Notice2024-29626
Self-Regulatory Organizations; NYSE Chicago, Inc.; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change To Amend the Fee Schedule of NYSE Chicago, Inc.
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Published
December 17, 2024
Issuing agencies
Securities and Exchange Commission
Full Text
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<title>Federal Register, Volume 89 Issue 242 (Tuesday, December 17, 2024)</title>
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[Federal Register Volume 89, Number 242 (Tuesday, December 17, 2024)]
[Notices]
[Pages 102231-102234]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2024-29626]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-101879; File No. SR-NYSECHX-2024-35]
Self-Regulatory Organizations; NYSE Chicago, Inc.; Notice of
Filing and Immediate Effectiveness of a Proposed Rule Change To Amend
the Fee Schedule of NYSE Chicago, Inc.
December 11, 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 December 2, 2024, the NYSE Chicago, Inc. (``NYSE Chicago'' or
``Exchange'') filed with the Securities and Exchange Commission
(``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 Fee Schedule of NYSE Chicago,
Inc. (the ``Fee Schedule'') by modifying certain fees and credits
applicable to Participants for executions resulting from single-sided
orders. 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 the Fee Schedule by modifying
certain fees and credits applicable to Participants \4\ for executions
resulting from single-sided orders, as described below. The Exchange
proposes to implement the fee changes effective December 2, 2024.
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\4\ The term ``Participant'' is defined in Article 1, Rule 1(s)
to mean, among other things, any Participant Firm that holds a valid
Trading Permit and that a Participant shall be considered a
``member'' of the Exchange for purposes of the Act. If a Participant
is not a natural person, the Participant may also be referred to as
a Participant Firm.
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Background
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.'' \5\
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\5\ See Securities Exchange Act Release No. 51808 (June 9,
2005), 70 FR 37496, 37499 (June 29, 2005) (File No. S7-10-04) (Final
Rule) (``Regulation NMS'').
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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.'' \6\ Indeed, equity trading is currently dispersed across
16 exchanges,\7\ numerous alternative trading systems,\8\ and broker-
dealer internalizers and wholesalers, all competing for order flow.
Based on publicly available information, no single exchange currently
has more than 20% market share.\9\ 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 1%.\10\
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\6\ 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).
\7\ See Cboe U.S Equities Market Volume Summary, available at
<a href="https://markets.cboe.com/us/equities/market_share">https://markets.cboe.com/us/equities/market_share</a>.
\8\ 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>.
\9\ 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>.
\10\ 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 categories of
products. While it is not possible to know a firm's reason for shifting
order flow, the Exchange believes that one such reason is because of
fee changes at any of the registered exchanges or non-exchange venues
to which the firm routes order flow. Accordingly, competitive forces
compel the Exchange to use exchange transaction fees and credits
because market participants can readily trade on competing venues if
they deem pricing levels at those other venues to be more favorable.
Proposed Rule Change
Pursuant to Section E.1 of the Fee Schedule, the Exchange currently
charges a fee for removing liquidity and for providing liquidity in
single-sided orders in Tape A, B and C securities. For each of Tape A,
B and C securities with a share price equal to or greater than $1.00,
the Exchange charges a fee of $0.0010 per share for orders that both
remove liquidity and provide liquidity.
The Exchange proposes the following changes for single-sided orders
in Tape A, B and C securities that remove liquidity and provide
liquidity. For each single-sided order in Tape A, B and C
[[Page 102232]]
securities that removes liquidity, the Exchange proposes to modify the
fee from $0.0010 per share to $0.0030 per share. For each single-sided
order in Tape A, B and C securities that provides liquidity, the
Exchange proposes to replace the current fee of $0.0010 per share with
a credit of $0.0029 per share for orders that provide displayed
liquidity, and a credit of $0.0014 per share for orders that provide
non-displayed liquidity, including Mid-Point Liquidity (``MPL'')
Orders.\11\
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\11\ A MPL Order is a limit order that is not displayed and does
not route, with a working price at the lower (higher) of the
midpoint of the Protected Best Bid/Offer or its limit price. See
NYSE Chicago Rule 7.31(d)(3).
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The proposed rule change is intended to encourage Participants to
direct orders that add liquidity, thereby contributing to robust levels
of trading, which would benefit all market participants. The Exchange
believes that the proposed changes, taken together, will encourage
submission of additional liquidity in Tape A, B and C securities to
qualify for higher credits, thereby promoting price discovery and
transparency and enhancing order execution opportunities for
Participants. The Exchange notes that despite the fee increase proposed
for orders that remove liquidity, the Exchange's fees remain
competitive with the fees to remove liquidity in securities with a
share price equal to or greater than $1.00 charged by other equities
exchanges.\12\
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\12\ See infra, note 17.
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In connection with the proposed rule change, the Exchange also
proposes to amend the heading of Section E. of the Fee Schedule by
adding the words ``and Credits.'' With this proposed change, Section E.
would be titled ``Transaction and Order Processing Fees and Credits.''
The Exchange similarly proposes to add the words ``and credits'' to the
text that immediately follows the pricing table under Section E.1.
Additionally, the Exchange proposes to amend the text of paragraph (a)
under Section E.1 by adding the word ``fee'' after ``liquidity
removing'' and replacing the word ``fee'' with ``credits'' after
``liquidity providing'' and replace the word ``charged'' with
``assessed'' to account for the proposed change to adopt credits
payable to Participants under this proposed rule change. Finally, the
Exchange proposes to amend the heading titled ``Liquidity Providing
Fee'' under Section E.1 of the Fee Schedule to ``Liquidity Providing
Rate'' as that column will now contain fees and credits assessed to
Participants.
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 (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) and (5).
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The Exchange operates in a highly fragmented and competitive market
in which market participants can readily direct their order flow to
competing venues if they deem fee levels at a particular venue to be
excessive or incentives to be insufficient. More specifically, the
Exchange is only one of sixteen registered equities exchanges, and
there are a number of alternative trading systems and other off-
exchange venues, to which market participants may direct their order
flow. As noted above, based on publicly available information, no
single registered equities exchange has more than approximately 20% of
the total market share of executed volume of equities trading.\15\
Thus, in such a low-concentrated and highly competitive market, no
single equities exchange possesses significant pricing power in the
execution of order flow, and the Exchange represents less than 1% of
the overall market share.\16\ The Commission and the courts have
repeatedly expressed their 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.'' \17\
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\15\ See Cboe U.S Equities Market Volume Summary, available at
<a href="https://markets.cboe.com/us/equities/market_share">https://markets.cboe.com/us/equities/market_share</a>.
\16\ Id.
\17\ See Regulation NMS, supra note 5, 70 FR at 37499.
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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 new or different pricing structures being
introduced into the market. Accordingly, competitive forces constrain
the Exchange's transaction fees and rebates, and market participants
can readily trade on competing venues if they deem pricing levels at
those other venues to be more favorable. The Exchange believes the
proposal reflects a reasonable and competitive pricing structure
designed to incentivize Participants to direct orders that add and
remove liquidity to the Exchange, which the Exchange believes would
deepen liquidity and promote market quality on the Exchange to the
benefit of all market participants.
Fees for Orders That Remove Liquidity
The Exchange believes that the proposed increase to the fees for
transactions that remove liquidity in Tape A, B and C securities with a
share price equal to or greater than $1.00 is reasonable, equitably
allocated and not unfairly discriminatory. Combined with the adoption
of credits proposed herein, the purpose of this proposed rule change is
to encourage additional liquidity on the Exchange. The proposed pricing
structure is designed to continue to encourage Participants to maintain
or increase their order flow directed to the Exchange, thereby
contributing to a deeper and more liquid market to the benefit of all
market participants and enhancing the attractiveness of the Exchange as
a trading venue. The Exchange notes that the proposed fee for
executions of single-sided orders that remove liquidity is comparable
to, and competitive with, the fees charged for executions of liquidity-
removing orders charged by other equities exchanges.\18\ The Exchange
further believes the proposed increased fee is fair, equitable and not
unfairly discriminatory because the pricing tier will continue to be
available to all Participants whose orders remove liquidity. In
addition, the Exchange believes that the proposed increased fee is
equitable and not unfairly discriminatory as all similarly situated
market participants will be subject to the same fee on an equal and
non-discriminatory basis.
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\18\ Cboe EDGA Exchange, Inc. (``EDGA''), for example, charges a
fee of $0.0030 per share for orders that remove liquidity in
securities priced at or above $1.00. See EDGA 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>. Long-Term Stock Exchange (``LTSE'') similarly
charges a fee of $0.0030 per share for orders that remove liquidity
in securities priced at or above $1.00. See LTSE fee schedule,
available at <a href="https://ltse.com/trading/fee-schedules">https://ltse.com/trading/fee-schedules</a>.
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[[Page 102233]]
Credits for Orders That Provide Displayed and Non-Displayed Liquidity
The Exchange believes that the proposed changes to replace the
current fee with proposed credits for orders that provide displayed and
non-displayed liquidity in Tape A, B and C securities with a share
price equal to or greater than $1.00, including MPL Orders, are
reasonable, equitable and not unfairly discriminatory. The proposed
credits for adding liquidity are reasonable because they would serve to
incentivize submission of liquidity to a public exchange, thereby
benefiting all Participants. The Exchange believes the proposed credits
are also reasonable as they would apply to all Participants. The
Exchange believes that providing a credit of $0.0029 per share for
executions of single-sided orders that provide displayed liquidity, and
a credit of $0.0014 per share for executions of single-sided orders
that provide non-displayed liquidity and for MPL Orders is also
reasonable because the proposed credits are comparable to credits
provided by other equities exchanges.\19\
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\19\ LTSE, for example, provides a credit of $0.0028 per share
for orders that provide displayed liquidity, and a credit of $0.0014
per share for orders that provide non-displayed liquidity. See LTSE
fee schedule, available at <a href="https://ltse.com/trading/fee-schedules">https://ltse.com/trading/fee-schedules</a>.
NYSE Arca, Inc. (``NYSE Arca''), for example, provides a credit of
$0.0010 per share for MPL Orders. See NYSE Arca fee schedule,
available at <a href="https://www.nyse.com/publicdocs/nyse/markets/nyse-arca/NYSE_Arca_Marketplace_Fees.pdf">https://www.nyse.com/publicdocs/nyse/markets/nyse-arca/NYSE_Arca_Marketplace_Fees.pdf</a>.
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The Exchange believes that the proposed changes will encourage the
submission of a greater number of orders to a national securities
exchange, thus promoting price discovery and transparency and enhancing
order execution opportunities for Participants on the Exchange.
However, without having a view of Participant's activity on other
markets and off-exchange venues, the Exchange has no way of knowing
whether this proposed rule change would result in a change in trading
behavior by Participants. The Exchange believes that the recalibrated
fees and credits for orders that add and remove liquidity may provide
an incentive for Participants to increase the number of orders they
submit to the Exchange, thereby promote price discovery and increased
execution opportunities for all Participants.
The Exchange believes the proposed rule change would improve market
quality for all market participants on the Exchange and, as a
consequence, attract more liquidity to the Exchange, thereby improving
market-wide quality and price discovery. Additionally, with respect to
MPL Orders, the Exchange believes that the proposed credit is
reasonable, equitable and not unfairly discriminatory because it may
provide increased opportunities for market participants to interact
with orders priced at the midpoint of the PBBO, thus providing price
improving liquidity to market participants and thereby increase the
quality of order execution on the Exchange, which would benefit all
market participants. Moreover, all market participants would be
eligible for the proposed credit.
The Exchange also believes that the proposed changes to the text
under Section E.1. of the Fee Schedule would not be inconsistent with
the public interest and the protection of investors because investors
will not be harmed and in fact would benefit from increased clarity and
transparency, thereby reducing potential confusion.
The proposal neither targets nor will it have a disparate impact on
any particular category of market participant.
Finally, the submission of orders to the Exchange is optional for
Participants in that they could choose whether to submit orders to the
Exchange and, if they do, the extent of its activity in this regard.
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,\20\ 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 changes would encourage the submission of orders to a
public exchange, thereby promoting market depth, price discovery and
transparency and enhancing order execution opportunities for
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.'' \21\
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\20\ 15 U.S.C. 78f(b)(8).
\21\ See Securities Exchange Act Release No. 51808, 70 FR 37495,
37498-99 (June 29, 2005) (S7-10-04) (Final Rule).
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Intramarket Competition. The Exchange believes the proposed change
would not impose any burden on competition that is not necessary or
appropriate in furtherance of the purposes of the Act. The proposed
change is designed to attract additional orders to the Exchange. The
Exchange believes that despite the increased fee, Participants would
continue to direct their orders to be executed on the Exchange instead
of at a competing exchange, given the introduction of credits for
adding liquidity. Greater overall order flow, trading opportunities,
and pricing transparency benefit all market participants on the
Exchange by enhancing market quality and continuing to encourage
Participants to send orders, thereby contributing towards a robust and
well-balanced market ecosystem. Additionally, the Exchange believes the
proposed credits applicable to orders that provide non-displayed
liquidity and to MPL Orders would enhance order execution opportunities
for all Participants. The Exchange notes that the current and proposed
fees would be available to all similarly situated market participants,
and, as such, the proposed change would not impose a disparate burden
on competition among market participants on the Exchange. As noted, the
proposal would apply to all similarly situated Participants on the same
and equal terms, who would benefit from the changes on the same basis.
Intermarket Competition. The Exchange operates in a highly
competitive market in which market participants can readily choose to
send their orders to other exchange and off-exchange venues if they
deem fee levels at those other venues to be more favorable. As noted
above, the Exchange's market share of intraday trading (i.e., excluding
auctions) is currently less than 1%. In such an environment, the
Exchange must continually review, and consider adjusting its fees and
rebates to remain competitive with other exchanges and with off-
exchange venues. Because competitors are free to modify their own fees
and credits in response, the Exchange does not believe its proposed fee
change can impose any burden on intermarket competition.
The Exchange believes that the proposed changes 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.
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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 pursuant to Section
19(b)(3)(A)(ii) of the Act \22\ and Rule 19b-4(f)(2) thereunder.\23\ 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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\22\ 15 U.S.C. 78s(b)(3)(A)(ii).
\23\ 17 CFR 240.19b-4(f)(2).
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IV. Solicitation of Comments
Interested persons are invited to submit written data, views and
arguments concerning the foregoing, including whether the proposed rule
change is consistent with the Act. Comments may be submitted by any of
the following methods:
Electronic Comments
<bullet> Use the Commission's internet comment form (<a href="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#c3b1b6afa6eea0acaeaea6adb7b083b0a6a0eda4acb5"><span class="__cf_email__" data-cfemail="3c4e495059115f5351515952484f7c4f595f125b534a">[email protected]</span></a>. Please include
file number SR-NYSECHX-2024-35 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-NYSECHX-2024-35. 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-NYSECHX-2024-35 and should
be submitted on or before January 7, 2025.
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. 2024-29626 Filed 12-16-24; 8:45 am]
BILLING CODE 8011-01-P
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