[Federal Register Volume 81, Number 180 (Friday, September 16, 2016)]
[Notices]
[Pages 63811-63815]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2016-22256]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-78817; File No. SR-NYSEMKT-2016-84]


Self-Regulatory Organizations; NYSE MKT LLC; Notice of Filing and 
Immediate Effectiveness of Proposed Rule Change To Amend Rule 67--
Equities To Modify Certain Data Collection Requirements of the 
Regulation NMS Plan To Implement a Tick Size Pilot Program

September 12, 2016.
    Pursuant to Section 19(b)(1) \1\ of the Securities Exchange Act of 
1934 (the ``Act'') \2\ and Rule 19b-4 thereunder,\3\

[[Page 63812]]

notice is hereby given that on August 29, 2016, NYSE MKT LLC (the 
``Exchange'' or ``NYSE MKT'') filed with the Securities and Exchange 
Commission (the ``Commission'') the proposed rule change as described 
in Items I and II 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 Rule 67--Equities to modify certain 
data collection requirements of the Regulation NMS Plan to Implement a 
Tick Size Pilot Program. The proposed rule change is available on the 
Exchange's Web site at www.nyse.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 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
    On August 25, 2014, NYSE MKT, and several other self-regulatory 
organizations (the ``Participants'') filed with the Commission, 
pursuant to Section 11A of the Act \4\ and Rule 608 of Regulation NMS 
thereunder,\5\ the Plan to Implement a Tick Size Pilot Program (the 
``Plan'').\6\ The Participants filed the Plan to comply with an order 
issued by the Commission on June 24, 2014.\7\ The Plan was published 
for comment in the Federal Register on November 7, 2014, and approved 
by the Commission, as modified, on May 6, 2015.\8\
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    \4\ 15 U.S.C. 78k-1.
    \5\ 17 CFR 242.608.
    \6\ See Letter from Brendon J. Weiss, Vice President, 
Intercontinental Exchange, Inc., to Secretary, Commission, dated 
August 25, 2014.
    \7\ See Securities Exchange Act Release No. 72460 (June 24, 
2014), 79 FR 36840 (June 30, 2014).
    \8\ See Securities Exchange Act Release No. 74892 (May 6, 2015), 
80 FR 27513 (May 13, 2015) (``Approval Order'').
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    The Plan is designed to allow the Commission, market participants, 
and the public to study and assess the impact of increment conventions 
on the liquidity and trading of the common stock of small-
capitalization companies. Each Participant is required to comply, and 
to enforce compliance by its member organizations, as applicable, with 
the provisions of the Plan.
    The Plan provides for the creation of a group of Pilot Securities, 
which shall be placed in a control group and three separate test 
groups, with each subject to varying quoting and trading increments. 
Pilot Securities in the control group will be quoted at the current 
tick size increment of $0.01 per share and will trade at the currently 
permitted increments. Pilot Securities in the first test group will be 
quoted in $0.05 minimum increments but will continue to trade at any 
price increment that is currently permitted.\9\ Pilot Securities in the 
second test group (``Test Group Two'') will be quoted in $0.05 minimum 
increments and will trade at $0.05 minimum increments subject to a 
midpoint exception, a retail investor order exception, and a negotiated 
trade exception.\10\ Pilot Securities in the third test group (``Test 
Group Three'') will be subject to the same quoting and trading 
increments as Test Group Two, and also will be subject to the ``Trade-
at'' requirement to prevent price matching by a market participant that 
is not displaying at the price of a Trading Center's ``Best Protected 
Bid'' or ``Best Protected Offer,'' unless an enumerated exception 
applies.\11\ In addition to the exceptions provided under Test Group 
Two, an exception for Block Size orders and exceptions that mirror 
those under Rule 611 of Regulation NMS \12\ will apply to the Trade-at 
requirement.
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    \9\ See Section VI(B) of the Plan.
    \10\ See Section VI(C) of the Plan.
    \11\ See Section VI(D) of the Plan.
    \12\ 17 CFR 242.611.
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    The Plan also requires a Trading Center \13\ or a Market Maker \14\ 
to collect and transmit certain data to its designated examining 
authority (``DEA''), and requires DEAs to transmit this data to the 
Commission. Participants that operate a Trading Center also are 
required under the Plan to collect certain data, which is then 
transmitted directly to the Commission. With respect to Trading 
Centers, Appendix B.I to the Plan (Market Quality Statistics) requires 
a Trading Center to submit to the Participant that is its DEA a variety 
of market quality statistics. Appendix B.II to the Plan (Market and 
Marketable Limit Order Data) requires a Trading Center to submit 
information to its DEA relating to market orders and marketable limit 
orders, including the time of order receipt, order type, the order 
size, and the National Best Bid and National Best Offer quoted price.
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    \13\ The Plan incorporates the definition of a ``Trading 
Center'' from Rule 600(b)(78) of Regulation NMS. Regulation NMS 
defines a ``Trading Center'' as ``a national securities exchange or 
national securities association that operates an SRO trading 
facility, an alternative trading system, an exchange market maker, 
an OTC market maker, or any other broker or dealer that executes 
orders internally by trading as principal or crossing orders as 
agent.'' See 17 CFR 242.600(b).
    \14\ The Plan defines a Market Maker as ``a dealer registered 
with any self-regulatory organization, in accordance with the rules 
thereof, as (i) a market maker or (ii) a liquidity provider with an 
obligation to maintain continuous, two-sided trading interest.''
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    With respect to Market Makers, Appendix B.III requires a 
Participant that is a national securities exchange to collect daily 
Market Maker Registration statistics. Appendix B.IV requires a 
Participant to collect data related to Market Maker participation with 
respect to each Market Maker engaging in trading activity on a Trading 
Center operated by the Participant. Appendix C.I requires a Participant 
to collect data related to Market Maker profitability from each Market 
Maker for which it is the DEA. Appendix C.II requires the Participant, 
as DEA, to aggregate the Appendix C.I data, and to transmit this data 
to the Commission.
    The Commission approved the Pilot on a two-year basis, with 
implementation to begin no later than May 6, 2016.\15\ On November 6, 
2015, the SEC exempted the Participants from implementing the pilot 
until October 3, 2016.\16\ As set forth in Appendices B and C to the 
Plan, data that is reported pursuant to the appendices shall be 
provided for dates starting six months prior to the Pilot Period 
through six months after the end of the Pilot Period. Under the revised 
Pilot implementation date, the Pre-Pilot data collection period 
commenced on April 4, 2016.
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    \15\ See Approval Order at 27533 and 27545.
    \16\ See Securities Exchange Act Release No. 76382 (November 6, 
2015), 80 FR 70284 (November 13, 2015) (File No. 4-657).
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    On March 29, 2016, NYSE MKT filed with the Commission a proposed 
rule change to adopt NYSE MKT Rule 67(b)--Equities to implement the 
data collection requirements of the Plan.\17\

[[Page 63813]]

On December 9, 2015, NYSE MKT submitted an exemptive request to the 
Commission, seeking an exemption from certain data collection and 
reporting requirements set forth in the Plan.\18\ On April 4, 2016, the 
Commission granted exemptive relief from complying with certain data 
collection and reporting requirements in the Plan.\19\
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    \17\ See Securities Exchange Act Release No. 77478 (March 30, 
2016), 81 FR 19665 (April 5, 2016) (Immediate Effectiveness of 
Proposed Rule Change Adopting Requirements for the Collection and 
Transmission of Data Pursuant to Appendices B and C of the 
Regulation NMS Plan to Implement a Tick Size Pilot Program) (SR-
NYSEMKT-2016-40).
     NYSE MKT also submitted a proposed rule change to implement the 
quoting and trading requirements of the Plan. See Securities 
Exchange Act Release No. 77949 (May 31, 2016), 81 FR 36367 (June 6, 
2016) (Immediate Effectiveness of Proposed Rule Change Implementing 
the Quoting and Trading Provisions of the Plan to Implement a Tick 
Size Pilot Program) (SR-NYSEMKT-2016-56).
    \18\ See Letter from Marcia E. Asquith, Senior Vice President 
and Corporate Secretary, FINRA, to Robert W. Errett, Deputy 
Secretary, Commission, dated December 9, 2015 (``Exemptive 
Request'').
    \19\ See letter from John C. Roeser, Associate Director, 
Division of Trading and Markets, Commission, to Sherry Sandler, 
Associate General Counsel, NYSE MKT, dated April 4, 2016.
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    NYSE MKT now proposes to further amend Rule 67--Equities to modify 
additional data collection and reporting requirements. First, Appendix 
B.I.a(21) through B.I.a(27) currently requires that Trading Centers 
report the cumulative number of shares of cancelled orders during a 
specified duration of time after receipt of the order that was 
cancelled. NYSE MKT and the other Participants believe that, for 
purposes of reporting cancelled orders, it is appropriate to categorize 
unexecuted Immediate or Cancel orders separately as one bucket 
irrespective of the duration of time after order receipt, i.e., without 
a time increment, to better differentiate orders cancelled subsequent 
to entry from those where the customer's intent prior to order entry 
was to cancel the order if no execution could be immediately obtained. 
NYSE MKT, therefore, proposes to modify Supplementary Material .30 to 
provide that unexecuted Immediate or Cancel orders shall be categorized 
separately for purposes of Appendix B.I.a(21) through B.I.a(27).
    The second change relates to the reporting of daily market quality 
statistics pursuant to Appendix B.I. Currently, Appendix B.I sets forth 
categories of orders, including market orders, marketable limit orders, 
and inside-the-quote resting limit orders, for which daily market 
quality statistics must be reported. NYSE MKT and the other 
Participants have determined that it is appropriate to include an order 
type for limit orders priced more than $0.10 away from the NBBO for 
purposes of Appendix B reporting. NYSE MKT therefore proposes to amend 
Supplementary Material .50 to provide that limit orders priced more 
than $0.10 away from the NBBO shall be included as an order type for 
purposes of Appendix B reporting, and shall be assigned the number 
(22). These orders are not currently required to be reported pursuant 
to Appendix B, and NYSE MKT and the other Participants believe that 
requiring the reporting of such orders will produce a more 
comprehensive data set.
    The third change relates to the reporting of market quality 
statistics pursuant to Appendix B.I for a variety of order types, 
including inside-the-quote resting limit orders (12), at-the-quote 
resting limit orders (13), and near-the-quote resting limit orders 
(within $0.10 of the NBBO) (14). NYSE MKT and the other Participants 
believe that it is appropriate to require Trading Centers to report all 
orders that fall within these categories, and not just those orders 
that are ``resting.'' NYSE MKT, therefore, proposes to amend 
Supplementary Material .50 to make this change.
    In the fourth change, NYSE MKT proposes to add new Supplementary 
Material .100 to modify the manner in which market maker participation 
statistics are calculated. Currently, Appendix B.IV provides that 
market maker participation statistics shall be calculated based on 
share participation, trade participation, cross-quote share (trade) 
participation, inside-the-quote share (trade) participation, at-the-
quote share (trade) participation, and outside-the-quote share (trade) 
participation. NYSE MKT and the other Participants have determined that 
it is appropriate to add the count of the number of Market Makers used 
in the calculation of share (trade) participation to each category. 
NYSE MKT is therefore proposing this change as part of Supplementary 
Material .100. In addition, Appendix B.IV(b) and (c) currently require 
that, when aggregating across Market Makers, share participation and 
trade participation shall be calculated using the share-weighted 
average and trade-weighted average, respectively. NYSE MKT and the 
other Participants believe that it is more appropriate to calculate 
share and trade participation by providing the total count of shares or 
trades, as applicable, rather than weighted averages, and NYSE MKT is 
therefore proposing this change as part of Supplementary Material .100.
    The fifth change relates to the NBBO that a Trading Center is 
required to use when performing certain quote-related calculations. 
When calculating cross-quote share (trade) participation pursuant to 
Appendix B.IV(d) and inside-the-quote share (trade) participation 
pursuant to Appendix B.IV(e), the Plan requires the Trading Center to 
utilize the NBBO at the time of the trade for both share and trade 
participation calculations. When calculating at-the-quote share (trade) 
participation and outside-the-quote share (trade) participation 
pursuant to Appendix B.IV(f) and (g), the Plan allows the Trading 
Center to utilize the National Best Bid or National Best Offer (NBBO) 
at the time of or immediately before the trade for both share and trade 
participation calculations. NYSE MKT and the other Participants believe 
that it is appropriate to calculate all quote participation (cross-
quote share (trade) participation, inside-the-quote share (trade) 
participation, at-the-quote share (trade) participation and outside-
the-quote share (trade) participation) solely by reference to the NBBO 
in effect immediately prior to the trade. NYSE MKT therefore proposes 
to make this change as part of Supplementary Material .100.
    Finally, NYSE MKT proposes to change the end date until which the 
Pre-Pilot Data Collection Securities shall be used to fulfill the 
Plan's data collection requirements. Currently, Supplementary Material 
.90 provides that Pre-Pilot Data Collection Securities are the 
securities designated by the Participants for purposes of the data 
collection requirements described in Items I, II and IV of Appendix B 
and Item I of Appendix C to the Plan for the period beginning six 
months prior to the Pilot Period and ending on the trading day 
immediately preceding the Pilot Period. NYSE MKT and the other 
Participants believe that it is appropriate to use the Pilot Securities 
to satisfy the Plan's data collection requirements prior to the 
commencement of the Pilot. Accordingly, NYSE MKT is revising 
Supplementary Material .90 to provide that the Pre-Pilot Data 
Collection Securities shall be used to satisfy the Plan's data 
collection requirements through thirty-one days prior to the Pilot 
Period, after which time the Pilot Securities shall be used for 
purposes of the data collection requirements.\20\
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    \20\ After regular trading hours on September 2, 2016, the 
national securities exchanges will establish which securities will 
be included as Pilot Securities for purposes of the Plan. NYSE MKT 
and the other Participants have determined that members should use 
the Pilot Securities list for data collection purposes once it 
becomes available. Thus, the proposed rule change requires that, 
beginning thirty days prior to the first day of the Pilot Period--
i.e., September 3, 2016--NYSE MKT and NYSE MKT members will comply 
with the data collection obligations of the Plan by collecting data 
on the Pilot Securities. As a result, beginning on September 3, 
2016, members must migrate from using NYSE MKT's published Pre-Pilot 
Data Collection Security list and begin using the Pilot Securities 
list. September 2, 2016 will be the last day that members use the 
Pre-Pilot Data Collection Security list.

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[[Page 63814]]

    As noted in Item 2 of this filing, NYSE MKT has filed the proposed 
rule change for immediate effectiveness. NYSE MKT has requested that 
the SEC waive the 30-day operative period so that the proposed rule 
change can become operative on August 30, 2016.
2. Statutory Basis
    The Exchange believes that its proposal is consistent with Section 
6(b) of the Act \21\ in general, and furthers the objectives of Section 
6(b)(5) of the Act \22\ in particular, in that it is designed 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 mechanism of a 
free and open market and a national market system and, in general, to 
protect investors and the public interest.
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    \21\ 15 U.S.C. 78f(b).
    \22\ 15 U.S.C. 78f(b)(5).
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    NYSE MKT believes that this proposal is consistent with the Act 
because it implements and clarifies the provisions of the Plan, and is 
designed to assist NYSE MKT in meeting its regulatory obligations 
pursuant to the Plan. In approving the Plan, the SEC noted that the 
Pilot was an appropriate, data-driven test that was designed to 
evaluate the impact of a wider tick size on trading, liquidity, and the 
market quality of securities of smaller capitalization companies, and 
was therefore in furtherance of the purposes of the Act. NYSE MKT 
believes that this proposal is in furtherance of the objectives of the 
Plan, as identified by the SEC, and is therefore consistent with the 
Act because the proposal implements and clarifies the requirements of 
the Plan.

B. Self-Regulatory Organization's Statement on Burden on Competition

    NYSE MKT notes that the proposed rule change implements the 
provisions of the Plan, and is designed to assist NYSE MKT in meeting 
its regulatory obligations pursuant to the Plan. NYSE MKT also notes 
that, other than the change to require use of the Pilot Securities 
beginning thirty days prior to the beginning of the Pilot Period, the 
proposed changes will only affect how NYSE MKT and Participants that 
operate Trading Centers collect and report data. NYSE MKT notes that, 
with respect to the change to require the use of the Pilot Securities 
beginning thirty days prior to the start of the Pilot Period, the 
proposed change reduces the number of securities on which affected 
members otherwise would have been required to collect data pursuant to 
the Plan and NYSE MKT Rule 67--Equities. In addition, the proposed rule 
change applies equally to all similarly situated members. Therefore, 
NYSE MKT does not believe that the proposed rule change will result in 
any burden on competition that is not necessary or appropriate in 
furtherance of the purposes of the Act.

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 Exchange has filed the proposed rule change pursuant to Section 
19(b)(3)(A)(iii) of the Act \23\ and Rule 19b-4(f)(6) thereunder.\24\ 
Because the proposed rule change does not: (i) Significantly affect the 
protection of investors or the public interest; (ii) impose any 
significant burden on competition; and (iii) by its terms, become 
operative prior to 30 days from the date on which it was filed, or such 
shorter time as the Commission may designate, if consistent with the 
protection of investors and the public interest.
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    \23\ 15 U.S.C. 78s(b)(3)(A)(iii).
    \24\ 17 CFR 240.19b-4(f)(6).
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    A proposed rule change filed under Rule 19b-4(f)(6) \25\ normally 
does not become operative prior to 30 days after the date of the 
filing. However, pursuant to Rule 19b4(f)(6)(iii),\26\ the Commission 
may designate a shorter time if such action is consistent with the 
protection of investors and the public interest. The Exchange has asked 
the Commission to waive the 30-day operative delay so that the proposal 
may become operative immediately upon filing.
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    \25\ 17 CFR 240.19b-4(f)(6).
    \26\ 17 CFR 240.19b-4(f)(6)(iii).
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    The Commission believes that waiving the 30 day operative delay is 
consistent with the protection of investors and the public interest 
because it will allow the Exchange to implement the proposed rules 
immediately thereby preventing delays in the implementation of the 
Plan. The Commission notes that the Plan is scheduled to start on 
October 3, 2016. Therefore, the Commission hereby waives the 30 day 
operative delay and designates the proposed rule change to be operative 
upon filing with the Commission.\27\
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    \27\ For purposes only of waiving the operative delay for this 
proposal, the Commission has considered the proposed rule's impact 
on efficiency, competition, and capital formation. See 15 U.S.C. 
78c(f).
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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) \28\ of the Act to determine whether the proposed 
rule change should be approved or disapproved.
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    \28\ 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-NYSEMKT-2016-84 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-NYSEMKT-2016-84. 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

[[Page 63815]]

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-NYSEMKT-2016-
84 and should be submitted on or before October 7, 2016.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\29\
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    \29\ 17 CFR 200.30-3(a)(12).
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Robert W. Errett,
Deputy Secretary.
[FR Doc. 2016-22256 Filed 9-15-16; 8:45 am]
 BILLING CODE 8011-01-P