Notices. Notice of intent to prepare an RMP/EIS and notice of public meetings
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/register/2006/12/18/06-9740A research copy — for the controlling text, always check the official state or federal source. Not legal advice.
BILLING CODE 4312-FN-M DEPARTMENT OF THE INTERIOR Bureau of Reclamation New Melones Lake Project Resource Management Plan/Environmental Impact Statement (RMP/EIS), Calaveras and Tuolumne Counties, CA AGENCY: Bureau of Reclamation, Interior. ACTION: Notice of intent to prepare an RMP/EIS and notice of public meetings. SUMMARY: Pursuant to the National Environmental Policy Act (NEPA), the Reclamation Act of 1902, the Reclamation Project Act of 1939, and the Reclamation Recreation Management Act of 1992, the Bureau of Reclamation (Reclamation) proposes to prepare an integrated RMP/EIS for the New Melones Lake Project.
Reclamation is the lead federal agency for NEPA. The RMP process is designed to evaluate current and future resource conditions for a management area and to analyze whether updated or new management actions are necessary to attain desired long-term goals. The public is invited to participate in the planning process by submitting comments during the scoping period and the public comment period on the draft RMP/EIS. Other opportunities to participate will be described during the public scoping meetings.
DATES: Reclamation will host a series of three public scoping meetings to solicit input on the development of alternatives, concerns, and issues to be addressed in the RMP/EIS. The meeting dates and times are: • Monday, January 29, 2007, 6:30 to 8:30 p.m., Sonora, CA, • Tuesday, January 30, 2007, 6:30 to 8:30 p.m., Angels Camp, CA, • Wednesday, January 31, 2007, 6:30 to 8:30 p.m., Manteca, CA. ADDRESSES: Scoping meetings will be held at: • Sonora at the Sonora Union High School Cafeteria, 251, South Barretta Street, Sonora, CA, • Angels Camp at the Brett Harte High School Library, 323 South Main, Angels Camp, CA, • Manteca at the Manteca High School Cafeteria, 450 East Yosemite Avenue, Manteca, CA.
Written comments on the scope of the proposed RMP/EIS should be sent by close of business on February 16, 2007 to: Ms. Elizabeth Vasquez, Natural Resource Specialist, Central California Area Office, U.S. Bureau of Reclamation, 7794 Folsom Dam Road, Folsom, CA 95630, or e-mail to *evasquez@mp.usbr.gov.* FOR FURTHER INFORMATION CONTACT: Ms. Elizabeth Vasquez at 916-989-7192. SUPPLEMENTARY INFORMATION: In 1976, during planning for construction of the New Melones Dam, a master plan was created to manage the various resources available at New Melones Lake.
This plan and a subsequent 1995 draft resource management plan do not fulfill the need for resource management planning, due to the age of the documents, changes in visitor use over the last 30 years, and the accumulation of more complete information about the various resources managed by Reclamation as part of the New Melones Lake Project. The RMP process is designed to evaluate current and future resource conditions for a management area and to analyze whether updated or new management actions are necessary to attain desired long-term goals.
All proposed management actions will be incorporated into a single document that will guide management of biological, social, and physical resources and, when implemented, will result in the desired conditions for the management area. The associated EIS will assess the potential effects of current management actions as well as those proposed under the action alternatives. The final RMP/EIS will reflect the alternative that is deemed most preferable given the range of resources to be managed and the management tools available to Reclamation.
Reclamation has developed a preliminary list of management issues to be addressed in the RMP/EIS. These items include: • Public health and safety; • Recreational use; • Interest groups; • Traffic and transportation; • Cultural and archaeological resources; • Land use, including historic and proposed rights-of-way; and • Sensitive species and habitats. This list is not exhaustive and may increase or change as a result of public response during the scoping period. Additional Information Persons needing reasonable accommodations in order to attend and participate in the public meeting should contact Ms.
Vasquez as soon as possible. In order to allow sufficient time to process requests, please call no later than one week before the meeting. Information regarding this proposed action is available in alternative formats upon request. During the meetings, Reclamation representatives will present an overview of the project. Those attending the meeting will have the opportunity to submit comments, which Reclamation will consider in the development of alternatives and for analysis of environmental issues that should be addressed in the RMP and EIS.
(Additional coordination meetings can be arranged with responsible/cooperating agencies and with special interest groups upon request.) Letters describing the proposed action and soliciting comments will be sent to the appropriate federal, state, and local agencies and to private organizations and citizens who have expressed an interest or who are known to have an interest in this proposal. Comments received in response to this notice will become part of the administrative record and are subject to public inspection.
Our practice is to make comments, including names, home addresses, home phone numbers, and email addresses of respondents, available for public review. Individual respondents may request that we withhold their names and/or home addresses, etc., but if you wish us to consider withholding this information, you must state this prominently at the beginning of your comments. In addition, you must present a rationale for withholding this information. This rationale must demonstrate that disclosure would constitute a clearly unwarranted invasion of privacy.
Unsupported assertions will not meet this burden. In the absence of exceptional, documentable circumstances, this information will be released. We will always make submissions from organizations or businesses, and from individuals identifying themselves as representatives or officials of organizations or businesses, available for public inspection in their entirety. Michael Nepstad, Acting Regional Environmental Officer, Mid-Pacific Region. [FR Doc. E6-21471 Filed 12-15-06; 8:45 am] BILLING CODE 4310-MN-P DEPARTMENT OF JUSTICE Office of Justice Programs [OMB Number 1121-0094] Agency Information Collection Activities:
Proposed Collection; Comments Requested ACTION: 30-Day notice of information collection under review: Reinstatement of a previously approved collection for which approval has expired: The Annual Survey of Jails. The Department of Justice (DOJ), Office of Justice Programs, Bureau of Justice Statistics has submitted 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. The proposed information collected is published to obtain comments from the public and affected agencies. The proposed information collected was previously published in the **Federal Register** Volume 71, Number 200, page 61071, on October 17, 2006, allowing a 30 day comment period. The purpose of this notice is to allow for an additional 30 days for public comment until January 17, 2007. This process is conducted in accordance with 5 CFR 1320.10. Written comments and/or suggestions regarding the items contained in this notice, especially the estimated public burden or associated response time, should be directed to The Officer of Management and Budget, Officer of Information and Regulatory Affairs, Attention Department of Justice Desk Officer, Washington DC 20503. Additionally, comments may be submitted to OMB via facsimile to
(202)395-7285. Request written comments and suggestions from the public and affected agencies concerning the proposed collection of information are encouraged. Your comments should address one or more of the following four points:
(1)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;
(2)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;
(3)Enhance the quality, utility and clarity of the information to be collected; and
(4)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, e.g. permitting electronic submission of responses. Overview of This Information Collection
(1)*Type of information collection:* Revision of a currently approved collection.
(2)*The title of the Form/Collection:* The Annual Survey of Jails (ASJ).
(3)*Agency form number, if any, and the applicable component of the Department of Justice sponsoring the collection:* Form Number: CJ-5, CJ-5A, CJ-5B, and CJ-5B Addendum. Bureau of Justice Statistics, Office of Justice Programs, United States Department of Justice.
(4)*Affected public who will be asked to respond, as well as a brief abstract: Primary:* County and City jail authorities and Tribal authorities. This form is the only collection effort that provides an ability to maintain important jail statistics in years between jail censuses. The ASJ enables the Bureau; Federal, State, and local correctional administrators; legislators; researchers; and planners to track growth in the number of jails and their capacities nationally; as well as, track changes in the demographics and supervision status of jail population and the prevalence of crowding.
(5)*An estimate of the total number of respondents and the amount of time estimated for an average respondent to respond:* Nine hundred and forty-five respondents each taking an average 75 minutes to respond for collection forms CJ-5, CJ-5A, and CJ-5B. Sixty-eight respondents each taking an average of 30 minutes to respond for collection form CJ-5B Addendum.
(6)*An estimate of the total public burden (in hours) associated with the collection:* There are an estimated 1,215 annual total burden hours associated with the collection. *If additional information is required contact:* Lynn Bryant, Department Clearance Officer, United States Department of Justice, Justice Management Division, Policy and Planning Staff, Patrick Henry Building, Suite 1600, 601 D Street NW., Washington, DC 20530. Dated: December 12, 2006. Lynn Bryant, Department Clearance Officer, PRA, Department of Justice. [FR Doc. E6-21478 Filed 12-15-06; 8:45 am] BILLING CODE 4410-18-P DEPARTMENT OF JUSTICE Office of Justice Programs [OMB Number 1121-NEW] Agency Information Collection Activities: Existing Collection in Use Without OMB Control Number; Comments Requested ACTION: 60-Day notice of information collection under review: Survey of state criminal history information systems. The Department of Justice (DOJ), Office of Justice Programs, Bureau of Justice Statistics (BJS), has submitted 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. The proposed information collection is published to obtain comments from the public and affected agencies. Comments are encouraged and will be accepted for “sixty days” until February 16, 2007. This process is conducted in accordance with 5 CFR 1320.10. If you have comments especially on the estimated public burden or associated response time, suggestions, or need a copy of the proposed information collection instrument with instructions or additional information, please contact Gerard Ramker, Bureau of Justice Statistics, 810 Seventh St., NW., Washington, DC 20531. Written comments and suggestions from the public and affected agencies concerning the proposed collection of information are encouraged. Your comments should address one or more of the following four points: —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 agencies 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, e.g., permitting electronic submission of responses. Overview of This Information Collection
(1)*Type of Information Collection:* Existing collection in use without OMB control number.
(2)*Title of the Form/Collection:* Survey of State Criminal History Information Systems.
(3)*Agency form number, if any, and the applicable component of the Department of Justice sponsoring the collection:* Not applicable.
(4)*Affected public who will be asked or required to respond, as well as a brief abstract:* *Primary:* State Government. This information collection is a survey of State record repositories to estimate the percentage of total state records that are immediately available through the FBI's Interstate Identification Index and the percentage of records that are complete and fingerprint-supported.
(5)*An estimate of the total number of respondents and the amount of time estimated for an average respondent to respond:* It is estimated that 53 respondents will expend approximately 3 hours to complete the survey once every two years.
(6)*An estimate of the total public burden (in hours) associated with the collection:* There are an estimated 159 total annual burden hours associated with this collection. *If additional information is required contact:* Lynn Bryant, Department Clearance Officer, United States Department of Justice, Justice Management Division, Policy and Planning Staff, Patrick Henry Building, Suite 1600, 601 D Street, NW., Washington, DC 20530. Dated: December 12, 2006. Lynn Bryant, Department Clearance Officer, Department of Justice. [FR Doc. E6-21481 Filed 12-15-06; 8:45 am] BILLING CODE 4410-18-P DEPARTMENT OF JUSTICE Office of Justice Programs [1121-NEW] Agency Information Collection Activities: Proposed Collection; Comments Requested ACTION: 60-Day notice of information collection under review: Reinstatement with change of a previously approved collection; 2007 survey of public defenders offices. The Department of Justice (DOJ), Office of Justice Programs, Bureau of Justice Statistics, has submitted 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. The proposed information collection is published to obtain comments from the public and affected agencies. Comments are encouraged and will be accepted for “sixty days” until February 16, 2007. This process is conducted in accordance with 5 CFR 1320.10. If you have additional comments, especially on the estimated public burden or associated response time, suggestions, or need a copy of the proposed information collection instrument with instructions or additional information, please contact: Lynn Langton,
(202)353-3328, Bureau of Justice Statistics, Office of Justice Programs, Department of Justice, 810 Seventh Street, NW., Washington, DC 20531 or *Lynn.Langton@usdoj.gov.* Written comments and suggestions from the public and affected agencies concerning the proposed collection of information are encouraged. Your comments should address one or more of the following four points: —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, e.g., permitting electronic submission of responses. Overview of This Information
(1)*Type of Information Collection:* Reinstatement, with change, of a previously approved collection for which approval has expired. 2007 Survey of Public Defenders Offices.
(2)*The Title of the Form/Collection:* 2007 Survey of Public Defenders Offices.
(3)*The Agency Form Number, if any, and the Applicable Component of the Department Sponsoring the Collection:* Previous OMB number was 1121-0095. The agency form numbers are 06-SPDO Form-A and 06-SPDO Form-B. Bureau of Justice Statistics, Office of Justice Programs, United States Department of Justice.
(4)*Affected Public Who Will be Asked or Required to Respond, as well as a Brief Abstract: Primary:* All State- and locally-funded attorneys serving as the head public defender for a county, city, or judicial district. Other: None. This nationwide information collection will identify the number and characteristics of state- and county-funded public defender offices. Information will be gathered on type of offenses represented, expenditures, caseloads, training requirements, funding sources, reliance on outside legal services, and other related administrative issues. The information collected will provide a comprehensive portrait of state and local efforts to meet the needs of indigent criminal defendants through designated public defender offices.
(5)*An Estimate of the Total Number of Respondents and the Amount of Time Estimated for an Average Respondent to Respond:* An estimated 1,400 public defender offices will complete a 1-hour questionnaire (06-SPDO Form-A).
(6)*An Estimate of the Total Public Burden (in hours) Associated with the collection:* The estimated public burden associated with this collection is 1,400 hours. (1,400 data collection forms completed by each public defender office * one hour per form = 1,400 burden hours). *If additional information is required contact:* Lynn Bryant, Department Clearance Officer, United States Department of Justice, Justice Management Division, Policy and Planning Staff, Patrick Henry Building, Suite 1600, 601 D Street, NW., Washington, DC 20530. Dated: December 12, 2006. Lynn Bryant, Department Clearance Officer, Department of Justice. [FR Doc. E6-21483 Filed 12-15-06; 8:45 am] BILLING CODE 4410-18-P NUCLEAR REGULATORY COMMISSION [Docket No. 030-04794] Notice of Environmental Assessment Related to the Issuance of a License Amendment to Byproduct Material License No. 21-01443-06, for Unrestricted Release of a Former Facility for Warner-Lambert, LC., Ann Arbor, MI AGENCY: Nuclear Regulatory Commission. ACTION: Issuance of Environmental Assessment and Finding of No Significant Impact for License Amendment. FOR FURTHER INFORMATION CONTACT: William Snell, Senior Health Physicist, Decommissioning Branch, Division of Nuclear Materials Safety, Region III, U.S. Nuclear Regulatory Commission, 2443 Warrenville Road, Lisle, Illinois 60532; telephone:
(630)829-9871; fax number:
(630)515-1259; or by e-mail at *wgs@nrc.gov.* SUPPLEMENTARY INFORMATION: The U.S. Nuclear Regulatory Commission
(NRC)is considering the issuance of an amendment to NRC Byproduct Materials License No. 21-01443-06, which is held by Warner-Lambert, LLC (licensee), which is a wholly owned subsidiary of Pfizer, Inc. The amendment would authorize the decommissioning and unrestricted release of the licensee's former Traverwood facility located at 2900 Huron Parkway, Ann Arbor, Michigan (the facility). The NRC has prepared an Environmental Assessment in support of this action in accordance with the requirements of 10 CFR Part 51. Based on the Environmental Assessment, the NRC has determined that a Finding of No Significant Impact is appropriate. The amendment to Warner-Lambert's license will be issued following the publication of this Environmental Assessment and Finding of No Significant Impact. I. Environmental Assessment Identification of Proposed Action The proposed action would approve Warner-Lambert's request to amend its license and release the licensee's facility for unrestricted use in accordance with 10 CFR Part 20, Subpart E. The proposed action is in accordance with the licensee's request to the U.S. Nuclear Regulatory Commission
(NRC)to amend its license by letter dated August 31, 2006 (ADAMS Accession No. ML062440517). Warner-Lambert was first licensed to use byproduct materials at its Traverwood facility on June 27, 2000. The licensee is authorized to use byproduct materials for activities involving in-vitro biochemical research. Hydrogen-3 and carbon-14 were the only two isotopes with a half-life greater than 120 days that were used at the facility in an unsealed form, and these were limited to less than 25 millicuries at any one time in the entire building. On May 17, 2006, Warner-Lambert completed removal of licensed radioactive material from the Traverwood facility. The licensee conducted surveys of the facility as part of its decommissioning activities and provided this information to the NRC to demonstrate that the radiological condition there is consistent with radiological criteria for unrestricted use in 10 CFR Part 20, Subpart E. No radiological remediation activities are required to complete the proposed action. Need for the Proposed Action The licensee is requesting this license amendment because it has moved out of the Traverwood facility, and is conducting licensed activities at another location. The NRC is fulfilling its responsibilities under the Atomic Energy Act to make a decision on the proposed action for decommissioning that ensures that residual radioactivity is reduced to a level that is protective of the public health and safety and the environment, and allows the facility to be released for unrestricted use. Environmental Impacts of the Proposed Action The NRC staff reviewed the information provided and surveys performed by the licensee to demonstrate that the release of the Traverwood facility is consistent with the radiological criteria for unrestricted use specified in 10 CFR 20.1402. Based on its review, the staff determined that there were no radiological impacts associated with the proposed action because no radiological remediation activities were required to complete the proposed action, and that the radiological criteria for unrestricted use in § 20.1402 have been met. Based on its review, the staff determined that the radiological environmental impacts from the proposed action for the Traverwood facility are bounded by the “Generic Environmental Impact Statement in Support of Rulemaking on Radiological Criteria for License Termination of NRC-Licensed Nuclear Facilities” (NUREG-1496). Additionally, no non-radiological or cumulative impacts were identified. Therefore, the NRC has determined that the proposed action will not have a significant effect on the quality of the human environment. Alternatives to the Proposed Action The only alternative to the proposed action is to take no action. Under the no-action alternative, the licensee's facility would remain under an NRC license and would not be released for unrestricted use. Denial of the license amendment request would result in no change to current conditions at the Traverwood facility. The no-action alternative is not acceptable because it is inconsistent with 10 CFR 30.36, which requires that decommissioning of by-product material facilities be completed and approved by the NRC after licensed activities cease. This alternative would impose an unnecessary regulatory burden in controlling access to the former Traverwood facility, and limit potential benefits from the future use of the facility. Conclusion The NRC staff concluded that the proposed action is consistent with the NRC's unrestricted release criteria specified in 10 CFR 20.1402. Because the proposed action will not significantly impact the quality of the human environment, the NRC staff concludes that the proposed action is the preferred alternative. Agencies and Persons Consulted The NRC staff has determined that the proposed action will not affect listed species or critical habitats. Therefore, no further consultation is required under Section 7 of the Endangered Species Act. Likewise, the NRC staff has determined that the proposed action is not a type of activity that has potential to cause effect on historic properties. Therefore, consultation under Section 106 of the National Historic Preservation Act is not required. The NRC consulted with the Michigan Department of Environmental Quality (DEQ). The Michigan DEQ, Waste and Hazardous Materials Division, Radiological Protection and Medical Waste Section was provided the draft EA for comment on November 9, 2006. Mr. Bob Skowronek, Chief, Radioactive Material and Medical Waste Unit, with the Michigan DEQ, responded to the NRC by e-mail on November 13, 2006, indicating that the State had no comments regarding the NRC Environmental Assessment for the release of the Warner-Lambert, Traverwood facility . II. Finding of No Significant Impact On the basis of the EA in support of the proposed license amendment to release the facility for unrestricted use, the NRC has determined that the proposed action will not have a significant effect on the quality of the human environment. Thus, the NRC has not prepared an environmental impact statement for the proposed action. III. Further Information Documents related to this action, including the application for amendment and supporting documentation, are available electronically at the NRC's Electronic Reading Room at *http://www.nrc.gov/reading-rm/adams.html.* From this site, you can access the NRC's Agencywide Document Access and Management System (ADAMS), which provides text and image files of NRC's public documents. If you do not have access to ADAMS, or if there are problems in accessing the documents located in ADAMS, contact the NRC Public Document Room
(PDR)Reference staff at 1-800-397-4209, 301-415-4737, or by e-mail to *pdr@nrc.gov.* The documents and ADAMS accession numbers related to this notice are: 1. Carol Lentz, Pfizer, Inc., letter to Patricia Pelke, U.S. Nuclear Regulatory Commission, August 31, 2006 (ADAMS Accession No. ML062440517). 2. U.S. Nuclear Regulatory Commission, “Environmental Review Guidance for Licensing Actions Associated with NMSS Programs,” NUREG-1748, August 2003. 3. U.S. Nuclear Regulatory Commission, “Generic Environmental Impact Statement in Support of Rulemaking on Radiological Criteria for License Termination of NRC-Licensed Nuclear Facilities,” NUREG-1496, August 1994. 4. NRC, NUREG-1757, “Consolidated NMSS Decommissioning Guidance,” Volumes 1-3, September 2003. Documents may also be viewed electronically on the public computers located at the NRC's PDR, O 1 F21, One White Flint North, 11555 Rockville Pike, Rockville, MD 20852. The PDR reproduction contractor will copy documents for a fee. For the Nuclear Regulatory Commission, Dated at Lisle, Illinois, this 5th day of December 2006. George M. McCann, Acting Chief, Decommissioning Branch, Division of Nuclear Materials Safety, Region III. [FR Doc. E6-21463 Filed 12-15-06; 8:45 am] BILLING CODE 7590-01-P NUCLEAR REGULATORY COMMISSION Notice of Opportunity To Comment on Model Safety Evaluation and Model License Amendment Request on Technical Specification Improvement Regarding Adding an Action Statement for Two Inoperable Control Room Air Conditioning Subsystems AGENCY: Nuclear Regulatory Commission. ACTION: Request for comment. SUMMARY: Notice is hereby given that the staff of the U.S. Nuclear Regulatory Commission
(NRC)has prepared a model license amendment request (LAR), model safety evaluation (SE), and model proposed no significant hazards consideration
(NSHC)determination related to changes to Standard Technical Specification
(STS)3.7.5 (STS 3.7.4 for BWR/6), “Control Room Air Conditioning
(AC)System” for NUREG-1433 and NUREG-1434. The proposed changes would also revise the Bases for STS 3.7.5 (STS 3.7.4 for BWR/6). The General Electric Boiling Water Reactor Owners Group (BWROG) participants in the Technical Specifications Task Force
(TSTF)proposed these changes to the STS in TSTF-477, Revision 3, “Add an Action for Two Inoperable Control Room AC Subsystems.” The purpose of these models is to permit the NRC to efficiently process amendments to incorporate changes into plant-specific Technical Specifications
(TS)for General Electric Boiling Water Reactors (BWR). Licensees of nuclear power reactors to which the models apply can request amendments conforming to the models. In such a request, a licensee should confirm the applicability of the model LAR, model SE and NSHC determination to its plant. The NRC staff is requesting comments on the model LAR, model SE and NSHC determination before announcing their availability for referencing in license amendment applications. DATES: The comment period expires 30 days from the date of this publication. Comments received after this date will be considered if it is practical to do so, but the Commission is able to ensure consideration only for comments received on or before this date. ADDRESSES: Comments may be submitted either electronically or via U.S. mail. Submit written comments to: Chief, Rules and Directives Branch, Division of Administrative Services, Office of Administration, Mail Stop: T-6 D59, U.S. Nuclear Regulatory Commission, Washington, DC 20555-0001. Hand deliver comments to: 11545 Rockville Pike, Rockville, Maryland, between 7:45 a.m. and 4:15 p.m. on Federal workdays. Submit comments by electronic mail to: *CLIIP@nrc.gov.* Copies of comments received may be examined at the NRC's Public Document Room, One White Flint North, Public File Area O1-F21, 11555 Rockville Pike (first floor), Rockville, Maryland. FOR FURTHER INFORMATION CONTACT: Peter C. Hearn, Mail Stop: O-12H2, Division of Inspection and Regional Support, Office of Nuclear Reactor Regulation, U.S. Nuclear Regulatory Commission, Washington, DC 20555-0001, telephone
(301)415-1189. SUPPLEMENTARY INFORMATION: Background Regulatory Issue Summary 2000-06, “Consolidated Line Item Improvement Process [CLIIP] for Adopting Standard Technical Specifications Changes for Power Reactors,” was issued on March 20, 2000. The CLIIP is intended to improve the efficiency and transparency of NRC licensing processes. This is accomplished by processing proposed changes to the STS in a manner that supports subsequent license amendment applications. The CLIIP includes an opportunity for the public to comment on proposed changes to the STS following a preliminary assessment by the NRC staff and finding that the change will likely be offered for adoption by licensees. This notice is soliciting comments on a proposed change to the STS that adds an action statement for two inoperable control room subsystems to the General Electric BWR STS Revision 3.0 of NUREG-1433 and NUREG-1434. The CLIIP directs the NRC staff to evaluate any comments received for a proposed change to the STS and to either reconsider the change or proceed with announcing the availability of the change for proposed adoption by licensees. Those licensees opting to apply for the subject change to TSs are responsible for reviewing the staff's evaluation, referencing the applicable technical justifications, and providing any necessary plant-specific information. Following the public comment period, the model LAR and model SE will be finalized, and posted on the NRC Web page. Each amendment application made in response to the notice of availability will be processed and noticed in accordance with applicable NRC rules and procedures. This notice involves adding an action statement for two inoperable control room air conditioning subsystems. By letter dated September 8, 2006, the BWROG proposed these changes for incorporation into the STS as TSTF-477, Revision 3. These changes are accessible electronically from the Agency-wide Documents Access and Management System's (ADAMS) Public Electronic Reading Room on the Internet (ADAMS Accession No. ML062510321) at the NRC Web site *http://frwebgate.access.gpo.gov/cgi-bin/leaving.cgi?from=leavingFR.html&log=linklog&to=http://www.nrc.gov/reading-rm/adams.html.* Persons who do not have access to ADAMS or who encounter problems in accessing the documents located in ADAMS should contact the NRC Public Document Room Reference staff by telephone at 1-800-397-4209, 301-415-4737, or by e-mail to * pdr@nrc.gov.* Applicability These proposed changes will revise Section 3.7.5 (Section 3.7.4 for BWR/6) for the General Electric plants. To efficiently process incoming license amendment applications, the NRC staff requests that each licensee applying for the changes addressed by TSTF-477, Revision 3, using the CLIIP submit an LAR that adheres to the following model. Any variations from the model LAR should be explained in the licensee's submittal. Variations from the approach recommended in this notice may require additional review by the NRC staff, and may increase the time and resources needed for the review. Significant variations from the approach, or inclusion of additional changes to the license, will result in staff rejection of the submittal. Instead, licensees desiring significant variations and/or additional changes should submit a LAR that does not claim to adopt TSTF-477. Public Notices This notice requests comments from interested members of the public within 30 days of the date of this publication. Following the NRC staff's evaluation of comments received as a result of this notice, the NRC staff may reconsider the proposed change or may proceed with announcing the availability of the change in a subsequent notice (perhaps with some changes to the model LAR, model SE or model NSHC determination as a result of public comments). If the NRC staff announces the availability of the change, licensees wishing to adopt the change will submit an application in accordance with applicable rules and other regulatory requirements. The NRC staff will, in turn, issue for each application a notice of consideration of issuance of amendment to facility operating license(s), a proposed NSHC determination, and an opportunity for a hearing. A notice of issuance of an amendment to operating license(s) will also be issued to announce the revised requirements for each plant that applies for and receives the requested change. For the Nuclear Regulatory Commission. Dated at Rockville, Maryland, this 7th day of December, 2006. Timothy J. Kobetz, Chief, Technical Specifications Branch, Division of Inspection and Regional Support, Office of Nuclear Reactor Regulation. ENCLOSURE 1 1.0 Description This letter is a request to amend Operating License(s) [LICENSE NUMBER(S)] for [PLANT/UNIT NAME(S)]. The proposed changes would revise Technical Specification 3.7.5 (3.7.4 for BWR/6) “Control Room Air Conditioning
(AC)System” to add an action statement for two inoperable control room subsystems. Technical Specification Task Force
(TSTF)change traveler TSTF-477, Revision 3, “Add Action for Two Inoperable Control Room AC Subsystems” was announced for availability in the **Federal Register** on [DATE] as part of the consolidated line item improvement process (CLIIP). 2.0 Proposed Changes Consistent with NRC-approved TSTF-477, Revision 3, the proposed TS changes include: Add an action statement for two inoperable control room subsystems. 3.0 Background The background for this application is as stated in the model SE in NRC's Notice of Availability published on [DATE] [ ] FR [ ]), the NRC Notice for Comment published on [DATE] ([ ] FR [ ]), and TSTF-477, Revision 3. 4.0 Technical Analysis [LICENSEE] has reviewed References 1 and 2, and the model SE published on [DATE] ([ ] FR [ ]) as part of the CLIIP Notice for Comment. [LICENSEE] has applied the methodology in Reference 1 to develop the proposed TS changes. [LICENSEE] has also concluded that the justifications presented in TSTF-477, Revision 3 and the model SE prepared by the NRC staff are applicable to [PLANT, UNIT NOS.], and justify this amendment for the incorporation of the changes to the [PLANT] TS. 5.0 Regulatory Analysis A description of this change and its relationship to applicable regulatory requirements and guidance was provided in the NRC Notice of Availability published on [Date] ([FR [ ]), the NRC Notice for Comment published on [Date] ([ ] FR [ ]) and TSTF-477, Revision 3. 6.0 No Significant Hazards Consideration [LICENSEE] has reviewed the proposed no significant hazards consideration determination published in the **Federal Register** on [DATE] ([ ] FR [ ]) as part of the CLIIP. [LICENSEE] has concluded that the proposed determination presented in the notice is applicable to [PLANT] and the determination is hereby incorporated by reference to satisfy the requirements of 10 CFR 50.91(a). 7.0 Environmental Evaluation [LICENSEE] has reviewed the environmental consideration included in the model SE published in the **Federal Register** on [DATE] ([ ] FR [ ]) as part of the CLIIP. [LICENSEE] has concluded that the staff's findings presented therein are applicable to [PLANT] and the determination is hereby incorporated by reference for this application. 8.0 References 1. **Federal Register** Notices: Notice for Comment published on [DATE] ([ ] FR [ ]) Notice of Availability published on [DATE] ([ ] FR [ ]) Enclosure 2 Proposed Technical Specification Changes and Technical Specification Bases Changes (Mark-Up) Enclosure 3 Final Technical Specification and Bases Pages [Clean copies of Licensee specific Technical Specification
(TS)pages, corresponding to the TS pages changed by TSTF-477, Rev 3, are to be included in Enclosure 3] Model Safety Evaluation—U.S. Nuclear Regulatory Commission Office of Nuclear Reactor Regulation—Technical Specification Task Force TSTF-477, Revision 3, “Add an Action for Two Inoperable Control Room AC Subsystems.” 1.0 Introduction By letter dated [_, 20_], [LICENSEE] (the licensee) proposed changes to the technical specifications
(TS)for [PLANT NAME]. The requested changes are the adoption of TSTF-477, Revision 3, “Add Action for Two Inoperable Control Room AC Subsystems” which was proposed by the Technical Specification Task Force
(TSTF)by letter on August__ , 2006. The proposed changes revising Technical Specification 3.7.5 (3.7.4 for BWR/6) “Control Room Air Conditioning
(AC)System” involve adding the following Limiting Conditions for Operation (LCO): B. Two [control room AC] subsystems inoperable B.1 Verify control room area Temperature < [90] °F AND Once per 4 hours. B.2 Restore one [control room AC] to OPERABLE status 72 hours. The Technical Specification Task Force
(TSTF)change traveler TSTF-477, Revision 3, was announced for availability in the **Federal Register** on [DATE] as part of the consolidated line item improvement process (CLIIP). 2.0 Regulatory Evaluation Section 182a of the Atomic Energy Act (the “Act”) requires applicants for nuclear power plant operating licenses to include TS as part of the license. The TS ensure the operational capability of structures, systems and components that are required to protect the health and safety of the public. The Commission's regulatory requirements related to the content of the TS are contained in 10 CFR Section 50.36. That regulation requires that the TS include items in the following specific categories:
(1)safety limits, limiting safety systems settings, and limiting control settings (50.36(c)(1));
(2)Limiting Conditions for Operation (50.36(c)(2));
(3)Surveillance Requirements (50.36(c)(3));
(4)design features (50.34(c)(4)); and
(5)administrative controls (50.36(c)(5)). In general, there are two classes of changes to TS:
(1)Changes needed to reflect modifications to the design basis (TS are derived from the design basis), and
(2)voluntary changes to take advantage of the evolution in policy and guidance as to the required content and preferred format of TS over time. This amendment deals with the second class of changes. In determining the acceptability of revising STS 3.7.5 (STS 3.7.4 for BWR/6), the staff used the accumulation of generically approved guidance in NUREG-1433, “Standard Technical Specifications, Revision 3 General Electric Plants, BWR/4” dated June, 2004 and; NUREG-1434, Revision 3, “Standard Technical Specifications, General Electric Plants, BWR/6” dated June, 2004. Licensees may revise the TS to adopt current improved STS
(iSTS)format and content provided that plant-specific review supports a finding of continued adequate safety because:
(1)The change is editorial, administrative or provides clarification (i.e., no requirements are materially altered),
(2)the change is more restrictive than the licensee's current requirement, or
(3)the change is less restrictive than the licensee's current requirement, but nonetheless still affords adequate assurance of safety when judged against current regulatory standards. The detailed application of this general framework, and additional specialized guidance, are discussed in Section 3.0 in the context of specific proposed changes. 3.0 Technical Evaluation The BWR STS for the Control Room Air Conditioning AC System do not contain an Action Statement for two inoperable subsystems. During the TS Conversion of the BWR/6 Plants, the BWR/6 Plants adopted Action Statements for the Ventilation and AC systems that contained Action Statements for 2 inoperable subsystems similar to the proposed Action Statements in TSTF-477. The STS for numerous safety related systems also contain Action Statements for 2 inoperable subsystems. The TSTF proposes to add an Action Statement for 2 inoperable CR AC subsystems to the BWR STS in order to be consistent with the BWR/6 current iSTS. Furthermore, the consistency of the BWR STS will be enhanced since most safety related systems presently have Action Statements in the STS to address two inoperable subsystems. 3.1 NUREG-1433, Revision 3, “Standard Technical Specifications, General Electric Plants, BWR/4” The proposed BWR/4 Action statement allows 72 hours to restore 1 subsystem to the operable status for 2 inoperable subsystems. During the 72 hour completion time the CR Temperature is verified < 90 degrees every 4 hours. If 1 CRAC can not be restored to operable status or the CR Temperature can not be maintained < 90 degrees then the unit must be placed in at least Mode 3 within 12 hours and Mode 4 within 36 hours. Maintaining the CR Temperature < 90 degrees assures that the Safety Related Equipment in the CR will remain within the original licensed design operating temperature, because the maximum allowable CR Temperature is unchanged by TSTF-477. The NRC staff finds that the proposed changes in TSTF-477 are acceptable for the BWR/4 because the TSTF-477 changes provide TS requirements that the CR Temperature will be maintained within the original licensed design operating temperature of the CR equipment or the plant will be placed in the Cold Shutdown Mode (Mode 4, Safe Shut Condition). 3.2 NUREG-1434, Revision 3, “Standard Technical Specifications, General Electric Plants, BWR/6” The proposed BWR/6 Action statement allows 7 days to restore 1 subsystem to the operable status for 2 inoperable subsystems. This is consistent with the current BWR/6 Plants iSTS. During the 7 days completion time the CR Temperature is verified < 90 degrees every 4 hours. If 1 CR AC cannot be restored to operable status or the CR Temperature cannot be maintained < 90 degrees then the unit must be placed in at least Mode 3 within 12 hours and Mode 4 within 36 hours. Maintaining the CR Temperature < 90 degrees assures that the Safety Related Equipment in the CR will remain within the original licensed design operating temperature, because the original allowable CR Temperature remains unchanged by TSTF-477. The NRC staff confirms that the proposed changes in TSTF-477 are acceptable for the BWR/6 because the TSTF-477 changes provide TS requirements that the CR Temperature will be maintained within the original licensed design operating temperature of the CR equipment or the plant will be placed in the Cold Shutdown Mode (Mode 4, Safe Shut Condition). 4.0 State Consultation In accordance with the Commission's regulations, the [ ] State official was notified of the proposed issuance of the amendment. The State official had [(1) no comments or
(2)the following comments—with subsequent disposition by the staff]. 5.0 Environmental Consideration The amendment[s] change[s] a requirement with respect to the installation or use of a facility component located within the restricted area as defined in 10 CFR part 20 or surveillance requirements. The NRC staff has determined that the amendment involves no significant increase in the amounts, and no significant change in the types, of any effluents that may be released offsite, and that there is no significant increase in individual or cumulative occupational radiation exposure. The Commission has previously issued a proposed finding that the amendment involves no significant hazards consideration and there has been no public comment on such finding published [DATE] ([ ] FR [ ]). Accordingly, the amendment meets the eligibility criteria for categorical exclusion set forth in 10 CFR 51.22(c)(9). Pursuant to 10 CFR 51.22(b), no environmental impact statement or environmental assessment need be prepared in connection with the issuance of the amendment. 6.0 Conclusion The Commission has concluded, based on the considerations discussed above, that
(1)There is reasonable assurance that the health and safety of the public will not be endangered by operation in the proposed manner,
(2)such activities will be conducted in compliance with the Commission's regulations, and
(3)the issuance of the amendment will not be inimical to the common defense and security or to the health and safety of the public. Proposed No Significant Hazards Consideration Determination Description of Amendment Request: [Plant name] requests adoption of an approved change to the standard technical specifications
(STS)for Boiling Water Reactor
(BWR)Plants (NUREG-1433 and NUREG-1434) and plant specific technical specifications (TS), to add an action statement for two inoperable control room subsystems. The changes are consistent with NRC approved Industry/Technical Specification Task Force
(TSTF)Standard Technical Specifcation Change Traveler, TSTF-477, Revision 3. Basis for proposed no-significant-hazards-consideration determination: As required by 10 CFR 50.91(a), an analysis of the issue of no-significant-hazards-consideration is presented below: *Criterion 1—* The Proposed Change Does Not Involve a Significant Increase in the Probability or Consequences of an Accident Previously Evaluated The proposed change is described in Technical Specification Task Force
(TSTF)Standard TS Change Traveler TSTF-477 adds an action statement for two inoperable control room subsystems. The proposed change does not involve a physical alteration of the plant (no new or different type of equipment will be installed). The proposed changes add an action statement for two inoperable control room subsystems. The equipment qualification temperature of the control room equipment is not affected. Future changes to the Bases or licensee-controlled document will be evaluated pursuant to the requirements of 10 CFR 50.59, “ Changes, test and experiments”, to ensure that such changes do not result in more than a minimal increase in the probability or consequences of an accident previously evaluated. The proposed changes do not adversely affect accident initiators or precursors nor alter the design assumptions, conditions, and configuration of the facility or the manner in which the plant is operated and maintained. The proposed changes do not adversely affect the ability of structures, systems and components
(SSCs)to perform their intended safety function to mitigate the consequences of an initiating event within the assumed acceptance limits. The proposed changes do not affect the source term, containment isolation, or radiological consequences of any accident previously evaluated. Further, the proposed changes do not increase the types and the amounts of radioactive effluent that may be released, nor significantly increase individual or cumulative occupation/public radiation exposures. Therefore, the changes do not involve a significant increase in the probability or consequences of any accident previously evaluated. *Criterion 2—* The Proposed Change Does Not Create the Possibility of a New or Different Kind of Accident from any Previously Evaluated The proposed changes add an action statement for two inoperable control room subsystems. The changes do not involve a physical altering of the plant (i.e., no new or different type of equipment will be installed) or a change in methods governing normal pant operation. The requirements in the TS continue to require maintaining the control room temperature within the design limits. Therefore, the changes do not create the possibility of a new or different kind of accident from any previously evaluated. *Criterion 3—* The Proposed Change Does Not Involve a Significant Reduction in the Margin of Safety The proposed changes add an action statement for two inoperable control room subsystems. Instituting the proposed changes will continue to maintain the control room temperature within design limits. Changes to the Bases or license controlled document are performed in accordance with 10 CFR 50.59. This approach provides an effective level of regulatory control and ensures that the control room temperature will be maintained within design limits. The proposed changes maintain sufficient controls to preserve the current margins of safety. Based upon the reasoning above, the NRC staff concludes that the amendment request involves no significant hazards consideration. For the Nuclear Regulatory Commission. Project Manager, Plant Licensing Branch [ ], Division of Operating Reactor Licensing, Office of Nuclear Reactor Regulation. [FR Doc. E6-21462 Filed 12-15-06; 8:45 am] BILLING CODE 7590-01-P OFFICE OF PERSONNEL MANAGEMENT Excepted Service AGENCY: Office of Personnel Management (OPM). ACTION: Notice. SUMMARY: This gives notice of OPM decisions granting authority to make appointments under Schedules A, B, and C in the excepted service as required by 5 CFR 6.6 and 213.103. FOR FURTHER INFORMATION CONTACT: C. Penn, Executive Resources Services Group, Center for Human Resources, Division for Human Capital Leadership and Merit System Accountability, 202-606-2246. SUPPLEMENTARY INFORMATION: Appearing in the listing below are the individual authorities established under Schedules A, B, and C between October 1, 2006, and October 31, 2006. Future notices will be published on the fourth Tuesday of each month, or as soon as possible thereafter. A consolidated listing of all authorities as of June 30 is published each year. Schedule A No Schedule A appointments were approved for October 2006. Schedule B No Schedule B appointments were approved for October 2006. The following Schedule C appointments were approved during October 2006: Section 213.3303 Executive Office of the President Office of Management and Budget BOGS70004 Special Assistant and Counselor to the Controller to the Controller, Office of Federal Financial Management. Effective October 11, 2006. BOGS60157 Confidential Assistant to the Administrator, E-Government and Information Technology. Effective October 23, 2006. BOGS70005 Confidential Assistant to the Associate Director for Legislative Affairs. Effective October 23, 2006. BOGS70006 Press Assistant to the Associate Director for Communications. Effective October 31, 2006. Office of the United States Trade Representative TNGS70001 Confidential Assistant to the Chief of Staff. Effective October 23, 2006. Section 213.333 Office of Science and Technology Policy TSGS60042 Deputy to the Associate Director to the Associate Director, Technology. Effective October 23, 2006. TSGS60043 Program Management Specialist to the Chief of Staff and General Counsel. Effective October 23, 2006. Section 213.334 Department of State DSGS61115 Foreign Affairs Officer to the Assistant Secretary for International Organizational Affairs. Effective October 06, 2006. DSGS61126 Staff Assistant to the Director, Policy Planning Staff. Effective October 11, 2006. DSGS61128 Special Assistant to the Under Secretary for Global Affairs. Effective October 11, 2006. DSGS61104 Special Assistant to the Director, Policy Planning Staff. Effective October 23, 2006. DSGS61127 Special Assistant to the Assistant Secretary for International Organizational Affairs. Effective October 23, 2006. Section 213.335 Department of the Treasury DYGS60277 Speechwriter to the Assistant Secretary (Public Affairs). Effective October 31, 2006. Section 213.336 Department of Defense DDGS16985 Speechwriter to the Principal Deputy Assistant Secretary of Defense for Public Affairs. Effective October 06, 2006. DDGS16986 Special Assistant to the Deputy General Counsel Legal Counsel. Effective October 06, 2006. DDGS16999 Personal and Confidential Assistant to the Assistant Secretary of Defense (International Security Affairs). Effective October 16, 2006. DDGS16984 Defense Fellow to the Special Assistant to the Secretary of Defense for White House Liaison. Effective October 23, 2006. DDGS16995 Special Assistant to the Under Secretary of Defense (Acquisition, Technology, and Logistics). Effective October 23, 2006. DDGS16996 Special Assistant to the Principal Deputy Assistant Secretary of Defense (Legal Affairs). Effective October 27, 2006. DDGS16998 Staff Assistant to the Special Assistant to the Secretary of Defense for White House Liaison. Effective October 27, 2006. DDGS16993 Deputy, White House Liaison Office to the Special Assistant to the Secretary of Defense for White House Liaison. Effective October 30, 2006. Section 213.337 Department of the Army DWGS60027 Special Assistant to the Deputy Under Secretary of the Army to the Deputy Under Secretary of the Army. Effective October 05, 2006. DWGS60024 Personal and Confidential Assistant to the Under Secretary of the Army. Effective October 06, 2006. Section 213.339 Department of the Air Force DFGS08001 Special Assistant to the Deputy Assistant Secretary (Force Management Integration). Effective October 30, 2006. Section 213.3310 Department of Justice DJGS00406 Public Affairs Specialist to the Director, Office of Public Affairs. Effective October 27, 2006. Section 213.3311 Department of Homeland Security DMGS00577 Deputy Director of the Center for Faith Based and Community Initiatives to the Director of Faith-Based and Community Initiatives. Effective October 03, 2006. DMGS00580 Associate Director of Strategic Communications for Policy to the Director of Strategic Communications. Effective October 03, 2006. DMGS00578 Business Liaison Director to the Assistant Secretary for Private Sector. Effective October 05, 2006. DMGS00579 Associate Director for Latin American Affairs to the Assistant Secretary for International Affairs. Effective October 05, 2006. Section 213.3311 Department of Homeland Security DMGS00583 Policy Advisor to the Chief of Staff. Effective October 11, 2006. DMGS00581 Associate Director of Legislative Affairs to the Assistant Secretary for Legislative Intergovernmental Affairs. Effective October 24, 2006. DMGS00582 Associate Director of Legislative Affairs to the Assistant Secretary for Legislative Intergovernmental Affairs. Effective October 24, 2006. DMGS00586 Counselor to the Director and Deputy Director to the Under Secretary for Federal Emergency Management. Effective October 24, 2006. Section 213.3312 Department of the Interior DIGS01079 Science Advisor to the Assistant Secretary for Water and Science. Effective October 25, 2006. Section 213.3313 Department of Agriculture DAGS00864 Confidential Assistant to the Administrator, Rural Housing Service. Effective October 30, 2006. Section 213.3314 Department of Commerce DCGS00442 Director of Public Affairs to the Assistant Secretary for Telecommunications and Information. Effective October 06, 2006. DCGS00431 Special Assistant to the Assistant Secretary for Export Administration. Effective October 11, 2006. DCGS00531 Confidential Assistant to the Deputy Assistant Secretary for Services. Effective October 11, 2006. DCGS00544 Chief of Staff to the Assistant Secretary and Director General of United States/For Commercial Services. Effective October 11, 2006. DCGS60262 Deputy Director of Advisory Committees to the Director of Advisory Committees. Effective October 11, 2006. DCGS60263 Special Assistant to the Executive Director for Trade Promotion and Outreach. Effective October 11, 2006. DCGS60533 Special Assistant to the Deputy Under Secretary and Deputy Director of U.S. Patent and Trademark Office. Effective October 11, 2006. Section 213.3315 Department of Labor DLGS60190 Legislative Officer to the Assistant Secretary for Congressional and Intergovernmental Affairs. Effective October 03, 2006. DLGS60078 Staff Assistant to the Assistant Secretary for Policy. Effective October 05, 2006. DLGS60111 Regional Representative to the Assistant Secretary for Congressional and Intergovernmental Affairs. Effective October 05, 2006. DLGS60178 Staff Assistant to the Counselor in the Office of the Secretary. Effective October 05, 2006. DLGS60182 Staff Assistant to the White House Liaison. Effective October 05, 2006. DLGS60278 Staff Assistant to the Chief Financial Officer. Effective October 05, 2006. DLGS60228 Chief of Staff to the Assistant Secretary for Occupational Safety and Health. Effective October 24, 2006. Section 213.3316 Department of Health and Human Services DHGS60040 Special Assistant to the Chief of Staff. Effective October 03, 2006. DHGS60056 Special Assistant to the Director Office of Refugee Resettlement. Effective October 24, 2006. DHGS60042 Special Assistant to the Assistant Secretary for Public Affairs to the Assistant Secretary for Public Affairs. Effective October 27, 2006. DHGS60238 Regional Director, Boston, Massachusetts, Region I to the Director of Intergovernmental Affairs. Effective October 27, 2006. DHGS60698 Special Assistant to the Director, Office of External Affairs. Effective October 31, 2006. Section 213.3318 Environmental Protection Agency EPGS06028 Deputy Associate Administrator to the Associate Administrator for Congressional and Intergovernmental Relations. Effective October 27, 2006. EPGS06029 Director, Office of Web Communications to the Associate Administrator for Public Affairs. Effective October 27, 2006. Section 213.3325 United States Tax Court JCGS60077 Trial Clerk to the Chief Judge. Effective October 26, 2006. Section 213.3330 Securities and Exchange Commission SEOT90007 Confidential Assistant to the Chairman. Effective October 25, 2006. SEOT90008 Confidential Assistant to a Commissioner. Effective October 31, 2006. Section 213.3331 Department of Energy DEGS00545 Senior Policy Advisor to the Assistant Secretary for Fossil Energy. Effective October 23, 2006. DEGS00544 Senior Communications Advisor to the Assistant Secretary of Energy (Environmental Management). Effective October 25, 2006. DEGS00546 Senior Advisor to the Assistant Secretary for Policy and International Affairs. Effective October 26, 2006. Section 213.3332 Small Business Administration SBGS00606 Speech Writer to the Associate Administrator for Communications and Public Liaison. Effective October 06, 2006. Section 213.3333 Federal Deposit Insurance Corporation FDOT00010 Chief of Staff to the Chairman of the Board of Directors (Director). Effective October 20, 2006. FDOT00011 Special Advisor to the Chairman to the Chairman of the Board of Directors (Director). Effective October 20, 2006. Section 213.3337 General Services Administration GSGS00166 Deputy Associate Administrator for Small Business Utilization to the Associate Administrator for Small Business Utilization. Effective October 05, 2006. Section 213.3384 Department of Housing and Urban Development DUGS60187 Staff Assistant to the Assistant Secretary for Public Affairs. Effective October 06, 2006. Section 213.3391 Office of Personnel Management PMGS60019 Special Assistant to the Director, Office of Communications and Public Liaison. Effective October 25, 2006. Section 213.3396 National Transportation Safety Board TBGS11123 Confidential Assistant to the Chairman. Effective October 23, 2006. Section 213.3397 Federal Housing Finance Board FBOT00010 Special Assistant to the Board Director. Effective October 23, 2006. Section 213.33 National Endowment for the Humanities NHGS00078 Associate Director of Communications and Chief Speechwriter to the Director of Communications. Effective October 25, 2006. Office of Personnel Management. Dan G. Blair, Deputy Director. [FR Doc. E6-21541 Filed 12-15-06; 8:45 am] BILLING CODE 6325-39-P SECURITIES AND EXCHANGE COMMISSION [Release No. 34-54920] Extension of Order Regarding Broker-Dealer Financial Statement Requirements Under Section 17 of the Exchange Act December 12, 2006. The Securities and Exchange Commission (“Commission”) is extending its Order, originally issued on August 4, 2003, 1 and extended on July 14, 2004 2 and on December 7, 2005 (the “2005 Order”) 3 under Section 17(e) of the Securities Exchange Act of 1934 (“Exchange Act”), regarding audits of financial statements of broker-dealers that are not issuers (“non-public broker-dealers”). The 2005 Order provided that non-public broker-dealers may file with the Commission and may send to their customers documents and information required by Section 17(e) certified by an independent public accountant, instead of by a registered public accounting firm, for fiscal years ending before January 1, 2007. 1 Exchange Act Release No. 48281, 68 FR 47375 (August 8, 2003). 2 Exchange Act Release No. 50020, 69 FR 43482 (July 20, 2004). 3 Exchange Act Release No. 52909, 70 FR 73809 (December 13, 2005). Section 17(e)(1)(A) of the Exchange Act requires that every registered broker-dealer annually file with the Commission a certified balance sheet and income statement, and Section 17(e)(1)(B) requires that the broker-dealer annually send to its customers its “certified balance sheet.” 4 The Sarbanes-Oxley Act of 2002 (“Act”) 5 established the Public Company Accounting Oversight Board (“Board”) 6 and amended Section 17(e) to replace the words “an independent public accountant” with “a registered public accounting firm.” 7 4 Exchange Act Rule 17a-5 requires registered broker-dealers to provide to the Commission and to customers of the broker-dealer other specified financial information. 5 Public Law 107-204. 6 Section 101 of the Act. 7 Section 205(c)(2) of the Act. The Act establishes a deadline for registration with the Board of auditors of financial statements of “issuers,” as that term is defined in the Act. 8 The Act does not provide a deadline for registration of auditors of non-public broker-dealers. 8 Section 2 of the Act defines “issuer.” Section 102 of the Act establishes a specific deadline by which auditors of issuers must register with the Board. Based on the statutory deadline of 180 days after the Commission determined the Board was ready to carry out the requirements of the Act, that date was October 22, 2003. See Exchange Act Release No. 48180 (July 16, 2003). The 2005 Order expires January 1, 2007. Application of registration requirements and procedures to auditors of non-public broker-dealers is still being considered. The Commission has therefore determined that extending the Order for two years is consistent with the public interest and the protection of investors. Accordingly, *It is ordered,* pursuant to Section 17(e) of the Exchange Act, that non-public broker-dealers may file with the Commission a balance sheet and income statement and may send to their customers a balance sheet certified by an independent public accountant, instead of by a registered public accounting firm, for fiscal years ending before January 1, 2009. By the Commission. Nancy M. Morris, Secretary. [FR Doc. E6-21475 Filed 12-15-06; 8:45 am] BILLING CODE 8011-01-P SECURITIES AND EXCHANGE COMMISSION [Release No. 34-54915; File No. SR-BSE-2006-54] Self-Regulatory Organizations; Boston Stock Exchange, Inc.; Notice of Filing and Immediate Effectiveness of Proposed Rule Change and Amendment No. 1 Thereto Relating to the Removal of Minimum Volume and Fill-Or-Kill Order Type Designations December 11, 2006. Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 (“Act”) 1 and Rule 19b-4 thereunder, 2 notice is hereby given that on November 21, 2006, the Boston Stock Exchange, Inc. (“BSE” or “Exchange”) submitted to the Securities and Exchange Commission (“Commission”) the proposed rule change as described in Items I and II below, which Items have been prepared by the Exchange. On December 8, 2006, the Exchange submitted Amendment No. 1 to the proposed rule change. 3 The Exchange filed the proposal as a “non-controversial” proposed rule change pursuant to Section 19(b)(3)(A) of the Act 4 and Rule 19b-4(f)(6) thereunder, 5 which renders it effective upon filing with the Commission. 6 The Commission is publishing this notice to solicit comments on the proposed rule change, as amended, from interested persons. 1 15 U.S.C. 78s(b)(1). 2 17 CFR 240.19b-4. 3 In Amendment No. 1, the Exchange clarified that there is no proposed change to the Supplemental Material following part
(c)of Section 27, entitled “Complex Orders.” 4 15 U.S.C. 78s(b)(3)(A). 5 17 CFR 240.19b-4(f)(6). 6 The Exchange requested the Commission to waive the five-day pre-filing notice requirement and the 30-day operative delay, as specified in Rule 19b-4(f)(6)(iii). 17 CFR 240.19b-4(f)(6)(iii). I. Self-Regulatory Organization's Statement of the Terms of Substance of the Proposed Rule Change The Exchange proposes to remove the Minimum Volume (“MV”) and Fill-Or-Kill (“FOK”) order type designations in the Boston Options Exchange (“BOX”) Rules. The text of the proposed rule change is available on BSE's Web site ( *http://www.bostonstock.com* ), at BSE's principal office, and at the Commission's Public Reference Room. II. Self-Regulatory Organization's Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change In its filing with the Commission, the Exchange included statements concerning the purpose of, and basis for, the proposed rule change, as amended, and discussed any comments it received on the proposed rule change. The text of these statements may be examined at the places specified in Item IV below. The Exchange has prepared summaries, set forth in Sections A, B, and C below, of the most significant aspects of such statements. A. Self-Regulatory Organization's Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change 1. Purpose The Exchange proposes to remove the MV and FOK order type designations contained in Chapter V, Sections 9(a), 14(d)(3)-(4), and 27(b)(iv) of the BOX Rules. The Exchange proposes to remove the MV and FOK order types because they are currently not supported by BOX's new trading system. The Exchange intends to add the MV and FOK order types when that functionality is implemented into the trading system. 7 7 The Exchange represents that it will submit a proposed rule change to the Commission to add the MV and FOK order types into the BOX rules pursuant to Section 19(b) of the Act. Telephone conversation between Brian Donnelly, AVP Regulation & Compliance, BSE, Terri Evans, Special Counsel, Division of Market Regulation (“Division”), Commission, and Angela Muehr, Attorney, Division, Commission, on December 4, 2006. 2. Statutory Basis The Exchange believes that the proposed rule change, as amended, is consistent with Section 6(b) of the Act, 8 in general, and Section 6(b)(5) of the Act, 9 in particular, in that it is designed to promote just and equitable principles of trade, and to protect investors and the public interest. 8 15 U.S.C. 78f(b). 9 15 U.S.C. 78f(b)(5). B. Self-Regulatory Organization's Statement on Burden on Competition The Exchange does not believe that the proposed rule change, as amended, will impose any burden on competition not necessary or appropriate in furtherance of the purposes of the Act. C. Self-Regulatory Organization's Statement on Comments on the Proposed Rule Change Received From Members, Participants, or Others The Exchange has neither solicited nor received comments on the proposed rule change. III. Date of Effectiveness of the Proposed Rule Change and Timing for Commission Action The foregoing rule change, as amended, has become effective pursuant to Section 19(b)(3)(A) of the Act 10 and subparagraph (f)(6) of Rule 19b-4 11 thereunder because it 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 after the date of filing, or such shorter time as the Commission may designate if consistent with the protection of investors and the public interest. 10 15 U.S.C. 78s(b)(3)(A). 11 17 CFR 240.19b-4(f)(6). The Exchange has requested that the Commission waive the five-day pre-filing requirement and the 30-day operative delay. 12 The Commission is exercising its authority to waive the five day pre-filing notice requirement and believes that the waiver of the 30-day operative delay is consistent with the protection of investors and the public interest, because it would allow the BSE to ensure that its rules more accurately reflect its trading system functionality. Therefore, the Commission designates the proposal, as amended, to be operative and effective upon filing with the Commission. 13 12 17 CFR 240.19b-4(f)(6)(iii). 13 For purposes only of waiving the operative delay for this proposal, the Commission has considered the proposed rule's impact on efficiency, competition, and capital formation. 15 U.S.C. 78c(f). At any time within 60 days of the filing of such proposed rule change, the Commission may summarily abrogate 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. 14 14 For purposes of calculating the 60-day period within which the Commission may summarily abrogate the proposed rule change, as amended, under section 19(b)(3)(C) of the Act, the Commission considers the period to commence on December 8, 2006, the date on which the Exchange submitted Amendment No. 1. *See* 15 U.S.C. 78s(b)(3)(C). IV. Solicitation of Comments Interested persons are invited to submit written data, views, and arguments concerning the foregoing, including whether the proposed rule change, as amended, is consistent with the Act. Comments may be submitted by any of the following methods: Electronic Comments • Use the Commission's Internet comment form ( *http://www.sec.gov/rules/sro.shtml* ); or • Send an e-mail to *rule-comments@sec.gov.* Please include File Number SR-BSE-2006-54 on the subject line. Paper Comments • Send paper comments in triplicate to Nancy M. Morris, Secretary, Securities and Exchange Commission, Station Place, 100 F Street, NE., Washington, DC 20549-1090. All submissions should refer to File Number SR-BSE-2006-54. This file number should be included on the subject line if e-mail is used. To help the Commission process and review your comments more efficiently, please use only one method. The Commission will post all comments on the Commission's Internet Web site ( *http://www.sec.gov/rules/sro.shtml* ). Copies of the submission, all subsequent amendments, all written statements with respect to the proposed rule change that are filed with the Commission, and all written communications relating to the proposed rule change between the Commission and any person, other than those that may be withheld from the public in accordance with the provisions of 5 U.S.C. 552, will be available for inspection and copying in the Commission's Public Reference Room. Copies of such filing also will be available for inspection and copying at the principal office of the Exchange. All comments received will be posted without change; the Commission does not edit personal identifying information from submissions. You should submit only information that you wish to make available publicly. All submissions should refer to File Number SR-BSE-2006-54 and should be submitted on or before January 8, 2007. For the Commission, by the Division of Market Regulation, pursuant to delegated authority. 15 15 17 CFR 200.30-3(a)(12). Florence E. Harmon, Deputy Secretary. [FR Doc. E6-21477 Filed 12-15-06; 8:45 am] BILLING CODE 8011-01-P SECURITIES AND EXCHANGE COMMISSION [Release No. 34-54919; File No. SR-CBOE-2006-14] Self-Regulatory Organizations; Chicago Board Options Exchange, Incorporated; Notice of Filing of Amendment Nos. 1 and 2 to the Proposed Rule Change Relating to Customer Portfolio Margining; Order Granting Accelerated Approval to the Proposed Rule Change, as Amended December 12, 2006. I. Introduction On February 2, 2006, the Chicago Board Options Exchange, Incorporated (“CBOE” or “Exchange”) filed with the Securities and Exchange Commission (“Commission”), pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 (“Act” or “Exchange Act”) 1 and Rule 19b-4 2 thereunder, a proposed rule change seeking to amend CBOE Rule 12.4 to expand the scope of products that are eligible for treatment as part of CBOE's approved portfolio margin pilot program and to eliminate the requirement for a separate cross-margin account. 3 The proposed rule change would expand the scope of eligible products in the pilot to include margin equity securities, 4 unlisted derivatives, listed options and securities futures. 5 The proposed rule change was published in the **Federal Register** on April 6, 2006. 6 The Commission subsequently extended the comment period for the original proposed rule filing until May 11, 2006. 7 The Commission received 7 comment letters in response to the **Federal Register** notice. 8 On July 26, 2006, CBOE filed a response to these comments. 9 The comment letters and CBOE's response to the comments are summarized below. On August 9, 2006, CBOE filed Amendment No. 1 to the proposed rule change. 10 On September 27, 2006, CBOE filed Amendment No. 2 to the proposed rule change. 11 1 15 U.S.C. 78s(b)(1). 2 17 CFR 240.19b-4. 3 *See* Exchange Act Release No. 52032 (July 14, 2005), 70 FR 42118 (July 21, 2005) (SR-CBOE-2002-03). On July 14, 2005, the Commission approved on a pilot basis expiring July 31, 2007, amendments to CBOE's margin rules that permit broker-dealers to determine customer margin requirements for portfolios of listed broad-based securities index options, warrants, futures, futures options and related exchange-traded funds using a specified portfolio margin methodology. The Commission also approved rule amendments to require disclosure to, and written acknowledgment from, customers using a portfolio margin account. 4 For purposes of the pilot, a margin equity security is a security that meets the definition of a “margin equity security” under Regulation T of the Federal Reserve Board (“FRB”). *See* 12 CFR 220.2. An unlisted derivative means “any equity-based (or equity index-based) unlisted option, forward contract or swap that can be valued by a theoretical pricing model approved by the Securities and Exchange Commission.” *See* proposed Rule 12.4(a)(4). 5 In addition to CBOE Rule 12.4, the proposed rule change also approves changes to CBOE Rules 9.15, 13.5 and 15.8A. 6 *See* Exchange Act Release No. 53576 (March 30, 2006), 71 FR 17519 (April 6, 2006) (SR-CBOE-2006-14). The New York Stock Exchange LLC (“NYSE”) also filed a similar proposed rule filing seeking to expand the scope of eligible products under its portfolio margin pilot program. *See* Exchange Act Release No. 53577 (March 30, 2006), 71 FR 17539 (April 6, 2006) (SR-NYSE-2006-13). 7 *See* Exchange Act Release No. 53728 (April 26, 2006), 71 FR 25878 (May 2, 2006). 8 *See* letter from Timothy H. Thompson, Senior Vice President, Chief Regulatory Officer, Regulatory Services Division, CBOE, to Nancy Morris, Secretary, Commission, dated June 5, 2006 (“CBOE Letter”); letter from William H. Navin, Executive Vice President, General Counsel and Secretary, The Options Clearing Corporation (“OCC”), to Nancy M. Morris, Secretary, Commission, dated May 19, 2006 (“OCC Letter”); letter from James Barry, on behalf of the *Ad Hoc* Portfolio Margin Committee, John Vitha, Chair, Derivatives Product Committee and Christopher Nagy, Chair, Options Committee, Securities Industry Association, to Nancy M. Morris, Secretary, dated May 16, 2006 (“SIA Letter”); letter from Gary Alan DeWaal, Group General Counsel and Director of Legal and Compliance, Fimat USA, LLC, to Nancy M. Morris, Secretary, Commission, dated May 11, 2006 (“Fimat Letter”); letter from Stuart J. Kaswell, Partner, Dechert LLP, Counsel for Federated Investors, Inc., to Nancy M. Morris, Secretary, Commission, dated May 10, 2006 (“Federated Letter”); letter from Craig S. Donohue, Chief Executive Officer, Chicago Mercantile Exchange Inc., to Jonathan G. Katz, Secretary, Commission, dated May 9, 2006 (“CME Letter”); and letter from Gerard J. Quinn, Vice President and Associate General Counsel, SIA, to Nancy M. Morris, Secretary, Commission, dated April 21, 2006 (“SIA Extension Letter”). 9 *See* letter from Timothy H. Thompson, Senior Vice President, Chief Regulatory Officer, Regulatory Services Division, CBOE, to Nancy M. Morris, Secretary, Commission, dated July 26, 2006 (“CBOE Response”). 10 CBOE filed Amendment No. 1 in response to comments received and to make other clarifying changes to the proposed rule filing. Amendment No. 1 replaced and superceded the original filing in its entirety. 11 CBOE filed partial Amendment No. 2 to conform its day trading language to the NYSE rule language and to request accelerated approval. A clean copy of the proposed rule, as amended by Amendment Nos. 1 and 2, is attached to this order as *Exhibit A.* This order provides notice of filing of Amendment Nos. 1 and 2 and solicits comments from interested persons on Amendment Nos. 1 and 2. This order also grants accelerated approval of the proposed rule change, as amended by Amendment Nos. 1 and 2. 12 12 By separate order, the Commission also is approving a parallel rule filing by the NYSE (SR-NYSE-2006-13). Exchange Act Release No. 54918; *see also supra* note 6. II. Description a. Portfolio Margining The proposed rule change consists of amendments to Rule 12.4 to include margin equity securities (as defined in Regulation T), unlisted derivatives, listed options and securities futures as eligible products for the portfolio margining pilot. 13 The proposed rule change also includes amendments to eliminate the requirement of a separate cross-margin account. CBOE Rule 12.3 prescribes specific margin requirements for customers based on the type of securities held in their accounts. 14 Outside the existing pilot program, CBOE's margin rules require that margin be calculated using fixed percentages, on a position-by-position basis. In contrast, the current portfolio margin pilot program permits a broker-dealer to calculate customer margin requirements by grouping all products in an account that are based on the same index or issuer into a single portfolio. For example, futures, options and exchange traded funds based on the S&P 500 would each be grouped in a portfolio and products based on IBM would be grouped into a separate portfolio. 13 The list of eligible products under the pilot currently includes listed broad-based securities index options, warrants, futures, futures options and related exchange-traded funds. 14 The margin rules specify the amount of equity a customer must maintain in his or her margin account with respect to securities positions financed by the broker-dealer. The equity protects the broker-dealer in the event the customer defaults on the obligation to re-pay the financing and the broker-dealer is forced to liquidate the position at a loss. The broker-dealer then calculates a customer's margin requirement by “shocking” each portfolio at different equidistant points along a range representing a potential percentage increase and decrease in the value of the instrument or underlying instrument in the case of a derivative product. Currently, under the pilot, products of portfolios based on high capitalization, broad-based securities indexes are shocked along a range spanning an increase of 6% and a decrease of 8%. Portfolios of products based on non-high capitalization, broad-based securities indexes are shocked along a range spanning an increase of 10% and a decrease of 10%. The proposed rule change would continue to apply these shock ranges. Under the proposed amendments, portfolios of products based on an equity security or a narrow-based index would be shocked along a range spanning an increase of 15% and a decrease of 15%. 15 In addition, as with the current pilot, a theoretical options pricing model would continue to be used to derive position values at each valuation point for the purpose of determining the gain or loss. 16 15 For example, under the pilot, a portfolio of single stock futures and listed equity options would be shocked at 10 equidistant points along a range bounded on one end by a 15% increase in the market value of the instrument and at the other end by a 15% decrease ( *i.e.* , at ±3%, ±6%, ±9%, ±12% and ±15%). 16 Currently, the only model that qualifies is the OCC's Theoretical Intermarket Margining System (TIMS). The portfolio shocks described above result in a gain or loss for each instrument in a portfolio at each calculation point along the range. These gains and losses are netted to derive a potential portfolio-wide gain or loss for the point. The margin requirement for a portfolio is the amount of the greatest portfolio-wide loss among the calculation points. The margin requirements for each portfolio are added together to calculate the total margin requirement for the portfolio margin account. This approach, in most cases, will generally lower customer margin requirements. 17 17 For example, the current required initial and maintenance margin requirements for an equity security are 50% and 25%, respectively. The market movement range to calculate the potential gains and losses under the proposed portfolio margin rule for equity securities is ±15%. The amount of margin (initial and maintenance) required with respect to a given portfolio would be the larger of:
(1)The greatest portfolio-wide loss amount among the valuation point calculations; or
(2)the sum of $.375 for each option and future in the portfolio multiplied by the contract's or instrument's multiplier. 18 The second computation establishes a minimum margin requirement to ensure that a certain level of margin is required from the customer in the event the greatest portfolio-wide loss among the valuation points is *de minimis* . 18 The multiplier for a standard listed option is fixed by the options market on which the options series is traded. For example, a cash settled equity option generally has a multiplier of 100. Therefore, the minimum margin for one options contract would be $37.50. The multipliers for different securities and futures products may vary. b. Expansion of Eligible Products Under CBOE's proposed rule, products eligible for portfolio margining would be expanded to include margin equity securities (as defined under Regulation T), 19 unlisted derivatives, listed options and securities futures. The unlisted derivatives would be included in a portfolio based on the underlying reference index or security. Individual equities and narrow-based index futures would be included in a portfolio shocked at a range spanning an increase of 15% and a decrease of 15%. 19 Margin equity securities include certain foreign equity securities and options on foreign equity securities. *See* 12 CFR 220.2 c. Margin Deficiency The proposed rule change would require a customer to satisfy a margin deficiency in a portfolio margin account within three business days by depositing additional margin or effecting an offsetting hedge. The current pilot requires that a customer deposit addition margin by T+1. The proposed rule also would require a broker-dealer to deduct from its net capital the amount of any portfolio margin call not met by the close of business on T+1 and until the call is satisfied. Additionally, the proposal would further require a broker-dealer to have in place procedures to identify accounts that periodically liquidate positions to eliminate margin deficiencies, and to take appropriate action when warranted. 20 20 *See* proposed rule 12.4(i)(1). d. $5 Million Equity Requirement The current pilot requires customers that are not broker-dealers or futures firms to maintain minimum account equity of $5 million dollars. The proposed rule change would eliminate the $5 million account equity requirement for all portfolio margin accounts, except those holding unlisted derivatives. 21 21 *See* proposed rule 12.4(b)(3). e. Risk Management Methodology The pilot requires member broker-dealers to monitor the risk of portfolio margin accounts and maintain a written risk analysis methodology for assessing potential risk to the firm's capital. This risk analysis methodology must be filed and maintained with CBOE. The proposed rule change strengthens these requirements by providing that, member organizations must file the risk analysis methodology with its firm's DEA and submit it to the Commission prior to implementation. 22 The proposed rule change also requires the inclusion of additional procedures and guidelines as part of the methodology. 23 22 *See* proposed Rule 12.4(b), under which the broker-dealer must receive prior approval from its DEA prior to offering portfolio margining to its customers. As part of the approval process, CBOE will require a firm to demonstrate compliance with the risk management analysis rules. 23 *See* proposed Rule 15.8A. f. Cross-Margin Account The proposed rule change would eliminate the requirement that portfolios with futures positions be held in a separate cross-margin account. Under the proposal, a customer would be permitted to use a single securities margin account for all eligible products. The Exchange and commenters have indicated that maintaining and monitoring two separate margin accounts would be operationally difficult and that it would be more efficient to hold all positions in one securities account. g. Excess Equity and Collateral CBOE also proposes to amend Rule 12.4 to add language allowing a customer to use excess equity in a regular margin account to meet a margin deficiency in a portfolio margin account without having to transfer any funds or securities where the portfolio margin account is a sub-account of the regular margin account. In addition, the proposed rule change adds language allowing positions (including nonequity securities and money market mutual funds) not eligible for portfolio margin treatment to be carried in the portfolio margin account for their collateral value, subject to the margin requirements of a regular margin account. h. Day Trading The proposed rule change amends the day trading provisions of Rule 12.4 to provide that CBOE's day trading rules do not apply to portfolio margin accounts that have at least $5 million equity, provided the member firm has the ability to monitor the intra-day risk associated with day trading. In addition, the proposed rule change would provide that day trading will not be deemed to have occurred whenever the position or positions day traded were part of a hedge strategy 24 that reduced the risk of the portfolio. 24 A “hedge strategy” for purposes of the day trading restrictions on portfolio margining means a transaction or series of transactions that reduces or offsets a material portion of the risk in a portfolio. i. Risk Disclosure Statement The proposed rule change eliminates the sample risk disclosure statement and acknowledgement in the rule text. 25 25 Instead the Exchange will send out a regulatory circular with the sample disclosure language. The Exchange made this change to avoid having to file a proposed rule change each time in the risk disclosure document is changed. j. Hedged Positions Under the pilot, an underlying security in a portfolio margin account must be removed from the account if it is no longer offset by an option position. The amendments propose to eliminate the requirement to remove instruments that are no longer offset by options positions. CBOE made this change in response to comments that all positions eligible for a portfolio margin account, including underlying securities, should receive equal treatment. Moreover, CBOE noted that it would be operationally difficult to move positions in and out of the portfolio margin account based on whether they are currently being offset. III. Summary of Comments Received and CBOE Response The Commission received a total of 7 comment letters to the proposed rule change. 26 The comments, in general, were supportive. One commenter stated that it strongly supports “the significant step forward represented by the currently proposed changes.” 27 Another commenter stated that the portfolio margining of securities products will “help U.S. brokers and exchanges compete more effectively with their overseas counterparts * * * and thereby increase the strength and liquidity of U.S. markets.” 28 Each commenter, however, recommended changes to specific provisions of the proposed rule change. 26 *See supra* note 8. One of the comment letters related to the extension of the comment period for the proposed rule change. *See* SIA Extension Letter. 27 *See* SIA Letter. 28 *See* Fimat Letter. Several commenters 29 submitted comments regarding the ability to use portfolio margin methodologies other than the method prescribed in the rule to calculate customer margin requirements. One commenter stated that the Commission has experience in approving proprietary market risk models for consolidated supervised entities
(CSEs)and OTC derivatives dealers. 30 The Exchange stated, however, that initially, the most prudent course is for all broker-dealers to utilize the rule's specified methodology and that in the longer term, proprietary risk models could be considered as alternatives. 31 29 *See* SIA Letter and OCC Letter; *see also* CME Letter (discussing SPAN). 30 *See* SIA Letter. 31 *See* CBOE Response, *supra* note 9. One commenter suggested that CBOE eliminate the requirement for a separate cross margin account and provide for one portfolio margin account for both futures and options; eliminate the requirement that stock must be hedged in order to be carried in a portfolio margin account; and eliminate the two-tiered per contract minimum margin requirement in favor of one overall minimum. 32 The CBOE stated that it agrees with the proposed changes and believes they are operationally feasible. In response, CBOE made these changes in Amendment No. 1 to the proposed rule filing. 33 32 *See* SIA Letter. 33 CBOE also made these changes to maintain consistency with the NYSE filing. One commenter stated that portfolio margining should be expanded to include nonequity securities, interest rate derivatives, collateralized debt obligations and other similar non-equity related products, and foreign currency derivatives. 34 This commenter also requested that nonequity securities be permitted to be held in the portfolio margin account for collateral purposes only, subject to the other applicable margin requirements. 35 The Exchange noted that it agrees with the commenter to the extent that nonequity securities may serve as collateral in the portfolio margin account. 36 34 *See* SIA Letter. 35 *See* SIA Letter. 36 *See* Amendment No. 1; *see also* CBOE Response, *supra* note 9. One commenter requested that CBOE and NYSE eliminate differences between the CBOE and NYSE risk disclosure documents. In response, CBOE (and the NYSE) amended the rule text to eliminate the risk disclosure language. 37 37 *Id.* ; *see supra* note 25. IV. Discussion and Commission Findings The Commission finds that the proposed rule change, as amended, is consistent with the requirements of the Act and the rules and regulations thereunder applicable to a national securities exchange. 38 In particular, the Commission believes that the proposed rule change, as amended, is consistent with section 6(b)(5) of the Act 39 in that it is designed to perfect the mechanism of a free and open market and to protect investors and the public interest. The Commission notes that the proposed portfolio margin rule change is intended to promote greater reasonableness, accuracy and efficiency with respect to Exchange margin requirements and will better align margin requirements with actual risk. 38 In approving this proposed rule change, the Commission notes that it has considered the proposed rule's impact on efficiency, competition, and capital formation. 15 U.S.C. 78c(f). 39 15 U.S.C. 78f(b)(5). Under a portfolio margin system, offsets are fully realized, whereas under the Exchange's current margin rules, positions are margined independent of each other and offsets between them do not figure into the total margin requirement. A portfolio margin system recognizes the offsetting gains from positions that react favorably in market declines, while market rises are tempered by offsetting losses from positions that react negatively. Consequently, a portfolio margin approach can have a neutralizing effect on the volatility of margin requirements. Thus, a portfolio margin system may better align a customer's total margin requirement with the actual risk associated with the customer's positions taken as a whole. The Commission further notes portfolio margining may alleviate excessive margin calls, improve cash flows and liquidity, and reduce volatility. Moreover, the Commission notes that approving the proposed rule change would enhance portfolio margining by permitting more products to be margined under this methodology. This is consistent with the amendments to Regulation T made by the FRB in 1998, which sought to advance the use of portfolio margining. 40 The Commission also believes that this expanded program for portfolio margining will serve to advance the development of even more risk-sensitive approaches to margining customer positions, including the use of internal models as advocated by commenters. The Commission intends to work with CBOE and the NYSE towards this objective after it gains experience with the portfolio margining system of this proposal. 40 Federal Reserve System, “Securities Credit Transactions; Borrowing by Brokers and Dealers,” 63 FR 2806 (January 16, 1998); *see also* 12 CFR 220.1(b)(3)(i); *see also* letter from the FRB to James E. Newsome, Acting Chairman, Commodity Futures Trading Commission, and Laura S. Unger, Acting Chairman, Commission, dated March 6, 2001. The FRB concluded the letter by writing “the Board anticipates that the creation of securities futures products will provide another opportunity to develop more risk-sensitive, portfolio-based approaches for all securities, including securities options and securities futures products.” *Id.* The Commission believes that while the portfolio margining system in the proposed rule will have the effect of reducing customer margin (in most cases), the methodology is relatively conservative in that it requires positions to be shocked at specified market move ranges ( *e.g.* , ±15% for individual equities) that represent potential future stress events. Essentially the same portfolio methodology has been used by broker-dealers to calculate haircuts on options positions for net capital purposes. 41 Furthermore, the proposed requirement that a firm receive pre-approval from the Exchange prior to offering portfolio margining to its customers, coupled with the requirement for enhanced risk management procedures, is designed to ensure that only those firms with adequate controls would be eligible to implement a customer portfolio margining program. 42 41 *See* Exchange Act Release No. 38248 (February 6, 1997), 62 FR 6474 (February 12, 1997). 42 The proposed rules also would continue to require a minimum per contract charge of $.375. The Commission also notes that the proposed rules contain a leverage test under which a broker-dealer cannot permit the amount of portfolio margin required of its customers to exceed 10 times the firm's net capital. CBOE also has requested that the Commission approve Amendment Nos. 1 and 2 to the proposed rule change prior to the thirtieth day after publication of notice of the filing in the **Federal Register** . The Commission believes that the changes in Amendment Nos. 1 and 2 to the proposed rule change do not raise significant new or unique issues from those previously raised in the earlier portfolio margin rule filings. 43 The changes proposed by the Exchange in Amendment Nos. 1 and 2 are designed to ensure consistency with the companion NYSE proposed rule filing and to respond to comments received as a result of the **Federal Register** notice. 44 The Commission believes that these proposed changes strengthen the proposed rule change. 43 *See supra* note 3. 44 *See supra* notes 6 and 7. Accordingly, the Commission finds good cause for approving Amendment Nos. 1 and 2 to the proposed rule change prior to the thirtieth day after the date of publication of notice thereof in the **Federal Register** . Specifically, the Commission believes that it is consistent with section 19(b)(2) of the Act 45 to approve Amendment Nos. 1 and 2 to CBOE's proposed rule change prior to the thirtieth day after publication of the notice of filing thereof in the **Federal Register** . 45 15 U.S.C. 78s(b)(2). Uniform Effective Date The Commission believes that approving the amendments on an accelerated basis will permit CBOE to begin the process of approving broker-dealers to implement portfolio margining and would allow firms to begin to make the necessary changes and upgrades to their systems, as well as their policies and procedures, in order to accommodate customer portfolio. The Commission, however, believes that if some firms receive CBOE approval to begin offering customer portfolio margining to customers before other firms, these other firms would be at a competitive disadvantage. Therefore, the Commission has determined to set a uniform effective date of April 2, 2007 for the proposed rule change, as amended. As stated above, the Commission believes that setting a uniform effective date will avoid placing some firms at a competitive disadvantage and reduce confusion in the marketplace. V. Solicitation of Comments of Amendment Nos. 1 and 2 Interested persons are invited to submit written data, views, and arguments concerning the foregoing, including whether the proposed rule change, as amended, is consistent with the Exchange Act. Comments may be submitted by any of the following methods: Electronic Comments • Use the Commission's Internet comment form ( *http://www.sec.gov/rules/sro.shtml* ); or • Send e-mail to *rule-comments@sec.gov* . Please include File Number SR-CBOE-2006-14 on the subject line. Paper Comments • Send paper comments in triplicate to Nancy M. Morris, Secretary, Securities and Exchange Commission, 100 F Street, NE., Washington, DC 20549-1090. All submissions should refer to File Number SR-CBOE-2006-14. This file number should be included on the subject line if e-mail is used. To help the Commission process and review your comments more efficiently, please use only one method. The Commission will post all comments on the Commission's Internet Web site ( *http://www.sec.gov/rules/sro/shtml* ). Copies of the submission, all subsequent amendments, all written statements with respect to the proposed rule change that are filed with the Commission, and all written communications relating to the proposed rule change between the Commission and any person, other than those that may be withheld from the public in accordance with the provisions of 5 U.S.C. 552, will be available for inspection and copying in the Commission's Public Reference Room. Copies of such filing also will be available for inspection and copying at the principal office of the Exchange. All comments received will be posted without change; the Commission does not edit personal identifying information from submissions. You should submit only information that you wish to make available publicly. All submission should refer to File Number SR-CBOE-2006-14 and should be submitted on or before January 8, 2007. VI. Conclusion It is therefore ordered, pursuant to section 19(b)(2) of the Act, 46 that the proposed rule change (File No. SR-CBOE-2006-14), as amended, be and it hereby is, approved on an accelerated basis, on a pilot basis to expire on July 31, 2007. The effective date will be April 2, 2007. 46 15 U.S.C. 78s(b)(2). By the Commission. Florence E. Harmon, Deputy Secretary. Exhibit A—Chicago Board Options Exchange, Inc. Chapter XII Margins Rule 12.4. Portfolio Margin As an alternative to the transaction/position specific margin requirements set forth in Rule 12.3 of this Chapter 12, a member organization may require margin for all margin equity securities (as defined in Section 220.2 of Regulation T), listed options, unlisted derivatives, security futures products, and index warrants in accordance with the portfolio margin requirements contained in this Rule 12.4. In addition, a member organization, provided it is a Futures Commission Merchant (“FCM”) and is either a clearing member of a futures clearing organization or has an affiliate that is a clearing member of a futures clearing organization, is permitted under this Rule 12.4 to combine a customer's related instruments (as defined below), listed index options, unlisted derivatives, options on exchange traded funds, index warrants, and underlying instruments and compute a margin requirement for such combined products on a portfolio margin basis. Application of the portfolio margin provisions of this Rule 12.4 to IRA accounts is prohibited.
(a)Definitions.
(1)The term “listed option” shall mean any equity (or equity index-based) option traded on a registered national securities exchange or automated facility of a registered national securities association.
(2)The term “security future” means a contract of sale for future delivery of a single security or of a narrow-based security index, including any interest therein or based on the value thereof, to the extent that that term is defined in Section 3(a)(55) of the Securities Exchange Act of 1934.
(3)The term “security futures product” means a security future, or an option on any security future.
(4)The term “unlisted derivative” means any equity-based (or equity index-based) unlisted option, forward contract or swap that can be valued by a theoretical pricing model approved by the Securities and Exchange Commission.
(5)The term “option series” means all option contracts of the same type (either a call or a put) and exercise style, covering the same underlying instrument with the same exercise price, expiration date, and number of underlying units.
(6)The term “class” refers to all listed options, unlisted derivatives, security futures products, and related instruments that are based on the same underlying instrument, and the underlying instrument itself.
(7)The term “portfolio” means products of the same class grouped together.
(8)The term “related instrument” within a class or product group means index futures contracts and options on index futures contracts covering the same underlying instrument, but does not include security futures products.
(9)The term “underlying instrument” means a security or security index upon which any listed option, unlisted derivative, security futures product or related instrument is based. The term underlying instrument shall not be deemed to include futures contracts, options on futures contracts or underlying stock baskets.
(10)The term “product group” means two or more portfolios of the same type for which it has been determined by Rule 15c3-1a(b)(ii) under the Securities Exchange Act of 1934 that a percentage of offsetting profits may be applied to losses at the same valuation point.
(11)The terms “theoretical gains and losses” means the gain and loss in the value of each eligible position at 10 equidistant intervals (valuation points) ranging from an assumed movement (both up and down) in the current market value of the underlying instrument. The magnitude of the valuation point range shall be as follows: Portfolio type Up/down market move (high & low valuation points) (percent) High Capitalization, Broad-based Market Index 1 +6/−8 Non-High Capitalization, Broad-based Market Index 1 +/−10 Narrow-based Index 1 +/−15 Individual Equity 1 +/−15 1 In accordance with sub-paragraph (b)(1)(i)(B) of Rule 15c3-1a under the Securities Exchange Act of 1934.
(b)Eligible Participants. Any member organization intending to apply the portfolio margin provisions of this Rule 12.4 to its accounts must receive prior approval from its DEA. The member organization will be required to, among other things, demonstrate compliance with Rule 15.8A—Risk Analysis of Portfolio Margin Accounts, and with the net capital requirements of Rule 13.5—Customer Portfolio Margin Accounts. The application of the portfolio margin provisions of this Rule 12.4 is limited to the following customers:
(1)Any broker or dealer registered pursuant to Section 15 of the Securities Exchange Act of 1934;
(2)any member of a national futures exchange to the extent that listed index options, unlisted derivatives, options on exchange traded funds, index warrants or underlying instruments hedge the member's related instruments, and
(3)any person or entity not included in (b)(1) or (b)(2) above that is approved for writing uncovered options. However, such persons or entities may not establish or maintain positions in unlisted derivatives unless minimum equity of at least five million dollars is established and maintained with the member organization. For purposes of the five million dollar minimum equity requirement, all securities and futures accounts carried by the member organization for the same customer may be combined provided ownership across the accounts is identical. A guarantee by any other account for purposes of the minimum equity requirement is not permitted.
(c)Opening of Accounts.
(1)Only customers that, pursuant to Rule 9.7, have been approved for writing uncovered options are permitted to utilize a portfolio margin account.
(2)On or before the date of the initial transaction in a portfolio margin account, a member shall:
(A)Furnish the customer with a special written disclosure statement describing the nature and risks of portfolio margining and which includes an acknowledgement for all portfolio margin account owners to sign, attesting that they have read and understood the disclosure statement, and agree to the terms under which a portfolio margin account is provided, and
(B)obtain a signed acknowledgement from the customer and record the date of receipt.
(d)Establishing Account and Eligible Positions.
(1)For purposes of applying the portfolio margin requirements provided in this Rule 12.4, member organizations are to establish and utilize a dedicated securities margin account, or sub-account of a margin account, clearly identified as a portfolio margin account that is separate from any other securities account carried for a customer. A margin deficit in the portfolio margin account of a customer may not be considered as satisfied by excess equity in another account. Funds and/or securities must be transferred to the deficient account and a written record created and maintained. In the case of a portfolio margin account carried as a sub-account of a margin account, excess equity in the margin account may be used to satisfy a margin deficiency in the portfolio margin sub-account without transferring funds and/or securities to the portfolio margin sub-account.
(3)Eligible Positions
(i)a margin equity security (including a foreign equity security and option on a foreign equity security, provided the foreign equity security is deemed to have a “ready market” under SEC Rule 15c3-1 or a no-action position issued thereunder; and a control or restricted security, provided the security has met the requirements in a manner consistent with SEC Rule 144 or an SEC no-action position issued thereunder, sufficient to permit the sale of the security, upon exercise of any listed option or unlisted derivative written against it, without restriction).
(ii)a listed option on an equity security or index of equity securities,
(iii)a security futures product,
(iv)an unlisted derivative on an equity security or index of equity securities,
(v)a warrant on an equity security or index of equity securities, and
(vi)a related instrument.
(4)Positions other than those listed in (3)(A) above are not eligible for portfolio margin treatment. However, positions not eligible for portfolio margin treatment (except for ineligible related instruments) may be carried in a portfolio margin account subject to the margin required pursuant Rule 12.3 of this Chapter 12. Shares of a money market mutual fund may be carried in a portfolio margin account subject to the margin required pursuant to Exchange Rule 12.3 of this Chapter 12 provided that:
(i)The customer waives any right to redeem the shares without the member organization's consent,
(ii)the member organization (or, if the shares are deposited with a clearing organization, the clearing organization) obtains the right to redeem the shares in cash upon request,
(iii)the fund agrees to satisfy any conditions necessary or appropriate to ensure that the shares may be redeemed in cash, promptly upon request, and
(iv)the member organization complies with the requirements of Section 11(d)(1) of the Securities Exchange Act of 1934 and Rule 11d1-2 thereunder.
(e)Initial and Maintenance Margin Required. The amount of margin required under this Rule 12.4 for each portfolio shall be the greater of:
(1)The amount for any of the ten equidistant valuation points representing the largest theoretical loss as calculated pursuant to paragraph
(f)below or
(2)$.375 for each listed option, unlisted derivative, security futures product, and related instrument multiplied by the contract or instrument's multiplier, not to exceed the market value in the case of long positions.
(f)Method of Calculation.
(1)Long and short positions in eligible positions are to be grouped by class; each class group being a “portfolio”. Each portfolio is categorized as one of the portfolio types specified in paragraph (a)(11) above.
(2)For each portfolio, theoretical gains and losses are calculated for each position as specified in paragraph (a)(11) above. For purposes of determining the theoretical gains and losses at each valuation point, member organizations shall obtain and utilize the theoretical value of a listed option, unlisted derivative, security futures product, underlying instrument, and related instrument rendered by a theoretical pricing model that has been approved by the Securities and Exchange Commission. 1 1 Currently, the theoretical model utilized by the Options Clearing Corporation is the only model qualified.
(3)Offsets. Within each portfolio, theoretical gains and losses may be netted fully at each valuation point. Offsets between portfolios within the High Capitalization, Broad-Based Index Option, Non-High Capitalization, Broad-Based Index Option and Narrow-Based Index Option product groups may then be applied as permitted by Rule 15c3-1a under the Securities Exchange Act of 1934.
(4)After applying paragraph
(3)above, the sum of the greatest loss from each portfolio is computed to arrive at the total margin required for the account (subject to the per contract minimum).
(5)In addition, if a security that is convertible, exchangeable, or exercisable into a security that is an underlying instrument requires the payment of money or would result in a loss if converted, exchanged, or exercised at the time when the security is deemed an underlying instrument, the full amount of the conversion loss is required.
(g)Minimum Equity Deficiency. If, as of the close of business, the equity in the portfolio margin account declines below the five million dollar minimum equity required under Paragraph
(b)of this Rule 12.4 and is not restored to the required level within three
(3)business days by a deposit of funds or securities, or through favorable market action; member organizations are prohibited from accepting new orders beginning on the fourth business day, except that new orders entered for the purpose of reducing market risk may be accepted if the result would be to lower margin requirements. This prohibition shall remain in effect until such time as:
(1)The required minimum account equity is re-established or
(2)all unlisted derivatives are liquidated or transferred from the portfolio margin account to the appropriate account. In computing net capital, a deduction in the amount of a customer's equity deficiency may not serve in lieu of complying with the above requirements.
(h)Determination of Value for Margin Purposes. For the purposes of this Rule 12.4, all *eligible* positions shall be valued at current market prices. Account equity for the purposes of this Rule 12.4 shall be calculated separately for each portfolio margin account by adding the current market value of all long positions, subtracting the current market value of all short positions, and adding the credit (or subtracting the debit) balance in the account.
(i)Additional Margin.
(1)If, as of the close of business, the equity in any portfolio margin account is less than the margin required, the customer may deposit additional margin or establish a hedge to meet the margin requirement within three business days. After the three business day period, member organizations are prohibited from accepting new orders, except that new orders entered for the purpose of reducing market risk may be accepted if the result would be to lower margin requirements. In the event a customer fails to deposit additional margin in an amount sufficient to eliminate any margin deficiency or hedge existing positions after three business days, the member organization must liquidate positions in an amount sufficient to, at a minimum, lower the total margin required to an amount less than or equal to account equity. Member organizations should not permit a customer to make a practice of meeting a portfolio margin deficiency by liquidation. Member organizations must have procedures in place to identify accounts that periodically liquidate positions to eliminate margin deficiencies, and a member organization is expected to take appropriate action when warranted. Liquidations to eliminate margin deficiencies that are caused solely by adverse price movements may be disregarded. Guarantees by any other account for purposes of margin requirements is not permitted.
(2)Pursuant to Rule 13.5—Customer Portfolio Margin Accounts, if additional margin required is not obtained by the close of business on T+1, member organizations must deduct in computing net capital any amount of the additional margin that is still outstanding until such time as the additional margin is obtained or positions are liquidated pursuant to (i)(1) above.
(3)A deduction in computing net capital in the amount of a customer's margin deficiency may not serve in lieu of complying with the requirements of (i)(1) above.
(4)A member organization may request from its DEA an extension of time for a customer to deposit additional margin. Such request must be in writing and will be granted only in extraordinary circumstances.
(5)The day trading restrictions promulgated under Rule 12.3(j) shall not apply to portfolio margin accounts that establish and maintain at least five million dollars in equity, provided a member organization has the ability to monitor the intra-day risk associated with day trading. Portfolio margin accounts that do not establish and maintain at least five million dollars in equity will be subject to the day trading restrictions under Rule 12.3(j), provided the member organization has the ability to apply the applicable day trading restrictions under that Rule. However, if the position or positions day traded were part of a hedge strategy, the day trading restrictions will not apply. A “hedge strategy” for the purpose of this rule means a transaction or a series of transactions that reduces or offsets a material portion of the risk in a portfolio. Member organizations are also expected to monitor these portfolio margin accounts to detect and prevent circumvention of the day trading requirements.
(j)Portfolio Margin Accounts—Requirement to Liquidate.
(1)A member organization is required immediately either to liquidate, or transfer to another broker-dealer eligible to carry related instruments within portfolio margin accounts, all customer portfolio margin accounts with positions in related instruments if the member is:
(i)Insolvent as defined in section 101 of title 11 of the United States Code, or is unable to meet its obligations as they mature;
(ii)The subject of a proceeding pending in any court or before any agency of the United States or any State in which a receiver, trustee, or liquidator for such debtor has been appointed;
(iii)Not in compliance with applicable requirements under the Securities Exchange Act of 1934 or rules of the Securities and Exchange Commission or any self-regulatory organization with respect to financial responsibility or hypothecation of customers' securities; or
(iv)Unable to make such computations as may be necessary to establish compliance with such financial responsibility or hypothecation rules.
(2)Nothing in this paragraph
(j)shall be construed as limiting or restricting in any way the exercise of any right of a registered clearing agency to liquidate or cause the liquidation of positions in accordance with its by-laws and rules. (Note: The sample risk description document is deleted in its entirety) Chapter 9 Doing Business with the Public Rule 9.15. Delivery of Current Options Disclosure Documents and Prospectus
(a)no change
(b)no change
(c)The special written disclosure statement describing the nature and risks of portfolio margining and acknowledgement for customer signature, required by Rule 12.4(c)(2) shall be in a format prescribed by the Exchange or in a format developed by the member organization, provided it contains substantially similar information as the prescribed Exchange format and has received prior written approval of the Exchange. Chapter XIII Net Capital Rule 13.5. Customer Portfolio Margin Accounts
(a)No member organization that requires margin in any customer accounts pursuant to Rule 12.4—Portfolio Margin shall permit gross customer portfolio margin requirements to exceed 1,000 percent of its net capital for any period exceeding three business days. The member organization shall, beginning on the fourth business day of any non-compliance, cease opening new portfolio margin accounts until compliance is achieved.
(b)If, at any time, a member organization's gross customer portfolio margin requirements exceed 1,000 percent of its net capital, the member organization shall immediately transmit telegraphic or facsimile notice of such deficiency to the Office of Market Supervision, Division of Market Regulation, Securities and Exchange Commission, 100 F Street, NE, Washington, DC 20549; to the district or regional office of the Securities and Exchange Commission for the district or region in which the member organization maintains its principal place of business; and to its Designated Examining Authority.
(c)If any customer portfolio margin account becomes subject to a call for additional margin, and all of the additional margin is not obtained by the close of business on T+1, member organizations must deduct in computing net capital any amount of the additional margin that is still outstanding until such time as it is obtained or positions are liquidated pursuant to Rule 12.4(i)(1). Chapter XV Records, Reports and Audits Rule 15.8A. Risk Analysis of Portfolio Margin Accounts
(a)Each member organization that maintains any portfolio margin accounts for customers shall establish and maintain a comprehensive written risk analysis methodology for assessing and monitoring the potential risk to the member organization's capital over a specified range of possible market movements of positions maintained in such accounts. The risk analysis methodology shall specify the computations to be made, the frequency of computations, the records to be reviewed and maintained, and the person(s) within the organization responsible for the risk function. This risk analysis methodology must be filed with the member organization's Designated Examining Authority and submitted to the SEC prior to the implementation of portfolio margining.
(b)Upon direction by the Department of Member Firm Regulation, each affected member organization shall provide to the Department such information as the Department may reasonably require with respect to the member organization's risk analysis for any or all of the portfolio margin accounts it maintains for customers.
(c)In conducting the risk analysis of portfolio margin accounts required by this Rule 15.8A, each member organization shall include in the written risk analysis methodology required pursuant to paragraph
(a)above procedures and guidelines for:
(1)Obtaining and reviewing the appropriate customer account documentation and financial information necessary for assessing the amount of credit extended to customers,
(2)the determination, review and approval of credit limits to each customer, and across all customers, utilizing a portfolio margin account,
(3)monitoring credit risk exposure to the member organization from portfolio margin accounts, on both an intra-day and end of day basis, including the type, scope and frequency of reporting to senior management,
(4)the use of stress testing of portfolio margin accounts in order to monitor market risk exposure from individual accounts and in the aggregate,
(5)the regular review and testing of these risk analysis procedures by an independent unit such as internal audit or other comparable group,
(6)managing the impact of credit extension on the member organization's overall risk exposure,
(7)the appropriate response by management when limits on credit extensions have been exceeded, and
(8)determining the need to collect additional margin from a particular eligible participant, including whether that determination was based upon the creditworthiness of the participant and/or the risk of the eligible position(s). Moreover, management must periodically review, in accordance with written procedures, the member organization's credit extension activities for consistency with these guidelines. Management must periodically determine if the data necessary to apply this Rule 15.8A is accessible on a timely basis and information systems are available to capture, monitor, analyze and report relevant data. [FR Doc. E6-21480 Filed 12-15-06; 8:45 am] BILLING CODE 8011-01-P SECURITIES AND EXCHANGE COMMISSION [Release No. 34-54909; File No. SR-NASD-2006-129] Self-Regulatory Organizations; National Association of Securities Dealers, Inc.; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change Relating to the Use of a Special Indicator for Transactions Reported in Accordance With Section 3 of Schedule A to the NASD By-Laws December 11, 2006. Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 (“Act”), 1 and Rule 19b-4 thereunder, 2 notice is hereby given that on November 29, 2006, the National Association of Securities Dealers, Inc. (“NASD”) filed with the Securities and Exchange Commission (“Commission”) the proposed rule change as described in Items I and II below, which Items have been prepared by the NASD. The NASD has submitted the proposed rule change under Section 19(b)(3)(A) of the Act 3 and Rule 19b-4(f)(6) thereunder, 4 which renders the proposal effective upon filing with the Commission. 5 The Commission is publishing this notice to solicit comments on the proposed rule change from interested persons. 1 15 U.S.C. 78s(b)(1). 2 17 CFR 240.19b-4. 3 15 U.S.C. 78s(b)(3)(A). 4 17 CFR 240.19b-4(f)(6). 5 The NASD has asked the Commission to waive the 30-day operative delay provided in Rule 19b-4(f)(6)(iii). 17 CFR 240.19b-4(f)(6)(iii). I. Self-Regulatory Organization's Statement of the Terms of Substance of the Proposed Rule Change The NASD proposes to adopt new paragraph
(f)of NASD Rule 6130C, “Trade Report Input,” which will require members that report to the NASD/NSX Trade Reporting Facility (“NASD/NSX TRF”) 6 odd-lot transactions, sales where the buyer and seller have agreed to a price substantially unrelated to the current market for the security (also referred to as “away from the market sales”), and purchases or sales of securities effected upon the exercise of an over-the-counter (“OTC”) option to use a special indicator denoting that such transactions are reported in accordance with Section 3 of Schedule A to the NASD By-Laws. Because the systems changes required to enable the NASD/NSX TRF to support the proposed new trade report modifiers have not been completed, proposed NASD Rule 6130C(f) specifies that prior to December 15, 2006, members cannot use the NASD/NSX TRF to report these transactions to the NASD and must use another electronic mechanism to satisfy their reporting obligations. The text of proposed NASD Rule 6130C(f) is substantially similar to NASD Rule 6130(g), which the Commission approved on June 12, 2006, 7 and which became effective on December 1, 2006. In this proposal, the NASD also is proposing technical conforming changes to NASD Rule 6130(g). 6 The NASD/NSX TRF is the trade reporting facility established by the NASD and the National Stock Exchange. 7 *See* Securities Exchange Act Release No. 53977 (June 12, 2006), 71 FR 34976 (June 16, 2006) (order approving SR-NASD-2006-055) (“June 2006 Order”). The text of the proposed rule change is available at *www.nasd.com* , at the principal offices of the NASD, and at the Commission's Public Reference Room. II. Self-Regulatory Organization's Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change In its filing with the Commission, the NASD included statements concerning the purpose of and basis for the proposed rule change and discussed any comments it received on the proposed rule change. The text of these statements may be examined at the places specified in Item IV below. The NASD has prepared summaries, set forth in sections A, B, and C below, of the most significant aspects of such statements. A. Self-Regulatory Organization's Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change 1. Purpose Background In the June 2006 Order, the Commission approved an NASD proposal that, among other things, amended the NASD's By-Laws to require members to report to the NASD in an automated manner all transactions that must be reported to the NASD and that are subject to a regulatory transaction fee pursuant to Section 3 of Schedule A to the NASD By-Laws (“Section 3”). 8 In that proposal, the NASD also adopted NASD Rule 6130(g), which requires members to report to the System, defined to include the NASD/ Nasdaq Trade Reporting Facility (the “NASD/Nasdaq TRF”), odd-lot transactions, away from the market sales, and OTC option exercises with a special indicator denoting that such transactions are reported in accordance with Section 3. The effective date of the proposal was December 1, 2006. 8 *See* June 2006 Order, *supra* note 7. Pursuant to Section 31 of the Act, the NASD and the national securities exchanges are required to pay transaction fees and assessments to the Commission that are designed to recover the costs related to the government's supervision and regulation of the securities markets and securities professionals. The NASD obtains its Section 31 fees and assessments from its membership, in accordance with Section 3. On November 6, 2006, the Commission approved the NASD's proposal to establish the NASD/NSX TRF. 9 The NASD/NSX TRF provides members with an additional mechanism for reporting transactions in exchange-listed securities executed otherwise than on an exchange. The rules relating to the NASD/NSX TRF, which are found in the NASD Rule 4000C and 6000C Series, are substantially similar to the rules relating to the NASD/Nasdaq TRF. The NASD/NSX TRF rules became effective on November 27, 2006, the date on which the NASD/NSX TRF commenced operation with respect to certain Nasdaq-listed securities. 9 *See* Securities Exchange Act Release No. 54715 (November 6, 2006), 71 FR 66354 (November 14, 2006) (order approving SR-NASD-2006-108). Proposed Amendments The NASD proposes to adopt new NASD Rule 6130C(f) to require members that submit reports to the NASD/NSX TRF for odd-lot transactions, away from the market sales, and transactions pursuant to the exercise of an OTC option to use a special indicator denoting that such transactions are reported in accordance with Section 3. The proposed new paragraph specifies that transactions may be entered as clearing or non-clearing. Pursuant to NASD Rule 4632C(e), these transactions are not to be reported to the NASD/NSX TRF for purposes of publication. Proposed NASD Rule 6130C(f) also specifies the trade report modifiers that must be used when reporting these transactions to the NASD/NSX TRF:
(1).RO for transactions of less than a normal unit of trading;
(2).RA for away from the market sales; and
(3).RX for transactions effected pursuant to the exercise of an OTC option. These trade report modifiers are identical to the modifiers required under NASD Rule 6130(g). The text of proposed NASD Rule 6130C(f) differs slightly from the current text of NASD Rule 6130(g). While members have an affirmative obligation pursuant to Section 3 to report to the NASD in an automated manner all covered odd-lot transactions, away from the market sales, and exercises of OTC options, they are not required to report such transactions to the NASD/NSX TRF. Instead, members may use any NASD facility that accepts the electronic reporting of such transactions, *e.g.,* the NASD/Nasdaq TRF or the Alternative Display Facility (“ADF”), to satisfy their reporting obligations. The text of proposed NASD Rule 6130C(f) makes clear that if members use the NASD/NSX TRF to report such transactions to the NASD, their reports must comply with the requirements set forth in NASD Rule 6130C(f). The NASD also is proposing conforming changes to the text of NASD Rule 6130(g) to maintain consistency among the rules for the NASD Trade Reporting Facilities and to clarify that members may, but are not required to, use the NASD/Nasdaq TRF to report such transactions. 10 10 The NASD notes that “System” is defined for purposes of NASD Rule 6130 to include the OTC Reporting Facility, which is the only mechanism available to members for reporting transactions in OTC equity securities in accordance with NASD Rule 6620. Finally, the NASD notes that the systems changes that will enable the NASD/NSX TRF to support the new trade report modifiers cannot be implemented as of December 1, 2006. As a result, proposed NASD Rule 6130C(f) provides that prior to December 15, 2006, members cannot report these transactions to the NASD/NSX TRF and must use an alternative electronic mechanism to satisfy their reporting obligations under Section 3. The NASD believes that requiring members to report these transactions for regulatory purposes with the appropriate modifier will enhance the audit trail while preventing the dissemination of trade information that could distort the tape. The NASD has filed the proposed rule change for immediate effectiveness. The NASD proposes to make the proposed rule change operative on December 1, 2006, the effective date of the amendments to Section 3 and substantially similar amendments to NASD Rule 6130(g) relating to the NASD/Nasdaq TRF. 11 11 *See* June 2006 Order, *supra* note 7. 2. Statutory Basis The NASD believes that the proposed rule change is consistent with the provisions of Section 15A(b)(6) of the Act, 12 which requires, among other things, that NASD rules be designed to prevent fraudulent and manipulative acts and practices, to promote just and equitable principles of trade, and, in general, to protect investors and the public interest. The NASD believes that the proposed rule change will enhance the audit trail while preventing the dissemination of trade information that could distort the tape. 12 15 U.S.C. 78o-3(b)(6). B. Self-Regulatory Organization's Statement on Burden on Competition The NASD does not believe that the proposed rule change will result in any burden on competition that is not necessary or appropriate in furtherance of the purposes of the Act. C. Self-Regulatory Organization's Statement on Comments on the Proposed Rule Change Received From Members, Participants or Others Written comments were neither solicited nor received. III. Date of Effectiveness of the Proposed Rule Change and Timing for Commission Action The NASD has filed the proposed rule change pursuant to Section 19(b)(3)(A) of the Act 13 and subparagraph (f)(6) of Rule 19b-4 thereunder. 14 Because the NASD has designated the foregoing proposed rule change as one that:
(1)Does not significantly affect the protection of investors or the public interest;
(2)does not impose any significant burden on competition; and
(3)does not become operative for 30 days from the date of filing, or such shorter time as the Commission may designate if consistent with the protection of investors and the public interest, the proposed rule change has become effective pursuant to Section 19(b)(3)(A) of the Act and Rule 19b-4(f)(6) thereunder. As required under Rule 19b-4(f)(6)(iii), the NASD provided the Commission with written notice of its intention to file the proposed rule change at least five business days prior to filing the proposal with the Commission or such shorter period as designated by the Commission. 13 15 U.S.C. 78s(b)(3)(A). 14 17 CFR 240.19b-4(f)(6). A proposed rule change filed under Rule 19b-4(f)(6) normally does not become operative prior to 30 days after the date of filing. However, Rule 19b-4(f)(6)(iii) permits the Commission to designate a shorter time if such action is consistent with the protection of investors and the public interest. The NASD has asked the Commission to waive the 30-day operative delay to allow the proposed rule change to become operative on December 1, 2006, the effective date for substantially similar amendments to NASD Rule 6130, which governs the NASD/Nasdaq TRF. 15 The NASD notes, however, that the systems changes necessary to allow the NASD/NSX TRF to support the new trade report modifiers provided in NASD Rule 6130C(f) could not be implemented as of December 1, 2006. For that reason, NASD Rule 6130C(f) prohibits NASD members from reporting transactions covered by NASD Rule 6130(f) to the NASD/NSX TRF prior to December 15, 2006, and requires them to use an alternative electronic mechanism to satisfy their reporting obligations prior to that date. 15 *See* June 2006 Order, *supra* note 7. The Commission believes that waiving the 30-day operative delay is consistent with the protection of investors and the public interest because it will allow NASD members to submit to the NASD/NSX TRF trade reports for the transactions specified in NASD Rule 6130C(f) on or after December 15, 2006, thereby providing NASD members with an additional means to satisfy their obligation to report these transactions. 16 For this reason, the Commission designates that the proposal become operative on December 1, 2006. 16 For purposes only of waiving the 30-day operative delay, the Commission has considered the proposed rule's impact on efficiency, competition, and capital formation. 15 U.S.C. 78c(f). At any time within 60 days of the filing of such proposed rule change, the Commission may summarily abrogate 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. VI. Solicitation of Comments Interested persons are invited to submit written data, views, and arguments concerning the foregoing, including whether the proposed rule change is consistent with the Act. Comments may be submitted by any of the following methods: Electronic Comments • Use the Commission's Internet comment form ( *http://www.sec.gov/rules/sro.shtml* ); or • Send an e-mail to *rule-comments@sec.gov.* Please include File Number SR-NASD-2006-129 on the subject line. Paper Comments • Send paper comments in triplicate to Nancy M. Morris, Secretary, Securities and Exchange Commission, Station Place, 100 F Street, NE., Washington, DC 20549-1090. All submissions should refer to File Number SR-NASD-2006-129. This file number should be included on the subject line if e-mail is used. To help the Commission process and review your comments more efficiently, please use only one method. The Commission will post all comments on the Commission's Internet Web site ( *http://www.sec.gov/rules/sro.shtml* ). Copies of the submission, all subsequent amendments, all written statements with respect to the proposed rule change that are filed with the Commission, and all written communications relating to the proposed rule change between the Commission and any person, other than those that may be withheld from the public in accordance with the provisions of 5 U.S.C. 552, will be available for inspection and copying in the Commission's Public Reference Room. Copies of such filing also will be available for inspection and copying at the principal office of the NASD. All comments received will be posted without change; the Commission does not edit personal identifying information from submissions. You should submit only information that you wish to make publicly available. All submissions should refer to File Number SR-NASD-2006-129 and should be submitted on or before January 8, 2007. 17 17 CFR 200.30-3(a)(12). For the Commission, by the Division of Market Regulation, pursuant to delegated authority. 17 Florence E. Harmon, Deputy Secretary. [FR Doc. E6-21452 Filed 12-15-06; 8:45 am] BILLING CODE 8011-01-P SECURITIES AND EXCHANGE COMMISSION Release No. 34-54918; File No. SR-NYSE-2006-13] Self-Regulatory Organizations; New York Stock Exchange LLC; Order Approving a Proposed Rule Change to Rule 431 (“Margin Requirements”) and Rule 726 (“Delivery of Options Disclosure Document and Prospectus”), and Notice of Filing and Order Granting Accelerated Approval to Amendment No. 1 to the Proposed Rule Change Relating to Customer Portfolio Margining December 12, 2006. I. Introduction On March 2, 2006, the New York Stock Exchange LLC (“NYSE” or “Exchange”) filed with the Securities and Exchange Commission (“Commission”), pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 (“Act” or “Exchange Act”) 1 and Rule 19b-4 2 thereunder, a proposed rule change seeking to amend NYSE Rules 431 and 726 to expand the scope of products that are eligible for treatment as part of the NYSE's approved portfolio margin pilot program and to eliminate the requirement for a separate cross-margin account. 3 The proposed rule change would expand the scope of eligible products in the pilot to include margin equity securities and unlisted derivatives. 4 The proposed rule change was published in the **Federal Register** on April 6, 2006. 5 The Commission subsequently extended the comment period for the original proposed rule filing until May 11, 2006. 6 The Commission received 8 comment letters in response to the **Federal Register** notice. 7 On July 20, 2006, the Exchange filed a response to these comments. 8 The comment letters and the Exchange's responses to the comments are summarized below. On September 13, 2006, the Exchange filed Amendment No. 1 to the proposed rule change. 9 1 15 U.S.C. 78s(b)(1). 2 17 CFR 240.19b-4. 3 *See* Exchange Act Release No. 52031 (July 14, 2005), 70 FR 42130 (July 21, 2005) (SR-NYSE-2002-19). On July 14, 2005, the Commission approved on a pilot basis expiring July 31, 2007, amendments to Rule 431 that permit broker-dealers to determine customer margin requirements for portfolios of listed broad-based securities index options, warrants, futures, futures options and related exchange-traded funds using a specified portfolio margin methodology. The Commission also approved amendments to Rule 726 to require disclosure to, and written acknowledgment from, customers using a portfolio margin account. *See also* NYSE Information Memo 05-56, dated August 18, 2005 (for additional information); and Exchange Act Release No. 54125 (July 11, 2006), 71 FR 40766 (July 18, 2006) (SR-NYSE-2005-93) (approving securities futures products and listed single stock options as eligible products for portfolio margining). 4 For purposes of the pilot, a margin equity security is a security that meets the definition of a “margin equity security” under Regulation T of the Federal Reserve Board (“FRB”). *See* 12 CFR 220.2. An unlisted derivative means “any equity-based or equity index-based unlisted option, forward contract, or security-based swap that can be valued by a theoretical pricing model approved by the SEC.” *See* proposed Rule 431(g)(2)(I). 5 * See* Exchange Act Release No. 53577 (March 30, 2006), 71 FR 17539 (April 6, 2006) (SR-NYSE-2006-13). The Chicago Board Options Exchange, Incorporated (“CBOE”) also filed a similar proposed rule filing seeking to expand the scope of eligible products under its portfolio margin pilot program. *See* Exchange Act Release No. 53576 (March 30, 2006), 71 FR 17519 (April 6, 2006) (SR-CBOE-2006-14). 6 *See* Exchange Act Release No. 53728 (April 26, 2006), 71 FR 25878 (May 2, 2006). 7 *See* letter from Timothy H. Thompson, Senior Vice President, Chief Regulatory Officer, Regulatory Services Division, CBOE, to Nancy Morris, Secretary, Commission, dated June 5, 2006 (“CBOE Letter”); letter from William H. Navin, Executive Vice President, General Counsel and Secretary, The Options Clearing Corporation (“OCC”), to Nancy M. Morris, Secretary, Commission, dated May 19, 2006 (“OCC Letter”); letter from James Barry, on behalf of the *Ad Hoc* Portfolio Margin Committee, John Vitha, Chair, Derivatives Product Committee and Christopher Nagy, Chair, Options Committee, Securities Industry Association, to Nancy M. Morris, Secretary, dated May 16, 2006 (“SIA Letter”); letter from Gary Alan DeWaal, Group General Counsel and Director of Legal and Compliance, Fimat USA, LLC, to Nancy M. Morris, Secretary, Commission, dated May 11, 2006 (“Fimat Letter”); letter from Stuart J. Kaswell, Partner, Dechert LLP, Counsel for Federated Investors, Inc., to Nancy M. Morris, Secretary, Commission, dated May 10, 2006 (“Federated Letter”); letter from Craig S. Donohue, Chief Executive Officer, Chicago Mercantile Exchange Inc., to Jonathan G. Katz, Secretary, Commission, dated May 9, 2006 (“CME Letter”); letter from Gerard J. Quinn, Vice President and Associate General Counsel, SIA, to Nancy M. Morris, Secretary, Commission, dated April 21, 2006 (“SIA Extension Letter”); and e-mail from Stephen A. Kasprzak, Principal Counsel, Rule and Interpretive Standards, NYSE, dated April 21, 2006 (“Kasprzak e-mail”). 8 *See* letter from Mary Yeager, Assistant Secretary, NYSE, to Michael A. Macchiaroli, Associate Director, Division of Market Regulation, Commission, dated July 20, 2006 (“NYSE Response”). 9 The NYSE filed Amendment No. 1 in response to comments received and to make other clarifying changes to the proposed rule filing. *See* Section II. for a discussion of the changes in Amendment No. 1. A clean copy of the proposed rule, as amended by Amendment No. 1, is attached to this order as *Appendix A.* This order approves the proposed rule change. Simultaneously, the Commission provides notice of filing of Amendment No. 1, grants accelerated approval of Amendment No. 1 and solicits comments from interested persons on Amendment No. 1. 10 10 By separate order, the Commission also is approving a parallel rule filing by CBOE (SR-CBOE-2006-14). Exchange Act Release No. 54919; *see also supra* note 5. II. Description a. Portfolio Margining The proposed rule change consists of amendments to Rule 431 to include margin equity securities (as defined in Regulation T) and unlisted derivatives as eligible products for the portfolio margining pilot. 11 The proposed rule change also includes amendments to eliminate the requirement of a separate cross-margin account. Rule 431 prescribes specific margin requirements for customers based on the type of securities held in their accounts. 12 Outside the existing pilot program, Rule 431 requires that margin be calculated using fixed percentages, on a position-by-position basis. In contrast, the current portfolio margin pilot program permits a broker-dealer to calculate customer margin requirements by grouping all products in an account that are based on the same index or issuer into a single portfolio. For example, futures, options and exchange traded funds based on the S&P 500 would each be grouped in a portfolio and products based on IBM would be grouped into a separate portfolio. 11 The list of eligible products under the pilot currently includes listed broad-based securities index options, warrants, futures, futures options and related exchange-traded funds, as well as single stock options and securities futures products. 12 The margin rules specify the amount of equity a customer must maintain in his or her margin account with respect to securities positions financed by the broker-dealer. The equity protects the broker-dealer in the event the customer defaults on the obligation to re-pay the financing and the broker-dealer is forced to liquidate the position at a loss. The broker-dealer then calculates a customer's margin requirement by “shocking” each portfolio at different equidistant points along a range representing a potential percentage increase and decrease in the value of the instrument or underlying instrument in the case of a derivative product. Currently, under the pilot, products of portfolios based on high capitalization, broad-based securities indexes are shocked along a range spanning an increase of 6% and a decrease of 8%. Portfolios of products based on non-high capitalization, broad-based securities indexes are shocked along a range spanning an increase of 10% and a decrease of 10%. Portfolios of products based on an equity security are shocked along a range spanning an increase of 15% and a decrease of 15%. 13 The proposed rule change would continue to apply these shock ranges. In addition, as with the current pilot, a theoretical options pricing model would continue to be used to derive position values at each valuation point for the purpose of determining the gain or loss. 14 13 For example, under the pilot, a portfolio of single stock futures and listed equity options would be shocked at 10 equidistant points along a range bounded on one end by a 15% increase in the market value of the instrument and at the other end by a 15% decrease ( *i.e.* , at +/−3%, +/−6%, +/−9%, +/−12% and +/−15%). 14 Currently, the only model that qualifies is the OCC's Theoretical Intermarket Margining System (TIMS). The portfolio shocks described above result in a gain or loss for each instrument in a portfolio at each calculation point along the range. These gains and losses are netted to derive a potential portfolio-wide gain or loss for the point. The margin requirement for a portfolio is the amount of the greatest portfolio-wide loss among the calculation points. The margin requirements for each portfolio are added together to calculate the total margin requirement for the portfolio margin account. This approach, in most cases, will generally lower customer margin requirements. 15 15 For example, the current required initial and maintenance margin requirements for an equity security are 50% and 25%, respectively. The market movement range to calculate the potential gains and losses under the proposed portfolio margin rule for equity securities is +/−15%. The amount of margin (initial and maintenance) required with respect to a given portfolio would be the larger of:
(1)The greatest portfolio-wide loss amount among the valuation point calculations; or
(2)the sum of $.375 for each option and future in the portfolio multiplied by the contract's or instrument's multiplier. 16 The second computation establishes a minimum margin requirement to ensure that a certain level of margin is required from the customer in the event the greatest portfolio-wide loss among the valuation points is *de minimis* . 16 The multiplier for a standard listed option is fixed by the options market on which the options series is traded. For example, a cash settled equity option generally has a multiplier of 100. Therefore, the minimum margin for one options contract would be $37.50. The multipliers for different securities and futures products may vary. b. Expansion of Eligible Products Under the Exchange's proposed rule, products eligible for portfolio margining would be expanded to include margin equity securities (as defined under Regulation T), 17 unlisted derivatives and futures contracts on narrow-based security indexes. 18 The unlisted derivatives would be included in a portfolio based on the underlying reference index or security. Individual equities and narrow-based index futures would be included in a portfolio shocked at a range spanning an increase of 15% and a decrease of 15% (as is the case with listed single stock options and securities futures). 17 Margin equity securities include certain foreign equity securities and options on foreign equity securities. *See* 12 CFR 220.2 18 The Commission approved listed single stock options and securities futures products (excluding narrow-based indexes) as eligible products on July 11, 2006. *See* supra note 3. c. Margin Deficiency The current rule requires a customer to satisfy a margin deficiency in a portfolio margin account within three business days by depositing additional securities or cash or effecting an offsetting hedge. 19 The current pilot also requires a broker-dealer to deduct from its net capital the amount of any portfolio margin call not met by the close of business on T+1 and until the call is satisfied. The proposal would now further require the broker-dealer to have in place procedures to identify accounts that periodically liquidate positions to eliminate margin deficiencies, and to take appropriate action when warranted. 20 19 The original pilot required margin calls to be met by T+1. The current requirement of meeting margin calls within three business days was approved in SR-NYSE-2005-93. *See* Exchange Act Release No. 54125 (July 11, 2006), 71 FR 40766 (July 18, 2006). 20 The current pilot requires that member firms not permit a customer to make a practice of meeting a portfolio margin deficiency through liquidation. d. $5 Million Equity Requirement The current pilot requires customers that are not broker-dealers or futures firms to maintain minimum account equity of $5 million if they opt to include portfolios of broad-based securities index products in their accounts. 21 The proposed rule change would eliminate the $5 million account equity requirement for all portfolio margin accounts, except those holding unlisted derivatives. 22 21 The $5 million account equity requirement for such customers was eliminated to the extent they limited their accounts to portfolios of listed options and securities futures. *See* SR-NYSE-2005-93, *supra* note 3. 22 *See* proposed Rule 431(g)(4)(C). e. Risk Management Methodology The pilot requires member broker-dealers to monitor the risk of portfolio margin accounts and maintain a written risk analysis methodology for assessing potential risk to the firm's capital. This risk analysis methodology must be made available to the Exchange upon request. The proposed rule change strengthens these requirements by providing that, the member broker-dealer must file the risk analysis methodology with the Exchange (or the firm's Designated Examining Authority, if not the Exchange) 23 and submit it to the Commission prior to implementation. The proposed rule change also requires the inclusion of additional procedures and guidelines as part of the methodology. 24 23 Amendment No. 1 to the proposed rule amended the rule language to state that the written risk methodology must be filed with the Exchange, rather than approved by the Exchange, as proposed, in the March 2, 2006 rule filing. 24 The current pilot also requires member firms to notify, and receive approval from the Exchange, prior to opening portfolio margin accounts for customers. The proposed rule modifies this requirement by requiring approval from a member firm's DEA, if it is not the Exchange. f. Cross-Margin Account The proposed rule change would eliminate the requirement that portfolios with futures positions be held in a separate cross-margin account. Under the proposal, a customer would be permitted to use a single securities margin account for all eligible products. The Exchange and commenters have indicated that maintaining and monitoring two separate margin accounts would be operationally difficult and that it would be more efficient to hold all positions in one securities account. g. Hedged Positions Under the pilot, an underlying security in a portfolio margin account must be removed from the account if it is no longer offset by an option position. The amendments propose to eliminate the requirement to remove instruments that are no longer offset by options positions. The Exchange made this change in response to comments that all positions eligible for a portfolio margin account, including underlying securities, should receive equal treatment. Moreover, the Exchange noted that it would be operationally difficult to move positions in and out of the portfolio margin account based on whether they are currently being offset. h. Discussion of Changes to the Proposed Rule Change in Amendment No. 1 The Exchange filed Amendment No. 1 to the proposed rule change in response to comments received, to make conforming changes to the CBOE rule filing 25 and to otherwise clarify certain terms and definitions. The following summarizes the changes made in Amendment No. 1 to the proposed rule change. In Amendment No. 1, the Exchange: 25 *See supra* note 5. • Clarifies certain definitions and conforms others to the CBOE filing; • Adds language allowing a customer to use excess equity in a regular margin account to meet a margin deficiency in a portfolio margin account without having to transfer any funds or securities where the portfolio margin account is a sub-account of the regular margin account; • Adds language allowing positions not eligible for portfolio margin treatment to be carried in the portfolio margin account for their collateral value, subject to the margin requirements of a regular margin account; • Adds language permitting shares of a money market mutual fund to be held in a portfolio margin account (subject to applicable margin requirements), provided certain requirements are met; • Clarifies the restrictions with respect to day trading 26 in a portfolio margin account; and 26 NYSE proposed to amend the rule text to allow a customer that establishes and maintains at least $5 million in equity to engage in day trading without the restrictions of NYSE's day trading rules, if the member firm has the ability to monitor the intra-day risk associated with day trading. Further, if a participant has less than $5 million equity, the day trading restrictions will apply, unless the position or positions day traded were part of a hedge strategy. • Eliminates the sample risk disclosure statement and acknowledgement in the rule text. 27 27 Instead the Exchange will send out an Information Memo with the sample disclosure language. The Exchange made this change to avoid having to file a proposed rule change each time in the risk disclosure document is changed. III. Summary of Comments Received and NYSE Response The Commission received a total of 8 comment letters to the proposed rule change. 28 The comments, in general, were supportive. One commenter stated that it strongly supports “the significant step forward represented by the currently proposed changes.” 29 Another commenter stated that the portfolio margining of securities products will “help U.S. brokers and exchanges compete more effectively with their overseas counterparts * * * and thereby increase the strength and liquidity of U.S. markets.” 30 Each commenter, however, recommended changes to specific provisions of the proposed rule change. 28 *See supra* note 7. Two of these comment letters related to the extension of the comment period for the proposed rule change. *See* SIA Extension Letter and Kasprzak e-mail. 29 *See* SIA Letter. 30 *See* Fimat Letter. Several commenters 31 submitted comments regarding the ability to use portfolio margin methodologies other than the method prescribed in the rule to calculate customer margin requirements. One commenter stated that the Commission has experience in approving proprietary market risk models for consolidated supervised entities
(CSEs)and OTC derivatives dealers. 32 In its response, the Exchange acknowledged that proprietary models may prove to be effective and efficient in managing risk. 33 The Exchange stated, however, that initially, regulators should gain experience with portfolio margining through the rule's specified methodology and that in the longer term, proprietary risk models could be considered as alternatives. 31 *See* SIA Letter and OCC Letter; *see also* CME Letter (discussing SPAN). 32 *See* SIA Letter. 33 *See* NYSE Response, *supra* note 8. One commenter suggested that futures positions in a portfolio margin account be held in a separate futures account, while securities positions be held in a securities account. 34 The commenter referred to this approach as the “two pot” model. 35 The commenter stated that it favors this “two pot” approach because it believes that it more easily accommodates differences in customer protection and capital requirements of the Commission and the Commodity Futures Trading Commission (“CFTC”). 36 Commenters, in general, favored a single portfolio margin securities account (referred to as the “one pot” approach). 37 One commenter stated that the “disadvantages of a two pot model outweigh its advantages.” 38 The Exchange stated that it believes that a one pot approach will provide for more efficient margining, reduce broker-dealer/FCM liquidity risk and reduce operational inefficiencies. 34 *See* CME Letter. 35 *Id.* 36 *See* CME Letter. 37 *See* OCC and CBOE Letters. 38 *See* CBOE Letter. Three commenters expressed the need for the Commission and the CFTC to continue working towards eliminating the legal and regulatory impediments to cross-margining futures and securities products. 39 In response, the Exchange stated that it will continue to work with the Commission and the CFTC on the regulatory issues related to holding securities and futures in a portfolio. 39 See SIA, Fimat and OCC Letters. One commenter stated that portfolio margining should be expanded to include nonequity securities, interest rate derivatives, collateralized debt obligations and other similar non-equity related products, and foreign currency derivatives. 40 This commenter also requested that nonequity securities be permitted to be held in the portfolio margin account for collateral purposes only, subject to the other margin requirements of NYSE Rule 431. 41 The Exchange noted that it agrees with the commenter to the extent that nonequity securities may serve as collateral in the portfolio margin account. 42 The Exchange also stated that once the SROs and broker-dealers gain more experience with portfolio margining, the Exchange may consider whether nonequity products should be eligible for portfolio margining. 40 *See* SIA Letter. 41 *See* SIA Letter. 42 *See* Amendment No. 1. One commenter sought clarification as to whether broker-dealers and their customers could use shares of money market funds as collateral for portfolio margining. 43 The Exchange noted that it believes the rule currently permits the use of money market funds in a portfolio margin account, and clarified this issue through changes to the rule text in Amendment No. 1 to the proposed rule change. 44 43 *See* Federated Letter. 44 *See* NYSE Response; *see also* Amendment No. 1 (adding language regarding use of money market mutual funds in a portfolio margin account). One commenter objected to the $0.375 per contract minimum margin requirement, and offered alternative lower minimums. 45 In response to this comment, the Exchange noted that the $.375 per contract minimum provides a cushion against significant market movements. The Exchange also noted that it is concerned about potential illiquidity in the market and the creation of gap risk in the event both sides of a hedge cannot be closed out simultaneously. 45 *See* SIA Letter. Several commenters objected to the proposed prohibition on day trading in a portfolio margin account. 46 The Exchange noted that the day trading prohibition is not intended to prohibit intraday trading in an account that contains a large portfolio of hedged instruments and, in response to the comments, amended the day trading rule language. 47 46 *See* SIA and Fimat Letters. 47 *See* Amendment No. 1. Finally, the Exchange encouraged the Commission to move forward in approving the amendments. 48 48 *See* NYSE Response. IV. Discussion and Commission Findings and Accelerated Approval of Amendment No. 1 The Commission finds that the proposed rule change, as amended, is consistent with the requirements of the Act and the rules and regulations thereunder applicable to a national securities exchange. 49 In particular, the Commission believes that the proposed rule change, as amended, is consistent with Section 6(b)(5) of the Act 50 in that it is designed to perfect the mechanism of a free and open market and to protect investors and the public interest. The Commission notes that the proposed portfolio margin rule change is intended to promote greater reasonableness, accuracy and efficiency with respect to Exchange margin requirements and will better align margin requirements with actual risk. 49 In approving this proposed rule change, the Commission notes that it has considered the proposed rule's impact on efficiency, competition, and capital formation. 15 U.S.C. 78c(f). 50 15 U.S.C. 78f(b)(5). Under a portfolio margin system, offsets are fully realized, whereas under the Exchange's current margin rules, positions are margined independent of each other and offsets between them do not figure into the total margin requirement. A portfolio margin system recognizes the offsetting gains from positions that react favorably in market declines, while market rises are tempered by offsetting losses from positions that react negatively. Consequently, a portfolio margin approach can have a neutralizing effect on the volatility of margin requirements. Thus, a portfolio margin system may better align a customer's total margin requirement with the actual risk associated with the customer's positions taken as a whole. The Commission further notes portfolio margining may alleviate excessive margin calls, improve cash flows and liquidity, and reduce volatility. Moreover, the Commission notes that approving the proposed rule change would enhance portfolio margining by permitting more products to be margined under this methodology. This is consistent with the amendments to Regulation T made by the FRB in 1998, which sought to advance the use of portfolio margining. 51 The Commission also believes that this expanded program for portfolio margining will serve to advance the development of even more risk-sensitive approaches to margining customer positions, including the use of internal models as advocated by commenters. The Commission intends to work with the NYSE and CBOE towards this objective after it gains experience with the portfolio margining system of this proposal. 51 Federal Reserve System, “Securities Credit Transactions; Borrowing by Brokers and Dealers,” 63 FR 2806 (January 16, 1998); *see also* 12 CFR 220.1(b)(3)(i); *see also* letter from the FRB to James E. Newsome, Acting Chairman, Commodity Futures Trading Commission, and Laura S. Unger, Acting Chairman, Commission, dated March 6, 2001. The FRB concluded the letter by writing “the Board anticipates that the creation of securities futures products will provide another opportunity to develop more risk-sensitive, portfolio-based approaches for all securities, including securities options and securities futures products.” *Id.* The Commission believes that while the portfolio margining system in the proposed rule will have the effect of reducing customer margin (in most cases), the methodology is relatively conservative in that it requires positions to be shocked at specified market move ranges ( *e.g.* , +/−15% for individual equities) that represent potential future stress events. Essentially the same portfolio methodology has been used by broker-dealers to calculate haircuts on options positions for net capital purposes. 52 Furthermore, the proposed requirement that a firm receive pre-approval from the Exchange prior to offering portfolio margining to its customers, coupled with the requirement for enhanced risk management procedures, is designed to ensure that only those firms with adequate controls would be eligible to implement a customer portfolio margining program. 53 52 *See* Exchange Act Release No. 38248 (February 6, 1997), 62 FR 6474 (February 12, 1997). 53 The proposed rules also would continue to require a minimum per contract charge of $.375. The Commission also notes that the proposed rules contain a leverage test under which a broker-dealer cannot permit the amount of portfolio margin required of its customers to exceed 10 times the firm's net capital. Accelerated Approval of Amendment No. 1 The Exchange also has requested that the Commission approve Amendment No. 1 to the proposed rule change prior to the thirtieth day after publication of notice of the filing in the **Federal Register** . The Commission believes that the changes in Amendment No. 1 to the proposed rule change do not raise significant new or unique issues from those previously raised in the earlier portfolio margin rule filings. 54 The changes proposed by the Exchange in Amendment No. 1 are designed to ensure consistency with the companion CBOE proposed rule filing and to respond to comments received as a result of the **Federal Register** notice. 55 The Commission believes that these proposed changes strengthen the proposed rule change. 54 *See supra* note 3. 55 *See supra* notes 5 and 7. Accordingly, the Commission finds good cause for approving Amendment No. 1 to the proposed rule change prior to the thirtieth day after the date of publication of notice thereof in the **Federal Register** . Specifically, the Commission believes that it is consistent with Section 19(b)(2) of the Act 56 to approve Amendment No. 1 to the Exchange's proposed rule change prior to the thirtieth day after publication of the notice of filing thereof in the **Federal Register** . 56 15 U.S.C. 78s(b)(2). Uniform Effective Date The Commission believes that approving the amendment on an accelerated basis will permit the NYSE to begin the process of approving broker-dealers to implement portfolio margining and would allow firms to begin to make the necessary changes and upgrades to their systems, as well as their policies and procedures, in order to accommodate customer portfolio. The Commission, however, believes that if some firms receive NYSE approval to begin offering customer portfolio margining to customers before other member firms, these other firms would be at a competitive disadvantage. Therefore, the Commission has determined to set a uniform effective date of April 2, 2007 for the proposed rule change, as amended. As stated above, the Commission believes that setting a uniform effective date will avoid placing some members firms at a competitive disadvantage and reduce confusion in the marketplace. V. Solicitation of Comments of Amendment No. 1 Interested persons are invited to submit written data, views, and arguments concerning the foregoing, including whether the proposed rule change, as amended, is consistent with the Exchange Act. Comments may be submitted by any of the following methods: Electronic Comments • Use the Commission's Internet comment form ( *http://www.sec.gov/rules/sro.shtml* ); or • Send e-mail to *rule-comments@sec.gov* . Please include File Number SR-NYSE-2006-13 on the subject line. Paper Comments • Send paper comments in triplicate to Nancy M. Morris, Secretary, Securities and Exchange Commission, 100 F Street, NE., Washington, DC 20549-1090. All submissions should refer to File Number SR-NYSE-2006-13. This file number should be included on the subject line if e-mail is used. To help the Commission process and review your comments more efficiently, please use only one method. The Commission will post all comments on the Commission's Internet Web site ( *http://www.sec.gov/rules/sro/shtml* ). Copies of the submission, all subsequent amendments, all written statements with respect to the proposed rule change that are filed with the Commission, and all written communications relating to the proposed rule change between the Commission and any person, other than those that may be withheld from the public in accordance with the provisions of 5 U.S.C. 552, will be available for inspection and copying in the Commission's Public Reference Room. Copies of such filing also will be available for inspection and copying at the principal office of the Exchange. All comments received will be posted without change; the Commission does not edit personal identifying information from submissions. You should submit only information that you wish to make available publicly. All submission should refer to File Number SR-NYSE-2006-13 and should be submitted on or before January 8, 2007. VI. Conclusion It is therefore ordered, pursuant to Section 19(b)(2) of the Act, 57 that the proposed rule change (File No. SR-NYSE-2006-13), is hereby approved, and that Amendment No. 1 to the proposed rule change be, and hereby is, approved on an accelerated basis, both on a pilot basis to expire on July 31, 2007. The effective date will be April 2, 2007. 57 15 U.S.C. 78s(b)(2). By the Commission. Florence E. Harmon, Deputy Secretary. Exhibit A—Margin Requirements Rule 431.
(a)through
(f)unchanged. Portfolio Margin
(g)As an alternative to the “strategy-based” margin requirements set forth in sections
(a)through
(f)of this Rule, member organizations may elect to apply the portfolio margin requirements set forth in this section
(g)to all margin equity securities 1 , listed options, unlisted derivatives, and security futures products (as defined in Section 3(a)(56) of the Securities Exchange Act of 1934 (the “Exchange Act”)), provided that the requirements of section (g)(6)(B)(1) of this Rule are met. 1 For purposes of this section
(g)of the Rule, the term “margin equity security” utilizes the definition at section 220.2 of Regulation T of the Board of Governors of the Federal Reserve System, excluding a nonequity security. In addition, a member organization, provided that it is a Futures Commission Merchant (“FCM”) and is either a clearing member of a futures clearing organization or has an affiliate that is a clearing member of a futures clearing organization, is permitted under this section
(g)to combine an eligible participant's related instruments as defined in section (g)(2)(E), with listed index options, options on exchange traded funds (“ETF”), index warrants and underlying instruments and compute a margin requirement for such combined products on a portfolio margin basis. The portfolio margin provisions of this Rule shall not apply to Individual Retirement Accounts (“IRAs”).
(1)Member organizations must monitor the risk of portfolio margin accounts and maintain a comprehensive written risk analysis methodology for assessing the potential risk to the member organization's capital over a specified range of possible market movements of positions maintained in such accounts. The risk analysis methodology shall specify the computations to be made, the frequency of computations, the records to be reviewed and maintained, and the person(s) within the organization responsible for the risk function. This risk analysis methodology must be filed with the New York Stock Exchange (“Exchange”), or the member organization's designated examining authority (“DEA”), if other than the Exchange, and submitted to the Securities and Exchange Commission (“SEC”) prior to the implementation of portfolio margining. In performing the risk analysis of portfolio margin accounts required by this Rule, each member organization shall include in the written risk analysis methodology procedures and guidelines for:
(A)Obtaining and reviewing the appropriate account documentation and financial information necessary for assessing the amount of credit to be extended to eligible participants.
(B)The determination, review and approval of credit limits to each eligible participant, and across all eligible participants, utilizing a portfolio margin account,
(C)Monitoring credit risk exposure to the member organization from portfolio margin accounts, on both an intra-day and end of day basis, including the type, scope and frequency of reporting to senior management,
(D)The use of stress testing of portfolio margin accounts in order to monitor market risk exposure from individual accounts and in the aggregate,
(E)The regular review and testing of these risk analysis procedures by an independent unit such as internal audit or other comparable group,
(F)Managing the impact of credit extended related to portfolio margin accounts on the member organization's overall risk exposure,
(G)The appropriate response by management when limits on credit extensions related to portfolio margin accounts have been exceeded, and
(H)Determining the need to collect additional margin from a particular eligible participant, including whether that determination was based upon the creditworthiness of the participant and/or the risk of the eligible product. Moreover, management must periodically review, in accordance with written procedures, the member organization's credit extension activities for consistency with these guidelines. Management must periodically determine if the data necessary to apply this section
(g)is accessible on a timely basis and information systems are available to adequately capture, monitor, analyze and report relevant data.
(2)Definitions.—For purposes of this section (g), the following terms shall have the meanings specified below:
(A)For purposes of portfolio margin requirements the term “equity”, as defined in section (a)(4) of this Rule, includes the market value of any long or short positions held in an eligible participant's account.
(B)The term “listed option” means any equity-based or equity index-based option traded on a registered national securities exchange or automated facility of a registered national securities association.
(C)The term “portfolio” means any eligible product, as defined in section (g)(6)(B)(1), grouped with its underlying instruments and related instruments.
(D)The term “product group” means two or more portfolios of the same type (see table in section (g)(2)(G) below) for which it has been determined by Rule 15c3-1a under the Exchange Act that a percentage of offsetting profits may be applied to losses at the same valuation point.
(E)The term “related instrument” within a security class or product group means broad-based index futures and options on broad-based index futures covering the same underlying instrument. The term “related instrument” does not include security futures products.
(F)The term “security class” refers to all listed options, security futures products, unlisted derivatives, and related instruments covering the same underlying instrument and the underlying instrument itself.
(G)The term “theoretical gains and losses” means the gain and loss in the value of individual eligible products and related instruments at ten equidistant intervals (valuation points) ranging from an assumed movement (both up and down) in the current market value of the underlying instrument. The magnitude of the valuation point range shall be as follows: Portfolio type Up/down market move (high & low valuation points) High Capitalization, Broad-based Market Index 2 +6%/−8% Non-High Capitalization, Broad-based Market Index 3 +/−10% Any other eligible product that is, or is based on, an equity security or a narrow-based index +/−15%
(H)The term “underlying instrument” means a security or security index upon which any listed option, unlisted derivative, security future, or broad-based index future is based.
(I)The term “unlisted derivative” means any equity-based or equity index-based unlisted option, forward contract, or security-based swap that can be valued by a theoretical pricing model approved by the SEC.
(3)Approved Theoretical Pricing Models.—Theoretical pricing models must be approved by the SEC.
(4)Eligible Participants.—The application of the portfolio margin provisions of this section
(g)is limited to the following:
(A)Any broker or dealer registered pursuant to Section 15 of the Exchange Act;
(B)Any member of a national futures exchange to the extent that listed index options hedge the member's index futures; and
(C)Any person or entity not included in sections (g)(4)(A) and (g)(4)(B) above approved for uncovered options and, if transactions in security futures are to be included in the account, approval for such transactions is also required. However, an eligible participant under this section (g)(4)(C) may not establish or maintain positions in unlisted derivatives unless minimum equity of at least five million dollars is established and maintained with the member organization. For purposes of this minimum equity requirement, all securities and futures accounts carried by the member organization for the same eligible participant may be combined provided ownership across the accounts is identical. A guarantee pursuant to section (f)(4) of this Rule is not permitted for purposes of the minimum equity requirement.
(5)Opening of Accounts.
(A)Member organizations must notify and receive approval from the Exchange or the member organization's DEA, if other than the Exchange, prior to establishing a portfolio margin methodology for eligible participants.
(B)Only eligible participants that have been approved to engage in uncovered short option contracts pursuant to Exchange Rule 721, or the rules of the member organization's DEA, if other than the Exchange, are permitted to utilize a portfolio margin account.
(C)On or before the date of the initial transaction in a portfolio margin account, a member organization shall:
(1)Furnish the eligible participant with a special written disclosure statement describing the nature and risks of portfolio margining which includes an acknowledgement for all portfolio margin account owners to sign, attesting that they have read and understood the disclosure statement, and agree to the terms under which a portfolio margin account is provided (see Exchange Rule 726(d)), and
(2)Obtain the signed acknowledgement noted above from the eligible participant and record the date of receipt.
(6)Establishing Account and Eligible Positions.
(A)For purposes of applying the portfolio margin requirements prescribed in this section (g), member organizations are to establish and utilize a specific securities margin account, or sub-account of a margin account, clearly identified as a portfolio margin account that is separate from any other securities account carried for an eligible participant. 2 In accordance with section (b)(1)(i)(B) of Rule 15c3-1a (Appendix A to Rule 15c3-1) under the Securities Exchange Act of 1934, 17 CFR 240.15c3-1a(b)(1)(i)(B). 3 See footnote above. A margin deficit in the portfolio margin account of an eligible participant may not be considered as satisfied by excess equity in another account. Funds and/or securities must be transferred to the deficient account and a written record created and maintained. However, if a portfolio margin account is carried as a sub-account of a margin account, excess equity in the margin account (determined in accordance with the rules applicable to a margin account other than a portfolio margin account) may be used to satisfy a margin deficit in the portfolio margin sub-account without having to transfer any funds and/or securities.
(B)Eligible Products.
(1)For eligible participants as described in sections (g)(4)(A) through (g)(4)(C), a transaction in, or transfer of, an eligible product may be effected in the portfolio margin account. Eligible products under this section
(g)consist of:
(i)A margin equity security (including a foreign equity security and option on a foreign equity security, provided the security is deemed to have a “ready market” under SEC Rule 15c3-1 or a “no-action” position issued thereunder, and a control or restricted security, provided the security has met the requirements in a manner consistent with SEC Rule 144 or an SEC “no-action” position issued thereunder, sufficient to permit the sale of the security, upon exercise or assignment of any listed option or unlisted derivative written or held against it, without restriction).
(ii)A listed option on an equity security or index of equity securities,
(iii)A security futures product,
(iv)An unlisted derivative on an equity security or index of equity securities,
(v)A warrant on an equity security or index of equity securities,
(vi)A related instrument as defined in section (g)(2)(E).
(7)Margin Required.—The amount of margin required under this section
(g)for each portfolio shall be the greater of:
(A)the amount for any of the ten equidistant valuation points representing the largest theoretical loss as calculated pursuant to section (g)(8) below, or
(B)for eligible participants as described in section (g)(4)(A) through (g)(4)(C), $.375 for each listed option, unlisted derivative, security future product, and related instrument, multiplied by the contract's or instrument's multiplier, not to exceed the market value in the case of long contracts in eligible products.
(C)Account guarantees pursuant to section (f)(4) of this Rule are not permitted for purposes of meeting margin requirements.
(D)Positions other than those listed in section (g)(6)(B)(1) above are not eligible for portfolio margin treatment. However, positions not eligible for portfolio margin treatment (except for ineligible related instruments) may be carried in a portfolio margin account, provided the member organization has the ability to apply the applicable strategy based margin requirements promulgated under this Rule. Shares of a money market mutual fund may be carried in a portfolio margin account, also subject to the applicable strategy based margin requirements under this Rule provided that:
(1)The customer waives any right to redeem shares without the member organization's consent, s
(2)The member organization (or, if the shares are deposited with a clearing organization, the clearing organization) obtains the right to redeem shares in cash upon request,
(3)The fund agrees to satisfy any conditions necessary or appropriate to ensure that the shares may be redeemed in cash, promptly upon request, and
(4)The member organization complies with the requirements of Section 11(d)(1) of the Exchange Act and Rule 11d1-2 thereunder.
(8)Method of Calculation.
(A)Long and short positions in eligible products including underlying instruments and related instruments, are to be grouped by security class; each security class group being a “portfolio”. Each portfolio is categorized as one of the portfolio types specified in section (g)(2)(G) above as applicable.
(B)For each portfolio, theoretical gains and losses are calculated for each position as specified in section (g)(2)(G) above. For purposes of determining the theoretical gains and losses at each valuation point, member organizations shall obtain and utilize the theoretical values of eligible products as described in this section
(g)rendered by an approved theoretical pricing model.
(C)Offsets. Within each portfolio, theoretical gains and losses may be netted fully at each valuation point. Offsets between portfolios within the eligible product groups, as described in section (g)(2)(G), may then be applied as permitted by Rule 15c3-1a under the Exchange Act.
(D)After applying the offsets above, the sum of the greatest loss from each portfolio is computed to arrive at the total margin required for the account (subject to the per contract minimum).
(9)Portfolio Margin Minimum Equity Deficiency.
(A)If, as of the close of business, the equity in the portfolio margin account of an eligible participant as described in section (g)(4)(C), declines below the five million dollar minimum equity required, if applicable, and is not restored to at least five million dollars within three business days by a deposit of funds and/or securities, member organizations are prohibited from accepting new opening orders beginning on the fourth business day, except that new opening orders entered for the purpose of reducing market risk may be accepted if the result would be to lower margin requirements. This prohibition shall remain in effect until,
(1)Equity of five million dollars is established or,
(2)All unlisted derivatives are liquidated or transferred from the portfolio margin account to the appropriate securities account.
(B)Member organizations will not be permitted to deduct any portfolio margin minimum equity deficiency amount from Net Capital in lieu of collecting the minimum equity required.
(10)Portfolio Margin Deficiency
(A)If, as of the close of business, the equity in the portfolio margin account of an eligible participant, as described in section (g)(4)(A) through (g)(4)(C), is less than the margin required, the eligible participant may deposit additional funds and/or securities or establish a hedge to meet the margin requirement within three business days. After the three business day period, member organizations are prohibited from accepting new opening orders, except that new opening orders entered for the purpose of reducing market risk may be accepted if the result would be to lower margin requirements. In the event an eligible participant fails to hedge existing positions or deposit additional funds and/or securities in an amount sufficient to eliminate any margin deficiency after three business days, the member organization must liquidate positions in an amount sufficient to, at a minimum, lower the total margin required to an amount less than or equal to the account equity.
(B)If the portfolio margin deficiency is not met by the close of business on the next business day after the business day on which such deficiency arises, member organizations will be required to deduct the amount of the deficiency from Net Capital until such time as the deficiency is satisfied.
(C)Member organizations will not be permitted to deduct any portfolio margin deficiency amount from Net Capital in lieu of collecting the margin required.
(D)The Exchange, or the member organization's DEA, if other than the Exchange, may grant additional time for an eligible participant to meet a portfolio margin deficiency upon written request, which is expected to be granted in extraordinary circumstances only.
(E)Member organizations should not permit an eligible participant to make a practice of meeting a portfolio margin deficiency by liquidation. Member organizations must have procedures in place to identify accounts that periodically liquidate positions to eliminate margin deficiencies, and the member organization is expected to take appropriate action when warranted. Liquidations to eliminate margin deficiencies that are caused solely by adverse price movements may be disregarded.
(11)Determination of Value for Margin Purposes.—For the purposes of this section (g), all eligible products shall be valued at current market prices. Account equity for the purposes of sections (g)(9)(A) and (g)(10)(A) shall be calculated separately for each portfolio margin account.
(12)Net Capital Treatment of Portfolio Margin Accounts.
(A)No member organization that requires margin in any portfolio margin account pursuant to section
(g)of this Rule shall permit the aggregate portfolio margin requirements to exceed ten times its Net Capital for any period exceeding three business days. The member organization shall, beginning on the fourth business day, cease opening new portfolio margin accounts until compliance is achieved.
(B)If, at any time, a member organization's aggregate portfolio margin requirements exceed ten times its Net Capital the member organization shall immediately transmit telegraphic or facsimile notice of such deficiency to the principal office of the Securities and Exchange Commission in Washington, D.C., the district or regional office of the Securities and Exchange Commission for the district or region in which the member organization maintains its principal place of business; and to the Exchange, or the member organization's DEA, if other than the Exchange.
(13)Day Trading Requirements.—The day trading restrictions promulgated under section (f)(8)(B) of this Rule shall not apply to portfolio margin accounts that establish and maintain at least five million dollars in equity, provided a member organization has the ability to monitor the intra-day risk associated with day trading. Portfolio margin accounts that do not establish and maintain at least five million dollars in equity will be subject to the day trading restrictions under section (f)(8)(B), provided the member organization has the ability to apply the applicable day trading requirements under this Rule. However, if the position or positions day traded were part of a hedge strategy, the day trading restrictions will not apply. A “hedge strategy” for the purpose of this rule means a transaction or a series of transactions that reduces or offsets a material portion of the risk in a portfolio. Member organizations are expected to monitor these portfolio margin accounts to detect and prevent circumvention of the day trading requirements.
(14)Requirements to Liquidate
(A)A member organization is required immediately either to liquidate, or transfer to another broker-dealer eligible to carry portfolio margin accounts, all portfolio margin accounts with positions in related instruments, if the member organization is:
(1)Insolvent as defined in section 101 of title 11 of the United States Code, or is unable to meet its obligations as they mature;
(2)the subject of a proceeding pending in any court or before any agency of the United States or any State in which a receiver, trustee, or liquidator for such debtor has been appointed;
(3)not in compliance with applicable requirements under the Exchange Act or rules of the Securities and Exchange Commission or any self-regulatory organization with respect to financial responsibility or hypothecation of eligible participant's securities; or
(4)unable to make such computations as may be necessary to establish compliance with such financial responsibility or hypothecation rules.
(B)Nothing in this section
(14)shall be construed as limiting or restricting in any way the exercise of any right of a registered clearing agency to liquidate or cause the liquidation of positions in accordance with its by-laws and rules.
(15)Member organizations must ensure that portfolio margin accounts are in compliance with all other applicable Exchange rules promulgated in Rules 700 through 795. Delivery of Options Disclosure Document and Prospectus Rule 726
(a)through
(c)unchanged. Portfolio Margining Disclosure Statement and Acknowledgement
(d)The special written disclosure statement describing the nature and risks of portfolio margining, and acknowledgement for an eligible participant signature, required by Rule 431(g)(5)(C) shall be in a format prescribed by the Exchange or in a format developed by the member organization, provided it contains substantially similar information as in the prescribed Exchange format and has received the prior written approval of the Exchange. [FR Doc. E6-21474 Filed 12-15-06; 8:45 am] BILLING CODE 8011-01-P SECURITIES AND EXCHANGE COMMISSION [Release No. 34-54810A; File No. SR-NYSE-2005-90] Self-Regulatory Organizations; New York Stock Exchange LLC; Order Granting Approval of Proposed Rule Change and Amendment No. 1 Thereto and Notice of Filing and Order Granting Accelerated Approval to Amendment No. 2 Thereto To Allow Certain Institutional Customers To Elect Not To Receive Account Statements December 8, 2006. Correction In FR Doc. No. E6-20227, beginning on page 69165 for Wednesday, November 29, 2006, a request for comment on Amendment No. 2 was inadvertently omitted. Accordingly, the following should be inserted immediately before the Conclusion of the document: “Solicitation of Comments on Amendment No. 2 Interested persons are invited to submit written data, views and arguments concerning Amendment No. 2, including whether such amendment is consistent with the Act. Comments may be submitted by any of the following methods: Electronic Comments • Use the Commission's Internet comment form ( *http://www.sec.gov/rules/sro.shtml* ); or • Send an e-mail to *rule-comments@sec.gov.* Please include File Number SR-NYSE-2005-90 on the subject line. Paper Comments • Send paper comments in triplicate to Nancy M. Morris, Secretary, Securities and Exchange Commission, 100 F Street, NE., Washington, DC 20549-1090. All submissions should refer to File Number SR-NYSE-2005-90. This file number should be included on the subject line if e-mail is used. To help the Commission process and review your comments more efficiently, please use only one method. The Commission will post all comments on the Commission's Internet Web site ( *http://www.sec.gov/rules/sro.shtml* ). Copies of the submission, all subsequent amendments, all written statements with respect to the proposed rule change that are filed with the Commission, and all written communications relating to the proposed rule change between the Commission and any person, other than those that may be withheld from the public in accordance with the provisions of 5 U.S.C. 552, will be available for inspection and copying in the Commission's Public Reference Room. Copies of such filing also will be available for inspection and copying at the principal office of the Exchange. All comments received will be posted without change; the Commission does not edit personal identifying information from submissions. You should submit only information that you wish to make available publicly. All submissions should refer to File Number SR-NYSE-2005-90 and should be submitted on or before January 8, 2007.” For the Commission, by the Division of Market Regulation, pursuant to delegated authority. 1 1 17 CFR 200.30-3(a)(12). Florence E. Harmon, Deputy Secretary. [FR Doc. E6-21479 Filed 12-15-06; 8:45 am] BILLING CODE 8011-01-P SECURITIES AND EXCHANGE COMMISSION Release No. 34-54914; File No. SR-Phlx-2006-81] Self-Regulatory Organizations; Philadelphia Stock Exchange Inc.; Notice of Filing of Proposed Rule Change Relating to the Establishment of a Maximum Number of Quoting Participants Permitted in a Particular Option on the Exchange December 11, 2006. Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 (“Act”), 1 and Rule 19b-4 thereunder, 2 notice is hereby given that on December 5, 2006, the Philadelphia Stock Exchange, Inc. (“Phlx” or “Exchange”) filed with the Securities and Exchange Commission (“Commission”) the proposed rule change as described in Items I, II, and III below, which Items have been substantially prepared by the Phlx. The Commission is publishing this notice to solicit comments on the proposed rule change from interested persons. 1 15 U.S.C. 78s(b)(1). 2 17 CFR 240.19b-4. I. Self-Regulatory Organization's Statement of the Terms of Substance of the Proposed Rule Change The Phlx proposes to amend Phlx Rule 507, 3 which governs the assignment of options to Streaming Quote Traders (“SQTs”) 4 and Remote Streaming Quote Traders (”RSQTs”), 5 by adding commentary to the rule establishing a maximum number of quoting participants that may be assigned to a particular equity option at any one time. 3 Phlx Rule 507 sets forth the process by which the Committee assigns or reassigns options to eligible Streaming Quote Traders and Remote Streaming Quote Traders. *See* Phlx Rule 507. 4 An SQT is an Exchange Registered Options Trader (“ROT ”) who has received permission from the Exchange to generate and submit options quotations electronically through AUTOM in eligible options to which such SQT is assigned. An SQT may only submit such quotations while such SQT is physically present on the floor of the Exchange. *See* Phlx Rule 1014(b)(ii)(A). 5 An RSQT is a ROT that is a member or member organization with no physical trading floor presence who has received permission from the Exchange to generate and submit option quotations electronically through AUTOM in eligible options to which such RSQT has been assigned. An RSQT may only submit such quotations electronically from off the floor of the Exchange. *See* Phlx Rule 1014(b)(ii)(B). The text of the proposed rule change is available on the Phlx's Web site at *http://www.phlx.com,* at the Phlx's Office of the Secretary, and at the Commission's Public Reference Room. II. Self-Regulatory Organization's Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change In its filing with the Commission, the Phlx included statements concerning the purpose of and basis for the proposed rule change and discussed any comments it received on the proposed rule change. The text of these statements may be examined at the places specified in Item IV below. The Exchange has prepared summaries, set forth in Sections A, B, and C below, of the most significant aspects of such statements. A. Self-Regulatory Organization's Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change 1. Purpose The purpose of the proposed rule change is to enable the Exchange to manage its quotation traffic and bandwidth capacity by limiting the number of streaming quote market participants that may be assigned to a particular option at a given point in time. The proposed amendments to Phlx Rule 507 would establish:
(i)A maximum number of quoters (“MNQ”) in equity options based on each option's monthly trading volume;
(ii)a process for recalculating the MNQ based upon changes in an option's monthly trading volume;
(iii)an increase to the MNQ due to exceptional circumstances;
(iv)the process by which the Exchange will notify market participants of changes to the MNQ; and
(v)additional criteria relating to the process by which the Exchange will assign SQT and/or RSQT applicants in options in the event that there are more applicants for assignment in a particular option than there are positions. The Exchange proposes to limit the number of participants that may be assigned to a particular equity option at any one time based upon each option's monthly national volume. Proposed Commentary .02 to Phlx Rule 507 sets forth tiered MNQ levels providing for 20 participants for the top 5% most actively traded options; 15 participants for next 10% most actively traded options, and 10 market participants for all other options. The ranking is based upon the preceding month's national volumes. The MNQ would be recalculated within the first five days of each month based on the previous month's trading volume (“new MNQ”). Proposed Commentary .03 to Phlx Rule 507 provides the process by which the Exchange will administer a decrease in the previous month's MNQ. The Exchange will immediately implement the new MNQ if the number of assigned participants in the option on the last day of the month equals or is less than the new MNQ. Under circumstances in which the number of assigned participants is greater than the new MNQ, the option will have an “increased” MNQ equal to the number of assigned participants quoting electronically in that option on the last day of the month. The “increased” MNQ will automatically decrease if an assigned participant changes or ceases the assignment in the option. The “increased” MNQ will continue to decrease until the number of assigned participants equals the new MNQ, at which point the number of assigned participants in the option may not exceed the new MNQ. The Exchange will be able to increase the MNQ in exceptional circumstances. The Exchange's Options Allocation, Evaluation and Securities Committee (“OAESC”) 6 may increase the MNQ when the circumstances warrant. Proposed Commentary .04 to Phlx Rule 507 describes the events that may be considered “exceptional” including substantial trading volume (whether actual or expected), a major news event or corporate event. The Exchange may reduce the MNQ following the cessation of the exceptional circumstances, but the Exchange must follow the same procedures for decreases to the MNQ outlined above. When relying on this provision, the Exchange would submit a rule filing to the Commission pursuant to Section 19(b)(3)(A) of the Act. 7 6 *See* Phlx By-Law Article X, Section 10-7. The OAESC has jurisdiction over, among other things: The appointment of specialists on the options and foreign currency options trading floors; allocation, retention and transfer of privileges to deal in options on the trading floors; and administration of the 500 series of Phlx rules. 7 15 U.S.C. 78s(b)(3)(A). The Exchange will inform market participants of changes to the MNQ via Exchange circular. The Exchange may increase the MNQ levels (meaning the 20, 15, and 10 number established in Commentary .02(a)-(c)) by submitting to the Commission a rule filing pursuant to Section 19(b)(3)(A) of the Act. 8 The Exchange may also decrease the MNQ levels upon Commission approval of a rule filing submitted pursuant to 19(b)(2) of the Act. 8 15 U.S.C. 78s(b)(3)(A). The Exchange is also proposing to amend Phlx Rule 507 by adding additional criteria for the OAESC to consider when determining whether to assign an option to a member in the situation where there are more applicants for assignment in a particular option than there are positions available. In this situation, proposed paragraph (b)(iii) of Phlx Rule 507 would require the OAESC to consider:
(i)The financial and technical resources available to the applicant;
(ii)the applicant's experience and expertise in market making or options trading; and
(iii)the applicant's prior performance as a specialist, SQT or RSQT, based on evaluations conducted pursuant to Phlx Rule 510, which includes quantified measures of performance. The purpose of this provision is to enable the OAESC to use these criteria to select the most qualified applicant in the event that there are more applicants for assignment in a particular option than there are positions available. The Exchange believes that the consideration of financial and technical capacity, as well as prior performance, will assist the OAESC in determining the most beneficial assignment of options for the Exchange and the public. Finally, the Exchange represents that members that are assigned in a particular option as of the date of Commission approval of this proposed rule change will be guaranteed a position as a quoting participant in the particular option. 2. Statutory Basis The Exchange believes that the proposed rule change is consistent with Section 6(b) of the Act, 9 in general, and furthers the objectives of Section 6(b)(5) of the Act, 10 in particular, in that the proposed rule change is designed to promote just and equitable principles of trade, to remove impediments to and perfect the mechanism of a free and open market and a national market system, and, in general, to protect investors and the public interest by allowing the Exchange to manage resources by fairly allocating limited bandwidth capacity. 9 15 U.S.C. 78f(b). 10 15 U.S.C. 78f(b)(5). B. Self-Regulatory Organization's Statement on Burden on Competition The Exchange does not believe that the proposed rule change will impose any burden on competition that is not necessary or appropriate in furtherance of the purposes of the Act. C. Self-Regulatory Organization's Statement on Comments on the Proposed Rule Change Received From Members, Participants or Others Written comments on the proposed rule change were neither solicited nor received. III. Date of Effectiveness of the Proposed Rule Change and Timing for Commission Action Within 35 days of the date of publication of this notice in the **Federal Register** or within such longer period
(i)as the Commission may designate up to 90 days of such date if it finds such longer period to be appropriate and publishes its reasons for so finding or
(ii)as to which the Exchange consents, the Commission will:
(A)By order approve such proposed rule change, or
(B)Institute proceedings to determine whether the proposed rule change should be disapproved. IV. Solicitation of Comments Interested persons are invited to submit written data, views and arguments concerning the foregoing, including whether the proposed rule change is consistent with the Act. Comments may be submitted by any of the following methods: Electronic Comments • Use the Commission's Internet comment form *http://www.sec.gov/rules/sro.shtml;* or • Send an e-mail to *rule-comments@sec.gov.* Please include File No. SR-Phlx-2006-81 on the subject line. Paper Comments • Send paper comments in triplicate to Nancy M. Morris, Secretary, Securities and Exchange Commission, 100 F Street, NE., Washington, DC 20549-1090. All submissions should refer to File No. SR-Phlx-2006-81. This file number should be included on the subject line if e-mail is used. To help the Commission process and review your comments more efficiently, please use only one method. The Commission will post all comments on the Commission's Internet Web site at *http://www.sec.gov/rules/sro.shtml.* Copies of the submission, all subsequent amendments, all written statements with respect to the proposed rule change that are filed with the Commission, and all written communications relating to the proposed rule change between the Commission and any person, other than those that may be withheld from the public in accordance with the provisions of 5 U.S.C. 552, will be available for inspection and copying in the Commission's Public Reference Room. Copies of such filing also will be available for inspection and copying at the principal office of the Exchange. All comments received will be posted without change; the Commission does not edit personal identifying information from submissions. You should submit only information that you wish to make available publicly. All submissions should refer to File No. SR-Phlx-2006-81 and should be submitted on or before January 8, 2007. 11 17 CFR 200.30-3(a)(12). For the Commission, by the Division of Market Regulation, pursuant to delegated authority. 11 Florence E. Harmon, Deputy Secretary. [FR Doc. E6-21449 Filed 12-15-06; 8:45 am] BILLING CODE 8011-01-P SOCIAL SECURITY ADMINISTRATION [Docket No. SSA 2006-0104] Rescission of Social Security Ruling 88-10c, Bowen v. Galbreath AGENCY: Social Security Administration. ACTION: Notice of Rescission of Social Security Ruling. SUMMARY: In accordance with 20 CFR 402.35(b)(1), the Commissioner of Social Security gives notice of the rescission of Social Security Ruling SSR 88-10c. EFFECTIVE DATE: December 18, 2006. FOR FURTHER INFORMATION CONTACT: Marg Handel, Social Security Administration, 6401 Security Boulevard, Baltimore, MD 21235-6401,
(410)965-4639 or TTY 410-966-5609, for information about this notice. For information on eligibility or filing for benefits, call our national toll-free number, 1-800-772-1213 or TTY 1-800-325-0778, or visit our Internet site, Social Security Online, at *http://www.socialsecurity.gov.* SUPPLEMENTARY INFORMATION: Social Security Rulings make available to the public precedential decisions relating to the Federal old-age, survivors, disability and supplemental security income programs. Social Security Rulings may be based on case decisions made at all administrative levels of adjudication, Federal court decisions, Commissioner's decisions, opinions of the Office of the General Counsel, and other policy interpretations of the law and regulations. On June 23, 1988 we issued SSR 88-10(c) to reflect the Supreme Court's decision in *Galbreath* v. *Bowen,* 485 U.S. 74 (1988), in which the Court held that the relevant statutes did not permit withholding past-due Supplemental Security Income benefits for attorney's fees in title XVI cases. As the Court noted at the end of its decision, the earlier Congressional decision not to extend attorney fee withholding to title XVI would stand “[u]ntil Congress [saw] fit to override its original decision, by amending Title XVI in a way that manifests an intent to allow withholding.” In the Social Security Protection Act of 2004 (SSPA), Public Law 108-203, Congress enacted such legislation. Section 302 of the SSPA amended section 1631(d)(2) of the Social Security Act to extend the attorney fee withholding and direct payment procedures to claims under title XVI. We began paying fees directly to attorneys in title XVI cases effectuated on or after February 28, 2005, the date the amendments made by section 302 took effect. While this provision will only be effective for 5 years, we believe that SSR 88-10(c) should be rescinded for this period and we will later determine if there is a need to reinstate it. (Catalog of Federal Domestic Assistance Programs No. 96.006, Supplemental Security Income) Dated: December 12, 2006. Jo Anne B. Barnhart, Commissioner of Social Security. [FR Doc. E6-21484 Filed 12-15-06; 8:45 am] BILLING CODE 4191-02-P DEPARTMENT OF TRANSPORTATION Federal Aviation Administration Approval of Noise Compatibility Program for McClellan Palomar Airport, Carlsbad, CA AGENCY: Federal Aviation Administration, DOT. ACTION: Notice. SUMMARY: The Federal Aviation Administration
(FAA)announces its findings on the noise compatibility program submitted by San Diego County, California under the provisions of Title I of the Aviation Safety and Noise Abatement Act, as amended, (Public Law96-193) (hereinafter referred to as “the Act”) and 14 CFR Part 150. These findings are made in recognition of the description of Federal and nonfederal responsibilities in Senate Report No. 96-52 (1980). On April 26, 2005, the FAA determined that the noise exposure maps submitted by San Diego County under Part 150 were in compliance with applicable requirements. EFFECTIVE DATE: The effective date of the FAA's approval of the Noise Compatibility Program for McClellan Palomar Airport is December 5, 2006. FOR FURTHER INFORMATION CONTACT: Victor Globa, Environmental Protection Specialist, Los Angeles Airports District Office, Airport Division, Western-Pacific Region, Federal Aviation Administration, 15000 Aviation Boulevard, Hawthorne, California, 90261, Mailing Address: P.O. Box 92007, Los Angeles, California 90009-2007. Telephone: 310/725-3637. Documents reflecting this FAA action may be reviewed at this same location. SUPPLEMENTARY INFORMATION: This notice announces that the FAA has given its overall approval to the Noise Compatibility Program for McClellan Palomar Airport, effective April 7, 2004. Under section 104(a) of the Aviation Safety and Noise Abatement Act of 1979, as amended (herein after referred to as the “Act”) [recodified as 49 U.S.C. § 47504], an airport operator who has previously submitted a Noise Exposure Map may submit to the FAA a Noise Compatibility Program which sets forth the measures taken or proposed by the airport operator for the reduction of existing non-compatible land uses and prevention of additional non-compatible land uses within the area covered by the Noise Exposure Maps. The Act requires such programs to be developed in consultation with interested and affected parties including local communities, government agencies, airport users, and FAA personnel. Each airport noise compatibility program developed in accordance with Federal Aviation Regulations
(FAR)Part 150 is a local program, not a Federal program. The FAA does not substitute its judgement for that of the airport proprietor with respect to which measures should be recommended for action. The FAA's approval or disapproval of 14 CFR Part 150 program recommendations is measured according to the standards expressed in Part 150 and the Act and is limited to the following determinations: a. The Noise Compatibility Program was developed in accordance with the provisions and procedures of FAR Part 150; b. Program measures are reasonably consistent with achieving the goals of reducing existing non-compatible land uses around the airport and preventing the introduction of additional non-compatible land uses; c. Program measures would not create an undue burden on interstate or foreign commerce, unjustly discriminate against types or classes of aeronautical uses, violate the terms of airport grant agreements, or intrude into areas preempted by the Federal Government; and d. Program measures relating to the use of flight procedures can be implemented within the period covered by the program without derogating safety, adversely affecting the efficient use and management of the navigable airspace and air traffic control systems, or adversely affecting other powers and responsibilities of the Administrator prescribed by law. Specific limitations with respect to FAA's approval of an airport noise compatibility program are delineated in FAR part 150, section 150.5. Approval is not a determination concerning the acceptability of land uses under Federal, State, or local law. Approval does not by itself constitute an FAA implementing action. A request for Federal action or approval to implement specific noise compatibility measures may be required, and an FAA decision on the request may require an environmental assessment of the proposed action. Approval does not constitute a commitment by the FAA to financially assist in the implementation of the program nor a determination that all measures covered by the program are eligible for grant-in-aid funding from the FAA under the Airport and Airway Improvement Act of 1982, as amended. Where Federal funding is sought, requests for project grants must be submitted to the FAA Airports District Office in Hawthorne, California. San Diego County submitted to the FAA on September 13, 2004, the Noise Exposure Maps, descriptions, and other documentation produced during the noise compatibility planning study conducted from December 1, 2002 through March 24, 2006. The McClellan Palomar Airport Noise Exposure Maps were determined by FAA to be in compliance with applicable requirements on April 26, 2005. Notice of this determination was published in the **Federal Register** on May 10, 2005 (70 FR 24671). The McClellan Palomar Airport study contains a proposed noise compatibility program comprised of actions designed for phased implementation by airport management and adjacent jurisdictions from (2004 to beyond the year 2009). It was requested that the FAA evaluate and approve this material as a Noise Compatibility Program as described in 49 U.S.C. § 47504 (formerly section 104(b) of the Act). The FAA began its review of the program on June 20, 2006, and was required by a provision of the Act to approve or disapprove the program within 180 days (other than the use of new or modified flight procedures for noise control). Failure to approve or disapprove such program within the 180-day period shall be deemed to be an approval of such program. The submitted program contained thirty-two
(32)proposed actions for noise abatement, land use management and program management on and off the airport. The FAA completed its review and determined that the procedural and substantive requirements of the Act and FAR part 150 have been satisfied. The overall program was approved, by the Manager of the Airports Division, Western-Pacific Region, effective December 5, 2006. Outright approval was granted for seven
(7)of the 10 noise abatement measures, all six
(6)land use management measures and twelve
(12)program management measures. The approved measures included such items as: Continue the existing published air traffic pattern altitudes; Continue the existing published “Alpha Departure” voluntary noise abatement procedure (VNAP); Continue the existing VNAP, as published on the airport Web site; Continue the existing designation of Runway 24 as the calm wind runway as published in the Airport/Facility Directory; Continue the existing policy discouraging jet aircraft training due to noise abatement and traffic congestion as published in the Airport/Facility Directory; Continue the existing VNAP, as published on the airport's Web site; Amend “Quiet Hours” to include all aircraft except emergency flight operations. Approved Land Use Management Measures include: Provide the recommended Noise Information Notification Area
(NINA)boundary to San Diego Geographic Information Source (SanGIS) in both electronic and hard copy formats; Provide the updated Noise Exposure Maps to SanGIS in electronic format, notify San Diego County and the City of Carlsbad that updated Noise Exposure Maps are available through SanGIS and encourage their use in updating the Noise Elements fo their General Plans; Rezone the undeveloped area designated E-A (APN 212-040-56) within the 60 CNEL to “P-M Planned Industrial” zone; Real estate disclosure within the CRQ's established Airport Influence Area should continue; Provide the updated NEMs, AIA, and NINA to SanGIS in electronic format, encourage the California Board of Realtors, San Diego North County Board, and the Building Industry Association—Sales and Marketing Council, North County Division to visit SanGIS Web site for the most updated NEMs, AIA and NINA and work with the aforementioned organizations to develop an “Airport Fact Book” for property sales agents; Provide San Diego County Regional Airport Authority (SDCRAA) with copies of the Final NEM and NCP documents. Approved Program Management measures include: Hire a dedicated Noise Abatement Officer/Appoint a Permanent Environmental Noise Specialist; The Palomar Airport Advisory Committee should continue to act as a forum for discussion of noise abatement actions; update Maps identifying the noise-sensitive areas around the airport; Produce an Airport Noise Information Booklet; Develop an Official Web site to disseminate VNAP and other noise-related information; Continue to coordinate with the Department of Public Works Public Information Officer to disseminate information to the news media; Continue attending and/or participating in aviation association meetings to expand awareness of VNAP and other noise related issues; Coordinate with the Department of Public Works Public Information officer to periodically distribute VNAP press releases to aviation media; Periodically provide updated VNAP information for distribution by Fixed Base Operators; Erect monument signs on airport property along El Camino Real and Palomar Airport Road to inform drivers of the existence and location of the airport; Produce signs, stickers, etc., using VNAP logo and prominently display and utilize as appropriate; Conduct biannual VNAP training classes and Implement the recently adopted “Fly Friendly Program.” FAA disapproved the following Noise Abatement measures: When traffic volume permits, CRQ ATCT should instruct pilots to delay the left turn from Runway 24 until aircraft is west of I-5. This measure would adversely impact the efficiency of navigable airspace at CRQ, further deviation from protected routes would place IFR aircraft at risk. Work with FAA to develop a GPS/RNAV departure procedure to emulate the “Alpha Departure” VNAP. This measure was disapproved pending submission of additional information to make an informed decision. The NCP did not quantify this measure's noise reduction benefits. FAA took no action on the following Noise Abatement Measure: Consider joining Sound Initiative, A Coalition for Quieter Skies. FAA action on this measure would conflict with anti-lobbying restrictions on Federal agencies. FAA disapproved the following Program Management Measures: Upgrade GEMS software to ANOMS8 and upgrade computer hardware as necessary to support operations of ANOMS8. If eligible for AIP funding, hardware should be upgraded at existing NMTs and two additional NMTs should be installed at CRQ. This measure was disapproved for the purposes of part 150 with respect to Airport Improvement Program funding. Section 189 of Public Law 108-176, Vision 100-Century of Reauthorization Act of 2003 specifically prohibits FAA approval of part 150 program measures that require AIP funding to mitigate aircraft noise outside of DNL
(CNEL)65 through Fiscally Year 2007; When Feasible, CRQ ATCT should encourage the use of the VNAP. This measure was disapproved because implementation of this measure by the ATCT would adversely affect air traffic workload and efficiency; Conduct the recommended workload study. This measure was disapproved because it is outside of the scope of 14 CFR part 150. These determinations are set forth, in detail, in the Record of Approval signed by the Manager of the Airports Division, Western-Pacific Region, on December 5, 2006. The Record of Approval, as well as other evaluation materials and the documents comprising the submittal, are available for review at the FAA office listed above and at the administrative offices of the San Diego County Public Works Department. The Record of Approval will be available on-line at: *http://www.faa.gov/airports_airtraffic/airports/environmental/airport_noise/part_150/states/.* Issued in Hawthorne, California on December 11, 2006. Mark A. McClardy, Manager, Airports Division, Western-Pacific Region, AWP-600. [FR Doc. 06-9740 Filed 12-15-06; 8:45 am]
Connectionstraces to 16
Traces to 16 documents
CFR
- Radiological criteria for unrestricted use.§ 20.1402
- Expiration and termination of licenses and decommissioning of sites and separate buildings or outdoor areas.§ 30.36
- Notice for public comment; State consultation.§ 50.91
- Technical specifications.§ 50.36
- Criterion for categorical exclusion; identification of licensing and regulatory actions eligible for categorical exclusion or otherwise not requiring environmental review.§ 51.22
- Changes, tests, and experiments.§ 50.59
- Delegation of authority to Director of Division of Trading and Markets.§ 200.30-3
- Definitions.§ 220.2
- Authority, purpose, and scope.§ 220.1
- Where to submit a FOIA request.§ 402.35
U.S. Code
- Registration, responsibilities, and oversight of self-regulatory organizations§ 78s
- National securities exchanges§ 78f
- Definitions and application§ 78c
- Public information; agency rules, opinions, orders, records, and proceedings§ 552
- Registered securities associations§ 78o–3
- Noise compatibility programs§ 47504
12 references not yet in our index
- 5 CFR 1320.10
- 10 CFR 51
- 10 CFR 20
- 5 CFR 6.6
- Pub. L. 107-204
- 17 CFR 240.19
- 17 CFR 240.15
- 485 U.S. 74
- Pub. L. 108-203
- Pub. L. 96-193
- 14 CFR 150
- Pub. L. 108-176
Citation graph
cites case law
Notices
Notice of intent to prepare an RMP/EIS and notice of public meetings
SCOTUS485 U.S. 74
Cite5 CFR 1320.10
Cite10 CFR 51
Cites 28 · showing 12Cited by 0 across 0 sources