[Federal Register Volume 84, Number 74 (Wednesday, April 17, 2019)]
[Notices]
[Pages 16079-16086]
[FR Doc No: 2019-07707]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-85637; File No. SR-NYSE-2018-34]

Self-Regulatory Organizations; New York Stock Exchange LLC;
Notice of Filing of Amendment No. 1 and Order Granting Accelerated
Approval of Proposed Rule Change, as Modified by Amendment No. 1, to
Amend NYSE Rule 104

April 12, 2019.

I. Introduction

    On July 31, 2018, New York Stock Exchange LLC (``NYSE'' or
``Exchange'') filed with the Securities and Exchange Commission
(``Commission''), pursuant to Section 19(b)(1) of the Securities
Exchange Act of 1934 (``Act'') \1\ and Rule 19b-4 thereunder,\2\ a
proposed rule change to amend NYSE Rule 104 governing transactions by
Designated Market Makers (``DMMs''). The proposed rule change was
published for comment in the Federal Register on August 16, 2018.\3\
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ See Securities Exchange Act Release No. 83821 (Aug. 10,
2018), 83 FR 40808 (Aug. 16, 2018) (``Notice'').
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    On September 24, 2018, pursuant to Section 19(b)(2) of the Act,\4\
the Commission extended to November 14, 2018, the time period in which
to approve, disapprove, or institute proceedings to determine whether
to approve or disapprove, the proposed

rule change.\5\ On November 1, 2018, the Commission issued an order
instituting proceedings, pursuant to Section 19(b)(2)(B) of the Act,\6\
to determine whether to approve or disapprove the proposed rule
change.\7\ On February 11, 2019, the Commission extended to April 13,
2019, the period for Commission action on proceedings to determine
whether to approve or disapprove the proposed rule change.\8\ The
Commission has received one comment letter on the proposal.\9\
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    \4\ 15 U.S.C. 78s(b)(2).
    \5\ See Securities Exchange Act Release No. 84276 (Sep. 24,
2018), 83 FR 49143 (Sep. 28, 2018).
    \6\ 15 U.S.C. 78s(b)(2)(B).
    \7\ See Securities Exchange Act Release No. 84515 (Nov. 1,
2018), 83 FR 55763 (Nov. 7, 2018) (``Order Instituting
Proceedings'').
    \8\ See Securities Exchange Act Release No. 85096 (Feb. 11,
2019), 84 FR 4553 (Feb. 15, 2019).
    \9\ See Letter from Stephen John Berger, Managing Director,
Government and Regulatory Policy, Citadel Securities, to Assistant
Secretary, Commission (Nov. 28, 2018) (``Citadel Letter'').
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    On April 9, 2019, the Exchange filed Amendment No. 1 to the
proposal, which supersedes the original filing in its entirety. The
Commission is publishing this notice to solicit comments on Amendment
No. 1 from interested persons, and is approving the proposed rule
change, as modified by Amendment No. 1, on an accelerated basis.

II. Self-Regulatory Organization's Description of the Proposal, as
Modified by Amendment No. 1

    In its filing with the Commission, the Exchange included statements
concerning the purpose of, and basis for, the proposed rule change and
discussed any comments it received on the proposed rule change. The
text of those statements may be examined at the places specified in
Item V 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 consolidate and restructure subsections
(g), (h) and (i) of Rule 104 governing DMM transactions and make a
related change to Rule 98(c)(5) (Operation of a DMM Unit). This
Amendment No. 1 supersedes the original filing its entirety.\10\
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    \10\ In this Amendment No. 1, the Exchange proposes to amend the
original filing by modifying proposed Rule 104(g)(1)(B) relating to
Aggressing Transactions prior to the close. In the original filing,
the Exchange proposed that Aggressing Transactions in the last ten
seconds of trading would be prohibited if they would result in a new
consolidated high or low price of the day unless such transaction
would bring the price of that security into parity with an
underlying or related security or asset. As amended, the Exchange
proposes that Aggressing Transactions in the last ten minutes of
trading would be prohibited if they would result in a new Exchange
high or low price of the day, with three exceptions for matching
another market's better bid or offer, bringing the price of that
security into parity with an underlying or related security or
asset, or liquidating or decreasing the DMM unit's position. This
Amendment No. 1 also proposes to amend Rule 98(c)(5).
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Background
    Rule 104 sets forth the obligations of Exchange DMMs. Under Rule
104(a), DMMs registered in one or more securities traded on the
Exchange are required to engage in a course of dealings for their own
account to assist in the maintenance of a fair and orderly market
insofar as reasonably practicable. Rule 104(a) also enumerates the
specific responsibilities and duties of a DMM, including: (1)
Maintenance of a continuous two-sided quote, which mandates that each
DMM maintain a bid or an offer at the National Best Bid (``NBB'') and
National Best Offer (``NBO,'' together the ``NBBO'') for a certain
percentage of the trading day,\11\ and (2) the facilitation of, among
other things, openings, re-openings, and the close of trading for the
DMM's assigned securities, all of which may include supplying liquidity
as needed.\12\ Rule 104(f) imposes an affirmative obligation on DMMs to
maintain, insofar as reasonably practicable, a fair and orderly market
on the Exchange in assigned securities, including maintaining price
continuity with reasonable depth and trading for the DMM's own account
when lack of price continuity, lack of depth, or disparity between
supply and demand exists or is reasonably to be anticipated.
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    \11\ See Rule 104(a)(1).
    \12\ See Rule 104(a)(2)-(3). Rule 104(e) further provides that
DMM units must provide contra-side liquidity as needed for the
execution of odd-lot quantities eligible to be executed as part of
the opening, reopening, and closing transactions but that remain
unpaired after the DMM has paired all other eligible round lot sized
interest.
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    Rule 104(g) provides that transactions on the Exchange by a DMM for
the DMM's account must be effected in a reasonable and orderly manner
in relation to the condition of the general market and the market in
the particular stock. More particularly, Rule 104(g) describes certain
transactions that are permitted to render the DMM's position adequate
to the market's needs, including Neutral and Non-Conditional
Transactions, and certain DMM transactions that are prohibited.
    Rule 104(g)(i)(A)(I) defines Neutral Transactions as a purchase or
sale by which a DMM liquidates or decreases a position. Neutral
Transactions may be made without restriction as to price. However, the
DMM's obligation to maintain a fair and orderly market may require re-
entry on the opposite side of the market trend after effecting one or
more Neutral Transactions. Such re-entry transactions should be in
accordance with the immediate and anticipated needs of the market.
    Rule 104(g)(i)(A)(II) defines Non-Conditional Transactions as a
DMM's bid or purchase and offer or sale that establishes or increases a
position, other than a transaction that reaches across the market to
trade with the Exchange BBO. Non-Conditional Transactions may be made
without restriction as to price in order to (i) match another market's
better bid or offer price; (ii) bring the price of a security into
parity with an underlying or related security or asset; (iii) add size
to an independently established bid or offer on the Exchange; (iv)
purchase at the published bid price on the Exchange; (v) sell at the
published offer price on the Exchange; (vi) purchase or sell at a price
between the Exchange BBO; and (vii) purchase below the published bid or
sell above the published offer on the Exchange. As with Neutral
Transactions, the DMM's obligation to maintain a fair and orderly
market may also require re-entry on the opposite side of the market
trend after effecting one or more Non-Conditional Transactions. Such
re-entry transactions should be commensurate with the size of the Non-
Conditional Transactions and the immediate and anticipated needs of the
market.
    Rule 104(g)(i)(A)(III) provides that, except as otherwise permitted
by Rule 104, during the last ten minutes prior to the close of trading,
a DMM with a long or short position in a security is prohibited from
making a purchase or sale in such security that results in a new high
or low price, respectively, on the Exchange for the day at the time of
the DMM's transaction (``Prohibited Transactions'').\13\
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    \13\ Rule 104(g)(i)(A)(III) contains two exceptions to
Prohibited Transactions: (1) Matching another market's better bid or
offer price, and (2) bringing the price of a security into parity
with an underlying or related security or asset.
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    Finally, Rule 104(h) addresses DMM transactions in securities that
establish or increase the DMM's position. Rule 104(h)(i) defines a
Conditional Transaction as a DMM transaction in a security that
establishes or increases a position and reaches across the market

to trade as the contra-side to the Exchange published bid or offer.\14\
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    \14\ A DMM reaches across the market when the DMM buys from the
NYSE offer or sells to the NYSE bid.
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    Rule 104(h)(ii) permits ``Conditional Transactions'' without
restriction as to price if they are followed by appropriate re-entry on
the opposite side of the market commensurate with the size of the DMM's
transaction. Thus, if a DMM establishes or increases a long position by
buying from the Exchange best offer, or establishes or increases a
short position by selling to the Exchange best bid, such transaction
would be followed by the DMM quoting on the opposite side of the last
transaction in order to dampen the impact of that transaction on the
market.
    The re-entry obligations for Conditional Transactions are set forth
in Rule 104(h)(iii). Under Rule 104(h)(iii)(A), DMMs must re-enter
within certain Exchange issued guidelines, called price participation
points (``PPP''), that identify the price at or before which a DMM is
expected to re-enter the market after effecting a Conditional
Transaction. PPPs are only minimum guidelines and compliance with them
does not guarantee that a DMM is meeting its obligations.
    Notwithstanding that a security may not have reached the PPP, the
DMM may be required to re-enter the market immediately after a
Conditional Transaction based on the price and/or volume of the DMM's
trading in reference to the market in the security at the time of such
trading. In such situations DMMs may or may not rely on the fact and
circumstance that there may have been one or more independent trades
following the DMM's trading to justify a failure to re-enter the
market. As set forth in Rule 104(h)(iii)(C)(I) and (II), immediate re-
entry is required after the following Conditional Transactions:
     a purchase that (1) reaches across the market to trade
with an Exchange published offer that is above the last differently
priced trade on the Exchange and above the last differently priced
published offer on the Exchange, (2) is 10,000 shares or more or has a
market value of $200,000 or more, and (3) exceeds 50% of the published
offer size; and
     a sale that (1) reaches across the market to trade with an
Exchange published bid that is below the last differently priced trade
on the Exchange and below the last differently priced published bid on
the Exchange, (2) is 10,000 shares or more or has a market value of
$200,000 or more, and (3) exceeds 50% of the published bid size.\15\
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    \15\ For purposes of subsections (h)(iii)(C)(I) and
(h)(iii)(C)(II), a Sweep is viewed as a transaction with the
published bid or offer.
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    Rule 104(h)(iv) permits certain other Conditional Transactions
without restriction as to price. Specifically, under subsection
(h)(iv)(A), a DMM's purchase from the Exchange published offer that is
priced above the last differently-priced trade on the Exchange or above
the last differently-priced published offer on the Exchange. Similarly,
under subsection (h)(iv)(B), a DMM's sale to the Exchange published bid
that is priced below the last differently-priced trade on the Exchange
or below the last differently-priced published bid on the Exchange.
    Rule 104(i) provides that re-entry obligations following such
Conditional Transactions would be the same as the re-entry obligations
for Non-Conditional Transactions pursuant to Rule 104(g).
    Finally, paragraph (c)(5) of Rule 98 provides that the member
organization operating a DMM unit must provide the Exchange with real-
time net position information in DMM securities by the DMM unit and any
independent trading unit of which it is part at such times and in the
manner prescribed by the Exchange.
Proposed Rule Change
    The Exchange proposes to consolidate and restructure current Rules
104(g), (h) and (i), which would be deleted and incorporated as
modified into a new subsection (g) titled ``Transactions by DMMs.''
    As discussed below, proposed Rule 104(g) would revise the
requirements for DMM transactions based on the type of trading by the
DMM, rather than by reference to the DMM's position. Rule 98(c)(5)
would be amended to require DMMs to provide net position information to
the Exchange daily. The Exchange also proposes certain technical and
conforming changes.\16\
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    \16\ The Exchange proposes the following technical and
conforming changes: (1) romanettes (i) through (vi) in Rule 104(b)
and (i) through (iv) in Rule 104(f) would be replaced with numbers 1
through 6 and 1 through 4, respectively; (2) current subsection (j)
would become new subsection (h); and (3) current subsection (k)
would become new subsection (i).
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    As restructured, proposed Rule 104 would replace the four current
types of DMM transactions based on the DMM's position (Neutral, Non-
conditional, Conditional and Prohibited) with a single, enhanced DMM
transaction called an ``Aggressing Transaction'' that would retain
existing re-entry requirements. During the ten minutes before the
scheduled close of trading, Aggressing Transactions that would result
in a new high (low) price for a security on the Exchange for the day at
the time of the DMM's transaction would be prohibited with three
exceptions discussed below.
Proposed Rule 104(g)(1)
    Proposed Rule 104(g)(1) would be based on current Rule104(g)(i).
Like current Rule 104(g)(i), proposed Rule 104(g)(1) would specify that
transactions on the Exchange by a DMM unit for the DMM unit's account
are to be effected in a reasonable and orderly manner in relation to
the condition of the general market and the market in the particular
stock. Proposed Rule 104(g)(1) would eliminate the definitions of
Neutral and Non-Conditional Transactions \17\ and retain Conditional
Transactions, which would be enhanced and renamed ``Aggressing
Transactions.''
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    \17\ As discussed below, the re-entry obligations for Neutral
and Non-Conditional Transactions would be retained and incorporated
into proposed subsection (g)(2).
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Aggressing Transactions
    In proposed Rule 104(g)(1)(A), the Exchange would define an
Aggressing Transaction as a DMM unit transaction that:
    (i) is a purchase (sale) that reaches across the market to trade as
the contra-side to the Exchange published offer (bid); and
    (ii) is priced above (below) the last differently-priced trade on
the Exchange and above (below) the last differently-priced published
offer (bid) on the Exchange.
    The proposed definition of Aggressing Transaction would be the same
as the current definition of Conditional Transaction in Rule 104(h)(i)
and (ii), except that Aggressing Transaction would not be defined by
reference to whether the transaction increases or decreases the DMM's
position. Accordingly, a DMM unit Aggressing Transaction would be any
trade where the DMM both reaches across the market and aggressively
moves the price of the security.
Prohibited Transactions
    The Exchange proposes to retain certain of the existing
prohibitions on specified DMM transactions during the final ten minutes
of the trading day and the current exceptions to Prohibited
Transactions, which are described in current Rule 104(g)(i)(A)(III).
With this proposed rule change, the Exchange proposes a substantive
difference for determining whether a DMM transaction should be
prohibited in the last ten minutes of trading. Rather than

the current rule, which looks at the DMM's position (long or short) and
then determines whether the trade should be prohibited based on whether
it results in a new Exchange high or low, as proposed, a DMM
transaction in the last ten minutes of trading would be prohibited if
it is an Aggressing Transaction, i.e., reaches across the market, and,
as a result, creates a new Exchange high or low. The Exchange also
proposes exceptions to this prohibition, which are based on exceptions
to prohibited transactions in the current rule.
    To effect this change, proposed Rule 104(g)(1)(B) would define
``Prohibited Transactions'' as Aggressing Transactions during the last
ten minutes prior to the scheduled close of trading that would result
in a new high (low) price for a security on the Exchange for the day at
the time of the DMM's transaction. The proposed three exceptions to
this prohibition would be if the trade:
     matches another market's better bid or offer price;
     brings the price of that security into parity with an
underlying or related security or asset; or
     liquidates or decreases the position of the DMM unit.
    The first two exceptions are in current Rule 104(g)(i)(A)(III) and
the Exchange proposes to retain these exceptions in the proposed
rule.\18\ The third exception is based in part on the position-based
review of whether a transaction would be prohibited under current
rules. Current Rule 104(g)(i)(A)(III)(1) prohibits a DMM with a long
position in a security from making a purchase in that security during
the last ten minutes that results in a new high price; the rule does
not prohibit a DMM with a long position from selling or decreasing
their position in the security. Likewise, current Rule
104(g)(i)(A)(III)(2) prohibits a DMM with a short position in a
security from making a sale in that security during the last ten
minutes prior to the close of trading that results in a new low price,
but the rule does not prohibit a DMM with a short position from
purchasing or liquidating their position in that security. Because
looking at the DMM's position would be an exception rather than the
basis for the prohibition, the Exchange proposes to restate the rule as
an exception that permits a DMM to liquidate or decrease a position of
the DMM unit, rather than focus on what is prohibited when the DMM is
long or short. This proposed rule text is also based on Rule
104(g)(i)(A)(I), which has no restrictions as to price for ``Neutral
Transactions,'' i.e., transactions when the DMM liquidates or decreases
a position.
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    \18\ See Rule 104(g)(i)(A)(III) (referencing Rules
104(g)(i)(A)(II)(2)(i) through (g)(i)(A)(II)(2)(ii)).
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    With this proposed difference for Prohibited Transactions, in the
last ten minutes of trading, DMMs would be able to trade at prices
lower than the published offer, or higher than the published bid, even
if such trade would result in a new Exchange high or low for the day.
The Exchange believes that this proposed change would support DMMs in
meeting their affirmative obligations while at the same time continuing
to prevent DMMs from aggressively taking liquidity and moving prices on
the Exchange by trading with the published bid or offer in the final
ten minutes before the closing auction \19\ For example, if the
Exchange best bid and offer were $10.01 x $10.05, the DMM has a long
position, and the DMM posts a bid at $10.04 to try and tighten that
spread, under the current rules, if that $10.04 bid were to trade with
non-displayed sell liquidity at that price and that trade resulted in a
new high price on the Exchange for the day, that trade would be
prohibited. Under the proposed change to Prohibited Transactions, this
trade would no longer be prohibited because the DMM is not reaching
across the market.
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    \19\ See Rule 104(g)(i)(A)(III).
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    Finally, the Exchange notes that the proposal is consistent with,
and in no way diminishes or relieves the DMM of, the other obligations
regarding the quality of the markets in securities to which DMMs are
assigned under Rule 104.\20\
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    \20\ In general, as noted above, transactions on the Exchange by
a DMM for the DMM's account must be effected in a reasonable and
orderly manner in relation to the condition of the general market
and the market in the particular stock, and DMMs must refrain from
causing or exacerbating excessive price movements. DMMs have
affirmative obligations under Rule 104(a) to engage in a course of
dealings for their own account to assist in the maintenance of a
fair and orderly market insofar as reasonably practicable.
Specifically, Rule 104(f)(ii) sets forth the DMM's obligation to act
as reasonably necessary to ensure appropriate depth and maintain
reasonable price variations between transactions (also known as
price continuity) and prevent unexpected variations in trading.
Further, under Rule 123D(a), openings and reopenings must be fair
and orderly, reflecting the DMM's professional assessment of market
conditions at the time, and appropriate consideration of the balance
of supply and demand as reflected by orders represented in the
market. The Exchange supplies DMMs with suggested Depth Guidelines
for each security in which a DMM is registered, and DMMs are
expected to quote and trade with reference to the Depth Guidelines.
See Rule 104(f)(iii).
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Proposed Rule 104(g)(2)
    Proposed subsection (g)(2) would set forth the re-entry obligations
for DMM transactions, which would be based on the current rule's re-
entry obligations. Specifically, proposed Rule 104(g)(2) would provide
that a DMM unit's obligation to maintain a fair and orderly market may
require re-entry on the opposite side of the market after effecting one
or more transactions. The proposed rule would provide that such re-
entry should be commensurate with the size of the transaction(s) and
the immediate and anticipated needs of the market, which are the same
re-entry requirements specified in current Rules 104(g)(i)(A)(I)(3) and
104(g)(i)(A)(II)(3) for Neutral and Non-Conditional Transactions,
respectively, as well as the types of Conditional Transactions
referenced in current Rules 104(h)(iv) and 104(i).\21\ Accordingly,
these re-entry obligations would be applicable to DMM transactions
other than Aggressing Transactions.
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    \21\ Current Rule 104(h)(iv) provides that two types of
Conditional Transactions may be made without restriction as to
price: (1) A DMM's purchase from the Exchange published offer that
is priced above the last differently-priced trade on the Exchange or
above the last differently-priced published offer on the Exchange
((h)(iv)(A)); and (2) a DMM's sale to the Exchange published bid
that is priced below the last differently-priced trade on the
Exchange or below the last differently-priced published bid on the
Exchange ((h)(iv)(B)). Current Rule 104(i) provides that the re-
entry obligations following transactions defined in Rule
104(h)(iv)(A) and (h)(iv)(B) are the same as for Non-Conditional
Transactions pursuant to Rule 104(g) (i)(A)(3).
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    Proposed Rule 104(g)(2)(A) and (B) would specify the re-entry
obligations for Aggressing Transactions. Following an Aggressing
Transaction, proposed Rule 104(g)(2)(A) would require the DMM unit to
re-enter the opposite side of the market at or before the applicable
PPP for that security commensurate with the size of the Aggressing
Transaction. The re-entry requirement for Aggressing Transactions set
forth in proposed Rule 104(g)(2)(A) is based on the current re-entry
requirements for certain Conditional Transactions set forth in current
Rule 104(h)(iii).
    Under proposed Rule 104(g)(2)(B), if the Aggressing Transaction (i)
is 10,000 shares or more or has a market value of $200,000 or more, and
(ii) exceeds 50% of the published offer (bid) size, immediate re-entry
on the opposite side of the market at or before the applicable PPP for
the security commensurate with the size of the Aggressing Transaction
would be required. The re-entry requirement for block-sized Aggressing
Transactions set forth in proposed Rule 104(g)(2)(B) is based the
current re-entry requirements for block-sized Conditional Transactions
under Rule 104(h)(iii)(C). The Exchange proposes a clarifying amendment
in proposed Rule 104(g)(2)(B), as compared to current Rule
104(h)(iii)(C), to provide that such

re-entry must be at or before the applicable PPP for that security. The
Exchange believes that this proposed change will provide greater detail
in the rule regarding the price at which the re-entry would be
required.
Proposed Rule 104(g)(3)
    Finally, proposed Rule 104(g)(3)(A) would provide that the Exchange
would periodically issue PPP Guidelines that identify the price at or
before which a DMM unit is expected to re-enter the market following an
Aggressing Transaction. PPPs are only minimum guidelines and compliance
with them does not guarantee that a DMM unit is meeting its
obligations. This portion of the proposed Rule is based on Rule
104(h)(iii)(A) without any differences.
    Proposed Rule 104(g)(3)(B) would provide that, notwithstanding that
a security may not have reached the PPP, the DMM unit may be required
to re-enter the market immediately after an Aggressing Transaction
based on the price and/or volume of the DMM unit's trading in reference
to the market in the security at the time of such trading. In such
situations, DMM units may or may not rely on the fact and circumstance
that there may have been one or more independent trades following the
DMM unit's trading to justify a failure to re-enter the market.
Subsection (B) of the proposed rule is based on current Rule
104(h)(iii)(B).
Proposed Amendment to Rule 98(c)(5)
    As noted above, except for an exception to Prohibited Transactions,
the Exchange proposes to eliminate reliance on the DMM's position to
determine DMM trading requirements under proposed Rule 104(g). The
Exchange proposes a related change to Rule 98(c)(5) to require DMMs to
provide the Exchange with net position information daily. The Exchange
proposes a further clarifying change to require DMM to provide net
position information ``for'' such time ``periods,'' rather than ``at''
such times, prescribed by the Exchange. The Exchange does not believe
that DMM net position information would need to be provided in real
time in order for the Exchange to effectively monitor for compliance
with the proposed exception to Rule 104(g)(1)(B).\22\ Rather, the
Exchange believes it would be able to effectively monitor for
compliance with the proposed exception utilizing DMM position
information provided on a same-day basis for its automated
surveillances. The Exchange would publish regulatory guidance setting
forth the requirement that DMMs provide net position on a daily basis
but in no event later than trading day plus one (T+1). To implement
this change, the Exchange proposes to delete the term ``real time'' in
Rule 98(c)(5) and add the word ``daily'' after ``must'' and before
``provide.'' The Exchange would also replace ``for'' for ``at'' before
``such times,'' delete the ``s'' in times, and add ``periods''
immediately following in order to clarify that the Exchange may request
DMM net position information for specific time periods on a daily
basis.
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    \22\ The Exchange currently provides DMMs with a technology
interface that supports the submission of DMM real-time position
information. In extremely limited circumstances, the Exchange relies
on that position information to assist the DMMs in marking certain
manual orders as sell short or sell long. When the Exchange
transitions NYSE-listed securities to its Pillar trading system, it
will no longer support this technology interface; nor will it be
marking orders on behalf of the DMM.
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Rule Implementation
    Subject to approval of this proposed rule change, the Exchange
proposes to implement these changes concurrent with the transition of
Exchange-listed securities to the Pillar trading system, which is
currently anticipated to begin in the third quarter of 2019.\23\
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    \23\ The Exchange has announced that, subject to rule approvals,
the Exchange will begin transitioning Exchange-listed securities to
Pillar on July 15, 2019, available at https://www.nyse.com/publicdocs/nyse/markets/nyse/Pillar_Update_NYSE_Tape_A_NGW_February_2019.pdf. The Exchange will
publish by separate Trader Update a complete symbol migration
schedule.
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2. Statutory Basis
    The Exchange believes that the proposed rule change is consistent
with Section 6(b) of the Act,\24\ in general, and furthers the
objectives of Section 6(b)(5) of the Act,\25\ in particular, because it
is designed to prevent fraudulent and manipulative acts and practices,
promote just and equitable principles of trade, remove impediments to
and perfect the mechanism of a free and open market and a national
market system, and protect investors and the public interest.
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    \24\ 15 U.S.C. 78f(b).
    \25\ 15 U.S.C. 78f(b)(5).
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    In particular, the Exchange believes that revising the requirements
for DMM transactions based on the type of DMM trading rather than the
DMM's position and introducing a new, enhanced DMM transaction called
an ``Aggressing Transaction'' would remove impediments to and perfect
the mechanism of a free and open market and a national market system by
simplifying and streamlining the requirements for DMM transactions. The
proposal would eliminate four separate types of DMM transactions and
introduce a simplified framework whereby all DMM transactions would be
subject to general re-entry requirements based on the current re-entry
obligations for Neutral, Non-Conditional and Conditional transactions,
and specific re-entry requirements for Aggressing Transactions, except
for Aggressing Transactions during the final ten minutes of trading
that result in a new high (low) price for a security on the Exchange
for the day at the time of the DMM's transaction, which would continue
to be prohibited unless subject to a specified exception.
    The Exchange believes that the proposal would not be inconsistent
with the public interest and the protection of investors. As noted, the
proposed rule would carry over the requirement that all DMM
transactions be effected in a reasonable and orderly manner in relation
to the condition of the general market and the market in the particular
stock. Further, DMM Aggressing Transactions would continue to require
re-entry on the opposite side of the market at or before the applicable
PPP for the security as warranted. Aggressing Transactions in the final
ten minutes of trading that result in a new high (low) price for a
security on the Exchange for the day at the time of the DMM's
transaction would continue to be prohibited. These safeguards would
reasonably ensure that DMM transactions continue to bear a reasonable
relationship to overall market conditions and that DMMs cannot
destabilize, inappropriately influence or manipulate a security going
into the close. In addition, the prohibition on Aggressing Transactions
that would create a new high or low price on the Exchange would
maintain the current bright-line rule that prohibits DMM transactions
that aggressively take liquidity during the final ten minutes prior to
the close.
    The Exchange believes that the proposed substantive difference to
Prohibited Transactions in the last ten minutes of trading to permit
DMM trades between the Exchange BBO, even if such trades resulted in a
new Exchange high or low and regardless of the DMM's position at the
time, would promote fair and orderly markets and not be inconsistent
with the public interest and the protection of investors because this
proposed change would promote the display of liquidity by enabling DMMs
to post bids and offers that would tighten the Exchange published bid
and offer. The Exchange further believes that retaining the current
exceptions for Prohibited Transactions, and permitting Aggressing
Transactions that would liquidate or

decrease the DMM unit's position during the ten minutes prior to the
scheduled close of trading even if they would result in a new Exchange
high or low price, would remove impediments to and perfect the
mechanism of a free and open market and a national market system
because DMMs would be able to quote appropriately in their assigned
securities during the period of the prohibition. The Exchange further
believes that not restricting Aggressing Transactions in the last ten
minutes of trading that result in a new Exchange high or low price for
the day if such trade is the result of the DMM liquidating or
decreasing a position would remove impediments to and perfect the
mechanisms of a free and open market and a national market system
because this exception is based on the current position-based review of
whether a transaction would be prohibited, which does not prohibit such
transactions, as well the current definition of ``Neutral
Transactions'' which have no restrictions as to price. Further, the
Exchange believes that the proposed exception would remove impediments
to and perfect the mechanisms of a free and open market and a national
market system because a DMM that reaches across the market when
liquidating or decreasing a position is generally not doing so to favor
a position leading into the close.
    Moreover, the numerous obligations currently imposed by Rule 104
would in no way be altered or diminished by the proposal. The Exchange
does not believe that the balance of benefits and obligations under
Rule 104 would be impacted by this proposed rule change. DMMs would
continue to be prohibited from engaging in specified transactions in
the final ten minutes prior to the close. Moreover, the proposed rule
would carry over the requirement that all DMM transactions be effected
in a reasonable and orderly manner in relation to the condition of the
general market and the market in the particular stock. These safeguards
would reasonably ensure that DMM transactions bear a reasonable
relationship to overall market conditions and that DMMs cannot
destabilize, inappropriately influence or manipulate a security going
into the close. For the same reasons, the proposed prohibition would
not alter or disrupt the balance between DMM benefits and obligations
of being an Exchange DMM.
    Finally, revising the requirements for DMM transactions based on
the type of DMM trading rather than the DMM's position, and amending
Rule 98 to require that DMM units provide net position information to
the Exchange on a daily basis and for such time periods as prescribed
by the Exchange, would remove impediments to and perfect the mechanism
of a free and open market and a national market system by simplifying
and streamlining the requirements for DMM transactions. The Exchange
further believes that the proposed rule change would promote just and
equitable principles of trade and is designed to prevent fraudulent and
manipulative acts and practices because DMMs would be required to
provide net position information daily to the Exchange and the Exchange
would be able to conduct automated surveillances monitoring for
compliance with the amended rule for this exception.
    For the foregoing reasons, the Exchange believes that the proposal
is consistent with the Act.

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

    The Exchange does not believe that the proposed rule change will
impose any burden on competition that is not necessary or appropriate
in furtherance of the purposes of the Act. The Exchange proposes
amendments to the rule governing DMM obligations to simplify and
streamline the requirements for DMM transactions. The Exchange believes
that the proposal would promote competition by allowing DMMs to quote
more aggressively in the final minutes of trading, thereby permitting
DMMs to remain competitive with other traders both on the Exchange and
on other trading venues, thereby enhancing the ability of DMMs to meet
their affirmative obligation under Rule 104. The Exchange further
believes that its proposed rules governing DMMs would not impose any
burden on competition that is not necessary or appropriate because the
proposed rules are designed to foster a fair and orderly marketplace
without diminishing the balance of benefits and obligations under Rule
104 or altering or diminishing the numerous obligations currently
imposed by Rule 104 on DMMs.

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. Summary of Comments Received

    The Commission received one comment letter in support of the
proposal as initially filed by the Exchange. The commenter asserts that
the proposal materially increases the obligations of DMMs because the
proposal would impose re-entry obligations on DMMs throughout the
trading day, including following transactions that reduce or liquidate
the DMM's position.\26\ The commenter asserts that the proposed
prohibition prior to the close of trading is also strengthened because
it would eliminate reference to the DMM's position.\27\ The commenter
also states that it supports the proposed changes to the NYSE rule
regarding prohibited transactions because it would modernize the rule
to reflect market structure changes, retain a bright line rule negative
obligation, and maintain an appropriate balance of benefits and
obligations for DMMs.\28\
---------------------------------------------------------------------------

    \26\ See Citadel Letter, supra note 9, at 1.
    \27\ See id. at 2. This commenter also asserted that the
prohibition would be strengthened because the rule would reference
the consolidated high or low price of a security, rather than the
high or low price on the NYSE, but Amendment No. 1, which was filed
after this comment letter was submitted, changed the Exchange's
proposal so that it no longer changed the reference price. See id.
    \28\ See id. The proposed rule change with respect to Prohibited
Transactions was substantially altered by Amendment No. 1, which was
filed after this comment letter was submitted.
---------------------------------------------------------------------------

IV. Discussion and Commission Findings

    After careful review of the proposal, as modified by Amendment No.
1, and the comments received, the Commission finds that the proposed
rule change, as modified by Amendment No. 1, is consistent with the
requirements of the Act and the rules and regulations thereunder
applicable to a national securities exchange.\29\ In particular, the
Commission finds that the proposed rule change, as amended, is
consistent with Section 6(b)(5) of the Act,\30\ which requires, among
other things, that the rules of a national securities exchange be
designed to prevent fraudulent and manipulative acts and practices, to
promote just and equitable principles of trade, to foster cooperation
and coordination with persons engaged in facilitating transactions in
securities, to remove impediments to and perfect the mechanism of a
free and open market and a national market system, and, in general, to
protect investors and the public interest; and are not designed to
permit unfair discrimination between customers, issuers, brokers, or
dealers. The Commission also finds that the proposed rule change, as
amended, is consistent with Section 6(b)(8) of the

Act, which provides that the rules of a national securities exchange
must not ``impose any burden on competition not necessary or
appropriate in furtherance of the purposes of'' the Act.\31\
---------------------------------------------------------------------------

    \29\ In approving this proposed rule change, the Commission has
considered the proposed rule's impact on efficiency, competition,
and capital formation. See 15 U.S.C. 78c(f).
    \30\ 15 U.S.C. 78f(b)(5).
    \31\ 15 U.S.C. 78(f)(8).
---------------------------------------------------------------------------

    The Exchange has proposed to substantially modify the provisions of
NYSE Rule 104(g) and (h) that govern the obligations of DMMs to re-
enter the market after certain transactions in assigned securities and
that prohibit certain transactions by DMMs in assigned securities near
the end of the trading day.\32\ Currently, whether a DMM's re-entry
obligation is triggered depends, in the first instance, on whether the
DMM's transaction establishes or increases the DMM's position or
instead liquidates or decreases the DMM's position, and this
distinction is reflected in the existing definitions in NYSE Rule
104(g) and (h) of Neutral Transactions, Non-Conditional Transactions,
and Conditional Transactions.\33\
---------------------------------------------------------------------------

    \32\ The Exchange has also proposed to make non-substantive
changes to renumber provisions within NYSE Rule 104 and to relocate
existing rule text regarding Price Participation Points.
    \33\ See Section II.A.1, supra. Non-Conditional Transactions are
distinguished from Conditional Transactions by whether a DMM has
reached across the market to trade as the contra-side to an Exchange
bid or offer. See id.
---------------------------------------------------------------------------

    NYSE now proposes to eliminate these transaction-type definitions
and replace them with a single transaction type called an Aggressing
Transaction, which would be a DMM unit purchase (sale) that reaches
across the market to trade with the Exchange's published offer (bid)
and is priced above (below) both the last differently priced trade on
the Exchange and the last differently priced offer (bid) on the
Exchange. An Aggressing Transaction would be similar to a Conditional
Transaction, which also involves a DMM reaching across the market, and
the same re-entry obligations that apply to Conditional Transactions
under current NYSE Rule 104 would apply to Aggressing Transactions
under amended NYSE Rule 104. But, while Conditional Transactions by
definition establish or increase a DMM position, whether a transaction
is an Aggressing Transaction would not depend on the DMM's position.
    The Commission believes that triggering DMM re-entry obligations
based solely on whether the DMM is aggressively taking liquidity--
rather than also considering a DMM's position at the time of trading--
is consistent with the Act, because those re-entry obligations are
based on price movement, rather than on the DMM's position. The
Commission further notes that, while the Exchange proposes to eliminate
the definitions of Neutral Transactions and Non-Conditional
Transactions, which currently have their own re-entry obligations,
those re-entry obligations are not substantially different from the
DMMs' general obligations under NYSE Rule 104(a) to ``engage in a
course of dealings for their own account to assist in the maintenance
of a fair and orderly market'' and under NYSE Rule 104(f) to maintain
``price continuity with reasonable depth.'' Thus, the Commission does
not believe that the Exchange's proposal to replace the existing
categories of Neutral Transactions, Non-Conditional Transactions, and
Conditional Transactions with a newly defined Aggressing Transaction
would substantially alter the balance of DMM benefits and obligations
previously approved by the Commission.\34\
---------------------------------------------------------------------------

    \34\ See Securities Exchange Act Release No. 58845 (Oct. 24,
2008), 73 FR 64379, 64388-89 (Oct. 29, 2008) (SR-NYSE-2008-46)
(approving NYSE New Market Model pilot and finding that it reflected
``an appropriate balance of DMM obligations against the benefits
provided to DMMs''). See also Citadel Letter, supra note 9, at 1
(asserting that the proposal materially increases the obligations on
DMMs during the trading day because the proposal would impose
obligations following transactions that reduce or liquidate the
DMM's position).
---------------------------------------------------------------------------

    The Exchange has also proposed to modify the existing definition of
Prohibited Transactions. Under its initial proposal, the Exchange
sought to make four substantive changes: (1) To limit the applicability
of the prohibition to the last 10 seconds of trading before the close,
rather than the last 10 minutes; (2) to change the price test in the
rule to the high or low consolidated price for the day, rather than the
high or low Exchange price for the day; (3) to remove from the
Prohibited Transactions rule the focus on a DMM's position at the time
of the transaction; and (4) to apply the Prohibited Transactions rule
only to Aggressing Transactions, rather than including certain
liquidity-providing trades.\35\
---------------------------------------------------------------------------

    \35\ See Notice, supra note 3.
---------------------------------------------------------------------------

    In its Order Instituting Proceedings, the Commission asked
questions about whether the proposed changes were consistent with the
Act.\36\ The Exchange subsequently amended its proposal significantly
with respect to Prohibited Transactions. First, the Exchange proposed
to retain the existing 10-minute period for Prohibited Transactions.
Second, the Exchange proposed to retain the existing price test for
Prohibited Transactions. And third, the Exchange proposed to add an
exception for transactions that would liquidate or decrease the
position of the DMM unit, incorporating as a specific exception to the
proposed Prohibited Transactions rule a transaction that is, by
definition, not covered by the existing rule.\37\
---------------------------------------------------------------------------

    \36\ See Order Instituting Proceedings, supra note 7, 83 FR at
55764-65.
    \37\ Consistent with its initial proposal, the Exchange's
amended proposal would also define a Prohibited Transaction as a
type of Aggressing Transaction, rather than as a separate type of
transaction, and it would retain the existing exceptions to the
Prohibited Transactions rule for transactions that would match
another market's better bid or offer or that would bring the price
of an assigned security into parity with an underlying security or
asset. See Proposed NYSE Rule 104(g)(1)(B).
---------------------------------------------------------------------------

    The Commission believes that the Exchange's amended proposal with
respect to Prohibited Transactions is consistent with the Act. While
the language and structure of the Prohibited Transactions rule would be
different, the only substantive difference between the Prohibited
Transactions rule in Amendment No. 1 and the existing rule would be
that DMMs could no longer potentially run afoul of the rule by
passively providing liquidity through a quote that narrowed the spread
in an assigned security. Consistent with its analysis in disapproving
an earlier proposal by the Exchange to eliminate the Prohibited
Transactions rule, the Commission does not believe that the provision
of liquidity by DMMs under such circumstances risks destabilizing the
market.\38\
---------------------------------------------------------------------------

    \38\ See Securities Exchange Act Release No. 81150 (July 1,
2017), 82 FR 33534, 33537 (July 20, 2018) (SR-NYSE-2016-71).
---------------------------------------------------------------------------

    Finally, the Exchange proposes to amend the obligation under NYSE
Rule 98 of a member organization operating a DMM unit to provide the
DMM unit's net position data to the Exchange. As amended, NYSE Rule 98
would require that daily data be provided for specified time periods,
rather than requiring real-time data. The Commission notes that the DMM
unit net position information to be provided will be relevant under
amended NYSE Rule 104 only for the last 10 minutes of trading before
the close--when the modified Prohibited Transactions rule would be in
effect--and the Exchange represents that it will be able to effectively
monitor for compliance with the proposed exception using information
provided as required by amended NYSE Rule 98, rather than in real time,
as required by current NYSE Rule 98.\39\ The Commission therefore
believes that this

change to NYSE Rule 98 is consistent with the Act.
---------------------------------------------------------------------------

    \39\ Under amended NYSE Rule 98, DMMs would have to provide net
position information on a same-day basis, but in no event later than
trading day plus one.
---------------------------------------------------------------------------

    For the foregoing reasons, the Commission finds that the proposed
rule change, as modified by Amendment No. 1, is consistent with
Sections 6(b)(5) and 6(b)(8) of the Act and the rules and regulations
thereunder applicable to a national securities exchange.

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

    Interested persons are invited to submit written data, views, and
arguments concerning the foregoing, including whether Amendment No. 1
is consistent with the Act. Comments may be submitted by any of the
following methods:

Electronic Comments

     Use the Commission's internet comment form (http://www.sec.gov/rules/sro.shtml); or
     Send an email to [email protected]. Please include
File Number SR-NYSE-2018-34 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-NYSE-2018-34. 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-NYSE-2018-34 and should be submitted on
or before May 8, 2019.

VI. Accelerated Approval of Proposed Rule Change, as Modified By
Amendment No. 1

    The Commission finds good cause to approve the proposed rule
change, as modified by Amendment No. 1, prior to the thirtieth day
after the date of publication of notice of the filing of Amendment No.
1 in the Federal Register. As discussed above,\40\ Amendment No. 1
substantially modifies the original proposed rule change with respect
to the Prohibited Transactions rule, narrowing the proposed rule change
significantly so that the only substantive change to the existing rule
governing Prohibited Transactions would be to limit the applicability
of the rule to instances in which a DMM was aggressively taking
liquidity, rather than including certain instances in which a DMM was
providing liquidity. As noted above, the Commission does not believe
that the provision of liquidity by DMMs under these circumstances risks
destabilizing the market.\41\ Amendment No. 1 made no other substantive
changes to the definition of Aggressing Transaction as published in the
original Notice.\42\
---------------------------------------------------------------------------

    \40\ See supra notes 36-38 and accompanying text.
    \41\ See supra note 38 and accompanying text.
    \42\ See Notice, supra note 3.
---------------------------------------------------------------------------

    Additionally, in Amendment No. 1, the Exchange proposes to amend
Rule 98--which requires that member organizations operating a DMM unit
provide the Exchange with real-time net position information for the
DMM unit--to require that DMM unit net position information be provided
to the Exchange on a daily basis and for such time periods as
prescribed by the Exchange. The Commission believes this proposal does
not raise regulatory concerns, as the Exchange has represented that it
would be able to effectively monitor for compliance with the proposed
exception to the Prohibited Transactions rule using information
provided under an amended Rule 98, rather than in real time, as
required under current Rule 98.\43\
---------------------------------------------------------------------------

    \43\ See supra note 39 and accompanying text.
---------------------------------------------------------------------------

    Accordingly, the Commission finds good cause, pursuant to Section
19(b)(2) of the Act,\44\ to approve the proposed rule change, SR-NYSE-
2018-34, as modified by Amendment No. 1, on an accelerated basis.
---------------------------------------------------------------------------

    \44\ 15 U.S.C. 78s(b)(2).
    \45\ 17 CFR 200.30-3(a)(12).

    For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\45\
Eduardo A. Aleman,
Deputy Secretary.
[FR Doc. 2019-07707 Filed 4-16-19; 8:45 am]
 BILLING CODE 8011-01-P


ABT Associates, Inc. and Syracuse Research Corp. ( SRC); Transfer of Data [ Federal Register: April 24, 2002 ( Volume 67, Number 79)] [ Notices] [ Page 20114 20115] From the Federal Register Online via GPO Access [ wais. access. gpo. gov] [ DOCID: fr24ap02 91]

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

ENVIRONMENTAL PROTECTION AGENCY [ OPP 2002 0027; FRL 6834 6]

ABT Associates, Inc. and Syracuse Research Corp. ( SRC); Transfer of Data AGENCY: Environmental Protection Agency ( EPA). ACTION: Notice.

SUMMARY: This notice announces that pesticide related information submitted to EPA's Office of Pesticide Programs ( OPP) pursuant to the Federal Insecticide, Fungicide, and Rodenticide Act ( FIFRA) and the Federal Food, Drug, and Cosmetic Act ( FFDCA), including information that may have been claimed as Confidential Business Information ( CBI) by the submitter, will be transferred to ABT Associates, Inc. and its subcontractor, Syracuse Research Corp., in accordance with 40 CFR 2.307( h)( 3) and 2.308( i)( 2). ABT Associates, Inc. and its subcontractor, Syracuse Research Corp., have been awarded a contract to perform work for OPP, and access to this information will enable ABT Associates, Inc. and its subcontractor, Syracuse Research Corp., to fulfill the obligations of the contract.

DATES: ABT Associates, Inc. and its subcontractor, Syracuse Research Corp., will be given access to this information on or before April 29, 2002.

FOR FURTHER INFORMATION CONTACT: By mail: Erik Johnson, FIFRA Security Officer, Information Resources and Services Division ( 7502C), Office of Pesticide Programs, Environmental Protection Agency, 1200 Pennsylvania Ave., NW., Washington, DC 20460; telephone number: ( 703) 305 7248; e mail address: johnson. erik@ epa. gov.

SUPPLEMENTARY INFORMATION:

I. General Information A. Does this Action Apply to Me?

This action applies to the public in general. As such, the Agency has not attempted to describe all the specific entities that may be affected by this action. If you have any questions regarding the applicability of this action to a particular entity, consult the person listed under FOR FURTHER INFORMATION CONTACT.

B. How Can I Get Additional Information, Including Copies of this Document and Other Related Documents?

You may obtain electronic copies of this document, and certain other related documents that might be available electronically, from the EPA Internet Home Page at http:// www. epa. gov. To access this document, on the home page select    Laws and Regulations,''    Regulations and Proposed Rules,'' and then look up the entry for this document under the    Federal Register Environmental Documents.'' You can also go directly to the Federal Register listings at http:// www. epa. gov/ fedrgstr/.

II. Contractor Requirements Under Contract No. 68 W0 1039, ABT Associates, Inc. and its subcontractor, Syracuse Research Corp., will perform the following: In response to the Food Quality Protection Act ( FQPA), the Office of Science Coordination and Policy ( OSCP) and the Office of Pesticide Programs ( OPP) are conducting a pilot project to evaluate existing toxicity data and data bases in the Agency and the scientific literature for a sample group of approximately 30 pesticide active ingredients. Toxicity and endocrine related mechanistic data shall be examined in detail to determine their adequacy to assess each chemical's potential to affect the endocrine system. For this work assignment, the contractor shall examine Agency toxicity data files, ( primarily located in OPP's Environmental Fate and Effects Division data bases), summary documents, electronic files, and the scientific literature for indications of endocrine system interaction, perturbation, or modulation in wildlife and aquatic organisms for up to 30 pesticide active ingredients. OPP has determined that access by ABT Associates, Inc. and its subcontractor, Syracuse Research Corp., to information on all pesticide chemicals is necessary, for the performance of this contract. Some of this information may be entitled to confidential treatment. The information has been submitted to EPA under sections 3, 4, 6, and 7 of FIFRA and under sections 408 and 409 of FFDCA. In accordance with the requirements of 40 CFR 2.307( h)( 2), the contract with ABT Associates, Inc. and its subcontractor, Syracuse Research Corp., prohibits the use of information for any purpose not specified in the contract; prohibits disclosure of the information to a third party without prior written approval from the agency; and requires that each official and employee of the contractor sign an agreement to protect the information from unauthorized release and to handle it in accordance with the FIFRA Information Security Manual. In addition, ABT Associates, Inc. and its subcontractor, Syracuse Research Corp., are required to submit for EPA approval a security plan under which any CBI will be secured and protected against unauthorized release or compromise. No information will be provided to ABT Associates, Inc. and its subcontractor, Syracuse Research Corp., until the requirements in this document have been fully satisfied. Records of information provided to ABT Associates, Inc. and its subcontractor, Syracuse Research Corp., will be maintained by EPA Project Officers for this contract. All information supplied to ABT Associates, Inc. and its subcontractor, Syracuse Research Corp., by EPA for use in connection with this contract will be returned to EPA when ABT Associates, Inc. and its [[ Page 20115]]

subcontractor, Syracuse Research Corp., have completed their work.

List of Subjects Environmental protection, Business and industry, Government contracts, Government property, Security measures.

Dated: April 10, 2002. Linda Vlier Moos, Acting Director, Information Resources and Services Division, Office of Pesticide Programs.

[ FR Doc. 02 9792 Filed 4 23 02; 8: 45 am] BILLING CODE 6560 50 S


[Federal Register Volume 77, Number 7 (Wednesday, January 11, 2012)]
[Rules and Regulations]
[Pages 1614-1618]
[FR Doc No: 2012-360]

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

DEPARTMENT OF TRANSPORTATION

Federal Aviation Administration

14 CFR Part 25

[Docket No. FAA-2010-1193; Amdt. No. 25-136]
RIN 2120-AJ80

Harmonization of Airworthiness Standards for Transport Category
Airplanes--Landing Gear Retracting Mechanisms and Pilot Compartment
View

AGENCY: Federal Aviation Administration (FAA), DOT.

ACTION: Final rule.

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

SUMMARY: The Federal Aviation Administration amends the airworthiness
standards for transport category airplanes on landing gear retracting
mechanisms and the pilot compartment view. For the landing gear
retracting mechanism, this rulemaking adopts the 1-g stall speed as a
reference stall speed instead of the minimum speed obtained in a
stalling maneuver and adds an additional requirement to keep the
landing gear and doors in the correct retracted position in flight. For
the pilot compartment view, this rulemaking revises the requirements
for pilot compartment view in precipitation conditions. This action
eliminates regulatory differences between the airworthiness standards
of the U.S. and the European Aviation Safety Agency (EASA), without
affecting current industry design practices.

DATES: Effective March 12, 2012.

ADDRESSES: For information on where to obtain copies of rulemaking
documents and other information related to this final rule, see ``How
To Obtain Additional Information'' in the SUPPLEMENTARY INFORMATION
section of this document.

FOR FURTHER INFORMATION CONTACT: For technical questions concerning
this action, contact Mahinder Wahi, Federal Aviation Administration,
Propulsion and Mechanical Systems Branch, ANM-112, Transport Airplane
Directorate, Aircraft Certification Service, 1601 Lind Avenue SW.,
Renton, WA 98057; telephone<PHONE_NUMBER>; facsimile<PHONE_NUMBER>,
email<EMAIL_ADDRESS>    For legal questions about this proposed rule, contact Doug
Anderson, FAA, Office of the Regional Counsel (ANM-7), 1601 Lind Avenue
SW., Renton, Washington 98057; telephone<PHONE_NUMBER>; facsimile
(425) 227-1007; email<EMAIL_ADDRESS>
SUPPLEMENTARY INFORMATION:

Authority for This Rulemaking

    The FAA's authority to issue rules on aviation safety is found in
Title 49 of the United States Code. Subtitle I, Section 106 describes
the authority of the FAA Administrator. Subtitle VII, Aviation
Programs, describes in more detail the scope of the agency's authority.
    This rulemaking is promulgated under the authority described in
Subtitle VII, Part A, Subpart III, Section 44701, ``General
requirements.'' Under that section, the FAA is charged with promoting
safe flight of civil aircraft in air commerce by prescribing
regulations and minimum standards for the design and performance of
aircraft that the Administrator finds necessary for safety in air
commerce. This regulation is within the scope of that authority. It
prescribes new safety standards for the design and operation of
transport category airplanes.

List of Abbreviations Frequently Used in This Document

Term Definition
VS the stalling speed or the minimum steady flight speed
at which the airplane is controllable.
VS1 the stalling speed or the minimum steady flight speed
obtained in a specific configuration.
VSR reference stall speed and may not be less than a 1-g
stall speed.
VSR1 reference stall speed in a specific configuration.
1-g stall speed minimum speed at which the airplane can develop the
usable maximum lift force capable of supporting the weight of the
airplane.

List of Acronyms Frequently Used in This Document

ALPA Airline Pilots Association
ANAC Ag[ecirc]ncia Nacional de Avia[ccedil][atilde]o Civil
ARAC Aviation Rulemaking Advisory Committee
EASA European Aviation Safety Agency
FAA Federal Aviation Administration
ICAO International Civil Aviation Organization
JAA European Joint Aviation Authorities
NPRM Notice of Proposed Rulemaking
RFA Regulatory Flexibility Act
SBREFA Small Business Regulatory Enforcement Fairness Act

I. Overview of Final Rule

    This action harmonizes airworthiness certification standards for
landing gear mechanisms and pilot compartment view for transport
category airplanes with those of EASA. Harmonizing these airworthiness
standards reduces costs to airplane manufacturers and operators while
retaining the level of safety.

II. Background

A. Statement of the Problem

    This rulemaking results from an agreement between the European
Joint Aviation Authorities (JAA), the predecessor to EASA, and the FAA
to harmonize certain airworthiness standards between the two
authorities. Differences between the regulations of the FAA and foreign
certification authorities increase the cost and complexity of
certification without contributing significantly to safety. These rules
result from the recommendations of the Aviation Rulemaking Advisory
Committee, through its Mechanical Systems Harmonization Working Group
(MSHWG).

B. Summary of the NPRM

    The FAA published a notice of proposed rulemaking (NPRM), Docket
No. FAA-2010-1193; Notice No. 10-19 in the Federal Register on January
5, 2011 (76 FR 472). The NPRM proposed to amend the standards for
landing gear retraction mechanism and pilot compartment view to
harmonize with the corresponding EASA standards. The proposed standards
for landing gear addressed reference stall speed, positive means to
keep the landing gear and doors in the correct retracted position, gear
position indication, and protection of equipment on the landing gear
and in the wheel well. The proposed standards for pilot compartment
view addressed single failures of rain removal systems, alternatives to
the openable side window requirement and certain environmental
conditions.
    The comment period for the NPRM ended on April 5, 2011.

C. General Overview of Comments

    The FAA received comments from Airbus, Boeing Company, Bombardier,
Cessna Aircraft Company, Embraer,

Hawker Beechcraft, Transport Canada, and Air Line Pilots Association,
International (ALPA). ALPA, Airbus, Bombardier, and Cessna provided
general comments in support of the proposed changes.
    Embraer correctly noted that a proposed text change to Sec.
25.729(a)(3) was unnecessary since EASA had already adopted the current
FAA standard. The proposed change to Sec.  25.729(a)(3) is therefore
withdrawn. Boeing, Transport Canada, and Hawker Beechcraft proposed
changes to the regulatory text. Embraer requested that the FAA wait for
the final rule issuance of NPRM 10-10, Airplane and Engine
Certification Requirements in Supercooled Large Drop, Mixed Phase, and
Ice Crystal Icing Conditions (75 FR 37311, June 29, 2010) (Docket No.
FAA-2010-0636) before issuing this final rule. Boeing, Transport Canada
and Bombardier noted editorial errors which have been corrected.

D. Associated Advisory Circular Guidance Material

    Advisory Circular AC 25.729-1 has been revised to incorporate
acceptable means of compliance to the amended requirements of this
rulemaking action. A draft of this AC was made available for public
comment during the comment period of the NPRM. The FAA received
comments on the AC from the Brazilian Civil Aviation Authority
(Ag[ecirc]ncia Nacional de Avia[ccedil][atilde]o Civil--ANAC),
Transport Canada, Boeing Company, and Embraer. The disposition of the
AC public comments is posted along with the final version of the AC on
the FAA Regulatory and Guidance Library Web site (http://rgl.faa.gov/).

III. Discussion of Public Comments and Final Rule

A. Effect of Flightcrew Alerting Rule

    Boeing recommended the proposed rule for landing gear position
indication be revised to be consistent with the new flightcrew alerting
rule, Sec.  25.1322. Boeing's rationale is that the proposed wording of
Sec.  25.729(e) in the NPRM is inconsistent with retractable landing
gear and associated door indication systems on existing FAA type
certificated and recent EASA validated airplanes. Boeing also stated
the proposed wording and the associated AC guidance material are
inconsistent with the quiet and dark flight deck philosophy used on
modern airplanes.
    The proposed wording would have required ``a clear indication or
warning must be provided whenever the landing gear position is not
consistent with the landing gear selector lever position.'' In some
situations, an advisory or caution message would be appropriate, not a
warning message. Boeing requested a change to make warning, caution,
and advisory messages compliant with Sec.  25.1322 and provide
information to the flight crew if the gear or doors are not in the
commanded position or are in a hazardous configuration. Boeing also
recommended deleting Sec.  25.729(e)(7) and rewording paragraph (e) to
reference Sec.  25.1322 for alerting.
    We agree the specification to provide a ``warning'' as in the
proposed Sec.  25.729(e)(7) is not consistent with the Sec.  25.1322 at
the current amendment level. ARAC recommended and EASA adopted the
proposed wording prior to the development of the current Sec.  25.1322
requirements. The intent of the wording recommended by ARAC was
consistent with the definition of the term ``flightcrew alert'' in the
current Sec.  25.1322. We replaced the wording ``clear indication or
warning'' with ``flightcrew alert'' to be consistent with Sec.
25.1322. This also addresses the Boeing comment associated with the
quiet and dark flightdeck concept. It is not necessary to specifically
refer to Sec.  25.1322 in the rule text, as the current version of
Sec.  25.1322 will be in the certification basis for new type designs
and new significant changes to type design (as determined per 14 CFR
Sec.  21.101).
    Boeing also noted the regulation does not address other landing
gear actuation functions, such as a landing gear lever lock or truck
tilt message to prevent retraction or the hazards associated with
retracting an out of configuration gear, or the necessary indication
for hazards associated with semi-lever gears or tail skid actuation.
    The FAA considers that Sec. Sec.  25.1301, 25.1309 and 25.1322
adequately address identification and alerting of these hazards and
provide the applicant the greatest flexibility in the use of such
functions. No change to the rule will be made in this regard.

B. Wheel Brake Temperature

    Hawker Beechcraft stated the proposed wording for Sec.
25.729(f)(3), ``possible wheel brake temperatures,'' is not specific
enough. Hawker Beechcraft recommends changing the text to ``excessive
wheel brake temperatures,'' or ``wheel brakes overheating.'' We note
that because Sec.  25.729(f) refers to the ``damaging effects of'' the
temperatures, we believe it is clear the regulation refers to high
``possible'' temperatures. No changes were made to the rule in response
to this comment.

C. Landing Gear Lock

    Transport Canada concurs with the new requirement for a positive
means to keep the landing gear and doors in the correct retracted
position in flight, and would like a similar requirement for a
downlock. As proposed, Sec.  25.729(b) is a performance-based rule that
requires positive means to keep the landing gear extended in flight and
on the ground. Adding specificity to require a downlock, limits design
options that would otherwise meet the intent of the rule without
increasing the level of safety. No change to the rule was made in this
regard.

D. Supercooled Large Drop Rulemaking

    Embraer suggested the FAA publish the final rule associated with
NPRM Notice No. 10-10, previously referenced on page 5, before
proceeding with proposed changes to Sec.  25.773(b) in this rulemaking
since the NPRM proposed to change Sec.  25.773(b)(1). This rulemaking
includes changes to Sec.  25.773(b)(2) and additionally to Sec.
25.773(b)(3) and (4), but proposed no changes to Sec.  25.773(b)(1).
Since these rulemaking changes are independent of those proposed in the
Supercooled Large Drop NPRM, the FAA does not plan to wait on
publishing this rule.

E. Lightning as a Discrete Damage Source for Pilot Compartment View

    Transport Canada requested we add lightning to the list of discrete
damage sources presented in Sec.  25.773(b)(4)(ii). The FAA is not
aware of any data that indicates lightning has resulted in the
reduction of pilot compartment view, therefore changing the regulatory
text is unnecessary.

F. Differences Between the NPRM and the Final Rule

    Except for the editorial correction in the rule title for Sec.
25.729, the withdrawal of proposed text change to Sec.  25.729(a)(3),
and the change in amendatory language found in Sec.  25.729(e)(7) from
``A clear indication or warning'' to ``A flightcrew alert,'' the
changes to Sec. Sec.  25.729 and 25.773 are adopted as proposed.

IV. Regulatory Notices and Analyses

A. Regulatory Evaluation

    Changes to Federal regulations must undergo several economic
analyses. First, Executive Order 12866 and Executive Order 13563 direct
that each Federal agency shall propose or adopt a regulation only upon
a reasoned determination that the benefits of the intended regulation
justify its costs. Second, the Regulatory Flexibility Act

of 1980 (Pub. L. 96-354) requires agencies to analyze the economic
impact of regulatory changes on small entities. Third, the Trade
Agreements Act (Pub. L. 96-39) prohibits agencies from setting
standards that create unnecessary obstacles to the foreign commerce of
the United States. In developing U.S. standards, this Trade Act
requires agencies to consider international standards and, where
appropriate, that they be the basis of U.S. standards. Fourth, the
Unfunded Mandates Reform Act of 1995 (Pub. L. 104-4) requires agencies
to prepare a written assessment of the costs, benefits, and other
effects of proposed or final rules that include a Federal mandate
likely to result in the expenditure by State, local, or tribal
governments, in the aggregate, or by the private sector, of $100
million or more annually (adjusted for inflation with base year of
1995). This portion of the preamble summarizes the FAA's analysis of
the economic impact of the final rule.
    Department of Transportation Order DOT 2100.5 prescribes policies
and procedures for simplification, analysis, and review of regulations.
If the expected cost impact is so minimal that a proposed or final rule
does not warrant a full evaluation, this order permits that a statement
to that effect and the basis for it be included in the preamble if a
full regulatory evaluation of the costs and benefits is not prepared.
Such a determination has been made for this final rule.
    The reasoning for this determination follows: The final rule will
amend the airworthiness standards for transport category airplanes for
landing gear retracting mechanisms and pilot compartment view to
harmonize with existing, more stringent European Aviation Safety Agency
(EASA) requirements. For landing gear retracting mechanisms, the more
stringent EASA requirements ensure (1) The landing gear is in the
appropriate configuration; (2) the landing gear and its supporting
structure, doors, and mechanisms operate properly; (3) the flight crew
is aware of the landing gear position status; and (4) critical
equipment is protected from tire failure or excessive brake
temperatures.
    For the pilot compartment view, reliable and safe operation during
precipitation is ensured by adoption of the EASA design requirements
for flight deck rain removal systems because there will be no single
failure of the rain removal system that could lead to a loss of pilot
view through both windshields. The effect of this requirement is that,
for newly certificated airplanes, manufacturers must provide a
separate, mechanically and electrically independent method for clearing
the windshield during precipitation. This method may include separate
flight deck control switches for left and right windshield wipers. The
FAA has determined that installation of the second wiper switch will
require minimal additional costs when the system is initially designed
to comply with the EASA requirement and received no comments regarding
this estimate.
    A review of current practices of U.S. manufacturers of transport
category airplanes has revealed that only a minority of manufacturers
are not already in compliance with the EASA requirements. For these
manufacturers, the FAA has determined that additional costs to comply
with the EASA requirements will be minimal and that there will be
additional safety benefits from adoption of the more stringent EASA
requirements. For the majority of manufacturers already in compliance
with the EASA requirements as a means of obtaining joint certification,
there will be no additional compliance costs or additional safety
benefits. We received no comments regarding this cost estimate.
However, the final rule will provide benefits from reduced joint
certification costs--in the requirements for data collection and
analysis, paperwork, and time spent applying for and obtaining approval
from the regulatory authorities. The FAA therefore has determined that
this final rule will have minimal costs and positive net benefits and
does not warrant a full regulatory evaluation.
    The FAA has also determined that this final rule is not a
``significant regulatory action'' as defined in section 3(f) of
Executive Order 12866, and is not ``significant'' as defined in DOT's
Regulatory Policies and Procedures.

B. Regulatory Flexibility Determination

    The Regulatory Flexibility Act of 1980 (Pub. L. 96-354) (RFA)
establishes ``as a principle of regulatory issuance that agencies shall
endeavor, consistent with the objectives of the rule and of applicable
statutes, to fit regulatory and informational requirements to the scale
of the businesses, organizations, and governmental jurisdictions
subject to regulation. To achieve this principle, agencies are required
to solicit and consider flexible regulatory proposals and to explain
the rationale for their actions to assure that such proposals are given
serious consideration.'' The RFA covers a wide-range of small entities,
including small businesses, not-for-profit organizations, and small
governmental jurisdictions.
    Agencies must perform a review to determine whether a rule will
have a significant economic impact on a substantial number of small
entities. If the agency determines that it would, the agency must
prepare a regulatory flexibility analysis as described in the RFA.
However, if an agency determines that a rule is not expected to have a
significant economic impact on a substantial number of small entities,
section 605(b) of the RFA provides that the head of the agency may so
certify and a regulatory flexibility analysis is not required. The
certification must include a statement providing the factual basis for
this determination, and the reasoning should be clear.
    As noted above, this final rule will impose no or little additional
costs on part 25 manufacturers. Moreover, all U.S. manufacturers of
transport category airplanes exceed the Small Business Administration
small-entity criteria of 1,500 employees. Therefore, the FAA certifies
that this final rule will not have a significant economic impact on a
substantial number of small entities.

C. International Trade Impact Assessment

    The Trade Agreements Act of 1979 (Pub. L. 96-39), as amended by the
Uruguay Round Agreements Act (Pub. L. 103-465), prohibits Federal
agencies from establishing standards or engaging in related activities
that create unnecessary obstacles to the foreign commerce of the United
States. Pursuant to these Acts, the establishment of standards is not
considered an unnecessary obstacle to the foreign commerce of the
United States, so long as the standard has a legitimate domestic
objective, such the protection of safety, and does not operate in a
manner that excludes imports that meet this objective. The statute also
requires consideration of international standards and, where
appropriate, that they be the basis for U.S. standards. The FAA has
assessed the potential effect of this final rule and determined that it
will promote international trade by harmonizing U.S. standards with
corresponding EASA regulations thus reducing the cost of joint
certification.

D. Unfunded Mandates Assessment

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

local, and tribal governments, in the aggregate, or by the private
sector; such a mandate is deemed to be a ``significant regulatory
action.'' The FAA currently uses an inflation-adjusted value of $141.3
million.
    This final rule does not contain such a mandate. The requirements
of Title II do not apply.

E. Paperwork Reduction Act

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

F. International Compatibility

    In keeping with U.S. obligations under the Convention on
International Civil Aviation, it is FAA policy to conform to
International Civil Aviation Organization (ICAO) Standards and
Recommended Practices to the maximum extent practicable. The FAA has
determined that there are no ICAO Standards and Recommended Practices
that correspond to these regulations.

G. Environmental Analysis

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

H. Regulations Affecting Intrastate Aviation in Alaska

    Section 1205 of the FAA Reauthorization Act of 1996 (110 Stat.
3213) requires the FAA, when modifying its regulations in a manner
affecting intrastate aviation in Alaska, to consider the extent to
which Alaska is not served by transportation modes other than aviation,
and to establish appropriate regulatory distinctions. In the NPRM, the
FAA requested comments on whether the proposed rule should apply
differently to intrastate operations in Alaska. The agency did not
receive any comments, and has determined, based on the administrative
record of this rulemaking, that there is no need to make any regulatory
distinctions applicable to intrastate aviation in Alaska.

V. Executive Order Determinations

A. Executive Order 13132, Federalism

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

B. Executive Order 13211, Regulations That Significantly Affect Energy
Supply, Distribution, or Use

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

VI. How To Obtain Additional Information

A. Rulemaking Documents

    An electronic copy of a rulemaking document may be obtained by
using the Internet:
    1. Search the Federal eRulemaking Portal (http://www.regulations.gov);
    2. Visit the FAA's Regulations and Policies Web page at http://www.faa.gov/regulations_policies/ or
    3. Access the Government Printing Office's Web page at http://www.fdsys.gov.
    Copies may also be obtained by sending a request (identified by
notice, amendment, or docket number of this rulemaking) to the Federal
Aviation Administration, Office of Rulemaking, ARM-1, 800 Independence
Avenue SW., Washington, DC 20591, or by calling<PHONE_NUMBER>.

B. Comments Submitted to the Docket

    Comments received may be viewed by going to http://www.regulations.gov and following the online instructions to search the
docket number for this action. Anyone is able to search the electronic
form of all comments received into any of the FAA's dockets by the name
of the individual submitting the comment (or signing the comment, if
submitted on behalf of an association, business, labor union, etc.).

C. Small Business Regulatory Enforcement Fairness Act

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

List of Subjects in 14 CFR Part 25

    Aircraft, Aviation safety.

The Amendment

    In consideration of the foregoing, the Federal Aviation
Administration amends part 25 of title 14, Code of Federal Regulations,
as follows:

PART 25--AIRWORTHINESS STANDARDS: TRANSPORT CATEGORY AIRPLANES

0
1. The authority citation for part 25 continues to read as follows:

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

0
2. Amend Sec.  25.729 by revising paragraphs (a)(1)(ii) and (iii), (b),
(e) introductory text, and (e)(5), adding paragraph (e)(7), revising
paragraphs (f) introductory text and (f)(1), and adding paragraph
(f)(3) to read as follows:

Sec.  25.729  Retracting mechanism.

    (a) * * *
    (1) * * *
    (ii) The combination of friction loads, inertia loads, brake torque
loads, air loads, and gyroscopic loads resulting from the wheels
rotating at a peripheral speed equal to 1.23VSR (with the
wing-flaps in take-off position at design take-off weight), occurring
during retraction and extension at any airspeed up to 1.5
VSR1 (with the wing-flaps in the approach position at design
landing weight), and
    (iii) Any load factor up to those specified in Sec.  25.345(a) for
the wing-flaps extended condition.
* * * * *
    (b) Landing gear lock. There must be positive means to keep the
landing gear extended in flight and on the ground. There must be
positive means to keep the landing gear and doors in the correct
retracted position in flight, unless it can be shown that lowering of
the landing gear or doors, or flight with the landing gear or doors
extended, at any speed, is not hazardous.
* * * * *
    (e) Position indicator and warning device. If a retractable landing
gear is

used, there must be a landing gear position indicator easily visible to
the pilot or to the appropriate crew members (as well as necessary
devices to actuate the indicator) to indicate without ambiguity that
the retractable units and their associated doors are secured in the
extended (or retracted) position. The means must be designed as
follows:
* * * * *
    (5) The system used to generate the aural warning must be designed
to minimize false or inappropriate alerts.
* * * * *
    (7) A flightcrew alert must be provided whenever the landing gear
position is not consistent with the landing gear selector lever
position.
    (f) Protection of equipment on landing gear and in wheel wells.
Equipment that is essential to the safe operation of the airplane and
that is located on the landing gear and in wheel wells must be
protected from the damaging effects of--
    (1) A bursting tire;
* * * * *
    (3) Possible wheel brake temperatures.

0
3. Amend Sec.  25.773 by revising paragraph (b)(2) and adding
paragraphs (b)(3) and (4) to read as follows:

Sec.  25.773  Pilot compartment view.

* * * * *
    (b) * * *
    (2) No single failure of the systems used to provide the view
required by paragraph (b)(1) of this section must cause the loss of
that view by both pilots in the specified precipitation conditions.
    (3) The first pilot must have a window that--
    (i) Is openable under the conditions prescribed in paragraph (b)(1)
of this section when the cabin is not pressurized;
    (ii) Provides the view specified in paragraph (b)(1) of this
section; and
    (iii) Provides sufficient protection from the elements against
impairment of the pilot's vision.
    (4) The openable window specified in paragraph (b)(3) of this
section need not be provided if it is shown that an area of the
transparent surface will remain clear sufficient for at least one pilot
to land the airplane safely in the event of--
    (i) Any system failure or combination of failures which is not
extremely improbable, in accordance with Sec.  25.1309, under the
precipitation conditions specified in paragraph (b)(1) of this section.
    (ii) An encounter with severe hail, birds, or insects.
* * * * *

    Issued in Washington, DC, on December 27, 2011.
Michael P. Huerta,
Acting Administrator.
[FR Doc. 2012-360 Filed 1-10-12; 8:45 am]
BILLING CODE 4910-13-P