[Federal Register Volume 85, Number 41 (Monday, March 2, 2020)]
[Notices]
[Pages 12362-12368]
[FR Doc No: 2020-04183]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-88281; File No. SR-CBOE-2020-013]

Self-Regulatory Organizations; Cboe Exchange, Inc.; Notice of
Filing and Immediate Effectiveness of a Proposed Rule Change To Amend
Rules 4.13 and 5.31 Concerning the Modified Opening Auction Process

February 25, 2020.
    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 February 11, 2020, Cboe Exchange, Inc. Inc. (the ``Exchange''
or ``Cboe Options'') filed with the Securities and Exchange Commission
(the ``Commission'') the proposed rule change as described in Items I
and II below, which Items have been prepared by the Exchange. The
Exchange filed the proposal as a ``non-controversial'' proposed rule
change pursuant to Section 19(b)(3)(A)(iii) of the Act \3\ and Rule
19b-4(f)(6) thereunder.\4\ The Commission is publishing this notice to
solicit comments on the proposed rule change from interested persons.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ 15 U.S.C. 78s(b)(3)(A)(iii).
    \4\ 17 CFR 240.19b-4(f)(6).
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I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change

    Cboe Exchange, Inc. (the ``Exchange'' or ``Cboe Options'') proposes
to amend Rules 4.13 and 5.31. The text of the proposed rule change is
provided below.
(additions are italicized; deletions are [bracketed])
* * * * *

Rules of Cboe Exchange, Inc.

* * * * *

Rule 4.13. Series of Index Options

    (a) General.
    (1)-(4) No change.
    (5) Method of Determining Day that Exercise Settlement Value will
be Calculated, Special Opening Quotation and Expiration Date and Last
Trading Day for Options on Volatility Indexes that Measure a 30-Day
Volatility Period (``Volatility Index options'').
    (A) No change.
    (B) Special Opening Quotation. The exercise settlement value of a
Volatility Index option for such purposes shall be calculated by the
Exchange as a Special Opening Quotation (SOQ) of the applicable
Volatility Index using the sequence of opening prices of the options
that comprise the Volatility Index[ ]. The opening price for any series
in which there is no trade shall be the average of that option's bid
price and ask price (which ask price equals $0.05 if the series opens
with unexecuted sell market orders) as determined at the opening of
trading.
* * * * *

Rule 5.31. Opening Auction Process

    (a) Definitions. For purposes of the opening auction process in
this Rule 5.31, the following terms have the meaning below. A term
defined elsewhere in the Rules has the same

meaning with respect to this Rule 5.31, unless otherwise defined below.
* * * * *

Opening Auction Updates

    The term ``opening auction updates'' means Exchange-disseminated
messages that contain information regarding the expected opening of a
series based on orders and quotes in the Queuing Book for the
applicable trading session and, if applicable, the GTH Book, including
the expected opening price, the then-current cumulative size on each
side at or more aggressive than the expected opening price, and whether
the series would open (and any reason it would not open pursuant to
paragraphs (e) and (j)([5]6) below).
* * * * *
    (b)-(i) No change.
    (j) Modified Opening Auction Process. All provisions set forth
above in this Rule 5.31 apply to the opening of SPX constituent option
series for Regular Trading Hours on exercise settlement value
determination days, except as otherwise provided in this paragraph (j)
(``modified opening auction process''). The Exchange uses the opening
trade prices of SPX series that comprise the settlement strip (or the
average of a series' opening bid and ask (which ask price equals $0.05
if the series opens with unexecuted sell market orders) if there is no
opening trade in that series) established by the modified opening
auction process to calculate the exercise or final settlement value, as
applicable, of expiring VIX derivatives.
    (1)-(4) No change.
    (5) SPX Option Series Opening Sequence. On exercise settlement
value determination days, following the opening trigger as set forth in
subparagraph (d)(1)(B), the System initiates the opening rotation
process for SPX option series in the following sequence:
    (i) at-the-money (``ATM'') (including series 5.00 above or below,
as applicable, the then-current index level) and out-of-the-money
(``OTM'') constituent series in order from closest to furthest away
from the ATM strike (if a put and call are the same distance away from
the ATM strike, the System opens them randomly);
    (ii) all other constituent series (i.e., in-the-money constituent
series) in order from closest to furthest away from the ATM strike (if
a put and call are the same distance away from the ATM strike, the
System opens them randomly); and
    (iii) all non-constituent series in a random order.
    (6) Opening Rotation. On exercise settlement value determination
days, the opening rotation process occurs as set forth in paragraph (e)
above, except the System performs the Maximum Composite Width Check and
determines the Opening Trade Price pursuant to this subparagraph
([5]6), in lieu of subparagraphs (e)(1) and (2), respectively.
    (A) No change.
    (B) Opening Trade Price Determination. After a series satisfies the
Maximum Composite Width Check in subparagraph (A), if there are orders
and quotes marketable against each other at a price not outside the
Opening Collar, the System determines the Opening Trade Price for the
series. If there are no such orders or quotes, there is no Opening
Trade Price.
    (i) No change.
    (ii) If (a) the VMIM price is not outside the Opening Collar, (b)
there would be no unexecuted buy market orders (or remaining portions),
and (c) there would be no unexecuted sell market orders (or remaining
portions) unless the low end of the Opening Collar equals $0.05,
[it]the VMIM price is the Opening Trade Price, and the System opens the
series pursuant to subparagraph (e)(3) above.
    (iii) If (a) the VMIM price is outside the Opening Collar, [or] (b)
there would be unexecuted buy market orders (or remaining portions), or
(c) there would be unexecuted sell market orders (or remaining
portions) and the low end of the Opening Collar is greater than $0.05,
the series does not open. The Queuing Period for the series continues
(including the dissemination of opening auction updates) until [the
VMIM price is not outside the Opening Collar]none of the conditions in
clauses (a) through (c) are present, or the Exchange opens the series
pursuant to paragraph (h).
    ([6]7) Opening Rotation Self-Trades. A User may submit multiple
orders and quotes in accordance with subparagraph (3) above. If, during
the opening rotation, the System executes an order or quote of that
User against another order or quote of that User, the Exchange does not
deem that fact alone to cause these executions to be considered
violations of Section 9(a)(1) of the Exchange Act, and instead will
evaluate other facts and circumstances. The Exchange reviews all
activity, including these executions, during the modified opening
auction process for compliance with [the Rules and] the Exchange Act
and the Rules, including Rule [10]8.6 (which prohibits manipulation).
* * * * *
    The text of the proposed rule change is also available on the
Exchange's website (http://www.cboe.com/AboutCBOE/CBOELegalRegulatoryHome.aspx), at the Exchange's Office of the
Secretary, and at the Commission's Public Reference Room.

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

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

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

1. Purpose
    The Exchange proposes to amend its Rules regarding the modified
opening auction process in no-bid series. Rule 5.31(j) describes the
opening auction process for S&P 500 options (``SPX'') that are
constituent option series \5\ on exercise settlement value
determination days.\6\ All provisions set forth in Rule 5.31 apply to
the opening of SPX constituent option series for Regular Trading Hours
on exercise settlement value determination days, except as otherwise
provided in Rule 5.31(j) (the ``modified opening auction process''),
which the Exchange uses in connection with calculating exercise or
final settlement values for VIX derivatives. The Exchange uses the
opening trade prices of SPX option series that comprise the settlement
strip \7\ (or the

average of a series' opening bid and ask if there is not opening trade
in that series) established by the modified opening auction process to
calculate the exercise or final settlement value, as applicable, of
expiring VIX derivatives.
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    \5\ The term ``constituent option series'' means all SPX
(including SPXW) option series listed on the Exchange with the
expirations the Exchange uses to calculate the exercise or final
settlement value of the expiring VIX derivative on exercise
settlement value determination days. The term ``VIX derivatives''
means VIX options listed for trading on the Exchange, VIX futures
listed for trading on an affiliated designated contract market, or
over-the-counter derivatives overlying VIX whose exercise or final
settlement values, as applicable, are calculated pursuant to, or by
reference to, as applicable, the modified opening auction process.
See Rule 5.31(j)(1).
    \6\ The term ``exercise settlement value determination day''
means a day on which the Exchange determines the exercise or final
settlement value, as applicable, of expiring VIX derivatives. See
Rule 5.31(j)(1).
    \7\ The term ``settlement strip'' means the constituent option
series used to calculate the exercise or final settlement value, as
applicable, of expiring VIX derivatives. See Rule 5.31(j)(1).
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    Current Rule 5.31(j)(5) (proposed Rule 5.31(j)(6)) describes the
opening rotation process for the modified opening auction process.
Specifically, on exercise settlement value determination days, the
opening rotation process occurs in the same manner it does on all other
days (as set forth in Rule 5.31(e)), except for the Maximum Composite
Width Check and Opening Trade Price,\8\ which the System performs
pursuant to current Rule 5.31(j)(5)(A) and (B), respectively.
Currently, after the opening trigger for SPX options, once a series
satisfies the Maximum Composite Width \9\ Check in current Rule
5.31(j)(5)(A), if there are orders and quotes marketable against each
other at a price not outside the Opening Collar,\10\ the System
determines the Opening Trade Price for the series. If there are no such
orders or quotes, there is no Opening Trade Price for the series.
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    \8\ See Rule 5.31(e)(1) and (2) for descriptions of the Maximum
Composite Width Check and Opening Trade Price determination on non-
exercise settlement value determination days.
    \9\ The term ``Maximum Composite Width'' means the amount that
the width of the Composite Market (which is the market for a series
comprised of (1) the higher of the then-current best appointed
Market-Maker bulk message bid on the Exchange and the away best bid
(``ABB'') (if there is an ABB) and (2) the lower of the then-current
best appointed Market-Maker bulk message offer on the Exchange and
the away best offer (``ABO'') (if there is an ABO)) of a series may
generally not be greater than for the series to open, subject to
certain exceptions. See Rule 5.31(a) and (j)(1).
    \10\ The term ``Opening Collar'' means the price range that
establishes limits at or inside of which the System determines the
Opening Trade Price (which is the price at which the System executes
opening trades in a series during the opening rotation) for a
series. See Rule 5.31(a) and (j)(1).
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    If there will be an opening trade, in order to determine the
Opening Trade Price, the System determines the volume-maximizing,
imbalance-minimizing (``VMIM'') price pursuant to Rule 5.31(e)(2)(A)
through (C) (in the same manner it determines the VMIM price on non-
exercise settlement value determination days). If the VMIM price is not
outside the Opening Collar, it is the Opening Trade Price, and the
System opens the series.\11\ If (a) the VMIM price is outside the
Opening Collar or (b) there would be unexecuted market orders (or
remaining portions), the series does not open.\12\
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    \11\ Rule 5.31(e)(3) describes how the System opens a series on
all days.
    \12\ In this case, the Queuing Period (the time period prior to
the initiation of an opening rotation during which the System
accepts orders and quotes in the electronic book for participation
in the opening rotation) for the series continues (including the
dissemination of opening auction updates) until the VMIM price is
not outside the Opening Collar, or the Exchange opens the series
pursuant to Rule 5.31(h) (which permits the Exchange to deviate from
the standard manner of the opening auction process when it believes
it is necessary in the interests of a fair and orderly market).
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    The proposed rule change first adopts a sequence in which the
System will open SPX option series on exercise settlement value
determination days. Currently, the System initiates the opening
rotation process in all classes each day in no particular order.\13\
Prior to the Exchange's System migration, which was effective on
October 7, 2019, the System opened series in a specific sequence. While
the System opened series in all classes in accordance with that
sequence on all trading days, the purpose of opening series in that
order was to enhance the modified opening auction process on exercise
settlement value determination days.\14\ In connection with the System
migration, the Exchange determined to not maintain this functionality
due to other enhancements implemented at the time of migration.\15\ The
Exchange believes those enhancements have had a positive impact on the
modified opening auction process on exercise settlement value
determination days. However, the Exchange has determined
reimplementation of the functionality to open constituent series on
exercise settlement value determination days in a specified sequence
(in a slightly different manner) may further enhance the modified
opening auction process.
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    \13\ See Securities Exchange Act Release No. 86387 (July 16,
2019), 84 FR 35147, 35152 (July 22, 2019) (SR-CBOE-2019-034) (notice
of filing of proposed rule change to amend the Exchange's opening
process).
    \14\ See Securities Exchange Act Release No. 83505 (June 25,
2018), 83 FR 30787, 30790 (June 29, 2018) (SR-CBOE-2018-046) (notice
of filing and immediate effectiveness of proposed rule change to
amend the hybrid opening process, which was the name of the former
opening auction process on the Exchange).
    \15\ See supra note 14.
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    Specifically, the proposed rule change adopts Rule 5.31(j)(5),\16\
which provides that on exercise settlement value determination days,
following the opening trigger as set forth in Rule 5.31(d)(1)(B),\17\
the System initiates the opening rotation process for SPX option series
in the following sequence:
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    \16\ The proposed rule change renumbers current subparagraphs
(j)(5) and (6) to be subparagraphs (j)(6) and (7), respectively.
There are no substantive changes to current subparagraph (j)(6)
(proposed subparagraph (j)(7)). Proposed changes to current
subparagraph (j)(5) (proposed subparagraph (j)(6)) are described
below.
    \17\ Rule 5.31(d)(1)(B) provides that for index options
(including SPX options, but excluding VIX options), the System
initiates the opening rotation after a time period (which the
Exchange determines for all classes) following the System's
observation after 9:30 a.m. Eastern time of the first disseminated
index value for the index underlying an index option. This applies
on exercise settlement value determination days.

    (i) at-the-money (``ATM'') (including series 5.00 above or
below, as applicable, the then-current index level) and out-of-the-
money (``OTM'') constituent series in order from closest to furthest
away from the ATM strike (if a put and call are the same distance
away from the ATM strike, the System opens them randomly);
    (ii) all other constituent series (i.e., in-the-money
constituent series) in order from closest to furthest away from the
ATM strike (if a put and call are the same distance away from the
ATM strike, the System opens them randomly); and
    (iii) all non-constituent series in a random order.

    For purposes of this proposed rule change, a series is ATM if its
strike price equals the last disseminated index value on the same
trading day. The proposed 5.00 buffer ensures that the ATM series at
the time the opening rotation process is initiated is included in the
first grouping of series to be opened. For example, assume for an
exercise settlement value determination day that the ATM strike value
for SPX series is 3300. The System will first initiate the opening
rotation for SPX constituent series with strike prices equal to 3300,
and then any series with strike prices of 3305 and 3295.\18\ The System
then initiates the opening rotation for OTM SPX constituent series
(which would consist of any SPX constituent put series with strike
prices below 3300 and SPX constituent call series with strike prices
above 3300) in order from series with strike prices closest to 3300 to
those with strike prices further away from 3300 until there are no more
OTM constituent series. For example, if there were constituent series
puts with strike prices of 3290, 3285, 3275, and 3270, and constituent
series calls with strike prices of 3310, 3315, 3320, and 3330, the
System would initiate the opening rotation process first for the 3290
put and 3310 call (in a random order), then the 3285 put and 3315 call
(in a random order), then the 3320 call, then the 3725 put, and finally
the 3270 put and 3330 call (in a random order). The System then
initiates the opening rotation for ITM SPX constituent series in order
from series with strike prices closest to 3300 to those with strike
prices further away from 3300 until there are no more constituent
series (in other words, in the same manner it initiated the opening
rotation for the OTM SPX constituent

series). After the System has initiated the opening rotation process
for all constituent series, the System initiates the opening rotation
process for all other SPX series (i.e., SPX non-constituent series) in
no particular order (as they are opened today).
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    \18\ If there is a put series and call series with strike prices
the same distance away from the ATM strike, the System opens them
randomly. In other words, sometimes the put will open first, and
other times the call will open first.
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    The order in which the System initiates the opening rotation
process for trading is generally immaterial; however, on exercise
settlement value determination days, certain ATM and OTM constituent
series comprise the settlement strip, and thus their the opening trade
prices are used to calculate the exercise or settlement value, as
applicable, of expiring VIX derivatives. The Exchange has observed
enhanced liquidity in the modified opening auction process since
enhancements were implemented in connection with the System migration.
At this time, the Exchange believes opening these series first may
further enhance liquidity in constituent series on exercise settlement
value determination days.
    Specifically, Market-Makers are the primary liquidity providers in
the Exchange's market, and, pursuant to Rule 5.31, Market-Maker quotes
on the Exchange comprise the Composite Market for a class exclusively
listed on the Exchange (such as SPX options). The Exchange provides
Users, including Market-Makers, with a tool, the Risk Monitor Mechanism
(``RMM''), they use to control risk of multiple, automatic executions.
An RMM event in a class will cause a Market-Makers' quotes in all
series in the class to be rejected or cancelled (certain events may
cause a User's quotes in all classes to be cancelled).\19\ As a result,
a Market-Maker's opening transactions in series not used to calculate
an exercise or settlement value, as applicable, may cause an RMM event,
cancelling the Market-Makers' orders or quotes in all other series in
the class, including series used to calculate an exercise settlement
value. This reduces liquidity in constituent series, and may contribute
to delayed openings of these series, which could ultimately delay
calculation of the exercise or settlement value, as applicable, of
expiring VIX derivatives. Additionally, the Exchange has observed
larger Market-Maker quote sizes in further OTM puts and calls compared
to sizes in less OTM puts and calls and ATM puts and calls, which have
higher weightings in the formula used to determine the exercise or
final settlement value, as applicable, of expiring VIX derivatives in
accordance with the VIX Index methodology.\20\ If the further OTM puts
and calls open prior to the less OTM puts and calls and ATM puts and
calls, similarly reduced liquidity in those ATM and less OTM puts and
calls from RMM events may occur. The Exchange believes the proposed
rule change may increase liquidity in constituent series, which is
desirable to ensure these series open at competitive prices on exercise
settlement value determination days. While liquidity is important to
open all series on the Exchange, given the potential impact on the
exercise settlement value determined for expiring VIX derivatives, the
Exchange believes it is appropriate to ensure a fair and orderly
opening of the series used to calculate the exercise settlement value.
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    \19\ See Rule 5.34(c)(5).
    \20\ See, e.g., the VIX methodology at http://www.cboe.com/vix/.
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    The proposed rule change clarifies in proposed Rule
5.31(j)(6)(B)(ii) and (iii) that having no unexecuted market orders (or
remaining portions) is a condition for a series to open, as implied by
current Rule 5.31(j)(5)(B)(iii), which states a series does not open if
there would be unexecuted market orders (or remaining portions). The
Exchange believes this proposed clarification enhances the description
of when a series is eligible to open pursuant to the modified opening
auction process by listing the complete list of opening criteria in all
relevant provisions within the rule.
    The proposed rule change also amends the modified opening auction
process to permit a series to open when there would be unexecuted sell
market orders \21\ (or remaining portions) if the low end of the
Opening Collar equals $0.05.\22\ A sell market order may only fully
execute during the opening rotation (at the Opening Trade Price) if
there is sufficient buy interest to satisfy the size of the market
order. Currently, if there is a sell market order but no buy interest,
or insufficient buy interest to satisfy the size of the sell market
order, the series would not open pursuant to current Rule
5.31(j)(5)(B)(iii).
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    \21\ A market order is an order to buy or sell a stated number
of option contracts at the best price available at the time of
execution. See Rule 5.6(b).
    \22\ The minimum increment applicable to SPX options is $0.05 if
the series trading price is lower than $3.00 and $0.10 if the series
trading price is $3.00 or higher. See Rule 5.4(a). A series will
continue to not be eligible to open if there would be unexecuted buy
market orders (or remaining portions) or unexecuted sell market
orders (or remaining portions) if the low end of the Opening Collar
equals anything other than $0.05.
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    The proposed rule change will permit series to open with unexecuted
sell market orders (or remaining portions) if the lower end of the
Opening Collar equals $0.05 (the minimum increment for the series). If
a series opens with any unexecuted sell market orders (or remaining
portions), the System will handle those orders as it would any other
orders that are unexecuted at the open.\23\ The current prohibition on
opening a series if there would be unexecuted sell market orders is
intended to protect those orders from executing at potentially
erroneous prices following the conclusion of the opening rotation in
series that may not be truly zero-bid options. The Exchange does not
believe a low-value series should not open because there is no (or
minimal) interest from investors purchase contracts in that series, as
that is consistent with the value (or lack of value) of the series. The
Exchange believes series for which the lower end of the Opening Collar
equals $0.05 are likely true no-bid series, or series with minimal
value. The following table demonstrates that when the Composite Market
is no-bid \24\ with an offer of 0.40 or less, the lower end of the
Opening Collar is $0.05 (which is the minimum increment in SPX series
trading less than $3.00).\25\ The lower end of the Opening Collar will
be greater than $0.05 in a series with a Composite Market offer greater
than 0.40.
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    \23\ Pursuant to Rule 5.31(f), following the conclusion of the
opening rotation, the System enters any unexecuted orders and quotes
(or remaining portions) from the Queuing Book into the Book in time
sequence (subject to a User's instructions), where they may be
processed in accordance with Rule 5.32. The System cancels any
unexecuted opening only orders (or remaining portions) following the
conclusion of the opening rotation.
    \24\ While it is possible for the lower end of the Opening
Collar to equal $0.05 in a series with a Composite Market bid of
0.05, if a series will open with unexecuted sell market orders, that
means it would open with no Market-Maker bid in the series.
Therefore, the proposed rule change focuses on no-bid Composite
Markets.
    \25\ See Rule 5.4(a).

----------------------------------------------------------------------------------------------------------------
                                                                                Opening collar
                      Composite market (CM)                         CM midpoint      OC width        (OC) \26\
----------------------------------------------------------------------------------------------------------------
0-.05...........................................................            .025             .25         .05-.15
0-.10...........................................................             .05             .25         .05-.20

0-.15...........................................................            .075             .25         .05-.20
0-.20...........................................................             .10             .25         .05-.25
0-.25...........................................................            .125             .25         .05-.25
0-.30...........................................................             .15             .25         .05-.30
0-.35...........................................................            .175             .25         .05-.30
0-.40...........................................................             .20             .25         .05-.35
0-.45...........................................................            .225             .25         .10-.35
----------------------------------------------------------------------------------------------------------------

    The Exchange believes it will contribute to a fair and orderly
opening and settlement process to open lower-value constituent series
on exercise settlement value determination days even if there would be
unexecuted sell market order interest. In order for the Exchange to
calculate the exercise or settlement value for expiring VIX
derivatives, in its role as index calculator for the VIX Index, all
constituent series that comprise the settlement strip must be open
(with or without an opening trade) on exercise settlement value
determination days. As set forth in Rules 4.13(a)(5)(B) and 5.31(j),
the Exchange uses the opening trade prices of SPX constituent series
that comprise the settlement strip (or the average of a series' opening
bid and ask if there is no opening trade in that series) established by
the modified opening auction process to calculate the exercise or final
settlement value, as applicable, of expiring VIX derivatives. This will
permit these constituent series (which may be truly no-bid series) that
may be part of the settlement strip to open sooner, and thus permit
calculation of the exercise or settlement value, as applicable, for VIX
derivatives sooner. This may also provide unexecuted sell market orders
in low-value series with additional execution opportunities, which may
be limited in such series. The Exchange believes the benefit of opening
these series earlier to permit calculation of the exercise or
settlement value of expiring VIX derivatives outweighs the minimal risk
(if any) of executing sell market orders at anomalous execution prices
following the opening rotation given the low-value of these series.
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    \26\ Because the Opening Collar establishes the limits for the
opening trade price, the minimum amount for the lower end of the
range collar is 0.05 in a nickel class, as that is the lowest
eligible opening trade price.
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    If an option series has a larger offer, it is less likely to be
worthless but may just not have any bids for a brief time.\27\ The
Exchange believes options in series with a Composite Market bid of zero
but a larger Composite Market offer \28\ are less likely to be
worthless, and therefore believes it is appropriate to not open such a
series if there would be unexecuted sell market orders to prevent a
potentially anomalous execution price, since the next bid entered in
that series is likely to be much higher than $0.05. It would be unfair
to an investor to let its sell market order trade at a price of $0.05
because, for example, the firm submitted its order during the Queuing
Period on a day when there was insufficient buy interest to satisfy all
sell market orders, even though the bids present during that Queuing
Period were significantly higher than $0.05.
---------------------------------------------------------------------------

    \27\ For similar reasons, the System currently converts a sell
market order to a limit order with a price equal to the minimum
trading increment for the series if it is no-bid and the national
best offer is less than or equal to $0.50, but will cancel the order
if the national best offer is greater than $0.50. See Rule
5.34(a)(1)(A).
    \28\ The Composite Market threshold of $0.40 is similar to the
threshold the Exchange currently has in place to protect sell market
orders in no-bid series after the opening of trading. See id.
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    As noted above, the Exchange uses the average of a series' opening
bid and ask if there is no opening trade in that series when
calculating the exercise or final settlement value, as applicable, of
expiring VIX derivatives on exercise settlement value determination
days. If a series opens with unexecuted sell market orders, that could
only occur if there was an opening bid of zero.\29\ In connection with
the proposed rule change that creates the possibility that a series may
open with no opening bid and unexecuted sell market orders, the
proposed rule change amends Rules 4.13(a)(5)(B) and 5.31(j) to provide
that, in series in which there is no opening trade, the ask price will
equal $0.05 (the minimum increment of the series) if the series opens
with unexecuted sell market orders. The Exchange believes it is
reasonable to use such an ask price, as it is consistent with currently
functionality that converts a sell market order to a limit order with a
price equal to the minimum trading increment for the series if it is
no-bid and the national best offer is less than or equal to $0.50.\30\
---------------------------------------------------------------------------

    \29\ As set forth in Rule 5.31(e)(3)(A), market orders have
first priority to trade at the Opening Trade Price. Therefore, if
there are unexecuted sell market orders (or remaining portions) at
the open, there was either no buy interest or any buy interest
executed against part of the sell market orders but there was an
insufficient amount to satisfy the size of the sell market order
interest.
    \30\ See Rule 5.34(a)(1)(A).
---------------------------------------------------------------------------

    The proposed rule change also amends proposed Rule 5.31(j)(7)
(current Rule 5.31(j)(6)) to make a clarifying change and correct a
cross-reference. Currently, that subparagraph regarding self-trades
that may occur during an opening rotation states that the Exchange
reviews all activity, including these types of executions, during the
modified opening auction process for compliance with the Rules and the
Exchange Act, including Rule 10.6 (which prohibits manipulation).
First, the proposed rule change rephrases this sentence so that it
references the Exchange Act and the Rules, including Rule 10.6, to make
clear that the rule cross-reference refers to an Exchange Rule rather
than a Rule under the Exchange Act. Second, the proposed rule change
corrects to the rule cross-reference to say Rule 8.6, rather than Rule
10.6. Rule 8.6 describes the Exchange's prohibition on manipulative
activity.
2. Statutory Basis
    The Exchange believes the proposed rule change is consistent with
the Securities Exchange Act of 1934 (the ``Act'') and the rules and
regulations thereunder applicable to the Exchange and, in particular,
the requirements of Section 6(b) of the Act.\31\ Specifically, the
Exchange believes the proposed rule change is consistent with the
Section 6(b)(5) \32\ requirements that the rules of an exchange be
designed to prevent fraudulent and manipulative acts and practices, to
promote just and equitable principles of trade, to foster cooperation
and coordination with persons engaged in regulating, clearing,
settling, processing information with respect to, and facilitating
transactions in securities, to remove impediments to and perfect the
mechanism of a free and open market and a national market system, and,
in general, to protect investors and the public interest.

Additionally, the Exchange believes the proposed rule change is
consistent with the Section 6(b)(5) \33\ requirement that the rules of
an exchange not be designed to permit unfair discrimination between
customers, issuers, brokers, or dealers.
---------------------------------------------------------------------------

    \31\ 15 U.S.C. 78f(b).
    \32\ 15 U.S.C. 78f(b)(5).
    \33\ Id.
---------------------------------------------------------------------------

    In particular, the Exchange believes the proposed rule change will
remove impediments to and perfect the mechanism of a free and open
market and a national market system, and, in general, protect investors
and the public interest, as it may permit an earlier opening of
constituent series on exercise settlement value determination days. As
a result, the Exchange may be able to calculate the exercise or
settlement value, as applicable, of expiring VIX derivatives, at an
earlier time.
    The proposed rule change regarding the sequence in which
constituent series will open merely modifies the order in which the
System opens select series in one class for trading on the Exchange on
certain days. The System will continue to open all non-constituent
series on all trading days, and all constituent series on non-exercise
settlement value determination days, in no particular order. With
respect to constituent series, the proposed rule change will permit the
System to initiate the opening rotation process for series with higher
weightings in the formula used to determine the exercise or final
settlement value prior to the series with lower weightings (or not SPX
option series that are not part of the exercise settlement value
calculation). While the order in which the System opens series is
generally immaterial (and thus why the Exchange has opened them in no
particular order, and will continue to do so for all non-constituent
series on all trading days, and for constituent series on all trading
days other than exercise settlement value determination days), the
Exchange believes opening ATM and OTM constituent series prior to all
other series on expiration settlement value determination days will
permit series used to calculate exercise or final settlement values, as
applicable, for expiring VIX Index derivatives to open at an earlier
time. As discussed above, the Exchange also believes this proposed rule
change may enhance liquidity in these series on exercise settlement
value determination days, which benefits investors that hold expiring
VIX derivatives.
    The proposed rule change regarding the opening of constituent
series when there are unexecuted sell market orders in certain
circumstances will further remove impediments to and perfect the
mechanism of a free and open market and a national market system, and,
in general, protect investors and the public interest. This proposed
rule change will permit these constituent series (which may be truly
no-bid series) that may be part of the settlement strip to open sooner,
and thus permit calculation of the settlement value for VIX derivatives
sooner. This may also provide unexecuted sell market orders in low-
value series with additional execution opportunities, which may be
limited in such series, and may be individuals seeking to close out a
worthless position. The Exchange believes the benefit of opening these
series earlier to permit calculation of the exercise or settlement
value of expiring VIX derivatives outweighs the minimal risk (if any)
of executing sell market orders at anomalous execution prices following
the opening rotation given the low-value of these series. By continuing
to not open series with higher offers if there would be unexecuted sell
market orders, the Exchange believes the modified opening auction
process will continue to protect these orders from executing at
potentially erroneous prices following the opening rotation in series
that are not truly low-value/no-bid.
    The Exchange believes the proposed threshold of series for which
the lower end of the Opening Collar is $0.05 (and thus has a Composite
Market offer of no more than $0.40) appropriately reflects the
interests of investors, as options in series with offers higher than
$0.40 are less likely to be worthless, and not permitting a series to
open in these conditions may prevent execution of these orders at
unfavorable prices. The Exchange also believes the threshold promotes
fair and orderly markets, because sell market orders in low-bid/no-bid
series with offers of $0.40 or less are likely to be individuals
seeking to close out worthless positions. The proposed rule change
provides these orders with additional execution opportunities by making
these series eligible to open earlier. The Exchange notes the proposed
rule change is consistent with other current functionality that
converts sell market orders in no-bid series to limit orders with a
price equal to the minimum increment in the series if the offer is
$0.50 or less.\34\ Additionally, other options exchanges will open
series if there are unexecuted sell market orders.\35\
---------------------------------------------------------------------------

    \34\ See Rule 5.34(a)(1)(A).
    \35\ See, e.g., NYSE Arca, Inc. (``Arca'') Rule 6.64-O.
---------------------------------------------------------------------------

    The Exchange believes the proposed rule change to clarify opening
conditions on exercise settlement value determination days enhances the
description of when a series is eligible to open pursuant to the
modified opening auction process, which promotes transparency in the
Exchange's Rules and ultimately benefits investors. As noted above,
this is not a change in the modified opening auction process, but
merely a clarification.

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

    The Exchange does not believe that the proposed rule change will
impose any burden on competition that is not necessary or appropriate
in furtherance of the purposes of the Act. The Exchange does not
believe the proposed rule change will impose any burden on intramarket
competition, because it will apply in the same manner to all
constituent series on exercise settlement value determination days. The
proposed rule change regarding the opening sequence of constituent
series only modified the order in which the System will open these
series for trading, and only those days. The proposed rule change has
no impact on the sequence in which the System will open non-constituent
series on all trading days, or constituent series on all trading days
other than exercise settlement value determination days. The proposed
rule change regarding opening constituent series with unexecuted sell
market orders will only impact low-value constituent series in a narrow
set of circumstances. The proposed rule change has no impact on
constituent series in which there would be unexecuted sell market
orders and the lower end of the Opening Collar is greater than $0.05,
which series will continue to not be eligible to open until that
condition is resolved.
    The Exchange does not believe the proposed rule change will impose
any burden on intermarket competition, as it solely impacts the timing
of the opening of certain series in one class listed for trading on the
Exchange on certain days. The proposed rule change will permit
constituent series with higher weightings in the calculation of the
exercise or settlement value, as applicable, of expiring VIX
derivatives, as well as low-value/no-bid constituent series that may be
part of the settlement strip, to open sooner, and thus permit an
earlier calculation of the exercise or settlement value, as applicable,
for VIX derivatives. As discussed above, the Exchange believes the
proposed rule change regarding the opening sequence of constituent
series may enhance liquidity in these series on exercise settlement
value determination days.

Additionally, the proposed rule change regarding opening constituent
series with unexecuted sell market orders may also provide unexecuted
sell market orders in low-value series with additional execution
opportunities, which may be limited in such series. The Exchange
believes the benefit of opening these series earlier to permit
calculation of the exercise or settlement value, as applicable, of
expiring VIX derivatives outweighs the minimal risk (if any) of
executing sell market orders at anomalous execution prices following
the opening rotation given the low-value of these series. By continuing
to not open series with higher Composite Market offers if there would
be unexecuted sell market orders, the Exchange believes the modified
opening auction process will continue to protect these orders from
executing at potentially erroneous prices following the opening
rotation in series that are not truly low-value/no-bid. As noted above,
the proposed rule change is consistent with current Exchange
functionality regarding the handling of sell market orders in no-bid
series.\36\ Additionally, other options exchanges will open series if
there are unexecuted sell market orders.\37\
---------------------------------------------------------------------------

    \36\ See Rule 5.34(a)(1)(A).
    \37\ See, e.g., Arca Rule 6.64-O.
---------------------------------------------------------------------------

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

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

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

    Because the proposed rule change does not: (i) Significantly affect
the protection of investors or the public interest; (ii) impose any
significant burden on competition; and (iii) become operative for 30
days from the date on which it was filed, or such shorter time as the
Commission may designate, it has become effective pursuant to Section
19(b)(3)(A) of the Act \38\ and subparagraph (f)(6) of Rule 19b-4
thereunder.\39\
---------------------------------------------------------------------------

    \38\ 15 U.S.C. 78s(b)(3)(A).
    \39\ 17 CFR 240.19b-4(f)(6). In addition, Rule19b-4(f)(6)(iii)
requires a self-regulatory organization to give the Commission
written notice of its intent to file the proposed rule change, along
with a brief description and text of the proposed rule change, at
least five business days prior to the date of filing of the proposed
rule change, or such shorter time as designated by the Commission.
The Exchange has satisfied this requirement.
---------------------------------------------------------------------------

    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.

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-2020-013 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-2020-013. 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-2020-013 and should be submitted on
or before March 23, 2020.
---------------------------------------------------------------------------

    \40\ 17 CFR 200.30-3(a)(12).

    For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\40\
J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2020-04183 Filed 2-28-20; 8:45 am]
 BILLING CODE 8011-01-P


[Federal Register Volume 81, Number 132 (Monday, July 11, 2016)]
[Proposed Rules]
[Pages 44812-44815]
[FR Doc No: 2016-16210]

=======================================================================
-----------------------------------------------------------------------

DEPARTMENT OF TRANSPORTATION

Federal Aviation Administration

14 CFR Part 39

[Docket No. FAA-2015-3985; Directorate Identifier 2014-NM-182-AD]
RIN 2120-AA64

Airworthiness Directives; Airbus Airplanes

AGENCY: Federal Aviation Administration (FAA), DOT.

ACTION: Supplemental notice of proposed rulemaking (NPRM); reopening of
comment period.

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

SUMMARY: We are revising an earlier proposed airworthiness directive
(AD) to supersede Airworthiness Directive (AD) 2010-04-03, for all
Airbus Model A310 series airplanes. AD 2010-04-03 currently requires
accomplishing repetitive detailed inspections for cracking around the
fastener holes in certain wing top skin panels between the front and
rear spars on the left- and right-hand sides of the fuselage, and
repair if necessary. The NPRM proposed to continue to require the
repetitive detailed inspections, and would also require supplemental
repetitive ultrasonic inspections for cracking around the fastener
holes in wing top skin panels 1 and 2 at rib 2, and repair if
necessary. This action revises the NPRM by expanding the inspection
area to include rib 3 due to widespread fatigue damage. We are
proposing this supplemental NPRM (SNPRM) to detect and correct fatigue
cracking around the fastener holes, which could result in reduced
structural integrity of the airplane. Since these actions impose an
additional burden over those proposed in the NPRM, we are reopening the
comment period to allow the public the chance to comment on these
proposed changes.

DATES: We must receive comments on this SNPRM by August 25, 2016.

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 http://www.regulations.gov. Follow the instructions for submitting comments.
     Fax:<PHONE_NUMBER>.
     Mail: U.S. Department of Transportation, Docket
Operations, M-30, West Building Ground Floor, Room W12-140, 1200 New
Jersey Avenue SE., Washington, DC 20590.
     Hand Delivery: U.S. Department of Transportation, Docket
Operations, M-30, West Building Ground Floor, Room W12-140, 1200 New
Jersey Avenue SE., Washington, DC, between 9 a.m. and 5 p.m., Monday
through Friday, except Federal holidays.
    For service information identified in this SNPRM, contact Airbus
SAS, Airworthiness Office--EAW, 1 Rond Point Maurice Bellonte, 31707
Blagnac Cedex, France; telephone +33 5 61 93 36 96; fax +33 5 61 93 44
51; email<EMAIL_ADDRESS>Internet http://www.airbus.com. You may view this referenced service information at the
FAA, Transport Airplane Directorate, 1601 Lind Avenue SW., Renton, WA.
For information on the availability of this material at the FAA, call
425-227-1221.

Examining the AD Docket

    You may examine the AD docket on the Internet at http://www.regulations.gov by searching for and locating Docket No. FAA-2015-
3985; or in person at the Docket Management Facility between 9 a.m. and
5 p.m., Monday through Friday, except Federal holidays. The AD docket
contains this proposed AD, the regulatory evaluation, any comments
received, and other information. The street address for the Docket
Office (telephone:<PHONE_NUMBER>) is in the ADDRESSES section. Comments
will be available in the AD docket shortly after receipt.

FOR FURTHER INFORMATION CONTACT: Dan Rodina, Aerospace Engineer,
International Branch, ANM-116, Transport Airplane Directorate, FAA,
1601 Lind Avenue SW., Renton, WA 98057-3356; telephone<PHONE_NUMBER>;
fax<PHONE_NUMBER>.

SUPPLEMENTARY INFORMATION:

Comments Invited

    We invite you to send any written relevant data, views, or
arguments about this proposed AD. Send your comments to an address
listed under the ADDRESSES section. Include ``Docket No. FAA-2015-3985;
Directorate Identifier 2014-NM-182-AD'' at the beginning of your
comments. We specifically invite comments on the overall regulatory,
economic, environmental, and energy aspects of this proposed AD. We
will consider all comments received by the closing date and may amend
this proposed AD based on those comments.
    We will post all comments we receive, without change, to http://www.regulations.gov, including any personal information you provide. We
will also post a report summarizing each substantive verbal contact we
receive about this proposed AD.

Discussion

    We issued a notice of proposed rulemaking (NPRM) to amend 14 CFR
part 39 to supersede AD 2010-04-03, Amendment 39-16196 (75 FR 6852,
February 12, 2010) (``AD 2010-04-03''). AD 2010-04-03 applied to all
Airbus Model A310 series airplanes. The NPRM published in the Federal
Register on October 13, 2015 (80 FR 61327) (``the NPRM''). The NPRM was
prompted by development of an ultrasonic inspection program to allow
for earlier crack detection and extend the repetitive inspection
intervals. The NPRM proposed to retain the requirements of AD 2010-04-
03, and proposed to require supplemental repetitive ultrasonic
inspections for cracking around the fastener holes in wing top skin
panels 1 and 2 at rib 2, and repair if necessary.
    Since we issued the NPRM, a widespread fatigue damage analysis
determined that the inspection area should be expanded to include
cracking around the fastener holes in wing top skin panels 1 and 2
between the front and rear spar at rib 3.
    The European Aviation Safety Agency (EASA), which is the Technical
Agent for the Member States of the European Union, has issued EASA
Airworthiness Directive 2016-0005, dated January 7, 2016 (referred to
after this as the Mandatory Continuing Airworthiness Information, or
``the MCAI''), to correct an unsafe condition on all Airbus Model A310
series airplanes. The MCAI states:

    Following scheduled maintenance, cracks were found around the
wing top skin panels fastener holes at Rib 2, between Stringer (STG)
2 and STG14.
    This condition, if not detected and corrected, could affect the
structural integrity of the aeroplane. The General Visual Inspection
required by the existing applicable Airworthiness Limitation Items
(ALI) tasks may not be adequate to detect these cracks.
    To address this issue, Airbus developed an inspection programme
based on repetitive detailed inspections (DET) to ensure that any
visible cracks in the wing top skin panels 1 and 2 along Rib 2 are
detected in time and repaired appropriately. EASA issued [EASA] AD
2008-0211 [http://ad.easa.europa.eu/ad/2008-0211, which corresponds
to FAA AD 2010-04-03] to require implementation of this inspection
programme.
    After that [EASA] AD was issued, Airbus improved the inspection
programme with an ultrasonic inspection to allow earlier crack
detection, to subsequently reduce the scope of potential repair
action, and to extend the intervals of the repetitive inspections.
    Consequently, EASA issued and AD 2014-0200 (later revised),
superseding [EASA] AD 2008-0211, retaining its requirements, and to
require supplementary repetitive ultrasonic inspections [for
cracking] of the wing top skin panel 1 and 2 between STG2 and STG10
at Rib 2 [and repair if needed].
    Since EASA AD 2014-0020R1 was issued, a widespread fatigue
damage analysis concluded that the inspection programme has to be
extended to include the wing top skin panels at Rib 3 attachments.
For the reasons described above, this [EASA] AD retains the
requirements of EASA AD 2014-0200R1, which is superseded, and
extends the inspection area to include Rib 3.

    You may examine the MCAI in the AD docket on the Internet at http://www.regulations.gov by searching for and locating Docket No. FAA-2015-
3985.

Related Service Information Under 1 CFR Part 51

    Airbus has issued Service Bulletin A310-57-2096, Revision 03, dated
June 30, 2015. This service information describes procedures for
detailed and ultrasonic inspections for cracking around the fastener
holes of wing top skin panels 1 and 2, at ribs 2 and 3, on the left-
and right-hand sides of the fuselage. This service information is
reasonably available because the interested parties have access to it
through their normal course of business or by the means identified in
the ADDRESSES section.

Comments

    We gave the public the opportunity to participate in developing
this proposed AD. We considered the comment received. The commenter,
FedEx, supported the content of the NPRM and is currently complying
with the requirements.

FAA's Determination and Requirements of This SNPRM

    This product has been approved by the aviation authority of another
country, and is approved for operation in the United States. Pursuant
to our bilateral agreement with the State of Design Authority, we have
been notified of the unsafe condition described in the MCAI and service
information referenced above. We are proposing this AD because we
evaluated all pertinent information and determined an unsafe condition
exists and is likely to exist or develop on other products of the same
type design.
    Certain changes described above expand the scope of the NPRM. As a
result, we have determined that it is necessary to reopen the comment
period to provide additional opportunity for the public to comment on
this SNPRM.

Costs of Compliance

    We estimate that this SNPRM affects 28 airplanes of U.S. registry.
    We also estimate that it would take about 8 work-hours per product
to comply with the basic requirements of this proposed AD. The average
labor rate is $85 per work-hour. Based on these figures, we estimate
the cost of this proposed AD on U.S. operators to be $19,040, or $680
per product.
    We estimate that it would take about 15 work-hours per product to
do any necessary on-condition actions that would be required based on
the results of the inspections. Required parts would cost about $10,000
per product. We have no way of determining the number of aircraft that
might need these actions.

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.
    We are 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

    We determined that this proposed AD would not have federalism
implications under Executive Order 13132. This proposed AD would not
have a substantial direct effect on the States, on the relationship
between the national Government and the States, or on the distribution
of power and responsibilities among the various levels of government.
    For the reasons discussed above, I certify this proposed
regulation:
    1. Is not a ``significant regulatory action'' under Executive Order
12866;
    2. Is not a ``significant rule'' under the DOT Regulatory Policies
and Procedures (44 FR 11034, February 26, 1979);
    3. Will not affect intrastate aviation in Alaska; and
    4. Will not have a significant economic impact, positive or
negative, on a substantial number of small entities under the criteria
of the Regulatory Flexibility Act.

List of Subjects in 14 CFR Part 39

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

The Proposed Amendment

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

PART 39--AIRWORTHINESS DIRECTIVES

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

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

Sec.  39.13  [Amended]

0
2. The FAA amends Sec.  39.13 by removing Airworthiness Directive (AD)
2010-04-03, Amendment 39-16196 (75 FR 6852, February 12, 2010), and
adding the following new AD:

Airbus: Docket No. FAA-2015-3985; Directorate Identifier 2014-NM-
182-AD.

(a) Comments Due Date

    We must receive comments by August 25, 2016.

(b) Affected ADs

    This AD replaces AD 2010-04-03, Amendment 39-16196 (75 FR 6852,
February 12, 2010) (``AD 2010-04-03'').

(c) Applicability

    This AD applies to all Airbus Model A310-203, -204, -221, -222,
-304, -322, -324, and -325 airplanes, certificated in any category,
all manufacturer serial numbers.

(d) Subject

    Air Transport Association (ATA) of America Code 57, Wings.

(e) Reason

    This AD was prompted by the development of an ultrasonic
inspection program to allow for earlier crack detection and extend
the repetitive inspection intervals. We are issuing this AD to
detect and correct fatigue cracking around the fastener holes in
certain wing top skin panels between the front and rear spars on the
left- and right-hand sides of the fuselage, which could result in
reduced structural integrity of the airplane.

(f) Compliance

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

(g) Repetitive Inspections

    Except as required by paragraph (i) of this AD: Within the
initial compliance time and thereafter at the repetitive intervals
specified in paragraphs (h)(1) through (h)(3) of this AD, as
applicable, accomplish the actions specified in paragraphs (g)(1)
and (g)(2) of this AD concurrently and in sequence, in accordance
with the Accomplishment Instructions of Airbus Service Bulletin
A310-57-2096, Revision 03, dated June 30, 2015, except as provided
by paragraph (j) of this AD.
    (1) Accomplish a detailed inspection for cracking around the
fastener holes in the wing top skin panels 1 and 2, along ribs 2 and
3, between the front and rear spars on the left- and right-hand
sides of the fuselage.
    (2) Accomplish an ultrasonic inspection for cracking around the
fastener holes in the wing top skin panels 1 and 2, along ribs 2 and
3, between stringer (STG) 2 and STG10 on the left- and right-hand
sides of the fuselage.

(h) Compliance Times for Airplanes Not Previously Inspected

    (1) For Model A310-203, -204, -221, and -222 airplanes: Do the
actions required by paragraphs (g)(1) and (g)(2) of this AD at the
later of the times specified in paragraphs (h)(1)(i) and (h)(1)(ii)
of this AD. Repeat the inspections specified in paragraphs (g)(1)
and (g)(2) of this AD thereafter at intervals not to exceed 2,000
flight cycles or 4,100 flight hours, whichever occurs first.
    (i) Prior to the accumulation of 18,700 flight cycles or 37,400
flight hours since first flight of the airplane, whichever occurs
first.
    (ii) Within 30 days after the effective date of this AD.
    (2) For Model A310-304, -322, -324, and -325 airplanes having an
average flight time (AFT) of less than 4 hours: Do the actions
required by paragraphs (g)(1) and (g)(2) of this AD at the later of
the times specified in paragraphs (h)(2)(i) and (h)(2)(ii) of this
AD. Repeat the inspections specified in paragraphs (g)(1) and (g)(2)
of this AD thereafter at intervals not to exceed 2,000 flight cycles
or 5,600 flight hours, whichever occurs first.
    (i) Prior to the accumulation of 17,300 flight cycles or 48,400
flight hours since first flight of the airplane, whichever occurs
first.
    (ii) Within 30 days after the effective date of this AD.
    (3) For Model A310-304, -322, -324, and -325 airplanes having an
AFT of equal to or more than 4 hours: Do the actions required by
paragraphs (g)(1) and (g)(2) of this AD at the later of the times
specified in paragraphs (h)(3)(i) and (h)(3)(ii) of this AD. Repeat
the inspections specified in paragraphs (g)(1) and (g)(2) of this AD
thereafter at intervals not to exceed 1,500 flight cycles or 7,500
flight hours, whichever occurs first.
    (i) Prior to the accumulation of 12,800 flight cycles or 64,300
flight hours since first flight of the airplane, whichever occurs
first.
    (ii) Within 30 days after the effective date of this AD.

(i) Compliance Times for Airplanes Previously Inspected

    For airplanes previously inspected before the effective date of
this AD using Airbus Service Bulletin A310-57-2096, dated May 6,
2008; Airbus Service Bulletin A310-57-2096, Revision 01, dated
August 5, 2010; or Airbus Service Bulletin A310-57-2096, Revision
02, dated March 5, 2014: At the applicable compliance times
specified in paragraphs (i)(1), (i)(2), and(i)(3) of this AD,
accomplish the actions specified in paragraphs (g)(1) and (g)(2)
concurrently and in sequence, in accordance with the Accomplishment
Instructions of Airbus Service Bulletin A310-57-2096, Revision 03,
dated June 30, 2015. Repeat the inspections specified in paragraphs
(g)(1) and (g)(2) of this AD thereafter at the repetitive intervals
specified in paragraphs (h)(1), (h)(2), and (h)(3) of this AD, as
applicable.
    (1) For Model A310-203, -204, -221, and -222 airplanes: Do the
actions required by paragraphs (g)(1) and (g)(2) of this AD within
3,500 flight hours or 1,700 flight cycles, whichever occurs first
since the most recent inspection.
    (2) For Model A310-304, -322, -324, and -325 airplanes having an
AFT of less than 4 hours: Do the actions required by paragraphs
(g)(1) and (g)(2) of this AD within 4,600 flight hours or 1,600
flight cycles, whichever occurs first since the most recent
inspection.
    (3) For Model A310-304, -322, -324, and -325 airplanes having an
AFT of equal to or more than 4 hours: Do the actions required by
paragraphs (g)(1) and (g)(2) of this AD within 6,100 flight hours or
1,200 flight cycles, whichever occurs first since the most recent
inspection.

(j) Compliance Times if No Ultrasonic Equipment Is Available

    If no ultrasonic equipment is available for the initial or
second inspection required by paragraph (g) or (h) of this AD,
accomplish the detailed inspection specified in paragraph (g)(1) of
this AD within the applicable compliance times specified in
paragraphs (j)(1) and (j)(2) of this AD. After accomplishing the
detailed inspection, do the inspections specified in paragraphs
(g)(1) and (g)(2) of this AD at the applicable compliance times
specified by paragraphs (i)(1), (i)(2), and (i)(3) of this AD.
Subsequently, repeat the inspections specified in paragraphs (g)(1)
and (g)(2) of this AD thereafter at the applicable repetitive
intervals specified in paragraphs (h)(1), (h)(2), and (h)(3) of this
AD.
    (1) For airplanes not previously inspected before the effective
date of this AD using the

service information identified in paragraph (j)(2)(i), (j)(2)(ii),
or (j)(2)(iii) of this AD: Do the actions required by paragraph
(g)(1) of this AD within the initial compliance time specified by
paragraphs (h)(1), (h)(2), and (h)(3) of this AD, as applicable.
    (2) For airplanes previously inspected before the effective date
of this AD using the service information identified in paragraph
(j)(2)(i), (j)(2)(ii), or (j)(2)(iii) of this AD: Do the actions
required by paragraph (g)(1) of this AD within the applicable
compliance times specified in paragraphs (i)(1), (i)(2), and (i)(3)
of this AD.
    (i) Airbus Service Bulletin A310-57-2096, dated May 6, 2008.
    (ii) Airbus Service Bulletin A310-57-2096, Revision 01, dated
August 5, 2010.
    (iii) Airbus Service Bulletin A310-57-2096, Revision 02, dated
March 5, 2014.

(k) Repair of Cracking

    If any cracking is found during any inspection required by
paragraph (g), (h), (i), or (j) of this AD, before further flight,
repair the cracking using a method approved by the Manager,
International Branch, ANM-116, Transport Airplane Directorate, FAA;
or the European Aviation Safety Agency (EASA); or Airbus's EASA
Design Organization Approval (DOA). Accomplishing the repair
specified in this paragraph terminates the repetitive inspections
required by paragraph (h), (i), or (j) of this AD, as applicable,
for the repaired area only.

(l) Definition of Average Flight Time (AFT)

    For the purposes of this AD, the AFT should be established as
specified in paragraphs (l)(1), (l)(2), and (l)(3) of this AD for
the determination of the compliance times.
    (1) The inspection threshold is defined as the total flight
hours accumulated (counted from take-off to touch-down), divided by
the total number of flight cycles accumulated at the effective date
of this AD.
    (2) The initial inspection interval is defined as the total
flight hours accumulated divided by the total number of flight
cycles accumulated at the time of the initial inspection threshold.
    (3) The second inspection interval is defined as the total
flight hours accumulated divided by the total number of flight
cycles accumulated between the initial and second inspection
threshold.

(m) Credit for Previous Actions

    This paragraph provides credit for the actions required by
paragraph (g)(1) of this AD, if those actions were performed before
the effective date of this AD using the applicable service
information identified in paragraph (m)(1), (m)(2), or (m)(3) of
this AD.
    (1) Airbus Service Bulletin A310-57-2096, dated May 6, 2008,
which was incorporated by reference in AD 2010-04-03.
    (2) Airbus Service Bulletin A310-57-2096, Revision 01, dated
August 5, 2010, which is not incorporated by reference in this AD.
    (3) Airbus Service Bulletin A310-57-2096, Revision 02, dated
March 5, 2014, which is not incorporated by reference in this AD.

(n) Other FAA AD Provisions

    The following provisions also apply to this AD:
    (1) Alternative Methods of Compliance (AMOCs): The Manager,
International Branch, ANM-116, Transport Airplane Directorate, FAA,
has the authority to approve AMOCs for this AD, if requested using
the procedures found in 14 CFR 39.19. In accordance with 14 CFR
39.19, send your request to your principal inspector or local Flight
Standards District Office, as appropriate. If sending information
directly to the International Branch, send it to ATTN: Dan Rodina,
Aerospace Engineer, International Branch, ANM-116, Transport
Airplane Directorate, FAA, 1601 Lind Avenue SW., Renton, WA 98057-
3356; telephone<PHONE_NUMBER>; fax<PHONE_NUMBER>. Information may be
emailed to<EMAIL_ADDRESS>Before using any
approved AMOC, notify your appropriate principal inspector, or
lacking a principal inspector, the manager of the local flight
standards district office/certificate holding district office. The
AMOC approval letter must specifically reference this AD.
    (2) Contacting the Manufacturer: As of the effective date of
this AD, for any requirement in this AD to obtain corrective actions
from a manufacturer, the action must be accomplished using a method
approved by the Manager, International Branch, ANM-116, Transport
Airplane Directorate, FAA; or the EASA; or Airbus's EASA DOA. If
approved by the DOA, the approval must include the DOA-authorized
signature.
    (3) Required for Compliance (RC): Except as required by
paragraph (k) of this AD, if any service information contains
procedures or tests that are identified as RC, those procedures and
tests must be done to comply with this AD; any procedures or tests
that are not identified as RC are recommended. Those procedures and
tests that are not identified as RC may be deviated from using
accepted methods in accordance with the operator's maintenance or
inspection program without obtaining approval of an AMOC, provided
the procedures and tests identified as RC can be done and the
airplane can be put back in an airworthy condition. Any
substitutions or changes to procedures or tests identified as RC
require approval of an AMOC.

(o) Related Information

    (1) Refer to Mandatory Continuing Airworthiness Information
(MCAI) EASA Airworthiness Directive 2016-0005, dated January 7,
2016, for related information. This MCAI may be found in the AD
docket on the Internet at http://www.regulations.gov by searching
for and locating Docket No. FAA-2015-3985.
    (2) For service information identified in this AD, contact
Airbus SAS, Airworthiness Office--EAW, 1 Rond Point Maurice
Bellonte, 31707 Blagnac Cedex, France; telephone +33 5 61 93 36 96;
fax +33 5 61 93 44 51; email<EMAIL_ADDRESS>
Internet http://www.airbus.com. You may view this service
information at the FAA, Transport Airplane Directorate, 1601 Lind
Avenue SW., Renton, WA. For information on the availability of this
material at the FAA, call<PHONE_NUMBER>.

    Issued in Renton, Washington, on July 1, 2016.
Phillip Forde,
Acting Manager, Transport Airplane Directorate, Aircraft Certification
Service.
[FR Doc. 2016-16210 Filed 7-8-16; 8:45 am]
 BILLING CODE 4910-13-P


[Federal Register Volume 79, Number 166 (Wednesday, August 27, 2014)]
[Notices]
[Page 51204]
[FR Doc No: 2014-20469]

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SECURITIES AND EXCHANGE COMMISSION

Sunshine Act Meeting

    Notice is hereby given, pursuant to the provisions of the
Government in the Sunshine Act, Public Law 94-409, that the Securities
and Exchange Commission will hold an Open Meeting on Wednesday, August
27, 2014 at 10:00 a.m., in the Auditorium, Room L-002.
    The subject matters of the Open Meeting will be:
     The Commission will consider whether to adopt rules
revising the disclosure, reporting and offering process for asset-
backed securities. The revisions would require asset-backed issuers to
provide enhanced disclosures, including information for certain asset
classes about each asset in the underlying pool in a standardized,
tagged format, and revise the shelf offering process and eligibility
criteria for asset-backed securities.
     The Commission will consider whether to adopt rule
amendments and new rules to implement provisions of the Dodd-Frank Wall
Street Reform and Consumer Protection Act concerning nationally
recognized statistical rating organizations, providers of third-party
due diligence services for asset-backed securities, and issuers and
underwriters of asset-backed securities under the Securities Exchange
Act of 1934.
    The duty officer has determined that no earlier notice was
practicable.
    At times, changes in Commission priorities require alterations in
the scheduling of meeting items.
    For further information and to ascertain what, if any, matters have
been added, deleted, or postponed, please contact: The Office of the
Secretary at<PHONE_NUMBER>.

    Dated: August 22, 2014.
Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2014-20469 Filed 8-25-14; 11:15 am]
BILLING CODE 8011-01-P