[Federal Register Volume 79, Number 46 (Monday, March 10, 2014)]
[Notices]
[Pages 13359-13364]
[FR Doc No: 2014-05071]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-71648; File No. SR-CBOE-2014-017]

Self-Regulatory Organizations; Chicago Board Options Exchange,
Incorporated; Notice of Filing of a Proposed Rule Change, as Modified
by Amendment 1, To Amend Its Rules Related to Complex Orders

March 5, 2014.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934
(the ``Act''),\1\ and Rule 19b-4 thereunder,\2\

notice is hereby given that on February 19, 2014, Chicago Board Options
Exchange, Incorporated (the ``Exchange'' or ``CBOE'') filed with the
Securities and Exchange Commission (the ``Commission'') the proposed
rule change as described in Items I, II, and III below, which Items
have been prepared by the Exchange. On March 3, 2014, the Exchange
filed Amendment No. 1 to the proposed rule change. The Commission is
publishing this notice to solicit comments on the proposed rule change
from interested persons.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
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I. Self-Regulatory Organization's Statement of the Terms of the
Substance of the Proposed Rule Change

    The Exchange proposes to amend its rules related to complex orders.
The text of the proposed rule change is provided below.
    (additions are italicized; deletions are [bracketed])

* * * * *

Chicago Board Options Exchange, Incorporated Rules

* * * * *

Rule 6.53C. Complex Orders on the Hybrid System

    (a) Definition: No change.
    (b) Types of Complex Orders: No change.
    (c) Complex Order Book
    No change.
    (d) Process for Complex Order RFR Auction: Prior to routing to
the COB or once on PAR, eligible complex orders may be subject to an
automated request for responses (``RFR'') auction process.
    (i) For purposes of paragraph (d):
    (1) ``COA'' is the automated complex order RFR auction process.
    (2) A ``COA-eligible order'' means a complex order that, as
determined by the Exchange on a class-by-class basis, is eligible
for a COA considering the order's marketability (defined as a number
of ticks away from the current market), size, complex order type (as
defined in paragraphs (a) and (b) above) and complex order origin
types (as defined in subparagraph (c)(i) above). Complex orders
processed through a COA may be executed without consideration to
prices of the same complex orders that might be available on other
exchanges.
    (ii) Initiation of a COA: On receipt of (1) a COA-eligible order
with two legs and request from the Trading Permit Holder
representing the order or the PAR operator handling the order, as
applicable, that it be COA'd or (2) a complex order with three or
more legs, regardless of the order's routing parameters or handling
instructions (except for orders routed for manual handling), the
[Exchange]System will send an RFR message to all Trading Permit
Holders who have elected to receive RFR messages. Notwithstanding
clause (2) of this subparagraph (ii), the System will reject back to
a Trading Permit Holder any complex order with three or more legs
that includes a request pursuant to Interpretation and Policy .04
that the order not COA. Any complex order with three or more legs on
PAR will COA even if the PAR operator requests that the order not
COA. The RFR message will identify the component series, the size
and side of the market of the COA-eligible order and any
contingencies, if applicable.
    (iii)-(ix) No change.
    . . . Interpretations and Policies:
    .01-.09 No change.
    .10 Execution of Complex Orders in Hybrid 3.0 Classes: For each
class trading on the Hybrid 3.0 Platform, the Exchange may determine
to not allow marketable complex orders entered into COB and/or COA
to automatically execute against individual quotes residing in the
EBook. The Exchange also may determine for each class trading on the
Hybrid 3.0 Platform to not allow leg orders to be generated pursuant
to paragraph (c)(iv) for complex orders resting in the COB. The
allocation of such marketable complex orders against orders residing
in the EBook and other complex orders shall be based on the best net
price(s) and, at the same net price, multiple orders will be
allocated as provided in paragraphs (c) and/or (d) in the Rule, as
applicable, subject to the following:
    (a)-(d) No change.
    (e) On receipt of any COA-eligible order, the Exchange will send
an RFR message to all Trading Permit Holders who have elected to
receive RFR messages. The RFR message will identify the component
series, the size and side of the market of the COA-eligible order
and any contingencies, if applicable.
    .11-.12 No change.
* * * * *
    The text of the proposed rule change is also available on the
Exchange's Web site (http://www.cboe.com/AboutCBOE/CBOELegalRegulatoryHome.aspx), at the Exchange'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 Exchange included statements
concerning the purpose of and basis for the proposed rule change and
discussed any comments it received on the proposed rule change. The
text of these statements may be examined at the places specified in
Item IV below. The Exchange has prepared summaries, set forth in
sections A, B, and C below, of the most significant aspects of such
statements.

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

1. Purpose
    Under Rule 8.18, CBOE offers Market-Makers that are obligated to
provide and maintain continuous electronic quotes in an option class
the Quote Risk Monitor Mechanism (``QRM''), which is functionality to
help Market-Makers manage their quotes and related risk. Market-Makers
with appointments in classes that trade on the Exchange's Hybrid
Trading System (the ``System'') \3\ must, among other things, provide
and maintain continuous electronic quotes in a specified percentage of
series in each class for a specified percentage of time.\4\ To comply
with this requirement, each Market-Maker may use its own proprietary
quotation and risk management system to determine the prices and sizes
at which it quotes. In addition, each Market-Maker may use QRM.
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    \3\ The System is a trading platform that allows automatic
executions to occur electronically and open outcry trades to occur
on the floor of the Exchange. To operate in this ``hybrid''
environment, the Exchange has a dynamic order handling system that
has the capability to route orders to the trade engine for automatic
execution and book entry, to Trading Permit Holder and PAR Official
workstations located in the trading crowds for manual handling, and/
or to other order management terminals generally located in booths
on the trading floor for manual handling. Where an order is routed
for processing by the Exchange order handling system depends on
various parameters configured by the Exchange and the order entry
firm itself.
    \4\ See Rules 8.7(d)(ii)(iv) (Market-Makers), 8.13(d) (Preferred
Market-Makers), 8.15A(b)(i) (Lead Market-Makers) and 8.85(a)(i)
(Designated Primary Market-Makers).
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    A Market-Maker's risk in a class is not limited to the risk in a
single series of that class. Rather, a Market-Maker is generally
actively quoting in multiple classes, and each class may comprise
hundreds or thousands of individual series. The System automatically
executes orders against a Market-Maker's quotes in accordance with the
Exchange's priority and allocation rules.\5\ As a result, a Market-
Maker has exposure and risk in all series in which it is quoting in
each of its appointed classes. QRM is an optional functionality that
helps Market-Makers, and TPH organizations with which a Market-Maker is
associated, limit this overall exposure and risk.
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    \5\ See Rules 6.45A, 6.45B and 6.53C.
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    Specifically, if a Market-Maker elects to use QRM, the System will
cancel a Market-Maker's quotes in all series in an appointed class if
certain parameters the Market-Maker establishes are triggered. Market-
Makers may set the following QRM parameters (Market-Makers may set
none, some or all of these parameters):
     a maximum number of contracts for that class (the
``contract limit'') and a specified rolling time period in seconds
within which such contract limit is to

be measured (the ``measurement interval'');
     a maximum cumulative percentage (which is the sum of the
percentages of the original quoted size of each side of each series
that trade) (the ``cumulative percentage limit'') that the Market-Maker
is willing to trade within a specified measurement interval; or
     a maximum number of series for which either side of the
quote is fully traded (the ``number of series fully traded'') within a
specified measurement interval.
    If the Exchange determines the Market-Maker has traded more than
the contract limit or cumulative percentage limit, or has traded at
least the number of series fully traded, of a class during the
specified measurement interval, the System will cancel all of the
Market-Maker's electronic quotes in that class (and any other cases
with the same underlying security) until the Market-Maker refreshes
those quotes (a ``QRM Incident''). A Market-Maker, or TPH organization
with which the Market-Maker is associated, may also specify a maximum
number of QRM Incidents that may occur on an Exchange-wide basis during
a specified measurement interval. If the Exchange determines that a
Market-Maker or TPH Organization, as applicable, has reached its QRM
Incident limit during the specified measurement interval, the System
will cancel all of the Market-Maker's or TPH Organization's quotes, as
applicable, and the Market-Maker's orders resting in the book in all
classes and prevent the Market-Maker and TPH organization from sending
additional quotes or orders to the Exchange until the earlier to occur
of (1) the Market-Maker or TPH organization reactivates this ability or
(2) the next trading day.
    The purpose of the QRM functionality is to allow Market-Makers to
provide liquidity across most series in their appointed classes without
being at risk of executing the full cumulative size of all their quotes
before being given adequate opportunity to adjust their quotes. For
example, if a Market-Maker can enter quotes with a size of 25 contracts
in 100 series of class ABC, its potential exposure is 2,500 contracts
in ABC. To mitigate the risk of having all 2,500 contracts in ABC
execute without the opportunity to evaluate its positions, the Market-
Maker may elect to use QRM. If the Market-Maker elects to use the
contract limit functionality and sets the contract limit at 100 and the
measurement interval at five seconds for ABC, the System will
automatically cancel the Market-Maker's quotes in all series of ABC if
100 or more contracts in series of ABC execute during any five-second
period.
    To assure that all quotations are firm for their full size, the
System performs the parameter calculations after an execution against a
Market-Maker's quote occurs. For example, using the same parameters in
class ABC as above, if a Market-Maker has executed a total of 95
contracts in ABC within the previous three seconds, a quote in a series
of ABC with a size of 25 contracts continues to be firm for all 25
contracts. An incoming order in that series could execute all 25
contracts of that quote, and, following the execution, the total size
parameter would add 25 contracts to the previous total of 95 for a
total of 120 contracts executed in ABC. Because the total size executed
within the previous five seconds now exceeds the 100 contract limit for
ABC, the System would, following the execution, immediately cancel all
of the Market-Maker's quotes in series of ABC. The Market-Maker would
then enter new quotes for series in ABC. Thus, QRM limits the amount by
which a Market-Maker's executions in a class may exceed its contract
limit to the largest size of its quote in a single series of the class
(or 25 in this example).
    The Exchange proposes to amend Rule 6.53C regarding complex orders
to limit a potential source of unintended Market-Maker risk related to
how the System calculates risk parameters under Rule 8.18 when complex
orders leg into the market.\6\ As discussed above, by checking the risk
parameters following each execution in a series, the risk parameters
allow a Market-Maker to provide liquidity across multiple series of a
class without being at risk of executing the full cumulative size of
all its quotes. This is not the case, however, when a complex order
legs into the regular market (i.e. the market for individual, or
simple, orders). Because the execution of each leg of a complex order
is contingent on the execution of the other legs, the execution of all
the legs in the regular market is processed as a single transaction,
not as a series of individual transactions.
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    \6\ Rule 6.53C(c)(ii)(1) provides that complex orders in the
complex order book (``COB'') may execute against individual orders
or quotes in the book provided the complex order can be executed in
full (or a permissible ratio) by the orders and quotes in the book.
Rule 6.53C(d)(v)(1) provides that orders that are eligible for the
complex order auction (``COA'') may trade with individual orders and
quotes in the book provided the COA-eligible order can be executed
in full (or a permissible ratio) by the orders and quotes in the
book. COA is an automated request for responses (``RFR'') auction
process. Upon initiation of a COA, the Exchange sends an RFR message
to all Trading Permit Holders who have elected to receive RFR
messages, which RFR message identifies the series, size and side of
the market of the COA-eligible order and any contingencies. Eligible
market participants may submit responses during a response time
interval. At the conclusion of the response time interval, COA-
eligible orders are allocated in accordance with Rule 6.53C(d)(v),
including against individual orders and quotes in the book.
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    For example, if market participants enter into the System
individual orders to buy 25 contracts for the Jan 30 call, Jan 35 call,
Jan 40 call and Jan 45 call in class ABC, the System processes each
order as it is received and calculates the Market-Makers parameters in
class ABC following the execution of each 25-contract call. However, if
a market participant enters into the System a complex order to buy all
four of these strikes in class ABC 25 times, which complex order
executes against bids and offers for the individual series (i.e. legs
into the market), the System will calculate the Market-Maker's
parameters in class ABC following the execution of all 100 contracts.
If the Market-Maker had set the same parameters in class ABC as
discussed above (100-contract limit with five-second measurement
interval) and had executed 95 contracts in class ABC within the
previous three seconds, the amount by which the next transaction might
exceed 100 is limited to the largest size of its quote in a single
series of the class. In that example, since the largest size of the
Market-Maker's quotes in any series was 25 contracts, the Market-Maker
could not have exceeded the 100-contract limit by more than 20
contracts (95 + 25 = 120). However, with respect to the complex order
with four legs 25 times, the next transaction against the Market-
Maker's quotes potentially could be as large as 100 contracts
(depending upon whether there are other market participants at the same
price), creating the potential in this example for the Market-Maker to
exceed the 100-contract limit by 95 contracts (95 + 100 = 195) instead
of 20 contracts.
    As this example demonstrates, legging of complex orders into the
regular market presents higher risk to Market-Makers than executing
their quotes against individual orders entered in multiple series of a
class in the regular market, because it may result in Market-Makers
exceeding their risk parameters by a greater number of contracts. This
risk is directly proportional to the number of legs associated with a
complex order. Market-Makers have expressed concerns to the Exchange
regarding this risk.
    To address this Market-Maker risk, the Exchange proposes to require
all complex orders with three or more legs

to COA prior to entering the COB.\7\ Under Rule 6.53C(d)(i)(2), the
Exchange may determine on a class-by-class which complex orders are
eligible for COA, including by complex order type and origin type.\8\
Rule 6.53C(d)(ii) provides that the Exchange will initiate a COA on
receipt of a COA-eligible order and request from the Trading Permit
Holder representing the order that it be COA'd. The Exchange proposes
to amend Rule 6.53C(d)(ii) to provide that the System\9\ will initiate
a COA on receipt of (1) a COA-eligible order with two legs and request
from the Trading Permit Holder representing the order that it be COA'd
or (2) a complex order with three or more legs, regardless of the
order's routing parameters (e.g., request to route directly to COB,
all-or-none order, immediate-or-cancel) or handling instructions
(except for orders routed for manual handling).\10\ Thus, all complex
orders in Hybrid classes with three or more legs will automatically COA
(other than those routed for manual handling) prior to entering the COB
where they can leg into the market.\11\ Additionally, the Exchange
proposes to amend Rule 6.53C(d)(ii) to provide that notwithstanding
proposed clause (2) described above, the System will reject back to a
Trading Permit Holder any complex order with three or more legs that
includes a request pursuant to Interpretation and Policy .04 that the
order not COA.\12\ This will prevent a Trading Permit Holder from using
a routing parameter request to not COA a complex order with three or
more legs to bypass the protection provided by the automatic COA
functionality proposed in this filing while providing the Trading
Permit Holder with an opportunity to reconsider how to handle the
complex order.
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    \7\ This proposed change applies to Hybrid classes only, and not
Hybrid 3.0 classes. The Exchange does not believe the risk discussed
in this rule filing is present in Hybrid 3.0 classes. The proposed
rule change amends Rule 6.53C, Interpretation and Policy .10 to
indicate that complex orders in Hybrid 3.0 classes, regardless of
the number of legs, will COA in the same manner they currently do.
    \8\ Currently, in all Hybrid classes, customer, firm and broker-
dealer complex orders are eligible for COA, and all complex order
types except for immediate-or-cancel (``IOC'') orders are eligible
for COA in all Hybrid classes. Additionally, only marketable orders
and ``tweeners'' (limit orders bettering the same side of the
derived net market) are eligible for COA. For Hybrid 3.0 classes
(i.e. SPX), all complex order types (including IOC orders) are
eligible for COA, but only customer complex orders are eligible for
COA. See Regulatory Circulars RG06-73, RG08-38 and RG08-97.
    \9\ The proposed rule change amends the language to say that the
System will send the RFR message rather than the Exchange. Because
the System will automatically send the RFR message when the
conditions set forth in Rule 6.53C(d)(ii) are met, the Exchange
believes using the term ``System'' in the rule text is appropriate.
    \10\ The Exchange notes that if a complex order with three or
more legs contains an instruction to route for manual handling, such
as to PAR, and through such manual handling routes to the COB, the
proposed rule change provides that order will COA prior to entry on
the COB, even if the PAR operator requests that the order not COA.
    \11\ The Exchange notes that this automatic COA applies only to
complex orders and not stock-option orders.
    \12\ Rule 6.53C, Interpretation and Policy .04 provides that
Trading Permit Holders routing complex orders directly to the COB
may request that the complex orders be COA'd on a class-by-class
basis and Trading Permit Holders with resting complex orders on PAR
may request that complex orders be COA'd on an order-by-order basis.
As discussed above, the Exchange intends to propose in a separate
rule filing to amend Interpretation and Policy .04 to allow Trading
Permit Holders to request that complex orders not COA on an order-
by-order basis, in addition to a class-by-class basis.
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    The Exchange notes that approximately 90% of complex orders
submitted to the Exchange have only two legs. Additionally, as
discussed above, orders in Hybrid classes of all order types except IOC
orders and all order origin codes except Market-Maker and away market-
maker orders are currently COA-eligible.\13\ Currently, all Trading
Permit Holders have requested that all of their COA-eligible orders in
Hybrid classes process through COA upon entry into the System. Thus,
the proposed rule change will only impact a small percentage of complex
orders that enter into the System, as a large percentage of complex
orders entered into the System are only two legs or already COA prior
to execution. The Exchange also notes that complex orders with three or
more legs will still have opportunities for execution through COA or on
the COB if they do not execute at the end of the COA (including
execution with the leg markets). The Exchange notes that the rules
contain provisions that prevent the execution of complex orders that
might otherwise be executable.\14\ Thus, the Exchange believes that
requiring complex orders with three or more legs to COA prior to
entering COB and legging into the regular market does not create any
unusual circumstances for the System. The Exchange believes that the
potential risk to Market-Makers in the regular market of allowing
orders with three or more legs to directly enter COB and leg into the
market far outweighs the potential benefit of continuing to allow COA
to be voluntary for a limited number of orders.
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    \13\ See supra note 8.
    \14\ See, e.g., Rules 6.45A(a) and 6.45B(a) (priority overlays,
such as public customer) and Rule 6.53C, Interpretation and Policy
.08 (price check parameters).
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    The Exchange believes that requiring complex orders in Hybrid
classes with three or more legs to COA prior to entering COB and
legging into the market will discourage market participants from
continuing to enter the ``complex orders'' that expose Market-Makers to
the risk described above. Those ``complex orders'' that primarily
create this risk are generally IOC complex orders (which are the only
order type that currently does not COA in Hybrid classes) with a large
number of legs that generally execute immediately against prices in the
leg markets, which do not appear to have investment strategies similar
to traditional complex orders but instead are specifically designed to
circumvent QRM settings. The proposed rule change eliminates the
possibility of immediate executions of these ``complex orders.'' Market
participants may still enter these ``complex orders.'' However, if they
do, the ``complex orders'' will COA, which COA will allow Market-Makers
to become aware of these ``complex orders'' and have adequate
opportunity to react accordingly, including to adjust their quotes to
avoid circumvention of their QRM settings. If a Market-Maker receives
an RFR for a COA for one of these ``complex orders'' in one of its
appointed Hybrid classes, and the Market-Maker believes the order may
execute against its quotes and cause executions that significantly
exceed its contract limit in that class, the Market-Maker may adjust
its quotes as it deems necessary to reduce its risk exposure prior to
the ``complex order'' legging into the market and being presented to
the Market-Maker for execution. The Exchange believes the proposed rule
change will allow Market-Makers to better manage their risk in their
appointments, as it will reduce the risk of these ``complex orders''
causing executions that significantly exceed Market-Makers' risk
parameters. The Exchange believes this reduced risk will encourage
Market-Makers to quote larger size, which will increase liquidity and
enhance competition in those classes.
    The Exchange notes that the proposed rule change does not impact
the allocation of complex orders or relieve Market-Makers of their
obligations to provide continuous electronic quotes under the Exchange
Rules or to provide ``firm'' quotes pursuant to CBOE Rule 8.51 or Rule
602 of Regulation NMS.
    The proposed rule change also amends Rule 6.53C(d)(ii) to provide
that PAR operators handling an order may request that a COA-eligible
order be

COA'd. Currently, Rule 6.53C(d)(ii) states that a Trading Permit Holder
representing an order may request that the order be COA'd. However,
other parts of the rules provide that orders resting on PAR may also
COA.\15\ The introductory language to Rule 6.53C(d) also states that
complex orders may be subject to COA once on PAR. Currently, the part
of the rule regarding initiation of a COA states that Trading Permit
Holders may initiate a COA. In order to have more consistency within
the rules, the Exchange believes that it is appropriate to include in
the part of the rule that describes the initiation of a COA that orders
on PAR may be submitted to COA by the PAR operator, in addition to
orders submitted directly to the System by Trading Permit Holders.
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    \15\ See, e.g., Rule 6.53C, Interpretation and Policy .04(a)
(which states that Trading Permit Holders with resting complex
orders on PAR may request that complex orders be COA'd).
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    The Exchange will announce the implementation date of the proposed
rule change in a Regulatory Circular to be published no later than 90
days following the effective date. The implementation date will be no
later than 180 days following the effective date.
2. Statutory Basis
    The Exchange believes the proposed rule change is consistent with
the Act and the rules and regulations thereunder applicable to the
Exchange and, in particular, the requirements of Section 6(b) of the
Act.\16\ Specifically, the Exchange believes the proposed rule change
is consistent with the Section 6(b)(5) \17\ requirements that the rules
of an exchange be designed to prevent fraudulent and manipulative acts
and practices, to promote just and equitable principles of trade, to
foster cooperation and coordination with persons engaged in regulating,
clearing, settling, processing information with respect to, and
facilitating transactions in securities, 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.
Additionally, the Exchange believes the proposed rule change is
consistent with the Section 6(b)(5) \18\ requirement that the rules of
an exchange not be designed to permit unfair discrimination between
customers, issuers, brokers, or dealers.
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    \16\ 15 U.S.C. 78f(b).
    \17\ 15 U.S.C. 78f(b)(5).
    \18\ Id.
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    In particular, the Exchange believes it is reasonable to require
complex orders in Hybrid classes with three or more legs to COA. In
this respect, the Exchange notes that the vast majority of complex
orders in Hybrid classes consist of only two legs, and the majority of
complex orders already COA upon entry into the System--those orders
will be unaffected by this proposed rule change. The proposed rule
change will essentially only impact the complex orders in Hybrid
classes with three or more legs that are currently not eligible for COA
(many of which the Exchange believes do not have investment strategies
of traditional complex orders). The Exchange believes this impact is
minimal, as these orders will still have opportunities for execution
through a COA, in the COB, or in the leg markets following the end of
the COA. Further, the Exchange believes that the potential risk of not
requiring these orders to COA prior to entering the COB and legging
into the market limits the amount of liquidity that Market-Makers are
willing to provide in the regular market. In particular, Market-Makers
may reduce the size of their quotations in the regular market because
of the presence of these ``complex orders'' that are designed to
circumvent QRM and risk the execution of the cumulative size of Market-
Makers' quotations across multiple series without Market-Makers' being
aware of these ``complex orders'' or having an opportunity to adjust
their quotes. Accordingly, the Exchange believes that reducing Market-
Maker risk in the regular market by requiring complex orders in Hybrid
classes with three or more legs to COA will benefit investors by
encouraging additional liquidity in the regular market. This potential
benefit to investors far exceeds any perceived detriment to requiring
certain ``complex'' orders to COA prior to potential interaction with
the leg markets. The Exchange also believe it is appropriate to reject
any complex orders with three or more legs for which a Trading Permit
Holder does not include a COA request, and to automatically COA any
complex order with three or more legs on PAR even if the PAR operator
requests that the order not COA, because a Trading Permit Holder or PAR
operator, as applicable, would otherwise be able to bypass this Market-
Maker protection.
    The Exchange also believes the proposed rule change to require all
complex orders with three or more legs to COA is consistent with the
requirement that Market-Makers' quotes be firm under Rule 602 of
Regulation NMS.\19\ The proposed rule change does not relieve Market-
Makers of their obligation to provide ``firm'' quotes. If a complex
order in a Hybrid class with three or more legs goes through COA and
then legs into the market for execution upon completion of the COA, at
which point the complex order would execute against a Market-Maker's
quotes based on priority rules, the Market-Maker must execute its
quotes against the order at its then-published bid or offer up to its
published quote size, even if such execution would cause the Market-
Maker to significantly exceed its risk parameters. However, as
discussed above, prior to the end of COA (and thus prior to a complex
order legging into the market), a Market-Maker may adjust its published
quotes to manage its risk in a class as it deems necessary, including
to prevent executions that would exceed its risk parameters. In this
case, the firm quote rule does not obligate the Market-Maker to execute
its quotes against the complex order at the quote price and size that
was published when the order entered the System and initiated the COA.
Rather, the Market-Maker's firm quote obligation applies only to its
disseminated quote at the time an order is presented to the Market-
Maker for execution, which presentation does not occur until the System
processes the order against the leg markets after completion of the
COA.\20\ Thus, the

proposed rule change is consistent with the firm quote rule.
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    \19\ Rule 602(b)(2) obligates a Market-Maker to execute any
order to buy or sell a subject security presented to it by another
broker or dealer or any other person belonging to a category of
persons with whom the Market-Maker customarily deals, at a price at
least as favorable to the buyer or sell as the Market-Maker's
published bid or offer in any amount up to its published quotation
size. Rule 602(b)(3) provides that no Market-Maker is obligated to
execute a transaction for any subject security to purchase or sell
that subject security in an amount greater than its revised
quotation size if, prior to the presentation of an order for the
purchase or sale of a subject security, the Market-Maker
communicated to the Exchange a revised quotation size. Similarly, no
Market-Maker is obligated to execute a transaction for any subject
security if, before the order sought to be executed is presented,
the Market-Maker has communicated to the Exchange a revised bid or
offer. CBOE Rule 8.51 imposes a similar obligation (Market-Maker
must sell (buy) at least the established number of contracts at the
offer (bid) which is displayed when the Market-Maker receives a buy
(sell) order at the trading station where the reported security is
located for trading; however, no Market-Maker is obligated to
execute a transaction for a listed option when, prior to the
presentation of an order to sell (buy) to the Market-Maker, the
Market-Maker has communicated to the Exchange a revised quote).
    \20\ See Staff Legal Bulletin No. 16, Transaction in Listed
Options Under Exchange Act Rule 11Ac1-1, U.S. Securities and
Exchange Commission, Division of Market Regulation, January 20, 2004
(``Scenario 3: When an Order is ``Presented'' . . . If an individual
market maker generates its own quotations . . . and exchange systems
route incoming orders to the responsible broker-dealer with
priority, when is an order presented to a responsible broker-dealer?
Response: . . . . When each market maker is the responsible broker-
dealer with respect to its own quote, an order is presented to it
when received by the market maker from the exchange system.''). When
a complex order is processing through COA, the order is still in the
System and has not yet been presented to a broker or dealer
(including a Market-Maker) for execution. Only after completion of
the COA, when the System allocates the complex order for execution
in accordance with priority rules, will that order be ``presented''
to the Market-Maker for firm quote purposes.
---------------------------------------------------------------------------

    The Exchange believes that the proposed rule change to provide that
PAR operators handling an order may request a COA for a COA-eligible
order is consistent with the Act because the Exchange rules already
allow orders on PAR to be submitted to COA, as described above. This
proposed rule change merely includes this ability in the rule provision
that describes how a COA may be initiated to more completely and
accurately describe the circumstances in which an order may COA.

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

    CBOE does not believe that the proposed rule change will impose any
burden on competition that is not necessary or appropriate in
furtherance of the purposes of the Act. The proposed rule change to
require all complex orders with three or more legs to COA addresses
concerns that Market-Makers raised to the Exchange and is intended to
reduce risk to Market-Makers that are quoting in the regular market.
CBOE believes that the proposed rule change will promote competition by
encouraging Market-Makers to increase the size of and to more
aggressively price their quotes, which will increase liquidity on the
Exchange. The proposed rule change applies in the same manner to all
complex orders in Hybrid classes of three or more legs and is intended
to reduce risk for all Market-Makers that electronically quote in
Hybrid classes.
    The proposed rule change to provide that PAR operators handling an
order may request a COA for a COA-eligible order is consistent with
current Exchange rules and thus has no competitive impact.

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

    The Exchange neither solicited nor received comments on the
proposed rule change.

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

    Within 45 days of the date of publication of this notice in the
Federal Register or within such longer period up to 90 days (i) as the
Commission may designate 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 or disapprove 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 email to<EMAIL_ADDRESS>Please include
File Number SR-CBOE-2014-017 on the subject line.

Paper Comments

     Send paper comments in triplicate to Elizabeth M. Murphy,
Secretary, Securities and Exchange Commission, 100 F Street NE.,
Washington, DC 20549-1090.

All submissions should refer to File Number SR-CBOE-2014-017. This file
number should be included on the subject line if email is used. To help
the Commission process and review your comments more efficiently,
please use only one method. The Commission will post all comments on
the Commission's Internet Web site (http://www.sec.gov/rules/sro.shtml). Copies of the submission, all subsequent amendments, all
written statements with respect to the proposed rule change that are
filed with the Commission, and all written communications relating to
the proposed rule change between the Commission and any person, other
than those that may be withheld from the public in accordance with the
provisions of 5 U.S.C. 552, will be available for Web site viewing and
printing in the Commission's Public Reference Room, 100 F Street NE.,
Washington, DC 20549-1090 on official business days between the hours
of 10:00 a.m. and 3:00 p.m. Copies of such filing also will be
available for inspection and copying at the principal offices 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-
CBOE-2014-017, and should be submitted on or before March 31, 2014.

    For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\21\
---------------------------------------------------------------------------

    \21\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------

Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2014-05071 Filed 3-7-14; 8:45 am]
BILLING CODE 8011-01-P


   UNITED STATES ENVIRONMENTAL PROTECTION AGENCY

        ANN ARBOR, MI 48105

January 12, 2007

                                                                                OFFICE OF 	                                                                              AIR AND RADIATION

MEMORANDUM

SUBJECT:	General Motors Product Changes Affecting SD/I Engine Marinizers

FROM:	Mike Samulski, Assessment and Standards Division

TO:		Docket EPA-HQ-OAR-2004-0007

  SEQ CHAPTER \h \r 1 Gasoline sterndrive and inboard (SD/I) engines are generally derived from land-based counterparts.  Engine marinizers purchase automotive engine blocks to take advantage of cost savings associated with economies of scale.  Marine engines are produced in relatively small volumes compared to automotive engines and the development of engine blocks by the marinizers would be expected to significantly increase engine costs.  Marinizers prepare the engines for marine use by   SEQ CHAPTER \h \r 1 adding the fuel and air management system, marine cooling system, intake and exhaust manifolds, and accessory drives and units.

	The vast majority of sterndrive and inboard (SD/I) marine engines are based on automotive engine blocks produced by General Motors (GM).  GM offers six engine blocks for marine use.  The smallest is a 4 cylinder in-line engine with a total displacement of 3.0L.  This engine is typically used for entry level boats.  The next largest engine is a V6 with a displacement of 4.3L.  This engine fills a niche in the marine market in that it can typically fit in the same engine compartments as the 3.0L engine but gives boaters a higher power option.  GM also offers four different V8 engines:  5.0L, 5.7L, 6.0L, and 8.1L.  The 5.0L and 5.7L engines, which have been in production for decades, are the most popular engines for SD/I applications.  The 6.0L and 8.1L engine blocks are newer designs and offer higher power ratings.

	GM has recently announced that it intends to discontinue the 4.3L and 8.1L engine blocks in 2009.  The 4.3L engine is scheduled to go out of production in May of 2009 and replaced with a 4.1L engine.  The 8.1L engine is scheduled to go out of production in December of 2009 and replaced with a supercharged version of the 6.0L engine.  Both of these replacement engines are still under development.  GM’s projected timelines for these engines are enclosed as Attachment 1.

	Attachment 2 presents information on the engine blocks used by the six SD/I marinizers that are certified in California for exhaust emissions.  These six manufacturers produce the vast majority of SD/I engines sold in the United States.  In some cases, the marinizers change the length of the stroke to provide a higher displacement option with a given engine block.  This is represented in Attachment 2 by showing multiple engine displacements for a company for a given engine block.  All six of these companies will be impacted by the changes in the GM product offerings.  Other SD/I manufacturers include airboat engine manufacturers and high-performance SD/I engine manufacturers.  Many airboat engines are based on GM engine blocks, though some are built using aircraft engines.  High-performance SD/I engines are typically based on custom racing blocks, though some smaller engines in this category may use the 8.1L GM block.

	As shown in Attachment 1, marine engine marinizers can expect to have access to prototype 4.1L and supercharged 6.0L engines in mid 2007.  Marinizers have stated that they will need to design and build new marine components for these engines, including exhaust manifolds, and that they will need to develop new fuel system calibrations.  These development efforts will likely include hardware and software designs, performance and durability testing, and tooling upgrades.  As a result, marinizers have raised concerns about having these engines ready to meet emission standards in the 2009 model year.  Because of the engine changes, it is unlikely that emission calibrations and catalyst packaging developed for the 4.3L and 8.1L engines would be directly transferable to the new engine designs.  Marinizers have also expressed concern that they will not have enough remaining years of sales of the 4.3L and 8.1L engines to justify the cost of developing catalyst-equipped exhaust manifolds for these engines.

Attachment 1:  Projected Timelines for New GM Engine Blocks

Attachment 2:  Table of GM Engine Blocks Used By SD/I Manufacturers

Sources:

www.gmpowertrain.com

www.mercurymarine.com

www.volvo.com/volvopenta/

www.indmar.com

www.pleasurecraft.com

www.kemequipment.com

www.marinepowerusa.com

www.arb.ca.gov/msprog/offroad/cert/cert_mfr.php

 “SD/I Implementation,” presented to EPA by NMMA on October 26, 2006, Docket Identification EPA-HQ-OAR-2004-0008-0509.

* Approximate number of engine power ratings is in parenthesis

4.3L block is planned to be replaced by a 4.1L block

8.1L block is planned to be replaced by a supercharged 6.0L block

8.1L

(4)

8.1L

(2)

8.1L, 8.2L

(2)

8.1L

(2)

8.1L

(2)

8.1L

(1)

6.0L, 6.3L

(2)

6.0L

(1)

6.0L

(2)

6.0L

(1)

5.7L, 6.2L

(8)

5.7L

(2)

5.7L

(2)

5.7L

(2)

5.7L

(2)

5.7L

(1)

5.0L

(2)

5.0L

(2)

5.0L

(1)

4.3L

(2)

4.3L

(2)

4.3L

(1)

3.0L

(1)

3.0L

(1)

Mercury

Volvo Penta

Indmar

PCM/Crusader

KEM

Marine Power


Checklists for Authorization

Revision

Checklist

Number  	  Federal Requirement				FR Reference &  	Date

17 S                HSWA Codification Rule- Exposure Information    50 FR 28702             7/15/85

117B              Toxicity Characteristic Amendment                         57 FR 23062               6/1/92

203		Hazardous Waste Management System;

		Identification and Listing of Hazardous Waste;

		Recycled Used Oil Management Standards		68 FR 44659  		 7/30/03

  205 		National Emission Standards for Hazardous

		Air Pollutants: Surface Coating of Automobiles

		and Light-Duty Trucks					69 FR 22601	 	4/26/04

    207  		Hazardous Waste System; Modification of the

Hazardous Wast Manifest 				70 FR 10775  		4/4/05

  207.1               Hazardous Waste System; Modification of

		Hazardous Waste Manifest System; Correction	70 FR 35034  		6/16/05

  209  	Hazardous Waste Management System;

 	Modification of the Hazardous Waste Program;

 	Mercury-containing Equipment			70 FR 45507 		 8/5/05

  212	 National Emission Standards for Hazardous

	Air Pollutants; Final Standards for Hazardous

Waste Combustors (Phase I Final Replacement

		Standards and Phase II)				70 FR 59402   		9/12/05

   213  	Resource Conservation and Recovery Act

		Burden Reduction Initiative				70 FR 16861  		 4/4/06

   214  	Hazardous Waste and Used Oil;

		Corrections to Errors in the Code of Federal

		Regulations						70 FR 40253		7/14/06

   215                Cathode Ray Tubes Rule                                             71 FR 4298                 7/28/06

   217 	Standards for Hazardous Air Pollutants

		For Hazardous Waste Combustors; Amendments	73 FR 18970		4/8/08

		Checklists for Authorization

		Washington – 2010


[Federal Register Volume 85, Number 55 (Friday, March 20, 2020)]
[Proposed Rules]
[Pages 16016-16019]
[FR Doc No: 2020-05486]

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

DEPARTMENT OF TRANSPORTATION

Federal Aviation Administration

14 CFR Part 39

[Docket No. FAA-2020-0202; Product Identifier 2020-NM-025-AD]
RIN 2120-AA64

Airworthiness Directives; Yabor[atilde] Ind[uacute]stria
Aeron[aacute]utica S.A. (Type Certificate Previously Held by Embraer
S.A.) Airplanes

AGENCY: Federal Aviation Administration (FAA), DOT.

ACTION: Notice of proposed rulemaking (NPRM).

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

SUMMARY: The FAA proposes to adopt a new airworthiness directive (AD)
for all Yabor[atilde] Ind[uacute]stria Aeron[aacute]utica S.A. (Type
Certificate Previously Held by Embraer S.A.) Model ERJ 170 airplanes
and Model ERJ 190-100 STD, -100 LR, -100 ECJ, -100 IGW, -200 STD, -200
LR, and -200 IGW airplanes. This proposed AD was prompted by reports of
cracks discovered on the engine pylon inboard lower link lugs. This
proposed AD would require repetitive detailed inspections of the engine
inboard and outboard engine pylon lower link lugs for cracking, and
repair if necessary, as specified in an Ag[ecirc]ncia Nacional de
Avia[ccedil][atilde]o Civil (ANAC) Brazilian AD, which will be
incorporated by reference. The FAA is proposing this AD to address the
unsafe condition on these products.

DATES: The FAA must receive comments on this proposed AD by May 4,
2020.

ADDRESSES: You may send comments, using the procedures found in 14 CFR
11.43 and 11.45, by any of the following methods:
     Federal eRulemaking Portal: Go to https://www.regulations.gov. Follow the instructions for submitting comments.
     Fax:<PHONE_NUMBER>.
     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: Deliver to Mail address above between 9
a.m. and 5 p.m., Monday through Friday, except Federal holidays.
    For the material identified in this proposed AD that will be
incorporated by reference (IBR), contact National Civil Aviation
Agency, Aeronautical Products Certification Branch (GGCP), Rua Laurent
Martins, n[ordm] 209, Jardim Esplanada, CEP 12242-431--S[atilde]o
Jos[eacute] dos Campos--SP, Brazil; telephone 55 (12) 3203-6600; email
<EMAIL_ADDRESS>internet www.anac.gov.br/en/. You may find this IBR
material on the ANAC website at https://sistemas.anac.gov.br/certificacao/DA/DAE.asp. You may view this IBR material at the FAA,
Transport Standards Branch, 2200 South 216th St., Des Moines, WA. For
information on the availability of this material at the FAA, call 206-
231-3195. It is also available in the AD docket on the internet at
https://www.regulations.gov by searching for and locating Docket No.
FAA-2020-0202.

Examining the AD Docket

    You may examine the AD docket on the internet at https://www.regulations.gov by searching for and locating Docket No. FAA-2020-
0202; or in person at Docket Operations between 9 a.m. and 5 p.m.,
Monday through Friday, except Federal holidays. The AD docket contains
this NPRM, the regulatory evaluation, any comments received, and other
information. The street address for Docket Operations is listed above.
Comments will be available in the AD docket shortly after receipt.

FOR FURTHER INFORMATION CONTACT: Krista Greer, Aerospace Engineer,
International Section, Transport Standards Branch, FAA, 2200 South
216th St., Des Moines, WA 98198; telephone and fax<PHONE_NUMBER>; email
<EMAIL_ADDRESS>
SUPPLEMENTARY INFORMATION:

Comments Invited

    The FAA invites you to send any written relevant data, views, or
arguments about this proposal. Send your comments to an address listed
under the ADDRESSES section. Include ``Docket No. FAA-2020-0202;
Product

Identifier 2020-NM-025-AD'' at the beginning of your comments. The FAA
specifically invites comments on the overall regulatory, economic,
environmental, and energy aspects of this NPRM. The FAA will consider
all comments received by the closing date and may amend this NPRM based
on those comments.
    The FAA will post all comments, without change, to https://www.regulations.gov, including any personal information you provide.
The FAA will also post a report summarizing each substantive verbal
contact received about this NPRM.

Discussion

    The ANAC, which is the aviation authority for Brazil, has issued
Brazilian AD 2020-01-02, effective January 28, 2020 (``Brazilian AD
2020-01-02'') (also referred to as the Mandatory Continuing
Airworthiness Information, or ``the MCAI''), to correct an unsafe
condition for all Yabor[atilde] Ind[uacute]stria Aeron[aacute]utica
S.A. (Type Certificate Previously Held by Embraer S.A.) Model ERJ 170-
100 LR, -100 STD, -100 SE, -100 SU, -200 LR, -200 SU, -200 STD, and -
200 LL airplanes; and Model ERJ 190-100 STD, -100 LR, -100 ECJ, -100
IGW, -100 SR, -200 STD, -200 LR, and -200 IGW airplanes. Model ERJ 190-
100 SR airplanes are not certified by the FAA and are not included on
the U.S. type certificate data sheet; therefore, this AD does not
include those airplanes in the applicability.
    This proposed AD was prompted by reports of cracking on the left
hand (LH) and right hand (RH) sides of engine pylon inboard lower link
lugs. The FAA is proposing this AD to address cracking of the engine
pylon lower link lugs, which could cause the loss of engine pylon
integrity, and could result in engine separation from the wing, loss of
airplane controllability, and possible injury to persons on the ground.
See the MCAI for additional background information.

Related IBR Material Under 1 CFR Part 51

    ANAC Brazilian AD 2020-01-02 describes procedures for repetitive
detailed inspections of LH and RH inboard and outboard engine pylon
lower link lugs for cracking, and repair if necessary. This material is
reasonably available because the interested parties have access to it
through their normal course of business or by the means identified in
the ADDRESSES section.

FAA's Determination and Requirements of This Proposed AD

    This product has been approved by the aviation authority of another
country, and is approved for operation in the United States. Pursuant
to the FAA's bilateral agreement with the State of Design Authority,
the FAA has been notified of the unsafe condition described in the MCAI
referenced above. The FAA is proposing this AD because the FAA
evaluated all the relevant information and determined the unsafe
condition described previously is likely to exist or develop in other
products of the same type design.

Proposed AD Requirements

    This proposed AD would require accomplishing the actions specified
in Brazilian AD 2020-01-02 described previously, as incorporated by
reference, except for any differences identified as exceptions in the
regulatory text of this AD.

Explanation of Required Compliance Information

    In the FAA's ongoing efforts to improve the efficiency of the AD
process, the FAA initially worked with Airbus and the European Union
Aviation Safety Agency (EASA) to develop a process to use certain EASA
ADs as the primary source of information for compliance with
requirements for corresponding FAA ADs. The FAA has since coordinated
with other manufacturers and civil aviation authorities (CAAs) to use
this process. As a result, Brazilian AD 2020-01-02 will be incorporated
by reference in the FAA final rule. This proposed AD would, therefore,
require compliance with Brazilian AD 2020-01-02 in its entirety,
through that incorporation, except for any differences identified as
exceptions in the regulatory text of this proposed AD. Service
information specified in Brazilian AD 2020-01-02 that is required for
compliance with Brazilian AD 2020-01-02 will be available on the
internet at https://www.regulations.gov by searching for and locating
Docket No. FAA-2020-0202 after the FAA final rule is published.

Costs of Compliance

    The FAA estimates that this proposed AD affects 659 airplanes of
U.S. registry. The FAA estimates the following costs to comply with
this proposed AD:

                                      Estimated Costs for Required Actions
----------------------------------------------------------------------------------------------------------------
                                                                                Cost per       Cost on U.S.
                          Labor cost                              Parts cost        product         operators
----------------------------------------------------------------------------------------------------------------
3 work-hours x $85 per hour = $255...........................              $0             $255         $168,045
----------------------------------------------------------------------------------------------------------------

    The FAA estimates that it would take about 1 work-hour per product
to comply with the reporting requirement in this proposed AD. The
average labor rate is $85 per hour. Based on these figures, the FAA
estimates the cost on U.S. operators of reporting the inspection
results to be $56,015, or $85 per product.
    The FAA has received no definitive data that would enable the FAA
to provide cost estimates for the on-condition actions specified in
this proposed AD.

Paperwork Reduction Act

    A federal agency may not conduct or sponsor, and a person is not
required to respond to, nor shall a person be subject to penalty for
failure to comply with a collection of information subject to the
requirements of the Paperwork Reduction Act unless that collection of
information displays a current valid OMB control number. The control
number for the collection of information required by this proposed AD
is 2120-0056. The paperwork cost associated with this proposed AD has
been detailed in the Costs of Compliance section of this document and
includes time for reviewing instructions, as well as completing and
reviewing the collection of information. Therefore, all reporting
associated with this proposed AD is mandatory. Comments concerning the
accuracy of this burden and suggestions for reducing the burden should
be directed to Information Collection Clearance Officer, Federal
Aviation Administration, 10101 Hillwood Parkway, Fort Worth, TX 76177-
1524.

Authority for This Rulemaking

    Title 49 of the United States Code specifies the FAA's authority to
issue

rules on aviation safety. Subtitle I, section 106, describes the
authority of the FAA Administrator. Subtitle VII: Aviation Programs,
describes in more detail the scope of the Agency's authority.
    The FAA is issuing this rulemaking under the authority described in
Subtitle VII, Part A, Subpart III, Section 44701: ``General
requirements.'' Under that section, Congress charges the FAA with
promoting safe flight of civil aircraft in air commerce by prescribing
regulations for practices, methods, and procedures the Administrator
finds necessary for safety in air commerce. This regulation is within
the scope of that authority because it addresses an unsafe condition
that is likely to exist or develop on products identified in this
rulemaking action.

Regulatory Findings

    The FAA determined that this proposed AD would not have federalism
implications under Executive Order 13132. This proposed AD would not
have a substantial direct effect on the States, on the relationship
between the national Government and the States, or on the distribution
of power and responsibilities among the various levels of government.
    For the reasons discussed above, I certify this proposed
regulation:
    (1) Is not a ``significant regulatory action'' under Executive
Order 12866,
    (2) Will not affect intrastate aviation in Alaska, and
    (3) Will not have a significant economic impact, positive or
negative, on a substantial number of small entities under the criteria
of the Regulatory Flexibility Act.

List of Subjects in 14 CFR Part 39

    Air transportation, Aircraft, Aviation safety, Incorporation by
reference, Safety.

The Proposed Amendment

    Accordingly, under the authority delegated to me by the
Administrator, the FAA proposes to amend 14 CFR part 39 as follows:

PART 39--AIRWORTHINESS DIRECTIVES

0
1. The authority citation for part 39 continues to read as follows:

    Authority:  49 U.S.C. 106(g), 40113, 44701.

Sec.  39.13  [Amended]

0
2. The FAA amends Sec.  39.13 by adding the following new airworthiness
directive (AD):

Yabor[atilde] Ind[uacute]stria Aeron[aacute]utica S.A. (Type
Certificate Previously Held by Embraer S.A.) Airplanes: Docket No.
FAA-2020-0202; Product Identifier 2020-NM-025-AD.

(a) Comments Due Date

    The FAA must receive comments by May 4, 2020.

(b) Affected ADs

    None.

(c) Applicability

    This AD applies to all Yabor[atilde] Ind[uacute]stria
Aeron[aacute]utica S.A. (Type certificate previously held by Embraer
S.A.) airplanes specified in paragraphs (c)(1) and (2) of this AD,
certificated in any category, as identified in Brazilian AD 2020-01-
02, effective January 28, 2020 (``Brazilian AD 2020-01-02'').
    (1) Model ERJ 170-100 LR, -100 STD, -100 SE, -100 SU, -200 LR, -
200 SU, -200 STD, and -200 LL airplanes.
    (2) Model ERJ 190-100 STD, -100 LR, -100 ECJ, -100 IGW, -200
STD, -200 LR, and -200 IGW airplanes.

(d) Subject

    Air Transport Association (ATA) of America Code 54, Nacelles/
pylons.

(e) Reason

    This AD was prompted by reports of cracking on the left hand
(LH) and right hand (RH) sides of engine pylon inboard lower link
lugs. The FAA is issuing this AD to address cracking of the engine
pylon lower link lugs, which could cause the loss of engine pylon
integrity, and could result in engine separation from the wing, loss
of airplane controllability, and possible injury to persons on the
ground.

(f) Compliance

    Comply with this AD within the compliance times specified,
unless already done.

(g) Requirements

    Except as specified in paragraph (h) of this AD: Comply with all
required actions and compliance times specified in, and in
accordance with, Brazilian AD 2020-01-02.

(h) Exceptions to Brazilian AD 2020-01-02

    (1) Where Brazilian AD 2020-01-02 refers to its effective date,
this AD requires using the effective date of this AD.
    (2) Where Brazilian AD 2020-01-02 requires contacting ``the ANAC
[Ag[ecirc]ncia Nacional de Avia[ccedil][atilde]o Civil] and Embraer
. . . to approve an adequate repair,'' for this AD, obtain repair
instructions using the procedures specified in paragraph (i)(2) of
this AD and do the repair.
    (3) The ``Alternative methods of compliance (AMOCs)'' section of
Brazilian AD 2020-01-02 does not apply to this AD.
    (4) Paragraph (e) of Brazilian AD 2020-01-02 specifies to report
inspection results to ANAC and Yabor[atilde] Ind[uacute]stria
Aeron[aacute]utica within a certain compliance time. For this AD,
report inspection results at the applicable time specified in
paragraph (h)(4)(i) or (ii) of this AD.
    (i) If the inspection was done on or after the effective date of
this AD: Submit the report within 30 days after the inspection.
    (ii) If the inspection was done before the effective date of
this AD: Submit the report within 30 days after the effective date
of this AD.

(i) Other FAA AD Provisions

    The following provisions also apply to this AD:
    (1) Alternative Methods of Compliance (AMOCs): The Manager,
International Section, Transport Standards Branch, FAA, has the
authority to approve AMOCs for this AD, if requested using the
procedures found in 14 CFR 39.19. In accordance with 14 CFR 39.19,
send your request to your principal inspector or local Flight
Standards District Office, as appropriate. If sending information
directly to the International Section, send it to the attention of
the person identified in paragraph (j)(2) of this AD. Information
may be emailed to<EMAIL_ADDRESS>Before using any
approved AMOC, notify your appropriate principal inspector, or
lacking a principal inspector, the manager of the local flight
standards district office/certificate holding district office.
    (2) Contacting the Manufacturer: For any requirement in this AD
to obtain instructions from a manufacturer, the instructions must be
accomplished using a method approved by the Manager, International
Section, Transport Standards Branch, FAA; or ANAC; or ANAC's
authorized Designee. If approved by the ANAC Designee, the approval
must include the Designee's authorized signature.
    (3) Reporting Requirements: A federal agency may not conduct or
sponsor, and a person is not required to respond to, nor shall a
person be subject to a penalty for failure to comply with a
collection of information subject to the requirements of the
Paperwork Reduction Act unless that collection of information
displays a current valid OMB Control Number. The OMB Control Number
for this information collection is 2120-0056. Public reporting for
this collection of information is estimated to be approximately 1
hour per response, including the time for reviewing instructions,
searching existing data sources, gathering and maintaining the data
needed, and completing and reviewing the collection of information.
All responses to this collection of information are mandatory as
required by this AD; the nature and extent of confidentiality to be
provided, if any. Send comments regarding this burden estimate or
any other aspect of this collection of information, including
suggestions for reducing this burden to Information Collection
Clearance Officer, Federal Aviation Administration, 10101 Hillwood
Parkway, Fort Worth, TX 76177-1524.

(j) Related Information

    (1) For information about Brazilian AD 2020-01-02, contact
National Civil Aviation Agency, Aeronautical Products Certification
Branch (GGCP), Rua Laurent Martins, n[ordm] 209, Jardim Esplanada,
CEP 12242-431--S[atilde]o Jos[eacute] dos Campos--SP, Brazil;
telephone 55 (12) 3203-6600; email<EMAIL_ADDRESS>internet
www.anac.gov.br/en/. You may find this material on the ANAC website
at https://sistemas.anac.gov.br/certificacao/DA/

DAE.asp. You may view this material at the FAA, Transport Standards
Branch, 2200 South 216th St., Des Moines, WA. For information on the
availability of this material at the FAA, call<PHONE_NUMBER>. This
material may also be found in the AD docket on the internet at
https://www.regulations.gov by searching for and locating Docket No.
FAA-2020-0202.
    (2) For more information about this AD, contact Krista Greer,
Aerospace Engineer, International Section, Transport Standards
Branch, FAA, 2200 South 216th St., Des Moines, WA 98198; telephone
and fax<PHONE_NUMBER>; email<EMAIL_ADDRESS>
    Issued on March 10, 2020.
Lance T. Gant,
Director, Compliance & Airworthiness Division, Aircraft Certification
Service.
[FR Doc. 2020-05486 Filed 3-19-20; 8:45 am]
 BILLING CODE 4910-13-P