[Federal Register Volume 84, Number 41 (Friday, March 1, 2019)]
[Notices]
[Pages 7140-7146]
[FR Doc No: 2019-03705]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-85200; File No. SR-CboeEDGX-2019-005]

Self-Regulatory Organizations; Cboe EDGX Exchange, Inc.; Notice
of Filing and Immediate Effectiveness of a Proposed Rule Change To
Amend Rule 20.6 To Apply the Obvious Error Rule to Stock-Option Orders,
and To Amend Rules 21.1(d) and 21.20 To Add Qualified Contingent Cross
With Stock Order Functionality

February 26, 2019.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934
(the ``Act''),\1\ and Rule 19b-4 thereunder,\2\ notice is hereby given
that on February 12, 2019, Cboe EDGX Exchange, Inc. (the ``Exchange''
or ``EDGX'') filed with the Securities and Exchange Commission (the
``Commission'') the proposed rule change as described in Items I, II,
and III below, which Items have been prepared by the Exchange. The
Exchange filed the proposal pursuant to Section 19(b)(3)(A)(iii) of the
Act \3\ and Rule 19b-4(f)(6) thereunder.\4\ The Commission is
publishing this notice to solicit comments on the proposed rule change
from interested persons.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ 15 U.S.C. 78s(b)(3)(A)(iii).
    \4\ 17 CFR 240.19b-4(f)(6).
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I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change

    Cboe EDGX Exchange, Inc. (the ``Exchange'' or ``EDGX'') proposes to
amend Rules [sic] 20.6 to apply the obvious error rule to stock-option
orders, and to amend Rules 21.1(d) and 21.20 to add Qualified
Contingent Cross with Stock Order (``QCC with Stock Order'')
functionality. The text of the proposed rule change is provided below.

(additions are italicized; deletions are [bracketed])
* * * * *

Rules of Cboe EDGX Exchange, Inc.

* * * * *

Rule 20.6. Nullification and Adjustment of Options Transactions
Including Obvious Errors

    The Exchange may nullify a transaction or adjust the execution
price of a transaction in accordance with this Rule. However, the
determination as to whether a trade was executed at an erroneous
price may be made by mutual agreement of the affected parties to a
particular transaction. A trade may be nullified or adjusted on the
terms that all parties to a particular transaction agree, provided,
however, that such agreement to nullify or adjust must be conveyed
to the Exchange in a manner prescribed by the Exchange prior to 8:30
a.m. Eastern Time on the first trading day following the execution.
It is considered conduct inconsistent with just and equitable
principles of trade for any Member to use the mutual adjustment
process to circumvent any applicable Exchange rule, the Act or any
of the rules and regulations thereunder.
    (a)-(l) No change.

Interpretations and Policies

    .01-.03 No change.
    .04 Complex Orders and Stock-Option Orders:
    (a)-(b) No change.
    (c) If the option leg of a stock-option order qualifies as an
Obvious Error under paragraph (c)(1) or a Catastrophic Error under
paragraph (d)(1), then the option leg that is an Obvious or
Catastrophic Error will be adjusted in accordance with paragraph
(c)(4)(A) or (d)(3), respectively, regardless of whether one of the
parties is a Customer. However, the option leg of any Customer order
subject to this paragraph (c) will be nullified if the adjustment
would result in an execution price higher (for buy transactions) or
lower (for sell transactions) than the Customer's limit price on the
stock-option order, and the Exchange will attempt to nullify the
stock leg. Whenever a stock trading venue nullifies the stock leg of
a stock-option order or whenever the stock leg cannot be executed,
the Exchange will nullify the option leg upon request of one of the
parties to the transaction or in accordance with paragraph (c)(3).
* * * * *

Rule 21.1. Definitions

    The following definitions apply to Chapter XXI for the trading
of options listed on EDGX Options.
    (a)-(c) No change.
    (d) The term ``Order Type'' shall mean the unique processing
prescribed for designated orders, subject to the restrictions set
forth in paragraph (j) below with respect to orders and bulk
messages submitted through bulk ports, that are eligible for entry
into the System, and shall include:
    (1)-(9) No change.
    (10) A ``Qualified Contingent Cross Order'' is comprised of an
originating order to buy or sell at least 1,000 standard option
contracts that is identified as being part of a qualified contingent
trade, as that term is defined in paragraph (A) below, coupled with
a contra-side order or orders totaling an equal number of contracts.
See Rule 21.20 for a definition of a QCC with Stock Order. For
purposes of this order type:
* * * * *

Rule 21.20. Complex Orders

    (a) No change.
    (b) Availability of Types of Complex Orders. The Exchange will
determine and communicate to Members via specifications and/or a
Regulatory Circular listing when the complex order types, among the
complex order types set forth in this Rule, are available for use on
the Exchange. The complex order types that may be submitted are
limit orders and market orders, and orders with a Time in Force of
GTD, IOC, DAY, GTC, or OPG as such terms are defined in Rule
21.1(f). Users may not submit complex orders through bulk ports. The
following complex orders will also be accepted by the Exchange:
    (1)-(5) No change.
    (6) QCC with Stock Orders. A ``QCC with Stock Order'' is a
qualified contingent cross order, as defined in Rule 21.1(d)(10),
entered with a stock component to be electronically communicated by
the Exchange to a designated broker-dealer for execution on behalf
of the submitting User pursuant to subparagraph (c)(7) below. QCC
with Stock Orders are available to Users on a voluntary basis.
    (c) Trading of Complex Orders. The Exchange will determine and
communicate to Members via specifications and/or Regulatory Circular
which complex order origin codes (i.e., non-broker-dealer customers,
broker-dealers that are not Market Makers on an options exchange,
and/or Market Makers on an options exchange) are eligible for entry
onto the COB. Complex orders will be subject to all other Exchange
Rules that pertain to orders submitted to the Exchange generally,
unless otherwise provided in this Rule.
    (1)-(6) No change.
    (7) QCC with Stock Orders. The System processes QCC with Stock
Orders as follows:
    (A) Entry of QCC with Stock Order. When a User enters a QCC with
Stock Order on the Exchange, it enters a QCC Order with a stock
component (pursuant to Rule 21.10(d)(10)). When entering a QCC with
Stock Order, the User must:
    (i) Include a net price for the stock and option components;
    (ii) give up a Clearing Member in accordance with Rule 21.12;
and
    (iii) designate a specific broker-dealer to which the stock
components will be communicated, which broker-dealer the Exchange
must have identified as having connectivity to electronically
communicate

the stock components of QCC with Stock Orders to stock trading
venues and with which the User must have entered into a brokerage
agreement (the ``designated broker-dealer''). The Exchange will have
no financial arrangements with the broker-dealers it has identified
with respect to communicating stock orders to them.
    (B) Option Component.
    (i) If the option component (i.e., the QCC Order) of a QCC with
Stock Order can execute, the System executes it in accordance with
Rule 21.8, but does not immediately send the User a trade execution
report. The System then automatically communicates the stock
component to the designated broker-dealer for execution at a stock
trading venue.
    (ii) If the option component of a QCC with Stock Order cannot
execute, the System cancels the QCC with Stock Order, including both
the stock and option components.
    (C) Stock Component.
    (i) If the System receives an execution report for the stock
component of a QCC with Stock Order from the designated broker-
dealer, the Exchange sends the User the trade execution report for
the QCC with Stock Order, including execution information for both
the stock and option components. The execution price of the buy
(sell) stock leg of a QCC with Stock Order may be any price
(including outside the NBBO for the stock leg), except the price
must be permitted by Regulation SHO and the Limit Up-Limit Down
Plan.
    (ii) If the System receives a report from the designated broker-
dealer that the stock component of a QCC with Stock Order cannot
execute, the Exchange nullifies the option component trade and
notifies the User of the reason for the nullification.
* * * * *
    The text of the proposed rule change is also available on the
Exchange's website (http://markets.cboe.com/us/options/regulation/rule_filings/edgx/), at the Exchange's Office of the Secretary, and at
the Commission's Public Reference Room.

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

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

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

1. Purpose
    In 2016, the Exchange's parent company, Cboe Global Markets, Inc.
(``Cboe Global''), which is the parent company of Cboe Exchange, Inc.
(``Cboe Options'') and Cboe C2 Exchange, Inc. (``C2''), acquired the
Exchange, Cboe EDGA Exchange, Inc. (``EDGA''), Cboe BZX Exchange, Inc.
(``BZX or BZX Options''), and Cboe BYX Exchange, Inc. (``BYX'' and,
together with C2, Cboe Options, the Exchange, EDGA, and BZX, the ``Cboe
Affiliated Exchanges''). The Cboe Affiliated Exchanges are working to
align certain system functionality, retaining only intended differences
between the Cboe Affiliated Exchanges, in the context of a technology
migration. Cboe Options intends to migrate its technology to the same
trading platform used by the Exchange, C2, and BZX Options in the
fourth quarter of 2019. The proposal set forth below is intended to add
certain functionality to the Exchange's System that is available on
Cboe Options in order to ultimately provide a consistent technology
offering for market participants who interact with the Cboe Affiliated
Exchanges. Although the Exchange intentionally offers certain features
that differ from those offered by its affiliates and will continue to
do so, the Exchange believes that offering similar functionality to the
extent practicable will reduce potential confusion for Users.
QCC With Stock Order
    The Exchange proposes to offer QCC with Stock Order functionality
to Users. QCC with Stock Order functionality facilitates the execution
of the stock component of qualified contingent trades (``QCTs'').
Specifically, a QCC with Stock Order is a QCC order entered with a
stock component to be communicated to a designated broker-dealer for
execution. QCC with Stock Orders will assist Users in maintaining
compliance with rules regarding the execution of the stock components
of QCTs, and help maintain an audit trail for surveillance of Users for
compliance with such rules. Currently, although the Exchange offers
qualified contingent cross (``QCC'') order functionality, it does not
facilitate electronic communication of the stock component of QCC
orders for execution. The proposed rule change provides Users with the
option to electronically submit the stock component of QCC orders to
the Exchange, and describes how the Exchange will electronically
communicate the stock component to a designated broker-dealer for
execution on behalf of Users.
    A QCC order is comprised of an originating order to buy or sell at
least 1000 contracts that is identified as being part of a QCT,\5\
coupled with a contra-side order or orders totaling an equal number of
contracts. QCC orders may execute without exposure provided the
execution (1) is not at the same price as a public customer order
resting in the electronic book and (2) is at or between the national
best bid or offer (``NBBO'').\6\ QCC orders will be cancelled if they
cannot be executed.\7\
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    \5\ See Rule 21.1(d)(10). A ``qualified contingent trade'' is a
transaction consisting of two or more component orders, executed as
agent or principal, where: (1) At least one component is an NMS
stock, as defined in Rule 600 of Regulation NMS under the Exchange
Act; (2) all components are effected with a product or price
contingency that either has been agreed to by all the respective
counterparties or arranged for by a broker-dealer as principal or
agent; (3) the execution of one component is contingent upon the
execution of all other components at or near the same time; (4) the
specific relationship between the component orders (e.g., the spread
between the prices of the component orders) is determined by the
time the contingent order is placed; (5) the component orders bear a
derivative relationship to one another, represent different classes
of shares of the same issuer, or involve the securities of
participants in mergers or with intentions to merge that have been
announced or cancelled; and (6) the transaction is fully hedged
(without regard to any prior existing position) as a result of other
components of the contingent trade. The proposed rule change amends
Rule 21.1(d)(10) to add a cross-reference to the proposed definition
of a QCC with Stock Order in Rule 21.20.
    \6\ See Rule 21.1(d)(10).
    \7\ Id.
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    Since QCC orders represent one component of a QCT, each QCC order
must be paired with a stock order. When a User enters a QCC order, the
User is responsible for executing the associated stock component of the
QCT within a reasonable period of time after the QCC order is executed.
The Exchange conducts surveillance of Users to ensure that Users
execute the stock component of a QCT at or near the same time as the
options component. While the Exchange does not specify how the User
should go about executing the stock component of the trade, this
process is often manual and is therefore a compliance risk for Users if
they do not execute the stock component within a reasonable time period
of execution of the options component. Thus, the Exchange is proposing
to offer QCC with Stock Order functionality, pursuant to which the
Exchange will automatically communicate the stock component of a QCT to
a designated broker-dealer for execution in connection with the
execution of a QCC order on the Exchange. This functionality will

reduce the compliance burden on Users by providing an automated means
of executing the stock component of a QCT, and also will provide
benefits for the Exchange's surveillance by providing an audit trail
for the execution of the stock component. QCC with Stock Orders can be
entered by Users through a front-end order and execution management
system or through a User's own electronic connection to the Exchange.
    QCC with Stock Orders will be available to all Users on a voluntary
basis.\8\ Under the proposed rule, when a User enters a QCC with Stock
Order on the Exchange, it enters a QCC order with a stock component
(pursuant to Rule 21.1(d)(10)). When entering a QCC with Stock Order,
the User must:
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    \8\ See proposed Rule 21.20(b)(6).
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     Enter a net price for the stock and option components.
Net-priced QCC with Stock Orders reduce the chance that Users will miss
the market since the Exchange will calculate a price for the stock and
options components that honors the net price of the package and current
market prices, if possible. It is also consistent with the use of
QCTs.\9\ The Exchange will not allow QCC with Stock Orders with a
specified price for the stock component or the option component;
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    \9\ See Securities Exchange Act Release No. 54389 (August 31,
2006), 71 FR 52829, 52831 (September 7, 2006) (Order Granting an
Exemption for Qualified Contingent Trades from Rule 611(a) of
Regulation NMS Under the Securities Exchange Act of 1934) (``QCT
Exemption Order''). In its exemption request, the Securities
Industry Association (``SIA'') indicated parties to a contingent
transaction are focused on the spread or ratio between the
transaction prices for each of the component instruments, rather
than on the absolute price of any single component instrument. The
SIA also noted the economics of a contingent trade are based on the
relationship between the prices of the security and related
derivative or security. See Letter to Nancy M. Morris, Secretary,
Commission, from Andrew Madoff, SIA Trading Committee, SIA, dated
June 21, 2006 (``SIA Exemption Request''), at 2.
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     give up a Clearing Member in accordance with Rule 21.12.
Pursuant to Rule 21.12, a User must give up a Clearing Member it
previously identified to the Exchange as a Designated Give Up for that
User for all orders it submits to the Exchange; and
     designate a specific broker-dealer to which the stock
components will be communicated, which broker-dealer the Exchange must
have identified as having connectivity to electronically communicate
the stock components of QCC with Stock Orders to stock trading venues
and with which the User must have entered into a brokerage agreement
(the ``designated broker-dealer''). The Exchange will have no financial
arrangements with any broker-dealer it has identified with respect to
communicating stock orders to them.\10\ The Exchange currently has one
broker-dealer that has established connectivity for executing the stock
component of QCC with Stock Orders. If the Exchange adds more in the
future, and the User enters into brokerage agreements with multiple of
the broker-dealers designated by the Exchange, the User must specify to
which broker-dealer the Exchange should communicate the stock
components of its QCC with Stock Orders when entering QCC with Stock
Orders.
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    \10\ The Exchange also represents that broker dealers it
identifies as having connectivity to electronically communicate the
stock components of QCC with Stock Orders to stock trading venues do
not receive other special benefits related to trading on the
exchange.
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    Current Exchange fees applicable to QCC orders will apply to the
options component of QCC with Stock Orders.\11\ To the extent the
Exchange will apply a fee to the stock component of QCC with Stock
Orders, the Exchange will submit a separate rule filing to adopt such a
fee.
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    \11\ See Cboe EDGX Options Fee Schedule.
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    If the option component of a QCC with Stock Order satisfies the
conditions of proposed Rule 21.20(b)(6) [sic] upon entry, the System
executes the order in accordance with Rule 21.8 (which describes how
simple option orders execute). However, the Exchange does not
immediately send the User a trade execution report for this option
execution.\12\ Because the User submitted a QCC with Stock Order to
execute as a package, the Exchange waits to send a trade execution
report to the User until after it has determined whether all components
of the QCC with Stock Order have executed, as described below. After
the QCC order is executed, the Exchange will then automatically
communicate the stock component to the designated broker-dealer for
execution.
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    \12\ Even though the Exchange does not send the User an
execution report immediately following execution of the option
component, the Exchange disseminates the trade at that time pursuant
to the OPRA Plan and creates a record to be sent to the Clearing
Corporation.
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    Although the option component (which is a QCC order) of a QCC with
Stock Order is eligible for automatic execution, it is possible that
the option component order may not be executable based on market prices
at the time the order is entered (e.g. the order would execute at the
same price as a customer). If the QCC order cannot execute after one
attempt, the System cancels the QCC with Stock Order, including both
the stock and options components. This prevents execution of the stock
component of a QCT where the options component has not been
successfully executed, consistent with the purpose of contingent trades
and the QCT exemption.
    As noted above, if the option component executes, the System then
automatically communicates the stock component to the designated
broker-dealer for execution. If the System receives an execution report
for the stock component of a QCC with Stock Order from the designated
broker-dealer, the Exchange sends the User the trade execution report
for the QCC with Stock Order, including execution information for both
the stock and option components. However, if the System receives a
report from the designated broker-dealer that the stock component of
the QCC with Stock Order cannot execute,\13\ the Exchange nullifies the
option component trade and notifies the User of the reason for the
nullification.\14\ This proposed rule change prevents execution of the
option component of a QCT where the stock component has not been
successfully executed, just as the proposed rule change prevents
execution of the stock component of a QCT where the option component
has not been successfully executed by cancelling the stock component if
the option component cannot execute.
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    \13\ For example, if the stock execution venue to which the
designated broker-dealer routed the stock component is experiencing
system issues, the stock component may not be able to execute.
Additionally, the Exchange understands certain stock execution
venues apply risk controls to the stock components of QCTs, which
may prevent execution of the stock components at certain prices.
    \14\ The Exchange will nullify the option component trade in the
same manner as it currently nullifies any other trades (when
nullification is permitted under the Rules).
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    Currently, whenever a stock trading venue nullifies the stock leg
of a stock-option order or whenever the stock leg cannot execute, the
Exchange will nullify the option leg upon request of one of the parties
to the transaction or on an Exchange Official's own motion in
accordance with the Rules.\15\ As noted above, to qualify as a QCT, the
execution of one component is contingent upon the execution of all
other components at or near the same time.\16\ Given this requirement,
if the

stock component does not execute at or near the same time as the option
component, it is reasonable to expect a User that submitted a QCC with
Stock Order to request such nullification.\17\ If the stock component
does not execute, rather than require the User that submitted the QCC
with Stock Order to contact the Exchange to request the nullification
of the option component execution pursuant to proposed Rule 20.6,
Interpretation and Policy .04 if the stock component cannot execute,
the proposed rule change simply eliminates this requirement for the
submitting User to make such a request. Instead, the proposed rule
states the Exchange will automatically nullify the option transaction
if the stock component does not execute. The Exchange believes such
nullification without a request from the User is consistent with the
definitions of QCC and QCT orders. The proposed rule change merely
automates an otherwise manual process for Users.
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    \15\ See proposed Rule 20.6, Interpretation and Policy .04(c).
As discussed below, proposed Rule 20.6, Interpretation and Policy
.04(c) is virtually identical to rules of other options exchanges.
Pursuant to Rule 20.6, other nullifications may generally occur only
if both parties agree.
    \16\ See QCT Exemption Order, which requires the execution of
one component of the QCT to be contingent upon the execution of all
other components at or near the same time to qualify for the
exemption. In the SIA Exemption Request, the SIA stated that for
contingent trades, the execution of one order is contingent upon the
execution of the other order. SIA further stated that, by breaking
up one or more components of a contingent trade and requiring that
such components be separately executed, one or more parties may
trade ``out of hedge.'' See SIA Exemption Request at 3. In the words
of Rob Base and DJ E-Z Rock, it takes two (executions) to make a
thing (a QCT) go right.
    \17\ As set forth in Rule 21.1(d)(10), when submitting a QCC
order, a User submits an order as well as a contra-side order or
orders totaling an equal number of contracts, which execute against
each other if they satisfy the conditions set forth in that Rule. As
a result, if that User requests nullification of the QCC order
execution (or as proposed, if the Exchange automatically nullifies
the QCC order execution) if the stock component cannot execute, no
other party is impacted by the nullification.
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    Additionally, the Exchange believes this automatic nullification
will reduce any compliance risk for the User associated with execution
of a QCC order and lack of execution of a stock order at or near the
same time.\18\ The Exchange conducts surveillance to ensure a User
executes the stock component of a QCT, which will also apply to QCC
with Stock Orders, if the option component executed. As a result, if
the stock component does not execute when initially submitted to a
stock trading venue by the designated broker-dealer, a User may be
subject to compliance risk if it does not execute the stock component
within a reasonable time period of the execution of the option
component. The proposed rule change reduces this compliance risk for
Users.
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    \18\ In the SIA Exemption Request, the SIA stated that parties
to a contingent trade will not execute one side of the trade without
the other component or components being executed in full (or in
ratio) and at the specified spread or ratio. See SIA Exemption
Request at 2. While a broker-dealer could re-submit the stock
component to a stock trading venue or execution after it initially
fails to execute, there is a compliance risk that the time at which
the stock component executes is not close enough to the time at
which the option component executed.

    Example 1:
    Stock NBBO: $100 x $101
    Option NBBO: $1 x $2

    A User submits a QCC with Stock Order buying 1,000 puts and 100,000
shares of stock with a net price of $101.50. A QCC order is entered on
the Exchange and executed at a price of $1.50. The Exchange reports
this trade to OPRA. The Exchange routes the stock component to an
Exchange-designed broker-dealer at a price of $100. The Exchange
receives a trade execution report from the designated broker-dealer
that the stock component executed at $100, and sends a trade execution
report for both components of the QCC with Stock Order to the User.

    Example 2:
    Stock NBBO: $100 x $101
    Option NBBO: $1 x $2

    A User submits a QCC with Stock Order buying 1,000 puts and 100,000
shares of stock with a net price of $101.50. A QCC order is entered on
the Exchange and executed at a price of $1.50. The Exchange reports
this trade to OPRA. The Exchange routes the stock component to an
Exchange-designed broker-dealer at a price of $100. The Exchange
receives a report from the designated broker-dealer that the stock
component did not execute. The Exchange nullifies the option component
trade, and sends a report to the User of the reason for the
nullification.

    Example 3:
    Stock NBBO: $100 x $101
    ABBO: $1.00 x $1.05
    Exchange BBO: $1.00 (Priority Customer) x 1.01 (Priority
Customer)

    A User submits a QCC with Stock Order buying 1,000 puts and 100,000
shares of stock with a net price of 101.01. A QCC order is entered on
the Exchange at a price of $1.01. Because the QCC order is at the same
price as a priority customer order resting on the Exchange, the
Exchange cancels the QCC with Stock Order.
Obvious Error
    The proposed rule change applies much of current Rule 20.6 to
stock-option orders.\19\ The proposed rule change deviates from the
current rule only to account for the unique qualities of stock-option
orders. The proposed rule reflects the fact that stock-option orders
contain a stock component that is executed on a stock trading venue,
and the Exchange may not be able to ensure that the stock trading venue
will adjust or nullify the stock execution in the event of an obvious
or catastrophic error.
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    \19\ In order for a stock-option order to qualify as an obvious
or catastrophic error, at least one of the legs must itself qualify
as an obvious or catastrophic error under current Rule 21.20. See
Rule 20.6, Interpretation and Policy .04. A QCC with Stock Order is
a type of stock-option order.
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    Proposed Interpretation and Policy .04(c) governs stock-option
orders. It provides that if the option leg of a stock-option order
qualifies as an Obvious Error under subparagraph (c)(1) or a
Catastrophic Error under subparagraph (d)(1), then the option leg that
is an Obvious or Catastrophic Error will be adjusted in accordance with
subparagraph (c)(4)(A) or (d)(3), respectively, regardless of whether
one of the parties is a Customer. However, the option leg of any
Customer order subject to proposed Interpretation and Policy .04(c)
will be nullified if the adjustment would result in an execution price
higher (for buy transactions) or lower (for sell transactions) than the
Customer's limit price on the stock-option order, and the Exchange will
attempt to nullify the stock leg. Whenever a stock trading venue
nullifies the stock leg of a stock-option order or whenever the stock
leg cannot be executed, the Exchange will nullify the option leg upon
request of one of the parties to the transaction or in accordance with
subparagraph (c)(3).
    Similar to Interpretation and Policy .04(a), an options leg (or
legs) of a stock-option order must qualify as an obvious or
catastrophic error under the Current Rule in order for the stock-option
order to qualify as an obvious or catastrophic error. Also similar to
Interpretation and Policy .04(a), if an options leg (or legs) does
qualify as an obvious or catastrophic error, the option leg (or legs)
will be adjusted in accordance with subparagraph (c)(4)(A) or (d)(3),
respectively, regardless of whether one of the parties is a Customer.
Again, as with Interpretation and Policy .04(a), where at least one
party to a complex order transaction is a Customer, the Exchange will
nullify the option leg and attempt to nullify the stock leg if
adjustment would result in an execution price higher (for buy
transactions) or lower (for sell transactions) than the Customer's
limit price on the complex order or individual leg(s).
    The stock leg of a stock-option order is not executed on the
Exchange; rather, the stock leg is sent to a stock trading venue for
execution. The Exchange is unaware of a mechanism by which the Exchange
can guarantee that the stock leg will be nullified by the stock trading
venue in the event of an obvious or

catastrophic error on the Exchange. Thus, in the event of the
nullification of the option leg pursuant to proposed Interpretation and
Policy .04(c), the Exchange will attempt to have the stock leg
nullified by the stock trading venue by either contacting the stock
trading venue or notifying the parties to the transaction that the
option leg is being nullified. The party or parties to the transaction
may ultimately need to contact the stock trading venue to have the
stock portion nullified.
    Finally, the Exchange proposes to provide guidance that whenever
the stock trading venue nullifies the stock leg of a stock-option
order, the option will be nullified upon request of one of the parties
to the transaction or by an Official acting on their own motion in
accordance with subparagraph (c)(3). There are situations in which
buyer and seller agree to trade a stock-option order, but the stock leg
cannot be executed. The Exchange proposes to provide guidance that
whenever the stock portion of a stock-option order cannot be executed,
the Exchange will nullify the option leg upon request of one of the
parties to the transaction or on an Official's own motion.
2. Statutory Basis
    The Exchange believes the proposed rule change is consistent with
the Securities Exchange Act of 1934 (the ``Act'') and the rules and
regulations thereunder applicable to the Exchange and, in particular,
the requirements of Section 6(b) of the Act.\20\ Specifically, the
Exchange believes the proposed rule change is consistent with the
Section 6(b)(5) \21\ requirements that the rules of an exchange be
designed to prevent fraudulent and manipulative acts and practices, to
promote just and equitable principles of trade, to foster cooperation
and coordination with persons engaged in regulating, clearing,
settling, processing information with respect to, and facilitating
transactions in securities, to remove impediments to and perfect the
mechanism of a free and open market and a national market system, and,
in general, to protect investors and the public interest. Additionally,
the Exchange believes the proposed rule change is consistent with the
Section 6(b)(5) \22\ requirement that the rules of an exchange not be
designed to permit unfair discrimination between customers, issuers,
brokers, or dealers.
---------------------------------------------------------------------------

    \20\ 15 U.S.C. 78f(b).
    \21\ 15 U.S.C. 78f(b)(5).
    \22\ Id.
---------------------------------------------------------------------------

    The Exchange believes the proposed rule change is designed to
promote just and equitable principles of trade because it will provide
Users with optional functionality to facilitate the stock component of
a QCT. The QCC with Stock Order is an optional piece of functionality
offered to Users to communicate the stock component of a QCT to a
designated broker-dealer for execution. A User that does not wish to
use QCC with Stock Order functionality can continue to execute a QCT by
entering a QCC order on the Exchange and separately executing the stock
component of the QCT [sic] another venue, as it may do today. A User
can also build its own technology to electronically communicate the
stock component of any QCT to a broker-dealer for execution.
    QCC with Stock Orders reduce Users' compliance burden because it
allows for the automatic submission of the stock component of a QCT in
connection with the execution of the options component(s) as a QCC
order on the Exchange. QCC with Stock Order functionality also provides
benefits to the Exchange by establishing an audit trail for the
execution of the stock component of a QCT within a reasonable period of
time after the execution of the QCC order. The proposed rule change
further reduces Users' compliance risk by providing that the Exchange
will, in addition to cancelling the stock component if the option
component cannot execute, nullify any option component execution when
the stock component does not execute without a request from the User.
Nullification of the option trade is consistent with the requirement
that a User must execute the stock component of a QCT within a
reasonable period of time after executing the option component on the
Exchange as a QCC order. The proposed rule change simply eliminates the
requirement that one party to the transaction request nullification of
the option component trade before the Exchange nullifies the option
trade (as proposed), because such nullification is consistent with the
definitions of QCC orders and QCT. The proposed rule change merely
automates an otherwise manual process for Users. As noted above, to
qualify as a QCT, the execution of one component is contingent upon the
execution of all other components at or near the same time.\23\ Since
the purpose of a QCC with Stock Order is for all components to trade at
or near the same time, if the stock component does not execute at or
near the same time as the option component, it is reasonable to expect
a User that submitted a QCC with Stock Order to request such
nullification to avoid any compliance risk associated with execution of
a QCC order and lack of execution of a stock order at or near the same
time.\24\
---------------------------------------------------------------------------

    \23\ See supra notes 5 and 16.
    \24\ See supra note 18.
---------------------------------------------------------------------------

    The Exchange conducts surveillance to ensure a User executes the
stock component of a QCT, which will also apply to QCC with Stock
Orders, if the option component executed. As a result, if the stock
component does not execute when initially submitted to a stock trading
venue by the designated broker-dealer, a User may be subject to
compliance risk if it does not execute the stock component within a
reasonable time period of the execution of the option component. The
proposed rule change reduces this compliance risk for Users. The
Exchange therefore believes the proposed rule change removes
impediments to and perfects the mechanisms of a free and open market
and a national market system, and in general, protects investors and
the public interest.
    The Exchange believes the proposed rule change to require a User to
submit a QCC with Stock Order with a net price will also perfect the
mechanism of a free and open market and a national market system and
protect investors, because a net price will reduce the chance that
Users will miss the market since the Exchange will calculate a price
for the stock and options components that honors the net price of the
package and current market prices, if possible. As noted above, a User
that wants to enter a net price for the stock and option components can
execute a QCT by entering a QCC order on the Exchange and separately
executing the stock component of the QCT [sic] another venue, as it may
do today. As noted above, submission of a QCC with Stock Order is
consistent with the use of QCTs.\25\
---------------------------------------------------------------------------

    \25\ See supra notes 5, 16, and 18.
---------------------------------------------------------------------------

    Additionally, the proposed functionality is similar to
functionality offered by another options exchange \26\ and consistent
with the QCT exemption previously approved by the Commission.\27\
---------------------------------------------------------------------------

    \26\ See Cboe Options Rules 6.53(u) and 6.53C, Interpretation
and Policy .06(g); see also Nasdaq ISE, LLC (``ISE'') Rules 715(t)
and 721(c) and Supplementary Material.
    \27\ See QCT Exemption Order.
---------------------------------------------------------------------------

    The proposed rule change to adopt obvious error provisions stock-
option orders is consistent with efforts among options exchanges to
seek harmonized rules related to the adjustment and nullification of
erroneous options transactions. The Exchange believes that the proposed
rule change will provide greater transparency and clarity with

respect to the adjustment and nullification of erroneous options
transactions. The proposed rule change is virtually identical to the
rules of other options exchanges.\28\ Particularly, the proposed
changes seek to achieve consistent results for participants across U.S.
options exchanges while maintaining a fair and orderly market,
protecting investors and protecting the public interest. Based on the
foregoing, the Exchange believes that the proposal is consistent with
Section 6(b)(5) of the Act \29\ in that the proposed rule change will
foster cooperation and coordination with persons engaged in regulating
and facilitating transactions [sic].
---------------------------------------------------------------------------

    \28\ See, e.g., Cboe Options Rule 6.25, Interpretation and
Policy .07; ISE Rule 720, Supplementary Material .05; and MIAX Rule
521, Interpretation and Policy .03.
    \29\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------

    The Exchange believes the various provisions allowing or dictating
adjustment rather than nullification of a trade are necessary given the
benefits of adjusting a trade price rather than nullifying the trade
completely. Because options trades are used to hedge, or are hedged by,
transactions in other markets, including securities and futures, many
Options Members, and their customers, would rather adjust prices of
executions rather than nullify the transactions and, thus, lose a hedge
altogether. As such, the Exchange believes it is in the best interest
of investors to allow for price adjustments as well as nullifications.
    The Exchange does not believe that the proposal is unfairly
discriminatory, even though it differentiates in certain places between
Customers and non-Customers. As with the Current Rule, Customers are
treated differently, often affording them preferential treatment. This
treatment is appropriate in light of the fact that Customers are not
necessarily immersed in the day-to-day trading of the markets, are less
likely to be watching trading activity in a particular option
throughout the day, and may have limited funds in their trading
accounts. At the same time, the Exchange reiterates that in the U.S.
options markets generally there is significant retail customer
participation that occurs directly on (and only on) options exchanges
such as the Exchange. Accordingly, differentiating among market
participants with respect to the adjustment and nullification of
erroneous options transactions is not unfairly discriminatory because
it is reasonable and fair to provide Customers with additional
protections as compared to non-Customers.
    The Exchange believes its proposal related to stock-option orders
is consistent with the Act. Stock-option orders consist of an option
component and a stock component. Due to the fact that the Exchange has
no control over the venues on which the stock is executed the proposal
focuses on the option component of the stock-option order by adjusting
or nullifying the option in accordance with subparagraph (c)(4)(A) or
(d)(3). Also, nullifying the option component if the stock component
cannot be executed ensures that market participants receive the
execution for which they bargained. Stock-option orders are negotiated
and agreed to as a package; thus, if for any reason the stock portion
of a stock-option order cannot ultimately be executed, the parties
should not be saddled with an options position sans stock.
    The proposed rule change is generally intended to align system
functionality currently offered by the Exchange with Cboe Options
functionality in order to provide a consistent technology offering for
the Cboe Affiliated Exchanges. A consistent technology offering, in
turn, will simplify the technology implementation, changes, and
maintenance by Users of the Exchange that are also participants on Cboe
Affiliated Exchanges. The proposed rule change would also provide Users
with access to functionality that is generally available on options
exchanges other than the Cboe Affiliated Exchanges,\30\ which may
result in the more efficient execution of QCTs and provide Users with
additional flexibility and increased functionality on the Exchange's
System. Additionally, the proposed functionality is consistent with the
QCT exemption previously approved by the Commission.\31\ The Exchange
believes this consistency will promote a fair and orderly national
options market system.
---------------------------------------------------------------------------

    \30\ See Cboe Options Rules 6.53(u) and 6.53C, Interpretation
and Policy .06 (which permits QCC orders with one or more option
components and QCC with Stock Orders, and stock-option orders with
one or more option legs, respectively); ISE Rules 715(t) and 721(c)
and Supplementary Material .01 through .03 (which permits QCC orders
and QCC with stock orders); and MIAX Rule 518 (which permits stock-
option orders with one or more option legs and QCC orders with one
or more option components).
    \31\ See QCT Exemption Order.
---------------------------------------------------------------------------

    When Cboe Options migrates to the same technology as that of the
Exchange and other Cboe Affiliated Exchanges, Users of the Exchange and
other Cboe Affiliated Exchanges will have access to similar
functionality on all Cboe Affiliated Exchanges. As such, the proposed
rule change would foster cooperation and coordination with persons
engaged in facilitating transactions in securities and would remove
impediments to and perfect the mechanism of a free and open market and
a national market system.

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. QCC with Stock Orders
facilitate Users [sic] compliance with the requirements associated with
executing QCC orders on the Exchange, and are not designed to impose
any unnecessary burden on competition. QCC with Stock Order
functionality is available to Users on a voluntary basis, and Users are
not required to use QCC with Stock Orders when executing QCTs. The
proposed rule change has no impact on Users that elect to execute QCTs
without using QCC with Stock Order functionality. Those Users may
continue to execute QCTS [sic] in the same manner as they do today by
entering a QCC order on the Exchange and separately executing the stock
component of the QCT another venue. A User can also build its own
technology to electronically communicate the stock component of any QCT
to a broker-dealer for execution. For Users that elect to use QCC with
Stock Order functionality to execute QCTs, the proposed rule change
reduces those Users' compliance burdens to satisfy their obligation to
execute the related stock component of the QCT within a reasonable
period of time after the QCC order is executed on the Exchange, as this
functionality provides an automated means for satisfying this
obligation.
    QCC with Stock Orders are available to all Users either through a
front-end order and execution management system or through a User's own
electronic connection to the Exchange. Additionally, the proposed
functionality is similar to functionality offered by another options
exchange \32\ and consistent with the QCT exemption previously approved
by the Commission.\33\
---------------------------------------------------------------------------

    \32\ See Cboe Options Rules 6.53(u) and 6.53C, Interpretation
and Policy .06(g); see also ISE Rules 715(t) and 721(c) and
Supplementary Material.
    \33\ See QCT Exemption Order.
---------------------------------------------------------------------------

    The Exchange believes the proposed rule change to adopt obvious
error rules related to stock-option orders will not impose a burden on
intermarket competition but will rather alleviate any burden on
competition because it is the result of a collaborative effort by all

options exchanges to harmonize and improve the process related to the
adjustment and nullification of erroneous options transactions. The
Exchange does not believe that the rules applicable to such process is
an area where options exchanges should compete, but rather, that all
options exchanges should have consistent rules to the extent possible.
Particularly where a market participant trades on several different
exchanges and an erroneous trade may occur on multiple markets nearly
simultaneously, the Exchange believes that a participant should have a
consistent experience with respect to the nullification or adjustment
of transactions. Several other options exchanges have virtually
identical rules.\34\
---------------------------------------------------------------------------

    \34\ See Cboe Options Rule 6.25, Interpretation and Policy .07,
ISE Rule 720, Supplementary Material .05, and MIAX Rule 521,
Interpretation and Policy .03.
---------------------------------------------------------------------------

    The Exchange does not believe that the proposed rule change imposes
a burden on intramarket competition because the obvious error
provisions apply to all market participants equally within each
participant category (i.e., Customers and non-Customers). With respect
to competition between Customer and non-Customer market participants,
the Exchange believes that the proposed rule change acknowledges
competing concerns and tries to strike the appropriate balance between
such concerns. For instance, the Exchange believes that protection of
Customers is important due to their direct participation in the options
markets as well as the fact that they are not, by definition, market
professionals. At the same time, the Exchange believes due to the
quote-driven nature of the options markets, the importance of liquidity
provision in such markets and the risk that liquidity providers bear
when quoting a large breadth of products that are derivative of
underlying securities, that the protection of liquidity providers and
the practice of adjusting transactions rather than nullifying them is
of critical importance. As described above, the Exchange will apply
specific and objective criteria to determine whether an erroneous
transaction has occurred and, if so, how to adjust or nullify a
transaction.

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

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

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

    Because the foregoing proposed rule change does not:
    A. significantly affect the protection of investors or the public
interest;
    B. impose any significant burden on competition; and
    C. 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 \35\ and
Rule 19b-4(f)(6) \36\ thereunder. At any time within 60 days of the
filing of the proposed rule change, the Commission summarily may
temporarily suspend such rule change if it appears to the Commission
that such action is necessary or appropriate in the public interest,
for the protection of investors, or otherwise in furtherance of the
purposes of the Act. If the Commission takes such action, the
Commission will institute proceedings to determine whether the proposed
rule change should be approved or disapproved.
---------------------------------------------------------------------------

    \35\ 15 U.S.C. 78s(b)(3)(A).
    \36\ 17 CFR 240.19b-4(f)(6).
---------------------------------------------------------------------------

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-CboeEDGX-2019-005 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-CboeEDGX-2019-005. 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-CboeEDGX-2019-005 and should be
submitted on or before March 22, 2019.

    For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\37\
---------------------------------------------------------------------------

    \37\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------

Eduardo A. Aleman,
Deputy Secretary.
[FR Doc. 2019-03705 Filed 2-28-19; 8:45 am]
 BILLING CODE 8011-01-P


[Federal Register: June 2, 2006 (Volume 71, Number 106)]
[Notices]
[Page 32153-32155]
[DOCID:fr02jn06-132]

=======================================================================
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SECURITIES AND EXCHANGE COMMISSION

[Release No. IC-27384]

Notice of Applications for Deregistration Under Section 8(f) of
the Investment Company Act of 1940

May 26, 2006.
    The following is a notice of applications for deregistration under
section 8(f) of the Investment Company Act of 1940 for the month of
May, 2006. A copy of each application may be obtained for a fee at the
SEC's Public Reference Branch (tel.<PHONE_NUMBER>). An order granting
each application will be issued unless the SEC orders a hearing.
Interested persons may request a hearing on any application by writing
to the SEC's Secretary at the address below and serving the relevant
applicant with a copy of the request, personally or by mail. Hearing
requests should be received by the SEC by 5:30 p.m. on June 20, 2006,
and should be accompanied by proof of service on the applicant, in the
form of an affidavit or, for lawyers, a certificate of service. Hearing
requests should state the nature of the writer's interest, the reason
for the request, and the issues contested. Persons who wish to be
notified of a hearing may request notification by writing to the
Secretary, U.S. Securities and Exchange Commission, 100 F Street, NE.,
Washington, DC 20549-1090.
    For Further Information Contact: Diane L. Titus at<PHONE_NUMBER>,
SEC, Division of Investment Management, Office of Investment Company
Regulation, 100 F Street, NE., Washington, DC 20549-4041.

Hyperion 2005 Investment Grade Opportunity Term Trust, Inc. [File No.
811-7386]

    Summary: Applicant, a closed-end investment company, seeks an order
declaring that it has ceased to be an investment company. On December
5, 2005, applicant made a liquidating distribution to its shareholders,
based on net asset value. American Stock Transfer & Trust Company is
holding funds for shareholders who have not yet been located. Applicant
incurred $415,495 in expenses in connection with the reorganization.
    Filing Date: The application was filed on April 25, 2006.
    Applicant's Address: Three World Financial Center, 200 Vesey St.,
10th Floor, New York, NY 10281-1010.

Oppenheimer Principal Protected Trust IV [File No. 811-21562]

    Summary: Applicant seeks an order declaring that it has ceased to
be an investment company. On April 13, 2006, applicant made a
liquidating distribution to its shareholders, based on net asset value.
Expenses of $2,500 incurred in connection with the liquidation were
paid by Oppenheimer Funds, Inc., applicant's investment adviser.
    Filing Date: The application was filed on April 21, 2006.
    Applicant's Address: 6803 Tucson Way, Centennial, CO 80112.

Grand Prix Funds, Inc. [File No. 811-8461]

    Summary: Applicant seeks an order declaring that it has ceased to
be an investment company. On February 17, 2006, applicant made a
liquidating distribution to its shareholders, based on net asset value.
Applicant incurred

$41,188 in expenses in connection with the liquidation. Target
Investors, Inc., applicant's investment adviser, will pay any
additional expenses incurred in connection with the liquidation.
    Filing Date: The application was filed on May 1, 2006.
    Applicant's Address: Wilton Executive Campus, 15 River Road, Suite
220, Wilton, CT 06897.

UM Investment Trust II [File No. 811-21679]

    Summary: Applicant, a closed-end investment company, seeks an order
declaring that it has ceased to be an investment company. Applicant has
never made a public offering of its securities and does not propose to
make a public offering or engage in business of any kind.
    Filing Dates: The application was filed on April 7, 2006, and
amended on May 18, 2006.
    Applicant's Address: 522 Fifth Ave., New York, NY 10036.

Weldon Capital Funds Inc. [File No. 811-21509]

    Summary: Applicant seeks an order declaring that it has ceased to
be an investment company. On February 28, 2006, applicant made a
liquidating distribution to its shareholders, based on net asset value.
Expenses of $20,529 incurred in connection with the liquidation were
paid by applicant's investment adviser, Weldon Capital Management, Ltd.
    Filing Dates: The application was filed on April 11, 2006, and
amended on May 8, 2006.
    Applicant's Address: 4747 W. 135th St., Suite 100, Leawood, KS
66224.

JPMorgan Securities Lending Collateral Investment Trust [File No. 811-
21581]

    Summary: Applicant seeks an order declaring that it has ceased to
be an investment company. By August 25, 2005, all of applicant's
shareholders had redeemed their shares at net asset value. No expenses
were incurred in connection with the liquidation.
    Filing Dates: The application was filed on February 13, 2006, and
amended on April 28, 2006.
    Applicant's Address: 522 Fifth Ave., New York, NY 10036.

Van Kampen California Municipal Trust [File No. 811-5662]

    Summary: Applicant, a closed-end investment company, seeks an order
declaring that it has ceased to be an investment company. On December
5, 2005, applicant transferred its assets to Van Kampen California
Value Municipal Income Trust, based on net asset value. Applicant's
preferred shares had liquidation preference of $50,000 per share and
the preferred shares of the acquiring fund have a liquidation
preference of $25,000 per share, so the preferred shares of applicant
were converted into preferred shares of the acquiring fund on a one-
for-two basis. Expenses of $217,083 incurred in connection with the
reorganization were paid by applicant and the acquiring fund.
    Filing Dates: The application was filed on March 20, 2006, and
amended on May 15, 2006.
    Applicant's Address: 1221 Avenue of the Americas, New York, NY
10020.

Van Kampen California Quality Municipal Trust [File No. 811-6361] Van
Kampen Trust for Investment Grade California Municipals [File No. 811-
6535]

    Summary: Each applicant, a closed-end investment company, seeks an
order declaring that it has ceased to be an investment company. On July
29, 2005, each applicant transferred its assets to Van Kampen
California Value Municipal Income Trust, based on net asset value. Each
applicant's preferred shares were converted into preferred shares of
the acquiring fund on a one-for-one basis. Expenses of $76,413 and
$227,503, respectively, incurred in connection with the reorganizations
were paid by the applicants and the acquiring fund.
    Filing Dates: The applications were filed on March 20, 2006, and
amended on May 15, 2006.
    Applicants' Address: 1221 Avenue of the Americas, New York, NY
10020.

Wayne Hummer Investment Trust [File No. 811-3880]

    Summary: Applicant seeks an order declaring that it has ceased to
be an investment company. On March 24, 2006, applicant transferred its
assets to Federated Kaufmann Fund, a series of Federated Equity Funds,
based on net asset value. Expenses of $276,593 incurred in connection
with the reorganization were paid by Wayne Hummer Asset Management
Company, applicant's investment adviser, and Federated Investors, Inc.,
an affiliate of the acquiring fund's investment adviser.
    Filing Dates: The application was filed on March 29, 2006, and
amended on May 18, 2006.
    Applicant's Address: 300 South Wacker Dr., Suite 1500, Chicago, IL
60606.

BAT Subsidiary Inc. [File No. 811-8951]

    Summary: Applicant, a closed-end investment company, seeks an order
declaring that it has ceased to be an investment company. On November
29, 2005, applicant made a liquidating distribution to its
shareholders, based on net asset value. Applicant incurred no expenses
in connection with the liquidation.
    Filing Date: The application was filed on May 15, 2006.
    Applicant's Address: 100 Bellevue Parkway, Wilmington, DE 19809.

TD Waterhouse Plus Funds, Inc. [File No. 811-7871]

    Summary: Applicant seeks an order declaring that it has ceased to
be an investment company. On February 24, 2006, applicant transferred
its assets to TDAM Money Market Portfolio Premium Class, a series of TD
Asset Management USA Funds Inc., based on net asset value. Expenses of
$66,291 incurred in connection with the reorganization were paid by TD
Asset Management USA Inc., applicant's investment adviser, or one of
its affiliates.
    Filing Date: The application was filed on May 10, 2006.
    Applicant's Address: c/o TD Asset Management USA Inc., 31 West 52nd
St., 21st Floor, New York, NY 10019.

Partners Balanced Trust [File No. 811-21270]

    Summary: Applicant, a closed-end investment company, seeks an order
declaring that it has ceased to be an investment company. On November
18, 2005, applicant made a liquidating distribution to its
shareholders, based on net asset value. Expenses of $18,500 incurred in
connection with the liquidation were paid by BlackRock Advisors, Inc.,
applicant's investment adviser.
    Filing Date: The application was filed on May 15, 2006.
    Applicant's Address: 100 Bellevue Parkway, Wilmington, DE 19809.

True Funds [File No. 811-21588]

    Summary: Applicant seeks an order declaring that it has ceased to
be an investment company. Applicant has never made a public offering of
its securities and does not propose to make a public offering or engage
in business of any kind.
    Filing Dates: The application was filed on March 30, 2006, and
amended on May 4, 2006.
    Applicant's Address: 5455 Corporate Dr., Suite 204, Troy, MI 48098.

Lord Abbett Delta Fund [File No. 811-10177]

    Summary: Applicant seeks an order declaring that it has ceased to
be an investment company. Applicant has never made a public offering of
its securities and does not propose to make a public offering or engage
in business of any kind.
    Filing Dates: The application was filed on March 27, 2006, and
amended on May 18, 2006.
    Applicant's Address: 90 Hudson St., Jersey City, NJ 07302.

North American Separate Account VAI [File No. 811-21426]

    Summary: Applicant seeks an order declaring that it has ceased to
be an investment company. Applicant requests deregistration based on
abandonment of registration. Applicant is not now engaged, or intending
to engage, in any business activities, other than those necessary for
winding up its affairs.
    Filing Date: The application was filed on April 20, 2006.
    Applicant's Address: North American Company for Life & Health
Insurance of New York, 990 Stewart Avenue, Garden City, New York 11530.

    For the Commission, by the Division of Investment Management,
pursuant to delegated authority.
J. Lynn Taylor,
Assistant Secretary.
[FR Doc. E6-8548 Filed 6-1-06; 8:45 am]

BILLING CODE 8010-01-P


[Federal Register Volume 79, Number 154 (Monday, August 11, 2014)]
[Rules and Regulations]
[Pages 46711-46714]
[FR Doc No: 2014-18620]

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ENVIRONMENTAL PROTECTION AGENCY

40 CFR Part 52

[EPA-R03-OAR-2014-0142; FRL-9914-49-Region 3]

Approval and Promulgation of Air Quality Implementation Plans;
Virginia; Revision to the Maintenance Plans for the Richmond 1990 1-
Hour and Richmond-Petersburg 1997 8-Hour Ozone Maintenance Areas To
Remove the Stage II Vapor Recovery Program

AGENCY: Environmental Protection Agency (EPA).

ACTION: Direct final rule.

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SUMMARY: The Environmental Protection Agency (EPA) is taking direct
final action to approve a revision to the Virginia State Implementation
Plan (SIP). The revision removes the Stage II vapor recovery program
(Stage II) from the maintenance plans for the Richmond 1990 1-hour and
Richmond-Petersburg 1997 8-hour ozone National Ambient Air Quality
Standard (NAAQS) Maintenance Areas (Richmond Area or Area). The
revision also includes an analysis that addresses the impact of the
removal of Stage II from subject gasoline dispensing facilities (GDFs)
in the Richmond Area. The analysis submitted by the Commonwealth of
Virginia (Commonwealth) satisfies the requirements of section 110(l) of
the Clean Air Act (CAA). EPA is approving this revision in accordance
with the requirements of the CAA.

DATES: This rule is effective on October 10, 2014 without further
notice, unless EPA receives adverse written comment by September 10,
2014. If EPA receives such comments, it will publish a timely
withdrawal of the direct final rule in the Federal Register and inform
the public that the rule will not take effect.

ADDRESSES: Submit your comments, identified by Docket ID Number EPA-
R03-OAR-2014-0142 by one of the following methods:
    A. www.regulations.gov. Follow the on-line instructions for
submitting comments.
    B. Email<EMAIL_ADDRESS>    C. Mail: EPA-R03-OAR-2014-0142, Cristina Fernandez, Associate
Director, Office of Air Program Planning, Mailcode 3AP30, U.S.
Environmental Protection Agency, Region III, 1650 Arch Street,
Philadelphia, Pennsylvania 19103.
    D. Hand Delivery: At the previously-listed EPA Region III address.
Such deliveries are only accepted during the Docket's normal hours of
operation, and special arrangements should be made for deliveries of
boxed information.
    Instructions: Direct your comments to Docket ID No. EPA-R03-OAR-
2012-0142. EPA's policy is that all comments received will be included
in the public docket without change, and may be made available online
at www.regulations.gov, including any personal information provided,
unless the comment includes information claimed to be Confidential
Business Information (CBI) or other information whose disclosure is
restricted by statute. Do not submit information that you consider to
be CBI or otherwise protected through www.regulations.gov or email. The
www.regulations.gov Web site is an ``anonymous access'' system, which
means EPA will not know your identity or contact information unless you
provide it in the body of your comment. If you send an email comment
directly to EPA without going through www.regulations.gov, your email
address will be automatically captured and included as part of the
comment that is placed in the public docket and made available on the
Internet. If you submit an electronic comment, EPA recommends that you
include your name and other contact information in the body of your
comment and with any disk or CD-ROM you submit. If EPA cannot read your
comment due to technical difficulties and cannot contact you for
clarification, EPA may not be able to consider your comment. Electronic
files should avoid the use of special characters, any form of
encryption, and be free of any defects or viruses.
    Docket: All documents in the electronic docket are listed in the
www.regulations.gov index. Although listed in the index, some
information is not publicly available, i.e., CBI or other information
whose disclosure is restricted by statute. Certain other material, such
as copyrighted material, is not placed on the Internet and will be
publicly available only in hard copy form. Publicly available docket
materials are available either electronically in www.regulations.gov or
in hard copy during normal business hours at the Air Protection
Division, U.S. Environmental Protection Agency, Region III, 1650 Arch
Street, Philadelphia, Pennsylvania 19103. Copies of the State submittal
are available at the Virginia Department of Environmental Quality, 629
East Main Street, Richmond, Virginia 23219.

FOR FURTHER INFORMATION CONTACT: Asrah Khadr,<PHONE_NUMBER>, or by
email at<EMAIL_ADDRESS>
SUPPLEMENTARY INFORMATION:

I. Background

    On November 12, 2013, the Commonwealth of Virginia submitted a
formal revision to its SIP through the Virginia Department of
Environmental Quality (VADEQ). The SIP revision consists of the removal
of Stage II from the maintenance plans for the Richmond Area. The SIP
revision also consists of an analysis demonstrating that the removal of
Stage II from the Richmond Area maintenance plans will not cause any
increase in emissions.

This analysis satisfies the requirements of section 110(l) of the CAA
because it demonstrates that the removal of Stage II from the Richmond
Area will not worsen air quality nor prevent maintenance of the NAAQS
by the Area.
    Stage II is a means of capturing gasoline vapors displaced during
transfer of gasoline from the gasoline dispensing unit to the motor
vehicle fuel tank during vehicle refueling at a (GDF). Stage II
involves use of special refueling nozzles and coaxial hoses for vapor
collection at each gasoline pump at a subject GDF. Gasoline vapors
belong to a class of pollutants known as volatile organic compounds
(VOC). These compounds along with nitrogen oxides (NOX) are
precursors to the formation of ozone. Stage II gasoline vapor recovery
systems have been a required emission control measure in areas
classified as serious, severe, and extreme for the ozone NAAQS.
    With the amendment of the CAA in 1990, Stage II controls were
required for moderate ozone areas, under CAA section 182(b)(3).
However, under section 202(a)(6) of the CAA, 42 U.S.C. 7521(a)(6), the
requirements of section 182(b)(3) no longer apply in moderate ozone
nonattainment areas after EPA promulgated standards for onboard
refueling vapor recovery (ORVR) as part of new motor vehicles' emission
control systems. ORVR is a mechanism employed by vehicles to re-use the
vapors in their gas tanks instead of allowing them to escape. Over
time, non-ORVR vehicles continue to be replaced by ORVR-equipped
vehicles. On May 16, 2012, EPA determined that ORVR technology is in
widespread use throughout the U.S. vehicle fleet and waived the
requirement for states to implement Stage II vapor recovery at GDFs in
nonattainment areas classified as Serious or above for the ozone NAAQS
(77 FR 28772). EPA determined that emission reductions from ORVR-
equipped vehicles are essentially equal to and will soon surpass the
emission reductions achieved by Stage II alone (77 FR 28772). EPA
determined that a state previously required to implement a Stage II
vapor recovery program may take appropriate action to remove the
measure from its SIP (77 FR 28772).
    The Richmond Area was designated as a moderate nonattainment area
under the 1990 1-hour ozone NAAQS as well as the 1997 8-hour ozone
NAAQS. On July 26, 1996, VADEQ submitted a redesignation request and
maintenance plan because the air quality data was showing attainment of
the 1990 1-hour ozone NAAQS. On November 17, 1997 (62 FR 61237), EPA
approved the redesignation request and maintenance plan. On September
26, 2006, VADEQ submitted a redesignation request and maintenance plan
because the air quality data was showing attainment of the 1997 8-hour
ozone NAAQS. On June 1, 2007 (72 FR 30485), EPA approved the
redesignation request and maintenance plan. Even though the 1990 1-hour
ozone NAAQS was revoked on June 15, 2005, EPA's subsequent
implementation rules for the 1997 8-hour ozone NAAQS retained the Stage
II-related requirements under CAA section 182(b)(3), but only as they
applied to the Area for the Area's classification for the 1-hour ozone
NAAQS designation for the 8-hour ozone NAAQS. See 40 CFR 51.900(f).
Therefore, the maintenance plans for both NAAQS contain provisions for
the implementation of Stage II.

II. Summary of SIP Revision

    The analysis submitted by VADEQ addresses the effects of removing
Stage II from the Richmond Area. In accordance with section 110(l) of
the CAA, the analysis demonstrates that the removal of Stage II from
the Richmond Area will not interfere with the attainment or maintenance
of the NAAQS. In this demonstration, VADEQ followed guidance provided
by EPA in the following guidance document: Guidance on Removing Stage
II Gasoline Vapor Control Programs from State Implementation Plans and
Assessing Comparable Measures. The guidance document provided a method
in which states could provide certain calculations showing that
increased emissions from non-ORVR compatible Stage II would eventually
negate benefits from the implementation of Stage II. Also, the guidance
gave the states flexibility to provide additional or alternate analyses
to EPA for consideration.
    As recommended by the guidance, VADEQ calculated the area-wide VOC
inventory emissions benefits from Stage II. These calculations
demonstrate when the emissions increases from non-ORVR compatible Stage
II would overtake emissions benefits from Stage II. The calculation
results for the area-wide Stage II emissions reductions from year 2002
to 2020 are provided in Table 1. The results provided in Table 1
demonstrate that in 2016 there would no longer be a VOC emissions
benefit from Stage II, or that the emissions benefit is negative.
Virginia plans on removing the Stage II requirement on January 1, 2017.
VADEQ also provided additional data and analyses demonstrating that
Stage II has very little impact on VOC emissions in the Richmond Area
and that modeling indicates that the formation of ozone in the Richmond
Area is much more dependent on NOX emissions than VOC
emissions. A detailed summary of EPA's review and rationale for
proposing to approve this SIP revision may be found in the Technical
Support Document (TSD) prepared in support of this rulemaking action
and is available on line at http://www.regulations.gov, Docket number
EPA-R03-OAR-2014-0142.

  Table 1--Stage II Emissions Reductions in the Area-Wide VOC Inventory
------------------------------------------------------------------------
                                                          Emissions
                        Year                          reductions  (tons
                                                         per day VOC)
------------------------------------------------------------------------
2002...............................................                 2.17
2005...............................................                 1.51
2008...............................................                 0.87
2009...............................................                 0.71
2010...............................................                 0.55
2011...............................................                  0.4
2012...............................................                 0.28
2013...............................................                 0.16
2014...............................................                 0.07
2015...............................................                 0.00
2016...............................................                -0.06
2017...............................................                -0.10
2018...............................................                -0.14
2020...............................................                -0.19
------------------------------------------------------------------------

III. Final Action

    EPA is approving the revision submitted by the Commonwealth of
Virginia to remove Stage II from the maintenance plans for the Richmond
Area. EPA is approving this revision because it was demonstrated that
the removal of the Stage II requirement on January 1, 2017 will not
cause any emissions increases that could interfere with the attainment
or maintenance of the NAAQS, or otherwise interfere with any applicable
requirement of the CAA. EPA is publishing this rule without prior
proposal because EPA views this as a noncontroversial amendment and
anticipates no adverse comment. However, in the ``Proposed Rules''
section of today's Federal Register, EPA is publishing a separate
document that will serve as the proposal to approve the SIP revision if
adverse comments are filed. This rule will be effective on October 10,
2014 without further notice unless EPA receives adverse comment by
September 10, 2014. If EPA receives adverse comment, EPA will publish a
timely withdrawal in the Federal Register informing the public that the
rule will not take effect. EPA will address all public comments in a
subsequent final rule based on the proposed rule. EPA will not
institute a second comment period on this action.

Any parties interested in commenting must do so at this time.

IV. General Information Pertaining to SIP Submittals From the
Commonwealth of Virginia

    In 1995, Virginia adopted legislation that provides, subject to
certain conditions, for an environmental assessment (audit)
``privilege'' for voluntary compliance evaluations performed by a
regulated entity. The legislation further addresses the relative burden
of proof for parties either asserting the privilege or seeking
disclosure of documents for which the privilege is claimed. Virginia's
legislation also provides, subject to certain conditions, for a penalty
waiver for violations of environmental laws when a regulated entity
discovers such violations pursuant to a voluntary compliance evaluation
and voluntarily discloses such violations to the Commonwealth and takes
prompt and appropriate measures to remedy the violations. Virginia's
Voluntary Environmental Assessment Privilege Law, Va. Code Sec. 10.1-
1198, provides a privilege that protects from disclosure documents and
information about the content of those documents that are the product
of a voluntary environmental assessment. The Privilege Law does not
extend to documents or information that: (1) Are generated or developed
before the commencement of a voluntary environmental assessment; (2)
are prepared independently of the assessment process; (3) demonstrate a
clear, imminent and substantial danger to the public health or
environment; or (4) are required by law.
    On January 12, 1998, the Commonwealth of Virginia Office of the
Attorney General provided a legal opinion that states that the
Privilege Law, Va. Code Sec.  10.1-1198, precludes granting a privilege
to documents and information ``required by law,'' including documents
and information ``required by Federal law to maintain program
delegation, authorization or approval,'' since Virginia must ``enforce
Federally authorized environmental programs in a manner that is no less
stringent than their Federal counterparts. . . .'' The opinion
concludes that ``[r]egarding Sec.  10.1-1198, therefore, documents or
other information needed for civil or criminal enforcement under one of
these programs could not be privileged because such documents and
information are essential to pursuing enforcement in a manner required
by Federal law to maintain program delegation, authorization or
approval.'' Virginia's Immunity law, Va. Code Sec. 10.1-1199, provides
that ``[t]o the extent consistent with requirements imposed by Federal
law,'' any person making a voluntary disclosure of information to a
state agency regarding a violation of an environmental statute,
regulation, permit, or administrative order is granted immunity from
administrative or civil penalty. The Attorney General's January 12,
1998 opinion states that the quoted language renders this statute
inapplicable to enforcement of any Federally authorized programs, since
``no immunity could be afforded from administrative, civil, or criminal
penalties because granting such immunity would not be consistent with
Federal law, which is one of the criteria for immunity.''
    Therefore, EPA has determined that Virginia's Privilege and
Immunity statutes will not preclude the Commonwealth from enforcing its
program consistent with the Federal requirements. In any event, because
EPA has also determined that a state audit privilege and immunity law
can affect only state enforcement and cannot have any impact on Federal
enforcement authorities, EPA may at any time invoke its authority under
the CAA, including, for example, sections 113, 167, 205, 211, or 213,
to enforce the requirements or prohibitions of the state plan,
independently of any state enforcement effort. In addition, citizen
enforcement under section 304 of the CAA is likewise unaffected by
this, or any, state audit privilege or immunity law.

V. Statutory and Executive Order Reviews

A. General Requirements

    Under the CAA, the Administrator is required to approve a SIP
submission that complies with the provisions of the CAA and applicable
Federal regulations. 42 U.S.C. 7410(k); 40 CFR 52.02(a). Thus, in
reviewing SIP submissions, EPA's role is to approve state choices,
provided that they meet the criteria of the CAA. Accordingly, this
action merely approves state law as meeting Federal requirements and
does not impose additional requirements beyond those imposed by state
law. For that reason, this action:
     Is not a ``significant regulatory action'' subject to
review by the Office of Management and Budget under Executive Order
12866 (58 FR 51735, October 4, 1993);
     does not impose an information collection burden under the
provisions of the Paperwork Reduction Act (44 U.S.C. 3501 et seq.);
     is certified as not having a significant economic impact
on a substantial number of small entities under the Regulatory
Flexibility Act (5 U.S.C. 601 et seq.);
     does not contain any unfunded mandate or significantly or
uniquely affect small governments, as described in the Unfunded
Mandates Reform Act of 1995 (Pub. L. 104-4);
     does not have Federalism implications as specified in
Executive Order 13132 (64 FR 43255, August 10, 1999);
     is not an economically significant regulatory action based
on health or safety risks subject to Executive Order 13045 (62 FR
19885, April 23, 1997);
     is not a significant regulatory action subject to
Executive Order 13211 (66 FR 28355, May 22, 2001);
     is not subject to requirements of Section 12(d) of the
National Technology Transfer and Advancement Act of 1995 (15 U.S.C. 272
note) because application of those requirements would be inconsistent
with the CAA; and
     does not provide EPA with the discretionary authority to
address, as appropriate, disproportionate human health or environmental
effects, using practicable and legally permissible methods, under
Executive Order 12898 (59 FR 7629, February 16, 1994).
    In addition, this rule does not have tribal implications as
specified by Executive Order 13175 (65 FR 67249, November 9, 2000),
because the SIP is not approved to apply in Indian country located in
the state, and EPA notes that it will not impose substantial direct
costs on tribal governments or preempt tribal law.

B. Submission to Congress and the Comptroller General

    The Congressional Review Act, 5 U.S.C. 801 et seq., as added by the
Small Business Regulatory Enforcement Fairness Act of 1996, generally
provides that before a rule may take effect, the agency promulgating
the rule must submit a rule report, which includes a copy of the rule,
to each House of the Congress and to the Comptroller General of the
United States. EPA will submit a report containing this action and
other required information to the U.S. Senate, the U.S. House of
Representatives, and the Comptroller General of the United States prior
to publication of the rule in the Federal Register. A major rule cannot
take effect until 60 days after it is published in the Federal
Register. This action is not a ``major rule'' as defined by 5 U.S.C.
804(2).

C. Petitions for Judicial Review

    Under section 307(b)(1) of the CAA, petitions for judicial review
of this action must be filed in the United States Court of Appeals for
the appropriate circuit by October 10, 2014. Filing a petition for
reconsideration by the Administrator of this final rule does not affect
the finality of this action for the purposes of judicial review nor
does it extend the time within which a petition for judicial review may
be filed, and shall not postpone the effectiveness of such rule or
action. Parties with objections to this direct final rule are
encouraged to file a comment in response to the parallel notice of
proposed rulemaking for this action published in the proposed rules
section of today's Federal Register, rather than file an immediate
petition for judicial review of this direct final rule, so that EPA can
withdraw this direct final rule and address the comment in the proposed
rulemaking action.
    This action approving the removal of Stage II from the Richmond
Area maintenance plans may not be challenged later in proceedings to
enforce its requirements. (See section 307(b)(2).)

List of Subjects in 40 CFR Part 52

    Environmental protection, Air pollution control, Incorporation by
reference, Nitrogen dioxide, Ozone, Volatile organic compounds.

    Dated: July 11, 2014.
William C. Early,
Acting Regional Administrator, Region III.

    40 CFR part 52 is amended as follows:

PART 52--APPROVAL AND PROMULGATION OF IMPLEMENTATION PLANS

0
1. The authority citation for part 52 continues to read as follows:

     Authority: 42 U.S.C. 7401 et seq.

Subpart VV--Virginia

0
2. In Sec.  52.2420, the table in paragraph (e) is amended by revising
the entries for ``Ozone Maintenance Plan, emissions inventory &
contingency measures, Richmond Area'', and ``8-Hour Ozone Maintenance
Plan and 2002 Base Year Emissions Inventory'' to read as follows:

Sec.  52.2420  Identification of plan.

* * * * *
    (e) EPA-approved non-regulatory and quasi-regulatory material

--------------------------------------------------------------------------------------------------------------------------------------------------------
                                       Applicable geographic
 Name of non-regulatory SIP revision            area             State submittal date               EPA approval date             Additional explanation
--------------------------------------------------------------------------------------------------------------------------------------------------------

                                                                      * * * * * * *
Ozone Maintenance Plan, emissions     Richmond Area..........  7/26/96................  11/17/97, 62 FR 61237...................  52.2465(c)(119)
 inventory & contingency measures.                             11/12/13...............  8/11/2014 [Insert Federal Register        Removal of Stage II
                                                                                citation].                                vapor recovery
                                                                                program. See section
                                                                                52.2428.

                                                                      * * * * * * *
8-Hour Ozone Maintenance Plan and     Richmond-Petersburg VA   9/18/06, 9/20/06, 9/25/  6/1/07, 72 FR 30485.....................  The SIP effective date
 2002 Base Year Emissions Inventory.   Area.                    06, 11/17/06, 2/13/07.  ........................................   is 6/18/07.
                                                               11/12/13...............  8/11/2014 [Insert Federal Register        Removal of Stage II
                                                                                citation].                                vapor recovery
                                                                                program. See section
                                                                                52.2428.

                                                                      * * * * * * *
--------------------------------------------------------------------------------------------------------------------------------------------------------

0
3. Section 52.2428 is amended by adding paragraph (i) to read as
follows:

Sec.  52.2428  Control Strategy: Carbon monoxide and ozone.

* * * * *
    (i) As of October 10, 2014, EPA approves the removal of the Stage
II vapor recovery program from the maintenance plans for the Richmond
1990 1-Hour Ozone Maintenance Area and the Richmond-Petersburg 1997 8-
Hour Ozone Maintenance Area.

[FR Doc. 2014-18620 Filed 8-8-14; 8:45 am]
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