Notice2021-11409
Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Amend the NYSE Arca Equities Fees and Charges
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Published
June 1, 2021
Issuing agencies
Securities and Exchange Commission
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<title>Federal Register, Volume 86 Issue 103 (Tuesday, June 1, 2021)</title>
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[Federal Register Volume 86, Number 103 (Tuesday, June 1, 2021)]
[Notices]
[Pages 29308-29311]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2021-11409]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-92016; File No. SR-NYSEARCA-2021-40]
Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing
and Immediate Effectiveness of Proposed Rule Change To Amend the NYSE
Arca Equities Fees and Charges
May 25, 2021.
Pursuant to Section 19(b)(1) \1\ of the Securities Exchange Act of
1934 (the ``Act''),\2\ and Rule 19b-4 thereunder,\3\ notice is hereby
given that on May 11, 2021, NYSE Arca, Inc. (``NYSE Arca'' or the
``Exchange'') filed with the Securities and Exchange Commission (the
``Commission'') the proposed rule change as described in Items I, II,
and III below, which Items have been prepared by the self-regulatory
organization. The Commission is publishing this notice to solicit
comments on the proposed rule change from interested persons.
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\1\ 15 U.S.C. 78s(b)(1).
\2\ 15 U.S.C. 78a.
\3\ 17 CFR 240.19b-4.
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I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
The Exchange proposes to amend the NYSE Arca Equities Fees and
Charges (``Fee Schedule'') to adopt reduced fees for Retail Orders that
are executed in the Exchange's opening and closing auctions. The
Exchange proposes to implement the fee changes effective May 11, 2021.
The proposed rule change is available on the Exchange's website at
<a href="http://www.nyse.com">www.nyse.com</a>, at the principal office of the Exchange, and at the
Commission's Public Reference Room.
II. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
In its filing with the Commission, the self-regulatory organization
included statements concerning the purpose of, and basis for, the
proposed rule change and discussed any comments it received on the
proposed rule change. The text of those statements may be examined at
the places specified in Item IV below. The Exchange has prepared
summaries, set forth in sections A, B, and C below, of the most
significant parts of such statements.
A. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
1. Purpose
The Exchange proposes to amend the Fee Schedule to adopt reduced
fees for Retail Orders \4\ that are executed in the Exchange's opening
and closing auctions.
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\4\ A Retail Order is an agency order that originates from a
natural person and is submitted to the Exchange by an ETP Holder,
provided that no change is made to the terms of the order to price
or side of market and the order does not originate from a trading
algorithm or any other computerized methodology. See Securities
Exchange Act Release No. 67540 (July 30, 2012), 77 FR 46539 (August
3, 2012) (SR-NYSEArca-2012-77).
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The proposed changes respond to the current competitive environment
where order flow providers have a choice of where to direct Retail
Orders by offering further incentives for ETP Holders \5\ to send such
orders to the Exchange.
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\5\ All references to ETP Holders in connection with this
proposed fee change include Market Makers.
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The Exchange proposes to implement the fee changes effective May
11, 2021.\6\
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\6\ The Exchange originally filed to amend the Fee Schedule on
May 3, 2021 (SR-NYSEArca-2021-36). SR-NYSEArca-2021-36 was
subsequently withdrawn and replaced by this filing.
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Background
As noted above, the Exchange operates in a highly competitive
market. The Commission has repeatedly expressed its preference for
competition over regulatory intervention in determining prices,
products, and services in the securities markets. In Regulation NMS,
the Commission highlighted the importance of market forces in
determining prices and SRO revenues and, also, recognized that current
regulation of the market system ``has been remarkably successful in
promoting market competition in its broader forms that are most
important to investors and listed companies.'' \7\
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\7\ See Securities Exchange Act Release No. 51808 (June 9,
2005), 70 FR 37496, 37499 (June 29, 2005) (File No. S7-10-04) (Final
Rule) (``Regulation NMS'').
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While Regulation NMS has enhanced competition, it has also fostered
a ``fragmented'' market structure where trading in a single stock can
occur across multiple trading centers. When multiple trading centers
compete for order flow in the same stock, the Commission has recognized
that ``such competition can lead to the fragmentation of order flow in
that stock.'' \8\ Indeed, equity trading is
[[Page 29309]]
currently dispersed across 16 exchanges,\9\ numerous alternative
trading systems,\10\ and broker-dealer internalizers and wholesalers,
all competing for order flow. Based on publicly-available information,
no single exchange currently has more than 17% market share.\11\
Therefore, no exchange possesses significant pricing power in the
execution of equity order flow. More specifically, the Exchange
currently has less than 10% market share of executed volume of equities
trading.\12\
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\8\ See Securities Exchange Act Release No. 61358, 75 FR 3594,
3597 (January 21, 2010) (File No. S7-02-10) (Concept Release on
Equity Market Structure).
\9\ See Cboe U.S. Equities Market Volume Summary, available at
<a href="https://markets.cboe.com/us/equities/market_share">https://markets.cboe.com/us/equities/market_share</a>. See generally
<a href="https://www.sec.gov/fast-answers/divisionsmarketregmrexchangesshtml.html">https://www.sec.gov/fast-answers/divisionsmarketregmrexchangesshtml.html</a>.
\10\ See FINRA ATS Transparency Data, available at <a href="https://otctransparency.finra.org/otctransparency/AtsIssueData">https://otctransparency.finra.org/otctransparency/AtsIssueData</a>. A list of
alternative trading systems registered with the Commission is
available at <a href="https://www.sec.gov/foia/docs/atslist.htm">https://www.sec.gov/foia/docs/atslist.htm</a>.
\11\ See Cboe Global Markets U.S. Equities Market Volume
Summary, available at <a href="http://markets.cboe.com/us/equities/market_share/">http://markets.cboe.com/us/equities/market_share/</a>.
\12\ See id.
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The Exchange believes that the ever-shifting market share among the
exchanges from month to month demonstrates that market participants can
move order flow, or discontinue or reduce use of certain categories of
products. While it is not possible to know a firm's reason for shifting
order flow, the Exchange believes that one such reason is because of
fee changes at any of the registered exchanges or non-exchange venues
to which a firm routes order flow. The competition for Retail Orders is
even more stark, particularly as it relates to exchange versus off-
exchange venues.
The Exchange thus needs to compete in the first instance with non-
exchange venues for Retail Order flow, and with the 16 other exchange
venues for that Retail Order flow that is not directed off-exchange.
Accordingly, competitive forces compel the Exchange to use exchange
transaction fees and credits, particularly as they relate to competing
for Retail Order flow, because market participants can readily trade on
competing venues if they deem pricing levels at those other venues to
be more favorable.
Proposed Rule Change
In response to this competitive environment, the Exchange proposes
to adopt reduced fees for Retail Orders that are executed in the
Exchange's opening and closing auctions. Specifically, under the Basic
rates section of the Fee Schedule, the Exchange currently charges a fee
of $0.0015 per share for Market and Auction-Only Orders in Tape A, Tape
B and Tape C securities executed in an Early Opening Auction, Core Open
Auction or Trading Halt Auction with a cap of $20,000 per Equity
Trading Permit ID. This fee also applies to Retail Orders that are
executed in such auctions. To attract additional Retail Orders for
execution in the Exchange's opening auctions, the Exchange proposes to
adopt a lower fee of $0.0005 per share for Market and Auction-Only
Orders in Tape A, Tape B and Tape C securities that are designated as
Retail Orders and executed in the Early Open Auction, Core Open Auction
or Trading Halt Auction.
Further, under the Basic rates section of the Fee Schedule, the
Exchange currently charges a fee of $0.0012 per share for Market,
Market-On-Close, Limit-On-Close, and Auction-Only Orders in Tape A,
Tape B and Tape C securities executed in the Closing Auction. This fee
also applies to Retail Orders executed in the Closing Auction. To
attract additional Retail Orders for execution on the Exchange, the
Exchange proposes to adopt a lower fee of $0.0008 per share for Market,
Market-On-Close, Limit-On-Close, and Auction-Only Orders in Tape A,
Tape B and Tape C securities that are designated as Retail Orders and
executed in the Closing Auction.
The Exchange is not proposing any change to the cap for Market and
Auction-Only Orders executed in an Early Open Auction, Core Open
Auction or Trading Halt Auction, which would remain at $20,000 per
Equity Trading Permit ID.
The purpose of the proposed rule change is to encourage even
greater participation from ETP Holders and promote additional liquidity
in Retail Orders. As described above, ETP Holders have a choice of
where to send such orders. The Exchange believes that the proposed
lower fees could lead to more ETP Holders choosing to route their
Retail Orders to the Exchange for execution in the opening and closing
auctions rather than to a competing exchange.
The Exchange does not know how much Retail Order flow ETP Holders
choose to route to other exchanges or to off-exchange venues. Without
having a view of ETP Holders' activity on other markets and off-
exchange venues, the Exchange has no way of knowing whether this
proposed rule change would result in any ETP Holders sending more of
their Retail Orders to the Exchange. The Exchange cannot predict with
certainty how many ETP Holders would avail themselves of this
opportunity but additional Retail Orders would benefit all market
participants because it would provide greater execution opportunities
in the Exchange's opening and closing auctions.
The proposed rule change is designed to be available to all ETP
Holders on the Exchange and is intended to provide ETP Holders a
greater incentive to direct more of their Retail Orders for execution
in the Exchange's opening and closing auctions.
The proposed changes are not otherwise intended to address any
other issues, and the Exchange is not aware of any significant problems
that market participants would have in complying with the proposed
changes.
2. Statutory Basis
The Exchange believes that the proposed rule change is consistent
with Section 6(b) of the Act,\13\ in general, and furthers the
objectives of Sections 6(b)(4) and (5) of the Act,\14\ in particular,
because it provides for the equitable allocation of reasonable dues,
fees, and other charges among its members, issuers and other persons
using its facilities and does not unfairly discriminate between
customers, issuers, brokers or dealers.
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\13\ 15 U.S.C. 78f(b).
\14\ 15 U.S.C. 78f(b)(4) and (5).
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The Proposed Fee Change Is Reasonable
As discussed above, the Exchange operates in a highly fragmented
and competitive market. The Commission has repeatedly expressed its
preference for competition over regulatory intervention in determining
prices, products, and services in the securities markets. Specifically,
in Regulation NMS, the Commission highlighted the importance of market
forces in determining prices and SRO revenues and, also, recognized
that current regulation of the market system ``has been remarkably
successful in promoting market competition in its broader forms that
are most important to investors and listed companies.'' \15\
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\15\ See Securities Exchange Act Release No. 51808 (June 9,
2005), 70 FR 37496, 37499 (June 29, 2005).
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The Exchange believes that the ever-shifting market share among the
exchanges from month to month demonstrates that market participants can
shift order flow, or discontinue to [sic] reduce use of certain
categories of products, in response to fee changes. With respect to
Retail Orders, ETP Holders can choose from any one of the 16 currently
operating registered exchanges, and numerous off-exchange venues, to
route such order flow. Accordingly, competitive forces
[[Page 29310]]
reasonably constrain exchange transaction fees that relate to Retail
Orders on an exchange. Stated otherwise, changes to exchange
transaction fees can have a direct effect on the ability of an exchange
to compete for order flow.
Given this competitive environment, the proposal represents a
reasonable attempt to attract additional Retail Orders to the Exchange.
The Exchange believes that the proposed change to adopt lower fees
for Retail Orders executed in the Exchange's opening and closing
auctions is reasonable because the lower fees would encourage ETP
Holders to send a greater number of their Retail Orders for execution
on the Exchange. As noted above, the Exchange operates in a highly
competitive environment, particularly for attracting Retail Order flow.
The Exchange believes it is reasonable to offer reduced fees for Retail
Orders in the opening and closing auctions. The Exchange believes the
proposed change is also reasonable because it is designed to attract
higher volumes of Retail Orders transacted on the Exchange by ETP
Holders which would benefit all market participants by offering greater
price discovery and an increased opportunity to trade on the Exchange.
On the backdrop of the competitive environment in which the
Exchange currently operates, the proposed rule change is a reasonable
attempt to increase liquidity on the Exchange and improve the
Exchange's market share relative to its competitors.
The Proposed Fee Change Is an Equitable Allocation of Fees and Credits
The Exchange believes its proposal is an equitable allocation of
its fees among its market participants because all ETP Holders that
participate on the Exchange may qualify for the proposed reduced fee if
they elect to send their Retail Orders for execution in the Exchange's
opening and closing auctions. Without having a view of ETP Holders'
activity on other markets and off-exchange venues, the Exchange has no
way of knowing whether this proposed rule change would result in any
ETP Holder sending more of their Retail Orders to the Exchange. The
Exchange cannot predict with certainty how many ETP Holders would avail
themselves of this opportunity but additional Retail Orders would
benefit all market participants because it would provide greater
execution opportunities in the Exchange's opening and closing auctions.
The Exchange anticipates that multiple ETP Holders that engage in
retail trading activity would endeavor to send more of their Retail
Orders for execution in the Exchange's opening and closing auctions and
pay the proposed lower fee.
Further, given the competitive market for attracting Retail Order
flow, the Exchange notes that with this proposed rule change, the
Exchange's pricing for Retail Orders that are executed in the opening
and closing auctions would be lower that fees charged by other
exchanges that the Exchange competes with for order flow. For example,
the Nasdaq Stock Market LLC (``Nasdaq'') charges its members a fee of
$0.0015 per share per share for orders, including Retail Orders, that
are executed in the Nasdaq Opening Cross, and a fee that ranges between
$0.0008 per share and $0.0016 per share for orders, including Retail
Orders, that are executed in the Nasdaq Closing Cross.\16\
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\16\ See Nasdaq Price List, NASDAQ Crossing Network, at <a href="http://nasdaqtrader.com/Trader.aspx?id=PriceListTrading2">http://nasdaqtrader.com/Trader.aspx?id=PriceListTrading2</a>.
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The Exchange further believes that the proposed change is equitable
because it is reasonably related to the value to the Exchange's market
quality associated with higher volume in Retail Orders. The Exchange
believes that recalibrating the fees charged for execution of Retail
Orders will continue to attract order flow and liquidity to the
Exchange, thereby contributing to price discovery on the Exchange and
benefiting investors generally.
The Exchange believes that the proposed rule change is equitable
because maintaining or increasing the proportion of Retail Orders in
exchange-listed securities that are executed on a registered national
securities exchange (rather than relying on certain available off-
exchange execution methods) would contribute to investors' confidence
in the fairness of their transactions and would benefit all investors
by deepening the Exchange's liquidity pool, supporting the quality of
price discovery, promoting market transparency and improving investor
protection.
The Proposed Fee Change Is Not Unfairly Discriminatory
The Exchange believes that the proposal is not unfairly
discriminatory. In the prevailing competitive environment, ETP Holders
are free to disfavor the Exchange's pricing if they believe that
alternatives offer them better value.
The Exchange believes that the proposed change is not unfairly
discriminatory because it would apply to all ETP Holders on an equal
and non-discriminatory basis. The Exchange believes that the proposed
rule change is not unfairly discriminatory because maintaining or
increasing the proportion of Retail Orders in exchange-listed
securities that are executed on a registered national securities
exchange (rather than relying on certain available off-exchange
execution methods) would contribute to investors' confidence in the
fairness of their transactions and would benefit all investors by
deepening the Exchange's liquidity pool, supporting the quality of
price discovery, promoting market transparency and improving investor
protection. This aspect of the proposed rule change also is consistent
with the Act because all similarly situated ETP Holders would pay the
same fee for Retail Orders executed in the Exchange's opening and
closing auctions. Lastly, the submission of Retail Orders is optional
for ETP Holders in that they could choose whether to submit Retail
Orders and, if they do, the extent of its activity in this regard. The
Exchange believes that it is subject to significant competitive forces,
as described below in the Exchange's statement regarding the burden on
competition.
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
In accordance with Section 6(b)(8) of the Act,\17\ the Exchange
believes that the proposed rule change would not impose any burden on
competition that is not necessary or appropriate in furtherance of the
purposes of the Act. Instead, as discussed above, the Exchange believes
that the proposed fee change would encourage the submission of
additional liquidity to a public exchange, thereby promoting market
depth, price discovery and transparency and enhancing order execution
opportunities for ETP Holders. As a result, the Exchange believes that
the proposed change furthers the Commission's goal in adopting
Regulation NMS of fostering integrated competition among orders, which
promotes ``more efficient pricing of individual stocks for all types of
orders, large and small.'' \18\
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\17\ 15 U.S.C. 78f(b)(8).
\18\ See Securities Exchange Act Release No. 51808, 70 FR 37495,
37498-99 (June 29, 2005) (S7-10-04) (Final Rule).
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Intramarket Competition. The Exchange believes the proposed
amendments to its Fee Schedule would not impose any burden on
competition that is not necessary or appropriate in
[[Page 29311]]
furtherance of the purposes of the Act. The proposed changes are
designed to attract additional Retail Orders to the Exchange, in
particular for execution in the Exchange's opening and closing
auctions. The Exchange believes that the proposed lower fee would
incentivize market participants to direct their Retail Orders to the
Exchange. Greater overall order flow, trading opportunities, and
pricing transparency benefits all market participants on the Exchange
by enhancing market quality and continuing to encourage ETP Holders to
send orders, thereby contributing towards a robust and well-balanced
market ecosystem.
Intermarket Competition. The Exchange operates in a highly
competitive market in which market participants can readily choose to
send their orders to other exchange and off-exchange venues if they
deem fee levels at those other venues to be more favorable. As noted
above, the Exchange's market share of intraday trading (i.e., excluding
auctions) is currently less than 10%. In such an environment, the
Exchange must continually adjust its fees and rebates to remain
competitive with other exchanges and with off-exchange venues. Because
competitors are free to modify their own fees and credits in response,
and because market participants may readily adjust their order routing
practices, the Exchange does not believe its proposed fee change can
impose any burden on intermarket competition.
The Exchange believes that the proposed change could promote
competition between the Exchange and other execution venues, including
those that currently offer similar order types and comparable
transaction pricing, by encouraging additional orders to be sent to the
Exchange for execution.
C. Self-Regulatory Organization's Statement on Comments on the Proposed
Rule Change Received From Members, Participants, or Others
No written comments were solicited or received with respect to the
proposed rule change.
III. Date of Effectiveness of the Proposed Rule Change and Timing for
Commission Action
The foregoing rule change is effective upon filing pursuant to
Section 19(b)(3)(A) \19\ of the Act and subparagraph (f)(2) of Rule
19b-4 \20\ thereunder, because it establishes a due, fee, or other
charge imposed by the Exchange.
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\19\ 15 U.S.C. 78s(b)(3)(A).
\20\ 17 CFR 240.19b-4(f)(2).
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At any time within 60 days of the filing of such proposed rule
change, the Commission summarily may temporarily suspend such rule
change if it appears to the Commission that such action is necessary or
appropriate in the public interest, for the protection of investors, or
otherwise in furtherance of the purposes of the Act. If the Commission
takes such action, the Commission shall institute proceedings under
Section 19(b)(2)(B) \21\ of the Act to determine whether the proposed
rule change should be approved or disapproved.
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\21\ 15 U.S.C. 78s(b)(2)(B).
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IV. Solicitation of Comments
Interested persons are invited to submit written data, views, and
arguments concerning the foregoing, including whether the proposed rule
change is consistent with the Act. Comments may be submitted by any of
the following methods:
Electronic Comments
<bullet> Use the Commission's internet comment form (<a href="http://www.sec.gov/rules/sro.shtml">http://www.sec.gov/rules/sro.shtml</a>); or
<bullet> Send an email to <a href="/cdn-cgi/l/email-protection#a1d3d4cdc48cc2ceccccc4cfd5d2e1d2c4c28fc6ced7"><span class="__cf_email__" data-cfemail="a2d0d7cec78fc1cdcfcfc7ccd6d1e2d1c7c18cc5cdd4">[email protected]</span></a>. Please include
File Number SR-NYSEARCA-2021-40 on the subject line.
Paper Comments
<bullet> Send paper comments in triplicate to Secretary, Securities
and Exchange Commission, 100 F Street NE, Washington, DC 20549-1090.
All submissions should refer to File Number SR-NYSEARCA-2021-40. 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 (<a href="http://www.sec.gov/rules/sro.shtml">http://www.sec.gov/rules/sro.shtml</a>).
Copies of the submission, all subsequent amendments, all written
statements with respect to the proposed rule change that are filed with
the Commission, and all written communications relating to the proposed
rule change between the Commission and any person, other than those
that may be withheld from the public in accordance with the provisions
of 5 U.S.C. 552, will be available for website viewing and printing in
the Commission's Public Reference Room, 100 F Street NE, Washington, DC
20549, on official business days between the hours of 10:00 a.m. and
3:00 p.m. Copies of the filing also will be available for inspection
and copying at the principal office of the Exchange. All comments
received will be posted without change. Persons submitting comments are
cautioned that we do not redact or edit personal identifying
information from comment submissions. You should submit only
information that you wish to make available publicly. All submissions
should refer to File Number SR-NYSEARCA-2021-40, and should be
submitted on or before June 22, 2021.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\22\
J. Matthew DeLesDernier,
Assistant Secretary.
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\22\ 17 CFR 200.30-3(a)(12).
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[FR Doc. 2021-11409 Filed 5-28-21; 8:45 am]
BILLING CODE 8011-01-P
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