Federal Register / Vol. 72, No. 92 / Monday, May 14, 2007 / Notices 27091 

1 7 U.S.C. 1 et seq. 

2 7 U.S.C. 6(c). 

3 15 U.S.C. 78q–l. 

4 15 U.S.C. 78f. 

5See Release No. 34–55251, 72 FR 7091 (Feb. 14, 

2007). 

6See SR–CBOE–2007–026. 

7 7 U.S.C. 7a–2(c), 17 CFR 39.4(a), 40.5. 

and analysis of potential impacts on 

marine mammal. 

NMFS was a cooperating agency (as 

defined by the Council on 

Environmental Quality (40 CFR 1501.6)) 

in the preparation of the Draft and Final 

EISs. NMFS has reviewed the Final EIS 

and has adopted it. Therefore, the 

preparation of another EIS or EA is not 

warranted. 

Determinations 

NMFS has determined that the impact 

of construction and operation of the 

Northeast Gateway Port Project may 

result, at worst, in a temporary 

modification in behavior of small 

numbers of certain species of marine 

mammals that may be in close 

proximity to the Northeast Gateway 

LNG facility and associated pipeline 

during its construction and subsequent 

operation. These activities are expected 

to result in some local short-term 

displacement and will have no more 

than a negligible impact on the affected 

species or stocks of marine mammals. 

This determination is supported by 

measures described in this document 

under ‘‘Marine Mammal Mitigation, 

Monitoring and Reporting’’ and NMFS’

Biological Opinion on this action. 

As a result of the described mitigation 

measures, no take by injury or death is 

requested, anticipated or authorized, 

and the potential for temporary or 

permanent hearing impairment is very 

unlikely due to the relatively low noise 

levels (and consequently small zone of 

impact) and would be avoided through 

the incorporation of the shut-down 

mitigation measures described in this 

document. 

While the number of marine 

mammals that may be harassed will 

depend on the distribution and 

abundance of marine mammals in the 

vicinity of the port construction and 

operations, the estimated number of 

marine mammals to be harassed is 

small. 

Authorization 

NMFS has issued an IHA to Northeast 

Gateway and Algonquin for the taking 

(by Level B harassment) during 

construction and operation of the 

Northeast Gateway Port, provided the 

previously mentioned mitigation, 

monitoring, and reporting requirements 

are incorporated. 

Dated: May 7, 2007. 

James H. Lecky 

Director, Office of Protected Resources, 

National Marine Fisheries Service. 

[FR Doc. E7–9216 Filed 5–11–07; 8:45 am] 

BILLING CODE 3510–22–S 

COMMODITY FUTURES TRADING 

COMMISSION 

Proposal To Exempt the Trading and 

Clearing of Certain Credit Default 

Products Traded on the Chicago Board 

Options Exchange and Cleared 

Through the Options Clearing 

Corporation Pursuant to the Exemptive 

Authority in § 4(c) of the Commodity 

Exchange Act 

AGENCY: Commodity Futures Trading 

Commission. 

ACTION: Notice of proposed order and 

request for comment. 

SUMMARY: The Commodity Futures 

Trading Commission (‘‘CFTC’’ or the 

‘‘Commission’’) is proposing to exempt 

the trading and clearing of certain credit 

default products that are proposed to be 

traded on the Chicago Board Options 

Exchange (‘‘CBOE’’) and cleared through 

the Options Clearing Corporation 

(‘‘OCC’’) from any applicable provisions 

of the Commodity Exchange Act 

(‘‘CEA’’).1 Authority for this exemption 

is found in Section 4(c) of the CEA.2

DATES: Comments must be received on 

or before May 29, 2007. 

ADDRESSES: Comments may be 

submitted by any of the following 

methods: 

• Federal eRulemaking Portal: http:// 

www.regulations.gov/http:// 

frwebgate.access.gpo/cgi-bin/leaving. 

Follow the instructions for submitting 

comments. 

• E-mail: secretary@cftc.gov. Include 

‘‘OCC Clearing Credit Default Options’’

in the subject line of the message. 

• Fax: 202–418–5521. 

• Mail: Send to Eileen A. Donovan, 

Acting Secretary, Commodity Futures 

Trading Commission, Three Lafayette 

Centre, 1155 21st Street, NW., 

Washington, DC 20581. 

• Courier: Same as mail above. 

All comments received will be posted 

without change to http:// 

www.CFTC.gov/. 

FOR FURTHER INFORMATION CONTACT: John 

C. Lawton, Deputy Director and Chief 

Counsel, 202–418–5480, 

jlawton@cftc.gov, and Robert B. 

Wasserman, Associate Director, 202–

418–5092, rwasserman@cftc.gov, 

Division of Clearing and Intermediary 

Oversight, Commodity Futures Trading 

Commission, Three Lafayette Centre, 

1151 21st Street, NW., Washington, DC 

20581. 

SUPPLEMENTARY INFORMATION: 

I. Introduction 

The OCC is both a Derivatives 

Clearing Organization (‘‘DCO’’) 

registered pursuant to Section 5b of the 

CEA, 7 U.S.C. 7a–1, and a securities 

clearing agency registered pursuant to 

Section 17A of the Securities Exchange 

Act of 1934 (‘‘1934 Act’’).3 The CBOE is 

a national securities exchange registered 

as such under Section 6 of the 1934 

Act.4

CBOE has filed with the Securities 

and Exchange Commission (‘‘SEC’’) 

proposed rule changes to provide for the 

listing and trading on CBOE of cashsettled, binary call options based on 

credit events in one or more debt 

securities.5 These options are referred to 

as Credit Default Options (‘‘CDOs’’), and 

would pay the holder a specified 

amount upon the occurrence, as 

determined by CBOE, of a ‘‘Credit 

Event,’’ defined to mean an ‘‘Event of 

Default’’ on any debt security issued or 

guaranteed by a specified ‘‘Reference 

Entity.’’

CBOE has also filed with the SEC 

proposed rule changes to provide for the 

listing and trading on CBOE of Credit 

Default Basket Options (‘‘CDBOs’’).6

These are similar in concept to CDOs, 

except that a CDBO covers more than 

one Reference Entity, and for each 

Basket Component (that is, a single 

Reference Entity) a notional value (a 

fraction of the aggregate Notional Face 

Value of the basket) and a recovery rate 

is specified. Upon the occurrence of a 

Credit Event involving a particular 

Reference Entity, the payout to the 

holder is equal to the product of (a) The 

Notional Face Value of that Basket 

Component multiplied by (b) one minus 

the recovery rate specified in advance 

for that Basket Component. CDBOs may 

be of the multiple-payout variety, or of 

the single-payout variety, where a 

payout occurs only the first time a 

Credit Event is confirmed with respect 

to a Reference Entity prior to expiration. 

OCC has filed with the CFTC, 

pursuant to Section 5c(c) of the CEA 

and Commission Regulations 39.4(a) 

and 40.5 thereunder,7 requests for 

approval of rules and rule amendments 

that would enable OCC to clear and 

settle these CDOs and CDBOs in its 

capacity as a registered securities 

clearing agency (and not in its capacity 


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27092 Federal Register / Vol. 72, No. 92 / Monday, May 14, 2007 / Notices 

8See SR–OCC–2007–01 A–1; SR–OCC–2007–06. 

OCC has filed identical proposed rule changes with 

the SEC. 

9Section 4(c)(1) of the CEA, 7 U.S.C. 6(c)(1), 

provides that: 

In order to promote responsible economic or 

financial innovation and fair competition, the 

Commission by rule, regulation, or order, after 

notice and opportunity for hearing, may (on its own 

initiative or on application of any person, including 

any board of trade designated or registered as a 

contract market or derivatives transaction execution 

facility for transactions for future delivery in any 

commodity under section 7 of this title) exempt any 

agreement, contract, or transaction (or class thereof) 

that is otherwise subject to subsection (a) of this 

section (including any person or class of persons 

offering, entering into, rendering advice or 

rendering other services with respect to, the 

agreement, contract, or transaction), either 

unconditionally or on stated terms or conditions or 

for stated periods and either retroactively or 

prospectively, or both, from any of the requirements 

of subsection (a) of this section, or from any other 

provision of this chapter (except subparagraphs 

(c)(ii) and (D) of section 2(a)(1) of this title, except 

that the Commission and the Securities and 

Exchange Commission may by rule, regulation, or 

order jointly exclude any agreement, contract, or 

transaction from section 2(a)(1)(D) of this title), if 

the Commission determines that the exemption 

would be consistent with the public interest. 

10HOUSE CONF. REPORT NO. 102–978, 1992 

U.S.C.C.A.N. 3179, 3213 (‘‘4(c) Conf. Report’’). 

11 4(c) Conf. Report at 3214–3215. 

12Section 4(c)(2) of the CEA, 7 U.S.C. § 6(c)(2), 

provides that: 

The Commission shall not grant any exemption 

under paragraph (1) from any of the requirements 

of subsection (a) of this section unless the 

Commission determines that—

(A) The requirement should not be applied to the 

agreement, contract, or transaction for which the 

exemption is sought and that the exemption would 

be consistent with the public interest and the 

purposes of this Act; and 

(B) The agreement, contract, or transaction—

(i) Will be entered into solely between 

appropriate persons; and 

(ii) Will not have a material adverse effect on the 

ability of the Commission or any contract market or 

derivatives transaction execution facility to 

discharge its regulatory or self-regulatory duties 

under this Act. 

13CEA § 3(b), 7 U.S.C. 5(b). See also CEA § 4(c)(1), 

7 U.S.C. 6(c)(1) (purpose of exemptions is ‘‘to 

promote responsible economic or financial 

innovation and fair competition.’’) 

as a DCO).8 Section 5c(c)(3) provides 

that the CFTC must approve any such 

rules and rule amendments submitted 

for approval unless it finds that the 

rules or rule amendments would violate 

the CEA. 

The request for approval concerning 

the CDO product was filed effective 

March 8, 2007. On April 23, 2007, the 

review period was extended pursuant to 

Regulation 40.5(c) until June 6, 2007, on 

the ground that the CDOs ‘‘raise novel 

or complex issues, including the nature 

of the contract, that require additional 

time for review.’’ The request for 

approval concerning the CDBO product 

was filed effective April 23, 2007, and 

absent an extension the review period is 

scheduled to run until June 7, 2007. 

II. Section 4(c) of the Commodity 

Exchange Act 

Section 4(c)(1) of the CEA empowers 

the CFTC to ‘‘promote responsible 

economic or financial innovation and 

fair competition’’ by exempting any 

transaction or class of transactions from 

any of the provisions of the CEA 

(subject to exceptions not relevant here) 

where the Commission determines that 

the exemption would be consistent with 

the public interest.9 The Commission 

may grant such an exemption by rule, 

regulation or order, after notice and 

opportunity for hearing, and may do so 

on application of any person or on its 

own initiative. 

In enacting Section 4(c), Congress 

noted that the goal of the provision ‘‘is 

to give the Commission a means of 

providing certainty and stability to 

existing and emerging markets so that 

financial innovation and market 

development can proceed in an effective 

and competitive manner.’’ 10 Permitting 

the CDOs and CDBOs to trade on CBOE 

and be cleared on OCC as discussed 

above may foster both financial 

innovation and competition. The CFTC 

believes that the venue or venues for 

trading and clearing of instruments such 

as CDOs and CDBOs should be 

determined by the competitive forces of 

the market, particularly where any 

potential venue would be subject to 

federal regulatory oversight. The CFTC 

is requesting comment on whether it 

should exempt CDOs and CDBOs, as 

described above, that are traded on 

CBOE and cleared through OCC, from 

any provision of the CEA that might be 

transgressed by trading and clearing 

those transactions as described above. 

In proposing this exemption, the 

CFTC need not—and does not—find 

that the CDOs and CDBOs are (or are 

not) subject to the CEA. During the 

legislative process leading to the 

enactment of Section 4(c) of the CEA, 

the House-Senate Conference 

Committee noted that: 

The Conferees do not intend that the 

exercise of exemptive authority by the 

Commission would require any 

determination beforehand that the agreement, 

instrument, or transaction for which an 

exemption is sought is subject to the Act. 

Rather, this provision provides flexibility for 

the Commission to provide legal certainty to 

novel instruments where the determination 

as to jurisdiction is not straightforward. 

Rather than making a finding as to whether 

a product is or is not a futures contract, the 

Commission in appropriate cases may 

proceed directly to issuing an exemption.11

CDOs and CDBOs are ‘‘novel 

instruments’’ and the ‘‘determination as 

to [their] jurisdiction is not 

straightforward.’’ Given their potential 

usefulness to the significant market for 

credit derivatives products, however, 

the Commission believes that this may 

be an appropriate case for issuing an 

exemption without making a finding as 

to the nature of these particular 

instruments. 

Section 4(c)(2) provides that the 

Commission may grant exemptions only 

when it determines that the 

requirements for which an exemption is 

being provided should not be applied to 

the agreements, contracts or transactions 

at issue, and the exemption is consistent 

with the public interest and the 

purposes of the CEA; that the 

agreements, contracts or transactions 

will be entered into solely between 

appropriate persons; and that the 

exemption will not have a material 

adverse effect on the ability of the 

Commission or any contract market or 

derivatives transaction execution 

facility to discharge its regulatory or 

self-regulatory responsibilities under the 

CEA.12

The purposes of the CEA include 

‘‘promot[ing] responsible innovation 

and fair competition among boards of 

trade, other markets and market 

participants.’’ 13 It may be consistent 

with these and the other purposes of the 

CEA, and with the public interest, for 

the mode of trading of these 

transactions—whether it is to be 

through CFTC-regulated markets and 

clearing organizations or SEC-regulated 

markets and clearing organizations—to 

be determined by competitive market 

forces rather than by regulatory linedrawing. Accordingly, the CFTC is 

requesting comment as to whether an 

exemption from the requirements of the 

CEA should be granted in the context of 

these transactions. 

Section 4(c)(3) includes within the 

term ‘‘appropriate persons’’ a number of 

specified categories of persons, and also 

in subparagraph (K) thereof ‘‘such other 

persons that the Commission 

determines to be appropriate in light of 

* * * the applicability of appropriate 

regulatory protections.’’ Both CBOE and 

OCC, as well as their members who will 

intermediate these transactions, are 

subject to extensive and detailed 

regulation by the SEC under the 1934 

Act. The CFTC is requesting comment 

as to whether all persons trading CDOs 

and CDBOs traded on CBOE and cleared 

on OCC are appropriate persons. 

In light of the above, the Commission 

also is requesting comment as to 

whether this exemption will interfere 

with its ability to discharge its 

regulatory responsibilities under the 

CEA, including its ability to determine 

whether the listing of similar or 


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Federal Register / Vol. 72, No. 92 / Monday, May 14, 2007 / Notices 27093 

14 44 U.S.C. 3507(d). 

15 7 U.S.C. 19(a). 

identical products on a designated 

contract market or derivatives 

transaction execution facility would or 

would not violate the CEA, or with the 

self-regulatory duties of any contract 

market or derivatives transaction 

execution facility. 

III. Request for Comment 

The Commission requests comment 

on all aspects of the issues presented by 

this proposed order. 

IV. Related Matters 

A. Paperwork Reduction Act 

The Paperwork Reduction Act of 1995 

(‘‘PRA’’) 14 imposes certain 

requirements on federal agencies 

(including the Commission) in 

connection with their conducting or 

sponsoring any collection of 

information as defined by the PRA. The 

proposed exemptive order would not, if 

approved, require a new collection of 

information from any entities that 

would be subject to the proposed order. 

B. Cost-Benefit Analysis 

Section 15(a) of the CEA, as amended 

by Section 119 of the Commodity 

Futures Modernization Act of 2000 

(‘‘CFMA’’),15 requires the Commission 

to consider the costs and benefits of its 

action before issuing an order under the 

CEA. By its terms, Section 15(a) as 

amended does not require the 

Commission to quantify the costs and 

benefits of an order or to determine 

whether the benefits of the order 

outweigh its costs. Rather, Section 15(a) 

simply requires the Commission to 

‘‘consider the costs and benefits’’ of its 

action. 

Section 15(a) of the CEA further 

specifies that costs and benefits shall be 

evaluated in light of five broad areas of 

market and public concern: Protection 

of market participants and the public; 

efficiency, competitiveness, and 

financial integrity of futures markets; 

price discovery; sound risk management 

practices; and other public interest 

considerations. Accordingly, the 

Commission could in its discretion give 

greater weight to any one of the five 

enumerated areas and could in its 

discretion determine that, 

notwithstanding its costs, a particular 

order was necessary or appropriate to 

protect the public interest or to 

effectuate any of the provisions or to 

accomplish any of the purposes of the 

CEA. 

The proposed exemptive order may 

facilitate market competition. The 

Commission is considering the costs 

and benefits of this proposed order in 

light of the specific provisions of 

Section 15(a) of the CEA, as follows: 

1. Protection of market participants 

and the public. CBOE, OCC and their 

members who would intermediate CDOs 

and CDBOs are subject to extensive SEC 

oversight. 

2. Efficiency, competition, and 

financial integrity. The proposed 

exemption may enhance market 

efficiency and competition since it 

could encourage potential trading of 

CDOs and CDBOs on markets other than 

designated contract markets or 

derivative transaction execution 

facilities. Financial integrity will not be 

affected since the CDOs and CDBOs will 

be cleared by OCC, a DCO and SECregistered clearing agency, and 

intermediated by SEC-registered brokerdealers. 

3. Price discovery. Price discovery 

may be enhanced through market 

competition. 

4. Sound risk management practices. 

OCC has described appropriate riskmanagement practices that it will follow 

to margin CDOs and CDBOs. 

5. Other public interest 

considerations. The proposed 

exemption may encourage development 

of credit derivative products through 

market competition without 

unnecessary regulatory burden. 

After considering these factors, the 

Commission has determined to seek 

comment on the proposed order as 

discussed above. The Commission 

invites public comment on its 

application of the cost-benefit provision. 

* * * * * 

Issued in Washington, DC, on May 9, 2007 

by the Commission. 

Eileen A. Donovan, 

Acting Secretary of the Commission. 

[FR Doc. E7–9212 Filed 5–11–07; 8:45 am] 

BILLING CODE 6351–01–P 

DEPARTMENT OF DEFENSE 

DEPARTMENT OF ENERGY 

ENVIRONMENTAL PROTECTION 

AGENCY 

[Docket No. EPA–HQ–OAR–2006–0957] 

NUCLEAR REGULATORY 

COMMISSION 

Multi-Agency Radiation Survey and 

Assessment of Materials and 

Equipment Manual 

AGENCY: Department of Defense, 

Department of Energy, Environmental 

Protection Agency, and the Nuclear 

Regulatory Commission. 

ACTION: Notice of availability: 

Reopening of public comment period. 

SUMMARY: On January 16, 2007 (72 FR 

1708) the Department of Defense (DoD), 

Department of Energy (DOE), U.S. 

Environmental Protection Agency 

(EPA), and the U.S. Nuclear Regulatory 

Commission (NRC) announced for 

public comment the availability of a 

draft document, entitled the ‘‘MultiAgency Radiation Survey and 

Assessment of Materials and Equipment 

Manual’’ (MARSAME). A 90-day 

comment period was provided for the 

draft MARSAME that expired on April 

16, 2007. A request for an extension to 

the comment period has been received 

from several stakeholders. The comment 

period for the draft manual has been 

reopened for an additional 30 days. 

DATES: The comment period for the draft 

manual has been reopened and now 

expires on June 13, 2007. Comments 

received after that date will be 

considered if it is practical to do so, but 

no assurance can be given for 

consideration of late comments. 

ADDRESSES: Submit your comments by 

one of the methods: 

• www.regulations.gov: Follow the 

on-line instructions for submitting 

comments. 

• http://www.marsame.org: Follow 

the on-line instructions for submitting 

comments. 

• Mail: Air and Radiation Docket and 

Information Center, U.S. Environmental 

Protection Agency, Mail Code 6102T, 

1200 Pennsylvania Ave., NW., 

Washington, DC 20460 or Chief, 

Rulemaking, Directives and Editing 

Branch, Division of Administrative 

Services, U.S. Nuclear Regulatory 

Commission, Washington, DC 20555–

0001. 

• Hand Delivery: Air and Radiation 

Docket and Information Center, U.S. 

Environmental Protection Agency, EPA 

West Building, Room 3334, 1301 

Constitution Ave., NW., Washington, 

DC. Such deliveries are only accepted 

during the Docket’s normal hours of 

operation, and special arrangements 

must be made for deliveries of boxed 

information. 

Copies of all comments received by 

one agency will be periodically copied 

and sent to the others. Copies of the 

draft MARSAME and all comments 

received may be examined or copied for 

a fee electronically in 

www.regulations.gov, or in hard copy at 

the HQ EPA Docket Public Reading 

Room, U.S. Environmental Protection 

Agency, Room 3334, Docket ID No. 

EPA–HQ–OAR–2006–0957, 1301 

Constitution Ave., NW., Washington, 

DC 20460, and the NRC Public 


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