[Federal Register Volume 87, Number 103 (Friday, May 27, 2022)]
[Notices]
[Pages 32212-32215]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2022-11398]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-94970; File No. SR-PEARL-2022-19]


Self-Regulatory Organizations; MIAX PEARL, LLC; Notice of Filing 
and Immediate Effectiveness of a Proposed Rule Change To Amend the MIAX 
Pearl Options Fee Schedule

May 23, 2022.
    Pursuant to the provisions of 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 May 9, 2022, MIAX PEARL, LLC (``MIAX Pearl'' or 
``Exchange'') filed with the Securities and Exchange Commission 
(``Commission'') a 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 is filing a proposal to amend the MIAX Pearl Options 
Fee Schedule (the ``Fee Schedule'').
    The text of the proposed rule change is available on the Exchange's 
website at http://www.miaxoptions.com/rule-filings/pearl at MIAX 
Pearl's principal office, 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.

[[Page 32213]]

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 the Add/Remove Tiered Rebates/Fees 
set forth in Section (1)(a) of the Fee Schedule to modify the Taker 
fees (defined below) in certain Tiers for transactions in Penny Classes 
(defined below) for MIAX Pearl Market Makers.\3\ The Exchange 
originally filed this proposal on April 29, 2022 (SR-PEARL-2022-16). On 
May 9, 2022, the Exchange withdrew SR-PEARL-2022-16 and resubmitted 
this proposal.
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    \3\ ``Market Maker'' means a Member registered with the Exchange 
for the purpose of making markets in options contracts traded on the 
Exchange and that is vested with the rights and responsibilities 
specified in Chapter VI of Exchange Rules. See the Definitions 
Section of the Fee Schedule and Exchange Rule 100.
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Background
    The Exchange currently assesses transaction rebates and fees to all 
market participants which are based upon the total monthly volume 
executed by the Member \4\ on MIAX Pearl in the relevant, respective 
origin type (not including Excluded Contracts) \5\ (as the numerator) 
expressed as a percentage of (divided by) TCV \6\ (as the denominator). 
In addition, the per contract transaction rebates and fees are applied 
retroactively to all eligible volume for that origin type once the 
respective threshold tier (``Tier'') has been reached by the Member. 
The Exchange aggregates the volume of Members and their Affiliates.\7\ 
Members that place resting liquidity, i.e., orders resting on the book 
of the MIAX Pearl System,\8\ are paid the specified ``maker'' rebate 
(each a ``Maker''), and Members that execute against resting liquidity 
are assessed the specified ``taker'' fee (each a ``Taker''). For 
opening transactions and ABBO \9\ uncrossing transactions, per contract 
transaction rebates and fees are waived for all market participants. 
Finally, Members are assessed lower transaction fees and receive lower 
rebates for order executions in standard option classes in the Penny 
Interval Program \10\ (``Penny Classes'') than for order executions in 
standard option classes which are not in the Penny Interval Program 
(``Non-Penny Classes''), where Members are assessed higher transaction 
fees and receive higher rebates.
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    \4\ ``Member'' means an individual or organization that is 
registered with the Exchange pursuant to Chapter II of Exchange 
Rules for purposes of trading on the Exchange as an ``Electronic 
Exchange Member'' or ``Market Maker.'' Members are deemed 
``members'' under the Exchange Act. See the Definitions Section of 
the Fee Schedule and Exchange Rule 100.
    \5\ ``Excluded Contracts'' means any contracts routed to an away 
market for execution. See the Definitions Section of the Fee 
Schedule.
    \6\ ``TCV'' means total consolidated volume calculated as the 
total national volume in those classes listed on MIAX PEARL for the 
month for which the fees apply, excluding consolidated volume 
executed during the period time in which the Exchange experiences an 
``Exchange System Disruption'' (solely in the option classes of the 
affected Matching Engine (as defined below)). The term Exchange 
System Disruption, which is defined in the Definitions section of 
the Fee Schedule, means an outage of a Matching Engine or collective 
Matching Engines for a period of two consecutive hours or more, 
during trading hours. The term Matching Engine, which is also 
defined in the Definitions section of the Fee Schedule, is a part of 
the MIAX PEARL electronic system that processes options orders and 
trades on a symbol-by-symbol basis. Some Matching Engines will 
process option classes with multiple root symbols, and other 
Matching Engines may be dedicated to one single option root symbol 
(for example, options on SPY may be processed by one single Matching 
Engine that is dedicated only to SPY). A particular root symbol may 
only be assigned to a single designated Matching Engine. A 
particular root symbol may not be assigned to multiple Matching 
Engines. The Exchange believes that it is reasonable and appropriate 
to select two consecutive hours as the amount of time necessary to 
constitute an Exchange System Disruption, as two hours equates to 
approximately 1.4% of available trading time per month. The Exchange 
notes that the term ``Exchange System Disruption'' and its meaning 
have no applicability outside of the Fee Schedule, as it is used 
solely for purposes of calculating volume for the threshold tiers in 
the Fee Schedule. See the Definitions Section of the Fee Schedule.
    \7\ ``Affiliate'' means (i) an affiliate of a Member of at least 
75% common ownership between the firms as reflected on each firm's 
Form BD, Schedule A, or (ii) the Appointed Market Maker of an 
Appointed EEM (or, conversely, the Appointed EEM of an Appointed 
Market Maker). An ``Appointed Market Maker'' is a MIAX PEARL Market 
Maker (who does not otherwise have a corporate affiliation based 
upon common ownership with an EEM) that has been appointed by an EEM 
and an ``Appointed EEM'' is an EEM (who does not otherwise have a 
corporate affiliation based upon common ownership with a MIAX PEARL 
Market Maker) that has been appointed by a MIAX PEARL Market Maker, 
pursuant to the following process. A MIAX PEARL Market Maker 
appoints an EEM and an EEM appoints a MIAX PEARL Market Maker, for 
the purposes of the Fee Schedule, by each completing and sending an 
executed Volume Aggregation Request Form by email to 
[email protected] no later than 2 business days prior to 
the first business day of the month in which the designation is to 
become effective. Transmittal of a validly completed and executed 
form to the Exchange along with the Exchange's acknowledgement of 
the effective designation to each of the Market Maker and EEM will 
be viewed as acceptance of the appointment. The Exchange will only 
recognize one designation per Member. A Member may make a 
designation not more than once every 12 months (from the date of its 
most recent designation), which designation shall remain in effect 
unless or until the Exchange receives written notice submitted 2 
business days prior to the first business day of the month from 
either Member indicating that the appointment has been terminated. 
Designations will become operative on the first business day of the 
effective month and may not be terminated prior to the end of the 
month. Execution data and reports will be provided to both parties. 
See the Definitions Section of the Fee Schedule.
    \8\ The term ``System'' means the automated trading system used 
by the Exchange for the trading of securities. See Exchange Rule 
100.
    \9\ ``ABBO'' means the best bid(s) or offer(s) disseminated by 
other Eligible Exchanges (defined in Exchange Rule 1400(g) and 
calculated by the Exchange based on market information received by 
the Exchange from OPRA. See the Definitions Section of the Fee 
Schedule and Exchange Rule 100.
    \10\ See Securities Exchange Act Release No. 88992 (June 2, 
2020), 85 FR 35142 (June 8, 2020) (SR-PEARL-2020-06).
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Proposal
    The Exchange proposes to amend the Fee Schedule for the Exchange's 
options market to modify the Taker fees in certain Tiers for options 
transactions in Penny Classes for MIAX Pearl Market Makers. Currently, 
the Exchange provides different Taker fees for options transactions in 
Penny Classes for MIAX Pearl Market Makers when trading against 
Priority Customer \11\ Origin in Tiers 5 and 6 depending on whether the 
executing buyer and seller are or are not the same Member or Affiliate. 
In particular, the Exchange assesses a Taker fee of $0.48 for options 
transactions in Penny Classes for MIAX Pearl Market Makers when trading 
against Priority Customer Origin in Tier 5 when the executing buyer and 
seller are the same Member or Affiliates. This is denoted by the symbol 
``[starf]'' following the tables of rebates and fees in Section (1)(a) 
of the Fee Schedule. The Exchange also assesses a Taker fee of $0.50 
for options transactions in Penny Classes for MIAX Pearl Market Makers 
when trading against Priority Customer Origin in Tier 5 when the 
executing buyer and seller are not the same Member or Affiliates. This 
is denoted by the symbol ``[star]'' following the tables of rebates and 
fees in Section (1)(a) of the Fee Schedule. Similarly, the Exchange 
assesses a Taker fee of $0.47 for options transactions in Penny Classes 
for MIAX Pearl Market Makers when trading against Priority Customer 
Origin in Tier 6 when the executing buyer and seller are the same 
Member or Affiliates. This is denoted by the symbol ``[starf]'' 
following the tables of rebates and fees in Section (1)(a) of the Fee 
Schedule. The Exchange also assesses a Taker fee of $0.50 for options 
transactions in Penny Classes for MIAX Pearl Market Makers when trading 
against Priority Customer

[[Page 32214]]

Origin in Tier 6 when the executing buyer and seller are not the same 
Member or Affiliates. This is denoted by the symbol ``[star]'' 
following the tables of rebates and fees in Section (1)(a) of the Fee 
Schedule.
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    \11\ The term ``Priority Customer'' means a person or entity 
that (i) is not a broker or dealer in securities, and (ii) does not 
place more than 390 orders in listed options per day on average 
during a calendar month for its own beneficial accounts(s). The 
number of orders shall be counted in accordance with Interpretation 
and Policy .01 of Exchange Rule 100. See the Definitions Section of 
the Fee Schedule and Exchange Rule 100, including Interpretation and 
Policy .01.
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    The Exchange now proposes to remove the symbols ``[starf]'' and 
``[loz]'' from the Fee Schedule and no longer assess different Taker 
fees for options transactions in Penny Classes for MIAX Pearl Market 
Makers when trading against the Priority Customer Origin in Tiers 5 and 
6 depending on whether the executing buyer and seller are or are not 
the same Member or Affiliate. With the proposed changes, the Exchange 
will assess the Taker fee rate of $0.50 for all options transactions in 
Penny Classes for MIAX Pearl Market Makers when trading against the 
Priority Customer Origin in Tiers 5 and 6. Accordingly, the Exchange 
proposes to delete the $0.48 Taker fee rate in Tier 5 and $0.47 Taker 
fee rate in Tier 6 in the MIAX Pearl Market Origin table for options 
transactions in Penny Classes when trading against the Priority 
Customer Origin.
    The purpose of adjusting the specified Taker fees is for business 
and competitive reasons. In order to attract order flow, the Exchange 
initially set its Taker fees so that they were lower than other options 
exchanges that operate comparable maker/taker pricing models.\12\ The 
Exchange now believes that it is appropriate to further adjust these 
specified Taker fees so that they are more in line with other 
exchanges, but will still remain highly competitive such that they 
should enable the Exchange to continue to attract order flow and 
maintain market share.\13\
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    \12\ See Securities Exchange Act Release Nos. 80061 (February 
17, 2017), 82 FR 11676 (February 24, 2017) (SR-PEARL-2017-10) 
(establishing the Exchange's fee schedule with the highest Tier 
Taker fee of $0.47 for Market Makers in Penny Classes); 82900 (March 
19, 2018), 83 FR 12836 (March 23, 2018) (SR-PEARL-2018-09) (lowering 
Taker fees in Tiers 4, 5 and 6 to $0.43 for Market Makers in Penny 
Classes approximately one year after the Exchange's launch); 83814 
(August 9, 2018), 83 FR 40605 (August 15, 2018) (SR-PEARL-2018-17) 
(increasing Taker fees in Tiers 4, 5 and 6 for Market Makers in 
Penny Classes to bring those fees more in line with other options 
exchanges' taker fees at that time).
    \13\ See e.g., BOX Options Fee Schedule, Section I. Electronic 
Transaction Fees, A. Non-Auction Transactions (base Taker fee of 
$0.50 per contract for the Market Maker account type when trading 
against a Public Customer).
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Implementation
    The proposed changes are immediately effective.
2. Statutory Basis
    The Exchange believes that its proposal to amend its Fee Schedule 
is consistent with Section 6(b) of the Act \14\ in general, and 
furthers the objectives of Section 6(b)(4) of the Act,\15\ in that it 
is an equitable allocation of reasonable dues, fees and other charges 
among Exchange members and issuers and other persons using its 
facilities, and 6(b)(5) of the Act,\16\ in that it is 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 facilitating transactions in 
securities, to remove impediments to and perfect the mechanisms 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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    \14\ 15 U.S.C. 78f(b).
    \15\ 15 U.S.C. 78f(b)(4).
    \16\ 15 U.S.C. 78f(b)(1) and (b)(5).
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    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.'' \17\
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    \17\ See Securities Exchange Act Release No. 51808 (June 9, 
2005), 70 FR 37496 (June 29, 2005).
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    There are currently 16 registered options exchanges competing for 
order flow. Based on publicly-available information, and excluding 
index-based options, no single exchange has more than approximately 13-
14% market share for the month of May 2022.\18\ Therefore, no exchange 
possesses significant pricing power. More specifically, as of May 9, 
2022, the Exchange has a market share of approximately 4.67% of 
executed volume of multiply-listed equity options for the month of May 
2022.\19\ The Exchange believes that the ever-shifting market share 
among the exchanges from month to month demonstrates that market 
participants can discontinue or reduce use of certain categories of 
products and services, terminate an existing membership or determine to 
not become a new member, and/or shift order flow, in response to 
transaction fee changes. For example, on February 28, 2019, the 
Exchange filed with the Commission a proposal to increase Taker fees in 
certain Tiers for options transactions in certain Penny classes for 
Priority Customers and decrease Maker rebates in certain Tiers for 
options transactions in Penny classes for Priority Customers (which fee 
was to be effective March 1, 2019).\20\ The Exchange experienced a 
decrease in total market share for the month of March 2019, after the 
proposal went into effect. Accordingly, the Exchange believes that its 
March 1, 2019, fee change, to increase certain transaction fees and 
decrease certain transaction rebates, may have contributed to the 
decrease in MIAX Pearl's market share and, as such, the Exchange 
believes competitive forces constrain the Exchange's, and other options 
exchanges, ability to set transaction fees and market participants can 
shift order flow based on fee changes instituted by the exchanges.
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    \18\ See ``The market at a glance,'' (last visited May 9, 2022), 
available at https://www.miaxoptions.com/.
    \19\ See id.
    \20\ See Securities Exchange Act Release No. 85304 (March 13, 
2019), 84 FR 10144 (March 19, 2019) (SR-PEARL-2019-07).
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    The Exchange believes its proposal to modify the Taker fees in 
certain Tiers for options transactions in Penny classes for Market 
Makers is reasonable, equitable and not unfairly discriminatory because 
all similarly situated market participants in the same Origin type are 
subject to the same tiered Taker fees and access to the Exchange is 
offered on terms that are not unfairly discriminatory. For competitive 
and business reasons, the Exchange initially set its Taker fees for 
such orders generally lower than certain other options exchanges that 
operate comparable maker/taker pricing models.\21\ The Exchange now 
believes that it is appropriate to modify those specified Taker fees by 
removing the different rates depending on whether the executing buyer 
and seller are the same Member or Affiliates, thereby making the Taker 
fee the same $0.50 for Tiers 5 and 6 so that they are more in line with 
other exchanges, and will still remain highly competitive such that 
they should enable the Exchange to continue to attract order flow and 
maintain market share.
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    \21\ See supra note 12.
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    The Exchange believes its proposal is not unfairly discriminatory 
because, with the proposed changes, the Taker fees for Market Makers 
will be the same as the Taker fees for all other Origin types except 
for Priority Customer Origin orders. With the proposed changes, the 
Taker fees for Market Makers will be $0.50 per contract for all Tiers, 
which is the same as the Taker fees for all Tiers for the Non-Priority 
Customer, Firm, BD, and non-MIAX Pearl Market Makers Origin

[[Page 32215]]

(``Professional Members''). The Exchange believes that it is equitable 
and not unfairly discriminatory to assess higher Taker fees to Market 
Makers and Professional Members than to Priority Customer Origin 
orders. A Priority Customer is by definition not a broker or dealer in 
securities, and does not place more than 390 orders in listed options 
per day on average during a calendar month for its own beneficial 
account(s).\22\ This limitation does not apply to participants on the 
Exchange whose behavior is substantially similar to that of market 
professionals, including non-Priority Customers, Non-MIAX Pearl Market 
Makers, Firms, and Broker-Dealers, who will generally submit a higher 
number of orders (many of which do not result in executions) than 
Priority Customers.
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    \22\ See supra note 11.
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B. Self-Regulatory Organization's Statement on Burden on Competition

    The Exchange does not believe that the proposed rule changes will 
impose any burden on competition not necessary or appropriate in 
furtherance of the purposes of the Act. The Exchange believes that the 
proposed changes in the Taker fees for the applicable market 
participants should continue to encourage the provision of liquidity 
that enhances the quality of the Exchange's market and increases the 
number of trading opportunities on the Exchange for all participants 
who will be able to compete for such opportunities. The proposed rule 
changes should enable the Exchange to continue to attract and compete 
for order flow with other exchanges. However, this competition does not 
create an undue burden on competition but rather offers all market 
participants the opportunity to receive the benefit of competitive 
pricing.
    The proposed Taker fee adjustments are intended to keep the 
Exchange's fees highly competitive with those of other exchanges, and 
to encourage liquidity and should enable the Exchange to continue to 
attract and compete for order flow with other exchanges. 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. In such an environment, the 
Exchange must continually adjust its rebates and fees to remain 
competitive with other exchanges and to attract order flow. The 
Exchange believes that the proposed rule changes reflect this 
competitive environment because the proposal modifies the Exchange's 
fees in a manner that encourages market participants to continue to 
provide liquidity and to send order flow to the Exchange.

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

    Written comments were neither solicited nor 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,\23\ and Rule 19b-4(f)(2) \24\ thereunder. 
At any time within 60 days of the filing of the proposed rule change, 
the Commission summarily may temporarily suspend such rule change if it 
appears to the Commission that such action is necessary or appropriate 
in the public interest, for the protection of investors, or otherwise 
in furtherance of the purposes of the Act. If the Commission takes such 
action, the Commission shall institute proceedings to determine whether 
the proposed rule should be approved or disapproved.
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    \23\ 15 U.S.C. 78s(b)(3)(A)(ii).
    \24\ 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

     Use the Commission's internet comment form (http://www.sec.gov/rules/sro.shtml); or
     Send an email to [email protected]. Please include 
File Number SR-PEARL-2022-19 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-PEARL-2022-19. 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-PEARL-2022-19, and should be submitted 
on or before June 17, 2022.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\25\
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    \25\ 17 CFR 200.30-3(a)(12).
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J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2022-11398 Filed 5-26-22; 8:45 am]
BILLING CODE 8011-01-P


