[Federal Register Volume 88, Number 243 (Wednesday, December 20, 2023)]
[Notices]
[Pages 88201-88204]
[FR Doc No: 2023-27913]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-99170; File No. SR-NYSEARCA-2023-85]

Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing
and Immediate Effectiveness of Proposed Rule Change To Amend Rule
6.62P-O

December 14, 2023.
    Pursuant to Section 19(b)(1) \1\ of the Securities Exchange Act of
1934 (``Act'') \2\ and Rule 19b-4 thereunder,\3\ notice is hereby given
that, on December 8, 2023, NYSE Arca, Inc. (``NYSE Arca'' or the
``Exchange'') filed with the Securities and Exchange Commission (the
``Commission'') the proposed rule change as described in Items I and II
below, which Items have been prepared by the self-regulatory
organization. The Commission is publishing this notice to solicit
comments on the proposed rule change from interested persons.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 15 U.S.C. 78a.
    \3\ 17 CFR 240.19b-4.

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I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change

    The Exchange proposes to amend Rule 6.62P-O to provide for the use
of ALO Reserve Orders. The proposed rule change is available on the
Exchange's website at www.nyse.com, at the principal office of the
Exchange, and at the Commission's Public Reference Room.

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

    In its filing with the Commission, the self-regulatory organization
included statements concerning the purpose of, and basis for, the
proposed rule change and discussed any comments it received on the
proposed rule change. The text of those 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 parts of such statements.

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

1. Purpose
    The Exchange proposes to amend Rule 6.62P-O (Orders and Modifiers)
(the ``Rule'') to provide for the use of ALO Reserve Orders.
ALO Orders
    Rule 6.62P-O(e)(2) defines an ALO Order as a Non-Routable Limit
Order that will not remove liquidity from the Consolidated Book. As
described below, an ALO Order can be designated to be cancelled if it
would be displayed at a price other than its limit price for any
reason.
    As described in Rule 6.62P-O(e)(2)(A)(ii), an ALO Order to buy
(sell) will be displayed at its limit price if it locks non-displayed
orders or quotes to sell (buy) on the Consolidated Book. However, per
Rule 6.62P-O(e)(2)(A), an ALO Order will not be displayed at a price
that would: lock or cross the ABBO, would lock or cross displayed
interest in the Consolidated Book, or would cross non-displayed
interest in the Consolidated Book.
    Rule 6.62P-O(e)(2)(A)(i) provides that an ALO Order may be
designated to cancel if it would be displayed at a price other than its
limit price. If an ALO Order is not so designated, it will be repriced
as follows (per Rules 6.62P-O (e)(2)(B)(i)-(iii)):
     If the limit price of an ALO Order to buy (sell) would
lock or cross displayed orders or quotes to sell (buy) on the
Consolidated Book, it will be repriced to have a working price and
display price one MPV below (above) the lowest (highest) priced
displayed order or quote to sell (buy) on the Consolidated Book;
     If the limit price of an ALO Order to buy (sell) would
lock or cross the ABO (ABB), it will be repriced to have a working
price equal to the ABO (ABB) and a display price one MPV below (above)
that ABO (ABB);
     If the limit price of an ALO Order to buy (sell) would
cross non-displayed orders or quotes on the Consolidated Book, it will
be repriced to have a working price and display price equal to the
lowest (highest) priced non-displayed order or quote to sell (buy) on
the Consolidated Book.
    Rule 6.62P-O(e)(2)(C) provides that, once resting on the
Consolidated Book, the display price of an ALO Order to buy (sell) that
has been repriced will be repriced higher (lower) only one additional
time. If, after that repricing, the display price could be repriced
higher (lower) again, the order can be designated to either remain at
its last working price and display price or be cancelled, provided that
a resting ALO Order that is a quote cannot be designated to be
cancelled.
     Per Rule 6.62P-O(e)(2)(C)(i), if the limit price of an ALO
Order to buy (sell) that has been repriced no longer locks or crosses
displayed orders or quotes in the Consolidated Book, locks or crosses
the ABBO, or crosses non-displayed orders or quotes in the Consolidated
Book, it will be assigned a working price and display price equal to
its limit price.
    Rule 6.62P-O(e)(2)(D) provides that the working price of a resting
ALO Order to buy (sell) that has been repriced will be adjusted to be
equal to its display price, if:
     the ABO (ABB) re-prices to be equal to or lower (higher)
than the display price of the resting ALO Order to buy (sell) (per Rule
6.62P-O(e)(2)(D)(i)); or
     an ALO Order or Day ISO ALO to sell (buy) is displayed on
the Consolidated Book at a price equal to the working price of the
resting ALO Order to buy (sell) (per Rule 6.62P-O(e)(2)(D)(ii)).
    Rule 6.62P-O(e)(2)(E) provides that when the working price and
display price of an ALO Order to buy (sell) are the same, the working
price will be adjusted higher (lower) only if the display price of the
order is adjusted.
    Finally, per Rule 6.62P-O(e)(2)(F), the ALO designation will be
ignored for ALO Orders that participate in an Auction.
Reserve Orders
    Rule 6.62P-O(d)(1) provides for Reserve Orders, which are Limit
Orders with a quantity of the size displayed and with a reserve
quantity of the size (``reserve interest'') that is not displayed. The
displayed quantity of a Reserve Order is ranked Priority 2--Display
Orders, and the reserve interest is ranked Priority 3--Non-Display
Orders. Both the display quantity and the reserve interest of an
arriving marketable Reserve Order are eligible to trade with resting
interest in the Consolidated Book or to route to Away Markets, unless
they are designated as a Non-Routable Limit Order. The working price of
the reserve interest of a resting Reserve Order to buy (sell) will be
adjusted in the same manner as a Non-Displayed Limit Order, as provided
for in paragraph (d)(2)(A) of this Rule, provided that it will never be
priced higher (lower) than the working price of the display quantity of
the Reserve Order.\4\
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    \4\ See infra regarding the proposed non-substantive change to
Rule 6.62P-O(d)(1) to remove the cross-reference to paragraph
(d)(2)(A) of Rule 6.62P-O and replace it with the specific text from
that paragraph regarding how the working price for resting interest
is adjusted. See proposed Rule 6.62P-O(d)(1).
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     Rule 6.62P-O(d)(1)(A) provides that the displayed portion
of a Reserve Order will be replenished when the display quantity is
decremented to zero. The replenish quantity will be the minimum display
size of the order or the remaining quantity of the reserve interest if
it is less than the minimum display quantity.
     Rule 6.62P-O(d)(1)(B) provides that each time the display
quantity of a Reserve Order is replenished from reserve interest, a new
working time will be assigned to the replenished quantity.
     Rule 6.62P-O(d)(1)(C) provides that a Reserve Order may be
designated as a Non-Routable Limit Order. If so designated, the reserve
interest that replenishes the display quantity will be assigned a
display price and working price consistent with the instructions for
the order.
     Rule 6.62P-O(d)(1)(D) provides that a routable Reserve
Order will be evaluated for routing both on arrival and each time the
display quantity is replenished.\5\
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    \5\ See Rule 6.62P-O(d)(1)(D)(i)-(ii) (providing that for a
routable Reserve Order, ``[i]f routing is required, the Exchange
will route from reserve interest before publishing the display
quantity'' and that ``[a]ny quantity of a Reserve Order that is
returned unexecuted will join the working time of the reserve
interest. If there is no reserve interest to join, the returned
quantity will be assigned a new working time'', respectively.)''

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     Rule 6.62P-O(d)(1)(E) provides that a request to reduce
the size of a Reserve Order will cancel the reserve interest before
cancelling the display quantity.
     Finally, Rule 6.62P-O(d)(1)(F) provides that a Reserve
Order may be designated Day or GTC; this provision also currently
provides that a Reserve Order may not be designated as an ALO Order.
Proposed ALO Reserve Orders
    The Exchange proposes to amend Rule 6.62P-O to provide for the use
of ALO Reserve Orders. The proposed change is not intended to introduce
any new functionality or modify any current functionality, but rather
to facilitate the combination of two order types currently offered by
the Exchange. As proposed, ALO Reserve Orders would operate consistent
with current Rule 6.62P-O (d)(1) regarding Reserve Orders and current
Rule 6.62P-O(e)(2) regarding ALO Orders. To allow for the use of ALO
Reserve Orders, the Exchange first proposes to amend Rule 6.62P-
O(d)(1)(F) to delete the clause in the latter half of the sentence of
such rule, which currently provides that a Reserve Order may not be
designated as an ALO Order.
    The proposed change is intended to allow ALO Orders, as described
in Rule 6.62P-O(e)(2) and the paragraphs thereunder, to have a
displayed quantity, along with non-displayed reserve interest, as
described in Rule 6.62P-O(d)(1). The display quantity of an ALO Reserve
Order would be replenished as provided in Rule 6.62P-O(d)(1)(A) and
(B). For an ALO Reserve Order that is designated as a Non-Routable-
Limit Order, per Rule 6.62P-O(d)(1)(C), the replenish quantity of such
non-routable ALO Reserve Order would be assigned a display price and
working price consistent with the behavior of ALO Orders as described
in current Exchange rules. The Exchange proposes to modify Rule 6.62P-
O(d)(1)(C) to add a cross reference to the paragraphs (i.e., to
paragraphs (e)(1)(A) and (e)(2)(A)-(B) of the Rule) that describe how
the working price and display price of Non-Routable Limit Orders and
ALO Orders--which are a subset of Non-Routable Limit Orders are
assigned, which would benefit investors by making the rule easier to
navigate and comprehend.\6\
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    \6\ See proposed Rule 6.62P-O(d)(1)(C) (providing that for
Reserve Orders designated as Non-Routable Limit Orders (inclusive of
ALO Orders), ``the reserve interest that replenishes the display
quantity will be assigned a display price and working price
consistent with the instructions for the order, as provided for in
paragraphs (e)(1)(A) and (e)(2)(A)-(B) of this Rule.'' (emphasis
added).
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    The proposed change is intended to facilitate the combined use of
two existing order types available on the Exchange, thereby providing
OTP Holders and OTP Firms with enhanced flexibility and optionality
when trading on the Exchange. The proposed change could also promote
increased liquidity and trading opportunities on the Exchange, to the
benefit of all market participants. The Exchange also believes the
proposed change would permit the Exchange to offer functionality
already available on the Exchange's affiliated (five) equities
exchanges and at least one other (non-NYSE) equities exchange, thereby
promoting uniformity in order types/functionality across our equity and
options markets.\7\
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    \7\ See Securities Exchange Act Release Nos.; 98892 (November 8,
2023), 88 FR 78398 (November 15, 2023) (SR-NYSEAmer-2023-56)
(adopting ALO Reserve Orders on immediately effective basis); 98899
(November 9, 2023), 88 FR 78413 ((November 15, 2023) SR-NYSEArca-
2023-77) (same); and 98891 (November 8, 2023), 88 FR 78407 (November
15, 2023) (SR-NYSE-2023-40) (same); 98893 (November 9, 2023), 88 FR
78401(November 15, 2023) (SR-NYSENAT-2023-25) (same); 98901
(November 9, 2023), 88 FR 78422 (November 15, 2023) (SR-NYSECHX-
2023-21) (same). See, e.g., MEMX Rules 11.8(b)(4) and (7) (providing
that a Limit Order may include a reserve quantity and may be
designated with a Post Only instruction); see also MEMX User Manual,
available at https://info.memxtrading.com/wp-content/uploads/2023/03/MEMX-User-Manual-03.10.23.pdf, at p. 9 (providing that a Limit
Order designated Day may have both reserve quantity and Post Only
instructions).
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    Because of the technology changes associated with this proposed
rule change, the Exchange will announce the implementation date by
Trader Update, which, subject to effectiveness of this proposed rule
change, will be in the fourth quarter of 2023.
Proposed Non-Substantive Change To Reserve Orders
    The Exchange proposes to modify Rule 6.62P-O(d)(1) to add rule text
specifying how the reserve interest of a resting Reserve Order to buy
(sell) will be adjusted, which text would replace the existing text
that directs the reader to another rule provision. Specifically, Rule
6.62P-O(d)(1) states that ``[t]he working price of the reserve interest
of a resting Reserve Order to buy (sell) will be adjusted in the same
manner as a Non-Displayed Limit Order, as provided for in paragraph
(d)(2)(A) of this Rule, provided that it will never be priced higher
(lower) than the working price of the display quantity of the Reserve
Order.'' The Exchange proposes to replace the cross reference to
``paragraph (d)(2)(A) of the Rule'' with the relevant text from that
paragraph (i.e., that the working price for the reserve interest of a
resting Reserve Order to buy (sell) will be adjusted ``to be the lower
(higher) of the limit price, or the NBO (NBB) . . . .'' \8\ The
Exchange deems this proposed change as non-substantive because it
merely copies the text that is being cross-referenced in the approved
rule without any changes.
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    \8\ See proposed Rule 6.62P-O(d)(1) (providing, in relevant
part, that ``[t]he working price of the reserve interest of a
resting Reserve Order to buy (sell) will be adjusted to be the lower
(higher) of the limit price, or the NBO (NBB), provided that it will
never be priced higher (lower) than the working price of the display
quantity of the Reserve Order.). (emphasis added).
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2. Statutory Basis
    The proposed rule change is consistent with Section 6(b) of the
Act,\9\ in general, and furthers the objectives of Section 6(b)(5),\10\
in particular, because it is designed to prevent fraudulent and
manipulative acts and practices, to promote just and equitable
principles of trade, to foster cooperation and coordination with
persons engaged in facilitating transactions in securities, to remove
impediments to, and perfect the 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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    \9\ 15 U.S.C. 78f(b).
    \10\ 15 U.S.C. 78f(b)(5).
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    The Exchange believes that the proposed rule change is designed to
remove impediments to and perfect the mechanism of a free and open
market because it would allow for the combined use of two existing
order types available on the Exchange and permit the Exchange to offer
functionality similar to that already available on the Exchange's
(five) affiliated equities exchanges and at least one other (non-NYSE)
equities exchange.\11\ The Exchange believes that offering ALO Reserve
Orders on the Exchange would promote uniformity in order types and
functionality across the NYSE equity and options markets. OTP Holders
and OTP Firms would be free to choose to use the proposed ALO Reserve
Order type or not, and the proposed change would not otherwise impact
the operation of the Reserve Order or ALO Order as described in current
Exchange rules. The Exchange also believes that the proposed rule
change would remove impediments to and perfect the mechanism of a free
and open market, as well as protect investors and the public interest,
by expanding the options available to OTP Holders

and OTP Firms when trading on the Exchange and promoting increased
liquidity and additional trading opportunities for all market
participants.
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    \11\ See note 7, supra (citing to equities markets that offer
this functionality).
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    The proposed non-substantive change to Rule 6.62P-O(d)(1) to
specify how the working price of the reserve interest of a resting
Reserve Order is adjusted would add clarity and transparency to
Exchange rules to the benefit of investors.

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. Specifically, the Exchange's
proposal to adopt Reserve ALO Orders--which combine two existing orders
available on the Exchange--would not impose a burden on intramarket
competition because the proposed ALO Reserve Order is available to all
market participants that trade on the Exchange.
    The Exchange believes that the proposed change would enhance inter-
market competition as other options exchanges that do not currently
offer this functionality are free to do so. The Exchange also believes
that, to the extent the proposed change increases opportunities for
order execution, the proposed change would promote competition by
making the Exchange a more attractive venue for order flow and
enhancing market quality for all market participants.
    The Exchange believes the proposed non-substantive change to Rule
6.62P-O(d)(1) to specify how the working price of the reserve interest
of a resting Reserve Order is adjusted, would not impose an undue
burden on competition. This proposed change is not meant to be
competitive but is instead designed to add clarity, transparency, and
internal consistency to Exchange rules.

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

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

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

    Because the foregoing proposed rule change does not: (i)
significantly affect the protection of investors or the public
interest; (ii) impose any significant burden on competition; and (iii)
become operative for 30 days from the date on which it was filed, or
such shorter time as the Commission may designate, it has become
effective pursuant to Section 19(b)(3)(A) of the Act \12\ and Rule 19b-
4(f)(6) thereunder.\13\
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    \12\ 15 U.S.C. 78s(b)(3)(A).
    \13\ 17 CFR 240.19b-4(f)(6). In addition, Rule 19b-4(f)(6)(iii)
requires a self-regulatory organization to give the Commission
written notice of its intent to file the proposed rule change, along
with a brief description and text of the proposed rule change, at
least five business days prior to the date of filing of the proposed
rule change, or such shorter time as designated by the Commission.
The Exchange has satisfied this requirement.
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    A proposed rule change filed pursuant to Rule 19b-4(f)(6) under the
Act normally does not become operative for 30 days after the date of
its filing. However, Rule 19b-4(f)(6)(iii) \14\ permits the Commission
to designate a shorter time if such action is consistent with the
protection of investors and the public interest. The Exchange has
requested that the Commission waive the 30-day operative delay so that
it may implement the ALO Reserve order type without delay. The
Commission believes that waiver of the operative delay is consistent
with the protection of investors and the public interest because the
proposal raises no novel or controversial issues in permitting the
proposed combination of two order types already in use on the Exchange,
as well as replacing a cross-reference to improve clarity in the
Exchange's rules. Accordingly, the Commission hereby waives the 30-day
operative delay and designates the proposal operative upon filing.\15\
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    \14\ 17 CFR 240.19b-4(f)(6)(iii).
    \15\ For purposes only of accelerating the operative date of
this proposal, the Commission has considered the proposed rule's
impact on efficiency, competition, and capital formation. 15 U.S.C.
78c(f).
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    At any time within 60 days of the filing of such proposed rule
change, the Commission summarily may temporarily suspend such rule
change if it appears to the Commission that such action is necessary or
appropriate in the public interest, for the protection of investors, or
otherwise in furtherance of the purposes of the Act.

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-NYSEARCA-2023-85 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-NYSEARCA-2023-85. 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-NYSEARCA-2023-85 and should
be submitted on or before January 10, 2024.

    For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\16\
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    \16\ 17 CFR 200.30-3(a)(12).
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Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2023-27913 Filed 12-19-23; 8:45 am]
BILLING CODE 8011-01-P


Appendix D, Page 1 of 15 Appendix D. Avian Respiratory Physiology Project Introduction This work plan originally included two primary purposes: determination of maximum respirable and inhalable particle size, and a comparison of avian and mammalian respiratory physiology. Determining the maximum respirable particle size would allow prediction of inhalation dose for avian species, while a comparison of avian and mammalian respiratory physiology will aid in determining potential causes for relative chemical absorption differences between birds and mammals. While plenty of data exist for mammalian inhalation and avian ingestion toxicity, little to none exist for avian inhalation. It is hoped that information resulting from this investigation will aid in predicting avian inhalation toxicity from avian oral toxicity.

Very little information was found regarding respirable or inhalable particles size for avian species. Only one study was found that related particulate deposition in the respiratory tract to particulate size. This was with one species, the domestic chicken. The largest particle diameter that was shown to have been deposited into the lung was in the range of 3.7 to 7

m. Other studies were found, but they did not have a wide particulate size range, being restricted to around 1

m.

Some excellent papers were found describing and discussing avian respiratory anatomy and physiology. A couple of papers compared mammalian and avian respiratory anatomy and physiology, being appropriate for our purposes. Three important differences were evident. First, the gaseous exchange tissue in avian lungs is thinner than the analogous tissue in mammalian lungs. Second, the surface area of such exchange tissue in a bird is greater than in a similar sized mammal. Third, the avian lung more efficiently exchanges gases with inspired air by both crossand counter current mechanisms, a method quite different from that utilized in mammalian lungs. The first two aspects are applicable for consideration of chemical absorption from both particulate and gaseous phases. The last aspect would be most applicable for gaseous phase chemicals. This information indicates that chemical absorption through respiratory surfaces is likely quite different between mammals and birds. It is therefore predicted that toxicological response in birds, via inhalation, will be greater for birds compared to mammals due to increased chemical absorption in avian lungs. The question is, how much greater?

Maximum Inhalable and Respirable Particle Size Two studies investigating particulate deposition in avian lungs were found. The white leghorn chicken ( Gallus domesticus) was the species utilized in both studies. In the earlier study, five discrete radio labeled particle sizes ( 0.091, 0.176, 0.312, 1.1, and 3.7 7.0

m) were inhaled through a mask by anaesthetized chickens ( Hayter and Besch, 1974). Different sections of the hen were then assayed for radioactivity as an indication of particulate deposition. The sections were divided into the head, trachea, lung region, and posterior air sac ( deepest penetration). While all particles penetrated into the deepest portions of the lung, particle size and penetration Appendix D, Page 2 of 15 depth into the respiratory tract were inversely related for particle sizes up to 0.312

m ( Figure 1). While the 3.7 to 7

m particles did not appear to follow the same trend, the data for all particles in that range were lumped together such that the sum of the radioactivity for all particle sizes within that range exceeded the radioactivity for a single particle size. What was evident was the largest proportion of the large particles were deposited in the head region, while the largest proportion of the small particles were deposited in the posterior air sac and lung regions. This indicates that increasingly large particles have a decreasing likelihood of penetration into the lungs.

A second study also utilized chickens to investigate particulate deposition within avian lungs ( Mensah and Brain, 1982). However, they restricted the range of particle sizes to 0.45

m ( ± 1.4), meaning the largest particle size was in the neighborhood of 2

m. Considering that the previous study had shown larger particle sizes were indeed respirable, the Mensah and Brain study can not be used to assess maximum respirable particle size. While they criticized the particle size specific deposition pattern found by Hayter and Besch, and found no statistically significant deposition pattern in their own study; visual inspection revealed that the majority of deposition was in the lungs and posterior air sacs. This is similar to what Hayter and Besch found for similarly sized particles in their study.

What neither of these studies allow is determination of maximum respirable or inhalable particle sizes. Respirable particles are those that enter the lung, while inhalable particles are those that pass through the nares and enter the upper respiratory tract, but do not enter the lungs or air sacs. In both studies, all particles penetrated to the most posterior portions of the respiratory tract, regardless of size. What was evident was that penetration into the respiratory tract was inversely related to particle size.

An investigation of studies on particulate deposition in mammalian respiratory systems was conducted to see if information from those studies could be used to determine a maximum respirable particle size for avian species. An understanding of factors that govern particulate deposition would be necessary to determine the accuracy of such an extrapolation.

Three major modes of particulate deposition occur within airways; inertial impaction, sedimentation, and Brownian motion ( Brown et al., 1997, Heyder et al., 1986, Eisenbud, 1952). Inertial impaction is the important deposition mode in the upper respiratory tract and nasal passages. Air flow velocity and turbulence in this region impart enough inertia upon particles that they will overcome gaseous forces and collide with respiratory surfaces. The inertia that a particle attains is proportional to particle density and diameter, and air velocity. The greater the particle density and air flow, the greater the inertia, and the more likely there will be impaction. Once the air velocity decreases beyond a certain point, particles not subject to inertial impaction are deposited by sedimentation. This tends to be the case deeper within the respiratory pathways where, at least for mammals, air velocity is less than in the nasal region. Brownian motion is the mode of deposition for particles with a diameter of generally less than 0.1 µ m ( Eisenbud, 1952). Brownian motion describes the random motion of very small gaseous particles whose direction Appendix D, Page 3 of 15 can be altered through collision with other gaseous molecules. The important point to understand is that these factors will be the same regardless of the species.

A species specific factor that could alter particulate deposition is respiratory system morphology ( Heyder et al., 1986). Particulate deposition within lungs of organisms with significantly different respiratory morphologies is likely to differ between those organisms, as the differing morphologies will affect air velocity and turbulence. With this in mind, and since there is a paucity of particulate deposition information for avian species, are mammalian and avian lung morphologies similar enough such that data from studies on particulate deposition in mammalian respiratory systems may be extrapolated to avian respiratory systems?

As might be expected, the avian and mammalian respiratory systems have similarities and differences. The respiratory systems for both are similar cranial to the first bifurcation ( Brown et al., 1997), but not identical. Both have a nasal cavity with communicating sinuses, a cartilaginous supported larynx, and a tracheal lumen. In this region, one difference is the tracheal lumen in mammals has a U shaped cartilaginous support while the avian lung has a circular cartilaginous support. The fact that the cartilage does not completely enclose the trachea means that there is a portion of it that is collapsible. The collapsible tissue in the mammalian lung is purported to allow the coughing reflex in mammals to clear the trachea. It could also lead to greater turbulence in mammalian trachea as compared to the avian trachea, thereby leading to greater inertial impaction as compared to avian species. Differences in the nasal cavity may also exist. The avian nasal cavity is lined with semi circular conchae, whereas the mammalian cavity is not. Both structures generate considerable turbulence that would lead to particulate impaction. But it is unclear if the structural differences in the upper respiratory tract are great enough to lead to significantly different particulate deposition characteristics in this region.

Considerable differences exist between the mammalian and avian lung. The avian lung consists of a set of air sacs that act like bellows circulating air uni directionally through the lung ( Brown et al.. 1997, Maina et al., 1989). The mammalian lung is a series of bifurcating airways in which air flow is bi directional. The gas exchange tissues in avian lungs line a series of parallel structures through which the air flows while the analogous tissue in mammals lines many small sacs called alveoli. These structural differences indicate that particulate deposition characteristics within the lung itself might be considerably different between mammals and birds.

Following a review of avian and mammalian morphology, the upper respiratory system might be similar enough between the two that it might be possible to determine a maximum respirable particle size for avian species based on particulate deposition studies with mammals. It is still not possible to predict maximum inhalable particle size.

One study proposing modeling of interspecies inhaled particulate deposition in mammals might be particularly useful to determine whether or not maximum respirable particle size in rats and humans would be similar to that for birds. A plot of the fraction of particles entering the trachea that are deposited in the naso pharyngeal and tracheal region relative to particle size Appendix D, Page 4 of 15 ( maximum particle size in studies was 6

m) revealed an asymptotic relationship in humans at maximal activity was being approached for 6

m particles ( minute volume of 122,000 ml/ min) ( Figure 2) ( Martonen et al., 1992). The maximum respirable particle size in humans at maximal activity levels is likely to be to close to 6

m. As activity level decreased, no asymptote was evident for the same particle size. This indicates that the maximum respirable particle size decreases as activity level, and thereby respiratory rate and minute volume, increases. Similar plots for rats did not reveal any asymptotic relationship for 6

m particles despite increasingly elevated respiratory activity ( 504 ml/ min) ( Figure 3), indicating that the maximum respirable particle size is likely greater for rats than for humans. This is ironic considering that the nares diameter in humans, being much greater than that for rats, should allow larger particles to pass compared to rats. What might be responsible for the difference in particulate deposition?

Interestingly, two factors pertaining to inertial impaction might explain these differences. Upper respiratory tract form in humans is different relative to rats. It makes an approximately 90 degree turn from horizontal to vertical in humans, while it remains essentially horizontal in rats. Any inertial forces attained by particles are more likely to lead to impaction when the particle encounters a 90 degree turn such as in the upper respiratory tract of an organism like a human or bird. In addition, the minute volume in humans was much greater than it was for rats. Minute volume for the humans in the study ranged from 7,000 to 122,000 ml/ min, and from 170 to 504 ml/ min for rats. These great differences could lead to considerable differences in particulate inertia for identically sized particles, and lead to different impaction likelihood. It is apparent from this study that despite the similarity in respiratory system structure between rats and humans, factors such as form and minute volume appear to have a considerable effect on particulate deposition, and thereby maximum respirable particle size.

Based on minute volume alone, it might be expected that the data for rats might be useable for prediction of maximum respirable particle size for birds. Using the allometric relationship between body weight and inhalation rate ( ml/ min) cited in the wildlife exposures handbook ( USEPA, 1993), the minute volume for non passerine birds up to 1 kg body weight will be around 300 ml/ min. This is within the reported minute volume range for the rats in the Martonen et al. study. However, the form of the upper respiratory tract differs considerably between the rat and birds. As noted earlier, this could have a significant affect upon particulate deposition within the upper respiratory tract meaning that the rat data may not accurately reflect what would be expected for birds.

On the other hand, based on the form of the upper respiratory tract, the data reported in Martonen et al. for humans might reflect what would be expected for birds. The upper respiratory tract makes an approximate 90 degree turn in both humans and birds. However, the minute volumes differ considerably. This would lead to large inertial differences between the two for the same particle size, ultimately leading to differences in particulate impaction. Therefore, the human data may not be applicable to avian species.

The data cited in Martonen et al. ( 1992) indicated an inverse relationship between Appendix D, Page 5 of 15 maximum respirable particle size and minute volume. Maximum respirable particle size was predicted from a plot of the fraction value noted earlier, yet log transformed, versus the particulate diameter. Setting the fraction value to 0.3 ( equivalent to the log transformed fraction deposition of one) in the relationship equation allowed calculation of an upper limit for particle size. Anything smaller would be expected to pass through the naso pharyngeal region and be considered respirable, while anything larger would not. The apparent asymptotic relationship noted earlier indicates that the relationship is not necessarily linear. Therefore, a maximum value predicted in this manner would likely underestimate the actual maximum. However, using the same method for all data will yield a constant underestimation for all data, and allow examination of the relationship between minute volume and maximum respirable particle size.

If the predicted maximal diameters are plotted relative to minute volume, it appears an inverse relationship exists between minute volume and maximum respirable particle size ( Figures 4 and 5). However, a significant gap exists for minute volumes between 7,000 and 504 ml/ min. In addition, the maximum respirable particle size will not get infinitely large at infinitely low minute volumes since gravitational forces will exceed the inertial forces up to an unknown particle size, and some particles will be so small that they will not impact despite tremendous airflow velocity. Therefore, a complete relationship is not evident.

Respiratory structure, form, and minute volumes all need to be known for predictions of maximum respirable particle size to be predicted. For avian species, allometric relationships have been established for minute volume, and upper respiratory tract structure and form is likely to be similar among species. What also needs to be known is a relationship between particulate deposition in avian species and the above factors. These data do not exist for avian species, leaving only mammalian data for any modeling effort. Significant respiratory structure differences exist between mammals and birds, emphasizing the difficulty in extrapolating from the larger mammalian data base to the virtually non existent avian data.

In conclusion, very little work has been done to establish what the maximum respirable or inhalable particle size for avian species would be. To this point, the largest particle size that has been demonstrated to be respirable in birds is 7

m. While this is certainly not likely to be the maximum, prediction of the maximum particle size would undoubtedly be complex, leaving 7

m as the most accurate estimate.

Comparison of Avian and Mammalian Respiratory Physiology This comparison of respiratory physiology will center on a discussion of those aspects affecting chemical uptake from inhaled air and pose how the physiological differences might affect relative absorption of chemicals from the air.

Assuming the chemical has bypassed impaction at sites elsewhere in the respiratory system and has reached gas exchange tissue sites, three primary factors govern chemical uptake, the thickness of tissue through which the chemical must pass ( assuming a passive transport process) Appendix D, Page 6 of 15 in order to enter the blood, the surface area of the exchange tissue, and the chemical concentration gradient between that of the inhaled air and that in the blood. By Fick's law of diffusion:

       Q D A u x t =   × × × ( ) where,

 Q = mass uptake D = chemical specific diffusion constant A = surface area of the diffusion site  u = concentration gradient  x = tissue thickness  t = duration of diffusion The rate of diffusion and, therefore, the total chemical uptake per unit time, is inversely related to the distance the chemical must travel ( gas exchange tissue thickness for our purposes) and directly proportional to both the surface area of the exchange tissue and concentration gradient. These were the primary areas of comparison in this discussion.

The gas exchange tissue surface area in an avian lung is greater than that in the lung of a mammal of the same mass ( Maina et al., 1989). A log log plot between body mass and gas exchange tissue surface area revealed the relationships between body weight and exchange tissue surface area for mammals and birds are parallel ( from 2 to 1,300 g bw) with the y intercept for birds ( 60.1) being approximately 14% greater than for mammals ( 52.1). In addition, the mass specific surface area of the gas exchange tissue ( cm2 per gram body weight) in both mammals and birds is inversely related to body mass. Therefore, assuming an even distribution of chemical across the entire surface area of the exchange tissue, the contribution of gas exchange tissue surface area to chemical uptake should be approximately 14% greater in a bird than in a mammal of the same body mass with the same inhalation rate.

Not only is the surface area of the exchange tissue greater in avian lungs, but the thickness of the exchange tissue in avian lungs is less than that of the analogous tissue in a similar sized mammal ( Maina et al., 1989). A log log plot between body mass and the thickness of the gas exchange tissue revealed that the exchange tissue thickness in bird lungs is approximately twice that for the analogous tissue in a mammal of the same mass; the y intercept for the relationships were 116.5 for birds and 238 for mammals. In addition, the relationships are not parallel, with the slope for mammals being approximately double that for birds, indicating that the thickness difference increases as body mass increases. As a result, the contribution of exchange tissue thickness to chemical absorption in a bird should be at least twice what would be expected in mammal of the same body mass.

The previous two aspects of avian lung morphology address two aspects of Fick's law of diffusion; surface area of the diffusion site and tissue thickness. The affect of these two aspects on diffusion was already mentioned. For the purposes of our discussion here, the chemical Appendix D, Page 7 of 15 specific diffusion rate and the duration of diffusion are assumed to be constant for comparative purposes. The only remaining contributing factor in Fick's law is the concentration gradient.

Passive diffusion occurs whenever there is a concentration difference between two compartments. The greater the concentration difference, the greater is the " force" driving a chemical molecule to move from the higher concentration area to the lower concentration area. In addition, the longer that concentration difference is maintained, the longer the " force" will be maintained. While the concentration difference between the inhaled air and blood may not initially be any greater in birds than in mammals, birds are able to maintain that difference for a greater period of time, enhancing the diffusion of chemical from the inhaled air into the blood.

The cross current gas exchange mechanism in birds is a more efficient method of gaseous chemical absorption than the alveolar gas exchange mechanism in mammals ( Scheid, 1979). In the cross current mechanism, venous blood flow in one direction from a single vein divides into multiple venules that cross an air capillary containing air traveling perpendicular to the blood flow. In such an arrangement, chemical concentrations in the air will always be greater than the chemical concentration in the blood of adjacent venules, thereby maintaining the concentration gradient and maintaining the diffusion rate. The concentrations in the blood and air will not reach an equilibrium. In alveolar gas exchange, venous blood flows through a capillary network around an alveolus containing essentially stagnant air. Chemical concentrations in the surrounding capillaries will begin to approach those in the air over time, decreasing the concentration gradient and slowing the diffusion rate. Therefore, while the chemical concentration gradient between blood and gas in both birds and mammals might initially be the same, over time it will decrease in the mammalian lung yet remain relatively constant in the avian lung. This enhances gaseous chemical uptake in the avian lung relative to the mammalian lung.

The cross current mechanism explains uptake of chemicals that are either gaseous or dissolved in a liquid. What is unknown is if the efficiency of the cross current exchange mechanism applies to particulate bound chemicals. Both exchange tissue thickness and surface area are applicable to chemical containing particulates that may be deposited onto the exchange tissue. Therefore, those are the only two aspects that will be further considered.

Having established that the thickness and surface area of the exchange tissue in avian lungs favors enhanced chemical uptake in avian lungs relative to mammalian lungs, there remains a question concerning potential differences in chemical absorption in avian and mammalian lungs.

Two allometric relationships reported in Maina et al. ( 1989) along with Fick's law of diffusion were utilized to determine approximately how much different chemical uptake via inhalation will be for avian and mammalian lungs. Both of the reported relationships were mentioned earlier; one for exchange tissue thickness and the other for exchange tissue surface area. Both were utilized to calculate tissue thicknesses and surface areas for both mammalian and avian lungs, and are reported in Table 1. It can be seen that the difference between exchange tissue surface areas in mammalian and avian lungs remains constant over a body mass range of 1 Appendix D, Page 8 of 15 to 2,000 g. This indicates that the allometric relationships for surface area in mammals and birds are parallel. On the other hand, exchange tissue thickness increases more rapidly with body weight in mammals as compared to birds indicating the influence of tissue thickness on chemical diffusion will not be constant for all body weights. Diffusion will decrease as body weight increases due to increased tissue thickness, but for mammals it will decrease more per unit body weight change as compared to birds. This means the ratio of chemical mass absorption in birds relative to mammals will likely increase, from 2.4 to 3.5, as the respective body mass increases, favoring absorption in birds ( Table 1). Appendix D, Page 9 of 15 0 5 10 15 20 25 30 35 40 45 expired head trachea lung region posterior air sac %

of total radioactivity within size class 0.091 0.176 0.312 1.1 3.7  7 Figure 1. Deposition patterns for particulates in the respiratory system of white leghorn chickens ( Gallus domesticus). Data from Hayter and Besch, 1974. Appendix D, Page 10 of 15 Tracheo bronchial particulate deposition in humans 0.00 0.05 0.10 0.15 0.20 0.25 0.30 0.35 0 1 2 3 4 5 6 7 Particulate diame ter ( um)

Proportion of inhaled particles deposited (

log proportion) sedentary low activity light activity heavy activity maximal activity Figure 2. Particulate deposition tracheo bronchial region of the human respiratory tract under varying degrees of activity. Data from Martonen et al., 1992. Appendix D, Page 11 of 15 Particulate deposition in tracheo bronchial region of rats 0.00 0.02 0.04 0.06 0.08 0.10 0.12 0.14 0 1 2 3 4 5 6 7 Particulate diameter ( um )

Proportion of inhaled particulates deposited (

log proportion) 0% CO2 2% CO2 4% CO2 6% CO2 8% CO2 Figure 3. Particulate deposition in the tracheo bronchial region of the rat respiratory tract under varying degrees of activity. Data from Martonen et al., 1992. Appendix D, Page 12 of 15 Predicted maximum respirable particle size 0 5 10 15 20 25 30 35 40 0 100 200 300 400 500 600 Minute volume Particle size (

um) Predicted maximum respirable particle size Figure 4. Predicted maximum respirable particle size relative to minute volume; rats. Data from Martonen et al.,

1992. Appendix D, Page 13 of 15 Maximum respirable particle size 0 2 4 6 8 10 12 0 20000 40000 60000 80000 100000 120000 140000 Minute volume Particle size Maximum respirable particle size Figure 5. Predicted maximum respirable particle size relative to minute volume; humans. Data from Martonen et al.,

1992. Appendix D, Page 14 of 15 Table 1. Relative diffusion across pulmonary exchange tissue for chemicals inhaled by birds and mammals.

Exchange tissue surface area ( cm2) a Exchange tissue thickness ( nm) b Relative diffusion rate c BW ( g) avian mamma l avian/ mammal avian mamma l mammal/ avian Q avian Q mammal Qa/ Qm 1 61 52 1.16 117 238 2.0 0.52 0.22 2.4 10 463 398 1.16 129 292 2.3 3.59 1.36 2.6 20 854 734 1.16 133 311 2.3 6.42 2.36 2.7 30 1221 1050 1.16 135 323 2.4 9.02 3.25 2.8 40 1574 1353 1.16 137 331 2.4 11.49 4.09 2.8 50 1917 1648 1.16 138 338 2.4 13.85 4.88 2.8 60 2252 1936 1.16 140 344 2.5 16.14 5.64 2.9 70 2580 2218 1.16 140 348 2.5 18.37 6.37 2.9 80 2903 2496 1.16 141 353 2.5 20.55 7.08 2.9 90 3222 2770 1.16 142 356 2.5 22.68 7.77 2.9 100 3536 3040 1.16 143 360 2.5 24.78 8.45 2.9 110 3846 3307 1.16 143 363 2.5 26.84 9.11 2.9 120 4153 3571 1.16 144 366 2.5 28.88 9.77 3.0 130 4457 3832 1.16 144 368 2.6 30.88 10.40 3.0 140 4759 4091 1.16 145 371 2.6 32.86 11.03 3.0 150 5058 4348 1.16 145 373 2.6 34.82 11.66 3.0 160 5354 4603 1.16 146 375 2.6 36.76 12.27 3.0 170 5649 4857 1.16 146 377 2.6 38.68 12.87 3.0 180 5941 5108 1.16 146 379 2.6 40.58 13.47 3.0 190 6232 5358 1.16 147 381 2.6 42.46 14.06 3.0 200 6521 5606 1.16 147 383 2.6 44.33 14.64 3.0 210 6808 5853 1.16 147 385 2.6 46.18 15.22 3.0 220 7093 6098 1.16 148 386 2.6 48.02 15.79 3.0 1000 27007 23219 1.16 158 443 2.8 171.04 52.47 3.3 2000 49806 42820 1.16 163 471 2.9 305.97 90.91 3.4 ( a) Surface area = 60.6* BW0.883 ( birds) § ; = 52.1* BW0.883 ( mammals) § ( b) Mean harmonic thickness = 116.51* BW0.044 ( birds) § ; = 237.66* BW0.090 ( mammals) § ( c) Q = surface area / thickness. From Fick's law assuming constant chemical specific diffusion coefficient, concentration gradient, and exposure period. Q and diffusion are directly proportional. § Allometric equations from Maina et al. ( 1989). Appendix D, Page 15 of 15 REFERENCES Brown, R. E., J. D. Brain, N. Wang. 1997. The avian respiratory system: A unique model for studies of respiratory toxicosis and for monitoring air quality. Env Health Perspec 105: 188 200.

Eisenbud, M. 1952. Retention, distribution, and elimination of inhaled particles. Arch Indust Hyg Occup Med 6: 214 225.

Hayter, R. B., E. L. Besch. 1974. Airborne particle deposition in the respiratory tract of chickens. Poultry Science 53: 1507 1511.

Heyder, J., J. Gebhart, G. Rudolph, C. F. Schiller, W. Stahlhofen. 1986. Deposition of particles in the human respiratory tract in the size range 0.005 15 um. J Acrosol Sci 17: 811 825.

Maina, J. N., A. S. King, G. Settle. 1989. An allometric study of pulmonary morphometric parameters in birds, with mammalian comparisons. Phil Trans R Soc Lond 326: 1 57.

Martonen, T. B., Z. Zhang, Y. Yang. 1992. Interspecies modeling of inhaled particle deposition patterns. J Aerosol Sci 23: 389 406.

Mensah, G. A., J. D. Brain. 1982. Deposition and clearance of inhaled aerosol in the respiratory tract of chickens. J Appl Phys: Resp, Env, Exerc Phys 53: 1423 1428.

U. S. Environmental Protection Agency ( USEPA). 1993. Wildlife Exposure Factors Handbook. EPA/ 600/ R 13/ 187a, Office of Research and Development, Washington, DC.


[Federal Register Volume 78, Number 89 (Wednesday, May 8, 2013)]
[Notices]
[Pages 26828-26832]
[FR Doc No: 2013-10876]

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SECURITIES AND EXCHANGE COMMISSION

Release No. 34-69504; File No. SR-CBOE-2013-027]

Self-Regulatory Organizations; Chicago Board Options Exchange,
Incorporated; Order Granting Approval of Proposed Rule Change, as
Modified by Amendment No. 1, Relating to Trading Ahead of Customer
Orders and Best Execution and Interpositioning Requirements

May 2, 2013.

I. Introduction

    On March 5, 2013, Chicago Board Options Exchange, Incorporated
(``CBOE'' 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 adopt CBOE Rules 53.2
(Prohibition Against Trading Ahead of Customer Orders) and 53.8 (Best
Execution and Interpositioning). The proposed rule change was published
for comment in the Federal Register on March 21, 2013.\3\ On April 12,
2013, CBOE filed Amendment No. 1 to the proposed rule change.\4\ The
Commission did not receive any comments on the proposed rule change.
This order approves the proposed rule change, as modified by Amendment
No. 1.
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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. 69146 (March 15,
2013); 78 FR 17454 (``Notice'').
    \4\ See Amendment No. 1 dated April 12, 2013. Amendment No. 1
corrected minor errors in the rule text of proposed Rules 53.2 and
53.8. Because Amendment No. 1 is technical in nature, it is not
subject to notice and comment.
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II. Description of Proposed Rule Change

    The Exchange proposes to amend Rule 53.2 of the CBSX Rules, which
governs the treatment of customer orders and prohibits a CBSX Trading
Permit Holder from proprietarily trading ahead of a customer order, and
to adopt Rule 53.8 in the CBSX Rules to govern Trading Permit Holders'
best execution and interpositioning requirements. The Exchange
represented that the proposed rule change is consistent with Financial
Industry Regulatory Authority (``FINRA'') Rules 5320 (Prohibition
Against Trading Ahead of Customer Orders) \5\ and 5310 (Best Execution
and Interpositioning),\6\ respectively, in the Consolidated FINRA
Rulebook.
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    \5\ See Securities Exchange Act Release No. 63895 (February 11,
2011), 76 FR 9386 (February 17, 2011) (SR-FINRA-2009-090) (order
approving FINRA Rule 5320, ``Prohibition Against Trading Ahead of
Customer Orders''). Other exchanges have adopted substantially
similar rules prohibiting trading ahead of customer orders. See,
e.g., Securities Exchange Act Release No. 64418 (May 6, 2011), 76 FR
27735 (May 12, 2011) (SR-CHX-2011-008) (notice of filing and
immediate effectiveness of proposed rule change of Chicago Stock
Exchange, Inc. to adopt customer order protection language
consistent with FINRA Rule 5320); Securities Exchange Act Release
No. 65165 (August 18, 2011), 76 FR 53009 (August 24, 2011) (SR-
NYSEAmex-2011-059) (notice of filing and immediate effectiveness of
proposed rule change of NYSE Amex LLC (now known as NYSE MKT LLC) to
adopt customer order protection language that is substantially the
same as FINRA Rule 5320); and Securities Exchange Act Release No.
65166 (August 18, 2011), 76 FR 53012 (August 24, 2011) (SR-NYSEArca-
2011-057) (notice of filing and immediate effectiveness of proposed
rule change of NYSE Arca, Inc. to adopt customer order protection
language that is substantially the same as FINRA Rule 5320).
    \6\ See Securities Exchange Act Release No. 65895 (December 5,
2011), 76 FR 77042 (December 9, 2011) (SR-FINRA-2011-052) (order
approving FINRA Rule 5310, ``Best Execution and Interpositioning'').
Other exchanges have similar best execution and interpositioning
rules. See, e.g., NASDAQ Stock Market LLC Rule 2320 (Best Execution
and Interpositioning) and IM-2320; and NASDAQ OMX PHLX LLC Rule 764
(Best Execution and Interpositioning).

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Rule 53.2--Prohibition Against Trading Ahead of Customer Orders

    The proposed rule change would replace in its entirety the text of
current Rule 53.2 and add a number of exceptions. Proposed Rule 53.2
includes customer order protection language that states if a Trading
Permit Holder holds an order in an equity security from its own
customer or a customer of another broker-dealer, the Trading Permit
Holder is prohibited from trading that security on the same side of the
market for its own account at a price that would satisfy the customer
order. The proposed rule change states that this prohibition does not
apply if a Trading Permit Holder, who has traded proprietarily ahead of
a customer order, immediately thereafter executes the customer order up
to the size and at the same or better price at which it traded for its
own account. In other words, in the event that a Trading Permit Holder
trades ahead of an unexecuted customer order at a price that is equal
to or better than the unexecuted customer order on the CBSX System, the
Trading Permit Holder is required to execute the customer order at the
price received by the Trading Permit Holder or better; otherwise the
Trading Permit Holder will be in violation of improperly trading ahead
of the customer order.\7\ The proposed rule change also would establish
the minimum amount of price improvement necessary for a Trading Permit
Holder to execute an order on a proprietary basis when holding an
unexecuted limit order.\8\
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    \7\ For example, if a Trading Permit Holder buys 100 shares of a
security at $10 per share while holding customer limit orders in the
same security to buy at $10 per share equaling, in aggregate, 1000
shares, the Trading Permit Holder is required to fill 100 shares of
the customer limit orders at $10 per share or better.
    \8\ See proposed Rule 53.2, Interpretation and Policy .05. For
example, for customer limit orders priced greater than or equal to
$1.00, the minimum amount of price improvement required would be
$0.01.
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    The Exchange proposes to establish that a Trading Permit Holder
must have written procedures in place governing the execution and
priority of all pending orders that is consistent with proposed Rule
53.2 and the best execution requirements of proposed Rule 53.8 and must
ensure that these procedures are applied consistently.
    In furtherance of ensuring customer order protection, the proposed
rule change clarifies Trading Permit Holder obligations in handling
marketable customer orders. In meeting these obligations, a Trading
Permit Holder must make every effort to execute a marketable customer
order that it receives fully and promptly. A Trading Permit Holder that
is holding a customer order that is marketable and has not been
immediately executed must make every effort to cross the order with any
other order received by the Trading Permit Holder on the other side of
the market up to the size of such order at a price that is no less than
the best bid and no greater than the best offer at the time that the
subsequent order is received by the Trading Permit Holder and that is
consistent with the terms of the orders. In the event that a Trading
Permit Holder is holding multiple orders on both sides of the market
that have not been executed, the Trading Permit Holder must make every
effort to cross or otherwise execute these orders in a manner that is
reasonable and consistent with the objectives of the proposed rule
change and with the terms of the orders. A Trading Permit Holder can
satisfy the crossing requirement by contemporaneously buying from the
seller and selling to the buyer at the same price.\9\
---------------------------------------------------------------------------

    \9\ See proposed Rule 53.2, Interpretation and Policy .06.
---------------------------------------------------------------------------

Large Orders and Institutional Accounts Exception \10\
---------------------------------------------------------------------------

    \10\ See proposed Rule 53.2, Interpretation and Policy .01.
---------------------------------------------------------------------------

    One exception to the prohibition on trading ahead of customer
orders permits Trading Permit Holders to negotiate terms and conditions
on the acceptance of certain large-sized orders (orders of 10,000
shares or more and greater than or equal to $100,000 in value) or
orders from institutional accounts.\11\ These terms and conditions will
permit Trading Permit Holders to continue to trade alongside or ahead
of these customer orders if the customer agrees. A Trading Permit
Holder will be permitted to trade a security on the same side of the
market for its own account at a price that will satisfy a customer
order provided that the Trading Permit Holder provides clear and
comprehensive written disclosure to each customer at account opening
and annually thereafter that: (1) Discloses that the Trading Permit
Holder may trade proprietarily at prices that would satisfy the
customer order, and (2) provides the customer with a meaningful
opportunity to opt in to the Rule 53.2 protections with respect to all
or any portion of its order(s).
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    \11\ Proposed Rule 53.2, Interpretation and Policy .01 defines
``institutional account'' as an account of: (a) A bank, savings and
loan association, insurance company, or registered investment
company; (b) an investment adviser registered either with the
Commission under Section 203 of the Investment Advisers Act of 1940
or with a state securities commission (or any agency or office
performing like functions); or (c) any other entity (whether a
natural person, corporation, partnership, trust, or otherwise) with
total assets of at least $50 million.
---------------------------------------------------------------------------

    If a customer does not opt in to the Rule 53.2 protections with
respect to all or any portion of its order(s), the Trading Permit
Holder may reasonably conclude that the customer has consented to the
Trading Permit Holder trading a security on the same side of the market
for its own account at a price that will satisfy the customer's
order.\12\
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    \12\ As is always the case, customers retain the right to
withdraw consent at any time. Therefore, a Trading Permit Holder's
reasonable conclusion that a customer has consented to the Trading
Permit Holder trading along with the customer's order is subject to
further instruction and modification from the customer.
---------------------------------------------------------------------------

    In lieu of providing written disclosure to customers at account
opening and annually thereafter, proposed Rule 53.2 will permit Trading
Permit Holders to provide clear and comprehensive oral disclosure to,
and obtain consent from, a customer on an order-by-order basis,
provided that the Trading Permit Holder documents who provided that
consent and that the consent evidences the customer's understanding of
the terms and conditions of the order. In addition, where a customer
has opted in to the Rule 53.2 protections, a Trading Permit Holder may
still obtain consent on an order-by-order basis to trade ahead of or
along with an order from that customer, provided that the Trading
Permit Holder documents who provided the consent and that the consent
evidences the customer's understanding of the terms and conditions of
the order.\13\
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    \13\ While a Trading Permit Holder organization relying on this
or any exception must be able to proffer evidence of its eligibility
for and compliance with the exception, the Exchange believes that
when obtaining consent on an order-by-order basis, Trading Permit
Holders must, at a minimum, document not only the terms and
conditions of the order (e.g., the relative price and size of the
allocated order/percentage split with the customer), but also the
identity of the person at the customer who approved the trade-along
request. For example, the identity of the person must be noted in a
manner that will enable subsequent contact with that person if a
question as to the consent arises (i.e., first names only, initials,
and nicknames will not suffice). A ``trade along'' request would be
when a Trading Permit Holder asks to trade for his/her proprietary
account while simultaneously holding and working a customer order in
that same stock.
---------------------------------------------------------------------------

No-Knowledge Exception \14\
---------------------------------------------------------------------------

    \14\ See proposed Rule 53.2, Interpretation and Policy .02.
---------------------------------------------------------------------------

    The Exchange also proposes to add a ``no-knowledge'' exception to
CBSX's

customer order protection rule. This proposed exception will allow a
proprietary trading unit of a Trading Permit Holder organization to
continue trading in a proprietary capacity and at prices that will
satisfy customer orders that are being held by another, separate
trading unit at the Trading Permit Holder organization. The ``no-
knowledge'' exception will be applicable with respect to NMS stocks, as
defined in Rule 600 of SEC Regulation NMS. In order to avail itself of
the ``no-knowledge'' exception, a Trading Permit Holder organization
will first be required to implement and utilize an effective system of
internal controls (such as appropriate information barriers) that
operate to prevent the proprietary trading unit from obtaining
knowledge of the customer orders that are held at a separate trading
unit. For example, in the case of a CBSX Broker \15\ that conducts both
a proprietary and agency brokerage business and has implemented and
utilized an effective system of internal controls, the ``walled off''
proprietary desk(s) of the CBSX Broker will be permitted to trade at
prices that will satisfy the customer orders held by the agency
brokerage desk without any requirement that these proprietary
executions trigger an obligation to fill pending customer orders at the
same price. The ``no-knowledge'' exception will also apply to a Trading
Permit Holder organization's market-making unit.
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    \15\ A ``CBSX Broker'' is a Trading Permit Holder who enters
orders as an agent. See Rule 50.3(5).
---------------------------------------------------------------------------

    A Trading Permit Holder organization that structures its order
handling practices in NMS stocks to permit its proprietary and/or
market-making desk to trade at prices that will satisfy customer orders
held by a separate trading unit must disclose in writing to its
customers, at account opening and annually thereafter, a description of
the manner in which customer orders are handled by the Trading Permit
Holder and the circumstances under which the Trading Permit Holder may
trade proprietarily at its market-making desk at prices that will
satisfy the customer order. This proposed disclosure may be combined
with the disclosure and negative consent statement permitted in
connection with the proposed large order and institutional account
exceptions.
    If a Trading Permit Holder intends to rely on the no-knowledge
exception by implementing information barriers, those information
barriers must (1) provide for the organizational separation of a
Trading Permit Holder's trading unit that holds customer orders and a
proprietary trading unit; (2) ensure that one trading unit does not
exert influence over the other trading unit; (3) ensure that
information relating to each trading unit's stock positions, trading
activities, and clearing and margin arrangements is not improperly
shared (except with persons in senior management who are involved in
exercising general managerial oversight of one or both entities); (4)
require each trading unit to maintain separate books and records (and
separate financial accounting); (5) require each trading unit to
separately meet all required capital requirements; (6) ensure the
confidentiality of each trading unit's book as provided by Exchange
rules; and (7) ensure that any other material, non-public information
(e.g., information related to any business transactions between a
trading unit and an issuer or any research reports or recommendations
issued by the trading unit) is not made improperly available to the
other trading unit in any manner that will allow that trading unit to
take undue advantage of that information while trading on CBSX. A
Trading Permit Holder will be required to submit the proposed
information barriers in writing to the Exchange upon request.
    The proposed rule change requires Trading Permit Holders that
intend to rely on the no-knowledge exception by implementing
information barriers to have ``appropriate'' information barriers. The
Exchange stated its belief that including these specific information
barrier requirements will clarify for Trading Permit Holders the types
of information barriers that will be deemed appropriate information
barriers and thus better allow Trading Permit Holders to rely on this
exception. The Exchange noted that its surveillance procedures will
continue to include a review of all orders for compliance with the
prohibition on trading ahead of customer orders, and part of that
review will include review of Trading Permit Holders' information
barriers to determine whether they are sufficient for Trading Permit
Holders to avail themselves of the no-knowledge exception for each
applicable order. These requirements regarding information barriers are
substantially similar to those set forth in CBOE Rule 54.8, which
includes special provisions for trading commodity-based trust shares on
CBSX, except that the proposed rule change provides that information
barriers must be submitted upon request while CBOE Rule 54.8 provides
that information barriers must be submitted and approved in advance.
The Exchange stated its belief that it is appropriate and efficient to
request from a Trading Permit Holder its information barriers as part
of its surveillance procedures with respect to the customer order
protection rule.

ISO Exception\16\
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    \16\ See proposed Rule 53.2, Interpretation and Policy .03.
---------------------------------------------------------------------------

    The proposed rule change also clarifies that a Trading Permit
Holder will be exempt from the obligation to execute a customer order
in a manner consistent with CBSX's customer order protection rule with
regard to trading for its own account that is the result of an
intermarket sweep order routed in compliance with Regulation NMS
(``ISO'') \17\ where the customer order is received after the Trading
Permit Holder routed the ISO. Where a Trading Permit Holder routes an
ISO to facilitate a customer order and that customer has consented to
not receiving the better prices obtained by the ISO, the Trading Permit
Holder also will be exempt with respect to any trading for its own
account that is the result of the ISO with respect to the consenting
customer's order.
---------------------------------------------------------------------------

    \17\ 17 CFR 242.600(b)(30)(ii).
---------------------------------------------------------------------------

Odd Lot and Bona Fide Error Transaction Exception \18\
---------------------------------------------------------------------------

    \18\ See proposed Rule 53.2, Interpretation and Policy .04.
---------------------------------------------------------------------------

    The Exchange proposes applying an exception for a firm's
proprietary trade that (1) offsets a customer odd lot order (i.e., an
order less than one round lot, which is typically 100 shares); or (2)
corrects a bona fide error. With respect to bona fide errors, Trading
Permit Holder will be required to demonstrate and document the basis
upon which a transaction meets the bona fide error exception. For
purposes of this proposed Rule, the definition of a ``bona fide error''
is as defined in Regulation NMS's exemption for error correction
transactions.\19\
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    \19\ See Securities Exchange Act Release No. 55884 (June 8,
2007), 72 FR 32926 (June 14, 2007) (Order Exempting Certain Error
Correction Transactions from Rule 611 of Regulation NMS under the
Securities Exchange Act of 1934).
---------------------------------------------------------------------------

Trading Outside Normal Market Hours \20\
---------------------------------------------------------------------------

    \20\ See proposed Rule 53.2, Interpretation and Policy .07.
---------------------------------------------------------------------------

    The proposed rule change will expand CBSX's customer order
protection requirements to apply at all times that a customer order is
executable by the Trading Permit Holder, even outside the period of
normal market hours. Thus, customers

will have the benefit of the customer order protection rules at all
times where such order is executable by the Trading Permit Holder,
subject to any applicable exceptions. This exception will apply to
those Trading Permit Holders that accept customer orders after normal
market hours.

Rule 53.8--Best Execution and Interpositioning

    The Exchange also proposes to adopt a new rule to govern Trading
Permit Holders' best execution and interpositioning requirements.
Proposed Rule 53.8(a)(1) will require a Trading Permit Holder or person
associated with a Trading Permit Holder, in any transaction for or with
a customer or a customer of another broker-dealer, to use ``reasonable
diligence'' to ascertain the best market for a security and to buy or
sell in that market so that the resultant price to the customer is as
favorable as possible under prevailing market conditions. The proposed
rule identifies five factors that are among those to be considered in
determining whether the Trading Permit Holder or person associated with
a Trading Permit Holder has used reasonable diligence:
    (1) The character of the market for the security;
    (2) the size and type of transaction;
    (3) the number of markets checked;
    (4) the accessibility of the quotation; and
    (5) the terms and conditions of the order as communicated to the
Trading Permit Holder or person associated with the Trading Permit
Holder.
    Proposed Rule 53.8(a)(2) relates to interpositioning and prohibits
a Trading Permit Holder or person associated with a Trading Permit
Holder, in any transaction for or with a customer or a customer of
another broker-dealer, from interjecting a third party between the
Trading Permit Holder or person associated with a Trading Permit Holder
and the best market for the subject security in a manner inconsistent
with the best execution requirements in subparagraph (a)(1) of proposed
Rule 53.8.
    Proposed Rule 53.8 also includes provisions related to the use of a
broker's broker, the staffing of order rooms, and the application of
the best execution requirements to other parties. Proposed paragraph
(b) provides that when a Trading Permit Holder cannot execute directly
with a market but must employ a broker's broker or some other means in
order to ensure an execution advantageous to the customer, the burden
of showing the acceptable circumstances for doing so is on the Trading
Permit Holder. Proposed paragraph (c) provides that failure to maintain
or adequately staff a department assigned to execute customers' orders
cannot be considered justification for executing away from the best
available market; nor can channeling orders through a third party as
reciprocation for service or business operate to relieve a Trading
Permit Holder of its obligations under proposed Rule 53.8. Proposed
paragraph (d) provides that a Trading Permit Holder through which an
order is channeled and that knowingly is a party to an arrangement
whereby the initiating Trading Permit Holder has not fulfilled its
obligations under Rule 53.8 will also be deemed to have violated Rule
53.8. Proposed paragraph (e) provides that the obligations in
paragraphs (a) through (d) apply when the Trading Permit Holder acts as
agent for the account of its customer as well as when transactions are
executed as principal.
    Proposed Rule 53.8 includes several Interpretations and Policies to
provide additional guidance and clarity regarding Trading Permit
Holders' obligations with respect to the best execution and
interpositioning requirements. Proposed Interpretation and Policy .01
reinforces a Trading Permit Holder's duty to make every effort to
execute a marketable customer order that it receives fully and
promptly. Proposed Interpretation and Policy .02 defines the term
``market'' for the purposes of proposed Rule 53.8.\21\
---------------------------------------------------------------------------

    \21\ For purposes of proposed Rule 53.8 and the accompanying
Interpretations and Policies, the term ``market'' or ``markets'' is
to be construed broadly, and it encompasses a variety of different
venues, including, but not limited to, market centers that are
trading a particular security. This expansive interpretation is
meant to both inform broker-dealers as to the breadth of the scope
of venues that must be considered in the furtherance of their best
execution obligations and to promote fair competition among broker-
dealers, exchange markets, and markets other than exchange markets,
as well as any other venue that may emerge, by not mandating that
certain trading venues have less relevance than others in the course
of determining a firm's best execution obligations.
---------------------------------------------------------------------------

    Proposed Interpretation and Policy .03 addresses broker-dealers
that are executing a customer's order against the Trading Permit
Holder's quote. It provides that a Trading Permit Holder's duty to
provide best execution in any transaction ``for or with a customer of
another broker-dealer'' does not apply in instances when another
broker-dealer is simply executing a customer order against the Trading
Permit Holders' quote. The duty to provide best execution to customer
orders received from other broker-dealers arises only when an order is
routed from the broker-dealer to the Trading Permit Holder for the
purpose of order handling and execution. This clarification is intended
to draw a distinction between those situations in which the Trading
Permit Holder is acting solely as the buyer or seller in connection
with orders presented by a broker-dealer against the Trading Permit
Holder's quote, as opposed to those circumstances in which the Trading
Permit Holder is accepting order flow from another broker-dealer for
the purpose of facilitating the handling and execution of such orders.
    Proposed Interpretation and Policy .04 provides that when a Trading
Permit Holder cannot execute directly with a market but must employ a
broker's broker or some other means in order to ensure an execution
advantageous to the customer, the burden of showing the acceptable
circumstances for doing so is on the Trading Permit Holder. Examples of
acceptable circumstances are where a customer's order is crossed with
another firm that has a corresponding order on the other side, or where
the identity of the firm, if known, would likely cause undue price
movements adversely affecting the cost or proceeds to the customer.
    Proposed Interpretation and Policy .05 addresses the fact that
markets for securities differ dramatically and provides additional
guidance regarding a Trading Permit Holder's best execution obligations
when handling an order involving any security for which there is
limited pricing information or other quotations available. The
Interpretation and Policy emphasizes that Trading Permit Holders must
be especially diligent with respect to best execution obligations where
there is limited quotation or other pricing information available
regarding the security that is the subject of the order and requires
Trading Permit Holders to have written policies and procedures in place
to address the steps the Trading Permit Holder will take to determine
the best interdealer market for such a security in the absence of
multiple quotations or pricing information and to document how they
have complied with those policies and procedures. The Interpretation
and Policy specifically notes that, when handling orders for these
securities, Trading Permit Holders should generally seek out other
sources of pricing information or potential liquidity, which may
include obtaining quotations from other sources (e.g., other firms that
the Trading Permit Holder previously has traded within the security).
For example, in many instances, particularly in the context of equity
securities with limited quotation information available, contacting
other broker-dealers may be necessary to

comply with a Trading Permit Holder's best execution obligations.
    When placing an order with a Trading Permit Holder, customers may
specifically instruct the Trading Permit Holder to route the order to a
particular market for execution.\22\ Proposed Interpretation and Policy
.06 addresses situations where the customer has, on an unsolicited
basis, specifically instructed the Trading Permit Holder to route that
customer's order to a particular market for execution.\23\ Under those
circumstances, the Trading Permit Holder will not be required to make a
best execution determination beyond that specific instruction; however,
the Interpretation and Policy mandates that Trading Permit Holders
process that customer's order promptly and in accordance with the terms
of the order. The Interpretation and Policy also makes clear that where
a customer has directed the Trading Permit Holder to route an order to
another specific broker-dealer that is also a Trading Permit Holder,
the exception will not apply to the receiving Trading Permit Holder to
which the order was directed.\24\
---------------------------------------------------------------------------

    \22\ When the order is for an NMS security, these orders are
often referred to as ``directed orders.'' See 17 CFR 242.600(b)(19).
Of note, directed orders are excluded from the order routing
statistics required to be produced under Rule 606 of SEC Regulation
NMS. See 17 CFR 242.606.
    \23\ The Interpretation and Policy also clarifies that a Trading
Permit Holder's best execution obligations extend to all customer
orders and is intended to avoid the potential misimpression that the
paragraph limits the scope of the rule's requirements.
    \24\ For example, if a customer of Trading Permit Holder Firm A
directs Trading Permit Holder Firm A to route an order to Trading
Permit Holder Firm B, Trading Permit Holder Firm B will continue to
have best execution obligations to that customer order received from
Trading Permit Holder Firm A.
---------------------------------------------------------------------------

    Proposed Interpretation and Policy .07 codifies a Trading Permit
Holder's obligation when it undertakes a regular and rigorous review of
execution quality likely to be obtained from different market centers.
These obligations are set forth and explained in various Commission
releases and NASD Notices to Members.\25\
---------------------------------------------------------------------------

    \25\ See, e.g., Securities Exchange Act Release No. 37619A
(September 6, 1996), 61 FR 48290 (September 12, 1996) and NASD
Notice to Members 01-22 (April 2001).
---------------------------------------------------------------------------

III. Commission's Findings

    After careful review of the proposed rule change the Commission
finds that the proposed rule change, as modified by Amendment No. 1, is
consistent with the requirements of the Act and the rules and
regulations thereunder applicable to self-regulatory organization.\26\
In particular, the Commission finds that the proposed rule change is
consistent with Section 6(b)(5) of the Act,\27\ which requires, among
other things, that the rules of a national securities exchange be
designed to prevent fraudulent and manipulative acts and practices, 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.
---------------------------------------------------------------------------

    \26\ In approving this proposal, the Commission has considered
the proposed rule's impact on efficiency, competition, and capital
formation. See 15 U.S.C. 78c(f).
    \27\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------

    The Commission believes that the proposed rule change is designed
to protect customer orders by establishing requirements governing the
trading ahead of customer orders by member firms and governing best
execution and interpositioning with respect to the handling of customer
orders. By CBOE aligning its customer protection rules with those of
FINRA and other exchanges,\28\ the Commission believes that the
proposed rule change will help reduce the complexity of the customer
order protection rules for those CBOE firms that also are subject to
the customer protection rules of FINRA and other exchanges.
Furthermore, the Commission believes that the proposed rules will help
assure the protection of customer orders without imposing undue
regulatory costs on industry participants.
---------------------------------------------------------------------------

    \28\ See notes 5 and 6 supra.
---------------------------------------------------------------------------

IV. Conclusion

    It is therefore ordered, pursuant to Section 19(b)(2) of the
Act,\29\ that the proposed rule change (SR-CBOE-2013-027), as modified
by Amendment No. 1, be, and hereby is, approved.
---------------------------------------------------------------------------

    \29\ 15 U.S.C. 78s(b)(2).

    For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\30\
---------------------------------------------------------------------------

    \30\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------

Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2013-10876 Filed 5-7-13; 8:45 am]
BILLING CODE 8011-01-P


[Federal Register Volume 79, Number 110 (Monday, June 9, 2014)]
[Notices]
[Pages 33034-33035]
[FR Doc No: 2014-13281]

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DEPARTMENT OF TRANSPORTATION

Federal Aviation Administration

Membership in the National Parks Overflights Advisory Group
Aviation Rulemaking Committee

AGENCY: Federal Aviation Administration, Transportation.

ACTION: Notice.

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

SUMMARY: By Federal Register notice (See 79 FR 18757, April 3, 2014)
the National Park Service (NPS) and the Federal Aviation Administration
(FAA) invited interested persons to apply to fill two openings on the
National Parks Overflights Advisory Group (NPOAG) Aviation Rulemaking
Committee (ARC). The notice invited interested persons to apply to fill
one upcoming and one currently vacant seat, both representing
environmental concerns. This notice informs the public of the person
selected to fill one of the vacancies, no selection has been made for
the other open vacancy representing environmental concerns.

FOR FURTHER INFORMATION CONTACT: Keith Lusk, Special Programs Staff,
Federal Aviation Administration, Western-Pacific Region Headquarters,
P.O. Box 92007, Los Angeles, CA 90009-2007, telephone:<PHONE_NUMBER>,
email<EMAIL_ADDRESS>
SUPPLEMENTARY INFORMATION:

Background

    The National Parks Air Tour Management Act of 2000 (the Act) was
enacted on April 5, 2000, as Public Law 106-181, and subsequently
amended in the FAA Modernization and Reform Act of 2012. The Act
required the establishment of the advisory group within 1 year after
its enactment. The NPOAG was established in March 2001. The advisory
group is comprised of a balanced group of representatives of general
aviation, commercial air tour operations, environmental concerns, and
Native American tribes. The Administrator of the FAA and the Director
of NPS (or their designees) serve as ex officio members of the group.
Representatives of the Administrator and Director serve alternating 1-
year terms as chairman of the advisory group.
    In accordance with the Act, the advisory group provides ``advice,
information, and recommendations to the Administrator and the
Director--
    (1) On the implementation of this title [the Act] and the
amendments made by this title;
    (2) On commonly accepted quiet aircraft technology for use in
commercial air tour operations over a national park or tribal lands,
which will receive preferential treatment in a given air tour
management plan;
    (3) On other measures that might be taken to accommodate the
interests of visitors to national parks; and
    (4) At the request of the Administrator and the Director, safety,
environmental, and other issues related to commercial

air tour operations over a national park or tribal lands.''

Membership

    The current NPOAG ARC is made up of one member representing general
aviation, three members representing the commercial air tour industry,
four members representing environmental concerns, and two members
representing Native American interests. Current members of the NPOAG
ARC are as follows:
    Heidi Williams representing general aviation; Alan Stephen, Matt
Zuccaro, and Mark Francis representing commercial air tour operators;
Greg Miller, Michael Sutton, and Dick Hingson representing
environmental interests with one open seat; and Rory Majenty and Martin
Begaye representing Native American tribes.

Selection

    The member selected to fill the upcoming open seat representing
environmental concerns is Dick Hingson. Mr. Hingson is a current member
of the NPOAG and his term begins on the day of this Federal Register
notice publication. The term of service for NPOAG ARC members is 3
years.

    Issued in Hawthorne, CA on June 2, 2014.
Keith Lusk,
Program Manager, Special Programs Staff, Western-Pacific Region.
[FR Doc. 2014-13281 Filed 6-6-14; 8:45 am]
BILLING CODE 4910-13-P