[Federal Register Volume 82, Number 10 (Tuesday, January 17, 2017)]
[Notices]
[Pages 4950-4953]
[FR Doc No: 2017-00780]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-79767; File No. SR-NYSEArca-2016-62]

Self-Regulatory Organizations; NYSEArca, Inc.; Order Granting
Approval of Proposed Rule Change, as Modified by Amendment No. 1
Thereto, Relating to a Change to the Underlying Index for the
PowerShares Build America Bond Portfolio

January 10, 2017.

I. Introduction

    On May 3, 2016, NYSE Arca, Inc. (``NYSE Arca'' or ``Exchange'')
filed with the Securities and Exchange Commission (``Commission''),
pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934
(``Act'') \1\ and Rule 19b-4 thereunder,\2\ a proposed rule change to:
(1) Propose changes to the index underlying the PowerShares Build
America Bond Portfolio (``Fund'') and the name of the Fund and (2)
permit the continued listing and trading of the shares (``Shares'') of
the Fund as a result of the changes to the index underlying the Fund.
The proposed rule change was published for comment in the Federal
Register on May 23, 2016.\3\
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ See Securities Exchange Act Release No. 77849 (May 17,
2016), 81 FR 32371 (``Notice'').
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    On June 27, 2016, pursuant to Section 19(b)(2) of the Act,\4\ the
Commission designated a longer period within which to either approve
the proposed rule change, disapprove the proposed rule change, or
institute proceedings to determine whether to disapprove the proposed
rule change.\5\ On August 12, 2016, the Commission instituted
proceedings to determine whether to approve or disapprove the proposed
rule change.\6\ On October 27, 2016, the Commission issued a notice of
designation of a longer period for Commission action on proceedings to
determine whether to approve or disapprove the proposed rule change.\7\
On January 4, 2017, the Exchange filed Amendment No. 1 to the proposed
rule change.\8\ The Commission has received no comments on the proposed
rule change. This order grants approval of the proposed rule change, as
modified by Amendment No. 1 thereto.
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    \4\ 15 U.S.C. 78s(b)(2).
    \5\ See Securities Exchange Act Release No. 78157, 81 FR 43327
(July 1, 2016).
    \6\ See Securities Exchange Act Release No. 78564, 81 FR 55247
(Aug. 18, 2016).
    \7\ See Securities Exchange Act Release No. 79173, 81 FR 76400
(Nov. 2, 2016). The Commission designated January 18, 2017 as the
date by which it should approve or disapprove the proposed rule
change.
    \8\ In Amendment No. 1 to the proposed rule change, the
Exchange: (a) Clarified that (i) in no event will the New Index (as
defined herein) be composed of fewer than 500 issues, and (ii) FINRA
(as defined herein) is able to access data obtained from the
Municipal Securities Rulemaking Board relating to municipal bond
trading activity for surveillance purposes in connection with
trading in the Shares; (b) stated that that Adviser (as defined
herein) represents that within a single municipal bond issuer,
separate issues by the same issuer are likely to trade similarly to
one another, and that individual CUSIPs within the New Index that
share characteristics with other CUSIPs have a high yield to
maturity correlation, and frequently have a correlation of one or
close to one; and (c) made other technical edits and non-substantive
corrections. Because Amendment No. 1 does not materially alter the
substance of the proposed rule change or raise unique or novel
regulatory issues, Amendment No. 1 is not subject to notice and
comment. Amendment No. 1, which amended and replaced the original
filing in its entirety, is available on the Commission's Web site
at: https://www.sec.gov/comments/sr-nysearca-2016-62/nysearca201662-1460311-130254.pdf.
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II. Exchange's Description of the Proposal

    The Exchange currently lists and trades Shares of the Fund \9\
under NYSE Arca Equities Rule 5.2(j)(3), Commentary .02, which governs
the listing and trading of Investment Company Units (``Units'') based
on fixed income securities indexes.\10\ The Fund is a series of the
Trust. Invesco PowerShares Capital Management LLC is the investment
adviser (``Adviser'') for the Fund. Invesco Distributors, Inc. is the
Fund's distributor. The Bank of New York Mellon is the administrator,
custodian, and fund accounting and transfer agent for the Fund.
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    \9\ The Exchange states that, on February 26, 2016, PowerShares
Exchange-Traded Fund Trust II (``Trust'') filed a post-effective
amendment on Form 485 under the Securities Act of 1933 (``Securities
Act'') to its registration statement on Form N-1A under the
Securities Act and the Investment Company Act of 1940 (``1940 Act'')
(File Nos. 333-138490 and 811-21977) (``Registration Statement'').
The Exchange states that the Trust has obtained certain exemptive
relief under the 1940 Act (File No. 812-13335) (``Exemptive
Order'').
    \10\ The Exchange states that the PowerShares Build America Bond
Portfolio was initially listed on November 17, 2009 pursuant to the
generic listing criteria of Commentary .02 to NYSE Arca Equities
Rule 5.2(j)(3).
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    The Fund currently seeks investment results that generally
correspond to the price and yield (before fees and expenses) of The
Bank of America (``BofA'') Merrill Lynch Build America Bond Index
(``Build America Bond Index''). The Fund generally invests at least 80%
of its total assets in taxable municipal securities eligible to
participate in the Build America Bond program created under the
American Recovery and Reinvestment Act of 2009 or other legislation
providing for the issuance of taxable municipal securities on which the
issuer receives federal support of the interest paid (``Build America
Bonds'') and that comprise the Build America Bond Index. The Build
America Bond Index is designed to track the performance of U.S. dollar-
denominated investment grade taxable municipal debt publicly issued
under the Build America Bond program by U.S. states and territories,
and their political subdivisions, in the U.S. market. Qualifying
securities must have a minimum amount outstanding of $1 million, at
least 18 months remaining term to final maturity at the time of
issuance, at least one year remaining term to final maturity, a fixed
coupon schedule, and an investment grade rating (based on an average of
Moody's Investors Services, Inc. (``Moody's''), Standard & Poor's, a
division of The McGraw-Hill Company, Inc. (``S&P''), and Fitch Ratings,
Inc. (``Fitch'')).
    The Trust has proposed to change the index underlying the Fund to
the BofA Merrill Lynch US Taxable Municipal Securities Plus Index
(``New Index'') and to change the name of the Fund to PowerShares
Taxable Municipal Bond Portfolio. The Exchange represents that the New
Index does not meet the generic listing criteria of NYSE Arca Equities
Rule 5.2(j)(3). The Exchange submitted this proposed rule change to
permit the continued listing of the Fund. The New Index meets all of
the requirements of the generic listing criteria of NYSE Arca Equities
Rule 5.2(j)(3), except for that set forth in Commentary .02(a)(2).\11\
Specifically, as of February 4, 2016, approximately 60.51% of the New
Index weight was composed of individual maturities of $100 million or
more (determined at the time of issuance).
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    \11\ Commentary .02(a)(2) to NYSE Arca Equities Rule 5.2(j)(3)
provides that components that in the aggregate account for at least
75% of the weight of the index or portfolio each shall have a
minimum original principal amount outstanding of $100 million or
more.
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A. Changes to the Index Underlying the Fund

    According to the Exchange, the Fund currently has a non-fundamental
policy to invest at least 80% of its net assets (plus the amount of any
borrowings for investment purposes) in Build America

Bonds. Moreover, as stated in the Registration Statement, the Fund
complies with that non-fundamental policy because it also is required
generally to invest at least 80% of the value of its total assets in
the Build America Bonds that comprise the Build America Bond Index, in
accordance with the terms of the relief set forth in the Trust's
Exemptive Order.
    However, in response to a changing market environment that includes
a reduction in the number of Build America Bonds, the Adviser has
proposed that the Fund's underlying index be changed from one that is
focused on Build America Bonds to one that is more broadly focused on
taxable municipal debt in general, and which may include Build America
Bonds. Changing the Fund's underlying index would require changing the
non-fundamental policy set forth above. Accordingly, before the Fund
can change its underlying index, the Registration Statement states that
the Fund's board of trustees (``Board'') must approve the underlying
index change, and the Fund must provide shareholders with sixty days
written notice of the change.
    Thus, after this proposed rule change is approved, the Trust
represents that it intends to seek to obtain Board approval and provide
the requisite shareholder notice. Subject to that Board approval and
shareholder notice, the Fund intends to change its underlying index to
one that is composed of taxable municipal securities, including both
Build America Bonds and non-Build America Bonds. Following such change,
the proposed underlying index for the Fund will be the New Index.
    According to the Exchange, the change in the Fund's underlying
index is designed to enable the Fund to expand its range of investments
in light of a diminishing supply of Build America Bonds; otherwise,
there is no other change to the Fund's investment strategies or
objective. After such change, the Fund's investment objective will be
to seek investment results that generally correspond (before fees and
expenses) to the price and yield of the New Index. The Fund's new non-
fundamental investment policy will be to invest at least 80% of its net
assets (plus borrowings for investment purposes) in taxable municipal
securities. In addition, the Fund generally will invest at least 80% of
its total assets in the securities that will compose the New Index, in
accordance with the terms of the Trust's Exemptive Order. However, the
Fund may invest up to 20% of its total assets in securities not
included in the New Index, money market instruments, including
repurchase agreements or other funds that invest exclusively in money
market instruments (subject to applicable limitations under the 1940
Act or exemptions therefrom), convertible securities and structured
notes (notes on which the amount of principal repayment and interest
payments is based on the movement of one or more specified factors,
such as the movement of a particular security or securities index), all
to the extent that the Adviser believes investment in such instruments
will facilitate the Fund's ability to achieve its new investment
objective. In addition, the Fund intends to change its name to
``PowerShares Taxable Municipal Bond Portfolio.'' \12\
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    \12\ The Exchange represents that the changes described herein
with respect to use of the New Index will be effective upon: (1)
Approval by the Trust's Board; (2) shareholders' receipt of sixty
days written notice of the proposed change; and (3) completing a
filing with the Commission of another amendment to the Trust's
Registration Statement, or a prospectus supplement reflecting these
changes. According to the Exchange, the Adviser has managed and will
continue to manage the Fund in the manner described in the
Registration Statement and will not implement the changes described
herein until this proposed rule change is operative.
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B. Description of the New Index \13\
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    \13\ The Exchange states that the description of the New Index
is based on information provided by BofA Merrill Lynch, which is the
``Index Provider'' with respect to the Underlying Index and the New
Index. The Index Provider is a broker-dealer and has implemented a
firewall with respect to, and will maintain procedures designed to
prevent the use and dissemination of material non-public information
regarding, the New Index.
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    The New Index tracks the performance of U.S. dollar denominated
taxable municipal debt publicly issued by U.S. states and territories,
and their political subdivisions, in the U.S. domestic market.
Qualifying securities must be subject to U.S. federal taxes and must
have at least 18 months to maturity at point of issuance, at least one
year remaining term to final maturity, a fixed coupon schedule
(including zero coupon bonds), and an investment grade rating (based on
an average of Moody's, S&P, and Fitch). The call date on which a pre-
refunded bond will be redeemed is used for purposes of determining
qualification with respect to final maturity requirements. For Build
America Bonds to qualify for inclusion, the securities must have a
minimum amount outstanding of $1 million and be only ``direct pay''
(i.e., a direct federal subsidy is paid to the issuer); ``tax-credit''
(i.e., where the investor receives a tax credit on the interest
payments) Build America Bonds are excluded. For all other securities,
minimum size requirements vary based on the initial term to final
maturity at time of issuance. Securities with an initial term to final
maturity greater than or equal to one year and less than five years
must have a current amount outstanding of at least $10 million.
Securities with an initial term to final maturity greater than or equal
to five years and less than ten years must have a current amount
outstanding of at least $15 million. Securities with an initial term to
final maturity of ten years or more must have a current amount
outstanding of at least $25 million. Local bonds issued by U.S.
territories within their jurisdictions that are tax exempt within the
U.S. territory but not elsewhere are excluded from the New Index. All
Rule 144A securities, both with and without registration rights, and
securities in legal default are excluded from the New Index. New Index
constituents are capitalization-weighted based on their current amount
outstanding times the market price plus accrued interest. Accrued
interest is calculated assuming next-day settlement. Cash flows from
bond payments that are received during the month are retained in the
New Index until the end of the month and then are removed as part of
the rebalancing. Cash does not earn any reinvestment income while it is
held in the New Index.\14\ The New Index is rebalanced on the last
calendar day of the month, based on information available up to and
including the third business day before the last business day of the
month. No changes are made to constituent holdings other than on month
end rebalancing dates.
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    \14\ Information concerning constituent bond prices, timing, and
conventions is provided in the BofA Merrill Lynch Bond Index Guide,
which can be accessed on Bloomberg.
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    As of February 4, 2016, approximately 84.39% of the weight of the
New Index components was composed of individual maturities that were
part of an entire municipal bond offering with a minimum original
principal amount outstanding of $100 million or more for all maturities
of the offering. In addition, as of February 4, 2016, the total dollar
amount outstanding of issues in the New Index was approximately
$281,589,346,769, and the average dollar amount outstanding of issues
in the New Index was approximately $ 27,808,547. Further, the most
heavily weighted component represents 2.27% of the weight of the New
Index, and the five most heavily weighted components represent 6.33% of
the weight of the New Index.\15\ The

Exchange also states that the New Index is composed of approximately
10,126 issues and 1,811 unique issuers, and that in no event will the
New Index be composed of fewer than 500 issues. According to the
proposal, within a single municipal bond issuer, separate issues by the
same issuer are likely to trade similarly to one another, and
individual CUSIPs within the New Index that share characteristics with
other CUSIPs have a high yield to maturity correlation, and frequently
have a correlation of one or close to one. All components of the New
Index have at least an investment grade composite rating of BBB3 or
higher (based on an average of S&P, Moody's, and Fitch).
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    \15\ Commentary .02(a)(4) to NYSE Arca Equities Rule 5.2(j)(3)
provides that no component fixed-income security (excluding Treasury
Securities and GSE Securities, as defined therein) shall represent
more than 30% of the weight of the index or portfolio, and the five
most heavily weighted component fixed-income securities in the index
or portfolio shall not in the aggregate account for more than 65% of
the weight of the index or portfolio.
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    The Exchange represents that: (1) With respect to the New Index,
except for Commentary .02(a)(2) to NYSE Arca Equities Rule 5.2(j)(3),
the Shares of the New Index currently satisfy all of the generic
listing standards under NYSE Arca Equities Rule 5.2(j)(3); (2) the
continued listing standards under NYSE Arca Equities Rules 5.2(j)(3)
and 5.5(g)(2) applicable to Units shall apply to the Shares of the
Fund; and (3) the Trust is required to comply with Rule 10A-3 under the
Act \16\ for the initial and continued listing of the Shares of the
Fund. In addition, the Exchange represents that the Shares of the Fund
will comply with all other requirements applicable to Units including,
but not limited to, requirements relating to the dissemination of key
information such as the value of the New Index and the applicable
Intraday Indicative Value (``IIV''),\17\ rules governing the trading of
equity securities, trading hours, trading halts, surveillance,
information barriers, and the Information Bulletin to Equity Trading
Permit Holders (``ETP Holders''), as set forth in Exchange rules
applicable to Units and prior Commission orders approving the generic
listing rules applicable to the listing and trading of Units.\18\
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    \16\ 17 CFR 240.10A-3.
    \17\ The IIV will be widely disseminated by one or more major
market data vendors at least every 15 seconds during the Exchange's
Core Trading Session of 9:30 a.m. to 4:00 p.m., Eastern time.
According to the Exchange, several major market data vendors display
and/or make widely available IIVs taken from the Consolidated Tape
Association (``CTA'') or other data feeds.
    \18\ See, e.g., Securities Exchange Act Release Nos. 55783 (May
17, 2007), 72 FR 29194 (May 24, 2007) (SR-NYSEArca-2007-36) (order
approving NYSE Arca generic listing standards for Units based on a
fixed income index); 44551 (July 12, 2001), 66 FR 37716 (July 19,
2001) (SR-PCX-2001-14) (order approving generic listing standards
for Units and Portfolio Depositary Receipts); 41983 (October 6,
1999), 64 FR 56008 (October 15, 1999) (SR-PCX-98-29) (order
approving rules for listing and trading of Units).
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III. Discussion and Commission's Findings

    After careful review, the Commission finds that the proposed rule
change is consistent with the requirements of Section 6 of the Act \19\
and the rules and regulations thereunder applicable to a national
securities exchange.\20\ In particular, the Commission finds that the
proposal is consistent with Section 6(b)(5) of the Act,\21\ which
requires, among other things, that the Exchange's rules 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.
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    \19\ 15 U.S.C. 78f.
    \20\ In approving this proposed rule change, the Commission has
considered the proposed rule's impact on efficiency, competition,
and capital formation. See 15 U.S.C. 78c(f).
    \21\ 17 U.S.C. 78f(b)(5).
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    The Commission also finds that the proposal to list and trade the
Shares on the Exchange is consistent with Section 11A(a)(1)(C)(iii) of
the Act,\22\ which sets forth Congress' finding that it is in the
public interest and appropriate for the protection of investors and the
maintenance of fair and orderly markets to assure the availability to
brokers, dealers, and investors of information with respect to
quotations for, and transactions in, securities. The current value of
the New Index is widely disseminated by one or more major market data
vendors at least once per day, as required by NYSE Arca Equities Rule
5.2(j)(3), Commentary .02(b)(ii). In addition, the IIV for the Shares
of the Fund is disseminated by one or more major market data vendors
and is updated at least every 15 seconds during the Exchange's Core
Trading Session, as required by NYSE Arca Equities Rule 5.2(j)(3),
Commentary .02(c). The components and percentage weightings of the New
Index are available from major market data vendors, and the portfolio
of securities held by the Fund is disclosed daily on the Fund's Web
site. The Exchange also represents that information regarding market
price and trading volume of the Shares will be continually available on
a real-time basis throughout the day on brokers' computer screens and
other electronic services, and quotation and last-sale information will
be available via the CTA high-speed line. Moreover, trade price and
other information relating to municipal bonds are available through the
Municipal Securities Rulemaking Board's Electronic Municipal Market
Access (``EMMA'') system. The Web site for the Fund will include the
prospectus for the Fund and additional data relating to net asset value
(``NAV'') and other applicable quantitative information.
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    \22\ 15 U.S.C. 78k-1(a)(1)(C)(iii).
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    The Commission believes that the proposal to list and trade the
Shares is reasonably designed to promote fair disclosure of information
that may be necessary to price the Shares appropriately and to prevent
trading when a reasonable degree of transparency cannot be assured.
Prior to the commencement of trading, the Exchange will inform its ETP
Holders in an Information Bulletin of the special characteristics and
risks associated with trading the Shares. If the Exchange becomes aware
that the NAV is not being disseminated to all market participants at
the same time, it will halt trading in the Shares until such time as
the NAV is available to all market participants. If the IIV and the New
Index value are not being disseminated as required, the Exchange may
halt trading during the day in which the interruption to the
dissemination of the IIV or New Index value occurs. If the interruption
to the dissemination of the IIV or New Index value persists past the
trading day in which it occurred, the Exchange will halt trading.
Trading in Shares of the Fund will be halted if the circuit breaker
parameters in NYSE Arca Equities Rule 7.12 have been reached or because
of market conditions or for reasons that, in the view of the Exchange,
make trading in the Shares inadvisable, and trading in the Shares will
be subject to NYSE Arca Equities Rule 7.34, which sets forth
circumstances under which Shares of the Fund may be halted.\23\ The
Exchange states that trade price and other information relating to
municipal bonds is available through the Municipal Securities
Rulemaking Board's Electronic Municipal Market Access system.
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    \23\ With respect to trading halts, the Exchange may consider
all relevant factors in exercising its discretion to halt or suspend
trading in the Shares of the Fund.
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    Based on the Exchange's representations, the Commission believes
that the New Index is

sufficiently broad-based to deter potential manipulation. The Exchange
represents that, as of February 4, 2016, approximately 84.39% of the
weight of the New Index components was composed of individual
maturities that were part of an entire municipal bond offering with a
minimum original principal amount outstanding of $100 million or more
for all maturities of the offering. In addition, as of February 4,
2016, the total dollar amount outstanding of issues in the New Index
was approximately $281,589,346,769, and the average dollar amount
outstanding of issues in the Index was approximately $ 27,808,547.
Further, the most heavily weighted component represented 2.27% of the
weight of the New Index, and the five most heavily weighted components
represented 6.33% of the weight of the New Index.\24\ The Exchange also
represents that the New Index is composed of approximately 10,126
issues and 1,811 unique issuers, and that in no event will the New
Index be composed of fewer than 500 issues.
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    \24\ See supra note 15.
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    In support of this proposal, the Exchange has also made
representations, including:
    (1) The Adviser has managed and will continue to manage the Fund in
the manner described in the Registration Statement, and it will not
implement the changes described herein until this proposed rule change
is operative.
    (2) The Index Provider is a broker-dealer and has implemented a
firewall with respect to, and will maintain procedures designed to
prevent the use and dissemination of material, non-public information
regarding, the New Index.
    (3) With respect to the New Index, except for Commentary .02(a)(2)
to NYSE Arca Equities Rule 5.2(j)(3), the Shares of Fund overlying the
New Index would satisfy all of the current generic listing standards
under NYSE Arca Equities Rule 5.2(j)(3).
    (4) The continued listing standards under NYSE Arca Equities Rules
5.2(j)(3) and 5.5(g)(2) applicable to Units shall apply to the Shares
of the Fund overlying the New Index.
    (5) The Trust is required to comply with Rule 10A-3 under the Act
\25\ for the initial and continued listing of the Shares of the Fund
overlying the New Index.
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    \25\ 17 CFR 240.10A-3.
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    (6) The Shares of the Fund overlying the New Index will comply with
all other requirements applicable to Units including, but not limited
to, requirements relating to the dissemination of key information such
as the value of the New Index and the applicable IIV,\26\ rules
governing the trading of equity securities, trading hours, trading
halts, surveillance, information barriers, and the Information Bulletin
to ETP Holders, as set forth in Exchange rules applicable to Units and
prior Commission orders approving the generic listing rules applicable
to the listing and trading of Units.\27\
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    \26\ See supra note 17.
    \27\ See supra note 18 and accompanying text.
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    (7) The Exchange represents that trading in the Shares will be
subject to the existing trading surveillances administered by the
Exchange, as well as cross-market surveillances administered by the
Financial Industry Regulatory Authority (``FINRA'') on behalf of the
Exchange, which are designed to detect violations of Exchange rules and
federal securities laws applicable to trading on the Exchange.\28\ The
Exchange represents that these procedures are adequate to properly
monitor Exchange trading of the Shares in all trading sessions and to
deter and detect violations of Exchange rules and federal securities
laws applicable to trading on the Exchange.
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    \28\ The Exchange represents that 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.
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    (8) The Exchange or FINRA, on behalf of the Exchange, or both, will
communicate as needed regarding trading in the Shares with other
markets that are members of the Intermarket Surveillance Group
(``ISG''). In addition, the Exchange will communicate as needed
regarding trading in the Shares with other markets that are members of
the ISG or with which the Exchange has in place a comprehensive
surveillance sharing agreement. FINRA also can access data obtained
from the Municipal Securities Rulemaking Board relating to municipal
bond trading activity for surveillance purposes in connection with
trading in the Shares.
    The Exchange represents that all statements and representations
made in this proposal regarding (a) the description of the Fund's
portfolio, (b) limitations on portfolio holdings or reference assets,
or (c) the applicability of Exchange rules and surveillance procedures
shall constitute continued listing requirements for listing the Shares
on the Exchange. The Adviser has represented to the Exchange that it
will advise the Exchange of any failure by the Fund to comply with the
continued listing requirements, and, pursuant to its obligations under
Section 19(g)(1) of the Act, the Exchange will monitor for compliance
with the continued listing requirements.\29\ If the Fund is not in
compliance with the applicable listing requirements, the Exchange will
commence delisting procedures under NYSE Arca Equities Rule 5.5(m).
This approval order is based on all of the Exchange's representations,
including those set forth above and in the Notice, as modified by
Amendment No. 1 thereto, and the Exchange's description of the Funds.
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    \29\ The Commission notes that certain other proposals for the
listing and trading of Managed Fund Shares include a representation
that the exchange will ``surveil'' for compliance with the continued
listing requirements. See, e.g., Securities Exchange Act Release No.
78005 (Jun. 7, 2016), 81 FR 38247 (Jun. 13, 2016) (SR-BATS-2015-
100). In the context of this representation, it is the Commission's
view that ``monitor'' and ``surveil'' both mean ongoing oversight of
a fund's compliance with the continued listing requirements.
Therefore, the Commission does not view ``monitor'' as a more or
less stringent obligation than ``surveil'' with respect to the
continued listing requirements.
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    For the foregoing reasons, the Commission finds that the proposed
rule change, as modified by Amendment No. 1 thereto, is consistent with
Section 6(b)(5) of the Act \30\ and the rules and regulations
thereunder applicable to a national securities exchange.
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    \30\ 15 U.S.C. 78f(b)(5).
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IV. Conclusion

    It is therefore ordered, pursuant to Section 19(b)(2) of the
Act,\31\ that the proposed rule change (SR-NYSEArca-2016-62), as
modified by Amendment No. 1 thereto, be, and it hereby is, approved.
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    \31\ 15 U.S.C. 78s(b)(2).

    For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\32\
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    \32\ 17 CFR 200.30-3(a)(12).
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Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2017-00780 Filed 1-13-17; 8:45 am]
 BILLING CODE 8011-01-P


[Federal Register: March 26, 2009 (Volume 74, Number 57)]
[Proposed Rules]
[Page 13148-13152]
[DOCID:fr26mr09-30]

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DEPARTMENT OF TRANSPORTATION

Federal Aviation Administration

14 CFR Part 39

[Docket No. FAA-2009-0264; Directorate Identifier 2008-NM-174-AD]
RIN 2120-AA64

Airworthiness Directives; Airbus Model A330-300, A340-200, and
A340-300 Series Airplanes

AGENCY: Federal Aviation Administration (FAA), DOT.

ACTION: Notice of proposed rulemaking (NPRM).

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SUMMARY: We propose to adopt a new airworthiness directive (AD) for the
products listed above. This proposed AD results from mandatory
continuing airworthiness information (MCAI)

originated by an aviation authority of another country to identify and
correct an unsafe condition on an aviation product. The MCAI describes
the unsafe condition as:

    One Long Range operator experienced a failure of one spoiler
servo-control, associated with surface deflection in flight and
hydraulic leak. On ground, this servo-control Part Number (P/N)
MZ4306000-02X was found with the maintenance cover broken.
Investigations showed that the rupture of the maintenance cover was
due to pressure pulse fatigue.
    * * * The rupture of the maintenance cover in flight may result
in the deflection of the associated spoiler surface up to the null-
hinge position (loss of the hydraulic locking). It may also result
in the loss of the associated hydraulic system (external leakage).
In the worst case, the three hydraulic systems may be affected,
which constitutes an unsafe condition.

* * * * *
    Loss of the three hydraulic systems could result in reduced
controllability of the airplane. The proposed AD would require actions
that are intended to address the unsafe condition described in the
MCAI.

DATES: We must receive comments on this proposed AD by April 27, 2009.

ADDRESSES: You may send comments 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 W12-40, 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 proposed AD, contact
Airbus SAS--Airworthiness Office--EAL, 1 Rond Point Maurice Bellonte,
31707 Blagnac Cedex, France; telephone +33 5 61 93 36 96; fax +33 5 61
93 45 80, e-mail<EMAIL_ADDRESS>Internet http://
www.airbus.com. You may review copies of the referenced service
information at the FAA, Transport Airplane Directorate, 1601 Lind
Avenue, SW., Renton, Washington. For information on the availability of
this material at the FAA, call<PHONE_NUMBER> or<PHONE_NUMBER>.

Examining the AD Docket

    You may examine the AD docket on the Internet at http://
www.regulations.gov; or in person at the Docket Operations office
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 Operations office (telephone<PHONE_NUMBER>) is
in the ADDRESSES section. Comments will be available in the AD docket
shortly after receipt.

FOR FURTHER INFORMATION CONTACT: Vladimir Ulyanov, Aerospace Engineer,
International Branch, ANM-116, Transport Airplane Directorate, FAA,
1601 Lind Avenue, SW., Renton, Washington 98057-3356; telephone (425)
227-1138; 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-2009-0264;
Directorate Identifier 2008-NM-174-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

    The European Aviation Safety Agency (EASA), which is the Technical
Agent for the Member States of the European Community, has issued EASA
Airworthiness Directive 2008-0160, dated August 22, 2008 (referred to
after this as ``the MCAI''), to correct an unsafe condition for the
specified products. The MCAI states:

    One Long Range operator experienced a failure of one spoiler
servo-control, associated with surface deflection in flight and
hydraulic leak. On ground, this servo-control Part Number (P/N)
MZ4306000-02X was found with the maintenance cover broken.
Investigations showed that the rupture of the maintenance cover was
due to pressure pulse fatigue.
    The maintenance cover allows switching the servo-control from
``Operational'' to ``Maintenance'' modes. The same cover is
installed on all standard MZ spoiler servo-controls except on P/N
MZ4339390-12 and MZ4306000-12, which have a reinforced maintenance
cover. The rupture of the maintenance cover in flight may result in
the deflection of the associated spoiler surface up to the null-
hinge position (loss of the hydraulic locking). It may also result
in the loss of the associated hydraulic system (external leakage).
In the worst case, the three hydraulic systems may be affected,
which constitutes an unsafe condition.
    For the reasons described above, this EASA AD requires the
identification and the modification of all standard MZ spoiler
servo-controls with initial maintenance cover (P/N MZ4339390-01X, -
02X, -10X for position 1 and P/N MZ4306000-01X, 02X, -10X for
positions 2 to 6) into standard MZ servo-controls with reinforced
maintenance cover (P/N MZ4339390-12 for position 1 and P/N
MZ4306000-12 for positions 2 to 6).

    Loss of the three hydraulic systems could result in reduced
controllability of the airplane. You may obtain further information by
examining the MCAI in the AD docket.

Relevant Service Information

    Airbus has issued the service information described in the
following table. The actions described in this service information are
intended to correct the unsafe condition identified in the MCAI.

                           Service Information
------------------------------------------------------------------------
        Service Bulletin            Revision level           Date
------------------------------------------------------------------------
Airbus Mandatory Service          01................  July 25, 2008.
 Bulletin A330-27A3154.
Airbus Service Bulletin A330-27-  02................  March 2, 2007.
 3110.
Airbus Mandatory Service          01................  July 25, 2008.
 Bulletin A340-27A4154.
Airbus Service Bulletin A340-27-  01................  March 2, 2007.
 4115.
------------------------------------------------------------------------

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 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.

Differences Between This AD and the MCAI or Service Information

    We have reviewed the MCAI and related service information and, in
general, agree with their substance. But we might have found it
necessary to use different words from those in the MCAI to ensure the
AD is clear for U.S. operators and is enforceable. In making these
changes, we do not intend to differ substantively from the information
provided in the MCAI and related service information.
    We might also have proposed different actions in this AD from those
in the MCAI in order to follow FAA policies. Any such differences are
highlighted in a NOTE within the proposed AD.

Costs of Compliance

    Based on the service information, we estimate that this proposed AD
would affect 16 products of U.S. registry. We also estimate that it
would take between 1 work-hour per product to comply with the basic
requirements of this proposed AD. The average labor rate is $80 per
work-hour. Based on these figures, we estimate the cost of the proposed
AD on U.S. operators to be $1,280, or $80 per product.

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); 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.
    We prepared a regulatory evaluation of the estimated costs to
comply with this proposed AD and placed it in the AD docket.

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

    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]

    2. The FAA amends Sec.  39.13 by adding the following new AD:

Airbus: Docket No. FAA-2009-0264; Directorate Identifier 2008-NM-
174-AD.

Comments Due Date

    (a) We must receive comments by April 27, 2009.

Affected ADs

    (b) None.

Applicability

    (c) This AD applies to Airbus Model A330-300, A340-200, and
A340-300 series airplanes; certificated in any category, except
those identified in paragraph (c)(1) and (c)(2) of this AD.
    (1) Airbus Model A330-301, -302, -303, -321, -322, -323, -341, -
342, and -343 airplanes, manufacturer serial numbers (MSNs) up to
and including MSN 588, except those on which Airbus Service Bulletin
A330-27-3110 has been embodied in service.
    (2) Airbus Model A340-211, -212, -213, -311, -312, and -313
airplanes, MSNs up to and including MSN 598, except those on which
Airbus Service Bulletin A340-27-4115 has been embodied in service.

Subject

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

Reason

    (e) The mandatory continuing airworthiness information (MCAI)
states:
    One Long Range operator experienced a failure of one spoiler
servo-control, associated with surface deflection in flight and
hydraulic leak. On ground, this servo-control Part Number (P/N)
MZ4306000-02X was found with the maintenance cover broken.
Investigations showed that the rupture of the maintenance cover was
due to pressure pulse fatigue.
    The maintenance cover allows switching the servo-control from
``Operational'' to ``Maintenance'' modes. The same cover is
installed on all standard MZ spoiler servo-controls except on P/N
MZ4339390-12 and MZ4306000-12, which have a reinforced maintenance
cover. The rupture of the maintenance cover in flight may result in
the deflection of the associated spoiler surface up to the null-
hinge position (loss of the hydraulic locking). It may also result
in the loss of the associated hydraulic system (external leakage).
In the worst case, the three hydraulic systems may be affected,
which constitutes an unsafe condition.
    For the reasons described above, this EASA AD requires the
identification and the modification of all standard MZ spoiler
servo-controls with initial maintenance cover (P/N MZ4339390-01X, -
02X, -10X for position 1 and P/N MZ4306000-01X, 02X, -10X for
positions 2 to 6) into standard MZ servo-controls with reinforced
maintenance cover (P/N MZ4339390-12 for position 1 and P/N
MZ4306000-12 for positions 2 to 6).
    Loss of the three hydraulic systems could result in reduced
controllability of the airplane.

Actions and Compliance

    (f) Unless already done, do the following actions.
    (1) For airplanes that have accumulated more than 8,500 total
flight cycles since first flight as of the effective date of this
AD: Do the actions required by paragraphs (f)(1)(i) and (f)(1)(ii)
of this AD, as applicable.
    (i) Within 3 months after the effective date of this AD:
Identify the part number of spoiler servo-controls installed on the
airplane at all positions in order to determine the number of
affected hydraulic circuits in accordance with the Accomplishment
Instructions of Airbus Mandatory Service Bulletin A330-27A3154,
Revision 01; or Airbus Mandatory Service Bulletin A340-27A4154,
Revision 01; both dated July 25, 2008, as applicable. If there is no
spoiler servo-control installed with a part number

identified in Table 1 of this AD, no further action is required by
this paragraph.
    (ii) If there is any spoiler servo-control installed with a part
number identified in Table 1 of this AD, do all applicable actions
required by paragraph (f)(2), (f)(3), or (f)(4) of this AD.

               Table 1--Spoiler Servo-Control Part Numbers
------------------------------------------------------------------------
                Position 1                      Positions 2 through 6
------------------------------------------------------------------------
MZ4339390-01X.............................  MZ4306000-01X.
MZ4339390-02X.............................  MZ4306000-02X.
MZ4339390-10X.............................  MZ4306000-10X.
------------------------------------------------------------------------

    (2) If three affected hydraulic circuits are identified during
the inspection required by paragraph (f)(1) of this AD, do the
actions required by paragraphs (f)(2)(i), (f)(2)(ii), and
(f)(2)(iii) of this AD, at the time specified.
    (i) Before the accumulation of 10,400 total flight cycles since
first flight, or within 3 months after accomplishing the
requirements of paragraph (f)(1)(i) of this AD, whichever occurs
later: Modify the affected spoiler servo-controls on one hydraulic
circuit in accordance with the Accomplishment Instructions of Airbus
Service Bulletin A330-27-3110, Revision 02; or Airbus Service
Bulletin A340-27-4115, Revision 01; both dated March 2, 2007, as
applicable.
    (ii) Before the accumulation of 10,800 total flight cycles since
first flight, or within 6 months after accomplishing the
requirements in paragraph (f)(1)(i) of this AD, whichever occurs
later: Modify the affected spoiler servo-controls on the second
hydraulic circuit in accordance with the Accomplishment Instructions
of Airbus Service Bulletin A330-27-3110, Revision 02; or Airbus
Service Bulletin A340-27-4115, Revision 01; both dated March 2,
2007, as applicable.
    (iii) Within 18 months after the effective date of this AD:
Modify the remaining affected spoiler servo-controls in accordance
with the Accomplishment Instructions of Airbus Service Bulletin
A330-27-3110, Revision 02; or Airbus Service Bulletin A340-27-4115,
Revision 01; both dated March 2, 2007, as applicable.
    (3) If two affected hydraulic circuits are identified during the
inspection required by paragraph (f)(1) of this AD, do the actions
required by paragraphs (f)(3)(i) and (f)(3)(ii) of this AD, at the
time specified:
    (i) Before the accumulation of 10,800 total flight cycles since
first flight, or within 6 months after accomplishing the
requirements in paragraph (f)(1)(i) of this AD, whichever occurs
later: Modify the affected spoiler servo-controls on one hydraulic
circuit in accordance with the Accomplishment Instructions of Airbus
Service Bulletin A330-27-3110, Revision 02; or Airbus Service
Bulletin A340-27-4115, Revision 01; both dated March 2, 2007, as
applicable.
    (ii) Within 18 months after the effective date of this AD:
Modify the remaining affected spoiler servo-controls in accordance
with the Accomplishment Instructions of Airbus Service Bulletin
A330-27-3110, Revision 02; or Airbus Service Bulletin A340-27-4115,
Revision 01; both dated March 2, 2007, as applicable.
    (4) If one affected hydraulic circuit is identified during the
inspection required by paragraph (f)(1) of this AD: Within 18 months
after the effective date of this AD, modify the affected spoiler
servo-controls in accordance with the Accomplishment Instructions of
Airbus Service Bulletin A330-27-3110, Revision 02; or Airbus Service
Bulletin A340-27-4115, Revision 01; both dated March 2, 2007, as
applicable.
    (5) For airplanes that have accumulated less than or equal to
8,500 total flight cycles since first flight as of the effective
date of this AD: Do the actions required by paragraphs (f)(5)(i) and
(f)(5)(ii) of this AD, as applicable.
    (i) Within 9 months after the effective date of this AD: Do the
actions specified in paragraph (f)(1)(i) of this AD. If there is no
spoiler servo-control installed with a part number identified in
Table 1 of this AD, no further action is required by this paragraph.
    (ii) If there is any spoiler servo-control installed with a part
number identified in Table 1 of this AD: Within 18 months after the
effective date of this AD, modify all the affected spoiler servo-
controls in accordance with the Accomplishment Instructions of
Airbus Service Bulletin A330-27-3110, Revision 02; or Airbus Service
Bulletin A340-27-4115, Revision 01; both dated March 2, 2007, as
applicable.
    (6) As of the effective date of this AD, no person may install
any spoiler servo-control with a part number identified in Table 1
of this AD on any aircraft as a replacement part, unless the part
has been modified in accordance with the Accomplishment Instructions
of Airbus Service Bulletin A330-27-3110, Revision 02; or Airbus
Service Bulletin A340-27-4115, Revision 01; both dated March 2,
2007, as applicable.
    (7) Actions accomplished before the effective date of this AD in
accordance with the service bulletins specified in Table 2 of this
AD are considered acceptable for compliance with the corresponding
requirements of this AD.

                   Table 2--Credit Service Information
------------------------------------------------------------------------
        Service Bulletin            Revision level           Date
------------------------------------------------------------------------
Airbus Service Bulletin A330-27-  Original..........  November 28, 2003.
 3110.
Airbus Service Bulletin A330-27-  01................  March 26, 2004.
 3110.
Airbus Service Bulletin A340-27-  Original..........  November 28, 2003.
 4115.
------------------------------------------------------------------------

FAA AD Differences

    Note 1: This AD differs from the MCAI and/or service information
as follows: No differences.

Other FAA AD Provisions

    (g) 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. Send information to ATTN:
Vladimir Ulyanov, Aerospace Engineer, International Branch, ANM-116,
Transport Airplane Directorate, FAA, 1601 Lind Avenue, SW., Renton,
Washington 98057-3356; telephone<PHONE_NUMBER>; fax<PHONE_NUMBER>.
Before using any approved AMOC on any airplane to which the AMOC
applies, notify your principal maintenance inspector (PMI) or
principal avionics inspector (PAI), as appropriate, or lacking a
principal inspector, your local Flight Standards District Office.
    (2) Airworthy Product: For any requirement in this AD to obtain
corrective actions from a manufacturer or other source, use these
actions if they are FAA-approved. Corrective actions are considered
FAA-approved if they are approved by the State of Design Authority
(or their delegated agent). You are required to assure the product
is airworthy before it is returned to service.
    (3) Reporting Requirements: For any reporting requirement in
this AD, under the provisions of the Paperwork Reduction Act, the
Office of Management and Budget (OMB) has approved the information
collection requirements and has assigned OMB Control Number 2120-
0056.

Related Information

    (h) Refer to European Aviation Safety Agency Airworthiness
Directive 2008-0160, dated August 22, 2008, and the service
bulletins specified in Table 3 of this AD, for related information.

                                          Table 3--Service Information
----------------------------------------------------------------------------------------------------------------
                                                    Revision
                Service Bulletin                      level                            Date
----------------------------------------------------------------------------------------------------------------
Airbus Mandatory Service Bulletin A330-27A3154.              01  July 25, 2008.

Airbus Service Bulletin A330-27-3110...........              02  March 2, 2007.
Airbus Mandatory Service Bulletin A340-27A4154.              01  July 25, 2008.
Airbus Service Bulletin A340-27-4115...........              01  March 2, 2007.
----------------------------------------------------------------------------------------------------------------

    Issued in Renton, Washington, on March 18, 2009.
Ali Bahrami,
Manager, Transport Airplane Directorate, Aircraft Certification
Service.
 [FR Doc. E9-6734 Filed 3-25-09; 8:45 am]

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