[Federal Register Volume 81, Number 13 (Thursday, January 21, 2016)]
[Notices]
[Pages 3547-3553]
[FR Doc No: 2016-01055]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-76903; File No. SR-NYSEARCA-2016-01]

Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing
and Immediate Effectiveness of Proposed Rule Change Amending the Fees
for NYSE ArcaBook

January 14, 2016.
    Pursuant to Section 19(b)(1) \1\ of the Securities Exchange Act of
1934 (the ``Act'') \2\ and Rule 19b-4 thereunder,\3\ notice is hereby
given that, on January 4, 2016, NYSE Arca, Inc. (the ``Exchange'' or
``NYSE Arca'') filed with the Securities and Exchange Commission (the
``Commission'' or ``SEC'') the proposed rule change as described in
Items I, II, and III below, which Items have been prepared by the self-
regulatory organization. The Commission is publishing this notice to
solicit comments on the proposed rule change from interested persons.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 15 U.S.C. 78a.
    \3\ 17 CFR 240.19b-4.
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I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change

    The Exchange proposes to amend the fees for NYSE ArcaBook to: (1)
Establish a multiple data feed fee; (2) discontinue fees relating to
managed non-display; and (3) modify the application of the non-
professional user fee cap. The proposed rule change is available on the
Exchange's Web site at www.nyse.com, at the principal office of the
Exchange, and at the Commission's Public Reference Room.

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

    In its filing with the Commission, the self-regulatory organization
included statements concerning the purpose of, and basis for, the
proposed rule change and discussed any comments it received on the
proposed rule change. The text of those statements may be examined at
the places specified in Item IV below. The Exchange has prepared
summaries,

set forth in sections A, B, and C below, of the most significant parts
of such statements.

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

1. Purpose
    The Exchange proposes to amend the fees for NYSE ArcaBook,\4\ as
set forth on the NYSE Arca Equities Proprietary Market Data Fee
Schedule (``Fee Schedule''). The Exchange proposes to make the
following fee changes effective January 4, 2016:
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    \4\ See Securities Exchange Act Release Nos. 53592 (June 7,
2006), 71 FR 33496 (June 9, 2006) (SR-NYSEArca-2006-21) (``2006
ArcaBook Notice''); 59039 (Dec. 2, 2008), 73 FR 74770 (Dec. 9, 2008)
(SR-NYSEArca-2006-21); 69315 (April 5, 2013), 78 FR 21668 (April 11,
2013) (SR-NYSEArca-2013-37) (``2013 Non-Display Filing''); 72560
(July 8, 2014), 79 FR 40801 (July 14, 2014) (SR-NYSEArca-2014-72)
(``2014 ArcaBook Filing''); 73011 (Sept. 5, 2014), 79 FR 54315
(Sept. 11, 2014) (SR-NYSEARCA-2014-93) (``2014 Non-Display
Filing''); and 74011 (Jan. 7, 2015), 80 FR 1681 (Jan. 13, 2015) (SR-
NYSEArca-2014-149) (``2015 ArcaBook Filing'').
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     Establish a multiple data feed fee; and
     Discontinue fees relating to managed non-display
    The Exchange also proposes to modify the application of the non-
professional fee cap, effective April 1, 2016.
Multiple Data Feed Fee
    The Exchange proposes to establish a new monthly fee, the
``Multiple Data Feed Fee,'' that would apply to data recipients that
take a data feed for a market data product in more than two locations.
Data recipients taking NYSE ArcaBook in more than two locations would
be charged $200 per additional location per month. No new reporting
would be required.\5\
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    \5\ Data vendors currently report a unique Vendor Account Number
for each location at which they provide a data feed to a data
recipient. The Exchange considers each Vendor Account Number a
location. For example, if a data recipient has five Vendor Account
Numbers, representing five locations, for the receipt of the NYSE
ArcaBook product, that data recipient will pay the Multiple Data
Feed fee with respect to three of the five locations.
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Managed Non-Display Fees
    Non-Display Use of NYSE Arca market data means accessing,
processing, or consuming NYSE Arca market data delivered via direct
and/or Redistributor \6\ data feeds for a purpose other than in support
of a data recipient's display usage or further internal or external
redistribution.\7\ Managed Non-Display Services fees apply when a data
recipient's non-display applications are hosted by a Redistributor that
has been approved for Managed Non-Display Services.\8\ A Redistributor
approved for Managed Non-Display Services manages and controls the
access to NYSE ArcaBook and does not allow for further internal
distribution or external redistribution of NYSE ArcaBook by the data
recipients. A Redistributor approved for Managed Non-Display Services
is required to report to NYSE Arca on a monthly basis the data
recipients that are receiving NYSE Arca market data through the
Redistributor's managed non-display service and the real-time NYSE Arca
market data products that such data recipients are receiving through
such service. Recipients of data through Managed Non-Display Service
have no additional reporting requirements. Data recipients that receive
NYSE ArcaBook from an approved Redistributor of Managed Non-Display
Services are charged an access fee of $1,000 per month and a Managed
Non-Display Services Fee of $1,800 per month, for a total fee of $2,800
per month.
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    \6\ ``Redistributor'' means a vendor or any other person that
provides an NYSE Arca data product to a data recipient or to any
system that a data recipient uses, irrespective of the means of
transmission or access.
    \7\ See e.g. 2015 ArcaBook Filing, supra note 4.
    \8\ To be approved for Managed Non-Display Services, a
Redistributor must manage and control the access to NYSE ArcaBook
for data recipients' non-display applications and not allow for
further internal distribution or external redistribution of the
information by data recipients. In addition, the Redistributor is
required to (a) host the data recipients' non-display applications
in equipment located in the Redistributor's data center and/or
hosted space/cage and (b) offer NYSE ArcaBook in the Redistributor's
own messaging formats (rather than using raw NYSE message formats)
by reformatting and/or altering NYSE ArcaBook prior to
retransmission without affecting the integrity of NYSE ArcaBook and
without rendering NYSE ArcaBook inaccurate, unfair, uninformative,
fictitious, misleading or discriminatory.
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    The Exchange proposes to discontinue the fees related to Managed
Non-Display Services because of the limited number of Redistributors
that have qualified for Managed Non-Display Services and the
administrative burdens associated with the program in light of the
limited number of Redistributors that have qualified for Managed Non-
Display Services. As proposed, all data recipients currently using NYSE
ArcaBook on a managed non-display basis would be subject to the same
access fee of $2,000 per month, and the same non-display services
fees,\9\ as other data recipients.\10\
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    \9\ See Fee Schedule.
    \10\ In order to harmonize its approach to fees for its market
data products, the Exchange is simultaneously proposing to remove
fees related to Managed Non-Display Services for NYSE Arca BBO, NYSE
Arca Trades, and NYSE Arca Integrated Feed. See SR-NYSEArca-2016-02
and SR-NYSEArca-2016-03.
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Non-Professional User Fee Cap
    For display use of the NYSE ArcaBook data feed, the Fee Schedule
sets forth a Professional User Fee of $40 per user per month and a Non-
Professional User Fee than [sic] ranges between $3 and $10 per user per
month, depending on the number of users. These user fees generally
apply to each display device that has access to NYSE ArcaBook.
    For customers that are broker-dealers, these fees are subject to a
$40,000 per month cap on non-professional user fees (the ``Non-
Professional User Fee Cap'').\11\ When adopting these fees, the
Exchange adopted guidelines under which the broker-dealer would be
eligible for the Non-Professional User Fee Cap notwithstanding the
inclusion, temporarily or unintentionally, of a limited number of
account-holding professional users (the ``Professional User
Exception''), subject to a complex set of conditions relating to the
percentage of professional users, the relationship of those
professional users to the broker-dealer, and the method of display and
use of the data.\12\ The Exchange proposed the Professional User
Exception to the Non-Professional User Fee Cap to permit broker-dealers
that primarily serve non-institutional brokerage account holders to
offer an online client experience without undue administrative burdens
while at the same time guarding against potential abuses by monitoring
the use of the exception closely and reserving the right to deny
application of the exception if a broker-dealer is determined to be
misusing it, such as by opening up retail brokerage accounts to
disseminate data to institutional clients.
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    \11\ See 2014 ArcaBook Filing, supra note 4. In the 2006
ArcaBook Notice, the Exchange described the Non-Professional User
Fee Cap as being subject to being increased (but not decreased) by
the percentage increase (if any) in the annual composite share
volume for the calendar year preceding that calendar year, subject
to a maximum annual increase of five percent. The Exchange has
waived its right to implement the increases it would have been
entitled to implement and has not increased the fee cap
commensurately and hereby proposes to set the fee cap at a constant
$40,000 per month that would not be subject to any adjustments.
    \12\ See 2006 ArcaBook Notice, supra note 4.
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    The Exchange proposes to eliminate the Professional User Exception
for NYSE ArcaBook effective April 1, 2016. The Exchange notes the
Professional User Exception was an accommodation, the benefits of which
were, when implemented, outweighed by the complexity of the terms of
the exception and the burdens on customers and on the Exchange that
have to track compliance with the exception. In addition, the Exchange
notes that the

Professional User Exception has been used by a small number of
customers since it was adopted.
    Accordingly, as proposed, the Non-Professional User Fee Cap would
no longer include any professional users that receive NYSE ArcaBook
data feed and the Professional User fee of $40 per user per month would
apply with respect to all Professional Users.
Non-Substantive Change to the Fee Schedule
    The Non-Professional User Fee Cap applies, as noted above, to any
broker-dealer for non-professional subscribers that maintain brokerage
accounts with the broker-dealer. The Exchange proposes to specify in
the Fee Schedule that the cap applies to broker-dealers only.
2. Statutory Basis
    The Exchange believes that the proposed rule change is consistent
with the provisions of Section 6 of the Act,\13\ in general, and
Sections 6(b)(4) and 6(b)(5) of the Act,\14\ in particular, in that it
provides an equitable allocation of reasonable fees among users and
recipients of the data and is not designed to permit unfair
discrimination among customers, issuers, and brokers.
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    \13\ 15 U.S.C. 78f(b).
    \14\ 15 U.S.C. 78f(b)(4), (5).
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    The fees are also equitable and not unfairly discriminatory because
they will apply to all data recipients that choose to subscribe to NYSE
ArcaBook.
Multiple Data Feed Fee
    The Exchange believes that it is reasonable to require data
recipients to pay a modest additional fee [sic] taking a data feed for
a market data product in more than two locations, because such data
recipients can derive substantial value from being able to consume the
product in as many locations as they want. In addition, there are
administrative burdens associated with tracking each location at which
a data recipient receives the product. The Multiple Data Feed Fee is
designed to encourage data recipients to better manage their requests
for additional data feeds and to monitor their usage of data feeds. The
proposed fee is designed to apply to data feeds received in more than
two locations so that each data recipient can have one primary and one
backup data location before having to pay a multiple data feed fee. The
Exchange notes that this pricing is consistent with similar pricing
adopted in 2013 by the Consolidated Tape Association (``CTA'').\15\ The
Exchange also notes that the OPRA Plan imposes a similar charge of $100
per connection for circuit connections in addition to the primary and
backup connections.\16\
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    \15\ See Securities Exchange Act Release No. 70010 (July 19,
2013), 78 FR 44984 (July 25, 2013) (SR-CTA/CQ-2013-04).
    \16\ See ``Direct Access Fee,'' Options Price Reporting
Authority Fee Schedule Fee Schedule PRA Plan [sic] at http://www.opradata.com/pdf/fee_schedule.pdf.
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Managed Non-Display Fees
    The Exchange believes that it is reasonable to discontinue Managed
Non-Display Fees. As the Exchange noted in the 2013 Non-Display Filing,
the Exchange determined at that time that its fee structure, which was
then based primarily on counting both display and non-display devices,
was no longer appropriate in light of market and technology
developments. Since then, the Exchange also modified its approach to
display and non-display fees with changes to the fees as reflected in
the 2014 Non-Display Filing.\17\ Discontinuing the fees applicable to
Managed Non-Display as proposed reflects the Exchange's continuing
review and consideration of the application of non-display fees, and
would harmonize and simplify the application of Non-Display Use fees by
applying them consistently to all users. In particular, after further
experience with the application of non-display use fees, the Exchange
believes that it is more equitable and less discriminatory to
discontinue the distinction for Managed Non-Display services because
all data recipients using data on a non-display basis are using it in a
comparable way and should be subject to similar fees regardless of
whether or not they receive the data directly from the Exchange. The
Exchange believes that applying the same non-display fees to all data
recipients on the same basis better reflects the significant value of
non-display data to data recipients and eliminates what is effectively
a discount for certain data recipients, and as such is not unfairly
discriminatory. The Exchange believes that the non-display fees
directly and appropriately reflect the significant value of using non-
display data in a wide range of computer-automated functions relating
to both trading and non-trading activities and that the number and
range of these functions continue to grow through innovation and
technology developments.
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    \17\ See note 4, supra.
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Non-Professional User Fee Cap
    The Exchange believes that it is reasonable to modify the
application of the non-professional user fee cap by eliminating the
Professional User Exception. The Exchange notes that the Professional
User Exception was an accommodation, the benefits of which were, when
implemented, outweighed by the complexity of the terms of the exception
and the burdens on customers and on the Exchange entailed with tracking
compliance with the exception. Eliminating the Professional User
Exception would make the application of the Non-Professional User Fee
Cap simpler and ease administrative burdens for customers and the
Exchange by removing an administrative exception that has had limited
use and application.
Non-Substantive Changes to the Fee Schedule
    The Exchange believes that specifying in the Fee Schedule that the
Non-Professional User Fee Cap applies to broker-dealers only will
remove impediments to and help perfect a free and open market by
providing greater transparency for the Exchange's customers regarding
the application of the Non-Professional User Fee Cap as previously
filed with the Commission and applicable to the existing Fee
Schedule.\18\
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    \18\ See 2014 ArcaBook Filing, supra note 4.
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    The Exchange notes that NYSE ArcaBook is entirely optional. The
Exchange is not required to make NYSE ArcaBook available or to offer
any specific pricing alternatives to any customers, nor is any firm
required to purchase NYSE ArcaBook. Firms that do purchase NYSE
ArcaBook do so for the primary goals of using it to increase revenues,
reduce expenses, and in some instances compete directly with the
Exchange (including for order flow); those firms are able to determine
for themselves whether NYSE ArcaBook or any other similar products are
attractively priced or not.\19\
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    \19\ See, e.g., Proposing Release on Regulation of NMS Stock
Alternative Trading Systems, Securities Exchange Act Release No.
76474 (Nov. 18, 2015) (File No. S7-23-15). See also, ``Brokers
Warned Not to Steer Clients' Stock Trades Into Slow Lane,''
Bloomberg Business, December 14, 2015 (Sigma X dark pool to use
direct exchange feeds as the primary source of price data).
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    Firms that do not wish to purchase NYSE ArcaBook at the new prices
have a variety of alternative market data products from which to
choose,\20\ or if NYSE ArcaBook does not provide

sufficient value to firms as offered based on the uses those firms have
or planned to make of it, such firms may simply choose to conduct their
business operations in ways that do not use NYSE ArcaBook or use it at
different levels or in different configurations. The Exchange notes
that broker-dealers are not required to purchase proprietary market
data to comply with their best execution obligations.\21\
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    \20\ See NASDAQ Rule 7023 (Nasdaq Totalview) and BATS Rule
11.22(a) and (c) (BATS TCP Pitch and Multicast Pitch).
    \21\ See FINRA Regulatory Notice 15-46, ``Best Execution,''
November 2015.
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    The decision of the United States Court of Appeals for the District
of Columbia Circuit in NetCoalition v. SEC, 615 F.3d 525 (D.C. Cir.
2010), upheld reliance by the Securities and Exchange Commission
(``Commission'') upon the existence of competitive market mechanisms to
set reasonable and equitably allocated fees for proprietary market
data:

    In fact, the legislative history indicates that the Congress
intended that the market system `evolve through the interplay of
competitive forces as unnecessary regulatory restrictions are
removed' and that the SEC wield its regulatory power `in those
situations where competition may not be sufficient,' such as in the
creation of a `consolidated transactional reporting system.'

    Id. at 535 (quoting H.R. Rep. No. 94-229 at 92 (1975), as reprinted
in 1975 U.S.C.C.A.N. 323). The court agreed with the Commission's
conclusion that ``Congress intended that `competitive forces should
dictate the services and practices that constitute the U.S. national
market system for trading equity securities.' '' \22\
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    \22\ NetCoalition, 615 F.3d at 535.
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    As explained below in the Exchange's Statement on Burden on
Competition, the Exchange believes that there is substantial evidence
of competition in the marketplace for proprietary market data and that
the Commission can rely upon such evidence in concluding that the fees
established in this filing are the product of competition and therefore
satisfy the relevant statutory standards. In addition, the existence of
alternatives to these data products, such as consolidated data and
proprietary data from other sources, as described below, further
ensures that the Exchange cannot set unreasonable fees, or fees that
are unreasonably discriminatory, when vendors and subscribers can
select such alternatives.
    As the NetCoalition decision noted, the Commission is not required
to undertake a cost-of-service or ratemaking approach. The Exchange
believes that, even if it were possible as a matter of economic theory,
cost-based pricing for proprietary market data would be so complicated
that it could not be done practically or offer any significant
benefits.\23\
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    \23\ The Exchange believes that cost-based pricing would be
impractical because it would create enormous administrative burdens
for all parties and the Commission to cost-regulate a large number
of participants and standardize and analyze extraordinary amounts of
information, accounts, and reports. In addition, and as described
below, it is impossible to regulate market data prices in isolation
from prices charged by markets for other services that are joint
products. Cost-based rate regulation would also lead to litigation
and may distort incentives, including those to minimize costs and to
innovate, leading to further waste. Under cost-based pricing, the
Commission would be burdened with determining a fair rate of return,
and the industry could experience frequent rate increases based on
escalating expense levels. Even in industries historically subject
to utility regulation, cost-based ratemaking has been discredited.
As such, the Exchange believes that cost-based ratemaking would be
inappropriate for proprietary market data and inconsistent with
Congress's direction that the Commission use its authority to foster
the development of the national market system, and that market
forces will continue to provide appropriate pricing discipline. See
Appendix C to NYSE's comments to the Commission's 2000 Concept
Release on the Regulation of Market Information Fees and Revenues,
which can be found on the Commission's Web site at http://www.sec.gov/rules/concept/s72899/buck1.htm.
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    For these reasons, the Exchange believes that the proposed fees are
reasonable, equitable, and not unfairly discriminatory.

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

    The Exchange does not believe that the proposed rule change will
impose any burden on competition that is not necessary or appropriate
in furtherance of the purposes of the Act. An exchange's ability to
price its proprietary market data feed products is constrained by
actual competition for the sale of proprietary market data products,
the joint product nature of exchange platforms, and the existence of
alternatives to the Exchange's proprietary data.
The Existence of Actual Competition
    The market for proprietary data products is currently competitive
and inherently contestable because there is fierce competition for the
inputs necessary for the creation of proprietary data and strict
pricing discipline for the proprietary products themselves. Numerous
exchanges compete with one another for listings and order flow and
sales of market data itself, providing ample opportunities for
entrepreneurs who wish to compete in any or all of those areas,
including producing and distributing their own market data. Proprietary
data products are produced and distributed by each individual exchange,
as well as other entities, in a vigorously competitive market. Indeed,
the U.S. Department of Justice (``DOJ'') (the primary antitrust
regulator) has expressly acknowledged the aggressive actual competition
among exchanges, including for the sale of proprietary market data. In
2011, the DOJ stated that exchanges ``compete head to head to offer
real-time equity data products. These data products include the best
bid and offer of every exchange and information on each equity trade,
including the last sale.'' \24\
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    \24\ Press Release, U.S. Department of Justice, Assistant
Attorney General Christine Varney Holds Conference Call Regarding
NASDAQ OMX Group Inc. and IntercontinentalExchange Inc. Abandoning
Their Bid for NYSE Euronext (May 16, 2011), available at http://www.justice.gov/iso/opa/atr/speeches/2011/at-speech-110516.html; see
also Complaint in U.S. v. Deutsche Borse AG and NYSE Euronext, Case
No. 11-cv-2280 (DC Dist.) ] 24 (``NYSE and Direct Edge compete head-
to-head . . . in the provision of real-time proprietary equity data
products.'').
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    Moreover, competitive markets for listings, order flow, executions,
and transaction reports provide pricing discipline for the inputs of
proprietary data products and therefore constrain markets from
overpricing proprietary market data. Broker-dealers send their order
flow and transaction reports to multiple venues, rather than providing
them all to a single venue, which in turn reinforces this competitive
constraint. As a 2010 Commission Concept Release noted, the ``current
market structure can be described as dispersed and complex'' with
``trading volume . . . dispersed among many highly automated trading
centers that compete for order flow in the same stocks'' and ``trading
centers offer[ing] a wide range of services that are designed to
attract different types of market participants with varying trading
needs.'' \25\ More recently, SEC Chair Mary Jo White has noted that
competition for order flow in exchange-listed equities is ``intense''
and divided among many trading venues, including exchanges, more than
40 alternative trading systems, and more than 250 broker-dealers.\26\
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    \25\ Concept Release on Equity Market Structure, Securities
Exchange Act Release No. 61358 (Jan. 14, 2010), 75 FR 3594 (Jan. 21,
2010) (File No. S7-02-10). This Concept Release included data from
the third quarter of 2009 showing that no market center traded more
than 20% of the volume of listed stocks, further evidencing the
dispersal of and competition for trading activity. Id. at 3598. Data
available on ArcaVision show that from June 30, 2013 to June 30,
2014, no exchange traded more than 12% of the volume of listed
stocks by either trade or dollar volume, further evidencing the
continued dispersal of and fierce competition for trading activity.
See https://www.arcavision.com/Arcavision/arcalogin.jsp.
    \26\ Mary Jo White, Enhancing Our Equity Market Structure,
Sandler O'Neill & Partners, L.P. Global Exchange and Brokerage
Conference (June 5, 2014) (available on the Commission Web site),
citing Tuttle, Laura, 2014, ``OTC Trading: Description of Non-ATS
OTC Trading in National Market System Stocks,'' at 7-8.

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    If an exchange succeeds in competing for quotations, order flow,
and trade executions, then it earns trading revenues and increases the
value of its proprietary market data products because they will contain
greater quote and trade information. Conversely, if an exchange is less
successful in attracting quotes, order flow, and trade executions, then
its market data products may be less desirable to customers in light of
the diminished content and data products offered by competing venues
may become more attractive. Thus, competition for quotations, order
flow, and trade executions puts significant pressure on an exchange to
maintain both execution and data fees at reasonable levels.
    In addition, in the case of products that are also redistributed
through market data vendors, such as Bloomberg and Thompson Reuters,
the vendors themselves provide additional price discipline for
proprietary data products because they control the primary means of
access to certain end users. These vendors impose price discipline
based upon their business models. For example, vendors that assess a
surcharge on data they sell are able to refuse to offer proprietary
products that their end users do not or will not purchase in sufficient
numbers. Vendors will not elect to make available NYSE ArcaBook unless
their customers request it, and customers will not elect to pay the
proposed fees unless NYSE ArcaBook can provide value by sufficiently
increasing revenues or reducing costs in the customer's business in a
manner that will offset the fees. All of these factors operate as
constraints on pricing proprietary data products.
Joint Product Nature of Exchange Platform
    Transaction execution and proprietary data products are
complementary in that market data is both an input and a byproduct of
the execution service. In fact, proprietary market data and trade
executions are a paradigmatic example of joint products with joint
costs. The decision of whether and on which platform to post an order
will depend on the attributes of the platforms where the order can be
posted, including the execution fees, data availability and quality,
and price and distribution of data products. Without a platform to post
quotations, receive orders, and execute trades, exchange data products
would not exist.
    The costs of producing market data include not only the costs of
the data distribution infrastructure, but also the costs of designing,
maintaining, and operating the exchange's platform for posting quotes,
accepting orders, and executing transactions and the cost of regulating
the exchange to ensure its fair operation and maintain investor
confidence. The total return that a trading platform earns reflects the
revenues it receives from both products and the joint costs it incurs.
    Moreover, an exchange's broker-dealer customers generally view the
costs of transaction executions and market data as a unified cost of
doing business with the exchange. A broker-dealer will only choose to
direct orders to an exchange if the revenue from the transaction
exceeds its cost, including the cost of any market data that the
broker-dealer chooses to buy in support of its order routing and
trading decisions. If the costs of the transaction are not offset by
its value, then the broker-dealer may choose instead not to purchase
the product and trade away from that exchange. There is substantial
evidence of the strong correlation between order flow and market data
purchases. For example, in September 2015, more than 80% of the
transaction volume on each of the Exchange and the Exchange's
affiliates New York Stock Exchange LLC (``NYSE'') and NYSE MKT LLC
(``NYSE MKT'') was executed by market participants that purchased one
or more proprietary market data products (the 20 firms were not the
same for each market). A supra-competitive increase in the fees for
either executions or market data would create a risk of reducing an
exchange's revenues from both products.
    Other market participants have noted that proprietary market data
and trade executions are joint products of a joint platform and have
common costs.\27\ The Exchange agrees with and adopts those discussions
and the arguments therein. The Exchange also notes that the economics
literature confirms that there is no way to allocate common costs
between joint products that would shed any light on competitive or
efficient pricing.\28\
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    \27\ See Securities Exchange Act Release No. 72153 (May 12,
2014), 79 FR 28575, 28578 n.15 (May 16, 2014) (SR-NASDAQ-2014-045)
(``[A]ll of the exchange's costs are incurred for the unified
purposes of attracting order flow, executing and/or routing orders,
and generating and selling data about market activity. The total
return that an exchange earns reflects the revenues it receives from
the joint products and the total costs of the joint products.'').
See also Securities Exchange Act Release No. 62907 (Sept. 14, 2010),
75 FR 57314, 57317 (Sept. 20, 2010) (SR-NASDAQ-2010-110), and
Securities Exchange Act Release No. 62908 (Sept. 14, 2010), 75 FR
57321, 57324 (Sept. 20, 2010) (SR-NASDAQ-2010-111).
    \28\ See generally Mark Hirschey, Fundamentals of Managerial
Economics, at 600 (2009) (``It is important to note, however, that
although it is possible to determine the separate marginal costs of
goods produced in variable proportions, it is impossible to
determine their individual average costs. This is because common
costs are expenses necessary for manufacture of a joint product.
Common costs of production--raw material and equipment costs,
management expenses, and other overhead--cannot be allocated to each
individual by-product on any economically sound basis. . . . Any
allocation of common costs is wrong and arbitrary.''). This is not
new economic theory. See, e.g., F. W. Taussig, ``A Contribution to
the Theory of Railway Rates,'' Quarterly Journal of Economics V(4)
438, 465 (July 1891) (``Yet, surely, the division is purely
arbitrary. These items of cost, in fact, are jointly incurred for
both sorts of traffic; and I cannot share the hope entertained by
the statistician of the Commission, Professor Henry C. Adams, that
we shall ever reach a mode of apportionment that will lead to
trustworthy results.'').
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    Analyzing the cost of market data product production and
distribution in isolation from the cost of all of the inputs supporting
the creation of market data and market data products will inevitably
underestimate the cost of the data and data products because it is
impossible to obtain the data inputs to create market data products
without a fast, technologically robust, and well-regulated execution
system, and system and regulatory costs affect the price of both
obtaining the market data itself and creating and distributing market
data products. It would be equally misleading, however, to attribute
all of an exchange's costs to the market data portion of an exchange's
joint products. Rather, all of an exchange's costs are incurred for the
unified purposes of attracting order flow, executing and/or routing
orders, and generating and selling data about market activity. The
total return that an exchange earns reflects the revenues it receives
from the joint products and the total costs of the joint products.
    As noted above, the level of competition and contestability in the
market is evident in the numerous alternative venues that compete for
order flow, including 11 equities self-regulatory organization
(``SRO'') markets, as well as various forms of alternative trading
systems (``ATSs''), including dark pools and electronic communication
networks (``ECNs''), and internalizing broker-dealers. SRO markets
compete to attract order flow and produce transaction reports via trade
executions, and two FINRA-regulated Trade Reporting Facilities compete
to attract transaction reports from the non-SRO venues.
    Competition among trading platforms can be expected to constrain
the aggregate return that each platform

earns from the sale of its joint products, but different trading
platforms may choose from a range of possible, and equally reasonable,
pricing strategies as the means of recovering total costs. For example,
some platforms may choose to pay rebates to attract orders, charge
relatively low prices for market data products (or provide market data
products free of charge), and charge relatively high prices for
accessing posted liquidity. Other platforms may choose a strategy of
paying lower rebates (or no rebates) to attract orders, setting
relatively high prices for market data products, and setting relatively
low prices for accessing posted liquidity. For example, BATS Global
Markets (``BATS'') and Direct Edge, which previously operated as ATSs
and obtained exchange status in 2008 and 2010, respectively, provided
certain market data at no charge on their Web sites in order to attract
more order flow, and used revenue rebates from resulting additional
executions to maintain low execution charges for their users.\29\ In
this environment, there is no economic basis for regulating maximum
prices for one of the joint products in an industry in which suppliers
face competitive constraints with regard to the joint offering.
---------------------------------------------------------------------------

    \29\ This is simply a securities market-specific example of the
well-established principle that in certain circumstances more sales
at lower margins can be more profitable than fewer sales at higher
margins; this example is additional evidence that market data is an
inherent part of a market's joint platform.
---------------------------------------------------------------------------

Existence of Alternatives
    The large number of SROs, ATSs, and internalizing broker-dealers
that currently produce proprietary data or are currently capable of
producing it provides further pricing discipline for proprietary data
products. Each SRO, ATS, and broker-dealer is currently permitted to
produce and sell proprietary data products, and many currently do,
including but not limited to the Exchange, NYSE, NYSE MKT, NASDAQ OMX,
BATS, and Direct Edge.
    The fact that proprietary data from ATSs, internalizing broker-
dealers, and vendors can bypass SROs is significant in two respects.
First, non-SROs can compete directly with SROs for the production and
sale of proprietary data products. By way of example, BATS and NYSE
Arca both published proprietary data on the Internet before registering
as exchanges. Second, because a single order or transaction report can
appear in an SRO proprietary product, a non-SRO proprietary product, or
both, the amount of data available via proprietary products is greater
in size than the actual number of orders and transaction reports that
exist in the marketplace. With respect to NYSE ArcaBook, competitors
offer close substitute products.\30\ Because market data users can find
suitable substitutes for most proprietary market data products, a
market that overprices its market data products stands a high risk that
users may substitute another source of market data information for its
own.
---------------------------------------------------------------------------

    \30\ See supra note 20.
---------------------------------------------------------------------------

    Those competitive pressures imposed by available alternatives are
evident in the Exchange's proposed pricing.
    In addition to the competition and price discipline described
above, the market for proprietary data products is also highly
contestable because market entry is rapid and inexpensive. The history
of electronic trading is replete with examples of entrants that swiftly
grew into some of the largest electronic trading platforms and
proprietary data producers: Archipelago, Bloomberg Tradebook, Island,
RediBook, Attain, TrackECN, BATS Trading and Direct Edge. As noted
above, BATS launched as an ATS in 2006 and became an exchange in 2008,
while Direct Edge began operations in 2007 and obtained exchange status
in 2010.
    In determining the proposed changes to the fees for NYSE ArcaBook,
the Exchange considered the competitiveness of the market for
proprietary data and all of the implications of that competition. The
Exchange believes that it has considered all relevant factors and has
not considered irrelevant factors in order to establish fair,
reasonable, and not unreasonably discriminatory fees and an equitable
allocation of fees among all users. The existence of numerous
alternatives to the Exchange's products, including proprietary data
from other sources, ensures that the Exchange cannot set unreasonable
fees, or fees that are unreasonably discriminatory, when vendors and
subscribers can elect these alternatives or choose not to purchase a
specific proprietary data product if the attendant fees are not
justified by the returns that any particular vendor or data recipient
would achieve through the purchase.

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

    No written comments were solicited or received with respect to the
proposed rule change.

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

    The foregoing rule change is effective upon filing pursuant to
Section 19(b)(3)(A) \31\ of the Act and subparagraph (f)(2) of Rule
19b-4 \32\ thereunder, because it establishes a due, fee, or other
charge imposed by the Exchange.
---------------------------------------------------------------------------

    \31\ 15 U.S.C. 78s(b)(3)(A).
    \32\ 17 CFR 240.19b-4(f)(2).
---------------------------------------------------------------------------

    At any time within 60 days of the filing of such proposed rule
change, the Commission summarily may temporarily suspend such rule
change if it appears to the Commission that such action is necessary or
appropriate in the public interest, for the protection of investors, or
otherwise in furtherance of the purposes of the Act. If the Commission
takes such action, the Commission shall institute proceedings under
Section 19(b)(2)(B) \33\ of the Act to determine whether the proposed
rule change should be approved or disapproved.
---------------------------------------------------------------------------

    \33\ 15 U.S.C. 78s(b)(2)(B).
---------------------------------------------------------------------------

IV. Solicitation of Comments

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

Electronic Comments

     Use the Commission's Internet comment form (http://www.sec.gov/rules/sro.shtml); or
     Send an email to<EMAIL_ADDRESS>Please include
File Number SR-NYSEARCA-2016-01 on the subject line.

Paper Comments

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

All submissions should refer to File Number SR-NYSEARCA-2016-01. This
file number should be included on the subject line if email is used. To
help the Commission process and review your comments more efficiently,
please use only one method. The Commission will post all comments on
the Commission's Internet Web site (http://www.sec.gov/rules/sro.shtml). Copies of the submission, all subsequent amendments, all
written statements with respect to the proposed rule change that are
filed with the Commission, and all written communications relating to
the

proposed rule change between the Commission and any person, other than
those that may be withheld from the public in accordance with the
provisions of 5 U.S.C. 552, will be available for Web site viewing and
printing in the Commission's Public Reference Room, 100 F Street NE.,
Washington, DC 20549 on official business days between the hours of
10:00 a.m. and 3:00 p.m. Copies of the filing also will be available
for inspection and copying at the principal office of the Exchange. All
comments received will be posted without change; the Commission does
not edit personal identifying information from submissions. You should
submit only information that you wish to make available publicly. All
submissions should refer to File Number SR-NYSEARCA-2016-01 and should
be submitted on or before February 11, 2016.

    For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\34\
---------------------------------------------------------------------------

    \34\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------

Robert W. Errett,
Deputy Secretary.
[FR Doc. 2016-01055 Filed 1-20-16; 8:45 am]
 BILLING CODE 8011-01-P


[Federal Register: June 4, 2008 (Volume 73, Number 108)]
[Notices]
[Page 31912-31913]
[DOCID:fr04jn08-117]

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

DEPARTMENT OF TRANSPORTATION

Federal Railroad Administration

Petition for Waiver of Compliance

    In accordance with Part 211 of Title 49 Code of Federal Regulations
(CFR), notice is hereby given that the Federal Railroad Administration
(FRA) has received a request for a waiver of compliance from certain
requirements of its safety standards. The individual petition is
described below, including the party seeking relief, the regulatory
provisions involved, the nature of the relief being requested, and the
petitioner's arguments in favor of relief.

San Manuel Arizona Railroad Company

(Waiver Petition Docket Number FRA-2008-0043)

    The San Manuel Arizona Railroad Company (SMAR) seeks a petition for
a permanent waiver of compliance from the requirements of 49 CFR Part
223 Safety Glazing--223.11, Requirement for Existing Locomotives. This
waiver request is specifically for locomotive numbers 16, 18 and 19.
    Locomotive numbers 18 and 19 are equipped with Type I and
locomotive number 16 is equipped with Type I-A DOT Glazing. SMAR states
that equipping their locomotives with FRA Type Certified Glazing would
be a financial burden.
    Interested parties are invited to participate in these proceedings
by submitting written views, data, or comments. FRA does not anticipate
scheduling a public hearing in connection with these proceedings since
the facts do not appear to warrant a hearing. If any interested party
desires an opportunity for oral comment, they should notify FRA, in
writing, before the end of the comment period and specify the basis for
their request.
    All communications concerning these proceedings should identify the
appropriate docket number (e.g., Waiver Petition Docket Number FRA-
2008-0043) and may be submitted by any of the following methods:
    Web site: http://www.regulations.gov. Follow the online
instructions for submitting comments.
    Fax:<PHONE_NUMBER>.
    Mail: Docket Operations Facility, U.S. Department of
Transportation, 1200 New Jersey Avenue, SE., W12-140, Washington, DC
20590.
    Hand Delivery: 1200 New Jersey Avenue, SE., Room W12-140,
Washington, DC 20590, between 9 a.m. and 5 p.m., Monday through Friday,
except Federal holidays.
    Communications received within 45 days of the date of this notice
will be considered by FRA before final action is taken. Comments
received after that date will be considered as far as practicable. All
written communications concerning these proceedings are available for
examination during regular business hours (9 a.m.-5 p.m.) at the above
facility. All documents in the public docket are also available for
inspection and copying on the Internet at the docket facility's Web
site at http://www.regulations.gov.
    Anyone is able to search the electronic form of any written
communications and comments received into any of our dockets by the

name of the individual submitting the comment (or signing the comment,
if submitted on behalf of an association, business, labor union, etc.).
You may review DOT's complete Privacy Act Statement in the Federal
Register published on April 11, 2000 (Volume 65, Number 70; Pages
19477-78).

    Issued in Washington, DC on May 29, 2008.
Grady C. Cothen, Jr.,
Deputy Associate Administrator for Safety Standards and Program
Development.
 [FR Doc. E8-12408 Filed 6-3-08; 8:45 am]

BILLING CODE 4910-06-P


MEMORANDUM

TO:		Public Record for the NPDES Electronic Reporting Rule
		EPA Docket Number EPA-HQ-OECA-2009-0274 (www.regulations.gov)

FROM:		Carey A. Johnston, P.E.
            USEPA/OECA/OC
            ph:<PHONE_NUMBER>
<EMAIL_ADDRESS>
DATE:		17 March 2014

--------------------------------------------------------------------------------
SUBJECT:	Notes from State Technical Workgroup Meeting (13 March 2014) [DCN 0133]
--------------------------------------------------------------------------------

Overview

      This was the sixth meeting for the EPA-state technical workgroup, which is discussing key issues related to the proposed NPDES Electronic Reporting Rule (eRule). These discussions will help inform the upcoming planned supplemental Federal Register notice and will continue beyond the supplemental notice to help EPA address state comments. EPA participants will include the OECA eRule Team as well as representatives from EPA's Office of Water and Office of Environmental Information. Technical workgroup members are listed below in Tables 1 and 2. The agenda for this meeting is also provided below. EPA is summarizing the notes from these discussions for the docket in order to provide transparency on EPA's outreach during the rulemaking process. The OECA eRule team will also be available for any other stakeholder group that would like to discuss the eRule.

Meeting Notes

     EPA (Mr. Carey Johnston) started the meeting with a roll call and then asked for any suggested edits to the draft notes from the February 20th and 27th State Technical Workgroup meetings. There were no edits for these two sets of meeting notes. Mr. Johnston then led the technical workgroup in a discussion on EPA's CROMERR (Cross-Media Electronic Reporting Regulation), which EPA promulgated in 2005 (40 CFR part 3). The meeting focused on the following aspects of CROMERR and electronic reporting:

*       CROMERR application approvals;
*       Technical requirements for identity proofing;
*       Clarification of who needs to submit CROMERR application packages (e.g., POTWs not required to submit CROMERR applications for the eRule); and
*       EPA's password change policy.

      Mr. Johnston started with an overview of CROMERR and how the eRule uses CROMERR for implement electronic reporting.

*       CROMERR sets performance-based, technology-neutral standards for systems that states, tribes, and local governments use to receive electronic reports from facilities they regulate under EPA-authorized programs.

*       EPA's proposed NPDES Electronic Reporting rule (Part 127) requires all electronic reporting systems that are used for implementing NPDES electronic reporting, whether already existing or to be developed by EPA, authorized NPDES programs, or third-party software vendors, to be CROMERR compliant.

*       In response to a question about EPA allowing states to receive contingent approval from EPA to operate partially implemented electronic reporting systems, Mr. Roy Chaudet (EPA/OEI) noted that EPA can give contingent CROMERR approval. Mr. Chaudet noted that final approval would be contingent on the full implementation of their system.

*       Ms. Beth Graves (ECOS) requested that EPA create a running list of how states have successfully completed their CROMERR applications. In response to this request, Mr. Chaudet noted that EPA tracks this information with a software program called Salesforce and is looking to make a summary of this information available within the next few months.

*       Ms. Graves noted that it would be very beneficial to involve the Exchange Network Leadership Council (ENLC) to help streamline the CROMERR approval process. Mr. Chaudet agreed with this idea and said that he would look into possible next steps.

*       Mr. Johnston noted that many state commenters on the proposed Rule expressed concern about EPA's processing of State CROMERR applications and concerns that more than one CROMERR application may be required if multiple system for electronic reporting were implemented.

*       Ms. Teresa Marks (Arkansas) noted that states don't want to "be in a bind because it can't meeting the rule's implementation schedule due to EPA's slow CROMERR approval process." Mr. Johnston replied that many state comments on the proposed eRule echoed her concern and that EPA is focused very intently on streamlining and improving the CROMERR approval process.
*       In particular, Mr. Johnston noted that EPA is now providing:

      o Standard CROMERR Checklists and Forms: EPA has developed a standard checklist for EPA's national electronic reporting systems and shared services (e.g., NetDMR, NPDES Electronic Reporting Tool (NeT), CROMERR shared services). The timeframes for receiving EPA's CROMERR approval when states uses these systems and services typically ranges from 16 and 20 weeks. See: http://www.epa.gov/cromerr/tools/index.html.
      o Model CROMERR Application: These models illustrate different CROMERR solutions that can be modified for another program's CROMERR implementation. Adopting one of these models will streamline EPA's CROMERR approval process to under 6 months.
      o Assistance and Training: Currently available are online forms, training videos, and webinars on best practices. See: http://www.epa.gov/cromerr/training/index.html.
         EPA has recently implemented a customer relationship management tool (Salesforce) and additional technical support to provide triggers and reminders on due dates and actions to improve the timeframes. Finally, EPA intends to work with states to develop state specific plans on how to attain needed CROMERR approval.

   * Ms. Elisa Willard (Colorado) asked if she could get a point of contact for giving technical assistance for their electronic reporting system design. She wanted to avoid the situation where they build out a system only be told by EPA that it does not meet EPA's CROMERR requirements. Other states also requested that there might be a single point of contact or help desk to help ensure that CROMERR approval packages don't get stuck in EPA's approval process. Mr. Chaudet provided the following contact for design assistance: William Labar<EMAIL_ADDRESS>or<PHONE_NUMBER>).

   * Oklahoma asked for clarification on what new CROMERR requirements (if any) need to be met in response to the eRule for existing state systems that have CROMERR approval. Mr. Le Desma (EPA/OCEFT) replied that just adding data flows to an already existing and EPA CROMERR approved state electronic reporting system will not likely require much time for EPA approval. Mr. Le Desma suggested that making edits via redline/strikeout will also speed EPA's approval process for any changes to existing state electronic reporting system that already has EPA's CROMERR approval.

   * Mr. Le Desma also noted that EPA considers some changes to existing state systems as non-significant or non-substantive changes and that these changes have a much more streamlined EPA approval process. For example, he noted that changing or upgrading a firewall would be a non-substantive change while changing the electronic signature agreement process might be a substantive change.  He noted that states can send an email to EPA asking for guidance on whether a change is substantive. New Jersey asked for the name of this contact. Mr. Chaudet provided the following contact for general help including determining if changes are substantive<EMAIL_ADDRESS>at<PHONE_NUMBER>.

*       Mr. Johnston also noted that States can also use one CROMERR approval package to cover multiple NPDES data flows include:
      o Discharge Monitoring Reports
      o General Permit Reports (NOIs, NOTs, LEWs, NECs)
      o Program Reports (e.g., Annual POTW Pretreatment Report)

*       He also noted that States can use EPA's NetDMR to electronically collect DMRs or EPA's NeT for one or more of these three data flows and that States can use a suite of shared CROMERR services available from EPA. He further noted that States can use a combination of EPA and state electronic reporting systems to cover these three data flows and that EPA will work with states and other stakeholders to help identify issues and potential solutions for the `third-party' electronic reporting option.

*       Mr. Le Desma noted that EPA's CROMERR shared services are also modular. For example, identify-proofing can be done without requiring the use of other services.

      Mr. Johnston then provided a summary of state comments on electronic signature agreement (ESA) requirements. In particular, he noted that states had concerns about: (1) the burden associated with potentially higher costs with obtaining and managing electronic signature agreements; and (2) the management of digital signatures for permittees high turnover and infrequent use of electronic reporting tools (e.g., construction stormwater sector). Mr. Johnston noted that EPA is moving from a `wet-ink' identity-proofing process to an electronic identity-proofing process using LexisNexis. He noted that the electronic identity-proofing process is a paperless, real-time, electronic identity proofing service that reduces the application and validation time from days to minutes, and costs from dollars to cents. This service can be invoked in a way that is transparent to the user and would allow users to begin using their electronic signature credentials in a single session.

         *       Mr. Tom Easterly (Indiana) asked how the electronic identity-proofing process works. Mr. Chaudet noted that the user would verify his identity using the last four Social Security numbers and challenge questions from LexisNexis data. Once the system grants electronic signature credentials the user can use a username and password to electronically sign documents. Several states asked for screenshots on this process and Mr. Chaudet stated that he would capture a few key screenshots to give an overview of how this electronic identify-proofing process works. [Note: Please see the Appendix for these screen shots.]

         *       Ms. Rochele Kadish (OECA/OC) also noted that EPA does not see or keep any of the personal identifiable information that is involved in this electronic identity-proofing process.

         *       Mr. Chaudet also noted that there are roles with these electronic signature credentials that include authorized company official (e.g., company president or director in charge of compliance), company employee with delegation authority to sign electronic submissions, company employee or contractor that can prepare (but not sign) electronic submissions.

         *       Mr. Johnston also noted that signing credentials and signature agreements do not expire. Electronic reporting systems can structure the agreements and the associated business processes so that only a single agreement is collected, once, from each user who is granted authority to electronically sign documents in the system. For EPA CDX systems, a user only has to register and complete the signature agreement once, the credentials do not expire.

         *       Oklahoma noted that EPA's CROMERR has different requirements for priority and non-priority reports (see Appendix 1 to Part 3 -- Priority Reports).Mr. Johnston noted that EPA is exploring option on how to provide clarity on CROMERR's requirements for non-priority reports and will share this information with the state technical workgroup and the rulemaking docket.

      Mr. Johnston also noted some confusion with some stakeholders on who is required to submit CROMERR approval packages. A number of California POTWs sought clarification on whether "POTWs need to be CROMERR certified to authorize electronic reporting directly to USEPA."

         *       Mr. Johnston stated that POTWs do not have to submit a CROMERR application to electronically report NPDES program data. POTWs are considered a NPDES regulated entity under this rule and are only required by the eRule to complete the necessary signature agreement to electronically report to their regulatory authority.

         *       He further noted that the proposed eRule does not require Significant Industrial Users (SIUs) and Categorical Industrial Users (CIUs) to electronically report their semi-annual compliance monitoring data [i.e., see 403.12 (e)  & (h)] to POTWs that have an approved pretreatment program. He noted that the eRule requires SIU/CIUs to electronically report these compliance monitoring data when the state or EPA is the control authority. POTWs that choose to electronically receive data from the facilities that they regulate (e.g., SIUs and CIUs) need to get CROMERR approval; however, this is not a requirement of the proposed eRule. Mr. Johnston noted that Grand Rapids, Michigan, recently recent such CROMERR approval to electronically receive data from facilities that they regulate (13 February 2014; 79 FR 8701).

      Mr. Johnston then discussed EPA's 90-day password reset requirement. He noted that the 90-day password reset requirement is not a CROMERR requirement but is a long standing EPA security requirement used for all of EPA's internal and external systems,  --  including websites for reporting. There is no such password reset requirement for state electronic reporting systems Mr. Johnston noted that a password reset will only be required at the time of electronic submission not when the password expires. For example, a regulated entity that only uses an EPA electronic reporting system or a state system that utilizes EPA's CROMERR services once a year can reset their password at the time of their electronic submission. These regulated entities would not need to access the electronic reporting system throughout the year to retain an active password or have an active password to initiate a password reset operation.

         *       Mr. Tom Easterly stressed that he foresees many problems with this approach and that states will likely be expending resources to deal with uses that have password problems.

         *       Mr. Andy Putnam (Colorado) stated that "it seems that we're designing a flaw into the system and that we're making it hard of future users of our electronic reporting tools."

         *       Mr. Johnston noted that EPA will pass these comments to senior EPA decision-makers and would get back to the state technical workgroup when he has more information to share.

Next Steps

      EPA agreed to summarize the meeting notes. EPA will share these draft notes with the technical workgroup in advance of the next meeting.
     State Technical Workgroup Meeting  -  NPDES Electronic Reporting Rule
                                 13 March 2014

      1pm		Introduction/Roll Call

      1:05		Edits to Notes from February 20th and 27th Meetings

      1:10		Discussion of CROMERR

      1:55		Solicitation of Topics for Next Meeting

      2:00		End of Call

Quick Reminder
   *    The technical workgroup is not a formal decision-making body. The workgroup is expected to develop, research, and evaluate options for consideration by EPA and state senior management.

   *    There are no formal quorum rules for the workgroup. Scheduled teleconferences will proceed with whichever workgroup members call in to participate.

   *    There will be no formal voting or consensus of the workgroup. Instead, the workgroup is expected to try to develop recommendations reflecting their various perspectives, not achieve consensus.

   *    Summaries of the workgroup's discussions will be prepared for and reviewed by the workgroup, for presentation to EPA senior management and other states and the rulemaking record. The discussions summaries will outline the major elements of the discussions, areas of agreement and any dissenting views.

Table 1: State Technical Workgroup Members
                                 Main Contact
                             State or Organization
                              Main Contact Email
                         State/Org. Present? (Yes/No)
                                 Sean  Rolland
                                     ACWA
<EMAIL_ADDRESS>                                      Yes
                                 Christy Monk
                                      AL
<EMAIL_ADDRESS>                                      Yes
                                 Teresa Marks
                                      AR
<EMAIL_ADDRESS>                                      Yes
                                  Andy Putnam
                                      CO
<EMAIL_ADDRESS><EMAIL_ADDRESS>                                      Yes
                                 Elisa Willard
                                      CO
<EMAIL_ADDRESS>                                      Yes
                                 Bob Zimmerman
                                      DE
<EMAIL_ADDRESS><EMAIL_ADDRESS>                                      Yes
                                  Beth Graves
                                     ECOS
<EMAIL_ADDRESS>                                      Yes
                                 Lee Garrigan
                                     ECOS
<EMAIL_ADDRESS>                                      Yes
                                  Chris Klena
                                      FL
<EMAIL_ADDRESS>                                      Yes
                                 Tom Easterly
                                      IN
<EMAIL_ADDRESS><EMAIL_ADDRESS>                                      Yes
                                  John Murphy
                                    NEIWPCC
<EMAIL_ADDRESS>                                      Yes
                                 Jason Lonardo
                                      NJ
<EMAIL_ADDRESS>                                      Yes
                                 Robert Wither
                                      NY
<EMAIL_ADDRESS>                                      Yes
                             Shellie Chard-McClary
                                      OK
<EMAIL_ADDRESS>                                      Yes
                                  Roy Walker
                                      OK
<EMAIL_ADDRESS>                                      No
                                 Sean Furjanic
                                      PA
<EMAIL_ADDRESS>                                      Yes
                                  Kim Wilson
                                      TX
<EMAIL_ADDRESS>                                      Yes
                                 Jerome Brooks
                                      VA
<EMAIL_ADDRESS>                                      Yes
                                  Nancy Kmet
                                      WA
<EMAIL_ADDRESS>                                      Yes

Tab le 2: EPA Technical Workgroup Members
                                     Name
                                  EPA Office
                                     Email
                               Present? (Yes/No)
                                   Lisa Lund
                                  OECA/OC/IO
<EMAIL_ADDRESS>                                      No
                                John Dombrowski
                                 OECA/OC/ETDD
<EMAIL_ADDRESS>                                      No
                                  Andy Hudock
                                 OECA/OC/ETDD
<EMAIL_ADDRESS>                                      No
                                Rochele Kadish
                                 OECA/OC/ETDD
<EMAIL_ADDRESS>                                      Yes
                                Carey Johnston
                                 OECA/OC/ETDD
<EMAIL_ADDRESS>                                      Yes
                                 Jackie Clark
                                  OW/OWM/WPD
<EMAIL_ADDRESS>                                      Yes
                                  Roy Chaudet
                                 OEI/OIC/IESD
<EMAIL_ADDRESS>                                      Yes
                                 Chuck Freeman
                                 OEI/OIC/IESD
<EMAIL_ADDRESS>                                      No
                               Michael Le Desma
                                OECA/OCEFT/NEIC
<EMAIL_ADDRESS>                                      Yes
                                 Aditi Prabhu
                                    OGC/WLO
<EMAIL_ADDRESS>                                      No
                                  Glynis Hill
                                 OP/ORPM/PRAD
<EMAIL_ADDRESS>                                      Yes

 Appendix: Screen Shots Showing the LexisNexis Identify Proofing Verification Process

1. Pre-Condition

Prior to seeing the verification screen below, the user will go to the following website (https://cdx.epa.gov/Registration/SelectDataflow) and complete the following tasks:

   1. Register in CDX by providing the program service, role, user, and organization information
   2. Verify the email by clicking on a link from an email sent by CDX.

2. Verification Option

Users are given the option to use the electronic verification option or manual paper verification.

Provide Personal Information

EPA's electronic option uses LexisNexis and there are two verification options:

   1. Verify a person's identity, the organization, and that the person works at the organization
   2. Verify a person's identity only (shown below)

The first and last name is pre-populated from CDX Registration. LexisNexis then requests additional personal identifiable information (PII) to be entered for their verification processing.

NOTE: CDX Web does not collect or store any of the PII used in the LexisNexis identity-proofing.

Complete Identity Verification

The user is redirected back to the CDX Web screen where after clicking on the "Continue" button, CDX Web will calculate the scores received from LexisNexis and determine whether the user has passed or failed verification. Passing scores prompt users to establish five (5) challenge questions and answers to be used as a second-factor authentication when signing document electronically.

CROMERR Challenge Questions and Answers Setup

The user is given the option to choose five (5) questions from a list of 20 possible questions. Among the 5 chosen questions, the CDX CROMERR service will present the user with one of these questions when attempting to sign a document.

Electronic Signature Agreement

After a user has successfully set up the challenge question and answers, they will be prompted to sign the ESA electronically.

Sign Document Electronically

Upon clicking on the Sign Electronically button, the user will be prompted to:

   1. Re-authenticate
   2. Provide challenge answer
   3. Apply digital signature to the ESA

1. CDX Password Reset

   A. Provide Known Account Information

User is prompted to provide email address and User ID for identification purposes.

   A. Provide Secret Answer

If the email and User ID combination matches, the user is then prompted to provide the secret answer. As part of this self-kiosk process and for security reasons, the user gets up to three failed attempts before they are required to call the help desk to reset their password.

NOTE: The secret answer is different from the CROMERR challenge answer that is set up for electronic signing.

   B. Successful Reset Notice

When the secret answer is correct, the user receives an on-screen message indicating the password was reset successfully. The message also indicates that an email has been sent with password reset instructions.

   A. Complete the Password Reset Process

Upon clicking on a hyperlink from the email, the user is prompted to provide new password to complete this process.