[Federal Register Volume 80, Number 121 (Wednesday, June 24, 2015)]
[Notices]
[Pages 36380-36385]
[FR Doc No: 2015-15452]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-75244; File No. SR-NYSEArca-2015-23]

Self-Regulatory Organizations; NYSE Arca, Inc.; Order Granting
Approval of Proposed Rule Change, as Modified by Amendment Nos. 1 and 3
Thereto, Relating to the Listing and Trading of Shares of the ALPS
Enhanced Put Write Strategy ETF Under NYSE Arca Equities Rule 8.600

June 18, 2015.

I. Introduction

    On April 15, 2015, NYSE Arca, Inc. (``Exchange'') filed with the
Securities and Exchange Commission (``Commission''), pursuant to
section 19(b)(1) of the Securities Exchange Act of 1934 (``Act'' or
``Exchange Act'') \1\ and Rule 19b-4 thereunder,\2\ a proposed rule
change to list and trade shares (``Shares'') of the ALPS Enhanced Put
Write Strategy ETF (``Fund'') under NYSE Arca Equities Rule 8.600,
which governs the listing and trading of Managed Fund Shares. The
proposed rule change was published for comment in the Federal Register
on May 5, 2015.\3\ On May 12, 2015, the Exchange filed Amendment No. 1
to the proposed rule change.\4\ On May 19, 2015, the Exchange filed
Amendment No. 2 to the proposed rule change, but withdrew that
amendment on May 20, 2015.\5\ On May 20, 2015, the Exchange filed
Amendment No. 3 to the proposed rule change.\6\ The Commission received
no

comments on the proposal, as modified by Amendment Nos. 1 and 3
thereto. This order grants approval of the proposed rule change, as
modified by Amendment Nos. 1 and 3 thereto.
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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. 74839 (Apr. 29,
2015), 80 FR 25729 (``Notice'').
    \4\ Amendment No. 1 to the proposed rule change replaced and
superseded the original filing in its entirety.
    \5\ The Exchange withdrew Amendment No. 2 to the proposed rule
change due to certain errors.
    \6\ Amendment No. 3 to the proposed rule change corrected
typographical errors and clarified that any futures and options on
futures utilized by the Fund will be U.S. exchange-traded futures
contracts on the S&P 500 Index and U.S. exchange-traded options on
futures contracts on the S&P 500 Index. Amendment Nos. 1 and 3 are
available at: http://www.sec.gov/comments/sr-nysearca-2015-23/nysearca201523.shtml.
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II. Description of the Proposal

    NYSE Arca proposes to list and trade Shares of the Fund under NYSE
Arca Equities Rule 8.600, which governs the listing and trading of
Managed Fund Shares on the Exchange. The Shares will be offered by ALPS
ETF Trust (``Trust''), which is registered with the Commission as an
investment company.\7\ ALPS Advisors, Inc. is the investment adviser
(``Adviser'') to the Fund.\8\ Rich Investment Solutions, LLC is the
investment sub-adviser (``Sub-Adviser'') to the Fund. ALPS Fund
Services, Inc. serves as the Trust's administrator, and The Bank of New
York Mellon serves as custodian (``Custodian'') and transfer agent for
the Fund. ALPS Portfolio Solutions Distributor, Inc. is the distributor
of the Fund's Shares.
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    \7\ The Trust is registered under the Investment Company Act of
1940 (``1940 Act''). The Exchange states that the Trust filed with
the Commission a registration statement on Form N-1A under the
Securities Act of 1933 (``Securities Act'') and under the 1940 Act
relating to the Fund (File Nos. 333-148826 and 811-22175)
(``Registration Statement'') on January 6, 2015. In addition, the
Exchange represents that the Trust has obtained certain exemptive
relief under the1940 Act. See Investment Company Act Release No.
30553 (June 11, 2013) (File No. 812-13884).
    \8\ The Exchange represents that the Adviser is not a registered
broker-dealer, but is affiliated with a broker-dealer and has
implemented a ``fire wall'' with respect to that broker-dealer
regarding access to information concerning the composition of or
changes to the Fund's portfolio. The Exchange further represents
that, in the event (a) the Adviser or any sub-adviser becomes
registered as a broker-dealer or newly affiliated with a broker-
dealer, or (b) any new adviser or sub-adviser is a registered
broker-dealer or becomes affiliated with a broker-dealer, the
Adviser or any new adviser or sub-adviser, as the case may be, will
implement a fire wall with respect to its relevant personnel or
broker-dealer affiliate, as applicable, regarding access to
information concerning the composition of or changes to the
portfolio, and will be subject to procedures designed to prevent the
use and dissemination of material, non-public information regarding
the portfolio.
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    The Exchange has made the following representations and statements
in describing the Fund and its investment strategy, including the
Fund's portfolio holdings and investment restrictions.\9\
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    \9\ The Commission notes that additional information regarding
the Fund, the Trust, and the Shares, including investment
strategies, risks, creation and redemption procedures, fees,
portfolio holdings disclosure policies, calculation of net asset
value (``NAV''), distributions, and taxes, among other things, can
be found in the Notice and the Registration Statement, as
applicable. See Notice and Registration Statement, supra notes 3 and
7, respectively.
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A. The Exchange's Description of the Fund's Principal Investment
Policies

    According to the Exchange, the investment objective of the Fund is
to seek total return, with an emphasis on income as the source of that
total return. The Fund will seek to achieve its investment objective by
selling listed one-month put options on the SPDR[supreg] S&P
500[supreg] ETF Trust (``SPY''). SPY is an exchange-traded fund that
seeks to provide investment results that, before expenses, correspond
generally to the price and yield performance of the S&P 500[supreg]
Index (``SPX'' or ``Index''). SPY holds a portfolio of the common
stocks that are included in the SPX, with the weight of each stock in
its portfolio substantially corresponding to the weight of that stock
in the SPX. The Fund may also sell listed one-month put options
directly on the SPX under certain circumstances (such as if those
options have more liquidity and narrower spreads than options on SPY).
SPY shares are listed on the Exchange and traded on national securities
exchanges. SPX options are traded on the Chicago Board Options
Exchange, and options on SPY are traded on national securities
exchanges.
    Each listed put option sold by the Fund will be an ``American-
style'' option (i.e., an option that can be exercised at the strike
price at any time prior to its expiration). As the seller of a listed
put option, the Fund will incur an obligation to buy SPY underlying the
option from the purchaser of the option at the option's strike price,
upon exercise by the option purchaser. If a listed put option sold by
the Fund is exercised prior to expiration, the Fund will buy the SPY
underlying the option at the time of exercise and at the strike price,
and will hold SPY until the market close on expiration.\10\
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    \10\ The Fund may also sell put options on the SPX directly
under certain circumstances (such as if such options have more
liquidity and narrower spreads than options on SPY) resulting in
lower transaction costs than options on SPY. The puts are struck at-
the-money (i.e., with a strike price that is equal to the market
price of the underlying SPY) and are typically sold on a monthly
basis, usually on the third Friday of the month (the ``roll date'').
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    The option premiums and cash (in respect of orders to create Shares
in large aggregations known as ``Creation Units,'' as further described
below) received by the Fund will be invested in an actively-managed
portfolio of investment grade debt securities (``Collateral
Portfolio'') at least equal in value to the Fund's maximum liability
under its written options (i.e., the strike price of each option).
Investment grade debt securities are those rated ``Baa'' equivalent or
higher by a nationally recognized statistical rating organization
(``NRSROs''), or are unrated securities that the Sub-Adviser believes
are of comparable quality. These investment grade debt securities will
include Treasury bills (short-term U.S. government debt securities),
corporate bonds, commercial paper, mortgage-backed securities
(``MBS''), asset-backed securities (``ABS''), and notes issued or
guaranteed by federal agencies or U.S. government sponsored
instrumentalities, such as the Government National Mortgage
Administration, the Federal Housing Administration, the Federal
National Mortgage Association, and the Federal Home Loan Mortgage
Corporation. It is expected that the average duration of these
securities will not exceed six months, and the maximum maturity of any
single security will not exceed one year.
    Under normal market conditions,\11\ substantially all of the Fund's
net assets will be invested in options on SPY or SPX and in the
Collateral Portfolio.
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    \11\ The term ``under normal market conditions'' includes, but
is not limited to, the absence of extreme volatility or trading
halts in the equity, options or fixed income markets or the
financial markets generally; events or circumstances causing a
disruption in market liquidity or orderly markets; operational
issues causing dissemination of inaccurate market information; or
force majeure type events such as systems failure, natural or man-
made disaster, act of God, armed conflict, act of terrorism, riot or
labor disruption, or any similar intervening circumstance.
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    The Fund may invest up to 20% of its net assets in non-agency MBS
and ABS in the aggregate. The Fund may seek to obtain exposure to U.S.
agency mortgage pass-through securities primarily through the use of
``to-be-announced'' or ``TBA transactions.'' According to the Exchange,
``TBA'' refers to a commonly used mechanism for the forward settlement
of U.S. agency mortgage pass-through securities and not to a separate
type of mortgage-backed security. Most transactions in mortgage pass-
through securities occur through the use of TBA transactions. TBA
transactions are generally conducted in accordance with widely-accepted
guidelines that establish commonly observed terms and conditions for
execution, settlement and delivery. In a TBA transaction, the buyer and
seller decide on general trade parameters, such as agency, settlement
date, par amount, and price. The actual pools delivered are generally
determined two days prior to settlement date. The Fund will enter into
TBA transactions only with established counterparties (such as major
broker-dealers) and the Sub-Adviser will

monitor the creditworthiness of such counterparties.\12\
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    \12\ The Fund intends to invest cash pending settlement of any
TBA transactions in money market instruments, repurchase agreements,
commercial paper (including asset-backed commercial paper), or other
high-quality, liquid short-term instruments, which may include money
market funds affiliated with the Adviser or Sub-Adviser.
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    According to the Exchange, every month, the options sold by the
Fund will be settled by delivery at expiration or will expire with no
value, and new option positions will be established while the Fund
sells any units of SPY it owns as a result of such settlements or of
the Fund's prior option positions having been exercised. \13\ The
Exchange states that this monthly cycle likely will cause the Fund to
have frequent and substantial turnover in its option positions. If the
Fund receives additional inflows (and issues more Shares in ``Creation
Unit'' size during a one-month period), the Fund will sell additional
listed put options, which will be exercised or expire at the end of
such one-month period. Conversely, if the Fund redeems Shares in
Creation Unit size during a monthly period, the Fund will terminate the
appropriate portion of the options it has sold.
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    \13\ The Fund may hold U.S. exchange-listed equity securities,
generally shares of SPY, for temporary periods upon settlement or
exercise of the options sold by the Fund.
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    With respect to no more than 20% of the Fund's assets, the Fund may
engage in certain opportunistic ``put spread'' and ``call spread''
strategies. Specifically, when the Sub-Adviser believes the SPX (and
thus SPY) will rise or not decline in value, the Fund may engage in
``put spreads'' whereby the Fund will buy back certain of the written
put options that are out of the money (i.e., the strike price of the
put option is lower than the market price of the underlying SPY) prior
to expiration in order to sell new put options that are less out of the
money. Similarly, the Fund may buy back certain of its written put
options prior to expiration in order to sell new longer-dated options
that will remain open past the one-month period of the original option.
Conversely, when the Sub-Adviser believes the SPX will decline in
value, the Fund may engage in ``call spreads'' whereby the Fund will
sell call options that are in-the-money (i.e., the strike price of the
call option is lower than the market price of the underlying SPY) and
buy back less in-the-money call options. The Sub-Adviser may employ a
variant of this call spread strategy whereby the Fund buys more calls
than it sells (as long as the Fund receives a net premium on the
transactions). This may enable the Fund to perform better when the SPX
(and thus SPY) experiences gains well above the strike price of the
calls bought by the Fund. However, even if the Fund engages in such
call spreads, a declining SPX (and thus SPY) will significantly detract
from Fund performance (given the Fund's principal strategy of selling
put options on SPY).

B. The Exchange's Description of the Fund's Non-Principal Investment
Policies

    While, under normal market conditions, substantially all of the
Fund's net assets will be invested in options on SPY or SPX and in the
Collateral Portfolio, the Fund may invest its remaining assets in other
securities and financial instruments, as described below. The Fund may
invest its remaining assets in any one or more of the following
instruments: money market instruments (as described below), in addition
to those in which the Fund invests as part of the Collateral Portfolio,
and including repurchase agreements or other funds that invest
exclusively in money market instruments; convertible securities;
structured notes (notes on which the amount of principal repayment and
interest payments are based on the movement of one or more specified
factors, such as the movement of a particular stock or stock index);
forward foreign currency exchange contracts; swaps; over-the-counter
(``OTC'') options on SPY or on the S&P 500 Index; and futures contracts
and options on futures contracts, as described further below. Swaps,
options, and futures contracts may be used by the Fund in seeking to
achieve its investment objective and in managing cash flows. The Fund
may also invest in money market instruments or other short-term fixed
income instruments as part of a temporary defensive strategy to protect
against temporary market declines.
    The Fund may invest in high-quality money market instruments on an
ongoing basis to provide liquidity. The instruments in which the Fund
may invest include: (i) Short-term obligations issued by the U.S.
Government; \14\ (ii) negotiable certificates of deposit (``CDs''),
fixed time deposits, and bankers' acceptances of U.S. and foreign banks
and similar institutions; \15\ (iii) commercial paper rated at the date
of purchase ``Prime-1'' by Moody's Investors Service, Inc. or ``A-1+''
or ``A-1'' by Standard & Poor's or, if unrated, of comparable quality
as determined by the Adviser; (iv) repurchase agreements; \16\ and (v)
money market mutual funds.
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    \14\ Obligations issued or guaranteed by the U.S. Government,
its agencies and instrumentalities include bills, notes, and bonds
issued by the U.S. Treasury, as well as ``stripped'' or ``zero
coupon'' U.S. Treasury obligations representing future interest or
principal payments on U.S. Treasury notes or bonds.
    \15\ CDs are short-term negotiable obligations of commercial
banks. Time deposits are non-negotiable deposits maintained in
banking institutions for specified periods of time at stated
interest rates. Banker's acceptances are time drafts drawn on
commercial banks by borrowers, usually in connection with
international transactions.
    \16\ Repurchase agreements may be characterized as loans secured
by the underlying securities. The Fund may enter into repurchase
agreements with (i) member banks of the Federal Reserve System
having total assets in excess of $500 million and (ii) securities
dealers (``Qualified Institutions''). The Adviser will monitor the
continued creditworthiness of Qualified Institutions.
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    The Fund may enter into reverse repurchase agreements, which
involve the sale of securities with an agreement to repurchase the
securities at an agreed-upon price, date, and interest payment and have
the characteristics of borrowing. The securities purchased with the
funds obtained from the agreement and securities collateralizing the
agreement will have maturity dates no later than the repayment date.
    The Fund may invest in the securities of other investment companies
(including money market funds), subject to applicable restrictions
under the 1940 Act.
    To the extent the Fund utilizes futures and options on futures, the
Fund will utilize U.S. exchange-traded futures contracts on the S&P 500
Index and U.S. exchange-traded options on futures contracts on the S&P
500 Index. The Fund may utilize such options on futures contracts as a
hedge against changes in value of its portfolio securities, or in
anticipation of the purchase of securities, and may enter into closing
transactions with respect to such options to terminate existing
positions.
    To the extent the Fund enters into swap agreements, the Fund will
enter into swap agreements based on the S&P 500 Index.
    The Fund may invest in investment grade debt obligations traded in
the U.S. Such debt obligations include, among others, bonds, notes,
debentures, and variable rate demand notes. In choosing corporate debt
securities on behalf of the Fund, the Sub-Adviser may consider (i)
general economic and financial conditions; and (ii) the specific
issuer's (a) business and management, (b) cash flow, (c) earnings
coverage of interest and dividends, (d) ability to operate

under adverse economic conditions, (e) fair market value of assets, and
(f) other considerations deemed appropriate.
    The Fund, in the absence of normal market conditions, may invest up
to 100% of its total assets in debt securities that are rated
investment grade by an NRSRO or are unrated securities that the Sub-
Adviser believes are of comparable quality.
    The Fund may invest in securities that have variable or floating
interest rates which are readjusted on set dates (such as the last day
of the month or calendar quarter) in the case of variable rates or
whenever a specified interest rate change occurs in the case of a
floating rate instrument.
    The Fund may use delayed delivery transactions as an investment
technique. Delayed delivery transactions, also referred to as forward
commitments, involve commitments by the Fund to dealers or issuers to
acquire or sell securities at a specified future date beyond the
customary settlement for such securities. These commitments may fix the
payment price and interest rate to be received or paid on the
investment. The Fund may purchase securities on a delayed delivery
basis to the extent that it can anticipate having available cash on the
settlement date. Delayed delivery agreements will not be used as a
speculative or leverage technique. The Fund also may purchase when-
issued securities.
    In addition, the Fund may invest in zero-coupon or pay-in-kind
securities. These securities are debt securities that do not make
regular cash interest payments. Zero-coupon securities are sold at a
deep discount to their face value. Pay-in-kind securities pay interest
through the issuance of additional securities.

C. The Exchange's Description of the Fund's Investment Restrictions

    The Fund may hold up to an aggregate of 15% of its net assets in
illiquid assets (calculated at the time of investment), including Rule
144A securities deemed illiquid by the Adviser or Sub-Adviser.\17\ The
Fund will monitor its portfolio liquidity on an ongoing basis to
determine whether, in light of current circumstances, an adequate level
of liquidity is being maintained, and will consider taking appropriate
steps in order to maintain adequate liquidity if through a change in
values, net assets, or other circumstances, more than 15% of the Fund's
net assets are held in illiquid assets. Illiquid assets include
securities subject to contractual or other restrictions on resale and
other instruments that lack readily available markets as determined in
accordance with Commission staff guidance.
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    \17\ Rule 144A securities are securities that, while privately
placed, are eligible for purchase and resale pursuant to Rule 144A
under the Securities Act. This rule permits certain qualified
institutional buyers, such as the Fund, to trade in privately placed
securities even though such securities are not registered under the
Securities Act. The Sub-Adviser, under supervision of the Board,
will consider whether securities purchased under Rule 144A are
illiquid and thus subject to the Fund's restriction on illiquid
assets. Determination of whether a Rule 144A security is liquid or
not is a question of fact. In making this determination, the Sub-
Adviser will consider the trading markets for the specific security
taking into account the unregistered nature of a Rule 144A security.
In addition, the Sub-Adviser could consider the (i) frequency of
trades and quotes; (ii) number of dealers and potential purchasers;
(iii) dealer undertakings to make a market; and (iv) nature of the
security and of market place trades (for example, the time needed to
dispose of the security, the method of soliciting offers and the
mechanics of transfer). The Sub-Adviser will also monitor the
liquidity of Rule 144A securities, and if, as a result of changed
conditions, the Sub-Adviser determines that a Rule 144A security is
no longer liquid, the Sub-Adviser will review the Fund's holdings of
illiquid securities to determine what, if any, action is required to
assure that the Fund complies with its restriction on investment of
illiquid securities.
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    The Fund intends to qualify for and to elect to be treated as a
separate regulated investment company under subchapter M of the
Internal Revenue Code. The Exchange further represents that the Fund's
investments will be consistent with the Fund's investment objective and
will not be used to enhance leverage.\18\
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    \18\ Investments in derivative instruments by the Fund will be
made in accordance with the 1940 Act and consistent with the Fund's
investment objective and policies. To limit the potential risk
associated with transactions in derivatives, the Fund will segregate
or ``earmark'' assets determined to be liquid by the Adviser in
accordance with procedures that will established by the Trust's
Board of Trustees (``Board'') and in accordance with the 1940 Act
(or, as permitted by applicable regulation, enter into certain
offsetting positions) to cover its obligations under derivative
instruments. These procedures will be adopted consistent with
section 18 of the 1940 Act and related Commission guidance. In
addition, the Fund will include appropriate risk disclosure in its
offering documents, including leveraging risk. Leveraging risk is
the risk that certain transactions of the Fund, including the Fund's
use of derivatives, may give rise to leverage, causing the Fund's
Shares to be more volatile than if they had not been leveraged.
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III. Discussion and Commission Findings

    After careful review, the Commission finds that the Exchange's
proposal to list and trade the Shares is consistent with the Exchange
Act and the rules and regulations thereunder applicable to a national
securities exchange.\19\ In particular, the Commission finds that the
proposed rule change, as modified by Amendment Nos. 1 and 3 thereto, is
consistent with section 6(b)(5) of the Exchange Act,\20\ which
requires, among other things, that the Exchange's rules be designed to
promote just and equitable principles of trade, to remove impediments
to and perfect the mechanism of a free and open market and a national
market system, and, in general, to protect investors and the public
interest. The Commission also finds that the proposal to list and trade
the Shares on the Exchange is consistent with section 11A(a)(1)(C)(iii)
of the Exchange Act,\21\ which sets forth the finding of Congress that
it is in the public interest and appropriate for the protection of
investors and the maintenance of fair and orderly markets to assure the
availability to brokers, dealers, and investors of information with
respect to quotations for and transactions in securities.
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    \19\ In approving this proposed rule change, the Commission has
considered the proposed rule's impact on efficiency, competition,
and capital formation. See 15 U.S.C. 78c(f).
    \20\ 15 U.S.C. 78f(b)(5).
    \21\ 15 U.S.C. 78k-1(a)(1)(C)(iii).
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    Quotation and last-sale information for the Shares will be
available via the Consolidated Tape Association high-speed line and
from the Exchange. The approximate value of the Fund's investments on a
per-Share basis, the Indicative Intra-Day Value (``IIV''), which is the
Portfolio Indicative Value as defined in NYSE Arca Equities Rule
8.600(c)(3), will be disseminated by one or more major market data
vendors every 15 seconds during the Exchange's Core Trading
Session.\22\ On each business day, before commencement of trading in
the Shares in the Core Session on the Exchange, the Fund will disclose
on its Web site the portfolio that will form the basis for the Fund's
calculation of NAV at the end of the business day.\23\
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    \22\ According to the Exchange, several major market data
vendors display or make widely available IIVs taken from CTA or
other data feeds.
    \23\ The Fund will disclose on the Fund's Web site the following
information regarding each portfolio holding, as applicable to the
type of holding: ticker symbol, CUSIP number or other identifier, if
any; a description of the holding (including the type of holding,
such as the type of swap); the identity of the security, commodity,
index, or other asset or instrument underlying the holding, if any;
for options, the option strike price; quantity held (as measured by,
for example, par value, notional value, or number of shares,
contracts or units); maturity date, if any; coupon rate, if any;
effective date, if any; market value of the holding; and the
percentage weighting of the holding in the Fund's portfolio. The Web
site information will be publicly available at no charge.
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    The NAV per Share will be calculated by the Custodian and
determined as of the close of the regular trading session on the New
York Stock Exchange (ordinarily 4:00 p.m., Eastern time) (``NYSE
Close'') on each day that such exchange is open. Information regarding
market price and trading volume of the

Shares will be continually available on a real-time basis throughout
the day on brokers' computer screens and other electronic services.
Information regarding the previous day's closing price and trading
volume information for the Shares will be published daily in the
financial section of newspapers. Intra-day and closing price
information regarding exchange-traded options (including options on
futures) and futures will be available from the exchange on which such
instruments are traded. Intra-day and closing price information
regarding debt securities, money market instruments, convertible
securities, structured notes, forward foreign currency exchange
contracts, swaps, repurchase agreements, reverse repurchase agreements,
US government securities, MBS and ABS, mortgage pass-throughs, variable
or floating interest rate securities, when-issued securities, delayed
delivery securities, zero-coupon securities, and pay-in-kind securities
also will be available from major market data vendors. Price
information for non-exchange-traded investment company securities will
be available from major market data vendors and from the Web site of
the applicable investment company. In addition, quotation and last-sale
information for exchange-listed options cleared via the Options
Clearing Corporation will be available via the Options Price Reporting
Authority. The S&P 500 Index value is available from major market data
vendors.
    The Commission further believes that the proposal to list and trade
the Shares is reasonably designed to promote fair disclosure of
information that may be necessary to price the Shares appropriately and
to prevent trading when a reasonable degree of transparency cannot be
assured. The Exchange will obtain a representation from the issuer of
the Shares that the NAV per Share will be calculated daily and that the
NAV and the Disclosed Portfolio will be made available to all market
participants at the same time. Trading in Shares of the Fund will be
halted if the circuit-breaker parameters in NYSE Arca Equities Rule
7.12 have been reached. Trading also may be halted because of market
conditions or for reasons that, in the view of the Exchange, make
trading in the Shares inadvisable.\24\ Trading in the Shares also will
be subject to NYSE Arca Equities Rule 8.600(d)(2)(D), which sets forth
circumstances under which Shares of the Fund may be halted. The
Exchange represents that it has a general policy prohibiting the
distribution of material, non-public information by its employees. The
Adviser is not a registered broker-dealer, but is affiliated with a
broker-dealer, and has implemented a ``fire wall'' with respect to that
broker-dealer regarding access to information concerning the
composition or changes to the Fund's portfolio.\25\ Prior to the
commencement of trading, the Exchange will inform its Equity Trading
Permit Holders (``ETP Holders'') in an Information Bulletin
(``Bulletin'') of the special characteristics and risks associated with
trading the Shares. The Exchange represents that trading in the Shares
will be subject to the existing trading surveillances, administered by
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.\26\
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    \24\ These may include: (1) the extent to which trading is not
occurring in the securities or the financial instruments
constituting the Disclosed Portfolio of the Fund; or (2) whether
other unusual conditions or circumstances detrimental to the
maintenance of a fair and orderly market are present.
    \25\ See supra note 8. The Exchange represents that an
investment adviser to an open-end fund is required to be registered
under the Investment Advisers Act of 1940 (``Advisers Act''). As a
result, the Adviser, Sub-Adviser, and their related personnel are
subject to the provisions of Rule 204A-1 under the Advisers Act
relating to codes of ethics. This Rule requires investment advisers
to adopt a code of ethics that reflects the fiduciary nature of the
relationship to clients as well as compliance with other applicable
securities laws. Accordingly, procedures designed to prevent the
communication and misuse of non-public information by an investment
adviser must be consistent with Rule 204A-1 under the Advisers Act.
In addition, Rule 206(4)-7 under the Advisers Act makes it unlawful
for an investment adviser to provide investment advice to clients
unless that investment adviser has (i) adopted and implemented
written policies and procedures reasonably designed to prevent
violation, by the investment adviser and its supervised persons, of
the Advisers Act and the Commission rules adopted thereunder; (ii)
implemented, at a minimum, an annual review regarding the adequacy
of the policies and procedures established pursuant to subparagraph
(i) above and the effectiveness of their implementation; and (iii)
designated an individual (who is a supervised person) responsible
for administering the policies and procedures adopted under
subparagraph (i) above.
    \26\ The Exchange states that FINRA surveils trading on the
Exchange pursuant to a regulatory services agreement. The Exchange
is responsible for FINRA's performance under this regulatory
services agreement.
---------------------------------------------------------------------------

    The Exchange represents that it deems the Shares to be equity
securities, thus rendering trading in the Shares subject to the
Exchange's existing rules governing the trading of equity securities.
In support of this proposal, the Exchange has also made the following
representations:
    (1) The Shares will conform to the initial and continued listing
criteria under NYSE Arca Equities Rule 8.600.
    (2) The Exchange has appropriate rules to facilitate transactions
in the Shares during all trading sessions.
    (3) Trading in the Shares will be subject to the existing trading
surveillances, administered by FINRA on behalf of the Exchange, which
are designed to detect violations of Exchange rules and applicable
federal securities laws, and these procedures are adequate to properly
monitor Exchange trading of the Shares in all trading sessions and to
deter and detect violations of Exchange rules and federal securities
laws applicable to trading on the Exchange.
    (4) FINRA, on behalf of the Exchange, will communicate as needed
regarding trading in the Shares, other exchange-traded equity
securities, exchange-traded investment company securities, futures
contracts, and exchange-traded options contracts with other market and
other entities that are members of the Intermarket Surveillance Group
(``ISG''), and FINRA, on behalf of the Exchange, may obtain trading
information in the Shares, other exchange-traded equity securities,
exchange-traded investment company securities, futures contracts, and
exchange-traded options contracts from those markets and other
entities. In addition, the Exchange may obtain information regarding
trading in the Shares, other exchange-traded equity securities,
exchange-traded investment company securities, futures contracts, and
exchange-traded options contracts from markets and other entities that
are members of ISG or with which the Exchange has in place a
comprehensive surveillance sharing agreement.\27\ The Exchange states
that FINRA, on behalf of the Exchange, is able to access, as needed,
trade information for certain fixed income securities held by the Fund
reported to FINRA's Trade Reporting and Compliance Engine.
---------------------------------------------------------------------------

    \27\ For a list of the current members of ISG, see
www.isgportal.org. The Exchange notes that not all components of the
Disclosed Portfolio for the Fund may trade on markets that are
members of ISG or with which the Exchange has in place a
comprehensive surveillance sharing agreement.
---------------------------------------------------------------------------

    (5) Prior to the commencement of trading of Shares in the Fund, the
Exchange will inform its ETP Holders in a Bulletin of the special
characteristics and risks associated with trading the Shares.
Specifically, the Bulletin will discuss the following: (i) The
procedures for purchases and redemptions of Shares in Creation Unit
aggregations (and that Shares are not individually redeemable); (ii)
NYSE Arca Equities Rule 9.2(a), which imposes a duty of due diligence
on its ETP Holders to learn the essential facts relating to every
customer prior to

trading the Shares; (iii) the risks involved in trading the Shares
during the Opening and Late Trading Sessions when an updated IIV or
Index value will not be calculated or publicly disseminated; (iv) how
information regarding the IIV, the Disclosed Portfolio, and the Index
value will be disseminated; (v) the requirement that ETP Holders
deliver a prospectus to investors purchasing newly issued Shares prior
to or concurrently with the confirmation of a transaction; and (vi)
trading information.
    (6) For initial and continued listing, the Fund will be in
compliance with Rule 10A-3 under the Act,\28\ as provided by NYSE Arca
Equities Rule 5.3.
---------------------------------------------------------------------------

    \28\ 17 CFR 240.10A-3.
---------------------------------------------------------------------------

    (7) The Fund may hold up to an aggregate amount of 15% of its net
assets in illiquid assets (calculated at the time of investment),
including Rule 144A restricted securities deemed illiquid by the
Adviser or Sub-Adviser, consistent with Commission guidance.
    (8) The Fund's investments will be consistent with its investment
objective and will not be used to enhance leverage.
    (9) To the extent the Fund utilizes futures and options on futures,
the Fund will utilize U.S. exchange-traded futures contracts on the S&P
500 Index and U.S. exchange-traded options on futures contracts on the
S&P 500 Index. To the extent the Fund enters into swap agreements, the
Fund will enter into swap agreements based on the S&P 500 Index.
    (10) Not more than 20% of the net assets of the Fund will be
invested in MBS and ABS in the aggregate.
    (11) A minimum of 100,000 Shares for the Fund will be outstanding
at the commencement of trading on the Exchange.
    This approval order is based on all of the Exchange's
representations, including those set forth above and in the Notice, and
Amendment Nos. 1 and 3 to the proposed rule change. The Commission
notes that the Fund and the Shares must comply with the requirements of
NYSE Arca Equities Rule 8.600 to be initially and continuously listed
and traded on the Exchange.
    For the foregoing reasons, the Commission finds that the proposed
rule change, as modified by Amendment Nos. 1 and 3 thereto, is
consistent with section 6(b)(5) of the Act \29\ and the rules and
regulations thereunder applicable to a national securities exchange.
---------------------------------------------------------------------------

    \29\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------

IV. Conclusion

    It is therefore ordered, pursuant to section 19(b)(2) of the
Exchange Act,\30\ that the proposed rule change (SR-NYSEArca-2015-23),
as modified by Amendment Nos. 1 and 3 thereto, be, and it hereby is,
approved.
---------------------------------------------------------------------------

    \30\ 15 U.S.C. 78s(b)(2).
    \31\ 17 CFR 200.30-3(a)(12).

    For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\31\
Brent J. Fields,
Secretary.
[FR Doc. 2015-15452 Filed 6-23-15; 8:45 am]
 BILLING CODE 8011-01-P


APPENDIX B
Developing Values for Natural Background and Progress Goals for the Class I Area of the Virgin Islands National Park, St. John, Virgin Islands

The Federal Implementation Plan for Regional Haze for the Virgin Islands is designed to take the first steps in improving visibility of the view in the Virgin Islands National Park by reducing emissions of substances that scatter light.  Emitting more light scattering aerosols in the air make it harder to see distant objects; these reductions are caused by human-caused emissions and emissions from natural causes.  This Plan will include the first ten years of visibility improvements through 2018 that will lead, by 2064, to no visibility impairment due to human emissions.

The prospect of clear skies - scenic vistas unmarred by human interference- go along with the Virgin Islands' reputation for clear water with magnificent coral reefs and underwater marine life.  The FIP has a goal of protecting scenic views visible to the people of the Islands and their many visitors.  The Clean Air Act gives special protection to the pristine areas like the Virgin Islands National Park on St. John.

Overall, a goal in the Clean Air Act is to develop a plan that reduces human interference with seeing the view.  Sometimes dust from human activities reduces the ability to see the view.  Motor traffic, especially on dirt roads, throws dust into the air.  Making concrete or working with gravel emits dust.  Emissions from combustion- electric generators, water heaters, industrial boilers, ships, power plants, open burning and refineries add sulfate, nitrates and carbon to the hazy mix.

Sometimes, particles from nature spoil our view.  Dust travels from the Sahara Desert, plankton can give off sulfur particles; and once in a while, the Montserrat Volcano sends ash toward the Islands.  We can't control the sources of these particles.  Some days, their effects on visibility can be very noticeable, especially because there are not as many human sources of air pollution in the Islands as opposed to the more built-up megalopolises in the continental United States.

Natural Background and Baseline Data

The Interagency Monitoring of Protected Visual Environments (IMPROVE) program was initiated in 1985 to establish current visibility conditions, track changes in visibility, and help determined the causes of visibility impairment in Class I Areas

We can use information from the types and amounts of particles captured in particulate samplers to calculate the effect the particles have on visibility.  The IMPROVE network collects particles at the air monitoring site in the Virgin Islands National Park every three days.  Since different particles scatter light in different ways, they have different effects on visibility.  Scientists have developed equations to quantify the obscuration of visibility from the particulates.  These calculations also take into account the humidity in the air, which can make some particles swell up and increase their ability to reduce visibility.  Then modelers can project the effect of reducing particle emissions on visibility by calculating the change in the amounts of the various particles and the amount of change in visibility that will occur.

The Clean Air Act stipulates that states should improve visibility to reach natural conditions.  The Act says that states should do this by improving the visibility on the worst days while making sure visibility does not get worse on the best days.  To address this requirement, we calculate the average visibility impairment over the worst one-fifth (top twenty percent) days and the best one-fifth (lowest twenty percent) days.

The Table below compares the average visibility impairment for the best and worst days for Class I areas that represent various parts of the country.  Brigantine and Acadia represent the `pristine' areas in the urban northeastern corridor of the United States.  Everglades has a tropical climate like the Virgin Islands, but has more sources of pollution nearby than the Virgin Islands.  Grand Canyon is representative of the dry deserts of the western United States, remote from major urban areas and sources of pollution.  While the Virgin Islands are remote from major urban areas and have less industry nearby, like the western United States, its more humid climate allows particulates, especially sulfates, to have a greater effect on reducing visibility.

Figure 1.  Visibility impairment for selected National Parks and Wilderness Areas

Virgin Islands
Brigantine, NJ
Acadia, ME
Everglades, FL
Grand Canyon, AZ
Worst 20%
                                                                          17.02
                                                                          29.01
                                                                          22.89
                                                                          22.30
                                                                          11.66
Average
                                                                          12.20
                                                                          21.14
                                                                          14.59
                                                                          16.04
                                                                           6.58
Best 20%
                                                                           8.54
                                                                          14.33
                                                                           8.77
                                                                          11.69
                                                                           2.16
Notes:  Units are amount of visibility impairment in deciviews.  Lower values of deciviews mean better visibility.  Higher numbers indicate more impairment to visibility.  Brigantine is representative of sites in the urban corridor of the eastern United States.  Acadia is a more rural location on the east coast.  The Everglades are representative of tropical conditions in the Continental United States.  Grand Canyon is a representative of the dry desert regime in the western United States.

        Sidebar:  What is a deciview?
        A deciview is a unit of visibility reduction.  More deciviews indicate lower visibility, or, a decrease in how far away you can see objects. The deciview scale was developed as a measure of visibility that is linear; to make it easier to do calculations needed to compare improvements to visibility.  Typically, a change of one deciview is large enough of a change to the noticeable to the human eye.  The following figure shows the different ways visibility is quantified, with worst visibility on the right side and clearer air on the left.

Virgin Islands' visibility is better than typical locations in the eastern United States.  But even the best days in the Virgin Islands have more obscuration than most days in dry western locations like the Grand Canyon.  Higher humidity in the tropics results in more obscuration when sulfates are in the air, since sulfates scatter more light, and decrease visibility, as the humidity increases.  Thus sites in the western United States have much better visibility than more humid places in the eastern United States and the Virgin Islands.

We can use information from the types and amounts of particles captured in particulate samplers to calculate the effect the particles have on visibility.  The IMPROVE network collects particles  at air monitoring sites in the Virgin Islands National Park and other Class I areas every three days.  Since different particles scatter light in different ways, they have different effects on visibility.  Scientists have developed equations to quantify the obscuration of visibility from the particulates.  These calculations also take into account the humidity in the air, which can make some particles swell up and increase their ability to reduce visibility.  Then modelers can project the effect of reducing particle emissions on visibility by calculating the change in the amounts of the various particles and the amount of change in visibility that will occur.

The Clean Air Act stipulates that states should improve visibility to reach natural conditions.  The Act says that states should do this by improving the visibility on the worst days while making sure visibility does not get worse on the best days.  To address this requirement, we calculate the average visibility impairment over the worst one-fifth (top twenty percent) days and the best one-fifth (best twenty percent) days.

Baseline and Natural Visibility

In September 2003, EPA issued guidance for the calculation of natural background and baseline visibility conditions. The guidance provided a default method and describes certain refinements that states may wish to evaluate to tailor these estimates to a specific Class I area if it is poorly represented by the default method.

EPA's Region 2 office met with representatives of the Federal Land Manager for the Virgin Islands National Park in 2008 to discuss the calculation of baseline and natural background conditions in the Virgin Islands National Park.  The FLM agreed with the calculation of the baseline conditions and the estimate of progress needed to reach natural conditions.  EPA noted that the default calculation of natural background conditions did not include the large impact of non-anthropogenic impacts from Sahara Dust and biogenic emissions.  The FLM agreed that the information presented (and described in this Plan) showed the large influence of Sahara Dust on visibility in the Park.  However, the FLM noted that more work would need to be done on more precisely calculate the impact on natural sources on visibility in the Park.  They suggested that a Plan that strove for implementing reasonable controls on sources that affect visibility in the Park would be the most important element of this Plan that covers the first ten years of improving visibility for the Park.  The issues of the impact of natural sources on visibility in the Virgin Islands National Park needs additional research the needs to be done before the next iteration of this Plan, due in 2018, is prepared.

Natural visibility represents the visibility for each Class I area representative of the conditions before human activities affected air quality in the area. Certain natural phenomena can reduce visibility. The Clean Air Act goal is to remedy visibility impairment resulting from human activity.
Natural visibility, without anthropogenic emissions, is calculated to provide a target level to meet the Act's goal of no anthropogenic obscuration of visibility.  This natural visibility is based on formulas that are specific to various parts of the country.  It does not include the impact of locally important natural obscurers of visibility.  In the Virgin Islands, for example, Saharan Dust can noticeably reduce visibility.   Less obvious are biologically produced sulfates from marine life, which may also contribute to obscuring the view.

Using data from the IMPROVE program, we can calculate the baseline (2000-2004) twenty percent worst visibility and natural visibility conditions for the IMPROVE monitoring site in the Class I area in Virgin Islands National Park.  These values are computed from the Visibility Information Exchange Web System (VIEWS) operated by the Regional Planning Organizations (available online at http://vista.cira.colostate.edu/views/).  The VIEWS site lists the worst visibility days as a five-year average for 2000-2004 using the alternative IMPROVE algorithm approved in 2006 by the IMPROVE Steering Committee. Also listed are the natural background visibility for the twenty percent worst and the twenty percent best visibility days.

Since one of the baseline years, 2000, has incomplete data, EPA guidance allows the use of calculations based on four year of data, from 2001-2004.  The resulting data are listed in the table below.

Table 2.  Calculations of visibility for natural conditions for selected National Parks and Wilderness Areas.

Virgin Islands
Brigantine, NJ
Acadia, ME
Everglades, FL
Grand Canyon, AZ
Worst 20%
                                                                          10.68
                                                                          12.24
                                                                          12.43
                                                                          12.15
                                                                           7.04
Average
                                                                           7.10
                                                                           8.48
                                                                           7.88
                                                                           7.77
                                                                           3.20
Best 20%
                                                                           4.41
                                                                           5.51
                                                                           4.65
                                                                           5.22
                                                                           0.31
This Table lists the amount of visibility reduction due to natural causes only, calculated based on typical background concentrations of pollutants, with assumed average local meteorological conditions.

Note that natural visibility calculations for the Virgin Islands are numerically similar to natural visibility calculations for eastern United States sites.

Figure 1.  Actual and natural visibility statistics from selected National Parks and Wilderness Areas compared with the Virgin Islands.  Note that the goal for these areas is for all days to achieve the natural background by 2064.

To calculate the natural and basecase actual visibility for the twenty percent worst days, we used the data from the IMPROVE site to calculate the impairment for each portion of the particulate data.

Table 3.  Calculations of Natural and Actual Visibility Reductions for the Virgin Islands National Park, by Parameter

Parameter
Natural worst 20% estimated by formula
Actual worst 20% calculated from data
Description
aBext
                                                                       18.52803
                                                                       44.85217
Bext is the amount of visibility reduction for all particles
bCM
                                                                        3.27672
                                                                       15.70808
Visibility reduction from coarse particulate matter
bEC
                                                                        0.27781
                                                                       1.545539
Visibility reduction from elemental carbon
bNO3
                                                                       0.947763
                                                                       2.075003
Visibility reduction from nitrates
bOMC
                                                                       1.744017
                                                                       1.836166
Visibility reduction from organic carbon
bSO4
                                                                       1.483411
                                                                       10.30606
Visibility reduction from sulfates
bSoil
                                                                       1.394714
                                                                       5.901773
Visibility reduction from fine soil
bSs
                                                                       9.403591
                                                                       7.479546
Visibility reduction from sea salt

dv
                                                                       10.68113
                                                                       17.02366
Total visibility reduction from all particles, converted to deciviews.
Source: VIEWS (http://vista.cira.colostate.edu/views/), prepared on 05/12/08
Calculated from IMPROVE data using the most recent set of calculation equations.
Data, except for the final row, is in Mm-1, which is light extinction per million meters, commonly said as units of `inverse megameters'

Then we combined all the visibility impairment from each contributor to the reduced visibility  -  the result is in the last row of Table 3. To reach the calculated natural background of 10.68 dv by 2064, visibility will need to improve by 6.34dv from the present actual 17.02dv.

According to EPA's Regional Haze Rule, a reduction of 6.34 dv by 2064 is to be accomplished by reducing visibility impairment by at least the rate of uniform reduction in each ten-year period covered by the haze plans.  A target for 2018 results from 6.34 divided by the number of years from 2004 to 2064 and multiplied by the number of years from 2004 to 2018 to get the target of visibility improvement for each ten-year period of at least 1.48dv.

Are the Calculations Accurate for the Virgin Islands?

Based on the work of Tombach, concentrations of fine soil in summer average 7.54 ug/m3 (likely to be mostly Saharan Dust in the Virgin Islands' summer  -  which is prime season for Sahara Dust).  This calculated natural background of fine soil of 7.54 ug/m3 is much higher than the 0.5ug/m3 assumed in the calculations of natural visibility or even the recorded concentrations of about 3 ug/m3 in the southeastern United States.

This is important to note that in order to be on track to improve visibility to the Clean Air Act goal of reaching natural visibility levels, this plan estimates the amount of progress needed by 2018 based on the calculated natural level of visibility.  If possible, emission reductions should meet the reasonable progress goal line for 2018.  However, the amount of progress estimate for 2018 may be an overestimate due to the underestimation of natural visibility conditions.  This calculation does not include the full impact of Saharan Dust and other natural emissions that interfere with visibility.

While there is uncertainty in estimating how much of the Virgin Islands' visibility impairment is due to natural sources, the amount of emission reductions for the first ten years' plan will still be based on the application of reasonably available emission reductions from sources that affect visibility in the Virgin Islands National Park on St. John, U. S. Virgin Islands.


[Federal Register: September 25, 2008 (Volume 73, Number 187)]
[Rules and Regulations]
[Page 55435-55437]
[DOCID:fr25se08-3]

=======================================================================
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DEPARTMENT OF TRANSPORTATION

Federal Aviation Administration

14 CFR Part 33

[Docket No.: FAA-2007-28501; Amendment No. 33-26]
RIN 2120-AJ05

Airworthiness Standards; Aircraft Engine Standards for
Pressurized Engine Static Parts

AGENCY: Federal Aviation Administration (FAA), DOT.

ACTION: Final rule.

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SUMMARY: The FAA is amending the aircraft engine type certification
standards by adding standards for pressurized engine static parts that
are equivalent to those already adopted by the European Aviation Safety
Agency. This rule establishes uniform standards for the certification
of these parts in the United States and in Europe. U.S. manufacturers
already meet the European requirements.

DATES: This amendment becomes effective November 24, 2008.

FOR FURTHER INFORMATION CONTACT: Tim Mouzakis, Engine and Propeller
Directorate Standards Staff, ANE-110, Engine and Propeller Directorate,
Aircraft Certification Service, FAA, New England Region, 12 New England
Executive Park, Burlington, Massachusetts 01803-5299; telephone (781)
238-7114; fax<PHONE_NUMBER>, e-mail<EMAIL_ADDRESS>
SUPPLEMENTARY INFORMATION:

Authority for This Rulemaking

    The FAA's authority to issue rules on aviation safety is found in
Title 49 of the United States Code. 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.
    This rulemaking is promulgated under the authority described in
Subtitle VII, Part A, Subpart III, Section 44701, ``General
Requirements.'' Under that section, the FAA is charged with prescribing
regulations for practices, methods, and procedures the Administrator
finds necessary for safety in air commerce, including minimum safety
standards for aircraft engines. This regulation is within the scope of
that authority because it updates the existing regulations for aircraft
engine pressurized static parts.

Summary of the NPRM

    A Notice of Proposed Rulemaking (NPRM) was published on September
6, 2007 (72 FR 18136) that proposed changes to requirements for
pressurized engine static parts in Title 14 Code of Federal Regulations
part 33. The comment period for the NPRM closed on December 5, 2007.

Summary of the Final Rule

    This final rule on requirements for pressurized engine static parts
contains minor changes from the NPRM. We made changes to two sections,
Sec. Sec.  33.71 and 33.91, in response to the comments we received and
our own review of the proposed rule. This final rule harmonizes FAA and
EASA regulations for part 33 requirements related to pressurized engine
static parts.

Summary of Comments

    There were five commenters. Rolls-Royce, General Aviation
Manufacturers Association (GAMA), and Airbus supported the rule and
suggested minor changes, which are discussed below. General Electric
and an individual supported the rule and did not suggest changes.
    The comments relate to the following general areas:
     Component tests; and
     Examples of static parts.

Discussion of the Final Rule

Component Tests

    Pressurized engine static parts operate at significant pressures
and Sec.  33.64 prescribes tests for these parts at maximum working and
operating pressures. Rolls-Royce and GAMA commented that Sec.  33.91,
Engine component tests, should be modified as there was an
inconsistency between proposed Sec.  33.64 and existing Sec.  33.91(c),
which prescribes testing of pressurized hydraulic fluid tanks. Rolls-
Royce and GAMA noted that depending on the maximum possible and maximum
working pressures, as described in Sec.  33.64, and the maximum
operating pressure as described in Sec.  33.91, the two rules could
result in two different testing requirements for a given component.
    The FAA agrees that the two rules could be interpreted as separate
and distinct test requirements, and that testing pressurized hydraulic
fluid tanks falls under the requirements of the new Sec.  33.64. We
have also determined that proposed Sec.  33.64 and Sec.  33.71,
Lubrication system, could be interpreted as two distinct testing
requirements for a single component. Section 33.71(c)(9) prescribes
testing for maximum operating temperature and pressure for pressurized
oil tanks. These tanks should be tested under the requirements of the
new Sec.  33.64.
    In the final rule, therefore, we are modifying Sec. Sec.
33.71(c)(9) and 33.91(c) by replacing existing testing requirements for
pressurized tanks with a reference to meeting the requirements of Sec.
33.64. This change is consistent with EASA regulations for pressurized
hydraulic fluid and oil tanks.

Examples of Static Parts

    In the NPRM discussion, we noted examples of pressurized engine
static parts which include compressor, combustion, diffuser, and
turbine cases; heat exchangers; bleed valve solenoids; starter motors;
and fuel, oil and hydraulic system components. Airbus commented that
the examples of pressurized static parts included in the preamble of
the NPRM should be expanded to include associated ducts and fittings.
    The purpose of this NPRM discussion was to provide examples to help
the applicant identify the type of parts affected by this rule. The
examples provided in the NPRM do not represent a complete list of
pressurized static parts. It is the applicant's responsibility to
ensure all applicable pressurized engine parts are identified. We have
made no changes to the rule in response to this comment.

Paperwork Reduction Act

    The Paperwork Reduction Act of 1995 (44 U.S.C. 3507(d)) requires
that the FAA consider the impact of paperwork and other information
collection burdens imposed on the public. We have determined that there
is no current or new requirement for information collection associated
with this amendment.

International Compatibility

    In keeping with U.S. obligations under the Convention on
International Civil Aviation, it is FAA policy to comply with
International Civil Aviation Organization (ICAO) Standards and
Recommended Practices to the maximum extent practicable. The FAA has
reviewed the corresponding ICAO Standards and Recommended Practices and
has identified no differences with these regulations.

Regulatory Evaluation, Regulatory Flexibility Determination,
International Trade Impact Assessment, and Unfunded Mandates Assessment

    Changes to Federal regulations must undergo several economic
analyses. First, Executive Order 12866 directs that each Federal agency
shall propose or adopt a regulation only upon a reasoned determination
that the benefits of the intended regulation justify its costs. Second,
the Regulatory Flexibility Act of 1980 (Pub. L. 96-354) requires
agencies to analyze the economic impact of regulatory changes on small
entities. Third, the Trade Agreements Act (Pub. L. 96-39) prohibits
agencies from setting standards that create unnecessary obstacles to
the foreign commerce of the United States. In developing U.S.
standards, this Trade Act requires agencies to consider international
standards and, where appropriate, that they be the basis of U.S.
standards. Fourth, the Unfunded Mandates Reform Act of 1995 (Pub. L.
104-4) requires agencies to prepare a written assessment of the costs,
benefits, and other effects of proposed or final rules that include a
Federal mandate likely to result in the expenditure by State, local, or
tribal governments, in the aggregate, or by the private sector, of $100
million or more annually (adjusted for inflation with base year of
1995). This portion of the preamble summarizes the FAA's analysis of
the economic impacts of this final rule.
    Department of Transportation Order DOT 2100.5 prescribes policies
and procedures for simplification, analysis, and review of regulations.
If the expected cost impact is so minimal that a proposed or final rule
does not warrant a full evaluation, this order permits that a statement
to that effect and the basis for it be included in the preamble if a
full regulatory evaluation of the cost and benefits is not prepared.
Such a determination has been made for this final rule. The reasoning
for this determination follows.
    The NPRM explained that, presently, engine manufacturers must
demonstrate compliance with both part 33 and EASA certification
standards to market turbine engines in both the United States and
Europe. Meeting two sets of certification requirements raises the cost
of developing a new turbine engine.
    In the NPRM, we explained that EASA has adopted this standard as
CS-E 640 Pressure Loads. This final rule adds the provisions of CS-E
640 Pressure Loads to part 33 as a new Sec.  33.64, Pressurized engine
static parts, under Subpart E--Design and Construction; Turbine
Aircraft Engines.
    We estimated that no incremental costs were associated with this
rule because our review of U.S. turbine aircraft engine manufacturers
revealed that they currently design their engines to meet the standards
of CS-E 640 Pressure Loads. Because our rule adopts this standard,
manufacturers will incur no additional costs resulting from this final
rule.
    By creating common part 33 and EASA requirements, turbine engine
manufacturers need to design to only one certification standard. We
have not attempted to quantify the cost savings from this rulemaking,
but note that harmonization in this area will contribute to the overall
savings that certification to one standard provides. We have also
concluded that further analysis is not required because turbine engine
manufacturers are already designing to EASA's CS-E 640 Pressure Loads.
    As discussed above, we received comments on the proposed rule and,
where appropriate, have made changes in the final rule. However, we
received no comments on the economic evaluation of the proposed rule,
and the changes made to the final rule, as a result of other comments,
did not affect the economic evaluation of the final rule. Therefore, as
in the NPRM, the FAA concludes that this rule is expected to have
minimal cost with positive net benefits and a complete regulatory
evaluation was not prepared.
    We have determined that this final rule is not a ``significant
regulatory action'' as defined in section 3(f) of Executive Order
12866, and is not ``significant'' as defined in DOT's Regulatory
Policies and Procedures.

Final Regulatory Flexibility Determination

    The Regulatory Flexibility Act of 1980 (Pub. L. 96-354) (RFA)
establishes ``as a principle of regulatory issuance that agencies shall
endeavor, consistent with the objectives of the rule and of applicable
statutes, to fit regulatory and informational requirements to the scale
of the businesses, organizations, and governmental jurisdictions
subject to regulation. To achieve this principle, agencies are required
to solicit and consider flexible regulatory proposals and to explain
the rationale for their actions to assure that such proposals are given
serious consideration.'' The RFA covers a wide range of small entities,
including small businesses, not-for-profit organizations, and small
governmental jurisdictions.
    Agencies must perform a review to determine whether a rule will
have a significant economic impact on a substantial number of small
entities. If the agency determines that it will, the agency must
prepare a regulatory flexibility analysis as described in the RFA.
    However, if an agency determines that a rule is not expected to
have a significant economic impact on a substantial number of small
entities, section 605(b) of the RFA provides that the head of the
agency may so certify and a regulatory flexibility analysis is not
required. The certification must include a statement providing the
factual basis for this determination, and the reasoning should be
clear.
    The NPRM was expected to be minimal cost and we concluded ``* * *
that this rule would not have a significant economic impact on a
substantial number of small entities.'' We certified that a full
regulatory flexibility analysis was not required and we requested
comments on this determination.
    We received no comments on the regulatory flexibility analysis and
have made no changes to our initial determination because comments
received on the proposal did not affect our regulatory flexibility
analysis determination. The final rule, like the NPRM, is minimal cost
with positive net benefits.
    Therefore, as the Acting FAA Administrator, I certify that this
rule will not have a significant economic impact on a substantial
number of small entities.

International Trade Impact Assessment

    The Trade Agreements Act of 1979 (Pub. L. 96-39) prohibits Federal
agencies from establishing any standards or engaging in related
activities that create unnecessary obstacles to the foreign commerce of
the United States. Legitimate domestic objectives, such as safety, are
not considered unnecessary obstacles. The statute also requires
consideration of international standards and, where appropriate, that
they be the basis for U.S. standards.
    The FAA has assessed the potential effect of this final rule and
has determined that it is in accord with the Trade Agreements Act as
the final rule uses European standards as the basis for United States
regulation.

Unfunded Mandates Assessment

    Title II of the Unfunded Mandates Reform Act of 1995 (Pub. L. 104-
4) requires each Federal agency to prepare a written statement
assessing the effects of any Federal mandate in a proposed or final
agency rule that may result in an expenditure of $100 million or more
(in

1995 dollars) in any one year by State, local, and tribal governments,
in the aggregate, or by the private sector; such a mandate is deemed to
be a ``significant regulatory action.'' The FAA currently uses an
inflation-adjusted value of $136.1 million in lieu of $100 million.
    This final rule does not contain such a mandate; therefore, the
requirements of Title II of the Act do not apply.

Executive Order 13132, Federalism

    The FAA has analyzed this final rule under the principles and
criteria of Executive Order 13132, Federalism. We determined that this
action will not have a substantial direct effect on the States, or the
relationship between the national Government and the States, or on the
distribution of power and responsibilities among the various levels of
government, and, therefore, does not have federalism implications.

Environmental Analysis

    FAA Order 1050.1E identifies FAA actions that are categorically
excluded from preparation of an environmental assessment or
environmental impact statement under the National Environmental Policy
Act in the absence of extraordinary circumstances. The FAA has
determined this rulemaking action qualifies for the categorical
exclusion identified in paragraph 312f and involves no extraordinary
circumstances.

Regulations That Significantly Affect Energy Supply, Distribution, or
Use

    The FAA has analyzed this final rule under Executive Order 13211,
Actions Concerning Regulations that Significantly Affect Energy Supply,
Distribution, or Use (May 18, 2001). We have determined that it is not
a ``significant energy action'' under the executive order because it is
not a ``significant regulatory action'' under Executive Order 12866,
and it is not likely to have a significant adverse effect on the
supply, distribution, or use of energy.

Availability of Rulemaking Documents

    You can get an electronic copy of rulemaking documents using the
Internet by--
    1. Searching the Federal eRulemaking Portal (http://
www.regulations.gov);
    2. Visiting the FAA's Regulations and Policies Web page at http://
www.faa.gov/regulations_policies/; or
    3. Accessing the Government Printing Office's Web page at http://
www.gpoaccess.gov/fr/index.html.
    You can also get a copy by sending a request to the Federal
Aviation Administration, Office of Rulemaking, ARM-1, 800 Independence
Avenue, SW., Washington, DC 20591, or by calling<PHONE_NUMBER>. Make
sure to identify the amendment number or docket number of this
rulemaking.
    Anyone is able to search the electronic form of all comments
received into any of our dockets by the name of the individual
submitting the comment (or signing the comment, if submitted on behalf
of an association, business, labor union, etc.). You may review DOT's
complete Privacy Act statement in the Federal Register published on
April 11, 2000 (Volume 65, Number 70; Pages 19477-78) or you may visit
http://DocketsInfo.dot.gov.

Small Business Regulatory Enforcement Fairness Act

    The Small Business Regulatory Enforcement Fairness Act (SBREFA) of
1996 requires FAA to comply with small entity requests for information
or advice about compliance with statutes and regulations within its
jurisdiction. If you are a small entity and you have a question
regarding this document, you may contact your local FAA official, or
the person listed under the FOR FURTHER INFORMATION CONTACT heading at
the beginning of the preamble. You can find out more about SBREFA on
the Internet at http://www.faa.gov/regulations_policies/rulemaking/
sbre_act/.

List of Subjects in 14 CFR Part 33

    Aircraft, Aviation safety, Reporting and recordkeeping
requirements.

The Amendment

0
In consideration of the foregoing, the Federal Aviation Administration
amends Chapter I of Title 14, Code of Federal Regulations as follows:

PART 33--AIRWORTHINESS STANDARDS: AIRCRAFT ENGINES

0
1. The authority citation for part 33 continues to read as follows:

    Authority: 49 U.S.C. 106(g), 40113, 44701-44702, 44704.

0
2. Add Sec.  33.64 to Subpart E to read as follows:

Sec.  33.64  Pressurized engine static parts.

    (a) Strength. The applicant must establish by test, validated
analysis, or a combination of both, that all static parts subject to
significant gas or liquid pressure loads for a stabilized period of one
minute will not:
    (1) Exhibit permanent distortion beyond serviceable limits or
exhibit leakage that could create a hazardous condition when subjected
to the greater of the following pressures:
    (i) 1.1 times the maximum working pressure;
    (ii) 1.33 times the normal working pressure; or
    (iii) 35 kPa (5 p.s.i.) above the normal working pressure.
    (2) Exhibit fracture or burst when subjected to the greater of the
following pressures:
    (i) 1.15 times the maximum possible pressure;
    (ii) 1.5 times the maximum working pressure; or
    (iii) 35 kPa (5 p.s.i.) above the maximum possible pressure.
    (b) Compliance with this section must take into account:
    (1) The operating temperature of the part;
    (2) Any other significant static loads in addition to pressure
loads;
    (3) Minimum properties representative of both the material and the
processes used in the construction of the part; and
    (4) Any adverse geometry conditions allowed by the type design.

0
3. Amend Sec.  33.71 by revising paragraph (c)(9) to read as follows:

Sec.  33.71  Lubrication system.

* * * * *
    (c) * * *
    (9) Each unpressurized oil tank may not leak when subjected to a
maximum operating temperature and an internal pressure of 5 p.s.i., and
each pressurized oil tank must meet the requirements of Sec.  33.64.
* * * * *

0
4. Amend Sec.  33.91 by revising paragraph (c) to read as follows:

Sec.  33.91  Engine component tests.

* * * * *
    (c) Each unpressurized hydraulic fluid tank may not fail or leak
when subjected to a maximum operating temperature and an internal
pressure of 5 p.s.i., and each pressurized hydraulic fluid tank must
meet the requirements of Sec.  33.64.
* * * * *

    Issued in Washington, DC, on September 15, 2008.
Robert A. Sturgell,
Acting Administrator.
[FR Doc. E8-22569 Filed 9-24-08; 8:45 am]

BILLING CODE 4910-13-P