[Federal Register Volume 80, Number 77 (Wednesday, April 22, 2015)]
[Notices]
[Pages 22584-22587]
[FR Doc No: 2015-09271]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-74742; File No. SR-NASDAQ-2015-011]

Self-Regulatory Organizations; The NASDAQ Stock Market LLC; Order
Approving a Proposed Rule Change, as Modified by Amendments No. 1 and
No. 2, To List and Trade the Shares of the First Trust Strategic
Floating Rate ETF of First Trust Exchange-Traded Fund IV

April 16, 2015.

I. Introduction

    On February 12, 2015, The NASDAQ Stock Market LLC (the ``Exchange''
or ``Nasdaq'') filed with the Securities and Exchange Commission
(``Commission''), pursuant to Section 19(b)(1) \1\ of the Securities
Exchange Act of 1934 (``Act'' or ``Exchange Act'') \2\ and Rule 19b-4
thereunder,\3\ a proposed rule change to list and trade shares
(``Shares'') of the First Trust Strategic Floating Rate ETF (the
``Fund'') of First Trust Exchange-Traded Fund IV (the ``Trust'') under
NASDAQ Rule 5735. The proposed rule change was published for comment in
the Federal Register on March 3, 2015.\4\ On April 6, 2015, the
Exchange filed Amendment No. 1 to the proposed rule change.\5\ On April
15, 2015, the Exchange filed Amendment No. 2 to the proposed rule
change.\6\ The Commission received no comments on the proposed rule
change. This order approves the proposed rule change, as modified by
Amendments No. 1 and No. 2.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 15 U.S.C. 78a.
    \3\ 17 CFR 240.19b-4.
    \4\ See Securities Exchange Act Release No. 74378 (February 25,
2015), 80 FR 11509 (``Notice'').
    \5\ In Amendment No. 1, the Exchange clarified that the
quotation and last-sale information will be available via the
Options Price Reporting Authority only for U.S. exchange-listed
options that the Fund holds. Amendment No. 1 is not subject to
notice and comment because it is a technical amendment that does not
materially alter the substance of the proposed rule change or raise
any novel regulatory issues.
    \6\ In Amendment No. 2, the Exchange removed exchange-listed
options on U.S. Treasury securities from the types of derivative
instruments in which the Fund may invest. Amendment No. 2 is not
subject to notice and comment because it does not materially alter
the substance of the proposed rule change or raise any novel
regulatory issues.
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II. Description of the Proposal

    The Exchange proposes to list and trade the Shares under Nasdaq
Rule 5735, which governs the listing and trading of Managed Fund Shares
on the Exchange. The Fund will be an actively-managed exchange-traded
fund (``ETF''). The Shares will be offered by the Trust.\7\ The Trust
is registered with the Commission as an investment company and has
filed a registration statement on Form N-1A (``Registration
Statement'') with the Commission.\8\ The Fund will be a series of the
Trust.
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    \7\ The Commission has issued an order, upon which the Trust may
rely, granting certain exemptive relief under the Investment Company
Act of 1940 (``1940 Act''). See Investment Company Act Release No.
30029 (April 10, 2012) (File No. 812-13795) (the ``Exemptive Relief
''). In addition, the Commission has issued no-action relief that
the Fund believes affects its ability to invest in derivatives
notwithstanding certain representations in the application for the
Exemptive Relief. See Commission No-Action Letter (December 6,
2012).
    \8\ See Post-Effective Amendment No. 104 to Registration
Statement on Form N-1A for the Trust, dated January 29, 2015 (File
Nos. 333-174332 and 811-22559).
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    First Trust Advisors L.P. will be the investment adviser
(``Adviser'') to the Fund. First Trust Portfolios L.P. (the
``Distributor'') will be the principal underwriter and distributor of
the Fund's Shares. The Bank of New York Mellon Corporation will act as
the administrator, accounting agent, custodian and transfer agent to
the Fund. The Exchange states that the Adviser is not a broker-dealer,
although it is affiliated with the Distributor, a broker-dealer.\9\ In
addition, the Exchange states that the Adviser has implemented a fire
wall with respect to its broker-dealer affiliate regarding access to
information concerning the composition and/or changes to the portfolio,
and that personnel who make decisions on the Fund's portfolio
composition will be subject to procedures designed to prevent the use
and dissemination of material non-public information regarding the
Fund's portfolio.\10\ In the event (a) the Adviser becomes, or becomes
newly affiliated with, a broker-dealer, or (b) any new adviser or sub-
adviser is a registered broker-dealer or becomes affiliated with
another broker-dealer, it will implement a fire wall with respect to
its relevant personnel and/or such broker-dealer affiliate, as
applicable, regarding access to information concerning the composition
and/or changes to the portfolio and will be subject to procedures
designed to prevent the use and dissemination of material non-public
information regarding such

portfolio.\11\ The Fund does not currently intend to use a sub-adviser.
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    \9\ See Notice, supra note 4, 80 FR at 11510.
    \10\ See id.
    \11\ See id.
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    The Exchange has made the following representations and statements
regarding the Fund.\12\
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    \12\ Additional information regarding, among other things, the
Fund, the Shares, the Fund's investment objectives, the Fund's
strategies, methodology and restrictions, risks; fees and expenses
associated with the Shares, creations and redemptions of Shares,
availability of price information, trading rules and halts, and
surveillance procedures can be found in the Notice and the
Registration Statement. See Notice, supra note 4, and Registration
Statement, supra note 7, respectively.
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Principal Investments for the Fund

    The investment objective of the Fund will be to seek current
income. To achieve its objective, the Fund will invest, under normal
market conditions,\13\ at least 80% of its net assets in a portfolio of
the following types of floating-rate debt instruments issued by U.S.
and non-U.S. public- and private-sector entities: Floating-rate
corporate \14\ and government bonds and notes; floating-rate agency
securities; floating-rate instruments of non-U.S. issuers; floating-
rate privately-issued securities; \15\ floating-rate asset-backed
securities; floating-rate mortgage-backed securities; floating-rate
loans; and investment companies that invest primarily in the foregoing
types of debt instruments (collectively, ``Floating Rate Debt
Instruments'').
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    \13\ The term ``under normal market conditions'' includes, but
is not limited to, the absence of adverse market, economic,
political or other conditions, including extreme volatility or
trading halts in the fixed income markets or the financial markets
generally; operational issues causing dissemination of inaccurate
market information; or force majeure type events such as systems
failure, natural or man-made disaster, act of God, armed conflict,
act of terrorism, riot or labor disruption or any similar
intervening circumstance.
    \14\ The Adviser expects that, generally, under normal market
conditions, for a corporate bond to be considered as an eligible
investment, after taking into account such an investment, at least
75% of the Fund's net assets that are invested in floating-rate
corporate bonds and, as described below, fixed-rate corporate bonds
(in the aggregate), will be comprised of corporate bonds that have,
at the time of original issuance, $100 million or more par amount
outstanding. See Notice, supra note 4, 80 FR at 11511, n.10.
    \15\ Under normal market conditions, the privately-issued
securities in which the Fund will invest will have, at the time of
original issuance, $100 million or more principal amount outstanding
to be considered eligible investments. See id. at 11511, n.12.
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    According to the Exchange, at least 65% of the Fund's net assets
will be invested in Floating Rate Debt Instruments that are, at the
time of purchase, investment grade. The Exchange represents that to be
considered ``investment grade,'' under normal market conditions, rated
Floating Rate Debt Instruments will carry, at the time of purchase, a
rating in the highest four rating categories of at least one nationally
recognized statistical ratings organization (``NRSRO'') (e.g., BBB- or
higher by Standard & Poor's Ratings Services, and/or Fitch Ratings, or
Baa3 or higher by Moody's Investors Service, Inc).\16\ For unrated
securities to be considered ``investment grade,'' under normal market
conditions, such securities will be determined, at the time of
purchase, to be of comparable quality \17\ by the Adviser. The Exchange
states that the Fund may invest up to 35% of its net assets in
securities that are, at the time of investment, rated below investment
grade by each NRSRO rating such securities (or securities that are
unrated and determined by the Adviser to be of comparable quality),
commonly referred to as ``high yield'' or ``junk'' bonds. If,
subsequent to purchase by the Fund, a security held by the Fund
experiences a decline in credit quality and falls below investment
grade, the Fund may continue to hold the security, and it will not
cause the Fund to violate the 35% investment limitation; however, the
security will be taken into account for purposes of determining whether
purchases of additional securities will cause the Fund to violate such
limitation.\18\
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    \16\ The Exchange states that if a security is rated by multiple
NRSROs and receives different ratings, the Fund will treat the
security as being rated in the highest rating category received from
an NRSRO. See id. at 11511, n.18.
    \17\ Comparable quality of unrated securities will be determined
by the Adviser based on fundamental credit analysis of the unrated
security and comparable NRSRO-rated securities. On a best efforts
basis, the Adviser will attempt to make a rating determination based
on publicly available data. In making a ``comparable quality''
determination, the Adviser may consider, for example, whether the
issuer of the security has issued other rated securities, the nature
and provisions of the relevant security, whether the obligations
under the relevant security are guaranteed by another entity and the
rating of such guarantor (if any), relevant cash flows,
macroeconomic analysis, and/or sector or industry analysis. See id.
at 11511, n.19.
    \18\ See id. at 11511.
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    The Exchange states that the Fund will limit its investments in
asset-backed securities (excluding agency mortgage-backed securities)
and non-agency mortgage-backed securities (in the aggregate) to 20% of
its net assets. In addition, the Fund will limit its investments in
junior loans to 20% of its net assets.\19\
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    \19\ See id.
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    The Fund will hold debt securities (including, in the aggregate,
Floating Rate Debt Instruments and the fixed-rate debt securities
described below) of at least 13 non-affiliated issuers.

Other Investments

    Under normal market conditions, the Fund will invest primarily in
the Floating Rate Debt Instruments described above to meet its
investment objective. In addition, the Fund may invest up to 20% of its
net assets in the following types of fixed-rate debt securities:
Corporate and government bonds and notes; agency securities;
instruments of non-U.S. issuers in developed markets; privately-issued
securities; asset-backed securities; mortgage-backed securities;
municipal bonds; money market securities; and investment companies
(including investment companies advised by the Adviser) that invest
primarily in the foregoing types of debt securities.
    Further, to pursue its investment objective, the Fund may invest up
to 20% of the value of its net assets in exchange-listed options on
U.S. Treasury futures contracts and exchange-listed U.S. Treasury
futures contracts.\20\ The use of these derivative transactions may
allow the Fund to obtain net long or short exposures to selected
interest rates. These derivatives may also be used to hedge risks,
including interest rate risks and credit risks, associated with the
Fund's portfolio investments. According to the Exchange, the Fund's
investments in derivative instruments will be consistent with the
Fund's investment objective and the 1940 Act and will not be used to
seek to achieve a multiple or inverse multiple of an index.
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    \20\ At least 90% of the Fund's net assets that are invested in
exchange-traded derivative instruments will be invested in
instruments that trade in markets that are members of the
Intermarket Surveillance Group (``ISG'') or are parties to a
comprehensive surveillance sharing agreement with the Exchange. See
id. at 11512, n.28.
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Investment Restrictions

    The Fund will not invest 25% or more of the value of its total
assets in securities of issuers in any one industry. This restriction
does not apply to (a) obligations issued or guaranteed by the U.S.
government, its agencies or instrumentalities or (b) securities of
other investment companies.
    The Fund may hold up to an aggregate amount of 15% of its net
assets in illiquid assets (calculated at the time of investment),
including Rule 144A securities deemed illiquid by the Adviser. The Fund
will monitor its portfolio liquidity on an ongoing basis to determine
whether, in light of current circumstances, an adequate level of
liquidity is being maintained, and will consider taking appropriate
steps in order to maintain adequate liquidity if, through a change in
values, net assets,

or other circumstances, more than 15% of the Fund's net assets are held
in illiquid assets. Illiquid assets include securities subject to
contractual or other restrictions on resale and other instruments that
lack readily available markets as determined in accordance with
Commission staff guidance.
    The Fund will not invest in non-U.S. equity securities.

III. Discussion and Commission Findings

    After careful review, the Commission finds that the Exchange's
proposal to list and trade the Shares is consistent with the Exchange
Act and the rules and regulations thereunder applicable to a national
securities exchange.\21\ In particular, the Commission finds that the
proposed rule change is consistent with Section 6(b)(5) of the Exchange
Act,\22\ which requires, among other things, that the Exchange's rules
be designed to promote just and equitable principles of trade, to
remove impediments to and perfect the mechanism of a free and open
market and a national market system, and, in general, to protect
investors and the public interest.
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    \21\ In approving this proposed rule change, the Commission has
considered the proposed rule's impact on efficiency, competition,
and capital formation. See 15 U.S.C. 78c(f).
    \22\ 15 U.S.C. 78f(b)(5).
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    The Commission finds that the proposal to list and trade the Shares
on the Exchange is consistent with Section 11A(a)(1)(C)(iii) of the
Exchange Act,\23\ which sets forth Congress' finding that it is in the
public interest and appropriate for the protection of investors and the
maintenance of fair and orderly markets to assure the availability to
brokers, dealers and investors of information with respect to
quotations for and transactions in securities. Quotation and last-sale
information for the Shares will be available via Nasdaq proprietary
quote and trade services, as well as in accordance with the Unlisted
Trading Privileges and the Consolidated Tape Association (``CTA'')
plans for the Shares. Quotation and last-sale information for the other
ETFs in which the Fund will invest will be available via the quote and
trade services of their respective primary exchanges, as well as in
accordance with the Unlisted Trading Privileges and the CTA plans, as
applicable. Quotation and last-sale information for U.S. exchange-
listed options will be available via the Options Price Reporting
Authority.\24\
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    \23\ 15 U.S.C. 78k-1(a)(1)(C)(iii).
    \24\ See Amendment No. 1, supra note 5.
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    Intraday executable price quotations on Floating Rate Debt
Instruments and other assets not traded on an exchange will be
available from major broker-dealer firms or market data vendors, as
well as from automated quotation systems, published or other public
sources, or online information services.\25\ Additionally, the Trade
Reporting and Compliance Engine (``TRACE'') of the Financial Industry
Regulatory Authority (``FINRA'') will be a source of price information
for corporate bonds, privately-issued securities, mortgage-backed
securities and asset-backed securities to the extent transactions in
such securities are reported to TRACE.\26\ For exchange-traded assets,
intraday pricing information will be available directly from the
applicable listing exchange. Information regarding market price and
trading volume of the Shares will be continually available on a real-
time basis throughout the day on brokers' computer screens and other
electronic services. Information regarding the previous day's closing
price and trading volume information for the Shares will be published
daily in the financial section of newspapers.
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    \25\ See Notice, supra note 4, 80 FR at 11514.
    \26\ See id.
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    The Commission also believes that the proposal to list and trade
the Shares is reasonably designed to promote fair disclosure of
information that may be necessary to price the Shares appropriately and
to prevent trading when a reasonable degree of transparency cannot be
assured. On each business day, before commencement of trading in Shares
in the Regular Market Session (9:30 a.m. to 4:00 p.m. or 4:15 p.m.,
Eastern Time) on the Exchange, the Fund will disclose on its Web site
the identities and quantities of the portfolio of securities and other
assets (the ``Disclosed Portfolio'' as defined in Nasdaq Rule
5735(c)(2)) held by the Fund that will form the basis for the Fund's
calculation of NAV at the end of the business day.\27\ The Fund's
disclosure of derivative positions in the Disclosed Portfolio will
include information that market participants can use to value these
positions intraday. The Web site information will be publicly available
at no charge. The NAV of the Fund's Shares generally will be calculated
once daily Monday through Friday as of the close of regular trading on
the New York Stock Exchange, generally 4:00 p.m., Eastern Time. The
Exchange will obtain a representation from the issuer of the Shares
that the NAV per Share will be calculated daily and that the NAV and
the Disclosed Portfolio will be made available to all market
participants at the same time.\28\ The Intraday Indicative Value,
available on the NASDAQ OMX Information LLC proprietary index data
service,\29\ will be based upon the current value for the components of
the Disclosed Portfolio and will be updated and widely disseminated by
one or more major market data vendors and broadly displayed at least
every 15 seconds during the Regular Market Session.\30\ The Fund's Web
site will include a form of the prospectus for the Fund and additional
data relating to NAV and other applicable quantitative information.\31\
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    \27\ Under accounting procedures to be followed by the Fund,
trades made on the prior business day (``T'') will be booked and
reflected in NAV on the current business day (``T+1''). Accordingly,
the Fund will be able to disclose at the beginning of the business
day the portfolio that will form the basis for the NAV calculation
at the end of the business day.
    \28\ See id.
    \29\ Currently, the NASDAQ OMX Global Index Data Service
(``GIDS'') is the NASDAQ OMX global index data feed service. The
Exchange represents that GIDS offers real-time updates, daily
summary messages, and access to widely followed indexes and Intraday
Indicative Values for ETFs, and that GIDS provides investment
professionals with the daily information needed to track or trade
NASDAQ OMX indexes, listed ETFs, or third-party partner indexes and
ETFs.
    \30\ See id.
    \31\ See id. at 11516.
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    The Exchange represents that it may consider all relevant factors
in exercising its discretion to halt or suspend trading in the Shares
of the Fund. Nasdaq will halt trading in the Shares under the
conditions specified in Nasdaq Rules 4120 and 4121, including the
trading pauses under Nasdaq Rules 4120(a)(11) and (12). Trading also
may be halted because of market conditions or for reasons that, in the
view of the Exchange, make trading in the Shares inadvisable.\32\
Trading in the Shares also will be subject to Rule 5735(d)(2)(D), which
sets forth circumstances under which Shares of the Fund may be halted.
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    \32\ These may include: (1) The extent to which trading is not
occurring in the securities and/or the other assets constituting the
Disclosed Portfolio of the Fund; or (2) whether other unusual
conditions or circumstances detrimental to the maintenance of a fair
and orderly market are present. See id. at 11514.
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    The Exchange states that it has a general policy prohibiting the
distribution of material, non-public information by its employees.\33\
The Exchange states that the Adviser is not a broker-dealer, although
it is affiliated with the Distributor, a broker-dealer. In addition,
the Exchange states that the Adviser has implemented a fire wall

with respect to its broker-dealer affiliate regarding access to
information concerning the composition and/or changes to the portfolio,
and that personnel who make decisions on the Fund's portfolio
composition will be subject to procedures designed to prevent the use
and dissemination of material non-public information regarding the
Fund's portfolio.\34\ In the event (a) the Adviser becomes, or becomes
newly affiliated with, a broker-dealer, or (b) any new adviser or sub-
adviser is a registered broker-dealer or becomes affiliated with
another broker-dealer, it will implement a fire wall with respect to
its relevant personnel and/or such broker-dealer affiliate, as
applicable, regarding access to information concerning the composition
and/or changes to the portfolio and will be subject to procedures
designed to prevent the use and dissemination of material non-public
information regarding such portfolio.
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    \33\ See id. at 11515.
    \34\ See id. at 11510.
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    FINRA, on behalf of the Exchange, will communicate as needed
regarding trading in the Shares and the exchange-traded securities and
instruments held by the Fund with other markets and other entities that
are members of ISG,\35\ and FINRA may obtain trading information
regarding trading in the Shares and the exchange-traded securities and
instruments held by the Fund from such markets and other entities. In
addition, the Exchange may obtain information regarding trading in the
Shares and the exchange-traded securities and instruments held by the
Fund from markets and other entities that are members of ISG, which
includes securities and futures exchanges, or with which the Exchange
has in place a comprehensive surveillance sharing agreement. Moreover,
FINRA, on behalf of the Exchange, will be able to access, as needed,
trade information for certain Floating Rate Debt Instruments and other
debt securities held by the Fund reported to FINRA's TRACE.
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    \35\ For a list of the current members of ISG, see
www.isgportal.org. The Exchange notes that not all components of the
Disclosed Portfolio may trade on markets that are members of ISG or
with which the Exchange has in place a comprehensive surveillance
sharing agreement.
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    The Commission notes that the Fund and the Shares must comply with
the requirements of Nasdaq Rule 5735 to be listed and traded on the
Exchange. Nasdaq deems the Shares to be equity securities, thus
rendering trading in the Shares subject to Nasdaq's existing rules
governing the trading of equity securities. In support of this
proposal, the Exchange represented that:
    (1) The Shares will be subject to Nasdaq Rule 5735, which sets
forth the initial and continued listing criteria applicable to Managed
Fund Shares.
    (2) Trading in the Shares will be subject to the existing trading
surveillances administered by both Nasdaq and FINRA on behalf of the
Exchange, which are designed to detect violations of Exchange rules and
applicable federal securities laws, and these procedures are adequate
to properly monitor Exchange trading of the Shares in all trading
sessions and to detect and help deter violations of Exchange rules and
applicable federal securities laws.
    (3) The Exchange has appropriate rules to facilitate transactions
in the Shares during all trading sessions.
    (4) Prior to the commencement of trading, the Exchange will inform
its members in an Information Circular of the special characteristics
and risks associated with trading the Shares. Specifically, the
Information Circular will discuss the following: (a) The procedures for
purchases and redemptions of Shares in Creation Units (and that Shares
are not individually redeemable); (b) Nasdaq Rule 2111A, which imposes
suitability obligations on Nasdaq members with respect to recommending
transactions in the Shares to customers; (c) how information regarding
the Intraday Indicative Value is disseminated; (d) the risks involved
in trading the Shares during the Pre-Market and Post-Market Sessions
when an updated Intraday Indicative Value will not be calculated or
publicly disseminated; (e) the requirement that members deliver a
prospectus to investors purchasing newly issued Shares prior to or
concurrently with the confirmation of a transaction; and (f) trading
information.
    (5) For initial and/or continued listing, the Fund must be in
compliance with Rule 10A-3 \36\ under the Act.
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    \36\ See 17 CFR 240.10A-3.
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    (6) Under normal market conditions, privately-issued securities
will have, at the time of original issuance, $100 million or more
principal amount outstanding to be considered eligible investments.
    (7) Not more than 35% of the Fund's net assets will be invested in
securities that are, at the time of investment, rated below investment
grade by each NRSRO rating such securities (or securities that are
unrated and determined by the Adviser to be of comparable quality).
    (8) Not more than 20% of the Fund's net assets will be invested in
asset-backed securities (excluding agency mortgage-backed securities)
and non-agency mortgage-backed securities (in the aggregate) to 20% of
its net assets.
    (9) Not more than 20% of the Fund's net assets will be invested in
in junior loans.
    (10) At least 90% of the Fund's net assets that are invested in
exchange-traded derivative instruments will be invested in instruments
that trade in markets that are members of ISG or are parties to a
comprehensive surveillance sharing agreement with the Exchange.
    (11) The Fund will not invest 25% or more of the value of its total
assets in securities of issuers in any one industry. This restriction
does not apply to (a) obligations issued or guaranteed by the U.S.
government, its agencies or instrumentalities or (b) securities of
other investment companies.
    (12) The Fund may hold up to an aggregate amount of 15% of its net
assets in illiquid assets (calculated at the time of investment),
including Rule 144A securities.
    (13) The Fund will not invest in non-U.S. equity securities.
    (14) A minimum of 100,000 Shares will be outstanding at the
commencement of trading on the Exchange.
    This approval order is based on all of the Exchange's
representations, including those set forth above and in the Notice. For
the foregoing reasons, the Commission finds that the proposed rule
change, as modified by Amendment No. 1 and No. 2, is consistent with
Section 6(b)(5) of the Act \37\ and the rules and regulations
thereunder applicable to a national securities exchange.
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    \37\ 15 U.S.C. 78f(b)(5).
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IV. Conclusion

    It is therefore ordered, pursuant to Section 19(b)(2) of the
Exchange Act,\38\ that the proposed rule change (SR-NASDAQ-2015-011),
as modified by Amendments No. 1 and No. 2, is hereby approved.
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    \38\ 15 U.S.C. 78s(b)(2).

    For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\39\
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    \39\ 17 CFR 200.30-3(a)(12).
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Brent J. Fields,
Secretary.
[FR Doc. 2015-09271 Filed 4-21-15; 8:45 am]
 BILLING CODE 8011-01-P


[Federal Register Volume 86, Number 239 (Thursday, December 16, 2021)]
[Rules and Regulations]
[Pages 71372-71373]
[FR Doc No: 2021-27188]

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DEPARTMENT OF TRANSPORTATION

Federal Aviation Administration

14 CFR Part 107

[Docket No. FAA-2021-1158; Notice No. 107-21-01-NOA]

Accepted Means of Compliance; Operations Over Human Beings,
Category 2 and Category 3 Small Unmanned Aircraft

AGENCY: Federal Aviation Administration, DOT.

ACTION: Notification of availability.

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SUMMARY: This document announces the acceptance of a means of
compliance (MOC) in accordance with a rule issued by the FAA on January
21, 2021, and went into effect on April 21, 2021. The Administrator
finds the Virginia Tech

Mid-Atlantic Aviation Partnership (VT MAAP) MOC Version 1.0 an
acceptable means, but not the only means, of demonstrating compliance
with the requirements of Category 2 and Category 3 small unmanned
aircraft systems (small UAS) operations over people.

DATES: December 16, 2021.

FOR FURTHER INFORMATION CONTACT:
    FAA Contact: Jeffrey Bergson, Production and Airworthiness Systems,
AIR-632, Systems Policy Branch, Policy and Innovation Division,
Aircraft Certification Service, Federal Aviation Administration, AIR-
600: 800 Independence Ave SW, Washington, DC 20591; telephone 206-231-
3661; email: [email protected]; telephone 1-844-FLY-MYUA; email:
[email protected].
    VT MAAP Contact: Robert Briggs, UAS Chief Engineer, 1991 Kraft
Drive, Suite 2018, Blacksburg, VA 24061,<PHONE_NUMBER>;
[email protected].

SUPPLEMENTARY INFORMATION:

Background

    The FAA published Title 14 Code of Federal Regulations, part 107,
subpart D permitting the routine operation of small UAS at night or
over people under certain conditions. Subpart D also provides aircraft
eligibility and operating requirements for categories of operations
over people. When promulgated, this rule was the next step in the FAA's
incremental approach to integrating UAS into the national airspace
system, based on demands for increased operational flexibility and the
experience the FAA has gained since it initially published part 107.
    To satisfy the eligibility requirements of part 107, subpart D, a
small unmanned aircraft must meet the performance-based safety
requirements of Sec.  107.120(a) for operations in Category 2 or the
performance-based safety requirements of Sec.  107.130(a) for
operations in Category 3 or both by following an FAA-accepted MOC. An
FAA-accepted MOC addresses the minimum testing, inspection, or analysis
necessary to demonstrate compliance with the safety requirements.
    An acceptable MOC must consist of test, analysis, or inspection. It
must address the injury severity limits, the exposed rotating parts
prohibition, and verification that there are no safety defects. The FAA
must accept a MOC before an applicant can rely on it to declare
compliance with part 107, subpart D requirements. In addition, the FAA
indicates acceptance of a MOC by publishing a Notice of Availability in
the Federal Register identifying the MOC as accepted and by informing
the applicant of its acceptance.\1\
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    \1\ Operation of Small Unmanned Aircraft Systems Over People, 86
FR 4314 (January 15, 2021), available at https://www.regulations.gov/document/FAA-2018-1087-0968.
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Means of Compliance Accepted in This Policy

    VT MAAP published the Operation of Small UAS Over People MOC
Version 1.0 on October 20, 2021. The FAA has acknowledged VT MAAP's
performance-based MOC as an acceptable MOC to the requirements of Sec.
107.120(a) for operations in Category 2, or the requirements of Sec.
107.130(a) for operations in Category 3.
    To utilize this MOC, an applicant should provide the VT MAAP
Federal Aviation Administration designated UAS Test Site with data on
the small unmanned aircraft. VT MAAP Test Site utilizes this
information to conduct a safety defect and failure assessment. This
assessment will determine the required testing to assess the small
unmanned aircraft's impact injury severity and laceration potential.
The VT MAAP Test Site will conduct the necessary testing and document
the results. Lastly, VT MAAP conducts a final safety and compliance
review to determine the small unmanned aircraft compliance with Sec.
107.120(a) or Sec.  107.130(a) as applicable. VT MAAP provides the
results of this process to the applicant for inclusion in a Declaration
of Compliance.

Availability

    This notice serves as a formal acceptance by the Federal Aviation
Administrator of the Virginia Tech Mid-Atlantic Aviation Partnership's
Means of Compliance Version 1.0.

    Issued in Washington, DC, on December 10, 2021.
Brian E. Cable,
Manager, Systems Policy Branch, Policy and Innovation Division,
Aircraft Certification Service.
[FR Doc. 2021-27188 Filed 12-15-21; 8:45 am]
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