[Federal Register Volume 84, Number 58 (Tuesday, March 26, 2019)]
[Notices]
[Pages 11347-11354]
[FR Doc No: 2019-05696]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-85365; File No. SR-MIAX-2019-12]

Self-Regulatory Organizations; Miami International Securities
Exchange, LLC; Notice of Filing and Immediate Effectiveness of a
Proposed Rule Change To Amend Exchange Rule 503

March 20, 2019.
    Pursuant to the provisions of Section 19(b)(1) of the Securities
Exchange Act of 1934 (``Act'') \1\ and Rule 19b-4 thereunder,\2\ notice
is hereby given that on March 7, 2019, Miami International Securities
Exchange, LLC (``MIAX Options'' or the ``Exchange'') filed with the
Securities and Exchange Commission (``Commission'') a proposed rule
change as described in Items I, II, and III below, which Items have
been prepared by the Exchange. The Commission is publishing this notice
to solicit comments on the proposed rule change from interested
persons.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
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I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change

    The Exchange is filing a proposal to amend Exchange Rule 503,
Openings on

the Exchange, Interpretations and Policies .03.
    The text of the proposed rule change is available on the Exchange's
website at http://www.miaxoptions.com/rule-filings/ at MIAX Options'
principal office, and at the Commission's Public Reference Room.

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

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

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

1. Purpose
    On October 12, 2018, the Exchange received approval from the
Securities and Exchange Commission (``SEC'' or ``Commission'') to list
and trade on the Exchange, options on the SPIKESTM Index, a
new index that measures expected 30-day volatility of the SPDR S&P 500
ETF Trust (commonly known and referred to by its ticker symbol,
``SPY'').\3\ To facilitate trading options on the Index the Exchange
proposes to amend Exchange Rule 503, Openings on the Exchange,
Interpretations and Policies .03.
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    \3\ See Securities Exchange Act Release No. 84417 (October 12,
2018), 83 FR 52865 (October 18, 2018) (SR-MIAX-2018-14) (Order
Granting Approval of a Proposed Rule Change by Miami International
Securities Exchange, LLC to List and Trade on the Exchange Options
on the SPIKES\TM\ Index).
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    Specifically, the Exchange proposes to amend Exchange Rule 503,
Openings on the Exchange, Interpretations and Policies .03, to provide
that bona fide Market Maker activity does not constitute either a
SPIKES strategy order or a modification to or cancellation of a
previously submitted SPIKES strategy order during the ``SPIKES Special
Settlement Auction.''
    The SPIKES Index is calculated using only standard options on SPY
that expire on the third Friday of each calendar month. Although weekly
options on SPY are available, these are not used in the calculation of
the Index. To determine the final settlement value of the Index, the
Exchange performs an Index settlement price calculation which includes
all SPY options that expire 30 days after the SPIKES settlement that
are included in the settlement (these options are referred to in this
rule filing as the ``constituent options''). In order to perform the
Index settlement price calculation, each constituent option is assigned
a Settlement Reference Price or ``SRP,'' defined and discussed in more
detail below. Each SRP is determined using the SPIKES Special
Settlement Auction, which is conducted once per month, in the
constituent options traded on the Exchange, on final settlement day.
The SPIKES Special Settlement Auction utilizes the Exchange's standard,
existing Opening Process, as defined and fully-described in Exchange
Rule 503(f), with a modification to account for situations where there
remains an order imbalance \4\ that must be filled at the opening price
after the requisite number of iterations of the imbalance process takes
place under the Exchange's existing Opening Process (the Exchange's
existing Opening Process provides that the Exchange can open with an
imbalance after the requisite number of iterations of the imbalance
process takes place).\5\ This modification to the Exchange's existing
Opening Process to facilitate the execution of this remaining must-fill
interest is referred to as the special settlement imbalance process
(``SSIP''), which is governed by Interpretations and Policies .03 to
Exchange Rule 503, as described more fully below. This modified Opening
Process functionality, which is accessible to all Members of the
Exchange for participation, occurs in highly liquid SPY options (which
are simultaneously opening and available for trading on up to 14 other
exchanges, thus providing real-time cross-reference prices for the SPY
options included in the settlement) is used to conduct the SPIKES
Special Settlement Auction to settle expiring SPIKES options.
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    \4\ An ``imbalance'' occurs when there is insufficient liquidity
to satisfy all trading interest due an execution at a certain price.
See Exchange Rule 503(f)(2)(v).
    \5\ See Exchange Rule 503(f)(2)(vii)(B)(5).
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    As discussed more fully below, the Exchange's existing Opening
Process runs to completion and precedes the engagement of the new SSIP.
The existing Opening Process cannot occur prior to 9:30 a.m. Eastern
Time and only begins following the dissemination of a quote or trade in
the market for the underlying security.\6\ Following the dissemination
of a quote or trade in the market for the underlying security, the
System \7\ pauses for a period of time no longer than one half second
to allow the marketplace to absorb this information.\8\ When there is
an imbalance,\9\ the System broadcasts a System Imbalance Message
(which includes the symbol, side of the market, quantity of matched
contracts, the imbalance quantity, must fill quantity (i.e., the number
of contracts that must be filled in order for that option to open on
the Exchange at the indicated price), quantity of routable contracts,
and price of the affected series) to subscribers of the Exchange's data
feeds and begins an Imbalance Timer \10\ not to exceed three
seconds.\11\ Under the existing Opening Process the Exchange may repeat
this process up to three times.\12\ While the Exchange is conducting
its Opening Process, all 14 other option exchanges will also be
conducting their opening process for SPY options. As the Exchange works
through its process to resolve imbalances under the existing Opening
Process, other Exchanges will be open and serve as real-time cross-
reference prices for those SPY options, enabling market participants to
send orders to the Exchange if there are pricing anomalies for these
SPY options across venues. The longer it takes the Exchange to work
through the imbalance, the greater the likelihood that other exchanges
will have opened their SPY options market and the natural pressures of
a competitive market helps to eliminate any pricing anomalies and aid
in eliminating the imbalance on the Exchange.
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    \6\ See Exchange Rule 503(e)(1).
    \7\ The term ``System'' means the automated trading system used
by the Exchange for the trading of securities. See Exchange Rule
100.
    \8\ The Exchange notes that the current setting is one half
second.
    \9\ See supra note 4.
    \10\ The Exchange notes that the current Imbalance Timer setting
is one second.
    \11\ See Exchange Rule 503(f)(2)(vii).
    \12\ See Exchange Rule 503(f)(2)(vii)(B)(4).
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    As previously discussed, on the day the settlement value for the
Index is calculated, the Exchange conducts the SPIKES Special
Settlement Auction, using its standard, existing Opening Process for
all options on the Exchange, including the constituent options.\13\
Pursuant to the standard, existing Opening Process, if there are no
quotes or orders that lock or cross each other, the System will open by
disseminating the Exchange's best bid and offer among quotes and orders
that exist in the System at that time. If there are quotes or orders
that lock each other, the System will calculate an Expanded

Quote Range (``EQR''), as described in Rule 503(f)(2). The EQR
represents the limits of the range in which transactions may occur
during the Opening Process.\14\ The EQR is recalculated any time a
route timer or Imbalance Timer expires if material conditions of the
market (imbalance size, ABBO \15\ price and size, liquidity price or
size, etc.) have changed during the timer. Once calculated, the EQR
represents the limits of the range in which transactions may occur
during the Opening Process.\16\ The System uses the EQR to determine
the highest and lowest price of the opening price range.
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    \13\ For a complete description of the Exchange's standard,
existing Opening Process, refer to Exchange Rule 503, Openings on
the Exchange.
    \14\ See Exchange Rule 503(f)(2)(i). See also Exchange
Regulatory Circular 2012-02, which sets forth the tables that
describe the calculation of the EQR for option classes traded on the
Exchange, at http://www.miaxoptions.com/sites/default/files/circular-files/MIAX_Opening_Process_and_Pause_Timer.pdf.
    \15\ The term ``ABBO'' or ``Away Best Bid or Offer'' means the
best bid(s) or offer(s) disseminated by other Eligible Exchanges
(defined in Rule 1400(f)) and calculated by the Exchange based on
market information received by the Exchange from OPRA. See Exchange
Rule 100.
    \16\ See Exchange Rule 503(f)(2)(i).
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    To calculate the opening price, the System takes into consideration
all valid Exchange quotes and all valid orders, together with other
exchanges' markets for the series, and identifies the price at which
the maximum number of contracts can trade. If that price is within the
EQR and leaves no imbalance, the Exchange will open at that price,
executing marketable trading interest as long as the opening price
includes only Exchange interest.\17\ If the calculated opening price
included interest other than solely Exchange interest, the System will
broadcast a system imbalance message (which includes the symbol, side
of the market, quantity of matched contracts, the imbalance quantity,
must fill quantity, quantity of routable contracts, and price of the
affected series) to Exchange Members \18\ and initiate a ``route
timer,'' not to exceed one second.\19\
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    \17\ See Exchange Rule 503(f)(2)(iv).
    \18\ The term ``Member'' means an individual or organization
approved to exercise the trading rights associated with a Trading
Permit. Members are deemed ``members'' under the Exchange Act. See
Exchange Rule 100.
    \19\ See Exchange Rule 503(f)(2)(iv)(A).
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    If all opening and marketable interest cannot be completely
executed at or within the EQR without trading at a price inferior to
the ABBO, or cannot trade at or within the quality opening market range
in the absence of a valid width NBBO,\20\ the System will automatically
institute an imbalance process.\21\ The System will broadcast a system
imbalance message (which includes the symbol, side of the market,
quantity of matched contracts, the imbalance quantity, must fill
quantity, quantity of routable contracts, and price of the affected
series) to subscribers of the Exchange's data feeds, and begin an
Imbalance Timer, not to exceed three seconds.\22\ Market Makers \23\
may enter Opening Only (``OPG'') eQuotes,\24\ Auction or Cancel
(``AOC'') eQuotes,\25\ Standard quotes,\26\ Opening Orders (``OPG
Orders''),\27\ AOC Orders \28\ and limit orders during the Imbalance
Timer. Other Exchange Members may enter OPG Orders, AOC Orders and
other order types (except those order types not valid during the
Opening Process, as described in Rule 516) during the Imbalance
Timer.\29\ If, at the conclusion of the timer, quotes and orders
submitted during the Imbalance Timer, or other changes to the ABBO,
would not allow the entire imbalance amount to trade at the Exchange at
or within the EQR without trading at a price inferior to the ABBO, the
System will send a new system imbalance message to Exchange Members and
initiate a route timer for routable Public Customer orders not to
exceed one second. If, during the route timer, interest is received by
the System which would allow all interest to trade on the System (i.e.,
there is no longer an imbalance) at the opening price without trading
at a price inferior to other markets, the System will trade and the
route timer will end.\30\ The System may repeat the imbalance process
up to three times (as established by the Exchange).\31\ Following
completion of the third imbalance process, if there is an opening
transaction, any unexecuted contracts from the imbalance not traded or
routed will be cancelled back to the entering Member if the price for
those contracts crosses the opening price, in effect cancelling that
must fill interest.\32\ That is the completion of the Exchange's
standard, existing Opening Process.
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    \20\ The term ``NBBO'' means the national best bid or offer as
calculated by the Exchange based on market information received by
the Exchange from OPRA. See Exchange Rule 100.
    \21\ See Exchange Rule 503(f)(2)(vii).
    \22\ See Exchange Rule 503(f)(2)(vii)(A).
    \23\ The term ``Market Makers'' refers to ``Lead Market
Makers'', ``Primary Lead Market Makers'' and ``Registered Market
Makers'' collectively. See Exchange Rule 100.
    \24\ An opening only or ``OPG'' eQuote is a quote that can be
submitted by a Market Maker only during the Opening as set forth in
Rule 503. OPG eQuotes will automatically expire at the end of the
Opening Process. See Exchange Rule 517(a)(2)(iii).
    \25\ An Auction or Cancel or ``AOC'' eQuote is a quote submitted
by a Market Maker to provide liquidity in a specific Exchange
process with a time in force that corresponds with the duration of
that event and will automatically expire at the end of that event.
See Exchange Rule 517(a)(2)(ii).
    \26\ A Standard quote is a quote submitted by a Market Maker
that cancels and replaces the Market Maker's previous Standard
quote, if any. See Exchange Rule 517(a)(1).
    \27\ An Opening or ``OPG'' Order is an order that is valid only
for the opening process. See Exchange Rule 516(h).
    \28\ An Auction-or-Cancel or ``AOC'' order is a limit order used
to provide liquidity during a specific Exchange process with a time
in force that corresponds with that event. See Exchange Rule
516(b)(4).
    \29\ See supra note 10.
    \30\ See Exchange Rule 503(f)(2)(vii)(B)(2).
    \31\ See Exchange Rule 503(f)(2)(vii)(B)(4).
    \32\ See Exchange Rule 503(f)(2)(vii)(B)(5).
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    Now, where an imbalance exists in constituent options and the final
imbalance process has been conducted as part of the Exchange's
standard, existing Opening Process, instead of cancelling that must
fill interest back to the entering Member, the Exchange conducts the
SSIP,\33\ where the Exchange will satisfy that must fill interest. The
Exchange does not want to cancel any must fill interest, as this
liquidity could represent previously hedged interest that must be
unwound.
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    \33\ See Exchange Rule 503(f)(2)(vii)(B)(5)(a).
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    The SSIP is employed to satisfy all liquidity identified as must
fill which is creating the imbalance, referred to as the must fill
imbalance. The SSIP is an iterative process that is designed to
determine a price at which all must fill imbalance interest can be
satisfied.\34\ In the SPIKES Special Settlement Auction, in addition to
any order types that may be regularly accepted by the Exchange, the
Exchange will also accept settlement auction only orders (``SAO
Orders'') and settlement auction only eQuotes (``SAO eQuotes'') (SAO
Orders and SAO eQuotes are collectively referred to as ``SAOs'') at any
time after the opening of the Live Order Window (``LOW'') \35\ and the
Live Quote Window (``LQW''),\36\ respectively. SAOs are specific order
types that allow a Member to voluntarily tag such order as a SPIKES
strategy order, defined below. All orders for participation in the
SPIKES Special Settlement Auction that are related to positions in, or
a trading strategy involving, SPIKES Index options (``SPIKES strategy
orders''), and any change to or cancellation of any such order: (i)
Must be received prior to the applicable SPIKES strategy order cut-off
time for the constituent option series, as determined by the Exchange,
which may be no earlier than the opening of the LOQ or the LQW, and no
later than the opening of trading in the series. The

Exchange will announce all determinations regarding changes to the
applicable SPIKES strategy order cut-off time via Regulatory Circular
at least one day prior to implementation (however the Exchange
anticipates initially establishing the cut-off time at 9:20 a.m.
Eastern); and (ii) may not be cancelled or modified after the
applicable SPIKES strategy order cut-off time, unless the SPIKES
strategy order is not executed in the SPIKES Special Settlement Auction
and the cancellation or modification is submitted after the SPIKES
Special Settlement Auction is concluded (provided that any such SPIKES
strategy order may be modified or cancelled after the applicable SPIKES
strategy order cut-off time and prior to the applicable non-SPIKES
strategy order cut-off time in order to correct a legitimate error, in
which case the Member submitting the change or cancellation will
prepare and maintain a memorandum setting forth the circumstances that
resulted in the change or cancellation and will file a copy of the
memorandum with the Exchange no later than the next business day in a
form and manner prescribed by the Exchange).
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    \34\ See Exchange Rule 503, Interpretations and Policies .03.
    \35\ The Exchange notes that the current Live Order Window opens
at 7:30 a.m.
    \36\ The Exchange notes that the current Live Quote Window
setting opens at 9:25 a.m., however the Exchange plans to open the
Live Quote Window for the SPIKES Special Settlement Auction at 8:30
a.m.
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    In general, the Exchange considers orders to be SPIKES strategy
orders for purposes of Rule 503 Interpretation and Policy .03, if the
orders possess the following three characteristics: (A) Are for options
with the expiration that will be used to calculate the exercise or
final settlement value of the applicable volatility index option
contract; (B) are for options spanning the full range of strike prices
for the appropriate expiration for options that will be used to
calculate the exercise or final settlement value of the applicable
volatility index option contract, but not necessarily every available
strike price; and (C) are for put options with strike prices less than
the ``at-the-money'' strike price and for call options with strike
prices greater than the ``at-the-money'' strike price. They may also be
for put and call options with ``at-the-money'' strike prices.
    Whether certain orders are SPIKES strategy orders for purposes of
Interpretation and Policy .03 depends upon specific facts and
circumstances. The Exchange may also deem order types other than those
provided above as SPIKES strategy orders if the Exchange determines
that to be the case based upon the applicable facts and circumstances.
    These requirements are substantially similar to Cboe's requirements
for ``strategy orders'' participating in the VIX settlement
auction.\37\
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    \37\ See Cboe Rule 6.2, Hybrid Opening (and Sometimes Closing)
System (``HOSS''), Interpretations and Policies .01, Modified
Opening Procedure for Series Used to Calculate the Exercise/Final
Settlement Values of Volatility Indexes.
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    Market participants that actively trade SPIKES options may hedge
their positions with SPY option series that will also be used to
calculate the SPIKES exercise settlement/final settlement value. Market
participants holding hedged SPIKES options positions may trade out of
their SPY option series on the relevant SPIKES expiration/final
settlement date. Specifically, market participants holding short,
hedged SPIKES options could liquidate that hedge by selling their SPY
options series, while traders holding long, hedged SPIKES options could
liquidate their hedge by buying SPY option series. In order to seek
convergence with the SPIKES exercise/final settlement value, these
market participants may liquidate their hedges by submitting SPIKES
strategy orders in the appropriate SPY option series during the SPIKES
Special Settlement Auction on the SPIKES expiration/final settlement
date.
    The SPIKES strategy order cut-off time exists because trades to
liquidate hedges can contribute to an order imbalance during the SPIKES
Special Settlement Auction in SPY option series on expiration/final
settlement dates. For example, traders liquidating hedges could
predominantly be on one side of the market and those market
participants' orders may create buy or sell order imbalances during the
SPIKES Special Settlement Auction in SPY option series on expiration/
final settlement dates. As a result of having a SPIKES strategy order
cut-off time in place, the Exchange has created a defined window to
encourage participation in the SPIKES Special Settlement Auction among
market participants who may wish to place off-setting orders against
imbalances to which SPIKES strategy orders may have contributed.
Additionally, by precluding the modification or cancellation of SPIKES
strategy orders from occurring after the cut-off time, the Exchange is
ensuring that the order book reflects bona-fide interest for execution,
and is a feature designed to prevent manipulation of the final
settlement price.
    Next, to begin the SSIP, which occurs during the SPIKES Special
Settlement Auction and is done to resolve imbalances, the System
broadcasts a system imbalance message to all subscribers of the
Exchange's relevant data feed and begins an SSIP Imbalance Timer, the
duration of which shall be determined by the Exchange, not to exceed
ten seconds, and shall be communicated via Regulatory Circular. During
the SSIP Imbalance Timer, the System accepts all quote and order types
supported during the standard Opening Process. Next, the System
evaluates the must fill imbalance and adjusts the EQR by a defined
amount by appending to the EQR (adding to offers or subtracting from
bids) the EQR value (as determined by the Exchange and communicated via
Regulatory Circular).\38\ During the SSIP, the allowable EQR is
increased .5 times the EQR value upon each iteration of the SSIP. The
SSIP is repeated until a price is reached at which there is no
remaining must fill imbalance.
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    \38\ See supra note 14.
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    Once there is no remaining must fill imbalance, SAOs, AOC Orders,
AOC eQuotes, OPG Orders, and OPG eQuotes submitted into the SPIKES
Special Settlement Auction are cancelled. Any unfilled day limit orders
and GTC orders that are priced at the Opening Price are placed on the
Book and managed by the System.
    As previously discussed, the System assigns an SRP to each
constituent option to facilitate the calculation of the final
settlement price of the Index. If the System opens the constituent
option with a trade, the System assigns the constituent option an SRP
equal to the trade price in that option. If there is no locking or
crossing interest and the System opens the constituent option without a
trade, and the bid-ask spread is at or within a range as defined by the
Exchange in an SRP opening width table and communicated via Regulatory
Circular, the System assigns the constituent option an SRP equal to the
midpoint of the bid and ask prices. If the bid-ask spread is not within
a range as defined in the SRP opening width table, the System conducts
an additional process to determine the SRP of the constituent option,
as follows.
    First, the System starts a settlement reference price timer
(``SRPT'') (the duration of which shall be defined by the Exchange not
to exceed sixty seconds and shall be communicated via Regulatory
Circular). If, during the SRPT, there is a trade on the Exchange, the
System will set the SRP equal to the trade price. If, during the SRPT,
the bid-ask spread changes so that it is within a range defined in the
settlement price opening width table, the System will set the SRP equal
to the midpoint of the bid and ask price.

    If the SRPT expires, the System will set the SRP equal to the
Reference Price (the current price of that option utilizing the cash
index calculation formula, described above) of the constituent option
if it is equal to or inside the MBBO.\39\ If the Reference Price is
non-zero and less than the Exchange's bid, then the System will set the
SRP equal to the Exchange's bid. If the Reference Price is non-zero and
greater than the Exchange's ask, then the System will set the SRP equal
to the Exchange's ask. If the Reference Price is zero and if one or
both adjacent constituent options have a non-zero SRP, the constituent
option will be excluded from the calculation. If the Reference Price is
zero and there are multiple adjacent constituent options with a current
Reference Price of zero, the System will use the midpoint of the NBBO
for the SRP if the NBBO bid-ask spread is at or within a range defined
in the settlement price opening width table. If the NBBO bid-ask spread
is not within a range defined in the settlement price opening width
table, the System will wait for either a trade, or a bid-ask spread
that is within a range defined in the settlement price opening width
table. Once all constituent options have been assigned an SRP, the
System performs the final settlement price calculation of the Index.
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    \39\ The term ``MBBO'' means the best bid or offer on the
Exchange. See Exchange Rule 100.
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    In the options market, it is important for Market Makers to provide
liquidity to execute against orders submitted by other market
participants. Pursuant to Rule 603, a Market Maker has general
obligations to, among other things, engage (to a reasonable degree
under existing circumstances) in dealings for the Market Maker's own
account when there exists, or it is reasonably anticipated that there
will exist, a lack of price continuity, a temporary disparity between
the supply of and demand for an option (i.e., an imbalance), to compete
with other Market Makers to improve markets in its appointed classes,
and to update market quotations in response to changed market
conditions in its appointed classes. Certain types of Market Makers
have obligations to facilitate resolution of imbalances and make
competitive markets, and the proposed rule change is consistent with
those obligations.\40\ As described above, the entry of SPIKES strategy
orders may lead to order imbalances in the option series used to
determine the final settlement value for expiring SPIKES Index options.
In order for the Exchange's system to open these series for trading
(i.e., to resolve order imbalances) and achieve the most competitive
pricing in these series, Market Maker participation in the SPIKES
Special Settlement Auction is important for adding liquidity and
promoting a fair and orderly opening and settlement process.
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    \40\ See, e.g., Rules 603 and 604 (describing the obligations of
Primary Lead Market Makers and Lead Market Makers).
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    The Exchange understands that some Market Makers may hesitate to
provide liquidity that could resolve order imbalances, out of a concern
that adding such liquidity after the SPIKES strategy order cut-off time
could be deemed either a new SPIKES strategy order or a modification to
or cancellation of an existing SPIKES strategy order. As a result, this
perceived risk may lead to reduced liquidity and may exacerbate the
time it takes to open a series at a competitive price.\41\ The proposed
rule change encourages Market Makers to provide liquidity on SPIKES
Index options settlement days by explicitly stating in Rule 503,
Interpretations and Policies .03, that bona fide Market Maker activity
does not constitute either a SPIKES strategy order or a modification to
or cancellation of a previously submitted SPIKES strategy order during
the SPIKES Special Settlement Auction. The Exchange believes Market
Maker liquidity is important to the resolution of order imbalances on
SPIKES Index settlement days and to the orderly opening of series on
such day, due to the fact that a series cannot open if there is a
market order imbalance. Also, Market Maker liquidity is desirable to
advance the opening of series at competitive prices on SPIKES Index
settlement days. The Exchange's system also relies on Market Maker
liquidity to open series for trading. Pursuant to Rule 503, the
Exchange's system will not open a series for trading if there are no
Market Maker quotes present. Additionally, the width of the best Market
Maker quotes on the Exchange must be within a certain price range for
the System to open a series for trading. The Exchange believes the
proposed rule change will incentivize Market Maker liquidity on SPIKES
Index settlement days by explicitly stating in the Rules that providing
such liquidity will not be deemed to constitute either submission of a
SPIKES strategy order or modification or cancellation of a previously
submitted SPIKES strategy order.
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    \41\ See Rules 503(f).
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    Specifically, proposed Rule 503, Interpretations and Policies
.03(e) states a Market Maker with an appointment in a class with
constituent option series may submit bids and offers in those series
for bona fide market making purposes in accordance with Rule 603 and
the Securities Exchange Act of 1934 (the ``Act''), for its market maker
account prior to the open of trading for participation in the SPIKES
Special Settlement Auction. The Exchange will deem these bids and
offers to be non-SPIKES strategy orders, and will not deem them to be
changes to or cancellations of previously submitted SPIKES strategy
orders, if:
    (i) The Member with which the Market Maker is affiliated has
established, maintains, and enforces reasonably designed written
policies and procedures (including information barriers, as
applicable), taking into consideration the nature of the Member's
business and other facts and circumstances, to prevent the misuse of
material nonpublic information (including the submission of SPIKES
strategy orders); and
    (ii) when submitting these bids and offers, the Market Maker has no
actual knowledge of any previously submitted SPIKES strategy orders.
    In other words, if a Market Maker submits bids or offers in
constituent options on a SPIKES Index option settlement day, and if
such bids and offers are for its market maker account and submitted for
purposes of its market making activities on the Exchange (including in
accordance with Market Maker obligations, such as to offset imbalances
or provide competitive pricing), the Market Maker may submit those bids
and offers any time prior to the open of trading, including both before
and after the strategy order cut-off time. As long as the Member has
appropriate procedures in place both to prevent the Market Maker from
knowing about the submission of SPIKES strategy orders by other persons
within the Member organization with which it is affiliated, and to
prevent other persons from knowing about the Market Maker's submission
of bids and offers, the Exchange will not review such bids and offers
for either potential impermissible entry of SPIKES strategy orders, or
cancellations of or modifications to previously submitted SPIKES
strategy orders.
    Bona fide Market Maker activity is generally activity consistent
with Market Maker requirements under the Act and MIAX Options Rules:
     Pursuant to the Act, a market maker is a specialist
permitted to act as a dealer, any dealer acting in the capacity of
block positioner, and any dealer who, with respect to a security, holds
himself out (by entering quotations in an inter-dealer communications
system or otherwise) as being willing to buy and

sell such security for his own account on a regular or continuous
basis.\42\
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    \42\ 15 U.S.C. 78c(a)(38); see also 12 U.S.C. 1851(d)(1)(B)
(market making is intended to service ``the reasonably expected
near-term demand'' of other parties).
---------------------------------------------------------------------------

     Pursuant to Rule 603, a Market Maker appointed to a class
must, among other things, engage to a reasonable degree under existing
circumstances in dealings for the Market Maker's own account when there
exists, or it is reasonably anticipated that there will exist, a lack
of price continuity, a temporary disparity between the supply of and
demand for an option (i.e., an imbalance), to compete with other Market
Makers to improve markets in its appointed classes, and to update
market quotations in response to changed market conditions in its
appointed classes. Additionally, pursuant to Rule 603, all quotes a
Market Maker submits, including prior to the opening, must comply with
all requirements including applicable bid-ask differential and minimum
size requirements.\43\ Rule 604 imposes an ongoing continuous quoting
requirement on Market Makers that applies through the opening of
trading, as well as during regular trading hours.
---------------------------------------------------------------------------

    \43\ Rule 603(b)(4) permits the Exchange to set different
minimum quote size and bid-ask differential requirements for opening
quotes as those for intraday quotes.
---------------------------------------------------------------------------

     In addition to these obligations, Market Makers also
effect transactions for the purpose of hedging, reducing risk of,
rebalancing, or liquidating their open positions.
    As noted above, the Exchange implemented the SPIKES strategy order
cut-off time for the operational purpose of providing market
participants with time to enter additional orders and quotes to offset
any such imbalances prior to the opening of these series.\44\ The
Exchange's surveillance procedures to determine market participants'
compliance with the SPIKES strategy order cut-off time are separate and
distinct from the Exchange's surveillance procedures to identify
potentially manipulative behavior. Therefore, from the Exchange's
perspective, whether a Market Maker's bids and offers constitute SPIKES
strategy orders is distinct from whether the submitting Market Maker is
attempting to engage in manipulative behavior. The classification of
bona fide Market Maker activity as non-SPIKES strategy orders will have
no impact on the Exchange's surveillance procedures to detect activity
intended to manipulate the settlement value or violate other Rules.
Additionally, all Market Maker bids and offers, even though not
considered SPIKES strategy orders pursuant to the proposed rule change,
will continue to be subject to Exchange surveillance procedures that
monitor trading in the option series used to calculate SPIKES Index
settlement values on expiration dates, as well as surveillance
procedures that monitor Market Maker activity for compliance with
Market Maker obligations in the Rules. This activity will merely be
excepted from Exchange surveillance procedures determining compliance
with the operational SPIKES strategy order cut-off time.
---------------------------------------------------------------------------

    \44\ See Exchange Rule 503, Interpretations and Policies .03.
---------------------------------------------------------------------------

    The Exchange believes Market Makers are more likely to interact
with and resolve order imbalances on SPIKES settlement days if they can
be confident that their bids and offers submitted for that purpose will
not be deemed SPIKES strategy orders or cancellations of or
modifications to previously submitted SPIKES strategy orders. As
discussed above, the purpose of the SPIKES strategy order cut-off time
is to provide market participants, including Market Makers, with
sufficient time to address imbalances created by SPIKES strategy
orders. Additionally, as discussed above, pursuant to Rule 503(f),
whether a series opens depends on the presence of Market Maker quotes
at prices no wider than an acceptable price range. Market Makers are an
important source of liquidity on the Exchange, and also have various
obligations with which they must comply. The proposed rule change will
provide a Market Maker with an opportunity to provide liquidity on
SPIKES Index settlement dates and to satisfy their Market Maker
obligations, without concern that the Exchange may consider such
activity to constitute the placing of, or cancellations to or
modifications of, SPIKES strategy orders, even if the Member with which
the Market Maker is affiliated submitted a SPIKES strategy order.
    The purpose of this proposed change is to accommodate the fact that
the Member with which the Market Maker is affiliated may submit a
SPIKES strategy order while the Market Maker may also be submitting
bids and offers to accommodate a fair and orderly opening process, by
among other things, resolving market order imbalances and submitting
competitively priced bids and offers.
    For example, a Member may have a SPY Market Maker and a separate
volatility trading desk. During the SPIKES Special Settlement Auction
on a SPIKES Index settlement day, the trading strategy of the SPY
Market Maker is to provide markets in SPY options (both before and
after the SPIKES strategy order cut-off time), and the trading strategy
of the volatility trading desk may be to replicate Vega exposure by
replacing its expiring SPIKES options positions with positions in the
SPY constituent series. To replicate its Vega exposure, the volatility
trading desk may enter SPIKES strategy orders prior to the SPIKES
strategy order cut-off time. These are separate and distinct trading
strategies. If the Member has reasonable policies and procedures in
place such that the SPY Market Maker has no knowledge of the volatility
trading desk's submission of SPIKES strategy orders, and that the
volatility trader has no knowledge of the SPY Market Maker's submission
of bids and offers, the Exchange believes it is appropriate for the SPY
Market Maker's bids and offers to not be deemed SPIKES strategy orders,
or the modification to or cancellation of the SPIKES strategy order
submitted by its affiliated volatility trading desk.
    The Exchange does not believe it is necessary to restrict the bona
fide market making activities of a Market Maker within its appointed
classes due to other unrelated trading activities that may involve
submissions of orders deemed to be SPIKES strategy orders of which the
Market Maker has no actual knowledge. The proposed rule change
expressly provides that activity related to a Market Maker's market
making activity in an appointed class will not constitute the
submission of a SPIKES strategy order or the cancellation of or
modification to a previously submitted SPIKES strategy order.
    The proposed rule change makes clear that a Market Maker's
submission of bids and offers for bona fide market making purposes in
constituent series is permitted on SPIKES Index settlement days through
the open of trading in the same manner as it is permitted in all series
in its appointed classes at all other times. This will encourage Market
Makers to continue to submit bids and offers through the open, despite
other trading activity within the Member organization. This will also
ensure Market Makers can respond to imbalances and update their quotes
\45\ in accordance with their market making dealings and obligations.
The Exchange believes this will contribute to price transparency and
liquidity in the option series at the open, and thus will promote a
fair and orderly opening on SPIKES Index settlement days. The

Exchange continuously evaluates the SPIKES Special Settlement Auction
to identify potential enhancements, and intends to modify the procedure
as it deems appropriate to contribute to a fair and orderly opening
process. A fair and orderly opening in these series benefits all market
participants who trade in the SPIKES Index options and the constituent
options.
---------------------------------------------------------------------------

    \45\ As noted above, the Exchange's system will not open a
series if there is no quote of if the opening quote or price is
outside an acceptable price range.
---------------------------------------------------------------------------

    The proposed rule change would not eliminate a Market Maker's
requirements to abide by Exchange Rules 301 (Just and Equitable
Principles of Trade), 318 (Manipulation), and 303 (Prevention of the
Misuse of Material Nonpublic Information). The requirement in the
proposed rule change that the Member with which a Market Maker is
affiliated must establish, maintain, and enforce policies and
procedures reasonably designed to ensure the Market Maker will not have
knowledge of the submission of SPIKES strategy orders is consistent
with requirements of Rule 303. The Exchange will continue to conduct
surveillance to monitor trading in the option series used to calculate
the SPIKES Index settlement values on expiration dates, including but
not limited to, monitoring entry of SPIKES strategy orders, or
modifications to SPIKES strategy orders, following the cut-off time, as
well as compliance with other Rules.
    The proposed rule change also makes a non-substantive change to
change paragraph numbering resulting from the addition of this proposed
rule.
    Additionally, the proposed rule changes modifies Interpretations
and Policies .03(c) to Rule 503, to state that ``SPIKES strategy
orders'' means all orders for participation in the SPIKES Special
Settlement Auction that are related to positions in, or a trading
strategy involving, expiring SPIKES Index options. The addition of the
word ``expiring'' is a codification of the Exchange's interpretation of
the term SPIKES strategy order. As discussed above, to replicate
expiring SPIKES Index options on their expiration dates with options
portfolios, market participants generally submit SPIKES strategy orders
to participate in the SPIKES Special Settlement Auction on SPIKES Index
settlement days. The addition of the word ``expiring'' is consistent
with the introductory paragraph in Interpretations and Policies .03 to
Rule 503, which states that the SPIKES Special Settlement Auction
applies to series used to calculate the exercise/final settlement value
of the SPIKES Index for expiring options contracts, and demonstrates
the rule is meant to refer to orders that relate to strategies
involving expiring SPIKES Index options. Therefore, the proposed
codification is consistent with this general practice, as well as the
current rule.
2. Statutory Basis
    The Exchange believes that its proposed rule change is consistent
with Section 6(b) of the Act \46\ in general, and furthers the
objectives of Section 6(b)(5) of the Act \47\ in particular, in that 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 regulating,
clearing, settling, processing information with respect to, and
facilitating transactions in securities, to remove impediments to and
perfect the mechanisms of a free and open market and a national market
system and, in general, to protect investors and the public interest.
Additionally, the Exchange believes the proposed rule change is
consistent with the Section 6(b)(5) requirement that the rules of an
exchange not be designed to permit unfair discrimination between
customers, issuers, brokers, or dealers.
---------------------------------------------------------------------------

    \46\ 15 U.S.C. 78f(b).
    \47\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------

    In particular, the Exchange believes the proposed change will
increase liquidity on SPIKES Index settlement dates, as it will remove
an impediment that may discourage Market Makers from submitting bids
and offers to offset imbalances and update the prices of their quotes
in response to changing market conditions prior to the open. The
Exchange believes this additional liquidity may contribute to a fair
and orderly opening by increasing execution opportunities, reducing
imbalances in constituent options, and increasing the presence of
quotes within the acceptable price range, which would benefit all
market participants who trade in the SPIKES Index options and the
constituent options. The Exchange does not believe it is necessary to
restrict the bona fide market maker activities of a Market Maker due to
other unrelated trading activity by the Member with which it is
affiliated. The Exchange notes that the proposed rule change would not
impact a Market Maker's requirements to abide by Exchange Rules 301
(Just and Equitable Principles of Trade), 318 (Manipulation), and 303
(Prevention of the Misuse of Material Nonpublic Information). The
requirement in the proposed rule change that the Member with which a
Market Maker is affiliated must establish, maintain, and enforce
policies and procedures reasonably designed to ensure the Market Maker
will not have knowledge of the submission of SPIKES strategy orders is
consistent with requirements of Rule 303. As a result, the Exchange
does not believe that the proposed rule change will be burdensome on
Market Makers.
    The Exchange believes the proposed rule change will contribute to
price transparency and liquidity in the option series at the open, and
thus a fair and orderly opening on SPIKES Index settlement days. A fair
and orderly opening in these series benefits all market participants
who trade in the SPIKES Index options and the constituent options.
    The proposed rule change to add the term ``expiring'' to the
definition of SPIKES strategy order is merely a codification of a
current Exchange interpretation and is consistent with the definition
of constituent options in the current rule.

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. Because of the importance of
Market Maker liquidity in the options market and the Exchange's need
for competitive quotes to open a series, the Exchange believes it is
appropriate for Market Makers' bids and offers prior to the opening of
trading, including after the SPIKES strategy order cut-off time, not to
be considered SPIKES strategy orders, or cancellations to or
modifications of previously submitted SPIKES strategy orders. As
discussed above, Market Makers are subject to various obligations under
the Rules, and the proposed rule change provides them with the ability
to satisfy these obligations without the risk of their market making
activity being deemed to constitute SPIKES strategy orders or
modifications to or cancellations of SPIKES strategy orders. The
requirement in the proposed rule change that the Member with which a
Market Maker is affiliated must establish, maintain, and enforce
policies and procedures is reasonably designed to ensure the Market
Maker will not have knowledge of the submission of SPIKES strategy
orders and is consistent with the requirements of Rule 303. As a
result, the Exchange does not believe the proposed rule change will be
burdensome on Market Makers. The Exchange does not believe it is
necessary to restrict the bona fide market maker activities of a Member
due to its other unrelated trading activities. The proposed rule change
has

no impact on intermarket competition, as it applies to orders and
quotes submitted to the SPIKES Special Settlement Auction the Exchange
conducts prior to the open of trading in certain classes.
    The Exchange believes that the proposed rule change will relieve
any burden on, or otherwise promote, competition. The Exchange believes
the proposed rule change will contribute to price transparency and
liquidity in constituent options at the open on SPIKES Index settlement
days, and thus to a fair and orderly opening on those days. A fair and
orderly opening, and increased liquidity in these series benefits all
market participants who trade in the SPIKES Index options and the
constituent options.
    The proposed rule change to add the term ``expiring'' to the
definition of SPIKES strategy orders has no impact on competition, as
it is merely a codification of a current Exchange interpretation and is
consistent with the definition of constituent options in the current
rule.

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

    Written comments were neither solicited nor received.

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 after the date of the filing, or such
shorter time as the Commission may designate, it has become effective
pursuant to 19(b)(3)(A) of the Act \48\ and Rule 19b-4(f)(6) \49\
thereunder.
---------------------------------------------------------------------------

    \48\ 15 U.S.C. 78s(b)(3)(A).
    \49\ 17 CFR 240.19b-4(f)(6). In addition, Rule 19b-4(f)(6)
requires a self-regulatory organization to give the Commission
written notice of its intent to file the proposed rule change at
least five business days prior to the date of filing of the proposed
rule change, or such shorter time as designated by the Commission.
The Exchange has satisfied this requirement.
---------------------------------------------------------------------------

    At any time within 60 days of the filing of the proposed rule
change, the Commission summarily may temporarily suspend such rule
change if it appears to the Commission that such action is necessary or
appropriate in the public interest, for the protection of investors, or
otherwise in furtherance of the purposes of the Act.

IV. Solicitation of Comments

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

Electronic Comments

     Use the Commission's internet comment form (http://www.sec.gov/rules/sro.shtml); or
     Send an email to<EMAIL_ADDRESS>Please include
File Number SR-MIAX-2019-12 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-MIAX-2019-12. This file
number should be included on the subject line if email is used. To help
the Commission process and review your comments more efficiently,
please use only one method. The Commission will post all comments on
the Commission's internet website (http://www.sec.gov/rules/sro.shtml).
Copies of the submission, all subsequent amendments, all written
statements with respect to the proposed rule change that are filed with
the Commission, and all written communications relating to the proposed
rule change between the Commission and any person, other than those
that may be withheld from the public in accordance with the provisions
of 5 U.S.C. 552, will be available for website viewing and printing in
the Commission's Public Reference Room, 100 F Street NE, Washington, DC
20549, on official business days between the hours of 10:00 a.m. and
3:00 p.m. Copies of the filing also will be available for inspection
and copying at the principal office of the Exchange. All comments
received will be posted without change. Persons submitting comments are
cautioned that we do not redact or edit personal identifying
information from comment submissions. You should submit only
information that you wish to make available publicly. All submissions
should refer to File Number SR-MIAX-2019-12 and should be submitted on
or before April 16, 2019.
---------------------------------------------------------------------------

    \50\ 17 CFR 200.30-3(a)(12).

    For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\50\
Eduardo A. Aleman,
Deputy Secretary.
[FR Doc. 2019-05696 Filed 3-25-19; 8:45 am]
 BILLING CODE 8011-01-P


[Federal Register Volume 82, Number 121 (Monday, June 26, 2017)]
[Proposed Rules]
[Pages 28788-28790]
[FR Doc No: 2017-13305]

========================================================================
Proposed Rules
                                                Federal Register
________________________________________________________________________

This section of the FEDERAL REGISTER contains notices to the public of
the proposed issuance of rules and regulations. The purpose of these
notices is to give interested persons an opportunity to participate in
the rule making prior to the adoption of the final rules.

========================================================================

Federal Register / Vol. 82, No. 121 / Monday, June 26, 2017 /
Proposed Rules

DEPARTMENT OF TRANSPORTATION

Federal Aviation Administration

14 CFR Part 33

[Docket No. FAA-2017-0586; Notice No. 33-17-01-SC]

Special Conditions: Safran Aircraft Engines, Silvercrest-2 SC-2D;
Rated Takeoff Thrust at High Ambient Temperature

AGENCY: Federal Aviation Administration (FAA), DOT.

ACTION: Notice of proposed special conditions.

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

SUMMARY: This action proposes special conditions for the Safran
Aircraft Engines (SAE), Silvercrest-2 SC-2D engine model. This engine
will have a novel or unusual design feature associated with an
additional takeoff rating that increases the exhaust gas temperature
(EGT) limit to maintain takeoff thrust in certain high ambient
temperature conditions for a maximum accumulated usage of 20 minutes in
any one flight. The applicable airworthiness regulations do not contain
adequate or appropriate safety standards for this design feature. These
proposed special conditions contain the additional safety standards
that the Administrator considers necessary to establish a level of
safety equivalent to that established by the existing airworthiness
standards.

DATES: Send your comments on or before July 6, 2017.
    Certification of the Silvercrest-2 SC-2D engine model is currently
scheduled for August 2018. The substance of these special conditions
has been subject to the notice and public comment procedure. Therefore,
because a delay would significantly affect the applicant's
certification of the engine, we are shortening the public comment
period from 45 days to 10 days.

ADDRESSES: Send comments identified by docket number [FAA-2017-0586]
using any of the following methods:
     Federal eRegulations Portal: Go to http://www.regulations.gov and follow the online instructions for sending your
comments electronically.
     Mail: Send comments to Docket Operations, M-30, U.S.
Department of Transportation (DOT), 1200 New Jersey Avenue SE., Room
W12-140, West Building Ground Floor, Washington, DC 20590-0001.
     Hand Delivery of Courier: Take comments to Docket
Operations in Room W12-140 of the West Building Ground Floor at 1200
New Jersey Avenue SE., Washington, DC, between 8 a.m., and 5 p.m.,
Monday through Friday, except Federal holidays.
     Fax: Fax comments to Docket Operations at<PHONE_NUMBER>.
    Privacy: In accordance with 5 U.S.C. 553(c), DOT solicits comments
from the public to better inform its rulemaking process. DOT posts
these comments without edit, including any personal information the
commenter provides, to http://www.regulations.gov, as described in the
system of records notice (DOT/ALL-14 FDMS), which can be reviewed at
http://www.transportation.gov/privacy.
    Docket: Background documents or comments received may be read at
http://www.regulations.gov at any time. Follow the online instructions
for accessing the docket or go to the Docket Operations Room in W12-140
of the West Building Ground Floor at 1200 New Jersey Avenue SE.,
Washington, DC, between 9 a.m., and 5 p.m., Monday through Friday,
except Federal holidays.

FOR FURTHER INFORMATION CONTACT: Tara Fitzgerald, ANE-112, Engine and
Propeller Directorate, Aircraft Certification Service, 1200 District
Avenue, Burlington, Massachusetts, 01803-5213; telephone (781) 238-
7130; facsimile<PHONE_NUMBER>; email<EMAIL_ADDRESS>
SUPPLEMENTARY INFORMATION:

Comments Invited

    We invite interested persons to participate in this rulemaking by
submitting written comments, data, or views. The agency also invites
comments relating to the economic, environmental, energy, or federalism
impacts that might result from adopting the proposals in this document.
The most helpful comments reference a specific portion of the proposed
special conditions, explain the reason for any recommended change, and
include supporting data. To ensure the docket does not contain
duplicate comments, commenters should send only one copy of written
comments, or if comments are filed electronically, commenters should
submit only one time.
    We will file in the docket all comments we receive, as well as a
report summarizing each substantive public contact with FAA personnel
concerning this proposed rulemaking. Before acting on this special
condition, we will consider all comments we receive on or before the
closing date for comments. We will consider comments filed after the
comment period has closed if it is possible to do so without incurring
expense or delay. We may change these special conditions based on the
comments we receive.

Background

    On April 19, 2011, SNECMA, now known as SAE, applied for a type
certificate for the Silvercrest-2 SC-2D engine model. On April 30,
2014, SAE requested an extension to their original type certificate
application, which the FAA granted through June 30, 2015. On May 26,
2015, SAE requested another extension to their type certificate
application, which the FAA granted through September 30, 2018.
    SAE proposed an additional takeoff rating to maintain takeoff
thrust in certain high ambient temperature conditions with all engines
operating (AEO) for the Silvercrest-2 SC-2D engine model. Therefore,
the Silvercrest-2 SC-2D engine model would have two different takeoff
ratings. The first rating corresponds with the rated takeoff thrust of
the engine. The second takeoff rating maintains the takeoff thrust in
certain high ambient temperature conditions. This additional takeoff
rating is named ``Rated Takeoff Thrust at High Ambient Temperature''
(Rated TOTHAT). The Rated TOTHAT is an approved engine thrust developed
under specified altitudes and temperatures within the operating
limitations established for the engine during takeoff operation for a
maximum usage of 20 minutes in any one flight.

Type Certification Basis

    Under the provisions of Title 14, Code of Federal Regulations (14
CFR) 21.17, SAE must show that the Silvercrest-2 SC-2D meets the
applicable provisions of 14 CFR part 33, as amended by

Amendments 33-1 through 33-34 in effect on the date of application.
    If the FAA finds that the applicable airworthiness regulations do
not contain adequate or appropriate safety standards for the
Silvercrest-2 SC-2D engine model, because of a novel or unusual design
feature, special conditions are prescribed under the provisions of
Sec.  21.16.
    Special conditions are initially applicable to the model for which
they are issued. Should the type certificate for that model be amended
later to include any other model that incorporates the same or similar
novel or unusual design feature, the special conditions would also
apply to the other model under Sec.  21.101.
    In addition to complying with the applicable product airworthiness
regulations and the requirements of the special conditions, the
Silvercrest-2 SC-2D engine model must comply with the fuel venting and
exhaust emission requirements of 14 CFR part 34.
    The FAA issues special conditions, as defined in 14 CFR 11.19, in
accordance with Sec.  11.38, and they become part of the type
certification basis under Sec.  21.17(a)(2).

Novel or Unusual Design Features

    The Silvercrest-2 SC-2D engine model will incorporate a novel or
unusual design feature, referred to as ``Rated TOTHAT''. This
additional takeoff rating increases the EGT limit to maintain takeoff
thrust in certain high ambient temperature conditions for a maximum of
20 minutes in any one flight.

Discussion

    The Rated TOTHAT is designed for use during takeoff in specified
high altitudes and high ambient temperature conditions to maintain
thrust during takeoff for a maximum of 20 minutes in any one flight.
These proposed special conditions contain additional mandatory post-
flight inspection and maintenance action requirements associated with
any use of the Rated TOTHAT. These requirements add a rating definition
in part 1.1 and mandate mandatory inspections in the instructions for
continued airworthiness (ICA); instructions for installing and
operating the engine; engine rating and operating limitations;
instrument connection; and endurance testing.
    The current requirements of the endurance test under Sec.  33.87
represent a typical airplane flight profile and the severity of the
takeoff rating. Therefore, the endurance test under Sec.  33.87 covers
normal, all-engines-operating takeoff conditions for which the engine
control system limits the engine to the takeoff thrust rating. It is
intended to represent the airplane flight profile during takeoff under
specified ambient temperatures for a time until the mandatory
inspection and maintenance actions can be performed.
    These proposed special conditions require additional test cycles
that include at least a 150 hours of engine operation as specified in
Sec.  33.87(a), to demonstrate the engine is capable of performing the
Rated TOTHAT rating during AEO conditions without disassembly or
modification.
    The associated engine deterioration, after use of the Rated TOTHAT,
is not known without the intervening mandatory inspections in these
special conditions. These mandatory inspections ensure the engine will
continue to comply with its certification basis, which includes these
proposed special conditions, after any use of the Rated TOTHAT. The
applicant is expected to assess the deterioration from use of the Rated
TOTHAT. The airworthiness limitations section (ALS) must prescribe the
mandatory post-flight inspections and maintenance actions associated
with any use of the Rated TOTHAT.
    These requirements maintain a level of safety equivalent to the
level intended by the applicable airworthiness standards in effect on
the date of application.

Applicability

    As discussed above, these proposed special conditions are
applicable to the Silvercrest-2 SC-2D engine model. Should SAE apply at
a later date for a change to the type certificate to include another
model incorporating the same novel or unusual design feature, the
special conditions would apply to that model as well.

Conclusion

    This action affects only the Rated TOTHAT features on the
Silvercrest-2 SC-2D engine model. It is not a rule of general
applicability and applies only to SAE, who requested FAA approval of
this engine feature.

List of Subjects in 14 CFR Part 33

    Aircraft, Engines, Aviation safety, Reporting and recordkeeping
requirements.

    The authority citation for these special conditions is as follows:

    Authority: 49 U.S.C. 106(g), 40113, 44701, 44702, and 44704.

The Proposed Special Conditions

    Accordingly, the FAA proposes, the following special conditions as
part of the type certification basis for SAE, Silvercrest-2 SC-2D
engine model.

1. Part 1 Definition

    ``Rated Take-off Thrust at High Ambient Temperature'' (Rated
TOTHAT) means the approved engine thrust developed under specified
altitudes and temperatures within the operating limitations established
for the engine during takeoff operation. Use is limited to two periods,
no longer than 10 minutes each under one engine inoperative (OEI)
conditions or 5 minutes each under AEO conditions in any one flight for
a maximum accumulated usage of 20 minutes in any one flight. Each
flight where the Rated TOTHAT is used must be followed by mandatory
inspection and maintenance actions.

2. Part 33 Requirements

    In addition to the airworthiness standards in 14 CFR part 33,
effective February 1, 1965, amendments 33-1 through 33-34 applicable to
the engine and the Rated TOTHAT, the following special conditions
apply:
    (a) Section 33.4, Instructions for Continued Airworthiness.
    (1) The ALS must prescribe the mandatory post-flight inspections
and maintenance actions associated with any use of the Rated TOTHAT.
    (2) The applicant must validate the adequacy of the inspections and
maintenance actions required under paragraph 2(a)(1) of these special
conditions.
    (3) The applicant must establish an in-service engine evaluation
program to ensure the continued adequacy of the instructions for
mandatory post-flight inspections and maintenance actions prescribed
under paragraph 2(a)(1) of these special conditions, and of the data
for thrust assurance procedures required by paragraph 2(b)(2) of these
special conditions. The program must include service engine tests or
equivalent service engine test experience on engines of similar design
and evaluations of service usage of the Rated TOTHAT.
    (b) Section 33.5, Instruction manual for installing and operating
the engine.
    (1) Installation Instructions:
    (i) The applicant must identify the means, or provisions for means,
provided in compliance with the requirements of paragraph 2(e) of these
special conditions.
    (ii) The applicant must specify that the engine thrust control
system automatically resets the thrust on the operating engine to the
Rated TOTHAT level when one engine fails during

takeoff at specified altitudes and temperatures.
    (iii) The applicant must specify that the Rated TOTHAT is available
by manual crew selection at specified altitudes and temperatures in AEO
conditions.
    (2) Operating Instructions: The applicant must provide data on
engine performance characteristics and variability to enable the
airplane manufacturer to establish airplane thrust assurance
procedures.
    (c) Section 33.7, Engine ratings and operating limitations.
    (1) Rated TOTHAT and the associated operating limitations are
established as follows:
    (i) The thrust is the same as the engine takeoff rated thrust with
extended flat rating corner point.
    (ii) The rotational speed limits are the same as those associated
with the engine takeoff rated thrust.
    (iii) The applicant must establish a gas temperature steady-state
limit and, if necessary, a transient gas over temperature limit for
which the duration is no longer than 30 seconds.
    (iv) The use is limited to two periods of no longer than 10 minutes
each under OEI conditions or 5 minutes each under AEO conditions in any
one flight, for a maximum accumulated usage of 20 minutes in any one
flight. Each flight where the Rated TOTHAT is used must be followed by
mandatory inspections and maintenance actions prescribed by paragraph
2(a)(1) of these special conditions.
    (2) The applicant must propose language to include in the type
certificate data sheet specified in Sec.  21.41 for the following:
    (i) Rated TOTHAT and associated limitations.
    (ii) As required by Sec.  33.5(b), Operating instructions, include
a note stating that ``Rated Takeoff Thrust at High Ambient Temperature
(Rated TOTHAT) means the approved engine thrust developed under
specified altitudes and temperatures within the operating limitations
established for the engine. Use is limited to two periods, no longer
than 10 minutes each under OEI conditions or 5 minutes each under AEO
conditions in any one flight, for a maximum accumulated usage of 20
minutes in any one flight. Each flight where the Rated TOTHAT is used
must be followed by mandatory inspection and maintenance actions.''
    (iii) As required by Sec.  33.5(b), Operating instructions, include
a note stating that the engine thrust control system automatically
resets the thrust on the operating engine to the Rated TOTHAT level
when one engine fails during takeoff at specified altitudes and
temperatures, and the Rated TOTHAT is available by manual selection
when all engines are operational during takeoff at specified altitudes
and temperatures.
    (d) Section 33.28, Engine Control Systems.
    The engine must incorporate a means, or a provision for a means,
for automatic availability and automatic control of the Rated TOTHAT
under OEI conditions and must permit manual activation of the Rated
TOTHAT under AEO conditions.
    (e) Section 33.29, Instrument connection.
    The engine must:
    (1) Have means, or provisions for means, to alert the pilot when
the Rated TOTHAT is in use, when the event begins and when the time
interval expires.
    (2) Have means, or provision for means, which cannot be reset in
flight, to:
    (i) Automatically record each use and duration of the Rated TOTHAT,
and
    (ii) Alert maintenance personnel that the engine has been operated
at the Rated TOTHAT and permit retrieval of recorded data.
    (3) Have means, or provision for means, to enable routine
verification of the proper operation of the means in paragraph 2(e)(1)
and (e)(2) of these special conditions.
    (f) Section 33.85(b), Calibration tests.
    The applicant must base the calibration test on the thrust check at
the end of the endurance test required by Sec.  33.87 of these special
conditions.
    (g) Section 33.87, Endurance test.
    (1) In addition to the applicable requirements of Sec.  33.87(a):
    (i) The Sec.  33.87 endurance test must be modified as follows:
    (A) Modify the thirty minute test cycle at the rated takeoff thrust
in Sec.  33.87(b)(2)(ii) to run one minute at rated takeoff thrust,
followed by five minutes at the Rated TOTHAT, followed by the rated
takeoff thrust for the remaining twenty-four minutes.
    (B) The modified thirty minute period described above in paragraph
2(g)(1)(i)(A) must be repeated ten times in cycles 16 through 25 of the
Sec.  33.87 endurance test.
    (2) After completion of the tests required by Sec.  33.87(b), as
modified in paragraph 2(g)(1)(i) above, and without intervening
disassembly, except as needed to replace those parts described as
consumables in the ICA, the applicant must conduct the following test
sequence for a total time of not less than 120 minutes:
    (i) Ten minutes at Rated TOTHAT.
    (ii) Eighty-eight minutes at rated maximum continuous thrust.
    (iii) One minute at 50 percent of rated takeoff thrust.
    (iv) Ten minutes at Rated TOTHAT.
    (v) Ten minutes at rated maximum continuous thrust.
    (vi) One minute at flight idle.
    (3) The test sequence of Sec. Sec.  33.87(b)(1) through (b)(6) of
these special conditions must be run continuously. If a stop occurs
during these tests, the interrupted sequence must be repeated unless
the applicant shows that the severity of the test would not be reduced
if the current tests were continued.
    (4) Where the engine characteristics are such that acceleration to
the Rated TOTHAT results in a transient over temperature in excess of
the steady-state temperature limit identified in paragraph 2(c)(1)(iii)
of these special conditions, the transient gas overtemperature must be
applied to each acceleration to the Rated TOTHAT of the test sequence
in paragraph 2(g)(2) of these special conditions.
    (h) Section 33.93, Teardown inspection.
    The applicant must perform the teardown inspection required by
Sec.  33.93(a), after completing the endurance test prescribed by Sec.
33.87 of these special conditions.
    (i) Section 33.201, Design and test requirements for Early ETOPS
eligibility.
    In addition to the requirements of Sec.  33.201(c)(1), the
simulated ETOPS mission cyclic endurance test must include two cycles
of 10 minute duration, each at the Rated TOTHAT; one before the last
diversion cycle and one at the end of the ETOPS test.

    Issued in Burlington, Massachusetts, on June 14, 2017.
Carlos A. Pestana,
Acting Assistant Manager, Engine and Propeller Directorate, Aircraft
Certification Service.
[FR Doc. 2017-13305 Filed 6-23-17; 8:45 am]
 BILLING CODE 4910-13-P


[Federal Register Volume 85, Number 94 (Thursday, May 14, 2020)]
[Notices]
[Pages 28970-28971]
[FR Doc No: 2020-10379]

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DEPARTMENT OF HOMELAND SECURITY

Federal Emergency Management Agency

[Docket ID: FEMA-FEMA-2020-0009; OMB No. 1660-0114]

Agency Information Collection Activities: Submission for OMB
Review; Comment Request; FEMA Preparedness Grants: Port Security Grant
Program

AGENCY: Federal Emergency Management Agency, DHS.

ACTION: 30 Day notice and request for comments.

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

SUMMARY: The Federal Emergency Management Agency (FEMA) will submit the
information collection abstracted below to the Office of Management and
Budget for review and clearance in accordance with the requirements of
the Paperwork Reduction Act of 1995. The submission will describe the
nature of the information collection, the categories of respondents,
the estimated burden (i.e., the time, effort and resources used by
respondents to respond) and cost, and the actual data collection
instruments FEMA will use.

DATES: Comments must be submitted on or before June 15, 2020.

ADDRESSES: Written comments and recommendations for the proposed
information collection should be sent within 30 days of publication of
this notice to www.reginfo.gov/public/do/PRAMain. Find this particular
information collection by selecting ``Currently under 30-day Review--
Open for Public Comments'' or by using the search function.

FOR FURTHER INFORMATION CONTACT: Duane Davis, Section Chief, FEMA,
Grant Programs Directorate,<PHONE_NUMBER><EMAIL_ADDRESS>You
may contact the Records Management Division for copies of the proposed
collection of information at email address<EMAIL_ADDRESS>
SUPPLEMENTARY INFORMATION: Section 102 of the Maritime Transportation
Security Act of 2002, as amended (46 U.S.C. 70107), established the
Port Security Grant System (PSGP) to provide for the establishment of a
grant program for a risk-based allocation of funds to implement Area
Maritime Transportation Security Plans and facility security plans
among port authorities, facility operators, and State and local
government agencies required to provide port security services. Before
awarding a grant under the program, the Secretary shall provide for
review and comment by the appropriate Federal Maritime Security
Coordinators and the Maritime Administrator. In administering the grant
program, the Secretary shall take into account national economic and
strategic defense concerns based upon the most current risk assessments
available. In addition, any information collected by FEMA for this
program is in accordance with 46 U.S.C. 70107(g), as amended by section
112(c) of the Security and Accountability For Every (SAFE) Port Act of
2006 (Pub. L. 109-347), which states: ``Any entity subject to an Area
Maritime Transportation Security Plan may submit an application for a
grant under this section, at such time, in such form, and containing
such information and assurances as the Secretary may require.'' This
proposed information collection was previously published in the Federal
Register on February 11, 2020, at 85 FR 7779 with a 60 day public
comment period. FEMA received one (1) unrelated comment. The purpose of
this notice is to notify the public that FEMA will submit the
information collection abstracted below to the Office of Management and
Budget for review and clearance.

Collection of Information

    Title: FEMA Preparedness Grants: Port Security Grant Program
(PSGP).

    Type of Information Collection: Revision of a currently approved
information collection.
    OMB Number: 1660-0114.
    Form Titles and Numbers: FEMA Form 089-5, PSGP Investment
Justification.
    Abstract: The previous version of FEMA Form 089-5 presented
numerous editing and submission challenges for applicants, often
leaving required information blank within the form. Additionally,
numerous applicants annually fail to provide required content
information within a detailed budget worksheet or provide no detailed
budget worksheet at all. A detailed budget worksheet is required;
however it is not currently in a required template. This update changes
the format and software of Form 089-5 and incorporates the detailed
budget worksheet to help ensure accurate project accounting. By
broadening the form to include all required project information,
applicants will have fewer documents to track and submit; and
subsequent agency reviews will be streamlined and improve consistency
among application format.
    Affected Public: State, local and Tribal Governments; businesses or
other for-profits and non-profits.
    Estimated Number of Respondents: 893.
    Estimated Number of Responses: 1,759.
    Estimated Total Annual Burden Hours: 17,450 hours.
    Estimated Total Annual Respondent Cost: $1,430,377.
    Estimated Respondents' Operation and Maintenance Costs: 0.
    Estimated Respondents' Capital and Start-Up Costs: 0.
    Estimated Respondents' Operation and Maintenance Costs: 0.
    Estimated Respondents' Capital and Start-Up Costs: 0.
    Estimated Total Annual Cost to the Federal Government: $1,055,219.

Comments

    Comments may be submitted as indicated in the ADDRESSES caption
above. Comments are solicited to (a) evaluate whether the proposed data
collection is necessary for the proper performance of the agency,
including whether the information shall have practical utility; (b)
evaluate the accuracy of the agency's estimate of the burden of the
proposed collection of information, including the validity of the
methodology and assumptions used; (c) enhance the quality, utility, and
clarity of the information to be collected; and (d) minimize the burden
of the collection of information on those who are to respond, including
through the use of appropriate automated, electronic, mechanical, or
other technological collection techniques or other forms of information
technology, such as permitting electronic submission of responses.

Maile Arthur,
Acting Records Management Branch Chief, Office of the Chief
Administrative Officer, Mission Support, Federal Emergency Management
Agency, Department of Homeland Security.
[FR Doc. 2020-10379 Filed 5-13-20; 8:45 am]
BILLING CODE 9111-27-P


Rev. 0313 1/ 01 c FISCAL IMPACT STATEMENT Department of Health Environmental Health Administration Lead Based Paint Abatement Program APPENDIX B APPENDIX B   Amended as of January I, 1999 FISCAL IMPACT STATEMENT FOR D. C. Law 11 221,   LEAD BASED PAINT ABATEMENT CONTROL ACT OF 1996

1 . General statement of the effect D. C. Law 11 221 will have on the operating and capital budgets for   99.

Implementation of D. C. Law 11 221 is not expected to have an impact on the District s operating budget for Fy   99. At present, the District s lead program for N   99is 100% grant funded and an application for continued grant funds in the amount of $ 216,339has been made to the U. S. Environmental Protection Agency, Region Ill for Grant Year 4. If awarded the full amount of the requested grant funds, the District is expected to continue to operate its lead program at a zero cost to the District budget.

2. Quantitative estimate of the expenditures needed to implement D. C. Law 11 221.

Current estimates indicate that it will cost in the range of $ 597,824 a year to administer the lead program. Ofthis $ 300,372 is in personal sewices,$ 128,352 is nonpersonal and the indirect cost is $ 1 15,334. Much of these costs are expected to be covered by federal grant monies which the District of Columbia is in a developing stage. Enforcement, fines and penalty although uncertain, may amount to $ 75,000. Accreditation and certification amounts to $ 136,500with total revenues amounting to approximately $ 2 I 1,500. These amounts would reduce the federal dollars by almost half the current amount. However, as indicated in Program Element 5, maintaining an effective infrastructure for the District will continue to rests on available future grant monies from the U. S. E. P. A. ( See Estimate of ExpendituresChart)***

Pursuant to this legislation, upon the implementation of the lead program, it is estimated that the District will generate the following revenue:

a Certification fees from individuals: An estimated 425 individuals are expected to apply for certification in one of the following categories: supervisors, inspectors, risk assessors, plannerddesigners, and workers. Certification fees for the aforementioned categories are expected to range from $ 60$ 300 every two ( 2) years. Total revenue from certification of individuals is estimated at 79,500.00. Individuals will be required to renew their certification every two vears.

( See chart on next page)

I This document was amended after Bill 11 640 became law. Therefore, this amendment has not been viewed by Counsel of the District of Columbia. Categoly/ Discipline Lead Based Paint Suoervisor Lead Based Paint Inspector Lead Based Paint Risk Assessors Planner/ Project Designer Estimated Number of Applications for Certification 100 75 40 10 Lead Based Paint Abatement Workers 200 TOTAL: 425 Category/ Discipline Estimated Number of Applications for Certification Business Entity I 15 0 Accreditation fees from training providers: Approximate Fee Estimated Revenue $ 300.00/ 2 years 30,000.00 $ 300.00/ 2years 22,500.00 $ 300.00/ 2 years 12,000.00 $ 300.00R years 3,000.00 $ 60.00R years 12,000.00 79,500.00

Approximate Fee Estimated Revenue $ 300.00/ year $ 4,500.00 Approximately 5 non government, for profit training programs2 are expected to apply for certification in the District. Expected revenue is $ 24.000 per annum. Training providers will be required to renew their accreditation every year.

Course Discipline Number Request Accred. Fee Revenue Inspector 5 $ 1,200.00/$ 400.00 6,000.00 Risk Assessor 5 $ 800.00/$ 400.00 4,000.00 Supem sor 5 $ 1,600.00/$ 400.00 8,000.00 Project Designer 5 $ 400.00/$ 200.00 2,000.00 Worker 5 $ 800.00/$ 400.00 4,000.00 ,

TOTAL: 25 24,000.00 2 The federal Residential Lead Based Paint Hazard Reduction Act of 1992 (  Title ,   I exempts state and local government and non profit training programs from paying accreditation fees. 15 U. S. C. 3 2682( a)( 3)( B).

3 Object Class Categories Grant Program 402j4046 Carryover EPNHCID II a. Personnel $ 1 18,500 $ 20,133 $ 89,614 b Fringe Benefits 21,212 3,604 16,040 c Travel 7,254 0 4,580 d Equipment 0 0 6,196 e Supplies 5,551 0 3,450 f contractual 16,600 0 58.804 3 Construction 0 0 0 7 Other 0 0 8,230 Total Direct Charges ( sum 169,117 23,737 186,914 Indirect Cost 47,222 8,023 35,711 c TOTALS ( sum of 6i 6j) $ 216,339 $ 31,760 $ 222,625 Cost Itemization Total CompliancdEnforcement $ 72,125 $ 300,372 12,910 53,766 3,832 15,666 0 6,196 5,377 14,378 5,344 80,748 0 3,134 11,364 102,722 482,490 24,378 1 15,334 $ 127,100 ' $ 597,824 a. Personnel includes staffing of Lead Coordinator, Program Assistant,' Outreach Coordinator, Attorney, Permit Processor and two ( 2) Compliance Monitors. b. Fringe which is 17.9% of base salary C. Traveuraining includes conferences, regional meeting for staff d. Equipment includes computer, server and Lead Awareness Week e. Supplies includes general office, toners, storage cabinet, database software f. Contractual includes Exam Vendor, Training Course Auditor, Lead Reduction Homeowner Demonstration h. Other includes gasoline, printing, color printer and safe 0 0 Permit fees: An estimated 150abatement projects will occur yearly and each will require a permit. Permits are estimated at 3%+ $ 40.00 per abatement project. Total estimated revenue $ 28.500 for an average abatement project of $ 5,000.

0 Enforcement fines and penalties: It is uncertain, at this time, how many violations will occur in Fy   99. a Returned Check Charae Return check charge is $ 25.00.

0 Total Estimated Revenues Certification of Individuals $ 79,500.00 Certification of Businesses $ 4,500.00 Accreditation of Training Providers $ 24,000.00 Permit Fees $ 28.500.00 $ 136,500.00 I 5 I THE TOTAL ESTIMATED YEARLY REVENUE TO BE GENERATED FROM IMPLEMENTATION OF D. C. LAW 11 221 IS $ 136.5000 3. Identification of the revenues and funds currently available, or likely to be available from existing revenue sources to implement D. C. Law 1 1 221, if it is to be implemented.

At present, the lead program is 100% funded through a grant from the US. Environmental Protection Agency. This grant, authorized under TSCA 404( g), funds three ( 3) full time positions: Lead Coordinator, Environmental Program Assistant, Community Coordinator, a partial Attorney Advisor. Monies from the grant also cover employee fringe benefits ( i. e., retirement, health benefits, life insurance, annual and sick leave), equipment, supplies, travel, and the District s indirect costs.

As previously stated, for N   99, the District has applied for, and received from the U. S. Environmental Protection Agency, $ 216,339.00 to continue to fund the three ( 3) fulltime positions and one ( 1) additional part time position. Monies from the FY   99grant are also expected to cover employee fringebenefits, travel, supplies, training, and other incidental costs.

4. Statement on the extent to which current appropriations are available to finance implementation of D. C. Law 11 221, if it is to be implemented within FY   99.

This is not applicable since District appropriated funds are currently unavailable to implement this legislation in N   99. The only appropriated support is the District match to receive the EPNHUD II grant award.

5. Identification of the specific funding source to be recommended in FY   99to implement D. C. Law 11 221, if cost implementation is. estimated to exceed $ 100,000 in FY   99.

The specific Funding sources that are recommended in N   99to implement D. C. Law 1 1 221, are the U. S. Environmental Protection Agency TSCA 404( g) grant monies in the estimated amount of $ 216,339. 00. Fees, fines and penalties collected pursuant to this legislation are not included.

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