Notice2025-06514
Self-Regulatory Organizations; Cboe BZX Exchange, Inc.; Notice of Filing of a Proposed Rule Change To Amend Various Provisions of Exchange Rule 14.11
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Published
April 17, 2025
Issuing agencies
Securities and Exchange Commission
Full Text
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<title>Federal Register, Volume 90 Issue 73 (Thursday, April 17, 2025)</title>
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[Federal Register Volume 90, Number 73 (Thursday, April 17, 2025)]
[Notices]
[Pages 16222-16224]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2025-06514]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-102843; File No. SR-CboeBZX-2025-049]
Self-Regulatory Organizations; Cboe BZX Exchange, Inc.; Notice of
Filing of a Proposed Rule Change To Amend Various Provisions of
Exchange Rule 14.11
April 11, 2025.
Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934
(``Act''),\1\ and Rule 19b-4 thereunder,\2\ notice is hereby given
that, on March 31, 2025, Cboe BZX Exchange, Inc. (``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 Exchange. 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\ 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
Cboe BZX Exchange, Inc. (``BZX'' or the ``Exchange'') is filing
with the Securities and Exchange Commission (``Commission'' or ``SEC'')
a proposed rule change to various provisions of Exchange Rule 14.11
that would (1) amend the requirement for a registered Market Maker in a
UTP Derivative Security or a Derivative Security listed on the Exchange
to file with the Exchange a current list identifying Related Instrument
Trading Accounts; and (2) eliminate the prohibition that a Member
acting as a registered Market Maker in a UTP Derivative Security or a
Derivative Security listed on the Exchange may not trade in a Related
Instrument Trading Account that has not been reported to the Exchange.
The text of the proposed rule change is also available on the
Exchange's website (<a href="http://markets.cboe.com/us/equities/regulation/rule_filings/bzx/">http://markets.cboe.com/us/equities/regulation/rule_filings/bzx/</a>), at the Exchange's Office of the Secretary, 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 Exchange 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 these 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 aspects of such
statements.
A. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
1. Purpose
The Exchange proposes to amend certain provisions under Exchange
Rule 14.11 to require Members \3\ that are registered as a Market Maker
\4\ in an Unlisted Trading Privilege (``UTP'') Derivative Security \5\
or a Derivative Security \6\ listed on the Exchange (``BZX-Listed
Derivative Security'') to provide a list identifying Related Instrument
\7\ Trading Accounts \8\ only at the request of the Exchange.\9\ The
Exchange also proposes to amend provisions under Rule 14.11 to
eliminate the prohibition that a Member acting as a registered Market
Maker in a UTP Derivative Security or BZX-Listed Derivative Security
may not have a Related Instruments Trading Account which has not been
reported to the Exchange. The proposal would not limit the Exchange's
authority to request, nor limit the registered Market Maker's
obligation to produce, any books, records, or other information
pertaining to any Related Instrument Trading Account or to the account
of any registered or non-registered employee affiliated with the Market
Maker for which Related Instruments are traded.\10\ Such provisions
apply to any Derivative Security listed pursuant to Rules 14.11(d)
Interpretation and Policy .01(a) Securities Linked to the Performance
of Indexes and Commodities (Including Currencies), 14.11(e)(4)(G)
Commodity-Based Trust Shares, 14.11(e)(5)(G) Currency Trust Shares,
14.11(e)(6)(G) Commodity Index Trust Shares, 14.11(e)(7)(F)(i)
Commodity Futures Trust Shares, 14.11(e)(8)(E)(i) Partnership Units,
14.11(e)(9))(F) Trust Units, 14.11(e)(10)(F)(i) Managed Trust
Securities, and Rule 14.11(f)(4)(D)(i) Trust Issued Receipts
(collectively with Rule 14.11(j) UTP Derivative Securities, the
``Market Maker Restriction Rules''). Derivative Securities that are
listed and traded on the Exchange pursuant to the Applicable Rules
require the Exchange to file separate proposals under Section 19(b) of
the Act before listing the Derivative Securities and each of those
filings contain references to the current rules.\11\ The Exchange notes
that this
[[Page 16223]]
proposed amendment to its rules would also apply to all BZX-Listed
Derivative Securities already listed and traded on the Exchange
pursuant to the Applicable Rules pursuant to the proposals filed under
Section 19(b) of the Act.
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\3\ See Exchange Rule 1.5(n).
\4\ See Exchange Rule 1.5(l).
\5\ See Exchange Rule 1.5(ee).
\6\ See Exchange Rule 1.5(dd).
\7\ ``Reference Assets'' refers to the currencies, commodities,
or derivatives based on one or more currencies or commodities, or
derivatives based on a basket or index comprised of currencies or
commodities, for which a UTP Derivative Security or BZX-Listed
Derivative Security derives its value. See e.g., Exchange Rule
14.11(j)(4). ``Related Instruments'' refers to the Reference Assets
collectively with the underlying physical asset or commodity,
related futures or options on futures, and any other related
derivatives of the UTP Derivative Security or BZX-Listed Derivative
Security. See e.g., Exchange Rule 14.11(j)(4)(A).
\8\ ``Related Instrument Trading Accounts'' refers to accounts
for which Related Instruments are trading in which (i) the Market
Maker Holds an interest; (ii) over which it has investment
discretion; or (iii) in which it shares in the profits and/or
losses. See Exchange Rule 14.11(j)(4)(B)(i)-(iii).
\9\ The Exchange notes that Exchange Rule 22.7 has similar
requirements to those at issue in Rule 14.11; however, the Exchange
is proposing to amend Rule 22.7 through a separate Rule amendment.
\10\ See Exchange Rule 14.11(j)(4)(B).
\11\ The Exchange notes that the following BZX-Listed
Derivatives Securities have been approved by the Commission and are
currently listed and traded on the Exchange: see Securities Exchange
Act Release Nos. 100216 (May 22, 2024) 89 FR 46514 (May 29, 2024)
(SR-CboeBZX-2023-070) (Notice of Filing of Amendment No. 2 to a
Proposed Rule Change to List and Trade Shares of the ARK 21Shares
Ethereum ETF Under BZX Rule 14.11(e)(4), Commodity-Based Trust
Shares); 99288 (January 8, 2024) 89 FR 2387 (January 12, 2024) (SR-
CboeBZX-2023-028) (Notice of Filing of Amendment No. 5 to a Proposed
Rule Change To List and Trade Shares of the ARK 21Shares Bitcoin ETF
Under BZX Rule 14.11(e)(4), Commodity-Based Trust Shares); 99290
(January 8, 2024) 89 FR 2338 (January 12, 2024) (SR-CboeBZX-2023-
044) (Notice of Filing of Amendment No. 3 to a Proposed Rule Change
To List and Trade Shares of the Wise Origin Bitcoin Fund Under BZX
Rule 14.11(e)(4), Commodity-Based Trust Shares); 100215 (May 22,
2024) 89 FR 46478 (May 29, 2024) (SR-CboeBZX-2023-095) (Notice of
Filing of Amendment No. 2 to a Proposed Rule Change to List and
Trade Shares of the Fidelity Ethereum Fund Under BZX Rule
14.11(e)(4), Commodity-Based Trust Shares); 99286 (January 8, 2024)
89 FR 2372 (January 12, 2024) (SR-CboeBZX-2023-072) (Notice of
Filing of Amendment No. 1 to a Proposed Rule Change To List and
Trade Shares of the Franklin Bitcoin ETF Under BZX Rule 14.11(e)(4),
Commodity-Based Trust Shares); 100218 (May 22, 2024) 89 FR 46499
(May 29, 2024) (SR-CboeBZX-2024-018) (Notice of Filing of Amendment
No. 1 to a Proposed Rule Change Relating To List and Trade Shares of
the Franklin Ethereum ETF, a Series of the Franklin Ethereum Trust,
Under BZX Rule 14.11(e)(4), Commodity-Based Trust Shares); 101963
(December 18. 2024) 89 FR 105109 (December 26, 2024) (SR-CboeBZX-
2024-091) (Notice of Filing of Amendment No. 1 to a Proposed Rule
Change To List and Trade Shares of the Franklin Crypto Index ETF, a
Series of the Franklin Crypto Trust, Under BZX Rule 14.11(e)(4),
Commodity-Based Trust Shares); 94094 (January 28, 2022) 87 FR 6206
(February 3, 2022) (SR-CboeBZX-2022-005) (Notice of Filing and
Immediate Effectiveness of Proposed Rule Change To List and Trade
Shares of the Goldman Sachs Physical Gold ETF Under BZX Rule
14.11(e)(4) (Commodity-Based Trust Shares)); 99283 (January 8, 2024)
89 FR 2263 (January 12, 2024) (SR-CboeBZX-2023-038) (Notice of
Filing of Amendment No. 2 to a Proposed Rule Change To List and
Trade Shares of the Invesco Galaxy Bitcoin ETF Under BZX Rule
14.11(e)(4), Commodity-Based Trust Shares); 100219 (May 22, 2024) 89
FR 46543 (May 29, 2024) (SR-CboeBZX-2023-087) (Notice of Filing of
Amendment No. 1 to a Proposed Rule Change To List and Trade Shares
of the Invesco Galaxy Ethereum ETF Under BZX Rule 14.11(e)(4),
Commodity-Based Trust Shares); 99289 (January 8, 2024) 89 FR 2413
(January 12, 2024) (SR-CboeBZX-2023-040) (Notice of Filing of
Amendment No. 2 to a Proposed Rule Change To List and Trade Shares
of the VanEck Bitcoin Trust Under BZX Rule 14.11(e)(4), Commodity-
Based Trust Shares); 100214 (May 22, 2024) 89 FR 46462 (May 29,
2024) (SR-CboeBZX-2023-069) (Notice of Filing of Amendment No. 2 to
a Proposed Rule Change to List and Trade Shares of the VanEck
Ethereum Trust Under BZX Rule 14.11(e)(4), Commodity-Based Trust
Shares); and 99292 (January 8, 2024) 89 FR 2429 (January 12, 2024)
(SR-CboeBZX-2023-042) (Notice of Filing of Amendment No. to a
Proposed Rule Change To List and Trade Shares of the WisdomTree
Bitcoin Fund Under BZX Rule 14.11(e)(4), Commodity-Based Trust
Shares).
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Background
Prior to 2014, Exchange Rules prohibited a Market Maker in a UTP
Derivative Security from acting or registering as a market maker on
another exchange in any Related Instrument of a UTP Derivative
Security. In 2014, the Exchange amended Rule 14.11(j) to permit a
Member acting as a registered Market Maker in a UTP Derivatives
Security on the Exchange the flexibility to act or register as a Market
Maker in any Reference Asset that a UTP Derivative Security derives its
value from consistent with the Commission and Exchange Rules.\12\ To
allow for this flexibility, among other requirements, Rule 14.11(j)
requires a Member acting as a registered Market Maker in a UTP
Derivative Security to file with the Exchange, in a manner prescribed
by the Exchange, and to keep a current list identifying all accounts
for trading the Related Instruments which the Member acting as a
registered Market Maker may have or over which it may exercise
investment discretion (i.e., Related Instrument Trading Accounts).
Additionally, Rule 14.11(j)(4) prohibits a Member from acting as a
registered Market Maker in the UTP Derivative Security from trading in
Related Instruments in an account in which a Member acting as a
registered Market Maker, directly or indirectly, controls trading
activities, or has a direct interest in the profits or losses thereof
(i.e., Related Instrument Trading Accounts), that has not been reported
to the Exchange. Substantively identical Exchange Rules exist under the
remaining Market Maker Restriction Rules.
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\12\ See Securities Exchange Act No. 73743 (December 4, 2014)
(79 FR 73367) (December 10, 2014) (SR-BATS-2014-057) (Notice of
Filing and Immediate Effectiveness of a Proposed Rule Change To
Amend Rule 14.11(j)(5) of BATS Exchange, Inc., To Remove the
Restriction Prohibiting Market Makers in UTP Derivative Securities
From Acting or Registering as a Market Maker in Any Reference Asset
of That UTP Derivative Security or Any Derivative Instrument Based
on Such Reference Asset).
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Proposal
Now, the Exchange proposes to amend the Market Maker Restriction
Rules to require a registered Market Maker to file with the Exchange a
current list identifying all Related Instrument Trading Accounts only
upon the request of the Exchange. For example, the Exchange proposes to
amend Exchange Rule 14.11(j)(4)(A) to provide that a Member acting as a
registered Market Maker in a UTP Derivative Security, must upon the
request of and in a manner prescribed by the Exchange, file with the
Exchange a current list identifying all accounts for trading the
Related Instruments which the Member acting as a registered Market
Maker may have or over which it may exercise investment discretion. The
Exchange proposes to make substantively similar amendments to all other
relevant subsections of the Market Maker Restriction Rules \13\ to
require a registered Market Maker to file with the Exchange a current
list identifying all Related Instrument Trading Accounts only upon the
request of the Exchange.
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\13\ The relevant subsections of the Market Maker Restriction
Rules are as follows: Securities Linked to the Performance of
Indexes and Commodities (Including Currencies) (Rule 14.11(d)
Interpretation and Policy .01(a)), Commodity-Based Trust Shares
(Rule 14.11(e)(4)(G)), Currency Trust Shares (Rule 14.11(e)(5)(G)),
Commodity Index Trust Shares (Rule 14.11(e)(6)(G)), Commodity
Futures Trust Shares (Rule 14.11(e)(7)(F)(i)), Partnership Units
(Rule 14.11(e)(8)(E)(i)), Trust Units (Rule 14.11(e)(9))(F), Managed
Trust Securities (Rule 14.11(e)(10)(F)(i)), and Trust Issued
Receipts (Rule 14.11(f)(4)(D)(i)).
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The Exchange also proposes to delete provisions of the Market Maker
Restriction Rules that provides that a Member acting as a registered
Market Maker in a UTP Derivative Security or a BZX-Listed Derivative
Security may not trade in a Related Instrument Trading Account that has
not been reported to the Exchange. For example, the Exchange proposes
to delete the sentence of Rule 14.11(j)(4)(B) which states that ``[a]
Market Maker may not have an interest in, exercise investment
discretion over, or share in the profits and/or losses of a Related
Instrument Trading Account which has not been reported to the Exchange
as required by this Rule.'' The Exchange proposes to remove similar
prohibitions from all other Market Maker Restriction Rules \14\ to
delete substantively similar sentences.
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\14\ Id.
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Last, the Exchange proposes to amend Rule 14.11(j)(4)(B) to provide
that a Market Maker shall, upon the request of the Exchange and in a
manner prescribed by the Exchange, file with the Exchange a list of
Related Instrument Trading Accounts for which Related Instruments are
traded.\15\
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\15\ The Exchange proposes no change to Rules 14.11(j)(4)(B)(i)-
(iii), which sets forth the types of accounts in which Related
Instruments are traded that would be considered Related Instrument
Trading Accounts.
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Exchange Rules \16\ ensure that Market Makers in UTP Derivative
Securities and BZX-Listed Derivatives would continue to have in place
reasonably designed policies and procedures to prevent the misuse of
material non-public information with regard to also acting as a Market
Maker in any Related Instruments.\17\ For example, Rule 14.11(j)(4)(B)
will continue to prohibit Market Makers from using material non-public
information in connection with trading a Related Instrument and will
also continue to require that, in addition to the existing obligations
under Exchange rules regarding the production of books and records, a
Market Maker shall, upon request by the Exchange, make available to the
Exchange any books, records or other information pertaining to any
Related Instrument trading account or to the account of any registered
or non-registered employee affiliated with the Market Maker for which
Related Instruments are traded.
[[Page 16224]]
Substantively identical Rules exist in all other Market Maker
Restriction Rules.\18\
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\16\ See Exchange Rule 5.5 and 14.1(j)(4)(B).
\17\ 15 U.S.C. 78o(g).
\18\ See Securities Linked to the Performance of Indexes and
Commodities (Including Currencies) (Rule 14.11(d) Interpretation and
Policy .01)(b), Commodity-Based Trust Shares (Rule 14.11(e)(4)(G)),
Currency Trust Shares (Rule 14.11(e)(5)(G)), Commodity Index Trust
Shares (Rule 14.11(e)(6)(G)), Commodity Futures Trust Shares (Rule
14.11(e)(7)(F)(ii)), Partnership Units (Rule 14.11(e)(8)(E)(ii)),
Trust Units (Rule 14.11(e)(9))(F), Managed Trust Securities (Rule
14.11(e)(10)(F)(ii)), and Trust Issued Receipts (Rule
14.11(f)(4)(D)(ii)).
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2. Statutory Basis
The Exchange believes the proposed rule change is consistent with
the Act and the rules and regulations thereunder applicable to the
Exchange and, in particular, the requirements of Section 6(b) of the
Act.\19\ Specifically, the Exchange believes the proposed rule change
is consistent with the Section 6(b)(5) \20\ requirements that the rules
of an exchange be designed to prevent fraudulent and manipulative acts
and practices, to promote just and equitable principles of trade, to
foster cooperation and coordination with persons engaged in regulating,
clearing, settling, processing information with respect to, and
facilitating transactions in securities, to 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.
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\19\ 15 U.S.C. 78f(b).
\20\ 15 U.S.C. 78f(b)(5).
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The Exchange believes that the proposed rule change is designed to
prevent fraudulent and manipulative acts and practices, to foster
cooperation and coordination with persons engaged in regulating,
clearing, settling, processing information with respect to, and
facilitating transactions in securities, 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,
because the proposed changes would reduce the paperwork received by the
Exchange and ease the burden on registered Market Makers in submitting
a list of Related Instrument Trading Accounts to the Exchange, without
changing the information available to the Exchange. As discussed above,
a registered Market Maker's list of Related Instrument Trading Accounts
would continue to be available to the Exchange under Rule14.11, as
amended, which requires Market Makers to make available to the Exchange
any books, records, or other information pertaining to any Related
Instrument Trading Account or to the account of any registered or non-
registered employee affiliated with the Market Maker for which Related
Instruments are traded. As such, the Exchange believes Rule 14.11, as
amended, would continue to serve to prevent fraudulent and manipulative
acts and practices, as well as to protect investors and the public
interest from concerns that may be associated with integrated market
making and any possible misuse of non-public information.
B. Self-Regulatory Organization's Statement on Burden on Competition
The Exchange does not believe that the proposed rule change will
impose any burden on competition that is not necessary or appropriate
in furtherance of the purposes of the Act. The Exchange believes that
the proposed changes that would (1) amend the requirement for a
registered Market Maker in a UTP Derivative Security or BZX-Listed
Derivative Security to file with the Exchange a current list
identifying Related Instrument Trading Accounts; and (2) eliminate the
prohibition that a Member acting as a registered Market Maker in a UTP
Derivative Security or BZX-Listed Derivative Security may not trade in
a Related Instrument Trading Account that has not been reported to the
Exchange, will have no impact on competition.
C. Self-Regulatory Organization's Statement on Comments on the Proposed
Rule Change Received From Members, Participants, or Others
The Exchange neither solicited nor received comments on the
proposed rule change.
III. Date of Effectiveness of the Proposed Rule Change and Timing for
Commission Action
Within 45 days of the date of publication of this notice in the
Federal Register or within such longer period up to 90 days (i) as the
Commission may designate if it finds such longer period to be
appropriate and publishes its reasons for so finding or (ii) as to
which the Exchange consents, the Commission will:
A. by order approve or disapprove such proposed rule change, or
B. institute proceedings to determine whether the proposed rule
change should be disapproved.
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#e193948d84cc828e8c8c848f9592a1928482cf868e97"><span class="__cf_email__" data-cfemail="4331362f266e202c2e2e262d3730033026206d242c35">[email protected]</span></a>. Please include
file number SR-CboeBZX-2025-049 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-CboeBZX-2025-049. 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-CboeBZX-2025-049 and should
be submitted on or before May 8, 2025.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\21\
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\21\ 17 CFR 200.30-3(a)(12).
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Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2025-06514 Filed 4-16-25; 8:45 am]
BILLING CODE 8011-01-P
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