[Federal Register Volume 81, Number 137 (Monday, July 18, 2016)]
[Notices]
[Pages 46725-46728]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2016-16849]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-78305; File No. SR-BatsBZX-2016-36]


Self-Regulatory Organizations; Bats BZX Exchange, Inc.; Notice of 
Filing and Immediate Effectiveness of a Proposed Rule Change Related to 
Fees for Use of Bats BZX Exchange, Inc.

July 12, 2016.
    Pursuant to section 19(b)(1) of the Securities Exchange Act of 1934 
(the ``Act''),\1\ and Rule 19b-4 thereunder,\2\ notice is hereby given 
that on July 1, 2016, Bats BZX Exchange, Inc. (the ``Exchange'' or 
``BZX'') 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 
Exchange has designated the proposed rule change as one establishing or 
changing a member due, fee, or other charge imposed by the Exchange 
under section 19(b)(3)(A)(ii) of the Act \3\ and Rule 19b-4(f)(2) 
thereunder,\4\ which renders the proposed rule change effective upon 
filing with the Commission. 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.
    \3\ 15 U.S.C. 78s(b)(3)(A)(ii).
    \4\ 17 CFR 240.19b-4(f)(2).
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The Exchange filed a proposal to amend the fee schedule applicable 
to Members \5\ and non-members of the Exchange pursuant to BZX Rules 
15.1(a) and (c).
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    \5\ The term ``Member'' is defined as ``any registered broker or 
dealer that has been admitted to membership in the Exchange.'' See 
Exchange Rule 1.5(n).
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    The text of the proposed rule change is available at the Exchange's 
Web site at www.batstrading.com, 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 parts 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 its fee schedule for its equity 
options platform (``BZX Options'') to: (i) Reduce the rate for fee code 
PA, which is appended to Professional \6\ orders in Penny Pilot 
Securities; \7\ (ii) add a new tier under footnote 9, Professional 
Penny Pilot Add Volume Tiers; (iii) to modify the criteria for the 
Customer Penny Pilot Add Tier 5 under footnote 1; and (iv) to modify 
the criteria for the Non-Customer Penny Pilot Take Volume Tier 1 under 
footnote 3. Additionally, the Exchange proposes to rename and ease the 
qualifications for the: (i) Firm, Broker Dealer, and Joint Back Office 
Penny Pilot Add Volume Step-Up Tier under footnote 2; (ii) Firm, Broker 
Dealer, and Joint Back Office Non-Penny Pilot Add Volume Step-Up Tier 
under footnote 8; and (iii) the Away Market Penny Pilot Add Volume 
Step-Up Tier under footnote 10. The Exchange also proposes to ease the 
criteria for the NBBO Setter Tier 3 under footnote 4.
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    \6\ The term ``Professional'' applies to any transaction 
identified by a Member as such pursuant to Exchange Rule 16.1.
    \7\ The term ``Penny Pilot Security'' applies to those issues 
that are quoted pursuant to Exchange Rule 21.5, Interpretation and 
Policy .01.
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Fee Code PA
    The Exchange proposes to reduce the rebate for fee code PA, under 
which a Member is currently receiving a rebate of $0.40 per contract 
for its Professional orders in Penny Pilot Securities. The Exchange 
proposes to reduce the rebate for fee code PA from $0.40 per contract 
to $0.25 per contract. The Exchange also proposes to update the 
Standard Rate table to reflect the new rebate.
New Professional Penny Pilot Add Volume Tier
    The Exchange currently offers one tier under footnote 9, 
Professional Penny Pilot Add Volume Tier. Under that tier (to be 
renamed Tier 2), a Member receives a rebate of $0.43 per contract for 
its orders that yield fee code PA where it has a combined ADAV \8\ in 
Customer \9\ and Professional orders equal to or greater than 0.20% of 
average TCV.\10\ The Exchange now proposes to add a new tier under 
footnote 9 to be named Tier 1, under which a Member would receive a 
rebate of $0.40 per contract for its orders that yield fee code PA 
where it has an ADV \11\ equal to or greater than 0.25% of average TCV. 
The current tier under footnote 9 would be renamed Tier 2.
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    \8\ As set forth in the Exchange's fee schedule, ``ADAV'' means 
average daily volume calculated as the number of contracts added per 
day.
    \9\ As set forth in the Exchange's fee schedule, the term 
``Customer'' applies to any transaction identified by a Member for 
clearing in the Customer range at the Options Clearing Corporation 
(``OCC''), excluding any transaction for a Broker Dealer or a 
``Professional'' as defined in Exchange Rule 16.1.
    \10\ As set forth in the Exchange's fee schedule, ``TCV'' means 
total consolidated volume calculated as the volume reported by all 
exchanges to the consolidated transaction reporting plan for the 
month for which the fees apply.
    \11\ As set forth in the Exchange's fee schedule, ``ADV'' means 
average daily volume calculated as the number of contracts added or 
removed, combined, per day.
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Customer Add Volume Tier 5
    Customer orders that add liquidity on the Exchange in Penny Pilot 
Securities yield fee code PY and receive a standard rebate of $0.25 per 
contract. In addition, footnote 1 of the fee schedule currently sets 
forth eight different types of Customer Penny Pilot Add Tiers, each 
providing an enhanced rebate ranging from $0.40 to $0.53 per contract 
to a Member's Customer orders that yield fee code PY upon satisfying 
monthly volume criteria required by the respective tier.
    The Exchange proposes to amend Customer Add Volume Tier 5 to amend 
the qualification criteria for the tier. In order to qualify for 
Customer Add Volume Tier 5 and receive a rebate of $0.53 per contract, 
the Exchange currently requires a Member to: (1) Have an ADAV in 
Customer orders equal to or greater than 0.80% of average TCV; and (2) 
have an ADAV in Market Maker \12\ orders equal to or greater than

[[Page 46726]]

0.30% of average TCV. The Exchange proposes to reduce the first prong 
of the qualifying criteria to require a Member to have an ADAV in 
Customer orders equal to or greater than 0.60% of average TCV. In 
addition, the Exchange proposes to add a third prong to the qualifying 
criteria to require that the Member have an ADV equal to or greater 
than 0.30% of average TCV on the Exchange's equity platform (``BZX 
Equities''). The Exchange notes that no changes are required to the 
Standard Rates table of the fee schedule in connection with the changes 
to footnote 1.
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    \12\ As set forth in the Exchange's fee schedule, the term 
``Market Maker'' applies to any transaction identified by a Member 
for clearing in the Market Maker range at the OCC, where such Member 
is registered with the Exchange as a Market Maker as defined in Rule 
16.1(a)(37).
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Non-Customer Add Volume Tier 1
    Non-Customer \13\ orders that remove liquidity from the Exchange in 
Penny Pilot Securities yield fee code PP and are charged a standard fee 
of $0.50 per contract. In addition, footnote 3 of the fee schedule 
currently sets forth four [sic] different types of Non-Customer Penny 
Pilot Take Volume Tiers, each providing a reduced fee ranging from 
$0.44 to $0.47 per contract to a Member's Non-Customer orders that 
yield fee code PP upon satisfying monthly volume criteria required by 
the respective tier.
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    \13\ As set forth in the Exchange's fee schedule, the term 
``Non-Customer'' applies to any transaction that is not a Customer 
order.
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    The Exchange proposes to amend the Non-Customer Take Volume Tier 1 
to amend the qualification criteria for the tier. In order to qualify 
for current Non-Customer Take Volume Tier 1, the Exchange currently 
requires a Member to: (1) Have an ADAV in Customer orders equal to or 
greater than 0.80% of average TCV; and (2) have an ADAV in Market Maker 
orders equal to or greater than 0.30% of average TCV. The Exchange 
proposes to reduce the first prong of the qualifying criteria to 
require a Member have an ADAV in Customer orders equal to or greater 
than 0.60% of average TCV. In addition, the Exchange proposes to add a 
third prong to the qualifying criteria to require that the Member have 
an ADV equal to or greater than 0.30% of average TCV on BZX Equities. 
The Exchange notes that no changes are required to the Standard Rates 
table of the fee schedule in connection with the changes to footnote 3.
Step-Up Tier Amendments
    The Exchange proposes to rename and ease the qualifications for 
the: (i) Firm, Broker Dealer, and Joint Back Office Penny Pilot Add 
Volume Step-Up Tier under footnote 2; (ii) Firm, Broker Dealer, and 
Joint Back Office Non-Penny Pilot Add Volume Step-Up Tier under 
footnote 8; and (iii) the Away Market Penny Pilot Add Volume Step-Up 
Tier under footnote 10. The Exchange also proposes to ease the criteria 
for the NBBO Setter Tier 3 under footnote 4. Each of the above tiers 
include the same criteria under which a Member must have an: (i) 
Options Step-Up Add TCV \14\ in Non-Customer orders from March 2015 
baseline equal to or greater than 0.15%; and (ii) ADAV in Away Market 
Maker/Firm/Broker-Dealer/Joint Back Office orders equal to or greater 
than 0.30% of average TCV. Upon satisfying the tier's criteria, the 
Member would receive an enhanced rebate of $0.43 per contract, $0.67 
per contract, $0.43 per contract, and $0.04 per contract under the 
Firm, Broker Dealer, and Joint Back Office Penny Pilot Add Volume Step-
Up Tier, Firm, Broker Dealer, and Joint Back Office Non-Penny Pilot Add 
Volume Step-Up Tier, the Away Market Penny Pilot Add Volume Step-Up 
Tier, and the NBBO Setter Tier 3, respectively.
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    \14\ As set forth in the Exchange's fee schedule, ``Options 
Step-Up TCV'' means ``ADAV as a percentage of TCV in the relevant 
baseline month subtracted from current ADAV as a percentage of 
TCV.''
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    The Exchange now proposes to ease the first prong of each of the 
above tier's criteria by replacing the requirement that the Member have 
an Options Step-Up Add TCV in Non-Customer orders from March 2015 
baseline equal to or greater than 0.15% with a new requirement that the 
Member have an ADV equal to or greater than 0.40% of average TCV. The 
Exchange does not propose to amend the second prong of each of the 
above tiers as Members would continue to be required to have an ADAV in 
Away Market Maker/Firm/Broker-Dealer/Joint Back Office orders equal to 
or greater than 0.30% of average TCV.
    In light of removing the monthly baseline step-up requirement, the 
Exchange proposes to rename the Firm, Broker Dealer, and Joint Back 
Office Penny Pilot Add Volume Step-Up Tier, the Firm, Broker Dealer, 
and Joint Back Office Non-Penny Pilot Add Volume Step-Up Tier, and the 
Away Market Penny Pilot Add Volume Step-Up Tier as follows:
     The Firm, Broker Dealer, and Joint Back Office Penny Pilot 
Add Volume Step-Up Tier would be renamed as the ``the Firm, Broker 
Dealer, and Joint Back Office Penny Pilot Add Volume Tier 2'';
     the Firm, Broker Dealer, and Joint Back Office Non-Penny 
Pilot Add Volume Step-Up Tier would be renamed as the ``the Firm, 
Broker Dealer, and Joint Back Office Non-Penny Pilot Add Volume Tier 
3''; and
     the Away Market Penny Pilot Add Volume Step-Up Tier would 
be renamed as the ``the Away Market Penny Pilot Add Volume Tier 3''.

The Exchange does not propose to amend the name of the NBBO Setter Tier 
3.
Implementation Date
    The Exchange proposes to implement these amendments to its fee 
schedule July 1, 2016.
2. Statutory Basis
    The Exchange believes that the proposed rule change is consistent 
with the objectives of section 6 of the Act,\15\ in general, and 
furthers the objectives of section 6(b)(4),\16\ in particular, as it is 
designed to provide for the equitable allocation of reasonable dues, 
fees and other charges among its Members and other persons using its 
facilities. The Exchange also notes that it operates in a highly-
competitive market in which market participants can readily direct 
order flow to competing venues if they deem fee levels at a particular 
venue to be excessive. The proposed rule change reflects a competitive 
pricing structure designed to incentivize market participants to direct 
their order flow to the Exchange. The Exchange believes that the 
proposed tier is equitable and non-discriminatory in that it would 
apply uniformly to all Members. The Exchange believes the rates remain 
competitive with those charged by other venues and, therefore, are 
reasonable and equitably allocated to Members.
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    \15\ 15 U.S.C. 78f.
    \16\ 15 U.S.C. 78f(b)(4).
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    The Exchange believes that its proposal to change the standard fee 
charged for Professional orders under fee code PA is reasonable, fair 
and equitable and non-discriminatory, because the change will apply 
equally to all participants, and because, while the change marks a 
decrease in the rebate for Professional orders in Penny Pilot 
Securities, such proposed rebate remains consistent with pricing 
previously offered by the Exchange as well as competitors of the 
Exchange and does not represent a significant departure from the 
Exchange's general pricing structure and will allow the Exchange to 
earn additional revenue that can be used to offset the addition of new 
pricing incentives, such as the new Professional Penny Pilot Add Volume 
Tier introduced as part of this proposal.
    The Exchange believes that the proposed modifications to the tiered

[[Page 46727]]

pricing structure are reasonable, fair and equitable, and non-
discriminatory. The Exchange operates in a highly competitive market in 
which market participants may readily send order flow to many competing 
venues if they deem fees at the Exchange to be excessive. The proposed 
fee structure remains intended to attract order flow to the Exchange by 
offering market participants a competitive pricing structure. The 
Exchange believes it is reasonable to offer and incrementally modify 
incentives intended to help to contribute to the growth of the 
Exchange.
    Volume-based rebates such as that proposed herein have been widely 
adopted by exchanges, including the Exchange, and are equitable because 
they are open to all Members on an equal basis and provide additional 
benefits or discounts that are reasonably related to: (i) The value to 
an exchange's market quality; (ii) associated higher levels of market 
activity, such as higher levels of liquidity provisions and/or growth 
patterns; and (iii) introduction of higher volumes of orders into the 
price and volume discovery processes.
    The proposed addition of an additional Professional Penny Pilot Add 
Volume Tier is broadly intended to incentivize participants to increase 
their participation on the Exchange, which will increase the liquidity 
and market quality on the Exchange. Thus, the Exchange believes that 
the proposed tier is reasonable, fair and equitable, and non-
discriminatory, for the reasons set forth above with respect to volume-
based pricing generally and because such changes will incentivize 
participants to further contribute to market quality. The Exchange also 
believes the rebate of $0.40 per contract is reasonable as compared to 
the existing tier under footnote 9. Currently, to receive a rebate of 
$0.43 per contract for orders that yield fee code PA, the Member must 
have a combined ADAV in Customer and Professional orders equal to or 
greater than 0.20% of average TCV. Under the proposed tier, the Member 
would receive a rebate of $0.40 per contract for its orders that yield 
fee code PA where it has an ADV equal to or greater than 0.25% of 
average TCV. The Exchange, therefore, believes that the lower rebate is 
equitable and reasonable as it correlates to the proposed tier's 
pricing structure and the criteria necessary to achieve the existing 
tier under footnote 9.
    The proposed modifications to the criteria required to qualify for 
current Customer Add Volume Tier 5 and Non-Customer Penny Pilot Take 
Volume Tier 1 are intended to incentivize additional Members to send 
Customer orders and/or Market Maker orders to the Exchange in an effort 
to qualify for the enhanced rebate or lower fee made available by the 
tiers. The Exchange believes that the proposal to require that the 
Member have an ADV equal to or greater than 0.30% of average TCV on BZX 
Equities under both tiers is a reasonable, fair and equitable, and not 
unfairly discriminatory allocation of fees and rebates because it will 
provide Members with an additional incentive to reach certain 
thresholds on both BZX Options and BZX Equities. The increased 
liquidity from this proposal also benefits all investors by deepening 
the BZX Options and BZX Equities liquidity pools, offering additional 
flexibility for all investors to enjoy cost savings, supporting the 
quality of price discovery, promoting market transparency and improving 
investor protection. Such pricing programs thereby reward a Member's 
growth pattern on the Exchange and such increased volume increases 
potential revenue to the Exchange, and will allow the Exchange to 
continue to provide and potentially expand the incentive programs 
operated by the Exchange. To the extent a Member participates on BZX 
Options and not BZX Equities, the Exchange believes that the proposal 
is still reasonable, equitably allocated and non-discriminatory with 
respect to such Member based on the overall benefit to the Exchange 
resulting from the success of BZX Options. As noted above, such success 
allows the Exchange to continue to provide and potentially expand its 
existing incentive programs to the benefit of all participants on the 
Exchange, whether they participate on BZX Options or not. The proposed 
pricing program is also fair and equitable in that membership in BZX 
Options is available to all market participants which would provide 
them with access to the benefits on BZX Options provided by the 
proposed changes, as described above, even where a member of BZX 
Options is not necessarily eligible for the proposed increased rebates 
on the Exchange. Further, the proposed changes will result in Members 
receiving either the same or an increased rebate than they would 
currently receive.
    The proposed amendments to the Firm, Broker Dealer, and Joint Back 
Office Penny Pilot Add Volume Step-Up Tier, Firm, Broker Dealer, and 
Joint Back Office Non-Penny Pilot Add Volume Step-Up Tier, Away Market 
Penny Pilot Add Volume Step-Up Tier and, the NBBO Setter Tier 3 are 
also are intended to incentivize additional Members to send orders to 
the Exchange in an effort to qualify for the enhanced rebate made 
available by the tiers. The Exchange notes that requiring improvement 
over a March 2015 baseline has become outdated and has prevented 
Members from seeking to achieve each tier's criteria. Therefore, the 
Exchange believes it is equitable and reasonable to replace the current 
March 2015 baseline with a requirement that Members have an ADV equal 
to or greater than 0.40% of average TCV. The Exchange believes the 
proposed change to each tier's criteria is consistent with the Act. The 
Exchange also believes renaming the Firm, Broker Dealer, and Joint Back 
Office Penny Pilot Add Volume Step-Up Tier, the Firm, Broker Dealer, 
and Joint Back Office Non-Penny Pilot Add Volume Step-Up Tier, and the 
Away Market Penny Pilot Add Volume Step-Up Tier is also reasonable 
because each tier would no longer require a step-up in volume based on 
a March 2015 baseline.

(B) Self-Regulatory Organization's Statement on Burden on Competition

    The Exchange believes the proposed amendment to its fee schedule 
would not impose any burden on competition that is not necessary or 
appropriate in furtherance of the purposes of the Act. The Exchange 
does not believe that the proposed change represents a significant 
departure from previous pricing offered by the Exchange or pricing 
offered by the Exchange's competitors. Additionally, Members may opt to 
disfavor the Exchange's pricing if they believe that alternatives offer 
them better value. Accordingly, the Exchange does not believe that the 
proposed change will impair the ability of Members or competing venues 
to maintain their competitive standing in the financial markets. The 
Exchange does not believe that the proposed change to the Exchange's 
tiered pricing structure burdens competition, but instead, enhances 
competition as it is intended to increase the competitiveness of the 
Exchange. The Exchange also believes the proposal enhances competition 
by seeking to draw additional volume to both BZX Equities and BZX 
Options. Therefore, the Exchange believes that the amendment to the 
tiers' thresholds contributes to, rather than burdens competition, as 
such change is intended to incentivize participants to increase their 
participation on the Exchange.

[[Page 46728]]

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

    The Exchange has not solicited, and does not intend to solicit, 
comments on this proposed rule change. The Exchange has not received 
any written comments from members or other interested parties.

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) of the Act \17\ and paragraph (f) of Rule 19b-4 
thereunder.\18\ At any time within 60 days of the filing of the 
proposed rule change, the Commission summarily may temporarily suspend 
such rule change if it appears to the Commission that such action is 
necessary or appropriate in the public interest, for the protection of 
investors, or otherwise in furtherance of the purposes of the Act.
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    \17\ 15 U.S.C. 78s(b)(3)(A).
    \18\ 17 CFR 240.19b-4(f).
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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-BatsBZX-2016-36 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-BatsBZX-2016-36. 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 such filing will also 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-BatsBZX-2016-36 and should 
be submitted on or before August 8, 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. 2016-16849 Filed 7-15-16; 8:45 am]
 BILLING CODE 8011-01-P