[Federal Register Volume 82, Number 243 (Wednesday, December 20, 2017)]
[Notices]
[Pages 60433-60439]
[FR Doc No: 2017-27342]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-82321; File No. SR-MSRb-2017-06)

Self-Regulatory Organizations; Municipal Securities Rulemaking
Board; Order Granting Accelerated Approval of a Proposed Rule Change,
as Modified by Amendment No. 1, Consisting of Proposed Amendments to
MSRB Rule G-34, on CUSIP Numbers, New Issue, and Market Information
Requirements

December 14, 2017.

I. Introduction

    On August 30, 2017, the Municipal Securities Rulemaking Board (the
``MSRB'' or ``Board'') filed with the Securities and Exchange
Commission (the ``SEC'' or ``Commission''), pursuant to Section
19(b)(1) of the Securities Exchange Act of 1934 (``Exchange Act'' or
``Act'') \1\ and Rule 19b-4 thereunder,\2\ a proposed rule change
consisting of proposed amendments to MSRB Rule G-34, on CUSIP numbers,
new issue, and market information requirements, to more clearly express
in the rule language the MSRB's longstanding interpretation that
brokers, dealers and municipal securities dealers (collectively,
``dealers'') when acting as a placement agent in a private placement of
municipal securities are subject to the CUSIP number requirements under
Rule G-34(a); to expand the application of the rule to cover not only
dealer municipal advisors but also non-dealer municipal advisors in
competitive sales of municipal securities; and to provide a limited
exception from the requirements to apply for CUSIP numbers and to apply
for depository eligibility (the ``proposed rule change''). The proposed
rule change was published for comment in the Federal Register on
September 18, 2017.\3\
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ Securities Exchange Act Release No. 81595 (September 13,
2017) (the ``Notice of Filing''), 82 FR 43587 (September 18, 2017).
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    The Commission received eleven comment letters on the proposed rule
change.\4\ On October 18, 2017, the MSRB granted an extension of time
for the Commission to act on the filing until December 15, 2017. On
November 7, 2017, the MSRB responded to those comments \5\ and filed
Amendment No. 1 to the proposed rule change (``Amendment No. 1'').\6\
The Commission published notice of Amendment No. 1 in the Federal
Register on November 17, 2017.\7\ In response to Amendment No. 1, the
Commission received two comment letters.\8\ On December 8, 2017, the
MSRB submitted a response to comments received on Amendment No. 1.\9\
This order approves the proposed rule change, as modified by Amendment
No. 1, on an accelerated basis.
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    \4\ See Letter to Secretary, Commission, from Leslie M. Norwood,
Managing Director and Associate General Counsel, Securities Industry
and Financial Markets Association (``SIFMA''), dated October 10,
2017 (the ``First SIFMA Letter''); Letter to Secretary, Commission,
from Susan Gaffney, Executive Director, National Association of
Municipal Advisors (``NAMA''), dated October 10, 2017 (the ``NAMA
Letter''); Letter to Secretary, Commission, from Steve Apfelbacher,
President, Ehlers Inc., dated October 10, 2017 (the ``Ehlers
Letter''); Letter to Secretary, Commission, from Noreen P. White,
Co-President, and Kim W. Whelan, Co-President, Acacia Financial
Group, Inc., dated October 10, 2017 (the ``Acacia Letter''); Letter
to Secretary, Commission, from Cristeena G. Naser, Vice President
and Senior Counsel, American Bankers Association (``ABA''), dated
October 10, 2017 (the ``First ABA Letter''); Letter to Secretary,
Commission, from Michael G. Sudsina, President, Sudsina &
Associates, LLC, dated October 10, 2017 (the ``Sudsina Letter'');
Letter to Secretary, Commission, from Marianne F. Edmonds, Senior
Managing Director, Public Resources Advisory Group (``PRAG''), dated
October 10, 2017 (the ``PRAG Letter''); Letter to Secretary,
Commission, from Emily Swenson Brock, Director, Federal Liaison
Center, Government Finance Officers Association (``GFOA''), dated
October 10, 2017 (the ``GFOA Letter''); Letter to Secretary,
Commission, from Peter Warms, Senior Manager of Fixed Income,
Entity, Regulatory Content and Symbology, Bloomberg L.P., dated
October 10, 2017 (the ``Bloomberg Letter''); Letter to Secretary,
Commission, from Dennis Dix, Principal, DIXWORKS LLC, dated October
10, 2017 (the ``DIXWORKS Letter''); Letter to Secretary, Commission,
from Stephan Wolf, CEO, Global Legal Entity Identifier Foundation
(``GLEIF''), dated October 9, 2017 (the ``GLEIF Letter''). Staff
from the Office of Municipal Securities discussed the proposed rule
change with representatives from PFM Financial Advisors LLC and PFM
Asset Management LLC on October 26, 2017.
    \5\ See Letter to Secretary, Commission, from Margaret R. Blake,
Associate General Counsel, MSRB, dated November 7, 2017 (the
``November Response Letter''), available at https://www.sec.gov/comments/sr-msrb-2017-06/msrb201706-2674227-161458.pdf.
    \6\ Id. Amendment No. 1 is available at http://www.msrb.org/~/
media/Files/SEC-Filings/2017/MSRb-2017-06-A-1.ashx.
    \7\ See Exchange Act Release No. 82053 (Nov. 13, 2017), 82 FR
54455 (Nov. 17, 2017) (the ``Notice of Amendment No. 1''). The
comment period closed on December 1, 2017.
    \8\ See Letter to Secretary, Commission, from Tab Stewart,
Senior Counsel, ABA, dated November 30, 2017 (the ``Second ABA
Letter''); and Letter to Secretary, Commission, Leslie M. Norwood,
Managing Director and Associate General Counsel, SIFMA, dated
December 1, 2017 (the ``Second SIFMA Letter'').
    \9\ See Letter to Secretary, Commission, from Margaret R. Blake,
Associate General Counsel, MSRB, dated December 8, 2017 (the
``December Response Letter'' and, together with the November
Response Letter, the ``MSRB Response Letters''), available at
https://www.sec.gov/comments/sr-msrb-2017-06/msrb201706-2779641-161626.pdf.
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II. Description of Proposed Rule Change

    As described more fully in the Notice of Filing and Amendment No.1,
the MSRB stated that the purpose of the proposed rule change is to:
Clarify the application of the CUSIP number requirements to dealers in
private placements; apply the CUSIP number requirements to all
municipal advisors advising on a competitive sale of municipal
securities; provide an exception from the CUSIP number and depository
eligibility requirements in certain circumstances; and make certain
technical and non-substantive changes.\10\
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    \10\ See Notice of Filing and Amendment No. 1.
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    The MSRB stated that proposed rule change would amend Rule G-
34(a)(i)(A) to delete the definition of ``underwriter'' from the rule
text and would add a new definition of ``underwriter'' in new section
(e), on definitions. New subsection (e)(vii) of Rule G-34 would cross
reference the term ``underwriter'' to the same term as it is defined in
Exchange Act Rule 15c2-12(f)(8).\11\ The MSRB stated that this proposed
rule change would codify existing interpretations and clarify in the
text of the rule that dealers acting as placement agents in private
placement transactions, including direct purchases of municipal
securities, are subject to the CUSIP-related requirements set forth in
Rule G-34(a).\12\
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    \11\ See Notice of Filing.
    \12\ Id.
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    The MSRB stated that paragraph (a)(i)(A) of Rule G-34 would be
amended to apply the CUSIP number requirements to all municipal
advisors (whether dealers or non-dealers) advising on a competitive
sale of a new issue of municipal securities.\13\ The MSRB noted that,
in 1986, the MSRB amended Rule G-34(a)(i)(A) to require a dealer
``acting as a financial advisor'' in a competitive sale of a new issue
to apply for CUSIP numbers so as to allow assignment of the number
prior to the date of award.\14\ The MSRB stated that, from a policy
standpoint, the market efficiencies served by the 1986 amendments also
would be served by these amendments because a dealer no longer would be
the first party to begin the process to obtain the CUSIP number after
the award in a competitive sale where a non-dealer municipal advisor
has been engaged.\15\
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    \13\ Id.
    \14\ Id.
    \15\ Id.
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    The proposed rule change would amend subparagraph (a)(i)(A)(3) of
Rule G-34 which clarifies the timeframe within which municipal advisors

advising on a competitive sale must make application for a CUSIP
number.\16\ The MSRB stated that the current provision indicates that
the financial advisor must make application by no later than one
business day after dissemination of a notice of sale.\17\ The proposed
rule change would amend subparagraph (a)(i)(A)(3) of Rule G-34 to
include ``or other such request for bids.'' The MSRB stated that the
additional language added by the proposed rule change would ensure the
timing of the application for a CUSIP number in those instances where a
municipal advisor seeks bids in a competitive sale of municipal
securities using documentation other than a traditional notice of
sale.\18\
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    \16\ Id.
    \17\ Id.
    \18\ Id.
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    The proposed rule change, as modified by Amendment No. 1, would
amend Rule G-34(a)(i) to add paragraph (F), to add an exception from
the CUSIP number requirement for situations where municipal securities
are purchased directly by a bank,\19\ any entity directly or indirectly
controlled by the bank or under common control with the bank, other
than a dealer registered under the Exchange Act (``non-dealer control
affiliate''), or a consortium of the entities described above, or by a
municipal entity with funds that are, at least in part, proceeds of, or
fully or partially secure or pay, the purchasing entity's issue of
municipal obligations (e.g., state revolving fund or bond bank), if the
dealer or municipal advisor reasonably believes (based on, for example,
a written representation from the purchaser) that the purchaser is
purchasing the new issue of municipal securities with the present
intent to hold the securities to maturity or earlier redemption or
mandatory tender.\20\ The term ``bank'' in proposed new paragraph (F)
would have the same meaning as set forth in Exchange Act Section
3(a)(6).\21\ The MSRB stated that it believes that obtaining CUSIP
numbers is generally a necessary aspect of, for example, tracking the
trading, recordkeeping, clearance and settlement, customer account
transfers and safekeeping of municipal securities, including those
issued in private placements.\22\ The MSRB also stated that it is of
the view that the increase in the number of direct purchase
transactions between municipal issuers and banks as an alternative to
letters of credit and other similar types of financings supports a
limited exception from the blanket requirement to apply for CUSIP
numbers in all private placements.\23\ Also, the MSRB stated that it
believes that, where a municipal entity is purchasing municipal
securities using funds that are at least in part proceeds of that
purchasing entity's issuance of other municipal obligations, or where
the municipal securities being purchased are used to fully or partially
secure or pay the purchasing entity's issue of municipal obligations,
there is a strong expectation that the underlying municipal securities
purchased are intended to be held and not traded in the secondary
market.\24\ As with the exception for dealers (or municipal advisors in
a competitive sale) engaging in direct purchase transactions of new
issue municipal securities to banks, the MSRB believes that requiring a
CUSIP number in these scenarios would not serve the purposes of Rule G-
34 to, among other things, improve efficiencies in the processing,
receiving, delivering and safekeeping of municipal securities.\25\
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    \19\ The MSRB noted that a ``bank'' for purposes of the proposed
exception would not include a ``separately identifiable department
or division'' of a bank, within the meaning of MSRB Rule G-1(a).
    \20\ See Notice of Filing and Amendment No. 1.
    \21\ See Notice of Filing.
    \22\ Id.
    \23\ Id.
    \24\ See Amendment No. 1.
    \25\ Id.
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    The proposed rule change would clarify that the depository
eligibility requirements of Rule G-34(a)(ii)(A) do not apply in the
case of an exemption under Rule G-34(d), which exempts securities that
are ineligible for CUSIP number assignment and municipal fund
securities.\26\ Further, the proposed rule change would add
subparagraph (a)(ii)(A)(3), providing an exception from the depository
eligibility requirements in instances where the new issue is purchased
directly by a bank, any entity directly or indirectly controlled by the
bank or under common control with the bank, other than a broker, dealer
or municipal securities dealer registered under the Exchange Act, or a
consortium of such entities; or by a municipal entity with funds that
are, at least in part, proceeds of, or fully or partially secure or
pay, the purchasing entity's issue of municipal obligations (e.g.,
state revolving fund or bond bank), from an issuer in which an
underwriter reasonably believes (e.g., by obtaining a written
representation) that the present intent of the purchasing entity or
entities is to hold the municipal securities to maturity or earlier
redemption or mandatory tender.\27\ The MSRB stated that, for
consistency, the proposed rule change would amend paragraph (a)(ii)(C),
to clarify that the requirement to input information about a new issue
into DTCC's New Issue Information Dissemination Service only applies to
an issue that has been made depository eligible.\28\
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    \26\ See Notice of Filing.
    \27\ See Notice of Filing and Amendment No. 1.
    \28\ See Notice of Filing.
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    The MSRB stated that the proposed rule change also would make
technical and non-substantive amendments as follows: \29\
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    \29\ Id.
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     The proposed rule change would move definitions that apply
generally throughout the rule into a new section (e) on definitions,
and, as noted above, would add a new definition of ``underwriter'' in
subsection (e)(vii). The terms moved into the new section (e) would be
(i) auction agent; (ii) auction rate security; (iii) notification
period; (iv) program dealer; (v) remarketing agent; (vi) SHORT system;
(vii) underwriter; and (viii) variable rate demand obligation.
     The proposed rule change would amend the rule to make more
specific references to the provision that describes information
necessary for CUSIP number assignments. Currently, the rule refers
throughout to paragraph (a)(i)(A). The proposed rule change would amend
these references to refer to subparagraph (a)(i)(A)(4). Similarly,
references in the rule to the enumerated items to be included in a
CUSIP number application would be changed from ``(1) through (8)'' to
``(a) through (h).''
     The proposed rule change would change capitalized defined
terms to lower case, as appropriate throughout the rule, and would
amend references to sections, subsections, paragraphs and
subparagraphs, as necessary, to be consistent with other MSRB rule
formatting.
    The MSRB requested that the proposed rule change be effective six
months from the date of Commission approval and is requesting
accelerated approval of Amendment No. 1.\30\
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    \30\ See Notice of Filing and Amendment No. 1.
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III. Summary of Comments Received and MSRB's Responses to Comments

    As noted previously, the Commission received eleven comment letters
in response to the Notice of Filing and two comment letters in response
to Amendment No. 1. The MSRB responded to the comment letters on the
Notice of Filing in its November Response Letter,\31\ and the MSRB
responded to the comment letters on

Amendment No. 1 in its December Response Letter.\32\
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    \31\ See November Response Letter.
    \32\ See December Response Letter.
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A. Application of CUSIP Number Requirements to All Municipal Advisors

    In response to the Notice of Filing, six commenters opposed
requiring municipal advisors in competitive sales to apply for CUSIP
numbers, and instead suggested dealers, in all instances, should bear
the responsibility of obtaining a CUSIP number for new issue municipal
securities.\33\ Commenters indicated that removing the obligation for
the municipal advisor to obtain a CUSIP number would result in a more
efficient process and consistent expectations because the CUSIP numbers
would always be obtained by the dealer in all relevant
transactions.\34\ Some commenters indicated that imposing the CUSIP
number requirement on non-dealer municipal advisors would not increase
transparency or efficiencies or serve a useful purpose, and instead
would pose an undue burden on independent municipal advisors.\35\ One
commenter stated that the costs to non-dealer municipal advisors to
comply with the proposed rule change were not addressed in the MSRB's
economic analysis.\36\
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    \33\ See Acacia Letter; DIXWORKS Letter, Ehlers Letter; NAMA
Letter; PRAG Letter and Sudsina Letter.
    \34\ See Acacia Letter; Ehlers Letter; NAMA Letter; PRAG Letter;
Sudsina Letter.
    \35\ See Acacia Letter; DIXWORKS Letter; NAMA Letter; PRAG
Letter and Sudsina Letter.
    \36\ See NAMA Letter.
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    The MSRB stated that the policy reason for initially adopting a
requirement for financial advisors to apply for CUSIP numbers in
competitive sales of new issue municipal securities was meant to
provide for assignment of a CUSIP number prior to the award date of the
sale.\37\ The MSRB noted that this policy reason continues to apply
where a municipal advisor is retained because in such a scenario, the
winning dealer would no longer be the first party to begin the process
of obtaining a CUSIP number after the award has been made in a
competitive sale.\38\ Several commenters indicated their understanding
that the practice of obtaining a CUSIP number in competitive sales only
applies where a municipal advisor is engaged. Commenters noted that
this practice would make municipal entities less likely to retain
municipal advisors in such transactions and indicated that the MSRB
should clarify who is responsible for obtaining CUSIP numbers when a
municipal advisor is not retained. The MSRB noted that Rule G-
34(a)(i)(A)(2) requires underwriters in a competitive sale to obtain
CUSIP numbers where no CUSIP number has been pre-assigned.\39\ The MSRB
further noted that because the CUSIP numbers would have been applied
for earlier in the process, this facilitates the ability to trade in
the new issue immediately upon award.\40\
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    \37\ See November Response Letter.
    \38\ Id.
    \39\ Id.
    \40\ Id.
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    The MSRB stated that while it appreciates commenters' views that
the dealer, in all instances, should be required to apply for the CUSIP
number, it believes this arrangement could have unintended results in
the market.\41\ The MSRB stated that under the current rule, where an
issuer in a competitive sale of municipal securities engages a non-
dealer municipal advisor and does not engage a dealer, there is no
party responsible for applying for CUSIP numbers.\42\ Similarly, the
MSRB noted, if the responsibility to apply for CUSIP numbers were
placed only on dealers, as commenters suggested, issuers choosing to
engage only a municipal advisor in a competitive sale would find
themselves in a situation where no party is responsible for applying
for CUSIP numbers on the new issue.\43\ The MSRB stated that across the
market, there potentially would be a universe of new issue municipal
securities being issued without CUSIP numbers assigned.\44\ The MSRB
stated that by requiring all municipal advisors in a competitive sale
to apply for CUSIP numbers, and dealers in a competitive sale to apply
for CUSIP numbers where none have been pre-assigned, Rule G-34 ensures
that all new issue municipal securities in a competitive sale where a
dealer or municipal advisor is engaged, other than those falling within
the proposed principles-based exception, have CUSIP numbers assigned as
early as possible in the issuance process.\45\ The MSRB stated that it
previously considered the impact of the new requirement on non-dealer
municipal advisors and concluded that, while non-dealer municipal
advisors are likely to incur up-front costs associated with development
of regulatory compliance policies and procedures to address the new
requirements, the costs would be justified by the likely aggregate
benefits of the proposed rule change over time.\46\ The MSRB stated
that it continues to believe that expanding the requirements of Rule G-
34 to apply to all municipal advisors in competitive sales of new issue
municipal securities will encourage uniformity and efficiency in
competitive sales of municipal securities by ensuring that CUSIP
numbers are obtained consistently and earlier in the process so as to
allow for immediate trading upon award.\47\
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    \41\ Id.
    \42\ Id.
    \43\ Id.
    \44\ Id.
    \45\ Id.
    \46\ Id.
    \47\ Id.
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B. Municipal Advisor Engaging in Broker-Dealer Activity

    In response to the Notice of Filing, commenters noted their concern
about the proposed requirement that a municipal advisor relying on the
principles-based exception in a competitive transaction must have a
reasonable belief as to the purchaser's present intent. These
commenters indicated that when a municipal advisor interacts with
investors, for example, to obtain their present intent, the municipal
advisor may be viewed as engaging in broker-dealer activity.\48\ One
commenter indicated that requiring municipal advisors to apply for
CUSIP numbers promotes violations of the Exchange Act by requiring
municipal advisors to act in a manner that may be viewed as broker-
dealer activity.\49\
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    \48\ See Acacia Letter; DIXWORKS Letter; NAMA Letter and Sudsina
Letter.
    \49\ See NAMA Letter.
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    The MSRB stated that it appreciates the commenters concerns and
understands that determining whether an activity may be deemed broker-
dealer in nature is a facts and circumstances analysis that must be
closely considered.\50\ The MSRB stated that, when drafting the
proposed rule change, it purposefully proposed a principles-based
exception to allow dealers and municipal advisors alike to establish
policies and procedures consistent with their relevant business
activities.\51\ The MSRB stated that it is not suggesting that a
municipal advisor engage in any activity that could be viewed as
broker-dealer in nature, but rather that the municipal advisor develop
a process for reaching a reasonable belief as to an investor's present
intent consistent with the municipal advisor's allowable business
activities.\52\ Thus, the MSRB stated, in the proposed rule change, the
MSRB suggested looking to a written representation from the purchaser
as just one example for determining the purchaser's present intent.\53\
The MSRB

stated that it believes that by creating a principles-based exception,
municipal advisors (and dealers) relying thereon are free to define the
process by which they reach a reasonable belief regarding a purchaser's
present intent.\54\ The MSRB also noted that in addition to reviewing a
written representation, this could include, for example, reviewing
transaction documentation without interacting with the purchaser.\55\
The MSRB also stated that the proposed rule change is not intended to
require or encourage municipal advisors to engage in activity they deem
outside the scope of their allowed activities.\56\
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    \50\ See November Response Letter.
    \51\ Id.
    \52\ Id.
    \53\ Id.
    \54\ Id.
    \55\ Id.
    \56\ Id.
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C. Present Intent to Hold

    In response to the Notice of Filing, several commenters indicated
that the principles-based exception in the original proposed rule
change did not accurately reflect the fundamental workings of the
direct purchase market.\57\ Specifically, according to commenters, the
requirement in the principles-based exception that the dealer (or
municipal advisor in a competitive sale) have a reasonable belief that
the purchaser is purchasing the municipal securities with the ``present
intent to hold the securities to maturity'' does not take into account
those scenarios where the transaction documentation provides for an
earlier call provision to permit a refinancing or other restructuring.
Commenters suggested revising the proposed language to account for this
common practice. In consideration of such commenters' suggestions, the
MSRB filed Amendment No. 1, which makes amendments to Rule G-
34(a)(i)(F) to reflect the suggested changes.\58\ In particular, the
MSRB stated that Amendment No. 1 would require the dealer (or municipal
advisor in a competitive sale) relying on the principles-based
exception to have a reasonable belief that the purchaser is purchasing
the municipal securities with the ``present intent to hold the
securities to maturity or earlier redemption or mandatory tender.''
\59\ The MSRB stated that it believes Amendment No. 1 more accurately
reflects the terms of direct purchase transactions and as a result
creates a more useful exception.\60\ The MSRB also stated that, for
consistency, Amendment No. 1 would make the same amendment to the
proposed principles-based exception for dealers from the depository
eligibility requirements in Rule G-34(a)(ii)(A)(3).\61\
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    \57\ See First ABA Letter, NAMA Letter and First SIFMA Letter.
    \58\ See November Response Letter and Amendment No. 1.
    \59\ Id.
    \60\ Id.
    \61\ Id.
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    In response to the Notice of Filing, one commenter suggested that
more clarity should be provided as to the documentation underwriters
and municipal advisors may be required to produce during an examination
and that sufficient documentation to reach the ``reasonable belief''
should include any reasonable indicia of an investor's present
intent.\62\ SIFMA suggested this should include an investor letter or
other certification or a term sheet stating conditions of the
transaction.\63\ The MSRB stated that it had indicated in the proposed
rule change and also in the proposed rule language that one example by
which an underwriter or municipal advisor could arrive at a reasonable
belief as to the purchaser's present intent would be by obtaining a
written representation.\64\ The MSRB stated that it agrees that there
are other reasonable indicia that could be considered in order to reach
a reasonable belief regarding the purchaser's present intent, but does
not believe an amendment to the proposed rule change is necessary on
this point. The MSRB also noted that it believes that the proposed rule
language makes clear that obtaining a written representation is just
one method by which a reasonable belief as to a purchaser's present
intent could be met.\65\
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    \62\ See First SIFMA Letter.
    \63\ Id.
    \64\ See November Response Letter.
    \65\ Id.
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    In response to Amendment No. 1 and the November Response Letter,
SIFMA reiterated its concerns about the proposed rule change, as
modified by Amendment No.1, particularly the scope of the proposed
principles-based exception in the proposed rule change as so modified,
and urged the SEC to institute disapproval proceedings.\66\ SIFMA
focused its concern on the requirement that dealers (and municipal
advisors in a competitive sale) relying on the principles-based
exception are required to have a reasonable belief that the ``present
intent of the purchasing entity or entities is to hold the municipal
securities to maturity or earlier redemption or mandatory tender.''
\67\ SIFMA stated that investors are not always willing to make a
representation as to the timeframe for which they intend to hold a
security, ``other than setting forth their present intention to hold a
security.'' \68\ SIFMA stated that an investor may be hesitant to
``make a statement currently required by the amendment . . . that may
be second-guessed if they, e.g., many years later, determine to sell
their securities.'' \69\ SIFMA stated that other rules, such as
Exchange Act Rule 15c2-12, do not require a specific time frame as to a
purchaser's intention to hold securities, and thus questioned why such
a requirement is necessary in Rule G-34.\70\ In particular, SIFMA noted
that it may be difficult for dealers or municipal advisors to obtain a
representation from investors as to the timeframe for which they intend
to hold a security.\71\ Finally, SIFMA stated that the current
principles-based exception is ``unduly restrictive'' and suggested that
the exception should be refined to require the dealer or municipal
advisor to have a ``reasonable belief (e.g., by obtaining a written
representation) that [the] purchasing entity or entities has no present
intent to sell or distribute the municipal securities.'' \72\
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    \66\ See Second SIFMA Letter.
    \67\ Id.
    \68\ Id.
    \69\ Id.
    \70\ Id.
    \71\ Id.
    \72\ Id.
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    The MSRB stated that it addressed most of SIFMA's concerns about
the proposed principles-based exception in the November Response Letter
and Amendment No. 1.\73\ The MSRB stated that one method by which an
underwriter or municipal advisor could arrive at a reasonable belief as
to the purchaser's present intent would be by obtaining a written
representation.\74\ However, the MSRB stated that it agreed with
commenters that there are other reasonable indicia that could be
considered in order to reach a reasonable belief regarding the
purchaser's present intent.\75\ The MSRB noted, as an example, that
another method of reaching a reasonable belief as to the investor's
intention would be by reviewing transaction documentation.\76\ The MSRB
stated that it continues to believe there are multiple ways by which a
dealer or municipal advisor could reach a reasonable belief regarding
the purchaser's intent with respect to holding the securities in
question.\77\ The MSRB stated that it purposefully made the exception
principles based so dealers and

municipal advisors could determine, based on their particular business
activities, the most effective way of reaching a reasonable belief as
to an investor's intent.\78\ The MSRB noted that obtaining a written
representation is merely one method for making such a
determination.\79\
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    \73\ See December Response Letter.
    \74\ See November Response Letter, December Response Letter.
    \75\ See December Response Letter.
    \76\ Id.
    \77\ Id.
    \78\ Id.
    \79\ Id.
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    In the First SIFMA Letter, SIFMA stated that the proposed language
in the principles-based exception was ``unduly restrictive'' because
``[f]or a bond maturing in 20 or 30 years, it is typical to include a
call or mandatory tender date at 5 to 10 years to permit a refinancing
or other restructuring.'' \80\ The MSRB responded that it agreed with
SIFMA and other commenters and proposed in Amendment No. 1 to refine
the language to more accurately reflect the terms of direct purchase
transactions including the potential for earlier redemption or
mandatory tender.\81\ SIFMA noted that the language in Amendment No. 1
is still ``unduly restrictive'' and may make a purchasing entity
uncomfortable to certify as to its present intent to hold the
securities to a date certain.\82\ SIFMA suggested alternative language
that would require the dealer or municipal advisor to have a
``reasonable belief (e.g., by obtaining a written representation) that
[the] purchasing entity or entities has no present intent to sell or
distribute the municipal securities.'' \83\
---------------------------------------------------------------------------

    \80\ See First SIFMA Letter.
    \81\ See Amendment No. 1 and December Response Letter.
    \82\ See Second SIFMA Letter.
    \83\ Id.
---------------------------------------------------------------------------

    The MSRB noted that the principles-based exception requires that
the dealer or municipal advisor reach a reasonable belief as to the
purchaser's present intent regarding holding the municipal securities
in question.\84\ The MSRB stated that this language recognizes that, in
those transactions included in the principles-based exception, the
dealer or municipal advisor is not required to speculate as to a
purchaser's future intent.\85\ The MSRB stated that the rule language
makes clear that it is solely the present intent of the purchaser that
need be considered.\86\ The MSRB noted that the purpose of the
principles-based exception is to acknowledge those scenarios where a
CUSIP number may not be necessary. The MSRB stated that, in particular,
the exception addresses the direct purchase market, which, according to
earlier comment letters, typically involves banks purchasing municipal
securities with the intention of holding them to maturity.\87\ The MSRB
stated that Amendment No. 1 merely recognizes that often there are
early redemption provisions or mandatory tenders in such arrangements,
and thus, the securities are not held to maturity in all instances.\88\
The MSRB added that if a purchaser's present intent is to hold the
securities today, but perhaps sell them tomorrow or sometime before
maturity, redemption or tender, this is not the type of transaction the
principles-based exception was created to address.\89\ Further, the
MSRB noted, the industry group representing many purchasers in direct
purchase transactions supported the proposed rule change with Amendment
No. 1, indicating that ``the exception language in the proposed rule
change and Amendment No. 1 to the proposed rule change appropriately
recognizes the realities of the direct purchase market.'' \90\
---------------------------------------------------------------------------

    \84\ See December Response Letter.
    \85\ Id.
    \86\ Id.
    \87\ Id.
    \88\ Id.
    \89\ Id.
    \90\ See Second ABA Letter and December Response Letter.
---------------------------------------------------------------------------

D. Sales of Municipal Securities to Other Municipal Entities

    In response to the Notice of Filing, several commenters stated that
the principles-based exception from the CUSIP number requirements
should be expanded to include private placements of municipal
securities with other municipal entities, including state revolving
funds.\91\ According to commenters, in this sort of transaction, a
state revolving fund issuance is secured by local government bonds
which are held by the state issuer and not traded in the secondary
market. Other commenters asked generally that all sales of municipal
securities to another municipal entity be excepted from the
requirements of Rule G-34.
---------------------------------------------------------------------------

    \91\ See GFOA Letter, NAMA Letter and First SIFMA Letter.
---------------------------------------------------------------------------

    The MSRB stated that, in consideration of comments received from
commenters, it amended the proposed rule change, in Amendment No. 1, to
expand the principles-based exception to include issuances of municipal
securities purchased by a municipal entity with funds that are, at
least in part, from the proceeds of, or used to fully or partially
secure or pay, the purchasing entity's issue of municipal obligations,
such as in the case of a state revolving fund or bond bank.\92\ The
MSRB stated that it believes these scenarios are, for purposes of this
context, comparable to sales of municipal securities to banks in direct
purchase transactions in that the municipal securities being sold to
the purchasing municipal entity are not intended to be sold in the
secondary market.\93\ In addition, the MSRB stated that, as with the
principles-based exception for direct purchase transactions with a
bank, in order to rely on the exception, a dealer (or municipal advisor
in a competitive sale) must have a reasonable belief that the
purchasing municipal entity has the present intent to hold the
securities to maturity or earlier redemption or mandatory tender.\94\
---------------------------------------------------------------------------

    \92\ See November Response Letter.
    \93\ Id.
    \94\ Id.
---------------------------------------------------------------------------

    The MSRB stated that it believes a dealer (or municipal advisor in
a competitive sale) should apply for a CUSIP number in sales of
municipal securities between municipal entities, other than in the
scenarios discussed above.\95\ The MSRB stated that it understands that
municipal entities purchasing municipal securities for investment
purposes may have a need for liquidity prior to the maturity of the
issue and may want to sell the municipal securities into the secondary
market.\96\ In such a scenario, the MSRB stated, the purchasing entity
may find it difficult to resell the municipal securities without a
CUSIP number and, based on discussions with industry participants, the
MSRB stated that it understands there is no existing process in place
to obtain a CUSIP number later for secondary market trading.\97\ The
MSRB stated that it believes that applying for a CUSIP number at the
time of the new issue will avoid this situation and will ensure the
municipal securities are tradeable in the secondary market.\98\
---------------------------------------------------------------------------

    \95\ Id.
    \96\ Id.
    \97\ Id.
    \98\ Id.
---------------------------------------------------------------------------

E. Use of Other Standard Identifiers

    In response to the Notice of Filing, one commenter suggested that
the proposed rule change be amended to permit the use of ``appropriate
open-standard identifiers.'' \99\ In particular, this commenter
emphasized concerns that Rule G-34 is an endorsement of a commercial
entity's product and is contradictory to SEC policy. The MSRB stated
that it recognizes the commenter's concerns and is aware of efforts in
the industry exploring a move towards an open-standard identifier
environment.\100\ However, the MSRB

stated that it understands that the use of an identifier other than a
CUSIP number extends well beyond the municipal securities market and a
change to expand the universe of identifiers would require significant
coordination between all market participants.\101\ The MSRB stated that
it believes that merely adding in language to Rule G-34 to allow the
use of ``other standard identifiers'', as the commenter suggested,
without significant coordination among other market participants and
consideration of how such a change would impact all aspects of the
overall securities market could cause substantial confusion.\102\ The
MSRB stated that, along with other industry stakeholders, it will
continue exploring the expansion of the universe of securities
identifiers, but that it does not believe amending Rule G-34 at this
time to include the use of other identifiers is appropriate without
further information gathering and industry input.\103\
---------------------------------------------------------------------------

    \99\ See Bloomberg Letter.
    \100\ See November Response Letter.
    \101\ Id.
    \102\ Id.
    \103\ Id.
---------------------------------------------------------------------------

F. Use of Legal Entity Identifier

    In response to the Notice of Filing, one commenter suggested that
the SEC should require issuers of municipal securities to be identified
by a legal entity identifier (``LEI'') as part of the proposed rule
change.\104\ The commenter suggested the SEC could use LEIs in its
regulatory data collection framework to identify parties and market
participants by a standard method. The MSRB stated that it recognizes
the potential for LEIs to provide useful information on municipal
issuers and is in the process of gathering industry input on the
availability and value of obtaining this information in the
market.\105\ Specifically, the MSRB noted, in a concept proposal issued
on September 14, 2017, the MSRB sought industry comment on whether
issuers and obligors typically have LEIs and if so, whether that
information should be collected by the MSRB on its Form G-32 and
included in Rule G-34 to permit or require dealers to submit such
information if available.\106\ The MSRB stated that it will consider
this issue further, once the results of the request for comment are
received and fully evaluated.\107\
---------------------------------------------------------------------------

    \104\ See GLEIF Letter.
    \105\ See November Response Letter.
    \106\ Id.
    \107\ Id.
---------------------------------------------------------------------------

G. Other Comments

    In response to the Notice of Amendment No. 1, the ABA stated that
it maintains its support for the exception to the proposed rule
requirement to obtain CUSIP numbers for dealers and municipal advisors
in private placements of municipal obligations to a single bank, its
affiliates (other than a registered broker-dealer), or a consortium of
such entities if the intent of the purchasing entity or entities is to
hold the municipal obligation until maturity.\108\ The ABA stated that
it supports the modification included in Amendment No. 1 and that it
``appreciates the MSRB's acknowledgment of the banking industry's
concerns about the impact of the CUSIP requirements on the direct
purchase market.'' \109\ The ABA also stated that it believes that the
modifications to the proposed rule change made by Amendment No. 1
``appropriately recognizes the realities of the direct purchase
market.'' \110\
---------------------------------------------------------------------------

    \108\ See Second ABA Letter.
    \109\ Id.
    \110\ Id.
---------------------------------------------------------------------------

IV. Discussion and Commission Findings

    The Commission has carefully considered the proposed rule change,
the comment letters received, the MSRB Response Letters, and Amendment
No. 1. The Commission finds that the proposed rule change, as modified
by Amendment No. 1, is consistent with the requirements of the Act and
the rules and regulations thereunder applicable to the MSRB.
    In particular, the proposed rule change, as modified by Amendment
No. 1, is consistent with Section 15B(b)(2)(C) of the Act.\111\ Section
15B(b)(2)(C) of the Act requires that the MSRB's rules 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 municipal securities and municipal financial products, to remove
impediments to and perfect the mechanism of a free and open market in
municipal securities and municipal financial products, in general, to
protect investors, municipal entities, obligated persons, and the
public interest.\112\
---------------------------------------------------------------------------

    \111\ 15 U.S.C. 78o-4(b)(2)(C).
    \112\ See 15 U.S.C. 78o-4(b)(2)(C).
---------------------------------------------------------------------------

    The Commission believes that the proposed rule change, as modified
by Amendment No. 1, is consistent with the provisions of Section
15B(b)(2)(C) \113\ of the Act because it would remove impediments to
and perfect the mechanism for a free and open municipal securities
market by codifying existing MSRB interpretations and clarifying in the
text of the rule that dealers acting as placement agents in private
placement transactions, including direct purchases of municipal
securities, are subject to the CUSIP-related requirements set forth in
Rule G-34(a). In addition, the Commission believes that the proposed
rule change, as modified by Amendment No. 1, would help prevent
fraudulent and manipulative practices, promote just and equitable
principles of trade and protect investors, municipal entities,
obligated persons and the public interest by ensuring that eligible
municipal securities, including those issued in a private placement,
have an appropriate identifier assigned in order to provide market
participants with greater ability to receive, deliver, and safekeep
such securities. The Commission believes that the availability of a
limited exception to this requirement would eliminate impediments to
and perfect the mechanism of a free and open market in municipal
securities by allowing dealers and municipal advisors to provide
services in certain direct purchase transactions without inhibiting
their issuer clients' access to financings that otherwise might not be
available if CUSIP numbers were required. In addition, the Commission
believes that the proposed rule change, as modified by Amendment No. 1,
would remove impediments to a free and open market by requiring all
municipal advisors to comply with the requirements of Rule G-
34(a)(i)(A), thus encouraging consistency and efficiency in competitive
sales of municipal securities and ensuring that CUSIP numbers are
obtained by municipal advisors earlier in a competitive deal to allow
for immediate trading upon award.
---------------------------------------------------------------------------

    \113\ Id.
---------------------------------------------------------------------------

    In approving the proposed rule change, as modified by Amendment No.
1, the Commission also has considered the impact of the proposed rule
change, as modified by Amendment No. 1, on efficiency, competition, and
capital formation.\114\ The Commission believes the proposed rule
change, as modified by Amendment No. 1, would reduce regulatory
uncertainty for underwriters and municipal advisors with regard to the
requirement to apply for CUSIP numbers because dealers and municipal

advisors would know with greater certainty when application for a CUSIP
number is required in private placement transactions. Similarly, the
Commission believes that while in practice some non-dealer municipal
advisors may be applying for CUSIP numbers in a competitive offering
before the final award is made, the proposed rule change, as modified
by Amendment No. 1,would ensure that this is the case, thus reducing
the risk of delays in secondary market trading where a competitive
offering is awarded but no CUSIP number has been assigned. The
Commission notes that the MSRB considered the impact of the proposed
rule change on non-dealer municipal advisors and concluded that, while
non-dealer municipal advisors are likely to incur up-front costs
associated with compliance with the proposed rule change, the cost
would be justified by the likely benefits of the proposed rule change
over time.\115\
---------------------------------------------------------------------------

    \114\ 15 U.S.C. 78c(f).
    \115\ See November Response Letter.
---------------------------------------------------------------------------

    As noted above, the Commission received eleven comment letters on
the Notice of Filing and two comment letters on Amendment No. 1. The
Commission believes that the MSRB, through its responses and through
Amendment No. 1, has addressed commenters' concerns.
    For the reasons noted above, the Commission believes that the
proposed rule change, as modified by Amendment No. 1, is consistent
with the Act.

VI. Accelerated Approval of Proposed Rule Change, as Modified by
Amendment No. 1

    The Commission finds good cause for approving the proposed rule
change, as modified by Amendment No. 1, prior to the 30th day after the
date of publication of the Notice of Amendment No. 1 in the Federal
Register. As discussed above, Amendment No. 1 modifies the proposed
rule change by amending proposed paragraph Rule G-34(a)(i)(F) of the
proposed rule change to require dealers (and municipal advisors in a
competitive sale) seeking to rely on the principles-based exception to
reasonably believe the purchaser's present intent is to hold the
municipal securities to maturity ``or earlier redemption or mandatory
tender.'' Amendment No. 1 also would modify the proposed rule change to
expand the principles-based exception in proposed paragraph Rule G-
34(a)(i)(F) to include cases where a municipal entity purchases the
municipal securities with funds that are at least in part proceeds of
the purchasing entity's issue of municipal obligations, or the
municipal securities being purchased are used to fully or partially
secure or pay the purchasing entity's issue of municipal obligations.
For consistency, Amendment No. 1 also would apply the same amendments
to the principles-based exception for dealers from the depository
eligibility requirements of the rule set forth in subparagraph Rule G-
34(a)(ii)(A)(3).\116\
---------------------------------------------------------------------------

    \116\ See Amendment No. 1.
---------------------------------------------------------------------------

    The MSRB stated that the only substantive change made by Amendment
No. 1 to the proposed rule change is responsive to commenters and that
Amendment No. 1 expands the application of the previously proposed
principles-based exception to include sales of new issue municipal
securities to municipal entities that are purchasing the underlying
municipal securities with funds that are at least in part proceeds of
the purchasing entity's issue of municipal obligations, or the
municipal securities being purchased are used to fully or partially
secure or pay the purchasing entity's issue of municipal
obligations.\117\ The MSRB further noted that the other amendment to
the proposed rule change made by Amendment No. 1 merely clarifies that
in a direct purchase transaction there may be a redemption or mandatory
tender that occurs prior to the municipal security's maturity.\118\
Additionally, the MSRB stated that, in light of one of the purposes of
the principles-based exception in the proposed rule change--to allow
dealers and municipal advisors to provide services without inhibiting
their issuer clients' access to certain financings--the revisions are
consistent with the proposed rule change.\119\
---------------------------------------------------------------------------

    \117\ Id.
    \118\ Id.
    \119\ Id.
---------------------------------------------------------------------------

    For the foregoing reasons, the Commission finds good cause for
approving the proposed rule change, as modified by Amendment No. 1, on
an accelerated basis, pursuant to Section 19(b)(2) of the Act.

VIII. Conclusion

    It is therefore ordered, pursuant to Section 19(b)(2) of the
Act,\120\ that the proposed rule change (SR-MSRB-2017-06), as modified
by Amendment No. 1, be, and hereby is, approved on an accelerated
basis.
---------------------------------------------------------------------------

    \120\ 15 U.S.C. 78s(b)(2).
    \121\ 17 CFR 200.30-3(a)(12).

    For the Commission, pursuant to delegated authority.\121\
Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2017-27342 Filed 12-19-17; 8:45 am]
BILLING CODE 8011-01-P


[Federal Register Volume 77, Number 45 (Wednesday, March 7, 2012)]
[Notices]
[Page 13590]
[FR Doc No: 2012-5467]

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DEPARTMENT OF ENERGY

Federal Energy Regulatory Commission

[Docket No. EL12-38-000]

New York Independent System Operator, Inc.; Notice of Petition
for Declaratory Order

    Take notice that on February 28, 2012, pursuant to Rule 207 of the
Federal Energy Regulatory Commission's (Commission) Rules of Practice
and Procedure, 18 CFR 385.207, New York Independent System Operator,
Inc. (NYISO), filed a Petition for Declaratory Order, requesting that
the Commission issue an order providing guidance on how the NYISO
should recover from its customers the costs assessed pursuant to the
Commission's December 30, 2010 Order issued in Docket No. ER11-1844-
000.\1\ NYISO's petition also seeks declaration that NYISO not be
required to pay invoices for charges imposed by Midwest Independent
Transmission System Operator, Inc. until after the hearing established
in December 30 Order has concluded and a final Commission order has
been issued.
---------------------------------------------------------------------------

    \1\ Midwest Independent System Operator, Inc., 133 FERC ] 61,275
(2010) (December 30 Order).
---------------------------------------------------------------------------

    Any person desiring to intervene or to protest this filing must
file in accordance with Rules 211 and 214 of the Commission's Rules of
Practice and Procedure (18 CFR 385.211, 385.214). Protests will be
considered by the Commission in determining the appropriate action to
be taken, but will not serve to make protestants parties to the
proceeding. Any person wishing to become a party must file a notice of
intervention or motion to intervene, as appropriate. Such notices,
motions, or protests must be filed on or before the comment date. On or
before the comment date, it is not necessary to serve motions to
intervene or protests on persons other than the Applicant.
    The Commission encourages electronic submission of protests and
interventions in lieu of paper using the ``eFiling'' link at http://www.ferc.gov. Persons unable to file electronically should submit an
original and 14 copies of the protest or intervention to the Federal
Energy Regulatory Commission, 888 First Street NE., Washington, DC
20426.
    This filing is accessible on-line at http://www.ferc.gov, using the
``eLibrary'' link and is available for review in the Commission's
Public Reference Room in Washington, DC. There is an ``eSubscription''
link on the Web site that enables subscribers to receive email
notification when a document is added to a subscribed docket(s). For
assistance with any FERC Online service, please email
<EMAIL_ADDRESS>or call<PHONE_NUMBER> (toll free). For
TTY, call<PHONE_NUMBER>.
    Comment Date: 5 p.m. Eastern Time on March 29, 2012.

    Dated: February 29, 2012.
Kimberly D. Bose,
Secretary.
[FR Doc. 2012-5467 Filed 3-6-12; 8:45 am]
BILLING CODE 6717-01-P


[Federal Register Volume 84, Number 231 (Monday, December 2, 2019)]
[Notices]
[Pages 66039-66041]
[FR Doc No: 2019-25970]

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

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-87624; File No. SR-ICEEU-2019-026]

Self-Regulatory Organizations; ICE Clear Europe Limited; Notice
of Filing and Immediate Effectiveness of Proposed Rule Change,
Security-Based Swap Submission or Advance Notice Relating to Amendments
to the ICE Clear Europe Delivery Procedures

November 25, 2019.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934
(``Act''),\1\ and Rule 19b-4 thereunder,\2\ notice is hereby given that
on November 21, 2019, ICE Clear Europe Limited (``ICE Clear Europe'' or
the ``Clearing House'') filed with the Securities and Exchange
Commission (``Commission'') the proposed rule changes described in
Items I, II and III below, which Items have been prepared by ICE Clear
Europe. ICE Clear Europe filed the proposed rule change pursuant to
Section 19(b)(3)(A) of the Act \3\ and Rule 19b-4(f)(4)(ii)
thereunder,\4\ such that the proposed rule change was immediately
effective upon filing with the Commission. The Commission is publishing
this notice to solicit comments on the proposed rule change from
interested persons.
---------------------------------------------------------------------------

    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ 15 U.S.C. 78s(b)(3)(A).
    \4\ 17 CFR 240.19b-4(f)(4)(ii).
---------------------------------------------------------------------------

I. Clearing Agency's Statement of the Terms of Substance of the
Proposed Rule Change, Security-Based Swap Submission, or Advance Notice

    The principal purpose of the proposed amendments is for ICE Clear
Europe to add delivery terms relating to the ICE Futures Europe Permian
West Texas Light Crude Oil Futures Contracts (the ``ICE WTL Futures
Contracts'') and the ICE Endex Austrian VTP Natural Gas Daily Futures
Contracts (the ``ICE Endex VTP Natural Gas Daily Futures'', and
collectively, the ``Contracts'').\5\
---------------------------------------------------------------------------

    \5\ Capitalized terms used but not defined herein have the
meanings specified in the ICE Clear Europe Clearing Rules (the
``Rules'') and the Delivery Procedures.
---------------------------------------------------------------------------

II. Clearing Agency's Statement of the Purpose of, and Statutory Basis
for, the Proposed Rule Change, Security-Based Swap Submission or
Advance Notice

    In its filing with the Commission, ICE Clear Europe 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. ICE Clear Europe has prepared summaries,
set forth in sections (A), (B), and (C) below, of the most significant
aspects of such statements.

(A) Clearing Agency's Statement of the Purpose of, and Statutory Basis
for, the Proposed Rule Change, Security-Based Swap Submission or
Advance Notice

(a) Purpose
    ICE Clear Europe is proposing to amend its Delivery Procedures to
amend Section 9 and Part CC to provide delivery procedures relating to
the ICE WTL Futures Contracts, which will be traded on ICE Futures
Europe and cleared by ICE Clear Europe. In addition, ICE Clear Europe
is proposing to amend Part EE to provide delivery procedures relating
to the ICE Endex VTP Natural Gas Daily Futures, which will be traded on
ICE Endex and cleared by ICE Clear Europe.
    Currently, Section 9 and Part CC set out the delivery
specifications and procedures for deliveries under the ICE Futures
Europe Permian West Texas Intermediate Crude Oil Futures Contracts
(``ICE WTI Contracts''). The proposed amendments would extend Section 9
and Part CC to also apply to the ICE WTL Futures Contracts, on
substantially the same basis as the ICE WTI Contracts. In this regard,
the amended procedures would address, with respect to the ICE WTL
Futures Contracts, among other matters, delivery options, delivery
timetables, the nominations process, invoicing, provision of buyer's
and seller's security, delivery tolerances, and relevant documentation.
Amended Part CC would make clear that the ICE WTI Contracts and ICE WTL
Futures Contracts remain separate contracts and would not be fungible,
and that the various delivery documentation for each of the contract
types would need to clearly reference the type to which they refer.
    The amendments would add a new definition of ``Permian WT,'' which
is used to refer to both types of contracts where appropriate in the
Delivery Procedures. The definition of ``Tariffs'' in Part CC would be
extended to also

include Magellan Tariff R.C.T. 1.3.0 or BridgeTex Tariff F.E.R.C. 6.1.0
in respect of the ICE WTL Futures Contracts. Additional conforming
amendments would be made throughout Part CC to incorporate the
inclusion of the ICE WTL Futures Contracts.
    Currently, Part EE sets out the delivery specifications and
procedures for deliveries under the ICE Endex CEGH Austrian VTP Natural
Gas Futures (``ICE Endex VTP Natural Gas Futures''). The proposed
amendments would extend Part EE to also apply to the ICE Endex VTP
Natural Gas Daily Futures, on a similar basis.
    In this regard, the amended procedures would address, with respect
to ICE Endex VTP Natural Gas Daily Futures, among other matters, trade
nominations, the delivery process, delivery timetables, Clearing House
liability, nominations process, invoicing, provision of buyer's and
seller's security, delivery failures and relevant documentation.
Separate delivery timetables (both for routine and failed deliveries)
would be added for the ICE Index VTP Natural Gas Daily Futures, which
would address in further detail the timing of the nominations process
and the provision of buyer's and seller's security, among other
matters. A new documentation summary would also be added for the ICE
Endex VTP Natural Gas Daily Futures.
    The amendments would also add a new definition for ``ICE Endex VTP
Natural Gas Daily Futures'' and amend the defined term, ``ICE Endex VTP
Natural Gas,'' to ``ICE Endex VTP Natural Gas Futures''. Additional
conforming amendments would be made throughout Part EE to incorporate
the inclusion of the ICE Endex VTP Natural Gas Daily Futures, as well
as to make certain typographical and similar corrections.
(b) Statutory Basis
    Section 17A(b)(3)(F) of the Act \6\ requires, among other things,
that the rules of a clearing agency be designed to promote the prompt
and accurate clearance and settlement of securities transactions and,
to the extent applicable, derivative agreements, contracts, and
transactions, the safeguarding of securities and funds in the custody
or control of the clearing agency or for which it is responsible, and
the protection of investors and the public interest. The proposed
amendments are designed to facilitate the clearing of new physically
settled Contracts that are being launched for trading by the ICE
Futures Europe and ICE Endex exchanges and that will be cleared by ICE
Clear Europe. The amendments would extend the existing Delivery
Procedures for the ICE WTI Contracts and the ICE Endex VTP Natural Gas
Futures to the obligations and roles of the Clearing House and the
relevant parties for delivery under the ICE WTL Futures Contracts and
the ICE Endex VTP Natural Gas Daily Futures, respectively. ICE Clear
Europe believes that its financial resources, risk management, systems
and operational arrangements are sufficient to support clearing of such
Contracts (and to address physical delivery under such Contracts) and
to manage the risks associated with such Contracts. As a result, in ICE
Clear Europe's view, the amendments would be consistent with the prompt
and accurate clearance and settlement of the Contracts as set out in
the proposed Delivery Procedures amendments, and the protection of
investors and the public interest consistent with the requirements of
Section 17A(b)(3)(F) of the Act.\7\ (In ICE Clear Europe's view, the
amendments would not adversely affect the safeguarding of funds or
securities in the custody or control of the clearing agency or for
which it is responsible, within the meaning of Section
17A(b)(3)(F).\8\)
---------------------------------------------------------------------------

    \6\ 15 U.S.C. 78q-1(b)(3)(F).
    \7\ 15 U.S.C. 78q-1(b)(3)(F).
    \8\ 15 U.S.C. 78q-1(b)(3)(F).
---------------------------------------------------------------------------

    In addition, Rule 17Ad-22(e)(10) \9\ requires that each covered
clearing agency establish and maintain transparent written standards
that state its obligations with respect to the delivery of physical
instruments, and establish and maintain operational practices that
identify, monitor and manage the risks associated with such physical
deliveries. As discussed above, the amendments would clarify the
application of the existing Delivery Procedures to establish the
obligations and roles of the Clearing House and the relevant parties
for delivery under the Contracts and facilitate identifying, monitoring
and managing risks associated with delivery.
---------------------------------------------------------------------------

    \9\ 17 CFR 240.17Ad-22(e)(10).
---------------------------------------------------------------------------

(B) Clearing Agency's Statement on Burden on Competition

    ICE Clear Europe does not believe the proposed rule changes would
have any impact, or impose any burden, on competition not necessary or
appropriate in furtherance of the purposes of the Act. The changes are
being proposed in order to update the Delivery Procedures in connection
with the listing of the Contracts for trading on the ICE Futures Europe
and ICE Endex markets. ICE Clear Europe believes that the Contracts
would provide additional opportunities for interested market
participants to engage in trading activity in the Permian West Texas
light crude oil market and in the Austrian natural gas market. ICE
Clear Europe does not believe the amendments would adversely affect
competition among Clearing Members, materially affect the cost of
clearing, adversely affect access to clearing in Contracts for Clearing
Members or their customers, or otherwise adversely affect competition
in clearing services. Accordingly, ICE Clear Europe does not believe
that the amendments would impose any impact or burden on competition
that is not appropriate in furtherance of the purpose of the Act.

(C) Clearing Agency's Statement on Comments on the Proposed Rule Change
Received From Members, Participants or Others

    Written comments relating to the proposed amendments have not been
solicited or received by ICE Clear Europe. ICE Clear Europe will notify
the Commission of any comments received with respect to the proposed
amendments.

III. Date of Effectiveness of the Proposed Rule Change, Security-Based
Swap Submission and Advance Notice and Timing for Commission Action

    The foregoing rule change has become effective pursuant to Section
19(b)(3)(A) of the Act \10\ and paragraph (f) of Rule 19b-4\11\
thereunder. At any time within 60 days of the filing of the proposed
rule change, the Commission summarily may temporarily suspend such rule
change if it appears to the Commission that such action is necessary or
appropriate in the public interest, for the protection of investors, or
otherwise in furtherance of the purposes of the Act.
---------------------------------------------------------------------------

    \10\ 15 U.S.C. 78s(b)(3)(A).
    \11\ 17 CFR 240.19b-4(f).
---------------------------------------------------------------------------

IV. Solicitation of Comments

    Interested persons are invited to submit written data, views, and
arguments concerning the foregoing, including whether the proposed rule
change, security-based swap submission or advance notice 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-ICEEU-2019-026 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-ICEEU-2019-026. 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 website (http://www.sec.gov/rules/sro.shtml).
Copies of the submission, all subsequent amendments, all written
statements with respect to the proposed rule change, security-based
swap submission or advance notice that are filed with the Commission,
and all written communications relating to the proposed rule change,
security-based swap submission or advance notice 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 website 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
will also be available for inspection and copying at the principal
office of ICE Clear Europe and on ICE Clear Europe's website at https://www.theice.com/clear-europe/regulation.
    All comments received will be posted without change. Persons
submitting comments are cautioned that we do not redact or edit
personal identifying information from comment submissions. You should
submit only information that you wish to make available publicly. All
submissions should refer to File Number SR-ICEEU-2019-026 and should be
submitted on or before December 23, 2019.

    For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\12\
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    \12\ 17 CFR 200.30-3(a)(12).
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Jill M. Peterson,
Assistant Secretary.
[FR Doc. 2019-25970 Filed 11-29-19; 8:45 am]
 BILLING CODE 8011-01-P


[Federal Register Volume 82, Number 146 (Tuesday, August 1, 2017)]
[Rules and Regulations]
[Pages 35623-35628]
[FR Doc No: 2017-16099]

========================================================================
Rules and Regulations
                                                Federal Register
________________________________________________________________________

This section of the FEDERAL REGISTER contains regulatory documents
having general applicability and legal effect, most of which are keyed
to and codified in the Code of Federal Regulations, which is published
under 50 titles pursuant to 44 U.S.C. 1510.

The Code of Federal Regulations is sold by the Superintendent of Documents.

========================================================================

Federal Register / Vol. 82, No. 146 / Tuesday, August 1, 2017 / Rules
and Regulations

DEPARTMENT OF TRANSPORTATION

Federal Aviation Administration

14 CFR Part 25

[Docket No. FAA-2017-0544; Special Conditions No. 25-692-SC]

Special Conditions: LifePort, Inc.: Boeing Model 747-8 Airplane;
Single- and Multiple-Occupant Side-Facing Seats

AGENCY: Federal Aviation Administration (FAA), DOT.

ACTION: Final special conditions; request for comments.

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SUMMARY: These special conditions are issued for the Boeing Model 747-8
airplane. This airplane, as modified by LifePort Inc. (LifePort), will
have novel or unusual design features when compared to the state of
technology envisioned in the airworthiness standards for transport-
category airplanes. These design features are single- and multiple-
occupant side-facing seats (i.e., seats positioned in the airplane with
the occupant facing 90 degrees to the direction of airplane travel).
The applicable airworthiness regulations do not contain adequate or
appropriate safety standards for these design features. These special
conditions contain the additional safety standards that the
Administrator considers necessary to establish a level of safety
equivalent to that established by the existing airworthiness standards.

DATES: This action is effective on LifePort on August 1, 2017. Send
your comments by September 15, 2017.

ADDRESSES: Send comments identified by docket number FAA-2017-0544
using any of the following methods:
     Federal eRegulations Portal: Go to http://www.regulations.gov/ and follow the online instructions for sending
your comments electronically.
     Mail: Send comments to Docket Operations, M-30, U.S.
Department of Transportation (DOT), 1200 New Jersey Avenue SE., Room
W12-140, West Building Ground Floor, Washington, DC 20590-0001.
     Hand Delivery or Courier: Take comments to Docket
Operations in Room W12-140 of the West Building Ground Floor at 1200
New Jersey Avenue SE., Washington, DC, between 9 a.m. and 5 p.m.,
Monday through Friday, except Federal holidays.
     Fax: Fax comments to Docket Operations at<PHONE_NUMBER>.
    Privacy: The FAA will post all comments it receives, without
change, to http://www.regulations.gov/, including any personal
information the commenter provides. Using the search function of the
docket Web site, anyone can find and read the electronic form of all
comments received into any FAA docket, including the name of the
individual sending the comment (or signing the comment for an
association, business, labor union, etc.). DOT's complete Privacy Act
Statement can be found in the Federal Register published on April 11,
2000 (65 FR 19477-19478).
    Docket: Background documents or comments received may be read at
http://www.regulations.gov/ at any time. Follow the online instructions
for accessing the docket or go to Docket Operations in Room W12-140 of
the West Building Ground Floor at 1200 New Jersey Avenue SE.,
Washington, DC, between 9 a.m. and 5 p.m., Monday through Friday,
except Federal holidays.

FOR FURTHER INFORMATION CONTACT: Alan Sinclair, FAA, Airframe and Cabin
Safety, ANM-115, Transport Airplane Directorate, Aircraft Certification
Service, 1601 Lind Avenue SW., Renton, Washington 98057-3356; telephone
425-227-2195; facsimile<PHONE_NUMBER>.

SUPPLEMENTARY INFORMATION: The FAA has determined that notice of, and
opportunity for prior public comment on, these special conditions is
impracticable because these procedures would significantly delay
issuance of the design approval and thus delivery of the affected
airplane.
    In addition, the substance of these special conditions has been
published in the Federal Register for public comment in several prior
instances with no substantive comments received. The FAA therefore
finds good cause that prior public notice and comment are unnecessary
and impracticable, and finds that good cause exists for making these
special conditions effective upon publication in the Federal Register.

Comments Invited

    We invite interested people to take part in this rulemaking by
sending written comments, data, or views. The most helpful comments
reference a specific portion of the special conditions, explain the
reason for any recommended change, and include supporting data.
    We will consider all comments we receive by the closing date for
comments. We may change these special conditions based on the comments
we receive.

Background

    On September 28, 2016, LifePort applied for a supplemental type
certificate for single- and multiple-occupant side-facing seats in the
Boeing Model 747-8 airplane. The Boeing Model 747-8 airplane is a wide-
body, four-engine, extended-range jet with a stretched upper deck. This
airplane is configured as a private executive jet, not for hire, not
for common carriage. The maximum takeoff weight is 987,331 pounds.

Type Certification Basis

    Under the provisions of Title 14, Code of Federal Regulations (14
CFR) 21.101, LifePort must show that the Boeing Model 747-8 airplane,
as changed, continues to meet the applicable provisions of the
regulations listed in Type Certificate No. A20WE or the applicable
regulations in effect on the date of application for the change, except
for earlier amendments as agreed upon by the FAA.
    If the Administrator finds that the applicable airworthiness
regulations (i.e., 14 CFR part 25) do not contain adequate or
appropriate safety standards for the Boeing Model 747-8 airplane,
because of a novel or unusual design feature, special conditions are
prescribed under the provisions of Sec.  21.16.
    Special conditions are initially applicable to the model for which
they are issued. Should the applicant apply for a supplemental type
certificate to modify any other model included on the same type
certificate to incorporate the same novel or unusual design feature,
these special conditions would also apply to the other model under
Sec.  21.101.

    In addition to the applicable airworthiness regulations and special
conditions, the Boeing Model 747-8 airplane must comply with the fuel-
vent and exhaust-emission requirements of 14 CFR part 34, and the
noise-certification requirements of 14 CFR part 36.
    The FAA issues special conditions, as defined in 14 CFR 11.19, in
accordance with Sec.  11.38, and they become part of the type
certification basis under Sec.  21.101.

Novel or Unusual Design Features

    The Boeing Model 747-8 airplane, as modified by LifePort, will
incorporate the following novel or unusual design features:
    Single- and multiple-occupant side-facing seats positioned in the
airplane with the occupant facing 90 degrees to the direction of
airplane travel.

Discussion

    Side-facing seats are considered a novel design for transport-
category airplanes that include Sec. Sec.  25.562 and 25.785 at
Amendment 25-64 in their certification basis, and were not considered
when those airworthiness standards were issued. The FAA has determined
that the existing regulations do not provide adequate or appropriate
safety standards for occupants of side-facing seats. To provide a level
of safety that is equivalent to that afforded to occupants of forward-
and aft-facing seats, additional airworthiness standards in the form of
special conditions are necessary.
    On June 16, 1988, 14 CFR part 25 was amended by Amendment 25-64 to
revise the emergency-landing conditions that must be considered in the
design of transport-category airplanes. Amendment 25-64 revised the
static-load conditions in Sec.  25.561, and added a new Sec.  25.562
that required dynamic testing for all seats approved for occupancy
during takeoff and landing. The intent of Amendment 25-64 was to
provide an improved level of safety for occupants on transport-category
airplanes. However, because most seating on transport-category
airplanes is forward-facing, the pass/fail criteria developed in
Amendment 25-64 focused primarily on these seats. For some time, the
FAA granted exemptions for the multiple-place side-facing-seat
installations because the existing test methods and acceptance criteria
did not produce a level of safety equivalent to the level of safety
provided for forward- and aft-facing seats. These exemptions were
subject to many conditions that reflected the injury-evaluation
criteria and mitigation strategies available at the time of the
exemption issuance.
    The FAA also issued special conditions to address single-place
side-facing seats based on the data available at the time the FAA
issued those special conditions. Continuing concerns regarding the
safety of side-facing seats prompted the FAA to conduct research to
develop an acceptable method of compliance with Sec. Sec.  25.562 and
25.785(b) for side-facing seat installations. That research has
identified injury considerations and evaluation criteria in addition to
those previously used to approve side-facing seats (see published
report DOT/FAA/AR-09/41, July 2011).
    One particular concern that was identified during the FAA's
research program, but not addressed in the previous special conditions,
was the significant leg injuries that can occur to occupants of both
single- and multiple-place side-facing seats. Because this type of
injury does not occur on forward- and aft-facing seats, the FAA
determined that, to achieve the level of safety envisioned in Amendment
25-64, additional requirements would be needed as compared to
previously issued special conditions. Nonetheless, the research has now
allowed the development of a single set of special conditions that is
applicable to all fully side-facing seats.
    On November 5, 2012, the FAA released policy statement PS-ANM-25-
03-R1, ``Technical Criteria for Approving Side-Facing Seats,'' to
update existing FAA certification policy on Sec. Sec.  25.562 and
25.785(a) at Amendment 25-64 for single- and multiple-place side-facing
seats. This policy addresses both the technical criteria for approving
side-facing seats and the implementation of those criteria. The FAA
methodology detailed in PS-ANM-25-03-R1 has been used in establishing a
new set of proposed special conditions. Some of the conditions issued
for previous exemptions are still relevant and are included in these
new special conditions. However, others have been replaced by different
criteria that reflect current research findings.
    In Policy Statement PS-ANM-25-03-R1, conditions 1 and 2 are
applicable to all side-facing seat installations, whereas conditions 3
through 16 represent additional requirements applicable to side-facing
seats equipped with an airbag system in the shoulder belt. Because the
applicant's side-facing seats do not have airbag systems, only
conditions 1 and 2 are applicable to, and included in, these special
conditions.
    These special conditions contain the additional safety standards
that the Administrator considers necessary to establish a level of
safety equivalent to that established by the existing airworthiness
standards.

Applicability

    As discussed above, these special conditions are applicable to the
Boeing Model 747-8 airplane as modified by LifePort. Should LifePort
apply at a later date for a supplemental type certificate to modify any
other model included on Type Certificate no. A20WE to incorporate the
same novel or unusual design feature, these special conditions would
apply to that model as well.

Conclusion

    This action affects only certain novel or unusual design features
on one model of airplane. It is not a rule of general applicability and
affects only the applicant who applied to the FAA for approval of these
features on the airplane.

List of Subjects in 14 CFR Part 25

    Aircraft, Aviation safety, Reporting and recordkeeping
requirements.

    The authority citation for these special conditions is as follows:

    Authority:  49 U.S.C. 106(g), 40113, 44701, 44702, 44704.

The Special Conditions

0
Accordingly, pursuant to the authority delegated to me by the
Administrator, the following special conditions are issued as part of
the type certification basis for Boeing Model 747-8 airplanes modified
by LifePort, Inc.
    1. Additional requirements applicable to tests or rational analysis
conducted to show compliance with Sec. Sec.  25.562 and 25.785 for
side-facing seats:
    a. The longitudinal test(s) conducted in accordance with Sec.
25.562(b)(2), to show compliance with the seat-strength requirements of
Sec.  25.562(c)(7) and (8) and these special conditions, must have an
ES-2re anthropomorphic test dummy (ATD) (49 CFR part 572, subpart U) or
equivalent, or a Hybrid II ATD (49 CFR part 572, subpart B as specified
in Sec.  25.562) or equivalent, occupying each seat position and
including all items (e.g., armrest, interior wall, or furnishing)
contactable by the occupant if those items are necessary to restrain
the occupant. If included, the floor representation and contactable
items must be located such that their relative position, with respect
to the center of the nearest seat place, is the same at the start of
the test as before floor misalignment is applied. For example, if

floor misalignment rotates the centerline of the seat place nearest the
contactable item 8 degrees clockwise about the airplane x-axis, then
the item and floor representations must be rotated by 8 degrees
clockwise also, to maintain the same relative position to the seat
place, as shown in Figure 1. Each ATD's relative position to the seat
after application of floor misalignment must be the same as before
misalignment is applied. To ensure proper occupant seat loading, the
ATD pelvis must remain supported by the seat pan, and the restraint
system must remain on the pelvis and shoulder of the ATD until rebound
begins. No injury-criteria evaluation is necessary for tests conducted
only to assess seat-strength requirements.
    b. The longitudinal test(s) conducted in accordance with Sec.
25.562(b)(2), to show compliance with the injury assessments required
by Sec.  25.562(c) and these special conditions, may be conducted
separately from the test(s) to show structural integrity. In this case,
structural-assessment tests must be conducted as specified in paragraph
1a, above, and the injury-assessment test must be conducted without yaw
or floor misalignment. Injury assessments may be accomplished by
testing with ES-2re ATD (49 CFR part 572, subpart U) or equivalent at
all places. Alternatively, these assessments may be accomplished by
multiple tests that use an ES-2re ATD at the seat place being
evaluated, and a Hybrid II ATD (49 CFR part 572, subpart B, as
specified in Sec.  25.562) or equivalent used in all seat places
forward of the one being assessed, to evaluate occupant interaction. In
this case, seat places aft of the one being assessed may be unoccupied.
If a seat installation includes adjacent items that are contactable by
the occupant, the injury potential of that contact must be assessed. To
make this assessment, tests may be conducted that include the actual
item, located and attached in a representative fashion. Alternatively,
the injury potential may be assessed by a combination of tests with
items having the same geometry as the actual item, but having stiffness
characteristics that would create the worst case for injury (injuries
due to both contact with the item and lack of support from the item).
    c. If a seat is installed aft of structure (e.g., an interior wall
or furnishing) that does not have a homogeneous surface contactable by
the occupant, additional analysis and/or test(s) may be required to
demonstrate that the injury criteria are met for the area that an
occupant could contact. For example, different yaw angles could result
in different injury considerations and may require additional analysis
or separate test(s) to evaluate.
    d. To accommodate a range of occupant heights (5th percentile
female to 95th percentile male), the surface of items contactable by
the occupant must be homogenous 7.3 in. (185 mm) above and 7.9 in. (200
mm) below the point (center of area) that is contacted by the 50th
percentile male size ATD's head during the longitudinal test(s)
conducted in accordance with paragraphs a, b, and c, above. Otherwise,
additional head-injury criteria (HIC) assessment tests may be
necessary. Any surface (inflatable or otherwise) that provides support
for the occupant of any seat place must provide that support in a
consistent manner regardless of occupant stature. For example, if an
inflatable shoulder belt is used to mitigate injury risk, then it must
be demonstrated by inspection to bear against the range of occupants in
a similar manner before and after inflation. Likewise, the means of
limiting lower-leg flail must be demonstrated by inspection to provide
protection for the range of occupants in a similar manner.

[GRAPHIC] [TIFF OMITTED] TR01AU17.010

    e. For longitudinal test(s) conducted in accordance with Sec.
25.562(b)(2) and these special conditions, the ATDs must be positioned,
clothed, and have lateral instrumentation configured as follows:
    (1) ATD positioning: Lower the ATD vertically into the seat while
simultaneously (see Figure 2):
[GRAPHIC] [TIFF OMITTED] TR01AU17.011

    (a) Aligning the midsagittal plane (a vertical plane through the
midline of the body; dividing the body into right and left halves) with
approximately the middle of the seat place.
    (b) Applying a horizontal x-axis direction (in the ATD coordinate
system) force of about 20 lb (89 N) to the torso at approximately the
intersection of the midsagittal plane and the bottom rib of the ES-2re
or lower sternum of the Hybrid II at the midsagittal plane, to compress
the seat back cushion.
    (c) Keeping the upper legs nearly horizontal by supporting them
just behind the knees.
    (d) After all lifting devices have been removed from the ATD:
    (i) Rock it slightly to settle it into the seat.
    (ii) Separate the knees by about 4 in. (100 mm).
    (iii) Set the ES-2re ATD's head at approximately the midpoint of
the available range of z-axis rotation (to align the head and torso
midsagittal planes).
    (iv) Position the ES-2re ATD's arms at the joint's mechanical
detent that puts them at approximately a 40-degree angle with respect
to the torso. Position the Hybrid II ATD hands on top of its upper
legs.
    (v) Position the feet such that the centerlines of the lower legs
are approximately parallel to a lateral vertical plane (in the airplane
coordinate system).
    (2) ATD clothing: Clothe each ATD in form-fitting, mid-calf-length
(minimum) pants and shoes (size 11E) weighing about 2.5 lb (1.1 Kg)
total. The color of

the clothing should be in contrast to the color of the restraint
system. The ES-2re jacket is sufficient for torso clothing, although a
form-fitting shirt may be used in addition if desired.
    (3) ES-2re ATD lateral instrumentation: The rib-module linear
slides are directional, i.e., deflection occurs in either a positive or
negative ATD y-axis direction. The modules must be installed such that
the moving end of the rib module is toward the front of the airplane.
The three abdominal-force sensors must be installed such that they are
on the side of the ATD toward the front of the airplane.
    f. The combined horizontal/vertical test, required by Sec.
25.562(b)(1) and these special conditions, must be conducted with a
Hybrid II ATD (49 CFR part 572, subpart B, as specified in Sec.
25.562), or equivalent, occupying each seat position.
    g. Restraint systems:
    (1) If inflatable restraint systems are used, they must be active
during all dynamic tests conducted to show compliance with Sec.
25.562.
    (2) The design and installation of seatbelt buckles must prevent
unbuckling due to applied inertial forces, or impact of the hands or
arms of the occupant during an emergency landing.
    2. Additional performance measures applicable to tests and rational
analysis conducted to show compliance with Sec. Sec.  25.562 and 25.785
for side-facing seats:
    a. Body-to-body contact: Contact between the head, pelvis, torso,
or shoulder area of one ATD with the adjacent-seated ATD's head,
pelvis, torso, or shoulder area is not allowed. Contact during rebound
is allowed.
    b. Thoracic: The deflection of any of the ES-2re ATD upper, middle,
and lower ribs must not exceed 1.73 in. (44 mm). Data must be processed
as defined in Federal Motor Vehicle Safety Standards (FMVSS) 571.214.
    c. Abdominal: The sum of the measured ES-2re ATD front, middle, and
rear abdominal forces must not exceed 562 lb (2,500 N). Data must be
processed as defined in FMVSS 571.214.
    d. Pelvic: The pubic symphysis force measured by the ES-2re ATD
must not exceed 1,350 lb (6,000 N). Data must be processed as defined
in FMVSS 571.214.
    e. Leg: Axial rotation of the upper-leg (femur) must be limited to
35 degrees in either direction from the nominal seated position.
    f. Neck: As measured by the ES-2re ATD and filtered at Channel
Frequency Class 600 as defined in SAE J211, ``Instrumentation for
Impact Test--Part 1--Electronic Instrumentation.''
    (1) The upper-neck tension force at the occipital condyle (O.C.)
location must be less than 405 lb (1,800 N).
    (2) The upper-neck compression force at the O.C. location must be
less than 405 lb (1,800 N).
    (3) The upper-neck bending torque about the ATD x-axis at the O.C.
location must be less than 1,018 in-lb (115 Nm).
    (4) The upper-neck resultant shear force at the O.C. location must
be less than 186 lb (825 N).
    g. Occupant (ES-2re ATD) retention: The pelvic restraint must
remain on the ES-2re ATD's pelvis during the impact and rebound phases
of the test. The upper-torso restraint straps (if present) must remain
on the ATD's shoulder during the impact.
    h. Occupant (ES-2re ATD) support:
    (1) Pelvis excursion: The load-bearing portion of the bottom of the
ATD pelvis must not translate beyond the edges of its seat's bottom
seat-cushion supporting structure.
    (2) Upper-torso support: The lateral flexion of the ATD torso must
not exceed 40 degrees from the normal upright position during the
impact.

    Issued in Renton, Washington, on July 13, 2017.
Dionne Palermo,
Acting Manager, Transport Airplane Directorate, Aircraft Certification
Service.
[FR Doc. 2017-16099 Filed 7-31-17; 8:45 am]
 BILLING CODE 4910-13-P