This section of the FEDERAL REGISTER

contains notices to the public of the proposed

issuance of rules and regulations. The

purpose of these notices is to give interested

persons an opportunity to participate in the

rule making prior to the adoption of the final

rules.

Proposed Rules Federal Register

79982 

Vol. 75, No. 244 

Tuesday, December 21, 2010 

1Section 803(6)(B) of the DFA excludes certain 

entities from the definition of a financial market 

utility, including designated contract markets and 

national securities exchanges. 

2The voting members consist of the Secretary of 

the Treasury who also is the Chairperson of the 

Council, the Chairman of the Board of Governors of 

the Federal Reserve System, the Comptroller of the 

Currency, the Director of the Bureau of Consumer 

Financial Protection, the Chairman of the Securities 

and Exchange Commission, the Chairperson of the 

Federal Deposit Insurance Corporation, the 

Chairperson of the Commodity Futures Trading 

Commission, the Director of the Federal Housing 

Finance Agency, the Chairman of the National 

Credit Union Administration Board, and an 

independent member having insurance expertise 

appointed by the President with the advice and 

consent of the Senate. The nonvoting members are 

the Director of the Office of Financial Research; the 

Director of the Federal Insurance Office; and a State 

insurance commissioner, a State banking 

supervisor, and a State securities commissioner (or 

an officer performing like functions), each 

designated by a selection process determined by 

their respective state supervisors or commissioners. 

FINANCIAL STABILITY OVERSIGHT 

COUNCIL 

12 CFR Chapter XIII 

Authority To Designate Financial 

Market Utilities as Systemically 

Important 

AGENCY: Financial Stability Oversight 

Council. 

ACTION: Advance notice of proposed 

rulemaking. 

SUMMARY: The Dodd-Frank Wall Street 

Reform and Consumer Protection Act 

(the ‘‘DFA’’) gives the Financial Stability 

Oversight Council (the ‘‘Council’’) the 

authority to identify and designate as 

systemically important a financial 

market utility if the Council determines 

that the failure, or a disruption to the 

functioning, of a financial market utility 

could create or increase the risk of 

significant liquidity or credit problems 

spreading among financial institutions 

or markets and thereby threaten the 

stability of the financial system of the 

United States. The DFA generally 

defines a ‘‘financial market utility’’ as 

any person that manages or operates a 

multilateral system for the purpose of 

transferring, clearing, or settling 

payments, securities, or other financial 

transactions among financial 

institutions or between financial 

institutions and that person.1 The 

utility-like arrangements used to settle 

financial transactions, whether 

involving payments, securities, 

derivatives, or other similar financial 

instruments, are critical parts of the 

financial infrastructure for the economy 

and are integral to the soundness of the 

financial system and overall economic 

performance. The importance of these 

arrangements has been highlighted by 

the recent period of market stress. This 

advance notice of proposed rulemaking 

(ANPR) invites public comment on the 

criteria and analytical framework that 

should be applied by the Council in 

designating financial market utilities 

under the DFA. 

DATES: Comments must be received by 

January 20, 2011. 

ADDRESSES: Interested persons are 

invited to submit comments regarding 

this advance notice of proposed 

rulemaking according to the instructions 

for ‘‘Electronic Submission of 

Comments’’ below. All submissions 

must refer to the document title. The 

FSOC encourages the early submission 

of comments. 

Electronic Submission of Comments. 

Interested persons must submit 

comments electronically through the 

Federal eRulemaking Portal at http:// 

www.regulations.gov. Electronic 

submission of comments allows the 

commenter maximum time to prepare 

and submit a comment, ensures timely 

receipt, and enables the FSOC to make 

them available to the public. Comments 

submitted electronically through the 

http://www.regulations.gov Web site can 

be viewed by other commenters and 

interested members of the public. 

Commenters should follow the 

instructions provided on that site to 

submit comments electronically. 

Note: To receive consideration as public 

comments, comments must be submitted 

through the method specified above. 

Public Inspection of Public 

Comments. All properly submitted 

comments will be available for 

inspection and downloading at http:// 

www.regulations.gov. 

Additional Instructions. Please note 

the number of the question to which 

you are responding at the top of each 

response. Though the responses will be 

screened for obscenities and 

appropriateness, in general comments 

received, including attachments and 

other supporting materials, are part of 

the public record and are immediately 

available to the public. Do not enclose 

any information in your comment or 

supporting materials that you consider 

confidential or inappropriate for public 

disclosure. 

FOR FURTHER INFORMATION CONTACT: 

Office of Domestic Finance, Treasury, at 

(202) 622–1703. 

SUPPLEMENTARY INFORMATION: Sections 

112(a)(2)(J) and 804(a) of the DoddFrank Wall Street Reform and Consumer 

Protection Act (the ‘‘DFA’’) give the 

Financial Stability Oversight Council 

(the ‘‘Council’’) the authority to identify 

and designate as systemically important 

a financial market utility if the Council 

determines that the failure, or a 

disruption to the functioning, of a 

financial market utility could create or 

increase the risk of significant liquidity 

or credit problems spreading among 

financial institutions or markets and 

thereby threaten the stability of the 

financial system of the United States. 

I. Background 

The Council, which was established 

by section 111 of the DFA, has ten 

voting members and 5 nonvoting 

members.2 It has several duties, 

including monitoring the financial 

services marketplace to identify 

potential threats to the financial 

stability of the United States and 

identifying those financial market 

utilities that should be designated by 

the Council as systemically important 

and subject to enhanced examination, 

supervision, enforcement and reporting 

standards and requirements. 

Financial market utilities exist in a 

number of markets and provide many 

benefits, but also concentrate risk. The 

payment and settlement processes of 

such systems are also highly 

interdependent, either directly through 

operational, contractual or affiliation 

linkages, or indirectly through liquidity 

flows or common participants. Problems 

in the completion of settlement at one 

system could spill over to other systems 

or financial institutions in the form of 

liquidity and credit disruptions. 

Through this ANPR the Council is 

seeking to gather information as it 

begins to develop the specific criteria 

and analytical framework by which it 


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Federal Register / Vol. 75, No. 244 / Tuesday, December 21, 2010 / Proposed Rules 79983 

3As defined in Section 803(6) of the DFA. 

4As defined in Section 803(9) of the DFA. 

5As defined in Section 803(7) of the DFA. 

6The Council may waive or modify the advance 

notice and hearing requirements if the Council 

determines it is necessary to prevent or mitigate an 

immediate threat to the financial system posed by 

the FMU. DFA § 804(c)(3). 

7As defined in Section 803(8) of the DFA. 

will designate financial market utilities 3

as systemically important 4 under Title 

VIII of the DFA. This ANPR does not 

address the designation criteria and 

analytical framework for payment, 

clearing, or settlement activities carried 

out by financial institutions 5, which the 

Council is considering separately. 

a. Considerations in Making a 

Determination 

Under section 804(a)(2) of the DFA, in 

making a determination on whether the 

financial market utility should be 

designated as systemically important, 

the Council must consider: 

(A) The aggregate monetary value of 

transactions processed by the financial 

market utility; 

(B) The aggregate exposure of the 

financial market utility to its 

counterparties; 

(C) The relationship, 

interdependencies, or other interactions 

of the financial market utility with other 

financial market utilities or payment, 

clearing or settlement activities; 

(D) The effect that the failure of or a 

disruption to the financial market utility 

would have on critical markets, 

financial institutions, or the broader 

financial system; and 

(E) Any other factors that the Council 

deems appropriate. 

b. Process for Making a Determination 

Under the provisions of the DFA, the 

Council generally must provide a 

financial market utility with advance 

notice that it proposes to make a 

determination, and the financial market 

utility has up to 30 days to request a 

hearing.6 The Council must schedule 

the hearing within 30 days of receipt of 

the request. After holding a hearing, the 

Council has up to 60 days to make a 

final determination. If a financial market 

utility does not make a timely request 

for a hearing, the Council must notify 

the firm of its final determination 

within 30 days of the expiration of the 

30-day period in which a hearing could 

have been requested. In making a 

determination, the Council must consult 

with the relevant supervisory agency for 

the financial market utility 7 and the 

Board of Governors of the Federal 

Reserve System. Once designated, the 

Council can rescind a designation. The 

Council is not requesting comment on 

these procedural requirements in this 

ANPR. 

II. Criteria for Designation 

1. What quantitative and qualitative 

information should the Council use to 

measure the factors it is required to 

consider in Section 804(a)(2) when 

making determinations under Section 

804 of the DFA? How should 

quantitative and qualitative 

considerations be incorporated into the 

determination process? 

2. Can the considerations listed in 

section 804(a)(2) be broken down into 

easily measured factors that the Council 

should use to determine whether 

financial market utilities are 

systemically important? Are there 

certain levels of quantitative measures 

(e.g., for value and exposure) or 

qualitative characteristics (e.g., 

registered clearing agencies versus 

exempt clearing agencies) that should 

trigger a review for systemic importance 

by the Council? 

3. Which of the considerations listed 

in section 804(a)(2) are most important 

for the Council to consider? Should the 

application of the considerations differ 

depending on the type of FMU, and if 

so how? 

4. How should the Council measure 

and assess the aggregate monetary value 

of transactions processed by financial 

market utilities? 

a. For each type of financial market 

utility (e.g., central counterparty, funds 

transfer system), what is the best 

approach for measuring value (e.g., 

notional values, margin flows, net 

versus gross values)? 

b. What time horizon/statistics should 

be used when assessing value (e.g., 

daily, monthly or annual averages; 

daily, monthly, or annual peaks?). 

Should the Council consider historical 

values, projected future values, or both? 

c. Should different measures be 

applied to different types of financial 

market utilities based on their activities, 

products, or markets? 

d. What is the best approach for 

measuring potential aggregate monetary 

values for start-up financial market 

utilities? 

e. Should certain payment systems 

that transfer relatively low aggregate 

values be considered by the Council for 

designation as systemically important 

given that the system’s failure or 

disruption could still cause widespread 

disruption, especially if there is no 

ready alternative means of making 

payments? For example, the failure or 

disruption of a system used extensively 

to make payments could leave a 

significant portion of the general public 

with unexpected overdrafts and/or lack 

of liquid funds. If so, what factors 

should the Council consider in making 

a determination of systemic importance 

for such systems? 

5. How should the Council measure 

and assess the aggregate exposure of 

financial market utilities engaged in 

payment, clearing, or settlement 

activities to its counterparties? 

a. How should the Council identify 

the extent to which financial market 

utilities bear and create risk exposures 

for themselves and their participants? 

b. What measures of exposure should 

be considered (e.g., liquidity exposures, 

current and potential future 

counterparty credit exposures, 

operational risk, the degree of 

concentration of exposures across 

participants)? 

c. For each type of financial market 

utility (e.g., central counterparty, funds 

transfer system), what is the best 

approach for measuring current credit 

exposure or, where relevant, potential 

future exposures? For liquidity 

(funding), how might the Council assess 

the potential liquidity risks that a 

financial market utility may bear or 

liquidity risks it may impose on the 

broader financial system should it fail to 

settle as expected? 

6. How should the Council identify, 

measure, and assess the effects of 

relationships, interdependencies, and 

other interactions of financial market 

utilities listed as considerations in 

section 804(a)(2)? 

a. What role should models of 

interdependencies (e.g., correlations; 

stress tests) play in the Council’s 

determinations? 

b. What role should the nature of 

participants or counterparties play in 

the Council’s determinations (e.g., 

common participants across utilities, 

systemic importance of participants)? 

c. Should the Council consider the 

legal, corporate, or contractual 

relationships of financial market 

utilities in assessing relationships, 

interdependencies, and other 

interactions (e.g., common holding 

company, joint ventures, crossmargining agreements, service provider 

relationships)? 

d. Should the Council consider 

whether there are readily available 

substitutes for the payment, clearing, 

and settlement services of financial 

market utilities? 

7. How should the Council assess 

whether failures or disruptions to a 

financial market utility could 

potentially threaten the financial system 

of the United States? 

a. What measures, information and 

thresholds should be used in assessing 

the effect of a financial market utility 


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79984 Federal Register / Vol. 75, No. 244 / Tuesday, December 21, 2010 / Proposed Rules 

failure or disruption on critical markets 

and financial institutions? For example, 

how might the Council assess potential 

credit and liquidity effects and 

spillovers from a financial market utility 

disruption? 

b. What factors should the Council 

consider when determining whether 

markets served by financial market 

utilities are critical? What qualitative or 

quantitative characteristics might lead 

the Council to scope in or out particular 

markets? 

8. Title VIII of the DFA contains 

distinct provisions with respect to 

financial market utilities and financial 

institutions engaged in payment, 

clearing and settlement activities. What 

factors should the Council consider in 

distinguishing between a systemically 

important financial market utility and a 

financial institution that is very 

substantially engaged in a systemically 

important payment, clearing, or 

settlement activity? 

9. What other types of information 

would be effective in helping the 

Council determine systemic 

importance? What additional factors 

does your organization consider when 

assessing exposure to, or the 

interconnectedness of, financial market 

utilities? 

10. What role should international 

considerations play in designating 

financial market utilities? 

Dated: December 14, 2010. 

Alastair Fitzpayne, 

Deputy Chief of Staff and Executive Secretary, 

Department of the Treasury. 

Statement of CFTC Chairman Gary 

Gensler 

I support the advanced notice of 

proposed rulemaking on the Authority 

to Designate Financial Market Utilities 

as Systematically Important. It is an 

important step in fulfilling the 

requirements of the Dodd-Frank Act to 

ensure that there is robust oversight and 

risk management of financial market 

utilities including clearinghouses. 

Clearinghouses in the futures markets 

have been around since the late-19th 

Century and have functioned both in 

clear skies and during stormy times— 

through the Great Depression, numerous 

bank failures, two world wars and the 

2008 financial crisis—to lower risk to 

the American public. By standing 

between two counterparties, by valuing 

transactions daily, requiring collateral, 

and rigorous risk management 

standards, clearinghouses help ensure 

that the failure of one entity does not 

harm its counterparties and reverberate 

throughout the financial system. 

Comprehensive and robust regulatory 

oversight of clearinghouses, however, is 

essential to our country’s financial 

stability. This is particularly important 

since, under the Dodd-Frank Wall Street 

Reform and Consumer Protection Act, 

standardized swaps between financial 

entities must be brought to 

clearinghouses. 

The Commodity Futures Trading 

Commission (CFTC) has overseen 

clearinghouses for decades. Currently, it 

oversees 14 clearinghouses and that 

number is expected to increase to 

approximately 20. The Dodd-Frank Act 

provides for enhanced oversight of these 

clearinghouses. In close consultation 

with the Securities and Exchange 

Commission, the Federal Reserve Board, 

other financial regulatory agencies, and 

international regulators, the CFTC is 

currently working to implement a series 

of rulemakings on risk management for 

clearinghouses. These rulemakings will 

take account of relevant international 

standards, particular those developed by 

the Committee on Payment and 

Settlement Systems and the 

International Organization of Securities 

Commissions (CPSS–IOSCO). In some 

instances, these rules also outline 

specific additional requirements for 

systemically important clearinghouses. 

The Dodd-Frank Act gives the 

Financial Stability Oversight Council 

and the Federal Reserve Board 

important roles in clearinghouse 

oversight by authorizing the Council to 

designate certain clearinghouses as 

systemically important and by 

permitting the Federal Reserve to 

recommend heightened prudential 

standards in certain circumstances. 

The advanced notice of proposed 

rulemaking being considered by this 

Council today complements the CFTC’s 

rulemaking efforts. It seeks the public’s 

input on how the Council should apply 

statutory criteria to determine which 

clearinghouses qualify for designation 

as systemically important. 

At the CFTC, we plan on completing 

the rulemaking with regard to 

clearinghouses by the statutory deadline 

of July 15, 2011. Although the effective 

dates of these rules will generally be 

later in 2011, it is my recommendation 

that we as a Council be in position to 

identify systemically important 

clearinghouses by the summer of next 

year. This will provide clarity to 

clearinghouses and market participants 

as to the standards that they will have 

to uphold when the mandatory clearing 

of standardized swaps becomes 

effective. 

[FR Doc. 2010–32005 Filed 12–20–10; 8:45 am] 

BILLING CODE 4810–25–P 

DEPARTMENT OF TRANSPORTATION 

Federal Aviation Administration 

14 CFR Part 39 

[Docket No. FAA–2010–1200; Directorate 

Identifier 2010–NM–136–AD] 

RIN 2120–AA64 

Airworthiness Directives; Bombardier, 

Inc. Model BD–100–1A10 (Challenger 

300) Airplanes 

AGENCY: Federal Aviation 

Administration (FAA), DOT. 

ACTION: Notice of proposed rulemaking 

(NPRM). 

SUMMARY: We propose to adopt a new 

airworthiness directive (AD) for the 

products listed above that would 

supersede an existing AD. This 

proposed AD results from mandatory 

continuing airworthiness information 

(MCAI) originated by an aviation 

authority of another country to identify 

and correct an unsafe condition on an 

aviation product. The MCAI describes 

the unsafe condition as: 

Investigation of a recent high altitude loss 

of cabin pressurization on a BD–100–1A10 

aircraft determined that it was caused by a 

partial blockage of a safety valve cabin 

pressure-sensing port, in conjunction with a 

dormant failure/leakage of the safety valve 

manometric capsule. The blockage, caused by 

accumulation of lint/dust on the grid of the 

port plug, did not allow sufficient airflow 

through the cabin pressure-sensing port to 

compensate for the rate of leakage from the 

manometric capsule, resulting in the opening 

of the safety valve. It was also determined 

that failure of the manometric capsule alone 

would not result in the opening of the safety 

valve. 

* * * * * 

The unsafe condition is possible loss of 

cabin pressure caused by the opening of 

the safety valve. The proposed AD 

would require actions that are intended 

to address the unsafe condition 

described in the MCAI. 

DATES: We must receive comments on 

this proposed AD by February 4, 2011. 

ADDRESSES: You may send comments by 

any of the following methods: 

• Federal eRulemaking Portal: Go to 

http://www.regulations.gov. Follow the 

instructions for submitting comments. 

• Fax: (202) 493–2251. 

• Mail: U.S. Department of 

Transportation, Docket Operations, 

M–30, West Building Ground Floor, 

Room W12–140, 1200 New Jersey 

Avenue, SE., Washington, DC 20590. 

• Hand Delivery: U.S. Department of 

Transportation, Docket Operations, 

M–30, West Building Ground Floor, 

Room W12–40, 1200 New Jersey 


jlentini on DSKJ8SOYB1PROD with PROPOSALS