Notice2024-13535
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
June 21, 2024
Issuing agencies
Securities and Exchange Commission
Full Text
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<title>Federal Register, Volume 89 Issue 120 (Friday, June 21, 2024)</title>
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[Federal Register Volume 89, Number 120 (Friday, June 21, 2024)]
[Notices]
[Pages 52182-52185]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2024-13535]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-100332; File No. SR-NYSEAMER-2024-41]
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
June 14, 2024.
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 June 12, 2024, 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 and II
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 replace the Excessive Bandwidth
Utilization Fees with a single fee. The Exchange proposes to implement
the fee changes effective June 12, 2024.\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\ On May 1, 2024, the Exchange originally filed to amend the
Fee Schedule (NYSEAMER-2024-30) and, on May 16, 2024, the Exchange
withdrew that filing and submitted NYSEAMER-2024-32. On May 30,
2024, the Exchange withdrew NYSEAMER-2024-32 and submitted NYSEAMER-
2024-37, which latter filing the Exchange withdrew on June 12, 2024.
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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 amend the Fee Schedule to replace
the Order to Trade Ratio Fee and Messages to Contracts Traded Ratio Fee
with an Excessive Bandwidth Utilization Fee to reflect the Exchange's
migration to NYSE Pillar (``Pillar''). The Exchange proposes to
implement the fee changes effective May 30, 2024 [sic].
[[Page 52183]]
The Exchange imposes certain fees to discourage excessive message
traffic (that do not result in executions or otherwise improve market
quality) that could unnecessarily tax the Exchange's resources,
bandwidth, and capacity, as no system has unlimited capacity.
With the Exchange's migration to the Pillar trading platform,
market participants can send both quote and order message traffic over
a single connection. This functionality allows the Exchange to monitor
the message traffic of each ATP Holder, which in turn impacts how the
Exchange calculates (and assess fees for) each ATP Holder's use of
Exchange bandwidth and processing resources.
Currently, the Exchange assesses two fees designed to curtail
excessive message traffic: an Order to Trade Ratio Fee that is based on
the number of orders entered as compared to the number of executions
received in a calendar month and a Messages to Contracts Traded Ratio
Fees that measures the efficiency of an ATP Holder's orders and quotes,
subject to certain exceptions (collectively, the ``Excessive Traffic
fees'').\5\ Because the Pillar trading system enables the Exchange to
monitor the excessive message traffic of both orders and quotes, the
Exchange has determined it no longer needs both Excessive Traffic fees.
The Exchange therefore proposes a single ``Monthly Excessive Bandwidth
Utilization Fee'' or ``EBUF''.\6\ As detailed below, the proposed EBUF
is similar in structure to the existing Order to Trade Ratio Fee,
except that the proposed EBUF would include quotes, which reflects the
communication protocol available on Pillar. Consistent with the purpose
of the proposed EBUF, the Exchange believes that assessing one fee
(instead of two) for excessive message traffic would result in a more
efficient use of Exchange resources.\7\
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\5\ See Fee Schedule, Section II. Monthly Excessive Bandwidth
Utilization Fees, II.A. (Order to Trade Ratio Fees) and II.B.
(Messages to Contracts Traded Ratio Fees). The calculation for
assessing the Messages to Contracts Traded Ratio Fees, which
aggregates the activity of affiliated entities, does not include for
quotes submitted by a Specialist or e-Specialist that set the NBBO
in their allocated issues and Market Makers that execute a monthly
average daily volume electronically of at least 20,000 contracts (as
aggregated all options issues in their assignment). See Fee
Schedule, Sections II.A. and B, respectively. If an ATP Holder is
liable for either or both fees in a given month, that firm is only
charged the greater of the two fees. See Fee Schedule, Section II.
\6\ See proposed Fee Schedule, Section II., Monthly Excessive
Bandwidth Utilization Fee.
\7\ As discussed further herein, the Exchange does not propose
to carry forward the existing ``Messages to Contracts Traded Ratio
Fee'' because the proposed EBUF is designed to capture the excessive
quote traffic that was captured by that fee. Because Pillar
processing renders the ``Messages to Contracts Traded Ratio Fee''
redundant (and therefore unnecessary), the Exchange believes the
proposed EBUF would streamline the Fee Schedule.
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Like the Order to Trade Ratio Fee, the proposed EBUF is designed to
strike the right balance between deterring ATP Holders from submitting
an excessive number of messages (that do not result in executions or
otherwise improve market quality) without discouraging ATP Holders from
accessing the Exchange, except that it will include quotes. As
proposed, the EBUF will only be assessed on ATP Holders that send more
than 50 million messages per day on average during a calendar month.\8\
For purposes of EBUF, ``messages'' include quotes, orders, order
cancellations and modifications.\9\
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\8\ See proposed Fee Schedule, Section II., Monthly Excessive
Bandwidth Utilization Fee.
\9\ Id.
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The proposed EBUF would calculate an ATP Holder's ``Monthly Message
to Execution Ratio'' (i.e., the number of messages sent versus the
number of executions). The Exchange has determined that, on Pillar,
setting a baseline threshold for this ``Monthly Message to Execution
Ratio'' at 500,000 to 1 or greater should ensure the efficient use of
the Exchange's resources, bandwidth, and capacity by ATP Holders that
are actively trading on the Exchange. Thus, as proposed, the Exchange
will calculate the number of messages submitted by an ATP Holder, and
the number of executions by the ATP Holder, and will only assess the
EBUF if the Monthly Message to Execution Ratio exceeds 500,000 to 1.
The proposed Fee will be assessed to further encourage efficient use of
the Exchange's resources as shown here:
------------------------------------------------------------------------
Monthly message to execution ratio Monthly charge
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Between 500,000 and 749,999 to 1........................ $5,000
Between 750,000 and 999,999 to 1........................ 10,000
1,000,000 to 1 and greater.............................. 15,000
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Like the Order to Trade Ratio Fee, the higher the Messages to
Executions Ratio (i.e., the more unexecuted message that Pillar
ingests), the higher the proposed fee, which increase is designed to
discourage (increasing levels of) excessive message traffic by ATP
Holders. The Exchange notes that the proposed minimum thresholds for
triggering the proposed EBUF are higher than the thresholds associated
with the Order to Trade Ratio Fee (but the associated fees are
substantially the same), which reflects the fact that both quotes and
orders (and cancellations or modification thereof) are ``messages''
included in the calculation as well as the fact that Pillar can
accommodate more message traffic than the Exchange's pre-Pillar
system.\10\ The proposed EBUF thresholds are set at levels that an ATP
Holder should not hit or exceed in the ordinary course of trading. As
such, the Exchange believes that the proposed EBUF thresholds and
associated fees are set at levels reasonable designed to encourage ATP
Holders to efficiently use message traffic as necessary.
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\10\ For example, the current Order to Trade Ratio Fee has
minimum ``order to execution'' ratio thresholds of between 10,000
and 14,999 to 1, with an accompanying fee of $5,000; between 15,000
and 19,999 to 1, with an accompanying fee of $10,000; between 20,000
and 24,999 to 1, with an accompanying fee of $20,000; and 25,000 to
1 and greater, with an accompanying fee of $35,000.
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In addition, like both existing Excessive Traffic fees, the
Exchange will not assess the EBUF for an ATP Holder's first occurrence
in a rolling twelve-month period (the ``Exemption'').\11\ For example,
an ATP Holder that exceeds the minimum EBUF threshold in October 2024
will not be assessed the EBUF as long as that ATP Holder does not
exceed the minimum EBUF threshold again before October 2025. If that
same ATP Holder exceeds the minimum EBUF threshold in December 2025, it
will not incur the EBUF if it does not exceed the minimum EBUF before
December 2026. As noted above, an ATP Holder should not exceed the EBUF
in its normal course of trading. Therefore, the proposed Exemption acts
as a guardrail of sorts that is designed to protect ATP Holders from
incurring the EBUF when they first encounter lower than expected
executions in a rolling twelve-month period, such as when they are new
to the Pillar trading platform, deploying new technologies, or testing
different trading strategies, thereby encouraging ATP Holders to
maintain their trading activity on the Exchange by mitigating the
initial impact of the EBUF.
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\11\ Compare Section II. of the Fee Schedule with the proposed
Section II. of the Fee Schedule, Monthly Excessive Bandwidth
Utilization Fee.
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Further, consistent with the application of the existing Excessive
Traffic fees, the Exchange will likewise retain discretion to exclude
one or more days of data for purposes of calculating the proposed EBUF
if the Exchange determines, in its sole discretion, that one or more
ATP Holders or the Exchange was experiencing a bona fide systems
problem.\12\
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\12\ See id.
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In adopting the single EBUF, the Exchange will no longer asses the
Messages to Contracts Traded Ratio Fee
[[Page 52184]]
(``Ratio''), which was adopted in 2011 to address quote traffic.\13\ In
calculating this additional Ratio fee, an ATP Holder could aggregate
all of its activity (orders and quotes and contracts) with its
affiliates.\14\ To encourage the use of quotes instead of orders, the
Exchange excluded from the Ratio fee calculation certain quotes (i.e.,
quotes setting the NBBO and those of Specialists). Because the proposed
EBUF monitors each ATP Holder's orders and quotes, the Exchange
believes there is no need to carry forward this Ratio fee. Further, the
Exchange notes that retaining this Ratio fees could result in ATP
Holders potentially being double charged for similar excessive
messaging activity. As such, the Exchange believes that adopting a
single EBUF would be a more efficient use of Exchange resources and
less burdensome to market participants.
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\13\ See Securities Exchange Act Release No. 64655 (June 13,
2011), 76 FR 35495 (June 17, 2011) (immediately effective filing
that, among other things, adopted the Messages to Contracts Traded
Ratio Fee) (SR-NYSEAmex-2011-37).
\14\ The Exchange notes that this aggregation feature of the
Ratio fee was not being employed by ATP Holders. The Order to Trade
Ratio Fee does not include an aggregation feature. Accordingly, the
proposed EBUF (which is similar to this fee) does not include an
aggregation feature.
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In connection with the proposed EBUF (and associated removal of the
current Excessive Traffic fees), the Exchange proposes to delete from
the Fee Schedule both Excessive Traffic fees and the now-expired
waivers.\15\
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\15\ See proposed Fee Schedule, Monthly Excessive Bandwidth
Utilization Fee.
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2. Statutory Basis
The Exchange believes that the proposed rule change is consistent
with Section 6(b) of the Act,\16\ in general, and furthers the
objectives of Sections 6(b)(4) and (5) of the Act,\17\ 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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\16\ 15 U.S.C. 78f(b).
\17\ 15 U.S.C. 78f(b)(4) and (5).
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The Exchange believes that the proposed EBUF is reasonable,
equitable, and not unfairly discriminatory because it is designed to
strike the right balance between deterring ATP Holders from submitting
an excessive number of messages that do not result in an execution (or
improve market quality) without discouraging ATP Holders from accessing
the Exchange. To the extent that the proposed EBUF results in the
efficient use of the Exchange's finite resources, all market
participant stand to benefit from improved market quality.
The proposal to assess one fee (instead of two) for excessive
message traffic is reasonable as it would result in a more efficient
use of Exchange resources and would streamline the Fee Schedule, which
benefits all market participants. The Exchange believes that the
proposed EBUF, which captures excessive quote traffic, would render the
``Messages to Contracts Traded Ratio Fee'' redundant and therefore
unnecessary.\18\
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\18\ As noted herein, the Pillar trading system enables the
Exchange to monitor the excessive message traffic of both orders and
quotes and the Exchange no longer needs both Excessive Traffic fees.
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The Exchange believes that the proposed minimum EBUF thresholds,
which are higher than the thresholds associated with the Order to Trade
Ratio Fee (but carry roughly the same incremental fees), are reasonable
because, unlike the Order to Trade Ratio Fee, the proposed EBUF counts
a broader category of ``message,'' including quotes, orders, order
cancellations, and modifications. Therefore, the Exchange believes the
EBUF appropriately accounts for the significantly wider category of
``messages'' now included and accounts for the increased capacity
available to Exchange participants on the Pillar trading system. Given
that the proposed EBUF is meant to operate as a guardrail of sorts that
an ATP Holder should not ``hit'' or exceed in the ordinary course of
trading, the Exchange proposes to set the EBUF thresholds at levels
reasonably designed to encourage ATP Holders to efficiently use message
traffic as necessary.
The Exchange believes that the proposed Exemption is reasonable,
equitable, and not unfairly discriminatory because is designed to
protect ATP Holders from incurring the EBUF when they first encounter
lower than expected executions in a rolling twelve-month period, such
as when they are new to the Pillar trading platform, deploying new
technologies, or testing different trading strategies, thereby
encouraging ATP Holders to maintain their trading activity on the
Exchange by mitigating the initial impact of the EBUF. The Exchange
believes the proposed Exemption is reasonable as it is intended to
lessen the initial impact of the EBUF while affording ATP Holders an
opportunity to moderate or fine tune their message rates as needed
once-every-twelve-months.
The proposed EBUF is a reasonable, equitable, and not unfairly
discriminatory because it neither targets nor will it have a disparate
impact on any category of market participant. The proposed EBUF would
impact all similarly situated ATP Holders on an equal basis; all ATP
Holders would be eligible for the Exemption the first time they incur
the EBUF in a rolling 12-month period.
The Exchange believes that eliminating the Ratio fee (in favor of
the single EBUF) is reasonable, equitable, and not unfairly
discriminatory because it is rendered redundant by the proposed EBUF,
which will monitor both order and quotes of each ATP Holder.\19\
Because the proposed EBUF monitors quote traffic, the Exchange believes
that retaining this Ratio fee would risk the potential for ATP Holders
being double charged for similar excessive messaging activity. The
proposed EBUF (like the Order to Trade Ratio Fee) would not include the
option for ATP Holders to aggregate their activity with their
affiliates.\20\ Moreover, ATP Holders did not employ this aspect of the
Ratio fee. As such, the Exchange believes that adopting a single EBUF
would be a more efficient use of Exchange resources and less burdensome
to market participants.
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\19\ As noted herein, the Pillar trading system enables the
Exchange to monitor the excessive message traffic of both orders and
quotes and the Exchange no longer needs both Excessive Traffic fees.
\20\ See supra note 14.
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The Exchange believes that the removal of the obsolete text from
the Fee Schedule (regarding the Excessive Traffic fees and associated
stale waiver language) would further the protection of investors and
the public interest by promoting clarity and transparency in Fee
Schedule thereby making the Fee Schedule easier to navigate and
understand.
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.
Intramarket Competition. The Exchange believes the proposed EBUF,
including the Exemption, would not place an unfair burden on
intramarket competition because it is designed to encourage efficient
and rational use of the Exchange's finite resources and would apply to
all market participants. Similarly, the elimination of the Ratio
[[Page 52185]]
fee will impact all similarly situated ATP Holders.
The deletion of the language relating to the now-expired waivers of
the Excessive Traffic fees would remove from the Fee Schedule language
that is no longer applicable to any ATP Holders and, accordingly, would
not have any impact on intramarket competition. The proposed Exemption
would apply equally to all ATP Holders; all ATP Holders would be
eligible for the Exemption for the first occurrence of the proposed
Ratio Threshold Fee in a rolling 12-month period.
Intermarket Competition. The Exchange believes the proposed EBUF,
including the Exemption, would not place an unfair burden on
intermarket competition as it is not intended to address any
competitive issues but is instead designed solely to encourage the
efficient use of the Exchange's resources. The Exchange believes that
the proposed EBUF should deter excessive message traffic that does not
improve market quality which, in turn, will sustain the Exchange's
overall competitiveness.
The proposed deletion of text related to the Excessive Traffic fees
would add clarity to the Fee Schedule by removing obsolete pricing and,
accordingly, would not have any impact on intermarket competition.
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="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#2153544d440c424e4c4c444f5552615244420f464e57"><span class="__cf_email__" data-cfemail="91e3e4fdf4bcf2fefcfcf4ffe5e2d1e2f4f2bff6fee7">[email protected]</span></a>. Please include
file number SR-NYSEAMER-2024-41 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-2024-41. 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 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-2024-41 and should
be submitted on or before July 12, 2024.
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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Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2024-13535 Filed 6-20-24; 8:45 am]
BILLING CODE 8011-01-P
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