Notice2022-02080
Self-Regulatory Organizations; NYSE American LLC; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change To Amend the NYSE American Options Fee Schedule
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Published
February 2, 2022
Issuing agencies
Securities and Exchange Commission
Full Text
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<title>Federal Register, Volume 87 Issue 22 (Wednesday, February 2, 2022)</title>
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[Federal Register Volume 87, Number 22 (Wednesday, February 2, 2022)]
[Notices]
[Pages 5923-5926]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2022-02080]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-94083; File No. SR-NYSEAMER-2022-07]
Self-Regulatory Organizations; NYSE American LLC; Notice of
Filing and Immediate Effectiveness of a Proposed Rule Change To Amend
the NYSE American Options Fee Schedule
January 27, 2022.
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 January 21, 2022, NYSE American LLC (``NYSE American''
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 American Options Fee
Schedule (``Fee Schedule'') to modify certain Market Maker incentives.
The Exchange proposes to implement the fee change effective January 21,
2022.\4\ The proposed 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.
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\4\ The Exchange originally filed to amend the Fee Schedule on
December 29, 2021 (SR-NYSEAmer-2021-51), with an effective date of
January 3, 2022, then withdrew such filing and amended the Fee
Schedule on January 12, 2022 (SR-NYSEAmer-2022-03), which latter
filing the Exchange withdrew on January 21, 2022.
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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 purpose of this filing is to modify certain incentives
available to NYSE American Options Market Makers (``Market Makers''),
as set forth below.
Currently, Market Makers are entitled to reduced per contract rates
for Electronic options transactions as set forth in Section I.C. of the
Fee Schedule, NYSE American Options Market Maker Sliding Scale--
Electronic (the ``Sliding Scale'').\5\ These lower per contract rates
are applicable to monthly volume within a given tier (expressed as
Market Maker Electronic ADV as a percentage of TCADV), such that the
lower per contract rate applies to volume that falls within the range
specified for each tier.\6\
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\5\ See Fee Schedule, Section I.C., NYSE American Options Market
Maker Sliding Scale--Electronic, available at: <a href="https://www.nyse.com/publicdocs/nyse/markets/american-options/NYSE_American_Options_Fee_Schedule.pdf">https://www.nyse.com/publicdocs/nyse/markets/american-options/NYSE_American_Options_Fee_Schedule.pdf</a>.
\6\ In calculating Market Maker Electronic monthly volumes, the
Exchange will exclude any volumes attributable to QCC trades, CUBE
Auctions, or Strategy Execution Fee Caps as these transactions are
subject to separate pricing described in Sections I.F., I.G. and
I.J. of the Fee Schedule, respectively. Id.
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The Exchange also offers a prepayment program to Market Makers, in
which Market Maker firms may prepay a portion of the fees they incur on
Electronic transactions, including CUBE transactions, ATP Fees, and
other fees (the ``Prepayment Program''). Market Makers who participate
in the Prepayment Program are entitled to further reduced rates on the
Sliding Scale.\7\
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\7\ See Fee Schedule, Section I.D., Prepayment Program.
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The Exchange now proposes to modify the requirements to qualify for
the Market Maker rates set forth in Tiers 1 through 4 of the Sliding
Scale and to adjust the Prepayment Program Participant Rate for non-
take volume in Tier 1, as modified. The Exchange also proposes to
eliminate Tier 5 of the Sliding Scale. These proposed changes are
reflected in the table below with deletions in brackets and new text in
italics.
[[Page 5924]]
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Prepayment Program Participant Rates
Rate per contract Rate per contract -------------------------------------
Tier Market Maker Electronic ADV as for non-take for take volume Rate per contract Rate per contract
a % of TCADV volume \1\ \1\ for non-take for take volume
volume \1\ \1\
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1........................................... 0.00% to [0.20] 0.25%......... $0.25 $0.25 [$0.22] $0.21 $0.24
2........................................... >[0.20% to 0.65%] 0.25% to 0.22 0.24 0.18 0.22
0.70%.
3........................................... >[0.65% to 1.40%] 0.70% to 0.12 0.17 0.09 0.13
1.50%.
4........................................... >[1.40% to 2.00%] 1.50%....... 0.09 0.14 0.06 0.10
[5.......................................... >2.00%........................ 0.06 0.09 0.03 0.06]
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The Exchange believes that the proposed changes will continue to
encourage Market Makers to direct orders and quotes to the Exchange and
to incent Market Makers to participate in the Prepayment Program to
receive reduced rates on Electronic options transactions, among other
benefits. Although the Exchange proposes slight increases to the ranges
covered by each of Tiers 1 through 4, the Exchange believes that the
Sliding Scale, as modified, would continue to offer a significant
reduction in overall transaction rates for Market Makers, as well as
additional reductions for Market Makers that participate in the
Prepayment Program. The Exchange further believes that the proposed
reduction to the Tier 1 rate per contract for non-take volume for
Prepayment Program participants will likewise continue to encourage
those Market Makers to participate in the program and to direct orders
and quotes to the Exchange to benefit from the reduced rates under the
program. Finally, the Exchange proposes to eliminate Tier 5 on the
Sliding Scale because it has not successfully incented Market Makers to
achieve the requisite volume to earn the corresponding per contract
rates.
Currently, the Exchange also offers Market Makers that participate
in the Prepayment Program a reduced rate on Manual transactions, as set
forth in Section I.A. of the Fee Schedule at footnote 6.\8\
Specifically, for each contract transacted manually, Market Makers
receive a $0.02 per contract discount, and NYSE American Options
Specialists/e-Specialists receive a $0.01 per contract discount. The
Exchange proposes to eliminate these reduced rates on Manual
transactions for participants in the Prepayment Program because this
incentive has not impacted their participation in Manual
transactions.\9\
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\8\ See Fee Schedule, Section I.A., Rates for Options
transactions, note 6.
\9\ To effect this change, the Exchange also proposes to delete
the references to footnote 6 in the ``Participant'' column of the
table in Section I.A. and to designate footnote 6 as ``Reserved.''
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The Exchange proposes to implement these changes effective January
12 [sic], 2022.
2. Statutory Basis
The Exchange believes that the proposed rule change is consistent
with Section 6(b) of the Act,\10\ in general, and furthers the
objectives of Sections 6(b)(4) and (5) of the Act,\11\ 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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\10\ 15 U.S.C. 78f(b).
\11\ 15 U.S.C. 78f(b)(4) and (5).
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The Proposed Rule Change Is Reasonable
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.'' \12\
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\12\ See Securities Exchange Act Release No. 51808 (June 9,
2005), 70 FR 37496, 37499 (June 29, 2005) (S7-10-04) (``Reg NMS
Adopting Release'').
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There are currently 16 registered options exchanges competing for
order flow. Based on publicly-available information, and excluding
index-based options, no single exchange has more than 16% of the market
share of executed volume of multiply-listed equity and ETF options
trades.\13\ Therefore, currently no exchange possesses significant
pricing power in the execution of multiply-listed equity and ETF
options order flow. More specifically, in November 2021, the Exchange
had less than 8% market share of executed volume of multiply-listed
equity and ETF options trades.\14\
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\13\ The OCC publishes options and futures volume in a variety
of formats, including daily and monthly volume by exchange,
available here: <a href="https://www.theocc.com/Market-Data/Market-Data-Reports/Volume-and-Open-Interest/Monthly-Weekly-Volume-Statistics">https://www.theocc.com/Market-Data/Market-Data-Reports/Volume-and-Open-Interest/Monthly-Weekly-Volume-Statistics</a>.
\14\ Based on a compilation of OCC data for monthly volume of
equity-based options and monthly volume of ETF-based options, see
id., the Exchange's market share in multiply-listed equity and ETF
options the Exchange's market share in equity-based options
decreased from 9.09% for the month of November 2020 to 7.06% for the
month of November 2021.
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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 or reduce use of certain categories of
products, in response to fee changes. Accordingly, competitive forces
constrain options exchange transaction fees. Stated otherwise, changes
to exchange transaction fees can have a direct effect on the ability of
an exchange to compete for order flow.
The Exchange believes the proposed modifications to the Sliding
Scale tier requirements for Market Makers and the rates available to
Prepayment Program participants are reasonable because they would
continue to incent Market Makers, including Prepayment Program
participants, to direct orders and quotes to the Exchange and because
the Sliding Scale fee structure, as modified, would remain in line with
a similarly structured program on another options exchange.\15\ The
Exchange also believes the elimination of Tier 5 of the Sliding Scale
and the reduced Manual rates for Prepayment Program participants is
reasonable, as neither incentive has fulfilled its intended purpose to
date.
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\15\ See CBOE Options Exchange Fee Schedule, Liquidity Provider
Sliding Scale and footnote 10, available at: <a href="https://www.cboe.com/publish/feeschedule/CBOEFeeSchedule.pdf">https://www.cboe.com/publish/feeschedule/CBOEFeeSchedule.pdf</a> (providing liquidity
providers that prepay monthly fees with reduced transaction rates).
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To the extent the proposed change continues to attract greater
volume and liquidity to the Exchange, the Exchange believes the
proposed change would improve the Exchange's overall competitiveness
and strengthen its market quality for all market
[[Page 5925]]
participants. In the backdrop of the competitive environment in which
the Exchange operates, the proposed rule change is a reasonable attempt
by the Exchange to increase the depth of its market and improve its
market share relative to its competitors.
While the Exchange cannot predict the extent to which Market Makers
would choose to participate in the Prepayment Program or seek to
achieve the Sliding Scale tiers, the Exchange believes that Market
Makers would continue to be encouraged to take advantage of the
favorable rates available in the Sliding Scale tiers and through the
Prepayment Program, thereby increasing order flow to the Exchange and
promoting market quality for all market participants.
The Proposed Rule Change is an Equitable Allocation of Credits and Fees
The Exchange believes the proposed rule change is an equitable
allocation of its fees and credits. The proposal is based on the amount
and type of business transacted on the Exchange, and Market Makers can
opt to participate in the Prepayment Program or not, and to achieve one
of the tiers on the Sliding Scale, or not. Moreover, to the extent the
proposal is designed to continue to encourage Market Makers to commit
capital to the Exchange as a demonstration of long-term participation
on the Exchange as a primary execution venue, the Exchange believes
that the proposed modifications to incent Market Maker participation in
the Prepayment Program are an equitable allocation of fees and credits.
In addition, to the extent that the proposed change continues to incent
Market Makers to increase volume on the Exchange in order to qualify
for the Sliding Scale rates, the resulting increased order flow would
continue to make the Exchange a more competitive venue for, among other
things, order execution.
The Exchange believes that eliminating Tier 5 of the Sliding Scale
and the reduced Manual rates for Prepayment Program participants is an
equitable allocation of fees and credits because these incentives have
not successfully encouraged the intended Market Maker activity.
Thus, the Exchange believes the proposed rule change would improve
market quality for all market participants on the Exchange and, as a
consequence, attract more order flow to the Exchange, thereby improving
market-wide quality and price discovery.
The Proposed Rule Change Is Not Unfairly Discriminatory
The Exchange believes the proposed modifications are not unfairly
discriminatory because they would apply and be available to all
similarly-situated market participants on an equal and non-
discriminatory basis. Specifically, the proposal is based on the amount
and type of business transacted on the Exchange, and Market Makers are
not obligated to participate in the Prepayment Program or try to
achieve any of the Sliding Scale tiers that would provide for reduced
rates. In addition, because Market Makers have increased obligations
with respect to trading on the Exchange, the Exchange believes that the
proposed changes are not unfairly discriminatory to non-Market Makers
and further believes that the proposed change would continue to incent
Market Makers to both participate in the Prepayment Program and
increase orders and quotes directed to the Exchange. To the extent that
the proposed change attracts a variety of transactions to the Exchange,
this increased order flow would continue to make the Exchange a more
competitive venue for order execution. Thus, the Exchange believes the
proposed rule change would improve market quality for all market
participants on the Exchange and, as a consequence, attract more order
flow to the Exchange, thereby improving market-wide quality and price
discovery. The resulting increased volume and liquidity would provide
more trading opportunities and tighter spreads to all market
participants and thus would 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, in general, to protect
investors and the public interest.
The Exchange further believes that the elimination of Sliding Scale
Tier 5 and the reduced Manual rates for Prepayment Program participants
is not unfairly discriminatory because the reduced rates have not been
effective in incenting Market Makers to execute sufficient volume to
qualify for the tier or to execute Manual transactions, as applicable.
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, the Exchange does
not believe that the proposed rule change would 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 changes 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 all market participants. 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.'' \16\
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\16\ See Reg NMS Adopting Release, supra note 12, at 37499.
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Intramarket Competition. The proposed change is designed to attract
additional order flow to the Exchange by offering competitive rates
based on increased volumes on the Exchange, including further reduced
rates for Market Makers that participate in the Prepayment Program. The
Exchange believes that the proposed modifications to the Sliding Scale
and other incentives available to Market Makers would continue to
incent Market Makers to direct additional volume to the Exchange.
Greater liquidity benefits all market participants on the Exchange, and
increased volume from Market Makers would increase opportunities for
execution of other trading interest. The proposed modifications would
apply to all similarly-situated Market Makers and, because Market
Makers have increased obligations with respect to trading on the
Exchange, are not unfairly discriminatory to non-Market Makers, and
thus 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 favor one
of the 16 competing option exchanges if they deem fee levels at a
particular venue to be excessive. In such an environment, the Exchange
must continually adjust its fees to remain competitive with other
exchanges and to attract order flow to the Exchange. Based on publicly-
available information, and excluding index-based options, no single
exchange has more than 16% of the market share of executed volume of
multiply-listed
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equity and ETF options trades.\17\ Therefore, currently no exchange
possesses significant pricing power in the execution of multiply-listed
equity and ETF options order flow. More specifically, in November 2021,
the Exchange had less than 8% market share of executed volume of
multiply-listed equity and ETF options trades.\18\
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\17\ See supra note 13.
\18\ Based on a compilation of OCC data for monthly volume of
equity-based options and monthly volume of ETF-based options, see
id., the Exchange's market share in multiply-listed equity and ETF
options the Exchange's market share in equity-based options
decreased from 9.09% for the month of November 2020 to 7.06% for the
month of November 2021.
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The Exchange believes that the proposed rule change reflects this
competitive environment because it modifies the Exchange's fees in a
manner designed to continue to encourage Market Makers to direct
trading interest to the Exchange, to provide liquidity and to attract
order flow. Specifically, the Exchange believes that the modifications
to the Sliding Scale would continue to offer a significant reduction in
overall transaction rates for Market Makers, as well as additional
reductions for Market Makers that participate in the Prepayment
Program. To the extent that this purpose is achieved, all the
Exchange's market participants should benefit from the improved market
quality and increased opportunities for price improvement.
The Exchange also believes that the proposed change would promote
competition between the Exchange and other execution venues, 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="https://www.sec.gov/rules/sro.shtml">https://www.sec.gov/rules/sro.shtml</a>); or
<bullet> Send an email to <a href="/cdn-cgi/l/email-protection#fd8f889198d09e9290909893898ebd8e989ed39a928b"><span class="__cf_email__" data-cfemail="a7d5d2cbc28ac4c8cacac2c9d3d4e7d4c2c489c0c8d1">[email protected]</span></a>. Please include
File Number SR-NYSEAMER-2022-07 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-NYSEAMER-2022-07. 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="https://www.sec.gov/rules/sro.shtml">https://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-NYSEAMER-2022-07, and should
be submitted on or before February 23, 2022.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\22\
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\22\ 17 CFR 200.30-3(a)(12).
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J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2022-02080 Filed 2-1-22; 8:45 am]
BILLING CODE 8011-01-P
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