Notice2023-18105
Self-Regulatory Organizations; NYSE American LLC; Notice of Filing and Immediate Effectiveness of Proposed Change To Modify the NYSE American Options Fee Schedule
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Published
August 23, 2023
Issuing agencies
Securities and Exchange Commission
Full Text
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<title>Federal Register, Volume 88 Issue 162 (Wednesday, August 23, 2023)</title>
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[Federal Register Volume 88, Number 162 (Wednesday, August 23, 2023)]
[Notices]
[Pages 57481-57485]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2023-18105]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-98159; File No. SR-NYSEAMER-2023-40]
Self-Regulatory Organizations; NYSE American LLC; Notice of
Filing and Immediate Effectiveness of Proposed Change To Modify the
NYSE American Options Fee Schedule
August 17, 2023.
Pursuant to section 19(b)(1) \1\ of the Securities Exchange Act of
1934 (``Act'') \2\ and Rule 19b-4 thereunder,\3\ notice is hereby given
that, on August 8, 2023, NYSE American LLC (``NYSE American'' or
``Exchange'') 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 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 modify the NYSE American Options Fee
Schedule (``Fee Schedule'') regarding Floor Broker incentives and the
Strategy Execution Fee Cap. The Exchange proposes to implement the fee
changes effective August 8, 2023.\4\ 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.
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\4\ The Exchange previously filed to amend the Fee Schedule on
July 31, 2023 (SR-NYSEAMER-2023-38) and withdrew such filing on
August 8, 2023.
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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 to amend the Fee Schedule to (1) delete
text relating to the expired Floor Broker Grow With Me Program and add
a new Floor Broker incentive, and (2) add dividend strategies to the
list of strategy executions eligible for the Strategy Execution Fee Cap
(the ``Strategy Cap''). The Exchange proposes to implement the rule
changes on August 8, 2023.
[[Page 57482]]
Floor Broker Incentives
The Exchange proposes to modify Section III.E.2. of the Fee
Schedule to delete text providing for the Floor Broker Grow With Me
Program (the ``Grow With Me Program''), which expired on July 31, 2023,
and to introduce the Floor Broker Manual Billable Incentive Program
(the ``Manual Billable Incentive Program''). The Exchange proposes that
Floor Brokers would be eligible for rebates on manual billable volume
through the Manual Billable Incentive Program by achieving certain
qualifying levels of average daily manual billable contracts.
Specifically, a Floor Broker would earn a rebate of ($0.05) per manual
billable side by executing an average daily volume of 40,000 manual
billable contracts; a rebate of ($0.07) per manual billable side by
executing an average daily volume of 100,000 manual billable contracts;
or a rebate of ($0.09) per manual billable side by executing an average
daily volume of 150,000 manual billable contracts. Rebates available
through the Manual Billable Incentive Program would be payable back to
the first contract, and Floor Brokers would earn the highest rebate for
which they qualify.\5\ The Exchange believes that the proposed
qualifications for rebates available through the Manual Billable
Incentive Program are reasonable and attainable by Floor Brokers based
on their recent manual billable volume.
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\5\ For example, a Floor Broker that executes an average daily
volume of 100,000 manual billable contracts would be eligible for
the ($0.07) rebate but would not also earn the ($0.05) rebate.
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Although the Exchange cannot predict with certainty whether the
proposed change would encourage Floor Brokers to increase their manual
billable volume, the proposed change is designed to continue to
incentivize Floor Brokers to do so by offering rebates on manual
billable volume. All Floor Brokers would be eligible to earn a rebate
through the Manual Billable Incentive Program, as proposed.
Strategy Cap
Currently, the Strategy Cap provides for a $1,000 cap on
transaction fees for strategy executions involving (a) reversals and
conversions, (b) box spreads, (c) short stock interest spreads, (d)
merger spreads, and (e) jelly rolls.\6\ The Strategy Cap applies to
each strategy execution executed in standard option contracts on the
same trading day. In addition, the cap is reduced to $200 on
transactions fees for qualifying strategies traded on the same trading
day for those ATP Holders that trade at least 25,000 monthly billable
contract sides in qualifying strategy executions.
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\6\ See Fee Schedule, Section I.J., Strategy Execution Fee Cap.
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The Exchange now proposes to modify Section I.J. of the Fee
Schedule to add dividend strategies as item (f) in the list of strategy
executions eligible for the Strategy Cap (and to make non-substantive
conforming changes to include an item (f) in such list). The Exchange
also proposes that dividend strategies would be included among the
strategies that contribute to an ATP Holder's qualification for the
lower cap of $200. Finally, the Exchange proposes to add new
subparagraph (f) to Section I.J. of the Fee Schedule to define a
dividend strategy as transactions done to achieve a dividend arbitrage
involving the purchase, sale, and exercise of in-the-money options of
the same class, executed the first business day prior to the date on
which the underlying stock goes ex-dividend.
The Exchange notes that other options exchanges currently offer
caps on fees for dividend strategy executions.\7\ Although the Exchange
cannot predict with certainty whether the proposed change would
encourage ATP Holders to increase their dividend strategy executions,
the proposed change is intended to encourage additional dividend
strategy executions on the Exchange by including them in the strategies
eligible for the Strategy Cap (including the lower cap for qualifying
ATP Holders).
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\7\ See, e.g., BOX Options Fee Schedule, Section V.D. (Strategy
QOO Order Fee Cap and Rebate), available at: <a href="https://boxexchange.com/assets/BOX-Fee-Schedule-as-of-July-3-2023.pdf">https://boxexchange.com/assets/BOX-Fee-Schedule-as-of-July-3-2023.pdf</a>
(providing for daily cap on manual transaction fees for dividend
strategies); Nasdaq PHLX LLC Options 7, Section 4, available at:
<a href="https://listingcenter.nasdaq.com/rulebook/phlx/rules/Phlx%20Options%207">https://listingcenter.nasdaq.com/rulebook/phlx/rules/Phlx%20Options%207</a> (providing for daily cap on fees for dividend
strategies).
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2. Statutory Basis
The Exchange believes that the proposed rule change is consistent
with section 6(b) of the Act,\8\ in general, and furthers the
objectives of sections 6(b)(4) and (5) of the Act,\9\ 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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\8\ 15 U.S.C. 78f(b).
\9\ 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.'' \10\
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\10\ 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.\11\ Therefore, no exchange possesses significant pricing power
in the execution of multiply-listed equity and ETF options order flow.
More specifically, in June 2023, the Exchange had less than 7% market
share of executed volume of multiply-listed equity and ETF options
trades.\12\
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\11\ 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>.
\12\ 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 equity-based options decreased
from 7.43% for the month of June 2022 to 6.57% for the month of June
2023.
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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 deletion of the language
describing the Grow With Me Program is reasonable because the program
has expired, and the deletion would thus improve the clarity of the Fee
Schedule and reduce confusion as to the fees and credits that are
currently in effect. The Exchange also believes that the removal of
obsolete text from the Fee Schedule would further the protection of
investors and the public interest by promoting clarity and transparency
in the Fee Schedule and making the Fee
[[Page 57483]]
Schedule easier to navigate and understand.
The Exchange believes that the proposed Manual Billable Incentive
Program is reasonable because it is designed to continue to incent
Floor Brokers to increase their manual billable volume executed on the
Exchange. The Exchange also believes that the proposed change is
reasonable because the proposed volume thresholds to qualify for the
rebates are attainable based on recent manual billable volume executed
by Floor Brokers, and the proposed rebates would be available to all
Floor Brokers.
The Exchange believes the proposed modification of the Strategy Cap
is reasonable because it is designed to encourage ATP Holders to
increase their dividend strategies executed on the Exchange by
including dividend strategies among the strategy executions eligible
for the Strategy Cap. The Exchange also believes the proposed change
could incent ATP Holders to execute and aggregate dividend strategy
orders as well as other types of strategy orders at NYSE American as a
primary execution venue.
To the extent that the proposed changes attract greater volume and
liquidity, the Exchange believes they would improve the Exchange's
overall competitiveness, strengthen its market quality for all market
participants, and continue to make the Exchange a more competitive
venue for order execution, which, in turn, promotes just and equitable
principles of trade and removes impediments to and perfects the
mechanism of a free and open market and a national market system. The
Exchange notes that all market participants stand to benefit from any
increase in volume, which could promote market depth, facilitate
tighter spreads, and enhance price discovery, particularly to the
extent the proposed change encourages market participants to utilize
the Exchange as a primary trading venue, and may lead to a
corresponding increase in order flow from other market participants.
In addition, 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. The Exchange's fees are
constrained by intermarket competition, as ATP Holders may direct their
order flow to any of the 16 options exchanges, including those that
also offer caps on dividend strategies.\13\ Thus, ATP Holders have a
choice of where they direct their order flow, including their strategy
executions. The proposed rule change is designed to incent ATP Holders
to direct liquidity to the Exchange, thereby promoting market depth and
enhancing order execution opportunities for market participants.
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\13\ See note 7, supra.
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The Proposed Rule Change Is an Equitable Allocation of Fees and Credits
The Exchange believes the proposed rule change is an equitable
allocation of its fees and credits. The proposed deletion of language
relating to the expired Grow With Me Program would eliminate text from
the Fee Schedule no longer applicable to any Floor Brokers, thus
impacting all similarly situated Floor Brokers on an equal basis and
improving the clarity of the Fee Schedule to the benefit of all market
participants. The proposed Manual Billable Incentive Program is
equitable because it is based on the amount and type of business
transacted on the Exchange; Floor Brokers can choose to execute manual
billable volume to earn rebates through the program or not. In
addition, the rebates offered through the Manual Billable Incentive
Program would be available to all qualifying Floor Brokers equally. The
Exchange further believes that the proposed change is equitable because
it is intended to encourage the role performed by Floor Brokers in
facilitating the execution of orders via open outcry, a function which
the Exchange wishes to support for the benefit of all market
participants. To the extent the proposed change continues to encourage
increased liquidity on the Exchange, all market participants would
benefit from enhanced opportunities for price improvement and order
execution.
The Exchange also believes that the proposed change to the Strategy
Cap is an equitable allocation of fees and credits because it is based
on the amount and type of business transacted on the Exchange, and ATP
Holders can opt to avail themselves of the Strategy Cap or not. The
modified Strategy Cap, as proposed, would continue to be available to
all ATP Holders that direct strategy executions, including dividend
strategies, to the Exchange. Moreover, the proposal is designed to
continue to encourage ATP Holders to aggregate strategy executions at
the Exchange as a primary execution venue. To the extent that the
proposed change attracts more dividend strategies 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 marked-wide quality and price
discovery.
The Proposed Rule Change Is Not Unfairly Discriminatory
The Exchange believes the proposed rule change is not unfairly
discriminatory. The proposed elimination of text describing the expired
Grow With Me Program would affect all Floor Brokers on an equal and
non-discriminatory basis, as the program would no longer be available
to any Floor Brokers. The Exchange believes that the proposed Manual
Billable Incentive Program is not unfairly discriminatory because all
Floor Brokers are eligible to qualify for the rebates offered through
the program. Moreover, the proposed change is not unfairly
discriminatory to non-Floor Brokers because Floor Brokers serve an
important function in facilitating the execution of orders on the
Exchange, which the Exchange wishes to encourage and support to promote
price improvement opportunities for all market participants.
The Exchange also believes the proposed change is not unfairly
discriminatory because the proposed modification of the Strategy Cap
would apply to all similarly-situated market participants on an equal
and non-discriminatory basis. The proposal is based on the amount and
type of business transacted on the Exchange, and ATP Holders are not
obligated to try to achieve the Strategy Cap, nor are they obligated to
execute any dividend strategies. Rather, the proposal is designed to
encourage ATP Holders to increase their dividend strategy executions
and to utilize the Exchange as a primary trading venue for all strategy
executions (if they have not done so previously).
Thus, the Exchange believes that, to the extent the proposed rule
change would continue to improve market quality for all market
participants on the Exchange by attracting 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, protect investors and the
public interest.
[[Page 57484]]
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.
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.'' \14\
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\14\ See Reg NMS Adopting Release, supra note 10, at 37499.
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Intramarket Competition. The Exchange does not believe that the
proposed changes would impose any burden on intramarket competition
that is not necessary or appropriate. The proposed changes are designed
to attract order flow to the Exchange. The proposed Manual Billable
Incentive Program is intended to attract additional order flow to the
Exchange by offering Floor Brokers rebates on manual billable volume,
which could increase the volume of contracts traded on the Exchange.
The proposed modification of the Strategy Cap to include dividend
strategies is intended to attract additional dividend strategies to the
Exchange and could also encourage ATP Holders to aggregate all strategy
executions on the Exchange to qualify for the Strategy Cap. Greater
liquidity benefits all market participants on the Exchange, and
increased manual billable transactions and strategy executions could
increase opportunities for execution of other trading interest.
Finally, the proposed deletion of language relating to the Grow With Me
Program would remove language from the Fee Schedule no longer
applicable to any Floor Brokers and, accordingly, would not have any
impact on intramarket competition.
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 equity and ETF options trades.\15\ Therefore, no
exchange possesses significant pricing power in the execution of
multiply-listed equity and ETF options order flow. More specifically,
in June 2023, the Exchange had less than 8% market share of executed
volume of multiply-listed equity and ETF options trades.\16\
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\15\ See note 11, supra.
\16\ See note 12, supra.
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The Exchange believes that the proposed rule change reflects this
competitive environment because it modifies the Exchange's fees and
credits in a manner designed to continue to incent additional manual
billable volume and dividend strategy volume to the Exchange, to
provide liquidity, and to attract order flow. To the extent the
proposed changes encourage Floor Brokers and other market participants
to utilize the Exchange as a primary trading venue for all
transactions, all of 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 could
promote competition between the Exchange and other execution venues, as
other competing options exchanges currently offer fee caps for dividend
strategies.\17\ Finally, the Exchange believes that deleting text
describing the Grow With Me Program would add clarity to the Fee
Schedule by removing expired pricing and, accordingly, would not have
any impact on intermarket competition.
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\17\ See note 7, supra.
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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 has become effective upon filing pursuant
to section 19(b)(3)(A) \18\ of the Act and paragraph (f) 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.
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\18\ 15 U.S.C. 78s(b)(3)(A).
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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#2052554c450d434f4d4d454e5453605345430e474f56"><span class="__cf_email__" data-cfemail="740601181159171b1919111a0007340711175a131b02">[email protected]</span></a>. Please include
file number SR-NYSEAMER-2023-40 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-NYSEAMER-2023-40. 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="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
a.m. and 3 p.m. Copies of the filing also will be available for
inspection and copying at the principal office of the Exchange. Do not
include personal identifiable information in submissions; you should
submit only information that you wish to make available
[[Page 57485]]
publicly. We may redact in part or withhold entirely from publication
submitted material that is obscene or subject to copyright protection.
All submissions should refer to file number SR-NYSEAMER-2023-40 and
should be submitted on or before September 13, 2023.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\19\
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\19\ 17 CFR 200.30-3(a)(12).
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Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2023-18105 Filed 8-22-23; 8:45 am]
BILLING CODE 8011-01-P
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