[Federal Register Volume 82, Number 87 (Monday, May 8, 2017)]
[Notices]
[Pages 21434-21437]
[FR Doc No: 2017-09194]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-80576; File No. SR-NYSEArca-2017-47]

Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing
and Immediate Effectiveness of Proposed Rule Change Amending NYSE Arca
Equities Rule 7.35 To Specify Order Handling for an IPO Auction

May 2, 2017.
    Pursuant to Section 19(b)(1) \1\ of the Securities Exchange Act of
1934 (the ``Act''),\2\ and Rule 19b-4 thereunder,\3\ notice is hereby
given that on April 21, 2017, NYSE Arca, Inc. (the ``Exchange''

or ``NYSE Arca'') 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 self-regulatory
organization. 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\ 15 U.S.C. 78a.
    \3\ 17 CFR 240.19b-4.
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I. Self-Regulatory Organization's Statement of the Terms of the
Substance of the Proposed Rule Change

    The Exchange proposes to amend NYSE Arca Equities Rule 7.35
(Auctions) to specify order handling for an IPO Auction. The proposed
rule change is available on the Exchange's website at www.nyse.com, at
the principal office of the Exchange, 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 self-regulatory organization
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 those 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 parts 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 NYSE Arca Equities Rule 7.35
(Auctions) (``Rule 7.35'') to specify order handling for an IPO
Auction.
    Under Rule 7.35(f), IPO Auctions follow the processing rules of a
Core Open Auction, provided that: (1) The Exchange will specify the
time an IPO Auction will be conducted; (2) there will be no Auction
Imbalance Freeze, Auction Collars, or restrictions on the entry or
cancellation of orders for an IPO Auction; and (3) an IPO Auction will
not be conducted if there are only Market Orders on both sides of the
market.
    The Exchange proposes to amend Rule 7.35(f)(2) to provide that
order types that are not eligible to participate in the IPO Auction
would be rejected until such time that the Auction Processing Period
for the IPO Auction has concluded. Specifically, Limit Orders
designated IOC, Limit Non-Displayed Orders, MPL Orders, Tracking
Orders, Market Pegged Orders, Discretionary Pegged Orders, Cross
Orders, Retail Orders, and Retail Price Improvement Orders are not
eligible to participate in auctions, including IPO Auctions.\4\ Because
none of these order types are eligible to participate in an auction and
because there would be no trading in a security before an IPO Auction,
the Exchange believes it would be appropriate to reject such orders
until after the Auction Processing Period concludes, at which time they
would be eligible to trade. Accordingly, the Exchange proposes to amend
Rule 7.35(f)(2) to specify that the Exchange would reject these orders
until after the Auction Processing Period for the IPO Auction has
concluded.
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    \4\ See Rules 7.31(b)(2) (A Limit Order designated IOC is not
eligible to participate in any auctions); 7.31(d)(2) (Limit Non-
Displayed Order does not participate in an auction); 7.31(d)(3) (MPL
Order does not participate in an auction); 7.31(d)(4) (Tracking
Orders are not triggered to trade during an auction because the
Exchange does not route during an auction); 7.31(h)(1) (Market
Pegged Orders will not participate in any auctions); 7.31(g) (A
Cross Order is not eligible to participate in any auctions); and
7.44(m) (the Retail Liquidity Program operates only during the Core
Trading Session and Retail Orders will be accepted during Core
Trading Hours only). Because Discretionary Pegged Orders are non-
displayed Pegged Orders, they are processed similarly to Market
Pegged Orders in that they would not participate in auctions, would
be rejected if entered or cancelled if cancel/replaced during a halt
or pause in a security listed on the Exchange, and would be rejected
if entered before or during the Early Trading Session. The Exchange
proposes to amend Rules 7.18(c)(4), 7.31(h)(3)(A), and 7.34(c)(1)(A)
to specify this behavior.
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    In conjunction with this change, the Exchange proposes to delete
the current text in Rule 7.32(f)(2) stating that there will be no
restriction on the entry of orders for an IPO Auction.
    As proposed, amended Rule 7.35(f)(2) would provide (deleted text
bracketed, new text underlined):

    (2) There will be no Auction Imbalance Freeze, Auction Collars,
or restrictions on the [entry or] cancellation of orders for an IPO
Auction. Limit Orders designated IOC, Limit Non-Displayed Orders,
MPL Orders, Tracking Orders, Market Pegged Orders, Discretionary
Pegged Orders, Cross Orders, Retail Orders, and Retail Price
Improvement Orders will be rejected until after the Auction
Processing Period for the IPO Auction has concluded.

    The Exchange also proposes to amend Rule 7.35(h)(3), which
describes the transition to continuous trading following an auction, to
specify how the Exchange would transition to continuous trading
following an IPO Auction. Currently, Rule 7.35(h)(3)(A) provides that
when transitioning to continuous trading from a prior trading session
or following an auction, a quote will be published based on unexecuted
orders that were eligible to trade in the trading sessions both before
and after the transition or auction, i.e., previously-live orders. To
make the text more specific, the Exchange proposes to define the term
``previously-live order'' separately for an IPO Auction to mean
unexecuted orders that were entered before the IPO Auction Processing
Period began. In the case of an IPO Auction, there is no prior trading
session. In addition, as described in detail above, the Exchange would
reject orders that are not eligible to participate in the IPO Auction
until after the Auction Processing Period for the IPO Auction has
concluded. Therefore, the only unexecuted orders following an IPO
Auction would be those orders that would have been eligible to
participate in the IPO Auction. The Exchange further proposes to
specify that the current definition of previously-live orders would be
applicable for the Core Open Auction, Trading Halt Auction, and Closing
Auction.
    In addition, the Exchange believes that in the context of
transitioning to continuous trading, an IPO Auction is more akin to a
Trading Halt Auction than to the Core Open Auction because there is no
trading in such security immediately preceding the auction, but there
may be a previously-published quote.\5\ Accordingly, the Exchange
proposes to amend Rule 7.35(h)(3)(A)(ii) to provide that the procedures
for publishing a quote after an IPO Auction would be the same as are
currently applicable for publishing a quote following a Trading Halt
Auction.\6\ Because all marketable orders at the indicative match price
would trade in an IPO Auction and the Exchange would reject orders that
are not eligible to participate in the IPO Auction, following an IPO
Auction there would not be any previously-live orders that would be
marketable against other orders in the NYSE Arca Book. For this reason,
the Exchange proposes to specify that the second step specified in

that rule would be for the Trading Halt Auction only. The Exchange also
proposes to amend this rule to correct a typographical error to remove
the hyphen between ``trade'' and ``through.''
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    \5\ In limited circumstances, the first day of trading of a new
listing on an exchange may not be an initial public offering, e.g.,
first day of listing of a new rights security, and therefore another
exchange that trades such security on an unlisted trading privileges
basis may begin quoting and trading in such security before the
Exchange's IPO Auction. In such case, there may be a quote in that
symbol before the IPO Auction, just as there would be a previously-
published quote in a security that is subject to a Trading Halt
Auction.
    \6\ Rule 7.35(h)(3)(A)(i) currently specifies order processing
following an Early Open Auction, Core Open Auction, and Closing
Auction. Because there is no trading in a security before an Early
Open Auction and no previously-published quote against which to
compare the new quote, the Exchange proposes to amend this rule text
to remove reference to the Early Open Auction.
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    Finally, the Exchange proposes to amend Rule 7.35(h)(3)(B). The
rule currently provides that unexecuted orders that were not eligible
to trade in the prior trading session (or were received during a halt
or pause) or that were received during the Auction Processing Period,
will be assigned a new working time at the end of the Auction
Processing Period in time sequence relative to one another based on
original entry time. The Exchange proposes to clarify this rule text by
adding sub-numbering, specifying that existing rule text relates to a
Trading Halt Auction, adding how orders entered before an Early Open
Auction would be assigned a working time, and specifying that all such
unexecuted orders would be processed in time sequence, i.e., such
orders would be quoted, traded, or routed consistent with Rules 7.36
and 7.37. As proposed, the rule would provide that ``unexecuted orders
that (1) were not eligible to trade in the prior trading session, (2)
for a Trading Halt Auction, were received during a halt or pause, (3)
for the Early Open Auction, were received before the Early Open Auction
Processing Period, or (4) that were received during the Auction
Processing Period'' would be assigned a new working time at the end of
the Auction Processing Period in time sequence relative to one another
based on original time entry [sic] and would be processed in time
sequence.\7\ This proposed rule text represents current functionality.
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    \7\ For example, for the Early Open Auction, unexecuted orders
that either did not participate in an auction or, if there were no
auction, were not represented in the first quote would be added to
the NYSE Arca Book in time sequence and processed consistent with
Rule 7.36 and 7.37 and the terms of the order.
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    The Exchange further proposes to amend how the Exchange would
assign working times to previously-live orders following an IPO
Auction. The Exchange proposes to amend Rule 7.35(h)(3)(B) to specify
that for an IPO Auction, previously-live orders (as defined in proposed
Rule 7.35(h)(3)(A) above) that did not trade in the auction would
retain the working time assigned at original entry time. The Exchange
proposes this difference for IPO Auctions because, as proposed above,
the Exchange would be rejecting orders that are not eligible to trade
in an IPO Auction until after the Auction Processing Period concludes.
Therefore, there would not be any other orders that need to be re-
ranked with such previously-live orders and therefore the previously-
live orders may retain their previously-assigned working times as they
are processed in time sequence.
* * * * *
    Because of the technology changes associated with this proposed
rule change, the Exchange will announce by Trader Update the
implementation date, which the Exchange anticipates will be in the
third quarter of 2017.
2. Statutory Basis
    The proposed rule change is consistent with Section 6(b) of the
Securities Exchange Act of 1934 (the ``Act''),\8\ in general, and
furthers the objectives of Section 6(b)(5),\9\ in particular, because
it is 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 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.
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    \8\ 15 U.S.C. 78f(b).
    \9\ 15 U.S.C. 78f(b)(5).
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    Specifically, the Exchange believes that the proposed rule change
would remove impediments to and perfect the mechanism of a free and
open market and a national market system by rejecting orders that are
not yet eligible to trade. Similar to how the Exchange rejects Limit
Orders designated IOC, Cross Orders, and Market Pegged Orders that are
entered during the Early Trading Session and designated for the Core
Trading Session, as provided for in Rule 7.34(c)(1), the Exchange
believes that it provides greater certainty for ETP Holders for the
Exchange to reject an order that is not yet eligible to trade. Because
Limit Orders designated IOC, Limit Non-Displayed Orders, MPL Orders,
Tracking Orders, Market Pegged Orders, Discretionary Pegged Orders,
Cross Orders, Retail Orders, and Retail Price Improvement Orders are
not eligible to participate in an auction and because there would be no
trading in a security before an IPO Auction, the Exchange believes it
would be consistent with the protection of investors and the public
interest to reject such orders until after the Auction Processing
Period concludes, at which time they would be eligible to trade.
    The Exchange further believes that it would remove impediments to
and perfect the mechanism of a free and open market and a national
market system to align its rules governing how the Exchange transitions
from an IPO Auction to continuous trading with its proposal to reject
orders that are not yet eligible to trade. Specifically, because
immediately following an IPO Auction, the only available orders would
be previously-entered orders that were eligible to participate in the
IPO Auction, the proposed rule changes are designed to reflect how this
order processing would be reflected in the transition to continuous
trading following an IPO Auction. For example, there would be no need
to adjust the working time of such orders. The Exchange believes that
specifying such order processing in its rules would promote
transparency and therefore remove impediments to and perfect the
mechanism of a free and open market and a national market system.
    The Exchange believes that the proposed amendments to Rule
7.35(h)(3)(A) and (B) would remove impediments to and perfect the
mechanism of a free and open market and a national market system
because the proposed changes would provide greater specificity
regarding how orders would be processed following an auction, including
defining what constitutes a ``previously-live order'' for different
auctions, how previously-live orders would be quoted following an
auction, and how unexecuted orders would be processed following all
auctions, including an Early Open Auction, thereby promoting
transparency and clarity in exchange rules.
    The Exchange further believes that the proposed amendments to Rules
7.18(c)(4) and 7.34(c)(1)(A) would remove impediments to and perfect
the mechanism of a free and open market and a national market system
because the Exchange proposes to process Discretionary Pegged Orders,
like [sic] Market Pegged Orders are non-displayed Pegged Orders, in the
same manner as Market Pegged Orders, which are also non-displayed
Pegged Orders. Accordingly, the Exchange proposes that Discretionary
Pegged Orders would not participate in auctions, would be rejected if
entered or cancelled if cancel/replaced during a halt or pause for an
Exchange-listed security, and would be rejected if entered before or
during the Early Trading Session.

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

    The Exchange 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

Exchange believes that the proposed rule change would not impose any
burden on competition because it is not designed to address any
competitive issues. Rather, the proposed rule change is designed to
provide specificity in Exchange rules regarding how the Exchange would
process orders before and after all auctions, including the Early Open
Auction and an IPO Auction. In addition the proposed changes regarding
Discretionary Pegged Orders would not impose any burden on competition
because Discretionary Pegged Orders, like Market Pegged Orders are non-
displayed orders, and the proposed changes are based on how Market
Pegged Orders operate.

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

    No written comments were solicited or received with respect to 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) of the Act \10\ and Rule 19b-
4(f)(6) thereunder.\11\
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    \10\ 15 U.S.C. 78s(b)(3)(A).
    \11\ 17 CFR 240.19b-4(f)(6). As required under Rule 19b-
4(f)(6)(iii), the Exchange provided the Commission with written
notice of its intent to file the proposed rule change, along with a
brief description and the text of 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.
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    At any time within 60 days of the filing of the proposed rule
change, the Commission summarily may temporarily suspend such rule
change if it appears to the Commission that such action is necessary or
appropriate in the public interest, for the protection of investors, or
otherwise in furtherance of the purposes of the Act. If the Commission
takes such action, the Commission shall institute proceedings to
determine whether the proposed rule change 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_ADDRESS>Please include
File Number SR-NYSEArca-2017-47 on the subject line.

Paper Comments

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

All submissions should refer to File Number SR-NYSEArca-2017-47. This
file number should be included on the subject line if email is used. To
help the Commission process and review your comments more efficiently,
please use only one method. The Commission will post all comments on
the Commission's Internet Web site (http://www.sec.gov/rules/sro.shtml). Copies of the submission, all subsequent amendments, all
written statements with respect to the proposed rule change that are
filed with the Commission, and all written communications relating to
the proposed rule change between the Commission and any person, other
than those that may be withheld from the public in accordance with the
provisions of 5 U.S.C. 552, will be available for Web site viewing and
printing in the Commission's Public Reference Room, 100 F Street NE.,
Washington, DC 20549 on official business days between the hours of
10:00 a.m. and 3:00 p.m. Copies of such filing also will be available
for inspection and copying at the principal office of the Exchange. All
comments received will be posted without change; the Commission does
not edit personal identifying information from submissions. You should
submit only information that you wish to make available publicly. All
submissions should refer to File Number SR-NYSEArca-2017-47, and should
be submitted on or before May 30, 2017.

    For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\12\
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    \12\ 17 CFR 200.30-3(a)(12).
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Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2017-09194 Filed 5-5-17; 8:45 am]
BILLING CODE 8011-01-P


[Federal Register Volume 77, Number 216 (Wednesday, November 7, 2012)]
[Notices]
[Pages 66883-66884]
[FR Doc No: 2012-27140]

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SECURITIES AND EXCHANGE COMMISSION

Submission for OMB Review; Comment Request

Upon Written Request, Copies Available From: Securities and Exchange
Commission, Office of Investor Education and Advocacy, Washington, DC
20549-0213.

Extension:
    Rule 2a-7; OMB Control No. 3235-0268, SEC File No. 270-258.

    Notice is hereby given that, pursuant to the Paperwork Reduction
Act of 1995 (44 U.S.C. 3501 et seq.), the Securities and Exchange
Commission (the ``Commission'') is soliciting comments on the
collection of information summarized below. The Commission plans to
submit this existing collection of information to the Office of
Management and Budget for extension and approval.
    Rule 2a-7 (17 CFR 270.2a-7) under the Investment Company Act of
1940 (15 U.S.C. 80a) (the ``Act'') governs money market funds. Money
market funds are open-end management investment companies that differ
from other open-end management investment companies in that they seek
to maintain a stable price per share, usually $1.00. The rule exempts
money market funds from the valuation requirements of the Act, and,
subject to certain risk-limiting conditions, permits money market funds
to use the ``amortized cost method'' of asset valuation or the ``penny-
rounding method'' of share pricing.
    Rule 2a-7 also imposes certain recordkeeping and reporting
obligations on money market funds. The board of directors of a money
market fund, in supervising the fund's operations, must establish
written procedures designed to stabilize the fund's net asset value
(``NAV''). The board must also adopt guidelines and procedures relating
to certain responsibilities it delegates to the fund's investment
adviser. These procedures and guidelines typically address various
aspects of the fund's operations. The fund must maintain and preserve
for six years a written copy of both these procedures and guidelines.
The fund also must maintain and preserve for six years a written record
of the board's considerations and actions taken in connection with the
discharge of its responsibilities, to be included in the board's
minutes. In addition, the fund must maintain and preserve for three
years written records of certain credit risk analyses, evaluations with
respect to securities subject to demand features or guarantees, and
determinations with respect to adjustable rate securities and asset
backed securities. If the board takes action with respect to defaulted
securities, events of insolvency, or deviations in share price, the
fund must file with the Commission an exhibit to Form N-SAR describing
the nature and circumstances of the action. If any portfolio security
fails to meet certain eligibility standards under the rule, the fund
also must identify those securities in an exhibit to Form N-SAR. After
certain events of default or insolvency relating to a portfolio
security, the fund must notify the Commission of the event and the
actions the fund intends to take in response to the situation.
    The 2010 amendments to rule 2a-7 also added new collection of
information requirements. First, money market fund boards must adopt
written procedures that provide for periodic testing (and reporting to
the board) of the fund's ability to maintain a stable NAV per share
based on certain hypothetical events. Second, funds must post monthly
portfolio information on their Web sites. Third, funds must maintain
records of creditworthiness evaluations on counterparties to repurchase
agreements that the fund intends to ``look through'' for purposes of
rule 2a-7's diversification limitations. Finally, money market funds
must promptly notify the Commission of the purchase of any money market
fund's portfolio security by an affiliated person in reliance on rule
17a-9 under the Act and explain the reasons for such purchase.
    The recordkeeping requirements in rule 2a-7 are designed to enable
Commission staff in its examinations of money market funds to determine
compliance with the rule, as well as to ensure that money market funds
have established procedures for collecting the information necessary to
make adequate credit reviews of securities in their portfolios. The
reporting requirements of rule 2a-7 are intended to assist Commission
staff in overseeing money market funds and reduce the likelihood that a
fund is unable to maintain a stable NAV.
    Commission staff estimates that there are 664 money market funds
(136 fund complexes), all of which are subject to rule 2a-7. Commission
staff further estimates that there will be approximately 10 new money
market funds established each year. Commission staff estimates that
rule 2a-7 contains the following collection of information
requirements:
     Record of credit risk analyses, and determinations
regarding adjustable rate securities, asset backed securities,
securities subject to a demand feature or guarantee, and counterparties
to repurchase agreements. Commission staff estimates a total annual
hour burden for 664 funds to be 451,520 hours.
     Establishment of written procedures designed to stabilize
NAV and guidelines and procedures for board delegation of authority.
Commission staff estimates a total annual hour burden for 10 new money
market funds to be 155 hours.
     Board review of procedures and guidelines of any
investment adviser or officers to whom the fund's board has delegated
responsibility under rule 2a-7 and amendment of such procedures and
guidelines. Commission staff estimates a total annual hour burden for
166 funds to be 830 hours.
     Written record of board determinations and actions related
to failure of a security to meet certain eligibility standards or an
event of default or insolvency and notice to the Commission of an event
of default or insolvency. Commission staff estimates a total annual
hour burden for 20 funds to be 30 hours.
     Establishment of written procedures to test periodically
the ability of the fund to maintain a stable NAV per share based on
certain hypothetical events (``stress testing''). Commission staff
estimates a total annual hour burden for 10 new money market funds to
be 220 hours.
     Review, revise, and approve written procedures to stress
test a fund's portfolio. Commission staff estimates a total annual hour
burden for 136 fund complexes to be 1,632 hours.
     Reports to fund boards on the results of stress testing.
Commission staff estimates a total annual hour burden for 136 fund
complexes to be 6,800 hours.
     Monthly posting of money market fund portfolio information
on a fund's Web site. Commission staff estimates a total annual hour
burden for 664 funds and 10 new money market funds to be 56,016 hours.
     Notice to the Commission of the purchase of a money market
fund's portfolio security by certain affiliated persons in reliance on
rule 17a-9. Commission staff estimates a total annual hour burden for
25 fund complexes to be 25 hours.

Thus, the Commission estimates the total annual burden of the rule's
information collection requirements is 517,228 hours.\1\
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    \1\ This estimate is based on the following calculation: 451,520
hours + 155 hours + 830 hours + 30 hours + 220 hours + 1,632 hours +
6,800 hours + 56,016 hours + 25 hours = 517,228 hours.

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    The estimated total annual burden is being increased from 395,779
hours to 517,228 hours. This net increase is attributable to a
combination of factors, including a decrease in the number of money
market funds and fund complexes, and updated information from money
market funds regarding hourly burdens, including revised staff
estimates of the burden hours required to comply with rule 2a-7 as a
result of new information received from surveyed fund representatives.
    These estimates of burden hours are made solely for the purposes of
the Paperwork Reduction Act. The estimates are not derived from a
comprehensive or even a representative survey or study of Commission
rules.
    Commission staff estimates that in addition to the costs described
above, money market funds will incur costs to preserve records, as
required under rule 2a-7. These costs will vary significantly for
individual funds, depending on the amount of assets under fund
management and whether the fund preserves its records in a storage
facility in hard copy or has developed and maintains a computer system
to create and preserve compliance records. Commission staff estimates
that the amount an individual fund may spend ranges from $100 per year
to $300,000. Based on a cost of $0.0051295 per dollar of assets under
management for small funds, $0.0005041 per dollar assets under
management for medium funds, and $0.0000009 per dollar of assets under
management for large funds, the staff estimates compliance with the
record storage requirements of rule 2a-7 costs the fund industry
approximately $57.3 million per year. Based on responses from
individuals in the money market fund industry, the staff estimates that
some of the largest fund complexes have created computer programs for
maintaining and preserving compliance records for rule 2a-7. Based on a
cost of $0.0000132 per dollar of assets under management for large
funds, the staff estimates that total annualized capital/startup costs
range from $0 for small funds to $35.6 million for all large funds.
Commission staff further estimates that, even absent the requirements
of rule 2a-7, money market funds would spend at least half of the
amount for capital costs ($17.8 million) and for record preservation
($28.65 million) to establish and maintain these records and the
systems for preserving them as a part of sound business practices to
ensure diversification and minimal credit risk in a portfolio for a
fund that seeks to maintain a stable price per share.
    The collections of information required by rule 2a-7 are necessary
to obtain the benefits described above. Notices to the Commission will
not be kept confidential. An agency may not conduct or sponsor, and a
person is not required to respond to, a collection of information
unless it displays a currently valid control number.
    Written comments are invited on: (a) Whether the proposed
collection of information is necessary for the proper performance of
the functions of the agency, including whether the information will
have practical utility; (b) the accuracy of the agency's estimate of
the burden of the collection of information; (c) ways to enhance the
quality, utility, and clarity of the information collected; and (d)
ways to minimize the burden of the collection of information on
respondents, including through the use of automated collection
techniques or other forms of information technology. Consideration will
be given to comments and suggestions submitted in writing within 60
days of this publication.
    Please direct your written comments to Thomas Bayer, Chief
Information Officer, Securities and Exchange Commission, c/o Remi
Pavlik-Simon, 6432 General Green Way, Alexandria, VA 22312; or send an
email to<EMAIL_ADDRESS>
    Dated: October 29, 2012.
Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2012-27140 Filed 11-6-12; 8:45 am]
BILLING CODE 8011-01-P


[Federal Register Volume 81, Number 211 (Tuesday, November 1, 2016)]
[Notices]
[Pages 75875-75879]
[FR Doc No: 2016-26300]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-79162; File No. SR-BatsBZX-2016-61]

Self-Regulatory Organizations; Bats BZX Exchange, Inc.; Notice of
Filing of a Proposed Rule Change To Amend Exchange Rule 11.23,
Auctions, To Enhance the Reopening Auction Process Following a Trading
Halt Declared Pursuant to the Plan To Address Extraordinary Market
Volatility Pursuant to Rule 608 of Regulation NMS

October 26, 2016.
    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 October 13, 2016, Bats BZX Exchange, Inc. (the ``Exchange'' or
``BZX'') filed with the Securities and Exchange Commission
(``Commission'') the proposed rule change as described in Items I and
II below, which Items have been prepared by the Exchange. The
Commission is publishing this notice to solicit comments on the
proposed rule change from interested persons.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
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I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change

    The Exchange filed a proposal to amend Exchange Rule 11.23,
Auctions, to enhance the reopening auction process following a trading
halt declared pursuant to the Plan to Address Extraordinary Market
Volatility Pursuant to Rule 608 of Regulation NMS under the Act (the
``Limit Up-Limit Down Plan'' or ``Plan'').\3\ The Exchange also
proposes to amend Rule 11.17, Clearly Erroneous Executions, to exclude
executions that are a result of

a Halt Auction from being reviewed as clearly erroneous.
---------------------------------------------------------------------------

    \3\ See Securities Exchange Act Release No. 67091 (May 31,
2012), 77 FR 33498 (June 6, 2012) (the ``Limit Up-Limit Down
Release'').
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    The text of the proposed rule change is available at the Exchange's
Web site at www.batstrading.com, at the principal office of the
Exchange, 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 parts 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 Exchange Rule 11.23, Auctions, to
enhance the reopening auction process following a trading halt declared
pursuant to the Limit Up-Limit Down Plan. The Exchange also proposes to
amend Rule 11.17, Clearly Erroneous Executions, to exclude executions
that are a result of a Halt Auction from being reviewed as clearly
erroneous.
Background
    The Operating Committee for the Plan, with input from the Advisory
Committee to the Plan and staff of the Commission, has identified a
number of enhancements to the reopening process following a Trading
Pause that will be addressed in a combination of a proposed amendment
to the Plan and amendments to the rules of the Primary Listing
Exchanges.\4\ The Exchange is a Participant of the Plan and a member of
the Operating Committee.
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    \4\ Unless otherwise specified, capitalized terms used herein
have the same meaning as set forth in the Plan or in Exchange rules.
---------------------------------------------------------------------------

    The Participants submitted to the Commission a proposal to amend
the Plan to provide that a Trading Pause will continue until the
Primary Listing Exchange has reopened trading using its established
reopening procedures and reports a Reopening Price.\5\ The Participants
further proposed to eliminate the current allowance for a trading
center to resume trading in an NMS Stock following a Trading Pause if
the Primary Listing Exchange has not reported a Reopening Price within
ten minutes after the declaration of a Trading Pause and has not
declared a Regulatory Halt. In addition, to close any gaps of potential
scenarios when trading may resume without Price Bands, the Participants
proposed to amend the Plan to provide that a trading center may not
resume trading in an NMS Stock following a Trading Pause without Price
Bands in such NMS Stock. To address potential scenarios of when there
may not be a Reopening Price from the Primary Listing Exchange from
which to calculate Price Bands, the Participants propose to make
related amendments to the Plan to address when trading may resume if
the Primary Listing Exchange is unable to reopen due to a systems or
technology issue and how the Reference Price would be determined either
under such circumstances or if the Primary Listing Exchange reopens
trading on a zero bid or zero quote, or both.
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    \5\ See letter from Elizabeth K. King, General Counsel, NYSE, to
Brent J. Fields, Secretary, Commission, dated September 16, 2016
(``Amendment No. 12'').
---------------------------------------------------------------------------

    In connection with the proposed Plan amendments, the Participants
have agreed on a standardized approach for how the Primary Listing
Exchanges should conduct certain aspects of an automated reopening
following a Trading Pause. Specifically, because trading centers would
not be permitted to resume trading in an NMS Stock until there is a
Reopening Price, the Participants believe it is appropriate for the
Primary Listing Exchanges to adopt uniform standards for determining
whether and when to conduct such automated reopenings, including what
price collar thresholds would be applicable to such automated
reopenings and how to provide for extensions of when a reopening
auction would be conducted. The goal of such changes would be to ensure
that all market order interest could be satisfied in an automated
reopening auction.
    More specifically, the Participants have agreed that if there is an
imbalance of market orders, or if the Reopening Price would be outside
of specified price collar thresholds, the Trading Pause would be
extended an additional five minutes in order to provide additional time
to attract offsetting liquidity. If at the end of such extension,
market orders still cannot be satisfied within price collar thresholds
or if the reopening auction would be priced outside of the applicable
price collar thresholds, the Primary Listing Exchange would extend the
Trading Pause an additional five minutes. With each such extension, the
Participants have agreed that it would be appropriate to widen the
price collar threshold on the side of the market on which there is
buying or selling pressure.
    With respect to price collar thresholds, the Participants have
agreed that the reference price for calculating price collar thresholds
would be the price of the limit state that preceded the Trading Pause,
i.e., either the Lower or Upper Price Band price. If there is selling
pressure, for NMS Stocks priced more than $3.00, the lower collar for
the auction would be the Lower Price Band minus five percent and the
upper collar would be the Upper Price Band; if there is buying
pressure, the upper collar for the auction would be the Upper Price
Band plus five percent and the lower collar would be the Lower Price
Band. For each extension, the collars would be widened an additional
five percent, but only on the side of the Impermissible Price (as
defined and discussed below).\6\ The Participants believe that widening
collars only in the direction of the Impermissible Price would address
issues relating to the concept of mean reversion.
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    \6\ For NMS Stocks that are priced $3.00 and under, the price
collar threshold would be $0.15.
---------------------------------------------------------------------------

    Finally, the Participants have agreed that the proposed new
procedures for reopening trading following a Trading Pause reduces the
potential that an order or orders entered by one or more Members caused
such execution to be clearly erroneous. Specifically, the Participants
believe that the proposed standardized procedures for reopening trading
following a Trading Pause incorporates a methodology that allows for
widened collars, which may result in a reopening price away from prior
trading prices, but which reopening price would be a result of a
measured and transparent process that eliminates the potential that
such trade would be considered erroneous.
    As a Primary Listing Exchange, the Exchange proposes to amend Rule
11.23(d) to implement the proposed uniform trading practices with
respect to reopening a security following a Trading Pause and amend
Rule 11.17, Clearly Erroneous Executions, to preclude Members from
requesting a review of a Trading Halt Auction as a clearly erroneous
execution, as described below.
Description of Changes to the Halt Auction Process
    To effect the proposed enhancements that would be implemented by
all Primary Listing Exchanges, the Exchange proposes to incorporate the

above items that were agreed to amongst the Participants under Exchange
Rule 11.23(d), IPO and Halt Auctions. First, the Exchange proposes to
adopt new paragraph (C) under Rule 11.23(d)(2) titled ``Incremental
Quote Period Extensions for Halt Auctions Following a Trading Pause.''
\7\ Under Exchange Rule 11.23(d)(1)(A), the Quote-Only Period \8\ with
respect to a Halt Auction commences five (5) minutes prior to such Halt
Auction. Proposed Rule 11.23(d)(2)(C) would provide for the Quote-Only
Period to be extended an additional five (5) minutes should a Halt
Auction be unable to be performed due to Market Order \9\ imbalance
under 11.23(d)(2)(B)(i) \10\ or the Indicative Price,\11\ before being
adjusted for Halt Auction Collars, is outside the Halt Auction Collars
set forth in proposed subparagraphs (i) and (ii) to Exchange Rule
11.23(d)(2)(C) discussed below (either, an ``Impermissible Price'')
(``Initial Extension Period'').\12\
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    \7\ The Exchange proposes to renumber current paragraphs (C) and
(D) under Rule 11.23(d)(2) as (D) and (E), respectively.
    \8\ ``Quote-Only Period'' is defined as ``a designated period of
time prior to a Halt Auction, a Volatility Closing Auction, or an
IPO Auction during which Users may submit orders to the Exchange for
participation in the auction.'' See Exchange Rule 11.23(a)(17).
    \9\ See Exchange Rule 11.9(a)(2).
    \10\ Under 11.23(d)(2)(B)(i), the Quote-Only Period may be
extended where there are unmatched Market Orders on the Auction Book
associated with the auction.
    \11\ ``Indicative Price'' is defined as ``the price at which the
most shares from the Auction Book and the Continuous Book would
match.'' See Exchange Rule 11.23(a)(10).
    \12\ The Quote-Only Period would not be extended and the Halt
Auction may occur where there is a Limit Order imbalance, but no
Market Order imbalance exists and the Indicative Price is inside the
thresholds set forth in proposed subparagraphs (i) and (ii) to
Exchange Rule 11.23(d)(2)(C).
---------------------------------------------------------------------------

    After the Initial Extension Period, the Quote-Only Period shall be
extended for additional five (5) minute periods should a Halt Auction
be unable to be performed due to an Impermissible Price (``Additional
Extension Period'') until a Halt Auction occurs. The Exchange shall
attempt to conduct a Halt Auction during the course of each Additional
Extension Period. The Halt Auction will be cancelled at 3:50 p.m.
eastern time, at which time the auction for the security shall be
conducted pursuant to the Volatility Closing Auction process under
section (e) of Exchange Rule 11.23. Renumbered paragraph (D) of Rule
11.23(d)(2) would also be amended to make clear that the Exchange will
notify market participants of the circumstances and length of an
extension of the Quote-Only Period as proposed herein.
    Under proposed subparagraph (i) to Rule 11.23(d)(2)(C), the Halt
Auction Reference Price shall equal the price of the Upper or Lower
Price Band that triggered the halt. If the Halt Auction Reference Price
is the Lower (Upper) Price Band, the initial lower (upper) Halt Auction
Collar shall be five (5) percent less (greater) than the Halt Auction
Reference Price, rounded to the nearest minimum price variation and the
upper (lower) Halt Auction Collar shall be the Upper (Lower) Price
Band. For securities with a Halt Auction Reference Price of $3.00 or
less, the initial lower (upper) Halt Auction Collar shall be $0.15 less
(greater) than the Halt Auction Reference Price, rounded to the nearest
minimum price variation and the upper (lower) Halt Auction Collar shall
be the Upper (Lower) Price Band.
    Proposed subparagraph (ii) to Rule 11.23(d)(2)(C) would state that
at the beginning of the Initial Extension Period, the upper (lower)
Halt Auction Collar shall be increased (decreased) by five (5) percent
in the direction of the Impermissible Price rounded to the nearest
minimum price variation. For securities with a Halt Auction Reference
Price of $3.00 or less, the Halt Auction Collar shall be increased
(decreased) in $0.15 increments in the direction of Impermissible
Price. At the beginning of each Additional Extension Period, the Halt
Auction Collar shall be widened by the same amount as the Initial
Extension Period.
    In addition, the Exchange proposes to amend paragraph (d)(2)(A) of
Rule 11.23 regarding the publication of BZX Auction information. Under
Rule 11.23(d)(2)(A), coinciding with the beginning of the Quote-Only
Period for a security and updated every five seconds thereafter, the
Reference Price,\13\ Indicative Price, Auction Only Price,\14\ and the
lesser of Reference Buy Shares \15\ and Reference Sell Shares \16\
associated with the Halt Auction are disseminated via electronic means.
The Exchange proposes to amend paragraph (d)(2)(A) of Rule 11.23 to
include the Halt Auction Reference Price and Halt Auction Collars as
part of the information to be publicly disseminated as part of the Halt
Auction process.
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    \13\ See Exchange Rule 11.23(a)(19).
    \14\ See Exchange Rule 11.23(a)(2).
    \15\ See Exchange Rule 11.23(a)(18).
    \16\ See Exchange Rule 11.23(a)(21).
---------------------------------------------------------------------------

    Renumbered paragraph (E) of Rule 11.23(d)(2) describes how the
Exchange determines the price of an IPO and Halt Auction and states
that orders will be executed at the price that maximizes the number of
shares executed in the auction. The Exchange proposes to amend
renumbered paragraph (E) of Rule 11.23(d)(2) to separately describe how
the price of an IPO and Halt Auction are calculated. As amended, for
IPO Auctions for ETPs, orders will continue to be executed at the price
level within the Collar Price Range that maximizes the number of shares
executed in the auction. For Halt Auctions for ETPs, orders will be
executed at the price level within the Halt Auction Collars that
maximizes the number of shares executed in the auction.
    The Exchange also proposes to add new paragraph (F) under Exchange
Rule 11.23(d)(2). Proposed paragraph (F) to Rule 11.23(d)(2) would
state if a Trading Pause is triggered by the Exchange or if the
Exchange is unable to reopen trading at the end of the Trading Pause
due to a systems or technology issue, the Exchange will immediately
notify the single plan processor responsible for consolidation of
information for the security pursuant to Rule 603 of Regulation NMS
under the Securities Exchange Act of 1934.
    Lastly, the Exchange proposes to amend Rule 11.17, Clearly
Erroneous Executions, to provide that Members may not request a review
of a Trading Halt Auction under Rule 11.17(b), which specifies the
procedures for a Member to request a review of an execution as clearly
erroneous. The Exchange believes that this proposed rule text would
implement the proposed standardized trading practice that reopening
auctions would not be eligible for review by Members as a clearly
erroneous execution.\17\
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    \17\ The Participants will be engaging in a more comprehensive
review of Rule 11.17 in connection with amendments to the Plan
relating to tiering of securities and applicable percentage
parameters. The Exchange proposes to make this limited amendment to
Rule 11.17 as an initial step to eliminating its clearly erroneous
executions rules in their current form.
---------------------------------------------------------------------------

Implementation Date
    The Exchange proposes to implement the proposed rule change
following the Commission's approval of Amendment No. 12 to the Plan.
The Exchange will announce the implementation date via a trading notice
to be issued after the Commission's approval of this proposed rule
change.
2. Statutory Basis
    The Exchange believes that its proposal is consistent with Section
6(b) of the Act \18\ in general, and furthers the objectives of Section
6(b)(5) of the Act \19\ in particular, in that it is designed to
promote just and equitable principles of

trade, to foster cooperation and coordination with persons engaged in
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.
The Exchange believes that the proposed rule change, together with the
proposed amendments to the Plan, are necessary or appropriate in the
public interest, for the protection of investors and the maintenance of
fair and orderly markets, to remove impediments to and perfect the
mechanisms of, a national market system, or otherwise in furtherance of
the purposes of the Act.
---------------------------------------------------------------------------

    \18\ 15 U.S.C. 78f(b).
    \19\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------

    The Exchange believes the proposed changes would 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, because they are designed, together with the proposed
amendments to the Plan, to address the issues experienced on August 24,
2015 by reducing the number of repeat Trading Pauses in a single NMS
Stock. The proposed Plan amendments are an essential component to
Participants' goal of more standardized processes across Primary
Listing Exchanges in reopening trading following a Trading Pause, and
facilitates the production of an equilibrium Reopening Price by
centralizing the reopening process through the Primary Listing
Exchange, which would also improve the accuracy of the reopening Price
Bands. The proposed Plan amendments support this initiative by
requiring trading centers to wait to resume trading following Trading
Pause until there is a Reopening Price.
    This proposed rule change further supports this initiative by
proposing uniform trading practices for reopening trading following a
Trading Pause. The Exchange believes that the proposed standardized
approach for how the Primary Listing Exchanges would conduct certain
aspects of an automated reopening following a Trading Pause would
remove impediments to and perfect the mechanism of a free and open
market and a national market system because it would provide certainty
for market participants regarding how a security would reopen following
a Trading Pause, regardless of the listing exchange. The Exchange
further believes that the proposed changes would remove impediments to
and perfect the mechanism of a free and open market and a national
market system and protect investors and the public interest because the
goal of the proposed changes is to ensure that all Market Order
interest could be satisfied in an automated reopening auction while at
the same time reducing the potential for multiple Trading Pauses in a
single security due to a large order imbalance.
    The Exchange further believes that the standardized proposal to
extend a Trading Pause an additional five minutes would remove
impediments to and perfect the mechanism of a free and open market and
a national market system because it would provide additional time to
attract offsetting liquidity. If at the end of such extension, Market
Orders still cannot be satisfied within the applicable price collar
thresholds or if the reopening auction would be priced outside of the
applicable price collar thresholds, the Primary Listing Exchange would
extend the Trading Pause an additional five minutes, which the Exchange
believes would further protect investors and the public interest by
reducing the potential for significant price disparity in post-auction
trading, which could otherwise trigger another Trading Pause. With each
such extension, the Exchange believes that widening the price collar
threshold on the side of the market on which there is buying or selling
pressure would remove impediments to and perfect the mechanism of a
free and open market and a national market system because it would
provide additional time to attract offsetting interest while at the
same time addressing that an imbalance may not be resolved within the
prior auction collars.
    With respect to price collar thresholds, the Exchange believes that
using the price of the limit state that preceded the Trading Pause,
i.e., either the Lower or Upper Price Band price, would better reflect
the most recent price of the security and therefore should be used as
the reference price for determining the auction collars for such Halt
Auction. The Exchange believes that widening auction collars only in
the direction of the imbalance would address issues relating to the
concept of mean reversion, which would protect investors and the public
interest by reducing the potential for wide price swings following a
Halt Auction.
    Finally, the Exchange believes that precluding Members from
requesting review of a Halt Auction as a clearly erroneous execution
would remove impediments to and perfect the mechanism of a free and
open market and a national market system because the proposed new
procedures for reopening trading following a Trading Pause would reduce
the possibility that an order(s) from a Member caused a Trading Halt
Auction be clearly erroneous. Specifically, the Exchange believes that
the proposed standardized procedures for reopening trading following a
Trading Pause incorporates a methodology that allows for widened
collars, which may result in a reopening price away from prior trading
prices, but which reopening price would be a result of a measured and
transparent process that eliminates the potential that such trade would
be considered erroneous.

(B) Self-Regulatory Organization's Statement on Burden on Competition

    The Exchange 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 Exchange believes that
the proposed rule change is not designed to address any competitive
issues, but rather, to achieve the Participants' goal of more
standardized processes across Primary Listing Exchanges in reopening
trading following a Trading Pause, and facilitates the production of an
equilibrium reopening price by centralizing the reopening process
through the Primary Listing Exchange, which would also improve the
accuracy of the reopening Price Bands. The Exchange believes that the
proposed rule change reduces the burden on competition for market
participants because it promotes a transparent and consistent process
for reopening trading following a Trading Pause regardless of where a
security may be listed. The Exchange further believes that the proposed
rule change would not impose any burden on competition because they are
designed to increase transparency regarding the Exchange's Trading Halt
Auction process while at the same time increase the ability for
offsetting interest to participate in an auction, which would assist in
achieving pricing equilibrium for such an auction.

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

    Written comments were neither solicited nor received.

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

    Within 45 days of the date of publication of this notice in the
Federal Register or within such longer period up to 90 days (i) as the
Commission may designate if it finds such longer period to be
appropriate and publishes its reasons for so finding or (ii) as to
which

the self-regulatory organization consents, the Commission will:
(A) By order approve or disapprove the proposed rule change, or
(B) institute proceedings to determine whether the proposed rule change
should be disapproved.

IV. Solicitation of Comments

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

Electronic Comments

     Use the Commission's Internet comment form (http://www.sec.gov/rules/sro.shtml); or
     Send an email to<EMAIL_ADDRESS>Please include
File Number SR-BatsBZX-2016-61 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-BatsBZX-2016-61. This
file number should be included on the subject line if email is used. To
help the Commission process and review your comments more efficiently,
please use only one method. The Commission will post all comments on
the Commission's Internet Web site (http://www.sec.gov/rules/sro.shtml). Copies of the submission, all subsequent amendments, all
written statements with respect to the proposed rule change that are
filed with the Commission, and all written communications relating to
the proposed rule change between the Commission and any person, other
than those that may be withheld from the public in accordance with the
provisions of 5 U.S.C. 552, will be available for Web site viewing and
printing in the Commission's Public Reference Room, 100 F Street NE.,
Washington, DC 20549, 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; the Commission does
not edit personal identifying information from submissions. You should
submit only information that you wish to make available publicly. All
submissions should refer to File Number SR-BatsBZX-2016-61 and should
be submitted on or before November 22, 2016.
---------------------------------------------------------------------------

    \20\ 17 CFR 200.30-3(a)(12).

    For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\20\
Brent J. Fields,
Secretary.
[FR Doc. 2016-26300 Filed 10-31-16; 8:45 am]
 BILLING CODE 8011-01-P


[Federal Register Volume 85, Number 127 (Wednesday, July 1, 2020)]
[Proposed Rules]
[Pages 39503-39505]
[FR Doc No: 2020-14075]

=======================================================================
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DEPARTMENT OF TRANSPORTATION

Federal Aviation Administration

14 CFR Part 39

[Docket No. FAA-2020-0576; Product Identifier 2020-NM-068-AD]
RIN 2120-AA64

Airworthiness Directives; Airbus SAS 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 Airbus SAS Model A350-941 and -1041 airplanes. This
proposed AD was prompted by a determination that new or more
restrictive airworthiness limitations are necessary. This proposed AD
would require revising the existing maintenance or inspection program,
as applicable, to incorporate new or more restrictive airworthiness
limitations, as specified in a European Union Aviation Safety Agency
(EASA) AD, which will be incorporated by reference. The FAA is
proposing this AD to address the unsafe condition on these products.

DATES: The FAA must receive comments on this proposed AD by August 17,
2020.

ADDRESSES: You may send comments, using the procedures found in 14 CFR
11.43 and 11.45, by any of the following methods:
     Federal eRulemaking Portal: Go to https://www.regulations.gov. Follow the instructions for submitting comments.
     Fax:<PHONE_NUMBER>.
     Mail: U.S. Department of Transportation, Docket
Operations, M-30, West Building Ground Floor, Room W12-140, 1200 New
Jersey Avenue SE, Washington, DC 20590.
     Hand Delivery: U.S. Department of Transportation, Docket
Operations, M-30, West Building Ground Floor, Room W12-140, 1200 New
Jersey Avenue SE, Washington, DC 20590, between 9 a.m. and 5 p.m.,
Monday through Friday, except Federal holidays.
    For material that will be incorporated by reference (IBR) in this
AD, contact the EASA, Konrad-Adenauer-Ufer 3, 50668 Cologne, Germany;
telephone +49 221 89990 1000; email<EMAIL_ADDRESS>internet
www.easa.europa.eu. You may find this IBR material on the EASA website
at https://ad.easa.europa.eu. You may view this IBR material 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 in
the AD docket on the internet at https://www.regulations.gov by
searching for and locating Docket No. FAA-2020-0576.

Examining the AD Docket

    You may examine the AD docket on the internet at https://www.regulations.gov by searching for and locating Docket No. FAA-2020-
0576; 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. Comments will be
available in the AD docket shortly after receipt.

FOR FURTHER INFORMATION CONTACT: Vladimir Ulyanov, Aerospace Engineer,
Large Aircraft Section, International Validation Branch, FAA, 2200
South 216th St., Des Moines, WA 98198; telephone and fax<PHONE_NUMBER>;
email<EMAIL_ADDRESS>
SUPPLEMENTARY INFORMATION:

Comments Invited

    The FAA invites you to send any written relevant data, views, or
arguments about this proposal. Send your comments to an address listed
under the ADDRESSES section. Include ``Docket No. FAA-2020-0576;
Product Identifier 2020-NM-068-AD'' at the beginning of your comments.
The FAA specifically invites comments on the overall regulatory,
economic, environmental, and energy aspects of this NPRM. The FAA will
consider all comments received by the closing date and may amend this
NPRM based on those comments.
    The FAA will post all comments it receives, without change, to
https://www.regulations.gov, including any personal information you
provide. The FAA will also post a report summarizing each substantive
verbal contact the FAA receives about this NPRM.

Discussion

    The EASA, which is the Technical Agent for the Member States of the
European Union, has issued EASA AD

2020-0091, dated April 22, 2020 (``EASA AD 2020-0091'') (also referred
to as the Mandatory Continuing Airworthiness Information, or ``the
MCAI''), to correct an unsafe condition for all Airbus SAS Model A350-
941 and -1041 airplanes. Airplanes with an original airworthiness
certificate or original export certificate of airworthiness issued
after June 7, 2019 must comply with the airworthiness limitations
specified as part of the approved type design and referenced on the
type certificate data sheet; this AD therefore does not include those
airplanes in the applicability.
    This proposed AD was prompted by a determination that new or more
restrictive airworthiness limitations are necessary. The FAA is
proposing this AD to address the potential failure of certain life-
limited parts, which could result in reduced structural integrity of
the airplane. See the MCAI for additional background information.

Related IBR Material Under 1 CFR Part 51

    EASA AD 2020-0091 describes new or more restrictive airworthiness
limitations for airplane structures and safe life limits. This material
is reasonably available because the interested parties have access to
it through their normal course of business or by the means identified
in the ADDRESSES section.

FAA's Determination and Requirements of This Proposed AD

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

Proposed AD Requirements

    This proposed AD would require revising the existing maintenance or
inspection program, as applicable, to incorporate new or more
restrictive airworthiness limitations, which are specified in EASA AD
2020-0091 described previously, as incorporated by reference. Any
differences with EASA AD 2020-0091 are identified as exceptions in the
regulatory text of this AD.
    This proposed AD would require revisions to certain operator
maintenance documents to include new actions (e.g., inspections).
Compliance with these actions is required by 14 CFR 91.403(c). For
airplanes that have been previously modified, altered, or repaired in
the areas addressed by this proposed AD, the operator may not be able
to accomplish the actions described in the revisions. In this
situation, to comply with 14 CFR 91.403(c), the operator must request
approval for an alternative method of compliance according to paragraph
(j)(1) of this proposed AD.

Explanation of Required Compliance Information

    In the FAA's ongoing efforts to improve the efficiency of the AD
process, the FAA initially worked with Airbus and EASA to develop a
process to use certain EASA ADs as the primary source of information
for compliance with requirements for corresponding FAA ADs. The FAA has
since coordinated with other manufacturers and civil aviation
authorities (CAAs) to use this process. As a result, EASA AD 2020-0091
will be incorporated by reference in the FAA final rule. This proposed
AD would, therefore, require compliance with EASA AD 2020-0091 in its
entirety, through that incorporation, except for any differences
identified as exceptions in the regulatory text of this proposed AD.
Using common terms that are the same as the heading of a particular
section in the EASA AD does not mean that operators need comply only
with that section. For example, where the AD requirement refers to
``all required actions and compliance times,'' compliance with this AD
requirement is not limited to the section titled ``Required Action(s)
and Compliance Time(s)'' in the EASA AD.
    Service information specified in EASA AD 2020-0091 that is required
for compliance with EASA AD 2020-0091 will be available on the internet
at https://www.regulations.gov by searching for and locating Docket No.
FAA-2020-0576 after the FAA final rule is published.

Airworthiness Limitation ADs Using the New Process

    The FAA's process of incorporating by reference MCAI ADs as the
primary source of information for compliance with corresponding FAA ADs
has been limited to certain MCAI ADs (primarily those with service
bulletins as the primary source of information for accomplishing the
actions required by the FAA AD). However, the FAA is now expanding the
process to include MCAI ADs that require a change to airworthiness
limitation documents, such as airworthiness limitation sections.
    For these ADs that incorporate by reference an MCAI AD that changes
airworthiness limitations, the FAA requirements are unchanged.
Operators must revise the existing maintenance or inspection program,
as applicable, to incorporate the information specified in the new
airworthiness limitation document. The airworthiness limitations must
be followed according to 14 CFR 91.403(c) and 91.409(e).

Costs of Compliance

    The FAA estimates that this proposed AD affects 13 airplanes of
U.S. registry. The FAA estimates the following costs to comply with
this proposed AD:
    The FAA has determined that revising the existing maintenance or
inspection program takes an average of 90 work-hours per operator,
although the agency recognizes that this number may vary from operator
to operator. In the past, the agency has estimated that this action
takes 1 work-hour per airplane. Since operators incorporate maintenance
or inspection program changes for their affected fleet(s), the FAA has
determined that a per-operator estimate is more accurate than a per-
airplane estimate. Therefore, the agency estimates the average total
cost per operator to be $7,650 (90 work-hours x $85 per work-hour).

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 has determined that this proposed AD would not have
federalism implications under Executive Order 13132. This proposed AD
would not have a substantial direct effect on the States, on the
relationship between the

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

List of Subjects in 14 CFR Part 39

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

The Proposed Amendment

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

PART 39--AIRWORTHINESS DIRECTIVES

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

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

Sec.  39.13  [Amended]

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

Airbus SAS: Docket No. FAA-2020-0576; Product Identifier 2020-NM-
068-AD.

(a) Comments Due Date

    The FAA must receive comments by August 17, 2020.

(b) Affected ADs

    None.

(c) Applicability

    This AD applies to Airbus SAS Model A350-941 and -1041
airplanes, certificated in any category, with an original
airworthiness certificate or original export certificate of
airworthiness issued on or before June 7, 2019.

(d) Subject

    Air Transport Association (ATA) of America Code 05, Time Limits/
Maintenance Checks.

(e) Reason

    This AD was prompted by a determination that new or more
restrictive airworthiness limitations are necessary. The FAA is
issuing this AD to address the potential failure of certain life-
limited parts, which could result in reduced structural integrity of
the airplane.

(f) Compliance

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

(g) Requirements

    Except as specified in paragraph (h) of this AD: Comply with all
required actions and compliance times specified in, and in
accordance with, European Union Aviation Safety Agency (EASA) AD
2020-0091, dated April 22, 2020 (``EASA AD 2020-0091'').

(h) Exceptions to EASA AD 2020-0091

    (1) The requirements specified in paragraph (1) of EASA AD 2020-
0091 do not apply to this AD.
    (2) Paragraph (2) of EASA AD 2020-0091 specifies revising ``the
approved AMP'' within 12 months after its effective date, but this
AD requires revising the existing maintenance or inspection program,
as applicable, to incorporate the ``limitations'' specified in
paragraph (2) of EASA 2020-0091 within 90 days after the effective
date of this AD.
    (3) The initial compliance time for complying with the
limitations specified in paragraph (2) of EASA AD 2020-0091 is at
the applicable ``limitations'' specified in paragraph (2) of EASA AD
2020-0091, or within 90 days after the effective date of this AD,
whichever occurs later.
    (4) The provisions specified in paragraphs (3) and (4) of EASA
AD 2020-0091 do not apply to this AD.
    (5) The ``Remarks'' section of EASA AD 2020-0091 does not apply
to this AD.

(i) Provisions for Alternative Actions and Intervals

    After the existing maintenance or inspection program has been
revised as required by paragraph (g) of this AD, no alternative
actions (e.g., inspections) and intervals are allowed unless they
are approved as specified in the provisions of the ``Ref.
Publications'' section of EASA AD 2020-0091.

(j) Other FAA AD Provisions

    The following provisions also apply to this AD:
    (1) Alternative Methods of Compliance (AMOCs): The Manager,
Large Aircraft Section, International Validation Branch, FAA, has
the authority to approve AMOCs for this AD, if requested using the
procedures found in 14 CFR 39.19. In accordance with 14 CFR 39.19,
send your request to your principal inspector or local Flight
Standards District Office, as appropriate. If sending information
directly to the Large Aircraft Section, International Validation
Branch, send it to the attention of the person identified in
paragraph (k)(2) of this AD. Information may be emailed to<EMAIL_ADDRESS>Before using any approved AMOC, notify
your appropriate principal inspector, or lacking a principal
inspector, the manager of the local flight standards district
office/certificate holding district office.
    (2) Contacting the Manufacturer: For any requirement in this AD
to obtain instructions from a manufacturer, the instructions must be
accomplished using a method approved by the Manager, Large Aircraft
Section, International Validation Branch, FAA; or EASA; or Airbus
SAS's EASA Design Organization Approval (DOA). If approved by the
DOA, the approval must include the DOA-authorized signature.
    (3) Required for Compliance (RC): For any service information
referenced in EASA AD 2020-0091 that contains RC procedures and
tests: Except as required by paragraph (j)(2) of this AD, RC
procedures and tests must be done to comply with this AD; any
procedures or tests that are not identified as RC are recommended.
Those procedures and tests that are not identified as RC may be
deviated from using accepted methods in accordance with the
operator's maintenance or inspection program without obtaining
approval of an AMOC, provided the procedures and tests identified as
RC can be done and the airplane can be put back in an airworthy
condition. Any substitutions or changes to procedures or tests
identified as RC require approval of an AMOC.

(k) Related Information

    (1) For information about EASA AD 2020-0091, contact the EASA,
Konrad-Adenauer-Ufer 3, 50668 Cologne, Germany; telephone +49 221
89990 6017; email<EMAIL_ADDRESS>internet www.easa.europa.eu.
You may find this EASA AD on the EASA website at https://ad.easa.europa.eu. You may view this material 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>. This material may be
found in the AD docket on the internet at https://www.regulations.gov by searching for and locating Docket No. FAA-
2020-0576.
    (2) For more information about this AD, contact Vladimir
Ulyanov, Aerospace Engineer, Large Aircraft Section, International
Validation Branch, FAA, 2200 South 216th St., Des Moines, WA 98198;
telephone and fax<PHONE_NUMBER>; email<EMAIL_ADDRESS>
    Issued on June 25, 2020.
Gaetano A. Sciortino,
Deputy Director for Strategic Initiatives, Compliance & Airworthiness
Division, Aircraft Certification Service.
[FR Doc. 2020-14075 Filed 6-30-20; 8:45 am]
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