[Federal Register Volume 83, Number 82 (Friday, April 27, 2018)]
[Notices]
[Pages 18605-18612]
[FR Doc No: 2018-08848]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-83089; File No. SR-CBOE-2018-029]

Self-Regulatory Organizations; Cboe Exchange, Inc.; Notice of
Filing and Immediate Effectiveness of a Proposed Rule Change in
Connection With the Migration of SPX Options From the Hybrid 3.0 System
to the Hybrid Trading System

April 23, 2018.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934
(the ``Act''),\1\ and Rule 19b-4 thereunder,\2\ notice is hereby given
that on April 12, 2018, Cboe Exchange, Inc. (the ``Exchange'' or ``Cboe
Options'') filed with the Securities and Exchange Commission (the
``Commission'') the proposed rule change as described in Items I and
II, below, which Items have been prepared by the Exchange. The Exchange
filed the proposal as a ``non-controversial'' proposed rule change
pursuant to Section 19(b)(3)(A)(iii) of the Act \3\ and Rule 19b-
4(f)(6) thereunder.\4\ The Commission is publishing this notice to
solicit comments on the proposed rule change from interested persons.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ 15 U.S.C. 78s(b)(3)(A)(iii).
    \4\ 17 CFR 240.19b-4(f)(6).
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I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change

    The Exchange proposes to amend its rules related to listing the SPX
class on a group basis and amend other rules in connection with the
Exchange's planned migration of standard third-Friday options on the
S&P 500 Index (``SPX options'') to the Hybrid Trading System from the
Hybrid 3.0 System.
(additions are italicized; deletions are [bracketed])
* * * * *

Cboe Exchange, Inc. Rules

* * * * *

Rule 6.2. Hybrid Opening (and Sometimes Closing) System (``HOSS'')

    (a)-(h) (No change).

    . . . Interpretations and Policies:
    .01 (No change).
    .02 Market-Maker Quotes.
    (a) Minimum Size. The Exchange determines on a class-by-class
basis [(a)] the minimum number of contracts for the initial size of
a Market-Maker's opening quote, which minimum must be at least one
contract. For SPX, the Exchange may also determine minimum initial
quote size on a premium basis and an expiration basis for series
with expirations of (1) 7 or fewer days, (2) 8 to 91 days, (3) 92 to
188 days, (4) 189 to 461 days, and (5) 462 or more days.
    (b) Bid/Ask Differentials. The Exchange determines on a class-
by-class and premium basis the bid/ask differential requirements
with which Market-Makers' opening quotes must comply, which minimum
and differential requirements may be different for the opening than
those applicable intraday. For SPX, the Exchange may determine bid/
ask differential requirements for series with expirations of (1)
fewer than 462 days and (2) 462 or more days, and for all other
classes, the Exchange may determine bid/ask differential
requirements for series with expiration of (1) less than nine months
and (2) nine months or more.
    .03-.07 (No change).
* * * * *

Rule 6.53C. Complex Orders on the Hybrid System

    (a)-(d) (No change).
    . . . Interpretations and Policies:
    .01 (No change).
    .02 [Reserved.] If the Exchange determines to list SPX on a
group basis pursuant to Rule 8.14, a marketable complex order
consisting of legs in different groups of series in the class does
not automatically execute against individual orders residing in the
EBook pursuant to Rule 6.53C(c)(ii)(1) or (d)(v)(1) and
automatically executes against complex orders (or COA responses) in
accordance with Rules 6.53C(c)(ii)(2) or (d)(v)(2) through (4). A
marketable complex order consisting of legs in the same group of
series in SPX executes against individual orders in the EBook in
accordance with Rule 6.53C(c)(ii) and (d)(v). Complex orders
consisting of legs in different groups of series that are marketable
against each other may only execute at a net price that has priority
over the individual orders and quotes resting in the EBook.
    .03-.12 (No change).
* * * * *

Rule 8.3. Appointment of Market-Makers

    (a)-(b) (No change).
    (c) Market-Maker Appointments. Absent an exemption by the
Exchange, an appointment of a Market-Maker confers the right to
quote electronically and in open outcry in the Market-Maker's
appointed classes during Regular Trading Hours as described below.
Subject to paragraph (e) below, a Market-Maker may change its
appointed classes upon advance notification to the Exchange in a
form and manner prescribed by the Exchange.
    (i) Hybrid Classes. Subject to paragraphs (c)(iv) and (e) below,
a Market-Maker can create a Virtual Trading Crowd (``VTC'')
appointment, which confers the right to quote electronically during
Regular Trading Hours in an appropriate number of Hybrid classes (as
defined in Rule 1.1(aaa)) selected from ``tiers'' that have been
structured according to trading volume statistics, except for the AA
tier. All classes within a specific tier will be assigned an
``appointment cost'' depending upon its tier location. The following
table sets forth the tiers and related appointment costs.

II.

------------------------------------------------------------------------
                                                            Appointment
              Tier                Hybrid options classes       cost
------------------------------------------------------------------------
AA.............................  Options on the Cboe                .499
                                  Volatility Index (VIX).
                                 Options on the Standard          ** 1.0
                                  & Poor's 500 Index
                                  (SPX).

                              * * * * * * *
------------------------------------------------------------------------
* Excludes Tier AA.
** If the Exchange determines to list SPX on a group basis pursuant to
  Rule 8.14, the SPX appointment cost confers the right to trade in all
  SPX groups.

    (ii) (No change).
    (iii) Hybrid 3.0 Class. In addition to paragraphs (i) and (ii)
above, and subject to paragraphs (c)(iv) and (e) below, a Market-
Maker can select as the Market-Maker's appointment a Hybrid 3.0
class traded on the Exchange, which confers the right to trade in
open outcry in the Hybrid 3.0 class during Regular Trading Hours as
described below. Each Hybrid 3.0 class is assigned an ``appointment
cost'', which is set forth below.

------------------------------------------------------------------------
                                                            Appointment
                    Hybrid 3.0 class                           cost
------------------------------------------------------------------------
[Options on the Standard & Poor's 500 Index (SPX)]......          [*1.0]
None....................................................  ..............
------------------------------------------------------------------------
[* This appointment cost also confers the right to trade any group of
  series of SPX that the Exchange has authorized for trading on the
  Hybrid Trading System pursuant to Rule 8.14.]

    (iv)-(v) (No change).
    (d)-(e) (No change).
* * * * *

Rule 8.7. Obligations of Market-Makers

    (a)-(c) (No change).
    (d) Market-Making Obligations in Applicable Hybrid Classes
    The following obligations in this paragraph (d) are only
applicable to Market-Makers trading classes on the Cboe Options
Hybrid System and only in those Hybrid classes. Unless otherwise
provided in this Rule, Market-Makers trading classes on the Hybrid
System remain subject to all obligations imposed by Cboe Options
Rule 8.7. To the extent another obligation contained elsewhere in
Rule 8.7 is inconsistent with an obligation contained in paragraph
(d) of Rule 8.7 with respect to a class trading on Hybrid, this
paragraph (d) shall govern trading in the Hybrid class.
    For Regular Trading Hours, these requirements are applicable on
a per class basis, except as set forth in paragraph (ii)(B) below,
depending upon the percentage of volume a Market-Maker transacts in
an appointed class during Regular Trading Hours electronically
versus in open outcry. With respect to making this determination,
the Exchange will monitor a Market-Maker's trading activity in each
appointed class during Regular Trading Hours every calendar quarter
to determine whether it exceeds the threshold established in
paragraph (d)(i). If a Market-Maker exceeds the threshold
established below, the obligations contained in (d)(ii) will be
effective the next calendar quarter.
    For a period of ninety (90) days commencing immediately after a
class begins trading on the Hybrid system, the provisions of
paragraph (d)(i) shall govern trading in that class.
    (i) Market-Maker Trades 20% or Less Contract Volume in an
Appointed Class Electronically:
    If a Market-Maker on the Cboe Options Hybrid System never
transacts more than 20% (i.e., trades 20% or less) of the Market-
Maker's contract volume electronically in an appointed Hybrid class
during Regular Trading Hours during any calendar quarter, the
following provisions shall apply to that Market-Maker with respect
to that class:
    (A) Quote Widths: With respect to electronic quoting, Market-
Makers must comply with the bid/ask differential requirements
determined by the Exchange on a class-by-class and premium basis
[the Market-Maker will not be required to comply with the bid/ask
differential requirements determined by the Exchange in that class.
The effectiveness of this subparagraph (i)(A) shall be in effect in
each Hybrid for a period of one year commencing with the date the
class begins trading on the Hybrid System]. For SPX, the Exchange
may determine bid/ask differential requirements for series with
expirations of (1) fewer than 462 days and (2) 462 or more days, and
for all other classes, the Exchange may determine bid/ask
differential requirements for series with

expiration of (1) less than nine months and (2) nine months or more.
    (B) Continuous Electronic Quoting Obligation: The Market-Maker
will not be obligated to quote electronically in any designated
percentage of series within that class. If a Market-Maker quotes
electronically, its undecremented quote must be for the minimum
number of contracts determined by the Exchange on a class[ ]-by[ ]-
class basis, which minimum shall be at least one contract. For SPX,
the Exchange may also determine minimum initial quote size on a
premium basis and an expiration basis for series with expirations of
(1) 7 or fewer days, (2) 8 to 91 days, (3) 92 to 188 days, (4) 189
to 461 days, and (5) 462 or more days.
    (C) (No change).
    (ii) Market-Maker Trades More Than 20% Contract Volume in an
Appointed Class Electronically:
    If a Market-Maker on the Cboe Options Hybrid System transacts
more than 20% of the Market-Maker's contract volume electronically
in an appointed Hybrid class during Regular Trading Hours during any
calendar quarter, commencing the next calendar quarter the Market-
Maker will be subject to the following quoting obligations in that
class for as long as the Market-Maker maintains an appointment in
that class:
    (A) Quote Widths: Market-Makers must comply with the bid/ask
differential requirements determined by the Exchange on a class[ ]-
by[ ]-class and premium basis. For SPX, the Exchange may determine
bid/ask differential requirements for series with expirations of (1)
fewer than 462 days and (2) 462 or more days, and for all other
classes, the Exchange may determine bid/ask differential
requirements for series with expiration of (1) less than nine months
and (2) nine months or more.
    (B) Continuous Electronic Quoting Obligation: A Market-Maker
will be required to maintain continuous electronic quotes (as
defined in Rule 1.1 (ccc)) in 60% of the non-adjusted option series
of the Market-Maker's appointed classes that have a time to
expiration of less than nine months. Compliance with this quoting
obligation applies to all of a Market-Maker's appointed classes
collectively (for which it must maintain continuous electronic
quotes pursuant to this paragraph (ii)(B)). The Exchange will
determine compliance by a Market-Maker with this quoting obligation
on a monthly basis. However, determining compliance with this
quoting obligation on a monthly basis does not relieve a Market-
Maker from meeting this obligation on a daily basis, nor does it
prohibit the Exchange from taking disciplinary action against a
Market-Maker for failing to meet this obligation each trading day.
The initial size of a Market-Maker's quote must be for the minimum
number of contracts determined by the Exchange on a class[ ]-by[ ]-
class basis, which minimum shall be at least one contract. For SPX,
the Exchange may also determine minimum initial quote size on a
premium basis and an expiration basis for series with expirations of
(1) 7 or fewer days, (2) 8 to 91 days, (3) 92 to 188 days, (4) 189
to 461 days, and (5) 462 or more days. This obligation does not
apply to intra-day add-on series on the day during which such series
are added for trading. Market-Maker continuous electronic quoting
obligations may be satisfied by Market-Makers either individually or
collectively with Market-Makers of the same TPH organization.
    (C) (No change).
    (iii) The obligations and duties of Market-Makers set forth in
paragraphs (d)(i) and (d)(ii) apply to a Market-Maker per trading
session (e.g., if a Market-Maker has an appointment in a class
during Regular Trading Hours and Extended Trading Hours, the
Exchange will determine a Market-Maker's compliance with the
continuous electronic quoting requirement during Regular Trading
Hours separately from compliance with the electronic quoting
requirement during Extended Trading Hours). Except as set forth in
paragraph (d)(ii)(B), the obligations and duties of Market-Makers
set forth in paragraphs (d)(i) and (d)(ii) apply to a Market-Maker
on a per class basis, except for SPX if the Exchange lists SPX on a
group basis pursuant to Rule 8.14 and determines to apply
obligations and duties of SPX Market-Makers on a group basis, and
only when the Market-Maker is quoting in a particular class during
the applicable trading session on a given trading day. For example,
if during a trading session on a given trading day a Market-Maker is
quoting in 1 of its 10 appointed classes, the Market-Maker has quote
width, continuous electronic quoting and, to the extent the Market-
Maker is present in the trading crowd, continuous open outcry
quoting obligations in that class, and the continuous electronic
quoting obligation in subparagraph (d)(ii)(B) applies to 60% of the
non-adjusted option series of that class that have a time to
expiration of less than nine months while the Market-Maker is
quoting. If during a trading session on a given trading day a
Market-Maker is quoting in 3 of its 10 appointed classes, the
Market-Maker has quote width and, to the extent the Market-Maker is
present in the trading crowd, continuous open outcry quoting
obligations in each of the 3 classes, and the continuous electronic
quoting obligation in subparagraph (d)(ii)(B) applies to 60% of the
non-adjusted option series of those three classes, collectively,
that have a time to expiration of less than nine months while the
Market-Maker is quoting. The obligations and duties are not
applicable to an appointed class if a Market-Maker is not quoting in
that appointed class.
    (iv) (No change).
    . . . Interpretations and Policies:
    .01-.13 (No change).
* * * * *

Rule 8.13. Preferred Market-Maker Program

    (a)-(d) (No change).
    . . . Interpretations and Policies:
    .01-.03 (No change).
    .04 If the Exchange determines to list SPX on a group basis
pursuant to Rule 8.14, obligations of an SPX Market-Maker designated
as a Preferred Market-Maker, as set forth in Rule 8.13, apply on a
class basis, unless the Exchange determines to apply obligations on
a group basis.

Rule 8.14. Hybrid Trading System Platforms & Market-Maker Participants

    (a)-(b) (No change).
    . . . Interpretations and Policies:
    .01 For each Hybrid 3.0 class, the Exchange may determine to
authorize a group of series of the class for trading on the Hybrid
Trading System and, if that authorization is granted, shall
determine the eligible categories of Market-Maker participants for
that group of series. The Exchange will also have the authority to
determine whether to change the trading platform on which the group
of series trades [and to change the eligible categories of Market-
Maker participants for the group]. If the Exchange lists SPX on the
Hybrid Trading System, the Exchange may determine to list the class
on a group basis, with both groups trading on the Hybrid Trading
System. The Exchange will also have the authority to change the
eligible categories of Market-Makers participants for each group. In
addition, the following shall apply:
    (a)-(b) (No change).
    (c) The Hybrid Trading System or Hybrid 3.0 Platform, as
applicable, trading parameters will be established by the Exchange
on a group basis to the extent the Exchange Rules otherwise provide
for such parameters to be established on a class basis.

Rule 8.15. Lead Market-Makers

    (a)-(d) (No change).
    . . . Interpretations and Policies:
    .01-.04 (No change).
    .05 If the Exchange determines to list SPX on a group basis
pursuant to Rule 8.14, obligations of an SPX Market-Maker designated
as a Lead Market-Maker, as set forth in Rule 8.15, apply on a class
basis, unless the Exchange determines to apply obligations on a
group basis.
* * * * *

Rule 8.85. DPM Obligations

    (a)-(e) (No change).
    . . . Interpretations and Policies:
    .01-.02 (No change).
    .03 If the Exchange determines to list SPX on a group basis
pursuant to Rule 8.14, obligations of a Designated Primary Market-
Maker with an SPX appointment, as set forth in Rule 8.85, apply on a
class basis, except if the Exchange determines to apply obligations
on a group basis.
* * * * *
    The text of the proposed rule change is also available on the
Exchange's website (http://www.cboe.com/AboutCBOE/CBOELegalRegulatoryHome.aspx), at the Exchange's Office of the
Secretary, and at the Commission's Public Reference Room.

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

    In its filing with the Commission, the Exchange included statements
concerning the purpose of and basis for the proposed rule change and
discussed any comments it received on the proposed rule change. The
text of these

statements may be examined at the places specified in Item IV below.
The Exchange has prepared summaries, set forth in sections A, B, and C
below, of the most significant aspects of such statements.

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

1. Purpose
    The Exchange proposes to amend its rules related to listing the SPX
class on a group basis and amend other rules in connection with the
Exchange's planned migration of SPX options to the Hybrid Trading
System from the Hybrid 3.0 System. Rule 8.14, Interpretation and Policy
.01 currently permits the Exchange to authorize a group of series of a
Hybrid 3.0 \5\ class for trading on the Hybrid Trading System. If the
Exchange authorizes this, it determines the eligible categories of
Market-Maker participants for the group (Designated Primary Market-
Makers (``DPMs''), Lead Market-Makers (``LMMs''), or Market-Makers).
The Exchange assigns a DPM or LMM to the group (or no DPM or LMM if the
conditions in Rule 8.14(b) are satisfied with respect to the group).
Market-Maker appointments apply on a class basis, except DPM and LMM
appointments apply only to the group of series to which the respective
DPM or LMM is assigned. The Exchange establishes Hybrid Trading System
trading parameters (e.g. minimum trading increment, allocation
algorithm) on a group basis to the extent the Rules otherwise provide
for such parameters to be established on a class basis.
---------------------------------------------------------------------------

    \5\ ``Hybrid Trading System'' refers to (a) the Exchange's
trading platform that allows Market-Makers to submit electronic
quotes in their appointed classes and (b) any connectivity to the
foregoing trading platform that is administered by or on behalf of
the Exchange, such as a communications hub. ``Hybrid 3.0 Platform''
is an electronic trading platform on the Hybrid Trading System that
allows one or more quoters to submit electronic quotes which
represent the aggregate Market-Maker quoting interest in a series
for the trading crowd. Classes authorized by the Exchange for
trading on the Hybrid Trading System are referred to as Hybrid
classes. Classes authorized by the Exchange for trading on the
Hybrid 3.0 Platform are referred to as Hybrid 3.0 classes. See Rule
1.1(aaa). Currently, SPX is the only Hybrid 3.0 class and the only
class the Exchange lists on a group basis.
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    The proposed rule change amends Rule 8.14, Interpretation and
Policy .01 to permit the Exchange to list the SPX class on a group
basis, even if SPX trades on the Hybrid Trading System.\6\ The
remaining provisions of Interpretation and Policy .01 would apply.
Thus, if the Exchange lists SPX as a Hybrid class in two groups, both
groups may trade on the Hybrid Trading System (as the Exchange plans to
do). In addition, the Exchange may determine the eligible categories of
Market-Maker participants for each group. Similarly, the Exchange could
assign a DPM or LMM to each group, which appointments would apply to
the group of series to which the respective DPM or LMM is assigned
(Market-Maker appointments would continue to apply to the entire SPX
class, as further discussed below).\7\
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    \6\ The proposed rule change makes a conforming change in
Interpretation and Policy .01(c).
    \7\ The Exchange does not currently (and does not intend to
following conversion of SPX options to Hybrid) appoint Preferred
Market-Makers (``PMMs'') or DPMs to SPX or SPXW options pursuant to
Rules 8.13 or 8.95, respectively. The Exchange currently appoints
LMMs to SPX options; however, it does not intend to do so following
conversion of SPX options to Hybrid.
---------------------------------------------------------------------------

    As it does today, when determining whether to list the SPX class on
a group basis, the Exchange intends to generally select series with
common expirations or classifications (e.g., end-of-week series or end-
of-month series, short-term option series, long-term option series, or
series that expire on a particular expiration date) and trade them
under individual listing symbols. For example, the Exchange currently
lists the SPX class in two groups: (1) One group consists of series
with standard third-Friday expirations that are a.m.-settled, which
group trades on the Hybrid 3.0 Platform (``SPX options''); and (2) the
second group consists of series with all other expirations, including
weekly, monthly, and p.m.-settled (``SPXW options''), which group
trades on the Hybrid Trading System. In the second quarter of 2018, the
Exchange plans to begin listing SPX options on the Hybrid Trading
System (and no longer on the Hybrid 3.0 platform). SPXW options would
continue to trade on the Hybrid Trading System. Pursuant to the
proposed rule change, the Exchange may determine to continue to list
SPX options and SPXW options as groups on the Hybrid Trading System.
    The Exchange would establish trading parameters (e.g., applicable
matching algorithm under Rule 6.45, opening rotation parameters under
Rule 6.2, automatic execution parameters under Rule 6.13, simple
auction liaison parameters under Rule 6.13A, hybrid agency liaison
parameters under Rule 6.14A, complex order parameters under Rule 6.53C,
and automated improvement mechanism parameters under Rule 6.74A) on a
group basis, as it does today for SPX options and SPXW options.\8\ For
example, currently, the Exchange applies customer priority allocation
to SPX options while the Exchange applies price-time allocation to SPXW
options. Pursuant to the proposed rule change, the Exchange could
continue to apply a different allocation algorithm to each group even
if both groups are trading on the same platform.
---------------------------------------------------------------------------

    \8\ See Rule 8.14(c).
---------------------------------------------------------------------------

    The Exchange believes for SPX, groups of series may exhibit
different trading characteristics, including appeal to different
categories of market participants. For example, SPXW options are
commonly traded by retail customers while SPX options are commonly
traded by institutional investors. The Exchange generally establishes
market models for classes based on these characteristics that most fit
the product, which the Exchange believes benefits investors. This is
true for SPX and SPXW options, which is why the Exchange believes it is
appropriate to continue to list the SPX class in groups once all SPX
series are trading on Hybrid.
    The Exchange proposes to amend Rule 6.53C, Interpretation and
Policy .02 to state if the Exchange determines to list the SPX class on
a group basis pursuant to Rule 8.14, if a marketable complex order
consists of legs in different groups of series in the class, it will
not automatically execute against individual orders residing in the
EBook pursuant to Rule 6.53C(c)(ii)(1) or (d)(v)(1). A marketable
complex order consisting of legs in the same group of series in the
class executes against individual orders in the EBook in accordance
with Rule 6.53C(c)(ii) and (d)(v). This is consistent with current
functionality today applicable to SPX and SPXW pursuant to Rule 6.53C,
Interpretation and Policy .10, which only applies to Hybrid 3.0
classes. The proposed rule change extends this functionality to SPX as
a Hybrid class.
    As discussed above, if the Exchange lists SPX as a Hybrid class on
a group basis, it may apply different trading parameters (including
different allocation algorithms) to each group. Due to system
limitations that based on the Exchange's experience are prohibitively
expensive to modify, complex orders consisting of different groups of
series will not automatically execute against individual orders
residing in the Ebook, even if they trade on the same platform.
Pursuant to Rule 6.53C, complex orders may only consist of legs from
the same class. While SPX and SPXW series are part of the same class,
and thus permissible for electronic handling under the Rules, the
System treats SPX and SPXW series as different classes and is unable to

process complex orders with components in different classes. Many
classes trade on their own trade server. Despite being the same class,
SPX options and SPXW options trade on separate trade servers due to the
number of series in each group and due to the fact that they trade as
different classes (as discussed above). Currently trading is not
possible ``across'' trade servers. If the System receives a complex
order with one SPX leg and one SPXW leg, it would need to trade the SPX
leg against the appropriate leg in the first trade server. After that
leg execution, it would then need to trade the SPXW leg against the
appropriate leg in the second trade server. Given the time these
executions would take, it would not result in the near simultaneous
execution of legs that is sought by the entry of complex orders.
Additionally, after the first leg execution, because the complex order
has not fully executed, the System would not be able to execute any
other orders within the series of the first leg, which may prevent
execution opportunities of those other orders.
    Currently, this only applies to SPX/SPXW orders, and the proposed
rule change would treat these orders as they are today. SPX/SPXW orders
may execute against other SPX/SPXW orders in the COB upon entry or
against orders and COA responses following a COA in accordance with the
allocation and priority rules set forth in Rule 6.53C(c)(ii)(2) and
(d)(v)(2) through (4), respectively.\9\ The proposed rule change states
marketable SPX/SPXW orders will be eligible to automatically execute
against other SPX/SPXW orders resting in the COB provided the execution
is at a net price that has priority over the individual orders and
quotes residing in the EBook (which is consistent with the manner in
which the Exchange currently handles [sic] these complex orders are
handled, as provided in Rule 6.53C, Interpretation and Policy .10(b)).
An SPX/SPXW order that is marketable against individual orders resting
in the Ebook but not marketable against any complex orders resting in
the COB or COA responses will enter the COB or instead be routed to a
PAR workstation during Regular Trading Hours and rejected back to the
Trading Permit Holder during Extended Trading Hours if not eligible for
COB entry due to the terms of the order (for example, if the order is
for an origin code the Exchange does not permit to rest in the COB),
which is how those orders are treated today.\10\
---------------------------------------------------------------------------

    \9\ Rule 6.53C(c)(ii)(2) states the allocation of a complex
order within the COB will be pursuant to the rules of trading
priority otherwise applicable to incoming electronic orders in the
individual component legs or another electronic matching algorithm
from Rule 6.45, as determined by the Exchange on a class-by-class
basis. Therefore, pursuant to that provision and the proposed rule
change, the Exchange will determine for SPX/SPXW complex orders
which electronic matching algorithm will apply to those orders when
executing against other orders in the COB. Rules 6.53(d)(v)(2)
through (4) specify the matching algorithm applicable to complex
orders that execute following a COA, and those provisions will apply
to SPX/SPXW complex orders pursuant to the proposed rule change.
    \10\ See Rules 6.12(a)(1) (which states orders initially routed
for electronic processing that are not eligible for automatic
execution or book entry will route to PAR, an order management
terminal, or back to the Trading Permit Holder); 6.53C(d)(vi) (which
states a COA-eligible order that cannot be filled in whole or in a
permissible ratio will route to the COB or back to PAR, as
applicable); and 6.1A(b) (which states if in accordance with the
Rules, an order would route to PAR, the order entry firm's booth, or
otherwise for manual handling, the System will return the order to
the Trading Permit Holder during Extended Trading Hours).
---------------------------------------------------------------------------

    In connection with the planned migration of SPX options to Hybrid,
the Exchange proposes to amend Rule 8.3 regarding appointment costs.
The proposed rule change moves the SPX class from the Hybrid 3.0
appointment cost table to the Hybrid appointment cost table. The
Exchange would maintain the 1.0 appointment cost for SPX (which
includes SPXW). The proposed rule change notes if the Exchange
determines to list SPX as a Hybrid class on a group basis pursuant to
Rule 8.14, the appointment cost for the class confers the right to
trade in all SPX groups. This is consistent with how appointment costs
currently work, as currently, the SPX appointment cost of 1.0 applies
to any group of series of SPX authorized to trade on the Hybrid Trading
System.\11\ The proposed rule change merely applies this same concept
to SPX if listed on the Hybrid Trading System on a group basis pursuant
to the proposed rule change.
---------------------------------------------------------------------------

    \11\ See Rule 8.3(c)(iii).
---------------------------------------------------------------------------

    The proposed rule change amends Rule 8.7(d)(iii) to provide if the
Exchange lists SPX on a group basis pursuant to Rule 8.14, it may
determine to apply obligations and duties of Market-Makers with an
appointment to SPX on a group basis rather than a class basis.
Currently, Market-Maker obligations for Hybrid classes apply on a class
basis (e.g., the Exchange determines a Market-Maker's compliance with
the continuous electronic quoting obligations set forth in Rule 8.7(d)
for a class based all series in that class).\12\ If the Exchange
determined to list SPX as a Hybrid class on a group basis, the Exchange
may determine it lists a significantly larger number of SPX series in
which it may be burdensome for Market-Makers to quote. For example,
currently, the Exchange lists over 3,000 SPX series and almost 8,000
SPXW series (compared to, for example, over 400 VIX series and almost
200 VIX weekly series). With SPX options listed on Hybrid 3.0, Market-
Makers may not submit quotes in those series. Therefore, Market-Makers
with SPX appointments that are subject to electronic quoting
obligations under Rule 8.7(d) must satisfy those obligations based on
the number of SPXW series. However, when the SPX class moves to Hybrid,
Market-Makers will be able to submit electronic quotes in SPX options
as well as SPXW options. Applying obligations on a class basis would
significantly increase the number of series in which Market-Makers
would have to submit electronic quotes due to the large number of
series. Permitting the Exchange to determine compliance with these
obligations on a group basis would permit Market-Maker obligations to
apply to SPX in a similar manner as they do today based on a more
reasonable number of series.
---------------------------------------------------------------------------

    \12\ The proposed rule change makes corresponding changes to
proposed Rules 8.13, Interpretation and Policy .04; 8.15,
Interpretation and Policy .05; and 8.85, Interpretation and Policy
.03 regarding obligations of Preferred Market-Makers, Lead Market-
Makers, and Designated Primary Market-Makers, respectively.
---------------------------------------------------------------------------

    The Exchange proposes to amend Rules 6.2, Interpretation and Policy
.02(b) \13\ and 8.7(d)(i)(A) and (ii)(A) to permit the Exchange to
establish bid-ask differentials for Market-Makers (for opening and
intraday quotes, respectively) on a premium basis and for SPX, for
series with expirations of (1) fewer than 462 days and (2) 462 or more
days, and for all other classes, for series with expiration of (1) less
than nine months and (2) nine months or more, in addition to a class-
by-class basis (as currently permitted by the Rules). Similarly, the
Exchange proposes to amend Rules 6.2, Interpretation and Policy .02(a)
and 8.7(d)(i)(B) and (ii)(B) to permit the Exchange to establish
minimum quote size requirements (for opening and intraday quotes,
respectively) for SPX on a premium basis and expiration basis for
series with expirations of (1) 7 or fewer days, (2) 8 to 91 days, (3)
92 to 188 days, (4) 189 to 461 days, and (5) 462 or more days, in
addition to a class-by-class basis (as currently permitted by the
Rules).\14\ While different classes may

exhibit different trading characteristics, which make different minimum
quote sizes and differentials on a class-by-class basis appropriate as
permitted by the current Rule, the same may be true of series with
different premiums and expirations within a class to ensure the quote
size is not burdensome on Market-Makers. For example, series with
higher premiums or farther expirations generally have wider spreads and
lower trading volumes, and positions in those series carry additional
risk. These characteristics make wider bid-ask differential and smaller
minimum quote size (with respect to SPX) requirements more appropriate
and less burdensome on Market-Makers.\15\ The proposed expiration
groupings for minimum quote size and bid-ask differential requirements
in SPX are based on the Exchange's review of various information,
including SPX transaction data, sizes of LMM quotes in SPX, and
feedback received from Market-Makers and Exchange advisory groups.
---------------------------------------------------------------------------

    \13\ As set forth in Rule 6.2, Interpretation and Policy .02(b),
the Exchange may set different minimum size and differential
requirements for the opening than those applicable intraday.
    \14\ For classes other than SPX, the Exchange will continue to
be permitted to establish minimum size requirements on a class-by-
class basis only (and not by premium or expiration). The current
minimum quote size is one contract in all classes. See Regulatory
Circular RG16-073 (April 7, 2016).
    \15\ The Exchange currently may set certain parameters on a
class and premium basis. See, e.g., Rules 6.2(d)(ii)(E) (opening
quote condition), 6.12(a)(3) (acceptable tick distance for limit
order price parameter). Currently, the Exchange sets bid-ask
differentials on a premium basis and for expirations of less than
nine months and nine months or more; the proposed rule change
codifies this practice for classes other than SPX in the Rules. See
Regulatory Circular RG16-073 (April 7, 2016) (wider requirements in
series with expirations of nine months or more and lower premiums).
---------------------------------------------------------------------------

    Additionally, the proposed rule change amends Rule 8.7(d)(i)(A).
That provision currently states Market-Makers that do not transact more
than 20% of their contract volume electronically in an appointed Hybrid
class during any calendar quarter will not be required to comply with
bid/ask differential requirements with respect to electronic quoting
for the first year a class begins trading on the Hybrid System. After
the first year of Hybrid trading, a Market-Maker would need to then
comply with bid/ask differential requirements when quoting
electronically. The Exchange proposes to delete that requirement and
instead require Market-Makers to comply with bid/ask differential
requirements when quoting electronically as soon as a class begins
trading on the Hybrid System. The Exchange no longer believes the one-
year delay in imposing these requirements is necessary. Requiring all
electronic quotes to comply with bid/ask differential requirements will
increase liquidity and tighter markets in these classes as soon as they
begin trading. Market-Makers ultimately have to comply with these
requirements; the proposed rule change merely change [sic] when they
must start to comply with them. For example, under the current rule,
Market-Makers not subject to continuous electronic quote obligations
would not be required to comply with bid/ask differential requirements
with respect to any electronic quotes they submit until one year after
SPX begins trading on the Hybrid System. Under the proposed rule
change, these Market-Makers will need to comply with bid/ask
differential requirements when submitted electronic quotes as soon as
SPX begins trading on the Hybrid System.
2. Statutory Basis
    The Exchange believes the proposed rule change is consistent with
the Securities Exchange Act of 1934 (the ``Act'') and the rules and
regulations thereunder applicable to the Exchange and, in particular,
the requirements of Section 6(b) of the Act.\16\ Specifically, the
Exchange believes the proposed rule change is consistent with the
Section 6(b)(5) \17\ requirements that the rules of an exchange be
designed to prevent fraudulent and manipulative acts and practices, to
promote just and equitable principles of trade, to foster cooperation
and coordination with persons engaged in regulating, clearing,
settling, processing information with respect to, and facilitating
transactions in securities, to remove impediments to and perfect the
mechanism of a free and open market and a national market system, and,
in general, to protect investors and the public interest. Additionally,
the Exchange believes the proposed rule change is consistent with the
Section 6(b)(5) \18\ requirement that the rules of an exchange not be
designed to permit unfair discrimination between customers, issuers,
brokers, or dealers.
---------------------------------------------------------------------------

    \16\ 15 U.S.C. 78f(b).
    \17\ 15 U.S.C. 78f(b)(5).
    \18\ Id.
---------------------------------------------------------------------------

    In particular, the Exchange believes the proposed rule change to
permit the Exchange to list the SPX class on Hybrid on a group basis
will benefit investors and promote just and equitable principles of
trade, as it provides the Exchange with flexibility to establish a more
appropriate market model for a group of SPX series that may exhibit
different trading characteristics than other series in the class, even
when both groups trade on the same platform. Currently, the Exchange
may list a class on a group basis if the groups of a class trade on
different trading platforms, and as noted above, the Exchange currently
only does so for SPX, the only Hybrid 3.0 class. The proposed rule
change merely permits the Exchange to similarly list the SPX class on a
group basis on the same trading platform when SPX options migrate to
the Hybrid Trading System. This will permit the Exchange to migrate SPX
options to the Hybrid Trading System without interruption to how SPX
and SPXW options currently trade.
    Similarly, the proposed rule change to provide that SPX/SPXW
complex orders will not execute against individual orders in the Ebook
will permit these orders to be handled in the same manner on the Hybrid
Trading System as they are today on the Hybrid 3.0 System. These orders
will continue to be eligible for electronic processing, including
electronic execution, in the same manner as complex orders consisting
of SPX series only or SPXW series only, except they will not
automatically against [sic] individual orders in the Ebook for the
legs, which will result in those SPX/SPXW orders being treated in the
same manner as they are today. This will provide these orders with the
same electronic execution opportunities they have today, which will
continue to not be eligible for automatic execution against the
individual leg markets due to system limitations described above and
would instead rest in the COB (if eligible) or route to PAR, an order
management terminal, or the Trading Permit Holder during Regular
Trading Hours, or be rejected back to the Trading Permit Holder during
Extended Trading Hours.
    The Exchange believes the proposed rule change to permit the
Exchange to establish minimum quote size for SPX, and bid-ask
differential requirements for all classes, on a premium basis and for
specific expirations, in addition to class basis, will ensure Market-
Maker obligations maintain an appropriate balance of obligations and
benefits. As discussed above, the Exchange currently establishes bid-
ask differential requirements on a class and premium basis and for
series with expirations of less than nine months and nine months or
more. The proposed rule change merely codifies this practice in the
Rules for classes other than SPX, so this will result in no change to
Market-Makers. The Exchange believes it is appropriate to establish
minimum quote sizes in SPX on an expiration and premium basis to
reflect the different trading characteristics of those series within
the SPX class. For example, series with higher premiums or farther
expirations generally have wider spreads and lower trading volumes, and
positions in those series carry additional risk. These characteristics
make wider bid-ask differential and smaller

minimum quote size (with respect to SPX) requirements more appropriate
and less burdensome on Market-Makers. The proposed expiration groupings
for minimum quote size and bid-ask differential requirements in SPX are
based on the Exchange's review of various information, including SPX
transaction data, sizes of LMM quotes in SPX, and feedback received
from Market-Makers and Exchange advisory groups. The Exchange believes
this proposed rule change will promote just and equitable principles of
trade by ensuring bid/ask differential requirements and minimum size
requirements for SPX are effective and not overly burdensome on Market-
Makers, which will ensure continued liquidity on the Exchange,
including in SPX options once they convert to Hybrid, which ultimately
benefits investors.
    The proposed rule change to move the appointment cost for the SPX
class from the Hybrid 3.0 table to the Hybrid table in Rule 8.3(c)(i)
reflects the Exchange's planned migration of SPX options from the
Hybrid 3.0 platform to the Hybrid Trading System. The Exchange proposes
no change to the appointment cost, and thus Market-Makers with SPX
appointments will not need to purchase any additional trading permits
to quote SPX options once the migrate trading platforms.
    The Exchange believes the proposed rule change to permit the
Exchange to apply Market-Maker (including PMMs and DPMs, as applicable)
\19\ obligations on a group basis rather than class basis for SPX will
promote just and equitable principles of trade, as it will ensure a
continued balance of an SPX Market-Maker's obligations with benefits
given the significantly large number of SPX series. Requiring a Market-
Maker to satisfy quoting obligations in multiple groups of SPX that, in
the aggregate, represent a significantly large number of series, may be
burdensome for Market-Makers to quote, which may disincentive Market-
Makers from selecting appointments in such a class and thus reduce
liquidity. The proposed rule change incentivizes Market-Makers to
retain SPX appointments. Additionally, permitting the Exchange to
determine compliance with these obligations on a group basis would
permit Market-Maker obligations to apply to SPX options when it
migrates to the Hybrid Trading System in a similar manner as they do
today. For example, SPX Market-Makers that currently quote in SPXW
options may elect to continue to only quote in those options without
having to quote in SPX options.
---------------------------------------------------------------------------

    \19\ The Exchange notes there are not currently any PMMs or DPMs
for SPX or SPXW, and there will be none at the time of conversion of
SPX to Hybrid.
---------------------------------------------------------------------------

    The proposed rule change to require Market-Makers to comply with
bid/ask differential requirements with respect to electronic quotes
upon a class beginning to trade on the Hybrid System will increase
liquidity and tighter markets in these classes as soon as they begin
trading. The proposed rule change maintains a balance of obligations
and benefits, as Market-Makers ultimately have to comply with these
requirements; the proposed rule change merely change when they must
start to comply with them.

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

    Cboe Options does not believe that the proposed rule change will
impose any burden on competition that is not necessary or appropriate
in furtherance of the purposes of the Act. The proposed rule change has
no impact on intramarket competition, as it will apply to all market
participants that trade in SPX when listed on a group basis on the
Hybrid Trading System. When SPX options move to trade on the Hybrid
Trading System, the SPX class will continue to trade in two groups as
it does today (SPX options and SPXW options), and SPX/SPXW complex
orders will continue to be handled in the same manner as they are
today. The proposed rule change has no impact on intermarket
competition, as the proposed rule change relates to a product
exclusively listed on the Exchange, and permits that product to
continue trading in a similar manner as it does today.
    The proposed rule change to permit the Exchange to determine a
Market-Maker's compliance with obligations on a group basis rather than
a class basis, as well as to establish minimum quote sizes on an
expiration and premium basis, in addition to class basis, for the SPX
class ensures a continued balance of a Market-Maker's obligations with
benefits. The proposed change will apply in the same manner to Market-
Makers that select SPX appointments. As set forth in Rule 8.3(c),
Market-Makers select which classes in which they have appointments, and
thus become subject to these obligations when they choose such
appointments in their discretion. Permitting the Exchange to determine
compliance with these obligations on a group basis would permit Market-
Maker obligations to apply to SPX options when they migrates [sic] to
the Hybrid Trading System, and apply to SPXW options in a similar
manner as they do today. Additionally, the proposed rule change ensures
the Exchange may apply these obligations to reasonable number of series
and not be overly burdensome on Market-Makers.
    The proposed rule change to permit the Exchange to establish
minimum quote size (for SPX) and bid-ask differential requirements on
an expiration and premium basis will ensure the Exchange can
effectively set these requirements without being overly burdensome on
Market-Makers given the differing trade characteristics applicable to
series with different expirations and premiums. These proposed changes
overall will continue to incentive Market-Makers to have appointments
in SPX, which increases liquidity and ultimately benefits investors. As
noted above, the rules permit the Exchange to establish other trading
parameters on a premium and class basis, and the proposed rule change
codifies a current Exchange practice to set bid-ask differential
requirements on a class and premium basis and for expirations of less
than nine months and nine months or more for all classes other than
SPX. The proposed expiration groupings for minimum quote size and bid-
ask differential requirements in SPX are based on the Exchange's review
of various information, including SPX transaction data, sizes of LMM
quotes in SPX, and feedback received from Market-Makers and Exchange
advisory groups. The proposed rule change has no impact on intermarket
competition, as the proposed rule change relates to obligations
applicable to Cboe Options Market-Makers.
    The proposed rule change regarding SPX appointment cost will have
no impact on competition, as the appointment cost will stay the same,
and thus Market-Makers will not need to obtain any additional trading
permits to quote in SPX options following their migration to the Hybrid
Trading System.
    The proposed rule change related to bid/ask differentials will not
impose any burden on intramarket competition, because it will apply in
the same manner to all Market-Makers subject to that requirement. It
will not impose any burden on intermarket competition, because it
relates to quoting requirements imposed by Cboe Options. Additionally,
requiring Market-Makers to comply with bid/ask differential
requirements with respect to electronic quotes as soon as a class
begins trading will increase liquidity and tighter markets in these
classes when the class starts trading. Market-Makers ultimately have to
comply with these

requirements; the proposed rule change merely change [sic] when they
must start to comply with them.

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

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

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

    Because the foregoing proposed rule change does not: (i)
Significantly affect the protection of investors or the public
interest; (ii) impose any significant burden on competition; and (iii)
become operative for 30 days from the date on which it was filed, or
such shorter time as the Commission may designate, it has become
effective pursuant to Section 19(b)(3)(A)(iii) of the Act \20\ and
subparagraph (f)(6) of Rule 19b-4 thereunder.\21\
---------------------------------------------------------------------------

    \20\ 15 U.S.C. 78s(b)(3)(A)(iii).
    \21\ 17 CFR 240.19b-4(f)(6). In addition, Rule 19b-4(f)(6)
requires a self-regulatory organization to give the Commission
written notice of its intent to file the proposed rule change at
least five business days prior to the date of filing of the proposed
rule change, or such shorter time as designated by the Commission.
The Exchange has satisfied this requirement.
---------------------------------------------------------------------------

    A proposed rule change filed under Rule 19b-4(f)(6) normally does
not become operative for 30 days after the date of the filing. However,
Rule 19b-4(f)(6)(iii) \22\ permits the Commission to designate a
shorter time if such action is consistent with the protection of
investors and the public interest. In its filing, Cboe Options
requested that the Commission waive the 30-day operative delay. The
Exchange represented that it would like to migrate SPX options from the
Hybrid 3.0 System to the Hybrid Trading System on April 30, 2018. The
Commission believes that waiver of the 30-day operative delay is
consistent with the protection of investors and the public interest
because the proposal is designed to modify the Hybrid Trading System
rules to accommodate SPX options in a manner substantively similar to
how they currently are listed and traded on Hybrid 3.0. In so doing,
the proposal permits the Exchange to migrate the one product currently
trading on Hybrid 3.0 onto the system it uses for all other options,
and to do so in a way that minimizes disruption for traders that
currently trade SPX on Hybrid 3.0 without raising novel issues.
Accordingly, the Commission waives the 30-day operative delay and
designates the proposed rule change operative upon filing.\23\
---------------------------------------------------------------------------

    \22\ 17 CFR 240.19b-4(f)(6)(iii).
    \23\ For purposes only of waiving the 30-day operative delay,
the Commission has also considered the proposed rule's impact on
efficiency, competition, and capital formation. See 15 U.S.C.
78c(f).
---------------------------------------------------------------------------

    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: (i)
Necessary or appropriate in the public interest; (ii) for the
protection of investors; or (iii) otherwise in furtherance of the
purposes of the Act. If the Commission takes such action, the
Commission shall institute proceedings to determine whether the
proposed rule should be approved or disapproved.

IV. Solicitation of Comments

    Interested persons are invited to submit written data, views, and
arguments concerning the foregoing, including whether the proposed rule
change is consistent with the Act. Comments may be submitted by any of
the following methods:

Electronic Comments

     Use the Commission's internet comment form (http://www.sec.gov/rules/sro.shtml); or
     Send an email to [email protected]. Please include
File Number SR-CBOE-2018-029 on the subject line.

Paper Comments

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

All submissions should refer to File Number SR-CBOE-2018-029. 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 that are filed with
the Commission, and all written communications relating to the proposed
rule change between the Commission and any person, other than those
that may be withheld from the public in accordance with the provisions
of 5 U.S.C. 552, will be available for 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 the filing also will be available for inspection
and copying at the principal office of the Exchange. 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-CBOE-2018-029, and should be submitted
on or before May 18, 2018.

    For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\24\
---------------------------------------------------------------------------

    \24\ 17 CFR 200.30-3(a)(12) and (59).
---------------------------------------------------------------------------

Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2018-08848 Filed 4-26-18; 8:45 am]
 BILLING CODE 8011-01-P


[Federal Register Volume 88, Number 192 (Thursday, October 5, 2023)]
[Proposed Rules]
[Pages 69107-69110]
[FR Doc No: 2023-22066]

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DEPARTMENT OF TRANSPORTATION

Federal Aviation Administration

14 CFR Part 39

[Docket No. FAA-2023-1986; Project Identifier AD-2022-00015-T]
RIN 2120-AA64

Airworthiness Directives; The Boeing Company Airplanes

AGENCY: Federal Aviation Administration (FAA), DOT.

ACTION: Notice of proposed rulemaking (NPRM).

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

SUMMARY: The FAA proposes to adopt a new airworthiness directive (AD)
for certain The Boeing Company Model 767 airplanes. This proposed AD
was prompted by a report of cracks on the forward entry door and
forward service door cutout aft lower corner fuselage skin and bear
strap. This proposed AD would require repetitive inspections for
cracking at the affected area, and applicable on-condition actions. The
FAA is proposing this AD to address the unsafe condition on these
products.

DATES: The FAA must receive comments on this proposed AD by November
20, 2023.

ADDRESSES: You may send comments, using the procedures found in 14 CFR
11.43 and 11.45, by any of the following methods:
     Federal eRulemaking Portal: Go to regulations.gov. Follow
the instructions for submitting comments.
     Fax:<PHONE_NUMBER>.
     Mail: U.S. Department of Transportation, Docket
Operations, M-30, West Building Ground Floor, Room W12-140, 1200 New
Jersey Avenue SE, Washington, DC 20590.
     Hand Delivery: Deliver to Mail address above between 9
a.m. and 5 p.m., Monday through Friday, except Federal holidays.
    AD Docket: You may examine the AD docket at regulations.gov under
Docket No. FAA-2023-1986; or in person at Docket Operations between 9
a.m. and 5 p.m., Monday through Friday, except Federal holidays. The AD
docket contains this NPRM, any comments received, and other
information. The street address for Docket Operations is listed above.
    Material Incorporated by Reference:
     For service information identified in this NPRM, contact
Boeing Commercial Airplanes, Attention: Contractual & Data Services
(C&DS), 2600 Westminster Blvd., MC 110-SK57, Seal Beach, CA 90740-5600;
telephone<PHONE_NUMBER>; website myboeingfleet.com.
     You may view this service information at the FAA,
Airworthiness Products Section, Operational Safety Branch, 2200 South
216th St., Des Moines, WA. For information on the availability of this
material at the FAA, call<PHONE_NUMBER>. It is also available at
regulations.gov by searching for and locating Docket No. FAA-2023-1986.

FOR FURTHER INFORMATION CONTACT: Joseph Hodgin, Aviation Safety
Engineer, FAA, 2200 South 216th St., Des Moines, WA 98198; phone: 206-
231-3962; email: [email protected].

SUPPLEMENTARY INFORMATION:

Comments Invited

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

FAA-2023-1986; Project Identifier AD-2022-00015-T'' at the beginning of
your comments. The most helpful comments reference a specific portion
of the proposal, explain the reason for any recommended change, and
include supporting data. The FAA will consider all comments received by
the closing date and may amend this proposal because of those comments.
    Except for Confidential Business Information (CBI) as described in
the following paragraph, and other information as described in 14 CFR
11.35, the FAA will post all comments received, without change, to
regulations.gov, including any personal information you provide. The
agency will also post a report summarizing each substantive verbal
contact received about this NPRM.

Confidential Business Information

    CBI is commercial or financial information that is both customarily
and actually treated as private by its owner. Under the Freedom of
Information Act (FOIA) (5 U.S.C. 552), CBI is exempt from public
disclosure. If your comments responsive to this NPRM contain commercial
or financial information that is customarily treated as private, that
you actually treat as private, and that is relevant or responsive to
this NPRM, it is important that you clearly designate the submitted
comments as CBI. Please mark each page of your submission containing
CBI as ``PROPIN.'' The FAA will treat such marked submissions as
confidential under the FOIA, and they will not be placed in the public
docket of this NPRM. Submissions containing CBI should be sent to
Joseph Hodgin, Aviation Safety Engineer, FAA, 2200 South 216th St., Des
Moines, WA 98198; phone:<PHONE_NUMBER>; email: [email protected].
Any commentary that the FAA receives that is not specifically
designated as CBI will be placed in the public docket for this
rulemaking.

Background

    The FAA has received reports from operators of cracks found on the
forward entry door and forward service door cutout aft lower corner
fuselage skin and bear strap between stringer 19 and the lower main
sill chord, from station (STA) 332 to STA 340. The cracks were reported
between 25,983 and 47,385 total flight cycles, and between 45,771 and
80,680 total flight hours. These cracks have been occurring at earlier
flight cycles and are spreading faster than initially predicted. One
Model 767-300 operator reported a 5.3-inch crack on the forward service
door, common to only the skin in the lower aft corner, and an
associated 0.32-inch crack in the bear strap at the same location. The
airplane had completed 43,459 total flight cycles and 61,086 total
flight hours when the cracks were discovered. Undetected fatigue
cracks, if not addressed, could result in a principal structural
element's loss of limit load capability, adversely affecting the
airplane's structural integrity.

FAA's Determination

    The FAA is issuing this NPRM after determining that the unsafe
condition described previously is likely to exist or develop on other
products of the same type design.

Related Service Information Under 1 CFR Part 51

    The FAA reviewed Boeing Alert Requirements Bulletin 767-53A0301 RB,
Revision 2, dated May 24, 2023. This service information specifies
procedures for repetitive inspections (external detailed, internal
detailed, and open hole high frequency eddy current) for cracking at
the forward entry door and forward service door cutout aft lower corner
fuselage skin and bear strap area. This service information also
specifies procedures for on-condition actions, including crack repair.
This service information is reasonably available because the interested
parties have access to it through their normal course of business or by
the means identified in ADDRESSES.

Proposed AD Requirements in This NPRM

    This proposed AD would require accomplishing the actions specified
in the service information already described, except for any
differences identified as exceptions in the regulatory text of this
proposed AD.

Costs of Compliance

    The FAA estimates that this AD, if adopted as proposed, would
affect 682 airplanes of U.S. registry. The FAA estimates the following
costs to comply with this proposed AD:

                                                 Estimated Costs
----------------------------------------------------------------------------------------------------------------
                                                                                Cost on U.S.
             Action                    Labor cost         Parts cost     Cost per  product        operators
----------------------------------------------------------------------------------------------------------------
Inspections.....................  Up to 8 work-hours               $0   Up to $680 per       Up to $463,760 per
                                   x $85 per hour =                      inspection cycle.    inspection cycle.
                                   $680 per
                                   inspection cycle.
----------------------------------------------------------------------------------------------------------------

    The FAA has received no definitive data on which to base the cost
estimates for the on-condition actions (i.e., possible crack repair)
specified in this proposed AD.

Authority for This Rulemaking

    Title 49 of the United States Code specifies the FAA's authority to
issue rules on aviation safety. Subtitle I, section 106, describes the
authority of the FAA Administrator. Subtitle VII: Aviation Programs,
describes in more detail the scope of the Agency's authority.
    The FAA is issuing this rulemaking under the authority described in
Subtitle VII, Part A, Subpart III, section 44701: General requirements.
Under that section, Congress charges the FAA with promoting safe flight
of civil aircraft in air commerce by prescribing regulations for
practices, methods, and procedures the Administrator finds necessary
for safety in air commerce. This regulation is within the scope of that
authority because it addresses an unsafe condition that is likely to
exist or develop on products identified in this rulemaking action.

Regulatory Findings

    The FAA determined that this proposed AD would not have federalism
implications under Executive Order 13132. This proposed AD would not
have a substantial direct effect on the States, on the relationship
between the national Government and the States, or on the distribution
of power and responsibilities among the various levels of government.
    For the reasons discussed above, I certify this proposed
regulation:
    (1) Is not a ``significant regulatory action'' under Executive
Order 12866,

    (2) Would not affect intrastate aviation in Alaska, and
    (3) Would not have a significant economic impact, positive or
negative, on a substantial number of small entities under the criteria
of the Regulatory Flexibility Act.

List of Subjects in 14 CFR Part 39

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

The Proposed Amendment

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

PART 39--AIRWORTHINESS DIRECTIVES

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

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

Sec.  39.13  [Amended]

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

The Boeing Company: Docket No. FAA-2023-1986; Project Identifier AD-
2022-00015-T.

(a) Comments Due Date

    The FAA must receive comments on this airworthiness directive
(AD) by November 20, 2023.

 (b) Affected ADs

    None.

 (c) Applicability

    This AD applies to The Boeing Company airplanes, certificated in
any category, identified in paragraphs (c)(1) and (2) of this AD.
    (1) Model 767-200, -300, -300F, and -400ER series airplanes, as
identified in Boeing Alert Requirements Bulletin 767-53A0301 RB,
Revision 2, dated May 24, 2023.
    (2) Model 767-2C series airplanes, line numbers 1065, 1066,
1067, 1069, 1091, 1092, 1098, 1100, 1102, 1104, 1107, 1109, 1111,
1113, 1114, 1116, 1117, 1119, 1120, 1122, 1124, 1126, 1128, 1129,
1131, 1132, 1134, 1135, 1137, 1139, 1143, 1145, 1147, 1149, 1151,
1154, 1156, 1158, 1160, 1162, 1164, 1166, 1168, 1170, 1172, 1174,
1176, 1178, 1181, 1184, 1188, 1192, 1196, 1200, 1202, 1205, 1207,
1210, 1213, 1216, 1219, 1223, 1226, 1230, 1234, 1236, 1238, 1241,
1243, 1246, 1248, 1250, 1252, 1254, 1257, 1259, 1261, 1264, 1267,
1269, 1271, and 1273.

 (d) Subject

    Air Transport Association (ATA) of America Code 53, Fuselage.

 (e) Unsafe Condition

    This AD was prompted by a report of cracks found on the forward
entry door and forward service door cutout aft lower corner fuselage
skin and bear strap. The FAA is issuing this AD to address
undetected fatigue cracks. The unsafe condition, if not addressed,
could result in a principal structural element losing its limit load
capability, adversely affecting the airplane's structural integrity.

 (f) Compliance

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

 (g) Required Actions: Model 767-200, -300, -300F, and -400ER

    For Model 767-200, -300, -300F, -400ER series airplanes: Except
as specified by paragraph (h) of this AD, at the applicable times
specified in the ``Compliance'' paragraph of Boeing Alert
Requirements Bulletin 767-53A0301 RB, Revision 2, dated May 24,
2023, do all applicable actions identified in, and in accordance
with, the Accomplishment Instructions of Boeing Alert Requirements
Bulletin 767-53A0301 RB, Revision 2, dated May 24, 2023.

    Note 1 to paragraph (g):  Guidance for accomplishing the actions
required by this AD can be found in Boeing Alert Service Bulletin
767-53A0301, Revision 2, dated May 24, 2023, which is referred to in
Boeing Alert Requirements Bulletin 767-53A0301, Revision 2, dated
May 24, 2023.

 (h) Exceptions to Service Information Specifications

    (1) Where Boeing Alert Requirements Bulletin 767-53A0301 RB,
dated May 24, 2023, compliance time columns in Tables 1 and 2,
paragraph E (Compliance), use the phrase ``the Original Issue date
of Requirements Bulletin 767-53A0301 RB,'' this AD requires
replacing those words with ``the effective date of this AD.''
    (2) Where Boeing Alert Requirements Bulletin 767-53A0301 RB,
Revision 2, dated May 24, 2023, specifies contacting Boeing for
repair instructions: This AD requires doing the repair before
further flight using a method approved in accordance with the
procedures specified in paragraph (l) of this AD.

 (i) Required Actions: Model 767-2C

    At the later of the times specified in paragraphs (i)(1) and (2)
of this AD: Perform inspections (external detailed, internal
detailed, and open hole high frequency eddy current, as applicable)
for cracking at the forward entry door and forward service door
cutout aft lower corner fuselage skin and bear strap area, and
repair any cracks found, in accordance with a method approved by the
Manager, AIR-520, Continued Operational Safety Branch, FAA.

    Note 1 to paragraph (i):  Guidance on doing the required actions
can be found in Boeing Alert Requirements Bulletin 767-53A0303 RB,
Revision 1, dated June 29, 2023; and Boeing Alert Requirements
Bulletin 767-53A0308 RB, Revision 1, dated June 21, 2023.

    (1) Before 15,000 cumulative flight cycles or 30,000 cumulative
total accumulated cycles, whichever occurs first. These terms are
defined in paragraph (j) of this AD.
    (2) Within 2,250 flight cycles, 4,500 total accumulated cycles,
or 24 months after the effective date of this AD, whichever occurs
first.

 (j) Compliance Time Definitions

    The definitions in paragraphs (j)(1) through (5) of this AD
apply to this AD.
    (1) A ``flight cycle'' is an operation by an aircraft that is
initially stopped on the ground, departs in flight, attains a
maximum above ground level (AGL) altitude greater than 5,000 feet
relative to the runway, lands on a runway, and stops on the ground.
A flight cycle may include one or more touch-and-go cycles.
    (2) A ``touch-and-go cycle'' is an operation by an aircraft that
lands and departs on a runway without stopping or exiting the runway
and is immediately followed by a short flight with a maximum AGL
altitude of 5,000 feet relative to the runway.
    (3) ``Total accumulated cycles'' is the sum of the accumulated
number of flight cycles, accumulated missed approaches, and the
accumulated number of touch-and-go cycles.
    (4) A ``missed approach'' (or go-around) is an aircraft landing
approach that is discontinued and proceeded by a climb-out for any
reason without landing gear touching the runway and is either
immediately preceded by or immediately followed by a short flight
with a maximum AGL altitude of 5,000 feet relative to the runway.
Any flight operation not meeting this definition is considered a
flight cycle.
    (5) ``Cumulative'' cycles are total cycles since new.

 (k) Credit for Previous Actions

    This paragraph provides credit for the actions specified in
paragraph (g) of this AD, if those actions were performed before the
effective date of this AD using Boeing Alert Requirements Bulletin
767-53A0301 RB, dated April 21, 2021, or Boeing Alert Requirements
Bulletin 767-53A0301 RB, Revision 1, dated April 11, 2022.

 (l) Alternative Methods of Compliance (AMOCs)

    (1) The Manager, AIR-520, Continued Operational Safety Branch,
FAA, has the authority to approve AMOCs for this AD, if requested
using the procedures found in 14 CFR 39.19. In accordance with 14
CFR 39.19, send your request to your principal inspector or
responsible Flight Standards Office, as appropriate. If sending
information directly to the manager of the certification office,
send it to the attention of the person identified in paragraph
(m)(1) of this AD. Information may be emailed to: [email protected].
    (2) Before using any approved AMOC, notify your appropriate
principal inspector, or lacking a principal inspector, the manager
of the responsible Flight Standards Office.
    (3) An AMOC that provides an acceptable level of safety may be
used for any repair, modification, or alteration required by this AD
if it is approved by The Boeing Company Organization Designation
Authorization (ODA) that has been authorized by the Manager, AIR-
520, Continued Operational Safety Branch, FAA, to make those
findings. To be approved, the repair method, modification deviation,
or alteration deviation must meet the certification basis of

the airplane, and the approval must specifically refer to this AD.

 (m) Related Information

    (1) For more information about this AD, contact Joseph Hodgin,
Aviation Safety Engineer, FAA, 2200 South 216th St., Des Moines, WA
98198; phone:<PHONE_NUMBER>; email: [email protected].
    (2) Service information identified in this AD that is not
incorporated by reference is available at the addresses specified in
paragraphs (n)(3) and (4) of this AD.

 (n) Material Incorporated by Reference

    (1) The Director of the Federal Register approved the
incorporation by reference (IBR) of the service information listed
in this paragraph under 5 U.S.C. 552(a) and 1 CFR part 51.
    (2) You must use this service information as applicable to do
the actions required by this AD, unless the AD specifies otherwise.
    (i) Boeing Alert Requirements Bulletin 767-53A0301 RB, Revision
2, dated May 24, 2023.
    (ii) [Reserved]
    (3) For service information identified in this AD, contact
Boeing Commercial Airplanes, Attention: Contractual & Data Services
(C&DS), 2600 Westminster Blvd., MC 110-SK57, Seal Beach, CA 90740-
5600; telephone<PHONE_NUMBER>; website myboeingfleet.com.
    (4) You may view this service information at the FAA,
Airworthiness Products Section, Operational Safety Branch, 2200
South 216th St., Des Moines, WA. For information on the availability
of this material at the FAA, call<PHONE_NUMBER>.
    (5) You may view this service information that is incorporated
by reference at the National Archives and Records Administration
(NARA). For information on the availability of this material at
NARA, email [email protected], or go to: www.archives.gov/federal-register/cfr/ibr-locations.html.

    Issued on September 28, 2023.
Victor Wicklund,
Deputy Director, Compliance & Airworthiness Division, Aircraft
Certification Service.
[FR Doc. 2023-22066 Filed 10-4-23; 8:45 am]
BILLING CODE 4910-13-P


Pulp, Paper, and Paperboard Production ( EPA 260 B 01 015)

Petroleum Terminals and Bulk Storage Facilities, January 1999 ( EPA 745 B 99 006)

Presswood & Laminated Wood Products Manufacturing ( EPA 260 B 01 013)

Printing, Publishing and Packaging Industry, April 2000 ( EPA 745 B 00 005)

RCRA Subtitle C TSD Facilities and Solvent Recovery Facilities, January 1999 ( EPA 745 B 99 004)

Rubber and Plastics Manufacturing, April 2000 ( EPA 745 B 00 017) A 5 Semiconductor Manufacture, July 1999 ( EPA 745 R 99 007)

Smelting Operations ( EPA 260 B 01 011)

Spray Application and Electrodeposition of Organic Coatings, December 1998 ( EPA 745 B 99 014)

Textile Processing Industry, April 200 ( EPA 745 B 00 008)

Welding Operations ( EPA 260 B 01 007)

Wood Preserving Operations ( EPA 260 B 01 008)

U. S. EPA, Office of Compliance, published a series of documents in 1995 called Sector Notebooks. These documents provide information of general interest regarding environmental issues associated with specific industrial sectors. The Document Control Numbers ( DCN) range from EPA/ 310 R 95 001 through EPA/ 310 R 95 018.

A. 4 CHEMICAL SPECIFIC GUIDANCE DOCUMENTS U. S. EPA has also developed a group of guidance documents specific to individual chemicals and chemical categories. These are presented below.

Emergency Planning and Community Right to Know EPCRA Section 313: Guidance for Reporting Aqueous Ammonia, December 2000 ( EPA 745 R 00 005)

Emergency Planning and Community Right to Know EPCRA Section 313: List of Toxic Chemicals within the Chlorophenols Category, June 1999 ( EPA 745 B 99 013)

Emergency Planning and Community Right to Know EPCRA Section 313: Guidance for Reporting Toxic Chemicals within Dioxin and Dioxin like Compounds Category, December 2000 ( EPA 745 B 00 021)

Estimating Releases for Mineral Acid Discharges Using pH Measurements, U. S. Environmental Protection Agency, June 1991 Guidance for Reporting Sulfuric Acid ( acid aerosols including mists, vapors, gas, fog, and other airborne forms of any particle size), March 1998 ( EPA 745 R 97 007)

Guidance for Reporting Hydrochloric Acid ( acid aerosols including mists, vapors, gas, fog, and other airborne forms of any particle size), December 1999 ( EPA 745 B 99 014)

Toxic Release Inventory List of Toxic Chemicals within the Glycol Ethers Category and Guidance for Reporting, December 2000 ( EPA 745 R 00 004) A 6 Toxic Release Inventory: List of Toxic Chemicals within the Nicotine and Salts Category, June 1999 ( EPA 745 R 99 010)

Toxic Release Inventory: List of Toxic Chemicals within the Polychlorinated Alkanes Category and Guidance for Reporting, June 1999 ( EPA 745 B 99 023)

Toxic Release Inventory: List of Toxic Chemicals within the Strychnine and Salts Category, June 1999 ( EPA 745 R 99 011)

Toxic Release Inventory List of Toxic of Chemicals within the Water Dissociable Nitrate Compounds Category and Guidance for Reporting, December 2000 ( EPA 745 R 00 006)

Toxics Release Inventory  List of Toxic Chemicals Within Ethylenebisdithiocarbamic Acid, Salts and Esters Category and List of Mixtures that Contain the Individually Listed Chemicals Maneb, Metiram, Nabam and Zineb, December 2000 ( EPA 745 B 00 018)

Toxics Release Inventory  Copper Phthalocyanine Compounds Excluded for the Reporting Requirements Under the Copper Compounds Category on the EPCRA Section 313 List, April 1995, EPA 745 R 95 007 Emergency Planning and Community Right to Know EPCRA Section 313: Guidance for Reporting: Mercury and Mercury Compounds Category, June 2001 ( EPA 745 B 01 00X)

Emergency Planning and Community Right to Know EPCRA Section 313: Guidance for Reporting: Pesticides and Other Persistent Bioaccumulative Toxic ( PBT) Chemicals, June 2001 ( EPA 745 B 01 00X)

Emergency Planning and Community Right to Know EPCRA Section 313: Guidance for Reporting: Polycyclic Aromatic Compounds Category, June 2001 ( EPA 745 B 01 00X)

Toxics Release Inventory  List of Toxic Chemicals Within Warfarin Category, June 1999 ( EPA 745 B 99 011)

A. 5 OTHER USEFUL REFERENCES Burgess, W. A. Recognition of Health Hazards in Industry. Harvard School of Public Health. Boston, Massachusetts, John Wiley & Sons.

CRC Handbook of Chemistry and Physics. Latest Edition, Robert C. Weast, Editor, CRC Press, Inc., Florida.

Kirk Othmer  Encyclopedia of Chemical Technology. Latest Edition, John Wiley & Sons, New York.

Locating and Estimating Air Emissions from Various Sources. Available from: National Technical Information Services ( NTIS), ( 703) 487 4650. A 7 The Merck Index. Latest Edition, Merck & Co., Inc., New Jersey.

Perry, R. H. and C. H. Chilton, Chemical Engineer's Handbook. Latest Edition, McGraw Hill Book Company, New York.

Sax, N. I. and R. J. Lewis, Sr., Hawley's Condensed Chemical Dictionary. Latest Edition, Van Nostrand Reinhold Company, New York. Appendix B BASIC CALCULATION TECHNIQUES B 1 Appendix B BASIC CALCULATION TECHNIQUES This section will provide the basic techniques needed to use specific types of data or engineering calculations. Examples are provided for:

( 1) Stack monitoring data;

( 2) Industrial hygiene data;

( 3) Raoult's Law;

( 4) Air emission factors;

( 5) RCRA hazardous waste analysis data;

( 6) NPDES monitoring data.

( 1) Stack Monitoring Data The following is an example of a release calculation using monitoring data.

Example: Stack monitoring data are available for a paint booth. The measured average concentration of toluene is 0.1 ppmv ( dry gas basis). The moisture content in the stack is typically 10%, and stack conditions are maintained at 80oC and atmospheric pressure. The stack gas velocity is 8 m/ s. The diameter of the stack is 0.3 m. Calculate the point air release of toluene.

Step 1. Calculate volumetric flow of stack gas stream.

Volumetric flow = ( gas velocity) × [(  ) × ( internal stack diameter) 2/ 4)]

Volumetric flow = ( 8.0 m/ s) × [(  ) × ( 0.3 m) 2/ 4] = 0.6 m3/ s Step 2. Correct for moisture content in stack gas stream.

Stack exhausts may contain large amounts of water vapor. The concentration of the chemical in the exhaust is often presented on a dry basis. For an accurate release rate, correct the vent gas flow rate for the moisture content by multiplying by the term ( 1  fraction water vapor). The dry gas rate can then by multiplied by the chemical concentration. B 2 Molar volume

V n

RT P ( Note: If the toluene concentration is on a wet gas basis, no correction is necessary for moisture content.)

Dry volumetric flow = ( Volumetric flow) × ( 1 fraction water vapor)

Dry volumetric flow = ( 0.6 m3/ s) × ( 1 0.10) = 0.5 m3/ s Step 3. Convert ppmv to mg/ m3.

ppmv is defined as one part of a chemical in 106 parts of gas ( 1.0 m3/ 106 m3).

Use the molar volume of a gas, corrected for stack temperature and pressure conditions, calculated by the ideal gas law ( PV = nRT). Note that the molar volume of an ideal gas at 237 K and 1 atm is 22.4 L/ mole.

Molecular weight of toluene ( MW) = 92.14 g/ mole.

R = the Ideal Gas Constant ( 0.082057 L  atm per mole Kelvin)

To calculate the molar volume of stack gas, use the ideal gas equation.

For the example, the stack conditions are 80o C ( 353 K) and atmospheric pressure ( 1 atm).

= 29.0 L/ mole The conversion of ppmv to mg/ m3 can now be calculated. B 3

2.5 lb/ yr of toluene Using the example, the concentration of toluene is calculated as follows:

Step 4. Calculate air releases.

Air releases are calculated as follows:

Air Release=( volumetric flow, m3/ s) × ( concentration, mg/ m3) × ( operating time, s/ yr)

The paint booth is used 8 hours per day, 5 days per week, 52 weeks per year.

It is important to note that this calculation assumes the measured emissions are representative of actual emissions at all times; however, this is not always the case. Ideally, a continuous emissions monitor provides the most representative data.

Also note that monitoring and stack data may have units that are different than those used in the example. Modify conversion factors and constants to reflect your data when calculating air releases.

( 2) Industrial Hygiene Data The following is an example of a release calculation using industrial hygiene data.

Example: Occupational industrial hygiene data shows that workers are exposed to an average of 0.1 ppmv benzene ( wet gas basis). The density of benzene vapor is 0.2 lb/ ft3. The ventilation system exhausts 20,000 acfm of room air at 70

F. The plant operates 24 hours per day, 330 days per year.

The benzene concentration is on a wet gas basis, therefore a moisture correction of the ventilation flow rate is not necessary. The industrial hygiene data is collected at the same ambient conditions as the ventilation system, therefore no B 4

190 lb/ yr of benzene adjustment for temperature or pressure needs to be performed. A conservative estimation of benzene fugitive releases could be calculated as follows:

Air Release = ( ventilation flow rate, ft3/ min) × ( operating time, min/ yr) × ( concentration of chemical, ppmv) × ( vapor density of chemical, lb/ ft3)

Benzene releases per year would be calculated as follows:

( 3) Raoult's Law The following is an example of a release calculation using Raoult's Law. Raoult's Law states that the partial pressure of a compound in the vapor phase over a solution may be estimated by multiplying its mole fraction in the liquid solution by the vapor pressure of the pure chemical.

P A = X A, L Po = X A, G P T where:

P

= Vapor pressure of pure liquid chemical A; X A, L = Mole fraction of chemical A in solution; X A, G = Mole fraction of chemical A in the gas phase; P A = Partial pressure of chemical A in the gas phase; and P T = Total pressure.

Example: A wash tank holds a solution containing 10% by weight of o xylene ( A) and 90% by weight of toluene ( B). The tank is vented to the atmosphere; the process vent flow rate is estimated as 100 acfm ( 2.83m3/ min) based on a minimum fresh air ventilation rate. The molecular weight of o xylene is 106.17 g/ mole and toluene is 92.14 g/ mole. The vapor pressure of o xylene is 10 mm of Hg ( 0.19 psia). The total pressure of the system is 14.7 psia ( atmospheric conditions). The process tank is in service 250 days/ yr. Calculate the air release of o xylene.

Step 1: Calculate the mole fraction of o xylene in the liquid solution. B 5 X A, L

wt fraction A MW A wt fraction A MW A  wt fraction B MW B X A, L

0.1 106.17 0.1 106.17  0.9 92.14 X A, L

0.09 X A, G

X A, L P

P T X A, G

[ 0.09] × 0.19 psia 14.7 psia

0.001 Where:

X A, L = Mole fraction of chemical A in liquid solution; MW = Molecular weight of chemical, g/ mole; and wt fraction = Weight fraction of chemical in material.

Step 2: Calculate the mole fraction of o xylene in the gas phase.

where:

X A, G = Mole fraction of chemical A in gas phase; X A, L = Mole fraction of chemical A in liquid solution; P

= Vapor pressure of pure liquid chemical A, psia; and P T = Total pressure of system, psia.

Step 3: Calculate releases using Raoult's Law. B 6 Emissions

( X A, G) × ( AFR) × ( t) × ( MW A) × 1 MV 2.83m3 min × 250 day yr × 24 hr day × 60 min hr × mole 22.4L × 106.17g mole × L 10

3m3 Emissions

4.8 × 106 g/ yr × lb 454 g

10,570 lb/ yr of o  xylene AE

( EF) × ( AU) × ( OT) where:

Emissions = Air release of pollutant A, g A/ yr; X A, G = Mole fraction of chemical A in gas phase; AFR = Air flow rate of room, m3/ min; t = Operating time of wash tank, min/ yr; MW = Molecular weight of chemical, g/ g mole; and MV = Gas molar volume ( 22.4 L/ mole at standard temperature and pressure).

If conditions vary from standard temperature and pressure the gas molar volume can be calculated using the ideal gas law and tank conditions as presented in Example 1.

Emissions = ( 0.001) × = 4.8 × 106 g/ yr The emission of o xylene is calculated as shown below.

Air releases for toluene can be calculated in a similar manner.

( 4) Air Emission Factor The following is an example of a release calculation using air emission factors.

Example: An industrial boiler uses 300 gallons per hour of No. 2 fuel oil. The boiler operates 2,000 hours per year. Calculate emissions of formaldehyde using the AP 42 emission factors. B 7 AE

0.061 lb 103 gal × 300 gal hr × 2,000 hr yr

36.6 lb/ yr of formaldehyde 5 drums yr × 55 gal drum × 9.5 lb gal × 5lb Cd 100lb waste

131 lb/ yr of cadmium where:

AE = Annual emissions of pollutant, lb/ yr EF = Emission factor of pollutant, lb/ 103 gallon of fuel. EF for formaldehyde for an industrial boiler burning No. 2 fuel oil is 0.035 to 0.061 lb/ 103 gallons. AU = Quantity of fuel used, gal/ yr. OT = Operating time, hr/ yr.

Using an emission factor of 0.061 pounds of formaldehyde per gallon of fuel, the air releases are calculated as follows:

( 5) RCRA Waste Analysis The following is an example of a calculation using RCRA waste analysis data.

Example: Spent paint wastes were disposed at an off site waste treatment facility. The quantity of paint waste shipped was five 55 gallon drums per year. Analysis of the waste showed 5% cadmium by weight. Estimating the density of the paint waste to be 9.5 lb/ gallon, the amount of cadmium to off site disposal is calculated as follows:

Amount of cadmium = ( amount of paint waste disposed, gal/ yr) × ( concentration of cadmium, lb/ lb) × ( density of paint waste, lb/ gal)

( 6) NPDES Data The following is an example of a calculation using NPDES data.

NPDES permits require periodic monitoring of the effluent stream. In this example, quarterly samples were taken to be analyzed for silver content. Each sample was an hourly, flow rate based composite taken for one day to be representative of the discharge for that day. The total effluent volume for that day was also recorded. The following data were collected on each sample day. B 8 First Quarter: 10 µ g L × 1g 106 µ g × 1lb 454g × 3.785L gal 0.5 × 106 gal day 0.04  0.05  0.02  0.005 4 lb/ day

0.03lb/ day Yearly Quarter Sample Number Discharge Flow Rate ( 106 gal/ day) Total Silver ( µ g/ L) 1 0.5 10 2 0.6 10 3 0.4 6 4 0.2 < 3 To calculate the amount of silver in pounds discharged on each sample day, the concentration of silver in the discharge is multiplied by the discharge flow rate for that day, as shown below for the first quarter sample.

Amount of silver = ( daily flow rate) × ( silver concentration)

= 0.04 lb/ day of silver The amount of silver discharged during each of the other three monitoring events was similarly determined to be:

0.05 lb/ day; 0.02 lb/ day, and 0.005 lb/ day.

For the last data point the concentration of silver was reported by the laboratory to be less than the detection limit of 3 µ g/ L. For this calculation the detection limit was used to calculate the daily discharge, a conservative assumption.

The average daily discharge was calculated to be:

The plant operates 350 days/ year ( plant shuts down for two weeks in July).

The estimated annual discharge of silver is calculated as follows:

Annual discharge = ( 350 day/ yr) ( 0.03 lb/ day) = 10.5 lb of silver/ yr Appendix C UNIT CONVERSION FACTORS ( From U. S. Coast Guard Commandant Instruction M. 16465.12A) C 1 CONVERSION FACTORS To Convert To Multiply By Length inches inches feet feet feet feet yards yards miles ( U. S. statute) miles ( U. S. statute) miles ( U. S. statute) miles ( U. S. statute) meters meters meters nautical miles millimeters feet inches meters yards miles ( U. S. statute) feet miles ( U. S. statute) feet yards meters nautical miles feet yards miles ( U. S. statute) miles ( U. S. statute) 25.4 0.0833 12 0.3048 0.3333 0.0001894 3 0.0005682 5280 1760 1609 0.868 3.271 1.094 0.0006214 1.152 Area square inches square inches square feet square feet square meters square miles square yards square centimeters square feet square inches square meters square feet square yards square feet 6.452 0.006944 144 0.09290 10.76 3,097,600 9 Volume cubic inches cubic inches cubic feet cubic feet cubic feet cubic meters liters quarts ( U. S. liquid) U. S. gallons U. S. gallons U. S. gallons barrels ( petroleum) Imperial gallons milliliters cubic centimeters cubic feet cubic inches cubic meters U. S. gallons cubic feet quarts ( U. S. liquid) liters barrels ( petroleum) cubic feet Imperial gallons U. S. gallons U. S. gallons cubic centimeters 16.39 0.0005787 1728 0.02832 7.481 35.31 1.057 0.9463 0.02381 0.1337 0.8327 42 1.201 1 CONVERSION FACTORS ( Continued)

To Convert To Multiply By C 2 Time seconds seconds seconds minutes minutes minutes hours hours hours minutes hours days seconds hours days seconds minutes days 0.01667 0.0002778 0.00001157 60 0.01667 0.0006944 3600 60 0.04167 Mass or Weight pounds pounds pounds pounds tons ( short) tons ( metric) tons ( long) kilograms tonnes ( metric tons) kilograms short tons long tons metric tons pounds pounds pounds pounds kilograms 0.4536 0.0005 0.000464 0.0004536 2000 2205 2240 2.205 1000 Energy calories calories Btu ( British thermal units) Btu joules joules Btu joules calories joules calories Btu 0.003968 4.187 252.0 1055 0.2388 0.0009479 Velocity feet per second feet per second feet per second meters per second meters per second miles per hour miles per hour knots knots knots pounds per cubic foot grams per cubic centimeter grams er cubic centimeter kilograms per cubic meter meters per second miles per hour knots feet per second miles per hour meters per second feet per second meters per second miles per hour feet per second grams per cubic centimeter pounds per cubic foot kilograms per cubic meter grams per cubic centimeter 0.3048 0.6818 0.5921 3.281 2.237 0.4470 1.467 0.5148 1.151 1.689 0.01602 62.42 1000 0.001 CONVERSION FACTORS ( Continued)

To Convert To Multiply By C 3 Pressure ponds per square inch ( absolute) ( psia) psia psia psia pounds per square inch ( gauge) ( psig) millimeters of mercury ( torr) millimeters of mercury ( torr) inches of water kilograms per square centimeter inches of water kilograms per square centimeter atmospheres kilograms per square centimeter atmospheres bars kilonewtons per square meter ( kN/ m2) bars kilonewtons per square meter ( kN/ m2) bars kilonewtons per square meter ( kN/ m2) atmospheres inches of water millimeters of mercury ( torr) psia psia kN/ m2 psia millimeters of mercury ( torr) kN/ m2 atmospheres kN/ m2 psia psia kN/ m2 psia atmospheres atmospheres kilograms per square centimeter 6.895 0.0680 27.67 51.72 add 14.70 0.01934 0.1333 0.03614 735.6 0.2491 0.9678 101.3 14.22 14.70 100 0.1450 0.9869 0.009869 1.020 Viscosity centipoises pounds per foot per second centipoises centipoises poises grams per centimeter per second Newton seconds per square meter pounds per foot per second centipoises poises Newton seconds per square meter grams per centimeter per second poises centipoises 0.0006720 1488 0.01 0.001 1 1 1000 Thermal Conductivity Btu per hour per foot per  F Btu per hour per foot per  F watts per meter kelvin kilocalories per hour per meter per  C kilocalories per hour per meter per  C watts per meter kelvin kilocalories per hour per meter per  C Btu per hour per foot per  F watts per meter kelvin Btu per hour per foot per  F 1.731 1.488 0.5778 1.163 0.6720 Heat Capacity Btu per pound per  F Btu per pound per  F joules per kilogram kelvin calories per gram per  C calories per gram per  C joules per kilogram kelvin Btu per pound per  F Btu per pound per  F 1 4187 0.0002388 1 CONVERSION FACTORS ( Continued)

To Convert To Multiply By C 4 Concentration ( in water solution)

parts per million ( ppm) milligrams per liter milligrams per cubic meter grams per cubic centimeter grams per cubic centimeter pounds per cubic foot milligrams per liter ppm grams per cubic centimeter milligrams per cubic meter pounds per cubic foot grams per cubic centimeter 1 1 1 × 10 9 1 × 109 62.42 0.01602 Temperature degrees Kelvin (  K) degrees Rankine (  R) degrees centigrade (  C) degrees Fahrenheit (  F)

degrees centigrade (  C) degrees Fahrenheit (  F) degrees Rankine (  R) degrees Kelvin (  K) degrees Fahrenheit (  F) degrees centigrade (  C)

degrees Kelvin (  K) degrees Kelvin (  K) 1.8 0.5556 first multiply by 1.8, then add 32 first subtract 32, then multiply by 0.5556 add 273.2 add 459.7 Flow cubic feet per second U. S. gallons per minute U. S. gallons per minute cubic feet per second 448.9 0.002228 Universal Gas Constant ( R)

8.314 joules per gram mole kelvin 1.987 calories per gram mole kelvin 1.987 Btu per pound mole per  F 10.73 psia cubic feet per pound mole per  F 82.057 atm cubic centimeters per gram mole kelvin 62.361 millimeters mercury liter per gram mole kelvin