[Federal Register Volume 86, Number 97 (Friday, May 21, 2021)]
[Proposed Rules]
[Pages 27540-27543]
[FR Doc No: 2021-10635]

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DEPARTMENT OF TRANSPORTATION

Federal Aviation Administration

14 CFR Part 39

[Docket No. FAA-2021-0372; Project Identifier MCAI-2020-01684-T]
RIN 2120-AA64

Airworthiness Directives; Airbus SAS Airplanes

AGENCY: Federal Aviation Administration (FAA), DOT.

ACTION: Notice of proposed rulemaking (NPRM).

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SUMMARY: The FAA proposes to supersede Airworthiness Directive (AD)
2020-21-05, which applies to all Airbus SAS Model A330-200 Freighter,
A330-200, A330-300, A330-900, A340-200, A340-300, A340-500, and A340-
600 series airplanes. AD 2020-21-05 requires repetitive inspections of
certain fuel pumps for cavitation erosion, replacement if necessary,
revision of the operator's minimum equipment list (MEL), and
accomplishment of certain maintenance actions related to defueling and
ground fuel transfer operations. Since the FAA issued AD 2020-21-05, a
determination was made that certain compliance times need to be revised
and that additional airplanes are subject to the unsafe condition. This
proposed AD would retain the requirements of AD 2020-21-05, revise
certain compliance times, and expand the applicability, as specified in
a European Union Aviation Safety Agency (EASA) AD, which is proposed
for incorporation by reference. The FAA is proposing this AD to address
the unsafe condition on these products.

DATES: The FAA must receive comments on this proposed AD by July 6,
2021.

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 https://www.regulations.gov. Follow the instructions for submitting comments.
     Fax:<PHONE_NUMBER>.
     Mail: U.S. Department of Transportation, Docket
Operations, M-30, West Building Ground Floor, Room W12-140, 1200 New
Jersey Avenue SE, Washington, DC 20590.
     Hand Delivery: Deliver to Mail address above between 9
a.m. and 5 p.m., Monday through Friday, except Federal holidays.
    For material that will be incorporated by reference (IBR) in this
AD, contact EASA, Konrad-Adenauer-Ufer 3, 50668 Cologne, Germany;
telephone +49 221 8999 000; email<EMAIL_ADDRESS>internet
www.easa.europa.eu. You may find this IBR material on the EASA website
at https://ad.easa.europa.eu. You may view this IBR material at the
FAA, Airworthiness Products Section, Operational Safety Branch, 2200
South 216th St., Des Moines, WA. For information on the availability of
this material at the FAA, call<PHONE_NUMBER>. It is also available in
the AD docket on the internet at https://www.regulations.gov by
searching for and locating Docket No. FAA-2021-0372.

Examining the AD Docket

    You may examine the AD docket on the internet at https://www.regulations.gov by searching for and locating Docket No. FAA-2021-
0372; or in person at Docket Operations between 9 a.m. and 5 p.m.,
Monday through Friday, except Federal holidays. The AD docket contains
this NPRM, any comments received, and other information. The street
address for Docket Operations is listed above.

FOR FURTHER INFORMATION CONTACT: Vladimir Ulyanov, Aerospace Engineer,
Large Aircraft Section, International Validation Branch, FAA, 2200
South 216th St., Des Moines, WA 98198; telephone and fax<PHONE_NUMBER>;
email<EMAIL_ADDRESS>
SUPPLEMENTARY INFORMATION:

Comments Invited

    The FAA invites you to send any written relevant data, views, or
arguments about this proposal. Send your comments to an address listed
under ADDRESSES. Include ``Docket No. FAA-2021-0372; Project Identifier
MCAI-2020-01684-T'' at the beginning

of your comments. The most helpful comments reference a specific
portion of the proposal, explain the reason for any recommended change,
and include supporting data. The FAA will consider all comments
received by the closing date and may amend the proposal because of
those comments.
    Except for Confidential Business Information (CBI) as described in
the following paragraph, and other information as described in 14 CFR
11.35, the FAA will post all comments received, without change, to
https://www.regulations.gov, including any personal information you
provide. The agency will also post a report summarizing each
substantive verbal contact received about this proposed AD.

Confidential Business Information

    CBI is commercial or financial information that is both customarily
and actually treated as private by its owner. Under the Freedom of
Information Act (FOIA) (5 U.S.C. 552), CBI is exempt from public
disclosure. If your comments responsive to this NPRM contain commercial
or financial information that is customarily treated as private, that
you actually treat as private, and that is relevant or responsive to
this NPRM, it is important that you clearly designate the submitted
comments as CBI. Please mark each page of your submission containing
CBI as ``PROPIN.'' The FAA will treat such marked submissions as
confidential under the FOIA, and they will not be placed in the public
docket of this NPRM. Submissions containing CBI should be sent to
Vladimir Ulyanov, Aerospace Engineer, Large Aircraft Section,
International Validation Branch, FAA, 2200 South 216th St., Des Moines,
WA 98198; telephone and fax<PHONE_NUMBER>; email
<EMAIL_ADDRESS>Any commentary that the FAA receives which is
not specifically designated as CBI will be placed in the public docket
for this rulemaking.

Background

    The FAA issued AD 2020-21-05, Amendment 39-21278 (85 FR 64963,
October 14, 2020) (AD 2020-21-05), which applies to all Airbus SAS
Model A330-200 Freighter, A330-200, A330-300, A330-900, A340-200, A340-
300, A340-500 and A340-600 series airplanes. AD 2020-21-05 requires
repetitive inspections of certain fuel pumps for cavitation erosion,
replacement if necessary, revision of the operator's MEL, and
accomplishment of certain maintenance actions related to defueling and
ground fuel transfer operations. The FAA issued AD 2020-21-05 to
address fuel pump erosion caused by cavitation. If this condition is
not addressed, a pump running dry could result in a fuel tank explosion
and consequent loss of the airplane.

Actions Since AD 2020-21-05 Was Issued

    Since the FAA issued AD 2020-21-05, it has been determined, through
an assessment of inspection results, that the flight cycles accumulated
by an affected part, when installed at a certain location, must also be
considered, and certain compliance times need to be revised
accordingly. In addition, Model A330-841 airplanes have been found to
be subject to the unsafe condition.
    EASA, which is the Technical Agent for the Member States of the
European Union, has issued EASA AD 2020-0283, dated December 17, 2020;
corrected December 24, 2020 (EASA AD 2020-0283) (also referred to as
the Mandatory Continuing Airworthiness Information, or the MCAI), to
correct an unsafe condition for all Airbus A330-201, A330-202, A330-
203, A330-223, A330-223F, A330-243, A330-243F, A330-301, A330-302,
A330-303, A330-321, A330-322, A330-323, A330-341, A330-342, A330-343,
A330-743L, A330-841, A330-941, A340-211, A340-212, A340-213, A340-311,
A340-312, A340-313, A340-541, A340-542, A340-642 and A340-643
airplanes. EASA AD 2020-0283 supersedes EASA AD 2019-0291R1 (which
corresponds to FAA AD 2020-21-05). Model A330-743L, A340-542, and A340-
643 airplanes are not certificated by the FAA and are not included on
the U.S. type certificate data sheet; this AD therefore does not
include those airplanes in the applicability.
    This proposed AD was prompted by reports of a fuel pump showing
cavitation erosion that breached the fuel pump housing through the
inlet webs and exposed the fuel pump power supply wires, and a
determination that certain compliance times need to be revised and that
additional airplanes are subject to the unsafe condition. The FAA is
proposing this AD to address fuel pump erosion caused by cavitation. If
this condition is not addressed, a pump running dry could result in a
fuel tank explosion and consequent loss of the airplane. See the MCAI
for additional background information.

Explanation of Retained Requirements

    Although this proposed AD does not explicitly restate the
requirements of AD 2020-21-05, this proposed AD would retain all of the
requirements of AD 2020-21-05. Those requirements are referenced in
EASA AD 2020-0283, which, in turn, is referenced in paragraph (g) of
this proposed AD.

Related Service Information Under 1 CFR Part 51

    EASA AD 2020-0283 describes procedures for repetitive inspections
of all affected parts, replacement if necessary, updating of the
applicable Master Minimum Equipment List (MMEL), and certain
maintenance actions related to defueling and ground fuel transfer
operations.
    This material 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.

FAA's Determination and Requirements of This Proposed AD

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

Proposed AD Requirements

    This proposed AD would require accomplishing the actions specified
in EASA AD 2020-0283 described previously, as incorporated by
reference, except for any differences identified as exceptions in the
regulatory text of this AD.
    EASA AD 2020-0283 requires operators to ``inform all flight crews''
of revisions to the MMEL, and thereafter to ``operate the aeroplane
accordingly.'' However, this AD would not specifically require those
actions as they are already required by FAA regulations.
    FAA regulations (14 CFR 121.628(a)(2)) require operators to provide
pilots with access to all of the information contained in the
operator's MEL.
    Furthermore, 14 CFR 121.628(a)(5) requires airplanes to be operated
under all applicable conditions and limitations contained in the
operator's MEL. Therefore, including a requirement in this AD to
operate the airplane according to the revised MEL would be redundant
and unnecessary. Further, compliance with such a requirement in an AD
would be impracticable to demonstrate or track on an ongoing basis;
therefore, a requirement to

operate the airplane in such a manner would be unenforceable.

Explanation of Required Compliance Information

    In the FAA's ongoing efforts to improve the efficiency of the AD
process, the FAA initially worked with Airbus and EASA to develop a
process to use certain EASA ADs as the primary source of information
for compliance with requirements for corresponding FAA ADs. The FAA has
since coordinated with other manufacturers and civil aviation
authorities (CAAs) to use this process. As a result, EASA AD 2020-0283
will be incorporated by reference in the FAA final rule. This proposed
AD would, therefore, require compliance with EASA AD 2020-0283 in its
entirety, through that incorporation, except for any differences
identified as exceptions in the regulatory text of this proposed AD.
Using common terms that are the same as the heading of a particular
section in the EASA AD does not mean that operators need comply only
with that section. For example, where the AD requirement refers to
``all required actions and compliance times,'' compliance with this AD
requirement is not limited to the section titled ``Required Action(s)
and Compliance Time(s)'' in the EASA AD. Service information specified
in EASA AD 2020-0283 that is required for compliance with EASA AD 2020-
0283 will be available on the internet at https://www.regulations.gov
by searching for and locating Docket No. FAA-2021-0372 after the FAA
final rule is published.

Interim Action

    The FAA considers this proposed AD interim action. If final action
is later identified, the FAA might consider further rulemaking then.

Costs of Compliance

    The FAA estimates that this proposed AD affects 112 airplanes of
U.S. registry. The FAA estimates the following costs to comply with
this proposed AD:

                                      Estimated Costs for Required Actions
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             Action                  Labor cost       Parts cost     Cost per  product   Cost on U.S.  operators
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Retained actions from AD 2020-   Up to 72 work-                  0  Up to $6,375.......  Up to $714,000.
 21-05.                           hours x $85 per
                                  hour = Up to
                                  $6,375.
New proposed actions...........  Up to 72 work-                  0  Up to $6,375.......  Up to $714,000.
                                  hours x $85 per
                                  hour = Up to
                                  $6,375.
MEL revision...................  1 work-hour x $85              $0  $85................  $9,520.
                                  = $85.
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    The FAA estimates the following costs to do any necessary on-
condition actions that would be required based on the results of any
required actions. The FAA has no way of determining the number of
aircraft that might need these on-condition actions:

                 Estimated Costs of On-Condition Actions
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           Labor cost                 Parts cost       Cost per product
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Up to 126 work-hours x $85 per    Up to $173,680....  Up to $184,390.
 hour = Up to $10,710.
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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.
    The FAA is 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

    The FAA determined that this proposed AD would not have federalism
implications under Executive Order 13132. This proposed AD would not
have a substantial direct effect on the States, on the relationship
between the national Government and the States, or on the distribution
of power and responsibilities among the various levels of government.
    For the reasons discussed above, I certify this proposed
regulation:
    (1) Is not a ``significant regulatory action'' under Executive
Order 12866,
    (2) Would not affect intrastate aviation in Alaska, and
    (3) Would not have a significant economic impact, positive or
negative, on a substantial number of small entities under the criteria
of the Regulatory Flexibility Act.

List of Subjects in 14 CFR Part 39

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

The Proposed Amendment

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

PART 39--AIRWORTHINESS DIRECTIVES

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

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

Sec.  39.13  [Amended]

0
2. The FAA amends Sec.  39.13 by:
0
a. Removing Airworthiness Directive (AD) 2020-21-05, Amendment 39-21278
(85 FR 64963, October 14, 2020), and
0
b. Adding the following new AD:

Airbus SAS: Docket No. FAA-2021-0372; Project Identifier MCAI-2020-
01684-T.

(a) Comments Due Date

    The FAA must receive comments on this airworthiness directive
(AD) by July 6, 2021.

(b) Affected ADs

    This AD replaces AD 2020-21-05, Amendment 39-21278 (85 FR 64963,
October 14, 2020) (AD 2020-21-05).

(c) Applicability

    This AD applies to all Airbus SAS airplanes, certificated in any
category, and identified in paragraphs (c)(1) through (9) of this
AD.
    (1) Model A330-223F and -243F airplanes.
    (2) Model A330-201, -202, -203, -223, and -243 airplanes.
    (3) Model A330-301, -302, -303, -321, -322, -323, -341, -342,
and -343 airplanes.
    (4) Model A330-841 airplanes.
    (5) Model A330-941 airplanes.
    (6) Model A340-211, -212, and -213 airplanes.
    (7) Model A340-311, -312, and -313 airplanes.
    (8) Model A340-541 airplanes.
    (9) Model A340-642 airplanes.

(d) Subject

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

(e) Reason

    This AD was prompted by reports of a fuel pump showing
cavitation erosion that exposed the fuel pump power supply wires,
and by a determination that certain compliance times need to be
revised and that additional airplanes are subject to the unsafe
condition. The FAA is issuing this AD to address fuel pump erosion
caused by cavitation. If this condition is not addressed, a pump
running dry could result in a fuel tank explosion and consequent
loss of the airplane.

(f) Compliance

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

(g) Requirements

    Except as specified in paragraph (h) of this AD: Comply with all
required actions and compliance times specified in, and in
accordance with, European Union Aviation Safety Agency (EASA) AD
2020-0283, dated December 17, 2020; corrected December 24, 2020
(EASA AD 2020-0283).

(h) Exceptions to EASA AD 2020-0283

    (1) Where EASA AD 2020-0283 refers to its effective date, this
AD requires using the effective date of this AD.
    (2) The ``Remarks'' section of EASA AD 2020-0283 does not apply
to this AD.
    (3) Where EASA AD 2020-0283 refers to the master minimum
equipment list (MMEL), this AD refers to the operator's minimum
equipment list (MEL).
    (4) Where EASA AD 2020-0283 refers to ``13 December 2019 [the
effective date of EASA AD 2019-0291 at original issue],'' this AD
requires using ``November 18, 2020 (the effective date of AD 2020-
21-05).''
    (5) Where EASA AD 2020-0283 refers to ``17 November 2017 [the
effective date of EASA AD 2017-0224],'' this AD requires using
``December 29, 2017 (the effective date of AD 2017-25-16, Amendment
39-19130 (82 FR 58718, December 14, 2017) (AD 2017-25-16).''
    (6) Where paragraphs (8), (9), and (10) of EASA AD 2020-0283
specify to ``inform all flight crews, and, thereafter, operate the
aeroplane accordingly,'' this AD does not require those actions as
those actions are already required by existing FAA operating
regulations.

(i) No Reporting Requirement

    Although the service information referenced in EASA AD 2020-0283
specifies to submit certain information to the manufacturer, this AD
does not include that requirement.

(j) Other FAA AD Provisions

    The following provisions also apply to this AD:
    (1) Alternative Methods of Compliance (AMOCs): The Manager,
Large Aircraft Section, International Validation Branch, FAA, has
the authority to approve AMOCs for this AD, if requested using the
procedures found in 14 CFR 39.19. In accordance with 14 CFR 39.19,
send your request to your principal inspector or responsible Flight
Standards Office, as appropriate. If sending information directly to
the Large Aircraft Section, International Validation Branch, send it
to the attention of the person identified in paragraph (k)(2) of
this AD. Information may be emailed to<EMAIL_ADDRESS>
Before using any approved AMOC, notify your appropriate principal
inspector, or lacking a principal inspector, the manager of the
responsible Flight Standards Office.
    (2) Contacting the Manufacturer: For any requirement in this AD
to obtain instructions from a manufacturer, the instructions must be
accomplished using a method approved by the Manager, Large Aircraft
Section, International Validation Branch, FAA; or EASA; or Airbus
SAS's EASA Design Organization Approval (DOA). If approved by the
DOA, the approval must include the DOA-authorized signature.
    (3) Required for Compliance (RC): For any service information
referenced in EASA AD 2020-0283 that contains RC procedures and
tests: Except as required by paragraph (j)(2) of this AD, RC
procedures and tests must be done to comply with this AD; any
procedures or tests that are not identified as RC are recommended.
Those procedures and tests that are not identified as RC may be
deviated from using accepted methods in accordance with the
operator's maintenance or inspection program without obtaining
approval of an AMOC, provided the procedures and tests identified as
RC can be done and the airplane can be put back in an airworthy
condition. Any substitutions or changes to procedures or tests
identified as RC require approval of an AMOC.

(k) Related Information

    (1) For information about EASA AD 2020-0283, contact EASA,
Konrad-Adenauer-Ufer 3, 50668 Cologne, Germany; telephone +49 221
8999 000; email<EMAIL_ADDRESS>Internet www.easa.europa.eu. You
may find this EASA AD on the EASA website at https://ad.easa.europa.eu. You may view this material at the FAA,
Airworthiness Products Section, Operational Safety Branch, 2200
South 216th St., Des Moines, WA. For information on the availability
of this material at the FAA, call<PHONE_NUMBER>. This material may be
found in the AD docket on the internet at https://www.regulations.gov by searching for and locating Docket No. FAA-
2021-0372.
    (2) For more information about this AD, contact Vladimir
Ulyanov, Aerospace Engineer, Large Aircraft Section, International
Validation Branch, FAA, 2200 South 216th St., Des Moines, WA 98198;
telephone and fax<PHONE_NUMBER>; email<EMAIL_ADDRESS>
    Issued on May 15, 2021.
Gaetano A. Sciortino,
Deputy Director for Strategic Initiatives, Compliance & Airworthiness
Division, Aircraft Certification Service.
[FR Doc. 2021-10635 Filed 5-20-21; 8:45 am]
BILLING CODE 4910-13-P


[Federal Register Volume 81, Number 66 (Wednesday, April 6, 2016)]
[Notices]
[Pages 20004-20007]
[FR Doc No: 2016-07834]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-77489; File No. SR-ISE-2016-08]

Self-Regulatory Organizations; International Securities Exchange,
LLC; Notice of Filing of Proposed Rule Change Related to Market Wide
Risk Protection

March 31, 2016.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934
(``Act''),\1\ and Rule 19b-4 thereunder,\2\ notice is hereby given
that, on March 17, 2016, the International Securities Exchange, LLC
(the ``Exchange'' or ``ISE'') filed with the Securities and Exchange
Commission (``Commission'') the proposed rule change, as described in
Items I, II, and III below, which Items have been prepared by the self-
regulatory organization. The Commission is publishing this notice to
solicit comments on the proposed rule change from interested persons.
---------------------------------------------------------------------------

    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
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I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change

    The Exchange proposes to introduce new activity based order
protections as described in more detail below. The text of the proposed
rule change is available on the Exchange's Web site (http://www.ise.com), at the principal office of the Exchange, and at the
Commission's Public Reference Room.

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

    In its filing with the Commission, the self-regulatory organization
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 self-regulatory organization
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 purpose of the proposed rule change is to introduce new risk
protections for orders designed to aid members in their risk management
by supplementing current price reasonability checks with activity based
order protections.\3\ In particular, the Exchange proposes to introduce
two activity based risk protections that will be mandatory for all
members: (1) The ``Order Entry Rate Protection,'' which protects
members against entering orders at a rate that exceeds predefined
thresholds,\4\ and (2) the ``Order Execution Rate Protection,'' which
protects members against executing orders at a rate that exceeds their
predefined risk settings. Both of these risk protections are detailed
in Proposed Rule 714(d), ``Market Wide Risk Protection.'' \5\ The
Exchange will announce the implementation date of the Market Wide Risk
Protection in a circular to be distributed to members prior to
implementation.
---------------------------------------------------------------------------

    \3\ The Exchange provides members with limit order price
protections designed to prevent erroneous executions by rejecting
orders priced too far through the market. See Rule 714(b)(2).
    \4\ The Exchange will determine when to initiate the Order Entry
Rate Protection pre-open to allow members time to load their orders
without inadvertently triggering the protection. The precise time
will be established by the Exchange and communicated to members via
circular prior to implementation.
    \5\ The term ``Market Wide Risk Protection'' includes both the
``Order Entry Rate Protection'' and the ``Order Execution Rate
Protection.''
---------------------------------------------------------------------------

    Pursuant to the proposed Market Wide Risk Protection rule, the
Exchange's trading system (the ``System'') will maintain one or more
counting programs on behalf of each member that will count the number
of orders entered, and the number of contracts traded on ISE or, if
chosen by the member,\6\ across both ISE and ISE's affiliate, ISE
Gemini, LLC (``ISE Gemini''), which shares a trading system with ISE.
Members can use multiple counting programs to separate risk protections
for different groups established within the member.\7\ The

counting programs will maintain separate counts, over rolling time
periods specified by the member for each count, of: (1) The total
number of orders entered in the regular order book; (2) the total
number of orders entered in the complex order book with only options
legs; (3) the total number of orders entered in the complex order book
with both stock and options legs; (4) the total number of contracts
traded in regular orders; and (5) the total number of contracts traded
in complex orders with only options legs.\8\
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    \6\ Members will have the option to set different risk
parameters for their trading activity on each exchange, or set risk
parameters that apply to their trading across both ISE and ISE
Gemini, if desired.
    \7\ The Exchange will explain how members can go about setting
up risk protections for different groups (e.g., business units) in a
circular issued to members.
    \8\ The member's allowable order rate for the Order Entry Rate
Protection is comprised of the parameters defined in (1) to (3),
while the allowable contract execution rate for the Order Execution
Rate Protection is comprised of the parameters defined in (4) and
(5). As explained below, the Exchange is not including a complex
execution count for complex orders with a stock component as the
execution counts maintained by the Order Execution Rate Protection
are based solely on options contracts traded. See note 9 supra [sic]
and accompanying text.
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    Members will have discretion to establish the applicable time
period for each of the counts maintained under the Market Wide Risk
Protection, provided that the selected period must be within minimum
and maximum parameters established by the Exchange and announced via
circular.\9\ While the Market Wide Risk Protection is mandatory for all
members, the Exchange is not proposing to establish minimum or maximum
values for the order entry and execution parameters described in (1)
through (5) above. The Exchange believes that this approach will give
members the flexibility needed to appropriately tailor the Market Wide
Risk Protection to their respective risk management needs. In this
regard, the Exchange notes that each member is in the best position to
determine risk settings appropriate for their firm based on the
member's trading activity and business needs. In the interest of
maintaining a fair and orderly market, however, the Exchange will
establish default values for the applicable time period and order entry
and execution parameters in a circular to be distributed to members.
Default values established by the Exchange will apply only to members
that do not submit their own parameters for the Market Wide Risk
Protection.
---------------------------------------------------------------------------

    \9\ The Exchange anticipates that the minimum and maximum values
for the applicable time period will be initially set at one second
and a full trading day, respectively.
---------------------------------------------------------------------------

    The Exchange proposes to use separate counts for regular orders,
complex options orders, and complex orders with a stock component as
members may want to have different risk settings for these instruments.
In order to fully protect members, however, if the Market Wide Risk
Protection is triggered based on any count, the triggered action will
be taken across the entire market. In particular, if the Market Wide
Risk Protection is triggered, action will be taken with respect to all
products traded in both simple and complex instruments, and across ISE
or, if applicable, ISE and ISE Gemini. Contracts executed on the agency
and contra-side of a two-sided crossing order will be counted
separately for the Order Execution Rate Protection. In addition, the
contract execution count for complex orders will be the sum of the
number of contracts executed with respect to each leg. Complex
instruments that contain a stock component will not be included as part
of the complex order execution count as the Order Execution Rate
Protection is based exclusively on options contracts executed, and
therefore does not apply to orders that have both stock and options
components.\10\
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    \10\ Stock-option orders contain both an option component(s)
executed in contracts and a stock component executed in shares. The
Exchange does not believe that these two components can be combined
in a way that provides a meaningful measure of risk exposure for
members, and has therefore determined not to provide the Order
Execution Rate Protection for complex orders that contain a stock
component.
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    The System will trigger the Market Wide Risk Protection when the
counting program has determined that the member has either (1) entered
during the specified time period a number of orders exceeding its
designated allowable order rate, or (2) executed during the specified
time period a number of contracts exceeding its designated allowable
contract execution rate. In particular, after a member enters an order,
or a member's order is executed, the System will look back over the
specified time period to determine whether the member has exceeded the
threshold that it has set for the total number of orders entered or the
total number of contracts traded, as applicable. If the member's
threshold has been exceeded in either simple or complex instruments,
the Market Wide Risk Protection will be triggered and the System will
automatically reject all subsequent incoming orders entered by the
member on ISE or, if applicable, across both ISE and ISE Gemini.\11\ In
addition, if the member has opted in to this functionality, the System
will automatically cancel all of the member's existing orders. The
Market Wide Risk Protection will remain engaged until the member
manually (e.g., via email) notifies the Exchange to enable the
acceptance of new orders; however, the System will still allow members
to interact with existing orders entered before the protection was
triggered, including sending cancel order messages and receiving trade
executions for those orders.
---------------------------------------------------------------------------

    \11\ Members that set different risk parameters for ISE and ISE
Gemini will only have their orders rejected on the exchange whose
threshold was exceeded.
---------------------------------------------------------------------------

    The Exchange believes that the proposed Market Wide Risk Protection
will assist members in better managing their risk when trading on the
[sic] ISE. In particular, the proposed rule change provides
functionality that allows members to set risk management thresholds for
the number of orders entered or contracts executed on the Exchange
during a specified period. This is similar to how other options
exchanges have implemented activity-based risk management
protections,\12\ and the Exchange believes this functionality will
likewise be beneficial for ISE members.
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    \12\ See Securities Exchange Act Release Nos. 74118 (January 22,
2015), 80 FR 4605 (January 28, 2015) (Notice); 74496 (March 13,
2015), 80 FR 14421 (March 19, 2015) (Approval) (SR-MIAX-2015-03).
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    The examples below illustrate how the Market Wide Risk Protection
would work both for order entry and order execution protections:

    Example 1, Order Entry Rate Protection:
    Broker Dealer 1 (``BD1'') designates an allowable order rate of 499
orders/1 second in simple instruments, 299 orders/1 second in complex
options orders, and 199 orders/1 second in complex orders with a stock
component.

@0 milliseconds, BD1 enters 200 regular orders. (Regular order total:
200 orders)
@150 milliseconds, BD1 enters 50 complex options orders. (Complex
options order total: 50 orders)
@250 milliseconds, BD1 enters 100 complex orders with a stock
component. (Complex order with stock total: 100 orders)
@450 milliseconds, BD1 enters 250 regular orders. (Regular order total:
450 orders)
@950 milliseconds, BD1 enters 50 regular orders. (Regular order total:
500 orders)

    Market Wide Risk Protection is triggered on ISE, and, if
applicable, ISE Gemini \13\ due to exceeding 499 regular orders in 1
second. All subsequent orders in both simple and complex

instruments are rejected, and if BD1 has opted in to this
functionality, all existing orders are cancelled. BD1 must contact
Market Operations to resume trading.
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    \13\ Members that share risk settings across both ISE and ISE
Gemini will have the Market Wide Risk Protection triggered on both
markets.

    Example 2, Order Execution Rate Protection:
    BD1 designates an allowable execution rate of 15,000 contracts/2
seconds in simple instruments and 10,000 contracts/2 seconds in complex
options orders.

@0 milliseconds, BD1 receives executions for 5,000 contracts from
regular orders. (Regular execution total: 5,000 contracts)
@500 milliseconds, BD1 receives an execution for 2,500 contracts from a
complex options order. (Complex execution total: 2,500 contracts)
@600 milliseconds, BD1 receives executions for 10,000 contracts from
regular orders. (Regular execution total: 15,000 contracts)
@650 milliseconds, BD1 receives an execution for 1,500 contracts from a
stock-option order. (Complex execution total: 2,500 contracts) \14\
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    \14\ Complex orders with a stock component are not included in
the order execution count.
---------------------------------------------------------------------------

@850 milliseconds, BD1 receives an execution for 3,000 contracts from a
complex options order. (Complex execution total: 5,500 contracts)
@1150 milliseconds, BD1 receives an execution for 3,000 contracts from
a
complex options order. (Complex execution total: 8,500 contracts)
@1700 milliseconds, BD1 receives an execution for 2,000 contracts from
a complex options order. (Complex execution total: 10,500 contracts)

    Market Wide Risk Protection is triggered on ISE, and, if
applicable, ISE Gemini \15\ due to exceeding 10,000 contracts in 2
seconds for complex options orders. All subsequent orders in both
simple and complex instruments are rejected, and if BD1 has opted in to
this functionality, all existing orders are cancelled. BD1 must contact
Market Operations to resume trading.
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    \15\ Members that share risk settings across both ISE and ISE
Gemini will have the Market Wide Risk Protection triggered on both
markets.
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2. Statutory Basis
    The Exchange believes that the proposed rule change is consistent
with the requirements of the Act and the rules and regulations
thereunder that are applicable to a national securities exchange, and,
in particular, with the requirements of Section 6(b) of the Act.\16\
Specifically, the proposed rule change is consistent with Section
6(b)(5) of the Act,\17\ because it is designed to promote just and
equitable principles of trade, remove impediments to and perfect the
mechanisms of a free and open market and a national market system and,
in general, to protect investors and the public interest.
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    \16\ 15 U.S.C. 78f(b).
    \17\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------

    The Exchange believes that the proposed rule change would assist
with the maintenance of a fair and orderly market by establishing new
activity based risk protections for orders. The Exchange currently
offers a risk protection mechanism for market maker quotes that removes
the member's quotes if a specified number of curtailment events occur
during a set time period (``Market Wide Speed Bump'').\18\ The Exchange
believes that this Market Wide Speed Bump functionality has been
successful in reducing market maker risk and now proposes to adopt risk
protections for orders that would allow other members to properly
manage their exposure to excessive risk. In particular, the proposed
rule change would implement two new risk protections based on the rate
of order entry and order execution, respectively. The Exchange believes
that both of these new protections, which together encompass the
proposed Market Wide Risk Protection, would enable members to better
manage their risk when trading options on the Exchange by limiting the
member's risk exposure when systems or other issues result in orders
being entered or executed at a rate that exceeds predefined thresholds.
In today's market the Exchange believes that robust risk management is
becoming increasingly more important for all members. The proposed rule
change would provide an additional layer of risk protection for market
participants that trade on the Exchange.
---------------------------------------------------------------------------

    \18\ See Rule 804(g)(2).
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    The proposed Market Wide Risk Protection is similar to risk
management functionality provided by other options exchanges,
including, for example, the MIAX Options Exchange (``MIAX''), which
recently received Commission approval for its ``Risk Protection
Monitor'' for orders.\19\ In particular, the Market Wide Risk
Protection is designed to reduce risk associated with system errors or
market events that may cause members to send a large number of orders,
or receive multiple, automatic executions, before they can adjust their
exposure in the market. Without adequate risk management tools, such as
those proposed in this filing, members could reduce the amount of order
flow and liquidity that they provide. Such actions may undermine the
quality of the markets available to customers and other market
participants. Accordingly, the proposed rule change is designed to
encourage members to submit additional order flow and liquidity to the
Exchange, thereby removing impediments to and perfect [sic] the
mechanisms of a free and open market and a national market system and,
in general, protecting investors and the public interest. In addition,
providing members with more tools for managing risk will facilitate
transactions in securities because, as noted above, the members will
have more confidence that protections are in place that reduce the
risks from potential system errors and market events. As a result, the
new functionality has the potential to promote just and equitable
principles of trade.
---------------------------------------------------------------------------

    \19\ See supra note 10 [sic].
---------------------------------------------------------------------------

    The Exchange also believes that it is consistent with the
protection of investors and the public interest to offer the Market
Wide Risk Protection to members across both ISE and ISE Gemini as this
will permit members to more effectively manage their risk
simultaneously on both markets if desired. The Exchange already offers
cross market risk protections for market makers [sic] quotes,\20\ and
is now proposing to similarly offer a cross market risk protection for
orders in order to reduce the risk that members face when entering
orders on multiple exchanges. The Exchange notes that issues that would
trigger the Market Wide Risk Protection are not normally confined to a
member's activity on a single exchange. Accordingly, the Exchange
believes that offering the Market Wide Risk Protection on a cross-
market basis would help members to more effectively manage their risk
when trading on multiple markets, and reduce disruptive trading events
to the benefit of all members and investors.
---------------------------------------------------------------------------

    \20\ See Securities Exchange Act Release Nos. 71759 (March 20,
2014), 79 FR 16850 (March 26, 2014) (``Notice''); 73147 (September
19, 2014), 79 FR 57639 (September 25, 2014) (Approval) (SR-ISE-2014-
09).
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B. Self-Regulatory Organization's Statement on Burden on Competition

    In accordance with Section 6(b)(8) of the Act,\21\ the Exchange
does not believe that the proposed rule change would impose any burden
on intermarket or intramarket competition that is not necessary or
appropriate in furtherance of the purposes of the Act. The proposed
Market Wide Risk Protection is similar to risk protections already
available on other options exchanges,\22\ and is designed to be a
competitive

offering that would mitigate the risk associated with trading on the
Exchange. Market makers already benefit from Market Wide Speed Bump
functionality available for quotes. The proposed change would extend
new risk protections to orders so that additional market participants
can benefit from risk mitigating functionality. Like the Exchange's
Market Wide Speed Bump, the proposed rule change would also be offered
cross-market to members that want to be protected from inadvertent
exposure to excessive risk when trading on both ISE and ISE Gemini.
Permitting this functionality to be cross-market will not have any
impact on competition that is not necessary or appropriate in
furtherance of the purposes of the Act. In addition, the proposed
functionality would be mandatory for all members, and would be made
available on an equal and non-discriminatory basis. As such, the
Exchange does not believe that the proposed rule change would impose
any unnecessary burden on competition.
---------------------------------------------------------------------------

    \21\ 15 U.S.C. 78f(b)(8).
    \22\ See supra notes 10 [sic] and 19.
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C. Self-Regulatory Organization's Statement on Comments on the Proposed
Rule Change Received From Members, Participants, or Others

    The Exchange has not solicited, and does not intend to solicit,
comments on this proposed rule change. The Exchange has not received
any unsolicited written comments from members or other interested
parties.

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

    Within 45 days of the publication date of this notice or within
such longer period (1) as the Commission may designate up to 45 days of
such date if it finds such longer period to be appropriate and
publishes its reasons for so finding or (2) as to which the self-
regulatory organization consents, the Commission will:
    (a) By order approve or disapprove such proposed rule change; or
    (b) Institute proceedings to determine whether the proposed rule
change should be disapproved.

IV. Solicitation of Comments

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

Electronic Comments

     Use the Commission's Internet comment form (http://www.sec.gov/rules/sro.shtml); or
     Send an email to<EMAIL_ADDRESS>Please include
File Number SR-ISE-2016-08 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-ISE-2016-08. 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-ISE-2016-08 and should be
submitted on or before April 27, 2016.

    For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\23\
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    \23\ 17 CFR 200.30-3(a)(12).
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Robert W. Errett,
Deputy Secretary.
[FR Doc. 2016-07834 Filed 4-5-16; 8:45 am]
BILLING CODE 8011-01-P