warren. gillette@ faa. gov Received Date: 04/ 03/ 2003 09: 58: 37 AM Transmission Date:

04/ 03/ 2003 09: 59: 37 AM To: Bryan Manning/ AA/ USEPA/ US@ EPA cc: curtis. holsclaw@ faa. gov, carl. burleson@ faa. gov, lynne. pickard@ faa. gov, edward. mcqueen@ faa. gov Subject:

an:

ve taken a look at the Draft NPRM to adopt the CAEP/ 4 NOx standard and reciate EPA's intentions towards harmonization. However, we did have y important and appreciable comments to the draft preamble, which are ached.

ase give our comments a review and let me know if you have any questions comments.

nk you for providing us with the advanced copy of the draft at this me.

arren ( See attached file: ndmentComments030402final. doc)

endmentComments030402final. d


[Federal Register Volume 85, Number 169 (Monday, August 31, 2020)]
[Notices]
[Pages 53902-53903]
[FR Doc No: 2020-19064]

=======================================================================
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DEPARTMENT OF TRANSPORTATION

Federal Aviation Administration

Membership in the National Parks Overflights Advisory Group

AGENCY: Federal Aviation Administration, Transportation.

ACTION: Notice.

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SUMMARY: By Federal Register notice on April 17, 2020 the National Park
Service (NPS) and the Federal Aviation Administration (FAA) invited
interested persons to apply to fill three current and three future
openings on the National Parks Overflights Advisory Group (NPOAG) to
represent air tour operator and environmental concerns and Native
American interests. This notice informs the public of the selection
made for the vacancies representing air tour operator and environmental
concerns and invites persons interested in serving on the NPOAG to
apply for the ongoing current opening representing Native American
concerns.

DATES: Persons interested in applying for the NPOAG opening
representing Native American interests need to apply by September 30,
2020.

FOR FURTHER INFORMATION CONTACT: Keith Lusk, Special Programs Staff,
Federal Aviation Administration, Western-Pacific Region Headquarters,
727 S. Aviation Boulevard, Suite #150, El Segundo, CA 90245, telephone:
(424) 405-7017, email<EMAIL_ADDRESS>
SUPPLEMENTARY INFORMATION:

Background

    The National Parks Air Tour Management Act of 2000 (the Act) was
enacted on April 5, 2000, as Public Law 106-181, and subsequently
amended in the FAA Modernization and Reform Act of 2012. The Act
required the establishment of the advisory group within one year after
its enactment. The NPOAG was established in March 2001. The advisory
group is comprised of a balanced group of representatives of general
aviation, commercial air tour operations, environmental concerns, and
Native American tribes. The Administrator of the FAA and the Director
of NPS (or their designees) serve as ex officio members of the group.
Representatives of the Administrator and Director serve alternating
one-year terms as chairman of the advisory group.
    In accordance with the Act, the advisory group provides ``advice,
information, and recommendations to the Administrator and the Director-
    (1) On the implementation of this title [the Act] and the
amendments made by this title;
    (2) On commonly accepted quiet aircraft technology for use in
commercial air tour operations over a national park or tribal lands,
which will receive preferential treatment in a given air tour
management plan;
    (3) On other measures that might be taken to accommodate the
interests of visitors to national parks; and
    (4) At the request of the Administrator and the Director, safety,
environmental, and other issues related to commercial air tour
operations over a national park or tribal lands.''

Membership

    The current NPOAG is made up of one member representing general
aviation, three members representing the commercial air tour industry,
four members representing environmental concerns, and two members
representing Native American interests. Members serve 3-year terms.
Current members of the NPOAG are as follows:
    Melissa Rudinger represents general aviation; Eric Lincoln
represents commercial air tour operators with two open seats; Les
Blomberg, Robert Randall, John Eastman, and Dick Hingson represent
environmental interests; and Carl Slater represents Native American
interests with one open seat.

Selection

    John Becker of Papillon Grand Canyon Helicopters and James Viola of
Helicopter Association International have been selected for the two
current open seats to represent commercial air tour operators.
Incumbents Les Blomberg of the Noise Pollution Clearinghouse, John
Eastman of the Jackson Hole Airport Board, and Dick Hingson of the
Sierra Club have been selected to serve new 3 year terms when their
current membership expires in September. No selection was made for the
current open seat representing Native American interests. These NPOAG
members 3 year terms commence on the publication date of this Federal
Register notice.
    The FAA and NPS invite persons interested in applying for the one
remaining opening on the NPOAG to contact Mr. Keith Lusk (contact
information is written above in FOR FURTHER INFORMATION CONTACT).
Requests to serve on the NPOAG must be made to Mr. Lusk in writing and
postmarked or emailed on or before September 30, 2020. The request
should indicate your affiliation with federally-recognized Native
American tribes, as

appropriate. The request should also state what expertise you would
bring to the NPOAG as related to issues and concerns with aircraft
flights over tribal lands and national parks. The term of service for
NPOAG members is 3 years.
    On August 13, 2014, the Office of Management and Budget issued
revised guidance regarding the prohibition against appointing or not
reappointing federally registered lobbyists to serve on advisory
committees (79 FR 47482).
    Therefore, before appointing an applicant to serve on the NPOAG,
the FAA and NPS will require the prospective candidate to certify that
they are not a federally registered lobbyist.

    Issued in El Segundo, CA, on August 26, 2020.
Keith Lusk,
Program Manager, Special Programs Staff, Western-Pacific Region.
[FR Doc. 2020-19064 Filed 8-28-20; 8:45 am]
BILLING CODE 4910-13-P


[Federal Register Volume 78, Number 153 (Thursday, August 8, 2013)]
[Rules and Regulations]
[Pages 48326-48330]
[FR Doc No: 2013-18881]

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ENVIRONMENTAL PROTECTION AGENCY

40 CFR Part 52

[EPA-R09-OAR-2012-0913; FRL-9843-7]

Partial Disapproval of State Implementation Plan; Arizona;
Regional Haze Requirements

AGENCY: Environmental Protection Agency (EPA).

ACTION: Final rule.

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SUMMARY: EPA is finalizing a partial disapproval of the Arizona State
Implementation Plan (SIP) to implement the regional haze program for
the first planning period through 2018. Regional haze is caused by
emissions of air pollutants from numerous sources located over a broad
geographic area. The Clean Air Act (``CAA'' or the ``Act'') and EPA's
regulations require states to adopt and submit to EPA SIPs that assure
reasonable progress toward the national goal of achieving natural
visibility conditions in 156 national parks and wilderness areas
designated as Class I areas.

DATES: Effective Date: This rule is effective on September 9, 2013.

ADDRESSES: EPA has established docket number EPA-R09-OAR-2012-0913 for
this action. Generally, documents in the docket for this action are
available electronically at www.regulations.gov and in hard copy at EPA
Region IX, 75 Hawthorne Street, San Francisco, California. While all
documents in the docket are listed at www.regulations.gov, some
information may be publicly available only at the hard copy location
(e.g., copyrighted material, large maps), and some may not be publicly
available in either location (e.g., confidential business information).
To inspect the hard copy materials, please schedule an appointment
during normal business hours with the contact listed directly below.

FOR FURTHER INFORMATION CONTACT: Thomas Webb, U.S. EPA, Region 9,
Planning Office, Air Division, Air-2, 75 Hawthorne Street, San
Francisco, CA 94105. Thomas Webb can be reached at telephone number
(415) 947-4139 and via electronic mail at<EMAIL_ADDRESS>
SUPPLEMENTARY INFORMATION: Throughout this document, ``we,'' ``us'' and
``our'' refer to EPA.

Table of Contents

I. Overview of Proposed Action
II. Public Comments and EPA Responses
III. Summary of Final Action
IV. Statutory and Executive Order Reviews

I. Overview of Proposed Action

    We proposed on February 5, 2013, to disapprove Arizona's SIP to
implement the regional haze program under 40 CFR 51.309.\1\
Specifically, we proposed to disapprove in part a December 24, 2008,
submittal by the Arizona Department of Environmental Quality (ADEQ) in
which the State resubmitted materials previously submitted on December
23, 2003, and December 30, 2004 (collectively ``Arizona's 309 Regional
Haze SIP'').\2\ These SIP submittals were intended to address the
regional haze requirements of the CAA and EPA's implementing
regulations at 40 CFR 51.309 for four of Arizona's mandatory Class I
areas. Our proposed rule includes additional information about these
requirements and Arizona's SIP submittals.
---------------------------------------------------------------------------

    \1\ 78 FR 8083.
    \2\ As explained in our proposal, this disapproval is
``partial'' rather than ``full'' because EPA previously approved
certain burning and smoke management rules that were part of the
2008 SIP submittal.
---------------------------------------------------------------------------

II. Public Comments and EPA Responses

    During the 30-day comment period on our proposal, we received
comments from:
     Eric Massey, Director Air Quality, ADEQ; and
     David Nimkin, Gloria Smith, Barbara Warren, Donna House
and Dan Randolph, on behalf of National Parks Conservation Association,
Sierra Club, Physicians for Social Responsibility (Arizona Chapter),
Dine' Citizens Against Ruining Our Environment, and San Juan Citizens
Alliance (collectively, the ``Conservation Organizations'').

We carefully considered these comments, which are located in the docket
for this action. In the following sections, we provide summaries of and
our responses to these comments.
    Comment 1: ADEQ commented that its December 24, 2008, ``re-
submittal'' letter was not a revision to Arizona's 309 Regional Haze
SIP because it did not include new information and was not subject to a
formal public comment period. ADEQ further asserted that its 2003 and
2004 SIP submittals were deemed complete by operation of law six months
after submission, pursuant to CAA section 110(k)(1)(B), and that EPA
should have acted on these submittals within 18 months pursuant to CAA
section 110(k)(2).
    Response 1: As an initial matter, ADEQ's comment appears to have no
relevance to the substance of EPA's proposed action. Regardless of
whether ADEQ's December 24, 2008, re-submittal letter was a SIP
revision or merely a request that EPA act upon ADEQ's 2003 and 2004 SIP
submittals, the fact remains that Arizona's 309 Regional Haze SIP does
not satisfy the requirements of 40 CFR 51.309(d)(4) and is therefore
not approvable. We also note that ADEQ's comment appears to contradict
the statements made in the December 24, 2008, re-submittal letter
itself.\3\ The re-submittal letter states that:
---------------------------------------------------------------------------

    \3\ Letter from Stephen A. Owens, ADEQ, to Wayne Nastri, EPA,
December 24, 2008 (``re-submittal letter'').

    Plan submittal is consistent with the provisions of Arizona
Revised Statutes (ARS) Title 49, Sec. Sec.  49- 104, 49- 06, 49-
404,49-406, 49-414, and 49-414.0 1 and the Code of Federal
Regulations (CFR) Title 40, Sec. Sec.  51.102-51.104. The plan also
complies with the public process requirements in Section 110(a)(l)
and (a)(2) of the Clean Air Act; 40 CFR 51.102 regarding
preparation, notice, and submission of state implementation plans;
and Arizona Revised Statutes 49-425 regarding notice and [public]
review of rules.\4\
---------------------------------------------------------------------------

    \4\ Id. at 1.

Consistent with these statements regarding public process, EPA viewed
the re-submittal letter as a SIP revision. However, if Arizona did not
intend for the letter to be a SIP revision, then we construe it as a
withdrawal of those

portions of the State's 2003 and 2004 SIP submittals addressing the
stationary source requirements of 40 CFR 51.309(d)(4), as well as an
acknowledgment of the State's failure to submit provisions to address
eight of the State's Class I areas under 40 CFR 51.309(g). As the
---------------------------------------------------------------------------
letter explains:

    This plan submittal does not include provisions under Sec.
309(d)(4) or Sec.  309(g). Due to the new requirements for
stationary source control strategies based on the decision rendered
in Center for Energy and Economic Development (CEED) v. EPA, 398
F.3d 653 (DC Cir. 2005), Arizona has not been able to complete
revisions to Sec.  309(d)(4) or complete Sec.  309(g) by the
deadline of December 17, 2007.\5\
---------------------------------------------------------------------------

    \5\ Id. at 2.

Thus, the re-submittal letter clearly acknowledged that Arizona's 309
Regional Haze SIP lacked any provisions to address the critical
requirements of 40 CFR 51.309(d)(4) and 51.309(g).
    The absence of these provisions cannot be remedied by the fact that
Arizona's 2003 and 2004 SIP submittals were deemed ``complete'' by
operation of law. Section 110(k)(1)(A) of the CAA requires EPA to
``promulgate minimum criteria that any plan submission must meet before
the Administrator is required to act on such submission under this
subsection.'' \6\ Pursuant to this requirement, EPA has promulgated
``completeness criteria,'' consisting of administrative materials and
technical support elements that must be included with all SIP
submittals.\7\ These criteria do not include the substantive provisions
that a given SIP must include to comply with the minimum requirements
of the CAA. Rather, such substantive requirements are set out in the
CAA itself and in EPA's implementing regulations. Thus, the fact that
the 2003 and 2004 SIP submittals were deemed ``complete'' with respect
to the minimum criteria required under CAA section 110(k)(1)(A) does
not mean that the submittals were complete in the sense that they
contained the provisions necessary to satisfy the requirements of 40
CFR 51.309. On the contrary, ADEQ acknowledged in its re-submittal
letter that Arizona's 309 Regional Haze SIP ``does not include
provisions under Sec.  309(d)(4) or Sec.  309(g).'' \8\
---------------------------------------------------------------------------

    \6\ 42 U.S.C. 7410(k)(1)(A).
    \7\ 40 CFR part 51, Appendix V.
    \8\ Re-submittal letter at 2.
---------------------------------------------------------------------------

    Finally, ADEQ's assertion that EPA should have acted on the State's
2003 and 2004 SIP submittals within 18 months of December 30, 2004, is
not persuasive. The D.C. Circuit's decision in Center for Energy &
Economic Development v. EPA, 398 F.3d 653 (D.C. Cir. 2005) (``CEED''),
which invalidated 40 CFR 51.309's stationary source requirements, was
issued on February 18, 2005. In response to this decision, EPA proposed
revisions to 40 CFR 51.309 on August 1, 2005.\9\ Among other things,
EPA proposed to allow states to submit or resubmit 309 SIPs at a later
date in order to provide time for States to revisit the SO2
milestones and backstop emission trading program. EPA further explained
that:
---------------------------------------------------------------------------

    \9\ 70 FR 44154 (August 1, 2005).

    With respect to the other strategies contained in Sec.  51.309,
although these other provisions of Sec.  51.309 were not affected by
the decision in CEED v. EPA and may remain effective as a matter of
State law in each State, the EPA cannot approve implementation plans
under Sec.  51.309 as meeting reasonable progress until the plans
contain valid provisions for addressing stationary sources.\10\
---------------------------------------------------------------------------

    \10\ Id. at 44165.

Thus, EPA clearly indicated that we could not approve previously
submitted 309 SIPs until they were resubmitted with valid provisions
for addressing stationary sources. EPA ultimately set a deadline of
December 17, 2007, for these re-submittals.\11\ Regardless of whether
ADEQ's December 24, 2008, re-submittal letter is characterized as a SIP
revision or merely a prompt for EPA to act upon the State's earlier
2003 and 2004 SIP submittals, the fact remains that Arizona, by its own
admission, failed to submit provisions addressing the requirements of
40 CFR 51.309(d)(4) and 51.309(g). Finally, even if it were true that
EPA should have acted on Arizona's 2003 and 2004 SIP submittals within
18 months, it is irrelevant to the substance of the action EPA is
taking in this final rule. EPA is addressing the approvability of
Arizona's 309 Regional Haze SIP now and partially disapproving it
because the SIP does not satisfy the requirements of 40 CFR
51.309(d)(4).
---------------------------------------------------------------------------

    \11\ Id. at 44166.
---------------------------------------------------------------------------

    Comment 2: ADEQ commented that EPA had no authority to adopt a
Federal Implementation Plan (FIP) in its December 5, 2012, final rule
that established BART for three power plants in Arizona.\12\ ADEQ
argued that EPA's January 15, 2009, finding of failure to submit
(``Finding''),\13\ which provided the basis for EPA's FIP authority,
was invalid because Arizona submitted 309 SIPs in 2003 and 2004, both
of which were deemed complete by operation of law. Finally, ADEQ
asserted that if EPA did have FIP authority, then it would extend only
to the requirements of 40 CFR 51.309(d)(4) and 51.309(g), not to the
requirement for BART.
---------------------------------------------------------------------------

    \12\ 77 FR 72512 (December 5, 2012).
    \13\ 74 FR 2392 (January 15, 2009).
---------------------------------------------------------------------------

    Response 2: As an initial matter, this comment is not germane in
any way to the present rulemaking, in which EPA is finalizing its
partial disapproval of Arizona's 309 Regional Haze SIP for failure to
comply with the requirements of 40 CFR 51.309(d)(4). Rather, ADEQ's
comment appears to be a collateral challenge to EPA's Finding and other
rulemakings EPA has conducted involving regional haze and BART
requirements in Arizona. We note that ADEQ's objection to EPA's Finding
comes nearly three years after the statutory deadline for challenging
that action has passed. Under the CAA, any party seeking judicial
review of EPA's Finding was required to file a petition for review
within 60 days of publication of the Finding in the Federal Register,
or by no later than March 16, 2009. No party, including Arizona, filed
such a petition. Therefore, ADEQ's claim that EPA's Finding was invalid
and that EPA did not have FIP authority to promulgate its December 5,
2012, final rule is time-barred.
    We also disagree with the substance of ADEQ's comment. As ADEQ
noted in its comment, EPA's authority to issue a FIP arises from one of
three triggering events: (1) A finding that a state has failed to make
a required SIP submittal; (2) a finding that a SIP submittal does not
satisfy the minimum criteria of CAA section 110(k)(1)(A); or (3) the
disapproval, in whole or in part, of a SIP submittal.\14\ Contrary to
ADEQ's assertion, the fact that Arizona's 2003 and 2004 SIP submittals
were deemed ``complete'' by operation of law has no bearing on EPA's
Finding, which was premised on the fact that Arizona failed to submit
SIP provisions to satisfy the requirements of 40 CFR 51.309(d)(4) and
51.309(g). The State's 2003 and 2004 SIP submittals could not have
addressed 40 CFR 51.309(d)(4) and 51.309(g) because the former
requirement was modified in response to the D.C. Circuit's 2005
decision in CEED, while the latter requirement did not even exist until
EPA finalized our revisions to 40 CFR 51.309 in 2006.\15\ ADEQ
acknowledged this fact in its December 24, 2008, re-submittal letter,
which plainly stated that Arizona's 309 Regional Haze SIP addresses
neither 40 CFR 51.309(d)(4) nor 51.309(g).\16\
---------------------------------------------------------------------------

    \14\ 42 U.S.C. 7410(c)(1).
    \15\ 71 FR 60633 (October 13, 2006) codified at 40 CFR 51.309.
    \16\ Re-submittal letter at 2.
---------------------------------------------------------------------------

    Additionally, we disagree with ADEQ's contention that EPA's FIP

authority is somehow limited to the requirements of 40 CFR 51.309(d)(4)
and 51.309(g). Section 309 is an alternative route to compliance with
the regional haze rule that can only be implemented at the election of
the state. The regional haze rule clearly explains that if a state
chooses to fulfill its regional haze obligation under 40 CFR 51.309,
but fails to submit the SIP provisions necessary to satisfy that
obligation, then the state remains subject to the requirements of 40
CFR 51.308.\17\ Thus, when Arizona failed to submit SIP provisions
addressing the requirements of 40 CFR 51.309(d)(4) and 51.309(g) by the
December 17, 2007, deadline, Arizona remained subject to the general
requirements of 40 CFR 51.308. In other words, the regulatory gap left
by Arizona's failure to submit a comprehensive 309 SIP was a duty to
submit a 308 SIP. As a result, EPA's Finding triggered a duty on behalf
of EPA to issue a FIP that satisfied the requirements of 40 CFR 51.308,
which include the requirement to establish BART for certain stationary
sources.
---------------------------------------------------------------------------

    \17\ See 40 CFR 51.309(a) (``Any Transport Region State electing
not to submit an implementation plan under this section is subject
to the requirements of Sec.  51.308 in the same manner and to the
same extent as any State not included within the Transport
Region.''). See also 64 FR 35754, July 1, 1999 (explaining that
``the requirements of Section 51.309 . . . are not severable. States
that wish to take advantage of the GCVTC's efforts and EPA's
acceptance thereof are obligated to meet all of the requirements of
section 51.309'' (emphasis added)).
---------------------------------------------------------------------------

    Finally, even if EPA's FIP authority were somehow limited to the
requirements of 40 CFR 51.309(d)(4) and 51.309(g), those provisions are
far more expansive than ADEQ suggests. Section 51.309(d)(4) governs
emissions of nitrogen oxides (NOX), particulate matter (PM),
and sulfur dioxide (SO2) from stationary sources that cause
or contribute to visibility impairment in the Class I areas on the
Colorado Plateau. In particular, 40 CFR 51.309(d)(4)(i) requires the
establishment of quantitative SO2 emission ``milestones''
that provide for emissions reductions, which ``must be shown to provide
for greater reasonable progress than would be achieved by application
of BART pursuant to Sec.  51.308(e)(2).'' In addition, 40 CFR
51.309(d)(4)(vi) requires 309 SIPs to ``contain any necessary long term
strategies and BART requirements for stationary source PM and
NOX emissions.'' Finally, 40 CFR 51.309(g) includes the
requirements for Arizona's eight other Class I Areas and mandates,
among other things, the establishment of reasonable progress goals and
implementation of ``any additional measures necessary to demonstrate
reasonable progress,'' consistent with the requirements of 40 CFR
51.308(d)(1)-(4). In short, the requirements of 40 CFR 51.309(d)(4) and
51.309(g) encompass three critical elements of the regional haze
program: Reasonable progress, long-term strategies, and BART (or
``better-than-BART'' alternatives) for NOX, PM, and
SO2. Therefore, even if EPA's FIP authority were somehow
limited to fulfilling the requirements of 40 CFR 51.309(d)(4) and
51.309(g), that authority nevertheless extends to each of these
critical elements, which include BART.
    Comment 3: ADEQ commented that EPA's delay in acting on Arizona's
309 Regional Haze SIP and the Agency's promulgation of a FIP in a
separate rulemaking did not give Arizona an adequate chance to revise
its SIP to address the identified deficiencies.
    Response 3: Arizona has been on notice since August 1, 2005, when
EPA proposed to amend 40 CFR 51.309 in response to the D.C. Circuit's
decision in CEED, of the deficiencies associated with the State's 2003
and 2004 SIP submittals. There, EPA publicly stated that ``EPA cannot
approve implementation plans under section 51.309 as meeting reasonable
progress until the plans contain valid provisions for addressing
stationary sources.'' \18\ We also explained that ``[s]tates opting for
Sec.  51.309 will be required to resubmit SIPs some time after [the
invalidated portions of the 309 regulations] have been rectified . . .
.'' \19\ EPA's October 2006 final rule amending 40 CFR 51.309 also made
clear that Arizona would have to revise and resubmit its 309 SIP to
address 40 CFR 51.309(d)(4) and 51.309(g) by December 17, 2007.\20\
Arizona's December 24, 2008, re-submittal letter, which stated ``[t]his
plan submittal does not include provisions under Sec.  309(d)(4) or
Sec.  309(g),'' \21\ illustrates that Arizona was well aware of these
requirements and the deficiencies in its 309 SIP.
---------------------------------------------------------------------------

    \18\ 70 FR 44165 (August 1, 2005).
    \19\ Id. at 44165, 44166.
    \20\ 71 FR 60633 (October 13, 2006) codified at 40 CFR 51.309.
    \21\ Re-submittal letter at 2.
---------------------------------------------------------------------------

    EPA found on January 15, 2009, that Arizona failed to re-submit the
required provisions, again stating explicitly and on public record:

    Arizona, New Mexico, and Wyoming have opted to develop SIPs
based on the recommendations of the Grand Canyon Visibility
Transport Commission under 40 CFR 51.309. All three States have
failed to submit the plan elements required by 40 CFR 51.309(g), the
reasonable progress requirements for areas other than the 16 Class I
areas covered by the Grand Canyon Visibility Transport Commission
Report. Arizona and New Mexico have also failed to submit the plan
element required by 40 CFR 51.309(d)(4), the alternate stationary
source program for control of sulfur dioxide (SO2).\22\
---------------------------------------------------------------------------

    \22\ 74 FR 2393 (January 15, 2009).

Around the same time, EPA sent a letter to ADEQ notifying the State of
the implications of its failure to submit the required SIP provisions,
---------------------------------------------------------------------------
explaining that:

    Upon the effective date of the Federal Register notice, EPA must
within two years either fully approve Arizona's regional haze SIP or
promulgate a Federal implementation plan (FIP) as required by CAA
section 110(c). Please be aware that EPA needs about 12 months after
receipt of a SIP to take final action. If we do not have sufficient
time to review and approve a submitted SIP revision, the CAA
requires that EPA impose a FIP. In order to avoid having EPA issue a
FIP, we strongly recommend that you submit your SIP revision within
a year of this finding, or sooner if possible.\23\
---------------------------------------------------------------------------

    \23\ Letter from Deborah Jordan, EPA, to Stephen Owens, ADEQ
(January 14, 2009).

Thus, over the last eight years, EPA has repeatedly and publicly
specified the deficiencies in Arizona's 309 Regional Haze SIP and
allowed ample time for Arizona to address these deficiencies.
    Comment 4: The Conservation Organizations expressed their support
for EPA's determination that Arizona's 309 Regional Haze SIP fails to
comply with the requirements of the regional haze rule. They provided a
summary of the requirements of 40 CFR 51.309(d)(4) and a history of
Arizona's regional haze SIP submissions since EPA's 2006 revisions to
the section 309 requirements, concluding that ``EPA's final rule should
disapprove Arizona's 309 SIP for failure to comply with the
requirements of Section 309(d)(4).'' They further asserted that ``EPA's
final rule should find that Arizona declined to participate in the
alternative Section 309 [Western Backstop Trading Program] and instead
has chosen to address SO2, NOX, and PM reductions
through the BART process and long-term strategy requirements found in
Section 308.''
    Response 4: We agree with this comment and acknowledge the
Conservation Organizations' support for this rulemaking.

III. Summary of Final Action

    For the reasons set out in our proposed rule and in this final
rulemaking, we are finalizing our partial disapproval of Arizona's 309
Regional Haze SIP. In particular, we are disapproving all portions of
Arizona's 2003 and 2004 SIP submittals, except those portions that have
already been

approved and those portions pertaining to Reasonably Attributable
Visibility Impairment (RAVI).
    Under section 179(a) of the CAA, EPA's final disapproval of a
submittal that addresses a requirement of CAA sections 171-193 or a
revision that is required in response to a finding of substantial
inadequacy as described in CAA section 110(k)(5) starts a sanctions
clock. Arizona's 309 Regional Haze SIP was not submitted to meet either
of these requirements. Therefore, today's action will not trigger
mandatory sanctions under CAA section 179(a).
    In addition, CAA section 110(c)(1) requires EPA to promulgate a FIP
at any time within two years after disapproving a SIP in whole or in
part, unless EPA first approves a SIP correcting the deficiencies. As
explained above, due to our previous Finding that Arizona failed to
submit a complete regional haze SIP, EPA is already subject to a FIP
duty under section 110(c)(1) with respect to the regional haze
requirements for Arizona. Moreover, we are also subject to a set of
court-ordered deadlines by which we must approve a SIP and/or
promulgate a FIP that collectively meet the regional haze requirements
for Arizona.\24\ Thus, we do not construe today's partial disapproval
of Arizona's 309 Regional Haze SIP as creating any new FIP obligation.
However, as noted in our proposed rulemaking, Arizona is appealing the
district court's entry and modification of the consent decree that set
the deadlines for EPA action on regional haze plans for Arizona.\25\ If
Arizona's challenge ultimately results in any changes to the scope of
EPA's existing FIP duty with respect to regional haze in Arizona, then
today's action will trigger a two-year FIP clock for any additional
regional haze requirements that are not subject to the previous FIP
clock.
---------------------------------------------------------------------------

    \24\ National Parks Conservation Association v. Jackson (D.D.C.
Case 1:11-cv-01548).
    \25\ National Parks Conservation Association v. EPA (D.C. Cir.,
USCA Case 12-5211).
---------------------------------------------------------------------------

IV. Statutory and Executive Order Reviews

A. Executive Order 12866, Regulatory Planning and Review

    This action is not a ``significant regulatory action'' under the
terms of Executive Order (E.O.) 12866 (58 FR 51735, October 4, 1993)
and is therefore not subject to review under the E.O.

B. Paperwork Reduction Act

    This action does not impose an information collection burden under
the provisions of the Paperwork Reduction Act, 44 U.S.C. 3501 et seq.
Burden is defined at 5 CFR 1320.3(b).

 C. Regulatory Reduction Act

    The Regulatory Flexibility Act (RFA) generally requires an agency
to conduct a regulatory flexibility analysis of any rule subject to
notice and comment rulemaking requirements unless the agency certifies
that the rule will not have a significant economic impact on a
substantial number of small entities. Small entities include small
businesses, small not-for-profit enterprises, and small governmental
jurisdictions.
    This rule will not have a significant impact on a substantial
number of small entities because SIP approvals or SIP disapprovals
under section 110 of the Clean Air Act do not create any new
requirements but simply approve or disapprove requirements that the
State is already imposing. Therefore, because the disapproval of SIP
revisions does not create any new requirements, I certify that this
action will not have a significant economic impact on a substantial
number of small entities. Moreover, due to the nature of the Federal-
State relationship under the Clean Air Act, preparation of a
flexibility analysis would constitute Federal inquiry into the economic
reasonableness of State action. The Clean Air Act forbids EPA to base
its actions concerning SIPs on such grounds. Union Electric Co., v.
U.S. EPA, 427 U.S. 246, 255-66 (1976); 42 U.S.C. 7410(a)(2).

D. Unfunded Mandates Reform Act

    Under section 202 of the Unfunded Mandates Reform Act of 1995
(``Unfunded Mandates Act''), signed into law on March 22, 1995, EPA
must prepare a budgetary impact statement to accompany any proposed or
final rule that includes a Federal mandate that may result in estimated
costs to State, local, or tribal governments in the aggregate, or to
the private sector, of $100 million or more. Under section 205, EPA
must select the most cost-effective and least burdensome alternative
that achieves the objectives of the rule and is consistent with
statutory requirements. Section 203 requires EPA to establish a plan
for informing and advising any small governments that may be
significantly or uniquely impacted by the rule.
    EPA has determined that this action does not include a Federal
mandate that may result in estimated costs of $100 million or more to
either State, local, or tribal governments in the aggregate, or to the
private sector. This Federal action disapproves certain SIP elements
and imposes no new requirements. Accordingly, no additional costs to
State, local, or tribal governments, or to the private sector, result
from this action.

E. Executive Order 13132, Federalism

    Executive Order 13132 requires EPA to develop an accountable
process to ensure ``meaningful and timely input by State and local
officials in the development of regulatory policies that have
federalism implications.'' ``Policies that have federalism
implications'' is defined in the Executive Order to include regulations
that have ``substantial direct effects on the States, on the
relationship between the national government and the States, or on the
distribution of power and responsibilities among the various levels of
government.'' Under Executive Order 13132, EPA may not issue a
regulation that has federalism implications, that imposes substantial
direct compliance costs, and that is not required by statute, unless
the Federal government provides the funds necessary to pay the direct
compliance costs incurred by State and local governments, or EPA
consults with State and local officials early in the process of
developing the proposed regulation. EPA also may not issue a regulation
that has federalism implications and that preempts State law unless the
Agency consults with State and local officials early in the process of
developing the proposed regulation.
    This rule will not have substantial direct effects on the States,
on the relationship between the national government and the States, or
on the distribution of power and responsibilities among the various
levels of government, as specified in Executive Order 13132, because it
merely disapproves certain SIP revisions implementing and does not
alter the relationship or the distribution of power and
responsibilities established in the Clean Air Act. Thus, the
requirements of section 6 of the Executive Order do not apply to this
rule.

F. Executive Order 13175, Coordination With Indian Tribal Governments

    Executive Order 13175, entitled ``Consultation and Coordination
with Indian Tribal Governments'' (65 FR 67249, November 9, 2000),
requires EPA to develop an accountable process to ensure ``meaningful
and timely input by tribal officials in the development of regulatory
policies that have tribal implications.'' This rule does not have
tribal implications, as specified in Executive Order 13175. It will not
have

substantial direct effects on tribal governments, on the relationship
between the Federal government and Indian tribes, or on the
distribution of power and responsibilities between the Federal
government and Indian tribes. Thus, Executive Order 13175 does not
apply to this rule.

G. Executive Order 13045, Protection of Children From Environmental
Health Risks and Safety Risks

    EPA interprets Executive Order 13045 (62 FR 19885, April 23, 1997)
as applying only to those regulatory actions that concern health or
safety risks, such that the analysis required under section 5-501 of
the Executive Order has the potential to influence the regulation. This
rule is not subject to Executive Order 13045, because it disapproves
certain SIP revisions.

H. Executive Order 13211, Actions That Significantly Affect Energy
Supply, Distribution, or Use

    This rule is not subject to Executive Order 13211, ``Actions
Concerning Regulations That Significantly Affect Energy Supply,
Distribution, or Use'' (66 FR 28355, May 22, 2001) because it is not a
significant regulatory action under Executive Order 12866.

I. National Technology Transfer and Advancement Act

    Section 12 of the National Technology Transfer and Advancement Act
(NTTAA) of 1995 requires Federal agencies to evaluate existing
technical standards when developing a new regulation. To comply with
NTTAA, EPA must consider and use ``voluntary consensus standards''
(VCS) if available and applicable when developing programs and policies
unless doing so would be inconsistent with applicable law or otherwise
impractical.
    EPA believes that VCS are inapplicable to this action. Today's
action does not require the public to perform activities conducive to
the use of VCS.

J. Executive Order 12898: Federal Actions To Address Environmental
Justice in Minority Populations and Low-Income Population

    Executive Order (E.O.) 12898 (59 FR 7629 (Feb. 16, 1994))
establishes federal executive policy on environmental justice. Its main
provision directs federal agencies, to the greatest extent practicable
and permitted by law, to make environmental justice part of their
mission by identifying and addressing, as appropriate,
disproportionately high and adverse human health or environmental
effects of their programs, policies, and activities on minority
populations and low-income populations in the United States.
    EPA lacks the discretionary authority to address environmental
justice in this rulemaking. In reviewing SIP submissions, EPA's role is
to approve or disapprove state choices, based on the criteria of the
Clean Air Act. Accordingly, this action merely disapproves certain SIP
revisions under section 110 of the Clean Air Act and will not in-and-of
itself create any new requirements. Accordingly, it does not provide
EPA with the discretionary authority to address, as appropriate,
disproportionate human health or environmental effects, using
practicable and legally permissible methods, under Executive Order
12898.

K. Congressional Review Act

    The Congressional Review Act, 5 U.S.C. 801 et seq., as added by the
Small Business Regulatory Enforcement Fairness Act of 1996, generally
provides that before a rule may take effect, the agency promulgating
the rule must submit a rule report, which includes a copy of the rule,
to each House of the Congress and to the Comptroller General of the
United States. EPA will submit a report containing this rule and other
required information to the U.S. Senate, the U.S. House of
Representatives, and the Comptroller General of the United States prior
to publication of the rule in the Federal Register. A major rule cannot
take effect until 60 days after it is published in the Federal
Register. This action is not a ``major rule'' as defined by 5 U.S.C.
804(2).

L. Petitions for Judicial Review

    Under section 307(b)(1) of the Clean Air Act, petitions for
judicial review of this action must be filed in the United States Court
of Appeals for the appropriate circuit by October 7, 2013. Filing a
petition for reconsideration by the Administrator of this final rule
does not affect the finality of this rule for the purposes of judicial
review nor does it extend the time within which a petition for judicial
review may be filed, and shall not postpone the effectiveness of such
rule or action. This action may not be challenged later in proceedings
to enforce its requirements (see section 307(b)(2)).

List of Subjects in 40 CFR Part 52

    Environmental protection, Air pollution control, Incorporation by
reference, Intergovernmental relations, Nitrogen dioxide, Particulate
matter, Sulfur oxides, Visibility.

    Dated: July 26, 2013.
Jared Blumenfeld,
Regional Administrator, EPA Region IX.

    Part 52, chapter I, title 40 of the Code of Federal Regulations is
amended as follows:

PART 52--APPROVAL AND PROMULGATION OF IMPLEMENTATION PLANS

0
1. The authority citation for Part 52 continues to read as follows:

    Authority: 42 U.S.C. 7401 et seq.

Subpart D--Arizona

0
2. Section 52.145 is amended by adding paragraph (h) to read as
follows:

Sec.  52.145  Visibility protection.

* * * * *
    (h) Disapproval. The following portions of the Arizona SIP are
disapproved because they do not meet the applicable requirements of
Clean Air Act sections 169A and 169B and the Regional Haze Rule at 40
CFR 51.309:
    (1) Regional Haze State Implementation Plan for the State of
Arizona (``Arizona 309 Regional Haze SIP'') submitted by the Arizona
Department of Environmental Quality on December 23, 2003, with the
exception of Chapter 5 (Strategy to Address Reasonably Attributable
Visibility Impairment (RAVI)) and Appendix A-5 (Attributable
Impairment).
    (2) The Arizona Regional Haze State Implementation Plan Revision
submitted by the Arizona Department of Environmental Quality on
December 31, 2004, with the exception of the provisions already
approved at 40 CFR 52.120(c)(131).
    (3) Letter from Stephen A. Owens, Director, Arizona Department of
Environmental Quality, dated December 24, 2008 re: Submittal of Arizona
Regional Haze State Implementation Plan.

[FR Doc. 2013-18881 Filed 8-7-13; 8:45 am]
BILLING CODE 6560-50-P


[Federal Register Volume 78, Number 86 (Friday, May 3, 2013)]
[Notices]
[Pages 26093-26095]
[FR Doc No: 2013-10508]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-69470; File No. SR-FICC-2013-02]

Self-Regulatory Organizations; Fixed Income Clearing Corporation;
Notice of Filing of Proposed Rule Change To Include Options on Interest
Rate Futures Contracts With Maturities Not Longer Than Two Years In The
One-Pot Cross-Margining Program Between the Government Securities
Division and New York Portfolio Clearing, LLC

April 29, 2013.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934
(``Act'') \1\ and Rule 19b-4 thereunder,\2\ notice is hereby given that
on April 15, 2013, the Fixed Income Clearing Corporation (``FICC'')
filed with the Securities and Exchange Commission (``Commission'') the
proposed rule change as described in Items I, II and III below, which
Items have been prepared primarily by FICC. The Commission is
publishing this notice to solicit comments on the proposed rule change
from interested persons.
---------------------------------------------------------------------------

    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
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I. Clearing Agency's Statement of the Terms of Substance of the
Proposed Rule Change

    The proposed rule change would allow FICC to include options on
interest rate futures contracts with maturities not longer than two
years in the one-pot cross-margining program between FICC's Government
Securities Division (``GSD'') and New York Portfolio Clearing, LLC
(``NYPC'').\3\
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    \3\ NYPC is jointly owned by NYSE Euronext and The Depository
Trust & Clearing Corporation.
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II. Clearing Agency's Statement of the Purpose of, and Statutory Basis
for, the Proposed Rule Change

    In its filing with the Commission, FICC 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 these statements may be examined at the places specified in
Item IV below. FICC has prepared summaries, set forth in sections (A),
(B), and (C) below, of the most significant aspects of these
statements.\4\
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    \4\ The Commission has modified the text of the summaries
prepared by FICC.
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(A) Clearing Agency's Statement of the Purpose of, and Statutory Basis
for, the Proposed Rule Change

    (i) The purpose of the proposed rule change is to include options
on interest rate futures contracts with maturities not longer than two
years in the one-pot cross-margining program between the GSD and NYPC.
Background on NYPC and the FICC-NYPC One-Pot Cross-Margining Program
    NYPC is registered with the Commodity Futures Trading Commission
(``CFTC'') as a derivatives clearing organization (``DCO'') pursuant to
Section 5b of the Commodity Exchange Act and Part 39 of the CFTC
regulations. NYPC launched operations on March 21, 2011, and currently
clears U.S. dollar-denominated interest rate futures contracts. It
plans to add options on interest rate futures to its set of products.
    Pursuant to FICC Rule Filing 2010-09,\5\ FICC offers ``single pot''
cross margining of certain positions cleared at NYPC and the GSD. This
arrangement is reflected in a cross-margining agreement (``FICC-NYPC
Cross-Margining Agreement'') between FICC and NYPC, which is a part of
the GSD's rules. Specifically, certain GSD members may opt to combine
within a single margin portfolio their positions at the GSD and their
positions (or those of certain permitted affiliates) cleared at NYPC.
Joint GSD-NYPC members or GSD members and their permitted affiliates
who wish to participate in the one-pot program must execute the
requisite cross-margining participant agreements, which are exhibits to
the FICC-NYPC Cross-Margining Agreement.\6\
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    \5\ The Commission approved this rule filing on February 28,
2011. See Exchange Act Release No. 34-63986 (February 28, 2011); 76
FR 12144-02 (March 4, 2011) (SR-FICC-2010-09).
    \6\ GSD members and NYPC members are also permitted to cross
margin in the single pot the activity of their market professional
customers. See Exchange Act Release No. 34-66989 (May 15, 2012); 77
FR 30032-02 (May 21, 2012) (SR-FICC-2012-03).
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    As noted in FICC Rule Filing 2010-09, FICC is responsible for
performing the margin calculations in its capacity as the
``Administrator'' under the terms of the FICC-NYPC Cross-Margining
Agreement. Specifically, FICC determines the combined FICC Clearing
Fund and NYPC Original Margin \7\ requirement for each cross-margining
participant. The FICC-NYPC one-pot margin requirement for each
participant is then allocated between FICC and NYPC in proportion to
each clearing organization's respective ``stand-alone'' margin
requirements--in other words, an amount reflecting the ratio of what
each clearing organization would have required from that member if it
were not participating in the cross-margining program (referred to as
the ``Constituent Margin Ratio'' in the FICC-NYPC Cross-Margining
Agreement). The FICC-NYPC Cross-Margining Agreement provides that
either FICC or NYPC may, at any time, require additional margin to be
deposited by a participant (above what is calculated under the FICC-
NYPC Cross-Margining Agreement) based upon the financial condition of
the participant, unusual market conditions or other special
circumstances. The standards that FICC proposed in Rule Filing 2010-09
to use for these purposes are the standards contained within the GSD's
rules currently, so that notwithstanding the calculation of a
participant's Clearing Fund requirement pursuant to the FICC-NYPC
Cross-Margining Agreement, FICC still retains the rights contained
within the GSD's rules to require an additional Clearing Fund deposit
under the circumstances specified in the GSD's rules. For example, the
GSD's rules currently provide that, if a Dealer Netting Member \8\
falls below its minimum financial requirement, it shall be required to
make an additional Clearing Fund deposit equal to the greater of (i) $1
million or (ii) 25 percent of its Required Fund Deposit.\9\ In the
event of the insolvency or default of a member that participates in the
one-pot cross-margining arrangement, the positions in such member's
FICC-NYPC one-pot portfolio (including, where applicable, the positions
of its permitted margin affiliate at NYPC) will be liquidated by FICC
and NYPC as a single portfolio, and the liquidation proceeds will be
applied to the defaulting member's obligations to FICC and NYPC in
accordance with the provisions of the FICC-NYPC Cross-Margining
Agreement. The FICC-NYPC Cross-Margining Agreement provides for the
sharing of losses by FICC and NYPC in the event that the one-pot
portfolio margin deposits of a defaulting participant are not
sufficient to cover the losses resulting from the liquidation of that
participant's trades and positions, which is covered in detail in FICC
Rule Filing 2010-09, and is reflected in the terms of the FICC-NYPC
Cross-Margining Agreement.
---------------------------------------------------------------------------

    \7\ Original Margin is the NYPC equivalent of the Clearing Fund.
    \8\ The GSD's rules define the term ``Dealer Netting Member'' as
``a Registered Government Securities Dealer that is admitted to
membership in the Netting System pursuant to these Rules, and whose
membership in the Netting System has not been terminated . . . ''
GSD Rulebook, Rule 2A, Section 2.
    \9\ The GSD's rules define the term ``Required Fund Deposit'' as
``the amount a Netting Member is required to deposit to the Clearing
Fund.'' GSD Rulebook, Rule 1.

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

    The addition of options on interest rate futures to the one-pot
cross-margining arrangement does not require any changes to the terms
of the FICC-NYPC Cross-Margining Agreement. FICC will continue to act
as the Administrator for purposes of margin calculations. The sharing
of loss provisions in the FICC-NYPC Cross-Margining Agreement that
would apply in the event of a participant's default will remain
unchanged under this proposal.
Proposal To Include Options on Interest Rate Futures in the One-Pot
Cross-Margining Arrangement
    FICC proposes to add options on interest rate futures contracts
with maturities not longer than two years to the one-pot cross-
margining arrangement. NYPC will act as the DCO for such products.
    Options on interest rate futures are a long-standing, standardized
product traded and cleared by futures exchanges \10\ around the globe,
including the Chicago Mercantile Exchange (``CME'').\11\ The key risks
associated with adding options on interest rate futures to the one-pot
cross-margining arrangement relate to the ability of FICC and NYPC to
properly model, test and monitor the risks that options on interest
rate futures present to the clearing organizations. Consistent with
FICC's quantitative policy for new initiatives, any new models or
enhancements are subject to external review before they are utilized.
The options proposal has followed this protocol, and the team of
external reviewers has tested the models and validated their
methodology.
---------------------------------------------------------------------------

    \10\ Exchanges that list options on interest rate futures
include the following: (i) CME (US); (ii) CBOT (a subsidiary of
CME); (iii) BM&F (Brazil); (iv) NYSE LIFFE (UK); (v) Eurex
(Germany); (vi) ASX (Australia); (vii) Montreal Exchange (Canada);
(viii) SGX (Singapore); and (ix) TFX (Japan).
    \11\ Options on interest rate futures are currently included in
the ``two-pot'' cross-margining arrangement between FICC and the
CME. The cross-margining agreement between FICC and the CME is
incorporated in the GSD's Rules and may be found on the DTCC Web
site, www.dtcc.com.
---------------------------------------------------------------------------

    In the case of options on interest rate futures that are physically
deliverable, the addition of options on interest rate futures to the
one-pot cross-margining arrangement will not alter the manner in which
physical deliveries occur. Upon exercise or assignment of an option,
the resulting futures position will be treated as a traded futures
contract, with the same delivery obligations if the resulting futures
position is not closed out prior to delivery. In general, delivery of
U.S. Treasury futures can be submitted to FICC by NYPC on a locked-in
basis and processed in accordance with FICC's rules (when these are
submitted to FICC, they are no longer futures contracts but rather are
in the form of buy-sells eligible for processing at the GSD).
    FICC will submit a separate rule filing to the Commission for the
inclusion in the single pot of longer-dated interest rate options
products. FICC will also conduct appropriate testing and analysis of
the options model and, consistent with FICC's quantitative policy for
new initiatives, submit the model for external review.
Risk Considerations Regarding the Proposal To Include Options on
Interest Rate Futures in the One-Pot Cross-Margining Arrangement
    The methodology for managing risk for options on interest rate
futures to be included in the one-pot cross-margining arrangement has
three pillars: (i) Value-at-Risk (``VaR'') with historical simulation,
(ii) the Barone-Adesi & Whaley (``BAW'') approximation, and (iii) the
Stochastic Alpha, Beta, Rho (``SABR'') Volatility Model.
    The historical-simulation-based VaR model proposed for options on
interest rate futures to be included in the one-pot cross-margining
arrangement is the same model utilized in the current one-pot cross-
margining arrangement between NYPC and the GSD described in FICC Rule
Filing 2010-09. The backbone of this VaR model--namely, the three-day/
one-day liquidation period assumption for cash and derivatives
positions, respectively; the 99th percentile confidence level; and the
one-year look-back period and the use of a linear interpolation/front-
weighting mechanism to arrive at the 99 percent threshold from
simulated profits and losses--will remain the same when options on
interest rate futures are added to FICC-NYPC one-pot portfolios.
    The BAW approximation is the pricing function that FICC and NYPC
will use to estimate analytically the value of options on interest rate
futures within the Black-Scholes-Merton framework. The SABR volatility
model will be used to estimate volatility curves for various options
series.
    As stated above, a three-day liquidation period is assumed for cash
positions cleared by FICC, whereas a one-day liquidation period is
assumed for futures positions cleared by NYPC. Options on interest rate
futures in the one-pot cross-margining arrangement will also be subject
to a one-day liquidation requirement due to the similar liquidity of
these products compared to futures. This is also consistent with CFTC
requirements. In addition, each cross-margining participant's FICC-NYPC
one-pot margin requirement is subject to a daily back test, and a
``coverage component'' is applied and charged to the participant in the
event the daily back test reflects insufficient coverage. Options on
interest rate futures in the one-pot cross-margining arrangement will
be subject to this daily testing.
    The one-pot FICC-NYPC VaR model will account for the non-linear
risk posed by the addition of options on interest rate futures to the
one-pot cross-margining arrangement by performing full revaluation of
such options using BAW and SABR. As options on interest rate futures
can exhibit magnified exposure in extreme market conditions, FICC is
proposing to employ the additional tools described below:
1. Minimum Margin Charge for Portfolios Including Options
    Similar to the practice that FICC's Mortgage-Backed Securities
Division uses to address potential mark-to-market offset of margin
requirements, FICC and NYPC are proposing to apply a floor margin
charge of five basis points of the gross market value of positions in
options on interest rate futures to the unadjusted Required Fund
Deposit of GSD Netting Members with one-pot portfolios that include
options on interest rate futures. Therefore, for GSD Netting Members
with one-pot portfolios that include options on interest rate futures,
their minimum Required Fund Deposit will be the greater of: (i) The
current minimum Required Fund Deposit as prescribed in GSD Rule 4,
Section 2; or (ii) the proposed floor margin charge.
2. Short Option Minimum Charge
    To address the risk associated with short positions in deep out-of-
the-money (``OTM'') options, FICC and NYPC propose to introduce a short
option minimum (``SOM'') for options on interest rate futures in the
one-pot cross-margining arrangement. The SOM will apply only to options
on interest rate futures with a settlement price of ``cabinet.'' \12\
These options demonstrate minimum price volatility in normal market
conditions, but may potentially become volatile when market conditions
change dramatically. In light of the losses that such options may
cause, an

SOM charge will be applied to any short position in these options.
---------------------------------------------------------------------------

    \12\ The minimum price increment for futures or options on
futures is normally referred to as a ``tick.'' For options on
futures whose value is less than one tick, trading and settlement in
the options are allowed at a price that is less than a tick. This
latter price is known as ``cabinet.''
---------------------------------------------------------------------------

3. Out-of-the-Money Options Surcharge
    FICC and NYPC also propose to impose a surcharge on all OTM options
positions in the one-pot cross-margining arrangement in order to
address any potential biases in the BAW options pricing model described
above. The amount of the surcharge will be determined by the moneyness
of the options position.
4. Options Stress Testing
    In addition to the regular stress testing practices utilized by
FICC and NYPC, monthly hypothetical implied volatility stress tests of
FICC-NYPC one-pot portfolios, including options on interest rate
futures, will be conducted in order to analyze specifically the non-
linear tail risks associated with options products.
Proposed Rule Changes
    FICC's proposal to add options on interest rate futures to the one-
pot cross-margining arrangement requires that Rule 4, Section 2 of the
GSD's rulebook be changed to include a reference to the proposed
minimum margin charge discussed above. Technical clarifications to
certain GSD rules are also required in order to make it clear that
options on interest rate futures will be included in the arrangement.
Specifically, FICC is proposing to make technical clarifications to the
following: (i) The definitions of ``CFTC-Recognized Clearing
Organization'' and ``Eligible Positions'' set forth in Rule 1; (ii)
Section 5a of GSD Rule 13, and (iii) subsection (b) of GSD Rule 29. As
noted above, no changes are required to be made to the FICC-NYPC Cross-
Margining Agreement itself.
    (ii) FICC believes that the proposed rule change is consistent with
the Act and the rules and regulations promulgated thereunder because it
may further the available offsets among positions held at FICC and
NYPC, thereby allowing a more efficient use of member collateral and
promoting additional efficiencies in the marketplace. FICC believes the
proposed rule change is therefore consistent with the Act and the rules
and regulations promulgated thereunder because it supports the prompt
and accurate clearance and settlement of securities transactions. FICC
further believes that, as it will implement this proposed rule change
using the enhanced risk-management measures discussed above, the
proposed rule change will also be consistent with the Act because it
will assure the safeguarding of the securities and funds in FICC's
custody and control.

(B) Clearing Agency's Statement on Burden on Competition

    FICC does not believe that the proposed rule change will have any
negative impact, or impose any burden, on competition that is not
necessary or appropriate in furtherance of the purposes of the Act.

(C) Clearing Agency's Statement on Comments on the Proposed Rule Change
Received From Participants, Members, or Others

    Written comments relating to the proposed rule change have not yet
been solicited or received. FICC will notify the Commission of any
written comments received by FICC.

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

    Within 45 days of the date of publication of this notice in the
Federal Register or within such longer period up to 90 days (i) as the
Commission may designate if it finds such longer period to be
appropriate and publishes its reasons for so finding or (ii) as to
which the self-regulatory organization consents, the Commission will:
    (A) By order approve or disapprove such proposed rule change, or
    (B) institute proceedings to determine whether the proposed rule
change should be disapproved.
    The proposal shall not take effect until all regulatory actions
required with respect to the proposal are completed.\13\ The clearing
agency shall post notice on its Web site of proposed changes that are
implemented.
---------------------------------------------------------------------------

    \13\ FICC also filed the proposals contained in this proposed
rule change as an advance notice pursuant to Section 806(e)(1) of
the Clearing Supervision Act and Rule 19b-4(n)(1)(i) thereunder. 12
U.S.C. 5465(e)(1); 17 CFR 240.19b-4(n)(1)(i). Proposed rule changes
filed under the Clearing Supervision Act may be implemented either:
at the time the Commission notifies the clearing agency that it does
not object to the proposed rule change and authorizes its
implementation, or, if the Commission does not object to the
proposed rule change, within 60 days of the later of (i) the date
that the advance notice was filed with the Commission or (ii) the
date that any additional information requested by the Commission is
received. See 12 U.S.C. 5465(e)(1)(G).
---------------------------------------------------------------------------

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 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 No. SR-FICC-2013-02 on the subject line.

Paper Comments

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

All submissions should refer to File No. SR-FICC-2013-02. 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 of submission. 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 such filings also will be
available for inspection and copying at the principal office of FICC
and on FICC's Web site at http://dtcc.com/downloads/legal/rule_filings/2013/ficc/SR_FICC_2013_02.pdf. 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 No. SR-FICC-2013-02 and should be submitted on or
before May 24, 2013.

    For the Commission by the Division of Trading and Markets,
pursuant to delegated authority.\14\
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    \14\ 17 CFR 200.30-3(a)(12).
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Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2013-10508 Filed 5-2-13; 8:45 am]
BILLING CODE 8011-01-P