[Federal Register Volume 81, Number 75 (Tuesday, April 19, 2016)]
[Notices]
[Pages 23043-23046]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2016-08941]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-77604; File No. SR-NYSE-2016-29]


Self-Regulatory Organizations; New York Stock Exchange LLC; 
Notice of Filing and Immediate Effectiveness of Proposed Rule Change 
Amending Its Price List for Equity Transactions in Stocks With a per 
Share Stock Price More Than $1.00

April 13, 2016.
    Pursuant to Section 19(b)(1) \1\ of the Securities Exchange Act of 
1934 (the ``Act'') \2\ and Rule 19b-4 thereunder,\3\ notice is hereby 
given that, on March 31, 2016, New York Stock Exchange LLC (``NYSE'' or 
the ``Exchange'') filed with the Securities and Exchange Commission 
(the ``Commission'') the proposed rule change as described in Items I, 
II, and III 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 its Price List for equity 
transactions in stocks with a per share stock price more than $1.00 to 
(1) add a new default charge for transactions that remove liquidity 
from the Exchange; (2) make certain pricing changes applicable to 
Supplemental Liquidity Providers (``SLPs'') on the Exchange; and (3) 
eliminate the fee for additional electronic copies of the Merged Order 
Report. The Exchange proposes to implement these changes to its Price 
List effective April 1, 2016. The proposed rule change is available on 
the Exchange's Web site at www.nyse.com, at the principal office of the 
Exchange, on the Commission's Web site at http//www.sec.gov, 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 its Price List to (1) add a new 
default charge for transactions removing liquidity from the Exchange 
for member firms whose adding liquidity falls below a specified 
threshold; and (2) add a new SLP Tier 1A; lower the credits for Non-
Displayed Reserve Orders for existing SLP Tiers 1 through 3; and, for 
SLPs that are also Designated Market Makers (``DMMs''), replace the 
numeric benchmark for calculating tier-based credits. The proposed 
changes would only apply to credits in transactions in securities 
priced $1.00 or more.
    The Exchange also proposes to eliminate the fee for additional 
electronic copies of the Merged Order Report.
    The Exchange proposes to implement these changes effective April 1, 
2016.
Charges for Removing Liquidity
    The Exchange currently charges a fee of $0.00275 for non-Floor 
broker transactions that remove liquidity from the Exchange, including 
those of DMMs.
    The Exchange proposes to retain this charge and introduce a 
slightly higher default charge of $0.0030 for non-Floor broker 
transactions removing liquidity from the Exchange by member 
organizations with an Adding ADV,\4\ excluding any liquidity added by a 
DMM, of less than 250,000 ADV \5\ on the Exchange during the billing 
month.
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    \4\ ``Adding ADV'' is when a member organization has ADV that 
adds liquidity to the Exchange during the billing month. Adding ADV 
excludes any liquidity added by a Designated Market Maker.
    \5\ The defined term, ``ADV,'' is used here as defined in 
footnote 2 to the Price List.
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Changes Applicable to SLPs
    SLPs are eligible for certain credits when adding liquidity to the 
Exchange. The amount of the credit is currently determined by the 
``tier'' for which the SLP qualifies, which is based on the SLP's level 
of quoting and ADV of liquidity added by the SLP in assigned 
securities.
    Currently, SLP Tier 3 provides that when adding liquidity to the 
NYSE in securities with a share price of $1.00 or more, an SLP is 
eligible for a credit of $0.0023 per share traded if the SLP (1) meets 
the 10% average or more quoting requirement in assigned securities 
pursuant to Rule 107B and (2) adds liquidity for assigned SLP 
securities in the aggregate \6\ of an ADV of more than 0.20% of NYSE 
consolidated ADV (``CADV''),\7\ or with respect to an SLP that is also 
a DMM and subject to Rule 107B(i)(2)(a),\8\ more than 0.15% of

[[Page 23044]]

NYSE CADV. The SLP Tier 3 credit in the case of Non-Displayed Reserve 
Orders is $0.0009.
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    \6\ Under Rule 107B, an SLP can be either a proprietary trading 
unit of a member organization (``SLP-Prop'') or a registered market 
maker at the Exchange (``SLMM''). For purposes of the 10% average or 
more quoting requirement in assigned securities pursuant to Rule 
107B, quotes of an SLP-Prop and an SLMM of the same member 
organization are not aggregated. However, for purposes of adding 
liquidity for assigned SLP securities in the aggregate, shares of 
both an SLP-Prop and an SLMM of the same member organization are 
included.
    \7\ NYSE CADV is defined in the Price List as the consolidated 
average daily volume of NYSE-listed securities.
    \8\ Rule 107B(i)(2)(A) prohibits a DMM from acting as a SLP in 
the same securities in which it is a DMM.
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    SLP Tier 2 provides that an SLP adding liquidity in securities with 
a per share price of $1.00 or more is eligible for a per share credit 
of $0.0026 if the SLP: (1) Meets the 10% average or more quoting 
requirement in an assigned security pursuant to Rule 107B; and (2) adds 
liquidity for all assigned SLP securities in the aggregate of an ADV of 
more than 0.45% of NYSE CADV, or with respect to an SLP that is also a 
DMM and subject to Rule 107B(i)(2)(a), more than 0.30% of NYSE CADV.\9\ 
The SLP Tier 2 credit in the case of Non-Displayed Reserve Orders is 
$0.0012.
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    \9\ In determining whether an SLP meets the requirement to add 
liquidity in the aggregate of an ADV of more than 0.35% or 0.30% 
depending on whether the SLP is also a DMM, the SLP may include 
shares of both an SLP-Prop and an SLMM of the same member 
organization.
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    SLP Tier 1 provides that an SLP adding liquidity in securities with 
a per share price of $1.00 or more is eligible for a per share credit 
of $0.0029 if the SLP: (1) Meets the 10% average or more quoting 
requirement in an assigned security pursuant to Rule 107B; and (2) adds 
liquidity for all for assigned SLP securities in the aggregate of an 
ADV of more than 0.90% of NYSE CADV, or with respect to an SLP that is 
also a DMM and subject to Rule 107B(i)(2)(a), more than 0.65% of NYSE 
CADV. The SLP Tier 1 credit in the case of Non-Displayed Reserve Orders 
is $0.0015.
    The Exchange proposes the following changes applicable to SLPs on 
the Exchange.
Credits for Non-Displayed Reserve Orders
    The Exchange proposes to decrease the credit for a Non-Displayed 
Reserve Order by $0.0003. Specifically, for Non-Displayed Reserve 
Orders the SLP Tier 1 credit would decrease from $0.0015 to $0.0012; 
the SLP Tier 2 credit would decrease from $0.0012 to $0.0009; and the 
SLP Tier 3 credit would decrease from $0.0009 to $0.0006.
Numeric Benchmark for Calculating Tier-Based Credits
    For SLP Tier 3, SLP Tier 2, and SLP Tier 1, the Exchange proposes 
to replace the ADV percentage benchmark for credits for SLPs that are 
also DMMs and subject to Rule 107B(i)(2)(A) representing a fixed 
discount of NYSE CADV with a dynamic discount based on the DMM's 
percentage of NYSE CADV in DMM assigned securities for the prior 
quarter. More specifically, the Exchange proposes that the current ADV 
percentage requirement for each tier would be discounted by the DMM's 
percentage of NYSE CADV for the prior quarter in DMM assigned 
securities as of the last business day of the prior month. The Exchange 
believes that a calculation utilizing the most recent quarter's 
percentage of DMM CADV would result in a fairer discount for SLPs that 
are also DMMs than the current fixed percentage, and thus represent a 
fairer benchmark for determining the appropriate credit for market 
participants that provide liquidity to the Exchange. SLPs that have DMM 
assigned securities with a larger percentage of NYSE CADV will receive 
a larger discount than SLPs with DMM assigned securities with a smaller 
percentage of NYSE CADV.
    For SLP Tier 3, the Exchange proposes that the ADV percentage 
requirement for SLPs that are also DMMs and subject to Rule 
107B(i)(2)(A) change from more than 0.15% of NYSE CADV to more than the 
current 0.20% requirement after a discount of the percentage for the 
prior quarter of NYSE CADV in DMM assigned securities as of the last 
business day of the prior month. For SLP Tier 2, the Exchange proposes 
that the requirement change from more than 0.30% to more than the 
current 0.45% requirement after a discount of the percentage for the 
prior quarter of NYSE CADV in DMM assigned securities as of the last 
business day of the prior month. Finally, for SLP Tier 1, the Exchange 
proposes that the requirement change from more than more than 0.65% to 
more than the current 0.90% requirement after a discount of the 
percentage for the prior quarter of NYSE CADV in DMM assigned 
securities as of the last business day of the prior month.
    As proposed, the NYSE CADV in DMM assigned securities would be on a 
prior quarter basis and the DMM assigned securities list applied to the 
quarter would be as of the last business day of the prior month. This 
would enable the Exchange to measure stock transfers in the prior month 
and among DMMs. For example, for April 2016, the calculation for each 
tier would be based on the 1st quarter of 2016 by reference to the DMM 
stock list for March 31, 2016, the last business day of the prior 
month. A DMM security that did not trade in prior quarter would not be 
used in measuring the discount. Securities assigned to the SLP's DMM in 
the current month will also not be used in measuring the discount. 
Further, days on which the Exchange closes early would be included in 
calculating the discount. This is consistent with the way in which the 
Exchange calculates other fees.\10\ If a SLP has no DMM assigned 
securities as of the last day of the prior month or if the DMM assigned 
securities did not have any NYSE CADV in the prior quarter, then the 
SLP will not be assigned a discount for the current month.
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    \10\ See Fee Schedule, footnote 4.
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    The following is an example of how the proposed change would 
operate by reference to SLP Tier 3. Assume an SLP that is also a DMM 
has DMM assigned securities with a NYSE CADV in the prior quarter of 
570 million shares. Assume that total NYSE CADV was 3.8 billion shares 
for the prior quarter. Under these circumstances, the requirement for 
SLP Tier 3 for such a SLP would be 0.17%, using a 15% discount based on 
570 million shares of NYSE CADV in the SLPs DMM assigned securities 
divided by 3.8 billion shares of total NYSE CADV, applied to the 
current 0.20% SLP Tier 3 requirement for all SLPs.
    The Exchange also proposes to add a footnote designated with an 
asterisk providing that SLPs that become DMMs on the Exchange after the 
beginning of a billing month would not be eligible until the next full 
billing month.
    The Exchange does not propose any changes to the SLP Non-Tier.
New SLP Tier 1A
    The Exchange proposes a new, fourth SLP Tier designated ``1A'' that 
would provide that an SLP adding liquidity in securities with a per 
share price of $1.00 or more is eligible for a per share credit of 
$0.00275 if the SLP: (1) Meets the 10% average or more quoting 
requirement in an assigned security pursuant to Rule 107B; and (2) adds 
liquidity for all for assigned SLP securities in the aggregate of an 
ADV of more than 0.60% of NYSE CADV, or with respect to an SLP that is 
also a DMM and subject to Rule 107B(i)(2)(a), more than 0.60% after a 
discount of the percentage for the prior quarter of NYSE CADV in DMM 
assigned securities as of the last business day of the prior month. The 
proposed SLP Tier 1A credit in the case of Non-Displayed Reserve Orders 
would be $0.00105. The Exchange believes that the new tier will provide 
greater incentives for member organizations between Tier 1 (.90%) and 
Tier 2 levels (.45%) to add liquidity to the Exchange.
Merged Order Report
    The Exchange currently charges member organizations $3.00 per copy 
(the first copy is provided at no charge) per 1,000 records for machine 
readable output and print image transmission

[[Page 23045]]

copies of the Merged Order Report (the ``Report''). The Exchange no 
longer provides the Report in these formats, which required individual 
transmissions each time a member organization wanted to access the 
Report. Instead, the Exchange provides a single, web-based transmission 
of the Report. Since the first copy of the Report is not charged, the 
Exchange proposes to eliminate the fee. The Exchange proposes to retain 
the current charge for hard copies of the Report.
* * * * *
    The proposed changes are not otherwise intended to address any 
other issues, and the Exchange is not aware of any problems that member 
organizations would have in complying with the proposed change.
2. Statutory Basis
    The Exchange believes that the proposed rule change is consistent 
with Section 6(b) of the Act,\11\ in general, and furthers the 
objectives of Sections 6(b)(4) and 6(b)(5) of the Act,\12\ 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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    \11\ 15 U.S.C. 78f(b).
    \12\ 15 U.S.C. 78f(b)(4) and (5).
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Charges for Removing Liquidity
    The Exchange believes that introducing a slightly higher default 
charge for non-Floor broker transactions removing liquidity from the 
Exchange for member organizations with an Adding ADV, excluding DMM 
liquidity, of less than 250,000 ADV during a billing month is 
reasonable. The Exchange believes that the proposed rate change will 
incentivize submission of additional liquidity to a public exchange, 
thereby promoting price discovery and transparency and enhancing order 
execution opportunities for member organizations. The Exchange also 
believes that the proposed fee is equitable because it would apply to 
all similarly situated member organizations.
    The proposed fee also is equitable and not unfairly discriminatory 
because it would be consistent with the applicable rate on other 
marketplaces. For example, EDGA Exchange, Inc. (``EDGA'') provides a 
credit for removing liquidity, subject to Footnote 1 to EDGA's fee 
schedule, which imposes a charge of $0.0030 per share for removing 
liquidity on members that do not add and/or route a minimum ADV, 
measured monthly, of 50,000 shares on EDGA.\13\ Given the Exchange's 
and EDGA's relative size and market share, the Exchange believes that 
EDGA's 50,000 share requirement is comparable to the proposed 250,000 
ADV requirement.
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    \13\ See http://www.bats.com/us/equities/membership/fee_schedule/edga/.
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New SLP Tier 1A
    The Exchange believes that proposal to introduce a new SLP Tier 1A 
is reasonable because it provides SLPs as well as SLPs that are also 
DMMs with an additional way to qualify for a rebate, thereby providing 
SLPs with greater flexibility and creating an added incentive for SLPs 
to bring additional order flow to a public market. In particular, as 
noted above, the Exchange believes that the new tier will provide 
greater incentives for member organizations between Tier 1 (.90%) and 
Tier 2 levels (.45%) to add liquidity to the Exchange.
Credits for Non-Displayed Reserve Orders
    The Exchange believes that the proposed rule change to reduce the 
credit for Non-Displayed Reserve Orders that provide liquidity is 
reasonable, equitable and not unfairly discriminatory because it 
strengthens the relative incentive for SLPs to submit displayed 
liquidity versus non-displayed liquidity to the Exchange. The Exchange 
also believes that the proposed lower credit is equitable and not 
unfairly discriminatory because it would apply equally to all SLPs.
Numeric Benchmark for Calculating Tier-Based Credits
    The Exchange believes that replacing the numeric benchmark 
representing a fixed discount of NYSE CADV for calculating tier-based 
credits for SLPs that are also DMMs and subject to Rule 107B(i)(2)(A) 
with the current numeric benchmark applicable to other SLPs for each 
tier discounted by the DMM's percentage of NYSE consolidated average 
daily volume for the prior quarter in DMM assigned securities is 
reasonable. As noted above, the Exchange believes that the proposed 
benchmark would result in a more accurate discount for market 
participants that provide liquidity to the Exchange and would thus be 
fairer. The Exchange notes that for some SLPs with DMMs, the proposed 
change may result in a lower requirement than the current tier 
requirement, and for some SLPs the change may result in a higher 
requirement, based on the NYSE CADV in the SLP's DMM assigned 
securities than the current tier requirement. The Exchange believes 
that more accurate and fairer discounts would incentivize these market 
participants to increase the orders sent directly to the Exchange and 
therefore provide liquidity that supports the quality of price 
discovery and promotes market transparency. Further, the Exchange 
believes that the proposed benchmark is equitable because it would 
apply to all similarly situated SLPs and provide credits that are 
reasonably related to the value of an exchange's market quality 
associated with higher volumes. The Exchange further believes that the 
proposal is reasonable, equitable and not unfairly discriminatory 
because other exchanges have implemented multiple step up tiers based 
on a firm's individual trading activity rather than a market 
baseline.\14\
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    \14\ See, e.g., Securities Exchange Act Release No. 34-76084 
(October 6, 2015), 80 FR 61529 (October 13, 2015) (SR-NYSEArca-2015-
87).
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Merged Order Report
    The Exchange believes that eliminating the per copy fee for the 
Merged Order Report is reasonable because the Exchange does not charge 
for the first copy and, in light of the Exchange's utilization of web-
based transmission of the Report, the need to transmit multiple copies 
to the member organizations has been eliminated. The Exchange believes 
that the proposed elimination of the per copy fee is equitable as the 
costs it was designed to defray have been eliminated by the web-based 
method of publishing the Report. As noted above, the Exchange proposes 
to retain the current charge for hard copies of the Report.
    Finally, 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,\15\ 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, the Exchange believes that the proposed 
change would encourage the submission of additional liquidity to a 
public exchange, thereby promoting price discovery and transparency and

[[Page 23046]]

enhancing order execution opportunities for member organizations. The 
Exchange believes that this 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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    \15\ 15 U.S.C. 78f(b)(8).
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    Finally, 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 and rebates to remain competitive with other exchanges and 
with alternative trading systems that have been exempted from 
compliance with the statutory standards applicable to exchanges. 
Because competitors are free to modify their own fees and credits 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. As a result of all of these considerations, the 
Exchange does not believe that the proposed changes will impair the 
ability of member organizations or competing order execution venues to 
maintain their competitive standing in the financial markets.

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

    No written comments were solicited or received with respect to the 
proposed rule change.

III. Date of Effectiveness of the Proposed Rule Change and Timing for 
Commission Action

    The foregoing rule change is effective upon filing pursuant to 
Section 19(b)(3)(A) \16\ of the Act and subparagraph (f)(2) of Rule 
19b-4 \17\ thereunder, because it establishes a due, fee, or other 
charge imposed by the Exchange.
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    \16\ 15 U.S.C. 78s(b)(3)(A).
    \17\ 17 CFR 240.19b-4(f)(2).
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    At any time within 60 days of the filing of such proposed rule 
change, the Commission summarily may temporarily suspend such rule 
change if it appears to the Commission that such action is necessary or 
appropriate in the public interest, for the protection of investors, or 
otherwise in furtherance of the purposes of the Act. If the Commission 
takes such action, the Commission shall institute proceedings under 
Section 19(b)(2)(B) \18\ of the Act to determine whether the proposed 
rule change should be approved or disapproved.
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    \18\ 15 U.S.C. 78s(b)(2)(B).
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IV. Solicitation of Comments

    Interested persons are invited to submit written data, views, and 
arguments concerning the foregoing, including whether the proposed rule 
change is consistent with the Act. Comments may be submitted by any of 
the following methods:

Electronic Comments

     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-NYSE-2016-29 on the subject line.

Paper Comments

     Send paper comments in triplicate to Brent J. Fields, 
Secretary, Securities and Exchange Commission, 100 F Street NE., 
Washington, DC 20549-1090.

All submissions should refer to File Number SR-NYSE-2016-29. 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 Web site (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 Web site 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; the Commission does 
not edit personal identifying information from submissions.
    You should submit only information that you wish to make available 
publicly. All submissions should refer to File Number SR-NYSE-2016-29 
and should be submitted on or before May 10, 2016.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\19\
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    \19\ 17 CFR 200.30-3(a)(12).
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Robert W. Errett,
Deputy Secretary.
[FR Doc. 2016-08941 Filed 4-18-16; 8:45 am]
BILLING CODE 8011-01-P