                        Information Collection Request
                         Supporting Statement for the
Implementation of the Fine Particulate Matter National Ambient Air Quality Standards
                            EPA ICR Number 2258.05
                           OMB Control No. 2060-0611

                                 Prepared by:

                 Office of Air Quality Planning and Standards
                          Office of Air and Radiation
                     U.S. Environmental Protection Agency
                 Research Triangle Park, North Carolina 27711

                              September 17, 2019

              EPA Information Collection Request Renewal for the
                 PM2.5 National Ambient Air Quality Standards
                  State Implementation Plan Requirements Rule

                               Table of Contents

 Identification of the Information Collection Request........................page 3

 Need for and Use of the Collection..........................................page 4

 Non-Duplication, Consultation, and other Collection Criteria......... page 7

 Respondents and the Information Requested..............................page 9

 Information Collected -- Agency Activities, Collection Methodology and Information Management....................................................................page 12

 Estimating the Burden and Cost of the Collection........................page 13

          Identification of the Information Collection Request

1(a) Title of the Information Collection

   The title of the Information Collection Request is Implementation of the PM2.5 National Ambient Air Quality Standards (NAAQS) (Renewal), ICR number 2258.05, and OMB Control Number 2060-0611.

1(b) Abstract/Executive Summary

   The EPA has established a suite of PM2.5 standards based on numerous health studies and other evidence demonstrating that serious health effects are associated with exposure to elevated levels of PM2.5. Estimates show that attainment of the PM2.5 standards would result in tens of thousands fewer premature deaths each year, tens of thousands fewer hospital admissions each year, and hundreds of thousands fewer doctor visits, absences from work and school, and respiratory illnesses in children annually. EPA initially established annual and 24-hour PM2.5 standards in 1997. The 24-hour standard was subsequently revised in 2006, and the primary annual standard was revised in 2012.

   The EPA finalized the PM2.5 NAAQS SIP Requirements Rule (81 FR 58010) effective October 24, 2016, to describe the Clean Air Act (CAA) requirements that must be met by states with nonattainment areas to develop plans for attaining and maintaining the NAAQS. The intended effect of the PM2.5 NAAQS SIP Requirements Rule is to provide certainty to states regarding their planning obligations related to SIP development. Only states with nonattainment areas are required to submit SIPs that meet the requirements of the rule.

   On December 18, 2014, the EPA designated fourteen areas as nonattainment for the 2012 PM2.5 NAAQS (78 FR 3086). The EPA conducted an analysis for ICR Number 2258.04 using the initial fourteen nonattainment areas. The estimate also included the estimated burden associated with ongoing implementation obligations for the remaining areas designated nonattainment for the 1997 and/or 2006 PM2.5 NAAQS. The EPA requested comment on this analysis in the proposed PM2.5 NAAQS SIP Requirements Rule (80 FR 18177) and received no comments. After proposing the PM2.5 NAAQS SIP Requirements Rule, the EPA revised initial area designations for several 2012 PM2.5 NAAQS areas on March 31, 2015 (80 FR 18535). This designation action revised the count from 14 to nine nonattainment areas, while several counties in three states remained deferred. In light of the lack of comments on the initial estimate, and to ensure that the final estimate was not an underestimate in light of uncertainty, the EPA did not revise its estimate for ICR Number 2258.04.

   The information collection activities in this proposed renewal have been submitted for approval to the Office of Management and Budget (OMB) under the Paperwork Reduction Act (PRA). The PRA requires the EPA to assess the administrative burden (in hours and dollars) for state air agencies to develop plans to attain the PM2.5 NAAQS, and for EPA to review and take action on such plans. This proposed ICR renewal covers the period February 1, 2020-January 31, 2023.

     The EPA estimates the administrative burden for states with nonattainment areas for the 1997, 2006 and 2012 PM2.5 NAAQS to be 76,500 hours. The present value of the total costs for state governments (the respondents) is estimated at $4.8 million for the 3-year period, or $1.6 million per year during the 3-year period of the ICR.

   The estimated administrative burden for EPA is estimated to be 8,415 hours. The present value of the Agency administrative cost burden is estimated at $0.53 million dollars for the 3-year period, or $0.17 million per year during the 3-year period.

          Need For and Use of the Collection
   2(a) Need/Authority for the Collection

   The CAA, which was last amended in 1990, requires the EPA to establish National Ambient Air Quality Standards (NAAQS) for air pollutants that may reasonably be anticipated to endanger public health or welfare, and which result from numerous or diverse sources. On July 18, 1997, the EPA revised the NAAQS for particulate matter to add new standards for fine particulate matter (particles of solid and liquid material less than 2.5 microns in aerodynamic diameter, or PM2.5. The EPA established health-based (primary) annual and 24-hour standards for PM2.5 (62 FR 38652). The annual standard was set at a level of 15 micrograms per cubic meter, based on the 3-year average of annual mean PM2.5 concentrations. The 24-hour standard was set a level of 65 micrograms per cubic meter, based on the 3-year average of the 98[th] percentile of 24-hour concentrations. The welfare-based secondary standards were established identical to the primary standards.

   Part D of Title I of the Clean Air Act sets forth the implementation plan requirements for areas designated nonattainment for a National Ambient Air Quality Standard. The initial PM2.5 National Ambient Air Quality Standard Implementation rule was proposed November 1, 2005 (70 FR 65983) and was promulgated on April 25, 2007 (72 FR 20586). The preamble to the proposed and final regulation addressed the administrative burden associated with attainment planning in general terms. The preamble to the final rule stated that an ICR would be prepared.

   On October 17, 2006, the EPA revised the NAAQS for fine particles. The EPA established a new primary 24-hour standards for PM2.5 (71 FR 61144). The 24-hour standard was set at a level of 35 micrograms per cubic meter, based on the 3-year average of the 98[th] percentile of 24-hour concentrations. The annual standard remained unchanged at a level of 15 micrograms per cubic meter, based on the 3-year average of annual mean PM2.5 concentrations. The initial ICR 2258.01 covered the time period between April 5, 2008 through April 4, 2011. An extension without change of ICR 2258.02 was subsequently issued through April 30, 2012.

   On December 14, 2012, the EPA revised the NAAQS for fine particles. The EPA established a new primary annual standard PM2.5 (78 FR 3086). The annual standard was set at a level of 12 micrograms per cubic meter, based on the 3-year average of annual mean PM2.5 concentrations. The 24-hour standard remained unchanged at a level of 35 micrograms per cubic meter, based on the 3-year average of the 98[th] percentile of 24-hour concentrations. The time period covered in the ICR 2258.03 was a 3-year period from May 1, 2012 through April 30, 2015. ICR 2258.03 was issued a 60-day extension from April 30, 2015 through June 30, 2015. The ICR 2258.03 lapsed on July 1, 2015.

   Following a January 2013 decision by the U.S. Circuit Court of Appeals for the D.C. Circuit that remanded the 2007 PM2.5 Implementation Rule, on March 23, 2015, the EPA proposed the PM2.5 NAAQS SIP Requirements Rule and finalized the rule on August 24, 2016. This rule provided the framework for states to follow in developing SIPs to attain the 1997 PM2.5 NAAQS, the 2006 PM2.5 NAAQS and the 2012 PM2.5 NAAQS.

   The framework in the rule reflects the applicable requirements described in the CAA part D nonattainment area provisions found in sections 172 (subpart 1) and sections 188-190 (subpart 4). A PM2.5 SIP must include rules requiring emission reductions and a demonstration showing whether the particular area can attain the standard by its attainment date. A state plan submittal for attaining the PM2.5 NAAQS is due to EPA within 18 months after the date the area is designated as nonattainment. After a state submits a SIP, the CAA requires the EPA to review the plan, and approve or disapprove it. Once an area is no longer violating the NAAQS, it may request a redesignation from "nonattainment" to "attainment." This requires the state to develop a maintenance plan to demonstrate that the area will continue to maintain the NAAQS during a 10-year maintenance period. ICR 2258.03 was included in the proposed and final regulations. This proposed ICR 2258.05 covers February 1, 2020-January 31, 2023.

    2(b) User/Users of the Data

   The data collected from the state and local air agency respondents will include the nonattainment SIP elements and maintenance plan requirements under the CAA that are described in more detail in the PM2.5 NAAQS SIP Requirements Rule. Attainment plans for the PM2.5 NAAQS nonattainment areas must contain state rules and other requirements designed to achieve the NAAQS by the deadlines established under the CAA. Maintenance plans must contain requirements designed to maintain the NAAQS for a 10-year maintenance period.

   The PM2.5 attainment plan submitted by the state must include the various requirements in subpart 1 and subpart 4 and guidance, including:

 Baseline emission inventory and projection year inventory for stationary, mobile, and area emissions sources in the nonattainment area consistent with 40 CFR 51.1008.
 For Moderate areas, an analysis of economic and technological feasibility of potential control measures (i.e., reasonably available control measures (RACM) and reasonably available control technology (RACT) and the adoption of state rules requiring emission reductions to ensure attainment of the standard "as expeditiously as practicable," consistent with 40 CFR 51.1007 and 51.1009.
 For Serious areas, an analysis of economic and technological feasibility of potential control measures (i.e., best available control measures (BACM) and best available control technology (BACT) and the adoption of state rules requiring emission reductions to ensure attainment of the standard "as expeditiously as practicable," consistent with 40 CFR 51.1010.
 For those Serious areas that fail to meet the Serious area attainment date, the state must submit a SIP revision consistent with CAA section 189(d) which provides an annual reduction in PM2.5 or its precursor emissions of not less than 5 percent of the emissions, within 12 months after the applicable attainment date.
 An attainment date consistent with 40 CFR 51.1004.
 An attainment demonstration with air quality modeling showing that existing federal and state emission reduction programs, plus any new emission reduction programs adopted by the state, will result in expeditious attainment by the attainment date, consistent with 40 CFR 51.1011. The attainment demonstration must meet the requirements of 40 CFR 51.112 and Part 51, Appendix W, and must include emission inventory data, modeling results, and emission reduction analyses on which the state has based its projected attainment date. The attainment demonstration and supporting air quality modeling should be consistent with the EPA's most current PM2.5 modeling guidance.
 An optional precursor demonstration to demonstrate out of the requirements under subpart 4 to regulate PM2.5 precursors for attainment and nonattainment new source review purposes.
 A plan showing that future emission reductions will provide for reasonable further progress (RFP) toward attainment of the standard for the period prior to the area's attainment date, consistent with 40 CFR 51.1012; and reporting every 3 years on quantitative milestones showing progress in the implementation of the attainment plan and associated control measures, consistent with 40 CFR 51.1013.
 Contingency measures to promptly correct NAAQS violations.

   The PM2.5 maintenance plan submitted by the state must include the various requirements in subpart 1 and subpart 4, and guidance including:
 Baseline emission inventory and projection year inventory for stationary, mobile, and area emissions sources in the nonattainment area consistent with 40 CFR 51.1008.
 A demonstration that the area will continue to attain for the 10-year period following the redesignation, including air quality modeling.
 Verification of continued attainment; including tracking progress through updating the inventory, re-evaluate modeling assumptions or inputs or other methods as needed.
 Contingency measures to promptly correct NAAQS violations that occur after the redesignation.

   The states use this information and analysis to fulfill federal obligations under Title I, part D of the Clean Air Act and the PM2.5 NAAQS SIP Requirements Rule.

   The EPA regional and headquarters offices will use the submitted information in determining the adequacy of the various elements of the PM2.5 attainment or maintenance plan. The EPA is required under the CAA to approve or disapprove a SIP revision within 12 months of the submission being found complete or within 18 months to approve a maintenance plan. Emission reduction regulations developed by the states become federally enforceable when approved by the EPA.

 Non-Duplication, Consultations, and Other Collection Criteria

   3(a) Non-Duplication

   	As noted in section 2(b) above, the state respondent will need to include a number of separate and unique elements for each plan submittal. For example, each Serious area attainment plan must include a unique BACM/BACT analysis, attainment demonstration, RFP plan and quantitative milestone reports.

   However, there are other activities covered by existing ICRs which complement the elements required in the PM2.5 plans. For example, the existing PM2.5 monitoring network, covered under a separate ICR, provides essential data for use by states and EPA in identifying key categories of emissions and tracking progress toward attainment.

   EPA encourages the states to account for control measures and expected emission reductions from existing regulations and implementation planning processes, such as for the the PM2.5 NAAQS, the ozone NAAQS, or the regional haze program. Taking such steps, where appropriate, may enable states to reduce the incremental administrative burden associated with this rule and enable identification of control strategies that achieve multi-pollutant environmental progress at a lower cost.

   Relevant ICRs and their titles are identified below.

 Requirements for Preparation, Adoption, and Submittal of Implementation Plans
 51.121-51.122  NOx SIP Call...................................2060-0445
 51.160-51.166  New Source Review................................2060-0003
 51.321-51.323  Air Quality Data Reporting..................2060-0088
 51.353-51.354  Inspection/Maintenance......................2060-0252
 51.365-51.366  Inspection/Maintenance......................2060-0252
 Approval and Promulgation of Implementation Plans
 52.21 Prevention of Significant Deterioration.................2060-0003
 Ambient Air Monitoring Reference and Equivalent Methods
 53.4 .................................................................2080-0005
 53.9(f),(h),(i).......................................................2080-0005
 53.14................................................................2080-0005
 53.15 ...............................................................2080-0005
 53.16(a)-(d),(f).....................................................2080-0005
 Outer Continental Shelf Air Regulations
 55.4-55.8 ...........................................................2060-0249
 55.11-55.14 ........................................................2060-0249
 Ambient Air Quality Surveillance
 58.11-58.14 ........................................................2060-0084
 58.20-58.23 ........................................................2060-0084
 58.25-58.28 ........................................................2060-0084
 58.30-58.31 ........................................................2060-0084
 58.33 ................................................................2060-0084
 58.35 ................................................................2060-0084
 58.40-58.41 .........................................................2060-0084
 58.43 ................................................................2060-0084
 58.45 ................................................................2060-0084
 58.50 ................................................................2060-0084
 Determining Conformity of Federal Actions to State or Federal Implementation Plans
 91.150-93.160 .....................................................2060-0279
 8-hour Ozone National Ambient Air Quality Standard Implementation Rule
 2236.02.............................................................2060  -  0594

   3(b) Public Notice Required Prior to ICR Submission to the Office of Management and Budget (OMB)
   	This is a renewal of a rule-related ICR.

   3(c) Consultations

   	The EPA will solicit comment.

   3(d) Effects of Less Frequent Collection

   	The collections under this rule (as reviewed in section 2(b)) are necessary to comply with Clean Air Act requirements and provide assurances that identified levels of emission reductions are adequate to ensure timely attainment and maintenance of the PM2.5 NAAQS.

   3(c) General Guidelines

   The reporting and recordkeeping requirements for the PM2.5 NAAQS SIP Requirements Rule do not violate any of the regulations promulgated by OMB under 5 CFR part 1320, section 1320.5. This submission meets the current Paperwork Reduction Act guidelines set forth by OMB. Those guidelines reflect the requirements of 5 CFR 1320.6. The PM2.5 SIP Requirements Rule does not require:
 reporting more than once a year;
 respondents to participate in a statistical survey;
 responses to Agency inquiries in less than 30 days;
 respondents to receive remuneration for preparation of reports;
 records to be kept more than 3 years;
 manual methods of reporting.

   3(f)	 Confidentiality

   	The information requested from the states to fulfill CAA requirements as described in section 2(b) will rely on emissions levels and control efficiency data provided by certain facilities in the private and public sectors. This information is available from a variety of sources and states should already have information from emission sources, as facilities should have provided this information to meet other NAAQS SIP requirements, operating permits, and/or emissions reporting requirements. It is the assimilation and analysis of that data (e.g., for BACM/BACT control measure determinations, the attainment demonstration, etc.) that is required by the PM2.5 NAAQS SIP Requirements Rule.

   	Emissions and control technology information from emissions sources generally do not reveal the details of production processes. But, to the extent that it may, the affected facilities are protected. Specifically, the provision of the emissions and control efficiency information that is confidential, proprietary, and trade secret is protected from disclosure under the requirements of subsections 503(e) and 114(c) of the Clean Air Act.

   3(g) Sensitive Information

   	The anticipated submissions are not expected to include sensitive information.

    The Respondents and the Information Requested

   4(a) Respondents and Nonattainment areas

   State and local air agencies are the primary respondents under this ICR. Table 1 lists all 18 area or parts of areas that are currently nonattainment for one or more of the PM2.5 NAAQS and the potential submissions that one might reasonably expect from their respective states during the 3-year period covered by this ICR.

   Table 1 also includes estimated burden hours for each nonattainment area and an estimated total weighted direct and indirect hourly equivalent salary cost of $67.96 per hour. For those areas that are expected not to attain by their applicable PM2.5 NAAQS attainment date, we estimate 18,000 hours to develop and submit SIP revisions in the form of a new attainment plan. For those areas that will have attained by their applicable attainment dates, we estimate 300 hours for states to develop and submit maintenance plans and requests to redesignate those nonattainment areas back to attainment.

   Table 1. Areas Designated Nonattainment for 1997, 2006 and/or 2012 PM2.5 NAAQS: Estimated Burden for Meeting PM2.5 NAAQS Attainment Plan or Maintenance Plan Requirements

                      Nonattainment Area for  PM2.5 NAAQS
                                     State
                                  EPA Region
             Potential Actions during ICR period 1/2020 to 2/2023
                        3-year Burden Estimate (Hours)
                       3-year Burden Estimate (Dollars)
                                   Fairbanks
                                      AK
                                      10
                              2006 SIP Revision
                                    18,000
                                  $1,223,280
                                    Nogales
                                      AZ
                                       9
                             2006 Maintenance Plan
                                      300
                                    $20,388
                              West Central Pinal
                                      AZ
                                       9
                             2006 Maintenance Plan
                                      300
                                    $20,388
                                   Imperial
                                      CA
                                       9
                             2006 Maintenance Plan
                                      300
                                    $20,388
                       Los Angeles-South Coast Air Basin
                                      CA
                                       9
                2006/2012 SIP Revisions; 1997 Maintenance Plan
                                    18,300
                                  $1,243,668
                                 Plumas County
                                      CA
                                       9
                               2012 SIP Revision
                                    18,000
                                  $1,223,280
                                  Sacramento
                                      CA
                                       9
                             2006 Maintenance Plan
                                      300
                                    $20,388
                                 San Francisco
                                      CA
                                       9
                             2006 Maintenance Plan
                                      300
                                    $20,388
                              San Joaquin Valley
                                      CA
                                       9
                         1997/2006/2012 SIP Revisions
                                    18,000
                                  $1,223,280
                                     Logan
                                      ID
                                      10
                             2006 Maintenance Plan
                                      300
                                    $20,388
                              West Silver Valley
                                      ID
                                      10
                             2012 Maintenance Plan
                                      300
                                    $20,388
                                     Libby
                                      MT
                                       8
                             1997 Maintenance Plan
                                      300
                                    $20,388
                                 Klamath Falls
                                      OR
                                      10
                             2006 Maintenance Plan
                                      300
                                    $20,388
                                   Oakridge
                                      OR
                                      10
                             2006 Maintenance Plan
                                      300
                                    $20,388
                                   Allegheny
                                      PA
                                       3
                        1997/2006/2012Maintenance Plan
                                      300
                                    $20,388
                                     Logan
                                      UT
                                       8
                             2006 Maintenance Plan
                                      300
                                    $20,388
                                     Provo
                                      UT
                                       8
                             2006 Maintenance Plan
                                      300
                                    $20,388
                                Salt Lake City
                                      UT
                                       8
                             2006 Maintenance Plan
                                      300
                                    $20,388
                                     TOTAL

                                    76,500
                                  $5,198,940

     4(b)	 	Information Requested

   The information requested, as described in section 2(b) of this ICR, is required to meet the requirements of the CAA. The implementation framework set forth in the PM2.5 SIP Requirements Rule does not adopt a "one-size-fits all" approach to meeting these requirements.  This additional flexibility enables the states to customize, to the extent allowed by the Clean Air Act, their approach to attaining and maintaining the PM2.5 NAAQS.

   Data Items.  The emissions and control efficiency data required for the attainment demonstration, RFP, BACT, BACM, and quantitative milestone reporting is assumed to have been collected as a result of reporting activities required by other OMB approved ICRs. For example, the collection of emissions information for many stationary sources is required under other program requirements, such as the Air Emissions Reporting Rule (AERR) Rule (see https://www.epa.gov/air-emissions-inventories/air-emissions-reporting-requirements-aerr). In developing PM2.5 SIPs, air agencies are expected to use a range of other readily available data sources, such as existing federal rules that are expected to reduce future emissions of particulate matter precursors, and economic and population growth rates.

   Respondents' Activities. The states will compile and reference the data, set forth the analytical methodology, analyze and assess control technology, conduct emission reduction and air quality modeling analyses, develop initial drafts, hold public hearings, adopt rules, regulations, and programs, have discussions with EPA staff as appropriate, refine the draft demonstrations as appropriate, adopt the plan, and formally submit to the EPA.

   Agency Activities. The EPA staff in the regional offices will facilitate receipt of the draft and final submissions by reviewing materials and answering questions from the states regarding regulatory requirements, potential data sources, analytical tools, the draft demonstrations, and other draft SIP or maintenance plan elements. The EPA regional offices will evaluate the formal plan submissions and take rulemaking actions to approve or disapprove the plan revisions. The EPA headquarters staff will facilitate policy coordination and national consistency in the timely review and evaluation of plans from states around the country. They will also facilitate information flow among the regions and states to promote the development of nationally consistent attainment plan and/or maintenance plan submissions.

   Reporting Protocols. The dates for plan submissions and milestone reports are as set forth in subpart 4 of Part D of the CAA (sections 188-190), and in the PM2.5 NAAQS SIP Requirements Rule.

 The Information Collected -- Agency Activities, Collection Methodology, and Information Management

     5(a)	States, EPA Regional Offices, and EPA Headquarters Offices

	States.  The state agencies' activities include:

 Develop baseline emissions inventory and projection year inventory.
 Conduct analyses of economic and technological feasibility of potential control measures and adopt state rules requiring emission reductions to ensure attainment of the standard "as expeditiously as practicable" or maintenance of the NAAQS during the 10-year maintenance period.
 Develop and evaluate emission reduction strategies, and conduct air quality modeling showing that existing federal and state emission reduction programs, plus any new emission reduction programs adopted by the state, will result in expeditious attainment by the attainment date or maintenance of the NAAQS.
 Develop plans to ensure that future emission reductions will provide for reasonable further progress toward attainment of the standard for the period prior to the area's attainment date.
 Submit quantitative milestone report within 90 days of a quantitative milestone date that demonstrates the area met its implementation milestones.

   	EPA Regional Offices. The regional office activities include:
 Respond to inquiries from the air agencies and providing guidance on plan development.
 Review technical data, analyses, and draft plan elements developed by the air agencies.
 Evaluate the formal plan submissions and conduct rulemaking actions approving or disapproving the submissions.

   	EPA Headquarters.  The EPA headquarters office activities include:
 Answer questions regarding application and interpretation of rule provisions.
 Facilitate policy coordination and national consistency in the timely review and evaluation of plans from states around the country.
 Coordinate information flow between the regions and states to promote the development of acceptable demonstrations plan submissions.

   5(b) Collection Methodology and Management

   	The PM2.5 plans submitted by air agencies will set forth the data sources, analytical methods, and emission reduction and air quality improvement verification procedures used in its development and implementation.

     5(c)	Small Entity Flexibility

		For an approved ICR, the Agency must demonstrate that it has taken all practical steps to develop separate and simplified requirements for small businesses and other small entities. See 5 CFR 1320.6(h). The PM2.5 NAAQS SIP Requirement Rule does not provide a direct administrative burden on small entities.

      5(d) Collection Schedule

		The deadlines for implementing the PM2.5 NAAQS under subpart 4 were approved consistent with CAA requirements. BACM/BACT requirements for Serious area SIPs are due within 18 months of the date an area is reclassified as Serious. For an area reclassified to Serious by operation of law under CAA section 188(b)(2), a state must submit a new attainment demonstration no later than 18 months after reclassification. For an area reclassified to Serious pursuant to the agency's discretionary authority provided under CAA section 188(b)(1), a state must submit a new attainment demonstration no later than 4 years after the reclassification. 189(d) plan revisions are due within 12 months after the applicable Serious area attainment date. Quantitative milestone reports, as required under the CAA, are due every 3 years. To receive a redesignation from "nonattainment" to "attainment," a state must submit a maintenance plan with its redesignation request. However, there is no requirement for a state to submit a redesignation request or maintenance plan.

 Estimating the Burden of the Collection

   	This section provides information on the hours and costs associated with the information collection for the respondents (the affected state and local air agencies) and the EPA (regional and headquarters offices).  Hours and costs are presented for the activities associated with each collection item for a nonattainment area (or portion thereof) in a given state, as well as the equivalent annual and present value cost estimates.

   6(a) Estimating Respondent Burden

   	The estimated respondent burden represents the estimated staff time associated with the activities required to develop the relevant PM2.5 attainment plan or maintenance plan and redesignation request.

   	The estimated burden in this ICR is incremental to the estimated burden of other EPA environmental reporting obligations. The actual incremental burden is expected to vary across areas for a number of reasons, such as the severity of the nonattainment problem and whether existing federal and state emission reduction programs are projected to attain or maintain the NAAQS.

   6(b) Remaining Nonattainment Areas for 1997, 2006 and 2012 PM2.5 NAAQS

   Table 1 provides the list of areas and states that remain nonattainment for the 1997, 2006 and 2012 PM2.5 NAAQS that potentially may need to develop Serious area SIP revisions or 189(d) SIP revisions, or could qualify for and choose to develop redesignation requests with a maintenance plan during the ICR period. The bulk of the anticipated work for the majority of the nonattainment areas consists of developing maintenance plans. The estimated burden hours for each of the areas to develop and submit maintenance plans and redesignation requests is 300 hours.

   However, the Fairbanks, AK; LA-South Coast, CA; Plumas, CA; and San Joaquin, CA, areas could be determined to have missed applicable Serious area attainment dates during the ICR period, and could have one or more Serious area 189(d) SIPs (or portions thereof) due within 12 months of the applicable attainment date (also within the period for this ICR renewal). For the purposes of this analysis, the estimated burden for development of the SIP revisions to address the Serious area requirements is 18,000 hours.

   Table 2 below summarizes the number of collection items (e.g. Serious area attainment plans and redesignation requests) that states may be anticipated to develop, and it provides a 3-year breakdown of expected burden hours by state.

   	As a starting point for developing burden estimates for this analysis, the Agency looked at the total hours expended in related EPA level of effort work assignments for meeting the 1997 ozone NAAQS, exclusive of the air quality modeling. The total estimate for ozone areas classified as Marginal was about 2,000 hours in level of technical effort.  The estimated burden for a subpart 4 PM2.5 SIP revision was considered similar to the burden for ozone areas classified as Moderate, and estimated at 9,000 hours. The estimated burden for a subpart 4 PM2.5 SIP revision after an area was reclassified to Serious was considered similar to ozone areas with higher classifications and estimated at 18,000 hours.

   For the purposes of this analysis, the assumed allocation of total incremental burden across the 3 years is divided evenly. Table 2 provides a 3-year breakdown of expected burden hours by state and by year.

Table 2.  Nonattainment Areas for 1997, 2006 and 2012 PM2.5 NAAQS: Estimated Incremental Burden Hours by State and Year

State
                                  EPA Region
                        No. of Areas or Parts of Areas

                            Additional hours Year 1
                            Additional hours Year 2
                            Additional hours Year 3
                                      AK
                                      10
                                       1
                                                                          6,000
                                                                          6,000
                                                                          6,000
                                      AZ
                                       9
                                       2
                                                                            200
                                                                            200
                                                                            200
                                      CA
                                       9
                                       6
                                                                         18,400
                                                                         18,400
                                                                         18,400
                                      ID
                                      10
                                       2
                                                                            200
                                                                            200
                                                                            200
                                      MT
                                       8
                                       1
                                                                            100
                                                                            100
                                                                            100
                                      OR
                                      10
                                       2
                                                                            200
                                                                            200
                                                                            200
                                      PA
                                       3
                                       1
                                                                            100
                                                                            100
                                                                            100
                                      UT
                                       8
                                       3
                                                                            300
                                                                            300
                                                                            300
                                     Total

                                      18
                                                                         25,500
                                                                         25,500
                                                                         25,500

6(c)	Estimating Respondent Cost

   	Labor costs are estimated for state and local governments using the total of projected burden hours for the current nonattainment for the 1997, 2006, and 2012 PM2.5 NAAQS areas. These estimates do not reflect staff experience and economies of scale. The hourly rates are the result of estimated direct and indirect cost per employee. The main source of the information is http://www.opm.gov/oca/payrates/index.htm.

   	The estimated weighted direct salary cost per employee is $43.02 per hour. This results from a summation of the professional, managerial, and support staff components.

 Hourly equivalent 2019 salary of permanent professional staff at GS 11, Step 3 is $35.47.  This is the average of hourly equivalent rates for the San Francisco, CA and Washington, D.C. areas.
 To account for permanent managerial staff, 1/11 or 9.1% of the hourly rate for GS 13, Step 3 is added to the professional staff hourly rates.  The average hourly equivalent rate for GS-13 using rates for San Francisco, CA and Washington, D.C. is $50.46.   The 9.1 percent estimate of that is $4.60.
 To account for permanent support staff at GS-6, Step 6, 1/8 or 12.5% of the hourly rate is added to the professional staff hourly rates. The average hourly equivalent rate for GS-6, Step 6 using rates for San Francisco, CA and Washington, D.C. is $23.60.  The 12.5 percent estimate of that is $2.95.

   	The estimated hourly indirect cost per employee is $24.95.  This amount is the sum of the following:

 Benefits at 16% of the weighted direct hourly equivalent salary cost per employee, or $6.88.
 Sick and annual leave at 10% of the weighted direct hourly equivalent salary cost per employee, or $4.30.
 General overhead at 32% of the weighed direct hourly equivalent salary cost per employee, or $13.77.

   	The estimated total weighted direct and indirect hourly equivalent salary cost per employee is therefore $67.96. The estimated annual incremental respondent burden for the state respondents to make the anticipated plan submissions in current year dollars is provided in Table 3.

Table 3.  Estimated Annual Incremental Hour and Cost Burden for the States (Respondents) to Fulfill the PM2.5 SIP Submittal Requirements including Maintenance Plans

                        No. of Areas or Parts of Areas

                       Burden for the 3-year ICR period
                                Cost for Year 1
                                Cost for Year 2
                                Cost for Year 3
                                      18
                                 76,500 hours
                                 $1.73 million
                                 $1.73 million
                                 $1.73 million

6(d)	Estimating Agency Burden and Cost

   The estimated agency burden is derived from the same estimates used for estimating respondent costs in section 6(c).

   The respondent burden was summed for each EPA regional office and a percentage factor was applied to the yearly respondent burden estimate to reflect the burden associated with EPA regional office actions for each SIP submission actions taken. Once yearly burdens were estimated for the Agency's regional offices, a percentage of those amounts was used to derive estimates for the Agency's headquarters office burden.

      Agency Regional Office Burden. The Agency regional office burden is presumed to be 10% of the estimated total incremental burden for respondent by the EPA regional office. The total incremental burden allocation for the Agency regional offices is divided evenly over the 3-year period.

      Agency Headquarters Burden.  The regional office burden estimates for years 1, 2, and 3 are multiplied by 10% to arrive at an estimate for headquarters burden for the same 3 years.

      Total Incremental Burden for the Agency.  The EPA regional and headquarters office burden estimate for each year is 2,805 hours.

      Total Cost for the Agency. Using the weighted direct and indirect salary equivalent hour rate derived in section 6(c), the total incremental burden hours are multiplied by that rate.

6(e)	Estimating the Respondent Universe and Total Additional Burden and Costs

	The total incremental respondent universe burden and cost estimates are presented in Table 4.

Table 4.  PM2.5 NAAQS Total Incremental Respondent & Agency Universe Burden and Cost Estimates

Entity
                         Average Yearly Burden (hours)
                              3-Year Burden (hrs)
                   Present Value of Costs for 3-Year Burden
States
                                    25,500
                                    76,500
                                 $4.8 million
Agency
                                     2,805
                                     8,415
                                 $0.53 million
Total
                                    28,305
                                    84,915
                                 $5.33 million

      *The estimates are in current year (2019) dollars.  Costs for years 2 and 3 are calculated using the equation Present Value = Future Value/ (1 + interest rate)[t] , where "t" is the number of years hence (i.e., 0 for year 1, 1 for year 2, 2 for year 3).  The adjusted values for years 1, 2, and 3 are then summed.

6(f)	Reason for Change in Burden

   We are estimating a total burden of 84,915 hours due to the implementation of the remaining requirements for the 1997 PM25, 2006 PM25 and 2012 PM25 NAAQS. This burden estimate is lower than the estimate for the previous PM2.5 NAAQS SIP Requirements Rule ICR primarily because the number of designated nonattainment areas covered by this ICR is estimated to be lower than it was for the prior 3-year period. The estimates have been calculated using 2019 dollars and some assumptions regarding overhead, O&M costs, and capital costs have been adjusted to meet current guidelines and common procedures for preparing ICRs.

6(g)	Burden Statement

   The annual public reporting and recordkeeping burden for this collection of information is estimated to average 4,250 hours per state respondent for this reporting period. This estimate is derived by taking 76,500 hours, the average yearly burden for the states identified in Table 1, and dividing by 8, the number of affected state respondents.

   The annual burden to the state respondents for this information collection averaged over the 3 years of this ICR is estimated to be a total of 76,500 labor hours at an average of 25,500 labor hours per year at an annual labor cost of $1.6 million (present value) over the 3-year period or approximately $199 thousand per state for the 8 state respondents. The average annual reporting burden is 4,250 hours per response, with approximately 2.25 responses per state for 18 state responses. There are no capital and operating and maintenance costs associated with the PM2.5 NAAQS SIP Requirements Rule.  Burden is defined at 5 CFR 1320.3(b).

   Burden means the total time, effort, or financial resources expended by persons to generate, maintain, retain, disclose, or provide information or for a Federal agency other than the EPA to do so.  This estimate includes the time and burden needed to conduct the tasks associated each state submitting plans required for each PM2.5 nonattainment area. The plan submissions anticipated during this ICR reporting period may include several elements, including emissons inventories, attainment demonstration, RFP plan, BACT and BACM, and quantitative milestones, or redesignation requests and maintenance plans. In meeting these elements, such incremental efforts may include reviewing instructions as well as verifying, processing, maintaining, and disclosing information. Such efforts may require incremental development, acquisition, installation, and/or utilization of technological systems for several purposes. These purposes include collecting, verifying, validating, processing, maintaining and disclosing information associated with the each milestone. The incremental efforts may result from adjusting the ways to comply with the previously applicable instructions associated with other NAAQS such as for 8-hr ozone and PM10.  Consequently, in meeting the milestones, there could be some incremental burden associated with learning/training, searching data sources, and transmitting the deliverables.

   An Agency may not conduct or sponsor, and a person is not required to respond to a collection of information unless it displays a currently valid OMB control number. The OMB control numbers for the EPA's regulations are listed in 40 CFR part 9 and 48 CFR chapter 15.  When this ICR is approved by OMB, the Agency will publish a technical amendment to 40 CFR part 9 in the Federal Register to display the OMB control number for the approved information collection requirements contained in the final implementation rule. However, as was stated in the April 2007 Federal Register Notice for the PM2.5 Implementation Rule, ".. the failure to have an approved ICR for this rule does not affect the statutory obligation for the states to submit SIPs as required under part D of the CAA."

   The Agency established a docket for the PM2.5 NAAQS SIP Requirements Rule under Docket ID No. EPA-HQ-OAR-2013-0691. All documents in the docket are listed at http://www.regulations. gov. Although listed in the docket index, some information may not be publicly available, e.g.,  Confidential Business Information (CBI)  or other information which disclosure is restricted by statue. Certain other material, such as copyrighted materials, is not placed on the internet and will be publicly available in hard copy form. The docket can be viewed online at www.regulations.gov or in person at the EPA Docket Center, WJC West, Room 3334,  1301 Constitution Ave., NW, Washington, DC. The telephone number for the Public Reading Room is<PHONE_NUMBER>. For additional information about EPA's public docket, visit http://www.epa.gov/dockets.


[Federal Register Volume 84, Number 249 (Monday, December 30, 2019)]
[Notices]
[Pages 71989-71993]
[FR Doc No: 2019-28030]

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

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-87822; File No. SR-Phlx-2019-54)

Self-Regulatory Organizations; Nasdaq PHLX LLC; Notice of Filing
and Immediate Effectiveness of Proposed Rule Change To Adopt a New Rule
Titled ``Off-Exchange RWA Transfers'' at Phlx Rule 1045

December 20, 2019.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934
(``Act''),\1\ and Rule 19b-4 thereunder,\2\ notice is hereby given that
on December 17, 2019, Nasdaq PHLX LLC (``Phlx'' or ``Exchange'') filed
with the Securities and Exchange Commission (``SEC'' or ``Commission'')
the proposed rule change as described in Items I, II, and III, below,
which Items have been prepared by the Exchange. The Commission is
publishing this notice to solicit comments on the proposed rule change
from interested persons.
---------------------------------------------------------------------------

    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
---------------------------------------------------------------------------

I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change

    The Exchange proposes to adopt a new rule titled ``Off-Exchange RWA
Transfers'' at Phlx Rule 1045.
    The text of the proposed rule change is available on the Exchange's
website at http://nasdaqphlx.cchwallstreet.com/, at the principal
office of the Exchange, and at the Commission's Public Reference Room.

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

    In its filing with the Commission, the Exchange included statements
concerning the purpose of and basis for

the proposed rule change and discussed any comments it received on the
proposed rule change. The text of these statements may be examined at
the places specified in Item IV below. The Exchange has prepared
summaries, set forth in sections A, B, and C below, of the most
significant aspects of such statements.

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

1. Purpose
    The Exchange proposes to adopt a new rule titled, ``Off-Exchange
RWA Transfers'' at Phlx Rule 1045, which is currently reserved. This
proposal is substantially the same as Cboe Exchange, Inc. (``Cboe'')
Rule 6.8.\3\
---------------------------------------------------------------------------

    \3\ See Securities Exchange Act Release No. 87374 (October 21,
2019), 84 FR 57542 (October 25, 2019) (SR-Cboe-2019-044).
---------------------------------------------------------------------------

    Proposed Rule 1045 is intended to facilitate the reduction of risk-
weighted assets (``RWA'') attributable to open options positions. SEC
Rule 15c3-1 (Net Capital Requirements for Brokers or Dealers) (``Net
Capital Rules'') requires registered broker-dealers, unless otherwise
excepted, to maintain certain specified minimum levels of capital.\4\
The Net Capital Rules are designed to protect securities customers,
counterparties, and creditors by requiring that broker-dealers have
sufficient liquid resources on hand, at all times, to meet their
financial obligations. Notably, hedged positions, including offsetting
futures and options contract positions, result in certain net capital
requirement reductions under the Net Capital Rules.\5\
---------------------------------------------------------------------------

    \4\ 17 CFR Sec.  240.15c3-1.
    \5\ In addition, the Net Capital Rules permit various offsets
under which a percentage of an option position's gain at any one
valuation point is allowed to offset another position's loss at the
same valuation point (e.g. vertical spreads).
---------------------------------------------------------------------------

    Subject to certain exceptions, Clearing Members \6\ are subject to
the Net Capital Rules.\7\ However, a subset of Clearing Members are
subsidiaries of U.S. bank holding companies, which, due to their
affiliations with their parent U.S.-bank holding companies, must comply
with additional bank regulatory capital requirements pursuant to
rulemaking required under the Dodd-Frank Wall Street Reform and
Consumer Protection Act.\8\ Pursuant to this mandate, the Board of
Governors of the Federal Reserve System, the Office of the Comptroller
of the Currency, and the Federal Deposit Insurance Corporation have
approved a regulatory capital framework for subsidiaries of U.S. bank
holding company clearing firms.\9\ Generally, these rules, among other
things, impose higher minimum capital and higher asset risk weights
than were previously mandated for Clearing Members that are
subsidiaries of U.S. bank holding companies under the Net Capital
Rules. Furthermore, the new rules do not fully permit deductions for
hedged securities or offsetting options positions.\10\ Rather, capital
charges under these standards are, in large part, based on the
aggregate notional value of short positions regardless of offsets. As a
result, in general, Clearing Members that are subsidiaries of U.S. bank
holding companies must hold substantially more bank regulatory capital
than would otherwise be required under the Net Capital Rules.
---------------------------------------------------------------------------

    \6\ The term Clearing Member is defined within Rule 1000(b)(3).
All Clearing Members must also be clearing members of The Options
Clearing Corporation (``Clearing Corporation'' or ``OCC'').
    \7\ In the event federal regulators modify bank capital
requirements in the future, the Exchange will reevaluate the
proposed rule change at that time to determine whether any
corresponding changes to the proposed rule are appropriate.
    \8\ H.R. 4173 (amending section 3(a) of the Securities Exchange
Act of 1934 (the ``Act'') (15 U.S.C. 78c(a))).
    \9\ 12 CFR 50; 79 FR 61440 (Liquidity Coverage Ratio: Liquidity
Risk Measurement Standards).
    \10\ Many options strategies, including relatively simple
strategies often used by retail customers and more sophisticated
strategies used by broker-dealers, are risk limited strategies or
options spread strategies that employ offsets or hedges to achieve
certain investment outcomes. Such strategies typically involve the
purchase and sale of multiple options (and may be coupled with
purchases or sales of the underlying securities), executed
simultaneously as part of the same strategy. In many cases, the
potential market exposure of these strategies is limited and
defined.
---------------------------------------------------------------------------

    The Exchange is concerned with the ability of Registered Options
Traders \11\ and Specialists \12\ (collectively ``Market Makers'') to
provide liquidity in their appointed classes. The Exchange believes
that permitting market participants to efficiently transfer existing
options positions through an off-exchange transfer process would likely
have a beneficial effect on continued liquidity in the options market
without adversely affecting market quality. Liquidity in the listed
options market is critically important. The Exchange believes that the
proposed rule change provides market participants with an efficient
mechanism to transfer their open options positions from one clearing
account to another clearing account and thereby increase liquidity in
the listed options market. Phlx currently has no mechanism that firms
may use to transfer positions between clearing accounts without having
to effect a transaction with another party and close a position.
---------------------------------------------------------------------------

    \11\ See Rule 1000(b)(57). A ``Registered Options Trader'' shall
mean a Streaming Quote Trader or a Remote Streaming Quote Trader who
enters quotations for his own account electronically into the
System.
    \12\ See Rule 1000(b)(58). A ``Specialist'' shall mean a member
who is registered as an options Specialist pursuant to Rule 1020(a).
A Specialist includes a Remote Specialist which is defined as a
Specialist in one or more classes that does not have a physical
presence on an Exchange's trading floor and is approved by the
Exchange pursuant to Rule 501.
---------------------------------------------------------------------------

    The proposed rule provides that existing positions in options
listed on the Exchange of a Member or non-Member (including an
affiliate of a Member) may be transferred on, from, or to the books of
a Clearing Member off the Exchange if the transfer establishes a net
reduction of RWA attributable to those options positions (an ``RWA
Transfer''). Proposed paragraph (a)(1) adds examples of two transfers
that would be deemed to establish a net reduction of RWA, and thus
qualify as a permissible RWA Transfer:
     A transfer of options positions from Clearing Corporation
member A to Clearing Corporation member B that net (offset) with
positions held at Clearing Corporation member B, and thus closes all or
part of those positions (as demonstrated in the example below) \13\;
and
---------------------------------------------------------------------------

    \13\ This transfer would establish a net reduction of RWA
attributable to the transferring Person, because there would be
fewer open positions and thus fewer assets subject to Net Capital
Rules.
---------------------------------------------------------------------------

     A transfer of options positions from a bank-affiliated
Clearing Corporation member to a non-bank-affiliated Clearing
Corporation member.\14\
---------------------------------------------------------------------------

    \14\ This transfer would establish a net reduction of RWA
attributable to the transferring Person, because the non-bank-
affiliated Clearing Corporation member would not be subject to Net
Capital Rules, as described above.
---------------------------------------------------------------------------

    These transfers will not result in a change in ownership, as they
must occur between accounts of the same Person.
    ``Person'' is defined within proposed Rule 1045(a) as an
individual, partnership (general or limited), joint stock company,
corporation, limited liability company, trust or unincorporated
organization, or any governmental entity or agency or political
subdivision thereof.
    In other words, RWA transfers may only occur between the same
individual or legal entity. These are merely transfers from one
clearing account to another, both of which are attributable to the same
individual or legal entity. A market participant effecting an RWA
Transfer is analogous to an individual transferring funds from a
checking account to a savings account, or from an account at one bank
to an account at

another bank--the money still belongs to the same person, who is just
holding it in a different account for personal financial reasons.
    For example, Market Maker A clears transactions on the Exchange
into an account it has with Clearing Member X, which is affiliated with
a U.S-bank holding company. Market Maker A opens a clearing account
with Clearing Member Y, which is not affiliated with a U.S.-bank
holding company. Clearing Member X has informed Market Maker A that its
open positions may not exceed a certain amount at the end of a calendar
month, or it will be subject to restrictions on new positions it may
open the following month. On August 28, Market Maker A reviews the open
positions in its Clearing Member X clearing account and determines it
must reduce its open positions to satisfy Clearing Member X's
requirements by the end of August. It determines that transferring out
1000 short calls in class ABC will sufficiently reduce the RWA capital
requirements in the account with Clearing Member X to avoid additional
position limits in September. Market Maker A wants to retain the
positions in accordance with its risk profile. Pursuant to the proposed
rule change, on August 31, Market Maker A transfers 1000 short calls in
class ABC to its clearing account with Clearing Member Y. As a result,
Market Maker A can continue to provide the same level of liquidity in
class ABC during September as it did in previous months.
    A Member must give up a Clearing Member for each transaction it
effects on the Exchange, which identifies the Clearing Member through
which the transaction will clear.\15\ A Member may change the give up
for a transaction within a specified period of time.\16\ Additionally,
a Member may also change the Clearing Member \17\ for a specific
transaction. The transfer of positions from an account with one
clearing firm to the account of another clearing firm pursuant to the
proposed rule change has a similar result as changing a give up or
CMTA, as it results in a position that resulted from a transaction
moving from the account of one clearing firm to another, just at a
different time and in a different manner.\18\ In the above example, if
Market Maker A had initially given up Clearing Member Y rather than
Clearing Member X on the transactions that resulted in the 1000 long
calls in class ABC, or had changed the give-up or CMTA to Clearing
Member Y pursuant to Rule 1045 the ultimate result would have been the
same. There are a variety of reasons why firms give up or CMTA
transactions to certain clearing firms (and not to non-bank affiliate
clearing firms) at the time of a transaction, and the proposed rule
change provides firms with a mechanism to achieve the same result at a
later time.
---------------------------------------------------------------------------

    \15\ See Phlx Rule 1043.
    \16\ See Phlx Rule 1037.
    \17\ The Clearing Member Trade Assignment (``CMTA'') process at
OCC facilitates the transfer of option trades/positions from one OCC
clearing member to another in an automated fashion. Changing a CMTA
for a specific transaction would allocate the trade to a different
OCC clearing member than the one initially identified on the trade.
    \18\ The transferred positions will continue to be subject to
OCC rules, as they will continue to be held in an account of an OCC
member.
---------------------------------------------------------------------------

    Proposed paragraph (a)(2) states RWA Transfers may occur on a
routine, recurring basis. As noted in the example above, clearing firms
may impose restrictions on the amount of open positions. Permitting
transfers on a routine, recurring basis will provide market
participants with the flexibility to comply with these restrictions
when necessary to avoid position limits on future options activity.
Additionally, proposed paragraph (a)(6) provides that no prior written
notice to the Exchange is required for RWA Transfers. Because of the
potential routine basis on which RWA Transfers may occur, and because
of the need for flexibility to comply with the restrictions described
above, the Exchange believes it may interfere with the ability of
investors firms to comply with any Clearing Member restrictions
described above, and may be burdensome to provide notice for these
routine transfers.
    Proposed paragraph (a)(3) states RWA Transfers may result in the
netting of positions. Netting occurs when long positions and short
positions in the same series ``offset'' against each other, leaving no
or a reduced position. For example, if there were 100 long calls in one
account, and 100 short calls of the same option series were added to
that account, the positions would offset, leaving no open positions.
Currently, the Exchange permits off-exchange transfers on behalf of a
Market Maker account for transactions in multiply listed options series
on different exchanges, but only if the Market Maker nominees are
trading for the same Member, and the options transactions on the
different options exchanges clear into separate exchange-specific
accounts because they cannot easily clear into the same Market Maker
account at OCC. In such instances, all Market Maker positions in the
exchange-specific accounts for the multiply listed class would be
automatically transferred on their trade date into one central Market
Maker account (commonly referred to as a ``universal account'') at the
Clearing Corporation. Positions cleared into a universal account would
automatically net against each other.
    While RWA Transfers are not occurring because of limitations
related to trading on different exchanges, similar reasoning for the
above exception applies to why netting should be permissible for the
limited purpose of reducing RWA. Firms may maintain different clearing
accounts for a variety of reasons, such as the structure of their
businesses, the manner in which they trade, their risk management
procedures, and for capital purposes. If a Market Maker clears all
transactions into a universal account, offsetting positions would
automatically net. However, if a Market Maker has multiple accounts
into which its transactions cleared, they would not automatically net.
While there are times when a firm may not want to close out open
positions to reduce RWA, there are other times when a firm may
determine it is appropriate to close out positions to accomplish a
reduction in RWA.
    In the example above, suppose after making the RWA Transfer
described above, Market Maker A effects a transaction on September 25
that results in 1000 long calls in class ABC, which clears into its
account with Clearing Member X. If Market Maker A had not effected its
RWA Transfer in August, the 1000 long calls would have offset against
the 1000 short calls, eliminating both positions and thus any RWA
capital requirements associated with them. At the end of August, Market
Maker A did not want to close out the 1000 short calls when it made its
RWA Transfer. However, given changed circumstances in September, Market
Maker A has determined it no longer wants to hold those positions. The
proposed rule change would permit Market Maker A to effect an RWA
Transfer of the 1000 short calls from its account with Clearing Member
Y to its account with Clearing Member X (or vice versa), which results
in elimination of those positions (and a reduction in RWA associated
with them). As noted above, such netting would have occurred if Market
Maker A cleared the September transaction directly into its account
with Clearing Member Y, or had not effected an RWA Transfer in August.
Netting provides market participants with appropriate flexibility to
conduct their businesses as they see fit while having the ability to
reduce RWA capital requirements when necessary.

    RWA Transfers may not result in preferential margin or haircut
treatment.\19\ Additionally, RWA Transfers may only be effected for
options listed on the Exchange and will be subject to applicable laws,
rules, and regulations, including rules of other self-regulatory
organizations (including OCC).\20\
---------------------------------------------------------------------------

    \19\ See proposed paragraph (a)(4).
    \20\ See proposed introductory paragraph and proposed paragraph
(a)(7). Transfers of non-Exchange listed options and other financial
instruments are not governed by this proposed rule. Any RWA
transfers will be subject to all applicable recordkeeping
requirements applicable to Members and Clearing Members under the
Securities Exchange Act of 1934, and the rules and regulations
thereunder (the ``Act''), such as Rule 17a-3 and 17a-4.
---------------------------------------------------------------------------

2. Statutory Basis
    The Exchange believes that its proposal is consistent with Section
6(b) of the Act,\21\ in general, and furthers the objectives of Section
6(b)(5) of the Act,\22\ in particular, in that it is designed to
promote just and equitable principles of trade, 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. Additionally, the Exchange believes the proposed rule change
is consistent with the Section 6(b)(5) \23\ requirement that the rules
of an exchange not be designed to permit unfair discrimination between
customers, issuers, brokers, or dealers. The Exchange's proposal is
substantially the same as Cboe Rule 6.8 [sic].
---------------------------------------------------------------------------

    \21\ 15 U.S.C. 78f(b).
    \22\ 15 U.S.C. 78f(b)(5).
    \23\ Id.
---------------------------------------------------------------------------

    In particular, the Exchange believes the proposed rule change to
permit RWA Transfers will remove impediments to and perfect the
mechanism of a free and open market and a national market system by
providing liquidity in the listed options market. The Exchange believes
providing market participants with an efficient process to reduce RWA
capital requirements attributable to open positions in clearing
accounts with U.S. bank-affiliated clearing firms may contribute to
additional liquidity in the listed options market, which, in general,
protects investors and the public interest.
    The proposed rule change, in particular the proposed changes to
permit RWA transfers to occur on a routine, recurring basis and result
in netting, also provides market participants with sufficient
flexibility to reduce RWA capital requirements at times necessary to
comply with requirements imposed on them by clearing firms. This will
permit market participants to respond to then-current market
conditions, including volatility and increased volume, by reducing the
RWA capital requirements associated with any new positions they may
open while those conditions exist. Given the additional capital that
may become available to market participants as a result of the RWA
Transfers, market participants will be able to continue to provide
liquidity to the market, even during periods of increased volume and
volatility, which liquidity ultimately benefits investors. It is not
possible for market participants to predict what market conditions will
exist at a specific time, and when volatility will occur. The proposed
rule change to permit routine, recurring RWA Transfers (and to not
provide prior written notice) will provide market participants with the
ability to respond to these conditions whenever they occur. Permitting
transfers on a routine, recurring basis will provide market
participants with the flexibility to comply with these restrictions
when necessary to avoid position limits on future options activity. In
addition, with respect to netting, as discussed above, firms may
maintain different clearing accounts for a variety of reasons, such as
the structure of their businesses, the manner in which they trade,
their risk management procedures, and for capital purposes. Netting may
otherwise occur with respect to a firm's positions if it structured its
clearing accounts differently, such as by using a universal account.
Therefore, the proposed rule change will permit netting while allowing
firms to continue to maintain different clearing accounts in a manner
consistent with their businesses.
    The Exchange recognizes the numerous benefits of executing options
transactions occur on an exchanges, including price transparency,
potential price improvement, and a clearing guarantee. However, the
Exchange believes it is appropriate to permit RWA Transfers to occur
off the exchange, as these benefits are inapplicable to RWA Transfers.
RWA Transfers have a narrow scope and are intended to achieve a
limited, benefit purpose. RWA Transfers are not intended to be a
competitive trading tool. There is no need for price discovery or
improvement, as the purpose of the transfer is to reduce RWA asset
capital requirements attributable to a market participants' positions.
Unlike trades on an exchange, the price at which an RWA Transfers
occurs is immaterial--the resulting reduction in RWA is the critical
part of the transfer. RWA Transfers will result in no change in
ownership, and thus they do not constitute trades with a counterparty
(and thus eliminating the need for a counterparty guarantee). The
transactions that resulted in the open positions to be transferred as
an RWA Transfer were already guaranteed by an OCC clearing member, and
the positions will continue to be subject to OCC rules, as they will
continue to be held in an account with an OCC clearing member. The
narrow scope of the proposed rule change and the limited, beneficial
purpose of RWA Transfers make allowing RWA Transfers to occur off the
floor appropriate and important to support the provision of liquidity
in the listed options market.
    The proposed rule change does not unfairly discriminate against
market participants, as all Members and non-Members with open positions
in options listed on the Exchange may use the proposed off-exchange
transfer process to reduce the RWA capital requirements of Clearing
Members.

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

    The Exchange does not believe that the proposed rule change will
impose any burden on competition that is not necessary or appropriate
in furtherance of the purposes of the Act.
    The Exchange does not believe that the proposed rule change will
impose any burden on competition that is not necessary or appropriate
in furtherance of the purposes of the Act. This process is not intended
to be a competitive trading tool. The Exchange does not believe that
the proposed rule change will impose any burden on intra-market
competition that is not necessary or appropriate in furtherance of the
purposes of the Act, as use of the proposed process is voluntary. All
Members and non-Members with open positions in options listed on the
Exchange may use the proposed off-exchange transfer process to reduce
the RWA capital requirements attributable to those positions. The
Exchange does not believe that the proposed rule change will impose any
burden on intermarket competition that is not necessary or appropriate
in furtherance of the purposes of the Act. RWA Transfers have a limited
purpose, which is to reduce RWA attributable to open positions in
listed options in order to free up capital. The Exchange believes the
proposed rule change may relieve the burden on liquidity providers in
the options market by reducing the RWA attributable to their open
positions. As a result, market participants may be able to increase
liquidity they provide to the

market, which liquidity benefits all market participants.

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

    No written comments were either solicited or received.

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

    Because the foregoing proposed rule change does not: (i)
Significantly affect the protection of investors or the public
interest; (ii) impose any significant burden on competition; and (iii)
become operative for 30 days from the date on which it was filed, or
such shorter time as the Commission may designate, it has become
effective pursuant to Section 19(b)(3)(A)(iii) of the Act \24\ and
subparagraph (f)(6) of Rule 19b-4 thereunder.\25\
---------------------------------------------------------------------------

    \24\ 15 U.S.C. 78s(b)(3)(A)(iii).
    \25\ 17 CFR 240.19b-4(f)(6). In addition, Rule 19b-4(f)(6)
requires a self-regulatory organization to give the Commission
written notice of its intent to file the proposed rule change at
least five business days prior to the date of filing of the proposed
rule change, or such shorter time as designated by the Commission.
The Exchange has satisfied this requirement.
---------------------------------------------------------------------------

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

IV. Solicitation of Comments

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

Electronic Comments

     Use the Commission's internet comment form (http://www.sec.gov/rules/sro.shtml); or
     Send an email to<EMAIL_ADDRESS>Please include
File Number SR-Phlx-2019-54 on the subject line.

Paper Comments

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

All submissions should refer to File Number SR-Phlx-2019-54. This file
number should be included on the subject line if email is used. To help
the Commission process and review your comments more efficiently,
please use only one method. The Commission will post all comments on
the Commission's internet website (http://www.sec.gov/rules/sro.shtml).
Copies of the submission, all subsequent amendments, all written
statements with respect to the proposed rule change that are filed with
the Commission, and all written communications relating to the proposed
rule change between the Commission and any person, other than those
that may be withheld from the public in accordance with the provisions
of 5 U.S.C. 552, will be available for website viewing and printing in
the Commission's Public Reference Room, 100 F Street NE, Washington, DC
20549, on official business days between the hours of 10:00 a.m. and
3:00 p.m. Copies of the filing also will be available for inspection
and copying at the principal office of the Exchange. All comments
received will be posted without change. Persons submitting comments are
cautioned that we do not redact or edit personal identifying
information from comment submissions. You should submit only
information that you wish to make available publicly. All submissions
should refer to File Number SR-Phlx-2019-54 and should be submitted on
or before January 21, 2020.
---------------------------------------------------------------------------

    \26\ 17 CFR 200.30-3(a)(12).

    For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\26\
J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2019-28030 Filed 12-27-19; 8:45 am]
BILLING CODE 8011-01-P


[Federal Register Volume 83, Number 21 (Wednesday, January 31, 2018)]
[Notices]
[Pages 4492-4494]
[FR Doc No: 2018-01890]

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

DEPARTMENT OF HEALTH AND HUMAN SERVICES

Food and Drug Administration

[Docket No. FDA-2015-E-2661]

Determination of Regulatory Review Period for Purposes of Patent
Extension; KEYTRUDA

AGENCY: Food and Drug Administration, HHS.

ACTION: Notice.

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

SUMMARY: The Food and Drug Administration (FDA or the Agency) has
determined the regulatory review period for KEYTRUDA and is publishing
this notice of that determination as required by law. FDA has made the
determination because of the submission of an application to the
Director of the U.S. Patent and Trademark Office (USPTO), Department of
Commerce, for the extension of a patent which claims that human
biological product.

DATES: Anyone with knowledge that any of the dates as published (in the
SUPPLEMENTARY INFORMATION section) are incorrect may submit either
electronic or written comments and ask for a redetermination by April
2, 2018. See ``Petitions'' in the SUPPLEMENTARY INFORMATION section for
more information.

ADDRESSES: You may submit comments as follows. Please note that late,
untimely filed comments will not be considered. Electronic comments
must be submitted on or before April 2, 2018. The https://www.regulations.gov electronic filing system will accept comments until
midnight Eastern Time at the end of April 2, 2018. Comments received by
mail/hand delivery/courier (for written/paper submissions) will be
considered timely if they are postmarked or the delivery service
acceptance receipt is on or before that date. Furthermore, any
interested person may petition FDA for a determination regarding
whether the applicant for extension acted with due diligence during the
regulatory review period by July 30, 2018. See ``Petitions'' in the
SUPPLEMENTARY INFORMATION section for more information.

Electronic Submissions

    Submit electronic comments in the following way:
     Federal eRulemaking Portal: https://www.regulations.gov.
Follow the instructions for submitting comments. Comments submitted
electronically, including attachments, to https://www.regulations.gov
will be posted to the docket unchanged. Because your comment will be
made public, you are solely responsible for ensuring that your comment
does not include any confidential information that you or a third party
may not wish to be posted, such as medical information, your or anyone
else's Social Security number, or confidential business information,
such as a manufacturing process. Please note that if you include your
name, contact information, or other information that identifies you in
the body of your comments, that information will be posted on https://www.regulations.gov.
     If you want to submit a comment with confidential
information that you do not wish to be made available to the public,
submit the comment as a

written/paper submission and in the manner detailed (see ``Written/
Paper Submissions'' and ``Instructions'').

Written/Paper Submissions

    Submit written/paper submissions as follows:
     Mail/Hand delivery/Courier (for written/paper
submissions): Dockets Management Staff (HFA-305), Food and Drug
Administration, 5630 Fishers Lane, Rm. 1061, Rockville, MD 20852.
     For written/paper comments submitted to the Dockets
Management Staff, FDA will post your comment, as well as any
attachments, except for information submitted, marked and identified,
as confidential, if submitted as detailed in ``Instructions.''
    Instructions: All submissions received must include the Docket No.
FDA-2015-E-2661 for ``Determination of Regulatory Review Period for
Purposes of Patent Extension; KEYTRUDA.'' Received comments, those
filed in a timely manner (see ADDRESSES), will be placed in the docket
and, except for those submitted as ``Confidential Submissions,''
publicly viewable at https://www.regulations.gov or at the Dockets
Management Staff between 9 a.m. and 4 p.m., Monday through Friday.
     Confidential Submissions--To submit a comment with
confidential information that you do not wish to be made publicly
available, submit your comments only as a written/paper submission. You
should submit two copies total. One copy will include the information
you claim to be confidential with a heading or cover note that states
``THIS DOCUMENT CONTAINS CONFIDENTIAL INFORMATION.'' The Agency will
review this copy, including the claimed confidential information, in
its consideration of comments. The second copy, which will have the
claimed confidential information redacted/blacked out, will be
available for public viewing and posted on https://www.regulations.gov.
Submit both copies to the Dockets Management Staff. If you do not wish
your name and contact information to be made publicly available, you
can provide this information on the cover sheet and not in the body of
your comments and you must identify this information as
``confidential.'' Any information marked as ``confidential'' will not
be disclosed except in accordance with Sec.  10.20 (21 CFR 10.20) and
other applicable disclosure law. For more information about FDA's
posting of comments to public dockets, see 80 FR 56469, September 18,
2015, or access the information at: https://www.gpo.gov/fdsys/pkg/FR-2015-09-18/pdf/2015-23389.pdf.
    Docket: For access to the docket to read background documents or
the electronic and written/paper comments received, go to https://www.regulations.gov and insert the docket number, found in brackets in
the heading of this document, into the ``Search'' box and follow the
prompts and/or go to the Dockets Management Staff, 5630 Fishers Lane,
Rm. 1061, Rockville, MD 20852.

FOR FURTHER INFORMATION CONTACT: Beverly Friedman, Office of Regulatory
Policy, Food and Drug Administration, 10903 New Hampshire Ave., Bldg.
51, Rm. 6250, Silver Spring, MD 20993,<PHONE_NUMBER>.

SUPPLEMENTARY INFORMATION:

I. Background

    The Drug Price Competition and Patent Term Restoration Act of 1984
(Pub. L. 98-417) and the Generic Animal Drug and Patent Term
Restoration Act (Pub. L. 100-670) generally provide that a patent may
be extended for a period of up to 5 years so long as the patented item
(human drug product, animal drug product, medical device, food
additive, or color additive) was subject to regulatory review by FDA
before the item was marketed. Under these acts, a product's regulatory
review period forms the basis for determining the amount of extension
an applicant may receive.
    A regulatory review period consists of two periods of time: A
testing phase and an approval phase. For human biological products, the
testing phase begins when the exemption to permit the clinical
investigations of the biological product becomes effective and runs
until the approval phase begins. The approval phase starts with the
initial submission of an application to market the human biological
product and continues until FDA grants permission to market the
biological product. Although only a portion of a regulatory review
period may count toward the actual amount of extension that the
Director of USPTO may award (for example, half the testing phase must
be subtracted as well as any time that may have occurred before the
patent was issued), FDA's determination of the length of a regulatory
review period for a human biological product will include all of the
testing phase and approval phase as specified in 35 U.S.C.
156(g)(1)(B).
    FDA has approved for marketing the human biologic product KEYTRUDA
(pembrolizumab). KEYTRUDA is a programmed death receptor-1 (PD-1)-
blocking antibody indicated for the treatment of:
     Patients with unresectable or metastatic melanoma.
     Patients with metastatic non-small cell lung cancer
(NSCLC) whose tumors have high PD-ligand 1 (PD-L1) expression (Tumor
Proportion Score (TPS) >= 50%) as determined by an FDA-approved test,
with no epidermal growth factor receptor (EGFR) or anaplastic lymphoma
kinase (ALK) genomic tumor aberrations, and no prior systemic
chemotherapy treatment for metastatic NSCLC.
     Patients with metastatic NSCLC whose tumors express PD-L1
(TPS >= 1%) as determined by an FDA-approved test, with disease
progression on or after platinum-containing chemotherapy. Patients with
EGFR or ALK genomic tumor aberrations should have disease progression
on FDA-approved therapy for these aberrations prior to receiving
KEYTRUDA.
     Patients with recurrent or metastatic head and neck
squamous cell carcinoma with disease progression on or after platinum-
containing chemotherapy. This indication is approved under accelerated
approval based on tumor response rate and durability of response.
Continued approval for this indication may be contingent upon
verification and description of clinical benefit in the confirmatory
trials.
     Adult and pediatric patients with refractory classical
Hodgkin lymphoma, or who have relapsed after three or more prior lines
of therapy. This indication is approved under accelerated approval
based on tumor response and durability of response. Continued approval
for this indication may be contingent upon verification and description
of clinical benefit in the confirmatory trials.
    Subsequent to this approval, the USPTO received a patent term
restoration application for KEYTRUDA (U.S. Patent No. 8,354,509) from
Merck Sharp & Dohme B.V., and the USPTO requested FDA's assistance in
determining this patent's eligibility for patent term restoration. In a
letter dated October 15, 2015, FDA advised the USPTO that this human
biological product had undergone a regulatory review period and that
the approval of KEYTRUDA represented the first permitted commercial
marketing or use of the product. Thereafter, the USPTO requested that
FDA determine the product's regulatory review period.

II. Determination of Regulatory Review Period

    FDA has determined that the applicable regulatory review period for

KEYTRUDA is 1,338 days. Of this time, 1,148 days occurred during the
testing phase of the regulatory review period, while 190 days occurred
during the approval phase. These periods of time were derived from the
following dates:
    1. The date an exemption under section 505(i) of the Federal Food,
Drug, and Cosmetic Act (21 U.S.C. 355(i)) became effective: January 7,
2011. The applicant claims January 8, 2011, as the date the
investigational new drug application (IND) became effective. However,
FDA records indicate that the IND effective date was January 7, 2011,
which was the first date after FDA receipt of the IND that the
investigational studies were allowed to proceed.
    2. The date the application was initially submitted with respect to
the human biological product under section 351 of the Public Health
Service Act (42 U.S.C. 262): February 27, 2014. FDA has verified the
applicant's claim that the biologics license application (BLA) for
KEYTRUDA (BLA 125514/0) was initially submitted on February 27, 2014.
    3. The date the application was approved: September 4, 2014. FDA
has verified the applicant's claim that BLA 125514/0 was approved on
September 4, 2014.
    This determination of the regulatory review period establishes the
maximum potential length of a patent extension. However, the USPTO
applies several statutory limitations in its calculations of the actual
period for patent extension. In its application for patent extension,
this applicant seeks 83 days of patent term extension.

III. Petitions

    Anyone with knowledge that any of the dates as published are
incorrect may submit either electronic or written comments and, under
21 CFR 60.24 ask for a redetermination (see DATES). Furthermore, as
specified in Sec.  60.30 (21 CFR 60.30), any interested person may
petition FDA for a determination regarding whether the applicant for
extension acted with due diligence during the regulatory review period.
To meet its burden, the petition must comply with all the requirements
of Sec.  60.30, including but not limited to: Must be timely (see
DATES), must be filed in accordance with Sec.  10.20, must contain
sufficient facts to merit an FDA investigation, and must certify that a
true and complete copy of the petition has been served upon the patent
applicant. (See H. Rept. 857, part 1, 98th Cong., 2d sess., pp. 41-42,
1984.) Petitions should be in the format specified in 21 CFR 10.30.
    Submit petitions electronically to https://www.regulations.gov at
Docket No. FDA-2013-S-0610. Submit written petitions (two copies are
required) to the Dockets Management Staff (HFA-305), Food and Drug
Administration, 5630 Fishers Lane, Rm. 1061, Rockville, MD 20852.

    Dated: January 24, 2018.
Leslie Kux,
Associate Commissioner for Policy.
[FR Doc. 2018-01890 Filed 1-30-18; 8:45 am]
 BILLING CODE 4164-01-P