[Federal Register Volume 85, Number 244 (Friday, December 18, 2020)]
[Notices]
[Pages 82554-82557]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2020-27837]



[[Page 82554]]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-90654; File No. SR-NASDAQ-2020-084]


Self-Regulatory Organizations; The Nasdaq Stock Market LLC; 
Notice of Filing and Immediate Effectiveness of Proposed Rule Change To 
Amend NOM's Pricing Schedule at Options 7, Section 2 and Options 7, 
Section 3

December 14, 2020.
    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 December 1, 2020, The Nasdaq Stock Market LLC (``Nasdaq'' 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 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

    The Exchange proposes to amend The NASDAQ Options Market LLC's 
(``NOM'') Pricing Schedule at Options 7, Section 2, ``Nasdaq Options 
Market Fees and Rebates'' and Options 7, Section 3, ``Nasdaq Options 
Market--Ports and Other Services.''
    The text of the proposed rule change is available on the Exchange's 
website at https://listingcenter.nasdaq.com/rulebook/nasdaq/rules, 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 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 NOM's Pricing Schedule at Options 7, 
Section 2, ``Nasdaq Options Market Fees and Rebates'' and Options 7, 
Section 3, ``Nasdaq Options Market--Ports and Other Services.'' Each 
change will be described below.
Options 7, Section 2
    Today, the Exchange pays certain Rebates to Add Liquidity in Penny 
Symbols according to the below table.

                                    Rebates To Add Liquidity in Penny Symbols
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                                       Tier 1       Tier 2       Tier 3       Tier 4       Tier 5       Tier 6
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Customer \1\ \8\ \9\ \10\.........      ($0.20)      ($0.25)      ($0.42)      ($0.43)      ($0.45)   \7\($0.48)
Professional \1\ \9\ \10\.........      ($0.25)      ($0.42)      ($0.43)      ($0.45)      ($0.48)
Broker-Dealer.....................      ($0.10)      ($0.10)      ($0.10)      ($0.10)      ($0.10)      ($0.10)
Firm..............................      ($0.10)      ($0.10)      ($0.10)      ($0.10)      ($0.10)      ($0.10)
Non-NOM Market Maker..............      ($0.10)      ($0.10)      ($0.10)      ($0.10)      ($0.10)      ($0.10)
NOM Market Maker \3\..............      ($0.20)      ($0.25)   \4\($0.30)   \4\($0.32)  \11\($0.44)      ($0.48)
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    Specifically, NOM Market Maker Rebates to Add Liquidity in Penny 
Symbols are paid according to the below tier qualifications.
Monthly Volume
    Tier 1: Participant adds NOM Market Maker liquidity in Penny 
Symbols and/or Non-Penny Symbols of up to 0.10% of total industry 
customer equity and ETF option average daily volume (``ADV'') contracts 
per day in a month.
    Tier 2: Participant adds NOM Market Maker liquidity in Penny 
Symbols and/or Non-Penny Symbols above 0.10% to 0.20% of total industry 
customer equity and ETF option ADV contracts per day in a month.
    Tier 3: Participant: (a) Adds NOM Market Maker liquidity in Penny 
Symbols and/or Non-Penny Symbols above 0.20% to 0.60% of total industry 
customer equity and ETF option ADV contracts per day in a month: Or 
(b)(1) transacts in all securities through one or more of its Nasdaq 
Market Center MPIDs that represent 0.70% or more of Consolidated Volume 
(``CV'') which adds liquidity in the same month on The Nasdaq Stock 
Market, (2) transacts in Tape B securities through one or more of its 
Nasdaq Market Center MPIDs that represent 0.18% or more of CV which 
adds liquidity in the same month on The Nasdaq Stock Market, and (3) 
executes greater than 0.01% of CV via Market-on- Close/Limit-on-Close 
(``MOC/LOC'') volume within The Nasdaq Stock Market Closing Cross in 
the same month.
    Tier 4: Participant adds NOM Market Maker liquidity in Penny 
Symbols and/or Non-Penny Symbols of above 0.60% to 0.90% of total 
industry customer equity and ETF option ADV contracts per day in a 
month.
    Tier 5: Participant adds NOM Market Maker liquidity in Penny 
Symbols and/or Non-Penny Symbols of above 0.40% of total industry 
customer equity and ETF option ADV contracts per day in a month and 
transacts in all securities through one or more of its Nasdaq Market 
Center MPIDs that represent 0.40% or more of Consolidated Volume 
(``CV'') which adds liquidity in the same month on The Nasdaq Stock 
Market.
    Tier 6: Participant: (a)(1) Adds NOM Market Maker liquidity in 
Penny Symbols and/or Non-Penny Symbols above 0.95% of total industry 
customer equity and ETF option ADV contracts per day in a month, (2) 
executes Total Volume of 250,000 or more contracts per day in a month, 
of which 30,000 or more contracts per day in a month must be removing 
liquidity, and (3) adds Firm, Broker-Dealer and Non-NOM Market Maker 
liquidity in Non-Penny Symbols of 10,000 or more contracts per day in a 
month; or (b)(1) adds NOM Market Maker liquidity in Penny Symbols and/
or Non-Penny Symbols above 1.50% of total industry customer equity and 
ETF option ADV contracts per day in a month, and (2) executes Total 
Volume of 250,000 or more contracts per day in a month, of which 15,000 
or more contracts per day in a month must be removing liquidity.

[[Page 82555]]

    The Exchange proposes to amend Penny Pilot NOM Market Maker Tier 4 
which currently provides, ``Participant adds NOM Market Maker liquidity 
in Penny Symbols and/or Non-Penny Symbols of above 0.60% to 0.90% of 
total industry customer equity and ETF option ADV contracts per day in 
a month.'' \3\ The Exchange proposes to amend Penny Pilot NOM Market 
Maker Tier 4 to provide, ``Participant adds NOM Market Maker liquidity 
in Penny Symbols and/or Non-Penny Symbols of above 0.60% of total 
industry customer equity and ETF option ADV contracts per day in a 
month.'' This proposed rule change will not impact NOM's pricing. 
Today, NOM Market Maker Rebates to Add Liquidity in Penny Symbols are 
paid per the highest tier achieved.\4\ Current Penny Pilot NOM Market 
Maker Tier 5 requires Participants to add NOM Market Maker liquidity in 
Penny Symbols and/or Non-Penny Symbols of above 0.40% of total industry 
customer equity and ETF option ADV contracts per day in a month and 
transact in all securities through one or more of its Nasdaq Market 
Center MPIDs that represent 0.40% or more of Consolidated Volume 
(``CV'') which adds liquidity in the same month on The Nasdaq Stock 
Market in order to achieve a rebate.\5\ Therefore, a Participant that 
adds NOM Market Maker liquidity in Penny Symbols and/or Non-Penny 
Symbols of above 0.60% to 0.90% of total industry customer equity and 
ETF option ADV contracts per day in a month volume would qualify for 
Penny Pilot NOM Market Maker Tier 4 today, and may qualify for Penny 
Pilot NOM Market Maker Tier 5 if the additional criteria was met. Penny 
Pilot NOM Market Maker Tier 6 requires, among other things, that a 
Participant adds NOM Market Maker liquidity in Penny Symbols and/or 
Non-Penny Symbols above 0.95% of total industry customer equity and ETF 
option ADV contracts per day in a month.\6\
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    \3\ Penny Pilot NOM Market Maker Tier 4 pays a rebate of $0.43 
per contract to Customers and Professionals, $0.10 per contract to 
Broker-Dealers, Firms and Non-NOM Market Makers and $0.32 per 
contract to NOM Market Makers. Further, pursuant to footnote 4, 
Participants who achieve the NOM Market Maker Tier 3 or Tier 4 
Rebate to Add Liquidity will receive $0.40 per contract to add 
liquidity in the following symbols: AAPL, SPY, QQQ, IWM, and VXX.
    \4\ See note 3 of Options 7, Section 2.
    \5\ Penny Pilot NOM Market Maker Tier 5 pays a rebate of $0.45 
per contract to Customers and Professionals, $0.10 per contract to 
Broker-Dealers, Firms and Non-NOM Market Makers and $0.44 per 
contract to NOM Market Makers. Further, pursuant to footnote 11, NOM 
Participants that qualify for the Tier 5 NOM Market Maker Rebate to 
Add Liquidity in Penny Symbols and add NOM Market Maker liquidity in 
Penny Symbols and/or Non-Penny Symbols of above 0.50% of total 
industry customer equity and ETF option ADV contracts per day in a 
month, will receive a $0.46 per contract rebate to add liquidity in 
Penny Symbols as Market Maker in lieu of the Tier 5 rebate.
    \6\ Penny Pilot NOM Market Maker Tier 6 provides, ``Participant: 
(a)(1) Adds NOM Market Maker liquidity in Penny Symbols and/or Non-
Penny Symbols above 0.95% of total industry customer equity and ETF 
option ADV contracts per day in a month, (2) executes Total Volume 
of 250,000 or more contracts per day in a month, of which 30,000 or 
more contracts per day in a month must be removing liquidity, and 
(3) adds Firm, Broker-Dealer and Non-NOM Market Maker liquidity in 
Non-Penny Symbols of 10,000 or more contracts per day in a month; or 
(b)(1) adds NOM Market Maker liquidity in Penny Symbols and/or Non-
Penny Symbols above 1.50% of total industry customer equity and ETF 
option ADV contracts per day in a month, and (2) executes Total 
Volume of 250,000 or more contracts per day in a month, of which 
15,000 or more contracts per day in a month must be removing 
liquidity.''
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    The Exchange believes that this proposal will bring greater clarity 
to the Penny Pilot NOM Market Maker tiers as any volume above 0.60% 
would qualify a Participant for Penny Pilot NOM Market Maker Tier 4, as 
is the case today unless the Participant qualified for Penny Pilot NOM 
Market Maker Tiers 5 or 6, as is also the case today. Stating, ``above 
0.60%'' within the rule text will make the aforementioned opportunities 
clearer for all Participants.
Options 7, Section 3
    The Exchange proposes to amend Options 7, Section 3, ``Nasdaq 
Options Market--Ports and Other Services,'' to remove obsolete text 
which reflects timeframes which have passed.
2. Statutory Basis
    The Exchange believes that its proposal is consistent with Section 
6(b) of the Act,\7\ in general, and furthers the objectives of Sections 
6(b)(4) and 6(b)(5) of the Act,\8\ in particular, in that it provides 
for the equitable allocation of reasonable dues, fees, and other 
charges among members and issuers and other persons using any facility, 
and is not designed to permit unfair discrimination between customers, 
issuers, brokers, or dealers.
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    \7\ 15 U.S.C. 78 f(b).
    \8\ 15 U.S.C. 78f(b)(4) and (5).
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    The Exchange's proposed changes to its Pricing Schedule are 
reasonable in several respects. As a threshold matter, the Exchange is 
subject to significant competitive forces in the market for options 
securities transaction services that constrain its pricing 
determinations in that market. The fact that this market is competitive 
has long been recognized by the courts. In NetCoalition v. Securities 
and Exchange Commission, the D.C. Circuit stated as follows: ``[n]o one 
disputes that competition for order flow is `fierce.' . . . As the SEC 
explained, `[i]n the U.S. national market system, buyers and sellers of 
securities, and the broker-dealers that act as their order-routing 
agents, have a wide range of choices of where to route orders for 
execution'; [and] `no exchange can afford to take its market share 
percentages for granted' because `no exchange possesses a monopoly, 
regulatory or otherwise, in the execution of order flow from broker 
dealers'. . ..'' \9\
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    \9\ NetCoalition v. SEC, 615 F.3d 525, 539 (DC Cir. 2010) 
(quoting Securities Exchange Act Release No. 59039 (December 2, 
2008), 73 FR 74770, 74782-83 (December 9, 2008) (SR-NYSEArca-2006-
21)).
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    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, while adopting a series of steps to improve the current market 
model, 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\ Securities Exchange Act Release No. 51808 (June 9, 2005), 
70 FR 37496, 37499 (June 29, 2005) (``Regulation NMS Adopting 
Release'').
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    Numerous indicia demonstrate the competitive nature of this market. 
For example, clear substitutes to the Exchange exist in the market for 
options security transaction services. The Exchange is only one of 
sixteen options exchanges to which market participants may direct their 
order flow. Within this environment, market participants can freely and 
often do shift their order flow among the Exchange and competing venues 
in response to changes in their respective pricing schedules. As such, 
the proposal represents a reasonable attempt by the Exchange to 
increase its liquidity and market share relative to its competitors.
Options 7, Section 2
    The Exchange's proposal to amend Penny Pilot NOM Market Maker Tier 
4 to change the current volume requirement from ``Participant adds NOM 
Market Maker liquidity in Penny Symbols and/or Non-Penny Symbols of 
above 0.60% to 0.90% of total industry customer equity and ETF option 
ADV contracts per day in a month'' to ``Participant adds NOM Market 
Maker liquidity in Penny Symbols and/or Non-Penny Symbols of above 
0.60% of total industry customer equity and ETF option ADV contracts 
per day in a

[[Page 82556]]

month,'' is reasonable. This proposed rule change will not impact NOM's 
pricing. Today, NOM Market Maker Rebates to Add Liquidity in Penny 
Symbols are paid per the highest tier achieved.\11\ Current Penny Pilot 
NOM Market Maker Tier 5 requires Participants to add NOM Market Maker 
liquidity in Penny Symbols and/or Non-Penny Symbols of above 0.40% of 
total industry customer equity and ETF option ADV contracts per day in 
a month and transact in all securities through one or more of its 
Nasdaq Market Center MPIDs that represent 0.40% or more of CV which 
adds liquidity in the same month on The Nasdaq Stock Market in order to 
achieve a rebate.\12\ Therefore, a Participant that adds NOM Market 
Maker liquidity in Penny Symbols and/or Non-Penny Symbols of above 
0.60% to 0.90% of total industry customer equity and ETF option ADV 
contracts per day in a month volume would qualify for Penny Pilot NOM 
Market Maker Tier 4 today, and may qualify for Penny Pilot NOM Market 
Maker Tier 5 if the additional criteria was met. Penny Pilot NOM Market 
Maker Tier 6 requires, among other things, that a Participants adds NOM 
Market Maker liquidity in Penny Symbols and/or Non-Penny Symbols above 
0.95% of total industry customer equity and ETF option ADV contracts 
per day in a month.\13\ This proposal will make clear that any volume 
above 0.60% would qualify a Participant for Penny Pilot NOM Market 
Maker Tier 4, as is the case today, unless the Participant qualified 
for Penny Pilot NOM Market Maker Tiers 5 or 6, as is also the case 
today. Any NOM Market Maker may qualify for a NOM Market Maker Penny 
Pilot rebate provided the requisite criteria has been met.
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    \11\ See note 3 of Options 7, Section 2.
    \12\ See note 5.
    \13\ See note 6.
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    The Exchange's proposal to amend Penny Pilot NOM Market Maker Tier 
4 to change the current volume requirement from ``Participant adds NOM 
Market Maker liquidity in Penny Symbols and/or Non-Penny Symbols of 
above 0.60% to 0.90% of total industry customer equity and ETF option 
ADV contracts per day in a month'' to ``Participant adds NOM Market 
Maker liquidity in Penny Symbols and/or Non-Penny Symbols of above 
0.60% of total industry customer equity and ETF option ADV contracts 
per day in a month,'' is equitable and not unfairly discriminatory as 
all NOM Market Makers may uniformly qualify for these NOM Market Maker 
Penny Pilot rebates, provided they submit the requisite qualifying 
criteria. NOM Market Makers add value through continuous quoting \14\ 
and are subject to additional requirements and obligations \15\ that 
other market participants are not. Incentivizing Market Makers to 
provide greater liquidity benefits all market participants through the 
quality of order interaction.
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    \14\ See Options 2, Section 5.
    \15\ See Options 2, Section 4.
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Options 7, Section 3
    The Exchange's proposal to amend Options 7, Section 3, ``Nasdaq 
Options Market--Ports and Other Services,'' is reasonable, equitable 
and not unfairly discriminatory as the rule text is obsolete in that 
the text reflects timeframes which have passed.

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 not necessary or appropriate in 
furtherance of the purposes of the Act.
Inter-Market Competition
    The proposal does not impose an undue burden on inter-market 
competition. The Exchange believes its proposal remains competitive 
with other options markets and will offer market participants another 
choice of where to transact options. The Exchange notes that it 
operates in a highly competitive market in which market participants 
can readily favor competing venues if they deem fee levels at a 
particular venue to be excessive, or rebate opportunities available at 
other venues to be more favorable. In such an environment, the Exchange 
must continually adjust its fees to remain competitive with other 
exchanges that have been exempted from compliance with the statutory 
standards applicable to exchanges. Because competitors are free to 
modify their own fees in response, and because market participants may 
readily adjust their order routing practices, the Exchange believes 
that the degree to which fee changes in this market may impose any 
burden on competition is extremely limited.
Intra-Market Competition
    The proposed amendments do not impose an undue burden on intra-
market competition.
    The Exchange's proposal to amend Penny Pilot NOM Market Maker Tier 
4 to change the current volume requirement from ``Participant adds NOM 
Market Maker liquidity in Penny Symbols and/or Non-Penny Symbols of 
above 0.60% to 0.90% of total industry customer equity and ETF option 
ADV contracts per day in a month'' to ``Participant adds NOM Market 
Maker liquidity in Penny Symbols and/or Non-Penny Symbols of above 
0.60% of total industry customer equity and ETF option ADV contracts 
per day in a month,'' does not impose an undue burden on competition as 
all NOM Market Makers may uniformly qualify for these NOM Market Maker 
Penny Pilot rebates, provided they submit the requisite qualifying 
criteria. NOM Market Makers add value through continuous quoting \16\ 
and are subject to additional requirements and obligations \17\ that 
other market participants are not. Incentivizing Market Makers to 
provide greater liquidity benefits all market participants through the 
quality of order interaction.
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    \16\ See Options 2, Section 5.
    \17\ See Options 2, Section 4.
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Options 7, Section 3
    The Exchange's proposal to amend Options 7, Section 3, ``Nasdaq 
Options Market--Ports and Other Services,'' does not impose an undue 
burden on competition as the rule text is obsolete in that the text 
reflects timeframes which have passed.

C. Self-Regulatory Organization's Statement on Comments on the Proposed 
Rule Change Received From Members, Participants, or Others

    No written comments were either solicited or received.

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.\18\
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    \18\ 15 U.S.C. 78s(b)(3)(A)(ii).
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    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: (i) 
Uecessary or appropriate in the public interest; (ii) for the 
protection of investors; or (iii) otherwise in furtherance of the 
purposes of the Act. If the Commission takes such action, the 
Commission shall institute proceedings to determine whether the 
proposed rule should be approved or disapproved.

IV. Solicitation of Comments

    Interested persons are invited to submit written data, views, and 
arguments concerning the foregoing, including whether the proposed rule

[[Page 82557]]

change is consistent with the Act. Comments may be submitted by any of 
the following methods:

Electronic Comments

     Use the Commission's internet comment form (http://www.sec.gov/rules/sro.shtml); or
     Send an email to rule-comments@sec.gov. Please include 
File Number SR-NASDAQ-2020-084 on the subject line.

Paper Comments

     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-NASDAQ-2020-084. 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 (http://www.sec.gov/rules/sro.shtml). 
Copies of the submission, all subsequent amendments, all written 
statements with respect to the proposed rule change that are filed with 
the Commission, and all written communications relating to the proposed 
rule change between the Commission and any person, other than those 
that may be withheld from the public in accordance with the provisions 
of 5 U.S.C. 552, will be available for website viewing and printing in 
the Commission's Public Reference Room, 100 F Street NE, Washington, DC 
20549, on official business days between the hours of 10:00 a.m. and 
3:00 p.m. Copies of the filing also will be available for inspection 
and copying at the principal office of the Exchange. All comments 
received will be posted without change. Persons submitting comments are 
cautioned that we do not redact or edit personal identifying 
information from comment submissions. You should submit only 
information that you wish to make available publicly. All submissions 
should refer to File Number SR-NASDAQ-2020-084 and should be submitted 
on or before January 8, 2021.

    For the Commission, by the Division of Trading and Markets, 
pursuant todelegated authority.\19\
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    \19\ 17 CFR 200.30-3(a)(12).
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J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2020-27837 Filed 12-17-20; 8:45 am]
BILLING CODE 8011-01-P


