[Federal Register Volume 84, Number 37 (Monday, February 25, 2019)]
[Notices]
[Pages 6026-6031]
[FR Doc No: 2019-03175]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-85166; File No. SR-CboeBZX-2018-077]

Self-Regulatory Organizations; Cboe BZX Exchange, Inc.; Order
Granting Approval of a Proposed Rule Change, as Modified by Amendment
No. 1, To List and Trade Shares of the JPMorgan Inflation Managed Bond
ETF of the J.P. Morgan Exchange-Traded Fund Trust Under Rule 14.11(i),
Managed Fund Shares

February 19, 2019.

I. Introduction

    On November 2, 2018, Cboe BZX Exchange, Inc. (``Exchange'' or
``BZX'') 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 list and trade shares (``Shares'') of the
JPMorgan Inflation Managed Bond ETF (``Fund'') of the J.P. Morgan
Exchange-Traded Fund Trust (``Trust'') under Rule 14.11(i) (``Managed
Fund Shares'').
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
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    The proposed rule change was published for comment in the Federal
Register on November 21, 2018.\3\ On December 10, 2018, the Exchange
filed Amendment No. 1 to the proposed rule change.\4\ On December 21,
2018, the

Commission extended the time period within which to approve the
proposed rule change, disapprove the proposed rule change, or institute
proceedings to determine whether to disapprove the proposed rule
change.\5\ The Commission has received no comments on the proposal, as
modified by Amendment No. 1. This order grants approval of the proposed
rule change, as modified by Amendment No. 1.
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    \3\ See Securities Exchange Act Release No. 84604 (November 15,
2018), 83 FR 58789 (``Notice'').
    \4\ In Amendment No. 1, which amended and replaced the proposed
rule change in its entirety, the Exchange: (a) Amended the universe
of Equity Holdings (as defined herein); (b) stated where intraday
price quotations for Bonds (as defined herein) and Equity Holdings
that are not exchange-traded could be found; (c) represented that
the Equity Holdings held by the Fund that will trade on markets that
are a member of Intermarket Surveillance Group (``ISG'') or
affiliated with a member of ISG or with which the Exchange has in
place a comprehensive surveillance sharing agreement would be the
exchange-listed Equity Holdings; and (d) made technical and
conforming changes. Because Amendment No. 1 does not materially
alter the substance of the proposed rule change or raise unique or
novel regulatory issues under the Act, Amendment No. 1 is not
subject to notice and comment. Amendment No. 1 to the proposed rule
change is available at: https://www.sec.gov/comments/SR-cboebzx-2018-077/srcboebzx2018077-4777675-176818.pdf.
    \5\ See Securities Exchange Act Release No. 84944, 83 FR 67751
(December 31, 2018).
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II. Exchange's Description of the Proposed Rule Change, as Modified by
Amendment No. 1

    The Exchange proposes to list and trade the Shares of the Fund
pursuant to BZX Rule 14.11(i), which governs the listing and trading of
Managed Fund Shares on the Exchange. The Shares will be offered by the
Trust, which was established as a Delaware statutory trust.\6\ The Fund
will be an actively managed exchange-traded fund. J.P Morgan Investment
Management, Inc. is the investment adviser (``Adviser'') and the
administrator to the Fund. JPMorgan Chase Bank, N.A. is the custodian
and transfer agent for the Trust. JPMorgan Distribution Services, Inc.
serves as the distributor for the Trust. The Exchange represents the
Adviser is not a broker-dealer, but is affiliated with multiple broker-
dealers and has implemented and will maintain ``fire walls'' with
respect to such broker-dealers regarding access to information
concerning the composition of, and/or changes to, the Fund's portfolio.
In addition, Adviser personnel who make decisions regarding the Fund's
portfolio are subject to procedures designed to prevent the use and
dissemination of material, non-public information regarding the Fund's
portfolio.\7\
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    \6\ The Exchange represents that the Trust is registered under
the Investment Company Act of 1940 (``1940 Act''). See Registration
Statement on Form N-1A for the Trust, dated July 31, 2018 (File Nos.
333-191837 and 811-22903) (``Registration Statement''). The Exchange
further represents that the Trust has obtained certain exemptive
relief under the 1940 Act.
    \7\ See BZX Rule 14.11(i)(7). The Exchange further represents
that, in the event that (a) the Adviser becomes registered as a
broker-dealer or newly affiliated with another broker-dealer, or (b)
any new adviser or sub-adviser is a registered broker-dealer or
becomes affiliated with a broker-dealer, it will implement and
maintain a fire wall with respect to its relevant personnel or such
broker-dealer affiliate, as applicable, regarding access to
information concerning the composition of, and/or changes to, the
portfolio, and will be subject to procedures designed to prevent the
use and dissemination of material, non-public information regarding
such portfolio.
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    Under the proposal, the Exchange seeks to permit the Fund to hold
Inflation Swaps and Other Derivatives, each as defined below, in a
manner that may not comply with BZX Rules 14.11(i)(4)(C)(iv)(a),\8\
14.11(i)(4)(C)(iv)(b),\9\ and/or 14.11(i)(4)(C)(v),\10\ as further
described below.\11\ Otherwise, the Exchange represents that the Fund
will comply with all other listing requirements on an initial and
continued listing basis under BZX Rule 14.11(i).
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    \8\ BZX Rule 14.11(i)(4)(C)(iv)(a) provides that ``there shall
be no limitation to the percentage of the portfolio invested in such
holdings; provided, however, that in the aggregate, at least 90% of
the weight of such holdings invested in futures, exchange-traded
options, and listed swaps shall, on both an initial and continuing
basis, consist of futures, options, and swaps for which the Exchange
may obtain information via the ISG from other members or affiliates
of the ISG or for which the principal market is a market with which
the Exchange has a comprehensive surveillance sharing agreement,
calculated using the aggregate gross notional value of such
holdings.'' The Exchange is proposing that the Fund be exempt from
this requirement only as it relates to the Fund's holdings in
certain credit default swaps, interest rate swaps, and Inflation
Swaps, as further described below.
    \9\ BZX Rule 14.11(i)(4)(C)(iv)(b) provides that ``the aggregate
gross notional value of listed derivatives based on any five or
fewer underlying reference assets shall not exceed 65% of the weight
of the portfolio (including gross notional exposures), and the
aggregate gross notional value of listed derivatives based on any
single underlying reference asset shall not exceed 30% of the weight
of the portfolio (including gross notional exposures).'' The
Exchange is proposing that the Fund would meet neither the 65% nor
the 30% requirements of BZX Rule 14.11(i)(4)(C)(iv)(b).
Specifically, the Exchange is proposing that the Fund be exempt from
this requirement as it relates to the Fund's holdings in listed
derivatives, which include U.S. Treasury futures, Eurodollar
futures, options on U.S. Treasuries and Treasury futures, credit
default swaps, and certain Inflation Swaps and interest rate swaps,
as further described below, which could constitute as much as 100%
of the weight of the portfolio (including gross notional exposures)
based on a single underlying reference asset.
    \10\ BZX Rule 14.11(i)(4)(C)(v) provides that ``the portfolio
may, on both an initial and continuing basis, hold OTC derivatives,
including forwards, options, and swaps on commodities, currencies
and financial instruments (e.g., stocks, fixed income, interest
rates, and volatility) or a basket or index of any of the foregoing,
however the aggregate gross notional value of OTC derivatives shall
not exceed 20% of the weight of the portfolio (including gross
notional exposures).'' The Exchange is proposing that the Fund be
exempt from this requirement as it relates to the Fund's holdings in
OTC derivatives, which could constitute as much as 75% of the weight
of the portfolio (including gross notional exposures).
    \11\ The Adviser notes that the Fund may by virtue of its
holdings be issued certain exchange-listed or OTC equity
instruments, including common and preferred stock, common stock
warrants and rights, and securities issued by real estate investment
trusts (collectively, ``Equity Holdings''), that may not meet the
requirements of Rule 14.11(i)(4)(C)(i). The Fund will not purchase
such instruments and will dispose of such holdings as the Adviser
determines is in the best interest of the Fund's shareholders.
Equity Holdings will not constitute more than 10% of the Fund's net
assets. The Adviser expects that the Fund will generally acquire
Equity Holdings through issuances that it receives by virtue of its
other holdings, such as corporate actions or convertible securities.
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A. Exchange's Description of the Fund's Primary Investments \12\
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    \12\ The Commission notes that additional information regarding
the Fund, the Trust, and the Shares, including investment
strategies, risks, creation and redemption procedures, fees,
portfolio holdings disclosure policies, calculation of net asset
value (``NAV''), distributions, and taxes, among other things, can
be found in Amendment No. 1 to the proposed rule change and the
Registration Statement, as applicable. See Amendment No. 1 and
Registration Statement, supra notes 4 and 6, respectively.
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    According to the Exchange, the Fund is designed to protect the
total return \13\ generated by its fixed income holdings from inflation
risk and will seek to maximize inflation protected total return. The
Fund seeks to achieve its investment objective by investing, under
Normal Market Conditions,\14\ at least 80% of its net assets in
Bonds,\15\ Inflation Hedging Instruments, and Other Derivatives, as
defined below.
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    \13\ According to the Exchange, total return includes income and
capital appreciation.
    \14\ As defined in BZX Rule 14.11(i)(3)(E), the term ``Normal
Market Conditions'' includes, but is not limited to, the absence of
trading halts in the applicable financial markets generally;
operational issues causing dissemination of inaccurate market
information or system failures; or force majeure type events such as
natural or man-made disaster, act of God, armed conflict, act of
terrorism, riot or labor disruption, or any similar intervening
circumstance.
    \15\ For purposes of this proposal, the term ``Bond'' includes
only the following U.S. dollar denominated instruments issued by the
U.S. Government or its agencies and instrumentalities, a domestic or
a foreign corporation or a municipality: Corporate bonds, U.S.
government and agency debt securities (excluding Treasury Inflation
Protected Securities (``TIPS''), which, as described below, may be
held by the Fund in order to attempt to mitigate inflation risk),
asset-backed securities, and mortgage-related and mortgage-backed
securities. Mortgage-related and mortgage-backed securities may be
structured as collateralized mortgage obligations (agency and non-
agency), stripped mortgage-backed securities (interest-only or
principal-only), commercial mortgage-backed securities, mortgage
pass-through securities, collateralized mortgage obligations,
adjustable rate mortgages, convertible bonds, and zero-coupon
obligations. The Exchange notes that the Fund's holdings in Bonds
will meet the requirements of BZX Rule 14.11(i)(4)(C)(ii)(a)-(e)
related to the fixed income securities portion of the Fund,
including the requirement that non-agency, non-GSE, and privately-
issued mortgage-related and other asset-backed securities components
of a portfolio shall not account, in the aggregate, for more than
20% of the weight of the fixed income portion of the portfolio.
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    The Fund will gain exposure to U.S. dollar-denominated bonds
primarily through investing directly in Bonds. Up to 10% of the Fund's
total assets may be invested in securities rated below investment grade
(junk bonds). Junk bonds are rated in the fifth or lower rated
categories (for example, BB+ or

lower by Standard & Poor's Ratings Services and Ba1 or lower by
Moody's). The Fund may also use the following instruments to gain
exposure to credit or interest rates: Credit default swaps,\16\
interest rate swaps,\17\ Eurodollar futures, U.S. Treasury futures,
options on U.S. Treasury Futures, and options on U.S. Treasuries \18\
(collectively, ``Other Derivatives'').
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    \16\ Credit default swaps held by the Fund will be traded on a
U.S. Swap Execution Facility registered with the Commodity Futures
Trading Commission (``CFTC''). The Fund may hold up to 10% of its
net assets in credit default swaps that are not investment-grade at
the time of purchase.
    \17\ Interest rate swaps held by the Fund may include listed
swaps, centrally cleared OTC swaps, or non-cleared OTC swaps. To the
extent that the Fund holds listed interest rate swaps, all such
listed swaps held by the Fund will be traded on a U.S. Swap
Execution Facility registered with the CFTC.
    \18\ Options on U.S. Treasuries held by the Fund may include
listed or OTC options. The Fund will attempt to limit counterparty
risk in non-listed and non-cleared OTC options contracts by entering
into such contracts only with counterparties the Adviser believes
are creditworthy and by limiting the Fund's exposure to each
counterparty. The Exchange represents that the Adviser will monitor
the creditworthiness of each counterparty and the Fund's exposure to
each counterparty on an ongoing basis.
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    The Fund will attempt to mitigate the inflation risk of the Fund's
exposure to Bonds primarily through the use of either over-the-counter
(``OTC'') or listed inflation swaps (``Inflation Swaps''),\19\ which
are managed on an active basis. Additionally, the Fund may also attempt
to mitigate inflation risk through investing in TIPS (together with
Inflation Swaps, collectively, ``Inflation Hedging Instruments''). The
Exchange is proposing to allow the Fund to hold up to 100% of the
weight of its portfolio (including gross notional exposure) in
Inflation Swaps and Other Derivatives, collectively, in a manner that
may not comply with BZX Rules 14.11(i)(4)(C)(iv)(a),\20\
14.11(i)(4)(C)(iv)(b),\21\ and/or 14.11(i)(4)(C)(v).\22\
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    \19\ The Fund will attempt to limit counterparty risk in non-
listed and non-cleared OTC swap contracts by entering into such
contracts only with counterparties the Adviser believes are
creditworthy and by limiting the Fund's exposure to each
counterparty. The Exchange represents that the Adviser will monitor
the creditworthiness of each counterparty and the Fund's exposure to
each counterparty on an ongoing basis. To the extent that the Fund
holds listed Inflation Swaps, all such listed Inflation Swaps held
by the Fund will be traded on a U.S. Swap Execution Facility
registered with the CFTC. Inflation Swaps held by the Fund will
reference the Consumer Price Index For All Urban Consumers (CPI-U).
    \20\ See supra note 8.
    \21\ See supra note 9.
    \22\ See supra note 10.
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    The Fund's investments, including derivatives, will be consistent
with the 1940 Act and the Fund's investment objective and policies and
will not be used to enhance leverage (although certain derivatives and
other investments may result in leverage).\23\ That is, while the Fund
will be permitted to borrow as permitted under the 1940 Act, the Fund's
investments will not be used to seek performance that is the multiple
or inverse multiple (i.e., 2Xs and 3Xs) of the Fund's primary broad-
based securities benchmark index (as defined in Form N-1A). The Fund
will only use those derivatives included in the defined terms Inflation
Swaps and Other Derivatives. The Fund's use of derivative instruments
will be collateralized. In addition to the use described above, the
Fund will also use derivative holdings for efficient portfolio
management, profit and gain for the Fund, interest rate hedging, and
managing credit risk.
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    \23\ The Fund will include appropriate risk disclosure in its
offering documents, including leveraging risk. Leveraging risk is
the risk that certain transactions of a fund, including a fund's use
of derivatives, may give rise to leverage, causing a fund to be more
volatile than if it had not been leveraged. The Fund's investments
in derivative instruments will be made in accordance with the 1940
Act and consistent with the Fund's investment objective and
policies. To mitigate leveraging risk, the Fund will segregate or
earmark liquid assets determined to be liquid by the Adviser in
accordance with procedures established by the Trust's Board and in
accordance with the 1940 Act (or, as permitted by applicable
regulations, enter into certain offsetting positions) to cover its
obligations under derivative instruments.
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B. Exchange's Description of the Fund's Other Investments

    Under Normal Market Conditions, the Fund may invest up to 20% of
its net assets in the following: One or more ETFs,\24\ Equity Holdings,
money market mutual funds, including affiliated money market mutual
funds, bank obligations, convertible securities (including contingent
convertible securities), loan assignment and participations,
commitments to purchase loan assignments, auction rate securities,
commercial paper, custodial receipts, inverse floating rate
instruments, non-ETF investment company securities, repurchase and
reverse repurchase agreements, short-term funding agreements,
structured investments, synthetic variable rate instruments, trust
preferred securities, when-issued securities, delayed delivery
securities, forward commitments, pay-in-kind securities, and deferred
payment securities (collectively, excluding ETFs and Equity Holdings,
``20% OTC Instruments''). The Fund may also engage in securities
lending.
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    \24\ For purposes of this proposal, the term ``ETF'' includes
Portfolio Depositary Receipts, Index Fund Shares, and Managed Fund
Shares as defined in BZX Rules 14.11(b), (c), and (i), respectively,
and their equivalents on other national securities exchanges.
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C. Exchange's Description of the Application of the Generic Listing
Requirements

    The Exchange represents that the Shares will meet each of the
initial and continued listing criteria in BZX Rule 14.11(i), except
that the Fund may not comply with BZX Rules 14.11(i)(4)(C)(iv)(a),\25\
14.11(i)(4)(C)(iv)(b),\26\ and 14.11(i)(4)(C)(v).\27\ With respect to
the requirement in BZX Rule 14.11(i)(4)(C)(iv)(a) that at least 90% of
the weight of the listed derivatives portion of the portfolio be in
listed derivatives for which the Exchange may obtain information via
ISG or for which the principal market is a market with which the
Exchange has a comprehensive surveillance sharing agreement, the
Exchange believes that its surveillance procedures are adequate to
properly monitor the trading of the Shares on the Exchange during all
trading sessions and to deter and detect violations of Exchange rules
and the applicable federal securities laws. Additionally, the Exchange
represents that all of the listed instruments that would not meet this
requirement would nevertheless have a primary market that is a swap
execution facility that is registered with and under the regulatory
oversight of the CFTC.\28\
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    \25\ See supra note 8.
    \26\ See supra note 9.
    \27\ See supra note 10.
    \28\ The Exchange represents that not all CFTC registered swap
execution facilities are members or affiliates of members of the
ISG.
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    The Exchange believes that the liquidity in the Treasury
futures,\29\ Eurodollar futures,\30\ and TIPS \31\ markets mitigates
the concern that BZX Rule 14.11(i)(4)(C)(iv)(b) is intended to address,
and that such liquidity would help prevent the Shares from being
susceptible to manipulation. Further, the Exchange believes that for
listed swaps, including credit default swaps, interest rate swaps, and
Inflation Swaps, the price transparency and surveillance performed by
the applicable swap execution facility would similarly act to mitigate
the risk of manipulation of the Shares. The Exchange also believes that

the size of the inflation swaps market,\32\ which would include all of
the Inflation Swaps that the Fund intends to invest in, would also
mitigate manipulation concerns relating to both listed and OTC
Inflation Swaps held by the Fund.\33\
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    \29\ According to the Exchange, in 2017, there were
approximately 744 million Treasury futures contracts traded.
    \30\ According to the Exchange, in 2017, there were
approximately 367 million Eurodollar futures contracts traded.
    \31\ According to the Exchange, in 2017, there were
approximately $17 billion worth of TIPS traded at primary dealers on
a daily basis.
    \32\ For purposes of this discussion, the term ``inflation swaps
market'' means any swap contract that references either a measure of
inflation, an inflation index, or an instrument designed to transfer
inflation risk from one party to another.
    \33\ According to publicly available numbers from LCH. Clearnet
Limited, which clears both listed and OTC swaps, as of October 26,
2018, there had been approximately $637 billion in U.S. dollar-
denominated inflation swaps traded year-to-date, which would include
the Inflation Swaps that the Fund intends to invest in, cleared
through their platform alone.
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    As it relates to BZX Rule 14.11(i)(4)(C)(v), which provides that
the notional value of OTC derivatives shall not exceed 20% of the
weight of the portfolio (including gross notional exposures), in an
effort to minimize exposure to potentially illiquid and manipulable
derivatives contracts, the Exchange notes that the inflation swaps
market, which would include all of the listed and OTC Inflation Swaps
that the Fund intends to invest in, is large and liquid, which the
Exchange believes further mitigates the concerns which BZX Rule
14.11(i)(4)(C)(v) is intended to address. The Exchange also notes that
the Fund will attempt to limit counterparty risk in non-cleared OTC
swap contracts, OTC Inflation Swaps, and interest rate swaps, by
entering into such contracts only with counterparties the Adviser
believes are creditworthy and by limiting the Fund's exposure to each
counterparty. The Exchange also notes that the Adviser will monitor the
creditworthiness of each counterparty and the Fund's exposure to each
counterparty on an ongoing basis. Further, the Exchange notes that
notional principal never changes hands in such swaps transactions, and
it is a theoretical value used to base the exchanged payments. The
Exchange believes that a more accurate representation of the swaps
value in order to monitor total counterparty risk would be the mark-to
market value of the swap since inception, which the Adviser generally
expects to remain below 15% of the Fund's net assets.
    The Exchange represents that, except for the exceptions to BZX Rule
14.11(i)(4)(C) as described above, the Fund's proposed investments will
satisfy, on an initial and continued listing basis, all of the generic
listing standards under BZX Rule 14.11(i)(4)(C) and all other
applicable requirements for Managed Fund Shares under BZX Rule
14.11(i). The Trust is required to comply with Rule 10A-3 under the Act
for the initial and continued listing of the Shares of the Fund. In
addition, the Exchange represents that the Shares of the Fund will
comply with all other requirements applicable to Managed Fund Shares
including, but not limited to, requirements relating to the
dissemination of key information such as the Disclosed Portfolio, NAV,
and the intraday indicative value (``IIV''), rules governing the
trading of equity securities, trading hours, trading halts,
surveillance, firewalls, and the information circular, as set forth in
Exchange rules applicable to Managed Fund Shares and the orders
approving such rules. According to the Exchange, at least 100,000
Shares will be outstanding upon the commencement of trading.
    The Exchange further represents that all of the ETFs, exchange-
listed Equity Holdings, futures contracts, and listed options contracts
held by the Fund will trade on markets that are a member of ISG or
affiliated with a member of ISG or with which the Exchange has in place
a comprehensive surveillance sharing agreement.\34\ Additionally, the
Exchange or the Financial Industry Regulatory Authority (``FINRA''), on
behalf of the Exchange, is able to access as needed trade information
for certain fixed income instruments reported to FINRA's Trade
Reporting and Compliance Engine (``TRACE'') and municipal securities
reported to the Municipal Securities Rulemaking Board's (``MSRB'')
Electronic Municipal Market Access system. FINRA may also access data
obtained from the MSRB relating to municipal bond trading activity for
surveillance purposes in connection with trading in the Shares.
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    \34\ For a list of the current members and affiliate members of
ISG, see www.isgportal.com. The Exchange notes that not all
components of the Disclosed Portfolio for the Fund may trade on
markets that are members of ISG or with which the Exchange has in
place a comprehensive surveillance sharing agreement.
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III. Discussion and Commission's Findings

    After careful review, the Commission finds that the Exchange's
proposal to list and trade the Shares, as modified by Amendment No. 1,
is consistent with the Act and the rules and regulations thereunder
applicable to a national securities exchange.\35\ In particular, the
Commission finds that the proposed rule change, as modified by
Amendment No. 1, is consistent with Section 6(b)(5) of the Act,\36\
which requires, among other things, that the Exchange's 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.
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    \35\ In approving this proposed rule change, 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).
    \36\ 15 U.S.C. 78f(b)(5).
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    As noted above, the Fund may hold up to 100% Inflation Swaps and
Other Derivatives \37\ in a manner that may not comply with the generic
listing requirements in Rules 14.11(i)(4)(C)(iv)(a),
14.11(i)(4)(C)(iv)(b), and 14.11(i)(4)(C)(v).\38\ The Exchange states
that the Fund will only use those derivatives included in the defined
term Inflation Hedging Instruments and Other Derivatives in order to
attempt to mitigate the inflation risk of the U.S. dollar-denominated
bonds to which the Fund will have exposure. The Exchange states that
the Fund's use of derivative instruments will be collateralized. In
addition, the Exchange represents that the Shares of the Fund will
comply with all other requirements applicable to Managed Fund Shares
including, but not limited to, requirements relating to the
dissemination of key information such as the Disclosed Portfolio, NAV,
IIV, rules governing the trading of equity securities, trading hours,
trading halts, surveillance, firewalls, and the information circular.
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    \37\ The Exchange states that the Fund's investments, including
derivative instruments will be made in accordance with the 1940 Act
and consistent with the Fund's investment objective and policies. To
mitigate leveraging risk, the Fund will segregate or earmark liquid
assets determined to be liquid by the Adviser in accordance with
procedures established by the Trust's Board and in accordance with
the 1940 Act to cover its obligations under derivative instruments.
    \38\ The Commission notes that it has previously approved other
proposals to list and trade series of Managed Fund Shares based on a
portfolio containing securities and instruments substantially
similar to Bonds, Inflation Hedging Instruments, and Other
Derivatives. See, e.g., Securities Exchange Act Release Nos. 76719
(December 21, 2015), 80 FR 80859 (December 28, 2015) (NYSEArca-2015-
73) (order approving listing and trading of the Guggenheim Total
Return ETF) and 77522 (April 5, 2016), 81 FR 21420 (April 11, 2016)
(NYSEArca-2015-125) (order approving listing and trading of the
RiverFront Dynamic Unconstrained Income ETF and RiverFront Dynamic
Core Income ETF).
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    The Exchange states that the Fund's Inflation Swaps and Other
Derivatives will not meet the generic listing requirement that at least
90% of the weight of the listed derivatives portion of the portfolio be
in listed derivatives for which the Exchange may obtain information via
ISG from other members or affiliates of the ISG or for which the
principal market is a market with which the Exchange has a
comprehensive

surveillance sharing agreement. The Exchange represents that its
surveillance procedures are adequate to properly monitor the trading of
the Shares on the Exchange during all trading sessions and to deter and
detect violations of Exchange rules and the applicable federal
securities laws. The Exchange also represents that all of the listed
instruments that would not meet this requirement would nevertheless
have a primary market that is a swap execution facility that is
registered with and under the regulatory oversight of the CFTC.\39\
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    \39\ See supra note 28.
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    The Exchange states that the Fund's investments in Inflation Swaps
and Other Derivatives will not meet the generic listing requirement
that the aggregate gross notional value of listed derivatives based on
any five or fewer underlying reference assets shall not exceed 65% of
the weight of the portfolio and that the aggregate gross notional value
of listed derivatives based on any single underlying reference asset
not exceed 30% of the weight of the portfolio. The Exchange states that
it believes the liquidity in the Treasury futures, Eurodollar futures,
and TIPS markets mitigates manipulation concerns. The Exchange further
believes that for listed swaps, including credit default swaps,
interest rate swaps, and Inflation Swaps, the price transparency and
surveillance performed by the applicable swap execution facility would
similarly act to mitigate the risk of manipulation of the Shares. The
Exchange also states that it believes that the size of the inflation
swaps market, which would include all of the Inflation Swaps that the
Fund intends to invest in, also mitigates manipulation concerns
relating to both listed and OTC Inflation Swaps held by the Fund.
    The Exchange states that the Fund's holdings in OTC derivatives
will exceed 20% of the weight of the portfolio and, therefore, not meet
the generic listing requirements. The Exchange states that the Fund
will attempt to limit counterparty risk in non-cleared OTC swaps and
OTC Inflation Swaps and interest rate swaps by entering into such
contracts only with counterparties the Adviser believes are
creditworthy and by limiting the Fund's exposure to each counterparty,
and that the Adviser will monitor the creditworthiness of each
counterparty and the Fund's exposure to each counterparty on an ongoing
basis. The Exchange states that the inflation swaps market, which would
include all of the listed and OTC Inflation Swaps that the Fund intends
to invest in, is large and liquid, which the Exchange believes
mitigates the concerns the 20% limitation is intended to address.
    The Commission also finds that the proposal to list and trade the
Shares on the Exchange is consistent with Section 11A(a)(1)(C)(iii) of
the Act \40\ which sets forth Congress' finding that it is in the
public interest and appropriate for the protection of investors and the
maintenance of fair and orderly markets to assure the availability to
brokers, dealers, and investors of information with respect to
quotations for, and transactions in, securities. The Exchange
represents that the intra-day, closing and settlement prices of
exchange-traded portfolio assets, including exchange-listed Equity
Holdings, ETFs, options, and futures, will be readily available from
the securities exchanges and futures exchanges trading such securities
and futures, as the case may be, automated quotation systems, published
or other public sources, or online information services such as
Bloomberg or Reuters. Intraday price quotations on both listed and OTC
swaps, TIPS, 20% OTC Instruments, Bonds, Equity Holdings that are not
exchange-listed, and fixed income instruments are available from major
broker-dealer firms and from third-parties, which may provide prices
free with a time delay or in real-time for a paid fee. Trade price and
other information relating to municipal securities is available through
the MSRB.
---------------------------------------------------------------------------

    \40\ 15 U.S.C. 78k-1(a)(1)(C)(iii).
---------------------------------------------------------------------------

    In addition, the Disclosed Portfolio will be available on the
issuer's website free of charge. The Fund's website includes a form of
the prospectus for the Fund and additional information related to NAV
and other applicable quantitative information. Information regarding
market price and trading volume of the Shares will be continuously
available throughout the day on brokers' computer screens and other
electronic services. Quotation and last-sale information on the Shares
will be available through the Consolidated Tape Association.
Information regarding the previous day's closing price and trading
volume for the Shares will be published daily in the financial section
of newspapers. Quotation and last-sale information for listed options
contracts cleared by the Options Clearing Corporation will be available
via the Options Price Reporting Authority. Further, trading in the
Shares may be halted for market conditions or for reasons that, in the
view of the Exchange, make trading inadvisable. The Exchange deems the
Shares to be equity securities, thus rendering trading in the Shares
subject to the Exchange's existing rules governing the trading of
equity securities. The Exchange represents that it has appropriate
rules to facilitate trading in the Shares during all trading sessions.
    The Exchange has made the following representations in support of
its proposal:

    (1) Other than BZX Rules 14.11(i)(4)(C)(iv)(a),
14.11(i)(4)(C)(iv)(b), and 14.11(i)(4)(C)(v), the Fund will comply
with all other requirements on an initial and continued listing
basis for Managed Fund Shares under BZX Rule 14.11(i), including
those requirements regarding the Disclosed Portfolio and the
requirement that the Disclosed Portfolio and the NAV will be made
available to all market participants at the same time,\41\ IIV,\42\
suspension of trading or removal,\43\ trading halts,\44\
disclosure,\45\ and firewalls.\46\
---------------------------------------------------------------------------

    \41\ See BZX Rules 14.11(i)(4)(A)(ii) and 14.11(i)(4)(B)(ii).
    \42\ See BZX Rule 14.11(i)(4)(B)(i).
    \43\ See BZX Rule 14.11(i)(4)(B)(iii).
    \44\ See BZX Rule 14.11(i)(4)(B)(iv).
    \45\ See BZX Rule 14.11(i)(6).
    \46\ See BZX Rule 14.11(i)(7).
---------------------------------------------------------------------------

    (2) Trading of the Shares on the Exchange will be subject to the
Exchange's surveillance procedures for derivative products,
including Managed Fund Shares, and these procedures are adequate to
properly monitor the trading of the Shares on the Exchange during
all trading sessions and to deter and detect violations of Exchange
rules and the applicable federal securities laws.
    (3) All of the ETFs, exchange-listed Equity Holdings, futures
contracts, and listed options contracts held by the Fund will trade
on markets that are a member of ISG or affiliated with a member of
ISG or with which the Exchange has in place a comprehensive
surveillance sharing agreement. Additionally, the Exchange or FINRA,
on behalf of the Exchange, are able to access, as needed, trade
information for certain fixed income instruments reported to FINRA's
TRACE and municipal securities reported to the MSRB's Electronic
Municipal Market Access system. FINRA also can access data obtained
from the MSRB relating to municipal bond trading activity for
surveillance purposes in connection with trading in the Shares. The
Exchange has a policy prohibiting the distribution of material, non-
public information by its employees.
    (4) Certain of the listed Inflation Swaps, listed credit default
swaps, and listed interest rate swaps held by the Fund will trade on
markets that are a member of ISG or affiliated with a member of ISG
or with which the Exchange has in place a comprehensive surveillance
sharing agreement. The Exchange, FINRA, on behalf of the Exchange,
or both will communicate regarding trading in the Shares and in
certain of the listed Inflation Swaps, credit default swaps, and
listed interest rate swaps held by the Fund with the ISG, other
markets or entities who are members or affiliates of the ISG, or
with

which the Exchange has entered into a comprehensive surveillance
sharing agreement.
    (5) Prior to the commencement of trading, the Exchange will
inform its members in an Information Circular of the special
characteristics and risks associated with trading the Shares.
Specifically, the Information Circular will discuss the following:
(a) The procedures for purchases and redemptions of Shares in
Creation Units (and that Shares are not individually redeemable);
(b) BZX Rule 3.7, which imposes suitability obligations on Exchange
members with respect to recommending transactions in the Shares to
customers; (c) how information regarding the IIV and the Disclosed
Portfolio is disseminated; (d) the risks involved in trading the
Shares during the Pre-Opening \47\ and After Hours Trading Sessions
\48\ when an updated IIV will not be calculated or publicly
disseminated; (e) the requirement that members deliver a prospectus
to investors purchasing newly issued Shares prior to or concurrently
with the confirmation of a transaction; and (f) trading information.
---------------------------------------------------------------------------

    \47\ The Pre-Opening Session is from 8:00 a.m. to 9:30 a.m.
Eastern Time.
    \48\ The After Hours Trading Session is from 4:00 p.m. to 5:00
p.m. Eastern Time.
---------------------------------------------------------------------------

    (6) The Fund's investments, including derivatives, will be
consistent with the 1940 Act and the Fund's investment objective and
policies and will not be used to enhance leverage (although certain
derivatives and other investments may result in leverage).\49\
---------------------------------------------------------------------------

    \49\ See supra note 23.
---------------------------------------------------------------------------

    (7) The Fund's investments will not be used to seek performance
that is the multiple or inverse multiple (i.e., 2Xs and 3Xs) of the
Fund's primary broad-based securities benchmark index (as defined in
Form N-1A).
    (8) Credit default swaps held by the Fund will be traded on a
U.S. Swap Execution Facility registered with the CFTC. At least 90%
of the Fund's net assets in credit default swaps will be investment-
grade at the time of purchase.
    (9) To the extent that the Fund holds listed Inflation Swaps or
interest rate swaps, all such listed Inflation Swaps and listed
interest rate swaps held by the Fund will be traded on a U.S. Swap
Execution Facility registered with the CFTC.
    (10) The Trust is required to comply with Rule 10A-3 under the
Act \50\ for the initial and continued listing of the Shares of the
Fund, and at least 100,000 Shares will be outstanding upon the
commencement of trading.
---------------------------------------------------------------------------

    \50\ See 17 CFR 240.10A-3.

    The Exchange represents that all statements and representations
made in this filing regarding the description of the portfolio or
reference assets, limitations on portfolio holdings or reference
assets, dissemination and availability of index, reference asset, and
intraday indicative values, and the applicability of Exchange rules
specified in this filing shall constitute continued listing
requirements for the Fund. In addition, the issuer has represented to
the Exchange that it will advise the Exchange of any failure by the
Fund or the Shares to comply with the continued listing requirements,
and, pursuant to its obligations under Section 19(g)(1) of the Act, the
Exchange will surveil for compliance with the continued listing
requirements. If the Fund or the Shares are not in compliance with the
applicable listing requirements, the Exchange will commence delisting
procedures under BZX Rule 14.12.
    This approval order is based on all of the Exchange's
representations and descriptions of the Shares and the Fund, including
those set forth above and in Amendment No. 1 to the proposed rule
change. Except as described herein, the Commission notes that the
Shares must comply with all applicable requirements of BZX Rule
14.11(i) to be listed and traded on the Exchange on an initial and
continuing basis.
    For the foregoing reasons, the Commission finds that the proposed
rule change, as modified by Amendment No. 1, is consistent with Section
11A(a)(1)(C)(iii) of the Act \51\ and Section 6(b)(5) of the Act \52\
and the rules and regulations thereunder applicable to a national
securities exchange.
---------------------------------------------------------------------------

    \51\ 15 U.S.C. 78k-1(a)(1)(C)(iii).
    \52\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------

IV. Conclusion

    It is therefore ordered, pursuant to Section 19(b)(2) of the
Act,\53\ that the proposed rule change (SR-CboeBZX-2018-077), as
modified by Amendment No. 1, be, and it hereby is, approved.
---------------------------------------------------------------------------

    \53\ 15 U.S.C. 78s(b)(2).

    For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\54\
---------------------------------------------------------------------------

    \54\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------

Eduardo A. Aleman,
Deputy Secretary.
[FR Doc. 2019-03175 Filed 2-22-19; 8:45 am]
BILLING CODE 8011-01-P


[Federal Register Volume 83, Number 154 (Thursday, August 9, 2018)]
[Rules and Regulations]
[Pages 39326-39331]
[FR Doc No: 2018-16504]

=======================================================================
-----------------------------------------------------------------------

DEPARTMENT OF TRANSPORTATION

Federal Aviation Administration

14 CFR Part 39

[Docket No. FAA-2018-0165; Product Identifier 2017-NM-122-AD; Amendment
39-19342; AD 2018-16-02]
RIN 2120-AA64

Airworthiness Directives; Airbus SAS Airplanes

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

ACTION: Final rule.

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

SUMMARY: We are adopting a new airworthiness directive (AD) for all
Airbus SAS Model A318-111 and -112 airplanes, Model A319-111, -112, -
113, -114, and -115 airplanes, Model A320-211, -212, -214, and -216
airplanes, and Model A321-111, -112, -211, -212, and -213 airplanes.
This AD was prompted by a report of a production quality deficiency on
the inner retainer installed on link assemblies of the aft engine
mount, which could result in

failure of the retainer. This AD requires modifying and re-identifying
the aft engine mount assemblies. We are issuing this AD to address the
unsafe condition on these products.

DATES: This AD is effective September 13, 2018.
    The Director of the Federal Register approved the incorporation by
reference of certain publications listed in this AD as of September 13,
2018.

ADDRESSES: For Airbus SAS service information identified in this final
rule, contact Airbus SAS, Airworthiness Office--EIAS, Rond-Point Emile
Dewoitine No: 2, 31700 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.
    For Goodrich Aerospace service information identified in this final
rule, contact Goodrich Corporation, Aerostructures, 850 Lagoon Drive,
Chula Vista, CA 91910-2098; phone:<PHONE_NUMBER>; email:
[email protected]; internet: http://www.goodrich.com/TechPubs.
    You may view this referenced service information at the FAA,
Transport Standards Branch, 2200 South 216th St., Des Moines, WA. For
information on the availability of this material at the FAA, call 206-
231-3195. It is also available on the internet at http://www.regulations.gov by searching for and locating Docket No. FAA-2018-
0165.

Examining the AD Docket

    You may examine the AD docket on the internet at http://www.regulations.gov by searching for and locating Docket No. FAA-2018-
0165; or in person at Docket Operations between 9 a.m. and 5 p.m.,
Monday through Friday, except Federal holidays. The AD docket contains
this final rule, the regulatory evaluation, any comments received, and
other information. The address for Docket Operations (phone: 800-647-
5527) is Docket Operations, U.S. Department of Transportation, Docket
Operations, M-30, West Building Ground Floor, Room W12-140, 1200 New
Jersey Avenue SE, Washington, DC 20590.

FOR FURTHER INFORMATION CONTACT: Sanjay Ralhan, Aerospace Engineer,
International Section, Transport Standards Branch, FAA, 2200 South
216th St., Des Moines, WA 98198; telephone and fax<PHONE_NUMBER>.

SUPPLEMENTARY INFORMATION:

Discussion

    We issued a notice of proposed rulemaking (NPRM) to amend 14 CFR
part 39 by adding an AD that would apply to all Airbus SAS Model A318-
111 and -112 airplanes, Model A319-111, -112, -113, -114, and -115
airplanes, Model A320-211, -212, -214, and -216 airplanes, and Model
A321-111, -112, -211, -212, and -213 airplanes. The NPRM published in
the Federal Register on March 9, 2018 (83 FR 10411). The NPRM was
prompted by a report of a production quality deficiency on the inner
retainer installed on link assemblies of the aft engine mount, which
could result in failure of the retainer. The NPRM proposed to require
modifying and re-identifying the aft engine mount assemblies.
    We are issuing this AD to address non-conforming retainers of the
aft engine mount. This condition could result in loss of the locking
feature of the nuts of the inner and outer pins; loss of the pins will
result in the aft mount engine link no longer being secured to the aft
engine mount, possibly resulting in damage to the airplane.
    The European Aviation Safety Agency (EASA), which is the Technical
Agent for the Member States of the European Union, has issued EASA AD
2017-0251, dated December 15, 2017 (referred to after this as the
Mandatory Continuing Airworthiness Information, or ``the MCAI''), to
correct an unsafe condition for all Airbus SAS Model A318-111 and -112
airplanes, Model A319-111, -112, -113, -114, and -115 airplanes, Model
A320-211, -212, -214, and -216 airplanes, and Model A321-111, -112, -
211, -212, and -213 airplanes. The MCAI states:

    During in-service inspections, several aft engine mount inner
retainers, fitted on aeroplanes equipped with CFM56-5A/5B engines,
were found broken. Investigation identified that the main cause of
crack initiation was the vibration dynamic effect that affects the
retainers, and that the ``dull'' surface finish pitting is an
aggravating factor when compared with the ``bright'' surface
finishing.
    This condition, if not detected and corrected, could lead to in-
flight loss of an aft engine mount link, possibly resulting in
damage to the aeroplane and/or injury to persons on the ground.
    To address this potential unsafe condition, Airbus issued Alert
Operators Transmission (AOT) A71N001-12 (later revised) and EASA
issued AD 2013-0050 [which corresponds to FAA AD 2014-14-06,
Amendment 39-17901 (79 FR 42655, July 23, 2014)], later superseded
by EASA AD 2015-0021 [which corresponds to FAA AD 2016-14-09,
Amendment 39-18590 (81 FR 44989, July 12, 2016) (``AD 2016-14-
09'')], requiring repetitive detailed inspections (DET) of all aft
engine mount inner retainers and, depending on findings, their
replacement.
    After EASA AD 2015-0021 was issued, a production quality
deficiency was identified by Airbus and Goodrich Aerostructures, the
engine mount retainer manufacturer, on the inner retainer, Part
Number (P/N) 238-0252-505, installed in the three link assemblies of
the engine mount fitted on CFM56-5A/5B engines. Airbus issued AOT
A71N011-15 and Service Bulletin (SB) A320-71-1070, providing a list
of affected parts and applicable corrective actions.
    Consequently, EASA issued AD 2016-0010 (later revised),
retaining the requirements of EASA AD 2015-0021, which was
superseded, and in addition requiring the identification and
replacement of all non-conforming aft engine mount inner retainers
[EASA AD 2016-0010 R1 corresponds to FAA AD 2017-04-10, Amendment
39-18805 (82 FR 11791, February 27, 2017) (``AD 2017-04-10'')].
    After that [EASA] AD was issued, a new engine mount retainer was
developed by Goodrich Aerostructures to improve the retainer
efficiency. For retrofit purposes, Goodrich Aerostructures issued SB
RA32071-164, and Airbus issued SB A320-71-1071, providing
instructions to modify and re-identify the engine mount assemblies
as instructed in the Goodrich Aerostructures SB. Subsequently, it
was observed that, on aeroplanes equipped with certain engines
fitted with a Turbine Rear Frame (TRF) with 4 lugs configuration,
the installation of the new engine mount retainers can lead to
interference, and Goodrich Aerostructures revised SB RA32071-164,
providing instructions not to install the new engine retainers on
affected engines. Airbus SB A320-71-1071 is expected to be revised
accordingly. For engines fitted with a TRF with 4 lugs, a new
installation (potentially requiring different engine mount
retainers) is being developed by Goodrich Aerospace and Airbus.
    Consequently, EASA issued AD 2017-0138, retaining the
requirements of EASA AD 2016-0010R1, which was superseded, and,
except for aeroplanes equipped with engines fitted with a TRF with 4
lugs configuration, requiring modification and identification of aft
engine mount assemblies as terminating action for the repetitive
inspections of the retainers. That [EASA] AD also included
additional instructions applicable to installation of engines fitted
with a TRF with 4 lugs configuration.
    Since EASA AD 2017-0138 was issued, it was determined that
installation of new engine mount assemblies must not be allowed for
some specific engine configurations, and that installation of
Goodrich Aerostructures SB RA32071-164 alone can be referred to, in
order to accomplish the terminating action as required by that
[EASA] AD.
    For the reason described above, this [EASA] AD retains the
requirements of EASA AD 2017-0138, which is superseded, adds
reference to Goodrich Aerostructures SB RA32071-164 * * *, and
introduces new requirement for aeroplanes equipped with engines
fitted with a TRF with 4 lugs configuration.

    This AD does not supersede AD 2017-04-10. Rather, we have

determined that a stand-alone AD is more appropriate to address the
changes in the MCAI. This AD requires modifying and re-identifying the
aft engine mount assemblies. Accomplishment of the required actions
terminates the repetitive detailed inspections required by paragraph
(l) of AD 2016-14-09, and serve as a method of compliance for the
requirements of paragraph (g) of AD 2017-04-10. 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-2018-0165.

Comments

    We gave the public the opportunity to participate in developing
this final rule. The following presents the comments received on the
NPRM and the FAA's response to each comment.

Support for the NPRM

    Air Line Pilots Association, International (ALPA) supported the
intent of the NPRM.

Request To Refer to Current Revision of Service Information

    Airbus SAS noted that it issued Service Bulletin A320-71-1071,
Revision 01, dated October 17, 2017, and requested that this revision
of the service bulletin be included in the final rule. The original
issue of Service Bulletin A320-71-1071, dated November 8, 2016, was
referred to in the proposed AD.
    We agree with the commenter's request. Airbus Service Bulletin
A320-71-1071, Revision 01, dated October 17, 2017, clarifies certain
notes and references but makes no substantive changes to Airbus Service
Bulletin A320-71-1071, dated November 8, 2016, as proposed in the NPRM.
Furthermore, while Airbus Service Bulletin A320-71-1071, Revision 01,
dated October 17, 2017, expands the effectivity, the applicability of
this AD has not been changed. We have revised the preamble of this
final rule and paragraph (h) of this AD to include Airbus Service
Bulletin A320-71-1071, Revision 01, dated October 17, 2017. We have
also added paragraph (n) to this AD to provide credit for actions done
prior to the effective date of this AD using the original issue of
Airbus Service Bulletin A320-71-1071, dated November 8, 2016. We
redesignated subsequent paragraphs accordingly.

Conclusion

    We reviewed the relevant data, considered the comments received,
and determined that air safety and the public interest require adopting
this final rule with the changes described previously and minor
editorial changes. We have determined that these minor changes:
     Are consistent with the intent that was proposed in the
NPRM for addressing the unsafe condition; and
     Do not add any additional burden upon the public than was
already proposed in the NPRM.
    We also determined that these changes will not increase the
economic burden on any operator or increase the scope of this final
rule.

Related Service Information Under 1 CFR Part 51

    Airbus SAS has issued Service Bulletin A320-71-1071, Revision 01,
dated October 17, 2017. Goodrich Aerostructures has issued Service
Bulletin RA32071-164, Revision 1, dated July 19, 2017. The service
information describes procedures for modifying and re-identifying the
aft engine mount retainer assembly. These documents are distinct since
they apply to different airplane models in different configurations.
    This service information is reasonably available because the
interested parties have access to it through their normal course of
business or by the means identified in the ADDRESSES section.

Costs of Compliance

    We estimate that this AD affects 500 airplanes of U.S. registry.
    We estimate the following costs to comply with this AD:

                                                 Estimated Costs
----------------------------------------------------------------------------------------------------------------
                                                                                Cost per      Cost on U.S.
                Action                         Labor cost           Parts cost        product        operators
----------------------------------------------------------------------------------------------------------------
Modification and re-identification....  20 work-hours x $85 per           $3,152          $4,852      $2,426,000
                                         hour = $1,700.
----------------------------------------------------------------------------------------------------------------

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

List of Subjects in 14 CFR Part 39

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

Adoption of the Amendment

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

PART 39--AIRWORTHINESS DIRECTIVES

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

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

Sec.  39.13   [Amended]

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

2018-16-02 Airbus SAS: Amendment 39-19342; Docket No. FAA-2018-0165;
Product Identifier 2017-NM-122-AD.

(a) Effective Date

    This AD is effective September 13, 2018.

(b) Affected ADs

    This AD affects AD 2016-14-09, Amendment 39-18590 (81 FR 44989,
July 12, 2016) (``AD 2016-14-09''); and AD 2017-04-10, Amendment 39-
18805 (82 FR 11791, February 27, 2017) (``AD 2017-04-10'').

(c) Applicability

    This AD applies to the Airbus SAS airplanes identified in
paragraphs (c)(1) through (c)(4) of this AD, certificated in any
category, all manufacturer serial numbers.
    (1) Model A318-111 and -112 airplanes.
    (2) Model A319-111, -112, -113, -114, and -115 airplanes.
    (3) Model A320-211, -212, -214, and -216 airplanes.
    (4) Model A321-111, -112, -211, -212, and -213 airplanes.

(d) Subject

    Air Transport Association (ATA) of America Code 71, Powerplant.

(e) Reason

    This AD was prompted by a report of a production quality
deficiency on the inner retainer installed on link assemblies of the
aft engine mount, which could result in failure of the retainer. We
are issuing this AD to address non-conforming retainers of the aft
engine mount. This condition could result in loss of the locking
feature of the nuts of the inner and outer pins; loss of the pins
will result in the aft mount engine link no longer being secured to
the aft engine mount, possibly resulting in damage to the airplane.

(f) Compliance

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

(g) Definitions

    (1) For the purpose of this AD: A Group 1 airplane has an aft
engine mount assembly installed, having a part number (P/N)
identified as ``Old P/N'' in figure 1 to paragraphs (g)(1), (h),
(i), (j), (k), and (l) of this AD. A Group 2 airplane does not have
any aft engine mount assembly installed having a part number
identified as ``Old P/N'' in figure 1 to paragraphs (g)(1), (h),
(i), (j), (k), and (l) of this AD.
[GRAPHIC] [TIFF OMITTED] TR09AU18.000

    (2) For the purpose of this AD, a 4-lugs engine is a CFM56-5A1,
CFM56-5A3, CFM56-5A4, CFM56-5A4/F, CFM56-5A5, or CFM56-5A5/F engine,
fitted with a turbine rear frame (TRF) having a part number as
identified in figure 2 to paragraph (g)(2) of this AD.

[GRAPHIC] [TIFF OMITTED] TR09AU18.001

(h) Modification

    For Group 1 airplanes: Within 48 months after the effective date
of this AD, except for 4-lugs engines, modify the aft engine mount
assembly, having a part number identified as ``Old P/N'' in figure 1
to paragraphs (g)(1), (h), (i), (j), (k), and (l) of this AD, and
re-identify it with the corresponding part number identified as
``New P/N'' in figure 1 to paragraphs (g)(1), (h), (i), (j), (k),
and (l) of this AD, in accordance with the Accomplishment
Instructions of Airbus Service Bulletin A320-71-1071, Revision 01,
dated October 17, 2017; or Goodrich Aerostructures Service Bulletin
RA32071-164, Revision 1, dated July 19, 2017.

(i) Other Acceptable Method of Compliance

    Replacement on an airplane of each aft engine mount assembly,
identified as ``Old P/N'' in figure 1 to paragraphs (g)(1), (h),
(i), (j), (k), and (l) of this AD, with a corresponding aft engine
mount assembly, identified as ``New P/N'' in figure 1 to paragraphs
(g)(1), (h), (i), (j), (k), and (l) of this AD, is an acceptable
method to comply with the requirements of paragraph (h) of this AD
for that airplane.

(j) Identification of Certain Airplanes That Do Not Have Affected Parts

    An airplane on which Airbus Modification 158435 has been
embodied in production and on which it can be positively determined
that no aft engine mount assembly, identified as ``Old P/N'' in
figure 1 to paragraphs (g)(1), (h), (i), (j), (k), and (l) of this
AD, is installed, is considered a Group 2 airplane. A review of
airplane maintenance records is acceptable to make this
determination, if it can be conclusively determined that no aft
engine mount assembly identified as ``Old P/N'' in figure 1 to
paragraphs (g)(1), (h), (i), (j), (k), and (l) of this AD is
installed. Group 2 airplanes are not affected by the requirements of
paragraph (h) of this AD.

(k) Parts Installation Prohibition

    (1) For Group 1 airplanes: Do not install an aft engine mount
assembly identified as ``Old P/N'' in figure 1 to paragraphs (g)(1),
(h), (i), (j), (k), and (l) of this AD on any airplane after
modification of the airplane as required by paragraph (h) of this
AD, or after any replacement specified in paragraph (i) of this AD.
    (2) For Group 2 airplanes: As of the effective date of this AD,
do not install an aft engine mount assembly identified as ``Old P/
N'' in figure 1 to paragraphs (g)(1), (h), (i), (j), (k), and (l) of
this AD on any airplane.
    (3) For airplanes equipped with a 4-lugs engine (left-hand (LH)
or right-hand (RH) side): As of the effective date of this AD, do
not modify any aft engine mount assembly identified as ``Old P/N''
in figure 1 to paragraphs (g)(1), (h), (i), (j), (k), and (l) of
this AD, as required by paragraph (h) of this AD, and do not install
on an affected engine pylon (LH or RH) any aft engine mount assembly
identified as ``New P/N'' in figure 1 to paragraphs (g)(1), (h),
(i), (j), (k), and (l) of this AD.

(l) 4-Lugs Engine Installation

    (1) From the effective date of this AD, it is allowed to install
or reinstall a 4-lugs engine on an airplane (LH or RH) provided that
the airplane is equipped with an aft engine mount assembly
identified as ``Old P/N'' in figure 1 to paragraphs (g)(1), (h),
(i), (j), (k), and (l) of this AD on the affected engine pylon (LH
or RH).

    (2) For airplanes equipped with a 4-lugs engine (LH or RH), and
on which, prior to the effective date of this AD, an aft engine
mount assembly identified as ``New P/N'' in figure 1 to paragraphs
(g)(1), (h), (i), (j), (k), and (l) of this AD has been installed on
the affected engine pylon (LH or RH), or on which the aft engine
part assembly has been modified as specified in paragraph (h) of
this AD: Within 30 days after the effective date of this AD, obtain
repair instructions 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), and accomplish those instructions
accordingly. If approved by the DOA, the approval must include the
DOA-authorized signature.

(m) Terminating Action and Method of Compliance

    (1) Modification of an airplane as required by paragraph (h) of
this AD, or as specified in paragraph (i) of this AD, constitutes
terminating action for the repetitive detailed inspections required
by paragraph (l) of AD 2016-14-09 for that airplane.
    (2) Modification of an airplane as required by paragraph (h) of
this AD, or as specified in paragraph (i) of this AD, is a method of
compliance with the requirements of paragraph (g) of AD 2017-04-10
for that airplane.

(n) Credit for Previous Actions

    This paragraph provides credit for the actions specified in
paragraph (h) of this AD, if those actions were performed before the
effective date of this AD using Airbus Service Bulletin A320-71-
1071, dated November 8, 2016, and the actions were not performed on
4-lugs engines.

(o) 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 (q)(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 EASA; or Airbus SAS'
EASA 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.

(p) Special Flight Permits

    Special flight permits, as described in Section 21.197 and
Section 21.199 of the Federal Aviation Regulations (14 CFR 21.197
and 21.199), are not allowed.

(q) Related Information

    (1) Refer to Mandatory Continuing Airworthiness Information
(MCAI) EASA AD 2017-0251 dated December 15, 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-2018-0165.
    (2) For more information about this AD, contact Sanjay Ralhan,
Aerospace Engineer, International Section, Transport Standards
Branch, FAA, 2200 South 216th St., Des Moines, WA 98198; telephone
and fax<PHONE_NUMBER>.
    (3) Service information identified in this AD that is not
incorporated by reference is available at the addresses specified in
paragraphs (r)(3) and (r)(5) of this AD.

(r) Material Incorporated by Reference

    (1) The Director of the Federal Register approved the
incorporation by reference (IBR) of the service information listed
in this paragraph under 5 U.S.C. 552(a) and 1 CFR part 51.
    (2) You must use this service information as applicable to do
the actions required by this AD, unless this AD specifies otherwise.
    (i) Airbus Service Bulletin A320-71-1071, Revision 01, dated
October 17, 2017.
    (ii) Goodrich Aerostructures Service Bulletin RA32071-164,
Revision 1, dated July 19, 2017.
    (3) For Airbus SAS service information identified in this AD,
contact Airbus SAS, Airworthiness Office--EIAS, Rond-Point Emile
Dewoitine No: 2, 31700 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.
    (4) For Goodrich Aerospace service information identified in
this AD, contact Goodrich Corporation, Aerostructures, 850 Lagoon
Drive, Chula Vista, CA 91910-2098; phone:<PHONE_NUMBER>; email:
[email protected]; internet: http://www.goodrich.com/TechPubs.
    (5) You may view this service information at the FAA, Transport
Standards Branch, 2200 South 216th St., Des Moines, WA. For
information on the availability of this material at the FAA, call
206-231-3195.
    (6) You may view this service information that is incorporated
by reference at the National Archives and Records Administration
(NARA). For information on the availability of this material at
NARA, call<PHONE_NUMBER>, or go to: http://www.archives.gov/federal-register/cfr/ibr-locations.html.

    Issued in Des Moines, Washington, on July 23, 2018.
James Cashdollar,
Acting Director, System Oversight Division, Aircraft Certification
Service.
[FR Doc. 2018-16504 Filed 8-8-18; 8:45 am]
 BILLING CODE 4910-13-P


[Federal Register Volume 85, Number 238 (Thursday, December 10, 2020)]
[Notices]
[Page 79497]
[FR Doc No: 2020-27167]

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DEPARTMENT OF HOMELAND SECURITY

Federal Emergency Management Agency

[Internal Agency Docket No. FEMA-3549-EM; Docket ID FEMA-2020-0001]

Louisiana; Emergency and Related Determinations

AGENCY: Federal Emergency Management Agency, DHS.

ACTION: Notice.

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SUMMARY: This is a notice of the Presidential declaration of an
emergency for the State of Louisiana (FEMA-3549-EM), dated October 27,
2020, and related determinations.

DATES: The declaration was issued October 27, 2020.

FOR FURTHER INFORMATION CONTACT: Dean Webster, Office of Response and
Recovery, Federal Emergency Management Agency, 500 C Street SW,
Washington, DC 20472,<PHONE_NUMBER>.

SUPPLEMENTARY INFORMATION: Notice is hereby given that, in a letter
dated October 27, 2020, the President issued an emergency declaration
under the authority of the Robert T. Stafford Disaster Relief and
Emergency Assistance Act, 42 U.S.C. 5121 et seq. (the ``Stafford
Act''), as follows:

    I have determined that the emergency conditions in certain areas
of the State of Louisiana resulting from Tropical Storm Zeta
beginning on October 26, 2020, and continuing, are of sufficient
severity and magnitude to warrant an emergency declaration under the
Robert T. Stafford Disaster Relief and Emergency Assistance Act, 42
U.S.C. 5121 et seq. (``the Stafford Act''). Therefore, I declare
that such an emergency exists in the State of Louisiana.
    You are authorized to provide appropriate assistance for
required emergency measures, authorized under title V of the
Stafford Act, to save lives and to protect property and public
health and safety, and to lessen or avert the threat of a
catastrophe in the designated areas. Specifically, you are
authorized to provide Public Assistance Category B emergency
protective measures, including direct Federal assistance in selected
areas and Public Assistance Category B emergency protective
measures, limited to direct Federal assistance in the other
designated areas.
    Consistent with the requirement that Federal assistance be
supplemental, any Federal funds provided under the Stafford Act for
Public Assistance will be limited to 75 percent of the total
eligible costs. In order to provide Federal assistance, you are
hereby authorized to allocate from funds available for these
purposes such amounts as you find necessary for Federal emergency
assistance and administrative expenses.
    Further, you are authorized to make changes to this declaration
for the approved assistance to the extent allowable under the
Stafford Act.

    The Federal Emergency Management Agency (FEMA) hereby gives notice
that pursuant to the authority vested in the Administrator, under
Executive Order 12148, as amended, John E. Long, of FEMA is appointed
to act as the Federal Coordinating Officer for this declared emergency.
    The following areas of the State of Louisiana have been designated
as adversely affected by this declared emergency:

    Public Assistance Category B emergency protective measures,
including direct federal assistance for the parishes of Acadia,
Allen, Ascension, Assumption, Beauregard, Calcasieu, Cameron, East
Baton Rouge, East Feliciana, Evangeline, Iberia, Iberville,
Jefferson, Jefferson Davis, Livingston, Lafayette, Lafourche,
Orleans, Plaquemines, Pointe Coupee, St. Bernard, St. Charles, St.
Helena, St. James, St. John the Baptist, St. Landry, St. Martin, St.
Mary, St. Tammany, Tangipahoa, Terrebonne, Vermilion, Washington,
West Baton Rouge, and West Feliciana.
    Public Assistance Category B emergency protective measures,
limited to direct federal assistance for the parishes of Avoyelles,
Bienville, Bossier, Caddo, Caldwell, Catahoula, Claiborne,
Concordia, DeSoto, East Carroll, Franklin, Grant, Jackson, La Salle,
Lincoln, Madison, Morehouse, Natchitoches, Ouachita, Rapides, Red
River, Richland, Sabine, Tensas, Union, Vernon, Webster, West
Carroll, and Winn.

The following Catalog of Federal Domestic Assistance Numbers (CFDA)
are to be used for reporting and drawing funds: 97.030, Community
Disaster Loans; 97.031, Cora Brown Fund; 97.032, Crisis Counseling;
97.033, Disaster Legal Services; 97.034, Disaster Unemployment
Assistance (DUA); 97.046, Fire Management Assistance Grant; 97.048,
Disaster Housing Assistance to Individuals and Households In
Presidentially Declared Disaster Areas; 97.049, Presidentially
Declared Disaster Assistance--Disaster Housing Operations for
Individuals and Households; 97.050, Presidentially Declared Disaster
Assistance to Individuals and Households--Other Needs; 97.036,
Disaster Grants--Public Assistance (Presidentially Declared
Disasters); 97.039, Hazard Mitigation Grant.

Pete Gaynor,
Administrator, Federal Emergency Management Agency.
[FR Doc. 2020-27167 Filed 12-9-20; 8:45 am]
BILLING CODE 9111-23-P


[Federal Register: March 19, 2009 (Volume 74, Number 52)]
[Notices]
[Page 11745]
[DOCID:fr19mr09-74]

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DEPARTMENT OF HOMELAND SECURITY

Federal Emergency Management Agency

[Internal Agency Docket No. FEMA-1828-DR; Docket ID FEMA-2008-0018]

Indiana; Major Disaster and Related Determinations

AGENCY: Federal Emergency Management Agency, DHS.

ACTION: Notice.

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

SUMMARY: This is a notice of the Presidential declaration of a major
disaster for the State of Indiana (FEMA-1828-DR), dated March 5, 2009,
and related determinations.

DATES: Effective Date: March 5, 2009.

FOR FURTHER INFORMATION CONTACT: Peggy Miller, Disaster Assistance
Directorate, Federal Emergency Management Agency, 500 C Street, SW.,
Washington, DC 20472,<PHONE_NUMBER>.

SUPPLEMENTARY INFORMATION: Notice is hereby given that, in a letter
dated March 5, 2009, the President issued a major disaster declaration
under the authority of the Robert T. Stafford Disaster Relief and
Emergency Assistance Act, 42 U.S.C. 5121-5207 (the Stafford Act), as
follows:

    I have determined that the damage in certain areas of the State
of Indiana resulting from a severe winter storm during the period of
January 26-28, 2009, is of sufficient severity and magnitude to
warrant a major disaster declaration under the Robert T. Stafford
Disaster Relief and Emergency Assistance Act, 42 U.S.C. 5121-5207
(the Stafford Act). Therefore, I declare that such a major disaster
exists in the State of Indiana.
    In order to provide Federal assistance, you are hereby
authorized to allocate from funds available for these purposes such
amounts as you find necessary for Federal disaster assistance and
administrative expenses.
    You are authorized to provide Public Assistance in the
designated areas, Hazard Mitigation throughout the State, and any
other forms of assistance under the Stafford Act that you deem
appropriate. Consistent with the requirement that Federal assistance
is supplemental, any Federal funds provided under the Stafford Act
for Public Assistance and Hazard Mitigation will be limited to 75
percent of the total eligible costs. If Other Needs Assistance under
Section 408 of the Stafford Act is later requested and warranted,
Federal funding under that program will also be limited to 75
percent of the total eligible costs.
    Further, you are authorized to make changes to this declaration
to the extent allowable under the Stafford Act.

    The Federal Emergency Management Agency (FEMA) hereby gives notice
that Regis Leo Phelan, of FEMA is appointed to act as the Federal
Coordinating Officer for this major disaster.
    The following areas of the State of Indiana have been designated as
adversely affected by this major disaster:

    Clark, Crawford, Dubois, Floyd, Gibson, Harrison, Jackson,
Jefferson, Orange, Perry, Spencer, Switzerland, Vanderburgh,
Warrick, and Washington Counties for Public assistance.
    All counties within the State of Indiana are eligible to apply
for assistance under the Hazard Mitigation Grant Program.

The following Catalog of Federal Domestic Assistance Numbers (CFDA)
are to be used for reporting and drawing funds: 97.030, Community
Disaster Loans; 97.031, Cora Brown Fund; 97.032, Crisis Counseling;
97.033, Disaster Legal Services; 97.034, Disaster Unemployment
Assistance (DUA); 97.046, Fire Management Assistance Grant; 97.048,
Disaster Housing Assistance to Individuals and Households In
Presidentially Declared Disaster Areas; 97.049, Presidentially
Declared Disaster Assistance--Disaster Housing Operations for
Individuals and Households; 97.050, Presidentially Declared Disaster
Assistance to Individuals and Households--Other Needs; 97.036,
Disaster Grants--Public Assistance (Presidentially Declared
Disasters); 97.039, Hazard Mitigation Grant.

Nancy Ward,
Acting Administrator, Federal Emergency Management Agency.
[FR Doc. E9-6004 Filed 3-18-09; 8:45 am]

BILLING CODE 9111-23-P