[Federal Register Volume 81, Number 9 (Thursday, January 14, 2016)]
[Rules and Regulations]
[Pages 1874-1876]
[FR Doc No: 2015-32259]

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DEPARTMENT OF TRANSPORTATION

Federal Aviation Administration

14 CFR Part 39

[Docket No. FAA-2015-1982; Directorate Identifier 2014-NM-108-AD;
Amendment 39-18353; AD 2015-26-05]
RIN 2120-AA64

Airworthiness Directives; Fokker Services B.V. Airplanes

AGENCY: Federal Aviation Administration (FAA), Department of
Transportation (DOT).

ACTION: Final rule.

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SUMMARY: We are adopting a new airworthiness directive (AD) for all
Fokker Services B.V. Model F.28 Mark

1000, 2000, 3000, and 4000 airplanes. This AD was prompted by a design
review, which revealed that no controlled bonding provisions are
present on a number of critical locations outside the fuel tank. This
AD requires installing additional and improved fuel system bonding
provisions, and revising the airplane maintenance or inspection
program, as applicable, by incorporating fuel airworthiness limitation
items and critical design configuration control limitations. We are
issuing this AD to prevent an ignition source in the fuel tank vapor
space, which could result in a fuel tank explosion and consequent loss
of the airplane.

DATES: This AD becomes effective February 18, 2016.
    The Director of the Federal Register approved the incorporation by
reference of certain publications listed in this AD as of February 18,
2016.

ADDRESSES: You may examine the AD docket on the Internet at http://www.regulations.gov/#!docketDetail;D=FAA-2015-1982 or in person at the
Docket Management Facility, U.S. Department of Transportation, Docket
Operations, M-30, West Building Ground Floor, Room W12-140, 1200 New
Jersey Avenue SE., Washington, DC.
    For service information identified in this final rule, contact
Fokker Services B.V., Technical Services Dept., P.O. Box 1357, 2130 EL
Hoofddorp, the Netherlands; telephone +31 (0)88-6280-350; fax +31
(0)88-6280-111; email<EMAIL_ADDRESS>Internet http://www.myfokkerfleet.com. You may view this referenced service information
at the FAA, Transport Airplane Directorate, 1601 Lind Avenue SW.,
Renton, WA. For information on the availability of this material at the
FAA, call<PHONE_NUMBER>. It is also available on the Internet at http://www.regulations.gov by searching for and locating Docket No. FAA-2015-
1982.

FOR FURTHER INFORMATION CONTACT: Tom Rodriguez, Aerospace Engineer,
International Branch, ANM-116, Transport Airplane Directorate, FAA,
1601 Lind Avenue SW., Renton, WA 98057-3356; telephone<PHONE_NUMBER>;
fax<PHONE_NUMBER>.

SUPPLEMENTARY INFORMATION:

Discussion

    We issued a notice of proposed rulemaking (NPRM) to amend 14 CFR
part 39 by adding an AD that would apply to all Fokker Services B.V.
Model F.28 Mark 1000, 2000, 3000, and 4000 airplanes. The NPRM
published in the Federal Register on June 15, 2015 (80 FR 34106).
    The European Aviation Safety Agency (EASA), which is the Technical
Agent for the Member States of the European Union, has issued EASA
Airworthiness Directive 2014-0109, dated May 8, 2014 (referred to after
this the Mandatory Continuing Airworthiness Information, or ``the
MCAI''), to correct an unsafe condition for all Fokker Services B.V.
Model F.28 Mark 1000, 2000, 3000, and 4000 airplanes. The MCAI states:

    Prompted by an accident * * *, the Federal Aviation
Administration (FAA) published Special Federal Aviation Regulation
(SFAR) 88 [(66 FR 223086, May 7, 2001)], and the Joint Aviation
Authorities (JAA) published Interim Policy INT/POL/25/12.
    The review conducted by Fokker Services on the Fokker F28
design, in response to these regulations, revealed that no
controlled bonding provisions are present on a number of critical
locations outside the fuel tank.
    This condition, if not corrected, could create an ignition
source in the fuel tank vapour space, possibly resulting in a fuel
tank explosions and consequent loss of the aeroplane.
    To address this potential unsafe condition, Fokker Services
developed a set of fuel tank bonding modifications.
    For the reasons described above, this [EASA] AD requires the
installation of additional and improved bonding provisions. These
modifications do not require opening of the fuel tank access panels.
    More information on this subject can be found in Fokker Services
All Operators Message AOF28.038#02.

Required actions include revising the airplane maintenance or
inspection program, as applicable, by incorporating fuel airworthiness
limitation items and critical design configuration control limitations.
You may examine the MCAI in the AD docket on the Internet at http://www.regulations.gov/#!documentDetail;D=FAA-2015-1982-0002.

Comments

    We gave the public the opportunity to participate in developing
this AD. We received no comments on the NPRM (80 FR 34106, June 15,
2015) or on the determination of the cost to the public.

Conclusion

    We reviewed the relevant data and determined that air safety and
the public interest require adopting this AD as proposed except for
minor editorial changes. We have determined that these minor changes:
     Are consistent with the intent that was proposed in the
NPRM (80 FR 34106, June 15, 2015) for correcting the unsafe condition;
and
     Do not add any additional burden upon the public than was
already proposed in the NPRM (80 FR 34106, June 15, 2015).

Related Service Information Under 1 CFR Part 51

    Fokker Services B.V. has issued Fokker F28 Appendix SB SBF28-28-
059/APP01, dated July 15, 2014, of Fokker F28 Proforma Service Bulletin
SBF28-28-059, Revision 1, dated July 15, 2014. The service information
describes procedures for the installation of additional bonding
provisions outside the fuel tank. 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.

Costs of Compliance

    We estimate that this AD affects 5 airplanes of U.S. registry.
    We also estimate that it will take about 11 work-hours per product
to comply with the basic requirements of this AD. The average labor
rate is $85 per work-hour. Required parts will cost about $140 per
product. Based on these figures, we estimate the cost of this AD on
U.S. operators to be $5,375, or $1,075 per product.

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.

Regulatory Findings

    We determined that this AD will not have federalism implications
under Executive Order 13132. This AD will 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 that this AD:
    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.

Examining the AD Docket

    You may examine the AD docket on the Internet at http://www.regulations.gov/#!docketDetail;D=FAA-2015-1982; or in person at the
Docket Management Facility between 9 a.m. and 5 p.m., Monday through
Friday, except Federal holidays. The AD docket contains this AD, the
regulatory evaluation, any comments received, and other information.
The street address for the Docket Operations office (telephone 800-647-
5527) is in the ADDRESSES section.

List of Subjects in 14 CFR Part 39

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

Adoption of the Amendment

    Accordingly, under the authority delegated to me by the
Administrator, the FAA amends 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):

2015-26-05 Fokker Services B.V.: Amendment 39-18353. Docket No. FAA-
2015-1982; Directorate Identifier 2014-NM-108-AD.

(a) Effective Date

    This AD becomes effective February 18, 2016.

(b) Affected ADs

    None.

(c) Applicability

    This AD applies to Fokker Services B.V. Model F.28 Mark 1000,
2000, 3000, and 4000 airplanes, certificated in any category, all
serial numbers.

(d) Subject

    Air Transport Association (ATA) of America Code 28, Fuel.

(e) Reason

    This AD was prompted by a design review, which revealed that no
controlled bonding provisions are present on a number of critical
locations outside the fuel tank. We are issuing this AD to prevent
an ignition source in the fuel tank vapor space, which could result
in a fuel tank explosion and consequent loss of the airplane.

(f) Compliance

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

(g) Installation of Bonding Provisions

    Within 24 months after the effective date of this AD, install
additional and improved fuel system bonding provisions, in
accordance with the Accomplishment Instructions of Fokker F28
Appendix SB SBF28-28-059/APP01, dated July 15, 2014, of Fokker F28
Proforma Service Bulletin SBF28-28-059, Revision 1, dated July 15,
2014.

(h) Revision of Maintenance or Inspection Program

    At the later of the times specified in paragraphs (h)(1) and
(h)(2) of this AD: Revise the airplane maintenance or inspection
program, as applicable, by incorporating the fuel airworthiness
limitation items and critical design configuration control
limitations (CDCCLs) specified in paragraph 1.L.(1)(b) of Fokker F28
Appendix SB SBF28-28-059/APP01, dated July 15, 2014, of Fokker F28
Proforma Service Bulletin SBF28-28-059, Revision 1, dated July 15,
2014.
    (1) Before further flight, after accomplishing the installation
required by paragraph (g) of this AD.
    (2) Within 30 days after the effective date of this AD.

(i) No Alternative Actions, Intervals, and/or CDCCLs

    After incorporating the revision required by paragraph (h) of
this AD, no alternative actions (e.g., inspections), intervals, or
CDCCLs may be used unless the actions, intervals, or CDCCLs are
approved as an alternative method of compliance (AMOC) in accordance
with the procedures specified in paragraph (j)(1) of this AD.

(j) Other FAA AD Provisions

    The following provisions also apply to this AD:
    (1) Alternative Methods of Compliance (AMOCs): The Manager,
International Branch, ANM-116, Transport Airplane Directorate, 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 International Branch, send it to ATTN: Tom
Rodriguez, Aerospace Engineer, International Branch, ANM-116,
Transport Airplane Directorate, FAA, 1601 Lind Avenue SW., Renton,
WA 98057-3356; telephone<PHONE_NUMBER>; fax<PHONE_NUMBER>. Information
may be emailed to<EMAIL_ADDRESS>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. The
AMOC approval letter must specifically reference this AD.
    (2) Contacting the Manufacturer: For any requirement in this AD
to obtain corrective actions from a manufacturer, the action must be
accomplished using a method approved by the Manager, International
Branch, ANM-116, Transport Airplane Directorate, FAA; or the
European Aviation Safety Agency (EASA); or Fokker B.V. Service's
EASA Design Organization Approval (DOA). If approved by the DOA, the
approval must include the DOA-authorized signature.

(k) Related Information

    Refer to Mandatory Continuing Airworthiness Information (MCAI)
EASA Airworthiness Directive 2014-0109, dated May 8, 2014, for
related information. This MCAI may be found in the AD docket on the
Internet at http://www.regulations.gov/#!documentDetail;D=FAA-2015-
1982-0002.

(l) Material Incorporated by Reference

    (1) The Director of the Federal Register approved the
incorporation by reference (IBR) of the service information listed
in this paragraph under 5 U.S.C. 552(a) and 1 CFR part 51.
    (2) You must use this service information as applicable to do
the actions required by this AD, unless this AD specifies otherwise.
    (i) Fokker F28 Proforma Service Bulletin SBF28-28-059, Revision
1, dated July 15, 2014.
    (ii) Fokker F28 Appendix SB SBF28-28-059/APP01, dated July 15,
2014.
    (3) For service information identified in this AD, contact
Fokker Services B.V., Technical Services Dept., P.O. Box 1357, 2130
EL Hoofddorp, the Netherlands; telephone +31 (0)88-6280-350; fax +31
(0)88-6280-111; email<EMAIL_ADDRESS>Internet http://www.myfokkerfleet.com.
    (4) You may view this service information at the FAA, Transport
Airplane Directorate, 1601 Lind Avenue SW., Renton, WA. For
information on the availability of this material at the FAA, call
425-227-1221.
    (5) You may view this service information that is incorporated
by reference at the National Archives and Records Administration
(NARA). For information on the availability of this material at
NARA, call<PHONE_NUMBER>, or go to: http://www.archives.gov/federal-register/cfr/ibr-locations.html.

    Issued in Renton, Washington, on December 11, 2015.
Michael Kaszycki,
Acting Manager, Transport Airplane Directorate, Aircraft Certification
Service.
[FR Doc. 2015-32259 Filed 1-13-16; 8:45 am]
BILLING CODE 4910-13-P


[Federal Register Volume 82, Number 117 (Tuesday, June 20, 2017)]
[Proposed Rules]
[Pages 28028-28030]
[FR Doc No: 2017-12561]

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DEPARTMENT OF TRANSPORTATION

Federal Aviation Administration

14 CFR Part 39

[Docket No. FAA-2017-0034; Directorate Identifier 2016-NE-32-AD]
RIN 2120-AA64

Airworthiness Directives; Honeywell International Inc. Turbofan
Engines

AGENCY: Federal Aviation Administration (FAA), DOT.

ACTION: Notice of proposed rulemaking (NPRM).

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SUMMARY: We propose to adopt a new airworthiness directive (AD) for
certain Honeywell International Inc. (Honeywell) AS907-1-1A turbofan
engines. This proposed AD was prompted by reports of loss of power due
to failure of the second stage low-pressure turbine (LPT2) blade. This
proposed AD would require a one-time inspection of the LPT2 blades and,
if the blades fail the inspection, the replacement of the blades with a
part eligible for installation. We are proposing this AD to correct the
unsafe condition on these products.

DATES: We must receive comments on this proposed AD by August 4, 2017.

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 Honeywell
International Inc., 111 S 34th Street, Phoenix, AZ 85034-2802; phone:
800-601-3099; Internet: https://myaerospace.honeywell.com/wps/portal/!ut/. You may view this service information at the FAA, Engine &
Propeller Directorate, 1200 District Avenue, Burlington, MA. For
information on the availability of this material at the FAA, call 781-
238-7125.

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-2017-
0034; or in person at the Docket Management Facility between 9 a.m. and
5 p.m., Monday through Friday, except Federal holidays. The AD docket
contains this proposed AD, the regulatory evaluation, any comments
received, and other information. The street address for the Docket
Office (phone:<PHONE_NUMBER>) is in the ADDRESSES section. Comments will
be available in the AD docket shortly after receipt.

FOR FURTHER INFORMATION CONTACT: Joseph Costa, Aerospace Engineer, Los
Angeles Aircraft Certification Office, FAA, Transport Airplane
Directorate, 3960 Paramount Blvd., Lakewood, CA 90712-4137; phone: 562-
627-5246; fax:<PHONE_NUMBER>; email<EMAIL_ADDRESS>
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-2017-0034;
Directorate Identifier 2016-NE-32-AD'' at the beginning of your
comments. We specifically invite comments on the overall regulatory,
economic, environmental, and energy aspects of this proposed AD. We
will consider all comments received by the closing date and may amend
this proposed AD 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 proposed AD.

Discussion

    We received reports of a loss of power due to failure of the LPT2
blade from high-cycle fatigue in the blade's dovetail region at similar
times-in-service. The probable cause of this failure is wear and
fretting of the LPT2 blade Z gap contact area at the blade tip shroud
that leads to loss of dampening and increased vibration of the LPT2
blade. This tip shroud condition in two new production engines with the
same time-in-service, if not corrected, could result in failure of the
LPT2 blades, failure of one or more engines, and loss of the airplane.

Related Service Information Under 1 CFR Part 51

    We reviewed Honeywell Service Bulletin (SB) AS907-72-9067, Revision

1, dated March 20, 2017. This SB describes procedures for inspecting
the LPT2 blades. 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.

Other Related Service Information

    We reviewed Honeywell SB AS907-72-9067, Revision 0, dated December
12, 2016, which also describe procedures for inspecting the LPT2
blades. We also reviewed the Honeywell Light Maintenance Manual, AS907-
1-1A, 72-00-00, Section 72-05-12, dated May 25, 2016, and Section 72-
55-03, dated September 27, 2011, which provide additional guidance for
performing borescope inspections.

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 a one-time borescope inspection of
the LPT2 blades and, if the blades fail the inspection, replacement of
the blades with an LPT2 rotor assembly eligible for installation.

Differences Between This Proposed AD and the Service Information

    Honeywell SB AS907-72-9067, Revision 1, dated March 20, 2017,
recommends borescope inspections of the affected LPT2 blades with more
than 8,000 hours-since-new (HSN) and recommends that these inspections
be completed within 400 operating hours after the issuance of Honeywell
SB AS907-72-9067, Revision 0, dated December 12, 2016. This NPRM would
require inspections of affected LPT2 blades with more than 8,000 HSN
and requires that these inspections be completed within 200 operating
hours after the effective date of this AD. This NPRM includes a
reporting requirement that Honeywell SB AS907-72-9067, Revision 1,
dated March 20, 2017 does not.

Costs of Compliance

    We estimate that this proposed AD affects 40 engines installed on
airplanes of U.S. registry.
    We estimate the following costs to comply with this proposed AD:

                                                 Estimated Costs
----------------------------------------------------------------------------------------------------------------
                                                                                Cost per      Cost on U.S.
               Action                         Labor cost            Parts cost        product        operators
----------------------------------------------------------------------------------------------------------------
Borescope inspection...............  10 work-hours x $85 per                  $0            $850         $34,000
                                      hour = $850.
Report results of inspection.......  1 work-hour x $85 per hour                0              85           3,400
                                      = 85.
----------------------------------------------------------------------------------------------------------------

    We estimate the following costs to do any necessary replacements
that would be required based on the results of the proposed inspection.
We estimate that 40 engines will need this replacement.

                                               On-Condition Costs
----------------------------------------------------------------------------------------------------------------
                                                                                Cost per
                  Action                                Labor cost                 Parts cost        product
----------------------------------------------------------------------------------------------------------------
Replacement of the LPT2 blade set.........  50 work-hours x $85 per hour =             $50,000          $54,250
                                             $4,250.
----------------------------------------------------------------------------------------------------------------

Paperwork Reduction Act

    A federal agency may not conduct or sponsor, and a person is not
required to respond to, nor shall a person be subject to penalty for
failure to comply with a collection of information subject to the
requirements of the Paperwork Reduction Act unless that collection of
information displays a current valid OMB control number. The control
number for the collection of information required by this AD is 2120-
0056. The paperwork cost associated with this AD has been detailed in
the Costs of Compliance section of this document and includes time for
reviewing instructions, as well as completing and reviewing the
collection of information. Therefore, all reporting associated with
this AD is mandatory. Comments concerning the accuracy of this burden
and suggestions for reducing the burden should be directed to the FAA
at 800 Independence Ave. SW., Washington, DC 20591. ATTN: Information
Collection Clearance Officer, AES-200.

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.

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 to the extent
that it justifies making a regulatory distinction, 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):

Honeywell International Inc.: Docket No. FAA-2017-0034; Directorate
Identifier 2016-NE-32-AD.

(a) Comments Due Date

    We must receive comments by August 4, 2017.

(b) Affected ADs

    None.

(c) Applicability

    This AD applies to Honeywell International Inc. (Honeywell)
AS907-1-1A turbofan engines with second stage low-pressure turbine
(LPT2) rotor blades, part number (P/N) 3035602-1, installed.

(d) Subject

    Joint Aircraft System Component (JASC) Code 7250, Turbine
Section.

(e) Unsafe Condition

    This AD was prompted by reports of loss of power due to failure
of the LPT2 blade. We are issuing this AD to prevent failure of the
LPT2 blades, failure of one or more engines, and loss of the
airplane.

(f) Compliance

    Comply with this AD within the compliance times specified,
unless already done.
    (1) For LPT2 rotor blades, P/N 3035602-1 that have more than
8,000 hours since new on the effective date of this AD, perform a
one-time borescope inspection for wear of the Z gap contact area at
the blade tip shroud for each of the 62 LPT2 rotor blades within 200
hours time in service after the effective date of this AD.
    (2) Use the Accomplishment Instructions, Paragraph 3.B.(1), of
Honeywell Service Bulletin (SB) AS907-72-9067, Revision 1, dated
March 20, 2017, to do the inspection.
    (3) If the measured wear and/or fretting of any Z gap contact
area is greater than 0.005 inch, replace the LPT2 rotor assembly
with a part eligible for installation before further flight.
    (4) Do the following actions within 200 hours time in service
after the effective date of this AD:
    (i) Using a borescope make a clear digital image of the Z gap
contact area at the blade tip shroud of the 62 LPT2 rotor blades.
    (ii) Identify the three Z gap contact areas with the greatest
amount of wear and/or fretting.
    (iii) Record the blade position on the LPT2 rotor assembly and
the measured wear of the three Z gap contact areas with the greatest
amount of wear and/or fretting.
    (iv) Send the results to Honeywell at
<EMAIL_ADDRESS>within 30 days after completing
these actions.

(g) Credit for Previous Actions

    You may take credit for the actions required by paragraphs
(f)(1) and (4) of this AD, if you performed these actions before the
effective date of this AD using Honeywell SB AS907-72-9067, Revision
0, dated December 12, 2016.

(h) Paperwork Reduction Act Burden Statement

    A federal agency may not conduct or sponsor, and a person is not
required to respond to, nor shall a person be subject to a penalty
for failure to comply with a collection of information subject to
the requirements of the Paperwork Reduction Act unless that
collection of information displays a current valid OMB Control
Number. The OMB Control Number for this information collection is
2120-0056. Public reporting for this collection of information is
estimated to be approximately 5 minutes per response, including the
time for reviewing instructions, completing and reviewing the
collection of information. All responses to this collection of
information are mandatory. Comments concerning the accuracy of this
burden and suggestions for reducing the burden should be directed to
the FAA at: 800 Independence Ave. SW., Washington, DC 20591, Attn:
Information Collection Clearance Officer, AES-200.

(i) Alternative Methods of Compliance (AMOCs)

    The Manager, Los Angeles Aircraft Certification Office, FAA, may
approve AMOCs for this AD. Use the procedures found in 14 CFR 39.19
to make your request.

(j) Related Information

    (1) For more information about this proposed AD, contact Joseph
Costa, Aerospace Engineer, Los Angeles Aircraft Certification
Office, FAA, Transport Airplane Directorate, 3960 Paramount Blvd.,
Lakewood, CA 90712-4137; phone:<PHONE_NUMBER>; fax:<PHONE_NUMBER>;
email<EMAIL_ADDRESS>    (2) Honeywell SBs AS907-72-9067, Revision 0, dated December 12,
2016 and AS907-72-9067, Revision 1, dated March 20, 2017, can be
obtained from Honeywell International Inc., using the contact
information in paragraph (j)(3) of this proposed AD.
    (3) For service information identified in this proposed AD,
contact Honeywell International Inc., 111 S 34th Street, Phoenix, AZ
85034-2802; phone:<PHONE_NUMBER>; Internet: https://myaerospace.honeywell.com/wps/portal/!ut/.
    (4) You may view this service information at the FAA, Engine &
Propeller Directorate, 1200 District Avenue, Burlington, MA. For
information on the availability of this material at the FAA, call
781-238-7125.

    Issued in Burlington, Massachusetts, on June 13, 2017.
Robert J. Ganley,
Acting Manager, Engine & Propeller Directorate, Aircraft Certification
Service.
[FR Doc. 2017-12561 Filed 6-19-17; 8:45 am]
 BILLING CODE 4910-13-P


[Federal Register Volume 86, Number 160 (Monday, August 23, 2021)]
[Notices]
[Page 47098]
[FR Doc No: 2021-18007]

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DEPARTMENT OF ENERGY

Federal Energy Regulatory Commission

[Docket No. AD21-10-000]

Modernizing Electricity Market Design; Supplemental Notice of
Technical Conference on Energy and Ancillary Services in the Evolving
Electricity Sector

    As first announced in the Notice of Technical Conference issued in
this proceeding on July 14, 2021, the Federal Energy Regulatory
Commission (Commission) will convene a staff-led technical conference
in the above-referenced proceeding on September 14, 2021, from
approximately 9:00 a.m. to 5:00 p.m. Eastern time. The conference will
be held remotely. Attached to this Supplemental Notice is an agenda for
the technical conference. Commissioners may attend and participate in
the technical conference.
    The conference will be open for the public to attend remotely.
There is no fee for attendance. Information on this technical
conference, including a link to the webcast, will be posted on the
conference's event page on the Commission's website (https://www.ferc.gov/news-events/events/technical-conference-regarding-energy-and-ancillary-services-markets-09142021) prior to the event. The
conference will be transcribed. Transcripts will be available for a fee
from Ace Reporting<PHONE_NUMBER>).
    Commission conferences are accessible under section 508 of the
Rehabilitation Act of 1973. For accessibility accommodations, please
send an email to<EMAIL_ADDRESS>or call toll free 1-866-208-
3372 (voice) or<PHONE_NUMBER> (TTY), or send a fax to<PHONE_NUMBER> with
the required accommodations.
    For more information about this technical conference, please
contact Emma Nicholson at<EMAIL_ADDRESS>or<PHONE_NUMBER>, or
Alexander Smith at<EMAIL_ADDRESS>or<PHONE_NUMBER>. For
legal information, please contact Adam Eldean at<EMAIL_ADDRESS>or<PHONE_NUMBER>. For information related to logistics, please contact
Sarah McKinley at<EMAIL_ADDRESS>or<PHONE_NUMBER>.

    Dated: August 17, 2021.
Kimberly D. Bose,
Secretary.
[FR Doc. 2021-18007 Filed 8-20-21; 8:45 am]
BILLING CODE 6717-01-P


[Federal Register Volume 83, Number 5 (Monday, January 8, 2018)]
[Notices]
[Pages 929-936]
[FR Doc No: 2018-00077]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-82429; File No. SR-CboeBZX-2017-021]

Self-Regulatory Organizations; Cboe BZX Exchange, Inc.; Notice of
Filing of a Proposed Rule Change To List and Trade Shares of the First
Trust Bitcoin Strategy ETF and the First Trust Inverse Bitcoin Strategy
ETF, Each a Series of the First Trust Exchange-Traded Fund VII, Under
Rule 14.11(i), Managed Fund Shares

January 2, 2018.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934
(the ``Act''),\1\ and Rule 19b-4 thereunder,\2\ notice is hereby given
that on December 19, 2017, Cboe BZX Exchange, Inc. (the ``Exchange'' or
``BZX'') filed with the Securities and Exchange Commission
(``Commission'') the proposed rule change as described in Items I and
II below, which Items have been prepared by the Exchange. The
Commission is publishing this notice to solicit comments on the
proposed rule change from interested persons.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
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I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change

    The Exchange filed a proposal to list and trade shares of the First
Trust Bitcoin Strategy ETF and the First Trust Inverse Bitcoin Strategy
ETF (each a ``Fund'' and, collectively, the ``Funds''), each a series
of the First Trust Exchange-Traded Fund VII (the ``Trust''), under Rule
14.11(i) (``Managed Fund Shares''). The shares of the Funds are
referred to herein as the ``Shares.''
    The text of the proposed rule change is available at the Exchange's
website at www.markets.cboe.com, at the principal office of the
Exchange, and at the Commission's Public Reference Room.

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

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

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

1. Purpose
    The Exchange proposes to list and trade shares of the First Trust
Bitcoin Strategy ETF (the ``Long Bitcoin Fund'') and the First Trust
Inverse Bitcoin Strategy ETF (the ``Inverse Bitcoin Fund'') under Rule
14.11(i), which governs the listing and trading of Managed Fund Shares
on the Exchange.\3\
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    \3\ The Commission originally approved BZX Rule 14.11(i) in
Securities Exchange Act Release No. 65225 (August 30, 2011), 76 FR
55148 (September 6, 2011) (SR-BATS-2011-018) and subsequently
approved generic listing standards for Managed Fund Shares under
Rule 14.11(i) in Securities Exchange Act Release No. 78396 (July 22,
2016), 81 FR 49698 (July 28, 2016) (SR-BATS-2015-100).
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    The Shares will be offered by the Trust, which was organized as a
Massachusetts business trust on November 6, 2012. The Trust is
registered with the Commission as an open-end investment company and
has filed a registration statement on behalf of the Funds on Form N-1A
(``Registration Statement'') with the Commission.\4\ The Adviser, as
defined below, is also registered as a Commodity Pool Operator.
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    \4\ See Registration Statement on Form N-1A for the Trust, dated
December 11, 2017 (File Nos. 333-184918 and 811-22767). The
descriptions of the Funds and the Shares contained herein are based,
in part, on information in the Registration Statement. The
Commission has issued an order, upon which the Trust may rely,
granting certain exemptive relief under the Investment Company Act
of 1940 (15 U.S.C. 80a-1) (``1940 Act'') (the ``Exemptive Order'').
See Investment Company Act Release No. 30029, April 10, 2012 (File
No. 812-13795). In addition, on December 6, 2012, the staff of the
Commission's Division of Investment Management (``Division'') issued
a no-action letter (``No-Action Letter'') relating to the use of
derivatives by actively-managed exchange-traded funds (``ETFs'').
See No-Action Letter dated December 6, 2012 from Elizabeth G.
Osterman, Associate Director, Office of Exemptive Applications,
Division of Investment Management. The No-Action Letter stated that
the Division would not recommend enforcement action to the
Commission under applicable provisions of and rules under the 1940
Act if ETFs operating in reliance on specified orders (which include
the Exemptive Order) invest in options contracts, futures contracts,
or swap agreements provided that they comply with certain
representations stated in the No-Action Letter.
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    First Trust Advisors L.P. is the investment adviser (the
``Adviser'') to the Funds and a commodity pool operator (``CPO''). The
Funds will be operated in accordance with applicable Commodity Futures
Trading Commission (``CFTC'') rules, as well as the regulatory scheme
applicable to registered investment companies. Registration as a CPO
imposes additional compliance obligations on the Adviser and the Funds
related to additional laws, regulations, and enforcement policies.
    Rule 14.11(i)(7) provides that, if the investment adviser to the
investment company issuing Managed Fund Shares is affiliated with a
broker-dealer, such investment adviser shall erect a ``fire wall''
between the investment adviser and the broker-dealer with respect to
access to information concerning the composition and/or changes to such
investment company portfolio.\5\ In

addition, Rule 14.11(i)(7) further requires that personnel who make
decisions on the investment company's portfolio composition must be
subject to procedures designed to prevent the use and dissemination of
material nonpublic information regarding the applicable investment
company portfolio. Rule 14.11(i)(7) is similar to Rule
14.11(b)(5)(A)(i), however, Rule 14.11(i)(7) in connection with the
establishment of a ``fire wall'' between the investment adviser and the
broker-dealer reflects the applicable open-end fund's portfolio, not an
underlying benchmark index, as is the case with index-based funds. The
Adviser is not a registered broker-dealer, but is currently affiliated
with a broker-dealer and, in the future may be affiliated with other
broker-dealers. The Adviser has implemented and will maintain a fire
wall with respect to its broker-dealer affiliate regarding access to
information concerning the composition and/or changes to each Fund's
portfolio. The Adviser personnel who make decisions regarding each
Fund's portfolio are subject to procedures designed to prevent the use
and dissemination of material nonpublic information regarding each
Fund's portfolio. In the event that (a) the Adviser becomes a broker-
dealer or newly affiliated with a broker-dealer, or (b) any new adviser
or sub-adviser is a broker-dealer or becomes affiliated with a broker-
dealer, it will implement a fire wall with respect to its relevant
personnel 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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    \5\ An investment adviser to an open-end fund is required to be
registered under the Investment Advisers Act of 1940, as amended
(the ``Advisers Act''). As a result, the Adviser and its related
personnel are subject to the provisions of Rule 204A-1 under the
Advisers Act relating to codes of ethics. This Rule requires
investment advisers to adopt a code of ethics that reflects the
fiduciary nature of the relationship to clients as well as
compliance with other applicable securities laws. Accordingly,
procedures designed to prevent the communication and misuse of non-
public information by an investment adviser must be consistent with
Rule 204A-1 under the Advisers Act. In addition, Rule 206(4)-7 under
the Advisers Act makes it unlawful for an investment adviser to
provide investment advice to clients unless such investment adviser
has (i) adopted and implemented written policies and procedures
reasonably designed to prevent violation, by the investment adviser
and its supervised persons, of the Advisers Act and the Commission
rules adopted thereunder; (ii) implemented, at a minimum, an annual
review regarding the adequacy of the policies and procedures
established pursuant to subparagraph (i) above and the effectiveness
of their implementation; and (iii) designated an individual (who is
a supervised person) responsible for administering the policies and
procedures adopted under subparagraph (i) above.
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Bitcoin Futures Contracts
    Prior to listing a new commodity futures contract, a designated
contract market must either submit a self-certification to the CFTC
that the contract complies with the Commodity Exchange Act (``CEA'')
and CFTC regulations or voluntarily submit the contract for CFTC
approval. This process applies to all futures contracts and all
commodities underlying the futures contracts, whether the new futures
contracts are related to oil, gold, or any other commodity.\6\ On
December 1, 2017, it was announced that both Cboe Futures Exchange,
Inc. (``CFE'') and Chicago Mercantile Exchange, Inc. (``CME'') had
self-certified with the CFTC new contracts for bitcoin \7\ futures
products.\8\ While the CFE bitcoin futures contracts (``XBT Futures'')
\9\ and the CME bitcoin futures contracts (``CME Futures'') \10\ will
differ in certain of their implementation details, both contracts will
generally trade and settle like any other cash-settled commodity
futures contracts.\11\
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    \6\ Section 1a(9) of the CEA defines commodity to include, among
other things, ``all services, rights, and interests in which
contracts for future delivery are presently or in the future dealt
in.'' The definition of commodity is broad. 7 U.S.C. 1a(9).
    \7\ Bitcoin is a digital asset based on the decentralized, open
source protocol of the peer-to-peer bitcoin computer network (the
``Bitcoin Network''). No single entity owns or operates the Bitcoin
Network; the infrastructure is collectively maintained by a
decentralized user base. The Bitcoin Network is accessed through
software, and software governs bitcoin's creation, movement, and
ownership. The value of bitcoin is determined by the supply of and
demand for bitcoin on websites that facilitate the transfer of
bitcoin in exchange for government-issued currencies, and in private
end-user-to-end-user transactions.
    \8\ Bitcoin is a commodity as defined in Section 1a(9) of the
CEA. 7 U.S.C. 1a(9). See In re Coinflip, Inc., No. 15-29 (CFTC Sept.
17, 2015), available at<EMAIL_ADDRESS>    \9\ The XBT Futures are cash-settled futures contracts based on
the auction price of bitcoin in U.S. dollars on the Gemini Exchange
that will expire on a weekly, monthly and quarterly basis. XBT
Futures are designed to reflect economic exposure related to the
price of bitcoin. XBT Futures began trading on December 10, 2017.
    \10\ The CME Futures are also cash-settled futures contracts
based on the CME CF Bitcoin Reference Rate, which is based on an
aggregation of trade flow from several bitcoin spot exchanges, that
will expire on a monthly and quarterly basis. CME Futures began
trading on December 17, 2017.
    \11\ Bitcoin Futures Contracts (as defined herein) are measures
of the market's expectation of the price of bitcoin at certain
points in the future, and as such will behave differently than
current or spot bitcoin prices. The Funds are not linked to bitcoin
and in many cases the Funds could significantly underperform or
outperform the price of bitcoin.
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    The Exchange proposes to list the Funds pursuant to Rule 14.11(i),
however there are two ways in which the Funds will not necessarily meet
the listing standards included in that Rule. As such, the Exchange
submits this proposal in order to allow each Fund to hold: (i) Listed
derivatives in a manner that does not comply with Rule
14.11(i)(4)(C)(iv)(b); \12\ and (ii) Non-U.S. Component Stocks \13\ in
a manner that may not comply with Rule 14.11(i)(4)(C)(i)(b)(3) \14\ and
(4).\15\ Otherwise, the Funds will comply with all other listing
requirements of the Generic Listing Standards \16\ for Managed Fund
Shares on an initial and continued listing basis under Rule 14.11(i).
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    \12\ Rule 14.11(i)(4)(C)(iv)(b) provides that ``the aggregate
gross notional value of listed derivatives based on any five or
fewer underlying reference assets shall not exceed 65% of the weight
of the portfolio (including gross notional exposures), and the
aggregate gross notional value of listed derivatives based on any
single underlying reference asset shall not exceed 30% of the weight
of the portfolio (including gross notional exposures).'' The
Exchange is proposing that the Funds be exempt from the requirement
of Rule 14.11(i)(4)(C)(iv)(b) that prevents the aggregate gross
notional value of listed derivatives based on any single underlying
reference asset from exceeding 30% of the weight of the portfolio
(including gross notional exposures) and the requirement that the
aggregate gross notional value of listed derivatives based on any
five or fewer underlying reference assets shall not exceed 65% of
the weight of the portfolio (including gross notional exposures).
    \13\ The term ``Non-U.S. Component Stock'' means an equity
security that (a) is not registered under Sections 12(b) or 12(g) of
the Act, (b) is issued by an entity that is not organized, domiciled
or incorporated in the United States, and (c) is issued by an entity
that is an operating company (including Real Estate Investment
Trusts (REITs) and income trusts, but excluding investment trusts,
unit trusts, mutual funds, and derivatives).
    \14\ Rule 14.11(i)(4)(C)(i)(b)(3) provides that ``the most
heavily weighted Non-U.S. Component stock shall not exceed 25% of
the equity weight of the portfolio, and, to the extent applicable,
the five most heavily weighted Non-U.S. Component Stocks shall not
exceed 60% of the equity weight of the portfolio.'' As proposed,
each Fund may hold as few as one Non-U.S. Component Stock, meaning
that the Non-U.S. Component Stock could constitute 100% of the
equity weight of the portfolio. As noted below, however, neither
Fund will hold more than 25% of the weight of the portfolio in Non-
U.S. Component Stocks.
    \15\ Rule 14.11(i)(4)(C)(i)(b)(4) provides that ``where the
equity portion of the portfolio includes Non-U.S. Component Stocks,
the equity portion of the portfolio shall include a minimum of 20
total component stocks; provided, however, that there shall be no
minimum number of component stocks if (a) one or more series of
Derivative Securities Products or Linked Securities constitute, at
least in part, components underlying a series of Managed Fund
Shares, or (b) one or more series of Derivative Securities Products
or Linked Securities account for 100% of the equity weight of the
portfolio of a series of Managed Fund Shares.'' While the Funds, as
proposed, would be permitted to hold Derivative Securities Products
or Linked Securities (both of which are ETPs, as defined below),
they won't necessarily hold such instruments and may hold fewer than
20 Non-U.S. Component Stocks, which would not comply with this Rule.
    \16\ For purposes of this proposal, the term ``Generic Listing
Standards'' shall mean the generic listing rules for Managed Fund
Shares under Rule 14.11(i)(4)(C).
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First Trust Bitcoin Strategy ETF
    According to the Registration Statement, the Long Bitcoin Fund is
an actively managed fund that seeks to provide investors with long
exposure to the price movements of bitcoin instruments. Under Normal
Market Conditions,\17\ the Long Bitcoin Fund

seeks to achieve its investment objective by investing in a portfolio
of financial instruments that provide exposure to movements in the
value of bitcoin. While the Long Bitcoin Fund intends to invest
primarily in Bitcoin Futures Contracts,\18\ it may also invest in other
Listed Bitcoin Derivatives,\19\ OTC Bitcoin Derivatives,\20\ U.S.
exchange-listed ETPs,\21\ and Non-U.S. Component Stocks (collectively,
``Bitcoin Instruments''), cash and Cash Equivalents,\22\ and U.S.
government and agency securities with maturities of five years or less
(``GSE Securities''). While the Long Bitcoin Fund intends to invest
primarily in Bitcoin Instruments, the remainder of the Fund's assets
will primarily be invested in cash, Cash Equivalents, and GSE
Securities. The Long Bitcoin Fund intends to use such instruments as
investments and, to the extent applicable, to collateralize the Fund's
Bitcoin Instrument exposure on a day-to-day basis.\23\
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    \17\ The term ``Normal Market Conditions'' includes, but is not
limited to, the absence of trading halts in the applicable financial
markets generally; operational issues causing dissemination of
inaccurate market information or system failures; or force majeure
type events such as natural or man-made disaster, act of God, armed
conflict, act of terrorism, riot or labor disruption, or any similar
intervening circumstance. On a temporary basis, including for
defensive purposes, during the initial invest-up period (i.e., the
six-week period following the commencement of trading of Shares on
the Exchange) and during periods of high cash inflows or outflows,
the Long Bitcoin Fund may depart from its principal investment
strategies; for example, it may hold a higher than normal proportion
of its assets in cash. During such periods, the Long Bitcoin Fund
may not be able to achieve its investment objective. The Long
Bitcoin Fund may adopt a defensive strategy when the Adviser
believes instruments in which the Long Bitcoin Fund normally invests
have elevated risks due to political or economic factors and in
other extraordinary circumstances.
    \18\ For purposes of this proposal, the term ``Bitcoin Futures
Contracts'' shall mean XBT Futures, CME Futures, and any other
exchange-listed bitcoin futures contracts, as available.
    \19\ The term ``Listed Bitcoin Derivatives'' includes Bitcoin
Futures Contracts and other listed derivatives (as provided in Rule
14.11(i)(4)(C)(iv)) including options contracts on Bitcoin Futures
Contracts as well as options contracts, swap contracts, and other
derivative instruments linked to bitcoin, the price of bitcoin, or
an index thereof.
    \20\ The term ``OTC Bitcoin Derivatives'' includes over-the-
counter options on bitcoin and bitcoin indices and over-the-counter
swaps, including total return swaps on bitcoin, Bitcoin Futures, or
bitcoin indices. The Exchange notes that the Long Bitcoin Fund's
holdings in OTC Bitcoin Derivatives will meet the Generic Listing
Standards related to OTC derivatives under Rule 14.11(i)(4)(C)(v).
    \21\ For purposes of this filing, the term ``ETP'' means
Portfolio Depository Receipts, Index Fund Shares, Linked Securities,
Trust Issued Receipts, and Managed Fund Shares, as defined in Rule
14.11(b), 14.11(c), 14.11(d), 14.11(f), and 14.11(i), respectively,
and the analogous products and listing rules on other national
securities exchanges.
    \22\ As defined in Rule 14.11(i)(4)(C)(iii), Cash Equivalents
are short-term instruments with maturities of less than three
months, including: (i) U.S. Government securities, including bills,
notes, and bonds differing as to maturity and rates of interest,
which are either issued or guaranteed by the U.S. Treasury or by
U.S. Government agencies or instrumentalities; (ii) certificates of
deposit issued against funds deposited in a bank or savings and loan
association; (iii) bankers acceptances, which are short-term credit
instruments used to finance commercial transactions; (iv) repurchase
agreements and reverse repurchase agreements; (v) bank time
deposits, which are monies kept on deposit with banks or savings and
loan associations for a stated period of time at a fixed rate of
interest; (vi) commercial paper, which are short-term unsecured
promissory notes; and (vii) money market funds.
    \23\ The Exchange notes that the Long Bitcoin Fund's holdings in
cash, Cash Equivalents, and GSE Securities will meet the Generic
Listing Standards related to fixed income securities and cash and
cash equivalents under Rules 14.11(i)(4)(C)(ii) and (iii).
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First Trust Inverse Bitcoin Strategy ETF
    According to the Registration Statement, the Inverse Bitcoin Fund
seeks to provide investors with short exposure to the price movements
of bitcoin instruments. Under Normal Market Conditions, the Inverse
Bitcoin Fund seeks to achieve its investment objective by investing in
a portfolio of financial instruments that provide short exposure to
movements in the value of bitcoin.\24\ While the Inverse Bitcoin Fund
intends to invest primarily in Bitcoin Futures Contracts, it may also
invest in Bitcoin Instruments,\25\ cash and Cash Equivalents, and GSE
Securities. While the Inverse Bitcoin Fund intends to invest primarily
in Bitcoin Instruments, the remainder of the Inverse Bitcoin Fund's
assets will primarily be invested in cash, Cash Equivalents, and GSE
Securities. The Inverse Bitcoin Fund intends to use such instruments as
investments and, to the extent applicable, to collateralize the Inverse
Bitcoin Fund's Bitcoin Instrument exposure on a day-to-day basis.\26\
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    \24\ On a temporary basis, including for defensive purposes,
during the initial invest-up period (i.e., the six-week period
following the commencement of trading of Shares on the Exchange) and
during periods of high cash inflows or outflows, the Inverse Bitcoin
Fund may depart from its principal investment strategies; for
example, it may hold a higher than normal proportion of its assets
in cash. During such periods, the Inverse Bitcoin Fund may not be
able to achieve its investment objective. The Inverse Bitcoin Fund
may adopt a defensive strategy when the Adviser believes instruments
in which the Inverse Bitcoin Fund normally invests have elevated
risks due to political or economic factors and in other
extraordinary circumstances.
    \25\ The Exchange notes that the Inverse Bitcoin Fund's holdings
in OTC Bitcoin Derivatives, which are included in the definition of
Bitcoin Instruments, will meet the Generic Listing Standards related
to OTC derivatives under Rule 14.11(i)(4)(C)(v).
    \26\ The Exchange notes that the Inverse Bitcoin Fund's holdings
in cash, Cash Equivalents, and GSE Securities will meet the Generic
Listing Standards related to fixed income securities and cash and
cash equivalents under Rules 14.11(i)(4)(C)(ii) and (iii).
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Investment Restrictions
    Each Fund may hold up to an aggregate amount of 15% of its net
assets in illiquid assets (calculated at the time of investment) deemed
illiquid by the Adviser \27\ under the 1940 Act.\28\ Each 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 a Fund's
net assets are held in illiquid assets. Illiquid assets include assets
subject to contractual or other restrictions on resale and other
instruments that lack readily available markets as determined in
accordance with Commission staff guidance.
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    \27\ In reaching liquidity decisions, the Adviser may consider
the following factors: The frequency of trades and quotes for the
security; the number of dealers wishing to purchase or sell the
security and the number of other potential purchasers; dealer
undertakings to make a market in the security; and the nature of the
security and the nature of the marketplace trades (e.g., the time
needed to dispose of the security, the method of soliciting offers,
and the mechanics of transfer).
    \28\ The Commission has stated that long-standing Commission
guidelines have required open-end funds to hold no more than 15% of
their net assets in illiquid securities and other illiquid assets.
See Investment Company Act Release No. 28193 (March 11, 2008), 73 FR
14618 (March 18, 2008), footnote 34. See also, Investment Company
Act Release No. 5847 (October 21, 1969), 35 FR 19989 (December 31,
1970) (Statement Regarding ``Restricted Securities''); Investment
Company Act Release No. 18612 (March 12, 1992), 57 FR 9828 (March
20, 1992) (Revisions of Guidelines to Form N-1A). A fund's portfolio
security is illiquid if it cannot be disposed of in the ordinary
course of business within seven days at approximately the value
ascribed to it by the fund. See Investment Company Act Release No.
14983 (March 12, 1986), 51 FR 9773 (March 21, 1986) (adopting
amendments to Rule 2a-7 under the 1940 Act); Investment Company Act
Release No. 17452 (April 23, 1990), 55 FR 17933 (April 30, 1990)
(adopting Rule 144A under the Securities Act of 1933).
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    Under Normal Market Conditions, each Fund's investments will be
consistent with the Fund's investment objective and will not be used to
enhance leverage (although certain derivatives and other investments
may result in leverage).\29\ Each Fund's

investments will not be used to seek leveraged or inverse leveraged
returns (i.e. two times or three times the Fund's benchmark). Each
Fund's use of derivative instruments will be collateralized or
earmarked.
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    \29\ Each Fund will include appropriate risk disclosure in its
offering documents, including leveraging risk. Leveraging risk is
the risk that certain transactions of a fund, including a fund's use
of derivatives, may give rise to leverage, causing a fund to be more
volatile than if it had not been leveraged. Each Fund's investments
in derivative instruments will be made in accordance with the 1940
Act and consistent with each Fund's investment objective and
policies. To mitigate leveraging risk, each Fund will segregate or
earmark liquid assets determined to be liquid by the Adviser in
accordance with procedures established by the Trust's Board and in
accordance with the 1940 Act or otherwise cover the transactions
that give rise to such risk. These procedures have been adopted
consistent with Section 18 of the 1940 Act and related Commission
guidance. See 15 U.S.C. 80a 18; Investment Company Act Release No.
10666 (April 18, 1979), 44 FR 25128 (April 27, 1979); Dreyfus
Strategic Investing, Commission No-Action Letter (June 22, 1987);
Merrill Lynch Asset Management, L.P., Commission No-Action Letter
(July 2, 1996).
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Additional Information
    Each Fund's holdings will meet the Generic Listing Standards with
two exceptions, and, as such, the Exchange submits this proposal in
order to allow each Fund to hold: (i) listed derivatives in a manner
that does not comply with Rule 14.11(i)(4)(C)(iv)(b); \30\ and (ii)
Non-U.S. Component Stocks in a manner that may not comply with Rules
14.11(i)(4)(C)(i)(b)(3) \31\ and (4).\32\ The Exchange, however,
believes that the policy concerns that these rules are intended to
address are mitigated as they relate to the Funds and their holdings
for a number of reasons.
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    \30\ See note 12, supra.
    \31\ See note 14, supra.
    \32\ See note 15, supra.
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    First, the policy concerns underlying all three rules are mitigated
by the fact that the Exchange believes that the underlying reference
asset is not susceptible to manipulation because the nature of the
bitcoin ecosystem makes manipulation of bitcoin difficult. The
geographically diverse and continuous nature of bitcoin trading makes
it difficult and prohibitively costly to manipulate the price of
bitcoin and, in many instances, the bitcoin market is generally less
susceptible to manipulation than the equity, fixed income, and
commodity futures markets. There are a number of reasons this is the
case, including that there is not inside information about revenue,
earnings, corporate activities, or sources of supply; manipulation of
the price on any single venue would require manipulation of the global
bitcoin price in order to be effective; a substantial over-the-counter
market provides liquidity and shock-absorbing capacity; bitcoin's 24/7/
365 nature provides constant arbitrage opportunities across all trading
venues; and it is unlikely that any one actor could obtain a dominant
market share.
    Further, bitcoin is arguably less susceptible to manipulation than
other commodities that underlie ETPs; there may be inside information
relating to the supply of the physical commodity such as the discovery
of new sources of supply or significant disruptions at mining
facilities that supply the commodity that simply are inapplicable as it
relates to bitcoin. Further, the Exchange believes that the
fragmentation across bitcoin exchanges, the relatively slow speed of
transactions, and the capital necessary to maintain a significant
presence on each exchange make manipulation of bitcoin prices through
continuous trading activity unlikely. Moreover, the linkage between the
bitcoin markets and the presence of arbitrageurs in those markets means
that the manipulation of the price of bitcoin price on any single venue
would require manipulation of the global bitcoin price in order to be
effective. Arbitrageurs must have funds distributed across multiple
bitcoin exchanges in order to take advantage of temporary price
dislocations, thereby making it unlikely that there will be strong
concentration of funds on any particular bitcoin exchange. As a result,
the potential for manipulation on a particular bitcoin exchange would
require overcoming the liquidity supply of such arbitrageurs who are
effectively eliminating any cross-market pricing differences. For all
of these reasons, bitcoin is not particularly susceptible to
manipulation, especially as compared to other approved ETP reference
assets.
    Second, the Exchange believes that the concerns on which Rule
14.11(i)(4)(C)(iv)(b) are based related to ensuring that no single
listed derivative and underlying reference asset that is susceptible to
manipulation constitutes greater than 35% of the weight of the
portfolio are further mitigated by the liquidity that the Exchange
expects to exist in the market for Listed Bitcoin Derivatives. This
belief is based on numerous conversations with market participants,
issuers, and discussions with personnel of CFE. This expected liquidity
in the market for Bitcoin Futures Contracts, the surveillance programs
of the futures exchanges listing such Bitcoin Futures Contracts,
Exchange surveillance procedures related to trading in the Shares, and
CFTC oversight of the Bitcoin Futures Contracts, all combined with the
difficulty in manipulating the bitcoin market described above will
mitigate the concerns that Rule 14.11(i)(4)(C)(iv)(b) was designed to
protect against and further prevent trading in the Shares from being
susceptible to manipulation.
    Third, the Exchange believes that the market cap and liquidity of
the Non-U.S. Component Stocks held by the Funds along with a cap at 25%
of each Fund's total assets that can be allocated to Non-U.S. Component
Stocks would mitigate the concerns which Rules 14.11(i)(4)(C)(i)(b)(3)
and (4) are intended to address. Any Non-U.S. Component Stock held by
the Funds will have at least $100 million in market cap and will have a
minimum global monthly trading volume of 250,000 shares, or a minimum
global notional volume traded per month of $25 million, averaged over
the last six months. This combination of large market cap with
significant trading volume reduces the likelihood of manipulation of
any particular security and the cap of 25% of the Fund's total assets
assures that, while the Non-U.S. Component Stock holdings may not meet
the concentration and diversity requirements of Rules
14.11(i)(4)(C)(i)(b)(3) and (4), respectively, such diversity and
concentration requirements will not be met only for a limited portion
of the portfolio.
    The Exchange represents that, except for the diversification
requirements for listed derivatives in Rule 14.11(i)(4)(C)(iv)(b) and
the concentration and diversification requirements for Non-U.S.
Component Stocks in Rules 14.11(i)(4)(C)(i)(b)(3) and (4), the Funds'
proposed investments will satisfy, on an initial and continued listing
basis, all of the Generic Listing Standards and all other applicable
requirements for Managed Fund Shares under Rule 14.11(i). The Trust is
required to comply with Rule 10A-3 under the Act for the initial and
continued listing of the Shares of the Funds. A minimum of 100,000
Shares will be outstanding at the commencement of trading on the
Exchange. In addition, the Exchange represents that the Shares of the
Funds will comply with all other requirements applicable to Managed
Fund Shares, which includes the dissemination of key information such
as the Disclosed Portfolio,\33\ Net Asset Value,\34\ and the Intraday
Indicative Value,\35\ suspension of trading or removal,\36\ trading
halts,\37\ surveillance,\38\ minimum price variation for quoting and
order entry,\39\ and the information circular,\40\ as set forth in
Exchange rules applicable to Managed Fund Shares. Moreover, at least
90% of the weight of the Listed Bitcoin Derivatives held by each Fund
will consist of instruments that trade on markets that are a member of
the Intermarket Surveillance Group (``ISG'') or affiliated with a
member of ISG or with which the Exchange has in place

a comprehensive surveillance sharing agreement. 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, and quotation and last sale
information will be available via the CTA high-speed line. Quotation,
intra-day, closing and settlement prices of Listed Bitcoin Derivatives
will be readily available from their respective exchange or swap
execution facility, as applicable, as well as through automated
quotation systems, published or other public sources, or online
information services such as Bloomberg or Reuters. Quotation, intra-
day, closing and settlement prices of U.S. exchange-listed ETPs will be
readily available from the listing exchange, automated quotation
systems, published or other public sources, or online information
services such as Bloomberg or Reuters. Quotation information for OTC
Bitcoin Derivatives may be obtained from brokers and dealers who make
markets in such instruments. Quotation, intra-day, closing and
settlement prices of Non-U.S. Component Stocks will be readily
available from automated quotation systems, published or other public
sources, or online information services such as Bloomberg or Reuters.
Price information on Cash Equivalents and GSE Securities is 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.
---------------------------------------------------------------------------

    \33\ See Rule 14.11(i)(4)(A)(ii) and 14.11(i)(4)(B)(ii).
    \34\ See Rule 14.11(i)(4)(A)(ii).
    \35\ See Rule 14.11(i)(4)(B)(i).
    \36\ See Rule 14.11(i)(4)(B)(iii).
    \37\ See Rule 14.11(i)(4)(B)(iv).
    \38\ See Rule 14.11(i)(2)(C).
    \39\ See Rule 14.11(i)(2)(B).
    \40\ See Rule 14.11(i)(6).
---------------------------------------------------------------------------

    The Exchange believes that its surveillance procedures are adequate
to properly monitor the trading of the Shares on the Exchange during
all trading sessions and to deter and detect violations of Exchange
rules and the applicable federal securities laws. Additionally, the
Listed Bitcoin Derivatives will be subject to the rules and
surveillance programs of their respective listing venue and the
CFTC.\41\ Trading of the Shares through the Exchange will be subject to
the Exchange's surveillance procedures for derivative products,
including Managed Fund Shares. The Exchange or FINRA, on behalf of the
Exchange, will communicate as needed regarding trading in the Shares
and the underlying Listed Bitcoin Derivatives with the ISG, other
exchanges who are members or affiliates of the ISG, or with which the
Exchange has entered into a comprehensive surveillance sharing
agreement.\42\ The Exchange may also obtain information regarding
trading in the spot bitcoin market via exchanges with which the
Exchange has entered into a comprehensive surveillance sharing
agreement. In addition, the Exchange is able to access, as needed,
trade information for certain fixed income instruments reported to
FINRA's Trade Reporting and Compliance Engine (``TRACE''). The Exchange
prohibits the distribution of material non-public information by its
employees.
---------------------------------------------------------------------------

    \41\ The CFTC issued a press release on December 1, 2017, noting
the self-certifications from CFE and CME and highlighting the
rigorous process that the CFTC had undertaken in its engagement with
CFE and CME prior to the self-certification for the applicable
Bitcoin Futures Contracts. The press release focused on the ongoing
surveillances that will occur on each listing exchange, including
surveillance based on information sharing with the underlying cash
bitcoin exchanges as well as the actions that the CFTC will
undertake after the contracts are launched, including monitoring and
analyzing the size and development of the market, positions and
changes in positions over time, open interest, initial margin
requirements, and variation margin payments, stress testing
positions, conduct reviews of designated contract markets,
derivatives clearing organizations, clearing firms, and individual
traders involved in trading and clearing bitcoin futures. For more
information, see http://www.cftc.gov/PressRoom/PressReleases/pr7654-17.
    \42\ For a list of the current members and affiliate members of
ISG, see www.isgportal.com. The Exchange notes that not all
components of the Disclosed Portfolio for a Fund may trade on
markets that are members of ISG or with which the Exchange has in
place a comprehensive surveillance sharing agreement. At least 90%
of the weight of the Listed Bitcoin Derivatives held by each Fund
will consist of instruments that trade on markets that are a member
of ISG or affiliated with a member of ISG or with which the Exchange
has in place a comprehensive surveillance sharing agreement.
---------------------------------------------------------------------------

2. Statutory Basis
    The Exchange believes that the proposal is consistent with Section
6(b) of the Act \43\ in general and Section 6(b)(5) of the Act \44\ in
particular in that it is designed to prevent fraudulent and
manipulative acts and practices, to promote just and equitable
principles of trade, to foster cooperation and coordination with
persons engaged in facilitating transactions in securities, to remove
impediments to and perfect the mechanism of a free and open market and
a national market system and, in general, to protect investors and the
public interest.
---------------------------------------------------------------------------

    \43\ 15 U.S.C. 78f.
    \44\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------

    The Exchange believes that the proposed rule change is designed to
prevent fraudulent and manipulative acts and practices in that the
Shares will meet each of the initial and continued listing criteria in
BZX Rule 14.11(i) except that each Fund may hold: (i) Listed
derivatives in a manner that does not comply with Rule
14.11(i)(4)(C)(iv)(b); \45\ and (ii) Non-U.S. Component Stocks in a
manner that may not comply with Rule 14.11(i)(4)(C)(i)(b)(3) \46\ and
(4).\47\ The Exchange, however, believes that the policy concerns that
these rules are intended to address are mitigated as they relate to the
Funds and their holdings for a number of reasons.
---------------------------------------------------------------------------

    \45\ See note 12, supra.
    \46\ See note 14, supra.
    \47\ See note 15, supra.
---------------------------------------------------------------------------

    First, the policy concerns underlying all three rules are mitigated
by the fact that the Exchange believes that the underlying reference
asset is not susceptible to manipulation because the nature of the
bitcoin ecosystem makes manipulation of bitcoin difficult. The
geographically diverse and continuous nature of bitcoin trading makes
it difficult and prohibitively costly to manipulate the price of
bitcoin and, in many instances, the bitcoin market is generally less
susceptible to manipulation than the equity, fixed income, and
commodity futures markets. There are a number of reasons this is the
case, including that there is not inside information about revenue,
earnings, corporate activities, or sources of supply; manipulation of
the price on any single venue would require manipulation of the global
bitcoin price in order to be effective; a substantial over-the-counter
market provides liquidity and shock-absorbing capacity; bitcoin's 24/7/
365 nature provides constant arbitrage opportunities across all trading
venues; and it is unlikely that any one actor could obtain a dominant
market share.
    Further, bitcoin is arguably less susceptible to manipulation than
other commodities that underlie ETPs; there may be inside information
relating to the supply of the physical commodity such as the discovery
of new sources of supply or significant disruptions at mining
facilities that supply the commodity that simply are inapplicable as it
relates to bitcoin. Further, the Exchange believes that the
fragmentation across bitcoin exchanges, the relatively slow speed of
transactions, and the capital necessary to maintain a significant
presence on each exchange make manipulation of bitcoin prices through
continuous trading activity unlikely. Moreover, the linkage between the
bitcoin markets and the presence of arbitrageurs in those markets means
that the manipulation of the price of bitcoin price on any single venue
would require manipulation of the global bitcoin price in order to be
effective. Arbitrageurs must have funds distributed across multiple
bitcoin exchanges in order to take advantage of temporary price
dislocations, thereby

making it unlikely that there will be strong concentration of funds on
any particular bitcoin exchange. As a result, the potential for
manipulation on a particular bitcoin exchange would require overcoming
the liquidity supply of such arbitrageurs who are effectively
eliminating any cross-market pricing differences. For all of these
reasons, bitcoin is not particularly susceptible to manipulation,
especially as compared to other approved ETP reference assets.
    Second, the Exchange believes that the concerns on which Rule
14.11(i)(4)(C)(iv)(b) are based related to ensuring that no single
listed derivative and underlying reference asset that is susceptible to
manipulation constitutes greater than 35% of the weight of the
portfolio are further mitigated by the liquidity that the Exchange
expects to exist in the market for Listed Bitcoin Derivatives. This
belief is based on numerous conversations with market participants,
issuers, and discussions with personnel of CFE. This expected liquidity
in the market for Bitcoin Futures Contracts, the surveillance programs
of the futures exchanges listing such Bitcoin Futures Contracts,
Exchange surveillance procedures related to trading in the Shares, and
CFTC oversight of the Bitcoin Futures Contracts, all combined with the
difficulty in manipulating the bitcoin market described above will
mitigate the concerns that Rule 14.11(i)(4)(C)(iv)(b) was designed to
protect against and further prevent trading in the Shares from being
susceptible to manipulation.
    Third, the Exchange believes that the market cap and liquidity of
the Non-U.S. Component Stocks held by the Funds along with a cap at 25%
of each Fund's total assets that can be allocated to Non-U.S. Component
Stocks would mitigate the concerns which Rules 14.11(i)(4)(C)(i)(b)(3)
and (4) are intended to address. Any Non-U.S. Component Stock held by
the Funds will have at least $100 million in market cap and will have a
minimum global monthly trading volume of 250,000 shares, or a minimum
global notional volume traded per month of $25 million, averaged over
the last six months. This combination of large market cap with
significant trading volume reduces the likelihood of manipulation of
any particular security and the cap of 25% of the Fund's total assets
assures that, while the Non-U.S. Component Stock holdings may not meet
the concentration and diversity requirements of Rules
14.11(i)(4)(C)(i)(b)(3) and (4), respectively, such diversity and
concentration requirements will not be met only for a limited portion
of the portfolio.
    The Exchange believes that its surveillance procedures are adequate
to properly monitor the trading of the Shares on the Exchange during
all trading sessions and to deter and detect violations of Exchange
rules and the applicable federal securities laws. Additionally, the
Listed Bitcoin Derivatives will be subject to the rules and
surveillance programs of their respective listing venue and the
CFTC.\48\ Trading of the Shares through the Exchange will be subject to
the Exchange's surveillance procedures for derivative products,
including Managed Fund Shares. The Exchange or FINRA, on behalf of the
Exchange, will communicate as needed regarding trading in the Shares
and the underlying Listed Bitcoin Derivatives with the ISG, other
exchanges who are members or affiliates of the ISG, or with which the
Exchange has entered into a comprehensive surveillance sharing
agreement.\49\ The Exchange may also obtain information regarding
trading in the spot bitcoin market via exchanges with which the
Exchange has entered into a comprehensive surveillance sharing
agreement. In addition, the Exchange is able to access, as needed,
trade information for certain fixed income instruments reported to
TRACE. The Exchange prohibits the distribution of material non-public
information by its employees. If the investment adviser to the
investment company issuing Managed Fund Shares is affiliated with a
broker-dealer, such investment adviser to the investment company shall
erect a ``fire wall'' between the investment adviser and the broker-
dealer with respect to access to information concerning the composition
and/or changes to such investment company portfolio. The Adviser is not
a registered broker-dealer, but is affiliated with a broker-dealer and
has implemented a ``fire wall'' with respect to such broker-dealer
regarding access to information concerning the composition and/or
changes to the Fund's portfolio. The Exchange may obtain information
regarding trading in the Shares and the underlying futures contracts
held by the Funds via the ISG from other exchanges who are members or
affiliates of the ISG or with which the Exchange has entered into a
comprehensive surveillance sharing agreement.\50\ In addition, the
Exchange is able to access, as needed, trade information for certain
fixed income instruments reported to FINRA's TRACE.
---------------------------------------------------------------------------

    \48\ See note 41, supra.
    \49\ See note 42, supra.
    \50\ See note 42, supra.
---------------------------------------------------------------------------

    The Exchange further believes that the proposal is designed to
prevent fraudulent and manipulative acts and practices in that the
Exchange expects that the market for Bitcoin Futures Contracts will be
sufficiently liquid to support numerous ETPs shortly after launch. This
belief is based on numerous conversations with market participants,
issuers, and discussions with personnel of CFE. As such, the Exchange
believes that the expected liquidity in the market for Listed Bitcoin
Derivatives combined with the Exchange surveillance procedures related
to the Shares and the broader regulatory structure will prevent trading
in the Shares from being susceptible to manipulation.
    Because of its innovative features as a cryptoasset, bitcoin has
gained wide acceptance as a secure means of exchange in the commercial
marketplace and has generated significant interest among investors. In
less than a decade since its creation in 2008, bitcoin has achieved
significant market penetration, with payments giant PayPal and
thousands of merchants and businesses accepting it as a form of
commercial payment, as well as receiving official recognition from
several governments, including Japan and Australia. Accordingly,
investor interest in gaining exposure to bitcoin is increasing
exponentially as well. As expected, the total volume of bitcoin
transactions in the market continues to grow exponentially.
    Despite the growing investor interest in bitcoin, the primary means
for investors to gain access to bitcoin exposure remains either through
the Listed Bitcoin Derivatives or direct investment through bitcoin
exchanges or over-the-counter trading. For regular investors simply
wishing to express an investment viewpoint in bitcoin, investment
through the Listed Bitcoin Derivatives is complex and requires active
management and direct investment in bitcoin brings with it significant
inconvenience, complexity, expense and risk. The Shares would therefore
represent a significant innovation in the bitcoin market by providing
an inexpensive and simple vehicle for investors to gain long or short
exposure to bitcoin in a secure and easily accessible product that is
familiar and transparent to investors. Such an innovation would help to
perfect the mechanism of a free and open market and, in general, to
protect investors and the public interest by improving investor access
to bitcoin exposure

through efficient and transparent exchange-traded derivative products.
    In addition to improved convenience, efficiency and transparency,
the Funds will also help to prevent fraudulent and manipulative acts
and practices by enhancing the security afforded to investors as
compared to a direct investment in bitcoin. Despite the extensive
security mechanisms built into the Bitcoin Network, a remaining risk to
owning bitcoin directly is the need for the holder to retain and
protect the ``private key'' required to spend or sell bitcoin after
purchase. If a holder's private key is compromised or simply lost,
their bitcoin can be rendered unavailable--i.e., effectively lost to
the investor. This risk will be eliminated by the Long Bitcoin Fund
because the exposure to bitcoin is gained through cash-settled Listed
Bitcoin Derivatives that do not present any of the security issues that
exist with direct investment in bitcoin.
    Additionally, the Funds may each hold up to an aggregate amount of
15% of its net assets in illiquid assets (calculated at the time of
investment). Each 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 assets 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 proposed rule change is designed to promote just and equitable
principles of trade and to protect investors and the public interest in
that the Exchange will obtain a representation from the issuer of the
Shares that the NAV will be calculated daily and that the NAV and the
Disclosed Portfolio will be made available to all market participants
at the same time. In addition, a large amount of information is
publicly available regarding the Funds and the Shares, thereby
promoting market transparency. Moreover, the Intraday Indicative Value
will be disseminated by one or more major market data vendors at least
every 15 seconds during Regular Trading Hours. On each business day,
before commencement of trading in Shares during Regular Trading Hours,
each Fund will disclose on its website the Disclosed Portfolio that
will form the basis for the Fund's calculation of NAV at the end of the
business day. Pricing information will be available on each Fund's
website including: (1) The prior business day's reported NAV, the Bid/
Ask Price of the Fund, and a calculation of the premium and discount of
the Bid/Ask Price against the NAV; and (2) data in chart format
displaying the frequency distribution of discounts and premiums of the
daily Bid/Ask Price against the NAV, within appropriate ranges, for
each of the four previous calendar quarters. Additionally, information
regarding market price and trading of the Shares will be continually
available on a real-time basis throughout the day on brokers' computer
screens and other electronic services, and quotation and last sale
information for the Shares will be available on the facilities of the
CTA. The website for the Funds will include a form of the prospectus
for the Funds and additional data relating to NAV and other applicable
quantitative information. Trading in Shares of the Funds will be halted
under the conditions specified in BZX Rule 11.18. Trading may also be
halted because of market conditions or for reasons that, in the view of
the Exchange, make trading in the Shares inadvisable. Finally, trading
in the Shares will be subject to BZX Rule 14.11(i)(4)(B)(iv), which
sets forth circumstances under which the Shares of each Fund may be
halted. In addition, as noted above, investors will have ready access
to information regarding the Fund's holdings, the Intraday Indicative
Value, the Disclosed Portfolio, and quotation and last sale information
for the Shares.
    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, and
quotation and last sale information will be available via the CTA high-
speed line. Quotation, intra-day, closing and settlement prices of
Listed Bitcoin Derivatives will be readily available from their
respective exchange or swap execution facility, as applicable, as well
as through automated quotation systems, published or other public
sources, or online information services such as Bloomberg or Reuters.
Quotation, intra-day, closing and settlement prices of U.S. exchange-
listed ETPs will be readily available from the listing exchange,
automated quotation systems, published or other public sources, or
online information services such as Bloomberg or Reuters. Quotation
information for OTC Bitcoin Derivatives may be obtained from brokers
and dealers who make markets in such instruments. Quotation, intra-day,
closing and settlement prices of Non-U.S. Component Stocks will be
readily available from automated quotation systems, published or other
public sources, or online information services such as Bloomberg or
Reuters. Price information on Cash Equivalents and GSE Securities is
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.
    The proposed rule change is designed to perfect the mechanism of a
free and open market and, in general, to protect investors and the
public interest in that it will facilitate the listing and trading of
additional types of actively-managed exchange-traded product [sic] that
will enhance competition among market participants, to the benefit of
investors and the marketplace. As noted above, the Exchange has in
place surveillance procedures relating to trading in the Shares and may
obtain information via ISG from other exchanges that are members of ISG
or affiliated with a member of ISG or with which the Exchange has
entered into a comprehensive surveillance sharing agreement as well as
trade information for certain fixed income instruments as reported to
FINRA's TRACE. At least 90% of the weight of the Listed Bitcoin
Derivatives held by each Fund will consist of instruments that will
trade on markets that are a member of ISG or affiliated with a member
of ISG or with which the Exchange has in place a comprehensive
surveillance sharing agreement. In addition, as noted above, investors
will have ready access to information regarding the Fund's holdings,
the Intraday Indicative Value, the Disclosed Portfolio, and quotation
and last sale information for the Shares.
    For the above reasons, the Exchange believes that the proposed rule
change is consistent with the requirements of Section 6(b)(5) of the
Act.

(B) Self-Regulatory Organization's Statement on Burden on Competition

    The Exchange does not believe that the proposed rule change will
impose any burden on competition that is not necessary or appropriate
in furtherance of the purpose of the Act. The Exchange notes that the
proposed rule change, rather will facilitate the listing and trading of
additional actively-managed exchange-traded products that will enhance
competition among both market participants and listing venues, to the
benefit of investors and the marketplace.

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

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

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

    Within 45 days of the date of publication of this notice in the
Federal Register or within such longer period up to 90 days (i) as the
Commission may designate if it finds such longer period to be
appropriate and publishes its reasons for so finding or (ii) as to
which the self-regulatory organization consents, the Commission will:
    A. By order approve or disapprove the proposed rule change, or
    B. institute proceedings to determine whether the proposed rule
change should be disapproved.

IV. Solicitation of Comments

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

Electronic Comments

     Use the Commission's internet comment form (http://www.sec.gov/rules/sro.shtml); or
     Send an email to [email protected]. Please include
File Number SR-CboeBZX-2017-021 on the subject line.

Paper Comments

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

All submissions should refer to File Number SR-CboeBZX-2017-021. This
file number should be included on the subject line if email is used. To
help the Commission process and review your comments more efficiently,
please use only one method. The Commission will post all comments on
the Commission's internet website (http://www.sec.gov/rules/sro.shtml).
Copies of the submission, all subsequent amendments, all written
statements with respect to the proposed rule change that are filed with
the Commission, and all written communications relating to the proposed
rule change between the Commission and any person, other than those
that may be withheld from the public in accordance with the provisions
of 5 U.S.C. 552, will be available for website viewing and printing in
the Commission's Public Reference Room, 100 F Street NE, Washington, DC
20549 on official business days between the hours of 10:00 a.m. and
3:00 p.m. Copies of the filing will also be available for inspection
and copying at the principal office of the Exchange. All comments
received will be posted without change. Persons submitting comments are
cautioned that we do not redact or edit personal identifying
information from comment submissions. You should submit only
information that you wish to make available publicly. All submissions
should refer to File Number SR-CboeBZX-2017-021 and should be submitted
on or before January 29, 2018.

    For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\51\
---------------------------------------------------------------------------

    \51\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------

Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2018-00077 Filed 1-5-18; 8:45 am]
 BILLING CODE 8011-01-P