[Federal Register Volume 87, Number 148 (Wednesday, August 3, 2022)]
[Rules and Regulations]
[Pages 47334-47336]
[FR Doc No: 2022-16606]

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DEPARTMENT OF TRANSPORTATION

Federal Aviation Administration

14 CFR Part 39

[Docket No. FAA-2022-0880; Project Identifier AD-2022-00620-T;
Amendment 39-22126; AD 2022-15-06]
RIN 2120-AA64

Airworthiness Directives; The Boeing Company Airplanes

AGENCY: Federal Aviation Administration (FAA), DOT.

ACTION: Final rule; request for comments.

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SUMMARY: The FAA is adopting a new airworthiness directive (AD) for all
The Boeing Company Model 777 airplanes. This AD was prompted by high
electrical resistance within the gust suppression sensor (GSS) transorb
modules due to corrosion on the transorb module threads. This AD
requires disconnecting the connectors and capping and stowing the wires
that had been attached to the affected transorb modules. The FAA is
issuing this AD to address the unsafe condition on these products.

DATES: This AD is effective August 18, 2022.
    The FAA must receive comments on this AD by September 19, 2022.

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: Deliver to Mail address above between 9
a.m. and 5 p.m., Monday through Friday, except Federal holidays.

Examining the AD Docket

    You may examine the AD docket at https://www.regulations.gov by
searching for and locating Docket No.

FAA-2022-0880; 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, any comments received, and other information.
The street address for the Docket Operations is listed above.

FOR FURTHER INFORMATION CONTACT: Joe Salameh, Aerospace Engineer,
Systems and Equipment Section, FAA, Seattle ACO Branch, 2200 South
216th St., Des Moines, WA 98198; phone:<PHONE_NUMBER>; email:
[email protected].

SUPPLEMENTARY INFORMATION:

Background

    During scheduled maintenance inspection, high electrical resistance
was found across the GSS transorb modules. The most likely cause of the
high resistance is corrosion over time of the transorb threads. High
electrical resistance in both transorb modules, if not addressed, can
result in two actuator control electronics (ACEs), which are part of
the flight control system, being exposed to damaging lightning
transient voltages in excess of the qualification levels, potentially
inducing erroneous or oscillatory outputs to flight control surfaces,
which could result in loss of control of the airplane. The FAA is
issuing this AD to address the unsafe condition on these products.
    The gust suppression function on the Boeing Model 777 airplanes is
a non-essential feature of the essential flight control system. The
gust suppression function provides a minor improvement to ride quality
during lateral wind gusts at low airspeeds. The actions required by
this AD disable the non-essential gust suppression function, which does
not affect the safety of flight.

FAA's Determination

    The FAA is issuing this AD because the agency has determined the
unsafe condition described previously is likely to exist or develop in
other products of the same type design.

AD Requirements

    This AD requires disconnecting the connectors from the affected
transorbs and capping and stowing those wires.

Interim Action

    The FAA considers this AD to be an interim action. The manufacturer
is currently developing a modification that will address the unsafe
condition identified in this AD. Once this modification is developed,
approved, and available, the FAA might consider additional rulemaking.

Justification for Immediate Adoption and Determination of the Effective
Date

    Section 553(b)(3)(B) of the Administrative Procedure Act (APA) (5
U.S.C. 551 et seq.) authorizes agencies to dispense with notice and
comment procedures for rules when the agency, for ``good cause,'' finds
that those procedures are ``impracticable, unnecessary, or contrary to
the public interest.'' Under this section, an agency, upon finding good
cause, may issue a final rule without providing notice and seeking
comment prior to issuance. Further, section 553(d) of the APA
authorizes agencies to make rules effective in less than thirty days,
upon a finding of good cause.
    An unsafe condition exists that requires the immediate adoption of
this AD without providing an opportunity for public comments prior to
adoption. The FAA has found that the risk to the flying public
justifies forgoing notice and comment prior to adoption of this rule
because failed electrical bonds in both transorb module lightning
protection devices can cause two ACEs to be exposed to damaging
lightning transient voltages. The failure mode of the transorb module
is latent, and therefore is not annunciated to the operator. Damaging
lightning transient voltages in excess of the qualification levels
could induce erroneous or oscillatory outputs to control surfaces and
result in loss of control of the airplane. Accordingly, notice and
opportunity for prior public comment are impracticable and contrary to
the public interest pursuant to 5 U.S.C. 553(b)(3)(B).
    In addition, the FAA finds that good cause exists pursuant to 5
U.S.C. 553(d) for making this amendment effective in less than 30 days,
for the same reasons the FAA found good cause to forgo notice and
comment.

Comments Invited

    The FAA invites you to send any written data, views, or arguments
about this final rule. Send your comments to an address listed under
ADDRESSES. Include Docket No. FAA-2022-0880 and Project Identifier AD-
2022-00620-T at the beginning of your comments. The most helpful
comments reference a specific portion of the final rule, explain the
reason for any recommended change, and include supporting data. The FAA
will consider all comments received by the closing date and may amend
this final rule because of those comments.
    Except for Confidential Business Information (CBI) as described in
the following paragraph, and other information as described in 14 CFR
11.35, the FAA will post all comments received, without change, to
https://www.regulations.gov, including any personal information you
provide. The agency will also post a report summarizing each
substantive verbal contact received about this final rule.

Confidential Business Information

    CBI is commercial or financial information that is both customarily
and actually treated as private by its owner. Under the Freedom of
Information Act (FOIA) (5 U.S.C. 552), CBI is exempt from public
disclosure. If your comments responsive to this AD contain commercial
or financial information that is customarily treated as private, that
you actually treat as private, and that is relevant or responsive to
this AD, it is important that you clearly designate the submitted
comments as CBI. Please mark each page of your submission containing
CBI as ``PROPIN.'' The FAA will treat such marked submissions as
confidential under the FOIA, and they will not be placed in the public
docket of this AD. Submissions containing CBI should be sent to Joe
Salameh, Aerospace Engineer, Systems and Equipment Section, FAA,
Seattle ACO Branch, 2200 South 216th St., Des Moines, WA 98198; phone:
206-231-3536; email: [email protected]. Any commentary that the FAA
receives that is not specifically designated as CBI will be placed in
the public docket for this rulemaking.

Regulatory Flexibility Act

    The requirements of the Regulatory Flexibility Act (RFA) do not
apply when an agency finds good cause pursuant to 5 U.S.C. 553 to adopt
a rule without prior notice and comment. Because the FAA has determined
that it has good cause to adopt this rule without notice and comment,
RFA analysis is not required.

Costs of Compliance

    The FAA estimates that this AD affects 279 airplanes of U.S.
registry. The FAA estimates the following costs to comply with this AD:

                                                 Estimated Costs
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                                                                                Cost per      Cost on U.S.
                Action                         Labor cost           Parts cost        product        operators
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Disconnecting connectors, capping and   3 work-hours x $85 per                $0            $255         $71,145
 stowing wires.                          hour = $255.
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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, and
    (2) Will not affect intrastate aviation in Alaska.

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:

2022-15-06 The Boeing Company: Amendment 39-22126; Docket No. FAA-
2022-0880; Project Identifier AD-2022-00620-T.

(a) Effective Date

    This airworthiness directive (AD) is effective August 18, 2022.

(b) Affected ADs

    None.

(c) Applicability

    This AD applies to all The Boeing Company Model 777-200, 777-
200LR, 777-300, 777-300ER, and 777F series airplanes, certificated
in any category.

(d) Subject

    Air Transport Association (ATA) of America Code 27, Flight
controls.

(e) Unsafe Condition

    This AD was prompted by high electrical resistance within the
gust suppression sensor (GSS) transorb modules due to corrosion on
the transorb threads. The FAA is issuing this AD to address high
electrical resistance in both transorb modules, which can result in
two actuator control electronics (ACEs) being exposed to damaging
lightning transient voltages in excess of the qualification levels,
potentially inducing erroneous or oscillatory outputs to flight
control surfaces, and result in loss of control of the airplane.

(f) Compliance

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

(g) Disconnect, Cap, and Stow Transorb Module Connectors

    At the later of the times specified in paragraphs (g)(1) and (2)
of this AD: Disconnect the connectors and cap and stow the wires to
bundles/connectors W7314/D02006P and W7579/D02005P from the transorb
module part numbers CLPT-12SP-06, -07, and -67.
    Note 1 to the introductory text of paragraph (g): Guidance on
locating wire bundles/connectors W7314/D02006P and W7579/D02005P can
be found in Section 05-55-43 of the Boeing 777 airplane maintenance
manual.
    Note 2 to the introductory text of paragraph (g): Guidance on
capping and stowing the wires once they are disconnected can be
found in Section 20-10-11 of the Boeing Standard Wiring Practices
Manual.
    (1) Before the accumulation of 75,000 total flight hours or
23,000 total flight cycles, whichever occurs first.
    (2) Within 3 months after the effective date of this AD.

(h) Alternative Methods of Compliance (AMOCs)

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

(i) Related Information

    For more information about this AD, contact Joe Salameh,
Aerospace Engineer, Systems and Equipment Section, FAA, Seattle ACO
Branch, 2200 South 216th St., Des Moines, WA 98198; phone: 206-231-
3536; email: [email protected].

(j) Material Incorporated by Reference

    None.

    Issued on July 11, 2022.
Gaetano A. Sciortino,
Deputy Director for Strategic Initiatives, Compliance & Airworthiness
Division, Aircraft Certification Service.
[FR Doc. 2022-16606 Filed 8-1-22; 4:15 pm]
BILLING CODE 4910-13-P


[Federal Register Volume 84, Number 169 (Friday, August 30, 2019)]
[Notices]
[Pages 45812-45816]
[FR Doc No: 2019-18752]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-86765; File No. SR-CBOE-2019-047]

Self-Regulatory Organizations; Cboe Exchange, Inc.; Notice of
Filing and Immediate Effectiveness of a Proposed Rule Change Amending
Its Fees Schedule

August 26, 2019.
    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 August 13, 2019, Cboe Exchange, Inc. (the ``Exchange'' or
``Cboe Options'') filed with the Securities and Exchange Commission
(the ``Commission'') the proposed rule change as described in Items I,
II, and III 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

    Cboe Exchange, Inc. (the ``Exchange'' or ``Cboe Options'') proposes
to amend its fees schedule. The text of the proposed rule change is
provided in Exhibit 5.
    The text of the proposed rule change is also available on the
Exchange's website (http://www.cboe.com/AboutCBOE/CBOELegalRegulatoryHome.aspx), at

the Exchange's Office of the Secretary, and at the Commission's Public
Reference Room.

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

    In its filing with the Commission, the Exchange included statements
concerning the purpose of and basis for the proposed rule change and
discussed any comments it received on the proposed rule change. The
text of these statements may be examined at the places specified in
Item IV below. The Exchange has prepared summaries, set forth in
sections A, B, and C below, of the most significant aspects of such
statements.

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

1. Purpose
    The Exchange proposes to amend its Fees Schedule in connection with
the Volume Incentive Program (``VIP''). The Exchange intends to
implement the proposed change on August 1, 2019.\3\
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    \3\ The Exchange initially filed the proposed fee change
pursuant to SR-CBOE-2019-041 and has withdrawn that filing and
submitted this filing.
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    The Exchange first notes that it operates in a highly competitive
market in which market participants can readily direct order flow to
competing venues if they deem fee levels at a particular venue to be
excessive or incentives to be insufficient. More specifically, the
Exchange is only one of 16 options venues to which market participants
may direct their order flow. Based on publicly available information,
no single options exchange has more than 20% of the market share.\4\
The Exchange notes that a similar statistic is also true for exchange
market share in connection with customer volume; no single options
exchange has more than 19% of customer volume.\5\ Thus, in such a low-
concentrated and highly competitive market, no single options exchange
possesses significant pricing power in the execution of option order
flow. The Exchange believes that the ever-shifting market share among
the exchanges from month to month demonstrates that market participants
can shift order flow, or discontinue to reduce use of certain
categories of products, in response to fee changes. Accordingly,
competitive forces constrain the Exchange's transaction fees, and
market participants can readily trade on competing venues if they deem
pricing levels at those other venues to be more favorable. In response
to the competitive environment, the Exchange offers tiered pricing in
it Fees Schedule, like that of other options exchanges fees
schedules,\6\ which provides Trading Permit Holders (``TPHs'')
opportunities to qualify for higher rebates or reduced fees where
certain volume criteria and thresholds are met. Tiered pricing provides
an incremental incentive for TPHs to strive for higher tier levels,
which provides increasingly higher benefits or discounts for satisfying
increasingly more stringent criteria.
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    \4\ See Cboe Global Markets U.S. Options Market Volume Summary
(July 31, 2019), available at https://markets.cboe.com/us/options/market_statistics/.
    \5\ Options Clearing Corporation (``OCC'') cleared customer
volume, available at https://www.theocc.com/market-data/volume/default.jsp.
    \6\ See e.g., NASDAQ Stock Market Rules, Options Rules, Options
7 Pricing Schedule, Sec. 2 Options Market--Fees and Rebates, Tiers
1-6; see also NYSE Arca Options, Fees and Charges, Customer Posting
Credit Tiers in Non-Penny Pilot Issues.
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    For example, under VIP, the Exchange credits each TPH the per
contract amount set forth in the VIP table for Public Customer (origin
code ``C'') orders transmitted by TPHs (with certain exceptions) \7\
and executed electronically on the Exchange, provided the TPH meets
certain volume thresholds, in which volume for Professional Customers
and Voluntary Professionals (``Professional Customers'') (origin code
``W''), Broker-Dealers (origin code ``B''), and Joint Back-Offices
(``JBO'') (origin code ``J'') orders are counted toward reaching such
thresholds. Specifically, the percentage thresholds are calculated per
month based on the percentage of national customer volume in all
underlying symbols entered and executed, excluding those in Underlying
Symbol List A,\8\ Sector Indexes,\9\ the MSCI EAFE Index (``MXEA''),
the MSCI Emerging Market Index (``MXEF''), Mini-NDX Index (``MNX''),
the NASDAQ-100 Index (``NDX''), the Dow Jones Industrial Average Index
(``DJX''), Mini-SPX Index (``XSP'') and Mini-XSP Index (AM Settlement)
(``XSPAM''). VIP offers rates for both Complex and Simple orders (both
in AIM and Non-AIM orders, respectively). The Exchange notes that its
market share in customer volume (which includes Customer, Professional
Customers, Broker-Dealer, and JBO order flow) \10\ has historically
been between 16.5% and 18.3%. In recent months, the Exchange's
percentage of such market share has hovered closer to the lower end of
this scale. As stated, the Exchange operates in a highly competitive
market where no single options exchange possesses significant pricing
power in the execution of option order flow, and the ever-shifting
market share among the exchanges from month to month demonstrates that
market participants can shift order flow. Therefore, in light of the
declination of the Exchange's market share in customer volume and
competitive forces, the Exchange now proposes to amend the volume
thresholds for Tiers 4 and 5. Currently, a TPH may meet the criteria
under Tier 4 if its qualifying volume in the qualifying classes is
above 3.00% and up to 3.75% of national customer volume, and may meet
criteria under Tier 5 if their qualifying volume is above 3.75% of
national customer volume. The Exchange now proposes to increase the
volume threshold percentage in Tier 4 to above 3.00% and up to 4.00%
and to increase the threshold percentage in Tier 5 to above 4.00%. The
purpose of these changes is to adjust for current volume trends by
encouraging more volume as the Exchange's market share in customer
volume has declined over recent months and the proposed increased
threshold is designed to incentivize more volume to earn the same
credits while also maintaining an incremental incentive for TPHs to
strive for the highest tier level. The Exchange notes that the credits
offered under VIP are not changing. The proposed change is designed to
increase the amount of volume TPHs provide on the Exchange and further
encourage them to contribute to a deeper, more liquid market, as well
as to increase transactions and take such execution opportunities
provided by such increased liquidity. The Exchange believes that this,
in turn, benefits all market participants by contributing towards a
robust and well-balanced market ecosystem. The Exchange notes the
proposed tiers are competitively achievable for all TPHs that submit
significant customer order flow, in that all firms that submit the
requisite significant customer order flow could compete to meet the
tiers.
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    \7\ See Cboe Options Fees Schedule, Footnote 36.
    \8\ See Cboe Options Fees Schedule, Footnote 34. Underlying
Symbol List A includes Underlying Symbol List A: OEX, XEO, RUT, RLG,
RLV, RUI, AWDE, FTEM, FXTM, UKXM, SPX (includes SPXw), VIX,
VOLATILITY INDEXES and binary options.
    \9\ See Cboe Options Fees Schedule, Footnote 47.
    \10\ See supra note 5.
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2. Statutory Basis
    The Exchange believes that the proposed rule change is consistent
with the objectives of Section 6 of the Act, in general, and furthers
the objectives of Section 6(b)(4), in particular, as it is designed to
provide for the equitable

allocation of reasonable dues, fees and other charges among its Members
and issuers and other persons using its facilities. The Exchange also
believes that the proposed rule change is consistent with the
objectives of Section 6(b)(5) requirements that the rules of an
exchange be designed to prevent fraudulent and manipulative acts and
practices, to promote just and equitable principles of trade, to foster
cooperation and coordination with persons engaged in regulating,
clearing, settling, processing information with respect to, and
facilitating transactions in securities, to remove impediments to and
perfect the mechanism of a free and open market and a national market
system, and, in general, to protect investors and the public interest,
and, particularly, is not designed to permit unfair discrimination
between customers, issuers, brokers, or dealers.
    The Exchange operates in a highly competitive market in which
market participants can readily direct order flow to competing venues
if they deem fee levels at a particular venue to be excessive or
incentives to be insufficient. The proposed rule change reflects a
competitive pricing structure designed to incentivize market
participants to direct their order flow to the Exchange, which the
Exchange believes would enhance market quality to the benefit of all
TPHs.
    In particular, the Exchange believes the proposed tier is
reasonable because it continues to encourage TPHs to take the
opportunity to receive credits on Customer orders by reaching the
proposed volume thresholds. The Exchange notes that relative volume-
based incentives and discounts have been widely adopted by exchanges
\11\ and are reasonable, equitable and non-discriminatory because they
are open to all members on an equal basis and provide additional
benefits or discounts that are reasonably related to (i) the value to
an exchange's market quality and (ii) associated higher levels of
market activity, such as higher levels of liquidity provision and/or
growth patterns. Additionally, as noted above, the Exchange operates in
a highly competitive market. The Exchange is only one of several
options venues to which market participants may direct their order
flow. Competing options exchanges offer similar tiered pricing
structures to that of the Exchange, including schedules of rebates/
credits and fees that apply based upon members achieving certain volume
and/or growth thresholds. These competing pricing schedules, moreover,
are presently comparable to those that the Exchange provides, including
the pricing of comparable tiers.\12\
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    \11\ See supra note 6.
    \12\ Id.
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    The Exchange believes adjusting the VIP volume thresholds for Tiers
4 and 5 is reasonable because it adjusts for the current volume trends
and is a reasonable means to continue to encourage TPHs to increase
their overall order flow to the Exchange based on increasing their
Customer, Professional Customer, Broker-Dealer, and JBO executed orders
as a percentage of national customer volume. Particularly, the Exchange
believes the proposed threshold change is reasonable because it will
encourage increased volume, thus a deeper, more liquid market, and an
increase in transaction opportunities provided by the increased
liquidity. In turn, these increases benefit all TPHs by contributing
towards a robust and well-balanced market ecosystem. Increased overall
order flow benefits all investors by deepening the Exchange's liquidity
pool, providing greater execution incentives and opportunities,
offering additional flexibility for all investors to enjoy cost
savings, supporting the quality of price discovery, promoting market
transparency, and improving investor protection.
    The proposed volume thresholds also do not represent a significant
departure from the current required criteria under the Exchange's
existing tiers and is therefore still reasonable based on the
difficulty of satisfying the tiers' criteria and ensures the existing
credit and proposed thresholds appropriately reflect the incremental
difficulty to achieve the existing VIP tiers. For example, the volume
threshold amount under existing Tier 3 is currently set as a range
within a whole percentage point, between 2.00% up to 3.00%. The
Exchange believes the proposed tiers are in line with this existing
tier, as the natural next highest tier, both in required criteria and
credits, is reasonable to also set as a range within a whole percentage
point, between 3.00% and 4.00%, and then over 4.00%, as proposed. The
Exchange also believes that a volume threshold increase of .25
percentage points is a reasonable increment to encourage overall order
flow to the Exchange without so significantly increasing the difficulty
in reach the tiers' criteria.
    The Exchange believes that the proposal represents an equitable
allocation of rebates and is not unfairly discriminatory because all
TPHs have the opportunity to meet the proposed tier thresholds. Given
that TPHs change their trading strategies and patterns month-to-month
to align with changing market trends and conditions, as well as pricing
and functionality changes across other exchanges, and without having a
view of activity on other markets and off-exchange venues, the Exchange
has no way of knowing whether this proposed rule change would
definitively result in a shift of TPHs qualifying for the proposed
tiers. While the Exchange has no way of predicting with certainty how
the rule change will impact Trading Permit Holders, the Exchange
anticipates the impact of the proposed change to be minimal in at least
one TPH will be able to reach proposed Tier 5. The Exchange notes that
typically five or six firms compete to qualify across all of the VIP
tiers and at least two such firms typically compete to qualify for the
top two tiers. As stated, the Exchange believes that the proposed
threshold increases do not represent a significant departure from the
current required criteria, is still reasonable based on the difficulty
of satisfying each tier's criteria, and is appropriately aligned with
the incremental difficulty to achieve the existing VIP tiers. As such,
the Exchange does not anticipate the proposed threshold change to
impact the number of firms that compete across all tiers, including
those that regularly compete across the top two tiers, but instead
encourages competition by encouraging increase in order flow to meet
the proposed tiers. Therefore, the Exchange does not believe that the
proposed tiers are unfairly discriminatory as it would not impact the
range of typical competition across such tiers.
    The Exchange also notes that the proposed tier will not adversely
impact any TPH's pricing or ability to qualify for other credit tiers.
Rather, should a TPH not meet the proposed criteria, the TPH will
merely not receive the proffered credit.
    The Exchange also notes that, while only certain orders would count
towards the qualifying thresholds, specifically, Customer, Professional
Customer, Broker-Dealer and JBO order, these market participants'
orders are primarily executed by an agent and VIP is an incentive
program for agency trading, whose order flow would bring greater volume
and liquidity, which benefits all market participants by providing more
trading opportunities and tighter spreads. The Exchange notes that
incentive programs based on aggregate volume of certain agency

trading market participants also exist on other options exchanges.\13\
---------------------------------------------------------------------------

    \13\ See NASDAQ Stock Market Rules, Options Rules, Options 7
Pricing Schedule, Sec. 2 Options Market--Fees and Rebates, Tiers 1-
6.
---------------------------------------------------------------------------

    Additionally, the Exchange believes that it is equitable and not
unfairly discriminatory to continue to only apply credits to Customer
orders (i.e., ``C'' origin code) because Customer order flow enhances
liquidity on the Exchange for the benefit of all market participants.
Specifically, Customer volume is important because it continues to
attract liquidity to the Exchange, which benefits all market
participants by providing more trading opportunities, which attracts
Market-Makers. An increase in Market-Maker activity, in turn,
facilitates tighter spreads, which may cause an additional
corresponding increase in order flow from other market participants.
Moreover, the options industry has a long history of providing
preferential pricing to Customers orders and the Exchange's current
Fees Schedule currently does so in many places, as do the fees
structures of multiple other exchanges.\14\
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    \14\ See id, specifically, Tier 6.
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B. Self-Regulatory Organization's Statement on Burden on Competition

    The Exchange does not believe that the proposed rule change will
not impose any burden on intramarket or intermarket competition that is
not necessary or appropriate in furtherance of the purposes of the Act.
Rather, as discussed above, the Exchange believes that the proposed
change would encourage the submission of additional liquidity to a
public exchange, thereby promoting market depth, price discovery and
transparency and enhancing order execution opportunities for all TPHs.
As a result, the Exchange believes that the proposed change furthers
the Commission's goal in adopting Regulation NMS of fostering
competition among orders, which promotes ``more efficient pricing of
individual stocks for all types of orders, large and small.'' \15\
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    \15\ See Securities Exchange Act Release No. 51808, 70 FR 37495,
37498-99 (June 29, 2005) (S7-10-04) (Final Rule).
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    The Exchange believes the proposed rule change does not impose any
burden on intramarket competition that is not necessary or appropriate
in furtherance of the purposes of the Act. Particularly, the proposed
change applies to all TPHs submitting qualified orders equally, in that
all TPHs submitting such orders are eligible for the proposed tiers,
have a reasonable opportunity to meet the tiers' criteria and will all
receive the existing credit if such criteria is met. As described
above, while only certain orders would count towards the qualifying
thresholds, specifically, Customers, Professionals, Broker-Dealers and
JBOs, these market participants' orders are primarily executed as
agency orders, whose order flow would bring greater volume and
liquidity, which benefits all market participants by providing more
trading opportunities and tighter spreads. Moreover, the Exchange does
not believe the current application of the credit to Customer orders
imposes any burden on intermarket competition because, as stated,
preferential pricing to Customers is a long-standing options industry
practice which serves to enhance Customer order flow, thereby
attracting Marker-Makers to facilitate tight spreads and trading
opportunities to the benefit of all market participants. Overall, the
proposed change is designed to encourage additional order flow to the
Exchange, which the Exchange believes benefits all market participants
on the Exchange by providing more liquidity, thus trading
opportunities, encouraging even more TPHs to send orders, thereby
contributing towards a robust and well-balanced market ecosystem to the
benefit of all market participants.
    Next, the Exchange believes the proposed rule change does not
impose any burden on intermarket competition that is not necessary or
appropriate in furtherance of the purposes of the Act. As previously
discussed, the Exchange operates in a highly competitive market.
Members have numerous alternative venues that they may participate on
and direct their order flow, including 15 other options exchanges.
Based on publicly available information, no single options exchange has
more than 20% of the market share.\16\ Therefore, no exchange possesses
significant pricing power in the execution of option order flow.
Indeed, participants can readily choose to send their orders to other
exchange, and, additionally off-exchange venues, if they deem fee
levels at those other venues to be more favorable. Moreover, the
Commission has repeatedly expressed its preference for competition over
regulatory intervention in determining prices, products, and services
in the securities markets. Specifically, in Regulation NMS, the
Commission highlighted the importance of market forces in determining
prices and SRO revenues and, also, recognized that current regulation
of the market system ``has been remarkably successful in promoting
market competition in its broader forms that are most important to
investors and listed companies.'' \17\ The fact that this market is
competitive has also long been recognized by the courts. In
NetCoalition v. Securities and Exchange Commission, the D.C. Circuit
stated as follows: ``[n]o one disputes that competition for order flow
is `fierce.' . . . As the SEC explained, `[i]n the U.S. national market
system, buyers and sellers of securities, and the broker-dealers that
act as their order-routing agents, have a wide range of choices of
where to route orders for execution'; [and] `no exchange can afford to
take its market share percentages for granted' because `no exchange
possesses a monopoly, regulatory or otherwise, in the execution of
order flow from broker dealers'. . . .''.\18\ Accordingly, the Exchange
does not believe its proposed fee change imposes any burden on
competition that is not necessary or appropriate in furtherance of the
purposes of the Act.
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    \16\ See supra note 4.
    \17\ See Securities Exchange Act Release No. 51808 (June 9,
2005), 70 FR 37496, 37499 (June 29, 2005).
    \18\ NetCoalition v. SEC, 615 F.3d 525, 539 (D.C. Cir. 2010)
(quoting Securities Exchange Act Release No. 59039 (December 2,
2008), 73 FR 74770, 74782-83 (December 9, 2008) (SR-NYSEArca-2006-
21)).
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C. Self-Regulatory Organization's Statement on Comments on the Proposed
Rule Change Received From Members, Participants, or Others

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

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

    The foregoing rule change has become effective pursuant to Section
19(b)(3)(A) of the Act \19\ and paragraph (f) of Rule 19b-4 \20\
thereunder. At any time within 60 days of the filing of the proposed
rule change, the Commission summarily may temporarily suspend such rule
change if it appears to the Commission that such action is necessary or
appropriate in the public interest, for the protection of investors, or
otherwise in furtherance of the purposes of the Act. If the Commission
takes such action, the Commission will institute proceedings to
determine whether the proposed rule change should be approved or
disapproved.
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    \19\ 15 U.S.C. 78s(b)(3)(A).
    \20\ 17 CFR 240.19b-4(f).
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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-CBOE-2019-047 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-2019-047. 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-2019-047 and should be submitted on
or before September 20, 2019.

    For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\21\
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    \21\ 17 CFR 200.30-3(a)(12).
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Jill M. Peterson,
Assistant Secretary.
[FR Doc. 2019-18752 Filed 8-29-19; 8:45 am]
 BILLING CODE 8011-01-P