or selling a security and that the decision by a firm to make a
market in a given security and the question of price should not be
influenced by payments to the member from issuers or promoters; if
payments to broker-dealers by promoters and issuers were permitted,
investors would not be able to ascertain which quotations in the
marketplace are based on actual interest and which quotations are
supported by issuers or promoters).
    \257\ 17 CFR 242.102.
    \258\ 15 U.S.C. 78k(d)(1).
    \259\ 17 CFT 270.12b-1.
---------------------------------------------------------------------------

    Regulation M. Because pricing integrity is essential during the
offering process, the Commission proscribes certain activity in
connection with distributions.\260\ Specifically, Rule 102 of
Regulation M prohibits, in connection with a distribution of
securities, issuers, selling security holders, and their affiliated
purchasers from directly or indirectly bidding for, purchasing, or
attempting to induce others to bid for or purchase covered securities--
including the security that is the subject of the distribution--during
the applicable restricted period.\261\ The purpose of this prohibition
is to ``prevent those persons participating in a distribution of
securities * * * from artificially conditioning the market for the
securities in order to facilitate the distribution'' as well as ``to
protect the integrity of the securities trading market as an
independent pricing mechanism.'' \262\ As the Commission has stated,
attempts to induce bids or purchases of covered securities outside of
the distribution raise substantial concerns about whether they would
fundamentally interfere with the independence of the market dynamics
that are essential to the ability of investors to evaluate the terms on
which securities are offered.\263\
---------------------------------------------------------------------------

    \260\ See Securities Exchange Act Release No. 50831 (Dec. 9,
2004), 69 FR 75774 (Dec. 17, 2004).
    \261\ 17 CFR 242.102.
    \262\ See Securities Exchange Act Release No. 33924 (Apr. 19,
1994), 59 FR 21681 (Apr. 26, 1994).
    \263\ See Commission Guidance Regarding Prohibited Conduct in
Connection with IPO Allocations, Securities Exchange Act Release No.
51500 (April 7, 2005), 70 FR 19672, 19673 (April 13, 2005).
---------------------------------------------------------------------------

    The Commission believes that issuer payments made under the SRO
Proposals would constitute an indirect attempt by the issuer \264\ of a
covered security to induce a purchase or bid in a covered security
during a restricted period in violation of Rule 102.\265\ Under the
NASDAQ Proposal, the issuer payments would ``be used for the purpose of
incentivizing one or more Market Makers in the MQP Security,'' \266\
which could induce bids or purchases for the issuer's security during a
restricted period. Under the NYSE Arca Proposal, the purpose of the
Program is ``to create a Fixed Incentive Program for issuers of certain
ETPs listed'' on NYSE Arca,\267\ which likewise could induce bids or
purchases for the issuer's security during a restricted period.
---------------------------------------------------------------------------

    \264\ Payments to the participating market makers under the NYSE
Arca Proposal would be made by the issuer (via NYSE Arca), but under
the NASDAQ Proposal, they would be made by the MQP Company (via
NASDAQ). ``MQP Company'' is defined as the ``fund sponsor or other
entity that lists one or more MQP Securities on NASDAQ.'' See
proposed NASDAQ Rule 5950(e)(7). For exchange traded notes and trust
issued receipts, the sponsor and issuer are the same entity. For
exchange traded funds, the payments are for the benefit of the
issuer (the fund). The Commission would view all of these payments
as constituting an indirect attempt by the issuer to induce a
purchase or bid.
    \265\ As the securities participating in the SRO Proposals are
ETPs that are in continuous distribution, these securities are
always in a restricted period under Rule 102.
    \266\ Preamble to proposed NASDAQ Rule 5950. See also NASDAQ
Notice, supra note 4, at 22043.
    \267\ See NYSE Arca Notice, supra note 12, at 29419.
---------------------------------------------------------------------------

    As a result, participation in the Programs by an MQP Company, in
the case of the NASDAQ Proposal, or issuer that is an ETP, in the case
of the NYSE Arca Proposal, would violate Rule 102, absent exemptive
relief.\268\ While the Commission or staff has granted relief from Rule
102 to a number of ETPs,\269\

this relief is designed to permit the ordinary operations (i.e.,
redemptions of ETP securities) of the ETP. Participation in the SRO
Programs is not necessary for the operation of the ETP in the same way
that redemptions are necessary. Moreover, commenters raised concerns
that the proposed issuers' payments to market makers have the potential
to distort market forces, impact pricing integrity, and prevent
investors from distinguishing quotations that reflect true market
forces from quotations that have been influenced by issuer payments,
and that the proposed safeguards of the Programs may not be sufficient
to overcome such distortions.\270\ Regulation M, among other things, is
intended to assure that distributions of securities are free of the
market effects of bids, purchases, and inducements to purchase by those
who have an interest in the success of a distribution. Thus, the
Commission would need to consider whether it would be appropriate to
grant exemptive relief in these circumstances, including whether there
would be any alternative means to address these concerns, which could
be established through conditions to any exemptive relief.
---------------------------------------------------------------------------

    \268\ The exception in Rule 102 for the redeemable securities of
open-end investment companies is not available for ETFs such as
those participating in the Programs. See 17 CFR 242.102(d)(4). This
is because while ETFs operate under exemptions from the definitions
of ``open-end company'' under Section 5(a)(1) of the 1940 Act and
``redeemable security'' under Section 2(a)(32) of the 1940 Act,
neither they nor the securities that they issue meet those
definitions.
    \269\ See, e.g., Letter from James A. Brigagliano, Acting
Associate Director, Division of Market Regulation, to Stuart M.
Strauss, Esq., Clifford Chance US LLP (Oct. 24, 2006) (regarding
class relief for exchange traded index funds).
    \270\ See IR Letter at 2 (``Incentivized trading obfuscates true
supply and demand by creating volume where no natural buyers or
sellers exist'') and NASDAQ Vanguard Letter at 3 (noting that ``it
is not clear whether [the proposed] safeguards will be sufficient to
overcome the presumption'' that issuer payments to market makers
have the potential to distort the market and create conflicts of
interest that corrupt the integrity of the marketplace). See also
Choi Letter at 1 (stating that the MQP program ``will make the
markets even more distorted and tilted to those who create an unfair
marketplace'').
---------------------------------------------------------------------------

    Rule 12b-1. The Commission notes that MQP Securities (in the case
of the NASDAQ Proposal) and ETPs (in the case of the NYSE Arca
Proposal) that operate as ETFs registered under the 1940 Act are
prohibited from paying for distribution of their shares, unless such
payments are made pursuant to a plan that meets the requirements of
Rule 12b-1 under the 1940 Act. An ETF's board of directors should
therefore initially (and periodically thereafter) evaluate the purpose
and effect of MQP Fees/Optional Incentive Fees (as applicable) proposed
to be made by an ETF to determine that such payments would be in
compliance with that provision. In addition, the ETF's board should
consider initially (and periodically thereafter) whether such fees to
be paid by an ETF's investment adviser or other affiliate would be an
indirect use of fund assets for distribution in assessing the
appropriateness of advisory or other fees paid by the ETF to such
persons.\271\
---------------------------------------------------------------------------

    \271\ See Payment of Asset-Based Sales Loads by Registered Open-
End Management Investment Companies, Investment Company Act Release
No. 16431 (June 13, 1988) at n.123 and accompanying text.
---------------------------------------------------------------------------

    In the NASDAQ Response Letter, NASDAQ noted its belief that Rule
12b-1 is not implicated by payments made pursuant to the MQP because
the MQP payments are being made by ETF sponsors, rather than the ETFs
themselves.\272\ The Commission notes that the prohibition in Rule 12b-
1 applies to both direct and indirect payments made by ETFs registered
under the 1940 Act.
---------------------------------------------------------------------------

    \272\ See NASDAQ Response Letter at 20.
---------------------------------------------------------------------------

    Section 11(d)(1). Section 11(d)(1) of the Exchange Act \273\
generally prohibits a broker-dealer from extending or maintaining
credit, or arranging for the extension or maintenance of credit, on
shares of new issue securities, if the broker-dealer participated in
the distribution of the new issue securities within the preceding 30
days. The Commission's view is that shares of open-end investment
companies and unit investment trusts registered under the 1940 Act,
such as ETF shares, are distributed in a continuous manner, and broker-
dealers that sell such securities are therefore participating in the
``distribution'' of a new issue for purposes of Section 11(d)(1).\274\
---------------------------------------------------------------------------

    \273\ 15 U.S.C. 78k(d)(1).
    \274\ See Exchange Act Release Nos. 6726 (Feb. 8, 1962), 27 FR
1415 (Feb. 15, 1962) and 21577 (Dec. 18, 1984), 49 FR 50174 (Dec.
27, 1984).
---------------------------------------------------------------------------

    The Commission, acting under delegated authority, granted an
exemption from Section 11(d)(1) and Rule 11d1-2 thereunder for broker-
dealers that have entered into an agreement with an ETF's distributor
to place orders with the distributor to purchase or redeem the ETF's
shares (``Broker-Dealer APs).\275\ The SIA Exemption allows a Broker-
Dealer AP to extend or maintain credit, or arrange for the extension or
maintenance of credit, to or for customers on the shares of qualifying
ETFs subject to the condition that neither the Broker-Dealer AP, nor
any natural person associated with the Broker-Dealer AP, directly or
indirectly (including through any affiliate of such Broker-Dealer AP),
receives from the fund complex any payment, compensation or other
economic incentive to promote or sell the shares of the ETF to persons
outside the fund complex, other than non-cash compensation permitted
under NASD Rule 2830(l)(5)(A), (B), or (C). This condition is intended
to eliminate special incentives that Broker-Dealer APs and their
associated persons might otherwise have to ``push'' ETF shares.
---------------------------------------------------------------------------

    \275\ See Letter from Catherine McGuire, Chief Counsel, Division
of Trading and Markets, Securities and Exchange Commission to
Securities Industry Association (November 21, 2005) (``SIA
Exemption'').
---------------------------------------------------------------------------

    The SRO Proposals would permit certain issuers, including ETFs, to
voluntarily pay increased listing fees to the Exchanges. In turn, the
Exchanges would use the fees to pay market makers incentives to improve
the liquidity of participating issuers' securities, and thus enhance
the market quality for the participating issuers. Incentives would be
accrued for, among other things, executing purchases and sales on the
Exchanges. Receipt of the incentive payments by certain broker-dealers
would implicate the condition of the SIA Exemption from the new issue
lending restriction in Section 11(d)(1) of the Exchange Act discussed
above.
    The Commission's view is that the incentives market makers would
receive under the SRO Proposals are indirect payments from the fund
complex to the market maker and that those payments are compensation to
promote or sell the shares of the ETF. If the SRO Proposals were
approved, a market maker that also is a Broker-Dealer AP for an ETF (or
an associated person or an affiliate of a Broker-Dealer AP) that
receives the incentives would not be able to rely on the SIA Exemption
from Section 11(d)(1). This does not mean that Broker-Dealer APs could
not participate in the SRO Proposals, if they were approved; it merely
means they could not rely on the SIA Exemption while doing so. Thus,
Broker-Dealer APs that participate in the SRO Proposals would need to
comply with Section 11(d)(1) unless there is another applicable
exemption.
    In light of the comments received and the importance of the policy
issues raised by the SRO Proposals, the Commission is seeking further
comment on various aspects of the Programs to help the Commission
evaluate whether the SRO Proposals are consistent with the requirements
of Sections 6(b)(4) and 6(b)(5) of the Act, including whether the
proposed Programs provide for the equitable allocation of reasonable
dues, fees and other charges among members and issuers, and whether the
Programs are designed to prevent fraudulent and manipulative acts and
practices, would protect investors and the public interest, and not be
designed to permit unfair discrimination between issuers, brokers or
dealers.
    Based on comments received on the SRO Proposals, and in light of
the fact that the proposed Programs raise similar issues, the
Commission is issuing this

joint order to institute proceedings on both of the SRO Proposals. The
Commission believes that instituting proceedings on both filings
jointly through this order will facilitate the Commission's ability to
solicit comment on the issues that are common to both SRO Proposals.
Nevertheless, the Commission will assess each SRO Proposal separately
for consistency with the requirements of the Exchange Act and the rules
and regulations thereunder.

V. Procedure: Request for Written Comments

    The Commission requests that interested persons provide written
submissions of their views, data, and arguments with respect to the
issues identified above, as well as any others they may have identified
with the SRO Proposals. In particular, the Commission invites the
written views of interested persons concerning whether the SRO
Proposals are consistent with Sections 6(b)(4), 6(b)(5), or any other
provision of the Act, or the rules and regulations thereunder. Although
there do not appear to be any issues relevant to approval or
disapproval which would be facilitated by an oral presentation of
views, data, and arguments, the Commission will consider, pursuant to
Rule 19b-4, any request for an opportunity to make an oral
presentation.\276\
---------------------------------------------------------------------------

    \276\ Section 19(b)(2) of the Act, as amended by the Securities
Act Amendments of 1975, Pub. L. 94-29 (June 4, 1975), grants the
Commission flexibility to determine what type of proceeding--either
oral or notice and opportunity for written comments--is appropriate
for consideration of a particular proposal by a self-regulatory
organization. See Securities Act Amendments of 1975, Senate Comm. on
Banking, Housing & Urban Affairs, S. Rep. No. 75, 94th Cong., 1st
Sess. 30 (1975).
---------------------------------------------------------------------------

    Interested persons are invited to submit written data, views and
arguments regarding whether the SRO Proposals should be approved or
disapproved by August 16, 2012. Any person who wishes to file a
rebuttal to any other person's submission must file that rebuttal by
August 31, 2012.
    The Commission is asking that commenters address the merit of the
statements of each Exchange in support of its respective proposed
Program and the statements of commenters in response to the SRO
Proposals, in addition to any other comments they may wish to submit
about the SRO Proposals. Specifically, the Commission requests comment
on the following aspects of the SRO Proposals:
    1. FINRA Rule 5250 (formerly NASD Rule 2460) is designed to
preserve ``the integrity of the marketplace by ensuring that quotations
accurately reflect a broker-dealer's interest in buying or selling a
security.'' \277\ Specifically, in the NASD Rule 2460 Approval Order,
the Commission found that the ``decision by a firm to make a market in
a given security and the question of price generally are dependent on a
number of factors, including, among others, supply and demand, the
firm's expectations toward the market, its current inventory position,
and exposure to risk and competition. This decision should not be
influenced by payments to the member from issuers or promoters. Public
investors expect broker-dealers' quotations to be based on the factors
described above. If payments to broker-dealers by promoters and issuers
were permitted, investors would not be able to ascertain which
quotations in the marketplace are based on actual interest and which
quotations are supported by issuers or promoters. This structure would
harm investor confidence in the overall integrity of the marketplace.''
\278\ The Commission also added that ``such payments may be viewed as a
conflict of interest since they may influence the member's decision as
to whether to quote or make a market in a security and, thereafter, the
prices that the member would quote.'' \279\
---------------------------------------------------------------------------

    \277\ See NASD Rule 2460 Approval Order, supra note 67, at
37107.
    \278\ See id.
    \279\ See id. at 37106.
---------------------------------------------------------------------------

    Several commenters have raised concerns that issuer payments such
as those proposed in the Programs could have the potential to distort
the market and create conflicts of interest that could corrupt the
integrity of the marketplace in violation of FINRA Rule 5250 and are
not consistent with the Exchange Act.\280\ Other commenters, and
NASDAQ, believe that the NASDAQ Proposal addresses the concerns that
FINRA Rule 5250 was designed to address.\281\
---------------------------------------------------------------------------

    \280\ See supra note 132 and 136 and accompanying text.
    \281\ See supra notes 143-155 and accompanying text.
---------------------------------------------------------------------------

    Given the rationale behind FINRA Rule 5250, what are commenters'
views on whether each Program addresses (or does not address) the
concerns that FINRA Rule 5250 was designed to mitigate, and why or why
not? If commenters are of the view that a Program does not address the
concerns that FINRA Rule 5250 was designed to mitigate, what specific
safeguards, if any, could be imposed to address these concerns? Are
there aspects of the Programs or features of the ETPs that would be
included in the Programs that would support their exclusion from the
general coverage of the Rule? If so, what are they, and why?
    2. The studies cited by NASDAQ in the NASDAQ Notice and by
commenters supportive of the NASDAQ Proposal examined programs
applicable to equity securities of operating companies and not to other
classes of securities, such as ETPs. Are there any studies that have
observed paid for market making programs specifically relating to ETPs?
Are there unique features of ETPs that would make market maker programs
in ETPs similar to the Programs fundamentally different than market
maker programs in other securities such that results of studies focused
on other securities cannot be applied to similar programs for ETPs?
    3. The studies cited by NASDAQ in the NASDAQ Notice and by
commenters supportive of the NASDAQ Proposal looked at the market
quality characteristics of equity securities of operating companies
under certain market making programs, but did not provide a comparison
to the market quality of those same securities before participating in
such programs. Are there any studies that have compared the market
qualities of securities before and during their participation in such a
program? How important is this distinction? Are there any studies that
have compared the market qualities of securities that did not
participate in such a program to the market qualities of similar
securities that participated in the same program? Are there any studies
that have compared the market qualities of securities during and after
their participation in such a program?
    4. NASDAQ believes that the MQP will be beneficial to the financial
markets, to market participants, and to the economy, in general.
Specifically, NASDAQ believes that the MQP will, among other things,
lower transaction costs and enhance liquidity in both ETPs and their
components, making those securities more attractive to a broader range
of investors, and in so doing, the MQP will help companies access
capital to invest and grow. Do commenters agree with NASDAQ's argument
that the MQP will enhance liquidity in both the ETP shares and the
component companies comprising the underlying index or portfolio? If
so, why? If not, why not? Do commenters agree with NASDAQ's assertion
that the MQP will ultimately help ETP component companies to gain
enhanced access to capital? If so, why? If not, why not? Please answer
with specificity.
    5. NASDAQ states that one of the goals of the MQP is to enhance
liquidity

in both ETFs and their components.\282\ NASDAQ further states that
there is a ``vital need for the MQP in the U.S. market for products
facing liquidity challenges.'' \283\ Are there specific examples of
ETPs that would be, or whose underlying components would be, considered
less liquid (and perhaps examples of ETPs that have failed in the past)
that commenters consider would benefit from inclusion in the MQP?
---------------------------------------------------------------------------

    \282\ See NASDAQ Response Letter at 2.
    \283\ See NASDAQ Response Letter at 1.
---------------------------------------------------------------------------

    6. NASDAQ states that the MQP is intended to help ``less actively
traded'' and ``less well known'' ETFs. As such, NASDAQ proposes to
terminate the MQP for an MQP Security that sustains an average ATV of
2,000,000 shares or more for 3 consecutive months. One commenter
believes that 2,000,000 ATV is an arbitrary threshold that is no better
or worse than any other large number, and that the number may need to
be adjusted after the MQP has been implemented.\284\ Similarly, another
commenter asserts that the determination of the correct threshold for
discontinuance of the MQP is an area that will require additional
study, and it is not clear that a hard threshold will be the most
efficient means of determining whether a security remains in the
MQP.\285\ Another commenter argues that any specific level of trading
volume or assets under management or any other arbitrary rule as a
basis for discontinuing the MQP is inappropriate.\286\ Finally, one
commenter notes that, although NASDAQ states that the MQP is intended
to help the most illiquid ETFs, the proposed 2,000,000 ATV threshold
would permit over 90% of the ETFs in existence as of March 31, 2012 to
enter the MQP.\287\ This commenter suggests that the Commission
consider whether a lower trading volume threshold would be more
consistent with the stated goals of the MQP as well as the public
interest, or alternatively, whether MQP eligibility should be based on
a metric other than trading volume, such as actual quotation and/or
transaction data, or should be restricted to newly created ETFs, or
whether a security's participation in the MQP should be limited to a
defined period of time, such as one or two years.\288\
---------------------------------------------------------------------------

    \284\ See Weaver Letter at 8.
    \285\ See Knight Letter at 2.
    \286\ See ETF Consultants Letter at 7.
    \287\ See NASDAQ Vanguard Letter at 5.
    \288\ See id.
---------------------------------------------------------------------------

    With respect to the NASDAQ Proposal, do commenters believe that a
lower or higher trading volume threshold would be more consistent with
the stated goals of the MQP as well as the public interest? Please
explain. Do commenters believe that MQP applicability should be based
on a metric other than trading volume, such as actual quotation and/or
transaction data or another metric? Why or why not? If so, what
metric(s) would commenters suggest and why? In the alternative, should
ETPs be ineligible for the MQP only when the trading volume (or another
measure of trading) is consistently over some reasonable level for a
longer period of time (e.g., 3-6 months) rather than when the ETP
crosses the 2,000,000 ATV threshold for 3 consecutive months, as
proposed? Why or why not? Should the MQP be restricted to newly listed
ETPs? Under a Program that would terminate using a specified threshold
for a particular ETP, would ETPs just above the threshold (and thus are
ineligible or no longer able to participate in the Program) suffer as a
result?
    7. Two commenters state that, unlike NASDAQ's Proposal, there are
no liquidity or trading volume requirements on ETPs that may
participate in the Fixed Incentive Program.\289\ One commenter notes
that, as proposed, nothing prevents an ETP issuer from enrolling in the
Fixed Incentive Program an ETP that already has ample trading volume
and therefore robust market maker activity and good market
quality.\290\ To address these concerns, both commenters recommend that
NYSE Arca limit the type of ETPs permitted into the Fixed Incentive
Program based on trading volume.\291\ One commenter argues that if an
ETP without an LMM has sufficient market maker activity to generate a
consistent, fair, and orderly market, then there is no compelling
rationale for the issuer to pay for an LMM, and such payments should
not be permitted.\292\ Do commenters agree or disagree with these
comments? Why or why not? Specifically, should NYSE Arca adopt
liquidity or other market quality requirements for ETPs that may
participate in the Fixed Incentive Program? Would this help to
alleviate the concerns voiced by commenters over the NYSE Arca
Proposal? Why or why not?
---------------------------------------------------------------------------

    \289\ See NYSE Arca ICI Letter at 3 and NYSE Arca Vanguard
Letter at 3.
    \290\ See NYSE Arca Vanguard Letter at 3.
    \291\ See NYSE Arca ICI Letter at 3 and NYSE Arca Vanguard
Letter at 3. One of these commenters states that other market
quality criteria would also be acceptable. See NYSE Arca Vanguard
Letter at 3, n.9.
    \292\ See NYSE Arca Vanguard Letter at 3, n.9.
---------------------------------------------------------------------------

    8. One commenter expressed the view that the Programs represent a
subsidization of ETPs that, on their own, are unable to generate much
trading volume.\293\ Do commenters agree with this view? Why or why
not? If commenters agree, what are their views on whether such ETPs
should be included within the Program or be ``allowed to fail'' (or
simply to trade at a wider spread) rather than artificially propped up
by the Programs, as one commenter suggests? \294\ Furthermore, should
such ETPs be allowed to continue in the Programs indefinitely? Why or
why not? Would the public interest and the protection of investors be
better served if there was a time limit on participation in the
Programs? Why or why not?
---------------------------------------------------------------------------

    \293\ See NASDAQ Vanguard Letter at 5.
    \294\ See IR Letter at 2.
---------------------------------------------------------------------------

    9. Under either of the SRO Proposals, issuers would have the
discretion to exit the respective Program with respect to a particular
ETP (subject to the requirements outlined in the respective SRO
Proposals). Please provide comment on how, if at all, the liquidity or
other market quality characteristics of an ETP participating in a
Program may or may not be affected once the ETP is no longer in such
Program. For example, if the issuer of the ETP ceases making payments
under a Program, could removal of that ETP from a Program lead to
unexpected illiquidity and/or trading disruptions for the ETP? Why or
why not? If an ETP is removed from a Program, could such removal impact
the spreads in the ETP? If so, why? If not, why not? If commenters
believe that there may be a potential impact on market quality
characteristics, do commenters believe that investors should be
provided disclosure of potential impacts? If so, what type of
disclosure would be effective, and why?
    10. If commenters believe that removal of an ETP from a Program
would impact market quality characteristics of the ETP, what are the
implications, if any, for investors? For example, how might removal
impact an investor's ability to buy or sell shares of the ETP during or
after removal from the Program? If commenters believe that removal of
an ETP from a Program could potentially negatively impact liquidity,
are there other potential solutions to address this concern? For
example, should the ETP sponsor allow all investors (including retail
investors) to redeem their shares of the fund if the ETP exits the
program?
    11. Under either of the SRO Proposals, issuers and market makers
would have discretion to choose to enter into the respective Program.
One commenter questions whether

competitive forces will essentially render the MQP compulsory, forcing
ETPs into a ``pay-to-play'' environment where new ETPs must pay for it
to launch and existing ETPs must pay to maintain quality markets.\295\
This commenter raises a similar concern for the Fixed Incentive
Program.\296\ Do commenters agree with this concern? Why or why not? If
so, should the Commission be concerned with this outcome? Why or why
not? How might ETPs that do not participate in a Program (even if they
qualify for participation), for whatever reason, be affected by the
Programs, if at all? For example, will market makers gravitate to the
ETPs that participate and avoid those that do not participate,
potentially rendering non-participating ETPs as funds with diminished
market making activity? Under this scenario, even if the Programs have
the desired effect of enhancing market quality for participating ETPs,
might they have the unintended effect of diminishing market quality
(widening spreads and limiting book depth) in non-participating ETPs?
Why or why not? Or, could the Programs result in an unintended
consequence of creating an over-supply of overall market maker services
as a result?
---------------------------------------------------------------------------

    \295\ See NASDAQ Vanguard Letter at 4.
    \296\ See NYSE Arca Vanguard Letter at 2, n.7.
---------------------------------------------------------------------------

    12. More generally, is it possible for either Program to result in
a prisoner's dilemma equilibrium, in which all eligible ETPs
participate in the program and achieve limited benefits while paying
higher fees? If so, how could the Programs be designed to prevent such
an equilibrium? If not, why not? Are there other potential equilibria
that these Programs should avoid and how could they be designed to
avoid them? For example, would limiting the number of participating
ETPs per fund sponsor, as proposed under the NYSE Arca Proposal,
prevent the possibility of market makers pressuring ETP issuers to
place every single listed ETP into the Program?
    13. Two commenters voice concerns that LMMs in the Fixed Incentive
Program would not have higher performance standards than LMMs not
participating in the Fixed Incentive Program, and suggest that NYSE
Arca impose higher performance standards on LMMs participating in the
Fixed Incentive Program.\297\ One commenter argues that requiring
heightened performance standards to receive the Optional Incentive Fee
would address conflict of interest concerns, may provide a greater
incentive for LMMs to make better markets in ETPs, and would make the
overall standards of the Fixed Incentive Program more transparent to
issuers and investors.\298\ Do commenters agree or disagree with this
comment? Why or why not? Specifically, should NYSE Arca adopt higher
performance standards for LLMs in the Fixed Incentive Program? Would
this help to alleviate the concerns voiced by commenters over the NYSE
Arca Proposal? Why or why not?
---------------------------------------------------------------------------

    \297\ See NYSE Arca ICI Letter at 3 and NYSE Arca Vanguard
Letter at 3.
    \298\ See NYSE Arca ICI Letter at 3.
---------------------------------------------------------------------------

    14. Under the NASDAQ Proposal, multiple market makers may compete
for incentive payments under the MQP with respect to an MQP Security.
Under the NYSE Arca Proposal, a single market maker (LMM) would be able
to receive incentive payments under the Fixed Income Program with
respect to a security in the program. How, if at all, would having
multiple Market Makers competing for payments under NASDAQ's MQP impact
the potential benefits of its program? How, if at all, would having
only one Market Maker be eligible to receive payments under the NYSE
Arca's Fixed Incentive Program impact the potential benefits of its
program?
    15. Under the NASDAQ Proposal, an MQP Company that wants to
participate in the MQP must submit an application in the form
prescribed by NASDAQ, which may limit the number of MQP Securities that
such MQP Company may list in the MQP based on factors relating to
current and expected liquidity characteristics of the MQP Securities,
the projected initial and continued market quality needs of the MQP
Securities, and the trading characteristics of the MQP Securities
(e.g., quoting, trading, and volume).\299\ In addition, for an MQP
Company to be eligible to participate in the MQP, NASDAQ must have
accepted the MQP Company's application in respect of an MQP Security,
the MQP Security must meet all requirements to be listed on NASDAQ, and
the MQP Security must meet all NASDAQ requirements for continued
listing at all times the MQP Security participates in the MQP.\300\
Under the NYSE Arca Proposal, an issuer that wants to have an ETP
participate in the Fixed Incentive Program must submit a written
application in a form prescribed by NYSE Arca, provided that an issuer
may not have more than 5 existing ETPs that are listed on NYSE Arca
prior to the pilot participate in the Fixed Incentive Program.\301\ In
addition, to be eligible to participate, an issuer must be current in
all payments due to NYSE Arca if it has other securities listed on NYSE
Arca and must be current in all payments due to NYSE Arca and compliant
with continued listing standards for the ETP proposed for inclusion if
the issuer elects to participate in the Fixed Incentive Program after
listing such ETP on NYSE Arca.\302\ With respect to each proposal, do
commenters agree that the applicable criteria defining participation
eligibility for the ETPs are sufficiently objective and clear? If not,
do the criteria raise concerns? If so, why, and if not, why not? Should
the Programs establish additional criteria for participation for ETPs,
other than those that are proposed? If so, what criteria do commenters
suggest, and why?
---------------------------------------------------------------------------

    \299\ See proposed NASDAQ Rule 5950(a)(1)(A) and (B).
    \300\ See proposed NASDAQ Rule 5950(b)(1).
    \301\ See proposed NYSE Arca Equities Rule 8.800(b)(1).
    \302\ See proposed NYSE Arca Equities Rule 8.800(b)(2).
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    16. Under the NASDAQ Proposal, the MQP Company would be paying the
MQP Fee. The term ``MQP Company'' is defined as ``a fund sponsor or
other entity that lists one or more MQP Securities on NASDAQ pursuant
to the MQP.'' \303\ NASDAQ has indicated in the NASDAQ Response Letter
that the entity paying the MQP Fee would be the ETF sponsor, rather
than the ETF itself.\304\ Under the NASDAQ Proposal, ETFs, TIRS and LSs
could all qualify to be MQP Securities. Thus, while NASDAQ indicates
that only ETF sponsors would be paying the MQP Fee, this only relates
to ETFs, and does not apply to the TIRs and LSs, which may not have
``sponsor'' arrangements. Do commenters believe that the entity that
would pay the MQP Fee under NASDAQ's proposal is sufficiently clear? If
not, how would commenters suggest clarifying the definition of MQP
Company as it pertains to each specific type of MQP Security?
---------------------------------------------------------------------------

    \303\ See proposed NASDAQ Rule 5950(e)(7).
    \304\ See NASDAQ Response Letter at 20.
---------------------------------------------------------------------------

    17. Under the NYSE Arca Proposal, the Optional Incentive Fee for
each ETP in the Fixed Incentive Program would be paid by the
issuer.\305\ The term ``issuer'' is not defined in the NYSE Arca
Proposal or elsewhere in the NYSE Arca Equities Rules. Two commenters
believe that it is unclear from NYSE Arca's Proposal whether the entity
paying the Optional Incentive Fee would be the ETP sponsor or the fund
itself. Do commenters believe that the entity that would pay the
Optional Incentive Fee under NYSE Arca's proposal is sufficiently
clear? If not,

how would commenters suggest clarifying the proposal?
---------------------------------------------------------------------------

    \305\ See proposed NYSE Arca Equities Rule 8.800(c)(1).
---------------------------------------------------------------------------

    18. NASDAQ is proposing to disclose on its Web site the acceptance
of an MQP Company and MQP Market Maker into the MQP; the total number
of MQP Securities that any one MQP Company may have in the MQP; the
names of MQP Securities and the MQP Market Maker(s) in each MQP
Security; the amount, if any, of any Supplemental MQP Fee and the Quote
Share Payment and Trade Share Payment allocation determined by each MQP
Company; and any limit on the number of MQP Market Makers that are
permitted to register in an MQP Security. NYSE Arca proposes to provide
notification on its Web site of the ETPs participating in the Fixed
Incentive Program and the LMMs assigned to such ETPs. Is it likely that
investors and other market participants would consult the Exchanges'
Web sites for information about which securities and market makers are
participating in the Programs? Would investors be able to easily
distinguish quotations for ETPs that are in the Program from those that
are not? Why or why not?
    One commenter suggests that, in addition to NASDAQ's Web site,
participation in the MQP also should be noted on the MQP Security's Web
site and in regulatory disclosure documents.\306\ Do commenters agree
or disagree with this suggestion? Why or why not? Is there a need for
additional disclosure to provide information to investors about issuer
participation in the Programs that would allow investors to make better
informed investment decisions at the time of purchase of ETPs in the
Programs, including the potential consequences if an ETP is no longer
in the Programs?
---------------------------------------------------------------------------

    \306\ See ETF Consultants Letter at 8.
---------------------------------------------------------------------------

    One commenter suggests that a ticker symbol identifier would be
useful for products in the MQP.\307\ NASDAQ asserts in its response to
comments that such an identifier is unnecessary and that it would be
undesirable ``to brand MQP products through symbology'' because the MQP
is designed to be transparent through information to be disclosed on
the Exchange's Web site.\308\ Would investors be able to easily
distinguish quotations for ETPs that are in the Program from those that
are not? If not, should the Commission be concerned about this? If the
Commission should be concerned, would a ticker symbol identifier for
securities in the Programs help to address this concern? Why or why
not? Are there other potential solutions?
---------------------------------------------------------------------------

    \307\ See Weaver Letter at 9.
    \308\ See NASDAQ Response Letter at 7-8.
---------------------------------------------------------------------------

    19. Under the NYSE Arca Proposal, an issuer participating in the
Fixed Incentive Program would be required to pay the Optional Incentive
Fee in an amount between $10,000 and $40,000, which amount would be
negotiated between the issuer and the LMM assigned to such issuer's
ETP, and the final amount of such Optional Incentive Fee would not be
publicly disclosed. Should NYSE Arca be required to disclose the final
amount of such Optional Incentive Fee? Would such information be
helpful to investors in determining whether to invest in an ETP in the
Fixed Incentive Program? Why or why not?
    20. A commenter suggests that NASDAQ be required to make available
the data gathered under the pilot to ETP sponsors participating in the
MQP.\309\ This same commenter also supports the view that, with respect
to the Fixed Incentive Program,\310\ NYSE Arca should be required to
publicly (and anonymously) disclose statistics on the performance of
LMMs in the Program, as such information could be meaningful for
investors and would help assess how much liquidity is being provided by
LMMs under the Program.\311\ Another commenter suggests that NASDAQ
publicly disclose on a monthly basis each MQP Market Maker's share of
Quote Share Payments and Trade Share Payments for each MQP Security the
MQP Market Maker quotes/trades.\312\ Should the Exchanges be required
to disclose the data gathered under the Programs to the issuers
participating in the Program? Should such information be required to be
publicly disclosed? Should the Exchanges be required to publicly
disclose (on an anonymous basis or otherwise) the performance of the
market makers participating in the respective Programs during the pilot
period? Should the Exchanges be required to provide to the Commission
and publically disclose any analysis of the impact of the Programs?
Would some or all of this information be useful for investors? Would
the public disclosure provide useful data to academics or other members
of the public to help assess the impact of the Programs? Would such
analyses provide useful information to the Exchanges or Commission to
help assess whether the Programs were operating in a manner consistent
with the Exchange Act and are consistent with the protection of
investors? For each question, please explain your answer.
---------------------------------------------------------------------------

    \309\ See NASDAQ ICI Letter at 3.
    \310\ Under the Fixed Incentive Program pilot, NYSE Arca states
that it would provide the Commission with certain market quality
data on a confidential basis each month. See NYSE Arca Notice, supra
note 12, at 29422.
    \311\ See NYSE Arca ICI Letter at 4.
    \312\ See ETF Consultants Letter at 8.
---------------------------------------------------------------------------

    21. With respect to the NASDAQ Proposal, two commenters suggest
improvements to the implementation of the pilot to allow the Commission
and NASDAQ to more effectively assess the impact of the MQP.\313\ One
of these commenters suggests that the pilot have a staggered
introduction of MQP Securities with a randomized sequence, and a long
enough pre- and post-event period (e.g., 3 months) for each
introduction to identify an effect.\314\ In the NASDAQ Response Letter,
NASDAQ states that a staggered introduction of MQP Securities and a
randomized sequence would add ``un-needed complexity to the program,
and is not necessary in light of the optional nature of the MQP.''
\315\ The same commenter also suggests that NASDAQ provide the
Commission with detailed reporting of all trades and quotes in all
securities for a pre-event period and a post-event period (with MQP
Market Maker trades and quotes flagged).\316\ Another commenter,
however, notes that any ``before and after'' data needed can be
obtained by comparing trading and asset growth in existing products
which move into the MQP after it is launched, and a period after an ETF
launch without participation in MQP would be an unnecessary and
inappropriate handicap for new ETFs.\317\ NASDAQ states its belief that
any pre-event period would be ``antithetical to the goal of the program
to enhance liquidity of products as soon as possible.'' \318\
---------------------------------------------------------------------------

    \313\ See Menkveld Letter at 4-5 and NASDAQ Vanguard Letter at
4-5.
    \314\ See Menkveld Letter at 4-5.
    \315\ See NASDAQ Response Letter at 9.
    \316\ See id.
    \317\ See ETF Consultants Letter at 8.
    \318\ See id.
---------------------------------------------------------------------------

    Another commenter believes NASDAQ should be required to monitor
market quality metrics during the pilot not only for ETFs participating
in the MQP, but also for ETFs that do not participate in the MQP, to
determine whether the non-participating ETFs are negatively
affected.\319\ With respect to the NYSE Arca Proposal, one commenter
believes it is important that NYSE Arca and the Commission have an
opportunity to evaluate the impact of the program on the quality of
markets in ETPs prior to considering its permanent approval, both with
respect to ETPs

participating in the program and those ETPs that choose not to
participate.\320\
---------------------------------------------------------------------------

    \319\ See NASDAQ Vanguard Letter at 4.
    \320\ See NYSE Arca ICI Letter at 4.
---------------------------------------------------------------------------

    Do commenters agree or disagree with these views? Why or why not?
Would the structure of each pilot as proposed, as well as the data or
other information proposed to be provided to the Commission,
sufficiently help inform the Commission as to whether the MQP or the
Fixed Incentive Program, as applicable, was working as intended to
achieve each Exchange's stated objective? Why or why not? For example,
would the applicable Exchange or the Commission be able to fully
evaluate a Program without being able to compare the performance of a
particular ETP before it enters the Program with its performance once
it has entered the Program? Why or why not? Should securities be
eligible for the Programs only after trading for some period of time
(e.g., 3-6 months) without the benefit of participating in the
applicable Program? In addition, would the structure of each pilot as
proposed and the data or other information to be provided to the
Commission allow the Exchanges and the Commission to adequately assess
commenters' concerns? If not, how should each Exchange amend its
respective pilot structure and/or data items or other information to
improve the ability of the Exchange and the Commission to be able to
adequately assess commenters' concerns? Similarly, would the proposed
pilot structures and submission of data items or other information be
helpful to the Commission in determining whether the Programs are
operating consistent with the requirements of the Exchange Act and the
rules thereunder? If not, how should each Exchange amend its respective
pilot structure and/or data items or other information to improve the
chances that the pilot would operate consistent with the requirements
of the Exchange Act and rules thereunder?
    22. In addition to the data items and/or other information that the
Exchanges have proposed to provide to the Commission, should each
Exchange also provide analyses of its respective pilot that addresses
the intended impacts of its Program? Have the Exchanges adequately
responded to commenters' concerns? If not, should the Exchanges be
required to supplement the public file with additional data and
analyses on the impact of the Programs? What specific issues should any
such analyses cover? Should the Exchanges provide empirical support for
these analyses?
    23. Under the NYSE Arca Proposal, NYSE Arca would retain a 5%
administrative fee to be deducted from the Optional Incentive Fee paid
by the ETP issuer.\321\ NYSE Arca states that this fee would be
reasonable to cover its costs of administering the program.\322\ What
are commenters views on whether a 5% administrative fee charged by NYSE
Arca for participation in its Fixed Incentive Program would be
reasonable? Do commenters believe that NYSE Arca has clearly and
sufficiently explained why this fee is reasonable? Also, do commenters
have a view as to whether this fee would or would not impact the
Exchange's incentives when administering the Program? If so, how so? If
not, why not?
---------------------------------------------------------------------------

    \321\ See NYSE Arca Notice, supra note 12, at 29421, n.12.
NASDAQ does not propose any similar fee in its proposal.
    \322\ See NYSE Arca Notice, supra note 12 at 29422.
---------------------------------------------------------------------------

    24. Are there any alternative means of addressing the concerns of
Rule 102 of Regulation M, which could be conditions to exemptive relief
from that provision? Please specify particular conditions that
commenters believe would be appropriate to address the Regulation M
concerns.
    25. Do commenters believe the ``incubation'' period potentially
provided by these Programs for newly listed ETPs will affect the
decision making process of ETP sponsors concerning which ETP products
to bring to market or not to bring to market? Why or why not?
    26. Section 6(b)(8) of the Exchange Act \323\ requires that the
rules of a national securities exchange not impose any burden on
competition not necessary or appropriate in furtherance of the purposes
of the Act. Both NASDAQ and NYSE Arca represent they do not believe
that their respective Programs will not result in any burden on
competition that is not necessary or appropriate in furtherance of the
purposes of the Act.\324\ What are commenters views as to whether the
Exchanges have sufficiently explained why their respective proposals do
not impose any burden on competition that is not necessary or
appropriate in furtherance of the purposes of the Act?
---------------------------------------------------------------------------

    \323\ 15 U.S.C. 78f(b)(8).
    \324\ See NASDAQ Notice, supra note 4, at 22050-51; NYSE Arca
Notice, supra note 12, at 29423.
---------------------------------------------------------------------------

    27. NASDAQ states that the MQP would be beneficial to the financial
markets, to market participants including traders and investors, and to
the economy in general. First, the Exchange proposes the MQP to
encourage narrow spreads and liquid markets in situations that
generally have not been, or may not be, conducive to naturally having
such markets. In NASDAQ's view, the securities that comprise these
markets may include less actively traded or less well known ETF
products that are made up of securities of less well known or start-up
companies as components.\325\ Second, in rewarding Market Makers that
are willing to ``go the extra mile'' to develop liquid markets for MQP
Securities, NASDAQ asserts that the MQP would clearly benefit traders
and investors by encouraging more quote competition, narrower spreads,
and greater liquidity. Third, NASDAQ asserts that the MQP will lower
transaction costs and enhance liquidity in both ETFs and their
components, making those securities more attractive to a broader range
of investors. In so doing, NASDAQ states that the MQP will help
companies access capital to invest and grow. And fourth, NASDAQ asserts
that the MQP may attract smaller, less developed companies and
investment opportunities to a regulated and transparent market and
thereby serve the dual function of providing access to on-Exchange
listing while expanding investment and trading opportunities to market
participants and investors.\326\ NYSE Arca states that the Fixed
Incentive Program is designed to encourage additional market makers to
pursue LMM assignments and thereby support the provision of consistent
liquidity in ETPs listed on the Exchange, and further states that the
assignment of an LMM is a critical component of the promotion of a
consistent, fair and orderly market in ETPs on the Exchange.\327\
---------------------------------------------------------------------------

    \325\ See NASDAQ Notice, supra note 4, at 22043, n.12 (``These
small companies and their securities (whether components of listed
products like ETFs or direct listings) have been widely recognized
as essential to job growth and creation and, by extension, to the
health of the economy. Being included in a successful ETF can
provide the stocks of these companies with enhanced liquidity and
exposure, enabling them to attract investors and access capital
markets to fund investment and growth'').
    \326\ See NASDAQ Notice, supra note 4, at 22043.
    \327\ See NYSE Arca Notice, supra note 12, at 29420, 29421-
29422.
---------------------------------------------------------------------------

    Do commenters agree or disagree with NASDAQ's and NYSE Arca's
assertions as to the Programs' potential impact on efficiency,
competition, and capital formation? Why or why not? Generally, do
commenters have any other views as to whether and, if so, how each of
the Programs would impact efficiency, competition, and capital
formation? Do the proposed pilot structures, for example, promote
efficiency, competition, and capital formation? Why or why not?
    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 Numbers SR-NASDAQ-2012-043 and/or SR-NYSEArca-2012-37 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 Numbers SR-NASDAQ-2012-043 and/or
SR-NYSEArca-2012-37. These file numbers 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 SRO
Proposals that are filed with the Commission, and all written
communications relating to the SRO Proposals 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, on official business days
between the hours of 10:00 a.m. and 3:00 p.m. Copies of such filings
also will be available for inspection and copying at the principal
office of the Exchanges. 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 Numbers
SR-NASDAQ-2012-043 and/or SR-NYSEArca-2012-37 and should be submitted
on or before August 16, 2012. Rebuttal comments should be submitted by
August 31, 2012.

    For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\328\
---------------------------------------------------------------------------

    \328\ 17 CFR 200.30-3(a)(57).
---------------------------------------------------------------------------

Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2012-17349 Filed 7-16-12; 8:45 am]
BILLING CODE 8011-01-P


[Federal Register Volume 86, Number 31 (Thursday, February 18, 2021)]
[Notices]
[Page 10116]
[FR Doc No: 2021-03315]

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DEPARTMENT OF HOMELAND SECURITY

Federal Emergency Management Agency

[Internal Agency Docket No. FEMA-4512-DR; Docket ID FEMA-2021-0001]

Virginia; Amendment No. 2 to Notice of a Major Disaster
Declaration

AGENCY: Federal Emergency Management Agency, DHS.

ACTION: Notice.

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

SUMMARY: This notice amends the notice of a major disaster declaration
for the Commonwealth of Virginia (FEMA-4512-DR), dated April 2, 2020,
and related determinations.

DATES: This change occurred on January 20, 2021.

FOR FURTHER INFORMATION CONTACT: Dean Webster, Office of Response and
Recovery, Federal Emergency Management Agency, 500 C Street SW,
Washington, DC 20472,<PHONE_NUMBER>.

SUPPLEMENTARY INFORMATION: The Federal Emergency Management Agency
(FEMA) hereby gives notice that pursuant to the authority vested in the
Administrator, under Executive Order 12148, as amended, Janice P.
Barlow, of FEMA is appointed to act as the Federal Coordinating Officer
for this disaster.
    This action terminates the appointment of MaryAnn Tierney as
Federal Coordinating Officer for this disaster.

    The following Catalog of Federal Domestic Assistance Numbers
(CFDA) are to be used for reporting and drawing funds: 97.030,
Community Disaster Loans; 97.031, Cora Brown Fund; 97.032, Crisis
Counseling; 97.033, Disaster Legal Services; 97.034, Disaster
Unemployment Assistance (DUA); 97.046, Fire Management Assistance
Grant; 97.048, Disaster Housing Assistance to Individuals and
Households In Presidentially Declared Disaster Areas; 97.049,
Presidentially Declared Disaster Assistance--Disaster Housing
Operations for Individuals and Households; 97.050, Presidentially
Declared Disaster Assistance to Individuals and Households--Other
Needs; 97.036, Disaster Grants--Public Assistance (Presidentially
Declared Disasters); 97.039, Hazard Mitigation Grant.

Robert J. Fenton,
Senior Official Performing the Duties of the Administrator, Federal
Emergency Management Agency.
[FR Doc. 2021-03315 Filed 2-17-21; 8:45 am]
BILLING CODE 9111-23-P


[Federal Register Volume 80, Number 158 (Monday, August 17, 2015)]
[Rules and Regulations]
[Pages 49152-49155]
[FR Doc No: 2015-20115]

=======================================================================
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DEPARTMENT OF HOMELAND SECURITY

Coast Guard

33 CFR Part 165

[Docket Number USCG-2015-0701]
RIN 1625-AA00

Safety Zone, James River; Newport News, VA

AGENCY: Coast Guard, DHS.

ACTION: Temporary final rule.

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SUMMARY: The Coast Guard is establishing a safety zone on the navigable
waters of the James River, in the vicinity of the James River Reserve
Fleet, in support of United States Navy explosives training on the M/V
SS DEL MONTE. This safety zone will restrict vessel movement in the
specified area during the explosives training. This action is necessary
to provide for the safety of life and property on the surrounding
navigable waters during the United States Navy explosives training.

DATES:  This rule is effective and enforced from 8 a.m. on August 17,
2015 until 4 p.m. on August 21, 2015.

ADDRESSES: Documents mentioned in this preamble are part of docket
[USCG-2015-0701]. To view documents

mentioned in this preamble as being available in the docket, go to
http://www.regulations.gov, type the docket number in the ``SEARCH''
box and click ``SEARCH.'' Click on Open Docket Folder on the line
associated with this rulemaking. You may also visit the Docket
Management Facility in Room W12-140 on the ground floor of the
Department of Transportation West Building, 1200 New Jersey Avenue SE.,
Washington, DC 20590, between 9 a.m. and 5 p.m., Monday through Friday,
except Federal holidays.

FOR FURTHER INFORMATION CONTACT: If you have questions on this rule,
call or email LCDR Barbara Wilk, Waterways Management Division Chief,
Sector Hampton Roads, Coast Guard; telephone<PHONE_NUMBER>, email
<EMAIL_ADDRESS>If you have questions on viewing or
submitting material to the docket, call Cheryl Collins, Program
Manager, Docket Operations, telephone<PHONE_NUMBER>.

SUPPLEMENTARY INFORMATION:

Table of Acronyms

DHS Department of Homeland Security
FR Federal Register
NPRM Notice of Proposed Rulemaking

A. Regulatory History and Information

    The Coast Guard is issuing this temporary final rule without prior
notice and opportunity to comment pursuant to authority under section
4(a) of the Administrative Procedure Act (APA) (5 U.S.C. 553(b)). This
provision authorizes an agency to issue a rule without prior written
notice and opportunity to comment when the agency for good cause finds
that those procedures are ``impracticable, unnecessary, or contrary to
the public interest.'' Under 5 U.S.C. 553(b)(B), the Coast Guard finds
that good cause exists for not publishing a notice of proposed
rulemaking (NPRM) with respect to this rule due to the fact that this
military training is necessary to train and qualify Navy personnel in
the use of explosives. This training is imperative to ensure that Navy
personnel located within the Fifth Coast Guard District are properly
trained and qualified before conducting military and national security
operations for use in securing ports and waterways. Navy policy
requires that Navy personnel meet and maintain certain qualification
standards before being allowed to carry out certain missions. Failure
to conduct this required training at this time will result in a lapse
in personnel qualification standards and, consequently, the inability
of Navy personnel to carry out important national security functions at
any time. The Coast Guard received the information about this event on
July 20, 2015; delaying the effective date by first publishing an NPRM
would be contrary to the safety zone's intended objectives as well as
to the public interest because immediate action is needed to protect
persons and vessels against the hazards associated. The Coast Guard
will provide advance notification to users of the affected waterway via
marine information broadcasts and local notice to mariners. The Coast
Guard will provide advance notifications to users of the affected
waterway via marine information broadcasts and local notice to
mariners.
    Under 5 U.S.C. 553(d)(3), the Coast Guard finds that good cause
exists for making this rule effective less than 30 days after
publication in the Federal Register. Due to the need for immediate
action, the restriction on vessel traffic is necessary to protect life,
property and the environment; therefore, a 30-day notice is
impracticable. Delaying the effective date would be contrary to the
safety zone's intended objectives of protecting persons and vessels,
and enhancing public and maritime safety.

B. Basis and Purpose

    The legal basis and authorities for this rule are found in 33
U.S.C. 1231; 33 CFR 1.05-1, 6.04-1, 160.5; Department of Homeland
Security Delegation No. 0170.1, which collectively authorize the Coast
Guard to propose, establish, and define regulatory safety zones.
    The purpose of this safety zone is to protect the participants,
patrol vessels, and other vessels transiting navigable waters of the
James River, in the vicinity of the James River Reserve Fleet, from
hazards associated with military explosives operations. The potential
hazards to mariners within the safety zone include shock waves, flying
shrapnel, and loud noises.

C. Discussion of the Final Rule

    The Captain of the Port of Hampton Roads is establishing a safety
zone on specified waters of the James River, in the vicinity of the
James River Reserve Fleet, in Newport News, VA. The safety zone will
encompass all navigable waters within a 1500 foot radius of the SS DEL
MONTE location at position 37[deg]06'11'' N., 076[deg]38'40'' W. (NAD
1983). This safety zone will be established and enforced from 8 a.m. on
August 17, 2015 until 4 p.m. on August 21, 2015. Access to the safety
zone will be restricted during the specified dates and times. Except
for participants and vessels authorized by the Captain of the Port of
his Representative, no person or vessel may enter or remain in the
regulated area.
    The Captain of the Port will give notice of the enforcement of the
safety zone by all appropriate means to provide the widest
dissemination of notice to the affected segments of the public. This
includes publication in the Local Notice to Mariners and Marine
Information Broadcasts.

D. Regulatory Analyses

    We developed this rule after considering numerous statutes and
executive orders related to rulemaking. Below we summarize our analyses
based on these statutes and executive orders.

1. Regulatory Planning and Review

    This rule is not a significant regulatory action under section 3(f)
of Executive Order 12866, Regulatory Planning and Review, as
supplemented by Executive Order 13563, Improving Regulation and
Regulatory Review, and does not require an assessment of potential
costs and benefits under section 6(a)(3) of Executive Order 12866 or
under section 1 of Executive Order 13563. The Office of Management and
Budget has not reviewed it under those Orders. Although this safety
zone restricts vessel traffic through the regulated area, the effect of
this rule will not be significant because: (i) This rule will only be
enforced for the limited size and duration of the event; and (ii) the
Coast Guard will make extensive notification to the maritime community
via marine information broadcasts so mariners may adjust their plans
accordingly.

2. Impact on Small Entities

    The Regulatory Flexibility Act of 1980 (RFA), 5 U.S.C. 601-612, as
amended, requires federal agencies to consider the potential impact of
regulations on small entities during rulemaking. The term ``small
entities'' comprises small businesses, not-for-profit organizations
that are independently owned and operated and are not dominant in their
fields, and governmental jurisdictions with populations of less than
50,000. The Coast Guard certifies under 5 U.S.C. 605(b) that this rule
will not have a significant economic impact on a substantial number of
small entities. This rule affects the following entities, some of which
might be small entities: The owners or operators of vessels intending
to transit or anchor in waters of the Eastern Branch of the Elizabeth
River during the enforcement period.
    This safety zone will not have a significant economic impact on a
substantial number of small entities for

the following reasons: (i) The safety zone is of limited size and
duration, and (ii) Sector Hampton Roads will issue maritime advisories
widely available to users of the James River allowing mariners to
adjust their plans accordingly.

3. Assistance for Small Entities

    Under section 213(a) of the Small Business Regulatory Enforcement
Fairness Act of 1996 (Pub. L. 104-121), we want to assist small
entities in understanding this rule. If the rule would affect your
small business, organization, or governmental jurisdiction and you have
questions concerning its provisions or options for compliance, please
contact the person listed in the FOR FURTHER INFORMATION CONTACT,
above.
    Small businesses may send comments on the actions of Federal
employees who enforce, or otherwise determine compliance with, Federal
regulations to the Small Business and Agriculture Regulatory
Enforcement Ombudsman and the Regional Small Business Regulatory
Fairness Boards. The Ombudsman evaluates these actions annually and
rates each agency's responsiveness to small business. If you wish to
comment on actions by employees of the Coast Guard, call 1-888-REG-FAIR
(1-888-734-3247). The Coast Guard will not retaliate against small
entities that question or complain about this rule or any policy or
action of the Coast Guard.

4. Collection of Information

    This rule will not call for a new collection of information under
the Paperwork Reduction Act of 1995 (44 U.S.C. 3501-3520).

5. Federalism

    A rule has implications for federalism under Executive Order 13132,
Federalism, if it has 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. We have analyzed this rule under that Order and determined
that this rule does not have implications for federalism.

6. Protest Activities

    The Coast Guard respects the First Amendment rights of protesters.
Protesters are asked to contact the person listed in the FOR FURTHER
INFORMATION CONTACT section to coordinate protest activities so that
your message can be received without jeopardizing the safety or
security of people, places or vessels.

7. Unfunded Mandates Reform Act

    The Unfunded Mandates Reform Act of 1995 (2 U.S.C. 1531-1538)
requires Federal agencies to assess the effects of their discretionary
regulatory actions. In particular, the Act addresses actions that may
result in the expenditure by a State, local, or tribal government, in
the aggregate, or by the private sector of $100,000,000 (adjusted for
inflation) or more in any one year. Though this rule will not result in
such expenditure, we do discuss the effects of this rule elsewhere in
this preamble.

8. Taking of Private Property

    This rule will not cause a taking of private property or otherwise
have taking implications under Executive Order 12630, Governmental
Actions and Interference with Constitutionally Protected Property
Rights.

9. Civil Justice Reform

    This rule meets applicable standards in sections 3(a) and 3(b)(2)
of Executive Order 12988, Civil Justice Reform, to minimize litigation,
eliminate ambiguity, and reduce burden.

10. Protection of Children

    We have analyzed this rule under Executive Order 13045, Protection
of Children from Environmental Health Risks and Safety Risks. This rule
is not an economically significant rule and does not create an
environmental risk to health or risk to safety that may
disproportionately affect children.

11. Indian Tribal Governments

    This rule does not have tribal implications under Executive Order
13175, Consultation and Coordination with Indian Tribal Governments,
because it does not have a substantial direct effect on one or more
Indian tribes, on the relationship between the Federal Government and
Indian tribes, or on the distribution of power and responsibilities
between the Federal Government and Indian tribes.

12. Energy Effects

    This action is not a ``significant energy action'' under Executive
Order 13211, Actions Concerning Regulations That Significantly Affect
Energy Supply, Distribution, or Use.

13. Technical Standards

    This rule does not use technical standards. Therefore, we did not
consider the use of voluntary consensus standards.

14. Environment

    We have analyzed this rule under Department of Homeland Security
Management Directive 023-01 and Commandant Instruction M16475.lD, which
guide the Coast Guard in complying with the National Environmental
Policy Act of 1969 (NEPA) (42 U.S.C. 4321-4370f), and have determined
that this action is one of a category of actions that do not
individually or cumulatively have a significant effect on the human
environment. This rule involves the establishment of a safety zone.
This rule is categorically excluded from further review under paragraph
34-(g) of Figure 2-1 of the Commandant Instruction. We seek any
comments or information that may lead to the discovery of a significant
environmental impact from this rule.

List of Subjects in 33 CFR Part 165

    Harbors, Marine safety, Navigation (water), Reporting and
recordkeeping requirements, Security measures, Waterways.

    For the reasons discussed in the preamble, the Coast Guard amends
33 CFR part 165 as follows:

PART 165--REGULATED NAVIGATION AREAS AND LIMITED ACCESS AREAS

0
1. The authority citation for part 165 continues to read as follows:

    Authority:  33 U.S.C. 1231; 50 U.S.C. 191; 33 CFR 1.05-1, 6.04-
1, 6.04-6, 160.5; Department of Homeland Security Delegation No.
0170.1.

0
2. Add Sec.  165.T05-0701 to read as follows:

Sec.  165.T05-0701  Safety Zone, James River; Newport News, VA.

    (a) Definitions. For the purposes of this section, Captain of the
Port means the Commander, Sector Hampton Roads. Representative means
any Coast Guard commissioned, warrant or petty officer who has been
authorized to act on the behalf of the Captain of the Port.
Participants mean individuals and vessels involved in explosives
training.
    (b) Locations. The following area is a safety zone:
    (1) All waters in the vicinity of the of the James River Reserve
Fleet, in the James River, within a 1500 foot radius of the M/V SS DEL
MONTE in approximate position 37[deg]06'11'' N., 076[deg]38'40'' W.
(NAD 1983).
    (c) Regulations. (1) All persons are required to comply with the
general regulations governing safety zones in Sec.  165.23 of this
part.
    (2) With the exception of participants, entry into or remaining in
this safety zone is prohibited unless authorized by the Captain of the
Port, Hampton Roads or his designated representatives.

    (3) All vessels underway within this safety zone at the time it is
implemented are to depart the zone immediately.
    (4) The Captain of the Port, Hampton Roads or his representative
can be contacted at telephone number<PHONE_NUMBER>.
    (5) The Coast Guard and designated James River Reserve Fleet
security vessels enforcing the safety zone can be contacted on VHF-FM
marine band radio channel 13 (165.65 Mhz) and channel 16 (156.8 Mhz).
    (6) This section applies to all persons or vessels wishing to
transit through the safety zone except participants and vessels that
are engaged in the following operations:
    (i) Enforcing laws;
    (ii) Servicing aids to navigation; and
    (iii) Emergency response vessels.
    (7) The U.S. Coast Guard may be assisted in the patrol and
enforcement of the safety zone by Federal, State, and local agencies.
    (d) Enforcement period. This rule will be enforced from 8 a.m. on
August 17, 2015 to 4 p.m. on August 21, 2015.

    Dated: July 31, 2015.
Christopher S. Keane,
Captain, U.S. Coast Guard, Captain of the Port Hampton Roads.
[FR Doc. 2015-20115 Filed 8-14-15; 8:45 am]
 BILLING CODE 9110-04-P