Notice2021-25228
Self-Regulatory Organizations; NYSE National, Inc.; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Amend Its Schedule of Fees and Rebates
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Published
November 19, 2021
Issuing agencies
Securities and Exchange Commission
Full Text
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<title>Federal Register, Volume 86 Issue 221 (Friday, November 19, 2021)</title>
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[Federal Register Volume 86, Number 221 (Friday, November 19, 2021)]
[Notices]
[Pages 64971-64974]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2021-25228]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-93576; File No. SR-NYSENAT-2021-21]
Self-Regulatory Organizations; NYSE National, Inc.; Notice of
Filing and Immediate Effectiveness of Proposed Rule Change To Amend Its
Schedule of Fees and Rebates
November 15, 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 November 1, 2021, NYSE National, Inc. (``NYSE National''
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 its Schedule of Fees and Rebates
(``Fee Schedule'') to (1) modify the fee for non-tiered orders adding
liquidity in securities priced at or above $1.00; (2) modify the
requirements to qualify for Removing Tier 4; and (3) add new Removing
Tier 5. The Exchange proposes to implement the rule change on November
1, 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 the
Statutory Basis for, the Proposed Rule Change
1. Purpose
The Exchange proposes to amend its Fee Schedule to (1) modify the
fee for non-tiered orders adding liquidity in securities priced at or
above $1.00; (2) modify the requirements to qualify for Removing Tier
4; and (3) add new Removing Tier 5.
The proposed changes respond to the current competitive environment
where order flow providers have a choice of where to direct liquidity-
providing and liquidity-removing orders by offering further incentives
for ETP Holders to send additional adding and removing liquidity to the
Exchange.
The Exchange proposes to implement the rule change on November 1,
2021.
Current Market and Competitive Environment
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. 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.'' \4\
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\4\ See Securities Exchange Act Release No. 51808 (June 9,
2005), 70 FR 37496, 37499 (June 29, 2005) (S7-10-04) (Final Rule)
(``Regulation NMS'').
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As the Commission itself has recognized, the market for trading
services in NMS stocks has become ``more fragmented and competitive.''
\5\ Indeed, equity trading is currently dispersed across 16
exchanges,\6\ 31 alternative trading systems,\7\ and numerous broker-
dealer internalizers and wholesalers. Based on publicly-available
information, no single exchange has more than 18% of the market.\8\
Therefore, no exchange possesses significant pricing power in the
execution of equity order flow. More specifically, the Exchange's share
of executed volume of equity trades in Tapes A, B and C securities is
less than 2%.\9\
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\5\ See Securities Exchange Act Release No. 51808, 84FR 5202,
5253 (February 20, 2019) (File No. S7-05-18) (Transaction Fee Pilot
for NMS Stocks Final Rule) (``Transaction Fee Pilot'').
\6\ 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>. See generally <a href="https://www.sec.gov/fast-answers/divisionsmarketregmrexchangesshtml.html">https://www.sec.gov/fast-answers/divisionsmarketregmrexchangesshtml.html</a>.
\7\ 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>.
\8\ 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>.
\9\ 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 products, in
response to fee changes. While it is not possible to know a firm's
reason for moving order flow, the Exchange believes that one such
reason is because of fee changes at any of the registered exchanges or
non-exchange trading venues to which a firm routes order flow. These
fees can vary from month to month, and not all are publicly available.
With respect to non-marketable order flow that would provide liquidity
on an exchange, ETP Holders can choose from any one of the
[[Page 64972]]
16 currently operating registered exchanges to route such order flow.
Accordingly, competitive forces constrain the Exchange's transaction
fees, and market participants can readily trade on competing venues if
they deem pricing levels at those other venues to be more favorable.
The Exchange utilizes a ``taker-maker'' or inverted fee model to
attract orders that provide liquidity at the most competitive prices.
Under the taker-maker model, offering rebates for taking (or removing)
liquidity increases the likelihood that market participants will send
orders to the Exchange to trade with liquidity providers' orders. This
increased taker order flow provides an incentive for market
participants to send orders that provide liquidity. The Exchange
generally charges fees for order flow that provides liquidity. These
fees are reasonable due to the additional marketable interest (in part
attracted by the Exchange's rebate to remove liquidity) with which
those order flow providers can trade.
Proposed Rule Change
To respond to this competitive environment, the Exchange proposes
the following changes to its Fee Schedule designed to provide order
flow providers with additional incentives to route order flow to the
Exchange. As described above, ETP Holders have a choice of where to
send their order flow.
Change of Fee for Non-Tiered Orders Adding Liquidity
The Exchange proposes to increase the fee for non-tiered orders
adding liquidity in securities priced at or above $1.00, currently set
at $0.0028 per share, to $0.0029 per share. The proposed fee is
competitive and would still be less than the fees charged by other
markets for non-tiered orders adding liquidity.\10\
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\10\ See, e.g., Nasdaq BX Pricing Schedule, available at <a href="https://www.nasdaqtrader.com/Trader.aspx?id=bx_pricing">https://www.nasdaqtrader.com/Trader.aspx?id=bx_pricing</a> (providing $0.0030
standard rate for adding displayed liquidity); Cboe EDGA Exchange
Fee Schedule, available at <a href="https://www.cboe.com/us/equities/membership/fee_schedule/edga">https://www.cboe.com/us/equities/membership/fee_schedule/edga</a>/ (providing $0.0030 standard rate for
adding displayed liquidity).
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Proposed Change To Removing Tier 4 and Addition of New Removing Tier 5
Under current Removing Tier 4, the Exchange provides a rebate of
$0.0015 per share to ETP Holders that remove liquidity from the
Exchange in securities with a per share price of $1.00 or more and that
have at least 50,000 Adding ADV.
The Exchange proposes to revise Removing Tier 4 by adding an
additional requirement. As proposed, ETP Holders would qualify for the
current rebate by if they have at least 50,000 Adding ADV and Adding
ADV and Removing ADV combined of at least 0.04% of US CADV. The
Exchange does not propose any changes to the removing rate for orders
that remove liquidity that qualify for Removing Tier 4.
In addition, the Exchange proposes to add new Removing Tier 5,
which would provide a rebate of $0.0007 per share to ETP Holders that
remove liquidity from the Exchange in securities with a per share price
of $1.00 or more and that have at least 50,000 Adding ADV.
The Exchange believes that together, these proposed changes will
incentivize more ETP Holders to route liquidity-removing and liquidity-
adding order flow to the Exchange to meet the tier requirements for
Removing Tier 4 by adding the proposed requirement to Removing Tier 4
of a combination of Adding and Removing ADV.\11\ For ETP Holders who
cannot meet the proposed additional requirement to qualify for proposed
Removing Tier 4, the Exchange believes that the addition of proposed
new Removing Tier 5 would encourage additional removing order flow to
the Exchange by providing a $0.0007 per share rebate for ETP Holders
that meet the 50,000 Adding ADV requirement, which would still be less
than the fees charged by other markets for non-tiered orders adding
liquidity.\12\
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\11\ The Exchange currently uses a similarly-structured
requirement for Removing Tier 1. See Securities Exchange Act Release
No. 89640 (August 12, 2020), 85 FR 53041 (August 27, 2020) (SR-
NYSENAT-2020-27).
\12\ See Nasdaq BX Pricing Schedule, available at <a href="https://www.nasdaqtrader.com/Trader.aspx?id=bx_pricing">https://www.nasdaqtrader.com/Trader.aspx?id=bx_pricing</a> (providing rebates of
$0.0005 for Tapes A and B and $0.0004 for Tape C for firms adding at
least 50,000 ADV).
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The Exchange believes that the increased order flow that may result
from these proposed changes would in turn support the quality of price
discovery on the Exchange and provide additional price improvement
opportunities for incoming orders.
As noted, the Exchange operates in a competitive environment. The
Exchange does not know how much order flow ETP Holders choose to route
to other exchanges or to off-exchange venues. Based on the profile of
firms generally, the Exchange believes that additional ETP Holders
could qualify for Removing Tier 4 with the additional qualification
criteria if they choose to direct order flow to the Exchange. Without
having a view of ETP Holders' activity on other exchanges and off-
exchange venues, the Exchange has no way of knowing whether this
proposed rule change would result in any additional ETP Holders
directing orders to the Exchange in order to qualify for the Removing
Tier 4 or Removing Tier 5 rate.
The proposed changes are not otherwise intended to address any
other issues, and the Exchange is not aware of any problems that ETP
Holders 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 6(b)(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) & (5).
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The Proposed Change Is Reasonable
As discussed 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.'' \15\ 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.'' \16\
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\15\ See Regulation NMS, supra note 4, at 37499.
\16\ 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).
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Given the current competitive environment, the Exchange believes
that the proposal represents a reasonable attempt to attract additional
order flow to the Exchange while aligning the Exchange's fees with
those charged by other markets. Specifically, the
[[Page 64973]]
proposed fee increase for non-tiered orders adding liquidity in
securities priced at or above $1.00 is reasonable because it is
competitive and the proposed fee would remain advantageous when
compared to the fees charged by other markets for non-tiered orders
adding liquidity.\17\ In addition, the Exchange believes that the
proposed changes to the Removing Tiers are reasonable because they
would encourage greater liquidity for ETP Holders routing order flow to
the Exchange.
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\17\ See supra note 10.
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The Exchange believes that the proposal as a whole represents a
reasonable effort to promote price discovery and enhanced order
execution opportunities for ETP Holders. All ETP Holders would benefit
from the greater amounts of liquidity on the Exchange, which would
represent a wider range of execution opportunities.
The Proposal Is an Equitable Allocation of Fees and Rebates
The Exchange believes the proposed rule change equitably allocates
its fees among its market participants. The proposed change would
continue to encourage ETP Holders to both submit additional liquidity
to the Exchange and execute orders on the Exchange, thereby
contributing to robust levels of liquidity, to the benefit of all
market participants.
The Exchange believes that increasing the fee currently charged for
non-tiered orders adding liquidity in securities priced at or above
$1.00 is an equitable allocation of fees. Even though the proposed
change would increase the fee for non-tiered orders, the Exchange does
not believe that it will discourage executions on the Exchange because
the proposed fee would remain advantageous when compared with
comparable fees charged by other markets.\18\ To the extent that the
proposed change continues to attract order flow to the Exchange, this
order flow would make the Exchange a more competitive venue for, among
other things, order execution. Thus, the Exchange believes the proposed
rule change would continue to improve market quality for all market
participants on the Exchange and, as a consequence, continue to attract
more order flow to the Exchange, thereby improving market-wide quality
and price discovery.
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\18\ See id.
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Similarly, the Exchange believes that the proposed changes to the
Removing Tiers would encourage the submission of additional liquidity
to the Exchange, thus enhancing order execution opportunities for ETP
Holders from the additional amounts of liquidity present on the
Exchange. All ETP Holders would benefit from the greater amounts of
liquidity that would be present on the Exchange, which would provide
greater execution opportunities and improve market quality.
The Exchange further believes that the proposal constitutes an
equitable allocation of fees and credits because all similarly situated
ETP Holders and other market participants would be eligible for the
same general and tiered rates and would be eligible for the same fees
and credits. Moreover, the proposed change is equitable because the
revised fees would apply equally to all similarly situated ETP Holders.
The proposal neither targets nor will it have a disparate impact on any
particular category of market participant.
The Proposal 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.
Moreover, the proposal neither targets nor will it have a disparate
impact on any particular category of market participant. The Exchange
believes that the proposal does not permit unfair discrimination
because the proposal would be applied to all similarly situated ETP
Holders and all ETP Holders would be subject to the same modified fee
for non-tiered orders adding liquidity in securities priced at or above
$1.00, and to the same qualification requirements for modified Removing
Tier 4 and new Removing Tier 5. Accordingly, no ETP Holder already
operating on the Exchange would be disadvantaged by the proposed
allocation of fees and credits.
The Exchange further believes that the proposed changes would not
permit unfair discrimination among ETP Holders because the non-tiered
and tiered rates are available equally to all ETP Holders. As described
above, in today's competitive marketplace, order flow providers have a
choice of where to direct order flow, and the Exchange believes there
are additional ETP Holders that could qualify if they chose to direct
their order flow to the Exchange.
Finally, 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,\19\ 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 change would encourage the submission of additional
liquidity and order flow to a public exchange, thereby 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 competition among orders, which
promotes ``more efficient pricing of individual stocks for all types of
orders, large and small.'' \20\
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\19\ 15 U.S.C. 78f(b)(8).
\20\ Regulation NMS, 70 FR at 37498-99.
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Intramarket Competition. The proposed change is designed to attract
additional order flow to the Exchange. As described above, the Exchange
believes that the proposed change would provide additional incentives
for market participants to route liquidity-providing and liquidity-
removing orders to the Exchange. Greater liquidity benefits all market
participants on the Exchange by providing more trading opportunities
and encourages ETP Holders to send orders, thereby contributing to
robust levels of liquidity. The proposed revised requirements for the
tiered rebates and fees would be available to all similarly-situated
market participants, and thus, the proposed change would not impose a
disparate burden on competition among market participants on the
Exchange.
Intermarket Competition. The Exchange operates in a highly
competitive market in which market participants can readily choose to
send their orders to other exchanges and off-exchange venues if they
deem fee levels at those other venues to be more favorable. In such an
environment, the Exchange must continually adjust its fees and rebates
to remain competitive with other exchanges and off-exchange venues.
Because competitors are free to modify their own fees and rebates 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.
[[Page 64974]]
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) \21\ of the Act and subparagraph (f)(2) of Rule
19b-4 \22\ thereunder, because it establishes a due, fee, or other
charge imposed by the Exchange.
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\21\ 15 U.S.C. 78s(b)(3)(A).
\22\ 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) \23\ of the Act to determine whether the proposed
rule change should be approved or disapproved.
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\23\ 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#3d4f485158105e5250505853494e7d4e585e135a524b"><span class="__cf_email__" data-cfemail="b1c3c4ddd49cd2dedcdcd4dfc5c2f1c2d4d29fd6dec7">[email protected]</span></a>. Please include
File Number SR-NYSENAT-2021-21 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-NYSENAT-2021-21. 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-NYSENAT-2021-21 and should be submitted
on or before December 10, 2021.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\24\
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\24\ 17 CFR 200.30-3(a)(12).
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J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2021-25228 Filed 11-18-21; 8:45 am]
BILLING CODE 8011-01-P
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