[Federal Register Volume 79, Number 242 (Wednesday, December 17, 2014)]
[Notices]
[Pages 75206-75207]
[FR Doc No: 2014-29491]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-73812; File No. SR-BYX-2014-037

Self-Regulatory Organizations; BATS Y-Exchange, Inc.; Notice of
Filing and Immediate Effectiveness of a Proposed Rule Change Related to
Fees for Use of BATS Y-Exchange, Inc.

December 11, 2014.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934
(the ``Act''),\1\ and Rule 19b-4 thereunder,\2\ notice is hereby given
that on December 1, 2014, BATS Y-Exchange, Inc. (the ``Exchange'' or
``BYX'') filed with the Securities and Exchange Commission
(``Commission'') the proposed rule change as described in Items I, II,
and III below, which Items have been prepared by the Exchange. The
Exchange has designated the proposed rule change as one establishing or
changing a member due, fee, or other charge imposed by the Exchange
under Section 19(b)(3)(A)(ii) of the Act \3\ and Rule 19b-4(f)(2)
thereunder,\4\ which renders the proposed rule change effective upon
filing with the Commission. The Commission is publishing this notice to
solicit comments on the proposed rule change from interested persons.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ 15 U.S.C. 78s(b)(3)(A)(ii).
    \4\ 17 CFR 240.19b-4(f)(2).
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I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change

    The Exchange filed a proposal to amend the fee schedule applicable
to Members \5\ and non-members of the Exchange pursuant to BYX Rules
15.1(a) and (c). Changes to the fee schedule pursuant to this proposal
are effective upon filing.
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    \5\ A Member is defined as ``any registered broker or dealer
that has been admitted to membership in the Exchange.'' See Exchange
Rule 1.5(n).
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    The text of the proposed rule change is available at the Exchange's
Web site at http://www.batstrading.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 parts 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 modify its fee schedule effective
immediately in order to adopt pricing for ROOC orders and to adopt
pricing for orders that execute pursuant to Rule 11.23, titled
``Opening Process.''
ROOC
    The Exchange recently filed a rule change to adopt a new routing
strategy, ROOC, which provides that orders entered on the Exchange may
be designated for participation in the opening, re-opening (following a
halt suspension or pause), or closing process (collectively, an
``Auction'') of a primary listing market other than the Exchange if
received before the opening/re-opening/closing time of such market.\6\
As such, the Exchange proposes to adopt pricing related to this new
routing strategy: the Exchange is proposing to charge $0.0015 per share
for ROOC orders routed and executed in the listing market's opening or
re-opening cross and charge $0.0010 per share for orders routed and
executed in the listing market's closing process.
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    \6\ See Securities Exchange Act Release No. 73411 (October 23,
2014), 79 FR 64452 (October 29, 2014) (SR-BYX-2014-028).
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Opening Process
    The Exchange recently filed and the Commission approved a proposed
rule change to adopt Rule 11.23, establishing an opening and re-opening
process on the Exchange in all securities (the ``Opening Process'').\7\
The Opening Process is substantially similar to the opening processes
on EDGA Exchange, Inc. (``EDGA'') and EDGX Exchange, Inc. (``EDGX'').
The Exchange proposes that securities executed in the new Opening
Process will be executed free of charge.\8\
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    \7\ See Securities Exchange Act Release No. 73472 (October 30,
2014), 79 FR 65735 (November 5, 2014) (SR-BYX-2014-018).
    \8\ The Exchange notes that this proposed fee is $0.0010 less
for executions in the opening process than on EDGX and the same as
executions in the opening process on EDGA.
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    The Exchange proposes to implement the amendments to its fee
schedule effective immediately.
2. Statutory Basis
    The Exchange believes that the proposed rule change is consistent
with the requirements of the Act and the rules and regulations
thereunder that are applicable to a national securities exchange, and,
in particular, with the requirements of Section 6 of the Act.\9\
Specifically, the Exchange believes that the proposed rule change is
consistent with Sections 6(b)(4) of the Act and 6(b)(5) of the Act,\10\
in that it provides for the equitable allocation of reasonable dues,
fees and other charges among members and other persons using any
facility or system which the Exchange operates or controls. The
Exchange notes that it operates in a highly competitive market in which
market participants can readily direct order flow to competing venues
if they deem fee levels at a particular venue to be excessive.
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    \9\ 15 U.S.C. 78f.
    \10\ 15 U.S.C. 78f(b)(4) and (5).
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    The Exchange believes that the proposed changes to the Exchange's
fee schedule to add fees for the ROOC routing strategy when routed and
executed in the listing market's Auction represent a reasonable and
equitable allocation of fees because they are equal to or roughly
equivalent to the fees that will be charged pursuant to the applicable
exchange's fee schedule for participation in an Auction. The Exchange
further believes that the proposed fees for ROOC are non-discriminatory
because they apply uniformly to all Members and, again, because they
approximate the fees at the away venue.
    The Exchange also believes that its proposed pricing for the
Opening Process is reasonable and equitable because the Exchange is
proposing for executions in the Opening Process to be free of charge,
which is the same price charged on EDGA for participation in its
analogous opening process and $0.0005 [sic.] cheaper than such
analogous opening process on EDGX, as noted above. The Exchange also
believes that the proposal to provide free executions in the Opening
Process on the Exchange is non-discriminatory because such proposed
pricing would apply uniformly to all Members and, again, because other
venues are providing

executions without charge in their respective analogous processes.

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

    The Exchange does not believe that the proposed rule change will
result in any burden on competition that is not necessary or
appropriate in furtherance of the purposes of the Act, as amended. To
the contrary, the Exchange believes that the proposed changes will
allow the Exchange to compete more ably with other execution venues by
providing additional competitive services at competitive prices,
including the addition of Opening Process executions free of charge.
Also, because the market for order execution is extremely competitive,
Members may readily opt to disfavor the Exchange's routing services if
they believe that alternatives offer them better value. For orders
routed through ROOC, the proposed fees approximate the cost to the
Exchange of executing the orders on away trading venues. As stated
above, the Exchange notes that it operates in a highly competitive
market in which market participants can readily direct order flow to
competing venues if the deem fee structures to be unreasonable or
excessive.

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

    The Exchange has not solicited, and does not intend to solicit,
comments on this proposed rule change. The Exchange has not received
any written comments from members or other interested parties.

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

    The foregoing rule change has become effective pursuant to Section
19(b)(3)(A) of the Act \11\ and paragraph (f)(2) of Rule 19b-4
thereunder.\12\ 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.
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    \11\ 15 U.S.C. 78s(b)(3)(A).
    \12\ 17 CFR 240.19b-4(f)(2).
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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-BYX-2014-037 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-BYX-2014-037. This file
number should be included on the subject line if email is used. To help
the Commission process and review your comments more efficiently,
please use only one method. The Commission will post all comments on
the Commission's Internet Web site (http://www.sec.gov/rules/sro.shtml). Copies of the submission, all subsequent amendments, all
written statements with respect to the proposed rule change that are
filed with the Commission, and all written communications relating to
the proposed rule change between the Commission and any person, other
than those that may be withheld from the public in accordance with the
provisions of 5 U.S.C. 552, will be available for Web site viewing and
printing in the Commission's Public Reference Room, 100 F Street NE.,
Washington, DC 20549, on official business days between the hours of
10:00 a.m. and 3:00 p.m. Copies of such filing also will be available
for inspection and copying at the principal office of the Exchange. All
comments received will be posted without change; the Commission does
not edit personal identifying information from submissions. You should
submit only information that you wish to make available publicly. All
submissions should refer to File Number SR-BYX-2014-037 and should be
submitted on or before January 7, 2015.

    For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\13\
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    \13\ 17 CFR 200.30-3(a)(12).
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Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2014-29491 Filed 12-16-14; 8:45 am]
BILLING CODE 8011-01-P


[Federal Register Volume 80, Number 156 (Thursday, August 13, 2015)]
[Notices]
[Pages 48594-48600]
[FR Doc No: 2015-19872]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-75642; File No. SR-NYSEMKT-2015-55]

Self-Regulatory Organizations; NYSE MKT LLC; Notice of Filing and
Immediate Effectiveness of Proposed Rule Change Amending Rule 961 To
Establish Exchange Rules Governing the Give Up of a Clearing Member by
ATP Holders and Conforming Changes to Rules 960 and 954NY

August 7, 2015
    Pursuant to Section 19(b)(1) \1\ of the Securities Exchange Act of
1934 (the ``Act'') \2\ and Rule 19b-4 thereunder,\3\ notice is hereby
given that on July 27, 2015, NYSE MKT LLC (the ``Exchange'' or ``NYSE
MKT'') filed with the Securities and Exchange Commission (the
``Commission'') the proposed rule change as described in Items I and II
below, which Items have been prepared by the self-regulatory
organization. The Commission is publishing this notice to solicit
comments on the proposed rule change from interested persons.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 15 U.S.C. 78a.
    \3\ 17 CFR 240.19b-4.
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I. Self-Regulatory Organization's Statement of the Terms of the
Substance of the Proposed Rule Change

    The Exchange proposes to amend Rule 961 to establish Exchange rules
governing the give up of a Clearing Member by ATP Holders and proposes
conforming changes to Rules 960 and 954NY. The text of the proposed
rule change is available on the Exchange's Web site at www.nyse.com, at
the principal office of the Exchange, and at the Commission's Public
Reference Room.

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

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

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

1. Purpose
    The Exchange proposes to amend Rule 961 to establish Exchange rules
governing the ``give up'' of a Clearing Member \4\ by ATP Holders. In
addition, the Exchange proposes changes to Rules 960 and 954NY to
reflect proposed amendments to Rule 961. The Exchange believes that
this proposal to include the give-up process in Exchange rules would
result in the fair and reasonable use of resources by both the Exchange
and ATP Holders. In addition, the proposed change would align the
Exchange with competing options exchanges that have recently adopted
rules consistent with this proposal.\5\
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    \4\ Rule 900.2NY (11) defines ``Clearing Member'' as an Exchange
ATP Holder which has been admitted to membership in the Options
Clearing Corporation pursuant to the provisions of the Rules of the
Options Clearing Corporation.
    \5\ See Securities and Exchange Act Release No. 72668 (July 24,
2014), 79 FR 44229 (July 30, 2014) (SR-CBOE-2014-048) (order
approving proposed rule change relating to the ``give up'' process,
the process by which a Trading Permit Holder ``gives up'' or selects
and indicates the Clearing Trading Permit Holder responsible for the
clearance of an Exchange transaction). See also Securities Exchange
Act Release No. 72325 (June 5, 2014), 79 FR 33614 (June 11, 2014)
(Notice). The Exchange notes that this proposal is a copycat filing,
which is substantially similar in all material respects to the give-
up process approved on CBOE, except as noted herein. See infra n. 14
(regarding rule text in amended Rule 961(f) explicitly describing
procedures for Guarantors to reject a trade).
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    By way of background, to enter transactions on the Exchange, an ATP
Holder must either be a Clearing Member or must have a Clearing Member
agree to accept financial responsibility for all of its transactions.
Specifically, Rule 961 provides that every Clearing Member will be
responsible for the clearance of Exchange option transactions of ATP
Holder that gives up the Clearing Member's name in an Exchange option
transaction, provided the clearing member has authorized such member or
member organization to give up its name with respect to Exchange option
transactions.\6\ In addition, Rule 954NY(a) (Order Identification)
provides that for each transaction in which an ATP Holder participates,
the ATP Holder must give up the name of the Clearing Member through
whom the transaction will be cleared. The

Exchange has determined that it would be beneficial to amend Rule 961
and specify in detail the give-up process and to modify Rules 960 and
954NY, as described below. The Exchange believes the proposed changes
would result in a more comprehensive streamlined give up process.
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    \6\ See also Rule 960 (General Comparison and Clearance Rule)
(providing that all Exchange transactions shall be submitted to the
Exchange for comparison of trade information, and all compared
transactions shall be cleared through the Options Clearing
Corporation and shall be subject to the Rules of the Options
Clearing Corporation).
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Designated Give Ups and Guarantors
    The Exchange proposes to amend current Rule 961 by replacing the
current rule text \7\ with details regarding the give up procedure for
ATP Holders executing transactions on the Exchange, and to re-title
this rule ``Give Up of a Clearing Member.'' \8\ As amended, Rule 961
would provide that an ATP Holder may only give up a ``Designated Give
Up'' or its ``Guarantor,'' as those roles would be defined in the Rule.
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    \7\ See Rule 961 (Responsibility of Clearing Members for
Exchange Option Transactions) (``Every member organization which is
a clearing member of the Options Clearing Corporation shall be
responsible for the clearance of the Exchange option transactions of
such member organization and of each member or member organization
who gives up the name of such clearing member in an Exchange option
transaction, provided the clearing member has authorized such member
or member organization to give up its name with respect to Exchange
option transactions.'').
    \8\ As discussed below, proposed paragraph (h) of amended Rule
961 addresses and clarifies the financial responsibility of Clearing
Members, and, as such, the Exchange believes the original rule text
is rendered unnecessary.
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    Specifically, amended Rule 961 would introduce and define the term
``Designated Give Up'' as any Clearing Member that an ATP Holder (other
than a Market Maker \9\) identifies to the Exchange, in writing, as a
Clearing Member the ATP Holder requests the ability to give up. To
designate a ``Designated Give Up,'' an ATP Holder must submit written
notification to the Exchange, in a form and manner prescribed by the
Exchange (``Notification Form''). A copy of the proposed Notification
Form is included with this filing in Exhibit 3. Similarly, should an
ATP Holder no longer want the ability to give up a particular
Designated Give Up, as proposed, the ATP Holder would have to submit
written notification to the Exchange, in a form and manner prescribed
by the Exchange.
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    \9\ For purposes of this rule, references to ``Market Maker''
refer to ATP Holders acting in the capacity of a Market Maker and
include all Exchange Market Maker capacities e.g., Lead Market
Makers. As explained below, Market Makers give up Guarantors that
have executed a Letter of Guarantee on behalf of the Marker Maker,
pursuant to Rule 932NY; Market Makers need not give up Designated
Give Ups.
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    The Exchange notes that, as proposed, an ATP Holder may designate
any Clearing Member as a Designated Give Up. Additionally, there would
be no minimum or maximum number of Designated Give Ups that an ATP
Holder must identify. The Exchange would notify a Clearing Member, in
writing and as soon as practicable, of each ATP Holder that has
identified it as a Designated Give Up. The Exchange, however, would not
accept any instructions, and would not give effect to any previous
instructions, from a Clearing Member not to permit an ATP Holder to
designate the Clearing Member as a Designated Give Up. Further, the
Exchange notes that there is no subjective evaluation of an ATP
Holder's list of proposed Designated Give Ups by the Exchange. Rather,
the Exchange proposes to process each list as submitted and ensure that
the Clearing Members identified as Designated Give Ups are in fact
current Clearing Members, as well as confirm that the Notification
Forms are complete (e.g., contain appropriate signatures) and that the
Options Clearing Corporation (``OCC'') numbers listed for each Clearing
Member are accurate.
    As amended, Rule 961 would also define the term ``Guarantor'' as a
Clearing Member that has issued a Letter of Guarantee or Letter of
Authorization for the executing ATP Holder, pursuant to Rules of the
Exchange \10\ that is in effect at the time of the execution of the
applicable trade. An executing ATP Holder may give up its Guarantor
without such Guarantor being a ``Designated Give Up.'' The Exchange
notes that Rule 924NY provides that a Letter of Guarantee is required
to be issued and filed by each Clearing Member through which a Market
Maker clears transactions. Accordingly, a Market Maker would only be
enabled to give up a Guarantor that had executed a Letter of Guarantee
on its behalf pursuant to Rule 932NY. Thus, Market Makers would not
identify any Designated Give Ups.
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    \10\ See Rule 924NY (Letters of Guarantees); Rule 932NY (Letters
of Authorization).
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    As noted above, amended Rule 961 would provide that an ATP Holder
may give up only (i) the name of a Clearing Member that has previously
been identified and processed by the Exchange as a Designated Give Up
for that ATP Holder, if not a Market Maker or (ii) its Guarantor.\11\
This proposed requirement would be enforced by the Exchange's trading
systems. Specifically, the Exchange has configured its trading systems
to only accept orders from an ATP Holder that identifies a Designated
Give Up or Guarantor for that ATP Holder and would reject any order
entered by an ATP Holder that designates a give up that is not at the
time a Designated Give Up or Guarantor of the ATP Holder.\12\ The
Exchange notes that it would notify an ATP Holder in writing when an
identified Designated Give Up becomes ``effective'' (i.e., when a
Clearing Member that has been identified by the ATP Holder as a
Designated Give Up has been enabled by the Exchange's trading systems
to be given up). A Guarantor for an ATP Holder, by virtue of having an
effective Letter of Authorization or Letter of Guarantee on file with
the Exchange, would be enabled to be given up for that ATP Holder
without any further action by the ATP Holder. The Exchange notes that
this configuration (i.e., the trading system accepting only orders that
identify a Designated Give Up or Guarantor) is intended to help reduce
``keypunch errors'' and prevent ATP Holders from mistakenly giving up
the name of a Clearing Member that it does not have the ability to give
up a trade.
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    \11\ As described below, amended Rule 961(f) provides that a
Designated Give Up or Guarantor may, under certain circumstances,
reject a trade on which it is given up and another Clearing Member
may agree to accept the subject trade.
    \12\ See id.
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Acceptance of a Trade
    The Exchange proposes in paragraph (e) of amended Rule 961 that a
Designated Give Up and a Guarantor may, in certain circumstances,
determine not to accept a trade on which its name was given up. If a
Designated Give Up or Guarantor determines not to accept a trade, the
proposed Rule would provide that it may reject the trade in accordance
with the procedures described more fully below under ``Procedures to
Reject a Trade.''
    As proposed, a Designated Give Up may determine to not accept a
trade on which its name was given up so long as it believes in good
faith that it has a valid reason not to accept the trade and follows
the procedures to reject a trade in proposed paragraph (f) of the
amended Rule.\13\
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    \13\ An example of a valid reason to reject a trade may be that
the Designated Give Up does not have a customer for that particular
trade.
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    The Exchange also proposes to provide that a Guarantor may opt to
not accept (and thereby reject) a non-Market Maker trade on which its
name was given up, provided that the following steps are completed: (i)
Another Clearing Member agrees to be the give up on the trade; (ii)
that other Clearing Member has notified both the Exchange and executing
ATP Holder in writing of its intent to accept the trade; and (iii) the
procedures in Rule 961(f) are

followed. In addition, the give up must be changed to the Clearing
Member that has agreed to accept the trade in accordance with the
procedures in paragraph (f) of Rule 961. A Guarantor may not reject a
trade given up by a Market Maker.
    The Exchange notes that only a Designated Give Up or Guarantor
whose name was initially given up on a trade is permitted to reject the
trade, subject to the conditions noted above. The Clearing Member or
Guarantor that becomes the give up on a rejected trade may not also
reject the trade.
Procedures to Reject a Trade
    The Exchange proposes to include in amended Rule 961 procedures
that must be followed and completed in order for a Designated Give Up
or Guarantor \14\ to reject a trade. Specifically, a Designated Give Up
can only change the give up to (1) another Clearing Member that has
agreed to be the give up on the subject trade (``New Clearing
Member''), provided the New Clearing Member has notified the Exchange
and the executing ATP Holder in writing of its intent to accept the
trade in a form and manner prescribed by the Exchange (``Give-Up Change
Form for Accepting Clearing Member'');\15\ or (2) a Guarantor for the
executing ATP Holder, provided the Designated Give Up has notified the
Guarantor in writing that it is changing the give up on the trade to
the Guarantor.\16\ Further, as proposed, a Guarantor, can only reject a
non-Market Maker trade\17\ for which its name was the initial give up
by an ATP Holder and change the give up to another Clearing Member that
has agreed to be the give up on the subject trade, provided the New
Clearing Member has notified the Exchange and the executing ATP Holder
in writing of its intent to accept the trade (i.e., by filling out a
Give-Up Change Form for Accepting Clearing Member). A Guarantor that
becomes the give up on a trade as a result of the Designated Give Up
rejecting the trade is prohibited from not accepting the trade/
rejecting the trade. This prohibition would provide finality to the
trade and ensure that the trade is not repeatedly reassigned from one
Clearing Member to another.
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    \14\ The Exchange notes that amended Rule 961(f) contains rule
text explicitly describing procedures for Guarantors to reject a
trade that is not contained in the rule text approved in SR-CBOE-
2014-048. See supra n. 5. The Exchange, however, believes that this
additional description serves only to clarify, as opposed to alter,
the procedure approved in SR-CBOE-2014-048.
    \15\ A copy of the proposed Give-Up Change Form for Accepting
Clearing Member is included with this filing in Exhibit 3. Also, as
noted above, a New Clearing Member cannot later reject the trade.
Requiring the New Clearing Member to provide notice to the Exchange
of its intent to accept the trade and prohibiting the New Clearing
Member from later rejecting the trade would provide finality to the
trade and ensure that the trade is not repeatedly reassigned from
one Clearing Member to another.
    \16\ The Guarantor would not need to notify the Exchange of its
intent to accept the trade.
    \17\ A Guarantor of an ATP Holder that is a Market Maker may not
reject a trade for which its name was given up in relation to such
Market Maker.
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    As proposed, a Guarantor may only reject a non-Market Maker trade
for which its name was the initial give up by an ATP Holder, if another
Clearing Member has agreed to be the give up on the trade and has
notified the Exchange and executing ATP Holder in writing of its intent
to accept the trade. If a Guarantor of an ATP Holder decides to reject
a trade on the trade date, it must follow the same procedures to change
the give up as would be followed by a Designated Give Up. The ability
to make any changes, either by the Designated Give Up or Guarantor, to
the give up pursuant to this procedure would end at the Trade Date
Cutoff Time.
    Finally, once the give up on a trade has been changed, the
Designated Give Up or Guarantor making the change must immediately
thereafter notify in writing the Exchange, the parties to the trade and
the Clearing Member given up of the change.
Rejection on Trade Date
    As proposed, a trade may only be rejected on (i) the trade date or
(ii) the business day following the trade date (``T+1'') (except that
transactions in expiring options series on the last trading day prior
to expiration may not be rejected on T+1).
    If, on the trade date, a Designated Give Up decides to reject a
trade, or another Clearing Member agrees to be the give up on a trade
for which a Guarantor's name was given up, the Exchange proposes that
the rejecting Designated Give Up or Guarantor must notify, in writing,
the executing ATP Holder or its designated agent, as soon as possible
and attempt to resolve the disputed give up. This requirement puts the
executing ATP Holder on notice that the give up on the trade may be
changed and provides the executing ATP Holder and Designated Give Up or
Guarantor an opportunity to resolve the dispute. The Exchange notes
that a Designated Give Up or Guarantor may request from the Exchange
the contact information of the executing ATP Holder or its designated
agent for any trade it intends to reject.
    Following notification to the executing ATP Holder on the trade
date, a Designated Give Up or Guarantor may request the ability from
the Exchange to change the give up on the trade, in a form and manner
prescribed by the Exchange (``Give-Up Change Form''). A copy of the
proposed Give-Up Change Form is included with this filing in Exhibit 3.
Provided that the Exchange is able to process the request prior to the
trade input cutoff time established by the OCC (or the applicable later
time if the Exchange receives and is able to process a request to
extend its time of final trade submission to the OCC) (``Trade Date
Cutoff Time''), the Exchange would provide the Designated Give Up or
Guarantor the ability to make the change to the give up on the trade to
either (1) another Clearing Member or, as applicable, (2) the executing
ATP Holder's Guarantor.
Rejection on T+1
    The Exchange acknowledges that some clearing firms may not
reconcile their trades until after the Trade Date Cutoff Time. A
clearing firm, therefore, may not realize that a valid reason exists to
not accept a particular trade until after the close of the trading day
or until the following morning. Accordingly, the Exchange proposes to
establish a procedure for a Designated Give Up or Guarantor of an ATP
Holder that is not a Market Maker to reject a trade on the following
trade day (``T+1'').\18\ The Exchange notes that a separate procedure
must be established for T+1 changes because to effectively change the
give up on a trade on T+1 an offsetting reversal must occur--as opposed
to merely identifying a different Clearing Member on the trade.
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    \18\ The Exchange proposes that no changes to the give up on
trades in expiring options series that take place on the last
trading day prior to their expiration may take place on T+1. Rather,
a Designated Give Up or Guarantor may only reject these transactions
on the trade date until the Trade Date Cutoff Time in accordance
with the trade date procedures described above.
---------------------------------------------------------------------------

    Consistent with amended Rule 961(f), a Designated Give Up or
Guarantor \19\ that wishes to reject a trade on T+1 would have to
notify the executing ATP Holder, in writing, to try to attempt and
resolve the dispute. In addition, a Designated Give Up or Guarantor may
contact the Exchange and request the ability to reject the trade on
T+1. Provided that the Exchange is receives the request prior to 12:00
p.m. (ET) on T+1 (``T+1 Cutoff Time''), the Exchange would provide the
Designated Give Up or Guarantor the ability to enter trade records into
the Exchange's systems that would effect a transfer of the trade to

another Clearing Member. As noted above, if a New Clearing Member
agrees to the give up on a trade, it would be required to inform the
Exchange of its acceptance via the Give-Up Change Form for Accepting
Clearing Members. A Guarantor that becomes the new give up on T+1 would
not need to notify the Exchange of its intent to accept the trade, nor
would it need to submit any notification or form. The Designated Give
Up however, would be required to provide written notice to the
Guarantor that it will be making this change on T+1. The Exchange notes
that the ability for either a Designated Give Up or Guarantor to make
these changes would end at the T+1 Cutoff Time and would provide
finality and certainty as to which Clearing Member will be the give up
on the subject trade.
---------------------------------------------------------------------------

    \19\ The Exchange again notes that, as proposed, only a
Guarantor whose name was initially given up is permitted to reject a
trade (i.e., a Guarantor cannot reject a trade on T+1 for which it
has become the give up as a result of a Designated Give Up not
accepting the trade).
---------------------------------------------------------------------------

    In addition, once any change to the give up has been made, the
Designated Give Up or Guarantor making the change would be required to
immediately thereafter notify, in writing, the Exchange, the parties to
the trade and the Clearing Member given up, of the change.
    As discussed above, the Exchange proposes to allow ATP Holders that
are not Market Makers to identify any Clearing Member as a Designated
Give Up. The Exchange's proposal does not permit a Clearing Member to
provide the Exchange instructions to prohibit a particular ATP Holder
from giving up the Clearing Member's name. This limitation prevents the
Exchange from being placed in the position of arbiter among a Clearing
Member, an ATP Holder and a customer. The Exchange recognizes, however,
that ATP Holders should not be given the ability to give up any
Clearing Member without also providing a method of recourse to those
Clearing Members which, for the prescribed reasons discussed above,\20\
should not be obligated to clear certain trades for which they are
given up. Accordingly, the Exchange is proposing to provide Designated
Give Ups and Guarantors the ability to reject a trade, provided each
has a good faith basis for doing so. Ultimately, however, the trade
must clear with a clearing firm and there must be finality to the
trade. The Exchange believes that the executing ATP Holder's Guarantor,
absent a Clearing Member that agrees to accept the trade, should become
the give up on any trade which a Designated Give Up determines to
reject in accordance with these proposed rule provisions, because the
Guarantor, by virtue of having issued a Letter of Guarantee or Letter
of Authorization, has already accepted financial responsibility for all
Exchange transactions made by the executing ATP Holder. The Exchange,
however, does not want to prevent a Clearing Member that agrees to
accept the trade from being able to do so, and accordingly, the
Exchange also provides that a New Clearing Member may become the give
up on a trade in accordance with the procedure discussed above.
---------------------------------------------------------------------------

    \20\ See supra n. 13.
---------------------------------------------------------------------------

Other Give Up Changes
    The Exchange proposes to modify the text of Rule 954NY(a), related
to the give up requirement for ATP Holders, to simply cross reference
Rule 961 given the detailed give up process proposed by the Exchange in
that Rule.
    The Exchange also proposes in paragraph (g) of amended Rule 961
three scenarios in which a give up on a transaction may be changed
without Exchange involvement. First, if an executing ATP Holder has the
ability through an Exchange system to do so, it could change the give
up on a trade to another Designated Give Up or its Guarantor. The
Exchange notes that ATP Holders often make these changes when, for
example, there is a keypunch error (i.e., an error that involves the
erroneous entry of an intended clearing firm's OCC clearing number).
The ability of the executing ATP Holder to make any such change would
end at the Trade Date Cutoff Time.\21\
---------------------------------------------------------------------------

    \21\ After that time, the ATP Holder would no longer have the
ability to make this type of change, as the trade will have been
submitted to OCC.
---------------------------------------------------------------------------

    Next, the modified rule would provide that, if a Designated Give Up
has the ability to do so, it may change the give up on a transaction
for which it was given up to (i) another Clearing Member affiliated
with the Designated Give Up or (ii) a Clearing Member for which the
Designated Give Up is a back office agent. The ability to make such a
change would end at the Trade Date Cutoff Time. The procedures to
reject a trade, as set forth in proposed subparagraph (f) of Rule 961
and described above, would not apply in these instances. The Exchange
notes that often Clearing Members themselves have the ability to change
a give up on a trade for which it was given up to another Clearing
Member affiliate or Clearing Member for which the Designated Give Up is
a back office agent. Therefore, Exchange involvement in these instances
is not necessary.
    In addition, the proposed rule provides that if both a Designated
Give Up or Guarantor and a Clearing Member have the ability through an
Exchange system to do so, the Designated Give Up or Guarantor and
Clearing Member may each enter trade records into the Exchange's
systems on T+1 that would effect a transfer of the trade in a non-
expired option series from that Designated Give Up to that Clearing
Member. Likewise, if a Guarantor of an ATP Holder trade (that is not a
Market Maker trade) and a Clearing Member have the ability through an
Exchange system to do so, the Guarantor and Clearing Member may each
enter trade records into the Exchange's systems on T+1 that would
effect a transfer of the trade in a non-expired option series from that
Guarantor to that Clearing Member. The Designated Give Up or Guarantor
could not make any such change after the T+1 Cutoff Time. The Exchange
notes that a Designated Give Up (or Guarantor) must notify, in writing,
the Exchange and all the parties to the trade, of any such change made
pursuant to this provision. This notification alerts the parties and
the Exchange that a change to the give up has been made. Finally, the
Designated Give Up (or Guarantor) would be responsible for monitoring
the trade and ensuring that the other Clearing Member has entered its
side of the transaction timely and correctly. If either a Designated
Give Up (or Guarantor) or Clearing Member cannot themselves enter trade
records into the Exchange's systems to effect a transfer of the trade
from one to the other, the Designated Give Up (or Guarantor) may
request the ability from the Exchange to enter both sides of the
transaction in accordance with amended Rule 961 and pursuant to the
procedures set forth in subparagraph (f)(3) of that Rule.
Responsibility
    The Exchange proposes in paragraph (h) of amended Rule 961 to state
that a Clearing Member would be financially responsible for all trades
for which it is the give up at the Applicable Cutoff Time (for purposes
of the proposed rule, the ``Applicable Cutoff Time'' shall refer to the
T+1 Cutoff Time for non-expiring option series and to the Trade Date
Cutoff Time for expiring option series). The Exchange notes, however,
that nothing in the proposed rule shall preclude a different party from
being responsible for the trade outside of the Rules of the Exchange
pursuant to OCC Rules, any agreement between the applicable parties,
other applicable rules and regulations, arbitration, court proceedings
or otherwise.\22\ Moreover,

in processing a request to provide a Designated Give Up the ability to
change a give up on a trade, the Exchange would not consider or
validate whether the Designated Give Up has satisfied the requirements
of this Rule in relation to having a good faith belief that it has a
valid reason not to accept a trade or having notified the executing ATP
Holder and attempting to resolve the disputed give up prior to changing
the give up. Rather, upon request, the Exchange would always provide a
Designated Give Up or Guarantor the ability to change the give up or to
reject a trade pursuant to the proposed Rule so long as the Designated
Give Up or Guarantor, and New Clearing Member, if applicable, have
provided a completed set of give up Change Forms within the prescribed
time period.
---------------------------------------------------------------------------

    \22\ See proposed Commentary .01 to Rule 691 (``Nothing herein
will be deemed to preclude the clearance of Exchange transactions by
a non- ATP Holder to the By-Laws of the Options Clearing Corporation
so long as a Clearing Member who is an ATP Holder is also designated
as having responsibility under these Rules for the clearance and
comparison of such transactions.'').
---------------------------------------------------------------------------

    The Exchange notes that given the inherent time constraints in
making a change to a give up on a transaction, the Exchange would not
be able to adequately consider the above-mentioned requirements and
make a determination within the prescribed period of time. Rather, the
Exchange would examine trades for which a give up was changed pursuant
to subparagraphs (e) and (f) after the fact to ensure compliance with
the requirements set forth in amended Rule 961. Particularly, the
Exchange notes that the give up Change Forms that Designated Give Ups,
Guarantors and New Clearing Members must submit, would help to ensure
that the Exchange obtains, in a uniform format, the information that it
needs to monitor and regulate this Rule and these give up changes in
particular. This information, for example, would better allow the
Exchange to determine whether the Designated Give Up had a valid reason
to reject the trade, as well as assist the Exchange in cross checking
and confirming that what the Designated Give Up or Guarantor said it
was going to do is what it actually did (e.g., check that the New
Clearing Member identified in the give up Change Form was the Clearing
Member that actually was identified on the trade as the give up).
Additionally, the proposed Rule does not preclude these factors from
being considered in a different forum (e.g., court or arbitration), nor
does it preclude any Clearing Member that violates any provision of
amended Rule 961 from being subject to discipline in accordance with
Exchange rules.
    Finally, the Exchange proposes to eliminate as obsolete the
reference in Rule 960 requiring that ``[a]ll option transactions
involving orders stored in the Opening Automated Report Service shall
be cleared and compared in accordance with the provisions of Rule
950(m) and Commentary thereto,'' \23\ which the Exchange believes will
add clarity and consistency to Exchange rules
---------------------------------------------------------------------------

    \23\ The Exchange also proposes to capitalize the two references
to ``clearing member'' in this rule to signify the defined term,
which the Exchange believes would add clarity and consistency to
Exchange rules.
---------------------------------------------------------------------------

Implementation
    The Exchange proposes to announce the implementation of the
proposed rule change via Trader Update, to be published no later than
thirty (30) days following the effectiveness of this proposal. The
implementation date will be no sooner than fourteen (14) day and no
later than thirty (30) days following publication of the Trader Update.
This additional time would afford the Exchange and ATP Holders the time
to submit and process the forms required under the proposed rule.
2. Statutory Basis
    The Exchange believes that the proposed change is consistent with
Section 6(b) of the Act,\24\ in general, and furthers the objectives of
Section 6(b)(5),\25\ in particular, in that it is designed to promote
just and equitable principles of trade, to foster cooperation and
coordination with persons engaged in regulating, clearing, settling,
processing information with respect to, and facilitation transactions
in securities, to remove impediments to, and perfect the mechanism of a
free and open market 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) \26\ requirement that the
rules of an exchange not be designed to permit unfair discrimination
between customers, issuers, brokers, or dealers.
---------------------------------------------------------------------------

    \24\ 15 U.S.C. 78f(b).
    \25\ 15 U.S.C. 78f(b)(5).
    \26\ Id.
---------------------------------------------------------------------------

    First, detailing in the rules how ATP Holders would give up
Clearing Members and how Clearing Members may ``reject'' a trade
provides transparency and operational certainty. The Exchange believes
additional transparency removes a potential impediment to, and would
contribute to perfecting, the mechanism for a free and open market and
a national market system, and, in general, would protect investors and
the public interest. Moreover, the Exchange notes that amended Rule 961
requires ATP Holders to adhere to a standardized process to ensure a
seamless administration of the Rule. For example, all notifications
relating to a change in give up must be made in writing. The Exchange
believes that these requirements will aid the Exchange's efforts to
monitor and regulate ATP Holders and Clearing Members as they relate to
amended Rule 961 and changes in give ups, thereby protecting investors
and the public interest.
    Additionally, the Exchange believes that its proposed give up rule
strikes the right balance between the various views and interests of
market participants. For example, although the rule allows ATP Holders
that are not Market Makers to identify any Clearing Member as a
Designated Give Up, it also provides that ATP Holders would receive
notice of any ATP Holder that has designated it as a Designated Give Up
and provides for a procedure for a Clearing Member to ``reject'' a
trade in accordance with the Rules, both on the trade date and T+1.
    The Exchange recognizes that ATP Holders should not be given the
ability to give up any Clearing Members without also providing a method
of recourse to those Clearing Members which, for the prescribed reasons
discussed above, should not be obligated to clear certain trades for
which they are given up. The Exchange believes that providing
Designated Give Ups the ability to reject a trade within a reasonable
amount of time is consistent with the Act as, pursuant to the proposed
rule, the Designated Give Ups may only do so if they have a valid
reason and because ultimately, the trade can always be assigned to the
Guarantor of the executing ATP Holder if a New Clearing Firm is not
willing to step in and accept the trade. A trade must clear with a
clearing firm and there must be finality to the trade. Absent a New
Clearing Member that agrees to accept the trade, the Exchange believes
that the executing ATP Holder's Guarantor, should become the give up on
any trade that a Designated Give Up determines to reject, in accordance
with the proposed rule provisions, because the Guarantor, by virtue of
having issued a Letter of Guarantee or Letter of Authorization, has
already accepted financial responsibility for all Exchange transactions
made by the executing ATP Holder. Therefore, amended Rule 961 is
reasonable and provides certainty that a Clearing Member will always be
responsible for a trade, which protects investors and the public
interest.
    The Exchange notes that amended Rule 961 does not preclude a
different party than the party given up from being

responsible for the trade outside of the Rules of the Exchange,
pursuant to OCC Rules, any agreement between the applicable parties,
other applicable rules and regulations, arbitration, court proceedings
or otherwise. The Exchange acknowledges that it would not consider
whether the Designated Give Up has satisfied the requirements of this
Rule in relation to having a good faith belief that it has a valid
reason not to accept a trade or having notified the executing ATP
Holder and attempting to resolve the disputed give up prior to changing
the give up, due to inherent time restrictions. However, the Exchange
believes investor and public interest are still protected as the
Exchange will still examine trades for which a give up was changed
pursuant to subparagraphs (e) and (f) of amended Rule 961 after the
fact to ensure compliance with the requirements set forth in the Rule.
As noted above, the implementation of a standardized process and the
requirement that certain notices be in writing would assist monitoring
any give up changes and enforcing amended Rule 961.
    Further, the Exchange notes that the Rule does not preclude these
factors from being considered in a different forum (e.g., court or
arbitration) nor does it preclude any ATP Holder or Clearing Member
that violates any provision of amended Rule 961 from being subject to
discipline by the Exchange.
    Finally, the Exchange believes that making non-substantive,
technical corrections to the rule text (i.e., capitalizing the defined
term ``clearing member'') and deleting obsolete references in Rule 960
would add clarity and consistency to Exchange rules to the benefit of
investors and the general public.

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

    The Exchange does not believe that this proposed rule change would
impose any burden on competition not necessary or appropriate in
furtherance of the purposes of the Act. The Exchange does not believe
that the proposed rule change would impose an unnecessary burden on
intramarket competition because it would apply equally to all similarly
situated ATP Holders. The Exchange also notes that, should the proposed
changes make the Exchange more attractive for trading, market
participants trading on other exchanges can always elect to become ATP
Holders on the Exchange to take advantage of the trading opportunities.
In addition, as noted above, the Exchange believes the proposed rule
change is pro-competitive and would allow the Exchange to compete more
effectively with other options exchanges that have already adopted
changes to their give up process that are substantially identical to
the changes proposed by this filing.\27\
---------------------------------------------------------------------------

    \27\ See supra n. 5.
---------------------------------------------------------------------------

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

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

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

    Because the 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, the proposed rule change has become effective
pursuant to Section 19(b)(3)(A) of the Act \28\ and Rule 19b-4(f)(6)
thereunder.\29\
---------------------------------------------------------------------------

    \28\ 15 U.S.C. 78s(b)(3)(A).
    \29\ 17 CFR 240.19b-4(f)(6). As required under Rule 19b-
4(f)(6)(iii), the Exchange provided the Commission with written
notice of its intent to file the proposed rule change, along with a
brief description and the text of 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.
---------------------------------------------------------------------------

    A proposed rule change filed under Rule 19b-4(f)(6) \30\ normally
does not become operative prior to 30 days after the date of the
filing. However, pursuant to Rule 19b4(f)(6)(iii),\31\ the Commission
may designate a shorter time if such action is consistent with the
protection of investors and the public interest. The Exchange has asked
the Commission to waive the 30-day operative delay so that the proposal
may become operative immediately upon filing. The Commission believes
that waiver of the operative delay is consistent with the protection of
investors and the public interest because the proposal is substantially
similar to that of another exchange that has been approved by the
Commission.\32\ Waiver of the 30-day operative delay will allow the
Exchange to implement the proposed rule change, which is designed to
bring greater operational certainty and efficiency to the give up
process, in accordance with the implementation schedule outlined above.
Therefore, the Commission designates the proposed rule change to be
operative upon filing.\33\
---------------------------------------------------------------------------

    \30\ 17 CFR 240.19b-4(f)(6).
    \31\ 17 CFR 240.19b-4(f)(6)(iii).
    \32\ See supra n. 5.
    \33\ For purposes only of waiving the 30-day operative delay,
the Commission has considered the proposed rule's impact on
efficiency, competition, and capital formation. See 15 U.S.C.
78c(f).
---------------------------------------------------------------------------

    At any time within 60 days of the filing of such proposed rule
change, the Commission summarily may temporarily suspend such rule
change if it appears to the Commission that such action is necessary or
appropriate in the public interest, for the protection of investors, or
otherwise in furtherance of the purposes of the Act. If the Commission
takes such action, the Commission shall institute proceedings under
Section 19(b)(2)(B) \34\ of the Act to determine whether the proposed
rule change should be approved or disapproved.
---------------------------------------------------------------------------

    \34\ 15 U.S.C. 78s(b)(2)(B).
---------------------------------------------------------------------------

IV. Solicitation of Comments

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

Electronic Comments

     Use the Commission's Internet comment form (http://www.sec.gov/rules/sro.shtml); or
     Send an email to<EMAIL_ADDRESS>Please include
File Number SR-NYSEMKT-2015-55 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-NYSEMKT-2015-55. This
file number should be included on the subject line if email is used. To
help the Commission process and review your comments more efficiently,
please use only one method. The Commission will post all comments on
the Commission's Internet Web site (http://www.sec.gov/rules/sro.shtml). Copies of the submission, all subsequent amendments, all
written statements with respect to the proposed rule change that are
filed with the Commission, and all written communications relating to
the proposed rule change between the Commission and any person, other
than those that may be withheld from the public in accordance with the
provisions of 5 U.S.C. 552, will be available for Web site viewing and
printing in the Commission's Public Reference Room, 100 F Street NE.,

Washington, DC 20549 on official business days between the hours of
10:00 a.m. and 3:00 p.m. Copies of such filing also will be available
for inspection and copying at the principal office of the Exchange. All
comments received will be posted without change; the Commission does
not edit personal identifying information from submissions. You should
submit only information that you wish to make available publicly. All
submissions should refer to File Number SR-NYSEMKT-2015-55, and should
be submitted on or before September 3, 2015.

    For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\35\
---------------------------------------------------------------------------

    \35\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------

Jill M. Peterson,
Assistant Secretary.
[FR Doc. 2015-19872 Filed 8-12-15; 08:45 am]
BILLING CODE P


[Federal Register Volume 81, Number 127 (Friday, July 1, 2016)]
[Rules and Regulations]
[Pages 43101-43105]
[FR Doc No: 2016-15642]

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

Federal Railroad Administration

49 CFR Part 209

[Docket No. FRA-2004-17530; Notice No. 4]
RIN 2130-AC61

Inflation Adjustment of the Ordinary Maximum and Aggravated
Maximum Civil Monetary Penalties for a Violation of the Hazardous
Material Transportation Laws or Regulations, Orders, Special Permits,
and Approvals Issued Under Those Laws

AGENCY: Federal Railroad Administration (FRA), Department of
Transportation (DOT).

ACTION: Interim final rule.

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

SUMMARY: To comply with the Federal Civil Penalties Inflation
Adjustment Act of 1990, as amended by the Federal Civil Penalties
Inflation Adjustment Act Improvements Act of 2015, FRA is adjusting the
minimum penalty, ordinary maximum penalty, and the aggravated maximum
penalty that it will apply when assessing a civil monetary penalty for
a knowing violation of the Federal hazardous material transportation
laws or a regulation, special permit, order, or approval issued under
those laws. The aggravated maximum penalty is available only for a
violation that results in death, serious illness, or severe injury to
any person or substantial destruction of property. In particular, FRA
is increasing the minimum penalty for a training violation from $450 to
$463; the ordinary maximum civil monetary penalty per violation from
$75,000 to $77,114; and the aggravated maximum civil penalty from
$175,000 to $179,933.

DATES: This interim final rule is effective August 1, 2016.

FOR FURTHER INFORMATION CONTACT: Roberta Stewart, Trial Attorney,
Office of Chief Counsel, FRA, 1200 New Jersey Avenue SE., Mail Stop 10,
Washington, DC 20590 (telephone<PHONE_NUMBER><EMAIL_ADDRESS>
SUPPLEMENTARY INFORMATION: On November 2, 2015, President Barack Obama
signed the Federal Civil Penalties Inflation Adjustment Act
Improvements Act of 2015 (the 2015 Inflation Act). Public Law 114-74,
Sec. 701. This amended the Federal Civil Penalties Inflation Adjustment
Act of 1990 (Inflation Act) that required each agency to (1) adjust by
regulation each maximum civil monetary penalty (CMP), or range of
minimum and maximum CMPs, within that agency's jurisdiction by October
23, 1996, and (2) adjust those penalty amounts once every four years
thereafter, to reflect inflation. See Public Law 101-410, 104 Stat.
890, 28 U.S.C. 2461, note, as amended by Section 31001(s)(1) of the
Debt Collection Improvement Act of 1996, Public Law 104-134, 110 Stat.
1321-373, April 26, 1996. Under the 2015 Inflation Act, agencies must
make a catch-up adjustment for CMPs with the new penalty levels
published by July 1, 2016, to take effect no later than August 1, 2016.
In addition, agencies must make annual inflation adjustments, starting
January 15, 2017, based on Office of Management and Budget (OMB)
guidance.

    In the 2015 Inflation Act, Congress recognized the important role
CMPs play in deterring violations of Federal laws, regulations, and
orders and determined that inflation has diminished the impact of these
penalties. In the Inflation Act, Congress countered the effect that
inflation has had on the CMPs by having the agencies charged with
enforcement responsibility administratively adjust the CMPs.
    This interim final rule is published under 49 U.S.C. 5123 and 5124,
which provide civil and criminal penalties for violations of the
Federal hazardous material transportation laws or a regulation, order,
special permit, or approval issued under those laws. The Pipeline and
Hazardous Materials Safety Administration (PHMSA) issues the hazardous
material transportation regulations. 49 CFR 1.96(b)(1). However, FRA is
authorized as the delegate of the Secretary of Transportation to
enforce the hazardous material statutes, regulations and orders,
including the civil penalty provisions codified primarily at 49 U.S.C.
5123. 49 CFR 1.89(j). In this interim final rule, FRA is amending all
references to the minimum and maximum civil penalties in 49 CFR part
209, app. B, to raise the minimum CMP for training violations from $450
to $463; the ordinary maximum CMP per violation from $75,000 to
$77,114; and the aggravated maximum CMP from $175,000 to $179,933.

Description of the Adjustment Calculation

    The 2015 Inflation Act requires FRA to calculate the inflation
adjustment by increasing the maximum CMP, or the range of minimum and
maximum CMPs, based on the Consumer Price Index for the month of
October 2015, not seasonally adjusted. The calculation uses multipliers
to adjust the maximum CMP, or the range of minimum and maximum CMPs,
based on the year the penalty was established or last adjusted by
statute or regulation other than under the Inflation Act. Congress
passed the Moving Ahead for Progress in the 21st Century Act in 2012
(MAP-21), which amended the maximum penalty (ordinary maximum) for a
knowing violation of a Federal hazardous material safety law,
regulation, order, special permit, or approval to $75,000. Public Law
112-141 (July 6, 2012). MAP-21 also set at $175,000 the maximum civil
penalty for a person who knowingly violates the Federal hazardous
material transportation laws or a regulation, order, special permit, or
approval issued under those laws that results in death, serious
illness, or severe injury to any person or substantial destruction of
property (aggravated maximum), and also added a $450 minimum for a
training violation.
    OMB guidance, M-16-06, ``Implementation of the Federal Civil
Penalties Inflation Adjustment Act Improvements Act of 2015,'' dated
Feb. 24, 2016, states that after applying the multiplier, FRA must
round the penalty levels to the nearest dollar.\1\ The 2015 Inflation
Act also specifies that agencies shall not increase penalty levels by
more than 150 percent of the corresponding levels in effect on November
2, 2015. If the new amount or range of the increase exceeds 150 percent
above the last reported level(s), the new amount or range should be
reduced to 150 percent over the last reported level(s). The resulting
penalty level(s) in that case would be 250 percent of the last reported
level(s).
---------------------------------------------------------------------------

    \1\ Available at https://www.whitehouse.gov/sites/default/files/omb/memoranda/2016/m-16-06.pdf. See also Public Law 114-74, Sec.
701.
---------------------------------------------------------------------------

    Applying the inflation adjustment calculation, FRA determined the
minimum CMP for training violations should be raised from $450 to $463;
the ordinary maximum CMP should be raised from $75,000 to $77,114; and
the aggravated maximum CMP should be raised from $175,000 to $179,933.

Calculations To Determine CMP Updates for 2016

1. Minimum CMP of $450 for Training Violations Raised to $463

    As the 2015 Inflation Act requires, FRA evaluated the minimum CMP
of $450 for training violations and concluded it should increase to
$463, as the next calculations show. The 2012 multiplier of 1.02819
(since the last update not for inflation was in 2012, by MAP-21) times
$450 equals $462.68, or $463 rounded to the nearest dollar. The
statutory 150 percent ceiling would be $450 (the penalty level in
effect on November 2, 2015, including Inflation Act increases), times
2.5, or $1,125. Because $463 is less than the $1,125 ceiling, the 150
percent limit does not apply. The inflation adjusted minimum penalty is
$463, and applies to all violations of the hazardous materials
statutes, regulations, special permits, approvals, and orders related
to training. This new FRA minimum penalty for training violations will
apply to violations that occur on or after August 1, 2016.

2. Ordinary Maximum CMP of $75,000 Raised to $77,114

    As the 2015 Inflation Act requires, FRA evaluated the ordinary
maximum CMP and determined it should increase to $77,114, as the
following calculations show. The 2012 multiplier of 1.02819 (since the
last update not for inflation was in 2012, by MAP-21) times $75,000
equals $77,114.25, or $77,114 rounded to the nearest dollar. The
statutory 150 percent ceiling would be $75,000 (the penalty level in
effect on November 2, 2015, including Inflation Act increases), times
2.5, or $187,500. Because $77,114 is less than the $ 187,500 ceiling,
the 150 percent limit does not apply. The inflation adjusted ordinary
maximum penalty is $77,114, and applies to all violations of the
hazardous materials transportation statutes, regulations, special
permits, approvals, and orders. Therefore, the ordinary maximum CMP
should increase from $75,000 to $77,114. This new FRA ordinary maximum
penalty will apply to violations that occur on or after August 1, 2016.

3. Aggravated Maximum CMP of $175,000 Raised to $179,933

    FRA also evaluated the maximum CMP for an aggravated violation and
determined it should increase to $179,933, as the following
calculations show. The 2012 multiplier of 1.02819 (since the last
update not for inflation was in 2012, by MAP-21) times $175,000 equals
$179,933.25, or $179,933, rounded to the nearest dollar. The statutory
150 percent ceiling would be $175,000 (the penalty level in effect on
November 2, 2015, including Inflation Act increases), times 2.5, or
$437,500 Because $179,933 is less than the $437,500 ceiling, the 150
percent limit does not apply. The inflation adjusted aggravated maximum
penalty is $179,933, and applies to all violations of the hazardous
materials transportation statutes, regulations, special permits,
approvals, and orders. Therefore, the aggravated maximum should
increase from $175,000 to $179,933. This new FRA aggravated maximum
penalty will apply to violations that occur on or after August 1, 2016.

Public Participation

    FRA is proceeding to an interim final rule without providing a
notice of proposed rulemaking or an opportunity for public comment. The
adjustments the 2015 Inflation Act requires are ministerial acts over
which FRA has no discretion, making public comment unnecessary. As
such, notice and comment procedures are ``impracticable, unnecessary,
or contrary to the public interest'' within the meaning of the
Administrative Procedure Act (APA), 5 U.S.C.

553(b)(3)(B). FRA is issuing these amendments as an interim final rule
applicable to all future hazardous materials transportation civil
penalty cases under its authority to cite for violations that occur on
or after the effective date of this interim final rule.

Regulatory Impact

A. Executive Orders 12866 and 13563 and DOT Regulatory Policies and
Procedures
    This interim final rule has been evaluated consistent with
Executive Order 12866 (Regulatory Planning and Review), Executive Order
13563 (Improving Regulation and Regulatory Review), and DOT policies
and procedures. It is not considered a significant regulatory action
under section 3(f) of Executive Order 12866. The rule is expected to
have minimal economic impacts. Additionally, FRA has no discretion to
change the amount by which the CMPs are updated due to the clear
direction in the 2015 Inflation Act and OMB memorandum M-16-06.
Further, this rule is not significant under the Regulatory Policies and
Procedures of the Department of Transportation (44 FR 11034; Feb. 26,
1979) because it is limited to ministerial acts on which the agency has
no discretion, and the economic impact of the interim final rule is
minimal to the extent that preparation of a regulatory evaluation is
not warranted.
B. Regulatory Flexibility Act and Executive Order 13272
    The Regulatory Flexibility Act of 1980 (RFA), Public Law 96-354, as
amended, and codified as amended at 5 U.S.C. 601-612, and Executive
Order 13272 (Proper Consideration of Small Entities in Agency
Rulemaking), require agency review of proposed and final rules to
assess their impact on ``small entities'' for purposes of the RFA. An
agency must prepare a regulatory flexibility analysis unless it
determines and certifies that a rule is not expected to have a
significant economic impact on a substantial number of small entities.
FRA does not expect this interim final rule will have a significant
economic impact on a substantial number of small entities. Although
this interim final rule will apply to railroads, hazardous materials
shippers, and others that are considered small entities, there is no
economic impact on any person who complies with the Federal hazardous
materials laws and the regulations, special permits, approvals, and
orders issued under those laws.
    In addition, FRA has determined the RFA does not apply to this
rulemaking. The 2015 Inflation Act requires FRA to publish an interim
final rule and does not require FRA to complete notice and comment
procedures under the APA. The Small Business Administration's A Guide
for Government Agencies: How to Comply with the Regulatory Flexibility
Act (2003), provides that:

    If, under the APA or any rule of general applicability governing
federal grants to state and local governments, the agency is
required to publish a general notice of proposed rulemaking (NPRM),
the RFA must be considered [citing 5 U.S.C. 604(a)] . . . . If an
NPRM is not required, the RFA does not apply.

    Therefore, because the 2015 Inflation Act does not require an NPRM
for this rulemaking, the RFA does not apply.
C. Federalism
    This interim final rule will not have a substantial effect on the
States, on the relationship between the national government and the
States, or the distribution of power and responsibilities among the
various levels of government. Thus, consistent with Executive Order
13132 (Federalism), preparation of a Federalism assessment is not
warranted.
D. Paperwork Reduction Act
    There are no new information collection requirements in this
interim final rule to submit for OMB review under the Paperwork
Reduction Act of 1995 (44 U.S.C. 3501 et seq.).
E. Unfunded Mandates Reform Act of 1995
    This interim final rule will not result in the expenditure, in the
aggregate, of $156,000,000 or more in any one year by State, local, or
Indian Tribal governments, or the private sector. Thus, consistent with
Section 202 of the Unfunded Mandates Reform Act of 1995 (Pub. L. 104-4,
2 U.S.C. 1532), preparation of a written statement detailing the effect
of such an expenditure is not warranted.
F. Environmental Impact
    FRA has evaluated this interim final rule under the National
Environmental Policy Act (NEPA; 42 U.S.C. 4321 et seq.), other
environmental statutes, related regulatory requirements, and its
``Procedures for Considering Environmental Impacts'' (FRA's Procedures)
(64 FR 28545; May 26, 1999). FRA has determined that this interim final
rule is categorically excluded from detailed environmental review
pursuant to section 4(c)(20) of FRA's NEPA Procedures, ``Promulgation
of railroad safety rules and policy statements that do not result in
significantly increased emissions of air or water pollutants or noise
or increased traffic congestion in any mode of transportation.'' See 64
FR 28547 (May 26, 1999). Categorical exclusions (CEs) are actions
identified in an agency's NEPA implementing procedures that do not
normally have a significant impact on the environment and therefore do
not require either an environmental assessment (EA) or environmental
impact statement (EIS). See 40 CFR 1508.4.
    In analyzing the applicability of a CE, the agency must also
consider whether extraordinary circumstances are present that would
warrant a more detailed environmental review through the preparation of
an EA or EIS. Id. Under section 4(c) and (e) of FRA's Procedures, FRA
has further concluded that no extraordinary circumstances exist with
respect to this regulation that might trigger the need for a more
detailed environmental review. The purpose of this rulemaking is to
comply with the Inflation Act, as amended by the 2015 Inflation Act.
Specifically, FRA is adjusting the minimum, maximum, and aggravated
maximum penalty that it will apply when assessing a civil penalty for a
violation of a Federal hazardous materials law, regulation, special
permit, approval, or order. FRA does not anticipate any environmental
impacts from this requirement and finds there are no extraordinary
circumstances present in connection with this interim final rule.
G. Executive Order 12898 (Environmental Justice)
    Executive Order 12898, Federal Actions to Address Environmental
Justice in Minority Populations and Low-Income Populations, and DOT
Order 5610.2(a) (91 FR 27534; May 10, 2012) require DOT agencies to
achieve environmental justice as part of their mission by identifying
and addressing, as appropriate, disproportionately high and adverse
human health or environmental effects, including interrelated social
and economic effects, of their programs, policies, and activities on
minority populations and low-income populations. The DOT Order
instructs DOT agencies to address compliance with Executive Order 12898
and requirements within the DOT Order in rulemaking activities, as
appropriate. FRA has evaluated this interim final rule under Executive
Order 12898 and the DOT Order and has determined that it would not
cause disproportionately high and adverse human health and
environmental effects on minority populations or low-income
populations.

H. Executive Order 13175 (Tribal Consultation)
    FRA has evaluated this interim final rule under the principles and
criteria contained in Executive Order 13175, Consultation and
Coordination with Indian Tribal Governments, dated November 6, 2000.
The interim final rule would not have a substantial direct effect on
one or more Indian tribes, would not impose substantial direct
compliance costs on Indian tribal governments, and would not preempt
tribal laws. Therefore, the funding and consultation requirements of
Executive Order 13175 do not apply, and a tribal summary impact
statement is not required.

List of Subjects in 49 CFR Part 209

    Administrative practice and procedure, Hazardous materials
transportation, Penalties, Railroad safety, Reporting and recordkeeping
requirements.

The Interim Final Rule

    In consideration of the foregoing, part 209 of subtitle B, chapter
II of title 49 of the Code of Federal Regulations is amended as
follows:

PART 209--[AMENDED]

0
1. The authority citation for part 209 continues to read as follows:

    Authority:  49 U.S.C. 5123, 5124, 20103, 20107, 20111, 20112,
20114; 28 U.S.C. 2461, note; and 49 CFR 1.89.

0
2. Revise Sec.  209.103(a) and (c) to read as follows:

Sec.  209.103  Minimum and maximum penalties.

    (a) A person who knowingly violates a requirement of the Federal
hazardous materials transportation laws, an order issued thereunder,
subchapter A or C of chapter I, subtitle B, of this title, or a special
permit or approval issued under subchapter A or C of chapter I,
subtitle B, of this title is liable for a civil penalty of not more
than $77,114 for each violation, except that--
    (1) The maximum civil penalty for a violation is $179,933 if the
violation results in death, serious illness, or severe injury to any
person, or substantial destruction of property and
    (2) A minimum $463 civil penalty applies to a violation related to
training.
* * * * *
    (c) The maximum and minimum civil penalties described in paragraph
(a) above apply to violations occurring on or after August 1, 2016.

0
3. Revise the last sentence of Sec.  209.105(c) to read as follows:

Sec.  209.105  Notice of probable violation.

    (c) * * * In an amended notice, FRA may change the civil penalty
amount proposed to be assessed up to and including the maximum penalty
amount of $77,114 for each violation, except that if the violation
results in death, serious illness or severe injury to any person, or
substantial destruction of property, FRA may change the penalty amount
proposed to be assessed up to and including the maximum penalty amount
of $179,933.

Appendix B to Part 209--[Amended]

0
4. Amend appendix B to part 209 as follows:

0
a. In the introductory text, revise the second sentence of the first
paragraph, the last sentence of the second paragraph, and the next to
last sentence of the third paragraph;
0
b. In the table ``CIVIL PENALTY ASSESSMENT GUIDELINES,'' below the
heading ``PART 173--SHIPPERS--GENERAL REQUIREMENTS FOR SHIPMENTS AND
PACKAGES,'' revise the entry for ``Sec. Sec.  173.24(b)(1) and
173.24(b)(2) and 173.24(f)(1) and 173.24(f)(1)(ii)'', and revise the
entry for ``Sec.  173.24(c)''; and

0
c. Revise footnote 2.
    The revisions read as follows:

Appendix B to Part 209--Federal Railroad Administration Guidelines for
Initial Hazardous Materials Assessments

    * * * The guideline penalty amounts reflect the best judgment of
the FRA Office of Railroad Safety (RRS) and of the Safety Law Division
of the Office of Chief Counsel (RCC) on the relative severity of the
various violations routinely encountered by FRA inspectors on a scale
of amounts up to the maximum $77,114 penalty, except the maximum civil
penalty is $179,933 if the violation results in death, serious illness
or severe injury to any person, or substantial destruction of property,
and a minimum $463 penalty applies to a violation related to training.
* * *
    * * * When a violation of the Federal hazardous material
transportation law, an order issued thereunder, the Hazardous Materials
Regulations or a special permit, approval, or order issued under those
regulations results in death, serious illness or severe injury to any
person, or substantial destruction of property, a maximum penalty of at
least $77,114 and up to and including $179,933 shall always be assessed
initially.
    * * * In fact, FRA reserves the express authority to amend the NOPV
to seek a penalty of up to $77,114 for each violation, and up to
$179,933 for any violation resulting in death, serious illness or
severe injury to any person, or substantial destruction of property, at
any time prior to issuance of an order. * * *
Civil Penalty Assessment Guidlenes
* * * * *

PART 173--SHIPPERS--GENERAL REQUIREMENTS FOR SHIPMENTS AND PACKAGES

* * * * *

----------------------------------------------------------------------------------------------------------------
                                                                                Guideline
              49 CFR Section                                    Description                         amount \2\
----------------------------------------------------------------------------------------------------------------

----------------------------------------------------------------------------------------------------------------
                                                  * * * * * * *
173.24(b)(1) and 173.24(b)(2) and          Securing closures: These subsections are the general ``no leak''
 173.24(f)(1) and 173.24(f)(1)(ii).         standard for all packagings. Sec. 173.24(b) deals primarily with
                                            packaging as a whole, while Sec.   173.24(f) focuses on closures.
                                            Use Sec.   173.31(d) for tank cars, when possible. Cite the sections
                                            accordingly, using both the leak/non-leak criteria and the package
                                            size considerations to reach the appropriate penalty. Any actual
                                            leak will aggravate the guideline by, typically, 50%; a leak with
                                            contact with a human being will aggravate by at least 100%, up to
                                            the maximum of $77,114, and up to $179,933 if the violation results
                                            in death, serious illness or injury or substantial destruction of
                                            property. For intermodal (IM) portable tanks and other tanks of that
                                            size range, use the tank car penalty amounts, as stated in Sec.
                                            173.31.
                                           --Small bottle or box................................           1,000
                                           --55-gallon drum.....................................           2,500
                                           --Larger container, e.g., IBC; not portable tank or             5,000
                                            tank car..
                                          ----------------------------------------------------------------------

                                           --IM portable tank, cite Sec.   173.24(f) and use the penalty amounts
                                            for tank cars: Residue, generally, Sec.   173.29(a) and, loaded,
                                            Sec.   173.31(d).
                                          ----------------------------------------------------------------------
                                           --Residue adhering to outside of package (i.e.,                 5,000
                                            portable tanks, tank cars, etc.)..
173.24(c)................................  Use of package not meeting specifications, including required
                                            stencils and markings. The most specific section for the package
                                            involved should be cited (see below). The penalty guideline should
                                            be adjusted for the size of the container. Any actual leak will
                                            aggravate the guideline by, typically, 50%; a leak with contact with
                                            a human being will aggravate by at least 100%, up to the maximum of
                                            $77,114, and up to $179,933 if the violation results in death,
                                            serious illness or injury or substantial destruction of property.
                                          ----------------------------------------------------------------------
                                           --Small bottle or box................................           1,000
                                           --55-gallon drum.....................................           2,500
                                           --Larger container, e.g., IBC; not portable tank or             5,000
                                            tank car, but this section is applicable to a hopper
                                            car..
                                           For more specific sections: Tank cars-Sec.   173.31(a), portable
                                            tanks-Sec.   173.32, and IM portable tanks-Sec.  Sec.   173.32a,
                                            173.32b, and 173.32c.
----------------------------------------------------------------------------------------------------------------
* * * * *
\2\ A person who knowingly violates the hazardous material transportation law or a regulation, order, special
  permit, or approval issued thereunder, is subject to a civil penalty of up to $77,114 for each violation,
  except that the maximum civil penalty for a violation is $179,933 if the violation results in death, serious
  illness, or severe injury to any person or substantial destruction of property; and a minimum $463 civil
  penalty applies to a violation related to training. Each day that the violation continues is a separate
  offense. 49 U.S.C. 5123; 28 U.S.C. 2461, note.

Corey Hill,
Executive Director.
[FR Doc. 2016-15642 Filed 6-30-16; 8:45 am]
 BILLING CODE 4910-06-P