[Federal Register Volume 82, Number 246 (Tuesday, December 26, 2017)]
[Notices]
[Pages 61100-61107]
[FR Doc No: 2017-27690]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-82350; File No. SR-NYSEArca-2017-139]

Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing
of Proposed Rule Change To List and Trade the Shares of the ProShares
Bitcoin ETF and the ProShares Short Bitcoin ETF Under NYSE Arca Rule
8.200-E, Commentary .02

December 19, 2017.
    Pursuant to Section 19(b)(1) \1\ of the Securities Exchange Act of
1934 (the ``Act'') \2\ and Rule 19b-4 thereunder,\3\ notice is hereby
given that, on December 4, 2017, NYSE Arca, Inc. (the ``Exchange'' or
``NYSE Arca'') filed with the Securities and Exchange Commission (the
``Commission'') the proposed rule change as described in Items I and II
below, which Items have been prepared by the Exchange. The Commission
is publishing this notice to solicit comments on the proposed rule
change from interested persons.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 15 U.S.C. 78a.
    \3\ 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 list and trade the shares of the following
under NYSE Arca Rule 8.200-E, Commentary .02 (``Trust Issued
Receipts''): The ProShares Bitcoin ETF and the ProShares Short Bitcoin
ETF. The proposed change is available on the Exchange's website at
www.nyse.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 those statements may be examined at
the places specified in Item IV below. The Exchange has prepared
summaries, set forth in sections A, B, and C below, of the most
significant parts of such statements.

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

1. Purpose
    The Exchange proposes to list and trade shares (``Shares'') of the
following under NYSE Arca Rule 8.200-E, Commentary .02, which governs
the listing and trading of Trust Issued Receipts: The ProShares Bitcoin
ETF and the ProShares Short Bitcoin ETF (each a ``Fund'' and,
collectively, the ``Funds'').\4\
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    \4\ Commentary .02 to NYSE Arca Rule 8.200-E applies to Trust
Issued Receipts that invest in ``Financial Instruments.'' The term
``Financial Instruments,'' as defined in Commentary .02(b)(4) to
NYSE Arca Rule 8.200-E, means any combination of investments,
including cash; securities; options on securities and indices;
futures contracts; options on futures contracts; forward contracts;
equity caps, collars, and floors; and swap agreements.
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    Each Fund is a series of the ProShares Trust II (the ``Trust''), a
Delaware statutory trust.\5\ The Trust and the Funds are managed and
controlled by ProShare Capital Management LLC (the ``Sponsor''). The
Sponsor is registered as a commodity pool operator (``CPO'') with the
Commodity Futures Trading Commission (``CFTC'') and is a member of the
National Futures Association (``NFA'').
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    \5\ The Trust is registered under the Securities Act of 1933. On
September 27, 2017, the Trust filed with the Commission a
registration statement on Form S-1 under the Securities Act of 1933
(15 U.S.C. 77a) (the ``Securities Act'') relating to the Funds (File
No. 333-220680) (the ``Registration Statement''). The description of
the operation of the Trust and the Funds herein is based, in part,
on the Registration Statement.
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    In its capacity as the Custodian for the Funds, Brown Brothers
Harriman & Co. (``BBH&Co.'' or the ``Custodian'') may hold the Funds'
investment assets and cash and cash equivalents pursuant to a custodian
agreement. The Custodian is also the transfer agent for the Funds. In
addition, in its capacity as Administrator for the Funds, BBH&Co. (the
``Administrator'') prepares and files certain regulatory filings on
behalf of the Funds.
    SEI Investments Distribution Co. serves as the distributor of the
Shares (the ``Distributor''). The Distributor is a broker-dealer
registered with the Commission under the Securities Exchange Act of
1934 and a member of the Financial Industry Regulatory Authority
(``FINRA''). The Trust will offer Shares of the Funds for sale through
the Distributor in ``Creation Units'', as described below. The
Distributor will also assist the Sponsor and Administrator with certain
functions and duties relating to distribution and marketing.
Pro Shares Bitcoin ETF
    According to the Registration Statement, the investment objective
of the Fund is to seek, results (before fees and expenses) that, both
for a single day and over time, correspond to the performance of lead
month \6\ bitcoin futures contracts \7\ listed and traded on either the
Cboe Futures Exchange (``CFE'') or the Chicago Mercantile Exchange
(``CME'') \8\ (the ``Benchmark Futures Contract'').\9\ Specifically,
the Fund will seek results that correspond to the last traded price of
the Benchmark Futures Contract on its primary listing exchange prior to
the Fund's NAV calculation time (typically 4:00 p.m. Eastern Time
(``E.T.'') each Business Day. Although the Fund generally intends to
invest substantially all of its assets in Benchmark Futures Contracts,
the Fund may invest in other U.S. exchange listed bitcoin futures
contracts (if available) in addition to Benchmark Futures Contracts
(collectively, along with Benchmark Futures Contracts, the ``Bitcoin
Futures Contracts''), as discussed herein.
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    \6\ The ``lead month contracts'' are the monthly contracts with
the earliest expiration date. As discussed below, each Fund will
``roll'' its Bitcoin Futures Contract (as defined below) to the next
``nearby'' Bitcoin Futures Contract prior to the expiration date of
such contracts. The ``nearby'' contracts are those monthly contracts
with the next closest expiration date. The Funds will incur the
costs (or benefits) of continually rolling into the new lead month
contracts.
    \7\ Futures contracts are standardized contracts traded on an
exchange that call for the future delivery of a specified quantity
and type of a particular underlying asset in exchange for payment at
a specified time and place or for cash settlement based on a
specified reference rate or settlement price. Bitcoin Futures
Contracts will be cash settled.
    \8\ See ``CFTC Statement on Self-Certification of Bitcoin
Products by CME, CFE and Cantor Exchange,'' dated December 1, 2017
(``CFTC Release''), available at http://www.cftc.gov/PressRoom/PressReleases/pr7654-17. The CME has announced that its bitcoin
futures contracts are scheduled to begin trading on December 18,
2017. See ``CME Group Self-Certifies Bitcoin Futures to Launch Dec.
18,'' December 1, 2017, available at http://www.cmegroup.com/media-room/press-releases/2017/12/01/cme_group_self-certifiesbitcoinfuturestolaunchdec18.html. Cboe Global Markets, Inc.
(``Cboe''), has announced that that [sic] CFE's bitcoin futures
contracts are scheduled to begin trading on December 10, 2017. See
``Cboe Plans December 10 Launch of Bitcoin Futures Trading,''
December 4, 2017, available at http://ir.cboe.com/press-releases/2017/12-04-2017.
    \9\ CFE and CME are registered with the CFTC and seek to provide
a neutral, regulated marketplace for the trading of derivatives
contracts for commodities, such as futures, options and certain
swaps. Both the CFE and CME are both members of the Intermarket
Surveillance Group (``ISG''). See note 22, infra. The determination
as to which futures contracts (i.e., CFE or CME listed) will be
utilized as each Fund's Benchmark Futures Contract will be made by
the Sponsor prior to the launch of each Fund based on the Sponsor's
assessment of the liquidity of such contracts.
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    The value of the Bitcoin Futures Contracts will be based on the
expected value of bitcoin at a future point in time, specifically, the
expiration date of such Bitcoin Futures Contracts. By being long
Bitcoin Futures Contracts, the Fund seeks to benefit from daily
increases in the price of the Bitcoin Futures Contracts. The Fund will
not be benchmarked to the current price of bitcoin and will not invest
directly in bitcoin. When the price of Bitcoin Futures Contracts held
by the Fund declines, the Fund will lose value. As noted, the Fund will
seek to achieve its investment objective both for a single day and over
time.\10\
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    \10\ According to the Registration Statement, a single day is
measured from the time a Fund calculates its net asset value
(``NAV'') to the time of a Fund's next NAV calculation.
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ProShares Short Bitcoin ETF
    According to the Registration Statement, the investment objective
of the Fund is to seek results, for a single day, that correspond
(before fees and expenses) to the inverse (-1x) of the daily
performance of the Benchmark Futures Contract. The Fund does not seek
to achieve its investment objective over a period greater than a single
day.\11\
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    \11\ According to the Registration Statement, the return of the
Fund for a period longer than a single day will be the result of
each day's returns compounded over the period, which will very
likely differ from the inverse (-1x) of the return of the Benchmark
Futures Contract for the same period.
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    The Fund generally intends to invest substantially all of its
assets through investment in short positions in Benchmark Futures
Contracts. However, the Fund may invest through short positions in
Bitcoin Futures Contracts other than Benchmark Futures Contracts as
described herein. In this manner, the Fund will seek to benefit from
decreases in the price of the Bitcoin Futures Contracts. When the price
of Bitcoin Futures Contracts increases, the Fund will lose value. The
Fund will not be benchmarked to the current price of bitcoin and will
not invest directly in bitcoin.
Investment Strategies of the Funds
    In seeking to achieve the Funds' investment objectives, the Sponsor
will utilize a mathematical approach to determine the type, quantity
and mix of investment positions that the Sponsor believes, in
combination, should produce daily returns consistent with the Funds'
respective objectives. The Sponsor will rely on a pre-determined model
to generate orders that result in repositioning the Funds' investments
in accordance with their respective investment objectives.
    Each Fund will seek to achieve its respective investment objective
by

investing, under normal market conditions,\12\ substantially all of its
assets in Benchmark Futures Contracts (or short positions in Benchmark
Futures Contracts, as applicable).
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    \12\ The term ``normal market conditions'' includes, but is not
limited to, the absence of trading halts in the applicable financial
markets generally; operational issues (e.g., systems failure)
causing dissemination of inaccurate market information; or force
majeure type events such as natural or manmade disaster, act of God,
armed conflict, act of terrorism, riot or labor disruption or any
similar intervening circumstance.
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    Each Fund also may obtain exposure (or inverse exposure, as
applicable) in whole or in part, through investments in Bitcoin Futures
Contracts other than Benchmark Futures Contracts if the Sponsor
believes doing so would be in the best interest of such Fund.\13\ For
example, each Fund could invest in Bitcoin Futures Contracts in the
event that position, price or accountability limits are reached with
respect to Benchmark Futures Contracts. In addition, in the event
position, price or accountability limits are reached with respect to
Bitcoin Futures Contracts, each Fund may invest in listed options on
Bitcoin Futures Contracts (should such listed options become available)
(``Options'') and over-the-counter (``OTC'') swap agreements
referencing Bitcoin Futures Contracts (together, Options and swap
agreements are referred to herein as ``Financial Instruments''). The
Funds may also invest in Financial Instruments if the market for a
specific Bitcoin Futures Contract experiences emergencies (e.g.,
natural disaster, terrorist attack or an act of God) or disruptions
(e.g., a trading halt or a flash crash) that prevent or make it
impractical for a Fund to obtain the appropriate amount of investment
exposure using Bitcoin Futures Contracts.
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    \13\ Each Fund's investments in Bitcoin Futures Contracts will
be subject to regulation under the Commodity Exchange Act and traded
pursuant to CFTC and applicable exchange regulations. See 7 U.S.C.
1.
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    Each Fund intends to enter into swap agreements only with major,
global financial institutions that meet certain credit quality
standards and monitoring policies. Each Fund will use various
techniques to minimize credit risk including posting collateral daily
that is marked to market, using different counterparties and limiting
the net amount due from any individual counterparty.
    The Funds' remaining net assets will be invested in cash or cash
equivalents and/or U.S. Treasury securities or other high credit
quality, short-term fixed-income or similar securities (such as money
market funds and repurchase agreements) (collectively ``Money Market
Instruments'') as collateral for, or pending investment in, Bitcoin
Futures Contracts and Financial Instruments.\14\
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    \14\ Each Fund will generally deposit cash or U.S. Treasury
securities with a Futures Commission Merchant (``FCM'') for open
positions in Bitcoin Futures Contracts and cash or U.S. Treasury
securities as collateral for open positions in Financial
Instruments.
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    The Funds do not intend to hold Bitcoin Futures Contracts through
expiration, but instead intend to either close or ``roll'' their
respective positions. When the market for these contracts is such that
the prices are higher in the more distant delivery months than in the
nearer delivery months, the sale during the course of the ``rolling
process'' of the more nearby contract would take place at a price that
is lower than the price of the more nearby Bitcoin Futures Contracts
would take place at a price that is lower than the price of the more
distant Bitcoin Futures Contracts [sic]. This pattern of higher futures
prices for longer expiration Bitcoin Futures Contracts is referred to
as ``contango.'' Alternatively, when the market for certain Bitcoin
Futures Contracts is such that the prices are higher in the nearer
months than in the more distant months, the sale during the course of
the ``rolling process'' of the more nearby Bitcoin Futures Contracts
would take place at a price that is higher than the price of the more
distant Bitcoin Futures Contracts. This pattern of higher future prices
for shorter expiration Bitcoin Futures Contracts is referred to as
``backwardation.'' The presence of contango in the relevant Bitcoin
Futures Contracts at the time of rolling would be expected to adversely
affect the long positions held by the ProShares Bitcoin ETF, and
positively affect the short positions held by the ProShares Short
Bitcoin ETF. Similarly, the presence of backwardation in Bitcoin
Futures Contracts at the time of rolling such Bitcoin Futures Contracts
would be expected to adversely affect the short positions held by the
ProShares Short Bitcoin ETF and positively affect the long positions
held by the ProShares Bitcoin ETF.
    According to the Registration Statement, many U.S. commodities
exchanges limit the amount of fluctuation permitted in futures contract
prices during a single trading day by regulations referred to as
``daily price fluctuation limits'' or ``daily limits.'' Once the daily
limit has been reached in a particular contract, no trades may be made
that day at a price beyond that limit or trading may be suspended for
specified periods during the trading day. In addition, the CFTC and
U.S. futures exchanges have established limits referred to as
``speculative position limits'' or ``accountability levels'' on the
maximum net long or short futures positions that any person may hold or
control in derivatives traded on such exchanges. These levels and
position limits apply to the Bitcoin Futures Contracts that each Fund
would invest in to meet its investment objective.
    According to the Registration Statement, as of the NAV calculation
time, the ProShares Bitcoin ETF will not have futures exposure greater
than one times [sic] (1x) that Fund's assets. Similarly, the ProShares
Short Bitcoin ETF will not have inverse futures exposure greater than
one time (1x) the Fund's assets. Thus, the maximum margin held at an
FCM would not exceed one times [sic] the margin requirement for the
ProShares Bitcoin ETF or the margin requirement for the ProShares Short
Bitcoin ETF.
Overview of Bitcoin
    According to the Registration Statement, bitcoin is a digital asset
based on the decentralized, open source protocol of the peer-to-peer
bitcoin computer network (the ``Bitcoin Network''). Bitcoin is not
issued by governments, banks or similar organizations. No single entity
owns or operates the Bitcoin Network. The infrastructure of the Bitcoin
Network is collectively maintained by a decentralized user base. The
Bitcoin Network is accessed through software, and software governs
bitcoin's creation, movement, and ownership.
    The value of bitcoin is determined, in part, by the supply of, and
demand for, bitcoin in the global exchange markets for the trading of
bitcoin,\15\ market expectations for the adoption of bitcoin by
individuals, the number of merchants that accept bitcoin as a form of
payment and the volume of private end-user-to-end-user transactions.
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    \15\ According to the Registration Statement, a ``Bitcoin
Exchange'' is an electronic marketplace where exchange participants
may trade, buy and sell bitcoin based on bid-ask trading. Bitcoin
Exchanges are typically web-based and trade on a 24-hour basis,
publishing transaction price and volume data. A ``Bitcoin Exchange
Market'' is the global bitcoin exchange market for the trading of
bitcoin, which consists of transactions on Bitcoin Exchanges.
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    Bitcoin transaction and ownership records are reflected on the
``Bitcoin Blockchain,'' which is a digital public record or ledger.
Copies of this ledger are stored in a decentralized manner on the
computers of each Bitcoin Network user. Transaction data is permanently
recorded in files called ``blocks,'' which

reflect transactions that have been recorded and authenticated by
Bitcoin Network participants. The Bitcoin Network software source code
includes protocols that govern the creation of bitcoin and the
cryptographic system that secures and verifies Bitcoin transactions.
Overview of Bitcoin Futures Contracts
    Bitcoin Futures Contracts are a new type of futures contract to be
traded on the CFE and CME or other U.S. exchanges (if available).
Unlike the established futures markets for traditional physical
commodities, the market for Bitcoin Futures Contracts is in the
development stage and has very limited trading and operational history.
As such, the liquidity of the market for Bitcoin Futures Contracts will
depend on, among other things, the supply and demand for Bitcoin
Futures Contracts, the adoption of bitcoin and the commercial and
speculative interest in the market for Bitcoin Futures Contracts and
the potential ability to hedge against the price of bitcoin with
exchange-traded Bitcoin Futures Contracts.
    Additionally, if market participants executing trades in Bitcoin
Futures Contracts face constraints, including capital constraints,
security risks, or high execution costs, the price of Bitcoin Futures
Contracts may fail to capture price movements in the underlying price
of bitcoin. Moreover, it is not clear how changes to the Bitcoin
Network, including changes that result in ``forks'' will impact the
price of any Bitcoin Futures Contracts.
    The CFTC has noted that the U.S. futures exchanges that will trade
bitcoin futures have agreed to significant enhancements to protect
customers and maintain orderly markets, and announced its expectation
that futures exchanges that list and trade bitcoin futures contracts
will, through information sharing agreements, monitor the trading
activity on the relevant cash platforms for potential impacts on the
price discovery process for bitcoin futures contracts, including
potential market manipulation and market dislocations due to flash
rallies and crashes and trading outages.\16\
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    \16\ See CFTC Release, supra, note 8.
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Net Asset Value
    According to the Registration Statement, a Fund's per Share NAV
will be calculated by dividing the value of the net assets of such Fund
(i.e., the value of its total assets less total liabilities) by its
total number of Shares outstanding. Each Fund's NAV will be calculated
on each Business Day that the New York Stock Exchange LLC (``NYSE) is
open. Each Fund will compute its NAVs as of 4:00 p.m. E.T. Each Fund's
NAV will be calculated only once each trading day. Each Fund's daily
NAV may be found at www.ProShares.com.
    In calculating the NAV of a Fund, Bitcoin Futures Contracts will be
valued using the last traded price on the primary listing exchange of
such contract before the NAV calculation time of the Fund on such day.
If Bitcoin Futures Contracts could not be liquidated on such day, due
to the operation of daily limits or other rules of the exchange upon
which that position is traded or otherwise, the Sponsor may determine a
fair value price as the basis for determining the market value of such
position for such day. Such fair value prices would generally be
determined based on available inputs about the current value of the
Bitcoin Futures Contracts and would be based on principles that the
Sponsor deems fair and equitable so long as such principles are
consistent with normal industry standards.
    In calculating the NAV of a Fund, the settlement value of a Fund's
non-exchange-traded Financial Instruments generally will be determined
by applying the then-current disseminated levels for the Bitcoin
Futures Contracts to the terms of such Fund's non-exchange-traded
Financial Instruments. However, in the event that the Bitcoin Futures
Contracts underlying the Financial Instruments are not trading due to
the operation of daily limits or otherwise, the Sponsor may choose to
fair value the Financial Instruments. Such fair value prices would
generally be determined based on available inputs about the current
value of the Bitcoin Futures Contracts and would be based on principles
that the Sponsor deems fair and equitable so long as such principles
are consistent with normal industry standards.
    Money Market Investments will be valued on the basis of broker
quotes, valuations provided by a third party pricing service or at
amortized cost.
Indicative Fund Value
    In order to provide updated information relating to the Funds for
use by investors and market professionals, the Exchange will calculate
an updated ``Indicative Fund Value'' (``IFV''). The IFV will be
calculated by using the prior day's closing net assets of a Fund as a
base and updating throughout the Exchange's Core Trading Session of
9:30 a.m. E.T. to 4:00 p.m. E.T. changes in the value of the Bitcoin
Futures Contracts and Financial Instruments held by a Fund based on the
most recently available prices for the Fund's investments.
    The IFV will be disseminated on a per Share basis every 15 seconds
during the Exchange's Core Trading Session and be widely disseminated
by one or more major market data vendors during the NYSE Arca Core
Trading Session.\17\ In addition, circumstances may arise in which the
NYSE Arca Core Trading Session is in progress, but trading in the
Bitcoin Futures Contracts is not occurring. Such circumstances may
result from reasons including, but not limited to, a futures exchange
having a separate holiday schedule than the NYSE Arca, a futures
exchange closing prior to the close of the NYSE Arca, price fluctuation
limits being reached in a Bitcoin Futures Contract, or a futures
exchange, imposing any other suspension or limitation on trading in a
Bitcoin Futures Contract. In such instances, for IFV calculation
purposes, the price of the applicable Bitcoin Futures Contracts, as
well as Financial Instruments whose price is derived from the Bitcoin
Futures Contracts, would be static or priced by the Fund at the
applicable early cut-off time of the exchange trading the applicable
Bitcoin Futures Contract.
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    \17\ Several major market data vendors display and/or make
widely available IFVs taken from the CTA or other data feeds.
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Creation and Redemption of Shares
    According to the Registration Statement, each Fund intends to
create and redeem Shares in one or more Creation Units. A Creation Unit
is a block of 25,000 Shares of a Fund. Except when aggregated in
Creation Units, the Shares are not redeemable securities.
    A creation transaction generally takes place when an Authorized
Participant deposits generally a specified amount of cash in exchange
for a specified number of Creation Units. Similarly, Shares can be
redeemed only in Creation Units for cash. The prices at which creations
and redemptions occur would be based on the next calculation of the NAV
after an order is received.
    Only Authorized Participants may purchase and redeem Creation
Units. An Authorized Participant is an entity that has entered into an
Authorized Participant Agreement with the Trust and the Sponsor.
Creation Procedures
    On any ``Business Day'', an Authorized Participant may place an
order with the Distributor to create one or more Creation Units. For
purposes of

processing both purchase and redemption orders, a ``Business Day'' for
each Fund means any day on which the NAV of such Fund is determined.
Purchase and redemption orders must be placed by 3:30 p.m. E.T. or
earlier if the Exchange or other exchange material to the valuation or
operation of such Fund closes before the cut-off time.
Redemption Procedures
    According to the Registration Statement, the procedures by which an
Authorized Participant can redeem one or more Creation Units mirror the
procedures for the creation of Creation Units. On any Business Day, an
Authorized Participant may place an order with the Distributor to
redeem one or more Creation Units.
    The redemption procedures allow Authorized Participants to redeem
Creation Units. Individual shareholders may not redeem directly from a
Fund. By placing a redemption order, an Authorized Participant agrees
to deliver the Creation Units to be redeemed through the Depository
Trust Company's (``DTC'') book entry system to the applicable Fund not
later than noon E.T. on the first Business Day immediately following
the redemption order date (T+1). The Sponsor reserves the right to
extend the deadline for a Fund to receive the Creation Units required
for settlement up to the second Business Day following the redemption
order date (T+2).
Availability of Information
    The NAV for the Funds' Shares will be disseminated daily to all
market participants at the same time. The intraday, closing prices, and
settlement prices of the Bitcoin Futures Contracts will be readily
available from the applicable futures exchange websites, automated
quotation systems, published or other public sources, or major market
data vendors. The value of the Benchmark Futures Contract will be
disseminated by one or more major market data vendors on at least a 15-
second delayed basis during the NYSE Arca Core Trading Session of 9:30
a.m. to 4:00 p.m. E.T.
    Complete real-time data for the Benchmark Futures Contracts and
Options on Bitcoin Futures will be available by subscription through
on-line information services. CFE and CME will provide delayed futures
and options on futures (once available) information on current and past
trading sessions and market news free of charge on their respective
websites. The specific contract specifications for Bitcoin Futures
Contracts would also be available on such websites, as well as other
financial informational sources. Quotation and last-sale information
regarding the Shares will be disseminated through the facilities of the
Consolidated Tape Association (``CTA''). Quotation information for
Money Market Investments and OTC swaps agreements may be obtained from
brokers and dealers who make markets in such instruments. Quotation
information for exchange-traded swaps will be available from the
applicable exchange and major market vendors. The IFV will be available
through on-line information services.
    In addition, the Funds' website, www.ProShares.com, will display
the applicable end of day closing NAV. The daily holdings of each Fund
will be available on the Funds' website before 9:30 a.m. E.T. Each
Fund's total portfolio composition will be disclosed each Business Day
that NYSE Arca is open for trading, on the Funds' website. The Funds'
website will also include a form of the prospectus for the Funds that
may be downloaded. The website will include the Shares' ticker and
CUSIP information, along with additional quantitative information
updated on a daily basis for each Fund. The Funds' website will include
(1) the prior business day's trading volume, the prior business day's
reported NAV and closing price, and a calculation of the premium and
discount of the closing price or mid-point of the bid/ask spread at the
time of NAV calculation (``Bid/Ask Price'') against the NAV; and (2)
data in chart format displaying the frequency distribution of discounts
and premiums of the daily closing price or Bid/Ask Price against the
NAV, within appropriate ranges, for at least each of the four previous
calendar quarters. The website disclosure of portfolio holdings will be
made daily and will include, as applicable, (i) the name, quantity,
value, expiration and strike price of Bitcoin Futures Contracts and
Financial Instruments, (ii) the counterparty to and value of Financial
Instruments, and (iii) the aggregate net value of the Money Market
Investments held in each Fund's portfolio, if applicable. The Funds'
website will be publicly available prior to the public offering of
Shares and accessible at no charge.
    The spot price of bitcoin also is available on a 24-hour basis from
major market data vendors.
Trading Halts
    With respect to trading halts, the Exchange may consider all
relevant factors in exercising its discretion to halt or suspend
trading in the Shares of a Fund.\18\ Trading in Shares of a Fund will
be halted if the circuit breaker parameters in NYSE Arca Rule 7.12-E
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.
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    \18\ See NYSE Arca Rule 7.12-E.
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    The Exchange may halt trading during the day in which an
interruption to the dissemination of the IFV or the value of the
Benchmark Futures Contract occurs.\19\ If the interruption to the
dissemination of the IFV or the value of the Benchmark persists past
the trading day in which it occurred, the Exchange will halt trading no
later than the beginning of the trading day following the interruption.
In addition, if the Exchange becomes aware that the NAV with respect to
the Shares is not disseminated to all market participants at the same
time, it will halt trading in the Shares until such time as the NAV is
available to all market participants.
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    \19\ A limit up/limit down condition in the futures market would
not be considered an interruption requiring one or both Funds to be
halted.
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Trading Rules
    The Exchange deems the Shares to be equity securities, thus
rendering trading in the Shares subject to the Exchange's existing
rules governing the trading of equity securities. Shares will trade on
the NYSE Arca Marketplace from 4 a.m. to 8 p.m. E.T. in accordance with
NYSE Arca Rule 7.34-E (Early, Core, and Late Trading Sessions). The
Exchange has appropriate rules to facilitate transactions in the Shares
during all trading sessions. As provided in NYSE Arca Rule 7.6-E, the
minimum price variation (``MPV'') for quoting and entry of orders in
equity securities traded on the NYSE Arca Marketplace is $0.01, with
the exception of securities that are priced less than $1.00 for which
the MPV for order entry is $0.0001.
    The Shares will conform to the initial and continued listing
criteria under NYSE Arca Rule 8.200-E. The trading of the Shares will
be subject to NYSE Arca Rule 8.200-E, Commentary .02(e), which sets
forth certain restrictions on Equity Trading Permit (``ETP'') Holders
acting as registered Market Makers in Trust Issued Receipts to
facilitate surveillance. The Exchange represents that, for initial and
continued listing, each Fund will be in compliance with Rule 10A-3 \20\
under the Act, as provided by NYSE Arca Rule 5.3-E. A minimum of
100,000 Shares of each Fund will be outstanding at the

commencement of trading on the Exchange.
---------------------------------------------------------------------------

    \20\ 17 CFR 240.10A-3.
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Surveillance
    The Exchange represents that trading in the Shares of each Fund
will be subject to the existing trading surveillances administered by
the Exchange, as well as cross-market surveillances administered by
FINRA on behalf of the Exchange, which are designed to detect
violations of Exchange rules and applicable federal securities
laws.\21\ The Exchange represents that 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.
---------------------------------------------------------------------------

    \21\ FINRA conducts cross-market surveillances on behalf of the
Exchange pursuant to a regulatory services agreement. The Exchange
is responsible for FINRA's performance under this regulatory
services agreement.
---------------------------------------------------------------------------

    The surveillances referred to above generally focus on detecting
securities trading outside their normal patterns, which could be
indicative of manipulative or other violative activity. When such
situations are detected, surveillance analysis follows and
investigations are opened, where appropriate, to review the behavior of
all relevant parties for all relevant trading violations.
    The Exchange or FINRA, on behalf of the Exchange, or both, will
communicate as needed regarding trading in the Shares and certain
Bitcoin Futures Contracts with other markets and other entities that
are members of the ISG, and the Exchange or FINRA, on behalf of the
Exchange, or both, may obtain trading information regarding trading in
the Shares and certain Bitcoin Futures Contracts from such markets and
other entities. In addition, the Exchange may obtain information
regarding trading in the Shares and certain Bitcoin Futures Contracts
from markets and other entities that are members of ISG or with which
the Exchange has in place a comprehensive surveillance sharing
agreement (``CSSA'').\22\ The Exchange is also able to obtain
information regarding trading in the Shares, the commodity underlying
futures or options on futures through ETP Holders, in connection with
such ETP Holders' proprietary or customer trades which they effect
through ETP Holders on any relevant market. The Exchange can obtain
market surveillance information, including customer identity
information, with respect to transactions (including transactions in
cash-settled Options) occurring on US futures exchanges, which are
members of the ISG.
---------------------------------------------------------------------------

    \22\ For a list of the current members of ISG, see
www.isgportal.org. The Exchange notes that not all components of a
Fund may trade on markets that are members of ISG or with which the
Exchange has in place a CSSA.
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    Not more than 10% of the net assets of a Fund in the aggregate
invested in Bitcoin Futures Contracts shall consist of Bitcoin Futures
Contracts whose principal market is not a member of the ISG or is a
market with which the Exchange does not have a CSSA.
    In addition, the Exchange also has a general policy prohibiting the
distribution of material, non-public information by its employees.
    All statements and representations made in this filing regarding
(a) the description of the portfolios of the Funds or the Benchmark,
(b) limitations on portfolio holdings, reference assets or the
Benchmark, or (c) the applicability of Exchange listing rules specified
in this rule filing shall constitute continued listing requirements for
listing the Shares on the Exchange.
    The issuer has represented to the Exchange that it will advise the
Exchange of any failure by the Funds to comply with the continued
listing requirements, and, pursuant to its obligations under Section
19(g)(1) of the Act, the Exchange will monitor for compliance with the
continued listing requirements. If a Fund is not in compliance with the
applicable listing requirements, the Exchange will commence delisting
procedures under NYSE Arca Rule 5.5-E(m).
Information Bulletin
    Prior to the commencement of trading, the Exchange will inform its
ETP Holders in an Information Bulletin of the special characteristics
and risks associated with trading the Shares. Specifically, the
Information Bulletin will discuss the following: (1) The risks involved
in trading the Shares during the Early and Late Trading Sessions when
an updated IFV will not be calculated or publicly disseminated; (2) the
procedures for purchases and redemptions of Shares in Creation Units
(and that Shares are not individually redeemable); (3) NYSE Arca Rule
9.2-E(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; (4) how information regarding the IFV is disseminated; (5)
how information regarding portfolio holdings is disseminated; (6) that
a static IFV will be disseminated, between the close of trading on the
CFE and CME and the close of the NYSE Arca Core Trading Session; (7)
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 (8) trading information.
    Prior to the commencement of trading, the Exchange will inform its
ETP Holders of the suitability requirements of NYSE Arca Rule 9.2-E(a)
in an Information Bulletin. Specifically, ETP Holders will be reminded
in the Information Bulletin that, in recommending transactions in the
Shares, they must have a reasonable basis to believe that (1) the
recommendation is suitable for a customer given reasonable inquiry
concerning the customer's investment objectives, financial situation,
needs, and any other information known by such ETP Holder, and (2) the
customer can evaluate the special characteristics, and is able to bear
the financial risks, of an investment in the Shares. In connection with
the suitability obligation, the Information Bulletin will also provide
that ETP Holders must make reasonable efforts to obtain the following
information: (1) The customer's financial status; (2) the customer's
tax status; (3) the customer's investment objectives; and (4) such
other information used or considered to be reasonable by such ETP
Holder or registered representative in making recommendations to the
customer.
    Further, the Exchange states that FINRA has implemented increased
sales practice and customer margin requirements for FINRA members
applicable to inverse, leveraged and inverse leveraged securities
(which include the Shares) and options on such securities, as described
in FINRA Regulatory Notices 09-31 (June 2009), 09-53 (August 2009), and
09-65 (November 2009) (collectively, ``FINRA Regulatory Notices''). ETP
Holders that carry customer accounts will be required to follow the
FINRA guidance set forth in these notices. As noted above, the Funds
will seek investment results that match or that are the inverse (-1x)
of, respectively, the performance of the Benchmark. Over a period of
time in excess of one day, the cumulative percentage increase or
decrease in the NAV of the Shares of a Fund may diverge significantly
from a multiple or inverse multiple of the cumulative percentage
decrease or increase in the relevant benchmark due to a compounding
effect.
    In addition, the Information Bulletin will advise ETP Holders,
prior to the commencement of trading, of the prospectus delivery
requirements applicable to a Fund. The Information Bulletin will also
discuss any

exemptive, no-action, and interpretive relief granted by the Commission
from any rules under the Act. In addition, the Information Bulletin
will reference that a Fund is subject to various fees and expenses
described in the Registration Statement. The Information Bulletin will
also reference that the CFTC has regulatory jurisdiction over the
trading of Bitcoin Futures Contracts traded on U.S. markets.
    The Information Bulletin will also disclose the trading hours of
the Shares that the NAV for the Shares will be calculated after 4:00
p.m. E.T. each trading day. The Information Bulletin will disclose that
information about the Shares will be publicly available on the Funds'
website.
2. Statutory Basis
    The basis under the Act for this proposed rule change is the
requirement under Section 6(b)(5) \23\ that an exchange have rules that
are designed to prevent fraudulent and manipulative acts and practices,
to promote just and equitable principles of trade, to remove
impediments to, and perfect the mechanism of a free and open market
and, in general, to protect investors and the public interest.
---------------------------------------------------------------------------

    \23\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------

    The Exchange believes that the proposed rule change is designed to
prevent fraudulent and manipulative acts and practices and to protect
investors and the public interest in that the Shares will be listed and
traded on the Exchange pursuant to the initial and continued listing
criteria in NYSE Arca Rule 8.200-E.
    The Exchange has in place surveillance procedures that are adequate
to properly monitor trading in the Shares in all trading sessions and
to deter and detect violations of Exchange rules and applicable federal
securities laws. The Exchange or FINRA, on behalf of the Exchange, or
both, will communicate as needed regarding trading in the Shares, and
certain Bitcoin Futures Contracts with other markets and other entities
that are members of the ISG, and the Exchange or FINRA, on behalf of
the Exchange, or both, may obtain trading information regarding trading
in the Shares and certain Bitcoin Futures Contracts from such markets
and other entities. In addition, the Exchange may obtain information
regarding trading in the Shares and certain Bitcoin Futures Contracts
from markets and other entities that are members of ISG or with which
the Exchange has in place a CSSA. The Exchange is also able to obtain
information regarding trading in the Shares, the commodity underlying
futures or options on futures through ETP Holders, in connection with
such ETP Holders' proprietary or customer trades which they effect
through ETP Holders on any relevant market.
    The Exchange can obtain market surveillance information, including
customer identity information, with respect to transactions (including
transactions in cash-settled Options) occurring on U.S. futures
exchanges, which are members of the ISG. Not more than 10% of the net
assets of a Fund in the aggregate invested in Futures Contracts shall
consist of Bitcoin Futures Contracts whose principal market is not a
member of the ISG or is a market with which the Exchange does not have
a CSSA. The intraday, closing prices, and settlement prices of the
Bitcoin Futures Contracts will be readily available from the applicable
futures exchange websites, automated quotation systems, published or
other public sources, or major market data vendors website or on-line
information services.
    Complete real-time data for the Bitcoin Futures Contracts and
Options on Bitcoin Futures will be available by subscription from on-
line information services. CFE and CME will provide delayed futures
information on current and past trading sessions and market news free
of charge on their websites. The specific contract specifications for
Bitcoin Futures Contracts would also be available on such websites, as
well as other financial informational sources. Information regarding
options will be available from the applicable exchanges or major market
data vendors. Quotation and last-sale information regarding the Shares
will be disseminated through the facilities of the CTA. The Funds'
website will also include a form of the prospectus for the Funds that
may be downloaded. The website will include the Shares' ticker and
CUSIP information, along with additional quantitative information
updated on a daily basis for each Fund. The Funds' website will include
(1) Daily trading volume, the prior business day's reported NAV and
closing price, and a calculation of the premium and discount of the
closing price or mid-point of the Bid/Ask Price against the NAV; and
(2) data in chart format displaying the frequency distribution of
discounts and premiums of the daily closing price or Bid/Ask Price
against the NAV, within appropriate ranges, for at least each of the
four previous calendar quarters. The website disclosure of portfolio
holdings will be made daily and will include, as applicable, (i) the
name, quantity, value, expiration and strike price of Bitcoin Futures
Contracts and Financial Instruments, (ii) the counterparty to and value
of Financial Instruments, and (iii) the aggregate net value of the
Money Market Investments held in each Fund's portfolio, if applicable.
The Funds' website will be publicly available prior to the public
offering of Shares and accessible at no charge.
    Moreover, prior to the commencement of trading, the Exchange will
inform its Equity Trading Permit Holders in an Information Bulletin of
the special characteristics and risks associated with trading the
Shares and of the suitability requirements of NYSE Arca Rule 9.2-E(a).
The Information Bulletin will advise ETP Holders, prior to the
commencement of trading, of the prospectus delivery requirements
applicable to a Fund. The Information Bulletin will also discuss any
exemptive, no-action, and interpretive relief granted by the Commission
from any rules under the Act. In addition, the Information Bulletin
will reference that a Fund is subject to various fees and expenses
described in the Registration Statement. The Information Bulletin will
also reference that the CFTC has regulatory jurisdiction over the
trading of Bitcoin Futures Contracts traded on U.S. markets. The
Information Bulletin will also disclose the trading hours of the Shares
and that the NAV for the Shares will be calculated after 4:00 p.m. E.T.
each trading day. The Information Bulletin will disclose that
information about the Shares will be publicly available on the Funds'
website.
    Trading in Shares of a Fund will be halted if the circuit breaker
parameters in NYSE Arca Rule 7.12-E have been reached or because of
market conditions or for reasons that, in the view of the Exchange,
make trading in the Shares inadvisable.
    The proposed rule change is designed to perfect the mechanism of a
free and open market and, in general, to protect investors and the
public interest in that it will facilitate the listing and trading of a
new type of Trust Issued Receipt based on the price of Bitcoin Futures
Contracts that will enhance competition among market participants, to
the benefit of investors and the marketplace. As noted above, the
Exchange has in place surveillance procedures that are adequate to
properly monitor trading in the Shares in all trading sessions and to
deter and detect violations of Exchange rules and applicable federal
securities laws.

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

    The Exchange does not believe that the proposed rule change will
impose

any burden on competition that is not necessary or appropriate in
furtherance of the purpose of the Act. The Exchange notes that the
proposed rule change will facilitate the listing and trading of a new
type of Trust Issued Receipt based on the price of Bitcoin Futures
Contracts and that will enhance competition among market participants,
to the benefit of investors and the marketplace.

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

    No written comments were solicited or received with respect to the
proposed rule change.

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

    Within 45 days of the date of publication of this notice in the
Federal Register or within such longer period up to 90 days (i) as the
Commission may designate if it finds such longer period to be
appropriate and publishes its reasons for so finding or (ii) as to
which the self-regulatory organization consents, the Commission will:
    A. By order approve or disapprove the 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 protected]. Please include
File Number SR-NYSEArca-2017-139 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-NYSEArca-2017-139. This
file number should be included on the subject line if email is used. To
help the Commission process and review your comments more efficiently,
please use only one method. The Commission will post all comments on
the Commission's internet website (http://www.sec.gov/rules/sro.shtml).
Copies of the submission, all subsequent amendments, all written
statements with respect to the proposed rule change that are filed with
the Commission, and all written communications relating to the proposed
rule change between the Commission and any person, other than those
that may be withheld from the public in accordance with the provisions
of 5 U.S.C. 552, will be available for website viewing and printing in
the Commission's Public Reference Room, 100 F Street NE, Washington, DC
20549 on official business days between the hours of 10:00 a.m. and
3:00 p.m. Copies of the filing also will be available for inspection
and copying at the principal office of the Exchange. All comments
received will be posted without change. Persons submitting comments are
cautioned that we do not redact or edit personal identifying
information from comment submissions. You should submit only
information that you wish to make available publicly. All submissions
should refer to File Number SR-NYSEArca-2017-139 and should be
submitted on or before January 16, 2018.
---------------------------------------------------------------------------

    \24\ 17 CFR 200.30-3(a)(12).

    For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\24\
Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2017-27690 Filed 12-22-17; 8:45 am]
 BILLING CODE 8011-01-P


[Federal Register Volume 80, Number 201 (Monday, October 19, 2015)]
[Notices]
[Pages 63240-63241]
[FR Doc No: 2015-26459]

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DEPARTMENT OF HOMELAND SECURITY

Federal Emergency Management Agency

[Internal Agency Docket No. FEMA-4241-DR; Docket ID FEMA-2015-0002]

South Carolina; Major Disaster and Related Determinations

AGENCY: Federal Emergency Management Agency, DHS.

ACTION: Notice.

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SUMMARY: This is a notice of the Presidential declaration of a major
disaster for the State of South Carolina (FEMA-4241-DR), dated October
5, 2015, and related determinations.

DATES: Effective Date: October 5, 2015.

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

SUPPLEMENTARY INFORMATION: Notice is hereby given that, in a letter
dated October 5, 2015, the President issued a major disaster
declaration under the authority of the Robert T. Stafford Disaster
Relief and Emergency Assistance Act, 42 U.S.C. 5121 et seq. (the
``Stafford Act''), as follows:

    I have determined that the damage in certain areas of the State
of South Carolina resulting from severe storms and flooding
beginning on October 1, 2015, and continuing, is of sufficient
severity and magnitude to warrant a major disaster declaration under
the Robert T. Stafford Disaster Relief and Emergency Assistance Act,
42 U.S.C. 5121 et seq. (the ``Stafford Act''). Therefore, I declare
that such a major disaster exists in the State of South Carolina.
    In order to provide Federal assistance, you are hereby
authorized to allocate from funds available for these purposes such
amounts as you find necessary for Federal disaster assistance and
administrative expenses.
    You are authorized to provide Individual Assistance and
assistance for debris removal and emergency protective measures
(Categories A and B) under the Public Assistance program in the
designated areas, Hazard Mitigation throughout the State, and any
other forms of assistance under the Stafford Act that you deem
appropriate subject to completion of Preliminary Damage Assessments
(PDAs). Direct Federal assistance is authorized.
    Consistent with the requirement that Federal assistance is
supplemental, any Federal funds provided under the Stafford Act for
Hazard Mitigation and Other Needs Assistance will be limited to 75
percent of the total eligible costs. Federal funds provided under
the Stafford Act for Public Assistance also will be limited to 75
percent of the total eligible costs, with the exception of projects
that meet the eligibility criteria for a higher Federal cost-sharing
percentage under the Public Assistance Alternative Procedures Pilot
Program for Debris Removal implemented pursuant to section 428 of
the Stafford Act.
    Further, you are authorized to make changes to this declaration
for the approved assistance to the extent allowable under the
Stafford Act.

    The time period prescribed for the implementation of section
310(a), Priority to Certain Applications for Public Facility and Public
Housing Assistance, 42 U.S.C. 5153, shall be for a period not to exceed
six months after the date of this declaration.
    The Federal Emergency Management Agency (FEMA) hereby gives notice
that pursuant to the authority vested in the Administrator, under
Executive Order 12148, as amended, W. Michael Moore, of FEMA is
appointed to act as the Federal Coordinating Officer for this major
disaster.
    The following areas of the State of South Carolina have been
designated as adversely affected by this major disaster:

    Charleston, Dorchester, Georgetown, Horry, Lexington,
Orangeburg, Richland, and Williamsburg Counties for Individual
Assistance.
    Berkley, Charleston, Clarendon, Dorchester, Georgetown, Horry,
Lexington, Orangeburg, Richland, Sumter, and Williamsburg Counties
for debris removal and emergency protective measures (Categories A
and B), including direct federal assistance, under the Public
Assistance.
    All areas within the State of South Carolina are eligible for
assistance under the Hazard Mitigation Grant Program.

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

W. Craig Fugate,
Administrator, Federal Emergency Management Agency.
[FR Doc. 2015-26459 Filed 10-16-15; 8:45 am]
 BILLING CODE 9111-23-P


8 Hour Ozone Reclassification Request for Kent and Queen Anne's County Maryland  5% Reclassification Bump Down  Clean Air Act Section 181 ( a) ( 4)

( FINAL)

July 15, 2004 Prepared for:

U. S. Environmental Protection Agency Prepared by:

Maryland Department of the Environment MARYLAND DEPARTMENT OF THE ENVIRONMENT 1800 Washington Boulevard   Baltimore MD 21230 410 537 3000   1 800 633 6101 Robert L. Ehrlich, Jr. Governor Michael S. Steele Lt. Governor Kendl P. Philbrick Secretary 2 This Page Left Intentionally Blank TABLE OF CONTENTS Executive Summary .................................................................................................................. 2 Part One: Review of Monitoring Data for Kent and Queen Anne's Counties ........................... 4 Part Two: Review of Additional Data to Support Reclassification Request ............................... 9 Request by the State ................................................................................................................ 9 Discontinuity ........................................................................................................................... 9 Attainment............................................................................................................................... 9 Emissions Reductions ............................................................................................................ 11 Trends ................................................................................................................................... 15 Years of Data......................................................................................................................... 17 Subpart 1 vs. Subpart 2 .......................................................................................................... 17 Limitations on Bump Downs ................................................................................................. 18 Appendix A: Copy of USEPA 5% Reclassification Possibilities Presentation Appendix B: Kent and Queen Anne's EAC Modeling Information 2 Executive Summary Section 181 ( a) ( 4) of the Clean Air Act ( CAA) states that an ozone nonattainment area may be reclassified in another category if the design value in the area were 5 percent greater or 5 percent less than the level on which the classification was based.

Kent and Queen Anne's County were recently classified as Moderate Nonattainment area under the new 8 hr ozone standard. Based on CAA Section 181 ( a) ( 4) Maryland would like to request that these two counties be " bumped down" from a Moderate Nonattainment area to a Marginal Nonattainment area. The monitoring values for the Millington air quality monitor ( located in Kent County) shows that these counties are within the prescribed 5% allowable design value that is eligible for a " bump down". A Moderate Nonattainment area with an 8 hr design value of 0.096 or less is eligible for a " bump down" and the 2003 Design Value for the Millington monitor is 0.095. Therefore, Maryland is making the formal request that Kent and Queen Anne's Counties be reclassified from a Moderate 8 hr Ozone Nonattainment area to a Marginal 8 hr Ozone Nonattainment area.

In addition to the monitoring data there are numerous other compelling statistics that point to these two counties being more of a Marginal Nonattainment area than a Moderate Nonattainment area. The counties attainment of the 1 hr standard, ozone violation statistics, pollution transport arguments, the mix of sources and air pollutants in the area, emission reductions over time, and trends in demographics were all reviewed during the development of this reclassification request.

Kent and Queen Anne's Counties were classified as a marginal nonattainment area under the 1 hr ozone standard. ( The two counties have since attained the 1 hr ozone standard and MDE has submitted a redesignation request to USEPA). No emission reduction requirements were associated with this classification. However, since Maryland is part of the Ozone Transport Region, some control strategies were required. These included NOx and VOC RACT, Stage II Vapor Recovery or equivalent reductions, Enhanced Vehicle Inspection and Maintenance Program in qualifying areas, and a lower major source threshold. Further, Maryland chose to include these nonattainment counties in a number of other non mandated control strategies including reformulated fuels Phase I and II, lower RVP requirements, NLEV and controls on auto refinishing and degreasing. Adding these " severe" area controls to a Marginal 1 hr Nonattainment area was not a simple task as shown by the number of OTC states that originally opted in to some of these programs and then decided to opt out as the costs and politics surrounding these programs created a great deal of pressure. Maryland is proud of our achievement in keeping these controls in rural counties, as we believe the emission benefits to be substantial. The high level of emissions control achieved in these rural counties already is a major factor in requesting the bump down. Very few, if any, cost effective controls remain available in these rural and economically fragile counties.

Maryland believes that the marginal classification is appropriate for these counties under the 8 hour standard also. The marginal classification allows Maryland more latitude in selecting appropriate additional controls for these counties that complement the stringent controls already in place. Maryland has shown this initiative under the 1 hour process and will continue to pursue clean air under the 8 hour standard including the adoption of beneficial controls in Kent and Queen Anne's County. 3 In combination, Maryland believes that the science and statistical information available combined with historical actions make a strong case that both Kent and Queen Anne's Counties should be reclassified to a Marginal 8 hr nonattainment area. 4 Part One: Review of Monitoring Data for Kent and Queen Anne's Counties Per EPA guidance the following calculation is used to determine if an area is eligible for a bump down from a higher to a lower ozone classification. Tom Helms of USEPA presented the following slides to STAPPA/ ALAPCO on April 28, 2004. 5 ° For an area to be eligible for a bump down ( or bump up) under section 181( a)( 4), the area's design value must be within 5% of the next lower ( or higher) classification.

° Example # 1   an area with a moderate design value of 0.096 ppm ( or less) would be eligible to request a bump down because 5% less than 0.096 ppm is 0.091 ppm   a marginal design value.

° Example # 2   an area with a moderate design value of 0.102 ppm ( or more) would be eligible for a bump up because 5% more than 0.102 ppm is 0.107 ppm, a serious design value. Calculation of 5% Percent

° The following areas may be eligible to request a bump down :

moderate areas with design value of 0.096 ppm or less;

serious areas with design value of 0.112 ppm or less; and

severe 17 areas with design value of 0.133 ppm or less.

° For bump ups, the following areas may be eligible:

marginal areas with a design value of 0.088 ppm or more;

moderate areas with a design value of 0.102 ppm or more; and

serious areas with a design value of 0.115 ppm or more. Calculation of Five Percent

5% 5% 6 Bump Ups Marginal areas with a DV of 88 ppb or more Moderate areas with a DV of 102 ppb or more Serious areas with a DV of 115 ppb or more Severe 15 areas with a DV of 121 ppb or more Severe 17 areas with a DV of 179 ppb or more Bump Downs Moderate areas with a DV of 96 ppb or less Serious areas with a DV of 112 ppb or less Severe 15 areas with a DV of 126 ppb or less Severe 17 areas with a DV of 133 ppb or less Extreme areas with a DV of 196 ppb or less How EPA bump ups and down work under 5% provision? More

16 Moderate to Marginal ( 96 design value cutpoint): Boston MA ( 95) Springfield MA ( 94) Boston/ Portsmouth MA/ NH ( 95) Greensboro NC ( 93) Greater CT ( 95) Cass Co MI ( 93) Kent/ Queen Anne's MD ( 95) La Porte IN ( 93) Muskegon MI ( 95) Lancaster PA ( 92) RI ( 95) Memphis TN ( 92) Ventura ( 95) St Louis MO/ IL ( 92) Poughkeepsie NY ( 94) Richmond VA ( 94)

2 Serious to Moderate ( 112 design value cutpoint): Riverside ( Coachella V.) CA ( 108) Sacramento CA ( 107)

Severe 17 to serious ( 133 design value cutpoint) Los Angeles CA ( 131) Which areas could EPA bump down under 5% provision? 5% 7 Below is a summary table showing the 2003 design value data for the Millington Monitor ( location shown in Map 1).

Maryland's 8 Hour Ozone Design Values Eastern Shore for 2003 Site Year % data 1st MAX 2nd MAX 3rd MAX 4th MAX Design capture Value Millington Kent Co. 2001 98% 0.106 0.103 0.097 0.096 2002 100% 0.115 0.105 0.104 0.103 2003 100% 0.109 0.108 0.092 0.086 0.095ppm As noted in the above table the 2003 8 hr Ozone Design Value of the Millington Monitor is 0.095 which is below the 5% Moderate to Marginal Bump Down Threshold of 0.096. Based on the data available Kent and Queen Anne's Counties are eligible for a reclassification. Therefore, Maryland is making the formal request that Kent and Queen Anne's Counties be reclassified from a Moderate 8 hr Ozone Nonattainment area to a Marginal 8 hr Ozone Nonattainment area. 8 Map 1: Millington Ozone Monitoring Site in Kent County 9 Part Two: Review of Additional Data to Support Reclassification Request USEPA listed the following Bump Down Criteria that will be reviewed during the analysis of a reclassification request:

  Request by the State   Discontinuity   Attainment   Emissions Reductions   Trends ( near and long term trends in emissions and air quality, growth projections, and vehicle miles traveled)   Years of Data   Subpart 1 vs. Subpart 2   Limitations on Bump Downs The Maryland Department of the Environment ( MDE) has reviewed each of the criteria and finds the following:

Request by the State Through the submission of this document the state of Maryland is formally requesting that the USEPA reclassify both Kent and Queen Anne's County as a Marginal Nonattainment area under the 8 hour Ozone Standard.

Discontinuity If granted, Maryland's reclassification request would not establish a discontinuous nonattainment structure in Maryland. Both the Washington DC and Baltimore Nonattainment areas would remain Moderate Nonattainment areas and the Chesapeake Bay divides these areas from Kent and Queen Anne's Counties. Whether comparing emissions or demographics there are very few connections between the remaining Moderate Nonattainment areas and Kent and Queen Anne's Counties. The main culprit in the monitoring values in Millington is pollution transport meaning that all the control measures being implemented to the south and west of these two rural eastern shore counties will help with attainment.

Attainment The MDE believes that early attainment of the 8 hr Ozone Standard is possible based on the following factors: reduced transport emissions, monitoring trends showing an improvement in air quality, the recent attainment of the 1 hr ozone standard in these two counties, and the proposed benefits of recent EPA modeling ( for Clear Skies Institutive) show attainment of the standard in the 2010 timeframe.

Transport Emissions: reductions made under the 1 hr ozone standard like the required installation of SCR from the NOx SIP Call, the new mobile diesel rules, and early reduction progress for the 8 he ozone standard will all assist Kent and Queen Anne's Counties in attaining the new standard. Lacking any large emission sources, the MDE believes that the main culprit in bad air quality for these two counties is transport primarily from the west and south. Reductions 10 in transport emissions will greatly impact the monitored values at Millington and we believe the timing of the NOx SIP Call implementation and the Federal mobile rules will show substantial benefits.

Monitoring Trends: for the 1 hr Ozone Standard show that the total number of violations in Millington are decreasing with time. These improvements in monitored values are expected to continue with time allowing an earlier attainment of the new standard.

Trend in Number of Exceedances of the 1 hour Standard for Ozone at the Millington Monitor Between 1989 and 2003 0 1 2 3 4 5 6 7 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 Year Attainment of the 1 hr Ozone Standard: In early 2004 the MDE submitted a redesignation request to USEPA showing that Kent and Queen Anne's Counties attained the 1 hr Ozone Standard based on 2001 2003 ozone season data. Being the first two counties in the state to attain the 1 hr standard there is reason to believe our progress in ozone controls will continue under the 8hr standard.

EPA Modeling Efforts: During the development of the Clear Skies Initiative in 2003/ 4 the EPA completed some air quality modeling showing the projected ozone benefits for the nation. The results of this modeling demonstration show that under a base case scenario where only the current Clean Air Act requirements are implemented a 5 10 ppb ozone reduction can be expected at the Millington monitor by 2010. Under this scenario with a 2003 design value of 0.095 a 10 ppb benefit will get us very close to the new standard.

MDE Modeling Efforts: Attached to this document is a modeling document prepared under the Early Action Compact Submittal for these two counties that shows that implementing local controls in these two counties could indeed assist with attainment of the 8 hour ozone standard in the 2007 timeframe. 11 EPA Clear Skies Modeling ( Base Case Scenario): 8Hr Ozone Benefits in 2010 Emissions Reductions Kent and Queen Anne's Counties were classified as a marginal nonattainment area under the 1 hr ozone standard ( Maryland has found that these two counties are now in attainment of the 1 hr ozone standard and have submitted a redesignation request to USEPA).

No emission reduction requirements were associated with this classification. However, since Maryland is part of the Ozone Transport Region, some control strategies were required. These included NOx and VOC RACT, Stage II Vapor Recovery or equivalent reductions, Enhanced Vehicle Inspection and Maintenance Program in qualifying areas, and a lower major source threshold. Maryland chose to include these nonattainment counties in a number of other nonmandated control strategies including reformulated fuels Phase I and II, lower RVP requirements, NLEV and controls on auto refinishing and degreasing. The high level of Kent County: 85 89 ppb 12 emissions control achieved in these rural counties already is a major factor in requesting the bump down. Very few, if any, cost effective controls remain available in these rural and economically fragile counties.

Most of the Severe Nonattainment area controls being applied to the Washington and Baltimore regions were adopted statewide meaning that while these two rural counties were classified as marginal most of their control requirements mirrored a severe nonattainment area. In essence, where applicable, severe area controls have already been implemented in Kent and Queen Anne's Counties. Implementing these rules statewide was not an easy process for Maryland. Many states in the OTR were initially interested in adopting some of the more difficult rules like reformulated fuels and enhanced I/ M but decided to opt out of these programs as the economic and political pressures were very intense. Maryland is proud of our successful implementation of these programs in rural counties like Kent and Queen Anne's, as we believe the emission benefits from these programs have been a significant help for Maryland and the region.

The following are state and federal emission reduction strategies adopted since 1990 that are included in this plan.

Stationary Point Sources   Reasonably Available Control Technology ( RACT) regulations   New Source Review ( NSR)   Emissions certification requirements   NOx SIP call   NOx Reduction and Trading Stationary Area Sources   Automobile refinish coatings   Consumer products   Degreasing   Architectural and industrial maintenance coatings ( AIM)   Tank truck unloading Highway Vehicles   Federal Motor Vehicle Control Program ( FMVCP) including onboard control of evaporative and refueling emissions   Lower Reid Vapor Pressure ( RVP) for gasoline   Reformulated gasoline   Enhanced Vehicle Emissions Inspection/ Maintenance   National Low Emission Vehicle ( NLEV) program   EPA's heavy duty diesel engine standards ( 2004 program)   EPA's Tier 2/ low sulfur gasoline program for light duty vehicles Nonroad Sources   EPA rules for large and small compression ignition engines   EPA rules for smaller spark ignition engines   EPA rules for recreational spark ignition marine engines 13 Before reviewing the various permanent and enforceable emission reduction measures that have led to lower levels of ozone in Kent and Queen Anne's Counties, it is important to have a good understanding of the ozone precursors inventory for the two jurisdictions. Tables 1 and 2 present the 1990 base year emissions inventories for VOC and NOx, the precursors of ozone ( 1990 Base Year Inventory, September 1993).

Table 1: 1990 Base Year Ozone Precursor Emissions Inventory, VOC Emissions Summary in Tons per Day Source of VOCs Point Area Non road Mobile On road Mobile Total Kent Co. 0 4.52 1.66 1.90 8.08 Queen Anne's Co. 0.24 5.17 1.79 4.70 11.90 Total 0.24 9.69 3.45 6.60 19.98 Table 2: 1990 Base Year Ozone Precursor Emissions Inventory, NOx Emissions Summary in Tons per Day Source of NOx Point Area Non road Mobile On road Mobile Total Kent Co. 0 0.35 0.77 1.90 3.02 Queen Anne's Co. 0 0.37 1.00 5.40 6.77 Total 0 0.72 1.77 7.30 9.79 A number of permanent and enforceable measures have caused emission reductions in Kent and Queen Anne's Counties. These reductions are from all source sectors.

A major portion of the decrease in ozone precursors is due to the Federal Motor Vehicle Control Program ( FMVCP) Tier 1 tailpipe standards. Over a period of time, older, poorer performing on road vehicles have gradually been replaced with newer vehicles that must meet increasingly more stringent tailpipe standards.

In 1997 and 1998, new emissions standards for non road mobile sources took effect, leading to additional permanent and enforceable reductions in Kent and Queen Anne's Counties. The major emissions categories in these counties are farm equipment, lawn and garden equipment and recreational boats. Nonroad VOC and NOx emissions are expected to decline due primarily to implementation of the following Federal permanent and enforceable measures and remain in check with additional Tier 3 standards that will be implemented in the future: 14   Tier 1, Tier 2, and Tier 3 compression ignition standards for diesel engines greater than 50 horsepower;   Tier 1 and Tier 2 compression ignition standards for diesel engines below 50 horsepower;   Phase 1 and Phase 2 of the spark ignition standards for gasoline engines less than 25 horsepower; and   Recreational spark ignition marine engine controls.

Total emissions form area sources will decrease as well in the two counties, the largest categories being tank truck unloading, degreasing, architectural surface coatings, and commercial and consumer solvents. State regulations address emissions from tank truck unloading and degreasing. The tank truck unloading regulation, COMAR <IP_ADDRESS>( C) 4 was adopted on March 26, 1993 and went into effect on November 15, 1993. The degreasing regulation, COMAR <IP_ADDRESS>, was adopted on May 12, 1995 and became effective on June 5, 1995. Federal regulations for reformulating architectural coatings and consumer solvents will also result in lower emissions.

There is very little industry in the two counties and thus point source emissions are very low. Growth in point sources will be controlled through the new source review program requirement for offsets. Any major sources that wish to locate in Kent or Queen Anne's Counties will need to procure emissions offsets at a ratio of 1.15 to 1 for NOx and VOCs. This will limit new point source emissions that would result from industry growth in these two counties in the future.

It is important to note that in addition to reductions caused by all of the measures outlined above, background concentrations of ozone in Kent and Queen Anne's Counties will decrease as a result of the many ozone precursor reduction strategies being implemented in the Baltimore and Washington D. C. severe nonattainment areas via transport MDE's calculations of future emissions of VOCs and NOx from stationary and mobile sources demonstrate that future emissions will continue to decrease with time.

Table 3: Base Year and Projected VOC Emissions Inventories for the Kent and Queen Anne's County Region Source Category 2002 VOC Emissions ( Tons per Day) 2014 Projected VOC Emissions ( Tons per Day) On road Mobile 4.91 2.09 Non road Mobile 5.91 6.59 Area 4.33 5.34 Point 0.12 0.16 Total 15.26 14.18 15 Table 4: Base Year and Projected NOx Emissions Inventories for the Kent and Queen Anne's County Region Source Category 2002 NOx Emissions ( Tons per Day) 2014 Projected NOx Emissions ( Tons per Day) On road Mobile 7.7 2.92 Non road Mobile 3.22 4.15 Area 1.46 1.75 Point 0.07 0.09 Total 12.45 8.91 Figure 5: Base Year and Projection Year Emissions for Kent and Queen Anne's Counties 0 5 10 15 20 25 1990 2002 2014 YEAR VOC NOx Throughout the 1990' s, there has been a growing understanding of the extent to which long range transport contributes to ozone nonattainment, especially along the East Coast of the United States. Incoming ozone transported from upwind areas needs to be reduced for areas like Kent and Queen Anne's Counties to continue to meet the federal air standards. To reduce both longrange and short range transport, Maryland has implemented the NOx SIP Call. In 2004, most other states required to implement the NOx SIP Call will have complied with this requirement. Tier 2 tailpipe standards for vehicles will also be implemented throughout the nation. EPA has performed modeling for the NOx SIP Call that shows these measures will reduce ozone transport to the Kent and Queen Anne's region substantially.

Trends Emissions   see section above Air Quality The 2003 8 hr Design Value for the Millington monitor is 0.095 which is .010 ppm above the 8 hr standard. However, when you look at the progress Maryland made with respect to the 1 hr standard at the same monitoring site you can see that overall air quality has vastly improved. 16 Number of Exceedances of the 1 hour Standard for Ozone at the Millington Monitor Between 1989 and 2003 0 1 2 3 4 5 6 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 Year Trend in Number of Exceedances of the 1 hour Standard for Ozone at the Millington Monitor Between 1989 and 2003 0 1 2 3 4 5 6 7 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 Year Vehicle Miles Traveled ( VMT)

While VMT is expected to increase slightly over time ( see attached graphic) the expected growth is very small when compared to other nonattainment counties in Maryland. 17 Page 41 8 hr Ozone Nonattainment ( NAA) Counties Expected Growth in Vehicle Miles Traveled 0 2000 4000 6000 8000 10000 12000 14000 16000 Allegany, MD Anne Arundel, MD Baltimore, MD Calvert, MD Caroline, MD Carroll, MD Cecil, MD Charles, MD Dorchester, MD Frederick, MD Garrett, MD Harford, MD Howard, MD Kent, MD Montgomery, MD Prince George's, MD Queen Anne's, MD St. Mary's, MD Somerset, MD Talbot, MD Washington, MD Wicomico, MD Worcester, MD Baltimore City, MD 1996 VMT 2007 VMT 2030 VMT VMT Growth ( 10^ 6 MILES)

Kent & Queen Anne's Population Projections The Maryland Department of Planning has calculated growth rates for all Maryland counties. Kent County, where the Millington monitor is located, has the smallest population of any Maryland county with a 2000 Census total of 19,197. It is projected to remain at low levels for the foreseeable future with a 2005 estimated population of 19,650 people. Queen Anne's County has a larger population ( 40,563 as of the 2000 Census) and is growing at a faster rate but still less than the growth rate of some of the metropolitan Baltimore and Washington counties. The Queen Anne's County projected population for 2005 is 44,600. Neither county is projected to have a population greater than 60,000 people by 2030.

Years of Data Other than for the purpose of historical trends analysis the MDE supports the use of 2001 2003 air quality data for this reclassification request.

Subpart 1 vs. Subpart 2 The MDE is not requesting a move from CAA Subpart 2 to Subpart 1 ( classification schemes) as part of this reclassification request. 18 Limitations on Bump Downs The MDE is requesting a Bump Down of one classification ( Moderate to Marginal).