Food and Nutrition Service
Forest Service
Rural Business-Cooperative Service
Industry and Security Bureau
International Trade Administration
National Oceanic and Atmospheric Administration
Defense Acquisition Regulations System
Navy Department
Federal Energy Regulatory Commission
Agency for Healthcare Research and Quality
Children and Families Administration
Food and Drug Administration
National Institutes of Health
Federal Emergency Management Agency
U.S. Customs and Border Protection
Fish and Wildlife Service
Drug Enforcement Administration
Prisons Bureau
Employee Benefits Security Administration
Employment and Training Administration
Workers Compensation Programs Office
Federal Aviation Administration
Federal Highway Administration
Federal Motor Carrier Safety Administration
Pipeline and Hazardous Materials Safety Administration
Comptroller of the Currency
Internal Revenue Service
Consult the Reader Aids section at the end of this issue for phone numbers, online resources, finding aids, and notice of recently enacted public laws.
To subscribe to the Federal Register Table of Contents electronic mailing list, go to https://public.govdelivery.com/accounts/USGPOOFR/subscriber/new, enter your e-mail address, then follow the instructions to join, leave, or manage your subscription.
Department of Homeland Security (DHS).
Ratification.
The Department of Homeland Security, through its Acting Secretary, is publishing a notice of two ratification documents regarding a number of previous actions by the Department. The ratifications provide the public with certainty, by resolving any potential defect in the validity of those actions.
The ratification documents were signed on November 16, 2020 and relate back to the original date of each action ratified.
Leo (Chip) Boucher, Assistant General Counsel, Administrative Law, Office of the General Counsel, Department of Homeland Security, Washington, DC 20528, (202) 282-9822.
The Department of Homeland Security, through its Acting Secretary, is ratifying a number of previous actions by the Acting Secretary and by former Acting Secretary Kevin K. McAleenan, and one previous action by U. S. Citizenship and Immigration Services Deputy Director for Policy Joseph Edlow. The Department continues to maintain that the November 8, 2019, succession order designating Chad Wolf as Acting Secretary is valid and that Acting Secretary Wolf had the authority to take the actions being ratified in the attached appendix. And the Department continues to maintain that the April 9, 2019, succession order designating Kevin K. McAleenan as Acting Secretary was valid and that Acting Secretary McAleenan had the authority to take the actions being ratified in the appendix. The Department issued these ratifications and is now publishing them in the
Nuclear Regulatory Commission.
Final rule, correcting amendment.
The U.S. Nuclear Regulatory Commission (NRC) is correcting a final rule that appeared in the
This correction is effective on November 25, 2020.
Please refer to Docket ID NRC-2020-0125 when contacting the NRC about the availability of information for this action. You may obtain publicly-available information related to this action by any of the following methods:
•
•
•
Jill Shepherd, Office of Nuclear Material Safety and Safeguards, U.S. Nuclear Regulatory Commission, Washington, DC 20555-0001; telephone: 301-415-1230, email:
The NRC is correcting FR Doc. 20-21148, a final rule that was published in the
On page 65657, third column, under the heading “10 CFR part 73,” correct the paragraph “
Criminal penalties, Exports, Hazardous materials transportation, Incorporation by reference, Imports, Nuclear energy, Nuclear materials, Nuclear power plants and reactors, Penalties, Reporting and recordkeeping requirements, Security measures.
Accordingly, 10 CFR part 73 is corrected by making the following correcting amendments:
Atomic Energy Act of 1954, secs. 53, 147, 149, 161, 170D, 170E, 170H, 170I, 223, 229, 234, 1701 (42 U.S.C. 2073, 2167, 2169, 2201, 2210d, 2210e, 2210h, 2210i, 2273, 2278a, 2282, 2297f); Energy Reorganization Act of 1974, secs. 201, 202 (42 U.S.C. 5841, 5842); Nuclear Waste Policy Act of 1982, secs. 135, 141 (42 U.S.C. 10155, 10161); 44 U.S.C. 3504 note.
Section 73.1 also issued under Nuclear Waste Policy Act secs. 135, 141 (42 U.S.C. 10155, 10161).
Section 73.37(b)(2) also issued under Sec. 301, Public Law 96-295, 94 Stat. 789 (42 U.S.C. 5841 note).
Section 73.37(f) also issued under Sec. 301, Pub. L. 96-295, 94 Stat. 789 (42 U.S.C. 5841 note).
For the Nuclear Regulatory Commission.
Drug Enforcement Administration, Department of Justice.
Final rule.
The Drug Enforcement Administration places cyclopentyl fentanyl (
Effective date: November 25, 2020.
Scott A. Brinks, Regulatory Drafting and Policy Support Section, Diversion Control Division, Drug Enforcement Administration; Mailing Address: 8701 Morrissette Drive, Springfield, Virginia 22152; Telephone: (571) 362-3261.
The Controlled Substances Act (CSA) provides that proceedings for the issuance, amendment, or repeal of the scheduling of any drug or other substance may be initiated by the Attorney General (1) on his own motion; (2) at the request of the Secretary of the Department of Health and Human Services (HHS);
On February 1, 2018, DEA published an order in the
On November 12, 2019, the Assistant Secretary submitted HHS's scientific and medical evaluation and scheduling recommendation for cyclopropyl fentanyl,
After a review of the available data, including the scientific and medical evaluation and the scheduling recommendations from HHS, DEA published an NPRM entitled “Schedules of Controlled Substances: Placement of cyclopentyl fentanyl, isobutyryl fentanyl,
DEA received six comments on the proposed rule to permanently control cyclopentyl fentanyl, isobutyryl fentanyl,
As indicated above, the final rule being issued today applies to five fentanyl-related substances that were the subject of a February 1, 2018 temporary scheduling order (which was issued five days prior to the class-wide temporary scheduling of fentanyl-related substances). These five substances will now be listed in 21 CFR 1308.11(b), as specified in the text of the rule that appears below.
After consideration of the relevant matter presented through public comments, the scientific and medical evaluation and accompanying recommendation of HHS, and after its own eight-factor evaluation, DEA finds that these facts and all other relevant data constitute substantial evidence of the potential for abuse of cyclopentyl fentanyl, isobutyryl fentanyl,
The CSA establishes five schedules of controlled substances known as schedules I, II, III, IV, and V. The CSA also specifies the findings required to place a drug or other substance in any particular schedule. 21 U.S.C. 812(b). After consideration of the analysis and recommendation of the Assistant Secretary for HHS and review of all other available data, the Acting Administrator of DEA, pursuant to 21 U.S.C. 811(a) and 812(b)(1), finds the following:
(1) The abuse potential of cyclopentyl fentanyl, isobutyryl fentanyl,
(2) Cyclopentyl fentanyl, isobutyryl fentanyl,
i. The drug's chemistry must be known and reproducible;
ii. there must be adequate safety studies;
iii. there must be adequate and well-controlled studies proving efficacy;
iv. the drug must be accepted by qualified experts; and
v. the scientific evidence must be widely available.
57 FR 10499 (1992).
(3) There is a lack of accepted safety for use of cyclopentyl fentanyl, isobutyryl fentanyl,
Based on these findings, the Acting Administrator of DEA concludes that cyclopentyl fentanyl (
This final rule does not affect the scheduling of fentanyl itself, which remains a Schedule II controlled substance.
Cyclopentyl fentanyl, isobutyryl fentanyl,
1.
2.
3.
4.
5.
After the initial inventory, every DEA registrant must take a new inventory of all stocks of controlled substances (including cyclopentyl fentanyl, isobutyryl fentanyl,
6.
7.
8.
9.
In accordance with 21 U.S.C. 811(a), this final scheduling action is subject to formal rulemaking procedures performed “on the record after opportunity for a hearing,” which are conducted pursuant to the provisions of 5 U.S.C. 556 and 557. The CSA sets forth the criteria for scheduling a drug
This final rule does not meet the definition of an E.O. 13771 regulatory action. OMB has previously determined that formal rulemaking actions concerning the scheduling of controlled substances, such as this rule, are not significant regulatory actions under section 3(f) of E.O. 12866.
This regulation meets the applicable standards set forth in sections 3(a) and 3(b)(2) of E.O. 12988 to eliminate drafting errors and ambiguity, minimize litigation, provide a clear legal standard for affected conduct, and promote simplification and burden reduction.
This rulemaking does not have federalism implications warranting the application of E.O. 13132. The rule does not have substantial direct effects 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.
This rule does not have tribal implications warranting the application of E.O. 13175. It does not have substantial direct effects on one or more Indian tribes, on the relationship between the Federal government and Indian tribes, or on the distribution of power and responsibilities between the Federal government and Indian tribes.
The Acting Administrator, in accordance with the Regulatory Flexibility Act (RFA), 5 U.S.C. 601-602, has reviewed this final rule and, by approving it, certifies that it will not have a significant economic impact on a substantial number of small entities. On February 1, 2018, DEA published an order to temporarily place cyclopentyl fentanyl, isobutyryl fentanyl,
As discussed in the NPRM, there are 34 registrations authorized to handle one or more of the following substances: cyclopentyl fentanyl, isobutyryl fentanyl,
A review of the 34 registrations indicates that all entities that currently handle cyclopentyl fentanyl, isobutyryl fentanyl,
In accordance with the Unfunded Mandates Reform Act (UMRA) of 1995, 2 U.S.C. 1501
This action does not impose a new collection of information under the Paperwork Reduction Act of 1995. 44 U.S.C. 3501-3521. This action would not impose recordkeeping or reporting requirements on State or local governments, individuals, businesses, or organizations. 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.
This rule is not a major rule as defined by the Congressional Review Act (CRA), 5 U.S.C. 804. This rule will not result in: “an annual effect on the economy of $100 million or more; a major increase in costs or prices for consumers, individual industries, Federal, State, or local government agencies, or geographic regions; or significant adverse effects on competition, employment, investment, productivity, innovation, or on the ability of United States-based enterprises to compete with foreign-based enterprises in domestic and export markets.” However, pursuant to the CRA, DEA has submitted a copy of this final rule to both Houses of Congress and to the Comptroller General.
Administrative practice and procedure, Drug traffic control, Reporting and recordkeeping requirements.
For the reasons set out above, 21 CFR part 1308 is amended as follows:
21 U.S.C. 811, 812, 871(b), 956(b), unless otherwise noted.
The revisions and addition read as follows:
(b) * * *
In rule document 2020-13439 beginning on page 49724 in the issue of August 14, 2020, make the following correction:
Environmental Protection Agency (EPA).
Final rule.
The Environmental Protection Agency (EPA) is amending the Toxic Substances Control Act (TSCA) Chemical Data Reporting (CDR) regulations by extending the submission deadline for 2020 reports to January 29, 2021. This is the final extension for the 2020 submission period only. The CDR regulations require manufacturers (including importers) of certain chemical substances included on the TSCA Chemical Substance Inventory (TSCA Inventory) to report data on the manufacturing, processing, and use of the chemical substances.
This final rule is effective November 25, 2020.
The docket for this action, identified by docket identification (ID) number EPA-HQ-OPPT-2018-0321, is available at
Please note that due to the public health emergency the EPA Docket Center (EPA/DC) and Reading Room was closed to public visitors on March 31, 2020. Our EPA/DC staff will continue to provide customer service via email, phone, and webform. For further information on EPA/DC services, docket contact information and the current status of the EPA/DC and Reading Room, please visit
You may be potentially affected by this action if you manufacture (including import) chemical substances listed on the TSCA Inventory. The following list of North American Industrial Classification System (NAICS) codes is not intended to be exhaustive, but rather provides a guide to help readers determine whether this document applies to them. Potentially affected entities may include but are not limited to:
• Chemical manufacturers (including importers) (NAICS codes 325 and 324110,
• Chemical users and processors who may manufacture a byproduct chemical substance (NAICS codes 22, 322, 331, and 3344,
The current 2020 CDR submission period is from June 1 to November 30, 2020 (on April 9, 2020, EPA extended the September 30, 2020 deadline to November 30, 2020 (see 85 FR 19890)). EPA is issuing this amendment to extend the deadline for 2020 CDR submission reports until January 29, 2021. This is an extension for the 2020 submission period only: Subsequent submission periods (recurring every four years, next in 2024) are not being amended.
The Agency is taking this action in response to concerns raised by the regulated community about their ability to submit the required information within the prescribed period. Written requests to extend the CDR submission period have been received by the Agency starting in late-September. Copies of these letters are included in the docket (see
• Air Products and Chemicals, Inc. 2020 CDR 90-day Extension Request [Letter]. September 25, 2020. Certain information needed to inform submissions is stored off-site and reviewing in-person presents a logistical challenge because of the COVID-19 pandemic (administrative staff is currently on business-critical or work from home status). (Ref. 1.)
• American Chemistry Council (ACC). Request for an Extension to the TSCA Chemical Data Reporting (CDR)
• Household & Commercial Products Association (HCPA). Request for an Extension to the TSCA Chemical Data Reporting (CDR) 2020 Submission Period [Letter]. October 27, 2020. The pandemic has required the dedication of significant resources that would normally be compiling and developing the data for CDR and additional time is necessary to complete submissions. HCPA member companies are also reporting a number of significant issues with accessing and using the CDX system that has further impeded the submission process. (Ref. 3.)
• National Association of Chemical Distributors (NACD). Request for an Extension to the TSCA CDR 2020 Submission Period [Letter]. October 30, 2020. NACD members have reported ongoing problems within CDX, including system crashes, freezes, and sluggishness, difficulty loading pages, and an inability to display a preview of the final data before submission. There is also concern that the reported issues will continue and worsen as more users are logged into CDX and attempting to submit information. (Ref. 4.)
• Society of Chemical Manufacturers & Affiliates (SOCMA). Extension Request for the 2020 TSCA CDR Submission Period [Letter]. October 30, 2020. SOCMA members have reported a wide variety of technical problems with EPA's Chemical Data Exchange (CDX) system that have negatively impacted their ability to complete data submissions. This includes system-wide outages, slowdowns, inability to access and validate forms, and practical difficulties with completing joint co-manufacturing submissions. With only a month remaining before the submission deadline, the CDR reporting system continues to experience significant technical problems impeding the timely and thorough reporting of information on the production and use of chemicals in U.S. commerce. (Ref. 5.)
• American Coatings Association (ACA). Request for an Extension to the TSCA Chemical Data Reporting (CDR) 2020 Submission Period [Letter]. November 13, 2020. ACA member companies cited significant problems with bulk uploads under the CDX system in stating that an extension would ease difficulty in reporting while improving overall accuracy and quality of information submitted. In particular, ACA members have noted difficulties with bulk uploads under the CDX system, whereby system errors have not allowed members to submit files or the system improperly aligns data upon submission. ACA members also note that uploaded information fails to save, thereby requiring submitters to resubmit all information. Problems with bulk uploads have also extended to data required for CBI substantiation, where the CDX systems fails to capture all data submitted, jeopardizing claims of CBI. ACA recognizes that EPA and its contractor CGI have been working diligently to resolve these issues. (Ref. 6.)
The compelling concerns raised by industry involve restrictions on their ability to report as a result of issues with several aspects of electronic reporting. The issues are experienced by a number of submitters and have not been limited to any specific submitter or type of submitter. Using the test application, EPA confirmed the existence of these problems and the impact they had on the ability to report. Specifically, these issues include difficulties with making bulk uploads (
The Agency has worked to resolve reporting issues since learning of these issues. On November 6, 2020, EPA made the following updates to CDX: Updated validations to correct functionality, updated the functionality for co-manufactured chemicals, and updated the ability to preview the submission before submitting the report. On November 13, 2020, EPA made the following updates to CDX: Enabling reporting zero for the 2019 Production Volume when the chemical is reported as co-manufactured, and updating validations associated with not needing to report processing and use information when all of the 2019 volume is directly exported. EPA plans to deploy additional updates on November 20, 2020, including updated CBI substantiation validation and processes for co-manufactured chemicals. EPA is monitoring the implementation of these updates and will, if necessary, deploy additional updates to ensure full functionality of the reporting tool. The Agency continues to assist CDR reporters encountering issues and has been and will continue to develop rapid solutions to such issues via weekly patches to the eCDRweb reporting tool.
Because the electronic issues have been widespread, have prevented access to the reporting tool, have restricted the ability for companies to identify information that the company considers confidential, and have ultimately resulted in a reduction in the amount of time the Agency had alloted for the completion and submission of the report, EPA believes it is appropriate to extend the reporting period to provide the regulated community the time needed to complete and submit their reports. With respect to the timing of this action, the need for the Agency to extend the deadline arose as a result of issues experienced by the regulated community with several aspects of electronic reporting that were brought to the Agency's attention recently. The collective significance of these issues was not apparent until the Agency completed review of letters from Air Products and Chemicals, Inc.; the American Chemistry Council; the Household & Commercial Products Association; the National Association of Chemical Distributors; the Society of Chemical Manufacturers & Affiliates; and the American Coatings Association; dated September 25, 2020, October 26, 2020, October 27, 2020, October 30, 2020, October 30, 2020, and November 13, 2020 respectively (Refs. 1, 2, 3, 4, 5 and 6).
The Agency has quickly responded to reporting issues as they have arisen and has gained experience with the reporting tool and troubleshooting that will enable EPA to quickly and effectively respond to any additional problems that may arise following full implementation of the reporting tool fixes. While the Agency endeavors to ensure full functionality of the tool, glitches may arise, including in response to reporting tool patches or updates. EPA believes that the additional two-month extension period will help provide a buffer for any additional updates to the tool that may be needed. This extension will also provide reporters with sufficient time to carefully review and submit information through CDX, especially following any prior problems using the reporting tool. As a result, EPA believes that extending the reporting period to January 29, 2021 will provide sufficient time for reporting problems to be addressed and for reporters to timely submit information.
The CDR rule was issued pursuant to the authority of TSCA section 8(a), 15 U.S.C. 2607(a). In addition, section 553(b)(B) of the Administrative Procedure Act (APA), 5 U.S.C. 553(b)(B), provides that, when an agency for good cause finds that public notice and comment procedures are impracticable, unnecessary, or contrary to the public interest, the agency may issue a rule without providing notice and an opportunity for public comment. The EPA has determined that there is good cause for making this rule final, extending the reporting period, without prior proposal and opportunity for comment because such notice and opportunity for comment is impracticable and unnecessary for the reasons explained in this section.
As explained in the prior section, the extent of the electronic reporting issues has unexpectedly resulted in a reduction in the amount of time the Agency had alloted under the regulations for the completion and submission of the report. The extent of the electronic reporting issues was unforeseen, given that EPA conducted a beta test with expected users of the reporting tool prior to the beginning of the submission period. Further, most sites submit CDR data during the final month of the reporting period, having collected and prepared data earlier in the submission period. Thus, the extent and magnitude of these reporting issues did not become fully manifest prior to the close of October. Given that the current reporting deadline is November 30, 2020, notice and comment procedures are impracticable to extend that deadline to address these unforeseen circumstances because the typical notice and comment rulemaking process would not allow a rule to be finalized before the current reporting deadline. Additionally, notice and comment procedures are unnecessary because this extension of the deadline merely provides the time and opportunity to submit the report as was intended under the current regulations, absent these unforeseen circumstances, and does not impact the substance of the collection or other regulatory requirements.
As indicated above, the Agency recently learned that the regulated community was having difficulty related to the required electronic reporting mechanism. Individual entities provided information about technical issues, reporting difficulties, and complications resulting from the COVID-19 pandemic. EPA is including requests for extension in the docket. Given ongoing improvements to the functionality of the electronic reporting application, EPA is extending the reporting period until January 29, 2021.
This action does not alter the substantive CDR reporting requirements in any way. The Agency also believes this extension will not result in a significant delay in the processing and availability of CDR information to potential users. This extension will not significantly impact the Agency's ability to carry out actions and activities that rely upon CDR, including work on the TSCA risk evaluations. EPA will consider CDR information as soon as it becomes available and work on risk evaluations remains ongoing. Further, this action is consistent with the public interest because it is designed to facilitate compliance with the CDR rule and to ensure that the 2020 collection includes accurate data on chemical manufacturing, processing, and use in the United States. Any impact on the regulated community is expected to be beneficial given that the extension provides additional time to submit accurate CDR reports to EPA.
Finally, section 553(d)(3) of the APA, 5 U.S.C. 553(d), provides that final rules shall not become effective until 30 days after publication in the
For these reasons, the agency finds that good cause exists under APA section 553(d)(3) to make this rule effective immediately upon publication in the
The following is a listing of the documents that are specifically referenced in this document. The docket includes these documents and other information considered by EPA, including documents that are referenced within the documents that are included in the docket, even if the referenced document is not physically located in the docket. For assistance in locating these other documents, please consult the technical person listed under
1. Air Products and Chemicals, Inc. 2020 CDR 90-day Extension Request [Letter]. September 25, 2020.
2. American Chemistry Council. Request for an Extension to the TSCA Chemical Data Reporting (CDR) 2020 Submission Period [Letter]. October 26, 2020.
3. Household & Commercial Products Association. Request for an Extension to the TSCA Chemical Data Reporting (CDR) 2020 Submission Period [Letter]. October 27, 2020.
4. National Association of Chemical Distributors. Request for an Extension to the TSCA CDR 2020 Submission Period [Letter]. October 30, 2020.
5. Society of Chemical Manufacturers & Affiliates (SOCMA). Extension Request for the 2020 TSCA CDR Submission Period [Letter]. October 30, 2020.
6. American Coatings Association (ACA). Request for an Extension to the TSCA Chemical Data Reporting (CDR) 2020 Submission Period [Letter]. November 13, 2020.
Additional information about these statutes and Executive Orders can be found at
This action is classified as a final rule because it makes an amendment to the Code of Federal Regulations (CFR). The amendment to the CFR is necessary to allow for an extension to the 2020 CDR reporting period. This action does not impose any new requirements or amend substantive requirements. As such, this action is not a “significant regulatory action” under Executive Order 12866 (58 FR 51735, October 4, 1993) and Executive Order 13563 (76 FR 3821, January 21, 2011).
This action does not contain any new or revised information collections subject to OMB approval under the PRA, 44 U.S.C. 3501
This action is not subject to the RFA, 5 U.S.C. 601
This action will not impose any enforceable duty or contain any unfunded mandate as described under Title II of UMRA, 2 U.S.C. 1531-1538
This action will not have federalism impacts as defined in Executive Order 13132 (64 FR 43255, August 10, 1999) because this action will not have substantial direct effects on States, on the relationship between the Federal Government and States, or on the distribution of power and responsibilities between the Federal Government and States.
This action will not have tribal implications as defined in Executive Order 13175 (65 FR 67249, November 9, 2000) because this action will not have substantial direct effects on tribal governments, on the relationship between the Federal Government and Indian tribes, or on the distribution of power and responsibilities between the Federal Government and Indian tribes.
This action is not subject to Executive Order 13045 (62 FR 19885, April 23, 1997), because this is not an economically significant regulatory action as defined under Executive Order 12866, and it does not address environmental health or safety risks disproportionately affecting children.
This action is not subject to Executive Order 13211 (66 FR 28355, May 22, 2001), because this action is not expected to affect energy supply, distribution, or use and because this action is not a significant regulatory action under Executive Order 12866.
Since this action does not involve any technical standards, NTTAA section 12(d), 15 U.S.C. 272 note, does not apply to this action.
This action does not entail special considerations of environmental justice related issues as delineated by Executive Order 12898 (59 FR 7629, February 16, 1994).
This action is subject to the CRA, 5 U.S.C. 801
Environmental protection, Chemicals, Confidential Business Information (CBI), Hazardous materials, Importer, Manufacturer, Reporting and recordkeeping requirements.
Therefore, for the reasons stated in the preamble, EPA amends 40 CFR chapter I as follows:
15 U.S.C. 2607(a).
All information reported to EPA in response to the requirements of this part must be submitted during an applicable submission period. The 2020 CDR submission period is from June 1, 2020, to January 29, 2021. Subsequent recurring submission periods are from June 1 to September 30 at 4-year intervals, beginning in 2024. In each submission period, any person described in § 711.8 must report as described in this part.
National Marine Fisheries Service (NMFS), National Oceanic and Atmospheric Administration (NOAA), Commerce.
Temporary rule; apportionment of reserves; request for comments.
NMFS apportions amounts of the non-specified reserve to the initial total allowable catch (ITAC) of Bering Sea and Aleutian Islands (BSAI) arrowtooth flounder, BSAI “other flatfish,” Bering Sea subarea and Eastern Aleutian District (BS/EAI) blackspotted/rougheye rockfish, Western Aleutian District and Central Aleutian District (WAI/CAI) blackspotted/rougheye rockfish, BSAI skates; and to the total allowable catch (TAC) of BSAI Alaska plaice. This action is necessary to allow the fisheries to continue operating. It is intended to promote the goals and objectives of the fishery management plan for the BSAI management area.
Effective November 20, 2020, through 2400 hrs, Alaska local time, December 31, 2020. Comments must be received at the following address no later than 4:30 p.m., Alaska local time, December 7, 2020.
Submit your comments, identified by docket number NOAA-NMFS-2019-0074, by either of the following methods:
•
•
Steve Whitney, 907-586-7228.
NMFS manages the groundfish fishery in the BSAI exclusive economic zone according to the Fishery Management Plan for Groundfish of the BSAI Management Area (FMP) prepared by the North Pacific Fishery Management Council under authority of the Magnuson-Stevens Fishery Conservation and Management Act. Regulations governing fishing by U.S. vessels in accordance with the FMP appear at subpart H of 50 CFR part 600 and 50 CFR part 679.
The 2020 ITAC of BSAI arrowtooth flounder was established as 8,500 metric tons (mt), the 2020 ITAC of BSAI “other flatfish” was established as 3,600 mt, the 2020 ITAC of BS/EAI blackspotted/rougheye rockfish was established as 112 mt, the 2020 ITAC of WAI/CAI blackspotted/rougheye rockfish was established as 224 mt, the 2020 ITAC of BSAI skates was established as 13,866 mt, and the 2020 TAC of BSAI Alaska plaice was established as 17,450 mt by the final 2020 and 2021 harvest specifications for groundfish of the BSAI (85 FR 13553, March 9, 2020) and revised in the release of groundfish reserves (85 FR 49976, August 17, 2020). In accordance with § 679.20(a)(3) the Regional Administrator, Alaska Region, NMFS, has reviewed the most current available data and finds that the ITACs of the BSAI arrowtooth flounder, BSAI “other flatfish,” BS/EAI blackspotted/rougheye rockfish, WAI/CAI blackspotted/rougheye rockfish, BSAI skates; and the TAC of BSAI Alaska plaice need to be supplemented from the non-specified reserve to promote efficiency in the utilization of fishery resources in the BSAI and allow fishing operations to continue.
Therefore, in accordance with § 679.20(b)(3), NMFS apportions from the non-specified reserve of groundfish to ITACs in the BSAI management area as follows: 430 mt to BSAI arrowtooth flounder, 521 mt to BSAI “other flatfish,” 20 mt to BS/EAI blackspotted/rougheye rockfish, 40 mt to WAI/CAI blackspotted/rougheye rockfish, 3,340 mt to BSAI skates, and 2,600 mt to BSAI Alaska plaice. These apportionments are consistent with § 679.20(b)(1)(i) and do not result in overfishing of any target species because the revised ITACs and TACs are equal to or less than the specifications of the acceptable biological catch in the final 2020 and 2021 harvest specifications for groundfish in the BSAI (85 FR 13553, March 9, 2020).
The harvest specification for the 2020 ITACs and TACs included in the harvest specifications for groundfish in the BSAI are revised as follows: 8,930 mt for BSAI arrowtooth flounder, 4,121 mt for BSAI “other flatfish,” 20,050 mt for BSAI Alaska plaice, 17,206 mt for BSAI skates, 132 mt for BS/EAI blackspotted/rougheye rockfish, and 264 mt for WAI/CAI blackspotted/rougheye rockfish.
NMFS issues this action pursuant to section 305(d) of the Magnuson-Stevens Act. This action is required by 50 CFR part 679, which was issued pursuant to section 304(b), and is exempt from review under Executive Order 12866.
Pursuant to 5 U.S.C. 553(b)(B), there is good cause to waive prior notice and an opportunity for public comment on this action, as notice and comment would be impracticable and contrary to the public interest, as it would prevent NMFS from responding to the most recent fisheries data in a timely fashion and would delay the apportionment of the non-specified reserves of groundfish to the BSAI arrowtooth flounder, BSAI “other flatfish,” BS/EAI blackspotted/rougheye rockfish, WAI/CAI blackspotted/rougheye rockfish, BSAI skates, and to the BSAI Alaska plaice. NMFS was unable to publish a notice providing time for public comment because the most recent, relevant data only became available as of November 17, 2020.
Under § 679.20(b)(3)(iii), interested persons are invited to submit written comments on this action (see
16 U.S.C. 1801
National Marine Fisheries Service (NMFS), National Oceanic and Atmospheric Administration (NOAA), Commerce.
Temporary rule; closure.
NMFS is prohibiting directed fishing for arrowtooth flounder in the Bering Sea and Aleutian Islands management area (BSAI). This action is necessary to prevent exceeding the 2020 arrowtooth flounder initial total allowable catch (ITAC) in the BSAI.
Effective 1200 hours, Alaska local time (A.l.t.), November 20, 2020, through 2400 hours, A.l.t., December 31, 2020.
Steve Whitney, 907-586-7228.
NMFS manages the groundfish fishery in the BSAI according to the Fishery Management Plan for Groundfish of the Bering Sea and Aleutian Islands Management Area (FMP) prepared by the North Pacific Fishery Management Council under authority of the Magnuson-Stevens Fishery Conservation and Management Act. Regulations governing fishing by U.S. vessels in accordance with the FMP appear at subpart H of 50 CFR part 600 and 50 CFR part 679.
The 2020 arrowtooth flounder ITAC in the BSAI is 8,500 metric tons (mt) as established by the final 2020 and 2021 harvest specifications for groundfish in the BSAI (85 FR 13553, March 9, 2020). In accordance with § 679.20(d)(1)(i), the Administrator, Alaska Region, NMFS (Regional Administrator), has determined that the 2020 arrowtooth flounder ITAC in the BSAI will soon be reached. Therefore, the Regional Administrator is establishing a directed fishing allowance of 3,500 mt, and is
While this closure is effective the maximum retainable amounts at § 679.20(e) and (f) apply at any time during a trip.
NMFS issues this action pursuant to section 305(d) of the Magnuson-Stevens Act. This action is required by 50 CFR part 679, which was issued pursuant to section 304(b), and is exempt from review under Executive Order 12866.
Pursuant to 5 U.S.C. 553(b)(B), there is good cause to waive prior notice and an opportunity for public comment on this action, as notice and comment would be impracticable and contrary to the public interest, as it would prevent NMFS from responding to the most recent fisheries data in a timely fashion and would delay the closure of arrowtooth flounder in the BSAI. NMFS was unable to publish a notice providing time for public comment because the most recent, relevant data only became available as of November 18, 2020.
16 U.S.C. 1801
Food and Nutrition Service (FNS), USDA.
Proposed rule.
This rulemaking proposes to codify three menu planning flexibilities established by the interim final rule titled,
The USDA, Food and Nutrition Service invites interested persons to submit written comments on this proposed rule. USDA seeks comment on all aspects of this proposal.
Comments may be submitted in writing by one of the following methods:
•
•
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All written comments submitted in response to this proposed rule will be included in the record and will be made available to the public. Please be advised that the substance of the comments and the identity of the individuals or entities submitting the comments will be subject to public disclosure. FNS will make the written comments publicly available via
Tina Namian, Chief, School Programs Branch, Policy and Program Development Division, Food and Nutrition Service, telephone: 703-305-2590.
This rulemaking proposes to maintain operational flexibility in certain Child Nutrition Program requirements related to milk, grains, and sodium. The proposed changes are expected to be effective in the spring of 2021. The proposed changes to the milk, grains, and sodium requirements are discussed in detail in Section IV. This section provides an overview of administrative and legislative actions that precipitated this rulemaking.
The National School Lunch Program (NSLP) and School Breakfast Program (SBP) provide nutritious, well-balanced meals to millions of children each school day. Section 9(f)(1) of the Richard B. Russell National School Lunch Act (NSLA), as amended, 42 U.S.C. 1758(f)(1), requires that school meals are consistent with the goals of the latest Dietary Guidelines for Americans (Dietary Guidelines). FNS regulations at 7 CFR 210.10 and 220.8 detail the meal patterns and nutrition standards for the NSLP and SBP, respectively.
Section 201 of Public Law 111-296 (the Healthy, Hunger-Free Kids Act of 2010) amended Section 4(b) of the NSLA (42 U.S.C. 1753(b)), requires FNS to update the meal patterns and nutrition standards for school meals based on recommendations in a report issued by the Health and Medicine Division of the National Academies of Science, Engineering, and Medicine (formerly, the Institute of Medicine). In response, the final rule,
In 2012, FNS updated the NSLP and SBP meal requirements to reflect the latest Dietary Guidelines, as required by Section 9(a)(4) of the NSLA (42 U.S.C. 1758(a)(4)). The implementing regulations increased the availability of fruits, vegetables, whole grains, and fat-free and low-fat milk in school meals; required sodium and saturated fat limits; eliminated synthetic trans-fat in the weekly school menu; and established calorie ranges to reflect the age-appropriate calorie needs of children.
The regulations implemented in 2012 included three key changes with regard to the milk, grains, and sodium requirements:
• Allowed flavoring only in fat-free milk in the NSLP and SBP. Prior to 2012, schools could offer flavored or unflavored, fat-free, low-fat, reduced fat, or whole milk;
• Implemented whole grain requirements and required that half of the grains offered in the NSLP and SBP be whole grain-rich beginning in SY 2012-2013 and SY 2013-2014, respectively, and required that, effective SY 2014-2015, all grains offered in both programs be whole grain-rich (meaning the grain product contains at least 50 percent whole grains and the remaining grain content of the product must be enriched). Prior to 2012, grains had to be made from any combination of enriched grains, whole grains, bran, and/or germ; and
• Required schools participating in the NSLP and SBP to gradually reduce the sodium content of meals offered on average over the school week by meeting progressively lower sodium targets over a 10-year period. At the end of the 10-year period, the sodium reduction in school breakfast and lunch would be significant. For example, schools would have had to reduce the sodium content of the meals by approximately 25-50 percent from the 2012 baseline to meet the Final Sodium Target by SY 2022-2023 (July 1, 2022). Prior to 2012, there were no limits on sodium for school meals.
While some schools successfully implemented the updated nutrition standards, others required additional flexibility and support from FNS to meet the standards. FNS continued to hear about persistent challenges with the milk, grains, and sodium requirements. The challenges identified by schools included decreased student participation, decreased meal consumption, difficulties preparing whole grain-rich food items, and limited ability to offer appealing meals with lower sodium content.
The requirement to offer exclusively whole grain-rich products was particularly challenging for some schools and, due to a long history of administrative and legislative actions allowing exemptions, it was never fully implemented nationwide. Seeking to assist schools, FNS allowed enriched pasta exemptions for SYs 2014-2015 and 2015-2016. Through successive legislative action, Congress also provided flexibilities for the whole grain-rich requirements, expanding the pasta flexibility to include other grain products. Congress also repeatedly delayed compliance with Sodium Target 2 through Federal appropriations.
On May 1, 2017, the Secretary of Agriculture issued a Proclamation acknowledging the challenges that some schools faced in meeting milk, grains, and sodium requirements and committing to working with stakeholders to ensure that the requirements are practical and result in wholesome and appealing meals that schoolchildren enjoy eating. Subsequently, and consistent with the Consolidated Appropriations Act, 2017 (Pub. L. 115-31), FNS issued policy guidance (SP 32-2017, May 22, 2017,
The 2017 Interim Final Rule extended the flexibilities already allowed through policy guidance and previous appropriations legislation. In addition, the 2017 Interim Final Rule allowed milk flexibility in NSLP, SMP, SBP, and CACFP. Furthermore, the rule asked the public to submit comments on the long-term availability of the milk, grains, and sodium flexibilities. The 2017 Interim Final Rule generated significant interest. FNS received 86,247 comments, most of which were form letters that opposed the regulatory changes. Opponents argued that making the flexibilities permanent would undermine the progress already made and discourage continued progress, not support children's dietary habits, and increase children's risk of developing health problems. Opponents also argued that most schools were already compliant, and that the food industry has resources to support compliance. In general, proponents argued that the flexibilities would provide more menu planning options for schools, and thus enhance their ability to offer wholesome and appealing meals. They stated that the flexibilities would lead to increased participation and meal consumption. Writing in support of the changes, the School Nutrition Association, representing 57,000 members, urged FNS to adopt a permanent solution to operational challenges rather than temporary rules and annual waivers.
After careful consideration of the stakeholders' comments, FNS published the 2018 Final Rule giving schools the operational flexibility they needed to move forward with menu planning that met student preferences. In publishing the 2018 Final Rule, FNS determined that school nutrition operators made the case that the 2017 Interim Final Rule's targeted regulatory flexibility was practical and necessary for efficient Program operation and sought to improve student participation by enabling schools to offer children more appealing meals that would still be consistent with the goals of the DGAs. FNS recognized that allowing for taste preferences and operational flexibility was essential to incentivize the food industry's efforts to support the service of wholesome and appealing school meals.
In general, the 2018 Final Rule, which became effective July 1, 2019, for SY 2019-2020, codified the flexibilities offered in the 2017 Interim Final Rule with some modifications. The optional flexibilities codified in the 2018 Final Rule included the following targeted changes; the balance of the meal pattern remained intact:
• Allowing schools in the NSLP and SBP to offer flavored, low-fat milk (1-percent fat) at lunch and breakfast and as a beverage for sale à la carte, and requiring that unflavored milk (fat-free or low-fat) be available at each school meal service;
• requiring that half of the weekly grains in the NSLP and SBP be whole grain-rich and that the remaining weekly grains offered be enriched; and
• retaining Sodium Target 1 through SY 2023-2024, recognizing more time was needed for Target 2 and moving it to SY 2024-2025, and removing the Final Target.
On April 3, 2019, the Center for Science in the Public Interest challenged the 2018 Final Rule claiming that the regulation was unlawful under the Administrative Procedure Act. On April 13, 2020, a decision by the District of Maryland in
The District Court also concluded that the 2018 Final Rule was a reasonable interpretation of the relevant statutory language from the NSLA as it relates to the Dietary Guidelines and that the USDA was not arbitrary in its explanation for its decision making.
The NSLA states that schools must serve meals “consistent with the goals of the most recent” Dietary Guidelines, 42 U.S.C. 1758(f)(1)(A). It is well established by Federal courts that if a statute is silent or ambiguous with respect to the specific issue, an agency may provide an interpretation that is based on a permissible construction of the statute. As the District Court explained, the statutory language “consistent with the goals of” is ambiguous and may lead to numerous permissible interpretations. The District Court found that the USDA reasonably interpreted “consistent with the goals of” of the Dietary Guidelines to be a broad, deferential phrase that requires consistency with the ultimate objectives of the Dietary Guidelines—in this case, increasing whole-grain consumption and reducing sodium consumption—but that also provides USDA with flexibility to rely on its expertise to depart from the Dietary Guidelines specific consumption requirements. As the District Court decision explained, it is also reasonable for USDA to interpret “consistent
The NSLA states, that USDA shall “promulgate rules, based on the most recent Dietary Guidelines, that reflect specific recommendations, expressed in serving recommendations, for increased consumption of foods and food ingredients offered in school nutrition programs,” 42 U.S.C. 1758(a)(4)(B), and “promulgate proposed regulations to update the meal patterns and nutrition standards for the [school lunch and breakfast programs] . . . based on recommendations” in the School Meals Report Dietary Guidelines and the Food and Nutrition Board of the National Research Council of the National Academy of Sciences in its report entitled “
The 2018 Final Rule reflected this interpretation in that it used the recommendations in the Dietary Guidelines and the School Meals Report as a starting point, but provided an explanation for its departure from the specific consumption requirements based on taste and operational flexibilities, the role of product innovation, health, and the need for nationwide standards. Regarding whole grains, it explained that the whole grain-rich requirement in this final rule is a minimum standard, not a maximum, and reflects in a practical and feasible way the Dietary Guidelines' emphasis on whole grains consumption. Regarding sodium, the 2018 Final Rule explains that USDA's intention is to ensure that the sodium targets reflect the most current Dietary Guidelines, are feasible for most schools, and allow them to plan appealing meals that encourage consumption and intake of key nutrients that are essential for children's growth and development. Thus, the 2018 Final Rule demonstrated that the USDA used its expertise to balance the nutrition science in the Dietary Guidelines with the practical considerations of implementation.
In the promulgation of the 2018 rule, USDA considered student taste preferences, operational flexibilities, the role of product innovation, nutrition science, and student health. Federal courts have found that an agency's decision must show that it examined the relevant data and articulated a satisfactory explanation for its action including a rational connection between the facts found and the choice made. Furthermore, Federal courts have also found an agency's actions to be arbitrary if it does one of the following: Relies on factors that Congress did not intend for it to consider, entirely ignores important aspects of the problem, explains its decisions in a manner contrary to the evidence before it, or reaches a decision that is so implausible that it cannot be ascribed to a difference in view.
The District Court found that the USDA examined relevant data when it considered student taste preferences, operational flexibilities, and product innovation in formulating the 2018 Final Rule. Although USDA is required to consider certain factors, including nutritional science and the Dietary Guidelines, in establishing standards for the school meal programs, see,
The District Court found that the USDA had considered student taste preferences, operational flexibilities, and the role of product innovation at the expense of student health and nutritional science and balanced these considerations against each other. Concerning whole-grain requirements, the District Court found that the USDA was permitted to balance the nutritional benefits of whole grains against the need for gradual adjustments in school menu planning, procurement, and food service equipment. As for sodium requirements, the District Court found that the USDA did not act arbitrarily by balancing nutrition science, practical application of requirements, and the need to ensure that children receive wholesome and appealing meals. Furthermore, the 2018 Final Rule did explain that almost a quarter of schools had asked for hardship exemptions from the whole-grain rich requirement for SY 2017-2018 and that continuing to operate these nationwide programs in an ad hoc fashion, with recurrent exemptions, was not feasible. The Final Rule also made clear that it was a minimum standard, not a maximum and that program operators may exceed the 2018 Final Rule's minimum requirements, and that USDA would continue to provide training and technical assistance resources to assist schools in increasing whole-grain content and decreasing sodium content in school meals.
The USDA acknowledged in the 2018 Final Rule that it was shifting its policy to find a better balance of practical operational concerns with student health needs. Federal courts have repeatedly found that an agency may not depart from prior policy sub silentio or simply disregard rules that are still in effect. However, Federal courts have permitted an agency to change its existing policies if it provides a reasoned explanation for the change. The District Court found that the USDA offered a reasoned explanation for the change of policy from the 2012 Final Rule's whole grain requirements and sodium targets to the 2018 Final Rule. The 2018 Final Rule explained that the USDA balanced practical operational concerns with student health needs in forming the altered whole grains standard.
The District Court also found that the USDA's decision to delay Sodium Target 2 was similarly adequate. The 2018 Final Rule delayed this target to provide schools more time for gradual sodium reduction. USDA established this delay for practical reasons, such as the fact that many schools are not equipped for scratch cooking, which makes further sodium reduction challenging.
This more flexible approach to sodium reduction allows more time for product reformulation, school menu adjustments, food service changes, personnel training, and changes in student preferences. Keeping the original date for Sodium Target 2 could potentially lower the acceptance of meals by students, who are currently accustomed to eating foods with higher sodium content outside of school. This could negatively impact program participation and contribute to food waste. Regarding elimination of the Final Target, the District Court found that it was within USDA's discretion to wait until after the new Dietary Guidelines and DRIs were released to set any final targets for sodium content. The District Court found that the USDA adequately explained and acknowledged its shift in policy from the 2012 Final Rule to the 2018 Final Rule.
This proposed rule seeks to remedy the procedural issues in the 2018 Final Rule by proposing to codify the operational flexibilities offered in the 2018 Final Rule. Codifying these flexibilities would provide the operational flexibility schools had been calling for and that Congress had repeatedly required through appropriations, while reflecting the recommendations of the Dietary Guidelines, as Section 9(a)(4), 42 U.S.C. 1758(a)(4) requires. The targeted optional flexibilities offered in this proposed rule apply only to the milk, grains, and sodium requirements that were addressed in the 2018 Final Rule and to which schools are accustomed. This rulemaking would help schools continue to provide wholesome and appealing meals that reflect the Dietary Guidelines and meet the needs and preferences of their students.
Since publication of the 2018 Final Rule, several relevant actions have taken place. USDA's School Meals Nutrition Cost Study (SNMCS), a rigorous evaluation conducted by an independent contractor, found high compliance in a nationally representative sample of schools in SY 2014-2015. Compared to school meals served before the new standards (SY 2009-2010), breakfasts and lunches served in 2014-2015 scored more than 20 percentage points higher on the Healthy Eating Index (HEI), a measure of overall diet quality. Both breakfasts and lunches showed significant reductions in empty calories, added sugars, and refined grains, and significant improvements in total fruit, whole fruit, and whole grains.
On October 20, 2020, the U.S. Surgeon General released “The Surgeon General's Call to Action to Control Hypertension”
However, many schools reported challenges in implementing or maintaining compliance with certain nutrition standards, including the cost and availability of foods, limited staff and equipment resources, and difficulty understanding the new nutrition standards.
As previously stated, this rule proposes retaining Target 2, but allowing more time for product
FNS requests comments on the final flexibilities that were implemented in SY 2019-2020, which this rule proposes to codify without change. Comments on the day-to-day impact of these flexibilities from State agencies, schools, the food industry, nutrition advocates, parents and guardians, and other stakeholders will be extremely helpful in the development of the final rule. FNS will consider all relevant comments submitted during the 30-day comment period for this rulemaking, and intends to issue a final rule in spring 2021 to ensure that stakeholders can continue to rely on the operational flexibilities proposed in this rule.
As explained in detail in the 2017 Interim Final Rule, widespread improvements to the NSLP and SBP meal patterns were first implemented in 2012; since then administrative and Congressional action has provided short-term assistance to schools facing challenges in fulfilling certain requirements, namely the grains and sodium requirements. This approach, however, did not allow enough lead time to have a significant beneficial impact on menu planning, procurement, and contract decisions made in advance of the school year. To implement recurring appropriations legislation, FNS developed and disseminated policy memoranda to State agencies and schools. This created a time lag that reduced the potential impact of the flexibilities. It also caused confusion, as the Congressional flexibilities were limited to specific school years, and were therefore issued through multiple memoranda with various effective dates that State agencies and schools were required to track. For example, FNS issued several memoranda in response to annual appropriations legislation addressing the whole grain-rich requirement. These include SP 20-2015,
With these considerations in mind, FNS published the 2017 Interim Final Rule and, ultimately, the 2018 Final Rule related to milk, grains, and sodium. Through these actions, FNS responded to the need for more operational flexibilities to accommodate menu planning, procurement challenges, local operational differences, taste, and community preferences. These actions were targeted to the areas of the meal pattern that have been continually troublesome since its inception in 2012. This proposed rule seeks to respond to the need for continued flexibility regarding these specific requirements.
FNS recognizes that schools, for several years now, have come to rely on the operational flexibilities proposed in this rule. In fact, due to the continued Congressional and administrative actions described above, many schools have never truly implemented the 2012 requirements for grains as written in the 2012 Final Rule and have not prepared for stricter sodium standards. Moreover, once FNS took action on these flexibilities with a regulation, States and schools became even more reliant on the flexibilities. With the vacatur of the 2018 Final Rule, there is a renewed need for these operational flexibilities. Based on the District Court action, schools are expected to revert immediately to the previous requirements of the 2012 regulations. However, section 2202(a) of the Families First Coronavirus Response Act (the FFCRA) (Pub. L. 116-127), permits the Secretary to establish a waiver for the purpose of providing meals under the Child Nutrition Programs with appropriate safety measures with respect to COVID-19, which FNS recently extended in the Nationwide Waiver to Allow Meal Pattern Flexibility in the Child Nutrition Programs—Extension #5, and which remains in effect through June 30, 2021. Without additional regulatory action, schools will have to immediately implement Sodium Target 2 and ensure that all grains served are whole grain rich, and would be restricted from serving flavored low-fat milk upon expiration of the FFCRA waivers. Schools and manufacturers are unprepared for these immediate and drastic changes to the meal programs.
This proposed rule reinforces FNS's commitment to a process that will result in a final rule that provides long-term operational flexibility for the milk, grains, and sodium requirements and provides schools with adequate time to implement important changes. To require a return to these strict standards would be especially burdensome to schools who cannot meet these standards without continued operational flexibility.
As explained in detail in the 2017 Interim Final Rule, since 2012, the school food industry has advised FNS that product development and testing take considerable time.
Food manufacturers note that innovations for grain products can also take several years, and involve steps similar to those needed to reformulate products lower in sodium. The formulation and processing of foods made with whole grains differ from and can be more challenging to manufacture than those made with refined grains. Manufacturers have indicated that in the past, when companies reformulated products early, they incurred significantly more costs compared to those that took a “wait and see” approach. The persistent uncertainty about the whole grain-rich requirement and the possibility of further meal pattern changes resulting from legislative activity have deterred manufacturers from investing time or resources to develop additional whole grain-rich products.
While product-specific information is proprietary, the overwhelming and consistent message is that it will be difficult, time-consuming, and expensive to develop products that meet the final sodium target, and the 100 percent whole grain-rich requirement and that, most importantly, students will eat. Practically, even if the food industry is able to eventually develop products meeting these strict standards, if students will not eat them, there is no benefit to the strict standards. Instead, as proposed, the standards would allow for healthy products that are still acceptable to students. If the proposed standards are finalized, manufacturers will have the incentive to commit to reformulating products and work towards innovative solutions knowing that the program requirements are stable, attainable, and acceptable to students. Given their unique perspective on product development and reformulation, FNS welcomes input from the school food industry in developing the final rule.
This proposed rule seeks to address the operational challenges experienced by some schools. It seeks to ease specific requirements beginning in SY 2021-2022, to help children gradually adjust to and enjoy school meals that are consistent with science-based recommendations. This proposed rule seeks to give menu planners more flexibility to make procurement decisions that reflect local preferences, empowering them in ways that may increase student participation and meal consumption.
Although many schools have had success in implementing the 2012 meal patterns and nutrition standards, FNS recognizes that many schools have not yet fully implemented the 2012 meal patterns due to feasibility and student preferences. In fact, due to administrative and Congressional action many schools have never implemented the grains and sodium requirements as intended by the 2012 Final Rule. This proposed rule aims to ensure that the operational flexibilities would be available for those schools that need them. It is important to stress that the proposed changes are optional, intended as additional tools for schools across the country working to provide students with wholesome meals they enjoy eating. In addition, as noted in the 2017 Interim Final Rule and in the 2018 Final Rule, and as allowed in 7 CFR 210.19(e), State agencies have discretion to set stricter requirements that are not inconsistent with the minimum nutrition standards for school meals.
The 2012 Final Rule required milk offered in the NSLP, SBP, and CACFP to be fat-free or low-fat milk,
In this proposed rule, FNS seeks to continue the flavored milk flexibility, which has been available in some form since SY 2017-2018.
In addition, FNS proposes a technical correction to clarify in CACFP regulations that lactose-free and reduced-lactose fluid milk meet the CACFP meal pattern requirements for fluid milk. Current NSLP and SBP regulations allow schools to serve lactose-free and reduced-lactose milk to meet the fluid milk requirements for reimbursable meals (7 CFR 210.10(d) and 220.8(d)). FNS has clarified that these options are also available in CACFP through policy, and it is generally understood that lactose-free and reduced-lactose milk are considered fluid milk in the CACFP. Clarifying in CACFP regulations that lactose-free and reduced-lactose milk may be served as milk in reimbursable meals builds greater consistency in program regulations and is expected to reduce confusion for CACFP institutions and facilities, as well as families.
Through this proposal, FNS seeks to maintain operational regulatory flexibilities that schools have come to rely on, and that FNS believes may
Consistent with comments received for the 2017 Interim Final Rule and the requirement included in the 2018 Final Rule, this proposed rule would also require that schools that choose to offer flavored milk also offer unflavored milk (fat-free or low-fat) at each meal service. This proposal would ensure that milk variety in the NSLP and SBP is not limited to flavored milk, underscoring the importance of having unflavored milk as an option at each meal service. For example, parents and guardians may prefer that their child consumes unflavored milk, and unflavored milk may be a more appropriate pairing with a student's meal (
The proposed requirement to ensure that unflavored milk is available on the school breakfast and lunch menu would not apply in the NSLP afterschool snack service, the SMP, or the CACFP, consistent with existing requirements for those Programs. These meal services do not have a requirement to offer a variety of fluid milk, as they are smaller in size and generally have fewer resources than schools that participate in the NSLP and SBP.
Accordingly, this proposed rule seeks to amend the following milk provisions:
The 2012 Final Rule revised the NSLP and SBP meal patterns to require that, beginning in SY 2014-2015, all grains offered on the school menu meet the FNS whole grain-rich criteria. To meet FNS's whole grain-rich criteria, a product must contain at least 50 percent whole grains and the remaining grain content of the product must be enriched. Due to reported limitations on the availability of certain products that met this criterion when the whole grain-rich requirement first went into effect, FNS allowed State agencies the option to provide certain exemptions for SY 2014-2015. As noted earlier, successive legislative action in 2012, 2015, and 2016 impeded full implementation of the whole grain-rich requirement. For SY 2017-2018, Congress extended the option allowing State agencies to grant whole grain-rich exemptions to SFAs that requested exemptions and demonstrated hardship in procuring or preparing specific products that met the whole grain-rich criteria and were acceptable to students.
For SY 2018-2019, the 2017 Interim Final Rule provided State agencies discretion to grant exemptions to the whole grain-rich requirement to SFAs that demonstrated hardship in meeting the whole grain-rich criteria. SFAs that received an exemption were required to offer at least half of the weekly grains as whole grain-rich.
The 2018 Final Rule, implemented in SY 2019-2020, and vacated in April 2020, required that at least half of the weekly grains offered in the NSLP and SBP meet the whole grain-rich criteria specified in FNS guidance, and that the remaining grain items offered must be enriched; exemptions were no longer required. This decision, which was recommended by the School Nutrition Association, representing 57,000 school nutrition professionals, eliminated the requirement that SFAs request exemptions based on hardship, which many commenters, including State agencies and schools, described as burdensome. Due to the vacatur of the 2018 Final Rule, the 2012 requirements are currently in effect.
This rulemaking proposes to require that at least half of the weekly grains offered in the NSLP and SBP meet the whole grain-rich criteria specified in FNS guidance,
Maintaining the grains requirement that menu planners have grown accustomed to would allow schools to continue to provide menu items that meet local preferences. For example, since certain regional foods are not widely available in acceptable whole grain-rich varieties, granting more flexibility through this change would help ensure that schools have more options to meet the expectations of their students. This proposal would not require schools to submit whole grain-rich exemption requests based on hardship as was required in the 2017 Interim Final Rule.
As previously described, the requirement to offer exclusively whole grain-rich products has been challenging for some schools and, due to a long history of administrative and legislative actions allowing exemptions, it was never fully implemented nationwide. FNS recognizes that continually granting short-term exemptions to the whole grain-rich requirement has created confusion for menu planners. Schools and the food industry have requested a workable regulatory solution that provides the long-term operational flexibility needed for food procurement and product reformulation.
The whole grain-rich requirement in this proposed rule would remain a minimum—not a maximum—standard. By maintaining the whole grain-rich requirement that was in place from SY 2012-2013 through SY 2013-2014, and then again in SY 2019-2020, FNS acknowledges the nutritional benefits of whole grains, while emphasizing the need for taste and operational flexibility in school menu planning, procurement, and food service equipment. As noted above, the requirement is a minimum
FNS believes the food industry will continue efforts to develop more acceptable, affordable whole grain-rich products that are appealing to students. For instance, whole grain-rich pizza crust and different types of breads, such as whole grain-rich pita and flatbread, are now available to schools. In cases where additional product research and development continue to be necessary, this proposal would provide the food industry time to develop whole grain-rich food products that are suitable for reheating and hot holding, resulting in more acceptable meals for students. These appealing, new products could assist schools in sustaining student participation, encouraging meal consumption, and limiting food waste.
Accordingly, this proposed rule seeks to amend the following grains provisions:
The 2012 Final Rule also set average weekly sodium limits for school meals.
The 2017 Interim Final Rule retained Sodium Target 1 through SY 2018-2019, and requested comments on continuing Target 1 for a longer time period. It also retained Target 2 and the Final Target as part of the gradual sodium reduction timeline. The 2018 Final Rule, which was vacated in April 2020, provided schools even more time for gradual sodium reduction by maintaining Sodium Target 1 through the end of SY 2023-2024; delaying compliance with Target 2 until SY 2024-2025; and eliminating the Final Target. Due to the vacatur of the 2018 Final Rule, the 2012 requirements are currently in effect.
This proposed rule seeks to maintain Sodium Target 1 requirements through SY 2023-2024 (June 30, 2024); delay required compliance with Target 2 requirements to SY 2024-2025 (July 1, 2024); and remove the Final Target. This change to the sodium requirements is consistent with previous Congressional actions directing USDA to maintain Sodium Target 1.
While FNS recognizes the importance of reducing the sodium content of school meals, this proposal reflects a recognition that reaching this objective requires a more gradual process—extended beyond the planned 10 years. A 2019 FNS study on sodium found that many challenges to meeting stricter standards remain. Food manufacturers noted the difficulty of decreasing sodium in processed food products, including bakery items, when sodium serves a functional purpose (
By proposing to retain Sodium Target 2, FNS recognizes the need to continue improving the nutritional quality of school meals. Most Americans exceed the Dietary Guidelines' recommended intakes for sodium, including nearly 9 in 10 children.
FNS remains committed to strong nutrition standards for school meals, consistent with the statutory requirement that school meals reflect the Dietary Guidelines. In the 2018 Final Rule, FNS also indicated an intention to consider the ongoing update of the current Dietary Reference Intakes (DRI) for sodium and potassium.
In recognition of the need for continued review of the most current recommendations, as well as the need to provide adequate notice to stakeholders of any adjustments in the requirements, this proposed rule would retain the sodium reduction timeline set in the 2018 Final Rule. Extending Target 1, delaying Target 2 implementation, and refraining from setting sodium reduction goals beyond Target 2 would give FNS the opportunity to assess the impact of the forthcoming 2020 Dietary Guidelines on school meals and maintain the regulatory plan relied upon by schools and the food industry. This timeline is intended to address concerns regarding student acceptability and consumption of meals with lower sodium, food service operational issues, product reformulation and innovation challenges, and the importance of safeguarding the health of millions of schoolchildren.
Reverting to a more aggressive timeline while schools are facing the effects of a global pandemic would create challenges for which schools and the food industry are unprepared. The most recent data collected and analyzed by FNS on this topic indicated that 81 percent of schools were not meeting Target 2 sodium levels in SY 2014-2015.
Instead, the sodium timeline proposed by this rule would provide the operational flexibility and time necessary for manufacturers, producers, and vendors to develop and produce compliant products. This proposed rule acknowledges the persistent menu planning challenges experienced by schools, which have become infinitely more difficult during the ongoing global pandemic, seeks to balance nutrition science, practical application of requirements, and the need to ensure that children receive school meals they will eat, and reaffirms the agency's commitment to give schools more control over food service decisions and greater ability to offer wholesome and appealing meals that reflect local preferences.
FNS will continue to engage with the public, health advocates, nutrition professionals, schools, and the food industry to gather input on needs and challenges associated with managing sodium levels in school meals. In addition, FNS will continue to ensure that low-sodium products are offered through USDA Foods; develop recipes that assist with sodium reduction; and provide menu planning resources, technical assistance, and information to schools through the FNS Team Nutrition initiative.
Accordingly, this proposed rule seeks to amend the following sodium provisions:
Executive Orders 12866 and 13563 direct agencies to assess all costs and benefits of available regulatory alternatives and, if regulation is necessary, to select regulatory approaches that maximize net benefits (including potential economic, environmental, public health and safety effects, distributive impacts, and equity). Executive Order 13563 emphasizes the importance of quantifying both costs and benefits, of reducing costs, of harmonizing rules, and of promoting flexibility. This proposed rule has been determined to be economically significant and was reviewed by the Office of Management and Budget (OMB) in conformance with Executive Order 12866.
A regulatory impact analysis (RIA) must be prepared for major rules with economically significant effects ($100 million or more in any one year). This proposed rule is likely to have an economic impact of $100 million or more in any one year, and therefore, meets the definition of “economically significant” under Executive Order 12866. The RIA for the 2012 Final Rule, underscores the importance of recognizing the linkage between poor diets and health problems such as childhood obesity. In addition to the impacts on the health of children, the RIA also cites information regarding the social costs of obesity and the additional economic costs associated with direct medical expenses of obesity. The RIA for the 2012 Final Rule included a literature review to describe qualitatively the benefits of a nutritious diet to combat obesity and did not estimate individual health benefits or decreased medical costs that could be directly attributed to the changes in the 2012 Final Rule, due to the complex nature of factors that impact food consumption and obesity.
The Secretary of Agriculture acknowledged the operational challenges in meeting the meal standards related to flavored milk, whole grain-rich requirements, and sodium targets in the May 1, 2017, Proclamation and committed to working with stakeholders to ensure that school meal requirements are practical and result in wholesome and appealing meals. The 2017 Interim Final Rule, established regulations that extended
As noted in the preamble, on April 13, 2020, the decision in the
• Allow NSLP and SBP operators to permanently offer flavored, low-fat milk as part of the reimbursable meal and for sale as a competitive beverage. Also allow flavored, low-fat milk in the SMP and CACFP for participants ages 6 and older;
• Require that at least half of the weekly grains offered in the NSLP and SBP to be whole grain-rich; and
• Provide schools participating in the NSLP and SBP more time for gradual sodium reduction by retaining Sodium Target 1 through the end of SY 2023-2024; continuing to Target 2 in SY 2024-2025 and eliminating the Final Target.
FNS expects the health benefits of the meal standards, which are mainly left intact, to be similar to the overall benefits of improving the diets of children cited in the RIA for the 2012 Final Rule. While the changes in this proposed rule would provide operational flexibilities to the meal standards, the targeted nature of the three specific changes address persistent challenges with milk, grain, and sodium requirements. Schools must continue to meet the same caloric and fat limits specified in the 2012 Final Rule irrespective of whether they use the flexibilities proposed in this rule. The nation's students will continue to benefit from the changes in the 2012 Final Rule, and the health benefits of a nutritious diet to reduce obesity qualitatively described in the 2012 RIA still apply. The updated standards are associated with higher nutritional quality for lunches among low-income, low-middle-income, and middle-high income NSLP participants from 2013 to 2016 compared to nonparticipants.
As noted above, this proposed rule would ease the operational challenges associated with these three requirements while balancing the nutrition science and operational concerns. While there have been many successes in the implementation of the 2012 Final Rule,
FNS is committed to nutrition science, but also understands the importance of practical requirements for schools to successfully operate the Child Nutrition Programs. The changes set forth in this rule still show progress in school meal nutrition, and children would continue to be offered and exposed to a variety of nutritious food choices. Further, FNS does not anticipate this proposed rule would deter the significant progress made to date
Two key questions we would like response from the public on:
1. Is there any feedback on costs or benefits experienced in using the provided flexibilities since the Final Rule was enacted?
2. Are there any advantages or challenges from SFAs that are implementing these flexibilities to meet the weekly nutrient requirements (
FNS anticipates minimal if any costs associated with the proposed changes to the nutrition standards for milk, grains, and sodium. The overall meal components, macro nutrient, and calorie requirements for the lunch and breakfast programs remain unchanged. Schools would choose whether or not to use the milk flexibility, and may exceed the minimum whole grain-rich requirements and sodium standards proposed in this rule. While the average cost to produce a school lunch has increased significantly since SY 2005-2006, the higher nutritional quality of NSLP lunches did not cost significantly
As stated in the 2017 Interim Final Rule, there may be some cases in which flavored, low-fat milk is slightly more expensive, and some in which it is slightly less expensive, compared to the varieties currently permitted in the 2012 Final Rule. However, any overall difference in cost is likely to be minimal. The requirement that unflavored milk be offered at each school meal service is not expected to impact cost. Unflavored milk was a popular offering prior to the 2012 Final Rule. In SY 2009-2010, the most commonly offered milks were unflavored, low-fat (73 percent of all daily NSLP menus) and flavored, low-fat (63 percent).
The changes in this proposed rule would provide schools the operational flexibility to offer some non-whole grain-rich products that are appealing to students without the administrative burden of the exemption process. All grains offered were required to be whole grain-rich starting in SY 2014-2015; however exemptions were available to schools starting in the same year. Only 27 percent of weekly lunch menus offered only whole grain-rich items in SY 2014-2015. The majority (87 percent) of weekly lunch menus did offer at least 50 percent grains as whole grain-rich.
Relative to the 2012 Final Rule, the requirement that at least half of the weekly grains offered in NSLP and SBP are whole grain-rich may provide savings for some SFAs facing challenges procuring certain whole grain-rich products; however, FNS expects that as more products become available, any differential costs associated with whole grain-rich and non-whole grain-rich products will normalize in the market. The availability of whole grain-rich products through USDA Foods
This proposed rule would extend Sodium Target 1 through SY 2023-2024, require compliance with Sodium Target 2 in SY 2024-2025, and would eliminate the final Sodium Target. The extension of Target 1 and the resulting delay of the implementation of Target 2 to SY 2024-2025 would provide additional time to assess potential changes, including regulatory adjustments to incorporate updated recommendations from the 2020 Dietary Guidelines for Americans. FNS recognizes the need for sodium reduction in school meals and is retaining Target 2 in this proposed rule.
FNS anticipates schools will continue their efforts to reduce sodium in school meals while industry will continue to work towards lower sodium formulations. FNS does not anticipate any measurable costs associated with this change, as it allows additional time for schools and industry to reduce sodium levels in meals with practical requirements.
There were about 20 comment submissions that provided input on risks or benefits of the 2017 Interim Final Rule. The comments expressed concern that the flexibilities could lower health benefits over time of the meal standards if children are offered more sodium, fewer whole grain-rich foods, and milk with higher calories and saturated fat. The following sections review the changes and provide additional information regarding potential nutritional impacts.
In this proposed rule, FNS would allow NSLP and SBP operators the
As noted in the 2017 Interim Final Rule, the regulatory impact analyses for the 2012 Final Rule did not estimate the health benefits associated with specific changes in meal components such as the exclusion of flavored, low-fat milk. The decision to allow flavored low-fat milk reflects the concerns of declining milk consumption and the importance of the key nutrients provided by milk for school-aged children.
Menu planners must make necessary adjustments in the weekly menu to account for the additional calories and fat content associated with offering flavored low-fat milk because this proposed rule would not change the upper caloric and fat limits specified in the 2012 Final Rule. The requirement to offer unflavored milk at each meal service ensures that students would have access to a choice in milk types and also prevents schools from only offering different flavored milk types to satisfy the milk variety requirement. FNS estimates the nutritional impact of allowing flavored, low-fat milk to be minimal. The added calories and fat would be managed by the upper caloric and fat limits. Further, student intake of key nutrients provided through milk would increase if milk consumption increases, including calcium, vitamin D, and vitamin B12, helping participants meet the Dietary Reference Intakes.
School Nutrition and Meal Cost Study on SY 2014-2015 found that “the vast majority of average weekly lunch menus were consistent with the DRI-based target for calcium (91 percent to virtually all weekly menus). This is driven by the fact that virtually all NSLP lunches prepared included a serving of milk (typically one cup), which provides all or most of the targeted amount of calcium.” Similarly, the study also found that milk accounts for 10 percent of dietary fiber at breakfast. And that “lunches consumed by NSLP participants provided significantly more vitamins D and B12, on average, than lunches consumed by matched nonparticipants. This finding is consistent with the fact that NSLP participants were more likely than matched nonparticipants to consume milk at lunch.”
Starting in SY 2021-2022, this proposed rule would require that at least half of the weekly grains offered in the NSLP and SBP meet the whole grain-rich criteria specified in FNS guidance, and the remaining grain items offered must be enriched. This flexibility would ease burden while ensuring the majority of the changes resulting from the 2012 Final Rule remain intact.
The requirement to offer all whole grain-rich items was never fully implemented due to a long history of administrative and legislative actions allowing exemptions. As noted earlier in SY 2014-2015, the first year in which all grains were required to be whole grain-rich, only 27 percent of weekly lunch menus actually met this requirement. However, the majority (87 percent) of weekly lunch menus offered at least 50 percent of the grains as whole grain-rich. In SBP, about half of all weekly breakfast menus offered only whole grain-rich grains, while 95 percent of all weekly breakfast menus offered at least 50 percent of the grains as whole grain-rich. However, schools still made considerable progress offering whole grain-rich products.
In SY 2014-2015, even though almost three quarters of weekly lunch menus did not meet the 100 percent whole grain-rich requirement, the HEI-2010 component score
U.S. Department of Agriculture, Food and Nutrition Service, School Nutrition and Meal Cost Study Final Report Volume 2: Nutritional Characteristics of School Meals, by Elizabeth Gearan et. al. Project Officer, John Endahl, Alexandria, VA: April 2019. Available online at:
Schools that have already made strides toward meeting the 100 percent whole grain-rich requirement can continue their current path with the flexibility to accommodate local preferences and intermittent challenges related to the food supply or market. Industry continues to work diligently to increase the number of products reformulated to be whole grain-rich and appealing to students. While significant progress has been made, schools still face challenges with serving all whole grain-rich items. In SY 2014-2015, more than half of students who had ever eaten a school lunch reported that they never or only sometimes liked the whole grain-rich foods that were available.
FNS does not have evidence that setting the whole grain-rich requirement to a percentage between 50 and 100 percent would successfully address the specific concerns and challenges cited by this requirement. Schools should be mindful of the progress to-date by ensuring school meal participants are continuously exposed to whole grain-rich offerings. Both NSLP and SBP participants had significantly higher usual daily intakes of whole grains than similar students not eating school meals. Specifically, NSLP participants were more likely than nonparticipants to consume a whole grain-rich bread, roll, bagel, and other plain bread.
The proposed change would result in some decrease in whole grain-rich offerings, and children may not receive the same level of key nutrients associated with whole grain-rich items. This rule would not change requirement that the grains that are not whole must be enriched.
By continuing to require that at least half of the offered grain items be whole grain-rich, this rule would continue to ensure that children are exposed to whole grain-rich products. The change in this proposed rule would allow more time for industry to develop appealing whole grain-rich items. Additionally, USDA Foods, which makes up about 15 to 20 percent of the food items offered on an average school day, continues to develop new whole grain-rich products each year. This proposed flexibility would allow additional flexibility for schools that are still struggling to serve all whole grain-rich products and would allow for additional time for the availability of innovative whole grain-rich items.
This proposed rule would extend Sodium Target 1 through the end of SY 2023-2024, require compliance with Sodium Target 2 starting in SY 2024-2025, and eliminate the Final Target that would have gone into effect in SY 2022-2023. In SY 2014-2015, the first year Target 1 was scheduled to take effect, 72 percent of all average weekly NSLP menus, and 67 percent of all average weekly SBP menus met Target 1.
There has been significant progress to date with sodium reduction in school meals. From SY 2009-2010 to SY 2014-2015, the average sodium content of NSLP lunches served decreased by 19 percent (from 1,375 mg to 1,105 mg).
Prior to the updated 2012 standards, sodium levels only slightly decreased between 5-year periods, by 2 percent overall for NSLP lunches and 11 percent for SBP breakfasts between SY 2004-2005 and SY 2009-2010. The updated standards had a significant impact on sodium levels in the school meal programs.
School children are consuming a considerable amount of sodium, and school meals contribute to their daily total. In 2011-2012, more than 9 in 10 U.S. school children consumed more sodium than the age-specific Tolerable Upper Intake Level established by the Food and Nutrition Board, NASEM (over 130 to 150 percent of the daily recommended amount).
In SY 2014-2015, 81 percent of NSLP participants and similar nonparticipants had usual sodium intakes that exceeded the Tolerable Upper Intake Level recommended in the 2010 Dietary Guidelines for Americans. Lunches consumed by NSLP participants provided significantly less sodium than lunches consumed by similar nonparticipants.
The impact of extending Sodium Target 1 through SY 2023-2024 increases the average daily sodium level permitted by about 55-70 mg for breakfast and 300-340 mg for lunch depending on the age/grade group compared to Sodium Target 2. In SY 2014-2015, about 19 percent of average weekly NSLP menus met Target 2, and 52 percent of average weekly SBP menus met Target 2.
The extension of Target 1 and delay in Target 2 would provide additional time for FNS to assess the 2020 Dietary Guidelines for Americans, which are scheduled for release at the end of 2020. Extending the Sodium Target 1 through SY 2023-2024 would allow FNS to incorporate the latest scientific evidence into the school meal standards, including time needed for potential regulatory changes. The updated DRIs, as noted in the preamble of this rule, were released in 2019. The updated DRIs recommend lower levels of sodium intake for children ages 1 to 13 years.
The DRI recommendations update the 2005 DRI for sodium and incorporate the new DRI concept of dietary intake recommendations to reduce the risk of chronic disease. As part of the new DRI concept, the 2019 DRI on sodium includes a Chronic Disease Risk Reduction Intake (CDRR) level for all age groups over 12 months of age. The risk that was previously captured in the Tolerable Upper Intake Level (UL) of the 2005 DRI for sodium is now captured in the CDRR. To reduce the risk of chronic disease in the population, daily sodium intakes should be below the CDRR.
The 2019 CDRR daily level for sodium for children aged 14 to 18 years is 2300 mg/day, the same level as the 2005 UL. However, the 2019 CDRR daily level for younger children is lower than the 2005 UL. This means prior to the 2019 DRIs update, Sodium Target 2 would have accounted for 71 to 74 percent of the UL compared to accounting for 87 to 95 percent of the new CDRR for the K-5 and 6-8 age grade/group.
Salt preferences develop in childhood and can influence long term sodium intakes. In adults, there is moderate to strong evidence for a causal and intake-response relationship between sodium intake and cardiovascular risk factors, including hypertension. Reducing daily sodium intake below the CDRR reduces these risks and would particularly
Despite insufficient evidence to assess the relationship of sodium intake and cardiovascular risk in children, the development of salt preferences early in life, evidence that blood pressure and cardiovascular disease risk factors track from early childhood into adulthood, and the public health importance of cardiovascular health, contributed to the rational for establishing the CDRR for children and adolescents.
FNS is mindful of the change in sodium recommendations, which will be considered in the 2020 Dietary Guidelines for Americans. Publication of the 2020 Dietary Guidelines will provide an additional opportunity to assess the impact of the recommendations on school meals. FNS remains committed to strong nutrition standards for school meals, consistent with the statutory requirement that school meals reflect the Dietary Guidelines, including sodium targets that are achievable for most schools, and allow schools to plan appealing meals that encourage student participation.
The proposed changes in this rule would allow the slow introduction to lower sodium foods and meals to students and for industry to develop and test consistent lower sodium products that are palatable for students. According to a 2019 FNS study on successful approaches to reduce sodium, SFAs noted that there needs to be a gradual change to give time for students to adjust to taste/flavor change. Gradual implementation allowed students adequate time to adjust and increase acceptance.
While the majority of average weekly menus in SY 2014-2015 met Sodium Target 1,
There were also concerns from Food Service Management Companies (FSMCs) that the Final Sodium Target could create inequities across companies. Larger FSMCs indicated they were positioned and equipped to meet sodium targets in different ways than smaller FSMCs. Larger FSMCs have a broader capacity to work with food manufacturers compared to the smaller, more regional FSMCs. There was also concern that the Final Sodium Target may be so low in sodium that it will affect the ability to produce processed food products, including bakery items, when sodium serves a functional purpose (
The proposed flexibilities to the nutrition standards would allow additional time to work with available products to provide wholesome and appealing meals to students within available resources. This may increase student consumption of school meals and reduce food waste and revenue loss. While the changes resulting from the 2012 Final Rule may not have resulted in long-term impacts for participation in some schools,
The Regulatory Flexibility Act (5 U.S.C. 601-612) requires Agencies to analyze the impact of rulemaking on small entities and consider alternatives that would minimize any significant impacts on a substantial number of small entities. Pursuant to that review, it has been certified that this rule would not have a significant impact on a substantial number of small entities.
This proposed rule would not have an impact on small entities because it adds flexibility to current Child Nutrition Program regulations, the changes
Pursuant to the Congressional Review Act (5 U.S.C. 801
Executive Order 13771 directs agencies to reduce regulation and control regulatory costs and provides that the cost of planned regulations be prudently managed and controlled through a budgeting process. This proposed rule's designation under E.O. 13771 will be informed by comments received. It alleviates the milk, grains, and sodium requirements in the Child Nutrition Program and provides flexibilities similar to those made available as a result of appropriations legislation in effect for SY 2017-2018 and administrative actions.
Title II of the Unfunded Mandates Reform Act of 1995 (UMRA), Public Law 104-4, establishes requirements for Federal agencies to assess the effects of their regulatory actions on State, local, and Tribal governments and the private sector. Under section 202 of the UMRA, the Department generally must prepare a written statement, including a cost benefit analysis, for proposed and final rules with “Federal mandates” that may result in expenditures by State, local or Tribal governments, in the aggregate, or the private sector, of $146 million or more (when adjusted for inflation; GDP deflator source: Table 1.1.9 at
This proposed rule does not contain Federal mandates (under the regulatory provisions of Title II of the UMRA) for State, local and Tribal governments or the private sector of $146 million or more in any one year. Thus, the rule is not subject to the requirements of sections 202 and 205 of the UMRA.
The NSLP, SMP, SBP, and the CACFP are listed in the Catalog of Federal Domestic Assistance under NSLP No. 10.555, SMP No. 10.556, SBP No. 10.553, and CACFP No. 10.558, respectively, and are subject to Executive Order 12372, which requires intergovernmental consultation with State and local officials. (See 2 CFR chapter IV.)
Since the Child Nutrition Programs are State-administered, USDA's FNS Regional Offices have formal and informal discussions with State and local officials, including representatives of Indian Tribal Organizations, on an ongoing basis regarding program requirements and operations. This provides FNS with the opportunity to receive regular input from program administrators and contributes to the development of feasible program requirements.
Executive Order 13132 requires Federal agencies to consider the impact of their regulatory actions on State and local governments. Where such actions have federalism implications, agencies are directed to provide a statement for inclusion in the preamble to the regulations describing the agency's considerations in terms of the three categories called for under Section (6)(b)(2)(B) of Executive Order 13132.
The Department has considered the impact of this proposed rule on State and local governments and has determined that this rule does not have federalism implications. Therefore, under section 6(b) of the Executive Order, a federalism summary is not required.
This proposed rule has been reviewed under Executive Order 12988, Civil Justice Reform. This rule is intended to have preemptive effect with respect to any State or local laws, regulations or policies which conflict with its provisions or which would otherwise impede its full and timely implementation. This rule is not intended to have retroactive effect. Prior to any judicial challenge to the provisions of the final rule, all applicable administrative procedures must be exhausted.
FNS has reviewed the proposed rule, in accordance with Department Regulation 4300-004, Civil Rights Impact Analysis, to identify and address any major civil rights impacts the rule might have on minorities, women, and persons with disabilities. A comprehensive Civil Rights Impact Analysis (CRIA) was conducted on the proposed rule, including an analysis of any available participant data and provisions contained in the rule. The CRIA outlines mitigation, outreach, and monitoring and evaluation strategies to lessen any possible civil rights impacts. FNS finds the implementation of the mitigation, outreach, and monitoring and evaluation strategies outlined in the CRIA by the FNS Civil Rights Division and FNS Child Nutrition staff may lessen these impacts. If deemed necessary, the FNS Civil Rights Division will propose additional mitigation strategies to alleviate impacts that may result from the implementation of this rule.
This rule has been reviewed in accordance with the requirements of Executive Order 13175, “Consultation and Coordination with Indian Tribal Governments.” Executive Order 13175 requires Federal agencies to consult and coordinate with tribes on a government-to-government basis on policies that have tribal implications, including regulations, legislative comments or proposed legislation, and other policy statements or actions that have substantial direct effects on one or more Indian tribes, on the relationship between the Federal Government and Indian tribes, or on the distribution of power and responsibilities between the Federal Government and Indian tribes.
The Office of Tribal Relations (OTR) has assessed the impact of this proposed rule on Indian tribes and determined that this rule does not, to the best of its knowledge, have tribal implications that require tribal consultation under E.O. 13175. If consultation is requested, OTR will work with FNS to ensure quality consultation is provided.
The Paperwork Reduction Act of 1995 (44 U.S.C. Chap. 35; 5 CFR part 1320) requires the Office of Management and Budget (OMB) to approve all collections of information by a Federal agency before they can be implemented. Respondents are not required to respond to any collection of information unless it displays a current valid OMB control number. This rule contains information collections that have been approved by OMB under OMB #0584-0006 (7 CFR part 210 National School Lunch Program), expires 7/31/2023; OMB #0584-0012 (7 CFR part 220, School Breakfast Program) expires 4/30/2022; OMB # 0584-0005 (7 CFR part 215—Special Milk Program for Children)
The Department is committed to complying with the E-Government Act of 2002 to promote the use of the internet and other information technologies to provide increased opportunities for citizen access to Government information and services, and for other purposes.
Grant programs—education, Grant programs—health, Infants and children, Nutrition, Penalties, Reporting and recordkeeping requirements, School breakfast and lunch programs, Surplus agricultural commodities.
Food assistance programs, Grant programs—education, Grant program—health, Infants and children, Milk, Reporting and recordkeeping requirements.
Grant programs—education, Grant programs—health, Infants and children, Nutrition, Reporting and recordkeeping requirements, School breakfast and lunch programs.
Accounting, Aged, Day care, Food assistance programs, Grant programs, Grant programs—health, American Indians, Individuals with disabilities, Infants and children, Intergovernmental relations, Loan programs, Reporting and recordkeeping requirements, Surplus agricultural commodities.
Accordingly, 7 CFR parts 210, 215, 220 and 226 are proposed to be amended as follows:
42 U.S.C. 1751-1760, 1779.
The revisions and addition read as follows:
(c) * * *
(2) * * *
(iv) * * *
(A) * * * The whole grain-rich criteria included in FNS guidance may be updated to reflect additional information provided by industry on the food label or a whole grains definition by the Food and Drug Administration.
(B)
(d) * * *
(1) * * *
(i) Schools must offer students a variety (at least two different options) of fluid milk. All milk must be fat-free (skim) or low-fat (1 percent fat or less). Milk with higher fat content is not allowed. Low-fat or fat-free lactose-free and reduced-lactose fluid milk may also be offered. Milk may be unflavored or flavored provided that unflavored milk is offered at each meal service.
(f) * * *
(3)
42 U.S.C. 1772 and 1779.
(a) * * *
(3)
42 U.S.C. 1773, 1779, unless otherwise noted.
(c) * * *
(2) * * *
(iv) * * *
(A)
(B)
(d)
(f) * * *
(3)
Secs. 9, 11, 14, 16, and 17, Richard B. Russell National School Lunch Act, as amended (42 U.S.C. 1758, 1759a, 1762a, 1765 and 1766).
(a) * * *
(1)
(i)
(ii)
(iii)
(iv)
(c) * * *
(1) * * *
(2) * * *
(3) * * *
Office of the Comptroller of the Currency, Treasury.
Notice of proposed rulemaking.
The Office of the Comptroller of the Currency is proposing a regulation to ensure that national banks and Federal savings associations offer and provide fair access to financial services.
Comments must be received on or before January 4, 2021.
Commenters are encouraged to submit comments through the Federal eRulemaking Portal, if possible. Please use the title “Fair Access to Financial
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You may review comments and other related materials that pertain to this rulemaking action through
Karen McSweeney, Special Counsel, or Emily Boyes, Counsel, Chief Counsel's Office, (202) 649-5490, Office of the Comptroller of the Currency, 400 7th Street SW, Washington, DC 20219.
Title III of the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank Act) included a revised statement of the mission of the Office of the Comptroller of the Currency (OCC or agency).
In one respect, the Dodd-Frank Act's amendments to 12 U.S.C. 1 recognized a broad and longstanding anti-discrimination principle that individuals are entitled to be treated fairly by national banks and Federal savings associations (banks). That principle is reinforced by specific laws such as the Equal Credit Opportunity Act, Fair Housing Act, and Community Reinvestment Act, among others. In another respect, the Dodd-Frank Act's articulation of “fair access” as a distinct concept implies a right of individual bank customers, whether natural persons or organizations, to have access to financial services based on their individual characteristics and not on their membership in a particular category of customers.
Consistent with the Dodd-Frank Act's mandate of fair access to financial services and since at least 2014, the OCC has repeatedly stated that while banks are not obligated to offer any particular financial service to their customers, they must make the services they do offer available to all customers except to the extent that risk factors particular to an individual customer dictate otherwise. As the OCC's then-Comptroller stated in a 2014 speech:
No matter what type of business you are dealing with, you have to exercise some sound judgment, conduct your due diligence, and evaluate customers individually. Even in areas that traditionally have been viewed as inherently risky, you should be able to appropriately manage the risk. This is basic risk management, and that's a business that the institutions we at the OCC supervise excel at. You shouldn't feel that you can't bank a customer just because they fall into a category that on its face appears to carry an elevated level of risk. Higher-risk categories of customers call for stronger risk management and controls, not a strategy of total avoidance. Obviously, if the risk posed by a business or an individual is too great to be managed successfully, then you have to turn that customer away. But you should only make those decisions after appropriate due diligence.
This principle of individual, rather than category-based, customer risk evaluation has since been reinforced in numerous OCC reports, the testimony of OCC officials, and other agency releases.
On at least two occasions, the OCC has issued guidance to specifically address reports of banks refusing to provide access to financial services to entire industry categories engaged in lawful business activities without regard to the risk factors of the individual customers in these industry categories. In 2014, amid reports of banks refusing to provide financial services to the entire category of money services businesses (MSBs), the OCC issued a clarification of its supervisory expectations with regard to banks offering financial services to MSBs.
In 2016, the OCC addressed a similar issue in the context of foreign correspondent banking. In guidance issued that year, the OCC made clear that refusing to service the entire category of foreign correspondent banking was inconsistent with supervisory expectations and that banks must decide whether to serve individual firms “based on analysis of the risks presented by
Despite the OCC's statements and guidance over the years about the importance of assessing and managing risk on an individual customer basis, some banks continue to employ category-based risk evaluations to deny customers access to financial services. This happens even when an individual customer would qualify for the financial service if evaluated under an objective, quantifiable risk-based analysis. These banks are often reacting to pressure from advocates from across the political spectrum whose policy objectives are served when banks deny certain categories of customers access to financial services.
The pressure on banks has come from both the for-profit and nonprofit sectors of the economy and targeted a wide and varied range of individuals, companies, organizations, and industries. For example, there have been calls for boycotts of banks that support certain health care and social service providers, including family planning organizations, and some banks have reportedly denied financial services to customers in these industries.
It is our understanding that some banks have taken these actions based on criteria unrelated to safe and sound banking practices, including (1) personal beliefs and opinions on matters of substantive policy that are more appropriately the purview of state and Federal legislatures; (2) assessments ungrounded in quantitative, risk-based analysis; and (3) assessments premised on assumptions about future legal or political changes. In some cases, banks appear to have denied persons access to financial services without even attempting to price the financial services to reflect the perceived risk. Particularly in light of the now-discredited Operation Choke Point, in which certain government agencies (but not the OCC) were revealed to have pressured banks to cut off access to financial services to disfavored (but not unlawful) sectors of the economy, the OCC believes these criteria are not, and cannot serve as, a legitimate basis for refusing to grant a person or entity access to financial services. Bank actions based on these criteria are inconsistent with a bank's legal
In June 2020, the Alaska Congressional delegation sent a letter to the OCC discussing decisions by several of the nation's largest banks to stop lending to new oil and gas projects in the Arctic.
In response to this letter, the OCC requested information from several large banks to better understand their decisionmaking. The responses received indicate that, over the course of 2019 and 2020, these banks had decided to cease providing financial services to one or more major energy industry categories, including coal mining, coal-fired electricity generation, and/or oil exploration in the Arctic region. The terminated services were not limited to lending, where risk factors might justify not serving a particular client (
Neither the OCC nor banks are well-equipped to balance risks unrelated to financial exposures and the operations required to deliver financial services. For example, climate change is a real risk, but so is the risk of foreign wars caused in part by U.S. energy dependence and the risk of blackouts caused by energy shortages. Furthermore, balancing these risks is the purview of Congress and Federal energy and environmental regulators. It is one thing for a bank not to lend to oil companies because it lacks the expertise to value or manage the associated collateral rights; it is another for a bank to make that decision because it believes the United States should abide by the standards set in an international climate treaty. Organizations involved in politically controversial but lawful businesses—whether family planning organizations, energy companies, or otherwise—are entitled to fair access to financial services under the law. In order to ensure that banks provide customers with fair access to financial services, and consistent with longstanding OCC policy, a bank's decision not to serve a particular customer must be based on an individual risk management decision about that individual customer, not on the fact that the customer operates in an industry subject to a broad categorical exclusion created by the bank.
While all banks have the responsibility to provide fair access to financial services, it is particularly important that the nation's largest banks fulfill this obligation. Large banks exercise sufficient market power to influence the price of financial services, and only the largest banks have the diversified balance sheets and sophisticated risk management systems to serve certain industries. It is also fair to place particular responsibilities on the largest banks because their systemic importance often results in their receiving assistance and favorable treatment from the government during periods of financial distress. In addition, these banks have positioned themselves to provide services to all sectors of the economy by virtue of the scale and breadth of their technical expertise. In contrast, smaller banks generally are not in a position to influence the price of services, are not systemically significant, may lack comprehensive technical expertise across the full range of banking services, and have limited capacity to bear overhead costs (
The dominant market position of the large bank population is clear when all OCC-regulated institutions with assets of $100 billion or more are considered. Together, these banks account for approximately 55 percent of the total assets and deposits of all U.S. banks and hold approximately 50 percent of the dollar value of outstanding loans and leases in the United States.
To address the concerns identified above, the OCC is proposing a regulation to clarify (1) the obligation of large banks to provide fair access to financial services, consistent with the Dodd-Frank Act's mandate
The proposed rule would create a new part 55 to address fair access to financial services, drawing both on principles of long-established antitrust law and on the OCC guidance and other statements referenced above. It would apply to any “covered bank,” which is defined in proposed § 55.1(a)(1)(i) as an entity for which the OCC is the appropriate Federal banking agency under 12 U.S.C. 1813(q)(1) that has the ability to (1) raise the price a person has to pay to obtain an offered financial service from the bank or from a competitor or (2) significantly impede a person, or a person's business activities, in favor of or to the advantage of another person. Under proposed § 55.1(a)(1)(ii), a bank would be presumed not to meet the definition of covered bank if it has less than $100 billion in total assets.
In addition to the proposed $100 billion asset threshold, the OCC contemplated including a separate threshold, linked to national market share of any financial service, as an alternative for a bank to be presumed to meet the definition of a covered bank. A national market share threshold would recognize that some banks have less significant on-balance sheet assets but nonetheless have a market position that provides them with the ability to (1) raise the price a person has to pay to obtain a financial service offered by the bank from the bank or from a competitor or (2) significantly impede a person, or a person's business activities, in favor of or to the advantage of another person. The OCC invites public comment on whether the agency should include a percent of national market share threshold as another reason for a bank to be presumed to meet the definition of covered bank and, if so, whether a 10 percent, 20 percent, or other percent of the national market share would be the appropriate threshold. The OCC also invites public comment on whether a presumption different than the $100 billion asset threshold presumption proposed in § 55.1(a)(1)(ii) and (iii) would be more effective to capture banks that meet the definition of covered bank in § 55.1(a)(1)(i) and to exclude banks that do not meet these standards.
Section 55.1(a)(2) would define “financial service” to mean a financial product or service. Section 55.1(a)(3) would define “person” to mean any natural person or any partnership, corporation, or other business or legal entity.
For a covered bank's board and its management to carry out their core risk management responsibilities, the rule would require that a covered bank provide fair access to its financial services with relevant risks quantified and managed, including through pricing, as needed. The covered bank's board and management would ultimately be responsible for ensuring that the bank's operations are consistent with its obligation to provide fair access to financial services, including through established written policies and procedures. Upon review of a covered bank's operations, including its written policies and procedures, it should be clear whether the bank is providing persons access to financial services based on quantitative, impartial risk-based standards or on a basis that is not tied to individual risk assessment and risk management.
Specifically, proposed § 55.1(b) states that to provide fair access to financial services, a covered bank shall (1) make each financial service it offers available to all persons in the geographic market served by the covered bank on proportionally equal terms;
Under this proposed rule, if a covered bank offers cash management services or commercial lending and specifically provides such services to a large retailer, the bank would be required to offer such services to any other lawful business (
Furthermore, under the proposal, a covered bank could deny a person access to a financial service without violating its obligation to provide fair access to financial services if the bank's decision is justified by the quantified and documented failure of the person to meet quantitative, impartial risk-based standards established by the bank in advance (
A covered bank should also consider whether it has the expertise or knowledge to offer a service in a given market. For example, while the rule would not require a covered bank to provide asset-based lending services collateralized by accounts receivable, if the bank provides this service to some
The OCC invites comments on all aspects of this proposal.
Banks and banking, Definitions, Federal savings associations, National banks, Risk, Safety and soundness.
For the reasons set out in the preamble, the OCC proposes to add part 12 CFR part 55, consisting of §§ 55.1 and 55.2, to read as follows:
12 U.S.C. 1
(a) For purposes of this section:
(1)(i)
(A) Raise the price a person has to pay to obtain an offered financial service from the bank or from a competitor; or
(B) Significantly impede a person, or a person's business activities, in favor of or to the advantage of another person.
(ii) A bank is presumed not to meet the definition of covered bank in paragraph (a)(1)(i) of this section if it has less than $100 billion in total assets.
(iii) A bank is presumed to meet the definition of covered bank in paragraph (a)(1)(i) of this section if it has $100 billion or more in total assets. A bank that meets the criteria in this paragraph (a)(1)(iii) can seek to rebut this presumption by submitting to the Office of the Comptroller of the Currency written materials that, in the agency's judgment, demonstrate the bank does not meet the definition of covered bank in paragraph (a)(1)(i) of this section.
(2)
(3)
(i) Any natural person; or
(ii) Any partnership, corporation, or other business or legal entity.
(b) To provide fair access to financial services, a covered bank shall:
(1) Make each financial service it offers available to all persons in the geographic market served by the covered bank on proportionally equal terms;
(2) Not deny any person a financial service the bank offers except to the extent justified by such person's quantified and documented failure to meet quantitative, impartial risk-based standards established in advance by the covered bank;
(3) Not deny any person a financial service the bank offers when the effect of the denial is to prevent, limit, or otherwise disadvantage the person:
(i) From entering or competing in a market or business segment; or
(ii) In such a way that benefits another person or business activity in which the covered bank has a financial interest; and
(4) Not deny, in coordination with others, any person a financial service the bank offers.
Federal Aviation Administration (FAA), DOT.
Notice of proposed rulemaking (NPRM).
This action proposes to revoke the Class E surface airspace at Tri-County Regional Airport, Lone Rock, WI, and amend the Class E airspace extending upward from 700 feet above the surface at Tri-County Regional Airport and Richland Airport, Richland Center, WI. The FAA is proposing this action as the result of airspace reviews caused by the decommissioning of the Lone Rock VHF omnidirectional range (VOR) navigation aid as part of the VOR Minimum Operational Network (MON) Program. The names and geographic coordinates of the airports would also be updated to coincide with the FAA's aeronautical database.
Comments must be received on or before January 11, 2021.
Send comments on this proposal to the U.S. Department of Transportation, Docket Operations, West Building Ground Floor, Room W12-140, 1200 New Jersey Avenue SE, Washington, DC 20590; telephone (202) 366-9826, or (800) 647-5527. You must identify FAA Docket No. FAA-2020-1059/Airspace Docket No. 20-AGL-40, at the beginning of your comments. You may also submit comments through the internet at
FAA Order 7400.11E, Airspace Designations and Reporting Points, and subsequent amendments can be viewed online at
Jeffrey Claypool, Federal Aviation Administration, Operations Support Group, Central Service Center, 10101 Hillwood Parkway, Fort Worth, TX 76177; telephone (817) 222-5711.
The FAA's authority to issue rules regarding aviation safety is found in Title 49 of the United States Code. Subtitle I, Section 106 describes the authority of the FAA Administrator. Subtitle VII, Aviation Programs, describes in more detail the scope of the agency's authority. This rulemaking is promulgated under the authority described in Subtitle VII, Part A, Subpart I, Section 40103. Under that section, the FAA is charged with prescribing regulations to assign the use of airspace necessary to ensure the safety of aircraft and the efficient use of airspace. This regulation is within the scope of that authority as it would revoke the Class E surface airspace at Tri-County Regional Airport, Lone Rock, WI, and amend the Class E airspace extending upward from 700 feet above the surface at Tri-County Regional Airport and Richland Airport, Richland Center, WI, which is contained within the Lone Rock, WI, airspace legal description, to support instrument flight rule operations at these airports.
Interested parties are invited to participate in this proposed rulemaking by submitting such written data, views, or arguments, as they may desire. Comments that provide the factual basis supporting the views and suggestions presented are particularly helpful in developing reasoned regulatory decisions on the proposal. Comments are specifically invited on the overall regulatory, aeronautical, economic, environmental, and energy-related aspects of the proposal. Communications should identify both docket numbers and be submitted in triplicate to the address listed above. Commenters wishing the FAA to acknowledge receipt of their comments on this notice must submit with those comments a self-addressed, stamped postcard on which the following statement is made: “Comments to Docket No. FAA-2020-1059/Airspace Docket No. 20-AGL-40.” The postcard will be date/time stamped and returned to the commenter.
All communications received before the specified closing date for comments will be considered before taking action on the proposed rule. The proposal contained in this notice may be changed in light of the comments received. A report summarizing each substantive public contact with FAA personnel concerned with this rulemaking will be filed in the docket.
An electronic copy of this document may be downloaded through the internet at https://www.regulations.gov. Recently published rulemaking documents can also be accessed through the FAA's web page at https://
You may review the public docket containing the proposal, any comments received, and any final disposition in person in the Dockets Office (see the
This document proposes to amend FAA Order 7400.11E, Airspace Designations and Reporting Points, dated July 21, 2020, and effective September 15, 2020. FAA Order 7400.11E is publicly available as listed in the
The FAA is proposing an amendment to Title 14 Code of Federal Regulations (14 CFR) part 71 by:
Revoking the Class E surface airspace at Tri-County Regional Airport, Lone Rock, WI, as the weather reporting and communications requirements of FAA Order 7400.2M, Procedures for Handling Airspace Matters, are no longer being met to retain this airspace;
Amending the Class E airspace extending upward from 700 feet above the surface to within a 6.5-mile (increased from a 6.4-mile) radius of Tri-County Regional Airport, Lone Rock,
And amending the Class E airspace extending upward from 700 feet above the surface to within a 6.4-mile (decreased from a 7.3-miles) radius of Richland Airport, Richland Center, WI, which is contained within the Lone Rock, WI, airspace legal description; and updating the name (previously Richland Center Airport) and geographic coordinates of the airport to coincide with the FAA's aeronautical database.
This action is the result of airspace reviews caused by the decommissioning of the Lone Rock VOR, which provided navigation information for the instrument procedures these airports, as part of the VOR MON Program.
Class E airspace designations are published in paragraph 6002 and 6005 of FAA Order 7400.11E, dated July 21, 2020, and effective September 15, 2020, which is incorporated by reference in 14 CFR 71.1. The Class E airspace designations listed in this document will be published subsequently in the Order.
FAA Order 7400.11, Airspace Designations and Reporting Points, is published yearly and effective on September 15.
The FAA has determined that this regulation only involves an established body of technical regulations for which frequent and routine amendments are necessary to keep them operationally current, is non-controversial and unlikely to result in adverse or negative comments. It, therefore: (1) Is not a “significant regulatory action” under Executive Order 12866; (2) is not a “significant rule” under DOT Regulatory Policies and Procedures (44 FR 11034; February 26, 1979); and (3) does not warrant preparation of a regulatory evaluation as the anticipated impact is so minimal. Since this is a routine matter that will only affect air traffic procedures and air navigation, it is certified that this rule, when promulgated, would not have a significant economic impact on a substantial number of small entities under the criteria of the Regulatory Flexibility Act.
This proposal will be subject to an environmental analysis in accordance with FAA Order 1050.1F, “Environmental Impacts: Policies and Procedures” prior to any FAA final regulatory action.
Airspace, Incorporation by reference, Navigation (air).
Accordingly, pursuant to the authority delegated to me, the Federal Aviation Administration proposes to amend 14 CFR part 71 as follows:
49 U.S.C. 106(f), 106(g); 40103, 40113, 40120; E.O. 10854, 24 FR 9565, 3 CFR, 1959-1963 Comp., p. 389.
That airspace extending upward from 700 feet above the surface within a 6.5-mile radius of the Tri-County Regional Airport, and within a 6.4-mile radius of the Richland Airport.
Bureau of Prisons, Justice.
Proposed rule.
This proposed rule would codify the Bureau of Prisons (Bureau) procedures regarding time credits as authorized by the First Step Act of 2018 (FSA), hereinafter referred to as “FSA Time Credits.” The FSA provides that eligible inmates may earn FSA Time Credits towards pre-release custody or early transfer to supervised release for successfully completing approved Evidence-Based Recidivism Reduction programs or Productive Activities that are assigned to the inmate based on the inmate's risk and needs assessment. Eligible inmates include those individuals who are sentenced under the U.S. Code and in the custody of the Bureau. However, as required by the FSA, an inmate cannot earn FSA Time Credits if he or she is serving a sentence for a disqualifying offense or has a disqualifying prior conviction. However, these inmates can still earn other benefits, as authorized by the Bureau, for successfully completing recidivism reduction programming.
Electronic comments must be submitted, and written comments must be postmarked, no later than 11:59 p.m. on January 25, 2021.
Please submit electronic comments through the
Sarah Qureshi, Office of General Counsel, Bureau of Prisons, phone (202) 353-8248.
Please note that all comments received are considered part of the public record and made available for public inspection online at
If you want to submit confidential business information as part of your comment but do not want it to be posted online, you must include the phrase “CONFIDENTIAL BUSINESS INFORMATION” in the first paragraph of your comment. You must also prominently identify confidential business information to be redacted within the comment. If a comment contains so much confidential business information that it cannot be effectively redacted, all or part of that comment may not be posted
Personal identifying information identified and located as set forth above will be placed in the agency's public docket file, but not posted online. Confidential business information identified and located as set forth above will not be placed in the public docket file. If you wish to inspect the agency's public docket file in person by appointment, please see the
This proposed rule would codify the Bureau of Prisons (Bureau) procedures regarding FSA Time Credits as authorized by 18 U.S.C. 3632(d)(4) and Section 101 of the First Step Act of 2018 (Pub. L. 115-391, December 21, 2018, 132 Stat 5194) (FSA). The FSA provides that an eligible inmate in Bureau custody who successfully completes an Evidence-Based Recidivism Reduction program or Productive Activity that is assigned to the inmate based on the inmate's risk and needs assessment may earn FSA Time Credits to be applied towards pre-release custody (
As required by the FSA in 18 U.S.C. 3632(d)(4)(D), an inmate cannot earn FSA Time Credits if he or she is serving a sentence for a disqualifying offense or has a disqualifying prior conviction as specified in 18 U.S.C. 3632(d)(4)(D). However, these inmates can still earn other benefits as authorized by the Bureau for successfully completing recidivism reduction programming.
The Bureau proposes to add a new subpart E to part 523 of Chapter V, entitled “FSA Time Credits,” which would contain regulations defining terms in more detail and describing how inmates may earn or forfeit FSA Time Credits. Section 523.40 would set forth the purpose of the subpart. The Bureau's proposed definitions of an Evidence-Based Recidivism Reduction program and Productive Activity in § 523.41 conform to the definitions provided by the FSA in 18 U.S.C. 3635(3) and (5) respectively.
The regulation next addresses successful completion, indicating that eligible inmates must successfully complete each Evidence-Based Recidivism Reduction program or Productive Activity that are assigned to the inmate based on the inmate's risk and needs assessment before they may earn FSA Time Credits. The requirements to successfully complete an Evidence-Based Recidivism Reduction program or Productive Activity are defined by the Bureau for each Evidence-Based Recidivism Reduction program or Productive Activity. The requirements will be based on the specific elements of each Evidence-Based Recidivism Reduction program or Productive Activity, and may vary based on the curricula, duration, or the specific needs or of either the Evidence-Based Recidivism Reduction program/Productive Activity or the inmate participating.
Eligible inmates are also described in this section: An “eligible inmate” is any inmate sentenced under the U.S. Code and in the custody of the Bureau who is not serving a term of imprisonment for a conviction specified in 18 U.S.C. 3632(d)(4)(D). An inmate who is in the custody of the Bureau, but is serving a term of imprisonment for a conviction under the law of one of the fifty (50) states, the District of Columbia, Guam, Puerto Rico, the U.S. Virgin Islands, the Commonwealth of the Mariana Islands, American Samoa, or any other territory or possession of the United States is not an “eligible inmate.” As the FSA also indicates, an inmate who is eligible to earn FSA Time Credits and not subject to a final order of removal under immigration laws as defined in 8 U.S.C. 1101(a)(17) may have FSA Time Credits applied towards pre-release custody or early transfer to supervised release under 18 U.S.C. 3624(g).
The proposed regulations also explain in § 523.42 that eligible inmates must successfully complete each Evidence-Based Recidivism Reduction program or Productive Activity that is assigned to the inmate based on the inmate's risk and needs assessment before they may earn FSA Time Credits. Consistent with the FSA, FSA Time Credits will not be given for anything less than successful completion. After successful completion of an Evidence-Based Recidivism Reduction program or Productive Activity, an eligible inmate may be awarded ten days of FSA Time Credits for every thirty “days” of participation. A “day” is a unit defined as one eight-hour-period of a successfully completed Evidence-Based Recidivism Reduction program or Productive Activity. The Bureau derives its proposal for earning FSA Time Credits from 18 U.S.C. 3632(d)(4)(A)(i), which indicates that inmates “shall earn 10 days of Time Credits for every 30 days of successful participation in evidence-based recidivism reduction programming or productive activities.”
As authorized by the FSA in 18 U.S.C. 3632(d)(4)(A)(ii), inmates may earn an additional five days of FSA Time Credits for every thirty “days” (with a “day” defined as one eight-hour-period) of participation in a successfully completed Evidence-Based Recidivism Reduction program or Productive Activity that is assigned to the inmate based on the inmate's risk and needs assessment if the inmate is at a minimum or low risk for recidivating and has had no increased risk of recidivism over the most recent two consecutive assessments conducted by the Bureau of Prisons.
FSA Time Credits may only be earned for successful completion of an Evidence-Based Recidivism Reduction program and Productive Activity assigned to the inmate based on the inmate's risk and needs assessment, and only for those successfully completed on or after January 15, 2020. Additionally, an inmate may only earn FSA Time Credits after the date that inmate's term of imprisonment commences, which is defined as when the inmate arrives or voluntarily surrenders at the facility where the sentence will be served. Further, FSA Time Credits can only be earned while an inmate is in a Bureau facility, and will not be earned if an inmate is in a Residential Reentry Center or on home confinement.
FSA Time Credits may be lost through inmate discipline procedures described in 28 CFR part 541 if an inmate violates prison rules or requirements/rules of an Evidence-Based Recidivism Reduction program or Productive Activity. The FSA authorizes the Bureau to develop
Also, inmates may have part or all of the lost FSA Time Credits restored to them, to be determined on a case-by-case basis, after clear conduct for at least four consecutive risk assessments. In the case of a loss of FSA Time Credits due to a violation of the requirements and/or rules of an Evidence-Based Recidivism Reduction program or Productive Activity, an inmate may have FSA Time Credits restored if the inmate successfully completes an Evidence-Based Recidivism Reduction program or Productive Activity assigned to the inmate based on the inmate's risk and needs assessment after the date of the rule or program violation, again, to be determined on a case-by-case basis.
The Bureau also proposes to make conforming amendments in 28 CFR part 541 to regulations on inmate discipline. As part of the FSA Time Credits proposal, the Bureau proposes to add in § 541.3, Table 1 (Prohibited Acts and Available Sanctions), appropriate sanctions to allow for forfeiture of FSA Time Credits in escalating amounts depending on the severity level of the prohibited act committed. The FSA Time Credit forfeiture sanctions mirror the current forfeiture sanctions in place for loss of Good Conduct Time. If an inmate commits a second violation of the same Low Severity prohibited act code within a six months, that inmate may receive a sanction of forfeiture of up to 7 days of FSA Time Credits, but a third violation of the same prohibited act within six months period may result in a sanction of forfeiture of up to 14 days of FSA Time Credits. For commission of a prohibited act in the Moderate category, a sanction up to 30 days of FSA Time Credits credit may be applied. Commission of a High Severity act may result in forfeiture of up to 60 days of FSA Time Credits, and commission of a Greatest Severity act may result in forfeiture of up to 120 days of FSA Time Credits.
All sanctions involving loss of FSA Time Credits may only be imposed by in the discretion of a Disciplinary Hearing Officer (DHO) after the process described in 28 CFR part 541, and may also be appealed through the Bureau's Administrative Remedy Process described in 28 CFR part 542. The procedures in 28 CFR parts 541 and 542 allow for inmate discipline and an appeals process that are both well-established and consistent with current Bureau operations. Bureau DHOs will use their considerable correctional experience and training, as they currently do, and will only, after careful consideration of several factors, including the nature and seriousness of the violation in connection with the FSA Time Credit Program, limit appropriate sanctions to befit the nature of the prohibited act committed.
This proposed rule falls within a category of actions that the Office of Management and Budget (OMB) has determined constitutes a “significant regulatory actions” under section 3(f) of Executive Order 12866 and, accordingly, it was reviewed by OMB.
The economic impact of this proposed rule is limited to a specific subset of inmates who are eligible to both earn and apply FSA Time Credits towards additional prerelease custody or early transfer to supervised release.
Under the FSA, FSA Time Credits may be earned by an eligible inmate who is assessed to have a minimum or low risk for recidivating and who has had no increased risk of recidivism over the most recent two consecutive assessments conducted by the Bureau. Consistent with the FSA, inmates in Bureau custody are assessed under its risk assessment system, Prisoner Assessment Tool Targeting Estimated Risk and Need (PATTERN), which includes both static and dynamic elements. For example on August 27, 2020, 131,386 inmates had been assessed under PATTERN and received a PATTERN score were in Bureau custody. The PATTERN scores for the entire group of 131,386 were: 50,060 classifed as high; 25,043 classified as medium; 38,084 classified as low; and 18,199 classified as minium. Of these inmates, approximately 65,000 would be ineligible to earn FSA Time Credits under the FSA due to the inmate's crime of conviction. This data represent a snapshot of those inmates in Bureau custody as of August 27, 2020. The Bureau anticipates that this data will change continually, as inmates in custody earn reductions in PATTERN risk classification, based on program participation and other dynamic factors, and inmates enter and release from Bureau custody.
The Bureau anticipates that as a result of this proposed rule and the FSA, additional inmates will engage in programming to earn FSA Time Credits. As discussed above, FSA Time Credits may be earned for successful completion of an Evidence-Based Recidivism Reduction program or Productive Activity that is assigned to an inmate based on the inmate's needs assessment. The current list of these programs can be found at:
The proposed rule may also result in movement of eligible inmates who earn FSA Time Credits from Bureau facilities to prerelease custody in the community (including Residential Reentry Centers (RRCs) and/or home confinement) earlier in the course of their confinement and for a longer period of time than would have previously occurred. In some cases, this transfer of time from secured confinement to prerelease custody may result in increased costs, depending on the relative costs of the inmate's current facility and the costs associated with housing and/or supervision in prerelease custody.
The proposed rule may also result in the early transfer of inmate from custody to supervised release, functionally shortening their sentences. In such cases, the Bureau would benefit from the avoidance of costs which would otherwise have been incurred to confine the affected inmates for that amount of time.
Notably, this proposed rule is limited to the processes for earning, awarding, and losing FSA Time Credits, and does not address the mechanisms through which those FSA Time Credits may be applied towards additional time in prerelease custody or early transfer to supervised release. Future decisions on that issue will significantly impact the relative amount of cost increases and cost savings to the Bureau. At present, therefore, specific costs or savings for these future actions cannot be calculated. Further, any increased costs or savings resulting from application of this proposed rule will only be realized at the end of an eligible inmate's sentence, as they are transferred to prerelease custody and/or released earlier to commence their term of supervised release. Therefore, the increased costs or cost savings realized from this proposed rule will not be fully realized for years to come, as increasing
For these reasons, it is not possible to forecast the actual economic effect which may occur as a result of this proposed rule. However, given the mix of cost increases and savings which may result, the overall long-term economic impact is expected to be marginal in either direction.
This proposed rule will not have substantial direct effect on the States, on the relationship between the national government and the States, or on distribution of power and responsibilities among the various levels of government. Therefore, under Executive Order 13132, we determine that this proposed rule does not have sufficient federalism implications to warrant the preparation of a Federalism Assessment.
The Director of the Bureau of Prisons, under the Regulatory Flexibility Act (5 U.S.C. 605(b)), reviewed this proposed rule and by approving it certifies that it will not have a significant economic impact upon a substantial number of small entities for the following reasons: This proposed rule pertains to the correctional management of offenders committed to the custody of the Attorney General or the Director of the Bureau of Prisons, and its economic impact is limited to the Bureau's appropriated funds.
This proposed rule will not result in the expenditure by State, local and tribal governments, in the aggregate, or by the private sector, of $100,000,000 or more in any one year, and it will not significantly or uniquely affect small governments. Therefore, no actions were deemed necessary under the provisions of the Unfunded Mandates Reform Act of 1995.
Prisoners.
Administrative practice and procedure, Prisoners.
Under rulemaking authority vested in the Attorney General in 5 U.S.C. 301; 28 U.S.C. 509, 510 and delegated to the Director, Bureau of Prisons in 28 CFR 0.96, we propose to amend 28 CFR parts 523 and 541 as follows:
5 U.S.C. 301; 18 U.S.C. 3568 (repealed November 1, 1987 as to offenses committed on or after that date), 3621, 3622, 3624, 3632, 3635, 4001, 4042, 4081, 4082 (Repealed in part as to conduct occurring on or after November 1, 1987), 4161-4166 (repealed October 12, 1984 as to offenses committed on or after November 1, 1987), 5006-5024 (Repealed October 12, 1984 as to conduct occurring after that date), 5039; 28 U.S.C. 509, 510.
(a) The purpose of this subpart is to describe time credits authorized by 18 U.S.C. 3632(d)(4) and Section 101 of the First Step Act of 2018 (Pub. L. 115-391, December 21, 2018, 132 Stat 5194) (FSA), hereinafter referred to as “FSA Time Credits”.
(b) Generally, as defined and described in this subpart, an eligible inmate who successfully completes an Evidence-Based Recidivism Reduction program or Productive Activity that is assigned to the inmate based on the inmate's risk and needs assessment may earn FSA Time Credits to be applied towards pre-release custody or early transfer to supervised release under 18 U.S.C. 3624(g).
(a)
(i) Has been shown by empirical evidence to reduce recidivism or is based on research indicating that it is likely to be effective in reducing recidivism; and
(ii) Is designed to help prisoners succeed in their communities upon release from prison.
(2)
(i) Social learning and communication, interpersonal, anti-bullying, rejection response, and other life skills;
(ii) Family relationship building, structured parent-child interaction, and parenting skills;
(iii) Classes on morals or ethics;
(iv) Academic classes;
(v) Cognitive behavioral treatment;
(vi) Mentoring;
(vii) Substance abuse treatment;
(viii) Vocational training;
(ix) Faith-based classes or services;
(x) Civic engagement and reintegrative community services;
(xi) Inmate work/employment opportunities;
(xii) Victim Impact Classes or other Restorative justice programs; and
(xiii) Trauma counseling and trauma-informed support programs.
(b)
(c)
(2) The requirements to successfully complete an Evidence-Based Recidivism Reduction program or Productive Activity are defined by the Bureau of Prisons (Bureau) for each Evidence-Based Recidivism Reduction program or Productive Activity. The requirements to successfully complete an Evidence-Based Recidivism Reduction program or Productive Activity will be based on the specific elements of each Evidence-Based Recidivism Reduction program or Productive Activity, and may vary based on the curricula, duration, or the specific needs or requirements of either the Evidence-Based Recidivism Reduction program or Productive Activity or the inmate participating.
(d)
(2)
An eligible inmate who successfully completes an Evidence-Based Recidivism Reduction program or Productive Activity that is assigned to the inmate based on the inmate's risk and needs assessment may earn FSA Time Credits as follows:
(a) An eligible inmate must successfully complete each Evidence-Based Recidivism Reduction program or Productive Activity before the inmate may earn FSA Time Credits. FSA Time Credits will not be given for anything less than successful completion of each Evidence-Based Recidivism Reduction program or Productive Activity.
(b) After an eligible inmate successfully completes an Evidence-Based Recidivism Reduction program or Productive Activity, the eligible inmate will be awarded ten days of FSA Time Credits for every thirty “days” of participation in a successfully completed Evidence-Based Recidivism Reduction program or Productive Activity. For purposes of earning FSA Time Credits, a “day” is defined as one eight-hour period of participation in an Evidence-Based Recidivism Reduction program or Productive Activity that an eligible inmate successfully completes.
(c)
(1) Is determined by the Bureau to be at a minimum or low risk for recidivating; and
(2) Has not increased his or her risk of recidivism over the most recent two consecutive risk and needs assessments conducted by the Bureau. For purposes of earning FSA Time Credits, a “day” is defined as one eight-hour period of participation in an Evidence-Based Recidivism Reduction program or Productive Activity that an eligible inmate successfully completes.
(d)
(1) For an Evidence-Based Recidivism Reduction program or Productive Activity authorized by the Bureau, that is assigned to the particular inmate based on his or her risk and needs assessment, and which the eligible inmate successfully completes on or after January 15, 2020; and
(2) After the date that the inmate's term of imprisonment commences. An inmate's term of imprisonment commences when the inmate arrives or voluntarily surrenders at the designated Bureau facility where the sentence will be served.
(3) FSA Time Credits can only be earned while an eligible inmate is in a Bureau facility. FSA Time Credits will not be earned in a Residential Reentry Center or on home confinement.
(a) Inmates may lose earned FSA Time Credits for violation of prison rules, or requirements and/or rules of an Evidence-Based Recidivism Reduction program or Productive Activity. The procedures for loss of FSA Time Credits are those described in 28 CFR part 541.
(b) Inmates may seek review of the loss of earned FSA Time Credits through the Bureau's Administrative Remedy Program (28 CFR part 542).
(c) Inmates who have lost FSA Time Credits under this regulation may have part or all of the FSA Time Credits restored to them, on a case-by-case basis, after:
(1) Clear conduct for at least four consecutive risk and needs assessments; or
(2) In the case of a loss of FSA Time Credits due to a violation of the requirements and/or rules of an Evidence-Based Recidivism Reduction program or Productive Activity, after successful completion of an Evidence-Based Recidivism Reduction program or Productive Activity assigned based on the risk and needs assessment after the date of the rule or program violation.
5 U.S.C. 301; 18 U.S.C. 3621, 3622, 3624, 4001, 4042, 4081, 4082 (Repealed in part as to offenses committed on or after November 1, 1987), 4161-4166 (Repealed as to offenses committed on or after November 1, 1987), 5006-5024 (Repealed October 12, 1984 as to offenses committed after that date), 5039; 28 U.S.C. 509, 510.
(f) Sanctions. If you committed a prohibited act or acts, the UDC can impose any of the available sanctions in Tables 1 and 2, except loss of good conduct sentence credit, FSA Time Credits, disciplinary segregation, or monetary fines.
Environmental Protection Agency (EPA).
Proposed rule.
The Environmental Protection Agency (EPA) is proposing to partially approve and partially disapprove a revision to the Wisconsin State Implementation Plan (SIP) for attaining the 2010 primary, health-based 1-hour sulfur dioxide (SO
Comments must be received on or before December 28, 2020.
Submit your comments, identified by Docket ID No. EPA-R05-OAR-2016-0074 at
Jennifer Liljegren, Physical Scientist, Attainment Planning and Maintenance Section, Air Programs Branch (AR-18J), Environmental Protection Agency, Region 5, 77 West Jackson Boulevard, Chicago, Illinois 60604, (312) 886-6832,
On June 22, 2010, EPA published a new 1-hour primary SO
In response to the requirement for SO
For reasons described in the following sections, EPA is proposing to disapprove portions of the Oneida County SO
If EPA finalizes the disapproval that EPA is proposing here, that action would initiate a new sanctions clock under section 179, providing for new source sanctions if EPA has not approved a revised plan within 18 months after final disapproval, and providing for highway funding sanctions if EPA has not approved a revised plan within 6 months thereafter, as well as initiating an obligation for EPA to promulgate a Federal implementation plan within 24 months unless in the meantime Wisconsin has submitted and EPA has approved a plan addressing these attainment planning requirements.
The remainder of this preamble describes the requirements that nonattainment plans must meet in order to obtain EPA approval, provides the history and description of EPA's stack height regulations (which are pertinent to Wisconsin's plan for Oneida County), provides a review of the Oneida County SO
On September 10, 2020, following discussions between EPA and Wisconsin regarding the requirements of EPA's stack height regulations, Wisconsin sent EPA a letter, included in the docket for this proposed action, expressing a desire for additional analyses of the “formula GEP height” (see 40 CFR 51.100(ii)(2) for EPA's regulations addressing formula height demonstrations) for the Ahlstrom-Munksjo facility and committing to adopt a limit consistent with EPA's stack height regulations by April 1, 2021. However, this letter does not provide any technical information that affects EPA's review of Wisconsin's existing plan that was submitted to EPA, and the commitment for an additional submittal does not serve as a substitute for a plan with suitable, enforceable limits. Therefore, this recent letter does not alter EPA's review of Wisconsin's Oneida County SO
Nonattainment plans for SO
For EPA to fully approve a SIP revision as meeting the requirements of CAA sections 110, 172, 191, and 192, and EPA's regulations at 40 CFR part 51, the plan for an affected area must demonstrate to EPA's satisfaction that each of the aforementioned requirements has been met. Under CAA section 110(l), EPA may not approve a plan that would interfere with any applicable requirement concerning NAAQS attainment and RFP, or any other applicable requirement. Under CAA section 193, no requirement in effect (or required to be adopted by an order, settlement, agreement, or plan in effect before November 15, 1990) in any area that is nonattainment for any air pollutant may be modified in any manner unless it ensures equivalent or greater emission reductions of such air pollutant.
Sections 172(c)(1) and 172(c)(6) of the CAA direct states with areas designated as nonattainment to demonstrate that the submitted plan and the emissions limitations and control measures in it provide for attainment of the NAAQS. 40 CFR part 51, subpart G further delineates the control strategy requirements that plans must meet, and EPA has long required that all SIPs and control strategies reflect four fundamental principles of quantification, enforceability, replicability, and accountability.
EPA's 2014 SO
Attainment demonstrations for the 2010 1-hour primary SO
Preferred air quality models for use in regulatory applications are described in appendix A of EPA's “Guideline on Air Quality Models” (appendix A of 40 CFR part 51, appendix W (“appendix W”)).
The meteorological data used in the analysis should generally be processed with the most recent version of AERMET, which is the meteorological data preprocessor for AERMOD. Estimated concentrations should include ambient background concentrations, follow the form of the standard, and be calculated as described in EPA's August 23, 2010 clarification memorandum.
Of particular relevance to Wisconsin's submittal are requirements in 40 CFR 51.100, generally referred to as the stack height regulations. These regulations, which implement CAA section 123, require that if the GEP stack height exceeds the height resulting from the 40 CFR 51.100(ii)(2) formulae and is determined based on the results of a special study, typically a fluid modeling or wind tunnel study, then additional requirements relating to emissions control must first be met. These additional requirements would result in a more stringent limit than that which is proposed for the Ahlstrom-Munksjo facility in the Wisconsin's Oneida County SO
Given the significance of the stack height regulations for EPA's review of Wisconsin's submittal, and given the distinctive nature of these regulations, a discussion of the history of these regulations is necessary to provide perspective on EPA's application of these requirements. Prior to the enactment of the CAA Amendments of 1977, some parties expressed the view that “the solution to pollution is dilution.” This viewpoint in effect argues that meeting air quality standards by building sufficiently tall stacks, thereby enhancing the degree of dispersion between the time a plume is released and the time the plume reaches ground level, should be an acceptable alternative to meeting air quality standards by reducing emissions. Other parties argued that dilution is not the solution to pollution, that the use of excessively tall stacks without any reduction to the atmospheric loading of pollutants should not be a permissible means for meeting air quality standards. Congress ultimately adopted the latter perspective, as reflected in its enactment of section 123 in its CAA Amendments of 1977. As discussed in a court ruling upholding this interpretation of section 123, Congress “refused to allow reliance” on tall stacks because “dispersion techniques do not reduce the amount of pollution in the air, but merely spread it around, exporting it to other areas . . . and exposing previously pristine areas to contamination.”
The pertinent text of CAA section 123(a) indicates that the degree of emission limitation required for control of any air pollutant under an applicable implementation plan shall not be affected in any manner by so much of the stack height of any source as exceeds good engineering practice (as determined under regulations
The stack height regulations define several terms used in evaluating whether or not a plan is consistent with the provisions in section 123 and 40 CFR 51.118 prohibiting reliance on dispersion techniques, as defined in 40 CFR (hh)(1)-(2). The pertinent terms relate to creditable stack heights. GEP stack height is defined as the greatest among three values, based on three defined approaches for determining GEP stack height. The first approach, defined in 40 CFR 51.100(ii)(1), uses a minimum GEP height of 65 meters. The second approach, defined in 40 CFR 51.100(ii)(2), defines GEP stack height by applying one of two formulae, as applicable based on the age of the stack, in which GEP stack height is calculated on the basis of building dimensions that influence how tall a stack is routinely warranted to avoid most of the downwash that the building creates. The first formula, defining GEP stack height based on an old equation developed for this purpose, is not germane to Wisconsin's plan. The second, pertinent equation (in 40 CFR 51.100(ii)(2)(ii)) is that the GEP stack height equals the height of the building plus 1.5 times the lesser of the height or the width of the building. The third approach, set forth in 40 CFR 51.100(ii)(3) and tied to the definitions of “nearby” and “excessive concentration” at 40 CFR 51.100(jj)(2) and (kk)(1), respectively, uses neither of the formulae and defines GEP height based on the results of a special study, typically a fluid modeling or wind tunnel study, with the provision in section 51.100(kk)(1) that additional requirements relating to emissions control must first be met, namely control to the new source performance standard (NSPS) level or an alternative rate established if the NSPS is demonstrated to be infeasible. For clarity, this notice will describe the first and second approach as relying on the formula GEP height and the third approach as relying on the height determined by fluid modeling or wind tunnel study. More detailed guidance on these analyses is provided in guidance that EPA issued in conjunction with the stack height regulations.
In this third approach, the creditable stack height is defined in 40 CFR 51.100(ii)(3) as the height demonstrated by a fluid model . . . which ensures that the emissions from a stack do not result in excessive concentrations of any air pollutant as a result of atmospheric downwash, wakes, or eddy effects created by the source itself, nearby structures or nearby terrain features. “Nearby” is defined in 40 CFR 51.100(jj)(2) as not greater than 0.8 km (
Thus, in cases where a source seeks credit for a stack height greater than formula GEP stack height, the stack height regulations require that the state first determine whether the air quality standard can be attained by applying suitable emission controls with credit for no more than formula GEP stack height. If so, then the facility does not have “excessive concentrations” with the stack at formula GEP height and no additional stack height is creditable. This feature is discussed further in the preamble to the 1985 regulations, which indicates that the EPA's 1976 stack height guidelines
That is, if fluid modeling showed that downwash with a formula GEP height stack increased concentrations by more than 40 percent but suitable controls would provide for attainment (or if no modeling was provided assessing whether suitable controls would provide for attainment or if the state did not adopt limits requiring suitable control), then the plan would not have justified a stack height above formula GEP height as being creditable. In that case, the attainment demonstration would be considered to rely on a prohibited dispersion technique, in contravention of CAA section 123.
A common phrase in the debate leading to the 1985 regulations was “control first.” Advocates for control first, notably Natural Resources Defense Council, Inc. (NRDC), urged that all candidates for taller stacks first be required to implement aggressive emissions control, and that sources only be granted credit for taller stacks if such control does not suffice to resolve air quality problems. The opposite
The preamble to the 1985 regulations provides further discussion of the level of control that is mandated as a prerequisite for finding any stack height greater than the formula GEP height to be creditable. As a general matter, the NSPS associated with the subject source's source category are presumed to be the level of control to be adopted and to be used in any assessment of whether such emission controls and a creditable stack height in excess of the formula height is needed to eliminate any excessive concentrations (in combination with an assessment of the percentage impact of downwash). However, the regulations also provide the possibility of demonstrating that the NSPS are infeasible at the source, in which case an alternate control requirement must be adopted and used in evaluating whether the source's controlled emissions and a stack height above formula GEP height may be credited to avoid an excessive concentration. Footnote 6 of the 1985 preamble (50 FR 27898) states that EPA will rely on its Best Available Retrofit Technology (BART) Guideline in reviewing any [demonstrations of NSPS infeasibility] and alternative emission limitations. That is, in cases where the NSPS is demonstrated to be infeasible, EPA will use the criteria in the BART Guideline to determine whether the plan adequately demonstrates the infeasibility of the NSPS and whether the limit that the state adopts qualifies as a suitable limit to use in evaluating whether excessive concentrations (
The majority of Wisconsin's submittal includes an assessment of the air quality impacts Wisconsin expected to result from emissions limits governing the Ahlstrom-Munksjo paper mill (formerly Expera Specialty Solutions LLC (Expera)), which Wisconsin found to be the primary SO
Wisconsin's Oneida County SO
While many aspects of Wisconsin's modeling are consistent with the recommendations of appendix W, the submittal relies on a stack height and corresponding emission limitation that is contrary to and exceeds what is creditable under EPA's stack height regulations. Wisconsin's proposed GEP stack height exceeds formula GEP height without satisfying the associated requirements for establishing suitable control requirements and without demonstrating the degree to which a height above formula GEP height (if any) is necessary to avoid violations with application of the control requirements. Since this portion of the submittal therefore cannot be approved, EPA is not providing a full review of the various features of Wisconsin's attainment demonstration for the Oneida County SO
As noted above, Wisconsin's Oneida County SO
The limit in Wisconsin's 2016 plan is 3.0 lbs per MMBTU on a 24-hour rolling average basis, which Wisconsin considers to be equivalent to a limit of 3.2 lbs per MMBTU on a 1-hour basis. As previously stated, the longer-term average limit should be set at an adjusted level that reflects a stringency comparable to the 1-hour average limit at the critical emission value shown to provide for attainment. Although EPA is not able to approve this limit as sufficient to provide for attainment (since the limit does not provide for attainment without credit for a taller stack than has been justified under EPA's stack height regulations), EPA is proposing to approve the limit as SIP strengthening, which is appropriate for limits that improve air quality whether or not these limits suffice to provide for attainment in accordance with CAA requirements.
EPA's 2014 SO
The emissions inventory and source emission rate data for an area serve as the foundation for air quality modeling and other analyses that enable states to estimate the degree to which different sources within a nonattainment area contribute to violations within the affected area and assess the expected improvement in air quality within the nonattainment area due to the adoption and implementation of control measures. The state must develop and submit to EPA a comprehensive, accurate, and current inventory of actual emissions from all sources of SO
The base year inventory establishes a baseline that is used to evaluate emission reductions achieved by the control strategy and to assess RFP requirements. Wisconsin used 2011 as the base year for emissions inventory preparation. At the time of preparation of the plan, 2011 reflected the most recent emissions data available to the State through its annual emissions reporting requirements during periods with air quality violations. The emissions inventory includes SO
In addition to addressing its obligation to inventory emissions within the nonattainment area, Wisconsin also evaluated whether any point sources nearby but outside the nonattainment area might have significant impacts. Based on this evaluation, Wisconsin identified PCA, emitting about 50 tons per year and located over 30 kilometers from the area of concern (in neighboring Lincoln County) as warranting inclusion in the modeling. However, this source was not included in the nonattainment area inventory summarized above.
EPA has evaluated Wisconsin's 2011 base year inventory and finds this inventory and the methodologies used for its development to be consistent with EPA guidance. As a result, EPA is proposing to determine that the Oneida County SO
CAA section 172(c)(1) states that nonattainment plans shall provide for the implementation of all RACM as expeditiously as practicable (including such reductions in emissions from existing sources in the area as may be obtained through the adoption, at a minimum, of RACT) and shall provide for attainment of the national primary ambient air quality standards. CAA section 172(c)(6) requires plans to include enforceable emissions limitations, and such other control measures as may be necessary or appropriate to provide for attainment of the NAAQS. Because the emissions limits for the Ahlstrom-Munksjo facility provided in the Oneida County plan were not calculated in compliance with the stack height regulations, and because as a result the plan cannot be considered to provide an appropriate attainment demonstration, the area does not demonstrate RACM/RACT or meet the requirement for necessary emissions limitations or control measures. EPA is therefore proposing that the State has not satisfied the requirements in CAA sections 172(c)(1) and (6) to adopt and submit all RACM/RACT and emissions limitations or control measures as needed to attain the standard as expeditiously as practicable.
Wisconsin has a fully approved nonattainment new source review program. The State has implemented chapter NR 408 of the Wisconsin Administrative Code to satisfy the nonattainment new source review requirements. The program was approved by EPA into the SIP on January 18, 1995 (60 FR 3538), and the most recent update was approved on November 5, 2014 (79 FR 193). NR 408 addresses nonattainment permitting requirements for SO
EPA's policy, that RFP for SO
In the Oneida County SO
However, EPA's policy that a comprehensive enforcement program can satisfy the contingency measures requirement for SO
Generally, as set forth in section 176(c) of the CAA, conformity requires that actions by Federal agencies do not cause new air quality violations, worsen existing violations, or delay timely attainment of the relevant NAAQS. General conformity applies to Federal actions, other than certain highway and transportation projects, if the action takes place in a nonattainment area or maintenance area (
Transportation conformity determinations are not required in SO
EPA is proposing to approve the base year emissions inventory and to affirm that the new source review requirements for the area have been met. EPA is also proposing to approve the Ahlstrom-Munksjo SO
In this rule, EPA is proposing to include in a final EPA rule regulatory text that includes incorporation by reference. In accordance with requirements of 1 CFR 51.5, EPA is proposing to incorporate by reference only the specific portions of Wisconsin Administrative Order AM-15-01, effective January 15, 2016, as described in section V. above. EPA has made, and will continue to make, these documents generally available through
Under the CAA, the Administrator is required to approve a SIP submission that complies with the provisions of the CAA and applicable Federal regulations. 42 U.S.C. 7410(k); 40 CFR 52.02(a). Thus, in reviewing SIP submissions, EPA's role is to approve state choices, provided that they meet the criteria of the CAA. Accordingly, this action merely approves state law as meeting Federal requirements and does not impose additional requirements beyond those imposed by state law. For that reason, this action:
• Is not a significant regulatory action subject to review by the Office of Management and Budget under Executive Orders 12866 (58 FR 51735, October 4, 1993) and 13563 (76 FR 3821, January 21, 2011);
• Is not an Executive Order 13771 (82 FR 9339, February 2, 2017) regulatory action because it is not a significant regulatory action under Executive Order 12866;
• Does not impose an information collection burden under the provisions of the Paperwork Reduction Act (44 U.S.C. 3501
• Is certified as not having a significant economic impact on a substantial number of small entities under the Regulatory Flexibility Act (5 U.S.C. 601
• Does not contain any unfunded mandate or significantly or uniquely affect small governments, as described in the Unfunded Mandates Reform Act of 1995 (Pub. L. 104-4);
• Does not have federalism implications as specified in Executive Order 13132 (64 FR 43255, August 10, 1999);
• Is not an economically significant regulatory action based on health or safety risks subject to Executive Order 13045 (62 FR 19885, April 23, 1997);
• Is not a significant regulatory action subject to Executive Order 13211 (66 FR 28355, May 22, 2001);
• Is not subject to requirements of Section 12(d) of the National Technology Transfer and Advancement Act of 1995 (15 U.S.C. 272 note) because application of those requirements would be inconsistent with the CAA; and
• Does not provide EPA with the discretionary authority to address, as appropriate, disproportionate human health or environmental effects, using practicable and legally permissible methods, under Executive Order 12898 (59 FR 7629, February 16, 1994).
In addition, the SIP is not approved to apply on any Indian reservation land or in any other area where EPA or an Indian tribe has demonstrated that a tribe has jurisdiction. In those areas of Indian country, the rule does not have tribal implications and will not impose substantial direct costs on tribal governments or preempt tribal law as specified by Executive Order 13175 (65 FR 67249, November 9, 2000).
Environmental protection, Air pollution control, Incorporation by reference, Intergovernmental relations, Reporting and recordkeeping requirements, Sulfur oxides.
Federal Motor Carrier Safety Administration (FMCSA), DOT.
Petition for rulemaking; request for public comments.
FMCSA requests public comments on the Transportation Intermediaries Association (TIA) petition for rulemaking concerning the rights of parties to a brokered transaction to review the records of the transaction and its request that the Agency issue regulatory guidance concerning dispatch services. TIA believes transparency in broker transactions is provided through other means in today's market place and that the regulatory guidance would ensure that interested parties can distinguish between a dispatch service and an authorized broker.
Comments must be submitted by January 25, 2021.
You may submit comments identified by Docket Number FMCSA-2020-0194 using any of the following methods:
•
•
•
•
To avoid duplication, please use only one of these four methods. See the “Public Participation and Request for Comments” portion of the
Ms. La Tonya Mimms, Chief, Driver and Carrier Operations, Federal Motor Carrier Safety Administration, 1200 New Jersey Avenue SE, Washington, DC 20590-0001, by telephone at (202) 366-4001, or by email at
If you submit a comment, please include the docket number for this document (Docket No. FMCSA-2020-0194), indicate the specific section of this document to which each comment
To submit your comment online, go to
If you submit your comments by mail or hand delivery, submit them in an unbound format, no larger than 8
FMCSA will consider all comments and material received during the comment period.
Confidential Business Information (CBI) is commercial or financial information that is both customarily and actually treated as private by its owner. Under the Freedom of Information Act (FOIA, 5 U.S.C. 552), CBI is exempt from public disclosure. If your comments responsive to the notice contain commercial or financial information that is customarily treated as private, that you actually treat as private, and that is relevant or responsive to the notice, it is important that you clearly designate the submitted comments as CBI. Please mark each page of your submission that constitutes CBI as “PROPIN” to indicate it contains proprietary information. FMCSA will treat such marked submissions as confidential under the FOIA, and they will not be placed in the public docket for this document. Submissions containing CBI should be sent to Mr. Brian Dahlin, Chief, Regulatory Analysis Division, Federal Motor Carrier Safety Administration, 1200 New Jersey Avenue SE, Washington, DC 20590. Any comments FMCSA receives which are not specifically designated as CBI will be placed in the public docket for this document.
To view comments, as well as any documents mentioned in this preamble as being available in the docket, go to
In accordance with 5 U.S.C. 553(c), DOT solicits comments from the public to better inform its rulemaking process. DOT posts these comments, without edit, including any personal information the commenter provides, to
Section 371.3(c) of title 49 of the CFR states that “[e]ach party to a brokered transaction has the right to review the record of the transaction required to be kept by these rules.” The current requirements under 49 CFR 371.3(c) were adopted by the Interstate Commerce Commission (ICC) on October 17, 1980 (45 FR 68941), at 49 CFR 1045.3(c). Prior to 1980, the broker records requirements under 49 CFR 1045.3 did not include a specific provision concerning the rights of parties to a brokered transaction to review the record of the transaction. In its May 12, 1980 (45 FR 31140) notice of proposed rulemaking concerning multiple broker regulations, the ICC explained that the proposed change to section 1045(c) would allow the agency to “. . . eliminate more complex rules found at sections 1045.5, 1045.6, and 1045.10.” Those requirements related to charges for brokerage services, charges for non-brokerage services, and duties and obligations of brokers, respectively.
With the termination of the ICC in 1995, the regulatory oversight of brokers was transferred to the Federal Highway Administration (FHWA) and the requirements under 49 CFR 1045.3 were redesignated, without change, under 49 CFR 371.3 (61 FR 54707; October 21, 1996). Subsequently, with the establishment of FMCSA in 2000, all motor carrier oversight responsibilities and regulations were transferred from FHWA to FMCSA.
TIA requested that FMCSA rescind 49 CFR 371.3(c) concerning the rights of parties to a brokered transaction to review the records of the transaction. TIA wrote, “The Interstate Commerce Commission's (ICC) commentary in the
The amount of the broker's fee is not regulated by the Commission. This means that a broker must engage in a bargaining process with its principals. The amount of commission that a principal agrees to pay will vary according to the benefits it perceives it will gain from the transaction. No party is obligated to deal with a broker or pays its commissions. A party may either choose to do without the brokers' services or to look for another broker who will offer the service at a lower price. In this regard, we note that the property broker industry is a highly competitive one. Our goal in regulating transactions between brokers, carriers, and shippers is to remove all unnecessary restrictions which might impede the free operation of the marketplace.”
TIA argues that 49 CFR 371.3(c) is in direct conflict with the original intent of the ICC to ensure that “all unnecessary restrictions which might impede the free operation of the marketplace” are removed. TIA stated, “In today's marketplace brokers are not commissioned sales agents of motor carriers. As noted above brokers pay motor carriers regardless of the rate that the shipper pays the broker. The need to verify commissions no longer exists.”
TIA asserts that motor carrier transportation on the spot market is one of the most transparent market places in the world. Load boards, the internet, and rate quotes in person-to-person communications within the industry provide the rate transparency that was intended by 49 CFR 371.3 when commissions paid by carriers to brokers were common. Motor carriers have sufficient access to current market rates without inspecting brokers' shipment records to find out what the brokers' gross margins are on a load-by-load basis.
TIA believes that some “dispatch services” are essentially unlicensed brokers that handle financial
TIA believes the Agency should publish regulatory guidance explaining that the legal duties of a dispatch service allow them to be an agent for one motor carrier, and that anything further requires a brokerage license and compliance with the financial responsibility requirements applicable to brokers. TIA believes this is especially necessary when the dispatch service is handling payment from the shipper and then making payment to the motor carrier. According to TIA, this guidance would ultimately enable private legal action to be taken for violations, which would allow the public and the Agency both to enforce the provisions of this regulation. A copy of TIA's letter petitioning the Agency to initiate rulemaking and to issue regulatory guidance is included in the docket for this document.
Petitions for rulemaking are governed by DOT regulations codified at 49 CFR 5.13 and FMCSA regulations at 49 CFR 389.31 and 389.33. While these regulations do not require FMCSA to publish a notice in the
1. To what extent would brokers' disclosure of the records of individual transactions to individual motor carriers under 49 CFR 371.3(c) place brokers and their shipper clients at risk of having proprietary information concerning freight descriptions, transportation rates and routes disclosed to their competitors?
2. For authorized brokers, how often do motor carriers exercise their right under 49 CFR 371.3(c) to review the record of the transaction, and are there motor carriers who make requests on such a frequent basis that they could, if working with other motor carriers, learn certain proprietary information concerning shippers' rates and routes?
3. In the absence of 49 CFR 371.3(c), what information concerning brokered transactions would authorized brokers share with the shippers and for-hire carriers?
4. To what extent do shippers engage in discussions with brokers about the rates the authorized motor carriers will be paid?
5. How often do shippers enter into negotiations about interstate transportation services with an entity that is neither an interstate motor carrier registered with FMCSA nor a broker registered with FMCSA?
6. Would the issuance of regulatory guidance concerning “dispatch services” provide an effective deterrent to unauthorized brokerage services, or would additional actions by FMCSA be required to address the challenges described by TIA?
7. Is there sufficient clarity in the current definitions of “broker,” “bona fide agents,” and “brokerage or brokerage service” under 49 CFR 371.2 to enable interested parties to identify dispatch services that are actually carrying out the functions of a registered broker and to file a complaint with FMCSA for subsequent investigation?
Issued under authority delegated in 49 CFR 1.87.
Office of Assistant Secretary for Civil Rights.
Notice and request for comments.
In accordance with the Paperwork Reduction Act of 1995, this notice announces the intention of the Office of the Assistant Secretary for Civil Rights (OASCR) to request a renewal to an approved information collection. OASCR will use the information collected to process Respondents' program discrimination complaints conducted or assisted by USDA.
Comments on this notice must be received by January 25, 2021 to be assured of consideration.
The Office of the Assistant Secretary for Civil Rights invites interested persons to submit comments on this notice. Comments may be submitted by one of the following methods:
Denise A. Banks, Office of the Assistant Secretary for Civil Rights, U.S. Department of Agriculture, 1400 Independence Avenue SW, Washington, DC 20250, (202) 401-7654 and fax number (202) 690-1782.
In accordance with the Paperwork Reduction Act of 1995 (44 U.S.C. Chapter 35), this notice announces the intention of the Office of the Assistant Secretary for Civil Rights to request approval for an existing collection in use with an OMB control number.
The requested information, which can be submitted by filling out a form or by submitting a letter, is necessary for USDA OASCR to address the alleged discriminatory action. The Respondent is asked to state his/her name, mailing address, property address (if different from mailing address), telephone number, email address (if any) and to provide a name and contact information for the Respondent's representative (if any). A brief description of who was involved with the alleged discriminatory action, what occurred and when, is requested. If the Respondent is filing the program discrimination complaint more than 180 days after the alleged discrimination occurred, the Respondent is asked to provide the reason for the delay.
Finally, the Respondent is asked to identify which bases are alleged to have motivated the discriminatory action. The form explains that laws and regulations prohibit on the bases of race, color, national origin, age, sex, gender identity (including gender expression), disability, religion, sexual orientation, marital or familial status, or because all or part of the individual's income is derived from any public assistance program, but that not all bases apply to all programs. The program discrimination complaint filing information, which is voluntarily provided by the Respondent, will be used by the staff of USDA OASCR to intake, investigate, resolve, and/or adjudicate the Respondent's complaint. The program discrimination complaint form will enable OASCR to better collect information from complainants in a timely manner, therefore, reducing delays and errors in determining USDA jurisdiction.
Comments are invited on: (1) Whether the proposed collection of information is necessary for the proper performance of the functions of the agency, including whether the information will have practical utility; (2) the accuracy of the agency's estimate of the burden of the proposed collection of information including the validity of the methodology and assumptions used; (3)
All comments received will be available for public inspection during regular business hours at the same address.
All responses to this notice will be summarized and included in the request for Office of Management and Budget approval. All comments will become a matter of public record.
Forest Service, USDA.
Notice of virtual meeting.
The South Central Idaho Resource Advisory Committee (RAC) will hold a virtual meeting. The committee is authorized under the Secure Rural Schools and Community Self-Determination Act (the Act) and operates in compliance with the Federal Advisory Committee Act. The purpose of the committee is to improve collaborative relationships and to provide advice and recommendations to the Forest Service concerning projects and funding consistent with Title II of the Act. RAC information can be found at the following website:
The meeting will begin at 9:00 a.m. on Thursday, December 10, 2020.
All RAC meetings are subject to cancellation. For status of the meeting prior to attendance, please contact the person listed under
The meeting will be held with virtual attendance only. For virtual meeting information, please contact the person listed under
Written comments may be submitted as described under
Julie Thomas, RAC Coordinator, by phone at 208-423-7500 or via email at
Individuals who use telecommunication devices for the deaf (TDD) may call the Federal Information Relay Service (FIRS) at 1-800-877-8339 between 8:00 a.m. and 8:00 p.m., Eastern Standard Time, Monday through Friday.
The purpose of the meeting is to:
1. Present project proposals; and
2. Discuss, recommend, and approve new Title II projects.
The meeting is open to the public. The agenda will include time for people to make oral statements of three minutes or less. Individuals wishing to make an oral statement should request in writing by December 1, 2020, to be scheduled on the agenda. Anyone who would like to bring related matters to the attention of the committee may file written statements with the committee staff before or after the meeting. Written comments and requests for time for oral comments must be sent to Julie Thomas, RAC Coordinator, 370 American Avenue, Jerome, Idaho 83338; by email to
Rural Business-Cooperative Service, USDA.
Notice of solicitation of applications.
The Rural Business-Cooperative Service (the Agency) Notice of Solicitation of Applications (NOSA) is being issued prior to passage of a final appropriations act to allow potential applicants time to submit applications for financial assistance under Rural Energy for America Program (REAP) for Federal Fiscal Year (FY) 2021 and give the Agency time to process applications within the current FY. This NOSA is being issued prior to enactment of full year appropriation for FY 2021. The Agency anticipates publishing a final rule for REAP later this year which will conform in part to the OneRD Guaranteed loan provisions published in the
The REAP program has two types of funding assistance: (1) Renewable Energy Systems, Energy Efficiency Improvements and Energy Efficient Equipment and Systems Assistance and (2) Energy Audit and Renewable Energy Development Assistance Grants.
The Renewable Energy Systems and Energy Efficiency Improvement Assistance provides grants and guaranteed loans to agricultural producers and rural small businesses to purchase and install renewable energy systems and make energy efficiency improvements to their operations. The Energy Efficient Equipment and Systems Assistance provisions were prescribed by the 2018 Farm Bill and provide guaranteed loans only to agricultural producers to purchase and install energy efficient equipment and systems for agricultural production and
The Energy Audit and Renewable Energy Development Assistance Grant is available to a unit of State, Tribal, or local government; instrumentality of a State, Tribal, or local government; institution of higher education; rural electric cooperative; a public power entity; or a council, as defined in 16 U.S.C. 3451. The recipient of grant funds (grantee) will establish a program to assist agricultural producers and rural small businesses with evaluating the energy efficiency and the potential to incorporate renewable energy technologies into their operations.
See under
The applicable USDA Rural Development Energy Coordinator for your respective State, as identified via the following link:
For information about this Notice, please contact Deb Yocum, Business Loan and Grant Analyst, USDA Rural Development, Program Management Division. Telephone: (402) 499-1198. Email:
The Agency encourages applications that will support recommendations made in the Rural Prosperity Task Force report to help improve life in rural America (
The Rural Energy for America Program (REAP) helps agricultural producers and rural small businesses reduce energy costs and consumption and helps meet the Nation's critical energy needs. REAP has two types of funding assistance: (1) Renewable Energy Systems, Energy Efficiency Improvements and Energy Efficient Equipment and Systems Assistance and (2) Energy Audit and Renewable Energy Development Assistance Grants.
The Renewable Energy Systems and Energy Efficiency Improvements Assistance provides grants and guaranteed loans to agricultural producers and rural small businesses for renewable energy systems (including storage systems as prescribed by the 2018 Farm Bill) and energy efficiency improvements. The Energy Efficient Equipment and Systems provides guaranteed loans to agricultural producers to purchase and install energy efficient equipment and systems for agricultural production and processing. Eligible renewable energy systems for REAP provide energy from: Wind, solar, renewable biomass (including anaerobic digesters and biogas), small hydro-electric, ocean, geothermal, or hydrogen derived from these renewable resources.
The Energy Audit and Renewable Energy Development Assistance Grant is available to a unit of State, Tribal, or local government; instrumentality of a State, Tribal, or local government; institution of higher education; rural electric cooperative; a public power entity; or a council, as defined in 16 U.S.C. 3451. The grantee will establish a program to assist agricultural producers and rural small businesses with evaluating the energy efficiency and the potential to incorporate renewable energy technologies into their operations.
Applications for REAP can be submitted any time throughout the year. This Notice announces the deadlines, dates and times that applications must be received in order to be considered for REAP funds provided by the 2018 Farm Bill, and any appropriated funds that REAP may receive from the appropriation for FY 2021 for grants, guaranteed loans, and combined grants and guaranteed loans to purchase and install renewable energy systems, make energy efficiency improvements, and install energy efficient equipment and systems for agricultural production and processing; and for grants to conduct energy audits and renewable energy development assistance.
The NOSA announces the acceptance of applications under REAP for FY 2021 for grants, guaranteed loans, and combined grants and guaranteed loans for the development of renewable energy systems, energy efficiency projects, and energy efficient equipment and systems for agricultural production and processing as provided by the 2018 Farm Bill. The Notice also announces the acceptance of applications under REAP for FY 2021 for energy audit and renewable energy development assistance grants as provided by the 2018 Farm Bill.
The administrative requirements in effect at the time the application window closes for a competition will be applicable to each type of funding available under REAP and are described in 7 CFR part 4280, subpart B for grant requests and combination grant and guaranteed loan, and in 7 CFR part 5001 for guaranteed loan only requests. In addition to the other provisions of this Notice:
(1) The provisions specified in 7 CFR 4280.101 through 4280.111 apply to each funding type described in this Notice.
(2) The requirements specified in 7 CFR 4280.112 through 4280.124 apply to renewable energy system and energy efficiency improvements project grants.
(3) The requirements for guaranteed loans for renewable energy systems, energy efficiency improvements, and energy efficient equipment and system projects are specified in 7 CFR part 5001. For FY 2021, the guarantee fee rates, the annual renewal fee, the maximum percentage of guarantee and the maximum portion of guarantee authority available for a reduced guarantee fee will be published in a separate notice.
(4) The requirements specified in 7 CFR 4280.165 apply to a combined grant and guaranteed loan for renewable energy system and energy efficiency improvements projects.
(5) The requirements specified in 7 CFR 4280.186 through 4280.196 apply to energy audit and renewable energy development assistance grants.
A.
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To ensure that small projects have a fair opportunity to compete for the funding and are consistent with the priorities set forth in the statute, the Agency will set-aside not less than 20 percent of the FY 2021 funds until June 30, 2021, to fund grants of $20,000 or less.
(1)
(2)
(3)
(4)
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The eligibility requirements for the applicant, borrower, lender, and project (as applicable) are clarified in 7 CFR part 4280 subpart B and in 7 CFR part 5001 and are summarized in this Notice. Failure to meet the eligibility criteria by the time of the competition window will preclude the application from competing until all eligibility criteria have been met.
The Agriculture Improvement Act of 2018, Public Law 115-334, (the 2018 Farm Bill) required USDA to promulgate regulations and guidelines to establish and administer a program for the production of hemp in the United States. Prior to the 2018 Farm Bill, state departments of agriculture and institutions of higher learning were permitted to produce hemp as part of a pilot program for research purposes pursuant to the Agricultural Act of 2014, Public Law 113-79, (the 2014 Farm Bill). The 2018 Farm Bill extended this 2014 Farm Bill pilot program authority until October 31, 2020.
In determining eligibility for the applicant, project or use of funds, any project applying for funding under the REAP Program and proposing to produce, procure, supply or market any component of the hemp plant or hemp related by-products, or provide technical assistance related to such products, must have a valid license from an approved State, Tribal or Federal plan pursuant to Section 10113 of the 2018 Farm Bill, be in compliance with regulations published by the Agricultural Marketing Service at 7 CFR part 990, and meet any applicable FDA and DEA regulatory requirements. Verification of valid Hemp licenses will occur prior to award. In addition, all projects proposing to use biomass feedstock from any part of the hemp plant must demonstrate assurance of an adequate supply of the feedstock.
Given the upcoming expiration of the 2014 Farm Bill authority as well as the absence of Federal oversight or regulations governing the 2014 Farm Bill pilot program, Rural Development will not award funds to any project proposing to produce, procure, supply or market any component of the hemp plant or hemp related by-products, or provide technical assistance related to such products, produced under 2014 Farm Bill authority.
A.
This solicitation is also for applications for Energy Audit or Renewable Energy Development Assistance grants from units of State, Tribal, or local government; instrumentalities of a State, Tribal, or local government; institutions of higher education; rural electric cooperatives; public power entities; and councils, as defined in 16 U.S.C. 3451, which serve agricultural producers and rural small businesses.
To be eligible for the grant portion of the program, an applicant must meet the requirements specified in 7 CFR 4280.110 and 7 CFR 4280.112, or 7 CFR 4280.186, as applicable.
To be eligible for the guaranteed loan portion of the program, a borrower must meet the requirements specified in 7 CFR 5001.126.
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C.
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(1)
(2)
E.
The U.S. Department of Agriculture Departmental Regulations and Laws that contain other compliance requirements are referenced in paragraphs IV.F and VI.B.(1) through (3) of this Notice. Applicants who have been found to be in violation of applicable Federal statutes will be ineligible.
A.
B.
(1)
(a) Information for the required content of a grant application to be considered complete is found in 7 CFR part 4280, subpart B.
(i) Grant applications for renewable energy systems and energy efficiency improvements projects with total project costs of $80,000 or less must provide information required by 7 CFR 4280.119.
(ii) Grant applications for renewable energy systems and energy efficiency improvements projects with total project costs of $200,000 or less, but more than $80,000, must provide information required by 7 CFR 4280.118.
(iii) Grant applications for renewable energy systems and energy efficiency improvements projects with total project costs of greater than $200,000 must provide information required by 7 CFR 4280.117.
(iv) Grant applications for energy audits or renewable energy development assistance grant applications must provide information required by 7 CFR 4280.190.
(b) All grant applications must be submitted as (i) hard copy (ii) electronically to the appropriate Rural Development “Energy Coordinator in the State in which the applicant's proposed project is located, or (iii) via the Government-wide
(i) Applicants must submit one original, hardcopy or electronic, to the appropriate Rural Development Energy Coordinator in the State in which the applicant's proposed project is located. A list of USDA Rural Development Energy Coordinators is available via the following link:
(ii) Applicants submitting a grant application to the Agency via the
(c) After successful applicants are notified of the intent to make a Federal award, applicants must meet the requirements of 7 CFR 4280.122 (a) through (h) for the financial assistance agreement to be executed.
(2)
(a) Information for the content required for a guaranteed loan application to be considered complete is found at 7 CFR 5001.303 and 5001.307.
(b) All guaranteed loan applications must be submitted either as hard copy or electronically to the appropriate Rural Development Energy Coordinator in the State in which the applicant's proposed project is located. A list of USDA Rural Development Energy Coordinators is available via the following link:
(c) After successful applicants are notified of the intent to make a Federal award, borrowers must meet the conditions prior to issuance of loan note guarantee as outlined in 7 CFR 5001.452.
(3)
(a) Information for the content required for a combined guaranteed loan and grant application to be considered complete is found at 7 CFR 4280.165(c), 7 CFR 5001.301 through 5001.303, and 7 CFR 5001.307.
(b) All combined guaranteed loan and grant applications must be submitted either as hard copy or electronically to the appropriate Rural Development Energy Coordinator in the State in which the applicant's proposed project is located. A list of USDA Rural Development Energy Coordinators is available via the following link:
(c) After successful applicants are notified of the intent to make a Federal award, applicants must meet the requirements, including the requisite forms, specified in 7 CFR 4280.117, 4280.118, 4280.119, 4280.137, and 7 CFR 5001.451 through 5001.452, as applicable, for the issuance of a financial assistance agreement and loan note guarantee.
(4)
(a) Grant applications for energy audits or renewable energy development assistance must provide the information required by 7 CFR 4280.190 to be considered a complete application.
(b) All energy audits or renewable development assistance grant applications must be submitted either as hard copy or electronically to the appropriate Rural Development Energy Coordinator in the State in which the applicant's proposed project is located, or via the Government-wide
(c) After successful applicants are notified of the intent to make a Federal award, applicants must meet the requirements of 7 CFR 4280.195 for the financial assistance agreement to be executed.
5.
To be eligible (unless you are excepted under 2 CFR 25.110(b), or (d)), you are required to:
(a) Provide a valid DUNS number in your application, which can be obtained at no cost via a toll-free request line at (866) 705-5711;
(b) Register in SAM before submitting your application. You may register in SAM at no cost at
(c) The SAM registration must remain active with current information at all times while RBCS is considering an application or while a Federal grant award is active. To maintain the registration in the SAM database the applicant must review and update the information in the SAM database annually from date of initial registration or from the date of the last update. The applicant must ensure that the information in the database is current, accurate, and complete. Applicants must ensure they complete the Financial Assistance General Certifications and Representations in SAM.
If you have not fully complied with all applicable DUNS and SAM requirements, the Agency may determine that the applicant is not qualified to receive a Federal award and the Agency may use that determination as a basis for making an award to another applicant. The Agency can accept an application, hardcopy or electronic, without a DUNS number or an active SAM registration. However, the DUNS number and active SAM registration must be completed before an award is made.
C.
(1)
(a) For applicants requesting a grant only of $20,000 or less or a combination grant and guaranteed loan where the grant request is $20,000 or less, that wish to have their grant application compete for the “Grants of $20,000 or less set aside,” complete applications must be received no later than
(i) 4:30 p.m. local time on October 31, 2020, or
(ii) 4:30 p.m. local time on March 31, 2021.
(b) For applicants requesting a grant only of over $20,000 (unrestricted) or a combination grant and guaranteed loan where the grant request is greater than $20,000, complete applications must be received no later than 4:30 p.m. local time on March 31, 2021.
(2)
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(1)
(a) Applicants can be awarded only one renewable energy system grant and one energy efficiency improvement grant in FY 2021. For the purposes of this Notice, the maximum amount of grant assistance to an entity will not exceed $750,000 for FY 2021 based on the total amount of the renewable energy system, and energy efficiency improvements grants awarded to an entity under REAP.
(b) For renewable energy system grants, the minimum grant is $2,500 and the maximum is $500,000. For energy efficiency improvements grants, the minimum grant is $1,500 and the maximum grant is $250,000.
(c) For renewable energy system and energy efficiency improvements loan guarantees, the minimum REAP guaranteed loan amount is $5,000 and the maximum amount of a guaranteed loan to be provided to a borrower is $25 million.
(d) Renewable energy system and energy efficiency improvements guaranteed loan and grant combination applications. Paragraphs IV.E.(1)(b) and (c) of this Notice contain the applicable maximum amounts and minimum amounts for grants and guaranteed loans. Requests for guaranteed loan and combined grant and guaranteed loan will not exceed 75 percent of total eligible project costs, with any Federal grant portion not to exceed 25 percent of the total eligible project costs, whether the grant is part of a combination request or is a grant-only.
(2)
(a) Applicants may submit only one energy audit grant application and one renewable energy development assistance grant application for FY 2021 funds. Separate applications must be submitted for energy audit and renewable energy development assistance per 7 CFR 4280.190(a).
(b) The maximum aggregate amount of energy audit and renewable energy development assistance grants awarded to any one recipient under this Notice cannot exceed $100,000 for FY 2021.
(c) The 2018 Farm Bill mandates that the recipient of a grant that conducts an energy audit for an agricultural producer or a rural small business must require the agricultural producer or rural small business to pay at least 25 percent of the cost of the energy audit, which shall be retained by the eligible entity for the cost of the audit.
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(1)
(a) Complete renewable energy systems and energy efficiency improvements grant applications requesting $20,000 or less are eligible to compete in up to five competitions within the FY as described in 7 CFR 4280.121.
(b) If the application remains unfunded after the final National Office competition for the FY it must be withdrawn. Pursuant to the publication of this announcement, all complete and eligible applications will be limited to competing in the FY that the application was received, versus rolling into the following FY, which may result in less than five total competitions.
(c) Complete renewable energy systems and energy efficiency improvements grant applications, regardless of the amount of funding requested, are eligible to compete in two competitions during a FY—a State competition and a National competition as described in 7 CFR 4280.121 (a).
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(1)
(a) Funds for renewable energy system and energy efficiency improvements grants of $20,000 or less will be allocated to the States. Eligible applications must be submitted by March 31, 2021, in order to be considered for these set-aside funds. Approximately 50 percent of these funds will be made available for those complete applications that the Agency receives by October 31, 2020, and approximately 50 percent of the funds for those complete applications that the Agency receives by March 31, 2021. All unused State allocated funds for grants of $20,000 or less will be pooled to the National Office.
(b) Eligible applications received by March 31, 2021, for renewable energy system and energy efficiency improvements grants of $20,000 or less, that are not funded by State allocations can be submitted to the National Office to compete against grant applications of $20,000 or less from other States at a national competition. Obligations of these funds will take place prior to June 30, 2021.
(c) Eligible applications for renewable energy system and energy efficiency improvements, regardless of the amount of the funding request, received by March 31, 2021, can compete for unrestricted grant funds. Unrestricted grant funds will be allocated to the States. All unused State allocated unrestricted grant funds will be pooled to the National Office.
(d) Eligible renewable energy system and energy efficiency improvements unrestricted grant applications received by March 31, 2021 that are not funded by State allocations can be submitted to the National Office to compete against unrestricted grant applications from other States at a national competition. Unfunded grants of $20,000 or less may also compete in this national competition.
(2)
(3)
Renewable energy system and energy efficiency improvements combined grant and guaranteed loan applications will compete with grant-only applications for grant funds allocated to their State. If the application is ranked high enough to receive State allocated grant funds, the State will request funding for the guaranteed loan portion of any combined grant and guaranteed loan applications from the National Office guaranteed loan reserve, and no further competition will be required. All unfunded eligible applications for combined grant and guaranteed loan applications that are received by March 31, 2021, and that are not funded by State allocations can be submitted to the National Office to compete against other grant and combined grant and guaranteed loan applications from other States at a final national competition.
(4)
C.
(1)
(a) Any one of the three impact areas, 1 point will be awarded.
(b) Any two of the three impact areas, 3 points will be awarded.
(c) All three impact areas, 5 points will be awarded.
(2)
(a)
(i)
(ii)
(b)
(i)
(C)
(1) Greater than 50 percent, 15 points will be awarded;
(2) Greater than 25 percent, but equal to or less than 50 percent, 10 points will be awarded; or
(3) Equal to or less than 25 percent, 5 points will be awarded.
(ii)
(iii)
(c)
(i)
(ii)
(d)
(i) If the applicant has never received and accepted a grant award or a guaranteed loan commitment under either this part or 7 CFR part 5001 of this title, 15 points will be awarded.
(ii) If the applicant has not received and accepted a grant award or guaranteed loan commitment under this subpart, or a guaranteed loan commitment under 7 CFR part 5001 of this title within the 2 previous Federal fiscal years, 10 points will be awarded.
(iii) If the applicant has received a grant award or guaranteed loan commitment under this subpart, or a guaranteed loan commitment under 7 CFR part 5001 of this title within the 2 previous Federal fiscal years, no points will be awarded.
(e)
Existing business means a business that has been in operation for at least 1 full year. The following will be treated as existing businesses provided there is not a significant change in operations of the existing business: Mergers by an existing business with a new or existing business, a change in the business name, or a new business and an existing business applying as co-applicants.
(f)
The estimated simple payback of a project funded under this part as calculated using paragraphs (i) or (ii), as applicable, of this definition.
(i) EEI projects simple payback = (total project costs) ÷ (dollar value of energy saved).
(
(
(
(ii) RES projects simple payback = (total project costs) ÷ (dollar value of energy units replaced, credited, sold, or used and fair market value of byproducts as applicable in a typical year).
(
Attach utility bills to document applicant entity's historical energy consumption quantity and actual average price of energy.
(
(
(
(
(iii)
(
(
(
(
(iv)
(
(
(
(
(g)
(h)
(i)
(i) May allow for applications for an under-represented technology to receive additional points.
(ii) May allow for applications that help achieve geographic diversity to receive additional points. This may include priority points for smaller grant requests which enhances geographic diversity.
(iii) May allow for applicants who are members of unserved or under-served populations to receive additional points if one of the following criteria are met:
(
(
(iv) May allow for applications that further a Presidential initiative, or a Secretary of Agriculture priority.
(v) The proposed project is located in a Federally declared disaster area. Declarations must be within the last 2 calendar years.
(vi) The proposed project is located in an area where 20 percent or more of its population is living in poverty, as defined by the United States Census Bureau, is an underserved community(ies) or has experienced long-term population decline, or loss of employment.
D.
(1)
(a) For State allocated funds:
(i) The applicant must be notified that they may accept the remaining funds or submit the total request for National Office reserve funds available after pooling. If the applicant agrees to lower its grant request, the applicant must certify that the purposes of the project will be met and provide the remaining total funds needed to complete the project.
(ii) If two or more grant or combination applications have the same score and remaining funds in the State allocation are insufficient to fully award them, the Agency will notify the applicants that they may either accept the proportional amount of funds or submit their total request for National Office reserve funds available after pooling. If the applicant agrees to lower its grant request, the applicant must certify that the purposes of the project will be met and provide the remaining total funds needed to complete the project.
(b) The applicant notification for national funds will depend on the competition as follows:
(i) For an application requesting a grant of $20,000 or less or a combination application where the grant amount is $20,000 or less from set-aside pooled funds, the applicant must be notified that they may accept the remaining funds, or submit the total request to compete in the unrestricted State competition. If the applicant agrees to lower the grant request, the applicant must certify that the purposes of the project will be met and provide the remaining total funds needed to complete the project. A declined partial award counts as a competition.
(ii) For any application competing in the final national office unrestricted pooling, the applicant must be notified that they may accept the remaining funds or their grant application will be withdrawn. If the applicant agrees to lower the grant request, the applicant must certify that the purposes of the project will be met and provide the remaining total funds needed to complete the project.
(iii) If two or more grant or combination applications have the same score and remaining funds are insufficient to fully award them, the Agency will notify the applicants that they may either accept the proportional amount of funds or submit their total request in the next available competition. If not awarded in the final fiscal year competition their application will be withdrawn.
(iv) At its discretion, the Agency may instead allow the remaining funds to be carried over to the next FY rather than selecting a lower scoring application(s) or distributing funds on a pro-rata basis.
(2)
(3)
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B.
(1)
(2)
(3)
(4)
(5)
(a) Renewable energy system and energy efficiency improvements grants that are awarded are required to fulfill the reporting requirements as specified in 7 CFR 4280.123.
(b) Guaranteed loan applications that are awarded are required to fulfill the reporting requirements as specified in 7 CFR 5001.501 through 5001.524
(c) Combined guaranteed loan and grant applications that are awarded are required to fulfill the reporting requirements as specified in 7 CFR 4280.165(f).
(d) Energy audit and renewable energy development assistance grants grant applications that are awarded are required to fulfill the reporting requirements as specified in 7 CFR 4280.196.
For further information contact the applicable USDA Rural Development Energy Coordinator for your respective State, as identified via the following link:
For information about this Notice, please contact Deb Yocum, Business Loan and Grant Analyst, USDA Rural Development, Program Management Division. Telephone: (402) 499-1198. Email:
In accordance with the Paperwork Reduction Act of 1995, the information collection requirements associated with renewable energy system and energy efficiency improvements grants and guaranteed loans, as covered in this Notice, have been approved by the Office of Management and Budget (OMB) under OMB Control Number 0570-0067. The information collection requirements associated with energy audit and renewable energy development assistance grants have also been approved by OMB under OMB Control Number 0570-0067.
In accordance with Federal civil rights law and U.S. Department of Agriculture (USDA) civil rights regulations and policies, the USDA, its Agencies, offices, and employees, and institutions participating in or administering USDA programs are prohibited from discriminating based on race, color, national origin, religion, sex, gender identity (including gender expression), sexual orientation, disability, age, marital status, family/parental status, income derived from a public assistance program, political beliefs, or reprisal or retaliation for prior civil rights activity, in any program or activity conducted or funded by USDA (not all bases apply to all programs). Remedies and complaint filing deadlines vary by program or incident.
Persons with disabilities who require alternative means of communication for program information (
To file a program discrimination complaint, complete the USDA Program Discrimination Complaint Form, AD-3027, found online at How to File a Program Discrimination Complaint and at any USDA office, or write a letter addressed to USDA and provide in the letter all of the information requested in the form. To request a copy of the complaint form, call (866) 632-9992. Submit your completed form or letter to USDA by:
USDA is an equal opportunity provider, employer, and lender.
U.S. Commission on Civil Rights.
Announcement of meeting.
Notice is hereby given, pursuant to the provisions of the rules and regulations of the U.S. Commission on Civil Rights (Commission) and the Federal Advisory Committee Act that the Mississippi Advisory Committee (Committee) will hold a series of meetings via Webex on Tuesday, December 15
The meetings will be held on:
Melissa Wojnaroski, DFO, at
Members of the public may join these meetings online or listen to this discussion through the above call in number. An open comment period will be provided to allow members of the public to make a statement as time allows. Callers can expect to incur regular charges for calls they initiate over wireless lines, according to their wireless plan. The Commission will not refund any incurred charges. Callers will incur no charge for calls they initiate over land-line connections to the toll-free telephone number. Individuals who are deaf, deafblind and hard of hearing may also follow the proceedings by first calling the Federal Relay Service at 1-800-877-8339 and providing the Service with the conference call number and conference ID number.
Members of the public are entitled to submit written comments; the comments must be received in the regional office within 30 days following the meeting. Written comments may be emailed to Corrine Sanders at
Records generated from this meeting may be inspected and reproduced at the Regional Programs Unit Office, as they become available, both before and after the meeting. Records of the meeting will be available via
U.S. Commission on Civil Rights.
Announcement of meeting.
Notice is hereby given, pursuant to the provisions of the rules and regulations of the U.S. Commission on Civil Rights (Commission) and the Federal Advisory Committee Act (FACA) that a teleconference meeting of the Nevada Advisory Committee (Committee) to the Commission will be held at 1:00 p.m. (Pacific Time) Thursday, December 10, 2020. The purpose will be to begin planning for their hearing on distance learning and equity in education.
The meeting will be held on Thursday, December 10, 2020 at 1:00 p.m. PT.
Ana Victoria Fortes (DFO) at
This meeting is available to the public through the following toll-free call-in number: 800-353-6461, conference ID number: 5422761. Any interested member of the public may call this number and listen to the meeting. Callers can expect to incur charges for calls they initiate over wireless lines, and the Commission will not refund any incurred charges. Callers will incur no charge for calls they initiate over land-line connections to the toll-free telephone number. Persons with hearing impairments may also follow the proceedings by first calling the Federal Relay Service at 1-800-877-8339 and providing the Service with the conference call number and conference ID number.
Members of the public are entitled to make comments during the open period at the end of the meeting. Members of the public may also submit written comments; the comments must be received in the Regional Programs Unit within 30 days following the meeting. Written comments may be mailed to the Western Regional Office, U.S. Commission on Civil Rights, 300 North Los Angeles Street, Suite 2010, Los Angeles, CA 90012 or email Ana Victoria Fortes at
Records and documents discussed during the meeting will be available for public viewing prior to and after the meeting at
Records generated from this meeting may also be inspected and reproduced at the Regional Programs Unit, as they become available, both before and after the meeting. Persons interested in the work of this Committee are directed to the Commission's website,
Commission on Civil Rights.
Announcement of briefing.
Notice is hereby given, pursuant to the provisions of the rules and regulations of the U.S. Commission on Civil Rights (Commission), and the Federal Advisory Committee Act (FACA), that a briefing of the South Dakota Advisory Committee to the Commission will convene by conference call and/or video conference on Wednesday, December 16, 2020 at 3:00 p.m. (CST), via teleconference and web platform. The purpose of the meeting is to hear testimony on the topic of maternal health disparities of Native American women.
Wednesday, December 16, 2020 from 3:00 p.m.-4:30 p.m. (CST)
Mallory Trachtenberg,
Members of the public may listen to the discussion by dialing the following Conference Call Toll-Free Number: 1-800-367-2403; conference ID: 9800799. Please be advised that before being placed into the conference call, the operator will ask callers to provide their names, their organizational affiliations (if any), and an email address (if available) prior to placing callers into the conference room. Callers can expect to incur charges for calls they initiate over wireless lines, and the Commission will not refund any incurred charges. Callers will incur no charge for calls they initiate over land-line connections to the toll-free phone number.
Individuals who are deaf, deafblind and hard of hearing may also follow the proceedings by first calling the Federal Relay Service at 1-800-877-8339 and providing the Federal Relay Service operator with the conference call-in numbers: 1-800-437-2398; Conference ID: 5226726. Members of the public are invited to submit written comments; the comments must be received within 30 days of the meeting date. Written comments may be emailed to Mallory Trachtenberg at
Records and documents discussed during the meeting will be available for public viewing as they become available at the
The Regulations and Procedures Technical Advisory Committee will meet December 8, 2020, at 10:00 a.m., Eastern Standard Time, via remote teleconference. The Committee advises the Office of the Assistant Secretary for Export Administration on implementation of the Export Administration Regulations (EAR) and provides for continuing review to update the EAR as needed.
1. Opening remarks by the Chairman.
2. Opening remarks by the Bureau of Industry and Security.
3. Presentation of papers or comments by the Public.
4. Regulations Update.
5. Working Group Reports.
6. Automated Export System Update.
7. Discussion of matters determined to be exempt from the provisions relating to public meetings found in 5 U.S.C. app. 2 §§ 10(a)(1) and 10(a)(3).
The open session will be accessible via teleconference to participants on a first come, first serve basis. To join the conference, submit inquiries to Ms. Yvette Springer at
To the extent that time permits, members of the public may present oral statements to the Committee. The public may submit written statements at any time before or after the meeting. However, to facilitate the distribution of public presentation materials to the Committee members, the Committee suggests that presenters forward the public presentation materials prior to the meeting to Ms. Springer via email.
The Assistant Secretary for Administration, with the concurrence of the delegate of the General Counsel, formally determined on August 17, 2020, pursuant to Section 10(d) of the Federal Advisory Committee Act, as amended (5 U.S.C. app. 2 § 10(d)), that the portion of the meeting dealing with pre-decisional changes to the Commerce Control List and the U.S. export control policies shall be exempt from the provisions relating to public meetings found in 5 U.S.C. app. 2 § § 10(a)(1) and 10(a)(3). The remaining portions of the meeting will be open to the public.
For more information, call Yvette Springer at (202) 482-2813.
The Emerging Technology Technical Advisory Committee (ETTAC) will meet on December 10, 2020, at 1:00 p.m., Eastern Standard Time. The meeting will be available via teleconference. The Committee advises the Office of the Assistant Secretary for Export Administration on the identification of emerging and foundational technologies with potential dual-use applications as early as possible in their developmental stages both within the United States and abroad.
1. Welcome and Introductions.
2. Introduction by the Bureau of Industry and Security Leadership.
3.
4.
5.
6.
7. Open Discussion.
8. Conclusion.
9. Discussion of matters determined to be exempt from the provisions relating to public meetings found in 5 U.S.C. app. 2 §§ 10(a)(1) and 10(a)(3).
The open session will be accessible via teleconference to 20 participants on a first come, first serve basis. To join the conference, submit inquiries to Ms. Yvette Springer at
A limited number of slots will be available for the public session. Reservations are not accepted. To the extent that time permits, members of the public may present oral statements to
The Assistant Secretary for Administration, with the concurrence of the delegate of the General Counsel, formally determined on November 13, 2020, pursuant to Section 10(d) of the Federal Advisory Committee Act, as amended (5 U.S.C. app. 2 § 10(d)), that the portion of the meeting dealing with pre-decisional changes to the Commerce Control List and the U.S. export control policies shall be exempt from the provisions relating to public meetings found in 5 U.S.C. app. 2 § § 10(a)(1) and 10(a)(3). The remaining portions of the meeting will be open to the public.
For more information, call Yvette Springer at (202) 482-2813.
Enforcement and Compliance, International Trade Administration, Department of Commerce.
The Department of Commerce (Commerce) is rescinding the administrative review of the countervailing duty (CVD) order on certain corrosion-resistant steel products (CORE) from the People's Republic of China (China), covering the period January 1, 2018, through December 31, 2018.
Applicable November 25, 2020.
Mark Hoadley, AD/CVD Operations, Office VII, Enforcement and Compliance, International Trade Administration, U.S. Department of Commerce, 1401 Constitution Avenue NW, Washington, DC 20230; telephone: (202) 482-3148.
On July 1, 2019, Commerce published in the
On September 19, 2019, one of the petitioners, U.S. Steel, submitted comments on the CBP Query, noting that certain companies subject to the review had shipped CORE products to the United States during the POR according to third-party manifest data submitted by the petitioners.
On December 4, 2019, the petitioners timely withdrew their request for a review in full.
On February 11, 2020, Commerce issued questionnaires to all three companies.
On April 24, 2020, Commerce tolled all deadlines in administrative reviews by 50 days.
On November 6, 2020, Commerce issued a memorandum notifying all parties of its intent to rescind the 2018 CVD administrative review of CORE from China.
The products covered by this order are certain flat-rolled steel products, either clad, plated, or coated with corrosion-resistant metals such as zinc, aluminum, or zinc-, aluminum-, nickel- or iron-based alloys, whether or not corrugated or painted, varnished, laminated, or coated with plastics or other non-metallic substances in addition to the metallic coating. The products covered include coils that have a width of 12.7 mm or greater, regardless of form of coil (
(1) Where the nominal and actual measurements vary, a product is within the scope if application of either the nominal or actual measurement would place it within the scope based on the definitions set forth above, and
(2) where the width and thickness vary for a specific product (
Steel products included in the scope of this order are products in which: (1) Iron predominates, by weight, over each of the other contained elements; (2) the carbon content is 2 percent or less, by weight; and (3) none of the elements listed below exceeds the quantity, by weight, respectively indicated:
Unless specifically excluded, products are included in this scope regardless of levels of boron and titanium.
For example, specifically included in this scope are vacuum degassed, fully stabilized (commonly referred to as Start Printed Page 48391interstitial-free (IF)) steels and high strength low alloy (HSLA) steels. IF steels are recognized as low carbon steels with micro-alloying levels of elements such as titanium and/or niobium added to stabilize carbon and nitrogen elements. HSLA steels are recognized as steels with micro-alloying levels of elements such as chromium, copper, niobium, titanium, vanadium, and molybdenum.
Furthermore, this scope also includes Advanced High Strength Steels (AHSS) and Ultra High Strength Steels (UHSS), both of which are considered high tensile strength and high elongation steels.
Subject merchandise also includes corrosion-resistant steel that has been further processed in a third country, including but not limited to annealing, tempering, painting, varnishing, trimming, cutting, punching and/or slitting or any other processing that would not otherwise remove the merchandise from the scope of the order if performed in the country of manufacture of the in-scope corrosion resistant steel.
All products that meet the written physical description, and in which the chemistry quantities do not exceed any one of the noted element levels listed above, are within the scope of this order unless specifically excluded. The following products are outside of and/or specifically excluded from the scope of this order:
• Flat-rolled steel products either plated or coated with tin, lead, chromium, chromium oxides, both tin and lead (“terne plate”), or both chromium and chromium oxides (“tin free steel”), whether or not painted, varnished or coated with plastics or other non-metallic substances in addition to the metallic coating;
• Clad products in straight lengths of 4.7625 mm or more in composite thickness and of a width which exceeds 150 mm and measures at least twice the thickness; and
• Certain clad stainless flat-rolled products, which are three-layered corrosion-resistant flat-rolled steel products less than 4.75 mm in composite thickness that consist of a flat-rolled steel product clad on both sides with stainless steel in a 20%-60%-20% ratio.
The products subject to the order are currently classified in the Harmonized Tariff Schedule of the United States (HTSUS) under item numbers: 7210.30.0030, 7210.30.0060, 7210.41.0000, 7210.49.0030, 7210.49.0091, 7210.49.0095, 7210.61.0000, 7210.69.0000, 7210.70.6030, 7210.70.6060, 7210.70.6090, 7210.90.6000, 7210.90.9000, 7212.20.0000, 7212.30.1030, 7212.30.1090, 7212.30.3000, 7212.30.5000, 7212.40.1000, 7212.40.5000, 7212.50.0000, and 7212.60.0000.
The products subject to the order may also enter under the following HTSUS item numbers: 7210.90.1000, 7215.90.1000, 7215.90.3000, 7215.90.5000, 7217.20.1500, 7217.30.1530, 7217.30.1560, 7217.90.1000, 7217.90.5030, 7217.90.5060, 7217.90.5090, 7225.91.0000, 7225.92.0000, 7225.99.0090, 7226.99.0110, 7226.99.0130, 7226.99.0180, 7228.60.6000, 7228.60.8000, and 7229.90.1000.
The HTSUS subheadings above are provided for convenience and customs purposes only. The written description of the scope of the order is dispositive.
Pursuant to 19 CFR 351.213(d)(1), Commerce will rescind an administrative review, in whole or in part, if all parties that requested the review withdraw their request within 90 days of the publication date of the notice of initiation of the requested review. All review requests were withdrawn for the following eight companies included in the initiation notice: China Steel Sumikin Vietnam, Dai Thien Loc Corp., Hoa Phat Steel Pipe, Maruichi Sun Steel, Nam Kim Steel, NS Bluescope, Southern Steel Sheet Co., and Vina One. Therefore, we are rescinding the administrative review for these eight companies in accordance with 19 CFR 351.213(d)(1).
Pursuant to 19 CFR 351.213(d)(3), Commerce will rescind an administrative review, in whole or only with respect to a particular exporter or producer, if Commerce concludes that there were no reviewable entries of the subject merchandise during the POR. Based on an examination of the record, Commerce has concluded there were no reviewable entries, exports or sales of subject merchandise during the POR of merchandise imported from NSSVC, HSG, and TDA. Therefore, we are rescinding the administrative review for these three companies in accordance with 19 CFR 351.213(d)(3).
Commerce will instruct CBP to assess countervailing duties on all appropriate entries. Because Commerce is rescinding this review in its entirety, the entries to which this administrative review pertained shall be assessed at rates equal to the cash deposit of estimated countervailing duties required at the time of entry, or withdrawal from warehouse, for consumption, in accordance with 19 CFR 351.212(c)(1)(i). Commerce intends to issue appropriate assessment instructions to CBP 15 days after the publication of this notice.
This notice serves as a final reminder to parties subject to administrative protective order (APO) of their responsibility concerning the return or destruction of proprietary information disclosed under APO in accordance with 19 CFR 351.305, which continues to govern business proprietary information in this segment of the proceeding. Timely written notification of the return or destruction of the APO materials, or conversion to judicial protective order is hereby requested. Failure to comply with regulations and terms of an APO is a violation, which is subject to sanction.
This notice is issued and published in accordance with sections 751(a)(1) and 777(i)(l) of the Tariff Act of 1930, as amended, and 19 CFR 351.213(d)(4).
Enforcement and Compliance, International Trade Administration, Department of Commerce.
The Department of Commerce (Commerce) preliminarily finds that Nippon Steel and Sumikin Sales Vietnam Co., Ltd. (NSSVC), Hoa Sen Group (HSG), and Ton Dong A Corporation (TDA) made no shipments of corrosion-resistant steel products (CORE) from the People's Republic of China (China) during the period of review (POR) from July 1, 2018 through June 30, 2019. We invite interested parties to comment on these preliminary results. In addition, Commerce is rescinding the administrative review, in part, for eight companies for which review requests were withdrawn.
Applicable November 25, 2020.
Mark Hoadley, AD/CVD Operations, Office VII, Enforcement and Compliance, International Trade Administration, U.S. Department of Commerce, 1401 Constitution Avenue NW, Washington, DC 20230; telephone: (202) 482-3148.
On July 1, 2019, Commerce published in the
On October 3, 2019, one of the petitioners, U.S. Steel, submitted comments on the CBP query, noting that certain companies subject to the review had shipped CORE products to the United States during the POR according to third-party manifest data submitted by the petitioners.
On December 4, 2019, the petitioners timely withdrew their request for a review in full.
On February 11, 2020, Commerce issued questionnaires to all three companies.
On April 24, 2020, Commerce tolled all deadlines in administrative reviews by 50 days.
The products covered by this order are certain flat-rolled steel products, either clad, plated, or coated with corrosion-resistant metals such as zinc, aluminum, or zinc-, aluminum-, nickel- or iron-based alloys, whether or not corrugated or painted, varnished, laminated, or coated with plastics or other non-metallic substances in addition to the metallic coating. The products covered include coils that have a width of 12.7 mm or greater, regardless of form of coil (
(1) Where the nominal and actual measurements vary, a product is within the scope if application of either the nominal or actual measurement would place it within the scope based on the definitions set forth above, and
(2) where the width and thickness vary for a specific product (
Steel products included in the scope of this order are products in which: (1) Iron predominates, by weight, over each of the other contained elements; (2) the carbon content is 2 percent or less, by weight; and (3) none of the elements listed below exceeds the quantity, by weight, respectively indicated:
For example, specifically included in this scope are vacuum degassed, fully stabilized (commonly referred to as interstitial-free (IF)) steels and high strength low alloy (HSLA) steels. IF steels are recognized as low carbon steels with micro-alloying levels of elements such as titanium and/or niobium added to stabilize carbon and nitrogen elements. HSLA steels are recognized as steels with micro-alloying levels of elements such as chromium, copper, niobium, titanium, vanadium, and molybdenum.
Furthermore, this scope also includes Advanced High Strength Steels (AHSS) and Ultra High Strength Steels (UHSS), both of which are considered high tensile strength and high elongation steels.
Subject merchandise also includes corrosion-resistant steel that has been
All products that meet the written physical description, and in which the chemistry quantities do not exceed any one of the noted element levels listed above, are within the scope of this order unless specifically excluded. The following products are outside of and/or specifically excluded from the scope of this order:
• Flat-rolled steel products either plated or coated with tin, lead, chromium, chromium oxides, both tin and lead (“terne plate”), or both chromium and chromium oxides (“tin free steel”), whether or not painted, varnished or coated with plastics or other non-metallic substances in addition to the metallic coating;
• Clad products in straight lengths of 4.7625 mm or more in composite thickness and of a width which exceeds 150 mm and measures at least twice the thickness; and
• Certain clad stainless flat-rolled products, which are three-layered corrosion-resistant flat-rolled steel products less than 4.75 mm in composite thickness that consist of a flat-rolled steel product clad on both sides with stainless steel in a 20%-60%-20% ratio.
The products subject to the order are currently classified in the Harmonized Tariff Schedule of the United States (HTSUS) under item numbers: 7210.30.0030, 7210.30.0060, 7210.41.0000, 7210.49.0030, 7210.49.0091, 7210.49.0095, 7210.61.0000, 7210.69.0000, 7210.70.6030, 7210.70.6060, 7210.70.6090, 7210.90.6000, 7210.90.9000, 7212.20.0000, 7212.30.1030, 7212.30.1090, 7212.30.3000, 7212.30.5000, 7212.40.1000, 7212.40.5000, 7212.50.0000, and 7212.60.0000.
The products subject to the order may also enter under the following HTSUS item numbers: 7210.90.1000, 7215.90.1000, 7215.90.3000, 7215.90.5000, 7217.20.1500, 7217.30.1530, 7217.30.1560, 7217.90.1000, 7217.90.5030, 7217.90.5060, 7217.90.5090, 7225.91.0000, 7225.92.0000, 7225.99.0090, 7226.99.0110, 7226.99.0130, 7226.99.0180, 7228.60.6000, 7228.60.8000, and 7229.90.1000.
The HTSUS subheadings above are provided for convenience and customs purposes only. The written description of the scope of the order is dispositive.
Pursuant to 19 CFR 351.213(d)(1), Commerce will rescind an administrative review, in whole or in part, if all parties that requested the review withdraw their request within 90 days of the publication date of the notice of initiation of the requested review. All review requests were withdrawn for the following eight companies included in the
The remaining three companies included in the
Therefore, we preliminarily determine that NSSVC, HSG, and TDA had no shipments of subject merchandise during the POR. Consistent with Commerce's practice, we are not preliminarily rescinding the review with respect to NSSVC, HSG, and TDA. Rather, we will complete the review and issue appropriate instructions to CBP based on the final results.
Interested parties may submit case briefs to Commerce no later than 30 days after the date of publication of this notice.
Case and rebuttal briefs must be filed electronically via Enforcement and Compliance's Antidumping and Countervailing Duty Centralized Electronic Service System (ACCESS) and must also be served on interested parties.
Pursuant to 19 CFR 351.310(c), interested parties who wish to request a hearing must submit a written request to the Assistant Secretary for Enforcement
Commerce intends to issue the final results of this administrative review, including the results of its analysis of the issues raised in any case or rebuttal briefs, no later than 120 days after the date of publication of this notice, unless extended.
For companies for which this review is rescinded, Commerce will instruct CBP to assess AD duties on all appropriate entries at a rate equal to the cash deposit of estimated AD duties required at the time of entry, or withdrawal from warehouse, for consumption, during the period July 1, 2018 through June 30, 2019, in accordance with 19 CFR 351.212(c)(l)(i). Commerce intends to issue appropriate assessment instructions directly to CBP 15 days after publication of this notice.
If Commerce continues to determine for the final results of this administrative review that an exporter under review had no shipments of the subject merchandise, any suspended entries that entered under that exporter's case number (
The following cash deposit requirements will be effective for all shipments of the subject merchandise entered, or withdrawn from warehouse, for consumption on or after the publication date of the finals results of this administrative review, as provided by section 751(a)(2)(C) of the Act: (1) The cash deposit rates for NSSVC, HSG, and TDA will remain unchanged from the rates assigned to them in the most recently completed segment for each company; (2) for previously investigated or reviewed Chinese and non-Chinese exporters not covered by this review that have received a separate rate in a prior segment of this proceeding, the cash deposit rate will continue to be the existing exporter-specific cash deposit rate published for the most recently completed period; (3) for all Chinese exporters of subject merchandise that have not been found to be entitled to a separate rate, the cash deposit rate will be the rate for the China-wide entity; and (4) for all non-Chinese exporters of subject merchandise which have not received their own separate rate, the cash deposit rate will be the rate applicable to the Chinese exporter that supplied that non-Chinese exporter. These cash deposit requirements, when imposed, shall remain in effect until further notice.
This notice also serves as a preliminary reminder to importers of their responsibility under 19 CFR 351.402(f)(2) to file a certificate regarding the reimbursement of antidumping and/or countervailing duties prior to liquidation of the relevant entries during this review period. Failure to comply with this requirement could result in Commerce's presumption that reimbursement of antidumping and/or countervailing duties occurred and the subsequent assessment of double antidumping duties.
This notice also serves as a reminder to parties subject to administrative protective orders (APO) of their responsibility concerning the return or destruction of proprietary information disclosed under APO in accordance with 19 CFR 351.305(a)(3), which continues to govern business proprietary information in this segment of the proceeding. Timely written notification of the return/destruction of APO materials, or conversion to judicial protective order, is hereby requested. Failure to comply with the regulations and the terms of an APO is a sanctionable violation.
This notice is issued and published in accordance with sections 751(a)(1) and 777(i) of the Act, and 19 CFR 351.221(b)(4).
Pursuant to Section 6(c) of the Educational, Scientific and Cultural Materials Importation Act of 1966 (Pub. L. 89-651, as amended by Pub. L. 106-36; 80 Stat. 897; 15 CFR part 301), we invite comments on the question of whether instruments of equivalent scientific value, for the purposes for which the instruments shown below are intended to be used, are being manufactured in the United States.
Comments must comply with 15 CFR 301.5(a)(3) and (4) of the regulations and be postmarked on or before December 15, 2020. Address written comments to Statutory Import Programs Staff, Room 3720, U.S. Department of Commerce, Washington, DC 20230. Please also email an electronic copy of any written comments to
Docket Number: 20-008. Applicant: Rice University, 6100 Main Street, Houston, TX 77005. Instrument: Signal Acquisition ASCI. Manufacturer: LiMicro, China. Intended Use: According to the applicant, the instrument will be used to study and investigate in-vivo large-scale, high density, long-term neutral recording to integrate the signal acquisition instrument that it plans to purchase with its custom developed ultra-flexible nano electronic thread (NET) microelectrodes as a neural recording system to monitor chronic neural signals in freely behaving animals. The applicant also plans to investigate the formation of connections between various brain regions and the evolution of the neural connections over extended periods. This large-scale, high-density, long-term neural recording study has the potential to help understand the fundamental mechanisms of neural
Docket Number: 20-009. Applicant: University of Chicago, Chemistry E005A, 929 E 57th Street (loading docket behind 5741 S Drexel Avenue), Chicago, IL 60637. Instrument: White Dwarf Optimal Parametric Amplifier System (OPCPA). Manufacturer: Class 5 Photonics, GmbH, Germany. Intended Use: According to the applicant, the instrument will be used to study and determine how the local electronic structure of nanostructured materials is related to their morphology, and directly measure the electronic transitions at buried interfaces in materials, controlling anisotropic charge transport via photoinduced strain effects, manipulating energy transfer in polaritonic systems. The OPCPA is a work-horse laser system for simultaneous use with multiple experiments. The experiments to be conducted involve time-resolved photoemission microscopy of both occupied and unoccupied electronic structure of materials, heterodyned electronic sum-frequency-generation spectroscopy, transient absorption spectroscopy. Justification for Duty-Free Entry: According to the applicant, there are no instruments of the same general category manufactured in the United States. Application accepted by Commissioner of Customs: October 9, 2020.
National Marine Fisheries Service (NMFS), National Oceanic and Atmospheric Administration (NOAA), Commerce.
Notice of SEDAR 66 Assessment Webinar I for South Atlantic Tilefish.
The SEDAR 66 stock assessment of the South Atlantic stock of Tilefish will consist of a data scoping webinar, a workshop, and a series of assessment webinars. See
The SEDAR 66 South Atlantic Tilefish Assessment Webinar I will be held via webinar on December 15, 2020, from 10 a.m. until 1 p.m. EST.
Kathleen Howington, SEDAR Coordinator, 4055 Faber Place Drive, Suite 201, North Charleston, SC 29405; phone: (843) 571-4366; email:
The Gulf of Mexico, South Atlantic, and Caribbean Fishery Management Councils, in conjunction with NOAA Fisheries and the Atlantic and Gulf States Marine Fisheries Commissions, have implemented the Southeast Data, Assessment and Review (SEDAR) process, a multi-step method for determining the status of fish stocks in the Southeast Region. SEDAR is a three-step process including: (1) Data Workshop; (2) Assessment Process utilizing webinars; and (3) Review Workshop. The product of the Data Workshop is a data report which compiles and evaluates potential datasets and recommends which datasets are appropriate for assessment analyses. The product of the Assessment Process is a stock assessment report which describes the fisheries, evaluates the status of the stock, estimates biological benchmarks, projects future population conditions, and recommends research and monitoring needs. The assessment is independently peer reviewed at the Review Workshop. The product of the Review Workshop is a Summary documenting panel opinions regarding the strengths and weaknesses of the stock assessment and input data. Participants for SEDAR Workshops are appointed by the Gulf of Mexico, South Atlantic, and Caribbean Fishery Management Councils and NOAA Fisheries Southeast Regional Office, Highly Migratory Species Management Division, and Southeast Fisheries Science Center. Participants include: Data collectors and database managers; stock assessment scientists, biologists, and researchers; constituency representatives including fishermen, environmentalists, and non-governmental organizations (NGOs); international experts; and staff of Councils, Commissions, and state and federal agencies.
The items of discussion at the SEDAR 66 South Atlantic Tilefish Assessment Webinar I are as follows:
• Finalize any data discussions if needed
• Continue discussion on base model configuration
• Discuss proposed changes to model, sensitivity runs, and projections
The established meeting times may be adjusted as necessary to accommodate the timely completion of discussion relevant to the assessment process. Such adjustments may result in the meeting being extended from or completed prior to the time established by this notice. Additional SEDAR 66 webinar dates and times will publish in a subsequent issue in the
Although non-emergency issues not contained in this agenda may come before this group for discussion, those issues may not be the subject of formal action during this meeting. Action will be restricted to those issues specifically identified in this notice and any issues arising after publication of this notice that require emergency action under section 305(c) of the Magnuson-Stevens Fishery Conservation and Management Act, provided the public has been notified of the intent to take final action to address the emergency.
This meeting is accessible to people with disabilities. Requests for auxiliary aids should be directed to the SAFMC office (see
The times and sequence specified in this agenda are subject to change.
16 U.S.C. 1801
National Marine Fisheries Service (NMFS), National Oceanic and Atmospheric Administration (NOAA), Commerce.
Notice of open public meeting.
This notice sets forth the proposed schedule and agenda of a forthcoming meeting of the Marine Fisheries Advisory Committee (MAFAC). The members will discuss and consider priorities and recommendations for the next four years and other organizational matters.
The meeting will be December 15, from 1-3 p.m., Eastern Time.
Meeting is by webinar and teleconference.
Heidi Lovett; NOAA Fisheries Office of Policy; (301) 427-8034; email:
Notice is hereby given of a meeting of MAFAC. The MAFAC was established by the Secretary of Commerce (Secretary), and, since 1971, advises the Secretary on all living marine resource matters that are the responsibility of the Department of Commerce. The MAFAC charter and summaries of prior MAFAC meetings are located online at
This meeting time and agenda are subject to change. The meeting is convened to discuss and consider priorities and recommendations to consider for the next four years, hear updates on current activities on seafood and aquaculture, and may also discuss future work for its subcommittees and other organizational matters.
The meeting is scheduled for December 15, 2020 from 1-3 p.m., Eastern Time by webinar and conference call. Access information for the public will be posted at
Defense Acquisition Regulations System, Department of Defense (DoD).
Notice.
The Defense Acquisition Regulations System has submitted to OMB for clearance, the following proposed revision and extension of a collection of information under the provisions of the Paperwork Reduction Act.
Consideration will be given to all comments received by December 28, 2020.
Ms. Heather Kitchens, 571-372-6104.
Comments and recommendations on the proposed information collection should be sent to Ms. Susan Minson, DoD Desk Officer, at
You may also submit comments, identified by docket number and title, by the following method:
DoD Clearance Officer: Ms. Angela James. Requests for copies of the information collection proposal should be sent to Ms. James at
Defense Acquisition Regulations System, Department of Defense (DoD).
Notice.
The Defense Acquisition Regulations System has submitted to OMB for clearance, the following proposed revision and extension of a
Consideration will be given to all comments received by December 28, 2020.
The clause at DFARS 252.247-7000, Hardship Conditions, is prescribed at DFARS 247.270-4(a) for use in all solicitations and contracts for the acquisition of stevedoring services. Paragraph (a) of the clause requires the contractor to notify the contracting officer of unusual conditions associated with loading or unloading a particular cargo, for potential adjustment of contract labor rates; and to submit any associated request for price adjustment to the contracting officer within 10 working days of the vessel sailing time.
The clause at DFARS 252.247-7002, Revision of Prices, is prescribed at DFARS 247.270-4(b) for use in solicitations and contracts when using negotiation to acquire stevedoring services. Paragraph (c) of the clause provides that, at any time, either the contracting officer or the contractor may deliver to the other a written demand that the parties negotiate to revise the prices under the contract. Paragraph (d) of the clause requires that, if either party makes such a demand, the contractor must submit relevant data upon which to base negotiations.
The clause at DFARS 252.247-7007, Liability and Insurance, is prescribed at DFARS 247.270-4(c) for use in all solicitations and contracts for the acquisition of stevedoring services. Paragraph (f) of the clause requires the contractor to furnish the contracting officer with satisfactory evidence of insurance.
The provision at DFARS 252.247-7022, Representation of Extent of Transportation by Sea, is prescribed at DFARS 247.574(a) for use in all solicitations except those for direct purchase of ocean transportation services or those with an anticipated value at or below the simplified acquisition threshold. Paragraph (b) of the provision requires the offeror to represent whether or not it anticipates that supplies will be transported by sea in the performance of any contract or subcontract resulting from the solicitation.
The clause at DFARS 252.247-7023, Transportation of Supplies by Sea, is prescribed at DFARS 247.574(b) for use in all solicitations and contracts except those for direct purchase of ocean transportation services. Paragraph (d) of the clause requires the contractor to submit any requests for use of other than U.S.-flag vessels in writing to the contracting officer. Paragraph (e) of the clause requires the contractor to submit one copy of the rated on board vessel operating carrier's ocean bill of landing. Paragraph (f) of the clause, if the contract exceeds the simplified acquisition threshold, requires the contractor to represent, with its final invoice, that: (1) No ocean transportation was used in the performance of the contract; (2) only U.S.-flag vessels were used for all ocean shipments under the contract; (3) the contractor had the written consent of the contracting officer for all non-U.S.-flag ocean transportation; or (4) shipments were made on non-U.S.-flag vessels without the written consent of the contracting officer. Contractors must flow down these requirements to noncommercial subcontracts and certain types of commercial subcontracts. Subcontracts at or below the simplified acquisition threshold are excluded from the requirements of paragraph (f) stated above. Paragraph (h) of the clause requires the contractor, after award, to notify the contracting officer if the contractor learns that supplies will be transported by sea and the contractor indicated, in the solicitation, that the contractor did not anticipate transporting any supplies by sea.
The provision at DFARS 252.247-7026, Evaluation Preference for Use of Domestic Shipyards—Applicable to Acquisition of Carriage by Vessel for DoD Cargo in the Coastwise or Noncontiguous Trade, is prescribed at DFARS 247.574(d) in solicitations that require a covered vessel for carriage of cargo for DoD. Paragraph (c) of the provision requires the offeror to provide information with its offer, addressing all covered vessels for which overhaul, repair, and maintenance work has been performed during the period covering the current calendar year, up to the date of proposal submission, and the preceding four calendar years.
The clause at DFARS 252.247.7028, Application for U.S. Government Shipping Documentation/Instructions, is prescribed at DFARS 247.207(2) for inclusion in all solicitations and contracts, including solicitations and contracts using FAR part 12 procedures for the acquisition of commercial items, when shipping under Bills of Lading and Domestic Route Order under FOB origin contracts, Export Traffic Release regardless of FOB terms, or foreign military sales shipments. Paragraph (a) of the clause requires contractors to complete DD Form 1659, Application for U.S. Government Shipping Documentation/Instructions, to request shipping instructions, unless an automated system is available (paragraph (b) of the clause).
Comments and recommendations on the proposed information collection should be sent to Ms. Susan Minson, DoD Desk Officer, at
You may also submit comments, identified by docket number and title, by the following method:
Defense Security Cooperation Agency, Department of Defense.
Arms sales notice.
The Department of Defense is publishing the unclassified text of an arms sales notification.
Karma Job at
This 36(b)(1) arms sales notification is published to fulfill the requirements of section 155 of Public Law 104-164 dated July 21, 1996. The following is a copy of a letter to the Speaker of the House of Representatives, Transmittal 20-51 with attached Policy Justification and Sensitivity of Technology.
(i)
(ii)
(iii)
(iv)
(v)
(vi)
(vii)
(viii)
* As defined in Section 47(6) of the Arms Export Control Act.
The Government of the United Kingdom has requested to buy three hundred ninety-five (395) AGM-114R2 Hellfire missiles. Also included is technical assistance, publications, integration support, and other related elements of logistics and program support. The estimated total cost is $46 million.
This proposed sale will support the foreign policy and national security objectives of the United States by improving the security of a NATO Ally which is an important force for political stability and economic progress in Europe.
The proposed sale will improve the United Kingdom's ability to meet current and future threats by replacing expiring and unserviceable missiles and maintaining capability to execute missions across a full range of military operations. The United Kingdom will have no difficulty absorbing these missiles into its armed forces.
The proposed sale of this equipment and support will not alter the basic military balance in the region.
The prime contractor will be Lockheed Martin Corporation, Orlando, Florida. The purchaser typically requests offsets. Any offset agreement will be defined in negotiations between the purchaser and the contractor.
Implementation of this proposed will not require the assignment of any additional U.S. Government or contractor representatives to the United Kingdom.
There will be no adverse impact on U.S. defense readiness as a result of this proposed sale.
(vii)
1. The AGM-114R2 Hellfire missile is used against heavy and light armored targets, thin skinned vehicles, urban structures, bunkers, caves and personnel. The missile is Inertial Measurement Unit (IMU) based, with a variable delay fuse and improved safety and reliability. The Hellfire II multipurpose warhead variant (AGM-114R) allows selection of warhead effects corresponding to a specific target type. The AGM-114R is capable of being launched from Army rotary-wing and UAS platforms and provides the pilot increased operational flexibility.
2. The highest level of classification of defense articles, components, and services included in this potential sale is SECRET.
3. If a technologically advanced adversary were to obtain knowledge of the specific hardware and software elements, the information could be used to develop countermeasures that might reduce weapon system effectiveness or be used in the development of a system with similar or advanced capabilities.
4. A determination has been made that United Kingdom can provide substantially the same degree of protection for the sensitive technology being released as the U.S. Government. This sale is necessary in furtherance of the U.S. foreign policy and national security objectives outlined in the Policy Justification.
5. All defense articles and services listed in this transmittal have been authorized for release and export to the United Kingdom.
Defense Security Cooperation Agency, Department of Defense.
Arms sales notice.
The Department of Defense is publishing the unclassified text of an arms sales notification.
Karma Job at
This 36(b)(1) arms sales notification is published to fulfill the requirements of section 155 of Public Law 104-164 dated July 21, 1996. The following is a copy of a letter to the Speaker of the House of Representatives, Transmittal 20-57 with attached Policy Justification and Sensitivity of Technology.
(i)
(ii)
(iii)
(iv)
(v)
(vi)
(vii)
(viii)
* As defined in Section 47(6) of the Arms Export Control Act.
The Government of Spain has requested to buy one hundred (100) AIM-120C-7/8 Advanced Medium Range Air-to-Air Missiles (AMRAAM) and one (1) AMRAAM Guidance Section (spare). Also included are KGV-135A encryption devices; containers; weapon support and support equipment; spare and repair parts; publications and technical documentation; U.S. Government and contractor engineering, technical, and logistics support services; and other related elements of logistical and program support. The estimated total cost is $248.5 million.
This proposed sale will support the foreign policy and national security of the United States by improving the security of a NATO ally which is an important force for political stability and economic progress in Europe. It is vital to the U.S. national interest to assist Spain in developing and maintaining a strong and ready self-defense capability.
This proposed sale will improve Spain's capability to meet current and future threats by increasing its stocks of AMRAAMs for its fighter aircraft fleets in support of national defense. The potential sale will further strengthen the interoperability between the United States and Spain. Spain will have no difficulty absorbing these additional missiles into its armed forces.
The proposed sale of this equipment and support will not alter the basic military balance in the region.
The prime contractor will be Raytheon Missiles and Defense, Tucson, AZ. There are no known offset arrangements proposed in connection with this potential sale.
Implementation of this sale will not require the assignment of U.S. Government or contractor representatives in Spain.
There will be no adverse impact on U.S. defense readiness as a result of this proposed sale.
(vii)
1. The AIM-120C-7/C-8 AMRAAM is a supersonic, air launched, aerial intercept, guided missile featuring digital technology and micro-miniature solid-state electronics. Purchase will include AMRAAM Guidance Section spares. AMRAAM capabilities include look-down/shootdown, multiple launches against multiple targets, resistance to electronic countermeasures, and interception of high- and low-flying and maneuvering targets. The AIM-120C-8 is a form, fit, function refresh of the AIM-120C-7 and is the next generation to be produced.
2. The highest level of classification of defense articles, components, and services included in this potential sale is SECRET.
3. If a technologically advanced adversary were to obtain knowledge of the specific hardware and software elements, the information could be used to develop countermeasures that might reduce weapon system effectiveness or be used in the development of a system with similar or advanced capabilities.
4. A determination has been made that Spain can provide substantially the same degree of protection for the sensitive technology being released as the U.S. Government. This sale is necessary in furthering U.S. foreign policy and national security objectives outlined in the Policy Justification.
5. All defense articles and services listed in this transmittal have been authorized for release and export to Spain.
Department of the Navy, U.S. Department of Defense (DoD).
Notice of Partially Closed Meeting; corrections.
The Department of the Navy published a document in the
Major Raphael Thalakottur, USMC, Executive Secretary to the Board of Visitors, Office of the Superintendent, U.S. Naval Academy, Annapolis, MD 21402-5000, 410-293-1503,
In the
1. On page 71889, in the second column, correct the
2. On page 71889, in the second column, correct the
3. On page 71889, in the second column, correct the
Current details on the board of visitors may be found at
The executive session of the meeting from 11:30 a.m. to 12 p.m. on December 7, 2020, will consist of discussions of new and pending administrative or minor disciplinary infractions and non-judicial punishments involving midshipmen attending the Naval Academy, to include but not limited to, individual honor or conduct violations within the Brigade, the disclosure of which would constitute a clearly unwarranted invasion of personal privacy. For this reason, the executive session of this meeting will be closed to the public, as the discussion of such information cannot be adequately segregated from other topics, which precludes opening the executive session of this meeting to the public. Accordingly, the Secretary of the Navy, in consultation with the Department of the Navy General Counsel, has determined in writing that the meeting shall be partially closed to the public because the discussions during the executive session from 11:30 a.m. to 12 p.m. will be concerned with matters protected under sections 552b(c) (5), (6), and (7) of title 5, United States Code.
5 U.S.C. 552b.
Office of Postsecondary Education, Department of Education.
Notice.
The Department of Education publishes information on how institutions of higher education may submit to the Secretary of Education a copy of certain final, non-default judgments as required under newly promulgated regulations in the Department's Religious Liberty and Free Inquiry Final Rule, (“Religious Liberty and Free Inquiry Final Rule” or “Final Rule”). The Department also publishes information about how a person may report a violation of newly promulgated regulations in the Final Rule that ensure equal treatment of religious student organizations at public institutions of higher education.
Gregory Martin, U.S. Department of Education, 400 Maryland Avenue SW, Room 281-15, Washington, DC 20202. Telephone: (202) 453-7535. Email:
If you use a telecommunications device for the deaf (TDD) or a text telephone (TTY), call the Federal Relay Service, toll free, at 1-800-877-8339.
The Department publishes this notice to inform public institutions of higher education how to submit to the Secretary a copy of a final, non-default judgment by a State or Federal court that the public institution or an employee of the public institution, acting in his or her official capacity, violated the First Amendment to the U.S. Constitution, as required under 34 CFR 75.500(b) and 34 CFR 76.500(b) of the Final Rule, 85 FR 59,916 (Sept. 23, 2020). The Department also publishes this notice to inform private institutions of higher education how to submit to the Secretary a copy of a final, non-default judgment by a State or Federal court to the effect that the private institution or an employee of the private institution, acting on behalf of the private institution, violated its stated institutional policy regarding freedom of speech or academic freedom, as required under 34 CFR 75.500(c) and 34 CFR 76.500(c) of the Final Rule. Finally, the Department publishes this notice to inform the public how a person may report a violation of newly promulgated regulations in the Final Rule, 34 CFR 75.500(d) and 34 CFR 76.500(d), that ensure equal treatment of religious student organizations at public institutions of higher education.
You may also access documents of the Department published in the
Under 34 CFR 75.500(b) and 34 CFR 76.500(b) of the Final Rule, which becomes effective on November 23, 2020, a public institution of higher education must submit to the Secretary a copy of a final, non-default judgment by a State or Federal court that the public institution or an employee of the public institution, acting in his or her official capacity, violated the First Amendment no later than 45 calendar days after such final, non-default judgment is entered. Under 34 CFR 75.500(c) and 34 CFR 76.500(c) of the Final Rule, a private institution of higher education must submit to the Secretary a copy of a final, non-default judgment by a State or Federal court to the effect that the private institution or
As previously noted, the Final Rule becomes effective November 23, 2020, and the Department will not enforce the Final Rule retroactively.
Under 34 CFR 75.500(d) and 34 CFR 76.500(d) of the Final Rule, a public institution as a material condition of the Department's grant “shall not deny to any student organization whose stated mission is religious in nature and that is at the public institution any right, benefit, or privilege that is otherwise afforded to other student organizations at the public institution (including but not limited to full access to the facilities of the public institution, distribution of student fee funds, and official recognition of the student organization by the public institution) because of the religious student organization's beliefs, practices, policies, speech, membership standards, or leadership standards, which are informed by sincerely held religious beliefs.” Anyone may report an alleged violation of 34 CFR 75.500(d) and 34 CFR 76.500(d) to the Department by email at
As explained in the preamble to the Final Rule, an “all-comers” policy as described in
Take notice that the Commission received the following electric corporate filings:
Take notice that the Commission received the following exempt wholesale generator filings:
Take notice that the Commission received the following electric rate filings:
The filings are accessible in the Commission's eLibrary system (
Any person desiring to intervene or protest in any of the above proceedings must file in accordance with Rules 211 and 214 of the Commission's Regulations (18 CFR 385.211 and 385.214) on or before 5:00 p.m. Eastern time on the specified comment date. Protests may be considered, but intervention is necessary to become a party to the proceeding.
eFiling is encouraged. More detailed information relating to filing requirements, interventions, protests, service, and qualifying facilities filings can be found at:
Take notice that the following hydroelectric application has been filed with the Commission and is available for public inspection:
a.
b.
c.
d.
e.
f.
g.
h.
i.
j.
The Commission strongly encourages electronic filing. Please file comments, motions to intervene, and protests using the Commission's eFiling system at
k.
l.
m. Individuals desiring to be included on the Commission's mailing list should so indicate by writing to the Secretary of the Commission.
n.
o.
The staff of the Federal Energy Regulatory Commission (FERC or Commission) will prepare an environmental document, that will discuss the environmental impacts of the
This notice announces the opening of the scoping process the Commission will use to gather input from the public and interested agencies regarding the project. As part of the National Environmental Policy Act (NEPA) review process, the Commission takes into account concerns the public may have about proposals and the environmental impacts that could result from its action whenever it considers amending a Certificate of Public Convenience and Necessity. This gathering of public input is referred to as “scoping.” The main goal of the scoping process is to focus the analysis in the environmental document on the important environmental issues. Additional information about the Commission's NEPA process is described below in the
By this notice, the Commission requests public comments on the scope of issues to address in the environmental document. To ensure that your comments are timely and properly recorded, please submit your comments so that the Commission receives them in Washington, DC on or before 5:00 p.m. Eastern Time on December 19, 2020. Comments may be submitted in written form. Further details on how to submit comments are provided in the
Your comments should focus on the potential environmental effects, reasonable alternatives, and measures to avoid or lessen environmental impacts. Your input will help the Commission
If you submitted comments on this project to the Commission before the opening of this docket on October 2, 2020 you will need to file those comments in Docket No. CP21-1-000 to ensure they are considered as part of this proceeding.
This notice is being sent to the Commission's current environmental mailing list for this project. State and local government representatives should notify their constituents of this proposed project and encourage them to comment on their areas of concern.
If you are a landowner receiving this notice, a pipeline company representative may contact you about the acquisition of an easement to construct, operate, and maintain the proposed facilities. The company would seek to negotiate a mutually acceptable easement agreement. You are not required to enter into an agreement. However, if the Commission approves the project, the Natural Gas Act conveys the right of eminent domain to the company. Therefore, if you and the company do not reach an easement agreement, the pipeline company could initiate condemnation proceedings in court. In such instances, compensation would be determined by a judge in accordance with state law. The Commission does not subsequently grant, exercise, or oversee the exercise of that eminent domain authority. The courts have exclusive authority to handle eminent domain cases; the Commission has no jurisdiction over these matters.
Golden Pass provided landowners with a fact sheet prepared by the FERC entitled An Interstate Natural Gas Facility On My Land? What Do I Need To Know? which addresses typically asked questions, including the use of eminent domain and how to participate in the Commission's proceedings. This fact sheet along with other landowner topics of interest are available for viewing on the FERC website (
There are three methods you can use to submit your comments to the Commission. Please carefully follow these instructions so that your comments are properly recorded. The Commission encourages electronic filing of comments and has staff available to assist you at (866) 208-3676 or
(1) You can file your comments electronically using the
(2) You can file your comments electronically by using the
(3) You can file a paper copy of your comments by mailing them to the Commission. Be sure to reference the project docket number (CP21-1-000) on your letter. Submissions sent via the U.S. Postal Service must be addressed to: Kimberly D. Bose, Secretary, Federal Energy Regulatory Commission, 888 First Street NE, Room 1A, Washington, DC 20426. Submissions sent via any other carrier must be addressed to: Kimberly D. Bose, Secretary, Federal Energy Regulatory Commission, 12225 Wilkins Avenue, Rockville, Maryland 20852.
Additionally, the Commission offers a free service called eSubscription which makes it easy to stay informed of all issuances and submittals regarding the dockets/projects to which you subscribe. These instant email notifications are the fastest way to receive notification and provide a link to the document files which can reduce the amount of time you spend researching proceedings. Go to
Specifically, Golden Pass seeks to modify previously authorized facilities, including:
• Relocate the approved compressor Station at Milepost (MP) 66 approximately three miles, to MP 69, and increase the amount of compression at the relocated facility;
• Add a meter station near MP 69 to support a new interconnection with a proposed interstate pipeline to be constructed an operated by Enable Gulf Run Transmission, LLC;
• Remove any bi-directional piping modification to the interconnect;
• Minor modifications to existing interconnects at MP 66 and MP 68.
The general location of the project facilities is shown in appendix 1.
Land requirements for the proposed modifications total approximately 44 acres, with construction and operation of the MP 69 compressor station requiring 35 acres.
Any environmental document issued by the Commission will discuss impacts that could occur as a result of the construction and operation of the proposed project under the relevant general resource areas:
• Geology and soils;
• water resources and wetlands;
• vegetation and wildlife;
• threatened and endangered species;
• cultural resources;
• land use;
• air quality and noise; and
• reliability and safety.
Commission staff will also evaluate reasonable alternatives to the proposed project or portions of the project and make recommendations on how to lessen or avoid impacts on the various resource areas. Your comments will help Commission staff identify and focus on the issues that might have an effect on the human environment and potentially eliminate others from further study and discussion in the environmental document.
Following this scoping period, Commission staff will determine whether to prepare an Environmental Assessment (EA) or an Environmental Impact Statement (EIS). The EA or the EIS will present Commission staff's independent analysis of the issues. If Commission staff prepares an EA, a
With this notice, the Commission is asking agencies with jurisdiction by law and/or special expertise with respect to the environmental issues of this project to formally cooperate in the preparation of the environmental document.
In accordance with the Advisory Council on Historic Preservation's implementing regulations for section 106 of the National Historic Preservation Act, the Commission is using this notice to initiate consultation with the applicable State Historic Preservation Office(s), and to solicit their views and those of other government agencies, interested Indian tribes, and the public on the project's potential effects on historic properties.
The environmental mailing list includes federal, state, and local government representatives and agencies; elected officials; environmental and public interest groups; Native American Tribes; other interested parties; and local libraries and newspapers. This list also includes all affected landowners (as defined in the Commission's regulations) who are potential right-of-way grantors, whose property may be used temporarily for project purposes, or who own homes within certain distances of aboveground facilities, and anyone who submits comments on the project and includes a mailing address with their comments. Commission staff will update the environmental mailing list as the analysis proceeds to ensure that Commission notices related to this environmental review are sent to all individuals, organizations, and government entities interested in and/or potentially affected by the proposed project.
Additional information about the project is available from the Commission's Office of External Affairs, at (866) 208-FERC, or on the FERC website at
Public sessions or site visits will be posted on the Commission's calendar located at
Take notice that the Commission has received the following Natural Gas Pipeline Rate and Refund Report filings:
The filings are accessible in the Commission's eLibrary system (
Any person desiring to intervene or protest in any of the above proceedings must file in accordance with Rules 211 and 214 of the Commission's
eFiling is encouraged. More detailed information relating to filing requirements, interventions, protests, service, and qualifying facilities filings can be found at:
Take notice that the following hydroelectric application has been filed with the Commission and is available for public inspection:
a.
b.
c.
d.
e.
f.
g.
h.
i.
j. Deadline for filing comments, motions to intervene, and protests is 30 days from the issuance date of this notice by the Commission.
The Commission strongly encourages electronic filing. Please file comments, motions to intervene, and protests using the Commission's eFiling system at
The Commission's Rules of Practice and Procedure require all intervenors filing documents with the Commission to serve a copy of that document on each person whose name appears on the official service list for the project. Further, if an intervenor files comments or documents with the Commission relating to the merits of an issue that may affect the responsibilities of a particular resource agency, it must also serve a copy of the document on that resource agency.
k.
l. In addition to publishing the full text of this document in the
m. Individuals desiring to be included on the Commission's mailing list should so indicate by writing to the Secretary of the Commission.
n. Comments, Protests, or Motions to Intervene: Anyone may submit comments, a protest, or a motion to intervene in accordance with the requirements of Rules of Practice and Procedure, 18 CFR 385.210, .211, and .214. In determining the appropriate action to take, the Commission will consider all protests or other comments filed, but only those who file a motion to intervene in accordance with the Commission's Rules may become a party to the proceeding. Any comments, protests, or motions to intervene must be received on or before the specified deadline date for the particular application.
o.
This is a supplemental notice in the above-referenced proceeding of Flat Ridge Interconnection LLC's filing of an Amended and Restated Common Facilities Agreement, noting that such filing includes a request for blanket authorization, under 18 CFR part 34, of future issuances of securities and assumptions of liability.
Any person desiring to intervene or to protest should file with the Federal Energy Regulatory Commission, 888 First Street NE, Washington, DC 20426, in accordance with Rules 211 and 214 of the Commission's Rules of Practice and Procedure (18 CFR 385.211 and 385.214). Anyone filing a motion to intervene or protest must serve a copy of that document on the Applicant.
Notice is hereby given that the deadline for filing protests with regard to the applicant's request for blanket authorization, under 18 CFR part 34, of future issuances of securities and assumptions of liability, is November 27, 2020.
The Commission encourages electronic submission of protests and interventions in lieu of paper, using the FERC Online links at
Persons unable to file electronically may mail similar pleadings to the Federal Energy Regulatory Commission, 888 First Street NE, Washington, DC 20426. Hand delivered submissions in docketed proceedings should be delivered to Health and Human Services, 12225 Wilkins Avenue, Rockville, Maryland 20852.
In addition to publishing the full text of this document in the
Federal Energy Regulatory Commission, Department of Energy.
Notice of information collection and request for comments.
In compliance with the requirements of the Paperwork Reduction Act of 1995, the Federal Energy Regulatory Commission (Commission or FERC) is soliciting public comment on the currently approved information collection FERC-598 (Self-Certification for Entities Seeking Exempt Wholesale Generator or Foreign Utility Company Status).
Comments on the collection of information are due January 25, 2021.
You may submit comments (identified by Docket No. IC21-7-000) by any of the following methods:
•
•
• Effective July 1, 2020, delivery of filings other than by eFiling or the U.S. Postal Service should be delivered to Health and Human Services, 12225 Wilkins Avenue, Rockville, Maryland 20852.
Ellen Brown may be reached by email at
Public utility holding companies and their associates may seek exemption from this requirement. The pertinent statutory and regulatory provisions, 42 U.S.C. 16454 and 18 CFR 366.7, authorize such entities to file with the Commission a notice of self-certification demonstrating that they are exempt wholesale generators (EWGs) or foreign utility companies (FUCOs). If the Commission takes no action on a good-faith self-certification filing within 60 days after the date of filing, the applicant is exempt from the requirements of 42 U.S.C. 16452(a).
An EWG is defined as any person engaged directly, or indirectly through one or more affiliates . . . and exclusively in the business of owning or operating, or both owning and operating, all or part of one or more eligible facilities and selling electric energy at wholesale.
In the case of EWGs, the person filing a notice of self-certification must also file a copy of the notice of self-certification with the state regulatory authority of the state in which the facility is located. In addition, that person must represent to the Commission in its submission that it has filed a copy of the notice with the appropriate state regulatory authority.
Take notice that the following hydroelectric application has been filed with the Commission and is available for public inspection.
a.
b.
c.
d.
e.
f.
g.
h.
i.
j.
The Commission strongly encourages electronic filing. Please file comments, recommendations, terms and conditions, and prescriptions using the Commission's eFiling system at
k. This application has been accepted and is now ready for environmental analysis.
The Council on Environmental Quality (CEQ) issued a final rule on July 15, 2020, revising the regulations under 40 CFR parts 1500—1518 that federal agencies use to implement NEPA (see Update to the Regulations Implementing the Procedural Provisions of the National Environmental Policy Act, 85 FR 43,304). The Final Rule became effective on and applies to any NEPA process begun after September 14, 2020. An agency may also apply the regulations to ongoing activities and environmental documents begun before September 14, 2020, which includes the proposed Gouverneur Project. Commission staff intends to conduct its NEPA review in accordance with CEQ's new regulations.
l.
The Village of Gouverneur proposes to continue operating the project in a run-of-river mode and release a minimum flow of 110 cubic feet per second over the project's spillways. In addition, the applicant proposes to enhance the existing boat launch located on River Street. The project generated an annual average of 1,195 megawatt-hours between 2014 and 2017.
m. A copy of the application can be viewed on the Commission's website at
All filings must (1) bear in all capital letters the title COMMENTS, REPLY COMMENTS, RECOMMENDATIONS, TERMS AND CONDITIONS, or PRESCRIPTIONS; (2) set forth in the heading the name of the applicant and the project number of the application to which the filing responds; (3) furnish the name, address, and telephone number of the person submitting the filing; and (4) otherwise comply with the requirements of 18 CFR 385.2001 through 385.2005. All comments, recommendations, terms and conditions or prescriptions must set forth their evidentiary basis and otherwise comply with the requirements of 18 CFR 4.34(b). Agencies may obtain copies of the application directly from the applicant. Each filing must be accompanied by proof of service on all persons listed on the service list prepared by the Commission in this proceeding, in accordance with 18 CFR 4.34(b) and 385.2010.
You may also register online at
n.
o.
Upon the affirmative votes of Chairman Danly and Commissioners Chatterjee, and Glick, the following Company name Entergy Mississippi, Inc., is hereby added to Item No. E-15 on the Commission's open meeting scheduled for November 19, 2020.
Environmental Protection Agency (EPA).
Notice.
This notice announces that pesticide related information submitted to EPA's Office of Pesticide Programs (OPP) pursuant to the Federal Insecticide, Fungicide, and Rodenticide Act (FIFRA) and the Federal Food, Drug, and Cosmetic Act (FFDCA), including information that may have been claimed as Confidential Business Information (CBI) by the submitter, will be transferred to Research Triangle Institute in accordance with the CBI regulations. Research Triangle Institute has been awarded a contract to perform work for OPP, and access to this information will enable Research Triangle Institute to fulfill the obligations of the contract.
Research Triangle Institute will be given access to this information on or before November 30, 2020.
William Northern, Information Technology and Resources Management Division (7502P), Office of Pesticide Programs, Environmental Protection Agency, 1200 Pennsylvania Ave. NW, Washington, DC 20460-0001; telephone number: (703) 305-6478 email address:
This action applies to the public in general. As such, the Agency has not attempted to describe all the specific entities that may be affected by this action.
The docket for this action, identified by docket identification (ID) number EPA-HQ-OPP-2019-0188, is available at
Due to the public health concerns related to COVID-19, the EPA Docket Center (EPA/DC) and Reading Room is closed to visitors with limited exceptions. The staff continues to provide remote customer service via email, phone, and webform. For the latest status information on EPA/DC services and docket access, visit
EPA requires technical and program support for the Agency's Endocrine Disruptor Screening Program (EDSP). This procurement entails services in the following areas: (1) Comprehensive toxicological and ecotoxicological testing and analysis; (2) toxicokinetics and dosimetry testing and analysis; (3) systematic literature reviews; (4) workshops/meeting support; (5) information/records management support; and (6) special studies/projects. Skills needed include, but are not limited to, technical experience and/or capability with performing Tier 1 and Tier 2 EDSP studies,
OPP has determined that the contracts described in this document involve work that is being conducted in connection with FIFRA, in that pesticide chemicals will be the subject of certain evaluations to be made under this contract. These evaluations may be used in subsequent regulatory decisions under FIFRA.
Some of this information may be entitled to confidential treatment. The information has been submitted to EPA under FIFRA sections 3, 4, 6, and 7 and under FFDCA sections 408 and 409.
In accordance with the requirements of 40 CFR 2.307(h)(3), the contracts with Research Triangle Institute, prohibits use of the information for any purpose not specified in these contracts; prohibits disclosure of the information to a third party without prior written approval from the Agency; and requires that each official and employee of the contractor sign an agreement to protect the information from unauthorized release and to handle it in accordance with the
7 U.S.C. 136
Export-Import Bank of the United States.
Notice.
This Notice is to inform the public that the Export-Import Bank of the United States (EXIM), in implementation of its historic seven-year reauthorization and directive to establish a new “Program on China and Transformational Exports” (“directive”) is considering changes to its U.S. medium- and long-term content policy (“content policy”). Any changes to the content policy would be specifically with respect to the new directive.
EXIM is considering whether changes to its content policy would improve the competitiveness of American exporters, and, by definition, their workers, as they face intense competition in transformational export sectors from China.
Comments must be received on or before December 14, 2020, to be assured of consideration before final consideration by the Board of Directors of EXIM.
Comments may be submitted through
U.S. stakeholders and financial institutions regularly identify EXIM's content policy as the greatest challenge to EXIM support of their exports. This concern has been further validated through extensive discussions with exporters across numerous sectors, including during EXIM's 2020 “Strengthening American Competitiveness” initiative—where more than 1,000 stakeholders participated—specifically when it comes to neutralizing China and supporting transformational exports.
EXIM's historic seven-year reauthorization (Pub. L. 116-94), signed into law December 20, 2019, directed EXIM to establish a new “Program on China and Transformational Exports” (Sec. 402). The Program's purpose is to support the extension of loans, guarantees, and insurance, at rates and on terms and other conditions, to the extent practicable, that are fully competitive with rates, terms, and other conditions established by the People's Republic of China or by other covered countries (as designated by the Secretary of the Treasury). The law charges EXIM with a goal of reserving not less than 20 percent of the agency's total financing authority (
Pursuant to EXIM's reauthorization, the China Program has two aims: (1) To directly neutralize export subsidies for
• Artificial intelligence.
• Biotechnology.
• Biomedical sciences.
• Wireless communications equipment (including 5G or subsequent wireless technologies).
• Quantum computing.
• Renewable energy, energy efficiency, and energy storage.
• Semiconductor and semiconductor machinery manufacturing.
• Emerging financial technologies (including technologies that facilitate financial inclusion through increased access to capital and financial services; data security and privacy; payments, the transfer of funds, and associated messaging services; and efforts to combat money laundering and the financing of terrorism).
• Water treatment and sanitation (including technologies and infrastructure to reduce contaminants and improve water quality).
• High-performance computing;
• Associated services necessary for use of any of the foregoing exports.
Export-Import Bank of the United States.
Submission for OMB review and comments request.
The Export-Import Bank of the United States (EXIM), as a part of its continuing effort to reduce paperwork and respondent burden, invites the general public and other Federal Agencies to comment on the proposed information collection, as required by the Paperwork Reduction Act of 1995.
Comments should be received on or before December 28, 2020 to be assured of consideration.
Comments may be submitted electronically on
EXIM plans to invite approximately 150 U.S. exporters and commercial lending institutions that have used EXIM's short-, medium-, and long-term programs over the previous calendar year with an electronic invitation to participate in the online survey. The proposed survey will ask participants to evaluate the competitiveness of EXIM's programs and how the programs compare to those of foreign credit agencies. EXIM will use the responses to develop an analysis of the Bank's competitiveness.
The survey can be reviewed at:
Federal Communications Commission.
Notice and request for comments.
As part of its continuing effort to reduce paperwork burdens, and as required by the Paperwork Reduction Act of 1995 (PRA), the Federal Communications Commission (FCC or Commission) invites the general public and other Federal agencies to take this opportunity to comment on the following information collections. Comments are requested concerning: whether the proposed collection of information is necessary for the proper performance of the functions of the Commission, including whether the information shall have practical utility; the accuracy of the Commission's burden estimate; ways to enhance the quality, utility, and clarity of the information collected; ways to minimize the burden of the collection of information on the respondents, including the use of automated collection techniques or other forms of information technology; and ways to further reduce the information collection burden on small business concerns with fewer than 25 employees.
The FCC may not conduct or sponsor a collection of information unless it displays a currently valid Office of Management and Budget (OMB) control number. No person shall be subject to any penalty for failing to comply with a collection of information subject to the PRA that does not display a valid OMB control number.
Written PRA comments should be submitted on or before January 25, 2021. If you anticipate that you will be submitting comments but find it difficult to do so within the period of time allowed by this notice, you should advise the contact listed below as soon as possible.
Direct all PRA comments to Cathy Williams, FCC, via email to
For additional information about the information collection, contact Cathy Williams at (202) 418-2918.
On November 18, 2011, the Commission released an order comprehensively reforming and modernizing the universal service and intercarrier compensation systems to ensure that robust, affordable voice and broadband service, both fixed and mobile, are available to Americans throughout the nation. Connect America Fund et al., Order and Further Notice of Proposed Rulemaking, FCC 11-161 (USF/ICC Transformation Order). In the USF/ICC Transformation Order, the Commission, among other things, created (1) the Connect America Fund (CAF), to help make broadband available to homes, businesses, and community anchor institutions in areas that do not, or would not otherwise, have broadband, (2) the Mobility Fund, to ensure the availability of mobile broadband networks in areas where a private-sector business case, (3) the Remote Areas Fund (RAF), to ensure that Americans living in the most remote areas in the nation, where the cost of deploying traditional terrestrial broadband networks is extremely high, can obtain affordable access through alternative technology platforms, including satellite and unlicensed wireless services. The USF/ICC Transformation Order directed that support under CAF Phase II, the Mobility Fund, and the RAF be awarded by competitive bidding. The Commission adopted rules to implement the reforms it adopted in the USF/ICC Transformation Order, including rules in Part 1, Subpart AA of the Commission's rules governing competitive bidding for universal service support generally. See 47 CFR 1.21001-1.21004.
On October 27, 2020, the Commission adopted a Report and Order in which it, among other things, amended its existing Part 1, Subpart AA general universal service competitive bidding rules to codify policies and procedures applicable to the universal service auction application process that have been adopted in its recent universal service auctions, better align provisions in the universal service competitive bidding rules with like provisions in the Commission's spectrum auction rules, and make other updates for consistency, clarification, and other purposes that would apply in all universal service auctions. Establishing a 5G Fund for Rural America, Report and Order, FCC 20-150 (5G Fund Report and Order). The amended Part 1, Subpart AA rules adopted in the 5G Fund Report and Order apply to applicants seeking to participate in future Commission auctions for universal service support.
Federal Communications Commission.
Notice and request for comments.
As part of its continuing effort to reduce paperwork burdens, and as required by the Paperwork Reduction Act of 1995 (PRA), the Federal Communications Commission (FCC or Commission) invites the general public and other Federal agencies to take this opportunity to comment on the following information collections. Comments are requested concerning: Whether the proposed collection of information is necessary for the proper performance of the functions of the Commission, including whether the information shall have practical utility; the accuracy of the Commission's burden estimate; ways to enhance the quality, utility, and clarity of the information collected; ways to minimize the burden of the collection of information on the respondents, including the use of automated collection techniques or other forms of information technology; and ways to further reduce the information collection burden on small business concerns with fewer than 25 employees.
The FCC may not conduct or sponsor a collection of information unless it displays a currently valid Office of Management and Budget (OMB) control number. No person shall be subject to any penalty for failing to comply with a collection of information subject to the PRA that does not display a valid OMB control number.
Written PRA comments should be submitted on or before January 25, 2021. If you anticipate that you will be submitting comments but find it difficult to do so within the period of time allowed by this notice, you should advise the contact listed below as soon as possible.
Direct all PRA comments to Cathy Williams, FCC, via email to
For additional information about the information collection, contact Cathy Williams at (202) 418-2918.
The Commission believes that C-band spectrum for terrestrial wireless uses will play a significant role in bringing next-generation services like 5G to the American public and assuring American leadership in the 5G ecosystem. The agency took action to make this valuable spectrum resource available for new terrestrial wireless uses as quickly as possible, while also preserving the continued operation of existing Fixed Satellite Services (FSS) available during and after the transition.
In the 3.7 GHz Report and Order, the Commission concluded that a public auction of the lower 280 megahertz of the C-band will best carry out our goals, and the agency will add a mobile allocation to the 3.7-4.0 GHz band so that next-generation services such as 5G can use the band. Relying on the Emerging Technologies framework, the Commission adopted a process to relocate FSS operations into the upper 200 megahertz of the band, while fully reimbursing existing operators for the costs of this relocation and offering accelerated relocation payments to encourage a speedy transition. The Commission also adopted service and technical rules for overlay licensees in the 280 megahertz of spectrum designated for transition to flexible use.
Among other information collection requirements in the 3.7 GHz Report and Order, the Commission has adopted several requirements, described in the text, related to the protection of TT&C earth stations and coordination with 3.7 GHz Service licensees. In a section of the 3.7 GHz Report and Order titled “Adjacent Channel Protection Criteria” the Commission sets out the following requirements:
Pursuant to paragraph 388 of the 3.7 GHz Report and Order, the Commission requires that the TT&C operators make available certain pertinent technical information about their systems upon request by licensees in the 3.7 GHz Service to ensure the protection of TT&C operations. In addition, paragraph 389 of the 3.7 GHz Report and Order includes the requirement that, in the event of a claim by a TT&C earth station operating in 4.0-4.2 GHz of harmful interference by a 3.7 GHZ operator, the earth station operator must demonstrate that that have installed a filter that complies with the mask requirement prescribed by the Commission. This requirement will facilitate an efficient and safe transition by requiring earth station operators to demonstrate their compliance with the mask requirements, thereby minimizing the risk of interference.
The notificants listed below have applied under the Change in Bank Control Act (Act) (12 U.S.C. 1817(j)) and § 225.41 of the Board's Regulation Y (12 CFR 225.41) to acquire shares of a bank or bank holding company. The factors that are considered in acting on the applications are set forth in paragraph 7 of the Act (12 U.S.C. 1817(j)(7)).
The public portions of the applications listed below, as well as other related filings required by the Board, if any, are available for immediate inspection at the Federal Reserve Bank(s) indicated below and at the offices of the Board of Governors. This information may also be obtained on an expedited basis, upon request, by contacting the appropriate Federal Reserve Bank and from the Board's Freedom of Information Office at
Comments regarding each of these applications must be received at the Reserve Bank indicated or the offices of the Board of Governors, Ann E. Misback, Secretary of the Board, 20th Street and Constitution Avenue NW, Washington DC 20551-0001, not later than December 10, 2020.
(Colette A. Fried, Assistant Vice President) 230 South LaSalle Street, Chicago, Illinois 60690-1414:
1.
(Dennis Denney, Assistant Vice President) 1 Memorial Drive, Kansas City, Missouri 64198-0001:
1.
2.
Federal Trade Commission.
Proposed consent agreement; correction.
The Federal Trade Commission published a document in the
Jonathan Ripa (202-326-2230), Bureau of Competition, 600 Pennsylvania Avenue NW, Washington, DC 20580.
In the
Independent monitors and watchdogs are shadow regulators that promise to impartially report to the government. These individuals are typically paid by companies engaged in alleged wrongdoing as part of a settlement. Monitors typically have relevant expertise in an industry and are often former government officials.
In this matter, the Federal Trade Commission is resolving allegations that the merger between Stryker and Wright is unlawful by requiring divestitures and other provisions that will be overseen by an independent monitor. I write separately to detail some of my ongoing concerns regarding the lack of adequate protections against independent monitor conflicts of interest in FTC orders.
Over the last twenty years, there has been substantial concern about whether auditors and other third parties are truly independent, or whether they are influenced by seeking additional fees for future business.
Unfortunately, they are not always so independent, given potential incentives for their firms to seek additional business with companies subject to monitoring. For example, in the FTC's investigation of Facebook for compliance with its privacy obligations under a 2012 Commission order, the FTC alleged major violations of the order even though PriceWaterhouseCoopers (PwC) was supposedly providing an independent assessment of the company's compliance.
The Commission's practice is to have the party alleged to have engaged in a law violation propose a monitor, subject to Commission approval. The party is also responsible for paying the monitor's fees, which can be substantial.
In this matter, the Commission has appointed a monitor who is an employee of a French-based global advisory business, Mazars, which provides consulting, accounting, tax, and other services.
The Commission should strengthen the conflict-of-interest and transparency provisions in our orders related to monitors across the FTC's mission by exploring whether to:
• Require monitors and their employers to agree to non-solicit provisions for a period of time after the completion of a monitoring engagement.
• Publish certain work products of monitors that detail their activities to ensure order compliance.
• Create open application processes for potential monitors to detail their qualifications, as the Commission pursued in the Herbalife matter.
• Require monitors to attest, under penalty of perjury, that they hold no financial interests in the industry of the companies subject to monitoring.
I am skeptical that the Commission can truly remedy anticompetitive harm with complex settlements that require independent monitors. While many monitors certainly provide independent advice and analysis, it is critical that their actions are never distorted by any real or perceived conflicts of interest.
Department of Defense (DOD), General Services Administration (GSA), and National Aeronautics and Space Administration (NASA).
Notice and request for comments.
In accordance with the Paperwork Reduction Act of 1995 and the Office of Management and Budget (OMB) regulations, DoD, GSA, and NASA invite the public to comment on a revision and an extension concerning alternatives to Government-unique standards. DoD, GSA, and NASA invite comments on: Whether the proposed collection of information is necessary for the proper performance of the functions of Federal Government acquisitions, including whether the information will have practical utility; the accuracy of the estimate of the burden of the proposed information collection; ways to enhance the quality, utility, and clarity of the information to be collected; and ways to minimize the burden of the information collection on respondents, including the use of automated collection techniques or other forms of information technology. OMB has approved this information collection for use through February 28, 2021. DoD, GSA, and NASA propose that OMB extend its approval for use for three additional years beyond the current expiration date.
DoD, GSA, and NASA will consider all comments received by January 25, 2021.
DoD, GSA, and NASA invite interested persons to submit comments on this collection through
Jennifer Hawes, Procurement Analyst, at telephone 202-969-7386, or
A. OMB Control Number, Title, and Any Associated Form(s)
9000-0018, Federal Acquisition Regulation (FAR) Part 3: Improper Business Practices and Personal Conflicts of Interest.
DoD, GSA, and NASA are combining OMB Control Nos. for the Federal Acquisition Regulation (FAR) by FAR part. This consolidation is expected to improve industry's ability to easily and efficiently identify all burdens associated with a given FAR part. The review of the information collections by FAR part allows improved oversight to ensure there is no redundant or unaccounted for burden placed on industry. Lastly, combining information collections in a given FAR part is also expected to reduce the administrative burden associated with processing multiple information collections.
This justification supports the revision and extension of OMB Control No. 9000-0018 and combines it with the previously approved information collections under OMB Control No. 9000-0091, with the new title “Federal Acquisition Regulation Part 3: Improper Business Practices and Personal Conflicts of Interest.” Upon approval of this consolidated information collection, OMB Control No. 9000-0091 will be discontinued. The burden requirements previously approved under the discontinued number will be covered under OMB Control No. 9000-0018.
This clearance covers the information collection that offerors or contractors must submit to comply with the following requirements in FAR Part 3:
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•
•
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Respondents:
Recordkeepers:
Total Annual Responses:
Total Burden Hours:
Please cite OMB Control No. 9000-0018, Federal Acquisition Regulation Part 3: Improper Business Practices and Personal Conflicts of Interest.
Agency for Healthcare Research and Quality (AHRQ), HHS.
Request for Supplemental Evidence and Data Submissions
The Agency for Healthcare Research and Quality (AHRQ) is seeking scientific information submissions from the public. Scientific information is being solicited to inform our review on
Jenae Benns, Telephone: 301-427-1496 or Email:
The Agency for Healthcare Research and Quality has commissioned the Evidence-based Practice Centers (EPC) Program to complete a review of the evidence for
The EPC Program is dedicated to identifying as many studies as possible that are relevant to the questions for each of its reviews. In order to do so, we are supplementing the usual manual and electronic database searches of the literature by requesting information from the public (
This is to notify the public that the EPC Program would find the following information on
A list of completed studies that your organization has sponsored for this indication. In the list, please
Description of whether the above studies constitute
Your contribution is very beneficial to the Program. Materials submitted must be publicly available or able to be made public. Materials that are considered confidential; marketing materials; study types not included in the review; or information on indications not included in the review cannot be used by the EPC Program. This is a voluntary request for information, and all costs for complying with this request must be borne by the submitter.
The draft of this review will be posted on AHRQ's EPC Program website and available for public comment for a period of 4 weeks. If you would like to be notified when the draft is posted, please sign up for the email list at:
We have developed contextual questions to guide our preliminary discussions with the stakeholders, as well as the specific review questions (or key questions) to be addressed.
CQ1. How is effectiveness defined and measured for survivorship care models for adult survivors of childhood cancer?
CQ2. What are the models of survivorship care for adult survivors of childhood cancer?
a. Which of these models include primary care?
i. What is the evidence of effectiveness of the different models that include primary care?
CQ3. What survivorship care resources are available for adult survivors of childhood cancer and their families?
a. What are the intended outcomes of the different resources available for adult survivors of childhood cancer and their families?
b. What is the evidence of effectiveness of the different resources available for adult survivors of childhood cancer and their families?
c. What are the monetary costs to access these resources?
CQ4. What survivorship care resources are available to providers who care for adult survivors of childhood cancer?
a. What are the intended outcomes of the different resources available to care providers?
b. What is the evidence of effectiveness of the different resources available to care providers?
c. What are the monetary costs to access these resources?
KQ1. For whom and under what circumstances could different survivorship care models for adult survivors of childhood cancer that include primary care be effective?
a. What are the key mechanisms by which these models could be effective?
b. What are important contexts that determine whether different mechanisms could be effective?
KQ2. For whom and under what circumstances could different survivorship care resources for adult survivors of childhood cancer be effective in achieving their intended outcomes?
a. For survivors and their families
i. What are the key mechanisms by which these resources could lead to their intended outcome?
ii. What are important contexts that determine whether different mechanisms could lead to outcomes?
b. For care providers
i. What are the key mechanisms by which these resources could lead to their intended outcome?
ii. What are important contexts that determine whether different mechanisms could lead to outcomes?
We will adapt the PICOTS framework (populations, interventions, comparators, outcomes, timing, and setting) to inform our realist review. The PICOTS include but are not limited to the following.
List of outcomes will be informed by contextual questions but may include:
Office of Refugee Resettlement, Administration for Children and Families, HHS.
Request for public comment.
The Office of Refugee Resettlement (ORR), Administration for Children and Families (ACF), U.S. Department of Health and Human Services (HHS), is proposing to collect data for a new data collection,
Written comments and recommendations for the proposed information collection should be sent within 30 days of publication of this notice to
6 U.S.C. Section 279: Exhibit 1, part A.2 of the Flores Settlement Agreement (Jenny Lisette Flores, et al., v. Janet Reno, Attorney General of the United States, et al., Case No. CV 85-4544-RJK [C.D. Cal. 1996]).
Food and Drug Administration, HHS.
Notice.
The Food and Drug Administration (FDA) is announcing that a proposed collection of information has been submitted to the Office of Management and Budget (OMB) for review and clearance under the Paperwork Reduction Act of 1995.
Submit written comments (including recommendations) on the collection of information by December 28, 2020.
To ensure that comments on the information collection are received, OMB recommends that written comments be submitted to
Ila S. Mizrachi, Office of Operations, Food and Drug Administration, Three White Flint North, 10A-12M, 11601 Landsdown St., North Bethesda, MD 20852, 301-796-7726,
In compliance with 44 U.S.C. 3507, FDA has submitted the following proposed collection of information to OMB for review and clearance.
This information collection supports Agency-sponsored research. Drug compounding is generally the practice of combining, mixing, or altering ingredients of a drug to create a medication tailored to the needs of an individual patient. Although compounded drugs can serve an important medical need for certain patients when an approved drug is not medically appropriate, they also present a risk to patients. Compounded drugs are not FDA-approved. Therefore, they do not undergo premarket review by FDA for safety, effectiveness, and quality. Since compounded drugs are subject to a lower regulatory standard than approved drugs, Federal law places conditions on compounding that are designed to protect the public health.
The Drug Quality and Security Act of 2013 (Pub. L. 113-54) created “outsourcing facilities”—a new industry sector of drug compounders held to
To help this industry meet its intended function, FDA intends to engage in several initiatives to address challenges and support compliance and advancement. One initiative includes conducting in-depth research to understand better the challenges and opportunities encountered by the outsourcing facility sector in a number of different areas. These include: Operational barriers and opportunities related to the outsourcing facility market and business viability; knowledge and operational barriers and opportunities related to compliance with Federal policies and good quality drug production; and barriers and opportunities related to outsourcing facility interactions with FDA.
This is an extension of research that began last year. We have learned about barriers and opportunities encountered by outsourcing facilities in several areas. These include: Operational barriers and opportunities related to the outsourcing facility market and business viability; knowledge and operational barriers and opportunities related to compliance with Federal policies and good quality drug production; and barriers and opportunities related to outsourcing facility interactions with FDA. We need to extend this information collection for two reasons: (1) Based on what we learned, we will want to ask some follow up questions in these areas; (2) We received a low response rate and need to reach the rest of the outsourcing facility industry. We only managed to obtain completed surveys from approximately one third of respondents. Only 45 percent of outsourcing facilities provided any response to the survey. Therefore, over half of outsourcing facilities did not respond to our survey, and we were unable to obtain their viewpoints. The results of this research will be used by FDA to develop a comprehensive understanding of the outsourcing facility sector, its challenges, and opportunities for advancement. The information will be essential to help identify knowledge and information gaps, operational barriers, and views on interactions with FDA. The research results will inform FDA's future approaches to communication, education, training, and other engagement with outsourcing facilities to address challenges and support advancement.
Researchers will engage pharmacists, staff, and management from outsourcing facilities and similar compounding businesses. Researchers may use surveys, interviews, and focus groups to obtain information concerning challenges and opportunities encountered by outsourcing facilities. Within this context, the following questions or similar, related questions may be posed:
1. What financial and operational considerations inform outsourcing facility operational and business model decisions?
2. What factors impact the development of a sustainable outsourcing facility business?
3. What financial and operational considerations inform outsourcing facility product decisions?
4. Do outsourcing facilities understand the Federal legislative and regulatory policies that apply to them? What, if any, knowledge gaps need to be addressed?
5. What challenges do outsourcing facilities face when implementing Federal current good manufacturing practice (CGMP) requirements?
6. How do outsourcing facilities implement quality practices at their facilities?
7. How is CGMP and quality expertise developed by outsourcing facilities? How do they obtain this knowledge, and what training do they need?
8. What are the economic consequences of CGMP noncompliance/product failures for outsourcing facilities?
9. What are outsourcing facility management and staff views on current interactions with FDA? How do they want the interactions to change?
10. What are outsourcing facilities' understanding of how to engage with FDA during and following an inspection?
In the
FDA estimates the burden of this collection of information as follows:
Based on a review of the information collection since our last request for OMB approval, we have made no adjustments to our burden estimate.
Food and Drug Administration, HHS.
Notice.
The Food and Drug Administration (FDA) is announcing that a proposed collection of information has been submitted to the Office of Management and Budget (OMB) for review and clearance under the Paperwork Reduction Act of 1995.
Submit written comments (including recommendations) on the collection of information by December 28, 2020.
To ensure that comments on the information collection are received, OMB recommends that written comments be submitted to
Domini Bean, Office of Operations, Food and Drug Administration, Three White Flint North, 10A-12M, 11601 Landsdown St., North Bethesda, MD 20852, 301-796-5733,
In compliance with 44 U.S.C. 3507, FDA has submitted the following proposed collection of information to OMB for review and clearance.
FDA's regulations in §§ 189.5 and 700.27 (21 CFR 189.5 and 700.27) set forth bovine spongiform encephalopathy (BSE)-related restrictions applicable to FDA-regulated human food and cosmetics. The regulations designate certain materials from cattle as “prohibited cattle materials,” including specified risk materials (SRMs), the small intestine of cattle not otherwise excluded from being a prohibited cattle material, material from nonambulatory disabled cattle, and mechanically separated (MS) beef.
Sections 189.5(c) and 700.27(c) set forth the requirements for recordkeeping and records access for FDA-regulated human food, including dietary supplements, and cosmetics manufactured from, processed with, or otherwise containing material derived from cattle. We issued these recordkeeping regulations under the adulteration provisions in sections 402(a)(2)(C), (a)(3), (a)(4), (a)(5), 601(c), and 701(a) of the Federal Food, Drug, and Cosmetic Act (FD&C Act) (21 U.S.C. 342(a)(2)(C), (a)(3), (a)(4), (a)(5), 361(c), and 371(a)). Under section 701(a) of the FD&C Act, we are authorized to issue regulations for the FD&C Act's efficient enforcement. With regard to records concerning imported human food and cosmetics, we relied on our authority under sections 701(b) and 801(a) of the FD&C Act (21 U.S.C. 371(b) and 381(a)). Section 801(a) of the FD&C Act provides requirements with regard to imported human food and cosmetics and provides for refusal of admission of human food and cosmetics that appear to be adulterated into the United States. Section 701(b) of the FD&C Act authorizes the Secretaries of Treasury and Health and Human Services to jointly prescribe regulations for the efficient enforcement of section 801 of the FD&C Act.
These requirements are necessary because once materials are separated from an animal it may not be possible, without records, to know the following: (1) Whether cattle material may contain SRMs (brain, skull, eyes, trigeminal ganglia, spinal cord, vertebral column (excluding the vertebrae of the tail, the transverse processes of the thoracic and lumbar vertebrae, and the wings of the sacrum), and dorsal root ganglia from animals 30 months and older and tonsils and distal ileum of the small intestine from all animals of all ages); (2) whether the source animal for cattle material was inspected and passed; (3) whether the source animal for cattle material was nonambulatory disabled, or MS beef; and (4) whether tallow in human food or cosmetics contain less than 0.15 percent insoluble impurities.
FDA's regulations in §§ 189.5(c) and 700.27(c) require manufacturers and processors of human food and cosmetics manufactured from, processed with, or otherwise containing material from cattle establish and maintain records sufficient to demonstrate that the human food or cosmetics are not manufactured from, processed with, or otherwise contain prohibited cattle materials. These records must be retained for 2 years at the manufacturing or processing establishment or at a reasonably accessible location. Maintenance of electronic records is acceptable, and electronic records are considered to be reasonably accessible if they are accessible from an onsite location. Records required by these sections and existing records relevant to compliance with these sections must be available to FDA for inspection and copying. Existing records may be used if they contain all of the required information and are retained for the required time period.
Because we do not easily have access to records maintained at foreign establishments, FDA regulations in §§ 189.5(c)(6) and 700.27(c)(6), respectively, require that when filing for entry with U.S. Customs and Border Protection, the importer of record of human food or cosmetics manufactured from, processed with, or otherwise containing, cattle material must affirm that the human food or cosmetics were manufactured from, processed with, or otherwise contains, cattle material and must affirm that the human food or cosmetics were manufactured in accordance with the applicable requirements of §§ 189.5 or 700.27. In addition, if human food or cosmetics were manufactured from, processed with, or otherwise contains cattle material, the importer of record must provide within 5 business days records sufficient to demonstrate that the human food or cosmetics were not manufactured from, processed with, or otherwise contains prohibited cattle material, if requested.
Under FDA's regulations, we may designate a country from which cattle materials inspected and passed for
Sections 189.5 and 700.27 further state that countries designated under §§ 189.5(e) and 700.27(e) will be subject to future review by FDA to determine whether their designations remain appropriate. As part of this process, we may ask designated countries to confirm that their BSE situation and the information submitted by them, in support of their original application, has remained unchanged. We may revoke a country's designation if we determine that it is no longer appropriate. Therefore, designated countries may respond to periodic FDA requests by submitting information to confirm their designations remain appropriate. We use the information to ensure their designations remain appropriate.
In the
We estimate the burden of this collection of information as follows:
Based on a review of the information collection since our last request for OMB approval, we have made no adjustments to our burden estimate.
Food and Drug Administration (FDA), Department of Health and Human Services (HHS).
Notice; request for information.
The Department of Health and Human Services is issuing this Notice to withdraw FDA's Marketed Unapproved Drugs—Compliance Policy Guide, Sec. 440.100, Marketed New Drugs Without Approved NDAs or ANDAs, and to request information from the public regarding drugs that may be grandfathered or generally recognized as safe and effective.
Part I of this Notice shall be effective thirty days from the date of publication in the
Responses to Part II must be submitted electronically, and should be addressed to
Nick Uehlecke, 200 Independence Ave. SW, Washington, DC 20201; or by email at
The Trump Administration, through the Department of Health and Human Services (HHS), is continuing its efforts to reduce the price of prescription drugs. This Notice addresses two related but distinct issues: (1) The Food and Drug Administration's (FDA) Unapproved Drugs Initiative (UDI) and (2) the construction of the statutory exemptions from the definition of “new drugs” subject to FDA approval under the federal Food, Drug, and Cosmetic Act (FD&C Act), namely so-called pre-1938 grandfathered drugs and drugs that are “generally recognized as safe and effective” or “GRASE.”
In 1938, Congress created the modern scheme for federal regulation of drugs. Before 1938, there was no requirement under federal law for a manufacturer to obtain FDA approval before marketing a drug. Today, as a general rule, under the FD&C Act, a “new drug” must be approved by the FDA for safety and efficacy pursuant to an approved New Drug Application (NDA) or Abbreviated New Drug Application (ANDA) before the drug is introduced into interstate commerce.
Not all drugs are “new drugs” which require FDA approval. There are two primary carve-outs from the FD&C Act's definition of “new drug.”
Through a guidance document issued in 2006 and later revised in 2011, and without conducting notice-and-comment rulemaking, FDA launched a program called the Unapproved Drugs Initiative (UDI).
Based on its ongoing review of FDA regulatory programs, the Department has decided to withdraw the 2006 and 2011 Guidance, effective thirty days after the date of publication of this Notice in the
The Department is withdrawing the 2006 and 2011 Guidances for several evidence-based reasons. After the UDI began, reports emerged that Americans were paying significantly more for prescription drugs approved by FDA through the UDI than they had paid previously. One report noted that a drug approved through the UDI “sells for about $4.50 a tablet—nearly 50 times the price of the unapproved version.”
In 2017, scholars from the Yale School of Medicine and the University of Utah published a peer-reviewed study corroborating the previous reports.
The study also linked the UDI to drug shortages, which the authors defined as “a supply issue that affects how a pharmacy prepares or dispenses a drug product that influences patient care when prescribers must use an alternative agent.”
Finally, the authors considered whether the UDI generated new clinical data evidence for older drugs. The authors found that, of the nineteen drugs that obtained FDA approval during the study period, only two were supported by “new clinical trial evidence.”
Therefore, the Department has concluded that while the UDI began with laudable goals, it has had numerous negative, unintended consequences on Americans' access to prescription drugs and generated very limited benefits.
Moreover, the fact that the program was initiated through guidance, as opposed to notice-and-comment rulemaking, further supports the Department's decision to withdraw the 2006 and 2011 Guidances, because the Department has serious legal concerns about whether the UDI was implemented through legally permissible procedures.
The UDI is distinguishable from the DACA program. Unlike DACA, the 2011 Guidance described how the FDA intended to exercise its enforcement discretion, but stopped short of committing FDA to any particular action. FDA stated that it was “more likely to take enforcement action” against unapproved competitors of newly approved drugs under the UDI, but that the agency “intend[s] to take into account the circumstances once the product is approved in determining how to exercise our enforcement discretion with regard to the unapproved products.”
Even if there were cognizable reliance interests in the UDI, the Department has ample evidence-based justification for rescinding the 2006 and 2011 Guidances. After more than fourteen years of experience with the program, evidence has emerged that the UDI has caused significant prescription drug price increases and drug shortages while providing limited new clinical data on older drugs. The Department believes these costs imposed on American patients and taxpayers outweigh any reliance interests that may exist in the program. The Department has also considered the public health effects of withdrawing the 2006 and 2011 Guidances. As the 2011 Guidance acknowledges, there are “several thousand” products on the market that lack FDA approval.
Besides, any reliance interests (if they existed) would be minimal. This Notice does not apply to drugs subject to (1) INDs in effect as of the effective date of this Notice, (2) any subsequent NDA based on new clinical investigations (other than bioavailability studies) derived under such IND, and (3) existing approved NDAs.
As noted above, when Congress enacted the FD&C Act in 1938 and later amended the Act in 1962, it exempted certain drugs from the FDA approval requirement. Section 201(p) of the FD&C Act, 21 U.S.C. 321(p), excludes from the definition of “new drug” certain drugs marketed prior to June 25, 1938 and drugs generally recognized as safe and effective, or GRASE. In the 2011 Guidance, FDA stated that “it is not likely that any currently marketed prescription drug is grandfathered or is otherwise not a
That was not always the case. For many years, FDA acknowledged that at least some drugs are not “new drugs” subject to FDA approval prior to marketing. In a 1980 version of the
This evolution in the agency's thinking has had consequences. Under the UDI, FDA required the manufacturer of an epinephrine brand which originally came onto the market in 1901 to submit an NDA.
The regulatory history of the prescription drug Daraprim raises similar issues. FDA originally approved Daraprim (pyrimethamine) for safety in 1953, and later deemed the drug effective through the Drug Efficacy Study Implementation, or DESI review process.
The Department wishes to engage with the public on the contours of the exceptions to the definition of “new drug.” In this regard, HHS is reviewing whether certain drugs, including the drug subject to Congressional scrutiny in 2016, might qualify as exempt from the FDA approval requirement. To aid that effort, HHS asks for input from patients, health care providers, industry, and other stakeholders to provide information responsive to any of the topics below:
1. Lists of drugs marketed prior to June 25, 1938 that are currently available on the market.
2. The extent to which drugs marketed prior to June 25, 1938, or drugs that might qualify as GRASE, have regulatory approvals in countries outside the United States.
3. Whether there would be adverse clinical or economic consequences to deeming as GRASE those drugs previously approved by the FDA for which patent and regulatory exclusivity have expired.
4. Any published literature reviews or clinical studies related to any drugs potentially exempt from the new drug approval requirement.
Food and Drug Administration, HHS.
Notice of availability.
The Food and Drug Administration's (FDA or Agency) Center for Drug Evaluation and Research (CDER) and Center for Biologics Evaluation and Research (CBER) are announcing the availability of a final guidance for industry and FDA staff entitled “Qualification Process for Drug Development Tools.” Under the 21st Century Cures Act (Cures Act), enacted on December 13, 2016, a new section was added to the Federal Food, Drug, and Cosmetic Act (FD&C Act), which defined a three-stage qualification process for drug development tools (DDTs). This guidance meets the Cures
The announcement of the guidance is published in the
You may submit either electronic or written comments on Agency guidances at any time as follows:
Submit electronic comments in the following way:
•
• 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”).
Submit written/paper submissions as follows:
•
• 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.”
• 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
You may submit comments on any guidance at any time (see 21 CFR 10.115(g)(5)).
Submit written requests for single copies of this guidance to the Division of Drug Information, Center for Drug Evaluation and Research, Food and Drug Administration, 10001 New Hampshire Ave., Hillandale Building, 4th Floor, Silver Spring, MD 20993-0002; or the Office of Communication, Outreach, and Development, Center for Biologics Evaluation and Research, Food and Drug Administration, 10903 New Hampshire Ave., Bldg. 71, Rm. 3128, Silver Spring, MD 20993-0002. Send one self-addressed adhesive label to assist that office in processing your requests. See the
Chris Leptak, Center for Drug Evaluation and Research, Food and Drug Administration, 10903 New Hampshire Ave., Bldg. 22, Rm. 6461, Silver Spring, MD 20993-0002, 301-796-0017; or Stephen Ripley, Center for Biologics Evaluation and Research, 10903 New Hampshire Ave., Bldg. 71, Rm. 7301, Silver Spring, MD 20993-0002; 240-402-7911.
CDER and CBER are announcing the availability of a final guidance for industry and FDA staff entitled “Qualification Process for Drug Development Tools.” Signed into law on December 13, 2016, the Cures Act codified, in new section 507 of the FD&C Act (21 U.S.C. 357), a new statutory process for DDT qualification and added transparency provisions for information related to qualification submissions through which there is enhanced ability to share knowledge. In addition, Congress directed the establishment of a taxonomy for the classification of biomarkers (and related scientific concepts) for use in drug (including biological product) development. CDER and CBER convened a public meeting on December 11, 2018, to solicit public input about implementing the new qualification process under section 507 of the FD&C Act and about identifying the Biomarkers, EndpointS, and other Tools (BEST) glossary as the taxonomy for classifying types of DDTs, including biomarkers. CDER and CBER are issuing this final guidance to meet the Cures Act requirement that the Agency issue final guidance on the section 507 qualification process.
DDTs are methods, materials, or measures that can aid drug development and regulatory review. Qualification means that a DDT and its proposed context of use can be relied upon to have a specific interpretation and application in drug development and regulatory review. Qualified DDTs can accelerate the integration of innovation, clinical knowledge, and scientific advances, thereby expediting drug development and aiding the regulatory review of applications.
Although the DDT qualification process is voluntary, requestors who seek qualification under section 507 of the FD&C Act must follow the three-
The Cures Act includes transparency provisions that require the Agency to make information with respect to qualification submissions publicly available. A description of information that is made public on the Agency's website is provided in section II of the final guidance.
CDER and CBER have considered public comments made during the December 11, 2018, public meeting and submitted to the docket in developing the draft guidance of the same title published on December 16, 2019 (84 FR 68460). The Agency received various comments to the docket in response to the publication of the draft guidance and has considered those comments in developing this final guidance. Changes made in the final guidance in response to comments include requests for additional clarity on the qualification process, support for the proposed time frames, and requests to reference specific programs' content element outlines in the guidance. This final guidance meets the Cures Act's requirement to finalize guidance on the section 507 qualification process and affirms the BEST glossary as the taxonomy for classifying types of DDTs. This guidance does not address evidentiary standards for purposes of DDT qualification. It also does not address the qualification of medical device development tools or other programs under the Center for Devices and Radiological Health oversight, which are not addressed in section 507 of the FD&C Act.
This guidance is being issued consistent with FDA's good guidance practices regulation (21 CFR 10.115). The guidance represents the current thinking of FDA on the “Qualification Process for Drug Development Tools.” It does not establish any rights for any person and is not binding on FDA or the public. You can use an alternative approach if it satisfies the requirements of the applicable statutes and regulations.
While this guidance contains no collection of information, it does refer to previously approved FDA collections of information. Therefore, clearance by the Office of Management and Budget (OMB) under the Paperwork Reduction Act of 1995 (44 U.S.C. 3501-3521). The previously approved collections of information are subject to review by OMB under the PRA. The collections of information pertaining to submissions of investigational new drug applications have been approved under OMB control number 0910-0014; the collections of information pertaining to submissions of new drug applications and abbreviated new drug applications have been approved under OMB control number 0910-0001; and the collections of information pertaining to submissions of biologics license applications in 21 CFR part 601 have been approved under OMB control number 0910-0338.
Persons with access to the internet may obtain the guidance at either
Food and Drug Administration, HHS.
Notice of availability.
The Food and Drug Administration (FDA or Agency) is announcing the availability of a final guidance for industry entitled “Formal Meetings Between FDA and ANDA Applicants of Complex Products Under GDUFA.” This guidance describes an enhanced pathway for discussions between FDA and a prospective applicant preparing to submit (or an applicant that has submitted) to FDA an abbreviated new drug application (ANDA) for a complex product. Specifically, this guidance provides information on requesting and conducting product development meetings, presubmission meetings, and midreview cycle meetings with FDA. This guidance will assist applicants in generating and submitting a meeting request and the associated meeting package to FDA for complex products to be submitted under the Federal Food, Drug, and Cosmetic Act (FD&C Act) and as contemplated in the commitments made by FDA in connection with the reauthorization of the Generic Drug User Fee Amendments for Fiscal Years (FYs) 2018-2022 (GDUFA II). This guidance finalizes the draft guidance of the same title issued on October 3, 2017.
The announcement of the guidance is published in the
You may submit either electronic or written comments on Agency guidances at any time as follows:
Submit electronic comments in the following way:
•
• 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”).
Submit written/paper submissions as follows:
•
• 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.”
• 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
You may submit comments on any guidance at any time (see 21 CFR 10.115(g)(5)).
Submit written requests for single copies of this guidance to the Division of Drug Information, Center for Drug Evaluation and Research, Food and Drug Administration, 10001 New Hampshire Ave., Hillandale Building, 4th Floor, Silver Spring, MD 20993-0002. Send one self-addressed adhesive label to assist that office in processing your requests. See the
Elizabeth Giaquinto Friedman, Center for Drug Evaluation and Research, Food and Drug Administration, 10903 New Hampshire Ave., Bldg. 75, Rm. 1670, Silver Spring, MD 20993-0002, 240-402-7930,
FDA is announcing the availability of a guidance for industry entitled “Formal Meetings Between FDA and ANDA Applicants of Complex Products Under GDUFA.” This guidance describes an enhanced pathway for discussions between FDA and a prospective applicant preparing to submit (or an applicant that has submitted) to FDA an ANDA for a complex product. Specifically, this guidance provides information on requesting and conducting product development meetings, presubmission meetings, and midreview cycle meetings with FDA.
This guidance reflects a unified approach to all formal meetings between FDA and ANDA applicants or prospective ANDA applicants for complex products. This guidance is intended to assist ANDA applicants and prospective ANDA applicants in generating and submitting to FDA a meeting request and the associated meeting package for these complex products, as defined in this guidance, to be submitted under section 505(j) of the FD&C Act (21 U.S.C. 355(j)) and as contemplated in GDUFA II.
As part of the commitments FDA made in connection with GDUFA II, FDA agreed to develop a program to assist ANDA applicants and prospective ANDA applicants of complex products before the submission of an ANDA to FDA. As stated in the GDUFA Reauthorization Performance Goals and Program Enhancements Fiscal Years 2018-2022 (GDUFA II Goals or Commitment Letter available at
To facilitate development of complex products that may be submitted in an ANDA, FDA and industry agreed to a series of meetings between ANDA applicants and prospective ANDA applicants and FDA to discuss the proposed complex product and support submission of a high-quality, approvable ANDA.
In addition to developing a robust pre-ANDA program, FDA agreed to respond to requests for and conduct meetings related to the development of complex products submitted on or after October 1, 2017, within specific timeframes.
This guidance finalizes the draft guidance entitled “Formal Meetings Between FDA and ANDA Applicants of Complex Products Under GDUFA” issued on October 3, 2017 (82 FR 46071). FDA considered comments received on the draft guidance as the guidance was finalized. Changes from the draft to the final guidance were made to address requests for clarity in seeking such meetings, as described in the guidance, with FDA.
This guidance is being issued consistent with FDA's good guidance practices regulation (21 CFR 10.115). The guidance represents the current thinking of FDA on “Formal Meetings Between FDA and ANDA Applicants of Complex Products Under GDUFA.” It does not establish any rights for any person and is not binding on FDA or the public. You can use an alternative approach if it satisfies the requirements of the applicable statutes and regulations.
While this guidance contains no collection of information, it does refer to previously approved FDA collections of information. Therefore, clearance by the Office of Management and Budget (OMB) under the Paperwork Reduction Act of 1995 (44 U.S.C. 3501-3521). The previously collections of information are subject to review by OMB under the PRA. The collections of information for meetings related to generic drug development have been approved under OMB control number 0910-0797.
Persons with access to the internet may obtain the guidance at either
Food and Drug Administration, HHS.
Notice.
The Food and Drug Administration (FDA or we) is announcing that a proposed collection of information has been submitted to the Office of Management and Budget (OMB) for review and clearance under the Paperwork Reduction Act (PRA) of 1995.
Submit written comments (including recommendations) on the collection of information by December 28, 2020.
To ensure that comments on the information collection are received, OMB recommends that written comments be submitted to
JonnaLynn Capezzuto, Office of Operations, Food and Drug Administration, Three White Flint North, 10A-12M, 11601 Landsdown St., North Bethesda, MD 20852, 301-796-3794,
In compliance with 44 U.S.C. 3507, FDA has submitted the following proposed collection of information to OMB for review and clearance.
This information collection supports implementation of section 503(g) of the Federal Food, Drug, and Cosmetic Act (FD&C Act) (21 U.S.C. 353(g)), as amended by the 21st Century Cures Act (Pub. L. 114-255) (Cures Act), section 563 of the FD&C Act (21 U.S.C 360bbb-2) added to the FD&C Act by the Food and Drug Administration Modernization Act of 1997 (Pub. L. 105-115), and Agency regulations in 21 CFR part 3. Section 503(g) of the FD&C Act expressly provides for the regulation of combination products, including how primary Agency responsibility shall be designated for such products and how certain submissions regarding such products may be made to the Agency. Section 563 of the FD&C Act requires FDA to classify products as biological products, devices, drugs, or combination products and to assign products to an Agency component for regulation, in response to requests for designation (RFDs) submitted by product sponsors. We updated our regulations in 21 CFR part 3 in 2005 to clarify the meaning of the statutory term “primary mode of action,” which determines the FDA component to which a combination product is assigned. We proposed to update these regulations further on May 15, 2018 (83 FR 22428), intending to: (1) Clarify the scope of our regulations; (2) streamline and clarify the appeals process; (3) align the regulations with more recent legislative and regulatory measures; (4) update advisory content; and (5) clarify Agency policies and practices.
We are revising the information collection to include changes to these existing procedures and current statutory and legislative mandates. Specifically, as amended by the Cures Act, section 503(g) of the FD&C Act includes provisions exclusive to FDA's Office of Combination Products (OCP) and/or to provide for combination product-specific submission types, including provisions addressing engagement between OCP and combination product sponsors and Combination Product Agreement Meetings (CPAMs) for sponsors to engage with FDA. In addition, FDA has developed an associated jurisdictional process to the RFD process, the pre-RFD process, for sponsors to obtain feedback regarding medical product classification and assignment.
To assist respondents with format and content elements related to the information collection for RFDs and pre-RFDs, we have developed proposed Forms FDA 5003, 5004, and 5005 (pre-request and request for designation). To support RFD and pre-RFD submissions, FDA has also made information technology improvements, enabling sponsors to use preferred submission methods, including automated, electronic, mechanical, and other technological collection techniques. We expect the use of improved technology to enhance sponsors' user experience with submissions.
We have also developed Agency guidance consistent with sections 503(g) and 563 of the FD&C Act and with our Good Guidance Practice regulations in 21 CFR 10.115 (approved under OMB control number 0910-0191).
The guidance entitled “How to Write a Request for Designation” (issued April 2011), provides instruction regarding the information that needs to be submitted to OCP in a RFD as described in 21 CFR 3.7. The guidance is available at
The guidance entitled “How to Prepare a Pre-Request for Designation,” was developed to assist sponsors in obtaining a preliminary, nonbinding assessment from OCP through the pre-RFD process. The guidance explains the pre-RFD process and helps a sponsor understand the type of information to provide in a pre-RFD submission. The guidance is available at
The guidance entitled “Requesting FDA Feedback on Combination Products,” was developed to discuss ways in which combination product sponsors can obtain feedback from FDA on scientific and regulatory questions
Respondents to the information collection are sponsors of medical products, including combination products. We estimate the burden of this collection of information as follows:
For RFDs and pre-RFDs, our estimate is based on the number of submissions received from October 1, 2018, to September 30, 2019. We assume 1 submission per respondent, for an annual average of 53 RFD submissions, and 83 pre-RFD submissions and assume that each submission requires an average of 24 hours to prepare and submit to FDA.
Our estimate for CPAM requests is based on future activity in light of the minimal use of CPAMs to date; FDA has received two CPAM requests since the enactment of the Cures Act in December 2016. We estimate one CPAM request will be received per year by each medical product center (Center for Biologics Evaluation and Research, Center for Drug Evaluation and Research, and Center for Devices and Radiological Health). We assume it will take sponsors approximately 25 hours to compile and submit the recommended information. Because we expect burden associated with application submissions is already captured by approved information collection requests for drug, biologic, and medical device applications, respectively (approved under OMB control numbers 0910-0001, 0910-0338, and 0910-0231), we do not include burden associated with application submissions captured by these programs in this information collection request.
Office of the Secretary, HHS.
Notice.
Findings of research misconduct have been made against Dr. David J. Panka (Respondent), former Harvard Medical School (HMS) Instructor of Medicine, and former HMS Associate Professor of Medicine at Beth Israel Deaconess Medical Center (BIDMC). Dr. Panka engaged in research misconduct in research supported by U.S. Public Health Service (PHS) funds, specifically National Cancer Institute (NCI), National Institutes of Health (NIH), grants P50 CA093683 and P50 CA101942. The administrative actions, including supervision for a period of three (3) years, were implemented beginning on November 9, 2020, and are detailed below.
Elisabeth A. Handley, Director, Office of Research Integrity, 1101 Wootton Parkway, Suite 240, Rockville, MD 20852, (240) 453-8200.
Notice is hereby given that the Office of Research Integrity (ORI) has taken final action in the following case:
ORI found that Respondent engaged in research misconduct by intentionally, knowingly, and/or recklessly falsifying and/or fabricating Western blot images by selectively cutting, flipping, reordering, and reusing the same source images or non-correlated images to represent different results in the following three (3) published papers and one (1) conference presentation:
• The Raf inhibitor BAY 43-9006 (Sorafenib) induces caspase-independent apoptosis in melanoma cells.
• Differential modulatory effects of GSK-3b and HDM2 on sorafenib-induced AIF nuclear translocation (programmed necrosis) in melanoma.
• Effects of HDM2 antagonism on sunitinib resistance, p53 activation, SDF-1 induction, and tumor infiltration by CD11b+/Gr-1+ myeloid derived suppressor cells.
• Presentation #5328, “BAY 43-9006 induces apoptosis in melanoma cell lines”, presented during Cellular and Molecular Biology session #63 “ (`Apoptosis 4: Chemotherapeutic Agents II')” on April 20, 2005, at the 96th Annual American Association for Cancer Research (AACR) meeting, held in Anaheim, California (hereafter referred to as the “2005 AACR Presentation”).
Specifically, ORI found that Respondent knowingly, intentionally, and/or recklessly falsified and/or fabricated:
• Western blot images in twelve (12) figures of three (3) published papers and one (1) conference presentation by editing, reusing, and relabeling the same source images or the non-correlated blots to represent different results from different experiments. Specifically:
Dr. Panka entered into a Voluntary Settlement Agreement and agreed to the following:
(1) Respondent agreed to have his research supervised for a period of three (3) years beginning on November 9, 2020. Respondent agrees that prior to the submission of an application for PHS support for a research project on which Respondent's participation is proposed and prior to Respondent's participation in any capacity on PHS-supported research, Respondent shall ensure that a plan for supervision of Respondent's duties is submitted to ORI for approval. The supervision plan must be designed to ensure the scientific integrity of Respondent's research contribution. Respondent agrees that he shall not participate in any PHS-supported research until such a supervision plan is submitted to and approved by ORI. Respondent agrees to maintain responsibility for compliance with the agreed upon supervision plan.
(2) The requirements for Respondent's supervision plan are as follows:
i. A committee of 2-3 senior faculty members at the institution who are familiar with Respondent's field of research, but not including Respondent's supervisor or collaborators, will provide oversight and guidance for a period of three (3) years from the effective date of the Agreement. The committee will review primary data from Respondent's laboratory on a quarterly basis and submit a report to ORI at six (6) month intervals, setting forth the committee meeting dates and Respondent's compliance with appropriate research standards and confirming the integrity of Respondent's research.
ii. The committee will conduct an advance review of any PHS grant applications (including supplements, resubmissions, etc.), manuscripts reporting PHS-funded research submitted for publication, and abstracts. The review will include a discussion with Respondent of the primary data represented in those documents and will include a certification to ORI that the data presented in the proposed application/publication are supported by the research record.
(3) Respondent agreed that for a period of three (3) years beginning on November 9, 2020, any institution employing him shall submit, in conjunction with each application of PHS funds, or report, manuscript, or abstract involving PHS-supported research in which Respondent is involved, a certification to ORI that the data provided by Respondent are based on actual experiments or are otherwise legitimately derived and that the data, procedures, and methodology are accurately reported in the application, report, manuscript, or abstract.
(4) If no supervisory plan is provided to ORI, Respondent agreed to provide certification to ORI at the conclusion of the supervision period that he has not engaged in, applied for, or had his name included on any application, proposal, or other request for PHS funds without prior notification to ORI.
(5) Respondent agreed to exclude himself voluntarily from serving in any advisory capacity to PHS including, but not limited to, service on any PHS advisory committee, board, and/or peer review committee, or as a consultant for a period of three (3) years, beginning on November 9, 2020.
(6) As a condition of the Agreement, Respondent will request that the following papers and conference abstract be corrected or retracted in accordance with 42 CFR 93.407(a)(1) and § 93.411(b):
Pursuant to section 10(d) of the Federal Advisory Committee Act, as amended, notice is hereby given of the following meeting.
The meeting will be closed to the public in accordance with the provisions set forth in sections 552b(c)(4) and 552b(c)(6), Title 5 U.S.C., as amended. The grant applications and the discussions could disclose confidential trade secrets or commercial property such as patentable material, and personal information concerning individuals associated with the grant applications, the disclosure of which would constitute a clearly unwarranted invasion of personal privacy.
This notice is being published less than 15 days prior to the meeting due to the timing limitations imposed by the review and funding cycle.
Pursuant to section 10(d) of the Federal Advisory Committee Act, as amended, notice is hereby given of a meeting of the National Advisory General Medical Sciences Council.
The meeting will be open to the public as indicated below, with a short public comment period at the end. The open session will be videocast and can be accessed from the NIH Videocasting and Podcasting website (
The meeting will be closed to the public in accordance with the provisions set forth in sections 552b(c)(4) and 552b(c)(6), Title 5 U.S.C., as amended. The grant applications and
Any interested person may file written comments with the committee by forwarding the statement to the Contact Person listed on this notice. The statement should include the name, address, telephone number and when applicable, the business or professional affiliation of the interested person.
Information is also available on the Institute's/Center's home page:
Pursuant to section 10(d) of the Federal Advisory Committee Act, as amended, notice is hereby given of a meeting of the Council of Councils.
The meeting will be held as a virtual meeting and will be open to the public as indicated below. Individuals who plan to view the virtual meeting and need special assistance or other reasonable accommodations to view the meeting, should notify the Contact Person listed below in advance of the meeting. The open session will be videocast and can be accessed from the NIH Videocasting and Podcasting website (
A portion of the meeting will be closed to the public in accordance with the provisions set forth in sections 552b(c)(4), and 552b(c)(6), Title 5 U.S.C., as amended. The grant applications and the discussions could disclose confidential trade secrets or commercial property such as patentable material, and personal information concerning individuals associated with the grant applications, the disclosure of which would constitute a clearly unwarranted invasion of personal privacy.
Any interested person may file written comments with the committee by forwarding the statement to the Contact Person listed on this notice. The statement should include the name, address, telephone number and when applicable, the business or professional affiliation of the interested person.
Information is also available on the Council of Council's home page at
Pursuant to section 10(d) of the Federal Advisory Committee Act, as amended, notice is hereby given of a meeting of the Division of Intramural Research Board of Scientific Counselors, National Institute of Allergy and Infectious Diseases.
The meeting will be closed to the public as indicated below in accordance with the provisions set forth in sections 552b(c)(4) and 552b(c)(6), Title 5 U.S.C., as amended for the review, discussion, and evaluation of individual intramural programs and projects conducted by the NATIONAL INSTITUTE OF DENTAL & CRANIOFACIAL RESEARCH, including consideration of personnel qualifications and performance, and the competence of individual investigators, the disclosure of which would constitute a clearly unwarranted invasion of personal privacy.
This notice is being published less than 15 days prior to the meeting due to the urgent need to meet timing limitations imposed by the intramural research review cycle.
Information is also available on the Institute's/Center's home page:
National Institutes of Health, HHS.
Notice.
Through this Request for Information (RFI), the Sexual & Gender Minority Research Office (SGMRO) in the Division of Program Coordination, Planning, and Strategic Initiatives (DPCPSI), Office of the Director (OD), National Institutes of Health (NIH), invites feedback from stakeholders throughout the scientific research community, clinical practice communities, patient and family advocates, scientific or professional organizations, federal partners, internal NIH stakeholders, and other interested constituents on research opportunities related to the upcoming NIH Scientific Workshop on Violence and Related Health Outcomes in Sexual and Gender Minority (SGM) Communities. The overarching purpose of this workshop is to identify and prioritize key research opportunities to further our understanding of violence against SGM individuals.
The SGMRO's RFI is open for public comment for a period of 8 weeks. Comments must be received on or before COB (5:00 p.m. E.T.) January 29, 2021, to ensure consideration. After the public comment period has closed, the comments received by SGMRO will be considered in a timely manner and shared with invitees to the Scientific Workshop on Violence and Related Health Outcomes in SGM Communities.
Please see the supplementary information to view the draft domains and themes of focus for the Scientific Workshop on Violence and Related Health Outcomes in SGM Communities. It is strongly encouraged to submit comments by email to
Irene Avila, Ph.D., Assistant Director, Sexual & Gender Minority Research Office (SGMRO), 6555 Rock Spring Drive, Rm 2SE31J, Bethesda, MD 20817,
In accordance with Section 404N of the 21st Century Cures Act (Pub. L. 114-255), the Director of NIH shall encourage research on SGM populations. The Sexual and Gender Minority Research Office (SGMRO) coordinates sexual and gender minority (SGM)-related research and activities by working directly with NIH Institutes, Centers, and Offices. The Office was officially established in September 2015 within the DPCPSI in the NIH OD and has the following operational goals: (1) Advance rigorous research on the health of SGM populations in both the extramural and intramural research communities; (2) expand SGM health research by fostering partnerships and collaborations with a strategic array of internal and external stakeholders; (3) foster a highly skilled and diverse workforce in SGM health research; and (4) encourage data collection related to SGM populations in research and the biomedical research workforce. The Scientific Workshop on Violence and Related Health Outcomes in Sexual and Gender Minority Communities represents an important step in pursuing these goals specifically in the field of violence research.
This RFI serves as the first phase of the Scientific Workshop on Violence and Related Health Outcomes in Sexual and Gender Minority Communities. After the RFI has closed and comments from the public have been reviewed by workshop invitees, the second phase of the workshop will take place. During phase II, workshop invitees will discuss the current landscape of violence research, including an overview of specific subsets of violence research, relevant terminology, impacts on SGM populations, and institutional contexts. This phase will focus on four domains of violence research:
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•
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In addition, relevant systemic and institutional barriers will be considered for each of these four areas.
In phase III, workgroups will be formed to identify and describe central themes and opportunities in violence research, taking into consideration feedback from the RFI. The workgroups will comprise expert participants from each of the four phase II sessions as well as other key partners and stakeholders. The four themes for workgroup discussion will be:
• Socio-demographics and epidemiology
• Risk factors and pathways
• Preventive strategies and interventions
• Structural interventions
NIH seeks comments and/or suggestions from all interested parties on key research opportunities in SGM health and violence.
Responses to this RFI are voluntary. Do not include any proprietary, classified, confidential, trade secret, or sensitive information in your response. The responses will be reviewed by NIH staff, and individual feedback will not be provided to any responder. The Government will use the information submitted in response to this RFI at its discretion. The Government reserves the right to use any submitted information on public NIH websites; in reports; in summaries of the state of the science; in any possible resultant solicitation(s), grant(s), or cooperative agreement(s); or in the development of future funding opportunity announcements.
This RFI is for information and planning purposes only and should not be construed as a solicitation for applications or proposals, or as an obligation in any way on the part of the United States Federal Government, NIH, or individual NIH Institutes, Centers, and Offices to provide support for any ideas identified in response to it. The Federal Government will not pay for the preparation of any information submitted or for the Government's use of such information. No basis for claims against the U.S. Government shall arise as a result of a response to this RFI or from the Government's use of such information. Additionally, the Government cannot guarantee the confidentiality of the information provided.
Pursuant to section 10(d) of the Federal Advisory Committee Act, as amended, notice is hereby given of the following meeting.
The meeting will be closed to the public in accordance with the provisions set forth in sections 552b(c)(4) and 552b(c)(6), Title 5 U.S.C., as amended. The grant applications and the discussions could disclose confidential trade secrets or commercial property such as patentable material, and personal information concerning individuals associated with the grant applications, the disclosure of which would constitute a clearly unwarranted invasion of personal privacy.
Pursuant to section 10(d) of the Federal Advisory Committee Act, as amended, notice is hereby given of the following meeting.
The meeting will be closed to the public in accordance with the provisions set forth in sections 552b(c)(4) and 552b(c)(6), Title 5 U.S.C., as amended. The grant applications and the discussions could disclose confidential trade secrets or commercial property such as patentable material, and personal information concerning individuals associated with the grant applications, the disclosure of which would constitute a clearly unwarranted invasion of personal privacy.
Pursuant to section 10(d) of the Federal Advisory Committee Act, as amended, notice is hereby given of the following meeting.
The meeting will be closed to the public in accordance with the provisions set forth in sections 552b(c)(4) and 552b(c)(6), Title 5 U.S.C., as amended. The grant applications and the discussions could disclose confidential trade secrets or commercial property such as patentable material, and personal information concerning individuals associated with the grant applications, the disclosure of which would constitute a clearly unwarranted invasion of personal privacy.
This notice is being published less than 15 days prior to the meeting due to the timing
Pursuant to section 10(d) of the Federal Advisory Committee Act, as amended, notice is hereby given of the following meetings.
The meetings will be closed to the public in accordance with the provisions set forth in sections 552b(c)(4) and 552b(c)(6), Title 5 U.S.C., as amended. The grant applications and the discussions could disclose confidential trade secrets or commercial property such as patentable material, and personal information concerning individuals associated with the grant applications, the disclosure of which would constitute a clearly unwarranted invasion of personal privacy.
Pursuant to section 10(d) of the Federal Advisory Committee Act, as amended, notice is hereby given of the following meetings.
The meetings will be closed to the public in accordance with the provisions set forth in sections 552b(c)(4) and 552b(c)(6), Title 5 U.S.C., as amended. The grant applications and the discussions could disclose confidential trade secrets or commercial property such as patentable material, and personal information concerning individuals associated with the grant applications, the disclosure of which would constitute a clearly unwarranted invasion of personal privacy.
Pursuant to section 10(d) of the Federal Advisory Committee Act, as amended, notice is hereby given of a meeting of the National Deafness and Other Communication Disorders Advisory Council.
This is a virtual meeting and will be open to the public as indicated below. The url link to this meeting is:
The meeting will be closed to the public in accordance with the provisions set forth in sections 552b(c)(4) and 552b(c)(6), Title 5 U.S.C., as amended. The grant applications and the discussions could disclose confidential trade secrets or commercial property such as patentable material, and personal information concerning individuals associated with the grant applications, the disclosure of which would constitute a clearly unwarranted invasion of personal privacy.
Information is also available on the Institute's/Center's home page:
U.S. Customs and Border Protection (CBP), Department of Homeland Security (DHS).
Committee Management; Notice of Federal Advisory Committee Meeting.
The Commercial Customs Operations Advisory Committee (COAC) will hold its quarterly meeting on Wednesday, December 16, 2020. The meeting will be open to the public via webinar only. There is no on-site, in-person option for this quarterly meeting.
The COAC will meet on Wednesday, December 16, 2020, from 1:00 p.m. to 5:00 p.m. EST. Please note that the meeting may close early if the committee has completed its business. Comments must be submitted in writing no later than December 15, 2020.
The meeting will be held via webinar. The webinar link and conference number will be provided to all registrants by 10:00 a.m. EST on December 16, 2020. For information on facilities or services for individuals with disabilities or to request special assistance at the meeting, contact Ms. Florence Constant-Gibson, Office of Trade Relations, U.S. Customs and Border Protection, at (202) 344-1440, as soon as possible.
Ms. Florence Constant-Gibson, Office of Trade Relations, U.S. Customs and Border Protection, 1300 Pennsylvania Avenue NW, Room 3.5A, Washington, DC 20229; telephone (202) 344-1440; or Mr. Jon B. Perdue, Designated Federal Officer, at (202) 344-1440.
Notice of this meeting is given under the authority of the Federal Advisory Committee Act, 5 U.S.C. Appendix. The Commercial Customs Operations Advisory Committee (COAC) provides advice to the Secretary of Homeland Security, the Secretary of the Treasury, and the Commissioner of U.S. Customs and Border Protection (CBP) on matters pertaining to the commercial operations of CBP and related functions within the Department of Homeland Security and the Department of the Treasury.
Please feel free to share this information with other interested members of your organization or association.
To facilitate public participation, we are inviting public comment on the issues the committee will consider prior to the formulation of recommendations as listed in the Agenda section below.
Comments must be submitted in writing no later than December 15, 2020, and must be identified by Docket No. USCBP-2020-0064, and may be submitted by one (1) of the following methods:
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There will be multiple public comment periods held during the meeting on December 16, 2020. Speakers are requested to limit their comments to two (2) minutes or less to facilitate greater participation. Please note that the public comment period for speakers may end before the time indicated on the schedule that is posted on the CBP web page,
The COAC will hear from the current subcommittees on the topics listed below and then will review, deliberate, provide observations, and formulate recommendations on how to proceed:
1. The Secure Trade Lanes Subcommittee will present updates related to the four active working groups as follows: Trusted Trader Working Group will present recommendations on the newly issued CBP White Paper for the Implementation of CTPAT Trade Compliance Requirements for Forced Labor; the In-Bond Working Group will provide an update on the ongoing work with the technical enhancements that is being shared with the Trade Support Network; the Export Modernization Working Group will report on the progress of the development of the White Paper mentioned during the October COAC meeting and present additional recommendations; and, the Remote and Autonomous Cargo Processing Working Group will provide an update on the progress reviewing the
2. The Intelligent Enforcement Subcommittee will discuss the kickoff of the Intellectual Property Rights Process Modernization Working Group that will leverage prior recommendations by formulating recommendations to address automation and data sharing. The Bond Working Group will report on continued work with CBP on the Monetary Guidelines for Setting Bond Amounts as part of a larger risk-based bonding initiative. The Anti-Dumping and Countervailing Duty (AD/CVD) Working Group will report on their continued work with CBP related to the growing number of complex AD/CVD cases. The Forced Labor Working Group will report on progress toward prioritized recommendations and future scope of work.
3. The Next Generation Facilitation Subcommittee will provide an update on the progress of the One U.S. Government Working Group and work-to-date on the Global Business Identifier initiative. The subcommittee will also report on their progress with Partner Government Agencies regarding advancement in Trusted Trader initiatives. There will be an update by the Emerging Technologies Working Group regarding their assessment of various technologies such as quantum computing evaluated this past quarter that could be adapted for use by CBP and the trade. The subcommittee will provide an update on the 21st Century Customs Framework initiative.
4. The Rapid Response Subcommittee will discuss the work that has been done by the Broker Exam Modernization Working Group regarding resolving challenges encountered during the recent October exam and continuing efforts to modernize and improve the quality and experience of future broker exams.
Meeting materials will be available by December 14, 2020, at:
U.S. Customs and Border Protection (CBP), Department of Homeland Security.
60-Day Notice and request for comments; Extension of an existing collection of information.
The Department of Homeland Security, U.S. Customs and Border Protection will be submitting the following information collection request to the Office of Management and Budget (OMB) for review and approval in accordance with the Paperwork Reduction Act of 1995 (PRA). The information collection is published in the
Comments are encouraged and must be submitted no later than January 25, 2021 to be assured of consideration.
Written comments and/or suggestions regarding the item(s) contained in this notice must include the OMB Control Number 1651-0136 in the subject line and the agency name.
Please submit comments via email to
Requests for additional PRA information should be directed to Seth Renkema, Chief, Economic Impact Analysis Branch, U.S. Customs and Border Protection, Office of Trade, Regulations and Rulings, 90 K Street NE, 10th Floor, Washington, DC 20229-1177, Telephone number 202-325-0056 or via email
CBP invites the general public and other Federal agencies to comment on the proposed and/or continuing information collections pursuant to the Paperwork Reduction Act of 1995 (44 U.S.C. 3501
This collection of information is necessary to enable CBP to garner customer and stakeholder feedback in an efficient, timely manner, in accordance with our commitment to improving service delivery. The information collected from our
Federal Emergency Management Agency, DHS.
Notice.
Flood hazard determinations, which may include additions or modifications of Base Flood Elevations (BFEs), base flood depths, Special Flood Hazard Area (SFHA) boundaries or zone designations, or regulatory floodways on the Flood Insurance Rate Maps (FIRMs) and where applicable, in the supporting Flood Insurance Study (FIS) reports have been made final for the communities listed in the table below. The FIRM and FIS report are the basis of the floodplain management measures that a community is required either to adopt or to show evidence of having in effect in order to qualify or remain qualified for participation in the Federal Emergency Management Agency's (FEMA's) National Flood Insurance Program (NFIP). In addition, the FIRM and FIS report are used by insurance agents and others to calculate appropriate flood insurance premium rates for buildings and the contents of those buildings.
The date of April 7, 2021 has been established for the FIRM and, where applicable, the supporting FIS report showing the new or modified flood hazard information for each community.
The FIRM, and if applicable, the FIS report containing the final flood hazard information for each community is available for inspection at the respective Community Map Repository address listed in the tables below and will be available online through the FEMA Map Service Center at
Rick Sacbibit, Chief, Engineering Services Branch, Federal Insurance and Mitigation Administration, FEMA, 400 C Street SW, Washington, DC 20472, (202) 646-7659, or (email)
The Federal Emergency Management Agency (FEMA) makes the final determinations listed below for the new or modified flood hazard information for each community listed. Notification of these changes has been published in newspapers of local circulation and 90 days have elapsed since that publication. The Deputy Associate Administrator for Insurance and Mitigation has resolved any appeals resulting from this notification.
This final notice is issued in accordance with section 110 of the Flood Disaster Protection Act of 1973, 42 U.S.C. 4104, and 44 CFR part 67. FEMA has developed criteria for floodplain management in floodprone areas in accordance with 44 CFR part 60.
Interested lessees and owners of real property are encouraged to review the new or revised FIRM and FIS report available at the address cited below for each community or online through the FEMA Map Service Center at
The flood hazard determinations are made final in the watersheds and/or communities listed in the table below.
Federal Emergency Management Agency, DHS.
30 Day notice and request for comments.
The Federal Emergency Management Agency (FEMA), as part of its continuing effort to reduce paperwork and respondent burden, invites the general public to take this opportunity to comment on a reinstatement, with change, of a previously approved information collection for which approval has expired. The reinstatement includes minor changes to survey questions in order for the agency to better assess changes to students' behaviors on the job. In accordance with the Paperwork Reduction Act of 1995, this notice seeks comments concerning the use of the three separate Kirkpatrick Training Program Evaluation Level 3 instruments by three geographically separated National Training and Education (NTED) Training Organizations: The Training Partners Program Branch (TPP) located at FEMA Headquarters, Washington, DC, the Center for Domestic Preparedness (CDP) located in Anniston, AL, and the Emergency Management Institute (EMI) located in Emmitsburg, MD.
Comments must be submitted on or before December 28, 2020.
Written comments and recommendations for the proposed information collection should be sent within 30 days of publication of this notice to
For any questions, please contact Dalia Abdelmeguid at
While these three instruments contain five common questions or data sets, other questions are required due to unique occupational and operational needs of their respective customers and the different course/program content or subject material that is designed to develop interoperable National Preparedness Core Capabilities, Community Lifelines, and/or Recovery Sector capabilities across and among various responder communities. Level 3 data is used to measure and monitor transfer or retention of knowledge, skills and abilities obtained during training to the students' work environment and/or organizational work environment. Data collected is utilized to continuously improve course material, delivery and to inform key stakeholders on course/program performance in accordance with the Government Performance and Results Act (GPRA) Modernization Act of 2010 (GPRAMA).
FEMA will submit the information collection abstracted below to the Office of Management and Budget for review and clearance in accordance with the requirements of the Paperwork Reduction Act of 1995. The submission will describe the nature of the information collection, the categories of respondents, the estimated burden (
In support of Presidential Policy Directive (PPD-8) National Preparedness, the National Preparedness Goal (NPG) and National Preparedness System (NPS) FEMA's NTED provides program oversight of three geographically separated training organizations: TPP in Washington DC, CDP in Anniston, AL, and EMI in Emmitsburg, MD. These organizations with the National Domestic Preparedness Consortium (NDPC) and the Continuing Training Grant (CTG) members comprise the National Training and Education System (NTES) and are organized to optimize the 6 U.S.C. 748 required National Training Program on behalf of the FEMA Administrator in collaboration with other Federal agencies. Working collectively as a NTES, the training capabilities and capacity of the Nation increase the planning, capability and capacity to design, develop, deliver and evaluate training and education solutions to build sustainable and interoperable National Core Capabilities, Community Lifelines, and Recovery Sectors that prevent, protect, mitigate, respond and recover the Nation from acts of terrorism and natural disasters.
As part of the Federal Government, FEMA's NTED and component organizations have developed these training evaluation instruments to measure their individual and collective program performance as required by the GPRA Modernization Act of 2010. Paragraph(a) of 31 U.S.C. 1115 covers Federal Government and Agency Performance Plans while paragraph (b) covers Agency Performance Plans (6) requires a balanced set of performance indicators to be used in measuring or assessing progress toward each performance goal, including, as appropriate, customer service, efficiency, output, and outcome indicators.
This information collection expired on February 28, 2019. FEMA is requesting a reinstatement, with change, of a previously approved information collection for which approval has expired.
This proposed information collection previously published in the
Comments may be submitted as indicated in the
Federal Emergency Management Agency, DHS.
Notice.
New or modified Base (1-percent annual chance) Flood Elevations (BFEs), base flood depths, Special Flood Hazard Area (SFHA) boundaries or zone designations, and/or regulatory floodways (hereinafter referred to as flood hazard determinations) as shown on the indicated Letter of Map Revision (LOMR) for each of the communities listed in the table below are finalized. Each LOMR revises the Flood Insurance Rate Maps (FIRMs), and in some cases the Flood Insurance Study (FIS) reports, currently in effect for the listed communities. The flood hazard determinations modified by each LOMR will be used to calculate flood insurance premium rates for new buildings and their contents.
Each LOMR was finalized as in the table below.
Each LOMR is available for inspection at both the respective Community Map Repository address listed in the table below and online through the FEMA Map Service Center at
Rick Sacbibit, Chief, Engineering Services Branch, Federal Insurance and Mitigation Administration, FEMA, 400 C Street SW, Washington, DC 20472, (202) 646-7659, or (email)
The Federal Emergency Management Agency (FEMA) makes the final flood hazard determinations as shown in the LOMRs for each community listed in the table below. Notice of these modified flood hazard determinations has been published in newspapers of local circulation and 90 days have elapsed since that publication. The Deputy Associate Administrator for Insurance and Mitigation has resolved any appeals resulting from this notification.
The modified flood hazard determinations are made pursuant to
For rating purposes, the currently effective community number is shown and must be used for all new policies and renewals.
The new or modified flood hazard information is the basis for the floodplain management measures that the community is required either to adopt or to show evidence of being already in effect in order to remain qualified for participation in the National Flood Insurance Program (NFIP).
This new or modified flood hazard information, together with the floodplain management criteria required by 44 CFR 60.3, are the minimum that are required. They should not be construed to mean that the community must change any existing ordinances that are more stringent in their floodplain management requirements. The community may at any time enact stricter requirements of its own or pursuant to policies established by other Federal, State, or regional entities.
This new or modified flood hazard determinations are used to meet the floodplain management requirements of the NFIP and are used to calculate the appropriate flood insurance premium rates for new buildings, and for the contents in those buildings. The changes in flood hazard determinations are in accordance with 44 CFR 65.4.
Interested lessees and owners of real property are encouraged to review the final flood hazard information available at the address cited below for each community or online through the FEMA Map Service Center at
Federal Emergency Management Agency, DHS.
Notice.
Comments are requested on proposed flood hazard determinations, which may include additions or modifications of any Base Flood Elevation (BFE), base flood depth, Special Flood Hazard Area (SFHA) boundary or zone designation, or regulatory floodway on the Flood Insurance Rate Maps (FIRMs), and where applicable, in the supporting Flood Insurance Study (FIS) reports for the communities listed in the table below. The purpose of this notice is to seek general information and comment regarding the preliminary FIRM, and where applicable, the FIS report that the Federal Emergency Management Agency (FEMA) has provided to the affected communities. The FIRM and FIS report are the basis of the floodplain management measures that the community is required either to adopt or to show evidence of having in effect in order to qualify or remain qualified for participation in the National Flood Insurance Program (NFIP). In addition, the FIRM and FIS report, once effective, will be used by insurance agents and others to calculate appropriate flood insurance premium rates for new buildings and the contents of those buildings.
Comments are to be submitted on or before February 23, 2021.
The Preliminary FIRM, and where applicable, the FIS report for each community are available for inspection at both the online location
You may submit comments, identified by Docket No. FEMA-B-2068, to Rick Sacbibit, Chief, Engineering Services Branch, Federal Insurance and Mitigation Administration, FEMA, 400 C Street SW, Washington, DC 20472, (202) 646-7659, or (email)
Rick Sacbibit, Chief, Engineering Services Branch, Federal Insurance and Mitigation Administration, FEMA, 400 C Street SW, Washington, DC 20472, (202) 646-7659, or (email)
FEMA proposes to make flood hazard determinations for each community listed below, in accordance with section 110 of the Flood Disaster Protection Act of 1973, 42 U.S.C. 4104, and 44 CFR 67.4(a).
These proposed flood hazard determinations, together with the floodplain management criteria required by 44 CFR 60.3, are the minimum that are required. They should not be construed to mean that the community must change any existing ordinances that are more stringent in their floodplain management requirements. The community may at any time enact stricter requirements of its own or pursuant to policies established by other Federal, State, or regional entities. These flood hazard determinations are used to meet the floodplain management requirements of the NFIP and are used to calculate the appropriate flood insurance premium rates for new buildings built after the FIRM and FIS report become effective.
The communities affected by the flood hazard determinations are provided in the tables below. Any request for reconsideration of the revised flood hazard information shown on the Preliminary FIRM and FIS report that satisfies the data requirements outlined in 44 CFR 67.6(b) is considered an appeal. Comments unrelated to the flood hazard determinations also will be considered before the FIRM and FIS report become effective.
Use of a Scientific Resolution Panel (SRP) is available to communities in support of the appeal resolution process. SRPs are independent panels of experts in hydrology, hydraulics, and other pertinent sciences established to review conflicting scientific and technical data and provide recommendations for resolution. Use of the SRP only may be exercised after FEMA and local communities have been engaged in a collaborative consultation process for at least 60 days without a mutually acceptable resolution of an appeal. Additional information regarding the SRP process can be found online at
The watersheds and/or communities affected are listed in the tables below. The Preliminary FIRM, and where applicable, FIS report for each community are available for inspection at both the online location
Federal Emergency Management Agency, DHS.
Notice.
Flood hazard determinations, which may include additions or modifications of Base Flood Elevations (BFEs), base flood depths, Special Flood Hazard Area (SFHA) boundaries or zone designations, or regulatory floodways on the Flood Insurance Rate Maps (FIRMs) and where applicable, in the supporting Flood Insurance Study (FIS) reports have been made final for the communities listed in the table below.
The FIRM and FIS report are the basis of the floodplain management measures that a community is required either to adopt or to show evidence of having in effect in order to qualify or remain qualified for participation in the Federal Emergency Management Agency's (FEMA's) National Flood Insurance Program (NFIP). In addition, the FIRM and FIS report are used by insurance agents and others to calculate appropriate flood insurance premium rates for buildings and the contents of those buildings.
The date of March 23, 2021 has been established for the FIRM and, where applicable, the supporting FIS report showing the new or modified flood hazard information for each community.
The FIRM, and if applicable, the FIS report containing the final flood hazard information for each community is available for inspection at the respective Community Map Repository address listed in the tables below and will be available online through the FEMA Map Service Center at
Rick Sacbibit, Chief, Engineering Services Branch, Federal Insurance and Mitigation Administration, FEMA, 400 C Street SW, Washington, DC 20472, (202) 646-7659, or (email)
The Federal Emergency Management Agency (FEMA) makes the final determinations listed below for the new or modified flood hazard information for each community listed. Notification of these changes has been published in newspapers of local circulation and 90 days have elapsed since that publication. The Deputy Associate Administrator for Insurance and Mitigation has resolved any appeals resulting from this notification.
This final notice is issued in accordance with section 110 of the Flood Disaster Protection Act of 1973, 42 U.S.C. 4104, and 44 CFR part 67. FEMA has developed criteria for floodplain management in floodprone areas in accordance with 44 CFR part 60.
Interested lessees and owners of real property are encouraged to review the new or revised FIRM and FIS report available at the address cited below for each community or online through the FEMA Map Service Center at
The flood hazard determinations are made final in the watersheds and/or communities listed in the table below.
Federal Emergency Management Agency, DHS.
Notice.
This notice lists communities where the addition or modification of Base Flood Elevations (BFEs), base flood depths, Special Flood Hazard Area (SFHA) boundaries or zone designations, or the regulatory floodway (hereinafter referred to as flood hazard determinations), as shown on the Flood Insurance Rate Maps (FIRMs), and where applicable, in the supporting Flood Insurance Study (FIS) reports, prepared by the Federal Emergency Management Agency (FEMA) for each community, is appropriate because of new scientific or technical data. The FIRM, and where applicable, portions of the FIS report, have been revised to reflect these flood hazard determinations through issuance of a Letter of Map Revision (LOMR), in accordance with Federal Regulations. The LOMR will be used by insurance agents and others to calculate appropriate flood insurance premium rates for new buildings and the contents of those buildings. For rating purposes, the currently effective community number is shown in the table below and must be used for all new policies and renewals.
These flood hazard determinations will be finalized on the dates listed in the table below and revise the FIRM panels and FIS report in effect prior to this determination for the listed communities.
From the date of the second publication of notification of these changes in a newspaper of local circulation, any person has 90 days in which to request through the community that the Deputy Associate Administrator for Insurance and Mitigation reconsider the changes. The flood hazard determination information may be changed during the 90-day period.
The affected communities are listed in the table below. Revised flood hazard information for each community is available for inspection at both the online location and the respective community map repository address listed in the table below. Additionally, the current effective FIRM and FIS report for each community are accessible online through the FEMA Map Service Center at
Submit comments and/or appeals to the Chief Executive Officer of the community as listed in the table below.
Rick Sacbibit, Chief, Engineering Services Branch, Federal Insurance and Mitigation Administration, FEMA, 400 C Street SW, Washington, DC 20472, (202) 646-7659, or (email)
The specific flood hazard determinations are not described for each community in this notice. However, the online location and local community map repository address where the flood hazard determination information is available for inspection is provided.
Any request for reconsideration of flood hazard determinations must be submitted to the Chief Executive Officer of the community as listed in the table below.
The modifications are made pursuant to section 201 of the Flood Disaster Protection Act of 1973, 42 U.S.C. 4105, and are in accordance with the National Flood Insurance Act of 1968, 42 U.S.C. 4001
The FIRM and FIS report are the basis of the floodplain management measures that the community is required either to adopt or to show evidence of having in effect in order to qualify or remain qualified for participation in the National Flood Insurance Program (NFIP).
These flood hazard determinations, together with the floodplain management criteria required by 44 CFR 60.3, are the minimum that are required. They should not be construed to mean that the community must change any existing ordinances that are more stringent in their floodplain management requirements. The community may at any time enact stricter requirements of its own or pursuant to policies established by other Federal, State, or regional entities. The flood hazard determinations are in accordance with 44 CFR 65.4.
The affected communities are listed in the following table. Flood hazard determination information for each community is available for inspection at both the online location and the respective community map repository address listed in the table below. Additionally, the current effective FIRM and FIS report for each community are accessible online through the FEMA Map Service Center at
Office of Community Planning and Development, HUD.
Implementation notice for the pilot recovery housing program, including allocations and applicable rules, waivers, and alternative requirements.
This notice describes the program rules, waivers, and alternative requirements that apply to $25,000,000 for activities authorized under the SUPPORT for Patients and Communities Act, entitled Pilot Program to Help Individuals in Recovery From a Substance Use Disorder Become Stably Housed, herein referred to as the Recovery Housing Program, or RHP. This pilot program authorizes assistance to grantees (states and the District of Columbia) to provide stable, temporary housing to individuals in recovery from a substance use disorder. The assistance is limited, per individual, to a period of not more than 2 years or until the individual secures permanent housing, whichever is earlier. The funds for fiscal year 2020 allocations described in this notice were made available by the Further Consolidated Appropriations Act, 2020, which was signed by President Trump on December 20, 2019. The SUPPORT Act requires funds appropriated or made available for the RHP be treated as community development block grant (CDBG) funds under the Housing and Community Development Act of 1974 (HCD Act), unless otherwise provided or modified by waivers and alternative requirements. The SUPPORT Act also authorizes the Secretary to waive or specify alternative requirements to any provision of the HCD Act, except for requirements related to fair housing, nondiscrimination, labor standards, the environment, and requirements that activities benefit persons of low- and moderate-income. This notice describes applicable waivers and alternative requirements to the CDBG program requirements which have been found to be necessary to expedite or facilitate the use of RHP funds.
Jessie Handforth Kome, Director, Office of Block Grant Assistance, Community Planning and Development, Department of Housing and Urban Development, 451 7th Street SW, Room 7282, Washington, DC 20410, telephone number 202-708-3587. Persons with hearing or speech impairments may access this number via TTY by calling the Federal Relay Service at 800-877-8339. Facsimile inquiries may be sent to Ms. Kome at 202-708-0033. (Except for the “800” number, these telephone numbers are not toll-free). Email inquiries may be sent to
This pilot program would support individuals in recovery onto a path to self-sufficiency. By providing stable housing to support recovery, RHP aims to support efforts for independent living. More specifically, RHP would provide the funds to develop housing or maintain housing for individuals. To maximize and leverage these resources, grantees
Section 8071 of the SUPPORT Act (Section 8071) required funds appropriated or made available for the Recovery Housing Program be treated as community development block grant (CDBG) funds under title I of the Housing and Community Development Act of 1974, unless otherwise provided in Section 8071 or modified by waivers and alternative requirements. The SUPPORT Act authorizes the Secretary to waive or specify alternative requirements to any provision of title I of the HCD Act, except for requirements related to fair housing, nondiscrimination, labor standards, the environment, and requirements that activities benefit persons of low- and moderate-income. This notice describes applicable waivers and alternative requirements to the CDBG program requirements at title I of the HCD Act and 24 CFR part 570 which have been found to be necessary to expedite or facilitate the use of RHP funds.
The Further Consolidated Appropriations Act, 2020 (Pub. L. 116-94) (“FY 20 Appropriations Act”) made available $25,000,000 for activities authorized under Section 8071 and required the Secretary to allocate the funds based on the percentages shown in Table 1 of the
The 25 grantees include 24 states and the District of Columbia. For grants authorized by the SUPPORT for Patients and Communities Act (Pub. L. 115-271, approved Oct. 24, 2018) (“SUPPORT Act”), the term “state” includes any state as defined in section 102 of the Housing and Community Development Act of 1974 (42 U.S.C. 5302) (HCD Act) and the District of Columbia. As required by the SUPPORT Act, HUD allocated funds only to states with an age-adjusted rate of drug overdose deaths above the national overdose mortality rate, according to the Centers for Disease Control and Prevention.
The SUPPORT Act authorized the Secretary to use up to 2 percent of the funds made available under the FY 20 Appropriations Act for technical assistance to grantees. Therefore, 2 percent ($500,000) will be used by the Secretary to provide technical assistance to grantees. The remaining $24,500,000 was allocated following the percentages shown in Table 1 of the Formula Notice, pursuant to the FY 20 Appropriations Act.
RHP Grantees must submit an RHP Action Plan, including the Form SF-424, application for federal funds, by August 16, 2021. The RHP action plan must meet the specific requirements identified in this notice under section II.H.
If a grantee receiving an allocation of funds under this notice fails to submit
The SUPPORT Act requires amounts appropriated or amounts otherwise made available to grantees be treated as though such funds are CDBG funds under the HCD Act. Except as provided in Section 8071 or in this notice, the statutory and regulatory provisions governing the CDBG program shall apply to grantees.
The SUPPORT Act authorizes the Secretary to waive or specify alternative requirements to any provision of title I of the HCD Act necessary to facilitate or expedite the use of RHP funds, except for requirements related to fair housing, nondiscrimination, labor standards, the environment, and requirements that activities benefit persons of low- and moderate-income.
As required by the SUPPORT Act, the Secretary has determined that the statutory and regulatory waivers and alternative requirements described in this notice are necessary to expedite or facilitate the use of RHP funds.
These waivers and alternative requirements are only applicable to the use of RHP funds and do not apply to CDBG funds used in conjunction with RHP funds or other sources of CDBG funds (
Section 8071(g) provides for purposes of Section 8071, the term “state” includes the District of Columbia and any state as defined in section 102 of the HCD Act (42 U.S.C. 5302).
Under the HCD Act, the District of Columbia is a CDBG entitlement grantee, not a grantee under the state CDBG program. Therefore, only for the District of Columbia, HUD is waiving the regulations in 24 CFR part 570, subpart I and imposing the requirements in 24 CFR 570, subparts A, C, D, J, K, and O, to permit the District of Columbia to be subject to the entitlement CDBG regulations for its RHP grant, except as modified by the waivers and alternative requirements in this notice.
Pursuant to section 102(c) of the HCD Act, the chief executive officer of a state or a unit of general local government may designate one or more public agencies to undertake activities assisted by RHP funds. Given that RHP is subject to CDBG program requirements, HUD recommends involving administrators with experience with CDBG funds, the Disaster Recovery Grant Reporting (DRGR) system, and other federally funded programs supporting recovery from a substance use disorder. If the administrator role is shared between multiple agencies (such as those described in Section II.D below), HUD recommends that these agencies enter into interagency agreements that describe how they will share responsibilities for grant administration.
The SUPPORT Act requires all grantees to distribute RHP funds giving priority to entities with the greatest need and ability to deliver effective assistance in a timely manner. Grantees must use RHP funds in a manner that reflects these priorities. Grantees are required to include a description of how they will comply with this requirement in their RHP Action Plans, as described in section II.H. of this notice.
The waivers and alternative requirements in this section permit a state grantee to use its RHP funds to act directly, subject to state law and RHP requirements, to carry out activities through employees, contractors, and subrecipients in all geographic areas within its jurisdiction, including entitlement areas and tribal areas.
HUD has determined that these waivers and alternative requirements will facilitate and streamline the use of RHP funds, particularly by nonprofits and other subrecipients that currently administer residential programs for persons in recovery from a substance use disorder. Permitting states to carry out activities directly will help the state to focus RHP funds towards projects that complement (but do not supplant) federal substance abuse-related assistance (
Requirements at 42 U.S.C. 5306(d) and 24 CFR 570.480(g) are waived to the extent necessary to allow a state to use its RHP grant to directly carry out activities eligible under this notice, rather than only distribute its RHP funds to units of general local government. For example, a state may also directly fund a public or private nonprofit entity as a subrecipient, may procure a for-profit entity to carry out the RHP activities, or may use state employees to administer RHP-funded activities. The waiver and alternative requirement do not apply to the District of Columbia, which can directly carry out activities under requirements applicable to entitlement CDBG grantees.
A state's proposal to act directly and to distribute or use RHP funds in entitlement areas must be published for public comment in its RHP action plan in accordance with its citizen participation plan. States carrying out projects in tribal areas through employees, contractors, or subrecipients must obtain the consent of the Indian tribe with jurisdiction over the tribal area.
While states may carry out RHP activities directly, states are not required to carry out activities directly and may use the existing authority under the HCD Act and state CDBG program regulations to develop a method of distribution (MOD) to distribute RHP funds to units of general local government, Indian tribes, and tribally-designated housing entities. At the state's discretion, the units of general local government eligible for RHP funds may include those participating in the Entitlement CDBG program.
To facilitate the use of RHP funds, HUD is granting the following waiver
i.
ii.
iii.
iv.
v.
vi.
vii.
viii.
ix.
The SUPPORT Act contains two requirements that modify existing CDBG requirements. Pursuant to Section
In addition, to implement the requirements of the SUPPORT Act, HUD is limiting the eligible activities that grantees may carry out with RHP funds to those activities described in section II.L. For example, although allowed in the state CDBG program, a planning-only grant is not an eligible RHP activity.
HUD is also clarifying the inapplicability of CDBG requirements that conflict with the SUPPORT Act and imposing waivers and alternative requirements to modify the applicability of requirements related to administrative, management, planning, and technical assistance costs.
i.
ii.
iii.
To facilitate the use of RHP funds to address the need for stable, temporary housing for individuals in recovery from a substance use disorder in all areas of a grantee's jurisdiction, 24 CFR 570.480(g) is waived to the extent necessary for a state to carry out activities in all areas of its jurisdiction and to distribute RHP funds to entitlement and non-entitlement units of general local government, Indian tribes, or tribally designated housing entities within all areas of its jurisdiction. Furthermore, HUD is waiving 24 CFR 570.486(c) to allow a state to use RHP funds for an activity located in an entitlement jurisdiction without a contribution from the entitlement jurisdiction. Indian tribes that receive RHP funds from a state grantee must comply with the Indian Civil Rights Act (Title II of the Civil Rights Act of 1968, 25 U.S.C. 1301
Under the waiver and alternative requirements described in section II.D., states may carry out activities in all areas of its jurisdiction by carrying out activities directly or by distributing RHP funds using a method of distribution. At the state's discretion, the eligible units of general local government for RHP funds may include those participating in the Entitlement CDBG program.
For the purpose of the District of Columbia, the definition of subrecipients at 24 CFR 570.500(c) is also modified to expressly include Indian tribes. Indian tribes that receive RHP funding from a grantee must comply with the Indian Civil Rights Act. This alternative requirement provides the District of Columbia with requirements consistent with those applicable to the state grantees under RHP.
To expedite and facilitate the use of RHP grant funds for eligible activities authorized by the SUPPORT Act, HUD is imposing the following waivers and alternative requirements:
i. The District of Columbia and its subrecipients are subject to the provisions of 24 CFR 570.200(h) for pre-award costs, except HUD waives 24 CFR 570.200(h) to require the effective date of the RHP grant agreement to be the date of HUD's execution of the RHP grant agreement. HUD is waiving 24 CFR 570.200(h)(1)(i)-(vi) and as an alternative requirement, the District of Columbia may reimburse pre-award costs in an amount not to exceed 25 percent of the grant, provided that the District of Columbia has described the pre-award costs in its RHP Action Plan and the costs comply with the RHP requirements, including applicable requirements at 2 CFR part 200 and Environmental Review Procedures stated in 24 CFR part 58.
ii. The provisions at 24 CFR 570.489(b) are modified to permit a state grantee to charge allowable pre-agreement costs incurred by itself, its recipients, or subrecipients to the RHP grant and require that all pre-agreement costs comply with RHP program requirements, including applicable requirements at 2 CFR part 200 and Environmental Review Procedures stated in 24 CFR part 58. Additionally, a grantee must include a description of pre-agreement costs to be reimbursed with RHP funds in its RHP Action Plan.
Grantees must complete the following steps to access RHP grant funds:
1. The grantee develops the proposed RHP Action Plan and publishes it in accordance with the grantee's adopted citizen participation plan (CPP) it has established in accordance with 24 CFR 91.105 or 24 CFR 91.115 and this Notice.
2. The grantee provides opportunity for public comment and public hearings, if any, on the RHP action plan and responds to such comments in accordance with its CPP. The CPP may be amended in accordance with 24 CFR 91.105(a)(3) and 91.115(a)(3) concurrently to address RHP funds, and to allow no less than 15 calendar days of public comment and encourage participation by organizations interested in residential recovery programs for individuals with substance use disorder.
3. The grantee considers and summarizes public comments received in its RHP Action Plan and attaches a summary to its RHP Action Plan, which must include a summary of any comments not accepted and the reasons therefore;
4. The grantee submits its final RHP Action Plan to HUD via DRGR by August 16, 2021, which includes Standard Form 424 (SF-424), SF-424D (HUD collects these assurances for both construction and non-construction activities), and certifications;
5. HUD will review the RHP Action Plan in accordance with 24 CFR 91.500;
6. Once HUD accepts the RHP Action Plan, HUD and the grantee will enter into a grant agreement. HUD transmits the RHP grant agreement to the grantee, and the grantee signs and returns the grant agreement for HUD's signature;
7. HUD establishes the line of credit that can be accessed through DRGR; and
8. The grantee may draw down funds from the line of credit after the Responsible Entity completes applicable environmental reviews(s) pursuant to 24 CFR part 58 and, as applicable, receives from HUD or the state the Authority to Use Grant Funds (AUGF) form and certification.
HUD is granting the following waivers and alternative requirements below for a grantee's RHP Action Plan to expedite the use of RHP grants. HUD is waiving 42 U.S.C. 5304(a)(1), 42 U.S.C. 5304(m), 42 U.S.C. 5306(a)(1), 42 U.S.C. 5306(d)(2)(C)(iii) 24 CFR 570.485, and 24 CFR 570.304 to the extent necessary to require a grantee to submit an RHP Action Plan separately from the consolidated plan covering other Community Planning and Development Programs, including CDBG. Under this waiver and alternative requirement, grantees do not need to reference the RHP program in the consolidated plan submitted via HUD's Integrated Disbursement and Information System (IDIS), unless the information included references other HUD programs. For example, if joint public comment and hearings are conducted by the grantee for RHP and CDBG, those meeting documents and comments may be uploaded for both RHP in DRGR and CDBG in IDIS. The RHP Action Plan will be separately submitted in DRGR and will be reviewed by HUD separately from any plan submissions made for other programs reported in IDIS. A grantee may prepare a single RHP Action Plan, including objectives and outcome measures, for its RHP allocation. In addition, RHP Action Plans may be submitted without updating the current consolidated plan's assessment, analysis, and strategy.
This waiver does not amend the CPP requirements or 24 CFR 570.486. HUD is imposing 24 CFR 91.505, as modified by this notice, to make the RHP Action Plan subject to the process provided for substantial amendments in a grantee's CPP. The CPP may be amended concurrently by grantees to allow no less than 15 calendar days of RHP public comment and to encourage participation by organizations interested in residential recovery programs for individuals with a substance use disorder. In addition to CPP requirements, HUD strongly encourages grantees to seek feedback from their Single State Agency (SSA), the state agency responsible for administering SABG and SOR grants from SAMHSA. The directory for SSA contacts for each state and the District of Columbia can be found at
A grantee's RHP Action Plan must include the proposed use of all funds, criteria for eligibility, and how the use addresses the purpose of RHP funds to provide stable, temporary housing to persons in recovery from a substance use disorder. The RHP Action Plan must include the following:
iii.
iv.
v.
(1) Awards to Communities by Method of Distribution (this element applies to grantees other than the District of Columbia). A statement of whether the grantee will distribute all or part of the RHP funds through a method of distribution and, if so, a description of the grantee's method for distributing RHP funds to any entitlement and non-entitlement units of general local government, Indian tribes, or tribally designated housing entities.
(2) Activities carried out directly. A statement of whether the grantee will use all or part of its RHP funds for activities to be carried out directly by the grantee, as described in section II.D., and, if so, a description of the eligible activities as described in section II.L. that will be carried out directly by the grantee. A grantee may carry out the activity with its own staff, procure a for-profit entity, or make a grant to a subrecipient.
(3) Eligible Subrecipients. A description of the types of entities or organizations that are eligible to become subrecipients. A grantee may choose to make public or private nonprofit entities eligible for RHP funding. A grantee may set other criteria related to the potential subrecipient's existing services, unmet need, experience, and past performance.
(4) Criteria for evaluation of applications and applicants. The grantee shall describe all criteria used to make funding choices, and describe the relative importance of the criteria, where applicable. This is required for all funding decisions, including items (1) and (2), and eligibility decisions under item (3) above. The description of the criteria must provide sufficient information so that applicants will be able to comment on it, know what criteria and information their application will be judged on, and be able to prepare responsive applications. The criteria must include a description of how the grantee will give priority to:
(a) Entities with the greatest need. A grantee may solicit qualitative and/or quantitative information from applicants to demonstrate a need for the activities being proposed for RHP funding. A grantee shall consider both the projected demand for the proposed temporary recovery housing solution and the financial need for assistance.
(b) Entities with the ability to deliver effective assistance in a timely manner. For example, a grantee may consider an applicant's prior performance related to administering prior federal awards and/or collaborating with other federal programs, including both HUD and HHS programs.
vi.
(1) Individual in recovery.
(2) Substance use disorder.
A grantee's definitions cannot exclude individuals with certain types of substance issues or co-occurring disabilities, or exclusively target a specific type of substance use disorder.
vii.
(1)
(2)
viii.
ix.
x.
xi.
xii.
(1) The grantee certifies that it has in effect and is following a residential anti-displacement and relocation assistance plan in connection with any activity assisted with funding under the RHP program. The grantee certifies that it will comply with the residential anti-displacement and relocation assistance plan, relocation assistance, and one-for-one replacement housing requirements of section 104(d) of the Housing and Community Development Act of 1974, as amended (42 U.S.C. 5304(d)) and implementing regulations at 24 CFR part 42, as applicable, except where waivers or alternative requirements are provided.
(2) The grantee certifies its compliance with restrictions on lobbying required by 24 CFR part 87, together with disclosure forms, if required by part 87.
(3) The grantee certifies that the RHP Action Plan is authorized under state and local law (as applicable) and that the grantee, and any entity or entities designated by the grantee, and any contractor, subrecipient, or designated public agency carrying out an activity with RHP funds, possess(es) the legal authority to carry out the program for which it is seeking funding, in accordance with applicable HUD regulations and the grant requirements. The grantee certifies that activities to be undertaken with RHP funds are consistent with its RHP Action Plan.
(4) The grantee certifies that it will comply with the acquisition and relocation requirements of the Uniform Relocation Assistance and Real Property Acquisition Policies Act of 1970, as amended (42 U.S.C. 4601
(5) The grantee certifies that it will comply with section 3 of the Housing and Urban Development Act of 1968 (12 U.S.C. 1701u) and implementing regulations at 24 CFR part 135.
(6) The grantee certifies that it is following a citizen participation plan adopted pursuant to 24 CFR 91.115 or 91.105 (as imposed in notices for its RHP grant). Also, each unit of general local government receiving RHP assistance from a state must comply with the citizen participation requirements of 24 CFR 570.486(a)(1) through (a)(7) for proposed and actual uses of RHP funding (except as provided in
(7) The grantee certifies that it is complying with each of the following criteria: (1) Funds will be used solely for allowable activities to provide individuals in recovery from a substance use disorder stable, temporary housing for a period of not more than 2 years or until the individual secures permanent housing, whichever is earlier; (2) with respect to activities expected to be assisted with RHP funds, the RHP Action Plan has been developed so as to give the maximum feasible priority to activities that will benefit low- and moderate-income individuals and families; (3) the aggregate use of RHP funds shall principally benefit low- and moderate-income families in a manner that ensures the grant amount is expended for activities that benefit such persons; and (4) the grantee will not attempt to recover any capital costs of public improvements assisted with RHP grant funds, by assessing any amount against properties owned and occupied by persons of low- and moderate-income, including any fee charged or assessment made as a condition of obtaining access to such public improvements, unless: (a) RHP grant funds are used to pay the proportion of such fee or assessment that relates to the capital costs of such public improvements that are financed from revenue sources other than RHP; or (b) for purposes of assessing any amount against properties owned and occupied by persons of moderate income, the grantee certifies to the Secretary that it lacks sufficient RHP funds (in any form, including program income) to comply with the requirements of clause (a).
(8) The grantee certifies that the grant will be conducted and administered in conformity with title VI of the Civil Rights Act of 1964 (42 U.S.C. 2000d), the Fair Housing Act (42 U.S.C. 3601-3619), and implementing regulations, and that it will affirmatively further fair housing.
(9) The grantee certifies that it has adopted and is enforcing the following policies, and, in addition, must certify that it will require local governments that receive grant funds to certify that they have adopted and are enforcing: (1) A policy prohibiting the use of excessive force by law enforcement agencies within its jurisdiction against any individuals engaged in nonviolent civil rights demonstrations; and (2) a policy of enforcing applicable state and local laws against physically barring entrance to or exit from a facility or
(10) The grantee certifies that the grant will be conducted and administered in conformity with the requirements of the Religious Freedom Restoration Act (42 U.S.C. 2000bb) and 24 CFR 5.109, allowing the full and fair participation of faith-based entities.
(11) The grantee certifies that it (and any subrecipient or administering entity) currently has or will develop and maintain the capacity to carry out RHP eligible activities in a timely manner and that the grantee has reviewed the requirements of the grant.
(12) The grantee certifies that its activities concerning lead-based paint will comply with the requirements of HUD's lead-based paint rules (Lead Disclosure; and Lead Safe Housing (24 CFR part 35)), and EPA's lead-based paint rules (
(13) The grantee certifies that it will comply with environmental review procedures and requirements at 24 CFR part 58.
(14) The grantee certifies that it will comply with applicable laws.
As previously described, HUD is waiving Section 104(a)-(c) (42 U.S.C. 5304(a)-(c)), 24 CFR 570.304, and 24 CFR 570.485 so that RHP funds are not required to be consistent with a grantee's consolidated plan because grantees may not have considered the needs associated with this special purpose funding when developing their current consolidated plan, strategic plan, and needs assessment. In conjunction, 42 U.S.C. 5304(e), to the extent that it would require HUD to annually review grantee performance under the consistency criteria, is also waived.
HUD is waiving the timely expenditure and obligation requirements of 42 U.S.C. 5304(e) and 24 CFR 570.494 and 570.902 and imposing the following alternative requirement: RHP funds will not be included in determining compliance with the requirements of 24 CFR 570.494 and 570.902. The RHP program is subject to the following requirements regarding the timely use of funds:
i.
ii.
RHP funds may only assist individuals in recovery from a substance use disorder for a cumulative period of not more than 2 years or until the individual secures permanent housing, whichever is earlier.
Although the SUPPORT Act provides that RHP funds are treated as CDBG funds, not all CDBG eligible activities in section 105 of the HCD Act (42 U.S.C. 5305(a)) satisfy the purpose of RHP funds to provide stable, temporary housing to individuals in recovery from a substance use disorder. HUD is imposing the following waiver and alternative requirement to modify section 105(a) for the statutory purpose described in the SUPPORT Act.
The use of RHP funds is limited to the following eligible activities.
i.
ii.
iii.
iv.
v.
vi.
vii.
viii.
ix.
x.
xi.
xii.
To facilitate the use of the RHP funds, the following waivers and alternative requirements modify several national objective criteria to be consistent with the purpose of Section 8071. All RHP activities must comply with the Limited Clientele National Objective as modified by this notice.
(i)
(ii)
(iii)
Income generated from the use of RHP funds is subject to 42 U.S.C. 5304(j), 24 CFR 570.489(e) (states), and 24 CFR 570.500 and 570.504 (District of Columbia) regarding program income. To expedite or facilitate the use of RHP funds, HUD is issuing the following alternative requirements to program income provisions at 24 CFR 570.489(e) and 24 CFR 570.504 as described below.
i. Definition of Program income. HUD is modifying 24 CFR 570.489(e)(1) (states) to modify the definition of “Program income” to include gross income received by subrecipients that was generated from the use of RHP funds. In addition, HUD is modifying 24 CFR 570.489(e)(2) (states) and 24 CFR 570.500(a)(4) (District of Columbia) to exclude from program income any income received and retained by a nonprofit operating within the grantee's jurisdiction whose primary mission includes serving individuals in recovery from substance use disorder. If a grantee chooses to require the nonprofit to return income generated from the use of RHP funds, the income returned by the nonprofit to the grantee would be defined as program income.
ii. Treatment of program income.
(1) Prior to closeout of an RHP grant, except as described in (2) below, a grantee must transfer program income to another open RHP grant or its annual CDBG program. Program income received by a grantee after closeout of all RHP grants must be transferred to the grantee's annual CDBG award. Once transferred to the annual program, the
(2) Grantees other than the District of Columbia may require that any subrecipient pay RHP program income to the state unless the exception in 24 CFR 570.489(e)(3)(ii)(A) applies. The provisions of 24 CFR 570.489(e)(3)(ii)(A) are modified to add an additional requirement that the state must require a unit of general local government to return to the state program income generated from the use of RHP funds, if the program income will not be used to continue the RHP-eligible activity from which it was derived. Program income returned to the state must be used for additional RHP-eligible activities pursuant to a grantee's RHP Action Plan or transferred to the state's annual CDBG program as described in (1) above.
iii. All RHP program income and assets shall be treated as program income and assets of the grantee's annual CDBG program at the earlier of grantee closeout or the date the grantee's RHP appropriation account is canceled pursuant to section II.P. of this notice.
iv. Revolving loan funds prohibited. Because of the requirement to transfer program income to the annual CDBG grant program, grantees are prohibited from establishing revolving funds with program income generated from the use of RHP funds.
General reporting requirements for grantees can be found at 24 CFR 570.507 (District of Columbia) and 24 CFR 570.491 (state).
HUD is facilitating the use of the RHP funds by implementing reporting and review requirements specific to the purpose of RHP. HUD will use grantee reports to oversee compliance with RHP grant requirements and perform risk analysis that may inform HUD's monitoring plans. The following reporting requirements apply to all RHP grants:
i. HUD requires each grantee to annually review and report on the use of RHP funds using the online DRGR system. To the extent feasible, HUD will configure DRGR performance measures to fit the purposes of the RHP program and the eligible activities described in section II.L. The annual performance report must include a comparison of the proposed versus actual outcomes for each outcome measure included in the RHP Action Plan. The grantee must explain, if applicable, why progress was not made toward meeting goals and objectives. The grantee must enter information in DRGR about the uses of RHP funds in sufficient detail to permit HUD's review of grantee data and allow HUD to assess compliance and risk. Required information includes, but is not limited to: The project name; activity; location; national objective; funds budgeted and expended; the funding source and total amount of any non-RHP funds expended for the same activity; numbers of properties and housing units; beginning and ending dates of activities; and numbers of low- and moderate-income persons or households benefiting from the activities.
ii. The annual performance report will include a financial report(s). Each grantee will enter information into DRGR on its obligations and expenditures, available cash, program income, and other financial information for the use of RHP funds as required by HUD. Grantees must use the DRGR system to generate and submit a form SF-425 federal financial report.
iii. Each RHP grantee must submit an annual performance report (including financial reports) as described in this notice no later than 30 days following the end of each federal fiscal year, beginning 30 days after the close of the first federal fiscal year in which HUD and the grantee sign the RHP grant agreement and continuing until 30 days after the end of the last fiscal year in which the grant is open or fiscal year 2027, whichever comes earlier. HUD may extend the date of the first report for grant agreements signed by HUD and the grantee within 30 days of the end of the federal fiscal year. Reports must be submitted using HUD's DRGR system. HUD will provide grantees with guidance on how to submit performance reports in DRGR.
iv. Before submitting the performance reports to HUD, the grantee must provide reasonable notice to citizens and make the full annual performance report in accordance with 24 CFR 91.105(d) and 24 CFR 91.115(d), including the SF-425 federal financial report and the Consolidated Annual Performance and Evaluation Report, available for citizen comment for a period not less than 15 days. Performance reports must be available to the public in compliance with 24 CFR 91.105(d) and 24 CFR 91.115(d), including availability in a form accessible to persons with disabilities, upon request (DRGR generates a version of the report that the grantee can download, save, and post on the grantee's website or share electronically).
v. HUD shall review the performance report and determine whether it is satisfactory. If a satisfactory report is not submitted in a timely manner, HUD may suspend access to RHP funds until a satisfactory report is submitted, or may withdraw and reallocate funding if HUD determines, after notice and opportunity for a hearing, that the grantee will not submit a satisfactory report.
Grantees must expend all RHP funds within the period of performance established by the RHP grant agreement. HUD is establishing a period of performance that begins on the date the grant agreement authorizes the grantee to begin to use RHP funds and ends on September 1, 2027, which is 29 days before the RHP appropriation account is cancelled in accordance with 31 U.S.C. 1552(a), 24 CFR 570.200(k), and 24 CFR 570.480(h). Grant funds are not available for obligation and expenditure after the period of performance.
HUD will close out RHP grants in accordance with the 24 CFR 570.489(o), which imposes the closeout requirements of 2 CFR 200.343. For the District of Columbia, to facilitate the use of grant funds in a timely manner, HUD is waiving the CDBG Entitlement regulation at 24 CFR 570.509 and imposing an alternative requirement that HUD will close out the RHP grant for the District of Columbia in accordance with grant closeout requirements of 2 CFR 200.343. This approach will allow for a single closeout approach for all RHP grantees.
Under the regulation at 2 CFR 200.343(a), the deadline for all grantees to submit financial, performance, and other reports is 90 calendar days after the end date of the period of performance or December 1, 2027.
Before HUD and the grantee enter a closeout agreement, the grantee must transfer all RHP program income and assets to its annual CDBG program, as discussed in section II.N. above.
The information collection requirements in this notice have been approved by the Office of Management and Budget (OMB) under the Paperwork Reduction Act of 1995 (44 U.S.C. 3501-3520) and assigned OMB Control Number 2506-0165. In accordance with the Paperwork Reduction Act, HUD may not conduct or sponsor, and a person is not required to respond to, a collection of information unless the collection displays a currently valid OMB control number.
The Catalog of Federal Domestic Assistance numbers for RHP grants under the SUPPORT Act are 14.218 (Community Development Block Grants/Entitlement Grants), 14.225 (Community Development Block Grants/Special Purpose Grants/Insular Areas, and 14.228 (Community Development Block Grants/State's Program and Non-Entitlement Grants in Hawaii) (formerly CDBG Grant/Small Cities Program).
A Finding of No Significant Impact (FONSI) with respect to the environment has been made in accordance with HUD regulations at 24 CFR part 50, which implement section 102(2)(C) of the National Environmental Policy Act of 1969 (42 U.S.C. 4332(2)(C)). During periods in which HUD's offices are closed to the public due to coronavirus, the FONSI will be available online at
Office of the Assistant Secretary for Public and Indian Housing (PIH), Department of Housing and Urban Development (HUD).
Notice of extension of application due date.
On July 15, 2020, HUD published a notice (“Notice”) implementing the Housing Choice Voucher (HCV) mobility demonstration (“demonstration”) authorized by the Consolidated Appropriations Act, 2019. Through this Notice, HUD is making available up to $50,000,000 to participating Public Housing Authorities (PHAs) throughout the country to implement housing mobility programs by offering mobility-related services to increase the number of voucher families with children living in opportunity areas. The Notice established October 13, 2020, as the deadline date for submission of PHA applications and a second
The new application deadline date for the HCV Mobility Demonstration Program is February 1, 2021.
Rebecca Primeaux, Director, Housing Voucher Management and Operations Division, Department of Housing and Urban Development, 451 Seventh Street SW, Room 4214, Washington, DC 20410, telephone number (202) 708-1112. (This is not a toll-free number.) Individuals with hearing or speech impediments may access this number via TTY by calling the Federal Relay during working hours at 800-877-8339. (This is a toll-free number). HUD encourages submission of questions about the demonstration be sent to
On July 15, 2020 (85 FR 42890), HUD published its Notice implementing the HCV Mobility Demonstration, and established October 13, 2020, as the deadline date for the submission of applications. Through the Notice, HUD is making available approximately $50,000,000 for grants to Public Housing Authorities (PHAs) under a demonstration program authorized by statute. On October 8, 2020 (85 FR 63569), HUD published a
Today's
The lead agency shall be responsible for submitting the application to HUD, no later than February 1, 2021. Applications that are submitted after midnight on February 1, 2021, or which fail to include the required elements, will be ineligible for consideration by HUD.
HUD may extend the application deadline for any program if
Fish and Wildlife Service, Interior.
Notice of receipt of permit applications; request for comments.
We, the U.S. Fish and Wildlife Service, have received applications for permits to conduct activities intended to enhance the propagation or survival of endangered or threatened species under the Endangered Species Act. We invite the public and local, State, Tribal, and Federal agencies to comment on these applications. Before issuing any of the requested permits, we will take into consideration any information that we receive during the public comment period.
We must receive your written comments on or before December 28, 2020.
•
•
Nathan Rathbun, 612-713-5343 (phone);
The Endangered Species Act of 1973, as amended (ESA; 16 U.S.C. 1531
A recovery permit issued by us under section 10(a)(1)(A) of the ESA authorizes the permittee to conduct activities with endangered species for scientific purposes that promote recovery or for enhancement of propagation or survival of the species. Our regulations implementing section 10(a)(1)(A) for these permits are found at 50 CFR 17.22 for endangered wildlife species, 50 CFR 17.32 for threatened wildlife species, 50 CFR 17.62 for endangered plant species, and 50 CFR 17.72 for threatened plant species.
We invite local, State, and Federal agencies; Tribes; and the public to comment on the following applications:
Written comments we receive become part of the administrative record associated with this action. Before including your address, phone number, email address, or other personal identifying information in your comment, you should be aware that your entire comment—including your personal identifying information—may be made publicly available at any time. While you can request in your comment that we withhold your personal identifying information from public review, we cannot guarantee that we will be able to do so. Moreover, all submissions from organizations or businesses, and from individuals identifying themselves as representatives or officials of organizations or businesses, will be made available for public disclosure in their entirety.
If we decide to issue permits to any of the applicants listed in this notice, we will publish a notice in the
We publish this notice under section 10(c) of the Endangered Species Act of 1973, as amended (16 U.S.C. 1531
Department of the Interior.
Notice of availability.
In accordance with the Oil Pollution Act of 1990 (OPA); the National Environmental Policy Act of 1969 (NEPA); the Final Programmatic Damage Assessment Restoration Plan and Final Programmatic Environmental Impact Statement (Final PDARP/PEIS) and Record of Decision; and the Consent Decree, the Federal and State natural resource trustee agencies for the Louisiana Trustee Implementation Group (LA TIG) prepared the
Alternatively, you may request a CD of the final RP/EA #7 (see
Nanciann Regalado, via email at
On April 20, 2010, the mobile offshore drilling unit
The Trustees conducted the natural resource damage assessment (NRDA) for the DWH oil spill under the Oil Pollution Act of 1990 (OPA; 33 U.S.C. 2701
The DWH Trustees are:
• U.S. Department of the Interior (DOI), as represented by the National Park Service, U.S. Fish and Wildlife Service, and Bureau of Land Management;
• National Oceanic and Atmospheric Administration (NOAA), on behalf of the U.S. Department of Commerce;
• U.S. Department of Agriculture (USDA);
• U.S. Environmental Protection Agency (EPA);
• State of Louisiana Coastal Protection and Restoration Authority, Oil Spill Coordinator's Office, Department of Environmental Quality, Department of Wildlife and Fisheries, and Department of Natural Resources;
• State of Mississippi Department of Environmental Quality;
• State of Alabama Department of Conservation and Natural Resources and Geological Survey of Alabama;
• State of Florida Department of Environmental Protection and Fish and Wildlife Conservation Commission; and
• State of Texas: Texas Parks and Wildlife Department, Texas General Land Office, and Texas Commission on Environmental Quality.
On April 4, 2016, the United States District Court for the Eastern District of Louisiana entered a Consent Decree resolving civil claims by the Trustees against BP arising from the DWH oil spill:
As provided for in the Final PDARP/PEIS, TIGs may propose conceptual projects for funding of a planning phase (
RP/EA #7 provides the LA TIG's analysis of alternatives under the “Wetlands, Coastal, and Nearshore Habitats” restoration type and the “Birds” restoration type. Under the “Wetlands, Coastal, and Nearshore Habitats” restoration type, the selected alternatives include one project for E&D and two for construction. These alternatives are: (1) Bird's Foot Delta Hydrologic Restoration project (E&D), (2) Terrebonne Basin Ridge and Marsh Creation Project: Bayou Terrebonne Increment (construction), and (3) Grande Cheniere Ridge Marsh Creation (construction). Under the “Birds” restoration type, the LA TIG selected two conceptual projects to undergo E&D: (1) Isle au Pitre Restoration and (2) Terrebonne Houma Navigation Canal Island Restoration.
The documents comprising the Administrative Record for RP/EA #7 can be viewed electronically at
The authority for this action is the Oil Pollution Act of 1990 (33 U.S.C. 2701
International Trade Commission.
Notice.
Notice is hereby given that the U.S. International Trade Commission has received a complaint entitled
Lisa R. Barton, Secretary to the Commission, U.S. International Trade Commission, 500 E Street SW, Washington, DC 20436, telephone (202) 205-2000. The public version of the complaint can be accessed on the Commission's Electronic Document Information System (EDIS) at
General information concerning the Commission may also be obtained by accessing its internet server at United States International Trade Commission (USITC) at
The Commission has received a complaint and a submission pursuant to § 210.8(b) of the Commission's Rules of Practice and Procedure filed on behalf of Jaguar Land Rover Limited and Jaguar Land Rover North America, LLC on November 19, 2020. The complaint alleges violations of section 337 of the Tariff Act of 1930 (19 U.S.C. 1337) in the importation into the United States, the sale for importation, and the sale within the United States after importation of certain vehicle control systems, vehicles containing the same, and components thereof. The complaint names as respondents: Porsche AG of Germany; Porsche Cars North America, Inc., of Atlanta, GA; Automobili Lamborghini S.p.A. of Italy; Automobili Lamborghini America, LLC of Herndon, VA; Volkswagen AG of Germany;
Proposed respondents, other interested parties, and members of the public are invited to file comments on any public interest issues raised by the complaint or § 210.8(b) filing. Comments should address whether issuance of the relief specifically requested by the complainant in this investigation would affect the public health and welfare in the United States, competitive conditions in the United States economy, the production of like or directly competitive articles in the United States, or United States consumers.
In particular, the Commission is interested in comments that:
(i) Explain how the articles potentially subject to the requested remedial orders are used in the United States;
(ii) identify any public health, safety, or welfare concerns in the United States relating to the requested remedial orders;
(iii) identify like or directly competitive articles that complainant, its licensees, or third parties make in the United States which could replace the subject articles if they were to be excluded;
(iv) indicate whether complainant, complainant's licensees, and/or third party suppliers have the capacity to replace the volume of articles potentially subject to the requested exclusion order and/or a cease and desist order within a commercially reasonable time; and
(v) explain how the requested remedial orders would impact United States consumers.
Written submissions on the public interest must be filed no later than by close of business, eight calendar days after the date of publication of this notice in the
Persons filing written submissions must file the original document electronically on or before the deadlines stated above. Submissions should refer to the docket number (“Docket No. 3508”) in a prominent place on the cover page and/or the first page. (
Any person desiring to submit a document to the Commission in confidence must request confidential treatment. All such requests should be directed to the Secretary to the Commission and must include a full statement of the reasons why the Commission should grant such treatment.
This action is taken under the authority of section 337 of the Tariff Act of 1930, as amended (19 U.S.C. 1337), and of §§ 201.10 and 210.8(c) of the Commission's Rules of Practice and Procedure (19 CFR 201.10, 210.8(c)).
By order of the Commission.
In accordance with section 512(a)(1) of the Employee Retirement Income Security Act of 1974 (ERISA) and the provisions of the Federal Advisory Committee Act and its implementing regulations issued by the General Services Administration (GSA), the charter for the Advisory Council on Employee Welfare and Pension Benefit Plans is renewed.
The Advisory Council on Employee Welfare and Pension Benefit Plans shall advise the Secretary of Labor on technical aspects of the provisions of ERISA and shall provide reports and/or recommendations each year on its findings to the Secretary of Labor. The Council shall be composed of fifteen members appointed by the Secretary. Not more than eight members of the Council shall be of the same political party. Three of the members shall be representatives of employee organizations (at least one of whom shall be a representative of any organization members of which are participants in a multiemployer plan); three of the members shall be representatives of employers (at least one of whom shall be a representative of employers maintaining or contributing to multiemployer plans); three members shall be representatives appointed from the general public (one of whom shall be a person representing those receiving benefits from a pension plan); and there shall be one representative each from the fields of insurance, corporate trust, actuarial counseling, investment counseling, investment management, and accounting.
The Advisory Council will report to the Secretary of Labor. It will function solely as an advisory body and in compliance with the provisions of the Federal Advisory Committee Act, and its charter will be filed under the Act. For further information, contact
Notice.
The Department of Labor's (DOL) Employment and Training Administration (ETA) is soliciting comments concerning a proposed extension for the authority to conduct the information collection request (ICR) titled, “DOL-only Performance Accountability, Information, and Reporting System.” This comment request is part of continuing Departmental efforts to reduce paperwork and respondent burden in accordance with the Paperwork Reduction Act of 1995 (PRA).
Consideration will be given to all written comments received by January 25, 2021.
A copy of this ICR with applicable supporting documentation, including a description of the likely respondents, proposed frequency of response, and estimated total burden, may be obtained free by contacting Toquir Ahmed by telephone at (202) 693-3901 (this is not a toll-free number), TTY 1-877-889-5627 (this is not a toll-free number), or by email at
Submit written comments about, or requests for a copy of, this ICR by mail or courier to the U.S. Department of Labor, Office of Policy Development and Research, Room N5641, Employment and Training Administration, 200 Constitution Ave. NW, Washington, DC 20210; by email:
Toquir Ahmed by telephone at (202) 693-3901 (this is not a toll-free number) or by email at
DOL, as part of continuing efforts to reduce paperwork and respondent burden, conducts a pre-clearance consultation program to provide the general public and Federal agencies an opportunity to comment on proposed and/or continuing collections of information before submitting them to the Office of Management and Budget (OMB) for final approval. This program helps to ensure requested data can be provided in the desired format, reporting burden (time and financial resources) is minimized, collection instruments are clearly understood, and the impact of collection requirements can be properly assessed.
This Information Collection Request (ICR) seeks to revise the Department of Labor's (DOL) Employment and Training Administration's (ETA) information collection 1205-0521, DOL-only Performance Accountability, Information, and Reporting System.
This ICR is the product of a joint effort among the DOL offices responsible for the following programs: WIOA Adult, WIOA Dislocated Worker, WIOA Youth, National Dislocated Worker Grants, Dislocated Worker Projects authorized under WIOA sec. 169(c), Wagner Peyser Employment Service, National Farmworker Jobs Program, Job Corps, YouthBuild, Indian and Native American Program, as well as non-WIOA covered programs, including Trade Adjustment Assistance (TAA), Reentry Employment Opportunities (REO), H-1B discretionary grants, Senior Community Service Employment Program (SCSEP), Apprenticeship grants, and the Jobs for Veterans' State Grants Programs. While H-1B grants, TAA, SCSEP, Apprenticeship grants and the REO programs are not authorized under WIOA, these programs will be utilizing the data element definitions and reporting templates proposed in this ICR.
As a part of this revision request, ETA has made changes to the
Section 116 of WIOA (29 U.S.C. 3141) authorizes this information collection.
This information collection is subject to the PRA. A Federal agency generally cannot conduct or sponsor a collection of information, and the public is generally not required to respond to an information collection, unless it is approved by OMB under the PRA and displays a currently valid OMB Control Number. In addition, notwithstanding any other provisions of law, no person shall generally be subject to penalty for failing to comply with a collection of information that does not display a valid Control Number. See 5 CFR 1320.5(a) and 1320.6.
Interested parties are encouraged to provide comments to the contact shown in the
Submitted comments will also be a matter of public record for this ICR and posted on the internet, without redaction. DOL encourages commenters to exclude personally identifiable information, confidential business data, or other sensitive statements/information in any comments.
DOL is particularly interested in comments that:
• Evaluate whether the proposed collection of information is necessary for the proper performance of the functions of the agency, including whether the information will have practical utility;
• Evaluate the accuracy of the agency's estimate of the burden of the proposed collection of information, including the validity of the methodology and assumptions used;
• Enhance the quality, utility, and clarity of the information to be collected; and
• Minimize the burden of the collection of information on those who are to respond, including through the use of appropriate automated, electronic, mechanical, or other technological collection techniques or other forms of information technology, (
44 U.S.C. 3506(c)(2)(A).
Office of Workers' Compensation Programs, Labor.
Notice.
The Department of Labor (DOL) is soliciting comments concerning a proposed revision for the authority to conduct the information collection request (ICR) titled, Rehabilitation Action Report (OWCP-44). This comment request is part of continuing Departmental efforts to reduce paperwork and respondent burden in accordance with the Paperwork Reduction Act of 1995 (PRA).
Consideration will be given to all written comments received by January 25, 2021.
A copy of this ICR with applicable supporting documentation; including a description of the likely respondents, proposed frequency of response, and estimated total burden may be obtained free by contacting Anjanette Suggs by telephone at 202-354-9660 or by email at
Submit written comments about, or requests for a copy of, this ICR by mail or courier to the U.S. Department of Labor, Office of Workers' Compensation Programs, Room S3323, 200 Constitution Avenue NW, Washington, DC 20210; by email:
Anjanette Suggs by telephone at 202-354-9660 or by email at
The DOL, as part of continuing efforts to reduce paperwork and respondent burden, conducts a pre-clearance consultation program to provide the general public and Federal agencies an opportunity to comment on proposed and/or continuing collections of information before submitting them to the OMB for final approval. This program helps to ensure requested data can be provided in the desired format, reporting burden (time and financial resources) is minimized, collection instruments are clearly understood, and the impact of collection requirements can be properly assessed.
For LHWCA, 20 CFR 702.506 and 20 CFR 702. 507, and for FECA, 20 CFR 10.518 and 20 CFR 10.519, authorizes this information collection. This information collection is subject to the PRA. A Federal agency generally cannot conduct or sponsor a collection of information, and the public is generally not required to respond to an information collection, unless the OMB under the PRA approves it and displays a currently valid OMB Control Number. In addition, notwithstanding any other provisions of law, no person shall generally be subject to penalty for failing to comply with a collection of information that does not display a valid Control Number.
Interested parties are encouraged to provide comments to the contact shown in the
Submitted comments will also be a matter of public record for this ICR and posted on the internet, without redaction. The DOL encourages commenters not to include personally identifiable information, confidential business data, or other sensitive statements/information in any comments.
The DOL is particularly interested in comments that:
• Evaluate whether the proposed collection of information is necessary for the proper performance of the functions of the agency, including whether the information will have practical utility.
• Evaluate the accuracy of the agency's estimate of the burden of the proposed collection of information, including the validity of the methodology and assumptions used.
• Enhance the quality, utility, and clarity of the information to be collected; and
• Minimize the burden of the collection of information on those who are to respond, including through the use of appropriate automated, electronic, mechanical, or other technological collection techniques or other forms of information technology,
44 U.S.C. 3506(c)(2)(A).
Nuclear Regulatory Commission.
Exemptions; issuance.
The U.S. Nuclear Regulatory Commission (NRC) issued seven exemptions in response to requests from six licensees. The exemptions afford these licensees temporary relief from certain requirements under NRC regulations. The exemptions are in response to the licensees' requests for relief due to the coronavirus disease 2019 (COVID-19) public health emergency (PHE). The NRC is issuing a single notice to announce the issuance of the exemptions.
During the period from October 6, 2020, to October 26, 2020, the NRC granted seven exemptions in response to requests submitted by licensees from July 13, 2020, to October 8, 2020.
Please refer to Docket ID NRC-2020-0110 when contacting the NRC about the availability of information regarding this document. You may obtain publicly available information related to this document using any of the following methods:
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•
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For the convenience of the reader, instructions about obtaining materials referenced in this document are provided in the “Availability of Documents” section.
James Danna, Office of Nuclear Reactor Regulation, U.S. Nuclear Regulatory Commission, Washington DC 20555-0001; telephone: 301-415-7422, email:
During the period from October 6, 2020, to October 26, 2020, the NRC granted seven exemptions in response to requests submitted by licensees from July 13, 2020, to October 8, 2020. These exemptions temporarily allow the licensees to deviate from certain requirements (as cited below) of various parts of chapter I of title 10 of the
The exemptions from certain requirements of 10 CFR part 26, “Fitness for Duty Programs,” for Indiana Michigan Power Company (for Donald C. Cook Nuclear Plant, Unit Nos. 1 and 2), and NextEra Energy Point Beach, LLC (for Point Beach Nuclear Plant, Units 1 and 2), afford these licensees temporary relief from the work-hour controls under 10 CFR 26.205(d)(1) through (d)(7). The exemptions from 10 CFR 26.205(d)(1) through (d)(7) ensure that the control of work hours and management of worker fatigue do not unduly limit licensee flexibility in using personnel resources to most effectively manage the impacts of the COVID-19 PHE on maintaining the safe operation of these facilities. Specifically, these licensees have stated that their staffing levels are affected or are expected to be affected by the COVID-19 PHE, and they can no longer meet or likely will not meet the work-hour controls of 10 CFR 26.205(d)(1) through (d)(7). These licensees have committed to effecting site-specific administrative controls for COVID-19 PHE fatigue-management for personnel specified in 10 CFR 26.4(a).
The exemptions from certain requirements of 10 CFR part 50, appendix E, “Emergency Planning and Preparedness for Production and Utilization Facilities,” section IV.F., “Training,” for Entergy Operations, Inc. (for Arkansas Nuclear One, Units 1 and 2), and STP Nuclear Operating Company (for South Texas Project, Units 1 and 2), grant temporary exemptions from the biennial emergency preparedness exercise requirement. The exemptions allow a temporary exemption from the requirements of 10 CFR part 50, appendix E, regarding the conduct of the biennial emergency preparedness exercise. These exemptions will not adversely affect the emergency response capability of the facilities because affected licensee personnel are currently qualified, and the licensees' proposed compensatory measures will enable their staff to maintain their knowledge, skills, and abilities without the conduct of the biennial emergency preparedness exercise during the exemption term.
The exemptions from certain requirements of 10 CFR part 73, appendix B, “General Criteria for Security Personnel,” section VI., “Nuclear Power Reactor Training and Qualification Plan for Personnel Performing Security Program Duties,” for Union Electric Company (for Callaway Plant, Unit No. 1); for Exelon Generation Company, LLC (for Calvert Cliffs Nuclear Power Plant, Units 1 and 2); and Entergy Operations, Inc. (for Grand Gulf Nuclear Station, Unit 1), afford these licensees temporary exemptions from certain requirements. The exemptions will help to ensure that these regulatory requirements do not unduly limit licensee flexibility in using personnel resources in a manner that most effectively manages the impacts of the COVID-19 PHE on maintaining the safe and secure operation of these facilities and the implementation of the licensees' NRC-approved security plans, protective strategy, and implementing procedures. These licensees have committed to certain security measures to ensure response readiness and for their security personnel to maintain performance capability.
The NRC is providing compiled tables of exemptions using a single
The tables below provide the facility name, docket number, document description, and ADAMS accession number for each exemption issued. Additional details on each exemption issued, including the exemption request submitted by the respective licensee and the NRC's decision, are provided in each exemption approval listed in the tables below. For additional directions on accessing information in ADAMS, see the
For the Nuclear Regulatory Commission.
Nuclear Regulatory Commission.
Opportunity to initiate background check for access to safeguards information.
In approximately 4 to 7 months, the U.S. Nuclear Regulatory Commission (NRC) will publish in the
This pre-clearance process is available until publication in the
Please refer to Docket ID NRC-2008-0252 when contacting the NRC about the availability of information regarding this document. You may obtain publicly available information related to this document using any of the following methods:
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•
Cayetano Santos Jr., Office of Nuclear Reactor Regulation, U.S. Nuclear Regulatory Commission, Washington, DC 20555-0001, telephone: 301-415-7270, email:
The NRC hereby gives notice that members of the public who believe they may need access to SGI to file a hearing request in the upcoming ITAAC proceeding for VEGP Unit 4 may initiate background checks for access to SGI before the proceeding begins. This notice describes how the required background check forms may be obtained and how the required forms and fee must be submitted. Requests to initiate background checks under this notice may be made until publication in the
Safeguards Information is a special category of sensitive unclassified information defined in section 73.2 of title 10 of the
To obtain access to SGI in an adjudicatory context, persons must (1) demonstrate a “need to know” for the SGI, (2) be deemed “trustworthy and reliable,” and (3) demonstrate a likelihood of establishing standing. As relevant to adjudications, “need to know” is defined in 10 CFR 73.2 as a determination by the originator of the SGI that the SGI is necessary to enable the proposed recipient to proffer and/or adjudicate a specific contention in that proceeding, and the proposed recipient of the specific SGI possesses demonstrable knowledge, skill, training, or education to effectively utilize the specific SGI in the proceeding. “Trustworthiness and reliability” is defined in 10 CFR 73.2 as the characteristics of an individual considered dependable in judgment, character, and performance, such that disclosure of SGI to that individual does not constitute an unreasonable risk to the public health and safety or common defense and security. A determination of trustworthiness and reliability for this purpose is based upon a background check. The standing requirements are in 10 CFR 2.309.
Southern Nuclear Operating Company, Inc., was issued a COL for VEGP Unit 4 on February 10, 2012. Appendix C of the COL includes the
The NRC's finding on whether the acceptance criteria are met will be based on the licensee's submission of ITAAC notifications required by 10 CFR 52.99(c) and on the results of NRC inspections. Supporting documents pertaining to ITAAC closure for VEGP Unit 4 are available electronically at
In addition, to provide additional background information to members of the public,
As required by Section 189a.(1)(B)(i) of the AEA and 10 CFR 52.103(a), the NRC must publish in the
The Commission published detailed generic procedures for the ITAAC hearing process in “Final Procedures for Conducting Hearings on Conformance with the Acceptance Criteria in Combined Licenses” (ITAAC Hearing Procedures) (81 FR 43266; July 1, 2016). The Commission intends to use these generic procedures (with appropriate modifications) in case-specific orders that will govern ITAAC proceedings. The ITAAC Hearing Procedures differ from 10 CFR part 2 in a number of ways, primarily because of the need to meet the statutory goal for timely completing the hearing. To meet this goal, the ITAAC hearing process will be conducted on a much shorter schedule than is used for other NRC hearings. Therefore, the NRC encourages interested members of the public to study the ITAAC Hearing Procedures and commence their hearing preparations well before publication of the notice of intended operation for VEGP Unit 4.
The notice of intended operation must be published at least 180 days prior to scheduled fuel load, but the NRC announced its intention in the ITAAC Hearing Procedures to publish the notice of intended operation between 210 and 285 days before scheduled fuel load.
Given the range of matters covered by the ITAAC, the NRC believes that petitioners may deem it necessary to obtain access to SGI for the purpose of submitting an admissible contention. Therefore, as discussed in the ITAAC Hearing Procedures, the notice of intended operation will set forth procedures providing such petitioners the opportunity to demonstrate they meet the requirements for access to SGI in the ITAAC hearing context. These requirements include a demonstration of “need to know,” a determination of “trustworthiness and reliability,” and a demonstration of likelihood to establish standing. If access is granted, non-
The background check used to support trustworthiness and reliability determinations can take some time, and delay could occur if persons seeking access to SGI are not already cleared for access and do not seek clearance until the notice of intended operation is published.
There is no guarantee that early initiation of the background check will be of practical use to a petitioner. For example, the petitioner might not satisfy the other requirements for access to SGI. Consequently, it is the petitioner's choice whether to pursue the pre-clearance process. The costs for initiating the background check are not refundable even if the background check is of no practical use to a petitioner (
[T]he NRC will not delay its actions in completing the hearing or making the 10 CFR 52.103(g) finding because of delays from background checks for persons seeking access to SGI. In other words, members of the public will have to take the proceeding as they find it once they ultimately obtain access to SGI for contention formulation. The pre-clearance process is designed to prevent the SGI background-check process from becoming a barrier to timely public participation in the hearing process. As stated in Attachment 1 to the SUNSI-SGI Access Procedures (p. 11), “given the strict timelines for submission of and rulings on the admissibility of contentions (including security-related contentions) . . . potential parties should not expect additional flexibility in those established time periods if they decide not to exercise the pre-clearance option.”
The pre-clearance process in this notice is based on the pre-clearance process in the “Procedures to Allow Potential Intervenors to Gain Access to Relevant Records that Contain Sensitive Unclassified Non-Safeguards Information or Safeguards Information,” dated February 29, 2008 (ADAMS Accession No. ML080380626), as modified and supplemented by provisions in the ITAAC Hearing Procedures and the final rule, “Protection of Safeguards Information” (73 FR 63546; October 24, 2008).
A. Any potential party
B. To request initiation of the background check to be conducted by the DCSA, the requestor must submit a background check request letter, two forms, and the fee for the background check, as discussed in Section II.C of this notice.
(1) To initiate the background check, Form FD-258 (fingerprint card) and Form SF-85, “Questionnaire for Non-Sensitive Positions,” must be completed and submitted. The requestor should contact the NRC's Office of Administration at 301-415-3710 to request a package containing the Form FD-258 and to obtain access to Form SF-85. To obtain access to Form SF-85, each individual for whom a background check is being requested will be asked to provide the individual's full legal name, social security number, date and place of birth, telephone number, and email address.
(2) The requestor must submit a background check request letter to the Office of the Secretary, U.S. Nuclear Regulatory Commission, and provide a copy to the Deputy General Counsel for Hearings and Administration, Office of the General Counsel. Email submission is preferred. The email addresses for the Office of the Secretary and the Office of the General Counsel are
C. Forms, Fee, and Background Check Request Letter.
(1) Required Forms: The requestor must submit the following forms:
(a) A completed Form FD-258 (fingerprint card), signed in original ink, for each individual for whom a background check is being requested. Copies of Form FD-258 will be provided in the background check request package supplied by the Office of Administration for each individual for whom a background check is being requested. The fingerprint card will be used to satisfy the requirements of 10 CFR part 2, 10 CFR 73.22(b)(1), and AEA Section 149, which mandates that all persons with access to SGI must be fingerprinted for a Federal Bureau of Investigation identification and criminal history records check;
(b) A completed Form SF-85, “Questionnaire for Non-Sensitive Positions” for each individual for whom a background check is being requested. The completed Form SF-85 will be used to conduct the background check required for access to SGI, as required by 10 CFR part 2, subpart C, and 10 CFR 73.22(b)(2), to determine the individual's trustworthiness and reliability. For security reasons, Form
(2) A check or money order payable in the amount of $326.00 to the U.S. Nuclear Regulatory Commission for each individual for whom a background check is being requested.
(3) Background Check Request Letter: The background check request letter must:
(a) Request initiation of a background check for the purpose of determining trustworthiness and reliability for access to SGI that may be relevant to the upcoming ITAAC proceeding for VEGP Unit 4.
(b) Provide the name and address of the potential party and a description of the potential party's particularized interest that could be harmed by an NRC finding that the acceptance criteria in the combined license are met.
(c) Identify each individual for whom access to SGI will be requested, including the identity of any expert, consultant, or assistant who will aid the petitioner in evaluating the SGI.
(d) If the requestor or any individual for whom access to SGI will be requested believes they belong to one or more of the categories of individuals that are exempt from the criminal history records check and background check requirements in 10 CFR 73.59, the requestor should provide a statement identifying which exemption the person is invoking and explaining the person's basis for believing that the exemption applies. While processing the request, the Office of Administration will make a final determination on whether the claimed exemption applies. Alternatively, the requestor may contact the Office of Administration for an evaluation of the person's exemption status prior to submission of the background check request. Persons who are exempt from the background check are not required to submit the forms and fee described in Sections II.C.(1) and II.C.(2) of this notice; however, all other requirements for access to SGI, including need to know, still apply.
(e) State that the completed forms and fee described in Sections II.C.(1) and II.C.(2) of this notice have been submitted for each individual for whom access to SGI will be requested (except for those exempted by 10 CFR 73.59).
(4) To avoid delays in processing background check requests, the requestor should review all submitted materials for completeness and accuracy (including legibility) before submitting them to the NRC. The NRC will return incomplete packages to the sender without processing.
D. Results of Background Check.
(1) If the background check results in a favorable trustworthiness and reliability determination, the NRC staff will so notify the requestor. In its discretion, the responsible NRC staff may proceed at that time with an inspection of the requestor's information protection system to confirm it is sufficient to protect SGI from inadvertent release or disclosure.
(2) If the background check results in an adverse trustworthiness and reliability determination, the NRC staff will so notify the requestor with a brief statement of the reasons for denial.
(a) Before the Office of Administration makes a final adverse determination, the individual against whom the adverse determination has been made must be provided an opportunity to correct or explain information. Specifically, the Office of Administration will (i) provide to the individual any records, including those required to be provided under 10 CFR 73.57(e)(1), that were considered in the trustworthiness and reliability determination; and (ii) resolve any challenge by the individual to the completeness or accuracy of these records. The individual may make this challenge by submitting information and/or an explanation to the Office of Administration within 10 days of the distribution of the records described previously.
(b) The requestor may challenge a final adverse determination by submitting a request for review of the adverse determination to the Chief Administrative Judge of the Atomic Safety and Licensing Board Panel (ASLBP) in accordance with 10 CFR 2.336(f)(1)(iv) and by the method described in the final adverse determination. Because a final adverse determination is sufficient grounds for denying a subsequent request for SGI access submitted after the notice of intended operation is published, the requestor should not wait until a subsequent denial to appeal the adverse trustworthiness and reliability determination.
(3) If the notice of intended operation is published while the background check is in progress or while an appeal of an adverse determination is pending, the petitioner should still submit the other components of its request for access consistent with the requirements set forth in the notice of intended operation. Those elements of the access determination will be handled in accordance with the procedures and timelines in the notice of intended operation. The petitioner's submission of its request need not repeat the information already submitted specifically for the background check—it may simply reference the pre-clearance background check request—but it must provide all other information requested in the notice of intended operation.
For the Nuclear Regulatory Commission.
Postal Service
Notice.
The Postal Service gives notice of filing a request with the Postal Regulatory Commission to add a domestic shipping services contract to the list of Negotiated Service Agreements in the Mail Classification Schedule's Competitive Products List.
Sean Robinson, 202-268-8405.
The United States Postal Service® hereby gives notice that, pursuant to 39 U.S.C. 3642 and 3632(b)(3), on November 13, 2020, it filed with the Postal Regulatory Commission a
Postal Service
Notice.
The Postal Service gives notice of filing a request with the Postal Regulatory Commission to add a domestic shipping services contract to the list of Negotiated Service Agreements in the Mail Classification Schedule's Competitive Products List.
Sean Robinson, 202-268-8405.
The United States Postal Service® hereby gives notice that, pursuant to 39 U.S.C. 3642 and 3632(b)(3), on November 20, 2020, it filed with the Postal Regulatory Commission a
Postal Service
Notice.
The Postal Service gives notice of filing a request with the Postal Regulatory Commission to add a domestic shipping services contract to the list of Negotiated Service Agreements in the Mail Classification Schedule's Competitive Products List.
Sean Robinson, 202-268-8405.
The United States Postal Service® hereby gives notice that, pursuant to 39 U.S.C. 3642 and 3632(b)(3), on November 12, 2020, it filed with the Postal Regulatory Commission a
Notice is hereby given in accordance with Public Law 92-463 that the Actuarial Advisory Committee will hold a virtual meeting on December 11, 2020, at 10:00 a.m. (Central Standard Time) on the conduct of the 28th Actuarial Valuation of the Railroad Retirement System. The agenda for this meeting will include a discussion of the assumptions to be used in the 28th Actuarial Valuation. A report containing recommended assumptions and the experience on which the recommendations are based will have been sent by the Acting Chief Actuary to the Committee before the meeting.
The meeting will be open to the public. Persons wishing to submit written statements, make oral presentations, or attend the meeting should address their communications or notices to Patricia Pruitt, (
On September 22, 2020, the Options Clearing Corporation (“OCC”) filed with the Securities and Exchange Commission (“Commission”) the proposed rule change SR-OCC-2020-011 (“Proposed Rule Change”) pursuant to Section 19(b) of the Securities Exchange Act of 1934 (“Exchange Act”)
OCC and CME are parties to an Amended and Restated Cross-Margining Agreement dated May 28, 2008, as further amended by Amendment No. 1 dated October 23, 2008
According to OCC, the Proposed X-M Agreement is designed to improve the clarity and readability by consolidating certain redundant provisions and moving certain operational details from the Existing X-M Agreement to a standalone service level agreement (“SLA”).
OCC proposes moving certain operational details from the Existing X-M Agreement to the new SLA, including: (1) Section 6 of the Existing X-M Agreement, which covers acceptable forms of collateral; (2) Section 7 of the Existing X-M Agreement, which covers the timing, methods, and forms of daily settlement in the Cross-Margining accounts; and (3) Section 15 of Existing X-M Agreement, which covers OCC and CME's information-sharing regarding Joint and Affiliated Clearing Members, banks, and their financial status.
The other changes to the Existing X-M Agreement that OCC proposes may be considered in two broad categories. The first category is modifications to conform the terms of the agreement to existing practices. The second category is modifications to the X-M Program (
The first category, modifications to conform the terms of the agreement to existing practices, includes various new or updated definitions: (1) The newly-defined terms “FSOC,” “Dodd Frank Act,” “DCO,” “Exchange Act,” and “SEC” to reflect OCC and CME's registration statuses and designations as systemically important by the Financial Stability Oversight Counsel;
The non-definitional changes or additions reflecting already-existing practices include the following: (1) Removing references to X-M Pledge Accounts and Section 3 of the Existing X-M Agreement, entitled “Establishment of X-M Pledge Accounts,” as these accounts are no longer in use; (2) revising Section 5 of the Existing X-M Agreement to reflect that the amount of collateral to be deposited with regard to an X-M Account would be determined using OCC's approved margin methodology, because CME already elects to use the margin requirements calculated by OCC; (3) stating that OCC and CME would each be permitted to invest any cash deposited as collateral in their joint margin cash accounts overnight in certain eligible investments and with certain custodians, depositories, and counterparties, as OCC and CME may mutually agree, with each clearinghouse sharing equally in any proceeds received or losses incurred from such overnight investments, to formalize the existing practice of equally sharing proceeds or losses from the investment of X-M cash margin; (4) modifying Section 7 and the relevant definitions in Section 1 to reflect that the “Margin and Settlement Report” would become the “Account Summary by Clearing Corporation Report” provided by OCC to Clearing Members, as only OCC has provided the current Margin and Settlement Report to Clearing Members in practice; (5) revising Section 8 of the X-M Agreement to clarify that each clearinghouse will follow its own rules for the default of a Clearing Member, while using best efforts to coordinate with the other clearinghouse regarding liquidation or transfer of accepted transactions; (6) clarifying the requirement that one clearinghouse must notify the other when subjected to a court order to disclose confidential information, only to the extent permitted by law; (7) clarifying that while OCC and CME are not permitted to reject any transaction effected in an X-M Account without the other's express consent, this condition would not interfere with their respective abilities to implement recovery and orderly wind-down plans under their own rules; (8) adding electronic mail and removing facsimiles as acceptable forms of communication for notice requirements, in conformance with current communication standards; and (9) adding Section 17 to clarify that each clearinghouse is responsible for obtaining its own regulatory approval in connection with the implementation of the Proposed X-M Agreement.
The second category, modifications to the X-M Program (
The non-definitional modifications to the cross-margining arrangement include the following: (1) In Section 5 of the Proposed X-M Agreement, adding a requirement for OCC to provide 30 calendar days' prior notice to CME of any proposed changes to OCC's margin methodology, and any changes to the way collateral requirements are calculated with respect to X-M Accounts would be required to be agreed upon in writing in advance by OCC and CME; (2) in Section 5, requiring OCC and CME to each determine net amount of premiums, exercise settlement amounts, and variation margin due for its respective products (newly defined as “Net Pay/Collect”) because the determination is made based upon the products cleared by OCC and CME, and to notify each other of the Net Pay/Collect amount in accordance with the SLA; (3) to the extent the two clearinghouses impose different concentration limits for eligible margin, requiring the use of the more conservative limits; (4) amending Section 7 to permit 30 minutes, rather than 15 minutes, for OCC and CME to approve or disapprove of revised Settlement Instructions to all for a full review of such instructions, to provide additional time during the process of performing a full review of such instructions; (5) amending Section 7 to provide for the communication of intra-day instructions to X-M clearing banks to facilitate the deposit of collateral in response to an intra-day margin call from CME or OCC, and amending Section 1 to include the term “Intra-day Instruction;” (6) amending Section 8 to include new language regarding the manner in which OCC and CME would prepare for and manage a Clearing Member default, including the establishment of liquidation plan for the transfer or liquidation of the Clearing Member's Accepted Transactions, the execution of liquidity agreements to ensure that the clearinghouses can obtain liquidity during a default scenario and will be jointly and equally responsible for providing liquidity, the potential use of a joint liquidating auction with respect to X-M Accounts during a Clearing Member default scenario, and joint default management testing for the X-M accounts at least annually; (7) amending Section 13 to change the process and timing related to termination of the agreement because OCC and CME believe the revised language would reduce risk in the event of a termination;
Section 19(b)(2)(C) of the Exchange Act directs the Commission to approve a proposed rule change of a self-regulatory organization if it finds that such proposed rule change is consistent with the requirements of the Exchange Act and the rules and regulations thereunder applicable to such organization.
Section 17A(b)(3)(F) of the Exchange Act requires, among other things, that the rules of a clearing agency be designed to remove impediments to and help perfect the mechanism of a national system for the prompt and accurate clearance and settlement of securities transactions; and to foster cooperation and coordination with persons engaged in the clearance and settlement of securities transactions.
The Commission continues to view cross-margining programs as consistent with clearing agency responsibilities under Section 17A of the Exchange Act. Cross-margining programs enhance clearing member liquidity and systemic liquidity both in times of normal trading and in times of market stress by reducing margin requirements for clearing members, which could prove crucial in maintaining Clearing Member liquidity during periods of market volatility, and enhancing market liquidity as a whole. By enhancing market liquidity, cross-margining arrangements remove impediments to and help perfect the mechanism of a national system for the prompt and accurate clearance and settlement of securities transactions.
The Commission believes that the proposed updates to the Existing X-M Agreement to conform to current practices provide additional clarity and certainty around the X-M Program to the relevant clearance and settlement topics, including the determination of the collateral requirement for the X-M Program, daily settlement, and suspension and liquidation. For example, replacing “Margin” or “Initial Margin” with “Posted Collateral” clarifies that STANS is the methodology used to determine the collateral requirement for the X-M Program and does not produce a separate initial margin requirement. This conforming change ensures that both clearinghouses are like-minded regarding the characterization of the margin requirement. Similarly, by updating the agreement to reflect that the amount of collateral to be deposited with regard to an X-M Account would be determined using OCC's margin methodology, the change confirms the already-existing practice of CME using OCC's margin calculation. Moreover, the proposed streamlining and consolidation of the Clearing Member Agreements would provide Joint Clearing Members and Affiliated Clearing Members with additional clarity with respect to the X-M Program. Reducing the number of available templates from six to three by having both Joint Clearing Members and Affiliated Clearing Members use the same three templates eliminates redundancy and makes the preparation
The Commission believes that the Proposed Rule Change is also consistent with the fostering of cooperation and coordination with persons engaged in the clearance and settlement of securities transactions. Based on a review of the documents provided by OCC, the Commission believes that the SLA presents operational details, such as those related to daily settlement procedures, more clearly than the Existing X-M Agreement. By moving Sections 6, 7, and 15 of the Existing X-M Agreement to a separate and newly-created SLA, OCC will be able to modify specific terms regarding forms of collateral, daily settlement, and information-sharing provisions without having to modify the language of the Proposed X-M Agreement. The Commission believes that clarifying operational details and reducing the cost of updating such details would foster cooperation and coordination between OCC and CME.
Similarly, the proposed changes to the X-M Program reflected in the Proposed X-M Agreement would modify certain program details that would augment the existing cooperation and coordination between OCC and CME. For example, OCC has proposed to amend Section 7 to facilitate the deposit of collateral in response to an intra-day margin call from CME or OCC by providing for the communication of intra-day instructions to X-M clearing banks with respect to the X-M Account. The non-definitional modifications that are new to the X-M Program would also serve to enhance the already existing cooperation between the two clearinghouses. For example, the proposed addition of the 30-calendar day notice period for changes to OCC's margin methodology would provide CME with additional time to understand and address the implications of the methodology changes. The Commission believes, therefore, that the proposed changes to the X-M Program reflected in the Proposed X-M Agreement would be consistent with the fostering of cooperation and coordination between OCC and CME in the settlement of securities transactions.
For the above reasons, the Commission believes that the Proposed Rule Change is designed to promote the prompt and accurate clearance and settlement of securities transactions and, to the extent applicable, derivative agreements, contracts and transactions; and to foster cooperation and coordination with persons engaged in the clearance and settlement of securities transactions. The Commission believes, therefore, that the Proposed Rule Change is consistent with the requirements of Section 17A(b)(3)(F) of the Exchange Act.
Rule 17Ad-22(e)(20) under the Exchange Act requires that a covered clearing agency establish, implement, maintain, and enforce written policies and procedures reasonably designed to identify, monitor, and manage risks related to any link the covered clearing agency establishes with one or more other clearing agencies, financial market utilities, or trading markets.
One of the primary objectives of the Proposed Rule Change is to update the Existing X-M Agreement to bring it into conformity with current operational procedures and eliminate provisions that are out of date. Updating the terms of the X-M Program to reflect existing operational procedures ensures that the two clearinghouses may incorporate the latest considerations and any resulting updated practices for identifying, monitoring, and managing risks associated with the link between OCC and CME. Moreover, the Proposed Rule Change also includes changes to the Existing X-M Agreement to reflect changes in the X-M Program. Regardless of whether the additions or changes in the Proposed X-M Agreement conform to already-existing practices or if they are new to the X-M Program, the terms of the Proposed X-M Agreement are, as discussed above, clearer than those in the Existing X-M Agreement. This greater clarity serves to reduce risk related to the link between the two clearinghouses; specifically, the increased clarity reduces potential operational risks by promoting a common understanding between the two clearinghouses of the terms governing the X-M Program.
Further, the transfer of certain sections of the Existing X-M Agreement to a separate SLA would streamline the Proposed X-M Agreement and more clearly present operational details, such as those related to daily settlement procedures. The clearinghouses would also have the ability to review the service level details separately and modify them without requiring changes to the full agreement. Simplifying the presentation and maintenance of such operational details would serve to reduce risks associated with the link between OCC and CME.
The Commission believes, therefore, that the Proposed Rule Change is consistent with the requirements of Rule 17Ad-22(e)(20) under the Exchange Act.
Rule 17Ad-22(e)(13) under the Exchange Act requires that a covered clearing agency establish, implement, maintain, and enforce written policies and procedures reasonably designed to ensure the covered clearing agency has the authority and operational capacity to take timely action to contain losses and liquidity demands and continue to meet its obligations by, at a minimum, requiring the covered clearing agency's participants to participate in the testing and review of its default procedures at least annually.
The Proposed X-M Agreement would require OCC and CME to conduct joint default management drills for the cross-margin accounts at least annually. The Commission believes that the adoption of rules requiring such joint default management tests on an at-least-annual basis is consistent with the involvement of stakeholders in default management testing as well as ensuring that such tests are conducted at least annually.
The Commission believes, therefore, that the Proposed Rule Change is consistent with the requirements of Rule 17Ad-22(e)(13) under the Exchange Act.
On the basis of the foregoing, the Commission finds that the Proposed Rule Change is consistent with the requirements of the Exchange Act, and in particular, the requirements of Section 17A of the Exchange Act
For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.
Pursuant to Section 19(b)(1)
The Exchange proposes to shorten the time period before a letter of acceptance, waiver, and consent under Rule 9216 and an uncontested offer of settlement under Rule 9270(f) becomes final and the corresponding time period to request review of these settlements under Rule 9310 from 25 days to 10 days. The proposed rule change is available on the Exchange's website at
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.
The Exchange proposes to shorten the time period before a letter of acceptance, waiver, and consent (“AWC”) under Rule 9216 and an uncontested offer of settlement under Rule 9270(f) becomes final and the corresponding time period to request review of these settlements under Rule 9310 from 25 days to 10 days.
In 2013, the NYSE adopted disciplinary rules that are, with certain exceptions, substantially the same as the FINRA Rule 8000 Series and Rule 9000 Series, and which set forth rules for conducting investigations and enforcement actions.
In adopting disciplinary rules modeled on FINRA's rules, the NYSE established processes for settling disciplinary matters both before and after issuance of a complaint.
Rule 9216 (Acceptance, Waiver, and Consent; Procedure for Imposition of Fines for Minor Violation(s) of Rules) establishes AWC procedures by which a member organization or covered person, prior to the issuance of a complaint, may execute a letter accepting a finding of violation, consenting to the imposition of sanctions, and agreeing to waive such member organization's or covered person's right to a hearing, appeal and certain other procedures. The rule also establishes procedures for executing a minor rule violation plan letter.
Under Rule 9216(a)(4), an AWC accepted by the Chief Regulatory Officer (“CRO”) must be sent to each Director and each member of the CFR and would be deemed final and constitute the complaint, answer, and decision in the matter 25 days after being sent to each Director and each member of the CFR, unless review by the Exchange Board of Directors is requested pursuant to Rule 9310(a)(1)(B).
The Exchange proposes that an AWC accepted by the CRO would be deemed final and constitute the complaint, answer, and decision in a matter 10 days after being sent to each Director and each member of the CFR, unless review is requested pursuant to Rule 9310(a)(1)(B)(i). As described below, the time period to request review under Rule 9310(a)(1)(B)(i) would also be shortened to 10 days.
Rule 9270 (Settlement Procedure) provides a settlement procedure for a Respondent who has been notified of the initiation of a proceeding. Specifically, Rule 9270(f) provides that uncontested settlement offers accepted by the CRO, the Hearing Panel or, if applicable, Extended Hearing Panel must be issued and sent to each Director and each member of the CFR and
The Exchange proposes that uncontested settlement offers accepted by the CRO, the Hearing Panel or, if applicable, Extended Hearing Panel (together, a “Panel”) under Rule 9270(f) would become final 10 days after being sent to each Director and each member of the CFR, unless review by the Exchange Board of Directors is requested pursuant to Rule 9310(a)(1). As noted, the time to request review of an uncontested settlement under Rule 9310(a)(1) would also be shortened to 10 days.
Finally, under Rule 9310(a)(1)(B)(i), any Director and any member of the CFR may require a review by the Board of any determination or penalty, or both, imposed in connection with an AWC letter under Rule 9216 or an offer of settlement determined to be uncontested before a hearing on the merits has begun under Rule 9270(f), except that none of those persons could request Board review of a determination or penalty concerning an affiliate of the Exchange as such term is defined in Rule 12b-2 under the Exchange Act. A request for review under this provision is made by filing with the Secretary of the Exchange a written request stating the basis and reasons for such review, within 25 days after an AWC letter or an offer of settlement has been sent to each Director and each member of the CFR pursuant to Rule 9216(a)(4) or Rule 9270(f)(3).
To permit AWC letters and uncontested settlements to become final within 10 days as proposed, the Exchange would amend Rule 9310(a)(1)(B)(i) to provide that a request for review of these settlements as permitted by the rule must be made by filing the requisite written request with the Secretary of the Exchange within 10 days after the AWC letter or an offer of settlement is sent to each Director and each member of the CFR pursuant to Rule 9216(a)(4) or Rule 9270(f)(3).
The Exchange believes maintaining a 25 day waiting period for negotiated settlements under Rule 9216 and uncontested settlements pursuant to 9270(f) unnecessarily delays final resolution of matters that have been resolved by the parties and accepted by the CRO or a Panel. Shortening the waiting period to 10 days, and requiring requests for Board of Directors review to be made within that same 10 day period, would significantly expedite the settlement process in situations where member organizations, covered persons and Respondents have entered into a consensual, negotiated settlement with Enforcement or made settlement offers that Enforcement does not oppose, while continuing to ensure the independence and integrity of the regulatory process by preserving the ability of Directors and CFR members to call those settlements for review.
Further, the Exchange believes that the proposed 10 day period to call a settlement for review under Rule 9310(a)(1)(B)(i) is reasonable and sufficient. Like the current 25 day period, the time to call a settlement for review would begin when the AWC or uncontested settlement is sent to each Director and member of the CFR. Rules 9216 and 9270 specify that an AWC or uncontested settlement accepted by the CRO or a Panel can be sent to each Director and each CFR member via courier, express delivery or electronic means. As a practical matter, AWCs and settlements are sent to the Directors and CFR members by email, which ensures prompt and instantaneous communication. As a result, the Directors and members of the CFR will have the full 10 day period to determine whether to call these settlements for review. Moreover, the requirement in Rule 9310(a)(1)(B)(i) that a request for review be in writing and state the basis and reasons for such review can similarly be satisfied by a Director or CFR member sending an email to the Secretary of the Exchange requesting that a specific matter be reviewed within the proposed 10 day period. The Director or CFR member would need to take no additional steps nor include any additional information in order to call a matter for review under Rule 9310(a)(1)(B)(i). In light of these facts, and the relative infrequency of calls for review of AWCs and uncontested settlements,
Finally, the Exchange also believes that shortening these time periods would further promote efficiency in connection with cross-market settlements involving multiple self-regulatory organizations (“SROs”). Often such settlements are contingent upon the acceptance of a settlement by all of the SROs involved in the matter. In these situations, a settlement with the Exchange would not be final until the end of the time period specified in Rules 9216 and 9270 while a settlement with other SROs could be final once accepted.
The Exchange intends to announce the operative date of the amended time periods in Rules 9216(a)(4), 9270(f)(3) and 9310(a)(1) at least 30 days in advance via regulatory notice to its members and member organizations.
The proposed rule change is consistent with Section 6(b) of the Act,
Specifically, the Exchange believes that shortening the waiting period for negotiated settlements and uncontested offers of settlement would serve to expedite the final resolution of both Exchange and cross-market matters that have been resolved by the parties and accepted by the CRO or Panel, thereby protecting investors and the public interest by addressing rule violations and achieving finality in disciplinary matters sooner. The proposed rule change to shorten the waiting period before an AWC letter and offer of settlement becomes final and the member of CFR or Board's time to call such settlements for review will therefore provide for a more efficient, streamlined disciplinary process.
The Exchange further believes that the proposed amendments are consistent with Section 6(b)(6) of the Act,
For the same reasons, the Exchange believes that the proposed changes are designed to provide a fair procedure for the disciplining of members and persons associated with members, consistent with Sections 6(b)(7) and 6(d) of the Act.
Finally, the Exchange believes that the non-substantive changes to clarify the cross-reference to Rule 9310 in Rules 9216 would remove impediments to and perfect the mechanism of a free and open market and a national market system and, in general, protect investors and the public interest because the proposed non-substantive changes would add clarity, transparency and consistency to the Exchange's disciplinary rules. The Exchange believes that market participants would benefit from the increased clarity, thereby reducing potential confusion and ensuring that persons subject to the Exchange's jurisdiction, regulators, and the investing public can more easily navigate and understand the Exchange's rules.
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 proposed rule change is not intended to address competitive issues but is rather concerned with facilitating less burdensome regulatory compliance and processes and enhancing the quality of the regulatory process. The Exchange believes the proposed rule changes would reduce the burdens within the disciplinary process, as well as move matters through the process expeditiously by providing for more efficient finality of negotiated settlements and offers of settlement, to the benefit of all members and member organizations and the investing public.
No written comments were solicited or received with respect to the proposed rule change.
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
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.
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:
• Use the Commission's internet comment form (
• Send an email to
• Send paper comments in triplicate to Secretary, Securities and Exchange Commission, 100 F Street NE, Washington, DC 20549-1090.
For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.
Notice is hereby given, pursuant to the provisions of the Government in the Sunshine Act, Public Law 94-409, that the Securities and Exchange Commission Investor Advisory Committee will hold a public meeting on Thursday, December 3, 2020.
The meeting will begin at 10:00 a.m. (ET) and will be open to the public. The meeting will be conducted by remote means and/or at the Commission's headquarters, 100 F St. NE, Washington, DC 20549. Members of the public may watch the webcast of the meeting on the Commission's website at
This Sunshine Act notice is being issued because a majority of the Commission may attend the meeting. On November 4, 2020, the Commission published notice of the Committee meeting (Release Nos. 33-10885; 34-90338), indicating that the meeting is open to the public and inviting the public to submit written comments to the Committee.
The agenda for the meeting includes: Welcome remarks; announcement of results of officers election; approval of previous meeting minutes; a panel discussion regarding corporate disclosure during COVID-19; a panel discussion regarding COVID-19 implications for next proxy season; subcommittee reports; and a non-public administrative session.
For further information and to ascertain what, if any, matters have been added, deleted or postponed; please contact Vanessa A. Countryman from the Office of the Secretary at (202) 551-5400.
Notice is given that the Securities and Exchange Commission (the “Commission”) intends to issue an order, pursuant to section 203(h) of the Investment Advisers Act of 1940 (the “Act”), cancelling the registration of Trevor Stewart Burton & Jacobsen Inc [File No. 801-10369], hereinafter referred to as the “
Section 203(h) provides, in pertinent part, that if the Commission finds that any person registered under section 203, or who has pending an application for registration filed under that section, is no longer in existence, is not engaged in business as an investment adviser, or is prohibited from registering as an investment adviser under section 203A, the Commission shall, by order, cancel the registration of such person.
The registrant has not filed a Form ADV amendment with the Commission as required by rule 204-1 under the Act and appears to be no longer in business as an investment adviser or is otherwise not engaged in business as an investment adviser.
Notice is also given that any interested person may, by December 15, 2020, at 5:30 p.m., submit to the Commission in writing a request for a hearing on the cancellation, accompanied by a statement as to the nature of his or her interest, the reason for such request, and the issues, if any, of fact or law proposed to be controverted, and he or she may request that he or she be notified if the Commission should order a hearing thereon. Any such communication should be emailed to the Commission's Secretary at
At any time after December 15, 2020, the Commission may issue an order cancelling the registration, upon the basis of the information stated above,
The Commission:
Christine Ayako Schleppegrell, Senior Counsel, at 202-551-6727; SEC, Division of Investment Management, Investment Adviser Regulation Office, 100 F Street NE, Washington, DC 20549-8549.
For the Commission, by the Division of Investment Management, pursuant to delegated authority.
Notice of request for public comment and submission to OMB of proposed collection of information.
The Department of State has submitted the information collection described below to the Office of Management and Budget (OMB) for approval. In accordance with the Paperwork Reduction Act of 1995 we are requesting comments on this collection from all interested individuals and organizations. The purpose of this Notice is to allow 30 days for public comment.
Submit comments up to December 28, 2020.
Written comments and recommendations for the proposed information collection should be sent within 30 days of publication of this notice to
Direct requests for additional information regarding the collection listed in this notice, including requests for copies of the proposed collection instrument and supporting documents, to Irum Zaidi, 1800 G St. NW, Suite 10300, SA-22, Washington, DC 20006, who may be reached on 202-663-2588 or at
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We are soliciting public comments to permit the Department to:
• Evaluate whether the proposed information collection is necessary for the proper functions of the Department.
• Evaluate the accuracy of our estimate of the time and cost burden for this proposed collection, including the validity of the methodology and assumptions used.
• Enhance the quality, utility, and clarity of the information to be collected.
• Minimize the reporting burden on those who are to respond, including the use of automated collection techniques or other forms of information technology.
Please note that comments submitted in response to this Notice are public record. Before including any detailed personal information, you should be aware that your comments as submitted, including your personal information, will be available for public review.
The U.S. President's Emergency Plan for AIDS Relief (PEPFAR) was established through enactment of the United States Leadership Against HIV/AIDS, Tuberculosis, and Malaria Act (Pub. L. 108-25), as amended by the Tom Lantos and Henry J. Hyde United States Global Leadership Against HIV/AIDS, Tuberculosis, and Malaria Reauthorization Act (Pub. L. 110-293) (HIV/AIDS Leadership Act), as amended by the PEPFAR Stewardship and Oversight Act (Pub. L. 113-56), and as amended and reauthorized for a third time by the PEPFAR Extension Act (Pub. L. 115-305) to support the global response to HIV/AIDS. In order to improve program monitoring, PEPFAR added reporting of expenditures by program area to the current routine reporting of program results for the annual report. Data are collected from implementing partners in countries with PEPFAR programs using a standard tool (DS-4213) via an electronic web-based interface into which users upload data. These expenditures are analyzed by partner for all PEPFAR program areas. These analyses then feed into partner and program reviews at the country level for monitoring and evaluation on an ongoing basis. Summaries of these data provide key information about program costs under PEPFAR on a global level. Applying expenditure results will improve strategic budgeting, identification of efficient means of delivering services, and accuracy in defining program targets; and will inform allocation of resources to ensure the program is accountable and using public funds for maximum impact.
Data will continue to be collected in a web-based interface available to all partners receiving funds under PEPFAR. After implementing Expenditure Reporting since 2012, we learned that implementing partners (IPs) prefer the Microsoft Excel template based data collection process. The requirements in the Excel template have been reduced with IP input to only request critical information. By being able to download a template, prime IPs responsible to complete the submission are more effectively able to collaborate quickly with other key personnel and coordinate with their subrecipients to enter the data for the full amount of PEPFAR funding expended during the prior fiscal year. This approach also proves helpful where internet connectivity is not strong. After completing the Excel template, IPs upload the data to an automated system that further checks the data entered for quality and completeness. Automated checks reduce the time needed by IPs to complete the data cleaning process. Aggregate data is
The Department of State will conduct a public meeting at 10:00 a.m. on Thursday, December 3, 2020, by way of teleconference. Members of the public may participate up to the capacity of the teleconference phone line, which will handle 500 participants. To access the teleconference line, participants should call (202) 475-4000 and use Participant Code: 415 533 25#. This is not a meeting of the Shipping Coordinating Committee.
The primary purpose of the public meeting is to prepare for the 70th session of the International Maritime Organization's (IMO) Technical Cooperation Committee to be held remotely, December 7 to 11, 2020.
The agenda items to be considered include:
Those who plan to participate may contact the meeting coordinator, LT Jessica Anderson, by email at
Additional information regarding this and other IMO public meetings may be found at:
Bureau of International Security and Nonproliferation, Department of State.
Notice.
A determination has been made that a number of foreign persons have engaged in activities that warrant the imposition of measures pursuant to Section 3 of the Iran, North Korea, and Syria Nonproliferation Act. The Act provides for penalties on foreign entities and individuals for the transfer to or acquisition from Iran since January 1, 1999; the transfer to or acquisition from Syria since January 1, 2005; or the transfer to or acquisition from North Korea since January 1, 2006, of goods, services, or technology controlled under multilateral control lists (Missile Technology Control Regime, Australia Group, Chemical Weapons Convention, Nuclear Suppliers Group, Wassenaar Arrangement) or otherwise having the potential to make a material contribution to the development of weapons of mass destruction (WMD) or cruise or ballistic missile systems. The latter category includes (a) items of the same kind as those on multilateral lists but falling below the control list parameters when it is determined that such items have the potential of making a material contribution to WMD or cruise or ballistic missile systems, (b) items on U.S. national control lists for WMD/missile reasons that are not on multilateral lists, and (c) other items with the potential of making such a material contribution when added through case-by-case decisions.
Applicable November 6, 2020.
On general issues: Pam Durham, Office of Missile, Biological, and Chemical Nonproliferation, Bureau of International Security and Nonproliferation, Department of State, Telephone (202) 647-4930. For U.S. government procurement ban issues: Eric Moore, Office of the Procurement Executive, Department of State, Telephone: (703) 875-4079.
On November 6, 2020, the U.S. government applied the measures authorized in Section 3 of the Iran, North Korea, and Syria Nonproliferation Act (Pub. L. 109-353) against the following foreign persons identified in the report submitted pursuant to Section 2(a) of the Act:
Chengdu Best New Materials Co Ltd. (China) and any successor, sub-unit, or subsidiary thereof;
Zibo Elim Trade Company, Ltd. (China) and any successor, sub-unit, or subsidiary thereof;
Aviazapchast (Russia) and any successor, sub-unit, or subsidiary thereof;
Joint Stock Company Elecon (Russia) and any successor, sub-unit, or subsidiary thereof;
Nilco Group (aka Nil Fam Khazar Company; aka Santers Holding) (Russia) and any successor, sub-unit, or subsidiary thereof.
Accordingly, pursuant to Section 3 of the Act, the following measures are imposed on these persons:
1. No department or agency of the U.S. government may procure or enter into any contract for the procurement of any goods, technology, or services from these foreign persons, except to the extent that the Secretary of State otherwise may determine;
2. No department or agency of the U.S government may provide any assistance to these foreign persons, and these persons shall not be eligible to participate in any assistance program of the U. S. government, except to the extent that the Secretary of State otherwise may determine;
3. No U.S. government sales to these foreign persons of any item on the United States Munitions List are permitted, and all sales to these persons of any defense articles, defense services, or design and construction services under the Arms Export Control Act are terminated; and
4. No new individual licenses shall be granted for the transfer to these foreign persons of items the export of which is controlled under the Export Control Reform Act of 2018 or the Export Administration Regulations, and any existing such licenses are suspended.
These measures shall be implemented by the responsible departments and agencies of the U.S. government and
Notice of request for public comment and submission to OMB of proposed collection of information.
The Department of State has submitted the information collection described below to the Office of Management and Budget (OMB) for approval. In accordance with the Paperwork Reduction Act of 1995 we are requesting comments on this collection from all interested individuals and organizations. The purpose of this Notice is to allow 30 days for public comment.
Submit comments up to December 28, 2020.
Written comments and recommendations for the proposed information collection should be sent within 30 days of publication of this notice to
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We are soliciting public comments to permit the Department to:
• Evaluate whether the proposed information collection is necessary for the proper functions of the Department.
• Evaluate the accuracy of our estimate of the time and cost burden for this proposed collection, including the validity of the methodology and assumptions used.
• Enhance the quality, utility, and clarity of the information to be collected.
• Minimize the reporting burden on those who are to respond, including the use of automated collection techniques or other forms of information technology.
Please note that comments submitted in response to this Notice are public record. Before including any detailed personal information, you should be aware that your comments as submitted, including your personal information, will be available for public review.
The Secretary of State is authorized to issue U.S. passports under 22 U.S.C. 211a. The Department of State, Passport Services administers the U.S. passport issuance program and operates passport agencies and application adjudication centers throughout the United States. As part of the Intelligence Reform and Terrorism Prevention Act of 2004, the Western Hemisphere Travel Initiative required the Secretary of Homeland Security and the Secretary of State to implement a plan to require all U.S. citizen and non-citizen nationals to present a passport and/or other sufficient documentation when entering the U.S. from abroad. This resulted in an increase in demand for U.S. passports.
The Passport Demand Forecasting Survey requests information from the general public about the demand for U.S. passports, anticipated travel, and the demographic profile of the respondent. This voluntary survey is conducted on a monthly basis using responses from a randomly selected but nationally representative sample of U.S. nationals ages 18 and older. The information obtained from the survey is used to monitor and project the demand for U.S. passport books and U.S. passport cards. The Passport Demand Forecasting Survey aids the Department of State, Passport Services in making decisions about staffing, resource allocation, and budget planning.
The Passport Demand Forecasting Study uses monthly surveys that will gather data from a national representative sample of U.S. nationals. Survey delivery methodologies can include mail, internet/web, telephone, and mix-mode surveys to ensure the CA/PPT reaches the appropriate audience and leverages the best research method to obtain valid responses.
CSX Transportation, Inc. (CSXT), has filed a verified notice of exemption under 49 CFR. part 1152 subpart F—
CSXT has certified that: (1) No local traffic has moved over the Line for at least two years; (2) any overhead traffic can be rerouted over other lines; (3) no formal complaint filed by a user of rail service on the Line (or a state or local government entity acting on behalf of such user) regarding cessation of service over the Line either is pending with the Surface Transportation Board or any U.S. District Court or has been decided in favor of a complainant within the two-year period; and (4) the requirements at 49 CFR 1105.12 (newspaper publication) and 49 CFR 1152.50(d)(1) (notice to governmental agencies) have been met.
As a condition to this exemption, any employee adversely affected by the discontinuance of service shall be protected under
Provided no formal expression of intent to file an offer of financial
A copy of any petition filed with Board should be sent to CSXT's representative, Louis E. Gitomer, Law Offices of Louis E. Gitomer, LLC, 600 Baltimore Avenue, Suite 301, Towson, MD 21204.
If the verified notice contains false or misleading information, the exemption is void ab initio.
Board decisions and notices are available at
By the Board, Allison C. Davis, Director, Office of Proceedings.
Tennessee Valley Authority.
Record of decision.
The Tennessee Valley Authority (TVA) has decided to adopt the preferred alternative identified in the Sugar Camp Energy, LLC Mine No. 1 Boundary Revision 6 Final Environmental Impact Statement (EIS), which was made available to the public on October 2, 2020. A Notice of Availability of the Final EIS was published in the
Elizabeth Smith, Tennessee Valley Authority, 400 West Summit Hill Drive, WT11B-K, Knoxville, Tennessee 37902; telephone (865) 638-2252, or by email
This notice is provided in accordance with the Council on Environmental Quality's regulations and TVA's procedures for implementing the National Environmental Policy Act (NEPA).
TVA is a corporate agency and instrumentality of the United States that, among several mission responsibilities, provides electricity for business customers and local power distributors serving more than 10 million people in a roughly 80,000 square mile area comprised of most of Tennessee and parts of Virginia, North Carolina, Georgia, Alabama, Mississippi, and Kentucky. TVA receives no taxpayer funding, deriving virtually all of its revenues from sales of electricity. In addition to operation of its power system, TVA provides flood control, navigation and land management for the Tennessee River system and assists local power companies and state and local governments with economic development and job creation.
In 2002, TVA leased its Illinois Basin coal reserves to Sugar Camp, under condition that any proposed mining plan must be subject to environmental review and TVA approval. The proposed mining plan is subject to review and approval by the State of Illinois, which has regulatory authority delegated by the U.S. Department of the Interior, Office of Surface Mining Reclamation and Enforcement under the Surface Mining Control and Reclamation Act of 1977. TVA has prepared an EIS pursuant to NEPA to assess the potential environmental impacts of the proposed action to approve the plan to extract TVA-owned coal reserves within a 12,125-acre portion of the overall Significant Boundary Revision No. 6 shadow area.
In 2008, Sugar Camp obtained Underground Coal Mine Permit No. 382 from the Illinois Department of Natural Resources (IDNR), Office of Mines and Minerals (OMM), Land Reclamation Division, referenced hereafter as IDNR-OMM, for Sugar Camp Mine No. 1. Underground Coal Mine Permit No. 382 originally authorized underground longwall mining operations under approximately 12,125 acres in Franklin and Hamilton counties. UCM Permit No. 382 also included a surface effects area to process, store and transport the coal, where the existing Coal Preparation Plant is located. Since then, Sugar Camp has received authorization from the state for permit revisions to expand underground longwall mining operations for Sugar Camp Mine No. 1, and TVA has prepared multiple environmental assessments for the extraction of TVA-owned coal in these additional areas.
TVA considered two alternatives in the Draft EIS and Final EIS. These alternatives are:
The purpose and need of the Proposed Action is to recover TVA's investment by approving the proposed SBR No. 6 mining plan under the terms of the coal lease agreement made with Sugar Camp in 2002. TVA's Preferred Alternative is the Action Alternative, which consists of TVA approving the plan to extract TVA-owned coal reserves within a 12,125-acre portion of the overall SBR No. 6 shadow area. The Action Alternative is preferred because it is the most economical way to meet TVA's purpose and need. Other alternatives are not economically feasible, are expected to have similar environmental impacts, and do not meet the purpose and need.
Coal mining activities would occur under either the No Action Alternative or the Action Alternative. Reasonably foreseeable greenhouse gas emissions, including downstream emissions, are quantified. Other environmental consequences associated with either alternative, including the Action Alternative, have been deemed not significant and, for the most part, would be temporary due to minimization and mitigation efforts required in IDNR permit conditions.
Minor, temporary impacts to soils, groundwater, floodplains, surface waters and wetlands, vegetation, wildlife, and aquatic life would occur with either alternative. Other resources that would be temporarily affected under either alternative include prime farmland, water quality and supply, natural areas, land use, transportation, utilities, noise, and visual. These impacts would be minimized or mitigated per IDNR permit requirements.
Under either alternative, permanent changes to geology would occur due to the removal of a portion of the Herrin No. 6 coal seam. Construction of the East Refuse Disposal Area, which constitutes an expansion of the existing surface effects area under either alternative, would result in permanent impacts to utilities, North Bobtail Road, wetlands, and land use. These impacts would be offset through required minimization and mitigation efforts.
Solid and hazardous waste and human health and safety impacts would be avoided due to compliance with relevant regulations and avoidance and mitigation measures under either alternative. Relative beneficial effects on socioeconomics would occur with either alternative. Environmental justice impacts would be avoided due to compliance with IDNR permit requirements to avoid, minimize, or mitigate the adverse effects of mining operations.
Under the Action Alternative, TVA would require appropriate consultations with the pertinent federal and state agencies to ensure impacts associated with the Bleeder Shaft Facilities to cultural resources and to federally and state-listed species are avoided, minimized, or mitigated, once siting locations for the Bleeder Shaft Facilities are determined. Generally, these consultations are also required under the No Action Alternative, per IDNR permit conditions.
Under the Action Alternative, TVA would require appropriate consultations with the pertinent federal and state agencies to ensure impacts associated with the Bleeder Shaft Facilities to cultural resources and to federally and state-listed species are avoided, minimized, or mitigated, once siting locations for the Bleeder Shaft Facilities are determined. Generally, these consultations are also required under the No Action Alternative, per IDNR permit conditions.
TVA has decided to implement the preferred alternative of the EIS and approve the plan to extract TVA-owned coal reserves within a 12,125-acre portion of the overall SBR No. 6 shadow area. This alternative would achieve the purpose and need of the project. The Proposed Action would implement the terms of the existing coal lease agreement and recoup TVA's investment. Minor, temporary impacts to soils, groundwater, floodplains, surface waters and wetlands, vegetation, wildlife, and aquatic life would occur with either alternative. Other resources that would be temporarily affected under either alternative include prime farmland, water quality and supply, natural areas, land use, transportation, utilities, noise, and visual. These impacts would be minimized or mitigated per IDNR permit requirements.
On August 12, 2019, TVA published a Notice of Intent (NOI) in the
During the public scoping period, TVA received comments from the U.S. Environmental Protection Agency (EPA), the Sierra Club, and one private citizen. Comments were received regarding permits and agency coordination, alternatives analysis, the action alternative, and several resource categories, including water resources, air quality and greenhouse gases, human health and safety, and socioeconomics and environmental justice. In their comments, EPA requested to participate in the NEPA process as a cooperating agency.
TVA released the Draft EIS for public review in April 2020. A Notice of Availability (NOA) for the Draft EIS was published in the
The NOA for the Final EIS was published in the
TVA notes that the U.S. Army Corps of Engineers (Army Corps) will also
In addition, impacts to aquatic life, streams or other waterbodies would be subject to Sugar Camp's integrated fish and wildlife habitat reclamation plan. Per the IDNR-OMM permit requirements, implementation of the plan would avoid or mitigate permanent impacts to biological resources associated with the Action Alternative and other mining actions within 20 miles of the Project, including the activities associated with the No Action Alternative. TVA anticipates that these permit requirements will be sufficiently detailed to mitigate anticipated impacts to the watershed and associated aquatic life. As acknowledged in the Final EIS, certain site-specific information is currently unknown, pending final mine component design. Bleeder shaft facilities would be located to avoid Waters of the U.S. to the maximum extent practicable. Construction on the site of the East Refuse Disposal Area would potentially impact 27,806 linear feet of ephemeral and intermittent streams, 1.4 acres of wetlands, and one pond totaling 0.2 acres. These waterbodies likely contain aquatic life, which has been or would be temporarily disturbed by surface disturbances and coal extraction-related effects. However, displaced species would likely return with completion of reclamation activities. Such effects to aquatic life resulting from mining operations are subject to mitigation under integrated fish and wildlife habitat reclamation plans.
The EPA identified a typographical error in TVA's response to Comment 18 in Appendix C of the Final EIS. In the response, TVA incorrectly identified IDNR as the state agency with authority for enforcement of the National Pollutant Discharge Elimination System (NPDES) permit for the mine. In fact, the IEPA is the authorized agency. TVA notes that IEPA was correctly identified as the authorized agency in section 1.5.1 of the Final EIS. The EPA also commented that TVA's response to Comment 18 in Appendix C should have noted that NPDES permit limits for categorical standards cannot allow for instream mixing for achieving effluent limits and that the description of the instream dissipation of chloride is not relevant to the discussion about effluent exceedances because the mixing zone and receiving water conditions are taken into account when the effluent limit is established. TVA agrees that the current permit does not contain authorizations for discharges in exceedance of the NPDES permit effluent limits. Finally, as pointed out by EPA, TVA acknowledges that the current permit (IL0078565) does not authorize acid mine drainage.
Permit conditions would be enforced by the State of Illinois; TVA does not regulate the mining activities of Sugar Camp. State of Illinois mitigation measures include:
1. The implementation of sediment and erosion control practices (
2. The implementation of water quality protection measures (
3. The repair or compensation of any damage to buildings or other structures caused by subsidence.
4. The minimization of invasive species transmission per the requirements of the Illinois Noxious Weed Law.
5. Compensation for any interruption to well water quality or quantity caused by subsidence until the groundwater is restored.
6. The repair of any damage to roads caused by subsidence.
7. The repair of any drainage alteration caused by subsidence.
8. The compensatory mitigation of wetlands and streams impacted by subsidence, if necessary. This condition would also be enforced by the United States Army Corps of Engineers.
9. The repair of any damage to utilities caused by subsidence.
Office of the United States Trade Representative.
Notice.
The Office of the United States Trade Representative (USTR) will convene a virtual public hearing and accept rebuttal comments in the Section 301 investigation concerning Vietnam's acts, policies, and practices related to the valuation of its currency.
You should submit requests to appear at the hearing, hearing testimony, and written rebuttal comments through the Federal eRulemaking Portal:
For procedural questions concerning the submission of documents, contact the Section 301 line at (202) 395-5725. For questions concerning the public hearing, contact Michael Gagain, Assistant General Counsel, (202) 395-9529.
On October 2, 2020, the U.S. Trade Representative initiated an investigation pursuant to Section 301 of the Trade Act of 1974, of whether Vietnam's acts, policies, and practices related to the valuation of its currency are unreasonable or discriminatory and burden or restrict U.S. commerce.
USTR will hold a virtual public hearing in this investigation on Tuesday, December 29, 2020. To be assured of consideration, you must submit requests to testify at the virtual hearing, and summaries of your testimony, by December 10, 2020, at 11:59 p.m. Because the hearing will be public, your testimony should not include any confidential information.
USTR will post information regarding access to the virtual public hearing at
You may request to testify on the issues covered by the investigation.
• Whether Vietnam's currency is undervalued, and the level of the undervaluation.
• Vietnam's acts, policies, or practices that contribute to undervaluation of its currency.
• The extent to which Vietnam's acts, policies, or practices contribute to the undervaluation.
• Whether Vietnam's acts, policies and practices are unreasonable or discriminatory.
• The nature and level of burden or restriction on U.S. commerce caused by the undervaluation of Vietnam's currency.
• The determinations required under section 304 of the Trade Act, including what action, if any, should be taken.
USTR will offer a further opportunity for public comment in the event actions affecting specific products or services are considered in the investigation. Accordingly, the upcoming hearing will not involve testimony regarding specific products or services that might be affected by an action in the investigation.
USTR will consider rebuttal comments submitted by January 7, 2021. Rebuttal comments should be strictly limited to demonstrating errors of fact or analysis not pointed out in the written submissions or hearing testimony and should be as concise as possible.
Requests to appear and summaries of testimony, as well as rebuttal comments, must be submitted on
When submitting a request to appear and a summary of your testimony, provide in the `comment' field on the next page the full name, address, email address, and telephone number of the person who wishes to present the testimony. To submit a written statement or summary,
For any rebuttal comments that contain business confidential information (BCI), the file name of the business confidential version should begin with the characters `BCI.' You must clearly mark any page containing BCI by including `BUSINESS CONFIDENTIAL' on the top of that page and clearly indicating, via brackets, highlighting, or other means, the specific information that is BCI. If you request business confidential treatment, you must certify in writing that disclosure of the information would endanger trade secrets or profitability, and that you would not customarily release the information to the public. Filers of submissions containing BCI also must submit a public version of their comments. The file name of the public version should begin with the character `P.' Follow the `BCI' and `P' with the name of the person or entity submitting the comments. If these procedures are not sufficient to protect BCI or otherwise protect business interests, please contact the Section 301 line at (202) 395-5725 to discuss whether alternative arrangements are possible.
USTR will post submissions in the docket for public inspection, except for submissions properly designated as BCI. You can view submissions on
Office of the United States Trade Representative.
Notice.
The Office of the United States Trade Representative (USTR) will convene a virtual public hearing and accept rebuttal comments in the Section 301 investigation concerning Vietnam's acts, policies, and practices related to the import and use of illegally harvested or traded timber.
You should submit requests to appear at the hearing, hearing testimony, and written rebuttal comments through the Federal eRulemaking Portal:
For procedural questions concerning the submission of documents, contact the Section 301 line at (202) 395-5725. For questions concerning the public hearing, contact Assistant General Counsels David Lyons at (202) 395-9446, or Kimberly Reynolds at (202) 395-6336.
On October 2, 2020 the U.S. Trade Representative initiated an investigation pursuant to Section 301 of the Trade Act of 1974, of whether Vietnam's acts, policies, and practices related to the import and use of illegal timber are unreasonable or discriminatory and burden or restrict U.S. commerce.
USTR will hold a virtual public hearing in this investigation on Monday, December 28, 2020. To be assured of consideration, you must submit requests to testify at the virtual hearing, and summaries of your testimony, by December 10, 2020, at 11:59 p.m. Because the hearing will be public, your testimony should not include any confidential information.
USTR will post information regarding access to the virtual public hearing at
You may request to testify on the issues covered by the investigation.
• The extent to which illegal timber is imported into Vietnam.
• The extent to which Vietnamese producers, including producers of wooden furniture, use illegal timber.
• The extent to which products of Vietnam made from illegal timber, including wooden furniture, are imported into the United States.
• Vietnam's acts, policies, or practices relating to the import and use of illegal timber.
• The nature and level of the burden or restriction on U.S. commerce caused by Vietnam's import and use of illegal timber.
• The determinations required under section 304 of the Trade Act, including what action, if any, should be taken in the investigation.
USTR will offer a further opportunity for public comment in the event actions affecting specific products or services are considered in the investigation. Accordingly, the upcoming hearing will not involve testimony regarding specific products or services that might be affected by an action in the investigation.
USTR will consider rebuttal comments submitted by January 6, 2021. Rebuttal comments should be strictly limited to demonstrating errors of fact or analysis not pointed out in the written submissions or hearing testimony and should be as concise as possible.
Requests to appear and summaries of testimony, as well as rebuttal comments, must be submitted on
When submitting a request to appear and a summary of your testimony, provide in the `comment' field on the next page the full name, address, email address, and telephone number of the person who wishes to present the testimony. To submit a written statement or summary,
For any rebuttal comments that contain business confidential information (BCI), the file name of the business confidential version should begin with the characters `BCI.' You must clearly mark any page containing BCI by including `BUSINESS CONFIDENTIAL' on the top of that page and clearly indicating, via brackets, highlighting, or other means, the specific information that is BCI. If you request business confidential treatment, you must certify in writing that disclosure of the information would endanger trade secrets or profitability, and that you would not customarily release the information to the public. Filers of submissions containing BCI also must submit a public version of their comments. The file name of the public version should begin with the character `P.' Follow the `BCI' and `P' with the name of the person or entity submitting the comments. If these procedures are not sufficient to protect BCI or otherwise protect business interests, please contact the Section 301 line at (202) 395-5725 to discuss whether alternative arrangements are possible.
USTR will post submissions in the docket for public inspection, except for submissions properly designated BCI. You can view submissions on
Federal Highway Administration (FHWA), DOT.
Notice of request for extension of currently approved information collection.
The FHWA invites public comments about our intention to request the Office of Management and Budget's (OMB) approval for renewal of an existing information collection that is summarized below under
Please submit comments by January 25, 2021.
You may submit comments identified by DOT Docket ID Number 2020-0030 by any of the following methods:
Follow the online instructions for submitting comments.
Michael Dougherty 202-366-9234, Department of Transportation, Federal Highway Administration, Office of Highway Policy Information, 1200 New Jersey Avenue SE, Washington, DC 20590, Monday through Friday, except Federal holidays.
The estimated annual reporting burden is 102 hours; the estimated recordkeeping burden is 510 hours for a total of 612 hours. The 50 States and the District of Columbia share this burden. Preparing and processing the annual certification is estimated to require 2 hours per State. Recordkeeping is estimated to require an average of 10 hours per State.
The Paperwork Reduction Act of 1995; 44 U.S.C. Chapter 35, as amended; and 49 CFR 1.48.
Federal Highway Administration (FHWA), DOT.
Notice and request for comments.
FHWA invites public comments about our intention to request the Office of Management and Budget's (OMB) approval for a new information collection, which is summarized below under
Please submit comments by January 25, 2021.
You may submit comments identified by DOT Docket ID 2020-0028 by any of the following methods:
John Moulden, 202-493-3470, Turner-Fairbank Highway Research Center, Office of Corporate Research, Technology, and Innovation Management, Federal Highway Administration, Department of Transportation, 6300 Georgetown Pike, McLean, VA 22101. Office hours are from 8 a.m. to 5 p.m., Monday through Friday, except Federal holidays.
The Paperwork Reduction Act of 1995; 44 U.S.C. Chapter 35, as amended; and 49 CFR 1.48.
Federal Highway Administration (FHWA), DOT.
Notice and request for comments.
The FHWA invites public comments about our intention to request the Office of
Management and Budget's (OMB) approval for a new information collection, which is summarized below under
Please submit comments by January 25, 2021.
You may submit comments identified by DOT Docket ID 2020-0027 by any of the following methods:
Mark Ferroni, 202-366-3233, Office of Planning, Environment, and Realty, Federal Highway Administration, Department of Transportation, 1200 New Jersey Avenue SE, Washington, DC 20590. Office hours are from 6:00 a.m. to 3:30 p.m., Monday through Friday, except Federal holidays.
Reduction of highway traffic noise should occur through a program of shared responsibility with the most effective strategy being implementation of noise compatible planning and land use control strategies by state and local governments. Local governments can use their power to regulate land development to prohibit noise-sensitive land use development adjacent to a highway, or to require that developers plan, design, and construct development in ways that minimize noise impacts. The FHWA noise regulations limit Federal participation in the construction of noise barriers along existing highways to those projects proposed along lands where land development or substantial construction predated the existence of any highway.
The data reflects the flexibility in noise abatement decision-making. Some states have built many noise barriers while a few have built none. Through the end of 2010, 47 SDOTs and the Commonwealth of Puerto Rico have constructed over 2,748 linear miles of barriers at a cost of over $4.05 billion ($5.44 billion in 2010 dollars). Three states and the District of Columbia have not constructed noise barriers. Ten SDOTs account for approximately sixty-two percent (62%) of total barrier length and sixty-nine percent (69%) of total barrier cost. The type of information requested can be found in 23CFR772.13(f).
The previously distributed listing can be found at
An updated listing of noise barriers will be distributed nationally for use in the highway traffic noise program. It is anticipated that this information will be requested in 2014 (for noise barriers constructed in 2011, 2012 and 2013) and then again in 2017 (for noise barriers constructed in 2014, 2015 and 2016). After review of the “Summary of Noise Barriers Constructed by December 31, 2004” document, a SDOT may request to delete, modify or add information to any calendar year.
The Paperwork Reduction Act of 1995; 44 U.S.C. Chapter 35, as amended; and 49 CFR 1.48.
Federal Highway Administration (FHWA), DOT.
Notice and request for comments.
The FHWA invites public comments about our intention to request the Office of
Management and Budget's (OMB) approval for a new information collection, which is summarized below under
Please submit comments by January 25, 2021.
You may submit comments identified by DOT Docket ID 2020-0029 by any of the following methods:
Carolyn Winborne-James, 202-493-0353, Department of Transportation, Federal Highway Administration, Office of Real Estate Services, 1200 New Jersey Avenue SE, Washington, DC 20590. Office hours are from 8 a.m. to 5 p.m., Monday through Friday, except Federal holidays.
Similarly, FHWA established the Excellence in Right-of-Way Awards Program to honor the use of innovative practices and outstanding achievements associated with highway improvement projects as it relates to the Right-of-Way program. The goal of the program is to showcase exemplary and innovative projects, programs, initiatives, and practices that successfully integrate the consideration of the Right-of-Way program along with the association of the acquisition of land required to construct transportation facilities.
The Paperwork Reduction Act of 1995; 44 U.S.C. Chapter 35, as amended; and 49 CFR 1.48.
Federal Motor Carrier Safety Administration (FMCSA), DOT.
Notice and request for comments.
In accordance with the Paperwork Reduction Act of 1995, FMCSA announces its plan to submit the Information Collection Request (ICR) described below to the Office of Management and Budget (OMB) for its review and approval and invites public comment. The purpose of this ICR titled, “Motor Carrier Records Change Form,” is to collect information required by the Office of Registration (MC-RS) to process name changes, address changes, and reinstatements of operating authority for motor carriers, freight forwarders, and brokers.
We must receive your comments on or before January 25, 2021.
You may submit comments identified by Federal Docket Management System (FDMS) Docket Number FMCSA-2020-0202 using any of the following methods:
•
•
•
•
Jeff Secrist, Chief, Office of Registration & Safety Information, West Building 6th Floor, 1200 New Jersey Avenue SE, Washington, DC 20590. Telephone: (202) 385-2367; email
Motor carriers, freight forwarders, and property brokers are required to use Form MCSA-5889 to request a name or address change and to request reinstatement of a revoked operating authority. Respondents can submit the form online through the Licensing and Insurance (L&I) website, by fax, or by mail. According to data collected between 2017 and 2019, annually, 1% of forms are submitted by mail; 32% are submitted by fax; and 67% are submitted online. The information collected is then entered in the L&I database by FMCSA staff.
Form MCSA-5889 enables FMCSA to maintain up-to-date records so that the Agency can recognize the entity in question in case of enforcement actions or other procedures required to ensure that the carrier is fit, willing, and able to provide for-hire transportation services, and so that entities whose operating authority has been revoked can resume operation if they are not otherwise blocked from doing so. This multi-purpose form, filed by registrants on a voluntary, as-needed basis, simplifies the process of gathering the information needed to process the entities' requests in a timely manner, with the least amount of effort for all parties involved.
To reduce burden on respondents, increase consistency among FMCSA forms, and to ensure regulatory compliance, FMCSA removed and added the following questions from the currently approved Form MCSA-5889:
1. Added a Yes/No question: “Do you currently have, or have you had within the last three years of the date of this application, relationships involving common stock, common ownership, common management, common control or familial relationships with any FMCSA-regulated entities?” The purpose of this is to close the affiliation disclosure loophole. If the respondent answers “Yes”, they must then report the affiliate's USDOT number, MC/FF/MX number, legal name, doing business as name (if applicable), and current safety rating.
2. Added the Applicant's Oath. The applicant must read the oath, print their name and title, and sign the form. The purpose of this addition is to increase accountability and make Form MCSA-5889 consistent with similar FMCSA forms.
3. Removed one question asking whether the applicant or its representative completed the form. This was removed because the information is not necessary.
4. Removed three questions: Name, title, and signature. This was done because, with the addition of the Applicant's Oath, these questions became redundant.
The form prompts users to report the following data points (whichever are relevant to their records change request):
1. Requestor's fax number, email address, and applicant's oath.
2. Entity's legal/doing business as names, USDOT number, docket MC/MX/FX number, current street address, and phone numbers.
3. Affiliations with FMCSA-licensed entities.
4. Requested changes to the entity's address.
5. Requested changes to the entity's name and/or ownership, management or control.
6. Type(s) of operating authority the entity wishes to reinstate.
7. Credit card information (name, number, expiration date, address, date) if filing a name change or reinstatement.
Office of the Assistant Secretary of Transportation for Research and Technology (OST-R), U.S. Department of Transportation (DOT).
Notice of public meeting.
The purpose of this notice is to inform the public that DOT, through the Office of the Assistant Secretary for Research and Technology (OST-R) and the Maritime Administration (MARAD), will host a workshop on Global Positioning System (GPS) jamming and spoofing in the maritime environment on December 3, 2020. The workshop will focus on:
• How positioning, navigation, and timing (PNT) supports maritime applications;
• What happens when PNT is denied, disrupted, or manipulated in a maritime environment; and
• Options to reduce operational impact and increase PNT resiliency.
This DOT Workshop will be held virtually and is open to the general public by registration only. For those who would like to attend the workshop, we request that you register no later than November 30, 2020. Please use the following link to register:
You must include:
• Name
• Organization
• Telephone number
• Mailing and email addresses
• Country of citizenship
Several days before the workshop, an email containing the agenda, dial-in number, and WebEx information will be provided. DOT is committed to providing equal access to this workshop for all participants. If you need alternative formats or services because of a disability, please contact Elliott Baskerville (contact information listed below) with your request by the close of business on November 27, 2020.
Elliott Baskerville, Office of Positioning, Navigation, and Timing & Spectrum Management, Office of the Assistant Secretary for Research and Technology, U.S. Department of Transportation, 1200 New Jersey Ave. SE, Washington, DC 20590, 202-366-5284,
Accurate and reliable PNT capabilities are essential for the safety for all modes of transportation and will become increasingly important for automated vessels. The primary and most recognizable PNT service supporting critical infrastructure is GPS. However, because GPS relies on signals broadcast from the satellite constellation, its signals are low power at the receiver and are thus vulnerable to intentional and unintentional disruption, such as jamming and spoofing. GPS “jamming” involves the use of a device to block or interfere with GPS signals; “spoofing” is deceiving a GPS device through fake signals. Both phenomena undermine the reliability of GPS and may have adverse consequences for maritime safety and commerce.
Jamming has long been a threat to GPS due to the weak signal power from the GPS satellites. North Atlantic Treaty Organization (NATO) military drills in the Baltic Sea last year, with 40,000 troops and all 29 Nations participating, experienced GPS jamming. Spoofing was considered an unrealistic threat for many years because it is complicated to perform. However, high-profile demonstrations at the University of Texas that spoofed a drone and a sophisticated yacht brought spoofing into the public eye in 2012-2013, a little more than a decade after DOT's Volpe National Transportation Systems Center (Volpe Center) issued its report, “Vulnerability Assessment of the Transportation Infrastructure Relying on the Global Positioning System” (August 2001; available at:
A likely GPS spoofing attack occurred in the Black Sea in 2017, where over 20 ships erroneously reported their GPS positions as being inland at an airport. The number of separate vessels that reported the same false position and the characteristic jumping between the false and true position of the ships is strong evidence of a large-scale spoofing attack. More recently, incidents of GPS spoofing have been occurring around the world, particularly in maritime environments. The U.S. Government provides advisories of GPS interference through the Maritime Security Communications with Industry (MSCI) portal, at
Much of global trade is conducted by waterways, where ports are often congested and visibility is variable. In a maritime environment, GPS not only provides positioning information, but also provides inputs to speed, heading, steering, radar and target information, Electronic Chart Display Information System (ECDIS), Under Keel Clearance (UKC), and the Automatic Identification System (AIS). Being able to detect when spoofing is occurring is vital, since over 50% of all casualties at sea occur due to navigation issues. When GPS jamming and spoofing is detected, the goal is for ships to immediately switch to other navigation tools. It is therefore critical to use complementary PNT technologies to ensure PNT resiliency.
Consistent with these concerns, on February 12, 2020, President Trump issued Executive Order (E.O.) 13905,
• Raising awareness of the extent to which critical infrastructure depends on PNT services;
• Ensuring that critical infrastructure can withstand disruption or manipulation of PNT services; and
• Engaging the public and private sectors to promote responsible use of PNT services.
In accordance with Section 4(g) of E.O. 13905, DOT is conducting a pilot program to inform the development of the relevant PNT profile and research and development (R&D) opportunities. The DOT pilot program, led by OST-R and MARAD, is focused on addressing GPS jamming and spoofing impacts to maritime vessels through stakeholder engagement and evaluating complementary PNT technologies that can be adopted to mitigate the impacts during these threat scenarios. The DOT pilot program will be conducted through stakeholder engagement and evaluation of complementary PNT technologies that can be adopted to
The purpose of the workshop, which is a key component of stakeholder engagement of the DOT pilot program, is to increase public awareness of real-world incidents of the GPS signal being jammed or spoofed in a maritime environment and to discuss potential options to detect this interference, as well as use of complementary PNT technologies to provide a resilient PNT capability in the maritime environment.
Internal Revenue Service (IRS), Treasury.
Notice and request for comments.
The Internal Revenue Service, as part of its continuing effort to reduce paperwork and respondent burden, invites the general public and other Federal agencies to take this opportunity to comment on continuing information collections, as required by the Paperwork Reduction Act of 1995. The IRS is soliciting comments concerning the monthly tax return for wagers.
Written comments should be received on or before January 25, 2021 to be assured of consideration.
Direct all written comments to Kinna Brewington, Internal Revenue Service, Room 6526, 1111 Constitution Avenue NW, Washington, DC 20224.
Requests for additional information or copies of the form should be directed to LaNita Van Dyke, at (202) 317-6009, at Internal Revenue Service, Room 6526, 1111 Constitution Avenue NW, Washington, DC 20224, or through the internet, at
The following paragraph applies to all the collections of information covered by this notice.
An agency may not conduct or sponsor, and a person is not required to respond to, a collection of information unless the collection of information displays a valid OMB control number. Books or records relating to a collection of information must be retained as long as their contents may become material in the administration of any internal revenue law. Generally, tax returns and tax return information are confidential, as required by 26 U.S.C. 6103.
Internal Revenue Service (IRS), Treasury.
Notice and request for comments.
The Internal Revenue Service, as part of its effort to reduce paperwork and respondent burden, invites the general public and Federal agencies to take this opportunity to comment on continuing information collections, as required by the Paperwork Reduction Act of 1995. The IRS is soliciting comments concerning Treatment of Gain from the Disposition of Interest in Certain Natural Resource Recapture Property by S Corporations and Their Shareholders.
Written comments should be received on or before January 25, 2021 to be assured of consideration.
Direct all written comments to Paul D. Adams, Internal Revenue Service, Room 6526, 1111 Constitution Avenue NW, Washington, DC 20224. Requests for additional information or copies of the information collection should be directed to Sara Covington, (737) 800-6149, at Internal Revenue Service, Room 6526, 1111 Constitution Avenue NW, Washington, DC 20224, or through the internet, at
The following paragraph applies to all of the collections of information covered by this notice:
An agency may not conduct or sponsor, and a person is not required to respond to, a collection of information unless the collection of information displays a valid OMB control number. Books or records relating to a collection of information must be retained as long as their contents may become material in the administration of any internal revenue law. Generally, tax returns and tax return information are confidential, as required by 26 U.S.C. 6103.
Internal Revenue Service (IRS), Treasury.
Notice and request for comments.
The Internal Revenue Service (IRS), as part of its continuing effort to reduce paperwork and respondent burden, invites the general public and other Federal agencies to take this opportunity to comment on proposed and/or continuing information collections, as required by the Paperwork Reduction Act of 1995. The IRS is soliciting comments concerning Form 8609, Low-Income Housing Credit Allocation and Certification, and Form 8609-A, Annual Statement for Low-Income Housing Credit.
Written comments should be received on or before January 25, 2021 to be assured of consideration.
Direct all written comments to Kinna Brewington, Internal Revenue Service, Room 6526, 1111 Constitution Avenue NW, Washington, DC 20224.
Requests for additional information or copies of the regulation should be directed to LaNita Van Dyke, at (202) 317-6009 or Internal Revenue Service, room 6526, 1111 Constitution Avenue NW, Washington, DC 20224, or through the internet at
The following paragraph applies to all of the collections of information covered by this notice:
An agency may not conduct or sponsor, and a person is not required to respond to, a collection of information unless the collection of information displays a valid OMB control number. Books or records relating to a collection of information must be retained as long as their contents may become material in the administration of any internal revenue law. Generally, tax returns and tax return information are confidential, as required by 26 U.S.C. 6103.
Internal Revenue Service (IRS), Treasury.
Notice and request for comments.
The Internal Revenue Service, as part of its continuing effort to reduce paperwork and respondent burden, invites the general public and other Federal agencies to take this opportunity to comment on continuing information collections, as required by the Paperwork Reduction Act of 1995. The IRS is soliciting comments concerning product liability losses and
Written comments should be received on or before January 25, 2021 to be assured of consideration.
Direct all written comments to Kinna Brewington, Internal Revenue Service, room 6526, 1111 Constitution Avenue NW, Washington, DC 20224.
Requests for additional information or copies of the form should be directed to LaNita Van Dyke, at (202) 317-6009, or Internal Revenue Service, Room 6526, 1111 Constitution Avenue NW, Washington DC 20224, or through the internet, at
The following paragraph applies to all the collections of information covered by this notice.
An agency may not conduct or sponsor, and a person is not required to respond to, a collection of information unless the collection of information displays a valid OMB control number. Books or records relating to a collection of information must be retained as long as their contents may become material in the administration of any internal revenue law. Generally, tax returns and tax return information are confidential, as required by 26 U.S.C. 6103.
Departmental Offices, U.S. Department of the Treasury.
Notice.
The Department of the Treasury, as part of its continuing effort to reduce paperwork and respondent burden, invites the general public and other federal agencies to comment on the proposed information collections listed below, in accordance with the Paperwork Reduction Act of 1995.
Written comments must be received on or before December 28, 2020.
Written comments and recommendations for the proposed information collection should be sent within 30 days of publication of this notice to
Copies of the submissions may be obtained from Molly Stasko by emailing
44 U.S.C. 3501
Departmental Offices, U.S. Department of the Treasury.
Notice.
The Department of the Treasury will submit the following information collection requests to the Office of Management and Budget (OMB) for review and clearance in accordance with the Paperwork Reduction Act of 1995, on or after the date of publication of this notice. The public is invited to submit comments on these requests.
Comments should be received on or before December 28, 2020 to be assured of consideration.
Written comments and recommendations for the proposed information collection should be sent within 30 days of publication of this notice to
Copies of the submissions may be obtained from Molly Stasko by emailing
The BSA authorizes the Secretary of the Treasury, inter alia, to require financial institutions to keep records and file reports that are determined to have a high degree of usefulness in criminal, tax, and regulatory matters, or in the conduct of intelligence or counter-intelligence activities, to protect against international terrorism, and to implement anti-money laundering (AML) programs and compliance procedures. Regulations implementing Title II of the BSA appear at 31 CFR Chapter X. The authority of the Secretary to administer the BSA has been delegated to the Director of FinCEN.
31 U.S.C. 5318(l) requires FinCEN to issue regulations prescribing minimum standards for customer identification programs (CIP) for financial institutions. Regulations implementing section 5318(l) are as follows: (i) Banks, savings associations, credit unions, and certain non-federally regulated banks (31 CFR 1020.220); (ii) brokers or dealers in securities (31 CFR 1023.220); (iii) mutual funds (31 CFR 1024.220); and (iv) futures commission merchants and introducing brokers in commodities (31 CFR 1026.220).
The BSA authorizes the Secretary of the Treasury, inter alia, to require financial institutions to keep records and file reports that are determined to have a high degree of usefulness in criminal, tax, and regulatory matters, or in the conduct of intelligence or counter-intelligence activities, to protect against international terrorism, and to implement anti-money laundering (AML) programs and compliance procedures. Regulations implementing Title II of the BSA appear at 31 CFR Chapter X. The authority of the Secretary to administer the BSA has been delegated to the Director of FinCEN.
Section 311 of the USA PATRIOT Act (Section 311), codified at 31 U.S.C. 5318A, grants FinCEN the authority, upon finding that reasonable grounds exist for concluding that a foreign jurisdiction, financial institution, class of transactions, or type of account is of primary money laundering concern, to require domestic financial institutions and financial agencies to take certain special measures to address the primary money laundering concern.
FinCEN may impose one or more of these special measures in order to protect the U.S. financial system from these threats. Special measures one through four, codified at 31 U.S.C. 5318A(b)(1)-(b)(4), impose additional recordkeeping, information collection, and reporting requirements on covered U.S. financial institutions. The fifth special measure, codified at 31 U.S.C. 5318A(b)(5), allows FinCEN to impose prohibitions or conditions on the opening or maintenance of certain correspondent accounts.
FinCEN issued a final rule on November 8, 2017, imposing the fifth special measure to prohibit covered U.S. financial institutions from opening or maintaining a correspondent account for, or on behalf of, Bank of Dandong.[3] The rule further requires covered U.S. financial institutions to apply due diligence to their correspondent accounts that is reasonably designed to guard against their use by Bank of Dandong.[4] It also requires covered institutions to apply special due diligence to their foreign correspondent accounts that is reasonably designed to guard against their use to process transactions involving Bank of Dandong.
The notification requirement in 31 CFR 1010.660(b)(3)(i)(A) is intended to enhance cooperation from correspondent account holders in preventing Bank of Dandong from accessing to the U.S. financial system. The information financial institutions are required to maintain pursuant to section 1010.660(b)(4)(i) will be used by federal agencies and certain self-regulatory organizations to verify compliance by covered financial
44 U.S.C. 3501
Departmental Offices, U.S. Department of the Treasury.
Notice.
The Department of the Treasury will submit the following information collection requests to the Office of Management and Budget (OMB) for review and clearance in accordance with the Paperwork Reduction Act of 1995, on or after the date of publication of this notice. The public is invited to submit comments on these requests.
Comments should be received on or before December 28, 2020 to be assured of consideration.
Written comments and recommendations for the proposed information collection should be sent within 30 days of publication of this notice to
Copies of the submissions may be obtained from Molly Stasko by emailing
44 U.S.C. 3501
Departmental Offices, Department of the Treasury.
Notice.
The Department of the Treasury will submit the following information collection requests to the Office of Management and Budget (OMB) for review and clearance in accordance with the Paperwork Reduction Act of 1995, on or after the date of publication of this notice. The public is invited to submit comments on these requests.
Comments should be received on or before December 28, 2020 to be assured of consideration.
Written comments and recommendations for the proposed information collection should be sent within 30 days of publication of this notice to
Copies of the submissions may be obtained from Molly Stasko by emailing
44 U.S.C. 3501
Departmental Offices, U.S. Department of the Treasury.
Notice.
The Department of the Treasury, as part of its continuing effort to reduce paperwork and respondent burden, invites the general public and other federal agencies to comment on the proposed information collections listed below, in accordance with the Paperwork Reduction Act of 1995.
Written comments must be received on or before January 25, 2021.
Written comments and recommendations for the proposed information collection should be sent within 30 days of publication of this notice to
Copies of the submissions may be obtained from Molly Stasko by emailing
44 U.S.C. 3501
Departmental Offices, U.S. Department of the Treasury.
Notice.
The Department of the Treasury will submit the following information collection requests to the Office of Management and Budget (OMB) for review and clearance in accordance with the Paperwork Reduction Act of 1995, on or after the date of publication of this notice. The public is invited to submit comments on these requests.
Comments should be received on or before December 28, 2020 to be assured of consideration.
Written comments and recommendations for the proposed information collection should be sent within 30 days of publication of this notice to
Copies of the submissions may be obtained from Molly Stasko by emailing
On March 13, 2020, the President of the United States issued an emergency declaration under the Robert T. Stafford
44 U.S.C. 3501
Veterans Health Administration, Department of Veterans Affairs.
Notice.
In compliance with the Paperwork Reduction Act (PRA) of 1995, this notice announces that the Veterans Health Administration, Department of Veterans Affairs, will submit the collection of information abstracted below to the Office of Management and Budget (OMB) for review and comment. The PRA submission describes the nature of the information collection and its expected cost and burden, and it includes the actual data collection instrument.
Written comments and recommendations for the proposed information collection should be sent within 30 days of publication of this notice to
Danny S. Green, Office of Quality, Performance and Risk (OQPR), Department of Veterans Affairs, 810 Vermont Avenue NW, Washington, DC 20420, (202) 421-1354 or email
a.
b.
c.
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
By direction of the Secretary.
Commodity Futures Trading Commission.
Final rule.
The Commodity Futures Trading Commission (“Commission” or “CFTC”) is amending certain regulations setting forth the real-time public swap reporting and dissemination requirements for swap data repositories (“SDRs”), derivatives clearing organizations (“DCOs”), swap execution facilities (“SEFs”), designated contract markets (“DCMs”), swap dealers (“SDs”), major swap participants (“MSPs”), and swap counterparties that are neither SDs nor MSPs. The amendments, among other things, address certain issues related to reporting post-priced swaps (“PPS”) and disseminating swaps associated with prime brokerage arrangements. In addition, the Commission is adopting technical amendments to certain provisions in other parts of its regulations.
Thomas Guerin, Special Counsel, (202) 734-4194,
Section 2(a)(13) of the Commodity Exchange Act (“CEA”) authorizes and requires the Commission to promulgate regulations for the real-time public reporting of swap transaction and pricing data. Section 2(a)(13)(A) defines “real-time public reporting” as reporting data relating to a swap transaction, including price and volume, as soon as technologically practicable after the time at which the swap transaction has been executed. Section 2(a)(13)(B) authorizes the Commission to make swap transaction and pricing data available to the public in such form and at such times as the Commission determines appropriate to enhance price discovery.
Section 2(a)(13) also imposes statutory requirements on the Commission. First, section 2(a)(13)(E) requires the Commission to prescribe regulations specifying what constitutes large notional swap transactions and the appropriate time delays for reporting such transactions to the public. Second, sections 2(a)(13)(E)(i) and 2(a)(13)(C)(iii) of the CEA require the Commission to protect the identities of counterparties and certain business transactions. Third, section 2(a)(13)(E)(iv) directs the Commission, in promulgating regulations under section 2(a)(13), to take into account whether public disclosure of swap transaction and pricing data will “materially reduce market liquidity.”
Part 43 of the Commission's regulations implements real-time public reporting requirements.
Following the adoption of part 43, Commission staff has worked with SDRs, SEFs, DCMs, and reporting counterparties to address questions regarding interpretation and implementation of the regulatory requirements. Several years ago, the Division of Market Oversight (“DMO”) also reviewed the Commission's swap reporting rules. After completing that review, DMO announced
In February 2020, the Commission proposed certain changes to part 43 (“Proposal”)
The Commission received 33 comment letters regarding the
The Commission is adopting non-substantive changes to § 43.1. The Commission is removing § 43.1(b). Existing § 43.1(b)(1), titled “Scope,” states that part 43 applies to all swaps, as defined in CEA section 1a(47),
The Commission is also re-designating existing § 43.1(c), entitled “Rules of construction,” as § 43.1(b). The first sentence of existing § 43.1(c) states that the examples in this part and in appendix A to this part are not exclusive. The Commission is deleting the reference to “appendix A” because the Commission is removing examples from appendix A.
The Commission is also deleting § 43.1(d), entitled “Severability.” Existing § 43.1(d) provides that if any provision of part 43, or the application thereof to any person or circumstance, is held invalid, such invalidity shall not affect other provisions or application of such provision to other persons or circumstances which can be given effect without the invalid provision or application. In the event a court invalidates one or more provisions of part 43, it is unclear that the Commission would interpret all related remaining provisions as continuing to be effective in the absence of the invalid provision(s). The Commission wishes to maintain the flexibility to make that determination at the time, and in light, of any such ruling.
The Commission received no comments on the changes to § 43.1. For the reasons discussed above, the Commission is adopting the changes thereto as proposed.
The paragraph of existing § 43.2 is not lettered. The Commission is lettering the existing paragraph as “(a)” and adding paragraph (b) to § 43.2. Paragraph (a) will contain all of the definitions in existing § 43.2, as the Commission is modifying them. New paragraph (b) will clarify the terms not defined in part 43 have the meanings assigned to those terms in § 1.3 of the Commission's regulations, which was implied before but was not explicit.
The Commission is also adding new definitions, amending certain existing definitions, and removing certain definitions. Within each of these categories of definitions, the Commission discusses the changes in alphabetical order, except as otherwise noted.
The Commission is adding a definition of “execution date” to § 43.2. As proposed, “execution date” refers to the date, determined by reference to Eastern Time, on which swap execution occurred. The Commission believes the term is necessary for the new regulations for PPSs.
The Commission received three comments opposing the definition's reference to Eastern Time. Chatham believes the Commission should use coordinated universal time (“UTC”) instead of Eastern Time to avoid reporting counterparties incurring time and expense converting systems to track in Eastern Time.
The Commission appreciates commenters raising the reference to Eastern Time is inconsistent with the appendix A data elements regarding execution that use UTC. The Commission believes removing the reference to time from the definition of “execution date” best addresses the issue, as the reference to time is unnecessary with time covered by the data elements
The Commission is adding a definition of “post-priced swap” to § 43.2. A “post-priced swap” will mean an off-facility swap for which the price is not determined as of the time of execution. The Commission discusses the new regulations for PPSs in section II.C.2.
The Commission is adding a definition of “reporting counterparty” to § 43.3. This definition is the same as the existing definition of “reporting party” in § 43.2, but uses the more-specific term “counterparty” instead of “party.”
The Commission is adding a definition of “swap execution facility” to § 43.2. Parts 43 and 45 currently use the term, but only part 45 defines it. “Swap execution facility” will mean a trading system or platform that is a SEF as defined in CEA section 1a(50) and in 17 CFR 1.3, and that is registered with the Commission pursuant to CEA section 5h and 17 CFR part 37.
The Commission is adding a definition of “swap transaction and
The Commission proposed adding the following six definitions to § 43.2: “mirror swap;”
The Commission is making non-substantive changes to the definitions of: “as soon as technologically practicable” (“ASATP”); “asset class;” “novation;” “other commodity;” and “reference price.”
The Commission proposed changing the definitions of “appropriate minimum block size,” “large notional off-facility swap” (LNOFS), and “block trade” in § 43.2.
The Commission first proposed changing the “block trade” definition in a November 2018 rule proposal.
The Commission believes the change to condition (2) permitting execution of block trades—intended to be cleared or not—on a SEF's non-order book trading systems or platforms furthers the CEA goal of promoting swap trading on SEFs.
In addition, the Commission believes that new condition (2), in allowing participants to use a SEF's non-Order Book functionalities to execute swap block trades, is consistent with the Commission's regulatory approach to mitigate risks of information leakage (
Finally, the Commission believes permitting block trades to be executed on a SEF's non-Order Book trading platforms while also allowing them to “occur away” from a SEF provides SEFs increased flexibility. In particular, SEFs will be able to provide execution methods for block trades that are most suitable, efficient, and cost-effective for the product being traded, the SEF's market, and its market participants.
Therefore, the Commission is adopting paragraph (2) of the “block trade” definition as proposed with a minor non-substantive technical edits for clarity and consistency. However, the Commission is not adopting paragraph (1) of the proposed “block trade” definition and is keeping the definition of “large notional off-facility swap” in part 43.
The Proposal combined the definition of “large notional off-facility swap” into the definition of “block trade” to conform to proposed changes to § 43.5. The changes to § 43.5 would have created a single block trade dissemination delay regardless of whether the transaction was a “block trade” or a “large notional off-facility swap,” thus obviating the need for separate definitions.
In light of the above changes, § 43.2 will define a “block trade” as a publicly reportable swap transaction that: (1) Involves a swap listed on a SEF or DCM; (2) is executed on a SEF's trading system or platform that is not an order book as defined in § 37.3(a)(3), or occurs away from the SEF's or DCM's trading system or platform and is executed pursuant to the SEF's or DCM's rules and procedures; (3) has a notional or principal amount at or above the appropriate minimum block size applicable to such swap; and (4) is reported subject to the rules and procedures of the SEF or DCM and the rules described in part 43, including the appropriate time delay requirements set forth in § 43.5.
The Commission received two comments on the Proposal's definition of “block trade.” ICI believes the proposed definition incorporating “block trade” and “large notional off-facility swap” would promote clarity and consistency across Commission regulations.
Conversely, the NFP Electric Associations believe “[t]he concept of a `block trade' is not well understood in the swap markets” and recommends that the Commission should continue “to use the descriptive term `large notional off-facility swap,' as drawn from the primary language of CEA section 2a(13)(E), rather than use `block trade'. . . .”
The Commission also received six comments on the 2020 SEF NPRM's “block trade” definition.
The Commission disagrees with the TP ICAP SEFs' assertion there should be no limitation on the method execution that can be used for a block trade.
The Commission is changing the definition of “embedded option” in § 43.2 by removing the reference to
The Commission is changing the definition of “execution” in § 43.2
The Commission is amending the definition of “off-facility swap” in § 43.2 by removing the reference to “publicly reportable” and “registered.” Existing § 43.2 defines off-facility swap as any publicly reportable swap transaction that is not executed on or pursuant to the rules of a registered
The Commission is changing the definition of “public dissemination and publicly disseminate” in § 43.2. Existing § 43.2 defines “public dissemination and publicly disseminate” as to publish and make available swap transaction and pricing data in a non-discriminatory manner, through the internet or other electronic data feed that is widely published and in machine-readable electronic format. Separately, § 43.3(d)(1) requires that SDRs “publicly disseminate” swap transaction and pricing data in a consistent, usable, and machine-readable electronic format that allows the data to be downloaded, saved, and analyzed.
The definition of “public dissemination and publicly disseminate” varies enough from § 43.3(d)(1) to create ambiguity for SDRs as to the format they must use in publicly disseminating swap transaction and pricing data. For instance, the definition of “publicly disseminate” requires that access be non-discriminatory, but § 43.3(d)(1) does not explicitly require access be non-discriminatory. Therefore, the Commission is re-locating the qualification in § 43.3(d)(1) that SDRs publicly disseminate swap transaction and pricing data in a consistent, usable, and machine-readable electronic format that allows the data to be downloaded, saved, and analyzed to the definition of “public dissemination and publicly disseminate” in § 43.2.
ISDA-SIFMA and ICE SDR both request the Commission clarify the list of swaps that are not included in the definition.
In response to ICE SDR's comment that it is unclear whether cross-border transactions are exempt from the definition the “publicly reportable swap transaction,” the Commission notes that its cross-border guidance covers cross-border reporting requirements. The Commission does not want to reassess the existing definition or its cross-border guidance without providing adequate notice for all market participants to comment on.
The NFP Electric Associations believe the Commission should exclude a subset of off-facility non-financial commodity swaps from the definition because few, if any, of such swaps enhance discovery.
ICE DCOs and CME believe if the Commission finalizes § 43.3(a)(5), it should also change the definition of publicly reportable swap transaction to exclude swaps created through DCO default management processes.
The Commission is changing the definition of “trimmed data set” in § 43.2 by changing the standard deviation used in the calculation of the trimmed data set from four to two for the “other commodity” asset class, and from four to three for all other asset classes. The Commission discusses the reasoning behind these changes in section II.F.2.
The Commission is removing the definition of “Act” from § 43.2 because the term is defined in § 1.3.
The Commission proposed removing the definition of “business day” from § 43.2 because the term is defined in § 1.3. Further, the Commission proposed removing the definition of “business hours” because the term would have been unnecessary as a result of the Commission's proposal to remove references to “business hours” in the § 43.5 regulations for the timing delays for block trades.
The Commission received one comment on removing the definition of “business day.” DTCC notes § 43.2 does not include Saturdays while § 1.3 includes Saturdays; thus, replacing § 43.2 with § 1.3 would impact SDR operations as well as the currency conversion requirements in proposed § 43.6(g)(4).
The Commission agrees with DTCC that removing the definition of business day from § 43.2 would create a discrepancy in the regulations that would impact operations for all market participants. Therefore, the Commission is not adopting the proposal to remove the definition of business day from § 43.2. Similarly, the Commission is not adopting the proposal to remove the term “business hours” from § 43.2 because, as the Commission discusses in section II.E.2, § 43.5(c) will continue to reference “business hours.”
The Commission is removing the definition of “confirmation” from § 43.2, along with the following related definitions: “affirmation” and “confirmation by affirmation.” These definitions are unnecessary in part 43, as they are not used in any of the regulations.
The Commission is removing the definition of “executed” from § 43.2. The current definition is vague and the definition of “execution date” will provide the specificity that the current “executed” definition lacks.
The Commission is removing the definition of “real-time public reporting” from § 43.2. Existing § 43.2 defines “real-time public reporting” as the reporting of data relating to a swap transaction, including price and volume, ASATP after the time at which the swap transaction has been executed. The CEA currently already defines “real-time public reporting” as to report data relating to a swap transaction, including price and volume, ASATP after the time at which the swap transaction has been executed.
The Commission is removing the definition of “reporting party” from § 43.2 because it is adding the more-precise definition of “reporting counterparty” to § 43.2, as discussed above.
The Commission proposed removing the following definitions from § 43.2 as a result of proposed changes to §§ 43.5 and 43.6 for block trades and LNOFSs: “futures-related swap,” “major currencies,” “non-major currencies,” and “super-major currencies.” The Commission declines to adopt the proposal to remove these definitions from § 43.2.
The Commission is also removing the following definitions from § 43.2 as a result of changes simplifying the definition of “novation:” “remaining party,” “transferee,” and “transferor.”
The Commission is removing the “unique product identifier” (“UPI”) definition from § 43.2. “Unique product identifier” is currently only used in § 43.4(e). The Commission is deleting existing § 43.4(e), as discussed below in section II.D.1. Therefore, the definition of UPI in § 43.2 is unnecessary.
The Commission is removing the definition of “widely published” from § 43.2. “Widely published” means to publish and make available through electronic means in a manner that is freely available and readily accessible to the public. “Widely published” is currently referenced in the definition for “public dissemination and publicly disseminate” as the standard by which SDRs must publish data.
The Commission is adopting changes to § 43.3(a)(1). Existing § 43.3(a)(1): (i)
The Commission is changing the reference to a “reporting party” to reference the persons that, depending on the circumstances, have the reporting obligation for a publicly reportable swap transaction: A reporting counterparty; a SEF; or a DCM to be more precise. The Commission is also rewording § 43.3(a)(1) for brevity and adding a cross-reference to proposed § 43.3(a)(2) through (6), which address matters such as who must report publicly reportable swap transactions and the timing thereof. Consequently, the Commission is adding language to § 43.3(a)(1) stating that it would be “subject to” proposed § 43.3(a)(2) through (6) to reflect that, with respect to the transactions and persons covered by proposed § 43.3(a)(2) through (6), the provisions thereof apply instead of the general ASATP requirement of proposed § 43.3(a)(1). The Commission is also adding a requirement that the publicly reportable swap transaction reporting required pursuant to proposed § 43.3(a)(1) through (6) be done in the manner set forth in proposed § 43.3(d).
Finally, the Commission is deleting the sentence in § 43.3(a)(1) stating that for purposes of part 43, a registered SDR includes any SDR provisionally registered with the Commission pursuant to part 49. The Commission is replacing all references to registered SDRs with references to SDRs in § 43.3(a) specifically and throughout part 43.
The Commission did not receive any comments on the non-substantive changes to § 43.3(a)(1). For the reasons discussed above, the Commission is adopting the changes to § 43.3(a)(1) as proposed with non-substantive edits for clarity. Amended § 43.3(a)(1) will require reporting counterparties, SEFs, or DCMs responsible for reporting a swap to report the publicly reportable swap transaction to an SDR ASATP after execution subject to § 43.3(a)(2) through (6) and in the manner set forth in § 43.3(d).
The Commission is adopting non-substantive changes to § 43.3(a)(2). Existing § 43.3(a)(2) states that a party to a publicly reportable swap transaction can satisfy its part 43 real-time public reporting obligations by executing publicly reportable swap transactions on or pursuant to the rules of a SEF or DCM. Existing § 43.3(b)(1) states that SEFs and DCMs satisfy their real-time public reporting obligations by transmitting swap transaction and pricing data to SDRs ASATP after the publicly reportable swap transaction was executed on or pursuant to the rules of the trading platform or facility.
The Commission is replacing § 43.3(a)(2) with the existing requirement in § 43.3(b)(1). New § 43.3(a)(2) will state that SEFs or DCMs must report publicly reportable swap transactions executed on or pursuant to the rules of a SEF or DCM ASATP after execution. As a result, § 43.3(a)(2), instead of § 43.3(b)(1), will contain SEFs' and DCMs' part 43 reporting obligations. In revising § 43.3(a)(2), the Commission is replacing the reference to a “registered [SEF]” with a reference to SEFs because the term “registered” is unnecessary with the Commission defining “SEFs” in § 43.2 as registered SEFs.
The Commission did not receive any comments on the structural and non-substantive changes to § 43.3(a)(2). For the reasons discussed above, the Commission is adopting the changes as proposed. Amended § 43.3(a)(2) will require that for each swap executed on or pursuant to the rules of a SEF or DCM, the SEF or DCM shall report swap transaction and pricing data to an SDR ASATP after execution.
The Commission proposed non-substantive changes to § 43.3(a)(3). Existing § 43.3(a)(3) requires reporting parties to report all off-facility swaps to an SDR for the appropriate asset class in accordance with the rules set forth in part 43 ASATP following execution, and sets out the reporting hierarchy for these publicly reportable swap transactions.
The Commission is clarifying in § 43.3(a)(3)(iii) through (v) that, in situations where the parties to an off-facility publicly reportable swap transaction must designate which of them is the reporting counterparty, they must make such designation prior to the execution of the off-facility publicly reportable swap transaction so that there is no delay in reporting the off-facility publicly reportable swap transaction pursuant to part 43. The Commission believes it will prevent a delay if the parties do not make such designation until after the off-facility publicly reportable swap transaction is executed or cannot agree on such designation.
Because the Commission is adding part 43 reporting requirements specific to PPSs, clearing swaps, and mirror swaps, respectively, in new § 43.3(a)(4) through (6), the Commission is introducing proposed § 43.3(a)(3) with “except as otherwise provided in paragraphs (a)(4) through (6) of this section.”
The Commission did not receive any comments on the changes to § 43.3(a)(3). For the reasons discussed above, the Commission is adopting the changes to § 43.3(a)(3) as proposed with non-substantive edits for clarity. Amended § 43.3(a)(3) will require that, except as otherwise provided in § 43.3(a)(4) through (6), a reporting counterparty report all publicly reportable swap transactions that are off-facility swaps to an SDR for the appropriate asset class in accordance with the rules set forth in part 43 ASATP after execution. Unless otherwise agreed to by the parties prior to execution, the reporting hierarchy will remain the same as it is in existing § 43.3(a)(3).
The Commission proposed new § 43.3(a)(4) to address issues market participants face in reporting PPSs. “Post-priced swap” is a newly defined term in § 43.2 that means an off-facility swap for which the price has not been determined at the time of execution. Existing § 43.3(a) generally requires the reporting party for each publicly reportable swap transaction to report
In the Proposal, the Commission proposed a longer deadline for reporting swap transaction and pricing data for PPSs. Proposed § 43.3(a)(4)(i) would permit the reporting counterparty to delay reporting a PPS to an SDR until the earlier of the price being determined and 11:59:59 p.m. eastern time on the execution date. Proposed § 43.3(a)(4)(i) would further provide that, if the price of a publicly reportable swap transaction that is a PPS is not determined by 11:59:59 p.m. eastern time on the execution date, the reporting counterparty shall: (i) Report all swap transaction and pricing data for such PPS other than the price and any other then-undetermined variable term, and (ii) report each such item of previously undetermined swap transaction and pricing data ASATP after such item is determined.
The Commission received two comments opposing a delay from real-time reporting for PPSs. Citadel comments that instead of reducing the amount of information publicly reported in real-time, the Commission should enhance the reported data by implementing a separate flag to specifically identify PPSs.
Better Markets comments that any delay in public reporting would advantage certain market participants but reporting on the date of execution would be achievable for the vast majority of PPSs contingent on an independent market measure.
The Commission received six comments supporting a delay from real-time reporting for PPSs. AMG supports permitting a reporting counterparty to report PPSs at the earlier of the price being determined or 11:59:59 p.m. eastern time on the execution date.
ICI comments that the proposal would provide clarity and consistency so market participants can understand when their trading information will be publicly disseminated to the market.
ISDA-SIFMA strongly agree with the proposal.
CME believes that PPSs and other swaps with variable term(s) that are not known at the time of execution should not be reported or disseminated until such time that the price(s) and all other variable term(s) are known.
FIA suggests the Commission amend the Proposal to require the reporting of a PPS only after the price is determined, regardless of whether the price is determined on or after the execution date. FIA believes there is no value in reporting swap data without a price element and that reporting only after the price has been determined should reduce the risk of front-running.
The Commission received one comment maintaining that the proposal lacked needed explanation. Better Markets comments that the Commission's general description is undoubtedly accurate, but it does not sufficiently describe the use of PPSs for the public to determine the value, if any, of such transactions that would justify codifying a delayed public reporting timeline.
The Commission received one comment regarding an alternative proposal of reporting PPSs ASATP and then updating the report after the price is determined (in response to the Commission's request for comment 2). ISDA-SIFMA oppose the alternative proposal and comment that PPSs should have a reporting delay before being publicly disseminated by the SDR.
The Commission received one comment related to the alternative of an indefinite delay for PPSs (in response to the Commission's request for comment 3). ISDA-SIFMA comments that PPS reporting under part 43 should be delayed until (a) the price is determined, or (b) 11:59:59 p.m. eastern time on the next business day following the execution date. If the price is still not yet known at 11:59:59 p.m. eastern time on the next business day following the execution date, ISDA-SIFMA comments that the reporting counterparty should then report the data elements that are known. Further, ISDA-SIFMA believe that the majority of PPSs would have the price determined prior to T+1. ISDA-SIFMA believe the reporting of PPSs before the price is determined may increase the costs of hedging by signaling to other participants that a SD will be hedging a particular large notional trade the following day.
The Commission received one comment regarding whether the definition of PPS should be amended to exclude swaps for which the price is not known at execution because it is contingent upon the outcome of SD hedging (in response to the Commission's request for comment 4). ISDA-SIFMA comments that swaps for which a price is not known at execution because it is contingent upon the outcome of SD hedging should benefit from a reporting delay. ISDA-SIFMA do not believe permitting such swaps to receive the reporting delay in proposed § 43.3(a)(4) would change trading behavior.
The Commission received three comments addressing indicators for PPSs. ISDA-SIFMA do not support an additional indicator to identify whether the price for a PPS is not known because it is contingent on SD hedging. ISDA-SIFMA believe that an identifier that specifies the reason the price is not known for a PPS would exacerbate the potential for other market participants to trade ahead of SD hedging.
The Commission received one comment regarding costs and benefits. ISDA-SIFMA recommend that reporting for PPSs be delayed at least until 11:59:59 p.m. eastern time on the next business day following the execution date because of the potential cost to customers that results from the proposed 11:59:59 p.m. eastern time cutoff for PPSs, particularly in the context of global equity index trades.
The Commission received one comment addressing an inconsistency with proposed validations. CME comments that the proposed PPS reporting process is inconsistent with the validations proposed in the Proposal.
For reasons discussed in the Proposal and as more fully considered in light of comments, discussed below, the Commission is adopting § 43.3(a)(4) as proposed with a minor ministerial change for clarity. The Commission is modifying the swap data technical specification in response to a comment from CME that § 43.3(a)(4) was inconsistent with the swap data technical specification.
The Commission agrees with commenters that believe the reporting and public dissemination of PPSs ASATP after execution, but before the price is determined, generally does not serve a significant price discovery function. However, the Commission disagrees with CME's comment that the public dissemination of a PPS prior to the price being determined
The Commission also agrees with FIA and ICI that the publishing of swap transaction and pricing data for PPSs ASATP after execution presents unique and heightened risks of front running. Public reporting of PPSs before their prices are determined would allow market participants to transact in swaps ahead of the event on which the price is contingent, potentially disadvantaging a counterparty to the PPS and increasing its costs. The Commission believes the increase in costs could be expected to lead market participants to forego the use of such swaps, thereby materially reducing swap market liquidity.
The Commission believes proposed § 43.3(a)(4) strikes an appropriate balance between public transparency and price discovery, and concerns that immediate publication of PPSs would materially reduce market liquidity.
In permitting the delayed reporting of PPSs until the earlier of the price being determined or the end of the execution day, the Commission expects that the majority of PPSs will be publicly disseminated only
The Commission also expects the end of the day reporting deadline in § 43.3(a)(4)
Additionally, the Commission is modifying the technical specification in response to a comment by CME. The Commission agrees with CME that the validations in the draft specification needed to be revised to ensure that swaps required to be reported pursuant to § 43.3(a)(4) would be consistent with the validations proposed in the specification. The validations in the technical specification have been revised accordingly.
The Commission agrees with DTCC that adding exceptions to the proposed validations in the technical specification, as the Commission is doing to facilitate the reporting of swaps with variable terms, should generally be avoided because it creates complexities and impedes the standardization of reporting brought about by strict validation rules. However, the Commission is cognizant of its statutory directive to make swap transaction and pricing data available as appropriate to enhance price discovery while taking into account whether the public dissemination will materially reduce market liquidity. Accordingly, the Commission does not view the benefits of simplicity and standardization available under the alternative approach of providing an indefinite delay in reporting PPSs until all variable terms are determined as sufficient reason to justify deviation from the more balanced approach that the Commission believes best suited to effectuate this statutory directive.
The Commission is amending § 43.3(a) by adding DCOs to the reporting counterparty hierarchy for clearing swaps that are publicly reportable swap transactions to address the limited circumstances in which DCOs may execute clearing swaps that meet the definition of a publicly reportable swap transaction in part 43. Proposed § 43.3(a)(5) stated that notwithstanding the provisions of § 43.3(a)(1) through (3), if a clearing swap, as defined in § 45.1, is a publicly reportable swap transaction, the DCO that is a party to such swap shall be the reporting counterparty and shall fulfill all reporting counterparty obligations for such swap ASATP after execution.
The Commission received two comments on the proposed amendments to § 43.3(a)(5). ICE DCOs and CME believe that if the Commission finalizes proposed § 43.3(a)(5), the Commission should amend the definition of “publicly reportable swap transaction” in § 43.2 to exclude swaps created through DCO default management processes to avoid frustrating the default management process by allowing front-running if the processes span multiple days.
The Commission agrees with ICE DCOs and CME that the Commission should amend the definition of publicly reportable swap transaction to exclude swaps created through DCO default management processes because of § 43.3(a)(5). The Commission is concerned that the new requirement could impede the efficacy or ability of DCOs to proceed with default management exercises.
As such, the Commission is adopting § 43.3(a)(5) as proposed, but as discussed above in section II.B.2, is amending the definition of “publicly reportable swap transaction” in § 43.2(a) to exclude swaps entered into by a DCO as part of managing the default of a clearing member. New § 43.3(a)(5) will require that notwithstanding the provisions of § 43.3(a)(1) through (3), if a clearing swap, as defined in § 45.1(a), is a publicly reportable swap transaction, the DCO that is a party to such swap shall be the reporting counterparty and shall fulfill all reporting counterparty obligations for such swap ASATP after execution.
The Commission understands that prime brokerage swaps begin with a counterparty opening an account with a PB that grants limited agency powers to the counterparty. These limited powers enable the counterparty, as an agent for the PB, to enter into swaps with approved executing dealers (“ED”), subject to specific limits and parameters, such as credit limits and collateral requirements. The PB also enters into “give-up” arrangements with approved EDs in which the EDs agree to negotiate swaps with the counterparty, acting as an agent for the PB, within the specified parameters and to face the PB as counterparty for the resulting ED-PB swap (“ED-PB Swap”).
The Commission understands that in a prime brokerage swap, the counterparty seeks bids for the desired swap from one or more of the approved EDs, within the parameters established by the PB. Once the counterparty and ED agree on the terms, the Commission believes that both the counterparty and ED provide a notice of the terms to the PB, and those terms constitute the ED-PB Swap, which the PB must accept if: The swap is with an approved ED; the counterparty and ED have committed to the material terms; and the terms are within the parameters established by the PB. Once the ED-PB Swap is accepted by the PB, the PB enters into a mirror swap (“Mirror Swap”) with the counterparty with identical economic terms and pricing, subject to adjustment, as a result of the prime brokerage servicing fee.
The CEA authorizes the Commission to make swap transaction and pricing data available to the public in such form and at such times as the Commission determines appropriate to enhance price discovery.
As noted above at section II.C, the Commission proposed adding the following six definitions to § 43.2: “mirror swap;” “pricing event;” “prime broker;” “prime brokerage agency arrangement;” “prime brokerage agent;” and “trigger swap.” Since these six proposed definitions are related to the Commission's proposal to exempt mirror swaps from public dissemination, the Commission discusses these definitions in this section.
The Commission proposed adding the term “prime brokerage agency arrangement” to § 43.2(a). “Prime brokerage agency arrangement” would mean an arrangement pursuant to which a PB authorizes one of its clients, acting as agent for such PB, to cause the execution of a particular leg of a prime brokerage transaction. The Commission's goal in proposing the “prime brokerage agency arrangement” definition and using this defined term in other definitions in proposed § 43.2(a) was to help ensure that the scope of unreported mirror swaps is limited to swaps that are, among other things, integrally related to the other leg(s) of a prime brokerage transaction that will always be required to be reported.
The Commission proposed adding the term “prime brokerage agent” to § 43.2(a) as a new definition that would mean a client of a PB who causes the execution of a particular leg(s) of a prime brokerage transaction acting pursuant to a prime brokerage agency arrangement.
The Commission also proposed adding the term “prime broker” to § 43.2(a). “Prime broker” would mean with respect to a mirror swap and the related leg(s) of a PB transaction that will not be required to be reported, a SD acting in the capacity of a PB with respect to such swaps. The Commission proposed to use the term “prime broker” in the proposed definitions of “prime brokerage agency arrangement,” “prime brokerage agent,” and “trigger swap” in proposed § 43.2(a), and in proposed § 43.3(a)(6), to establish the parameters of when a “mirror swap” would not be reportable under part 43 if it satisfied the terms of proposed § 43.3(a)(6)(i).
The Commission proposed adding the term “trigger swap” to § 43.2(a) as a new definition that would mean a swap: (1) That is executed pursuant to one or more prime brokerage agency arrangements;
The Commission proposed adding the term “pricing event” to § 43.2(a) as a new definition that would mean the completion of the negotiation of the material economic terms and pricing of a trigger swap. The Commission proposed using the term “pricing event” in proposed § 43.3(a)(6)(i) to make it clear when execution of a trigger swap, which would be required to be reported under proposed § 43.3(a)(6)(iv) (discussed below in section II.C.4.b), occurs.
The Commission proposed adding the term “mirror swap” to § 43.2(a) to mean a swap: (1) To which a PB is a counterparty or both counterparties are PBs; (2) that is executed contemporaneously with a corresponding trigger swap; (3) that has identical terms and pricing as the contemporaneously executed trigger swap (except that a mirror swap, but not the corresponding trigger swap, may include any associated prime brokerage service fees agreed to by the parties and except as provided in the final sentence of this “mirror swap” definition); (4) with respect to which the sole price forming event is the occurrence of the contemporaneously executed trigger swap; and (5) the execution of which is contingent on, or is triggered by, the execution of the contemporaneously executed trigger swap. As further proposed, the notional amount of a mirror swap may differ from the notional amount of the corresponding trigger swap, including, but not limited to, in the case of a mirror swap that is part of a partial reverse give-up;
The Commission proposed defining the term “mirror swap” to delineate a group of swaps that do not have to be reported under part 43 if the related conditions set forth in proposed § 43.3(a)(6) are satisfied. The Commission believed that because the terms and pricing of a trigger swap and its related mirror swaps are similar, part 43 reporting of both a trigger swap and the related mirror swaps could falsely indicate the occurrence of two or more pricing events and incorrectly suggest the presence of more trading activity and price discovery than actually exist.
The Commission proposed using the word “contemporaneously” in clause (2) of the “mirror swap” definition rather than “simultaneously” to reflect the fact that it may take time for potential parties to a mirror swap to receive the terms of such mirror swap and to verify that the terms are within the parameters established by the governing prime brokerage arrangement.
The Commission proposed the language regarding associated prime brokerage service fees in clause (3) of the proposed “mirror swap” definition to reflect that a mirror swap may contain fees that a PB that is a counterparty to a mirror swap may charge as a fee for serving as a PB in such swap. The Commission understands that PBs typically charge their clients a service fee for the swap intermediation service that PBs provide. The PB service fee is meant to reflect PBs' credit intermediation costs as well as PBs' back-office and middle-office administrative services costs related to trigger swaps and mirror swaps (
Proposed new § 43.3(a)(6)(i) would provide that a mirror swap, which the Commission proposed to define in § 43.2(a), as discussed above in section II.B.1, is not a publicly reportable swap transaction. Proposed new § 43.3(a)(6)(i) would also state that, for purposes of determining when execution occurs under § 43.3(a)(1) through (3), execution of a trigger swap shall be deemed to occur at the time of the pricing event for such trigger swap.
Proposed new § 43.3(a)(6)(ii) would provide parameters for determining which counterparty is the reporting counterparty for a given trigger swap in situations where it is unclear, with respect to a given set of swaps, which are mirror swaps and which is the related trigger swap. More specifically, proposed new § 43.3(a)(6)(ii) would state that if, with respect to a given set of swaps, it is unclear which are mirror swaps and which is the related trigger swap, the PBs would be required to determine which swap is the trigger swap and which are mirror swaps. Proposed new § 43.3(a)(6)(ii) would also specify that, with respect to the trigger swap to which a PB is a party, the reporting counterparty shall be determined pursuant to § 43.3(a)(3). Proposed new § 43.3(a)(6)(ii) would add that, notwithstanding the foregoing, if the counterparty to a trigger swap that is not a PB is an SD, then that counterparty will be the reporting counterparty for the trigger swap.
Proposed new § 43.3(a)(6)(iii) would provide that, if, with respect to a given set of swaps, it is clear which are mirror swaps and which is the related trigger swap, the reporting counterparty for the trigger swap shall be determined pursuant to § 43.3(a)(3).
Proposed new § 43.3(a)(6)(iv) would provide that trigger swaps described in proposed § 43.3(a)(6)(ii) and (iii) shall be reported pursuant to the requirements set out in § 43.3(a)(2) or (a)(3), as applicable, except that the provisions of proposed § 43.3(a)(6)(ii), rather than of proposed § 43.3(a)(3), shall govern the determination of the reporting counterparty for purposes of the trigger swaps described in proposed § 43.3(a)(6)(ii).
The goal of proposed § 43.3(a)(6)(ii) is to have each trigger swap be reported ASATP after its pricing event. The Commission understands that one counterparty to a trigger swap often will have participated in negotiating the related pricing event, so should be well-placed to report the trigger swap pursuant to part 43 in such circumstances, particularly if that counterparty is an SD, given that most SDs are experienced with part 43 reporting. If the PB is an SD, but its counterparty is not, the PB would be the reporting counterparty for the trigger swap even though the PB may not learn of the pricing event for some time. However, pursuant to proposed § 43.3(a)(7), discussed below in section II.C.5, the PB could contract with a third-party service provider (which could include a party to the pricing event (
The Commission received one comment opposing the proposal to provide an exemption from real-time reporting for mirror swaps. Citadel comments the Commission should instead enhance swap transaction and pricing data by implementing a separate flag to specifically identify mirror swaps.
The Commission received two comments supporting the proposal to provide an exemption from real-time reporting for mirror swaps. CME comments that publishing information regarding mirror swaps would not provide any information of value to market participants.
The Commission received an additional two comments that support the proposal but also suggest
ISDA-SIFMA also believe the current proposal could be improved by modifying obligations to report trigger swaps where the reporting obligation may fall on a prime broker. ISDA-SIFMA suggest that when an off-facility trigger swap is entered into with a SD that is not a PB with respect to such trigger swap, that SD should always report such trigger swap ASATP after such pricing event.
ISDA-SIFMA also note that non-SDs generally do not have the necessary systems to effectuate reporting and PBs would thus be reluctant to delegate reporting responsibility to a non-SD.
ISDA-SIFMA acknowledge that the suggestion that PBs be required to report trigger swaps after the PB has accepted the trigger swap may lead to a delay in the reporting of the trigger swap.
ISDA-SIFMA do not believe additional indicators for trigger swaps are necessary because pricing data that is of interest to the public are already included in the swap transaction and pricing data for the trigger swap.
GFMA supports ISDA-SIFMA's response and similarly believes that the above modifications to the proposal are necessary.
The Commission received one comment addressing definitions. ISDA-SIFMA do not believe the proposed definitions need to be modified to reflect that prime brokerage fees might not be included in all mirror swaps. ISDA-SIFMA comments that clause (3) of the proposed “Mirror Swap” definition appears to adequately address such a possibility.
ISDA-SIFMA support the Commission's proposed definition for “prime broker” and believes it accurately describes the term as understood in common industry practice.
The Commission received one comment specifically regarding costs and benefits. ISDA-SIFMA comments that adding an additional reporting data element identifying if a swap was a mirror swap or a trigger swap would only result in added costs and complexity to PB reporting, without commensurate benefit to regulatory oversight.
The Commission is adopting the proposal and the proposed new § 43.2 definitions related to mirror swaps with some modifications suggested by commenters, as discussed further below.
The CEA authorizes the Commission to make swap transaction and pricing data available to the public in such form and
The Commission disagrees with the comment that mirror swaps should continue to be publicly disseminated. The commenter suggests that the Commission address concerns that mirror swaps may create false signals of swap trading volume by requiring the reporting of a new indicator for mirror swaps, but the Commission notes that none of the other commenters assert that the public reporting of mirror swaps enhances price discovery. The Commission believes that it would be inconsistent with section 2(a)(13) of the CEA for the Commission to continue to require the public dissemination of swap transaction and pricing data that does not enhance price discovery.
The Commission is also finalizing as proposed those portions of the proposal that provide that the execution of a trigger swap, for purposes of determining when execution occurs under § 43.3(a)(1) through (3), shall be deemed to occur at the time of the pricing event for such trigger swap. Since all of the material terms of trigger swaps are determined at the time of its related pricing event, the Commission believes it would enhance price discovery for swap transaction and pricing data associated with trigger swaps to be reported in real time and disseminated, subject to any applicable time delay described in § 43.5, ASATP after the occurrence of the pricing event.
The Commission disagrees with the comment that a PB should be required to report a trigger swap after the trigger swap has been accepted by the PB in circumstances where the counterparty to the trigger swap is not an SD. The commenter acknowledges that conditioning the requirement to report a trigger swap upon the acceptance of the trigger swap by a PB would permit an indefinite delay in the reporting of some trigger swaps. The Commission believes that the proposed indefinite delay is generally inconsistent with the section 2(a)(13) of the CEA and would have negative impacts on transparency, price discovery, and liquidity. Since all of the material terms of trigger swaps are determined at the time of its related pricing event, the Commission believes it would enhance price discovery for swap transaction and pricing data associated with trigger swaps to be reported in real time and disseminated, subject to any applicable time delay described in § 43.5, ASATP after the occurrence of the pricing event.
The Commission is also finalizing the proposed definition of mirror swap and trigger swap with modifications suggested by commenters.
The Commission agrees with comments suggesting clarifying revisions to the proposed definitions of mirror swap and trigger swap, and the creation of a newly defined term “prime broker swap.” These modifications seek to clarify that such terms apply across asset classes and were not intended to imply that a prime brokerage agency arrangement is limited to the execution of the trigger swap. The Commission did not intend to imply otherwise and believes such clarifications may help market participants better understand their obligations. Accordingly, the Commission is amending proposed § 43.2(a) to define the term “Prime broker swap” as “any swap to which a SD acting in the capacity as PB is a party.” Under this definition, both the trigger swap and mirror swap would be prime broker swaps. The Commission is similarly amending the proposed definitions of “Prime brokerage agency arrangement” and “Prime brokerage agent” to reference PB swaps instead of trigger swaps.
The Commission is amending the proposed definition of “Trigger swap” to clarify that a PB swap executed on or pursuant to the rules of a SEF or DCM shall be treated as the trigger swap for purposes of part 43. The Proposal did not directly address the potential fact pattern where a leg of a prime brokerage transaction is executed on a facility. In such instances, the Commission believes that it is preferable for that leg to be deemed the trigger swap so that it can be reported in real-time by the SEF or DCM.
The Commission is amending the proposed definition of “Mirror swap” to replace references to “notional” with a broader reference to “contractually agreed payment and delivery amounts.” The Commission believes that use of the broader term “contractually agreed payment and delivery amounts” clarifies that the term mirror swap may apply to swaps in all asset classes, including swaps for which the term “notional” may not generally be used by market participants. The Commission is also amending the proposed definition of “Mirror swap” to remove the phrase: Including, but not limited to, in the case of a mirror swap that is part of a partial reverse give-up. While the Commission understands that the definition of “Mirror swap” may apply to swaps associated with partial reverse give-ups, as described in the Proposal, the Commission believes such specific reference in the text of the regulation is unnecessary.
The Commission is otherwise finalizing the proposed definitions of mirror swap and trigger swap as proposed. The Commission believes the definitions are necessary to ensure that § 43.3(a)(6) only exempts from public reporting those legs of a prime brokerage transaction that might incorrectly suggest the presence of more trading activity and price discovery than actually exist.
The Commission is therefore defining a mirror swap to mean a swap: (1) To which (i) a PB is a counterparty or (ii) both counterparties are prime brokers; (2) that is executed contemporaneously with a corresponding trigger swap; (3) That has identical terms and pricing as the contemporaneously executed trigger swap (except (i) that a mirror swap, but not the corresponding trigger swap, may include any associated prime brokerage service fees agreed to by the parties and (ii) as provided in paragraph (5) of this “mirror swap” definition); (4) With respect to which the sole price forming event is the occurrence of the contemporaneously executed trigger swap; and (5) The execution of which is contingent on, or is triggered by, the execution of the contemporaneously executed trigger swap. The contractually agreed payments and delivery amounts under a mirror swap may differ from those amounts of the corresponding trigger swap if: (i) Under all such mirror swaps to which the PB that is a counterparty to the trigger swap is also a counterparty, the aggregate contractually agreed payments and delivery amounts shall be equal to the aggregate of the contractually agreed payments and delivery amounts under the corresponding trigger swap; and (ii) the market risk and contractually agreed payments and delivery amounts of all such mirror swaps to which a PB that is not a counterparty to the corresponding trigger swap is a party will offset each other, resulting in such PB having a flat market risk position at the execution of such mirror swaps.
The Commission is similarly defining a trigger swap to mean a swap: (1) That is executed pursuant to one or more prime brokerage agency arrangements; (2) to which one counterparty or both counterparties are prime brokers; (3)
The Commission expects the parties to a trigger swap to promptly convey those terms to the relevant prime broker(s) that would be a party or parties to related mirror swaps. Any delay in conveying such terms should not be used as an opportunity to find additional counterparties to take part in unreported mirror swaps.
The Commission disagrees with comments suggesting the proposed definition of trigger swap be amended to allow an exception to the requirement that such swap be a publicly reportable swap transaction reported to an SDR, where the trigger swap is otherwise exempt from public reporting. The Commission is excluding mirror swaps from public dissemination because of its concern that the public dissemination of both trigger and mirror swaps may falsely indicate the occurrence of two or more pricing events. The Commission's concern that the publication of a mirror swap may mislead the market is premised on the publication of the associated trigger swap. If the trigger swap is not publicly disseminated, this concern is moot. The Commission is therefore not amending the definition of trigger swap to allow for an exception to the requirement that a trigger swap be a publicly reportable swap transaction that is reported to an SDR.
The Commission agrees with the comment suggesting revisions to clarify and simplify reporting obligations for trigger swaps. The Commission is changing the title of § 43.6(a)(6) from “Mirror swaps” to the more general “Prime Broker swaps” as the paragraph contains reporting obligations related to trigger swaps. The Commission is modifying proposed § 43.6(a)(6)(ii) to clarify that the obligation for PBs to determine which swaps are mirror swaps and which are trigger swaps applies when the trigger swap would occur between two PBs under a prime brokerage agency arrangement. The Commission is also removing the distinction in proposed §§ 43.6(a)(6)(ii) and 43.6(a)(6)(iii) that would have created slight differences in the process for determining the reporting counterparty for certain off-facility trigger swaps.
The Commission is adding new § 43.3(a)(7) to provide for the third-party facilitation of data reporting. New § 43.3(a)(7) states that any person required by part 43 to report swap transaction and pricing data, while remaining fully responsible for reporting as required by part 43, may contract with a third-party service provider to facilitate reporting. Regulation 45.9 provides for third-party facilitation of data reporting, and the Commission believes a parallel requirement in part 43 will provide regulatory certainty by expressly permitting the same opportunity for part 43 reporting.
The Commission received one comment on the proposal. Markit comments the proposed explicit acknowledgement that third-party reporting services may be used to meet part 43 reporting requirements will encourage more firms to provide such services and will consequently result in reduced compliance costs.
The Commission is adopting changes to § 43.3(b). Existing § 43.3(b)(2)
The Commission is re-locating existing § 43.3(b)(2) to § 43.3(b)(1). The Commission is replacing the language in existing § 43.3(b)(2) stating that SDRs “shall ensure” swap transaction and pricing data is publicly disseminated with an SDR “shall publicly disseminate” swap transaction and pricing data ASATP to clarify that SDRs must disseminate the data, rather than ensure it is done. The Commission is also correcting two references to “publicly reportable swap transaction” to reference “swap transaction and pricing data.”
The Commission is re-locating § 43.3(c)(1) to § 43.3(b)(2) in conjunction with the above relocation of § 43.3(b)(2) to § 43.3(b)(1). Existing § 43.3(c)(1) states that any SDR that accepts and publicly disseminates swap transaction and pricing data in real-time shall comply with part 49 and shall publicly disseminate swap transaction and pricing data in accordance with part 43 ASATP upon receipt of such data, except as otherwise provided in part 43. Because existing § 43.3(c)(1) is an SDR obligation regarding the public dissemination of swap transaction and pricing data, the Commission is re-locating it to revised § 43.3(b).
The Commission is also removing the last phrase of existing § 43.3(c)(1), which states that SDRs must publicly disseminate swap transaction and pricing data in accordance with part 43 ASATP upon receipt of such data, except as otherwise provided in part 43. The language is unnecessary given the similar, but more precise, reference to § 43.5 in existing § 43.3(b)(2) and in proposed § 43.3(b)(1).
The Commission did not receive any comments on the non-substantive or structural changes to § 43.3(b). For the reasons discussed above, the Commission is adopting the changes to § 43.3(b) as proposed. Separately, DTCC recommends deleting the annual independent review requirements for SDRs in existing § 43.3(c)(3), re-designated § 43.3(b)(5), because SDRs are subject to the system safeguards requirements in § 49.24, so the requirements in § 43.3(b)(5) create unnecessary compliance costs and burdens for SDRs.
The Commission is relocating the requirements to make swap transaction and pricing data available to the public from existing § 43.3(d)(1) and (2) to § 43.3(c)(1) and (2).
The Commission is also changing existing § 43.3(d)(1) and (2), re-designated as § 43.3(c)(1) and (2) to establish requirements for SDRs to make swap transaction and pricing data available to the public on their websites. First, the Commission is specifying that SDRs must make swap transaction and pricing data available on their websites for a period of a least one year after the initial “public dissemination” of such data. Second, the Commission is moving the format requirements for SDRs in making this swap transaction and pricing data available to the revised definition of “public dissemination.”
The Commission believes publishing historical data supports the fairness and efficiency of markets and increases transparency, which in turn improves price discovery and decreases risk.
The Commission received three comments supporting the proposal to require SDR's to make public data available on their websites free for one year.
DTCC recommends clarifying the connection between the fee requirement in proposed § 43.3(c)(2) and the one-year period set forth in § 43.3(c)(1) by either (i) combining the requirements in a single paragraph or (ii) changing the language under § 43.3(c)(2) from “pursuant to this part” to “pursuant to this paragraph (c).”
Therefore, § 43.3(c) will state that SDRs shall make: Swap transaction and pricing data available on their websites for a period of time that is at least one year after the initial public dissemination thereof; instructions freely available on their websites on how to download, save, and search such swap transaction and pricing data; and swap transaction and pricing data that is publicly disseminated pursuant to this paragraph available free of charge.
The Commission is adopting new § 43.3(d)(1) to require reporting counterparties, SEFs, and DCMs to report the swap transaction and pricing data as described in the elements in appendix A. The Commission provides guidance with respect to the form and manner of reporting such elements in the technical specification published by the Commission in place of existing § 43.3(d)(1).
The Commission is also removing existing § 43.3(d)(3). In its place, the Commission is requiring reporting counterparties, SEFs, and DCMs to use the facilities, methods, or data standards provided or required by the SDR to which the reporting counterparty, SEF, or DCM, reports the data.
The Commission believes reporting counterparties will benefit from distinct regulatory requirements in part 43 for reporting the swap transaction and pricing data as described in the data elements in appendix A in the form and manner provided in the technical specification published by the Commission. In addition, the Commission believes the SDR validation procedures the Commission is adopting in § 43.3(f) will help improve the timeliness and accuracy of data SDRs publicly disseminate. However, the Commission believes a companion requirement to § 43.3(f) for reporting counterparties, SEFs, and DCMs to satisfy SDR validation procedures in § 43.3(d)(2) is necessary. Without a companion requirement, ambiguity could arise as to the responsibilities of reporting counterparties, SEFs, and DCMs to actually satisfy the validation requirements in § 43.3(f).
The Commission received one comment
The Commission is adopting new regulations for SDRs to validate swap transaction and pricing data in § 43.3(f). New § 43.3(f) will require that, in addition to validating each swap transaction and pricing data report submitted to it, the SDR also shall notify the reporting counterparty, SEF, or DCM submitting the report whether the report satisfied the data validation procedures of the SDR. The SDR will have to provide such notice ASATP after accepting the swap transaction and pricing data report. New § 43.3(f)(1) will provide that an SDR may satisfy the validation requirements by transmitting data validation acceptance messages as required by § 49.10.
New § 43.3(f)(2) will provide that if a swap transaction and pricing data report submitted to an SDR does not satisfy the data validation procedures of the SDR, the reporting counterparty, SEF, or DCM required to submit the report has not satisfied its obligation to report swap transaction and pricing data in the manner provided by § 43.3(d). The reporting counterparty, SEF, or DCM will not have satisfied its obligation until it submits the swap transaction and pricing data report in the manner provided by § 43.3(d), which includes the requirement to satisfy the data validation procedures of the SDR.
The Commission is making one change to the proposal in response to a comment from DTCC. DTCC believes the Commission should replace the word “transmitting” with “making available” to give market participants flexibility in using the best available means to achieve proposed § 43.3(f)(1)'s purpose.
The Commission believes rules for validations in § 43.3(f) are critical for ensuring accurate, high-quality swap transaction and pricing data reaches the public. The Commission's regulations do not currently require that SDRs validate swap transaction and pricing data. The Commission understands, however, that SDRs have implemented validations as a best practice. As a result, each SDR runs a number of checks, or validations, on each message prior to publicly disseminating it. A failed validation can cause an SDR to reject the message without disseminating it to the public.
The Commission is concerned that the lack of validation requirements has resulted in reporting counterparties, SEFs, and DCMs being unaware of, or unfamiliar with, the existence of such validations. The Commission is concerned that the lack of awareness may be resulting in reporting counterparties, SEFs, and DCMs being unclear about their responsibilities to monitor their submissions to SDRs for errors that may result in validation failures that ultimately result in non-dissemination. As a result, the Commission is adopting § 43.3(d)(2) to require reporting counterparties, SEFs, and DCMs to satisfy SDR validation procedures when reporting swap transaction and pricing data to SDRs. The Commission is also adopting § 43.3(f) to make clear the requirement for each SDR to notify submitting parties of their failure to meet the SDR's validation procedures and that an entity's reporting obligation is not satisfied until the SDR's validation procedures have been satisfied.
The Commission received one comment opposing validations. NFP Electric Associations believe they will impose a significant additional burden on non-SD/MSP/DCO counterparties to off-facility non-financial commodity swaps and believe the Commission has not proved the validations will achieve a specific regulatory benefit to offset these burdens.
The Commission is removing the timestamp requirements in existing § 43.3(h)(1) through (4).
The updated list of data elements in appendix A will cover the timestamps described in § 43.3(h).
The Commission did not receive any comments on the changes to § 43.3(h)(1)-(4). For the reasons discussed above, the Commission is adopting the changes as proposed.
The Commission is adopting several changes to § 43.4(a) through (e). Existing § 43.4(a) generally requires that swap transaction and pricing data be reported to an SDR so that the SDR can publicly disseminate the data in real-time, including according to the manner described in § 43.4 and appendix A. Existing § 43.4(b) requires that any SDR that accepts and publicly disseminates swap transaction and pricing data in real-time publicly disseminate the information described in appendix A, as applicable, for any publicly reportable swap transaction. Existing § 43.4(c) states that SDRs that accept and publicly disseminate swap transaction and pricing data in real-time may require reporting parties, SEFs, and DCMs to report to the SDR information necessary to compare the swap transaction and pricing data that was publicly disseminated in real-time to the data reported to an SDR pursuant to section 2(a)(13)(G) of the CEA or to confirm that parties to a swap have reported in a timely manner pursuant to § 43.3.
The Commission is deleting existing § 43.4(a) as it is overly general. As a result, the Commission is re-designating § 43.4(b) through (d) as § 43.4(a) through (c) and making minor non-substantive changes. The Commission is also removing existing § 43.4(e), which gives SDRs discretion regarding what fields to publicly disseminate after a UPI exists.
The Commission is adopting its proposed changes to § 43.4(d)(4) with modifications. The Commission proposed removing § 43.4(d)(4)(i) through (iii); re-designating § 43.4(d)(4) as § 43.4(c)(4); consolidating the substance of § 43.4(d)(4)(i) and (iii) in proposed § 43.4(c)(4); and eliminating the requirement in existing § 43.4(d)(4)(ii) that SDRs publicly disseminate the actual assets underlying certain swaps in the other commodity asset class that either reference one of the contracts described in appendix B to part 43
In proposing the changes to § 43.4(d)(4), the Commission believed other commodity swaps referencing, or economically related to, the contracts in appendix B could still be sufficiently bespoke to warrant additional masking. Consequently, the Commission proposed eliminating the requirement in existing § 43.4(d)(4)(ii) that registered SDRs publicly disseminate the actual assets underlying other commodity swaps that either reference one of the contracts described in appendix B to part 43 or that are economically related to such contracts. Because the Commission proposed removing that requirement from existing § 43.4(d)(4)(ii), the Commission also proposed removing appendix B to part 43 and re-designating existing appendix E as appendix B.
The Commission is keeping the masking requirements in existing § 43.4(d)(4), but re-locating the requirement to § 43.4(c)(4) and making minor technical edits. The Commission has reconsidered whether expanding masking outweighs reducing transparency, and believes the analysis that formed the basis for adopting existing § 43.4(d)(4) remains operative. As a result, the Commission is keeping appendix B as well, as § 43.4(d)(4) references it. The Commission is leaving appendices B and E in their current locations and making minor technical edits to appendix E to reflect the relocation of § 43.4(d)(4) to § 43.4(c)(4).
The Commission received two comments on geographic masking of commodities swap transactions. NFP Electric Associations strongly support the proposed additional masking of swap transactions as it will help ensure that business transactions and market positions of counterparties are not disclosed.
The Commission is adopting non-substantive changes to existing § 43.4(f). Existing § 43.4(f) requires reporting parties, SEFs, and DCMs to report the actual notional or principal amount of any swap, including block trades, to an SDR that accepts and publicly disseminates such data pursuant to part 43.
The Commission is re-designating existing § 43.4(g) as § 43.4(e).
The rounding rules in existing § 43.4(g) will be in § 43.4(f), titled “Process to determine appropriate rounded notional or principal amounts.” New § 43.4(f) will contain the rounding rules set forth in existing § 43.4(g), subject to two substantive changes explained below, among other non-substantive changes.
The Commission is changing § 43.4(g)(8) and (9), re-designated as § 43.4(f)(8) and (9). Existing § 43.4(g)(8) requires an SDR to round the notional or principal amount of a publicly reportable swap transaction to the nearest one billion if it is less than 100 billion but equal to or greater than one billion. The Commission is changing § 43.4(f)(8) to require rounding to the nearest 100 million instead of one billion. Existing § 43.4(g)(9) requires an SDR to round the notional or principal amount of a publicly reportable swap transaction to the nearest 50 billion if it is greater than 100 billion. The Commission is changing existing § 43.4(f)(9) to require rounding to the nearest 10 billion and adding the words “equal to or” before “greater than 100 billion” to include swaps with notional or principal amounts that are exactly 100 billion, the omission of which from the 2012 reporting rules appears to have been an oversight.
The Commission is concerned that broadly rounded notional or principal amounts could undermine the price discovery purpose of real-time reporting. The Commission is particularly concerned about swaps with notional or principal amounts over 1 billion because there tend to be fewer swaps of such size relative to swaps with smaller notional or principal amounts. The Commission believes smaller rounding increments for the notional or principal amount of swaps covered by proposed § 43.4(f)(8) and (9) will improve price discovery for such swaps. Rounding the notional or principal amounts in smaller increments in § 43.4(f)(8) and (9) also would be consistent with the rounding increments prescribed in § 43.4(g)(1) through (7) (
In the Proposal, the Commission proposed removing the regulations for initial cap sizes and replacing them with new regulations for cap sizes. To avoid removing regulations that still need to be effective during the compliance period for the changes to § 43.4(h) (which the Commission is still re-designating § 43.4(g) as proposed), the Commission has decided to leave the existing regulations for the initial cap sizes as § 43.4(g), while adding the new updated regulations for cap sizes during the post-initial period that were proposed in the Proposal to new § 43.4(h). The Commission discusses the new regulations in this section.
First, the Commission is re-designating existing § 43.4(h)(1) (regulations for initial cap sizes) as § 43.4(g).
The Commission is keeping the substance of existing § 43.4(h)(1), while also publishing post-initial cap sizes using the 75-percent notional calculation as required by existing § 43.4(h)(2) through (4). As discussed above, to avoid removing regulations needed during the compliance period until market participants need to comply with the regulations for post-initial cap sizes, the Commission is retaining the substance of § 43.4(h)(1) in new § 43.4(g) (titled “Initial cap sizes”) in its regulations.
Second, the Commission is establishing cap sizes for each of the proposed new swap categories set forth in proposed § 43.6(c)(1)(i) (interest rate (“IRS”)), (c)(2)(i) through (xii) (credit (“CDS”)), (c)(4)(i) (foreign exchange (“FX”)), and (c)(5)(i) (other commodity) using the 75-percent notional amount calculation.
The Commission received several comments on its proposal to implement post-initial cap sizes using the 75-percent notional calculation. Most commenters combined their comments on raising cap sizes with the Commission's proposal to raise the block threshold in § 43.6. As such, the Commission discusses these comments together, along with the Commission's decision to raise the cap sizes and block thresholds, in section II.F.4 below.
Existing § 43.4(h)(2)(i) requires the Commission to recalculate cap sizes no less than once each calendar year. The Commission proposed replacing existing § 43.4(h)(2)(i), re-designated as § 43.4(g)(2)(i), with a flexible approach permitting the Commission to recalculate cap sizes when it determined necessary. The Commission is not adopting these changes. Most commenters combined their comments on the flexible approach for determining cap sizes with the Commission's proposal to adopt a flexible approach for determining block thresholds. The Commission discusses these comments together, along with the Commission's decision to keep the substance of the current requirements in re-designated § 43.4(h)(9) and (10), in section II.F.1 below.
Separately, the Commission requested comment on whether it should require SDRs to remove any caps applied pursuant to § 43.4(h) after six months to reveal the actual notional amount after six months of anonymity and whether six months was long enough to mitigate anonymity concerns. The Commission received two general comments on the topic. DTCC suggests the Commission carefully consider the costs and burdens associated with removing cap sizes as it would deviate from current market practice and would likely lead to significant operational complexity for implementation.
The Commission received two comments requesting faster removal. Citadel recommends the Commission consider publishing full, uncapped notionals of block trades three months after execution.
The Commission received one comment opposing SDR removal of caps. GFMA believes caps protect the ability of liquidity providers to manage and hedge any risk exposure without compromising anonymity.
Despite some commenters supporting such a proposal, the Commission is concerned about revealing information that could enable market participants to identify trading patterns or open positions of swap counterparties. The CEA requires the Commission ensure swap transaction and pricing data disseminated by SDRs does not identify the transaction's participants.
The Commission proposed many technical changes to § 43.5(a) and (b). The Commission proposed one substantive change to remove references to LNOFS transactions in § 43.5(a), and throughout part 43, to reflect proposed changes to § 43.5(c) for a single time delay for block trade delays.
The Commission proposed removing the requirements of § 43.5(b)(1) and (2) that SDRs must disseminate the specified swap transaction and pricing data no sooner than, and no later than the prescribed time delay period and to retain the requirement of § 43.5(b)(3) that SDRs must disseminate the specified swap transaction and pricing data precisely upon the expiration of the time delay period. The Commission also proposed ministerial rephrasing amendments to § 43.5(b). The Commission believed that together, the proposed amendments to § 43.5(b) would improve the clarity of the provision.
The Commission is keeping § 45.3(a) and (b) without any changes because the Commission is not adopting a single time delay for public dissemination of block trades. The Commission discusses the decision to keep different time delays in § 43.5 in the following section. Since the changes to § 43.5(a) and (b) would have conformed to changes the Commission is not adopting, adopting the changes would make § 43.5(a) and (b) inconsistent with the rest of part 43. As a result, the Commission is not adopting any of the changes to § 43.5(a) and (b).
The Commission proposed removing existing § 43.5(c) through (h) and adding a new § 43.5(c) that would require SDRs to implement a time delay of 48 hours for disseminating swap transaction and pricing data for each applicable swap transaction with a notional or principal amount above the corresponding appropriate minimum block size, if the parties to the swap have elected block treatment. Because the time delays in proposed § 43.5(c) would replace the time delays in existing appendix C, the Commission also proposed removing appendix C.
Existing § 43.5(c) provides interim time delays for each publicly reportable swap transaction, not just block trades and LNOFSs, until an appropriate minimum block size is established for such publicly reportable swap transaction. The Commission adopted § 43.5(c) in case compliance with part 43 was required before the establishment of appropriate minimum
Existing § 43.5(d) through (h) phased in the various time delays for the dissemination of swap block trades and LNOFSs over a one- to two-year period. The Commission believed when it adopted those regulations that providing longer time delays for public dissemination during the first year or years of real-time reporting would enable market participants to perfect and develop technology and to adjust hedging and trading strategies in connection with the introduction of post-trade transparency.
Existing § 43.5(d) through (h) provides specific time delays for the public dissemination of swap transaction and pricing data by an SDR. As background, CEA section 2(a)(13)(E)(iv) directs the Commission to take into account whether public disclosure of swap transaction and pricing data “will materially reduce market liquidity.” When the Commission adopted the Block Trade Rule in 2013, the Commission understood that the publication of detailed information regarding “outsize swap transactions” (
If a liquidity provider agrees to execute an outsize swap transaction, it likely will charge the counterparty the additional cost associated with hedging this transaction. In consideration of these potential outcomes, the Commission established the time delays for block trades and LNOFSs to balance public transparency and the concerns that post-trade reporting would reduce market liquidity.
When the Commission adopted the time delays for block trades and LNOFSs in 2012, it noted that commenters to the proposal recommended a range of time delays for public dissemination of block trades and LNOFSs, including end-of-day, 24 hours, T+1, T+2, a minimum of four hours, and 180 days.
In response to the Roadmap comments, the Commission proposed significant changes to the time delays for block trades and LNOFSs. In place of the current time delays ranging between 15 minutes to 24 business hours, depending upon the type of market participant, method of execution and asset class, the Commission proposed a single 48 hour time delay for all block trades and LNOFSs. The Commission sought comment on whether a single 48 hour time delay was necessary to account for potential situations when a market participant requires additional time to place a hedge position without significant unfavorable price movement and to create some consistency with the disclosure requirements of other authorities for non-liquid swaps.
The Commission received three comments supporting, and 15 comments opposing, the proposed 48 hour time delay for block trades and LNOFSs.
FXPA and GFMA support the proposed delay for FX swaps because it would assist market participants conducting hedging activities.
Other commenters express concern that the proposed delay would have negative impacts on transparency, price discovery, and liquidity.
Citadel expresses concern that counterparties to a block trade or LNOFS would have significantly more information regarding the fair value of a particular instrument than the rest of the market, which could advantage them when negotiating additional transactions in both that and similar instruments during the 48 hour period.
CHS, Citadel, and FIA PTG contrast the proposed 48-hour time delay to time delays in futures markets. Citadel notes the five-minute deferral for block trades in U.S. Treasury futures, a primary hedging tool for the USD IRS.
Better Markets, Carnegie Mellon, Citadel, MIT, and SMU comment that the Proposal is inconsistent with research indicating that post-trade transparency improves liquidity while reducing transaction costs in financial markets, including the swaps market.
Commenters urge the Commission to not adopt the proposal and to retain the current reporting delays because the current reporting delays have been effective in supporting liquidity and risk transfer.
Clarus presents a methodology for measuring liquidity using data publicly disseminated by SDRs and comments that because liquidity is currently identical for swaps above and below the appropriate minimum block size, it does not appear that the proposed substantial delay is necessary.
The Commission also received comments asserting that a 48-hour delay would impair risk management functions. Commenters note that the Proposal would restrict access to current prices, which would make it more difficult for market participants to correctly value transactions to support end-of-day valuations and margin calculations. Commenters believe such difficulties would be particularly pronounced during periods of market volatility.
CME did not comment on whether 48 hours is an appropriate delay, but supports the simplified approach of a single time delay set forth in the Proposal because it would be less costly for SDRs to implement.
The Commission received six comments regarding the Commission's stated goal of harmonization. Better Markets comments that harmonization should not be used as pretext for deregulatory initiatives contravening statutory objectives, but acknowledged harmonization of an appropriately balanced regulatory framework that is consistent with Congress' instructions and intent would be sensible and statutorily commanded.
FXPA comments that a 48-hour delay would better align with MiFID II requirements.
The Commission also received three comments asserting that the Commission did not put forward legally sufficient support for the proposed 48-hour delay. Healthy Markets comments that the proposed reporting delay is insufficiently supported to fulfill the Commission's obligations under the
For reasons discussed below, the Commission is not adopting proposed § 43.5(c), which would have required SDRs to implement a time delay of 48 hours for disseminating swap transaction and pricing data for each block trade or LNOFS, if the parties to those swaps elected such treatment. The Commission is also not removing the existing regulatory text in § 43.5(d)-(h) and appendix C that provides for potential block and LNOFS time delays ranging between 15 minutes to 24 business hours, depending upon the type of market participant, method of execution and asset class. The Commission is removing and reserving existing § 43.5(c) and paragraphs within §§ 43.5(d), 43.5(e), 43.5(f), 43.5(g), and 43.5(h) as described further below. The regulatory text being removed is technically no longer applicable. The Commission is also making non-substantive ministerial and conforming edits to align the text with other changes being made throughout this part.
The majority of commenters oppose the proposed 48-hour delay and expressed concern that such a delay would have negative impacts on transparency, price discovery, and liquidity. Several commenters believe that, particularly for the most liquid products that are currently eligible for a 15-minute delay, there is no evidence that current post-trade reporting requirements have reduced market liquidity. The Commission recognizes the merit in those concerns. Taking into account the comments and data submitted by commenters regarding the liquidity of, and necessary time to hedge, U.S. dollar IRS swaps, the Commission concludes that a 48 hour delay would be particularly inappropriate for those products and would unnecessarily restrict transparency and price discovery.
Existing § 43.5(d) through (h) establish time delays for block trades and LNOFSs that vary based upon the type of market participant, method of execution, and asset class, an approach the Commission saw as appropriate to balance public transparency and price discovery against the concerns that post-trade reporting would reduce market liquidity. Several commenters reference and support this prior determination by the Commission. These commenters believe that the current varying time delays are preferable to the proposed 48-hour delay that did not distinguish transactions according to the type of market participant, method of execution, and asset class. Informed by commenters, the Commission agrees.
The Commission reiterates its stated policy goal “to provide maximum public transparency, while taking into account the concerns of liquidity providers regarding possible reductions in market liquidity.”
The Commission believes the transparency currently provided by the dissemination of swap transaction data promotes confidence in the fairness and integrity of swaps markets. This transparency increases participation in the swaps markets and provides enhanced price discovery that is of particular value to buy-side participants and end-users.
The Commission agrees with one commenter that the proposed simplified approach of a 48-hour time delay for all block and LNOFSs may have reduced operational costs compared to the current approach of varying time delays. However, the Commission is cognizant of its statutory directive to make swap transaction and pricing data available as appropriate to enhance price discovery while taking into account whether the public dissemination will materially reduce market liquidity. Accordingly, the Commission does not view operational cost savings potentially available under an alternative simplified time-delay regime sufficient reason to justify deviation from the current varied-time delay approach that the Commission believes best suited to effectuate this statutory directive.
The Commission also agrees with commenters that EU and CFTC regulations requiring the public dissemination of swap transaction and pricing data differ significantly, particularly with respect to the duration of deferrals from public dissemination. Since the Commission is not changing the dissemination delays available to block trades or LNOFSs, differences with respect to the duration of deferrals are not being harmonized at this time. The Commission understands that EU authorities are currently examining potential changes to their public dissemination rules, leading the Commission to conclude that it is premature to attempt harmonization with respect to the duration of deferrals at this time.
The Commission is removing and reserving existing § 43.5(c). Existing § 43.5(c) provides interim time delays for each publicly reportable swap transaction, not just block trades and LNOFSs, until an appropriate minimum block size is established for such publicly reportable swap transaction. The Commission adopted § 43.5(c) in case compliance with part 43 was required before the establishment of appropriate minimum block sizes.
The Commission is also removing and reserving existing §§ 43.5(d)(1), 43.5(e)(2)(i), 43.5(e)(3)(i), 43.5(e)(3)(ii), 43.5(f)(1), 43.5(f)(2), 43.5(g)(1), 43.5(g)(2), 43.5(h)(1), and 43.5(h)(2). These sections phased in the various time delays for the dissemination of swap block trades and LNOFSs after the existing rules came into effect. Since the phasing in of the time delays in existing § 43.5(d) through (h) is complete, the Commission is removing the text remaining from the phase-in concept.
In the Proposal, the Commission proposed removing the regulations for initial appropriate minimum block sizes and replacing them with new regulations for appropriate minimum block sizes. To avoid removing
Existing § 43.6(a) states that the Commission shall establish the appropriate minimum block size for publicly reportable swap transactions based on the swap categories in existing § 43.6(b) in accordance with the provisions set forth in paragraphs (c), (d), (e), (f) or (h) of § 43.6, as applicable. Existing § 43.6(f) contains requirements for the Commission to update the block thresholds annually. Existing § 43.6(f)(1) through (3) requires the Commission to establish post-initial appropriate minimum block size using a one-year window of reliable SDR data recalculated no less than once each calendar year using the 67-percent notional amount calculation for most swap categories. Existing § 43.6(f)(4) requires the Commission to publish post-initial appropriate minimum block size on its website. Existing § 43.6(f)(5) specifies that unless otherwise indicated on the Commission's website, the post-initial appropriate minimum block size shall be effective on the first day of the second month following the date of publication.
Similarly, § 43.4(h) contains analogous requirements for the Commission to update the cap sizes annually. Existing § 43.4(h)(2) requires the Commission to establish post-initial cap sizes using a one-year window of reliable SDR data recalculated no less than once each calendar year using the 75-percent notional amount calculation. Existing § 43.4(h)(3) requires the Commission to publish post-initial cap sizes on its website. Existing § 43.4(h)(4) specifies that unless otherwise indicated on the Commission's website, the post-initial cap sizes shall be effective on the first day of the second month following the date of publication.
To implement a more flexible approach than this current regime provides, the Commission proposed amending existing § 43.6(a) to instead provide that the Commission would establish appropriate minimum block size at such times the Commission determines necessary. Since the processes for updating cap sizes and block thresholds are analogous, the Commission discusses these changes together in this section.
The Commission only proposed changing the requirement to recalculate the block thresholds and cap sizes annually. The Commission proposed keeping the requirement to post new cap sizes and block thresholds on its website in new § 43.4(g)(9) and § 43.6(e)(5), respectively. The Commission also proposed keeping the requirement for revised cap sizes to be effective on the first day of the second month following publication, unless otherwise indicated by the Commission, in new § 43.4(g)(10), but omitted the effective date of any appropriate minimum block size in error.
The Commission received two general comments on the proposed flexible approach. GFMA believes the flexible approach to updating cap sizes and block thresholds will create operational burdens with limited benefits.
As it expressed in the Proposal, the Commission believed the flexible approach would avoid frequent updates to SDR systems without a clear benefit to the real-time public tape.
As a result, the Commission finds GFMA's point that the proposal would be difficult to implement and operationalize persuasive and significant enough to reconsider the proposed flexible approach. While CME supports the Commission's expectation that the flexible approach would avoid frequent updates, the Commission's concerns about creating uncertainty override the anticipated benefits of the proposal and the Commission is declining to adopt the proposal to amend § 43.6(a). Instead, the Commission is maintaining the current requirement to establish cap sizes using a one-year window of reliable SDR data according to the 75-percent notional amount calculation recalculated no less than once each calendar year in § 43.4(h)(2). Similarly, the Commission is maintaining the current requirement to establish appropriate minimum block size using a one-year window of reliable SDR data according to the 67-percent notional amount calculation no less than once each calendar year in § 43.6(g)(2).
The Commission received two comments on the effective date requirements. CME believes the effective date should instead be the date determined by the Commission in consultation with the SDRs.
The Commission received three comments on the publication requirement. CME requests the Commission explain whether the cap thresholds or the actual methodology or swap categories will change on an ongoing basis without a rulemaking, and how the Commission would notify the public about changes to cap sizes so SDRs do not have to establish programs
As the existing rules provide, the Commission updates the cap sizes and block thresholds on its website, but modifies the categories and methodologies through rulemaking.
The Commission received one comment on temporary changes to the block thresholds and cap sizes. Citing March 2020 volatility, ISDA-SIFMA (Blocks) suggest the Commission create a formal adjustment mechanism to allow market participants to petition the Commission to temporarily change block and cap thresholds based on observed market conditions, or enable the Commission to do so subject to a public comment process.
Existing § 43.6(b) delineates the swap categories referenced in § 43.6(a) by five asset classes: IRS, CDS, equity, FX, and other commodity. It then subdivides these asset classes into various swap categories. The categories group together swaps with similar quantitative or qualitative characteristics that warrant being subject to the same appropriate minimum block size.
The Commission is concerned the existing swap categories disparately impact different swap transaction types. For instance, the existing swap categories group together economically distinct swaps, such as IRS denominated in U.S. dollars (“USD IRS”) and IRS denominated in Japanese yen (“JPY IRS”). Because the notional amounts of USD IRS transactions are, on average, higher than the notional amounts of JPY IRS transactions, the current IRS appropriate minimum block size, which includes transactions from a group of currencies, is too high for some products, like JPY IRS, and too low for others, like USD IRS. In other words, USD IRSs are eligible for a dissemination delay, even though a delay may be unnecessary for a counterparty to hedge the trade at minimal additional cost due to the trade size, and JPY IRS are ineligible for a dissemination delay even though a delay may be necessary for a counterparty to hedge the trade without incurring material costs due to the trade size.
The Commission analyzed 2018-2019 part 43 SDR data for each asset class to evaluate the sufficiency of the existing swap categories. The Commission reviewed all products within each asset class, but removed certain swaps from the data sets: Duplicate swap reports, indicated by swaps having the same unique swap identifier (“USI”); terminated swaps; cancelled swap reports; modifications to existing swap reports; and swaps with notional values of zero. The Commission removed FX swaps with blank currency fields.
In addition, the Commission removed CDS trades around the time the index rolls twice a year. As new CDS indexes are introduced each March and September, many market participants “roll” their positions from the old “off-the-run” index into the new “on-the-run” index. These trades are often done as spread trades, similar to how futures positions are rolled using calendar spread trades during the expiration cycle. As discussed below, commenters raised including CDS roll days in the CDS data set would result in significantly larger thresholds for non-roll swaps. For almost all indices, the Commission found there was a substantial increase in daily notional on those days in a way that could skew the block thresholds.
The Commission proposed new swap categories in § 43.6(c)
The Commission received one comment generally opposing the new swap categories. Citadel believes the new categories significantly increase operational complexity for market participants and trading venues, as each threshold must be separately implemented, monitored, and surveilled.
As explained above, the Commission believes the new swap categories are better calibrated and will result in more reliable appropriate minimum block sizes. As explained below, the Commission believes setting the appropriate minimum block size to zero is appropriate for swaps with a low level of trading activity for which the Commission cannot determine a robust and reliable appropriate minimum block size. In response to Citadel's comment that the rule could reduce transparency for certain newly-created categories that have smaller trading volumes, the Commission has assessed the impact that the new categories could have on transparency as part of its review of the 2018-2019 data but nonetheless found that block treatment was appropriate given low liquidity. The Commission finds that the appropriate minimum block sizes for certain swaps will increase thus leading to real-time reporting for swaps that had previously received block treatment and thereby increased transparency. For these reasons, the Commission is adopting the new swap categories subject to the modifications to the categories the Commission describes below.
In addition, as mentioned above, in the Proposal, the Commission proposed removing the regulations for initial appropriate minimum block sizes and replacing them with new regulations for appropriate minimum block sizes. As part of this, the Commission proposed removing the existing swap categories. To avoid removing regulations that still need to be effective during the compliance period for the changes to § 43.6, the Commission has decided to leave the existing swap categories in § 43.6(b), while adding the new updated swap categories for appropriate minimum block sizes during the post-initial period that were proposed in the Proposal in § 43.6(c). The Commission discusses the new regulations in this section.
Existing § 43.6(b)(1) sets forth the IRS categories. The Commission based the existing IRS categories on a unique combination of three currency groups and nine tenor ranges, for a total of 27 categories.
The Commission proposed new swap categories for each combination of the top 15 different currencies
The Commission is adopting the new IRS categories as proposed, but numbered as § 43.6(c) in the regulations. For IRS, the Commission believes new swap categories referencing the top 15 currencies, which make up 96% of the total population of IRS trades, will have appropriate minimum block sizes that better fit these swaps by grouping IRS into more discrete categories. A 136th category for swaps in currencies outside of the top 15 currencies that will have an appropriate minimum block size of zero will address the swaps for which there is not enough activity for the Commission to compute a reliable and robust appropriate minimum block size.
The Commission received three comments on the new IRS categories. SIFMA AMG believes the 135 new IRS categories will burden market participants with complicated reporting that may not provide meaningful transparency or price discovery for numerous IRS categories.
When the Commission formulated the proposed categories it recognized, as SIFMA AMG comments, that increasing the number of categories could increase operational and reporting costs. The Commission also recognized the concern expressed by ISDA-SIFMA (Blocks) that there must be enough categories so that the categories are not overly inclusive. The Commission believes the new IRS categories balance these concerns. As described in the Proposal, the new swap categories address the following two policy objectives: (1) Categorizing together swaps with similar quantitative or qualitative characteristics that warrant being subject to the same appropriate minimum block size; and (2) minimizing the number of swap categories within an asset class in order to avoid unnecessary complexity in the determination process.
The Commission is not persuaded by ACLI's recommendation. To be consistent, the Commission could not just create a new interest rate category based on risk sensitivity. The Commission would have to adopt an entirely new block regime based on risk—it would have to establish new categories and develop new appropriate minimum block sizes on the basis of risk. As explained fully in its § 43.6(e) discussion, the Commission believes its approach is superior to a risk-based approach as the ultimate goal in establishing thresholds is to focus on liquidity differences across swap categories, not risk-transfer
Existing § 43.6(b)(2) sets forth the CDS swap categories. The Commission based the current CDS swap categories on combinations of three conventional spread levels and six tenor ranges, for a total of 18 swap categories. The Commission proposed replacing the current spreads and tenor ranges in § 43.6(b)(2)(i) and (ii) with seven product types and four to six year tenor ranges. The Commission proposed setting the new CDS categories in § 43.6(b)(2) as: (i) Based on the CDXHY product type and a tenor greater than 1,477 days and less than or equal to 2,207 days; (ii) based on the iTraxx Europe product type and a tenor greater than 1,477 days and less than or equal to 2,207 days; (iii) based on the iTraxx Crossover product type and a tenor greater than 1,477 days and less than or
The Commission is adopting the new CDS categories with modifications. For CDS, the Commission believes spreads may not be a consistent measure for the swap categories. Specifically, the Commission is concerned products with similar spreads are not necessarily economically similar because all market participants may not calculate the same spread for a given product. In addition, a product's spread range can change, making it difficult for parties to be certain that they are eligible for block treatment. Instead, the Commission finds most market participants trade specific credit products within specific tenor ranges. The Commission finds the most-traded CDS products are: (i) The CDXHY; (ii) iTraxx Europe, Crossover, and Senior Financials indexes; (iii) CDXIG; (iv) CDXEmergingMarkets; and (v) CMBX.
The Commission received one comment on the scope of data used to create the CDS categories. In response, the Commission is adopting § 43.6(c)(2) with additional swap categories for CDS with optionality. ISDA-SIFMA (Blocks) are concerned the scope of data was overly inclusive and not representative of all swaps in a particular swap category, especially with CDS.
In response to the ISDA-SIFMA (Blocks) comment that it may be inappropriate when determining the block and cap thresholds to include swap products with optionality in particular swap categories, the Commission examined non-option and option products separately. The Commission determined there is a substantial difference in the distribution of trade sizes between non-option and option CDS products.
In response to the ISDA-SIFMA (Blocks) comment that the data sets used to determine appropriate minimum block sizes should capture calm and stressed market conditions, the Commission notes the current data set includes data from the fourth quarter of 2018 when markets were stressed and data from the third quarter of 2018 and the first quarter of 2019 when the markets were calm. The Commission understands that basing appropriate minimum block sizes primarily on periods of high or low volatility would lead to appropriate minimum block sizes that are inappropriate under most market conditions; thus, the adopted appropriate minimum block sizes are based on a sample that is representative of market activity in a range of market conditions.
The Commission also has determined that it will not establish appropriate minimum block sizes for stressed market conditions. By their nature, markets may be stressed for different reasons and to different levels, and thus, the appropriate minimum block sizes cannot be determined in advance.
Existing § 43.6(b)(3) specifies that there shall be one swap category consisting of all swaps in the equity asset class. The Commission did not propose changing the equity asset class in § 43.6(b)(3).
The Commission received one comment on the equity asset class. ICI requests the Commission consider whether to include appropriate minimum block size for equity swaps because the assumption that a highly liquid underlying cash market negates the need for an appropriate minimum block size does not hold true.
Existing § 43.6(b)(4) sets forth the FX swap categories. The Commission grouped the existing FX swap categories by: (i) The unique currency combinations of one super-major currency
The Commission proposed replacing the FX swap categories in § 43.6(b)(4) with new swap categories by currency pair. The new FX categories would be comprised of FX swaps with one currency of the currency pair being USD, paired with another currency from one of the following: Argentina, Australia, Brazil, Canada, Chile, China, Colombia, the European Union, Great Britain, India, Indonesia, Japan, Malaysia, Mexico, New Zealand, Peru, Philippines, Russia, South Korea, or Taiwan.
The Commission proposed creating a new category for FX swaps in § 43.6(b)(4)(ii) (re-designated as § 43.6(c)(4)(ii)) where neither currency in the currency pair is USD. Proposed § 43.6(c)(4)(ii) would be comprised of swaps with currencies from Argentina, Australia, Brazil, Canada, Chile, China, Colombia, the European Union, Great Britain, India, Indonesia, Japan, Malaysia, Mexico, New Zealand, Peru, Philippines, Russia, South Korea, or Taiwan. Parties to these FX swaps could elect block treatment if the notional amount of either currency in the currency exchange is greater than the appropriate minimum block size for a FX swap between the respective currencies, in the same amount, and USD described in § 43.6(c)(4)(i). The Commission proposed adding a swap category in § 43.6(b)(4)(iii) (re-designated as § 43.6(c)(4)(iii)) for FX swaps that trade with relatively low activity and setting the appropriate minimum block size to zero to make these swaps eligible for delayed dissemination.
The Commission is adopting the new FX swap categories as proposed, with technical modifications to re-designate/re-number certain requirements, as discussed above. For FX, the Commission finds that almost 94% of the over 7 million FX swaps included USD as one currency in each swap's currency pair. Of these swaps, the top-20 currencies paired with USD were currencies from Argentina, Australia, Brazil, Canada, Chile, China, Colombia, the European Union, Great Britain, India, Indonesia, Japan, Malaysia, Mexico, New Zealand, Peru, Philippines, Russia, South Korea, or Taiwan. The Commission believes a separate category for FX swaps outside the above currency pairs that will have an appropriate minimum block size of zero will address these swaps for which there is not enough activity for the Commission to compute a reliable and robust appropriate minimum block size.
The Commission received two comments on the new FX swap categories. The FXPA believes the Commission's reliance on market data has led to an appropriate outcome and the Commission's empirical analysis supports the conclusions set forth in the proposal and encourages the Commission to commit to periodic reviews of FX asset class categories on a regular basis.
GFMA, conversely, believes significant changes have occurred to the FX market and the Commission should consider the impact of changes in FX market conditions, including changes to the number and size of transactions, since the 2018-2019 time period for which data was analyzed.
The Commission acknowledges GFMA's comment that market conditions may have changed since the proposed categories were created, creating potential that the categories may be a looser fit today than when designed. However, the Commission believes that the swap categories are appropriately based on an analysis of SDR swap data, discussions with market participants, as well as information from commenters, including FXPA which concurs with the outcome. The Commission does not agree that the block and cap sizes of certain currencies are too high. The appropriate minimum block size of an FX product is determined by the FX category to which the FX product belongs. The Commission utilized 2018-2019 part 43 SDR data to construct the FX categories. The Commission believes the FX categories are appropriate as they advance the Commission's policy objectives of (1) categorizing swaps with similar quantitative or qualitative characteristics that warrant being subject to the same appropriate minimum block size and (2) minimizing the number of swap categories within an asset class in order to avoid unnecessary complexity in the determination process.
Per GFMA's comment, the Commission reviewed whether FX non-deliverable forwards and FX options should be aggregated. The Commission determined that aggregating the two types of swaps is appropriate for achieving its policy goals, and is concerned treating them separately would complicate the categories without a commensurate benefit to transparency.
Existing § 43.6(b)(5) sets forth the other commodity swap categories. The Commission grouped the existing other commodity swap categories by either (1) the relevant contract referenced in existing appendix B of part 43
The Commission proposed new swap categories for the other commodity asset class based on the list of underliers in existing appendix D to part 43. The Commission also proposed modifying the list of underliers in existing appendix D and re-designating it as appendix A.
For other commodity swaps outside of those based on the underliers in proposed appendix A, the Commission found the trade count was not high enough to compute a robust and reliable appropriate minimum block size. The Commission proposed adding a swap category in § 43.6(b)(5)(ii) for relatively illiquid other commodity swaps and setting the appropriate minimum block size for these swaps at zero.
The Commission is adopting the new other commodity swap categories as proposed in § 43.6(c).
The Commission received one comment on the commodity asset class. ICE SDR recommends the Commission provide additional clarity on the appropriate minimum block sizes in the other commodity asset class table, as, for example, electricity and natural gas references do not specify whether they apply to North America only or apply to all global gas and electricity products.
Based on the reasons above concerning the Commission's policy objectives to maintain a reasonable number of categories with adequate breadth, the Commission declines to create additional categories. Thus, the categories will continue to cover all products with the referenced underlier regardless of geographic location. Similarly, commodity index swaps comprised of underliers that span multiple categories will continue to be in the other commodity swaps category under § 43.6(c)(5)(ii) and other refined oil products without their own category will continue to be the broad oil category.
Existing § 43.6(c) sets forth the methodologies the Commission must use to determine appropriate minimum block sizes and cap sizes in the § 43.6(b) swap categories. These methodologies are: A 50-percent notional amount calculation; a 67-percent notional amount calculation; and a 75-percent notional amount calculation.
For the initial period,
Prior to the Proposal the Commission had not calculated the post-initial block sizes or cap sizes, although the condition specified in § 43.6(f)(1) for moving to the post-initial period had been met,
In the Proposal, the Commission proposed removing the 50-percent notional amount calculation in § 43.6(c)(1) and re-designating § 43.6(c)(2) and (3) as § 43.6(c)(1) and (2), respectively. However, as discussed above, to avoid removing regulations that still need to be effective during the
The Commission is also adopting minor changes to the 50-percent, 67-percent and 75-percent notional amount calculations. The Commission is updating certain steps of the statistical calculations set forth in existing § 43.6(c)(2)(i) through (ix) to improve clarity and sharpen their application. Existing § 43.6(c)(2)(i) requires the Commission to select all publicly reportable swap transactions within a specific swap category using a one-year window of data. As re-designated, § 43.6(d)(1)(i) will require the Commission to select all reliable SDR data for at least a one-year period for each relevant swap category to simplify the language and clarify that the Commission would be using SDR data in its calculations.
Existing § 43.6(c)(2)(ii) requires the Commission to convert to the same currency or units and use a trimmed data set, but does not specify what is being converted. As re-designated, § 43.6(d)(1)(ii) will clarify the Commission will convert the notional amount to the same currency or units and use a trimmed data set to improve readability.
The Commission is updating the definition of “trimmed data set” in § 43.2 to mean a data set that has had extraordinarily large notional transactions removed by transforming the data into a logarithm with a base of 10, computing the mean, and excluding transactions that are beyond two standard deviations above the mean for the other commodity asset class and three standard deviations above the mean for all other asset classes. The Commission explains the change in this section because the trimmed data set is used in § 43.6(d)(2)(ii).
Trimming the data set avoids having outliers skew the data set, which could lead to inappropriately high appropriate minimum block sizes.
The Commission is also changing the rounding rules in the methodology. Existing § 43.6(d)(2)(viii) directs the Commission to round the notional amount of the observation discussed in § 43.6(d)(2)(vii) “to” two significant digits,
Finally, the Commission is replacing the individual instructions for the 75-percent and 50-percent notional amount calculations contained in existing § 43.6(c)(1) and (3) with a cross-reference to the procedures set out in § 43.6(d)(1). Since the steps for the calculations are the same, cross-referencing the procedures in proposed § 43.6(d)(1) will reflect the calculation steps are the same.
The Commission did not receive any comments on the changes to § 43.6(d). For the reasons discussed above, the Commission is adopting the changes as proposed.
Existing § 43.6(e) and (f) set forth the processes for the Commission to set appropriate minimum block size in the initial
Prior to the Proposal, the Commission had not published any post-initial appropriate minimum block sizes. As the condition specified in § 43.6(f)(1) has been met,
However, in the Proposal, the Commission proposed removing the regulations for initial appropriate minimum block sizes in § 43.6(e) and replacing them with new regulations for appropriate minimum block sizes in the post-initial period. To avoid removing regulations that still need to be effective during the compliance period for the changes to § 43.6, the Commission has decided to leave the substance of the existing regulations for the initial appropriate minimum block sizes in § 43.6(e) but move it to § 43.6(f),
Renumbered § 43.6(g)(1) will state the Commission shall establish appropriate minimum block size, by swap categories, as described in § 43.6(g)(2) through (6). Renumbered § 43.6(g)(2) states the Commission shall determine the appropriate minimum block size for the swap categories described in § 43.6(c)(1)(i), (c)(2)(i) through (xii), (c)(4)(i), and (c)(5)(i) by applying the 67-percent notional amount methodology in proposed § 43.6(d)(1). Re-designated § 43.6(g)(2) also clarifies that if the Commission is unable to determine an appropriate minimum block size for any swap category described in § 43.6(c)(1)(i), the Commission shall assign an appropriate minimum block size of zero to such category.
New § 43.6(g)(3) sets forth the method for determining appropriate minimum block sizes for FX swaps. New § 43.6(g)(3) specifies that the parties to an FX swap described in § 43.6(c)(4)(ii) may elect to receive block treatment if the notional amount of either currency would receive block treatment if the currency were paired with USD. In other words, for each currency underlying the FX swap, the counterparties will determine whether the notional amount of either currency will be above the block threshold if paired with USD, as described in § 43.6(c)(4)(i). If either notional amount paired with USD is greater than the block threshold, the swap described in § 43.6(c)(4)(ii) will qualify for block treatment.
As discussed above in section II.F.2, the Commission is setting the appropriate minimum block size of all swaps in certain swap categories
Aside from the new swap categories, the substantive import of § 43.6(g) is the Commission's move to the post-initial block threshold prescribed in the Block Trade Rule; raising thresholds is not implementing novel thresholds. More specifically, the Commission is implementing thresholds adopted in 2013 after notice and comment and that, by regulation, were to be implemented after an SDR had collected data for a year, a threshold that has been met and surpassed since April 2014.
These amendments thus reflect a policy continuation that effectuates the essential substance of what the Commission deemed appropriate in originally promulgating § 43.6. As supported by a refreshed analysis described below—including information not available to the Commission in 2013—the Commission continues to view the fundamental policy judgments that supported its 2013 decision to prescribe a 67-percent notional amount calculation after an initial introductory phase in period (now elapsed) as sound. For reasons discussed below, the Commission does not find comments to the contrary to be persuasive.
When it promulgated the requirement in 2013 that the notional amount calculation be raised from 50-percent to 67-percent, the Commission's goal was to increase market transparency by decreasing the portion of swaps within a category that qualified for block treatment and thus increasing the number of trades reported in real time.
The Commission continues to believe that transparency will increase liquidity, improve market integrity and price discovery, while reducing information asymmetries enjoyed by market makers. As explained in section V.C. below, this belief is supported by an extensive review of the academic literature. In addition, the Commission received a number of comments noting the importance of transparency in regard to lowering trading costs and pointing to a significant body of academic literature that empirically demonstrated this effect.
When the Commission promulgated existing § 43.6(f)(2), it recognized that increasing the appropriate minimum block size notional amount calculation from 50-percent to 67-percent could make it more difficult for SDs to hedge the exposure created by trading a large swap because real-time reporting and public dissemination will be required.
Notably, when § 43.6(f)(2) was finalized, the Commission determined that the 67-percent was appropriate.
The Commission continues to believe that raising the notional amount calculation from 50-percent to 67-percent strikes an appropriate balance between the benefits of transparency and the costs to SDs and other market participants. Further, the Commission believes that the cost of raising the threshold is more limited today than it
However, as discussed in the Compliance section, the Commission recognizes it would be challenging for market participants to come into compliance with the post-initial appropriate minimum block size at the same time they have to come into compliance with significant aspects of some of the additional changes to § 43.6, including the new swap categories. As a result, the Commission is providing a compliance period of 18-months for the changes to the part 43 rules except for § 43.4(g) and § 43.6. In the Proposal, the Commission proposed removing the regulations for initial appropriate minimum block sizes and replacing them with new regulations for appropriate minimum block sizes. To avoid removing regulations that still need to be effective during the compliance period for the changes to § 43.4(g) and § 43.6, the Commission has decided to leave the existing regulations for the initial appropriate minimum block sizes in § 43.6, while adding the new updated regulations for appropriate minimum block sizes during the post-initial period that were proposed in the Proposal.
As shown below, the Commission carefully reviewed the comments opposed to the higher notional amount calculations and does not find them to be persuasive. The Commission discusses the comments received on the changes to § 43.6(g) thematically in the following sections.
The Commission received four comments supporting raising the block threshold to 67%. Better Markets believes the proposed increase is overdue and should be adopted.
Two commenters raised concerns about the March 2020 volatility as a basis for their opposition to raising the block thresholds. PIMCO believes their counterparties were simply unable to quote markets for block trades in otherwise liquid products, in part, based on their own inability to efficiently manage the risks associated with transacting in larger sizes in a volatile market.
The Commission is not persuaded by PIMCO's and SIFMA AMG's comments that the threshold should not be raised because it would be inappropriate in periods of extreme volatility, such as those experienced in March 2020. The block trade levels are not designed to address periods of extreme volatility. Moreover, in March 2020, Commission staff heard opposing views from market participants, some of whom believed the block thresholds did not need to be lowered during the period of volatility.
Three commenters raised concerns about the Commission's analysis as a basis for their opposition. Vanguard believes changing the thresholds needs to be supported by data to confirm that a change in the appropriate minimum block size is now justified, or, if justified, what percentage change is justified.
The Commission does not believe that the threshold is arbitrary and is not based on a data-driven analysis. Under the current 50-percent threshold, while the number of swap reported in real-time is large (87 and 82 percent for IRS and CDS, respectively), this accounts for less than half of total notional traded (46 and 39 percent for IRS and CDS, respectively).
Four commenters raised concerns about SEF execution methods as a basis for their opposition. SIFMA AMG and ISDA-SIFMA (Blocks) are concerned that large trades that fall between the current block trade thresholds and the newer, larger proposed block trade thresholds may now be subject to the risk of information leakage as such trades, to the extent they are subject to
The Commission recognizes the potential that some degree of information leakage and liquidity impairment could result from market participants now being required to execute some large-notional MAT swap transactions—
One commenter raised concerns about putting SEFs at a competitive disadvantage as a basis for their opposition. ISDA-SIFMA (Blocks) believe unattainably high block thresholds will put SEFs at a competitive disadvantage with non-U.S. trading platforms and shift execution (and trading business) away from the U.S.
In response to the ISDA-SIFMA (Blocks) comment that higher block sizes will put SEFs at a competitive disadvantage with non-U.S. trading platforms,
Four commenters raised concerns about using risk metrics for appropriate minimum block sizes as a basis for their opposition. ISDA-SIFMA (Blocks) believe the proposed thresholds do not properly account for risk sensitivity and if the Commission needs to pursue a notional-based framework, the levels should be established through a risk-based approach by using risk metrics such as DV01 to account for the fact that they are only proxies for true risk.
The Commission is neither persuaded by comments that appropriate minimum block sizes should be linked to risk by metrics such as DV01, nor suggestions that the number of true block trades in a given swap category should depend on the relevant level of liquidity and risk. Although basing appropriate minimum block size on DV01 theoretically might be appropriate, the commenters have not explained how this could be accomplished in practice, nor are the means for doing so apparent to the Commission. For example, the commenters have not explained whether DV01 would be the only criteria, or if other factors would be utilized. In addition, DV01 changes daily and there is no guidance on how often thresholds should be adjusted. Most significantly, the commenters have not demonstrated that the appropriate minimum block sizes that would result from their risk-based approach would be more appropriate than those that result from the Commission's approach, nor that their approach would be less costly to implement. Rather, as explained in section V.C., the Commission believes its approach is superior as the ultimate goal in establishing thresholds is to focus on liquidity differences across swap categories, not risk-transfer
One commenter raised concerns specifically about FX swaps as a basis for their opposition. GFMA was not expecting such significant changes between existing and proposed FX block and cap sizes.
The Commission disagrees with GFMA's comment because the category includes less liquid currency pairs.
One commenter raised concerns the block threshold should be higher than 67% as a basis for their opposition. Clarus believes the appropriate minimum block size levels should be set at 75%-90% and that the current 50% level confers an unfair information asymmetry to large SD banks who act as liquidity providers for these large swaps.
At this time, given the data available to it, the Commission disagrees with Clarus that the appropriate minimum block size levels should be set at 75% to 90%. The Commission agrees that adding extra transparency for large trades would provide market participants with clearer signs of liquidity and reduce information asymmetry, which, during crisis times, provides even greater reassurance that markets are not “seizing up.” However, the Commission believes that the adverse impact on SDs and their customers of setting the threshold at 75 to 90% may be too significant to justify setting the threshold at this level.
PIMCO is concerned the premature dissemination of block trade details transmits sensitive proprietary information to short-term speculators before SDs are able to hedge and otherwise manage their risk and could lead to market liquidity decreases, bid-ask spreads widening, and costs to PIMCO's clients.
As explained above in the introduction to the § 43.6(e) discussion, the Commission specifically considered PIMCO's concerns that raising the notional amount calculation from 50-percent to 67-percent could adversely impact SDs and their clients because the swaps would no longer benefit from delayed reporting both in the 2013 rulemaking and in the current rulemaking. The Commission has determined to raise the notional amount calculation to obtain the benefits of increased transparency.
The Commission received three comments related to appropriate minimum block sizes of zero. Clarus strongly opposes the Commission's proposal to set the block threshold at zero for any instrument that the Commission currently considers “relatively illiquid.”
With respect to the proposed zero appropriate minimum block sizes, the Commission agrees with Clarus that price discovery is important for illiquid products. However, the Commission must weigh the goal of public transparency against the concern that post-trade reporting would reduce market liquidity. In illiquid markets, transactions occur infrequently and the benefit of real-time information is limited. For example, if transactions occur throughout the day and less than every ten minutes on average, knowing the price of a swap immediately after execution will provide little additional benefit than knowing the price of a swap fifteen minutes after execution. However, other market participants could potentially anticipate the trades of the SD trying to hedge its position and act accordingly to their own advantage, and this could increase costs to SDs and other market participants. Accordingly, the Commission has determined that zero appropriate minimum block sizes are appropriate for the swap categories with illiquid swaps.
The Commission received one comment addressing cross-border concerns. GFMA believes the Commission needs to coordinate with its foreign regulator peers regarding block and cap thresholds.
In response to cross-border concerns raised by GFMA, the Commission anticipates that it will address the cross-border application of the reporting rules in a separate rulemaking.
The Commission is re-designating existing § 43.6(g) as § 43.6(h) to reflect the Commission's decision to retain § 43.6(e) and (f) but add new § 43.6(c). Existing § 43.6(g) sets forth the requirements for parties to notify their execution venue (
Existing § 43.6(g)(1)(i) requires the parties to a publicly reportable swap transaction with a notional amount at or above the appropriate minimum block size to notify the SEF or DCM of their election to have the publicly reportable swap transaction treated as a block trade. The current phrasing suggests parties must elect to have a qualifying publicly reportable swap transaction treated as a block trade, instead of letting parties choose. The Commission believes having the option is important, as some counterparties may not object to having their block trade disseminated in real-time. To give them the option, the Commission is changing § 43.6(h)(1)(i) to state if the parties make such an election, the reporting counterparty must notify the SEF or DCM.
Existing § 43.6(g)(1)(ii) requires the SEF or DCM to notify the SDR of a block trade election when transmitting swap transaction and pricing data to the SDR in accordance with § 43.3(b)(1). The Commission is retaining the substance of existing § 43.6(g)(1)(ii) in re-
The Commission is adding new § 43.6(h)(1)(iii) to clarify that SEFs and DCMs may not disclose block trades prior to the expiration of the applicable dissemination delay in § 43.5(c) to avoid ambiguity.
Existing § 43.6(g)(2) states that reporting parties executing an off-facility swap with a notional amount at or above the appropriate minimum block size shall notify the applicable registered SDR that such swap transaction qualifies as an LNOFS concurrently with the transmission of swap transaction and pricing data in accordance with part 43. The Commission is clarifying in § 43.6(g)(2), re-designated as § 43.6(h)(2), that the parties to a publicly reportable swap transaction that is an off-facility swap with a notional at or above the appropriate minimum block size can elect to have the publicly reportable swap transaction treated as a LNOFS. If the parties make such an election, the reporting counterparty will notify the SDR. However, because the Commission is keeping the term “large notional off-facility swap” in § 43.2, the Commission is keeping the reference to “large notional off-facility swap” in the rule.
The Commission received one comment on the proposed amendments to block trade notifications. Chatham believes they provide more clarity to reporting counterparties for how such trades should be reported. Chatham believes confusion currently exists regarding whether the SDR may make the calculation or whether the reporting counterparty must do so. If the Commission does not adopt this change, Chatham encourages the Commission to further clarify the SDRs also make the block trade calculations.
The Commission is re-designating existing § 43.6(h) as § 43.6(i) in response to retaining § 43.6(e) and (f).
Existing § 43.6(h)(6) generally prohibits the aggregation of orders for different accounts to satisfy minimum block trade size or cap size requirements but contains an exception for orders on SEFs and DCMs by certain commodity trading advisors (“CTAs”), investment advisers, and foreign persons performing a similar role or function. The Commission believed such a prohibition was necessary to ensure the integrity of block trade principles and preserve the basis for the anonymity associated with establishing cap sizes.
While the aggregation prohibition in existing § 43.6(h)(6) is intended to incentivize trading on SEFs and DCMs, this incentive is nonexistent for swaps that are not listed or offered for trading on a SEF or DCM.
Existing § 43.6(h)(6)(ii) conditions the exception from the aggregation prohibition on a CTA, investment adviser, or foreign person having more than $25 million in assets under management. In adopting this condition, the Commission explained that the $25 million threshold would help ensure that persons allowed to aggregate orders were appropriately sophisticated, while at the same time not excluding an unreasonable number of CTAs, investment advisers, and similar foreign persons.
However, the Commission has come to believe the $25 million threshold may be excluding more participants from taking advantage of the exception than initially expected.
Finally, the Commission is making several non-substantive changes throughout § 43.6(i)(6) for clarity, updating cross-references, and specifying the aggregated transaction is reported as a block trade or LNOFS, as applicable, and the aggregated orders are executed as one swap transaction.
The Commission received one comment on the proposed amendments to § 43.6(h), which will be adopted in § 43.6(i). ICI agrees with the Commission's policy goal behind removing the aggregation prohibition in § 43.6(h)(6), because the exception to the prohibition does not exist for swaps that are not listed or offered for trading on a SEF or DCM.
The Commission has determined removing the $25 million aggregation threshold is appropriate because the existing rule excludes appropriately sophisticated CTAs, investment advisers, or foreign persons from aggregating trades and is adopting § 43.6(h) as proposed in renumbered § 43.6(i). As noted above, the Commission intended to change existing § 43.6(h) to permit aggregation for swaps not listed on a SEF or DCM, but continue to require aggregation on a SEF or DCM if the swap is listed on a SEF or DCM. The Proposal inadvertently eliminated the existing requirement aggregation occur on a SEF or DCM if the swap is listed on a SEF or DCM. Accordingly, the Commission is adding a condition to final § 43.6(i)(6) to clarify aggregation must occur on a SEF or DCM if the swap is listed on a SEF or DCM.
The Commission is renumbering § 43.6(i) as § 43.6(j) in response to the changes above related to retaining certain existing regulations. In addition, to conform to the proposed revisions to § 43.6(i)—specifically the removal of the
As discussed above, ICI supports removing the $25 million threshold requirement to engage in block trades and removing the condition requiring that orders be on SEFs and DCMs.
The Commission is adopting several changes to § 43.7, which governs Commission delegation of certain authority to the DMO Director or such other employee or employees as the DMO Director may designate from time to time (“DMO staff”). The Commission is adding new (a)(1) to delegate the authority to publish the technical specification providing the form and manner for reporting and publicly disseminating the swap transaction and pricing data elements in appendix A as described in §§ 43.3(d)(1) and 43.4(a). If it chooses to, the Commission may, pursuant to § 43.7(c), which the Commission did not propose to amend, exercise any authority delegated pursuant to proposed § 43.7(a)(1) (or any other authority delegated pursuant to § 43.7(a)) rather than permit the DMO Director or DMO staff to exercise such authority.
Because there currently is a § 43.7(a)(1), the Commission is renumbering existing § 43.7(a)(1) as § 43.7(a)(3). The Commission is further renumbering existing § 43.7(a)(2) as § 43.7(a)(4) and replacing the reference to § 43.6(f) with a reference to § 43.6(e).
The Commission did not receive any comments on the changes to § 43.7. For reasons discussed above, the Commission is adopting the changes as proposed.
The Commission is revising the list of swap transaction and pricing data elements in appendix A to update it
Existing appendix A includes a description of each field, in most cases phrased in terms of “an indication” of the data that must be reported and disseminated and an example illustrating how the field could be populated. For example, the description of the “Asset class” field in table A1 of appendix A calls for an indication of one of the broad categories as described in § 43.2(e), and the example provided states IR (
In adopting appendix A, the Commission believed consistency could be achieved in the data, but intentionally avoided prescriptive requirements in favor of flexibility in reporting the various types of swaps.
The Commission has reviewed the data fields in appendix A to update the existing list and provide further specifications on reporting and public dissemination. This assessment was part of a larger review of the parts 43 and 45 data the Commission requires to be reported to, and publicly disseminated by, SDRs. The Commission reviewed the swap transaction and pricing data data fields in appendix A and the swap data elements in appendix 1 to part 45 to determine if any currently required data elements should be eliminated and if any data elements should be added. As part of this process, the Commission also reviewed the part 45 swap data elements to determine whether any differences could be reconciled across parts 45 and 43.
After determining the set of swap data and swap transaction and pricing data elements, the Commission reviewed the CDE Technical Guidance to determine which data elements the Commission could adopt according to the CDE Technical Guidance.
DMO also published a draft technical specification, along with validation conditions, on the Commission's website at
The Commission proposed appendix C would contain the list of swap transaction and pricing data elements required to be publicly disseminated by SDRs, but the Commission recognized that SDRs would need additional part
The Commission discusses comments received on the swap transaction and pricing data elements in appendix A
As a preliminary matter, the swap transaction and pricing data elements in appendix A do not include swap transaction and pricing data elements specific to swap product terms. The Commission is heavily involved in separate international efforts to introduce UPIs.
In addition, the Commission notes that it has adopted the CDE Technical Guidance data elements as closely as possible. This means that some terms may be different for certain concepts. For instance, “derivatives clearing organization” is the Commission's term for registered entities that clear swap transactions, but the CDE Technical Guidance uses the term central counterparty.
To help clarify, DMO has placed footnotes in the technical specification to explain these differences in at least four terms as well as provide examples and jurisdiction-specific requirements. However, the Commission is not including these footnotes in appendix A. In addition, the definitions from CDE Technical Guidance data elements included in appendix A sometimes reference allowable values in the CDE Technical Guidance, which may not be included in appendix A but can be found in DMO's technical specification.
Finally, the CDE Technical Guidance did not harmonize many data elements that would be particularly relevant for commodity and equity swap asset classes (
The Commission invited comment on all of the swap transaction and pricing data elements proposed in appendix A. The Commission discusses the swap transaction and pricing data elements below by category to simplify the organization of comments received. To the extent any comment involved data elements adopted according to the CDE Technical Guidance, however, the Commission anticipates raising issues according to the CDE Governance Arrangements procedures to help ensure that authorities follow the established processes for doing so. In addition, the Commission anticipates updating its rules to adopt any new or updated CDE Technical Guidance.
The Commission proposed requiring SDRs to publicly disseminate one data element related to clearing: Cleared (1). This data element is currently being publicly disseminated by SDRs according to the field in existing appendix A “Cleared or uncleared.”
The Commission received four comments on clearing data elements. Clarus and Citadel believe the name of the DCO (or exempt DCO) where the transaction is cleared should be publicly disclosed given that this is a key data element that affects transaction pricing.
The Commission is adopting the clearing data element in appendix A as proposed. The Commission is not adopting an additional data element identifying the DCO at which the swap would be cleared. Most publicly reportable swap transactions are original swaps, which means they are swaps that the counterparties or exchange will submit for clearing. In many instances, the counterparties may not yet know the DCO to which they will submit the original swap for clearing. As a result, the Commission is concerned this ambiguity could either encourage counterparties to report unreliable data or generally inconsistent reporting.
The Commission proposed requiring SDRs to publicly disseminate a custom basket indicator.
The Commission did not receive any comments on the custom basket indicator data element in appendix A and for reasons articulated in the Proposal and reiterated above, is adopting the data element as proposed.
The Commission proposed requiring SDRs to publicly disseminate four data elements related to events.
The Commission received two comments on the events data elements. Citadel supports the Commission adding a flag to identify swaps that result from risk reduction services, given that these may be publicly reported with off-market prices.
The Commission is adopting the events data elements in appendix A as proposed, with a modification. The Commission is adding an amendment indicator data element to flag changes to a previously submitted transaction.
The Commission proposed requiring SDRs publicly disseminate eleven data elements related to notional amounts and quantities.
The Commission did not receive any comments on adding or removing notional amounts and quantities data elements in appendix A and for reasons articulated in the Proposal and reiterated above, is adopting the notional amounts and quantities data elements in appendix A as proposed, with the addition of three notional amount schedule data elements to appendix A.
The Commission proposed requiring SDRs to publicly disseminate four data elements related to package transactions.
ISDA-SIFMA do not support additional package related data elements being disseminated on the public tape because they are exceptionally complex.
The Commission is adopting the package data elements in appendix A as proposed, but is declining to require the package identifier for part 43 reporting. Further, the Commission is adding three package transaction swap data elements to appendix A from the CDE Technical Guidance: Package transaction spread; Package transaction spread currency; and Package transaction spread notation. The Commission will also add a package indicator data element to appendix A.
The Commission believes Citadel's recommendation should be addressed through the CDE governance process to ensure jurisdictions adopt the data element consistently. Finally, the Commission does not believe the package data elements require examples, but DMO will monitor their implementation and add examples to the technical specification if they would be beneficial in the future.
The Commission proposed requiring SDRs to publicly disseminate eight data elements related to payments.
The Commission did not receive any comments on the payments data elements in appendix A and for reasons articulated in the Proposal and reiterated above, is adopting the data elements as proposed.
The Commission proposed requiring reporting counterparties to report seventeen data elements related to swap prices for SDRs to publicly disseminate.
In the price category, the Commission proposed a Post-priced swap indicator (68), in connection with the proposed
The Commission did not receive any comments on the price data elements in appendix A and for reasons articulated in the Proposal and reiterated above, is adopting the data elements as proposed.
The Commission proposed requiring SDRs publicly disseminate two data elements relating to products, and has included a placeholder data element for the UPI.
The Commission received one comment on the UPI. FXPA believes the Commission should carefully review, or consider guidance with respect to, the unique product identifier data element (87) as there are several related product taxonomies in use today.
The Commission is adopting the products data elements in appendix A as proposed. As explained above, the placeholder reflects the Commission's decision for reporting counterparties to continue to report product-related data elements as they currently do until the Commission designates a UPI in the next two years.
The Commission proposed requiring SDRs to publicly disseminate one data element related to settlement: Settlement currency (89). Existing appendix A contains a field for settlement currency.
The Commission did not receive any comments on the settlement data element in appendix A and for reasons articulated in the Proposal and reiterated above, is adopting the data element as proposed, with the addition of the CDE Technical Guidance data element for Settlement location to appendix A. This would help the Commission collect information on trades involving offshore currencies.
The Commission proposed requiring SDRs to publicly disseminate seven transaction-related data elements.
The Commission received one comment on the Prime broker transaction indicator data element. ISDA-SIFMA believe the prime broker transaction indicator should not be subject to public dissemination if a trigger swap is reported upon the occurrence of the pricing event because the public receives the pricing data in real time like for any other part 43 reportable trade.
The Commission received one comment related to Platform identifier. Citadel believes the MIC code of the venue should be publicly disclosed to assist market participants in understanding current market dynamics and locating active liquidity pools.
The Commission is adopting the transaction-related date elements in appendix A as proposed. With respect to ISDA-SIFMA's comment on Prime brokerage indicator, the Commission believes that the data element provides appropriate notice to the public about transactions that may not be reported because they are part of a prime brokerage arrangement. With respect to Citadel's comment, the Commission notes that it adopting Platform identifier according to the CDE Technical Guidance. Any comments on the data element should be addressed through the CDE governance process.
In the Proposal, the Commission suggested that the compliance date would be at least one year from the date that the last one of such final Roadmap rulemakings was published in the
The Commission received two comments regarding the compliance date. ICE DCOs believes the Commission should adopt a “realistic compliance implementation period that allows for industry-wide coordination and roll-out.”
The Commission also received many comments related to the compliance date in response to the other Roadmap proposals. Those comments are discussed in the
The Commission appreciates the comments received on the compliance date for the Proposal and for all of the Roadmap proposals. Based on the many comments that requested one compliance date for all aspects of the Roadmap proposals and the many comments that requested a compliance date that is more than one year from the date the Roadmap proposals are finalized, the Commission will, except as discussed below, extend a unified compliance date for this Final Rule that is 18 months from the date of publication in the
The Commission will extend the compliance date for the post-initial block thresholds and cap sizes in § 43.4(h) and § 43.6 separate from those of the rest of the part 43 rules for an additional twelve months. In this instance, the Commission believes market participants should have the chance to adapt to the changes to part 43, including the new swap categories and capping and rounding rules, before
In addition, the Commission recognizes the changes to its part 43 rules in this release, along with the changes to the part 45 rules in a separate release, will provide the Commission with an enhanced, standardized data set that will help the Commission best calibrate the appropriate minimum block sizes when applying the 67-percent and 75-percent thresholds. Given the robust improvements to swap data the Commission expects to realize from the part 45 reforms and the intervening period in which market participants will need to update their systems to comply with aspects such as the new swap categories, the Commission expects to use the new and improved data to analyze the best way to apply the thresholds and make any adjustments as appropriate.
Since the Commission has to recalculate the appropriate minimum block sizes and cap sizes no less than once each calendar year, the additional twelve months will give the Commission the opportunity to recalculate the appropriate minimum block sizes and cap sizes using the publicly reportable swap transactions in the new part 45 data to help ensure the levels are appropriately calibrated. The Commission intends to take action, as necessary, to ensure the appropriate minimum block sizes and cap sizes are appropriately tailored. Moreover, the additional time avoids creating additional operational or compliance challenges at the end of the 18-month compliance period when market participants begin compliance with the updated part 43 rules.
Therefore, while the changes to the rest of part 43 rules will have a compliance period of 18 months, §§ 43.4(h) and 43.6 and the new, post-initial block and cap sizes, calculated according to the 67-percent and 75-percent notional amount calculations, will have a compliance date of one year after the 18-month compliance period (for a total of 30 months) for the rest of the part 43 rule changes.
The Regulatory Flexibility Act (“RFA”) requires federal agencies, in promulgating rules, to consider the impact of those rules on small entities.
Various changes to part 43 would have a direct impact on all reporting counterparties. These reporting counterparties may include SDs, MSPs, DCOs, and non-SD/MSP/DCO counterparties. Regarding whether non-SD/MSP/DCO reporting counterparties are small entities for RFA purposes, the Commission notes that section 2I of the CEA prohibits a person from entering into a swap unless the person is an eligible contract participant (“ECP”), except for swaps executed on or pursuant to the rules of a DCM.
The Commission has analyzed swap data reported to each SDR
Based on the above analysis, the Commission does not believe that this Final Rule will have a significant economic impact on a substantial number of small entities. Therefore, the Chairman, on behalf of the Commission, pursuant to 5 U.S.C. 605(b), hereby certifies that the Final Rules will not have a significant economic impact on a substantial number of small entities.
The PRA of 1995
The Commission did not receive any comments regarding its PRA burden analysis in the preamble to the Proposal. The Commission is revising the information collection to reflect the adoption of amendments to part 43, as discussed below, including changes to reflect adjustments that were made to the Final Rules in response to comments on the Proposal (not relating to PRA). In the Proposal, the Commission omitted the aggregate reporting burden for proposed § 43.3 and § 43.4 in the preamble and instead provided PRA
Under the PRA, Federal agencies must obtain approval from OMB for each collection of information they collect or sponsor. “Collection of information” is defined in 44 U.S.C. 3502(3) and 5 CFR 1320.3 and includes agency requests or requirements that members of the public submit reports, keep records, or provide information to a third party. Section 3506(c)(2)(A) of the PRA, 44 U.S.C. 3506(c)(2)(A), requires Federal agencies to provide a 60-day notice in the
Existing § 43.3 requires reporting counterparties, SEFs, and DCMs to send swap reports to SDRs ASATP after execution of a publicly reportable swap transaction. The Commission is adopting changes that would add new § 43.3(a)(4) to give reporting counterparties more time to report PPS to SDRs. Currently, some entities report PPS using a placeholder price, and then send a swap report later amending the price. Those entities would experience a reduction in the number of swap reports they are required to send pursuant to § 43.3 under the Final Rules. The Commission estimates 50 SD/MSP reporting counterparties would reduce the number of PPS reports they report to SDRs by 100 reports per respondent annually or 5,000 reports in the aggregate.
The Commission is also amending § 43.3 to establish new requirements for reporting prime brokerage swaps in § 43.3(a)(6). New § 43.3(a)(6) will not require SDRs to publicly disseminate “mirror swaps.” Reporting counterparties will continue to report mirror swaps to SDRs pursuant to part 45, but the amendment to § 43.3 will reduce the number of reports SDRs are required to publicly disseminate pursuant to § 43.4. The amendment to the requirement for SDRs in § 43.4 is discussed in the next section below.
The Commission is also adding a new requirement in new § 43.3(a)(5) for DCOs to report swap transaction and pricing data for clearing swaps that are publicly reportable swap transactions. Currently, § 43.3 does not account for DCOs in the hierarchy of entities required to report to SDRs. This would be a new requirement for DCOs to send swap transaction and pricing data reports to SDRs, to the extent they are not currently required to do so. DCOs would only be required to do so when reporting swaps associated with clearing member defaults. However, the Commission, recognizing the importance of the DCO clearing member default process, decided to exempt these swaps from the definition of “publicly reportable swap transaction,” with the result being there will be no reporting requirement for DCOs. As such, there is now no PRA burden.
Existing § 43.3(h) requires timestamping by multiple entities.
As a result of the removal of § 43.3(h), the Commission is removing the current recordkeeping burden of 5,854 hours from the collection. The estimated aggregate reporting burden for § 43.3 is as follows:
The Commission did not include any burden estimates in the Proposal related to the modification or maintenance of systems in order to be in compliance with the proposed amendments to § 43.3. The Commission estimates that the cost for a reporting entity, including DCMs, DCOs, MSPs, non-SD/MSPs, SDs, and SEFs, to modify their systems and maintain those modifications going forward to adopt the Final Rule could range from $24,000 to $74,000. There are an estimated 1,732 reporting entities, for a total estimated cost of $84,868,000. The estimated cost range is based on a number of assumptions that cover tasks required to design, test, and implement an updated data system based on the new swap data elements contained in part 43. The Commission estimates it would take a reporting entity an estimated total of 500 to 725 hours per reporting to perform the necessary tasks. The Commission estimates that the cost for an SDR to modify their systems, including their data reporting, ingestion, and validation systems, and maintain those modifications going forward may range from $144,000 to $510,000 per SDR. There are currently three SDRs, for an estimated total cost of $981,000. The estimated cost range is based on assumptions that cover the set of tasks required for the SDR to design, test, and implement a data system based on the list of swap data elements contained in part 43. These numbers assume that each SDR will spend approximately 3,000-5,000 hours to establish a relational database to handle such tasks. As noted above, the Commission is soliciting comments on the revised burden estimates for part 43, including the estimated costs related to the modification or maintenance of systems
As discussed above, existing § 43.3 requires reporting counterparties to send swap reports to SDRs ASATP after execution. The Commission is adopting changes to § 43.3 to establish new requirements for reporting prime brokerage swaps in § 43.3(a)(6). The amended rules would establish that “mirror swaps” would not need to be publicly disseminated by SDRs. Reporting counterparties would continue to report mirror swaps to SDRs pursuant to part 45, but the amendment to § 43.3 would reduce the number of reports SDRs would be required to publicly disseminate according to § 43.4.
The Commission estimates that the amendments would reduce the number of mirror swaps SDRs would need to publicly disseminate by 100 reports per each SDR, for an aggregate burden hour reduction of 20.10 hours.
The estimated aggregate reporting burden total for § 43.4, as adjusted for the reduction in reporting by SDRs of mirror swaps, is as follows:
The Commission did not include any burden estimates in the Proposal related to the modification or maintenance of systems in order to be in compliance with the proposed amendments to § 43.4. To avoid double-counting, the Commission included the costs associated with updates to § 43.3, discussed above, as they would be captured in the costs of updating systems based on the list of swap data elements in part 43. As noted above, the Commission is soliciting comments on the revised burden estimates for part 43 that are being adopted in the Final Rule.
Section 15(a)
Generally, the Commission expects that, taken together, the revisions and additions to part 43 will improve the real-time public reporting regime for reporting counterparties, SEFs, DCMs, SDRs, and market participants that use real-time public data, with some attendant costs. The discussion below considers the costs and benefits the Commission—informed by commenters—foresees resulting from the particular substantive amendments it is adopting.
The Commission lacks precise cost data to quantify the costs and benefits considered below.
The discussion in this section is based on the understanding that swap markets often extend across geographical regions. Many swap transactions involving U.S. firms occur across international borders. Some Commission registrants are headquartered outside of the U.S., with the most active participants often conducting operations both within and outside the U.S. Where the Commission does not specifically refer to matters of location, the discussion of costs and benefits refers to the rules' effects on all swaps activity, whether by virtue of the activity's physical location in the U.S. or by virtue of the activity's connection
New § 43.3(a)(4) establishes requirements for reporting PPSs, which the Commission defines as off-facility swaps for which the price has not been determined at the time of execution.
The new requirements help address a challenge reporting counterparties face, and, in doing so, remedy an impediment to the quality of the real-time tape. Under existing regulations, reporting parties must report all trades ASATP after execution. Existing rules do not address how reporting parties represent unknown trade terms in swap reports to SDRs or whether SDRs must accept trade reports missing values or with zero values in fields. SDRs often reject these trades, which means reporting counterparties cannot accurately report PPSs in real time. The current lack of specific requirements creates inconsistencies in how and when reporting counterparties report PPSs.
As expressed in the Proposal—and undisputed by commenters—the Commission believes that while some variable term swaps, including PPS, are reported shortly after execution, these swaps also account for a significant but unknown percentage of swaps not reported to SDRs in a timely manner.
As discussed in section II.D.2, above, and incorporated by reference for purposes of the Commission's consideration of costs and benefits here, the Commission received a number of comments concerning new § 43.3(a)(4). Some commenters oppose delaying PPS reporting. For example, Citadel suggests the Commission instead require real-time reporting and dissemination of PPSs with an identifier for PPSs on the public tape.
Other commenters believe the Commission should delay PPS reporting by a day or more. For example, ISDA-SIFMA suggest delaying PPS reporting until the earlier of (a) the price being determined, or (b) 11:59:59 p.m. eastern time on the next business day following the execution date.
The Commission considered the costs and benefits of delaying PPS reporting. The Commission agrees that dissemination of swap transaction and pricing data immediately after execution increases price transparency. But this benefit is limited where the price of a swap is not known.
The Commission also believes that, because the PPS price is determined after execution, SDs face unique risks hedging a PPS. For example, the price of some PPSs is tied to a reference price that is not determined until the end of the trading day. Publishing swap transaction data before the price is determined presents unique and heightened risks of front running, as market participants will be able to transact in swaps ahead of the event on which the price is contingent. This could increase hedging costs, disadvantaging the SD and the counterparty to the PPS, and potentially cause market participants to forego the use of such swaps, thereby materially reducing swap market liquidity. Thus, there is significant benefit delaying reporting until after price has been determined.
The Commission has determined that the final rules provide an appropriate balance. Citadel's faster reporting could have a significant impact on the ability of SDs to hedge their position, while ISDA-SIFMA's delayed reporting would have a significant negative effect on price transparency.
CME and FIA opposed reporting and disseminating PPSs until all terms are known, not only price.
Another benefit to the final regulations it that the final requirements would permit parties to hedge the positions they acquire in a more cost-effective way. For example, if a client asks an SD to take the long side of a large swap, the SD may be able to hedge that position with less price impact if other traders are unaware of the SD's hedging need. This ability to hedge while mitigating price impact can often translate to better pricing for the client. Thus, the Commission anticipates final § 43.3(a)(4) would decrease SDs' hedging costs, especially for large or non-standardized trades, improve customer pricing, and increase market participants' willingness to take positions.
Another potential cost is that § 43.3(a)(4) might encourage traders to trade more PPSs and fewer swaps for which the price is known at execution. For example, if choosing between two swaps with comparable terms except one has a price determined at the end of the day, if the size is large relative to the rest of the market, the delay could encourage the counterparties to select the swap with an unknown price. The incentive to choose PPSs for a delay would reduce transparency with fewer trades reported ASATP after execution.
The Commission is adopting § 43.3(a)(4) to specify the requirements for reporting PPSs. Notwithstanding the potential costs identified above, the Commission believes this change is warranted in light of the anticipated benefits.
Final § 43.3(a)(5) adds DCOs to the reporting counterparty hierarchy for clearing swaps that are publicly reportable swap transactions. DCOs do not typically report swap transaction and pricing data under part 43, because cleared swaps have already been reported at execution: SEFs, DCMs, and reporting counterparties report the original, market-facing swap to SDRs for public dissemination while sending the swap to a DCO for clearing. Final § 43.3(a)(5) covers the limited cases where a DCO executes a publicly reportable swap transaction that has not already been reported under part 43. However, the Commission is adopting an alternative to § 43.3(a)(5) raised by commenters that would lead to maintaining the status quo. ICE DCOs and CME believe the Commission should also amend the definition of “publicly reportable swap transaction” in § 43.2 to exclude swaps created through DCO default management processes to avoid allowing front-running if the processes span multiple days.
While the Commission is adopting final § 43.3(a)(5), the Commission is also adopting the alternative proposed by ICE DCOs and CME because the Commission shares these commenters' concerns that the new requirement could impede the efficacy or ability of DCOs to complete default management exercises.
Final § 43.3(a)(6) establishes rules for publicly reporting PB swaps.
Banks typically offer prime brokerage services to large, sophisticated customers. Customers that avail themselves of this service enter into an agency agreement with their PB by which the PB agrees to serve as the counterparty for at least two off-setting swaps: A trigger swap with its customer,
Existing part 43 does not expressly address mirror swaps or trigger swaps, and, as a result, both are currently required to be reported to an SDR and publicly disseminated ASATP as a publicly reportable swap transaction.
Compounding the Commission's transparency concerns under existing part 43 is its understanding, based on anecdotal information, that PB swaps are reported, to an unclear degree, inconsistently. In particular, the Commission is concerned mirror swaps are currently under-reported because some market participants, believing that reporting mirror swap terms is duplicative of the corresponding trigger swap and would distort price discovery.
Pursuant to new § 43.3(a)(6)(i), a mirror swap would fall outside the obligations for ASATP reporting and SDR public dissemination,
As discussed in sections II.C.4 and III above, and incorporated by reference for purposes of the Commission's consideration of costs and benefits herein, the Commission received several comments concerning new § 43.3(a)(6), including its associated definitions and new prime broker transaction indicator in appendix A.
In reaching this conclusion, the Commission acknowledges marginal transparency imperfections due to PB swaps will remain. As discussed below in the cost context, there are aspects of mirror swap reporting that could theoretically inform price discovery to some degree regarding market participant credit risk, total price (including PB fees that reflect credit intermediation costs), and that, in some cases, a single trigger swap's notional value may be offset by multiple mirror swaps. However, relative to distortion from mirror swap double counting, the Commission views these potentially beneficial aspects of mirror swap reporting as less impactful to the integrity of the public tape. Further, since mirror swaps are currently required to be reported without any flag indicative of their status or association with a trigger swap, whatever information they now convey on the public tape is likely more akin to distortive “noise” than helpful to inform market participants. Accordingly, the Commission believes that, overall, excluding mirror swaps from real-time reporting will improve the quality of the real-time tape, thereby enhancing price discovery relative to the status quo.
The Commission also foresees benefits from establishing clear rules for PB swap reporting to alleviate reporting ambiguity, but the price discovery value of mirror swaps remaining unclear. Uncertainty as to how market participants are reporting PB swaps can challenge the public tape's quality, as well as undermine its price discovery utility. Further, to the extent some market participants may not be fully reporting PB swaps, while others may be fully reporting these swaps, § 43.3(a)(6) should level the playing field. Finally, as one commenter notes, to the extent some market participants are now reluctant to engage in PB swaps because of regulatory uncertainty, § 43.3(a)(6) “should bring increased liquidity to OTC swaps markets” by countering this uncertainty.
The informative value of each of the above, however, is largely dependent on a market participant's ability to recognize whether a reported swap is a mirror swap. This is currently impossible to determine because part 43 does not require mirror swaps to be reported with any indicator. Accordingly, relative to the status quo baseline, the Commission views any lost-transparency cost from not requiring mirror swap reporting as largely theoretical.
Separately, eliminating mirror swap dissemination could incentivize the use of more complex mirror swaps to avoid public reporting, increasing the possibility of more complicated, risky swaps being created. But the Commission expects such risk to be minimal, given that all trigger swaps associated with prime brokerage transactions will still be reported to SDRs pursuant to part 45. Further, with the benefit of part 45 data, the Commission is well-positioned to monitor, and respond as appropriate, should PB swap activity appear to be evolving as a real-time reporting avoidance strategy.
Citadel advocates for the first alternative approach,
ISDA-SIFMA's preferred alternative would relax the ASATP timeframe for reporting trigger swaps if the reporting obligation falls on the PB,
Notwithstanding potential costs, the Commission believes new § 43.3(a)(6) is warranted in light of the anticipated benefits.
Existing § 43.3(d)(1) and (2) specify the format in which SDRs make swap transaction and pricing data available to the public and require that disseminated data must be made “freely available and readily accessible” to the public. Substantively, amended § 43.3(c) changes these requirements to specify that SDRs shall make such data publicly available on their websites for at least one year after dissemination, and provide instructions on how to download, save, and search the data. As noted above in section II.C.7, the Commission understands a one-year data availability time-frame is current practice for at least a majority of SDRs. However, in that this is not a current requirement, potential remains for an SDR to elect to remove the data at some point in the future, thereby depriving market participants of extended data access that may be useful as a tool to assess market conditions.
The Commission received several comments, all generally supportive of amended § 43.3(c). None raised cost-benefit issues, advocated an alternative, or disputed the Proposal's assessment that costs will likely be negligible because SDRs already make the public reports available for more than one year.
The Commission is adopting revisions to § 43.3(d), including on how reporting counterparties, SEFs, and DCMs report data to SDRs for public dissemination, as well as respond to SDR notifications of missing or incomplete data.
New § 43.3(d)(2) will require the reporting counterparty, SEF, or DCM to satisfy the data validation procedures of the SDR for each required data element listed in appendix A. Since § 43.3(d)(2) is closely related to new data validation requirements in § 43.3(f)(1) and the cost considerations to validate overlap significantly with initial design costs, most, if not all, of the costs discussion here will overlap with new § 43.3(f).
Along with the expected benefits that will arise from the standardization and uniformity of information reported in real-time, the Commission expects additional benefits related to the new swap transaction and pricing data elements in appendix A. For example, there is a new data element allowing users to identify whether a swap is a PPS or if the swap is considered a bespoke swap. This additional information will allow for additional options in processing and studying market information.
The Commission expects many of the changes related to part 43 will be planned and developed in accordance with changes required under new regulations in part 45. While the Commission cannot apportion shares of the aggregate total between these two rules, the costs attributable to part 43 would be some smaller proportional share of the indicated aggregate total since the list of data elements subject to real-time reporting is a small subset of
ODT SMEs, using experience designing data reporting, ingestion, and validation systems, estimates the cost per SDR range from $144,000 to $510,000.
For reporting entities, ODT SMEs estimate the cost per reporting entity to range from $24,000 to $74,000.
However, the Commission reiterates that these costs have been accounted for in the separate part 45 adopting release. The Commission repeats the analysis here, but cautions the cost to SDRs in updating their systems to disseminate the updated data elements in appendix A, most of which the SDRs are already disseminating, would be a smaller portion of the costs just described.
In summary, new § 43.3(d) places regulations on the reporting counterparty, SEF, or DCM related to how data is reported to SDRs along with requirements to satisfy the data validation procedures of the SDR. Taking into account the anticipated costs, the Commission believes the rules are warranted in light of the anticipated benefits.
New § 43.3(f) establishes requirements for SDRs to validate real-time public data by sending SEFs, DCMs, and reporting counterparties data validation acceptance or rejection messages. Validation requirements, for each data element required under part 43, will be fully described in a guidebook published by DMO. The Commission expects SDRs to implement these validations while designing their reporting systems to reflect the newly required data elements discussed above in § 43.3(d).
Currently, the Commission does not require validations by SDRs, and therefore has not provided any guidance on either the content or format of the messages associated with these validations. New validations will help ensure reported data is accurate and consistent across SDRs. While the Commission does not currently require validations, the Commission can observe activity related to market participants cancelling and correcting publicly disseminated trade information.
It is difficult to estimate how many trades are reported with errors under the current system. The Commission estimates more than 10% of trades are subsequently corrected or cancelled. In
While the Commission acknowledges there will some costs associated with this regulation, additional flexibility has been provided to allow SDRs options in how they perform validations. Based on a comment from DTCC, the Commission changed the rule text by replacing “transmitting” with “making available” to allow SDRs the flexibility to establish more efficient lines of communication to ensure the validation occurs with the least possible disruption.
The Commission is adopting § 43.3(f) to establish requirements for SDRs to validate real-time public data. Taking into consideration the anticipated costs, the Commission believes this change is warranted in light of the anticipated benefits.
The Commission is changing the § 43.4(f) rules for rounding actual notional or principal amounts of a swap before disseminating such swap transaction and pricing data. The Commission requires SDRs to disseminate rounded notional or principal amounts of swaps to conceal the exact notional of swap transactions in order to preserve the anonymity of counterparties. Absent some degree of concealment, disseminating the exact notional of a swap could allow market participants to more easily discern the identity of the counterparties and gain insight into the counterparties' trading strategies, which would potentially discourage market participants from executing swaps and harm liquidity.
Final § 43.4(f)(8) requires SDRs to round the notional value of swap transactions so that the revealed amount is more precise. For example, final § 43.4(f)(8) requires trades with a notional or principal amount less than 100 billion but equal to or greater than one billion to be rounded to the nearest 100 million; the existing regulation requires rounding to nearest billion. Similarly, final § 43.4(f)(9) requires SDRs to round trades with a notional or principal amount greater than 100 billion to the nearest 10 billion before disseminating such swap transaction and pricing data; the existing requirement is round to the nearest 50 billion. The Commission did not receive any comments on the proposal.
This change effectively means that market participants will have more precise measures of the size of large trades. The effects of this change on anonymity are mitigated by the fact that most of swaps to which these changes will apply will also be eligible for block and/or cap treatment. If a trade is subject to cap treatment, no information will be revealed about the trade size above the capping level, such that this change will have no anonymity impact in many cases. For trades with a cap above one billion, this change in § 43.4(f)(8) will allow for a more precise estimate of total traded notional or principal amounts, and thereby help market participants achieve a more accurate estimate of general market trading activity.
As noted above, the benefits and costs of the changes in § 43.4(f)(8) are mitigated by the fact that change is only relevant when cap sizes are above one billion. Since the cap sizes for CDS and FX are well below the one billion mark for all swap categories, the change will have no effect in those asset classes. Only shorter-tenor IRS categories have cap sizes above one billion.
The Commission is amending the rules for rounding actual notional or principal amounts of a swap. Notwithstanding the anticipated costs, the Commission believes this change is warranted in light of the anticipated benefits to increased transparency.
Section 43.6 specifies how the Commission sets appropriate minimum block sizes—thresholds determining whether a transaction qualifies as either a block trade or LNOFS
The cornerstones of current § 43.6 are subsections (b) prescribing the swap categories for which appropriate minimum block sizes (also referred to as block thresholds) and caps must be set, and (c)-(h), which specify the process, methodology and other details for how the block thresholds and caps are determined for the categories specified in subsection (b). The Commission is updating two primary areas of § 43.6: (1) The swap categories; and (2) the
As discussed above, the Commission established a phased-in approach for the block thresholds and cap sizes. In general, the first phase involved using a 50-percent notional amount calculation for block thresholds and a 67-percent notional amount calculation for cap sizes. In this release, the Commission is moving to the second and final phase by using a 67-percent notional calculation for block thresholds and a 75-percent notional calculation for cap sizes. Using the 67-percent and 75-percent notional calculations will generally result in higher block thresholds and larger cap sizes, but, as applied to the better calibrated swap categories in § 43.6(c), will result in some transactions qualifying as blocks that previously would not have, while others that previously did may not going forward. The Commission provides additional background on its economic assessment of the updated § 43.6(c) swap categories, and their interplay with appropriate minimum block size and cap sizes, below.
As discussed at length in section II.F, the Commission is changing the swap categories in § 43.6(c) to alleviate concerns the current categories are too broad and would result in an undesirable impact on certain categories of swaps when appropriate minimum block sizes and cap sizes are calculated using the 67-percent and 75-percent notional calculations, respectively. The Commission believes the new categories: (1) Group together swaps with similar quantitative or qualitative characteristics that warrant being subject to the same appropriate minimum block size thresholds and cap sizes; and (2) minimize the number of swap categories within an asset class in order to avoid unnecessary complexity in the determination process.
As the Commission did in creating the existing swap categories, the Commission is grouping products with similar characteristics. For example, the Commission believes products are typically related when: The products are complements of, or substitutes for, one another; one product is a significant input into the other product(s); the products share a significant common input; or the prices of the products are influenced by shared external factors. The Commission believes this is how market participants assign products to larger swap categories, including DCOs when portfolio margining. Further, the Commission recognizes some market participants trade related products, and the Commission did not want to create a block rule that would disadvantage one product for another product by influencing market participants to trade in the illiquid products.
The adoption of § 43.6(c) will expand the number of swap categories the Commission uses to calculate block thresholds.
The Commission is adopting similar changes for other asset classes. For CDS, the new swap categories are no longer based on observed spreads with multiple tenor groups, but instead on well-defined products (
Further, in response to commenters, the Commission found a notable difference in the distribution of trade sizes between non-option and option CDS. As such, the Commission is giving certain option CDS their own categories to avoid skewing the appropriate minimum block size threshold and cap size calculations higher in CDS categories in which they remained combined with non-option CDS (thereby resulting in more non-option CDS falling under the thresholds, precluding them from a block reporting delay or notional-amount capping). For example, the average option notional trade size is three-to-six times larger than non-option trades for certain CDS. This results in clear differences in block and cap treatment between option and non-option swaps as 97-percent of total notional for CDXIG options are eligible for block and cap treatment, as compared to 66-percent for non-options.
FX swap categories include a list of 22 currencies exchanged for USD along with the set of 180 swap categories, comprised of each unique pairwise combination of these 22 currencies. This differs from the current set of 84 swap categories comprised of 22 currencies exchanged for one of the super-major currencies (EUR, GBP, JPY, or USD).
The adoption of § 43.6(c) will result in an appropriate minimum block size of zero for swaps excluded from the defined swap categories.
As discussed in section II.F. above, and incorporated by reference for purposes of the Commission's consideration of costs and benefits herein, the Commission received numerous comments concerning the block threshold and cap size amendments. Many concern issues of
In addition to the block threshold and cap size amendments, the Commission is changing the provisions for order aggregation in existing § 43.6(h) and revising the block trade definition in § 43.2.
The Commission has recognized “the optimal point in [the transparency/liquidity interplay] defies precision.”
The Commission expects the changes to the swap categories will better achieve the intention of the Block Trade Rule to group swaps with similar characteristics together, thereby improving the transparency/liquidity optimization. The block thresholds and cap sizes applied in the context of § 43.6(c)'s swap categories will result in levels that better reflect current liquidity for each type of swap. For example, USD IRSs currently represent most of the actual trades in the IRS Super-Major category, such that the current appropriate minimum block size for JPY IRS swaps (also in the Super-Major category) is based largely on USD trades. The new categories, which separate JPY IRS from USD IRS will result in an appropriate minimum block size that better reflects the size distribution of JPY rate swaps. This will mean that instruments like the JPY IRS, with fewer large trades (than USD IRS) will have lower thresholds, meaning that smaller trades will be eligible for block treatment and have lower caps for such instruments than if swap categories were not changed. This will benefit relatively large JPY IRS trades. The move from spread-based (
The amendment to the block trade definition will enable market participants to execute block trades on SEFs. These trades may be executed bilaterally so that a party wishing to make a large trade on a SEF can choose to reveal the would-be trade to a single selected counterparty.
Regarding the ability to aggregate orders into a large single trade, the Commission expects the rule changes will expand the opportunity to aggregate across more products and market participants. By removing the $25-million requirement, the Commission expects to create a more equal and accessible market by allowing the opportunity to aggregate regardless of the aggregator's size. Extending the aggregation policy to additional products will allow more equal treatment across products, potentially reducing an entity's incentive to trade a product because of the differential regulation.
Further, there will be operational costs for reporting parties adjusting their systems, by writing and implementing new code, for instance. The Commission expects the operational costs of these changes to vary by asset class and the activity level of the reporting entity, but believes that the more granular bucketing of block categories will help mitigate costs. Costs may also differ depending on the type of cost. For instance, the Commission expects market participants specializing in a single swap category to face smaller operational costs relative to those operating across multiple categories, given the single-category market participants will likely only need to adjust their operational systems (where necessary) for a more limited number of categories.
The Commission does not expect the block trade definition amendment will impose significant costs on market participants. The change does not reduce choices, but instead provides block trade counterparties with the additional choice of executing block on SEFs. For counterparties choosing to execute trades on SEFs, there will be no increase in reporting costs as the existing regulation requires counterparties to report transactions to a SEF after a block is executed. The final regulation simply allows counterparties to report the trade to the SEF before it is executed. FCMs will also not incur greater expenses as they currently use SEFs to conduct pre-trade credit checks. Finally, SEFs are not expected to incur greater costs processing block trades before execution than they incur processing block trades after execution as the entire process is automated and already in place.
The Commission expects minimal costs resulting from changes in how market participants aggregate orders into a single large order to obtain block treatment. As this ability is already available to the largest market participants, the Commission expects the new increase in activity will be small relative to current activity. Regardless, any increase due to greater aggregation will result in a reduction of transparency, which can create inhibit price discovery. Moreover, to the extent that some entities, such as asset managers, may encourage trading by their clients in order to have sufficient volume to meet the block threshold, the rule may lead to increased agency issues.
Notwithstanding the potential costs, the Commission believes the substantive changes to §§ 43.4(h), 43.6, and 43.2's definition of block trade change are warranted in light of the anticipated benefits.
Maintaining the existing threshold would, all else being equal, increase the number of swaps eligible for block delays. For those trades, SDs could find it less difficult to hedge the exposure
The idea that SDs could experience higher hedging costs if their intentions were widely known has a long history. Harris (2003), for example, suggests other traders anticipating SDs hedging trades could result in higher trading costs for SDs.
In sum, a certain body of academic literature suggests more information released in some circumstances can negatively impact SDs' hedging costs, and consequently, the prices offered by SDs to large traders. However, the magnitude of these effects in swaps markets is not precisely known. Further, as discussed below, there is an offsetting body of academic literature indicating that, in at least some circumstances, increased transparency lowers trading costs.
The Commission believes maintaining existing block thresholds would reduce transparency in swaps markets by increasing the overall number of trades eligible for block delays and decreasing the number of swaps reported in real time. This would lead to decreased accuracy in the real-time tape.
In the Proposal, the Commission characterized the costs and benefits of changing the cap and blocks thresholds in regard to the potential effects on liquidity of large blocks and on price transparency. The Commission received a number of comments that discussed these liquidity and transparency effects.
These studies analyze a change in information-related regulation based on appropriate data before and after the regulatory change. Without a similar study for block and cap changes for swaps, the Commission bases its conclusion that greater transparency will benefit the market on findings in related markets.
The ideal appropriate minimum block size balances the benefits of large size blocks—increased transparency, price discovery, and swaps market competitiveness with their costs—increased trading costs for SDs and their customers and less liquidity. After providing notice to the public of proposed methods, considering public comments and considering costs and benefits of the proposed and alternative methods, the Commission determined in 2013 to adopt a 67-percent notional amount calculation method, but to implement a 50-percent notional amount calculation method as a conservative, transitionary level to allow the market time to adjust before moving to the more appropriate 67-percent method.
As discussed in section II.F.4 above, the Commission continues to believe the 67-percent method provides a better outcome than the 50-percent method as
A second alternative advocated in comments relates to risk adjusting notional values before determining block and cap thresholds (
Although basing appropriate minimum block size on DV01 theoretically might be appropriate, the commenters have not explained how this could be accomplished in practice, nor are the means for doing so apparent to the Commission. Moreover, the ultimate goal in establishing thresholds is to focus on liquidity differences across swap categories, not risk-transfer
Section 15(a) of the CEA requires the Commission to consider the costs and benefits of the amendments to part 43 with respect to the following factors: Protection of market participants and the public; efficiency, competitiveness, and financial integrity of markets; price discovery; sound risk management practices; and other public interest considerations.
As discussed above, the amendments to part 43 include changes that reflect what the Commission has learned about the technical aspects of reporting as well as changes that alter categories of swaps. The Commission expects that this, along with the data validation requirements in § 43.3(f), will increase the quality and timeliness of swap transaction and pricing data reported and publicly disseminated pursuant to part 43.
The Commission believes by enhancing transparency, the reporting requirements empower market participants by informing them, in real-time, about the trade prices of a broad set of swap products. This real-time information helps protect these participants from transacting at prices significantly different from the prevailing market. In addition, the Commission believes enhanced transparency allows for better monitoring of the quantity and size of market transactions, leading to improved protection of market participants and the public. As discussed above, several of the changes increase transparency, such as improvements in how swap categories are defined and improvements in reported data. However, these same changes at times may make it more expensive for SDs to hedge large positions they acquire, thereby increasing hedging costs for trades within certain size ranges.
Real-time reporting of transactions affects the efficiency of markets by quickly providing new information to all market participants in a standardized manner. This real-time information, which is publicly accessible, allows prices to rapidly and efficiently adjust to the prevailing trading conditions. To the extent that these Final Rules reduce the cost of information gathering and processing, as the Commission expects, market efficiency should be improved.
Improvements to real-time reporting may also enhance competition, as market participants may learn about the prices and venues where potential counterparties are executing their transactions. As such, swaps markets may become more competitive because parties will have better access to the prices where most participants are transacting and will be able to use this information to make their own trading decisions.
The Final Rules, through their effects on transparency, are also designed to positively impact the financial integrity of markets, because market participants can verify that they are transacting at or near prevailing market prices. In addition to transparency, the Commission expects changes to part 43 are likely to positively affect financial integrity in other ways. In particular, the Commission believes that more accurate swap transaction and pricing data will lead to greater understanding of liquidity and market depth for market participants executing swap transactions. Also, changes improving part 43 swap transaction and pricing data for the public will expand the ability of market participants to monitor real-time activity by other participants and to respond appropriately.
Section 2(a)(13) of the CEA and the Commission's existing regulations in part 43 implementing CEA section 2(a)(13) require swap transaction and pricing data to be made available to the public in real time. The Commission
One aspect of the final regulations does hold some potential to dampen price discovery relative to the status quo to a limited degree. Specifically, if § 43.4(a)(4) encourages more PPSs, then this may also reduce price discovery because fewer trades would have prices that are known at the time of execution. But countering this, as noted above, removing mirror swaps from public reporting could remove redundancy false impressions of market activity, thereby promoting the accuracy of the data.
The rule changes promulgated here will have a variety of effects on risk management practices. The effect of increasing the threshold for block determinations will result in more rapid dissemination of trade data for trades within specific size ranges. As discussed above, some commenters note that this change may make it more expensive for SDs to manage the risk they take on when accommodating customer trades.
Conversely, to the extent the final regulations result in more price transparency for the reasons discussed above, it is likely that trading costs will fall for some swaps, particularly smaller-sized swaps. This effect will enable some market participants to more readily hedge their inherent risk, and thereby improve risk management.
More accurate swap transaction and pricing data would be helpful to researchers who may use the data to improve the public's understanding of how swap markets function with respect to market participants, other financial markets, and the overall economy. Higher-quality data would also likely improve the Commission's regulatory oversight and enforcement capabilities.
Section 15(b) of the CEA requires the Commission to take into consideration the public interest to be protected by the antitrust laws and to endeavor to take the least anticompetitive means of achieving the objectives of the CEA, in issuing any order or adopting any Commission rule or regulation.
The Commission does not believe that the amendments to part 43 will result in anti-competitive behavior. The Commission did not receive any comments on the antitrust considerations in the Proposal.
Real-time public swap reporting.
For the reasons stated in the preamble, the Commodity Futures Trading Commission amends 17 CFR part 43 as set forth below:
7 U.S.C. 2(a), 12a(5), and 24a, as amended by Pub. L. 111-203, 124 Stat. 1376 (2010).
The revision reads as follows:
(b)
(a)
(1) Involves a swap that is listed on a swap execution facility or designated contract market;
(2) Is executed on a swap execution facility's trading system or platform that is not an order book as defined in § 37.3(a)(3) of this chapter, or occurs away from the swap execution facility's or designated contract market's trading system or platform and is executed pursuant to the swap execution facility's or designated contract market's rules and procedures;
(3) Has a notional or principal amount at or above the appropriate minimum block size applicable to such swap; and
(4) Is reported subject to the rules and procedures of the swap execution facility or designated contract market and the rules described in this part, including the appropriate time delay requirements set forth in § 43.5.
(1) To which—
(i) A prime broker is a counterparty; or
(ii) Both counterparties are prime brokers;
(2) That is executed contemporaneously with a corresponding trigger swap;
(3) That has identical terms and pricing as the contemporaneously executed trigger swap, except:
(i) That a mirror swap, but not the corresponding trigger swap, may include any associated prime brokerage service fees agreed to by the parties; and
(ii) As provided in paragraph (5) of this “mirror swap” definition;
(4) With respect to which the sole price forming event is the occurrence of the contemporaneously executed trigger swap; and
(5) The execution of which is contingent on, or is triggered by, the execution of the contemporaneously executed trigger swap. The contractually agreed payments and delivery amounts under a mirror swap may differ from those amounts of the corresponding trigger swap if:
(i) Under all such mirror swaps to which the prime broker that is a counterparty to the trigger swap is also a counterparty, the aggregate contractually agreed payments and delivery amounts shall be equal to the aggregate of the contractually agreed payments and delivery amounts under the corresponding trigger swap; and
(ii) The market risk and contractually agreed payments and delivery amounts of all such mirror swaps to which a prime broker that is not a counterparty to the corresponding trigger swap is a party will offset each other, resulting in such prime broker having a flat market risk position at the execution of such mirror swaps.
(1) Unless otherwise provided in this part—
(i) Any executed swap that is an arm's-length transaction between two parties that results in a corresponding change in the market risk position between the two parties; or
(ii) Any termination, assignment, novation, exchange, transfer, amendment, conveyance, or extinguishing of rights or obligations of a swap that changes the pricing of the swap.
(2) Examples of executed swaps that do not fall within the definition of publicly reportable swap may include:
(i) Internal swaps between one-hundred percent owned subsidiaries of the same parent entity;
(ii) Portfolio compression exercises; and
(iii) Swaps entered into by a derivatives clearing organization as part of managing the default of a clearing member.
(3) These examples represent swaps that are not at arm's length and thus are not publicly reportable swap transactions, notwithstanding that they do result in a corresponding change in the market risk position between two parties.
(1) That is executed pursuant to one or more prime brokerage agency arrangements;
(2) To which one counterparty or both counterparties are prime brokers;
(3) That serves as the contingency for, or triggers, the execution of one or more corresponding mirror swaps; and
(4) That is a publicly reportable swap transaction that is required to be
(b)
The revisions read as follows:
(a)
(2)
(3)
(i) If only one party is a swap dealer or major swap participant, then the swap dealer or major swap participant shall be the reporting counterparty;
(ii) If one party is a swap dealer and the other party is a major swap participant, then the swap dealer shall be the reporting counterparty;
(iii) If both parties are swap dealers, then the swap dealers shall designate which party shall be the reporting counterparty prior to execution of such swap;
(iv) If both parties are major swap participants, then the major swap participants shall designate which party shall be the reporting counterparty prior to execution of such swap; and
(v) If neither party is a swap dealer or a major swap participant, then the parties shall designate which party shall be the reporting counterparty prior to execution of such swap.
(4)
(ii)
(5)
(6)
(ii) With respect to a given set of swaps, if it is unclear which is, or are the mirror swap(s) and which is the related trigger swap (including, but not limited to, situations where there is more than one prime broker counterparty within such set of swaps and situations where the pricing event for each set of swaps occurs between prime brokerage agents of a common prime broker), or if under the prime brokerage agency arrangement, the trigger swap would occur between two prime brokers, the prime broker(s) shall determine which of the prime broker swaps shall be treated as the trigger swap and which are mirror swaps.
(iii) Trigger swaps shall be reported in accordance with the following:
(A) Trigger swaps executed on or pursuant to the rules of a swap execution facility or designated contract market shall be reported pursuant to paragraph (a)(2) of this section; and
(B) Off-facility trigger swaps shall be reported pursuant to paragraph (a)(3) of this section, except that if a counterparty to a trigger swap is a swap dealer that is not a prime broker with respect to that trigger swap, then that swap dealer counterparty shall be the reporting counterparty for the trigger swap.
(7)
(b)
(2)
(3)
(A) Such disclosure is made no earlier than the transmittal of such data to a swap data repository for public dissemination;
(B) Such disclosure is only made to market participants on such swap execution facility or designated contract market;
(C) Market participants are provided advance notice of such disclosure; and
(D) Any such disclosure by the swap execution facility or designated contract market is non-discriminatory.
(ii) If there is a swap data repository for an asset class, a swap dealer or major swap participant shall not disclose swap transaction and pricing data relating to publicly reportable swap transactions in such asset class, prior to the public dissemination of such data by a swap data repository unless:
(A) Such disclosure is made no earlier than the transmittal of such data to a swap data repository for public dissemination;
(B) Such disclosure is only made to the customer base of such swap dealer or major swap participant, including parties who maintain accounts with or have been swap counterparties with such swap dealer or major swap participant;
(C) Swap counterparties are provided advance notice of such disclosure; and
(D) Any such disclosure by the swap dealer or major swap participant is non-discriminatory.
(4)
(5)
(c)
(2) Swap transaction and pricing data that is publicly disseminated pursuant to this paragraph shall be made available free of charge.
(d)
(2) In reporting swap transaction and pricing data to a swap data repository, each reporting counterparty, swap execution facility, or designated contract market making such report shall satisfy the data validation procedures of the swap data repository.
(3) In reporting swap transaction and pricing data to a swap data repository, each reporting counterparty, swap execution facility, or designated contract market shall use the facilities, methods, or data standards provided or required by the swap data repository to which the entity or reporting counterparty reports the data.
(f)
(2) If a swap transaction and pricing data report submitted to a swap data repository does not satisfy the data validation procedures of the swap data repository, the reporting counterparty, swap execution facility, or designated contract market required to submit the report has not satisfied its obligation to report swap transaction and pricing data in the manner provided by paragraph (d) of this section. The reporting counterparty, swap execution facility, or designated contract market has not satisfied its obligation until it submits the swap transaction and pricing data report in the manner provided by paragraph (d) of this section, which includes the requirement to satisfy the data validation procedures of the swap data repository.
(g)
(a)
(b)
(c)
(2)
(3)
(4)
(i) A swap data repository shall publicly disseminate swap transaction and pricing data for publicly reportable swap transactions in the other commodity asset class in the manner described in paragraphs (c)(4)(ii) and (iii) of this section.
(ii) The actual underlying asset(s) shall be publicly disseminated for the following publicly reportable swap transactions in the other commodity asset class:
(A) Any publicly reportable swap transaction that references one of the contracts described in appendix B to this part;
(B) Any publicly reportable swap transaction that is economically related to one of the contracts described in appendix B of this part; or
(C) Any publicly reportable swap transaction executed on or pursuant to the rules of a swap execution facility or designated contract market.
(iii) The underlying assets of swaps in the other commodity asset class that are not described in paragraph (c)(4)(ii) of this section shall be publicly disseminated by limiting the geographic detail of the underlying asset(s). The identification of any specific delivery point or pricing point associated with the underlying asset of such other commodity swap shall be publicly disseminated pursuant to appendix E of this part.
(d)
(2)
(ii) The actual notional or principal amount for any block trade executed on or pursuant to the rules of a swap execution facility or designated contract market shall be reported to the swap execution facility or designated contract market pursuant to the rules of the swap execution facility of designated contract market.
(e)
(f)
(2) If the notional or principal amount is less than 10 thousand but equal to or greater than one thousand, round to nearest one hundred;
(3) If the notional or principal amount is less than 100 thousand but equal to or greater than 10 thousand, round to nearest one thousand;
(4) If the notional or principal amount is less than one million but equal to or greater than 100 thousand, round to nearest 10 thousand;
(5) If the notional or principal amount is less than 100 million but equal to or greater than one million, round to the nearest one million;
(6) If the notional or principal amount is less than 500 million but equal to or greater than 100 million, round to the nearest 10 million;
(7) If the notional or principal amount is less than one billion but equal to or greater than 500 million, round to the nearest 50 million;
(8) If the notional or principal amount is less than 100 billion but equal to or greater than one billion, round to the nearest 100 million;
(9) If the notional or principal amount is equal to or greater than 100 billion, round to the nearest 10 billion.
(g)
(1) For swaps in the interest rate asset class, the publicly disseminated notional or principal amount for a swap subject to the rules in this part shall be:
(i) USD 250 million for swaps with a tenor greater than zero up to and including two years;
(ii) USD 100 million for swaps with a tenor greater than two years up to and including ten years; and
(iii) USD 75 million for swaps with a tenor greater than ten years.
(2) For swaps in the credit asset class, the publicly disseminated notional or principal amount for a swap subject to the rules in this part shall be USD 100 million.
(3) For swaps in the equity asset class, the publicly disseminated notional or principal amount for a swap subject to the rules in this part shall be USD 250 million.
(4) For swaps in the foreign exchange asset class, the publicly disseminated notional or principal amount for a swap
(5) For swaps in the other commodity asset class, the publicly disseminated notional or principal amount for a swap subject to the rules in this part shall be USD 25 million.
(h)
(2) The Commission shall determine post-initial cap sizes for the swap categories described in paragraphs (c)(1)(i), (c)(2)(i) through (xii), (c)(4)(i), and (c)(5)(i) of § 43.6 by utilizing reliable data collected by swap data repositories, as determined by the Commission, based on paragraphs (h)(2)(i) and (ii) of this section. If the Commission is unable to determine a cap size for any swap category described in § 43.6(c)(1)(i), the Commission shall assign a cap size of USD 100 million to such category.
(i) A one-year window of swap transaction and pricing data corresponding to each relevant swap category recalculated no less than once each calendar year; and
(ii) The 75-percent notional amount calculation described in § 43.6(d)(2).
(3) The Commission shall determine the post-initial cap size for a swap category in the foreign exchange asset class described in § 43.6(c)(4)(ii) as the lower of the notional amount of either currency's cap size for the swap category described in § 43.6(c)(4)(i).
(4) All swaps or instruments in the swap category described in § 43.6(c)(1)(ii) shall have a cap size of USD 100 million.
(5) All swaps or instruments in the swap category described in § 43.6(c)(2)(xiii) shall have a cap size of USD 400 million.
(6) All swaps or instruments in the swap category described in § 43.6(c)(3) shall have a cap size of USD 250 million.
(7) All swaps or instruments in the swap category described in § 43.6(c)(4)(iii) shall have a cap size of USD 150 million.
(8) All swaps or instruments in the swap category described in § 43.6(c)(5)(ii) shall have a cap size of USD 100 million.
(9) The Commission shall publish post-initial cap sizes on its website at
(10) Unless otherwise indicated on the Commission's website, the post-initial cap sizes shall be effective on the first day of the second month following the date of publication of the revised cap size.
(a)
(b)
(1) No later than the prescribed time delay period described in this paragraph;
(2) No sooner than the prescribed time delay period described in this paragraph; and
(3) Precisely upon the expiration of the time delay period described in this paragraph.
(c) [Reserved]
(d)
(1) [Reserved]
(2) The time delay for public dissemination of swap transaction and pricing data for all publicly reportable swap transactions described in this paragraph (d) shall be 15 minutes immediately after execution of such publicly reportable swap transaction.
(e)
(2)
(i) [Reserved]
(ii) The time delay for public dissemination of swap transaction and pricing data for all swaps described in this paragraph (e)(2) shall be 15 minutes immediately after execution of such swap.
(3)
(i)-(ii) [Reserved]
(iii) The time delay for public dissemination of swap transaction and pricing data for all swaps described in this paragraph (e)(3) shall be one hour immediately after execution of such swap.
(f)
(1)-(2) [Reserved]
(3) The time delay for public dissemination of swap transaction and pricing data for all swaps described in this paragraph (f) shall be 30 minutes immediately after execution of such swap.
(g)
(1)-(2) [Reserved]
(3) The time delay for public dissemination of swap transaction and pricing data for all swaps described in this paragraph (g) shall be two hours after the execution of such swap.
(h)
(1)-(2) [Reserved]
(3) The time delay for public dissemination transaction and pricing data for all swaps described in this paragraph (h) shall be 24 business hours immediately after the execution of such swap.
(a)
(b)
(1)
(i) Currency by:
(A) Super-major currency;
(B) Major currency; or
(C) Non-major currency; and
(ii) Tenor of swap as follows:
(A) Zero to 46 days;
(B) Greater than 46 days to three months (47 to 107 days);
(C) Greater than three months to six months (108 to 198 days);
(D) Greater than six months to one year (199 to 381 days);
(E) Greater than one to two years (382 to 746 days);
(F) Greater than two to five years (747 to 1,842 days);
(G) Greater than five to ten years (1,843 to 3,668 days);
(H) Greater than ten to 30 years (3,669 to 10,973 days); or
(I) Greater than 30 years (10,974 days and above).
(2)
(i) Traded Spread rounded to the nearest basis point (0.01) as follows:
(A) 0 to 175 points;
(B) 176 to 350 points; or
(C) 351 points and above;
(ii) Tenor of swap as follows:
(A) Zero to two years (0-746 days);
(B) Greater than two to four years (747-1,476 days);
(C) Greater than four to six years (1,477-2,207 days);
(D) Greater than six to eight-and-a-half years (2,208-3,120 days);
(E) Greater than eight-and-a-half to 12.5 years (3,121-4,581 days); and
(F) Greater than 12.5 years (4,582 days and above).
(3)
(4)
(i) By the unique currency combinations of one super-major currency paired with one of the following:
(A) Another super major currency;
(B) A major currency; or
(C) A currency of Brazil, China, Czech Republic, Hungary, Israel, Mexico, Poland, Russia, and Turkey; or
(ii) By unique currency combinations not included in paragraph (b)(4)(i) of this section.
(5)
(i) For swaps that are economically related to contracts in appendix B of this part, by the relevant contract as referenced in appendix B of this part; or
(ii) For swaps that are not economically related to contracts in appendix B of this part, by the following futures-related swaps:
(A) CME Cheese;
(B) CBOT Distillers' Dried Grain;
(C) CBOT Dow Jones-UBS Commodity Index;
(D) CBOT Ethanol;
(E) CME Frost Index;
(F) CME Goldman Sachs Commodity Index (GSCI), (GSCI Excess Return Index);
(G) NYMEX Gulf Coast Sour Crude Oil;
(H) CME Hurricane Index;
(I) CME Rainfall Index;
(J) CME Snowfall Index;
(K) CME Temperature Index;
(L) CME U.S. Dollar Cash Settled Crude Palm Oil; or
(iii) For swaps that are not covered in paragraphs (b)(5)(i) and (b)(5)(ii) of this section, the relevant product type as referenced in appendix D of this part.
(c)
(1)
(i) Based on a unique combination of the following currencies and tenors:
(A) A currency of one of the following countries or union:
(
(
(
(
(
(
(
(
(
(
(
(
(
(
(
(B) One of the following tenors:
(
(
(
(
(
(
(
(
(
(ii) Other interest rate swaps not covered in the paragraph (c)(1)(i) of this section.
(2)
(i) Based on the CDXHY product type, without options and a tenor greater than 1,477 days and less than or equal to 2,207 days;
(ii) Based on the CDXHY product type, with only options and a tenor greater than 1,477 days and less than or equal to 2,207 days;
(iii) Based on the iTraxx Europe product type, without options and a tenor greater than 1,477 days and less than or equal to 2,207 days;
(iv) Based on the iTraxx Europe product type, with only options and a tenor greater than 1,477 days and less than or equal to 2,207 days;
(v) Based on the iTraxx Crossover product type, without options and a tenor greater than 1,477 days and less than or equal to 2,207 days;
(vi) Based on the iTraxx Crossover product type, with only options and a tenor greater than 1,477 days and less than or equal to 2,207 days;
(vii) Based on the iTraxx Senior Financials product type, without options and a tenor greater than 1,477 days and less than or equal to 2,207 days;
(viii) Based on the iTraxx Senior Financials product type, with only options and a tenor greater than 1,477 days and less than or equal to 2,207 days;
(ix) Based on the CDXIG product type and a tenor greater, without options than 1,477 days and less than or equal to 2,207 days;
(x) Based on the CDXIG product type with only options and a tenor greater, than 1,477 days and less than or equal to 2,207 days;
(xi) Based on the CDXEmergingMarkets product type and a tenor greater than 1,477 days and less than or equal to 2,207 days;
(xii) Based on the CMBX product type; and
(xiii) Other credit swaps not covered in paragraphs (c)(2)(i)-(xii) of this section.
(3)
(4)
(i) By the unique currency combinations of the United States currency paired with a currency of one of the following countries or union: Argentina, Australia, Brazil, Canada, Chile, China, Colombia, the European Union, Great Britain, India, Indonesia, Japan, Malaysia, Mexico, New Zealand, Peru, Philippines, Russia, South Korea, or Taiwan.
(ii) By the unique currency pair consisting of two separate currencies from the following countries or union: Argentina, Australia, Brazil, Canada, Chile, China, Colombia, the European Union, Great Britain, India, Indonesia, Japan, Malaysia, Mexico, New Zealand, Peru, Philippines, Russia, South Korea, and Taiwan.
(iii) Other swap categories in the foreign exchange asset class not covered in paragraph (c)(4)(i) or (ii) of this section.
(5)
(i) For swaps that have a physical commodity underlier listed in appendix D of this part, by the relevant physical commodity underlier; or
(ii) Other commodity swaps that are not covered in paragraph (c)(5)(i) of this section.
(d)
(1)
(i) For each relevant swap category, select all reliable SDR data for at least a one-year period;
(ii) Convert the notional amount to the same currency or units and use a trimmed data set;
(iii) Determine the sum of the notional amounts of swaps in the trimmed data set;
(iv) Multiply the sum of the notional amount by 67 percent;
(v) Rank order the observations by notional amount from least to greatest;
(vi) Calculate the cumulative sum of the observations until the cumulative sum is equal to or greater than the 67-percent notional amount calculated in paragraph (d)(1)(iv) of this section;
(vii) Select the notional amount associated with that observation;
(viii) Round the notional amount of that observation up to two significant digits, or if the notional amount associated with that observation is already significant to only two digits, increase that notional amount to the next highest rounding point of two significant digits; and
(ix) Set the appropriate minimum block size at the amount calculated in paragraph (d)(1)(viii) of this section.
(2)
(3)
(e)
(f)
(1)
(2)
(3)
(g)
(2)
(3)
(4) All swaps or instruments in the swap category described in paragraphs (c)(1)(ii), (c)(2)(xiii), (c)(4)(iii), and (c)(5)(ii) of this section shall have a block size of zero and be eligible to be treated as a block trade or large notional off-facility swap, as applicable.
(5)
(6)
(h)
(A) Is executed on the trading system or platform, that is not an order book as defined in § 37.3(a)(3) of this chapter of a swap execution facility, or pursuant to the rules of a swap execution facility or designated contract market; and
(B) That has a notional amount at or above the appropriate minimum block size.
(ii) The swap execution facility or designated contract market, as applicable, shall notify the swap data repository of such a block trade election when reporting the swap transaction and pricing data to such swap data repository in accordance with this part.
(iii) The swap execution facility or designated contract market, as applicable, shall not disclose swap transaction and pricing data relating to a block trade subject to the block trade election prior to the expiration of the applicable delay set forth in § 43.5(d).
(2)
(i)
(1)
(2)
(3)
(4)
(5)
(i) Greater than $2 trillion, then the successor currency shall be included among the super-major currencies;
(ii) Greater than $500 billion but less than $2 trillion, then the successor currency shall be included among the major currencies; or
(iii) Less than $500 billion, then the successor currency shall be included among the non-major currencies.
(6)
(i) The aggregation of orders is done by a person who:
(A) Is a commodity trading advisor registered pursuant to section 4n of the Act, or exempt from such registration under the Act, or a principal thereof, and who has discretionary trading authority or directs client accounts;
(B) Is an investment adviser who has discretionary trading authority or directs client accounts and satisfies the criteria of § 4.7(a)(2)(v) of this chapter; or
(C) Is a foreign person who performs a similar role or function as the persons described in paragraph (i)(6)(i)(A) or (B) of this section and is subject as such to foreign regulation;
(ii) The aggregated transaction is reported pursuant to this part and part 45 of this chapter as a block trade or large notional off-facility swap, as applicable, subject to the cap size thresholds;
(iii) The aggregated orders are executed as one swap transaction; and
(iv) Aggregation occurs on a designated contract market or swap execution facility if the swap is listed for trading by a designated contract market or swap execution facility.
(j)
(i) A commodity trading advisor registered pursuant to section 4n of the Act, or exempt from registration under the Act, or a principal thereof, and who has discretionary trading authority or directs client accounts,
(ii) An investment adviser who has discretionary trading authority or directs client accounts and satisfies the criteria of § 4.7(a)(2)(v) of this chapter, or
(iii) A foreign person who performs a similar role or function as the persons described in paragraph (j)(1)(i) or (ii) of this section and is subject as such to foreign regulation, to transact block trades for customers who are not eligible contract participants.
(2) A person transacting a block trade on behalf of a customer shall receive prior written instruction or consent from the customer to do so. Such instruction or consent may be provided in the power of attorney or similar document by which the customer provides the person with discretionary trading authority or the authority to direct the trading in its account.
(a) * * *
(1) To publish the technical specification providing the form and manner for reporting and publicly disseminating the swap transaction and pricing data elements in appendix A of this part as described in §§ 43.3(d)(1) and 43.4(a);
(2) To determine cap sizes as described in § 43.4(g) and (h);
(3) To determine whether swaps fall within specific swap categories as described in § 43.6(b) and (c); and
(4) To determine and publish post-initial appropriate minimum block sizes as described in § 43.6(g).
The tables below provide clarification of the time delays for public dissemination set forth in § 43.5. The first row of each table describes the asset classes to which each chart applies. The column entitled “Time Delay for Public Dissemination” indicates the precise length of time delay, starting upon execution, for the public dissemination of such swap transaction and pricing data by a swap data repository.
Table C2 excludes off-facility swaps that are excepted from the mandatory clearing requirement pursuant to Section 2(h)(7) of the Act and Commission regulations and those off-facility swaps that are required to be cleared under Section 2(h)(2) of the Act and Commission regulations but are not cleared.
Table C3 excludes off-facility swaps that are excepted from the mandatory clearing requirement pursuant to Section 2(h)(7) of the Act and Commission regulations and those swaps that are required to be cleared under Section 2(h)(2) of the Act and Commission regulations but are not cleared.
Table C4 includes large notional off-facility swaps that are not subject to the mandatory clearing requirement or are exempt from such mandatory clearing requirement pursuant to Section 2(h)(7) of the Act and Commission regulations.
Table C5 includes large notional off-facility swaps that are not subject to the mandatory clearing requirement or are excepted from such mandatory clearing requirement pursuant to Section 2(h)(7) of the Act and Commission regulations.
Table C6 includes large notional off-facility swaps that are not subject to the mandatory clearing requirement or are exempt from such mandatory clearing requirement pursuant to Section 2(h)(7) of the Act and Commission regulations.
Swap data repositories are required by § 43.4(c)(4)(iii) to publicly disseminate any specific delivery point or pricing point associated with publicly reportable swap transactions in the “other commodity” asset class pursuant to Tables E1 and E2 in this appendix. If the underlying asset of a publicly reportable swap transaction described in § 43.4(c)(4)(iii) has a delivery or pricing point that is located in the United States, such information shall be publicly disseminated pursuant to the regions described in Table E1 in this appendix. If the underlying asset of a publicly reportable swap transaction described in § 43.4(c)(4)(iii) has a delivery or pricing point that is not located in the United States, such information shall be publicly disseminated pursuant to the countries or sub-regions, or if no country or sub-region, by the other commodity region, described in Table E2 in this appendix.
The following appendices will not appear in the Code of Federal Regulations.
On this matter, Chairman Tarbert and Commissioners Quintenz, Behnam, Stump, and Berkovitz voted in the affirmative. No Commissioner voted in the negative.
I am pleased to support today's final swap data reporting rules under Parts 43, 45, and 49 of the CFTC's regulations, which are foundational to effective oversight of the derivatives markets. As I noted when these rules were proposed in February, “[d]ata is the lifeblood of our markets.”
In the month following our data rule proposals, historic volatility caused by the coronavirus pandemic rocketed through our derivatives markets, affecting nearly every asset class.
But data reporting is not just about mitigating systemic risk. Vibrant derivatives markets must be open and free, meaning transparency is a critical component of any reporting system. Price discovery requires robust public reporting that supplies market participants with the information they need to price trades, hedge risk, and supply liquidity. Today we double down on transparency, ensuring that public reporting of swap transactions is even more accurate and timely. In particular, our final rules adjust certain aspects of the Part 43 proposal's block-trade
Promoting clarity in our markets also demands that we, as an agency, have clear goals in mind. Today's final swap data reporting rules reflect a hard look at the data we need and the data we collect, building on insights gleaned from our own analysis as well as feedback from market participants. The key point is that more data does not necessarily mean better information. Instead, the core of an effective data reporting system is focus.
As Aesop reminds us, “Beware lest you lose the substance by grasping at the shadow.”
That last point is worth highlighting: Our final swap data reporting rules account for market participants both within and outside the United States. A diversity of market participants, some of whom reside beyond our borders and are accountable to foreign regulatory regimes, contribute to vibrant derivatives markets. But before today, inconsistent international rules meant some swap dealers were left to navigate what I have called “a byzantine maze of disparate data fields and reporting timetables” for the very same swap.
It is important to understand the specific function of each of the three swap data reporting rules, which together form the CFTC's reporting system. First, Part 43 relates to the
Second, Part 45 relates to the
Finally, Part 49 requires
Today's final swap data reporting rules are designed to fulfill our agency's first Strategic Goal: To strengthen the resilience and integrity of our derivatives markets while fostering the vibrancy.
Justice Brandeis's words also resonate across other areas of the final swap data reporting rules. The final swap data reporting rules enhance transparency to the public of pricing and trade data.
A critical aspect of the final Part 43 rule is the issue of block trades and dissemination delays. When the Part 43 proposal was issued, I noted that “[o]ne of the issues we are looking at closely is whether a 48-hour delay for block trade reporting is appropriate.”
The final Part 43 rule also changes the threshold for block trade treatment, raising the amount needed from a 50% to 67% notional calculation. It also increases the threshold for capping large notional trades from 67% to 75%. These changes will enhance market transparency by applying a stricter standard for blocks and caps, thereby enhancing public access to swap trading data. At the same time, the rule reflects serious consideration of how these thresholds are calculated, particularly for block trades. In excluding certain option trades and CDS trades around the roll months from the 67% notional threshold for blocks, the final rule helps ensure that dissemination delays have their desired effect of preventing front-running and similar disruptive activity.
The swaps market is highly complex, reflecting a nearly endless array of transaction structures. Part 43 takes these differences into account in setting forth the public reporting requirements for price and transaction data. For example, post-priced swaps are valued after an event occurs, such as the ringing of the daily closing bell in an equity market. As it stands today, post-priced swaps often appear on the public tape with no corresponding pricing data—rendering the data largely unusable. The final Part 43 rule addresses this data quality issue and improves price discovery by requiring post-priced swaps to appear on the public tape after pricing occurs.
The final Part 43 rule also resolves an issue involving the reporting of prime-brokerage swaps. The current rule requires that offsetting swaps executed with prime brokers—in addition to the initial swap reflecting the actual terms of trade—be reported on the public tape. This duplicative reporting obfuscates public pricing data by including prime-broker costs and fees that are unrelated to the terms of the swap. As I explained when the rule was proposed, cluttering the public tape with duplicative or confusing data can impair price discovery.
Data is only as useful as it is accurate. The final Part 49 rule establishes an efficient framework for verifying SDR data accuracy and correcting errors, which serves both regulatory oversight and public price discovery purposes.
Today's final swap data reporting rules improve the regulatory experience for market participants at home and abroad in several key ways, advancing the CFTC's third Strategic Goal.
As I stated at the proposal stage, “[s]implicity should be a central goal of our swap data reporting rules.”
We resolve this situation today by replacing the sprawling mass of disparate SDR fields—sometimes running into the hundreds or thousands—with 128 that are important to the CFTC's oversight of the swaps markets. These fields reflect an honest look at the data we are collecting and the data we can use, ensuring that our market participants are not burdened with swap reporting obligations that do not advance our statutory mandates.
The swaps markets are integrated and global; our data rules must follow suit.
Data harmonization is not just good for market participants: It also advances the CFTC's vision of being the global standard for sound derivatives regulation.
In addition to certain CDE fields, the final Part 45 rule also adopts other important features of the CPMI-IOSCO Technical Guidance, such as the use of a Unique Transaction Identifier (UTI) system in place of today's Unique Swap Identifier (USI) system. This change will bring the CFTC's swap data reporting system in closer alignment with those of other regulators, leading to better data sharing and lower burdens on market participants.
Last, the costs of altering data reporting systems makes implementation timeframes especially important. To that effect, the CFTC has worked with ESMA to bring our jurisdictions' swap data reporting compliance timetables into closer harmony, easing transitions to new reporting systems.
The final Part 49 rule has changed since the proposal stage to facilitate easier verification of SDR data by swap dealers. Based on feedback we received, the final rule now requires SDRs to provide a mechanism for swap dealers and other reporting counterparties to access the SDR's data for their open swaps to verify accuracy and address errors. This approach replaces a message-based system for error identification and correction, which would have produced significant implementation costs without improving error remediation. The final rule achieves the goal—data accuracy—with fewer costs and burdens.
I have long said that if our derivatives markets are not working for agriculture, then
The derivatives markets run on data. They will be even more reliant on it in the future, as digitization continues to sweep through society and industry. I am pleased to support the final rules under Parts 43, 45, and 49, which will help ensure that the CFTC's swap data reporting systems are effective, efficient, and built to last.
The Commodity Exchange Act (CEA) specifically directs the Commission to ensure that real-time public reporting requirements for swap transactions (i) do not identify the participants; (ii) specify the criteria for what constitutes a block trade and the appropriate time delay for reporting such block trades, and (iii) take into account whether public disclosure will materially reduce market liquidity.
Unfortunately, I fear the balance struck in this rule misses that mark. The final rule before us today clearly favors transparency over market liquidity, with the sacrifice of the latter being particularly more acute given the nature of the swaps market. In this final rule, the Commission asserts that the increased transparency resulting from higher block trade thresholds and cap sizes will lead to increased competition, stimulate more trading, and enhance liquidity and pricing. That is wishful thinking, which is no basis upon which to predicate a final rule. As numerous commenters pointed out, this increased transparency comes directly at the expense of market liquidity, competitive pricing for end-users, and the ability of dealers to efficiently hedge their large swap transactions. While the Commission hopes the 67% block calculation will bring about the ample benefits it cites, I think the exact opposite is the most probable outcome. I remain unconvinced that the move from the 50% notional amount calculation for block sizes to the 67% notional amount calculation is necessary or appropriate. Unfortunately, the decision to retain the 67% calculation, which was adopted in 2013 but never implemented, was not seriously reconsidered in this rule.
Instead, in the final rule, the Commission asserts that it “extensively analyzed the costs and benefits of the 50-percent threshold and 67-percent threshold when it adopted the phased-in approach” in 2013. Respectfully, I believe that statement drastically inflates the Commission's prior analysis. I have no doubt the Commission “analyzed” the costs and benefits in 2013 to the best of its ability. However, the reality is that in 2013, as the Commission acknowledged in its own cost-benefit analysis, “in a number of instances, the Commission lacks the data and information required to precisely estimate costs,
In my opinion, the fact that currently 87% of IRS and 82% of CDS trades are reported in real time is evidence that the transparency policy goals underlying the real-time reporting requirements have already been achieved. In 2013, the Commission, quoting directly from the Congressional Record, noted that when it considered the benefits and effects of enhanced market transparency, the “guiding principle in setting appropriate block trade levels [is that] the
Despite my reservations, I am voting for the real-time reporting rule before the Commission today for several reasons. First, I worked hard to ensure that this final rule contains many significant improvements from the initial draft we were first presented, as well as the original proposal which I supported. For example, in order to make sure the CDS swap categories are representative, the Commission established additional categories for CDS with optionality. In addition, the Commission is also providing guidance that certain risk-reduction exercises, which are not arm's length transactions, are not publicly reportable swap transactions, and therefore should be excluded from the block size calculations.
Second, while most of the changes to the part 43 rules will have a compliance period of 18 months, compliance with the new block and cap sizes will not be not be required until one year later, providing market participants with a 30-month compliance period and the Commission with an extra 12 months to revisit this issue with actual data analysis, as good government and well-reasoned public policy demands. This means that when any final block and cap sizes go into effect for the amended swap categories, it will be with the benefit of cleaner, more precise data resulting from our part 43 final rule improvements adopted today. It is my firm expectation that DMO staff will review the revised block trade sizes, in light of the new data, at that time to ensure they are appropriately calibrated for each swap category. In addition, as required by the rule, DMO will publish the revised block trade and cap sizes the month before they go effective. I am hopeful that with the benefit of time, cleaner data and public comment, the Commission can, if necessary, re-calibrate the minimum block sizes to ensure they strike the appropriate balance built into our statute between the liquidity needs of the market and transparency. To the extent market participants also have concerns about maintaining the current time delays for block trades given the move to the 67% calculation, I encourage them to reach out to DMO and my fellow Commissioners during the intervening 30-month window. That time frame is more than enough to further refine the reporting delays, as necessary, for the new swap categories based on sound data.
I respectfully concur in the Commission's amendments to its regulations regarding real-time public reporting, recordkeeping, and swap data repositories. The three rules being finalized together today are the culmination of a multi-year effort to streamline, simplify,
But the road really goes back much further than that, to the time prior to the 2008 financial crisis, when swaps were largely exempt from regulation and traded exclusively over-the-counter.
In the aftermath of the financial crisis, Congress enacted the Dodd-Frank Wall Street Reform and Consumer Protection Act in 2010 (Dodd-Frank Act).
Among many critically important statutory changes, which have shed light on the over-the-counter derivatives markets, Title VII of the Dodd-Frank Act amended the Commodity Exchange Act (“CEA” or “Act”) and added a new term to the Act: “real-time public reporting.”
As we amend these rules, I think it is important that we keep in mind the Dodd-Frank Act's emphasis on transparency, and what transpired to necessitate that emphasis. However, the Act is also clear that its purpose, in regard to transparency and real time public reporting, is to authorize the Commission to make swap transaction and pricing data available to the public “as the Commission determines appropriate to enhance price discovery.”
Today's final rules amending the swap data and recordkeeping and reporting requirements also culminate a multi-year undertaking by dedicated Commission staff and our international counterparts working through the Committee on Payments and Market Infrastructures and the International Organization of Securities Commissions working group for the harmonization of key over-the-counter derivatives data elements. The amendments benefit from substantial public consultation as well as internal data and regulatory analyses aimed at determining, among other things, how the Commission can meet its current data needs in support of its duties under the CEA. These include ensuring the financial integrity of swap transactions, monitoring of substantial and systemic risks, formulating bases for and granting substituted compliance and trade repository access, and entering information sharing agreements with fellow regulators.
I wish to thank the responsible staff in the Division of Market Oversight, as well as in the Offices of International Affairs, Chief Economist, and General Counsel for their efforts and engagement over the last several years as well as their constructive dialogues with my office over the last several months. Their timely and fulsome responsiveness amid the flurry of activity at the Commission as we continue to work remotely is greatly appreciated.
The final rules should improve data quality by eliminating duplication, removing alternative or adjunct reporting options, utilizing universal data elements and identifiers, and focusing on critical data elements. To the extent the Commission is moving forward with mandating a specific data standard for reporting swap data to swap data repositories (“SDRs”), and that the standard will be ISO 20022, I appreciate the Commission's thorough discussion of its rationale in support of that decision. I also commend Commission staff for its demonstrated expertise in incorporating the mandate into the regulatory text in a manner that provides certainty while acknowledging that the chosen standard remains in development.
The rules provide clear, reasonable and universally acceptable reporting deadlines that not only account for the minutiae of local holidays, but address the practicalities of common market practices such as allocation and compression exercises.
I am especially pleased that the final rules require consistent application of rules across SDRs for the validation of both Part 43 and Part 45 data submitted by reporting counterparties. I believe the amendments to part 49 set forth a practical approach to ensuring SDRs can meet the statutory requirement to confirm the accuracy of swap data set forth in CEA section 21(c)
I appreciate that the Commission considered and received comments regarding whether to require reporting counterparties to indicate whether a specific swap: (1) Was entered into for dealing purposes (as opposed to hedging, investing, or proprietary trading); and/or (2) needs not be considered in determining whether a person is a swap dealer or need not be counted towards a person's
Thank you again to the staff who worked on these rules. I support the overall vision articulated in these several rules and am committed to supporting the acquisition and development of information technology and human resources needed for execution of that vision. As data forms the basis for much of what we do here at the Commission, especially in terms of identifying, assessing, and monitoring risk, I look forward to future discussions with staff regarding how the CFTC's Market Risk Advisory Committee which I sponsor may be of assistance.
I have often referenced the need for a review of policies as per the wishes of the G-20 Leaders' Statement from the Pittsburgh
Prior to the Dodd-Frank Act
The Commission previously decided
In the Dodd-Frank Act, Congress amended the Commodity Exchange Act (CEA) to require the Commission to “take into account whether the public disclosure will materially reduce market liquidity.”
Despite many years of experience with SEFs and SDRs since then, the Commission is today choosing to continue down the previously determined path of raising block sizes instead of leveraging data. Commenters, including entities responsible for providing liquidity and entities utilizing swaps to perform risk management, expressed concerns that increasing the block size thresholds would negatively impact the swaps market and raise costs for end users. Yet, we are moving forward to further limit the number of transactions that can receive block treatment under real time reporting, and the resulting allowable methods of execution if a swap is included in the SEF mandate. That is, we are raising the threshold largely because a previous Commission decided to do so many years ago.
Though I may not be happy that this Commission is left to grapple with an arbitrary metric set by a former Commission in 2013, even that Commission recognized the importance of considering data before proceeding. The original block rules spoke of the Commission updating the threshold once it had one year's worth of reliable data. No Commission has ever updated the calculation to adopt higher block sizes, and one would reasonably expect this is due to a lack of reliable data. Today, the Commission is rectifying data reliability challenges by adopting a robust set of rule amendments to improve the quality of swap data reporting, but chooses not to re-assess the block size thresholds with the improved data that will result from those new rules. Perhaps that data will show that we have gone too low or too high in setting the thresholds. I would prefer not to predetermine the outcome until we can ascertain and evaluate the improved data.
The Commission proposed an updated list of categories and refreshed block sizes in February 2020. In the interim period, changes, some that I hope will yield positive results, have been made to affect the categories, calculations, and, as a result, the actual block sizes. However, the lack of transparency concerns me. I believe in this case, it would benefit the Commission to hear from market participants as to their views on the changes to all of these parameters.
I believe that the driving force behind the substantial rewrite of the swap data reporting rule set we are adopting today is that the Commission is not confident in the quality of SDR data, and that an overhaul is needed to provide the CFTC with complete and accurate information for data-driven policy decision making. I feel strongly that the vast majority of the rule amendments before the Commission today will improve the quality of the data reported to SDRs and available for our analysis. I am encouraged that after the 18-month compliance date, staff will be able to better review reliable data and inform the Commission of their analysis as it pertains to block size. I believe the more prudent course of action would be to finalize the remainder of the rules before us today, but set aside any Commission action on block size, thereby preserving current block sizes until the Commission and the public can consider these issues in light of the improved reporting rules and with the new, more reliable data that will result from those rules.
The Commission should incorporate reliable swaps data and what it has learned since the inception of SEFs to make a more fully informed decision on this very meaningful metric. The numbers established in 2013 were arbitrary, and eight years later a different Commission is now faced with reconciling that, still without the availability of reliable data. I believe it is equally unfair to leave another Commission, 30 months from now, with the same predicament. We should not be finalizing a rule to transition to the higher block size calculation today while dictating that other Commissioners implement our decision or have to deal with the consequences of our decision making that is based on contemporary, unreliable data.
It is unclear what, if any, Commission or staff analysis might transpire between the effective date of the swap data reporting rules (18 months) and the block size threshold compliance date (30 months). I intend to ensure that any input received will be taken seriously, notwithstanding its retrospective nature and the fact that it is well beyond many of our terms of office. I wish for the Commission to soon hold a formal forum to receive input from affected market participants, especially end users in these markets, such as those who manage teacher retirement and college savings plans for millions of Americans. It is that input, and reliable data reported pursuant to the enhanced reporting rules we are adopting today, on which the Commission's block determinations should be based.
I support today's final rules amending the swap data reporting requirements in parts 43, 45, 46, and 49 of the Commission's rules (the “Reporting Rules”). The amended rules provide major improvements to the Commission's swap data reporting requirements. They will increase the transparency of the swap markets, enhance the usability of the data, streamline the data collection process, and better align the Commission's reporting requirements with international standards.
The Commission must have accurate, timely, and standardized data to fulfill its customer protection, market integrity, and risk monitoring mandates in the Commodity Exchange Act (“CEA”).
As enacted by the Dodd-Frank Act, CEA section 2(a)(13)(G) directs the CFTC to establish real-time and comprehensive swap data reporting requirements, on a swap-by-swap basis. CEA section 21 establishes SDRs as the statutory entities responsible for receiving, storing, and facilitating regulators' access to swap data. The Commission began implementing these statutory directives in 2011 and 2012 in several final rules that addressed regulatory and real-time public reporting of swaps; established SDRs to receive data and make it available to regulators and the public; and defined certain swap dealer (“SD”) and major swap participant (“MSP”) reporting obligations.
The Commission was the first major regulator to adopt data repository and swap data reporting rules. Today's final rules are informed by the Commission's and the market's experience with these initial rules. Today's revisions also reflect recent international work to harmonize and standardize data elements.
Price transparency fosters price competition and reduces the cost of hedging. In directing the Commission to adopt real-time public reporting regulations, the Congress stated “[t]he purpose of this section is to authorize the Commission to make swap transaction and pricing data available to the public in such form and at such times as the Commission determines appropriate
The Commission's proposed rule for block trades included two significant amendments to part 43: (1) Refined swap categories for calculating blocks; and (2) a single 48-hour time-delay for reporting all blocks. In addition, the proposed rule would give effect to increased block trade size thresholds from 50% to 67% of a trimmed (excluding outliers) trade data set as provided for in the original part 43. The increases in the block sizing thresholds and the refinement of swap categories were geared toward better meeting the statutory directives to the Commission to enhance price discovery through real-time reporting while also providing appropriate time delays for the reporting of swaps with very large notional amounts,
Although I supported the issuance of the proposed rule, I outlined a number of concerns with the proposed blanket 48-hour delay. As described in the preamble to the part 43 final rule, a number of commenters supported the longer delay as necessary to facilitate the laying off of risk resulting from entering into swaps in illiquid markets or with large notional amounts. Other commenters raised concerns that such a broad, extended delay was unwarranted and could impede, rather than foster, price discovery. The delay also would provide counterparties to large swaps with an information advantage during the 48-hour delay.
The CEA directs the Commission to provide for both real-time reporting and appropriate block sizes. In developing the final rule the Commission has sought to achieve these objectives.
As described in the preamble, upon analysis of market data and consideration of the public comments, the Commission has concluded that the categorization of swap transactions and associated block sizes and time delay periods set forth in the final rule strikes an appropriate balance to achieve the statutory objectives of enhancing price discovery, not disclosing “the business transactions and market positions of any person,” preserving market liquidity, and providing appropriate time delays for block transactions. The final part 43 includes a mechanism for regularly reviewing swap transaction data to refine the block trade sizing and reporting delays as appropriate to maintain that balance.
I have consistently supported the use of the best available data to inform Commission rulemakings, and the periodic evaluation and updating of those rules, as new data becomes available. The preamble to the final rules for part 43 describes how available data, analytical studies, and public comments informed the Commission's rulemaking. Following press reports about the contents of the final rule, the Commission recently has received comments from a number of market participants raising issues with the reported provisions in the final rule. These commenters have expressed concern that the reported reversion of the time delays for block trades to the provisions in the current regulations, together with the 67% threshold for block trades, will impair market liquidity, increase costs to market participants, and not achieve the Commission's objectives of increasing price transparency and competitive trading of swaps. Many of these commenters have asked the Commission to delay the issuance of the final rule or to re-propose the part 43 amendments for additional public comments.
I do not believe it would be appropriate for the Commission to withhold the issuance of the final rule based on these latest comments and at this late stage in the process. The Commission has expended significant time and resources in analyzing data and responding to the public comments received during the public comment period. As explained in the preamble, the Commission is already years behind its original schedule for revising the block thresholds. I therefore do not support further delay in moving forward on these rules.
Nonetheless, I also support evaluation and refinement of the block reporting rules, if appropriate, based upon market data and analysis. The 30-month implementation schedule for the revised block sizes provides market participants with sufficient time to review the final rule and analyze any new data. Market participants can then provide their views to the Commission on whether further, specific adjustments to the block sizes and/or reporting delay periods may be appropriate for certain instrument classes. This implementation period is also sufficient for the Commission to consider those comments and make any adjustments as may be warranted. The Commission should consider any such new information in a transparent, inclusive, and deliberative manner. Amended part 43 also provides a process for the Commission to regularly review new data as it becomes available and amend the block size thresholds and caps as appropriate.
The International Swaps and Derivatives Association, Inc. (“ISDA”) and the Securities Industry and Financial Markets Association (“SIFMA”) commented that higher block size thresholds may put swap execution facilities (“SEFs”) organized in the United States at a competitive disadvantage as compared to European trading platforms that provide different trading protocols and allow longer delays in swap trade reporting. SIFMA and ISDA commented that the higher block size thresholds might incentivize swap dealers to move at least a portion of their swap trading from United States SEFs to European trading platforms. They also noted that this regulatory arbitrage activity could apply to swaps that are subject to mandatory exchange trading. Importantly, European platforms allow a non-competitive single-quote trading mechanism for these swaps while U.S. SEFs are required to maintain more competitive request-for-quotes mechanisms from at least three parties. The three-quote requirement serves to fulfill important purposes delineated in the CEA to facilitate price discovery and promote fair competition.
The migration of swap trading from SEFs to non-U.S. trading platforms to avoid U.S. trade execution and/or swap reporting requirements would diminish the liquidity in and transparency of U.S. markets, to the detriment of many U.S. swap market participants. Additionally, as the ISDA/SIFMA comment letter notes, it would provide an unfair competitive advantage to non-U.S. trading platforms over SEFs registered with the CFTC, who are required to abide by CFTC regulations. Such migration
I have supported the Commission's substituted compliance determinations for foreign swap trading platforms in non-U.S. markets where the foreign laws and regulations provide for comparable and comprehensive regulation. Substituted compliance recognizes the interests of non-U.S. jurisdictions in regulating non-U.S. markets and allows U.S. firms to compete in those non-U.S. markets. However, substituted compliance is
The Commission should be vigilant to protect U.S. markets and market participants. The Commission should monitor swap data to identify whether any such migration from U.S. markets to overseas markets is occurring and respond, if necessary, to protect the U.S. swap markets.
I also support today's final rules amending the swap data reporting, verification, and SDR registration requirements in parts 45, 46, and 49 of the Commission's rules. These regulatory reporting rules will help ensure that reporting counterparties, including SDs, MSPs, designated contract markets (“DCMs”), SEFs, derivatives clearing organizations (“DCOs”), and others report accurate and timely swap data to SDRs. Swap data will also be subject to a periodic verification program requiring the cooperation of both SDRs and reporting counterparties. Collectively, the final rules create a comprehensive framework of swap data standards, reporting deadlines, and data validation and verification procedures for all reporting counterparties.
The final rules simplify the swap data reports required in part 45, and organize them into two report types: (1) “Swap creation data” for new swaps; and (2) “swap continuation data” for changes to existing swaps.
The amended reporting deadlines will result in a moderate time window where swap data may not be available to the Commission or other regulators with access to an SDR. However, it is likely that they will also improve the accuracy and reliability of data. Reporting parties will have more time to ensure that their data reports are complete and accurate before being transmitted to an SDR.
The final rules in part 49 will also promote data accuracy through validation procedures to help identify errors when data is first sent to an SDR, and periodic reconciliation exercises to identify any discrepancies between an SDR's records and those of the reporting party that submitted the swaps. The final rules provide for less frequent reconciliation than the proposed rules, and depart from the proposal's approach to reconciliation in other ways that may merit future scrutiny to ensure that reconciliation is working as intended. Nonetheless, the validation and periodic reconciliation required by the final rule is an important step in ensuring that the Commission has access to complete and accurate swap data to monitor risk and fulfill its regulatory mandate.
The final rules also better harmonize with international technical standards, the development of which included significant Commission participation and leadership. These harmonization efforts will reduce complexity for reporting parties without significantly reducing the specific data elements needed by the Commission for its purposes. For example, the final rules adopt the Unique Transaction Identifier and related rules, consistent with CPMI-IOSCO technical standards, in lieu of the Commission's previous Unique Swap Identifier. They also adopt over 120 distinct data elements and definitions that specify information to be reported to SDRs. Clear and well-defined data standards are critical for the efficient analysis of swap data across many hundreds of reporting parties and multiple SDRs. Although data elements may not be the most riveting aspect of Commission policy making, I support the Commission's determination to focus on these important, technical elements as a necessary component of any effective swap data regime.
Today's Reporting Rules are built upon nearly eight years of experience with the current reporting rules and benefitted from extensive international coordination. The amendments make important strides toward fulfilling Congress's mandate to bring transparency and effective oversight to the swap markets. I commend CFTC staff, particularly in Division of Market Oversight and the Office of Data and Technology, who have worked on the Reporting Rules over many years. Swaps are highly variable and can be difficult to represent in standardized data formats. Establishing accurate, timely, and complete swap reporting requirements is a difficult, but important function for the Commission and regulators around the globe. This proposal offers a number of pragmatic solutions to known issues with the current swap data rules. For these reasons, I am voting for the final Reporting Rules.
Commodity Futures Trading Commission.
Final rule.
The Commodity Futures Trading Commission (“Commission” or “CFTC”) is amending certain regulations setting forth the swap data recordkeeping and reporting requirements for swap data repositories (“SDRs”), derivatives clearing organizations (“DCOs”), swap execution facilities (“SEFs”), designated contract markets (“DCMs”), swap dealers (“SDs”), major swap participants (“MSPs”), and swap counterparties that are neither SDs nor MSPs. The amendments, among other things, streamline the requirements for reporting new swaps, define and adopt swap data elements that harmonize with international technical guidance, and reduce reporting burdens for reporting counterparties that are neither SDs nor MSPs.
Richard Mo, Special Counsel, (202) 418-7637,
Pursuant to section 2(a)(13)(G) of the Commodity Exchange Act (“CEA”), all swaps, whether cleared or uncleared, must be reported to SDRs.
Since the Commission adopted the part 45 regulations, Commission staff has worked with SDRs, SEFs, DCMs, reporting counterparties, and non-reporting counterparties to interpret and implement of the requirements established in the regulations. Several years ago, the Division of Market Oversight (“DMO”) announced
In February 2020, the Commission proposed certain changes to its parts 45, 46, and 49 regulations (“Proposal”)
The Commission received 26 comment letters on the Proposal.
Before discussing the changes to the regulations, the Commission highlights the important role international data harmonization efforts have played in this rulemaking. As discussed in the Proposal, since November 2014, regulators across major derivatives jurisdictions, including the CFTC, have come together through the Committee on Payments and Market Infrastructures (“CPMI”) and the International Organization of Securities Commissions (“IOSCO”) working group for the harmonization of key over-the-counter (“OTC”) derivatives data elements (“Harmonisation Group”) to develop global guidance regarding the definition, format, and usage of key OTC derivatives data elements reported to trade repositories (“TRs”), including the Unique Transaction Identifier (“UTI”), the Unique Product Identifier (“UPI”), and critical data elements other than UTI and UPI (“CDE”).
The Commission has played an active role in the development and publication of each of the Harmonisation Group's technical guidance documents. For the CDE Technical Guidance in particular, as part of the Harmonisation Group, Commission staff worked alongside representatives from Canada, France, Germany, Hong Kong, Japan, Singapore, and the United Kingdom, among others, to provide feedback regarding the data elements, taking into account the Commission's experience with swap data reporting thus far. Commission staff also participated in the solicitation of responses to three public consultations on the CDE Technical Guidance, along with related industry workshops and conference calls.
The Commission's sustained, active role in the Harmonisation Group in developing global guidance on key OTC derivatives data elements reported to TRs is part of the Commission's broader, long-range goal of continued efforts to achieve international harmony in the area of swaps reporting. The Commission has co-led efforts to design ongoing international regulatory oversight of these standards in the Financial Stability Board (“FSB”) Working Group on UPI and UTI Governance (“GUUG”) and the Commission's efforts to achieve international harmonization in the entire clearing ecosystem, including swap data reporting, will continue.
In particular, the Commission continues to be open to further ways to cooperate with our foreign regulatory counterparts in the supervision of TRs. An example is the consideration of when and how the Commission should grant swap data reporting substituted compliance determinations for SDs and DCOs domiciled in non-U.S. jurisdictions with similar swap data reporting requirements, permitting reporting of swap data to a foreign TR to satisfy Commission swap data requirements under appropriate circumstances. Efficiencies in cross-border reporting are critical to the smooth operation of transatlantic clearing and trading. To the degree the Commission can work with its international counterparts to thus increase interoperability between jurisdictions, this will enhance cross-border trading efficiency. Moreover, with appropriate tailoring and protections, and due access to foreign TR data, deference to foreign jurisdictions will reduce expensive redundancies in trade reporting.
The paragraph of existing § 45.1 is not lettered. The Commission is lettering the existing paragraph as “(a)” and adding (b) to § 45.1. Paragraph (a) will contain all of the definitions in existing § 45.1, as the Commission is modifying them. New paragraph (b) provides the terms not defined in part 45 have the meanings assigned to the terms in Commission regulation § 1.3, which was implied in the existing regulation but will now be explicit.
The Commission is adding new definitions, amending certain existing definitions, and removing certain existing definitions. Within each of these categories, the Commission discusses the changes in alphabetical order, except as otherwise noted.
The Commission is adding a definition of “allocation” to § 45.1(a). “Allocation” means the process by which an agent, having facilitated a single swap transaction on behalf of clients, allocates a portion of the executed swap to the clients. Existing § 45.3(f) contains regulations for reporting allocations without defining the term. The definition will help market participants comply with the regulations for reporting allocations in § 45.3.
The Commission is adding a definition of “as soon as technologically practicable” (“ASATP”) to § 45.1(a). “As soon as technologically practicable” means as soon as possible, taking into consideration the prevalence, implementation, and use of technology by comparable market participants. The phrase “as soon as technologically practicable” is currently undefined but used throughout part 45. The Commission is adopting the same definition of “as soon as technologically practicable” as is defined in § 43.2 for swap transaction and pricing data.
The Commission is adding a definition of “collateral data” to § 45.1(a). “Collateral data” means the data elements necessary to report information about the money, securities, or other property posted or received by a swap counterparty to margin, guarantee, or secure a swap, as specified in appendix 1 to part 45. The Commission explains this definition in a discussion of collateral data reporting in section II.D.4 below.
The Commission is adding definitions of “execution” and “execution date” to § 45.1(a). “Execution” means an agreement by the parties, by any method, to the terms of a swap that legally binds the parties to such swap terms under applicable law.
The Commission received three comments supporting the definition of “execution date.”
The Commission received three comments opposing the reference to Eastern Time in the proposed definition of “execution date.” CME and Chatham both believe the definition should use a coordinated universal time (“UTC”) standard.
The Commission agrees the reference to Eastern Time in “execution date” would create unnecessary operational complexities and be inconsistent with the approach taken by other regulators. In addition, the Commission's updated swap data elements in appendix 1 reference UTC. In response, the Commission is removing the references to Eastern Time in the definition of “execution date,” and the swap data elements in appendix 1 will clarify that SEFs, DCMs, and reporting counterparties should report the specific data elements using UTC. As such, the new definition of “execution date” means the date of execution of a particular swap. The execution date for a clearing swap that replaces an original swap is the date on which the original swap has been accepted for clearing.
The Commission is adding the following three definitions to § 45.1(a): “Global Legal Entity Identifier System,” “legal entity identifier” or “LEI,” and “Legal Entity Identifier Regulatory Oversight Committee” (“LEI ROC”). “Global Legal Entity Identifier System” means the system established and overseen by the LEI ROC for the unique identification of legal entities and individuals. “Legal entity identifier” or “LEI” means a unique code assigned to swap counterparties and entities in accordance with the standards set by the Global Legal Entity Identifier System. “Legal Entity Identifier Regulatory Oversight Committee” means the group charged with the oversight of the Global Legal Entity Identifier System that was established by the finance ministers and the central bank governors of the Group of Twenty nations and the FSB, under the Charter of the Regulatory Oversight Committee for the Global Legal Entity Identifier System dated November 5, 2012, or any successor thereof.
The Commission is adding a definition of “non-SD/MSP/DCO reporting counterparty” to § 45.1(a). “Non-SD/MSP/DCO reporting counterparty” means a reporting counterparty that is not an SD, MSP, or DCO. The existing definition of “non-SD/MSP reporting counterparty” does not explicitly include DCOs. This creates problems when, for instance, the Commission did not intend DCOs follow the required swap creation data reporting regulations in § 45.3(d) for off-facility swaps not subject to the clearing requirement with a non-SD/MSP reporting counterparty, even though DCOs are technically reporting counterparties that are neither SDs nor MSPs. Instead, DCOs follow § 45.3(e) for clearing swaps. The definition of “non-SD/MSP/DCO reporting counterparty” addresses this unintended gap.
The Commission is adding a definition of “novation” to § 45.1(a). “Novation” means the process by which a party to a swap legally transfers all or part of its rights, liabilities, duties, and obligations under the swap to a new legal party other than the counterparty to the swap under applicable law. The term “novation” is currently undefined but used in the definition of “life cycle event,” as well as the existing § 45.8(g) regulations for determining which counterparty must report.
The Commission is adding a definition of “swap” to § 45.1(a). “Swap” means any swap, as defined by § 1.3, as well as any foreign exchange forward, as defined by CEA section 1a(24), or foreign exchange swap, as defined by CEA section 1a(25).
The Commission is adding definitions of “swap data” and “swap transaction and pricing data” to § 45.1(a). In the Proposal, the Commission proposed “swap data” to mean the specific data elements and information in appendix 1 to part 45 required to be reported to an SDR pursuant to part 45 or made available to the Commission pursuant to part 49, as applicable. The Commission received a comment from DTCC suggesting deleting the phrase “and information” from the definition of “swap data,” because it is unclear to what “and information” refers.
Separately, the Commission is adopting the definition of “swap transaction and pricing data,” with minor changes from the proposed definition. “Swap transaction and pricing data” will mean all data elements for a swap in appendix A
The Commission is adding a definition of “swap data validation procedures” to § 45.1(a). “Swap data validation procedures” means procedures established by an SDR pursuant to § 49.10 to accept, validate, and process swap data reported to an SDR pursuant to part 45. The Commission discusses this definition in section IV.C.3 below.
The Commission is adding a definition of “unique transaction identifier” to § 45.1(a). “Unique transaction identifier” means a unique alphanumeric identifier with a maximum of 52 characters constructed solely from the upper-case alphabetic characters A to Z or the digits 0 to 9, inclusive in both cases, generated for each swap pursuant to § 45.5. The Commission received a comment from DTCC supporting the definition because it is consistent with UTI Technical Guidance.
The Commission is making non-substantive technical changes to the existing definitions of “asset class,” “derivatives clearing organization,” and “swap execution facility.”
The Commission is changing the definition of “business day” in § 45.1. Existing § 45.1 defines “business day” to mean the twenty-four hour day, on all days except Saturdays, Sundays, and legal holidays, in the location of the reporting counterparty or registered entity reporting data for the swap.
The Commission received four comments raising concerns with the changes to “business day.” CME believes the proposed changes could result in firms keeping some staff in the office on local holidays or reporting before the deadline.
The Commission seeks to avoid firms keeping staff in the office on local holidays, as commenters pointed out the changes suggest. As such, the Commission is keeping the current definition of “business day” with one modification: “registered entity” refers to SEFs and DCMs. Therefore, the “business day” will mean the twenty-four-hour day, on all days except Saturdays, Sundays, and legal holidays, in the location of SEF, DCM, or reporting counterparty reporting data for the swap.
The Commission is changing the definition of “life cycle event” in § 45.1. Existing § 45.1 defines “life cycle event” to mean any event that would result in either a change to a primary economic term (“PET”) of a swap or to any PET data (“PET data”) previously reported to an SDR in connection with a swap.
The Commission is changing the definition of “non-SD/MSP counterparty” in § 45.1. Existing § 45.1 defines “non-SD/MSP counterparty” to mean a swap counterparty that is neither an SD nor an MSP. The Commission is changing the defined term to “non-SD/MSP/DCO counterparty.”
The Commission is changing the definition of “required swap continuation data” in § 45.1. Existing § 45.1 defines “required swap continuation data” to mean all of the data elements that must be reported during the existence of a swap to ensure that all data concerning the swap in the SDR remains current and accurate, and includes all changes to the PET terms of the swap occurring during the existence of the swap. The definition further specifies that required swap continuation data includes: (i) All life-cycle-event data for the swap if the swap is reported using the life cycle reporting method, or all state data for the swap if the swap is reported using the snapshot reporting method; and (ii) all valuation data for the swap.
First, the Commission is removing the reference to “[PET] of the swap.”
The Commission is changing the definition of “required swap creation data” in § 45.1. Existing § 45.1 defines “required swap creation data” to mean all PET data for a swap in the swap asset class in question and all confirmation data for the swap. The Commission is replacing the reference to PET data and confirmation data with a reference to the swap data elements in appendix 1 to part 45, to reflect the Commission's update of the swap data elements in existing appendix 1.
The Commission is changing the definition of “valuation data” in § 45.1(a). Existing § 45.1 defines “valuation data” to mean all of the data elements necessary to fully describe the daily mark of the transaction, pursuant to CEA section 4s(h)(3)(B)(iii),
The Commission is removing the following definitions from § 45.1: “credit swap;” “designated contract market;” “foreign exchange forward;” “foreign exchange instrument;” “foreign exchange swap;” “interest rate swap;” “major swap participant;” “other commodity swap;” “state data;” “swap data repository;” and “swap dealer.” The Commission wants market participants to use the terms as they are already defined in Commission regulation § 1.3 or in CEA section 1a.
The Commission is removing the following definitions from § 45.1: “confirmation;” “confirmation data;” “electronic confirmation;” “non-electronic confirmation;” “primary economic terms;” and “primary economic terms data.” The definitions are unnecessary due to the Commission combining PET data and confirmation data into a single data report in § 45.3.
The Commission is removing the definition of “quarterly reporting” from § 45.1 because the Commission is removing the quarterly reporting requirement for non-SD/MSP reporting counterparties from § 45.4(d)(2)(ii).
The Commission is removing the definitions of “electronic verification,” “non-electronic verification,” and “verification” from § 45.1 because the Commission is changing the deadlines for reporting counterparties to report required swap creation data in § 45.3 to no longer depend on verification.
The Commission is removing the definition of “international swap” from § 45.1. Existing § 45.1 defines “international swap” to mean a swap required by U.S. law and the law of another jurisdiction to be reported both to an SDR and to a different TR registered with the other jurisdiction. The Commission is removing the definition because the Commission is removing the international swap regulations in § 45.3(i).
The Commission is adopting technical changes to the § 45.2 swap recordkeeping regulations.
The Commission received three comments on § 45.2 unrelated to the technical changes. COPE requests the Commission confirm recordkeeping requirements for physical energy companies that use swaps for hedging purposes are limited to recordkeeping in the normal course of business, as is customary for the hedger's particular industry.
EEI-EPSA request the Commission clarify no additional recordkeeping is mandated to avoid injecting regulatory uncertainty into recordkeeping requirements.
The Commission did not receive any comments on the non-substantive changes to § 45.2. For the reasons discussed above, the Commission is adopting the changes as proposed.
Existing § 45.3 requires SEFs, DCMs, and reporting counterparties to report swap data to SDRs upon swap execution. As discussed in the sections below, the Commission is adopting four significant changes to the regulations for reporting new swaps: (i) Requiring a single data report at execution instead of two separate reports; (ii) extending the time SEFs, DCMs, and reporting counterparties have to report new swaps to SDRs; (iii) removing the requirement for SDRs to map allocations; and (iv) removing the regulations for international swaps. The remaining changes to § 45.3 discussed below are non-substantive clarifying, cleanup, or technical changes.
The Commission is removing the introductory text to § 45.3. The existing introductory text to § 45.3 provides a broad overview of the swap data reporting regulations for registered entities and swap counterparties. The Commission believes the introductory text is superfluous because the scope of § 45.3 is clear from the operative provisions of § 45.3.
The Commission did not receive any comments on the proposal to remove the introductory text to § 45.3.
The Commission is adopting several changes to the § 45.3(a) required swap creation data reporting regulations for swaps executed on or pursuant to the rules of a SEF or DCM. Existing § 45.3(a) requires that SEFs and DCMs report all PET data
First, the Commission is changing § 45.3(a) to require SEFs and DCMs to report a single required swap creation data report, regardless of whether the swap is intended to be cleared. While the Commission intended the initial PET report would ensure SDRs have sufficient data on each swap for the Commission to perform its regulatory functions while the more complete confirmation data is not yet available,
One of the PET data elements in existing appendix 1 to part 45 is any other term(s) matched or affirmed by the counterparties in verifying the swap.
Second, the Commission is changing § 45.3(a) to extend the deadline for SEFs and DCMs to report required swap creation data until the end of the next business day following the execution date (sometimes referred to as “T+1”). Initially, the Commission believed reporting swap data immediately after execution ensured the ability of the Commission and other regulators to fulfill their systemic risk mitigation, market transparency, position limit monitoring, and market surveillance objectives,
The Commission received four comments supporting a single report for PET data and confirmation data in § 45.3(a).
The Commission received seven comments generally supporting extending the deadline for reporting required swap creation data in existing § 45.3(a).
Markit opposes extending the deadline for reporting because it believes ASATP reporting is already possible and using experienced third-party service providers like Markit helps minimize errors.
The Commission received three comments concerning the reference to Eastern Time in the proposed extended deadline. Eurex and Chatham believe the Commission should consider aligning with regulators that reference UTC for global harmonization.
In summary, in light of the above changes, § 45.3(a) will require that for each swap executed on or pursuant to the rules of a SEF or DCM, the SEF or DCM shall report required swap creation data electronically to an SDR in the manner provided in § 45.13(a) not later than the end of the next business day following the execution date.
The Commission is making several changes to the § 45.3(b) through (e) required swap creation data reporting regulations for off-facility swaps. Most of these changes conform to the changes in § 45.3(a) because the regulations in § 45.3(b) through (e) for off-facility swaps are analogous to the regulations in § 45.3(a) for swaps executed on SEFs and DCMs.
In general, for off-facility swaps subject to the Commission's clearing requirement, existing § 45.3(b) requires that SD/MSP reporting counterparties report PET data ASATP after execution, with a 15-minute deadline, while non-SD/MSP reporting counterparties report PET data ASATP after execution with a one-business-hour deadline.
Existing § 45.3(c)(2) requires that for swaps in the other commodity asset class, SD/MSP reporting counterparties report PET data ASATP after execution, with a two-hour deadline, and confirmation data for swaps that are not intended to be cleared ASATP after confirmation with a 30-minute deadline if confirmation is electronic, or a 24-business-hour deadline if confirmation is not electronic.
Finally, existing § 45.3(e) requires that ASATP after a DCO accepts an original swap for clearing, or ASATP after execution of a clearing swap that does not replace an original swap, the DCO report all required swap creation data for the clearing swap, which includes all confirmation data and all PET data.
First, the Commission is replacing existing § 45.3(b) through (e) with § 45.3(b), titled “Off-facility swaps,” to restructure the regulations.
The Commission did not receive any comments beyond those discussed in section II.C.2.a above.
Third, the Commission is changing the existing § 45.3(b) through (e) requirements for reporting counterparties to report required swap creation data ASATP after execution with different deadlines for off-facility swaps in § 45.3(b)(1) and (2). New § 45.3(b)(1) requires SD/MSP/DCO reporting counterparties report swap creation data to an SDR by T+1 following the execution date. New § 45.3(b)(2) requires non-SD/MSP/DCO reporting counterparties report swap creation data to an SDR not later than T+2 following the execution date.
The Commission discusses the background to these changes in section II.C.2.a above. The Commission discusses several comments beyond those discussed in section II.C.2.a in this section. CEWG believes a T+2 deadline for non-SD/MSP/DCO reporting counterparties strikes an appropriate balance between giving end-users enough time to report, incurring a limited compliance burden, and providing the Commission with swap data in a timely manner.
The Commission received two comments raising issues with the new deadlines for reporting required swap creation data in § 45.3(b). ICE SDR believes including a set time of no later than 11:59 p.m. on T+1 or T+2 could impede the SDR's ability to update its reporting system during its maintenance window.
CME believes the reporting deadline should be T+1 or T+2 for all entities to avoid a sequencing issue with non-SD/MSP/DCO reporting counterparties that have a T+2 deadline, and the § 45.4(b) deadline for DCOs to report original swap terminations, which would result in DCO terminations being rejected until original swaps are reported.
In summary, § 45.3(b) will require that for each off-facility swap, the reporting counterparty shall report required swap creation data electronically to an SDR as provided by § 45.3(b)(1) or (2), as applicable. If the reporting counterparty is an SD, MSP, or DCO, § 45.3(b)(1) will require the reporting counterparty report required swap creation data electronically to an SDR in the manner provided in § 45.13(a) not later than the end of the next business day following the execution date. If the reporting counterparty is a non-SD/MSP/DCO counterparty, the reporting counterparty shall report required swap creation data electronically to an SDR in the manner provided in § 45.13(a) not later than the end of the second business day following the execution date.
The Commission is making several changes to the existing § 45.3(f) regulations for reporting allocations, re-designated as § 45.3(c). The Commission is making most of the changes to § 45.3(f) to conform to the changes in § 45.3(a) through (e). Existing § 45.3(f)(1) provides that the reporting counterparty to an initial swap with an allocation agent reports required swap creation
First, the Commission is making non-substantive changes, including specifying required swap creation data for allocations must be reported “electronically” to SDRs in § 45.3(c), (c)(1), and (c)(2)(ii), and replacing the reference in existing § 45.3(f)(1) (re-designated as § 45.3(c)(1)) to “§ 45.3(a) through (d)” with a reference to paragraph (a) or (b) of § 45.3, to reflect the structural revisions to § 45.3(a) through (e). However, because the Commission is extending the time to report required swap creation data in § 45.3(a) and (b), reporting counterparties will have additional time to report required swap creation data for the initial swaps for allocations as well.
Second, the Commission is changing existing § 45.3(f)(2)(ii) (re-designated as § 45.3(c)(2)(ii))
Finally,
The Commission received one question from two commenters on the proposed changes to § 45.3(f).
The Commission did not receive additional comments on the proposed changes to § 45.3(f), re-designated as § 45.3(c). For the reasons discussed above, the Commission is adopting the changes to § 45.3(f).
The Commission is making non-substantive changes to the § 45.3(g) regulations for reporting multi-asset swaps to conform to the changes in § 45.3(a) through (f). Existing § 45.3(g) provides that for each multi-asset swap, required swap creation data and required swap continuation data must be reported to a single SDR that accepts swaps in the asset class treated as the primary asset class involved in the swap by the SEF, DCM, or reporting counterparty making the first report of required swap creation data pursuant to § 45.3. Existing § 45.3(g) also provides that the registered entity or reporting counterparty making the first report of required swap creation data report all PET data for each asset class involved in the swap.
First, the Commission is replacing “making the first report” of required swap creation data with “reporting” required swap creation data to reflect the single report for required swap creation data, instead of separate PET data and confirmation data reports. Second, the Commission is removing the last sentence of the regulation concerning all PET data for each asset class involved in the swap. The Commission believes this sentence is unnecessary and no longer relevant with the Commission's removal of PET data from the regulations.
The Commission did not receive any comments on the amendments to § 45.3(g). The Commission is adopting the amendments to § 45.3(g), re-designated as § 45.3(d), as proposed.
The Commission is making several non-substantive changes to the § 45.3(h) regulations for mixed swaps to conform to the changes in § 45.3(a) through (g). Existing § 45.3(h)(1) requires that for each mixed swap, required swap creation data and required swap continuation data shall be reported to an SDR registered with the Commission and to a security-based SDR (“SBSDR”) registered with the SEC. This requirement may be satisfied by reporting the mixed swap to an SDR or SBSDR registered with both Commissions. Existing § 45.3(h)(2) requires that the registered entity or reporting counterparty making the first report of required swap creation data under § 45.3(h) ensure that the same USI is recorded for the swap in both the SDR and the SBSDR.
The Commission is replacing “making the first report” of required swap creation data with “reporting” required swap creation data, among other non-substantive changes. The Commission did not receive any comments on the changes to § 45.3(h), re-designated as § 45.3(e). The Commission is adopting the changes as proposed.
The Commission is removing the § 45.3(i) regulations for international swaps. Existing § 45.3(i) requires that for each international swap, the reporting counterparty report to an SDR the identity of the non-U.S. TR to which the swap is also reported and the swap identifier used by the non-U.S. TR.
When § 45.3(i) was adopted, the Commission believed the regulations for international swaps were necessary to provide an accurate picture of the swaps market to regulators to further the purposes of the Dodd-Frank Wall Street Reform and Consumer Protection Act (the “Dodd-Frank Act”).
The Commission is making non-substantive changes to the § 45.3(j) regulations for reporting counterparties in choosing their SDR. Existing § 45.3(j) requires that the entity with the obligation to choose the SDR to which all required swap creation data for a swap is reported be the entity to make the first report of all data pursuant to § 45.3, as follows: (i) For swaps executed on or pursuant to the rules of a SEF or DCM, the SEF or DCM choose the SDR; (ii) for all other swaps, the reporting counterparty, as determined in § 45.8, choose the SDR.
The Commission is changing the heading of re-designated § 45.3(f) from “Choice of SDR” to “Choice of swap data repository,” to be consistent with other headings throughout part 45, among other technical changes. The Commission did not receive any comments on the proposed changes to § 45.3(j), re-designated as § 45.3(f). The Commission is adopting the changes to § 45.3(j) as proposed.
Existing § 45.4 requires reporting counterparties to report updates to existing swap data and swap valuations to SDRs. As discussed in the sections below, the Commission is adopting four significant changes to these regulations: (i) Removing the option for state data reporting; (ii) extending the deadline for reporting required swap continuation data to T+1 or T+2; (iii) removing the requirement for non-SD/MSP/DCO reporting counterparties to report valuation data quarterly; and (iv) requiring SD/MSP reporting counterparties to report margin and collateral data daily. The remaining changes to § 45.4 discussed below are non-substantive clarifying, cleanup, or technical changes.
The Commission is removing the introductory text to existing § 45.4.
The Commission did not receive any comments on the proposal to remove the introductory text to § 45.4.
The Commission is making several changes to the § 45.4(a) regulations for required swap continuation data reporting. Existing § 45.4(a) requires reporting counterparties and DCOs
First, the Commission is changing the first two sentences to state that for each swap, regardless of asset class, reporting counterparties and DCOs required to report required swap continuation data shall report, to improve readability without changing the regulatory requirement.
Second, the Commission is removing state data reporting as an option for reporting changes to swaps from § 45.4. State data reporting involves reporting counterparties re-reporting the PET terms of a swap every day, regardless of whether any changes have occurred to the terms of the swap since the last state data report.
In adopting part 45, the Commission gave reporting counterparties the option of reporting changes to swaps by either the state data reporting method or life cycle event method to provide flexibility.
CME opposes removing state data reporting from § 45.4(a). CME believes the Commission should instead require the reporting of final-state life cycle event changes per swap on the day in question to reduce further submission of unnecessary data, noting that this requirement would be consistent with the requirements of other international regulators.
For the reasons discussed above, the Commission is adopting the changes to § 45.4(a) as proposed. Therefore, § 45.4(a) will require that for each swap, regardless of asset class, reporting counterparties and DCOs required to report required swap continuation data shall report life-cycle-event data for the swap electronically to an SDR in the manner provided in § 45.13(a) within the applicable deadlines outlined in § 45.4.
The Commission is making several changes to the existing § 45.4(b) regulations for required swap continuation data reporting for clearing swaps. The Commission is moving the § 45.4(b) required swap continuation data reporting regulations for clearing swaps to § 45.4(c) as part of structural changes to the regulations.
The Commission is also making several changes to the continuation data reporting regulations for original swaps in re-designated § 45.4(b). Existing § 45.4(c) requires required swap continuation data, including terminations, must be reported to the SDR to which the original swap that was accepted for clearing was reported pursuant to § 45.3(a) through (d).
First, the Commission is extending the deadline for reporting swap continuation data for original swaps in § 45.4(c)(1) to either T+1 or T+2, depending on the reporting counterparty, to be consistent with the new deadlines for reporting required swap creation data in § 45.3.
The Commission received three comments supporting extending the deadline for reporting required swap continuation data in § 45.4(b).
DTCC requests clarification on when “each business day” begins for § 45.4(b) reporting.
Eurex proposes removing the DCO obligation to report terminations of original swaps for “off facility swaps.”
In summary, § 45.4(b) will require that for each original swap, the DCO shall report required swap continuation data, including terminations, electronically to the SDR to which the swap that was accepted for clearing was reported pursuant to § 45.3 in the manner provided in § 45.13(a), and such required swap continuation data shall be accepted and recorded by such SDR as provided in § 49.10. New § 45.4(b)(1) will provide that the DCO that accepted the swap for clearing shall report all life-cycle-event data electronically to an SDR in the manner provided in § 45.13(a) not later than the end of the next business day following the day that any life cycle event occurs with respect to the swap. New § 45.4(b)(2) will require that, in addition to all other required swap continuation data, life-
The Commission is making several changes to the § 45.4(c) regulations for reporting required swap continuation data for original swaps. The Commission is moving the required swap continuation data reporting requirements for original swaps from existing § 45.4(c) to § 45.4(b) as part of structural changes.
The Commission is making several changes to the continuation data reporting regulations for clearing swaps and uncleared swaps in § 45.4(b) and (d), respectively, proposed to be re-designated as § 45.4(c). Existing § 45.4(b) requires that for all clearing swaps, DCOs report: (i) Life-cycle-event data or state data reporting either on the same day that any life cycle event occurs with respect to the swap, or daily for state data reporting; and (ii) daily valuation data. Existing § 45.4(d) requires that for all uncleared swaps, including swaps executed on a SEF or DCM, the reporting counterparty report: (i) All life-cycle-event data on the same day for SD/MSP reporting counterparties, or the second business day if it relates to a corporate event of the non-reporting counterparty, or state data daily; (ii) all life-cycle-event data on the next business day for non-SD/MSP reporting counterparties, or the end of the second business day if it relates to a corporate event of the non-reporting counterparty, or state data daily; (iii) daily valuation data for SD/MSP reporting counterparties; and (iv) the current daily mark of the transaction as of the last day of each fiscal quarter, within 30 calendar days of the end of each fiscal quarter for non-SD/MSP reporting counterparties.
First, the Commission is changing the life cycle event reporting deadlines for these swaps to match other T+1 and T+2 deadlines.
Second, the Commission is removing the references to state data reporting in new § 45.4(c).
Fourth, the Commission is changing the swap valuation data reporting requirements for all reporting counterparties. DCOs, SDs, and MSPs report valuation data daily, while non-SD/MSP reporting counterparties report the daily mark of transactions quarterly.
The Commission decided against requiring collateral data reporting when it adopted part 45 in 2012. At the time, both the Commission and industry understood collateral data was important for systemic risk management, but was not yet possible to include in transaction-based reporting since it was calculated at the portfolio level.
The Commission is concerned not having margin and collateral data at SDRs impedes its ability to fulfill systemic risk mitigation objectives. As a result, the Commission revisited this issue in the Proposal to determine whether it is now feasible.
However, the Commission is concerned valuation, margin, and collateral data reporting could create a significant burden for non-SD/MSP/DCO reporting counterparties. These entities include those market
The Commission received 11 comments on expanding daily valuation data reporting to include margin and collateral data reporting in § 45.4(c) for SD/MSP/DCO reporting counterparties. Three commenters support the proposal.
Eight commenters oppose the proposal.
The Commission received nine comments supporting excluding non-SD/MSP/DCO reporting counterparties from reporting valuation, margin, and collateral data in § 45.4(c).
The Commission acknowledges the concerns raised by CME, Eurex, ICE DCOs, ISDA-SIFMA, and FIA about duplicative reporting for DCOs regarding cleared swaps. While collateral and margin data is reported pursuant to part 39 using a different set of data elements than those contained in appendix 1, and collateral and margin data is reported for end-of-day positions pursuant to part 39 as opposed to a more granular transaction-by-transaction basis pursuant to part 45, the Commission believes the collateral and margin data reported by DCOs pursuant to part 39 is sufficiently similar to data reported pursuant to part 45 to meet the Commission's current needs.
However, the Commission is also open to requiring DCO reporting counterparties to report collateral and margin data on a transaction-by-transaction basis pursuant to part 45 at a future date if a Commission need for more granular data emerges in its monitoring of systemic risk or if granular data is needed as a condition for global jurisdictions to grant substituted compliance and TR access to one another. The Commission notes any added costs to DCO reporting counterparties to comply with any such future Commission requirement would be substantially mitigated by DCOs' existing and future systems for transaction-by-transaction reporting of collateral and margin data developed to comply with the requirements of other jurisdictions, including Europe.
The Commission received one comment on reporting corporate events. FIA suggests that for the reporting of corporate events of non-reporting counterparties, the Commission measure the reporting deadline from the day the non-reporting counterparty informs the reporting counterparty of the corporate event.
For the reasons discussed above, the Commission is adopting the changes to § 45.4(c) as proposed, except the Commission is excluding DCO reporting counterparties from the requirement to report collateral data. In summary, § 45.4(c) will require that for each swap that is not an original swap, including clearing swaps and swaps not cleared by DCOs, the reporting counterparty shall report all required swap continuation data electronically to an SDR in the manner provided in § 45.13(a) as provided in § 45.4(c). New § 45.4(c)(1) will require that: (i) If the reporting counterparty is a SD, MSP, or DCO, the reporting counterparty shall report life-cycle-event data electronically to an SDR in the manner provided in § 45.13(a) not later than the end of the next business day following the day that any life cycle event occurred, with the sole exception that life-cycle-event data relating to a corporate event of the non-reporting counterparty shall be reported in the manner provided in § 45.13(a) not later than the end of the second business day following the day that such corporate event occurred; (ii) if the reporting counterparty is a non-SD/MSP/DCO counterparty, the reporting counterparty shall report life-cycle-event data electronically to an SDR in the manner provided in § 45.13(a) not later than the end of the second business day following the day that any life cycle event occurred. New § 45.4(c)(2)(i) will require that if the reporting counterparty is a SD, MSP, or DCO, swap valuation data shall be reported electronically to an SDR in the manner provided in § 45.13(b) each business day. New § 45.4(c)(2)(ii) will require that if the reporting counterparty is a SD or MSP, collateral data shall be reported electronically to an SDR in the manner provided in § 45.13(b) each business day.
The Commission is amending § 45.5 to adopt requirements for UTIs, the globally accepted transaction identifier, replacing USIs in existing § 45.5. In general, the Commission is amending existing § 45.5(a) through (f) to require each swap to be identified with a UTI in all recordkeeping and all swap data reporting, and to require the UTI be comprised of the LEI of the generating entity and a unique alphanumeric code. Before discussing the specific changes to § 45.5(a) through (f) in sections II.E.1 to II.E.7 below, the Commission explains the policy behind adopting UTIs.
In general, existing § 45.5 requires: (i) Each swap be identified with a USI in all recordkeeping and all swap data reporting, and (ii) the USI be comprised of a unique alphanumeric code and an identifier the Commission assigns to the generating entity. Each swap retains its USI from execution until, for instance,
The Commission implemented the existing USI regulations before global consensus was reached on the structure and format for a common swap identifier. For entities reporting swap data to multiple jurisdictions, this has resulting in conflicting or ambiguous generation and transmission requirements across jurisdictions. Practically, the Commission is concerned this has resulted in: (i) Conflicting responsibilities for generating identifiers and (ii) entities reporting different identifiers identifying the same swap to different SDRs and TRs.
The Commission believes amending § 45.5 to require each swap be identified with a UTI in all recordkeeping and all swap data reporting, and to require that the UTI be comprised of the LEI of the generating entity and a unique alphanumeric code, will result in the structure and format for the swap identifier being consistent with the UTI Technical Guidance, which will reduce cross-border reporting complexity and encourage global swap data aggregation.
The Commission proposed several conforming amendments to the § 45.5 title and the introductory text. Existing § 45.5 is titled “Unique swap identifiers.” The existing introductory text states that each swap subject to the jurisdiction of the Commission shall be identified in all recordkeeping and all swap data reporting pursuant to part 45 by the use of a USI, which shall be created, transmitted, and used for each swap as provided in § 45.5(a) through (f).
The Commission proposed replacing “swap” in the title with “transaction” to reflect the Commission's proposed adoption of the UTI. Accordingly, the Commission proposed updating the reference to USI with UTI in the introductory text.
The Commission also proposed updating the reference to paragraphs (a) through (f) of existing § 45.5 to (a) through (h) of proposed § 45.5. This would reflect the Commission's addition of proposed § 45.5(g) and (h), discussed in sections II.E.8 and II.E.9 below.
The Commission received eight general comments on adopting UTIs in § 45.5. Four commenters generally support adopting UTIs in § 45.5.
GFXD supports implementing global UTI standards but is concerned the Commission will conflict with the global harmonized generation hierarchy or run on a timeframe that is not coordinated with other jurisdictions, negating the purpose and benefits of a universal UTI standard and creating significant extra cost and complexity, as well as the need to separate UTI systems and logic for each jurisdiction.
Eurex supports harmonizing the UTI and believes it would significantly relieve reporting counterparties. Eurex recommends the Commission align UTI requirements with ESMA and other global regulators on the effective date of UTI and phase in UTI to handle existing open swap positions.
JBA believes not adopting the UTI Technical Guidance precisely could lead to confusion for the UTI generation responsibility for cross-border transactions. JBA asks the Commission consider designing easy-to-implement and flexible rules, such as allowing a change to the UTI generation responsibility in accordance with a bilateral agreement or adopting tiebreaker logic similar to the existing ISDA Tie-Breaker Logic that easily determines the UTI generation responsibility.
The Commission did not receive any comments on the proposals to retitle § 45.5 “Unique Transaction Identifiers,” to update the reference to paragraphs (a) through (f) of § 45.5 to (a) through (h) of § 45.5, or to update the reference to USI with UTI in the introductory text and for reasons articulated in the Proposal and reiterated above, is adopting the changes to those portions of the introductory text as proposed. For the reasons articulated in the Proposal and the additional reasons discussed below, the Commission is adopting the changes to the remainder of the introductory text to § 45.5 as proposed.
The Commission acknowledges the comments supportive of the Commission's proposal to adopt UTIs. The Commission agrees with Eurex and GFXD that the promise of UTIs can only be realized if jurisdictions worldwide adopt the UTI, but the Commission shares the FSB's belief that it is not feasible for jurisdictions to have one coordinated global implementation date due to differences in the legislative and regulatory process across jurisdictions.
As to the comments from LCH, GFXD, and JBA on the importance of following the UTI Technical Guidance for assigning UTI generation responsibilities, the Commission agrees and has cited the specific steps from the UTI Technical Guidance generation flowchart in sections II.E.2 to II.E.5 below to demonstrate the conformity of § 45.5(a) to (d) with the UTI Technical Guidance.
The Commission declines JBA's request for a rule affording flexibility in UTI generation responsibilities, such as allowing bilateral agreement between counterparties to override the UTI generation responsibilities in § 45.5, because it believes clear rules delineating UTI generation responsibilities provide the best assurance that only one unique UTI is generated for a trade, a necessity for swap data reporting integrity. Allowing UTIs to be generated according to bilateral agreement results in the need to reach agreement on a trade-by-trade or counterparty-by-counterparty basis, a scenario the Commission believes will increase the likelihood, due to miscommunication, that no UTI is generated for a swap if each entity believes the other agreed to generate or multiple UTIs are generated for a swap if each entity believes it agreed to generate.
The Commission proposed several conforming amendments to § 45.5(a) for the creation and transmission of UTIs for swaps executed on or pursuant to the rules of SEFs and DCMs. Existing § 45.5(a)(1) requires that for swaps executed on or pursuant to the rules of SEFs and DCMs, the SEFs and DCMs generate and assign USIs at or ASATP following execution, but prior to the reporting of required swap creation data, that consist of a single data field.
Existing § 45.5(a)(2) requires that the SEF or DCM transmit the USI electronically (i) to the SDR to which the SEF or DCM reports required swap creation data for the swap, as part of that report; (ii) to each counterparty to the swap ASATP after execution of the swap; and (iii) to the DCO, if any, to which the swap is submitted for clearing, as part of the required swap creation data transmitted to the DCO for clearing purposes.
First, the Commission proposed amendments to conform to the Commission's proposed adoption of the UTI. The Commission proposed replacing all references to “USIs” with “UTIs” in proposed § 45.5(a)(1) and (2). In addition, the Commission proposed updating the phrase in existing § 45.5(a)(1) that requires the USI to consist of a single data “field” that contains two components to a single data “element with a maximum length of 52 characters” so that the length of the UTI is consistent with the UTI Technical Guidance.
The Commission also proposed amending the § 45.5(a)(1)(i) description of the first component of the UTI's single data element to replace “unique alphanumeric code assigned to” the SEF or DCM with “legal entity identifier of” the SEF or DCM so that the identifier used to identify the UTI generating entity is consistent with the UTI Technical Guidance.
The Commission did not receive any comments on the proposed amendments to the requirements for the creation and transmission of UTIs for swaps executed on or pursuant to the rules of SEFs and DCMs in proposed § 45.5(a) and for reasons articulated in the Proposal and reiterated above, is adopting the changes as proposed. The Commission notes assigning UTI generation responsibilities for swaps executed on or pursuant to the rules of SEFs and DCMs to the SEF or DCM adheres to the generation flowchart in the UTI Technical Guidance.
The Commission proposed several amendments to existing § 45.5(b) for the creation and transmission of UTIs for off-facility swaps by SD/MSP reporting counterparties. Existing § 45.5(b)(1) requires that, for off-facility swaps with SD/MSP reporting counterparties, the reporting counterparty generate and assign a USI consisting of a single data field.
Existing § 45.5(b)(2) requires that the reporting counterparty transmit the USI electronically: (i) To the SDR to which the reporting counterparty reports required swap creation data for the swap, as part of that report; and (ii) to the non-reporting counterparty to the swap, ASATP after execution of the swap; and (iii) to the DCO, if any, to which the swap is submitted for clearing, as part of the required swap creation data transmitted to the DCO for clearing purposes.
First, the Commission proposed expanding the UTI creation and transmission requirements for SD/MSP reporting counterparties to include reporting counterparties that are financial entities.
Second, the Commission proposed amendments to conform to the Commission's proposed adoption of the UTI. The Commission proposed replacing all references to “USIs” with “UTIs” in proposed § 45.5(b)(1) and (2). In addition, the Commission proposed updating the phrase in proposed § 45.5(b)(1) that requires the USI to consist of a single data “field” that contains two components to a single data “element with a maximum length of 52 characters” so that the length of the UTI is consistent with the UTI Technical Guidance.
The Commission proposed amending § 45.5(b)(1)(i) to describe the first component of the UTI's single data element by replacing “unique alphanumeric code assigned to” the SD or MSP with “legal entity identifier of” the reporting counterparty so that the identifier used to identify the UTI generating entity is consistent with the UTI Technical Guidance.
The Commission also believed this would more closely align the UTI generation hierarchy with the reporting counterparty determination hierarchy in § 45.8, which incorporates financial entities for purposes of determining the reporting counterparty.
The Commission received two comments on the proposed amendments to § 45.5(b). ISDA-SIFMA believe the Commission should delay the requirement to disseminate UTIs to non-reporting counterparties from ASATP to T+1, because the UTI transmission mechanisms generally align with the method of confirmation, such as electronic or paper. ISDA-SIFMA suggest the Commission replace the ASATP requirement for UTI transmission with a deadline of no later than T+1, to correspond with the proposed timeline for reporting creation data to the SDR.
The Commission did not receive any comments opposing the proposed amendments to § 45.5(b) expanding the UTI creation and transmission requirements for SD/MSP reporting counterparties to include reporting counterparties that are financial entities, and for reasons articulated in the Proposal and reiterated above, is adopting the proposal with one modification relating to transmission. The Commission agrees with ISDA-SIFMA and believes in light of the proposed changes in § 45.3(b) to the deadline for reporting required swap creation data, that transmission of the UTI to the non-reporting counterparty should be similarly delayed in order to not potentially provide two separate confirmations to the non-reporting counterparty. The Commission therefore is adopting the changes as proposed, except it replaces “To the non-reporting counterparty to the swap, as soon as technologically practicable after execution of the swap; and” with “To the non-reporting counterparty to the swap, no later than the applicable deadline in § 45.3(b) for reporting required swap creation data; and” in final § 45.5(b)(2)(ii).
The Commission notes assigning UTI generation responsibilities for off-facility swaps with a financial entity reporting counterparty to the reporting counterparty adheres to the generation flowchart in the UTI Technical Guidance.
The Commission proposed several amendments to existing § 45.5(c) for the creation and transmission of USIs for off-facility swaps by non-SD/MSP reporting counterparties. Existing § 45.5(c)(1) requires that, for off-facility swaps with non-SD/MSP reporting counterparties, the SDR generates and assigns the USI ASATP after receiving the first report of PET data, consisting of a single data field.
Existing § 45.5(c)(2) requires that the SDR transmit the USI electronically: (i) To the counterparties to the swap ASATP after creation of the USI, and (ii) to the DCO, if any, to which the swap is submitted for clearing ASATP after creation of the USI.
First, the Commission proposed replacing “non-SD/MSP reporting counterparty” in the title of proposed § 45.5(c) with “non-SD/MSP/DCO reporting counterparty that is not a financial entity” and replacing “reporting counterparty is a non-SD/MSP counterparty” in the first sentence of proposed § 45.5(c) with “reporting counterparty is a non-SD/MSP/DCO counterparty that is not a financial entity.” The new title of § 45.5(c) would be “Off-facility swaps with a non-SD/MSP/DCO reporting counterparty that is not a financial entity” and the first sentence of § 45.5(c) would begin with “For each off-facility swap for which the reporting counterparty is a non-SD/MSP/DCO counterparty that is not a financial entity. . . .” The Commission is expanding UTI generation responsibilities to financial entities,
Second, the Commission proposed amending existing § 45.5(c) to provide non-SD/MSP/DCO reporting counterparties that are not financial entities with the option to generate the UTI for an off-facility swap or to request the SDR to which required swap creation data will be reported to generate the UTI. If the non-SD/MSP/DCO reporting counterparty that is not a financial entity chooses to generate the UTI for an off-facility swap, the reporting counterparty would follow the creation and transmission requirements for financial entity reporting counterparties in final § 45.5(b)(1) and (2). If the non-SD/MSP/DCO reporting counterparty that is not a financial entity chooses to request the SDR generates the UTI, the SDR would follow the creation and transmission requirements for SDRs in proposed § 45.5(c)(1) and (2). The Commission proposed amendments to the requirements for SDRs in proposed § 45.5(c)(1), as discussed below.
The Commission participated in the preparation of the UTI Technical Guidance, which includes guidance to authorities for allocating responsibility for UTI generation, including a generation flowchart that places SDRs at the end.
Because the UTI Technical Guidance was produced with the need to accommodate the different trading patterns and reporting rules in jurisdictions around the world, the Commission explained certain factors included in the UTI Technical Guidance generation flowchart are not applicable for the Commission (
The Commission explained in the Proposal that amending § 45.5(c) to provide the reporting counterparty with the option to generate the UTI for an off-facility swap where the reporting counterparty is neither a DCO nor financial entity or, if the reporting counterparty elects not to generate the UTI, to request the SDR to which required swap creation data will be reported generate the UTI would provide a reporting counterparty that is neither a DCO nor financial entity with the flexibility to generate the UTI should it choose to do so. Simultaneously, the Commission believed the proposal would reduce the number of swaps where an SDR is assigned UTI generation responsibilities, while also maintaining the existing SDR role as a guarantee that every off-facility swap will be identified with a UTI.
Third, the Commission proposed amendments to conform to the Commission's proposed adoption of the UTI.
The Commission received four comments supporting expansion of the ability to generate UTIs. CME supports expanding the ability to generate UTIs to non-SD/MSP/DCO reporting counterparties that are not financial entities, because the internal reference identifier used in bookkeeping systems is different than the transaction identifier used in swap data reporting.
The Commission received four comments opposing the requirement for SDRs to generate UTIs. CME believes the rule changes appear to require SDRs to offer separate parts 43 and 45 messages because of the different reporting deadlines, and that SDRs would not be able to link the parts 43 and 45 messages, necessitating the reporting counterparty to include the UTI from the first message in the second message. CME believes SDRs should not generate UTIs to avoid this situation. CME also notes some reporting counterparties who currently rely on SDRs to generate USIs have swaps with multiple USIs because of an issue when reporting counterparties submit swaps to the SDR in batches but the swaps fail some validations.
DTCC opposes SDRs generating and transmitting UTIs because it would not enable early and automated generation in the transaction's life-cycle, which may be necessary for counterparties.
ISDA-SIFMA believe each jurisdiction must align to a global UTI waterfall to the maximum extent possible. ISDA-SIFMA also believe the Commission deviates from the UTI Technical Guidance by assigning SDRs the obligation to generate UTIs for non-SD/MSP/DCOs superior in the hierarchy than the UTI Technical Guidance. As non-SD reporting counterparties can conduct trade reporting and must transmit the UTI to their counterparties, ISDA-SIFMA question whether there is sufficient demand for UTI generation by the SDR to substantiate this deviation from the UTI Technical Guidance.
For reasons articulated in the Proposal and informed by comments and analysis as further discussed below, the Commission is adopting the proposed changes to the § 45.5(c) regulations for the creation and transmission of UTIs for off-facility swaps with a non-SD/MSP/DCO reporting counterparty that is not a financial entity as proposed. The Commission notes SDRs have been required to generate USIs pursuant to existing § 45.5(c) since the adoption of part 45 in 2012 and further notes assigning UTI generation responsibility for off-facility swaps with a non-SD/MSP/DCO reporting counterparty that is not a financial entity to the SDR adheres
In addition to adhering to the UTI Technical Guidance, the Commission also believes the adopted rule appropriately balances the burdens between reporting counterparties and SDRs by providing optionality to a non-SD/MSP/DCO reporting counterparty that is not a financial entity to elect to generate a UTI if it so chooses, and lowers costs for both SDRs and non-SD/MSP/DCO reporting counterparties. SDR costs would be lowered due to fewer transaction identifiers that SDRs would be required to generate under final § 45.5(c) compared to existing § 45.5(c). Costs on non-SD/MSP/DCO reporting counterparties who choose not to generate UTIs would be lowered due to their ability to leverage the existing transaction identifier generation infrastructure of SDRs rather than expenditures to develop their own UTI generation systems.
In response to the several comments indicating that the proposed amendments to § 45.5(c) do not follow the UTI Technical Guidance, the Commission notes Commission staff was heavily involved in the preparation of the UTI Technical Guidance generation flowchart, and disagrees that assigning UTI generation to SDRs contravenes the UTI Technical Guidance for the following reasons. Section 45.5(c) would apply only for off-facility trades where both counterparties are of equal status (
While the optionality to generate UTIs for non-SD/MSP/DCO reporting counterparties that are not financial entities is not a step in the UTI Technical Guidance generation flowchart, the Commission does not believe the optionality conflicts with an SDR's responsibility for serving as UTI generator of last resort. Under the optionality, an SDR continues to be the entity that has legal responsibility for UTI generation for this type of off-facility trade should the non-SD/MSP/DCO reporting counterparty that is not a financial entity elect not to, and at no point would a non-SD/MSP/DCO reporting counterparty that is not a financial entity that is unwilling or unable to generate the UTI be forced to generate the UTI. Additionally, no commenters oppose providing non-SD/MSP/DCO reporting counterparties that are not financial entities with the ability to generate UTIs.
The Commission acknowledges ICE SDR's request to remove the requirement to transmit the UTI to the non-reporting counterparty due to a potential lack of relationship between an SDR and the non-reporting counterparty, but declines to adopt the suggestion for two reasons. First, the Commission notes the requirement for an SDR generator to transmit USIs to both counterparties has been in existing § 45.5(c)(2)(i) that SDRs have complied with since part 45 was adopted in 2012, and based on experience with compliance by SDRs since 2012, the Commission has seen no evidence that lack of relationship presents a problem in need of being addressed. In addition, the Commission is adopting three amendments to § 45.5 that will result in SDRs generating fewer UTIs than USIs and mitigate any burden placed on SDRs to transmit the UTIs they generate to non-reporting counterparties, including: (i) All financial entities, not just SD/MSPs, being required to generate UTIs pursuant to final § 45.5(b); (ii) the optionality provided to non-SD/MSP/DCO reporting counterparties that are not financial entities to generate UTIs in final § 45.5(c); and (iii) as described in section II.E.8 below, the requirement in final § 45.5(g) for entities using third-party service providers to ensure that the third-party service providers generate UTIs.
Finally, the Commission declines to adopt the SDRs' suggestion to end the UTI generation responsibilities with the reporting counterparty as the last step of the hierarchy, since this would result in incomplete UTI generation logic. A natural person reporting counterparty, who by definition is a non-SD/MSP/DCO reporting counterparty that is not a financial entity, will highly likely be unable to generate UTIs due to the inability of most natural persons to obtain an LEI
The Commission also acknowledges—but does not find persuasive—DTCC's comment that reporting counterparties should be the entity responsible for generating UTIs because they are in the best position to collect information such as LEI from a non-reporting counterparty necessary to generate a UTI. The Commission notes no information about the non-reporting counterparty is necessary for an entity to generate UTIs, as the UTI is composed using the LEI
The Commission proposed several amendments to the existing § 45.5(d) regulations for the creation and transmission of USIs for clearing swaps. Existing § 45.5(d) requires that for each clearing swap, the DCO that is a
Existing § 45.5(d)(2) requires that the DCO transmit the USI electronically to: (i) The SDR to which the DCO reports required swap creation data for the clearing swap; and (ii) to the counterparty to the clearing swap, ASATP after accepting the swap for clearing or executing the swap, if the swap does not replace an original swap.
First, the Commission proposed to retitle proposed § 45.5(d) as “Off-facility swaps with a [DCO] reporting counterparty.” The Commission also proposed rephrasing the introductory text in § 45.5(d) to reflect this shift in terminology.
Second, the Commission proposed amendments to conform to the Commission's proposed adoption of the UTI.
The Commission received two comments regarding DCOs in § 45.5(d). LCH supports the proposal that DCOs generate the UTIs for cleared swaps, as it is in line with the UTI Technical Guidance.
The Commission received one supportive comment on the proposed amendments to the § 45.5(d) regulations for the creation and transmission of UTIs for clearing swaps and for reasons articulated in the Proposal and reiterated above, is adopting the changes as proposed. The Commission notes assigning UTI generation responsibilities for clearing swaps to the DCO adheres to the generation flowchart in the UTI Technical Guidance.
The Commission appreciates the comment from ISDA-SIFMA recommending that the Commission issue a clarification that exempt DCOs, SEFs, and DCMs have the same reporting and UTI generation responsibilities as their non-exempt equivalents. The Commission did not propose including exempt DCOs, SEFs, and DCMs in § 45.5 and has not had enough time to study the range of effects that any inclusion of these exempt entities in § 45.5 would have on other provisions of the Act and the Commission's regulations, and as a result, the Commission declines to adopt alternative amendments relating to UTI generation for exempt entities such as exempt DCOs, SEFs, and DCMs at this time. However, the Commission notes despite exempt DCOs, SEFs, and DCMs not being assigned with formal UTI generation responsibilities in § 45.5, exempt entities wishing to generate UTIs on behalf of their clients could do so voluntarily by entering into agreements with their clients to act as their third-party service provider pursuant to § 45.5(g).
The Commission proposed several amendments to the existing § 45.5(e) regulations for the creation and transmission of USIs for allocations. The Commission proposed replacing references to USIs with UTI throughout proposed § 45.5(e) to conform to the Commission's proposed adoption of the UTI. The Commission also proposed non-substantive technical and language edits to update cross-references and improve readability.
The Commission did not receive any comments on the proposed changes to existing § 45.5(e) is adopting the changes to § 45.5(e) as proposed.
The Commission proposed several amendments to the existing § 45.5(f) regulations for the use of UTIs by registered entities and swap counterparties. Existing § 45.5(f) requires that registered entities and swap counterparties subject to the jurisdiction of the Commission include the USI for a swap in all of their records and all of their swap data reporting concerning that swap, from the time they create or receive the USI, throughout the existence of the swap, and for as long as any records concerning the swap are required to be kept by the CEA or Commission regulations, regardless of any life cycle events or any changes to state data concerning the swap, including, without limitation, any changes with respect to the counterparties to or the ownership of the swap.
Existing § 45.5(f) also specifies that this requirement shall not prohibit the use by a registered entity or swap counterparty in its own records of any additional identifier or identifiers internally generated by the automated systems of the registered entity or swap counterparty, or the reporting to an SDR, the Commission, or another regulator of such internally generated identifiers in addition to the reporting of the USI.
First, the Commission proposed amendments to conform proposed § 45.5(f) to the Commission's proposed adoption of the UTI. The Commission proposed replacing all references to “USIs” with “UTIs” in proposed § 45.5(f). The Commission also proposed removing the reference to state data in part 45, and to make minor technical language edits, including removing reference to ownership of the swap, which is not needed given the reference to counterparties.
Second, the Commission proposed removing the existing § 45.5(f) provision permitting the reporting of any additional identifier or identifiers internally generated by the automated systems of the registered entity or swap counterparty to an SDR, the Commission, or another regulator. The Commission explained this amendment would improve consistency in the swap data reported to SDRs, and further the goal of harmonization of SDR data across FSB member jurisdictions.
Proposed § 45.5(f) would therefore require that registered entities and swap counterparties include the UTI for a swap in all of their records and all of their swap data reporting concerning that swap, from the time they create or receive the UTI, throughout the existence of the swap, and for as long as any records are required to be kept concerning the swap by the CEA or Commission regulations, regardless of any life cycle events concerning the swap, including, without limitation, any changes to the counterparties to the swap.
The Commission received one request for clarification on the proposal. ISDA-SIFMA believe, due to the requirement for a UTI to persist through “changes with respect to the counterparty,” the Commission should be clearer that these counterparty changes, when related to corporate events such as name change, are not considered novations or assignments, as current market practice is to create a new USI for a swap created through the novation process.
The Commission received no additional comments on proposed § 45.5(f) and for reasons articulated in the Proposal and reiterated above in this section, is adopting § 45.5(f) as proposed.
The Commission proposed adding new § 45.5(g) to its regulations, titled “Third-party service provider.” Proposed § 45.5(g) would create requirements for registered entities and reporting counterparties—when contracting with third-party service providers to facilitate reporting under § 45.9—to ensure that the third-party service providers create and transmit UTIs.
The Commission explained in the Proposal that it had encountered inconsistencies in the format and standard of USIs for swaps reported using third-party service providers, which is detrimental to the Commission's ability to use swap data for its regulatory purposes. The Commission believed proposed § 45.5(g) would help ensure consistency with the UTI Technical Guidance in the format and standard of UTIs for swaps reported by third-party service providers. The Commission further explained that proposed § 45.5(g) would also reinforce that a registered entity or reporting counterparty is responsible for the data reported on its behalf by a third-party service provider.
The Commission received one comment supporting the proposal. Markit supports § 45.5(g) UTI generation by third-party service providers and believes this is an important clarification, but advises the Commission to monitor SDRs' implementation of this requirement as some SDRs have struggled to capture third-party service provider LEIs as part of the transaction record, especially when reporting on behalf of SEFs.
The Commission received no additional comments on proposed § 45.5(g) and for reasons articulated in the Proposal and reiterated above in this section, is adopting § 45.5(g) as proposed.
The Commission proposed adding new § 45.5(h) to its regulations, titled “Cross-jurisdictional swaps.” Proposed § 45.5(h) would clarify that, notwithstanding §§ 45.5(a) through (g), if a swap is also reportable to one or more other jurisdictions with a regulatory reporting deadline earlier than the deadline set forth in § 45.3, the same UTI generated according to the rules of the jurisdiction with the earliest regulatory reporting deadline is to be transmitted pursuant to §§ 45.5(a) through (g) and used in all recordkeeping and all swap data reporting pursuant to part 45.
The Commission explained in the Proposal that the benefits resulting from global swap data aggregation and harmonization are realizable only if each swap is identified in all regulatory reporting worldwide with a single UTI to avoid double- or triple-counting of the swap. While the existing requirement in part 45 (for swap creation data to be reported ASATP after execution) results in the Commission having the earliest reporting deadline, changes to the reporting deadline in proposed amendments to § 45.3 may result in the reporting of a cross-jurisdictional swap to another jurisdiction earlier than to the Commission. Further, given the critical importance of a unique UTI used to identify each swap, the Commission proposed that, if a cross-jurisdictional swap is reportable to another jurisdiction earlier than required under part 45, the UTI for such swap reported pursuant to part 45 be generated according to the rules of the jurisdiction with the earliest regulatory reporting deadline.
The Commission explained in the Proposal that the new proposed provision would: (i) Ensure consistency with the UTI Technical Guidance;
The Commission received three comments on cross-jurisdictional swaps. Specifically, ISDA-SIFMA highlight several implementation issues.
JBA believes it would be difficult for a counterparty in a jurisdiction to generate a UTI if other jurisdictions with a regulatory reporting deadline earlier than the Commission's do not mandate the UTI or use an identifier different from the UTI required under Commission or global rules.
The Commission is adopting the proposed provisions relating to cross-jurisdictional swaps in § 45.5(h) as proposed, with one clarification relating
The Commission declines to adopt ISDA-SIFMA's suggestion regarding nexus obligations, as the Commission has no requirements for nexus reporting and how the jurisdictions requiring nexus reporting mandate UTI generation is outside of the Commission's jurisdiction. As discussed above, the Commission expects the vast majority of cross-jurisdictional swaps reportable to both the CFTC and one or more additional jurisdictions will result in the CFTC having the earliest regulatory reporting deadline due to the CFTC being one of the few jurisdictions with real-time reporting requirement and UTIs being required to be generated ASATP for part 43 reporting. However, the Commission recognizes the potential concern that market participants may have in complying with similar rules that other jurisdictions may adopt to ensure consistency with the UTI Technical Guidance, and recommends that market participants and the LEI ROC work collaboratively on additional guidance relating to cross-jurisdictional swaps. The Commission also recognizes that the UTI Technical Guidance did not address which jurisdiction's UTI generation rules to follow if two jurisdictions hypothetically have the same reporting deadline, and similarly recommends that market participants and the LEI ROC work collaboratively on guidance to address this scenario.
The Commission appreciates JBA's comment regarding the potential difficulties if other jurisdictions with a regulatory reporting deadline earlier than the Commission's do not mandate the UTI, but the Commission does not believe this hypothetical is likely to occur. As discussed above, the Commission's ASATP reporting deadline under part 43 will result in the UTIs for most, if not all, swaps reportable to the Commission and another jurisdiction being generated according to § 45.5. Furthermore, the Commission also acknowledges JBA's concern that other jurisdictions may require an identifier different from the UTI, but the Commission notes authorities in the major swap markets have all indicated through the FSB and CPMI-IOSCO harmonization initiatives of their intention to adopt the UTI and the other harmonized identifiers, and the Commission does not believe inaction by a holdout authority should hinder the Commission's fulfillment of its commitments on UTI.
The Commission also acknowledges BP's desire for SDRs to coordinate identification of the jurisdiction with the earliest regulatory reporting deadline and conform to that jurisdiction's UTI requirements, but the Commission declines to adopt the suggestion. SDRs lack information to determine on their own the jurisdiction(s) that a SEF, DCM, DCO, or counterparty for each swap is subject to, and therefore the Commission believes requiring entities without such information such as SDRs to serve as the entity responsible for determining the earliest regulatory reporting deadline would not serve the Commission's interest in seeing that each swap is identified in all regulatory reporting worldwide with a single UTI.
Existing § 45.6 requires counterparties to be identified in all recordkeeping and swap data reporting under part 45 by an LEI. As discussed in the sections below, the Commission is revising the § 45.6 LEI regulations in two ways: (i) Cleanup changes removing unnecessary outdated regulatory text concerning LEIs and (ii) changes to the LEI regulations for SEFs, DCMs, DCOs, SDRs, and reporting and non-reporting counterparties.
The Commission proposed amending the introductory text of the § 45.6 regulations for LEIs. The existing introductory text states that each counterparty to any swap subject to the jurisdiction of the Commission shall be identified in all recordkeeping and all swap data reporting under part 45 through a single LEI as specified in § 45.6.
First, to improve the section's precision, the Commission proposed replacing “each counterparty” with each SEF, DCM, DCO, SDR, entity reporting pursuant to § 45.9, and counterparty to any swap. Second, the Commission proposed revising the introductory text to require each relevant entity (SEF, DCM, DCO, SDR, entity reporting pursuant to § 45.9, and counterparty to any swap that is eligible to receive an LEI) to “obtain,” as well as be identified in, all recordkeeping and swap data reporting by a single LEI.
The Commission received two comments on proposed § 45.6. ISDA-SIFMA, while recognizing that SEF trades are not specifically addressed in § 45.6, suggest clarifying that SEFs must require any entity allowed to execute a trade on a SEF under part 45 to obtain an LEI prior to reporting by the SEF.
XBRL agrees with the proposed requirement that counterparties must be identified, not only with their own LEI, but that they must obtain an LEI if they do not have one.
The Commission believes extending the requirement for each counterparty to any swap to be identified in all recordkeeping and swap data reporting by a single LEI to all SEFs, DCMs, DCOs, entities reporting under § 45.9, and SDRs will ensure consistency with the CDE Technical Guidance, allow for standardization in the identification in recordkeeping and swap data reporting,
For reasons discussed above, the Commission is adopting the proposed changes to the introductory text of the § 45.6 regulations for LEIs as proposed, with one clarification relating to the maintenance of LEI reference data. As discussed in section II.F.8 below, the Commission is adding “maintain” to the introductory text of final § 45.6 to clarify that each SEF, DCM, DCO, SDR, entity reporting under § 45.9, and counterparty to any swap that is eligible to receive an LEI is required to “maintain,” as well as obtain and be identified in, all recordkeeping and swap data reporting by a single LEI.
The Commission proposed several changes to the definitions for the LEI regulations in § 45.6(a). As background, existing § 45.6(a) provides definitions for “control,” “legal identifier system,” “level one reference data,” “level two reference data,” “parent,” “self-registration,” “third-party registration,” and “ultimate parent.”
The Commission proposed moving certain definitions pertaining to LEIs to § 45.1(a). The Commission explained in the Proposal these definitions should be in § 45.1(a) because they are used in regulations outside of § 45.6. These definitions were: “Global Legal Entity Identifier System,”
The Commission proposed removing certain definitions pertaining to LEIs from § 45.6(a). The Commission explained that these definitions would no longer be necessary in light of the proposed amendments to the LEI regulations, discussed in sections II.F.3 to II.F.8 below. These definitions were: “control,” “level one reference data,” “level two reference data,” “parent,” and “ultimate parent.”
The Commission proposed amending certain definitions pertaining to LEIs in § 45.6(a). Specifically, the Commission proposed amending the definition of “self-registration” in several respects. First, the Commission proposed removing the specific reference to “level one or level two” reference data, and the accompanying specifier “as applicable.” The amendment reflected the Commission's proposal to remove the definitions of “level one reference data” and “level two reference data.”
Second, the Commission proposed adding a reference to “individuals,” to reflect the fact that swap counterparties may be individuals who need to obtain LEIs. As amended, “self-registration” would mean submission by a legal entity or individual of its own reference data.
Separately, the Commission proposed amending the definition of “third-party registration.” In this regard, the Commission proposed removing the specific references to “level one or level two” reference data, and the accompanying specifier “as applicable.” This amendment reflected the Commission's proposal to remove the definitions of “level one reference data” and “level two reference data.”
Further, the Commission proposed adding references to “individuals,” to reflect that swap counterparties may be individuals who need to obtain LEIs. As amended, “third-party registration” would mean submission of reference data for a legal entity or individual that is or may become a swap counterparty, made by an entity or organization other than the legal entity or individual identified by the submitted reference data. Examples of third-party registration include, without limitation, submission by an SD or MSP of reference data for its swap counterparties, and submission by a national numbering agency, national registration agency, or data service provider of reference data concerning legal entities or individuals with respect to which the agency or service provider maintains information.
Finally, the Commission proposed adding two definitions pertaining to LEIs to § 45.6(a). First, the Commission proposed adding a definition of “local operating unit.” As proposed, “local operating unit” would mean an entity authorized under the standards of the Global Legal Entity Identifier System to issue legal entity identifiers. Second, the Commission proposed adding a definition of “reference data.” As proposed, “reference data” would mean all identification and relationship information, as outlined in the standards of the Global Legal Entity Identifier System, of the legal entity or individual to which an LEI is assigned. The terms “local operating unit” and “reference data” are explained in a discussion of the proposed amendments to § 45.6(e) in section II.F.7 below.
As also noted in section II.A.1 above, GLIEF suggests moving proposed definitions to § 45.1(a) from § 45.6(a) for “local operating unit” and “legal entity reference data.”
The Commission received one comment on the proposed definition of “reference data.” GLEIF suggests an alternative definition: “data as defined by the currently valid common data file formats in the Global [Legal Entity Identifier] System describing business card and relationship information related to corresponding [Legal Entity Identifier] Regulatory Oversight Committee policies.” GLEIF, however, does not explain why it believes its suggested alternative is preferable to the Commission's proposal.
The Commission received one comment on the definition of “self-registration.” GLEIF supports the proposed definition revisions in § 45.6(a), including removal of references to “level one” and “level two.”
The Commission did not receive any comments on the proposed definitions for “local operating unit” and “third-party registration” and for reasons articulated in the Proposal and reiterated in section II.F.2.a above, is adopting those two definitions as proposed. The only comment submitted on the proposed definition of “self-registration” supports the proposal and for reasons articulated in the Proposal and reiterated in section II.F.2.a above, the Commission is adopting the definition as proposed.
GLEIF does not explain why its suggested alternative for “reference data” is preferred to the Commission's proposal. Based on the analysis of the proposed text, the Commission believes the GLEIF definition's references to “data as defined by the currently valid common data file formats” and “related to corresponding [LEI ROC] policies” are unnecessarily detailed, and may not account for potential future changes to the Global Legal Entity Identifier System. The Commission believes
As the four definitions proposed in § 45.6(a) are only used in § 45.6, the Commission declines to adopt GLEIF's suggestion to move the proposed definitions to § 45.1(a).
The Commission proposed several changes to § 45.6(b) regulations for the international standards for LEIs. The amendments would reflect changes that have taken place since the Commission adopted the existing LEI regulations in § 45.6 in 2012. Existing § 45.6(b) states that the LEI used in all recordkeeping and all swap data reporting required by part 45, following designation of the legal entity identifier system as provided in § 45.6(c)(2), shall be issued under, and shall conform to, International Organization for Standardization (“ISO”) Standard 17442, Legal Entity Identifier (LEI), issued by the ISO.
The Commission proposed removing the phrase “following designation of the [LEI] system as provided in [§ 45.6(c)(2)].” The Commission explained in the Proposal that governance of the Global Legal Entity Identifier System was designed by the FSB with the contribution of private sector participants and was fully in place.
The Commission did not receive any comments on the proposed changes to § 45.6(b) and for reasons articulated in the Proposal and reiterated above, is adopting the changes to § 45.6(b) as proposed.
The Commission proposed removing this redundantly-numbered § 45.6(b) for the technical principles for the LEI.
Existing § 45.6(b) enumerates the six technical principles for the legal entity identifier to be used in all recordkeeping and all swap data reporting: (i) Uniqueness; (ii) neutrality; (iii) reliability; (iv) open source; (v) extensibility; and (vi) persistence.
The Commission proposed removing the technical principles from § 45.6(b). The Commission explained in the Proposal that it adopted § 45.6(b) before global technical principles for the LEI were developed. The Commission further explained that it has participated in the Global Legal Entity Identifier System and the LEI ROC since their establishment in 2013, through which global technical principles have been developed and a functioning LEI system introduced. The Commission believed removing the technical principles from § 45.6(b) for the LEI to be used in all recordkeeping and all swap data reporting was warranted because the global technical principles that have been developed and adopted by the Global Legal Entity Identifier System already conform to the technical principles in § 45.6(b).
The Commission did not receive any comments on the changes to § 45.6(b) and for reasons articulated in the Proposal and reiterated above, is adopting the changes to § 45.6(b) as proposed.
The Commission proposed removing the existing § 45.6(c) regulations for the governance principles for the LEI.
Existing § 45.6(c) enumerates the five governance principles for the LEI to be used in all recordkeeping and all swap data reporting: International governance; reference data access; non-profit operation and funding; unbundling and non-restricted use; and commercial advantage prohibition.
The Commission proposed removing the governance principles from § 45.6(c). The Commission explained in the Proposal that it adopted § 45.6(c) before global governance principles for the LEI were developed. The Commission further explained that it has participated in the Global Legal Entity Identifier System and the LEI ROC since their establishment in 2013, through which global governance principles have been developed and a functioning LEI system introduced. The Commission believed deleting existing § 45.6(c) to remove the governance principles for the legal entity identifier to be used in all recordkeeping and all swap data reporting was warranted because the global governance principles that have been developed and adopted by the Global Legal Entity Identifier System already conform to the governance principles in § 45.6(c).
The Commission did not receive any comments on the proposed changes to § 45.6(c) and for reasons articulated in the Proposal and reiterated above, is adopting the changes to § 45.6(c) as proposed.
The Commission proposed removing the § 45.6(e) regulations for the designation of the legal entity identifier system. Existing § 45.6(e) enumerates the procedures for determining whether a legal entity identifier system meets the Commission's requirements and the procedures for designating the legal entity identifier system as the provider of LEIs to be used in all recordkeeping and all swap data reporting.
The Commission explained in the Proposal that it adopted § 45.6(e) before a global legal entity identifier system was developed. The Commission further explained that it has participated in the Global Legal Entity Identifier System and the LEI ROC since their establishment in 2013, through which a functioning LEI system has been introduced, overseeing the issuance of LEIs by local operating units. The Commission believed deleting existing
The Commission did not receive any comments on the proposed changes to § 45.6(e) and for reasons articulated in the Proposal and reiterated above, is adopting the changes to § 45.6(e) as proposed.
The Commission proposed changes to the § 45.6(e) regulations for LEI reference data reporting.
Second, the Commission proposed changing the requirements for reporting LEI reference data in existing § 45.6(e) to be moved to § 45.6(c). Existing § 45.6(e)(1) requires level one reference data for each counterparty to be reported via self-registration, third-party registration, or both, and details the procedures for doing so, including the requirement to update level one reference data in the event of a change or discovery of the need for a correction. Existing § 45.6(e)(2) contains the requirement, once the Commission has determined the location of the level two reference database, for level two reference data for each counterparty to be reported via self-registration, third-party registration, or both, and the procedures for doing so, including the requirement to update level two reference data in the event of a change or discovery of the need for a correction.
The Commission proposed removing the distinction between level one and level two reference data now found in § 45.6(e). Instead, proposed new § 45.6(c) would require that all reference data for each SEF, DCM, DCO, SDR, entity reporting under § 45.9, and counterparty to any swap be reported via self-registration, third-party registration, or both, to a local operating unit in accordance with the standards set by the Global Legal Entity Identifier System. Proposed new § 45.6(c) would retain the requirement in existing § 45.6(e) to update the reference data in the event of a change or discovery of the need for a correction.
The Commission explained in the Proposal that it adopted § 45.6(e) before a global legal entity identifier system was developed. The Commission further explained that it has participated in the Global Legal Entity Identifier System and the LEI ROC since their establishment in 2013, through which a functioning LEI system has been introduced that sets, and updates as needed, the standards governing the identification and relationship reference data required to be provided to obtain an LEI. The Commission believed amending existing § 45.6(e) to remove the distinction between level one and level two reference data, and proposed a new § 45.6(c) to require that all reference data is reported to a local operating unit in accordance with the standards set by the Global Legal Entity Identifier System was warranted because the establishment of Global Legal Entity Identifier System removes the role of individual authorities in determining the standards governing LEI reference data.
The Commission explained in the Proposal that while existing § 45.6(e) requires that reference data for only the counterparties to a swap be reported, the extension of the requirement to be identified in all recordkeeping and swap data reporting by a single LEI to all SEFs, DCMs, DCOs, entities reporting pursuant to § 45.9, and SDRs described in section II.F.1 above also necessarily requires that all SEFs, DCMs, DCOs, entities reporting pursuant to § 45.9, and SDRs report their LEI reference data.
The Commission did not receive any comments on the proposed changes to § 45.6(e) and for reasons articulated in the Proposal and reiterated above in this section, is adopting the changes to § 45.6(e) as proposed.
The Commission proposed changing the § 45.6(f) regulations for the use of LEIs by registered entities and swap counterparties. Existing § 45.6(f)(1) requires that when a legal entity identifier system has been designated by the Commission pursuant to § 45.6(e), each registered entity and swap counterparty shall use the LEI provided by that system in all recordkeeping and swap data reporting pursuant to part 45. Existing § 45.6(f)(2) requires that before a legal entity identifier system has been designated by the Commission, each registered entity and swap counterparty shall use a substitute counterparty identifier created and assigned by an SDR in all recordkeeping and swap data reporting pursuant to part 45.
Existing § 45.6(f)(3) requires that for swaps reported pursuant to part 45 prior to Commission designation of a legal entity identifier system, after such designation each SDR shall map the LEIs for the counterparties to the substitute counterparty identifiers in the record for each such swap. Existing § 45.6(f)(4) requires that prior to October 15, 2012, if an LEI has been designated by the Commission as provided in § 45.6, but a reporting counterparty's automated systems are not yet prepared to include LEIs in recordkeeping and swap data reporting pursuant to part 45, the counterparty shall be excused from complying with § 45.6(f)(1), and shall instead comply with § 45.6(f)(2), until its automated systems are prepared with respect to LEIs, at which time it must commence compliance with § 45.6(f)(1).
The Commission proposed retitling the section “Use of the legal entity identifier,” because, as discussed below, the LEI will no longer be used only by registered entities and swap counterparties. The Commission proposed moving the requirements for the use of LEIs from existing § 45.6(f) to correctly renumbered § 45.6(d),
The Commission proposed removing the sections of existing § 45.6(f) that are no longer operative, either because the Commission has designated a legal entity identifier system, or the provisions have expired. For these reasons, the Commission proposed removing existing § 45.6(f)(2) and (4). As a result, the substantive requirements of existing § 45.6(f)(2) and (4) were not proposed to be moved to § 45.6(d).
The Commission explained in the Proposal that while the provisions of existing § 45.6(f)(3) relating to substitute counterparty identifiers are no longer applicable for new swaps, the substantive requirements in § 45.6(f)(3), which are still applicable for swaps
The Commission proposed the following substantive changes to the regulations requiring the use of LEIs. First, the Commission proposed revisions to the existing § 45.6(f)(1) regulations for the use of LEIs. The revised regulations would be moved to final § 45.6(d)(1), as discussed below.
The Commission proposed deleting the introductory clause “[w]hen a legal entity identifier system has been designated by the Commission pursuant to paragraph (e) of this section” in existing § 45.6(f)(1) because it was no longer relevant due to the establishment of the Global Legal Entity Identifier System and the LEI ROC in 2013. In addition, while existing § 45.6(f)(1) requires “each registered entity and swap counterparty” to use LEIs in all recordkeeping and swap data reporting pursuant to part 45, the Commission proposed to replace “each registered entity and swap counterparty” with “[e]ach [SEF], [DCM], [DCO], [SDR], entity reporting pursuant to § 45.9, and swap counterparty” to, as described in section II.F.1 above, ensure consistency with the CDE Technical Guidance, allow for standardization in the identification in recordkeeping and swap data reporting, and encourage global swap data aggregation. The Commission also proposed to add “to identify itself and swap counterparties” immediately after “use [LEIs]” in this section to clarify the intended use of LEIs. Finally, the Commission proposed to add a new sentence in this section to clarify that if a swap counterparty is not eligible to receive an LEI, such counterparty should be identified in all recordkeeping and all swap data reporting pursuant to part 45 with an alternate identifier pursuant to § 45.13(a). Because some counterparties, including many individuals, are currently ineligible to receive an LEI based on the standards of the Global Legal Entity Identifier System, the Commission believed this sentence would provide clarity as to how LEI-ineligible counterparties should be identified.
Second, the Commission proposed § 45.6(d)(2) to require each SD, MSP, SEF, DCM, DCO, and SDR to maintain and renew its LEI in accordance with the standards set by the Global Legal Entity Identifier System (as opposed to the requirement for other entities to only maintain its LEI). Existing § 45.6(e) requires that reference data be updated in the event of a change or discovery of the need for a correction, which will continue to be required under final § 45.6(c).
The Commission explained in the Proposal that pursuant to the Global Legal Entity Identifier System, established in 2013, a person or entity is issued an LEI after: (1) Providing its identification and relationship reference data to a local operating unit and (2) paying a fee, currently as low as approximately $65, to the local operating unit to validate the provided reference data. After initial issuance, an LEI holder is asked to certify the continuing accuracy of, or provide updates to, its reference data annually, and pay a fee, currently as low as approximately $50, to the local operating unit. LEIs that are not renewed annually are marked as lapsed. Existing § 45.6 does not require annual LEI renewal because part 45 was drafted and implemented before the establishment of the Global Legal Entity Identifier System. The Commission further explained that since the implementation of existing § 45.6, the Commission has received consistent feedback from certain market participants and industry groups that the Commission should require at least some LEI holders to annually renew their LEIs.
The Commission explained in the Proposal that it was aware that some LEI holders have not updated reference data as required by existing § 45.6(e), and imposing an annual renewal requirement may increase the accuracy of their reference data. The Commission also recognized that other LEI holders comply with the continuing requirement to update reference data, and imposing an annual renewal requirement may impose costs on those LEI holders without necessarily increasing the accuracy of their reference data. The Commission further explained that it has participated in the Global Legal Entity Identifier System since its inception, and values the functionality of the LEI reference data collected, including the introduction of level two reference data.
The Commission explained in the Proposal that it considers the activities of SDs, MSPs, SEFs, DCMs, DCOs, and SDRs to have the most systemic impact affecting the Commission's ability to fulfill its regulatory mandates. Accordingly, in light of the introduction of LEI level two reference data, the Commission believed requiring each SD, MSP, SEF, DCM, DCO, and SDR to maintain and renew its LEI in accordance with the standards set by the Global Legal Entity Identifier System in § 45.6(d)(2) struck the appropriate balance between the Commission's interest in accurate LEI reference data and cost to LEI holders.
Third, the Commission proposed a new § 45.6(d)(3) that would obligate each DCO and each financial entity reporting counterparty executing a swap with a counterparty that does not have an LEI but is eligible for one to cause, before reporting any required swap creation data for such swap, an LEI to be assigned to the counterparty, including if necessary, through third-party registration.
The Commission explained in the Proposal that it was aware that some counterparties have not obtained an LEI. While proposed amendments to § 45.6 clarify the requirement that a counterparty required to be identified with an LEI in swap data reporting also has an associated affirmative requirement to obtain an LEI, the Commission explained that it anticipates a small percentage of counterparties nonetheless will not have obtained an LEI before executing a swap. The Commission further explained that swap data that does not identify eligible counterparties with an LEI hinders the Commission's fulfillment of its regulatory mandates, including monitoring systemic risk, market monitoring, and market abuse prevention. The Commission believed new § 45.6(d)(3) to require each DCO and each financial entity reporting counterparty executing a swap with a counterparty that does not have an LEI to cause an LEI to be assigned to the non-reporting counterparty would further the objective of identifying each counterparty to a swap with an LEI.
Proposed § 45.6(d)(3) did not prescribe the initial manner in which a DCO or financial entity reporting counterparty causes an LEI to be assigned to the non-reporting counterparty, though if initial efforts are unsuccessful, proposed § 45.6(d)(3) required the DCO or financial entity reporting counterparty to obtain an LEI for the non-reporting counterparty. The Commission explained in the Proposal that having a DCO or financial entity reporting counterparty serving as a backstop under new § 45.6(d)(3) to ensure the identification of the non-reporting counterparty with an LEI was appropriate because: (i) Each DCO and financial entity reporting counterparty already had obtained, via its “know your customer” and anti-money laundering compliance processes, all identification and relationship reference data of the non-reporting counterparty
The Commission received two comments on the proposed provision relating to use of the LEI in proposed § 45.6(f)(1) and moved to § 45.6(d)(1). CME suggests that the Commission revise the proposal to require a DCO to record the LEIs of all of its swap counterparties in its books and records, instead of “in all recordkeeping” and swap data reporting, to avoid DCOs identifying a swap counterparty by its LEI every time the name of that counterparty is in its records.
GLEIF suggests that, in the interest of clarity, the Commission reformulate § 45.6(d)(1) to state that alternative identifiers pursuant to § 45.13(a) can only be used for natural persons who are not eligible for an LEI, though no explanation was provided as to why it believes the alternative formulation is clearer than the Commission's proposal.
The Commission received six comments, all supporting the LEI maintenance and renewal requirements for SDs, MSPs, SEFs, DCMs, DCOs, and SDRs under proposed § 45.6(d)(2),
Chatham opposes expanding the requirement to renew LEIs annually beyond SDs, MSPs, SEFs, DCMs, DCOs, and SDRs.
The Commission received four comments supporting obtaining an LEI for a counterparty that does not have one under proposed § 45.6(d)(3).
The Commission received four comments opposing obtaining an LEI for a counterparty that does not have one, under proposed § 45.6(d)(3). GFXD believes the proposal disincentivizes smaller counterparties from obtaining their own LEI and places an administrative and financial burden on reporting counterparties.
JBA believes obtaining an LEI on behalf of the counterparty is impractical and costly.
ISDA-SIFMA have concerns about a reporting counterparty's ability to comply with such a requirement because a DCO or financial entity reporting counterparty cannot obtain an LEI on behalf of a non-reporting counterparty without the non-reporting counterparty's permission, and ISDA-SIFMA anticipate that some counterparties would be resistant to obtaining an LEI.
ICE DCOs believe it is inappropriate for DCOs to backstop the compliance functions of other participants, especially since this may include clients of clearing members with which a DCO has no relationship, requests the
For reasons articulated in the Proposal and informed by comments and analysis as further discussed below, the Commission is adopting the changes to § 45.6(f), re-designated as § 45.6(d), largely as proposed, with certain modifications in response to commenters and other considerations.
The Commission did not receive any comments on the proposals to retitle § 45.6(f) “Use of the legal entity identifier” or to remove § 45.6(f)(2) and (4) and for reasons articulated in the Proposal and reiterated above, is adopting the changes as proposed. The Commission also did not receive any comments on the proposals to move the requirements for the use of LEIs from § 45.6(f) to renumbered § 45.6(d) or to move the substantive requirements in § 45.6(f)(3) relating to substitute counterparty identifiers to § 45.6(d)(4) and for reasons articulated in the Proposal and reiterated above, is adopting the changes as proposed.
The Commission is adopting the changes to the § 45.6(f)(1) regulations for the use of LEIs as proposed and the move to § 45.6(d)(1) as proposed. The Commission believes a change to the “all recordkeeping and all swap data reporting” language in § 45.6(f)(1) would only lead to confusion due to the term being used extensively elsewhere in § 45.6 and other sections of part 45, and therefore declines to adopt CME's suggestion. The Commission notes the requirement to identify entities using an LEI in “all recordkeeping and swap data reporting” has existed in § 45.6(f)(1) that all entities have complied with since part 45 was adopted in 2012, and the Commission has seen no evidence that any entity has encountered difficulty complying with this provision. The Commission notes nothing prevents an entity from supplementing the LEI with a human-readable alternative in its records.
The Commission also declines to adopt GLEIF's suggestion to rephrase the second sentence of § 45.6(f)(1) to state that alternative identifiers may only be used for natural persons who are not eligible for an LEI, as the Commission lacks sufficient knowledge of all entity structures and legal systems worldwide to know for certain that every non-natural person is eligible for an LEI.
The Commission did not receive any comments opposing the proposed requirements in § 45.6(d)(2) for each SD, MSP, SEF, DCM, DCO, and SDR to maintain and renew its LEI in accordance with the standards set by the Global Legal Entity Identifier System and for reasons articulated in the Proposal and reiterated above, is adopting § 45.6(d)(2) as proposed.
The Commission acknowledges LCH's request to clarify in § 45.6 that SDRs should not reject LEIs that have not been renewed, but declines to adopt this suggestion in the text of § 45.6, as the Commission has delegated to the DMO Director in § 45.15 to issue guidance on the form and manner of the technical specification governing reporting to SDRs. Nevertheless, the Commission notes DMO has not asked SDRs to validate the renewal status of LEIs in the technical specification being published concurrent with adoption of the revisions to part 45.
The Commission acknowledges GFXD's comment regarding the duty to renew should apply to a reporting counterparty's own LEIs and not that of the non-reporting counterparty, but believes GFXD conflates two separate requirements: The LEI renewal requirement for SDs, MSPs, SEFs, DCMs, DCOs, and SDRs in § 45.6(d)(2) and the requirements described in § 45.6(d)(3) below regarding efforts to obtain LEIs for counterparties without LEIs. The Commission believes § 45.6(d)(2) is clear that the renewal requirement applies only to an entity's own LEI. By definition, an LEI has to be issued before it can be renewed, so § 45.6(d)(3) would not apply to LEI renewals.
The Commission also acknowledges the alternative suggestions of expanding the LEI renewal requirement to either all reporting counterparties or all counterparties, but declines to adopt an expansion of the LEI renewal requirement, as the Commission continues to believe requiring each SD, MSP, SEF, DCM, DCO, and SDR to maintain and renew its LEI strikes the appropriate balance between the Commission's interest in accurate LEI reference data and the current cost to LEI holders. The Commission acknowledges and appreciates the reduction in the cost to LEI holders to obtain and renew LEIs since the start of the Global Legal Entity Identifier System, but does not believe further expansion of the renewal requirement and the resulting increased costs on LEI holders
In response to Chatham's request for clarification, the Commission notes the requirements of § 45.6 would not apply retroactively to swap data reports previously reported before the adoption of the amendments to part 45, but do apply to creation data and continuation data submitted after the adoption of the amendments to part 45.
For reasons articulated in the Proposal and informed by comments and analysis as further discussed below, the Commission is adopting § 45.6(d)(3) largely as proposed, with certain modifications in response to commenters and other considerations.
Section 45.6(d)(3) of the final rule removes DCOs from the obligation, as DCOs may not have information regarding customers clearing trades through futures commission merchants. Section 45.6(d)(3) of the final rule also reflects the addition of “use best efforts to” before “cause a legal entity identifier to be assigned to the counterparty” to clarify that the obligation relates to actions within a financial entity reporting counterparty's control, instead of the obligation to ensure an outcome that may be outside of a financial entity reporting counterparty's control. Section 45.6(d)(3) of the final rule also removes the phrase “including if necessary, through third-party registration.” Finally, as the Commission still has a need to know the identity of the non-
As discussed in the Proposal, swap data that does not identify eligible counterparties with an LEI hinders the Commission's fulfillment of its regulatory mandates. However, the Commissioner declines to adopt a “no LEI, no trade” requirement that GFXD suggests due to concerns of the potential impact of such a requirement may have on market liquidity, as a “no LEI, no trade” rule would result in market participants without an LEI not being permitted to transact in the market. The Commission also notes part 45 relates to the reporting of swaps that already have been executed, whereas “no LEI, no trade” relates to who is eligible to engage in swap transactions, a completely different topic than the reporting of executed swaps and outside of the scope of the part 45 swap data reporting rule. With regards to GFXD's operational concerns, the Commission does not believe operational issues such as multiple LEI being issued to a counterparty are likely to arise, as checks in the Global Legal Entity Identifier System prohibit multiple LEIs being issued to an entity. The Commission also does not believe GFXD's concerns that the provision will result in a material shifting of costs for obtaining an LEI onto reporting counterparties are particularly realistic due to: (i) Most counterparties having already obtained an LEI due to significant LEI adoption by other authorities whose jurisdictions the counterparties may be subject to, (ii) the relatively sophisticated nature of counterparties in the swaps market, (iii) the financial due diligence that reporting counterparties such as GFXD's members perform on their counterparties, and (iv) the unlikelihood that those relatively sophisticated counterparties with adequate financial resources would willingly and knowingly disregard their own separate obligation to obtain their own LEIs pursuant to § 45.6 just so they may realize a one-time savings of $65.
The Commission also recognizes the concerns noted by commenters that obtaining an LEI for a counterparty via third-party registration requires the consent of the counterparty, consent that may potentially not be obtained despite a financial entity reporting counterparty's best efforts. The Commission believes § 45.6(d)(3) of the final rule addresses those concerns, as financial entities will only be required to “use best efforts to cause [an LEI] to be assigned to the counterparty,” so financial entities would not be required to obtain an LEI for a non-consenting counterparty. It was never the Commission's intent for anyone other than the entity to which an LEI is issued to be responsible for maintaining the reference data for that LEI, and the Commission has, in response to ISDA-SIFMA's suggestion, added a clarification in the introductory text of § 45.6 that each entity is responsible for maintaining its LEI, in addition to obtaining and being identified with an LEI.
The Commission is changing the introductory text to the § 45.8 reporting counterparty determination regulations. The existing introductory text states the determination of which counterparty is the reporting counterparty for all swaps, except clearing swaps, shall be made as provided in § 45.8(a) through (h), and that the determination of which counterparty is the reporting counterparty for all clearing swaps shall be made as provided in § 45.8(i).
The Commission is changing the introductory text to state that the determination of which counterparty is the reporting counterparty for each swap shall be made as provided in § 45.8. The Commission believes this language is clearer, as much of the introductory text is superfluous given that the scope of what § 45.8 covers is clear from the operative provisions of § 45.8. The Commission is making non-substantive amendments to the rest of existing § 45.8.
The Commission received two comments beyond the non-substantive changes the Commission proposed. ICE SDR recommends the Commission allow swap counterparties to determine which entity is best suited to report swap data where both counterparties are non-SDs/MSPs and only one counterparty is a financial entity and where both counterparties are non-SDs/MSPs and only one counterparty is a U.S. person.
ISDA-SIFMA propose deleting language that seems to address cross-border matters that do not fully align with Commission guidance or no-action letters and request the Commission confirm that, so long as both counterparties incorporate a widely accepted industry practice into their internal policies and procedures, they will have met the requirements of § 45.8.
For the reasons discussed above, the Commission is adopting the changes to § 45.8 as proposed.
The Commission is changing the § 45.10 regulations for reporting swap data to a single SDR. The Commission is amending and removing existing regulations, and adding new regulations to § 45.10. In particular, new § 45.10(d) will permit reporting counterparties to change the SDR to which they report swap data and swap transaction and pricing data.
The Commission is amending the introductory text to § 45.10. The existing
First, the Commission is clarifying all “swap transaction and pricing data and swap data” (both terms that the Commission proposed to newly define and add to § 45.1(a))
The Commission did not receive any comments on the changes to the introductory text in § 45.10. The Commission is adopting the changes as proposed.
The Commission is amending the § 45.10(a) regulations for reporting swaps executed on or pursuant to the rules of a SEF or DCM to a single SDR. Existing § 45.10(a) requires that to ensure all swap data, including all swap data required to be reported pursuant to parts 43 and 45, for a swap executed on or pursuant to the rules of a SEF or DCM is reported to a single SDR: (i) The SEF or DCM that reports required swap creation data as required by § 45.3 shall report all such data to a single SDR, and ASATP after execution shall transmit to both counterparties to the swap, and to any DCO, the identity of the SDR and the USI for the swap; and (ii) thereafter, all required swap creation data and all required swap continuation data reported for the swap reported by any registered entity or counterparty must be reported to that same SDR (or to its successor in the event that it ceases to operate, as provided in existing part 49).
First, the Commission is removing the phrase “(or to its successor in the event that it ceases to operate, as provided in part 49)” from § 45.10(a)(2).
Third, the Commission is removing § 45.10(a)(1)(ii) and combining the text of § 45.10(a) and (a)(i) into a single provision § 45.10(a) to provide clarity as the requirement in § 45.10(a)(1)(ii) is already located in § 45.5(a)(2). Fourth, the Commission is adding the qualifier to the end of § 45.10(a)(2) that all swap data and swap transaction and pricing data for a swap must be reported to a single SDR “unless the reporting counterparty changes the [SDR] to which such data is reported” pursuant to the new regulations in proposed § 45.10(d).
The Commission did not receive any comments on the changes to § 45.10(a). For the reasons discussed above, the Commission is adopting the changes as proposed.
The Commission is amending the § 45.10(b) regulations for reporting swaps executed off-facility with an SD/MSP reporting counterparty to a single SDR. Existing § 45.10(b)(1) requires that to ensure that all swap data, including all swap data required to be reported pursuant to parts 43 and 45, for off-facility swaps with an SD or MSP reporting counterparty is reported to a single SDR: (i) If the reporting counterparty reports PET data to an SDR as required by § 45.3, the reporting counterparty shall report PET data to a single SDR and ASATP after execution, but no later than as required pursuant to § 45.3, shall transmit to the other counterparty to the swap both the identity of the SDR to which PET data is reported by the reporting counterparty, and the USI for the swap created pursuant to § 45.5; and (ii) if the swap will be cleared, the reporting counterparty shall transmit to the DCO at the time the swap is submitted for clearing both the identity of the SDR to which PET data is reported by the reporting counterparty, and the USI for the swap created under § 45.5.
Thereafter, § 45.10(b)(2) requires that all required swap creation data and all required swap continuation data reported for the swap, by any registered entity or counterparty, shall be reported to the SDR to which swap data has been reported pursuant to § 45.10(b)(1) or (2) (or to its successor in the event that it ceases to operate, as provided in part 49).
First, the Commission is combining the requirements for SD/MSP reporting counterparties in § 45.10(b) for off-facility swaps with the requirements for non-SD/MSP reporting counterparties in § 45.10(c) for off-facility swaps. The Commission believes combining the requirements for SD/MSP reporting counterparties and non-SD/MSP reporting counterparties in § 49.10(b) and (c) will simplify the regulations in § 45.10. The Commission is re-titling § 45.10(b) “Off-facility swaps that are not clearing swaps.”
Second, the Commission is removing the phrase “(or to its successor in the event that it ceases to operate, as provided in part 49)” from § 45.10(b)(2).
Fourth, the Commission is removing existing § 45.10(b)(1) and combining the regulations in existing § 45.10(b)(1)(i) through (iii) into § 45.10(b)(1). The Commission believes existing § 45.10(b)(1) is unnecessary, as all reporting counterparties must report required swap creation data to an SDR pursuant to § 45.3 for off-facility swaps. Fifth, the Commission is removing the requirement in existing § 45.10(b)(1)(ii) for the reporting counterparty to transmit the USI to the non-reporting counterparty to the swap. The requirement in § 45.10(b)(1) is unnecessary, as it is already located in § 45.5(b)(2) and (c)(2), depending on the type of counterparty.
Finally, the Commission is adding the qualifier to the end of § 45.10(b)(2) that all swap data and swap transaction and pricing data for a swap must be reported to a single SDR “unless the reporting counterparty changes the [SDR] to
The Commission did not receive any comments on the proposed changes to § 45.10(b). For the reasons discussed above, the Commission is adopting the changes as proposed.
The Commission is moving the requirements in § 45.10(d) to § 45.10(c). The Commission discusses the requirements of existing § 45.10(d) in the following section, II.H.5. The Commission discusses the requirements of existing § 45.10(c) that it proposed moving to § 45.10(b) in section II.H.3 above.
Existing § 45.10(d)(1) requires that to ensure that all swap data for a given clearing swap, and for clearing swaps that replace a particular original swap or that are created upon execution of the same transaction and that do not replace an original swap, is reported to a single SDR the DCO that is a counterparty to the clearing swap report all required swap creation data for that clearing swap to a single SDR, and ASATP after acceptance of an original swap by a DCO for clearing or execution of a clearing swap that does not replace an original swap, the DCO transmit to the counterparty to each clearing swap the LEI of the SDR to which the DCO reported the required swap creation data for that clearing swap.
Thereafter, existing § 45.10(d)(2) requires the DCO report all required swap creation data and all required swap continuation data reported for that clearing swap to the SDR to which swap data has been reported pursuant to § 45.10(d)(1) (or to its successor in the event that it ceases to operate, as provided in part 49). Existing § 45.10(d)(3) requires that for clearing swaps that replace a particular original swap, and for equal and opposite clearing swaps that are created upon execution of the same transaction and that do not replace an original swap, the DCO report all required swap creation data and all required swap continuation data for such clearing swaps to a single SDR.
Newly re-designated § 45.10(c) would include several changes to the requirements in existing § 45.10(d). First, the Commission is removing the phrase “(or to its successor in the event that it ceases to operate, as provided in part 49)” in existing § 45.10(d)(2) from re-designated § 49.10(c)(2).
Second, the Commission is updating all references to swap data now found throughout existing § 45.10(d) with references to “swap transaction and pricing data and swap data.” Third, the Commission is adding the following qualifier: “unless the reporting counterparty changes the [SDR] to which such data is reported” pursuant to the new regulations in § 45.10(d). Finally, the Commission is making numerous language edits to improve readability and to update certain cross-references.
The Commission did not receive any comments on the proposed changes to § 45.10(d), as moved to § 45.10(c). For the reasons discussed above, the Commission is adopting the changes as proposed.
The Commission is adding new § 45.10(d) to permit reporting counterparties to change the SDR to which they report swap data and swap transaction and pricing data. Existing § 45.10 provides all swaps must be reported to a “single [SDR].”
The Commission is titling new § 45.10(d) “Change of [SDR] for swap transaction and pricing data and swap data reporting.” The introductory text to § 45.10(d) states a reporting counterparty may change the SDR to which swap transaction and pricing data and swap data is reported as outlined in § 45.10(d).
New § 45.10(d)(1) will require that at least five business days prior to changing the SDR to which the reporting counterparty reports swap transaction and pricing data and swap data for a swap, the reporting counterparty provide notice of such change to the other counterparty to the swap, the SDR to which swap transaction and pricing data and swap data is currently reported, and the SDR to which swap transaction and pricing data and swap data will be reported going forward. Such notification will include the UTI of the swap and the date on which the reporting counterparty will begin reporting such swap transaction and pricing data and swap data to a different SDR.
New § 45.10(d)(2) will require that after providing notification, the reporting counterparty: (i) Report the change of SDR to the SDR to which the reporting counterparty is currently reporting swap transaction and pricing data and swap data as a life cycle event for such swap pursuant to § 45.4; (ii) on the same day that the reporting counterparty reports required swap continuation data as required by § 45.10(d)(2)(i), the reporting counterparty also report the change of SDR to the SDR to which swap transaction and pricing data and swap data will be reported going forward, as a life cycle event for such swap pursuant to § 45.4, and the report identify the swap using the same UTI used to identify the swap at the previous SDR; (iii) thereafter, all swap transaction and pricing data, required swap creation data, and required swap continuation data for the swap be reported to the new SDR, unless the reporting counterparty for the swap makes another change to the SDR to which such data is reported pursuant to § 45.10(d).
When the Commission adopted § 45.10 in 2012, it believed regulators' ability to see necessary information concerning swaps could be impeded if data concerning a swap was spread over multiple SDRs.
However, the ability to change SDRs cannot frustrate the Commission's ability to use swap data due to duplicative swap reports housed at multiple SDRs. For this reason, the Commission is permitting reporting counterparties to change SDRs in § 49.10(d), subject to certain notification procedures described below to ensure swaps are properly transferred between SDRs.
The Commission received five comments supporting new § 45.10(d).
The Commission did not receive any comments opposing § 45.10(d), but did receive comments seeking clarification or commenting on some aspects of the new regulation. Markit supports § 45.10(d), but does not believe the notice period and other formal procedures are necessary, and notes a swap transaction that has been moved will be evident from the “Events” data elements in appendix 1.
ISDA-SIFMA suggest the § 45.10(d)(1) notification obligation could be satisfied via an email notification, reporting counterparty portal, or the reporting counterparty's public-facing website.
ISDA-SIFMA and DTCC have questions relating to transferring historical swap data. ISDA-SIFMA believe, where a reporting counterparty elects to transfer from an SDR due to the deregistration of the SDR, the deregistering SDR should be required to bear the reporting counterparty's costs of porting.
The Commission is making non-substantive changes to the § 45.11 regulations for reporting swaps in an asset class not accepted by any SDR. Existing § 45.11(a) requires that, should there be a swap asset class for which no SDR registered with the Commission currently accepts swap data, each registered entity or counterparty required by part 45 to report any required swap creation data or required swap continuation data with respect to a swap in that asset class report that same data to the Commission.
For instance, the Commission is removing the phrase “registered with the Commission” following the term SDR. The Commission believes this phrase is confusing, as the three SDRs are provisionally registered with the Commission pursuant to § 49.4(b) of the Commission's regulations. The Commission also believes this phrase is unnecessary, as provisionally registered SDRs and fully registered SDRs are subject to the same requirements in the CEA and the Commission's regulations. The Commission is also replacing “each registered entity or counterparty” with a reference to SEFs, DCMs, and DCOs, and the term “reporting counterparty.” The list of entities is more precise and does not modify the types of entities to which the requirements of § 49.11 would apply.
Existing § 45.11(c) and (d) contain a delegation of authority to the Chief Information Officer of the Commission concerning the requirements in § 45.11(a) and (b). The Commission is moving this delegation to a new section, § 45.15, for delegations of authority. The Commission discusses § 45.15 in section II.L below.
The Commission did not receive any comments on the proposed changes to existing § 45.11. For the reasons discussed above, the Commission is adopting the changes as proposed.
The Commission is removing the § 45.12 regulations for voluntary supplemental reporting from part 45. Existing § 45.12 permits the submission of voluntary supplemental swap data reports by swap counterparties.
When it adopted § 45.12 in 2012, the Commission believed voluntary supplemental reporting could have benefits for data accuracy and counterparty business processes, especially for counterparties that were not the reporting counterparty to a swap.
In practice, the Commission is concerned voluntary supplemental reports compromise data quality and provide no clear regulatory benefit. In analyzing reports that have been marked as “voluntary reports,” it is not immediately apparent to the Commission why reporting counterparties mark the reports as voluntary. In some cases, it appears these reports can be related to products outside the Commission's jurisdiction. The Commission believes it should not accept duplicative or non-jurisdictional reports at the expense of the Commission's technical and staffing resources with no clear regulatory benefit. The Commission adopted existing § 45.12 in 2012 without the benefit of having swap data available to consider the practical implications of existing § 45.12. However, after years of use by Commission staff, the Commission now believes existing § 45.12 has led to swap data reporting that inhibits the Commission's use of the swap data. The Commission believes eliminating § 45.12 will help improve data quality.
The Commission received three comments on the removal of § 45.12. NRECA-APPA and ISDA-SIFMA support removing § 45.12.
The Commission is changing the § 45.13(a) regulations for data maintained and furnished to the Commission by SDRs. Existing § 45.13(a) requires each SDR maintain all swap data reported to it in a format acceptable to the Commission, and transmit all swap data requested by the Commission to the Commission in an electronic file in a format acceptable to the Commission.
The Commission is removing existing § 45.13(a), and moving existing § 45.13(b) to § 45.13(a)(3). The May 2019 notice of proposed rulemaking relating to the Commission's SDR regulations in parts 23, 43, 45, and 49 (the “2019 Part 49 NPRM”)
Existing § 45.13(b) requires that in reporting swap data to an SDR as required by part 45, each reporting entity or counterparty shall use the facilities, methods, or data standards provided or required by the SDR to which the entity or counterparty reports the data. Existing § 45.13(b) further provides that an SDR may permit reporting entities and counterparties to use various facilities, methods, or data standards, provided that its requirements in this regard enable it to meet the requirements of § 45.13(a) with respect to maintenance and transmission of swap data.
In new § 43.13(a)(1), the Commission is requiring that in reporting required swap creation data and required swap continuation data to an SDR, each reporting counterparty, SEF, DCM, and DCO shall report the swap data elements in appendix 1 in the form and manner provided in the technical specifications published by the Commission pursuant to § 45.15. This requirement is implied in the current regulations through the requirements in the introductory text to § 45.3 and § 45.4, the definitions of “required swap creation data” and “required swap continuation data,” and § 45.13(b) and (c), but new § 45.13(a)(1) would make the existing requirement explicit.
In new § 45.13(a)(2), the Commission is requiring that in reporting required swap creation data and required swap continuation data to an SDR, each reporting counterparty, SEF, DCM, and DCO making such report satisfy the swap data validation procedures of the SDR receiving the swap data. The Commission is adopting companion requirements for SDRs to validate swap data in § 49.10.
Finally, the Commission is moving existing § 45.13(b) to § 45.13(a)(3) and changing the regulatory requirements. Existing § 45.13(b) requires that in reporting swap data to an SDR as required by part 45, each reporting entity or counterparty use the facilities, methods, or data standards provided or required by the SDR to which the entity or counterparty reports the data. An SDR may permit reporting entities and counterparties to use various facilities, methods, or data standards, provided its requirements in this regard enable it to meet the requirements of § 45.13(a) with respect to maintenance and transmission of swap data.
First, the Commission is replacing “each reporting entity or counterparty” with “each reporting counterparty [SEF, DCM, and DCO]” to be more precise. Second, the Commission is removing the second sentence in existing § 45.13(b) because it pertains to the requirements of § 45.13(a), which the Commission is moving to part 49.
The Commission did not receive any comments on the changes to § 45.13(a) and (b). For the reasons discussed above, the Commission is adopting the changes as proposed.
The Commission is specifying the requirements for data validation acceptance messages for SDRs, SEFs, DCMs, DCOs, and reporting counterparties. New § 45.13(b)(1) will require that for each required swap creation data or required swap continuation data report submitted to an SDR, an SDR notify the reporting counterparty, SEF, DCM, DCO, or third-party service provider submitting the report whether the report satisfied the swap data validation procedures of the SDR. The SDR will have to provide such notification ASATP after accepting the required swap creation data or required swap continuation data report. An SDR satisfies these requirements by transmitting data validation acceptance messages as required by proposed § 49.10.
New § 45.13(b)(2) will require that if a required swap creation data or required swap continuation data report to an SDR does not satisfy the data validation procedures of the SDR, the reporting counterparty, SEF, DCM, or DCO required to submit the report has not yet satisfied its obligation to report required swap creation or continuation data in the manner provided by paragraph (a) within the timelines set forth in §§ 45.3 and 45.4. The reporting counterparty, SEF, DCM, or DCO has not satisfied its obligation until it submits the required swap data report in the manner provided by paragraph (a), which includes the requirement to satisfy the data validation procedures of the SDR, within the applicable time deadline outlined in §§ 45.3 and 45.4.
The Commission did not receive any comments on the new validations requirements in § 45.13(b). As the new regulations for data validations in § 45.13(b) are analogous to new regulations for SDRs to validate data in § 49.10, the Commission discusses its reasoning behind requiring validations in one section in section IV.C.3, below.
Existing § 45.13(c) and (d) contain a delegation of authority to the Chief Information Officer of the Commission concerning the requirements in existing § 45.13(a) and (b). The Commission is deleting § 45.13(c) and (d) and moving
The Commission is adding a new regulation to part 45 for delegations of authority. New § 45.15 is titled “Delegation of authority” and contains the delegation of authority in existing § 45.11(c) and (d) and § 45.13(c) and (d) with a new delegation to the DMO Director regarding reporting under § 45.13.
Existing § 45.11(c) delegates to the Chief Information Officer of the Commission, or another such employee he or she designates, with respect to swaps in an asset class not accepted by any SDR, the authority to determine the manner, format, coding structure, and electronic data transmission standards and procedures acceptable to the Commission; whether the Commission may permit or require use by reporting entities or counterparties in reporting pursuant to § 45.11 of one or more particular data standards (such as FIX, FpML, ISO 20022, or some other standard), in order to accommodate the needs of different communities of users; and the dates and times at which required swap creation data or required swap continuation data must be reported to the Commission.
Existing § 45.11(d) requires the Chief Information Officer to publish from time to time in the
Separately, existing § 45.13(c) delegates to the Chief Information Officer, until the Commission orders otherwise, the authority to establish the format by which SDRs maintain swap data reported to them, and the format by which SDRs transmit the data to the Commission. The authority includes the authority to determine the manner, format, coding structure, and electronic data transmission standards and procedures acceptable to the Commission for § 45.13(a); and the authority to determine whether the Commission may permit or require use by reporting entities or counterparties, or by SDRs, of one or more particular data standards (such as FIX, FpML, ISO 20022, or some other standard), to accommodate the needs of different communities of users, or to enable SDRs to comply with § 45.13(a).
Existing § 45.13(d) requires the Chief Information Officer to publish from time to time in the
The Commission is moving the delegations in existing §§ 45.11(c) and (d) and 45.13(c) and (d) to new § 45.15(a) and (b). The Commission is also updating the delegations to reflect the changes to the cross-references resulting from the Commission's other proposed amendments to part 45, and changing the delegation in § 45.13 from the Chief Information Officer to the Director of the Division of Market Oversight due to different responsibilities over swap data within the Commission.
The Commission received one comment on new § 45.15. NRECA-APPA support the delegation to DMO.
The Proposal solicited comment on whether the Commission should mandate a specific data standard for reporting swap data to SDRs, and whether that standard should be ISO 20022. Existing § 45.13(c) delegates to the Commission's Chief Information Officer the authority to determine whether the Commission may permit or require use by reporting entities or counterparties, or by SDRs, of one or more particular data standards, including ISO 20022, in order to accommodate the needs of different communities of users. The Commission is retaining this delegation but moving the authority to § 45.15(b)(2) and transferring it to the DMO Director.
While the Commission would mandate any standards via the delegated authority in § 45.15(b)(2), the Commission took the opportunity presented by the Proposal to solicit public comment on the topic.
The Commission received five comments supporting mandating data standards for swap data reporting.
The Commission received two comments opposing mandating standards for SDR reporting. ISDA-SIFMA state that, even if the Commission mandates that certain messaging formats (
ICE SDR believes SDRs need flexibility to determine how to implement the requirement. For example, an SDR may choose to provide notifications through a graphical user interface so that less-sophisticated reporting entities are not forced to write an application programming interface.
The Commission received four comments supporting mandating the ISO 20022 standard specifically.
The Commission received three comments opposing mandating ISO 20022. CME questions the value of using ISO 20022 values for reporting certain data elements given the significant implementation cost.
The Commission agrees with some commenters that mandating one standard for reporting swap data to SDRs is necessary to ensure data quality. The Commission believes if the data is reported using different standards or protocols, the data is then subject to interpretation by the SDRs, as it is transformed or translated into the SDRs' systems and further transformed when it is reported to the Commission. These successive layers of transformation inject ambiguity and data quality issues into the life cycle of the data. Such layers of transformation are unnecessary if the reporting solution is straight through processing. Consistency of data from the source, in a common format, regardless of SDR, will lead to better quality data.
Several commenters note aligning with other jurisdictions will help reduce burden on market participants. Staff supports the idea that having a consistent standard for reporting, such as ISO 20022, across the globe would reduce reporting burden, streamline processing and allow industry to leverage scaled solutions bringing down the cost of changes and updates. As previously noted by a commenter, ESMA has proposed ISO 20022 in its EMIR REFIT consultation published in March 2020 and has implemented ISO 20022 for other reporting regimes, including SFTR.
As discussed in the Proposal, CPMI-IOSCO assigned ISO to execute the maintenance functions for the CDE Technical Guidance because ISO has significant experience maintaining financial data standards and almost half of the CDE data elements in the CDE Technical Guidance are already tied to an ISO standard. CPMI-IOSCO also decided that the CDE data elements should be included in the ISO 20022 data dictionary and the development of an ISO 20022-compliant message for CDE data elements is in progress. Further, a majority of the data elements in the technical specification are from the CDE Technical Guidance. For these reasons, and because comprehensive and unambiguous rules regarding reporting format will ensure the quality and usefulness of the data, the Commission will mandate ISO 20022 for reporting to SDRs according to § 45.15(b)(2) when the standard is developed.
CEA sections 4r(a)(2)(A) and 2(h)(5) provide for the reporting of pre-enactment and transition swaps.
Existing § 46.1 contains the definitions for terms used throughout the regulations in part 46. The Commission is separating § 46.1 into two paragraphs: § 46.1(a) for definitions and § 46.1(b), which would state that terms not defined in part 46 have the meanings assigned to the terms in § 1.3, to be consistent with the same change in § 45.1.
The Commission is adding a definition of “historical swaps” to § 46.1(a). “Historical swaps” means pre-enactment swaps or transition swaps. This term will provide clarity as it is already used in part 46.
The Commission is adding a definition of “substitute counterparty identifier” to § 46.1(a). “Substitute counterparty identifier” means a unique alphanumeric code assigned by an SDR to a swap counterparty prior to the Commission designation of an LEI identifier system on July 23, 2012. The term “substitute counterparty identifier” is already used throughout § 46.4.
The Commission is making non-substantive minor technical changes to “asset class” and “required swap continuation data.”
The Commission is amending the definition of “non-SD/MSP counterparty” in § 46.1(a) to conform to the amendments proposed to the corresponding term in § 45.1(a).
The Commission is amending the definition of “reporting counterparty” to update the reference to “swap data.” Currently, “reporting counterparty” means the counterparty required to report swap data pursuant to part 46, selected as provided in § 46.5. As discussed in section II.A.1 above, the Commission is defining “swap data” to mean swap data reported pursuant to part 45. As a result, the Commission is changing the reference to “data for a pre-enactment swap or transition swap” to reflect the reference is to part 46 data.
The Commission is removing the following definitions from § 46.1. The Commission has determined that the
The Commission is removing the definition of “international swap,” as there are no regulations for international swaps in part 46.
The Commission did not receive any comments on the changes to § 46.1.
Existing § 46.3(a)(2)(i)
The Commission is amending § 46.3(a)(2)(i) to remove the exception from PET data reporting for pre-enactment and transition swaps to specify that reporting counterparties would report updates to pre-enactment and transition swaps according to part 45. The Commission believes this is current practice and would not result in any significant change for the entities reporting updates to historical swaps.
The Commission received one comment supporting the proposal. ISDA-SIFMA believe SDs should benefit from more limited part 46 reporting obligations. The Commission is adopting the changes as proposed.
Existing § 46.10 requires that in reporting swap data to an SDR as required by part 46, each reporting counterparty use the facilities, methods, or data standards provided or required by the SDR to which counterparty reports the data.
The Commission is adding a provision that in reporting required swap continuation data as required by this part, each reporting counterparty shall comply with the required data standards outlined in part 45 of this chapter, including those set forth in § 45.13(a) of this chapter. As discussed above in the previous section, the Commission believes this is current practice for reporting counterparties and should not result in any significant change for reporting counterparties. The Commission did not receive any comments on the changes to § 46.10. The Commission is adopting the changes as proposed.
Consistent with the Commission's removal of the option to report required swap continuation data by the state data reporting method, discussed in section II.D.2 above, the Commission is removing the option in § 46.11(b) for pre-enactment/transition swaps reporting. Specifically, existing § 46.11(b) provides that for pre-enactment or transition swaps for which part 46 requires reporting of continuation data, reporting counterparties reporting state data as provided in part 45 may fulfill the requirement to report errors or omissions by making appropriate corrections in their next daily report of state data pursuant to part 45. Further to the removal of existing § 46.11(b), the Commission is re-designating existing § 46.11(c) and (d) as new § 46.11(b) and (c), respectively.
The Commission received two comments supporting the proposal. Consistent with its position supporting removing state data reporting in § 45.4, Chatham believes this will significantly reduce the number of reports as life cycle data reporting provides the same critical information as state data reporting.
The Commission is adding four definitions to § 49.2(a): “data validation acceptance message,” “data validation error,” “Data validation error message,” and “data validation procedures.”
“Data validation acceptance message” means a notification that SDR data satisfied the data validation procedures applied by a SDR. “Data validation error” means that a specific data element of SDR data did not satisfy the data validation procedures applied by a SDR. “Data validation error message” means a notification SDR data contained one or more data validation error(s). “Data validation procedures” means procedures established by a SDR pursuant to § 49.10 to validate SDR data reported to the SDR.
The Commission is amending the § 49.4 regulations for SDR withdrawals from registration. Existing § 49.4(a)(1)(iv) requires that a request to withdraw filed pursuant to § 49.4(a)(1) shall specify, among other items, a statement that the custodial SDR is authorized to make such data and records available in accordance with § 1.44.
Existing § 49.4(a)(2) requires that before filing a request to withdraw, a registered SDR shall file an amended Form SDR to update any inaccurate information. A withdrawal of registration shall not affect any action taken or to be taken by the Commission based upon actions, activities, or events occurring during the time that the facility was designated by the Commission.
First, the Commission is removing the § 49.4(a)(1)(iv) requirement for SDRs to submit a statement to the Commission that the custodial SDR is authorized to make the withdrawing SDR's data and records available in accordance with § 1.44. The reference to § 1.44 is erroneous. Existing § 1.44 requires “depositories” to maintain all books, records, papers, and memoranda relating to the storage and warehousing of commodities in such warehouse,
Second, the Commission is removing the § 49.4(a)(2) requirement that prior to filing a request to withdraw, a registered SDR file an amended Form SDR to update any inaccurate information.
The Commission did not receive any comments on the changes to § 49.4. The Commission believes the existing § 49.4(a)(2) requirement is unnecessary and does not help the Commission confirm the successful transfer of data and records to a custodial SDR. The Commission has a significant interest in ensuring that the data and records of an SDR withdrawing from registration are successfully transferred to a custodial SDR. In addition, the Commission needs confirmation that the custodial SDR will retain the data and records for at least the remainder of the time that records are required to be retained according to the Commission's recordkeeping rules. When an SDR is withdrawing from registration, the Commission would no longer have a regulatory need for the information in Form SDR to be updated. The Commission believes § 49.4(a)(2) will better address the Commission's primary concerns in an SDR withdrawal from registration.
The Commission is adopting the changes to § 49.4 as proposed.
The Commission is changing the § 49.10(a) through (d)
The Commission is making non-substantive amendments to the general requirements in existing § 49.10(a) for SDRs to have policies and procedures to accept swap data and swap transaction and pricing data. Existing § 49.10(a) requires that registered SDRs establish, maintain, and enforce policies and procedures for the reporting of swap data to the registered SDR and shall accept and promptly record all swap data in its selected asset class and other regulatory information that is required to be reported pursuant to parts 43 and 45 by DCMs, DCOs, SEFs, SDs, MSPs, or non-SD/MSP counterparties.
The non-substantive amendments include titling § 49.10(a) “General requirements” to distinguish it from the rest of § 49.10 and renumbering the sections. The Commission is revising the first sentence to specify that SDRs shall maintain and enforce policies and procedures reasonably designed to facilitate the complete and accurate reporting of SDR data. The Commission is removing the last phrase of § 49.10(a) beginning with “all swap data in its selected asset class” and create a second sentence requiring SDRs to promptly accept, validate, and record SDR data. Finally, the Commission is correcting references to defined terms.
Together, the amendments to § 49.10(a)(1) through (2) will improve the readability of § 49.10(a) while updating the terminology to use the proposed “SDR data” term for the data SDRs are required to accept, validate, and record pursuant to § 49.10.
The Commission did not receive any comments on the proposed changes to § 49.10(a). For reasons discussed above, the Commission is adopting the changes as proposed.
The Commission is adopting non-substantive amendments to the § 49.10(b) requirements for SDRs to accept SDR data. Existing § 49.10(b) requires a registered SDR set forth in its application for registration as described in § 49.3 the specific asset class or classes for which it will accept swaps data. If an SDR accepts swap data of a particular asset class, then it shall accept data from all swaps of that asset class, unless otherwise prescribed by the Commission.
The non-substantive changes include titling § 49.10(b) “Duty to accept SDR data” and updating references to data in § 49.10(b) to “SDR data” to use the correct defined term. The Commission did not receive any comments on the changes. For the reasons discussed above, the Commission is adopting the changes as proposed.
The Commission is adding new regulations for the SDR validation of SDR data in § 49.10(c). The Commission is moving the requirements in existing § 49.10(c) to § 49.10(d).
The Commission believes the consistent application of validation rules across SDRs will lead to an improvement in the quality of swap data maintained at SDRs. SDRs currently check each swap report for compliance with a list of rules specific to each SDR. However, the Commission is concerned SDRs apply different validation rules that could be making it difficult for SDR data to either be reported to the SDR or the SDRs' real-time public data feeds. The SDRs applying different validations to swap reports creates numerous challenges for the Commission and
ESMA has published specific validations for TRs to perform to ensure that derivatives data meets the requirements set out in their technical standards pursuant to EMIR.
The Commission received two comments supporting data validations regulations in § 45.13. FIA believes the validations should strengthen data accuracy and appreciates using the SDRs' current processes.
The Commission received two comments on the new validations requirements in § 49.10(c) and § 45.13(b). NRECA-APPA request the Commission provide evidence that the validation process will achieve a specific regulatory benefit to offset the significant additional burden on non-SD/MSP/DCO counterparties to off-facility swaps.
GFXD believes limited exceptions to the validation requirements should be in place but believes such exceptions may have limited use.
The Commission did not receive any additional comments on § 49.10(c) or § 45.13(b). The Commission is adopting the regulations as proposed.
As described above, the Commission is moving the requirement in § 49.10(c) for SDRs to have policies and procedures to prevent invalidations or modifications of swaps to § 49.10(d). As a result, the Commission is re-designating § 49.10(d) as new § 49.10(f).
The Commission is making non-substantive amendments to existing § 49.10(c), moved to § 49.10(d). For instance, the Commission is titling § 49.10(c) “Policies and procedures to prevent invalidation or modification” to distinguish it from the other requirements in § 49.10.
The Commission did not receive any comments on the non-substantive changes to § 49.10(d). For the reasons discussed above, the Commission is adopting the changes as proposed.
As described above, the Commission is re-designating § 49.10(d) as § 49.10(f).
The Commission is re-titling § 49.10(f) “Policies and procedures for resolving disputes regarding data accuracy” and updating terminology in the regulation. The Commission did not receive any comments on the amendments to § 49.10(f). For the reasons discussed above, the Commission is adopting the changes as proposed.
The Commission is updating and standardizing the data elements in appendix 1 to part 45. The Commission's minimum PET for swaps in each swap asset class are found in existing appendix 1 to part 45. The existing PET for swaps contain a set of “data categories and fields” followed by “comments” instead of specifications such as allowable values, formats, and conditions.
In adopting part 45, the Commission intended the PET would ensure uniformity in “essential data” concerning swaps across all of the asset classes and across SDRs to ensure the Commission had the necessary information to characterize and understand the nature of reported swaps.
In the course of revisiting which swap data elements should be reported to SDRs, the Commission reviewed the swap data elements currently in appendix 1 to part 45 to determine if any currently required data elements should be eliminated and if any additional data elements should be added. The Commission then reviewed the CDE Technical Guidance to determine which data elements the Commission could adopt according to the CDE Technical Guidance.
As a general matter, the Commission believes the implementation of the CDE Technical Guidance will further
As part of this process, the Commission also reviewed the part 43 swap transaction and pricing data and part 45 swap data elements to determine whether any differences could be reconciled.
At the same time as the Commission proposed updating the swap data elements in appendix 1, DMO published draft technical specifications for reporting the swap data elements in appendix 1 to part 45 to SDRs, and for reporting and publicly disseminating the swap transaction and pricing data elements in appendix A to part 43 described in a separate proposal. Once finalized, DMO would then publish the technical specification in the
The swap data elements to be reported to SDRs will therefore consist of: (i) The data elements implemented in the CDE Technical Guidance; and (ii) additional CFTC-specific data elements that support the Commission's regulatory responsibilities.
DMO's technical specification contains an extensive introduction to help reviewers. As a preliminary matter, the Commission notes the swap data elements in appendix 1 do not include swap data elements specific to swap product terms. The Commission is currently heavily involved in separate international efforts to introduce UPIs.
In addition, the Commission is adopting the CDE Technical Guidance data elements as closely as possible. Where the Commission adopts a CDE Technical Guidance data element, the Commission adopts the terms used in the CDE Technical Guidance. This means that some terms may be different for certain concepts. For instance, “derivatives clearing organization” is the Commission's term for registered entities that clear swap transactions, but the CDE Technical Guidance uses the term “central counterparty.”
To help clarify, DMO includes footnotes in the technical specification to explain these differences as well as provide examples and jurisdiction-specific requirements. However, the Commission is not including these footnotes in appendix 1. In addition, the definitions from CDE Technical Guidance data elements included in appendix 1 sometimes include references to allowable values in the CDE Technical Guidance, which may not be included in appendix 1, but are in the technical specification.
Finally, the CDE Technical Guidance did not harmonize many data elements that would be particularly relevant for commodity and equity swap asset classes (
The Commission anticipates addressing implementation issues through the international working groups to help ensure that authorities follow the established processes for doing so. In addition, the Commission anticipates updating its rules to adopt any new or updated CDE Technical Guidance, as necessary.
The Commission proposed requiring reporting counterparties report 12 clearing data elements.
The Commission is adopting the clearing data elements for clearing in appendix 1 as proposed. Nearly all of this information is currently being reported to SDRs. Three of these data elements are consistent with the CDE Technical Guidance. Four of these data elements would transition clearing swap and original swap USIs to UTIs. All of these data elements help the Commission monitor the cleared swaps market.
The Commission proposed requiring reporting counterparties to report ten counterparty data elements.
Reflecting input received from the Department of Treasury, the Commission is adopting two counterparty swap data elements that were not in the Proposal: Counterparty 1 federal entity indicator and Counterparty 2 federal entity indicator.
The Commission proposed requiring reporting counterparties to report four event data elements.
The Commission is adopting the event data elements as proposed, with one modification. The Commission is adding an Amendment indicator data element to flag changes to a previously submitted transaction due to a newly negotiated modification. The Amendment indicator will notify the public a swap is being amended on the public tape pursuant to part 43, to indicate that the change to the previously disseminated swap transaction is price-forming.
The Commission is adopting the rest of the events swap data elements as proposed. Nearly all of this information is currently being reported to SDRs. Event data elements were not included in the CDE Technical Guidance. This information is, however, critical for the Commission to be able to properly utilize swap data. Without it, the Commission would be unable to discern why each swap event is reported following the initial required swap creation data report.
The Commission proposed requiring reporting counterparties report 12 notional data elements.
The Commission also requested comment on whether it should require the reporting of a USD equivalent notional amount data element. Four commenters oppose the data element on the grounds it would impose an unnecessary burden on reporting counterparties.
The Commission is adopting the notional data elements as proposed, with the modification described above for Notional amount schedule data elements and the data element Delta (109) which will be moved and included with valuation data elements. Nearly all of this information is currently being reported to SDRs. Eleven of the data elements are consistent with the CDE Technical Guidance. Exposure information, in conjunction with valuation information, is critical for, and currently used
The Commission proposed requiring reporting counterparties report four package transaction data elements.
The Commission believes package transaction data is necessary for the Commission to monitor the exposure of its registrants to these complex transactions. As a result, despite the objections of ISDA-SIFMA and Markit, the Commission is adding three package transaction swap data elements to appendix 1 from the CDE Technical Guidance: Package transaction spread; Package transaction spread currency; and Package transaction spread notation. The Commission is also adding Package indicator data element to appendix 1. The Commission agrees with GFXD that it should harmonize with ESMA to ensure consistent implementation across jurisdictions, and that is why the Commission adopted the package data elements according to the CDE Technical Guidance where possible. The Package indicator will alert the public on the part 43 tape that the swap is part of a package, so the public will know the price is impacted by factors beyond the swap.
The Commission is adopting the rest of the package data elements as proposed. Some of this information is currently being reported to SDRs. Seven of these data elements are consistent with the CDE Technical Guidance. The Commission anticipates using this information to better understand risk in the swaps market, as the Commission understands that many swaps are executed as part of packages.
The Commission proposed requiring reporting counterparties to report 12 data elements related to payments.
The Commission proposed requiring reporting counterparties to report 18 data elements related to swap prices.
The Commission is adopting the price data elements in appendix 1 as proposed. Nearly all of this information is currently being reported to SDRs. Seventeen of these data elements are consistent with the CDE Technical Guidance. This information is critical for, and used by, the Commission in understanding pricing in the swaps market.
The Commission proposed requiring reporting counterparties to report five product-related data elements.
The Commission is adopting the product data elements in appendix 1 as proposed. Product data elements are currently being reported to SDRs. The Commission has determined these data elements are critical for monitoring risk in the swaps market, even though the Commission expects any additional product data elements to remain unstandardized until the UPI is introduced.
The Commission proposed requiring reporting counterparties to report two settlement data elements.
The Commission proposed requiring reporting counterparties to report 15 data elements that provide information about each swap transaction.
The Commission received one comment on whether the Commission should add a Prime brokerage transaction identifier data element in appendix 1. ISDA-SIFMA have significant concerns with the Prime brokerage transaction identifier data element and opposes its adoption.
The Commission is adopting the rest of the transaction data elements in appendix 1 as proposed. Most of this information is currently being reported to SDRs and the Commission requires data elements like transaction identifiers to properly track new and amended swaps.
The Commission proposed requiring reporting counterparties to report one data element related to changing SDRs.
The Commission proposed requiring reporting counterparties to report six valuation data elements.
The Commission is adopting Next floating reference reset date, along with the other valuation data elements in appendix 1. Nearly all of this information is currently being reported to SDRs. Five data elements are consistent with the CDE Technical Guidance. Valuation information is critical for, and currently used by, the Commission to monitor risk in the swaps market.
The Commission proposed requiring reporting counterparties to report 14 collateral and margins data elements.
CME requests clarification on whether SDRs can add proprietary data elements to its technical specification or whether an SDR can reject submissions due to validation failures of these data elements, and gave two examples of certain data elements for internal processing purposes (
ISDA-SIFMA request the Commission follows EMIR's process on the data elements in the future: ESMA publishes the data validation table on an “EMIR Reporting” web landing page, while
In the Proposal, the Commission acknowledged that market participants will need a sufficient implementation period to accommodate the changes proposed in the three Roadmap proposals that would be adopted by the Commission. The Commission expected to finalize all rules at the same time, even though the three Roadmap proposals were approved separately. The Commission also expected that the compliance date for the Roadmap rules that the Commission adopts other than the rules on UTIs in § 45.5 would be one year from the date the final rulemakings are published in the
The Commission expected that the compliance date for the rules on UTIs in § 45.5 would be December 31, 2020, according to the UTI implementation deadline recommended by the FSB.
The Commission received three comments supporting the proposed one-year compliance period. ISDMA-SIFMA support a single compliance date for parts 43, 45, and 49 at a minimum of 12 months from the date the final rules are published in the
Similarly, LCH recommends the Commission set the compliance date for all requirements under the proposal to 12 months from publication to comply with all aspects of the rules, as LCH believes the current date of December 31, 2020, related to UTI implementation does not allow enough time for market participants to comply.
ICE SDR suggests the Commission allow voluntary early implementation before the compliance effective date, and points out that having SDRs and market participants implement immediately after publication would be advantageous to the market and would eliminate the need for reporting counterparties to report valuation data.
The Commission received five comments opposing the proposed implementation period. GFXD suggests 12 months from publication of final rules should be the minimum implementation period and that GFXD believes the changes to the technical specification in parts 43 and 45 should be implemented and allowed to imbed before the validation changes under part 49 are implemented.
CME believes SDRs will need an extra six months beyond the Commission's proposal because the Commission expects SDRs to implement all changes simultaneously. CME notes this timing assumes the technical specification would be finalized at the same time and would not be modified in any material respect prior. CME's DCO also believes the Commission underestimated the number of man-hours that it will take reporting entities, including CME's DCO, to implement the Commission's proposed changes to the reporting requirements.
DTCC requests clarification regarding the implementation period for any proposed changes to the reporting requirements in § 45.15(a)(1) through (3) and in § 45.15(b)(1) through (3), because certain changes, including the potential use and ingestion of prescribed message standards, may take significant time to implement.
ICE DCOs believe the Commission should adopt a realistic compliance period that allows for industry coordination.
The Commission received six comments opposing the UTI compliance date proposal. GFXD believes the December 31, 2020 compliance date for UTIs is “extremely ambitious,” and that there should be a later implementation period for UTI that is coordinated with the EU.
JBA believes aligning the UTI implementation timeline across jurisdictions will be more beneficial, and that deadlines should coincide with those of the UPI and CDE, in light of proposals offered in the ESMA consultation.
CS recommends the Commission not separate the Proposal's compliance dates. If the Commission does keep them separate, CS suggests working closely with fellow IOSCO members in considering an extended implementation timeline for the UTI. In light of other initiatives for global SDs, the operationalizing requirements and operational hurdles present challenges for SDs. CS requests the Commission continue to weigh concerns related to data fragmentation in evaluating a bifurcated implementation of the proposals. CS also suggests the Commission continue to engage in dialogue with the Harmonisation Group and could suggest a timeframe that takes into account the Commission's proposals and other data reform efforts in other IOSCO jurisdictions.
FIA believes the USI and UTI compliance changes will have to be addressed and should occur in tandem with the rest of the reporting rule requirements. It recommends eliminating the December 30, 2020
The Commission received two questions on going-forward amendments for UTIs. ISDA-SIFMA request the amendments to the Commission's swap reporting rules clarify that requirements should be applied on a “going forward” basis and only apply to swaps and events occurring on or after the compliance date of the amended rules, including the clarification that UTI requirements only apply to new swap transactions and not to swaps prior to the compliance date that have a USI.
Based on the many comments that requested one compliance date for all aspects of the Proposal and all of the Roadmap proposals, including final § 45.5, and the many comments that requested a compliance date that is more than one year from the date the proposals are finalized, the Commission has determined to adopt a unified compliance date that is 18 months from the date of publication of the final rule amendments in the
Regarding the UTI implementation, the Commission clarifies that UTI implementation should be on a going-forward basis. This means that all new swaps entered into after the compliance date should have UTIs according to final § 45.5. As a result, SDRs will need to accommodate both USIs and UTIs for a certain amount of time after the compliance date, but the Commission anticipates SDRs would be able to phase it out at a certain point after swaps using USIs are terminated or reach maturity.
Part 20 of the Commission's regulations governing large trader reporting for physical commodity swaps contains a “sunset provision” in § 20.9 that would take effect upon a Commission finding that, through the issuance of an order, operating SDRs are processing positional data and that such processing will enable the Commission to effectively surveil trading in paired swaps and swaptions and paired swap and swaption markets.
The Commission received three comments on the appropriateness of sunsetting part 20. BP supports sunsetting part 20 since SDRs have been collecting and processing data for several years, Commission and industry resources should no longer be expended on part 20.
Since part 20 data is reported directly to the Commission and not to SDRs, the Commission did not propose any changes to part 20 in the Roadmap or in the Proposal, and therefore, the Commission is taking no action on part 20 in this release. The Commission nonetheless acknowledges the commenters' responses to the question. The Commission may address part 20 reporting at a future date after implementation of the Roadmap rules.
The Regulatory Flexibility Act (“RFA”) requires federal agencies, in promulgating rules, to consider the impact of those rules on small entities.
Various changes to parts 45, 46, and 49 would have a direct impact on all reporting counterparties. These reporting counterparties may include SDs, MSPs, DCOs, and non-SD/MSP/DCO counterparties. Regarding whether non-SD/MSP/DCO reporting counterparties are small entities for RFA purposes, the Commission notes CEA section 2(e) prohibits a person from entering into a swap unless the person is an eligible contract participant (“ECP”), except for swaps executed on or under the rules of a DCM.
The Commission has analyzed swap data reported to each SDR
Based on the above analysis, the Commission does not believe this Final Rule will have a significant economic impact on a substantial number of small entities. Therefore, the Chairman, on behalf of the Commission, pursuant to 5 U.S.C. 605(b), hereby certifies that the Final Rule will not have a significant economic impact on a substantial number of small entities.
The Paperwork Reduction Act (“PRA”)
The Commission did not receive any comments regarding its PRA burden analysis in the preamble to the Proposal. The Commission is revising the three information collections to reflect the adoption of amendments to parts 45, 46, and 49, as discussed below, including changes to reflect adjustments that were made to the final rules in response to comments on the Proposal (not relating to the PRA). In addition, the Commission is revising the information collections for part 45 to include estimates of the burden hours that SDRs, SEFs, DCMs, and reporting counterparties could incur to report updated swap data elements in appendix 1 to part 45 in the form and manner provided in the technical specification published by the Commission, as discussed below, which were not included in the Proposal. The Commission has re-evaluated its analysis of the one-time costs that SDRs, SEFs, DCMs, and reporting counterparties could incur to modify their systems for part 45. These estimates have been updated to include software developer labor costs for amended § 45.3 related to the technical specification, as developed by staff in its Offices of the Chief Economist and Data and Technology. The Commission does not expect any ongoing costs after the initial builds. Further, the Commission previously included estimates for proposed § 45.4 of costs for SDRs and reporting counterparties to update systems for reporting required swap continuation data. However, after further analysis, the Commission is removing the estimates for § 45.4 to avoid double-counting, since the costs relate to reporting certain swap data elements that are included in the estimated one-time start-up costs for § 45.3. The Commission does not believe the rule amendments as adopted impose any other new collections of information that require the approval of OMB under the PRA.
Under the PRA, Federal agencies must obtain approval from OMB for each collection of information they collect or sponsor. “Collection of information” is defined in 44 U.S.C. 3502(3) and 5 CFR 1320.3 and includes agency requests or requirements that members of the public submit reports, keep records, or provide information to a third party. Section 3506(c)(2)(A) of the PRA, 44 U.S.C. 3506(c)(2)(A), requires Federal agencies to provide a 60-day notice in the
Existing § 45.3 requires SEFs, DCMs, and reporting counterparties to report confirmation data reports and PET data reports when entering into new swaps. The Commission is adopting changes that will remove the requirement for SEFs, DCMs, and reporting counterparties
The Commission is also adopting changes that will remove the § 45.3(i) requirement for SEFs, DCMs, and reporting counterparties to report TR identifiers and swap identifiers for international swaps. The changes remove the requirement to report two pieces of information within a required swap creation data report without impacting the number of reports themselves. The requirement to report swap identifiers is duplicative, and will not change the burden estimate, as SEFs, DCMs, and reporting counterparties are required to report swap identifiers for all swaps pursuant to § 45.5. However, the removal of the requirement to report TR identifiers will slightly reduce the amount of time required to make each report, as SEFs, DCMs, and reporting counterparties will not need to report this information anymore.
The Commission estimates the removal of this requirement will lower the burden hours by .01 hour per report. However, at the same time, as discussed further below in section VII.B.1.c, the Commission is adopting changes to require the reporting of UTIs instead of USIs, which are currently reported in every required swap creation data report. The Commission estimates the new rules requiring SEFs, DCMs, and reporting counterparties to report UTIs will impact the burden calculations for § 45.3 by increasing the burden hours by .01 hour per report. As a result, the Commission estimates there will be no net change to the .01 burden hours per report for § 45.3 required swap creation data reporting resulting from the amendments to § 45.3(i).
The aggregate burden estimate for § 45.3 required swap creation data reports is as follows:
In addition, the Commission estimates SDRs, SEFs, DCMs, and reporting counterparties will incur capital/start-up costs related to adopting the changes proposed in § 45.3. The Commission
Existing § 45.4 requires reporting counterparties to report data to SDRs when swap terms change, as well as daily and quarterly swap valuation data, depending on the type of reporting counterparty. As a preliminary matter, the Commission is correcting the estimated number of respondents for § 45.4 from 1,732 SDRs, SEFs, DCMs, and reporting counterparties to 1,705 SDRs and reporting counterparties to reflect that SEFs and DCMs do not report required swap continuation data.
Existing § 45.4(a) permits reporting counterparties to report changes to swap terms when they occur (life cycle reporting), or to provide a daily report of all of the swap terms (state data reporting). The Commission is adopting changes that will remove the option for state data reporting for reporting counterparties. The Commission estimates that this will reduce the number of § 45.4 continuation data reports that reporting counterparties report from 207,543 reports per respondent to 103,772 reports per respondent.
The Commission is also adopting changes to remove the requirement for non-SD/MSP/DCO reporting counterparties to report quarterly valuation data. For the 1,585 non-SD/MSP/DCO reporting counterparties, the Commission estimates this will further reduce the number of § 45.4 swap continuation data reports they send to SDRs by four quarterly reports per 1,585 non-SD/MSP/DCO reporting counterparties. This is estimated to reduce the number of § 45.4 continuation data reports sent by reporting counterparties from 103,772 reports per respondent to 97,431 reports per respondent.
Separately, the Commission is adopting changes to expand the daily valuation data reporting requirement for SD/MSP reporting counterparties to report margin and collateral data in addition to valuation data. This is a change from the Proposal, in which the Commission proposed requiring DCO counterparties to report the information as well. The frequency of the report will not change for SD/MSP reporting counterparties, but the Commission estimated SD/MSP/DCO reporting counterparties would require more time to prepare each report. However, since all of this information is reported electronically, the Commission expected the increase per report to be small, from .003 to .004 hours per report. Since the Commission is not requiring DCO reporting counterparties to report the information, the Commission is revising its estimate to .0035 hours per report. The reduction in this estimate from .004 hours in the Proposal reflects the Commission adopting a less burdensome rule than was proposed.
The aggregate burden estimate for § 45.4 required swap continuation data is as follows:
In addition, in the Proposal, the Commission estimated SDRs and reporting counterparties would incur capital/start-up costs and ongoing operational/maintenance costs related to adopting the changes proposed in § 45.4. In reevaluating its analysis in the Proposal, the Commission recognizes the reporting costs created by the changes to § 43.4 relate to reporting swap data elements, which the Commission has included in the estimated costs for § 45.3. To avoid double-counting costs, the Commission is not estimating separate initial and ongoing costs for § 43.4 and removing the estimate that was included in the Proposal.
Existing § 45.5 requires SEFs, DCMs, reporting counterparties, and SDRs to generate and transmit USIs, and include USIs in all of their § 45.3 creation data and § 45.4 continuation data reports to SDRs. As a preliminary matter, the Commission is correcting the estimated number of respondents and the estimated number of reports per each respondent. Currently, SDRs, SDs, MSPs, SEFs, and DCMs are required to generate USIs, but the Commission inadvertently had included the 1,585 non-SD/MSP/DCO reporting counterparties in the current estimated number of respondents. The Commission is updating the number of respondents to 147 SDs, MSPs, SEFs, DCMs, DCOs, and SDRs. However, these entities generate USIs on behalf of non-SD/MSP/DCO reporting counterparties for all swaps, so the estimated number of reports per each respondent will increase proportionately to 115,646 reports per 147 respondents to account for the 17,000,000 new swaps reported each year with USIs.
Existing § 45.5 requires SDRs to generate and transmit USIs for off-facility swaps with a non-SD/MSP reporting counterparty. The Commission is adopting changes that will require non-SD/MSP/DCO reporting counterparties that are financial entities to generate and transmit UTIs for off-facility swaps. The Commission estimates that approximately half of non-SD/MSP/DCO reporting counterparties are financial entities. Therefore, the Commission estimates that the number of respondents will increase from 147 SDs, MSPs, SEFs, DCMs, DCOs, and SDRs to 940 respondents with the addition of financial entities. At the same time, however, this will lower the number of UTIs generated per respondent to account for the increase in the number of respondents generating UTIs. The Commission estimates the estimated number of reports per respondent will decrease from 115,646 reports per 147 respondents to 18,085 reports per 940 respondents.
The aggregate burden estimate for § 45.5 is as follows:
In addition, the Commission estimates that § 45.5 will create costs for entities required to generate USIs to update their systems to generate UTIs. The Commission estimates that SDRs and reporting counterparties required to generate UTIs will incur a one-time initial burden of one hour per entity to modify their systems to adopt the changes described below, for a total estimated hours burden of 940 hours. The cost per entity is estimated to be
Existing § 45.6 requires reporting entities to have LEIs and report them to SDRs as part of their § 45.3 creation data and § 45.4 continuation data reports. As a preliminary matter, the Commission is revising the burden estimate for § 45.6. LEIs are reported in required swap creation data and required swap continuation data reports, which are separately accounted for in the estimates for §§ 45.3 and 45.4. The current estimate for § 45.6 double-counts the estimates for §§ 45.3 and 45.4 by calculating the burden per data report. Instead, the burden for § 45.6 should be based on the requirement for each counterparty to obtain an LEI. The Commission is revising the estimate to state that there are 1,732 entities required to have one LEI per respondent, and revise the burden hours based on this change.
The Commission is also adopting amendments to § 45.6 to require SDs, MSPs, SEFs, DCMs, DCOs, and SDRs to renew their LEIs annually. The change will increase the burden estimates for these entities, but will not affect the burden for the majority of entities required to have LEIs. Nonetheless, the Commission expects the burden associated with these changes to increase from .01 to .02 hours per report, and 17 hours in the aggregate.
The aggregate burden estimate for § 45.6 is as follows:
The Commission is adopting new regulations in § 45.10(d) that require reporting counterparties to send SDRs and non-reporting counterparties notifications if they change the SDR to which they report swap data and swap transaction and pricing data. This is a new reporting burden that is not covered in the current collection.
The Commission estimates that no more than 15 reporting counterparties will choose to change the SDR to which they report data. As a result, the Commission estimates these 15 reporting counterparties will each send one report annually, with an average response time of .01 hours per report and a gross annual burden of .15 hours.
The aggregate burden estimate for § 45.10 is as follows:
Existing § 49.4 requires SDRs to follow certain requirements when withdrawing from registration with the Commission. These requirements involve filing paperwork with the Commission. The Commission does not believe any of the changes the Commission is adopting will require any one-time or ongoing system updates for SDRs. In addition, the Commission notes it had not previously provided a burden estimate for § 49.4, so the Commission provided an estimate with the Proposal.
Existing § 49.4(a)(1)(iv) requires that an SDR's request to the Commission to withdraw from SDR registration specify, among other items, a statement that the custodial SDR is authorized to make such data and records available in accordance with § 1.44. The Commission is adopting changes to remove this requirement from § 49.4(a)(1)(iv).
Existing § 49.4(a)(2) requires that before filing a request to withdraw, a registered SDR shall file an amended Form SDR to update any inaccurate information. The Commission is adopting changes that eliminate the requirement for SDRs to file an amended Form SDR prior to filing a request to withdraw.
Separately, the Commission is adopting new § 49.4(a)(2) to require SDRs to execute an agreement with the custodial SDR governing the custody of the withdrawing SDR's data and records prior to filing a request to withdraw with the Commission.
The Commission estimates that at most one SDR will request to withdraw from registration each year pursuant to amended § 49.4. The Commission estimates that the SDR will provide one notification to the CFTC, which will take an estimated 40 hours for the SDR to complete.
The aggregate burden estimate for § 49.4 is as follows:
Existing § 49.10 provides the requirements for SDRs in accepting SDR data. As an initial matter, the Commission is correcting the estimates for § 49.10 in the Proposal. In the Proposal, the Commission misstated the current burden estimate for § 49.10 as 5,652,000 messages per SDR respondent, for a total of almost 17,000,000 messages across SDRs. The correct current estimate for § 49.10 is 2,652,000 messages per SDR, for a total of almost 8,000,000 messages. The Commission will discuss the changes to the estimate for § 49.10 resulting from this rulemaking below according to the corrected estimate for § 49.10.
Existing § 49.10(a) requires SDRs to accept and promptly record all swap data. In the 2019 Part 49 NPRM, the Commission proposed amending the requirements in § 49.10 by detailing separate § 49.10(e) requirements for correcting swap errors. The Commission is adopting those changes in a separate release. In this release, the Commission is adopting separate § 49.10(c) requirements for validating swap messages. These changes further specify that SDRs must send validation acceptance and rejection messages after validating SDR data. The Commission estimates that this will increase the number of reports SDRs will need to send reporting entities.
The Commission estimates that the new requirement to send validation messages in § 49.10(c) will add 3,000,000 messages to each SDR's current burden estimate, at .00055 hours per message, or 4,950 aggregate burden hours for all three SDRs.
When added to the current estimate for § 49.10, the aggregate burden estimate for § 49.10 is as follows:
In addition, the Commission estimates that SDRs will incur capital/start-up costs and ongoing operational/maintenance costs related to adopting the changes proposed in § 49.10(c). The Commission estimates that SDRs will incur a one-time initial burden of 100 hours per entity to modify their systems to adopt the changes described above, for a total estimated hours burden of 300 hours, and that SDRs will additionally spend 100 hours per entity annually to perform any needed maintenance or adjustments to reporting systems. Based on a labor cost of $72.23 per hour, the total cost of the one-time initial burden is estimated at $21,669 across all three SDRs, and the total cost to perform any additional needed maintenance or adjustments to reporting systems annually is estimated at $21,669 across all three SDRs.
Existing § 46.11 provides that for pre-enactment or transition swaps for which part 46 requires reporting of continuation data, reporting counterparties reporting state data as provided in part 45 may fulfill the requirement to report errors or omissions by making appropriate corrections in their next daily report of state data pursuant to part 45. Since the Commission is adopting changes to remove the option for state data reporting from § 45.4, the Commission is also adopting changes to remove the option for state data reporting from § 46.11.
Because reporting counterparties will no longer be able to send daily state data reports for their part 46 historical swaps, the Commission estimates the changes adopted in § 46.11 will reduce the number of continuation data reports reporting counterparties send SDRs for historical swaps by 50%. As a result, the Commission estimates that the 125
The aggregate burden estimate for reporting historical swaps to SDRs under part 46 is as follows:
The Commission does not believe the changes to § 46.11 being adopted will require SDRs or reporting counterparties to make any one-time or ongoing updates to their systems.
Since issuing the first swap reporting rules in 2012, the Commission has gained a significant amount of experience with swaps markets and products based on studying and monitoring swap data.
While the Commission believes the amendments will meaningfully benefit market participants and the public, some costs could result as well. Section 15(a) of the CEA requires the Commission to consider the costs and benefits of its actions before promulgating rules under the CEA.
In this release, the Commission is adopting revisions to existing regulations in parts 45, 46, and 49. The Commission is also adopting new requirements in parts 45, 46, and 49. Together, these revisions and additions should further specify and streamline swap data reporting and improve the quality of swap data reporting. The Commission is making most of the changes to existing systems and processes, so nearly all costs considered are incremental additions or updates to systems already in place. The Commission believes many of the amendments, which are non-substantive or technical, will not have material cost-benefits implications.
The Commission is adopting multiple changes to harmonize the Commission's reporting regulations with those of other regulators as part of the FSB and CPMI-IOSCO harmonization efforts. As these efforts have incorporated industry feedback, and the Commission has been vocal about its support and participation,
Many jurisdictions have committed to these harmonization efforts for which the Commission is adopting standards. If the Commission did not adopt these standards, but other jurisdictions—consistent with the technical guidance and implementation deadlines recommended by the FSB—did, SDRs and reporting entities could experience unnecessary costs due to unharmonized reporting infrastructures for CFTC reporting, while market participants in other jurisdictions enjoyed harmonization efficiencies.
The Commission discusses reasonably quantifiable costs and benefits in this section; the Commission discusses them qualitatively if they are not reasonably quantifiable. Throughout this release, the Commission estimates the cost-benefit impact of its changes using swap data, such as the prevalence of state data reporting and duplicative required swap creation data reports. Most of the changes affect reporting requirements for reporting counterparties, SDRs, SEFs, and DCMs. As a result, there will likely be some reasonably quantifiable costs related to either: (a) Creating new data reporting systems; (b) reprogramming existing data reporting systems to meet the new reporting requirements; or (c) canceling data streams, which might lead to archiving data and maintaining legacy systems. These estimates focus on the costs and benefits of the amended rules market participants are likely to encounter with an emphasis on technical details, implementation, and market-level impacts. Where software changes are expected, these costs reflect software developer labor costs only, not a blend of different occupations. Costs and benefits quantified at the respondent level are estimated in the PRA section in section VII.B above. Those costs are not repeated in this section, but where appropriate, quantified costs reflected in the PRA are noted below to reflect PRA costs have been taken into account in the cost-benefit analysis.
These costs are quantifiable if entities covered by the final regulations can price-out the changes to the information technology architecture to adopt the reporting requirement changes. These quantifiable costs, however, will likely vary because the sophistication of reporting entities varies. For example, some reporting entities operate their own data reporting systems and employ in-house developers and analysts to plan, design, code, test, establish, and monitor systems. Other reporting entities pay fees to third-party vendors. The quantitative costs associated with the reporting rules in this release will vary depending on the reporting entities' operations and number of swaps they execute. The Commission provides a monetary range for quantifiable costs as they relate to each change discussed below where possible.
This consideration of costs and benefits is based on the understanding that the swaps market functions internationally. Many swaps transactions involving U.S. firms occur across international borders and some Commission registrants are organized outside of the U.S., including many SDs. Many of the largest market participants often conduct operations both within and outside the U.S. Where the Commission does not always refer to location, the discussion of costs and benefits refers to the rules' effects on all swaps activity, whether by virtue of the activity's physical location in the U.S. or by virtue of the activity's connection with or effect on U.S. commerce under CEA section 2(i).
The Commission has issued several rulemakings related to swaps reporting where it has considered the benefits and costs.
Based on its experience with swap data and extensive feedback from market participants, the Commission believes improving data quality will significantly enhance the utility of the swap data while also reducing burdens on reporting entities and SDRs through harmonizing, streamlining, and clarifying data requirements. In this release, the Commission focuses on the swap data reporting workflows, the swap data elements reporting counterparties report to SDRs, and the validations SDRs apply to help ensure the swap data they receive is accurate. The Commission is also modifying several other regulations for clarity and consistency.
Three SDRs are currently provisionally registered with the Commission: CME, DTCC, and ICE. The changes the Commission is adopting should apply equally to all three SDRs. The current reporting environment also involves third-party service providers that help market participants fulfill their reporting requirements, though the reporting requirements do not apply directly to them. The Commission estimates that third-party service providers do not account for a large portion of the overall record submissions to SDRs, but provide an important service for entities that use them.
Finally, the current reporting environment depends on reporting counterparties. The Commission estimates reporting counterparties include 107 provisionally registered SDs, 24 SEFs, 3 DCMs, 13 DCOs, and approximately 1,585 non-SD/MSP/DCO reporting counterparties. Each of these reporting counterparty types varies as to size and activity. The Commission believes most SDs and nearly all SEFs, DCMs, DCOs, and SDRs have sophisticated technology dedicated to data reporting because of the frequency with which they enter into or facilitate swaps execution or accept swap data from reporting entities. The Commission also believes these entities have greater access to resources to update these systems as regulatory requirements change. Further, the Commission estimates that SDs will incur much of the costs and benefits associated with the Commission's changes, given they are the most sophisticated participants with the most experience reporting under the EU and U.S. reporting regimes. For instance, SDs accounted for
Non-SD/MSP/DCO reporting counterparties account for a small fraction of SDR reports. The Commission believes there is a wide variation in the reporting systems maintained by these entities and the resources available to them. These reporting counterparties can be large, sophisticated financial entities, including banks, hedge funds, and asset management firms, but a significant number are smaller, less-sophisticated swap end-users entering into swaps less frequently to hedge commercial risk.
The Commission has a significant interest in ensuring these smaller, less-sophisticated entities can access the U.S. swaps market without unnecessary costs or burdens, but the Commission has difficulty accurately estimating the cost impact of the changes on them. The challenge stems from the wide range of complexity of firms in this group: A large asset manager with billions of dollars in assets under management and a large swaps portfolio could have a reporting system as complex and sophisticated as an SD while a small hedge fund with a limited swaps portfolio might rely on third-party service providers to handle its reporting obligations. Commenters did not provide information to help the Commission quantify the costs to these smaller entities, notwithstanding the Proposal's request for data and other information to assist the Commission's quantification effort.
Swap data reports submitted under the existing regulations have posed data quality challenges. For example, the existing appendix 1 to part 45 provides no standards, formats, or allowable values for the swap data that reporting counterparties report to SDRs and there is no technical specification or other guidance associated with the existing rule. Since the industry has not identified a standard for all market participants to use, market participants have reported information in many different ways, often creating difficulties in data harmonization, or even identification, within and across SDRs.
It is not uncommon for Commission staff to find discrepancies between open swaps information available to the Commission and swap transaction data reported for the same swaps. In the processing of swap data to generate the CFTC's Weekly Swaps Report,
In addition to the lack of standardization across SDRs, the Commission is concerned the current timeframes for reporting swap data may have contributed to the prevalence of errors. Common examples of errors include incorrect references to underlying currencies, such as a notional value incorrectly linked to U.S. dollars instead of Japanese Yen. Among others, these examples strongly suggest a need for standardized, validated swap data as well as additional time to review the accuracy of the data report.
Based on its experience with data reporting, the Commission is amending certain regulations, particularly in parts 45, 46, and 49, to improve swap data accuracy and completeness. This release also adopts one amendment to part 49 to improve the process for an SDR's withdrawal from registration. Many of the final regulations have costs and benefits that must be considered. The Commission discusses these below.
The Commission summarizes the amendments
There are multiple baselines for the costs and benefits that might arise from the regulations in this release. The Commission believes the baseline for measurement of costs and benefits attributable to the amendments to §§ 45.3, 45.4, 45.5, 45.6, 45.10, 45.12, 46.3, 46.10, 46.11, and 49.4 are the costs and benefits realized under current regulations, as discussed above in sections II, III, and IV. The baseline for § 49.10 is current practice, which is that SDRs may be performing validations according to their own specifications, as discussed above in section IV.C.
The Commission received no comments on the general costs and benefits of the Proposal overall. The Commission received a few comments on the costs and benefits of the proposed amendments to individual sections, which are discussed in the relevant sections below. To the extent the Commission did not receive comments objecting to the Proposal's general cost-benefit consideration, or to its cost-benefit consideration of specific sections, the Commission views the absence of comment as affirmation that the Proposal's consideration of costs and benefits was sound, unless otherwise stated below.
The Commission also notes, with one exception discussed in section VII.C.5.a below, it did not receive specific data or information regarding costs and benefits from commenters in response to its requests for such information in the Proposal.
The Commission is changing § 45.3 to (i) remove the requirement for SEFs, DCMs, and reporting counterparties to report separate PET and confirmation data reports; (ii) extend the deadline for reporting required swap creation data and allocations to T+1 or T+2, depending on the reporting counterparty; (iii) remove the requirement for SDRs to map allocations; and (iv) remove the international swap reporting requirements.
The Commission believes: (i) Single required creation data report will reduce complexity for reporting counterparties, as well as for the Commission; (ii) extending the deadline to report required swap creation data and allocations will improve data quality without impacting the Commission's ability to perform its regulatory responsibilities; (iii) the requirements for SDRs to map allocations and the international swap requirements are unnecessary.
The Commission is also updating the swap data elements in appendix 1, which existing and amended § 45.3 require SEFs, DCMs, and reporting counterparties report to SDRs in the manner provided in § 45.13(b).
Requiring a single confirmation data report for SEFs, DCMs, and reporting counterparties will benefit SDRs, SEFs, DCMs, and reporting counterparties by reducing the number of swap data reports being sent to and stored by SDRs. An analysis of SDR data by Commission staff found this change is likely to significantly reduce reported messages, which benefits the reporting parties sending data, and the SDRs who ingest, validate and store the data. The analysis showed 26% of all swap messages received by the Commission from DTCC, ICE, and CME in December of 2019 (48 million records in total) were separate PET and confirm messages, which means this amendment could reduce overall messages reported to and stored by SDRs by approximately 13% overall.
Extending the deadline to report required swap creation data will benefit SDRs, SEFs, DCMs, and reporting counterparties by giving SEFs, DCMs, and reporting counterparties more time to report swap data to SDRs, likely reducing the number of errors SDRs would need to follow-up on with reporting entities. Since reporting data ASATP requires reporting systems to monitor activity and report in real-time, the new deadline will also benefit SDRs, SEFs, DCMs, and reporting counterparties by allowing them to implement a simpler data reporting workflow that assembles and submits data once per day.
Removing the requirements to map allocations and international swaps will benefit SDRs by removing the need to manage separate processes to maintain this information. SEFs, DCMs, and reporting counterparties will benefit from reporting allocations directly via swap data reporting, and no longer reporting information about international swaps that will be rendered unnecessary given the UTI standards.
Through updating and further specifying the swap data elements required to be reported to SDRs, the Commission will benefit from having swap data that is more standardized, accurate, and complete across SDRs. As discussed in section V above, the Commission's use of the data to fulfill its regulatory responsibilities has been complicated by varying degrees of compliance with swap data standards both within and across SDRs.
The Commission expects the initial cost of updating systems to adopt the changes in § 45.3—outside of updating the data elements in appendix 1—to be small.
In both cases, the changes will reduce complexity and software functionality. Reporting entities will no longer have to generate and submit multiple messages, which will require limited cost and effort to implement. SDRs will also require few, if any, updates to ingest fewer messages and will see data storage costs decline over time.
The Commission expects market participants to further mitigate costs by the fact they involve updates to current systems, rather than having to create new systems as most firms had to do when the CFTC first required swaps reporting. CFTC SMEs estimate the cost of these changes to be small, but not zero, for large reporting entities and SDRs due to the reduction in complexity and system features. However, over time, after entities implement these one-time system updates, the Commission expects SDRs, SEFs, DCMs, and reporting counterparties will recognize significant benefits through reduced costs and complexity associated with reporting streamlined data to SDRs.
The Commission received comments supporting its expectation that the changes to § 45.3 will improve data quality and reduce compliance and cost burdens. Specifically, DTCC believes these changes will improve data quality by reducing the number of corrections sent to the SDRs and streamline reporting for market participants.
Conversely, the Commission expects SEFs, DCMs, SDRs, and reporting counterparties will incur greater costs in response to the changes to the appendix 1 data elements in order to comply with § 45.3. Beyond the changes to appendix 1, the Commission expects SEFs, DCMs, SDRs, and reporting counterparties will update systems according to DMO's technical specification on website at
The three SDRs will need to update their systems to accept the updated swap data elements in appendix 1. SEFs, DCMs, and reporting counterparties will need to update systems to report the swap data elements in appendix 1 to SDRs. SDRs will also need to update systems to validate swap data pursuant to the validations requirements in § 49.10(c). The costs are likely to differ across entities but, depending on current systems, as indicated in the estimates detailed below, could be significant, before accounting for likely mitigating factors, also discussed below.
The Commission believes some factors will mitigate the costs to these entities. First, most of the swap data the Commission is further standardizing with updated appendix 1 is currently being reported to SDRs. Commission staff recognizes that data quality has improved over the past years as SDRs adopted more technical standards on their own. However, for certain assets classes, the Commission expects the changes from current practice could be more pronounced. Costs to standardize data elements that had not previously been standardized in certain asset classes like commodities, or adding new data elements would be costlier; although the reporting entity could mitigate costs if it already saves this information but either does not currently send it to an SDR or sends it in a non-standard format.
To the extent SDRs operate in multiple jurisdictions, ESMA already requires many of the swap data elements the Commission is adopting. An SDR presumably will spend fewer resources updating its systems for the changes in appendix 1 if it has already made these changes for European markets. Similarly, SEFs, DCMs, and reporting counterparties reporting to European TRs may have to spend fewer resources.
Additionally, after the updates are made, the Commission expects SDRs, SEFs, DCMs, and reporting counterparties will see an offsetting reduction in costs through reporting a more streamlined data set than what is currently being reported to SDRs. In addition, entities reporting in multiple jurisdictions will be able to report more efficiently as jurisdictions adopt the CDE Technical Guidance data elements.
Finally, the changes adopted to the swap data elements makes the part 43 swap transaction and pricing data elements a subset of the part 45 swap data elements. This means the changes to parts 43 and 45 will require technological changes that could merge two different data streams into one. For example, SDRs will have to adjust their extraction, transformation, and loading (“ETL”) process to accept feeds that comply with the new technical specification and validation conditions, but these changes will apply to data elements in both parts 43 and 45.
Because many of the changes SDRs will make to comply with part 45 will likely also help them comply with part 43, the Commission anticipates significantly lower aggregate costs for complying with both rules relative to the costs for parts 43 and 45 separately. For this reason, the costs described below may most accurately represent the full technological cost of satisfying the requirements for both final rules but for purposes of this section focus on the part 45 swap data elements.
Based on conversations with ODT SMEs experienced in designing data reporting, ingestion, and validation systems, Commission staff estimates the cost per SDR to be in a range of $144,000 to $505,000.
For reporting entities, the Commission estimates the cost per reporting entity to be in a range of $24,000 to $73,225.
The Commission received one comment, from CME, addressing these estimates.
In sum, for reasons discussed above and taking into account relevant comments, the Commission believes the expected benefits justify the final rule amendments notwithstanding their expected mitigated costs.
The Commission is amending § 45.4 to (i) remove the option for state data reporting; (ii) extend the deadline for reporting required swap continuation data to T+1 or T+2; (iii) remove the requirement for non-SD/MSP/DCO reporting counterparties to report valuation data quarterly; and (iv) require SD/MSP reporting counterparties to report margin and collateral data daily.
The Commission believes: (i) Removing state data reporting will reduce the number of messages being sent to and stored by SDRs; (ii) extending the deadline to report required swap continuation data will improve data quality without impacting the Commission's ability to perform its regulatory responsibilities; (iii) removing the valuation data reporting for non-SD/MSP/DCO reporting counterparties will reduce burdens for these counterparties, which tend to be smaller and less active in the swaps market; and (iv) requiring SD/MSP reporting counterparties to report margin and collateral daily is reasonable given the sophistication of their trading and reporting systems, especially on a T+1 timeline, and essential for the Commission to monitor risk.
Removing state data reporting will benefit reporting counterparties by reducing the number of messages they report to SDRs. This will also benefit SDRs by reducing the number of messages they need to ingest, validate, process, and store. In 2019, CFTC staff estimates the Commission received over 557 million swap messages from CME, DTCC, and ICE. Staff analysis from December 2019 shows over 50% of all records submitted were state data messages.
Extending the deadline to report required swap continuation data will benefit SDRs and reporting counterparties by reducing the number of validation errors SDRs must notify reporting counterparties about. Removing the requirement for non-SD/MSP/DCO reporting counterparties to report quarterly valuation data will reduce reporting costs for these estimated 1,585 counterparties, which tend to be smaller and less active in the swaps market. Because of their size, the Commission does not expect the lack of valuation data to inhibit the Commission's market oversight responsibilities.
ISDA-SIFMA note approximately 98% of uncleared swaps involve at least one SD. As such, this change will affect 2% of reported swaps, which they agree do not present systemic risk issues.
The Commission expects the initial costs of updating systems to adopt the changes in § 45.4 to range from low to moderate, offset by the decreased reporting burden for all reporting entities.
Non-SD/MSP/DCO reporting counterparties will need to update their systems to stop sending valuation data to SDRs. In contrast, SD/MSP reporting counterparties will need to program systems to begin reporting margin and collateral data in addition to valuation data. The T+1 reporting timeline mitigates this by allowing end-of-day data integration and validation processes as opposed to near-real-time integration, which, according to CFTC SMEs and staff conversations with industry participants, provides flexibility in how and when system resources are used to produce the reports and better aligns trade and collateral and margin data reporting streams. The Commission understands SD/MSP reporting counterparties currently have access to the data they need to report collateral and margin data and the costs lie in integrating that information with the swap data reporting stream. The cost of implementing these changes is expected to be fully contained in and a subset of the costs associated with implementing the updated data elements in appendix 1 detailed in section VII.C.5.a above. As a result, the Commission expects the cost of reporting daily collateral and margin data for SD/MSP reporting counterparties on a T+1 basis to be fully encapsulated by the effort to implement the updated data elements in appendix 1.
Additionally, over time, after these one-time system updates, the Commission expects SDRs, SEFs, DCMs, and reporting counterparties will recognize the full benefits of the reduced costs associated with reporting streamlined data to SDRs in a more reasonable time frame. While the Commission understands reporting margin and collateral data to SDRs will likely involve costs for the estimated 107 SD/MSP reporting counterparties, it is unlikely to occasion significant, if any material, additional costs for the SDRs serving EU jurisdictions. This is because ESMA currently requires the reporting of much of the same information to EU-registered TRs.
The Commission expects this could also mitigate the costs for most of the 107 SD/MSP reporting counterparties given that they are likely active in European swap markets and thus already comply with similar requirements. The Commission also expects, for the smaller remaining group of reporting entities not active in European swaps markets, each entity already has access to the collateral and margin information. Accordingly, for
The Commission received comments supporting its expectation these amendments will benefit the market and mitigate costs incurred. FIA agrees the quarterly valuation data reported by non-SD/MSP/DCO reporting counterparties is not integral to the CFTC's systemic risk monitoring and the benefit of collecting this data do not justify the cost incurred by the impacted market participants.
The Commission received 12 comments related to the daily collection of collateral and margin data from SD/MSP/DCO counterparties, with four in favor and eight opposed. Of the supportive comments, Markit addresses the expected costs by noting the daily submission of both cleared and uncleared collateral and margin data is more streamlined and efficient (and therefore cost-effective) than making reporting for cleared trades optional.
CME, Eurex, ICE DCOs, ISDA-SIFMA, and FIA raise concerns about duplicative reporting for DCOs regarding cleared swaps. Further, as noted in section II.D.4 above, the Commission acknowledges these concerns but believes the costs are warranted for uncleared swaps reported by SD/MSP reporting counterparties, as this information is not available elsewhere and is critical for monitoring systemic risk. For cleared swaps reported by DCOs, however, the Commission acknowledges the potential duplication with collateral and margin data reported by DCOs pursuant to part 39. While collateral and margin data is reported pursuant to part 39 using a different set of data elements than those contained in appendix 1, and collateral and margin data is reported for end-of-day positions pursuant to part 39 as opposed to a more granular transaction-by-transaction basis pursuant to part 45, the Commission believes the collateral and margin data reported by DCOs pursuant to part 39 is sufficiently similar to data reported pursuant to part 45 to meet the Commission's current needs.
In sum, for reasons discussed above and taking into account relevant comments, the Commission believes the expected benefits justify the final rule amendments notwithstanding their expected mitigated costs.
The Commission is amending § 45.5 to (i) require reporting parties use UTIs instead of USIs for new swaps; (ii) require financial entities to generate UTIs for off-facility swaps; and (iii) permit non-SD/MSP/DCO reporting counterparties that are not financial entities to generate UTIs themselves or ask their SDR to generate UTIs for off-facility swaps. In general, the Commission believes transitioning to the globally standardized UTI system will benefit SDRs, SEFs, DCMs, and reporting counterparties by reducing the complexity associated with reporting swaps to multiple jurisdictions.
The Commission believes amending § 45.5 will benefit SDRs by providing one identifier for multiple regulators to adopt to reduce the burdens associated with multiple jurisdictions requiring different, and possibly conflicting, identifiers. The Commission believes requiring SD/MSP and other financial entity reporting counterparties to generate UTIs for off-facility swaps will benefit SDRs by reducing the frequency with which they would be responsible for UTI generation, as compared to the current frequency with which they generate USIs.
The Commission believes permitting non-SD/MSP/DCO reporting counterparties that are not financial entities to either generate UTIs or ask their SDR to generate UTIs for off-facility swaps will benefit smaller, less-active swaps market participants by relieving them of the burden to generate UTIs unless they choose to do so. Non-financial entities may include end-users more likely to not maintain systems that automatically generate UTIs. Therefore, this group will benefit proportionally more from this change.
Permitting these entities to ask the SDRs to generate UTIs will maintain, but lower, an ancillary cost for the three SDRs that are currently required to generate USIs for off-facility swaps with non-SD/MSP reporting counterparties. The Commission believes giving these reporting counterparties the option, rather than a mandate, strikes the appropriate balance between avoiding undue costs for SDRs and significant burdens for the least-sophisticated market participants.
In general, the Commission expects the initial costs of updating systems to adopt UTIs will be small to moderate for most reporting entities and SDRs.
In addition, the Commission understands ESMA mandates UTIs. The Commission views this as a significant mitigating factor when assessing what, if any, additional burden SDRs serving multiple jurisdictions as well as reporting counterparties active in the European markets, will experience, since they have likely already updated their systems to meet the European standards.
Commenters support the Commission's expectation implementing the global standard would streamline reporting across jurisdictions, reduce costs overall, and benefit markets by facilitating more accurate global swap data aggregation.
Some commenters disagree with keeping SDRs as the UTI “generator of last resort.”
In sum, for reasons discussed above and taking into account relevant comments, the Commission believes the expected benefits justify the final rule amendments notwithstanding their expected mitigated costs.
The Commission is amending § 45.6 to (i) require SDs, MSPs, DCOs, SEFs, DCMs, and SDRs to maintain and renew LEIs; (ii) require financial entity reporting counterparties to use best efforts to cause LEIs to be issued for swap counterparties that do not have one and if those efforts fail, to promptly provide the identity and contact information of the counterparty to the Commission; and (iii) update unnecessary and outdated regulatory text. The Commission believes accurate LEIs are essential for the Commission to use swap data to fulfill its regulatory responsibilities.
Mandating LEI renewal will benefit the swaps market by improving the Commission's ability to analyze activity in the swaps market. Reference data provide valuable identification and relationship information about swap counterparties. Accurate reference data allow for robust analysis of risk concentration within and across entities, as well as a way to identify the distribution or transfer of risk across different legal entities under the same parent. The Commission believes accurate reference data is essential for it to satisfy its regulatory responsibilities because it clearly identify entities involved in the swaps market, as well as how these entities relate to one another—both key requirements for monitoring systemic risk and promoting fair and efficient markets. In addition, LEIs have already been broadly adopted in swaps markets and have reduced ambiguity for market participants previously using various unstandardized identifiers.
LEI renewals will impose some costs.
Requiring financial entities to endeavor to cause LEIs to be issued for swap counterparties that do not have one (and, if those efforts fail, to report the identity and contact information of the counterparty to the Commission) will both further the Commission's objective of monitoring risk in the swaps market and incentivize LEI registration for counterparties that have not yet obtained LEIs. However, the Commission recognizes this requirement imposes some costs on both the entity encouraged to obtain an LEI and the financial entity in verifying that its counterparties have valid LEIs and encouraging them to obtain one (or obtaining an LEI for them) if they do not and informing the Commission if the financial entity's efforts fail. As mentioned above, the cost to an entity to obtain an LEI is minor, and has trended down over time. Further, financial entities collect the same information during the onboarding process when entering into a swap contract with a new counterparty that is needed to obtain an LEI for the counterparty, a mitigating factor for the financial entities to the extent they must be required to encourage their counterparties to obtain LEIs (or obtain an LEI for them). The cost to notify the Commission if the financial entity's efforts fail is also expected to be low. The Commission expects both cases to impose a limited burden on swaps markets as the widespread adoption of the LEI standard continues.
The number of current swap counterparties without LEIs is difficult to estimate because of the lack of standardization of non-LEI identifiers. The Commission cannot determine whether non-LEI identifiers represent an entity that has already been assigned an LEI or whether two non-LEI identifiers are two different representations of the same entity. However, the Commission expects the number of counterparties currently without LEIs to be small, given the results of an analysis from December 2019 that showed 90% of all records reported had LEIs for both counterparties. More generally, any swap data that does not identify eligible counterparties with an LEI hinders the Commission's fulfillment of its regulatory mandates, including systemic risk monitoring. Given the low cost of registering for a new LEI listed above, the small number of remaining entities engaging in swap transactions without an LEI, and the limited amount of additional effort financial entities need to exert so that every LEI-eligible counterparty has an LEI, the Commission expects the overall cost of this amendment to be minimal.
The Commission received comments supporting its expectation that requiring the most systemically important swaps market participants to maintain and renew their LEIs will facilitate better aggregation of entities and more accurate analysis of swaps market activity, market concentration, risk transfer, and systemic risk. Commenters, including DTCC, GLEIF, XBRL, LCH, Chatham, and Eurex, all support the requirement for SDs, MSPs, DCOs, SEFs, DCMs, and SDRs to maintain and renew their LEIs to ensure their accuracy noting this improves transparency and aligns with the global adoption of LEIs.
In sum, for reasons discussed above and taking into account relevant comments, the Commission believes the expected benefits justify the final rule amendments notwithstanding their expected mitigated costs.
The Commission is amending § 45.10 to permit reporting counterparties to transfer swap data and swap transaction and pricing data between SDRs in revised § 45.10(d). To do so, reporting counterparties will need to notify the current SDR, new SDR, and non-reporting counterparty of the UTIs for the swaps being transferred and the date of transfer at least five business days before the transfer. Reporting counterparties will then need to report the change of SDR to the current SDR and the new SDR, and then begin reporting to the new SDR. The Commission believes the ability to change SDRs will benefit reporting counterparties by permitting them to choose the SDR that best fits their business needs.
The amendments to § 45.10(d) will benefit reporting counterparties by giving them the freedom to select the SDR that provides the best services, pricing, and functionality to serve their business needs instead of having to use the same SDR for the entire life of the swap. The Commission believes reporting counterparties could benefit through reduced costs if they had the ability to change to an SDR that provided services better calibrated to their business needs.
The amendments will impose costs on the three SDRs. SDRs will need to update their systems to permit reporting counterparties to transfer swap data and swap transaction pricing data in the middle of a swap's life cycle, rather than at the point of swap initiation. However, the Commission believes SDRs will be able to accommodate these changes after initial system updates since they are only slightly more burdensome than current onboarding practices for new clients at SDRs.
The Commission received comments supporting its expectation that market participants will benefit from the flexibility to change SDRs and the SDRs themselves will be able to accommodate the changes with minimal additional burden.
In sum, for reasons discussed above and taking into account relevant comments, the Commission believes the expected benefits justify the rule amendments notwithstanding their expected mitigated costs.
The Commission is removing the § 45.12 regulations permitting voluntary supplemental reporting. Existing § 45.12 permits voluntary supplemental reporting to SDRs and specifies counterparties must report USIs, LEIs, and an indication of jurisdiction as part of the supplementary report. Existing § 45.12 also requires counterparties correct errors in voluntary supplemental reports. The Commission believes removing voluntary supplemental reports will reduce unnecessary messages at SDRs that do not provide a clear regulatory benefit to the Commission.
Removing the option for voluntary supplemental reporting will benefit SDRs that will no longer need to take in, process, validate, and store the reports. This should reduce costs and any unnecessary complexities for SDRs concerning these reports that provide little benefit to the Commission.
The change could impose initial costs on SDRs. SDRs may need to update their systems to stop accepting these reports. However, the Commission expects these costs will be minimal and after the initial system updates, SDRs should see reduced costs by not having to accommodate these reports. CFTC SMEs estimate the cost of these changes to be small for large reporting entities and SDRs.
The Commission received comments from Eurex, ISDA-SIFMA, and NRECA-APPA in support of this amendment.
The Commission is amending § 46.3 to remove an exception for required swap continuation data reporting for pre-enactment and transition swaps. Existing § 46.3(a)(2) provides that reporting counterparties need to report only a subset of part 45 swap data elements when reporting updates to pre-enactment and transition swaps. The Commission is removing that exception to specify that reporting counterparties would report updates to pre-enactment and transition swaps according to part 45.
The Commission believes this is current practice for SDRs and reporting counterparties, and therefore should not impact costs or benefits to SDRs and reporting counterparties. The Commission did not receive any comments on the cost-benefit considerations for the proposed changes to § 46.3.
The Commission is updating § 46.10 to require reporting counterparties to use the required data standards outlined in § 45.13(a) and data elements in appendix 1 for reporting historical swaps to SDRs. The Commission believes reporting counterparties currently use the same data standards for both parts 45 and 46 reporting. This change will ensure that reporting counterparties continue to do so under the updated list of swap data elements in appendix 1 and the new technical specification.
SDRs and reporting counterparties will both incur costs in updating their part 46 reporting systems to report according to any of the changes to part 45 reporting. However, given the diminishing number of historical swaps that have not yet matured or been terminated, the Commission expects these costs will be negligible compared to the costs associated with complying with new data elements in appendix 1.
The Commission is removing § 46.11(b) to remove the option for state data reporting. This is consistent with the Commission's elimination of state data reporting in § 45.4. While the number of historical swaps that have not yet matured or been terminated is dwindling, SD/MSP and non-SD/MSP reporting counterparties would see a reduction in costs due to no longer having to submit daily reports for any open swaps.
The Commission is amending § 49.4 to (i) remove the erroneous requirement for SDRs to submit a statement to the Commission that the custodial SDR is authorized to make the withdrawing SDR's data and records available in accordance with § 1.44; and (ii) remove the § 49.4(a)(2) requirement that prior to filing a request to withdraw, a registered SDR file an amended Form SDR to update any inaccurate information and replace it with a new requirement for SDRs to execute an agreement with the custodial SDR governing the custody of the withdrawing SDR's data and records prior to filing a request to withdraw with the Commission. The Commission believes the amendments will simplify the regulations and help ensure that swap data is properly transferred to a different SDR when one SDR withdraws from registration.
The Commission believes SDRs will benefit from the removal of the unnecessary requirement to update Form SDR prior to withdrawing from registration. The swaps market will benefit from having an explicit regulatory requirement for an SDR withdrawing from registration to have an agreement with the custodial SDR regarding the withdrawing SDR's data and records. This will also benefit market participants by ensuring the preservation of historical swap data which will improve the Commission's oversight abilities and promote the health and integrity of swaps markets.
The Commission believes SDRs will not incur any material costs associated with the changes.
Most of the amendments to § 49.10 are non-substantive technical amendments. However, the Commission is adding new § 49.10(c) to require SDRs to validate SDR data. New § 49.10(c) will require that SDRs establish data validations. SDRs will also be required to send SEFs, DCMs, and reporting counterparties data validation acceptance and error messages that identify the validation errors. The Commission is prohibiting SDRs from rejecting a swap transaction and pricing data message if it was submitted jointly with a swap data message that contained a validation error.
SDRs, SEFs, DCMs, and reporting counterparties will benefit by having a single set of validation rules in the technical specification instead of the current environment where each SDR applies different validations they designed independently. A common set of validations specified in the technical data standards will also benefit market participants by streamlining the data reporting process for market participants and ensuring more accurate data which facilitates more effective market oversight by the Commission.
SDRs, SEFs, DCMs, and reporting counterparties will incur costs in updating their reporting systems to apply these validation rules.
The Commission received comments from FIA that they believe validations will improve data accuracy.
In sum, for reasons discussed above and taking into account relevant comments, the Commission believes the expected benefits justify the final rule amendments notwithstanding their expected mitigated costs.
The Dodd-Frank Act sought to promote the financial stability of the U.S., in part, by improving financial system accountability and transparency.
CEA section 15(a) requires the Commission to consider the costs and benefits of the proposed amendments to parts 45, 46, and 49 with respect to the following factors:
• Protection of market participants and the public;
• Efficiency, competitiveness, and financial integrity of markets;
• Price discovery;
• Sound risk management practices; and
• Other public interest considerations.
The Commission discusses the CEA section 15(a) factors below.
The Commission believes the reporting changes under parts 45, 46, and 49 will enhance protections already in place for market participants and the public. By lengthening reporting timeframes and standardizing data formats, the Commission believes it will receive more cohesive, more standardized, and, ultimately, more accurate data without sacrificing the ability to oversee the markets robustly. Higher-quality swap data will improve the Commission's oversight and enforcement capabilities, and, in turn, will aid it in protecting markets, participants, and the public in general.
The Commission believes the final rules will streamline reporting and improve efficiencies given the improved data standardization. By identifying reporting entities and more sharply defining reporting responsibilities by making DCO reporting duties clearer, the final rules strive to improve the reliability and consistency of swap data. This enhanced reliability, in turn, is an added support that might further lead to bolstering the financial integrity of swaps markets. Finally, the validation of swap data will improve the accuracy and completeness of swap data available to the Commission and will assist the Commission with, among other things, improved monitoring of risk exposures of individual counterparties, monitoring concentrations of risk exposure, and evaluating systemic risk.
The Commission does not believe the final rules will have a significant impact on price discovery.
The Commission believes the final rules will improve the quality of swap data reported to SDRs and, hence, improve the Commission's ability to monitor the swaps market, react to changes in market conditions, and fulfill its regulatory responsibilities generally. The Commission believes regulator access to high-quality swap data is essential for regulators to monitor the swaps market for systemic risk or unusually large concentrations of risk in individual swaps markets or asset classes.
The Commission believes the improved accuracy resulting from improvements to data entry by market participants and validation efforts by SDRs via the final rules has other public interest impacts including:
• Increased understanding for the public, market participants, and the Commission of the interaction between the swaps market, other financial markets, and the overall economy;
• Improved regulatory oversight and enforcement capabilities; and
• Enhanced information for the Commission and other regulators so that they may establish more effective public policies to monitor and, where necessary, reduce overall systemic risk.
CEA section 15(b) requires the Commission to take into consideration the public interest to be protected by the antitrust laws and endeavor to take the least anticompetitive means of achieving the objectives of the CEA, in issuing any order or adopting any Commission rule or regulation.
The Commission does not believe the changes to part 45 would result in anti-competitive behavior. The Commission believes the amendments to § 45.10(d) that would permit reporting counterparties to change SDRs would promote competition by encouraging SDRs to offer competitive pricing and services to encourage reporting counterparties to either stay customers or come to their SDR. The Commission did not receive any comments on the antitrust considerations in the Proposal.
Data recordkeeping requirements, Data reporting requirements, Swaps.
Data recordkeeping requirements, Data reporting requirements, Swaps.
Registration and regulatory requirements, Swap data repositories.
For the reasons stated in the preamble, the Commodity Futures Trading Commission amends 17 CFR chapter I as follows:
7 U.S.C. 6r, 7, 7a-1, 7b-3, 12a, and 24a, as amended by Title VII of the Wall Street Reform and Consumer Protection Act of 2010, Pub. L. 111-203, 124 Stat. 1376 (2010), unless otherwise noted.
(a) As used in this part:
(i) All life-cycle-event data for the swap; and
(ii) All swap valuation, margin, and collateral data for the swap.
(b)
(a)
(b)
(1) If the reporting counterparty is a swap dealer, major swap participant, or derivatives clearing organization, the reporting counterparty shall report required swap creation data electronically to a swap data repository in the manner provided in § 45.13(a) not later than the end of the next business day following the execution date.
(2) If the reporting counterparty is a non-SD/MSP/DCO counterparty, the reporting counterparty shall report required swap creation data electronically to a swap data repository in the manner provided in § 45.13(a) not later than the end of the second business day following the execution date.
(c)
(1)
(2)
(ii)
(d)
(e)
(2) The registered entity or reporting counterparty reporting required swap creation data pursuant to this section shall ensure that the same unique transaction identifier is recorded for the swap in both the swap data repository and the security-based swap data repository.
(f)
(1) For swaps executed on or pursuant to the rules of a swap execution facility or designated contract market, the swap execution facility or designated contract market shall choose the swap data repository;
(2) For all other swaps, the reporting counterparty, as determined in § 45.8, shall choose the swap data repository.
(a)
(b)
(1) The derivatives clearing organization that accepted the swap for clearing shall report all life-cycle-event data electronically to a swap data repository in the manner provided in § 45.13(a) not later than the end of the next business day following the day that
(2) In addition to all other required swap continuation data, life-cycle-event data shall include all of the following:
(i) The legal entity identifier of the swap data repository to which all required swap creation data for each clearing swap was reported by the derivatives clearing organization pursuant to § 45.3(b);
(ii) The unique transaction identifier of the original swap that was replaced by the clearing swaps; and
(iii) The unique transaction identifier of each clearing swap that replaces a particular original swap.
(c)
(1)
(ii) If the reporting counterparty is a non-SD/MSP/DCO counterparty, the reporting counterparty shall report life-cycle-event data electronically to a swap data repository in the manner provided in § 45.13(a) not later than the end of the second business day following the day that any life cycle event occurred.
(2)
(ii) If the reporting counterparty is a swap dealer or major swap participant, collateral data shall be reported electronically to a swap data repository in the manner provided in § 45.13(b) each business day.
The revisions and additions read as follows:
(a) * * *
(1) * * *
(i) The legal entity identifier of the swap execution facility or designated contract market; and
(b) * * *
(1) * * *
(i) The legal entity identifier of the reporting counterparty; and
(2) * * *
(ii) To the non-reporting counterparty to the swap, no later than the applicable deadline in § 45.3(b) for reporting required swap creation data; and
(c)
(1)
(i) The legal entity identifier of the swap data repository; and
(d)
(1) * * *
(i) The legal entity identifier of the derivatives clearing organization; and
(f)
(g)
(1) The legal entity identifier of the third-party service provider; and
(2) An alphanumeric code generated and assigned to that swap by the automated systems of the third-party service provider, which shall be unique with respect to all such codes generated and assigned by that third-party service provider.
(h)
Each swap execution facility, designated contract market, derivatives clearing organization, swap data repository, entity reporting pursuant to § 45.9, and counterparty to any swap that is eligible to receive a legal entity identifier shall obtain, maintain, and be identified in all recordkeeping and all swap data reporting pursuant to this part by a single legal entity identifier as specified in this section.
(a)
(b)
(c)
(d)
(2) Each swap dealer, major swap participant, swap execution facility, designated contract market, derivatives clearing organization, and swap data repository shall maintain and renew its legal identity identifier in accordance with the standards set by the Global Legal Entity Identifier System.
(3) Each financial entity reporting counterparty executing a swap with a counterparty that is eligible to receive a legal entity identifier, but has not been assigned a legal entity identifier, shall, prior to reporting any required swap creation data for such swap, use best efforts to cause a legal entity identifier to be assigned to the counterparty. If these efforts do not result in a legal entity identifier being assigned to the counterparty prior to the reporting of required swap creation data, the financial entity reporting counterparty shall promptly provide the identity and contact information of the counterparty to the Commission.
(4) For swaps previously reported pursuant to this part using substitute counterparty identifiers assigned by a swap data repository prior to Commission designation of a legal entity identifier system, each swap data repository shall map the legal entity identifiers for the counterparties to the substitute counterparty identifiers in the record for each such swap.
The revisions read as follows:
The determination of which counterparty is the reporting counterparty for each swap shall be made as provided in this section.
All swap transaction and pricing data and swap data for a given swap shall be reported to a single swap data repository, which shall be the swap data repository to which the first report of such data is made, unless the reporting counterparty changes the swap data repository to which such data is reported pursuant to paragraph (d) of this section.
(a)
(1) The swap execution facility or designated contract market shall report all swap transaction and pricing data and required swap creation data for a swap to a single swap data repository. As soon as technologically practicable after execution of the swap, the swap execution facility or designated contract market shall transmit to both counterparties to the swap, and to the derivatives clearing organization, if any, that will clear the swap, the identity of the swap data repository to which such data is reported.
(2) Thereafter, all swap transaction and pricing data, required swap creation data, and required swap continuation data for the swap shall be reported to that same swap data repository, unless the reporting counterparty changes the swap data repository to which such data is reported pursuant to paragraph (d) of this section.
(b)
(1) The reporting counterparty shall report all swap transaction and pricing data and required swap creation data to a single swap data repository. As soon as technologically practicable after execution, the reporting counterparty shall transmit to the other counterparty to the swap, and to the derivatives clearing organization, if any, that will clear the swap, the identity of the swap data repository to which such data is reported.
(2) Thereafter, all swap transaction and pricing data, required swap creation data, and required swap continuation data for the swap shall be reported to the same swap data repository, unless the reporting counterparty changes the swap data repository to which such data is reported pursuant to paragraph (d) of this section.
(c)
(1) The derivatives clearing organization that is a counterparty to such clearing swap shall report all swap transaction and pricing data and required swap creation data for that clearing swap to a single swap data repository. As soon as technologically practicable after acceptance of an original swap for clearing, or execution of a clearing swap that does not replace an original swap, the derivatives clearing organization shall transmit to the counterparty to each clearing swap the identity of the swap data repository to which such data is reported.
(2) Thereafter, all swap transaction and pricing data, required swap creation data and required swap continuation data for that clearing swap shall be reported by the derivatives clearing organization to the same swap data repository to which swap data has been reported pursuant to paragraph (c)(1) of this section, unless the reporting counterparty changes the swap data repository to which such data is reported pursuant to paragraph (d) of this section.
(3) For clearing swaps that replace a particular original swap, and for equal and opposite clearing swaps that are created upon execution of the same transaction and that do not replace an original swap, the derivatives clearing organization shall report all swap transaction and pricing data, required swap creation data, and required swap continuation data for such clearing swaps to a single swap data repository.
(d)
(1)
(2)
(i) The reporting counterparty shall report the change of swap data repository to the swap data repository to which the reporting counterparty is currently reporting swap transaction and pricing data and swap data as a life cycle event for such swap pursuant to § 45.4.
(ii) On the same day that the reporting counterparty reports required swap continuation data as required by paragraph (d)(2)(i) of this section, the reporting counterparty shall also report the change of swap data repository to the swap data repository to which swap transaction and pricing data and swap data will be reported going forward as a life cycle event for such swap pursuant to § 45.4. The required swap continuation data report shall identify the swap using the same unique transaction identifier used to identify the swap at the previous swap data repository.
(iii) Thereafter, all swap transaction and pricing data, required swap creation data, and required swap continuation data for the swap shall be reported to the same swap data repository, unless the reporting counterparty for the swap makes another change to the swap data repository to which such data is reported pursuant to paragraph (d) of this section.
(a) Should there be a swap asset class for which no swap data repository currently accepts swap data, each swap execution facility, designated contract market, derivatives clearing organization, or reporting counterparty required by this part to report any required swap creation data or required swap continuation data with respect to a swap in that asset class must report that same data to the Commission.
(b) Data subject to this section shall be reported at times announced by the Commission and in an electronic file in a format acceptable to the Commission.
(a)
(2) In reporting required swap creation data and required swap continuation data to a swap data repository, each reporting counterparty, swap execution facility, designated contract market, and derivatives clearing organization making such report shall satisfy the swap data validation procedures of the swap data repository.
(3) In reporting swap data to a swap data repository as required by this part, each reporting counterparty, swap execution facility, designated contract market, and derivatives clearing organization shall use the facilities, methods, or data standards provided or required by the swap data repository to which the entity or counterparty reports the data.
(b)
(2) If a required swap creation data or required swap continuation data report to a swap data repository does not satisfy the data validation procedures of the swap data repository, the reporting counterparty, swap execution facility, designated contract market, or derivatives clearing organization required to submit the report has not yet satisfied its obligation to report required swap creation or continuation data in the manner provided by paragraph (a) of this section within the timelines set forth in §§ 45.3 and 45.4. The reporting counterparty, swap execution facility, designated contract market, or derivatives clearing organization has not satisfied its obligation until it submits the required swap data report in the manner provided by paragraph (a) of this section, which includes the requirement to satisfy the data validation procedures of the swap data repository, within the applicable time deadline set forth in §§ 45.3 and 45.4.
(a)
(1) The authority to determine the manner, format, coding structure, and electronic data transmission standards and procedures acceptable to the Commission for the purposes of § 45.11;
(2) The authority to determine whether the Commission may permit or require use by swap execution facilities, designated contract markets, derivatives clearing organizations, or reporting counterparties in reporting pursuant to § 45.11 of one or more particular data standards (such as FIX, FpML, ISO 20022, or some other standard), to accommodate the needs of different communities of users;
(3) The dates and times at which required swap creation data or required swap continuation data shall be reported pursuant to § 45.11; and
(4) The chief information officer shall publish from time to time in the
(b)
(1) The authority to publish the technical specifications providing the form and manner for reporting the swap data elements in appendix 1 to this part to swap data repositories as provided in § 45.13(a)(1);
(2) The authority to determine whether the Commission may permit or require use by swap execution facilities, designated contract markets, derivatives clearing organizations, or reporting counterparties in reporting pursuant to § 45.13(a)(1) of one or more particular data standards (such as FIX, FpML, ISO 20022, or some other standard), to accommodate the needs of different communities of users;
(3) The dates and times at which required swap creation data or required swap continuation data shall be reported pursuant to § 45.13(a)(1); and
(4) The Director of the Division of Market Oversight shall publish from time to time in the
Appendix 1 to Part 45—Swap Data Elements
Title VII, sections 723 and 729, Pub. L. 111-203, 124 Stat. 1738.
The revisions and additions read as follows:
(a) As used in this part:
(b)
The revisions read as follows:
(a) * * *
(2) * * *
(i) For each uncleared pre-enactment or transition swap in existence on or after April 25, 2011, throughout the existence of the swap following the compliance date, the reporting counterparty must report all required swap continuation data as required by part 45 of this chapter.
* * * In reporting required swap continuation data as required by this part, each reporting counterparty shall comply with the required data standards set forth in part 45 of this chapter, including those set forth in § 45.13(a) of this chapter.
The revision reads as follows:
(b) Each counterparty to a pre-enactment or transition swap that is not the reporting counterparty as determined pursuant to § 46.5, and that discovers any error or omission with respect to any data for a pre-enactment or transition swap reported to a swap data repository for that swap, shall promptly notify the reporting counterparty of each such error or omission. As soon as technologically practicable after receiving such notice, the reporting counterparty shall report a correction of each such error or omission to the swap data repository.
7 U.S.C. 1a, 2(a), 6r, 12a, and 24a, as amended by Title VII of the Wall Street Reform and Consumer Protection Act, Pub. L. 111-203, 124 Stat. 1376 (Jul. 21, 2010), unless otherwise noted.
The additions read as follows:
(a) * * *
The revision reads as follows:
(a) * * *
(2) Prior to filing a request to withdraw, a swap data repository shall execute an agreement with the custodial swap data repository governing the custody of the withdrawing swap data repository's data and records. The custodial swap data repository shall retain such records for at least as long as the remaining period of time the swap data repository withdrawing from registration would have been required to retain such records pursuant to this part.
(a)
(2)
(b)
(c)
(1)
(2)
(3)
(d)
(e) [Reserved]
(f)
The following appendices will not appear in the Code of Federal Regulations.
On this matter, Chairman Tarbert and Commissioners Quintenz, Behnam, Stump, and Berkovitz voted in the affirmative. No Commissioner voted in the negative.
I am pleased to support today's final swap data reporting rules under Parts 43, 45, and 49 of the CFTC's regulations, which are foundational to effective oversight of the derivatives markets. As I noted when these rules were proposed in February, “[d]ata is the lifeblood of our markets.”
In the month following our data rule proposals, historic volatility caused by the coronavirus pandemic rocketed through our derivatives markets, affecting nearly every asset class.
But data reporting is not just about mitigating systemic risk. Vibrant derivatives markets must be open and free, meaning transparency is a critical component of any reporting system. Price discovery requires robust public reporting that supplies market participants with the information they need to price trades, hedge risk, and supply liquidity. Today we double down on transparency, ensuring that public reporting of swap transactions is even more accurate and timely. In particular, our final rules adjust certain aspects of the Part 43 proposal's block-trade
Promoting clarity in our markets also demands that we, as an agency, have clear goals in mind. Today's final swap data reporting rules reflect a hard look at the data we need and the data we collect, building on insights gleaned from our own analysis as well as feedback from market participants. The key point is that more data does not necessarily mean better information. Instead, the core of an effective data reporting system is focus.
As Aesop reminds us, “Beware lest you lose the substance by grasping at the shadow.”
That last point is worth highlighting: Our final swap data reporting rules account for market participants both within and outside the United States. A diversity of market participants, some of whom reside beyond our borders and are accountable to foreign regulatory regimes, contribute to vibrant derivatives markets. But before today, inconsistent international rules meant some swap dealers were left to navigate what I have called “a byzantine maze of disparate data fields and reporting timetables” for the very same swap.
It is important to understand the specific function of each of the three swap data
Second, Part 45 relates to the
Finally, Part 49 requires
Today's final swap data reporting rules are designed to fulfill our agency's first Strategic Goal: to strengthen the resilience and integrity of our derivatives markets while fostering the vibrancy.
Justice Brandeis's words also resonate across other areas of the final swap data reporting rules. The final swap data reporting rules enhance transparency to the public of pricing and trade data.
A critical aspect of the final Part 43 rule is the issue of block trades and dissemination delays. When the Part 43 proposal was issued, I noted that “[o]ne of the issues we are looking at closely is whether a 48-hour delay for block trade reporting is appropriate.”
The final Part 43 rule also changes the threshold for block trade treatment, raising the amount needed from a 50% to 67% notional calculation. It also increases the threshold for capping large notional trades from 67% to 75%. These changes will enhance market transparency by applying a stricter standard for blocks and caps, thereby enhancing public access to swap trading data. At the same time, the rule reflects serious consideration of how these thresholds are calculated, particularly for block trades. In excluding certain option trades and CDS trades around the roll months from the 67% notional threshold for blocks, the final rule helps ensure that dissemination delays have their desired effect of preventing front-running and similar disruptive activity.
The swaps market is highly complex, reflecting a nearly endless array of transaction structures. Part 43 takes these differences into account in setting forth the public reporting requirements for price and transaction data. For example, post-priced swaps are valued after an event occurs, such as the ringing of the daily closing bell in an equity market. As it stands today, post-priced swaps often appear on the public tape with no corresponding pricing data—rendering the data largely unusable. The final Part 43 rule addresses this data quality issue and improves price discovery by requiring post-priced swaps to appear on the public tape after pricing occurs.
The final Part 43 rule also resolves an issue involving the reporting of prime-brokerage swaps. The current rule requires that offsetting swaps executed with prime brokers—in addition to the initial swap reflecting the actual terms of trade—be reported on the public tape. This duplicative reporting obfuscates public pricing data by including prime-broker costs and fees that are unrelated to the terms of the swap. As I explained when the rule was proposed, cluttering the public tape with duplicative or confusing data can impair price discovery.
Data is only as useful as it is accurate. The final Part 49 rule establishes an efficient framework for verifying SDR data accuracy and correcting errors, which serves both regulatory oversight and public price discovery purposes.
Today's final swap data reporting rules improve the regulatory experience for market participants at home and abroad in several key ways, advancing the CFTC's third Strategic Goal.
As I stated at the proposal stage, “[s]implicity should be a central goal of our swap data reporting rules.”
We resolve this situation today by replacing the sprawling mass of disparate SDR fields—sometimes running into the hundreds or thousands—with 128 that are important to the CFTC's oversight of the swaps markets. These fields reflect an honest look at the data we are collecting and the data we can use, ensuring that our market participants are not burdened with swap reporting obligations that do not advance our statutory mandates.
The swaps markets are integrated and global; our data rules must follow suit.
Data harmonization is not just good for market participants: it also advances the CFTC's vision of being the global standard for sound derivatives regulation.
In addition to certain CDE fields, the final Part 45 rule also adopts other important features of the CPMI-IOSCO Technical Guidance, such as the use of a Unique Transaction Identifier (UTI) system in place of today's Unique Swap Identifier (USI) system. This change will bring the CFTC's swap data reporting system in closer alignment with those of other regulators, leading to better data sharing and lower burdens on market participants.
Last, the costs of altering data reporting systems makes implementation timeframes especially important. To that effect, the CFTC has worked with ESMA to bring our jurisdictions' swap data reporting compliance timetables into closer harmony, easing transitions to new reporting systems.
The final Part 49 rule has changed since the proposal stage to facilitate easier verification of SDR data by swap dealers. Based on feedback we received, the final rule now requires SDRs to provide a mechanism for swap dealers and other reporting counterparties to access the SDR's data for their open swaps to verify accuracy and address errors. This approach replaces a message-based system for error identification and correction, which would have produced significant implementation costs without improving error remediation. The final rule achieves the goal—data accuracy—with fewer costs and burdens.
I have long said that if our derivatives markets are not working for agriculture, then they are not working at all.
The derivatives markets run on data. They will be even more reliant on it in the future, as digitization continues to sweep through society and industry. I am pleased to support the final rules under Parts 43, 45, and 49, which will help ensure that the CFTC's swap data reporting systems are effective, efficient, and built to last.
I am pleased to support these amendments to part 45 regulatory reporting, which hopefully represent the beginning of the end of this agency's longstanding efforts to collect and utilize accurate, reliable swap data to further its regulatory mandates.
There is frequently a trade-off between being first and being right. That is especially true when it comes to regulation and specifically true when it comes to the CFTC's historical approach to data reporting. Although the CFTC was the first regulator in the world to implement swap data reporting requirements, it did so only in a partial, non-descriptive, and non-technical fashion, which has led to the fact that, even today—more than 10 years after Dodd Frank—the Commission has great difficulty aggregating and analyzing data for uncleared swaps across swap data repositories (SDRs).
Since the CFTC first implemented its swap data reporting requirements, the CFTC has continued to lead global efforts to reach international consensus on those reporting requirements so that derivatives regulators can finally get a clear picture of the uncleared swaps landscape. I would like to recognize the diligent efforts of DMO staff to finally get us over the finish line.
Today's amendments to part 45 regulatory reporting will provide the Commission with the homogeneous data it needs to readily analyze swap data for both cleared and uncleared swaps across jurisdictions. The final rule eliminates unnecessary reporting fields and implements internationally agreed to “critical data elements” (CDE fields) consistently with the detailed technical standards put forth by CPMI-IOSCO.
The final rule also provides reporting counterparties with a longer time to report trades accurately to an SDR by moving to a “T+1” reporting timeframe for swap dealer (SD), derivatives clearing organization (DCO), and swap execution facility (SEF) reporting parties, and a “T+2” reporting timeframe for non-SD/DCO/SEF reporting counterparties. I have long supported providing additional time for market participants to meet their regulatory reporting obligations given it is a matter of being right, not first. A later regulatory reporting deadline will help counterparties report the trade correctly the first time, instead of reporting an erroneous trade that then needs to be corrected later. This change also more closely harmonizes the CFTC's and ESMA's reporting deadlines.
For the first time, the final rule also requires SD reporting counterparties to report daily margin and collateral information for uncleared swaps to the Commission. However, the final rule would not require DCO reporting parties to report margin and collateral information with respect to cleared swaps. Instead, the Commission will continue to rely on the comprehensive margin and collateral data reported by DCOs pursuant to part 39. Importantly, in order to alleviate burdens on small reporting counterparties, non-SD/MSP reporting counterparties are not required to report valuation, margin, or collateral information to the Commission.
Although this final rule implements the lion's share of regulatory reporting requirements, it is not quite the capstone of the Commission's reporting efforts. The CDE technical guidance did not harmonize many data elements that are relevant to the physical commodity and equity swap asset classes. More work remains to be done with respect to how certain data elements should be reported, including how the prices and quantities of physical commodity swaps should be reported and how swaps on customized equity baskets should be represented. I know DMO will continue to play an active role through CPMI-IOSCO's CDE governance process to ensure that additional guidance and specificity are provided regarding the data elements for these asset classes.
I support the CFTC's efforts to adopt the CDE fields—the most basic data elements that are critical to the analysis and supervision of swaps activities—in a manner identical to other jurisdictions' reporting fields. Over time and through cooperative arrangements with other jurisdictions, global aggregation and measurement of risk, including counterparty credit risk, can become a reality. However, as the Commission moves closer to achieving its goal of global data harmonization, in my opinion, it should keep in mind that the benefits of harmonization should always be balanced against the burdens and practical realities facing reporting counterparties. I think the final rule before us today strikes an appropriate balance on this point.
I respectfully concur in the Commission's amendments to its regulations regarding real-time public reporting, recordkeeping, and swap data repositories. The three rules being
But the road really goes back much further than that, to the time prior to the 2008 financial crisis, when swaps were largely exempt from regulation and traded exclusively over-the-counter.
In the aftermath of the financial crisis, Congress enacted the Dodd-Frank Wall Street Reform and Consumer Protection Act in 2010 (Dodd-Frank Act).
Among many critically important statutory changes, which have shed light on the over-the-counter derivatives markets, Title VII of the Dodd-Frank Act amended the Commodity Exchange Act (“CEA” or “Act”) and added a new term to the Act: “real-time public reporting.”
As we amend these rules, I think it is important that we keep in mind the Dodd-Frank Act's emphasis on transparency, and what transpired to necessitate that emphasis. However, the Act is also clear that its purpose, in regard to transparency and real time public reporting, is to authorize the Commission to make swap transaction and pricing data available to the public “as the Commission determines appropriate to enhance price discovery.”
Today's final rules amending the swap data and recordkeeping and reporting requirements also culminate a multi-year undertaking by dedicated Commission staff and our international counterparts working through the Committee on Payments and Market Infrastructures and the International Organization of Securities Commissions working group for the harmonization of key over-the-counter derivatives data elements. The amendments benefit from substantial public consultation as well as internal data and regulatory analyses aimed at determining, among other things, how the Commission can meet its current data needs in support of its duties under the CEA. These include ensuring the financial integrity of swap transactions, monitoring of substantial and systemic risks, formulating bases for and granting substituted compliance and trade repository access, and entering information sharing agreements with fellow regulators.
I wish to thank the responsible staff in the Division of Market Oversight, as well as in the Offices of International Affairs, Chief Economist, and General Counsel for their efforts and engagement over the last several years as well as their constructive dialogues with my office over the last several months. Their timely and fulsome responsiveness amid the flurry of activity at the Commission as we continue to work remotely is greatly appreciated.
The final rules should improve data quality by eliminating duplication, removing alternative or adjunct reporting options, utilizing universal data elements and identifiers, and focusing on critical data elements. To the extent the Commission is moving forward with mandating a specific data standard for reporting swap data to swap data repositories (“SDRs”), and that the standard will be ISO 20022, I appreciate the Commission's thorough discussion of its rationale in support of that decision. I also commend Commission staff for its demonstrated expertise in incorporating the mandate into the regulatory text in a manner that provides certainty while acknowledging that the chosen standard remains in development.
The rules provide clear, reasonable and universally acceptable reporting deadlines that not only account for the minutiae of local holidays, but address the practicalities of common market practices such as allocation and compression exercises.
I am especially pleased that the final rules require consistent application of rules across SDRs for the validation of both Part 43 and Part 45 data submitted by reporting counterparties. I believe the amendments to part 49 set forth a practical approach to ensuring SDRs can meet the statutory requirement to confirm the accuracy of swap data set forth in CEA section 21(c)
I appreciate that the Commission considered and received comments regarding whether to require reporting counterparties to indicate whether a specific swap: (1) Was entered into for dealing purposes (as opposed to hedging, investing, or proprietary trading); and/or (2) needs not be considered in determining whether a person is a swap dealer or need not be counted towards a person's
Thank you again to the staff who worked on these rules. I support the overall vision articulated in these several rules and am committed to supporting the acquisition and development of information technology and human resources needed for execution of that vision. As data forms the basis for much of what we do here at the Commission, especially in terms of identifying, assessing, and monitoring risk, I look forward to future discussions with staff regarding how the CFTC's Market Risk Advisory Committee which I sponsor may be of assistance.
I support today's final rules amending the swap data reporting requirements in parts 43,
The Commission must have accurate, timely, and standardized data to fulfill its customer protection, market integrity, and risk monitoring mandates in the Commodity Exchange Act (“CEA”).
As enacted by the Dodd-Frank Act, CEA section 2(a)(13)(G) directs the CFTC to establish real-time and comprehensive swap data reporting requirements, on a swap-by-swap basis. CEA section 21 establishes SDRs as the statutory entities responsible for receiving, storing, and facilitating regulators' access to swap data. The Commission began implementing these statutory directives in 2011 and 2012 in several final rules that addressed regulatory and real-time public reporting of swaps; established SDRs to receive data and make it available to regulators and the public; and defined certain swap dealer (“SD”) and major swap participant (“MSP”) reporting obligations.
The Commission was the first major regulator to adopt data repository and swap data reporting rules. Today's final rules are informed by the Commission's and the market's experience with these initial rules. Today's revisions also reflect recent international work to harmonize and standardize data elements.
Price transparency fosters price competition and reduces the cost of hedging. In directing the Commission to adopt real-time public reporting regulations, the Congress stated “[t]he purpose of this section is to authorize the Commission to make swap transaction and pricing data available to the public in such form and at such times as the Commission determines appropriate
The Commission's proposed rule for block trades included two significant amendments to part 43: (1) Refined swap categories for calculating blocks; and (2) a single 48-hour time-delay for reporting all blocks. In addition, the proposed rule would give effect to increased block trade size thresholds from 50% to 67% of a trimmed (excluding outliers) trade data set as provided for in the original part 43. The increases in the block sizing thresholds and the refinement of swap categories were geared toward better meeting the statutory directives to the Commission to enhance price discovery through real-time reporting while also providing appropriate time delays for the reporting of swaps with very large notional amounts,
Although I supported the issuance of the proposed rule, I outlined a number of concerns with the proposed blanket 48-hour delay. As described in the preamble to the part 43 final rule, a number of commenters supported the longer delay as necessary to facilitate the laying off of risk resulting from entering into swaps in illiquid markets or with large notional amounts. Other commenters raised concerns that such a broad, extended delay was unwarranted and could impede, rather than foster, price discovery. The delay also would provide counterparties to large swaps with an information advantage during the 48-hour delay.
The CEA directs the Commission to provide for both real-time reporting and appropriate block sizes. In developing the final rule the Commission has sought to achieve these objectives.
As described in the preamble, upon analysis of market data and consideration of the public comments, the Commission has concluded that the categorization of swap transactions and associated block sizes and time delay periods set forth in the final rule strikes an appropriate balance to achieve the statutory objectives of enhancing price discovery, not disclosing “the business transactions and market positions of any person,” preserving market liquidity, and providing appropriate time delays for block transactions. The final part 43 includes a mechanism for regularly reviewing swap transaction data to refine the block trade sizing and reporting delays as appropriate to maintain that balance.
I have consistently supported the use of the best available data to inform Commission rulemakings, and the periodic evaluation and updating of those rules, as new data becomes available. The preamble to the final rules for part 43 describes how available data, analytical studies, and public comments informed the Commission's rulemaking. Following press reports about the contents of the final rule, the Commission recently has received comments from a number of market participants raising issues with the reported provisions in the final rule. These commenters have expressed concern that the reported reversion of the time delays for block trades to the provisions in the current regulations, together with the 67% threshold for block trades, will impair market liquidity, increase costs to market participants, and not achieve the Commission's objectives of increasing price transparency and competitive trading of swaps. Many of these commenters have asked the Commission to delay the issuance of the final rule or to re-propose the part 43 amendments for additional public comments.
I do not believe it would be appropriate for the Commission to withhold the issuance of the final rule based on these latest comments and at this late stage in the process. The Commission has expended significant time and resources in analyzing data and responding to the public comments received during the public comment period. As explained in the preamble, the Commission is already years behind its original schedule for revising the block thresholds. I therefore do not support further delay in moving forward on these rules.
Nonetheless, I also support evaluation and refinement of the block reporting rules, if appropriate, based upon market data and analysis. The 30-month implementation schedule for the revised block sizes provides market participants with sufficient time to review the final rule and analyze any new data. Market participants can then provide their views to the Commission on whether further, specific adjustments to the block sizes and/or reporting delay periods may be appropriate for certain instrument classes. This implementation period is also sufficient for the Commission to consider those comments and make any adjustments as may be warranted. The Commission should consider any such new information in a transparent, inclusive, and deliberative manner. Amended part 43 also provides a process for the Commission to regularly review new data as it becomes available and amend the block size thresholds and caps as appropriate.
The International Swaps and Derivatives Association, Inc. (“ISDA”) and the Securities Industry and Financial Markets Association (“SIFMA”) commented that higher block size thresholds may put swap execution facilities (“SEFs”) organized in the United States at a competitive disadvantage as compared to European trading platforms that provide different trading protocols and allow longer delays in swap trade reporting. SIFMA and
The migration of swap trading from SEFs to non-U.S. trading platforms to avoid U.S. trade execution and/or swap reporting requirements would diminish the liquidity in and transparency of U.S. markets, to the detriment of many U.S. swap market participants. Additionally, as the ISDA/SIFMA comment letter notes, it would provide an unfair competitive advantage to non-U.S. trading platforms over SEFs registered with the CFTC, who are required to abide by CFTC regulations. Such migration would fragment the global swaps market and undermine U.S. swap markets.
I have supported the Commission's substituted compliance determinations for foreign swap trading platforms in non-U.S. markets where the foreign laws and regulations provide for comparable and comprehensive regulation. Substituted compliance recognizes the interests of non-U.S. jurisdictions in regulating non-U.S. markets and allows U.S. firms to compete in those non-U.S. markets. However, substituted compliance is
The Commission should be vigilant to protect U.S. markets and market participants. The Commission should monitor swap data to identify whether any such migration from U.S. markets to overseas markets is occurring and respond, if necessary, to protect the U.S. swap markets.
I also support today's final rules amending the swap data reporting, verification, and SDR registration requirements in parts 45, 46, and 49 of the Commission's rules. These regulatory reporting rules will help ensure that reporting counterparties, including SDs, MSPs, designated contract markets (“DCMs”), SEFs, derivatives clearing organizations (“DCOs”), and others report accurate and timely swap data to SDRs. Swap data will also be subject to a periodic verification program requiring the cooperation of both SDRs and reporting counterparties. Collectively, the final rules create a comprehensive framework of swap data standards, reporting deadlines, and data validation and verification procedures for all reporting counterparties.
The final rules simplify the swap data reports required in part 45, and organize them into two report types: (1) “Swap creation data” for new swaps; and (2) “swap continuation data” for changes to existing swaps.
The amended reporting deadlines will result in a moderate time window where swap data may not be available to the Commission or other regulators with access to an SDR. However, it is likely that they will also improve the accuracy and reliability of data. Reporting parties will have more time to ensure that their data reports are complete and accurate before being transmitted to an SDR.
The final rules in part 49 will also promote data accuracy through validation procedures to help identify errors when data is first sent to an SDR, and periodic reconciliation exercises to identify any discrepancies between an SDR's records and those of the reporting party that submitted the swaps. The final rules provide for less frequent reconciliation than the proposed rules, and depart from the proposal's approach to reconciliation in other ways that may merit future scrutiny to ensure that reconciliation is working as intended. Nonetheless, the validation and periodic reconciliation required by the final rule is an important step in ensuring that the Commission has access to complete and accurate swap data to monitor risk and fulfill its regulatory mandate.
The final rules also better harmonize with international technical standards, the development of which included significant Commission participation and leadership. These harmonization efforts will reduce complexity for reporting parties without significantly reducing the specific data elements needed by the Commission for its purposes. For example, the final rules adopt the Unique Transaction Identifier and related rules, consistent with CPMI-IOSCO technical standards, in lieu of the Commission's previous Unique Swap Identifier. They also adopt over 120 distinct data elements and definitions that specify information to be reported to SDRs. Clear and well-defined data standards are critical for the efficient analysis of swap data across many hundreds of reporting parties and multiple SDRs. Although data elements may not be the most riveting aspect of Commission policy making, I support the Commission's determination to focus on these important, technical elements as a necessary component of any effective swap data regime.
Today's Reporting Rules are built upon nearly eight years of experience with the current reporting rules and benefitted from extensive international coordination. The amendments make important strides toward fulfilling Congress's mandate to bring transparency and effective oversight to the swap markets. I commend CFTC staff, particularly in Division of Market Oversight and the Office of Data and Technology, who have worked on the Reporting Rules over many years. Swaps are highly variable and can be difficult to represent in standardized data formats. Establishing accurate, timely, and complete swap reporting requirements is a difficult, but important function for the Commission and regulators around the globe. This proposal offers a number of pragmatic solutions to known issues with the current swap data rules. For these reasons, I am voting for the final Reporting Rules.
Commodity Futures Trading Commission.
Final rule.
The Commodity Futures Trading Commission (“Commission” or “CFTC”) is amending its regulations to improve the accuracy of data reported to, and maintained by, swap data repositories (“SDRs”), and to provide enhanced and streamlined oversight over SDRs and data reporting generally. Among other changes, the amendments
Benjamin DeMaria, Special Counsel, Division of Market Oversight, (202) 418-5988,
Section 727 of the Dodd-Frank Act added section 2(a)(13)(G) to the Commodity Exchange Act (“CEA” or “Act”), which requires each swap—whether cleared or uncleared—to be reported to an SDR,
To register and maintain registration with the Commission, an SDR must comply with specific duties and core principles enumerated in CEA section 21 as well as other requirements that the Commission may prescribe by rule. In particular, CEA section 21(c) mandates that an SDR: (1) Accept data; (2) confirm with both counterparties the accuracy of submitted data; (3) maintain data according to standards prescribed by the Commission; (4) provide direct electronic access to the Commission or any designee of the Commission (including another registered entity); (5) provide public reporting of data in the form and frequency required by the Commission; (6) establish automated systems for monitoring, screening, and analyzing data (including the use of end-user clearing exemptions) at the direction of the Commission; (7) maintain data privacy; (8) make data available to other specified regulators, on a confidential basis, pursuant to CEA section 8,
Part 49 of the Commission's regulations implements the requirements of CEA section 21.
Since the Commission adopted its part 49 regulations in 2011, Commission staff has led many efforts to evaluate and improve the reporting of swap data and its accuracy. Commission staff leads or participates in several international regulatory working groups concentrating on harmonization of data reporting. Commission staff's efforts have also included the formation of an interdivisional staff working group to identify, and make recommendations to resolve, reporting challenges associated with certain swap data recordkeeping and reporting provisions.
Based on its efforts, the Commission determined that three conditions work in concert to achieve a higher degree of data accuracy: (i) SDR processes confirming the accuracy of data submitted; (ii) data reconciliation exercises by entities that reported data; and (iii) the prompt reporting of errors and omissions when discovered.
The Roadmap solicited public comment on how to improve data reporting and achieve the Commission's regulatory goals without imposing unnecessary burdens on market participants. Commission staff received numerous comments in response to the Roadmap that addressed data accuracy and confirmation of data reported to SDRs, among other subjects.
Based in part on these public comments and the Commission staff's review of these issues, the Commission issued a notice of proposed rulemaking (“Proposal”) on May 13, 2019 to address the Roadmap's SDR Operations Review goals.
In the Proposal, the Commission set forth a new swap data verification regime to replace existing requirements for swap data confirmation and proposed amendments to error correction requirements in parts 43, 45, and 49 of the Commission's regulations. The primary components of the proposed verification regime included: A requirement for an SDR to regularly distribute to reporting counterparties an open swaps report containing the data maintained by the SDR for a relevant reporting counterparty's open swaps; a requirement that a reporting counterparty reconcile the data in the open swaps reports with the reporting counterparty's own data; a requirement that a reporting counterparty provide the SDR with a verification of the data's accuracy or a notice of discrepancy; and a requirement that, in the event of a discrepancy, a reporting counterparty submit corrected data to the SDR within a specified time frame or, if it is unable to do so, inform Commission staff of the error, its scope, and the reporting counterparty's initial remediation plan.
In this final rulemaking, the Commission has determined to adopt the amendments as proposed, with certain exceptions. The Commission has determined, based, in part, on public comments,
Instead, under the final rules, an SDR must provide a mechanism for a reporting counterparty to access swap data maintained by the SDR for the reporting counterparty's open swaps. Further, the final rules require a reporting counterparty to verify the SDR's data by using the mechanism provided by the SDR to compare the swap data for open swaps maintained by the SDR with the reporting counterparty's own books and records for the swap data, and to submit corrected swap data, if necessary, to the SDR. The reporting counterparty must perform the verification at specified intervals and maintain a verification log that sets forth any errors discovered and corrections made by the reporting counterparty. The final rule also extends the time frame within which a reporting counterparty must correct an error or notify the Commission.
The Proposal also included various amendments and new regulations aimed at eliminating unduly burdensome requirements, streamlining and consolidating the provisions of part 49 and other Commission regulations applicable to SDRs, and enhancing the Commission's ability to fulfill its oversight obligations with respect to SDRs. The Commission is generally adopting those rules as proposed, with limited modifications in some cases to address public comments. Additionally, for the reasons discussed below, the Commission has determined not to finalize at this time its proposed amendments to § 49.13 and § 49.22 and its proposed additions to part 23.
Where possible, in developing the Proposal and in adopting final rules as set forth herein, the Commission has taken into consideration certain pertinent rules adopted by other regulators, including the European Securities and Markets Authority and the U.S. Securities and Exchange Commission (“SEC”). This is particularly the case for the SEC's regulations relating to the registration requirements, duties, and core principles applicable to security-based swap data repositories (“SBSDRs”)
The Commission proposed a general formatting change to the definitions in § 49.2(a). The defined terms in § 49.2(a) currently are numbered and arranged in alphabetical order. The Commission proposed to remove the numbering while still arranging the terms in § 49.2(a) in alphabetical order. Eliminating the numbering of defined terms in § 49.2(a) will reduce the need for the Commission to make conforming amendments to § 49.2(a) and other regulations when it amends § 49.2(a) in future rulemaking by adding or removing defined terms.
The Commission did not receive any comments on the proposed formatting changes to § 49.2(a). The Commission is adopting the formatting amendments to § 49.2(a) as proposed, with non-substantive editorial changes to conform the format to the current style conventions.
The Commission proposed non-substantive editorial and conforming amendments to certain definitions to provide clarity and for consistency with other Commission regulations.
Specifically, the Commission adopts the following amendments to definitions in § 49.2(a):
• Asset class: Modify the definition to conform the wording to the definition of “asset class” used in part 43.
• Commercial use: Modify the definition to use active instead of passive voice, and to change “use of swap data for regulatory purposes and/or responsibilities” to “use of SDR data for regulatory purposes and/or to perform its regulatory responsibilities.”
• Market participant: Change the term “swaps execution facilities” to “swap execution facilities,” to conform to CEA section 5h and other Commission regulations, and make the word “counterparties” singular.
• Non-affiliated third party: Clarify paragraph (3) to identify “a person jointly employed” by an SDR and any affiliate.
• Person associated with a swap data repository: Clarify that paragraph (3) includes a “jointly employed person.”
• Swap data: Modify the definition to more closely match the related definitions of “SDR data” and “swap transaction and pricing data” that are being added to § 49.2(a) and to incorporate the requirements to provide swap data to the Commission pursuant to part 49.
The Commission also is removing the word “capitalized” from § 49.2(b), to reflect that most defined terms used in part 49 are not capitalized in the text of part 49.
The Commission is also removing the term “registered swap data repository” from the definitions in § 49.2. In the Proposal, the Commission explained that the term “registered swap data repository” is not needed in part 49 because the defined term “swap data repository” already exists in § 1.3.
The Commission further explained that the inclusion of the word “registered” in “registered swap data repository” and the definition of the term
The Commission proposed to add the term “as soon as technologically practicable” as a defined term in § 49.2. The Proposal defined the term to mean “as soon as possible, taking into consideration the prevalence,
The Commission received several comments on the proposed definition. One comment generally supported standardizing definitions across the Commission's regulations.
The Commission is adopting the addition of “as soon as technologically practicable” as a defined term as proposed. The Commission notes that concomitant with adopting these final rules, the Commission is adopting final rules for § 43.2 and § 45.1, which both include the identical definition for this term.
The Commission proposed to add the term “non-swap dealer/major swap participant/derivatives clearing organization reporting counterparty” as a defined term in § 49.2. The Commission is not adopting this proposed definition.
The Commission proposed to add the term “open swap” as a defined term in § 49.2. The Proposal defined the term to mean an executed swap transaction that has not reached maturity or the final contractual settlement date, and has not been exercised, closed out, or terminated. Under this definition, the term “open swap” refers to swaps that are often colloquially called “alive.” The Commission noted in the Proposal that the definition is intended to have the same function as the definitions of “open swap”
The Commission received several comments on the proposed definition. One comment supported standardizing definitions across the Commission's rules, and supported the proposed definition for “open swap.”
The Commission proposed to add the term “reporting counterparty” as a defined term to § 49.2. This term would mean the counterparty responsible for reporting SDR data to an SDR pursuant to part 43, 45, or 46 of the Commission's regulations. The Proposal explained that this would standardize its meaning and use across the Commission's swap reporting regulations. The Commission also proposed to remove the term “reporting entity” from the definitions in § 49.2 because it is no longer necessary with the addition of “reporting counterparty” as a defined term.
Concomitant with the adoption of these final rules, the Commission also is adopting final rules amending § 43.2 and § 45.1. Those final rules both include a definition for the term “reporting counterparty” specific to part 43 and part 45, respectively. Current § 46.1 also includes a definition for the term.
The Commission notes that the reporting counterparty may not always be the entity reporting SDR data to the SDR, particularly for transactions executed on a swap execution facility (“SEF”) or designated contract market (“DCM”), but it is the counterparty responsible for the initial and/or subsequent SDR data reporting, pursuant to part 43, 45, or 46 of the Commission's regulations, as applicable to a particular swap. SEFs and DCMs are
The Commission did not receive any comments on the proposed definition of the term “reporting counterparty” and the related removal of the defined term “reporting entity.” The Commission is adopting these amendments as proposed, with minor, non-substantive editorial changes to conform the definition of “reporting counterparty” in § 49.2 to the definitions in §§ 43.2, 45.1, and 46.1, as discussed above. Accordingly, final § 49.2 includes the term “reporting counterparty” as a defined term, which means the counterparty required to report SDR data pursuant to part 43, 45, or 46 of 17 CFR chapter I. Final § 49.2 no longer includes the term “reporting entity” as a defined term.
The Commission proposed to add the term “SDR data” as a defined term in § 49.2. The Proposal defined the term to mean the specific data elements and information required to be reported to an SDR or disseminated by an SDR, pursuant to two or more of parts 43, 45, 46, and/or 49, as applicable in the context. The Commission noted that in this context, “disseminated” would include an SDR making swap data available to the Commission as required by part 49.
In the Proposal, the Commission noted that the proposed definition of “SDR data” would include multiple sources of data reported to the SDR or disseminated by the SDR. For example, “SDR data” could refer to all data reported or disseminated pursuant to parts 43, 45, and 46. It may also refer to data reported or disseminated pursuant to parts 45 and 46, depending on the context in which the term is used. This is in contrast with the proposed term “swap transaction and pricing data,” which, as defined in the Proposal, would only refer to data reported to an SDR or publicly disseminated by an SDR pursuant to part 43. It is also in contrast with the term “swap data,” which, as defined in the Proposal, would only refer to data reported to an SDR or made available to the Commission pursuant to part 45. In the Proposal, the Commission explained that consolidating references to the different types of data that must be reported to an SDR or disseminated by an SDR to the public or to the Commission into a single term would provide clarity throughout part 49.
The Commission received several comments on the proposed addition of the defined term “SDR data” and the proposed definition in § 49.2. One comment generally supported the proposed amendment.
The Commission is adopting the addition of the defined term “SDR data” to final § 49.2, as proposed. Accordingly, final § 49.2 includes the defined term “SDR data,” which is defined to mean the specific data elements and information required to be reported to a swap data repository or disseminated by a swap data repository pursuant to two or more of parts 43, 45, 46, and/or 49 of 17 CFR chapter I, as applicable in the context.
The Commission proposed to amend the existing definition of “SDR information” in § 49.2 to add the clause “related to the business of the swap data repository that is not SDR data” to the end of the definition. This change clarifies that the scope of SDR information is limited to information that the SDR receives or maintains related to its business that is not the SDR data reported to or disseminated by the SDR. SDR information would include, for example, SDR policies and procedures created pursuant to part 49.
The Commission proposed to add “swap transaction and pricing data” as a defined term in § 49.2 to increase consistency in terminology used in the Commission's swap reporting regulations. The Proposal defined the term to mean the specific data elements and information required to be reported to a swap data repository or publicly disseminated by a swap data repository pursuant to part 43 of this chapter, as applicable. Concomitant with adopting these final rules, the Commission is adopting final rules in § 43.2 that add “swap transaction and pricing data” as a defined term. As defined in final § 43.2, the term means all data elements for a swap in appendix A of this part that are required to be reported or publicly disseminated pursuant to this part. In order to increase consistency throughout its rules, the Commission adopts the addition of the defined term “swap transaction and pricing data” and the definition in § 49.2 as proposed.
One commenter stated that the definition of the term in § 49.2 should not include the clause “or publicly disseminated by a swap data repository.”
Section 49.3 sets forth the procedures and standard of approval for registration
Existing § 49.3(a)(5) requires an SDR to promptly file an amended Form SDR to update any information that becomes inaccurate before or after the SDR's application for registration is granted. In addition, the regulation requires an SDR to annually file an amendment on Form SDR within 60 days after the end of its fiscal year.
The Commission proposed to amend § 49.3(a)(5) to eliminate the requirements for an SDR that has been granted registration under § 49.3(a) to: (i) file an amended Form SDR if any of the information therein becomes inaccurate, and (ii) annually file an amended Form SDR.
The Commission is adopting the amendments to § 49.3(a)(5) and the conforming amendments to Form SDR and § 49.22(f)(2) as proposed in part and not adopting the amendments as proposed in part. The Commission is adopting the removal of the requirement to file an annual amendment to Form SDR because the Commission believes the annual Form SDR filing requirement is unnecessary and is duplicative of the requirement to file an amended Form SDR if any of the information in the Form SDR becomes inaccurate.
The Commission has, however, reconsidered the proposed removal of the requirement to file an amended Form SDR if any of the information in the Form SDR (including the Form SDR exhibits) becomes inaccurate and has determined not to finalize the proposed removal of this requirement. SDRs will continue to be required to file amendments to Form SDR as necessary after being granted registration under § 49.3(a). While the Commission stated in the Proposal that the Commission would have access to the information that would be updated in an amended Form SDR because an SDR would be required to file updates for some of the information with the Commission as a rule change under part 40 of the Commission's regulations and that, under proposed § 49.29, the Commission could require an SDR to file information demonstrating the SDR's compliance with its obligations under the CEA and Commission regulations,
Instead, the Commission believes that Commission staff would be more effectively alerted to changes to the information in Form SDR for compliance monitoring purposes by maintaining the existing requirement for SDRs to update any Form SDR information that is or that becomes inaccurate. The Commission also believes it would be more efficient for SDRs to continue to send the updated Form SDR information to the Commission as currently required, as opposed to the Commission requesting the SDRs to demonstrate compliance whenever the Commission needs to check whether the Form SDR information remains current. Under the proposed approach, for example, the Commission may need to require SDRs to provide an all-encompassing demonstration of compliance for all of the Form SDR information under § 49.29, as opposed to the SDRs only updating Form SDR information that has changed, as the SDRs regularly do under the existing requirement, because the Commission will not be aware of what information may or may not have changed. The Commission is therefore not adopting the proposed removal of the requirement for an SDR that is registered under § 49.3(a) to file an updated Form SDR when the information in its Form SDR is inaccurate or becomes inaccurate, and this existing requirement in § 49.3(a)(5) remains in effect.
The Commission requested comment on all aspects of the proposed changes to § 49.3(a)(5). Two comments supported the proposed amendments to § 49.3(a)(5).
One comment suggested that the Commission add the legal entity identifier (“LEI”) of the applicant into the Form SDR, stating that incorporating an applicant's LEI record in the form would make various information fields unnecessary, while making the information provided more standardized and accurate.
As explained above, the Commission agrees with the comments that supported the removal of the annual Form SDR update requirement and the Commission disagrees with the comments supporting the removal of the requirement to update Form SDR when the information is inaccurate. The Commission also disagrees with the suggestion regarding provisionally-registered SDRs. Final § 49.3(a)(5), as adopted, requires a provisionally-registered SDR to file an amended Form SDR if information in the form becomes inaccurate. The Commission notes that provisional registration is an interim status for applicants for registration, and the accuracy of information in the Form SDR of a provisionally-registered SDR is necessary for the Commission to make a determination regarding the SDR's application for full registration.
The Commission is also declining to adopt the suggestion to use the LEI of the applicant instead of various data fields in the Form SDR. While there may be benefits to doing so, the Commission believes the current format is more useful to Commission staff in reviewing applications for registration by providing the relevant entity names directly, without the need to reference the information underlying an LEI.
Section 49.5 sets forth requirements for an SDR that enters into an agreement involving the transfer of an equity interest of ten percent or more in the SDR.
Current § 49.5(a) requires an SDR to (i) notify the Commission of the agreement no later than the business day following the date of the agreement and; (ii) amend any information that is no longer accurate on Form SDR.
The Commission is amending § 49.5 to specify that the regulation applies to both direct and indirect transfers of ten percent or more of an equity interest in an SDR. As the Commission explained in the Proposal, indirect transfers of equity ownership (
In addition, the Commission is amending § 49.5 to extend the deadline by which an SDR must file an equity transfer notification and to specify that the SDR shall file the notice with the Secretary of the Commission and the Director of the Division of Market Oversight (“DMO”) via email. The Commission believes an SDR may need additional time to file the necessary documents, and ten business days provides greater flexibility without sacrificing the availability of information the Commission needs to conduct effective oversight of the SDR. The Commission also is removing the requirement for an SDR to amend information that is no longer accurate on Form SDR due to the equity interest transfer because the requirement is duplicative of other requirements.
Finally, the Commission is amending § 49.5(c) to simplify the certification and information requirements in the filing an SDR is required to make with the Commission following an equity interest transfer. The Commission believes these amendments provide the Commission with the pertinent information it needs to assess the impact of an equity interest transfer on the SDR's operations.
The Commission requested public comment on all aspects of proposed § 49.5. One comment supported the Commission's proposal to simplify § 49.5, stating that current requirements of the regulation are overly burdensome, and reserving authority for the Commission to request supporting documentation, rather than compelling specific document production, would satisfy the Commission's need for information.
The Commission proposed to amend § 49.6
Current § 49.6(a) provides that, in the event of a corporate transaction that creates a new entity as which an SDR operates, the SDR must request a transfer of its registration no later than 30 days after the succession.
Final § 49.6(a) instead requires an SDR seeking to transfer its registration to a new legal entity as a result of a corporate change to file a request for approval of the transfer with the Secretary of the Commission in the form and manner specified by the Commission. Examples of such corporate changes may include, but are not limited to, re-organizations, mergers, acquisitions, bankruptcy, or other similar events that result in the creation of a new legal entity for the SDR.
Final § 49.6(b) specifies that an SDR shall file a request for transfer of registration as soon as practicable prior to the anticipated corporate change.
Final § 49.6(c) sets forth the information that must be included in a request for transfer of registration, including, among other things, the underlying documentation that governs the corporate change, a description of the corporate change and its impact on the SDR and on the rights and obligations of market participants, governance documents of the transferee, and various representations by the transferee related to its ability to operate the SDR and comply with the Act and Commission regulations.
Final § 49.6(d) specifies that upon review of a request for transfer of registration, the Commission, as soon as practicable, shall issue an order either
The Commission requested public comment on all aspects of proposed § 49.6. One comment opposed the proposed amendments to § 49.6, asserting that the amendments will add uncertainty into the transfer process by making a transfer contingent upon obtaining prior Commission approval without specifying a deadline by which the Commission must approve or deny a request for transfer.
The Commission has determined to adopt the amendments to § 49.6 as proposed. With respect to the comment, the Commission recognizes that corporation transactions and reorganizations that involve the transfer of an SDR registration may arise without significant notice, and require certainty and prompt action by regulators. The Commission similarly has an interest in facilitating such transfers in order to maintain the operation of SDRs while also ensuring compliance with the applicable statutory and regulatory requirements. To that end, the Commission believes it is important to apply the information and procedural requirements set forth in § 49.6, as proposed and adopted, in order to enable the Commission and its staff to promptly address requests for transfer and to ensure that the transferee entity is fully capable of complying with the Commission's regulations for SDRs.
The Commission proposed to remove the text of existing § 49.9
As part of the Commission's proposed new requirements in § 49.9 for SDRs to provide open swaps reports to the Commission,
Final § 49.9(a) requires each SDR to provide the Commission with open swaps reports that contain an accurate reflection of the swap data maintained by the SDR for every swap data field required to be reported under part 45 of the Commission's regulations for every open swap, as of the time the SDR compiles the report. Open swaps reports must be organized by the unique identifier created pursuant to § 45.5 of the Commission's regulations that is associated with each open swap.
SDRs currently send reports that are similar to the proposed open swaps reports to the Commission on a regular basis. The Commission currently uses these reports to produce a weekly swaps report that is made available to the public
Final § 49.9(b) requires an SDR to transmit all open swaps reports to the Commission as instructed by the Commission. Such instructions may include, but are not limited to, the method, timing, and frequency of transmission, as well as the format of the swap data to be transmitted.
The Commission requested comment on all aspects of proposed § 49.9. One comment generally supported standardizing the open swaps reports.
The Commission is adopting § 49.9 as proposed, with non-substantive editorial changes for clarity. With regard to the comments on open swaps reports provided by SDRs to reporting counterparties, the Commission notes that, as described in section II.G below, final § 49.11 will not require SDRs to
The Commission declines to adopt the suggested revisions related to constraints, which would unnecessarily restrict the Commission's discretion to issue transmission instructions. The Commission reiterates its intent to work with the SDRs before creating or modifying any instructions pursuant to § 49.9 and to provide a reasonable amount of time for SDRs to adjust their systems before any instructions take effect. The Commission's existing practice of collaborating with SDRs stems from the recognition that such collaboration will ultimately improve SDRs' ability to comply with their regulatory obligations and further the Commission's regulatory objectives.
The Commission is adopting new § 49.10(e) generally as proposed, with modifications and textual clarifications in response to the comments received. Final § 49.10(e) complements the error correction requirements in other Commission regulations, including final §§ 43.3(e) and 45.14(b), that apply to the entities that report SDR data to the SDRs. Each SEF, DCM, and reporting counterparty must correct errors in their SDR data by submitting complete and accurate SDR data to the relevant SDR.
As it stated in the Proposal, the Commission believes that clearly delineating an SDR's obligations to receive and make corrections to SDR data, and to disseminate the corrected SDR data to the public and the Commission, as applicable, will further the Commission's goal of more accurate and complete SDR data being made available to the public and the Commission. The Commission believes that the steps required by § 49.10(e) will also facilitate, and therefore encourage, compliance by SEFs, DCMs, and reporting counterparties with their regulatory obligation to correct SDR data. The Commission further believes proposed § 49.10(e) is consistent with the current statutory and regulatory requirements for SDRs to correct errors and omissions.
Final § 49.10(e)(1) requires an SDR to accept corrections of errors and omissions
One comment suggested that the final rule should clarify that the only obligation on SDRs under § 49.10(e) is to accept, record, and disseminate corrections to SDR data.
The comment also stated that applying the requirements of proposed § 49.10(e)(2) to SDR data “regardless of the state of the swap” will require SDRs to make SDR data available for corrections for an unlimited amount of time.
Finally, the comment stated that the Commission should make clear that an entity submitting SDR data corrections or previously omitted SDR data must comply with the then current technical specifications of the SDR and that an SDR is not required to make accommodations for data that is unable to comport with the then current technical specifications.
Section 21(c)(2) of the CEA requires SDRs to confirm submitted swap data.
For swap creation data, if the swap data was submitted directly by a swap counterparty, such as an SD, MSP, or non-SD/MSP counterparty, an SDR is required to notify both counterparties to the swap and to receive from both counterparties acknowledgement of the accuracy of the swap data and corrections for any errors.
If the swap data was instead submitted by a SEF, DCM, DCO, or third-party service provider acting on behalf of a swap counterparty, the SDR must, among other things, provide both counterparties with a 48-hour correction period after which a counterparty is assumed to have acknowledged the accuracy of the swap data.
These provisions in existing § 49.11 reflect the Commission's view in adopting the regulation that an SDR need not always affirmatively communicate with both counterparties to in order to confirm the accuracy of swap data.
As noted in the Proposal, the Commission previously raised these issues in the Roadmap and received many comments in response.
Based on its experience with swap data reporting and the comments it received in response to the Roadmap, the Proposal set forth a new swap verification scheme for swap data.
The Commission is modifying its approach to verification in final § 49.11, based on comments received on proposed § 49.11. The Commission believes the verification process required by final § 49.11 is less burdensome and more flexible than the verification process set forth in the proposed regulation. As described in detail below, in order for SDRs to verify the accuracy and completeness of swap data, final § 49.11 requires each SDR to provide reporting counterparties that are users of the SDR with a mechanism that allows a reporting counterparty to access the current swap data for all open swaps for which the reporting counterparty is serving as the reporting counterparty, in such a manner that allows the reporting counterparty to fulfill its own verification obligations under final § 45.14.
This approach is similar to the requirements in proposed § 49.11 in many respects, particularly in that under final § 49.11, SDRs are required to facilitate verification by reporting counterparties of all swap data for all open swaps on a regular basis. However, the Commission believes final § 49.11 provides a less prescriptive and less burdensome method to achieve the Commission's goals related to swap data verification. In particular, final § 49.11 will not require the SDRs to create and send open swaps reports to reporting counterparties as proposed.
The Commission adopts final § 49.11(a) largely as proposed, with some non-substantive rearrangement of proposed § 49.11(a) into final paragraphs § 49.11(a) and (c). The first sentence of proposed § 49.11(a) is being finalized as final § 49.11(a). Final § 49.11(a) reiterates each SDR's statutory duty to verify the accuracy of swap data pursuant to CEA section 21(c)(2). The second sentence of proposed § 49.11(a) is now included in final § 49.11(c)(1), with non-substantive rewording to more clearly articulate the requirement for SDRs to establish, maintain, and enforce policies and procedures related to verification and the content requirements for the policies and procedures.
Final § 49.11(b)(1) requires each SDR to provide a mechanism through which each reporting counterparty that is a user of the SDR can access all swap data the SDR maintains for each open swap for which the reporting counterparty serves as the reporting counterparty. The mechanism must allow sufficient access, provide sufficient information, and be in a form and manner to enable each reporting counterparty to perform swap data verification as required under § 45.14 of this chapter. The Commission believes that, together with final § 45.14(b), final § 49.11(b)(1) will create an effective verification process to help ensure that swap data maintained by SDRs is complete and accurate.
The Commission notes that, similar to the communication requirements in proposed § 49.11, it is not prescribing the form of mechanism that SDRs must provide in final § 49.11(b)(1), beyond the data access, data scope, frequency, and confidentiality requirements contained in final § 49.11(b). The Commission expects that SDRs and
The Commission adopts the substance of the Proposal in final § 49.11(b)(2) in regards to the scope of data that the SDRs must make available to reporting counterparties for verification. Final § 49.11(b)(2) provides that the swap data accessible through the mechanism must accurately reflect the most current swap data maintained by the SDR, as of the time the reporting counterparty accesses the swap data using the mechanism, for each data field that the reporting counterparty was required to report under part 45 for each of the reporting counterparty's open swaps for which it is serving as the reporting counterparty. Final § 49.11(b)(2) only requires the mechanism to make available the then-current swap data for each of the data fields that the SDR maintains for the relevant open swaps. There is no requirement to include swap data contained in any particular messages from the reporting counterparty or any outdated swap data.
The Commission notes again that it is not prescribing the particular method by which the mechanism grants access to all of the swap data as required, as long as the mechanism satisfies the requirements in final § 49.11(b)(2), including the general requirement that the swap data accessible through the mechanism provides sufficient information to allow the reporting counterparties utilizing the mechanism to successfully perform their swap data verification responsibilities as required under final § 45.14. The Commission expects that SDRs will work with reporting counterparties to devise the most efficient and effective method by which the mechanism will provide access to all of the required swap data, with particular attention to accommodating non-SD/MSP/DCO reporting counterparties.
The Commission also notes that final § 49.11(b)(2) references the limits on providing access to swap data that must be kept confidential under final § 49.11(b)(3). The swap data access provided under final § 49.11(b)(2) must not allow access to data that is required to be kept confidential, as described further below in the discussion of § 49.11(b)(3).
Final § 49.11(b)(3) adopts the proposed limits on access to swap data as part of verification for swap data that is required to be kept confidential from reporting counterparties under the Act or other Commission regulations. Notwithstanding the other requirements of final § 49.11(b), final § 49.11(b)(3) explicitly prohibits SDRs from allowing access to swap data that a reporting counterparty is otherwise prohibited to access. The Commission notes that the same confidential swap data is also excluded from the reporting counterparties' corresponding verification requirements in final § 45.14(b).
This confidentiality requirement is particularly relevant for counterparty identity information that is required to be kept confidential under final § 49.17.
Final § 49.11(b)(4) provides that the mechanism each SDR adopts under final § 49.11(b) must allow sufficiently frequent access for reporting counterparties to perform the required swap data verification under § 45.14(b). This minimum frequency is necessary so that reporting counterparties are able to access all of their relevant swap data every time they are required to perform verification under § 45.14(b), in order to help ensure that reporting counterparties perform a robust verification of all swap data for their relevant open swaps. Final § 45.14(b) requires SD/MSP/DCO reporting counterparties to verify every 30 calendar days and requires non-SD/MSP/DCO reporting counterparties to verify once every calendar quarter, with at least two months between verifications.
The Commission notes that the frequency requirement in final § 49.11(b)(4) is a minimum frequency standard. Nothing prohibits SDRs from allowing reporting counterparties to access swap data through the mechanism more frequently than required and nothing prohibits reporting counterparties from utilizing the mechanism to access their own swap data more frequently than is required.
Final § 49.11(b)(5) provides requirements related to SDRs making swap data available to third-party service providers for verification purposes. As with other Commission regulations, reporting counterparties are permitted to utilize third-party service providers to perform verification, and the Commission believes that accommodating the use of diligent third-party services providers may increase the efficiency and effectiveness of the verification process.
Accordingly, in order to accommodate the reporting counterparties' use of third-party service providers, final § 49.11(b)(5) provides that an SDR will satisfy its verification requirements under final § 49.11 by, after a reporting counterparty informs the SDR that the reporting counterparty will utilize a particular third-party service provider for verification purposes, providing the third-party service provider with the same access to the mechanism and the relevant swap data as the SDR is required to provide to the reporting counterparty.
As part of this third-party service provider access, final § 49.11(b)(5) also provides that the third-party service provider access is in addition to (
Finally, § 49.11(b)(5) requires the verification policies and procedures an SDR must create pursuant to final § 49.11(c) to include instructions detailing how each reporting counterparty can successfully inform the SDR so that the SDR will grant or discontinue access for a third-party service provider at the reporting counterparty's instruction. This requirement is necessary to ensure that third-party service provider access for verification purposes is as efficient and seamless as possible. The Commission notes that these SDR policies and procedures are required to be publicly disclosed under final § 49.26(j).
The Commission made several non-substantive organizational and editorial modifications in final § 49.11(c), as compared to the Proposal. For example, as described above, the SDR verification policies and procedures requirement from proposed § 49.11(a) is included in final § 49.11(c). The wording in final § 49.11(c)(1) is changed slightly from proposed § 49.11(a) for clarity purposes, but similarly requires SDRs to establish, maintain, and enforce policies and procedures that address how the swap data repository will fulfill all of the applicable requirements of final § 49.11. The policies and procedures must also include instructions on how each reporting counterparty, or third-party service provider acting on behalf of a reporting counterparty, can successfully utilize the mechanism to access swap data in order to perform the reporting counterparty's verification responsibilities under final § 45.14(b). This requirement is necessary to ensure that reporting counterparties are clearly instructed on how to access the verification mechanism and their relevant swap data, in order to ensure that verification is as efficient and seamless as possible. The Commission notes that the companion verification requirements for reporting counterparties in final § 45.14(b) require reporting counterparties to follow the relevant SDR policies and procedures when performing verification.
Final § 49.11(c)(2) sets forth the requirements for an SDR that amends its verification policies and procedures, which were previously set forth in proposed § 49.11(d). Final § 49.11(c)(2), like proposed § 49.11(d), requires each SDR to comply with the requirements of part 40 of the Commission's regulations in adopting or amending the verification policies and procedures required under final § 49.11(c)(1). The Commission notes that SDRs would be required to comply with part 40 when adopting or amending the verification policies and procedures regardless of whether this requirement is included in § 49.11(c)(2).
The Commission received many comments on the verification approach in proposed § 49.11. Many commenters did not distinguish their comments between the verification requirements proposed for SDRs under proposed § 49.11 and the verification requirements proposed for reporting counterparties under proposed § 45.14, but the Commission has organized the discussion between the two different final rules based on its best estimation of whether particular comments applied to one or both of the proposed sections. The discussion of comments relevant to final § 49.11 is contained in this section, while the discussion of comments that pertain to the verification requirements for reporting counterparties is contained in the discussion of final § 45.14(b), unless otherwise noted below.
Many comments on specific requirements of proposed § 49.11 are now moot, because the Commission is not adopting the proposed requirements. For example, some commenters addressed particular aspects and mechanics of the proposed verification of open swaps reports and the messages the Proposal would require reporting counterparties to send to SDRs related to verification results.
Many comments were generally supportive of the Commission's efforts to improve the accuracy of data reported to and maintained by SDRs.
Along with the comments of general support, the Commission received many comments supporting specific requirements in proposed § 49.11. Comments in particular supported limiting data verification to swap data,
Commenters also suggested alternatives for the proposed approach to verification, including alternatives that helped form the basis of the revised verification requirements in final § 49.11. Multiple comments suggested that the Commission adopt a more “principles based” approach to verification.
The Commission recognizes the comments that provided robust alternatives to the proposed verification requirements that also met the Commission need for swap data to be verified in a thorough and timely manner. The Commission is finalizing § 49.11 with more principles-based requirements that incorporate each of these suggestions, including that reporting counterparties periodically
The Commission also received other comments addressing issues that have been incorporated into the final verification requirements. Though largely included with comments related to the proposed open swaps reports, multiple comments advocated for flexibility in the form and manner that SDRs and reporting counterparties perform verification, as these entities already have established methods for communicating swap data and other information.
The Commission recognizes the suggestions included with these comments and agrees with the comments. The Commission originally proposed, and is also now adopting, verification requirements that provide SDRs with flexibility in implementing the verification requirements. Thus, final § 49.11(b) intentionally does not prescribe the form and manner of the verification mechanism and allows SDRs to determine the means for reporting counterparties access to their relevant swap data. The Commission expects that SDRs and reporting counterparties will work together to devise the most efficient and effective mechanism that meets the specific verification requirements in final §§ 49.11 and 45.14. The Commission also proposed, and is now adopting, requirements that only require the verification of up-to-date swap data, as opposed to verification of all messages. Final § 49.11(b)(2) only requires SDRs to make the relevant “most current” swap data available to reporting counterparties, as opposed to every message regarding swap data. Though no longer related to open swaps reports, the Commission is also adopting verification timing requirements in § 45.14(b) that serve as a minimum frequency requirement, not a maximum. As the Commission detailed above in the discussion of final § 49.11(b)(4), the SDRs must make the verification mechanism available to the reporting counterparties at least as often as needed for the reporting counterparties to perform their verification responsibilities under final § 45.14(b), but that nothing prevents the SDRs from providing proper access more frequently. The Commission anticipates that some SDRs may choose to provide access to the mechanism on a more-frequent, even potentially continuous, basis.
The Commission also received a comment related to open swaps reports that observed that SDRs would not be able perform verification with reporting counterparties or third-party service providers that are not members of the SDR. The comment suggested that the Commission modify the verification requirement to limit an SDR's verification responsibilities to reporting counterparties and third-party service providers that are members of the SDR.
The Commission also received a number of comments that made suggestions that are not being accepted. In the context of open swaps reports, one comment suggested that the Commission should specify that verification timing requirements be clarified as “business days” and “business hours,” as this would facilitate the SDRs including the date and time that an open swap report was sent.
One comment suggested that the Commission should remove the requirement in proposed § 49.11(d) that SDRs make a filing under part 40 of the Commission's regulations when changing their verification policies and procedures, asserting that such a requirement is unnecessary because reporting counterparties will be required to follow SDR verification procedures.
The Commission also received multiple comments suggesting changes that would narrow the data fields subject to verification. One comment recommended that verification be limited to data fields related to the “economic terms” of the trade only, with the Commission identifying which fields are included in the economic terms.
As described in more detail in the discussion of verification requirements under final § 45.14(b),
The Commission received several comments suggesting that verification is unnecessary and that the Commission can instead rely on SDR swap data validation, standardized and harmonized swap data fields, and/or the swap data error corrections requirements to improve data quality.
As described in more detail in the discussion of verification requirements under final § 45.14(b), the Commission disagrees with the suggestions that verification is unnecessary and that swap data validation, standardized swap data fields, and error correction would be sufficient to meet the Commission's data quality goals. While swap data validation and standardized data fields are valuable tools to prevent certain types of swap data errors, such as swap data being reported without required data, they do not address the same errors that swap data verification is intended to address. Swap data verification, which is designed to inform and trigger the swap data error correction process, is intended to address plausible but incorrect swap data that would not be identified by validation because the incorrect data meets the technical standards for the standardized fields, such as a swap being reported with a notional value of $1,000,000 instead of the correct $10,000,000. These errors would only be found, and the error correction requirement triggered, by a party to the swap reviewing the data after it has been reported and discovering the error(s), such as through the verification process. The Commission also notes that swap data validation and standardized data fields can only prevent errors in swap data that have not yet been reported, as opposed to swap data verification, which will be useful for finding undiscovered errors in swap data for open swaps that have already been reported.
Through its experience administering the data reporting regulations, the Commission is also aware of many examples of significant swap data errors that would not have been prevented by swap data validations, and that, in the absence of an adequate verification requirement, persisted for long periods of time before being discovered and corrected. Based on this experience, the Commission determined that swap data validation, standardized data fields, and the error correction requirements are not sufficient to meet the Commission's data quality goals without the addition of swap data verification. As a result, the Commission is adopting final § 49.11, and the companion requirements in final § 45.14(b), in order to require a robust and effective verification process for SDRs and reporting counterparties that the Commission expects will help ensure significant improvements in swap data quality.
Section 49.12 sets forth recordkeeping requirements for SDRs.
Current § 49.12(a) requires an SDR to maintain its books and records in accordance with the recordkeeping requirements of part 45. The Commission proposed to amend § 49.12(a) to incorporate the provisions of current § 45.2(f) and to clarify that the requirement in final § 49.12(a) that an SDR keep records applies to records of all activities relating to the business of the SDR, not just records of swap data reported to the SDR.
Current § 49.12(b) requires an SDR to maintain swap data (including all historical positions) throughout the existence of the swap and for five years following the final termination of the swap, during which time the records must be readily accessible by the SDR, and available to the Commission via real-time electronic access; and in archival storage from which the data is retrievable by the SDR within three business days.
The Commission is amending § 49.12(b) by incorporating the requirements of § 45.2(g) into final § 49.12(b). Thus, as amended, final § 49.12(b) will: (i) Clarify that the requirements of the regulation apply to all records required to be kept by an SDR, not just swap data reported to an SDR,
Final § 49.12(b) sets forth separate recordkeeping requirements for SDR information in final § 49.12(b)(1) and SDR data reported to the SDR in final § 49.12(b)(2). Section 49.12(b)(1) requires an SDR to maintain all SDR information, including, but not limited to, all documents, policies, and procedures required to be kept by the Act and the Commission's regulations, correspondence, memoranda, papers, books, notices, accounts, and other such records made or received by the SDR in the course of its business. An SDR must maintain such information in accordance with § 1.31 of the Commission's regulations.
As amended, final § 49.12(b)(2) requires an SDR to maintain all SDR data and timestamps reported to or created by the SDR, and all messages related to such reporting, throughout the existence of the swap that is the subject of the SDR data and for five years following final termination of the swap, during which time the records must be readily accessible by the SDR and available to the Commission via real-time electronic access, and for a period of at least ten additional years in archival storage from which such records are retrievable by the SDR within three business days.
The amendments to § 49.12(b) are also intended to help harmonize the Commission's regulations with the SEC's regulations.
The Commission again notes that the amendments to § 49.12(b) do not change the requirements for SDRs; they merely consolidate existing requirements set forth in current § 45.2(f) and (g) into final § 49.12.
The Commission is amending existing § 49.12(c) and renumbering it as § 49.12(d).
Final § 49.12(c)(2) requires an SDR to create and maintain an accurate record of all SDR data errors and omissions reported to the SDR and all corrections disseminated by the SDR pursuant to parts 43, 45, 46, and 49 of the Commission's regulations. Section 49.12(c)(2) also requires SDRs to make the records available to the Commission on request.
The Commission believes SDRs already receive the data validation information specified in final § 49.12(c) via regular interaction with SEFs, DCMs, and reporting counterparties. The Commission emphasizes that such data must be maintained in order to allow for assessments of reporting compliance, including the initial reporting and the correction of the SDR data.
The Commission notes that while final § 49.12(c) specifies recordkeeping requirements for SDR data validation errors and SDR data reporting errors, these requirements do not in any way limit the applicability of the recordkeeping requirements in final § 49.12 to these records. Thus, since the records specified in final § 49.12(c) are
Existing § 49.12(d) requires an SDR to comply with the real time public reporting and recordkeeping requirements of existing § 49.15 and part 43. The Commission believes that existing § 49.12(d)
Accordingly, the Commission is moving the text of existing § 49.12(c) to final § 49.12(d) and amending the regulation to provide that (i) all records required to be kept pursuant to part 49 must be open to inspection upon request by any representative of the Commission or any representative of the U.S. Department of Justice; and (ii) an SDR must produce any record required to be kept, created, or maintained by the SDR in accordance with § 1.31 of the Commission's regulations.
Finally, the Commission proposed a technical change to move the existing requirements of § 49.12(e) to proposed § 49.13.
The Commission requested comment on all aspects of proposed § 49.12.
One comment supported consolidating the SDR recordkeeping requirements in part 45 into part 49.
The Commission has determined to adopt the amendments to §§ 49.12 and 45.2 as proposed, except the Commission is not adopting the technical change of moving § 49.12(e) to § 49.13, as discussed below in Section II.I.
With regard to record retention period comments, the Commission notes that retention period in final § 49.12(b)(2) is the current retention period applicable to SDRs, not a new requirement, and that SDRs currently have this unique ten-year retention period because they are the source of all SDR data for the public and the CFTC. Further, the Commission believes the existing 10-year retention period has functioned well and did not propose to amend the retention period. Accordingly, the Commission declines to shorten the retention period.
Existing § 49.13 implements CEA section 21(c)(5), which requires SDRs to, at the direction of the Commission, establish automated systems for monitoring, screening, and analyzing swap data, including compliance and frequency of end-user clearing exemption claims by individuals and affiliated entities.
The Commission proposed to amend § 49.13 to provide more detail on the monitoring, screening, and analyzing tasks that an SDR may be required to perform as directed by the Commission. The Commission also proposed to amend § 49.13 to make clear that the requirements of proposed § 49.13 apply to SDR data reported to the SDR pursuant to parts 43, 45, and 46. The Commission received a number of comments on the proposed rule, both supporting and recommending against its adoption.
The Commission has determined not to make any amendments to § 49.13 at this time. The Commission believes it may benefit from further consideration and experience with swap data following the implementation of the requirements of part 49, as amended in this final rule, as well as the implementation of the significantly amended rules in part 45 that the Commission is adopting as final along with this final rule. The Commission may consider the proposed amendments to § 49.13 in a future rulemaking.
As part of the Proposal, the Commission also proposed a technical change that would move existing § 49.15(c) to § 49.13.
The Commission proposed to amend existing § 49.15 to conform the regulation to the proposed amended definitions in § 49.2. As discussed above, the Commission also proposed to
The Commission did not receive any comments on the proposed amendments to § 49.15(b) and is adopting the amendments as proposed, with the exception of the proposed movement of existing § 49.15(c) to proposed § 49.13(c).
The Commission proposed to amend existing § 49.16 to conform the regulation to the proposed amendments to the definitions in § 49.2.
The Commission did not receive any comments on the proposed conforming amendments to § 49.16 and is adopting the amendments as proposed.
Section 49.17 sets forth the requirements and conditions for an SDR to provide access to SDR data to the Commission, foreign and domestic regulators, and swap counterparties, among others.
As discussed in the Proposal, the Commission believes the amendments to the definition of “direct electronic access” in final § 49.17(b)(3) will provide additional flexibility to implement methods for data transfers from SDRs to the Commission, and may facilitate the use of advancing technology and more efficient means of direct electronic access for the Commission. The amendments also make clear that the Commission may decide to accept other methods of access, as long as the method is able to efficiently provide the Commission with real-time access to SDR data and scheduled SDR data transfers to the Commission.
Existing § 49.17(c)(1) requires an SDR to provide “direct electronic access,” a term defined in existing § 49.17(b)(3),
The revised definition of direct electronic access also adds a condition that the technology or form of access be “acceptable to the Commission” in order to clarify that any form of direct electronic access, including any new technology, must be approved by the Commission. As discussed below, the Commission anticipates working with SDRs to determine acceptable forms of direct electronic access, consistent with the Commission's current practice of coordinating and collaborating with SDRs to facilitate transfers of, and real-time access to, SDR data.
Finally, the amended definition of “direct electronic access” replaces the phrase “real-time swap transaction data”
The Commission is amending § 49.17(c) to incorporate the requirements of current § 45.13(a),
Final § 49.17(c) adds introductory text that requires an SDR to provide the Commission with access to all SDR data maintained by the SDR.
The Commission is amending existing § 49.17 to replace an incorrect reference to “§ 37.12(b)(7)” at the end of paragraph (f)(2) with the correct reference to “§ 39.12(b)(7).”
The Commission is moving the delegation of authority provision in existing § 49.17(i)
The Commission requested comment on all aspects of proposed § 49.17. The Commission also requested specific comment on a whether there is a need to further clarify any of the requirements of proposed § 49.17 and whether there are any aspects of existing or proposed § 49.17 that would inhibit or prevent the development of new technological approaches to SDR operations or the provision of SDR data to the Commission.
The Commission received one comment on the proposed rule. The comment agreed with the Commission that flexibility as to future technological advancements and innovations is an important consideration in an SDR's provision of direct electronic access to the Commission.
Specifically, the comment asserted that the amended definition of direct electronic access in proposed § 49.17(b)(3) is too broad because the term “SDR data” includes data reported pursuant to part 46 of this chapter, and the Commission should not have a time-sensitive need for such data.
In addition, the comment recommended the Commission remove the phrase “in a format acceptable to the Commission” from the second sentence of proposed § 49.17(c)(1), asserting that the phrase deprives the SDRs of the flexibility and discretion needed with respect to the storage and maintenance of data without a clear regulatory purpose.
The Commission has determined to adopt the amendments to 49.17 as proposed.
With regard to the comment that the definition of direct electronic access is too broad and provides the Commission with too much discretion, the Commission believes the amendments to the definition are appropriately tailored to help ensure that the Commission's direct electronic access, and the data provided through this access, serves the Commission needs to meet its regulatory obligations, and ensures that an SDR does not change the means of direct electronic access in a manner that impairs the Commission's regulatory functions. The Commission intends to be flexible, when possible, in regards to the methods and forms of direct electronic access an SDR may utilize, especially in the context of technological advancement, and believes that the definition ensures an appropriate level of discretion as to whether a method of direct electronic access is acceptable.
The Commission believes final § 49.17(b)(3) will not hinder or prevent an SDR from incorporating new technology for collecting or maintaining SDR data, as long as the SDR data is collected by the SDR and provided to the Commission as required. The Commission does, however, expect an SDR to provide SEFs, DCMs, and reporting counterparties with commonly-used methods for reporting SDR data and to not force SEFs, DCMs, and reporting counterparties to unnecessarily expend resources on technology upgrades by unreasonably limiting available reporting methods. The Commission also expects SDRs to be particularly accommodating of non-SD/MSP/DCO reporting counterparties
Similarly, final § 49.17(c)(1) is intended to provide clarity and certainty to SDRs regarding their responsibilities and the Commission's authority with respect to how an SDR maintains and transmits data to the Commission.
With regard to the comments' suggested revisions, the Commission believes the revisions would unduly constrain the Commission's authority. The Commission notes that it currently works with SDRs to facilitate data transfers and implement technology changes.
The Commission proposed to amend existing § 49.18
This non-substantive amendment does not change the functions delegated by the Commission and, as discussed further below, is intended to enable the Commission to locate most delegations of authority in proposed § 49.31. The Commission did not receive any comments on the proposed amendments to § 49.18 and is adopting amendments as proposed.
The Commission proposed to amend § 49.20
The Commission did not receive any comments on the proposed amendments to § 49.20 and is adopting the amendments as proposed.
Existing § 49.22 sets forth an SDR's requirements with respect to its chief compliance officer (“CCO”).
The Commission has determined not to address the proposed amendments in this final rulemaking, with the exception of a number of technical changes to conform § 49.22 to other regulations amended in this final rulemaking.
The Commission proposed to make non-substantive amendments § 49.24
The Commission also proposed to make technical amendments to § 49.24(i), to remove a reference to § 45.2. As described above, the Commission is moving the SDR recordkeeping requirements contained in current § 45.2(f) and (g) to § 49.12 for consistency and clarity purposes. This proposed technical change would conform § 49.24(i) to final §§ 45.2 and 49.12, but would not change any of the requirements applicable to SDRs.
The Commission did not receive any comments on the proposed amendments to § 49.24 and is adopting the amendments as proposed.
As discussed above, the Commission proposed conforming changes to existing § 49.25
The Commission also proposed to amend existing § 49.25(f)(3) to change the deadlines for an SDR to submit the financial resources report under § 49.25.
One comment supported the extension of the deadline for filings financial reports under § 49.25, stating that the amendment reduces burdens on SDRs without material detriment to the CFTC's oversight.
The Commission has determined to adopt the proposed amendments to § 49.25, except for the proposed amendments to 49.25(f)(3),which would align the deadline for an SDR's fourth quarter financial resources report with the deadline for an SDR to submit its annual CCO report under proposed § 49.22(f)(2). As discussed above, the Commission has determined not to address the proposed changes to the filing deadline for the annual compliance report under § 49.22(f)(2) in this final rulemaking, and accordingly, the Commission is not adopting the related proposed amendment to § 49.25(f)(3).
Section 49.26 requires an SDR to furnish SEFs, DCMs, and reporting counterparties with an SDR disclosure document that sets forth the risks and costs associated with using the services of the SDR, and contains the information specified in § 49.26(a) through (i).
The addition of final § 49.26(j) is intended to provide information about an SDR's operations to market participants in order to assist them in making decisions regarding which SDR to use for swaps reporting.
The Commission requested comment on all aspects of proposed § 49.26. The Commission also invited specific comment on whether the Commission should require an SDR to disclose any other information under § 49.26.
Two comments supported the proposed disclosure requirements under § 49.26(j).
The Commission has determined to adopt the amendments to § 49.26(j) as proposed. With regard to the suggestions in the comments, the Commission notes that the requirement to make the specified disclosures in § 49.26 is an ongoing requirement that applies to an SDR “[b]efore accepting any swap data from [the relevant party] . . . ” Accordingly, the Commission believes § 49.26(j), as proposed and adopted, requires an SDR to update the required disclosures if the SDR revises the policies or procedures specified in § 49.26(j). Moreover, under part 40, an SDR would be required to file with the Commission revisions to the policies and procedures required to be disclosed § 49.26(j).
The Commission proposed to add a new § 49.28 to address an SDR's obligations with respect to its hours of operation, which are currently set forth in existing § 43.3(f) and (g).
The Commission has determined to adopt § 49.28 as proposed. The Commission continues to believe that the continuous operation of SDRs is critical to the proper functioning of the swaps market and the SDR data reporting process. Moreover, the need for continuous operation of SDRs is not limited to the receipt and dissemination of swap transaction and pricing data pursuant to part 43. Rather, an SDR must be able to continuously perform all of its responsibilities under the Commission's regulations. To this end, proposed and final § 49.28 expands the obligations of an SDR to continuously accept, promptly record, and publicly disseminate all SDR data reported to the SDR.
While the Commission strongly encourages SDRs to adopt redundant systems to allow public reporting during closing hours, final § 49.28 continues to allow SDRs to schedule downtime to perform system maintenance. However, the Commission continues to believe that disruptions to the data reporting process due to closing hours should be as limited as possible, with advance notice of, or, if not possible, notice promptly after, closing.
The need for continuous operations of SDRs also mandates that SDRs minimize and mitigate disruptions caused by necessary downtime or unexpected disruptions, to the extent reasonably possible. Therefore, final § 49.28 requires an SDR to have the capacity to receive and hold in queue data reported to it, and to process and disseminate that data following a resumption in its operations. The Commission emphasizes that it expects SDRs to be able to accept and hold in queue SDR data that is reported during closing hours. The inability to accept and hold in queue SDR data should be a rare occurrence that results from unanticipated emergency situations, and the provisions in final § 49.28(c)(2) are intended as a last resort to prevent data loss.
As discussed below, the requirements of final § 49.28 also include many of the requirements of the SEC's operating hours regulations governing SBSDRs in order to increase consistency between the regulations for SDRs and SBSDRs.
Existing § 43.3(f) requires an SDR to have systems in place to continuously receive and publicly disseminate swap transaction and pricing data in real-time. Existing § 43.3(f) allows an SDR to declare closing hours to perform system maintenance, while requiring that the SDR must, to the extent reasonably possible, avoid scheduling closing hours when, in its estimation, the U.S. market and major foreign markets are most active.
These provisions were adopted based on the Commission's belief that the global nature of the swaps market necessitates that SDRs be able to publicly disseminate swap transaction and pricing data at all times and that SDRs should generally be fully operational 24 hours a day, seven days a week.
Proposed and final § 49.28(a) require an SDR to have systems in place to continuously accept and promptly record all SDR data reported to the SDR, and publicly disseminate swap transaction and pricing data reported to the SDR as required under part 43.
Final § 49.28(a)(1) allows an SDR to establish normal closing hours to perform system maintenance during periods when, in the SDR's reasonable estimation, the SDR typically receives the least amount of SDR data.
Final § 49.28(a)(2) allows an SDR to declare, on an ad hoc basis, special closing hours to perform system maintenance that cannot wait until normal closing hours. Similar to final § 49.28(a)(1), final § 49.28(a)(2) requires an SDR to schedule special closing hours during periods when, in the SDR's reasonable estimation, the special closing hours would, to the extent possible given the circumstances prompting the special closing hours, be least disruptive to the SDR satisfying its SDR data-related responsibilities. Final § 49.28(a)(2) also requires an SDR to provide reasonable advance notice of the special closing hours to market participants and the public whenever possible, and, if advance notice is not reasonably possible, to notify market participants and the public as soon as is reasonably possible after declaring special closing hours.
Proposed and final § 49.28(b) require an SDR to comply with the requirements under part 40 of the Commission's regulations when adopting or amending normal closing hours and special closing hours.
Existing § 43.3(g) addresses an SDR's obligations regarding swap transaction and pricing data sent to the SDR for publicly reportable swap transactions during closing hours. The Commission is moving existing § 43.3(g) to final § 49.28(c), and expanding the existing requirements for swap transaction and pricing data in current § 43.3(g)
Final § 49.28(c)(1) requires an SDR, on reopening from normal or special closing hours, to promptly process all SDR data received during the closing hours and, pursuant to part 43, publicly disseminate swap transaction and pricing data reported to the SDR that was held in queue during the closing hours. Final § 49.28(c)(1) expands the existing requirements for an SDR to disseminate swap transaction and pricing data pursuant to § 43.3(g)(1)
Final § 49.28(c)(2) expands existing requirements for swap transaction and pricing data that an SDR cannot receive and hold in queue during closing hours in existing § 43.3(g)(2) to all SDR data and also mirrors the requirements for an SBSDR that cannot receive and hold in queue information regarding security-based swaps during closing hours.
Though final § 49.28 expands the existing requirements of § 43.3(f) and (g) to apply to all SDR data, the Commission believes the regulation will not lead to significant changes in the operations of an SDR. The Commission understands that, under current practice, SDRs routinely receive and hold in queue all SDR data submitted during declared SDR closing hours, regardless of whether that data is being submitted pursuant to part 43. Additionally, because the requirements of final § 49.28 largely mirror the requirements for an SBSDR to receive and hold in queue information regarding security-based swaps, final § 49.28 will not impose additional requirements on an SDR that is also registered as an SBSDR. Therefore, the Commission believes that expanding the operating hours requirements to all SDR data would have little practical impact on current SDR operations.
The Commission requested comment on all aspects of proposed § 49.28. The Commission also invited specific comment on whether proposed § 49.28 provides SDRs sufficient flexibility to conduct necessary maintenance on their systems while facilitating the availability of SDR data for the Commission and the public.
One comment stated that business flow considerations should be taken into account in addition to sufficient flexibility for SDRs when considering operating hours. The comment suggested that proposed § 49.28(a)(1) be revised to employ the phrase “based on historical volume” in place of “in the reasonable estimation of the [SDR]” to describe the basis on which an SDR may determine when it typically receives the least amount of SDR data.
Another comment supported the proposed requirements in § 49.28(a)(2) for normal closing hours and special closing hours.
This comment also opposed the requirement in proposed § 49.28(c)(2) that an SDR provide notice of its resumption of normal activities following a period of time during which it was unable to receive and hold in queue any SDR data. The comment asserted such notice is unnecessary when the downtime was planned and
In response to the business flow considerations comment, the Commission believes an SDR is best situated to make a judgement regarding when it receives the least amount of SDR data. The Commission agrees that historical volume is one factor SDRs may consider, but other considerations may factor into an SDR's determination, so long as the estimation is reasonable.
With regard to the comment on proposed § 49.28(b), the Commission notes that the regulation, as adopted, does not impose requirements beyond what is already required under part 40. The Commission also notes that special closing hours are intended for unforeseeable, emergency situations, not planned system updates and maintenance, as described in the comment. For planned system updates or maintenance, under the normal closing hours provisions, an SDR could use a single part 40 filing for all planned updates or maintenance, to the extent that the SDR knows the schedule for such activities. The Commission would expect SDRs to plan anticipated system updates or maintenance, and the related closing hours determinations, well ahead of time and for SDRs to follow the normal closing hours requirements, and their reasonable discretion on timing of such closing hours, when performing the system updates or maintenance.
With regard to the comment on proposed § 49.28(c)(2), the Commission believes that in circumstances where an SDR is unable to receive and hold in queue SDR data, keeping impacted parties informed and updated as to changes to the SDR's operations is critical to limiting potential negative impacts caused by the disruption. The Commission expects that instances where an SDR is unable to receive and hold in queue SDR will be the result of emergency situations that prompt special closing hours, as opposed to planned and scheduled SDR system outages. Such situations do not easily allow for accurate planning or estimation of when the SDR will resume normal operations. Further, even for planned outages, the scheduled outage may not finish on schedule, for myriad reasons, and it would be extremely disruptive for market participants to begin reporting SDR data to an SDR based on an outdated estimate of when the SDR would resume normal operations. Accordingly, the Commission believes an SDR should be required to inform market participants and the public that it has resumed operations following a period during which it was unable to receive and hold SDR data, regardless of whether the inability to receive and hold SDR was planned and announced ahead of time.
The Commission proposed to add a new § 49.29 to require an SDR to provide, upon the Commission's request, information necessary for the Commission to perform its duties or to demonstrate the SDR's compliance with its obligations under the Act and Commission regulations.
Proposed § 49.29(a) would require an SDR, upon request by the Commission, to file with the Commission information related to its business as an SDR and information the Commission determines to be necessary or appropriate for the Commission to perform its duties under the Act and Commission regulations thereunder. The SDR must provide the requested information in the form and manner and within the time specified by the Commission in its request.
Proposed § 49.29(b) would require an SDR, upon request by the Commission, to file with the Commission a written demonstration, containing supporting data, information, and documents, that it is in compliance with its obligations under the Act and the Commission's regulations. SDRs must provide the written demonstration in the form and manner and within the time specified by the Commission in its request. The Commission notes that the requests may include, but are not limited to, demonstrating compliance with the core principles applicable to SDRs under CEA section 21(f) and with any or all requirements in part 49 of the Commission's regulations.
The Commission requested comment on all aspects of proposed § 49.29 and received one comment in response. The comment generally supported proposed § 49.29,
The Commission has determined to adopt final § 49.29 as proposed. The Commission believes that § 49.29, as proposed and adopted, provides the Commission with the necessary flexibility to obtain information and documentation to determine whether an SDR is complying with applicable statutory and regulatory requirements, and to ensure that the Commission is able to fulfill its responsibilities in the oversight of SDRs. The Commission notes that requests under § 49.29 may be made for any Commission oversight purpose. For example, the Commission may request that an SDR provide information relating to its operations or its practices in connection with its compliance with particular regulatory duties and core principles, other conditions of its registration, or in connection with the Commission's general oversight responsibilities under the Act. Final § 49.29 is also based on similar existing Commission requirements applicable to SEFs and DCMs, which have successfully assisted the Commission in obtaining needed information from these registered entities for many years without difficulty.
The Commission also notes that, as discussed above, final § 49.29 facilitates the removal of the requirement in § 49.3(a)(5) that an SDR file an annual amendment to Form SDR, by allowing the Commission to request the relevant information as needed without requiring an SDR to file a full Form SDR update.
The Commission believes the comment's proposed revisions would unduly constrain the Commission's ability to obtain needed information in a timely manner and inappropriately restrict the Commission in fulfilling its oversight responsibilities. However, the Commission emphasizes that it intends to coordinate and collaborate with SDRs in formulating information requests pursuant to § 49.29 in order to ensure that such requests are reasonable, based on the facts and circumstances, as is the current practice between the Commission and the SDRs.
The Commission proposed to add a new § 49.30 to place in one location the requirements governing the form and manner in which an SDR must provide information to the Commission.
Final § 49.30 sets forth the broad parameters of the “form and manner” requirement. Under final § 49.30, unless otherwise instructed by the Commission, an SDR must submit SDR data reports and any other information required to be provided to the Commission under part 49 within the time specified, using the format, coding structure, and electronic data transmission procedures approved in writing by the Commission.
The Commission requested comment on all aspects of proposed § 49.30. The Commission also invited specific comment on (i) whether the Commission should provide a single format or coding structure for each SDR to deliver reports and other information in a consistent manner; (ii) whether existing standards and formats are sufficient for providing the Commission with requested information; and (iii) whether the Commission should require specific electronic data transmission methods and/or protocols for SDRs to disseminate reports and other information to the Commission.
One comment supported mandating messaging formats for transmission from an SDR to the Commission, but emphasized the Commission should not mandate the format for reporting from a reporting counterparty to an SDR.
Another comment recommended that the Commission revise the text of proposed § 49.30 to include the phrase “as soon as practicable, given the nature of the request and the SDR's circumstances” after “[u]nless otherwise instructed by the Commission.”
The Commission has determined to adopt § 49.30 as proposed. The Commission notes that final § 49.30 does not expand the existing substantive SDR informational requirements of part 49. Rather, the regulation authorizes the Commission to specify how information reported to an SDR under other requirements of part 49 should be formatted and delivered to the Commission.
Under final § 49.30, the format, coding structure, and electronic data transmission procedures an SDR uses for reports and submissions to the Commission pursuant to part 49 must be approved in writing by the Commission. These written specifications could include specifications similar to the “guidebooks” and other technical specifications currently published on the Commission's website.
The Commission believes the comment's proposed revision may unduly constrain the Commission's ability to adjust the process by which it obtains information. However, the Commission emphasizes that it intends to continue to coordinate and collaborate with SDRs in formulating information requests and specifications pursuant to § 49.30 in order to ensure that such requests are reasonable, based on the facts and circumstances, as is the current practice for the Commission and the SDRs.
The Commission proposed to add new § 49.31 to set forth and consolidate delegations of authority for part 49 of the Commission's regulations.
More specifically, the Commission proposed to delegate its authority under the current and proposed part 49 regulations, as set forth below, to the Director of DMO, and to such members of the Commission's staff acting under his or her direction as he or she may see fit from time to time.
The Commission did not receive any comments on proposed § 49.31. The Commission continues to believe the proposed addition of § 49.31 and the proposed new delegations thereunder will improve the Commission's ability to respond to developments in the swaps market, to access information and data from SDRs, and to fulfill the Commission's oversight obligations. Accordingly, the Commission is adopting § 49.31 as proposed.
Final § 49.31(a)(1) delegates to the Director of DMO the Commission's authority to request documentation related to an SDR equity interest transfer pursuant to § 49.5.
Final § 49.31(a)(2) delegates to the Director of DMO the Commission's authority to instruct an SDR on transmitting open swaps reports to the Commission pursuant to § 49.9.
Final § 49.31(a)(3) delegates to the Director of DMO the Commission's authority under § 49.10 to modify an SDR's required acceptance of all SDR data in a particular asset class for which the SDR accepts data.
Final § 49.31(a)(4) delegates to the Director of DMO the Commission's
Final § 49.31(a)(5) delegates to the Director of DMO the Commission's authority under § 49.13 to require an SDR to monitor, screen, and analyze SDR data.
Final § 49.31(a)(6) delegates to the Director of DMO the Commission's authority under § 49.16 to request that an SDR disclose aggregated SDR data in the form and manner prescribed by the Commission.
Final § 49.31(a)(7) delegates to the Director of DMO the Commission's authority with respect to all functions reserved to the Commission under § 49.17.
Final § 49.31(a)(8) delegates to the Director of DMO the Commission's authority under § 49.18 to permit an SDR to accept alternative forms of confidentiality arrangements and the ability to direct an SDR to limit, suspend, or revoke access to swap data.
Final § 49.31(a)(9) delegates to the Director of DMO the authority under § 49.22 to grant an SDR an extension to the annual compliance report filing deadline.
Final § 49.31(a)(10) delegates to the Director of DMO the Commission's authority under § 49.23 to require an SDR to exercise emergency authority and to request the documentation underlying an SDR's decision to exercise its emergency authority.
Final § 49.31(a)(11) delegates to the Director of DMO the Commission's authority under § 49.24 to determine an SDR to be a “critical SDR” and to request copies of BC-DR books and records, assessments, test results, plans, and reports.
Final § 49.31(a)(12) delegates to the Director of DMO the Commission's authority under § 49.25, including the authority under § 49.25(b)(2) to deem other financial resources as acceptable; the authority under § 49.25(c) to review and require changes to an SDR's computations of projected operating costs; the authority under § 49.25(f)(1) to request reports of financial resources; and the authority under § 49.25(f)(3) to extend the deadline by which an SDR must file a quarterly financial report.
Final § 49.31(a)(13) delegates to the Director of DMO the Commission's authority under § 49.29 to request information from an SDR, and to require an SDR to provide a written demonstration of its compliance with the Act and Commission regulations, including the authority to specify the form, manner and time for the an SDR's provision of such information or written demonstration.
Final § 49.31(a)(14) delegates to the Director of DMO the Commission's authority under § 49.30 to establish the format, coding structure, and electronic data transmission procedures for the submission of SDR data reports and any other information required by the Commission under part 49.
The Commission is adding a definition for the term “open swap” to final § 45.1 that will define the term as an executed swap transaction that has not reached maturity or expiration, and has not been fully exercised, closed out, or terminated. The definition is identical to the definition for “open swap” added to final § 49.2 and is intended to create consistency between defined terms in parts 45 and 49 of the Commission's regulations. The term “open swap” is used is both final part 45 and part 49, particularly in regards to the requirements related to swap data verification, and consistency in the use of the term across both parts is crucial to ensure swap data verification functions properly. See section II.A.3 above for a more robust discussion of the definition of “open swap.”
As discussed above in Section II.H, as part of the amendments to § 49.12, the Commission proposed to consolidate the SDR recordkeeping requirements set forth in current § 45.2(f) and (g) into § 49.12. As discussed above, the Commission has determined to adopt the consolidation of § 45.2(f) and (g) into § 49.12, as proposed.
Pursuant to CEA section 2(a)(13)(G), all swaps must be reported to an SDR.
Accordingly, in order to ensure the high quality of swap data, the Commission is adopting the proposed rules, with modifications, to require counterparties to take steps to ensure the accuracy and completeness of swap data reported to SDRs. In response to comments, the Commission is modifying final § 45.14 to make the error-correction and verification processes less burdensome and more flexible than the processes set forth in proposed § 45.14. To this end, final § 45.14(a)(1), as does current § 45.14, requires each SEF, DCM, and reporting counterparty to correct errors
Final § 45.14(a)(1) provides that any SEF, DCM, or reporting counterparty that by any means
However, final § 45.14(a)(3) provides that the error correction requirement in final § 45.14(a)(1) does not apply to swaps for which the record retention periods under § 45.2 of this part have expired as of the time that the errors are discovered. The Commission determined that this exclusion is appropriate, as SEFs, DCMs, and reporting counterparties are not required to maintain records related to their swaps beyond the applicable retention periods in § 45.2. The exclusion therefore removes any potential confusion as to the correction of swaps beyond the retention period for these swaps. The Commission further notes that, with the adoption of the verification requirement, the Commission expects that errors will generally be discovered during the record retention period and the exclusion will not have a significant impact on the accuracy of swap data for future swaps. The Commission emphasizes that a SEF, DCM, or reporting counterparty may not in any way attempt to avoid “discovering” errors, including, but not limited to, by not performing thorough verification as required under final § 45.14(b).
Final § 45.14(a)(1)(i) provides that corrections must be made as soon as technologically practicable after discovery of an error. In all cases, errors must be corrected within seven business days after discovery. This deadline is necessary to ensure that errors are corrected in a timely manner. Final § 45.14(a)(1)(ii) provides that if an error will not be corrected in a timely fashion, the entity required to correct must notify the Director of DMO, or such other employee or employees of the Commission as the Director may designate from time to time, of the error. The notification must be made within twelve hours of when the determination is made that the error will not be corrected in time. This notification requirement is necessary to alert the Commission to problems with the quality of swap data. The notification must be made according to the instructions that will be specified by the Director of DMO, or such other employee or employees of the Commission as the Director may designate from time to time. The notification must generally include an initial assessment of the scope of the error or errors. If an initial remediation plan exists, the notification must include the initial remediation plan as well.
Final § 45.14(b) requires each reporting counterparty to verify the accuracy and completeness of swap data for all of its open swaps. To perform verification, each reporting counterparty must utilize the mechanism adopted for verification under § 49.11 by each SDR the reporting counterparty uses for swap data reporting. Each reporting counterparty must use the relevant SDR mechanism to compare all swap data for each open swap that is maintained by the SDR for which it is the reporting counterparty with all swap data contained in the reporting counterparty's internal books and records to verify that there are no errors.
Final § 45.14(a)(1)(i) provides that any error that is discovered or could have been discovered during the performance of the verification process is considered discovered as of the moment the verification process began, and the error must be corrected accordingly. The Commission determined that this rule is necessary in order to ensure that reporting counterparties diligently perform verification.
Under final § 45.14(b)(1) and final § 49.11(b)(2), the verification requirement entails verifying that there are no errors for each data field for each open swap that the reporting counterparty was required to report under this part. The Commission determined that all swap data is relevant, and that none of the data that the Commission requires to be reported is unnecessary. All swap data fields are necessary to ensure the quality of all swap data available to the Commission, which the Commission uses to fully perform its regulatory mission. Accordingly, the verification requirement applies to all reporting counterparties, for all open swaps, and for each required data element. However, the Commission determined that it is only necessary for reporting counterparties to verify that there are no errors in the up-to-date swap data for each data field that is required to be reported under part 45 of this chapter, and it is unnecessary to require verification of data reporting messages. Accordingly, SDRs are only required to make available to reporting counterparties the most current swap data the SDR maintains using the verification mechanism, as discussed above in II.G, and reporting counterparties are only required to verify using the swap data available through this mechanism under final § 45.14(b).
Final § 45.14(b)(4) provides the minimum frequency at which a reporting counterparty must perform verification. A reporting counterparty that is an SD, MSP, or DCO, must perform verification once every thirty calendar days. All other reporting counterparties must perform verification once every calendar quarter, provided that there are at least two calendar months between verifications.
The Commission determined that these time frames are sufficient to ensure the quality of swap data because SDs, MSPs, and DCOs serve as reporting counterparties for the overwhelming majority of swap data,
Under final § 45.14(b), a reporting counterparty is not required to notify the relevant SDR regarding the result of a verification,
Non-reporting counterparties must also participate in ensuring that errors in swap data are corrected, although to a much smaller degree than reporting counterparties. Final § 45.14(a)(2) provides that a non-reporting counterparty that by any means discovers an error must notify the reporting counterparty of the error. The notification must be made as soon as technologically practicable after discovery, but not later than three business days following discovery of the error. The Commission notes that non-reporting counterparties are not required to verify swap data, and that the notification only needs to include the errors that the non-reporting counterparty discovers. To the extent that an error exists, the reporting counterparty will be required to correct the error under the requirements of final § 45.14(a)(1). The Commission determined that this notification requirement is necessary to ensure the quality of swap data. The Commission further determined that the three-business-day notification deadline is necessary to ensure that the non-reporting counterparty will notify the reporting counterparty of errors in a timely manner.
The Commission recognizes that a non-reporting counterparty may not know the identity of the reporting counterparty. Accordingly, § 45.14(a)(2) provides that when the non-reporting counterparty does not know the identity of the reporting counterparty, the non-reporting counterparty must notify the SEF or DCM where the swap was executed of the error in the same time frame for notifying the reporting counterparty. Such notification constitutes discovery of the error for the SEF or DCM for purpose of the SEF's or DCM's error correction requirement under final § 45.14(a).
Errors are described in final § 45.14(c), which provides that for the purposes of § 45.14, there is an error when swap data is not completely and accurately reported. Under final § 45.14(c)(1), errors include, but are not limited to, where swap data is reported to an SDR, or is maintained by an SDR, containing incorrect information (
Under § 45.14(c)(2), there is a presumption that, for the purposes of § 45.14, an error exists if the swap data that is maintained and disseminated by an SDR for a swap is not complete and accurate. The Commission determined that this presumption is necessary because the swap data maintained and disseminated by the SDRs is the same as the swap data available to the Commission and it is necessary to ensure the accuracy of that swap data for the Commission's regulatory purposes. Further, the presumption that the swap data maintained and disseminated by SDRs is the same as the swap data that was reported is implicit in the structure of swap data reporting under CEA section 21. Under CEA section 21(c)(4) and (7), an SDR is required to make the swap data it maintains available to the Commission and to certain other regulators. This requirement only serves its purpose if there is a presumption that the swap data maintained by the SDR is the same as the swap data that was reported to the SDR.
The Commission received a number of comments on the Proposal recommending limitations on the scope of the error correction rules. Comments recommended that the error correction rules should only apply to open swaps
The Commission generally does not agree with the recommendations to exclude swaps that are no longer open from the full requirement to correct errors. There is no expiration in the CEA and the Commission's regulations on the requirement to report swap data. If there is an error in the reporting of swap data, the reporting counterparty has not fulfilled its requirement to report swap data. Further, the Commission utilizes data regarding swaps that are no longer open in a variety of ways, including in its market and economic analyses and in its enforcement and administration of the provisions of the CEA. It is therefore necessary to ensure that swap data for these swaps does not contain errors. Although the Commission is limiting the verification requirements to open swaps, the Commission is doing so because the verification of swaps that are no longer open is not as practicable as with open swaps, not because it is unnecessary to ensure that swap data from these swaps is free from error.
The Commission similarly declines to accept recommendations to limit the scope of the error correction rules by adopting a materiality requirement, or by limiting the application of the rules to only certain data elements. A reporting counterparty does not satisfy the requirement to report swap data until all required elements are accurately reported. Further, all the required swap data elements are significant and required in order for the Commission to perform its regulatory functions. As a result, it is necessary for the Commission to ensure that the swap data for every data element is accurate.
However, the Commission agrees with the recommendation to exclude errors that are discovered after the expiration of the relevant recordkeeping requirement. The Commission recognizes that it would be impracticable for SEFs, DCMs, and reporting counterparties to be required to correct such errors, as these entities are not required to keep records of swap data beyond the applicable retention periods, and these records would be necessary to discover and correct errors. Accordingly, final § 45.14(a)(3) excludes such errors from the error correction requirement.
The Proposal provided that errors must be corrected as soon as technologically practicable after discovery, but no later than three business days after discovery.
The Commission does not agree with the recommendations to replace or not adopt the notification requirement. The purpose of the notification requirement is to provide the Commission with the information that it needs to assess the accuracy of swap data. The notification requirement is not punitive. However, to make the notification more useful to the Commission, the Commission accepts the recommendation for a longer notification time frame and final § 45.14(a)(1)(ii) extends the notification deadline for correcting errors to seven business days. This longer time frame will provide the entity making the correction time to develop a more accurate understanding of the scope of the error. The Commission also agrees with the recommendations that it may not be feasible in every case to develop an initial remediation plan. Accordingly, final § 45.14(a)(1)(ii) provides that the notification needs to include the initial remediation plan, but only if one exists.
The Commission received several comments recommending against requiring reporting counterparties to verify their swap data. Several commenters stated that improving SDR validations and the required data elements is a more efficient way to increase data accuracy than the proposed verification rules.
The Commission does not agree with the recommendations against requiring verification. As noted above, the Commission interprets the requirement to report data to an SDR in section 2(a)(13)(G) of the CEA to include a requirement that the reporting counterparty verifies that it accurately complied with the requirement. The Commission also interprets the requirement in section 21(c)(2) of the CEA for SDRs to confirm the accuracy of reported data with the counterparties to also include a requirement for counterparties to participate in ensuring the swap data accuracy, as not including counterparties in the confirmation process would render the statutory requirement useless. The purpose of the verification requirement is to ensure the quality of swap data, as required by the Act. Improving SDR validations and standardizing the data elements alone will not accomplish this, because a swap data error that is still a plausible value, such as reporting a notional value of $1,000,000 instead of the correct notional value of $10,000,000, would not be caught by validations. Only a review of the swap data by the counterparty that is responsible for reporting the swap data would catch this error.
Additionally, the Commission has ample experience with the existence of swap data errors that would pass validations that, in the absence of an adequate verification requirement, persisted for long periods of time before being discovered and corrected. The Commission cannot know the precise nature and scope of existing errors that have not been corrected, which the
The Commission also received comments regarding which counterparties should be required to perform verifications. Comments recommended excluding specific reporting counterparties, including end users with centralized trading structures,
The Commission notes that although CEA section 21(c)(2) also includes non-reporting counterparties in the obligation to confirm the accuracy of reported swap data, the Commission determined that it is unnecessary to require non-reporting counterparties to perform verification. The Act places the burden of reporting on the reporting counterparty, and, as the only counterparty with swap data reporting responsibilities, the reporting counterparty is best positioned to perform verification. Commenters generally supported this determination.
The Commission also received comments recommending changes to the proposed verification rule. The proposed rule required reporting counterparties that are SDs, MSPs, or DCOs to perform verification weekly and all other reporting counterparties to perform verification monthly.
The Commission also received comments on the scope of the data that must be verified. The verification rule in the Proposal would apply to all required swap data fields for all open swaps.
The Commission declines to accept the recommendation to limit the scope of the verification requirement. Every data field that is required to be reported to the Commission is significant and necessary for the Commission's performance of its regulatory responsibilities, and to ensure the quality of all swap data.
One comment recommended limiting the verification requirement to once per swap, meaning that once swap data for a particular swap has been verified, the reporting counterparty no longer is required to verify the data for that swap.
The Commission also received comments regarding the requirements on non-reporting counterparties to ensure that swap data is free from errors. Comments supported excluding non-reporting counterparties from the verification requirements.
The Commission also received comments on the proposed § 45.14(b)(2),which provided, in part, that a reporting counterparty, SEF, or DCM that is notified of an error by a non-reporting counterparty is only required to correct the error if it agrees with the non-reporting counterparty that an error exists.
The Commission is not adopting the requirement. Final § 45.14(a) explicitly applies to errors regardless of the how the SEF, DCM, or reporting counterparty becomes aware of the error. If the non-reporting counterparty notifies the reporting counterparty of the error, and the SEF, DCM, or reporting counterparty disagrees that there is an error, then the SEF, DCM, or reporting counterparty has not discovered an error and there is nothing to correct. The Commission does however note that a SEF, DCM, or reporting counterparty refusing to acknowledge an error that does exist, and therefore not correcting the error, would violate the Commission's regulations.
The Commission is adopting proposed § 43.3(e), with modifications. Final § 43.3(e) is identical in substance to § 45.14(a), described in III.B, above, except that § 45.14(a) provides the rules for correcting errors
Current § 43.3(f) and (g) set forth the operating hours requirements for SDRs.
The Commission proposed additions to §§ 23.204 and 23.205 of the Commission's regulations. The proposed additions would require each SD and MSP to establish, maintain, enforce, review, and update as needed written policies and procedures that are reasonably designed to ensure that the SD or MSP complies with all obligations to report swap data to an SDR, consistent with parts 43 and 45. The Proposal noted that pursuant to other Commission regulations, SDs and MSPs are already expected to establish policies and procedures related to their swap market activities, including but not limited to, swaps reporting obligations.
In the Proposal, the Commission stated that it intended to provide a unified compliance date for all three of the Roadmap rulemakings because all three must work in tandem to achieve the Commission's goals.
The Commission received comments recommending a staggered implementation period instead of a unified one,
The Regulatory Flexibility Act (“RFA”) requires federal agencies, in promulgating rules, to consider the impact of those rules on small entities.
Various changes to parts 43, 45, and 49 would have a direct impact on all reporting counterparties. These reporting counterparties may include SDs, MSPs, DCOs, and non-SD/MSP/DCO counterparties. Regarding whether non-SD/MSP/DCO reporting counterparties are small entities for RFA purposes, the Commission notes that CEA section 2(e) prohibits a person from entering into a swap unless the person is an eligible contract participant (“ECP”), except for swaps executed on or pursuant to the rules of a DCM.
The Commission has analyzed swap data reported to each SDR
Based on the above analysis, the Commission does not believe that this Final Rule will have a significant economic impact on a substantial number of small entities. Therefore, the Chairman, on behalf of the Commission, pursuant to 5 U.S.C. 605(b), hereby certifies that the Final Rule will not have a significant economic impact on a substantial number of small entities.
The Paperwork Reduction Act of 1995 (“PRA”)
The Commission did not receive any comments regarding its PRA burden analysis in the preamble to the Proposal. The Commission is revising the three information collections to reflect the adoption of amendments to parts 43, 44, and 49, including changes to reflect adjustments that were made to the final rules in response to comments on the Proposal (not relating to the PRA).
The Commission is adopting changes that remove paragraphs (f) and (g) from § 45.2 and move the requirements of these paragraphs to amended § 49.12. Paragraphs (f) and (g) contain recordkeeping requirements specific to SDRs. Existing § 49.12 already incorporates the requirements of current § 45.2(f) and (g), and amended § 49.12 includes the same requirements, but deleting this requirement from § 45.2 and amending § 49.12 to clarify the requirements better organizes the regulations for SDRs by locating these SDR requirements in part 49 of the Commission's regulations. These amendments modify collection 3038-0096 because it removes these recordkeeping requirements from part 45 of the Commission's regulations. The Commission estimates that moving these requirements results in a reduction of 50 annual burden hours for each SDR in collection 3038-0096, for a total reduction of 150 annual burden hours across all three SDRs.
Final § 45.14(a) requires SEFs, DCMs, and reporting counterparties to correct errors and omissions in swap data previously reported to an SDR, or erroneously not reported to an SDR as required, as soon as technologically practicable after discovery of the errors or omissions, similar to existing § 45.14. Also, similar to existing § 45.14, final § 45.14(a) requires a non-reporting counterparty to report a discovered error or omission to the relevant SEF, DCM, or reporting counterparty as soon as technologically practicable after discovery of the error or omission.
Final § 45.14(a)(1)(ii) includes the new requirement for SEFs, DCMs, and reporting counterparties to notify the Director of DMO when errors or omissions cannot be timely corrected and, in such case, to provide the Director of DMO with an initial assessment of the errors and omissions and an initial remediation plan if one exists. The notification shall be made in the form and manner, and according to the instructions, specified by the Director of DMO. This requirement constitutes a new collection of information. The Commission estimates that each SEF, DCM, and reporting counterparty will, on average need to provide notice to the Commission under final § 45.14(a)(1)(ii) once per year and that each instance will require 6 burden hours.
Final § 45.14(b) requires all reporting counterparties to verify the accuracy and completeness of all swap data for all open swaps to which they are the reporting counterparty. Reporting counterparties comply with this provision by utilizing the relevant mechanism(s) to compare all swap data for each open swap for which it serves as the reporting counterparty maintained by the relevant swap data repository or repositories with all swap data contained in the reporting counterparty's internal books and records for each swap, to verify that there are no errors in the relevant swap data maintained by the swap data repository. Additionally, reporting counterparties must conform to each relevant swap data repository's verification policies and procedures created pursuant to final § 49.11. Final § 45.14(b)(5) requires each reporting counterparty to keep a log of each verification that it performs. The log must include all errors discovered during the verification and the corrections performed under § 45.14(a). Compliance with § 45.14(b) constitutes a collection of information not currently included in collection 3038-0096, and therefore requires a revision of that collection.
The Commission expects that compliance with § 45.14(b) will include: (1) A one-time hours burden to establish internal systems needed to perform their verification responsibilities, and (2) an ongoing hours burden to complete the verification process for each report provided by an SDR.
In order to comply with the relevant SDR verification policies and procedures as required to complete the verification process, the Commission believes that reporting counterparties will create their own verification systems or modify their existing connections to the SDRs. The Commission estimates that each reporting counterparty will incur an initial, one-time burden of 100 hours to build, test, and implement their verification systems based on SDR instructions. This burden may be reduced, if complying with SDR verification requirements only requires reporting counterparties to make small modifications to their existing SDR reporting systems, but the Commission is estimating the burden based on the creation of a new system. The Commission also estimates an ongoing annual burden of 10 hours per reporting counterparty to maintain their verification systems and to make any needed updates to verification systems to conform to any changes to SDR verification policies and procedures. As there are approximately 1,702 reporting counterparties based on data available to the Commission, the Commission estimates a one-time overall hours burden of 170,200 hours to build reporting counterparty verification systems and an ongoing annual overall hours burden of 17,020 hours to maintain the reporting counterparty verification systems.
Under final § 45.14(b)(4), SD, MSP, or DCO reporting counterparties must perform verification once every thirty days for each SDR where the reporting counterparty maintains any open swaps. Non-SD/MSP/DCO reporting counterparties must perform verification once every calendar quarter for each SDR where the reporting counterparty maintains any opens swaps. The Commission also expects, based on discussions with SDRs and reporting
As there are 117 SDs, MSPs, or DCOs that clear swaps registered with the Commission, the Commission estimates
The Commission therefore estimates that the overall burden for updated Information Collection 3038-0096 will be as follows:
Final § 43.3(e) requires SEFs, DCMs, and reporting counterparties to correct errors and omissions in swap transaction and pricing data as soon as technologically practicable after discovery. Final § 43.3(e) also requires a non-reporting counterparty to report a discovered error or omission to the relevant SEF, DCM, or reporting counterparty as soon as technologically practicable after discovery of the error or omission. These final rules clarify the requirements to be consistent with the requirements in final § 45.14(b), but are also effectively the same as the requirements of exiting § 43.3(e).
Final § 43.3(e)(1)(ii) includes the new requirement for SEFs, DCMs, and reporting counterparties to notify the Director of DMO when errors or omissions cannot be timely corrected and, in such case, to provide the Director of DMO with an initial assessment of the errors and omissions and an initial remediation plan if one exists. This requirement constitutes a new collection of information. The Commission estimates that each SEF, DCM, and reporting counterparty will, on average need to provide notice to the Commission under final § 43.3(e)(1)(ii) once per year and that each instance will require 6 burden hours.
The Commission is also removing paragraphs (f) and (g) from § 43.3 in order to move the requirements of these paragraphs to final § 49.28. Paragraphs (f) and (g) contain requirements for SDRs related to their operating hours. Final § 49.28 includes all of the current § 43.3(f) and (g) requirements, and this deletion and move is intended to better organize regulations for SDRs by locating as many SDR requirements as possible in part 49 of the Commission's regulations. Moving the requirements modifies collections 3038-0070 and 3038-0086 because it removes these recordkeeping requirements from part 43 of the Commission's regulations and adds them to part 49 of the Commission's regulations. The Commission estimates that the public notice requirements of existing § 43.3(f) and (g) require SDRs to issue three notices per year and spend five hours creating and disseminating each notice, for a total of 15 hours annually for each SDR, for a total of 45 annual burden hours being moved across all three SDRs. As a result, the Commission estimates that moving these requirements will result in a total reduction of 45 annual burden hours for SDRs in collection 3038-0070.
The Commission therefore estimates that the total overall burdens for updated Information Collection 3038-0070 will be as follows:
The Commission is revising collection 3038-0086 to account for changes in certain SDR responsibilities under the final amendments to §§ 49.3, 49.5, 49.6, 49.9, 49.10, 49.11, and 49.26, and to the addition of §§ 49.28, 49.29, and 49.30. The estimated hours burdens and costs provided below are in addition to or subtracted from the existing hours burdens and costs in collection 3038-
The final amendments to § 49.3(a)(5) remove the requirement for each SDR to file an annual amendment to its Form SDR. This reduces the PRA burden for SDRs by lowering the number of filings required for each SDR. The Commission estimates that the PRA burden for each SDR will remain at 15 hours per filing, but that the number of filings per year will be reduced from three to two, meaning that the final amendments to § 49.3(a)(5) reduces the burden on SDRs by 15 hours per year, for a total reduction of 45 annual burden hours across all three SDRs. This estimate is based on the Commission's experience with current SDR practices and the original supporting statement for collection 3038-0086.
The final amendments to § 49.5 require SDRs to file a notification with the Commission for each transaction involving the direct or indirect transfer of ten percent or more of the equity interest in the SDR within ten business days of the firm obligation to transfer the equity interest, to provide the Commission with supporting documentation for the transaction upon the Commission's request, and, within two business days of the completion of the equity interest transfer, to file a certification with the Commission that the SDR will meet all of its obligations under the Act and the Commission's regulations. The Commission estimates that the requirements of final § 49.5 create a burden of 15 hours per SDR for each qualifying equity interest transfer. Equity interest transfers for SDR are rare, so the Commission estimates that each SDR will provide information pursuant to final § 49.5 no more often than once every three years. As a result, the estimated average annual PRA burden related to final § 49.5 is 5 hours per SDR, for a total estimated ongoing annual burden of 15 hours total for all three SDRs. The Commission does not anticipate any one-time, initial burdens related to final § 49.5.
The final amendments to § 49.6 require an SDR seeking to transfer its registration to another legal entity due to a corporate change to file a request for approval with the Commission before the anticipated corporate change, including the specific documents and information listed in final § 49.6(c). The Commission estimates that the requirements of final § 49.6 create a burden of 15 hours per SDR for each transfer of registration. Transfers of registration for SDR are rare, so the Commission estimates that each SDR will provide information pursuant to final § 49.6 no more often than once every three years. As a result, the estimated average annual PRA burden related to final § 49.6 is 5 hours per SDR, for a total estimated ongoing annual burden of 15 hours total for all three SDRs. The Commission does not anticipate any one-time, initial burdens related to final § 49.6.
The final amendments to § 49.9 remove the current text of the section and replace it with requirements related to SDRs providing open swaps reports to the Commission, as instructed by the Commission. The instructions may include the method, timing, frequency, and format of the open swaps reports.
The Commission estimates that SDRs will incur a one-time initial burden of 250 hours per SDR to create or modify their systems to provide the open swaps reports to the Commission as instructed, for a total estimated hours burden of 750 hours. This burden may be mitigated by the fact that SDRs currently have systems in place to provide similar information to the Commission, which may reduce the effort needed to create or modify SDRs' systems. The Commission additionally estimates 30 hours per SDR annually to perform any needed maintenance or adjustments to SDR systems.
The Commission expects that the process for providing the open swaps reports to the Commission will be largely automated and therefore estimates a burden on the SDRs of 2 hours per report. Though the Commission is not prescribing the frequency of the open swaps reports at this time, the Commission estimates, only for the purposes of this burden calculation, that the SDRs will provide the Commission with 365 open swaps reports per year, meaning that the estimated ongoing annual additional hours burden for generating the open swaps reports and providing the reports to the Commission is 730 hours per SDR.
The Commission therefore estimates a total ongoing additional annual hours burden related to final § 49.9 of 760 hours per SDR,
Final § 49.10(e) requires SDRs to accept, process, and disseminate corrections to SDR data errors and omissions. Final § 49.10(e) also requires SDRs to have policies and procedures in place to fulfill these requirements.
The Commission estimates that SDRs will incur a one-time initial burden of 100 hours per SDR to update and implement the systems, policies, and procedures necessary to fulfill their obligations under final § 49.10(e), for a total increased initial hours burden of 300 hours across all three SDRs. This burden may be mitigated by the fact that SDRs already have systems, policies, and procedures in place to accomplish corrections to SDR data and that the SDRs currently make such corrections on a regular basis. The Commission additionally estimates 30 hours per SDR annually to perform any needed maintenance on correction systems and to update corrections policies and procedures as needed.
The Commission anticipates that the process for SDRs to perform corrections will be largely automated, as this is the case with current SDR corrections. Based on swap data available to the Commission and discussions with the SDRs, the Commission estimates that an SDR will perform an average of approximately 2,652,000 data corrections per year. Based on the same information, the Commission estimates that performing each correction will require 2 seconds from an SDR. As a result, the Commission estimates that the ongoing burden of performing the actual corrections to SDR data will be approximately 1,473 hours per SDR annually, on average. The Commission anticipates that once applicable, the verification rules may have the short term effect of increasing the number of corrections per year, as reporting counterparties discover errors in open swaps. The Commission further anticipates that the number of corrections will then decrease as the new validation rules and revised technical specifications improve the quality and accuracy of initial reporting, reducing the number of corrections.
The Commission therefore estimates a total additional annual hours burden related to final § 49.10(e) of 1,503 hours per SDR annually, for a total estimated ongoing burden of 4,509 hours.
The final amendments to § 49.11 modify the existing obligations on SDRs to confirm the accuracy and completeness of swap data. Final § 49.11(b) requires SDRs to provide a mechanism that allows each reporting counterparty that is a user of the swap data repository to access all swap data maintained by the swap data repository for each open swap for which the reporting counterparty is serving as the reporting counterparty. Final §§ 49.11(a) and 49.11(c)
While SDRs are already required to confirm the accuracy and completeness of swap data under current § 49.11, the requirements in final § 49.11 impose different burdens on the SDRs than the current regulation. The Commission estimates that each SDR will incur an initial, one-time burden of 300 hours to build, test, and implement updated verification systems, for a total of 900 initial burden hours across all SDRs. The Commission also estimates 30 hours per SDR annually for SDRs to maintain their verification systems and make any needed updates to verification policies and procedures required under final § 49.11(a) and (c).
Currently, SDRs are required to confirm swap data by contacting both counterparties for swaps that are not submitted by a SEF, DCM, DCO, or third-party service provider every time the SDR receives swap data related to the swap. For swaps reported by a SEF, DCM, DCO, or third-party service provider, the SDRs must currently assess the swap data to form a reasonable belief that the swap data is accurate every time swap data is submitted for a swap. Under final § 49.11(b) and (c), SDRs are only required to provide the mechanism that will allow reporting counterparties to perform verification, as described above. The Commission also anticipates, based on discussions with SDRs and other market participants, that the verification process will be largely automated once the processes are in place, and will consist of an annual burden of 30 hours per SDR.
The Commission therefore estimates a total additional ongoing hours burden related to final § 49.11 of 60 hours per SDR annually,
The final amendments to § 49.12(a) and (b) incorporate existing SDR recordkeeping obligations from § 45.2(f) and (g) respectively, which are already applicable to SDRs under current § 49.12(a). As the recordkeeping requirements being moved from § 45.2 already apply to SDRs under current § 49.12, the Commission does not believe that amended § 49.12(a) or (b) requires any revision to hours burden related to § 49.12 already included in collection 3038-0086. Final amendments to § 49.12(c) require SDRs to maintain records of data validation errors and of data reporting errors, which include records of data subsequently corrected by a SEF, DCM, or reporting counterparty pursuant to parts 43, 45, and 46. Final § 49.12(c) does not, however, add any new requirement to part 49, as all of the records to be kept are already required to be kept by existing recordkeeping obligations as data submitted under part 43, 45, or 46. As a result, the Commission does not believe that final § 49.12(c) requires an additional PRA burden beyond that already included in collection 3038-0086.
Final new § 49.26(j) requires SDRs to provide their users and potential users with the SDR's policies and procedures on reporting SDR data, including SDR data validation procedures, swap data verification procedures, and SDR data correction procedures. The Commission anticipates that SDRs will incur a one-time burden of 20 burden hours to draft written documents to provide to their users and potential users, for a total increase of 60 one-time burden hours across SDRs. The Commission also anticipates that SDRs will update their policies once per year and incur a recurring burden of 10 hours annually from providing any updated reporting policies and procedures to their users and potential users, as needed, for a for a total estimated ongoing annual burden of 30 hours across the three SDRs.
Final new § 49.28 incorporates existing provisions of § 43.3(f) and (g) with respect to hours of operation with minor changes and clarifications. Final § 49.28 extends the provisions of current § 43.3(f) and (g) to include all SDR data and clarifies the different treatment of regular closing hours and special closing hours. SDRs currently have closing hours systems, policies, and procedures that apply to all SDR functions and all SDR data under the current requirements. The final requirements related to declaring regular closing hours and special closing hours also effectively follow current requirements, without necessitating changes to current SDR systems or practices. The Commission does, however, anticipate that the SDRs will need to issue notices to the public related to closing hours under final § 49.28(a) and (c). The Commission estimates that each SDR will issue three notices per year and spend five hours creating and disseminating each notice, for a total of 15 hours per year preparing and providing public notices per SDR, for a for a total estimated ongoing annual burden of 45 hours per year across all SDRs.
Final new § 49.29 requires each SDR to provide, upon request by the Commission, information relating to its business as an SDR, and such other information that the Commission needs to perform its regulatory duties. This provision also requires each SDR, upon request by the Commission, to provide a written demonstration of compliance with the SDR core principles and other regulatory obligations. The PRA burden associated with such responses is dependent on the number of requests made and the complexity of such requests. Based on its experience with requests to DCMs, the Commission estimates that each SDR will likely receive on average between three and five requests per year, considering that an SDR is a newer type of registered entity than a DCM. The Commission anticipates that the number of requests will decrease over time. The Commission also anticipates that each such request will require the SDR to spend 20 hours to gather information and formulate a response, and bases its estimate of burden hours assuming five such requests per year, for a total additional hours burden of 100 hours per SDR per year, for a total estimated ongoing annual burden of 300 hours per
The Commission therefore estimates that the total overall burdens for updated Information Collection 3038-0086 will be as follows:
Section 15(a)
In this release, the Commission is revising existing regulations in parts 43, 45, and 49. The Commission is also issuing new regulations in part 49. Together, these revisions and additions are intended to address swap data verification and to improve the quality of data reporting generally. Some of the amendments are substantive. A number of amendments, however, are non-substantive or technical, and therefore will not have associated cost-benefits implications.
In the sections that follow, the Commission discusses the costs and benefits associated with the final rule and reasonable alternatives are considered. Comments addressing the associated costs and benefits of the rule are addressed in the appropriate sections. Wherever possible, the Commission has considered the costs and benefits of the final rule in quantitative terms.
Given that many aspects of the Proposal did not dictate the means by which SDRs or reporting counterparties must comply, the Commission recognized that the quantitative impact of the proposed rule would vary by each entity because the affected market participants vary in technological and staffing structure and resources. The Commission also noted in the Proposal that because of differences in the sizes of SDR operations, many of the costs associated with the proposed rulemaking were not readily quantifiable without relying on and potentially divulging confidential information. The Commission believed that many of the proposed rules would have affected a wide variety of proprietary reporting systems developed by SDRs and reporting counterparties.
With these understandings, the Commission asked the public to provide information regarding quantitative costs and benefits related to complying with the Commission's proposed rules. The Commission received comments from market participants, such as SDRs and reporting counterparties, and other interested public commenters. Some of the commenters asserted that some of the proposed rules would generate significant or burdensome costs, but no commenters quantified such costs. Nor did commenters, in particular the limited universe of market participants required to report and collect data, quantify costs they currently expend to comply with current swap data reporting requirements.
As a result, the Commission has considered the costs and benefits of the rules in this final rulemaking and has provided broad ranges of estimates of the costs associated with implementing some of the rule changes. It is reasonable to use ranges because the final rules are flexible, which means SDRs and reporting counterparties will take different approaches to comply with the final rules. In addition, ranges account for variation in technological and staffing structure, resources, and operational sophistication of affected market participants.
In several of the sections below, the Commission has estimated the number of hours it believes market participants will likely expend to comply with the final rules. These cost estimates focus on the technical aspects of the final rules and are separate from those listed in the Paperwork Reduction Act discussion above in section VII.B. The Commission has made reasonable estimations based, in part, on its familiarity with the work of SDRs and reporting counterparties, and its own experience in building systems to collect swap data. To monetize the hours, the Commission multiplies the number of hours and an hourly wage estimate. As most of the final rules may require technological changes, the Commission uses hourly wages for developers. The Commission estimated the hourly wages market participants will likely pay software developers to implement changes to be between $48 and $101 per hour.
Since their promulgation in 2011, the provisions in part 49 have required SDRs to, among other things, accept and confirm data reported to SDRs. The Commission believes SDRs' collection and maintenance of swap data as required in parts 45 and 49 has allowed the Commission to better monitor the overall swaps market and individual market participants. In contrast, before the adoption of the Dodd-Frank Act and its implementing regulations, the swaps
Under the current data reporting requirements, the Commission has had the opportunity to work directly with SDR data reported to, and held by, SDRs. Based on its experience working with SDR data, along with extensive feedback and comments received from market participants, the Commission believes that improving SDR data quality will help enhance the data's usefulness. In this final rulemaking, the Commission has focused on the operation and implementation of CEA section 21,
Prior to discussing the rule changes, the Commission describes below the current environment that will be impacted by these changes. Three SDRs are currently provisionally registered with the Commission: CME, DDR, and ICE. Each SDR has unique characteristics and structures that determine how the rule changes will impact its operations. For example, SDRs affiliated with DCOs tend to receive a large proportion of their SDR data from swaps cleared through those affiliated DCOs, while independent SDRs tend to receive SDR data from a wider range of market participants.
The current reporting environment also involves third-party service providers. These entities assist market participants with fulfilling the applicable data reporting requirements, though the reporting requirements do not apply to third-party service providers directly.
Current regulations have not resulted in data quality that meets the Commission's expectations. For example, current regulations do not include a specific affirmative obligation for swap counterparties to review reported swap data for errors.
Weaknesses in SDR policies and procedures also have created additional challenges for swap data accuracy. As discussed above, certain SDR policies and procedures for swap data have been based on negative affirmation,
The Commission believes that amendments and additions to certain regulations, particularly in parts 43, 45, and 49, will improve data accuracy and completeness. The regulatory changes in this final rulemaking aim to meet this objective.
This final rulemaking also includes amendments to part 49 to improve and streamline the Commission's oversight of SDRs. These amendments include new provisions allowing the Commission to request demonstrations of compliance and other information from SDRs.
For each amendment discussed below, the Commission summarizes the changes,
The Commission notes that this consideration of costs and benefits is based on the understanding that the swaps market functions internationally. Many swaps transactions involving U.S. firms occur across international borders and some Commission registrants are organized outside of the United States, with leading industry members often conducting operations both within and outside the United States, and with market participants commonly following substantially similar business practices wherever located. Where the Commission does not specifically refer to matters of location, the discussion of costs and benefits refers to the rules' effects on all swaps activity, whether by virtue of the activity's physical location in the United States or by virtue of the activity's connection with, or effect on, U.S. commerce under CEA section 2(i).
There are separate baselines for the costs and benefits that arise from the finalized regulations in this release. The baseline for final § 43.3(e) is existing § 43.3(e). The baseline for final § 45.14 is existing § 45.14. The baseline for amendments to current part 49 regulations is the existing part 49 and current practices. For final § 49.12, the baseline is existing § 49.12, as well as
The Commission is also finalizing four new regulations: §§ 49.28, 49.29, 49.30, and 49.31. For final § 49.28 the baseline is existing § 43.3(f) and (g), because the requirements in § 43.3(f) and (g) are being moved to final § 49.28. For final §§ 49.29 and 49.30, the baselines are current practices. Final § 49.31 concerns internal Commission practices and is not subject to consideration of costs and benefits.
The Commission is adopting editorial and conforming amendments to certain definitions in final § 49.2. The Commission considers the definitions to have no cost-benefit implications on their own. In addition, the Commission believes the amendments to § 49.2 are non-substantive changes that will not impact existing obligations on SDRs or reporting counterparties, and, therefore, the amended definitions have no cost-benefit implications.
The Commission is adopting the amendments to § 49.3(a)(5) and the conforming amendments to Form SDR and § 49.22(f)(2) as proposed in part and is not adopting the proposed amendments in part. The Commission is removing the current requirements for SDRs to file an annual amendment to Form SDR but declines to amend the requirement to update the Form SDR after the Commission grants an SDR registration under § 49.3(a).
The amendments to § 49.3(a)(5) benefit SDRs by reducing the amount of information that SDRs must provide to the Commission on an annual basis and the frequency with which SDRs must deliver information updating Form SDR.
By removing the requirement to file an annual update to Form SDR in current § 49.3(a)(5), SDRs will benefit from expending fewer resources to provide information to the Commission. The Commission believes that the eliminated requirement is burdensome and unnecessary, as the SDRs already submit, and will continue to submit, the same updated information in the required periodic Form SDR amendments. The Commission believes that costs of eliminating the annual Form SDR update requirement, in terms of impairing the Commission's access to information, will be minimal. The costs related to the changes to § 49.3(a)(5) will largely be associated with any needed adjustments to SDR policies and procedures related to reducing the number of updates to Form SDR.
Notwithstanding the anticipated incremental costs, the Commission believes this change to § 49.3(a)(5) is warranted in light of the anticipated benefits.
The Commission is finalizing various amendments to § 49.5 to simplify and streamline the requirements for when an SDR enters into an agreement involving the transfer of an equity interest of ten percent or more in the SDR. The Commission also is extending the notice filing deadline.
Current § 49.5 requires three actions by an SDR as part of an equity interest transfer: (1) Issue a notice to the Commission within one business day of committing to the transfer; (2) submit specific documents to the Commission, as well as update its Form SDR; and (3) certify compliance with CEA section 21 and Commission regulations adopted thereunder within two business days of the transfer of equity.
Final § 49.5 is less demanding than current § 49.5. Final § 49.5 ensures that the Commission is apprised of a change that might impact SDR operations and provided with information to aid any evaluation processes the Commission undertakes. Yet, final § 49.5 gives an SDR more time in which to notify the Commission of an equity interest transfer and eliminates unnecessary filings. Final § 49.5(a) requires an SDR: (i) To notify the Commission of each transaction involving the direct or indirect transfer of ten percent or more of the equity interest in the SDR within ten business days of “a firm obligation to transfer”; and (ii) to provide the Commission with supporting documentation upon request. Final § 49.5(b) requires that the notice in § 49.5(a) be filed electronically with the Secretary of the Commission and DMO at the earliest possible time, but in no event later than ten business days following the date upon which a firm obligation is made for the equity interest transfer. Final § 49.5(c) requires that upon the transfer, whether directly or indirectly, the SDR shall file electronically with the Secretary of the Commission and DMO a certification that the SDR meets all of the requirements of CEA section 21 and the Commission regulations thereunder, no later than two business days following the date on which the equity interest was acquired.
The Commission requested the public to comment on the cost-benefit considerations related to proposed § 49.5, but the Commission did not receive any comments. Consequently, the Commission continues to believe that the amendments will benefit SDRs by lowering the burdens related to notifying the Commission of equity interest transfers and by extending the time SDRs have to file the notice with the Commission. The amendments benefit SDRs by reducing the burden to notify the Secretary of the Commission and DMO of transfers by extending the available time from one business day to ten business days. More time will give SDRs greater latitude in managing how they use their time and allocate resources to file the required notices and certification.
In addition, SDRs will no longer have the obligations in current § 49.5(a) to update Form SDR and in current § 49.5(b) to provide specifically-identified documents to the Commission with the equity interest transfer notification. Final § 49.5 instead states that the Commission may request supporting documentation for the transaction. Even if the request causes the SDR to submit more documents than the ones listed in the current regulation or Form SDR, the requested documents will be tailored to the Commission's evaluation of the equity transfer. SDRs will benefit from not expending resources and time to collect, file, record, and track documents listed in current § 49.5 that may have no value to the Commission's review. The Commission's ability to request supporting documentation mitigates costs in terms of detrimental effects that could arise from less information about the transfer being available to the Commission.
Additional costs to SDRs, if any, will stem from the inclusion of “indirect transfers” of equity interest in § 49.5. This could increase the costs to SDRs, if the inclusion of indirect transfers results in more equity interest transfers being subject to the regulation and the associated need to provide information to the Commission. The inclusion of indirect transfers benefits the Commission by providing greater insight into equity interest transfers that could affect the business of an SDR, even though the equity interest transfer does not involve the SDR directly. As equity interest transfers are rare occurrences and the Commission does not anticipate that including indirect transfers will result in substantially more equity interest transfers, the
Notwithstanding the anticipated incremental costs, the Commission believes the changes to § 49.5 are warranted in light of the anticipated benefits.
The Commission is finalizing § 49.6 as proposed. Final § 49.6(a) requires an SDR seeking to transfer its SDR registration following a corporate change to file a request for approval to transfer the registration with the Secretary of the Commission in the form and manner specified by the Commission. Final § 49.6(b) specifies that an SDR file a request for transfer of registration as soon as practicable before the anticipated corporate change. Final § 49.6(c) sets forth the information that must be included in the request for transfer of registration, including the documentation underlying the corporate change, the impact of the change on the SDR, governance documents, updated rulebooks, and representations by the transferee entity, among other things. Final § 49.6(d) specifies that upon review of a request for transfer of registration, the Commission, as soon as practicable, shall issue an order either approving or denying the request for transfer of registration.
The Commission sought public comment on its cost-benefit considerations related to § 49.6. The Commission did not receive any comments.
The Commission continues to believe that § 49.6 will not impose any additional costs on SDRs compared to the current requirements that include meeting filing deadlines for submitting a Form SDR. The amendments to § 49.6 create several benefits that include simplifying the process for requesting a transfer of SDR registration and reducing the burdens on SDRs for successfully transferring an SDR registration to a successor entity. Final § 49.6 eliminates duplicative filings by requiring a more limited scope of information and representations from the transferor and transferee entities than existing § 49.6, which requires a full application for registration on Form SDR, including all Form SDR exhibits. Final § 49.6 focuses on ensuring the Commission receives relevant information needed to approve a request for a transfer of an SDR registration promptly.
The Commission is finalizing § 49.9 as proposed. Final § 49.9 creates a new regulatory obligation by requiring an SDR to provide the Commission with an open swaps report that contains an accurate reflection of data for every swap data field required to be reported under part 45 for every open swap maintained by the SDR.
Final § 49.9 alters current § 49.9 substantially. Current § 49.9 does not specifically discuss open swaps reports; rather, it outlines twelve SDR duties through cross-references to other part 49 regulations. For example, current § 49.9 states that SDRs must “accept swap data as prescribed in § 49.10;” provide direct electronic access to the Commission “as prescribed in § 49.17;” and adopt disaster recovery plans “as prescribed in § 49.23 and § 49.13.”
The Commission requested public comment on its consideration of the costs and benefits related to proposed § 49.9. The Commission did not receive any comments.
The Commission believes that while there may be costs imposed by final § 49.9, costs will be mitigated by the fact that SDRs already send the Commission reports that are similar to the open swaps reports required by final § 49.9. Given that SDRs already have systems to issue reports, the adjustments SDRs must undertake to comply with final § 49.9 should be incremental in terms of financial and administrative outlays to modify technological infrastructures to meet the Commission's requirements. The Commission believes the costs may include expenditures to modify current reporting systems to meet the requirements for the open swaps reporting systems and costs to maintain SDR systems.
Currently, SDRs produce reports using differing approaches to calculations and formats. There may be costs to change systems to meet the Commission's required standardized format for open swaps reports. The Commission, however, does not expect the format of these reports to change frequently. The Commission believes a standardized report will ensure the report is in a more usable format that assists and improves the Commission's regulatory efforts. The Commission uses current SDR reports to perform market risk and position calculations. The Commission also uses SDR reports to create and publish the Commission's weekly swaps report and quarterly entity-netted notional reports. The Commission-issued reports benefit market participants and the public by providing and analyzing data sourced directly from the SDRs. This information on open swaps is unique and is not available to the public until the Commission publishes its reports.
The Commission recognizes that the three existing SDRs vary in size of operations. They also service and process different volumes of data for various asset classes. As a result, the qualitative and quantitative costs to comply with § 49.9 will differ between SDRs. Notably, however, no commenters submitted estimates of time or monetized costs for proposed § 49.9 or the amount of current costs to produce reports. Based on the Commission's knowledge of SDRs and its own technological experience, the Commission estimates that each SDR will expend 250 hours to establish an open swaps report system that complies with § 49.9. Thereafter, the Commission estimates that each SDR will spend 30 hours on maintenance and 730 hours dedicated to issuing open swaps reports annually. The Commission monetizes the initial set-up and annual hours by multiplying by the wage-rate range of $48 to $101 to estimate that each SDR will expend $12,000 to $25,250 to establish an open swaps report system and then expend $36,480 to $76,760 for annual maintenance and reporting.
The Commission considered and rejected the alternative of not adopting § 49.9. The Commission believes that the absence of a requirement for open swaps reports creates regulatory ambiguity and the possibility that SDRs might stop voluntarily producing open swaps reports. If the latter were to
Notwithstanding the costs and in light of the drawbacks of possible alternatives, the Commission believes § 49.9 is warranted in light of the anticipated benefits.
Final § 49.10(e) requires an SDR to accept corrections for errors in SDR data that was previously reported, or erroneously not reported, to SDRs. The Commission is finalizing § 49.10(e)(1) through (4) generally as proposed, with modifications and textual clarifications in response to public comments. The final rule sets forth the specific requirements SDRs will need to satisfy under § 49.10(e): (i) Accept corrections for errors reported to, or erroneously not reported to, the SDR until the end of the record-keeping retention period under § 49.12(b)(2); (ii) record corrections as soon as technologically practicable after accepting the corrections; (iii) disseminate corrected SDR data to the public and the Commission, as applicable; and (iv) establish, maintain, and enforce policies and procedures designed to fulfill these responsibilities under § 49.10(e)(1) through (3).
In the Proposal, the Commission explained that § 49.10(e) could impose some costs on SDRs, but that the costs would not be significant and are largely related to any needed updates to SDR error correction systems. The Commission based its belief, in part, on the fact that SDRs are currently required to identify cancellations, corrections, and errors under parts 43 and 45.
The Commission is persuaded by commenters' statements that proposed § 49.10(e) would be costly and burdensome without changes. Given that final § 49.10(e) must be read with final §§ 43.3(e), 45.14, and 49.11, SDRs' costs related to § 49.10(e) should be far less than anticipated.
The Commission believes that there will be costs connected with implementing final § 49.10(e). Currently, SDRs must accept and record data, as well as disseminate calculations and corrections to SDR data.
The Commission also believes that the inclusion of the technical specification and validation requirements for SDR data in parallel Commission rulemaking
Final § 49.10(e) will also limit SDR error correction requirements to the applicable recordkeeping obligation in final § 49.12. SDRs will not be obligated to indefinitely maintain storage and legacy systems for dead swaps or to correct dead swaps for which the records retention period has expired.
SDRs also might incur incremental costs related to establishing, maintaining, and enforcing the policies and procedures required by final § 49.10(e). The Commission, however, believes that costs will be limited to initial creation costs and update costs for the policies and procedures as needed, as mitigated by any existing SDR error correction policies and procedures.
The Commission continues to believe that one of the main benefits of § 49.10(e) is improved data quality resulting from SDRs collecting and disseminating accurate swaps data. Accurate and complete datasets will enable the Commission to better understand markets and trading behavior, and guard against abusive practices. In addition, the Commission uses swap SDR data to produce public information on the swaps markets, such as the weekly swaps reports. The Commission believes that accurate data reflected in the weekly swaps report will improve the quality and reliability of the reports. All market participants and the public benefit from complete and accurate SDR data.
Final § 49.10(e) is linked closely to final §§ 43.3(e), 45.14, and 49.11. Because of the changes to current §§ 43.3(e), 45.14, and 49.11, there will be costs associated with § 49.10(e). The Commission, however, believes that the benefits related to using accurate data sets warrant the costs of changes to § 49.10(e).
In response to comments, the Commission is modifying final § 49.11 so that the verification process is less burdensome and more flexible than the process set forth in proposed § 49.11. Final § 49.11 requires an SDR to: (i) Verify the accuracy and completeness of swap data that the SDR receives from a SEF, DCM, or reporting counterparty, or third-party service providers acting on their behalf; and (ii) establish, maintain, and enforce policies and procedures reasonably designed to verify the accuracy and completeness of that swap data. In terms of implementation, § 49.11 requires an SDR to provide a mechanism that allows each reporting counterparty that is a user of the SDR to access all swap data maintained by the SDR for each open swap for which the reporting counterparty is serving as the reporting counterparty. Under companion provisions in § 45.14, a reporting counterparty is required to perform verifications of the relevant
The Commission anticipates that the final rule will provide benefits, as compared to the current regulation, by improving the quality of data received and maintained by SDRs. The final rule is expected to lead to swap data errors being discovered and corrected more frequently and earlier than is often the case under the current regulations. Existing Commission regulations and SDRs rules and policies allow counterparties to presume data is accurate when it may not be. The absence of an affirmative verification requirement has also resulted in counterparties not discovering errors, including many obvious errors, and therefore not correcting the errors, for extended periods.
The new requirements in final § 49.11 will also impose costs. As discussed in more detail below, commenters provided qualitative comments on the Commission's consideration of the costs and benefits of proposed § 49.11, but did not provide quantitative information. As final § 49.11 grants SDRs the flexibility to devise their own processes to allow reporting counterparties to access swap data for verification, it is difficult to determine the amount of hours and effort SDRs will need to comply with § 49.11. Based on comments, the Commission believes that SDRs will be able to leverage current technological systems to provide access to reporting counterparties to verify data under § 49.11.
Before adopting the verification requirements in final § 49.11, the Commission considered the two following requirements that were in the Proposal: (1) Requiring an SDR to establish, maintain, and enforce policies and procedures reasonably designed for the SDR to successfully receive verifications of data accuracy and notices of discrepancy from reporting counterparties
The Commission received numerous comments on these two requirements in response to the Commission's request for comment. ISDA/SIFMA suggested that the Commission issue a more principles-based verification process than the one described in proposed §§ 45.14(a) and 49.11(b).
As explained in section II.G above, the Commission is persuaded by comments that a more flexible verification process will have the same, if not better, effect on data quality as the proposed verification process. As final § 49.11 does not include the requirement for SDRs to distribute open swaps reports to reporting counterparties or to have policies and procedures to receive verifications of accuracy and notices of discrepancy from reporting counterparties, SDRs will have greater flexibility in managing their relationships with reporting counterparties than they were expected to have under the Proposal.
The differences between final § 49.11 and the Proposal also affect the Commission's cost considerations. In the Proposal, the Commission recognized that the SDRs would bear most of the costs associated with the proposed amendments to § 49.11.
Joint SDR disagreed with the Commission's cost assessments for proposed § 49.11.
Other commenters characterized their objections to the proposed message-based verification process as a costly endeavor. FIA requested a more principles-based approach to verifying swaps under § 49.11, because they
The Commission believes that the costs resulting from the verification process under § 49.11 as finalized will be less burdensome than the costs the Commission estimated in the Proposal. For instance, SDRs would have incurred costs to create and distribute weekly and monthly open swaps reports as the Commission initially proposed, but will not incur these costs under final § 49.11.
The Commission is not eliminating the overall verification requirement because it believes verifying data is crucial to ensure data quality. Data review and verification improves the reliability and usability of swap data, and more accurate swap data helps the Commission in monitoring risk; analyzing metrics for such indicators as volume, price, and liquidity; and developing policy. Thus, final § 49.11 will benefit the Commission and the public by improving the accuracy of data they will receive.
Besides considering proposed § 49.11, the Commission also considered and rejected the idea of maintaining current § 49.11. The Commission rejected this approach because of concerns about the quality of data received under current regulations, as swap data quality has not sufficiently improved under current regulations. As explained above, the presumption that reported swap data is accurate along with the absence of an affirmative verification requirement, have resulted in many instances of inaccurate or unusable swap data being provided to the Commission under current regulations and procedures. In the nine years since the Commission issued the data reporting regulations, it has become apparent that the current requirements are inadequate to ensure swap data accuracy and that processes like verification can improve the accuracy and completeness of data sets. Accurate data sets are crucial for overseeing modern markets and for understanding the structure and operations of the markets.
Notwithstanding the anticipated incremental costs of final § 49.11 and after considering alternatives, the Commission believes the amendments to § 49.11 are warranted in light of the anticipated benefits.
The Commission is finalizing § 49.12 as proposed. Final § 49.12(a) requires an SDR to keep full, complete, and systematic records, together with all pertinent data and memoranda, of all activities relating to the business of the SDR, including, but not limited to, all SDR information and all SDR data reported to the SDR.
Final § 49.12(b)(1) requires an SDR to maintain all SDR information received by the SDR in the course of its business. Final § 49.12(b)(2) requires an SDR to maintain all SDR data and timestamps, and all messages to and from an SDR, related to SDR data reported to the SDR throughout the existence of the swap to which the SDR data relates and for five years following final termination of the swap, during which time the records must be readily accessible by the SDR and available to the Commission via real-time electronic access, and then for an additional period of at least ten years in archival storage from which such records are retrievable by the SDR within three business days.
Final § 49.12(c) requires an SDR to create and maintain records of errors related to SDR data validations and errors related to SDR data reporting. Final § 49.12(c)(1) requires an SDR to create and maintain an accurate record of all SDR data that fails to satisfy the SDR's data validation procedures. Final § 49.12(c)(2) requires an SDR to create and maintain an accurate record of all SDR data errors reported to the SDR and all corrections disseminated by the SDR pursuant to parts 43, 45, 46, and 49. SDRs must make the records available to the Commission on request.
Final § 49.12(d) contains the requirements of existing § 49.12(c) and provides that: (i) All records required to be kept pursuant to part 49 must be open to inspection upon request by any representative of the Commission or any representative of the U.S. Department of Justice; and (ii) an SDR must produce any record required to be kept, created, or maintained by the SDR in accordance with § 1.31.
The Commission did not receive any comments concerning its consideration of costs and benefits related to the recordkeeping requirements in proposed § 49.12.
The Commission continues to believe that the costs of amendments to § 49.12 will primarily be incurred by the SDRs as they make any needed adjustments to create and maintain all required records. The Commission believes these incremental costs will be limited, as the recordkeeping requirements in § 49.12 are largely the same as the requirements in existing § 49.12 and existing § 45.2(f) and (g).
The amendments to § 49.12 related to SDR information will also be substantially similar to the SEC's requirements for its SBSDRs.
Joint SDR objected to the requirements moved to final § 49.12(b) that requires SDRs to retain data “for a period of at least ten additional years in archival storage from which such records are retrievable by the swap data repository within three business days.”
The Commission recognizes that the ten-year archival storage is lengthy, but the Commission notes that this period is the current SDR retention periods for the same data under existing § 45.2(f) and (g)
The Commission believes that the amendments to § 49.12 will provide greater clarity to SDRs in regards to their recordkeeping responsibilities. The amendments also will help improve efforts to track data reporting errors, because the requirements for SDRs to maintain records of reporting errors will be clearer. Data recordkeeping should lead to better quality data by allowing an SDR and the Commission to look for patterns in records that may lead to adjustments to SDR systems or future adjustments to reporting policies. The availability of quality records is also crucial for the Commission to effectively perform its market surveillance and enforcement functions, which benefit the public by protecting market integrity and identifying risks within the swaps markets.
Notwithstanding the anticipated incremental costs of § 49.12, the Commission believes this change is warranted in light of the anticipated benefits.
The Commission is finalizing § 49.17 as proposed. Final § 49.17(b)(3) amends the definition of “direct electronic access” to mean an electronic system, platform, framework, or other technology that provides internet-based or other form of access to real-time SDR data that is acceptable to the Commission and also provides scheduled data transfers to Commission electronic systems.
Final § 49.17(c) requires an SDR to provide access to the Commission for all SDR data maintained by the SDR pursuant to the Commission's regulations. Final § 49.17(c)(1) requires an SDR to provide direct electronic access to the Commission or its designee in order for the Commission to carry out its legal and statutory responsibilities under the CEA and Commission regulations. Final § 49.17(c)(1) also requires an SDR to maintain all SDR data reported to the SDR in a format acceptable to the Commission, and transmit all SDR data requested by the Commission to the Commission as instructed by the Commission.
Final § 49.17(c)(1) amends the requirements of existing § 45.13(a) from maintaining and transmitting “swap data” to maintaining and transmitting “SDR data,” to make clear that an SDR must maintain all SDR data reported to the SDR in a format acceptable to the Commission and transmit all SDR data requested by the Commission, not just swap data.
Final § 49.17(c)(1) also modifies the requirements of existing § 45.13(a) from “transmit all swap data requested by the Commission to the Commission in an electronic file in a format acceptable to the Commission” to “transmit all SDR data requested by the Commission to the Commission as instructed by the Commission,” and explains what these instructions may include.
The Commission also is finalizing amendments to § 49.17(f) to replace the incorrect reference to § “37.12(b)(7)” at the end of paragraph (f)(2) with a correct reference to § “39.12(b)(7)” of the Commission's regulations, as there is no § 37.12(b)(7) in the Commission's regulations.
The Commission's amendments also include the movement of the delegation of authority in existing § 49.17(i) to final § 49.31(a)(7).
The Commission believes that § 49.17 will generate costs and benefits. In the Proposal, the Commission asked for public comment on its consideration of costs and benefits. DDR commented that an SDR cannot estimate costs of proposed § 49.17(c)(1) because the proposed rule provided “no specificity as to the method, timing, format or transmission frequency for required transmission of SDR data requested by the Commission” and left “the requirements associated with both the provision of direct electronic access and the maintenance of SDR data to be determined by the Commission at a later date.”
The Commission continues to believe that the costs imposed by the changes to § 49.17(c) will fall mainly on SDRs, because SDRs will incur costs to provide the Commission with direct electronic access to all SDR data and to provide access to SDR data as instructed. The costs associated with the use of the term “direct electronic access” in § 49.17(c) are negligible, as SDRs are currently required to provide the Commission with direct electronic access and the definition is being modified to allow SDRs more flexibility in providing the Commission with direct electronic access to SDR data, subject to the Commission's approval. The other amendments to § 49.17(c) grant the Commission greater flexibility to instruct SDRs on how to transfer SDR data to the Commission at the Commission's request. As mentioned above, the Commission currently works closely with SDRs to facilitate data transfers and implement technology changes. The Commission anticipates that because the rule changes reinforce the existing working relationships, there will be better communications between the Commission and SDRs that will help both parties devise efficient and cost-effective ways to facilitate the transfer of SDR data to the Commission. As explained in the Proposal, SDRs are already required to transmit data under existing § 49.17(b)(3) and (c)(1), and are required to transmit all swap data requested by the Commission to the Commission in an electronic file in a format acceptable to the Commission under existing § 45.13(a). It is also current market practice for SDRs to regularly provide SDR data to the Commission as instructed by Commission staff. The changes in final § 49.17 do not substantially change the current requirements or market practices.
The final changes to § 49.17(b)(3) that modify the definition of “direct electronic access” to allow for more technological flexibility will likely reduce future costs for SDRs because the amendment allows the Commission to consider any technology that may provide direct electronic access. This will allow the Commission to adapt to changing technology more quickly and may allow SDRs to save costs by having more efficient technology and processes approved in the future.
The Commission continues to believe that the amendments to § 49.17 will be beneficial to SDRs by including the data access requirements applicable to SDRs in one section and by more clearly stating the Commission's ability to instruct SDRs on all aspects of providing SDR data to the Commission.
Notwithstanding the anticipated incremental costs of § 49.12, the Commission believes the changes are warranted in light of the anticipated benefits.
The Commission is finalizing changes to § 49.25 as proposed, except for the proposed amendments to § 49.25(f)(3). The conforming changes to § 49.25 eliminate the reference to § 49.9 and to core principle obligations identified in § 49.19. Final § 49.25(a) refers to SDR obligations under “this chapter,” to be broadly interpreted as any regulatory or statutory obligation specified in part 49. The Commission considered these to be non-substantive changes that will not impact existing obligations on SDRs, and therefore have no cost-benefit implications. The Commission did not receive any comments on this point.
The Commission is not finalizing proposed amendments to § 49.25(f)(3) to extend the time SDRs have to submit their quarterly financial resources reports to 40 calendar days after the end of the SDR's first three fiscal quarters, and 90 days after the end of the SDR's fourth fiscal quarter, or a later time that the Commission permits upon request. As discussed above, the Commission has determined not to address the proposed changes to the filing deadline for the annual compliance report under § 49.22(f)(2) in this final rulemaking. Accordingly, the Commission is not adopting the related proposed amendment to § 49.25(f)(3).
The Commission is finalizing § 49.26 as proposed. Final § 49.26 includes updates to the introductory paragraph of § 49.26 to reflect updates to the terms “SDR data,” “registered swap data repository,” and “reporting entity” in final § 49.2. The Commission is also finalizing updates to other defined terms used in the section to conform to the amendments to § 49.2. These non-substantive amendments do not change the requirements of § 49.26 and do not have cost-benefit implications.
The Commission also is finalizing § 49.26(j) as proposed. Final § 49.26(j) requires that the SDR disclosure document set forth the SDR's policies and procedures regarding the reporting of SDR data to the SDR, including the SDR data validation and swap data verification procedures implemented by the SDR, and the SDR's procedures for correcting SDR data errors and omissions (including the failure to report SDR data as required pursuant to the Commission's regulations).
The Commission requested public comments on its cost-benefit considerations related to § 49.26, but the Commission did not receive any comments.
The Commission believes that costs related to final § 49.26 will be limited and incremental given that current § 49.26 requires every SDR to issue disclosure documents.
The Commission expects that the addition of final § 49.26(j) will benefit market participants by providing more instructive information regarding data reporting to SDR users. The availability of this information should improve data reporting, because SDR users will be able to align their data reporting systems with SDRs' data reporting systems before using the SDRs' services. SDR users will be able to prepare operations and train staff before reporting SDR data and, thereby, able reduce reporting errors and potential confusion.
Notwithstanding the anticipated incremental costs associated with § 49.26, the Commission believes this change is warranted in light of the anticipated benefits.
The Commission is finalizing § 49.28 as proposed. Final § 49.28 provides more detail on an SDR's responsibilities with respect to hours of operation. Final § 49.28(a) requires an SDR to have systems in place to continuously accept and promptly record all SDR data reported to the SDR, and, as applicable, publicly disseminate all swap transaction and pricing data reported to the SDR pursuant to part 43. Final § 49.28(a)(1) allows an SDR to establish normal closing hours to perform system maintenance when, in the SDR's reasonable estimation, the SDR typically receives the least amount of SDR data, and requires the SDR to provide reasonable advance notice of its normal closing hours to market participants and the public.
Final § 49.28(a)(2) allows an SDR to declare, on an ad hoc basis, special closing hours to perform system maintenance that cannot wait until normal closing hours. Final § 49.28(a)(2) requires an SDR to schedule special closing hours during periods when, in the SDR's reasonable estimation while considering the circumstances that prompt the need for the special closing hours, the special closing hours will be least disruptive to the SDR's data reporting responsibilities. Final § 49.28(a)(2) also requires the SDR to provide reasonable advance notice of the special closing hours to market participants and the public whenever possible, and, if advance notice is not reasonably possible, to give notice to the public as soon as is reasonably possible after declaring special closing hours.
Final § 49.28(b) requires an SDR to comply with the requirements under part 40 of the Commission's regulations when adopting or amending normal closing hours or special closing hours.
Final § 49.28(c) requires an SDR to have the capability to accept and hold in queue any and all SDR data reported to the SDR during normal closing hours and special closing hours
The Commission requested public comment on its consideration of costs and benefit related to § 49.28 but did not receive any.
The Commission continues to believe that the final requirements, which are largely based on existing rule text found in current § 43.3(f) and (g), will have limited cost implications for SDRs. There may be costs associated with any needed modification to SDR systems to accommodate all SDR data during closing hours, as opposed to only swap transaction and pricing data. These costs will be incremental because all SDRs currently have policies, procedures, and systems in place to accommodate all SDR data during closing hours under the current requirements.
The Commission also still believes that SDRs, market participants, and the public will benefit from final § 49.28 because the requirements for setting closing hours and handling SDR data during closing hours will be clearer. Final § 49.28 removes discrepancies between current requirements for SDRs and SBSDRs related to closing hours, which will allow SDRs that are also registered as SBSDRs to comply with one consistent requirement.
Notwithstanding the anticipated incremental costs related to § 49.28, the Commission believes the addition of § 49.28 is warranted in light of the anticipated benefits.
The Commission is finalizing new § 49.29 as proposed, which requires an SDR to respond to Commission information requests regarding, among other things, its business as an SDR and its compliance with SDR regulatory duties and core principles.
Final § 49.29(a) requires an SDR, upon request of the Commission, to file certain information related to its business as an SDR or other such information as the Commission determines to be necessary or appropriate for the Commission to perform its regulatory duties. An SDR must provide the requested information in the form and manner and within the time specified by the Commission in its request.
Final § 49.29(b) requires an SDR, upon the request of the Commission, to demonstrate compliance with its obligations under the CEA and Commission regulations, as specified in the request. An SDR must provide the requested information in the form and manner and within the time specified by the Commission in its request. Final § 49.29 is based on similar existing Commission requirements applicable to SEFs and DCMs.
The costs associated with responding to requests for information include the staff hours required to prepare and submit materials related to the Commission's requests. These costs will vary among SDRs depending upon the nature and frequency of Commission inquiries. The Commission expects these requests to be limited in both size and scope, which will likely mitigate the associated costs for SDRs. While final § 49.29 allows the Commission to make requests on an ad hoc basis, the Commission expects that the need for these requests will decrease over time as SDR data quality and SDR compliance with Commission regulations improve.
DDR commented that because proposed § 49.29 provided “no detail as to the potential scope of a request or to the form, manner and timing associated with satisfying the request” an SDR could not assess accurately costs associated with the rule.
Benefits attributed to final § 49.29 include improving the Commission's oversight of SDRs due to Commission inquiries. The Commission expects that this oversight will lead to improved data quality and SDR compliance with Commission regulations. Better data quality will help improve the Commission's ability to fulfill its regulatory responsibilities and help to increase the Commission's understanding of the swaps market. These improvements are expected to benefit the public because accurate and complete SDR data reporting improves the Commission's analyses and oversight of the swaps markets, and increases market integrity due to the Commission's improved ability to detect and investigate noncompliance issues and oversee their correction.
The Commission also continues to believe that final § 49.29 will help the Commission to obtain the information it needs to perform its regulatory functions more effectively, as opposed to requiring SDRs to supply information on a set schedule, such as under the current requirement for annual Form SDR updates in § 49.3(a)(5). This will reduce the burden on SDRs, as the SDRs will no longer need to expend resources to prepare annual filings.
Notwithstanding the anticipated incremental costs related to § 49.29, the Commission believes the addition of § 49.29 is warranted in light of the anticipated benefits.
The Commission is finalizing new § 49.30 as proposed to address the form and manner of information the Commission requests from SDRs.
Final § 49.30 establishes the broad parameters of the “form and manner” requirements found in part 49. The form and manner requirement in § 49.30 will not supplement or expand upon existing substantive provisions of part 49, but instead, will allow the Commission to specify how information reported by SDRs should be formatted and delivered to the Commission. Final § 49.30 provides that an SDR must submit any information required under part 49, within the time specified, using the format, coding structure, and electronic data transmission procedures approved in writing by the Commission.
The Commission continues to believe that the form and manner requirements will have costs associated with conforming reports and information to Commission specifications. For instance, there may be costs associated with staff hours and technology used to format reports. DDR commented that because proposed § 49.30 was vague, an
The Commission continues to believe that, in practice, the incremental costs of § 49.30 will be limited, because SDRs have ample experience working with Commission staff to deliver data, reports, and other information in the form and manner requested by Commission staff. The Commission believes that this experience will significantly mitigate the costs of similar activities under this requirement. The Commission also still believes that the Commission will benefit through increased standardization of information provided by SDRs, thereby aiding the Commission in the performance of its regulatory obligations by ensuring the provided information is in useable formats and delivered by usable methods. The ability to standardize the form and manner of information provided to the Commission will also help SDRs to efficiently fulfill their obligations to provide information to the Commission.
Notwithstanding the anticipated incremental costs related to § 49.30, the Commission believes the addition of § 49.30 is warranted in light of the anticipated benefits.
The Commission is moving existing § 45.2(f) and (g) (SDR recordkeeping and SDR records retention, respectively) to final § 49.12. As such, all costs and benefits associated with this change are discussed in the section, above, that discusses the amendments to § 49.12.
The Commission is adopting proposed § 45.14, with modifications, to improve the requirements to correct data errors and to verify data. Currently, the Commission requires error corrections but it does not directly require reporting counterparties to verify data. In the Proposal, the Commission outlined error correction and verification processes that included specific actions and timelines for those actions. In response to comments on the Proposal, the Commission is modifying final § 45.14 so that the error-correction and verification processes for reporting counterparties are less burdensome and more flexible than the processes set forth in the Proposal. The Commission will discuss the final error-correction process first, and then the final verification process.
Final § 45.14(a) sets forth requirements for correcting swap data errors. Final § 45.14(a) requires a SEF, DCM, or reporting counterparty to correct swap data errors as soon as technologically practicable, but no later than seven business days, after discovery. Final § 45.14(a) requires a SEF, DCM, or reporting counterparty to correct errors and omissions for open swaps and dead swaps, but § 45.14(a)(3) provides that the error correction requirement does not apply to swaps for which the applicable record retention period under § 45.2 has expired. Final § 45.14(a)(2) requires a non-reporting counterparty that becomes aware of an error to notify the reporting counterparty of the error as soon as technologically practicable, but no later than three business days, after discovery. If a non-reporting counterparty does not know the identity of the reporting counterparty, the non-reporting counterparty must notify the SEF or DCM where the swap was executed of the error as soon as technologically practicable, but no later than three business days, following the discovery.
Final § 45.14(a) differs from current § 45.14, because it provides more parameters for SEFs, DCMs, and reporting counterparties correcting errors and sets timelines for correcting errors or issuing error notices to the Commission. Current § 45.14(a) requires each registered entity or swap counterparty to report discovered data errors and omissions as soon as technologically practicable, but there is no deadline for making a correction.
In final § 45.14(a), the Commission establishes a seven-day correction period in response to comments that the proposed three-day period to correct or notify would not be practicable.
The Commission believes there will be costs associated with correcting errors under the revised seven-business day correction period. Market participants correcting errors will need to expend technological and staff resources to identify the causes of data errors and resources to correct errors. The amount of resources used will likely be dictated by the complexity of the error. The Commission notes that these costs will be minimal, compared to current requirements, because the current requirements would necessitate the same cause identification and error correction. The seven-day deadline in final § 45.14, however, will require
The Commission believes that market participants will benefit from the seven-day correction period because it eliminates any uncertainty about the time period in which market participants must correct errors before notifying the Commission of an issue. A time period also helps market participants manage time in terms of scheduling and assigning resources to correct errors. The Commission believes seven business days is sufficient time to complete the steps needed to identify, investigate, and rectify most errors or omissions. The Commission also believes that the seven-day period, as compared to the absence of a deadline in current § 45.14, will not negatively affect the Commission's regulatory duties, including its ability to monitor swaps markets. Under the current error correction requirements, counterparties have neglected to inform SDRs of errors or omissions for extended periods, which has meant that SDRs have transmitted inaccurate data to the Commission and the Commission may have relied on inaccurate data while performing its regulatory responsibilities.
The Commission is also modifying, in final § 45.14, the proposed requirement for a reporting counterparty to produce remediation plans and issue notices to the Commission, and for a non-reporting counterparty to notify a reporting counterparty, SEF, or DCM of errors, as applicable.
The Commission believes that the final § 45.14 requirement to issue error notices will generate costs. Market participants will need to expend technological and staff resources to develop and maintain notification systems. SEF's, DCM's, and reporting counterparties will incur additional costs to develop systems to assess the scope of an error and to submit initial remediation plans, if they decide to use such plans. For SEFs, DCMs, and reporting counterparties that already send the Commission error-correction notices and remediation plans, the costs will be incremental.
The Commission believes that error correction notices are beneficial because they will help alert the Commission to data that is unreliable and to reporting issues. Notices also will help the Commission monitor whether market participants are complying with Commission regulations. If a market participant creates an initial remediation plan, it will be useful to the market participants and the Commission because such plans help with tracking errors, identifying data issues, discovering recurring errors, and preventing errors from reoccurring. The Commission also believes that the inclusion of the technical specification and validation requirements for swap data in parallel Commission rulemaking
The Commission also believes that the final § 45.14 error correction process will improve data accuracy and will enable the Commission to better monitor risk and identify issues in the swaps markets. As discussed above, the Commission currently issues a weekly swaps report and quarterly entity-netted notional reports using swaps data.
The Commission is requiring error corrections for all swaps that are within their respective records retention periods. In a change from the Proposal, and is response to comments received, the Commission is finalizing a limit on the SEFs', DCMs', and reporting counterparties' obligations to correct errors in swap data that confines the error correction requirements to errors discovered during the relevant recordkeeping periods for the relevant swaps under § 45.2. The Commission recognizes the comments that argued that correcting swaps that are outside of their record retention periods is burdensome and impractical. ISDA/SIFMA explained that as dead swaps “no longer pose risks to U.S. markets, it is unclear how correcting any errors would enhance the Commission's ability to monitor risk.”
The Commission acknowledges that the burden shouldered by market participants to expend resources to correct older data and to maintain legacy formats will affect costs and complexity of compliance.
In final § 45.14(b), the Commission is requiring reporting counterparties to verify data. Currently, there are no specific verification requirements for reporting counterparties. The Commission is adopting verification requirements in final § 45.14(b) that differ from the process described in the Proposal.
Proposed § 45.14(a) outlined a verification process that involved an exchange of open swaps reports and messaging between SDRs and reporting counterparties. Proposed § 45.14(a) would have required reporting counterparties to reconcile open swaps reports with their internal records for the swap data and to submit to an SDR a verification of the accuracy or notice of discrepancy for the relevant swap data within a 48- or 96-hour period, as applicable,
Final § 45.14(b) modifies the proposed verification process. Final § 45.14(b)(1) requires a reporting counterparty to utilize the mechanism provided by an SDR pursuant to final § 49.11 to access and verify swap data by comparing its internal records for swap data with the relevant swap data maintained by the SDR. Under final § 45.14(b)(2), a reporting counterparty must conform to the relevant SDR's policies and procedures for verification. In final § 45.14(b)(4), the Commission is setting the verification frequency at every thirty calendar days for reporting counterparties that are SDs, MSPs, or DCOs, and at every quarter for other reporting counterparties. Final § 45.14(b)(5) requires a reporting counterparty to maintain a verification log, wherein the reporting counterparty records the verifications it performed, errors discovered during the verification processes, and corrections made. The reporting counterparty must provide the verification log to the Commission on request.
The Commission understands that the costs of verification processes under final § 45.14 will involve time and personnel resources for reporting counterparties. A reporting counterparty may be required to expend resources to develop processes to access swap data through one or more SDR mechanisms and to compare swap data maintained by SDRs with its internal data and records for open swaps. The absence of a verification process under the Commission's current rules has been costly in terms of the harmful effect erroneous and incomplete swaps data submissions have had on the Commission's regulatory efforts, especially when data errors that could have been discovered through verification are not discovered and not corrected.
The Commission believes there may be recurring costs associated with performing monthly and quarterly verifications and with preparing verification logs. The Commission proposed more frequent verifications than are included in the final requirement, and some commenters suggested that the Commission reduce the frequency of the verification process and focus on key economic fields for trades to alleviate the costs and the challenges of verification.
The Commission believes that the final frequency of verifications will still support the Commission's objectives for high-quality data without overburdening reporting counterparties and SDRs.
The Commission also believes that § 45.14 encourages accountability, because reporting counterparties must record their data verification efforts. Under the current regulations, there is little accountability for counterparties that do not participate in the confirmation process.
The Commission believes that verification processes that lead to accurate data are vital to meaningful regulation and essential to fulfilling the purposes of CEA section 21. With more accurate data, the Commission can better identify discrepancies in swaps markets, determine whether market participants are complying with Commission regulations, and guard against abusive practices. Accurate data also benefits the public, because it is used to inform the Commission's policy decisions that help support well-functioning markets.
For proposed § 45.14, like proposed § 49.11, commenters provided qualitative comments in response to the Commission's consideration of costs and benefits. Commenters did not provide quantitative information.
Based on the Commission's familiarity with reporting counterparty operations and the currently collected data, the Commission recognizes there will be monetary costs for reporting counterparties to comply with the error-correction and verification requirements
The Commission estimates that the hours needed for reporting counterparties to meet their verification obligations under the final rules will be less than the hours estimated to be required under the Proposal, as a result of the technical specifications and validation requirements from other Roadmap rulemakings, which the Commission expects will reduce errors in the first instance, and because the verification process under final § 45.14(b) will be less time-consuming than the requirements under proposed §§ 45.14(a) and 49.11. The Commission understands that the hours and rates will vary based on many factors, including each reporting counterparty's expertise in data reporting and operational size. The Commission estimates that the initial efforts to implement § 45.14(b) will require 100 hours on average, meaning each reporting counterparty will expend up to 100 hours a year to establish systems to verify data and prepare verification logs. The Commission estimates these efforts to cost between $4,800 to $10,100, which are the sums of the hours multiplied by a wage rate of $48 to $101.
Besides considering proposed § 45.14, the Commission considered and rejected the idea of maintaining current § 45.14. The Commission rejected this approach because it has become evident that mandates to correct errors and verification processes improve data quality, and that current requirements have proven inadequate for providing the Commission with the level of data quality that it requires to perform its regulatory functions. As explained above, the current regulations for confirmation and error correction have resulted in the Commission receiving data that is presumed accurate, when this is often not the case. The Commission also has observed that the absence of a verification requirement has resulted in counterparties neglecting to inform SDRs of errors, or otherwise not discovering even glaring errors in swap data, often for long periods of time. This leaves the Commission with flawed data, which hinders the Commission's ability to understand the nature of swaps, price fluctuations, and markets generally, and hampers the Commission's ability to perform its regulatory functions. Thus, the Commission believes the alternative of retaining current § 45.14 would undermine the Commission's regulatory efforts and hinder the Commission's ability to make informed decisions using accurate data.
Notwithstanding the anticipated incremental costs related to final § 45.14 and after considering alternative approaches, the Commission believes the amendments to § 45.14 are warranted in light of the anticipated benefits.
The Commission is amending the error correction requirements of existing § 43.3(e) to conform to the error correction requirements in § 45.14. The amendments to § 43.3(e) create regulatory consistency and reduce any confusion around error-correction requirements for data under Part 43 and swap data required under Part 45.
Final § 43.3(e)(1) requires any SEF, DCM, or reporting counterparty that by any means becomes aware of any errors in swap transaction and pricing data previously-reported, or not properly reported, to an SDR by the SEF, DCM, or reporting counterparty to submit corrected swap transaction and pricing data to the SDR regardless of the state of the swap, including swaps that have terminated, matured, or are otherwise no longer open. Final § 43.3(e)(1)(i) requires a SEF, DCM, or reporting counterparty to correct swap transaction and pricing data as soon as technologically practicable following discovery of the errors, but no later than seven business days following the discovery of the error. Under final § 43.3(e)(1)(ii), if a SEF, DCM, or reporting counterparty is unable to correct the errors within seven business days following discovery of the errors, the SEF, DCM, or reporting counterparty must inform the Director of DMO, or his or her designee, of such errors or omissions and provide an initial assessment of the scope of the errors or omissions and an initial remediation plan for correcting the errors, if one exists, within 12 hours of determining that the correction cannot be made within the required time frame. Final § 43.3(e)(1)(iii) requires that a SEF, DCM, or reporting counterparty conform to an SDR's policies and procedures for corrections of errors in previously-reported swap transaction and pricing data and reporting of omitted swap transaction and pricing data.
Final § 43.3(e)(2) applies to a non-reporting counterparty that becomes aware of any errors in swap transaction and pricing data. Final § 43.3(e)(2) requires a non-reporting counterparty to inform the reporting counterparty for the swap of the error, but does not require the non-reporting counterparty to correct the error. A non-reporting counterparty has three business days following the discovery of the errors or omissions to notify the reporting counterparty of the error, instead of the seven business days provided for corrections under final § 43.3(e)(1). If a non-reporting counterparty does not know the identity of the reporting counterparty, the non-reporting counterparty must notify the SEF or DCM where the swap was executed of the errors and omissions no later than three business days after the discovery.
The Commission is moving all of the requirements of existing § 43.3(f) and (g) to new § 49.28. As such, all costs and benefits associated with this change are discussed above in section discussing § 49.28.
The costs related to final § 43.3(e)(1) are similar to the costs to correct errors under final § 45.14(a)(1), as the final rules to each section are intended to be consistent. Final § 43.3(e) will impose costs on SEFs, DCMs, and reporting counterparties for correcting errors and submitting remediation plans, if they exist, to the Director of DMO within a seven-day period. Market participants are also currently required to correct errors under existing § 43.3(e), so costs associated with § 43.3(e) are only those
Non-reporting counterparties also may incur additional costs related to the requirements in § 43.3(e)(2). Non-reporting counterparties may expend resources to make the required notification within the three-day period under final § 43.3(e)(2). Under current § 43.3(e)(1)(i), non-reporting counterparties must act “promptly” so the three-day deadline under the final rule may require non-reporting counterparties to allocate resources differently to meet the deadline. The additional requirement in final § 43.3(e)(2) for a non-reporting counterparty to inform a SEF or DCM of an error if the identity of the reporting counterparty is not known is intended to accommodate non-reporting counterparties in fulfilling their role in the data correction process for swaps executed anonymously. The Commission expects that non-reporting counterparties will not incur many costs to notify a SEF or DCM of errors and omissions beyond the cost currently incurred when notifying reporting counterparties.
As discussed in the section regarding the benefits of final § 45.14, the Commission believes consistent error correction requirements for swap data and swap transaction and pricing data will help ensure that the Commission has access to accurate and complete swap transaction and pricing data in order to fulfill its various regulatory responsibilities. Accurate swap transaction and pricing data helps the Commission to monitor and surveil market activity and risks within the swaps markets. Accurate and complete swap transaction and pricing data is also beneficial to market participants and the public, who rely on the data in their swaps-related decision-making. Inaccurate or incomplete swap transaction and pricing data can create market volatility. Additionally, the Commission believes that accurate swap transaction and pricing data is necessary for effective risk management for swap counterparties, and the correction requirements under the final rule will help ensure that swap counterparties have access to accurate and complete swap transaction and pricing data.
SDRs and counterparties also benefit from consistent regulations. The final rule establishes a swap data error-correction framework for reporting counterparties in § 45.14. The requirements in final § 43.3(e) are consistent with the requirements in final § 45.14(a). Both of these rules complement amendments to Part 49 that require SDRs to provide reporting counterparties with access to swaps data reporting systems to identify errors and make corrections. The Commission believes that inconsistent requirements may lead to confusion and unnecessary efforts by covered entities. By ensuring that obligations in final § 43.3(e) are consistent with the obligations to § 45.14, these issues should be avoided. Finally, the Commission believes its ability to monitor swaps markets is not compromised by the three-day or seven-day correction and notification periods in final § 43.3(e). While incorrect data might affect market analysis in the short-term, there is greater value in possessing accurate data for the life of a swap that can provide insight into market activity for months and years; support a point-in-time examination of the data, and enable back-testing.
The Commission recognizes there will be monetary costs for reporting counterparties and non-reporting counterparties to comply with the error-correction and notification requirements in § 43.3(e). For the error-correction and remediation process, the Commission estimates that 1,729 SEFs, DCMs, and reporting counterparties will each spend about 30 hours a year correcting swap transaction and pricing data, providing notices to the Commission and submitting remediation plans, if such plans exist.
While the Commission does anticipate incremental costs associated with § 43.3(e), the Commission believes the amendments to § 43.3(e) are warranted in light of the anticipated benefits related to error-correction processes that lead to accurate data.
The Dodd-Frank Act sought to promote the financial stability of the United States, in part, by improving financial system accountability and transparency. More specifically, Title VII of the Dodd-Frank Act directs the Commission to promulgate regulations to increase swaps market transparency and thereby reduce the potential for counterparty and systemic risk.
Section 15(a) of the Act requires the Commission to consider the costs and benefits of the amendments to parts 43, 45, and 49 with respect to the following factors:
• Protection of market participants and the public;
• Efficiency, competitiveness, and financial integrity of markets;
• Price discovery;
• Sound risk management practices; and
• Other public interest considerations.
A discussion of these amendments in light of section 15(a) factors is set out immediately below.
In the Part 49 Adopting Release, the Commission noted that it believed that the registration and regulation of SDRs will serve to better protect market participants by providing the Commission and other regulators with important oversight tools to monitor, measure, and comprehend the swaps markets. Inaccurate and incomplete data reporting hinders the Commission's ability to oversee the swaps market. The final rules adopted in this release mostly focus on ensuring that SDRs and reporting counterparties verify and correct errors or omissions in data reported to SDRs and on streamlining and simplifying the requirements for SDRs. Both error-correction and verification processes are steps in a series of data checks or techniques needed to build accurate data sets. Regardless of whether verification is done automatically or manually, the accuracy of SDR data should improve under these final regulations because inaccuracies will be removed.
Overall, the Commission believes that the adoption of all the amendments to parts 43, 45, and 49 will improve the quality of the data reported, increase transparency, and enhance the Commission's ability to fulfill its regulatory responsibilities, including its market surveillance and enforcement capabilities. In some cases, as discussed above, the final regulations are expected to be more flexible as compared to the requirements in the Proposal. The Commission does not believe that this increased flexibility will encumber the benefits from better quality data. Rather, the Commission believes that monitoring of potential risks to financial stability will be more effective with more accurate data. More accurate data will therefore lead to improved protection of market participants and the public.
The Commission believes that the adoption of the amendments to parts 43, 45, and 49, together with the swap data recordkeeping and reporting requirements in parts 43 and 45, will provide a robust source of information on swaps markets that is expected to promote increased efficiency and competition. Under the final Roadmap regulations, parts 43, 45, and 49 will work together to establish a data validation and verification system for SDRs and reporting counterparties. The result is a data reporting system that fulfills the CEA's mandate that the Commission prescribe data collection and maintenance standards for SDRs, and, ultimately, supports the collection of accurate and complete data.
The Commission believes that accurate swap transaction and pricing data will lead to greater efficiencies for market participants executing swap transactions due to a better understanding of their overall positions within the context of the broader market. This improved understanding will be facilitated by two distinct channels. First, amendments adopted in this final rulemaking are expected to result in improved swap transaction and pricing data being made available to the public, which will improve the ability of market participants to monitor real-time activity by other participants and to respond as they see fit. Second, amendments that result in improved swap data will improve the Commission's ability to monitor the swaps markets for abusive practices and improve the Commission's ability to create policies that ensure the integrity of the swaps markets. This improvement will be facilitated by the Commission's improved oversight and enforcement capabilities and the reports and studies published as part of the Commission's research and information programs.
In particular, the amendments to §§ 45.14, 49.2, 49.10, 49.11, 49.12, and 49.26 will help improve the financial integrity of markets. For example, the verification and correction of swap data will improve the accuracy and completeness of swap data available to the Commission. The verification and correction processes also will assist the Commission with, among other things, improving monitoring of risk exposures of individual counterparties, monitoring concentrations of risk exposure, and evaluating systemic risk. The efficient oversight and accurate data reporting enabled by these amendments will improve the financial integrity of the swaps markets.
In the Part 49 Adopting Release, the Commission expected that the introduction of SDRs would further automate the reporting of swap data. The Commission expected that automation would benefit market participants and reduce transactional risks through the SDRs and other service providers offering important ancillary services, such as confirmation and matching services, valuation, pricing, reconciliation, position limits management, and dispute resolution. These benefits did follow and have enhanced the efficiency, competitiveness, and financial integrity of markets.
The CEA requires that swap transaction and pricing data be made publicly available. The CEA and its existing regulations in part 43 also require swap transaction and pricing data to be available to the public in real-time. Combined, parts 43 and 49 achieve the statutory objective of providing transparency and enhanced price discovery to swap markets in a timely manner. The amendments to §§ 43.3, 49.2, 49.10, 49.11, 49.12, and 49.26 improve the fulfillment of these objectives. The amendments, both directly and indirectly, upgrade the quality of real-time public reporting of swap transaction and pricing data by improving the accuracy of information that is reported to the SDRs and disseminated to the public.
As explained above, many of the final rules adopted in this release focus on a system for verifying swap data reported to and maintained by SDRs, who are also charged with disseminating such data to the Commission. The value of the swap data to the Commission depends on its accuracy and completeness. Swap data that contains errors or missing information has limited value because the Commission cannot rely on it to monitor risk and pricing, measure volume and liquidity, or inform policy.
Similarly, the Commission believes that inaccurate and incomplete swap transaction and pricing data hinders the public's use of the data, which harms transparency and price discovery. The Commission is aware of at least three publicly-available studies that support this point. The studies examined data and remarked on incomplete, inaccurate, and unreliable data. The first study analyzed the potential impact of the Dodd-Frank Act on OTC transaction costs and liquidity using real-time CDS trade data. The study found that more than 5,000 reports had missing data and more than 15,000 reports included a price of zero, leaving a usable sample of 180,149 reports.
In the Part 49 Adopting Release, the Commission stated that part 49 and part 45 will strengthen the risk management practices of the swaps market.
The Commission believes that the amendments to parts 43, 45, and 49 will improve the quality of SDR data reported to SDRs and, hence, improve the Commission's ability to monitor the swaps market, react to potential market emergencies, and fulfill its regulatory responsibilities generally. The amendments adopted in this final rulemaking place different obligations on SDRs and reporting counterparties to verify accuracy and completeness of SDR data. The Commission believes that access for regulators to accurate and reliable SDR data is essential for appropriate risk management and is especially important for regulators' ability to monitor the swaps market for systemic risk. Moreover, the Commission expects efforts to improve data quality will increase market participants' confidence in SDR data and therefore their confidence in any subsequent analyses based on the data.
The Commission believes that the increased transparency resulting from improvements to the SDR data via the amendments to parts 43, 45, and 49 has other public interest considerations including: Creating greater understanding for the public, market participants, and the Commission of the interaction between the swaps market, other financial markets, and the overall economy; improving regulatory oversight and enforcement capabilities; and generating more information for regulators so that they may establish more effective public policies to reduce overall systemic risk.
Section 15(b) of the CEA requires the Commission to take into consideration the public interest to be protected by the antitrust laws and endeavor to take the least anticompetitive means of achieving the objectives of the CEA, in issuing any order or adopting any Commission rule or regulation (including any exemption under section 4(c) or 4c(b)), or in requiring or approving any bylaw, rule, or regulation of a contract market or registered futures association established pursuant to section 17 of the CEA.
The Commission requested comments on whether the Proposal may have the potential to be inconsistent with the anti-trust laws or anti-competitive in nature. The Commission has considered this final rule to determine whether it is anticompetitive and has identified no anticompetitive effects.
Because the Commission has determined that the final rule is not anticompetitive and has no anticompetitive effects, the Commission has not identified any less anticompetitive means of achieving the purposes of the CEA.
Real-time public swap reporting.
Data recordkeeping requirements, Data reporting requirements, Swaps.
Registration and regulatory requirements, Swap data repositories.
For the reasons stated in the preamble, the Commodity Futures Trading Commission amends 17 CFR chapter I as follows:
7 U.S.C. 2(a), 12a(5) and 24a, as amended by Pub. L. 111-203, 124 Stat. 1376 (2010).
(e)
(i)
(ii)
(iii)
(2)
(3)
(4)
(A) Any of the swap transaction and pricing data for a swap reported to a swap data repository is incorrect or any of the swap transaction and pricing data that is maintained by a swap data repository differs from any of the relevant swap transaction and pricing data contained in the books and records of a party to the swap.
(B) Any of the swap transaction and pricing data for a swap that is required to be reported to a swap data repository or to be maintained by a swap data repository is not reported to a swap data repository or is not maintained by the swap data repository as required by this part.
(C) None of the swap transaction and pricing data for a swap that is required to be reported to a swap data repository or to be maintained by a swap data repository is reported to a swap data repository or is maintained by a swap data repository.
(D) Any of the swap transaction and pricing data for a swap that is no longer an open swap is maintained by the swap data repository as if the swap is still an open swap.
(ii)
7 U.S.C. 6r, 7, 7a-1, 7b-3, 12a, and 24a, as amended by Title VII of the Wall Street Reform and Consumer Protection Act of 2010, Pub. L. 111-203, 124 Stat. 1376 (2010), unless otherwise noted.
(a) * * *
(a)
(i)
(ii)
(iii)
(2)
(3)
(b)
(1)
(2)
(3)
(4)
(i) If the reporting counterparty is a swap dealer, major swap participant, or derivatives clearing organization, once every thirty calendar days; or
(ii) If the reporting counterparty is not a swap dealer, major swap participant, or a derivatives clearing organization, once every calendar quarter, provided that there are at least two calendar months between verifications.
(5)
(c)
(i) Any of the swap data for a swap reported to a swap data repository is incorrect or any of the swap data that is maintained by a swap data repository differs from any of the relevant swap data contained in the books and records of a party to the swap.
(ii) Any of the swap data for a swap that is required to be reported to a swap data repository or to be maintained by a swap data repository is not reported to a swap data repository or is not maintained by the swap data repository as required by this part.
(iii) None of the swap data for a swap that is required to be reported to a swap data repository or to be maintained by a swap data repository is reported to a swap data repository or is maintained by a swap data repository.
(iv) Any of the swap data for a swap that is no longer an open swap is maintained by the swap data repository as if the swap is still an open swap.
(2)
7 U.S.C. 1a, 2(a), 6r, 12a, and 24a, as amended by Title VII of the Wall Street Reform and Consumer Protection Act of 2010, Pub. L. 111-203, 124 Stat. 1376 (Jul. 21, 2010), unless otherwise noted.
The revisions and additions read as follows:
(a) * * *
(1) The swap data repository;
(2) The swap data repository's affiliate; or
(3) A person jointly employed by a swap data repository and any entity that is not the swap data repository's affiliate (the term “non-affiliated third party” includes such entity that jointly employs the person).
(1) Any partner, officer, or director of such swap data repository (or any person occupying a similar status or performing similar functions);
(2) Any person directly or indirectly controlling, controlled by, or under common control with such swap data repository; or
(3) Any person employed by such swap data repository, including a jointly employed person.
(1) Underlying instrument;
(2) Index, or reference entity;
(3) Counterparty;
(4) Asset class;
(5) Long risk of the underlying instrument, index, or reference entity; and
(6) Short risk of the underlying instrument, index, or reference entity.
(b)
The revision reads as follows:
(a) * * *
(5)
(c)
(a)
(b)
(c)
(a)
(b)
(c)
(1) The underlying documentation that governs the corporate change;
(2) A description of the corporate change, including the reason for the change and its impact on the swap data repository, including the swap data repository's governance and operations, and its impact on the rights and obligations of market participants;
(3) A discussion of the transferee's ability to comply with the Act, including the core principles applicable to swap data repositories and the Commission's regulations;
(4) The governance documents adopted by the transferee, including a copy of any constitution; articles or certificate of incorporation, organization, formation, or association with all amendments thereto; partnership or limited liability agreements; and any existing bylaws, operating agreement, or rules or instruments corresponding thereto;
(5) The transferee's rules marked to show changes from the current rules of the swap data repository; and
(6) A representation by the transferee that it:
(i) Will be the surviving entity and successor-in-interest to the transferor swap data repository and will retain and assume the assets and liabilities of the transferor, except if otherwise indicated in the request;
(ii) Will assume responsibility for complying with all applicable provisions of the Act and the Commission's regulations; and
(iii) Will notify market participants of all changes to the transferor's rulebook prior to the transfer, including those changes that may affect the rights and obligations of market participants, and will further notify market participants of the concurrent transfer of the registration to the transferee upon Commission approval and issuance of an order permitting the transfer.
(d)
Each swap data repository shall provide reports of open swaps to the Commission in accordance with this section.
(a)
(b)
(e)
(2)
(3)
(4)
(a)
(b)
(2)
(3)
(4)
(5)
(c)
(2)
(a)
(b)
(1) A swap data repository shall maintain all SDR information, including, but not limited to, all documents, policies, and procedures required by the Act and the Commission's regulations, correspondence, memoranda, papers, books, notices, accounts, and other such records made or received by the swap data repository in the course of its business. All SDR information shall be maintained in accordance with § 1.31 of this chapter.
(2) A swap data repository shall maintain all SDR data and timestamps reported to or created by the swap data repository pursuant to this chapter, and all messages related to such reporting, throughout the existence of the swap that is the subject of the SDR data and for five years following final termination of the swap, during which time the records shall be readily accessible by the swap data repository and available to the Commission via real-time electronic access, and for a period of at least ten additional years in archival storage from which such records are
(c)
(1) A swap data repository shall create and maintain an accurate record of all reported SDR data that fails to satisfy the swap data repository's data validation procedures including, but not limited to, all SDR data reported to the swap data repository that fails to satisfy the data validation procedures, all data validation errors, and all related messages and timestamps. A swap data repository shall make these records available to the Commission on request.
(2) A swap data repository shall create and maintain an accurate record of all SDR data errors and omissions reported to the swap data repository and all corrections disseminated by the swap data repository pursuant to parts 43, 45, and 46 of this chapter and this part. A swap data repository shall make these records available to the Commission on request.
(d)
(e) A swap data repository shall establish policies and procedures to calculate positions for position limits and any other purpose as required by the Commission, for all persons with swaps that have not expired maintained by the swap data repository.
(a)
(b)
(a)
(b)
(c)
(a) Each swap data repository shall:
(1) Establish, maintain, and enforce written policies and procedures reasonably designed to protect the privacy and confidentiality of any and all SDR information and all SDR data that is not swap transaction and pricing data disseminated under part 43 of this chapter. Such policies and procedures shall include, but are not limited to, policies and procedures to protect the privacy and confidentiality of any and all SDR information and all SDR data (except for swap transaction and pricing data disseminated under part 43 of this chapter) that the swap data repository shares with affiliates and non-affiliated third parties; and
(2) Establish and maintain safeguards, policies, and procedures reasonably designed to prevent the misappropriation or misuse, directly or indirectly, of:
(i) Section 8 material;
(ii) Other SDR information or SDR data; and/or
(iii) Intellectual property, such as trading strategies or portfolio positions, by the swap data repository or any person associated with a swap data repository. Such safeguards, policies, and procedures shall include, but are not limited to:
(A) Limiting access to such section 8 material, other SDR information or SDR data, and intellectual property;
(B) Standards controlling persons associated with a swap data repository trading for their personal benefit or the benefit of others; and
(C) Adequate oversight to ensure compliance with this paragraph (a)(2).
(b) A swap data repository shall not, as a condition of accepting SDR data from any swap execution facility, designated contract market, or reporting counterparty, require the waiver of any privacy rights by such swap execution facility, designated contract market, or reporting counterparty.
(c) Subject to section 8 of the Act, a swap data repository may disclose aggregated SDR data on a voluntary basis or as requested, in the form and manner prescribed by the Commission.
The revisions and addition read as follows:
(b) * * *
(3)
(c)
(1)
(d) * * *
(1)
(5)
(f) * * *
(2)
The revisions read as follows:
(b) * * *
(2) * * *
(v) A description of the manner in which the board of directors, as well as any committee referenced in paragraph (b)(2)(ii) of this section, considers an independent perspective in its decision-making process, as § 49.2(a) defines such term;
(vii) Summaries of significant decisions impacting the public interest, the rationale for such decisions, and the process for reaching such decisions. Such significant decisions shall include decisions relating to pricing of repository services, offering of ancillary services, access to SDR data, and use of section 8 material, SDR information, and intellectual property (as referenced in § 49.16). Such summaries of significant decisions shall not require the swap data repository to disclose section 8 material or, where appropriate, information that the swap data repository received on a confidential basis from a swap execution facility, designated contract market, or reporting counterparty.
(c) * * *
(1) * * *
(ii) * * *
(B) A description of the relationship, if any, between such members and the swap data repository or any swap execution facility, designated contract market, or reporting counterparty user thereof (or, in each case, affiliates thereof, as § 49.2(a) defines such term); and
(c) * * *
(1)
(f)
(2) The annual compliance report shall be provided electronically to the Commission not more than 60 days after the end of the swap data repository's fiscal year.
The revision reads as follows:
(d) A swap data repository shall maintain a business continuity-disaster recovery plan and business continuity-disaster recovery resources, emergency procedures, and backup facilities sufficient to enable timely recovery and resumption of its operations and resumption of its ongoing fulfillment of its duties and obligations as a swap data repository following any disruption of its operations. Such duties and obligations include, without limitation, the duties set forth in §§ 49.10 through 49.18, § 49.23, and the core principles set forth in §§ 49.19 through 49.21 and §§ 49.25 through 49.27, and maintenance of a comprehensive audit trail. The swap data repository's business continuity-disaster recovery plan and resources generally should enable resumption of the swap data repository's operations and resumption of ongoing fulfillment of the swap data repository's duties and obligation during the next business day following the disruption. A swap data repository shall update its business continuity-disaster recovery plan and emergency procedures at a frequency determined by an appropriate risk analysis, but at a minimum no less frequently than annually.
(a) * * * (1) A swap data repository shall maintain sufficient financial resources to perform its statutory and regulatory duties set forth in this chapter.
The revisions and additions read as follows:
Before accepting any SDR data from a swap execution facility, designated contract market, or reporting counterparty; or upon a swap execution facility's, designated contract market's, or reporting counterparty's request; a swap data repository shall furnish to the swap execution facility, designated contract market, or reporting counterparty a disclosure document that contains the following written information, which shall reasonably enable the swap execution facility, designated contract market, or reporting counterparty to identify and evaluate accurately the risks and costs associated with using the services of the swap data repository:
(j) The swap data repository's policies and procedures regarding the reporting of SDR data to the swap data repository, including the swap data repository's SDR data validation procedures, swap data verification procedures, and procedures for correcting SDR data errors and omissions.
(a) Except as otherwise provided in this paragraph (a), a swap data
(1) A swap data repository may establish normal closing hours to perform system maintenance during periods when, in the reasonable estimation of the swap data repository, the swap data repository typically receives the least amount of SDR data. A swap data repository shall provide reasonable advance notice of its normal closing hours to market participants and to the public.
(2) A swap data repository may declare, on an ad hoc basis, special closing hours to perform system maintenance that cannot wait until normal closing hours. A swap data repository shall schedule special closing hours during periods when, in the reasonable estimation of the swap data repository in the context of the circumstances prompting the special closing hours, the special closing hours will be the least disruptive to the swap data repository's SDR data reporting responsibilities. A swap data repository shall provide reasonable advance notice of its special closing hours to market participants and to the public whenever possible, and, if advance notice is not reasonably possible, shall provide notice of its special closing hours to market participants and to the public as soon as reasonably possible after declaring special closing hours.
(b) A swap data repository shall comply with the requirements under part 40 of this chapter in adopting or amending normal closing hours and special closing hours.
(c) During normal closing hours and special closing hours, a swap data repository shall have the capability to accept and hold in queue any and all SDR data reported to the swap data repository during the normal closing hours or special closing hours.
(1) Upon reopening after normal closing hours or special closing hours, a swap data repository shall promptly process all SDR data received during normal closing hours or special closing hours, as required pursuant to this chapter, and, pursuant to part 43 of this chapter, publicly disseminate all swap transaction and pricing data reported to the swap data repository that was held in queue during the normal closing hours or special closing hours.
(2) If at any time during normal closing hours or special closing hours a swap data repository is unable to receive and hold in queue any SDR data reported pursuant to this chapter, then the swap data repository shall immediately issue notice to all swap execution facilities, designated contract markets, reporting counterparties, and the public that it is unable to receive and hold in queue SDR data. Immediately upon reopening, the swap data repository shall issue notice to all swap execution facilities, designated contract markets, reporting counterparties, and the public that it has resumed normal operations. Any swap execution facility, designated contract market, or reporting counterparty that was obligated to report SDR data pursuant to this chapter to the swap data repository, but could not do so because of the swap data repository's inability to receive and hold in queue SDR data, shall report the SDR data to the swap data repository immediately after receiving such notice.
(a)
(b)
Unless otherwise instructed by the Commission, a swap data repository shall submit SDR data reports and any other information required under this part to the Commission, within the time specified, using the format, coding structure, and electronic data transmission procedures approved in writing by the Commission.
(a) The Commission hereby delegates, until such time as the Commission orders otherwise, the following functions to the Director of the Division of Market Oversight and to such members of the Commission staff acting under his or her direction as he or she may designate from time to time:
(1) All functions reserved to the Commission in § 49.5.
(2) All functions reserved to the Commission in § 49.9.
(3) All functions reserved to the Commission in § 49.10.
(4) All functions reserved to the Commission in § 49.12.
(5) All functions reserved to the Commission in § 49.13.
(6) All functions reserved to the Commission in § 49.16.
(7) All functions reserved to the Commission in § 49.17.
(8) All functions reserved to the Commission in § 49.18.
(9) All functions reserved to the Commission in § 49.22.
(10) All functions reserved to the Commission in § 49.23.
(11) All functions reserved to the Commission in § 49.24.
(12) All functions reserved to the Commission in § 49.25.
(13) All functions reserved to the Commission in § 49.29.
(14) All functions reserved to the Commission in § 49.30.
(b) The Director of the Division of Market Oversight may submit to the Commission for its consideration any matter that has been delegated under paragraph (a) of this section.
(c) Nothing in this section may prohibit the Commission, at its election, from exercising the authority delegated in this section.
Unless the context requires otherwise, all terms used in this Form SDR have the same meaning as in the Commodity Exchange Act, as amended (“Act”), and in the General Rules and Regulations of the Commodity Futures Trading Commission (“Commission”) thereunder (17 CFR chapter I).
For the purposes of this Form SDR, the term “Applicant” shall include any applicant for registration as a swap data repository or any applicant amending a pending application.
1. This Form SDR, which includes instructions, a Cover Sheet, and required Exhibits (together “Form SDR”), is to be filed with the Commission by all Applicants, pursuant to section 21 of the Act and the Commission's regulations thereunder. Upon the filing of an application for registration in accordance with the instructions provided herein, the Commission will publish notice of the filing and afford interested persons an opportunity to submit written comments concerning such application. No application for registration shall be effective unless the Commission, by order, grants such registration.
2. Individuals' names, except the executing signature, shall be given in full (Last Name, First Name, Middle Name).
3. Signatures on all copies of the Form SDR filed with the Commission can be executed electronically. If this Form SDR is filed by a corporation, it shall be signed in the name of the corporation by a principal officer duly authorized; if filed by a limited liability company, it shall be signed in the name of the limited liability company by a manager or member duly authorized to sign on the limited liability company's behalf; if filed by a partnership, it shall be signed in the name of the partnership by a general partner duly authorized; if filed by an unincorporated organization or association that is not a partnership, it shall be signed in the name of such organization or association by the managing agent,
4. If this Form SDR is being filed as an application for registration, all applicable items must be answered in full. If any item is inapplicable, indicate by “none,” “not applicable,” or “N/A,” as appropriate.
5. Under section 21 of the Act and the Commission's regulations thereunder, the Commission is authorized to solicit the information required to be supplied by this Form SDR from any Applicant seeking registration as a swap data repository. Disclosure by the Applicant of the information specified in this Form SDR is mandatory prior to the start of the processing of an application for registration as a swap data repository. The information provided in this Form SDR will be used for the principal purpose of determining whether the Commission should grant or deny registration to an Applicant. The Commission may determine that additional information is required from an Applicant in order to process its application. A Form SDR that is not prepared and executed in compliance with applicable requirements and instructions may be returned as not acceptable for filing. Acceptance of this Form SDR, however, shall not constitute a finding that the Form SDR has been filed as required or that the information submitted is true, current, or complete.
6. Except in cases where confidential treatment is requested by the Applicant and granted by the Commission pursuant to the Freedom of Information Act and Commission Regulation § 145.9, information supplied on this Form SDR will be included in the public files of the Commission and will be available for inspection by any interested person. The Applicant must identify with particularity the information in these exhibits that will be subject to a request for confidential treatment and supporting documentation for such request pursuant to Commission Regulations § 40.8 and § 145.9.
1. An Applicant amending a pending application for registration as a swap data repository shall file an amended Form SDR electronically with the Secretary of the Commission in the manner specified by the Commission.
2. When filing this Form SDR for purposes of amending a pending application, an Applicant must re-file the entire Cover Sheet, amended if necessary, include an executing signature, and attach thereto revised Exhibits or other materials marked to show any amendments. The submission of an amendment to a pending application represents that all unamended items and Exhibits remain true, current, and complete as previously filed.
This Form SDR shall be filed electronically with the Secretary of the Commission in the manner specified by the Commission.
The following Exhibits must be included as part of Form SDR and filed with the Commission by each Applicant seeking registration as a swap data repository pursuant to section 21 of the Act and the Commission's regulations thereunder. Such Exhibits must be labeled according to the items specified in this Form SDR. If any Exhibit is inapplicable, please specify the Exhibit letter and indicate by “none,” “not applicable,” or “N/A,” as appropriate. The Applicant must identify with particularity the information in these Exhibits that will be subject to a request for confidential treatment and supporting documentation for such request pursuant to Commission Regulations § 40.8 and § 145.9.
If the Applicant is a newly formed enterprise and does not have the financial statements required pursuant to Items 27 and 28 of this form, the Applicant should provide pro forma financial statements for the most recent six months or since inception, whichever is less.
14. Attach as Exhibit A, any person who owns ten (10) percent or more of Applicant's equity or possesses voting power of any class, either directly or indirectly, through agreement or otherwise, in any other manner, may control or direct the management or policies of Applicant. “Control” for this purpose is defined in Commission Regulation § 49.2(a).
State in Exhibit A the full name and address of each such person and attach a copy of the agreement or, if there is none written, describe the agreement or basis upon which such person exercises or may exercise such control or direction.
15. Attach as Exhibit B, a narrative that sets forth the fitness standards for the board of directors and its composition including the number or percentage of public directors.
Attach a list of the present officers, directors (including an identification of the public directors), governors (and, if the
a. Name
b. Title
c. Date of commencement and, if appropriate, termination of present term of position
d. Length of time each present officer, director, or governor has held the same position
e. Brief account of the business experience of each officer and director over the last five (5) years
f. Any other business affiliations in the securities industry or OTC derivatives industry
g. A description of:
(1) any order of the Commission with respect to such person pursuant to section 5e of the Act;
(2) any conviction or injunction within the past 10 years;
(3) any disciplinary action with respect to such person within the last five (5) years;
(4) any disqualification under sections 8b and 8d of the Act;
(5) any disciplinary action under section 8c of the Act; and
(6) any violation pursuant to section 9 of the Act.
h. For directors, list any committees on which the director serves and any compensation received by virtue of their directorship.
16. Attach as Exhibit C, the following information about the chief compliance officer who has been appointed by the board of directors of the swap data repository or a person or group performing a function similar to such board of directors:
a. Name
b. Title
c. Dates of commencement and termination of present term of office or position
d. Length of time the chief compliance officer has held the same office or position
e. Brief account of the business experience of the chief compliance officer over the last five (5) years
f. Any other business affiliations in the derivatives/securities industry or swap data repository industry
g. A description of:
(1) any order of the Commission with respect to such person pursuant to section 5e of the Act;
(2) any conviction or injunction within the past 10 years;
(3) any disciplinary action with respect to such person within the last five (5) years;
(4) any disqualification under sections 8b and 8d of the Act;
(5) any disciplinary action under section 8c of the Act; and
(6) any violation pursuant to section 9 of the Act.
17. Attach as Exhibit D, a copy of documents relating to the governance arrangements of the Applicant, including, but not limited to:
a. The nomination and selection process of the members on the Applicant's board of directors, a person or group performing a function similar to a board of directors (collectively, “board”), or any committee that has the authority to act on behalf of the board, the responsibilities of each of the board and such committee, and the composition of each board and such committee;
b. a description of the manner in which the composition of the board allows the Applicant to comply with applicable core principles, regulations, as well as the rules of the Applicant; and
c. a description of the procedures to remove a member of the board of directors, where the conduct of such member is likely to be prejudicial to the sound and prudent management of the swap data repository.
18. Attach as Exhibit E, a narrative or graphic description of the organizational structure of the Applicant. Note: If the swap data repository activities are conducted primarily by a division, subdivision, or other segregable entity within the Applicant's corporation or organization, describe the relationship of such entity within the overall organizational structure and attach as Exhibit E only such description as applies to the segregable entity. Additionally, provide any relevant jurisdictional information, including any and all jurisdictions in which the Applicant or any affiliated entity is doing business and registration status, including pending application (
19. Attach as Exhibit F, a copy of the conflicts of interest policies and procedures implemented by the Applicant to minimize conflicts of interest in the decision-making process of the swap data repository and to establish a process for the resolution of any such conflicts of interest.
20. Attach as Exhibit G, a list of all affiliates of the swap data repository and indicate the general nature of the affiliation. Provide a copy of any agreements entered into or to be entered by the swap data repository, including partnerships or joint ventures, or its participants, that will enable the Applicant to comply with the registration requirements and core principles specified in section 21 of the Act. With regard to an affiliate that is a parent company of the Applicant, if such parent controls the Applicant, an Applicant must provide (i) the board composition of the parent, including public directors, and (ii) all ownership information requested in Exhibit A for the parent. “Control” for this purpose is defined in Commission Regulation § 49.2(a).
21. Attach as Exhibit H, a copy of the constitution; articles of incorporation or association with all amendments thereto; existing by-laws, rules, or instruments corresponding thereto, of the Applicant. The Applicant shall also provide a certificate of good standing dated within one week of the date of the application.
22. Where the Applicant is a foreign entity seeking registration or filing an amendment to an existing registration, attach as Exhibit I, an opinion of counsel that the swap data repository, as a matter of law, is able to provide the Commission with prompt access to the books and records of such swap data repository and that the swap data repository can submit to onsite inspection and examination by the Commission.
23. Where the Applicant is a foreign entity seeking registration, attach as Exhibit I-1, a form that designates and authorizes an agent in the United States, other than a Commission official, to accept any notice or service of process, pleadings, or other documents in any action or proceedings brought against the swap data repository to enforce the Act and the regulations thereunder.
24. Attach as Exhibit J, a current copy of the Applicant's rules, as defined in Commission Regulation § 40.1, consisting of all the rules necessary to carry out the duties as a swap data repository.
25. Attach as Exhibit K, a description of the Applicant's internal disciplinary and enforcement protocols, tools, and procedures. Include the procedures for dispute resolution.
26. Attach as Exhibit L, a brief description of any material pending legal proceeding(s), other than ordinary and routine litigation incidental to the business, to which the Applicant or any of its affiliates is a party or to which any of its or their property is the subject. Include the name of the court or agency in which the proceeding(s) are pending, the date(s) instituted, and the principal parties thereto, a description of the factual basis alleged to underlie the proceeding(s) and the relief sought. Include similar information as to any such proceeding(s) known to be contemplated by the governmental agencies.
27. Attach as Exhibit M, a balance sheet, statement of income and expenses, statement of sources and application of revenues, and all notes or schedules thereto, as of the most recent fiscal year of the Applicant. If a balance sheet and statements certified by an independent public accountant are available, such balance sheet and statement shall be submitted as Exhibit M.
28. Attach as Exhibit N, a balance sheet and an income and expense statement for each affiliate of the swap data repository that also engages in swap data repository activities as of the end of the most recent fiscal year of each such affiliate.
29. Attach as Exhibit O, the following:
a. A complete list of all dues, fees, and other charges imposed, or to be imposed, by or on behalf of Applicant for its swap data repository services and identify the service or services provided for each such due, fee, or other charge.
b. Furnish a description of the basis and methods used in determining the level and structure of the dues, fees, and other charges listed in paragraph a of this item.
c. If the Applicant differentiates, or proposes to differentiate, among its customers, or classes of customers in the amount of any dues, fees, or other charges imposed for the same or similar services, so
30. Attach as Exhibit P, copies of all material contracts with any swap execution facility, designated contract market, clearing agency, central counterparty, or third party service provider. To the extent that form contracts are used by the Applicant, submit a sample of each type of form contract used. In addition, include a list of swap execution facilities, designated contract markets, clearing agencies, central counterparties, and third party service providers with whom the Applicant has entered into material contracts. Where swap data repository functions are performed by a third-party, attach any agreements between or among the Applicant and such third party, and identify the services that will be provided.
31. Attach as Exhibit Q, any technical manuals, other guides or instructions for users of, or participants in, the market.
32. Attach as Exhibit R, a description of system test procedures, test conducted or test results that will enable the Applicant to comply, or demonstrate the Applicant's ability to comply, with the core principles for swap data repositories.
33. Attach as Exhibit S, a description in narrative form, or by the inclusion of functional specifications, of each service or function performed as a swap data repository. Include in Exhibit S a description of all procedures utilized for the collection, processing, distribution, publication, and retention (
34. Attach as Exhibit T, a list of all computer hardware utilized by the Applicant to perform swap data repository functions, indicating where such equipment (terminals and other access devices) is physically located.
35. Attach as Exhibit U, a description of the personnel qualifications for each category of professional employees employed by the swap data repository or the division, subdivision, or other segregable entity within the swap data repository as described in Item 16.
36. Attach as Exhibit V, a description of the measures or procedures implemented by Applicant to provide for the security of any system employed to perform the functions of a swap data repository. Include a general description of any physical and operational safeguards designed to prevent unauthorized access (whether by input or retrieval) to the system. Describe any circumstances within the past year in which the described security measures or safeguards failed to prevent any such unauthorized access to the system and any measures taken to prevent a reoccurrence. Describe any measures used to verify the accuracy of information received or disseminated by the system.
37. Attach as Exhibit W, copies of emergency policies and procedures and Applicant's business continuity-disaster recovery plan. Include a general description of any business continuity-disaster recovery resources, emergency procedures, and backup facilities sufficient to enable timely recovery and resumption of its operations and resumption of its ongoing fulfillment of its duties and obligations as a swap data repository following any disruption of its operations.
38. Where swap data repository functions are performed by automated facilities or systems, attach as Exhibit X a description of all backup systems or subsystems that are designed to prevent interruptions in the performance of any swap data repository function as a result of technical malfunctions or otherwise in the system itself, in any permitted input or output system connection, or as a result of any independent source. Include a narrative description of each type of interruption that has lasted for more than two minutes and has occurred within the six (6) months preceding the date of the filing, including the date of each interruption, the cause, and duration. Also state the total number of interruptions that have lasted two minutes or less.
39. Attach as Exhibit Y, the following:
a. For each of the swap data repository functions:
(1) Quantify in appropriate units of measure the limits on the swap data repository's capacity to receive (or collect), process, store, or display (or disseminate for display or other use) the data elements included within each function (
(2) identify the factors (mechanical, electronic, or other) that account for the current limitations reported in answer to (1) on the swap data repository's capacity to receive (or collect), process, store, or display (or disseminate for display or other use) the data elements included within each function.
b. If the Applicant is able to employ, or presently employs, the central processing units of its system(s) for any use other than for performing the functions of a swap data repository, state the priorities of assignment of capacity between such functions and such other uses, and state the methods used or able to be used to divert capacity between such functions and such other uses.
40. Attach as Exhibit Z, the following:
a. As to each swap data repository service that the Applicant provides, state the number of persons who presently utilize, or who have notified the Applicant of their intention to utilize, the services of the swap data repository.
b. For each instance during the past year in which any person has been prohibited or limited in respect of access to services offered by the Applicant as a swap data repository, indicate the name of each such person and the reason for the prohibition or limitation.
c. Define the data elements for purposes of the swap data repository's real-time public reporting obligation. Appendix A to Part 43 of the Commission's Regulations (Data Elements and Form for Real-Time Reporting for Particular Markets and Contracts) sets forth the specific data elements for real-time public reporting.
41. Attach as Exhibit AA, copies of any agreements governing the terms by which information may be shared by the swap data repository, including with market participants. To the extent that form contracts are used by the Applicant, submit a sample of each type of form contract used.
42. Attach as Exhibit BB, a description of any specifications, qualifications, or other criteria that limit, are interpreted to limit, or have the effect of limiting access to or use of any swap data repository services furnished by the Applicant and state the reasons for imposing such specifications, qualifications, or other criteria, including whether such specifications, qualifications, or other criteria are imposed.
43. Attach as Exhibit CC, any specifications, qualifications, or other criteria required of participants who utilize the services of the Applicant for collection, processing, preparing for distribution, or public dissemination by the Applicant.
44. Attach as Exhibit DD, any specifications, qualifications, or other criteria required of any person, including, but not limited to, regulators, market participants, market infrastructures, venues from which data could be submitted to the Applicant, and third party service providers who request access to data maintained by the Applicant.
45. Attach as Exhibit EE, policies and procedures implemented by the Applicant to review any prohibition or limitation of any person with respect to access to services offered or data maintained by the Applicant and to grant such person access to such services or data if such person has been discriminated against unfairly.
46. Attach as Exhibit FF, a narrative and supporting documents that may be provided under other Exhibits herein, that describes the manner in which the Applicant is able to comply with each core principle and other requirements pursuant to Commission Regulation § 49.19.
47. Attach as Exhibit GG, policies and procedures implemented by the Applicant to protect the privacy of any and all SDR data, section 8 material, and SDR information that the swap data repository receives from reporting entities.
48. Attach as Exhibit HH, a description of safeguards, policies, and procedures implemented by the Applicant to prevent the misappropriation or misuse of (a) any confidential information received by the Applicant, including, but not limited to, SDR data, section 8 material, and SDR information, about a market participant or any of its customers; and/or (b) intellectual property by Applicant or any person associated with the Applicant for their personal benefit or the benefit of others.
49. Attach as Exhibit II, policies and procedures implemented by the Applicant regarding its use of the SDR data, section 8 material, and SDR information that it receives from a market participant, any registered entity, or any person for non-commercial and/or commercial purposes.
50. Attach as Exhibit JJ, procedures and a description of facilities of the Applicant for effectively resolving disputes over the accuracy of the SDR data and positions that are maintained by the swap data repository.
51. Attach as Exhibit KK, policies and procedures relating to the Applicant's calculation of positions.
52. Attach as Exhibit LL, policies and procedures that are reasonably designed to prevent any provision in a valid swap from being invalidated or modified through the procedures or operations of the Applicant.
53. Attach as Exhibit MM, Applicant's policies and procedures that ensure that the SDR data that are maintained by the Applicant continues to be maintained after the Applicant withdraws from registration as a swap data repository, which shall include procedures for transferring the SDR data to the Commission or its designee (including another swap data repository).
The U.S. Commodity Futures Trading Commission (“CFTC”) and the [
1. ABC is permitted to request and receive swap data directly from an SDR (“Swap Data”) on the terms and subject to the conditions of this Arrangement.
2. This Arrangement is entered into to fulfill the requirements under Section 21(d) of the Commodity Exchange Act (“Act”) and CFTC Regulation 49.18. Upon receipt by an SDR, this Arrangement will satisfy the requirement for a written agreement pursuant to Section 21(d) of the Act and CFTC Regulation 49.17(d)(6). This Arrangement does not apply to information that is [reported to an SDR pursuant to [ABC]'s regulatory regime where the SDR also is registered with [ABC] pursuant to separate statutory authority, even if such information also is reported pursuant to the Act and CFTC regulations][reported to an SDR pursuant to [ABC]'s regulatory regime where the SDR also is registered with, or recognized or otherwise authorized by, [ABC], which has supervisory authority over the repository pursuant to foreign law and/or regulation, even if such information also is reported pursuant to the Act and CFTC regulations.]
3. This Arrangement is not intended to limit or condition the discretion of an Authority in any way in the discharge of its regulatory responsibilities or to prejudice the individual responsibilities or autonomy of any Authority.
4. This Arrangement does not alter the terms and conditions of any existing arrangements.
5. ABC will be acting within the scope of its jurisdiction in requesting Swap Data and employs procedures to maintain the confidentiality of Swap Data and any information and analyses derived therefrom (collectively, the “Confidential Information”). ABC undertakes to notify the CFTC and each relevant SDR promptly of any change to ABC's scope of jurisdiction.
6. ABC undertakes to treat Confidential Information as confidential and will employ safeguards that:
a. To the maximum extent practicable, identify the Confidential Information and maintain it separately from other data and information;
b. Protect the Confidential Information from misappropriation and misuse;
c. Ensure that only authorized ABC personnel with a need to access particular Confidential Information to perform their job functions related to such Confidential Information have access thereto, and that such access is permitted only to the extent necessary to perform their job functions related to such particular Confidential Information;
d. Prevent the disclosure of aggregated Confidential Information; provided, however, that ABC is permitted to disclose any sufficiently aggregated Confidential Information that is anonymized to prevent identification, through disaggregation or otherwise, of a market participant's business transactions, trade data, market positions, customers, or counterparties;
e. Prohibit use of the Confidential Information by ABC personnel for any improper purpose, including in connection with trading for their personal benefit or for the benefit of others or with respect to any commercial or business purpose; and
f. Include a process for monitoring compliance with the confidentiality safeguards described herein and for promptly notifying the CFTC, and each SDR from which ABC has received Swap Data, of any violation of such safeguards or failure to fulfill the terms of this Arrangement.
7. Except as provided in Paragraphs 6.d. and 8, ABC will not onward share or otherwise disclose any Confidential Information.
8. ABC undertakes that:
a. If a department, central bank, or agency of the Government of the United States, it will not disclose Confidential Information except in an action or proceeding under the laws of the United States to which it, the CFTC, or the United States is a party;
b. If a department or agency of a State or political subdivision thereof, it will not disclose Confidential Information except in connection with an adjudicatory action or proceeding brought under the Act or the laws of [
c. If a foreign futures authority or a department, central bank, ministry, or agency of a foreign government or subdivision thereof, or any other Foreign Regulator, as defined in Commission Regulation 49.2(a)(5), it will not disclose Confidential Information except in connection with an adjudicatory action or proceeding brought under the laws of [
9. Prior to complying with any legally enforceable demand for Confidential Information, ABC will notify the CFTC of such demand in writing, assert all available appropriate legal exemptions or privileges with respect to such Confidential Information, and use its best efforts to protect
10. ABC acknowledges that, if it does not fulfill the terms of this Arrangement, the CFTC may direct any SDR to suspend or revoke ABC's access to Swap Data.
11. ABC will comply with all applicable security-related requirements imposed by an SDR in connection with access to Swap Data maintained by the SDR, as such requirements may be revised from time to time.
12. ABC will promptly destroy all Confidential Information for which it no longer has a need or which no longer falls within the scope of its jurisdiction, and will certify to the CFTC, upon request, that ABC has destroyed such Confidential Information.
13. This Arrangement may be amended with the written consent of the Authorities.
14. The text of this Arrangement will be executed in English, and may be made available to the public.
15. On the date this Arrangement is signed by the Authorities, it will become effective and may be provided to any SDR that holds and maintains Swap Data that falls within the scope of ABC's jurisdiction.
16. This Arrangement will expire 30 days after any Authority gives written notice to the other Authority of its intention to terminate the Arrangement. In the event of termination of this Arrangement, Confidential Information will continue to remain confidential and will continue to be covered by this Arrangement.
The following appendices will not appear in the Code of Federal Regulations.
On this matter, Chairman Tarbert and Commissioners Quintenz, Behnam, Stump, and Berkovitz voted in the affirmative. No Commissioner voted in the negative.
I am pleased to support today's final swap data reporting rules under Parts 43, 45, and 49 of the CFTC's regulations, which are foundational to effective oversight of the derivatives markets. As I noted when these rules were proposed in February, “[d]ata is the lifeblood of our markets.”
In the month following our data rule proposals, historic volatility caused by the coronavirus pandemic rocketed through our derivatives markets, affecting nearly every asset class.
But data reporting is not just about mitigating systemic risk. Vibrant derivatives markets must be open and free, meaning transparency is a critical component of any reporting system. Price discovery requires robust public reporting that supplies market participants with the information they need to price trades, hedge risk, and supply liquidity. Today we double down on transparency, ensuring that public reporting of swap transactions is even more accurate and timely. In particular, our final rules adjust certain aspects of the Part 43 proposal's block-trade
Promoting clarity in our markets also demands that we, as an agency, have clear goals in mind. Today's final swap data reporting rules reflect a hard look at the data we need and the data we collect, building on insights gleaned from our own analysis as well as feedback from market participants. The key point is that more data does not necessarily mean better information. Instead, the core of an effective data reporting system is focus.
As Aesop reminds us, “Beware lest you lose the substance by grasping at the shadow.”
That last point is worth highlighting: our final swap data reporting rules account for market participants both within and outside the United States. A diversity of market participants, some of whom reside beyond our borders and are accountable to foreign regulatory regimes, contribute to vibrant derivatives markets. But before today, inconsistent international rules meant some swap dealers were left to navigate what I have called “a byzantine maze of disparate data fields and reporting timetables” for the very same swap.
It is important to understand the specific function of each of the three swap data reporting rules, which together form the CFTC's reporting system. First, Part 43 relates to the
Second, Part 45 relates to the
Finally, Part 49 requires
Today's final swap data reporting rules are designed to fulfill our agency's first Strategic Goal: To strengthen the resilience and integrity of our derivatives markets while fostering the vibrancy.
Justice Brandeis's words also resonate across other areas of the final swap data reporting rules. The final swap data reporting rules enhance transparency to the public of pricing and trade data.
A critical aspect of the final Part 43 rule is the issue of block trades and dissemination delays. When the Part 43 proposal was issued, I noted that “[o]ne of the issues we are looking at closely is whether a 48-hour delay for block trade reporting is appropriate.”
The final Part 43 rule also changes the threshold for block trade treatment, raising the amount needed from a 50% to 67% notional calculation. It also increases the threshold for capping large notional trades from 67% to 75%. These changes will enhance market transparency by applying a stricter standard for blocks and caps, thereby enhancing public access to swap trading data. At the same time, the rule reflects serious consideration of how these thresholds are calculated, particularly for block trades. In excluding certain option trades and CDS trades around the roll months from the 67% notional threshold for blocks, the final rule helps ensure that dissemination delays have their desired effect of preventing front-running and similar disruptive activity.
The swaps market is highly complex, reflecting a nearly endless array of transaction structures. Part 43 takes these differences into account in setting forth the public reporting requirements for price and transaction data. For example, post-priced swaps are valued after an event occurs, such as the ringing of the daily closing bell in an equity market. As it stands today, post-priced swaps often appear on the public tape with no corresponding pricing data—rendering the data largely unusable. The final Part 43 rule addresses this data quality issue and improves price discovery by requiring post-priced swaps to appear on the public tape after pricing occurs.
The final Part 43 rule also resolves an issue involving the reporting of prime-brokerage swaps. The current rule requires that offsetting swaps executed with prime brokers—in addition to the initial swap reflecting the actual terms of trade—be reported on the public tape. This duplicative reporting obfuscates public pricing data by including prime-broker costs and fees that are unrelated to the terms of the swap. As I explained when the rule was proposed, cluttering the public tape with duplicative or confusing data can impair price discovery.
Data is only as useful as it is accurate. The final Part 49 rule establishes an efficient framework for verifying SDR data accuracy and correcting errors, which serves both regulatory oversight and public price discovery purposes.
Today's final swap data reporting rules improve the regulatory experience for market participants at home and abroad in several key ways, advancing the CFTC's third Strategic Goal.
As I stated at the proposal stage, “[s]implicity should be a central goal of our swap data reporting rules.”
We resolve this situation today by replacing the sprawling mass of disparate SDR fields—sometimes running into the hundreds or thousands—with 128 that are important to the CFTC's oversight of the swaps markets. These fields reflect an honest look at the data we are collecting and the data we can use, ensuring that our market participants are not burdened with swap
The swaps markets are integrated and global; our data rules must follow suit.
Data harmonization is not just good for market participants: it also advances the CFTC's vision of being the global standard for sound derivatives regulation.
In addition to certain CDE fields, the final Part 45 rule also adopts other important features of the CPMI-IOSCO Technical Guidance, such as the use of a Unique Transaction Identifier (UTI) system in place of today's Unique Swap Identifier (USI) system. This change will bring the CFTC's swap data reporting system in closer alignment with those of other regulators, leading to better data sharing and lower burdens on market participants.
Last, the costs of altering data reporting systems makes implementation timeframes especially important. To that effect, the CFTC has worked with ESMA to bring our jurisdictions' swap data reporting compliance timetables into closer harmony, easing transitions to new reporting systems.
The final Part 49 rule has changed since the proposal stage to facilitate easier verification of SDR data by swap dealers. Based on feedback we received, the final rule now requires SDRs to provide a mechanism for swap dealers and other reporting counterparties to access the SDR's data for their open swaps to verify accuracy and address errors. This approach replaces a message-based system for error identification and correction, which would have produced significant implementation costs without improving error remediation. The final rule achieves the goal—data accuracy—with fewer costs and burdens.
I have long said that if our derivatives markets are not working for agriculture, then they are not working at all.
The derivatives markets run on data. They will be even more reliant on it in the future, as digitization continues to sweep through society and industry. I am pleased to support the final rules under Parts 43, 45, and 49, which will help ensure that the CFTC's swap data reporting systems are effective, efficient, and built to last.
The Commodity Exchange Act (CEA) specifically directs the Commission to ensure that real-time public reporting requirements for swap transactions (i) do not identify the participants; (ii) specify the criteria for what constitutes a block trade and the appropriate time delay for reporting such block trades, and (iii) take into account whether public disclosure will materially reduce market liquidity.
Unfortunately, I fear the balance struck in this rule misses that mark. The final rule before us today clearly favors transparency over market liquidity, with the sacrifice of the latter being particularly more acute given the nature of the swaps market. In this final rule, the Commission asserts that the increased transparency resulting from higher block trade thresholds and cap sizes will lead to increased competition, stimulate more trading, and enhance liquidity and pricing. That is wishful thinking, which is no basis upon which to predicate a final rule. As numerous commenters pointed out, this increased transparency comes directly at the expense of market liquidity, competitive pricing for end-users, and the ability of dealers to efficiently hedge their large swap transactions. While the Commission hopes the 67% block calculation will bring about the ample benefits it cites, I think the exact opposite is the most probable outcome. I remain unconvinced that the move from the 50% notional amount calculation for block sizes to the 67% notional amount calculation is necessary or appropriate. Unfortunately, the decision to retain the 67% calculation, which was adopted in 2013 but never implemented, was not seriously reconsidered in this rule.
Instead, in the final rule, the Commission asserts that it “extensively analyzed the costs and benefits of the 50-percent threshold and 67-percent threshold when it adopted the phased-in approach” in 2013. Respectfully, I believe that statement drastically inflates the Commission's prior analysis. I have no doubt the Commission “analyzed” the costs and benefits in 2013 to the best of its ability. However, the reality is that in 2013, as the Commission acknowledged in its own cost-benefit analysis, “in a number of instances, the Commission lacks the data and information required to precisely estimate costs,
In my opinion, the fact that currently 87% of IRS and 82% of CDS trades are reported in real time is evidence that the transparency policy goals underlying the real-time reporting requirements have already been achieved. In 2013, the Commission, quoting directly from the Congressional Record,
Despite my reservations, I am voting for the real-time reporting rule before the Commission today for several reasons. First, I worked hard to ensure that this final rule contains many significant improvements from the initial draft we were first presented, as well as the original proposal which I supported. For example, in order to make sure the CDS swap categories are representative, the Commission established additional categories for CDS with optionality. In addition, the Commission is also providing guidance that certain risk-reduction exercises, which are not arm's length transactions, are not publicly reportable swap transactions, and therefore should be excluded from the block size calculations.
Second, while most of the changes to the part 43 rules will have a compliance period of 18 months, compliance with the new block and cap sizes will not be not be required until one year later, providing market participants with a 30-month compliance period and the Commission with an extra 12 months to revisit this issue with actual data analysis, as good government and well-reasoned public policy demands. This means that when any final block and cap sizes go into effect for the amended swap categories, it will be with the benefit of cleaner, more precise data resulting from our part 43 final rule improvements adopted today. It is my firm expectation that DMO staff will review the revised block trade sizes, in light of the new data, at that time to ensure they are appropriately calibrated for each swap category. In addition, as required by the rule, DMO will publish the revised block trade and cap sizes the month before they go effective. I am hopeful that with the benefit of time, cleaner data and public comment, the Commission can, if necessary, re-calibrate the minimum block sizes to ensure they strike the appropriate balance built into our statute between the liquidity needs of the market and transparency. To the extent market participants also have concerns about maintaining the current time delays for block trades given the move to the 67% calculation, I encourage them to reach out to DMO and my fellow Commissioners during the intervening 30-month window. That time frame is more than enough to further refine the reporting delays, as necessary, for the new swap categories based on sound data.
I respectfully concur in the Commission's amendments to its regulations regarding real-time public reporting, recordkeeping, and swap data repositories. The three rules being finalized together today are the culmination of a multi-year effort to streamline, simplify, and internationally harmonize the requirements associated with reporting swaps. Today's actions represent the end of a long procedural road at the Commission, one that started with the Commission's 2017 Roadmap to Achieve High Quality Swap Data.
But the road really goes back much further than that, to the time prior to the 2008 financial crisis, when swaps were largely exempt from regulation and traded exclusively over-the-counter.
In the aftermath of the financial crisis, Congress enacted the Dodd-Frank Wall Street Reform and Consumer Protection Act in 2010 (Dodd-Frank Act).
Among many critically important statutory changes, which have shed light on the over-the-counter derivatives markets, Title VII of the Dodd-Frank Act amended the Commodity Exchange Act (“CEA” or “Act”) and added a new term to the Act: “Real-time public reporting.”
As we amend these rules, I think it is important that we keep in mind the Dodd-Frank Act's emphasis on transparency, and what transpired to necessitate that emphasis. However, the Act is also clear that its purpose, in regard to transparency and real time public reporting, is to authorize the Commission to make swap transaction and pricing data available to the public “as the Commission determines appropriate to enhance price discovery.”
Today's final rules amending the swap data and recordkeeping and reporting requirements also culminate a multi-year undertaking by dedicated Commission staff and our international counterparts working through the Committee on Payments and Market Infrastructures and the International Organization of Securities Commissions working group for the harmonization of key over-the-counter derivatives data elements. The amendments benefit from substantial public consultation as well as internal data and regulatory analyses aimed at determining, among other things, how the Commission can meet its current data needs in support of its duties under the CEA. These include ensuring the financial integrity of swap transactions, monitoring of substantial and systemic risks, formulating bases for and granting substituted compliance and trade repository access, and entering information sharing agreements with fellow regulators.
I wish to thank the responsible staff in the Division of Market Oversight, as well as in the Offices of International Affairs, Chief Economist, and General Counsel for their efforts and engagement over the last several years as well as their constructive dialogues with my office over the last several months. Their timely and fulsome responsiveness amid the flurry of activity at the Commission
The final rules should improve data quality by eliminating duplication, removing alternative or adjunct reporting options, utilizing universal data elements and identifiers, and focusing on critical data elements. To the extent the Commission is moving forward with mandating a specific data standard for reporting swap data to swap data repositories (“SDRs”), and that the standard will be ISO 20022, I appreciate the Commission's thorough discussion of its rationale in support of that decision. I also commend Commission staff for its demonstrated expertise in incorporating the mandate into the regulatory text in a manner that provides certainty while acknowledging that the chosen standard remains in development.
The rules provide clear, reasonable and universally acceptable reporting deadlines that not only account for the minutiae of local holidays, but address the practicalities of common market practices such as allocation and compression exercises.
I am especially pleased that the final rules require consistent application of rules across SDRs for the validation of both Part 43 and Part 45 data submitted by reporting counterparties. I believe the amendments to part 49 set forth a practical approach to ensuring SDRs can meet the statutory requirement to confirm the accuracy of swap data set forth in CEA section 21(c)
I appreciate that the Commission considered and received comments regarding whether to require reporting counterparties to indicate whether a specific swap: (1) Was entered into for dealing purposes (as opposed to hedging, investing, or proprietary trading); and/or (2) needs not be considered in determining whether a person is a swap dealer or need not be counted towards a person's
Thank you again to the staff who worked on these rules. I support the overall vision articulated in these several rules and am committed to supporting the acquisition and development of information technology and human resources needed for execution of that vision. As data forms the basis for much of what we do here at the Commission, especially in terms of identifying, assessing, and monitoring risk, I look forward to future discussions with staff regarding how the CFTC's Market Risk Advisory Committee which I sponsor may be of assistance.
I support today's final rules amending the swap data reporting requirements in parts 43, 45, 46, and 49 of the Commission's rules (the “Reporting Rules”). The amended rules provide major improvements to the Commission's swap data reporting requirements. They will increase the transparency of the swap markets, enhance the usability of the data, streamline the data collection process, and better align the Commission's reporting requirements with international standards.
The Commission must have accurate, timely, and standardized data to fulfill its customer protection, market integrity, and risk monitoring mandates in the Commodity Exchange Act (“CEA”).
As enacted by the Dodd-Frank Act, CEA section 2(a)(13)(G) directs the CFTC to establish real-time and comprehensive swap data reporting requirements, on a swap-by-swap basis. CEA section 21 establishes SDRs as the statutory entities responsible for receiving, storing, and facilitating regulators' access to swap data. The Commission began implementing these statutory directives in 2011 and 2012 in several final rules that addressed regulatory and real-time public reporting of swaps; established SDRs to receive data and make it available to regulators and the public; and defined certain swap dealer (“SD”) and major swap participant (“MSP”) reporting obligations.
The Commission was the first major regulator to adopt data repository and swap data reporting rules. Today's final rules are informed by the Commission's and the market's experience with these initial rules. Today's revisions also reflect recent international work to harmonize and standardize data elements.
Price transparency fosters price competition and reduces the cost of hedging. In directing the Commission to adopt real-time public reporting regulations, the Congress stated “[t]he purpose of this section is to authorize the Commission to make swap transaction and pricing data available to the public in such form and at such times as the Commission determines appropriate
The Commission's proposed rule for block trades included two significant amendments to part 43: (1) refined swap categories for calculating blocks; and (2) a single 48-hour time-delay for reporting all blocks. In addition, the proposed rule would give effect to increased block trade size thresholds from 50% to 67% of a trimmed (excluding outliers) trade data set as provided for in the original part 43. The increases in the block sizing thresholds and the refinement of swap categories were geared toward better meeting the statutory directives to the Commission to enhance price discovery through real-time reporting while also providing appropriate time delays for the reporting of swaps with very large notional amounts,
Although I supported the issuance of the proposed rule, I outlined a number of concerns with the proposed blanket 48-hour delay. As described in the preamble to the part 43 final rule, a number of commenters supported the longer delay as necessary to facilitate the laying off of risk resulting from entering into swaps in illiquid markets or with large notional amounts. Other commenters raised concerns that such a broad, extended delay was unwarranted and could impede, rather than foster, price discovery. The delay also would provide counterparties to large swaps with an information advantage during the 48-hour delay.
The CEA directs the Commission to provide for both real-time reporting and appropriate block sizes. In developing the final rule the Commission has sought to achieve these objectives.
As described in the preamble, upon analysis of market data and consideration of the public comments, the Commission has concluded that the categorization of swap transactions and associated block sizes and time delay periods set forth in the final rule strikes an appropriate balance to achieve the statutory objectives of enhancing price discovery, not disclosing “the business transactions and market positions of any person,” preserving market liquidity, and providing appropriate time delays for block transactions. The final part 43 includes a mechanism for regularly reviewing swap transaction data to refine the block trade sizing and reporting delays as appropriate to maintain that balance.
I have consistently supported the use of the best available data to inform Commission rulemakings, and the periodic evaluation and updating of those rules, as new data becomes available. The preamble to the final rules for part 43 describes how available data, analytical studies, and public comments informed the Commission's rulemaking. Following press reports about the contents of the final rule, the Commission recently has received comments from a number of market participants raising issues with the reported provisions in the final rule. These commenters have expressed concern that the reported reversion of the time delays for block trades to the provisions in the current regulations, together with the 67% threshold for block trades, will impair market liquidity, increase costs to market participants, and not achieve the Commission's objectives of increasing price transparency and competitive trading of swaps. Many of these commenters have asked the Commission to delay the issuance of the final rule or to re-propose the part 43 amendments for additional public comments.
I do not believe it would be appropriate for the Commission to withhold the issuance of the final rule based on these latest comments and at this late stage in the process. The Commission has expended significant time and resources in analyzing data and responding to the public comments received during the public comment period. As explained in the preamble, the Commission is already years behind its original schedule for revising the block thresholds. I therefore do not support further delay in moving forward on these rules.
Nonetheless, I also support evaluation and refinement of the block reporting rules, if appropriate, based upon market data and analysis. The 30-month implementation schedule for the revised block sizes provides market participants with sufficient time to review the final rule and analyze any new data. Market participants can then provide their views to the Commission on whether further, specific adjustments to the block sizes and/or reporting delay periods may be appropriate for certain instrument classes. This implementation period is also sufficient for the Commission to consider those comments and make any adjustments as may be warranted. The Commission should consider any such new information in a transparent, inclusive, and deliberative manner. Amended part 43 also provides a process for the Commission to regularly review new data as it becomes available and amend the block size thresholds and caps as appropriate.
The International Swaps and Derivatives Association, Inc. (“ISDA”) and the Securities Industry and Financial Markets Association (“SIFMA”) commented that higher block size thresholds may put swap execution facilities (“SEFs”) organized in the United States at a competitive disadvantage as compared to European trading platforms that provide different trading protocols and allow longer delays in swap trade reporting. SIFMA and ISDA commented that the higher block size thresholds might incentivize swap dealers to move at least a portion of their swap trading from United States SEFs to European trading platforms. They also noted that this regulatory arbitrage activity could apply to swaps that are subject to mandatory exchange trading. Importantly, European platforms allow a non-competitive single-quote trading mechanism for these swaps while U.S. SEFs are required to maintain more competitive request-for-quotes mechanisms from at least three parties. The three-quote requirement serves to fulfill important purposes delineated in the CEA to facilitate price discovery and promote fair competition.
The migration of swap trading from SEFs to non-U.S. trading platforms to avoid U.S. trade execution and/or swap reporting requirements would diminish the liquidity in and transparency of U.S. markets, to the detriment of many U.S. swap market participants. Additionally, as the ISDA/SIFMA comment letter notes, it would provide an unfair competitive advantage to non-U.S. trading platforms over SEFs registered with the CFTC, who are required to abide by CFTC regulations. Such migration would fragment the global swaps market and undermine U.S. swap markets.
I have supported the Commission's substituted compliance determinations for foreign swap trading platforms in non-U.S. markets where the foreign laws and regulations provide for comparable and comprehensive regulation. Substituted compliance recognizes the interests of non-U.S. jurisdictions in regulating non-U.S. markets and allows U.S. firms to compete in those non-U.S. markets. However, substituted compliance is
The Commission should be vigilant to protect U.S. markets and market participants. The Commission should monitor swap data to identify whether any such migration from U.S. markets to overseas markets is occurring and respond, if necessary, to protect the U.S. swap markets.
I also support today's final rules amending the swap data reporting, verification, and SDR registration requirements in parts 45, 46, and 49 of the Commission's rules. These regulatory reporting rules will help ensure that reporting counterparties, including SDs, MSPs, designated contract markets (“DCMs”), SEFs, derivatives clearing organizations (“DCOs”), and others report accurate and timely swap data to SDRs. Swap data will also be subject to a periodic verification program requiring the cooperation of both SDRs and reporting counterparties. Collectively, the final rules create a comprehensive framework of swap data standards, reporting deadlines, and data validation and verification procedures for all reporting counterparties.
The final rules simplify the swap data reports required in part 45, and organize them into two report types: (1) “Swap creation data” for new swaps; and (2) “swap continuation data” for changes to existing swaps.
The amended reporting deadlines will result in a moderate time window where swap data may not be available to the Commission or other regulators with access to an SDR. However, it is likely that they will also improve the accuracy and reliability of data. Reporting parties will have more time to ensure that their data reports are complete and accurate before being transmitted to an SDR.
The final rules in part 49 will also promote data accuracy through validation procedures
The final rules also better harmonize with international technical standards, the development of which included significant Commission participation and leadership. These harmonization efforts will reduce complexity for reporting parties without significantly reducing the specific data elements needed by the Commission for its purposes. For example, the final rules adopt the Unique Transaction Identifier and related rules, consistent with CPMI-IOSCO technical standards, in lieu of the Commission's previous Unique Swap Identifier. They also adopt over 120 distinct data elements and definitions that specify information to be reported to SDRs. Clear and well-defined data standards are critical for the efficient analysis of swap data across many hundreds of reporting parties and multiple SDRs. Although data elements may not be the most riveting aspect of Commission policy making, I support the Commission's determination to focus on these important, technical elements as a necessary component of any effective swap data regime.
Today's Reporting Rules are built upon nearly eight years of experience with the current reporting rules and benefitted from extensive international coordination. The amendments make important strides toward fulfilling Congress's mandate to bring transparency and effective oversight to the swap markets. I commend CFTC staff, particularly in Division of Market Oversight and the Office of Data and Technology, who have worked on the Reporting Rules over many years. Swaps are highly variable and can be difficult to represent in standardized data formats. Establishing accurate, timely, and complete swap reporting requirements is a difficult, but important function for the Commission and regulators around the globe. This proposal offers a number of pragmatic solutions to known issues with the current swap data rules. For these reasons, I am voting for the final Reporting Rules.
Pipeline and Hazardous Materials Safety Administration (PHMSA), Department of Transportation (DOT).
Final rule.
The Pipeline and Hazardous Materials Safety Administration (PHMSA) is amending the Hazardous Materials Regulations in response to 24 petitions for rulemaking submitted by the regulated community between February 2015 and March 2018. This final rule updates, clarifies, or provides relief from various regulatory requirements without adversely affecting safety. PHMSA also, as of the effective date of this final rule, withdraws its September 28, 2017 enforcement discretion regarding the phase-out of mobile refrigeration systems.
Steven Andrews at (202) 366-8553 in the Office of Hazardous Materials Safety, Pipeline and Hazardous Materials Safety Administration, U.S. Department of Transportation, 1200 New Jersey Avenue SE, Washington, DC 20590-0001.
The Administrative Procedure Act
This final rule revises the Hazardous Materials Regulations (HMR
• Revising § 173.31 to prohibit the use of tank cars with shells or heads constructed of non-normalized steel in
• Harmonizing availability of limited quantity shipping exceptions for more than 100 entries for corrosive materials in the Hazardous Materials Table (HMT, § 172.101).
• Revising § 172.302(b)(2) to allow a minimum height of 12 mm (0.47 inches) for a proper shipping name marked on a portable tank with a capacity of less than 3,785 L (1,000 gallons).
• Revising § 173.28(c)(1)(i) to allow for regulatory flexibility for cleaning metal drums for reuse and clarifying the existing cleaning standard.
• Revising § 173.5b to allow for the continued use of portable and mobile refrigerator systems placed into service prior to 1991 that are rated to a minimum service pressure of 250 pounds per square inch (psig).
• Incorporating by reference updated editions of multiple Compressed Gas Association (CGA) publications into § 171.7.
• Removing the reference to special provision 103 in § 172.101 from Column (7) for four HMT entries.
• Removing the words “manufactured before September 1, 1995” from § 180.417(a)(3) to allow for an alternative report for cargo tanks manufactured after September 1, 1995.
• Revising the basis weight tolerance provided in § 178.521 from ±5 percent to ±10 percent from the nominal basis weight reported in the initial design qualification test report for paper shipping sacks.
• Revising § 173.308(d)(3) to harmonize with the International Maritime Dangerous Goods (IMDG) Code by removing the requirement for a closed transport container to have the warning mark “WARNING—MAY CONTAIN EXPLOSIVE MIXTURES WITH AIR—KEEP IGNITION SOURCES AWAY WHEN OPENING” when transporting lighters.
• Revising §§ 173.244(a)(2) and 173.314(c) to make the “interim” rail tank car specifications the “final” specifications for the transportation of PIH materials.
• Revising § 173.31 to prohibit the use of certain rail tank cars for the transportation of PIH materials after December 31, 2027.
• Allowing all waste materials to be managed in accordance with the lab pack exception and associated paragraphs in § 173.12 irrespective of whether they meet the definition of a hazardous waste per Environmental Protection Agency (EPA) regulations implementing the Resource Conservation and Recovery Act (RCRA).
• Incorporating by reference the 2017 edition of the American Society of Mechanical Engineers (ASME) Boiler and Pressure Vessel Code (BPVC) Sections II (Parts A and B), V, VIII (Division 1), and IX into § 171.7.
• Revising §§ 171.23, 173.302, and 173.304 to permit the import of filled pi-marked foreign pressure receptacles for intermediate storage, transport to point of use, discharge, and export as well as the import of certain pi-marked foreign pressure receptacles for filling, intermediate storage, and export.
• Revising § 172.101(c) to clarify that the word “stabilized” must be included as part of the proper shipping name when stabilization is required for transportation.
• Revising § 171.7(r) to update the address of the Institute of Makers of Explosives (IME) and to incorporate by reference the Association of Energy Service Companies (AESC)/IME Jet Perforating Gun (JPG) Standard, also known as the “Guide to Obtaining DOT Approval of Jet Perforating Guns using AESC/IME Perforating Gun Specifications,” Ver. 02, dated September 1, 2017.
• Incorporating by reference the January 1, 2018, edition of the American Pyrotechnics Association (APA) Standard 87-1 A, B, C, “Standard for Construction and Approval for Transportation of Fireworks, Novelties, and Theatrical Pyrotechnics,” replacing the December 1, 2001 edition into § 171.7.
PHMSA discusses the petitions and revisions in detail in Section IV (Discussion of Amendments and Applicable Comments) of the preamble to this final rule. PHMSA also, as of the effective date of this final rule, withdraws its September 28, 2017, enforcement discretion regarding the phase-out of mobile refrigeration systems.
The European Union (EU) standards, the APA standards, and the AESC/IME standards are free and accessible to the public on the internet, with access provided through the parent organization websites. The CGA and ASME references are available for interested parties to purchase in either print or electronic editions through the parent organization websites. The specific standards are discussed in greater detail in the section-by-section review (see § 171.7).
On August 14, 2019, PHMSA published a notice of proposed rulemaking (NPRM) in the
The comment period for the NPRM closed on October 15, 2019. PHMSA received a total of 49 sets of comments from 48 separate entities, 6 of which had submitted petitions that were the basis for HMR amendments proposed in the NPRM. There were no late-filed comments. An alphabetical list of the persons, companies, and associations that submitted comments to the HM-219C NPRM may be found in the below table:
The comments submitted to this docket may be accessed via the docket file numbers listed in the above table, as well as at
Following the closing of the comment period, Executive Order (E.O.) 13924, “Regulatory Relief to Support Economic Recovery,”
Based on an assessment of the 24 petitions and the comments received, PHMSA is amending the HMR as detailed in this section.
In its petition (P-1646), the Association of American Railroads (AAR) requests that PHMSA consider an amendment to § 173.31 to codify a prohibition on the use of rail tank cars with shells or heads constructed of non-normalized steel for transportation of PIH materials.
PHMSA agrees with AAR's safety rationale for its recommendation of a regulatory prohibition on the use of rail tank cars with shells or heads constructed of non-normalized steel for transportation of PIH materials. Further, PHMSA expects that a regulatory phase-out of these rail tank cars would reinforce the voluntary phase-out of legacy PIH tank cars pursuant to current industry efforts. In 2008, PHMSA considered mandating a 5-year phase-out of non-normalized steel tank cars in
PHMSA received comments from AAR, the Chemours Company (Chemours), and a joint comment from the American Chemistry Council (ACC), the Chlorine Institute (CI), and The Fertilizer Institute (TFI) in support of the proposal to amend the HMR to include a regulatory phase-out of the use of pressurized tank cars constructed from non-normalized steel for rail transportation of PIH materials. These associations represent major stakeholders impacted by this change, including the shippers who own or lease the tank cars, and may bear the cost of implementing any phase-out, and the railroads who must transport the freight under their obligations as common carriers. PHMSA's actions to align the HMR with industry's voluntary phase-out the use of non-normalized (legacy) steel tank cars in PIH service in this final rule provide both shippers and carriers with regulatory certainty on the transportation of PIH materials by rail. This regulatory certainty makes transportation cost known to industry and, more importantly, locks-in within the HMR safety benefits from the transportation of PIH materials by rail achieved by industry's voluntary efforts to phasing-out the use of tank cars with shells or heads constructed of non-normalized steel.
Therefore, in this final rule, PHMSA is revising § 173.31 to provide for a regulatory phase-out non-normalized steel rail tank cars for the transportation of PIH materials by December 31, 2020.
In its petition (P-1658), Steris requests that PHMSA revise Column (8A) of the HMT to make available the limited quantity packaging exceptions at § 173.152 for “UN2014, Hydrogen peroxide aqueous solution.” Steris notes that the United Nations (UN) Recommendations on the Transport of Dangerous Goods: Model Regulations (Model Regulations) authorize shipment of limited quantities of UN2014 (Hydrogen peroxide). Steris contends that this amendment would provide economic and logistical consistency in global transportation and facilitate commerce for domestic companies without adversely impacting safety. PHMSA received no comments on this proposed revision in the NPRM.
The HMR at subpart D of part 173 provides, among other provisions, exceptions for some classes of hazardous materials when shipped under certain limited quantity thresholds. However, while other international standards and regulations, such as the UN Model Regulations, provide for the transport of UN2014 in limited quantities (up to 60 percent concentration), UN2014 is not authorized a limited quantity exception within the HMR as currently written. PHMSA has considered the operational experience in international transportation of UN2014 pursuant to the UN Model Regulations as well as in the domestic transport of materials of the same hazard class in limited quantities as allowed by current HMR exceptions and concluded that a limited quantity exception should be extended to UN2014 as well. PHMSA is unaware of any characteristics of UN2014 (Hydrogen peroxide) making it uniquely unsuitable for limited quantity shipment when other hazardous materials assigned the same hazard class can be shipped in limited quantities. Consequently, PHMSA expects that expanding the applicability of the limited quantity exception to this material will not adversely affect safety—particularly as other HMR requirements would still apply to assure safe shipment of limited quantities of UN2014 (Hydrogen peroxide). PHMSA expects cost savings to be achieved from this amendment to the HMR, as extension of the limited quantity exceptions to apply to another material will reduce regulatory burdens on regulated entities. However, since limited quantity shipments within the United States have not been authorized for UN2014 (Hydrogen peroxide) previously, there is inadequate domestic data available to quantify the specific cost savings that would result from this change. A more detailed discussion of the economic analysis can be found in the accompanying RIA.
Therefore, in this final rule, PHMSA is revising Column (8A) of the HMT for “UN2014, Hydrogen peroxide aqueous solution” to allow limited quantity packaging for this material by referencing the exception in § 173.152.
In his petition (P-1666), William J. Briner requests that PHMSA revise § 172.302(b)(2) of the HMR consistent with section 5.3.2.0.2 of the IMDG Code to allow a minimum height of 12 mm (0.47 inches) for proper shipping name markings on portable tanks with a capacity of less than 3,785 L (1,000 gallons). The petitioner contends that the revision would provide regulatory flexibility for the size of markings on portable tanks without adversely impacting safety. PHMSA received no comments on this proposed revision in the NPRM.
As currently codified in the HMR, § 172.302(b)(2) requires markings on portable tanks with capacity less than 3,785 L (1,000 gallons) to have a width of at least 4.0 mm (0.16 inch) and a height of at least 25 mm (1 inch). Through its technical review of this petition, PHMSA determined that harmonizing the height of this marking with that in the IMDG Code (12 mm) would not cause a reduction in hazard communication and, therefore, would not have a negative effect on safety. PHMSA expects that harmonizing this requirement with international standards would provide cost savings and efficiencies in transportation; however, PHMSA is unable to quantify these potential cost savings as there is no cost data on the savings gained from using smaller markings and the number of stakeholders affected. A more detailed discussion of the economic
Therefore, in this final rule, PHMSA is revising § 172.302(b)(2) to allow a minimum height of 12 mm (0.47 inches) for proper shipping name markings on portable tanks with a capacity of less than 3,785 L (1,000 gallons).
In its petition (P-1670), the Reusable Industrial Packaging Association (RIPA) requests that PHMSA revise § 173.28(c)(1)(i) to require that labels be substantially removed, rather than completely removed, during the reconditioning of metal drums. RIPA states that a strict reading of the current HMR requirement asks for an impossible standard, as the full removal of coatings and labels (including their adhesive residues) is practically impossible. RIPA justifies this request by noting that current cleaning and surface preparation processes have been utilized for decades and, from its standpoint, have never been considered a safety issue.
In the NPRM, PHMSA responded to P-1670 by proposing to allow tightly adhering paint, mill scale, and rust to remain on no more than 10 percent of the surface area of a drum being reconditioned. While supportive of revising this section, RIPA notes in its comments to the NPRM that the proposed revision fails to achieve PHMSA's goal of allowing some coating residue to remain on steel drums provided safety is not compromised. RIPA contends it is technically impossible to meet a requirement that entails the removal of 90 percent of “tightly adhering paint . . .” from the entire surface area of every steel drum and contends that the limit of 10 percent surface area for exterior coatings is arbitrary and will be difficult to enforce. Lastly, RIPA notes that mill scale does not appear on metal used to manufacture or recondition steel drums and should be removed from the proposed revisions to § 173.28(c)(1)(i). Therefore, in its comments to the NPRM, RIPA suggests that § 173.28(c)(1)(i) be revised to read, “Cleaning to base material of construction, with all former contents, internal and external corrosion removed, and any external coatings and labels sufficiently removed to expose any metal deterioration which adversely affects transportation safety.” RIPA contends this will establish a workable safety standard based upon adequate removal of surface coating materials to expose evidence of metal deterioration. PHMSA received no other comments on this proposed change to the HMR.
After further consideration, PHMSA agrees that identifying a specific numeric threshold for sufficient removal of coatings and labels to expose deterioration is impracticable and expects that the language RIPA suggests in its comments to the NPRM will appropriately address the issue by ensuring external coatings and labels are sufficiently removed to expose metal deterioration that could adversely impact transportation safety. Furthermore, PHMSA expects cost savings to be achieved through this amendment, as it provides for a partial relaxation of the requirements in the HMR; however, PHMSA is unable to quantify these potential cost savings because it does not have data on the cost differences between “removed” and “substantially removed” or the number of persons affected. A more detailed discussion of the economic analysis can be found in the accompanying RIA.
Therefore, in this final rule, PHMSA is revising § 173.28(c)(1)(i) to read, “Cleaning to base material of construction, with all former contents, internal and external corrosion removed, and any external coatings and labels sufficiently removed to expose any metal deterioration that adversely affects transportation safety.”
In its petition (P-1676), URS Corporation requests that PHMSA revise Column (8A) of the HMT to extend exceptions allowing for shipment of limited quantities of 45 additional hazardous materials. URS Corporation noted that the absence from the HMR of limited quantity exceptions for those materials is inconsistent with provisions under various international standards authorizing limited quantity shipment of the same materials. URS Corporation contends that this inconsistency between domestic and international standards regarding the limited quantity exception for these 45 proper shipping names causes confusion regarding the pertinent regulatory requirements with importing hazardous materials shipments into the United States that had been prepared as limited quantity shipments under international regulations.
As noted in the NPRM, PHMSA conducted a technical review of the petition and identified a total of 114 entries in the HMT—including the 45 listed in URS Corporation's petition—that are not in alignment with the UN Model Regulations permitting limited quantity shipment of hazardous materials. In addition, PHMSA determined that HMR treatment of 64 of those 114 entries also diverged from the International Civil Aviation Organization Technical Instructions for the Safe Transport of Dangerous Goods (ICAO Technical Instructions) permitting limited quantity shipment of hazardous materials. Further, in reviewing the HMR, PHMSA determined that these hazardous materials currently without limited quantity exceptions are of the same hazard classes as materials for which the HMR already contains an exception allowing limited quantity shipment.
PHMSA expects that expanding the applicability of the limited quantity exception to these additional materials would not adversely affect safety. PHMSA is unaware of any characteristics of the hazardous materials at issue that makes them uniquely unsuitable for limited quantity shipment when the HMR authorizes other hazardous materials assigned the same hazard class to be shipped in limited quantities. Consequently, PHMSA expects that expanding the applicability of the limited quantity exception to other materials that are within the same hazard class will not adversely affect safety—particularly as other HMR requirements would still apply to assure safe shipment of limited quantities of those materials. By way of example, limited quantities of these hazardous materials will still need to display a conspicuous marking indicating they are limited quantity shipments pursuant to § 172.315, and will still need to be packaged in accordance with other requirements in 49 CFR part 173. The operational experience of safe transportation of limited quantities of these materials pursuant to UN Model Regulations provides additional evidence that extension of the HMR's limited quantity exceptions to those materials will not adversely affect safety. Furthermore, PHMSA expects cost savings to be achieved through this amendment, as it provides exceptions to the requirements in the HMR that impose compliance burdens on regulated entities; however, due to a lack of domestic data on these types of shipments, PHMSA is unable to quantify the specific cost savings that would result from this change. A more detailed discussion of the economic analysis can be found in the accompanying RIA.
The Council on Safe Transportation of Hazardous Articles (COSTHA) and International Vessel Operators Dangerous Goods Association (IVODGA) submitted comments to the NPRM in support of this proposed revision, while also noting that PHMSA overlooked one listing in the HMT for harmonization. The commenters explain that the HMT
Therefore, in this final rule, PHMSA is revising Column (8A) (exceptions) of the HMT consistent with the UN Model Regulations to allow an additional 114 hazardous materials entries to be shipped as limited quantities under the HMR. The complete list of hazardous materials affected by this provision is in the amendments to the HMT at the end of this final rule.
In its petition (P-1677), the International Institute of Ammonia Refrigeration (IIAR) requests that PHMSA revise § 173.5b to allow the continued use of mobile refrigeration units (which are commonly used by the U.S. produce industry) that were placed into service prior to 1991, provided they are tested to a service pressure of 250 psig. PHMSA received no comments on this proposed revision in the NPRM.
As currently written, § 173.5b(b)(6) of the HMR requires that mobile refrigeration systems placed into service prior to June 1, 1991 be phased-out by October 1, 2017; however, PHMSA issued an enforcement discretion memorandum
As described in the RIA, although PHMSA describes the nature of cost savings associated with adoption of this petition, PHMSA was unable to estimate the cost savings with sufficient accuracy to quantify them due to data uncertainties. Therefore, in this final rule, PHMSA is revising § 173.5b to allow the continued use of certain portable and mobile refrigerator systems that meet the 250 psig service pressure specification by removing the prohibition on use of refrigeration systems placed into service before June 1, 1991. Further, PHMSA, as of the effective date of this final rule, withdraws its September 28, 2017, enforcement discretion regarding the phase-out of mobile refrigeration systems because it will no longer be necessary.
PHMSA received multiple petitions to update CGA standards currently incorporated by reference in § 171.7 of the HMR. These petitions include:
• Petition P-1679. CGA requests that PHMSA incorporate by reference CGA C-6.3, “Standard for Visual Inspection of Low Pressure Aluminum Alloy Cylinders, 2013, Third Edition”
• Petition P-1680. CGA requests that PHMSA incorporate by reference CGA S-7, “Method for Selecting Pressure Relief Devices for Compressed Gas Mixtures in Cylinders, 2013, Fifth Edition” into § 171.7 to replace the outdated reference to the Fourth Edition of this standard published in 2005. This industry standard governs methods for selecting pressure relief devices (PRDs) for compressed gas mixtures packaged in cylinders having water capacities of 1000 lb (454 kg) or less. Notable changes from the previous edition of this document includes revising reference temperatures, changing the characterization of this document from a “publication” to a “standard,” and expanding its scope to address PRDs for five additional gases.
• Petitions P-1684 and P-1693. In two separate petitions, Worthington Cylinders and CGA request that PHMSA incorporate by reference CGA C-11, “Practices for Inspection of Compressed Gas Cylinders at Time of Manufacture, 2013, Fifth Edition” into § 171.7 to replace the outdated reference to the Third Edition of this standard published in 2001. These petitions also request revisions to § 178.35(b) and (c) to refer to CGA C-11. This updated publication outlines best practices for inspection of cylinders consistent with industry practice and clarifies the parameters of inspector actions when inspecting compressed gas cylinders.
• Petition P-1694. CGA requests that PHMSA incorporate by reference CGA C-6.1-2013, “Standards for Visual Inspection of High Pressure Aluminum Compressed Gas Cylinders” into § 171.7 to replace the outdated reference to the Fourth Edition of this standard published in 2002. This standard was developed for the visual inspection of aluminum alloy compressed gas cylinders with service pressures of 1800 psi (12410 kPa) or greater. Notable changes from the previous edition of this publication include new guidelines for the use of ultrasonic inspection (UE), and incorporation by reference of another CGA publication (CGA Safety Bulletin 22 Aluminum Cylinders—Guidelines for Heat Exposure) for use with aluminum cylinders.
PHMSA evaluated the recommended CGA standards as part of its technical review of these petitions. In each instance, PHMSA compared the two editions—the edition currently incorporated by reference in the HMR and the update edition proposed to be incorporated by the petitioner—for any changes or substantial revisions. PHMSA found only non-substantial revisions during that review and determined that they would not result in a reduction in safety. Moreover, insofar as the revisions in the updated CGA standards reflect lessons learned from operational experience and best practices developed since the earlier standards were placed in effect, incorporation of those updated standards could promote safety. There were no quantifiable cost savings identified, as these revisions to the CGA standards incorporated by reference are primarily technical in nature and are not expected to have a material effect on the cost of business. A more detailed discussion of the economic analysis can be found in the accompanying RIA.
PHMSA received comments from CGA, COSTHA, and Gentry Investigative Service (GIS) in support of this proposal. However, in its comment, GIS notes that there are newer editions of the CGA publications and suggests that these editions should be incorporated as part of this final rule. Although PHMSA acknowledges that newer editions have been recently developed, PHMSA declines to incorporate by reference in this rulemaking newer editions of CGA documents. PHMSA has yet to evaluate those more recent editions, which were not proposed in the HM-219C NPRM. PHMSA, however, encourages industry to petition PHMSA to include any newer edition of incorporated-by-reference publications as desired and supported by technical analysis within those petitions.
Therefore, in this final rule, PHMSA is updating CGA standards incorporated by reference in § 171.7 of the HMR as proposed in the NPRM.
In its petition (P-1681), IME requests that PHMSA remove special provision 103 from § 172.102 and from Column (7) of the HMT for the following entries: “UN0361, Detonator assemblies, non-electric, for blasting”; “UN0365, Detonators for ammunition”; “UN0255, Detonators, electric, for blasting”; and “UN0267, Detonators, non-electric, for blasting.” IME explains that this change would harmonize the HMR with the UN Model Regulations, and would enhance continuity when transporting these materials domestically and internationally. PHMSA proposed these changes in the NPRM and PHMSA received comments in support from IME, Owen Compliance Services, and COSTHA.
Special provision 103 restricts classification of detonators as Division 1.4B if they are shipped in packages containing more than 25 grams of net explosive mass that could be involved in a limited propagation explosion. However, the UN Model Regulations contain no quantified mass restriction for the same materials: rather, they require only that detonators must pass the tests prescribed by the UN Manual of Tests and Criteria (MTC)—in this case, the UN Test Series 6 requirements—to be classified as Division 1.4B. The UN MTC contains the criteria, test methods, and procedures used for the classification of dangerous goods (
PHMSA agrees that the removal of special provision 103 would harmonize with the international regulations and would have no negative impact on safety. Special provision 103 is outdated, as the HMR has since aligned its classification methodologies with the UN performance-based classification method to improve harmonization with the internationally-accepted system for the classification of explosives. Finally, the operational experience of safe transportation of these materials pursuant to UN Model Regulations provides further evidence that the amendments to the HMR as proposed will not adversely affect safety—particularly as other HMR requirements would still apply to assure safe shipment. However, since special provision 103 is no longer widely used, PHMSA does not expect there would be any quantifiable cost savings. A more detailed discussion of the economic analysis can be found in the accompanying RIA.
Therefore, in this final rule, PHMSA is removing the references to special provision 103 from four entries in Column (7) (Special provisions) of the HMT, and removing special provision 103 from § 172.102 altogether.
In its petition (P-1683), the Ford Motor Company requests that PHMSA remove the word “None” from Column (8A) of the HMT for the proper shipping name “UN0503, Safety Devices, pyrotechnic” and replace it with “166,” which would allow for the packaging exceptions currently authorized for other safety devices in § 173.166.
PHMSA proposed this revision in the HM-219C NPRM. PHMSA separately published a notice of request for information (RFI) in the
In its petition (P-1685), Polar Service Systems requests that PHMSA revise § 180.417(a)(3) to remove the words “manufactured before September 1, 1995,” thereby allowing an alternative report in lieu of obtaining the manufacturers certificate of compliance for cargo tanks manufactured after September 1, 1995. The petitioner notes that there is no provision to allow for the use of alternative reports when a certificate of compliance is unavailable for cargo tanks manufactured after September 1, 1995,
PHMSA's technical review of the petition determined there are challenges in maintaining the required documentation for cargo tanks and cargo tank motor vehicles when cargo tank manufacturers are no longer in business. This is true irrespective of the timeframe set forth in § 180.417. Further, PHMSA does not expect there would be a reduction in safety in allowing alternative reports for cargo tanks manufactured after September 1, 1995, because the testing and recordkeeping requirements that PHMSA would demand in those alternative reports provide much of the same information that would be in a manufacturer's certificate. Further, PHMSA's experience administering the alternative reporting requirement under existing HMR provisions demonstrates that extension of this compliance flexibility to additional cargo tanks would not adversely affect safety. Similarly, this amendment is not expected to result in any material cost to industry; rather, cargo tanks manufactured after September 1, 1995, with useful life remaining would not be forced out of service, thereby saving regulated entities the cost of replacement. A more detailed
Therefore, in this final rule, PHMSA is revising the language in § 180.417(a)(3) to allow for alternative reports when a manufacturer's certificate is not available regardless of the date of manufacture of the cargo tank.
In its petition (P-1688), the Paper Shipping Sack Manufacturers Association requests that PHMSA amend § 178.521 to revise the basis weight tolerances for liners and mediums used in the manufacture of multi-wall shipping sacks from ±5 percent to ±10 percent from the nominal basis weight reported to PHMSA in the initial design qualification test. The petitioner explains that multi-wall sacks are manufactured on the same or technically equivalent machines that manufacture the liners for fiberboard boxes and further notes that PHMSA revised the basis weight tolerances from ±5 percent to ±10 percent for fiberboard boxes in the HM-219A final rule.
PHMSA notes that the petitioner is correct in that the paper used to manufacture multi-wall shipping sacks is made on the same or similar machines as those used to make fiberboard boxes. Given the technical data presented in the petition, which included linerboard drop and dynamic compression tests, PHMSA concluded that a small reduction (or a nearly infinite increase) in basis weight of the paper used in manufacturing fiberboard boxes would not affect the safety of the packaging, and PHMSA expects that multi-wall shipping sacks—made of similar materials and manufactured on the same or technically equivalent machines—will behave similarly such that there will be no adverse impact to safety. Furthermore, PHMSA estimates the total potential annualized cost savings to the industry of between $20,000 and $200,000. A more detailed discussion of the economic analysis can be found in the accompanying RIA.
PHMSA received one comment from David Carlson in support of this proposal. However, in addition to his support, Mr. Carlson requested that PHMSA extend a similar provision to 11G packagings in this final rule. PHMSA notes that 11G packagings were not discussed in the NPRM, and while there may be merits to this proposed revision, PHMSA has not conducted a technical analysis of that proposal and is not adopting it at this time. PHMSA would like to allow further stakeholder engagement and opportunity to comment on any proposed changes before making this specific determination. The commenter is encouraged to petition PHMSA with supporting data to include 11G packagings in a future rulemaking.
Therefore, based on its technical analysis showing no negative impact on safety, PHMSA is amending § 178.521 to revise the nominal basis weight reported in the initial design qualification test report from ±5 percent to ±10 percent.
In its petition (P-1690), Matson requests that PHMSA amend § 173.308(d)(3) to remove the requirement for a warning to be placed on the access door of a closed transport vehicle or a closed freight container when lighters are transported by vessel. Matson explains that the IMDG Code does not require a similar warning, thereby noting inconsistencies between the HMR and the international requirements that could cause confusion regarding the pertinent requirements governing international shipments. PHMSA received one comment from IVODGA in support of this proposal. The petitioner is correct in that the current HMR requirement is inconsistent with the IMDG Code. The IMDG Code does not require this additional marking and has not experienced an appreciable adverse safety impact. PHMSA is, further, unaware of a compelling safety justification for requiring the marking—particularly as other HMR hazard communication requirements (such as transport documents and container placards) would remain operative even if the amendment is adopted. In addition, the amendment would improve the internal consistency of the HMR, which does not impose the same restriction on other packages containing a Division 2.1 flammable gas as it does packages composed of lighters containing Division 2.1 flammable gasses. Furthermore, while PHMSA was unable to quantify any specific cost savings associated with this amendment, no costs are anticipated. A more detailed discussion of the economic analysis can be found in the accompanying RIA.
Therefore, based on its technical analysis, PHMSA is amending § 173.308(d)(3) to remove the requirement for vessel transport of a closed transport vehicle or freight container to display the warning mark “WARNING—MAY CONTAIN EXPLOSIVE MIXTURES WITH AIR—KEEP IGNITION SOURCES AWAY WHEN OPENING” on the access door.
In a joint petition (P-1691), AAR, CI, ACC, TFI, and the Railway Supply Institute (RSI) request that PHMSA revise §§ 173.314(c) and 173.244(a)(2) of the HMR to convert “interim” rail tank car specifications to “final” tank car specifications. The interim tank car specifications were issued as part of the HM-246 final rule titled, “Hazardous Materials: Improving the Safety of Railroad Tank Car Transportation of Hazardous Materials”
The HM-246 final rule prescribed enhanced safety measures for PIH materials transported in rail tank cars. These safety measures include stronger tanks made from normalized steel and capable of withstanding higher tank test pressures, fittings, tank head-puncture resistance protection, and thermal protection for some commodities. The HM-246 final rule was the result of industry consensus that an updated regulatory standard was necessary to improve accident survivability, even as research continued to develop a long-term PIH tank car specification. Following publication of the HM-246 final rule and adoption of the interim specifications, the Advanced Tank Car Collaborative Research Program (ATCCRP)
• The interim specifications provide significant improvement in accident
• No design feature or material was identified that would provide a significantly greater level of improvement, or would be a reasonable alternative (from an economic or manufacturability standpoint) that should be required industry-wide.
PHMSA received comments to the HM-219C NPRM from AAR, The Dow Chemical Company, Chemours, and a joint comment from ACC, CI, and TFI in support of this proposal. These commenters noted that by re-designating the HM-246 specifications as permanent, PHMSA will provide regulatory certainty to the stakeholder community that an “interim” standard cannot. In its comment, AAR recommended that PHMSA coordinate with Transport Canada (TC) to assign a unique designator when translating the interim tank car specifications into permanent tank car specifications. PHMSA agrees with AAR and collaborated with TC during the final rule drafting stage to assign a unique designator to denote those permanent tank car specifications. This unique identifier will help ensure that tank cars used to transport PIH materials built to the permanent specifications can more easily move between the United States and Canada without encountering delays.
PHMSA's technical review of this petition determined that the HM-246 compliant rail tank cars have an established safety record with no major incidents attributed to the tank car design. As explained by ATCCRP and discussed at greater length in Section IV.14. (Phase-out of Non-HM-246 Compliant Rail Tank Cars), the HM-246 interim specifications represent a substantial safety improvement over legacy tank cars in PIH service. This amendment is not expected to result in any new material costs to industry. Any costs associated with phasing out legacy tank cars result from the decision by AAR to utilize interchange agreements to mandate retirement of these cars from PIH service by the date (December 31, 2027) specified in CPC-1336; this final rule would align the HMR with those industry efforts. A more detailed discussion of this economic analysis can be found in the accompanying RIA.
Therefore, in this final rule, PHMSA is amending §§ 173.314(c) and 173.244(a)(2) of the HMR to make the HM-246 rail tank car specifications permanent for the transportation of PIH materials and is assigning the unique identifier of “DOT-105H600W” for HM-246 tank cars transporting PIH materials by rail.
In its petition (P-1692), AAR requests that PHMSA amend § 173.31 to adopt a 6-year phase-out for PIH rail tank cars that do not meet the interim HM-246 specifications as implemented in the HM-246 final rule published on January 13, 2009. Specifically, AAR argues that collaborative research undertaken by industry and government partners (through ATCCRP) has confirmed that HM-246 specification cars have the highest accident survivability rate over other designs and are the most feasible available technology to transport PIH materials.
In 2006, after several major PIH rail tank car accidents, AAR began to release a series of CPCs that mandated the use of a safer design for tank cars that transport PIH materials. On March 31, 2008, AAR published CPC-1187, which implemented design specifications for tank cars used in PIH service and included a 10-year phase-out schedule for tank cars that did not meet the CPC-1187 specifications. According to CPC-1187, non-compliant tank cars would not be accepted for interchange after December 31, 2018. PHMSA published an NPRM
In the HM-246 NPRM, PHMSA considered adopting a phase-out of tank cars that did not meet the proposed interim specifications. However, PHMSA did not codify a phase-out timeline in the final rule, stating “[a]lthough PHMSA continues to expect that an accelerated phase-out of these cars is justified, PHMSA recognizes the voluntary efforts already underway by many fleet owners to phase out these cars, in many cases on schedules more aggressive than the five-year deadline proposed in the NPRM.”
As discussed in the previous sub-section (“Finalization of the HM-246 Tank Car Standard”), research conducted under the ATCCRP has since demonstrated that the HM-246 interim tank car specifications provide significant improvements in survivability and there is no reason to expect a different design would provide a significantly greater level of improvement. However, despite initial indications in 2009 that voluntary efforts would result in an accelerated phase-out of those tank cars in PIH service that failed to comply with the HM-246 interim specifications, the industry had not adopted a voluntary phase-out schedule as of December 2016 that would eliminate such tank cars from PIH service.
On December 16, 2016, AAR submitted its petition (P-1692) requesting that PHMSA adopt a 6-year phase-out for PIH rail tank cars that do not meet the interim specifications as implemented in the HM-246 final rule published on January 13, 2009. AAR argued that collaborative research undertaken by industry and government partners (through ATCCRP) over the last 7 years had confirmed that HM-246 specification cars have the highest accident survivability rate over other designs and are the most feasible technology to transport PIH materials.
Before PHMSA completed its review of P-1692, AAR adopted CPC-1325 in April 2017, which implemented a mandatory phase-out by July 1, 2023, of any tank car in PIH service that does not comply with the HM-246 interim specifications. Prior to AAR's adoption of CPC-1325, TFI commented to the P-1692 docket
Similar comments were relayed to PHMSA by a group of shipper associations during a January 13, 2017 meeting.
On July 27, 2018, AAR revised CPC-1325 and re-issued it as CPC-1336, extending the phase-out schedule for non-HM-246 compliant tank cars from 6 years (July 1, 2023) to 10 years (December 31, 2027). On August 15, 2018, the railroads (represented by AAR) and a group of leading PIH material shippers (represented by ACC, CI, and TFI) submitted a joint comment to P-1692 proposing a phase-out date of December 31, 2027, for all non-HM-246 specification rail tank cars. The December 31, 2027, phase-out date is in lieu of the 6-year timeline requested in AAR's original petition. The joint commenters met with PHMSA on September 6, 2018, and urged PHMSA to act quickly in completing a rulemaking that would adopt the petition's proposed 10-year phase-out timeline.
PHMSA expects the phase-out of legacy rail tank cars for PIH service will have a positive impact on safety because they would be replaced with more robust tank cars for use in the transportation of PIH materials and because regulatory certainty could foster market certainty. In the NPRM, PHMSA proposed a phase-out deadline of December 31, 2027; however, the phase-out will go into effect under mandatory railroad interchange rules regardless of whether PHMSA adopts this date into regulation. As a result, there is no cost associated with PHMSA promulgating this date as a regulatory deadline for the phase-out. A more detailed discussion of the economic analysis can be found in the accompanying RIA.
As such, PHMSA is codifying the phase-out of all non-HM-246 rail tank cars for use in the transportation of PIH materials. PHMSA's actions in this final rule provide both shippers and carriers with regulatory certainty on the transportation of PIH materials by rail. This regulatory certainty makes transportation cost predictable to industry and—more importantly—locks-in safety benefits associated with industry's movement to phase-out non-HM-246 tank cars in the transportation of PIH materials by rail.
Therefore, PHMSA is revising § 173.31 to phase-out all non-HM-246 rail tank cars for the transportation of PIH materials by December 31, 2027, to align with the agreed upon phase-out dates between AAR and leading PIH material shippers.
In its petition (P-1695), Veolia requests that PHMSA amend § 171.8 by adding a definition of “waste material” to allow for all waste material to be managed in accordance with the lab packs exception and associated paragraphs in § 173.12, regardless of whether it meets the definition of a “hazardous waste” in EPA regulations implementing RCRA at 40 CFR 261.3. The “lab pack exception” for waste under § 173.12(b) provides for exceptions from some HMR packaging requirements (such as those pertaining to chemical constituent marking and specification packaging requirements for combination packages) to facilitate transportation for disposal of certain waste materials when shipped in packages satisfying packaging requirements identified in that section. The petitioner notes that PHMSA has stated in a letter of interpretation (16-0099)
PHMSA's technical review of the petition supports the petitioner's interpretation. Neither the regulatory text nor the preamble of the December 21, 1990 final rule codifying § 173.12(b) indicate the lab pack exception is limited to “hazardous wastes” as that term is defined under the EPA's RCRA regulations.
Therefore, in this final rule, PHMSA is adding a definition of “waste material” to allow for all waste material to be managed in accordance with the lab packs exception and associated paragraphs in § 173.12.
In its petition (P-1700), Trinity Containers requests that PHMSA incorporate by reference the 2017 edition of the ASME BPVC Sections II (Parts A and B), V, VIII (Division 1), and IX into § 171.7(g)(1) of the HMR. The ASME BPVC is a consensus industry standard for the design and construction of boilers and pressure vessels. Significant revisions to the relevant portions of the ASME BPVC introduced in the 2017 edition include the following:
• ASME BPVC Section II, Part A: Incorporation of 25 new American Society for Testing and Materials (ASTM) and 7 new international specifications authorized in connection within ferrous material within ASME-compliant boilers and pressure vessels;
• ASME BPVC Section II, Part B: Incorporation of 10 new ASTM specifications authorized for use in connection with non-ferrous material within ASME-compliant boilers and pressure vessels;
• ASME BPVC Section V: Incorporation of 19 new ASTM specifications providing for ASME-compliant methodologies in conducting non-destructive examination of boilers
• ASME BPVC Section VIII, Division 1: Revision of existing specifications for the construction of pressure vessels to expand coverage of openings and quick-action/actuation closures, clarify guidelines on performance of manual and automated ultrasonic testing, and provide new procedural pathways for manufacturers to obtain ASME certifications; and
• ASME BPVC Section IX: Revision of existing specifications for welding, brazing and fusing qualifications to expand acceptable testing methods and clarify welder personnel qualification requirements.
The petitioner contends that without regulatory amendment, ASME certificate holders would be obliged to comply with obsolete industry standards for manufacturing cargo tanks, non-specification tanks, and implements of husbandry to the ASME BPVC referenced in § 171.7(g)(1).
PHMSA received comments on this proposal from Global Transport Tank Consultants (GTTC), GIS, and NJP Engineering. GTTC requests that PHMSA clarify which sections are being updated and whether the updated ASME BPVC Section VIII, Division 1 “Design Margin” would be applicable to any of the cargo tank packaging “designed” to the requirements of ASME BVCP Section VIII, Division 1. In addition, GTTC asks if it was PHMSA's intention to require the repair of ASME “marked” packaging to meet the requirements of the 1992 edition of the National Board Inspection Code (NBIC) currently incorporated by reference in to HMR. GTTC and GIS request that PHMSA incorporate the 2019 editions of the ASME BPVC and the NBIC since they are currently available.
NJP Engineering supports the HMR amendments proposed in the NPRM but requests correction of an alleged oversight by PHMSA in incorporating the 2015 edition of the ASME BPVC.
In this final rule, PHMSA is incorporating by reference the 2017 editions of the ASME BPVC Section II, Part A (Ferrous Materials Specifications); Section II, Part B (Nonferrous Material Specifications); Section V (Nondestructive Examination); Section VIII, Division 1 (Rules for Construction of Pressure Vessels Division); and Section IX (Welding, Brazing, and Fusing Qualifications). PHMSA's technical review of P-1700 determined that the HMR's incorporation by reference of the obsolete 2015 edition of the ASME BPVC could induce confusion among stakeholders about the controlling edition of the ASME BPVC. PHMSA agrees with the petitioner that adopting the updated edition would help ensure that the HMR remains consistent with the best practices used by the industry.
The design margin(s) in the HMR for DOT specification cargo tanks remain as currently authorized;
In its petition (P-1701), CGA requests that PHMSA modify §§ 171.23, 173.302, and 173.304 to permit the transportation of filled pi-marked foreign pressure receptacles in compliance with applicable requirements of the European Agreement Concerning the International Carriage of Dangerous Goods by Road (ADR) and EU Directive 2010/35/EU of the European Parliament and of the Council. The HMR currently allows pi-marked cylinders (which are filled and shipped within the EU and marked with a pi (π) symbol to denote compliance with the ADR and EU Directive 2010/35/EU) to be imported through use of special permits. The petitioner requests revisions to the HMR authorizing without the need for a special permit, the (1) import, intermediate storage, transport to point of use, discharge, and export, as well as (2) import of empty pi-marked foreign pressure receptacles for filling, intermediate storage, and export. Entegris provided comments to the P-1701 docket
PHMSA's technical review did not find evidence to suggest there would be any adverse safety impacts resulting from those HMR amendments. The shipping of pi-marked cylinders within the United States has been allowed for many years through special permits—with at least 3,000 shipments occurring since the special permits were first issued; there is also extensive operational experience in the safe international shipment of pi-marked cylinders. Although there is limited market data on the current export of pi-marked cylinders pursuant to special permit, PHMSA expects that adopting
PHMSA received comments from CGA and Chemours in support of this proposal. COSTHA notes that the 2017 edition of the ADR is being referenced in § 171.7 of the NPRM. COSTHA also notes that as of September 2019, the most current edition of the ADR is the 2019 edition that became effective July 1, 2019. PHMSA will consider updating this reference in a future rulemaking, as it has yet to conduct a technical evaluation of the 2019 edition of the ADR.
In this final rule, PHMSA is modifying §§ 171.23, 173.302, and 173.304 to permit the import of filled pi-marked foreign pressure receptacles for storage incidental to movement, transport to point of use, discharge, and export. PHMSA is also permitting the transportation of pi-marked foreign pressure receptacles for export, including filling and storage incidental to movement. In addition, PHMSA is revising §§ 171.23(a) and 173.302(a)(2) to ensure that the authorization for pi-marked cylinders is applicable to adsorbed gas packages. Finally, to align with similar ADR provisions and increase shipper and carrier awareness of the requirements for pi-marked cylinders, PHMSA is requiring a notation on the shipping paper following the basic description of the hazardous material to certify compliance with the pi-marked cylinder requirements. PHMSA is updating § 171.7 to include the ADR and EU Directive 2010/35/EU of the European Parliament and of the Council into the HMR.
In its petition (P-1706), Evonik requests that PHMSA revise how the word “stabilized” should appear when providing the shipping name for a hazardous material to maintain consistency with the IMDG Code. The HMR does not allow the word “stabilized” to appear as part of the proper shipping name, whereas the IMDG Code requires it, when stabilization is required prior to transportation. The petitioner claims that this causes needless discrepancies with the IMDG Code in connection with international shipments. PHMSA received comments from the Dow Chemical Company, Dangerous Goods Advisory Council (DGAC), and IVODGA supporting this proposal.
PHMSA's technical review confirmed inconsistency between the HMR and the IMDG Code and revealed that hazardous materials that have some instability but that are not specifically identified or classified as self-reactive substances or organic peroxides cannot be shipped in compliance with both the IMDG Code and the HMR as currently written. In addition, PHMSA determined that requiring the use of the word “stabilized” when stabilization is required by § 173.21(f) would not result in any reduction in safety, but would instead increase safety by indicating that a material has been stabilized in preparing it for transportation. Although this amendment may incur costs for manufacturers and shippers related to training and compliance, costs are expected to be negligible because affected entities that engage in international commerce are already aware of the requirement under the IMDG Code. A more detailed discussion of the economic analysis can be found in the accompanying RIA.
Therefore, in this final rule, PHMSA is revising § 172.101(c) to clarify that the word “stabilized” must be included as part of the proper shipping name when the HMR requires stabilization before transportation.
In its petition (P-1710), IME requests that PHMSA update § 171.7(r) to update IME's corporate address and incorporate by reference the AESC/IME JPG Standard, also called the “Guide to Obtaining DOT Approval of Jet Perforating Guns using AESC/IME Perforating Gun Specifications,” Version 02, dated September 1, 2017. IME also proposes that PHMSA include a new § 173.67 codifying PHMSA's current practice excepting JPGs conforming to the AESC/IME JPG Standard from the exhaustive testing generally required pursuant to § 173.56 to receive an EX number authorizing transportation of a new explosive.
JPGs use shaped explosive charges to produce a high-pressure jet penetrating the liner or casing of a wellbore to enhance production of oil and gas wells. The petitioners note that the initial version of the AESC/IME JPG Standard has been used by PHMSA since 2008. Entities seeking PHMSA's assignment of an EX number for a JPG product submit applications demonstrating conformity with one of 13 standard design templates within the AESC/IME JPG Standard, thereby avoiding having to submit their product for explosive laboratory testing normally required under § 173.56. IME submits that the HMR amendments identified in its petition would codify existing PHMSA practices for review of JPG products under § 173.56. PHMSA received no adverse comments on the petition or the proposals in the NPRM.
PHMSA expects that adoption of the petition as proposed in the NPRM will not have an adverse effect on safety. PHMSA has relied on AESC/IME's JPG Standard to expedite its review of applications since 2008; PHMSA is unaware any significant operational or testing experience indicating that historical practice is unsafe. Further, the most recent version of the AESC/IME JPG Standard is potentially more conservative than the current standard, as it would narrow the universe of JPG product designs (from 13 to 8) eligible for expedited review to only those 1.1D products without a detonator. Furthermore, the economic analysis suggests potential annualized cost savings of approximately $360,000 for manufacturers of JPGs that would avail themselves of the newly-codified regulations incorporating the updated AESC/IME JPG Standard to avoid the need for explosives laboratory testing. Additional cost savings are expected for both manufacturers and PHMSA due to reduced labor requirements for processing applications for EX approvals. A more detailed discussion of the economic analysis can be found in the accompanying RIA.
Therefore, in this final rule, PHMSA is updating IME's address in § 171.7(r), incorporating the updated AESC/IME JPG Standard into a new § 171.7(r)(3) of the HMR, and adding a new § 173.67 codifying existing practice allowing AESC/IME JPG Standard-compliant products access to expedited PHMSA review under § 173.56.
In its petition (P-1711), the APA requests that PHMSA incorporate by reference the 2018 edition of APA Standard 87-1, “Standard for Construction and Approval for Transportation of Fireworks, Novelties,
• Re-organizing Standard 87-1 into three parts: APA Standard 87-1A (consumer fireworks), APA Standard 87-1B (display fireworks), and APA Standard 87-1C (entertainment and technical industry fireworks, otherwise referred to as articles pyrotechnics).
• Updating the product descriptions throughout each of those parts to accommodate new types and configurations popularized since the 2001 edition of APA Standard 87-1.
The petitioner contends that because the classification system in the 2001 edition of APA Standard 87-1 does not reflect new product types and configurations (
PHMSA received numerous comments to the NPRM regarding this petition, and to address each issue, PHMSA broke them out into the following sub-sections for detailed discussion.
PHMSA received comments in support of this proposal from Charles Ward; Huang Johnson; Western Enterprises Inc.; ResPyro (Steve Comen); StageFX (Lyle Salmi); Galaxy Fireworks, Inc.; ResPyro (Kent Orwoll); NextFX; Fireworks Over America; Dennis Slicer; Santore and Sons; Pyrotechnics Guild International (Paul Smith); Garrett's Fireworks; ICON Pyrotechnics Internationals; American Fireworks Standards Laboratory (AFSL); Inter-Oriental Fireworks LTD; APA; APA Rebuttal to National Fireworks Association (NFA); and Matthew Jones. These commenters generally supported incorporating the updated APA Standard 87-1, noting that it will add numerous new devices, expand the permitted chemical list, and is directed toward hazard classification for transportation. The commenters add that the updated APA Standard 87-1 provides defined criteria that will relieve the burden of submitting new fireworks designs to a third-party test lab for classification and will reduce the regulatory burden on industry, including manufacturers and small business importers, who often have to spend their time helping their foreign manufacturers obtain EX approvals.
PHMSA received comments opposing incorporation of APA Standard 87-1A from Yienger Fireworks, NFA, and Crazy Debbie's Fireworks. NFA and Crazy Debbie's Fireworks explain that while many of the proposed revisions to APA Standards 87-1A, B, and C would clarify the requirements applicable to fireworks devices, there are certain revisions in APA Standard 87-1A that will not reduce regulatory burdens and do not relate to improving transportation safety. These commenters further contend that APA Standard 87-1A would conflict with the regulatory regime of the Consumer Product Safety Commission (CPSC) governing the safety of fireworks from a consumer-use standpoint.
Instead, PHMSA's incorporation of APA Standard 87-1 pertains to its distinguishable jurisdictional responsibility over regulation of packaging and transportation of fireworks and other hazardous materials. PHMSA-imposed restrictions on packaging and shipment of hazardous materials for transportation that give rise to incidental effects on the way those materials are marketed to consumers are, therefore, not duplicative or conflicting regulations. In addition, PHMSA notes that the APA 87-1 standards were developed with the resources of the APA, which welcomed broad input and participation from the fireworks industry. APA allowed organizations, including the NFA, to participate in that process as an organization.
PHMSA received several comments on section 2.4 of APA Standard 87-1A, which outlines the general requirements that must be met for construction and design of consumer firework devices and novelties. Jake's Fireworks, NFA, Crazy Debbie's Fireworks, Ultratec Special Effects and the APA provided comments specifically on the break/burst charge limits outlined in this section of APA Standard 87-1A:
• Jake's Fireworks contends that APA Standard 87-1A's limitation on metals in the composition of a break/burst charges was rejected by the CPSC commissioners, alleging that in doing so, the CPSC rejected metal composition as a factor in the safety of break/burst charges.
• Ultratec Special Effects states that some of the weight limit increases for devices per tube in APA Standard 87-1A will allow for a break/burst charge of 42.5 grams, which is more than enough to produce a salute device. It also claims that if these devices were subject to UN Series 6 testing, they would likely be classified as 1.3G or 1.1G devices, further adding that reports and airburst reports should always be subject to UN Series 6 testing since these devices are highly energetic and should be scrutinized for proper construction and packing techniques to ensure safe transportation. Ultratec Special Effects adds that many of these devices are currently unregulated due to older issued EX numbers that have vague specifications and no specified part numbers.
• NFA asserts that adoption of the language for break/burst charges in APA Standard 87-1A will not reduce regulatory burdens and will create conflict and confusion between agency regulations instead, further claiming that it is unrelated to safe transportation of hazardous materials in commerce.
• Crazy Debbie's Fireworks alleges that APA Standards 87-1A and C should have identical break/burst charge limits for the same fireworks. By way of example, Crazy Debbie's Fireworks notes that for the same firework—“UN0336, Fireworks, 1.4G”—each of APA Standard 87-1A and Standard 87-1C impose two different break/burst composition restrictions. Under APA Standard 87-1A, this material is limited to less than 149 microns (100 mesh) metals in the break/burst charges, but APA Standard 87-1C states that aluminum particles greater than 53 microns in diameter must not exceed 10 percent by weight of the break/burst charge.
APA Standard 87-1A's restrictions on metal size and chemical composition within break/burst charges for consumer fireworks are not new regulatory requirements; rather, they have been in place since the 2001 edition of APA Standard 87-1 currently incorporated into § 171.7, as metal size and chemical composition directly impact hazard classification. For this reason, PHMSA is not persuaded by the commenters' arguments that APA Standard 87-1A's limitations on break/burst device metal composition are unnecessary; rather, PHMSA understands those metal size limitations to be essential to safe transportation of consumer fireworks whose chemical structure and metal composition makes them inherently more dangerous than fireworks with different constituents. Further, even if the CPSC may not have had reservations about whether an adequate technical basis to conclude that the precise metal composition limits at issue in its rulemaking would ensure consumer product safety, PHMSA is satisfied, based on its experience regulating transportation of hazardous materials (an activity that involves a different risk profile than use of fireworks by individual consumers) that the approach taken in APA Standard 87-1 and 87-1A is appropriate for its transportation regulatory oversight activities. PHMSA notes that none of the commenters on the NPRM provided technical or operational data supporting a contrary conclusion.
In addition, Ultratec Special Effects' assertion that APA Standard 87-1A will allow for an increased break/burst charge of 42.5 grams, and therefore allow salute device access to the expedited review processes under §§ 173.64 and 173.65, is incorrect. A device containing a burst charge weight of 42.5 grams would not comply with either the existing APA Standard 87-1 nor the updated APA Standard 87-1A. The only weight increases in the updated APA Standard 87-1A pertain to fountain devices, which do not contain burst/break charges; the break/burst charge weight limit of 15 grams for aerial shells did not change. Devices with break/burst charges exceeding 15 grams would have to be submitted to a DOT-approved test laboratory pursuant to § 173.56, where the device would be subjected to the UN Series 6 testing and subsequently reviewed by PHMSA.
Further, although PHMSA acknowledges that the HMR allows the use of the default UN classification testing (including UN Series 6 testing) instead of reliance on compliance with APA Standard 87-1A, PHMSA is not convinced that UN Series 6 testing is necessarily superior to APA Standard 87-1A's approach of limiting the metal particle sizes and chemical composition. Indeed, insofar as both APA Standards (87-1 and 87-1A) as well as the UN Model Regulations classify fireworks with an eye toward limiting the amount of flash powder compositions that can be present in fireworks, they do so by different approaches: APA Standard 87-1 and the updated 87-1A do so by way of adjusting chemical composition and metal particle sizes to control flash powder compositions, while the UN Model Regulations rely on the use of a flash powder test to determine the presence of flash powder compositions. Based on its long experience regulating safe transportation of fireworks, PHMSA is satisfied that both the APA Standard (87 and 87-1A) and UN approaches are appropriate. PHMSA notes that none of the commenters on the NPRM provided technical or operational data supporting a contrary conclusion.
PHMSA is aware of the different limits on metal size permitted under APA Standards 87-1A and C for the same UN0336, 1.4G firework. As explained above, PHMSA understands metal size to be an important factor in classifying fireworks to ensure their safe transportation. But metal size is not necessarily the only component that should be considered in the classification of fireworks under the HMR. Indeed, the differences between APA Standards 87-1A and C with respect to the same fireworks reflect the common-sense proposition that other characteristics of fireworks can influence their classification for regulation of their transportation—and that those transportation-relevant characteristics often derive from (or incidentally effect) the end uses of the fireworks. As explained by APA in supplemental comments submitted in response to Crazy Debbie's Fireworks et al., the chemical composition and design of articles pyrotechnics governed by APA Standard 87-1C are much more energetic than the consumer fireworks governed by APA Standard 87-1A—hence, the difference in authorized metal sizes despite the same 1.4G classification. PHMSA understands the different metal size limits for consumer applications (APA Standard 87-1A) and articles pyrotechnics applications (APA Standard 87-1C) to be appropriate.
PHMSA received comments from Jake's Fireworks, NFA, and Crazy Debbie's Fireworks, on sections 2.4 and 3.2.5.1 of APA Standard 87-1A pertaining to reloadable aerial shell kits. These commenters do not view those requirements (for fully assembled tubes, inner packaging and a base) as being related to the risk of harm in the transportation of these products, instead claiming they relate to the kits' packaging and design as it interfaces with the consumer, which they allege is subject to the jurisdiction of the CPSC and distinct from transportation safety regulated by PHMSA. NFA further claims adoption of this portion of the proposed language under section 3.2.5.1 will not reduce regulatory burdens, may create conflict and confusion between CPSC and PHMSA regulations, and eliminate a currently-allowed industry practice prior to an item being offered for retail sale.
However, APA submitted supplemental comments noting that NFA, et al. were not criticizing the NPRM so much as existing HMR requirements as elaborated by PHMSA safety guidance
PHMSA agrees with APA that Standard 87-1A's requirement for reloadable aerial shell kits to contain fully assembled tube and be packaged in an inner packaging with base is not a new regulatory requirement: Those elements are in the 2001 edition of APA Standard 87-1, in addition to the PHMSA guidance identified above. PHMSA further agrees with APA that the requirements for inner packagings and bases for reloadable aerial shell kits in APA Standard 87-1A are important contributors to the safe shipment of aerial shell kits. Indeed, PHMSA's technical review regarding P-1710 included research yielding a preliminary conclusion that reloadable aerial shell kits can be shipped in bulk safely as 1.4G explosives.
PHMSA received comments from Jake's Fireworks and the NFA on “Appendix VI: General Requirements
PHMSA agrees with the commenters that Appendix VI of APA Standard 87-1A is within the jurisdiction of CPSC, and will therefore not incorporate it by reference in this final rule. Nor will PHMSA incorporate by reference any of Appendices II-V of APA Standard 87-1A, Appendices II-IV of APA Standard 87-1B, and Appendices II-IV of APA Standard 87-1C, as PHMSA has not conducted a technical evaluation of those Appendices.
Based on PHMSA's technical analysis and the comments received on the NPRM, PHMSA will in this final rule incorporate by reference the updated APA Standards 87-1A, B, and C, with their respective Appendix I Permitted and Restricted Chemicals lists. Other Appendices of APA Standard 87-1A (Appendices II-VI), APA Standard 87-1B (Appendices II-IV), and APA Standard 87-1C (Appendices II-IV) will not be incorporated by reference. PHMSA expects the updated APA Standards 87-1A, B, and C will provide clarity to the fireworks industry, while maintaining the composition restrictions for classification that are needed to ensure the safe transportation of fireworks. Furthermore, PHMSA's decision to incorporate by reference the updated APA Standard 87-1 is based on its review of the requirements for consumer fireworks in APA Standard 87-1A, display fireworks in APA Standard 87-1B, and professional fireworks (classed as articles pyrotechnics) in APA Standard 87-1C. These standards add numerous new devices, expand the permitted chemical list, and are directed toward hazard classification for transportation. PHMSA is also clarifying that in incorporating Appendix I of each of APA Standards 87-1A, B, and C, it will adopt a one-percent manufacturing tolerance for the application of the chemical constituent limits in updated APA Standard 87-1. This would mean that for individual chemical constituents, an increase or decrease of one-percent of that material's share of the composition compared to the limits set forth in the updated APA Standard will be permitted for chemicals (other than red phosphorous and silver fulminate).
PHMSA expects its incorporation of the updated APA Standard 87-1 will provide cost savings to the fireworks industry by streamlining the EX approval process for many types of pyrotechnic devices. The EX approval processes within the updated APA Standard 87-1 will relieve the burden of submitting new fireworks designs to a third-party test lab for classification—a compliance cost often borne by distributors and small business importers, who often must contract to assist foreign manufacturing sources in obtaining EX approvals for their manufactured products. In addition, PHMSA expects that the incorporation of the revised APA standards will provide opportunities for the fireworks industry to work with the Department of Defense in developing incendiary type devices for training exercises. PHMSA estimates that adoption of this petition would provide an annualized cost savings of approximately $270,000 to industry through expediting the approval process to reduce explosives lab testing requirements. A more detailed discussion of the economic analysis can be found in the accompanying RIA.
Below is a section-by-section description of the amendments in this final rule.
Appendix A to Part 107, Subpart D sets forth the guidelines PHMSA uses (as of October 2, 2013) in making initial baseline determinations for civil penalties. In this final rule, PHMSA is updating the references to APA Standard 87-1 to reflect the new edition of this standard.
Section 107.402 outlines how to apply for designation as a certification agency. PHMSA is updating the references to the APA Standard 87-1 to reflect the new edition of this standard in § 107.402(d).
Section 171.7 lists all standards incorporated by reference into the HMR that are not specifically set forth in the regulations. In this final rule, PHMSA is incorporating by reference the following publications by the APA, ASME, CGA, EU, and AESC/IME:
•
•
• CGA C-6.1,
• CGA C-6.3,
• CGA C-11,
• CGA S-7,
• ASME
• AESC/IME JPG Standard,
• APA Standards: 87-1A
Section 171.8 defines terms generally used throughout the HMR that have broad or multi-modal applicability. PHMSA is adding a definition for “waste material” to allow wastes that do not meet the EPA/RCRA definition of hazardous waste to be managed in accordance with the lab pack exception and associated paragraphs in § 171.23.
Section 171.23 covers the requirements for specific materials and packagings transported under the ICAO Technical Instructions, IMDG Code, TC Transport of Dangerous Goods (TDG) Regulations, or the International Atomic Energy Agency (IAEA) Regulations. PHMSA is revising § 171.23(a)(3) to allow for the use of pressure vessels and pressure receptacles that are marked with a pi mark in accordance with the European Directive 2010/35/EU on TPED and that comply with the requirements of Packing Instruction P200, P208 and 6.2 of ADR concerning PRD use, test period, filling ratios, test pressure, maximum working pressure, and material compatibility for the lading contained or gas being filled. This revision allows for import, intermediate storage, transport to point of use, discharge, and export of pi-marked cylinders. Note that since the publication of the NPRM, PHMSA has made minor editorial revisions to this section such as revising § 171.23(a)(3) to refer to 6.2.2. of the ADR instead of 6.2. PHMSA also removed the word “import” from § 171.23(a)(3)(i) and “export” from § 171.23(a)(3)(ii).
The HMT is contained in § 172.101. The HMT lists alphabetically, by proper shipping name, those materials that have been designated hazardous materials for transportation purpose. It provides information used on shipping papers, package marking, and labeling, as well as other pertinent shipping information for hazardous materials. In this final rule, PHMSA is removing references to special provision 103 from Column (7) of the HMT for the following four explosive entries: “UN0361, Detonator assemblies, non-electric, for blasting”; “UN0365, Detonators for ammunition”; “UN0255, Detonators, electric, for blasting”; and “UN0267, Detonators, non-electric, for blasting.” PHMSA is also revising more than 100 entries to harmonize the limited quantity exceptions in Column (8A) with the ICAO Technical Instructions and the UN Model Regulations.
Section 172.102 lists special provisions applicable to the transportation of specific hazardous materials. Special provisions contain packaging requirements, prohibitions, and exceptions applicable to particular quantities or forms of hazardous materials. Consistent with the § 172.101 Column (7) revisions to “UN0361, Detonator assemblies, non-electric, for blasting”; “UN0365, Detonators for ammunition”; “UN0255, Detonators, electric, for blasting”; and “UN0267, Detonators, non-electric, for blasting,” PHMSA is removing special provision 103 as it would no longer apply to any HMT entry.
Section 172.302 describes the general marking requirements for bulk packagings. In this final rule, PHMSA is revising the minimum size of the marking requirement on certain portable tanks in § 172.302(b)(2). This revision requires a minimum marking of 12 mm (0.47 inch) in height as applicable to portable tanks with capacities less than 3,785 L (1,000 gallons).
Section 173.5b authorizes the transportation by highway of residual amounts of Division 2.2 refrigerant gases or anhydrous ammonia contained in non-specification pressure vessels that are components of refrigeration systems. PHMSA is revising paragraph (b) to indefinitely allow the use of refrigeration systems placed into service prior to June 1, 1991 under specified conditions.
Section 173.28 outlines the requirements for the reuse, reconditioning, and re-manufacture of packagings. In this final rule, PHMSA is modifying language in § 173.28(c)(1)(i) to clarify requirements for reconditioning metal drums and to allow for the sufficient removal of external coatings to ensure there is no adverse effect on transportation safety.
Section 173.31 outlines the requirements for shipping hazardous materials in tank cars. In this final rule, PHMSA is prohibiting the use of tank cars that were manufactured using non-normalized steel for head or shell construction for the transportation of PIH materials after December 31, 2020. Furthermore, PHMSA is phasing out all non-HM-246 compliant tank cars for the transportation of PIH materials by December 31, 2027.
Section 173.56 outlines the definitions and procedures for the classification and approval of a new explosive. In this final rule, PHMSA is adding a reference to the new § 173.67, which would apply to exceptions for Division 1.1 JPGs.
Section 173.59 outlines the description of terms for explosives. In this final rule, PHMSA is updating a reference to the APA documents in the definition of consumer fireworks.
Section 173.64 outlines the exceptions for Division 1.3 and 1.4 fireworks. In this final rule, PHMSA is updating a reference to the APA documents in § 173.64(a)(1) and (3).
Section 173.65 outlines the exceptions for Division 1.4G consumer fireworks. In this final rule, PHMSA is updating a reference to the APA documents in § 173.65(a)(1), (a)(3)(i), and (a)(4)(iv).
In this final rule, PHMSA is adding a new § 173.67 to outline exceptions for Division 1.1 JPGs.
Section 173.151 outlines exceptions for Class 4 materials. In this final rule, PHMSA is revising the limited quantities provisions in this section to present limited quantities in appropriate SI units in liters in addition to kilograms.
Section 173.244 outlines the requirements for bulk packaging for certain pyrophoric liquids, dangerous when wet (Division 4.3) materials, and poisonous liquids with inhalation hazards (Division 6.1). In this final rule, PHMSA is modifying the list of authorized tank car specifications in the table of PIH materials (§ 173.244(a)(2)) by replacing the delimiter “I” with “W” to reflect the change of the interim tank car standard to a permanent standard.
Section 173.302 outlines the requirements for the filling of cylinders with nonliquefied (permanent) compressed gases or adsorbed gases. In this final rule, PHMSA is revising § 173.302(a)(1) to refer to exceptions in § 171.23(a)(3) for the importation of pi-marked cylinders. PHMSA is also revising § 173.302(a)(2) to make adsorbed gases eligible for the exceptions provided in § 171.23(a)(3).
Section 173.304 outlines the requirements for the filling of cylinders with liquefied compressed gases. In this final rule, PHMSA is revising § 173.304(a) to refer to exceptions in § 171.23(a)(3) for the importation of pi-marked cylinders.
Section 173.308 outlines the requirements for the shipment of lighters. In this final rule, PHMSA is deleting § 173.308(d)(3), which requires a closed transport vehicle or closed freight container being transported by vessel to contain the marking, “WARNING—MAY CONTAIN EXPLOSIVE MIXTURES WITH AIR—KEEP IGNITION SOURCES AWAY WHEN OPENING.”
Section 173.314 outlines the requirements for transporting compressed gases in tank cars and multi-unit tank cars. In this final rule, PHMSA is modifying the table in § 173.314(c), which lists the authorized tank car specifications for specific compressed gases. The changes replace the last specification delimiter “J” with “H” and “I” with “W” to reflect the change of the interim HM-246 tank car specification standard for PIH materials to a permanent standard.
Section 178.35 prescribes the manufacturing and testing specifications for cylinders used for the transportation of hazardous materials in commerce. In this final rule, PHMSA is modifying § 178.35(b) and (c) to clarify inspection requirements as stipulated in CGA C-11. This includes revision to the inspector duties as consistent with CGA C-11.
Section 178.521 prescribes the requirements for paper bags used as non-bulk packagings for hazardous materials. In this final rule, PHMSA is revising § 178.521(b)(4) to allow for a weight tolerance of ±10 percent from the nominal basis weight reported in the initial design qualification test report instead of ±5 percent.
Section 179.22 specifies additional marking requirements for tank cars. In this final rule, PHMSA is modifying § 179.22(e) to provide for new markings for tank cars manufactured after March 16, 2009, to meet the requirements of §§ 173.244(a)(2) or (3) or 173.314(c) or (d) to reflect the change of the interim tank car standard to a permanent standard. PHMSA is replacing “I” with “W” for cars manufactured before the effective date of this final rule and specifying that tank cars manufactured after the effective date will be marked with “W” following the test pressure and with a delimiter of “H.”
Section 180.209 specifies requirements for requalification of specification cylinders. In this final rule, PHMSA is modifying § 180.209(l)(2) to reference § 171.23(a)(5) in lieu of paragraph (4).
Section 180.213 specifies requirements for requalification markings. In this final rule, PHMSA is modifying § 180.213(d)(2) to reference § 171.23(a)(5) in lieu of paragraph (4).
Section 180.417 prescribes the reporting and record retention requirements pertaining to cargo tanks. Currently, §§ 180.417(a)(3)(i) and (ii) allow the use of alternative reports when a manufacturer's certificate and related papers are not available for DOT specification cargo tanks that were manufactured before September 1, 1995. In this final rule, PHMSA is removing the provision that limits use of alternative reports to those DOT specification cargo tanks “manufactured before September 1, 1995” from § 180.417(a)(3).
This rulemaking is published under the authority of Federal hazardous materials transportation law
This final rule is not considered a significant regulatory action under section 3(f) of E.O. 12866, “Regulatory Planning and Review”
In addition, E.O. 12866 and DOT implementing regulations at 49 CFR 5.5(i) require PHMSA to provide a meaningful opportunity for public participation, which also reinforces requirements for notice and comment under the Administrative Procedure Act. Therefore, in the NPRM, PHMSA sought public comment on its proposed revisions to the HMR, the preliminary cost and cost savings analyses in the Preliminary RIA, as well as any information that could assist in quantifying the benefits of this rulemaking. Those comments are addressed in this final rule, and additional discussion about the economic impacts of the final rule are provided within the RIA posted in the docket.
In this final rule, PHMSA is introducing amendments to the HMR responding to 24 petitions that have been submitted by stakeholders. Overall, this rulemaking maintains the continued safe transportation of hazardous materials while producing a net cost savings. PHMSA estimates a present value of quantified net cost savings of approximately $0.72 million annualized at a 7 percent discount rate over a perpetual time horizon. These estimates do not include non-monetized and qualitative cost/cost savings discussed in the RIA.
PHMSA's cost/cost savings analysis relies on the monetization of impacts for three petitions included in this rulemaking. The following table presents a summary of the three petitions that would have monetized impacts upon codification and contribute to PHMSA's estimation of quantified net cost savings.
In addition to those three items, this rulemaking amends the HMR in response to other petitions that are either (1) cost neutral or (2) deregulatory in nature in that they provide relief from unnecessary requirements or provide additional flexibility, but which have not been monetized due to information gaps preventing quantification of cost savings. Furthermore, PHMSA's actions in this final rule provide regulatory certainty to industry and allow efficient movement of hazardous materials resulting in increased economic activity.
PHMSA's findings are described in further detail in the RIA posted in the docket.
This final rule is a deregulatory action under E.O. 13771, “Reducing Regulation and Controlling Regulatory Costs.”
This rulemaking was analyzed in accordance with the principles and criteria contained in E.O. 13132, “Federalism”,
The Federal hazmat law contains an express preemption provision, 49 U.S.C. 5125(b), that preempts State, local, and Indian Tribal requirements on the following subjects:
(1) The designation, description, and classification of hazardous materials;
(2) The packing, repacking, handling, labeling, marking, and placarding of hazardous materials;
(3) The preparation, execution, and use of shipping documents related to hazardous materials and requirements related to the number, contents, and placement of those documents;
(4) The written notification, recording, and reporting of the unintentional release in transportation of hazardous material; and
(5) The design, manufacture, fabrication, marking, maintenance, recondition, repair, or testing of a packaging or container represented, marked, certified, or sold as qualified for use in transporting hazardous material.
This final rule addresses covered certain of the subject items above and preempts State, local, and Indian Tribe requirements concerning those subjects unless the non-Federal requirements are “substantively the same” as the Federal requirements. PHMSA received no comments on the NPRM regarding the effect of the adoption of the specific proposals on State, local or tribal governments.
This rulemaking was analyzed in accordance with the principles and criteria contained in E.O. 13175, “Consultation and Coordination with Indian Tribal Governments”
The Regulatory Flexibility Act
1.
This final rule amends miscellaneous provisions in the HMR in response to 24 petitions for rulemaking. While maintaining safety, this final rule would amend certain requirements that are overly burdensome and provide clarity and flexibility where requested by the regulated community. The changes are generally intended to provide relief to shippers, carriers, and packaging manufacturers, including small entities.
2.
PHMSA did not receive any public comments suggesting that the proposed amendments would have a significant impact on small entities. Please refer to Section IV. (Discussion of Amendments and Applicable Comments) above and the RIA for PHMSA's responses to comments submitted in the rulemaking docket.
3.
PHMSA received no comments filed by the SBA in response to the NPRM, and therefore has introduced no changes to this final rule in response.
4.
This final rule affects numerous small entities across a wide range of industries. However, quantified impacts on entities, large or small, could only be assessed for a few of the changes incorporated in this final rule due to data limitations. These impacts are explained, discussed and assessed in the accompanying RIA. For the purposes of identifying affected small entities, PHMSA focused on the industries for which quantified impacts could be estimated. PHMSA assumes that any change that did not draw comment from the industry and could not be quantified is unlikely to have a significant economic or other impact on small entities. PHMSA therefore limits the discussion here to the three items for which impacts could be quantified: (1) The adoption of petition P-1688 adopting a wider range of basis weight for the paper stock used to manufacture UN specification paper sacks; (2) P-1710 adopting a new AESC/IME standard for JPGs; and (3) P-1711 incorporating by reference an updated APA Standard 87-1 pertaining to fireworks.
The table below presents the U.S. Census Bureau Statistics of U.S. Businesses (SUBS) revenue data for each relevant NAICS Code that could be affected by incorporating P-1688.
Depending on the industrial sector, the SBA defines small entities either by a revenue threshold or by the number of employees. As identified in the accompanying RIA, the entities affected by the adoption of petition P-1688 are in North American Industrial Classification System (NAICS) code 322220—Paper Bag and Coated and Treated Paper Products Manufacturing. Firms in this NAICS sector manufacture a wide range of products, of which only a small subset are shipping sacks or shipping sack feed stock. Data are not available that would enable PHMSA to identify how many firms within the larger NAICS manufacture both shipping sacks and feed stock for shipping sacks, much less identify the number of small entities. Neither can PHMSA estimate the revenues for those small entities with any degree of certainty. As noted in the RIA, the high-end cost savings estimate is roughly $160,000 in cost savings per year. PHMSA does not believe these modest cost savings, spread among all affected manufacturers, would rise to the level of a significant impact for affected small entities.
The second industry to consider is associated with petition P-1710 and affects manufacturers of JPGs. As described in the RIA, there are five NAICS sectors that manufacture, operate or contract JPG services. These sectors include:
The RIA quantifies impacts related to elimination of testing requirements. The entities most directly impacted by this elimination are manufacturers of JPGs. While the firms involved in drilling wells, and equipment wholesalers, and support activities for oil and gas operations may use JPGs they are unlikely to manufacture them. PHMSA therefore uses NAICS codes 325920 and 333132 to identify the entities most likely to be affected by the cost savings associated with the changes associated with adoption of this petition. The small business size threshold for NAICS 325920—Explosives Manufacturing—is fewer than 750 employees. For NAICS 333132 the threshold for a small business is fewer than 1,250 employees. Given the size threshold for NAICS 333132—Oil and Gas Field Machinery and Equipment Manufacturing, and looking at the Census Bureau SUBS tables, for this NAICS, it seems likely that virtually all firms in this industry qualify as small businesses. The average number of employees per firm with 500 employees or more is essentially 500 employees, indicating that even the largest firms in this industry are not much larger than 500 employees. Given that the threshold is more than double 500 employees, it seems reasonable to assume that essentially all firms in this industry fall under the SBA threshold.
The other NAICS under consideration (Explosives Manufacturing) has a threshold of 750 employees. 15 of the 52 firms in this sector have more than 500 employees. Again, it appears likely that the larger firms are clustered nearer the 500-employee threshold and hence would qualify as small businesses given a threshold of 750 employees.
Both industrial sectors manufacture a wide range of products: Explosives range from munitions, to fireworks, demolitions explosives, etc. JPGs make up a small fraction of the product output for these firms. Similarly, there is a wide range of drilling and other equipment manufactured for oil and gas exploration, of which JPGs make up a small fraction. Given the nature of the data available from the Census Bureau or other sources, PHMSA is unable to identify the number of firms in either of these broader industrial sectors that manufacture JPGs, much less those that would qualify as small entities. Nor could PHMSA identify revenues for small entities for use in making a significance determination with any degree of certainty. Although PHMSA cannot determine the number of JPG manufacturers or their revenues with any degree of specificity, PHMSA does not believe that the cost savings would amount to a significant impact on small entities, as estimated cost savings would be $360,000 split among all manufacturers of JPGs.
PHMSA concludes by evaluating the last provision of this final rule for which it has quantified the economic impacts: That element responding to petition P-1711 by incorporating an updated edition of APA Standard 87-1 by reference. This provision is the only element of the NPRM that drew adverse comments. These adverse comments are addressed above in the preamble. To summarize PHMSA's response, the items that drew the most concern appear to be unchanged from the existing regulatory requirements. Insofar as that is the case, the negative consequences for small entities alleged by the comments on the NPRM do not result from adoption of the updated APA Standard 87-1.
PHMSA did quantify some cost savings related to testing fireworks associated with adoption of the updated APA Standard 87-1. These cost savings result from reducing UN series 5 and 6 testing requirements for certain classes of fireworks. As described in the RIA, PHMSA estimated that this change may reduce testing costs by roughly $270,000 per year. Such a reduction in costs would be to the benefit of the fireworks industry, and PHMSA does not interpret these cost savings to be significant.
As described in the RIA, virtually all consumer fireworks, and roughly 75 percent of display fireworks, are manufactured in China. The RIA describes the U.S. fireworks industry as having about $1.2 billion in revenue, of which consumer fireworks revenues account for about $885 million and display fireworks account for the remaining $353 million.
Fireworks manufacturers fall into a miscellaneous NAICS code—NAICS 325998—All Other Miscellaneous Chemical Product and Preparation Manufacturing. Fireworks manufacturing makes up a small fraction of the economic activity in this industry, which has a total revenue of roughly $22 billion according to the Census Bureau SUBS data. The SBA size threshold for this industry is 500 employees: Firms with fewer than 500 employees are defined as small entities and those with 500 or more employees are not defined as small entities. The table below presents the relevant SUBS data for this NAICS code.
As with other sectors assessed in this section, PHMSA cannot estimate the number of entities within the broader NAICS category that manufacture fireworks. The NAICS category in question contains firms that manufacture a wide range of products, only one small subset of which are fireworks. Given the lack of data with more detailed specificity, PHMSA cannot identify firms that manufacture fireworks, much less identify small entities that manufacture fireworks, or estimate revenue for those small entities. Given the relatively modest estimate of $270,000 in annual cost savings, and that those savings would be split among multiple firms, PHMSA does not expect the impacts to be significant.
5.
There are no reporting or recordkeeping requirements under the “Paperwork Reduction Act” associated with this final rule.
6.
The Regulatory Flexibility Act directs agencies to establish exceptions and differing compliance standards for small entities, where it is possible to do so and still meet the objectives of the applicable regulatory statutes.
To the extent that PHMSA received adverse comments, they were not targeted at alleviating burdens on small entities. While PHMSA may consider guidance to the extent that it is necessary to help clarify responsibilities for small entities, PHMSA does not expect that establishing exceptions to the HMR amendments in this final rule or alternative requirements for small entities to address potential concerns about the impact on small entities would accomplish the safety objectives of Federal hazmat law. Moreover, many of the HMR amendments introduced in this final rule—insofar as they relate to or incorporate by reference technical specifications or industry standards—do not accommodate different regulatory approaches based on whether the entity is small entity or not. Further, as explained at length in Section IV. (Discussion of Amendments and Applicable Comments) of this final rule, the HMR amendments introduced in this final rule are generally deregulatory in nature and intended to provide reduce regulatory burdens on small entities and other members of the regulated community.
7.
The changes in this final rule are generally intended to provide relief to shippers, carriers, and packaging manufactures and testers, including small entities. As discussed above, a shortage of pertinent data prevents PHMSA from quantifying economic impacts on small entities potentially affected by most of the HMR amendments introduced in this final rule. However, PHMSA has developed estimates for the numbers of small businesses that may be affected by the HMR revisions introduced in this final rule for which PHMSA has provided quantified cost benefits. For those HMR amendments, PHMSA has compared cost savings impacts to average small entity annual revenue and in none of those cases does an impact rise to even 1 percent of average small entity revenue, and in all cases the impacts reduce costs for the entities affected. Therefore, PHMSA determines that this final rule will not have a significant economic impact on a substantial number of small entities.
PHMSA has analyzed this final rule in accordance with the Paperwork Reduction Act of 1995.
A regulation identifier number (RIN) is assigned to each regulatory action listed in the Unified Agenda of Federal Regulatory and Deregulatory Actions (Unified Agenda). The Regulatory Information Service Center publishes the Unified Agenda in April and October of each year. The RIN contained in the heading of this final rule can be used to cross-reference this action with the Unified Agenda.
The Unfunded Mandates Reform Act (UMRA)
This final rule does not impose unfunded mandates under the UMRA. It does not result in costs of $100 million or more, adjusted for inflation, to either State, local, or tribal governments, in the aggregate, or to the private sector in any one year, and is the least burdensome alternative that achieves the objective of the rule.
The National Environmental Policy Act of 1969 (NEPA)
PHMSA has completed its NEPA analysis. Based on the environmental assessment herein, PHMSA determined that an environmental impact statement is not required for this final rule because the HMR amendments introduced will not result in a significant environmental impact requiring the preparation of an environmental impact statement. PHMSA notes that it received no comments from the public on the NEPA analysis within the NPRM.
PHMSA is amending the HMR in response to petitions for rulemaking submitted by the regulated community to update, clarify, or provide relief from miscellaneous regulatory requirements. PHMSA expects that the HMR revisions in this final rule will provide cost benefits to the regulated community without adversely affecting safety. PHMSA has provided a brief summary of each of those HMR revisions, including their impact on safety, in Section IV (Discussion of Amendments and Applicable Comments) of this final rule.
In this rulemaking, PHMSA considered the following alternatives:
The No Action Alternative would not proceed with a rulemaking on any of the previously-accepted petitions for rulemaking submitted by stakeholders. In the No Action Alternative, current HMR provisions would remain in effect.
The Final Rule Alternative would adopt the HMR amendments set forth in this final rule.
Hazardous materials are substances that may pose a threat to public safety or the environment during transportation because of their physical, chemical, or nuclear properties. Under the HMR, hazardous materials are transported by aircraft, vessel, rail, and highway. The HMR embodies a risk management approach that is prevention-oriented and focused on identifying a safety hazard and reducing the probability and quantity of a hazardous material release. The potential for environmental damage or contamination exists when packages of hazardous materials are involved in accidents or en route incidents resulting from cargo shifts, valve failures, package failures, loading, unloading, collisions, handling problems, or deliberate sabotage. The release of hazardous materials can cause the loss of ecological resources (
If PHMSA were to select the No Action Alternative, current regulations would remain in place. However, efficiencies gained through harmonization of HMR provisions with international (UN, ICAO, IMDG, and EU) and consensus standards (AAR, APA, ASME, CGA, IME) for domestic U.S. industry would not be realized, thereby foregoing cost and safety benefits identified in Section IV. (Discussion of Amendments and Applicable Comments) of this final rule. Consistency between HMR requirements and international regulations and updated industry standards can promote the safety of international hazardous materials transportation through a better understanding of HMR requirements, an increased level of industry compliance, and fewer disruptions in transport of hazardous materials from their points of origin to their points of destination. Each of those consequences promote protection of human health and the environment; they also result in decreased compliance costs for regulated entities.
Nor, moreover, would the No Action Alternative provide meaningful safety benefits in declining to adopt HMR revisions in this final rule affording regulated entities greater flexibility in complying with HMR requirements. As explained in greater detail in Section IV. (Discussion of Amendments and Applicable Comments) PHMSA does not expect those flexibility-affording HMR amendments in the final rule (including, but not limited to, extension of regulatory exceptions to additional commodities; relaxation of labelling requirements or cleaning requirements) to adversely affect safety. Further, the regulatory flexibilities foregone in the No Action Alternative do not exist in isolation: Rather, they are each backstopped by the robust, proven safety framework provided by other HMR requirements governing the transportation of hazardous materials.
PHMSA selected the Final Rule Alternative as the preferred alternative. The Final Rule Alternative updates, clarifies, or provides relief from a variety of HMR regulatory requirements. As explained at greater length in Section IV (Discussion of Amendments and Applicable Comments) of this final rule and the above discussion of the No Action Alternative, PHMSA expects the Final Rule Alternative will realize cost benefits from providing greater compliance flexibility for regulated entities without adversely affecting safety. Further, PHMSA expects cost and safety benefits from harmonizing HMR requirements with international and domestic U.S. industry standards can also promote safety, thereby minimizing the risk of environmental impacts from the release of hazardous materials to the environment during shipment. For example, the Final Rule Alternative's regulatory phase out of legacy-specification PIH tank cars consistent with industry (AAR) consensus standards and contractual practices (
The table below summarizes the anticipated environmental impacts from each of the elements of the final rule alternative:
PHMSA expects this final rule would affect hazardous materials shippers and carriers by highway, rail, vessel, and aircraft, as well as package manufacturers and testers. PHMSA sought therefore sought comment from the following Federal Agencies and modal partners:
PHMSA did not receive any adverse comments on the amendments in this final rule from these or any other Federal Agencies.
PHMSA finds that no significant environmental impacts will result from this final rule. The revisions in the final rule are intended to update, clarify, or provide relief from certain existing HMR requirements by eliminating unnecessary regulatory requirements; aligning HMR requirements with international and industry standards; and introducing editorial clarifications to make HMR requirements easier to understand. PHMSA does not expect those HMR revisions to adversely impact safety, much less cause a significant environmental impact under NEPA.
In accordance with 5 U.S.C. 553(c), DOT solicits comments from the public to better inform its rulemaking process. DOT posts these comments, without edit, including any personal information the commenter provides, to
Under E.O. 13609, “Promoting International Regulatory Cooperation,”
Similarly, the Trade Agreements Act of 1979,
PHMSA participates in the establishment of international standards to protect the safety of the American public. PHMSA has assessed the effects of the rulemaking to ensure that it does not cause unnecessary obstacles to foreign trade. As explained in greater detail in Section IV. (Discussion of Amendments and Applicable Comments) of the preamble to this final rule, several of the HMR amendments introduced in this rulemaking better align U.S. requirements for transportation of hazardous materials with international (
E.O. 13211, “Actions Concerning Regulations That Significantly Affect Energy Supply, Distribution, or Use”
This final rule is not significant energy action as contemplated by E.O. 13211. It is neither a “significant regulatory action” under E.O. 12866, nor expected to have a significant adverse effect on the supply, distribution or use of energy in the United States. The Administrator of OIRA has not designated the final rule as a significant energy action.
The National Technology Transfer and Advancement Act of 1995
Administrative practice and procedure, Hazardous materials transportation, Incorporation by reference, Packaging and containers, Penalties, Reporting and recordkeeping requirements.
Exports, Hazardous materials transportation, Hazardous waste, Imports, Incorporation by reference, Reporting and recordkeeping requirements.
Education, Hazardous materials transportation, Hazardous waste, Incorporation by reference, Labeling, Markings, Packaging and containers, Reporting and recordkeeping requirements.
Hazardous materials transportation, Incorporation by reference, Packaging and containers, Radioactive materials, Reporting and recordkeeping requirements, Uranium.
Hazardous materials transportation, Incorporation by reference, Motor vehicle safety, Packaging and containers, Reporting and recordkeeping requirements.
Hazardous materials transportation, Incorporation by reference, Railroad safety, Reporting and recordkeeping requirements.
Hazardous materials transportation, Incorporation by reference, Motor carriers, Motor vehicle safety, Packaging and containers, Railroad safety, Reporting and recordkeeping requirements.
In consideration of the foregoing, PHMSA amends 49 CFR chapter I as follows:
49 U.S.C. 5101-5128, 44701; Pub. L. 101-410, Section 4; Pub. L. 104-121, Sections 212-213; Pub. L. 104-134, Section 31001; Pub. L. 114-74, Section 4 (28 U.S.C. 2461 note); 49 CFR 1.81 and 1.97; 33 U.S.C. 1321.
(d)
49 U.S.C. 5101-5128, 44701; Pub. L. 101-410, Section 4; Pub. L. 104-134, Section 31001; Pub. L. 114-74, Section 4 (28 U.S.C. 2461 note); 49 CFR 1.81 and 1.97.
The revisions and additions read as follows:
(f)
(1) APA 87-1A: Standard for the Construction, Classification, Approval and Transportation of Consumer Fireworks, final draft January 1, 2018 (excluding appendices II through VI), into §§ 107.402(d); 173.59; 173.64; and 173.65.
(2) APA 87-1B: Standard for the Construction, Classification, Approval, and Transportation of Display Fireworks, final draft January 1, 2018 (excluding appendices II through IV), into § 173.64.
(3) APA 87-1C: Standard for the Construction, Classification, Approval, and Transportation of Entertainment Industry and Technical (EI&T) Pyrotechnics, final draft January 1, 2018 (excluding appendices II through IV), into § 173.64.
(g)
(1) ASME Boiler and Pressure Vessel Code (ASME Code), 2017 Edition, July 1, 2017 (as follows), into §§ 172.102; 173.3; 173.5b; 173.24b; 173.306; 173.315; 173.318; 173.420; 178.255-1; 178.255-2; 178.255-14; 178.255-15; 178.273; 178.274; 178.276; 178.277; 178.320; 178.337-1; 178.337-2; 178.337-3; 178.337-4; 178.337-6; 178.337-16; 178.337-18; 178.338-1; 178.338-2; 178.338-3; 178.338-4; 178.338-5; 178.338-6; 178.338-13; 178.338-16; 178.338-18; 178.338-19; 178.345-1; 178.345-2; 178.345-3; 178.345-4; 178.345-7; 178.345-14; 178.345-15; 178.346-1; 178.347-1; 178.348-1; 179.400-3; 180.407:
(i) ASME BPVC.II.A-2017 (vols. 1 and 2), Section II—Materials—Part A—Ferrous Materials Specifications.
(ii) ASME BPVC.II.B-2017, Section II—Materials—Part B—Nonferrous Material Specifications.
(iii) ASME BPVC.V-2017, Section V—Nondestructive Examination.
(iv) ASME BPVC.VIII.1-2017, Section VIII—Rules for Construction of Pressure Vessels Division 1.
(v) ASME BPVC.IX-2017, Section IX—Qualification Standard for Welding, Brazing, and Fusing Procedures; Welders; Brazers; and Welding, Brazing, and Fusing Operators.
The requirement for a 6% knuckle radius on torispherical heads are excepted.
(2) ASME B31.4-2012, Pipeline Transportation Systems for Liquids and Slurries, November 12, 2012, into § 173.5a.
(n) * * *
(4) CGA C-6.1—2013, Standards for Visual Inspection of High Pressure Aluminum Compressed Gas Cylinders, Sixth Edition, copyright 2013 (corrected 4/14/2015), into §§ 180.205; 180.209.
(6) CGA C-6.3—2013, Standard for Visual Inspection of Low Pressure Aluminum Alloy Compressed Gas Cylinders, Third Edition, copyright 2013, into §§ 180.205; 180.209.
(9) CGA C-11—2013, Practices for Inspection of Compressed Gas Cylinders at Time of Manufacture, Fifth Edition, copyright 2013, into § 178.35.
(20) CGA S-7—2013, Standard for Selecting Pressure Relief Devices for Compressed Gas Mixtures in Cylinders, Fifth Edition, copyright 2013, into § 173.301.
(p)
(1) Directive 2010/35/EU of the European Parliament and of the Council, “on transportable pressure equipment and repealing Council Directives 76/767/EEC, 84/525/EEC, 84/526/EEC, 84/527/EEC and 1999/36/EC”, June 16, 2010, into § 171.23.
(2) [Reserved].
(r)
(3) AESC/IME JPG Standard, Guide to Obtaining DOT Approval of Jet Perforating Guns using AESC/IME Perforating Gun Specifications, Ver. 02, dated September 1, 2017, into § 173.67.
(dd) * * *
(4) ECE/TRANS/257 (Vol.I), European Agreement concerning the International Carriage of Dangerous Goods by Road, copyright 2016, into § 171.23.
(a)
(2)
(i) The cylinder is manufactured, inspected and tested in accordance with a DOT specification or a UN standard prescribed in part 178 of this subchapter, or a TC, CTC, CRC, or BTC specification set out in the Transport Canada TDG Regulations (IBR, see § 171.7), except that cylinders not conforming to these requirements must meet the requirements in paragraph (a)(3), (4), or (5) of this section;
(ii) The cylinder is equipped with a pressure relief device in accordance with § 173.301(f) of this subchapter and conforms to the applicable requirements in part 173 of this subchapter for the hazardous material involved;
(iii) The openings on an aluminum cylinder in oxygen service conform to the requirements of this paragraph, except when the cylinder is used for aircraft parts or used aboard an aircraft in accordance with the applicable airworthiness requirements and operating regulations. An aluminum DOT specification cylinder must have an opening configured with straight (parallel) threads. A UN pressure receptacle may have straight (parallel) or tapered threads provided the UN pressure receptacle is marked with the thread type,
(iv) A UN pressure receptacle is marked with “USA” as a country of approval in conformance with §§ 178.69 and 178.70 of this subchapter, or “CAN” for Canada.
(3)
(i) Filled pressure receptacles imported for intermediate storage, transport to point of use, discharge, and export without further filling; and
(ii) Pressure receptacles imported or domestically sourced for the purpose of filling, intermediate storage, and export.
(iii) The bill of lading or other shipping paper must identify the cylinder and include the following certification: “This cylinder (These cylinders) conform(s) to the requirements for pi-marked cylinders found in 171.23(a)(3).”
(4)
(i) The cylinder is transported in a closed freight container;
(ii) The cylinder is certified by the importer to provide a level of safety at least equivalent to that required by the regulations in this subchapter for a comparable DOT, TC, CTC, BTC, or CRC specification or UN cylinder; and
(iii) The cylinder is not refilled for export unless in compliance with paragraph (a)(5) of this section.
(5)
(i) The cylinder has been requalified and marked with the month and year of requalification in accordance with subpart C of part 180 of this subchapter, or has been requalified as authorized by the Associate Administrator;
(ii) In addition to other requirements of this subchapter, the maximum filling density, service pressure, and pressure relief device for each cylinder conform to the requirements of this part for the gas involved; and
(iii) The bill of lading or other shipping paper identifies the cylinder and includes the following certification: “This cylinder has (These cylinders have) been qualified, as required, and filled in accordance with the DOT requirements for export.”
(6)
(i) Each DOT specification cylinder or UN pressure receptacle must be plainly and durably marked “For Export Only”;
(ii) The shipping paper must carry the following certification: “This cylinder has (These cylinders have) been retested and refilled in accordance with the DOT requirements for export.”; and
(iii) The emergency response information provided with the shipment and available from the emergency response telephone contact person must indicate that the pressure receptacles are not fitted with pressure relief devices and provide appropriate guidance for exposure to fire.
49 U.S.C. 5101-5128, 44701; 49 CFR 1.81, 1.96 and 1.97.
(c) * * *
(17) Unless it is already included in the proper shipping name in the § 172.101 Table, the qualifying word “stabilized” may be added in association with the proper shipping name, as appropriate, where without stabilization the substance would be forbidden for transportation according to § 173.21(f) of this subchapter.
(b) * * *
(2) Have a width of at least 4.0 mm (0.16 inch) and a height of at least 12 mm (0.47 inch) for portable tanks with capacities of less than 3,785 L (1,000 gallons) and a width of at least 4.0 mm (0.16 inch) and a height of 25 mm (one inch) for IBCs; and
49 U.S.C. 5101-5128, 44701; 49 CFR 1.81, 1.96 and 1.97.
(b)
(2) Each pressure vessel and associated piping that is part of the evaporating line must be marked “LOW SIDE” in a permanent and clearly visible manner. The evaporating line must have a pressure gauge with corresponding temperature markings mounted in a manner that is easily readable when standing on the ground. The gauge must be permanently marked or tagged “SATURATION GAUGE.”
(3) Each pressure vessel and associated piping containing liquid anhydrous ammonia must be isolated using appropriate means from piping and components marked “LOW SIDE.”
(4) Prior to transportation, each pressure vessel and associated piping must be relieved of enough gaseous lading to ensure that the MAWP is not exceeded at transport temperatures up to 54 °C (130 °F).
(c) * * *
(1) * * *
(i) Cleaning to base material of construction, with all former contents, internal and external corrosion removed, and any external coatings and labels sufficiently removed to expose any metal deterioration that adversely affects transportation safety;
(a) * * *
(6) * * *
(v) When a tank car delimiter is a “H”, offerors may not use a tank car with any other delimiter.
(e)
(2)
(i) A higher test pressure is required if otherwise specified in this subchapter; and
(ii) Each tank car constructed on or after March 16, 2009, and used for the transportation of PIH materials must meet the applicable authorized tank car specifications and standards listed in §§ 173.244(a)(2) or (3) and 173.314(c) or (d).
(iii) A tank car owner retiring or otherwise removing a tank car from service transporting PIH material, other than because of damage to the car, must retire or remove cars constructed of non-normalized steel in the head or shell before removing any car in service transporting PIH materials constructed of normalized steel meeting the applicable DOT specification.
(3)
(4)
(b)
(a) * * *
(1) The fireworks are manufactured in accordance with the applicable requirements in APA 87-1A, 87-1B, and 87-1C (IBR, see § 171.7 of this subchapter);
(3) The manufacturer applies in writing to the Associate Administrator following the applicable requirements in APA 87-1A, 87-1B, and 87-1C and is notified in writing by the Associate Administrator that the fireworks have been classed, approved, and assigned an EX number. Each application must be complete and include all relevant background data and copies of all applicable drawings, test results, and any other pertinent information on each device for which approval is being requested. The manufacturer must sign the application and certify that the device for which approval is requested conforms to the appropriate APA Standard, that the descriptions and technical information contained in the application are complete and accurate, and with respect to APA 87-1A that no duplicate application has been submitted to a fireworks certification agency. If the application is denied, the manufacturer will be notified in writing of the reasons for the denial. The Associate Administrator may require that the fireworks be examined by an agency listed in § 173.56(b)(1) of this part.
(a) * * *
(1) The fireworks are manufactured in accordance with the applicable requirements in APA 87-1A (IBR, see § 171.7 of this subchapter);
(3) * * *
(i) Certified that it complies with APA 87-1A, and meets the requirements of this section; and
(4) * * *
(iv) Signed certification declaring that the device for which certification is requested conforms to the APA 87-1A, that the descriptions and technical information contained in the application are complete and accurate, and that no duplicate applications have been submitted to PHMSA. If the application is denied, the Fireworks Certification Agency must notify the manufacturer in writing of the reasons for the denial. As detailed in the DOT-approval issued to the Fireworks Certification Agency, following the issuance of a denial from a Fireworks Certification Agency, a manufacturer may seek reconsideration from the Fireworks Certification Agency, or may appeal the reconsideration decision of the Fireworks Certification Agency to the PHMSA Administrator.
(a) Notwithstanding the requirements of § 173.56(b), Division 1.1 jet perforating guns may be classed and approved by the Associate Administrator without prior examination and offered for transportation if the following conditions are met:
(1) The jet perforating guns are manufactured in accordance with the applicable requirements in AESC/IME JPG Standard (IBR, see § 171.7 of this subchapter);
(2) The jet perforating gun must be of a type described in the AESC/IME JPG Standard;
(3) The applicant applies in writing to the Associate Administrator following
(b) [Reserved]
(b) * * *
(1) * * *
(i) For flammable solids in Packing Group II, inner packagings not over 1.0 kg (2.2 pounds) or 1 L (0.3 gallon) net capacity each, packed in a strong outer packaging.
(ii) For flammable solids in Packing Group III, inner packagings not over 5.0 kg (11 pounds) or 5.0 L (1.3 gallon) net capacity each, packed in a strong outer packaging.
(a) * * *
(2) * * *
(a)
(2)
(a)
(d)
(2) In addition to the requirements of subpart D of part 172, a lighter design test report identifier (see paragraph (b)(4)(i)(C) of this section) or, if applicable, the previously issued approval number (
(c)
49 U.S.C. 5101-5128; 49 CFR 1.81 and 1.97.
(b) * * *
(2) For DOT Specifications 3B, 3BN, 3E, 4B, 4BA, 4B240ET, 4AA480, 4L, 8, 8AL, 4BW, 4E, 4D (with a water capacity less than 1,100 cubic inches) and Specification 39 (with a marked service pressure 900 psig or lower), and manufactured within the United States, a competent inspector of the manufacturer.
(c)
(1)
(2)
(3)
(4)
(b) * * *
(4) UN5M1 and UN5M2 multi-wall paper bags that have paper wall basis weights that vary by not more than plus or minus 10 percent from the nominal basis weight reported in the initial design qualification test report.
49 U.S.C. 5101-5128; 49 CFR 1.81 and 1.97.
(e) Each tank car manufactured after March 16, 2009, and before December 28, 2020, to meet the requirements of §§ 173.244(a)(2) or (3) or 173.314(c) or (d) that is marked with the letter “I” in the specification marking, following the test pressure, shall be re-marked with the letter “W” with a delimeter of letter “H” at the tank car's next qualification. (Example: DOT 105J600I would be re-marked as 105H600W.) Each new tank car manufactured after December 28, 2020 shall be marked with the letter “W” following the test pressure and with a delimiter of “H”. (Example: 105H600W).
49 U.S.C. 5101-5128; 49 CFR 1.81 and 1.97.
(l) * * *
(2) It is offered for transportation in conformance with the requirements of §§ 171.12(a)(4) or 171.23(a)(5) of this subchapter.
(d) * * *
(2) Exception: A cylinder subject to the requirements of § 171.23(a)(5) of this subchapter may not be marked with a RIN.
(a) * * *
(3)
Office of the Secretary, Department of Health and Human Services.
Request for information.
Under an Executive Order that directs federal agencies to address the economic emergency created by the COVID-19 pandemic by rescinding, modifying, waiving, or providing exemptions from regulations and other requirements that may inhibit economic recovery, consistent with applicable law and with protection of the public health and safety, with national and homeland security, and with budgetary priorities and operational feasibility. The Order directs agencies to “identify regulatory standards that may inhibit economic recovery” and to take appropriate action such as rescission or suspension of regulations, including by use of good cause or emergency authorities where appropriate. Agencies have likewise been called on to assess the various temporary deregulatory actions they have taken to fight COVID-19 and its impact on our economy to determine which temporary regulatory actions should be made permanent. The Order directs agencies to assist businesses and other entities in complying with the law through prompt issuance of pre-enforcement rulings and to formulate policies of enforcement discretion that recognize such entities' efforts to comply with the law.
To be assured consideration, comments must be received at the address provided below, no later than 11:59 p.m. on December 28, 2020.
Because of staff and resource limitations, we cannot accept comments by facsimile (FAX) transmission.
Comments, including mass comment submissions, must be submitted electronically at
For information on viewing public comments, see the beginning of the
Allison Beattie, Department of Health and Human Services, 200 Independence Avenue SW, Room 713F, Washington, DC 20201. Email:
Executive Order 13924,
In December 2019, a novel coronavirus known as SARS-CoV-2 (“the virus”) was first noted by the People's Republic of China as having been detected in Wuhan, Hubei Province, People's Republic of China, causing an outbreak of the disease COVID-19, which has now spread globally. The Secretary of Health and Human Services declared a public health emergency (PHE) effective January 27, 2020, under section 319 of the Public Health Service Act (42 U.S.C. 247d), in response to COVID-19, and has extended the declaration several times, most recently on October 2, 2020 effective October 23. In Proclamation 9994 of March 13, 2020 (Declaring a National Emergency Concerning the Novel Coronavirus Disease (COVID-19) Outbreak), President Trump declared that the COVID-19 outbreak in the United States constituted a national emergency, beginning March 1, 2020.
The federal government has taken sweeping action to control the spread of the virus in the United States. HHS and its federal partners are working together with state, local, tribal and territorial governments, public health officials, healthcare providers, researchers, private sector organizations and the public to execute a whole-of-America response to the COVID-19 pandemic to protect the health and safety of the American people.
In February 2020, Secretary Azar declared that circumstances justified the authorization of emergency use for tests to detect and diagnose COVID-19. In March 2020, the Secretary declared that circumstances justified the authorization of emergency use for drugs and biological products during the COVID-19 pandemic. Emergency Use Authorizations (EUAs) allow medical countermeasures to be authorized by the U.S. Food and Drug Administration (FDA), pursuant to certain criteria, during emergencies.
During the COVID-19 PHE, HHS has taken steps to make it easier to provide telehealth services so patients may receive care without going to healthcare facilities.
To continue the federal response to the COVID-19 pandemic, President Trump signed Executive Order 13924 on May 19, 2020, to direct agencies to continue to remove regulatory barriers that could be stymying American economic recovery.
To respond to the COVID-19 pandemic and its impact on the healthcare industry, HHS made changes to numerous regulations, agency guidance materials, or compliance obligations, or announced enforcement discretion (
1. Of the regulatory changes that have been made by the HHS in response to the COVID-19 PHE and the pandemic, please identify which changes;
a. Have been beneficial to healthcare or human services providers, healthcare or human services systems, or to the patients and clients using these providers and systems, and under what circumstances; or
b. Have been detrimental to healthcare or human services providers, healthcare or human services systems, or to the patients and clients using these providers and systems, and under what circumstances; or
c. Have been beneficial to healthcare or human services providers, healthcare or human services systems, or to the patients and clients using these providers and systems on a temporary basis, but would be detrimental if continued, absent the exigencies of the COVID-19 PHE and pandemic.
Please explain and provide any evidence you have of benefit or detriment.
2. Of the regulatory changes that have been made by the Department of Health and Human Services in response to the COVID-19 PHE and the pandemic, please identify which changes:
a. Should be maintained only for the duration of the PHE and pandemic;
b. Should be maintained after the expiration of the PHE or the end of the pandemic;
c. Should be extended for a period of time after the expiration of the PHE or the end of the pandemic without being made permanent;
d. Should be modified but maintained after the expiration of the PHE or the end of the pandemic, and thus made permanent with modifications, and what modifications are being proposed; or
e. Should be discontinued immediately.
Please explain and provide the rationale for your recommendation, including evidence for or against the short-term or long-term suitability of these regulatory changes. Please describe all suggested modifications for those changes that should be maintained with modification. Of the regulatory changes that have been made or been issued by the Department of Health and Human Services in response to the COVID-19 PHE, please identify which changes should be discontinued only following a transition period, and what type of transition period is recommended.
Commenters may respond to any and all of the key questions as they pertain to any of the regulatory changes with which commenters have experience. HHS requests that commenters provide any evidence or experience they may have to support their recommendations. HHS asks that commenters identify by number the regulatory action(s) from Attachment A to which they are responding and submit their comments to the docket associated with this notice.
Please note, this is a RFI only. In accordance with the implementing regulations of the Paperwork Reduction Act of 1995 (PRA), specifically 5 CFR 1320.3(h)(4), this general solicitation is exempt from the PRA. Facts or opinions submitted in response to general solicitations of comments from the public, published in the
This RFI is issued solely for information and planning purposes; it does not constitute a Request for Proposal (RFP), applications, proposal abstracts, or quotations. This RFI does not commit the U.S. Government to contract for any supplies or services or make a grant award. Further, we are not seeking proposals through this RFI and will not accept unsolicited proposals. Responders are advised that the U.S. Government will not pay for any information or administrative costs incurred in response to this RFI; all costs associated with responding to this RFI will be solely at the interested party's expense. We note that not responding to this RFI does not preclude participation in any future procurement, if conducted. It is the responsibility of the potential responders to monitor this RFI announcement for additional information pertaining to this request. In addition, we note that HHS will not respond to questions about potential policy issues raised in this RFI.
We will actively consider all input as we develop future regulatory proposals or future policy guidance. We may or may not choose to contact individual responders. Such communications would be for the sole purpose of clarifying statements in the responders' written responses. Contractor support personnel may be used to review responses to this RFI. Responses to this notice are not offers and cannot be accepted by the Government to form a binding contract or issue a grant. Information obtained as a result of this RFI may be used by the Government for program planning on a non-attribution basis. Respondents should not include any information that might be considered proprietary or confidential. This RFI should not be construed as a commitment or authorization to incur cost for which reimbursement would be required or sought. All submissions become U.S. Government property and will not be returned. In addition, we may publicly post the public comments received or a summary of those public comments.
Federal Communications Commission.
Final rule.
In this document, the Federal Communications Commission (Commission or FCC) acts on its proposal to retarget universal service funding for mobile broadband and voice in the high-cost program to support the deployment of 5G services by establishing the 5G Fund for Rural America as a replacement for the Mobility Fund Phase II and adopting the basic framework for implementing the 5G Fund.
Effective December 28, 2020, except for §§ 1.21001(b)(1), 1.21001(b)(2), 1.21001(b)(3), 1.21001(b)(4), 1.21001(b)(5), 1.21001(b)(6), 1.21001(b)(7), 1.21001(b)(8), 1.21001(b)(9), 1.21001(b)(10), 1.21001(b)(11), 1.21001(b)(12), 1.21001(b)(13), 1.21001(e), 1.21002(e), 1.21002(f), 54.313(n), 54.322(b), 54.322(c)(4), 54.322(g), 54.322(h), 54.322(i), 54.322(j), 54.1014(a), 54.1014(b)(2), 54.1016(b), 54.1018(a), 54.1018(b), 54.1018(c), 54.1019(a)(1), 54.1019(a)(2), 54.1019(a)(3), 54.1019(a)(4), 54.1020(a), 54.1020(b), 54.1020(c)(1), and 54.1020(c)(2), which are delayed and for which we will publish a document in the
Federal Communications Commission, 45 L Street NE, Washington, DC 20554.
Valerie M. Barrish, Office of Economics and Analytics, Auctions Division, (202) 418-0660 or
This is a summary of the Commission's
1. Our nation is at the dawn of the 5G era of wireless connectivity. Recently, nationwide mobile wireless providers have deployed 5G networks covering more than 200 million Americans. And today we ensure that all Americans benefit from the country's 5G future, no matter where they live. We act on our proposal to replace the Mobility Fund Phase II with the 5G Fund for Rural America and make certain that our limited Universal Service Fund dollars are directed to support the deployment of state-of-the art wireless networks that are more responsive, more secure, and faster than today's 4G LTE networks. Moreover, by establishing the 5G Fund, we further secure our nation's leadership in 5G, which will promote technological innovation in the United States, enhance our economic prosperity and protect our national security.
2. Many urban and suburban areas of our nation are already benefiting from the evolution to 5G networks. Nationwide providers have begun deploying 5G service in more populated parts of our country, with even more widely-available 5G service expected in the near future. For example, T-Mobile has made enforceable commitments to the Commission as part of its acquisition of Sprint to deploy 5G service covering 85% of the population in rural areas and 97% of all Americans within three years, with coverage rising to 90% of the population in rural areas and 99% nationwide within six years. Moreover, it committed to deploy 5G service meeting minimum download speed performance benchmarks of at least 50 Mbps available to 90% of the rural population, with two-thirds of rural Americans able to receive download speeds of at least 100 Mbps. Late last year, T-Mobile announced that it switched on its 5G network across the nation using low-band spectrum.
3. 5G networks will improve the lives of Americans living and working in rural areas by providing much needed access to telehealth, telework, remote learning opportunities, precision agriculture, and other services and applications. We anticipate that the deployment of 5G-capable networks in rural areas will drive job creation and have a powerful impact on the nation's economy. The framework for the 5G Fund that we adopt today will bring technological innovation and economic benefits to the parts of our country that need them the most. We embark on this new 5G era recognizing that the next decade and beyond hold significant promise for rural America, and we envision that the 5G Fund will be an important catalyst to propel the nationwide deployment of networks capable of closing the digital divide, once and for all.
4. The 5G Fund for Rural America will use multi-round reverse auctions to distribute up to $9 billion, in two phases, bringing voice and 5G broadband service to those rural areas of our country that, absent subsidies, would be unlikely to see the deployment of 5G-capable networks. Based on lessons learned from the Mobility Fund, and overwhelming record support, we adopt our proposal to determine which areas will be eligible for 5G Fund support through improved mobile broadband coverage data that will be gathered through the Commission's Digital Opportunity Data Collection proceeding. Although this approach will not be the fastest possible path to the Phase I auction, it will allow us to identify with greater precision those areas of the country where support is most needed and will be spent most efficiently.
5. Since 2011, the Commission has taken numerous steps to comprehensively reform the universal service program to focus our limited funds on ensuring access to fixed and mobile broadband for unserved Americans living in rural, insular, and high cost areas of the country. As part of these efforts, in the
6. In Mobility Fund Phase I, the Commission awarded almost $300 million, along with an additional $50 million for Tribal Mobility Fund Phase I, in one-time universal service support through two reverse auctions. Before adopting rules for Phase II of the Mobility Fund, Commission staff conducted a review of mobile wireless providers' FCC Form 477 submissions to identify the specific areas of the country that were lacking 4G LTE coverage as well as to examine the efficiency of the distribution of legacy high-cost support. Staff analysis revealed that almost 75% of legacy high-cost support was being distributed to carriers in areas where 4G LTE service was already being provided by an unsubsidized provider. Furthermore, according to the report, only approximately 20% of the land area of the United States outside of Alaska either lacked 4G LTE service entirely or had 4G LTE service provided only by a subsidized carrier. Mobile wireless carriers were therefore receiving approximately $300 million or more each year in subsidies that were unnecessary to ensure the continued availability of 4G LTE service in those areas.
7. Recognizing the need to redirect universal service funds to target areas of the country that were unlikely to receive 4G LTE service without subsidies, in its 2017
8. On December 4, 2019, the Rural Broadband Auctions Task Force released a staff report on the results of that investigation. Staff determined that the Mobility Fund Phase II coverage maps submitted by certain carriers overstated actual coverage and did not reflect on-the-ground performance in many instances. The staff report recommended that the Commission terminate the challenge process, concluding that the coverage maps were not a sufficiently reliable or accurate basis upon which to complete the challenge process as designed.
9. On April 23, 2020, we adopted the
10. To meet our obligation of ensuring that all Americans have access to services reasonably comparable to those in urban areas and to achieve our goal of ensuring that all Americans experience the benefits of next-generation 5G technology, we now adopt a path forward for the 5G Fund for Rural America. The rapid pace of deployment of 5G networks in many parts of the country, combined with T-Mobile's commitment to cover 90% of rural Americans with its 5G network, supports our conclusion that it is no longer the time to begin a 10-year support program to deploy 4G LTE networks. We adopt our proposals to replace Mobility Fund Phase II with the 5G Fund for Rural America and to distribute up to $9 billion in universal service support to bring mobile voice and 5G broadband service to rural areas of our country. In adopting our proposal to replace Mobility Fund Phase II with the 5G Fund, we terminate the Mobility Fund Phase II challenge process and dismiss as moot several petitions for waiver in that proceeding which are unnecessary to address given the termination of the Mobility Fund Phase II challenge process. We also adopt our proposals to impose 5G public interest obligations and performance requirements on carriers continuing to receive legacy mobile high-cost support to help ensure that the areas they serve enjoy the benefits that 5G promises. Our actions here will ensure that rural communities can connect to the digital economy and benefit from the opportunities for enhanced education, employment, healthcare, and civic and social engagement that access to advanced mobile broadband communications can provide.
11. We adopt our proposal, known in the
12. In proposing to establish a 5G Fund for Rural America, we sought comment on two different options to determine the areas that would be eligible for support in the Phase I auction: One would be based upon existing governmental data on the ruralness of an area and allow us to proceed more quickly to the auction, and the other would be based upon new mobile coverage data but would, by necessity, delay the start of the auction. These two approaches represented a fundamental tradeoff between more precisely targeting support to areas that need it and the time required to collect, process, and analyze the data necessary for such precision. In the
13. Most commenters urge us to collect new mobile coverage data prior to holding the 5G Fund Phase I auction, with some citing in particular the findings of the
14. We disagree with those comments arguing that the Broadband Deployment Accuracy and Technological Availability (Broadband DATA) Act
15. Several commenters support moving forward quickly with the 5G Fund Phase I auction based on existing U.S. Census Bureau and U.S. Department of Agriculture data under our Option A proposal, or some variant of it. We recognize the pressing need to bring 5G to unserved rural areas; however we agree with the concerns raised by some commenters that reliance upon 10-year-old U.S. Department of Agriculture data as a proxy for rurality and to award funding that will continue for an additional 10 years risks both directing support to areas where support is not needed and also missing areas where support is needed. Option B will allow us to more efficiently allocate 5G Fund support by identifying areas that are already served by an unsubsidized provider and thus should not be ineligible for support. Establishing eligibility under Option A using a degree of rurality would not have allowed us target funds in this manner. We conclude, therefore, that on balance it is not in the public interest to follow the Option A approach. We also decline to adopt the 5G Fund Supporters' proposal for an “Initial Tranche” of support targeted at particular historically disadvantaged communities that this commenter contends should be given priority because of similar concerns about the accuracy of available data. We will take all appropriate steps to implement Option B as quickly as we can without jeopardizing the quality or accuracy of the new data we will collect.
16. While urging us to first collect new mobile coverage data, many commenters supporting Option B make various suggestions for expediting the Phase I auction. We agree on the need to move quickly toward an auction and will take steps to minimize the delay caused by our decision. However, we disagree with suggestions that we should collect new mobile coverage data prior to implementation of the Digital Opportunity Data Collection. We are unconvinced that those approaches would provide reliable coverage data in a shorter timeframe. In particular, while carriers may have experience generating and submitting mobile coverage data as part of their required FCC Form 477 filings, or as part of the one-time collection of 4G LTE coverage data for Mobility Fund Phase II, we would need to develop the processes and IT systems necessary to allow for the submission and verification of mobile coverage data and allow for a public-facing challenge process regardless of whether or not the collection is implemented through the Digital Opportunity Data Collection. Although we have recently adopted new requirements for the Digital Opportunity Data Collection stemming from the Broadband DATA Act, the Commission still lacks funding to implement the statute's requirements. Implementation of any alternative data collection and public challenge process would run into the same logistical and funding hurdles, and staff estimates it would take at least as long to complete. Such arguments also overlook the fact that we originally tasked the Universal Service Administrative Company (USAC) with implementation of the Digital Opportunity Data Collection, work which came to a halt when Congress expressly prohibited the Commission from delegating responsibility for these tasks to USAC in the Broadband DATA Act.
17. We will determine the areas eligible for support in the 5G Fund Phase I auction based upon where new mobile coverage data submitted in the Digital Opportunity Data Collection show a lack of unsubsidized 4G LTE and 5G broadband service by at least one service provider, broadly in line with our Option B proposal. In determining which areas are subsidized for this purpose, we will use Geographic Information Systems (GIS) data from USAC delineating the boundaries of the subsidized service areas of each competitive ETC receiving mobile legacy high-cost support. While most providers are still in the early stages of deploying their 5G networks in rural areas, we expect that a new collection of mobile coverage data in 2021 or 2022 will show significant 5G broadband deployments. Because these areas will have already seen deployment of 5G without subsidy, we will exclude such areas from eligibility consistent with our longstanding policy of avoiding overbuilding competitive networks. Moreover, we will also exclude from eligibility those areas where new coverage data gathered in the Digital Opportunity Data Collection show unsubsidized 4G LTE networks have been deployed. Given the rapid state of competitive 5G deployment in the marketplace, combined with enforceable merger commitments from T-Mobile, we believe that subsidizing 5G deployments where unsubsidized 4G LTE networks have been deployed is unnecessary and risks preempting reasonably near-term 5G deployments we could expect in those areas.
18. Commenters that support Option B also generally support our proposal to define as eligible those areas where new coverage data show a lack of 4G LTE broadband service. However, one commenter suggests also making eligible under Option B those areas that historically lacked 4G LTE service. Given the potential for allocating inefficient support to areas more likely to see competitive 5G deployments and concerns over the accuracy of historical FCC Form 477 and Mobility Fund Phase II 4G LTE mobile coverage data, we are unconvinced that there is a meaningful basis upon which to allocate support to some areas otherwise served by unsubsidized 4G LTE networks. We likewise decline to prioritize any areas based upon historical 3G and 4G LTE coverage data. While we proposed a similar approach in the context of Option A, we conclude that such prioritization is unnecessary in light of our decision to base eligibility on more precise Digital Opportunity Data Collection maps. Moreover, our concerns with developing a meaningful way to incorporate less reliable historical data sources into our eligibility determinations are equally applicable. There is likely significant overlap between areas that have historically lacked 3G or 4G LTE service and the areas that currently lack unsubsidized 4G LTE service, more than 10 years after the technology was first deployed. Moreover, we believe that use of an adjustment factor that considers terrain and potential business case will provide adequate prioritization to ensure historically underserved or unserved areas will receive support in the Phase I auction.
19. We adopt our proposal to exclude from eligibility for the 5G Fund those areas in Alaska, for which high-cost
20. We adopt the basic framework we proposed for the 5G Fund for Rural America, with a few specific modifications to the requirements we proposed for competitive ETCs receiving legacy high-cost support for mobile wireless service. We will require both legacy high-cost support recipients and 5G Fund auction support recipients to meet public interest obligations to provide voice and 5G broadband service, and to satisfy distinct, measured performance requirements as a condition of receiving support. Recipients of both legacy high-cost support and 5G Fund auction support must meet minimum baseline performance requirements for data speed, latency, and data allowance, including: (1) Deploying 5G networks that meet at least the 5G-NR (New Radio) technology standards developed by the 3rd Generation Partnership Project with Release 15 (or any successor release that may be adopted by the Office and Bureau after appropriate notice and comment) with median download and upload speeds of at least 35 Mbps and 3 Mbps with minimum cell edge download and upload speeds of 7 Mbps and 1 Mbps; (2) meeting end-to-end round trip data latency measurements of 100 milliseconds or below; and (3) offering at least one service plan that includes a minimum monthly data allowance that is equivalent to the average United States subscriber data usage. We adopt performance goals and measures for the 5G Fund similar to those that the Commission has implemented in recent high-cost support proceedings and direct the Office and Bureau to adopt others. Designing and adopting oversight and accountability measures when adopting a new or modified universal service program not only ensures that the Commission meets its obligations under the Act, but also facilitates our compliance with government-wide obligations for the efficient and effective design and implementation of federal programs.
21. These performance requirements, along with public interest obligations for reasonably comparable rates, collocation, and voice and data roaming, will ensure that rural areas receive service comparable to high-speed, mobile broadband service available in urban areas. We also adopt interim and final 5G service deployment milestones for 5G Fund auction support recipients, and reporting requirements to monitor the progress of all recipients in meeting the distinct performance requirements that we adopt.
22. We adopt our proposal to award support from the 5G Fund for Rural America through a competitive reverse auction in two phases. In Phase I, we will target support nationwide to all eligible rural areas that lack unsubsidized 4G LTE and 5G broadband service, and in Phase II we will focus support to specifically target the deployment of technologically innovative 5G networks that facilitate precision agriculture.
23. We conclude that a reverse auction is the appropriate mechanism for allocating scarce universal service resources to the carriers that will use them most efficiently. The Commission has long endorsed competitive bidding for distributing support. In the
24. Our experience using competitive bidding in the Mobility Fund Phase I, Tribal Mobility Fund Phase I, and Connect America Fund Phase II auctions confirms the Commission's prediction that it is the most efficient and effective mechanism for awarding universal service support. An auction mechanism allows us to distribute support in a transparent, speedy, and efficient manner, and provides a straightforward means of identifying those providers that are willing to provide 5G service at the lowest cost to the Universal Service Fund by determining support levels that winning bidders are willing to accept in exchange for the public interest obligations and performance requirements we impose.
25. Consistent with our decision to base eligibility on new, granular Digital Opportunity Data Collection mobile broadband coverage data, as well as our decision to adopt 5G performance requirements and public interest obligations for legacy high-cost recipients, we decline to adopt RWA's proposal for a three-phase approach that would award support to certain existing legacy high-cost recipients. Under RWA's proposal, the 5G Fund would create a $1.5 billion “Phase 0” for current legacy support recipients with 500,000 or fewer subscribers so that those carriers could build out 5G in areas eligible under Option A before proceeding to an auction with remaining funds. NTCA supports RWA's three-phase proposal, but proposes that the Commission should base eligible areas for both the Phase I and Phase II auctions on Option B.
26. RWA argues that its approach would provide certainty to small rural carriers and promote faster 5G deployment, while NTCA claims that its approach can leverage existing high-cost support recipients' networks. Based on the record before us, and our experience with competitive bidding mechanisms, we are not convinced that this approach would be a more efficient or effective means of awarding support than an auction. We are unpersuaded that a three-phase approach improves our ability to better target support or to significantly accelerate 5G deployment in rural areas. While we do not doubt that recipients of mobile legacy high-
27. We agree with AT&T that implementing a Phase 0 approach risks continuing to provide legacy high-cost support to fund service in areas that may already have unsubsidized 4G LTE (or even 5G) service from one or more providers. Further, we agree with T-Mobile that setting aside funds for a limited subset of providers would be an inefficient use of our scarce resources, and could limit our ability to expand 5G coverage to as many unserved areas as possible. This concern is amplified by the fact that we would risk overpaying for 5G networks in some areas that another provider (or even the same legacy support recipient) would be willing to serve for less support through an auction.
28. We adopt a budget of $9 billion for the 5G Fund, to be awarded in two phases: Up to $8 billion for Phase I, of which we will reserve $680 million of support for service to Tribal lands, and at least $1 billion in Phase II, as well as any unawarded funds from Phase I. We further adopt our proposal to repurpose the Mobility Fund Phase II budget for the 5G Fund.
29. Given the apparent overstatement of coverage data the Commission staff investigation discovered, we anticipate that the more precise and granular mobile broadband coverage data that will become available in the Digital Opportunity Data Collection proceeding will show that the number of areas unserved by unsubsidized 4G LTE is greater than the Commission originally estimated, and the number of areas unserved by 5G will likewise be substantial. Insofar as almost two years have passed since the Commission ceased the Mobility Fund II challenge process, however, we note that some carriers will have expanded their 4G LTE footprint; therefore, all of the areas that were eligible for a Mobility Fund II auction may not be eligible for a 5G Fund Phase I auction. The deployment of networks capable of providing this 5G service undoubtedly will be expensive, particularly given the need to build high quality infrastructure beyond just our rural roadways. We therefore conclude that significantly more funds than those budgeted for Mobility Fund Phase II will be necessary to achieve our rural 5G goals. By repurposing the entire $4.53 billion budget originally adopted for Mobility Fund Phase II, and essentially doubling our financial commitment to deploying mobile broadband in rural areas, we will have a greater likelihood of achieving the Commission's goals while incentivizing carriers to participate in the auction.
30. In establishing the total budget for the 5G Fund, we are mindful that the cost of universal service programs is ultimately borne by the consumers and businesses that pay to fund these programs, and we have a corresponding obligation to exercise fiscal responsibility by avoiding excessive subsidization and overburdening communications consumers. Courts have recognized that over-subsidizing universal service programs can actually undermine the statutory principles set forth in section 254(b) of the Communications Act of 1934, as amended (the Act). With this in mind, we adopt a 5G Fund budget that seeks to balance the various competing objectives in section 254 of the Act, including the objective of providing support that is sufficient, but not so excessive so as to impose an undue burden on consumers and businesses. Our approach is consistent with judicial interpretation of these objectives, as well as our own.
31. As we have repeatedly emphasized since we began reforming of our universal service programs, ratepayer funds are not unlimited and must be prioritized to achieve our policy goals. We conclude that the budget of $8 billion that we adopt today for Phase I of the 5G Fund incentivizes competition from carriers that wish to participate in the Phase I auction in order to deploy 5G consistent with the public interest obligations and performance requirements we propose for the 5G Fund. We further conclude that a budget of at least $1 billion for Phase II of the 5G Fund will be necessary for carriers to commit to the deployment of technologically innovative 5G networks that facilitate precision agriculture. Dedicating at least $1 billion to this second phase of the 5G Fund will help close the remaining digital divide but also direct funds to networks supporting innovative agricultural solutions, increasing our nation's economic efficiency and encouraging economic growth in rural areas, especially in vast areas of agricultural lands that currently remain unserved.
32. For these same reasons, we decline to allot a larger portion of the total 5G Fund budget to the Phase II auction, as some commenters suggest. Such an approach risks significantly increasing the number of areas that remain unserved after the Phase I auction. Moreover, because the amount of funds necessary to cover the phase down of legacy high-cost support will not be known until the conclusion of the Phase I auction, we decline to reduce the Phase I budget by the amount necessary to fund the phase down, which should provide maximum certainty to prospective bidders.
33. Although some commenters suggest that the total budget may be insufficient to deploy 5G networks to all eligible areas, none of those commenters proposed an alternative amount for the total 5G Fund budget. Those same commenters also support reassessing the Phase II budget following Phase I. Aside from the commenters suggesting a three-phase approach for the 5G Fund, no commenters addressed our request for comment on an alternative total budget.
34. Although it did not offer an alternative total budget amount, we note that AST&Science comments that we should “earmark a small portion (10% to 15%) of the 5G Fund for “
35. We acknowledge concerns of commenters that contend that funds necessary to deploy 5G-capable networks in rural areas may be significantly higher than our total 5G Fund budget. The Commission's experience in the CAF Phase II auction demonstrates that competitive bidding can bring costs below projections: The aggregate reserve price of more than 713,000 locations assigned in that auction was $5 billion, compared to total winning bids of $1.5 billion. Moreover, we anticipate that many providers will use private capital in conjunction with the 5G Fund support they receive to build their 5G networks. By establishing the budget at $9 billion, we also recognize the risk of
36. We adopt our proposal to reserve up to $680 million of the $8 billion 5G Fund Phase I budget to support networks serving eligible areas in Tribal lands. Under the approach we adopt, only eligible areas on Tribal lands will be assigned support from this reserve. This doubles the minimum amount that the Commission intended to reserve to support Tribal lands from the Mobility Fund Phase II budget. Most commenters favored our proposal to reserve support for Tribal lands in the 5G Fund, but some express concern that $680 million will still be insufficient to ensure that these areas receive reasonably comparable service at affordable prices. We are mindful of these concerns, and we recognize that deploying networks that support 5G service will require a significant undertaking, particularly on Tribal lands where services often lag behind even non-Tribal rural lands. For those reasons, we acknowledge that we may need to revisit the amount of the budget reserved for Tribal lands after the conclusion of a Phase I auction, and, if necessary, we will do so at that time.
37. We adopt our proposal that bidding under the Tribal reserve budget and bidding under the unreserved portion of the budget will take place simultaneously as part of the single 5G Fund Phase I auction. The Cherokee Nation expresses concern with this approach maintaining that we should conduct additional auctions as needed to ensure that the support reserved for Tribal lands in the 5G Fund auction serves Tribal lands. These concerns are unwarranted. Contrary to the Cherokee Nation's assumption, conducting bidding simultaneously creates no disincentive for bidders because fewer bids on Tribal lands under the reserved Tribal lands budget will not lead to more funds being transferred to the unreserved budget. Rather, Tribal areas with winning bids will receive a greater share of the Tribal budget. Accordingly, we do not believe that reserving those funds for a subsequent auction for support for Tribal lands will be a timely or practical approach to enhance 5G Tribal land deployments.
38. Consistent with past practice, the details and final bidding procedures for a 5G Fund auction will be developed during our standard pre-auction process, and we anticipate that the procedures we adopt after notice and comment will ensure that support levels assigned from the Tribal reserve will not be less than support assigned from the unreserved budget, except possibly in cases where more than one bidder is competing for support in the same area.
39. We decline to adopt Smith Bagley, Inc.'s Remote Tribal Areas Plan, which proposes allowing carriers serving Tribal lands to participate in an opt-in funding plan similar to the Alaska Plan, as an alternative mechanism for providing support to remote Tribal areas. We are not convinced that this approach would improve the outcome on Tribal lands over awarding support to Tribal areas through a reverse auction. As the Commission explained in rejecting a similar proposal in the Mobility Fund Phase II proceeding, the Commission adopted the Alaska Plan not because of the existence of Tribal lands in Alaska, but because of the need for support to be flexible enough to accommodate Alaska's unique conditions, like its “remoteness, lack of roads, challenges and costs associated with transporting fuel, lack of scalability per community, satellite and backhaul availability, extreme weather conditions, challenging topography, and short construction season.” We again conclude that adopting such an approach for all remaining states would be inconsistent with our decision to use a reverse auction as an efficient mechanism for deciding where to allocate Tribal support. Based on the $680 million budget that we are reserving for support for Tribal lands, we anticipate that 5G Fund support will meaningfully flow to Tribal areas.
40. We also decline to adopt Standing Rock Telecommunications, Inc.'s request that we use a Tribal entity weighting factor as a mechanism to provide Tribal entities with the opportunity to become the winning bidder to provide supported 5G service on their Tribal lands. The $680 million reserved Tribal lands budget we adopt will create a powerful incentive for service providers to bid to serve Tribal lands. We are unpersuaded that creating a preference for a particular type of entity will advance our goals and produce greater deployment on Tribal lands. Indeed, including an additional weighting factor for Tribal entities could deter non-Tribal entities from bidding to serve Tribal lands, reducing both the competitiveness of the Phase I auction and the potential reach of our finite funds.
41.
42. We designate three types of off-reservation lands as Tribal lands for purposes of the high-cost program. First, we designate as Tribal lands any federally recognized off-reservation trust lands, Tribal designated statistical areas (TDSAs), or joint use areas from the Census Bureau's American Indian, Alaska Native, and Native Hawaiian boundaries. In effect, we will thus include as Tribal lands all areas from the U.S. Census Bureau's American Indian, Alaska Native, Native Hawaiian dataset that are classified as federally recognized, regardless of the area's census code, classification, or component type in the data. Because many Tribal citizens live and work in, or travel to such off-reservation trust lands, TDSAs, or joint use areas, or are otherwise areas which are near federally-recognized reservations that we unambiguously consider Tribal lands, we conclude that the “Tribal character of” such off-reservation lands is clear. Moreover, in the context of the high-cost program, such areas face many of the same barriers to service as faced by on-reservation land—
43. Commenters generally support our proposals concerning identification of Tribal lands. Smith Bagley supports the definitional change to the Eastern Navajo Agency to capture so-called “checkerboard” areas consisting of multiple land classifications, so that residents have access to the 5G Fund, and all future universal service programs, consistent with past Commission waivers. It submits that it is the correct course for the Commission to identify as part of the Navajo Nation the portions of the study area boundaries of the Eastern Navajo Agency and Sacred Wind Communications in New Mexico that fall outside of any Tribal boundary from the Census Bureau's data, and submits that solidifying the Eastern Navajo Agency's status as Tribal land will save Commission resources, bring certainty to carriers serving these areas, and generally serve the public interest.
44. The Cherokee Nation states that it interprets the Commission's proposal to mean that the Cherokee Nation's former reservation lands, the Cherokee Outlet, will be assigned to the Cherokee Nation because the Cherokee Nation is the only tribe to have treaty rights to the Cherokee Outlet, and that any “former reservation lands” of the Iowa, Kickapoo, and Pawnee will be assigned to them respectively, but asks for clarity regarding which particular “former reservation lands” will be assigned to each of the four Tribal entities. RWA supports the Cherokee Nation's request. We clarify that the area not currently designated as Tribal in the U.S. Census Bureau's American Indian, Alaska Native, and Native Hawaiian data but identified as the Cherokee Outlet on the Oklahoma Historical Map (1870-1890) will be considered Tribal under the definition we adopt. Similarly, areas not currently designated as Tribal in the Census Bureau data but identified as Iowa, Kickapoo, or Pawnee based upon the “former reservations in Oklahoma” identified on the Oklahoma Historical Map (1870-1890) will be considered Tribal.
45. The Council of Athabascan Tribal Governments and the Mount Sanford Tribal Consortium each state that the Commission's proposal to include Alaska in the definition of “Tribal lands” but exclude Alaska from the 5G Fund is inconsistent and will create confusion unless the Commission either deletes the reference to Alaska, or notes in the definition that areas in Alaska are not eligible for 5G Fund support. We note that the existing definition of “Tribal lands” in section 54.5 of the Commission's rules defines that term for purposes of high-cost support and thus applies to all high-cost support programs. The Commission did not propose in the
46. We adopt a 10-year support term for each phase of the 5G Fund, with monthly disbursements to winning bidders. As we recently explained in adopting a 10-year support term for the Rural Digital Opportunity Fund in the
47. Commenters largely agree that a 10-year support term will provide the certainty and stability needed to encourage deployment of 5G service in rural areas while allowing providers to recover the cost of deploying their networks over time. We decline to shorten the term of support to five years as one commenter suggests, because we conclude that a five-year support term is too short to encourage long-term investment. For similar reasons, we also reject the suggestion that we should
48. We adopt our proposal to rely on the Commission's existing Part 1, Subpart AA competitive bidding process rules for universal service support for the 5G Fund, with specific detailed clock auction bidding and bid processing procedures to be developed through our ordinary pre-auction notice and comment process. For Phase I and Phase II of the 5G Fund, we will use a multi-round, descending clock auction to identify the areas that will receive support, the carriers that will receive support in those areas, and the amount of support that each winning bidder will be eligible to receive. This descending clock auction will consist of sequential bidding rounds according to an announced schedule. Using multi-round auctions will enable bidders to adjust their bidding strategies over the course of the bidding so as to create viable aggregations of geographic areas in which to construct networks. The Commission has found that this approach to developing competitive bidding procedures—first defining important elements of the basic structure while later considering the detailed procedures for implementation—gives it necessary flexibility for integrating its auction objectives and high-level decisions into a workable and consistent auction process. Most commenters support our proposal. CCA, however, cautions against the use of reverse auctions because they can “drive support to lowest cost options,” specifically citing the use of equipment that may be subject to security concerns. We do not find this argument compelling. Firms generally face an incentive to minimize costs not limited to reverse auction bidders. Moreover, the Commission generally ensures equipment safety and security standards, and those concerns are not limited to competitive bidding in a reverse clock auction.
49. For both the Phase I and Phase II auctions, we adopt our proposal to accept bids and identify winning bids using a support price per adjusted square kilometer. Each eligible area will have an associated number of square kilometers which will be adjusted by an adjustment factor, described below. We will determine support amounts for an area by multiplying an area's associated adjusted square kilometers by the relevant price per square kilometer. For example, an area with 100 square kilometers and an adjustment factor of 1.2 would have 100 × 1.2 or 120 adjusted square kilometers. This approach will ensure that carriers bidding to serve the hardest-to-serve parts of the country can compete efficiently and fairly in the auction. Commenters did not oppose these specific proposals.
50. During the pre-auction processes for Phase I and Phase II, as is the Commission's normal practice, we will seek comment on and adopt an opening price per adjusted square kilometer that is high enough that even carriers requiring a very high level of support will be able to compete in the auction. The opening price multiplied by the number of adjusted square kilometers in the area will represent the highest support amount that a winning bidder could receive for the area in the auction. The same opening price and subsequent clock prices, in dollars per adjusted square kilometer, will apply to all the eligible areas in the auction. The clock price will be decremented in subsequent rounds of the auction, implying lower support amounts for each area. Since the opening price is intended to serve as a starting point for bidding and not an estimate of final prices, we anticipate that the opening price that we propose will be based on rough estimates of the cost of providing service in hard-to serve areas, taking into account any adjustments that are adopted.
51. We conclude that the minimum geographic area for bidding—
52. We also conclude that the minimum geographic area for bidding for a 5G Fund auction will be larger than individual census blocks, which are smaller than census tracts and census block groups. Although at least one commenter supports using individual census blocks, as we recently concluded in the context of the CAF Phase II and Rural Digital Opportunity Fund auctions, doing so would significantly increase the complexity of the bidding process both for bidders and the bidding system and minimize the potential for broad coverage by winning bidders. Furthermore, using census blocks as the minimum geographic area could create more challenges for providers in putting together a bidding strategy that aligns with their intended network construction or expansion.
53. In order to provide interested parties greater certainty, and insofar as no commenter objected to it, we also adopt our proposal to remove from a 5G Fund auction any geographic area that has
54. Moreover, because we decide to allocate funds reserved for support to Tribal lands from a separate Tribal lands budget, we also adopt our proposal to identify the eligible areas that coincide with an area of a specific Tribal entity by overlaying the boundaries of Tribal lands for each federally recognized
55. We adopt our proposal to incorporate an adjustment factor into the 5G Fund auction that will assign a weight to each geographic area and will apply that adjustment factor to bidding for support amounts, and to apply that adjustment factor to the methodology for disaggregating legacy high-cost support. This weighting will reflect the relative cost of serving areas with differing terrain characteristics, as well as the potential business case for each area, with less profitable areas receiving greater weight and therefore greater support. The descending clock auction format we will use is one in which a uniform support rate is offered across all eligible areas, and carriers indicate which specific areas they would serve at that rate. If the sum of all payments that would be made at a specific rate given carriers' expressed willingness to serve exceeds the 5G Fund budget, then the rate is reduced and carriers express their willingness to serve at the lower rate. This process continues until the payment is equal to the 5G Fund budget. Under this process, carriers will be willing to serve fewer areas as the rate falls, but if the same rate is offered for all remaining areas, more support than is needed will flow to the less costly-to-serve and more profitable remaining areas. The adjustment factor will, however, for any given support rate, allocate a multiple of the support rate to more costly and less profitable areas, thereby making them more attractive to serve and increasing the support to such areas.
56. Using an adjustment factor to help distribute 5G Fund support to, and disaggregate legacy support in, a range of areas across the country that are geographically and economically diverse serves the public interest. As stated in the
57. As directed in the
58. Commenters broadly support our proposal to adopt an adjustment factor, although they differ in how to calculate and apply it. T-Mobile argues that an adjustment factor will “encourage investment in areas that are more costly or less profitable to serve.” The Massachusetts Department of Telecommunications and Cable also supports using an adjustment factor to score auction bids, but argues that the Commission should “account for all relevant differences in 5G deployment and operating costs between locations, not just differences in terrain.” AST&Science strongly supports incorporating an adjustment factor into the 5G Fund auction design “in order to increase support to areas that are more costly and less profitable to serve.” RWA believes that adjustment factors are “an effective way of targeting support to hard-to-serve rural areas” in an auction.
59. Our application of an adjustment factor in bidding in the 5G Fund auction and for the disaggregation of legacy support recognizes the variability of costs of deploying service, especially mobile service, across the country, and in that way advances our core universal service goal of ensuring access to reasonably comparable services in all areas of the country. We accordingly decline to adopt a disaggregation methodology allocating universal service support uniformly throughout a provider's subsidized service area; doing so would ignore the significant additional costs that wireless providers incur to deploy service in more difficult terrain and economic conditions. Instead, consistent with the direction in the
60. We adopt our proposal to use an adjustment factor that accounts for both the relative costs and business cases of deploying a 5G network given the differing terrain and economic conditions throughout the United States. The adopted adjustment factor will ensure that bids to serve areas that tend to be less profitable to serve, such as more economically disadvantaged areas and areas with more challenging terrain, are given greater weight in the auction and are not disadvantaged. We defer the final determination of the precise manner in which the adjustment factor will be incorporated into the auction mechanism to the pre-auction process.
61. We disagree with Verizon that applying such an adjustment factor to bidding is untested. In the CAF Phase II auction, the Commission's cost model adjusted reserve prices based on variations in the deployment costs of fixed networks due to factors like geography and regional costs. This cost-based adjustment to the bid amount is effectively the same as we adopt here—albeit designed here for application to mobile networks—and we will build on our experience in that auction. We also disagree with RWA that the adjustment factor should not be applied to the disaggregation of legacy support. Using an adjustment factor is appropriate because it will alleviate potential concerns over a carrier losing a disproportionate amount of its legacy support resulting from a disaggregation methodology in which more costly areas would be treated the same as less costly areas with respect to subsidies received. For example, a hypothetical carrier serving one mountainous census tract and one flat census tract of equal size in its subsidized service area might require 75% of its support to serve the mountainous tract and 25% to serve the flat tract. Were an unsubsidized carrier to enter the flat tract, which may be more likely given the relatively lower costs in the flat tract, if we did not apply the adjustment factor in calculating disaggregated support, the carrier would lose 50% of its funding and would be unable to continue serving the mountainous tract. However, applying an adjustment factor of three to the mountainous area would result in the carrier retaining 75% of its original support amount and allow it to continue serving the mountainous tract.
62. We decline to adopt the Massachusetts Department of Telecommunications and Cable's proposal to explicitly account for all 5G capital and ongoing cost differences in the calculation of the adjustment factor. We first note that two of the models presented in the
63. To bring accountability and ensure deployment of 5G technology in each carrier's subsidized service area, we establish broadband public interest obligations that will require competitive ETCs receiving legacy high-cost support for mobile wireless service to provide mobile, terrestrial voice and data services that comply, at a minimum, with 5G-NR technology as defined by 3GPP Release 15 (or any successor release that the Office of Economics and Analytics and the Wireline Competition Bureau may require after notice and comment). Specifically, we adopt our proposal to require that legacy support recipients use an increasing percentage of their support toward 5G service. We will also require competitive ETCs receiving legacy high-cost support to meet specified coverage requirements until such legacy support begins to phase down or otherwise ceases.
64. We note that the Commission has already begun phasing down support for those competitive ETCs that receive legacy high-cost support to provide service to fixed locations, and will similarly exempt entirely from new obligations and requirements competitive ETCs receiving legacy high-cost support for mobile wireless service in Alaska, Puerto Rico, and the U.S. Virgin Islands, areas for which the Commission adopted alternative support mechanisms and that are not otherwise eligible for 5G Fund support. We further note that competitive ETCs may voluntarily relinquish receipt of legacy high-cost support for a subsidized service area, and upon so doing, will no longer be required to meet these public interest obligations. However, in cases where a carrier voluntarily relinquishes legacy support at some point after effective date of these rules, the Commission may seek up to full recovery of all legacy support the carrier received after the effective date of these rules which was not spent toward the deployment, operation, and/or maintenance of 5G services consistent with the non-compliance framework we adopt herein.
65. No commenter disputes our reliance on the Commission's determination in the
66. Because we recognize that the amount of legacy high-cost support received by each competitive ETC varies considerably and bears no direct relation to the size of its subsidized service area or to the expected cost of deploying 5G service, we do not adopt our proposal to require recipients to meet uniform 5G service deployment milestone coverage requirements largely mirroring those we adopt herein for 5G Fund support recipients. Instead, we adopt a general requirement for competitive ETCs receiving legacy high-cost support to meet deployment coverage requirements, and direct the Office and Bureau to develop and adopt, after notice and comment, specific 5G broadband service deployment coverage requirements and service deployment milestone deadlines for each legacy support recipient that take into consideration the amount of legacy support the carrier receives. In so doing, we direct the Office and Bureau to analyze the costs of 5G deployment in subsidized service areas and to evaluate the adequacy of legacy support to meet the particular deployment coverage requirements ultimately adopted.
67. Some parties raise objections to or otherwise question our directing the Office and Bureau to develop 5G deployment coverage requirements for legacy support recipients. We disagree and believe that these workstreams can proceed in parallel. Without more rigorous and objective 5G deployment obligations, we are concerned that legacy support may not ensure the timely deployment of 5G service to rural areas, that we will lack adequate information by which to measure the effectiveness of this support, and that legacy recipients may not be properly incentivized to participate in a 5G Fund auction. We therefore disagree with these concerns and anticipate that the Office and Bureau will adopt appropriate carrier-specific coverage deployment requirements expeditiously.
68. We note as a threshold matter that each ETC receiving high-cost support has an existing public interest obligation to offer broadband service throughout its subsidized service area. The details of the technical characteristics and deployment requirements of this broadband public interest obligation differ for each of the specific mechanisms under which carriers receive high-cost support, but the obligation to offer broadband service applies broadly, including to competitive ETCs that continue to receive legacy high-cost support to provide mobile services. Our decision today thus helps to complete the reform of the high-cost program begun in 2011 by effectuating this broadband service public interest obligation for legacy high-cost support recipients, whose broadband-specific public interest obligations for mobile services were not previously detailed. In so doing, we also effectuate the Commission's expectation that any pause in the phase down would include additional mobile broadband public interest obligations and performance requirements for the continued receipt of support. For the reasons stated in the
69. Each competitive ETC receiving legacy high-cost support for mobile wireless services must now use an increasing percentage of its legacy support toward the deployment, maintenance, and operation of voice and broadband networks that support 5G meeting the performance requirements we adopt today within its subsidized service areas. Specifically, legacy support recipients must use at least one-third of the legacy support they receive in 2021 and at least two-thirds of the legacy support they receive in 2022 for these purposes. Some carriers raise a concern that budgets and
70. We conclude that adopting uniform coverage requirements for 5G broadband service deployment similar to those we adopt for 5G Fund winning bidders without first estimating the sufficiency of support amounts to meet a coverage requirement could give some carriers a windfall for little deployment while imposing impossible expectations on others. On the other hand, requiring that an increasing percentage of legacy support be used to deploy 5G service does not present similar concerns about the sufficiency of support. For example, a competitive ETC that receives $10 million per year to provide service across a state would thus, presumably, be able to deploy 5G broadband service on a faster timeline and covering more area (
71. Several commenters oppose our proposal to require legacy support recipients to meet uniform 5G coverage requirements as part of the public interest obligations and performance requirements we tentatively concluded we should adopt. AT&T argues that requiring 5G deployment in areas after support has been phased down would “violate[ ] the Commission's obligation [under section 254(b)(5) of the Act] to establish support mechanisms that provide sufficient funding.” We expressly proposed in the
72. Three commenters support alternative frameworks that would require the deployment of 5G broadband service over a 10-year period in return for the same or an increased amount of legacy support carriers receive. Both RWA and NTCA suggest requiring modified 5G broadband service deployment obligations and performance requirements of legacy support recipients, but only as part of their respective “5G Small Carrier Fund” proposals. These proposals, which are largely modeled on the Commission's Alaska Plan, would offer legacy support recipients an increase in their support amounts over 10 years to deploy 5G and which we declined to adopt above. Smith Bagley proposes a “Remote Tribal Areas Plan” that would similarly offer the same amount of support, or a modified amount determined by the Commission, over 10 years for legacy support recipients that serve remote Tribal lands to deploy 5G in such areas. While we recognize the challenges of small carriers and those that provide service to Tribal areas, as we explain above in declining to adopt the alternate proposals advanced by RWA, NTCA, and Smith Bagley, the Commission's experience awarding support via competitive bidding has shown it to be an effective use of ratepayer funds and none of these commenters has convinced us that departing from that approach is warranted. We further conclude that the broadband public interest obligations and performance requirements we adopt today will help bring 5G service to existing high-cost areas while incentivizing current legacy high-cost support recipients, including small carriers and those that serve Tribal lands, to participate in the 5G Fund Phase I auction, ultimately ensuring that
73. Finally, recognizing that there may be particular circumstances where the amount of legacy support received is so low or the costs of any steps toward the deployment of 5G service so high as to frustrate any 5G broadband public interest obligation, we direct the Office and Bureaus to consider adopting, after notice and comment, a
74. We adopt our proposal to establish public interest obligations for 5G Fund support recipients to provide terrestrial mobile voice and data services that comply, at a minimum, with 5G-NR technology defined as 3GPP Release 15 (or any successor release that the Office and Bureau may require 5G Fund support recipients to comply with after appropriate notice and comment) and to meet measured performance requirements as a condition of receiving support. We also adopt our proposal to require 5G Fund support recipients to meet baseline performance requirements for minimum data speed, maximum data latency, and a minimum monthly data allowance.
75. Commenters generally support requiring specific public interest obligations and performance requirements for 5G Fund support recipients, and most support requiring the deployment of 5G service. CCA, however, suggests allowing 5G Fund support recipients to deploy 4G LTE-Advanced and provide a plan to transition to 5G-NR within a set period. In its reply comments, RWA disagrees with CCA's suggestion that 5G Fund support recipients be allowed to deploy 4G LTE-Advanced and suggests that the 5G buildout requirements require 5G-NR 3GPP Release 15 or later.
76. We agree with RWA and find it imperative that consumers in rural America receive service meeting the minimum industry standard to be considered 5G in order to ensure the 5G Fund is consistent with our goal to bridge the digital divide. We therefore adopt the requirement that 5G service deployed to meet public interest obligations and performance requirements for 5G Fund support recipients comply with the 5G-NR standard defined as 3GPP Release 15 (or any successor release with which the Office and Bureau may require 5G Fund support recipients to comply after notice and comment). In so doing, we also decline to adopt the suggestion of the 5G Fund Supporters who argue that the Commission should add an extension of the Cable Procurement Rule to the 5G Fund public interest obligations to ensure that minority- and women-owned businesses apply for the many procurement opportunities that will owe their creation to the 5G Fund. Our experience using reverse auctions to distribute support successfully in the Mobility Fund Phase I and CAF Phase II auctions supports our decision that competitive bidding without specific preferences provides the most efficient and effective mechanism to award universal service support.
77.
78. We also adopt our proposed final service deployment milestone that requires a 5G Fund support recipient to offer 5G service that meets the established 5G Fund performance requirements to at least 85% of the total square kilometers associated with the eligible areas for which it is authorized to receive 5G Fund support in a state by the end of the sixth full calendar year following authorization of support. Additionally, we adopt our proposal to require a 5G Fund support recipient to demonstrate by the end of the sixth full calendar year following authorization of support that it provides service that meets the established 5G performance requirements to least 75% of the total square kilometers within each of its individual biddable areas.
79. NTCA generally supports our proposed interim and final service deployment milestones, and the New York Public Service Commission similarly supports our proposals. We decline to adopt an alternative milestone schedule for deployment of 5G service suggested by RWA that would require recipients to cover 40% of the areas for which 5G Fund support is authorized by the end of year four, 60% by the end of year six, and 85% by the end of year 10. While RWA claims that deployment of a 5G network is “more complex and time consuming than building out prior generation networks” and will be difficult for legacy high-cost support recipients to do as part of its Phase 0 proposal, RWA provides no persuasive reason why 5G Fund support recipients should follow this delayed schedule. We are unconvinced that 5G Fund support recipients, which are able to factor in the cost and complexity of meeting service deployment milestones when placing bids in an auction, will find it overly burdensome to meet the deployment milestones we adopt.
80. We decline to adopt the proposal of the California Public Utilities Commission to adopt a higher service deployment milestone coverage requirement—90% by the end of year six and 100% by the end of year seven. There may be isolated areas that are particularly challenging to serve even in terrain that is otherwise not difficult to serve, and adopting a 100% coverage requirement could drastically increase costs in a 5G Fund auction if bidders reasonably conclude that certain areas they would otherwise be interested in serving are cost prohibitive due to an especially challenging terrain feature like a ravine or mountaintop. Such a requirement would thus potentially distort the 5G Fund auction with little gain. At the same time, we disagree with Verizon's suggestion to reduce the required coverage percentage within each biddable unit with particularly challenging areas, based on an alternate deployment requirement focusing on road miles and population. We believe that deviating from our area-coverage approach in the 5G Fund would undercut our focus on ensuring widespread availability of 5G services, including in sparsely populated areas like agricultural lands. Moreover, while we acknowledge that achieving 5G deployment covering 85% required by the final service deployment milestone may be difficult to achieve in particularly challenging terrain, bidders in a 5G Fund auction will be able to factor in the costs of deployment in
81. Lastly, we adopt the interim and final service milestones for 5G Fund support recipients as proposed in the
82. We adopt our proposal to require recipients of legacy high-cost support and 5G Fund support to meet baseline performance requirements for minimum data speed, maximum latency, and minimum monthly data allowance. In the
83. We disagree with CCA's suggestion to fund both 5G deployments and 4G LTE-Advanced deployments using equipment that can subsequently be upgraded to 5G. As RWA and CRWC demonstrate, many competitive ETCs receiving legacy high-cost support have already deployed 4G LTE equipment in their network core using legacy support, which should significantly reduce the burden of using future legacy support to upgrade these networks to 5G service meeting at least the 5G-NR standard we adopt. Consistent with our overall approach in this proceeding, we believe support is best directed to modern 5G deployments rather than further deployments of 4G LTE technology. Moreover, we agree with RWA that “[o]nly real 5G will allow the provision of flexible broadband services, increased speed, reduced latency, and reduced energy consumption, [among] other 5G capabilities that 4G (or `5G Lite') simply cannot provide.”
84. RWA is the only commenter to directly address adopting these performance requirements specifically for legacy high-cost support recipients, which it generally supports albeit with a longer deployment buildout timeframe and as part of its “Phase 0” proposal. RWA and AT&T otherwise support our proposed data speeds of 35/3 Mbps, and we agree with these commenters that a median speed of 35/3 Mbps, combined with the requirement that supported networks meet 3GPP's 5G-NR standard, recognizes that network speeds will vary across service areas and will allow a variety of 5G applications in rural areas. We disagree with CCA's claims that data speeds of 35/3 Mbps are arbitrary and will not be attainable for rural carriers without substantial cost. The Commission has previously required minimum speeds of 35/3 Mbps for 5G service in the high-cost program and to date most eligible carriers have accepted that funding and associated obligation to deploy at those speeds. While it is true that 5G service is not defined by a particular speed, we conclude that setting both minimum cell edge and median target speeds based upon what we believe to be achievable with a minimum amount of spectrum will help align the services funded with 5G Fund support with the performance of 5G service in unsubsidized areas. We note that a review of the Commission's public Universal Licensing System indicates that the licenses held by competitive ETCs receiving legacy high-cost support provide the minimum amount of bandwidth that we find to be necessary to support 5G services (at least 10 megahertz x 10 megahertz using frequency division duplex (FDD) or 20 megahertz using time division duplex (TDD)) meeting these speeds in more than 95% of subsidized service areas. We consequently believe even small and mid-size rural providers will be reasonably capable of meeting a 35/3 Mbps standard with available spectrum.
85. We also disagree with suggestions from Next Century Cities, Juniper Networks, and Verizon that we should adopt higher speeds for the 5G Fund, ranging from 50/5 Mbps to 1 Gbps. While many 5G networks will be capable of higher speeds, the 5G Fund is intended to support networks in even the most sparsely populated and hardest-to-serve parts of the country. Setting network speeds too high risks raising the costs of deploying in those areas so high that service providers are unwilling to bid. As we have noted, we believe 35/3 Mbps will be achievable by the vast majority of potential 5G Fund bidders and legacy support recipients, and is consistent with other 5G universal support requirements in insular areas. We likewise disagree with CRWC's suggestion to use signal strength requirements and a link budget as the manner of measuring compliance with performance requirements, rather than data speed and latency. We do not believe there is, and CRWC does not offer, a meaningful way to impose a single set of signal strength and link budget parameters that can reliably predict network performance for every network design and configuration.
86. Though AST&Science argues that low-earth orbit satellite service should be able to meet the 100 milliseconds or lower latency standard, other satellite companies seek to allow higher latency, perhaps via a tiered system similar to Rural Digital Opportunity Fund's performance and latency tiers. We agree with RWA that an increase in permitted latency could reduce service quality, however. We also decline to add the complexity of adopting a tiered system to the 5G Fund auctions. We believe that adopting a round-trip latency requirement of 100 milliseconds or better for all areas better achieves our goal of ensuring access to services reasonably comparable to those in urban areas. One of the key benefits of 5G over other mobile technologies is reduced latency.
87. While the New York Public Service Commission generally supported requiring a data allowance that corresponds to the average United
88.
89. For both voice and broadband services, the Commission considers rural rates to be “reasonably comparable” to urban rates under section 254(b)(3) if rural rates fall within a reasonable range of urban rates for reasonably comparable voice and broadband services. As an initial matter, we will define “urban” for this purpose consistent with the definition from the latest decennial U.S. Census Bureau data. Currently, the latest decennial data available from the U.S. Census Bureau for this purpose is from 2010. We anticipate that 2020 data will be available in the near future. Consequently, we will update our definition of “urban” when new decennial data becomes available. Consistent with suggestions filed in the Mobility Fund Phase II docket and our decision in that proceeding, we conclude that if a legacy high-cost or 5G Fund support recipient is offering the same rates, terms, and conditions (including usage allowances, if any, for a specified rate) to both urban and rural customers, then it would fulfill the requirement that its rates are reasonably comparable. We also will allow a support recipient to demonstrate it provides reasonably comparable rates if one of its stand-alone voice plans and one service plan offering data are substantially similar to plans offered in urban areas. We note that we may define more precisely the circumstances under which a legacy or 5G Fund support recipient can demonstrate compliance with this certification in later proceedings, and retain our authority to look behind recipients' certifications and take action to address any violations.
90. Where a legacy high-cost or 5G Fund support recipient does not serve urban areas and therefore cannot demonstrate that it is offering reasonably comparable rates based upon its own offerings, we will require the support recipient to identify the carrier and specific rate plans upon which it is basing its compliance certification so that we can verify that its rates are reasonably comparable. We note that allowing for cross-carrier comparison is broadly similar to our decision in the Mobility Fund Phase II Report and Order to require that a support recipient offer at least one service plan that includes a minimum monthly data allowance equivalent to a mid-level plan offered by a nationwide provider. In such a case, we will require that the support recipient submit corroborating evidence of reasonably comparable rates from the web page or other marketing materials of the other mobile carrier that does serve urban areas.
91. The New York Public Service Commission supports the proposed method for a support recipient to demonstrate that it offers reasonably comparable rates if it offers stand-alone voice plans and one service plan with data that is substantially like those offered in urban areas. NTCA also supports this approach, stating that “[a]ll who receive or win funding must . . . commit to offering a terrestrial mobile wireless product that is similar in features and price to the 5G mid-level plan offered in urban areas by large, nationwide providers.” We note that AST&Science supports our proposal to adopt a reasonably comparable rate requirement, but suggests that we include handset costs when determining whether rates are reasonably comparable. We decline to mandate specific prices for handsets because handsets are broadly available from vendors other than service providers, and thus market forces establish handset prices. We received no comments on the proposed method of demonstrating reasonably comparable rates if the support recipient does not serve urban areas by identifying a carrier and specific rate plan upon which the support recipient is basing its compliance certification, and requiring the submission of corroborating evidence of reasonably comparable rates from the web page or other marketing materials of the mobile carrier serving urban areas on which the demonstration is based. We adopt this proposal as a reasonable and not burdensome method of demonstrating compliance with the reasonably comparable rate requirement.
92. Emphasizing the obligation to offer voice and broadband service at reasonably comparable rates further ensures that service made available with universal service funds in rural areas is not beyond the financial reach of rural customers. We note that all ETCs must advertise the availability of their voice services throughout their service areas, and we require support recipients also to advertise the availability of their broadband services within their service area.
93.
94. RWA purports to support this collocation proposal, but asserts that collocation should only be required to the extent that the tower can support multiple carriers, and suggests that any reinforcement or upgrade costs would have to be borne by the last provider desiring to collocate on the tower. We disagree with RWA's view regarding reasonable collocation because it conflicts with the underlying policy of ensuring that universal service support is used in a manner that does not allow one provider to gain an unfair competitive advantage over another. As the Commission explained in the context of adopting a similar requirement for Mobility Fund Phase II, the goal of having a public interest obligation to require reasonable collocation is to ensure that “publicly funded investments can be leveraged by other service providers.” We decline to adopt RWA's position regarding collocation because we conclude it would place an undue burden on those service providers seeking to take advantage of the public benefits that can be gained for rural consumers from the 5G Fund, and would run counter to our efforts to close the digital divide. We remind both legacy high-cost and 5G Fund support recipients that they must also comply with the Commission's voice and data roaming requirements in effect as of the effective date of these rules on networks that are built using high-cost support.
95.
96. Consistent with our decision herein to require annual reports from legacy support recipients, we will require initial reports to be filed with USAC via a web portal, and the reports will be made available to the Commission and the relevant state, territory, and Tribal governmental agencies, as applicable. A legacy support recipient must maintain the accuracy and completeness of the information provided its initial report, and any substantial change in the accuracy or completeness of any initial report submitted by a legacy support recipient must be reported within 10 business days after the reportable event occurs. We retain our authority to look behind recipients' initial reports and to take action to address any violations. We additionally direct the Office and Bureau to further specify the process by which legacy high-cost support recipients will be required to file their initial reports.
97. In order to have a complete understanding of current service offerings, we will require in the initial report information about the service each legacy support recipient offers in each subsidized service area where it receives legacy support. Such information will include an indication of the highest level of technology deployed, a target date for when 5G broadband service meeting the performance requirements we adopt today will be deployed within the subsidized service area (for any service area in which 5G has not been deployed), and an estimate of the percentage of area covered by 5G deployment meeting the adopted performance requirements (for any area in which 5G has been deployed). To help us better understand the services offered, we will also require that each recipient provide infrastructure information on the cell sites that the carrier uses to provide mobile service within each subsidized service area in a standardized template. We note that we are currently considering in our Digital Opportunity Data Collection proceeding whether to require from all mobile service providers the submission of infrastructure information more generally across providers' networks. Our decision to adopt a requirement here that legacy support recipients provide infrastructure information for subsidized service areas is without prejudice to the matter of whether to adopt a similar requirement in the Digital Opportunity Data Collection proceeding. We recognize that carriers may consider infrastructure information to be sensitive, and so we will treat such data submitted as part of the initial report as presumptively confidential. While the Commission and USAC will treat as presumptively confidential and withhold from public inspection infrastructure information submitted as part of this report, USAC will provide these data to the Commission and the relevant state, territory, and Tribal governmental entities that have jurisdiction over a particular service area, as applicable.
98. We will require each legacy support recipient to provide, as part of the initial report, a brief narrative describing its current service offerings and providing a high-level accounting of how it has used legacy high-cost support received for the 12-month period prior to the deadline for the initial report. We direct the Office and Bureau to issue further guidance on the level of detail required and manner in which such initial accounting information must be provided consistent with our decision. Finally, we will require that each legacy support recipient provide certain certifications related to its current service offerings and use of legacy high-cost support, as
99.
100. Legacy high-cost support recipients must file annual reports with USAC via a web portal and filing these reports will replace the carrier's current obligation to annually file the existing FCC Form 481 with USAC. The requirement for legacy high-cost support recipients to file annual reports, and that these reports will replace the current obligation to file the existing FCC Form 481, will take effect following submission of the initial report of current service offerings. As with the initial reports, we will require a legacy support recipient to report any substantial change in the accuracy or completeness of any annual report it submits within 10 business days after the reportable event occurs, and we retain our authority to look behind recipients' annual reports and to take action to address any violations. And as with the initial reports, USAC will make the annual report filings available to the Commission and the relevant state, territory, and Tribal governmental agencies, as applicable. We direct the Office and Bureau to further specify the process by which legacy high-cost support recipients will be required to file their annual reports, including whether these reports will be incorporated into a modified FCC Form 481 or will be collected via a new form.
101. In addition to collecting the same general information collected as part of FCC Form 481, and broadly similar to the initial report, we will require annual reports to include updated information about the services each legacy support recipient offers in each subsidized service area where it receives legacy support for the previous calendar year, including the highest level of technology deployed, a target date for when 5G broadband service meeting the performance requirements will be deployed within the subsidized service area (for any service area in which 5G has not been deployed), and an estimate of the percentage of area covered by 5G deployment meeting the performance requirements we adopt today (for any area in which 5G has been deployed), as well as other relevant information that the Office and Bureau decide may be necessary. We will also require that each recipient provide updated infrastructure information on the cell sites that are located within each subsidized service area in a standardized template. As with the submission of these data as part of the initial report, we will treat infrastructure data submitted as part of an annual report as presumptively confidential.
102. We will require legacy support recipients to provide as part of each annual report an accounting of the support a carrier has received and how legacy support is being used, including a brief narrative with high-level accounting of how it used legacy high-cost support received for the previous calendar year. In addition, we will require that the legacy support recipient indicate which of these expenditures were for the deployment, maintenance, and/or operation of networks capable of offering 5G service that meet the performance requirements we adopt herein. Requiring this information will allow us to ensure that legacy support recipients meet their public interest obligation to use an increasing percentage of their legacy support toward the deployment of 5G service. We note that all ETCs that receive high-cost support remain subject to periodic audits by USAC to ensure compliance, and while we will not require legacy support recipients to submit detailed accounting information on its expenditures as part of its annual reports, opting instead to require only a brief submission of a high-level narrative alongside certifications on the use of support, we emphasize to competitive ETCs that they should retain adequate accounting records as evidence that they have met their public interest obligations to spend a minimum percentage of legacy support on the deployment of 5G in the case of an audit.
103. Finally, we will require that each legacy support recipient provide a number of certifications related to its current service offerings and use of legacy high-cost support as part of its annual reports. These will include, among other certifications, a certification that the carrier has used the required minimum percentage of legacy support toward the deployment and/or operation of 5G service meeting the minimum performance requirements, as well as that it has filed relevant deployment data either as part of FCC Form 477 or in the Digital Opportunity Data Collection, as appropriate, that reflect its current deployment covering the subsidized service area. As with our decision to require an initial report of current service offerings, to the extent that the Digital Opportunity Data Collection is not yet in place at the time that an annual report is due, we will require that each legacy support recipient certify to submitting coverage data consistent with the specifications adopted in the Digital Opportunity Data Collection proceeding via the existing FCC Form 477 system.
104.
105. We adopt a modified version of our proposal to require legacy support recipients to demonstrate compliance with performance requirements. This
106. Because the requirements adopted for the filing of 5G coverage maps in the Digital Opportunity Data Collection proceeding mirror the propagation model parameters specified for 5G deployment maps proposed in the
107. Although we adopt a general requirement that legacy high-cost support recipients submit on-the-ground measurement tests to demonstrate compliance with 5G performance requirements, we do not adopt specific requirements at this time because of our decision deferring adoption of carrier-specific 5G broadband service coverage requirements for these recipients. Instead, we direct the Office and Bureau to adopt, after notice and comment, appropriate parameters for legacy high-cost support recipients to demonstrate compliance with 5G broadband public interest obligations and performance requirements, as necessary, concurrent with adoption of carrier-specific 5G broadband service coverage requirements for legacy support recipients. We anticipate that the test metrics and data specifications that the Office and Bureaus adopt, along with the methodologies for conducting on-the-ground tests and validating results, would be generally similar to the requirements we adopt herein for 5G Fund support recipients to demonstrate compliance.
108. Several commenters oppose the on-the-ground measurement testing methodology proposed in the
109. We agree with the Vermont Department of Public Service that on-the-ground testing is important to verify appropriate use of legacy support. We nevertheless acknowledge commenters' concerns that on-the-ground testing may be burdensome, and expect the Office and Bureau will give appropriate weight to those concerns in determining the appropriating testing methodology for legacy support recipients. Although the issue of whether to adopt a requirement that service providers substantiate coverage maps with on-the-ground testing data remains open in the Digital Opportunity Data Collection proceeding, the outcome of that proceeding is not determinative here.
110. Because this is a universal service subsidy program, our obligations as stewards of the Fund require that we take steps to ensure that support is being used for its intended purpose and to minimize waste, fraud, and abuse. This view is consistent with our treatment of fixed broadband deployments in the universal service high-cost program, where support recipients' subsidized networks are subject to mandatory speed and latency testing, even though we did not adopt a similar testing requirement for fixed broadband networks in the Digital Opportunity Data Collection Proceeding.
111. We adopt our proposal to terminate support payments to mobile competitive ETCs receiving legacy high-cost support that fail to comply with their public interest obligations and performance requirements. As stewards of the Universal Service Fund, it is our obligation to ensure that all Americans living in areas served by these carriers receive the most advanced wireless services. We do this, and create a powerful incentive to meet obligations, by ending support payments to legacy mobile competitive ETCs that fail to comply with their obligations and/or performance requirements. While ending support payments is a stricter consequence than what other high-cost support recipients face for failing to meet their public interest obligations and performance requirements, the continuation of legacy support is an interim mechanism in place as we implement the 5G Fund, and therefore, unlike the Commission's other modernized support mechanisms, the non-compliance measures here do not benefit from allowing legacy support recipients to come back into compliance prior to the end of the support term.
112. The rule we adopt is a modified version of our proposal. As we proposed, mobile competitive ETCs
113. CRWC's argument that provisions in the Consolidated Appropriations Act of 2020, Public Law 116-93 (2020 Appropriations Act), barring the Commission from modifying its rules to reduce competitive mobile ETCs' support below 60% of their monthly baseline support amount until the Commission begins disbursing Mobility Fund Phase II support has no bearing on our authority to impose the non-compliance measures we adopt. The 2020 Appropriations Act does not relieve competitive ETCs of their obligation to comply with the high-cost program's rules, including public interest obligations. Consequently, the Commission, even after enactment of the 2020 Appropriations Act, maintains its authority to subject competitive ETCs to reductions in support amounts for failing to comply with program rules. Nor does any provision of the 2020 Appropriations Act prohibit us from adopting new rules or obligations for mobile competitive ETCs, which if not adhered to, would result in reductions in support. Congress was aware that the Commission in 2011 had expressed its intent to subject legacy high-cost support recipients to additional mobile broadband public interest obligations if the phase down in support were paused when it passed the later-in-time 2016 Appropriations Act, Public Law 114-113. The proviso to the appropriations statute permits the adoption of additional public interest obligations. The proviso states that it “shall not prohibit the Commission from . . . adopting other support mechanisms as an alternative to Mobility Fund Phase II.” Because this Report and Order implements a comprehensive alternative plan for mobile high-cost support that would replace Mobility Fund Phase II (much like the Alaska Plan, Uniendo a Puerto Rico Fund, and Connect USVI Fund), including a transition for legacy support recipients, the adoption of the 5G Fund and the associated public interest obligations on legacy support recipients are consistent with the statutory language.
114. In addition, the public interest obligations we adopt here do not “modify, amend, or change the rules or regulations of the Commission for universal service high-cost support for competitive eligible telecommunications carriers in a way that is inconsistent with” the relevant rules in place in 2015—support amounts for competitive ETCs that comply with their obligations are still determined pursuant to those rules. In fact, the public interest obligations we adopt today do not alter the support amounts competitive ETCs receive and are consistent with the statutory requirement that recipients use support “for the provision, maintenance, and upgrading of facilities and services for which the support is intended.” Finally, in enacting the 2020 Appropriations Act, Congress was legislating against the background of the established principle that we can impose additional conditions on the continued receipt of universal service funds.
115. We adopt our proposal to give mobile competitive ETCs receiving legacy high-cost support for a particular subsidized service area the flexibility to use support for the provision, maintenance, and upgrading of facilities and services within any of the designated service areas for which they receive legacy mobile support. Mobile competitive ETCs may also use legacy support within any of the designated service areas of an affiliated mobile competitive ETC (
116. Commenters were generally supportive of our proposal, and we agree with CRWC that providing geographic flexibility on the use of legacy high-cost support “is a no-cost means of improving the efficiency of investments to cover the greatest number of rural citizens.” AT&T supports providing legacy support recipients with this flexibility, but cautions that doing so could result in state regulators being “unwilling to include the carrier in its annual [section 54.314] certification, rendering the ETC ineligible for support the following year.” AT&T proposes that the Commission “permit ETCs that avail themselves of this flexibility to certify directly to the Commission pursuant to section 54.314(b).” We believe adopting such a procedure at this time is premature because we cannot say whether this perceived issue will develop. Moreover, nothing we adopt permits a competitive ETC to use high-cost support to provide service outside of its or an affiliated competitive ETC's
117. We adopt our proposal to freeze the mobile high-cost support of Standing Rock, the sole competitive ETC that continues to receive non-frozen support. Standing Rock, a competitive ETC in North Dakota (study area code: 389014) and South Dakota (study area code: 399020) has been exempt from the freeze and phase-down of competitive ETC support. The pause of the phase down of competitive ETC support in 2014 adopted in the
118. Standing Rock urges the Commission to delay freezing support until release of the final eligibility map and in that time continue to use line counts for determining support amounts. It reasons that due to the COVID-19 pandemic, it “expects” line counts to increase (which would result in more support) as “Tribal residents continue to adapt to social distancing requirements and the need for online learning and online business.” With increased line counts, Standing Rock's support will increase, and it claims that it will therefore be in a better position to meet the “needs of Tribal residents.” However, Standing Rock offers no data to support this claim. Given that its comments were filed more than three months after the President declared a national emergency due to the COVID-19 pandemic, we would expect Standing Rock to demonstrate that its line counts have already increased, but it did not. Without adequate support for the claim, we find no reason to deviate from our proposal.
119. We now clarify, as we proposed, that only terrestrial mobile wireless carriers may receive mobile high-cost support, and that recipients of mobile legacy high-cost support must use such support only for the provision, maintenance, and upgrading of terrestrial mobile voice and broadband facilities and services. Consequently, carriers offering only non-terrestrial services, such as mobile-satellite service, will no longer be eligible to receive mobile legacy high-cost support after the effective date of these rules. We must ensure that we are funding advanced mobile services with our limited universal service funds, even for carriers receiving legacy support, and non-terrestrial services receiving legacy support cannot meet the appropriate broadband public interest obligations that we adopt for legacy support recipients. However, an affected carrier is not prohibited from bidding for, and winning, new 5G Fund support in an auction, provided that it is otherwise determined to be eligible. Moreover, we clarify that legacy support and 5G Fund support recipients may use whatever backend technologies, including satellite backhaul, to meet 5G public interest obligations so long as they offer to the end user terrestrial 5G service that complies with the 5G-NR standard and meets all performance requirements. We are not, therefore, categorically excluding satellite technology from networks supported by the 5G Fund so long as a carrier seeking 5G Fund support is capable of providing voice and 5G broadband terrestrial service meeting necessary program requirements.
120.
121. The statutory language expressly allowed for the Commission to “consider[ ], develop[ ], or adopt[ ] other support mechanisms as an alternative to Mobility Fund Phase II.” Indeed, the Commission has adopted alternate support mechanisms and otherwise ceased disbursement of legacy high-cost support based upon the phase down schedule in section 54.307(e)(2) of our rules to mobile competitive ETCs in Alaska, as well as in Puerto Rico and the U.S. Virgin Islands. Similar to the schedule we adopt here, 12 months after release of the
122. In the
123. The assertion by CRWC that “a competitive ETC is currently entitled to receive 60 percent of its monthly base line support amount each month until Mobility Fund Phase II is implemented” widely misses the mark. As the Commission has consistently made clear and the courts have recognized, carriers are not “entitled” to receipt of universal service funds. The statutory provision is best read as a limitation on our ability to resume the currently-paused phase down of legacy support without ensuring that recipients can avail themselves of a high-cost support mechanism to replace legacy support, and not as establishing an “entitlement” for competitive ETCs to receive mobile legacy high-cost support at 60% of the frozen support level. As an alternative to Mobility Fund Phase II, the 5G Fund, along with the transition schedule adopted herein, provides an alternate comprehensive mechanism for distributing high-cost support as provided for within our statutory authority.
124. We also disagree with CRWC's argument that we are “barred from finding that, by adopting new rules [the Commission] will have successfully `implemented' ” the 5G Fund, which CRWC considers to be simply a “rebranded Mobility Fund [Phase] II.” This “implementation” argument lacks merit because nothing in the express language of the statute precludes us from adopting rules for a comprehensive support mechanism that is an alternative to Mobility Fund Phase II, and in so doing, reducing the legacy support for areas that are found to be ineligible for support under this new, alternate mechanism. We also do not consider the 5G Fund simply to be Mobility Fund Phase II by another name. Rather, this Report and Order establishes an entirely new program for mobile high-cost support that builds upon lessons we have learned from our previous efforts to reform high-cost support and close the digital divide, and includes an integrated plan with performance requirements, public interest obligations, and compliance provisions for both legacy high-cost support recipients and 5G Fund support recipients to ensure the efficiency and the good stewardship of our limited universal service fund dollars.
125. Even if our ability to reduce the amount of mobile legacy high-cost support that we distribute were to turn on whether we have “implemented” the 5G Fund, CRWC's argument still fails. In finalizing the rules and determining the final map of areas eligible for 5G Fund support, we will have implemented the 5G Fund for ineligible areas because we will have “give[n] practical effect to” the new program and ensured its “actual fulfillment by concrete measures.” In reading the language of the statute and our rules, CRWC seemingly confuses the concept of adopting a support mechanism,
126. Further, we are also not persuaded by CRWC's argument that its reading of the verb “implement” is most consistent with section 54.307(e)(5) and (e)(6) of our rules, as in effect in 2015. Former section 54.307(e)(5) specifies the legacy support amount that a competitive ETC shall receive “[i]n the event that the implementation of Mobility Fund Phase II has not occurred by” 2014, whereas former section 54.307(e)(6) specifies the “[e]ligibility after [i]mplementation of Mobility Fund Phase II” of a competitive ETC to continue receiving legacy support after it becomes eligible to receive Mobility Fund Phase II support. These rules are meant to override the general phase down schedule in section 54.307(e)(2), establishing the legacy high-cost support amounts that a competitive ETC is eligible to receive at points in time before and after future high-cost support amounts are determined via the support mechanism that replaces legacy high-cost support. In the 5G Fund, we will have determined the future high-cost support amounts for areas that are ineligible for 5G Fund (no support) after the final rules are effective and eligible areas are finalized.
127. Lastly, reading the statute and our rules in the manner that CRWC proposes, providing potentially endless entitlement to legacy high-cost support after a final conclusion that no support is warranted, would broadly conflict with our responsibility to be good stewards of universal service support and our long standing policy goal to reform our high-cost program. We do not believe Congress could reasonably have intended such a result. Indeed, this reading would provide a competitive ETC with legacy support at the same level until the close of the Phase I auction, even after we have made a final
128.
129. Under the transition schedule we adopt, in areas determined not to be eligible for 5G Fund Phase I support, legacy support will be phased down starting the first day of the month after the release of the final map of areas eligible for 5G Fund support. Because we expect that carriers will not require support in order to deploy 5G service in areas ineligible for 5G Fund support, and legacy support recipients will not be able to win 5G Fund support in the 5G Fund Phase I auction for those areas, we conclude that it is not in the public interest to continue legacy support for ineligible areas. As previously discussed, we will exempt areas determined to be ineligible for support from the 5G broadband public interest obligations and performance requirements we adopt for legacy high-cost support recipients. However, legacy support recipients will continue to have a public interest obligation to file annual reports, offer services at reasonably comparable rates, and allow for reasonable collocation and voice and data roaming for areas ineligible for support until support is fully phased down and they cease to receive legacy high-cost support for such areas. We will commence the phase down of support in ineligible areas after release of the final map of eligible areas and prior to the conclusion of the Phase I auction. While CRWC asserts that it would be “arbitrary” to adopt the phase down of support in ineligible areas prior to the close of the 5G Fund Phase I auction because carriers' support funds have already been committed through 2020 and 2021, in view of our decision to base the areas eligible for Phase I support on a new collection of coverage data, we now anticipate that it may be a year or more before this phase down would commence. Competitive ETCs that receive legacy high-cost support should therefore be able to factor into their capital expenditure plans that the amount of support they receive may be reduced in areas also served by an unsubsidized competitor in the near future.
130. However, we decline to adopt our proposal to end all legacy high-cost support to mobile carriers at the frozen high-cost support level no later than five years after the effective date of this Order, regardless of when the 5G Fund Phase I auction is conducted. No commenters support this proposal, and we agree that providing more certainty to legacy support recipients will promote expansive 5G deployment in these otherwise high-cost areas. Instead, for areas that are eligible for 5G Fund Phase I support, on the first day of the month following the release of a public notice announcing the close of the 5G Fund Phase I auction, legacy support for current recipients will either be maintained, pending authorization of the winning bidder to receive 5G Fund support, maintained in order to preserve service in areas without a winning bidder in the Phase I auction, or subject to phase down for all other legacy support recipients. That is, for eligible areas not won in the 5G Fund Phase I auction, legacy support will begin to phase down over two years or be maintained in order to preserve service for no more than five years after the Phase I auction closes regardless of whether the eligible area may be won in the 5G Fund Phase II auction.
131. In eligible areas won in the 5G Fund Phase II auction, legacy support (whether subject to phase down or preservation-of-service support) will either be maintained, pending authorization of the winning bidder to receive 5G Fund support, maintained in order to preserve service for the legacy support recipient receiving preservation-of-service support in areas without a winning bidder, or be subject to phase down beginning the first day of the month following release of a public notice announcing the close of the 5G Fund Phase II auction. Legacy high-cost support subject to phase down after the 5G Fund Phase I auction will continue to follow the original phase down schedule that commenced after the close of the 5G Fund Phase I auction for support recipients that were not the winning bidder in eligible areas won
132. More specifically, we adopt our proposal that for a winning bidder that is receiving legacy support in the area of its bid, legacy support will cease and 5G Fund support will commence on the first day of the month following release of a public notice authorizing that carrier to receive 5G Fund support. For portions of a legacy support recipient's subsidized service area that are eligible for 5G Fund support but for which there is no winner in a 5G Fund auction, the carrier will continue to receive legacy support in areas that do not overlap another legacy support recipient's subsidized service area. In those portions where more than one carrier receives legacy support (
133. In eligible areas where there is no winning bidder in the 5G Fund Phase I auction, the legacy support recipient receiving the minimum level of sustainable support will continue to receive support until further Commission action, but for no more than five years after the first day of the month following the release of a public notice announcing the close of the 5G Fund Phase I auction. We adopt our proposal to define the minimum level of sustainable support to be the lowest amount of legacy support among carriers that have deployed the highest level of mobile technology within the state. In eligible areas where there is no winning bidder in the 5G Fund Phase II auction, the legacy support recipient receiving the minimum level of sustainable support would continue to receive such “preservation-of-service” support until further Commission action, but for no more than five years after the first day of the month following the release of a public notice announcing the close of the 5G Fund Phase I auction.
134. The following chart summarizes the schedule we adopt to transition from legacy support to 5G Fund support for areas in the 5G Fund Phase I auction:
135. Consistent with the requirements adopted for CAF Phase II and the Rural Digital Opportunity Fund, we will require that a 5G Fund support recipient file annual reports certifying its compliance with the public interest obligations, performance requirements, and any other terms and conditions associated with receipt of 5G Fund support, and file interim and final service deployment milestone reports demonstrating that it has met the 5G Fund performance requirements for deployment of service. We also adopt a rule that would require a support recipient authorized to receive 5G Fund support and its agents to retain any documentation prepared for, or in connection with, the award of the 5G Fund support for a period of not less than 10 years after the date on which the support recipient receives its final disbursement of 5G Fund support.
136.
137.
138. The New York Public Service Commission supports the proposal to establish interim and final service milestones “to ensure 5G Fund support recipients meet their public interest obligations.” We adopt interim and final service milestone reporting requirements to ensure that support recipients continually document their progress toward meeting their meeting 5G Fund public interest obligations and performance requirements, as a mechanism to reveal and remedy non-compliance. We will also require that each 5G Fund support recipient provide infrastructure information on the cell sites that the carrier uses to provide mobile service within the areas for which it is authorized to receive 5G Fund support in a standardized template as part of its interim and final milestone reports, as suggested by the Massachusetts Department of Telecommunications and Cable. We note that we are currently considering in the Digital Opportunity Data Collection proceeding whether to require from all mobile service providers the submission of infrastructure information more generally across providers' networks. Our decision to adopt a requirement that 5G Fund support recipients provide infrastructure information for areas in which the carrier is authorized to receive 5G Fund support is without prejudice to the matter of whether to adopt a similar requirement in the Digital Opportunity Data Collection proceeding. We recognize that carriers may consider infrastructure information to be sensitive, and so we will treat such data submitted as part of the initial report as presumptively confidential. While the Commission and USAC will treat as presumptively confidential and withhold from public inspection infrastructure information submitted as part of this report, USAC will provide these data to the relevant state, territory, or Tribal governmental entity that has jurisdiction over a particular service area, if applicable.
139. While we adopt our proposal from the
140. We adopt our proposal to require a support recipient to file interim and final service deployment milestone reports by March 1 of the calendar year following each applicable December 31 milestone deadline. Failing to timely submit a service milestone report that includes the required certification concerning performance and coverage requirements by the established deadline would subject support recipients to defined consequences (as specified in the non-compliance requirements below). We also adopt the proposal that standards for related data submissions align with those adopted for the Digital Opportunity Data Collection, as modified below.
141. We adopt a modified version of our proposals regarding the 5G Fund support recipients' demonstration of compliance with performance requirements. We will not require customized propagation modeling and mapping data, as we proposed in the
142. We decide neither to specify distinct 5G Fund requirements for propagation modeling nor to require the separate submission of coverage data because the requirements adopted for the filing of 5G coverage maps in the Digital Opportunity Data Collection proceeding mirror the propagation
143. We will require 5G Fund support recipients to substantiate reported 5G deployment with on-the-ground measurement tests submitted at interim and final milestones, as proposed. Rather than adopt customized 5G Fund testing requirements at this time, we adopt as a starting point test metrics, data specifications, and permitted testing applications at least as stringent as those already adopted or that may be adopted for the governmental and third party challenges in the Digital Opportunity Data Collection proceeding. Such requirements will serve as a minimum for the on-the-ground tests that we require for the 5G Fund, and we defer to the pre-auction process specifying any additional parameters, to allow for similar matters to be resolved in the Digital Opportunity Data Collection proceeding. However, because we have a heightened obligation to ensure the prudent use of universal service support, we note that we may go further than the requirements adopted in the Digital Opportunity Data Collection proceeding, or otherwise adopt more stringent requirements during the pre-auction process.
144. As for the methodologies for conducting on-the-ground tests and validating test results, we adopt the
145. Finally, we adopt a methodology to validate results of on-the-ground testing based on the
146. The Vermont Department of Public Services generally supports on-the-ground testing, arguing it provides the most accurate information regarding availability of broadband, and would serve as a check on what is reported based on propagation modeling alone. We agree, and believe that requiring on-the-ground measurement testing will help ensure that 5G Fund support recipients are actually providing the level of service necessary to help close the digital divide. CTIA supports aligning the 5G Fund demonstrations of compliance and testing with the Digital Opportunity Data Collection proceeding and the Broadband DATA Act, noting that doing so will promote consistent information about mobile coverage, avoid confusion, and prevent wasted resources. AT&T urges the Commission not to adopt the
147. We agree with CTIA and AT&T that we should generally align the framework for 5G Fund support recipients to demonstrate compliance with public interest obligations and performance requirements with the Digital Opportunity Data Collection to the extent appropriate, and have taken steps to do just that. We also acknowledge the concerns raised by AT&T and have modified the requirements and methodologies proposed in the
148. The California Public Utilities Commission urges the Commission to require 5G Fund recipients to demonstrate milestone compliance with drive test data, until and unless recipients demonstrate that such test results validate the accuracy of propagation modeling and maps predicting coverage based on on-the-move radio frequency sampling. The California Public Utilities Commission notes that “drive tests” often includes two types of testing—tests taken from a moving vehicle and stationary tests taken at specific designated points—and that drive tests should be designed to capture the service parameters likely to be experienced by consumers and thus should be conducted using stationary testing, rather than testing from moving vehicles, because stationary testing will most accurately capture this user experience. The Institute for the Wireless Internet of Things at Northeastern University advocates for site surveying through unmanned aerial systems, with methodology hardened by experimentation at the AERPAW PAWR platform or other test environments where controlled flights are permitted, and for realistic, at-scale validation and testing using the world's largest radiofrequency emulation platform—Colosseum. We anticipate that the possible use of UAS for mobile coverage testing will be addressed subsequently along with other testing metrics and specifications.
149. In light of comments suggesting that we harmonize requirements in the 5G Fund with the Digital Opportunity Data Collection proceeding, we decline to adopt these alternative methods of demonstrating coverage. Our decision to align the test metrics, data specifications, and permitted testing applications as part of the 5G Fund's reporting requirements with those already adopted or that may be adopted for the Digital Opportunity Data Collection moots many of the issues raised in these comments. We anticipate that standardizing the data required for compliance reporting will ease the burden on support recipients throughout universal service programs, while collecting sufficient data to confirm that the 5G Fund's requirements have been met.
150. We disagree with the assertion that propagation modeling alone, in the absence of on-the-ground measurements to substantiate predicted coverage, is sufficient for 5G Fund support recipients, and note that our obligation to be good stewards of limited ratepayer funds weighs on our conclusion to also require on-the-ground tests. To the extent that commenters raise concerns about the burden of requiring such on-the-ground tests, we conclude that by relaxing the requirement to conduct a test in every grid cell, we have substantially reduced the burden of demonstrating compliance with 5G Fund public interest obligations and performance requirements. Moreover, we believe that bidders in a 5G Fund auction will adequately take into account the expected costs of demonstrating compliance when placing their bids, and that such costs would be less than the cost to the fund, in the absence of any on-the-ground testing requirement, of providing support to carriers that have not fully met their obligations. We defer to the pre-auction process specifying any further speed test parameters.
151. We adopt post-authorization non-compliance measures for the 5G Fund that are similar to the non-compliance measures and framework for support reductions applicable to all high-cost ETCs and the process adopted by the Commission for drawing on letters of credit for CAF Phase II and Rural Digital Opportunity Fund support recipients to address a support recipient's failure to meet a service milestone. We will require any support recipient to notify the Commission, USAC, and the relevant state, U.S. Territory, or Tribal government, if applicable, within 10 business days of its non-compliance with any interim milestone. Upon such notification, the Bureau will issue a letter evidencing the default, and the issuance of this letter will initiate reporting obligations and withholding a percentage of the 5G Fund support recipient's total monthly 5G Fund support, if applicable, starting the month after issuance of the letter. We will rely on the following non-compliance tiers for failure to meet the 5G Fund performance requirements as of the deadline for each interim service milestone:
152. A compliance gap is the percentage of required square kilometers that a recipient has not served by the relevant service milestone. A 5G Fund support recipient will have the opportunity to move tiers as it comes into compliance and will receive any support that has been withheld if it moves from one of the higher tiers (
153. We separately require a support recipient that has not deployed service that meets the performance requirements adopted for the 5G Fund to at least 20% of the total square kilometers associated with the eligible areas for which it is authorized to receive support in a state by the Year Three Interim Service Milestone deadline to notify the Commission and USAC within 10 business days of its non-compliance. Upon such notification, the Bureau will issue a letter evidencing the default, and the support recipient will be subject to full support recovery and will not be permitted to avail itself of the opportunity provided by the non-compliance tier framework to come into greater or full compliance.
154. We will require any support recipient to notify the Commission, USAC, and the relevant state, U.S. Territory, or Tribal government, if applicable, within 10 business days of its non-compliance with the Year Six Final Service Milestone. If a support recipient misses the Year Six Final Service Milestone, it will have 12 months from the date of the Year Six Final Service Milestone deadline within which to come into full compliance.
155. If the support recipient is not able to come into full compliance with the Year Six Final Service Milestone deployment requirements within this 12-month grace period, as verified by USAC, the Wireline Competition Bureau will issue a letter to that effect and support will be recovered as follows: (1) If the support recipient has deployed service to at least 80%, but less than the required 85%, of the total eligible square kilometers in a state, USAC will recover 1.25 times the average support amount per square kilometer that the recipient has received in the state times the number of square kilometers unserved, up to the 85% coverage requirement; (2) if the support recipient has deployed service to at least 75% but less than 80% of the total eligible square kilometers in a state, USAC will recover 1.5 times the average support per square kilometer that the recipient has received in the state times the number of eligible square kilometers unserved, up to the 85% coverage requirement, plus 5% of the recipient's total 10-year support in the state; and (3) if the support recipient has deployed service to less than 75% of the total eligible square kilometers in a state, USAC will recover 1.75 times the average support per square kilometer that that the recipient has received in the state times the number of eligible square kilometers unserved up to the 85% coverage requirement, plus 10% of the recipient's total 10-year support for the state.
156. We will apply the same support reduction if USAC subsequently determines in the course of a compliance review that a support recipient did not provide evidence to demonstrate that it was offering service at the required performance levels to the square kilometers required by the Year Six Final Service Milestone. The non-compliance measures we adopt are consistent with those adopted for the Rural Digital Opportunity Fund, with adjustments to account for the fact that we are proposing that the Year Six Final Service milestone require service to at least 85% of the total eligible square kilometers in a state.
157. We also adopt a service deployment requirement pursuant to which a 5G Fund support recipient must demonstrate that it provides service that aligns with the 5G Fund performance requirements established by the Commission to least 75% of the total square kilometers within each biddable area (
158. As for CAF Phase II and the Rural Digital Opportunity Fund, USAC will be authorized to draw on a 5G Fund support recipient's letter of credit to recover the full value of the support covered by the letter of credit in the event that a support recipient does not meet the relevant service milestones, does not come into compliance during the Year Six Final Service Milestone grace period, and does not repay the Commission the support associated with the non-compliance gap within a certain amount of time. If a support recipient is in Tier 4 status during the deployment period or has missed the Year Six Final Service Milestone, and USAC has initiated support recovery as described above, the support recipient will have six months to pay back the support that USAC seeks to recover. If the support recipient does not repay USAC by the deadline, the Wireline Competition Bureau will issue a letter to that effect and USAC will draw on the letter of credit to recover all of the support covered by the letter of credit, with any remaining balance due being a debt owed to the Commission by the support recipient.
159. If a support recipient has closed its letter of credit and it is later determined that the support recipient have ceased offering service at the required performance levels to the required square kilometers of eligible area in a state during the 10-year term of support, the support recipient will be subject to additional non-compliance measures, such as withholding of monthly payments and enforcement action, if it does not repay the Commission after six months. As for other high-cost universal service support programs, the failure to comply with the public interest obligations or any other terms and conditions associated with receipt of 5G Fund support may subject the support recipient to the Commission's existing enforcement procedures and penalties, reductions in support amounts, potential revocation of ETC designation, and/or suspension or debarment.
160. And as for CAF Phase II and the Rural Digital Opportunity Fund, 5G Fund support recipients will be subject to compliance reviews. If subsequent to the Year Six Final Service Milestone USAC determines that a support recipient does not have sufficient evidence to demonstrate that it continues to offer service that meets the performance requirements adopted for the 5G Fund to all of the eligible square kilometers in the state as required by the Year Six Final Service Milestone, USAC will immediately recover a percentage of support from the support recipient.
161. As we concluded in the
162. We adopt our proposal to require parties seeking 5G Fund support to satisfy eligibility requirements that are consistent with those adopted for Mobility Fund Phase I, CAF Phase II, and the Rural Digital Opportunity Fund.
163.
164. As the Commission determined in CAF Phase II, permitting entities to obtain ETC designation after the announcement of winning bidders for support encourages broader participation in the competitive process by a wider range of entities. It will also conserve participants' resources by avoiding obligations for auction participants who do not win any coverage areas in the auction, as well as safeguarding potential bidding strategies of applicants seeking ETC designation before an auction. The Commission's experience with CAF Phase II indicates that most applicants were ultimately designated within the long-form review period, even if it took them longer than the deadline for submitting proof of ETC designation. If the ETC process takes longer than 180 days, we will entertain requests from winning bidders for waiver of the ETC deadline. Consistent with the approach adopted for CAF Phase II and the Rural Digital Opportunity Fund, we will require such waiver requests to demonstrate that the ETC application was filed no later than 30 days after the release of the public notice announcing that it is a winning bidder or that the petitioner has a persuasive good-faith case for not having done so. As the Commission discovered with both the rural broadband experiments and CAF Phase II auction, there were various circumstances impacting the ability of individual bidders to file their ETC applications, and when an application was filed did not always determine whether an applicant was designated within the 150 remaining days. We note that any circumstances where a state will need more time due to procedural requirements or resource issues can be dealt with through the waiver process. The limited comment we received on our ETC designation eligibility requirement proposals support this approach.
165.
166. Therefore, for those entities that obtain ETC designations after becoming winning bidders in a 5G Fund auction, we forbear from applying section 214(e)(5) of the Act, insofar as this section requires that the service area of such an ETC conform to the service area of any rural telephone company serving an area eligible for 5G Fund support. We note that forbearing from the service area conformance requirement eliminates the need for redefinition of any rural telephone company service areas in the context of 5G Fund competitive bidding process. Accordingly, Commission rules regarding the redefinition process are inapplicable to petitions that are subject to this Report and Order. However, if an existing ETC seeks support through the 5G Fund competitive bidding process for areas within its existing service area, this forbearance will not have any impact on the ETC's pre-existing obligations with respect to other support mechanisms and the existing service area. For the Mobility Fund Phase I auction, the Commission forbore from requiring that the service areas of an ETC conform to the service area of any rural telephone company serving the same area, pursuant to section 214(e)(5) of the Act and section 54.207(b) of the Commission's rules. Similarly, the Commission concluded that like Mobility Fund Phase I, some of the price cap carrier study areas that may become eligible for the CAF Phase II and the Rural Digital Opportunity Fund competitive bidding processes meet the statutory definition so that the carrier serving those study areas would be classified as a rural telephone company.
167. We find that forbearance is warranted in these limited circumstances. Our objective is to distribute support to winning bidders as soon as possible so that they can begin the process of deploying new broadband service to consumers in those areas. Case-by-case forbearance would likely delay our post-selection review of entities once they are announced as winning bidders.
168. The Act requires the Commission to forbear from applying any requirement of the Act or our regulations to a telecommunications carrier if the Commission determines that: (1) Enforcement of the requirement is not necessary to ensure that the charges, practices, classifications, or regulations by, for, or in connection with that telecommunications carrier or telecommunications service are just and reasonable and are not unjustly or unreasonably discriminatory; (2) enforcement of that requirement is not necessary for the protection of consumers; and (3) forbearance from applying that requirement is consistent with the public interest. We conclude each of these statutory criteria is met for the 5G Fund for the same reasons we concluded they were met for Mobility Fund Phase I, CAF Phase II, and the Rural Digital Opportunity Fund.
169.
170.
171.
172. Similarly, enabling new ETC service areas to be defined in a more targeted manner for the 5G Fund is consistent with our approach of targeting support to areas with a specific need for the support, helps preserve those efficiencies, and thus serves the public interest. 5G Fund support will be determined by a competitive bidding process in which ETCs will bid for the support they need to serve a specific area, rather than any larger area, such as an underlying rural telephone company study area. Absent forbearance, we find that entities seeking 5G Fund support may be required to take on unsupported ETC obligations in portions of rural carriers' study areas—areas that may not be eligible for support or for which they may not win support—and that this is likely to discourage participation in a 5G Fund auction. We conclude that requiring 5G Fund support recipients to serve a wider area runs counter to the Commission's recent and ongoing efforts to serve the public interest by focusing Universal Service Fund resources on defined areas of need.
173. We also note that requiring each 5G Fund support recipient to conform its service areas to those of the rural telephone companies in the states they seek to serve could result in lengthy redefinition proceedings, which may delay our post-auction review of winning bidders' long-form applications and consequently delay our distribution of 5G Fund support and the deployment of voice and 5G broadband services in the area(s) won by the support recipient.
174. In addition, we find that in these limited circumstances requiring conformance is not essential to protect the ability of rural telephone companies to continue to provide service. Past concerns that an ETC serving only a relatively low-cost portion of a rural carrier's service area might cream skim by receiving per line support based on the rural carrier's costs of serving the entire area are not relevant to 5G Fund support, which will be awarded through a competitive process. Unlike the legacy identical support rule, under which a competitive ETC received the same per-line support as an incumbent calculated based on the incumbent's cost of serving its entire service area, the amount of 5G Fund support is not linked to the support received by an overlapping rural carrier but is determined by the results of competitive bidding for support. Consequently, cream skimming concerns that arose under the identical support rule are not relevant for purposes of seeking 5G Fund support. Moreover, because the Commission decided in the
175. For similar reasons, we conclude that forbearance in these limited circumstances will not harm competitive market conditions. The public interest benefits of forbearance go beyond efficiently enabling consumer access to 5G services. If anything, forbearance may enhance competition by introducing new service providers to the market and, as discussed above, will not eliminate any existing market participants or introduce concerns about cream skimming. ETCs that receive 5G Fund support will have the obligations of any other ETCs, including an obligation to make available Lifeline service to eligible low-income consumers, and thus an ETC deploying 5G services to new areas as part of the 5G Fund also will be making its services available to low-income consumers who may qualify to receive reduced charges for these advanced services. Moreover, as a 5G Fund support recipient is deploying service in its funded areas, it may also find that it has a business case to deploy service in surrounding areas, thereby increasing competition and providing more options for consumers.
176. We further note that forbearance from the conformance requirement and redefinition process for these limited purposes should not affect rural carriers' abilities to serve their entire rural service territories. Moreover, the Act contains safeguards to address any such potential concerns. The Act already requires designating commissions to affirmatively determine that designating a carrier as an ETC within a rural service area is in the public interest, and this is not affected by this grant of forbearance.
177. We will require that an applicant seeking to participate in a 5G Fund auction have exclusive access to licensed spectrum with sufficient bandwidth in an area that enables it to satisfy the applicable performance requirements in order to receive 5G Fund support for that area. As more fully explained in the application process requirements we adopt herein, we will require an applicant to have exclusive access to licensed spectrum with sufficient bandwidth (
178. Consistent with what the Commission has required in other universal service proceedings, we adopt our proposal to require an entity to certify that it is financially and technically qualified to meet the 5G Fund public interest obligations and performance requirements within the 10-year support term in the geographic areas for which it seeks support. We implemented such a requirement for Mobility Fund Phase I, Tribal Mobility Fund Phase I, CAF Phase II, and the Rural Digital Opportunity Fund, and we conclude it is an equally appropriate requirement for the 5G Fund. As we have previously stated, “it would not be administratively efficient to conduct a competitive bidding process with participation from entities that are not prepared to make such commitments.” Accordingly, requiring this certification is a reasonable protection for the auction process and to safeguard the award of universal service funds. As more fully explained in the application process requirements we adopt herein, we will require an applicant to certify as to its financial and technical qualifications in both its pre-auction short-form application and its post-auction long-form application.
179. To encourage participation by the widest possible range of entities, we adopt our proposal to permit all qualified applicants to participate in a 5G Fund auction. Our commitment to fiscal responsibility requires that we distribute our finite budget cost effectively in light of our goals for the 5G Fund and consistent with the bidding procedures we adopt for the auction. The Commission did not prohibit any particular class of parties from participating in Mobility Fund Phase I based on size or other concerns or from seeking Mobility Fund Phase I support based solely on a party's past decision to relinquish universal service support provided on another basis. In order to avoid potentially limiting our ability to close the 5G coverage gap, we follow the same approach here. We expect that our general auction rules and procedures will provide the basis for an auction process that promotes our objectives for the 5G Fund and provide a fair opportunity for all serious, interested parties to participate.
180. AST&Science asks the Commission to allow mobile-satellite companies capable of providing 5G-NR broadband service to standard smartphones and off-the-shelf user devices to participate meaningfully in closing the digital divide by partnering with terrestrial broadband providers in the 5G Fund auction. It states that providers should be invited to demonstrate, on a case-by-case basis at the short-form application stage, the capability of these transformational, mobile-satellite-based technologies to meet the technical and performance standards for the 5G Fund, consistent with the Commission's longstanding policy of implementing regulatory policies in a technologically-neutral fashion and in a manner that avoids picking winners and losers. AST&Science submits that this approach would enable it to more quickly implement its business plan of formulating cooperative arrangements with wireless carriers to extend high-quality 5G services to areas that are extremely unlikely to be covered by traditional terrestrial technologies. SES Americom and O3B Limited similarly state the Commission “should not stifle 5G deployment by barring mobile service providers from using satellite technologies that can support latency-sensitive mobile services, such as SES's Medium Earth Orbit (“MEO”) satellite network.”
181. RWA asserts that satellite providers should be eligible to participate in a 5G Fund auction “if they can (1) meet the proposed speed and latency performance requirements; and (2) provide for continuity of mobile service by being capable of holding voice and data sessions while moving across the country at speeds of 75 miles per hour without regularly dropping the session, and being able to provide roaming services at reasonable rates to other carriers pursuant to the Commission's roaming rules.” We decline to adopt RWA's continuity of mobile service threshold for being capable of holding voice and data sessions without regularly dropping a session because we find it adds a qualifier to the definition of what we consider to be a component of 5G mobile service. We are unconvinced that this qualifier is how reasonably comparable 5G services in urban environment are defined. We therefore conclude that the requirements we adopt for median data speed, latency, and technology standards are sufficient to capture the range of services that customers reasonably expect 5G services to provide.
182. Consistent with our decision to permit all qualified applicants to participate in a 5G Fund auction, we will not categorically preclude a satellite provider from applying for, bidding in, and winning 5G Fund support in a 5G Fund auction, provided that it is otherwise eligible. We note that pursuant to the rules we adopt herein, entities seeking 5G Fund support must satisfy certain eligibility requirements, and 5G Fund support recipients must be capable of providing mobile, terrestrial voice and broadband services that meet public interest obligations and performance requirements we adopt for the 5G Fund as a condition of receiving support—which include among other things offering voice and 5G broadband service that conforms to the 5G-NR standard using permitted spectrum bands directly to an off-the-shelf handset (
183. In the
184. AT&T, the California Public Utilities Commission, CCA, RWA, and Verizon agree with our tentative conclusion that T-Mobile should not be allowed to use 5G Fund support to fulfill its transaction commitments to deploy 5G. T-Mobile does not object to prohibiting it from using 5G Fund support to meet its transaction commitments, but argues that such a prohibition should not apply only to it, asserting that it would be unfair to single out T-Mobile in this way and that such a prohibition applied only to T-Mobile would be an inefficient use of funds. T-Mobile has encouraged the Commission to rely on objective criteria such as rurality and population density or coverage data to determine the areas that are eligible for 5G Fund support, and to keep T-Mobile's transaction commitments separate from the 5G Fund. We believe that establishing 5G Fund auction eligibility based upon a new mobile data coverage collection, combined with the procedures we adopt herein regarding enforceable commitments to deploy 5G, appropriately address this concern while balancing our priorities in distributing universal service fund support.
185. CRWC asserts that T-Mobile could game any pre-auction commitment process by strategically selecting areas thereby excluding them from the 5G Fund auction for anti-competitive reasons, cross-subsidize its merger commitments, and then face no consequences if it ultimately does not decide to deploy in those areas. Accordingly, CRWC argues that T-Mobile should be barred from participating in a 5G Fund auction. CRWC attempts to show that it would be optimal to exclude T-Mobile from the auction through a stylized numerical simulation of subsidy auctions in Missouri. CRWC quantifies the benefits of excluding T-Mobile by comparing its simulations to two baseline scenarios making the following assumptions about T-Mobile's conduct: (1) T-Mobile might not deploy 5G in an eligible area if another provider could cover that area for a lower cost, or (2) T-Mobile would not deploy at all in any eligible area. However, it is likely T-Mobile will deploy in many eligible areas regardless of where other providers deploy or what happens in an auction, especially in light of its transaction commitments; in those cases, the area would not require a subsidy to be served. These baseline scenarios are therefore inappropriate. Further, the analysis ignores the auction budget constraint, and therefore cannot capture the benefits of increased competition by including T-Mobile. The analysis also attempts to demonstrate that T-Mobile could use the pre-selection process to strategically disadvantage rival service providers, but it is based on a single simplified theoretical scenario with no evidence of its practical relevance. RWA also argues that T-Mobile should not be able to make pre-auction binding commitments to deploy 5G that would remove areas from the auction.
186. In advocating for Commission approval of its transaction with Sprint, T-Mobile made several commitments to deploy 5G, which were adopted as conditions of approval. T-Mobile is subject to significant financial penalties if it does not meet its 5G deployment commitments. We expect T-Mobile to be able to fulfill these commitments without 5G Fund support based upon their claimed merger synergies. Accordingly, we agree that T-Mobile should not be allowed to use 5G Fund support to fulfill its transaction commitments to deploy 5G. We are mindful that other entities could be similarly situated to T-Mobile, with enforceable commitments to deploy 5G, and any such entities will likewise not be allowed to use 5G Fund support to fulfill their commitments. We note that on July 26, 2019, DISH filed applications seeking more time to satisfy the construction requirements for its AWS-4, Lower 700 MHz E Block, and AWS H block licenses, and that DISH has enforceable commitments to deploy 5G and is subject to significant penalties if it fails to meet its commitments. Accordingly, DISH cannot use 5G Fund support to meet its enforceable 5G deployment commitments. We will nevertheless evaluate enforceable commitments other than T-Mobile's on a case-by-case basis considering the specific commitments and our goals in the 5G Fund.
187. We are mindful that prohibiting carriers with enforceable commitments from participating in a 5G Fund auction would accomplish the goal of preventing universal service funds from being used to fulfill those commitments. Such a prohibition, however, would not address our interest in avoiding the use of universal funds to overbuild areas that will already see 5G deployment. As we noted in the
188. We conclude that our approach to enforceable commitments to deploy 5G must promote our goals of: Prohibiting the use of 5G Fund support to fulfill enforceable 5G deployment commitments; avoiding the use of 5G Fund support to overbuild areas that will see unsubsidized 5G deployment; and establishing procedures that will ensure a fair and competitive auction. Accordingly, we will allow T-Mobile to make pre-auction, binding commitments to deploy 5G in certain areas, thus removing those areas from the auction inventory of areas eligible for support. We note that if T-Mobile does remove areas from the auction inventory of areas eligible for support, then those areas would be subject to the drive-testing requirements negotiated in the transaction and not to the 5G Fund performance requirements. We direct the Office and Bureau to establish the specific procedures for pre-auction binding commitments, that would cover, as appropriate, qualifications and restrictions on participating in the pre-selection process. These pre-auction commitment procedures will address which entities with enforceable commitments can use these procedures. For example, these procedures will address whether DISH should receive the same or similar treatment as T-Mobile. These procedures can address, as appropriate, deterrence of any anti-competitive behavior, performance measures, noncompliance penalties, and any actions (before, during, or after the auction) that would run contrary to the goals of the 5G Fund. We are confident that the Office and Bureau can develop and implement procedures that accord with enforceable commitments, balance our priorities, ensure the most efficient use of our limited funds, and appropriately address anti-competitive concerns.
189. In addition, we will allow T-Mobile to participate—and win support—in the 5G Fund auction, but consistent with our prohibition on using universal service support to fulfill other 5G deployment obligations, we will not allow T-Mobile to claim any population in areas won in the 5G Fund auction toward their population-based merger commitments. Similar to T-Mobile's commitment concerning its potential participation in the Puerto Rico/U.S. Virgin Islands Stage 2 Competition, population in any areas won by T-Mobile in a 5G Fund auction will be added to its merger population commitments, such that T-Mobile's total deployment commitment shall increase in equal measure. The same condition will apply to any similarly situated carrier with enforceable commitments for 5G deployment that participates in the 5G Fund auction, preventing the 5G Fund supported deployments from counting toward satisfying the carrier's enforceable commitments to deploy 5G.
190. These measures balance our interests in prohibiting entities from using universal service funding to fulfill enforceable commitments, limiting overbuilding by not subsidizing areas that will already see timely 5G deployment without universal service support, and holding an efficient, open auction in which entities can compete vigorously for funding to serve areas that they would not otherwise serve without support.
191. We adopt our proposal to allow recipients of other high-cost universal service support to participate in a 5G Fund auction. While we will not prohibit applicants from participating in a 5G Fund auction merely because they have won support through other universal service mechanisms, we note that the goals of 5G Fund are to help ensure the availability of
192. Consistent with prior Commission auctions and the process adopted for the Rural Digital Opportunity Fund, we adopt a two-stage application process for the 5G Fund, consisting of pre-auction and post-auction requirements. Each entity interested in participating in a 5G Fund auction will be required to file a pre-auction short-form application that provides basic information and certifications regarding its qualifications to receive support. If determined to be qualified to bid, an applicant will be allowed to participate in the auction. After the auction concludes, a winning bidder must file a post-auction long-form application with more extensive information about its qualifications, funding, and the network it intends to use to meet its 5G Fund public interest obligations and performance requirements to demonstrate to the Commission that it is legally, technically and financially qualified to receive 5G Fund support. As we did for CAF Phase II and the Rural Digital Opportunity Fund, we stress that each potential bidder has the sole responsibility to perform its due diligence research and analysis before proceeding to participate in a 5G Fund auction. We direct the Office and Bureau and to adopt the format and deadlines for the submission of documentation for the short-form and long-form application processes.
193. As more fully explained below, we adopt our proposal to apply the Commission's existing Part 1, Subpart AA universal service competitive bidding rules to entities seeking to participate in the competitive bidding process for 5G Fund support so that such entities will be required to: (1) Provide information that would establish their identity, including disclosing parties with ownership interests and any agreements they may have relating to the support to be sought through the competitive bidding process, (2) identify their authorized bidders, (3) make various universal service support specific certifications, (4) provide any additional information that may be required by the Commission in order to evaluate their qualifications to participate in the competitive bidding process, and (5) comply with the rule prohibiting certain communications during the competitive bidding process. We also adopt our proposed amendments to various Part 1, Subpart AA rules to codify policies and procedures applicable to the auction application process that have been adopted for CAF Phase II and the Rural Digital Opportunity Fund, better align provisions in Part 1, Subpart AA with like provisions in the Commission's Part 1, Subpart Q spectrum auction rules, and make other updates for consistency, clarification, and other purposes. We received no comments on our proposed
194. An entity interested in participating in the 5G Fund competitive bidding process will submit a pre-auction short-form application in which it must provide, among other things, information as to the applicant's identity, ownership, and any agreements into which it has entered, as well as a description of the applicant's access to spectrum and various applicant certifications. Commission staff then will review the submitted short-form applications to determine whether applicants have provided the necessary information required at the short-form stage and thereafter release a public notice indicating which short-form applications are deemed complete and which are deemed incomplete. Consistent with CAF Phase II and the Rural Digital Opportunity Fund, applicants whose short-form applications are deemed incomplete will be given a limited opportunity to cure defects and to resubmit correct applications, excluding major modifications. As in CAF Phase II and the Rural Digital Opportunity Fund, following the conclusion of the short-form application review process and a determination of which applicants are qualified to participate in the auction, a public notice will be released identifying those applicants that may bid in the auction.
195.
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203. Because the spectrum an applicant plans to use to meet its 5G Fund public interest obligations and performance requirements must be capable of supporting 5G service as it is defined in the performance requirements adopted for 5G Fund support, we will require that entities seeking to receive support from the 5G Fund have access to spectrum and sufficient bandwidth (at a minimum, 10 megahertz x 10 megahertz using frequency division duplex (FDD) or 20 megahertz using time division duplex (TDD)) capable of supporting 5G services in the particular area(s) for which it intends to bid. An applicant will be required to disclose the total amount of bandwidth (in megahertz) to which the applicant has access under the license applicable to the spectrum to be accessed.
204. In addition, we will permit an applicant to rely only on licensed spectrum to which the applicant has exclusive use (
205. AST&Science supports requiring applicants to demonstrate that they have access to spectrum in an area sufficient to satisfy the 5G Fund performance requirements, but asks the Commission to clarify that an applicant with a binding contract to gain access to the requisite spectrum at the time of the auction meets this eligibility requirement. AST&Science submits that a contractual right to access spectrum should be sufficient even if Commission approval is necessary to consummate the contract, as long as there is no apparent regulatory disability that would prevent the applicant from securing the requisite consent, and advocates allowing a winning bidder to file the requisite request for Commission approval promptly (
206. We decline to allow a winning bidder to obtain any necessary spectrum access approvals after the auction because we find that doing so in an auction where spectrum is the sole technology that will be relied upon by a winning bidder to meet the public interest obligations and performance requirements associated with receiving support could increase the risk of defaults if it is ultimately unable to secure the necessary approvals. Unlike the post-auction ETC designation process with state entities or the Commission, pre-auction agreements between private parties for exclusive use of licensed spectrum that are contingent upon a party winning in the auction could raise auction integrity concerns involving, for example, prohibited communications between potential bidders and joint bidding. In addition, such agreements present more risk of default for multiple reasons, including the statutory requirements for Commission approval of such agreements. In addition, it would not be appropriate for the short-form application review process to effectively grant an advisory opinion on whether an applicant is likely to receive Commission approval for spectrum access after due consideration of the spectrum screen and any potential competitive implications. Accordingly, we conclude that requiring an applicant to have secured any Commission approvals necessary for the required spectrum access prior to submitting its short-form application to participate in a 5G Fund auction, as we did for Mobility Fund Phase I, CAF Phase II, and the Rural Digital Opportunity Fund, will serve to avoid these issues.
207. RWA supports our proposal to require 5G Fund auction applicants to demonstrate that they have access to sufficient bandwidth to meet their 5G Fund public interest obligations and performance requirements, and submits that a minimum of 15 megahertz of spectrum should be available in a given census tract that can be devoted to 5G use because 15 megahertz is a sufficient amount of spectrum to support 35/3 Mbps speed when used in coordination with Multiple Input Multiple Output
208. RWA opposes allowing unlicensed spectrum to be used to satisfy the spectrum access eligibility criterion because its availability cannot be relied upon, but submits that General Authorized Access (GAA) spectrum in the Citizens Broadband Radio Service should be considered qualifying spectrum if enough is available in the rural area due to the presence of Spectrum Access System (SAS) administrators in the 3550-3700 MHz band (3.5 GHz band). The Commission adopted a three-tiered access and authorization framework to coordinate shared federal and non-federal use of the 3.5 GHz band, with incumbents comprising the first tier (Incumbent Access) and receiving protection from all other users, followed by Priority Access Licenses (PALs) in the second tier, and GAA in the third tier. GAA spectrum is available on a shared/non-exclusive basis throughout the 3550-3700 MHz band (3.5 GHz band), and GAA users are also permitted to use frequencies in the 3550-3650 MHz band when higher-tier Incumbent Access tier users and Priority Access Licensees are not using the spectrum, as determined by the SAS, and consistent with the rules governing PAL protection areas. GAA users must avoid causing harmful interference to higher-tier users and must accept interference from all other users, including other GAA users. We decline to allow 5G Fund support recipients to rely only on GAA spectrum to satisfy the spectrum access requirements we adopt for the 5G Fund. We find that the criteria for gaining and retaining access to GAA spectrum and the interference provisions associated with its use are inconsistent with the spectrum access requirements we adopt for an applicant seeking to participate in the 5G Fund, which require an applicant to demonstrate that it has secured access to spectrum and sufficient bandwidth to meet the 5G Fund public interest obligations and performance requirements in the areas for which it seeks support prior to submitting its short-form application and to certify that it will retain such access over the ten year support term if it is authorized to receive 5G Fund support. We therefore conclude that, similar to unlicensed spectrum, the availability of GAA spectrum cannot be relied upon by a 5G Fund support recipient to meet its public interest obligations and performance requirements because the recipient may not be able to predictably and/or consistently gain and/or retain access to GAA spectrum throughout the support term, which could significantly increase its risk of default. Thus, while we will permit a 5G Fund support recipient to use GAA spectrum to augment its spectrum access in its provision of 5G service in areas for which it is awarded support, it must have exclusive access to a sufficient amount of spectrum that enables it to meet the 5G Fund public interest obligations and performance requirements independently of any GAA spectrum use. Consistent with our decision not to allow 5G Fund support recipients to rely on GAA spectrum alone to satisfy the spectrum access requirements we adopt for the 5G Fund, we will similarly not allow 5G Fund support recipients to rely on GAA spectrum alone to meet the associated minimum bandwidth requirement we adopt. Thus, while a 5G Fund support recipient may use GAA spectrum to augment the amount of bandwidth it has available to meet the 5G Fund public interest obligations and performance requirements, it must have access to sufficient bandwidth that enables it to meet the minimum bandwidth requirement independently of any GAA spectrum use.
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212. As in any Commission auction for universal service fund support, we seek to balance the burdens on 5G Fund auction applicants of completing a short-form application with the Commission's statutory obligation to protect universal service funds, the integrity of the auction, and rural consumers. We conclude that requiring a potential bidder to submit evidence in its short-form application that it can meet the 5G Fund public interest obligations and performance requirements in the area(s) for which it seeks 5G Fund support strikes the correct balance of helping to safeguard consumers from situations where bidders unable to meet such obligations divert support from bidders that can meet them while not being unduly burdensome for auction applicants.
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217. Further, we adopt our other proposed amendments to section 1.21002 to better align with our spectrum auction rules and the decisions adopted herein. We will require an applicant that has a non-controlling interest with respect to more than one application to implement internal controls that preclude any person acting on behalf of the applicant from possessing information about the bids or bidding strategies of more than one applicant or communicating such information with respect to either applicant to another person acting on behalf of and possessing such information regarding another applicant. We will also require an applicant to modify its application for an auction to reflect any changes in ownership or in membership of a consortium or a joint venture or agreements or understandings related to the support being sought. In addition, we adopt our proposed clarification and accuracy amendments to section 1.21002 concerning the procedure for reporting a prohibited communication.
218. The Commission adopted rules, including a provision referred to as the “red light rule,” that implement the Commission's obligation under the Debt Collection Improvement Act of 1996, which governs the collection of debts owed to the United States, including debts owed to the Commission. Under the red light rule, applications and other requests for benefits filed by parties that have outstanding debts owed to the Commission will not be processed. Applicants seeking to participate in a universal service auction are subject to the Commission's red light rule. Pursuant to the red light rule, unless otherwise expressly provided for, the Commission will withhold action on an application by any entity found to be delinquent in its debt to the Commission.
219. Concluding that robust participation would be critical to the success of the CAF Phase II auction, the Commission provided a limited waiver of the red light rule for any CAF Phase II auction applicant seeking to participate in the auction that was red lighted for debt owed to the Commission at the time it timely filed its short-form application. Because we consider robust participation to be critical to the success of any universal service auction, including a 5G Fund auction, we adopt our proposed amendments to the Commission's rules to codify the relief granted by the CAF Phase II auction limited waiver, to provide an applicant seeking to participate in any universal service auction the opportunity to resolve its red light issue(s) by the close of the application resubmission filing window. Under this approach, a red lighted applicant seeking to participate in a universal service auction will have until the close of the application resubmission filing window for that auction to resolve with its red light issue(s). If the applicant has not resolved its red light issue(s) by the close of the initial application filing window for a given auction, its application would be deemed incomplete, and if the applicant has not resolved its red light issue(s) by the close of the application resubmission window for the auction, Commission staff will immediately cease all processing of the applicant's short-form application, and the applicant will be deemed not qualified to bid in the auction.
220. We provide no further opportunity for an applicant to cure any red light issue beyond what we describe here. Moreover, we emphasize that the amendments we adopt here do not waive or otherwise affect the Commission's right or obligation to collect any debt owed to the Commission by a universal service auction applicant by any means available to the Commission, including set off, referral of debt to the United States Treasury for collection, and/or by red lighting other applications or requests filed by the affected auction applicant.
221. After the close of the auction, a public notice will be released declaring the auction closed, identifying the winning bidders, and establishing details and deadlines for next steps. A winning bidder will then be required to submit a post-auction long-form application with more extensive information about its qualifications, funding, and the network it intends to use to meet its 5G Fund public interest obligations and performance requirements, allowing for a further in-depth review of its qualifications prior to authorization of support.
222. We adopt our proposal to apply the Commission's existing Part 1, Subpart AA universal service competitive bidding rules (including the amendments to those rules adopted herein) to 5G Fund auction winning bidders applying for 5G Fund support, as well as our proposed amendments to such rules. We also adopt our proposal to require 5G Fund auction winning bidders to provide the information described below in their post-auction long-form applications to demonstrate their qualifications for support. We conclude the long-form application requirements we adopt here provide for a fair and efficient review process and will best serve the Commission's ability to determine whether the applicants are ultimately eligible for 5G Fund support authorization funding.
223.
224.
225.
226.
227.
228.
229.
230.
231.
232. We adopt the same letter of credit rules for the 5G Fund as adopted for the Rural Digital Opportunity Fund, inclusive of subsequent guidance concerning the issuance of letters of credit by non-United States banks. Letters of credit must be issued by a bank that is acceptable to the Commission in substantially the same form as set forth in the model letter of credit in Appendix C to this
233. In addition, to ensure uniformity and transparency across our high-cost universal service rules, we adopt our proposed amendments to the Commission's letter of credit rules for other universal service programs to codify the expansion of the definition of branch offices of non-United States banks that are considered eligible to issue letters of credit concerning such programs.
234. Prior to being authorized for support, a 5G Fund long-form applicant must obtain a letter of credit valued at
235. Consistent with the rules adopted for the Rural Digital Opportunity Fund, we will allow a 5G Fund support recipient to reduce the value of its letter of credit after it meets—and USAC verifies that a support recipient has completed—a relevant service milestone deadline. Specifically, we require support recipients to submit their service milestone reports to USAC by March 1 of the calendar year following each applicable December 31 milestone deadline. Upon verification by USAC that the support recipient has timely met a service milestone, we will then allow the recipient to reduce the value of its letter of credit to an amount equal to only one year of total support. Once a support recipient reduces the value of its letter of credit to an amount equal to one year of total support, we will allow the recipient to maintain its letter of credit at that level for the remainder of the service milestones, as long as USAC verifies that the support recipient has successfully and timely met each of its remaining service milestone obligations and deadlines.
236. Additionally, consistent with the rules adopted for the Rural Digital Opportunity Fund, we adopt our proposal to create an Optional Year Two Interim Service Milestone to provide an accelerated approach for a 5G Fund support recipient to reduce its letter of credit. Under this approach, a support recipient may reduce the value of its letter of credit to an amount equal to one year of total support if it is providing—and USAC has verified that it is providing—service that meets the performance requirements adopted for the 5G Fund to at least 20% of the total square kilometers associated with the eligible areas for which it is authorized to receive support in a state by December 31 of the second full calendar year following support authorization. This approach allows a support recipient to demonstrate concrete progress in service deployment earlier than its required milestones (
237. Consistent with the approach adopted for the Rural Digital Opportunity Fund, a 5G Fund support recipient does not need to wait for a specific support year to end to meet a deployment milestone. For example, if a support recipient is able to deploy to 20% of the total square kilometers associated with the eligible areas for which it is authorized to receive support in a state by the end of Year One, it may report its deployment progress and request that USAC complete the verification process in order to allow it to reduce the value of its letter of credit to an amount equal to one year of support. In those instances, we require that a support recipient be able to promptly produce the necessary documentation to minimize the time required for USAC to verify its milestone.
238. As we determined for the Rural Digital Opportunity Fund, we find it necessary to maintain larger letters of credit for support recipients that fail to meet their service deployment milestones by the applicable deadlines. Specifically, if a support recipient misses a required interim service milestone, it will be required to obtain a new letter of credit (or renew its existing letter of credit) that it is valued at an amount equal to its existing letter of credit, plus an additional year of support, up to a maximum of three years of its total support. Likewise, any support recipient that fails to meet two or more service milestones (that is, fails to catch up after missing a service deployment milestone and remains behind on service deployed to the required percentage of square kilometers at the next service milestone deployment deadline) will be required to maintain a letter of credit in the amount of three years of support and will be subject to the additional non-compliance measures we adopt herein. We find that these increased letter of credit requirements will both protect federal funds from potential non-compliance and serve as an incentive to timely deployment. Under the non-compliance measures we adopt herein, a support recipient that fails to meet any required service milestone must file a letter informing the Commission of the missed milestone within 10 business days of the conclusion of the relevant support year for which that milestone was applicable, which will allow the Wireline Competition Bureau to determine whether it is necessary to direct USAC to suspend disbursements to the recipient or engage other mechanisms, including requiring a greater value letter of credit going forward.
239. We will require a 5G Fund support recipient to maintain a letter of credit until it has certified, and USAC has verified, that it is providing service that meets the 5G Fund performance requirements to at least 85% of the total square kilometers associated with the eligible areas for which it is authorized to receive support in a state, and at least 75% of the total square kilometers in each eligible census tract in a state, by the Year Six Final Service Milestone deadline. Consistent with the approach adopted for CAF Phase II and the Rural Digital Opportunity Fund, a 5G Fund support recipient may be subject to other action if it does not comply with the public interest obligations or any other terms and conditions associated with receiving 5G Fund support, including but not limited to the Commission's existing enforcement procedures and penalties, reductions in support amounts, revocation of ETC designations, and suspension or debarment.
240. We find that the letter of credit schedule we adopt for 5G Fund support recipients balances the need to safeguard federal funds with the costs a support recipient many incur to maintain a letter of credit.
241. Consistent with CAF Phase II and the Rural Digital Opportunity Fund, we will only authorize USAC to draw on the letter of credit for the entire amount of the letter of credit if the entity does not repay the Commission for the support associated with its compliance gap. Additionally, as stated in CAF Phase II, “[i]f the entity fails to pay this support amount, we conclude that the risk that the entity will be unable to continue to serve its customers or may go into bankruptcy is more likely, and thus it is necessary to ensure that the Commission can recover the entire amount of support that it has disbursed.”
242. In instances where the amount of the letter of credit fails to satisfy the amount owed, such deficiency will be a debt due to the Commission and, if not paid, will be collected pursuant to the Commission's rules. Where the draw on the letter of credit results in a greater recovery than is required to satisfy the default, we direct the Wireline Competition Bureau to take appropriate
243. As we have previously recognized, we will again allow greater flexibility regarding letter of credit for Tribally owned and controlled winning bidders. Consistent with our approach for CAF Phase II and the Rural Digital Opportunity Fund, if any Tribally owned and controlled 5G Fund winning bidder is unable to obtain a letter of credit, it may file a petition for a waiver of the letter of credit requirement. Consistent with our precedent, a petitioner must show, with evidence acceptable to the Commission, that the Tribally owned and controlled winning bidder is unable to obtain a letter of credit.
244. As for the Rural Digital Opportunity Fund, we provide a letter of credit trajectory for 5G Fund support recipients that recognizes that once a recipient has demonstrated significant and verifiable progress toward meeting its service deployment obligations, it should have the opportunity to avoid some of the more costly letter of credit requirements. For support recipients that elect to deploy service quickly and meet the Optional Year Two Service Milestone early in their support term, and continue to meet all of their service milestones, their letters of credit may never exceed 18 months' support at any time during their support term. At the same time, the more gradual increase in the letter of credit requirements we adopt for support recipients that do not chose to take advantage of the Optional Year Two Service Milestone will nonetheless reduce potential financial strain on support recipients, and still allow those support recipients to maintain a smaller letter of credit after they timely meet their Year Three Interim Service Milestone.
245. Only two parties commented on our letter of credit proposals. RWA supports our proposal to adopt an early service milestone that would allow a support recipient to reduce the value of its letter of credit if it offers service that meets the established 5G performance requirements in at least 20% of the total square kilometers in its winning bid areas in a state by the end of Year Two. RWA submits that the letter of credit should be further reduced by another 20% at the end of Year Four, provided the recipient has met its Year Four 40% benchmark coverage, and by another 20% at the end of Year Six, provided the recipient has met its 60% coverage benchmark.
246. We decline to adopt the additional letter of credit reductions at the end of Year Four and Year Six advanced by RWA. We note that RWA's proposal is similar to proposals we received in the Rural Digital Opportunity Fund proceeding which we declined to adopt after determining that such proposals fail to sufficiently account for the Commission's interests in ensuring that universal service dollars are being used efficiently and for their intended purposes, as well as protecting against the potential for those carriers that may fail to fulfill their broadband deployment obligations. We conclude that the rules we adopt permitting 5G Fund support recipients to reduce their letters of credit after meeting the Optional Year Two Interim Milestone or the Year Three Interim Milestone—which are modeled on those adopted for the Rural Digital Opportunity Fund, and which took into account lessons learned from CAF Phase II and comments received in the Rural Digital Opportunity Fund proceeding—provide sufficient flexibility and will help reduce the costs of participating in the 5G Fund.
247. The National Association of Surety Bond Producers (NASBP) supports broadening the range of options for performance security to include a surety bond because it asserts that doing so would help rural internet service providers (ISPs) who are having difficulty securing sufficient collateral to obtain a letter of credit, and creates greater competition and participation, which may reduce costs while still protecting the government's financial interest. NASBP submits that a performance bond assures that carrier awarded support is qualified to perform its obligations under the award, and serves as a “deep pocket” in the event the carrier fails. It states that by comparison, a letter of credit is secured by a specific liquid asset(s), has a specific expiration date, and does not provide the same financial guarantee to the government. RWA supports NASBP's request to allow surety bonds as an option for performance security, stating that they are more economical than letters of credit, and that allowing their use would enable support recipients to make greater investment in their networks rather than tying up money on securing letters of credit.
248. We decline to allow the use of a surety bond as security for a 5G Fund participant's failure to meet its public interest obligations and/or and performance requirements. We note that these commenters' requests are similar to those we received in the Rural Digital Opportunity Fund proceeding, where we noted that letters of credit, unlike performance bonds, allow for an immediate reclamation of support in the event the recipient is not properly using those funds, and that performance bonds would not provide the same level of protection and would require the involvement of a third party to adjudicate any disputes that arise, which would complicate our process and unnecessarily limit the Commission's authority to allocate funds. A letter of credit, unlike a performance bond, has the benefit of the “independence principle” in that the letter of credit is independent of the underlying transaction. The bank's obligation to pay under the letter of credit does not depend on the auction winner's default but on the presentation of documents evidencing the default. As in the Rural Digital Opportunity Fund, we conclude that being independent in this way assures that USAC can collect monies due to it promptly without engaging in disputes with the winning bidder, the performance bond guarantor or the winning bidder's trustee in bankruptcy over whether the funds should be paid or even whether the funds are available to the 5G Fund due to competing claims of creditors.
249. As we noted in the
250.
251.
252. A winning bidder will be considered in default and will be subject to forfeiture if it is not authorized to receive 5G Fund support (
253. We conclude that it is reasonable to subject all bidders to the same $3,000 base forfeiture per violation subject to adjustment based on the criteria set forth in our forfeiture guidelines. To determine the final forfeiture amount, the Commission's Enforcement Bureau will consider the “nature, circumstances, extent and gravity of the violations and, with respect to the violator, the degree of culpability, any history of prior offenses, ability to pay, and such other matters as justice may require.”
254. As the Commission has previously stated, auction defaults undermine the stability and predictability of the auction process and impose costs on the Commission and higher support costs for the Universal Service Fund. They also hinder the disbursement of funds that could have gone to another carrier, and thereby further delay the deployment of broadband service offerings in unserved areas. The 5G Fund represents our biggest undertaking for any mobile universal service program thus far, and will award the largest amount of support for mobile service deployments to date. The areas eligible for 5G Fund support will be those that have been determined to lack unsubsidized 4G LTE and 5G broadband service by at least one carrier. Therefore, in keeping with our goal of facilitating the deployment of 5G mobile services to as many of these areas as possible with the limited funds that are available, and as responsible stewards of 5G Fund support, it is imperative that we ensure that there are appropriate safeguards in place to deter auction defaults by 5G Fund winning bidders to the greatest extent possible.
255. In adopting procedures for competitive bidding in advance of an auction, the Commission makes a determination through notice and comment regarding how it will calculate payments or forfeitures for an auction default, taking into account the nature of the auction, lessons learned from past auctions, and other relevant factors. We note that in our typical spectrum auctions, where the
256. In view of this, we modify our proposal to limit the total base forfeiture to a percentage of a winning bidder's total winning bid amount for the support term, and will instead limit the total base forfeiture to 15% of the support at the opening price for an area for the entire 10-year support term for each separate violation. The opening price multiplied by the number of adjusted square kilometers in an area represents the highest support amount that a winning bidder could receive for that area in the auction for the 10-year support term. Given the nature of 5G Fund auctions, we find that basing the limit of the forfeiture on the support at the opening price for an area, rather than the winning bid price for an area, will better balance our interest in ensuring that the amount of any forfeiture assessed for a 5G Fund auction default is sufficient to deter insincere bidding while at the same time having a relationship to the area affected by the auction default, and is thus a better approach for achieving our desired effect. We recognize this is a departure from the approach taken in our recent universal service auctions but find it appropriate under these circumstances after taking into account the nature of auctions for 5G Fund support and what is at stake to meet our goals for the 5G Fund.
257. As we did for CAF Phase II and the Rural Digital Opportunity Fund, we conclude that the rules we adopt governing forfeitures for auction defaults and requiring auction applicants to acknowledge in their short-form applications that they will be subject to a forfeiture in the event of an auction default will impress upon entities that apply to participate in a 5G Fund auction the importance of being prepared to meet the requirements adopted for the post-auction support authorization process, and highlight the need to conduct a due diligence review to ensure that they are qualified to both participate in the 5G Fund competitive bidding process and to meet the terms and conditions for being authorized to receive support if they become winning bidders.
258.
259. To allow the Commission to more efficiently and effectively process pending applications for universal service support, and taking into account lessons learned from the Mobility Fund Phase I and CAF Phase II post-auction application processes such as significant delays or failures by applicants in prosecuting their applications, we adopt our proposal to amend section 1.21004 to add a new rule that permits the Commission to dismiss any universal service auction winning bidder's long-form application with prejudice and deem the winning bidder to be in default if the winning bidder fails to prosecute its long-form application, fails to respond substantially within a specified time period to official correspondence or requests for additional information, or otherwise fails to comply with requirements for becoming authorized to receive universal service support. We received no comments on our proposal and adopt the rule as proposed in the
260. The
261. The Commission has determined, and the Administrator of the Office of Information and Regulatory Affairs, Office of Management and Budget, concurs that this rule is non-major under the Congressional Review Act, 5 U.S.C. 804(2). The Commission will send a copy of this Report and Order to Congress and the Government Accountability Office pursuant to 5 U.S.C. 801(a)(1)(A).
262. As required by the Regulatory Flexibility Act of 1980, as amended (RFA), an Initial Regulatory Flexibility Analysis (IRFA) was incorporated in the
263.
264. Many urban and suburban areas of the nation are already benefiting from the evolution to 5G networks. Nationwide providers have begun deploying 5G service in populated parts of the country, with even more widely-available 5G service expected in the near future. For example, T-Mobile has made enforceable commitments to the Commission as part of its acquisition of Sprint to deploy 5G service covering 85% of the population in rural areas and 97% of all Americans within three years, with coverage rising to 90% of the population in rural areas and 99% nationwide within six years. Moreover, it committed to deploy 5G service meeting minimum download speed performance benchmarks of at least 50 Mbps available to 90% of the rural population, with two-thirds of rural Americans able to receive download speeds of at least 100 Mbps. Late last year, T-Mobile announced that it switched on its 5G network across the nation using low-band spectrum.
265. 5G networks will improve the lives of Americans living and working in rural areas by providing much needed access to telehealth, telework, remote learning opportunities, precision agriculture, and other services and applications. The Commission anticipates that the deployment of 5G-capable networks in rural areas will drive job creation and have a powerful impact on the nation's economy. The framework for the 5G Fund that the Commission adopts today will bring technological innovation and economic benefits to the parts of the country that need them the most. The Commission embarks on this new 5G era recognizing that the next decade and beyond hold significant promise for rural America, and envisions that the 5G Fund will be an important catalyst to propel the nationwide deployment of networks capable of closing the digital divide, once and for all.
266. The 5G Fund for Rural America will use multi-round reverse auctions to distribute up to $9 billion, in two phases, bringing voice and 5G broadband service to those rural areas of the country that, absent subsidies, would be unlikely to see the deployment of 5G-capable networks. Based on lessons learned from the Mobility Fund, and overwhelming record support, the Commission adopts its proposal to determine which areas will be eligible for 5G Fund support through improved mobile broadband coverage data that will be gathered through the Commission's Digital Opportunity Data Collection
267.
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269. Description and Estimate of the Number of Small Entities to which the Rules Would Apply. The RFA directs agencies to provide a description of, and where feasible, an estimate of the number of small entities that may be affected by the rules adopted in the 5G Fund Report and Order. The RFA generally defines the term “small entity” as having the same meaning as the terms “small business,” “small organization,” and “small governmental jurisdiction.” In addition, the term “small business” has the same meaning as the term “small-business concern” under the Small Business Act. A “small-business concern” is one which: (1) Is independently owned and operated; (2) is not dominant in its field of operation; and (3) satisfies any additional criteria established by the SBA.
270. The Commission's actions, over time, may affect small entities that are not easily categorized at present. The Commission therefore describes here, at the outset, three broad groups of small entities that could be directly affected herein. First, while there are industry specific size standards for small businesses that are used in the regulatory flexibility analysis, according to data from the Small Business Administration's (SBA) Office of Advocacy, in general a small business is an independent business having fewer than 500 employees. These types of small businesses represent 99.9% of all businesses in the United States, which translates to 30.7 million businesses.
271. Next, the type of small entity described as a “small organization” is generally “any not-for-profit enterprise which is independently owned and operated and is not dominant in its field.” The Internal Revenue Service (IRS) uses a revenue benchmark of $50,000 or less to delineate its annual electronic filing requirements for small exempt organizations. Nationwide, for tax year 2018, there were approximately 571,709 small exempt organizations in the U.S. reporting revenues of $50,000 or less according to the registration and tax data for exempt organizations available from the IRS.
272. Finally, the small entity described as a “small governmental jurisdiction” is defined generally as “governments of cities, counties, towns, townships, villages, school districts, or special districts, with a population of less than fifty thousand.” U.S. Census Bureau data from the 2017 Census of Governments indicate that there were 90,075 local governmental jurisdictions consisting of general purpose governments and special purpose governments in the United States. Of this number there were 36,931 general purpose governments (county, municipal and town or township) with populations of less than 50,000 and 12,040 special purpose governments—independent school districts with enrollment populations of less than 50,000. Accordingly, based on the 2017 U.S. Census of Governments data, the Commission estimates that at least 48,971 entities fall into the category of “small governmental jurisdictions.”
273. Small entities potentially affected by the rules adopted herein include Wireless Telecommunications Carriers (except Satellite), internet Service Providers (Broadband), and Satellite Telecommunications.
274.
275. The Commission adopts a public interest obligation for both competitive ETCs receiving legacy high-cost support for mobile wireless service and 5G Fund support recipients to provide mobile voice and 5G broadband service in their subsidized areas, and to satisfy distinct, measured performance requirements as a condition of receiving support. Recipients of both legacy high-cost support and 5G Fund support will have minimum baseline performance requirements for data speed, data latency, and data allowance. Like all high-cost ETCs, both legacy high-cost support recipients and 5G Fund support recipients will be required to offer voice and broadband services meeting the relevant performance requirements at rates that are reasonably comparable to what they offer in urban areas. These performance requirements, along with public interest obligations the Commission adopts for data allowances, reasonably comparable rates, collocation, and voice and data roaming, will ensure that rural areas receive service comparable to high-speed, mobile broadband available in urban areas.
276. The Commission adopts a 10-year support term for 5G Fund support recipients, along with three interim service deployment milestones and a final service deployment milestone at which a support recipient must demonstrate that it provides 5G service that meets the performance requirements the Commission adopts in the
277. The Commission adopts certain eligibility requirements for entities that are interested in participating in a 5G Fund auction, as well as a two-step application process. The Commission will require applicants to submit a pre-auction short-form application that includes information about their ownership, any agreements relating to the support to be sought through the auction, technical and financial qualifications, current status as an ETC, access to spectrum, and an acknowledgement of their responsibility to conduct due diligence. Commission staff will review the applications to determine if applicants are qualified to bid in the auction.
278. After the auction ends, winning bidders will be required to submit a post-bidding long-form application in which they will submit ownership, agreement, and spectrum access information, as well as information about their qualifications, funding, and the networks they intend to use to meet their obligations. During the long-form application review process, the Commission will also require winning bidders to obtain and submit documentation of an ETC designation from the state or the Commission, as appropriate, that covers each of the geographic areas in which they won support within 180 days after the release of the public notice announcing winning bidders. Prior to being authorized to receive support, winning bidders must submit an irrevocable stand-by letter of credit that meets the Commission's requirements from an eligible bank along with a bankruptcy opinion letter from outside legal counsel. The letter of credit must be valued at an amount equal to one year of the total support it will receive. Commission staff will review the applications and submitted documentation to determine whether long-form applicants are qualified to be authorized to receive support. The Commission will subject winning bidders or long-form applicants that default during the long-form application process to forfeiture.
279. A 5G Fund support recipient will be required to submit a modified, renewed, or new letter of credit annually in order to receive its next year's support. The value of the letter of credit must cover the support that has been disbursed and that will be disbursed in the coming year, subject to modest adjustments as support recipients meet—and the Universal Service Administrative Company (USAC) has verified they have timely completed—their required service deployment milestones.
280. The Commission also adopts specific reporting requirements to monitor the progress of both competitive ETCs receiving legacy high-cost support for mobile wireless service and 5G Fund support recipients in meeting the public interest obligations and distinct performance requirements the Commission adopts. The Commission will require each legacy high-cost support recipient to file an initial report of its current service offerings that includes accounting information on the support a carrier has received and how legacy support is being used, along with certifications related to its current service offerings and use of legacy high-cost support. The Commission will also require each legacy high-cost support recipient to file annual reports that include updated information about the carrier's service offerings for the previous calendar year in its subsidized service areas, and how legacy support is being used, along with certifications that the support recipient is in compliance with its public interest obligations and performance requirements. The Commission will require a 5G Fund support recipient to file service milestone reports demonstrating that it has met its interim and final milestones for deployment of 5G service that meets the 5G Fund performance requirements the Commission adopts. The Commission will also require a 5G Fund support recipient to file annual reports covering the preceding calendar year along with certifications that the support recipient is in compliance with each of the 5G Fund public interest obligations, performance requirements, and any other terms and conditions associated with receipt of 5G Fund support. As for other high-cost support recipients, both legacy high-cost support recipients and 5G Fund support recipients will be subject to record retention and audit requirements, and to support reductions and/or full recovery for untimely filings.
281. The Commission will subject a 5G Fund support recipient that fails to meet its public interest obligations and/or and performance requirements or other terms and conditions of receiving 5G Fund support to a reduction, or loss, in support, in accordance with the framework for support reductions that is applicable to all high-cost ETCs that are required to meet adopted service deployment milestones and to the process the Commission adopts in the
282. The Commission will require a competitive ETC receiving legacy high-cost support for mobile wireless service that fails to comply with its public interest obligations or performance requirements to notify the Wireline Competition Bureau and USAC within 10 business days of its non-compliance. Upon receipt of the notification, the Commission will find the recipient to be in default, and the recipient will no longer be eligible to receive such support, will receive no further support disbursements, and may be subject to up to full recovery of all such support disbursed since effective date of the public interest obligations and performance requirement rules adopted in the
283.
284. The Commission concludes that the minimum geographic area for bidding in a 5G Fund auction will be no larger than a census tract and no smaller than a census block group, as identified by the U.S. Census Bureau. Consistent with its approach in recent universal service auctions, the Commission will determine the exact geographic area for grouping eligible areas when it finalizes the auction design during the pre-auction process and have better data for determining eligible areas. The Commission finds that this approach is preferable because it ensures that a wide variety of interested bidders, including small entities, have the flexibility to design a network that matches their business model and that allows service providers to achieve their performance benchmarks and public interest obligations efficiently. We decline to adopt census blocks as the minimum geographic unit in a 5G Fund auction, as some commenters suggest, because doing so would significantly increase the complexity of the bidding process both for bidders and the bidding system and minimize the potential for broad coverage by winning bidders, and using census blocks as the minimum geographic area could create more challenges for providers in putting together a bidding strategy that aligns with their intended network construction or expansion. No commenter suggests that the Commission should adopt a geographic area larger than a census tract.
285. We are reserving up to $680 million of the $8 billion 5G Fund Phase I budget to support networks serving eligible areas in Tribal lands—which is double the amount that the Commission had estimated it would reserve to support Tribal lands from the Mobility Fund Phase II budget—to provide an incentive for service providers, including small entities, to bid on and serve Tribal lands.
286. Consistent with the approach taken in recent universal service auctions, the Commission adopts a two-step application process for participating in the 5G Fund consisting of a pre-auction short-form application and a post-auction long-form application. Entities interested in bidding to submit a short-form application in order to be deemed qualified to bid in the auction, which the Commission has found to be an appropriate but not burdensome screen to ensure participation by qualified carriers, including small entities. Only if an applicant becomes a winning bidder will it be required to submit a long-form application, which requires a more detailed information about, and a more thorough review of, an applicant's qualifications to be authorized to receive 5G Fund support.
287. We provide two pathways for an applicant to demonstrate its technical and financial qualifications to participate in a 5G Fund auction based on its experience providing mobile wireless voice and/or broadband service. Entities, including small entities, that have been providing mobile wireless voice and/or broadband service for at least three years will be required to submit information concerning the number of years they have been providing service and their FCC Form 477 filings and/or Digital Opportunity Data Collection filings, as applicable, for the past three years, but will not be required to submit any other technical or financial information, while entities that have been providing such service(s) for fewer than three years (or not at all) will need to submit information concerning their operational history, a preliminary project description, and an acceptable letter of interest from an eligible bank. We expect that by allowing experienced entities to submit less information at the short-form application stage to demonstrate their technical and financial qualifications, more entities, including small entities, will be able to participate in the auction.
288. We will also permit all long-form applicants, including small entities, to obtain their ETC designations after becoming winning bidders so that they do not have to go through the ETC designation process prior to finding out if they won support through the auction. We decline to adopt the alternatives to letters of credit that were suggested by commenters because letters of credit better achieve the Commission's objective of protecting the public's funds. But recognizing that some participants in the Commission's past universal auctions, including small entities, have expressed concerns about the costs of obtaining and maintaining a letter of credit, the Commission adopts rules allowing support recipients to cover less support with their letters of credit and further reduce the value of their letters of credit once it has been verified that they have met certain service deployment milestones. Additionally, consistent with the approach taken in recent universal service auctions, the Commission will allow greater flexibility regarding letters of credit for Tribally owned and controlled winning bidders by permitting any Tribally owned and controlled 5G Fund winning bidder that is unable to obtain a letter of credit to petition for a waiver of the letter of credit requirement.
289. To streamline the filing of annual reports by both mobile legacy high-cost support recipients and 5G Fund support recipients regarding their efforts to provide 5G services throughout their subsidized service areas that meet the public interest obligations and distinct performance requirements adopted in the
290. The Commission also provides a competitive ETC receiving legacy high-cost support for a particular subsidized service area with the flexibility to use such support for the provision, maintenance, and upgrading of facilities and services within any of the designated service areas for which it receives legacy high-cost support for mobile services, which the Commission concludes could allow for more efficient decisions about use of legacy support while “still satisfying the statutory obligation to use such support for its intended purposes.”
291. The additional public interest obligations, performance requirements, and reporting requirements adopted for current mobile legacy high-cost support recipients in order to continue receiving high-cost support, as well as the public interest obligations and performance requirements, interim and final construction milestones, reporting obligations, and non-compliance measures adopted for the 5G Fund, balance the Commission's responsibility to monitor the use of universal service funds with minimizing administrative and compliance costs and burdens on mobile legacy high-cost support recipients and 5G Fund support recipients, including small entities. The reporting requirements the Commission adopts for all mobile legacy high-cost support and for all 5G Fund support recipients are tailored to ensuring that support is used for its intended purpose and so that the Commission can monitor the progress of recipients in meeting
292. Accordingly,
293.
294.
295.
296.
Administrative practice and procedures, Reporting and recordkeeping requirements, Telecommunications.
Communications common carriers, internet, Reporting and recordkeeping requirements, Telecommunications.
For the reasons discussed in the preamble, the Federal Communications Commission amends 47 CFR parts 1 and 54 to read as follows:
47 U.S.C. chs. 2, 5, 9, 13; 28 U.S.C. 2461, unless otherwise noted.
(f) Nothing in this subpart shall supersede or invalidate other Commission rules, such as the part 1 general competitive bidding rules (47 CFR part 1, subparts Q and AA) or the service specific competitive bidding rules, as may be amended, regarding the Commission's rights, including but not limited to the Commission's right to cancel a license or authorization, obtain judgment, or collect interest, penalties, and administrative costs.
The revisions and additions read as follows:
(b)
(1) The identity of the applicant,
(2) The identities of up to three individuals authorized to make or withdraw a bid on behalf of the applicant. No person may serve as an authorized bidder for more than one auction applicant;
(3) The identities of all real parties in interest to, and a brief description of, any agreements relating to the participation of the applicant in the competitive bidding;
(4) Certification that the applicant has provided in its application a brief description of, and identified each party to, any partnerships, joint ventures, consortia or other agreements, arrangements or understandings of any kind relating to the applicant's participation in the competitive bidding and the support being sought, including any agreements that address or communicate directly or indirectly bids (including specific prices), bidding strategies (including the specific areas on which to bid or not to bid), or the post-auction market structure, to which the applicant, or any party that controls as defined in paragraph (d)(1) of this section or is controlled by the applicant, is a party;
(5) Certification that the applicant (or any party that controls as defined in paragraph (d)(1) of this section or is controlled by the applicant) has not entered and will not enter into any partnerships, joint ventures, consortia or other agreements, arrangements, or understandings of any kind relating to the support to be sought that address or communicate, directly or indirectly, bidding at auction (including specific
(6) Certification that if the applicant has ownership or other interest disclosed pursuant to paragraph (b)(1) of this section with respect to more than one application in a given auction, it will implement internal controls that preclude any individual acting on behalf of the applicant as defined in § 1.21002(a) from possessing information about the bids or bidding strategies (including post-auction market structure), of more than one party submitting an application for the auction or communicating such information with respect to a party submitting an application for the auction to anyone possessing such information regarding another party submitting an application for the auction;
(7) Certification that the applicant has sole responsibility for investigating and evaluating all technical and marketplace factors that may have a bearing on the level of support it submits as a bid, and that if the applicant wins support, it will be able to build and operate facilities in accordance with the obligations applicable to the type of support it wins and the Commission's rules generally;
(8) Certification that the applicant and all applicable parties have complied with and will continue to comply with § 1.21002;
(9) Certification that the applicant is in compliance with all statutory and regulatory requirements for receiving the universal service support that the applicant seeks, or, if expressly allowed by the rules specific to a high-cost support mechanism, a certification that the applicant acknowledges that it must be in compliance with such requirements before being authorized to receive support;
(10) Certification that the applicant will be subject to a default payment or a forfeiture in the event of an auction default and that the applicant will make any payment that may be required pursuant to § 1.21004;
(11) Certification that the applicant is not delinquent on any debt owed to the Commission and that it is not delinquent on any non-tax debt owed to any Federal agency as of the deadline for submitting applications to participate in competitive bidding pursuant to this subpart, or that it will cure any such delinquency prior to the end of the application resubmission period established by public notice.
(12) Certification that the individual submitting the application is authorized to do so on behalf of the applicant; and
(13) Such additional information as may be required.
(c)
(d)
(1) The term
(2) The term
(3) The term
(e)
(f)
(2) Any application to participate in competitive bidding that does not identify the applicant or does not include all of the certifications required pursuant to this section is unacceptable for filing and cannot be corrected subsequent to the applicable deadline for submitting applications. The application will be deemed incomplete and the applicant will not be found qualified to bid.
(3) If an individual or entity submits multiple applications in a single auction, or if entities that are commonly controlled by the same individual or same set of individuals submit more than one application in a single auction, then at most only one of such applications may be deemed complete, and the other such application(s) will be deemed incomplete, and such applicants will not be found qualified to bid.
(4) An applicant will not be permitted to participate in competitive bidding if the applicant has not provided any bond or deposit of funds required pursuant to paragraph (e) of this section, as of the applicable deadline.
(5) The Commission will provide applicants a limited opportunity to cure defects (except for failure to sign the application and to make all required certifications) during a resubmission period established by public notice and to resubmit a corrected application. During the resubmission period for curing defects, an application may be amended or modified to cure defects identified by the Commission or to make minor amendments or modifications. After the resubmission period has ended, an application may be
(6) An applicant that fails to cure the defects in their applications in a timely manner during the resubmission period as specified by public notice will have its application dismissed with no further opportunity for resubmission.
(7) An applicant that is found qualified to participate in competitive bidding shall be identified in a public notice.
(8) Applicants shall have a continuing obligation to make any amendments or modifications that are necessary to maintain the accuracy and completeness of information furnished in pending applications. Such amendments or modifications shall be made as promptly as possible, and in no case more than five business days after applicants become aware of the need to make any amendment or modification, or five business days after the reportable event occurs, whichever is later. An applicant's obligation to make such amendments or modifications to a pending application continues until they are made.
(a)
(1) The term “applicant” shall include all controlling interests in the entity submitting an application to participate in a given auction, as well as all holders of partnership and other ownership interests and any stock interest amounting to 10 percent or more of the entity, or outstanding stock, or outstanding voting stock of the entity submitting the application, and all officers and directors of that entity. In the case of a consortium, each member of the consortium shall be considered to have a controlling interest in the consortium; and
(2) The term
(b)
(1)
(i) That it has communicated with and will communicate neither with Company A or anyone else concerning Company A's bids or bidding strategy, nor with Company C or anyone else concerning Company C's bids or bidding strategy, or
(ii) That it has not communicated with and will not communicate with Company D or anyone else concerning Company D's bids or bidding strategy.
(2) [Reserved]
(c)
(d)
(e)
(f)
The addition and revisions read as follows:
(b)
(c)
(d)
47 U.S.C. 151, 154(i), 155, 201, 205, 214, 219, 220, 229, 254, 303(r), 403, 1004, and 1302, unless otherwise noted.
The revisions and addition read as follows:
(f)
The revisions and addition read as follows:
(e) * * *
(2)
(i) From January 1, 2012, to June 30, 2012, each competitive eligible telecommunications carrier shall receive its monthly baseline support amount each month.
(ii) From July 1, 2012 to June 30, 2013, each competitive eligible telecommunications carrier shall receive 80 percent of its monthly baseline support amount each month.
(iii) Beginning July 1, 2013, each competitive eligible telecommunications carrier shall receive 60 percent of its monthly baseline support amount each month.
(5)
(i) A competitive eligible telecommunications carrier that is not a mobile competitive eligible telecommunications carrier, as that term is defined in § 54.5, shall no longer receive monthly baseline support.
(ii) Until the first day of the month following the release of a public notice by the Office of Economics and Analytics and Wireline Competition Bureau announcing the final areas eligible for support in the 5G Fund Phase I auction:
(A) A mobile competitive eligible telecommunications carrier that receives support pursuant to paragraph (a) of this
(B) A mobile competitive eligible telecommunications carrier that receives support pursuant to paragraph (e)(2) of this section shall receive support at the same level described in paragraph (e)(2)(iii) of this section.
(iii) Beginning the first day of the month following the release of a public notice by the Office of Economics and Analytics and Wireline Competition Bureau announcing the final areas eligible for support in the 5G Fund Phase I auction and until the first day of the month following release of a public notice announcing the close of the 5G Fund Phase I auction, a mobile competitive eligible telecommunications carrier that receives support pursuant to paragraph (e)(5)(ii) of this section for any such eligible area shall receive an adjusted, disaggregated amount of monthly support for that area, which shall be calculated by multiplying the monthly support level described in paragraph (e)(5)(ii) of this section by the areal percentage of the eligible portion of the competitive eligible telecommunications carrier's service area, weighted by applying the 5G Fund adjustment factor methodology and values adopted by the Office of Economics and Analytics and Wireline Competition Bureau and announced in a public notice.
(iv) Beginning the first day of the month following the release of a public notice by the Office of Economics and Analytics and Wireline Competition Bureau announcing the final areas eligible for support in the 5G Fund Phase I auction, a mobile competitive eligible telecommunications carrier that receives support pursuant paragraph (e)(5)(ii) of this section for any ineligible area shall receive an adjusted, disaggregated amount of monthly support for that area, which shall be calculated by multiplying the monthly support level described in paragraph (e)(5)(ii) of this section by the areal percentage of the ineligible portion of the competitive eligible telecommunications carrier's service area, weighted by applying the 5G Fund adjustment factor methodology and values adopted by the Office of Economics and Analytics and Wireline Competition Bureau and announced in a public notice, and reduced as follows:
(A) For the first 12 months, each mobile competitive eligible telecommunications carrier shall receive monthly support that is two-thirds (
(B) For 12 months starting the first day of the month following the period described in paragraph (e)(5)(iv)(A) of this section, each mobile competitive eligible telecommunications carrier shall receive monthly support that is one-third (
(C) Following the period described in paragraph (e)(5)(iv)(B) of this section, no mobile competitive eligible telecommunications carrier shall receive monthly support for any ineligible area pursuant to this section.
(6)
(A) Upon the Office of Economics and Analytics and Wireline Competition Bureau's release of a public notice approving a mobile competitive eligible telecommunications carrier's application for support submitted pursuant to § 54.1014(b) and authorizing the carrier to receive 5G Fund Phase I support, the carrier shall no longer receive support at the level of monthly support described in paragraph (e)(5)(iii) of this section for such area. Thereafter, the carrier shall receive monthly support in the amount of its 5G Fund Phase I winning bid pursuant to § 54.1017, provided that the Administrator shall decrease the amount of the carrier's support to the extent necessary to account for any support the carrier received during the period between the close of the 5G Fund Phase I auction and the release of the public notice authorizing the carrier to receive 5G Fund Phase I support.
(B) A mobile competitive eligible telecommunications carrier that is a winning bidder in the 5G Fund Phase I auction but is not subsequently authorized to receive 5G Fund Phase I support shall no longer receive support at the level of monthly support described in paragraph (e)(5)(iii) of this section for such area following the determination not to authorize the carrier for 5G Fund Phase I support. Thereafter, the carrier shall receive monthly support as set forth in paragraph (e)(6)(iv) of this section for such area, provided that the Administrator shall decrease the amount of the carrier's support to the extent necessary to account for any support the carrier received during the period between the close of the 5G Fund Phase I auction and the Office of Economics and Analytics and Wireline Competition Bureau's authorization determination.
(ii) A mobile competitive eligible telecommunications carrier that does not receive monthly support pursuant to this section and is a winning bidder in the 5G Fund Phase I auction shall receive monthly support pursuant to § 54.1017.
(iii) A mobile eligible telecommunications carrier that receives monthly support pursuant to paragraph (e)(5)(iii) of this section for an area for which support is not won in the 5G Fund Phase I auction shall continue to receive support at the level of monthly support described in paragraph (e)(5)(iii) of this section provided that it is the carrier receiving the minimum level of sustainable support for the area, but for no more than 60 months from the first day of the month following the release of a public notice by the Office of Economics and Analytics and Wireline Competition Bureau announcing the close of the 5G Fund Phase I auction. The “minimum level of sustainable support” is the lowest monthly support received by a mobile competitive eligible telecommunications carrier for the area that has deployed the highest level of technology (
(iv) All other mobile competitive eligible telecommunications carriers that receive monthly support pursuant to paragraph (e)(5)(iii) of this section for eligible areas shall instead receive the following monthly support amounts for such areas:
(A) For 12 months starting the first day of the month following release of a public notice announcing the close of the 5G Fund Phase I auction, each mobile competitive eligible telecommunications carrier shall receive monthly support that is two-thirds (
(B) For 12 months starting the month following the period described in paragraph (e)(6)(iv)(A) of this section, each mobile competitive eligible telecommunications carrier shall receive monthly support that is one-third (
(C) Following the period described in paragraph (e)(6)(iv)(B) of this section, no mobile competitive eligible telecommunications carrier shall receive monthly support for the area pursuant to this section.
(7)
(A) Upon the Office of Economics and Analytics and Wireline Competition Bureau's release of a public notice approving a mobile competitive eligible telecommunications carrier's application for support submitted pursuant to § 54.1014(b) and authorizing the carrier to receive 5G Fund Phase II support, the carrier shall no longer receive support at the level of monthly support pursuant to this section for such area. Thereafter, the carrier shall receive monthly support in the amount of its 5G Fund Phase II winning bid pursuant to § 54.1017, provided that the Administrator shall decrease the amount of the carrier's support to the extent necessary to account for any support the carrier received during the period between the close of the 5G Fund Phase II auction and the release of the public notice authorizing the carrier to receive 5G Fund Phase II support.
(B) A mobile competitive eligible telecommunications carrier that is a winning bidder in the 5G Fund Phase II auction but is not subsequently authorized to receive 5G Fund Phase II support shall no longer receive support at the level of monthly support pursuant to paragraph (e)(6)(iii) or (iv) of this section for such area, as applicable, following the determination not to authorize the carrier for 5G Fund Phase II support. Thereafter, the carrier shall receive monthly support as set forth in paragraphs (e)(7)(iv) or (v) of this section for such area, as applicable, provided that the Administrator shall decrease the amount of the carrier's support to the extent necessary to account for any support received during the period between the close of the 5G Fund Phase II auction and the Office of Economics and Analytics and Wireline Competition Bureau's authorization determination.
(ii) A mobile competitive eligible telecommunications carrier that does not receive monthly support pursuant to this section and is a winning bidder in the 5G Fund Phase II auction shall receive monthly support pursuant to § 54.1017.
(iii) A mobile competitive eligible telecommunications carrier that receives monthly support pursuant to paragraph (e)(6)(iii) of this section for an area for which support is not won in the 5G Fund Phase II auction shall continue to receive support for that area as described in paragraph (e)(6)(iii) of this section.
(iv) A mobile competitive eligible telecommunications carrier that receives monthly support pursuant to paragraph (e)(6)(iii) of this section for an area for which support is won in the 5G Fund Phase II auction and for which the carrier is not the winning bidder shall receive the following monthly support amounts for such areas:
(A) For 12 months starting the first day of the month following release of a public notice announcing the close of the 5G Fund Phase II auction, the mobile competitive eligible telecommunications carrier shall receive monthly support that is two-thirds (
(B) For 12 months starting the month following the period described in paragraph (e)(7)(iv)(A) of this section, the mobile competitive eligible telecommunications carrier shall receive monthly support that is one-third (
(C) Following the period described in paragraph (e)(7)(iv)(B) of this section, the mobile competitive eligible telecommunications carrier shall not receive monthly support for the area pursuant to this section.
(v) All other mobile competitive eligible telecommunications carriers that receive monthly support pursuant to paragraph (e)(6)(iv) of this section for an area shall continue to receive support for the area pursuant to that paragraph.
The revisions and addition read as follows:
(k) This section does not apply to recipients that solely receive support from Phase I of the Mobility Fund.
(n) In addition to the information and certifications in paragraph (a) of this section, a mobile competitive eligible telecommunications carrier receiving legacy high-cost support pursuant to § 54.307(e)(5), (e)(6), or (e)(7) shall certify whether it used any support pursuant to § 54.207(f), and if so, whether it used such support in compliance with § 54.7.
(c) * * *
(2) * * *
(iv) * * *
(B) Has a branch office:
(
(
(a)
(b)
(c)
(1)
(2)
(3)
(4)
(d)
(1) Median data transmission rates of 35 Mbps download and 3 Mbps upload, and with at least 90 percent of measurements recording data transmission rates of not less than 7 Mbps download and 1 Mbps upload;
(2) Transmission latency of 100 milliseconds or less round trip for successfully transmitted measurements (
(3) At least one service plan offered must include a data allowance that is equivalent to the average United States subscriber data usage as specified and adopted by the Office of Economics and Analytics and Wireline Competition Bureau after notice and comment.
(e)
(f)
(g)
(1) If the carrier offers service in urban areas, it may demonstrate that it offers reasonably comparable rates if it offers the same rates, terms, and conditions (including usage allowances, if any, for a specific rate) in both urban and rural areas or if one of the carrier's stand-alone voice service plans and one service plan offering data are substantially similar to plans it offers in urban areas.
(2) If the carrier does not offer service in urban areas, it may demonstrate that it offers reasonably comparable rates by identifying a carrier that does offer service in urban areas and the specific rate plans to which its plans are reasonably comparable, along with submission of corroborating evidence that its rates are reasonably comparable, such as marketing materials from the identified carrier.
(h)
(i) Information regarding the carrier's current service offerings in its subsidized service areas, including the highest level of technology deployed, a target date for when 5G broadband service meeting the performance requirements specified in paragraph (d) of this section will be deployed within the subsidized service area, and an estimate of the percentage of area covered by 5G deployment meeting the performance requirements specified in paragraph (d) of this section within the subsidized service area;
(ii) A brief narrative describing its current service offerings and providing an accounting of how monthly support has been used to provide mobile wireless services for the 12-month period prior to the deadline of this report;
(iii) Detailed cell-site and sector infrastructure information for infrastructure that the carrier uses to provide service in its subsidized service areas;
(iv) Certification that the carrier has filed relevant deployment data (either via FCC Form 477 or the Digital Opportunity Data Collection, as
(v) Certification that the carrier is in compliance with the public interest obligations as set forth in this section and all of the terms and conditions associated with the continued receipt of such monthly support disbursements; and
(vi) Additional information as required by the Office of Economics and Analytics and Wireline Competition Bureau after release of a public notice detailing the procedures to file this report.
(2) The party submitting the report must certify that it has been authorized to do so by the mobile competitive eligible telecommunications carrier that receives support.
(3) Each initial report of current service offerings shall be submitted solely via the Administrator's online portal.
(i) The Commission and the Administrator shall treat infrastructure data submitted as part of such reports as presumptively confidential.
(ii) The Administrator shall make such reports available to the Commission and to the relevant state, territory, and Tribal governmental entities, as applicable.
(4) A mobile competitive eligible telecommunications carrier that receives monthly support pursuant to § 54.307(e)(5), (e)(6), or (e)(7) shall have a continuing obligation to maintain the accuracy and completeness of the information provided in its initial report. Any substantial change in the accuracy or completeness of such a report must be reported as an update to its submitted report within ten (10) business days after the reportable event occurs.
(5) The Commission shall retain the authority to look behind a mobile competitive eligible telecommunications carrier's initial report and to take action to address any violations.
(i)
(i) Except for areas for which the carriers receives monthly support pursuant to § 54.307(e)(5)(iv), (e)(6)(iv) or (e)(7)(iv), updated information regarding the carrier's current service offerings in its subsidized service areas for the previous calendar year, including the highest level of technology deployed, a target date for when 5G broadband service meeting the performance requirements specified in paragraph (d) of this section will be deployed within the subsidized service area, and an estimate of the percentage of area covered by 5G deployment meeting the performance requirements specified in paragraph (d) of this section within the subsidized service area;
(ii) A brief narrative providing an accounting of the support the carrier has received and how monthly support has been used to provide mobile wireless services for the previous calendar year, with an indication of which of these expenditures were used to meet the requirements specified in paragraph (c) of this section within the subsidized service area;
(iii) Detailed cell-site and sector infrastructure information for infrastructure that the carrier uses to provide service in its subsidized service areas;
(iv) Certification that the carrier has filed relevant deployment data (either via FCC Form 477 or the Digital Opportunity Data Collection, as appropriate) that reflect its current deployment covering its subsidized service areas;
(v) Certification that the carrier is in compliance with the public interest obligations as set forth in this section and all of the terms and conditions associated with the continued receipt of monthly support; and
(vi) Additional information as required by the Office of Economics and Analytics and Wireline Competition Bureau after release of a public notice detailing the procedures to file these reports.
(2) A mobile competitive eligible telecommunications carrier that receives monthly support pursuant to § 54.307(e)(5), (e)(6), or (e)(7) shall supplement the information provided to the Administrator in any annual report within ten (10) business days from the onset of any reduction in the percentage of areas for which the recipient receives support being served after the filing of an initial or annual certification report or in the event of any failure to comply with any of the requirements for continued receipt of such support.
(3) The party submitting the annual report must certify that it has been authorized to do so by mobile competitive eligible telecommunications carrier that receives support.
(4) Each annual report shall be submitted solely via the Administrator's online portal.
(i) The Commission and the Administrator shall treat infrastructure data submitted as part of such a report as presumptively confidential.
(ii) The Administrator shall make such reports available to the Commission and to the relevant state, territory, and Tribal governmental entities, as applicable.
(5) A mobile competitive eligible telecommunications carrier that receives monthly support pursuant to § 54.307(e)(5), (e)(6), or (e)(7) shall have a continuing obligation to maintain the accuracy and completeness of the information provided in its annual reports. Any substantial change in the accuracy or completeness of any such report must be reported as an update to the submitted annual report within ten (10) business days after the reportable event occurs.
(6) The Commission shall retain the authority to look behind a mobile competitive eligible telecommunications carrier's annual reports and to take action to address any violations.
(j)
(2) All data submitted in or certified to in any service milestone report shall be subject to verification by the Administrator for compliance with the performance requirements specified in paragraph (d) of this section.
(k)
(2) Upon notification by a carrier of its non-compliance pursuant to paragraph (k) of this section, or a determination by the Administrator or Wireline Competition Bureau of a carrier's non-compliance with any of the public interest obligations set forth in paragraphs (e) through (j) of this section or the performance requirements set forth in paragraph (d) of this section, the carrier will be deemed to be in default, and for monthly support received pursuant to § 54.307(e)(5), (e)(6), or (e)(7), will no longer be eligible to receive such support, will receive no further support disbursements, and may be subject to recovery of up to the amount of support received since the effective date of the Report and Order, FCC 20-150, that was not used for the deployment, maintenance, and operation of mobile networks that provide 5G service as specified in paragraph (a) of this section and that meet the performance requirements specified in paragraph (d) of this section. The carrier may also be subject to further action, including the Commission's existing enforcement procedures and penalties, potential revocation of ETC designation, and suspension or debarment pursuant to § 54.8.
(3) A mobile competitive eligible telecommunications carrier that voluntarily relinquishes receipt of monthly support pursuant to § 54.307(e)(5), (e)(6), or (e)(7) will no longer be required to comply with the public interest obligations specified in this section, except that the carrier may be deemed to be in default and subject to recovery of support as set forth in paragraph (k)(2) of this section.
(c) * * *
(2) * * *
(iv) * * *
(B) Has a branch office:
(
(
(a) The Commission will use competitive bidding, as provided in part 1, subpart AA, of this chapter, to determine the recipients of support available through the 5G Fund and the amount(s) of support that they may receive for specific geographic areas, subject to applicable post-auction procedures.
(b) 5G Fund support will be awarded in two phases using multi-round, descending clock auctions.
(c) Areas eligible for 5G Fund Phase I support will be those areas identified by the Office of Economics and Analytics and Wireline Competition Bureau in a public notice as showing a lack of 4G Long Term Evolution (LTE) and 5G coverage on an unsubsidized basis based on the mobile broadband coverage maps created by the Commission using coverage data submitted in the Digital Opportunity Data Collection pursuant to § 1.7004(c)(3).
(d) The Commission will incorporate an adjustment factor into the 5G Fund auction design that will assign a weight to each geographic area eligible in the 5G Fund Phase I auction using the adjustment factor values adopted by the Office of Economics and Analytics and Wireline Competition Bureau and announced in a public notice.
(e) The Commission will incorporate an adjustment factor into the methodology for disaggregation of high-cost legacy support pursuant to § 54.307(e)(5)(iii) and (e)(5)(iv) that will assign a weight to each geographic area using the adjustment factor values adopted by the Office of Economics and Analytics and Wireline Competition Bureau and announced in a public notice.
(a) 5G Fund support will be made available for geographic areas identified as eligible by public notice.
(b) Coverage units for purposes of conducting competitive bidding and disbursing support based on square kilometers will be identified by public notice for each area eligible for support.
(a) An applicant for 5G Fund support shall be an eligible telecommunications carrier in an area in order to receive 5G Fund support for that area. The applicant may obtain its designation as an eligible telecommunications carrier after the close of a 5G Fund auction, provided that the applicant submits proof of its designation within 180 days after the release of the public notice identifying the applicant as a winning bidder. The eligible telecommunications carrier service area of a 5G Fund support recipient will not be required to conform to the service area of the rural telephone company serving the same area. An applicant for 5G Fund support shall not receive such support prior to the submission of proof of its designation as an eligible telecommunications carrier. After such submission, the eligible telecommunications carrier shall receive a balloon payment that will consist of the carrier's monthly 5G Fund support amount multiplied by the number of whole months between the first day of the month after the close of the auction and the issuance of the public notice authorizing the carrier to receive 5G Fund support.
(b) An applicant must have exclusive access to Commission licensed spectrum and sufficient bandwidth in an area that enables it to satisfy the performance requirements specified in § 54.1015 in order to receive 5G Fund support for that area. The applicant shall describe its access to spectrum as specified in § 54.1014(a)(3) and certify, in a form acceptable to the Commission, that it has such access and sufficient bandwidth (at a minimum, 10 megahertz x 10 megahertz using frequency division duplex (FDD) or 20 megahertz using time division duplex (TDD)) in each area in which it intends to bid for support at the time it applies to participate in competitive bidding, and that it will retain such access for at least ten (10) years after the date on which it is authorized to receive
(c) An applicant shall certify that it is financially and technically qualified to provide the services supported by the 5G Fund within the ten (10) year support term in each geographic area for which it seeks and is authorized to receive support.
(a)
(1) Certify that the applicant is financially and technically capable of meeting the public interest obligations and performance requirements in § 54.1015 in each area for which it seeks support;
(2) Disclose its status as an eligible telecommunications carrier in any area for which it will seek support and associated study area code(s) or as an entity that will file an application to become an eligible telecommunications carrier in any such area after being identified as a winning bidder for such area in a 5G Fund auction, and certify that the disclosure is accurate;
(3) Describe the Commission licensed spectrum to which the applicant has exclusive access that the applicant plans to use to meet its public interest obligations and performance requirements in areas for which it will bid for support, including whether the applicant currently holds a license for or leases the spectrum, including any necessary renewal expectancy, and whether such spectrum access is contingent upon receiving support in a 5G Fund auction, the license applicable to the spectrum to be accessed, the type of service covered by the license, the particular frequency band(s), the call sign, and the total amount of bandwidth (in megahertz) to which the applicant has access under the license applicable to the spectrum to be accessed, and certify that the description is accurate, that the applicant has access to spectrum in each area for which it intends to bid for support, and that the applicant will retain such access for at least ten (10) years after the date on which it is authorized to receive 5G Fund support;
(4) Submit specified operational and financial information;
(i) Indicate whether the applicant has been providing mobile wireless voice and/or mobile wireless broadband service for at least three years prior to the short-form application deadline (or is a wholly-owned subsidiary of an entity that has been providing such service for at least three years). An applicant for a 5G Fund auction will be deemed to have started providing mobile wireless broadband service on the date it began commercially offering service to end users. If the applicant is applying as a consortium or joint venture, the applicant will be permitted to rely on the length of time a member of the consortium or joint venture has been providing mobile service prior to the short-form application deadline in responding to this question;
(ii) If the applicant has been providing mobile wireless voice and/or mobile wireless broadband service for at least three years prior to the short-form application deadline (or is a wholly-owned subsidiary of an entity that has been providing such service for at least three years), it must:
(A) Certify that the applicant has been providing mobile wireless voice and/or mobile wireless broadband service for at least three years prior to the short-form application deadline (or is a wholly-owned subsidiary of an entity that has been providing such service for at least three years),
(B) Specify the number of years it (or its parent company, if it is a wholly-owned subsidiary) has been providing such service,
(C) Certify that it (or its parent company, if it is a wholly-owned subsidiary) has submitted mobile wireless voice and/or mobile wireless broadband data as required on FCC Form 477 and/or in the Digital Opportunity Data Collection, as applicable, during that time period,
(D) Provide each of the FCC Registration Numbers (FRNs) that the applicant or its parent company (and in the case of a holding company applicant, its operating companies) has used to submit mobile wireless voice and/or mobile wireless broadband data on FCC Form 477 and/or in the Digital Opportunity Data Collection, as applicable, during that time period.
(iii) If the applicant has been providing mobile wireless voice and/or mobile wireless broadband service for fewer than three years prior to the application deadline (or is not a wholly-owned subsidiary of an entity that has been providing such service for at least three years), it must:
(A) submit information concerning its operational history and a preliminary project description as prescribed by the Commission or the Office of Economics and Analytics and the Wireline Competition Bureau in a public notice;
(B) submit a letter of interest from a qualified bank that meets the qualifications set forth in § 54.1016 stating that the bank would provide a letter of credit as described in section to the applicant if the applicant becomes a winning bidder for bids of a certain dollar magnitude, as well as the maximum dollar amount for which the bank would be willing to issue a letter of credit to the applicant; and
(C) submit a statement that the bank would be willing to issue a letter of credit that is substantially in the same form as the Commission's model letter of credit.
(5) Certify that it will be subject to a forfeiture pursuant to § 1.21004 in the event of an auction default; and
(6) Certify that the party submitting the application is authorized to do so on behalf of the applicant.
(b)
(2)
(i) Identification of the party seeking the support, including ownership information as set forth in § 1.2112(a) of this chapter;
(ii) Updated information regarding the agreements, arrangements, or understandings related to 5G Fund support disclosed in the application to participate in competitive bidding for 5G Fund support. A winning bidder may also be required to disclose in its application for 5G Fund support the specific terms, conditions, and parties involved in any agreement into which it has entered and the agreement itself;
(iii) Certification that the applicant is financially and technically capable of providing the required coverage and performance levels within the specified timeframe in the geographic areas in which it won support;
(iv) Proof of the applicant's status as an eligible telecommunications carrier, or a statement that the applicant will become an eligible telecommunications carrier in any area for which it seeks support within 180 days of the public notice identifying them as winning bidders, and certification that the proof is accurate;
(v) A description of the Commission licensed spectrum to which the applicant has exclusive access that the applicant plans to use to meet its public interest obligations and performance requirements in areas for which it is winning bidder for support, including whether the applicant currently holds a license for or leases the spectrum, along with any necessary renewal expectancy, the license applicable to the spectrum to be accessed, the type of service covered by the license, the particular frequency band(s), the call sign, and the total amount of bandwidth (in megahertz) to which the applicant has access under the license applicable to the spectrum to be accessed, and certification that the description is accurate, that the winning bidder has access to spectrum in each area for which it is applying for support, and that the applicant will retain such access for the entire ten (10) year 5G Fund support term;
(vi) A detailed project description that describes the network to be built, identifies the proposed technology, demonstrates that the project is technically feasible, discloses the complete project budget, and discusses each specific phase of the project (
(vii) Certifications that the applicant has available funds for all project costs that exceed the amount of support to be received from 5G Fund and that the applicant will comply with all program requirements, including the public interest obligations and performance requirements set forth in § 54.1015;
(viii) Any guarantee of performance that the Commission may require by public notice or other proceedings, including but not limited to the letters of credit and opinion letter required in § 54.1016, or a written commitment from an acceptable bank, as defined in § 54.1016, to issue such a letter of credit;
(ix) Certification that the applicant will offer services in supported areas at rates that are reasonably comparable to the rates the applicant charges in urban areas;
(x) Certification that the party submitting the application is authorized to do so on behalf of the applicant; and
(xi) Such additional information as the Commission may require.
(3)
(ii) Any application that, as of the submission deadline, either does not identify the applicant seeking support as specified in the public notice announcing application procedures, or does not include required certifications, shall be denied.
(iii) An applicant may be afforded an opportunity to make minor modifications to amend its application or correct defects noted by the applicant, the Commission, the Administrator, or other parties. Minor modifications include correcting typographical errors in the application and supplying non-material information that was inadvertently omitted or was not available at the time the application was submitted.
(iv) Applications to which major modifications are made after the deadline for submitting applications shall be denied. Major modifications include, but are not limited to, any changes in the ownership of the applicant that constitute an assignment or change of control, or the identity of the applicant, or the certifications required in the application.
(v) After receipt and review of the applications, a public notice shall identify each winning bidder that may be authorized to receive 5G Fund support, after the winning bidder submits a Letter of Credit and an accompanying opinion letter from its outside legal counsel as required by § 54.1016, in a form acceptable to the Commission, and any final designation as an eligible telecommunications carrier that any applicant may still require. Each such winning bidder shall submit a Letter of Credit and an accompanying opinion letter from its outside legal counsel as required by § 54.1016, in a form acceptable to the Commission, and any required final designation as an eligible telecommunications carrier no later than ten (10) business days following the release of the public notice.
(vi) After receipt of all necessary information, a public notice will identify each winning bidder that is authorized to receive 5G Fund support.
(a)
(b)
(1)
(2)
(3)
(4)
(5)
(c)
(1) Median of 35 Mbps download and 3 Mbps upload, and with at least 90 percent of measurements recording data transmission rates of not less than 7 Mbps download and 1 Mbps upload; and
(2) Transmission latency of 100 milliseconds or less round trip for successfully transmitted measurements (
(3) At least one service plan offered must include a data allowance that is equivalent to the average United States subscriber data usage as specified by public notice.
(d)
(e)
(f)
(1) If the recipient offers service in urban areas, it may demonstrate that it offers reasonably comparable rates if it offers the same rates, terms, and conditions (including usage allowances, if any, for a specific rate) in both urban and rural areas or if one of the carrier's rural stand-alone voice service plans and one rural service plan offering data are substantially similar to plans it offers in urban areas.
(2) If the recipient does not offer service in urban areas, it may demonstrate that it offers reasonably comparable rates by identifying a carrier that does offer service in urban areas and the specific rate plans to which its rural plans are reasonably comparable, along with submission of corroborating evidence that its rates are reasonably comparable, such as marketing materials from the identified carrier.
(g)
(a) Before being authorized to receive 5G Fund support, a winning bidder shall obtain an irrevocable standby letter of credit which shall be acceptable in all respects to the Commission.
(1) Each winning bidder that becomes authorized to receive 5G Fund support shall maintain the standby letter of credit in an amount equal to, at a minimum, one year of support, until the Administrator has verified that the support recipient serves at least 85 percent of the eligible square kilometers for which it is authorized to receive support in a state, and at least 75 percent of the eligible square kilometers in each eligible census tract, by the Year Six Final Service Milestone..
(i) For Year One of a support recipient's support term, it must obtain a letter of credit valued at an amount equal to one year of support.
(ii) For Year Two of a support recipient's support term, it must obtain a letter of credit valued at an amount equal to eighteen months of support.
(iii) For Year Three of a support recipient's support term, it must obtain a letter of credit valued at an amount equal to two years of support.
(iv) For Year Four of a support recipient's support term, and for each year thereafter unless the support recipient is allowed to reduce it pursuant to § 54.1015(b), it must obtain a letter of credit valued at an amount equal to three years of support.
(v) A support recipient may obtain a new letter of credit or renew its existing letter of credit so that it is valued at an amount equal to one year of support once it meets its optional or required service milestones as specified in § 54.1015(b). The recipient may obtain or renew this letter of credit upon verification by the Administrator that it has deployed service that meets the 5G Fund deadlines as specified in § 54.1015(b) and performance requirements as specified in § 54.1015(c). The recipient may maintain its letter of credit at this level for the remainder of its deployment term, so long as the Administrator verifies that the recipient successfully and timely meets its remaining required interim and final service milestones.
(vi) A support recipient that fails to meet its required interim service milestones must obtain a new letter of credit or renew its existing letter of credit valued at an amount equal to its existing letter of credit, plus an additional year of support, up to a maximum of three years of support.
(vii) A support recipient that fails to meet two or more required interim service milestones must maintain a letter of credit valued at an amount equal to three years of support and may
(2) The bank issuing the letter of credit shall be acceptable to the Commission. A bank that is acceptable to the Commission is:
(i) Any United States bank:
(A) That is insured by the Federal Deposit Insurance Corporation, and
(B) That has a bank safety rating issued by Weiss of B−or better; or
(ii) CoBank, so long as it maintains assets that place it among the 100 largest United States Banks, determined on basis of total assets as of the calendar year immediately preceding the issuance of the letter of credit and it has a long-term unsecured credit rating issued by Standard & Poor's of BBB− or better (or an equivalent rating from another nationally recognized credit rating agency); or
(iii) The National Rural Utilities Cooperative Finance Corporation, so long as it maintains assets that place it among the 100 largest United States Banks, determined on basis of total assets as of the calendar year immediately preceding the issuance of the letter of credit and it has a long-term unsecured credit rating issued by Standard & Poor's of BBB− or better (or an equivalent rating from another nationally recognized credit rating agency); or
(iv) Any non-United States bank:
(A) That is among the 100 largest non-U.S. banks in the world, determined on the basis of total assets as of the end of the calendar year immediately preceding the issuance of the letter of credit (determined on a U.S. dollar equivalent basis as of such date);
(B) Has a branch office
(i) Located in the District of Columbia; or
(ii) Located in New York City, New York, or such other branch office agreed to by the Commission, that will accept a letter of credit presentation from the Administrator via overnight courier, in addition to in-person presentations; and
(C) Has a long-term unsecured credit rating issued by a widely recognized credit rating agency that is equivalent to a BBB− or better rating by Standard & Poor's; and
(D) Issues the letter of credit payable in United States dollars.
(b) Before being authorized to receive 5G Fund support, a winning bidder shall obtain an opinion letter from its outside legal counsel clearly stating, subject only to customary assumptions, limitations, and qualifications, that in a proceeding under Title 11 of the United States Code, 11 U.S.C. 101
(c) Authorization to receive 5G Fund support is conditioned upon full and timely performance of all of the performance requirements set forth in § 54.1015(c), and any additional terms and conditions upon which the support was granted.
(1) Failure by a 5G Fund support recipient to meet any of the service milestones set forth in § 54.1015(b) will trigger reporting obligations and the withholding of support as described in § 54.1020. Failure to come into full compliance during the relevant cure period as described in § 54.1020(b)(4)(ii) or § 54.1020(c) will trigger a recovery action by the Administrator set forth in § 54.1020(b)(4)(ii) or § 54.1020(c), as applicable. If the recipient authorized to receive 5G Fund support does not repay the requisite amount of support within six months, the Administrator will be entitled to draw upon the entire amount of the letter of credit and may disqualify the 5G Fund support recipient from the receipt of 5G Fund support or additional universal service support.
(2) The default will be evidenced by a letter issued by the Chief of the Wireline Competition Bureau, or its respective designees, which letter, describing the performance default and attached to a standby letter of credit draw certificate, shall be sufficient for a draw on the standby letter of credit for the entire amount of the standby letter of credit.
(a) A winning bidder of 5G Fund support will be advised by public notice whether it has been authorized to receive support.
(b) 5G Fund support will be disbursed on a monthly basis to a recipient for ten (10) years following the date on which it is authorized to receive support.
(c) If a 5G Fund support recipient fails to comply with the performance requirements of the 5G Fund, the Administrator shall reduce, pause, or freeze, the monthly payments to the recipient until the recipient cures the non-compliance, as provided in § 54.1020. As set forth in § 54.1015(g), if a support recipient fails to comply with the public interest obligations or any other terms and conditions associated with receiving 5G Fund support
(d) A winning bidder of 5G Fund support may not use such support to fulfill any enforceable commitments with the Commission to deploy 5G service.
(a) A 5G Fund support recipient authorized to receive 5G Fund support shall submit an annual report to the Administrator no later than July 1 of each year after the year in which it was authorized to receive support. Each support recipient shall certify in its annual report that it is in compliance with the public interest obligations, performance requirements, and all of the terms and conditions associated with the receipt of 5G Fund support in order to continue receiving 5G Fund support disbursements.
(b) All 5G Fund support recipients shall supplement the information provided in an annual report to the Administrator within 10 business days from the onset of any reduction in the percentage of the total eligible square kilometers being served in a state after the filing of an annual certification report or in the event of any failure to comply with any of the 5G Fund requirements.
(c) The party submitting the annual report must certify that it has been authorized to do so by the 5G Fund support recipient.
(d) Each annual report shall be submitted solely via the Administrator's online portal.
(1) The Commission and the Administrator shall treat infrastructure data submitted as part of such a report as presumptively confidential.
(2) The Administrator shall make such reports available to the Commission and to the relevant state, territory, and Tribal governmental entities, as applicable.
(e) A 5G Fund support recipient shall have a continuing obligation to maintain the accuracy and completeness of the information provided in its annual reports. Any substantial change in the accuracy or completeness of any annual report must be reported as an update to the submitted annual report within ten (10) business days after the reportable event occurs.
(f) The Commission shall retain the authority to look behind 5G Fund support recipients' annual reports and to take action to address any violations.
(a) A recipient authorized to receive 5G Fund support shall submit a report to the Administrator on or before March 1 after the third, fourth, fifth, and sixth
(1) Certifications to representative data submitted in the Digital Opportunity Data Collection or as part of FCC Form 477, as applicable, demonstrating mobile transmissions to and from the network that establish compliance with the 5G Fund coverage, speed, and latency requirements;
(2) On-the-ground measurement tests to substantiate 5G broadband coverage data:
(i) With at least three tests conducted per square kilometer, measured by overlaying a uniform grid of one square kilometer (1 km by 1 km) on the recipient's submitted in-vehicle 5G coverage maps within the area for which 5G Fund support was awarded;
(ii) For a subset of drive-testable grid cells, such that the minimum percentage of drive-testable grid cells tested equals the minimum percentage of coverage required for each service buildout milestone (
(iii) Where a drive-testable grid cell is any grid cell that has more than the
(3) Detailed cell-site and sector infrastructure information; and
(4) Additional information as required by the Commission in a public notice.
(b) All data submitted and certified to in compliance with a recipient's public interest obligations in the milestone report shall be in compliance with standards set forth in the applicable public notice and shall be certified by a professional engineer.
(c) Each service milestone report shall be submitted solely via the Administrator's online portal.
(d) All data submitted in and certified to in any service milestone report shall be subject to verification by the Administrator for compliance with the 5G Fund performance requirements specified in § 54.1015(c).
(a)
(b)
(1)
(2)
(3)
(4)
(i) The Administrator will withhold 50 percent of the support recipient's monthly support for that state and the support recipient will then be required to file quarterly reports with the Administrator. As with the other tiers, as the support recipient reports, and the Administrator verifies, that it has lessened the extent of its non-compliance, and the Wireline Competition Bureau issues a letter to that effect, it will move through the tiers until it reaches Tier 1 (or no longer is out of compliance with the applicable interim service milestone).
(ii) If after having 50 percent of its support withheld for six months, the support recipient has not reported that it is eligible for Tier 3 status (or one of the lower tiers), the Administrator will withhold 100 percent of the support recipient's forthcoming monthly support for that state and will commence a recovery action for a percentage of support that is equal to the support recipient's compliance gap plus 10 percent of the support recipient's support in that state that has been disbursed to that date.
(5) If at any point prior to the Year Six Final Service Milestone the support recipient reports, and the Administrator verifies, that it is eligible for Tier 1 status or that it is no longer out of compliance with the 5G Fund performance requirements specified in § 54.1015(c), it will have its support fully restored and the Administrator will repay any funds that were recovered or withheld.
(c)
(1) If a support recipient has deployed service that meets the 5G Fund performance requirements specified in § 54.1015(c) to at least 80 percent of the total eligible square kilometers in a state, but less than the required 85 percent of the total eligible square kilometers in that state, the Administrator will recover an amount of support that is equal to 1.25 times the average amount of support per square kilometer that the support recipient has received in the state times the number of square kilometers unserved up to the 85 percent requirement;
(2) If a support recipient has deployed service that meets the 5G Fund performance requirements specified in § 54.1015(c) to at least 75 percent, but less than 80 percent, of the total eligible square kilometers in that state, the Administrator will recover an amount of support that is equal to 1.5 times the average amount of support per square kilometer that the support recipient has received in the state times the number of square kilometers unserved up to the 85 percent requirement, plus 5 percent of the support recipient's total 5G Fund support for the 10 year support term for that state;
(3) If a support recipient has deployed service that meets the 5G Fund performance requirements specified in § 54.1015(c) to less than 75 percent of the total eligible square kilometers in a state, the Administrator will recover an amount of support that is equal to 1.75 times the average amount of support per square kilometer that the support recipient has received in the state times the number of square kilometers unserved up to the 85 percent requirement, plus 10 percent of the support recipient's total 5G Fund support for the 10 year support term for that state.
(d)
(e)
A recipient authorized to receive 5G Fund support and its agents are required to retain any documentation prepared for, or in connection with, the award of the 5G Fund support for a period of not less than ten (10) years after the date on which the recipient receives its final disbursement of 5G Fund support.
(c) * * *
(4) * * *
(ii) Has a branch office:
(A) Located in the District of Columbia, or
(B) Located in New York City, New York, or such other branch office agreed to by the Commission, that will accept a letter of credit presentation from the Administrator via overnight courier, in addition to in-person presentations;