[Federal Register Volume 85, Number 167 (Thursday, August 27, 2020)]
[Notices]
[Pages 53051-53054]
[FR Doc No: 2020-18827]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-89635; File No. SR-CBOE-2020-050]

Self-Regulatory Organizations; Cboe Exchange, Inc.; Notice of
Filing of Amendment Nos. 1 and 2 and Order Instituting Proceedings To
Determine Whether To Approve or Disapprove a Proposed Rule Change, as
Modified by Amendment Nos. 1 and 2, To Amend Rules 5.37 and 5.73
Related to the Solicitation of Market Makers for SPX Initiating Orders
in the Automated Improvement Mechanism and FLEX Automated Improvement
Mechanism

August 21, 2020.

I. Introduction

    On June 3, 2020, Cboe Exchange, Inc. (``Exchange'' or ``Cboe'')
filed with the Securities and Exchange Commission (``Commission''),
pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934
(``Act'') \1\ and Rule 19b-4 thereunder,\2\ a proposed rule change to
permit orders for the accounts of market makers with an appointment in
S&P 500[supreg] Index Options (``SPX'') to be solicited for the
initiating order submitted for execution against an agency order into
an Automated Improvement Mechanism (``AIM'') auction or a FLEX AIM
auction. The proposed rule change was published for comment in the
Federal Register on June 18, 2020.\3\ On July 2, 2020, the Exchange
submitted Amendment No. 1 to the proposed rule change, which replaced
and superseded the proposed rule change in its entirety.\4\ On July 22,
2020, the Exchange submitted Amendment No. 2 to the proposed rule
change.\5\ On July 27, 2020, pursuant to Section 19(b)(2) of the
Act,\6\ the Commission designated a longer period within which to
approve the proposed rule change, disapprove the proposed rule change,
or institute proceedings to determine whether to disapprove the
proposed rule change.\7\ The Commission is publishing this notice and
order to solicit comment on the proposed rule change, as modified by
Amendment Nos. 1 and 2, from interested persons and to institute
proceedings pursuant to Section 19(b)(2)(B) of the Act \8\ to determine
whether to approve or disapprove the proposed rule change, as modified
by Amendment Nos. 1 and 2.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ See Securities Exchange Act Release No. 89062 (June 12,
2020), 85 FR 36907. Comments received on the proposed rule change
are available on the Commission's website at: https://www.sec.gov/comments/sr-cboe-2020-050/srcboe2020050.htm.
    \4\ In Amendment No. 1, the Exchange: (1) Limited the scope of
its original proposal, which would have permitted orders for the
accounts of market makers with an appointment in any class to be
solicited for the initiating order in an AIM or FLEX AIM auction in
that class, to only allow market makers with an appointment in SPX
to be solicited for the initiating order in an AIM or FLEX AIM
auction in SPX; and (2) provided additional data, justification, and
support for its modified proposal. The full text of Amendment No. 1
is available on the Commission's website at: https://www.sec.gov/comments/sr-cboe-2020-050/srcboe2020050-7382058-218888.pdf.
    \5\ In Amendment No. 2, the Exchange: (1) Provided additional
data, justification, and support for its proposal; and (2) made
technical corrections and clarifications to the description of the
proposal. The full text of Amendment No. 2 is available on the
Commission's website at: https://www.sec.gov/comments/sr-cboe-2020-050/srcboe2020050-7464399-221161.pdf.
    \6\ 15 U.S.C. 78s(b)(2).
    \7\ See Securities Exchange Act Release No. 89398, 85 FR 46197
(July 31, 2020). The Commission designated September 16, 2020 as the
date by which the Commission shall approve or disapprove, or
institute proceedings to determine whether to disapprove, the
proposed rule change.
    \8\ 15 U.S.C. 78s(b)(2)(B).
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II. Exchange's Description of the Proposed Rule Change, as Modified by
Amendment Nos. 1 and 2

    The Exchange proposes to permit orders for the accounts of Market-
Makers with an appointment in SPX to be solicited for the Initiating
Order \9\ submitted for execution against an Agency Order in SPX
options into a simple AIM Auction pursuant to Rule 5.37 or a simple
FLEX AIM Auction pursuant to Rule 5.73. The Exchange does not generally
activate AIM for SPX options, and AIM for SPX options is currently not
activated.\10\ The introductory paragraphs of Rules 5.37 and 5.73
prohibit orders for the accounts of Market-Makers with an appointment
in the applicable class to be solicited to execute against the Agency
Order in a simple AIM or FLEX AIM Auction, respectively. No similar
restriction applies to crossing transactions in open outcry trading,
where a significant portion of SPX options trade.\11\ As further
discussed below, brokers seeking liquidity to execute against customer
orders on the trading floor regularly solicit appointed SPX Market-
Makers for this liquidity, as they are generally the primary source of
pricing and liquidity for those options.
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    \9\ The ``Initiating Order'' is the order comprised of principal
interest or a solicited order(s) submitted to trade against the
order the submitting Trading Permit Holder (the ``Initiating TPH''
or ``Initiating FLEX Trader,'' as applicable) represents as agent
(the ``Agency Order'').
    \10\ FLEX AIM is generally activated, and currently is
activated, for FLEX SPX options.
    \11\ See Rules 5.86 and 5.87.
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    As of March 16, 2020, the Exchange suspended open outcry trading to
help prevent the spread of the novel coronavirus and began operating in
an all-electronic configuration.\12\ As a result, the Exchange
activated AIM for SPX options for the first time to provide market
participants with a mechanism to cross SPX options while the floor was
inoperable, which would otherwise not be possible without open outcry
trading The Exchange adopted a temporary rule change to permit Market-
Makers to be solicited for electronic crossing transactions in its
exclusively listed index options (including SPX options) when the
Exchange's trading floor was inoperable. The Exchange believed this
would make the same sources of liquidity for customer orders that are
generally available in open outcry available for those orders in an
electronic-only environment.\13\ This was particularly true for SPX
options, for which the Exchange enabled AIM for the first time. The
Exchange believed not permitting Market-Makers to participate as
contras could have made it difficult for brokers to find sufficient
liquidity to fill their customer orders, which liquidity they generally
solicited from SPX Market-Makers on the trading floor. For example,
when the Exchange operates in its a hybrid manner as it currently is
(with electronic and open outcry trading), if a customer order is not
fully executable against electronic bids and offers, a floor broker can
attempt to execute the order, or remainder thereof, on the trading
floor, where the liquidity to trade with this remainder is generally
provided by Market-Makers in the open outcry trading crowd.
Additionally, brokers may solicit liquidity from upstairs Market-Maker
firms.
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    \12\ The Exchange continues to operate in an all-electronic
environment, but currently plans to reopen its trading floor on June
8, 2020.
    \13\ See Rule 5.24(e)(1)(A); see also Securities Exchange Act
Release No. 88886 (May 15, 2020), 85 FR 31008 (May 21, 2020) (SR-
CBOE-2020-047).
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    Upon the reopening of the trading floor, the Exchange deactivated
AIM for SPX options. While AIM was activated

for SPX options, the Exchange observed price improvement benefits AIM
auctions provided to smaller, retail-sized SPX options.\14\ As a
result, the Exchange intends to reactivate AIM for SPX options while
the trading floor is operable for orders up to a maximum size to
continue to provide these price improvement opportunities for retail-
sized SPX orders.\15\ Regardless of whether the trading floor is open,
the Exchange believes brokers will have difficulty finding sufficient
liquidity to initiate AIM auctions from only market participants that
are not SPX Market-Makers. If the Exchange determines to reactivate AIM
for SPX options, the Exchange believes it is appropriate to permit
orders for the account of an appointed SPX Market-Maker to be submitted
as the contra order, as the Exchange believes the liquidity provided by
SPX Market-Makers will need to be available for brokers to initiate AIM
Auctions and create potential price improvement opportunities for those
retail-sized orders. Currently, there are 28 TPHs with SPX
appointments, which represent a significant pool of SPX liquidity that
would be available to participate in AIM Auctions through both contra
orders and auction responses. To demonstrate the importance of the
liquidity provided by SPX Market-Makers, in January and February 2020,
the percentage of smaller simple Customer orders (20 or fewer) that
executed in open outcry against an SPX Market-Maker as contra was
approximately 85%, and the percentage of smaller simple Customer orders
(20 or fewer) that executed electronically against an SPX Market-Maker
as contra was approximately 87%. If SPX Market-Makers cannot be
solicited for SPX AIM Auctions, the Exchange believes brokers may not
be able to initiate as many AIM Auctions for their retail orders as
they were able to do while the trading floor was closed, which may
reduce the price improvement opportunities available for those orders.
While the trading floor was closed, orders for the accounts of SPX
Market-Makers created opportunities for customer orders to be submitted
in AIM Auctions and receive price improvement. The Exchange believes
those SPX Market-Maker orders should be permitted to be solicited at
all times for SPX AIM Auctions in order to create similar price
improvement opportunities for those customer orders.
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    \14\ See Securities Exchange Act Release No. 89058 (June 12,
2020), 85 FR 36918 (June 18, 2020) (SR-CBOE-2020-051).
    \15\ Id.
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    In multi-list classes, many market-makers serve as both appointed
Market-Makers on the Exchange and as market-makers on other options
exchanges. These firms, as a result, can use their accounts for their
away market-maker activities for being solicited with respect to AIM
Auctions. In general, solicited orders submitted as the Initiating
Order for AIM Auctions are almost always comprised of orders for the
accounts of away market-makers. For example, in April of 2020,
approximately 99.6% of the orders submitted into all AIM Auctions had
Initiating Orders comprised of orders for accounts of away market-
makers, making up approximately 86.2% of the volume executed through
AIM auctions. However, SPX is an exclusively listed class on the
Exchange, so a firm cannot serve as an SPX market-maker at another
options exchange. During April and May 2020, when Initiating Orders
could be comprised of orders for accounts of SPX Market-Makers pursuant
to a temporary rule, approximately 22% of Initiating Orders executed in
SPX AIM Auctions were comprised of orders for SPX Market-Makers,
representing approximately 45% of SPX volume executed in AIM Auctions.
While approximately 76% of Initiating Orders executed in SPX AIM
Auctions were comprised of orders for accounts of away market-makers,
those orders represented only approximately 5% of the SPX volume
executed through AIM Auctions. The Exchange notes SPX Market-Makers
also executed approximately 31% of SPX volume executed through AIM
Auctions with auction responses. This demonstrates the difficulty
brokers may have to find sufficient interest to fill customer orders in
SPX if the Exchange activates AIM for SPX without permitting appointed
Market-Makers to be solicited. If brokers may solicit primary liquidity
providers in SPX for electronic auctions, regardless of whether the
trading floor is operational, the Exchange believes brokers will be
able to more efficiently locate liquidity to initiate AIM Auctions to
fill their customer orders, particularly during times of volatility,
which may create additional execution and price improvement
opportunities for customers at all times. The Exchange believes the
proposed rule change will, therefore, provide retail-sized orders with
similar price improvement opportunities when AIM is activated while the
trading floor is open that those orders realized while the trading
floor was closed.
    Permitting SPX Market-Makers to serve as contra parties to crossing
transactions submitted into an AIM Auction will also further align AIM
Auctions with SPX crossing executions that occur on the trading floor.
SPX Market-Makers frequently serve as contra parties to crossing
transactions on the trading floor. For example, during February 2020
(when the trading floor was open), approximately 76% of SPX orders
crossed on the trading floor (consisting of 2,944,161 contracts)
included an order of an SPX Market-Maker one side of the transaction.
    This further demonstrates the importance of appointed SPX Market-
Makers to the provision of liquidity in the SPX market with respect to
crossing transactions, which liquidity would not be available to
initiate electronic crossing transactions under the current AIM rule.
Therefore, the Exchange believes the proposed rule change will permit
it to activate AIM in SPX in a manner that aligns open outcry and
electronic crossing auctions, and thus aligns the execution and price
improvement opportunities available in both auctions, by permitting the
same participants to be solicited as contras in both types of auctions
in SPX at all times.
    While FLEX AIM is currently available for SPX orders of all sizes,
the Exchange believes brokers currently have similar difficulties
locating liquidity to initiate FLEX AIM Auctions for SPX orders. Unlike
in simple non-FLEX markets, FLEX Market-Makers have no obligations to
provide liquidity to FLEX classes (and there is book into which FLEX
Market-Makers may submit quotes to rest). Therefore, in FLEX markets,
appointed Market-Makers are on equal footing with all other market
participants with respect to FLEX AIM Auctions. Permitting FLEX Market-
Makers to be solicited provides all market participants with the
opportunity to provide liquidity to execute against Agency Orders in
FLEX AIM Auctions in the same manner (both through solicitation and
responses). The Exchange believes the proposed rule change may result
in additional FLEX AIM auctions occurring in SPX, which may create
additional price improvement opportunities for FLEX SPX orders.\16\ The
Exchange also believes permitting FLEX SPX Market-Makers to be
solicited for FLEX AIM Auctions will provide consistency among
electronic crossing auctions for SPX.
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    \16\ The Exchange notes Market-Makers are currently able to be
solicited for complex AIM and complex FLEX AIM for similar reasons.
See Rules 5.38 and 5.73.

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    The proposed rule change also amends Rules 5.37(c)(5) and
5.73(c)(5) to codify that any User or FLEX Trader, respectively, other
than the Initiating TPH or FLEX Trader, respectively, may submit
responses to AIM and FLEX AIM Auctions. As set forth in Rules 5.37(e)
and 5.73(e), the Initiating Order may receive an entitlement of 40% or
50% of the Agency Order. The Exchange believes it is appropriate to not
permit the Initiating TPH or Initiating FLEX Trader, as applicable, to
also submit responses in order to try to trade against a larger
percentage of the Agency Order. This is consistent with allocation
rules, pursuant to which the Initiating Order may only receive more
than 40% or 50%, as applicable, of the Agency Order if there are
remaining contracts after all other interest has executed.
    The Rule change also notes that the System will reject a response
with the same EFID \17\ as the Initiating Order. The Exchange notes
that orders for the same User may have different EFIDs. However, the
rule prohibits all responses from the same User, even with different
EFIDs. The System is currently only able to reject responses with the
same EFID as the Initiating Order, which is why that is specified in
the proposed rule. If the same User submits a response to an auction in
which that same User had an order comprising the Initiating Order (even
with a different EFID), the Exchange may take regulatory action against
that User for a violation of the proposed rule. The Exchange currently
applies this restriction to simple AIM and FLEX AIM Auctions, but it
was inadvertently omitted from the Rules, so the proposed rule change
adds transparency to the Rules. This restriction is also currently in
the Rules related to AIM for complex orders, so the proposed rule
change adds consistency to the rules of Exchange auctions.\18\
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    \17\ See Rule 1.1, which defines EFID as an Executing Firm ID.
    \18\ See Rule 5.38(c)(5).
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III. Summary of the Comment Letters Received

    To date the Commission has received two comment letters on the
proposal.\19\ The commenters agreed with Cboe's assertions that the
proposal would increase liquidity for AIM auctions, which could
increase execution and price improvement opportunities.\20\ One
commenter argued that removing the market maker solicitation
prohibition would eliminate an inequity against market makers that
unduly curtails liquidity to customer orders.\21\ This commenter argued
that, because Cboe's rules no longer restrict AIM and FLEX AIM
responses to appointed market makers and trading permit holders
representing customer orders at the top of the book, the market maker
solicitation prohibition is no longer necessary.\22\ The commenters
also supported the proposal because it would better align the execution
and price improvement opportunities in electronic crossing auctions
with those available in open outcry trading, where no similar
solicitation prohibition exists.\23\
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    \19\ See letters to Vanessa Countryman, Secretary, Commission,
from Richard J. McDonald, Susquehanna International Group, LLP,
dated July 8, 2020 (``SIG Letter'') and Ellen Greene, Managing
Director, Equities & Options Market Structure, The Securities
Industry and Financial Markets Association, dated July 9, 2020
(``SIFMA Letter'').
    \20\ See SIG Letter, supra note 19, at 2 and SIFMA Letter, supra
note 19, at 3.
    \21\ See SIG Letter, supra note 19, at 1.
    \22\ See id. at 2.
    \23\ See id.; SIFMA Letter, supra note 19, at 3.
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IV. Proceedings To Determine Whether To Approve or Disapprove SR-CBOE-
2020-050, as Modified by Amendment Nos. 1 and 2, and Grounds for
Disapproval Under Consideration

    The Commission is instituting proceedings pursuant to Section
19(b)(2)(B) of the Act \24\ to determine whether the proposed rule
change should be approved or disapproved. Institution of such
proceedings is appropriate at this time in view of the legal and policy
issues raised by the proposed rule change. Institution of proceedings
does not indicate that the Commission has reached any conclusions with
respect to any of the issues involved. Rather, as stated below, the
Commission seeks and encourages interested persons to provide
additional comment on the proposed rule change, as modified by
Amendment Nos. 1 and 2, to inform the Commission's analysis of whether
to approve or disapprove the proposed rule change.
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    \24\ 15 U.S.C. 78s(b)(2)(B).
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    Pursuant to Section 19(b)(2)(B) of the Act,\25\ the Commission is
providing notice of the grounds for disapproval under consideration.
The Commission is instituting proceedings to allow for additional
analysis of the proposed rule change's consistency with Section 6(b)(5)
of the Act, which requires, among other things, that the rules of a
national securities exchange be designed to prevent fraudulent and
manipulate 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 to protect investors and the public interest, and
not be designed to permit unfair discrimination between customers,
issuers, brokers, or dealers; \26\ and Section 6(b)(8) of the Act,
which requires that the rules of the Exchange do not impose any burden
on competition that is not necessary or appropriate in furtherance of
the purposes of the Act.\27\
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    \25\ 15 U.S.C. 78s(b)(2)(B).
    \26\ 15 U.S.C. 78f(b)(5).
    \27\ 15 U.S.C. 89f(b)(8).
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    Under the Commission's Rules of Practice, the ``burden to
demonstrate that a proposed rule change is consistent with the [Act]
and the rules and regulations issued thereunder . . . is on the self-
regulatory organization that proposed the rule change.'' \28\ The
description of a proposed rule change, its purpose and operation, its
effect, and a legal analysis of its consistency with applicable
requirements must all be sufficiently detailed and specific to support
an affirmative Commission finding,\29\ and any failure of a self-
regulatory organization to provide this information may result in the
Commission not having a sufficient basis to make an affirmative finding
that a proposed rule change is consistent with the Act and the
applicable rules and regulations.\30\
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    \28\ Rule 700(b)(3), Commission Rules of Practice, 17 CFR
201.700(b)(3).
    \29\ See id.
    \30\ See id.
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    The Commission is instituting proceedings to allow for additional
consideration and comment on the issues raised herein, including as to
whether the proposal is consistent with the Act.

V. Procedure: Request for Written Comments

    The Commission requests that interested persons provide written
submissions of their views, data, and arguments with respect to the
issues identified above, as well as any other concerns they may have
with the proposal. In particular, the Commission invites the written
views of interested persons concerning whether the proposal is
consistent with Sections 6(b)(5) and 6(b)(8), or any other provision of
the Act, or the rules and regulations thereunder. Although there do not
appear to be any issues relevant to approval or disapproval that would
be facilitated by an oral presentation of

views, data, and arguments, the Commission will consider, pursuant to
Rule 19b-4 under the Act,\31\ any request for an opportunity to make an
oral presentation.\32\
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    \31\ 17 CFR 240.19b-4.
    \32\ Section 19(b)(2) of the Act, as amended by the Securities
Act Amendments of 1975, Public Law 94-29 (June 4, 1975), grants the
Commission flexibility to determine what type of proceeding--either
oral or notice and opportunity for written comments--is appropriate
for consideration of a particular proposal by a self-regulatory
organization. See Securities Act Amendments of 1975, Senate Comm. on
Banking, Housing & Urban Affairs, S. Rep. No. 75, 94th Cong., 1st
Sess. 30 (1975).
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    Interested persons are invited to submit written data, views, and
arguments regarding whether the proposal should be approved or
disapproved by September 17, 2020. Any person who wishes to file a
rebuttal to any other person's submission must file that rebuttal by
October 1, 2020. Commission may be submitted by any of the following
methods:

Electronic Comments

     Use the Commission's internet comment form (http://www.sec.gov/rules/sro.shtml); or
     Send an email to<EMAIL_ADDRESS>Please include
File Number SR-CBOE-2020-050 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-2020-050. 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-2020-050, and should be submitted
on or before September 17, 2020. Rebuttal comments should be submitted
by October 1, 2020.

    For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\33\
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    \33\ 17 CFR 200.30-3(a)(57).
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J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2020-18827 Filed 8-26-20; 8:45 am]
BILLING CODE 8011-01-P


[Federal Register: May 11, 2010 (Volume 75, Number 90)]
[Notices]
[Page 26304-26309]
[DOCID:fr11my10-138]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-62032; File No. SR-NYSEArca-2010-31]

Self-Regulatory Organizations; Notice of Filing of Proposed Rule
Change by NYSE Arca, Inc. Amending NYSE Arca Rule 3.3(a) and Section
401(a) of the Exchange's Bylaws to Eliminate the Exchange's Audit
Committee, Compensation Committee, and Regulatory Oversight Committee

May 4, 2010.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934
(``Act'') \1\, and Rule 19b-4 \2\ thereunder, notice is hereby given
that on April 20, 2010, NYSE Arca, Inc. (``Exchange'' or ``NYSE Arca'')
filed with the Securities and Exchange Commission (``Commission'') the
proposed rule change as described in Items I, II, and III 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\ 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 proposes to amend NYSE Arca Rule 3.3 to eliminate its
audit committee (the ``NYSE Arca Audit Committee''), its compensation
committee (the ``NYSE Arca Compensation Committee'') and its regulatory
oversight committee (``ROC'') as committees of the board of directors
of the Exchange. References to those board committees will also be
deleted from Section 4.01(a) of the Exchange's Bylaws. The formal
responsibilities of the NYSE Arca Audit Committee and the NYSE Arca
Compensation Committee will, following elimination, be exercised by the
committees of the board of directors of the Exchange's ultimate parent
company, NYSE Euronext. The formal responsibilities of the ROC will be
exercised by the board of directors of NYSE Regulation, Inc.
(``NYSER'') in part, pursuant to the terms of a regulatory services
agreement with the Exchange, and the board of directors of the Exchange
in other respects.
    The text of the proposed rule change is available on the Exchange's
Web site at http://www.nyse.com, at the principal office of the
Exchange, on the Commission's Web site at http://www.sec.gov, 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 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 delete NYSE Arca Rule 3.3(a)(3) and the
NYSE Arca Audit Committee provided for therein, thereby making the
audit committee of the NYSE Euronext board (the ``NYSE Euronext Audit
Committee'') the sole committee responsible for all Exchange-related
audit functions. Similarly, the Exchange proposes to delete NYSE Arca
Rule 3.3(a)(4) and the NYSE Arca Compensation Committee provided for
therein, thereby making the human resources and compensation committee
of the NYSE Euronext board (the ``NYSE Euronext Human Resources and
Compensation Committee'') the sole committee responsible for all
Exchange-related compensation functions. Finally, the Exchange proposes
to delete NYSE Arca Rule 3.3(a)(2) and the ROC provided for therein,
with the board of directors of NYSER and the board of directors of the
Exchange each exercising some portion of the former responsibilities of
the ROC related to ensuring (i) the independence of Exchange
regulation, (ii) adequate resources for the Exchange to properly
fulfill its SRO regulatory obligations and (iii) that Exchange
management fully supports the execution of the regulatory process.
NYSER performs regulatory responsibilities on behalf of the Exchange
pursuant to the terms of a regulatory services agreement (``RSA'')
between NYSER and the Exchange. As described in more detail below, the
Exchange board receives reports on regulatory matters from NYSER and
from the Exchange's Chief Regulatory Officer (``CRO''), and the
Exchange will still retain ultimate legal responsibility for the
performance of its regulatory obligations as well as the ability to
take action as required to meet that responsibility. References to the
three aforementioned NYSE Arca board committees will also be deleted
from Section 4.01(a) of the Exchange's Bylaws.
Background
    Since the demutualization of the New York Stock Exchange LLC
(``NYSE'') in 2006 in connection with the merger of New York Stock
Exchange, Inc. and Archipelago Holdings, Inc. (``Archipelago''), the
audit and compensation functions of NYSE have been carried out at the
parent holding company level.\3\ This principle was extended in 2007
with the merger of NYSE Group, Inc. (``NYSE Group'') and Euronext, N.V.
to form NYSE Euronext (the ``NYSE-Euronext Merger''). As noted in the
Commission's order approving the NYSE-Euronext Merger,\4\ upon
consummation, the board of directors of NYSE Euronext (the ``Company')
was expected to have an audit committee, a human resource and
compensation committee, and a nominating and governance committee, each
consisting solely of directors meeting the independence requirements of
the Company.\5\ The order further stated that these committees also
would perform relevant functions for NYSE Group, NYSE, NYSE Market,
Inc., NYSE Regulation, Inc., Archipelago, NYSE Arca Equities, Inc., and
the Exchange, as well as other subsidiaries of the Company, except that
the board of directors of NYSE Regulation, Inc. would continue to have
its own compensation committee and nominating and governance
committee.\6\
---------------------------------------------------------------------------

    \3\ See Securities Exchange Act Release No. 53382 (February 27,
2006), 71 FR 11251 (March 6, 2006) (SR-NYSE-2005-77) (order
approving NYSE's business combination with Archipelago Holdings,
Inc.) at 11257.
    \4\ Securities Exchange Act Release No. 55293 (February 14,
2007), 72 FR 8033 (February 22, 2007) (SR-NYSE-2006-120) (``NYSE
Euronext Approval Order'').
    \5\ See NYSE Euronext Approval Order, 72 FR at 8036.
    \6\ Id.
---------------------------------------------------------------------------

    In addition, on October 1, 2008, the American Stock Exchange LLC
(``Amex'') was acquired by the Company. In connection with the merger,
the Amex self-regulatory organization ultimately became known as NYSE
Amex LLC (``NYSE Amex''). In its order approving the acquisition,\7\
the Commission again noted that, ``Amex expects that the committees of
the NYSE Euronext board of directors will perform for NYSE [Amex] the
board committee functions relating to audit, governance and
compensation.'' \8\
---------------------------------------------------------------------------

    \7\ Securities Exchange Act Release No. 58673 (September 29,
2008), 73 FR 57707 (October 3, 2008) (SR-Amex-2008-62, SR-NYSE-2008-
60) (``NYSE Amex Approval Order'').
    \8\ NYSE Amex Approval Order, 73 FR at 57712. Note 66 following
this language reiterates that, ``Each of these NYSE Euronext
committees is composed solely of directors meeting the independence
requirements of NYSE Euronext.''
---------------------------------------------------------------------------

The NYSE Euronext Audit Committee Will Become the Sole Committee To
Handle All Audit Responsibilities for the Exchange
    Among the various U.S. consolidated subsidiary corporations of the
Company, only the Exchange has an audit committee that is separate and
apart from the NYSE Euronext Audit Committee. Moreover, in practice,
the audit responsibilities of the NYSE Arca Audit Committee overlap
with those of the NYSE Euronext Audit Committee because the latter
reviews the financial condition of the Exchange as part of its audit
responsibilities.
    Under its charter, the NYSE Euronext Audit Committee has broad
authority to assist the board of directors of the Company in its
oversight of (a) the integrity of the Company's financial statements
and internal controls, (b) compliance with legal and regulatory
requirements, including the Company's ethical standards and policies,
(c) the qualifications, independence and performance of the Company's
independent auditor, (d) the process relating to internal risk
management and control systems, (e) the performance of the Company's
internal audit function and its independent auditors, and (f) the
Company's tax policy. It also prepares the Audit Committee report to
shareholders for inclusion in the Company's annual proxy statement.
Because the Company's financial statements are prepared on a
consolidated basis that includes the financial results of all of the
Company's subsidiaries, including the Exchange and any subsidiaries of
the Exchange, the NYSE Euronext Audit Committee's purview necessarily
includes these subsidiaries. The committee is composed of at least
three members, all of whom must meet the independence and experience
requirements of the New York Stock Exchange and Rule 10A-3 under the
Securities Exchange Act of 1934 (the ``Act''). Each member of the
committee must be financially literate or become financially literate
within a reasonable time after appointment to the committee, and at
least one member must have accounting or related financial management
expertise.
    By contrast, the NYSE Arca Audit Committee has a more limited role,
focused solely on the exchange entity and its subsidiary NYSE Arca
Equities,

Inc. which operates as a facility of the Exchange. As described in
current Exchange Rule 3.3(a)(3)(B), the primary functions of that audit
committee are (i) to conduct an annual review with the independent
auditors, to determine the scope of their examination and the cost
thereof, (ii) to periodically review with the independent auditors and
the internal auditor the Exchange's internal controls and the adequacy
of the internal audit program, (iii) to review the annual reports
submitted both internally and externally, and take such action with
respect thereto as it may deem appropriate, and (iv) to recommend to
the board independent public accountants as auditors of the Exchange
and its subsidiaries. However, to the extent that the committee
performs these functions, its activities are duplicative of the
activities of the NYSE Euronext Audit Committee which, for example, is
specifically responsible under its charter for appointing, overseeing
the work of, evaluating the qualifications, performance and
independence of, and determining compensation for, the independent
auditor. That responsibility also specifically includes reviewing and
pre-approving the scope and general extent of the auditor's services
and the estimated fees for those services. The independent auditor, in
turn, is required to report directly to the NYSE Euronext Audit
Committee.
    Similarly, the NYSE Euronext Audit Committee is responsible under
its charter for assessing the effectiveness of the internal audit
function and reviewing with management and the independent auditor any
major issues as to the adequacy of the Company's internal risk
management and internal controls. The NYSE Euronext Audit Committee is
also charged with meeting to review and discuss with management and the
independent auditor the Company's annual audited financial statements,
quarterly financial statements prior to the filing of Form 10-Q, and
significant financial reporting issues and judgments made in connection
with the preparation of the financial statements. These specific
responsibilities of the NYSE Euronext Audit Committee, as well as
numerous others in its charter relating to oversight of both the
independent and internal auditors, financial statement and disclosure
matters, and corporate oversight, result in the responsibilities of the
NYSE Arca Audit Committee being fully duplicated by the
responsibilities of the NYSE Euronext Audit Committee.
    To make the practices of the Exchange consistent with the company-
wide corporate practices of the Company, the Exchange is now proposing
to delete NYSE Arca Rule 3.3(a)(3) to eliminate the NYSE Arca Audit
Committee and thereby formally establish the NYSE Euronext Audit
Committee as the sole committee responsible for audit functions with
regard to the Exchange. As has been the case since the creation of the
NYSE Euronext Audit Committee, it will continue to be composed at all
times of independent directors and will continue to review the
financial condition of the Exchange as part of its oversight of the
financial processes of the Company and of each of its consolidated
subsidiaries.
    NYSER, a not-for-profit indirect subsidiary of the Company, has
broad authority to oversee the regulatory activities of the Exchange
and the other self-regulatory organizations whose ultimate parent is
the Company, through delegated authority and regulatory services
agreements. It is the practice of the Company's Global Risk and Audit
Services Department (``RAS''), which performs internal audit functions,
to report to the board of directors of NYSER (``NYSER Board'') on all
internal audit matters relating to the Exchange's regulatory
responsibilities. The Exchange represents that, to ensure that NYSER
has the appropriate authority to oversee RAS's activities with respect
to the Exchange's regulatory responsibilities pursuant to the
provisions of the RSA between the Exchange and NYSER as described
below, RAS's written procedures will be amended to stipulate that the
NYSER Board may, at any time, request that RAS conduct an audit of a
matter of concern to it and report the results of the audit both to the
NYSER Board and the NYSE Euronext Audit Committee. The CRO of the
Exchange, whose role is described below in more detail and who attends
meetings of both the NYSER Board and the Exchange's board of directors,
would be in attendance at any meeting of the NYSER Board at which the
results of any such audit would be reported by RAS. The CRO would
discuss these audit results with each of the NYSER Board and the
Exchange's board of directors, as appropriate. NYSER also provides
reports on regulatory matters at Exchange board meetings. The Exchange
retains the authority to direct NYSER to request that RAS conduct such
an audit of a matter of concern to it.
The NYSE Euronext Human Resources and Compensation Committee Will
Become the Sole Committee To Handle All Human Resources and
Compensation Responsibilities for the Exchange
    The Exchange also currently has a separate Compensation Committee
whose assigned responsibilities with respect to compensation and
personnel matters overlap with the broader mandate of the NYSE Euronext
Human Resources and Compensation Committee. The latter committee is
charged under its charter with discharging the responsibilities of the
Company's board of directors relating to human resources policies and
procedures, executive benefit plans, and compensation and compensation
disclosure with respect to the Company.
    The primary functions of the NYSE Arca Compensation Committee, as
described in current Exchange Rule 3.3(a)(4)(B), are relatively
limited. The committee is required to (i) review and approve corporate
goals and objectives relevant to the Exchange CEO's compensation, (ii)
evaluate the CEO's performance in light of those goals and objectives,
(iii) set the CEO's compensation level based on this evaluation, and
(iv) make recommendations to the board of the Exchange with respect to
the design of incentive compensation and equity-based plans. The first
three of these functions relate to the determination of the Exchange
CEO's compensation. However, the Exchange CEO, as an executive officer
of the Company, already has his/her compensation established by the
Company's board of directors, in conjunction with recommendations from
the NYSE Euronext Human Resources and Compensation Committee.
    Regarding the fourth and last primary function of the NYSE Arca
Compensation Committee as stated in Exchange Rule 3.3(a)(4)(B),
involving recommendations to the Exchange board ``with respect to the
design of incentive compensation and equity-based plans,'' the charter
of the NYSE Euronext Human Resources and Compensation Committee states
that a primary responsibility of that committee of the Company is to
``[r]eview and make recommendations to the Board with respect to
incentive-compensation and equity based plans that are subject to Board
approval.'' The direct responsibility of the NYSE Euronext Human
Resources and Compensation Committee for making such recommendations to
the board of the Company is also a requirement for the

Company as a listed company, as provided in Section 303A.05 of the NYSE
Listed Company Manual. Because there is no incentive compensation nor
any equity-based plans for employees other than as determined at the
parent company level, the NYSE Arca Compensation Committee is precluded
from exercising its stated function of making such recommendations to
the Exchange board (which could not act on any such recommendations in
any case).
    To make the practices of the Exchange consistent with the company-
wide corporate practices of the Company, the Exchange is now proposing
to delete NYSE Arca Rule 3.3(a)(4) to eliminate the NYSE Arca
Compensation Committee and thereby formally establish the NYSE Euronext
Human Resources and Compensation Committee as the sole committee
responsible for human resources and compensation functions with regard
to the Exchange as anticipated in those Commission orders referenced
herein. As has been the case since the creation of the NYSE Euronext
Human Resources and Compensation Committee, it will continue to be
composed at all times of independent directors and will continue to
address human resources policies and procedures, executive benefit
plans, and compensation and compensation disclosure with respect to the
Company and of each of its consolidated subsidiaries, including the
Exchange (and excepting, with respect to certain items, NYSE
Regulation, Inc.).
The NYSER Board and the Board of Directors of the Exchange Will Each
Exercise a Portion of the Current Responsibilities of the ROC, and the
Board of Directors of the Exchange Will Retain Ultimate Legal
Responsibility for the Regulation of Its Permit Holders and Its Market
    The proposed elimination of the ROC will result in the exercise of
the current formal responsibilities of that position being divided
between the NYSER Board and the board of directors of the Exchange as
described below. Those responsibilities are to ensure (i) the
independence of Exchange regulation, (ii) adequate resources for the
Exchange to properly fulfill its SRO regulatory obligations and (iii)
that Exchange management fully supports the execution of the regulatory
process. The Exchange believes that the performance of its regulatory
functions following elimination of the ROC will closely parallel the
current performance by NYSE Amex of its regulatory functions as
previously considered and approved by the Commission.
    In the NYSE Amex Approval Order, the Commission noted that ``upon
the consummation of the Mergers and the Related Transactions, NYSE
[Amex] will no longer have a Regulatory Oversight Committee (``ROC'').
Instead, NYSE [Amex] will contract with NYSE Regulation to perform all
of its regulatory functions. The Commission believes that it is
consistent with the Act for NYSE [Amex] to eliminate its ROC and
instead contract with NYSE Regulation to perform its regulatory
functions because the governance of NYSE Regulation will provide a
comparable level of independence that a ROC would provide.'' \9\ The
Exchange has previously entered into the RSA with NYSER to perform all
of the Exchange's regulatory functions on the Exchange's behalf. The
Financial Industry Regulatory Authority (``FINRA'') performs some of
the regulatory functions contracted out to NYSER pursuant to a separate
multi-party regulatory services agreement with FINRA. These regulatory
contractual arrangements closely parallel the regulatory arrangements
for NYSE Amex that the Commission reviewed and approved in the NYSE
Amex Approval Order.\10\
---------------------------------------------------------------------------

    \9\ NYSE Amex Approval Order, 73 FR at 57717.
    \10\ See id. [``First, NYSE [Amex] will enter into a regulatory
contract with NYSE Regulation * * * under which NYSE [Amex] will
contract with NYSE Regulation to perform all of NYSE [Amex]'s
regulatory functions on NYSE [Amex]'s behalf. However, FINRA may
perform some of the regulatory functions contracted out to NYSE
Regulation pursuant to a separate multi-party regulatory services
agreement * * *. Notwithstanding these regulatory contracts, NYSE
[Amex] will retain ultimate legal responsibility for the regulation
of its members and its market.''] The Exchange represents that its
contractual arrangements with NYSER and FINRA with respect to the
performance of its regulatory functions are fully equivalent to the
contractual arrangements that NYSE Amex has entered into with NYSER
and FINRA as described in this footnote, and that the Exchange
retains ultimate legal responsibility for the performance of its
regulatory functions and the ability to take action to assure the
performance of those functions.
---------------------------------------------------------------------------

    Regarding the ROC's current formal responsibility to ensure the
independence of Exchange regulation, the Exchange notes the
Commission's comment cited in the prior paragraph that the governance
of NYSER will provide a comparable level of independence as that of a
ROC. The Exchange represents that the aforementioned statement in the
NYSE Amex Approval Order will be equally valid with respect to
regulation of the Exchange because of the very similar regulatory
contractual arrangements.\11\ Further, regarding the ROC's current
formal responsibility to ensure adequate resources for the Exchange to
properly fulfill its SRO regulatory obligations, the Exchange notes the
Commission's statement in the NYSE Amex Approval Order that ``NYSE
Euronext has agreed to provide adequate funding to NYSE Regulation to
conduct its regulatory activities with respect to NYSE, NYSE Arca and *
* * NYSE [Amex].'' \12\ That funding arrangement led the Commission to
state that ``the Commission believes that NYSE Euronext's commitment to
provide adequate funding to NYSE Regulation to conduct its regulatory
activities is designed to ensure that NYSE [Amex] can perform its
obligations under the Act.'' \13\ Because that funding commitment by
NYSE Euronext is also applicable by its terms to the Exchange, the
Commission's conclusion in the preceding sentence regarding adequate
funding of NYSER for the conduct of regulatory activities is equally
valid as applied to the Exchange's SRO regulatory obligations.
---------------------------------------------------------------------------

    \11\ Some of the specific reasons cited by the Commission in
support of its conclusion that independence of SRO regulation would
exist under NYSE Amex's contractual arrangements with NYSER are that
``all directors on the Board of NYSE Regulation (other than its CEO)
are, and will be, required to be independent of management of NYSE
Euronext and its subsidiaries, as well as of NYSE, NYSE Arca, and
NYSE [Amex] members and listed companies.'' The Commission further
noted that, ``In addition, a majority of the members of the NYSE
Regulation board must be directors that are not also directors of
NYSE Euronext.'' See id.
    \12\ Id.
    \13\ Id.
---------------------------------------------------------------------------

    As with NYSE Amex, and notwithstanding these regulatory agreements,
the Exchange retains ultimate legal responsibility for the regulation
of its permit holders \14\ and its market and has full authority to
take action to assure that its regulatory responsibilities are met. In
addition, the Exchange board of directors will directly assume the
ROC's current formal responsibility to ensure that Exchange management
fully supports the execution of the regulatory process.
---------------------------------------------------------------------------

    \14\ Permit holders at the Exchange are ``members'' of the
Exchange as that term is defined in Section 3 of the Act.
---------------------------------------------------------------------------

    In connection with the foregoing arrangements, as stated above, the
Exchange retains the authority to direct NYSER and FINRA to take any
action necessary to fulfill the Exchange's statutory and self-
regulatory obligations, and NYSER provides a report on regulatory
matters at each meeting of the Exchange board. The Exchange board
appoints its CRO who is also an officer of NYSER and reports to the
Chief Executive Officer of NYSER. The CRO is also an officer of the
Exchange, and in that capacity is charged with reporting on regulatory
matters to the Exchange

board. These arrangements also closely track the current arrangements
for NYSE Amex that were considered by the Commission in issuing the
NYSE Amex Approval Order \15\ and will assure that the Exchange board
receives reports on regulatory matters that are sufficient to enable it
to take action as necessary in the performance of its regulatory
responsibilities.
---------------------------------------------------------------------------

    \15\ See NYSE Amex Approval Order, 73 FR at 57717. [``NYSE
[Amex] also will retain the authority to direct NYSE Regulation,
FINRA, or any other SRO that provides regulatory services to take
any action necessary to fulfill NYSE [Amex]'s statutory and self-
regulatory obligations. In addition, the NYSE [Amex] Board will
appoint a CRO, who will be an officer of NYSE [Amex] and will report
directly to the NYSE [Amex] Board.'']
---------------------------------------------------------------------------

    As a consequence of realigning its regulatory arrangements to
closely match those of NYSE Amex, which arrangements were previously
considered and approved by the Commission, the Exchange believes that
the proposed rule change is non-controversial and presents no new or
novel issues. In the NYSE Amex Approval Order, the Commission found
that NYSE Amex's proposed regulatory structure ``is consistent with the
Act, including Section 6(b)(1) of the Act * * *'' and further stated
that, ``The Commission believes that it is consistent with the Act to
allow NYSE [Amex] to contract with NYSE Regulation and FINRA to perform
its regulatory functions, including its examination, enforcement, and
disciplinary functions.'' \16\ The Commission also determined that NYSE
Amex's ``proposal to appoint a CRO reporting to the NYSE [Amex] Board
will further NYSE [Amex]'s ability to satisfy these self-regulatory
obligations consistent with Section 6(b)(1) of the Act.'' \17\ Because
all of the same elements will be present in the Exchange's regulatory
arrangements following the elimination of the ROC, the Exchange
believes that the proposed rule change is fully consistent with the
Act.
---------------------------------------------------------------------------

    \16\ NYSE Amex Approval Order, 73 FR at 57717.
    \17\ Id.
---------------------------------------------------------------------------

2. Statutory Basis
    The proposed rule change is consistent with Section 6(b) \18\ of
the Act,\19\ in general, and furthers the objectives of Section 6(b)(1)
\20\ of the Act, which requires a national securities exchange to be so
organized and have the capacity to carry out the purposes of the Act
and to comply, and to enforce compliance by its members and persons
associated with its members, with the provisions of the Act. The
proposed rule change is also consistent with, and furthers the
objectives of Section 6(b)(5) \21\ of the Act, in that 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 mechanisms of a
free and open market and a national market system and, in general, to
protect investors and the public interest.
---------------------------------------------------------------------------

    \18\ 15 U.S.C. 78f(b).
    \19\ 15 U.S.C. 78.
    \20\ 15 U.S.C. 78f(b)(1).
    \21\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------

    More specifically, the Exchange believes that the proposed rule
change will promote efficiency and just and equitable principles of
trade by simplifying the corporate structure of the Exchange through
allowing the Exchange to eliminate two board committees whose
responsibilities overlap with, and are adequately handled by,
corresponding committees of the board of directors of the Exchange's
ultimate parent. This will allow directors of the Exchange to focus
their attention on matters falling directly within the purview of the
Exchange's board. Similarly, elimination of the ROC will further
simplify the corporate structure of the Exchange, thereby promoting
efficiency, by aligning the structure relating to the performance of
the regulatory functions of the Exchange more closely with the
structure of NYSE Amex relating to its performance of those same
functions. As discussed above, the Commission has previously determined
that the regulatory structure of NYSE Amex is consistent with the Act,
including Section 6(b)(1) of the Act.

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 not necessary or appropriate in
furtherance of the purposes of the Act.

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

    No written comments were either solicited or received with respect
to the proposed rule change.

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

    Within 35 days of the date of publication of this notice in the
Federal Register or within such longer period (i) as the Commission may
designate up to 90 days of such date if it finds such longer period to
be appropriate and publishes its reasons for so finding or (ii) as to
which NYSE consents, the Commission will:
    (A) By order approve such proposed rule change, or
    (B) Institute proceedings to determine whether the proposed rule
change should be disapproved.

IV. Solicitation of Comments

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

Electronic Comments

     Use the Commission's Internet comment form (http://
www.sec.gov/rules/sro.shtml; or
     Send an e-mail to<EMAIL_ADDRESS>Please include
File Number SR-NYSEArca-2010-31 on the subject line.

Paper Comments

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

All submissions should refer to File Number SR-NYSEArca-2010-31. This
file number should be included on the subject line if e-mail 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, on
official business days between the hours of 10 a.m. and 3 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-NYSEArca-2010-31 and should
be submitted on or before June 1, 2010.

    For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\22\
---------------------------------------------------------------------------

    \22\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------

Florence E. Harmon,
Deputy Secretary.
[FR Doc. 2010-11094 Filed 5-10-10; 8:45 am]
BILLING CODE 8010-01-P


[Federal Register Volume 80, Number 158 (Monday, August 17, 2015)]
[Rules and Regulations]
[Pages 49136-49138]
[FR Doc No: 2015-20177]

=======================================================================
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DEPARTMENT OF HEALTH AND HUMAN SERVICES

Food and Drug Administration

21 CFR Part 882

[Docket No. FDA-2015-N-2737]

Medical Devices; Neurological Devices; Classification of the
Computerized Cognitive Assessment Aid

AGENCY: Food and Drug Administration, HHS.

ACTION: Final order.

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

SUMMARY: The Food and Drug Administration (FDA) is classifying the
computerized cognitive assessment aid into class II (special controls).
The special controls that will apply to the device are identified in
this order, and will be part of the codified language for the
computerized cognitive assessment aid's classification. The Agency is
classifying the device into class II (special controls) in order to
provide a reasonable assurance of safety and effectiveness of the
device.

DATES: This order is effective September 16, 2015. The classification
was applicable on June 5, 2015.

FOR FURTHER INFORMATION CONTACT: Peter Como, Center for Devices and
Radiological Health, Food and Drug Administration, 10903 New Hampshire
Ave., Bldg. 66, Rm. G242, Silver Spring, MD 20993-0002,<PHONE_NUMBER>,
<EMAIL_ADDRESS>
SUPPLEMENTARY INFORMATION:

I. Background

    In accordance with section 513(f)(1) of the Federal Food, Drug, and
Cosmetic Act (the FD&C Act) (21 U.S.C. 360c(f)(1)), devices that were
not in commercial distribution before May 28, 1976 (the date of
enactment of the Medical Device Amendments of 1976), generally referred
to as postamendment devices, are classified automatically by statute
into class III without any FDA rulemaking process. These devices remain
in class III and require premarket approval, unless and until the
device is classified or reclassified into class I or II, or FDA issues
an order finding the device to be substantially

equivalent, in accordance with section 513(i) of the FD&C Act, to a
predicate device that does not require premarket approval. The Agency
determines whether new devices are substantially equivalent to
predicate devices by means of premarket notification procedures in
section 510(k) of the FD&C Act (21 U.S.C. 360(k)) and part 807 (21 CFR
part 807) of the regulations.
    Section 513(f)(2) of the FD&C Act, as amended by section 607 of the
Food and Drug Administration Safety and Innovation Act (Pub. L. 112-
144), provides two procedures by which a person may request FDA to
classify a device under the criteria set forth in section 513(a)(1).
Under the first procedure, the person submits a premarket notification
under section 510(k) of the FD&C Act for a device that has not
previously been classified and, within 30 days of receiving an order
classifying the device into class III under section 513(f)(1) of the
FD&C Act, the person requests a classification under section 513(f)(2).
Under the second procedure, rather than first submitting a premarket
notification under section 510(k) of the FD&C Act and then a request
for classification under the first procedure, the person determines
that there is no legally marketed device upon which to base a
determination of substantial equivalence and requests a classification
under section 513(f)(2) of the FD&C Act. If the person submits a
request to classify the device under this second procedure, FDA may
decline to undertake the classification request if FDA identifies a
legally marketed device that could provide a reasonable basis for
review of substantial equivalence with the device or if FDA determines
that the device submitted is not of ``low-moderate risk'' or that
general controls would be inadequate to control the risks and special
controls to mitigate the risks cannot be developed.
    In response to a request to classify a device under either
procedure provided by section 513(f)(2) of the FD&C Act, FDA will
classify the device by written order within 120 days. This
classification will be the initial classification of the device. On
June 24, 2013, Cerebral Assessment Systems, Inc., submitted a request
for classification of the Cognivue under section 513(f)(2) of the FD&C
Act. The manufacturer recommended that the device be classified into
class II (Ref. 1).
    In accordance with section 513(f)(2) of the FD&C Act, FDA reviewed
the request in order to classify the device under the criteria for
classification set forth in section 513(a)(1). FDA classifies devices
into class II if general controls by themselves are insufficient to
provide reasonable assurance of safety and effectiveness, but there is
sufficient information to establish special controls to provide
reasonable assurance of the safety and effectiveness of the device for
its intended use. After review of the information submitted in the
request, FDA determined that the device can be classified into class II
with the establishment of special controls. FDA believes these special
controls, in addition to general controls, will provide reasonable
assurance of the safety and effectiveness of the device.
    Therefore, on June 5, 2015, FDA issued an order to the requestor
classifying the device into class II. FDA is codifying the
classification of the device by adding Sec.  882.1470.
    Following the effective date of this final classification
administrative order, any firm submitting a premarket notification
[510(k)] for a computerized cognitive assessment aid will need to
comply with the special controls named in the final order. The device
is assigned the generic name computerized cognitive assessment aid, and
it is identified as a prescription device that uses an individual's
score(s) on a battery of cognitive tasks to provide an interpretation
of the current level of cognitive function. The computerized cognitive
assessment aid is used only as an assessment aid to determine level of
cognitive functioning for which there exists other valid methods of
cognitive assessment and does not identify the presence or absence of
clinical diagnoses. The computerized cognitive assessment aid is not
intended as a stand-alone or adjunctive diagnostic device.
    FDA has identified the following risks to health associated
specifically with this type of device, as well as the measures required
to mitigate these risks in table 1:

   Table 1--Computerized Cognitive Assessment Aid Risks and Mitigation
                                Measures
------------------------------------------------------------------------
            Identified risk                     Mitigation measure
------------------------------------------------------------------------
Equipment malfunction leading to         Electrical safety testing.
 subject injury (shock, burn, or         Labeling.
 mechanical failure).
User discomfort (e.g., visual fatigue,   Labeling.
 stimulus-induced nausea).
Incorrect result, inclusive of:          Hardware and software
 False positive--cognitive        verification, validation, and
 impairment when, in fact, none is        hazard analysis.
 present                                 Labeling.
 False negative--cognitive
 impairment when, in fact, cognitive
 impairment is present
------------------------------------------------------------------------

    FDA believes that the following special controls, in addition to
the general controls, address these risks to health and provide
reasonable assurance of safety and effectiveness:
     The technical parameters of the device's hardware and
software must be fully characterized and be accompanied by appropriate
non-clinical testing:
    [cir] Hardware specifications must be provided. Appropriate
verification, validation, and hazard analysis must be performed.
    [cir] Software, including any proprietary algorithm(s) used by the
device to arrive at its interpretation of the patient's cognitive
function, must be described in detail in the Software Requirements
Specification (SRS) and Software Design Specification (SDS).
Appropriate software verification, validation, and hazard analysis must
be performed.
     The device must be designed and tested for electrical
safety.
     The labeling must include:
    [cir] A summary of any testing conducted to demonstrate how the
device functions as an interpretation of the current level of cognitive
function. The summary of testing must include the following, if
available: Any expected or observed adverse events and complications;
any performance measurements including sensitivity, specificity,
positive predictive value (PPV), and negative predictive value (NPV)
per the device intended use; a description of the repeatability of
measurements; a description of how the cut-off values for
categorization of measurements were determined; and a

description of the construct validity of the device.
    [cir] A warning that the device does not identify the presence or
absence of clinical diagnoses.
    [cir] A warning that the device is not a stand-alone diagnostic.
    [cir] The intended use population and the intended use environment.
    [cir] Any instructions technicians must convey to patients
regarding the administration of the test and collection of cognitive
test data.
    Computerized cognitive assessment aids are prescription devices
restricted to patient use only upon the authorization of a practitioner
licensed by law to administer or use the device; see 21 CFR 801.109
(Prescription devices).
    Section 510(m) of the FD&C Act provides that FDA may exempt a class
II device from the premarket notification requirements under section
510(k), if FDA determines that premarket notification is not necessary
to provide reasonable assurance of the safety and effectiveness of the
device. For this type of device, FDA has determined that premarket
notification is necessary to provide reasonable assurance of the safety
and effectiveness of the device. Therefore, this device type is not
exempt from premarket notification requirements. Persons who intend to
market this type of device must submit to FDA a premarket notification,
prior to marketing the device, which contains information about the
computerized cognitive assessment aid they intend to market.

II. Environmental Impact

    The Agency has determined under 21 CFR 25.34(b) that this action is
of a type that does not individually or cumulatively have a significant
effect on the human environment. Therefore, neither an environmental
assessment nor an environmental impact statement is required.

III. Paperwork Reduction Act of 1995

    This final order establishes special controls that refer to
previously approved collections of information found in other FDA
regulations. These collections of information are subject to review by
the Office of Management and Budget (OMB) under the Paperwork Reduction
Act of 1995 (44 U.S.C. 3501-3520). The collections of information in
part 807, subpart E regarding premarket notification submissions have
been approved under OMB control number 0910-0120, and the collections
of information in 21 CFR part 801, regarding labeling have been
approved under OMB control number 0910-0485.

IV. Reference

    The following reference has been placed on display in the Division
of Dockets Management (HFA-305), Food and Drug Administration, 5630
Fishers Lane, Rm. 1061, Rockville, MD 20852, and may be seen by
interested persons between 9 a.m. and 4 p.m., Monday through Friday,
and is available electronically at http://www.regulations.gov.

1. DEN130033: De Novo Request per 513(f)(2) of the Federal Food,
Drug, and Cosmetic Act from Cerebral Assessment Systems, Inc., dated
June 24, 2013.

List of Subjects in 21 CFR Part 882

    Medical devices, Neurological devices.

    Therefore, under the Federal Food, Drug, and Cosmetic Act and under
authority delegated to the Commissioner of Food and Drugs, 21 CFR part
882 is amended as follows:

PART 882--NEUROLOGICAL DEVICES

0
1. The authority citation for 21 CFR part 882 continues to read as
follows:

    Authority:  21 U.S.C. 351, 360, 360c, 360e, 360j, 371.

0
2. Add Sec.  882.1470 to subpart B to read as follows:

Sec.  882.1470  Computerized cognitive assessment aid.

    (a) Identification. The computerized cognitive assessment aid is a
prescription device that uses an individual's score(s) on a battery of
cognitive tasks to provide an interpretation of the current level of
cognitive function. The computerized cognitive assessment aid is used
only as an assessment aid to determine level of cognitive functioning
for which there exists other valid methods of cognitive assessment and
does not identify the presence or absence of clinical diagnoses. The
computerized cognitive assessment aid is not intended as a stand-alone
or adjunctive diagnostic device.
    (b) Classification. Class II (special controls). The special
control(s) for this device are:
    (1) The technical parameters of the device's hardware and software
must be fully characterized and be accompanied by appropriate non-
clinical testing:
    (i) Hardware specifications must be provided. Appropriate
verification, validation, and hazard analysis must be performed.
    (ii) Software, including any proprietary algorithm(s) used by the
device to arrive at its interpretation of the patient's cognitive
function, must be described in detail in the software requirements
specification (SRS) and software design specification (SDS).
Appropriate software verification, validation, and hazard analysis must
be performed.
    (2) The device must be designed and tested for electrical safety.
    (3) The labeling must include:
    (i) A summary of any testing conducted to demonstrate how the
device functions as an interpretation of the current level of cognitive
function. The summary of testing must include the following, if
available: Any expected or observed adverse events and complications;
any performance measurements including sensitivity, specificity,
positive predictive value (PPV), and negative predictive value (NPV)
per the devices intended use; a description of the repeatability of
measurements; a description of how the cut-off values for
categorization of measurements were determined; and a description of
the construct validity of the device.
    (ii) A warning that the device does not identify the presence or
absence of clinical diagnoses.
    (iii) A warning that the device is not a stand-alone diagnostic.
    (iv) The intended use population and the intended use environment.
    (v) Any instructions technicians must convey to patients regarding
the administration of the test and collection of cognitive test data.

    Dated: August 11, 2015.
Leslie Kux,
Associate Commissioner for Policy.
[FR Doc. 2015-20177 Filed 8-14-15; 8:45 am]
BILLING CODE 4164-01-P


[Federal Register Volume 87, Number 232 (Monday, December 5, 2022)]
[Rules and Regulations]
[Pages 74296-74298]
[FR Doc No: 2022-26355]

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DEPARTMENT OF TRANSPORTATION

Federal Aviation Administration

14 CFR Part 39

[Docket No. FAA-2022-0890; Project Identifier MCAI-2022-00391-T;
Amendment 39-22242; AD 2022-24-02]
RIN 2120-AA64

Airworthiness Directives; Airbus SAS Airplanes

AGENCY: Federal Aviation Administration (FAA), DOT.

ACTION: Final rule.

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

SUMMARY: The FAA is adopting a new airworthiness directive (AD) for
certain Airbus SAS Model A300 F4-600R series airplanes. This AD was
prompted by a determination that the forward cargo door compartment
between certain frame forks is susceptible to widespread fatigue damage
(WFD). This AD completes certain mandated programs to support the
airplane reaching its limit of validity (LOV) of the engineering data
that support the established structural maintenance program. This AD
requires modifying the forward cargo compartment between certain frame
forks, as specified in a European Union Aviation Safety Agency (EASA)
AD, which is incorporated by reference. The FAA is issuing this AD to
address the unsafe condition on these products.

DATES: This AD is effective January 9, 2023.
    The Director of the Federal Register approved the incorporation by
reference of a certain publication listed in this AD as of January 9,
2023.

ADDRESSES:
    AD Docket: You may examine the AD docket at regulations.gov under
Docket No. FAA-2022-0890; 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 final rule, the mandatory continuing airworthiness
information (MCAI), any comments received, and other information. The
address for

Docket Operations is U.S. Department of Transportation, Docket
Operations, M-30, West Building Ground Floor, Room W12-140, 1200 New
Jersey Avenue SE, Washington, DC 20590.
    Material Incorporated by Reference:
     For material incorporated by reference in this AD, contact
EASA, Konrad-Adenauer-Ufer 3, 50668 Cologne, Germany; telephone +49 221
8999 000; email [email protected]; website easa.europa.eu. You may
find this material on the EASA website at 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>. It is also available in the AD docket at
regulations.gov under Docket No. FAA-2022-0890.

FOR FURTHER INFORMATION CONTACT: Dan Rodina, Aerospace Engineer, Large
Aircraft Section, FAA, International Validation Branch, 2200 South
216th St., Des Moines, WA 98198; telephone<PHONE_NUMBER>; email
[email protected].

SUPPLEMENTARY INFORMATION:

Background

    The FAA issued a notice of proposed rulemaking (NPRM) to amend 14
CFR part 39 by adding an AD that would apply to certain Airbus SAS
Model A300 F4-600R series airplanes. The NPRM published in the Federal
Register on July 25, 2022 (87 FR 44032). The NPRM was prompted by EASA
AD 2022-0048, dated March 18, 2022 (EASA AD 2022-0048) issued by EASA,
which is the Technical Agent for the Member States of the European
(referred to after this as the MCAI). The MCAI states that the forward
cargo compartment between frames 21 through 25 forks is susceptible to
WFD, and a structural modification is required to allow airplanes to
continue operation up to the LOV.
    In the NPRM, the FAA proposed to complete certain mandated programs
to support the airplane reaching its LOV of the engineering data that
support the established structural maintenance program, as specified in
EASA AD 2022-0048. The NPRM also proposed to require modifying the
forward cargo compartment between frames 21 through 25 forks, as
specified in EASA AD 2022-0048. The FAA is issuing this AD to address
this unsafe condition, which if not corrected, could result in reduced
structural integrity of the airplane.
    You may examine the MCAI in the AD docket at regulations.gov under
Docket No. FAA-2022-0890.

Discussion of Final Airworthiness Directive

Comments

    The FAA received a comment from the Air Line Pilots Association,
International (ALPA), who supported the NPRM without change.
    The FAA received an additional comment from FedEx. The following
presents the FAA's response to that comment.

Request To Approve Equivalent Label

    FedEx asked the FAA approve installing an equivalent label that
contains the same information as the label identified in the service
information required by EASA AD 2022-0048. FedEx stated that it is
having difficulty procuring that label, having part number (P/N)
ABS2127B01. FedEx noted that the label is to be installed on the
aircraft to identify that the modification required by EASA AD 2022-
0048 has been accomplished, and does not affect the other work
performed.
    The FAA agrees that installing an equivalent label (placard) which
contains the same information as the label having P/N ABS2127B01 is
acceptable. Therefore, the FAA has added paragraph (h)(1) of this AD,
which allows the use of an equivalent label on the forward cargo
compartment door. The FAA has redesignated subsequent paragraphs
accordingly.

Conclusion

    This product has been approved by the aviation authority of another
country and is approved for operation in the United States. Pursuant to
the FAA's bilateral agreement with this State of Design Authority, it
has notified the FAA of the unsafe condition described in the MCAI
referenced above. The FAA reviewed the relevant data, considered the
comments received, and determined that air safety requires adopting
this AD as proposed. Accordingly, the FAA is issuing this AD to address
the unsafe condition on this product. Except for minor editorial
changes, and any other change described previously, this AD is adopted
as proposed in the NPRM. None of the changes will increase the economic
burden on any operator.

Related Service Information Under 1 CFR Part 51

    EASA AD 2022-0048 specifies procedures for modifying the forward
cargo compartment between frames 21 through 25 forks. The modification
includes reinforcing the fastener holes through cold working and
replacing all the fasteners.
    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.

Costs of Compliance

    The FAA estimates that this AD affects 67 airplanes of U.S.
registry. The FAA estimates the following costs to comply with this AD:

                                      Estimated Costs for Required Actions
----------------------------------------------------------------------------------------------------------------
                                                                                Cost per       Cost on U.S.
                          Labor cost                              Parts cost        product         operators
----------------------------------------------------------------------------------------------------------------
36 work-hours x $85 per hour = $3,060........................            $177           $3,237         $216,879
----------------------------------------------------------------------------------------------------------------

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

    This AD will not have federalism implications under Executive Order
13132. This AD will 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 that this AD:
    (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 Amendment

    Accordingly, under the authority delegated to me by the
Administrator, the FAA amends 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:

2022-24-02 Airbus SAS: Amendment 39-22242; Docket No. FAA-2022-0890;
Project Identifier MCAI-2022-00391-T.

(a) Effective Date

    This airworthiness directive (AD) is effective January 9, 2023.

(b) Affected ADs

    None.

(c) Applicability

    This AD applies to Airbus SAS Model A300 F4-605R and F4-622R
airplanes, certificated in any category, as identified in European
Union Aviation Safety Agency (EASA) AD 2022-0048, dated March 18,
2022 (EASA AD 2022-0048).

(d) Subject

    Air Transport Association (ATA) of America Code 52, Doors.

(e) Unsafe Condition

    This AD was prompted by a determination that the forward cargo
door compartment between frames 21 through 25 forks is susceptible
to widespread fatigue damage (WFD). The FAA is issuing this AD to
address this condition, which if not corrected, 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, EASA AD 2022-0048.

(h) Exceptions to EASA AD 2022-0048

    (1) Where the service information referenced in EASA AD 2022-
0048 specifies installing a label (placard) having part number (P/N)
ABS2127B01 on the forward cargo compartment door, this AD allows
installing an equivalent label provided the label contains the same
information as the label having P/N ABS2127B01.
    (2) The ``Remarks'' section of EASA AD 2022-0048 does not apply
to this AD.

(i) Additional AD Provisions

    The following provisions also apply to this AD:
    (1) Alternative Methods of Compliance (AMOCs): The Manager,
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 responsible Flight Standards Office, as
appropriate. If sending information directly to the International
Validation Branch, send it to the attention of the person identified
in paragraph (j) of this AD. Information may be emailed to: [email protected]. Before using any approved AMOC, notify your
appropriate principal inspector, or lacking a principal inspector,
the manager of the local flight standards district office/
certificate holding district office.
    (2) Contacting the Manufacturer: For any requirement in this AD
to obtain instructions from a manufacturer, the instructions must be
accomplished using a method approved by the Manager, International
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.

(j) Additional Information

    For more information about this AD, contact Dan Rodina,
Aerospace Engineer, Large Aircraft Section, FAA, International
Validation Branch, 2200 South 216th St., Des Moines, WA 98198;
telephone<PHONE_NUMBER>; email [email protected].

(k) Material Incorporated by Reference

    (1) The Director of the Federal Register approved the
incorporation by reference 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 this AD specifies otherwise.
    (i) European Union Aviation Safety Agency (EASA) AD 2022-0048,
dated March 18, 2022.
    (ii) [Reserved]
    (3) For EASA AD 2022-0048, contact EASA, Konrad-Adenauer-Ufer 3,
50668 Cologne, Germany; telephone +49 221 8999 000; email
[email protected]; website easa.europa.eu. You may find this EASA
AD on the EASA website at ad.easa.europa.eu.
    (4) 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>.
    (5) You may view this material 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 November 9, 2022.
Christina Underwood,
Acting Director, Compliance & Airworthiness Division, Aircraft
Certification Service.
[FR Doc. 2022-26355 Filed 12-2-22; 8:45 am]
BILLING CODE 4910-13-P