[Federal Register Volume 87, Number 6 (Monday, January 10, 2022)]
[Notices]
[Pages 1231-1238]
[FR Doc No: 2022-00154]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-93896; File No. SR-BX-2021-054]

Self-Regulatory Organizations; Nasdaq BX, Inc.; Notice of Filing
and Immediate Effectiveness of Proposed Rule Change To Adopt an Add
Liquidity Order and Post-Only Quote Configuration Functionality

January 4, 2021.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934
(``Act''),\1\ and Rule 19b-4 thereunder,\2\ notice is hereby given that
on December 22, 2021, Nasdaq BX, Inc. (``BX'' or ``Exchange'') filed
with the Securities and Exchange Commission (``SEC'' or ``Commission'')
the proposed rule change as described in Items I, II and III, below,
which Items have been prepared by the Exchange. The Commission is
publishing this notice to solicit comments on the proposed rule change
from interested persons.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
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I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change

    The Exchange proposes to amend Options 3, Section 1 (Days and Hours
of

Business), Section 7 (Types of Orders and Quote Protocols), Section 13
(Price Improvement Auction (``PRISM'')) and Section 15 (Risk
Protections).
    The text of the proposed rule change is available on the Exchange's
website at https://listingcenter.nasdaq.com/rulebook/bx/rules, 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 aspects of such
statements.

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

1. Purpose
    The Exchange proposes to amend the following rules: Options 3,
Section 1 (Days and Hours of Business), Section 7 (Types of Orders and
Quote Protocols), Section 13 (Price Improvement Auction (``PRISM''))
and Section 15 (Risk Protections). Each change will be described below.
Options 3, Section 1
    The Exchange proposes to amend Options 3, Section 1 concerning the
Days and Hours of Business. The Exchange proposes to amend the title
from ``Days and Hours of Business'' to ``Hours of Business.'' BX
recently filed to establish General 3, Section 1030, which governs the
days the Exchange will be open for business.\3\ At this time the
Exchange proposes to amend Options 3, Section 1(c) which provides, ``BX
Options shall not be open for business on any holiday observed by BX.''
The Exchange proposes to instead provide, ``BX Options shall not be
open for business as provided within General 3, Section 1030.'' This
proposed text will make clear that while General 3, Section 1030
governs the days the Exchange will be open for business, the remainder
of the rule addresses the hours of operation of the System and specific
products. Finally, the Exchange proposes to update citations to the
Options 4 rules related to Exchange-Traded Fund Shares and Index-Linked
Securities.
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    \3\ See Securities Exchange Act Release No. 93675 (November 29,
2021), 86 FR 68714 (December 3, 2021) (SR-NASDAQ-2021-69) (Notice of
Filing and Immediate Effectiveness of Proposed Rule Change To
Include Juneteenth National Independence Day as a Holiday). BX's
General 3 rules incorporate by reference The Nasdaq Stock Market
LLC's General 3 Rules. Rule 1030 of General 3 memorialized all
current Exchange holidays and added a provision to permit the
Exchange the authority to halt or suspend trading or close Exchange
facilities for certain unanticipated closures.
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Options 3, Section 7
    The Exchange proposes to amend Options 3, Section 7 to add a new
order type entitled ``Add Liquidity Order'' within Options 3, Section
7(a)(12). Today, Nasdaq ISE, LLC (``ISE''), Nasdaq GEMX, LLC (``GEMX'')
and Nasdaq MRX, LLC (``MRX'') have a similar order type within Options
3, Section 7(n). ISE adopted the Add Liquidity Order to provide an
additional order type that will give market participants greater
control over the circumstances in which their orders are executed.\4\
ISE's 2012 rule change explained that
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    \4\ See Securities Exchange Act Release No. 66617 (March 19,
2012), 77 FR 17102 (March 23, 2012) (SR-ISE-2012-20) (Notice of
Filing and Immediate Effectiveness of Proposed Rule Change To Adopt
a New Order Type).

[s]ome investors and market participants wish only to provide
liquidity in certain circumstances, such as to receive a maker fee
(rebate) upon execution of an order. To accommodate this strategy,
the Exchange proposed to adopt a new order type called an add
liquidity order (``ALO''). ALOs are limit orders that will only be
executed as a ``maker'' on the ISE. Members can choose whether an
ALO that is executable on the ISE upon entry (or that locks or
crosses an away market upon entry) will be cancelled or re-priced to
one minimum price variation above the national best bid or below the
national best offer. An Add Liquidity Order will only be re-priced
once and will be executed at the re-priced price.\5\
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    \5\ Id at 17103.

    ISE subsequently amended this order type in 2012 such that, if at
the time of entry, an ALO would lock or cross one or more non-displayed
orders on the Exchange, the ALO will be cancelled or re-priced to the
minimum price variation \6\ (``MPV'') above the best non-displayed bid
price (for sell orders) or below the best non-displayed offer price
(for buy orders).\7\ ISE noted in that filing that it believed that
adding this functionality was imperative to ensure that ALOs are only
executed when providing liquidity. Without the ability to re-price an
ALO that locks or crosses a non-displayed order, under certain
circumstances, an incoming ALO could execute against a non-displayed
order resting on the ISE limit order book, which would be in direct
contravention with the purpose of an ALO--to provide liquidity, not
take liquidity.\8\
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    \6\ See Options 3, Section 3 (Minimum Increments).
    \7\ See Securities Exchange Act Release No. 67353 (July 5,
2012), 77 FR 40935 (July 11, 2012) (SR-ISE-2012-61) (Notice of
Filing and Immediate Effectiveness of Proposed Rule Change by
International Securities Exchange To Amend ISE Rule 715 To Reflect a
Modification in the Functionality of the Add Liquidity Order).
    \8\ Id at 40935.
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    At this time, the Exchange proposes to adopt an Add Liquidity Order
similar to ISE, GEMX and MRX Options 3, Section 7(n). The proposed Add
Liquidity Order would be a limit order that is to be executed in whole
or in part on the Exchange (i) only after being displayed on the
Exchange's limit order book; and (ii) without routing any portion of
the order to another market center. Participants would be able to
specify whether an Add Liquidity Order shall be cancelled or re-priced
to the MPV above the national best bid price (for sell orders) or below
the national best offer price (for buy orders) if, at the time of
entry, the order (i) is executable on the Exchange; or (ii) the order
is not executable on the Exchange but would lock or cross the national
best bid or offer. If at the time of entry, an Add Liquidity Order
would lock or cross one or more non-displayed orders or quotes on the
Exchange, the Add Liquidity Order shall be cancelled or re-priced to
the MPV above the best non-displayed bid price (for sell orders) or
below the best non-displayed offer price (for buy orders).
Notwithstanding the aforementioned, if an Add Liquidity Order would not
lock or cross an order or quote on the System but would lock or cross
the NBBO,\9\ the order will be handled pursuant to Options 3, Section
5(d).\10\ This repricing of Add Liquidity Orders is the way other order
types are currently re-priced on ISE, GEMX and

MRX. The Exchange notes that the same sentence does not appear in the
ISE, GEMX and MRX Add Liquidity Order description.\11\
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    \9\ The term ``NBBO'' means the national best bid or offer as
calculated by BX Options based on market information received by BX
Options from OPRA. See Options 3, Section 1(a)(33).
    \10\ Options 3, Section 5(d) provides, ``An order will not be
executed at a price that trades through another market or displayed
at a price that would lock or cross another market. An order that is
designated by the member as routable will be routed in compliance
with applicable Trade-Through and Locked and Crossed Markets
restrictions. An order that is designated by a member as non-
routable will be re-priced in order to comply with applicable Trade-
Through and Locked and Crossed Markets restrictions. If, at the time
of entry, an order that the entering party has elected not to make
eligible for routing would cause a locked or crossed market
violation or would cause a trade-through violation, it will be re-
priced to the current national best offer (for bids) or the current
national best bid (for offers) and displayed at one minimum price
variance above (for offers) or below (for bids) the national best
price.''
    \11\ See ISE, GEMX and MRX Options 3, Section 5(d). The Exchange
will amend the ISE, GEMX and MRX rules in separate rule changes.
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    Finally, BX proposes to add rule text that is not currently in the
ISE, GEMX and MRX rule. Add Liquidity Orders may only be submitted when
an options series is open for trading.\12\ Therefore, an Add Liquidity
Order would not be accepted during the Opening Process when the order
book is not available.
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    \12\ ISE, GEMX and MRX will propose a change to Options 3,
Section 7(n) to add similar rule text.
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    The Exchange believes that, similar to ISE, GEMX and MRX, the
adoption of an Add Liquidity Order will give market participants
greater control over the circumstances in which their orders are
executed in addition to the order types which are currently offered
today on BX. Below are some examples of the Add Liquidity Order.
Add Liquidity Only Order Re-Price Example
 Non-Penny Program MPV Option in open trading state
 Market Maker A quote $0.90 (10) x $1.00 (10)
 ABBO $0.85 x $1.05
 Firm A sends Add Liquidity Only Order to buy 5 arrives at
$1.00
[cir] Reprices on book to $0.95
[cir] Displays on $0.95 bid, which is National Best displayed bid with
5 quantity
 Order to sell 10 arrives at $0.90
[cir] 5 execute with Firm A @ $0.95
[cir] 5 execute with Market A @ $0.90
[cir] NBBO updates back to $0.90 x $1.00
Add Liquidity Only Reject Example
 Non-Penny Program MPV Option in open trading state
 Market Maker A quote $0.90 (10) x $1.00 (10)
 ABBO $0.85 x $1.05
 Firm A sends Add Liquidity Only Order to buy 5 arrives at
$1.00
[cir] Order is rejected back to sender because the sender configured
the order for reject instead of re-price

    The Exchange also proposes to amend Options 3, Section 7(a)(11) to
remove the title ``Block Order'' at the beginning of the sentence to
conform the style of the description to the remaining order types
within Options 3, Section 7.
Options 3, Section 13
    The Exchange proposes to amend the Exchange's PRISM rule in Options
3, Section 13 to delete an obsolete auction eligibility requirement and
clarify existing rule text.
    Today, Options 3, Section 13(i) describes the various eligibility
criteria under which a PRISM auction may be initiated, including
requirements for when PRISM orders may be submitted. In particular,
Section 13(i)(F) provides that PRISM orders submitted during the final
two seconds of the trading session in the affected series are not
eligible to initiate a PRISM auction and will be immediately cancelled.
This restriction was introduced when PRISM was first adopted on the
Exchange,\13\ and was based on certain technical restraints from BX's
original technical design which required no ongoing auctions to begin
preparing for the end of trading day transition to closing state.
However, with the Exchange's recent technology migration,\14\ this
system restriction was removed in order to be more consistent with the
price improvement mechanisms on the Exchange's affiliated options
markets, Nasdaq ISE, GEMX, and MRX.\15\ The corresponding rule text in
Options 3, Section 13(i)(F) should have likewise been deleted with the
legacy functionality. Accordingly, the Exchange now proposes to delete
the obsolete rule text in Section 13(i)(F) in its entirety, and
renumber Section 13(i)(G) as (F).
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    \13\ See Securities Exchange Act Release No. 76301 (October 29,
2015), 80 FR 68347 (November 4, 2015) (SR-BX-2015-032) (Notice of
Filing of Amendment No. 2 and Order Granting Accelerated Approval of
a Proposed Rule Change, as Modified by Amendment Nos. 1 and 2, To
Adopt a New Price Improvement Auction, BX PRISM).
    \14\ See Securities Exchange Act Release No. 89476 (August 4,
2020), 85 FR 48274 (SR-BX-2020-017) (August 10, 2020) (Notice of
Filing and Immediate Effectiveness of Proposed Rule Change To Amend
Various BX Rules in Connection With a Technology Migration).
    \15\ None of these markets have similar system restrictions
preventing the submission of orders in their respective price
improvement mechanisms during the last two seconds of the trading
day. See Nasdaq ISE, GEMX, and MRX Options 3, Section 13.
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    Additionally, the Exchange proposes to amend rule text regarding
the PRISM Auction process. Currently, Options 3, Section 13(ii)
describes the manner in which a PRISM auction may be conducted.
Specifically, with respect to an unrelated market or marketable limit
order, Options 3, Section 13(a)(ii)(D) provides,

    An unrelated market or marketable limit order (against the BX
BBO) on the opposite side of the market from the PRISM Order
received during the Auction will not cause the Auction to end early
and will execute against interest outside of the Auction. If
contracts remain from such unrelated order at the time the auction
ends, they will be considered for participation in the order
allocation process described in sub-paragraphs (E) and (F) below.

    The term ``marketable limit order'' is too narrow a term as both
orders and quotes on the opposite side of the market from the PRISM
Order received during the PRISM auction would not cause the PRISM
auction to end early and will execute against interest outside of the
PRISM auction. Therefore, the Exchange proposes to replace the term
``marketable limit order'' with the broader term ``marketable
interest'' to accurately describe the interest a PRISM auction would
interact with in the order book on the opposite side of the market from
the PRISM Order. The Exchange believes that this amendment will bring
greater clarity to the PRISM rule. The proposed new rule text would
provide,

    Unrelated market or marketable interest (against the BX BBO) on
the opposite side of the market from the PRISM Order received during
the Auction will not cause the Auction to end early and will execute
against interest outside of the Auction. If contracts remain from
such unrelated interest at the time the auction ends, they will be
considered for participation in the order allocation process
described in sub-paragraphs (E) and (F) below.

    The Exchange notes that Nasdaq PHLX LLC's Price Improvement XL
(``PIXL'') auction does not early terminate from contra-side unrelated
marketable interest.\16\
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    \16\ See Phlx Options 3, Section 13(b)(4). The Exchange will
separately amend Phlx's rule to make a similar change to the rule
text.
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Options 3, Section 15
    The Exchange proposes to amend Options 3, Section 15, Risk
Protections, to adopt an optional quoting protection for BX Market
Makers. This optional risk protection would allow BX Market Makers to
prevent their quotes from removing liquidity from the Exchange's order
book upon entry.
    Specifically, the Exchange proposes to adopt a new risk protection
within Options 3, Section 15(c)(3). With this risk protection, NOM
Market Makers may elect to configure their SQF \17\ protocols to
prevent their quotes from

removing liquidity (``Post-Only Quote Configuration''). This Post-Only
Quote Configuration would re-price or cancel a BX Market Maker's quote
that would otherwise lock or cross any resting order \18\ or quote on
the BX order book upon entry. The Exchange notes that this
functionality does not apply during an Opening Process \19\ because the
order book is established once options series are open for trading.
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    \17\ ``Specialized Quote Feed'' or ``SQF'' is an interface that
allows Market Makers to connect, send, and receive messages related
to quotes, Immediate-or-Cancel Orders, and auction responses into
and from the Exchange. Features include the following: (1) Options
symbol directory messages (e.g., underlying instruments); (2) system
event messages (e.g., start of trading hours messages and start of
opening); (3) trading action messages (e.g., halts and resumes); (4)
execution messages; (5) quote messages; (6) Immediate-or-Cancel
Order messages; (7) risk protection triggers and purge
notifications; (8) opening imbalance messages; (9) auction
notifications; and (10) auction responses. The SQF Purge Interface
only receives and notifies of purge requests from the Market Maker.
Market Makers may only enter interest into SQF in their assigned
options series. See Options 3, Section 7(e)(1)(B).
    \18\ This would include any re-priced orders as described in
Options 3, Section 5(d), any re-priced quotes as described in
Options 3, Section 4(b)(6), and the proposed Add Liquidity Orders
within proposed Options 3, Section 7(a)(12). As noted herein, Add
Liquidity Orders may re-price.
    \19\ The Exchange's Opening Process is described at Options 3,
Section 8.
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    Participants may elect whether to re-price or cancel their quotes
with this functionality. When configured for re-price, quotes would be
re-priced to one MPV below the current low offer (for bids) or above
the current best bid (for offers) and displayed by the System at one
MPV below the current low offer (for bids) or above the current best
bid (for offers). Notwithstanding the aforementioned, if a quote with a
Post-Only Quote Configuration would not lock or cross an order or quote
on the System but would lock or cross the NBBO, the quote will be
handled pursuant to Options 3, Section 4(b)(6).\20\ When configured for
cancel, Participants will have their quotes returned whenever the quote
would lock or cross the NBBO or be placed on the book at a price other
than its limit price.
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    \20\ Options 3, Section 4(b)(6) provides, ``A quote will not be
executed at a price that trades through another market or displayed
at a price that would lock or cross another market. If, at the time
of entry, a quote would cause a locked or crossed market violation
or would cause a trade-through, violation, it will be re-priced to
the current national best offer (for bids) or the current national
best bid (for offers) and displayed at one minimum price variance
above (for offers) or below (for bids) the national best price.''
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    This optional risk protection would enable BX Market Makers to
better manage their risk when quoting on BX. Today, BOX Exchange LLC
(``BOX''),\21\ NYSE Arca, Inc. (``NYSE Arca''),\22\ and MIAX Emerald,
LLC (``MIAX Emerald'') \23\ have similar functionality. BOX does not
permit Market Maker's quotes to take liquidity and will reject the
quote. Other options markets, unlike BOX, continue to permit their
market makers to add or remove liquidity from the order book.\24\ NYSE
Arca and MIAX Emerald will re-price quotes one MPV to avoid the quote
from trading as a liquidity taker against the resting order similar to
BX's proposal. Also, the Exchange's proposal permits a BX Market Maker
a choice as to whether to cancel or re-price its quote when using the
Post-Only Quote Configuration.
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    \21\ BOX Rules provide, ``Notwithstanding Rule 100(a)(56), all
quotes and quote updates on BOX after the opening are liquidity
adding only. Specifically, after the Opening Match pursuant to Rule
7070, a Market Maker's quote will not execute against a resting
order or quote on the BOX Book. If an incoming quote is marketable
against the BOX Book and will execute against a resting order or
quote, it will be rejected.'' See BOX IM-8050-3. See also Securities
Exchange Act Release No. 79311 (November 15, 2016), 81 FR 83322
(November 21, 2016) (SR-BOX-2016-45) (Order Approving a Proposed
Rule Change To Amend the Treatment of Quotes To Provide That All
Quotes on BOX Are Liquidity Adding Only).
    \22\ NYSE Arca permits a market maker to optionally designate a
quote as ``Add Liquidity Only.'' See NYSE Arca Rule 6.37A-
O(a)(3)(B).
    \23\ See MIAX Emerald Rule 517(a)(1)(i).
    \24\ Miami International Securities Exchange LLC (``MIAX'')
permits its market makers to add and remove liquidity from the order
book. See MIAX's Fee Schedule which delineates Maker and Taker
pricing. Nasdaq ISE, LLC (``ISE'') also permits market makers to add
and remove liquidity from the order book. See ISE's Pricing Schedule
at Options 7.
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    Finally, the Nasdaq Options Market LLC (``NOM'') recently codified
\25\ a similar risk protection, however, unlike BX, NOM reprices $.01
below the current low offer (for bids) or above the current best bid
(for offers) and displays the quote at one MPV below the current low
offer (for bids) or above the current best bid (for offers). The
Exchange notes that, unlike BX, NOM does not offer auction
functionality. Because an auction mechanism may interact adversely with
Add Liquidity Only Orders or quotes with a Post-Only Quote
Configuration that are re-priced in $0.01 increments and displayed at
MPV increments, the Exchange proposes to re-price at one MPV.\26\ BX
has the PRISM auction.\27\ The Exchange believes that it is consistent
with the protection of investors and the general public to utilize one
MPV to re-price an Add Liquidity Only Order or quote with a Post-Only
Quote Configuration to avoid a PRISM auction rejecting against a non-
displayed Add Liquidity Only Order or quote with a Post-Only Quote
Configuration. The Exchange notes that a similar result could not be
obtained on NOM as there are no auctions. The Add Liquidity Order on
ISE, GEMX and MRX \28\ also re-prices in one MPV as those markets have
a price improvement auction.\29\
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    \25\ See Securities and Exchange Release No. 93662 (November 23,
2021), 86 FR 68009 (November 30, 2021) (SR-NASDAQ-2021-094) (Notice
of Filing and Immediate Effectiveness of Proposed Rule Change To
Adopt a Post-Only Quote Configuration Risk Protection).
    \26\ For example, the inbound auction would reject against the
non-displayed Add Liquidity Only Order or quote with a Post-Only
Quote Configuration with an auction mechanism.
    \27\ See Options 3, Section 13.
    \28\ See Options 3, Section 7(n).
    \29\ Id.
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    Further, with the adoption of Add Liquidity Orders as proposed
herein within Options 3, Section 7, all BX Participants may utilize the
Add Liquidity Order. The Post-Only Quote Configuration is available to
Market Makers only as a risk protection.
    Below are some examples of the Post-Only Quote Configuration
functionality.
Post-Only Quote Configuration Reprice Example
 Penny Interval Program MPV in open trading state
 Market Makers A and C do not have Post-Only Quote
Configuration risk protection configured
 Market Maker B is configured for Post-Only Quote Configuration
re-price
 Market Maker A quote $0.98 (10) x $1.00 (10)
 ABBO $0.96 x $1.03
 Market Maker B quote $1.00 (10) x $1.01 (10) arrives
[cir] Bid side of quote re-prices onto order book @ 0.99 and updates
displayed NBBO to 20 quantity
[cir] Offer side rests at 1.01 without issue
 Market Maker C quote $0.97 (20) x 0.98 (20) arrives
Trades 10 with Market Maker A and 10 with Market Maker B

    Market Maker B avoids taking liquidity while Market Maker C, who
chose not to be configured for such, removes liquidity by interacting
with re-priced interest on BX's order book.
Re-Priced Post-Only Quote Configuration--Penny Interval Program Display
and Execution Example--Non-Penny Interval Program (Options 3, Section
7(a)(9))
 Non-Penny Interval Program MPV in open trading state
 Market Maker A quote $0.95 (10) x $1.00 (10)
 ABBO $0.85 x $1.05
 Market Maker B (configured at the badge level for Post-Only
Quote Configuration and selection of re-price upon quote) quote arrives
1.00 (5) x $1.05 (5)
[cir] Bid side quote re-prices on order book to $0.95
[cir] Displays on order book @ $0.95 (bid), which now shows (15
quantity)
[cir] Offer side quote books and displays at $1.05
 Order to sell 10 contracts arrives @ $0.95
[cir] 5 contracts execute with Market Maker B @ $0.95
[cir] 5 contracts execute with Market A @ $0.95

In this example, the Market Maker avoided taking liquidity by deploying
the Post-Only Quote Configuration with re-price.
Implementation
    The Exchange will issue an Options Trader Alert to Participants
with the date of implementation for the Add Liquidity Order and the
Post-Only Quote Configuration functionality.
2. Statutory Basis
    The Exchange believes that its proposal is consistent with Section
6(b) of the Act,\30\ in general, and furthers the objectives of Section
6(b)(5) of the Act,\31\ in particular, in that it is designed to
promote just and equitable principles of trade, to remove impediments
to and perfect the mechanism of a free and open market and a national
market system, and, in general to protect investors and the public
interest.
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    \30\ 15 U.S.C. 78f(b).
    \31\ 15 U.S.C. 78f(b)(5).
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Options 3, Section 1
    The Exchange's proposal to amend Options 3, Section 1 concerning
the Days and Hours of Business is consistent with the Act. The proposal
to amend the title from ``Days and Hours of Business'' to ``Hours of
Business'' will bring greater clarity to the rule. BX recently filed to
establish General 3, Section 1030, which governs the days the Exchange
will be open for business.\32\ Amending Options 3, Section 1(c) to
reference General 3, Section 1030 will provide Participants with a
guidepost as to where to locate the rule that applies to the days the
Exchange is open for business. The proposed updated citations to the
Options 4 rules will provide correct references for Participants and
thereby bring greater clarity to the rules.
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    \32\ See note 3 above.
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Options 3, Section 7
    The Exchange's proposal to amend Options 3, Section 7 to add a new
order type entitled ``Add Liquidity Order'' within Options 3, Section
7(a)(12) is consistent with the Act. Today, ISE, GEMX and MRX have a
similar order type within Options 3, Section 7(n). The Add Liquidity
Order will provide an additional order type that will give market
participants greater control over the circumstances in which their
orders are executed. For investors and market participants that elect
only to provide liquidity in certain circumstances, such as to receive
a maker fee (rebate) upon execution of an order, the proposed order
type will accommodate this strategy. Add Liquidity Orders will only be
executed as a ``maker'' if elected.
    Participants may choose to cancel or re-price Add Liquidity Orders
if, at the time of entry, the order is executable on BX or the order is
not executable on BX but would lock or cross the national best bid or
offer. Allowing Add Liquidity Order to re-price ensures that Add
Liquidity Orders are only executed when providing liquidity and avoid
executing against a non-displayed order or quote resting on BX's order
book, which would be in direct contravention with the purpose of the
order type--to provide liquidity, not take liquidity. The Add Liquidity
Order type is one of the order types that Participants may elect to
utilize on BX to accomplish their trading strategies. The Exchange
believes that adoption of the Add Liquidity Order will protect
investors and the general public by making clear the manner in which
the order would re-price on BX's order book if re-price is elected,
that is to the MPV above the best non-displayed bid price (for sell
orders) or below the best non-displayed offer price (for buy orders).
As is the case today, if an order would not lock or cross an order or
quote on the System but would lock or cross the NBBO, the order will be
handled pursuant to Options 3, Section 5(d).
    Add Liquidity Orders may only be submitted when an options series
is open for trading.\33\ Therefore, an Add Liquidity Order would not be
accepted during the Opening Process as the order book is not available.
The Exchange believes that similar to ISE, GEMX and MRX, the adoption
of an Add Liquidity Order will give market participants greater control
over the circumstances in which their orders are executed in addition
to the order types which are currently offered today on BX.
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    \33\ ISE, GEMX and MRX will propose a change to Options 3,
Section 7(n) to add similar rule text.
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    The Exchange's proposal to amend Options 3, Section 7(a)(11) to
remove the title ``Block Order'' at the beginning of the sentence will
conform the style of the description to the remaining order types
within Options 3, Section 7.
Options 3, Section 13
    With respect to amendments to Options 3, Section 13, first, the
proposed rule change deletes a PRISM auction eligibility requirement
that restricts PRISM orders from being submitted during the final two
seconds of the trading day. As discussed above, this system restriction
is legacy functionality that was removed as part of the Exchange's
technology migration in 2020. The Exchange is therefore proposing to
remove the corresponding rule text in Options 3, Section 13(i)(F) as
obsolete. The Exchange believes that the proposed changes will align
the PRISM rule with the current operation of the Exchange's system and
will reduce potential confusion about when PRISM orders may be
submitted. As noted above, the Exchange's affiliated options markets,
Nasdaq ISE, GEMX, and MRX, do not have similar system restrictions for
their respective price improvement mechanisms.\34\ Furthermore, the
Exchange believes that removing this system restriction may encourage
greater participation in PRISM as Participants are no longer restricted
from submitting PRISM orders during the last two seconds of the trading
day, thereby increasing the opportunity for options orders to receive
executions and price improvement on the Exchange.
---------------------------------------------------------------------------

    \34\ See note 15 above.
---------------------------------------------------------------------------

    Second, the proposed rule change amends Options 3, Section
13(a)(ii)(D) which describes the manner in which a PRISM auction may be
conducted. As noted herein, the term ``marketable limit order'' is too
narrow a term as both orders and quotes on the opposite side of the
market from the PRISM Order received during the PRISM auction would not
cause the PRISM auction to end early and execute against interest
outside of the PRISM auction. Amending Options 3, Section 13(a)(ii)(D)
to replace the term ``marketable limit order'' with the broader term
``marketable interest'' will more accurately describe the way a PRISM
auction would interact with interest in the order book on the opposite
side of the market from the PRISM Order. The Exchange believes that
this amendment is consistent with the Act as it will bring greater
clarity to the PRISM rule.
Options 3, Section 15
    The Exchange's proposal to amend Options 3, Section 15, Risk
Protections, to codify new paragraph (c)(3) to permit BX Market Makers
to prevent their quotes from removing liquidity from the Exchange's
order book promotes equitable principles of trade and protects
investors and the public interest by enhancing the risk protections
available to BX Market Makers. The proposal also promotes the policy
goals of the Commission which has encouraged execution venues,
exchanges, and non-exchanges alike, to enhance risk protection tools
and other mechanisms to decrease risk and increase stability.

    While BX Market Makers may manage their risk by utilizing the Post-
Only Quote Configuration to avoid removing liquidity from the
Exchange's order book if their quote would otherwise lock or cross any
resting order or quote on the BX order book upon entry, there are also
downstream benefits to market participants. Re-priced interest on the
order book provides price improvement for market participants that
interact with that non-displayed interest that is priced better than
the NBBO. For example, the proposed Add Liquidity Order may re-price to
the MPV above the national best bid price (for sell orders) or below
the national best offer price (for buy orders) resulting in better-
priced non-displayed interest that is available on the order book.
Market participants are entitled to the better-priced interest when
they interact with the re-priced Add Liquidity Order on the order book.
Additionally, the benefits of enhanced risk protections flow downstream
to counterparties both within and away from the Exchange, thereby
increasing systemic protections as well.
    The proposed risk protection allows BX Market Makers the ability to
avoid removing liquidity from the Exchange's order book if their quote
would otherwise lock or cross any resting order or quote on BX's order
book upon entry, thereby protecting investors and the general public as
BX Market Makers transact a large number of orders on the Exchange and
bring liquidity to the marketplace. BX Market Makers would utilize the
proposed risk protection to avoid unexpectedly taking liquidity with
non-displayed, non-transparent interest \35\ on the order book. As a
result of taking liquidity, BX Market Makers would incur a taker fee
that may impact the BX Market Maker's ability to provide liquidity and
meet quoting obligations. BX Market Makers are required to add
liquidity on NOM and, in turn, are rewarded with lower pricing \36\ and
enhanced allocations.\37\ Specifically, the risk protection would
permit BX Market Makers to add liquidity only and avoid removing non-
displayed interest on the order book thereby maximizing the benefit of
their quoting to bring liquidity to BX by allowing BX Market Makers to
provide as much liquidity as possible, thereby removing impediments to
and perfecting the mechanism of a free and open market and a national
market system and protecting investors and the public interest. There
is no impact to other market participants by introducing this Post-Only
Quote Configuration as other non-Market Makers may utilize the proposed
Add Liquidity Only order type that will continue to benefit downstream
counterparties, both within and away from the Exchange, who may
interact with non-displayed interest on BX's order book and thereby
interact with order flow that is priced better than the NBBO. Also,
other market participants may interact with the liquidity provided by
BX Market Makers.
---------------------------------------------------------------------------

    \35\ See note 18 above.
    \36\ See Options 7, Section 2.
    \37\ See Options 3, Section 10.
---------------------------------------------------------------------------

    This optional risk protection enables BX Market Makers to better
manage their risk when quoting on BX. Today, BOX,\38\ NYSE Arca,\39\
MIAX Emerald \40\ and NOM \41\ have similar functionality. BOX does not
permit Market Maker's quotes to take liquidity and will reject the
quote. Other options markets, unlike BOX, continue to permit their
market makers to add or remove liquidity from the order book.\42\ NYSE
Arca and MIAX Emerald will re-price quotes one MPV to avoid the quote
from trading as a liquidity taker against the resting order similar to
BX's proposal. Also, the Exchange's proposal permits a BX Market Maker
a choice as to whether to cancel or re-price its quote when using the
Post-Only Quote Configuration.
---------------------------------------------------------------------------

    \38\ BOX Rules provide, ``Notwithstanding Rule 100(a)(56), all
quotes and quote updates on BOX after the opening are liquidity
adding only. Specifically, after the Opening Match pursuant to Rule
7070, a Market Maker's quote will not execute against a resting
order or quote on the BOX Book. If an incoming quote is marketable
against the BOX Book and will execute against a resting order or
quote, it will be rejected.'' See BOX IM-8050-3. See also Securities
Exchange Act Release No. 79311 (November 15, 2016), 81 FR 83322
(November 21, 2016) (SR-BOX-2016-45) (Order Approving a Proposed
Rule Change To Amend the Treatment of Quotes To Provide That All
Quotes on BOX Are Liquidity Adding Only).
    \39\ NYSE Arca permits a market maker to optionally designate a
quote as ``Add Liquidity Only.'' See NYSE Arca Rule 6.37A-
O(a)(3)(B).
    \40\ See MIAX Emerald Rule 517(a)(1)(i).
    \41\ See Securities and Exchange Release No. 93662 (November 23,
2021), 86 FR 68009 (November 30, 2021) (SR-NASDAQ-2021-094) (Notice
of Filing and Immediate Effectiveness of Proposed Rule Change To
Adopt a Post-Only Quote Configuration Risk Protection).
    \42\ Miami International Securities Exchange LLC (``MIAX'')
permits its market makers to add and remove liquidity from the order
book. See MIAX's Fee Schedule which delineates Maker and Taker
pricing. Nasdaq ISE, LLC (``ISE'') also permits market makers to add
and remove liquidity from the order book. See ISE's Pricing Schedule
at Options 7.
---------------------------------------------------------------------------

    Finally, NOM recently codified \43\ a similar risk protection,
however, unlike BX which re-prices in MPVs, NOM reprices $.01 below the
current low offer (for bids) or above the current best bid (for offers)
and displays the quote at one MPV below the current low offer (for
bids) or above the current best bid (for offers). The Exchange notes
that, unlike BX, NOM does not offer auction functionality. Because an
auction mechanism may interact adversely with Add Liquidity Only Orders
or quotes with a Post-Only Quote Configuration that are re-priced in
$0.01 increments and displayed at MPV increments, the Exchange proposes
to re-price at one MPV.\44\ BX has the PRISM auction.\45\ The Exchange
believes that it is consistent with the protection of investors and the
general public to utilize one MPV to re-price an Add Liquidity Only
Order or quote with a Post-Only Quote Configuration to avoid a PRISM
auction rejecting against a non-displayed Add Liquidity Only Order or
quote with a Post-Only Quote Configuration. The Exchange notes that a
similar result could not be obtained on NOM as it has no auctions. The
Add Liquidity Order on ISE, GEMX and MRX \46\ also re-prices in one MPV
as those markets have a price improvement auction.\47\
---------------------------------------------------------------------------

    \43\ See Securities and Exchange Release No. 93662 (November 23,
2021), 86 FR 68009 (November 30, 2021) (SR-NASDAQ-2021-094) (Notice
of Filing and Immediate Effectiveness of Proposed Rule Change To
Adopt a Post-Only Quote Configuration Risk Protection).
    \44\ For example, the inbound auction would reject against the
non-displayed Add Liquidity Only Order or quote with a Post-Only
Quote Configuration with an auction mechanism.
    \45\ See Options 3, Section 13.
    \46\ See Options 3, Section 7(n).
    \47\ Id.
---------------------------------------------------------------------------

    Further, with the adoption of Add Liquidity Orders as proposed
herein within Options 3, Section 7, all BX Participants may utilize the
Add Liquidity Order. The Post-Only Quote Configuration is available to
Market Makers only as a risk protection.
    Unlike other market participants, BX Market Makers have certain
obligations on the market. BX Market Makers are required to provide
continuous two-sided quotes on a daily basis \48\ and are subject to
various obligations associated with providing liquidity on the
market.\49\ BX Market Makers are the sole liquidity providers on the
Exchange and, therefore, are offered certain quote risk protections
noted within Options 3, Section 15 to allow them to manage their risk
more effectively.\50\ The proposed Post-Only Quote Configuration is
another risk protection afforded to BX Market Makers to assist them in
managing their risk while continuing to comply with their obligations.
The Exchange notes that

enhancing the ability of BX Market Makers to add liquidity and avoid
taking liquidity from the order book promotes just and equitable
principles of trade on BX and protects investors and the public
interest, thereby enhancing market structure by allowing BX Market
Makers to add liquidity only. Greater liquidity benefits all market
participants by providing more trading opportunities and attracting
greater participation by BX Market Makers. Also, an increase in the
activity of BX Market Makers in turn facilitates tighter spreads.
---------------------------------------------------------------------------

    \48\ See BX Options 2, Section 4(j) and Section 5(d).
    \49\ See BX Options 2, Section 4.
    \50\ Options 3, Section 15(c) describes the Anti-Internalization
and Quotation Adjustments Protections that are available today to BX
Market Makers.
---------------------------------------------------------------------------

    Finally, with the proposed addition of Add Liquidity Orders, all
Participants may utilize similar functionality for orders and quotes.

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 not necessary or appropriate in
furtherance of the purposes of the Act.
Options 3, Section 1
    The Exchange's proposal to amend Options 3, Section 1 concerning
the Days and Hours of Business does not impose an undue burden on
competition. The proposal to amend the title from ``Days and Hours of
Business'' to ``Hours of Business'' will bring greater clarity to the
rule. Amending Options 3, Section 1(c) to reference General 3, Section
1030 will provide Participants with a guidepost as to where to locate
the rule that applies to the days the Exchange is open for business.
The proposed updated citations to the Options 4 rules will provide
correct references for Participants and thereby bring greater clarity
to the rules.
Options 3, Section 7
    The Exchange's proposal to amend Options 3, Section 7 to add a new
order type entitled ``Add Liquidity Order'' within Options 3, Section
7(a)(12) does not impose an undue burden on competition. Today, ISE,
GEMX and MRX have a similar order type within Options 3, Section 7(n).
The Add Liquidity Order will provide an additional order type that will
give market participants greater control over the circumstances in
which their orders are executed. All Participants may utilize the Add
Liquidity Order type.
    The Exchange's proposal to amend Options 3, Section 7(a)(11) to
remove the title ``Block Order'' at the beginning of the sentence will
conform the style of the description to the remaining order types
within Options 3, Section 7.
Options 3, Section 13
    Removing Options 3, Section 13(i)(F) does not impose an undue
burden on competition as the rule text is obsolete and the removal of
the rule text will bring greater transparency to and reducing potential
confusion about the Exchange's Rulebook.
    Amending Options 3, Section 13(a)(ii)(D) to utilize the broader
term ``marketable interest'' does not impose an undue burden on
competition as it will more accurately describe the way a PRISM auction
would interact with interest in the order book on the opposite side of
the market from the PRISM Order.
Options 3, Section 15
    Adopting a Post-Only Quote Configuration within Options 3, Section
15(c)(3) does not impose an undue burden on competition, rather the
proposal provides BX Market Makers with the opportunity to continue to
avail themselves of functionality that currently exists on BOX, NYSE
Arca, MIAX Emerald and NOM.\51\
---------------------------------------------------------------------------

    \51\ See notes 21-25 above.
---------------------------------------------------------------------------

    The proposal does not impose a burden on inter-market competition,
because Participants may choose to become market makers on a number of
other options exchanges, which may have similar but not identical
features. The Post-Only Quote Configuration functionality will continue
to benefit downstream counterparties, both within and away from the
Exchange, who may interact with non-displayed interest on BX's order
book and thereby interact with order flow that is priced better than
the NBBO.
    The proposal does not impose a burden on intra-market competition.
BX proposes to adopt an Add Liquidity Order herein which will permit
all Participants to receive similar treatment for their orders.
Offering BX Market Makers the ability to configure their quotes as
Post-Only will allow all market participants on BX to add liquidity
only if desired.
    The proposed risk protection allows BX Market Makers the ability to
avoid removing liquidity from the Exchange's order book if their quote
would otherwise lock or cross any resting order or quote on BX's order
book upon entry, thereby protecting investors and the general public as
BX Market Makers transact a large number of orders on the Exchange and
bring liquidity to the marketplace. BX Market Makers are required to
add liquidity on BX and, in turn, are rewarded with lower pricing \52\
and enhanced allocations.\53\ Specifically, the risk protection would
permit BX Market Makers to add liquidity only and avoid removing non-
displayed interest on the order book thereby maximizing the benefit of
their quoting to bring liquidity to BX by allowing BX Market Makers to
provide as much liquidity as possible. Unlike other market
participants, BX Market Makers have certain obligations on the market.
BX Market Makers are required to provide continuous two-sided quotes on
a daily basis \54\ and are subject to various obligations associated
with providing liquidity on the market.\55\ BX Market Makers are the
sole liquidity providers on the Exchange and, therefore, are offered
certain quote risk protections noted within Options 3, Section 15 to
allow them to manage their risk more effectively.\56\ The proposed
Post-Only Quote Configuration is another risk protection afforded to BX
Market Makers to assist them in managing their risk while continuing to
comply with their obligations.
---------------------------------------------------------------------------

    \52\ See Options 7, Section 2.
    \53\ See Options 3, Section 10.
    \54\ See BX Options 2, Section 4(j) and Section 5(d).
    \55\ See BX Options 2, Section 4.
    \56\ Options 3, Section 15(c) describes the Anti-Internalization
and Quotation Adjustments Protections that are available today to BX
Market Makers.
---------------------------------------------------------------------------

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

    No written comments were either solicited or received.

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

    Because the foregoing proposed rule change does not: (i)
Significantly affect the protection of investors or the public
interest; (ii) impose any significant burden on competition; and (iii)
become operative for 30 days from the date on which it was filed, or
such shorter time as the Commission may designate, it has become
effective pursuant to Section 19(b)(3)(A)(iii) of the Act \57\ and
subparagraph (f)(6) of Rule 19b-4 thereunder.\58\
---------------------------------------------------------------------------

    \57\ 15 U.S.C. 78s(b)(3)(A)(iii).
    \58\ 17 CFR 240.19b-4(f)(6). In addition, Rule 19b-4(f)(6)
requires a self-regulatory organization to give the Commission
written notice of its intent to file the proposed rule change at
least five business days prior to the date of filing of the proposed
rule change, or such shorter time as designated by the Commission.
The Exchange has satisfied this requirement.
---------------------------------------------------------------------------

    At any time within 60 days of the filing of the proposed rule
change, the Commission summarily may

temporarily suspend such rule change if it appears to the Commission
that such action is necessary or appropriate in the public interest,
for the protection of investors, or otherwise in furtherance of the
purposes of the Act. If the Commission takes such action, the
Commission shall institute proceedings to determine whether the
proposed rule should be approved or 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-BX-2021-054 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-BX-2021-054. This file
number should be included on the subject line if email is used. To help
the Commission process and review your comments more efficiently,
please use only one method. The Commission will post all comments on
the Commission's internet website (http://www.sec.gov/rules/sro.shtml).
    Copies of the submission, all subsequent amendments, all written
statements with respect to the proposed rule change that are filed with
the Commission, and all written communications relating to the proposed
rule change between the Commission and any person, other than those
that may be withheld from the public in accordance with the provisions
of 5 U.S.C. 552, will be available for website viewing and printing in
the Commission's Public Reference Room, 100 F Street NE, Washington, DC
20549, on official business days between the hours of 10:00 a.m. and
3:00 p.m. Copies of the filing also will be available for inspection
and copying at the principal office of the Exchange. All comments
received will be posted without change. Persons submitting comments are
cautioned that we do not redact or edit personal identifying
information from comment submissions. You should submit only
information that you wish to make available publicly.
    All submissions should refer to File Number SR-BX-2021-054 and
should be submitted on or before January 31, 2022.
---------------------------------------------------------------------------

    \59\ 17 CFR 200.30-3(a)(12).

    For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\59\
J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2022-00154 Filed 1-7-22; 8:45 am]
BILLING CODE 8011-01-P


[Federal Register: December 12, 2007 (Volume 72, Number 238)]
[Notices]
[Page 70627-70628]
[DOCID:fr12de07-87]

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SECURITIES AND EXCHANGE COMMISSION

Release No. 34-56916; File No. SR-NASD-2007-044]

Self-Regulatory Organizations; National Association of Securities
Dealers, Inc. (n/k/a Financial Industry Regulatory Authority Inc.);
Order Granting Approval of Proposed Rule Change, as Modified by
Amendment No. 1 Thereto, To Expand the Class of Entities Permitted To
Use the Delta Hedging Exemption From Equity Options Position Limits

 December 6, 2007.
    On June 29, 2007, the National Association of Securities Dealers,
Inc. (``NASD'') (n/k/a Financial Industry Regulatory Authority, Inc.)
filed with the Securities and Exchange Commission (``Commission''),
pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934
(``Act'')\1\ and Rule 19b-4 thereunder,\2\ a proposed rule change to
amend Rule 2860 to expand the class of entities permitted to use the
delta hedging exemption from equity options position limits.\3\ The
Commission published the proposed rule change for comment in the
Federal Register on August 13, 2007.\4\ On October 15, 2007, FINRA
filed Amendment No. 1 to the proposed rule change.\5\ The Commission
received one comment letter on the proposed rule change.\6\ This order
approves the proposed rule change as modified by Amendment No. 1.
---------------------------------------------------------------------------

    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ On July 26, 2007, the Commission approved a proposed rule
change filed by NASD to amend NASD's Certificate of Incorporation to
reflect its name change to Financial Industry Regulatory Authority
Inc., or FINRA, in connection with the consolidation of the member
firm regulatory functions of NASD and NYSE Regulation, Inc. See
Securities Exchange Act Release No. 56146 (July 26, 2007), 72 FR
42190 (August 1, 2007).
    \4\ See Securities Exchange Act Release No. 56207 (August 6,
2007), 72 FR 45284.
    \5\ In Amendment No. 1, FINRA made technical revisions to the
proposal. This is a technical amendment and is not subject to notice
and comment. In Amendment No. 1, FINRA noted that the effective date
of the proposal will be February 1, 2008, or such later date as may
be necessary to ensure completion of the required technology changes
by the Options Clearing Corporation and the Securities Industry
Automation Corporation.
    \6\ See letter to Nancy M. Morris, Secretary, Commission, from
John R. Vitha, Esq., Chairman, Derivative Products Committee,
Securities Industry and Financial Markets Association, dated
September 25, 2007. The commenter supported the proposed rule
change.
---------------------------------------------------------------------------

    In 2004, the Commission approved amendments to Rule 2860 that
provide a delta hedging exemption from stock

options position and exercise limits \7\ for positions held by
affiliates of FINRA members approved by the Commission as ``OTC
derivatives dealers.'' \8\ Under the proposal, FINRA would expand
eligibility for its delta hedging exemption beyond OTC derivatives
dealers by allowing members and certain non-member affiliates \9\ to
rely on this exemption if its position in standardized and/or
conventional equity options is delta neutral under a ``Permitted
Pricing Model.'' \10\ The options contract equivalent of the net delta
\11\ of a hedged options position still would be subject to the
position limits in Rule 2860 (subject to the availability of any other
position limit exemptions).\12\ A member that intends to employ, or
whose non-member affiliate intends to employ, this exemption would be
required to provide a written certification to FINRA stating that the
member and/or its affiliate will use a Permitted Pricing Model, and
that if an affiliate ceases to hedge stock options positions in
accordance with such systems and models, it will provide immediate
written notice to the member.\13\ Furthermore, any member or designated
aggregation unit would be required to report any aggregate position of
200 or more contracts on the same side of the market and the options
contract equivalent of the net delta of a position representing 200 or
more contracts.\14\ In addition, the options positions of a non-member
relying on this exemption would be required to be carried by a member
with which it is affiliated.\15\
---------------------------------------------------------------------------

    \7\ The proposed rule change does not expressly amend FINRA's
options exercise limits in Rule 2860(b)(4) because such exercise
limits apply only to the extent Rule 2860(b)(3) imposes position
limits. Thus, as delta neutral positions would be exempt from
position limits under the proposed rule change, such positions also
would be exempt from exercise limits. See NASD Notice to Members 94-
46 (June 1994) at 2 (``* * * exercise limits correspond to position
limits, such that investors in options classes on the same side of
the market are allowed to exercise * * * only the number of options
contracts set forth as the applicable position limit for those
options classes.''). Similarly, for positions held that are not
delta neutral, only the option contract equivalent of the net delta
of such positions would be subject to exercise limits.
    \8\ See Securities Exchange Act Release No. 50748 (November 29,
2004), 69 FR 70485 (December 6, 2004) (SR-NASD-2004-153).
    \9\ The Commission notes that only those non-member affiliates
identified in the definition of ``Permitted Pricing Model'' would be
eligible to rely on the delta hedging exemption. See infra note 10.
    \10\ ``Permitted Pricing Model'' for purposes of this exemption
would be a pricing model used by: (1) A member or its affiliate
subject to consolidated supervision by the Commission pursuant to
Appendix E of Rule 15c3-1 under the Act (i.e., a consolidated
supervised entity or ``CSE''); (2) a financial holding company
(``FHC'') or a company treated as an FHC under the Bank Holding
Company Act of 1956, or its affiliate subject to consolidated
holding company group supervision; (3) a Commission registered OTC
derivatives dealer; (4) a national bank under the National Bank Act;
and (5) a member, or non-member affiliate (that is part of a CSE or
FHC), using a pricing model maintained and operated by the Options
Clearing Corporation. See proposed Rule 2860(b)(3)(A)(vii)(b)(1).
    \11\ ``Net delta'' would be defined to mean ``the number of
shares that must be maintained (either long or short) to offset the
risk that the value of an equity options position will change with
incremental changes in the price of the security underlying the
options position.'' See proposed changes to Rule 2860(b)(2)(GG).
    ``Options Contract Equivalent of the Net Delta'' would be
defined to mean the net delta divided by the number of shares
underlying the options contract. See proposed Rule 2860(b)(2)(LL).
    \12\ See proposed Rule 2860(b)(3)(A)(vii)(b). The Commission
notes that Rule 2860(b)(3)(A)(vii) provides for multiple,
independent hedge exemptions. Of course, to the extent that a
position is used to hedge for the purpose of one exemption from
position limit requirements, such as the delta hedge exemption, such
position cannot be used to take advantage of another exemption from
position limit requirements.
    \13\ See proposed Rule 2860(b)(3)(A)(vii)(b)(3).
    \14\ See proposed Rule 2860(b)(3)(A)(vii)(b)(4).
    \15\ See proposed Rule 2860(b)(3)(A)(vii)(b)(3).
---------------------------------------------------------------------------

    The Commission finds that the proposed rule change is consistent
with the requirements of the Act and the rules and regulations
thereunder that are applicable to a national securities
association.\16\ In particular, the Commission believes that the
proposed rule change is consistent with Section 15A(b)(6) of the
Act,\17\ which requires, among other things, that FINRA rules be
designed to prevent fraudulent and manipulative acts and practices, to
promote just and equitable principles of trade, to remove impediments
to and perfect the mechanism of a free and open market and a national
market system, and, in general, to protect investors and the public
interest. The Commission has previously stated its support for
recognizing options positions hedged on a delta neutral basis as
properly exempted from position limits.\18\
---------------------------------------------------------------------------

    \16\ In approving this rule, the Commission notes that it has
considered the proposed rule's impact on efficiency, competition,
and capital formation. See 15 U.S.C. 78c(f).
    \17\ 15 U.S.C. 78o-3(b)(6).
    \18\ See Securities Exchange Act Release No. 40594 (October 23,
1998), 63 FR 59362, 59380 (November 3, 1998) (File No. S7-30-97)
(adopting rules relating to OTC derivatives dealers).
---------------------------------------------------------------------------

    It is therefore ordered, pursuant to Section 19(b)(2) of the
Act,\19\ that the proposed rule change (SR-NASD-2007-044), as modified
by Amendment No. 1, be, and it hereby is, approved.
---------------------------------------------------------------------------

    \19\ 15 U.S.C. 78s(b)(2).
    \20\ 17 CFR 200.30-3(a)(12).

    For the Commission, by the Division of Trading and Markets
pursuant to delegated authority.\20\
Florence E. Harmon,
Deputy Secretary.
 [FR Doc. E7-24044 Filed 12-11-07; 8:45 am]

BILLING CODE 8011-01-P


[Federal Register Volume 81, Number 98 (Friday, May 20, 2016)]
[Notices]
[Pages 31983-31984]
[FR Doc No: 2016-11871]

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SECURITIES AND EXCHANGE COMMISSION

Proposed Collection; Comment Request

Upon Written Request, Copies Available From: Securities and Exchange
Commission, Office of FOIA Services, 100 F Street NE., Washington, DC
20549-2736.

Extension:
    Rule 19b-5 and Form PILOT, SEC File No. 270-448, OMB Control No.
3235-0507.

    Notice is hereby given that, pursuant to the Paperwork Reduction
Act of 1995 (``PRA'') (44 U.S.C. 3501 et seq.), the Securities and
Exchange Commission (``Commission'') is soliciting comments on the
existing collection of information provided for in Rule 19b-5 (17 CFR
240.19b-5) and Form PILOT (17 CFR 249.821) under the Securities
Exchange

Act of 1934 (``Act'') (15 U.S.C. 78a et seq.). The Commission plans to
submit this existing collection of information to the Office of
Management and Budget (``OMB'') for extension and approval.
    Rule 19b-5 provides a temporary exemption from the rule-filing
requirements of Section 19(b) of the Act (15 U.S.C. 78s(b)) to self-
regulatory organizations (``SROs'') wishing to establish and operate
pilot trading systems. Rule 19b-5 permits an SRO to develop a pilot
trading system and to begin operation of such system shortly after
submitting an initial report on Form PILOT to the Commission. During
operation of any such pilot trading system, the SRO must submit
quarterly reports of the system's operation to the Commission, as well
as timely amendments describing any material changes to the system.
Within two years of operating such pilot trading system under the
exemption afforded by Rule 19b-5, the SRO must submit a rule filing
pursuant to Section 19(b)(2) of the Act (15 U.S.C. 78s(b)(2)) to obtain
permanent approval of the pilot trading system from the Commission.
    The collection of information is designed to allow the Commission
to maintain an accurate record of all new pilot trading systems
operated by SROs and to determine whether an SRO has properly availed
itself of the exemption afforded by Rule 19b-5, is operating a pilot
trading system in compliance with the Act, and is carrying out its
statutory oversight obligations under the Act.
    The respondents to the collection of information are national
securities exchanges and national securities associations.
    While there are 20 national securities exchanges and national
securities associations that may avail themselves of the exemption
under Rule 19b-5 and the use of Form PILOT, it is estimated that
approximately three respondents will file a total of 3 initial reports,
12 quarterly reports, and 6 amendments on Form PILOT per year, with an
estimated total annual response burden of 126 hours and an estimated
total annual cost burden of $10,047. At an average hourly cost of
$272.33, the estimated aggregate related internal cost of compliance
with respect to Rule 19b-5 for all respondents is $34,314 per year (126
burden hours multiplied by $272.33/hour = $34,314).
    Written comments are invited on (a) whether the proposed collection
of information is necessary for the proper performance of the functions
of the Commission, including whether the information shall have
practical utility; (b) the accuracy of the Commission's estimates of
the burden of the proposed collection of information; (c) ways to
enhance the quality, utility, and clarity of the information to be
collected; and (d) ways to minimize the burden of the collection of
information on respondents, including through the use of automated
collection techniques or other forms of information technology.
Consideration will be given to comments and suggestions submitted in
writing within 60 days of this publication.
    An agency may not conduct or sponsor, and a person is not required
to respond to, a collection of information under the PRA unless it
displays a currently valid OMB control number.
    Please direct your written comments to: Pamela Dyson, Director/
Chief Information Officer, Securities and Exchange Commission, c/o Remi
Pavlik-Simon, 100 F Street NE., Washington, DC 20549 or send an email
to<EMAIL_ADDRESS>
    Dated: May 16, 2016.
Robert W Errett,
Deputy Secretary.
[FR Doc. 2016-11871 Filed 5-19-16; 8:45 am]
 BILLING CODE 8011-01-P


[Federal Register Volume 82, Number 229 (Thursday, November 30, 2017)]
[Proposed Rules]
[Pages 56749-56752]
[FR Doc No: 2017-25747]

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

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

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

Federal Register / Vol. 82, No. 229 / Thursday, November 30, 2017 /
Proposed Rules

DEPARTMENT OF TRANSPORTATION

Federal Aviation Administration

14 CFR Part 39

[Docket No. FAA-2017-1096; Product Identifier 2017-NM-072-AD]
RIN 2120-AA64

Airworthiness Directives; Airbus Airplanes

AGENCY: Federal Aviation Administration (FAA), DOT.

ACTION: Notice of proposed rulemaking (NPRM).

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

SUMMARY: We propose to adopt a new airworthiness directive (AD) for
certain Airbus Model A318, A319, A320, and A321 series airplanes; all
Model A330-200 Freighter, -200, and -300 series airplanes; and all
Model A340-200, -300, -500, and -600 series airplanes. This proposed AD
was prompted by reports of false traffic collision avoidance system
(TCAS) resolution advisories. This proposed AD would require modifying
the software in the TCAS computer processor or replacing the TCAS
computer with a new TCAS computer. We are proposing this AD to address
the unsafe condition on these products.

DATES: We must receive comments on this proposed AD by January 16,
2018.

ADDRESSES: You may send comments, using the procedures found in 14 CFR
11.43 and 11.45, by any of the following methods:
     Federal eRulemaking Portal: Go to http://www.regulations.gov. Follow the instructions for submitting comments.
     Fax:<PHONE_NUMBER>.
     Mail: U.S. Department of Transportation, Docket
Operations, M-30, West Building Ground Floor, Room W12-140, 1200 New
Jersey Avenue SE., Washington, DC 20590.
     Hand Delivery: Deliver to Mail address above between 9
a.m. and 5 p.m., Monday through Friday, except Federal holidays.
    For service information identified in this NPRM, contact Airbus,
Airworthiness Office--EIAS, 1 Rond Point Maurice Bellonte, 31707
Blagnac Cedex, France; telephone +33 5 61 93 36 96; fax +33 5 61 93 44
51; email [email protected]; Internet http://www.airbus.com. You may view this service information at the FAA,
Transport Standards Branch, 1601 Lind Avenue SW., Renton, WA. For
information on the availability of this material at the FAA, call 425-
227-1221.

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-
1096; 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 NPRM, the regulatory evaluation, any comments received,
and other information. The street address for the Docket Operations
office (telephone<PHONE_NUMBER>) is in the ADDRESSES section. Comments
will be available in the AD docket shortly after receipt.

FOR FURTHER INFORMATION CONTACT: Sanjay Ralhan, Aerospace Engineer,
International Section, Transport Standards Section, FAA, 1601 Lind
Avenue SW., Renton, WA 98057-3356; telephone<PHONE_NUMBER>; fax 425-227-
1149.

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-2017-1096;
Product Identifier 2017-NM-072-AD'' at the beginning of your comments.
We specifically invite comments on the overall regulatory, economic,
environmental, and energy aspects of this NPRM. We will consider all
comments received by the closing date and may amend this NPRM based on
those comments.
    We will post all comments we receive, without change, to http://www.regulations.gov, including any personal information you provide. We
will also post a report summarizing each substantive verbal contact we
receive about this NPRM.

Discussion

    The European Aviation Safety Agency (EASA), which is the Technical
Agent for the Member States of the European Union, has issued EASA
Airworthiness Directive 2017-0091R2, dated June 2, 2017 (referred to
after this as the Mandatory Continuing Airworthiness Information, or
``the MCAI''), to correct an unsafe condition for certain Airbus Model
A318, A319, A320, and A321 series airplanes; all Model A330-200
Freighter, -200, and -300 series airplanes; and all Model A340-200, -
300, -500, and -600 series airplanes. The MCAI states:

    Since 2012, a number of false TCAS [traffic collision avoidance
system] resolution advisories (RA) have been reported by various
European Air Navigation Service Providers. EASA has published
certification guidance material for collision avoidance systems (AMC
20-15) which defines a false TCAS RA as an RA that is issued, but
the RA condition does not exist. It is possible that more false (or
spurious) RA events have occurred, but were not recorded or
reported. The known events were mainly occurring on Airbus single-
aisle (A320 family) aeroplanes, although several events have also
occurred on Airbus A330 aeroplanes. Investigation determined that
the false RAs are caused on aeroplanes with a certain Honeywell TPA-
100B TCAS processor, P/N 940-0351-001, installed, through a
combination of three factors: (1) Hybrid surveillance enabled; (2)
processor connected to a hybrid GPS source, without a direct
connection to a GPS source; and (3) an encounter with an intruder
aeroplane with noisy (jumping) ADS-B Out position.
    EASA previously published Safety Information Bulletin (SIB)
2014-33 to inform owners and operators of affected aeroplanes about
this safety concern. At that time, the false RAs were not considered
an unsafe condition. Since the SIB was issued, further events have
been reported, involving a third aeroplane.
    This condition, if not corrected, could lead to a loss of
separation with other aeroplanes, possibly resulting in a mid-air
collision.
    Prompted by these latest findings, and after review of the
available information, EASA reassessed the severity and rate of
occurrence of false RAs and has decided that mandatory action must
be taken to reduce the rate of occurrence, and the risk of loss of
separation with other aeroplanes.
    Honeywell International Inc. published Service Bulletin (SB)
940-0351-34-0005 [Publication Number D201611000002] to provide
instructions for an upgrade of TPA-100B processors P/N [part number]
940-0351-001 to P/N 940-0351-005, introducing software version 05/
01.

    Consequently, Airbus developed certain modifications (mod 159658
and mod 206608) and published SB A32034-1656, SB A320-34-1657, SB
A330-34-3342, SB A340-34-4304 and SB A340-34-5118, to provide
instructions for in-service introduction of the software update
(including change to P/N 940-0351-005) on the affected aeroplanes,
or to replace the TCAS processor with a P/N 940-0351-005 unit.
    Consequently, EASA issued AD 2017-0091, to require modification
or replacement of Honeywell TPA-100B TCAS P/N 940-0351-001
processors, hereafter referred to as `affected processor' in this
[EASA] AD. That [EASA] AD also prohibits installation of an affected
processor on post-mod aeroplanes.
    After that [EASA] AD was issued, it was found that an error had
been introduced, inadvertently restricting the required action to
those aeroplanes that had the affected part installed on the Airbus
production line, thereby excluding those that had the part installed
in-service by Airbus SB. Consequently, EASA revised AD 2017-0091 to
amend Note 1 and include references to the relevant Airbus SBs that
introduced the affected processor in service.
    Since EASA AD 2017-0091R1 was issued, prompted by operator
feedback and to avoid confusion, it was decided to exclude
aeroplanes that had an affected processor installed by STC, for
which EASA AD No.: 2017-0091R2 separate [EASA] AD action is planned.
It was also determined that the prohibition to install an affected
processor was too strict, particularly for Group 2 aeroplanes.
    For the reason described above, this [EASA] AD is revised to
reduce the Applicability, introduce some minor editorial changes and
to amend paragraph (3).

    You may examine the MCAI in the AD docket on the Internet at http://www.regulations.gov by searching for and locating Docket No. FAA-2017-
1096.

Related Service Information Under 1 CFR Part 51

    Airbus has issued the following service information, which
describes procedures for modifying the software in the TCAS computer
processor and procedures for replacing the TCAS computer with a new
TCAS computer. These documents are distinct since they apply to
different airplane models in different configurations.
     Airbus Service Bulletin A320-34-1656, dated April 19,
2017.
     Airbus Service Bulletin A320-34-1657, dated April 19,
2017.
     Airbus Service Bulletin A330-34-3342, dated April 19,
2017.
     Airbus Service Bulletin A340-34-4304, dated April 19,
2017.
     Airbus Service Bulletin A340-34-5118, dated April 19,
2017.
    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

    Honeywell has issued Service Bulletin 940-0351-34-0005, Revision 0,
dated January 20, 2017. This service information describes procedures
for modifying an affected TCAS processor and re-identifying the
processor as part number (P/N) 940-0351-005.

FAA's Determination and Requirements of This Proposed AD

    This product has been approved by the aviation authority of another
country, and is approved for operation in the United States. Pursuant
to our bilateral agreement with the State of Design Authority, we have
been notified of the unsafe condition described in the MCAI and service
information referenced above. We are proposing this AD because we
evaluated all pertinent information and determined an unsafe condition
exists and is likely to exist or develop on other products of these
same type designs.

Differences Between This Proposed AD and the MCAI or Service
Information

    Paragraph 3 of EASA AD 2017-0091R2, dated June 2, 2017, states
that, for Group 2 airplanes (that do not have an affected processor
installed), a Honeywell TPA-100B processor having P/N 940-0351-001
should not be installed on any airplane as of June 2, 2018; however,
this proposed AD would prohibit installation of a processor having P/N
940-0351-001 as of the effective date of the AD. In cases where a part
is known to be unairworthy--such as when it creates an unsafe
condition--we typically do not allow such a part to be installed on
airplanes that are not affected by the unsafe condition as of the
effective date of the AD.

Costs of Compliance

    We estimate that this proposed AD affects 205 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
----------------------------------------------------------------------------------------------------------------
Software modification...................  2 work-hours x $85 per              $0            $170         $14,450
                                           hour = $170.
TCAS replacement........................  2 work-hours work-                $298            $468         $95,940
                                           hours x $85 per hour
                                           = $170.
----------------------------------------------------------------------------------------------------------------

Authority for This Rulemaking

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

Regulatory Findings

    We determined that this proposed AD would not have federalism
implications under Executive Order 13132. This proposed AD would not
have a substantial direct effect on the States, on the relationship
between the national Government and the States, or on the distribution
of power and responsibilities among the various levels of government.

    For the reasons discussed above, I certify this proposed
regulation:

    1. Is not a ``significant regulatory action'' under Executive Order
12866;
    2. Is not a ``significant rule'' under the DOT Regulatory Policies
and Procedures (44 FR 11034, February 26, 1979);
    3. Will not affect intrastate aviation in Alaska; and
    4. Will not have a significant economic impact, positive or
negative, on a substantial number of small entities under the criteria
of the Regulatory Flexibility Act.

List of Subjects in 14 CFR Part 39

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

The Proposed Amendment

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

PART 39--AIRWORTHINESS DIRECTIVES

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

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

Sec.  39.13   [Amended]

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

Airbus: Docket No. FAA-2017-1096; Product Identifier 2017-NM-072-AD.

(a) Comments Due Date

    We must receive comments by January 16, 2018.

(b) Affected ADs

    None.

(c) Applicability

    This AD applies to Airbus airplanes, all manufacturer serial
numbers, certificated in any category, as identified in paragraphs
(c)(1) through (c)(11) of this AD; except those Model A318, A319,
A320 and A321 series airplanes that have been modified by a
supplemental type certificate that installs Honeywell traffic alert
and collision avoidance system (TCAS) 7.1 processor, part number (P/
N) 940-0351-001.
    (1) Model A318-111, -112, -121, and -122 airplanes.
    (2) Model A319-111, -112, -113, -114, -115, -131, -132, and -133
airplanes.
    (3) Model A320-211, -212, -214, -216, -231, -232, -233, -251N,
and -271N airplanes.
    (4) Model A321-111, -112, -131, -211, -212, -213, -231, -232, -
251N, -253N, and -271N airplanes.
    (5) Model A330-223F and -243F airplanes.
    (6) Model A330-201, -202, -203, -223, and -243 airplanes.
    (7) Model A330-301, -302, -303, -321, -322, -323, -341, -342,
and -343 airplanes.
    (8) Model A340-211, -212, and -213 airplanes.
    (9) Model A340-311, -312, and -313 airplanes.
    (10) Model A340-541 airplanes.
    (11) Model A340-642 airplanes.

(d) Subject

    Air Transport Association (ATA) of America Code 34, Navigation.

(e) Reason

    This AD was prompted by reports of false TCAS resolution
advisories. We are issuing this AD to prevent false TCAS resolution
advisories. False TCAS resolution advisories could lead to a loss of
separation with other airplanes, possibly resulting in a mid-air
collision.

(f) Compliance

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

(g) Definition of Group 1 and Group 2 Airplanes

    (1) For the purposes of this AD, Group 1 airplanes are those
that have a Honeywell TPA-100B TCAS P/N 940-0351-001 processor that
was installed during production, or in-service using the procedures
in the applicable service information identified in paragraphs
(g)(1)(i) through (g)(1)(xii) of this AD.
    (i) Airbus Service Bulletin A320-34-1504.
    (ii) Airbus Service Bulletin A320-34-1506.
    (iii) Airbus Service Bulletin A320-34-1533.
    (iv) Airbus Service Bulletin A320-34-1534.
    (v) Airbus Service Bulletin A320-34-1572.
    (vi) Airbus Service Bulletin A330-34-3247.
    (vii) Airbus Service Bulletin A330-34-3281.
    (viii) Airbus Service Bulletin A330-34-3344.
    (ix) Airbus Service Bulletin A340-34-4263.
    (x) Airbus Service Bulletin A340-34-4254.
    (xi) Airbus Service Bulletin A340-34-5076.
    (xii) Airbus Service Bulletin A340-34-5087.
    (2) For the purposes of this AD, Group 2 airplanes are airplanes
that do not have a Honeywell TPA-100B TCAS P/N 940-0351-001
processor installed.

(h) Software Modification or TCAS Processor Replacement

    For Group 1 airplanes, as identified in paragraph (g)(1) of this
AD: Within 12 months after the effective date of this AD, do a
modification of the TCAS processor to upgrade the software, or
replace the TCAS processor with a TCAS TPA-100B processor having P/N
940-0351-005, in accordance with the Accomplishment Instructions of
the applicable service information identified in paragraph (i) of
this AD.
    Note 1 to paragraph (h) of this AD: Guidance for modifying an
affected TCAS processor and re-identifying the processor as P/N 940-
0351-005 can be found in paragraph 3.F. of Honeywell Service
Bulletin 940-0351-34-0005, Revision 0, dated January 20, 2017.

(i) Service Information for Accomplishment of Actions Specified in
Paragraph (h) of This AD

    Use the applicable service information specified in paragraphs
(i)(1) through (i)(5) of this AD to accomplish the actions required
by paragraph (h) of this AD.
    (1) For Model A318 and A319 series airplanes; Model A320-211,
A320-212, A320-214, A320-216, A320-231, A320-232, and A320-233
airplanes; and Model A321 series airplanes: Airbus Service Bulletin
A320-34-1656, dated April 19, 2017.
    (2) For Model A320-251N and Model A320-271N airplanes: Airbus
Service Bulletin A320-34-1657, dated April 19, 2017.
    (3) For Model A330-200, A330-200 Freighter, and A330-300 series
airplanes: Airbus Service Bulletin A330-34-3342, dated April 19,
2017.
    (4) For Model A340-200 and A340-300 series airplanes: Airbus
Service Bulletin A340-34-4304, dated April 19, 2017.
    (5) For Model A340-500 and A340-600 series airplanes: Airbus
Service Bulletin A340-34-5118, dated April 19, 2017.

 (j) Identification of Airplanes That do not Have a Honeywell TPA-100B
TCAS P/N 940-0351-001 Processor Installed

    An airplane on which Airbus modification 159658 or Airbus
modification 206608, as applicable, has been embodied in production
and on which it can be positively determined that no TCAS processor
has been replaced or modified on that airplane since its date of
manufacture is a Group 2 airplane, as identified in paragraph (g)(2)
of this AD. Group 2 airplanes are not affected by the requirements
of paragraph (h) of this AD. A review of airplane maintenance
records is acceptable to make this determination, provided those
records can be relied upon for that purpose and that the TCAS
processor part number and software standard can be positively
identified from that review.

(k) Parts Installation Prohibition

    Installation of a Honeywell TCAS TPA-100B processor having P/N
940-0351-001 is prohibited, as required by paragraphs (k)(1) and
(k)(2) of this AD.
    (1) For Group 1 airplanes, as identified in paragraph (g)(1) of
this AD: After modification of an airplane as required by paragraph
(h) of this AD.
    (2) For Group 2 airplanes, as identified in paragraph (g)(2) of
this AD: As of the effective date of this AD.

(l) Other FAA AD Provisions

    The following provisions also apply to this AD:
    (1) Alternative Methods of Compliance (AMOCs): The Manager,
International Section, Transport Standards Branch, FAA, has the
authority to approve AMOCs for this AD, if requested using the
procedures found in 14 CFR 39.19. In accordance with 14 CFR 39.19,
send your request to your principal inspector or local Flight
Standards District Office, as appropriate. If sending information
directly to the International Section, send it

to the attention of the person identified in paragraph (m)(2) of
this AD. Information may be emailed to: [email protected]. 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.
    (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
Section, Transport Standards Branch, FAA; or the European Aviation
Safety Agency (EASA); or Airbus's EASA Design Organization Approval
(DOA). If approved by the DOA, the approval must include the DOA-
authorized signature.
    (3) Required for Compliance (RC): If any service information
contains procedures or tests that are identified as RC, those
procedures and tests must be done to comply with this AD; any
procedures or tests that are not identified as RC are recommended.
Those procedures and tests that are not identified as RC may be
deviated from using accepted methods in accordance with the
operator's maintenance or inspection program without obtaining
approval of an AMOC, provided the procedures and tests identified as
RC can be done and the airplane can be put back in an airworthy
condition. Any substitutions or changes to procedures or tests
identified as RC require approval of an AMOC.

(m) Related Information

    (1) Refer to Mandatory Continuing Airworthiness Information
(MCAI) EASA Airworthiness Directive 2017-0091R2, dated June 2, 2017,
for related information. This MCAI may be found in the AD docket on
the Internet at http://www.regulations.gov by searching for and
locating Docket No. FAA-2017-1096.
    (2) For more information about this AD, contact Sanjay Ralhan,
Aerospace Engineer, International Section, Transport Standards
Section, FAA, 1601 Lind Avenue SW., Renton, WA 98057-3356; telephone
425-227-1405; fax<PHONE_NUMBER>.
    (3) For service information identified in this AD, contact
Airbus SAS, Airworthiness Office--EAL, 1 Rond Point Maurice
Bellonte, 31707 Blagnac Cedex, France; telephone +33 5 61 93 36 96;
fax +33 5 61 93 45 80; email [email protected];
Internet http://www.airbus.com. You may view this service
information at the FAA, Transport Standards Branch, 1601 Lind Avenue
SW., Renton, WA. For information on the availability of this
material at the FAA, call<PHONE_NUMBER>.

    Issued in Renton, Washington, on November 22, 2017.
Jeffrey E. Duven,
Director, System Oversight Division, Aircraft Certification Service.
[FR Doc. 2017-25747 Filed 11-29-17; 8:45 am]
BILLING CODE 4910-13-P


Elizabeth Materna To: Allen. Adrianne@ epamail. epa. gov, cohon. keith@ epamail. epa. gov,

siciliano. carolann@ epamail. epa. gov, Keenan. Dru@ epamail. epa. gov,

09/ 24/ 2003 03: 23 Palmer. John@ epamail. epa. gov, lalley. cara@ epamail. epa. gov, Kay Dawn Mar/ NIFC/ BLM/ DOI@ BLM PM cc:

Subject: bull trout spawning criteria Here is a description of the bull trout spawning criteria issue and some related information from our Bull Trout Recovery Plan, October 2002. Issue For most areas of bull trout spawning and rearing where numeric criteria of 12C as the 7DADM apply, we are assuming that the appropriate spawning temperature will be reached as the fall season progresses. Bull trout spawning typically occurs from August to November during periods of decreasing water temperatures. However, reservoirs can interrupt the natural cooling pattern/ process that the assumption is based upon and thus, we need to be able to ensure that water temperatures for BT spawning areas below reservoirs are at the appropriate temperatures ( 9C) during spawning times.

During the EPA Region 10 Temperature Criteria Guidance Project, a panel of experts investigating different aspects of bull trout temperature requirements was assembled to review information related to the range of optimal temperatures for bull trout and risks associated within and beyond the range. The Bull Trout Temperature Criteria Peer Review Panel was specifically asked if establishing a separate spawning season criteria was warranted. The panel did not feel it would be appropariate to establish a separate spawning criteria with the possible exception of regulated rivers ( i. e. those with dams). US Fish and Wildlife Service ( FWS) Bull Trout Recovery Unit Team lead biologists for Oregon were separately surveyed about this issue and they also felt that a separate spawning criteria was not necessary except where spawning areas occur below dams.

FWS Bull Trout Recovery Unit Team lead biologists were asked to identify dams or reservoirs above spawning areas. They identified the following four dams: Clear Creek Reservoir and Mehlhorn Reservoir on upper Clear Creek in the Pine Subbasin ( Powder Basin); Laurance Lake ( Clear Branch Dam) on the Middle Fork Hood River ( Hood Basin); and Carmen Reservoir on the upper McKenzie in the Willamette Basin. The corresponding spawning times from ODFW timing information is as follows: Hood Basin ( Middle Fork Hood River) peak use Sept. 15 Oct. 30 and lesser use Aug. 15 to Nov. 30; and McKenzie ( above Blue River) peak use Sept. 1 30 and lesser use Aug. 15 Oct. 30. There are no timing tables for the Powder Basin ( Pine Creek) but Paul Bridges of our office ( Recovery Unit Team lead biologist for the John Day Basin with much on the ground experience) said Sept. 1 would be an appropriate start date and Oct. 31 an adequate end date.

General Background Dams affect bull trout by altering temperature regimes. Manipulated flow releases from storage projects alter the natural flow regime and affect water temperature. The effects of the myriad of small irrigation diversion and hydropower projects throughout the range of bull trout are likely of even greater significance than the large hydropower and flood control projects. Many of these are located further up in the watersheds and can periodically dewater a downstream reach. Even if diversions are not so severe as to dewater downstream reaches, reduced flows can result in thermal passage barriers. The prevalence of these structures throughout the range of bull trout has contributed to isolation of bull trout populations to the upper watersheds in many areas.

Although bull trout are widely distrubuted over a large geographic area, increased habitat fragmentation reduces the amount of available habitat and increases isolation from other populations. When species are isolated by fragmentation, low rates of population growth are typical in local populations and their probability of exinction is directly related to the degree of isolation and fragmentation. Without sufficent immigration, growth for local populations may be low and probablility of extinction high. There is more genetic divergence among bull trout than among salmon, indicating less genetic exchange among bull trout populations. Bull trout are isolated in the headwaters of tributaries and where migratory bull trout are not present, these isolated populations cannot be replenished when a disturbance makes local habitats unsuitable.

Basin Specific Information Pine Creek subbasin has depressed resident populations of bull trout. Maximum estimated abundance for bull trout was less than 400 individuals for each stream. Numerous water diversions, ditches, and reservoirs have been constructed to supply water for the irrigated agriculture and ranching activities that occur here. Many of these structures have created unsuitable habitat conditions including elevated water temperatures. In the Pine Creek subbasin there are 12 reservoirs which may be sufficiently raising water temperatures downstream so that bull trout distribution is affected. Habitat fragmentation has resulted in isolated groups of bull trout in this recovery unit.

Bull trout populations in the Willamette Recovery Unit are exposed to greater risk of extinction because of their small population size and physical isolation and they are below the numbers that, in current population theory, are thought to represent a viable population ( minimum of 1,000 adult spawning individuals) to minimize inbreeding effects and maintain an ability to adapt to changing evnironmental conditions. Spawning and rearing habitat is in the mainstem McKenize River above the Trail Bridge pool.

Clear Branch Dam ( Laurance Lake) in the Middle Fork Hood River has isolated bull trout above and below the dam. The relatively warm impounded waters increase stream temperatures below the dam beyond those suitable for bull trout at certain times of the year. The draft recovery plan states that Bull trout in the Clear Branch of Hood River occur primarily above the Clear Branch Dam, however comments collected during the public comment period indicate that it provides spawning and rearing habitat below the dam as well. Migratory life forms persist in at least some local populations with partial ability to connect with other local populations resulting in this area categorized as at an intermediate threat level.