[Federal Register Volume 85, Number 215 (Thursday, November 5, 2020)]
[Proposed Rules]
[Pages 70523-70526]
[FR Doc No: 2020-24535]

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DEPARTMENT OF TRANSPORTATION

Federal Aviation Administration

14 CFR Part 39

[Docket No. FAA-2020-0982; Project Identifier MCAI-2020-01037-T]
RIN 2120-AA64

Airworthiness Directives; Airbus SAS Airplanes

AGENCY: Federal Aviation Administration (FAA), DOT.

ACTION: Notice of proposed rulemaking (NPRM).

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SUMMARY: The FAA proposes to adopt a new airworthiness directive (AD)
for all Airbus SAS Model A318, A319, A320, and A321 series airplanes.
This proposed AD was prompted by a report that the oil used to protect
the nose landing gear (NLG) main fittings for transportation and
storage was not removed before final heat treatment of the affected
parts, possibly generating sub-surface cavities during heat treatment
of the affected parts. This proposed AD would require replacing each
affected NLG main fitting with a serviceable part, as specified in a
European Union Aviation Safety Agency (EASA) AD, which will be
incorporated by reference. The FAA is proposing this AD to address the
unsafe condition on these products.

DATES: The FAA must receive comments on this proposed AD by December
21, 2020.

ADDRESSES: You may send comments, using the procedures found in 14 CFR
11.43 and 11.45, by any of the following methods:
     Federal eRulemaking Portal: Go to https://www.regulations.gov. Follow the instructions for submitting comments.
     Fax:<PHONE_NUMBER>.
     Mail: U.S. Department of Transportation, Docket
Operations, M-30, West Building Ground Floor, Room W12-140, 1200 New
Jersey Avenue SE, Washington, DC 20590.
     Hand Delivery: Deliver to Mail address above between 9
a.m. and 5 p.m., Monday through Friday, except Federal holidays.
    For material incorporated by reference (IBR) in this AD, contact
the EASA, Konrad-Adenauer-Ufer 3, 50668 Cologne, Germany; telephone +49
221 8999 000; email<EMAIL_ADDRESS>internet www.easa.europa.eu.
You may find this IBR material on the EASA website at https://ad.easa.europa.eu. You may view this IBR material at the FAA,
Airworthiness Products Section, Operational Safety Branch, 2200 South
216th St., Des Moines, WA. For information on the availability of this
material at the FAA, call<PHONE_NUMBER>. It is also available in the AD
docket on the internet at https://www.regulations.gov by searching for
and locating Docket No. FAA-2020-0982.

Examining the AD Docket

    You may examine the AD docket on the internet at https://www.regulations.gov by searching for and locating Docket No. FAA-2020-
0982; or in person at Docket Operations between 9 a.m. and 5 p.m.,
Monday through Friday, except Federal holidays. The AD docket contains
this NPRM, any comments received, and other information. The street
address for Docket Operations is listed above. Comments will be
available in the AD docket shortly after receipt.

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

Comments Invited

    The FAA invites you to send any written relevant data, views, or
arguments about this proposal. Send your comments to an address listed
under ADDRESSES. Include ``Docket No. FAA-2020-0982; Product Identifier
MCAI-2020-01037-T'' at the beginning of your comments. The most helpful
comments reference a specific portion of the proposal, explain the
reason for any recommended change, and include supporting data. The FAA
will consider all comments received by the closing date and may amend
the proposal because of those comments.
    Except for Confidential Business Information (CBI) as described in
the

following paragraph, and other information as described in 14 CFR
11.35, the FAA will post all comments received, without change, to
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 proposed AD.

Confidential Business Information

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

Discussion

    The EASA, which is the Technical Agent for the Member States of the
European Union, has issued EASA AD 2020-0165, dated July 23, 2020
(``EASA AD 2020-0165'') (also referred to as the Mandatory Continuing
Airworthiness Information, or ``the MCAI''), to correct an unsafe
condition for all Airbus SAS Model A318, A319, and A321 series
airplanes and Model A320-211, -212, -214, -215, -216, -231, -232, -233,
-251N, -252N, -253N, -271N, -272N, and -273N airplanes. Model A320-215
airplanes are not certificated by the FAA and are not included on the
U.S. type certificate data sheet; this AD therefore does not include
those airplanes in the applicability.
    This proposed AD was prompted by a report that the oil used to
protect the NLG main fittings for transportation and storage was not
removed before final heat treatment of the affected parts, possibly
generating sub-surface cavities during heat treatment of the affected
parts. The FAA is proposing this AD to address possible sub-surface
cavities in the NLG main fittings, which could cause detrimental impact
on fatigue performance and affect the structural integrity of the NLG.
See the MCAI for additional background information.

Related Service Information Under 1 CFR Part 51

    EASA AD 2020-0165 describes procedures for replacing each NLG main
fitting having a certain part number and serial number with a
serviceable part. This material is reasonably available because the
interested parties have access to it through their normal course of
business or by the means identified in the ADDRESSES section.

FAA's Determination and Requirements of This Proposed AD

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

Proposed AD Requirements

    This proposed AD would require accomplishing the actions specified
in EASA AD 2020-0165 described previously, as incorporated by
reference, except for any differences identified as exceptions in the
regulatory text of this AD.

Explanation of Required Compliance Information

    In the FAA's ongoing efforts to improve the efficiency of the AD
process, the FAA initially worked with Airbus and EASA to develop a
process to use certain EASA ADs as the primary source of information
for compliance with requirements for corresponding FAA ADs. The FAA has
since coordinated with other manufacturers and civil aviation
authorities (CAAs) to use this process. As a result, EASA AD 2020-0165
will be incorporated by reference in the FAA final rule. This proposed
AD would, therefore, require compliance with EASA AD 2020-0165 in its
entirety, through that incorporation, except for any differences
identified as exceptions in the regulatory text of this proposed AD.
Using common terms that are the same as the heading of a particular
section in the EASA AD does not mean that operators need comply only
with that section. For example, where the AD requirement refers to
``all required actions and compliance times,'' compliance with this AD
requirement is not limited to the section titled ``Required Action(s)
and Compliance Time(s)'' in the EASA AD. Service information specified
in EASA AD 2020-0165 that is required for compliance with EASA AD 2020-
0165 will be available on the internet at https://www.regulations.gov
by searching for and locating Docket No. FAA-2020-0982 after the FAA
final rule is published.

Costs of Compliance

    The FAA estimates that this proposed AD affects 15 airplanes of
U.S. registry. The FAA estimates the following costs to comply with
this proposed AD:

                                      Estimated Costs for Required Actions
----------------------------------------------------------------------------------------------------------------
                                                                                Cost per       Cost on U.S.
                          Labor cost                              Parts cost        product         operators
----------------------------------------------------------------------------------------------------------------
8 work-hours x $85 per hour = $680...........................             $ *             $680          $10,200
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* The FAA has received no definitive data on which to base the parts cost estimates for the replacements
  specified in this proposed AD.

    According to the manufacturer, some or all of the costs of this
proposed AD may be covered under warranty, thereby reducing the cost
impact on affected individuals. The FAA does not control warranty
coverage for affected individuals. As a result, the FAA has included
all known costs in the cost estimate.

Authority for This Rulemaking

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

Regulatory Findings

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

List of Subjects in 14 CFR Part 39

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

The Proposed Amendment

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

PART 39--AIRWORTHINESS DIRECTIVES

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

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

Sec.  39.13  [Amended]

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

Airbus SAS: Docket No. FAA-2020-0982; Project Identifier MCAI-2020-
01037-T.

(a) Comments Due Date

    The FAA must receive comments by December 21, 2020.

(b) Affected ADs

    None.

(c) Applicability

    This AD applies to all Airbus SAS airplanes, certificated in any
category, as identified in paragraphs (c)(1) through (4) of this AD.
    (1) Model A318-111, -112, -121, and -122 airplanes.
    (2) Model A319-111, -112, -113, -114, -115, -131, -132, -133, -
151N, -153N, and -171N airplanes.
    (3) Model A320-211, -212, -214, -216, -231, -232, -233, -251-
252N, -253N, -271N, -272N, and -273N airplanes.
    (4) Model A321-111, -112, -131, -211, -212, -213, -231, -232, -
251N, -252N, -253N, -271N, -272N, -251NX, -252NX, -253NX, -271NX,
and -272NX airplanes.

(d) Subject

    Air Transport Association (ATA) of America Code 32, Landing
gear.

(e) Reason

    This AD was prompted by a report that the oil used to protect
the nose landing gear (NLG) main fittings for transportation and
storage was not removed before final heat treatment of the affected
parts, possibly generating sub-surface cavities during heat
treatment of the affected parts. The FAA is issuing this AD to
address possible sub-surface cavities in the NLG main fittings,
which could cause detrimental impact on fatigue performance and
affect the structural integrity of the NLG.

(f) Compliance

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

(g) Requirements

    Except as specified in paragraph (h) of this AD: Comply with all
required actions and compliance times specified in, and in
accordance with, European Union Aviation Safety Agency (EASA) AD
2020-0165, dated July 23, 2020 (``EASA AD 2020-0165'').

(h) Exceptions to EASA AD 2020-0165

    (1) Where EASA AD 2020-0165 refers to its effective date, this
AD requires using the effective date of this AD.
    (2) The ``Remarks'' section of EASA AD 2020-0165 does not apply
to this AD.

(i) No Reporting Requirement

    Although the service information referenced in EASA AD 2020-0165
specifies to submit certain information to the manufacturer, this AD
does not include that requirement.

(j) Other FAA AD Provisions

    The following provisions also apply to this AD:
    (1) Alternative Methods of Compliance (AMOCs): The Manager,
Large Aircraft Section, International Validation Branch, FAA, has
the authority to approve AMOCs for this AD, if requested using the
procedures found in 14 CFR 39.19. In accordance with 14 CFR 39.19,
send your request to your principal inspector or responsible Flight
Standards Office, as appropriate. If sending information directly to
the Large Aircraft Section, International Validation Branch, send it
to the attention of the person identified in paragraph (k)(2) of
this AD. Information may be emailed to<EMAIL_ADDRESS>
Before using any approved AMOC, notify your appropriate principal
inspector, or lacking a principal inspector, the manager of the
responsible Flight Standards Office.
    (2) Contacting the Manufacturer: For any requirement in this AD
to obtain instructions from a manufacturer, the instructions must be
accomplished using a method approved by the Manager, Large Aircraft
Section, International Validation Branch, FAA; or EASA; or Airbus
SAS's EASA Design Organization Approval (DOA). If approved by the
DOA, the approval must include the DOA-authorized signature.
    (3) Required for Compliance (RC): For any service information
referenced in EASA AD 2020-0165 that contains RC procedures and
tests: Except as required by paragraph (j)(2) of this AD, RC
procedures and tests must be done to comply with this AD; any
procedures or tests that are not identified as RC are recommended.
Those procedures and tests that are not identified as RC may be
deviated from using accepted methods in accordance with the
operator's maintenance or inspection program without obtaining
approval of an AMOC, provided the procedures and tests identified as
RC can be done and the airplane can be put back in an airworthy
condition. Any substitutions or changes to procedures or tests
identified as RC require approval of an AMOC.

(k) Related Information

    (1) For information about EASA AD 2020-0165, contact the EASA,
Konrad-Adenauer-Ufer 3, 50668 Cologne, Germany; telephone +49 221
8999 000; email<EMAIL_ADDRESS>internet www.easa.europa.eu. You
may find this EASA AD on the EASA website at https://ad.easa.europa.eu. You may view this material at the FAA,
Airworthiness Products Section, Operational Safety Branch, 2200
South 216th St., Des Moines, WA. For information on the availability
of this material at the FAA, call<PHONE_NUMBER>. This material may be
found in the AD docket on the internet at https://www.regulations.gov by searching for and locating Docket No. FAA-
2020-0982.
    (2) For more information about this AD, contact Sanjay Ralhan,
Aerospace Engineer, Large Aircraft Section, International Validation
Branch, FAA, 2200 South 216th St., Des Moines, WA 98198; telephone
and fax<PHONE_NUMBER>; email<EMAIL_ADDRESS>

    Issued on October 29, 2020.
Lance T. Gant,
Director, Compliance & Airworthiness Division, Aircraft Certification
Service.
[FR Doc. 2020-24535 Filed 11-4-20; 8:45 am]
BILLING CODE 4910-13-P


[Federal Register Volume 88, Number 169 (Friday, September 1, 2023)]
[Notices]
[Pages 60516-60521]
[FR Doc No: 2023-18896]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-98231; File No. SR-CboeBZX-2023-062]

Self-Regulatory Organizations; Cboe BZX Exchange, Inc.; Notice of
Filing of a Proposed Rule Change To Amend the Initial Period After
Commencement of Trading of a Series of ETF Shares on the Exchange as It
Relates to the Holders of Record and/or Beneficial Holders, as Provided
in Exchange Rule 14.11(l)

August 28, 2023.
    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 14, 2023, Cboe BZX Exchange, Inc. (the ``Exchange'' or
``BZX'') 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 BZX Exchange, Inc. (the ``Exchange'' or ``Cboe'') is filing
with the Securities and Exchange Commission (``Commission'') a proposed
rule change to Exchange Rule 14.11(l), Exchange-Traded Fund Shares
(``ETF Shares''), to amend the initial period after commencement of
trading of a series of ETF Shares on the Exchange as it specifically
relates to holders of record and/or beneficial holders. 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://markets.cboe.com/us/equities/regulation/rule_filings/bzx/), 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 change to Rule 14.11(l)(4)(B)(i)(c) (the
``Beneficial Holders Rule'') in order to amend the continued listing
standard applicable to ETF Shares \3\ listed on the Exchange.
Specifically, the Exchange is proposing to amend the Beneficial Holders
Rule such that it would provide additional time for a series of ETF
Shares to meet the Beneficial Holders \4\ standards.5 6
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    \3\ The term ``ETF Shares'' means shares of stock issued by an
Exchange-Traded Fund. See Exchange Rule 14.11(l)(3)(A). The term
``Exchange-Traded Fund'' has the same meaning as the term
``exchange-traded fund'' as defined in Rule 6c-11 under the
Investment Act of 1940. See Exchange Rule 14.11(l)(3)(B).
    \4\ As it relates to this filing, ``Beneficial Holders'' shall
mean beneficial holders and, where applicable in a particular
continued listing standard, record holders.
    \5\ The Exchange notes that its Rules related to the listing and
trading of other product types (that is, products that are not ETF
Shares as defined above) have similar requirements related to
Beneficial Holders which the Exchange is not proposing to change at
this time. Specifically, the Exchange is only proposing to amend the
Beneficial Holders Rules as it pertains to ETF Shares because such
product type represents the vast majority of products listed on the
Exchange. The Exchange may consider proposing to amend the
Beneficial Holders standards for other product types in a future
proposal.
    \6\ The Exchange notes that a different proposal to modify the
Beneficial Holders Rules was disapproved by the Commission on
December 29, 2020. See Securities Exchange Act No. 90819 (December
29, 2020) 86 FR 332 (January 5, 2021) (SR-CboeBZX-2020-036) (the
``Prior Disapproval'').
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    Currently, the Exchange's continued listing standard for ETF Shares
under the Beneficial Holders Rule requires that, following the initial
12-month period after commencement of trading on the Exchange, the
Exchange shall consider the suspension of trading in and will commence
delisting proceedings under Rule 14.12 for a series of ETF Shares for
which there are fewer than 50 Beneficial Holders for 30 or more
consecutive trading days. The Exchange is proposing to change the date
at which a series of ETF Shares would need to have at least 50
Beneficial Holders or be subject to delisting proceedings under Rule
14.12 from 12 months after commencement of trading on the Exchange to
36 months after commencement of trading on the Exchange.
    As further described below, the Exchange believes it is appropriate
to increase the period of time for a series of ETF Shares to comply
with the Beneficial Holders Rule from 12 months to 36 months because:
(i) it would bring the rule more in line with the life cycle of an ETP;
(ii) the economic and competitive structures in place in the ETP
ecosystem naturally incentivize issuers to de-list products rather than
continuing to list products that do not garner investor interest; and
(iii) extending the period from 12 to 36 months will not meaningfully
impact the manipulation concerns that the Beneficial Holders Rule is
intended to address.
    First, the Exchange-Traded Product (``ETP'') \7\ space generally is
more competitive than it has ever been--with more than 2,000 ETPs
listed on U.S. national securities exchanges competing for investor
assets, the natural cycle for an average ETP to gain traction in the
market is growing longer and longer. As more and more ETPs have come to
market, many distribution platforms have become more restrictive about
the ETPs that they allow on their systems, often requiring a minimum
existing track record (e.g., at least 12 months) and meeting certain
thresholds for assets under management (e.g., at least $100 million)
for an ETP to be added. Similarly, many larger entities are unwilling
to invest in ETPs that do not have at least one calendar year track
record. All of these factors have contributed to the natural slowing of
the average ETP's growth cycle and, unsurprisingly, the Exchange has
seen a significant number of deficiencies based on a failure to meet
the Beneficial Holders standards over the last several years.
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    \7\ The Exchange notes that ETF Shares is a type of ETP.
---------------------------------------------------------------------------

    The Exchange has issued deficiency notifications to 39 ETPs for
non-compliance with the Beneficial Holders standards since 2015. Of
those 39 ETPs, 30 attained compliance with the Beneficial Holder
standards after the deficiency notice was issued. This means that more
than three quarters of these ETPs had to go through the process of
requesting and justifying an extension,\8\ dealing with shareholder
uncertainty, waste of internal resources, potentially engage outside
counsel, etc. all to end up remaining listed on the Exchange. This
false positive rate is unnecessarily high and makes clear that a 12-
month threshold is an inappropriately short time frame for the
Beneficial Holder standards. It only served as regulatory and
administrative burdens for impacted issuers, which makes it more
difficult for smaller issuers to compete because they have limited
resources to overcome legal, marketing, or other obstacles that arise
from the Beneficial Holders standards.
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    \8\ Exchange Rule 14.12(f)(2) provides that the Listings
Qualifications Department may accept and review a plan to regain
compliance when a Company is deficient with respect to certain
listing standards, including a failure to meet a continued listing
requirement contained in Rule 14.11. Generally, Exchange staff may
grant up to 180 calendar days from the date of the staff's initial
deficiency notification.
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    Changing the timeline for meeting the Beneficial Holders Rule from
12 months to 36 months would provide ETF Shares with a more reasonable
runway to establish a track record and grow assets under management,
both of which generally precede the accumulation of Beneficial Holders.
Further, the Exchange believes that extending that runway will
encourage smaller issuers to make the necessary capital expenditures to
launch additional ETF

Shares, as well as help both large and small issuers by allowing them
to continue to list and promote products that they believe can succeed
and that they are willing to continue paying for, all of which will
help to foster competition and innovation in the ETP marketplace.
    Second, the economic and competitive structures in place in the ETP
ecosystem naturally incentivize issuers to de-list products rather than
continuing to list products that do not garner investor interest,
meaning that the rule does not provide any meaningful ``pruning''
function for the industry.\9\ Rather, the Exchange has found that, as
currently constructed, the 12 month Beneficial Holders standards have
instead resulted in the forced termination of ETPs that issuers
believed were still economically viable. While some observers might
argue that forced delisting of an ETP based on a failure to meet the
Beneficial Holders standards is a good way to reduce the number of ETPs
in the marketplace that have not drawn meaningful market interest, the
Exchange disagrees with this sentiment. First, there are significant
costs associated with both the initial launch and continued operation
of an ETP and the Exchange has found that the ecosystem tends to prune
itself of ETPs without meaningful investor interest. In fact, the
Exchange has had 148 products that have voluntarily delisted since
2018,\10\ creating meaningful turnover in products which issuers
believe are not economically viable. Second, the Exchange contests the
underlying assumption that the number of Beneficial Holders is even a
meaningful measure of market interest in an ETP. While a very high
Beneficial Holder count would most certainly indicate an ETP's success,
the absence of Beneficial Holders is not necessarily a good measure of
market interest or the amount of assets held by the ETP.
---------------------------------------------------------------------------

    \9\ Approximately 43 ETPs have voluntarily delisted within their
first year listed on the Exchange since 2015. The Exchange notes
that a subset of this group might also include those who didn't want
to spend the extra funds to get an extension to the requirement.
    \10\ There are currently 613 ETPs listed on the Exchange and 777
have been listed on the Exchange for at least some period since
2018, meaning that there's been a nearly 19% voluntary turnover of
ETPs listed on the Exchange since 2018.
---------------------------------------------------------------------------

    Further to this point, the Beneficial Holders standards are not
rules that an ETP issuer is incentivized to cut close or exceed by the
smallest amount possible. Unlike many other quantitative or disclosure
based listing requirements, an ETP issuer is incentivized to have as
many Beneficial Holders as possible and would almost certainly prefer
that they were able to meet and exceed the applicable Beneficial
Holders standard as soon as possible after beginning trading on the
Exchange. As such, extending the time period from 12 months to 36
months will not provide issuers of ETF Shares with a longer window to
intentionally keep the number of Beneficial Holders lower, but, rather,
will only extend the period during which a series of ETF Shares could
have fewer than 50 Beneficial Holders in specific instances where an
issuer is unable to meet the 50 Beneficial Holders threshold but still
believes that the series of ETF Shares is viable and worth the cost of
continued operation. Again, it takes money and resources to launch and
operate an ETP and where an issuer does not believe that an ETP is
economically viable, both common sense and prior experience point to
issuers delisting these products.
    Finally, the Exchange believes that making this change does not
create any significant change in the risk of manipulation for ETF
Shares listed on the Exchange for several reasons. First, a time
extension to meet the requirement would present no new issues because
the Exchange already has no Beneficial Holder requirement for the first
12 months of trading ETF Shares on the Exchange. Any risk that is
present during months 12 through 36 of initial listing would also be
present during the first 12 months as provided under current rules. The
Exchange believes that the Beneficial Holders standards are generally
intended to ensure that products that do not have broad ownership and
could be susceptible to manipulation by a few parties are not able to
list on the Exchange after they've had sufficient time to diversify
their ownership base. Leaving aside the issue of whether an open-ended
ETP with creation and redemption processes would really be subject to
manipulation by virtue of narrow ownership, the Exchange believes that,
for all of the reasons explained above, 36 months is a more appropriate
amount of time to consider sufficient time to diversify a series of ETF
Shares ownership base.
    Further to this point, the Exchange has in place a robust
surveillance program for ETPs that allows it to monitor trading of
ETPs, including ETF Shares, during all trading sessions on the Exchange
and it believes are sufficient to deter and detect violations of
Exchange rules and the applicable federal securities laws. These
surveillances generally focus on detecting securities trading outside
of their normal patterns, which could be indicative of manipulative or
other violative activity. When such situations are detected,
surveillance analysis follows and investigations are opened, where
appropriate, to review the behavior of all relevant parties for all
relevant trading violations. Further, the Exchange or the Financial
Industry Regulatory Authority (``FINRA''),\11\ on behalf of the
Exchange, or both, communicate as needed regarding trading in ETPs with
other markets and other entities that are members of the Intermarket
Surveillance Group (``ISG''). The Exchange believes these robust
surveillance procedures have successfully mitigated manipulation
concerns during an ETPs first 12 months of listing on the Exchange,
during which there is currently no Beneficial Holder requirement, and
further believes that these surveillance procedures will act to
mitigate any manipulation concerns that arise from extending the
compliance period for the Beneficial Holders Rules from 12 months to 36
months.
---------------------------------------------------------------------------

    \11\ FINRA conducts cross-market surveillances on behalf of the
Exchange pursuant to a regulatory services agreement. The Exchange
is responsible for FINRA's performance under this regulatory
services agreement.
---------------------------------------------------------------------------

    The Exchange also believes that the other continued listing
standards in the Exchange's rules or representations that constitute
continued listing standards in Exchange rule filings (the disclosure
obligations applicable under Rule 6c-11 of the Investment Company Act
of 1940 for series of ETF Shares) are generally sufficient to mitigate
manipulation concerns associated with ETF Shares. During the first 12
months of trading on the Exchange when the Beneficial Holders standards
do not apply, these disclosure obligations, in conjunction with the
Exchange's surveillance program (as discussed above), are generally
deemed sufficient to prevent any manipulation concerns in Exchange-
listed ETPs. As such, the Exchange believes that extending the period
from 12 months to 36 months does not significantly increase any risk of
manipulation that wasn't already generally deemed acceptable for the
first 12 months that an ETP was listed. Again, the Exchange is not
proposing to eliminate the Beneficial Holders Rule, but merely to
extend the period for a series of ETF Shares to meet the 50 Beneficial
Holder requirement.
2. Statutory Basis
    The Exchange believes that the proposal is consistent with section
6(b) of the Act \12\ in general and section 6(b)(5) of the Act \13\ in
particular in that it is designed to promote just and

equitable principles of trade, 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.
---------------------------------------------------------------------------

    \12\ 15 U.S.C. 78f.
    \13\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------

    The proposed rule changes are designed to promote just and
equitable principles of trade, to remove impediments to and perfect the
mechanism of a free and open market and, in general, to protect
investors and the public interest because it would prevent the
premature delisting of ETF Shares that have not had sufficient time to
build up to 50 Beneficial Holders without significantly impacting the
manipulation concerns that the Beneficial Holders Rule is intended to
address.
    The Exchange believes it is appropriate to increase the period of
time for a series of ETF Shares to comply with the applicable
Beneficial Holders Rule from 12 months to 36 months because: (i) it
would bring the rule more in line with the life cycle of an ETP; (ii)
the economic and competitive structures in place in the ETP ecosystem
naturally incentivize issuers to de-list products rather than
continuing to list products that do not garner investor interest; and
(iii) extending the period from 12 to 36 months will not meaningfully
impact the manipulation concerns that the Beneficial Holders Rule is
intended to address.
    First, the ETP space is more competitive than it has ever been--
with more than 2,000 ETPs listed on U.S. national securities exchanges
competing for investor assets, the natural cycle for an average ETP to
gain traction in the market is growing longer and longer. As more and
more ETPs have come to market, many distribution platforms have become
more restrictive about the ETPs that they allow on their systems, often
requiring a minimum existing track record (e.g., at least 12 months)
and meeting certain thresholds for assets under management (e.g., at
least $100 million) for an ETP to be added. Similarly, many larger
entities are unwilling to invest in ETPs that do not have at least one
calendar year track record. All of these factors have contributed to
the natural slowing of the average ETP's growth cycle and,
unsurprisingly, the Exchange has seen a significant number of
deficiencies based on a failure to meet the applicable Beneficial
Holders standards over the last several years.
    The Exchange has issued deficiency notifications to 39 ETPs for
non-compliance with the Beneficial Holders standards since 2015. Of
those 39 ETPs, 30 attained compliance with the Beneficial Holder
standards after the deficiency notice was issued. This means that more
than three quarters of these ETPs had to go through the process of
requesting and justifying an extension,\14\ dealing with shareholder
uncertainty, waste of internal resources, potentially engage outside
counsel, etc. all to end up remaining listed on the Exchange. This
false positive rate is unnecessarily high and makes clear that a 12-
month threshold is an inappropriately short time frame for the
Beneficial Holder standards. It only served as regulatory and
administrative burdens for impacted issuers, which makes it more
difficult for smaller issuers to compete because they have limited
resources to overcome legal, marketing, or other obstacles that arise
from the Beneficial Holders requirement.
---------------------------------------------------------------------------

    \14\ Exchange Rule 14.12(f)(2) provides that the Listings
Qualifications Department may accept and review a plan to regain
compliance when a Company is deficient with respect to certain
listing standards, including a failure to meet a continued listing
requirement contained in Rule 14.11. Generally, Exchange staff may
grant up to 180 calendar days from the date of the staff's initial
deficiency notification.
---------------------------------------------------------------------------

    Changing the timeline for meeting the Beneficial Holders Rules from
12 months to 36 months would provide ETF Shares with a more reasonable
runway to establish a track record and grow assets under management,
both of which generally precede the accumulation of Beneficial Holders.
Further, the Exchange believes that extending that runway will
encourage smaller issuers to make the necessary capital expenditures to
launch additional ETF Shares, as well as help both large and small
issuers by allowing them to continue to list and promote products that
they believe can succeed and that they are willing to continue paying
for, all of which will help to foster competition and innovation in the
ETP marketplace.
    Second, the economic and competitive structures in place in the ETP
ecosystem naturally incentivize issuers to de-list products rather than
continuing to list products that do not garner investor interest,
meaning that the rule does not provide any meaningful ``pruning''
function for the industry.\15\ Rather, the Exchange has found that, as
currently constructed, the 12 month Beneficial Holders Rule has instead
resulted in the forced termination of ETPs that issuers believed were
still economically viable. While some observers might argue that forced
delisting of an ETP based on a failure to meet the Beneficial Holders
Rule is a good way to reduce the number of ETPs in the marketplace that
have not drawn meaningful market interest, the Exchange disagrees with
this sentiment. First, there are significant costs associated with both
the initial launch and continued operation of an ETP and the Exchange
has found that the ecosystem tends to prune itself of ETPs without
meaningful investor interest. In fact, the Exchange has had 148
products that have voluntarily delisted since 2018,\16\ creating
meaningful turnover in products which issuers believe are not
economically viable. Second, the Exchange contests the underlying
assumption that the number of Beneficial Holders is even a meaningful
measure of market interest in an ETP. While a very high Beneficial
Holder count would most certainly indicate an ETP's success, the
absence of Beneficial Holders is not necessarily a good measure of
market interest or the amount of assets held by the ETP.
---------------------------------------------------------------------------

    \15\ Approximately 43 ETPs have voluntarily delisted within
their first year listed on the Exchange since 2015. The Exchange
notes that a subset of this group might also include those who
didn't want to spend the extra funds to get an extension to the
requirement.
    \16\ There are currently 613 ETPs listed on the Exchange and 777
have been listed on the Exchange for at least some period since
2018, meaning that there's been a nearly 19% voluntary turnover of
ETPs listed on the Exchange since 2018.
---------------------------------------------------------------------------

    Further to this point, the Beneficial Holders Rule is not a rule
that an ETP issuer is incentivized to cut close or exceed by the
smallest amount possible. Unlike many other quantitative or disclosure
based listing requirements, an ETP issuer is incentivized to have as
many Beneficial Holders as possible and would almost certainly prefer
that they were able to meet and exceed the Beneficial Holders Rule as
soon as possible after beginning trading on the Exchange. As such,
extending the time period from 12 months to 36 months will not provide
issuers with a longer window to intentionally keep the number of
Beneficial Holders lower, but, rather, will only extend the period
during which a series of ETF Shares could have fewer than 50 Beneficial
Holders in specific instances where an issuer is unable to meet the 50
Beneficial Holders threshold but still believes that the ETP is viable
and worth the cost of continued operation. Again, it takes money and
resources to launch and operate an ETP and where an issuer does not
believe that an ETP is economically viable, both common sense and prior
experience point to issuers delisting these products.
    Finally, the Exchange believes that making this change does not
create any

significant change in the risk of manipulation for ETF Shares listed on
the Exchange for several reasons. First, a time extension to meet the
requirement would present no new issues because the Exchange already
has no Beneficial Holder requirement for the first 12 months of trading
ETF Shares on the Exchange. Any risk that is present during months 12
through 36 of initial listing would also be present during the first 12
months as provided under current rules. The Exchange believes that the
rule is generally intended to ensure that products that do not have
broad ownership and could be susceptible to manipulation by a few
parties are not able to list on the Exchange after they've had
sufficient time to diversify their ownership base. Leaving aside the
issue of whether an open-ended ETP with creation and redemption
processes would really be subject to manipulation by virtue of narrow
ownership, the Exchange believes that, for all of the reasons explained
above, 36 months is a more appropriate amount of time to consider
sufficient time to diversify an ETP's ownership base.
    Further to this point, the Exchange has in place a robust
surveillance program for ETPs that allows it to monitor trading of ETPs
during all trading sessions on the Exchange and it believes are
sufficient to deter and detect violations of Exchange rules and the
applicable federal securities laws. These surveillances generally focus
on detecting securities trading outside of their normal patterns, which
could be indicative of manipulative or other violative activity. When
such situations are detected, surveillance analysis follows and
investigations are opened, where appropriate, to review the behavior of
all relevant parties for all relevant trading violations. Further, the
Exchange or the FINRA,\17\ on behalf of the Exchange, or both,
communicate as needed regarding trading in ETPs with other markets and
other entities that are members of the ISG. The Exchange believes these
robust surveillance procedures have successfully mitigated manipulation
concerns during an ETPs first 12 months of listing on the Exchange,
during which there is currently no Beneficial Holder requirement, and
further believes that these surveillance procedures will act to
mitigate any manipulation concerns that arise from extending the
compliance period for the Beneficial Holders Rule from 12 months to 36
months.
---------------------------------------------------------------------------

    \17\ FINRA conducts cross-market surveillances on behalf of the
Exchange pursuant to a regulatory services agreement. The Exchange
is responsible for FINRA's performance under this regulatory
services agreement.
---------------------------------------------------------------------------

    The Exchange also believes that the other continued listing
standards in the Exchange's rules or representations that constitute
continued listing standards in Exchange rule filings (the disclosure
obligations applicable under Rule 6c-11 of the Investment Company Act
of 1940 for series of ETF Shares) are generally sufficient to mitigate
manipulation concerns associated with the ETF Shares. During the first
12 months of trading on the Exchange when the Beneficial Holders Rule
does not apply, these disclosure obligations, in conjunction with the
Exchange's surveillance program (as discussed above), are generally
deemed sufficient to prevent any manipulation concerns in Exchange-
listed ETF Shares. As such, the Exchange believes that extending the
period from 12 months to 36 months will not significantly increase any
risk of manipulation that wasn't already generally deemed acceptable
for the first 12 months that a series of ETF Shares was listed. Again,
the Exchange is not proposing to eliminate the Beneficial Holders Rule,
but merely to extend the period for a series ETF Shares to meet the 50
Beneficial Holder requirement.
    The proposed rule change is also designed to protect investors and
the public interest because the Exchange is only proposing to amend the
continued listing requirement related to Beneficial Holders and all
ETPs listed on the Exchange would continue to be subject to the full
panoply of Exchange rules and procedures that currently govern the
trading of equity securities on the Exchange.
    For the above reasons, the Exchange believes that the proposed rule
change is consistent with the requirements of section 6(b)(5) of the
Act.

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

    The Exchange does not believe that the proposed rule change will
impose any burden on competition that is not necessary or appropriate
in furtherance of the purposes of the Act. Instead, the Exchange
believes that the proposed rule change would help to encourage smaller
issuers to make the necessary capital expenditures to launch additional
ETF Shares, as well as help both large and small issuers by allowing
them to continue to list and promote products that they believe can
succeed and that they are willing to continue paying for, which will
enhance competition among market participants, to the benefit of
investors and the marketplace.

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

    Within 45 days of the date of publication of this notice in the
Federal Register or within such longer period up to 90 days (i) as the
Commission may designate if it finds such longer period to be
appropriate and publishes its reasons for so finding or (ii) as to
which the Exchange consents, the Commission will:
    A. by order approve or disapprove such proposed rule change, or
    B. institute proceedings to determine whether the proposed rule
change should be disapproved.

IV. Solicitation of Comments

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

Electronic Comments

     Use the Commission's internet comment form (https://www.sec.gov/rules/sro.shtml); or
     Send an email to [email protected]. Please include
file number SR-CboeBZX-2023-062 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-CboeBZX-2023-062. 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 (https://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
a.m. and 3 p.m. Copies of the filing also will be available for
inspection and copying at the principal office of the Exchange. Do not
include personal identifiable information in submissions; you should
submit only information that you wish to make available publicly. We
may redact in part or withhold entirely from publication submitted
material that is obscene or subject to copyright protection. All
submissions should refer to file number SR-CboeBZX-2023-062 and should
be submitted on or before September 22, 2023.

    For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\18\
---------------------------------------------------------------------------

    \18\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------

Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2023-18896 Filed 8-31-23; 8:45 am]
BILLING CODE 8011-01-P


[Federal Register Volume 81, Number 154 (Wednesday, August 10, 2016)]
[Notices]
[Pages 52956-52957]
[FR Doc No: 2016-18955]

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DEPARTMENT OF TRANSPORTATION

Federal Railroad Administration

[Docket Number FRA-2007-0030]

Petition for Waiver of Compliance

    In accordance with part 211 of title 49 Code of Federal Regulations
(CFR), this document provides the public notice that by a document
dated June 15, 2016, the New Jersey Transit Corporation (NJ Transit)
has petitioned the Federal Railroad Administration (FRA) for an
extension of its existing waiver of compliance from certain provisions
of the Federal railroad safety regulations. FRA assigned the petition
Docket Number FRA-2007-0030.
    NJ Transit owns and operates Southern New Jersey Light Rail
Transit, a commuter light rail transit system operating for
approximately 34 miles between Trenton, NJ, and Camden, NJ. This
commuter operation is also known as the River Line and operates over a
Conrail freight line. The operation uses non-FRA-compliant diesel
multiple unit trainsets during an exclusive passenger period,
temporally separated from Conrail's nightly freight operations over the
same tracks. NJ Transit first requested FRA approval of the shared use
arrangement and the associated regulatory waivers for this operation on
July 13, 1999, in Docket Number 1999-6135, and has received subsequent
extensions and modifications of this regulatory relief in 2004, 2005,
2006, 2007 (relating to ``Extended Temporal Separation Plan''), 2008
(related to further modifications to the temporal separation plan and
for allowing increased maximum operating speed of 65 mph with 4 inches
of cant deficiency), 2012 (baselining all prior relief into sole Docket
Number FRA-2007-0030 so that all related waivers would expire at the
same time), and again in 2013 (modification to include relief from 49
CFR part 242, Qualification and Certification of Conductors).
    This request is consistent with the requirements set forth in the
``Statement of Agency Policy Concerning Jurisdiction Over the Safety of
Railroad Passenger Operations and Waivers Related to Shared Use of the
Tracks of the General Railroad System by Light

Rail and Conventional Equipment,'' 65 FR 42529 (July 10, 2000); see
also ``Joint Statement of Agency Policy Concerning Shared Use of the
Tracks of the General Railroad System by Conventional Railroads and
Light Rail Transit Systems,'' 65 FR 42626 (July 10, 2000).
    In its present petition, NJ Transit seeks an extension of the terms
and conditions of the 2012 waiver of compliance, and respectfully
requests that FRA incorporates the subsequent terms and conditions
granted in the 2013 relief so that all waivers are baselined from this
time forward. NJ Transit again seeks relief from the following: 49 CFR
part 219, Control of Alcohol and Drug Use; 49 CFR 221.13(a) and
221.14(a) (related to rear end marking devices); 49 CFR part 222, Use
of Locomotive Horns at Public Highway-rail Grade Crossings (at
locations and per the conditions of FRA's November 9, 2006 decision
letter); 49 CFR 223.9(c), (d), and 223.15(c) (related to safety
glazing); 49 CFR 229.125 (related to vehicle headlights and auxiliary
lights); 49 CFR part 231, Railroad Safety Appliance Standards; 49 CFR
234.105(c)(3) (related to grade crossing warning system activation
failures); 49 CFR 236.23, 236.502, 236.504, 236.507, 236.566 (related
to railroad signal and train control systems); 49 CFR 238.113,
238.115(b)(4), 238.203, 238.205(a), 238.207, 238.209, 238.211, 238.213,
238.215, 238.217, 238.221(a), 238.223, 238.231(i), 238.233, 238.235,
238.237, and 238.301-238.319 (related to various aspects of FRA's
passenger equipment safety standards); 49 CFR part 239, Passenger Train
Emergency Preparedness; and 49 CFR part 242. NJ Transit also seeks
FRA's approval to operate at 4 inches underbalance in accordance with
49 CFR 213.57.
    A copy of the petition, as well as any written communications
concerning the petition, is available for review online at
www.regulations.gov and in person at the U.S. Department of
Transportation's (DOT) Docket Operations Facility, 1200 New Jersey
Avenue SE., W12-140, Washington, DC 20590. The Docket Operations
Facility is open from 9 a.m. to 5 p.m., Monday through Friday, except
Federal Holidays.
    Interested parties are invited to participate in these proceedings
by submitting written views, data, or comments. FRA does not anticipate
scheduling a public hearing in connection with these proceedings since
the facts do not appear to warrant a hearing. If any interested party
desires an opportunity for oral comment, they should notify FRA, in
writing, before the end of the comment period and specify the basis for
their request.
    All communications concerning these proceedings should identify the
appropriate docket number (e.g., Waiver Petition Docket Number FRA-
2007-0030) and may be submitted by any of the following methods:
     Web site: http://www.regulations.gov. Follow the online
instructions for submitting comments.
     Fax:<PHONE_NUMBER>.
     Mail: Docket Operations Facility, U.S. Department of
Transportation, 1200 New Jersey Avenue SE., W12-140, Washington, DC
20590.
     Hand Delivery: 1200 New Jersey Avenue SE., Room W12-140,
Washington, DC 20590, between 9 a.m. and 5 p.m., Monday through Friday,
except Federal holidays.
    Communications received by September 26, 2016 will be considered by
FRA before final action is taken. Comments received after that date
will be considered as far as practicable.
    Anyone is able to search the electronic form of any written
communications and comments received into any of our dockets by the
name of the individual submitting the comment (or signing the document,
if submitted on behalf of an association, business, labor union, etc.).
In accordance with 5 U.S.C. 553(c), DOT solicits comments from the
public to better inform its processes. DOT posts these comments,
without edit, including any personal information the commenter
provides, to www.regulations.gov, as described in the system of records
notice (DOT/ALL-14 FDMS), which can be reviewed at www.dot.gov/privacy.
See also http://www.regulations.gov/#!privacyNotice for the privacy
notice of regulations.gov.

Robert C. Lauby,
Associate Administrator for Railroad Safety Chief Safety Officer.
[FR Doc. 2016-18955 Filed 8-9-16; 8:45 am]
 BILLING CODE 4910-06-P