[Federal Register Volume 79, Number 105 (Monday, June 2, 2014)]
[Notices]
[Pages 31362-31368]
[FR Doc No: 2014-12647]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-72255; File No. SR- NYSEArca-2014-10]

Self-Regulatory Organizations; NYSE Arca, Inc.; Order Instituting
Proceedings to Determine Whether To Approve or Disapprove Proposed Rule
Change To Adopt NYSE Arca Equities Rule 8.900, Which Permits the
Listing and Trading of Managed Portfolio Shares, and To List and Trade
Shares of the ActiveShares\SM\ Large-Cap Fund, ActiveShares\SM\ Mid-Cap
Fund, and ActiveShares\SM\ Multi-Cap Fund Pursuant to That Rule

May 27, 2014.
    On February 7, 2014, NYSE Arca, Inc. (``Exchange'') filed with the
Securities and Exchange Commission (``Commission''), pursuant to
Section 19(b)(1) of the Securities Exchange Act of 1934 (``Act'') \1\
and Rule 19b-4 thereunder,\2\ a proposed rule change to adopt new NYSE
Arca Equities Rule 8.900, which would govern the listing and trading of
Managed Portfolio Shares, and to list and trade shares of the
ActiveShares\SM\ Large-Cap Fund, ActiveShares\SM\ Mid-Cap Fund, and
ActiveShares\SM\ Multi-Cap Fund (collectively, ``Funds'') under
proposed NYSE Arca Equities Rule 8.900. The proposed rule change was
published for comment in the Federal Register on February 26, 2014.\3\
The Commission received one comment letter on the proposed rule
change.\4\ On April 7, 2014, pursuant to Section 19(b)(2) of the
Act,\5\ the Commission designated a longer period within which to
approve the proposed rule change, disapprove the proposed rule change,
or institute proceedings to determine whether to disapprove the
proposed rule change.\6\ The Commission received two additional comment
letters on the proposed rule change, including a letter from the
Exchange in support of its proposal.\7\ This Order institutes
proceedings under Section 19(b)(2)(B) of the Act \8\ to determine
whether to approve or disapprove the proposed rule change.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ See Securities Exchange Act Release No. 71588 (Feb. 20,
2014), 79 FR 10848 (``Notice''), available at http://www.sec.gov/rules/sro/nysearca.shtml.
    \4\ See Letter from Gary L. Gastineau, President, ETF
Consultants.com, Inc., to Elizabeth M. Murphy, Secretary, Commission
(Mar 18, 2014) (``Gastineau Letter'').
    \5\ 15 U.S.C. 78s(b)(2).
    \6\ See Securities Exchange Act Release No. 71895, 79 FR 20285
(Apr. 11, 2014). The Commission designated a longer period within
which to take action on the proposed rule change and designated May
27, 2014 as the date by which it should approve, disapprove, or
institute proceedings to determine whether to disapprove the
proposed rule change.
    \7\ See Letter from Dennis J. DeCore, Former Co-Head U.S. Index
Arbitrage (1997-2007), Nomura Securities, to Elizabeth M. Murphy,
Secretary, Commission (Apr. 8, 2014) (``DeCore Letter''); and Letter
from Martha Redding, Chief Counsel and Assistant Corporate
Secretary, NYSE Euronext, to Secretary, Commission (May 14, 2014)
(``Response Letter''). All of the comment letters are available at
http://www.sec.gov/comments/sr-nysearca-2014-10/nysearca201410.shtml.
    \8\ 15 U.S.C. 78s(b)(2)(B).
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I. Description of the Proposal

    As described in the Notice, the Exchange proposes: (1) To adopt new
NYSE Arca Equities Rule 8.900, which would permit the listing and
trading, or trading pursuant to unlisted trading privileges (``UTP''),
of Managed Portfolio Shares, which are securities issued by an actively
managed open-end investment management company; and (2) to list and
trade shares (``Shares'') of the Funds under proposed NYSE Arca
Equities Rule 8.900.\9\ The discussion below summarizes the Exchange's
proposal, details of which are described in the Notice.\10\
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    \9\ The Exchange also proposes to amend NYSE Arca Equities Rule
7.34(a)(4)(A) (Trading Sessions) to include Managed Portfolio Shares
in the trading halt provision for shares traded pursuant to UTP
during the Exchange's Opening Session.
    \10\ See Notice, supra note 3. Additional information regarding
the Trust and the Shares, including investment strategies, risks,
creation and redemption procedures, fees, portfolio holdings
disclosure policies, distributions and taxes is available in the
registration statement filed by the Trust on January 22, 2014 on
Form N-1A under the Securities Act of 1933 and under the Investment
Company Act of 1940 (``1940 Act'') relating to the Funds (File Nos.
333-171987 and 811-22524) (``Registration Statement'').
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A. Proposed Listing Rules

    The Exchange's proposal defines the term ``Managed Portfolio
Share'' as a security that (a) is issued by a registered investment
company (``Investment Company'') organized as an open-end management
investment company or similar entity that invests in a portfolio of
securities selected by the Investment Company's investment adviser
consistent with the Investment Company's investment objectives and
policies; (b) is issued in any number of shares for a cash amount equal
to the next determined net asset value (``NAV''); (c) may be redeemed
for cash by any Retail Investor (as defined below) in any size less
than a Redemption Unit (as defined below) for a cash amount equal to
the next determined NAV; and (d) when aggregated in a number of shares
equal to a Redemption Unit or multiples thereof, may be redeemed at a
holder's request, with payment to the holder to be made, through a
blind trust established for the holder's benefit, in the form of
securities, cash, or both with a value equal to the next determined
NAV.
    While funds issuing Managed Portfolio Shares will be actively-
managed and, to that extent, will be similar to Managed Fund Shares
(which are actively-managed funds listed and traded under NYSE Arca
Equities Rule 8.600), Managed Portfolio Shares differ from Managed Fund
Shares in the following important respects. First, in contrast to
Managed Fund Shares, for which a ``Disclosed Portfolio'' is required to
be disseminated at least once daily,\11\ the portfolio for an issue of
Managed Portfolio Shares will be disclosed once quarterly in accordance
with normal disclosure requirements otherwise applicable to open-end
investment companies registered under the 1940 Act.\12\ Second, in
connection with the redemption of shares in Redemption Unit \13\ size,
the in-kind delivery of any portfolio securities will generally be
effected through a blind trust for the benefit of the redeeming
authorized participant, and the blind trust will liquidate the
portfolio securities pursuant to standing instructions from the
authorized participant without disclosing the identity of those
securities to the authorized participant. Third, as with traditional
open-end investment companies, ``Retail Investors'' \14\ will be able
to redeem shares for cash directly from a fund on any day and in any
size

less than a Redemption Unit at the fund's NAV, as described in more
detail below. Fourth, investors will be able to purchase shares either
(a) in the secondary markets (e.g., the Exchange) at market prices or
(b) for cash directly from a fund in any amount on any day a fund
determines its NAV, as described in more detail below.
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    \11\ NYSE Arca Equities Rule 8.600(c)(2) defines the term
``Disclosed Portfolio'' as the identities and quantities of the
securities and other assets held by the Investment Company that will
form the basis for the Investment Company's calculation of net asset
value at the end of the business day. NYSE Arca Equities Rule
8.600(d)(2)(B)(i) requires that the Disclosed Portfolio be
disseminated at least once daily and that it be made available to
all market participants at the same time.
    \12\ A mutual fund is required to file with the Commission its
complete portfolio schedules for the second and fourth fiscal
quarters on Form N-SAR under the 1940 Act, and is required to file
its complete portfolio schedules for the first and third fiscal
quarters on Form N-Q under the 1940 Act, within 60 days of the end
of the quarter. Form N-Q requires funds to file the same schedules
of investments that are required in annual and semi-annual reports
to shareholders. These forms are available to the public on the
Commission's Web site at www.sec.gov.
    \13\ A ``Redemption Unit'' is a specified number of Managed
Portfolio Shares used for determining whether a retail investor may
redeem for cash.
    \14\ Under the proposal, a ``Retail Investor'' is defined as (i)
a natural person; (ii) a trust established exclusively for the
benefit of a natural person or a group of related family members; or
(iii) a tax deferred retirement plan where investments are selected
by a natural person purchasing for its own account.
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    For each series of Managed Portfolio Shares, an estimated value,
defined in the proposed rules as the ``Portfolio Indicative Value''
(``PIV''), that reflects an estimated intraday value of a fund's
portfolio will be disseminated. The PIV will be based upon all of a
fund's holdings as of the close of the prior business day and will be
widely disseminated by one or more major market data vendors at least
every 15 seconds during the Exchange's Core Trading Session (normally,
9:30 a.m. to 4:00 p.m., Eastern Time). The Exchange states that
dissemination of the PIV will allow investors to determine the
estimated intra-day value of the underlying portfolio of a series of
Managed Portfolio Shares on a daily basis and will provide a close
estimate of that value throughout the trading day. The exchange further
states that the PIV should not be viewed as a ``real-time'' update of
the NAV per share of each fund because the PIV may not be calculated in
the same manner as the NAV, which will be computed once a day,
generally at the end of the business day.\15\
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    \15\ Unlike the PIV, which will be based on consolidated last
sale information, the NAV per share will be based on the closing
price on the primary market for each portfolio security. If there is
no closing price for a particular portfolio security, such as when
it is the subject of a trading halt, a fund will use fair value
pricing. That fair value pricing will be carried over to the next
day's PIV until the first trade in that stock is reported.
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    The Exchange has represented that, after consulting with various
Lead Market Makers that trade exchange-traded funds (``ETFs'') on the
Exchange, it believes that market makers will be able to make efficient
and liquid markets priced near the PIV as long as an accurate PIV is
disseminated every 15 seconds and as long as market makers have
knowledge of a fund's means of achieving its investment objective, even
without daily disclosure of a fund's underlying portfolio. The Exchange
believes that market makers will employ risk-management techniques such
as ``statistical arbitrage'' to make efficient markets in an issue of
Managed Portfolio Shares without knowledge of a fund's underlying
portfolio. The Exchange represents that market makers have indicated to
it that, after the first few days of trading, there will be sufficient
data to run a statistical analysis that will lead to spreads being
tightened substantially around the PIV. The Exchange states that this
is similar to certain other existing exchange traded products (for
example, ETFs that invest in foreign securities that do not trade
during U.S. trading hours).
    The Exchange's proposal provides that the Exchange will file
separate proposals under Section 19(b) of the Act before listing and
trading any series of Managed Portfolio Shares.

B. Description of the Funds

1. The Funds' Investments
    The portfolio for each Fund would consist primarily of stocks in
the Russell 3000 Index and shares issued by other ETFs that invest
primarily in shares of issuers in the Russell 3000 Index (which
consists of stocks included in the Russell 1000 Index and the Russell
2000 Index).\16\ All exchange-listed equity securities in which the
Funds would invest would be listed and traded on U.S. national
securities exchanges. Each Fund would target an overall net equity
market exposure of between 70% and 130% of the Fund's assets. Each Fund
would purchase securities that its portfolio managers believed to be
undervalued and would sell short securities that the portfolio managers
believed to be overvalued. Under normal market conditions,\17\ each
Fund's net long equity market exposure would not exceed 130%, and its
net short equity market exposure would not exceed 30%, but the
portfolio managers might at times exceed these percentages.
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    \16\ ETFs would include Investment Company Units (as described
in NYSE Arca Equities Rule 5.2(j)(3)); Portfolio Depositary Receipts
(as described in NYSE Arca Equities Rule 8.100); and Managed Fund
Shares (as described in NYSE Arca Equities Rule 8.600). All ETFs
would be listed and traded on a U.S. national securities exchange.
The Funds would invest in the securities of ETFs registered under
the 1940 Act consistent with the requirements of Section 12(d)(1) of
the 1940 Act, or any rule, regulation or order of the Commission or
interpretation thereof.
    \17\ The terms ``normally'' and ``under normal market
conditions'' would include, but not be limited to, the absence of
extreme volatility or trading halts in the equity markets or the
financial markets generally; operational issues causing
dissemination of inaccurate market information; or force majeure
events such as systems failure, natural or man-made.
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    The ActiveShares\SM\ Large Cap Fund. According to the Exchange, the
Fund's investment objective would be long-term capital appreciation.
Normally, the Fund would invest primarily in securities included in the
Russell 1000 Index and ETFs that primarily invest in stocks in the
Russell 1000 Index.
    The ActiveShares\SM\ Mid-Cap Fund. According to the Exchange, the
Fund's investment objective would be long-term capital appreciation.
Normally, the Fund would invest primarily in securities that are
included in the Russell 2000 Index and ETFs that primarily invest in
stocks in the Russell 2000 Index.
    The ActiveShares\SM\ Multi-Cap Fund. According to the Exchange, the
Fund's investment objective would be long-term capital appreciation.
The Fund would invest primarily in securities included in the Russell
3000 Index and ETFs that primarily invest in stocks in the Russell 3000
Index.
    Other Investments. While each Fund, under normal market conditions,
would invest primarily in stocks included in the Russell 3000 Index and
ETFs, as described above, each Fund would be able to invest its
remaining assets in repurchase agreements and reverse repurchase
agreements, high-quality money market instruments, and the securities
of other investment companies to the extent allowed by law.
2. Creation of Shares
    Each Fund would issue Shares on a continuous basis for cash at NAV,
and the Exchange represents that the issuance of Shares would operate
in a manner substantially similar to that of other ETFs and, in
particular, to that of certain fixed-income ETFs that issue shares
solely for cash. Unlike most ETFs, however, Shares would be issued in
any amount rather than only in a specified block size (i.e., a Creation
Unit). Only Depository Trust Company participants and their customers
will be able to acquire Shares at NAV directly from a Fund.
    Each Fund would establish a cut-off time (``Order Cut-Off Time'')
for orders, and this time could be set earlier than the time at which
the fund calculates its NAV. Each Fund would reserve the right to
reject any purchase order at any time. Each Fund would be able to
impose a transaction fee in connection with the purchase of Shares from
the Fund. This fee would be determined by the Fund's adviser, but would
not exceed 2%.
3. Redemption of Shares by or Through Authorized Participants
    Redemption orders of Redemption Units (currently 50,000 shares)
\18\ or

multiples thereof would have to be placed by or through an authorized
participant. The agreement signed by each authorized participant would
require the establishment of a blind trust, with the Funds' custodian
as trustee, to receive distributions of portfolio securities upon
redemption.\19\ Accordingly, although redemption proceeds generally
would be in the form of portfolio securities, rather than cash, the
redeeming authorized participants would never know what securities they
had received in exchange for their Shares.\20\
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    \18\ Proposed Rule 8.900(c)(4) defines the term ``Redemption
Unit'' as a specified number of Managed Portfolio Shares used for
determining whether a Retail Investor may redeem for cash.
Currently, the size of a Redemption Unit is 50,000 Shares, but this
is subject to change.
    \19\ The custodian would act as trustee of the blind trusts, and
the trustee will be paid by the authorized participant a fee
negotiated by the funds' adviser on behalf of authorized
participants.
    \20\ In contrast, an authorized participant redeeming Managed
Fund Shares generally knows what securities it will receive from the
fund, because these securities are disclosed on a daily basis as a
``redemption basket.''
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    The Exchange has stated that it expects that an authorized
participant would instruct the trustee of its blind trust to liquidate
redemption securities using market-on-close orders on the date of
redemption so that the authorized participant would realize redemption
proceeds as close as possible to the Fund's NAV on the redemption date.
To allow the Funds' adviser sufficient time to identify the redemption
securities and transfer the redemption basket of portfolio securities
to the blind trusts, and to permit the trustee adequate time to process
liquidation transactions in accordance with the authorized
participants' instructions, the Exchange expects each of the Funds to
designate an Order Cut-Off Time prior to the time that its NAV is
calculated. The redemption basket would consist of the same securities
for all authorized participants on any given day, subject to the
adviser's ability to make minor adjustments to address odd lots,
fractional shares, tradable sizes, or other situations. The redemption
securities that the blind trust receives may mirror the portfolio
holdings of a fund pro rata or, if the adviser determines to reduce one
or more portfolio exposures through an in-kind distribution, may
constitute only a portion of the holdings that would not be
proportionate to the overall portfolio holdings of a Fund.
4. Redemption of Shares Through the Retail Redemption Facility
    Retail Investors would be able to place orders to redeem Shares in
less than Redemption Unit size by instructing their broker to redeem
Shares directly from the Fund for cash at NAV (the ``Retail Redemption
Facility''). Each Fund would be able to impose a transaction fee in
connection with the redemption of Shares directly with the Fund. This
fee would be determined by the Fund's adviser, but would not exceed 2%.

II. Summary of the Comments Received

    The Commission received one letter opposing the proposed rule
change, and two letters supporting it, including one from the Exchange
responding to the opposing commenter's objections. These letters are
summarized below.

A. The Gastineau Letter

    This commenter opposes approval of the proposal, presenting a
number of arguments.\21\ The commenter asserts that there is a
``significant risk'' that the Internal Revenue Service (``IRS'') will
deny the purported tax benefits of the Funds' distinctive in-kind
redemption program.\22\ Therefore, the commenter recommends that
approval of the proposal be conditioned on the issuer obtaining a
favorable IRS determination of the tax treatment through a Private
Letter Ruling.\23\
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    \21\ The commenter notes that he has a retained economic
interest in a product that may be competitive with Managed Portfolio
Shares and states that his views on the Exchange's filing ``may be
considered subject to a conflict of interest.'' Gastineau Letter,
supra note 4, at 1, n.1.
    \22\ See id. at 5.
    \23\ See id.
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    The commenter predicts that, compared to most existing ETFs, the
Shares will probably trade with significantly wider bid-ask spreads,
with more variable premiums and discounts, or with both, because of
what the commenter characterizes as the unreliability of the Funds'
proposed method for ensuring secondary market trading efficiency. The
commenter states that the Funds would not be disclosing any holdings
(except on a quarterly basis) and that the Funds' market makers would
have only indirect, and likely imperfect, information about Fund
holdings.\24\ The commenter argues that effectively arbitraging the
Funds will be significantly more difficult than the arbitrage for most
existing foreign ETFs.\25\ The commenter argues that there is no
support for the Exchange's contention that existing ETFs holding
portfolios of foreign securities, such as index-based ETFs holding
Asian stocks, have demonstrated efficient pricing characteristics even
though, because foreign stocks do not trade during the same hours as
U.S. ETFs, the ETFs holding foreign stocks do not provide opportunities
for riskless arbitrage transactions during much of the trading day.\26\
The commenter also cites a draft academic working paper \27\ for the
propositions that market trading efficiency varies significantly by
type and size of ETF; that funds with high share trading volumes,
liquid underlying holdings, and efficient arbitrage mechanisms trade
with relatively tight bid-ask spreads and more stable premiums and
discounts; and that funds lacking these characteristics generally
traded with wider spreads and more variable premiums and discounts.
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    \24\ See id. at 8.
    \25\ See id. at 7, 8.
    \26\ See id. at 9.
    \27\ ``Inefficiencies in the Pricing of Exchange-Traded Funds,''
Antti Petajisto, September 20, 2013, available at http://www.petajisto.net/.
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    The commenter states that, for a number of reasons, the
dissemination of a PIV by the Funds is likely to prove ineffective in
ensuring alignment of secondary market prices for the Shares with the
values of the underlying portfolios. The commenter asserts that, during
periods of rapid market movement, the use of last-sale prices to
calculate a PIV, coupled with the dissemination of the PIV only every
15 seconds, will mean that the PIV will be a lagging indicator of
actual portfolio values.\28\ Additionally, the commenter asserts that
the PIV may reflect clearly erroneous values for securities that have
not yet opened for trading on a particular business day or that are
subject to an intraday interruption in trading.\29\ The commenter also
criticizes the Exchange's representation that the adviser and
calculation agent will use ``commercially reasonable efforts'' to
calculate the PIV, arguing that this is a substantially lower standard
of care than that applying to NAV calculations for ETFs and mutual
funds.\30\ The commenter further asserts that no one will stand behind
a Fund's PIV to ensure timeliness and accuracy.\31\ The commenter
asserts that, without a reliable PIV, the Shares cannot and will not
trade acceptably in the secondary market.\32\
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    \28\ See Gastineau Letter, supra note 4, at 10.
    \29\ See id.
    \30\ See id. at 10-11.
    \31\ See id. at 11.
    \32\ See id.
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    The commenter predicts that frequent PIV errors will in turn cause
``erroneous share trades'' to be executed.\33\ The commenter states
that the proposal does not address the treatment of erroneous share
trades resulting from a faulty PIV--namely, whether PIV errors and
related erroneous trades will be detected by the Exchange, whether such
trades would be cancelled, and whether the Exchange would apply a
materiality

standard for cancellations.\34\ The commenter argues that, as a
condition of approval, the Exchange should be required to monitor the
timeliness and accuracy of PIV dissemination and to implement
procedures to address trades when an erroneous PIV has been
disseminated.\35\
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    \33\ See id. at 13.
    \34\ See id.
    \35\ See id.
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    The commenter also predicts that the following elements of the
proposed redemption arrangements would introduce additional costs and
uncertainties for authorized participants:
     The Funds' custodian would have a monopoly position as the
sole eligible provider of trustee services for the blind trust;
     The Funds' adviser, rather than the authorized
participant, would negotiate the fees paid to the trustee;
     In contrast to existing ETFs, no authorized participant
would have the potential ability to use its market knowledge and market
position to enhance arbitrage profits (or offset arbitrage costs) by
managing sales of the distributed securities to minimize market impact
or to realize prices above the market close; and
     The Funds' custodian, who stands in for the authorized
participant in the sale of distributed securities, would have no
apparent incentive to sell distributed securities with low market
impact or at prices above the close and would experience little or no
downside from doing the opposite.
    The commenter also asserts that redeeming authorized participants
would be exposed to potential costs and risks associated with not being
able to control disposition of significantly more concentrated
redemption proceeds, and the commenter argues that these extra costs
and risks associated with the blind trust arrangement will be passed
through to shareholders transacting in the secondary market, reflected
as wider bid-ask spreads, more volatile premiums and discounts for the
Shares, or both.
    The commenter posits that the lack of portfolio transparency would
favor market makers and other professional traders over other market
participants, such as investors, and the commenter concludes that this
disparate treatment is contrary to the principle that all participants
should be on an equal footing with respect to knowledge of a fund's
holdings.\36\ Notwithstanding the public dissemination of the PIV, the
commenter argues that market makers and other professional traders
would have a significant indirect information advantage over other
participants because of their ability to glean information about a
Fund's holdings through sophisticated data analysis of changes in the
PIV.\37\ In particular, the commenter asserts that PIV disclosures
might enable market makers and professional traders to uncover a Fund's
holdings and trading activity, rendering the Fund susceptible to the
dilutive effects of front running.\38\ The commenter asserts that,
prior to approval, the proposal should be amended to include: (1) A
discussion of the steps to be taken to minimize reverse engineering
risk; (2) a discussion of how the Funds propose to resolve the conflict
between providing market makers with adequate information to support
efficient Share trading and protecting against reverse engineering; and
(3) representations that the Funds will adequately disclose reverse-
engineering risk and the conflicts the Funds face in seeking to provide
for efficient market trading and protection against reverse
engineering.\39\
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    \36\ See id. at 14-15.
    \37\ See id. at 14.
    \38\ See id. at 15. The commenter discusses certain factors
determining a fund's susceptibility to reverse engineering using
intraday valuations disseminated at 15 second intervals. See id.
    \39\ See id. at 15-16.
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    The commenter argues that the Commission should not grant the
issuer's pending request for exemptive relief under the 1940 Act to
maintain early Order Cut-Off Times for Fund redemptions, which are
intended to facilitate the timely sale of distributed securities by the
blind trusts that receive the proceeds of authorized participant
redemptions and the efficient processing of redemptions by retail
investors through the Retail Redemption Facility.\40\
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    \40\ See id. at 16. The commenter alleges that the prospectus
contains a number of material misstatements and omissions relating
to in-kind redemptions and direct purchases and redemptions. See id.
at 27-28.
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    The commenter posits that a principal purpose of including direct
Share purchases and the Retail Redemption Facility in the proposal is
to provide comfort to the Commission and market participants that
investors will be able to transact with the Fund at or near NAV
whenever secondary market trading prices of shares vary significantly
from NAV.\41\ The commenter argues that these provisions, as proposed,
are inadequate for this purpose because: (1) The Retail Redemption
Facility will be available only to a limited set of shareholders and
will restricted to redemptions of less than a Redemption Unit of
shares; (2) the expected early Order Cut-Off Time for direct share
purchases and the Retail Redemption Facility means that an investor's
ability to directly purchase or redeem shares for cash will exist for
only a portion of each business day; (3) investors who directly
purchase and redeem shares will be subject to transaction fees imposed
by the Fund of up to 2% and may also be subject to broker-dealer
processing fees; (4) self-directed investors may not have adequate
information about the available liquidity options to make intelligent
choices about how best to buy and sell shares; (5) broker-dealers may
not have adequate information to ensure that their customers
consistently receive best execution on transactions in shares, given
the two distinct liquidity pathways; and (6) broker-dealers may not
have or may not develop the systems capabilities necessary to support
customer transactions in Funds offering both secondary market trading
in shares and direct share purchases and redemptions.\42\
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    \41\ See id. at 17.
    \42\ See id. at 18.
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    The commenter recommends that the Funds should be required to
extend eligibility for the Retail Redemption Facility to all
shareholders and that the Order Cut-Off Times for direct purchases of
shares and redemptions under the Retail Redemption Facility be
established as of the close of the Exchange's regular trading
session.\43\ The commenter recommends that the Exchange be required to
limit trading in shares to broker-dealers that have represented to the
Exchange that they have systems in place (a) to accommodate direct
purchases and redemptions of Shares on terms no less favorable than
secondary market transactions and (b) to ensure best execution of
transactions in shares, considering both secondary market trading and
direct purchase and redemption options.\44\ The commenter also
recommends that the broker-dealers trading shares on the Exchange
should not be permitted to charge their customers processing fees on
direct purchases and redemptions of shares that exceed what they charge
the same customers for secondary market trades.\45\ Further, the
commenter recommends that the Funds should not be permitted to charge
transaction fees on direct purchases and redemptions of shares that
exceed the associated Fund

expenses incurred, taking into account the size of a specific
transaction.\46\
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    \43\ See id. at 20.
    \44\ See id.
    \45\ See id.
    \46\ See id. at 20-21. The commenter does not agree with the
representations made in the proposal relating to certain cost
efficiencies with respect to: (1) Fund operating expenses as
reflected in their total expense ratios; (2) Fund trading costs and
possible cash drag on returns incurred in connection with direct
purchases and redemptions of shares; (3) transaction fees imposed by
the Fund on direct purchases and redemptions of shares; and (4)
processing fees paid by shareholders to their broker-dealers on
direct purchases and redemptions of shares. See id. at 21-23.
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    The commenter asserts that the Funds should: (1) Be required to
limit their equity investments to U.S.-exchange-listed stocks with
market caps of $5 billion or greater (consistent with the general
understanding of large- and medium-cap stocks; a universe of about 700
stocks currently); (2) not be permitted to invest in illiquid assets or
debt instruments of non-U.S. issuers; and (3) not be permitted to
employ investment leverage or hold short positions.\47\
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    \47\ See id. at 24.
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    The commenter notes that the Exchange will permit trading in the
Shares between 4:00 a.m. and 8:00 p.m., but that the PIV will only be
disseminated during the Core Trading Session of 9:30 a.m. to 4:00 p.m.
The commenter asserts that the proposal does not adequately address the
significant risk that the prices of shares bought or sold in the
Opening Session (4:00 a.m. to 9:30 a.m.) and Late Trading Session (4:00
p.m. to 8:00 p.m.) will vary widely from underlying portfolio values
because an updated PIVs would not be available.\48\ Therefore, the
commenter suggests that trading in shares should be limited to the
Exchange's Core Trading Session.\49\
---------------------------------------------------------------------------

    \48\ See id.
    \49\ See id.
---------------------------------------------------------------------------

    The commenter states that, given the importance of the PIV to the
decision-making process of current and prospective Fund investors, all
Fund investors should have ongoing access to current PIV values.\50\
The commenter suggests that each Fund's current PIV be provided at no
charge on a public Web site and made available to the public no later
than it is made available to any other market participant.\51\ The
commenter also suggests that the following information be published on
the Funds' Web site:
---------------------------------------------------------------------------

    \50\ See id. at 25.
    \51\ See id.
---------------------------------------------------------------------------

     PIV Information--Real-time PIVs updated continuously
throughout the Exchange's Core Trading Session on each business day;
updated daily, complete intraday PIV history for at least the 20 most
recent trading days (allowing buyers and sellers of shares to compare
their executed prices to reported PIVs at the time of their trade
execution); updated daily, the prior business day's closing PIV and a
calculation showing the relationship of closing PIV to NAV (allowing
investors to evaluate PIV to NAV correspondence); and updated daily, a
chart and tables showing the frequency distribution and range of the
closing PIV-to-NAV ratios for each calendar quarter over the life of
the Fund.\52\
---------------------------------------------------------------------------

    \52\ See id. at 26.
---------------------------------------------------------------------------

     Closing Price Premiums/Discounts--Updated daily, the prior
business day's closing market price and premium or discount (expressed
as a percentage) based on the relationship of the closing market price
to NAV; and, updated daily, a chart showing the frequency distribution
and range of daily closing price premiums and discounts (expressed as
percentages) for each calendar quarter over the life of the Fund.
     Intraday Estimated Premiums/Discounts--Updated daily, the
prior business day's average, minimum, and maximum intraday estimated
premiums and discounts (expressed as percentages) based on PIVs and
bid-ask midpoints at each PIV publication time; and, updated daily, a
chart showing the frequency distribution and range of daily average,
minimum, and maximum intraday estimated premiums and discounts
(expressed as percentages) for each calendar quarter over the life of
the Fund.\53\
---------------------------------------------------------------------------

    \53\ See id.
---------------------------------------------------------------------------

     Bid-Ask Spreads--Updated daily, the prior business day's
closing bid-ask spread and average, minimum, and maximum intraday bid-
ask spreads (expressed as percentages) during the Exchange's Core
Trading Session; and, updated daily, a chart showing the frequency
distribution and range of daily closing bid/ask spreads and intraday
average, minimum, and maximum bid-ask spreads (expressed as
percentages) for each calendar quarter over the life of the Fund.\54\
---------------------------------------------------------------------------

    \54\ See id.
---------------------------------------------------------------------------

     Fund Market Exposure and Leverage--Updated daily, the
prior business day's net long or short equity market exposure and
amount of investment leverage employed, each expressed as a percentage
of Fund net assets; and, updated daily, a chart showing the frequency
distribution and range of the Fund's daily net market exposure and
leverage percentages for each calendar quarter over the life of the
Fund.\55\
---------------------------------------------------------------------------

    \55\ See id. at 26-27.
---------------------------------------------------------------------------

     Purchase and Redemption Transaction Fees--Updated daily,
transaction fees currently applicable to direct purchases of shares,
redemptions through the Retail Redemption Facility, and redemption unit
redemptions; and, updated daily, a chart showing the frequency
distribution and range of transaction fees applicable to direct
purchases of shares, redemptions through the Retail Redemption
Facility, and redemption unit redemptions for each calendar quarter
over the life of the Fund.\56\
---------------------------------------------------------------------------

    \56\ See id. at 27.
---------------------------------------------------------------------------

    Finally, the commenter asserts that, given the fundamental
differences in how the Shares may be bought or sold, compared to other
ETFs, it is not appropriate for the Funds to be advertised or marketed
as ETFs.\57\ Therefore, the commenter recommends that the Commission
take appropriate steps to ensure that the Exchange, broker-dealers, and
market data providers do not describe the Funds as ETFs.\58\
---------------------------------------------------------------------------

    \57\ See id. at 28-29.
    \58\ See id.
---------------------------------------------------------------------------

B. The DeCore Letter

    The DeCore Letter supports the proposed rule change, asserting that
investors would have access for the first time to many different types
of active management strategies.\59\ The commenter predicts that
trading spreads in Managed Portfolio Shares will not be as ``tight'' as
trading spreads in the SPY or QQQ (where futures, options, and equity
portfolios can be used as a pure hedge), but that a frequent update of
the intraday indicative value will allow market maker spreads to be
reasonable.\60\ The commenter asserts that Managed Portfolio Shares
would have the benefit of intraday trading and of creation and
redemption at closing NAV and that they would, unlike other ETFs, also
offer the additional advantage of allowing investors to create or
redeem directly for cash in amounts less than a creation unit.\61\
---------------------------------------------------------------------------

    \59\ See DeCore Letter, supra note 7, at 1.
    \60\ See id.
    \61\ See id. at 1-2.
---------------------------------------------------------------------------

C. The Exchange's Response Letter

    The Exchange asserts that the concerns of the opposing commenter
are driven by competitive motives and argues that these concerns should
not affect the Commission's decision to approve or disapprove the
proposed rule change.\62\ Instead, according to the Exchange, different
proposals to list and trade actively managed EFTs without daily
portfolio disclosure should be

assessed on their individual merits and risks.\63\ The Exchange also
asserts that, assuming investor protection concerns are adequately
addressed, investors and the marketplace can only benefit from listing
and trading of a variety of products with different structures,
positing that competitive forces will ultimately decide the success of
failure of such initiatives.\64\
---------------------------------------------------------------------------

    \62\ See Response Letter, supra note 7, at 5.
    \63\ See id.
    \64\ See id.
---------------------------------------------------------------------------

    More specifically, the Exchange states that the opposing commenter
offers no direct support for his doubts regarding the assertions by
lead market makers (``LMMs'') about efficient secondary market trading,
and the Exchange asserts that these LMMs are uniquely suited to
prospectively assess the effectiveness of arbitrage in the shares.\65\
The Exchange reiterates that market makers have indicated that the
available information regarding the Shares would be sufficient for
arbitrage and hedging purposes.\66\ Additionally, the Exchange states
that, based on discussions with market makers, it expects that market
makers would agree to act as LMMs in the Shares and believes that no
market maker would accept an LMM assignment if it were not entirely
comfortable in its ability to hedge its positions.\67\ The Exchange
also reiterates that its existing trading surveillance procedures would
be applied to trading in the Shares and that such procedures are
adequate to properly deter and detect violations of Exchange rules and
federal securities laws applicable to trading on the Exchange.\68\
---------------------------------------------------------------------------

    \65\ See id. at 2.
    \66\ See id.
    \67\ See id.
    \68\ See id.
---------------------------------------------------------------------------

    The Exchange agrees with the opposing commenter that an accurate
PIV would be essential for trading in the Shares, but asserts that the
commenter offers no support for the assertion that the PIV would be
unreliable.\69\ The Exchange reiterates that market makers have
indicated that, after the first few days of trading, there would be
sufficient data to run a statistical analysis that would lead to
differences between the Share price of the ETF and the PIV being
tightened substantially.\70\ The Exchange states that it has no reason
to believe that the PIV, which would be calculated using methodology
substantially similar to that used in the calculation of all other ETF
intraday indicative values, would be inherently unreliable.\71\ The
Exchange reiterates its view that market participants would accept the
PIV as a reliable, indicative real-time value because (1) the PIV would
be calculated and disseminated based on a Fund's actual portfolio
holdings; (2) the securities in which the Funds plan to invest are
generally highly liquid and actively traded and therefore generally
have accurate real-time pricing available; and (3) market participants
would have a daily opportunity to evaluate whether the PIV at or near
the close of trading was indeed predictive of the actual NAV.\72\
---------------------------------------------------------------------------

    \69\ See id.
    \70\ See id.
    \71\ See id.
    \72\ See id.
---------------------------------------------------------------------------

    Responding to the opposing commenter's suggestion that the Exchange
be required to institute a program to monitor the timeliness and
accuracy of disseminated PIVs and to adopt appropriate procedures for
the treatment of trades executed during periods when erroneous PIVs
were disseminated, the Exchange reiterates that it has no reason to
believe that the PIVs would be inherently unreliable, and therefore it
does not propose to institute any additional monitoring programs.
Instead, the Exchange states that it would rely on its existing
surveillance systems to monitor trading in the Shares.\73\ The Exchange
also states that all exchanges may cancel trades only according to
their respective rules and that, while its rule applicable to trade
cancellations (NYSE Area Equities Rule 7.10) would apply to trading in
the Shares, that rule neither addresses trade cancellations in the
event erroneous PIVs are disseminated nor provides the Exchange
discretion to cancel trades.\74\
---------------------------------------------------------------------------

    \73\ See id. at 3.
    \74\ See id.
---------------------------------------------------------------------------

    In response to the opposing commenter's concerns about the adequacy
of the risks included in the Exchange's Information Bulletin
(``Bulletin'')--which would provide Exchange members with key
information about the Shares--and the commenter's suggestion that
trading in the Shares be limited to the Core Trading Session, the
Exchange states that: (1) Its surveillance procedures are operative
during all trading sessions and are adequate to monitor trading in the
Shares; (2) that it has no reason to discount the assertions of market
makers regarding their ability to make efficient markets during all
trading sessions; and (3) it will ensure that the Bulletin would
adequately address the special characteristics and risks associated
with trading in the Shares.\75\
---------------------------------------------------------------------------

    \75\ See id.
---------------------------------------------------------------------------

    In response to the opposing commenter's concern that market
professionals could reverse-engineer the holdings underlying the Shares
and thereby obtain an advantage over retail customers, the Exchange
states that the following information would be publicly available to
market professionals and retail investors alike: A PIV, disseminated
every 15 seconds; an NAV, disseminated daily after the close; and the
national best bid and offer and last trade for the Shares, disseminated
in real-time through the Consolidated Quotation System and the
Consolidated Tape.\76\ The Exchange states that, as with other ETFs,
any independent view that market participants might have about the
composition of the fund holdings and the value of those holdings would
be included in the prices at which those participants would be willing
to trade the product.\77\
---------------------------------------------------------------------------

    \76\ See id.
    \77\ See id.
---------------------------------------------------------------------------

    Responding to the commenter's recommendations that the Funds extend
eligibility for the Retail Redemption Facility to all shareholders,
that the Order Cut-off Times for direct purchases of Shares and
redemption under the Retail Redemption Facility be established as the
close of the Exchange's Regular Trading Session, and that trading in
the Shares be limited to broker-dealers that make certain
representations to the Exchange regarding direct purchases and
redemptions, the Exchange asserts that the process proposed in the
Notice is consistent with the applicable provisions of the Act.\78\
---------------------------------------------------------------------------

    \78\ See id. at 4.
---------------------------------------------------------------------------

    Responding to the commenter's recommendation that the PIV be posted
on each Fund's Web site in real time (along with other information),
the Exchange states that such real-time Web site disclosure of an
indicative value is not required of other ETFs.\79\ The Exchange states
that the PIV is designed to provide guidance regarding variances
between the prior day's closing prices and intraday changes in the
value of the underlying portfolio.\80\ The pricing of the Shares
themselves would be disseminated in real time through the Consolidated
Quotation System, according to the Exchange.\81\
---------------------------------------------------------------------------

    \79\ See id.
    \80\ See id.
    \81\ See id.
---------------------------------------------------------------------------

    Finally, the Exchange argues that the opposing commenter's
arguments regarding the following are not relevant to the Commission's
determination, under Section 19(b) of the Act, whether the Exchange's
proposal is consistent with the Act: (1) Tax treatment of in-

kind distributions through the blind trust; (2) early Order Cut-Off
Times for redemption; (3) cost considerations; \82\ (4) the commenter's
recommendation to curtail the permitted investments of the funds; and
(5) prospectus disclosures.\83\
---------------------------------------------------------------------------

    \82\ The Exchange argues that limiting broker-dealer processing
fees on direct purchases and redemptions of Shares would require
Commission rulemaking. See id. at 4.
    \83\ See id. at 4-5.
---------------------------------------------------------------------------

III. Proceedings to Determine Whether to Approve or Disapprove SR-
NYSEArca-2014-10 and Grounds for Disapproval Under Consideration

    The Commission is instituting proceedings pursuant to Section
19(b)(2)(B) of the Act \84\ to determine whether the proposed rule
change should be approved or disapproved. Institution of such
proceedings is appropriate at this time in view of the legal and policy
issues raised by the proposed rule change, as discussed below.
Institution of proceedings does not indicate that the Commission has
reached any conclusions with respect to any of the issues involved.
Rather, as described below, the Commission seeks and encourages
interested persons to provide comments on the proposed rule change.
---------------------------------------------------------------------------

    \84\ 15 U.S.C. 78s(b)(2)(B).
---------------------------------------------------------------------------

    Pursuant to Section 19(b)(2)(B) of the Act,\85\ the Commission is
providing notice of the grounds for disapproval under consideration.
The Commission is instituting proceedings to allow for additional
analysis of the proposed rule change's consistency with Section 6(b)(5)
of the Act, which requires, among other things, that the rules of a
national securities exchange be ``designed to prevent fraudulent and
manipulative acts and practices, to promote just and equitable
principles of trade,'' and ``to protect investors and the public
interest.'' \86\
---------------------------------------------------------------------------

    \85\ Id.
    \86\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------

IV. Procedure: Request for Written Comments

    The Commission requests that interested persons provide written
submissions of their views, data, and arguments with respect to the
issues identified above, as well as any other concerns they may have
with the proposal. In particular, the Commission invites the written
views of interested persons concerning whether the proposal is
consistent with Section 6(b)(5) or any other provision of the Act, or
the rules and regulations thereunder. Although there do not appear to
be any issues relevant to approval or disapproval which would be
facilitated by an oral presentation of views, data, and arguments, the
Commission will consider, pursuant to Rule 19b-4, any request for an
opportunity to make an oral presentation.\87\
---------------------------------------------------------------------------

    \87\ Section 19(b)(2) of the Act, as amended by the Securities
Act Amendments of 1975, Public Law 94-29 (June 4, 1975), grants the
Commission flexibility to determine what type of proceeding--either
oral or notice and opportunity for written comments--is appropriate
for consideration of a particular proposal by a self-regulatory
organization. See Securities Act Amendments of 1975, Senate Comm. on
Banking, Housing & Urban Affairs, S. Rep. No. 75, 94th Cong., 1st
Sess. 30 (1975).
---------------------------------------------------------------------------

    Interested persons are invited to submit written data, views, and
arguments regarding whether the proposal should be approved or
disapproved by June 23, 2014. Any person who wishes to file a rebuttal
to any other person's submission must file that rebuttal by July 7,
2014.
    The Commission asks that commenters address the sufficiency of the
Exchange's statements in support of the proposal, in addition to any
other comments they may wish to submit about the proposed rule change.
In particular, the Commission seeks comment on the statements of the
Exchange contained in the Notice,\88\ the issues raised by the opposing
commenter, the Exchange's responses to those issues, and any other
issues raised by the listing and trading of an actively managed ETF
that does not make daily public disclosure of its investment portfolio.
---------------------------------------------------------------------------

    \88\ Supra, note 3.
---------------------------------------------------------------------------

    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-NYSEArca-2014-10 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 Numbers SR-NYSEArca-2014-10. 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 Web site (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 Web site 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 these filings also will be available
for inspection and copying at the principal office of the Exchange. All
comments received will be posted without change; the Commission does
not edit personal identifying information from submissions. You should
submit only information that you wish to make available publicly. All
submissions should refer to File Number SR-NYSEArca-2014-10 and should
be submitted on or before June 23, 2014. Rebuttal comments should be
submitted by July 7, 2014.

    For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\89\
---------------------------------------------------------------------------

    \89\ 17 CFR 200.30-3(a)(57).
---------------------------------------------------------------------------

Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2014-12647 Filed 5-30-14; 8:45 am]
BILLING CODE 8011-01-P


[Federal Register Volume 83, Number 181 (Tuesday, September 18, 2018)]
[Proposed Rules]
[Pages 47116-47118]
[FR Doc No: 2018-20002]

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

DEPARTMENT OF TRANSPORTATION

Federal Aviation Administration

14 CFR Part 39

[Docket No. FAA-2018-0833; Product Identifier 2018-CE-031-AD]
RIN 2120-AA64

Airworthiness Directives; Weatherly Aircraft Company

AGENCY: Federal Aviation Administration (FAA), DOT.

ACTION: Notice of proposed rulemaking (NPRM).

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

SUMMARY: We propose to adopt a new airworthiness directive (AD) for all
Weatherly Aircraft Company (Weatherly) Models 201, 201A, 201B, 201C,
620, 620A, 620B, 620B-TG, and 620TP airplanes. This proposed AD was
prompted by reports of fatigue cracking of the center wing and outer
wing spar hinge brackets due to corrosion pitting. This proposed AD
would require repetitive inspections of the wing hinge brackets, pins,
and wing spar structure with repair or replacement of parts as
necessary. We are proposing this AD to address the unsafe condition on
these products.

DATES: We must receive comments on this proposed AD by November 2,
2018.

ADDRESSES: You may send comments, using the procedures found in 14 CFR
11.43 and 11.45, by any of the following methods:
     Federal eRulemaking Portal: Go to http://www.regulations.gov. Follow the instructions for submitting comments.
     Fax:<PHONE_NUMBER>.
     Mail: U.S. Department of Transportation, Docket
Operations, M-30, West Building Ground Floor, Room W12-140, 1200 New
Jersey Avenue SE, Washington, DC 20590.
     Hand Delivery: Deliver to Mail address above between 9
a.m. and 5 p.m., Monday through Friday, except Federal holidays.
    For service information identified in this NPRM, contact Weatherly
Aircraft Company, 2034 West Potomac Avenue, Chicago, Illinois 60622-
3152; telephone:<PHONE_NUMBER>; email: [email protected]. You may
review copies of the referenced service information at the FAA, Policy
and Innovation Division, 901 Locust, Kansas City, Missouri 64106. For
information on the availability of this material at the FAA, call (816)
329-4148.

Examining the AD Docket

    You may examine the AD docket on the internet at http://www.regulations.gov by searching for and locating Docket No. FAA-2018-
0833; or in person at Docket Operations between 9 a.m. and 5 p.m.,
Monday through Friday, except Federal holidays. The AD docket contains
this NPRM, the regulatory evaluation, any comments received, and other
information. The street address for Docket Operations (phone: 800-647-
5527) is listed above. Comments will be available in the AD docket
shortly after receipt.

FOR FURTHER INFORMATION CONTACT: Mike Lee, Aerospace Engineer, Los
Angeles Aircraft Certification Office, FAA, 3960 Paramount Blvd., Suite
100, Lakewood, California, 90712; phone:<PHONE_NUMBER>; fax: (562)
627-5210; email: [email protected].

SUPPLEMENTARY INFORMATION:

Comments Invited

    We invite you to send any written relevant data, views, or
arguments about this proposal. Send your comments to an address listed
under the ADDRESSES section. Include ``Docket No. FAA-2018-0833;
Product Identifier 2018-CE-018-AD'' at the beginning of your comments.
We specifically invite comments on the overall regulatory, economic,
environmental, and energy aspects of this NPRM. We will consider all
comments received by the closing date and may amend this NPRM because
of those comments.
    We will post all comments we receive, without change, to http://www.regulations.gov, including any personal information you provide. We
will also post a report summarizing each substantive verbal contact we
receive about this NPRM.

Discussion

    In 2015, we were notified of a fatal accident caused by the in-
flight structural failure of a wing on a Weatherly Model 620B airplane.
The accident investigation found multiple fatigue cracks in the center
wing front spar lower hinge bracket. As a result of operator
inspections, a cracked hinge bracket in the center wing to outer wing
joint was also reported on a different airplane. The hinge bracket from
the second report had completely failed, and the airplane was relying
on the second failsafe hinge bracket to carry the wing loads. This
condition, if not addressed, could result in failure of the wing front
spar lower hinge brackets and lead to in-flight separation of the wing
with consequent loss of control of the airplane.
    To correct this unsafe condition, we issued AD 2016-07-11 (81 FR
18461, March 31, 2016) (``AD 2016-07-11''), which requires a one-time
visual inspection of the center and outer wing front spar lower hinge
brackets for cracks and corrosion and corrective action as necessary.
AD 2016-07-11 also requires sending a report of the inspection results
to the FAA.
    Since we issued AD 2016-07-11, Weatherly has developed improved
center wing hinge brackets manufactured from corrosion resistant
material. Weatherly also issued new service information for repetitive
visual and detailed inspections. Since the cause of the fatigue cracks
were attributed to corrosion pits on the accident airplane, we propose
to issue this new AD to require those repetitive visual and detailed
inspection actions.

Related Service Information Under 1 CFR Part 51

    We reviewed Weatherly 201/620 Service Bulletin SB-201/620-18001,
Revision C, dated May 21, 2018. The service information describes
procedures for initial and repetitive inspections of the wing hinge
brackets, pins, and wing spar structure for corrosion and/or cracks
with repair or replacement as necessary. This service

information is reasonably available because the interested parties have
access to it through their normal course of business or by the means
identified in the ADDRESSES section.

FAA's Determination

    We are proposing this AD because we evaluated all the relevant
information and determined the unsafe condition described previously is
likely to exist or develop in other products of the same type design.

Proposed AD Requirements

    This proposed AD would require repetitive visual and detailed
inspections of the wing hinge brackets, pins, and wing spar structure
for corrosion and/or cracks with replacement of parts as necessary.

Costs of Compliance

    We estimate that this proposed AD affects 94 airplanes of U.S.
registry.
    We estimate the following costs to comply with this proposed AD:

                                                 Estimated Costs
----------------------------------------------------------------------------------------------------------------
                                                                                Cost on U.S.
             Action                  Labor cost           Parts cost         Cost per product      operators
----------------------------------------------------------------------------------------------------------------
Detailed inspection for          50 work-hours x    Not applicable........  $4,250 per         $399,500 per
 corrosion and cracks with wing   $85 per hour =                             inspection cycle.  inspection
 removed.                         $4,250 per                                                    cycle.
                                  inspection cycle.
Visual inspection for corrosion  4 work-hours x     Not applicable........  $340 per           $31,960 per
 with bolts and pin caps          $85 per hour =                             inspection cycle.  inspection
 removed.                         $340 per                                                      cycle.
                                  inspection cycle.
----------------------------------------------------------------------------------------------------------------

    We estimate the following costs to do any necessary replacements
that would be required based on the results of the proposed inspection.
We have no way of determining the number of airplanes that might need
these replacements.

                                               On-Condition Costs
----------------------------------------------------------------------------------------------------------------
                                                                                Parts cost
                    Action                                Labor cost               (includes         Cost per
                                                                                hardware)         product
----------------------------------------------------------------------------------------------------------------
Replacement of the assembly if all parts are   0 work-hours since part is              $10,500          $10,500
 found with corrosion.                          already removed from airplane.
----------------------------------------------------------------------------------------------------------------

    The on-condition costs reflects the cost to replace the entire
assembly. The scope of damage found in the required inspection and
which specific parts need replaced could vary significantly from
airplane to airplane. We have no way of determining how much damage may
be found on each airplane or the cost to repair damaged parts on each
airplane or the number of airplanes that may require repair.

Authority for This Rulemaking

    Title 49 of the United States Code specifies the FAA's authority to
issue rules on aviation safety. Subtitle I, section 106, describes the
authority of the FAA Administrator. Subtitle VII: Aviation Programs,
describes in more detail the scope of the Agency's authority.
    We are issuing this rulemaking under the authority described in
Subtitle VII, Part A, Subpart III, Section 44701: ``General
requirements.'' Under that section, Congress charges the FAA with
promoting safe flight of civil aircraft in air commerce by prescribing
regulations for practices, methods, and procedures the Administrator
finds necessary for safety in air commerce. This regulation is within
the scope of that authority because it addresses an unsafe condition
that is likely to exist or develop on products identified in this
rulemaking action.
    This proposed AD is issued in accordance with authority delegated
by the Executive Director, Aircraft Certification Service, as
authorized by FAA Order 8000.51C. In accordance with that order,
issuance of ADs is normally a function of the Compliance and
Airworthiness Division, but during this transition period, the
Executive Director has delegated the authority to issue ADs applicable
to small airplanes, gliders, balloons, airships, domestic business jet
transport airplanes, and associated appliances to the Director of the
Policy and Innovation Division.

Regulatory Findings

    We determined that this proposed AD would not have federalism
implications under Executive Order 13132. This proposed AD would not
have a substantial direct effect on the States, on the relationship
between the national government and the States, or on the distribution
of power and responsibilities among the various levels of government.
    For the reasons discussed above, I certify this proposed
regulation:
    (1) Is not a ``significant regulatory action'' under Executive
Order 12866,
    (2) Is not a ``significant rule'' under the DOT Regulatory Policies
and Procedures (44 FR 11034, February 26, 1979),
    (3) Will not affect intrastate aviation in Alaska, and
    (4) Will not have a significant economic impact, positive or
negative, on a substantial number of small entities under the criteria
of the Regulatory Flexibility Act.

List of Subjects in 14 CFR Part 39

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

The Proposed Amendment

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

PART 39--AIRWORTHINESS DIRECTIVES

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

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

Sec.  39.13  [Amended]

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

Weatherly Aircraft Company: Docket No. FAA-2018-0833; Product
Identifier 2018-CE-031-AD.

(a) Comments Due Date

    We must receive comments by November 2, 2018.

(b) Affected ADs

    None.

(c) Applicability

    This AD applies to Weatherly Aircraft Company (Weatherly) Models
201, 201A, 201B, 201C, 620, 620A, 620B, 620B-TG, and 620TP
airplanes, all serial numbers, certificated in any category.

(d) Subject

    Joint Aircraft System Component (JASC)/Air Transport Association
(ATA) of America Code 5740, Wing Attach Hinge Fitting.

(e) Unsafe Condition

    This AD was prompted by reports of cracks found on the center
wing front spar lower hinge bracket. We are issuing this AD to
detect and correct corrosion and cracks on the wing hinge brackets
and pin assemblies. The unsafe condition, if not addressed, could
result in failure of the wing front and rear spar lower hinge
brackets and lead to in-flight separation of the wing with
consequent loss of control of the airplane.

(f) Compliance

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

(g) Detailed Inspection

    (1) Within 3 months after the effective date of this AD and
thereafter at intervals not to exceed 5 years, inspect each center
and outer wing spar and spar cap, wing hinge bracket, and hardware
for corrosion and cracks by following paragraphs 7 through 22 under
the Detailed Inspection section in Weatherly 201/620 Service
Bulletin SB-201/620-18001, Revision C, dated May 21, 2018 (Weatherly
SB-201/620-18001, Revision C), except this AD does not require you
to contact Weatherly.
    (2) Serial numbers (S/N) 1155 and 1558 have already had the
initial detailed inspection required by paragraph (g)(1) of this AD
and only the 5-year repetitive detailed inspections are required for
these airplanes.
    (3) If any corrosion or cracking is found during any of the
inspections required in paragraph (g)(1) of this AD, before further
flight, repair or replace any parts with corrosion and cracking as
specified in paragraphs 7 through 13 under the Detailed Inspection
section in Weatherly SB-201/620-18001, Revision C.

(h) Visual Inspection

    Within 12 months after the initial detailed inspection required
in paragraph (g) of this AD and thereafter at intervals not to
exceed 12 months, visually inspect each forward and rear wing hinge
bracket attachment pins, bolts, removed caps, spacers, and hardware
for corrosion by following paragraphs 4 through 7 under the Visual
Inspection section in Weatherly SB-201/620-18001, Revision C. If any
corrosion is found during any of the inspections required by this
paragraph, before further flight, inspect further, repair, and/or
replace any parts with corrosion as specified in paragraphs 5 and 6
under the Visual Inspection section in Weatherly SB-201/620-18001,
Revision C. You may perform a detailed inspection in accordance with
paragraph (g) of this AD instead of any visual inspection required
by paragraph (h) of this AD.

(i) Alternative Methods of Compliance (AMOCs)

    (1) The Manager, Los Angeles ACO Branch, FAA, has the authority
to approve AMOCs for this AD, if requested using the procedures
found in 14 CFR 39.19. In accordance with 14 CFR 39.19, send your
request to your principal inspector or local Flight Standards
District Office, as appropriate. If sending information directly to
the manager of the certification office, send it to the attention of
the person identified in paragraph (j) of this AD.
    (2) Before using any approved AMOC, notify your appropriate
principal inspector, or lacking a principal inspector, the manager
of the local flight standards district office/certificate holding
district office.

(j) Related Information

    (1) For more information about this AD, contact Mike Lee,
Aerospace Engineer, Los Angeles Aircraft Certification Office, FAA,
3960 Paramount Blvd., Suite 100, Lakewood, California, 90712; phone:
(562) 627-5325; fax:<PHONE_NUMBER>; email: [email protected].
    (2) For service information identified in this AD, contact
Weatherly Aircraft Company, 2034 West Potomac Avenue, Chicago,
Illinois 60622-3152; telephone:<PHONE_NUMBER>; email:
[email protected]. You may view this referenced service information
at the FAA, Policy and Innovation Division, 901 Locust, Kansas City,
Missouri 64106. For information on the availability of this material
at the FAA, call<PHONE_NUMBER>.

    Issued in Kansas City, Missouri, on September 7, 2018.
Melvin J. Johnson,
Aircraft Certification Service, Deputy Director, Policy and Innovation
Division, AIR-601.
[FR Doc. 2018-20002 Filed 9-17-18; 8:45 am]
 BILLING CODE 4910-13-P


[Federal Register: April 14, 2010 (Volume 75, Number 71)]
[Notices]
[Page 19449-19451]
[DOCID:fr14ap10-115]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-61869; File No. SR-ISE-2010-25]

Self-Regulatory Organizations; International Securities Exchange,
LLC; Notice of Filing and Immediate Effectiveness of a Proposed Rule
Change Relating to Fees and Rebates for Adding and Removing Liquidity

April 7, 2010.
    Pursuant to 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 31, 2010, International Securities Exchange, LLC (``ISE'' or
``Exchange'') filed with the Securities and Exchange Commission
(``Commission'') the proposed rule change as described in Items I, II,
and III below, which Items have been prepared by the Exchange. ISE has
designated this proposal as one establishing or changing a member due,
fee, or other charge imposed under Section 19(b)(3)(A)(ii) of the Act
\3\ and Rule 19b-4(f)(2) thereunder,\4\ which renders the proposal
effective upon filing with the Commission. 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)(ii).
    \4\ 17 CFR 240.19b-4(f)(2).
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I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change

    The ISE is proposing to amend its Schedule of Fees by adopting per
contract transaction fees for options overlying the PowerShares QQQ
Trust (``QQQQ'') [supreg]; Bank of America Corporation (``BAC'') and
Citigroup Inc. (``C''). The fees would apply to transactions that take
and remove liquidity in the above symbols. The Exchange also proposes
to offer transaction rebates to certain market participants. The text
of the proposed rule change is available on the Exchange's Web site
(http://www.ise.com), at the principal office of the Exchange, at the
Commission's Public Reference Room, and on the Commission's Web site at
http://www.sec.gov.

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

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

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

1. Purpose
    The purpose of the proposed rule change is to increase liquidity
and attract order flow in QQQQ, BAC and C options on the Exchange.\5\
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    \5\ The fees proposed herein are similar to the ``maker/taker''
fees currently assessed by NASDAQ OMX PHLX (``PHLX''). PHLX
currently charges a fee (a) for adding liquidity to the following
class of market participants on that exchange: (i) Firm and (ii)
Broker-Dealer; (b) for removing liquidity to the following class of
market participants: (i) Customer, (ii) Directed Participant, (iii)
Specialist, ROT, SQT and RSQT, (iv) Firm and (v) Broker-Dealer. PHLX
also provides a rebate for adding liquidity to the following class
of market participants: (i) Customer, (ii) Directed Participant,
(iii) Specialist, ROT, SQT and RSQT. See Securities Exchange Act
Release No. 61684 (March 10, 2010), 75 FR 13189 (March 18, 2010).
---------------------------------------------------------------------------

Transaction Charges for Removing Liquidity
    The Exchange proposes to assess a per contract transaction charge
in QQQQ, BAC and C options to market participants that remove, or
``take,'' liquidity from the Exchange. The per contract transaction
charge would depend on the category of market participant submitting an
order or quote to the Exchange that removes liquidity.\6\
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    \6\ Although these options classes will no longer be subject to
the tiered market maker transaction fees, the volume from these
options classes will continue to be used in the calculation of the
tiers so that this new pricing does not affect a market maker's fee
in all other names.
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    The proposed amendment to the Exchange's Schedule of Fees
identifies

the following categories of market participants: (i) Market Maker; (ii)
Market Maker Plus; \7\ (iii) Non-ISE Market Maker; \8\ (iv) Firm
Proprietary; (v) Customer (Professional); \9\ (vi) Priority
Customer,\10\ 100 or more contracts; and (vii) Priority Customer, less
than 100 contracts.\11\
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    \7\ A Market Maker Plus is a market maker who is on the National
Best Bid or National Best Offer 80% of the time in that symbol
during the current trading month for series trading between $0.03
and $5.00 in premium. The Exchange will determine whether a market
maker qualifies as a Market Maker Plus at the end of each month by
looking back at each market maker's quoting statistics during that
month. If at the end of the month, a market maker meets the 80%
criteria, the Exchange will rebate $0.10 per contract for
transactions executed by that market maker during that month. The
Exchange will provide market makers a report on a daily basis with
quoting statistics so that market makers can determine whether or
not they are meeting the 80% criteria.
    \8\ A Non-ISE Market Maker, or Far Away Market Maker
(``FARMM''), is a market maker as defined in Section 3(a)(38) of the
Securities Exchange Act of 1934, as amended (``Exchange Act''),
registered in the same options class on another options exchange.
    \9\ A Customer (Professional) is a person who is not a broker/
dealer and is not a Priority Customer.
    \10\ A Priority Customer is defined in ISE Rule 100(a)(37A) as a
person or entity that is not a broker/dealer in securities, and does
not place more than 390 orders in listed options per day on average
during a calendar month for its own beneficial account(s).
    \11\ The Chicago Board Options Exchange (``CBOE'') currently
makes a similar distinction between large size customer orders that
are fee liable and small size customer orders whose fees are waived.
CBOE currently waives fees for customer orders of 99 contracts or
less in options on exchange-traded funds (``ETFs'') and Holding
Company Depositary Receipts (``HOLDRs'') and charges a transaction
fee for customer orders that exceed 99 contracts. See Securities
Exchange Act Release No. 59892 (May 8, 2009), 74 FR 22790 (May 14,
2009).
---------------------------------------------------------------------------

    The transaction charges to be assessed for removing liquidity in
QQQQ, BAC and C options from the Exchange are: (i) $0.25 per contract
for Market Maker, Market Maker Plus, Firm Proprietary and Customer
(Professional) orders; (ii) $0.35 per contract for Non-ISE Market Maker
orders; (iii) $0.20 per contract for Priority Customer orders for 100
or more contracts. Priority Customer orders for less than 100 contracts
will not be assessed a fee for removing liquidity.
    The transaction charges to be assessed for each leg of Complex
Orders that remove liquidity in QQQQ, BAC and C options are: (i) $0.25
per contract for Market Maker, Market Maker Plus, Firm Proprietary and
Customer (Professional) orders; and (ii) $0.35 per contract for Non-ISE
Market Maker orders. Priority Customer Complex orders, regardless of
size, will not be assessed a fee for removing liquidity.
Transaction Charges for Adding Liquidity
    The Exchange proposes to assess transaction charges for adding
liquidity in QQQQ, BAC and C options on the Exchange, as follows: (i)
$0.10 per contracts for Market Maker, Firm Proprietary and Customer
(Professional) orders; and (ii) $0.20 per contract for Non-ISE Market
Maker orders. Priority Customer orders, regardless of size, and Market
Maker Plus orders will not be assessed a fee for adding liquidity.
    The transaction charges to be assessed for each leg of Complex
Orders that add liquidity in QQQQ, BAC and C options are: (i) $0.10 per
contract for Market Maker, Market Maker Plus, Firm Proprietary and
Customer (Professional) orders; and (ii) $0.20 per contract for Non-ISE
Market Maker orders. Priority Customer Complex orders, regardless of
size, will not be assessed a fee for adding liquidity.
Rebates
    In order to promote and encourage liquidity in QQQQ, BAC and C
options, the Exchange proposes a $0.10 per contract rebate for Market
Maker Plus orders sent to the Exchange.\12\ Further, in order to
incentivize members to direct retail orders to the Exchange, Priority
Customer Complex orders, regardless of size, will receive a rebate of
$0.15 per contract on all legs when these orders trade with non-
customer orders in the Exchange's Complex Orderbook.
---------------------------------------------------------------------------

    \12\ The concept of incenting market makers with a rebate is not
novel. In 2008, the CBOE established a program for its Hybrid Agency
Liaison whereby it provides a $0.20 per contact rebate to its market
makers provided that at least 80% of the market maker's quotes in a
class during a month are on one side of the national best bid or
offer. Market makers not meeting CBOE's criteria are not eligible to
receive a rebate. See Securities Exchange Act Release No. 57231
(January 30, 2008), 73 FR 6752 (February 5, 2008). The CBOE has
since lowered the criteria from 80% to 60%. See Securities Exchange
Act Release No. 57470 (March 11, 2008), 73 FR 14514 (March 18,
2008).
---------------------------------------------------------------------------

    The fee for orders executed in the Exchange's Facilitation,
Solicited Order, Price Improvement and Block Order Mechanisms remain
unchanged from what the Exchange currently charges. Specifically,
Market Maker, Market Maker Plus, Non-ISE Market Maker, Firm Proprietary
and Customer (Professional) orders in QQQQ, BAC and C options entered
into these mechanisms will be charged $0.20 per contract. Priority
Customer orders executed in the Exchange's Facilitation, Solicited
Order, Price Improvement and Block Order Mechanisms, regardless of
size, are not assessed a fee. The Exchange's Facilitation Mechanism has
an auction which allows for participation in a trade by members other
than the member who entered the trade. Thus, to incentivize members, a
rebate of $0.15 per contract will apply to contracts that do not trade
with the contra order in the Facilitation Mechanism.\13\
---------------------------------------------------------------------------

    \13\ Assume the ISE BBO and NBBO are 0.95 x 1.00. A firm enters
a Facilitation order for a Customer to buy 100 contracts for $0.98
(originating order). The Firm is the Seller (contra order). During
the auction period a market maker responds to sell 40 contracts at
$0.98. At the conclusion of the auction, the Firm is allocated 60
contracts and the market maker is allocated 40 contracts. The contra
order will then receive a rebate of $0.15 per contract for the 40
contracts that did not trade with it. See e-mail from Samir Patel,
Assistant General Counsel, ISE, to Johnna B. Dumler, Special
Counsel, Commission, and Andrew Madar, Special Counsel, Commission,
dated April 1, 2010.
---------------------------------------------------------------------------

Other Fees
     Fees for orders executed in the Exchange's Facilitation,
Solicited Order, Price Improvement and Block Order Mechanisms are for
contracts that are part of the originating or contra order.
     Complex orders executed in the Facilitation and Solicited
Order Mechanisms are charged fees only for the leg of the trade
consisting of the most contracts.
     Payment for Order Flow fees will not be collected on
transactions on QQQQ, BAC and C options.\14\
---------------------------------------------------------------------------

    \14\ ISE currently has a payment-for-order-flow (``PFOF'')
program that helps the Exchange's market makers establish PFOF
arrangements with an Electronic Access Member (``EAM'') in exchange
for that EAM preferencing some or all of its order flow to that
market maker. This program is funded through a fee paid by Exchange
market makers for each customer contract they execute, and is
administered by both Primary Market Makers (``PMM'') and Competitive
Market Makers (``CMM''), depending to whom the order is preferenced.
---------------------------------------------------------------------------

     The Cancellation Fee will continue to apply in QQQQ, BAC
and C options.\15\
---------------------------------------------------------------------------

    \15\ The Exchange assesses a Cancellation Fee of $2.00 to EAMs
that cancel at least 500 orders in a month, for each order
cancellation in excess of the total number of orders such member
executed that month. All orders from the same clearing EAM executed
in the same underlying symbol at the same price within a 300 second
period are aggregated and counted as one executed order for purposes
of this fee. This fee is charged only to customer orders.
---------------------------------------------------------------------------

     The Exchange has a $0.20 per contract fee credit for
members who, pursuant to Supplementary Material .02 to Rule 803,
execute a transaction in the Exchange's flash auction as a response to
orders from persons who are not broker/dealers and who are not Priority
Customers.\16\ For QQQQ, BAC and C options, the Exchange proposes to
lower the per contract fee credit for members who execute a transaction
in the Exchange's flash auction as a response

to orders from persons who are not broker/dealers and who are not
Priority Customers to $0.10 per contract.
---------------------------------------------------------------------------

    \16\ See Securities Exchange Act Release No. 61731 (March 18,
2010), 75 FR 14233 (March 24, 2010).
---------------------------------------------------------------------------

     The Exchange has a $0.20 per contract fee for market maker
orders sent to the Exchange by EAMs.\17\ Market Maker orders sent to
the Exchange by EAMs will be assessed a fee of $0.25 per contract for
removing liquidity in QQQQ, BAC and C options and $0.10 per contract
for adding liquidity in QQQQ, BAC and C options.
---------------------------------------------------------------------------

    \17\ See Securities Exchange Act Release No. 60817 (October 13,
2009), 74 FR 54111 (October 21, 2009).
---------------------------------------------------------------------------

    The Exchange has designated this proposal to be operative on April
1, 2010.
2. Statutory Basis
    The basis under the Exchange Act for this proposed rule change is
the requirement under Section 6(b)(4) that an exchange have an
equitable allocation of reasonable dues, fees and other charges among
its members and other persons using its facilities. The impact of the
proposal upon the net fees paid by a particular market participant will
depend on a number of variables, most important of which will be its
propensity to add or remove liquidity in QQQQ, BAC and C options. The
Exchange operates in a highly competitive market in which market
participants can readily direct order flow to another exchange if they
deem fee levels at a particular exchange to be excessive. The Exchange
believes that the proposed fees it charges for options overlying QQQQ,
BAC and C remain competitive with fees charged by other exchanges and
therefore continue to be reasonable and equitably allocated to those
members that opt to direct orders to the Exchange rather than to a
competing exchange.

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

    The proposed rule change does not impose any burden on competition
that is not necessary or appropriate in furtherance of the purposes of
the Act.

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

    The Exchange has not solicited, and does not intend to solicit,
comments on this proposed rule change. The Exchange has not received
any unsolicited written comments from members or other interested
parties.

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

    The foregoing rule change has become effective pursuant to Section
19(b)(3) of the Act \18\ and Rule 19b-4(f)(2) \19\ thereunder. At any
time within 60 days of the filing of such proposed rule change, the
Commission may summarily abrogate 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.
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    \18\ 15 U.S.C. 78s(b)(3)(A).
    \19\ 17 CFR 240.19b-4(f)(2).
---------------------------------------------------------------------------

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 e-mail to<EMAIL_ADDRESS>Please include
File Number SR-ISE-2010-25 on the subject line.

Paper Comments

     Send paper comments in triplicate to Secretary, Securities
and Exchange Commission, Station Place, 100 F Street, NE., Washington,
DC 20549-1090.

All submissions should refer to File Number SR-ISE-2010-25. This file
number should be included on the subject line if e-mail 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 Web site (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 Web site viewing and
printing in the Commission's Public Reference Room, 100 F Street, NE.,
Washington, DC 20549, on official business days between the hours of 10
a.m. and 3 p.m. Copies of such filing also will be available for
inspection and copying at the principal office of the Exchange. All
comments received will be posted without change; the Commission does
not edit personal identifying information from submissions. You should
submit only information that you wish to make publicly available. All
submissions should refer to File Number SR-ISE-2010-25 and should be
submitted on or before May 5, 2010.

    For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\20\
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    \20\ 17 CFR 200.30-3(a)(12).
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Florence E. Harmon,
Deputy Secretary.
[FR Doc. 2010-8542 Filed 4-13-10; 8:45 am]
BILLING CODE 8011-01-P