Notice2021-15031
Self-Regulatory Organizations; Miami International Securities Exchange LLC; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change To Establish Fees for the cToM Market Data Product
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Published
July 15, 2021
Issuing agencies
Securities and Exchange Commission
Full Text
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<title>Federal Register, Volume 86 Issue 133 (Thursday, July 15, 2021)</title>
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[Federal Register Volume 86, Number 133 (Thursday, July 15, 2021)]
[Notices]
[Pages 37393-37397]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2021-15031]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-92359; File No. SR-MIAX-2021-28]
Self-Regulatory Organizations; Miami International Securities
Exchange LLC; Notice of Filing and Immediate Effectiveness of a
Proposed Rule Change To Establish Fees for the cToM Market Data Product
July 9, 2021.
Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934
(``Act''),\1\ and Rule 19b-4 thereunder,\2\ notice is hereby given that
on June 30, 2021, Miami International Securities Exchange LLC (``MIAX''
or ``Exchange'')
[[Page 37394]]
filed with the Securities and Exchange Commission (``Commission'') the
proposed rule change as described in Items I, II, and III below, which
Items have been prepared by the Exchange. The Commission is publishing
this notice to solicit comments on the proposed rule change from
interested persons.
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\1\ 15 U.S.C. 78s(b)(1).
\2\ 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 is filing a proposal to amend the MIAX Options Fee
Schedule (the ``Fee Schedule'') to establish fees for the market data
product known as MIAX Complex Top of Market (``cToM'').
The text of the proposed rule change is available on the Exchange's
website at <a href="http://www.miaxoptions.com/rule-filings">http://www.miaxoptions.com/rule-filings</a>, at MIAX's principal
office, 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 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 these 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 aspects of such
statements.
A. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
1. Purpose
The Exchange proposes to amend Section 6(a) of the Fee Schedule to
establish fees for the cToM market data product.
The Exchange previously adopted rules governing the trading of
Complex Orders \3\ on the MIAX System \4\ in 2016.\5\ At that time, the
Exchange also adopted the market data product cToM and expressly waived
fees for cToM to provide an incentive to prospective market
participants to subscribe to that market data feed.\6\ The Exchange has
not charged fees to cToM subscribers in the nearly five years since it
was first available for subscription.
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\3\ See Exchange Rule 518(a)(5) for the definition of Complex
Orders.
\4\ The term ``System'' means the automated trading system used
by the Exchange for the trading of securities. See Exchange Rule
100.
\5\ See Securities Exchange Act Release No. 79072 (October 7,
2016), 81 FR 71131 (October 14, 2016) (SR-MIAX-2016-26) (Order
Approving a Proposed Rule Change to Adopt New Rules to Govern the
Trading of Complex Orders).
\6\ See Securities Exchange Act Release No. 79146 (October 24,
2016), 81 FR 75171 (October 28, 2016) (SR-MIAX-2016-36) (providing a
complete description of the cToM data feed).
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In summary, cToM provides subscribers with the same information as
the MIAX Top of Market (``ToM'') data product as it relates to the
Strategy Book,\7\ i.e., the Exchange's best bid and offer for a complex
strategy, with aggregate size, based on displayable order and quoting
interest in the complex strategy on the Exchange. However, cToM
provides subscribers with the following additional information that is
not included in ToM: (i) The identification of the complex strategies
currently trading on the Exchange; (ii) complex strategy last sale
information; and (iii) the status of securities underlying the complex
strategy (e.g., halted, open, or resumed). cToM is a distinct market
data product from ToM. ToM subscribers are not required to subscribe to
cToM, and cToM subscribers are not required to subscribe to ToM.\8\
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\7\ The ``Strategy Book'' is the Exchange's electronic book of
complex orders and complex quotes. See Exchange Rule 518(a)(17).
\8\ See supra note 6.
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The Exchange now proposes to amend Section 6(a) of the Fee Schedule
to charge monthly fees to Distributors \9\ of cToM. Specifically, the
Exchange proposes to assess Internal Distributors $1,250 per month and
External Distributors $1,750 per month for the cToM data feed.\10\ The
Exchange notes that the proposed monthly cToM fees for Internal and
External Distributor are the same prices that the Exchange charges for
its ToM data product, and are similar to other options exchanges' data
feed prices for their comparable complex order data feed products.\11\
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\9\ A ``Distributor'' of MIAX data is any entity that receives a
feed or file of data either directly from MIAX or indirectly through
another entity and then distributes it either internally (within
that entity) or externally (outside that entity). All Distributors
are required to execute a MIAX Distributor Agreement. See Section
6(a) of the Fee Schedule.
\10\ The Exchange also proposes to make a minor related change
to remove ``(as applicable)'' from the explanatory paragraph in
Section 6(a) as it will not change [sic] fees for both the ToM and
cToM data feeds.
\11\ See NYSE American Options Proprietary Market Data Fees,
American Options Complex Fees ($1,500 per month Access Fee and
$1,000 per month Redistribution Fee), at <a href="https://www.nyse.com/publicdocs/nyse/data/NYSE_American_Options_Market_Data_Fee_Schedule.pdf">https://www.nyse.com/publicdocs/nyse/data/NYSE_American_Options_Market_Data_Fee_Schedule.pdf</a>; see also NYSE
Arca Options Proprietary Market Data Fees, Arca Options Complex Fees
($1,500 per month Access Fee and $1,000 per month Redistribution
Fee), at <a href="https://www.nyse.com/publicdocs/nyse/data/NYSE_Arca_Options_Proprietary_Data_Fee_Schedule.pdf">https://www.nyse.com/publicdocs/nyse/data/NYSE_Arca_Options_Proprietary_Data_Fee_Schedule.pdf</a>; Nasdaq PHLX LLC
Price List--U.S. Derivatives Data, PHLX Orders Fees (Internal
Distributor fee of $3,000 per month and External Distributor fee of
$3,500 per month), at <a href="http://www.nasdaqtrader.com/Trader.aspx?id=DPPriceListOptions#PHLX">http://www.nasdaqtrader.com/Trader.aspx?id=DPPriceListOptions#PHLX</a>.
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Like it does today for ToM, MIAX proposes to assess cToM fees on
Internal and External Distributors in each month the Distributor is
credentialed to use cToM in the production environment. Also, like the
Exchange does today for ToM, market data fees for cToM will be reduced
for new Distributors for the first month during which they subscribe to
cToM, based on the number of trading days that have been held during
the month prior to the date on which that subscriber has been
credentialed to use cToM in the production environment. Such new
Distributors will be assessed a pro-rata percentage of the fees in the
table in Section 6(a) of the Fee Schedule, which is the percentage of
the number of trading days remaining in the affected calendar month as
of the date on which they have been credentialed to use cToM in the
production environment, divided by the total number of trading days in
the affected calendar month.
Implementation Date
The proposed fee changes will become effective on July 1, 2021.
2. Statutory Basis
The Exchange believes that its proposal to amend its Fee Schedule
is consistent with Section 6(b) of the Act \12\ in general, and
furthers the objectives of Section 6(b)(4) of the Act \13\ in
particular, in that it is an equitable allocation of reasonable dues,
fees and other charges among its members and issuers and other persons
using its facilities. The Exchange also believes the proposal furthers
the objectives of Section 6(b)(5) of the Act in that it is designed to
promote just and equitable principles of trade, to remove impediments
to and perfect the mechanism of a free and open market and a national
market system, and, in general to protect investors and the public
interest and is not designed to permit unfair discrimination between
customers, issuers, brokers and dealers.
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\12\ 15 U.S.C. 78f(b).
\13\ 15 U.S.C. 78f(b)(4) and (5).
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In adopting Regulation NMS, the Commission granted self-regulatory
organizations (``SROs'') and broker-dealers increased authority and
flexibility to offer new and unique market data to the public. It was
believed that this authority would expand the amount of data available
to
[[Page 37395]]
consumers, and also spur innovation and competition for the provision
of market data. Particularly, cToM further broadens the availability of
U.S. option market data to investors consistent with the principles of
Regulation NMS. The data product also promotes increased transparency
through the dissemination of cToM. Particularly, cToM provides
subscribers with the same information as ToM, but includes the
following additional information: (i) The identification of the complex
strategies currently trading on the Exchange; (ii) complex strategy
last sale information; and (iii) the status of securities underlying
the complex strategy (e.g., halted, open, or resumed). The Exchange
believes cToM provides a valuable tool that subscribers can use to gain
substantial insight into the trading activity in Complex Orders, but
also emphasizes such data is not necessary for trading. Moreover, other
exchanges offer similar data products.\14\
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\14\ See supra note 11.
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The Exchange operates in a highly competitive environment. Indeed,
there are currently 16 registered options exchanges that trade options.
Based on publicly available information, no single options exchange has
more than 15% of the market share and currently the Exchange represents
only approximately 6.75% of the market share.\15\ The Commission has
repeatedly expressed its preference for competition over regulatory
intervention in determining prices, products, and services in the
securities markets. Particularly, 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.'' \16\ Making similar data products available to
market participants fosters competition in the marketplace, and
constrains the ability of exchanges to charge supra-competitive fees.
In the event that a market participant views one exchange's data
product as more or less attractive than the competition, that market
participant can and may switch between similar products. The proposed
fees are a result of the competitive environment, as the Exchange seeks
to adopt fees to attract purchasers of cToM.
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\15\ See MIAX's ``The Market at a Glance'', available at <a href="https://www.miaxoptions.com/">https://www.miaxoptions.com/</a> (last visited June 29, 2021).
\16\ See Securities Exchange Act Release No. 51808 (June 9,
2005), 70 FR 37496, 37499 (June 29, 2005) (``Regulation NMS Adopting
Release'').
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No market participant is required by any rule or regulation to
utilize the Exchange's Complex Order functionality or subscribe to the
cToM data feed. Further, unlike orders on the Exchange's Simple Order
Book, Complex Orders are not protected and will never trade through
Priority Customer \17\ orders, thus protecting the priority that is
established in the Simple Order Book.\18\ Additionally, unlike the
continuous quoting requirements of Market Makers in the simple order
market, there are no continuous quoting requirements respecting Complex
Orders. It is a business decision whether market participants utilize
Complex Order strategies on the Exchange and whether to purchase cToM
data to help effect those strategies.
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\17\ The term ``Priority Customer'' means a person or entity
that (i) is not a broker or dealer in securities and (ii) does not
place more than 390 orders in listed options per day on average
during a calendar month for its own beneficial accounts(s). The term
``Priority Customer Order'' means an order for the account of a
Priority Customer. See Exchange Rule 100.
\18\ The ``Simple Order Book'' is the Exchange's regular
electronic book of orders and quotes. See Exchange Rule 100. See
supra note 5.
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The Exchange believes the proposed fees are reasonable as the
proposed fees are both modest and similar to, or even lower than, the
fees assessed by other exchanges that provide similar data
products.\19\ Indeed, proposing fees that are excessively higher than
established fees for similar data products would simply serve to reduce
demand for the Exchange's data product, which as noted, is entirely
optional. Like the Exchange's cToM data product, other exchanges offer
similar data products and complex order functionality. As such, if a
market participant views another exchange's complex order functionality
and related data feed(s) as more attractive than what is offered by the
Exchange, then such market participant can merely choose not to utilize
the Exchange's Complex Order functionality or purchase cToM. Instead,
that market participant can utilize similar complex functionality
elsewhere and purchase another exchange's complex data product, which
likely offers similar data points, albeit based on that other market's
complex order trading activity.
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\19\ See supra note 11.
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Selling market data, such as cToM, is also a means by which
exchanges compete to attract business. If the market deems the proposed
fees to be unfair or inequitable, firms can diminish or discontinue
their use of the data and/or avail themselves of similar products
offered by other exchanges.\20\ The Exchange therefore believes that
the proposed fees for cToM reflect the competitive environment and
would be properly assessed on Member or non-Member users. The Exchange
also believes the proposed fees are equitable and not unfairly
discriminatory as the fees would apply equally to all users who choose
to purchase such data. The Exchange's proposed fees would not
differentiate between subscribers that purchase cToM and are set at a
modest level that would allow any interested Member or non-Member to
purchase such data based on their business needs.
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\20\ See id.
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The Exchange also believes the proposed cToM fees are reasonable
and not unfairly discriminatory because since the Exchange initially
established the cToM data product in 2016, all Exchange Members have
had the ability to receive the Exchange's cToM data free of charge for
the past five years.\21\
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\21\ See supra note 6.
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The Exchange believes that it is reasonable, equitable and not
unfairly discriminatory to assess Internal Distributors fees that are
less than the fees assessed for External Distributors for subscriptions
to the cToM data feed because Internal Distributors have limited,
restricted usage rights to the market data, as compared to External
Distributors, which have more expansive usage rights. All Members and
non-Members that determine to receive any market data feed of the
Exchange (or its affiliates, MIAX PEARL, LLC and MIAX Emerald, LLC),
must first execute, among other things, the MIAX Exchange Group
Exchange Data Agreement (the ``Exchange Data Agreement'').\22\ Pursuant
to the Exchange Data Agreement, Internal Distributors are restricted to
the ``internal use'' of any market data they receive. This means that
Internal Distributors may only distribute the Exchange's market data to
the recipient's officers and employees and its affiliates.\23\ External
Distributors may distribute the Exchange's market data to persons who
are not officers, employees or affiliates of the External
Distributor,\24\ and may charge their own fees for the distribution of
such market data. Accordingly, the Exchange believes it is fair,
reasonable and not unfairly discriminatory to assess External
Distributors a higher fee for the Exchange's market data products as
External Distributors have greater usage rights to commercialize such
market
[[Page 37396]]
data. The Exchange also utilizes more resources to support External
Distributors versus Internal Distributors, as External Distributors
have reporting and monitoring obligations that Internal Distributors do
not have, thus requiring additional time and effort of Exchange staff.
The Exchange believes the proposed cToM fees are equitable and not
unfairly discriminatory because the fee level results in a reasonable
and equitable allocation of fees amongst subscribers for similar
services, depending on whether the subscribers is an Internal or
External Distributor. Moreover, the decision as to whether or not to
purchase market data is entirely optional to all market participants.
Potential purchasers are not required to purchase the market data, and
the Exchange is not required to make the market data available.
Purchasers may request the data at any time or may decline to purchase
such data. The allocation of fees among users is fair and reasonable
because, if market participants deem the proposed fees to be unfair or
inequitable, firms can discontinue their use of the cToM data.
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\22\ See Exchange Data Agreement, available at <a href="https://miaxweb2.pairsite.com/sites/default/files/page-files/MIAX_Exchange_Group_Data_Agreement_09032020.pdf">https://miaxweb2.pairsite.com/sites/default/files/page-files/MIAX_Exchange_Group_Data_Agreement_09032020.pdf</a>.
\23\ See id.
\24\ See id.
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Further, the Exchange no longer believes it is necessary to provide
cToM data for free to attract market participants since the Exchange's
Strategy Book is now established and the Exchange no longer needs to
rely on such waivers to attract market participants to its Complex
Order market or cToM subscribers. The Exchange believes that the
proposal is equitable and not unfairly discriminatory because the
proposed cToM fees will apply to all market participants of the
Exchange on a uniform basis. The Exchange also notes that the proposed
monthly cToM fees for Internal and External Distributors are the same
prices that the Exchange charges for its ToM data product, and are
generally lower than other options exchanges' data feed prices for
their comparable data feed products.\25\
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\25\ See supra note 11.
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B. Self-Regulatory Organization's Statement on Burden on Competition
The Exchange does not believe that the proposed rule change will
result in any burden on competition that is not necessary or
appropriate in furtherance of the purposes of the Act. Rather, the
Exchange believes that the proposal will promote competition by
permitting the Exchange to sell a data product similar to those offered
by other competitor options exchanges.\26\ The Exchange made Complex
Order functionality and cToM available in order to keep pace with
changes in the U.S. options industry and evolving customer needs, and
believes the data product will continue to contribute to robust
competition among national securities exchanges. Other U.S. options
exchanges offer complex order functionality and market data products
that are substantially similar to that offered by the Exchange. As a
result, the Exchange believes this proposed rule change permits fair
competition among national securities exchanges.
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\26\ Id.
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Furthermore, the Exchange operates in a highly competitive
environment, and its ability to price cToM is constrained by
competition among exchanges that offer similar data products and
complex order functionality to their customers. As discussed, there are
currently a number of similar products available to market participants
and investors. Other U.S. options exchanges offer market data products
that are substantially similar to cToM, which the Exchange must
consider in its pricing discipline in order to compete for the market
data.\27\ For example, proposing fees that are excessively higher than
established fees for similar data products would simply serve to reduce
demand for the Exchange's data product, which as discussed, market
participants are under no obligation to utilize. In this competitive
environment, potential purchasers are free to choose which, if any,
similar product to purchase to satisfy their need for market
information. As a result, the Exchange believes this proposed rule
change permits fair competition among national securities exchanges.
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\27\ Id.
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The Exchange also does not believe the proposed fees would cause
any unnecessary or in appropriate [sic] burden on intermarket
competition as other exchanges are free to introduce their own
comparable data product and lower their prices to better compete with
the Exchange's offering. The Exchange does not believe the proposed
rule change would cause any unnecessary or inappropriate burden on
intramarket competition. Particularly, the proposed product and fees
apply uniformly to any purchaser, in that it does not differentiate
between subscribers that purchase cToM. The proposed fees are set at a
modest level that would allow any interested Member or non-Member to
purchase such data based on their business needs.
C. Self-Regulatory Organization's Statement on Comments on the Proposed
Rule Change Received From Members, Participants, or Others
Written comments were neither solicited nor received.
III. Date of Effectiveness of the Proposed Rule Change and Timing for
Commission Action
The foregoing rule change has become effective pursuant to Section
19(b)(3)(A)(ii) of the Act,\28\ and Rule 19b-4(f)(2) \29\ thereunder.
At any time within 60 days of the filing of the 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 to determine whether
the proposed rule should be approved or disapproved.
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\28\ 15 U.S.C. 78s(b)(3)(A)(ii).
\29\ 17 CFR 240.19b-4(f)(2).
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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#ef9d9a838ac28c8082828a819b9caf9c8a8cc1888099"><span class="__cf_email__" data-cfemail="6614130a034b05090b0b030812152615030548010910">[email protected]</span></a>. Please include
File Number SR-MIAX-2021-28 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-MIAX-2021-28. 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
[[Page 37397]]
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-MIAX-2021-28, and should be
submitted on or before August 5, 2021.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\30\
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\30\ 17 CFR 200.30-3(a)(12).
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J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2021-15031 Filed 7-14-21; 8:45 am]
BILLING CODE 8011-01-P
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