98 to 100%, pH ranged from 7.5 to 7.8, and temperature ranged from 20.2 to 20.7ºC).

Daphnids were fed a concentrated suspension of Chlorella vulgaris at 5 x 105 cells/mL (<=2 weeks in age), and seaweed extract (Marinure, Glenside Organics, Scotland) daily.

The adults used to produce offspring for this study were 14 to 42 days old. Juveniles collected for use in the study were collected from the third brood onwards.  New cultures were started with D. magna <24 hours old at a density of about 20/L. D. magna were cultured in 600 mL glass beakers containing 500 mL of standard hard water.  Water in the glass beakers were renewed weekly.

All juveniles used to initiate a test were <24 hours old.

The recommended acclimation period is a minimum of 7 days. Organisms should not feed during the study.  Pretest mortality should be <3% 48 hours prior to testing. Duration of the test 48 hours

EPA requires 96 hours, except daphnids which are 48 hours. Test condition Static/flow-through

Type of dilution system for flow- through method.

Renewal rate for static renewal

Static

N/A

N/A

The recommended flow rates are 5 - 10 volume additions/24 hours; meter systems should be calibrated before and after the study and checked twice daily during the test period. Aeration, if any None provided.

Test vessel

Material: (glass/stainless steel)

Size: Fill volume:

Glass beakers

400 mL 200 mL

EPA requires:  small organisms in 3.9 L (1 gallon) wide mouth jars with 2-3 L of solution or daphnids and midge larvae in 250 ml jars w/ 200 ml fill Source of dilution water ASTM standard hard water (prepared with analysis grade reagents and reverse-osmosis water).  The final concentrations of the following constituents in dilution water were as follows: Sodium hydrogen carbonate: 192 mg/L Calcium sulphate dihydrate: 120 mg/L Magnesium sulphate heptahydrate: 246 mg/L Potassium chloride: 8 mg/L

The dilution water had a hardness ranging from 165-170 mg/L as CaCO3, alkalinity ranging from 77-84 mg/L as CaCO3, a pH ranging from7.5-7.8, and a dissolved oxygen % saturation ranging from 98-100%, and a culture temperature ranging from 20.2-20.7°C. Full preparation details were presented in Appendix 1 of the study report (pg. 25-26).

Recommended source of dilution water is soft, reconstituted water or water from a natural, uncontaminated source.  EPA does not recommend the use of dechlorinated tap water; however, its use may be supportable if the biological responses for the organisms and chemical analyses of residual chlorine meet conditions in the Agency's 850.1010 guidelines for dilution water (http://www.epa.gov/opptsfrs/OPPTS_Harmonized/850_Ecological_Effects_Test_Guidelines/Draft/850.1010Opdf).  Dilution water should be intensely aerated before the study.   Water parameters

Hardness pH Dissolved oxygen Temperature Total Organic Carbon Particulate matter Metals Pesticides Chlorine

163 to 168 mg/L as CaCO3 7.3 to 8.3 98 to 100% 20.1 to 20.6ºC Not reported Not reported Not reported Not reported Not reported

Alkalinity as CaCO3: 88 to 94 mg/L

Hardness: EPA recommends  40 - 48 mg/L as CaCO3 (OECD recommends 140 - 250 mg/L) pH:  EPA recommends: 7.2 - 7.6 (OECD recommends pH of 6-9); measured at start and end of test in control, high, medium, and low test concentrations Temperature:  EPA recommends: 20oC for Daphnia (measured hourly) in at least one test vessel or if water baths are used, every 6 hr, may not vary > 1oC;  OECD recommends range of 18-22C (+-1C) Dissolved oxygen:   EPA recommends: Measured at start and every 48 hours thereafter in control, high, medium, and low test concentrations. Static: 60-100% during 1st 48 hr and 40-100% during 2nd 48 hr Flow-through: 60-100% at all times Number of replicates  Negative control: Solvent control: Treatments:

4 N/A 4

EPA requires 2 or more containers for each treatment group; individuals must be randomly assigned to test vessels

OECD recommends 4 groups of 5 animals for each test concentration and the controls Number of organisms per replicate Negative control: Solvent control: Treatments:

5 N/A 5 20 daphnids per concentration and control.

EPA/OECD requires 5 treatment levels plus one or more control groups; no more than 10% or 5% of control organisms should die during a static or flow-through study, respectively

EPA requires a minimum of 20 daphnids in 2 or more containers per treatment; however, if a limit test is conducted, it must be shown that the LC50/EC50 is >100 mg/L by exposing 30 organisms to >=100 mg/L or greater. Biomass loading rate for static <= 0.8 g/L at <= 17oC and  0.5 g/L at > 17oC; flow-through:  10 g/L at <= 17C and <=5 g/L at > 17C.

OECD recommends a minimum of 20 animals, preferably with 4 groups of 5 animals for each test concentration. There should be at least 2ml of test solution for each animal. Treatment concentrations Nominal:

Measured:

0 (negative control), 100 mg a.i./L

<LOD (<0.002, control), 103 mg a.i./L This study was conducted as a limit test.

The negative control medium was prepared using ASTM only

Treatment concentrations should include a geometric series of at least five concentrations plus a control with each recommended concentration being at least 60% of the next higher one. The variability of measured concentrations between replicates of the same concentration should not exceed 1.5.

OECD recommends that the highest test concentration should result in 100% immobilization and not be >=1 g/L, while the lowest concentration should have no observable effect. Solvent (type, percentage, if used) N/A

Solvents should not exceed 0.5 ml/L for static tests or 0.1 ml/L for flow-though tests. OECD recommends that the solvent not exceed 100 mg/L. Lighting Provided by fluorescent bulbs at a photoperiod of 16L:8D; transition period and light intensity measurements not reported.

EPA-recommended photoperiod is 16 hours of light and 8 hours of dark with a 15-30 minute transition period. OECD: optional light-dark cycle or complete darkness. Stability of chemical in the test system The test material was stable; recovery was 103 to 104% of nominal at 48 hours.

Recovery of chemical

Level of Quantitation (LOQ) Level of Detection (LOD) Test solutions were sampled in every treatment vessel at 0 and 48 hours. Test solutions were analyzed for TPA using HPLC with UV detection (220 nm).

Not reported 0.002 mg a.i./L Samples (duplicate 20 mL volumes) of test solutions for analysis were taken from each test vessel for chemical analysis of TPA at the start and end of the exposure period.

At the start of exposure and at the end of exposure period the test solutions were clear and colorless.  Positive control {if used, indicate the chemical and concentrations} N/A

Other parameters, if any None

2. Observations:

Table 2:  Observations Criteria Details Remarks Parameters measured including sublethal effects Immobility and sublethal effects Considered immobile if, when the contents of the test vessel were briefly swirled, they did not swim during a 15-second period of observation. Observation intervals  0, 24, and 48 hours

Were raw data included? Yes

Other observations, if any None

                    II. RESULTS AND DISCUSSION        A. MORTALITY:

   No immobility occurred in the control or treatment levels throughout the study. The study author reported an EC50 value of >100 mg a.i./L, based on the nominal concentrations.     Table 3:  Effect of TPA on Mortality of Daphnia magna1 Treatment Nominal                [Mean-Measured] (mg a.i./L) No. of Organisms Observation Period

0 hour 24 hours 48 hours

No Dead % Immobility No Dead % Immobility No Dead % Immobility <LOD* (Control; dilution water only) 20 0 0 0 0 0 0 100 [103] 20 0 0 0 0 0 0 EC50 >100 mg a.i./L Positive control, if used. mortality:  LC50: N/A   1 Data were obtained from Table 3 and 4 on page 23 of the study report.   * Level of Detection (LOD) = 0.002 mg a.i./L

   B. SUB-LETHAL TOXICITY ENDPOINTS:

   No sublethal effects were observed in the control or any of the treatment groups that were tested.

Table 4:  Effect of TPA on Sublethal Effects  -  Daphnia magna Treatment Nominal                [Mean-Measured] (mg a.i./L) Observation period

0 hour 24 hours 48 hours

% affected % affected % affected <LOD* (Control; dilution water only) 0 0 0 100 [103] 0 0 0 EC50 N/A Positive control, if used  % sublethal effect: EC50: N/A   * Level of Detection (LOD) = 0.002 mg a.i./L

C. REPORTED STATISTICS:         No concentration tested resulted in >=50% mortality, so the EC50 value was empirically estimated. Nominal concentrations were used for the analysis.

   D. VERIFICATION OF STATISTICAL RESULTS:

   Statistical Method: The mortality data and mean-measured concentrations of the test material were entered into the program CETIS, (Version <IP_ADDRESS>) with backend settings implemented by EFED on 10/20/15. The reviewer visually determined the EC50 due to a complete lack of mortality in this study. Mean-measured concentrations were used.        48-hour LC50:  >103 mg a.i./L95% C.I.:  N/A    Probit Slope: N/A

   E.  STUDY DEFICIENCIES:

   There were no major study deficiencies. Minor deficiencies included the following: the health of parental daphnids (e.g., number of broods, presence of ephippia) was not fully described, juveniles for use in acute toxicity tests were collected from the third brood onwards from adults aged between 14 and 42 days, light intensity measurements were not reported, nor was the use of a transition period, and the TOC, particulate matter, pesticides, metals, and residual chlorine content of the test water were not reported. All were considered to be minor deficiencies.

   F.  REVIEWER'S COMMENTS:         The reviewer's and the study author's results were in general agreement; there was no toxicity in this study. However, the reviewer's results are reported using the mean-measured concentration, and therefore reported in the Executive Summary and Conclusions sections of this DER.        The study was conducted following the draft OPPTS 850.1010 (1996) guideline, OECD 202 guideline, and JMAFF 2-7-2 Guideline, and the reviewer considered both the draft and the final OCSPP 850.1010 (2016) guideline and OECD 202 guideline in their evaluation of the data.        The in-life phase of the study was initiated on May 12, 2003 and the definitive test was completed on April 2, 2003.         G. CONCLUSIONS:

   This study is scientifically sound and is classified as acceptable.  There was no mortality or sublethal effects observed in this study. The 48-hour EC50 value for Tetrachloroterephthalic Acid (TPA) (metabolite of DCPA) was >103 mg a.i./L, and the observed NOAEC was 103 mg a.i./L, based on the mean-measured concentration.

III. REFERENCES:

None.


[Federal Register Volume 80, Number 31 (Tuesday, February 17, 2015)]
[Notices]
[Pages 8383-8387]
[FR Doc No: 2015-03097]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-74241; File No. SR-OCC-2014-812]

Self-Regulatory Organizations; The Options Clearing Corporation;
Notice of No Objection to Advance Notice Concerning Extended and
Overnight Trading Sessions

February 10, 2015.
    On December 12, 2014, The Options Clearing Corporation (``OCC'')
filed with the Securities and Exchange Commission (``Commission'')
advance notice SR-OCC-2014-812 (``Advance Notice'') \1\ pursuant to
Section 806(e)(1) of the Payment, Clearing, and Settlement Supervision
Act of 2010 (``Clearing Supervision Act'') \2\ and Rule 19b-4(n)(1)(i)
under the Securities Exchange Act of 1934 (``Exchange Act'').\3\ The
Advance Notice was published for comment in the Federal Register on
January 22, 2015.\4\ The Commission did not receive any comments on the
Advance Notice. This publication serves as a notice of no objection to
the Advance Notice.
---------------------------------------------------------------------------

    \1\ OCC initially filed a similar advance notice on September
17, 2014. Securities Exchange Act Release No. 73343 (October 14,
2014), 79 FR 62684 (October 20, 2014), (SR-OCC-2014-805). OCC
withdrew that advance notice on October 28, 2104. Securities
Exchange Act Release No. 73710 (December 1, 2014), 79 FR 72225
(December 5, 2014), (SR-OCC-2014-805).
    \2\ 12 U.S.C. 5465(e)(1). The Financial Stability Oversight
Council designated OCC a systemically important financial market
utility on July 18, 2012. See Financial Stability Oversight Council
2012 Annual Report, Appendix A, http://www.treasury.gov/initiatives/fsoc/Documents/2012%20Annual%20Report.pdf. Therefore, OCC is
required to comply with the Clearing Supervision Act and file
advance notices with the Commission. See 12 U.S.C. 5465(e).
    \3\ 17 CFR 240.19b-4(n)(1)(i).
    \4\ See Securities Exchange Act Release No. 74073 (January 15,
2015), 80 FR 3287 (January 22, 2015) (SR-OCC-2014-812). OCC also
filed the proposal contained in this advance notice as a proposed
rule change under Section 19(b)(1) of the Act and Rule 19b-4
thereunder, which was published for comment in the Federal Register
on December 30, 2014. 15 U.S.C. 78s(b)(1); 17 CFR 240.19b-4. See
Securities Exchange Act Release No. 73907 (December 22, 2014), 79 FR
78543 (December 30, 2014) (SR-OCC-2014-24). The Commission did not
receive any comments on the proposed rule change.
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I. Description of the Advance Notice

Description of Change

    This advance notice was filed in connection with OCC's proposed
change to its operations concerning the clearance of confirmed trades
executed in overnight trading sessions offered by exchanges for which
OCC provides clearance and settlement services. OCC currently clears
overnight trading activity for CBOE Futures Exchange, LLC (``CFE'').\5\
The total number of trades submitted to OCC from overnight trading
sessions is nominal, typically less than 3,000 contracts per session.
However, OCC has recently observed an industry trend whereby exchanges
are offering overnight trading sessions beyond traditional hours.
Exchanges offering overnight trading sessions have indicated to OCC
that such sessions benefit market participants by providing additional
price transparency and hedging opportunities for products traded in
such sessions, which, in turn, promotes market stability.\6\ In light
of this trend, OCC proposed to implement a framework for clearing
trades executed in such sessions that includes: (1) Qualification
criteria used to approve clearing members for overnight trading
sessions, (2) systemic controls to identify trades executed during
overnight trading sessions by clearing members not approved for such
sessions, (3) enhancements to OCC's overnight monitoring of trades
submitted by exchanges during overnight trading sessions, (4)
enhancements to OCC's credit controls with respect to monitoring
clearing members' credit risk during overnight trading sessions,
including procedures for contacting an exchange offering overnight
trading sessions in order to invoke use of the exchange's kill switch,
and (5) taking appropriate disciplinary action against clearing members
who attempt to clear during the overnight trading session without first
obtaining requisite approvals. These changes (described in greater
detail below) are designed to reduce and mitigate the risks associated
with clearing trades executed in overnight trading sessions. In
addition, the only products that will be eligible for clearing in
overnight trading sessions are index options and index futures
products.
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    \5\ ELX Futures LP (``ELX'') previously submitted overnight
trading activity to OCC, but currently does not submit such trades.
OCC will re-evaluate ELX's risk controls in the event ELX re-
institutes its overnight trading sessions.
    \6\ See CFE-2014-010 at http://cfe.cboe.com/publish/CFErulefilings/SR-CFE-2014-010.pdf.
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    OCC's framework for determining whether to provide clearing
services for overnight trading sessions offered by an exchange is
designed to work in conjunction with the risk controls of the exchange
that offers overnight trading sessions. OCC will confirm an exchange's
risk controls as well as its staffing levels as they relate to
overnight trading sessions to determine if OCC may reasonably rely on
such risk controls to reduce the risk presented to OCC by the
exchange's overnight trading sessions. Such exchange risk controls will
consist of: (1) Price reasonability checks, (2) controls to prevent
orders from being executed beyond a certain percentage (determined by
the exchange) from the initial execution price, (3) activity based
protections which focus on risk beyond price, such as a high number of
trades occurring in a set period of time, and (4) kill switch
capabilities, which may be initiated by the exchange and can cancel all
open quotes or all orders of a particular participant. OCC believes
that confirming the existence of applicable pre-trade risk controls as
well as overnight staffing at the relevant exchanges is essential to
mitigating risks presented to OCC from overnight trading sessions.\7\
OCC believes that providing clearing services to exchanges offering
such sessions is consistent with

OCC's mission to provide market participants with clearing and risk
management solutions that respond to changes in the marketplace.
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    \7\ Comparable controls are applied to futures and future option
trades executed in overnight trading sessions currently cleared by
OCC, although such controls have been implemented by clearing
futures commission merchants (``clearing FCMs'') pursuant to
Commodity Futures Trading Commission (``CFTC'') Regulation 1.73.
This requires clearing FCMs to monitor for adherence to such
controls during regular and overnight trading sessions. Some of
these risk control measures are similar to those proposed by OCC for
use in clearing securities trades in overnight trading sessions. For
instance, OCC confirmed that CFE maintains kill switch capabilities.
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Qualification Criteria

    In order to mitigate risks associated with clearing for overnight
trading sessions, clearing members that participate in such trading
sessions will be required to provide contact information to OCC for
operational and risk personnel available to be contacted by OCC during
such sessions. In addition, OCC will require that clearing members
participating in an overnight trading session post additional margin in
a designated account in order to mitigate the risk that OCC cannot
draft a clearing member's bank account during an overnight trading
session.\8\ OCC also will adopt a procedure whereby, on a quarterly
basis, it confirms its record of clearing members eligible for
overnight trading sessions with a similar record maintained by
exchanges offering such overnight trading sessions.
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    \8\ Clearing members will be required to designate a firm
account to ensure that OCC has a general lien on the assets in the
account and can use them to satisfy any obligation of the clearing
member to OCC.
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    With respect to providing operational and risk contacts, under OCC
Rule 201, each clearing member is required to maintain facilities for
conducting business with OCC and to have a representative authorized in
the name of the clearing member to take all action necessary for
conducting business with OCC available at the facility during such
hours as may be specified from time-to-time by OCC. Similarly, OCC
Rules 214(c) and (d) require clearing members to ensure that they have
the appropriate number of qualified personnel and to maintain the
ability to process anticipated volumes and values of transactions. OCC
will use this existing authority to require clearing members trading
during overnight trading sessions to maintain operational and risk
staff that may be contacted by OCC during such sessions.
    OCC will impose upon clearing members qualified to participate in
overnight trading sessions additional margin requirement in an amount
of the lesser of $10 million or 10% of the clearing member's net
capital (``Additional Margin''), which will be equal to the first
monitoring risk threshold (described below) and which will be collected
the morning before each overnight trading sessions. Clearing members
must identify the proprietary account that would be charged the
Additional Margin amount. The Additional Margin requirement is intended
to provide OCC with additional margin assets should a clearing member's
credit risk increase during overnight trading sessions.\9\ OCC proposes
to adopt a process whereby each morning OCC Financial Risk Management
staff will assess the Additional Margin requirement against clearing
members eligible to participate in overnight trading sessions. Clearing
members that do not have sufficient excess margin on deposit with OCC
to meet the Additional Margin amount will be required to deposit
additional funds with OCC to satisfy the Additional Margin requirement
prior to participating in any future overnight trading sessions.\10\
This process will be adopted under existing rule authority.
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    \9\ Clearing members approved for overnight trading sessions
that do not meet the Additional Margin requirement for a given
overnight trading session would be treated like a clearing member
not approved for overnight trading sessions, as described below.
    \10\ Under OCC Rule 601, OCC has the discretion to fix the
margin requirement for any account at an amount that it deems
necessary or appropriate under the circumstances to protect the
interests of clearing members, OCC and the public.
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    Moreover, OCC also will confirm that an exchange offering overnight
trading sessions has adopted a procedure whereby such exchange would
contact OCC when a trader requests trading privileges during overnight
trading sessions. The purpose of this contact is to verify that the
trader's clearing firm (i.e., the OCC clearing member) is approved for
overnight trading sessions. If the applicable OCC clearing member is
not approved for overnight trading sessions, then the clearing member
must receive OCC's approval for overnight trading sessions, or the
exchange will not provide the trader trading privileges during
overnight trading sessions. Moreover, OCC will confirm that an exchange
offering overnight trading sessions has implemented a procedure to
periodically (i.e., quarterly) validate its record of approved clearing
firms against OCC's record of clearing members approved for overnight
trading sessions.\11\ Any discrepancies between the two records will be
promptly resolved by either the clearing member obtaining approval from
OCC for overnight trading sessions or by the exchange revoking the
clearing firm's trading privileges for overnight trading sessions.
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    \11\ As discussed in more detail below, clearing members that
attempt to participate in overnight trading sessions without the
necessary approval will be subject to a minor rule violation fine.
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Systemic Controls

    OCC will implement system changes so that trades submitted to OCC
during overnight trading sessions that have been executed by clearing
members not approved for such trading sessions will be reviewed by OCC
staff after acceptance but before being processed (each such trade
being a ``Reviewed Trade''). OCC will contact the submitting exchange
regarding each Reviewed Trade in order to determine if the trade is a
valid trade. If the exchange determines that the Reviewed Trade was in
error such that, as provided in Article VI, Section 7(c) of OCC's By-
laws, new or revised trade information is required to properly clear
the transaction, OCC expects the exchange would instruct OCC to
disregard or ``bust'' the trade. If the exchange determines that the
Reviewed Trade was not in error, then OCC will clear the Reviewed Trade
and take appropriate disciplinary action against the non-approved
clearing member, as described below. OCC believes that clearing the
Reviewed Trade is appropriate in order to avoid potentially harming the
clearing member approved for overnight trading sessions that is on the
opposite side of the transaction.

Overnight Monitoring

    OCC will implement additional overnight monitoring in order to
better monitor clearing members' credit risk during overnight trading
sessions. Such monitoring of credit risk is similar to existing OCC
practices concerning futures cleared during overnight trading hours and
includes automated processes within OCC's ENCORE clearing system to
measure, by clearing member: (i) The aggregate mark-to-market amounts
of a clearing member's positions, including positions created during
overnight trading, based on current prices using OCC's Portfolio
Revaluation system, (ii) the aggregate incremental margin produced by
all positions resulting from transactions executed during overnight
trading, and (iii) with respect to options cleared during overnight
trading hours, the aggregate net trade premium positions resulting from
trades executed during overnight trading (each of these measures being
a ``Credit Risk Number''). Hourly credit reports would be generated by
ENCORE containing the Credit Risk Numbers expressed in terms of both
dollars and, except for the mark-to-market position values, as a
percentage of net capital for each clearing member trading during
overnight trading sessions. The Credit Risk Numbers are the same
information used by OCC staff to evaluate clearing member exposure
during regular trading hours and, in addition to OCC's knowledge of its
clearing members' businesses, are effective measures of the

risk presented to OCC by each clearing member. OCC's Operations staff
will review such reports as they are generated and, in the event that
any of the Credit Risk Numbers for positions established by a clearing
member during an overnight trading session exceed established
thresholds, staff will alert OCC's Market Risk staff \12\ of the
exceedance in accordance with established procedures, as described
below.
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    \12\ OCC's Member Services staff will also receive alerts in
order to contact clearing members as may be necessary.
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    Market Risk staff will follow a standardized process concerning
such exceedances, including escalation to OCC's management, if required
by such process. Given the nominal volume of trades executed in
overnight trading sessions that are presently submitted for clearance,
OCC does not contemplate changes in its current staffing levels that
support overnight clearing activities at this time, however, OCC will
periodically assess and adjust such staffing levels as appropriate. As
part of the overnight clearing activities, OCC has, however, designated
an on-call Market Risk duty officer who would be responsible for
reviewing issues that arise when clearing for overnight trading session
and determining what measures to be taken as well as additional
escalation, if necessary.
    With respect to OCC's escalation thresholds, if any Credit Risk
Number of a clearing member approved for overnight trading sessions is
$10 million or more, or any Credit Risk Number equals 10% or more of
the clearing member's net capital, OCC's Operations staff will be
required to provide email notification to Market Risk and Member
Services staff. If any Credit Risk Number of a clearing member not
approved for overnight trading sessions is $10 million or more, or any
Credit Risk Number equals 10% or more of the clearing member's net
capital, OCC's Operations will also notify Market Risk and Member
Services staff as well as its senior management. Such departments will
take action to prevent additional trading by the non-approved clearing
member, including contacting the exchange to invoke use of the
exchange's kill switch.
    If any Credit Risk Number of a clearing member approved for
overnight trading sessions is $50 million or more, or equals 25% or
more of the clearing member's net capital, Operations staff will be
required to contact, by telephone: (i) Market Risk and Member Services,
(ii) the applicable exchange for secondary review, and (iii) the
clearing member's designated contacts. The on-call Market Risk duty
officer also will consider if additional action is necessary, which may
include contacting a designated executive officer in order to issue an
intra-day margin call, increase the clearing member's margin
requirement in order to prevent the withdrawal of a specified amount of
excess margin collateral, if any, the clearing member has on deposit
with OCC, or contacting the exchange in order to invoke the use of its
kill switch.
    If any Credit Risk Number is $75 million or more, or equals 50% or
more of the clearing member's net capital, Operations staff will be
required to contact, by telephone, Market Risk staff, the on-call
Market Risk duty officer, and a designated executive officer. Such
officer will be responsible for reviewing the situation and determining
whether to implement credit controls, which are described in greater
detail below and include: Issuing an intra-day margin call, increasing
a clearing member's margin requirement in order to prevent the
withdrawal of a specified amount of excess margin collateral, if any,
the clearing member has on deposit with OCC, whether further escalation
is warranted in order for OCC to take protective measures pursuant to
OCC Rule 305, or contact the exchange in order to invoke use of its
kill switch. OCC stated that it chose the above described escalation
thresholds based on its analysis of historical overnight trading
activity across the futures industry. OCC believes that these
thresholds strike an appropriate balance between effective risk
monitoring and operational efficiency.

Credit Controls

    In order to address credit risk associated with trading during
overnight trading sessions, and as described above, OCC will collect
Additional Margin from clearing members as well as monitor and analyze
the impact that positions established during such sessions have on a
clearing member's overall exposure. Should the need arise based on
threshold breaches described above, and pursuant to OCC Rule 609, OCC
may require the deposit of additional margin (``intra-day margin'') by
any clearing member that increases its incremental risk as a result of
trading activity during overnight trading sessions. Accordingly, a
clearing member's positions established during such sessions will be
incorporated into OCC's intra-day margin process. Should a clearing
member's exposure significantly increase while settlement banks are not
open to process an intra-day margin call, OCC has the authority under
OCC Rule 601 to increase a clearing member's margin requirement which
will restrict its ability to withdraw excess margin collateral. The
implementation of these measures is discussed more fully below.
    In the event that a clearing member's exposure during overnight
trading sessions causes a clearing member to exceed OCC's intra-day
margin call threshold for overnight trading sessions, OCC will require
the clearing member to deposit intra-day margin equal to the increased
incremental risk presented by the clearing member. Specifically, if a
clearing member has a total risk charge \13\ exceeding 25% (a reduction
of the usual figure of 50%), as computed overnight by OCC's STANS
system, and a loss of greater than $50,000 from an overnight trading
session(s), as computed by Portfolio Revaluation, OCC will initiate an
intra-day margin call. OCC will know at approximately 8:30 a.m.
(Central Time) if an intra-day margin call on a clearing member will be
initiated based on breaches of these thresholds. This ``start of
business'' margin call is in addition to daily margin OCC collects from
clearing members pursuant to OCC Rule 605, any intra-day margin call
that OCC may initiate as a result of regular trading sessions, or
special margin call that OCC may initiate.
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    \13\ Total risk charge is a number derived from STANS outputs
and is the sum of expected shortfall, stress test charges and any
add-on charges computed by STANS. STANS is OCC's proprietary margin
methodology.
---------------------------------------------------------------------------

    In addition to, or instead of, requiring additional intra-day
margin, OCC Rule 601 \14\ and OCC's Clearing Member Margin Call Policy
will work together to authorize Market Risk staff to increase a
clearing member's margin requirement which may be in an amount equal to
an intra-day margin call.\15\ (Any increased margin requirement will
remain in effect until the next business day.) This action will
immediately prevent clearing members from withdrawing any excess margin
collateral (in the amount of the increased margin requirement) the
clearing member has deposited with OCC. With respect to clearing trades
executed in overnight trading sessions, and in the event OCC requires
additional margin from a clearing member, Market Risk staff may use
increased margin requirements as a means of collateralizing the
increase in

incremental risk a clearing member incurred during such sessions
without having to wait for banks to open to process an intra-day margin
call.\16\ Such action may be taken by OCC instead of, or in addition
to, issuing an intra-day margin call depending on the amount of excess
margin a clearing member has on deposit with OCC and the amount of the
incremental risk presented by such clearing member. OCC believes that
the expansion of its intra-day margin call process as described in the
preceding paragraph, including OCC's ability to manually increase
clearing members' margin requirements, will mitigate the risk that OCC
is under-collateralized as a result of overnight trading hours.
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    \14\ In addition, OCC Rule 601 provides OCC with the authority
to fix the margin requirement for any account or any class of
cleared contracts at such amount as it deems necessary or
appropriate under the circumstances to protect the respective
interests of clearing members, OCC, and the public.
    \15\ Clearing members frequently deposit margin at OCC in excess
of requirements.
    \16\ Clearing members will be able to substitute the locked-up
collateral during normal time frames (i.e., 6:00 a.m. to 5:00 p.m.
(Central Time) for equity securities).
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    Moreover, a designated executive officer may call an exchange
offering overnight trading sessions to invoke the use of its kill
switch. The kill switch prevents a clearing member (or the market
participant clearing through a clearing member) from executing trades
on the exchange during a given overnight trading session or, if needed,
stop all trading during a given overnight trading session. Finally,
pursuant to OCC Rule 305, the Executive Chairman or the President of
OCC, in certain situations, has the authority to impose limitations and
restrictions on the transactions, positions, and activities of a
clearing member. This authority will be used, as needed, in the event a
clearing member accumulates significant credit risk during overnight
trading sessions, or a clearing member's activities during such trading
sessions otherwise warrant OCC taking protective action.

Rule Enforcement Actions

    In order to deter clearing members from attempting to participate
in overnight trading sessions without authorization as well as
appropriately enforce the above described processes, OCC will ensure
that any attempt by a clearing member to participate in overnight
trading sessions without first obtaining the necessary approval will
result in the initiation of a rule enforcement action against such
clearing member. As described above, clearing members not approved for
overnight trading sessions that trade during such overnight sessions
will have their trades reviewed by OCC staff. Clearing members that
attempt to participate in overnight trading sessions but do not obtain
the necessary approval to do so will be subject to a minor rule
violation fine.\17\ In addition, if a clearing member's operational or
risk contacts for overnight trading sessions were unavailable had OCC
attempted to contact such individuals, the clearing member will be
subject to a minor rule violation fine. OCC has existing processes in
place to monitor for clearing member violations of OCC's rules and such
processes also will apply to clearing member activity during overnight
trading sessions.
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    \17\ See OCC Rule 1201(b).
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Effect That OCC Anticipates on and Management of Risk

    Clearing transactions executed in overnight trading sessions may
increase risk presented to OCC due to the period of time between trade
acceptance and settlement, the staffing levels at clearing members
during such trading sessions, and the deferment of executing intra-day
margin calls until banking settlement services are operational.
However, OCC will expand its risk management practices in order to
mitigate these risks by implementing, and expanding, the various tools
discussed above. For example, OCC will enhance its monitoring practices
in order to closely monitor clearing members' credit risk from trades
placed during overnight trading sessions as well as implement processes
so that OCC takes appropriate action when such credit risk exceeds
certain limits. OCC also will use its existing authority to require
adequate clearing member staffing during such trading sessions, in
order to mitigate the operational risk associated with clearing members
trading while they are not fully staffed. These risk management
functions will work in tandem with risk controls, including the
implementation of kill switch capabilities, adopted by the exchanges
operating overnight trading sessions or by clearing FCMs, as
applicable.
    In addition to the above, OCC will adapt existing processes so that
such processes can be used to mitigate risk associated with overnight
trading sessions. Specifically, OCC will exercise its authority to
issue margin calls and prevent the withdrawal of excess margin on
deposit at OCC, as a result of activity during such trading sessions as
a means of reducing risk. OCC also will implement a systemic function
to identify trades executed during overnight trading sessions by
clearing members not approved for such trading sessions for further
review prior to allowing such trades to proceed further through OCC's
clearance processing, and therefore mitigate the risk of losses from
erroneous trades. Finally, OCC will be able to assess the need to take
protective action pursuant to OCC Rule 305 as a result of clearing
member activity during such sessions.

II. Discussion and Commission Findings

    Although the Clearing Supervision Act does not specify a standard
of review for an advance notice, the Commission believes that the
stated purpose of the Clearing Supervision Act is instructive.\18\ The
stated purpose of the Clearing Supervision Act is to mitigate systemic
risk in the financial system and promote financial stability by, among
other things, promoting uniform risk management standards for
systemically-important financial market utilities and strengthening the
liquidity of systemically important financial market utilities.\19\
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    \18\ See 12 U.S.C. 5461(b).
    \19\ Id.
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    Section 805(a)(2) of the Clearing Supervision Act \20\ authorizes
the Commission to prescribe risk management standards for the payment,
clearing, and settlement activities of designated clearing entities and
financial institutions engaged in designated activities for which it is
the supervisory agency or the appropriate financial regulator. Section
805(b) of the Clearing Supervision Act \21\ states that the objectives
and principles for the risk management standards prescribed under
Section 805(a) shall be to:
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    \20\ 12 U.S.C. 5464(a)(2).
    \21\ 12 U.S.C. 5464(b).
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     promote robust risk management;
     promote safety and soundness;
     reduce systemic risks; and
     support the stability of the broader financial system.
    The Commission has adopted risk management standards under Section
805(a)(2) of the Clearing Supervision Act (``Clearing Agency
Standards'').\22\ The Clearing Agency Standards became effective on
January 2, 2013, and require registered clearing agencies that perform
central counterparty services to establish, implement, maintain, and
enforce written policies and procedures that are reasonably designed to
meet certain minimum requirements for their operations and risk
management practices on an ongoing basis.\23\ As

such, it is appropriate for the Commission to review advance notices
against these Clearing Agency Standards, and the objectives and
principles of these risk management standards as described in Section
805(b) of the Clearing Supervision Act.\24\
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    \22\ 17 CFR 240.17Ad-22.
    \23\ The Clearing Agency Standards are substantially similar to
the risk management standards established by the Board of Governors
of the Federal Reserve System governing the operations of designated
financial market utilities that are not clearing entities and
financial institutions engaged in designated activities for which
the Commission or the Commodity Futures Trading Commission is the
Supervisory Agency. See Financial Market Utilities, 77 FR 45907
(August 2, 2012).
    \24\ 12 U.S.C. 5464(b).
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    The Commission believes that the proposal in this Advance Notice is
designed to further the objectives and principles of Section 805(b) of
the Clearing Supervision Act.\25\ The Commission notes that clearing
transactions executed in overnight trading sessions may present
additional risks to OCC and the markets in general; specifically,
overnight trading sessions may create risk due to the gap between trade
acceptance and settlement, the staffing levels at clearing members and
OCC during such trading sessions, and the inability of clearing members
to transfer funds to satisfy margin during overnight hours. However,
OCC's proposal is designed in a manner that should adequately monitor
for the risks presented by accepting trades for clearance and
settlement during these extended and overnight sessions, and should
adequately mitigate these risks.
---------------------------------------------------------------------------

    \25\ 12 U.S.C. 5464(b).
---------------------------------------------------------------------------

    As part of that design, OCC proposed to limit to the product set
eligible for overnight trading sessions to index options and index
futures products and to institute qualification criteria for
determining whether to provide clearing services for overnight trading
sessions offered by a particular exchange. These qualification criteria
include price reasonability checks, controls to prevent orders from
being executed at prices beyond a certain percentage of the initial
execution price, activity based protections focused on risk beyond
price, such as a high number of trades occurring in a set period of
time, and kill switch capabilities. Limiting the eligible product set
as well as confirming risk management controls by participating
exchanges also should help promote robust risk management and safety,
and soundness of the clearance of overnight trades.
    In addition, OCC's proposed framework also incorporates a number of
mechanisms designed to further control the risks posed by overnight
trading, including (i) clearing member qualification criteria, (ii)
systemic controls to identify trades executed by clearing members not
approved for overnight trading, (iii) enhancements to OCC's overnight
monitoring of trades submitted by exchanges during overnight trading
sessions, (iv) enhancements to OCC's credit controls with respect to
monitoring clearing members' credit risk during overnight trading
sessions, and (v) disciplinary actions for unapproved clearing members
who attempt to clear during overnight trading sessions.
    Particularly, OCC's overnight monitoring and escalation, including
requiring additional intra-day margin, increasing a clearing member's
margin requirement, and/or invoking an exchange's kill switch should
serve to help mitigate the risks posed by the inability of clearing
members to transfer funds to satisfy margin during overnight hours due
to the, lack of availability of bank payment systems in the overnight
hours and the period of time between trade acceptance and settlement.
Moreover, requiring and enforcing adequate staffing at clearing members
as well as at OCC through a designated an on-call Market Risk duty
officer should help to mitigate the risks of overnight clearing.
Accordingly, the Commission believes that the proposal should promote
robust risk management, promote safety and soundness in the
marketplace, reduce systemic risks, and support the stability of the
broader financial system as it provides OCC with a range of mechanisms
that help mitigate the risks posed by clearance trades from extended
and overnight trading sessions.

III. Conclusion

    It is therefore noticed, pursuant to Section 806(e)(1)(I) of the
Clearing Supervision Act,\26\ that the Commission does not object to
advance notice proposal (SR-OCC-2014-812) and that OCC is authorized to
implement the proposal as of the date of this notice or the date of an
order by the Commission approving a proposed rule change that reflects
rule changes that are consistent with this advance notice proposal (SR-
OCC-2014-24), whichever is later.
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    \26\ 12 U.S.C. 5465(e)(1)(I).

    By the Commission.
Brent J. Fields,
Secretary.
[FR Doc. 2015-03097 Filed 2-13-15; 8:45 am]
BILLING CODE 8011-01-P