[Federal Register: June 12, 2007 (Volume 72, Number 112)]
[Notices]
[Page 32372-32378]
[DOCID:fr12jn07-79]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-55871; File No. SR-CBOE-2006-84]

Self-Regulatory Organizations; Chicago Board Options Exchange,
Incorporated; Notice of Filing of Amendment No. 5 to a Proposed Rule
Change To List and Trade Credit Default Options; and Order Granting
Accelerated Approval of the Proposed Rule Change, as Modified by
Amendment Nos. 3, 4, and 5, and Designating Credit Default Options as
Standardized Options Under Rule 9b-1 of the Securities Exchange Act of
1934

June 6, 2007.

I. Introduction

    On October 26, 2006, the Chicago Board Options Exchange,
Incorporated (``CBOE'' or ``Exchange'') filed with the Securities and
Exchange Commission (``Commission'') a proposed rule change, pursuant
to Section 19(b)(1) of the Securities Exchange Act of 1934 (``Act'')
\1\ and Rule 19b-4 thereunder,\2\ to permit CBOE to list and trade
cash-settled, binary call options based on credit events in one or more
debt securities of an issuer, referred to as credit default options. On
December 21, 2006, CBOE filed Amendment No. 1 to the proposed rule
change; on January 16, 2007, CBOE filed Amendment No. 2 to the proposed
rule change; on February 2, 2007, CBOE filed Amendment No. 3 to the
proposed rule change; \3\ and on February 7, 2007, CBOE filed Amendment
No. 4 to the proposed rule change. The proposed rule change, as
amended, was published for comment in the Federal Register on February
14, 2007.\4\ The Commission received no comments on the proposal. On
March 28, 2007, CBOE filed Amendment No. 5 to the proposed rule change
(``Amendment No. 5''). This notice and order notices Amendment No. 5;
solicits comments from interested persons on Amendment No. 5; approves
the proposed rule change, as amended, on an accelerated basis; and
designates credit default options as ``standardized options'' pursuant
to Rule 9b-1 under the Act.\5\
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ Amendment No. 3 replaced the original filing, as modified by
Amendment Nos. 1 and 2, in its entirety.
    \4\ See Securities Exchange Act Release No. 55251 (February 7,
2007) (SR-CBOE-2006-84), 72 FR 7091 (``CBOE Proposal'').
    \5\ See 17 CFR 240.9b-1. Pursuant to Rule 9b-1(a)(4) under the
Act, the Commission may, by order, designate as ``standardized
options'' securities that do not otherwise meet the definition for
``standardized options.'' Standardized options are defined in Rule
9b-1(a)(4) as: ``[O]ptions contracts trading on a national
securities exchange, an automated quotations system of a registered
securities association, or a foreign securities exchange which
relate to options classes the terms of which are limited to specific
expiration dates and exercise prices, or such other securities as
the Commission may, by order, designate.'' 17 CFR 240.9b-1(a)(4).
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II. Description of the CBOE Proposal

A. Generally

    CBOE proposes to list and trade credit default options, which are
cash-settled, binary options \6\ that are automatically exercised upon
the occurrence of specified credit events or expire worthless. A credit
default option would be referenced to the debt securities issued by a
specified public company (``Reference Entity'') \7\ and would either
have a fixed payout or expire worthless, depending upon whether or not
a credit event (as described below) occurs during the life of the
option. Upon confirmation of a credit event prior to the last day of

trading of a credit default option series,\8\ the options positions
existing as of that time would be automatically exercised and the
holders of long options positions would receive a fixed cash payment of
$100,000 per contract.\9\ If no credit event is confirmed during the
life of the option, the final settlement price would be $0.
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    \6\ A binary option is a style of option having only two
possible payoff outcomes: Either a fixed amount or nothing at all.
    \7\ Proposed CBOE Rule 29.1(f) also includes as a ``Reference
Entity'' the guarantor of the debt security underlying the credit
default option.
    \8\ Proposed CBOE Rule 29.9 requires that CBOE confirm the
occurrence of a credit event through at least two sources, which may
include announcements published via newswire services or information
service companies, the names of which would be announced to the
membership via a CBOE regulatory circular, or information contained
in any order, decree, or notice of filing, however described, of or
filed with the courts, the Commission, an exchange, an association,
the Options Clearing Corporation (``OCC''), or another regulatory
agency or similar authority.
    \9\ The settlement amount would be $100,000 per contract unless
adjusted pursuant to proposed CBOE Rule 29.4, as discussed below.
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    Credit events that would trigger automatic exercise include a
failure to make payment pursuant to the terms of the underlying debt
security and any other event of default specified by CBOE at the time
the Exchange initially lists a particular class of credit default
options. The events of default that CBOE may specify must be defined in
accordance with the terms of the debt security underlying the credit
default option (``Reference Obligation'') or any other debt security of
the Reference Entity (collectively with the Reference Obligation,
``Relevant Obligations'').\10\
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    \10\ See proposed CBOE Rule 29.1(c).
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B. Listing Standards

    A credit default option must conform to the initial and continued
listing standards under proposed CBOE Chapter XXIX. CBOE may list and
trade a credit default option that overlies a debt security of a
Reference Entity, provided that such issuer or guarantor, or its parent
if a wholly owned subsidiary, has at least one class of securities that
is registered under the Act and is an ``NMS stock'' \11\ as defined in
Rule 600 of Regulation NMS under the Act.\12\ The registered equity
securities issued by the Reference Entity also would have to satisfy
the requirements of CBOE Rule 5.4 for continued options trading, which
requires, among other things, that an equity security underlying an
option be itself widely held and actively traded.\13\ The requirement
that the equity securities of an issuer of a debt security underlying a
credit default option meet the criteria of Rule 5.4 is designed to
ensure that the issuer's securities enjoy widespread investor interest.
The requirement that the Reference Entity be an issuer of a registered
NMS stock will help ensure that investors have access to comprehensive
public information about the issuer, including the registration
statement filed under the Securities Act of 1933 (``Securities Act'')
and other periodic reports.\14\
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    \11\ ``NMS stock'' means any security, or class of securities,
other than an option for which transaction reports are collected,
processed, and made available pursuant to an effective transaction
reporting plan, or an effective national market system plan for
reporting transaction in listed options. See 17 CFR 242.600(b)(46)
and (47).
    \12\ See proposed CBOE Rule 5.3.11.
    \13\ CBOE Rule 5.4 provides that, absent exceptional
circumstances, an underlying security will not be deemed to meet the
Exchange's requirements for continued approval when: (a) There are
fewer than 6,300,000 shares of the underlying security held by
persons other than those who are required to report their security
holdings under Section 16(a) of the Act (15 U.S.C. 78p); (b) there
are fewer than 1,600 holders of the underlying security; (c) the
trading volume (in all markets in which the underlying security is
traded) was less than 1,800,000 shares in the preceding twelve
months; (d) the market price per share of the underlying security
closed below $3 on the previous trading day as measured by the
closing price reported in the primary market in which the underlying
security traded; or (e) the underlying security ceases to be an NMS
stock.
    \14\ Section 13 of the Act, 15 U.S.C. 78m, requires that any
issuer of a security registered pursuant to Section 12 of the Act,
15 U.S.C. 78l, would file with the Commission annual reports and
information and documents necessary to keep reasonably current the
information in its Section 12 registration statement.
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    A credit default option could not be exercised at the discretion of
the investor, but instead would have an automatic payout only upon the
occurrence of a credit event. The expiration date would be the fourth
business day after the last day of trading of the series, which would
be the third Friday of the expiration month.\15\ A credit default
option generally would expire up to 123 months from the time it is
listed, and the Exchange usually would open one to four series for each
year up to 10.25 years from the current expiration.\16\
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    \15\ If a credit event is confirmed, the expiration date would
be the second business day after the confirmation of a credit event.
See proposed CBOE Rule 29.1(d) and (e).
    \16\ See proposed CBOE Rule 29.2(b)(1) and (2).
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C. Trading

    Credit default options will trade on CBOE's Hybrid Trading System
from 8:30 a.m. to 3 p.m. (Central Time) \17\ in a manner similar to the
trading of equity options. With limited distinctions, as described more
fully in the proposal, CBOE's equity option trading rules will apply to
credit default options.\18\ Also, credit default options will be
eligible for trading as Flexible Exchange Options (``FLEX Options''). A
FLEX Option that is a credit default option would be cash-settled and
the exercise-by-exception provisions of OCC Rule 805 \19\ would not
apply. Market-makers shall be appointed to credit default options
pursuant to CBOE's existing requirements,\20\ as supplemented by
proposed CBOE Rule 29.17. Additionally, CBOE represents that there will
be a maximum of one series per quarterly expiration in a given credit
default option class, and that it, and the Options Price Reporting
Authority (``OPRA''), have the necessary systems capacity to handle the
additional quote volume anticipated to be associated with credit
default options.
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    \17\ See proposed CBOE Rule 29.11.
    \18\ See proposed CBOE Rules 29.11-29.17 and 29.19.
    \19\ OCC Rule 805 sets forth the expiration date exercise
procedures for options cleared and settled by the OCC.
    \20\ See Chapter VIII of CBOE's Rules.
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    Once a particular credit default option class has been approved for
listing and trading, the Exchange would, from time to time, open for
trading a series of that class. If a credit default option initially
approved for trading no longer meets the Exchange's requirements for
continued approval, the Exchange would not open for trading any
additional series of options and, as provided in CBOE Rule 5.4, could
prohibit any opening purchase transactions in such series. The proposed
trading rules for credit default options are designed to create an
environment that takes into account the small number of transactions
likely to occur, while providing price improvement and the transparency
benefits of competitive Exchange floor bidding, as compared to the
over-the-counter (``OTC'') market.
    Upon the confirmation of a credit event or the redemption of all
Relevant Obligations, the applicable credit default option class would
cease trading and all outstanding contracts in that class would be
subject to automatic exercise. In addition, the CBOE's trading halt
procedures applicable to equity options shall apply to credit default
options.\21\ When determining whether to institute a trading halt in
credit default options, CBOE floor officials would consider whether
current quotations for the Relevant Obligation(s) or other securities
of the Reference Entity are unavailable or have become unreliable. The
Exchange's board of directors shall also have the power to impose
restrictions on transactions or exercises in one or more series of
credit default options as the board, in its judgment, determines
advisable in the interests of maintaining a fair and orderly market or
otherwise deems

advisable in the public interest or for the protection of
investors.\22\
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    \21\ See CBOE Rules 6.3 and 6.3B; proposed CBOE Rule 29.13.
    \22\ See proposed CBOE Rule 29.8.
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D. Clearance and Settlement

    Because credit default options do not have an exercise price, they
do not, by their terms, meet the definition of ``standardized options''
for purposes of Rule 9b-1 under the Act.\23\ However, as discussed
herein, the Commission today is using its authority pursuant to Rule
9b-1 to designate credit default options as ``standardized options''
under Rule 9b-1. Consequently, credit default option transactions would
be eligible for clearance and settlement by the OCC in accordance with
procedures that are substantially similar to existing systems and
procedures for the clearance and settlement of exchange-traded
options.\24\
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    \23\ See 17 CFR 240.9b-1.
    \24\ On February 13, 2007, the OCC filed with the Commission
pursuant to Section 19(b)(1) of the Act, 15 U.S.C. 78s(b)(1), and
Rule 19b-4 thereunder, 17 CFR 240.19b-4, a proposed rule change to
enable it to clear and settle credit default options proposed to be
listed by CBOE. The proposed rule change was published for comment
in the Federal Register on February 27, 2007. Securities Exchange
Act Release No. 55362, 72 FR 9826 (March 5, 2007). On March 7, 2007,
the OCC filed Amendment No. 1 to the proposed rule change. See SR-
OCC-2007-01 (as amended, the ``OCC Proposal''). The Commission has
not yet taken action on the OCC proposal.
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E. Adjustments

    Credit default options will be subject to adjustments in two
circumstances.\25\ First, if the original Reference Entity is succeeded
by another entity in accordance with the terms of the underlying debt
security, the related credit default options would be replaced by one
or more credit default options derived from the debt securities of the
successor entity or entities. To the extent necessary and appropriate
for the protection of investors and the public interest, all other
terms and conditions of the successor options would be the same as the
original credit default options.
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    \25\ See CBOE Proposed Rule 29.4.
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    Second, if the specific debt security (the Reference Obligation) is
redeemed during the life of the credit default option, another debt
security of the Reference Entity would be specified as the new
Reference Obligation. In the event that all debt securities of the
Reference Entity (i.e., all Relevant Obligations) are redeemed during
the life of the credit default option, the option would cease trading
and, assuming that CBOE has not confirmed a credit event, the contract
payout would be $0.

F. Position Limits

    Pursuant to proposed CBOE Rule 29.5, credit default options will be
subject to a position limit equal to 5,000 contracts on the same side
of the market. Credit default options shall not be aggregated with
option contracts on the same underlying security and will not be
subject to the hedge exemption to CBOE's standard position limits.
Instead, the following hedge exemption strategies and positions shall
be exempt from CBOE's position limits: (i) A credit default option
position ``hedged'' or ``covered'' by an appropriate amount of cash to
meet the cash settlement amount obligation (e.g., $100,000 for a credit
default option with an exercise settlement value of $100 multiplied by
a contract multiplier of 1,000); and (ii) a credit default option
position ``hedged'' or ``covered'' by an amount of an underlying debt
security(ies) that serves as a Relevant Obligation(s) or other
securities, instruments, or interests related to the Reference Entity
that is sufficient to meet the cash settlement amount obligation.\26\
Also, CBOE's market-maker and firm facilitation exemptions to position
limits will apply.\27\
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    \26\ See proposed CBOE Rule 29.5.
    \27\ Proposed CBOE Rule 29.5 requires that for purposes of its
market-maker hedge exemption (CBOE Rule 4.11.05) the position must
be within 20% of the applicable limit before an exemption would be
granted. With respect to CBOE's firm facilitation exemption (CBOE
Rule 4.11.06), proposed CBOE Rule 29.5 provides that the aggregate
exemption position could not exceed three times the standard limit
of 5,000 contracts.
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G. Margin

    The margin (both initial and maintenance) required for writing
short and long positions in credit default options will be as follows:
\28\
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    \28\ See proposed CBOE Rule 12.3(l); Amendment No. 5.
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     For a qualified customer \29\ carrying a long position in
credit default options, the margin requirement will be 20% of the
current market value of the credit default option.
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    \29\ Proposed CBOE Rule 12.3(l)(1)(i) defines ``qualified
customer'' as a person or entity that owns and invests on a
discretionary basis no less than $5,000,000 in investments.
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     For a non-qualified customer carrying a long position in a
credit default option, the margin requirement will be 100% of the
current market value of the credit default option.
     For a non-qualified customer carrying a short position in
a credit default option, the margin requirement will be the cash
settlement amount, i.e., $100,000 per contract.
     For a qualified customer carrying a short position in a
credit default option, the margin requirement will be the lesser of the
current market value plus 20% of the cash settlement amount or the cash
settlement amount.

These requirements may be satisfied by a deposit of cash or marginable
securities. These requirements may not be satisfied by presentation to
the member organization carrying the customer's account of a letter of
credit meeting the requirements of proposed CBOE Rule
12.3(l)(1)(iii).\30\
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    \30\ In Amendment No. 5, CBOE deletes from proposed rule
12.3(l)(1)(iii) the option of using a letter of credit to satisfy
margin requirements applicable to credit default options and makes
non-substantive corrections to the formatting of proposed CBOE Rule
12.3(l)(1)(iii) and the ``Interpretations and Policies'' heading
that accompanies CBOE Rule 12.3.
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    A credit default option carried short in a customer's account will
be deemed a covered position, and eligible for the cash account,
provided any one of the following is either held in the account at the
time the option is written or is received into the account promptly
thereafter: (i) Cash or cash equivalents equal to 100% of the cash
settlement amount or (ii) an escrow agreement. The Exchange believes
that these requirements strike the appropriate balance and adequately
address concerns that a member or its customer may try to maintain an
inordinately large unhedged position in credit default options. In
addition, in Amendment No. 5, the Exchange notes that, in accordance
with CBOE Rule 12.3(a)(3), an escrow agreement must be issued in a form
acceptable to the Exchange, and that it has traditionally recognized as
acceptable the escrow agreement forms of the OCC and the New York Stock
Exchange.
    In Amendment No. 5, the Exchange also represents the following:

    ``As part of its regulatory oversight of member organizations,
the Exchange generally reviews member organizations' compliance with
margin requirements applicable to customer accounts. In the future,
the Exchange will include [c]redit [d]efault [o]ption margin
requirements as part of this review. Additionally, the Exchange will
review member organizations' internal procedures for managing credit
risk associated with extending margin to customers trading [c]redit
[d]efault [o]ptions. The Exchange also notes that, pursuant to CBOE
Rule 12.10, the Exchange may at any time impose higher margin
requirements when it deems such higher margin requirements
advisable.''

    Lastly, in Amendment No. 5, the Exchange makes non-substantive
changes to the text of CBOE Rule 12.5, to clarify that a credit default
option that is carried for the account of a qualified investor may be
deemed to

have market value for the purposes of CBOE Rule 12.3(c).

H. Surveillance

    The Exchange has represented that it will have in place adequate
surveillance procedures to monitor trading in credit default options
prior to listing and trading such options.

III. Solicitation of Comments

    Interested persons are invited to submit written data, views, and
arguments concerning Amendment No. 5, including whether Amendment No. 5
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 e-mail to<EMAIL_ADDRESS>Please include

File Number SR-CBOE-2006-84 on the subject line.

Paper Comments

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

All submissions should refer to Amendment No. 5 to File Number SR-CBOE-
2006-84. This file number should be included on the subject line if e-
mail 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 inspection
and copying in the Commission's Public Reference Room. Copies of such
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
Amendment No. 5 of File Number SR-CBOE-2006-84 and should be submitted
on or before July 3, 2007.

IV. Discussion

    The Commission finds that the proposed rule change is consistent
with the requirements of the Act and the rules and regulations
thereunder applicable to a national securities exchange.\31\ In
particular, the Commission finds that the proposal is consistent with
Section 6(b)(5) of the Act,\32\ which requires, among other things,
that the rules of an exchange be designed to prevent fraudulent and
manipulative acts and practices; to promote just and equitable
principles of trade; to foster cooperation and coordination with
persons engaged in regulating, clearing, processing information with
respect to, and facilitating transactions in securities; to remove
impediments to and perfect the mechanism of a free and open market and
a national market system; and, in general to protect investors and the
public interest. The CBOE's proposal, by enabling CBOE to offer a
security that will be listed and traded on the Exchange, as opposed to
the OTC market, would extend to investors the benefits of a listed
exchange market, which include: A centralized market center; an auction
market with posted, transparent market quotations and transaction
reporting; standardized contract specifications; and the guarantee of
the OCC.
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    \31\ In approving this proposed rule change, the Commission
notes that it has considered the proposed rule's impact on
efficiency, competition, and capital formation. See 15 U.S.C.
78c(f).
    \32\ 15 U.S.C. 78f(b)(5).
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    As a threshold matter, the Commission finds that the credit default
options proposed by CBOE are securities. Section 3(a)(10) of the Act
\33\ defines security to include, in part, ``any put, call, straddle,
option or privilege on any security, certificate of deposit, or group
or index of securities (including any interest therein or based on the
value thereof).'' After careful analysis, the Commission finds that
credit default options are options \34\ based on the value of a
security or securities and, therefore, securities under Section
3(a)(10) of the Act; \35\ in addition, the Commission finds that credit
default options are options on an interest in, or based on the value of
an interest in, a security or securities and, therefore, are securities
under Section 3(a)(10) of the Act.\36\
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    \33\ 15 U.S.C. 78c(a)(10).
    \34\ Although credit default options do not share every feature
of a classic option, the Commission nonetheless finds that credit
default options are option contracts. In particular, the Commission
notes that the buyer of a credit default option pays to the seller a
nonrefundable premium, has rights but no further obligations under
the contract, and has no further risk exposure because the seller
bears all the risk of the credit event occurring. See United States
v. Bein, 728 F.2d 107, 112 (2d Cir. 1984) (highlighting
characteristics that distinguish options from futures contracts).
    \35\ 15 U.S.C. 78c(a)(10).
    \36\ 15 U.S.C. 78c(a)(10). In determining whether a derivative
is a security, the Commission and the courts have looked to the
economic reality of the product. See Caiola v. Citibank, N.A., New
York, 295 F.3d 312, 325 (2d Cir. 2002), quoting United Housing
Foundation v. Foreman, 421 U.S. 837, 848 (1975) (``In searching for
the meaning and scope of the word `security' * * * the emphasis
should be on economic reality''). Construing the definition of a
security in this manner permits the Commission and the courts
``sufficient flexibility to ensure that those who market investments
are not able to escape the coverage of the Securities Acts by
creating new instruments that would not be covered by a more
determinate definition.'' Reves v. Ernst & Young, 494 U.S. 56, 63
n.2 (1990).
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    The Commission interprets ``based on the value [of a security or
securities]'' in Section 3(a)(10) of the Act \37\ to include options
whose pricing in the secondary market moves in relation to the value of
the underlying security or securities of the option in question. Thus
the fact that the payout of a cash-settled option will not increase or
decrease based on the price movement of the underlying security of that
option is not dispositive.\38\
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    \37\ Id.
    \38\ In addressing whether a ``digital option'' or a ``binary
option'' with a fixed payout is an option based on the value of a
security or securities, the court in Stechler v. Sidley, Austin
Brown & Wood, L.L.P., 382 F.Supp.2d 580, 596-97 (S.D.N.Y. 2005),
held that the issue ultimately turned on questions of fact and
declined to decide the issue on a motion to dismiss. However, the
court's analysis made clear that the existence of a fixed payout
that is not tied in a proportionate manner to the price of an
underlying security is not a determining factor in deciding whether
an instrument is an option on a security. Rather, the court accepted
that, in evaluating the economic reality of an instrument, it is
appropriate to consider whether the resale value of the instrument
moves in relation to the movement of an underlying reference.
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    Because credit default options are not currently traded, there is
no empirical data regarding their pricing in the secondary market.
However, credit default options are essentially exchange-traded
equivalents of single-name, OTC credit default swaps.\39\ A single-name

credit default swap is an agreement between a protection buyer and a
protection seller whereby the buyer pays a periodic fee in return for a
contingent payment by the seller upon the occurrence of a credit event
with respect to one or more reference obligations of a reference
entity. Credit events typically include one or more of the following:
(1) Bankruptcy, (2) obligation acceleration, (3) obligation default,
(4) a failure to pay, (5) repudiation or moratorium, or (6)
restructuring. Similarly, as explained above, each credit default
option shall specify (a) the Reference Entity, (b) the specific debt
security or securities that serve as its Reference Obligation or other
Relevant Obligations, and (c) the applicable events of default that
trigger payout (as determined in accordance with the terms of the
Reference Obligation or other Relevant Obligations), which could
include such events as a failure to pay, obligation acceleration or
default, and restructuring. Hence, credit default options have
essentially the same structure as credit default swaps.
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    \39\ Despite the similarities between credit default options and
OTC credit default swaps, the Commission wishes to make two things
clear. First, because credit default options will be exchange-traded
and not individually negotiated (and not necessarily between
eligible contract participants), they are not qualifying swap
agreements under Section 206A of the Gramm-Leach-Bliley Act
(``GLBA''), 15 U.S.C. 78c note, and, therefore, not excluded from
the definition of security by Section 3A of the Act, 15 U.S.C. 78c-
1. Second, certain OTC credit default swaps are not securities. The
finding that credit default options are securities because they are
options based on the value of a security might suggest that OTC
credit default swaps are also options based on the value of a
security or securities and, therefore, excluded from the definition
of swap agreement because Section 206A(b)(1) of the GLBA, 15 U.S.C.
78c note, excludes from the definition of swap agreement ``any put,
call, straddle, option, or privilege on any security, certificate of
deposit, or group or index of securities, including any interest
therein or based on the value thereof.'' However, Congress
specifically enumerated ``credit default swaps'' (without defining
the term) as one example of a qualifying swap agreement. See Section
206A(a)(3) of the GLBA, 15 U.S.C. 78c note. The Commission views the
specific enumeration of ``credit default swaps'' as reflecting the
intention of Congress to exclude certain OTC credit default swaps
from the definition of security pursuant to Sections 206B & C of the
GLBA, 15 U.S.C. 78c note. Credit default swaps that involve terms
similar to credit default options, but that are otherwise excluded
from the definition of security because they are qualifying swap
agreements, remain subject to the Commission's antifraud
jurisdiction (including authority over insider trading) as
``security-based swap agreements'' under Section 206B of the GLBA,
15 U.S.C. 78c note.
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    In the case of a credit default swap, the amount the buyer pays for
protection is based on a quoted spread expressed in basis points on a
notional amount specified in the swap agreement. This quoted spread is
often referred to as a ``CDS spread'' and is principally based on the
probability that the Reference Entity will default (i.e., its
creditworthiness). More specifically, the CDS spread represents the
price required by a swap counterparty to compensate it for the credit
risk associated with the potential default on a particular reference
obligation or obligations of an issuer. Similarly, the value of a debt
security is a function of the issuer's creditworthiness, which is
expressed in terms of a ``yield spread'' (sometimes called ``credit
spread''). The yield (or credit) spread is the difference between the
yield on the debt instrument and the yield on a debt security of
similar maturity whose yield represents pure interest rate risk, such
as U.S. Treasuries,\40\ and represents the additional yield required by
an investor to compensate it for the credit risk associated with the
potential default on the particular debt instrument of an issuer.\41\
As a consequence of this relationship between debt securities and
credit default swaps, the credit default swap market enables more
widespread trading in an issuer's creditworthiness than was previously
possible.
---------------------------------------------------------------------------

    \40\ Some academics have hypothesized that there may be some
deviation between the yield on U.S. Treasuries and pure interest
rate risk because bond interest is subject to state tax but U.S.
Treasuries are not. See, e.g., Haibin Zhu, An Empirical Comparison
of Credit Spreads between the Bond Market and the Credit Default
Swap Market, BIS Working Papers No. 160 (August 2004) (also noting
that transparency and the widespread use of U.S. Treasuries as
collateral could explain apparent deviations).
    \41\ While the terms of both corporate securities and credit
default swaps are established when parties enter into the respective
contracts, the fair market value of these contracts can vary over
the life of the contracts in response to changing perceptions of the
creditworthiness of an issuer.
---------------------------------------------------------------------------

    There is a close empirical correlation between the price of a
credit default swap (as expressed in the CDS spread) and the yield (or
credit) spread of the specific reference obligation or obligations of
that credit default swap.\42\ This correlation is to be expected
because the valuation of credit default swaps and debt securities are
each based on credit risk, and because of the potential for arbitrage
between the secondary bond market and the credit default swap
market.\43\ Similarly, because credit default options are exchange-
traded equivalents of credit default swaps, the Commission expects that
there will be a close empirical correlation between the pricing of a
specific credit default option during the life of the contract and the
yield spread of the Reference Obligation or other Relevant Obligations
of that credit default option.
---------------------------------------------------------------------------

    \42\ See, e.g., Roberto Blanco, Simon Brennan, and Ian W. Marsh,
An Empirical Analysis of the Dynamic Relation between Investment-
Grade Bonds and Credit Default Swaps, The Journal of Economics,
Volume LX, No. 5 (Oct. 2005) (finding credit default swap spreads to
be quite close to bond yield spreads).
    \43\ See Zhu, An Empirical Comparison of Credit Spreads between
the Bond Market and the Credit Default Swap Market, supra note 40.
---------------------------------------------------------------------------

    We further note, more generally, that credit default options
expressly reference in their payout conditions a term of an underlying
security that is material to the value of that security. A credit
default option will pay out if there is a failure to pay or other
default event under the terms of the underlying debt security.
    For these reasons, credit default options are options ``based on
the value [of a security or securities]'' and, therefore, securities.
    In addition, the Commission has determined that credit default
options are options on an ``interest in,'' or based on the value of an
interest in, a security or securities within the meaning of Section
3(a)(10) of the Act.\44\ A security is a collection of rights (and
obligations) running between the issuer and the holder of the security.
The concept of an ``interest in'' a security plainly includes rights
generating a pecuniary interest in a security, such as the right to a
dividend payment or bond (coupon) payment. One relevant ``interest in''
a debt security underlying a credit default option is the right to
receive (coupon) payments under the terms of that debt security. When a
(coupon) payment is not made, impairing the value of that interest, the
protection seller must make a payment to the protection buyer.
Similarly, a specified default event may trigger other rights of a
holder of the debt security. The default events that trigger exercise
and payment under the credit default option are meaningful only because
they are material terms of a security, essential to the debt holder's
rights and interests in that security.\45\ The credit default option
payout is contingent on these security-dependent events. For these
reasons, credit default options are options on an interest in, or based
on the value of an interest in, a security or securities.\46\
---------------------------------------------------------------------------

    \44\ 15 U.S.C. 78c(a)(10).
    \45\ Although certain default events trigger the exercise and
payment of a credit default option, it would not be accurate to
describe these options as options on ``an event''. There is no event
delivered upon exercise of the option, rather a payment is
delivered. The crucial question is what causes the option to be in-
the-money and pay out. In the case of credit default options, it is
an event that is created by a security.
    \46\ It is important to note that merely because the option does
not transfer ownership of the interest or right in a security--but
instead becomes in-the-money and provides a cash payment if certain
security rights are triggered--does not mean the option is not on an
interest in a security. Cf. Caiola, 295 F.3d 312 (2d Cir. 2002)
(including within the definition of ``security'' an option that did
not deliver an actual security or interest in a security, but merely
a cash payment).
---------------------------------------------------------------------------

    Moreover, the economic reality of credit default options supports
the conclusion that credit default options are securities. Taking a
short position (i.e., taking on the role of a protection seller) via
credit default options would be akin to purchasing the corporate bond
that is the Reference Obligation or other Relevant Obligations of that
credit

default option with the interest rate risk fully hedged. Both give the
investor the same risk exposure to creditworthiness of an issuer.
Indeed, credit default options may even more closely reflect the
financial condition of an SEC-registered issuer because, unlike
corporate bonds, which reflect both an issuer's creditworthiness and
general interest rate risk, credit default options would only reflect
an issuer's creditworthiness. That ability to isolate and transfer
credit risk, backed by the guarantee of a central counterparty and the
transparency of an exchange, should provide investors with additional
opportunities to gain exposure to the public debt market.
    For these reasons, the Commission finds that credit default options
are options based on the value of, and options on interests in or based
on the value of interests in, a security or securities of the Reference
Entity and, therefore, securities under Section 3(a)(10) of the
Act.\47\
---------------------------------------------------------------------------

    \47\ 15 U.S.C. 78c(a)(10).
---------------------------------------------------------------------------

    Further, the Commission believes that the listing rules proposed by
CBOE for credit default options are reasonable and consistent with the
Act. The Commission notes in particular that a credit default option
must be based on a Reference Obligation issued by an entity that issues
registered equity securities that are NMS stocks and that meet the
Exchange's standards for listing an equity option. These requirements
are reasonably designed to facilitate investors' access to information
about the Reference Entity that may be necessary to price a credit
default option appropriately.
    The Commission believes that the proposed position limits and
margin rules for credit default options are reasonable and consistent
with the Act. The proposed position limit of 5,000 contracts in any
credit default option class appears to reasonably balance the promotion
of a free and open market for these securities with minimization of
incentives for market manipulation and insider trading. The proposed
margin rules appear reasonably designed to deter a member or its
customer from assuming an imprudent position in credit default options.
    In support of this proposal, the Exchange made the following
representations:
     The Exchange will have in place adequate surveillance
procedures to monitor trading in credit default options prior to
listing and trading such options, thereby helping to ensure the
maintenance of a fair and orderly market for trading in credit default
options.
     The Exchange and the OPRA will have the necessary systems
capacity to accommodate the additional volume associated with credit
default options as proposed.

This approval order is conditioned on CBOE's adherence to these
representations.
    For the foregoing reasons, the Commission finds that the proposed
rule is consistent with the Act.

V. Accelerated Approval

    The Commission finds good cause for approving the proposed rule
change, as modified by Amendment No. 5, prior to the thirtieth day
after publishing notice of Amendment No. 5 in the Federal Register
pursuant to Section 19(b)(2) of the Act.\48\ In Amendment No. 5, CBOE:
(1) Modified the text of the proposed margin requirements applicable to
credit default options contained in proposed Rules 12.3 and 12.5; (2)
made corresponding changes to the discussion sections of the Form 19b-4
and the Exhibit 1 thereto; and (3) inserted information in the
discussion sections of the Form 19b-4 and the Exhibit 1 thereto
regarding the form of escrow agreements and the Exchange's supervision
of member organizations that extend margin to customers trading Credit
Default Options.\49\ The Commission believes that Amendment No. 5
raises no significant regulatory issues. The Commission therefore finds
good cause exists to accelerate approval of the proposed change, as
modified by Amendment No. 5, pursuant to Section 19(b)(2) of the Act.
---------------------------------------------------------------------------

    \48\ 15 U.S.C. 78s(b)(2). Pursuant to Section 19(b)(2) of the
Act, the Commission may not approve any proposed rule change, or
amendment thereto, prior to the thirtieth day after the date of
publication of the notice thereof, unless the Commission finds good
cause for so doing.
    \49\ The changes pursuant to Amendment No. 5 are discussed more
fully in Section II.G, supra.
---------------------------------------------------------------------------

VI. Designation of Credit Default Options Pursuant to Rule 9b-1

    Rule 9b-1 establishes a disclosure framework for standardized
options that are traded on a national securities exchange and cleared
through a registered clearing agency. Under this framework, the
exchange on which a standardized option is listed and traded must
prepare an Options Disclosure Document (``ODD'') that, among other
things, identifies the issuer and describes the uses, mechanics, and
risks of options trading, in language that can be easily understood by
the general investing public. The ODD is treated as a substitute for
the traditional prospectus. A broker-dealer must provide a copy of the
ODD to each customer at or before approving of the customer's account
for trading any standardized option.\50\ Any amendment to the ODD must
be distributed to each customer whose account is approved for trading
the options class for which the ODD relates.\51\
---------------------------------------------------------------------------

    \50\ See 17 CFR 240.9b-1(d)(1).
    \51\ See 17 CFR 240.9b-1(d)(2).
---------------------------------------------------------------------------

    Under Rule 9b-1, use of the ODD is limited to ``standardized
options'' for which there is an effective registration statement on
Form S-20 under the Securities Act or that are exempt from
registration.\52\ The Commission specifically reserved in Rule 9b-1 the
ability to designate as standardized options other securities ``that
the Commission believes should be included within the options
disclosure framework.'' \53\
---------------------------------------------------------------------------

    \52\ See 17 CFR 240.9b-1(b)(1) and (c)(8). See also 17 CFR
230.238. Rule 238 under the Securities Act provides an exemption
from the Securities Act for any standardized option, as defined by
Rule 9b-1(a)(4) under the Act, with limited exceptions. Rule 238
does not exempt standardized options from the antifraud provisions
of Section 17 of the Securities Act, 15 U.S.C. 77q. Also, offers and
sales of standardized options by or on behalf of the issuer of the
underlying security or securities, an affiliate of the issuer, or an
underwriter, will constitute an offer or sale of the underlying
security or securities as defined in Section 2(a)(3) of the
Securities Act, 15 U.S.C. 77b(a)(3). See also Securities Act Release
No. 8171 (December 23, 2002), 68 FR 188 (January 2, 2003) (Exemption
for Standardized Options From Provisions of the Securities Act of
1933 and From Registration Requirements of the Exchange Act of
1934).
    \53\ See Securities Exchange Act Release No. 19055 and
Securities Act Release No. 6426 (September 16, 1982), 47 FR 41950,
41954 (September 23, 1982).
---------------------------------------------------------------------------

    The Commission hereby designates credit default options, as defined
in the OCC Proposal,\54\ as standardized options for purposes of Rule
9b-1 under the Act. Credit default options do not meet the definition
of ``standardized options,'' because they do not have an exercise
price. However, they resemble

standardized options in other significant respects. Credit default
options have an underlying security and an expiration date. Like other
standardized options, credit default options have standardized terms
relating to exercise procedures, contract adjustments, time of
issuance, effect of closing transactions, restrictions, and other
matters pertaining to the rights and obligations of holders and
writers. Further, credit default options are designed to provide market
participants with the ability to hedge their exposure to an underlying
security. The fact that credit default options lack a specified
exercise price does not detract from this option-like benefit. The
Commission believes that the fact that the OCC, the clearing agency for
all standardized options, is willing to serve as issuer of credit
default options supports the view that adding credit default options to
the standardized option disclosure framework is reasonable.
---------------------------------------------------------------------------

    \54\ For purposes of its proposal, OCC would define the term
``credit default option'' as an option that is automatically
exercised upon receipt by the OCC of a credit event confirmation
with respect to the reference obligation(s) of a reference entity.
Credit default options have only two possible payoff outcomes:
Either a fixed automatic exercise settlement amount or nothing at
all. See proposed Section 1.C.(2) of Article XIV of the OCC By-Laws.
     I11``Credit event'' would be as defined in the rules of
the exchange on which the credit default options are listed, with
respect to a reference obligation for such option. See proposed
Section 1.C.(3) of Article XIV of the OCC By-Laws.
     I11``Reference entity'' would mean the issuer or
guarantor of the reference obligation(s). See proposed Section
1.R.(1) of Article XIV of the OCC By-Laws.
     I11``Reference obligations'' would mean one or more
debt securities the terms of which define a credit event for a class
of credit default options, as provided in the rules of the listing
exchange. See id.
---------------------------------------------------------------------------

    Therefore, the Commission hereby designates credit default options,
such as those proposed by CBOE, as standardized options for purposes of
Rule 9b-1 under the Act.

VII. Conclusion

    It is therefore ordered, pursuant to Section 19(b)(2) of the
Act,\55\ that the proposed rule change (SR-CBOE-2006-84) as modified by
Amendment Nos. 3, 4, and 5, be, and hereby is approved on an
accelerated basis.
---------------------------------------------------------------------------

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

    It is further ordered, pursuant to Rule 9b-1(a)(4) under the Act,
the credit default options, as defined in proposed rule change (SR-OCC-
2007-01) are designated as standardized options.

    By the Commission.
Florence E. Harmon,
Deputy Secretary.
[FR Doc. E7-11273 Filed 6-11-07; 8:45 am]

BILLING CODE 8010-01-P


Comment Info: =================

General Comment:Dear Mr. Zeller:

I am writing as an individual consumer to request an extension of the comment period for the Food and Drug Administration's ("FDA") Proposed Rule Deeming Tobacco Products to be Subject to the Federal Food, Drug, and Cosmetic Act, as amended by the Family Smoking and Prevention and Tobacco Control Act (the "Proposed Rule") published at 79 Fed. Reg. 23,142 and Federal Register No. 2014-09491. On behalf of myself, I am requesting that the comment period for the Proposed Rule be extended by the FDA for an additional 105 days, from its current 75-day period, to 180 days.

The Proposed Rule raises a number of significant issues and questions that are important and relevant to me, as a consumer of products that are proposed for regulation under the Proposed Rule. The Proposed Rule asks about a hundred different questions I might want to respond to. I want to provide my thoughts and comments on many of these issues, but my time to devote to researching and providing thoughtful comments on these important questions is limited. I have already spent many hours researching and dissecting these issues, but they take time. I know that the FDA took many years to even come up with the Proposed Rule, so I do not think it is at all unreasonable to allow the public a mere six months to comment on it. This is our only opportunity, as consumers, to provide our feedback.

I feel very strongly about e-cigarettes as an alternative to combustible cigarettes. Quite simply, I firmly believe that they saved my life. I wish to provide you with my personal story, as well as science- and evidence-based responses to your questions so that you can take my comment into account. I realize that the FDA has the authority under 21 CFR 10.40 to extend this time frame and that the FDA has exercised this authority on numerous occasions in the past. I would therefore ask that you do so here, so that all stakeholders have the opportunity to provide their comments on this proposed regulation.

While I do respect the obvious need to restrict those under 18 from nicotine products, I also know that my parents both died from smoking related diseases. I will soon be a year free of cigarettes and I feel amazing to compared to how I felt just a year ago.  I appreciate your consideration of my request and am happy to discuss this issue with you further.


UNITED STATES ENVIRONMENTAL PROTECTION AGENCY
                NATIONAL VEHICLE AND FUEL EMISSIONS LABORATORY
                             2000 TRAVERWOOD ROAD
                           ANN ARBOR, MI  48105-2498

									          	OFFICE OF
										AIR AND RADIATION

July 21, 2011

MEMORANDUM

SUBJECT:	Meeting with Volvo

FROM:	Angela Cullen, Mechanical Engineer

TO:		Docket EPA-HQ-OAR-2010-0162

This memorandum documents a meeting held on March 11, 2011 between Volvo, DOT, and EPA.  The attendees included:

      Volvo: Michael Sorrels, Matthew Heinke
      EPA: Chien Sze, Arvon Mitcham, Angela Cullen
      DOT: Coralie Cooper, Maurice Hicks

The discussion focused on enhanced coastdown test procedures, including the following:
   * Grade
   * Road surface
   * Coastdown tracks
   * Coastdown data analyss
   * Trailer specification
   * Speed range
   * Tires
   * Anemometer

The agencies also discussed full scale wind tunnel testing and wind averaged yaw with Volvo.


[Federal Register Volume 79, Number 99 (Thursday, May 22, 2014)]
[Notices]
[Page 29452]
[FR Doc No: 2014-11824]

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

DEPARTMENT OF HOMELAND SECURITY

Federal Emergency Management Agency

[Internal Agency Docket No. FEMA-4175-DR; Docket ID FEMA-2014-0003]

Mississippi; Amendment No. 3 to Notice of a Major Disaster
Declaration

AGENCY: Federal Emergency Management Agency, DHS.

ACTION: Notice.

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

SUMMARY: This notice amends the notice of a major disaster declaration
for the State of Mississippi (FEMA-4175-DR), dated April 30, 2014, and
related determinations.

DATES: Effective Date: May 12, 2014.

FOR FURTHER INFORMATION CONTACT: Dean Webster, Office of Response and
Recovery, Federal Emergency Management Agency, 500 C Street SW.,
Washington, DC 20472,<PHONE_NUMBER>.

SUPPLEMENTARY INFORMATION: The notice of a major disaster declaration
for the State of Mississippi is hereby amended to include the following
areas among those areas determined to have been adversely affected by
the event declared a major disaster by the President in his declaration
of April 30, 2014.

    Itawamba, Lee, Lowndes, Rankin, Wayne, and Winston Counties for
Public Assistance [Categories C-G] (already designated for
Individual Assistance and assistance for debris removal and
emergency protective measures [Categories A and B], including direct
federal assistance, under the Public Assistance program).
    Jones and Leake Counties for Public Assistance [Categories A-G]
(already designated for Individual Assistance).
    Newton County for Public Assistance (Categories A-G).

    The following Catalog of Federal Domestic Assistance Numbers
(CFDA) are to be used for reporting and drawing funds: 97.030,
Community Disaster Loans; 97.031, Cora Brown Fund; 97.032, Crisis
Counseling; 97.033, Disaster Legal Services; 97.034, Disaster
Unemployment Assistance (DUA); 97.046, Fire Management Assistance
Grant; 97.048, Disaster Housing Assistance to Individuals and
Households in Presidentially Declared Disaster Areas; 97.049,
Presidentially Declared Disaster Assistance--Disaster Housing
Operations for Individuals and Households; 97.050, Presidentially
Declared Disaster Assistance to Individuals and Households--Other
Needs; 97.036, Disaster Grants--Public Assistance (Presidentially
Declared Disasters); 97.039, Hazard Mitigation Grant.

W. Craig Fugate,
Administrator, Federal Emergency Management Agency.
[FR Doc. 2014-11824 Filed 5-21-14; 8:45 am]
BILLING CODE 9111-23-P


[Federal Register: September 8, 2009 (Volume 74, Number 172)]
[Proposed Rules]
[Page 46068-46074]
[DOCID:fr08se09-29]

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

DEPARTMENT OF HOMELAND SECURITY

Federal Emergency Management Agency

44 CFR Part 67

[Docket ID FEMA-2008-0020; Internal Agency Docket No. FEMA-B-1065]

Proposed Flood Elevation Determinations

AGENCY: Federal Emergency Management Agency, DHS.

ACTION: Proposed rule.

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

SUMMARY: Comments are requested on the proposed Base (1% annual-chance)
Flood Elevations (BFEs) and proposed BFE modifications for the
communities listed in the table below. The purpose of this notice is to
seek general information and comment regarding the proposed regulatory
flood elevations for the reach described by the downstream and upstream
locations in the table below. The BFEs and modified BFEs are a part of
the floodplain management measures that the community is required
either to adopt or show evidence of having in effect in order to
qualify or remain qualified for participation in the National Flood
Insurance Program (NFIP). In addition, these elevations, once
finalized, will be used by insurance agents, and others to calculate
appropriate flood insurance premium rates for new buildings and the
contents in those buildings.

DATES: Comments are to be submitted on or before December 7, 2009.

ADDRESSES: The corresponding preliminary Flood Insurance Rate Map
(FIRM) for the proposed BFEs for each community is available for
inspection at the community's map repository. The respective addresses
are listed in the table below.
    You may submit comments, identified by Docket No. FEMA-B-1065, to
Kevin C. Long, Acting Chief, Engineering Management Branch, Mitigation
Directorate, Federal Emergency Management Agency, 500 C Street, SW.,
Washington, DC 20472,<PHONE_NUMBER>, or (e-mail<EMAIL_ADDRESS>
FOR FURTHER INFORMATION CONTACT: Kevin C. Long, Acting Chief,
Engineering Management Branch, Mitigation Directorate, Federal
Emergency Management Agency, 500 C Street, SW., Washington, DC 20472,
(202) 646-2820, or (e-mail<EMAIL_ADDRESS>
SUPPLEMENTARY INFORMATION: The Federal Emergency Management Agency
(FEMA) proposes to make determinations of BFEs and modified BFEs for
each community listed below, in accordance with section 110 of the
Flood Disaster Protection Act of 1973, 42 U.S.C. 4104, and 44 CFR
67.4(a).
    These proposed BFEs and modified BFEs, together with the floodplain
management criteria required by 44 CFR 60.3, are the minimum that are
required. They should not be construed to mean that the community must
change any existing ordinances that are more stringent in their
floodplain management requirements. The community may at any time enact
stricter requirements of its own, or pursuant to policies established
by other Federal, State, or regional entities. These proposed
elevations are used to meet the floodplain management requirements of
the NFIP and are also used to calculate the appropriate flood insurance
premium rates for new buildings built after these elevations are made
final, and for the contents in these buildings.
    Comments on any aspect of the Flood Insurance Study and FIRM, other
than the proposed BFEs, will be considered. A letter acknowledging
receipt of any comments will not be sent.
    National Environmental Policy Act. This proposed rule is
categorically excluded from the requirements of 44 CFR part 10,
Environmental Consideration. An environmental impact assessment has not
been prepared.
    Regulatory Flexibility Act. As flood elevation determinations are
not within the scope of the Regulatory Flexibility Act, 5 U.S.C. 601-
612, a regulatory flexibility analysis is not required.
    Executive Order 12866, Regulatory Planning and Review. This
proposed rule is not a significant regulatory action under the criteria
of section 3(f) of Executive Order 12866, as amended.
    Executive Order 13132, Federalism. This proposed rule involves no
policies that have federalism implications under Executive Order 13132.
    Executive Order 12988, Civil Justice Reform. This proposed rule
meets the applicable standards of Executive Order 12988.

List of Subjects in 44 CFR Part 67

    Administrative practice and procedure, Flood insurance, Reporting
and recordkeeping requirements.
    Accordingly, 44 CFR part 67 is proposed to be amended as follows:

PART 67--[AMENDED]

    1. The authority citation for part 67 continues to read as follows:

    Authority:  42 U.S.C. 4001 et seq.; Reorganization Plan No. 3 of
1978, 3 CFR, 1978 Comp., p. 329; E.O. 12127, 44 FR 19367, 3 CFR,
1979 Comp., p. 376.

Sec.  67.4  [Amended]

    2. The tables published under the authority of Sec.  67.4 are
proposed to be amended as follows:

----------------------------------------------------------------------------------------------------------------
                                                                  * Elevation in feet
                                                                (NGVD)  + Elevation in
                                                                feet (NAVD)
                                                                  Depth in feet above
         Flooding source(s)            Location of referenced       ground  [caret]        Communities affected
                                            elevation **          Elevation in meters
                                                                         (MSL)
                                                              --------------------------
                                                                Effective     Modified
----------------------------------------------------------------------------------------------------------------
                                Colfax County, New Mexico, and Incorporated Areas
----------------------------------------------------------------------------------------------------------------
Ranton Creek........................  Approximately 450 feet          None        +6541  Unincorporated Areas of
                                       downstream of Kiowa                                Colfax County.
                                       Avenue.
                                      Approximately 150 feet          None        +6547
                                       downstream of Kiowa
                                       Avenue.
----------------------------------------------------------------------------------------------------------------
* National Geodetic Vertical Datum.
+ North American Vertical Datum.
 Depth in feet above ground.
[caret] Mean Sea Level, rounded to the nearest 0.1 meter.

** BFEs to be changed include the listed downstream and upstream BFEs, and include BFEs located on the stream
 reach between the referenced locations above. Please refer to the revised Flood Insurance Rate Map located at
 the community map repository (see below) for exact locations of all BFEs to be changed.

Send comments to Kevin C. Long, Acting Chief, Engineering Management Branch, Mitigation Directorate, Federal
 Emergency Management Agency, 500 C Street, SW., Washington, DC 20472.

                                                    ADDRESSES

                                      Unincorporated Areas of Colfax County
Maps are available for inspection at the Floodplain Manager's Office, 116 South 3rd Street, Raton, NM 87740.
----------------------------------------------------------------------------------------------------------------
                                 Luna County, New Mexico, and Incorporated Areas
----------------------------------------------------------------------------------------------------------------
Mimbres River.......................  Approximately 2.1 miles        +4152        +4151  Unincorporated Areas of
                                       upstream of State                                  Luna County.
                                       Highway 549 Southeast.
                                      Approximately 1,500            +4280        +4282
                                       feet downstream of
                                       Interstate Highway 10.
----------------------------------------------------------------------------------------------------------------
* National Geodetic Vertical Datum.
+ North American Vertical Datum.
 Depth in feet above ground.
[caret] Mean Sea Level, rounded to the nearest 0.1 meter.

** BFEs to be changed include the listed downstream and upstream BFEs, and include BFEs located on the stream
 reach between the referenced locations above. Please refer to the revised Flood Insurance Rate Map located at
 the community map repository (see below) for exact locations of all BFEs to be changed.

Send comments to Kevin C. Long, Acting Chief, Engineering Management Branch, Mitigation Directorate, Federal
 Emergency Management Agency, 500 C Street, SW., Washington, DC 20472.

                                                    ADDRESSES

                                       Unincorporated Areas of Luna County
Maps are available for inspection at 201 East Cody Street, Deming, NM 88030.
----------------------------------------------------------------------------------------------------------------
                                 Taos County, New Mexico, and Incorporated Areas
----------------------------------------------------------------------------------------------------------------
Bitter Creek........................  At the confluence with         +8654        +8659  Town of Red River,
                                       Red River.                                         Unincorporated Areas
                                                                                of Taos County.
                                      Approximately 1,150             None        +8696
                                       feet upstream of High
                                       Creek.
Red River...........................  Just upstream of High          +8608        +8612  Town of Red River,
                                       Cost Trail.                                        Unincorporated Areas
                                                                                of Taos County.
                                      Approximately 1.08              None        +8782  .......................
                                       miles downstream of
                                       Goose Lake Trail 66.
Rio Lucero..........................  At the confluence with          None        +6886  Pueblo of Taos.
                                       Rio Pueblo De Taos.
                                      Approximately 0.56              None        +6995
                                       miles upstream of
                                       Paseo Del Pueblo Norte
                                       Road.
Rio Pueblo De Taos..................  Just upstream of                None        +6886  Town of Taos, Pueblo of
                                       Karavas Road.                                      Taos.
                                      Approximately 600 feet          None        +6952
                                       downstream of Paseo
                                       Del Pueblo Norte Road.
----------------------------------------------------------------------------------------------------------------
* National Geodetic Vertical Datum.
+ North American Vertical Datum.
 Depth in feet above ground.

[caret] Mean Sea Level, rounded to the nearest 0.1 meter.

** BFEs to be changed include the listed downstream and upstream BFEs, and include BFEs located on the stream
 reach between the referenced locations above. Please refer to the revised Flood Insurance Rate Map located at
 the community map repository (see below) for exact locations of all BFEs to be changed.

Send comments to Kevin C. Long, Acting Chief, Engineering Management Branch, Mitigation Directorate, Federal
 Emergency Management Agency, 500 C Street, SW., Washington, DC 20472.

                                                    ADDRESSES

Pueblo of Taos
Maps are available for inspection at the Floodplain Administrator's Office, 105 Albright Street, Suite A, Taos,
 NM 87571.

Town of Red River
Maps are available for inspection at 100 East Main Street, Red River, NM 87558.

Town of Taos
Maps are available for inspection at the Planning Department, 400 Camino De La Placita, Taos, NM 87571.

                                       Unincorporated Areas of Luna County
Maps are available for inspection at the Floodplain Administrator's Office, 105 Albright Street, Suite A, Taos,
 NM 87571.
----------------------------------------------------------------------------------------------------------------
                                Cannon County, Tennessee, and Incorporated Areas
----------------------------------------------------------------------------------------------------------------
East Fork Stones River..............  Approximately 80 feet           None         +690  Unincorporated Areas of
                                       downstream of                                      Cannon County.
                                       confluence with Lehman
                                       Branch.
                                      Approximately 40 feet           None         +706  .......................
                                       upstream of Dolittle
                                       Road.
----------------------------------------------------------------------------------------------------------------
* National Geodetic Vertical Datum.
+ North American Vertical Datum.
 Depth in feet above ground.
[caret] Mean Sea Level, rounded to the nearest 0.1 meter.

** BFEs to be changed include the listed downstream and upstream BFEs, and include BFEs located on the stream
 reach between the referenced locations above. Please refer to the revised Flood Insurance Rate Map located at
 the community map repository (see below) for exact locations of all BFEs to be changed.

Send comments to Kevin C. Long, Acting Chief, Engineering Management Branch, Mitigation Directorate, Federal
 Emergency Management Agency, 500 C Street, SW., Washington, DC 20472.

                                                    ADDRESSES

                                      Unincorporated Areas of Cannon County
Maps are available for inspection at 1 Courthouse Square, Woodbury, TN 37190.
----------------------------------------------------------------------------------------------------------------
                                Stewart County, Tennessee, and Incorporated Areas
----------------------------------------------------------------------------------------------------------------
Tennessee River.....................  County Boundary Between         None         +375  Unincorporated Areas of
                                       Houston/Stewart                                    Stewart County.
                                       Counties, Tennessee
                                       (approximately River
                                       Mile 74.2).
                                      From the Kennedy/               None         +375
                                       Tennessee state
                                       boundary
                                       (approximately River
                                       Mile 49.2).
----------------------------------------------------------------------------------------------------------------
* National Geodetic Vertical Datum.
+ North American Vertical Datum.
 Depth in feet above ground.
[caret] Mean Sea Level, rounded to the nearest 0.1 meter.

** BFEs to be changed include the listed downstream and upstream BFEs, and include BFEs located on the stream
 reach between the referenced locations above. Please refer to the revised Flood Insurance Rate Map located at
 the community map repository (see below) for exact locations of all BFEs to be changed.

Send comments to Kevin C. Long, Acting Chief, Engineering Management Branch, Mitigation Directorate, Federal
 Emergency Management Agency, 500 C Street, SW., Washington, DC 20472.

                                                    ADDRESSES

                                     Unincorporated Areas of Stewart County
Maps are available for inspection at 226 Lakeview Drive, Dover, TN 37058.
----------------------------------------------------------------------------------------------------------------
                                  DeWitt County, Texas, and Incorporated Areas
----------------------------------------------------------------------------------------------------------------
Gohlke Creek........................  Just upstream of Old            None         +166  Unincorporated Areas of
                                       Clinton Road.                                      DeWitt County.
                                      Approximately 800 feet          None         +167
                                       downstream of West
                                       Heaton Street.
SCS Channel.........................  Approximately 1.1 miles         None         +178  Unincorporated Areas of
                                       downstream of Old                                  DeWitt County.
                                       Cheapside Road.

                                      Approximately 650 feet          None         +184
                                       downstream of Terrell
                                       Street.
----------------------------------------------------------------------------------------------------------------
* National Geodetic Vertical Datum.
+ North American Vertical Datum.
 Depth in feet above ground.
[caret] Mean Sea Level, rounded to the nearest 0.1 meter.

** BFEs to be changed include the listed downstream and upstream BFEs, and include BFEs located on the stream
 reach between the referenced locations above. Please refer to the revised Flood Insurance Rate Map located at
 the community map repository (see below) for exact locations of all BFEs to be changed.

Send comments to Kevin C. Long, Acting Chief, Engineering Management Branch, Mitigation Directorate, Federal
 Emergency Management Agency, 500 C Street, SW., Washington, DC 20472.

                                                    ADDRESSES

                                      Unincorporated Areas of DeWitt County
Maps are available for inspection at 307 North Gonzalez Street, Cuero, TX 77954.
----------------------------------------------------------------------------------------------------------------
                                  Medina County, Texas, and Incorporated Areas
----------------------------------------------------------------------------------------------------------------
Burnt Boot Creek....................  Approximately 1,570             None         +634  Unincorporated Areas of
                                       feet downstream of the                             Medina County, City of
                                       intersection of                                    Devine.
                                       Thompson Avenue.
                                      Approximately 0.54              None         +700
                                       miles upstream of the
                                       intersection of RM 92.
Chacon Creek........................  Approximately 1.46              None         +660  Unincorporated Areas of
                                       miles downstream of                                Medina County, City of
                                       the intersection of                                Natalia.
                                       Highway 81.
                                      Approximately 698 feet          None         +717
                                       upstream of the
                                       intersection of RM 139.
East Branch of Live Oak Creek.......  Approximately 2.28              None         +847  Unincorporated Areas of
                                       miles downstream of                                Medina County, City of
                                       the intersection of                                Hondo.
                                       Highway 90.
                                      Approximately 2.02              None         +913
                                       miles upstream of the
                                       intersection of
                                       Highway 90.
Elm Slough..........................  Approximately 1.13              None         +803  Unincorporated Areas of
                                       miles downstream of CR                             Medina County, City of
                                       446.                                               Hondo.
                                      Approximately 1,987             None         +888
                                       feet upstream of Co.
                                       Highway 443.
Flat Creek..........................  Approximately 2.4 miles         None         +720  Unincorporated Areas of
                                       downstream of the                                  Medina County, City of
                                       intersection of                                    Castroville.
                                       Highway 90.
                                      Approximately 1.7 miles         None         +784
                                       upstream of the
                                       intersection of
                                       Highway 90.
Fort Ewell Creek....................  Just upstream of the            None         +694  Unincorporated Areas of
                                       confluence of Chacon                               Medina County, City of
                                       Creek.                                             Natalia.
                                      Just downstream of the          None         +701
                                       intersection of RM 136.
Hondo Creek.........................  Approximately 0.50              None         +839  Unincorporated Areas of
                                       miles downstream of CR                             Medina County.
                                       4526.
                                      Approximately 1.29              None         +917
                                       miles upstream of
                                       Vandenburg Road.
Hondo Creek Tributary...............  Approximately 873 feet          None         +862  Unincorporated Areas of
                                       downstream of Highway                              Medina County.
                                       173.
                                      Approximately 0.62              None         +878
                                       miles upstream of
                                       Highway 173.
Kempf Creek.........................  Just upstream of the            None         +758  Unincorporated Areas of
                                       confluence of Medina                               Medina County, City of
                                       River.                                             Castroville.
                                      Approximately 215 feet          None         +778
                                       downstream of the
                                       intersection of Farm
                                       Road 471.
Little Live Oak Creek and flooding    Approximately 1.41              None         +812  Unincorporated Areas of
 effects.                              miles downstream of                                Medina County, City of
                                       the intersection of CR                             Hondo.
                                       532.
                                      Approximately 1,011             None         +897
                                       feet upstream of 19th
                                       Street.
Little Sous Creek...................  Approximately 4,009             None         +737  Unincorporated Areas of
                                       feet downstream of the                             Medina County.
                                       intersection of
                                       Highway 90.
                                      Approximately 2.2 miles         None         +827
                                       upstream of the
                                       intersection of
                                       Highway 90.
Medina River........................  Approximately 0.60              None         +689  Unincorporated Areas of
                                       miles downstream of                                Medina County, City of
                                       the intersection of                                Castroville.
                                       Lacoste Road.
                                      Approximately 1.8 miles         None         +767
                                       upstream of the
                                       confluence of Kempf
                                       Creek.

Parkers Creek.......................  Approximately 2.71              None         +826  Unincorporated Areas of
                                       miles downstream of                                Medina County.
                                       the intersection of FM
                                       2200.
                                      Approximately 1.61              None         +914
                                       miles upstream of the
                                       intersection of
                                       Highway 90.
Polecat Creek.......................  Approximately 0.55              None         +708  Unincorporated Areas of
                                       miles downstream of                                Medina County, City of
                                       the intersection of                                LaCoste.
                                       Dhanis Street.
                                      Approximately 503 feet          None         +722
                                       upstream of the
                                       intersection of FM 471.
San Fransisco Perez Creek...........  Approximately 0.49              None         +646  Unincorporated Areas of
                                       miles downstream of                                Medina County, City of
                                       the intersection of RM                             Devine.
                                       101.
                                      Approximately 1.1 miles         None         +699
                                       upstream of the
                                       intersection of RM 90.
Seco Creek..........................  Approximately 5.94              None         +838  Unincorporated Areas of
                                       miles downstream of                                Medina County.
                                       the intersection of CR
                                       512.
                                      Approximately 4.1 miles         None         +935
                                       upstream of the
                                       intersection of CR 428.
South Fork San Geronimo Creek.......  Approximately 786 feet          None        +1324  Unincorporated Areas of
                                       downstream of the                                  Medina County.
                                       confluence of Unnamed
                                       Tributary 1 to South
                                       Fork San Geronimo
                                       Creek.
                                      Approximately 947 feet          None        +1407
                                       upstream of the
                                       confluence of Unnamed
                                       Tributary 2 to South
                                       Fork San Geronimo
                                       Creek.
South Polecat Creek.................  Approximately 0.42              None         +708  Unincorporated Areas of
                                       miles downstream of                                Medina County, City of
                                       the intersection of                                LaCoste.
                                       Dhanis Street.
                                      Approximately 0.44              None         +730
                                       miles upstream of the
                                       intersection of Contis
                                       Avenue.
Tehuacana Creek.....................  Approximately 1.24              None         +623  Unincorporated Areas of
                                       miles downstream of                                Medina County.
                                       the confluence of East
                                       Tehuacana Creek.
                                      Just downstream of the          None         +660
                                       confluence of West
                                       Fork Tehuacana Creek.
Unnamed Tributary 1 to San Geronimo   Approximately 1.4 miles         None        +1360  Unincorporated Areas of
 Creek.                                upstream of the                                    Medina County.
                                       confluence of San
                                       Geronimo Creek.
                                      Approximately 2.6 miles         None        +1465
                                       upstream of the
                                       confluence of San
                                       Geronimo Creek.
Unnamed Tributary 1 to South Fork     Just upstream of the            None        +1345  Unincorporated Areas of
 San Geronimo Creek.                   confluence of South                                Medina County.
                                       Fork San Geronimo
                                       Creek.
                                      Approximately 1,844             None        +1371
                                       feet upstream of the
                                       confluence of South
                                       Fork San Geronimo
                                       Creek.
Unnamed Tributary 2 to South Fork     Just upstream of the            None        +1401  Unincorporated Areas of
 San Geronimo Creek.                   confluence of South                                Medina County.
                                       Fork San Geronimo
                                       Creek.
                                      Approximately 1,069             None        +1412
                                       feet upstream of the
                                       confluence of South
                                       Fork San Geronimo
                                       Creek.
Unnamed Tributary 2 to San Geronimo   Approximately 779 feet          None        +1295  Unincorporated Areas of
 Creek.                                upstream of the                                    Medina County.
                                       intersection of RT 37.
                                      Approximately 0.65              None        +1339
                                       miles upstream of the
                                       intersection of RT 37.
Unnamed Tributary to Medina           Approximately 1,514             None        +1159  Unincorporated Areas of
 Diversion Reservoir.                  feet downstream of the                             Medina County.
                                       confluence of Unnamed
                                       Tributary to Unnamed
                                       Tributary to Medina
                                       Diversion Reservoir.
                                      Approximately 1.4 miles         None        +1242
                                       upstream of the
                                       confluence of Unnamed
                                       Tributary to Unnamed
                                       Tributary to Medina
                                       Diversion Reservoir.
Unnamed Tributary to Unnamed          Just upstream of the            None        +1173  Unincorporated Areas of
 Tributary to Medina Diversion         confluence of Unnamed                              Medina County.
 Reservoir.                            Tributary to Medina
                                       Diversion Reservoir.
                                      Approximately 0.8 miles         None        +1264
                                       upstream of the
                                       confluence of Unnamed
                                       Tributary to Medina
                                       Diversion Reservoir.
West Branch Little Live Oak Creek...  Approximately 0.57              None         +832  Unincorporated Areas of
                                       miles downstream of                                Medina County, City of
                                       intersection of CR 532.                            Hondo.
                                      Approximately 0.39              None         +885
                                       miles upstream of the
                                       intersection of CR 530.

West Fork Tehuacana Tributary.......  Just upstream of the            None         +668  Unincorporated Areas of
                                       confluence of West                                 Medina County.
                                       Fork Tehuacana Creek.
                                      Approximately 0.62              None         +699
                                       miles upstream of CR
                                       732.
West Prong Atascosa River...........  Approximately 295 feet          None         +693  Unincorporated Areas of
                                       downstream of the                                  Medina County, City of
                                       intersection of Main                               Lytle.
                                       Street.
                                      Just downstream of the          None         +715
                                       intersection of CR 681.
West Tehuacana Creek................  Just upstream of the            None         +662  Unincorporated Areas of
                                       confluence of                                      Medina County.
                                       Tehuacana Creek.
                                      Approximately 1,258             None         +707
                                       feet upstream of the
                                       intersection of CR 732.
----------------------------------------------------------------------------------------------------------------
* National Geodetic Vertical Datum.
+ North American Vertical Datum.
 Depth in feet above ground.
[caret] Mean Sea Level, rounded to the nearest 0.1 meter.

** BFEs to be changed include the listed downstream and upstream BFEs, and include BFEs located on the stream
 reach between the referenced locations above. Please refer to the revised Flood Insurance Rate Map located at
 the community map repository (see below) for exact locations of all BFEs to be changed.

Send comments to Kevin C. Long, Acting Chief, Engineering Management Branch, Mitigation Directorate, Federal
 Emergency Management Agency, 500 C Street, SW., Washington, DC 20472.

                                                    ADDRESSES

City of Castroville
Maps are available for inspection at 703 Paris Street, Castroville, TX 78009.

City of Devine
Maps are available for inspection at 303 South Teel Drive, Devine, TX 78016.

City of Hondo
Maps are available for inspection at 1600 Avenue M, Hondo, TX 78861.

City of LaCoste
Maps are available for inspection at 16004 South Front Street, LaCoste, TX 78039.

City of Lytle
Maps are available for inspection at 19325 FM 2790, Lytle, TX 78052.

City of Natalia
Maps are available for inspection at 300 3rd Street, Natalia, TX 78059.

                                      Unincorporated Areas of Medina County
Maps are available for inspection at 709 Avenue Y, Hondo, TX 78861.
----------------------------------------------------------------------------------------------------------------
                                Washington County, Texas, and Incorporated Areas
----------------------------------------------------------------------------------------------------------------
Hog Branch..........................  Approximately 2,500             None         +240  Unincorporated Areas of
                                       feet upstream of North                             Washington County.
                                       Blue Bell Road.
                                      Approximately 1,000             None         +249
                                       feet upstream of North
                                       Blue Bell Road.
Little Sandy Creek..................  Approximately 300 feet          None         +240  Unincorporated Areas of
                                       upstream of Old                                    Washington County.
                                       Independence Road.
                                      Approximately 200 feet          None         +278
                                       downstream of Burleson
                                       Street.
----------------------------------------------------------------------------------------------------------------
* National Geodetic Vertical Datum.
+ North American Vertical Datum.
 Depth in feet above ground.
[caret] Mean Sea Level, rounded to the nearest 0.1 meter.

** BFEs to be changed include the listed downstream and upstream BFEs, and include BFEs located on the stream
 reach between the referenced locations above. Please refer to the revised Flood Insurance Rate Map located at
 the community map repository (see below) for exact locations of all BFEs to be changed.

Send comments to Kevin C. Long, Acting Chief, Engineering Management Branch, Mitigation Directorate, Federal
 Emergency Management Agency, 500 C Street, SW., Washington, DC 20472.

                                                    ADDRESSES

                                    Unincorporated Areas of Washington County
Maps are available for inspection at the County Courthouse, 100 East Main, Brenham, TX 77833.
----------------------------------------------------------------------------------------------------------------
                                 Box Elder County, Utah, and Incorporated Areas
----------------------------------------------------------------------------------------------------------------
Box Elder Creek.....................  Just upstream of Watery         None        +4236  City of Brigham City.
                                       Lane.
                                      Upstream end of Mayor's         None        +4541
                                       Pond spillway.
----------------------------------------------------------------------------------------------------------------

* National Geodetic Vertical Datum.
+ North American Vertical Datum.
 Depth in feet above ground.
[caret] Mean Sea Level, rounded to the nearest 0.1 meter.

** BFEs to be changed include the listed downstream and upstream BFEs, and include BFEs located on the stream
 reach between the referenced locations above. Please refer to the revised Flood Insurance Rate Map located at
 the community map repository (see below) for exact locations of all BFEs to be changed.

Send comments to Kevin C. Long, Acting Chief, Engineering Management Branch, Mitigation Directorate, Federal
 Emergency Management Agency, 500 C Street, SW., Washington, DC 20472.

                                                    ADDRESSES

City of Brigham City
Maps are available for inspection at 20 North Main Street, Brigham City, UT 84302.
----------------------------------------------------------------------------------------------------------------

(Catalog of Federal Domestic Assistance No. 97.022, ``Flood
Insurance.'')

Deborah S. Ingram,
Acting Deputy Assistant Administrator for Mitigation, Mitigation
Directorate, Department of Homeland Security, Federal Emergency
Management Agency.
[FR Doc. E9-21471 Filed 9-4-09; 8:45 am]

BILLING CODE 9110-12-P