[Federal Register Volume 86, Number 219 (Wednesday, November 17, 2021)]
[Notices]
[Pages 64277-64280]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2021-25015]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-93550; File No. SR-MIAX-2021-56]


Self-Regulatory Organizations; Miami International Securities 
Exchange, LLC; Notice of Filing and Immediate Effectiveness of Proposed 
Rule Change To Amend the MIAX Options Fee Schedule

November 10, 2021.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act''),\1\ and Rule 19b-4 thereunder,\2\ notice is hereby given that 
on October 29, 2021, Miami International Securities Exchange, LLC 
(``MIAX'' or ``Exchange'') filed with the Securities and Exchange 
Commission (``Commission'') the proposed rule change as described in 
Items I, II, and III below, which Items have been prepared by the 
Exchange. The Commission is publishing this notice to solicit comments 
on the proposed rule change from interested persons.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The Exchange is filing a proposal to amend the MIAX 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, at MIAX'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.

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 Fee Schedule to: (1) Amend the 
criteria for Members \3\ to receive the additional incremental MIAX 
Price Improvement Mechanism (``PRIME'') Agency Order (defined below) 
credit that is available for Priority Customer \4\ PRIME Agency Orders 
for Members who achieve Priority Customer Rebate Program (``PCRP'') 
Tier 3 or higher and who achieve over a threshold of 0.60% of national 
customer volume in multiply-listed options classes listed on MIAX 
during the relevant month; and (2) make a minor, non-substantive 
corrective edit.
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    \3\ The term ``Member'' means an individual or organization 
approved to exercise the trading rights associated with a Trading 
Permit. Members are deemed ``members'' under the Exchange Act. See 
Exchange Rule 100.
    \4\ ``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). A ``Priority 
Customer Order'' means an order for the account of a Priority 
Customer. See Exchange Rule 100.
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Background
    PRIME is a process by which a Member may electronically submit for 
execution an order it represents as agent (an ``Agency Order'') against 
principal interest and/or solicited interest. The Member that submits 
the Agency Order (``Initiating Member'') agrees to guarantee the 
execution of the Agency Order by submitting a contra-side order 
representing principal interest or solicited interest (``Contra-Side 
Order''). When the Exchange receives a properly designated Agency Order 
for Auction processing, a request for response (``RFR'') detailing the 
option, side, size and initiating price is broadcasted to MIAX 
participants up to an optional designated limit price. Members may 
submit responses to the RFR, which can be either an Auction or Cancel 
(``AOC'') order or an AOC eQuote. The PRIME mechanism applies to orders 
on the Exchange's Simple Order Book.\5\
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    \5\ The ``Simple Order Book'' is the Exchange's regular 
electronic book of orders and quotes. See Exchange Rule 518(a)(15).
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    The Priority Customer rebate payment is calculated from the first 
executed contract at the applicable threshold per contract credit with 
rebate payments made at the highest achieved volume tier for each 
contract traded in that month. The percentage thresholds are calculated 
based on the percentage of national customer volume in multiply-listed 
options classes listed on MIAX entered and executed over the course of 
the month (excluding QCC and cQCC Orders, Priority Customer-to-Priority 
Customer Orders, C2C and cC2C Orders, PRIME and cPRIME AOC Responses, 
PRIME and cPRIME Contra-side Orders, and PRIME and cPRIME Orders for

[[Page 64278]]

which both the Agency and Contra-side Order are Priority Customers). 
Volume for transactions in both simple and complex orders are 
aggregated to determine the appropriate volume tier threshold 
applicable to each transaction. Volume is recorded for and credits are 
delivered to the Member that submits the order to MIAX. MIAX aggregates 
the contracts resulting from Priority Customer orders transmitted and 
executed electronically on MIAX from Members and their Affiliates \6\ 
for purposes of the thresholds described in the PCRP table.
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    \6\ The term ``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, (``Affiliate''), 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 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 Market Maker) that has been appointed by a MIAX Market 
Maker, pursuant to the following process. A MIAX Market Maker 
appoints an EEM and an EEM appoints a MIAX 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 Fee Schedule, note 1.
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Additional Agency Order Credit for Members in PCRP Tier 3 or Higher
    The Exchange proposes to amend Section 1(a)(iii) of the Fee 
Schedule to amend the criteria for Members to receive the additional 
PRIME Agency Order credit that is available for Priority Customer PRIME 
Agency Orders for Members who achieve PCRP Tier 3 or higher and who 
achieve over a threshold of 0.60% of national customer volume in 
multiply-listed options classes listed on MIAX during the relevant 
month. Currently, any Member or its Affiliate that qualifies for PCRP 
Tier 3 or higher is credited an additional $0.01 per contract on 
incremental volume for each Priority Customer order executed in the 
PRIME Auction as a PRIME Agency Order over a threshold of above 0.60% 
of national customer volume in multiply-listed options classes listed 
on MIAX during the relevant month.\7\
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    \7\ The Exchange notes that the following orders are excluded 
from counting towards this threshold: QCC and cQCC Orders, mini-
options, Priority Customer-to-Priority Customer Orders, C2C and cC2C 
Orders, cPRIME Agency Orders, PRIME and cPRIME AOC Responses, PRIME 
and cPRIME Contra-side Orders, PRIME and cPRIME Orders for which 
both the Agency and Contra-side Order are Priority Customers, and 
executions related to contracts that are routed to one or more 
exchanges in connection with the Options Order Protection and 
Locked/Crossed Market Plan referenced in MIAX Rule 1400. See Fee 
Schedule, Section 1(a)(iii).
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    The Exchange proposes to amend the criteria to include an 
additional requirement for Members to receive the additional PRIME 
Agency Order credit that is available for Priority Customer PRIME 
Agency Orders for Members who achieve PCRP Tier 3 or higher and who 
achieve over a threshold of 0.60% of national customer volume in 
multiply-listed options classes listed on MIAX during the relevant 
month. To qualify for the additional PRIME Agency Order credit, the 
Exchange proposes that Members must also achieve greater than 0.85% in 
Priority Customer complex volume on MIAX during a relevant month, 
represented as a percentage of the total national customer volume in 
multiply-listed options classes listed on MIAX during the same month. 
Accordingly, with the proposed change, Members will be eligible to 
receive the additional PRIME Agency Order credit of $0.01 per contract 
for their incremental Priority Customer PRIME Agency Orders if the 
Member executes over a monthly threshold of 0.60% of national customer 
volume in multiply-listed options classes listed on MIAX during the 
relevant month, the Member achieves PCRP Tier 3 or higher, and the 
Member achieves greater than 0.85% in Priority Customer complex volume 
on MIAX during a particular month, represented as a percentage of 
national customer volume in multiply-listed options classes listed on 
MIAX during the relevant month.
Fee Schedule Cleanup Item
    The Exchange also proposes to amend Section 1(a)(iv) of the Fee 
Schedule to make a minor, non-substantive corrective edit. In 
particular, the Exchange proposes to amend the explanatory paragraph 
immediately below the table in Section 1(a)(iv) of the Fee Schedule to 
delete the phrase ``Non-Priority Customer-to-Non-Priority Customer 
Orders.'' The purpose of this change is to remove an order type that 
does not exist on the Exchange, which will provide clarity to all 
market participants that the Fee Schedule is accurate and concise.
Implementation
    The proposed changes will become effective on November 1, 2021.
2. Statutory Basis
    The Exchange believes the proposed rule change is consistent with 
the Act and the rules and regulations thereunder applicable to the 
Exchange and, in particular, the requirements of Section 6(b) of the 
Act.\8\ Specifically, the Exchange believes the proposed rule change is 
consistent with the Section 6(b)(5) \9\ requirements that the rules of 
an exchange be 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 regulating, 
clearing, settling, processing information with respect to, and 
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. 
Additionally, the Exchange believes the proposed rule change is 
consistent with the Section 6(b)(5) \10\ requirement that the rules of 
an exchange not be designed to permit unfair discrimination between 
customers, issuers, brokers, or dealers.
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    \8\ 15 U.S.C. 78f(b).
    \9\ 15 U.S.C. 78f(b)(5).
    \10\ Id.
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    The Exchange believes that its proposal provides for the equitable 
allocation of reasonable dues and fees and is not unfairly 
discriminatory for the following reasons. The Exchange operates in a 
highly competitive market. 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.'' \11\ There are currently 
16 registered options exchanges competing for order flow. Based on 
publicly-available information, and excluding index-based options, as 
of October 20, 2021, no

[[Page 64279]]

single exchange has more than approximately 12% of the market share of 
executed volume of multiply-listed equity and exchange-traded fund 
(``ETF'') options trades, for the month of October 2021.\12\ Therefore, 
no exchange possesses significant pricing power in the execution of 
multiply-listed equity and ETF options order flow. More specifically, 
as of October 20, 2021, the Exchange had a market share of 
approximately 5.87% of executed volume of multiply-listed equity and 
ETF options for the month of October 2021.\13\
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    \11\ See Securities Exchange Act Release No. 51808 (June 9, 
2005), 70 FR 37496 (June 29, 2005).
    \12\ See MIAX's ``The Market at a Glance'', available at https://www.miaxoptions.com/ (last visited October 20, 2021).
    \13\ See id.
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    The Exchange believes that the ever-shifting market shares among 
the exchanges from month to month demonstrates that market participants 
can shift order flow, or discontinue or reduce use of certain 
categories of products, in response to transaction and/or non-
transaction fee changes. For example, on February 28, 2019, the 
Exchange's affiliate, MIAX PEARL, LLC (``MIAX Pearl''), 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).\14\ MIAX Pearl experienced a decrease in total market 
share between the months of February and March of 2019, after the fees 
were in effect. Accordingly, the Exchange believes that the MIAX Pearl 
March 1, 2019, fee change may have contributed to the decrease in the 
MIAX Pearl's market share and, as such, the Exchange believes 
competitive forces constrain options exchange transaction fees and 
market participants can shift order flow based on fee changes 
instituted by the exchanges.
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    \14\ See Securities Exchange Act Release No. 85304 (March 13, 
2019), 84 FR 10144 (March 19, 2019) (SR-PEARL-2019-07).
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    Accordingly, competitive forces constrain the Exchange's 
transaction fees, and market participants can readily trade on 
competing venues if they deem pricing levels at those other venues to 
be more favorable. In response to the competitive environment, the 
Exchange offers specific rates and credits in its fee schedule, like 
those of other options exchanges', which the Exchange believes provides 
incentives to Members to increase order flow of certain qualifying 
orders.
    The Exchange believes its proposal to amend the criteria for 
Members to receive the additional PRIME Agency Order credit that is 
available for Priority Customer PRIME Agency Orders for Members who 
achieve PCRP Tier 3 or higher to include an additional requirement is 
reasonable, equitably allocated and not unfairly discriminatory because 
this change is for business and competitive reasons.
    The Exchange believes its proposal is consistent with Section 
6(b)(4) of the Act \15\ because it applies equally to all participants 
with similar order flow who reach Tier 3 of the PCRP or higher. The 
Exchange believes that the proposed new requirement to achieve the 
additional PRIME Agency Order credit will encourage market participants 
to execute greater Priority Customer complex volume in order to receive 
the additional PRIME Agency Order credit. The Exchange believes this 
will result in increased liquidity that benefits all Exchange 
participants by providing more trading opportunities and tighter 
spreads.
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    \15\ 15 U.S.C. 78f(b)(4).
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    Further, the Exchange believes that its proposal will continue to 
encourage Priority Customer order flow to PRIME Auctions. Increased 
Priority Customer order flow benefits all market participants because 
it continues to attract liquidity to the Exchange by providing more 
trading opportunities. This attracts Market Makers and other liquidity 
providers, thus, facilitating price improvement in the auction process, 
signaling additional corresponding increase in order flow from other 
market participants, and, as a result, increasing liquidity on the 
Exchange. The PCRP is reasonably designed because it incentivizes 
providers of Priority Customer order flow to send that Priority 
Customer order flow to the Exchange in order to obtain the highest 
volume threshold and receive a credit in a manner that enables the 
Exchange to improve its overall competitiveness and strengthen its 
market quality for all market participants.
    In addition, the Exchange believes that its proposal is consistent 
with Section 6(b)(5) of the Act \16\ because it perfects the mechanisms 
of a free and open market and a national market system and protects 
investors and the public interest because an increase in Priority 
Customer order flow will bring greater volume and liquidity to the 
Exchange, which benefits all market participants by providing more 
trading opportunities and tighter spreads. To the extent Priority 
Customer order flow and complex order flow is increased by this 
proposal, market participants will increasingly compete for the 
opportunity to trade on the Exchange including sending more orders and 
provided narrower and larger-sized quotations in the effort to trade 
with such Priority Customer and/or complex order flow.
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    \16\ 15 U.S.C. 78f(b)(4).
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    The Exchange believes the proposed change to remove the incorrect 
phrase regarding a certain order type promotes just and equitable 
principles of trade and removes impediments to and perfects the 
mechanism of a free and open market and a national market system 
because the proposed change makes a clarifying, non-substantive edit to 
the Fee Schedule. The Exchange believes that this proposed change will 
provide greater clarity to Members and the public regarding the 
Exchange's Fee Schedule and that it is in the public interest for the 
Fee Schedule to be accurate and concise so as to eliminate the 
potential for confusion.

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

    The Exchange 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.
Intra-Market Competition
    The Exchange does not believe that other market participants at the 
Exchange would be placed at a relative disadvantage by the proposed 
change to amend the criteria for Members to receive the additional 
PRIME Agency Order credit that is available for Priority Customer PRIME 
Agency Orders for Members who achieve PCRP Tier 3 or higher to include 
an additional requirement. The proposed change is designed to attract 
additional order flow to the Exchange. Accordingly, the Exchange 
believes that the proposal will not impose any burden on competition 
not necessary or appropriate in furtherance of the purposes of the Act 
because it will continue to encourage Priority Customer order flow and 
an increase in Priority Customer order flow will bring greater volume 
and liquidity, which benefits all market participants by providing more 
trading opportunities and tighter spreads.
Inter-Market Competition
    The Exchange 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. There are currently 16 
registered options exchanges competing for order flow. Based on 
publicly-available

[[Page 64280]]

information, and excluding index-based options, no single exchange has 
exceeded approximately 12% of the market share of executed volume of 
multiply-listed equity and ETF options trades as of October 20, 2021, 
for the month of October 2021.\17\ Therefore, no exchange possesses 
significant pricing power in the execution of multiply-listed equity 
and ETF options order flow. More specifically, as of October 20, 2021, 
the Exchange had a market share of approximately 5.87% of executed 
volume of multiply-listed equity and ETF options for the month of 
October 2021. In such an environment, the Exchange must continually 
adjust its transaction and non-transaction 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 they modify the Exchange's fees in a manner that encourages 
market participants to provide Priority Customer liquidity and to send 
order flow to the Exchange. To the extent this is achieved, all the 
Exchange's market participants should benefit from the improved market 
quality.
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    \17\ See supra note 12.
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Fee Schedule Cleanup Item
    The Exchange believes that the proposed change to remove an 
incorrect order type will not result in any burden on competition that 
is not necessary or appropriate in furtherance of the purposes of the 
Act. The proposed rule change is not a competitive filing but rather is 
designed to remedy a minor non-substantive issue and provide added 
clarity to the Fee Schedule in order to avoid potential confusion on 
the part of market participants. In addition, the Exchange does not 
believe the proposal will impose any burden on inter-market competition 
as the proposal does not address any competitive issues and is intended 
to protect investors by providing further transparency regarding the 
Exchange's Fee Schedule.

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,\18\ and Rule 19b-4(f)(2) \19\ 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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    \18\ 15 U.S.C. 78s(b)(3)(A)(ii).
    \19\ 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-MIAX-2021-56 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-MIAX-2021-56. 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-MIAX-2021-56, and should be submitted on 
or before December 8, 2021.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\20\
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    \20\ 17 CFR 200.30-3(a)(12).
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J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2021-25015 Filed 11-16-21; 8:45 am]
BILLING CODE 8011-01-P