[Federal Register Volume 82, Number 149 (Friday, August 4, 2017)]
[Notices]
[Pages 36460-36467]
[FR Doc No: 2017-16400]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-81265; File No. SR-NASDAQ-2017-038]

Self-Regulatory Organizations; The NASDAQ Stock Market LLC;
Notice of Filing of Amendment No. 1, and Order Granting Accelerated
Approval of a Proposed Rule Change, as Modified by Amendments No. 1 and
2, Relating to the First Trust Municipal High Income ETF

July 31, 2017.

I. Introduction

    On May 16, 2017, The NASDAQ Stock Market LLC (``Nasdaq'' or
``Exchange'') filed with the Securities and Exchange Commission
(``Commission''), pursuant to Section 19(b)(1) of the Securities
Exchange Act of 1934 (``Act'') \1\ and Rule 19b-4 thereunder,\2\ a
proposed rule change relating to the First Trust Municipal High Income
ETF (``Fund'') of First Trust Exchange-Traded Fund III (``Trust''), the
shares of which have been approved by the Commission for listing and
trading under Nasdaq Rule 5735 (``Managed Fund Shares''). The proposed
rule change was published for

comment in the Federal Register on June 2, 2017.\3\ On July 10, 2017,
the Exchange filed Amendment No. 1 to the proposed rule change.\4\ On
July 11, 2017, the Commission designated a longer period within which
to approve the proposed rule change, disapprove the proposed rule
change, or institute proceedings to determine whether to disapprove the
proposed rule change.\5\ On July 13, 2017, the Exchange filed Amendment
No. 2 to the proposed rule change.\6\ The Commission has received no
comments on the proposal. The Commission is publishing this notice to
solicit comments on Amendment No. 1 from interested persons, and is
approving the proposed rule change, as modified by Amendments No. 1 and
2, on an accelerated basis.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ See Securities Exchange Act Release No. 80802 (May 26,
2017), 82 FR 25648 (Jun. 2, 2017) (``Notice'').
    \4\ In Amendment No. 1, which amended and replaced the proposed
rule change in its entirety, the Exchange: (a) modified the
requirement that the Fund invest at least 65% of its net assets in
Municipal Securities (as defined herein) that are rated below
investment grade to at least 50% of its net assets; (b) modified the
limitation that the Fund invest up to 35% of its net assets in
investment grade Municipal Securities to up to 50% of its net
assets; and (c) removed references to the Liquidity Rule. Amendment
No. 1 to the proposed rule change is available on the Commission's
Web site at: https://www.sec.gov/comments/sr-nasdaq-2017-038/nasdaq2017038-1841718-155073.pdf.
    \5\ See Securities Exchange Act Release No. 81123 (Jul. 11,
2017), 82 FR 32737 (Jul. 17, 2017). The Commission designated August
31, 2017, as the date by which the Commission shall either approve
or disapprove, or institute proceedings to determine whether to
disapprove, the proposed rule change. See id.
    \6\ In Amendment No. 2, which partially amended the proposed
rule change, as modified by Amendment No. 1, the Exchange provided
the rationale with respect to the modifications to the percentages
of investment grade and non-investment grade Municipal Securities in
which the Fund may invest. Because Amendment No. 2 makes clarifying
changes and does not present unique or novel regulatory issues, it
is not subject to notice and comment. Amendment No. 2 is available
on the Commission's Web site at: https://www.sec.gov/comments/sr-nasdaq-2017-038/nasdaq2017038-1851791-155341.pdf. See infra notes
30-32 (noting where the Exchange provided the rationale with respect
to the modifications to the percentages of investment grade and non-
investment grade Municipal Securities in Amendment No. 2).
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II. The Exchange's Description of the Proposed Rule Change, as Modified
by Amendments No. 1 and 2

    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 Commission has approved the listing and trading of Shares under
Nasdaq Rule 5735, which governs the listing and trading of Managed Fund
Shares on the Exchange.\7\ However, no Shares are currently listed and
traded on the Exchange. The Exchange believes the proposed rule change
reflects no significant issues not previously addressed in the Prior
Release.
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    \7\ The Commission approved Nasdaq Rule 5735 in Securities
Exchange Act Release No. 57962 (June 13, 2008), 73 FR 35175 (June
20, 2008) (SR-NASDAQ-2008-039). The Commission previously approved
the listing and trading of the Shares of the Fund. See Securities
Exchange Act Release No. 78913 (September 23, 2016), 81 FR 69109
(October 5, 2016) (SR-NASDAQ-2016-002) (``Prior Release'').
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    The Fund is an actively-managed exchange-traded fund (``ETF''). The
Shares will be offered by the Trust, which was established as a
Massachusetts business trust on January 9, 2008. The Trust, which is
registered with the Commission as an investment company under the
Investment Company Act of 1940 (the ``1940 Act''), has filed a
registration statement on Form N-1A (``Registration Statement'')
relating to the Fund with the Commission. \8\ The Fund is a series of
the Trust.
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    \8\ See Post-Effective Amendment No. 27 to Registration
Statement on Form N-1A for the Trust, dated August 31, 2015 (File
Nos. 333-176976 and 811-22245). The descriptions of the Fund and the
Shares contained herein are based, in part, on information in the
Registration Statement. Before Shares are publicly offered, the
Trust will file a post-effective amendment to its Registration
Statement. The changes in this proposed rule change will not be
implemented for the Fund until the post-effective amendment to the
Registration Statement becomes effective. First Trust Advisors L.P.
(the ``Adviser'') represents that the Adviser will not implement the
changes described herein until the instant proposed rule change is
operative.
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    The primary purpose of this proposed rule change is to modify
certain representations set forth in the Prior Release. Since the Prior
Release, in evaluating its ability to construct a portfolio that would
both enable the Fund to pursue its investment objectives effectively
and satisfy the representations set forth in the Prior Release, the
Adviser determined that, based on certain factors, including regulatory
and market developments with portfolio management implications,
additional flexibility would be needed to launch and operate the Fund.
Additionally, the Adviser took into account that recent increases in
interest rates have been accompanied by substantial outflows from
mutual funds and ETFs, and that future interest rate swings may spark
increased market volatility and trigger potentially dramatic inflows
and outflows. To enable the Fund to operate effectively (including, in
addition to pursuing its investment objectives, responding to potential
market volatility), the Adviser believes that additional portfolio
management flexibility is needed and warranted. Additionally, for the
reasons discussed in more detail below, the Exchange believes that the
proposal is consistent with Section 6(b)(5) of the Act.
    As a related matter, the Exchange notes that although the Prior
Release included certain representations that were based on the generic
listing standards for index-based ETFs, the Exchange's ``generic
listing standards'' for actively-managed ETFs (the ``Active ETF Generic
Listing Standards'') \9\ were recently adopted and, with one exception,
the Fund's proposed revised representations would meet or exceed
similar requirements for portfolios of fixed income securities set
forth in Nasdaq Rule 5735(b)(1)(B) under the Active ETF Generic Listing
Standards (``Rule 5735(b)(1)(B)''). In addition, this proposed rule
change would make certain changes to the description of the Fund's
investments. Further, to provide the Adviser with greater flexibility
in hedging interest rate risks associated with the Fund's portfolio
investments, this proposed rule change would expand the Fund's ability
to invest in derivatives by permitting it to invest in over-the-counter
(``OTC'') forward contracts and OTC swaps, subject to a limitation that
would be consistent with the limitation on investments in OTC
derivatives set forth in Nasdaq Rule 5735(b)(1)(E) under the Active ETF
Generic Listing Standards (``Rule 5735(b)(1)(E)'').
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    \9\ See Securities Exchange Act Release No. 78918 (September 23,
2016), 81 FR 67033 (September 29, 2016).
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Changes to Representations
    The Prior Release noted that the Fund would be actively managed and
not tied to an index, but that under normal market conditions, on a
continuous basis determined at the time of purchase, its portfolio of
Municipal Securities (as defined in the Prior Release) would generally
meet, as applicable, all except for two of the criteria for non-
actively managed, index-based, fixed income ETFs contained in Nasdaq
Rule 5705(b)(4)(A),

as described therein. More specifically, the Prior Release stated that,
under normal market conditions, the Fund's portfolio of Municipal
Securities would meet the requirements of: (i) Nasdaq Rule
5705(b)(4)(A)(i) (requiring that the index or portfolio consist of
``Fixed Income Securities''); (ii) Nasdaq Rule 5705(b)(4)(A)(iv)
(requiring that no component fixed income security (excluding Treasury
securities) represent more than 30% of the weight of the index or
portfolio, and that the five highest weighted component fixed income
securities do not, in the aggregate, account for more than 65% of the
weight of the index or portfolio); and (iii) Nasdaq Rule
5705(b)(4)(A)(v) (requiring that an underlying index or portfolio
(excluding one consisting entirely of exempted securities) include
securities from a minimum of 13 non-affiliated issuers) (collectively,
the ``Rule 5705-Related Representations'').
    Additionally, the Prior Release noted that Nasdaq Rule
5705(b)(4)(A)(iii) (relating to convertible securities) was
inapplicable to the Fund's portfolio of Municipal Securities. Further,
the Prior Release provided that the Fund's portfolio of Municipal
Securities may not satisfy 5705(b)(4)(A)(vi) (requiring that component
securities that in the aggregate account for at least 90% of the weight
of the index or portfolio be either exempted securities or from a
specified type of issuer) and that it would not generally satisfy Rule
5705(b)(4)(A)(ii) (requiring that components that in the aggregate
account for at least 75% of the weight of the index or portfolio have a
minimum original principal amount outstanding of $100 million or more).
However, the Prior Release stated that under normal market conditions,
at least 40% (based on dollar amount invested) of the Municipal
Securities in which the Fund invested would be issued by issuers with
total outstanding debt issuances that, in the aggregate, have a minimum
amount of municipal debt outstanding at the time of purchase of $75
million or more (the ``40/75 Representation'').\10\
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    \10\ As noted in the Prior Release, the Commission has
previously issued orders approving proposed rule changes relating to
the listing and trading under NYSE Arca Equities Rule 5.2(j)(3),
Commentary .02 (which governs the listing and trading of fixed-
income index ETFs on NYSE Arca, Inc.) to various ETFs that track
indexes comprised of municipal securities (including high-yield
municipal index ETFs) that did not meet the analogous requirement
included in Commentary .02(a)(2) to NYSE Arca Equities Rule
5.2(j)(3), but demonstrated that the portfolio of municipal
securities in which the ETFs would invest would be sufficiently
liquid (including Securities Exchange Act Release Nos. 75376 (July
7, 2015), 80 FR 40113 (July 13, 2015) (SR-NYSEArca-2015-18) (order
approving listing and trading of Vanguard Tax-Exempt Bond Index
Fund); 71232 (January 3, 2014), 79 FR 1662 (January 9, 2014) (SR-
NYSEArca-2013-118) (order approving listing and trading of Market
Vectors Short High-Yield Municipal Index ETF); and 63881 (February
9, 2011), 76 FR 9065 (February 16, 2011) (SR-NYSEArca-2010-120)
(order approving listing and trading of SPDR Nuveen S&P High Yield
Municipal Bond ETF)). See also Securities Exchange Act Release Nos.
67985 (October 4, 2012), 77 FR 61804 (October 11, 2012) (SR-
NYSEArca-2012-92) (order approving listing and trading of iShares
2018 S&P AMT-Free Municipal Series and iShares 2019 S&P AMT-Free
Municipal Series); 72464 (June 25, 2014), 79 FR 37373 (July 1, 2014)
(SR-NYSEArca-2014-45) (order approving continued listing and trading
of PowerShares Insured California Municipal Bond Portfolio,
PowerShares Insured National Municipal Bond Portfolio and
PowerShares Insured New York Municipal Bond Portfolio); 72523 (July
2, 2014), 79 FR 39016 (July 9, 2014) (SR-NYSEArca-2014-37) (order
approving listing and trading of iShares 2020 S&P AMT-Free Municipal
Series); 75468 (July 16, 2015), 80 FR 43500 (July 22, 2015) (SR-
NYSEArca-2015-25) (order approving listing and trading of iShares
iBonds Dec 2021 AMT-Free Muni Bond ETF and iShares iBonds Dec 2022
AMT-Free Muni Bond ETF); 78329 (July 14, 2016), 81 FR 47217 (July
20, 2016) (SR-BatsBZX-2016-01) (order approving listing and trading
of VanEck Vectors AMT-Free 6-8 Year Municipal Index ETF, VanEck
Vectors AMT-Free 8-12 Year Municipal Index ETF, and VanEck Vectors
AMT-Free 12-17 Year Municipal Index ETF); and 79885 (January 26,
2017), 82 FR 8963 (February 1, 2017) (SR-NYSEArca-2016-100) (order
approving listing and trading of Direxion Daily Municipal Bond
Taxable Bear 1X Fund).
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    In addition to the Rule 5705-Related Representations and the 40/75
Representation, the Prior Release provided that under normal market
conditions, except for the initial invest-up period and periods of high
cash inflows or outflows,\11\ the Fund's investments in Municipal
Securities would provide exposure (based on dollar amount invested) to
(a) at least 10 different industries (with no more than 25% of the
value of the Fund's net assets comprised of Municipal Securities that
provide exposure to any single industry) and (b) at least 15 different
states (with no more than 30% of the value of the Fund's net assets
comprised of Municipal Securities that provide exposure to any single
state) (collectively, the ``Industry/State Representations'').
Additionally, the Prior Release stated that under normal market
conditions, except for the initial invest-up period and periods of high
cash inflows or outflows, (a) with respect to 75% of the Fund's net
assets, the Fund's exposure to any single borrower (based on dollar
amount invested) would not exceed 3% of the value of the Fund's net
assets and (b) with respect to 15% of the Fund's net assets, the Fund's
exposure to any single borrower (based on dollar amount invested) would
not exceed 5% of the value of the Fund's net assets (collectively, the
``Borrower Exposure Representations'').
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    \11\ As described in the Prior Release, the term ``initial
invest-up period'' means the six-week period following the
commencement of trading of Shares on the Exchange and the term
``periods of high cash inflows or outflows'' means rolling periods
of seven calendar days during which inflows or outflows of cash, in
the aggregate, exceed 10% of the Fund's net assets as of the opening
of business on the first day of such periods.
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    The Prior Release also provided that under normal market
conditions, except for the initial invest-up period and periods of high
cash inflows or outflows, (a) with respect to the Municipal Securities
in which the Fund invested that were rated investment grade by each
nationally recognized statistical rating organization (``NRSRO'')
rating such securities, at the time of purchase, the applicable
borrower would be obligated to pay debt service on issues of municipal
obligations that have an aggregate principal amount outstanding of $100
million or more and (b) with respect to all other Municipal Securities
in which the Fund invested (referred to as ``Clause B Munis''), at the
time of purchase of a Clause B Muni, the borrowers of all Clause B
Munis held by the Fund, in the aggregate, would have a weighted average
of principal municipal debt outstanding of $50 million or more
(collectively, the ``Borrower Debt Representations'' and, together with
the Borrower Exposure Representations, the Industry/State
Representations, the 40/75 Representation and the Rule 5705-Related
Representations, the ``Prior Representations'').
    As indicated above, the Adviser has reconsidered the Prior
Representations and concluded that additional flexibility will be
needed to launch and operate the Fund. As a result, in this proposed
rule change, the Exchange is proposing that, going forward: (a) The
Prior Representations, except for the Industry/State Representations,
would be deleted and (b) the representations included in the next two
paragraphs (referred to as the ``New Representations'') would be added.
Further, the Exchange notes that the New Representations have been
designed to correspond to the requirements of Rule 5735(b)(1)(B), as
these are more readily adapted to the Fund (as an actively-managed ETF)
than the generic listing standards for index-based ETFs upon which the
Rule 5705-Related Representations were based.
    Although as described below, certain of the New Representations
would meet or exceed similar requirements set forth in Rule
5735(b)(1)(B), it is not anticipated that the Fund would meet the
requirement that components that in the aggregate account for at least
75% of the fixed income weight of the portfolio each have a minimum
original principal

amount outstanding of $100 million or more (the ``Generic 100
Requirement'').\12\ In general terms, the Fund would operate as an
actively-managed ETF that normally invests in a portfolio of Municipal
Securities (as defined in the Prior Release, with the modification
described below). The Adviser notes that debt issuance sizes for
municipal obligations are generally smaller than for corporate
obligations.\13\ Furthermore, as a general matter, municipal borrowers
in certain industries in which the Fund currently intends to invest
significantly \14\ tend to have less outstanding debt than municipal
borrowers in other municipal industries. Therefore, under normal market
conditions, except for the initial invest-up period and periods of high
cash inflows or outflows,\15\ at least 40% (based on dollar amount
invested) of the Municipal Securities in which the Fund invests \16\
would be issued by issuers with total outstanding debt issuances that,
in the aggregate, have a minimum amount of municipal debt outstanding
at the time of purchase of $50 million or more (the ``40/50
Representation''). Based on its expertise and understanding of the
municipal securities market and the manner in which municipal
securities generally trade, the Adviser believes that, notwithstanding
both the previous more stringent 40/75 Representation and the Generic
100 Requirement, the 40/50 Representation is appropriate in light of
the Fund's investment objectives and the manner in which the Fund
intends to pursue them.\17\ Given the nature of the municipal
securities market and the manner in which municipal securities
generally trade, the expected availability of Municipal Securities that
would satisfy the Fund's investment parameters, and the debt issuance
profiles of the corresponding issuers and borrowers, the 40/50
Representation should both provide the Fund with flexibility to
construct its portfolio and, when combined with the Industry/State
Representations and the other New Representations included in this
filing (including certain representations set forth below pertaining to
fixed income securities weightings and number of non-affiliated issuers
that are based on, but more stringent than, as applicable, the
requirements set forth in Rule 5735(b)(1)(B)), should support the
potential for diversity and liquidity, thereby mitigating the
Commission's concerns about manipulation.\18\
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    \12\ See Nasdaq Rule 5735(b)(1)(B)(i).
    \13\ As indicated above in note 10, various ETFs seeking to
track indexes comprised of municipal securities have previously
sought and obtained approval by the Commission of proposed rule
changes because they would not meet the requirement under the
applicable generic listing standards that is similar to the Generic
100 Requirement.
    \14\ These industries include charter schools, senior living
facilities (i.e., continuing care retirement communities
(``CCRCs'')) and special tax districts, among others. As noted in
the Prior Release, in the case of a municipal conduit financing (in
general terms, the issuance of municipal securities by an issuer to
finance a project to be used primarily by a third party (the
``conduit borrower'')), the ``borrower'' is the conduit borrower
(i.e., the party on which a bondholder must rely for repayment) and
in the case of other municipal financings, the ``borrower'' is the
issuer of the municipal securities.
    \15\ See note 11 regarding the meaning of the terms ``initial
invest-up period'' and ``periods of high cash inflows or outflows.''
    \16\ For the avoidance of doubt, in the case of Municipal
Securities that are issued by entities whose underlying assets are
municipal bonds (``Municipal Entities''), the underlying municipal
bonds would be taken into account.
    \17\ The Adviser notes that individual issues of municipal
securities represented by CUSIPs (i.e., the specific identifying
numbers for securities) may be placed into categories according to
common characteristics (such as rating, geographical region,
purpose, and maturity). Municipal securities that share similar
characteristics generally tend to trade similarly to one another;
therefore, within these categories, issues may be considered
somewhat fungible from a portfolio management perspective, allowing
one CUSIP to be represented by another that shares similar
characteristics for purposes of developing an investment strategy.
Moreover, when municipal securities are close substitutes for one
another, pricing vendors may be able to use executed trade
information from similar municipal securities as pricing inputs for
an individual security. This can make individual securities more
liquid because valuations for a single security are generally better
estimators of actual trading prices when they are informed by trades
in a large group of closely related securities.
    \18\ The Exchange notes that, in addition to approving the Fund
in the Prior Release, the Commission has also approved for listing
and trading shares of other actively-managed ETFs that principally
hold municipal securities. See, e.g., Securities Exchange Act
Release Nos. 60981 (November 10, 2009), 74 FR 59594 (November 18,
2009) (SR-NYSEArca-2009-79) (order approving listing and trading of
PIMCO Short Term Municipal Bond Strategy Fund and PIMCO Intermediate
Municipal Bond Strategy Fund); 71617 (February 26, 2014), 79 FR
12257 (March 4, 2014) (SR-NYSEArca-2013-135) (order approving
listing and trading of db-X Managed Municipal Bond Fund); 71913
(April 9, 2014), 79 FR 21333 (April 15, 2014) (SR-NASDAQ-2014-019)
(order approving listing and trading of First Trust Managed
Municipal ETF); and 79293 (November 10, 2016), 81 FR 81189 (November
17, 2016) (SR-NYSEArca-2016-107) (order approving listing and
trading of Cumberland Municipal Bond ETF).
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    Under normal market conditions, except for the initial invest-up
period and periods of high cash inflows or outflows,\19\ no component
fixed income security (excluding the U.S. government securities
described under the heading ``Other Investments'' in the Prior Release)
would represent more than 15% of the Fund's net assets, and the five
most heavily weighted component fixed income securities in the Fund's
portfolio (excluding U.S. government securities) would not, in the
aggregate, account for more than 25% of the Fund's net assets.\20\
Further, under normal market conditions, except for the initial invest-
up period and periods of high cash inflows or outflows,\21\ the Fund's
portfolio of Municipal Securities would include securities from a
minimum of 30 non-affiliated issuers.\22\ Moreover, under normal market
conditions, except for the initial invest-up period and periods of high
cash inflows or outflows,\23\ component securities that in the
aggregate account for at least 90% of the weight of the Fund's
portfolio of Municipal Securities would be exempted securities as
defined in Section 3(a)(12) of the Act (the ``Exempted Securities
Representation'').\24\ Additionally, to the

extent the Fund invests in Municipal Securities that are mortgage-
backed or asset-backed securities, such investments would not account,
in the aggregate, for more than 20% of the weight of the fixed income
portion of the Fund's portfolio.\25\
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    \19\ See note 11 regarding the meaning of the terms ``initial
invest-up period'' and ``periods of high cash inflows or outflows.''
    \20\ See the Active ETF Generic Listing Standards requirement
set forth in Nasdaq Rule 5735(b)(1)(B)(ii), which provides that no
component fixed income security (excluding U.S. Treasury securities
and government-sponsored entity (``GSE'') securities) may represent
more than 30% of the fixed income weight of the portfolio, and that
the five most heavily weighted component fixed income securities in
the portfolio (excluding U.S. Treasury securities and GSE
securities) may not in the aggregate account for more than 65% of
the fixed income weight of the portfolio. For the avoidance of
doubt, in the case of Municipal Securities that are issued by
Municipal Entities, the underlying municipal bonds would be taken
into account.
    \21\ See note 11 regarding the meaning of the terms ``initial
invest-up period'' and ``periods of high cash inflows or outflows.''
    \22\ For the avoidance of doubt, in the case of Municipal
Securities that are issued by Municipal Entities, the underlying
municipal bonds would be taken into account. Additionally, for
purposes of this restriction, each state and each separate political
subdivision, agency, authority, or instrumentality of such state,
each multi-state agency or authority, and each guarantor, if any,
would be treated as separate, non-affiliated issuers of Municipal
Securities. The Active ETF Generic Listing Standards requirement set
forth in Nasdaq Rule 5735(b)(1)(B)(iii) provides that generally, an
underlying portfolio (excluding exempted securities) that includes
fixed income securities must include a minimum of 13 non-affiliated
issuers. Although not required, if the Fund's portfolio of Municipal
Securities is comprised entirely of securities that meet the
definition of ``municipal securities'' set forth in Section 3(a)(29)
of the Act, then such portfolio would also be comprised entirely of
``exempted securities'' as defined in Section 3(a)(12) of the Act
and, therefore, the requirements of Rule 5735(b)(1)(B)(iii) would
not pertain to such portfolio; see the Exempted Securities
Representation below (which refers to 90% of the weight of the
Fund's portfolio of Municipal Securities).
    \23\ See note 11 regarding the meaning of the terms ``initial
invest-up period'' and ``periods of high cash inflows or outflows.''
    \24\ See the Active ETF Generic Listing Standards requirement
set forth in Nasdaq Rule 5735(b)(1)(B)(iv)(d). For the avoidance of
doubt, in the case of Municipal Securities that are issued by
Municipal Entities, the underlying municipal bonds would be taken
into account.
    \25\ See the Active ETF Generic Listing Standards requirement
set forth in Nasdaq Rule 5735(b)(1)(B)(v).
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    The New Representations differ from the Prior Representations and
do not, in certain respects, comply with Rule 5735(b)(1)(B)
(particularly with respect to the Generic 100 Requirement). However,
taking into account the nature of the municipal securities market and
the manner in which municipal securities generally trade, in light of
the requirements that the New Representations and the Industry/State
Representations would impose (e.g., concerning municipal debt
outstanding, fixed income securities weightings, issuer
diversification, the nature of the securities in which the Fund would
invest (including representations relating to exempted securities and
mortgage-backed and asset-backed securities), and exposure to
industries and states), they should provide support regarding the
anticipated diversity and liquidity of the Fund's Municipal Securities
portfolio and should mitigate the risks associated with manipulation,
while also providing the Adviser with the necessary flexibility to
operate the Fund as intended.
Changes to Description of Certain Fund Investments
    The Prior Release stated that under normal market conditions, the
Fund would seek to achieve its investment objectives by investing at
least 80% of its net assets (including investment borrowings) in
municipal debt securities that pay interest that is exempt from regular
federal income taxes which are ``exempted securities'' under Section
3(a)(12) of the Act (collectively, ``Municipal Securities''). In light
of the Exempted Securities Representation, going forward, the Exchange
proposes to revise the foregoing by deleting the phrase ``which are
`exempted securities' under Section 3(a)(12) of the Act.'' In addition,
the Prior Release stated that the Fund ``may invest up to 20% of its
net assets in short-term debt instruments . . . , taxable municipal
securities or tax-exempt municipal securities that are not exempted
securities under Section 3(a)(12) under the Act, or it may hold cash.''
Going forward, the Exchange proposes to revise the foregoing by
replacing the phrase ``taxable municipal securities or tax-exempt
municipal securities that are not exempted securities under Section
3(a)(12) under the Act,'' with the phrase ``and taxable municipal
securities and other municipal securities that are not Municipal
Securities,''.
    Additionally, the Prior Release stated that under normal market
conditions, the Fund would invest at least 65% of its net assets in
Municipal Securities that are, at the time of investment, rated below
investment grade (i.e., not rated Baa3/BBB- or above) by at least one
NRSRO rating such securities (or Municipal Securities that are unrated
and determined by the Adviser to be of comparable quality) (the ``Below
Investment Grade Requirement''). The Prior Release also provided that
the Fund could invest up to 35% of its net assets in ``investment
grade'' Municipal Securities (meaning Municipal Securities that are, at
the time of investment, rated investment grade (i.e., rated Baa3/BBB-
or above) by each NRSRO rating such securities (or Municipal Securities
that are unrated and determined by the Adviser to be of comparable
quality)) (the ``Investment Grade Limitation''). Going forward, the
Exchange proposes to modify the Below Investment Grade Requirement by
replacing the phrase ``Under normal market conditions, the Fund will
invest at least 65% of its net assets'' with the following: ``Under
normal market conditions, except for the initial invest-up period and
periods of high cash inflows or outflows, the Fund will invest at least
50% of its net assets''.\26\ Further, the Exchange proposes to modify
the Investment Grade Limitation by replacing the phrase ``The Fund may
invest up to 35% of its net assets'' with the following: ``Under normal
market conditions, except for the initial invest-up period and periods
of high cash inflows or outflows, the Fund may not invest more than 50%
of its net assets''.\27\
---------------------------------------------------------------------------

    \26\ See note 11 regarding the meaning of the terms ``initial
invest-up period'' and ``periods of high cash inflows or outflows.''
In addition, to conform to the change to the Below Investment Grade
Requirement, the Exchange proposes that, going forward, the phrase
``65% investment requirement'' be replaced with ``50% investment
requirement'' in the following statement included in the Prior
Release: ``The Municipal Securities in which the Fund will invest to
satisfy this 65% investment requirement may include Municipal
Securities that are currently in default and not expected to pay the
current coupon (``Distressed Municipal Securities'').''
    \27\ See note 11 regarding the meaning of the terms ``initial
invest-up period'' and ``periods of high cash inflows or outflows.''
In addition, to conform to the change to the Investment Grade
Limitation, the Exchange proposes that, going forward, the phrase
``35% investment limitation'' be replaced with ``50% investment
limitation'' in the following statement included in the Prior
Release: ``If, subsequent to purchase by the Fund, a Municipal
Security held by the Fund experiences an improvement in credit
quality and becomes investment grade, the Fund may continue to hold
the Municipal Security and it will not cause the Fund to violate the
35% investment limitation; however, the Municipal Security will be
taken into account for purposes of determining whether purchases of
additional Municipal Securities will cause the Fund to violate such
limitation.''
---------------------------------------------------------------------------

Changes To Expand Permitted Derivatives Investments
    As described in the Prior Release, the Fund may (i) invest in
exchange-listed options on U.S. Treasury securities, exchange-listed
options on U.S. Treasury futures contracts, and exchange-listed U.S.
Treasury futures contracts (collectively, the ``Listed Derivatives'')
and (ii) acquire short positions in the Listed Derivatives. No changes
are being proposed with respect to the Fund's investments in the Listed
Derivatives. Going forward, however, the Exchange proposes that the
Fund's ability to invest in derivatives would be expanded to permit it
to also invest in OTC forward contracts and OTC swaps (collectively,
the ``OTC Derivatives'') to hedge interest rate risks associated with
the Fund's portfolio investments.
    On both an initial and continuing basis, no more than 20% of the
assets in the Fund's portfolio would be invested in the OTC Derivatives
and, for purposes of calculating this limitation, the Fund's investment
in the OTC Derivatives would be calculated as the aggregate gross
notional value of the OTC Derivatives.\28\ The Fund would only enter
into transactions in the OTC Derivatives with counterparties that the
Adviser reasonably believes are capable of performing under the
applicable contract or agreement.\29\ The Fund's investments in both
Listed Derivatives and OTC Derivatives would be consistent with the
Fund's investment objectives and the 1940 Act and would not be used to
seek to achieve a multiple or inverse multiple of an index.
---------------------------------------------------------------------------

    \28\ This limitation is consistent with the limitation set forth
in Rule 5735(b)(1)(E).
    \29\ The Fund would seek, where possible, to use counterparties,
as applicable, whose financial status is such that the risk of
default is reduced; however, the risk of losses resulting from
default is still possible. The Adviser would evaluate the
creditworthiness of counterparties on an ongoing basis. In addition
to information provided by credit agencies, the Adviser's analysis
would evaluate each approved counterparty using various methods of
analysis and may consider the Adviser's past experience with the
counterparty, its known disciplinary history and its share of market
participation.
---------------------------------------------------------------------------

    The OTC Derivatives would typically be valued using information
provided by a Pricing Service (as defined in the Prior Release).
Pricing information for the OTC Derivatives would be available from
major broker-dealer firms and/or

major market data vendors and/or Pricing Services (as defined in the
Prior Release).
    The Adviser represents that there would be no change to the Fund's
investment objectives. Except as provided herein, all other facts
presented and representations made in the Prior Release would remain
unchanged. The Fund and the Shares would comply with all initial and
continued listing requirements under Nasdaq Rule 5735.
2. Statutory Basis
    Nasdaq believes that the proposal is consistent with Section 6(b)
of the Act in general and Section 6(b)(5) of the Act, in particular, in
that it is designed to prevent fraudulent and manipulative acts and
practices, to promote just and equitable principles of trade, to foster
cooperation and coordination with persons engaged in facilitating
transactions in securities, and to remove impediments to and perfect
the mechanism of a free and open market and, in general, to protect
investors and the public interest. Except as provided herein, all other
facts presented and representations made in the Prior Release would
remain unchanged. The Fund would comply with all the initial and
continued listing requirements under Nasdaq Rule 5735.
    The Exchange believes that the proposed rule change is designed to
prevent fraudulent and manipulative acts and practices in that the
Shares would be listed and traded on the Exchange pursuant to the
initial and continued listing criteria in Nasdaq Rule 5735 and, except
as provided herein, all other facts presented and representations made
in the Prior Release would remain unchanged. The Exchange notes that
Shares have not yet been listed on the Exchange. Consistent with the
Prior Release, the Exchange represents that trading in the Shares would
be subject to the existing trading surveillances, administered by both
Nasdaq and also the Financial Industry Regulatory Authority
(``FINRA''), on behalf of the Exchange, which are designed to detect
violations of Exchange rules and applicable federal securities laws.
    The proposed rule change is designed to promote just and equitable
principles of trade and to protect investors and the public interest in
that the Adviser represents that taking into account the nature of the
municipal securities market and the manner in which municipal
securities generally trade, in light of the requirements that the New
Representations, the Industry/State Representations, the modified Below
Investment Grade Requirement and the modified Investment Grade
Limitation would impose (e.g., concerning municipal debt outstanding,
fixed income securities weightings, issuer diversification, the nature
of the securities in which the Fund would invest (including
representations relating to exempted securities and mortgage-backed and
asset-backed securities), exposure to industries and states, and
investments in below investment grade Municipal Securities), they
should provide support regarding the anticipated diversity and
liquidity of the Fund's Municipal Securities portfolio and should
mitigate the risks associated with manipulation, while also providing
the Adviser with the necessary flexibility to operate the Fund as
intended.\30\
---------------------------------------------------------------------------

    \30\ See Amendment No. 2, supra note 6.
---------------------------------------------------------------------------

    With one exception, the New Representations would meet or exceed
similar requirements for portfolios of fixed income securities set
forth in Rule 5735(b)(1)(B). In this regard, it is not anticipated that
the Fund would meet the Generic 100 Requirement. Based on its expertise
and understanding of the municipal securities market and the manner in
which municipal securities generally trade, the Adviser believes that,
notwithstanding both the previous more stringent 40/75 Representation
and the Generic 100 Requirement, the 40/50 Representation is
appropriate in light of the Fund's investment objectives and the manner
in which the Fund intends to pursue them. Further, given the nature of
the municipal securities market and the manner in which municipal
securities generally trade, the expected availability of Municipal
Securities that would satisfy the Fund's investment parameters, and the
debt issuance profiles of the corresponding issuers and borrowers, the
40/50 Representation should both provide the Fund with flexibility to
construct its portfolio and, when combined with the Industry/State
Representations, the other New Representations, the modified Below
Investment Grade Requirement and the modified Investment Grade
Limitation, should support the potential for diversity and liquidity,
thereby mitigating the Commission's concerns about manipulation.\31\
---------------------------------------------------------------------------

    \31\ See id.
---------------------------------------------------------------------------

    In connection with the proposal to modify the Below Investment
Grade Requirement and the Investment Grade Limitation, the Exchange
notes that the Fund's ability to invest in investment grade Municipal
Securities would be expanded. Accordingly, Nasdaq believes that this is
consistent with the Act because the liquidity profile of the Fund's
potential pool of Municipal Securities is expected to increase, which
should lessen manipulation concerns.\32\
---------------------------------------------------------------------------

    \32\ See id.
---------------------------------------------------------------------------

    Further, in connection with the proposal to permit the Fund to
invest in the OTC Derivatives, the Exchange notes that the ability to
invest in the OTC Derivatives would provide the Adviser with additional
flexibility in hedging interest rate risks associated with the Fund's
portfolio investments and would be subject to a limitation that is
consistent with the limitation set forth in Rule 5735(b)(1)(E).
Additionally, the Fund would only enter into transactions in the OTC
Derivatives with counterparties that the Adviser reasonably believes
are capable of performing under the applicable contract or agreement.
    In addition, a large amount of information would be publicly
available regarding the Fund and the Shares, thereby promoting market
transparency. Moreover, the Intraday Indicative Value (as described in
the Prior Release), available on the NASDAQ OMX Information LLC
proprietary index data service, would be widely disseminated by one or
more major market data vendors and broadly displayed at least every 15
seconds during the Regular Market Session. On each business day, before
commencement of trading in Shares in the Regular Market Session on the
Exchange, the Fund would disclose on its Web site the Disclosed
Portfolio that will form the basis for the Fund's calculation of NAV at
the end of the business day.
    The proposed rule change is designed to perfect the mechanism of a
free and open market and, in general, to protect investors and the
public interest. The Exchange notes that the Fund does not yet have
publicly offered Shares and does not yet have Shares listed and traded
on the Exchange. Before Shares are publicly offered, the Trust will
file a post-effective amendment to its Registration Statement. The
Shares will not be publicly offered until the post-effective amendment
to the Registration Statement becomes effective.
    For the above reasons, Nasdaq believes the proposed rule change is
consistent with the requirements of Section 6(b)(5) of the Act.

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

    The Exchange does not believe that the proposed rule change will
impose any burden on competition that is not necessary or appropriate
in furtherance

of the purposes of the Act. The Exchange believes that the proposed
rule change would provide the Adviser with the flexibility needed to
proceed with launching the Fund, accommodating the listing and trading
of Managed Fund Shares for an additional actively-managed exchange-
traded product, thereby enhancing competition among market
participants, to the benefit of investors and the marketplace.

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

    No written comments were either solicited or received.

III. Discussion and Commission Findings

    After careful review, the Commission finds that the Exchange's
proposal is consistent with the requirements of Section 6 of the Act
\33\ and the rules and regulations thereunder applicable to a national
securities exchange.\34\ In particular, the Commission finds that the
proposed rule change is consistent with Section 6(b)(5) of the Act,\35\
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.
---------------------------------------------------------------------------

    \33\ 15 U.S.C. 78f.
    \34\ 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).
    \35\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------

    As described above, the Exchange proposes to: (a) Delete all of the
Prior Representations (including the 40/75 Representation), except for
the Industry/State Representations; and (b) apply the New
Representations. According to the Exchange, the Fund's proposed New
Representations would meet the requirements of Nasdaq Rule
5735(b)(1)(B), with the exception of the Generic 100 Requirement. In
lieu of the Generic 100 Requirement, the Exchange proposes to apply New
Representations, which include the 40/50 Representation. Specifically,
the 40/50 Representation requires that, under normal market conditions
and except for the initial invest-up period and periods of high cash
inflows or outflows, at least 40% (based on dollar amount invested) of
the Municipal Securities in which the Fund invests would be issued by
issuers with total outstanding debt issuances that, in the aggregate,
have a minimum amount of municipal debt outstanding at the time of
purchase of $50 million or more.
    The Commission believes that, because this Fund is a series of
Managed Fund Shares under Nasdaq Rule 5735, it is reasonable and
appropriate for the Exchange to use the Active ETF Generic Listing
Standards of Nasdaq Rule 5735 as a point of comparison, rather than to
apply the 5705-Related Representations from the Prior Release, which
were based on standards applicable to the listing and trading of Index
Fund Shares.\36\ The Exchange acknowledges that the 40/50
Representation is less stringent than the 40/75 Representation provided
in the Prior Release. The Commission notes, however, that the
Exchange's proposed 40/50 Representation is consistent with similar
requirements applicable to other series of Managed Fund Shares that
invest in municipal securities.\37\ The Commission also notes that,
according to the Exchange, the ``Industry/State Representations'' from
the Prior Release would remain in effect with respect to this Fund.
---------------------------------------------------------------------------

    \36\ See supra note 9 (order approving the adoption of generic
listing standards for Managed Fund Shares).
    \37\ See, e.g., Securities Exchange Act Release No. 80745 (May
23, 2017), 82 FR 24755 (May 30, 2016) (SR-NASDAQ-2017-033) (order
approving the listing and trading of shares of the First Trust
California Municipal High Income ETF) (``CA Municipal ETF'').
---------------------------------------------------------------------------

    The Commission further notes that, as part of the proposed New
Representations, the Exchange has made the following additional
representations with respect to the Fund and the requirements
applicable to its Municipal Securities investments:
    (1) No component fixed income security (excluding the U.S.
government securities described under the heading ``Other Investments''
in the Prior Release) would represent more than 15% of the Fund's net
assets, and the five most heavily weighted component fixed income
securities in the Fund's portfolio (excluding U.S. government
securities) would not, in the aggregate, account for more than 25% of
the Fund's net assets.\38\
---------------------------------------------------------------------------

    \38\ See Nasdaq Rule 5735(b)(1)(B)(ii) (requiring that no
component fixed income security (excluding U.S. Treasury securities
and government-sponsored entity (``GSE'') securities) may represent
more than 30% of the fixed income weight of the portfolio, and that
the five most heavily weighted component fixed income securities in
the portfolio (excluding U.S. Treasury securities and GSE
securities) may not in the aggregate account for more than 65% of
the fixed income weight of the portfolio).
---------------------------------------------------------------------------

    (2) Under normal market conditions, except for the initial invest-
up period and periods of high cash inflows or outflows, the Fund's
portfolio of Municipal Securities would include securities from a
minimum of 30 non-affiliated issuers.\39\
---------------------------------------------------------------------------

    \39\ The Exchange has clarified that, for purposes of this
restriction, each state and each separate political subdivision,
agency, authority, or instrumentality of such state, each multi-
state agency or authority, and each guarantor, if any, would be
treated as separate, non-affiliated issuers of Municipal Securities.
See Nasdaq Rule 5735(b)(1)(B)(iii) (requiring that an underlying
portfolio that includes fixed income securities, excluding exempted
securities, must include a minimum of 13 non-affiliated issuers).
The Exchange further clarifies that if the Fund's portfolio of
Municipal Securities is composed entirely of securities that meet
the definition of ``municipal securities'' set forth in Section
3(a)(29) of the Act, then the portfolio would also be composed
entirely of ``exempted securities'' as defined in Section 3(a)(12)
of the Act and, therefore, the requirements of Rule
5735(b)(1)(B)(iii) would not pertain to the portfolio.
---------------------------------------------------------------------------

    (3) Under normal market conditions, except for the initial invest-
up period and periods of high cash inflows or outflows, component
securities that in the aggregate account for at least 90% of the weight
of the Fund's portfolio of Municipal Securities would be exempted
securities as defined in Section 3(a)(12) of the Act.\40\
---------------------------------------------------------------------------

    \40\ See Nasdaq Rule 5735(b)(1)(B)(iv)(d). See also id.
(describing Nasdaq Rule 5735(b)(1)(B)(iii) and applicability of this
requirement if the Fund's portfolio of Municipal Securities is
comprised entirely of securities that meet the definition of
``exempted securities'' under the Act).
---------------------------------------------------------------------------

    (4) To the extent the Fund invests in Municipal Securities that are
mortgage-backed or asset-backed securities, such investments would not
account, in the aggregate, for more than 20% of the weight of the fixed
income portion of the Fund's portfolio.\41\
---------------------------------------------------------------------------

    \41\ See Nasdaq Rule 5735(b)(1)(B)(v) (requiring that non-
agency, non-GSE and privately-issued mortgage-related and other
asset-backed securities components of a portfolio must not account,
in the aggregate, for more than 20% of the weight of the fixed
income portion of the portfolio).
---------------------------------------------------------------------------

    (5) No more than 20% of the Fund's assets will be invested in OTC
Derivatives, and, for purposes of calculating this limitation, the
Fund's investment in the OTC Derivatives would be calculated as the
aggregate gross notional value of the OTC Derivatives.
    The Exchange also proposes to change the description of certain
fund investments to remove references to ``exempted securities'' as a
redundancy because Section 3(a)(12) of the Act exempts certain
Municipal Securities. The Commission believes that this clarifying
change is reasonable, in light of the representations provided by the
Exchange with respect to the Fund's Municipal Securities investment
restrictions.

    The Commission notes that the Exchange has represented that, other
than the proposed changes, the Fund and the Shares will comply with all
other initial and continued listing requirements under Nasdaq Rule
5735. The Commission notes that, according to the Exchange, there is no
change to the Fund's investment objectives and that, except as provided
herein, all other facts presented and representations made in the Prior
Release would remain unchanged. Specifically, the Commission notes that
in the Prior Release, the Exchange represented that all statements and
representations made in the proposed rule change regarding (a) the
description of the portfolio, (b) limitations on portfolio holdings or
reference assets, or (c) the applicability of Exchange rules and
surveillance procedures constitute continued listing requirements for
listing the Shares on the Exchange. In addition, the issuer has
represented to the Exchange that it will advise the Exchange of any
failure by the Fund to comply with the continued listing requirements,
and, pursuant to its obligations under Section 19(g)(1) of the Act, the
Exchange will monitor for compliance with the continued listing
requirements. If the Fund is not in compliance with the applicable
listing requirements, the Exchange will commence delisting procedures
under the Nasdaq 5800 Series.\42\
---------------------------------------------------------------------------

    \42\ See supra note 7.
---------------------------------------------------------------------------

    This approval order is based on all of the Exchange's
representations, including those set forth above, in the Notice, and in
the Prior Release, as applicable, and the Exchange's description of the
Fund. The Commission notes that the Fund and the Shares must comply
with the requirements of Nasdaq Rule 5735 to be listed and traded on
the Exchange.
    For the foregoing reasons, the Commission finds that the proposed
rule change, as modified by Amendments No. 1 and 2, is consistent with
Section 6(b)(5) of the Act \43\ and the rules and regulations
thereunder applicable to a national securities exchange.
---------------------------------------------------------------------------

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

IV. Solicitation of Comments on Amendment No. 1 to the Proposed Rule
Change

    Interested persons are invited to submit written data, views, and
arguments concerning whether Amendment No. 1 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_ADDRESS>Please include
File Number SR-NASDAQ-2017-038 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-NASDAQ-2017-038. This
file number should be included on the subject line if email is used. To
help the Commission process and review your comments more efficiently,
please use only one method. The Commission will post all comments on
the Commission's Internet Web site (http://www.sec.gov/rules/sro.shtml). Copies of the submission, all subsequent amendments, all
written statements with respect to the proposed rule change that are
filed with the Commission, and all written communications relating to
the proposed rule change between the Commission and any person, other
than those that may be withheld from the public in accordance with the
provisions of 5 U.S.C. 552, will be available for Web site viewing and
printing in the Commission's Public Reference Room, 100 F Street NE.,
Washington, DC 20549, on official business days between the hours of
10:00 a.m. and 3:00 p.m. Copies of 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; the Commission does
not edit personal identifying information from submissions. You should
submit only information that you wish to make available publicly. All
submissions should refer to File Number SR-NASDAQ-2017-038, and should
be submitted on or before August 25, 2017.

V. Accelerated Approval of Proposed Rule Change, as Modified by
Amendments No. 1 and 2

    The Commission finds good cause to approve the proposed rule
change, as modified by Amendments No. 1 and 2, prior to the thirtieth
day after the date of publication of notice of the filing of Amendment
No. 1 in the Federal Register. In Amendment No. 1, the Exchange: (a)
Modified the requirement that the Fund invest at least 65% of its net
assets in Municipal Securities that are rated below investment grade to
at least 50% of its net assets; (b) modified the limitation that the
Fund invest up to 35% of its net assets in investment grade Municipal
Securities to up to 50% of its net assets; and (c) removed references
to the Liquidity Rule.
    The Commission notes that Amendment No. 1 supplements the proposed
rule change by providing additional information regarding the scope of
the Fund's permitted investments in investment grade and below
investment grade Municipal Securities. The Commission believes that the
proposed change to the Fund's investment parameters does not change the
Commission's determination in the Prior Release that the listing and
trading of the Shares on the Exchange is consistent with the
requirements of the Act. In addition, the Commission believes that
Amendment No. 1 clarifies the proposed rule change by deleting
references to the Liquidity Rule under the 1940 Act. The Commission
believes that Amendment No. 1 does not raise any novel or unique
regulatory issues under the Act. The changes and additional information
in Amendment No. 1 helped the Commission to evaluate whether the
listing and trading of the Shares would be consistent with the
protection of investors and the public interest. Accordingly, the
Commission finds good cause, pursuant to Section 19(b)(2) of the
Act,\44\ to approve the proposed rule change, as modified by Amendments
No. 1 and 2, on an accelerated basis.
---------------------------------------------------------------------------

    \44\ 15 U.S.C. 78s(b)(2).
---------------------------------------------------------------------------

VI. Conclusion

    It is therefore ordered, pursuant to Section 19(b)(2) of the
Exchange Act,\45\ that the proposed rule change (SR-NASDAQ-2017-038),
as modified by Amendments No. 1 and 2 be, and it hereby is, approved on
an accelerated basis.
---------------------------------------------------------------------------

    \45\ Id.

    For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\46\
---------------------------------------------------------------------------

    \46\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------

Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2017-16400 Filed 8-3-17; 8:45 am]
 BILLING CODE 8011-01-P


 From:
<EMAIL_ADDRESS> To:
Keith Barnett/RTP/USEPA/US@EPA
 Cc:
"Andrew O'Hare"<EMAIL_ADDRESS>Steven Silverman/DC/USEPA/US@EPA, Peter Tsirigotis/RTP/USEPA/US@EPA
 Date:
10/13/2010 12:48 PM
 Subject:
Re: Fw: Two things

My understanding based on our conversation and emails is as follows:

On Nov 8, 2010  any affected source must comply with :

1.		 D/F revisions which included startup and shutdown limit
2.		 Monthly monitoring is increased to 10 minutes on MHOs
3.		 Affirmative defense for exceedance of emission limit during
malfunction
4.		 Clinker Storage Pile Requirements

All other standards become effective in 2013

The monitoring question I had was that the rule using the following
language for each monitor

" Compliance with the XXX emissions standard must be determined based on
the first 30 operating days you operate a XXX CEMS."

This language suggest that if a source installs a CEM before 2013 it must
comply after 30 operating days.

 While we have discussed this and my understanding is that a source that
installs a PM CEM for example in 2011 will not have to comply until the
emission rate standard becomes effective in 2013.

This needs to also be cleared up because the rule is confusing.

_____________________

Hector Ybanez
Corporate Manager, Environmental
122 West Carpenter Freeway
Suite 485
Irving, Texas 75039
Phone (214) 524 - 2814
Cell<PHONE_NUMBER>
<EMAIL_ADDRESS><EMAIL_ADDRESS>www.holcim.com/us
This e-mail is confidential and intended only for the use of the above
named addressee. If you have received this e-mail in error, please delete
it immediately and notify us by e-mail or telephone.

                   Barnett.Kei
                   th@epamail.
                   epa.gov                                              To
                                       "Andrew O'Hare"<EMAIL_ADDRESS>                   10/13/2010                                           cc
                   10:37 AM<EMAIL_ADDRESS>
<EMAIL_ADDRESS>
<EMAIL_ADDRESS>
                                                                   Subject
                                       Re: Fw: Two things

Dear Andy:

I will get back to you with a definitive answer hopefully today.

On that note - I know the open clinker piles are the main issue - but I
also received calls on the changes to testing and monitoring procedures
- notably the opacity monitoring.  Though this is not a big deal it does
require that current procedures be changes to comply.  Can you point me
to specific changes (i.e. the paragraphs) where we might want to at
least consider moving the compliance date?

I am cc'ing Hector on this because he called me at one time on the
testing procedures issue.

Keith W. Barnett
USEPA/OAQPS/SPPD/MMG
Mail Code D243-02
Research Triangle Park, NC  27711
919-541-5605
<EMAIL_ADDRESS>

|------------>
| From:      |
|------------>

>--------------------------------------------------------------------------------------------------------------------------------------|

  |Peter Tsirigotis/RTP/USEPA/US
|

>--------------------------------------------------------------------------------------------------------------------------------------|

|------------>
| To:        |
|------------>

>--------------------------------------------------------------------------------------------------------------------------------------|

  |Keith Barnett/RTP/USEPA/US@EPA
|

>--------------------------------------------------------------------------------------------------------------------------------------|

|------------>
| Date:      |
|------------>

>--------------------------------------------------------------------------------------------------------------------------------------|

  |10/12/2010 04:43 PM
|

>--------------------------------------------------------------------------------------------------------------------------------------|

|------------>
| Subject:   |
|------------>

>--------------------------------------------------------------------------------------------------------------------------------------|

  |Fw: Two things
|

>--------------------------------------------------------------------------------------------------------------------------------------|

----- Forwarded by Peter Tsirigotis/RTP/USEPA/US on 10/12/2010 04:43 PM
-----
|------------>
| From:      |
|------------>

>--------------------------------------------------------------------------------------------------------------------------------------|

  |O'Hare, Andrew<EMAIL_ADDRESS>|

>--------------------------------------------------------------------------------------------------------------------------------------|

|------------>
| To:        |
|------------>

>--------------------------------------------------------------------------------------------------------------------------------------|

  |Peter Tsirigotis/RTP/USEPA/US@EPA
|

>--------------------------------------------------------------------------------------------------------------------------------------|

|------------>
| Date:      |
|------------>

>--------------------------------------------------------------------------------------------------------------------------------------|

  |10/12/2010 03:44 PM
|

>--------------------------------------------------------------------------------------------------------------------------------------|

|------------>
| Subject:   |
|------------>

>--------------------------------------------------------------------------------------------------------------------------------------|

  |Two things
|

>--------------------------------------------------------------------------------------------------------------------------------------|

Peter,

Checking in on the compliance deadline matter addressed in the attached
letter, which we discussed last week, and wondering when you will be in
DC next and whether we could sit down again for some discussion.

Thanks,
Andy

Andrew T. O'Hare, CAE
Vice President, Regulatory Affairs
Portland Cement Association
500 New Jersey, Avenue, NW
Washington, DC 20001
Phone:<PHONE_NUMBER>
Fax:<PHONE_NUMBER>
Cell:<PHONE_NUMBER>
e-mail<EMAIL_ADDRESS> [attachment "Barnett-Silverman 10-8-10.pdf" deleted by Keith
Barnett/RTP/USEPA/US]


[Federal Register Volume 80, Number 128 (Monday, July 6, 2015)]
[Rules and Regulations]
[Pages 38391-38394]
[FR Doc No: 2015-16171]

========================================================================
Rules and Regulations
                                                Federal Register
________________________________________________________________________

This section of the FEDERAL REGISTER contains regulatory documents
having general applicability and legal effect, most of which are keyed
to and codified in the Code of Federal Regulations, which is published
under 50 titles pursuant to 44 U.S.C. 1510.

The Code of Federal Regulations is sold by the Superintendent of Documents.
Prices of new books are listed in the first FEDERAL REGISTER issue of each
week.

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

Federal Register / Vol. 80, No. 128 / Monday, July 6, 2015 / Rules
and Regulations

DEPARTMENT OF TRANSPORTATION

Federal Aviation Administration

14 CFR Part 39

[Docket No. FAA-2015-2435; Directorate Identifier 2015-CE-020-AD;
Amendment 39-18197; AD 2015-13-10]
RIN 2120-AA64

Airworthiness Directives; M7 Aerospace LLC Airplanes

AGENCY: Federal Aviation Administration (FAA), DOT.

ACTION: Final rule; request for comments.

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

SUMMARY: We are superseding Airworthiness Directive (AD) 2011-17-07 for
certain M7 Aerospace LLC (type certificate previously held by M7
Aerospace LP) Models SA226-T, SA226-T(B), SA226-TC, and SA226-AT
airplanes. AD 2011-17-07 required repetitive replacement and inspection
of certain elevator, rudder, aileron, and aileron-to-rudder
interconnect primary control cables, and checking and setting of flight
control cable tension. This AD requires repetitively inspecting and
replacing the primary flight control rudder cables, repetitively
replacing all other primary flight control and trim tab cables, and
checking/setting the flight control cable tension. This AD was prompted
by a report of extensive damage found on the left hand primary flight
control rudder cable located under the cockpit floor on one of the
airplanes affected by AD 2011-17-07. We are issuing this AD to correct
the unsafe condition on these products.

DATES: This AD is effective July 21, 2015.
    The Director of the Federal Register approved the incorporation by
reference of a certain publication listed in this AD as of July 21,
2015.
    The Director of the Federal Register approved the incorporation by
reference of a certain other publication listed in this AD as of
September 1, 2011 (76 FR 50881, August 17, 2011).
    We must receive any comments on this AD by August 20, 2015.

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: U.S. Department of Transportation, Docket
Operations, M-30, West Building Ground Floor, Room W12-140, 1200 New
Jersey Avenue SE., Washington, DC 20590, between 9 a.m. and 5 p.m.,
Monday through Friday, except Federal holidays.
    For service information identified in this AD, contact M7 Aerospace
LLC, 10823 NE Entrance Road, San Antonio, Texas 78216; phone: (210)
824-9421; fax:<PHONE_NUMBER>; Internet: http://www.elbitsystems-us.com; email<EMAIL_ADDRESS>You may review this
referenced service information at the FAA, Small Airplane Directorate,
901 Locust, Kansas City, Missouri 64106. For information on the
availability of this material at the FAA, call<PHONE_NUMBER>. It is
also available on the Internet at http://www.regulations.gov by
searching for and locating Docket No. FAA-2015-2435.

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-2015-
2435; or in person at the Docket Management Facility between 9 a.m. and
5 p.m., Monday through Friday, except Federal holidays. The AD docket
contains this AD, the regulatory evaluation, any comments received, and
other information. The street address for the Docket Office (phone:
800-647-5527) is in the ADDRESSES section. Comments will be available
in the AD docket shortly after receipt.

FOR FURTHER INFORMATION CONTACT: Andrew McAnaul, Aerospace Engineer,
FAA, ASW-143 (c/o San Antonio MIDO), 10100 Reunion Place, Suite 650,
San Antonio, Texas 78216; phone:<PHONE_NUMBER>; fax:<PHONE_NUMBER>;
email<EMAIL_ADDRESS>
SUPPLEMENTARY INFORMATION:

Discussion

    On August 2, 2011, we issued AD 2011-17-07, Amendment 39-16771 (76
FR 50881, August 17, 2011), (``AD 2011-17-07''), for certain M7
Aerospace LLC (type certificate previously held by M7 Aerospace LP)
Models SA226-T, SA226-T(B), SA226-TC, and SA226-AT airplanes. AD 2011-
17-07 required repetitive replacement and inspection of certain
elevator, rudder, aileron, and aileron-to-rudder interconnect primary
control cables, and checking and setting of flight control cable
tension. AD 2011-17-07 resulted from a report that the left-hand
primary rudder control cable on a Model SA226-T airplane failed where
the cable makes a 30 degree angle over a small pulley to accommodate
re-routing of the control cable alongside the camera system installed
in the center of the cabin.
    We issued AD 2011-17-07 to prevent failure of a rudder, aileron
and/or elevator control cable.

Actions Since AD 2011-17-07 Was Issued

    Since we issued AD 2011-17-07, extensive damage to the left hand
(LH) primary flight control rudder cable was found under the cockpit
floor on one of the airplanes affected by AD 2011-17-07. Inspection of
the cable revealed five of the seven wires that make up the LH cable
were broken adjacent to the pulley at FS126.06. A follow-on inspection
of the right hand (RH) primary flight control rudder cable also showed
several strands of some of the 7 x 19 cable wires were broken at the
same RH FS126.06 pulley location. Both cables had been replaced at
1,513 hours time-in-service (TIS) before the finding of the broken
cables to comply with the 3,500-hour TIS replacement time required in
AD 2011-17-07.
    We are issuing this AD to correct the unsafe condition on these
products.

Related Service Information Under 1 CFR Part 51

    We reviewed M7 Aerospace SA226 Series Service Bulletin 226-27-072,
issued June 27, 2011, and M7 Aerospace SA226 Series Service Letter 226-
SL-050, issued April 15, 2015. The service

information describes procedures for repetitively inspecting and
replacing all elevator, rudder, aileron, and aileron-to-rudder
interconnect primary control cables. 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 of this AD.

FAA's Determination

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

AD Requirements

    This AD retains the actions previously required in AD 2011-17-07
and adds new inspection and replacement requirements for the LH and RH
primary flight control rudder cables.

Differences Between This AD and the Service Information

    M7 Aerospace SA226 Series Service Bulletin 226-27-072, issued June
27, 2011, requires replacing the LH and the RH primary flight control
rudder cables every 3,500 hours TIS. This AD requires inspecting the LH
and the RH primary flight control rudder cables every 200 hours TIS and
requires replacing the LH and the RH primary flight control rudder
cables every 800 hours TIS.

FAA's Justification and Determination of the Effective Date

    An unsafe condition exists that requires the immediate adoption of
this AD. The FAA has found that the risk to the flying public justifies
waiving notice and comment prior to adoption of this rule because there
are no airplanes currently on the U.S. registry and thus, does not have
any impact upon the public. Therefore, we find that notice and
opportunity for prior public comment are unnecessary and that good
cause exists for making this amendment effective in less than 30 days.

Comments Invited

    This AD is a final rule that involves requirements affecting flight
safety, and we did not provide you with notice and an opportunity to
provide your comments before it becomes effective. However, we invite
you to send any written data, views, or arguments about this AD. Send
your comments to an address listed under the ADDRESSES section. Include
Docket No. FAA-2015-2435 and Directorate Identifier 2015-CE-020-AD at
the beginning of your comments. We specifically invite comments on the
overall regulatory, economic, environmental, and energy aspects of this
AD. We will consider all comments received by the closing date and may
amend this AD because of those comments.
    We will post all comments we receive, without change, to http://www.regulations.gov, including any personal information you provide. We
will also post a report summarizing each substantive verbal contact we
receive about this AD.

Costs of Compliance

    There are no affected airplanes currently on the U.S. registry.
However, if an airplane affected by this AD were to become a U.S.-
registered airplane, 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
----------------------------------------------------------------------------------------------------------------
Inspection of all elevator,     100 work-hours x   Not Applicable.............          $8,500  None to date.
 rudder, aileron, and aileron-   $85 per hour =
 to-rudder interconnect          $8,500.
 primary control cables.
Replacement of all elevator,    180 work-hours x   $18,800....................          34,100  None to date.
 rudder, aileron, and aileron-   $85 per hour =
 to-rudder interconnect          $15,300.
 primary control cables.
Check (set) flight control      25 work-hours x    Not Applicable.............           2,125  None to date.
 cable tension.                  $2,125.
----------------------------------------------------------------------------------------------------------------

Authority for This Rulemaking

    Title 49 of the United States Code specifies the FAA's authority to
issue rules on aviation safety. Subtitle I, section 106, describes the
authority of the FAA Administrator. Subtitle VII, Aviation Programs,
describes in more detail the scope of the Agency's authority.
    We are issuing this rulemaking under the authority described in
Subtitle VII, Part A, Subpart III, section 44701, ``General
requirements.'' Under that section, Congress charges the FAA with
promoting safe flight of civil aircraft in air commerce by prescribing
regulations for practices, methods, and procedures the Administrator
finds necessary for safety in air commerce. This regulation is within
the scope of that authority because it addresses an unsafe condition
that is likely to exist or develop on products identified in this
rulemaking action.

Regulatory Findings

    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 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 part 39 of the Federal Aviation
Regulations (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 removing Airworthiness Directive (AD)
2011-17-07, Amendment 39-16771 (76

FR 50881, August 17, 2011) and adding the following new AD:

2015-13-10 M7 Aerospace LLC (type certificate previously held by M7
Aerospace LP): Amendment 39-18197; Docket No. FAA-2015-2435;
Directorate Identifier 2015-CE-020-AD.

(a) Effective Date

    This AD is effective July 21, 2015.

(b) Affected ADs

    (1) This AD supersedes AD 2011-17-07, Amendment 39-16771 (76 FR
50881, August 17, 2011) (``AD 2011-17-07'').
    (2) AD 87-02-02, Amendment 39-5518 (52 FR 2511, January 23,
1987) relates to the subject of this AD.

(c) Applicability

    This AD applies to the following M7 Aerospace LLC airplanes,
certificated in any category, as identified in table 1 of paragraph
(c) of this AD:

           Table 1 of Paragraph (c) of This AD--Applicability
------------------------------------------------------------------------
               Model                           Serial numbers
------------------------------------------------------------------------
SA226-T...........................  T265, T267
SA226-T(B)........................  T(B)348
SA226-TC..........................  TC277
SA226-AT..........................  AT071, AT072, AT073
------------------------------------------------------------------------

(d) Subject

    Joint Aircraft System Component (JASC)/Air Transport Association
(ATA) of America Code 27, Flight Controls.

(e) Unsafe Condition

    This AD was prompted by a report of extensive damage found to
the left hand primary flight control rudder cable located under the
cockpit floor on one of the airplanes affected by AD 2011-17-07. We
are issuing this AD to prevent failure of a rudder, aileron and/or
elevator control cable.

(f) Compliance

    Unless already done, comply with paragraphs (g) through (k) of
this AD. If the hours time-in-service (TIS) of the control cables
cannot be positively determined by the logbook, then you must use
hours TIS of the airplane to comply with the requirements of this
AD.

(g) Primary Flight Control Rudder Cable Inspection

    Within the next 10 hours TIS after July 21, 2015 (the effective
date of this AD) or within the next 60 days after July 21, 2015 (the
effective date of this AD), whichever occurs first, and repetitively
thereafter at or before reaching 200 hours TIS from the last
inspection or replacement, do a detailed visual inspection of the
left hand (LH) and right hand (RH) primary flight control rudder
cables under the floor between FS 116.56 and FS 138.56, with
specific focus on the cable and the pulley at FS126.06. Do the
inspection as stated in paragraph 4. ACTION of M7 Aerospace SA226
Series Service Letter 226-SL-050, issued April 15, 2015, following
the procedures specified in paragraph 2. ACCOMPLISHMENT
INSTRUCTIONS, section B., subparagraph (2) of M7 Aerospace SA226
Series Service Bulletin 226-27-072, issued June 27, 2011.

(h) Primary Flight Control Rudder Cable On-Condition Replacement

    Before further flight after any inspection required in paragraph
(g) of this AD, if any one of the conditions described in paragraph
2. ACCOMPLISHMENT INSTRUCTIONS, section B., subparagraphs (3)(a)
through (3)(d) of M7 Aerospace SA226 Series Service Bulletin 226-27-
072, issued June 27, 2011, is found, replace the affected primary
flight control rudder cable or cables with a new cable. Do the
replacements following paragraph 2. ACCOMPLISHMENT INSTRUCTIONS,
sections C. through E., including all subparagraphs of M7 Aerospace
Service Bulletin 226-27-072, issued June 27, 2011.

(i) Primary Flight Control Rudder Cable Mandatory Life Limit
Replacement

    Within the next 800 hours TIS after the last replacement or
within the next 50 hours TIS after July 21, 2015 (the effective date
of this AD), whichever occurs later, and repetitively thereafter
every 800 hours TIS, replace the LH and RH primary flight control
rudder cables with new cables. Do the replacements following
paragraph 2. ACCOMPLISHMENT INSTRUCTIONS, sections C. through E.,
including all subparagraphs of M7 Aerospace SA226 Series Service
Bulletin 226-27-072, issued June 27, 2011.

(j) Primary Flight Control and Trim Tab Cable (Other Than Rudder
Cables) Mandatory Life Limit Replacement

    (1) For cables with more than 6,000 hours TIS: Inspect cables
for deficiencies within 10 hours TIS after September 1, 2011, (the
effective date retained from AD 2011-17-07).
    (2) If any deficiencies are found during the inspection required
in paragraph (j)(1) of this AD, before further flight replace the
cable(s).
    (3) Replace all other primary control and trim tab cables (pilot
and co-pilot aileron cables, rudder/aileron interconnect cables,
aileron trim tab cables, rudder trim tab cables, and elevator
cables) within the initial compliance times as listed in paragraphs
(j)(3)(i) through (j)(3)(iii) below and repetitively thereafter at
intervals not to exceed 3,500 hours TIS. Do the replacements
following paragraph 2. ACCOMPLISHMENT INSTRUCTIONS, sections C.
through E., including all subparagraphs of M7 Aerospace SA226 Series
Service Bulletin 226-27-072, issued June 27, 2011.
    (i) For cables with less than or equal to 3,500 hours TIS:
replace cables when the control cables reach a total of 3,500 hours
TIS or 150 hours TIS after September 1, 2011, (the effective date
retained from AD 2011-17-07), whichever occurs later.
    (ii) For cables with less than or equal to 5,000 hours TIS but
greater than 3,500 hours TIS: replace cables within 150 hours TIS
after September 1, 2011, (the effective date retained from AD 2011-
17-07).
    (iii) For cables with more than 5,000 hours TIS: replace cables
within 50 hours TIS after September 1, 2011, (the effective date
retained from AD 2011-17-07).

(k) Set Flight Control Cable Tension

    Between 50 hours TIS and 200 hours TIS after installing any new
control cable as required in paragraphs (g) through (j) of this AD,
including all subparagraphs, check (set) flight control cable
tension following paragraph 2. ACCOMPLISHMENT INSTRUCTIONS, sections
C. through E. of M7 Aerospace SA226 Series Service Bulletin 226-27-
072, issued June 27, 2011.

(l) Paperwork Reduction Act Burden Statement

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

(m) Alternative Methods of Compliance (AMOCs)

    (1) The Manager, Fort Worth Airplane Certification Office, FAA,
has the authority to approve AMOCs for this AD, if requested using
the procedures found in 14 CFR 39.19. In accordance with 14 CFR
39.19, send your request to your principal inspector or local Flight
Standards District Office, as appropriate. If sending information
directly to the manager of the ACO, send it to the attention of the
person identified in paragraph (n) of this AD.
    (2) Before using any approved AMOC, notify your appropriate
principal inspector, or lacking a principal inspector, the manager
of the local flight standards district office/certificate holding
district office.
    (3) AMOCs approved for AD 2011-17-07, Amendment 39-16771 (76 FR
50881, August 17, 2011) are not approved as AMOCs for the
corresponding provisions of this AD.

(n) Related Information

    For more information about this AD, contact Andrew McAnaul,
Aerospace Engineer, FAA, ASW-143 (c/o San Antonio MIDO), 10100
Reunion Place, Suite 650, San Antonio, Texas 78216; phone: (210)
308-3365; fax:<PHONE_NUMBER>; email<EMAIL_ADDRESS>
(o) 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 the AD specifies otherwise.
    (3) The following service information was approved for IBR on
July 21, 2015.
    (i) M7 Aerospace SA226 Series Service Letter 226-SL-050, issued
April 15, 2015.
    (ii) Reserved.
    (4) The following service information was approved for IBR on
September 1, 2011 (76 FR 50881, August 17, 2011).
    (i) M7 Aerospace SA226 Series Service Bulletin 226-27-072,
issued June 27, 2011.
    (ii) Reserved.
    (5) For M7 Aerospace LLC service information identified in this
AD, contact M7 Aerospace LLC, 10823 NE Entrance Road, San Antonio,
Texas 78216; phone:<PHONE_NUMBER>; fax:<PHONE_NUMBER>; Internet:
http://www.elbitsystems-us.com; email<EMAIL_ADDRESS>    (6) You may view this service information at FAA, FAA, Small
Airplane Directorate, 901 Locust, Kansas City, Missouri 64106. For
information on the availability of this material at the FAA, call
(816) 329-4148.
    (7) 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 Kansas City, Missouri, on June 25, 2015.
Earl Lawrence,
Manager, Small Airplane Directorate, Aircraft Certification Service.
[FR Doc. 2015-16171 Filed 7-2-15; 8:45 am]
 BILLING CODE 4910-13-P


UNITED STATES ENVIRONMENTAL PROTECTION AGENCY

NATIONAL VEHICLE AND FUEL EMISSIONS LABORATORY

2000 TRAVERWOOD DRIVE

ANN ARBOR, MI  48105-2498

									     OFFICE OF

									AIR AND RADIATION

4/7/16

MEMORANDUM

SUBJECT: Test Procedure Review with Cummins, Volvo, Navistar, Paccar,
Daimler Eaton and Allison

FROM: James Sanchez

TO:  Greenhouse Gas Emissions Standards and Fuel Efficiency Standards
for Medium- and

Heavy-Duty Engines and Vehicles - Phase 2 - Docket EPA-HQ-OAR-2014-0827

This memo documents communication on April 7, 2016 between
representatives of Cummins, Volvo, Navistar, Paccar, Eaton, Allison,
Daimler, Caterpillar, Hino, EMA and EPA to discuss heavy-duty test
procedures proposed in the Phase 2 greenhouse gas and fuel efficiency
standards for heavy-duty vehicles notice of proposed rulemaking.

Participants:

Allison – Scott Mundy

Caterpillar –

Cummins – Manik Narula, Jackie Yeager

Daimler – Gerald Freitag, Don Keski, Inderpal Singh

Eaton –

EMA – Tim Blubaugh

EPA – Houshun Zhang, James Sanchez, Matt Spears

Hino – Tom Manley

Navistar – Dave Gardner

PACCAR – Mark Malowicki, Erin Luke, Dan Kieffer, Costi Nedelcu

Volvo – Marc Miller, Tim Connors, Tony Greszler, Chuck Kaslavage,
Steve Berry

Discussion and follow-up items (with owner's name in bold):

ISL engine test results – Manik

Cummins presented cycle average map test results for ISL 450 and 300 hp
ratings – see slides emailed previously

Cycle average map performance matches that of steady state map on cruise
cycles

Addressing N/V overlap – Manik

Cummins presented example of how to revise generic vehicle definition to
prevent N/V overlap – see slides emailed previously

EPA asked companies to consider options of 1) adding generic vehicle
configurations, or 2) selecting custom vehicle configurations instead of
generic

Discussion about how to certify vehicles not designed to reach 65 or 55
mph

Road grade profiles – EPA

Discussion about a couple options for further modifying the cycles to
better match time at peak torque in-use:

Add miles at zero grade, or

Reduce grade by a fixed percentage (same effect as reducing vehicle
mass)

Topics for future calls:

(TBD) SwRI results (N13 365, gasoline engine) – Houshun

(4/21) Road grade evaluation – TBD


Review of memorandum " Recommended revision of the fraction of diesel particulate emissions mass less than 2.5 microns in size"

I have read this memorandum with interest. The memorandum contains the recommendation for a change in how the diesel particulate emissions are considered as a fraction of the PM2.5 particle size fraction. The current fraction is specified as 92% and it is recommended that, on the basis of two recent experimental studies, that fraction should be adjusted upwards to 97%. Based on the limited scenario presented, the proposed change seems reasonable. However, for the argument to be truly persuasive, the memorandum should address the following questions:

1. The memorandum contains no information on the rationale for the specified fraction. Does it relate to a standard that is used by EPA for regulating emissions from diesel engines, specifically to a method of making valid measurements and interpretation of such emissions? The memorandum would be stronger if it were to contain a short introductory paragraph that outlines the context for what is proposed, include a description of the purpose and scope of EPA MOBILE. In addition, some indication should be given, for the record, of the practical significance or impact of what is being proposed.

2. For completeness, it should be stated that the particle sizes mentioned in the text are defined in terms of particle aerodynamic diameter.

3. In the first sentence that describes PM2.5 as the fraction less than 2.5 µ m, it should be clearly stated that it is the mass fraction that is being referred to. In addition, since the term " less than" is used, it should be clarified whether this indicates a truly sharp cut, or a selection curve ( e. g., as is the case for PM10).

4. It should be stated clearly that the mass fraction in question refers only to the diesel emission itself, and not diesel fume in environments where other aerosol may be present.

5. For the two studies on which this recommendation is based, a few words of description should be given. I assume these were carried out in the laboratory. To what extent were the engines and their operating conditions ` typical' of what might be found in the real world ( i. e., to which EPA MOBILE is directed)?

6. The two reports on which the recommendation is based appear to have been internal to the respective organizations that sponsored the studies in question. These do not appear to have been peer reviewed. Although this does not necessarily disqualify them for applications like the one proposed, it does mean that they should be viewed very critically. Or the work should be offered for publication. In this regard, I do note that at least one of the reports has one or more authors from academia. Perhaps the reports themselves should undergo third party peer review, if they have not already done so. In summary, the memorandum needs to be clarified by the inclusions of some information about the aims, scope and impact of what is being proposed, and by attention to some of the details mentioned above. Based on the evidence presented in the memorandum, the conclusions certainly seem reasonable. However I am not entirely convinced that the available evidence is sufficient to be taken entirely at face value, especially if the implications of the change may be significant. It would be good if available information could be enriched by the inclusion of data from other sources, including from overseas laboratories. If such information cannot be found, and the implications are indeed significant, then independent peer review of the two reports may provide the level of ` comfort' that is desired.