[Federal Register Volume 89, Number 222 (Monday, November 18, 2024)]
[Notices]
[Pages 90812-90815]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2024-26749]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-101582; File No. SR-NYSE-2024-69]
Self-Regulatory Organizations; New York Stock Exchange LLC;
Notice of Filing and Immediate Effectiveness of Proposed Rule Change To
Amend the Service for Virtual Control Circuits in the Connectivity Fee
Schedule
November 12, 2024.
Pursuant to Section 19(b)(1) \1\ of the Securities Exchange Act of
1934 (``Act'') \2\ and Rule 19b 4 thereunder,\3\ notice is hereby given
that on October 30, 2024, 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 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 the service for virtual control
circuits in the Connectivity Fee Schedule. The proposed rule change is
available on the Exchange's website 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
The Exchange proposes to amend the existing service for virtual
control circuits (``VCCs'') in the Connectivity Fee Schedule.
A VCC (previously called a ``peer to peer'' connection) is a
unicast connection through which two participants can establish a
connection between two points over dedicated bandwidth, to be used for
any purpose. At the Mahwah, New Jersey data center (``MDC'') \4\ the
Exchange offers VCCs between two Users.\5\ The recurring monthly fees
are based upon the bandwidth requirements per VCC connection between
two Users.\6\
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\4\ Through its Fixed Income and Data Services (``FIDS'')
(previously ICE Data Services) business, Intercontinental Exchange,
Inc. (``ICE'') operates the MDC. The Exchange and NYSE American LLC,
NYSE Arca, Inc., NYSE Chicago, Inc. and NYSE National, Inc.
(together, the ``Affiliate SROs'') are indirect subsidiaries of ICE.
\5\ For purposes of the Exchange's colocation services, a
``User'' means any market participant that requests to receive
colocation services directly from the Exchange. See Securities
Exchange Act Release No. 76008 (September 29, 2015), 80 FR 60190
(October 5, 2015) (SR-NYSE-2015-40). As specified in the Fee
Schedule, a User that incurs colocation fees for a particular
colocation service pursuant thereto would not be subject to
colocation fees for the same colocation service charged by the
Affiliate SROs. Each Affiliate SRO has submitted substantially the
same proposed rule change to propose the change described herein.
See SR-NYSEAMER-2024-64, SR-NYSEARCA-2024-91, SR-NYSECHX-2024-31,
and SR-NYSENAT-2024-28.
\6\ See Securities Exchange Act Release No. 80311 (March 24,
2017), 82 FR 15741 (March 30, 2017) (SR-NYSE-2016-45).
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However, not all VCCs are between two Users in the MDC. Although
all VCCs have at least one end that is a User inside the MDC, the other
party may be a non-User outside of the MDC at a remote access center,
or the VCC can be between a User in the MDC and the same User outside
of the MDC at a remote access center. A VCC that goes outside of the
MDC herein is called a ``MDC VCC.''
Accordingly, the Exchange proposes to amend the Connectivity Fee
Schedule to delete ``between two Users'' after ``Virtual Control
Circuit.'' Fees for the service would not change and, as now,
connectivity to a VCC would require the permission of the non-billed
party before the Exchange would establish the connection.
As background, Users require wired circuits to connect into and out
of the MDC. A User's equipment in the MDC's colocation hall connects to
a circuit leading out of the MDC, which connects to the User's
equipment in their back office or another data center.
Before 2013, all such circuits were provided by ICE's predecessor,
NYSE Euronext. In response to customer demand for more connectivity
options, in 2013, the MDC opened two ``meet-me-rooms'' to
telecommunications service providers (``Telecoms''),\7\ to enable
Telecoms to offer circuits into the MDC in competition with NYSE
Euronext. Currently, 16 Telecoms operate in the meet-me-rooms and
provide circuit options to Users requiring connectivity into and out of
the MDC.
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\7\ Telecommunication service providers that choose to provide
circuits at the MDC are referred to as ``Telecoms.'' Telecoms are
licensed by the Federal Communications Commission (``FCC'') and are
not required to be, or be affiliated with, a member of the Exchange
or an Affiliate SRO.
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In addition, FIDS provides two different types of circuits, Optic
Low Latency and Optic Access. Optic Access,\8\ which is more similar to
the MDC VCC, is a circuit between the MDC and the FIDS access centers
at five third-party owned data centers: (1) 111 Eighth Avenue, New
York, NY; (2) 32 Avenue of the Americas, New York, NY; (3) 165 Halsey,
Newark, NJ; (4) Secaucus, NJ; and (5) Carteret, NJ.
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\8\ The ``Optic Low Latency'' circuits are lower latency. See
Securities Exchange Act Release No. 99165 (December 13, 2023), 88 FR
87832 (December 19, 2023) (SR-NYSE-2023-48).
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Ultimately, the MDC VCCs are similar to the Optic Access FIDS
circuits in that, like Optic Access, the MDC VCCs run between the MDC
and five FIDS access centers as well as, in the case of the MDC VCCs,
additional U.S. FIDS access centers. They are smaller than the Optic
Access FIDS circuits, however. While the Exchange has no visibility
into how a User utilizes its connections, the Exchange believes that
the Optic Access FIDS circuit is used for items that require more
bandwidth, like market data, while the MDC VCCs are used for items that
require smaller amounts of bandwidth, such as messaging, pre- and post-
trade data, or clearing information, as determined by the User.
Accordingly, if a User wants a smaller connection to a U.S. access
center, or wants to reach an access center that Optic Access does not
reach, the MDC VCCs are a viable option.
General
The proposed rule change would not apply differently to distinct
types or sizes of market participants. Rather, it would apply to all
Users equally. As is currently the case, the Fee Schedule would be
applied uniformly to all Users. FIDS does not expect that the proposed
rule change will result in new Users.
The proposed change is not otherwise intended to address any other
issues relating to co-location services and/or related fees, and the
Exchange is not aware of any problems that customers would have in
complying with the proposed change.
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2. Statutory Basis
The Exchange believes that the proposed rule change is consistent
with Section 6(b) of the Act,\9\ in general, and furthers the
objectives of Section 6(b)(5) of the Act,\10\ in particular, because it
is designed to prevent fraudulent and manipulative acts and practices,
to promote just and equitable principles of trade, to foster
cooperation and coordination with persons engaged in 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
and because it is not designed to permit unfair discrimination between
customers, issuers, brokers, or dealers. The Exchange further believes
that the proposed rule change is consistent with Section 6(b)(4) of the
Act,\11\ because it provides for the equitable allocation of reasonable
dues, fees, and other charges among its members and issuers and other
persons using its facilities and does not unfairly discriminate between
customers, issuers, brokers, or dealers.
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\9\ 15 U.S.C. 78f(b).
\10\ 15 U.S.C. 78f(b)(5).
\11\ 15 U.S.C. 78f(b)(4).
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The Proposed Change Is Reasonable
The Exchange believes that the proposed rule change is reasonable.
Although all VCCs have at least one end that is a User inside the
MDC, the other party may be a non-User outside of the MDC at a remote
access center, or the VCC can be between a User in the MDC and the same
User outside of the MDC at a remote access center. Accordingly, the
proposed change is reasonable because it would make the Connectivity
Fee Schedule more accurately reflect the usage of VCCs. It would ensure
that the description of VCCs was complete, accessible and transparent,
and thereby provide market participants with greater clarity.
In considering the reasonableness of proposed services and fees,
the Commission's market-based test considers ``whether the exchange was
subject to significant competitive forces in setting the terms of its
proposal . . . , including the level of any fees.'' \12\ If the
Exchange meets that burden, ``the Commission will find that its
proposal is consistent with the Act unless `there is a substantial
countervailing basis to find that the terms' of the proposal violate
the Act or the rules thereunder.'' \13\ Here, the Exchange is subject
to significant competitive forces in setting the terms on which it
offers its proposal, in particular because substantially similar
substitutes are available, and the third-party vendors are not at a
competitive disadvantage created by the Exchange.
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\12\ Securities Exchange Act Release No. 90209 (October 15,
2020), 85 FR 67044, 67049 (October 21, 2020) (Order Granting
Accelerated Approval to Establish a Wireless Fee Schedule Setting
Forth Available Wireless Bandwidth Connections and Wireless Market
Data Connections) (SR-NYSE-2020-05, SR-NYSEAMER-2020-05, SR-
NYSEArca-2020-08, SR-NYSECHX-2020-02, SR-NYSENAT-2020-03, SR-NYSE-
2020-11, SR-NYSEAMER-2020-10, SR-NYSEArca-2020-15, SR-NYSECHX-2020-
05, SR-NYSENAT-2020-08) (``Wireless Approval Order''), citing
Securities Exchange Act Release No. 59039 (December 2, 2008), 73 FR
74770, 74781 (December 9, 2008) (``2008 ArcaBook Approval Order'').
See NetCoalition v. SEC, 615 F.3d 525 (D.C. Cir. 2010).
\13\ Wireless Approval Order, supra note 12, at 67049, citing
2008 ArcaBook Approval Order, supra note 12, at 74781.
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MDC VCCs would compete with circuits currently offered by the 16
third-party Telecoms that have installed their equipment in the MDC's
two meet-me-rooms. The Telecom circuits are reasonable substitutes for
the MDC VCCs. The Commission has recognized that products do not need
to be identical to be considered substitutable; it is sufficient that
they be substantially similar.\14\ The MDC VCCs, the FIDS circuits, and
the circuits provided by the Telecoms all perform the same function:
connecting into and out of the MDC. The providers of the MDC VCCs, VCCs
between Users, FIDS circuits and Telecom circuits design them to
perform with particular combinations of latency, bandwidth, price,
termination point, and other factors that they believe will attract
Users, and Users choose from among these competing services on the
basis of their business needs.
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\14\ See 2008 ArcaBook Approval Order, supra note 12, at 74789
and note 295 (recognizing that products need not be identical to be
substitutable).
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The MDC VCCs are sufficiently similar substitutes to the circuits
offered by the 16 Telecoms even though the MDC VCCs all terminate in
one of the U.S. remote access centers, while circuits from the 16
Telecoms could terminate in those locations or additional locations.
While neither the Exchange nor FIDS knows the end point of any
particular Telecom circuit, the Exchange understands that the Telecoms
can offer circuits terminating in any location, including the remote
access centers where the MDC VCCs would terminate. Moreover, the
Telecoms may offer smaller circuits that are the same as or similar
size to the MDC VCCs. Ultimately, Users can choose to configure their
pathway leading out of colocation in the way that best suits their
business needs, which may include connecting to the User's equipment at
one of the U.S. remote access center locations that serve as
termination points for MDC VCCs, or connecting first to one of those
remote access centers with a FIDS- or Telecom-supplied circuit and then
further connecting to another remote location using a telecommunication
provider-supplied circuit.
Neither the MDC VCCs, Optic Access circuits, nor the Optic Low
Latency circuits have a distance or latency advantage over the
Telecoms' circuits within the MDC. FIDS has normalized (a) the distance
between the meet-me-rooms and the colocation halls and (b) the distance
between the rooms where the FIDS circuits and the MDC VCCs exit the MDC
and the colocation halls. As a result, a User choosing whether to use
the MDC VCCs or Telecom circuits does not face any difference in the
distances or latency within the MDC.
The Exchange also believes that the MDC VCCs do not have any
latency or bandwidth advantage over the Telecoms' circuits outside of
the MDC. The Exchange believes that the Telecoms operating in the meet-
me-rooms offer circuits with a variety of latency and bandwidth
specifications, some of which may exceed the specifications of the
proposed MDC VCCs.\15\ The Exchange believes that Users consider these
latency and bandwidth factors--as well as other factors, such as price
and termination point--in determining which offerings will best serve
their business needs.
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\15\ The specifications of FIDS's competitors' circuits are not
publicly known. The Exchange understands that FIDS has gleaned any
information it has about its competitors through anecdotal
communications, by observing customers' purchasing choices in the
competitive market, and from its own experience as a purchaser of
circuits from telecommunications providers to build FIDS's own
networks.
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In sum, the Exchange does not believe that there is anything about
the MDC VCCs that would make the Telecoms' circuits inadequate
substitutes.
Nor does the Exchange have a competitive advantage over any third-
party competitors by virtue of the fact that it owns and operates the
MDC's meet-me-rooms. In most cases, circuits coming out of the MDC are
provided by the Telecoms.\16\ Currently, 16 Telecoms operate in the
meet-me-rooms and provide a variety of circuit choices. It is in the
Exchange's best interest to set the
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fees that Telecoms pay to operate in the meet-me-rooms at a reasonable
level \17\ so that market participants, including Telecoms, will
maximize their use of the MDC. By setting the meet-me-room fees at a
reasonable level, the Exchange encourages Telecoms to participate in
the meet-me-rooms and to sell circuits to Users for connecting into and
out of the MDC. These Telecoms then compete with each other by pricing
such circuits at competitive rates. These competitive rates for
circuits help draw in more Users and Hosted Customers to the MDC, which
directly benefits the Exchange by increasing the customer base to whom
the Exchange can sell its colocation services, which include cabinets,
power, ports, and connectivity to many third-party data feeds, and
because having more Users and Hosted Customers leads, in many cases, to
greater participation on the Exchange. In this way, by setting the
meet-me-room fees at a level attractive to telecommunications firms,
the Exchange spurs demand for all of the services it sells at the MDC,
while setting the meet-me-room fees too high would negatively affect
the Exchange's ability to sell its services at the MDC.\18\
Accordingly, there are real constraints on the meet-me-room fees the
Exchange charges, such that the Exchange does not have an advantage in
terms of costs when compared to third parties that enter the MDC
through the meet-me-rooms to provide services to compete with the
Exchange's services.
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\16\ Note that in the case of wireless connectivity, a User in
colocation still requires a fiber circuit to transport data. If a
Telecom is used, the data is transmitted wirelessly to the relevant
pole, and then from the pole to the meet-me-room using a fiber
circuit.
\17\ See Securities Exchange Act Release No. 97998 (July 26,
2023), 88 FR 50238 (August 1, 2023) (SR-NYSE-2023-27).
\18\ See id. at 50241. Importantly, the Exchange is prevented
from making any alteration to its meet-me-room services or fees
without filing a proposal for such changes with the Commission.
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If the Exchange were to set the price of the MDC VCCs too high,
Users would likely respond by choosing one of the many alternative
options offered by the 16 Telecoms. Conversely, if the Exchange were to
offer the MDC VCCs at prices aimed at undercutting comparable Telecom
circuits, the Telecoms might reassess whether it makes financial sense
for them to continue to participate in the MDC's meet-me-rooms. Their
departure might negatively impact User participation in colocation and
on the Exchange. As a result, the Exchange is not motivated to undercut
the prices of Telecom circuits.
For these reasons, the proposed change is reasonable.
The Proposed Change Is Equitable
The Exchange believes that the proposed change provides for the
equitable allocation of reasonable dues, fees, and other charges among
its members and issuers and other persons using its facilities and does
not unfairly discriminate between customers, issuers, brokers, or
dealers because it is not designed to permit unfair discrimination
between market participants. The proposed change would apply equally to
all types and sizes of market participants. It would clarify that all
VCCs, irrespective of whether between two Users, a User and non-User
outside of the VCC, or the same User, are subject to the same size and
cost provisions. In addition, the Exchange believes that the proposal
is equitable because only market participants that voluntarily select
to receive MDC VCCs would be charged for them.
Moreover, the proposed change would ensure that the Connectivity
Fee Schedule accurately reflects the usage of VCCs. It would ensure
that the description of VCCs was complete, accessible and transparent,
and provide market participants with greater clarity.
The Proposed Change Is Not Unfairly Discriminatory
The Exchange believes its proposal is not unfairly discriminatory.
The proposed change does not apply differently to distinct types or
sizes of market participants. Rather, it applies to all market
participants equally. The purchase of any proposed service is
completely voluntary and the Fee Schedule will be applied uniformly to
all market participants.
In addition, the Exchange believes that the proposal is equitable
because only market participants that voluntarily select to receive MDC
VCCs would be charged for them. The MDC VCCs are available to all
market participants on an equal basis, and all market participants that
voluntarily choose to purchase a MDC VCC are charged the same amount as
all other market participants purchasing that type of MDC VCC.
For the reasons above, the proposed change does not unfairly
discriminate between or among market participants that are otherwise
capable of satisfying any applicable co-location fees, requirements,
terms, and conditions established from time to time by the Exchange.
For these reasons, the Exchange believes that the proposal is
consistent with the Act.
B. Self-Regulatory Organization's Statement on Burden on Competition
The Exchange believes that the proposal will not impose any burden
on competition that is not necessary or appropriate in furtherance of
the purposes of Section 6(b)(8) of the Act.\19\ The proposed rule
change is designed to ensure that the provision on VCCs clarifies that
all VCCs, irrespective of whether between two Users, a User and non-
User outside of the VCC, or the same User, are subject to the same size
and cost provisions. It is not meant to address intramarket or
intermarket competition.
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\19\ 15 U.S.C. 78f(b)(8).
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The proposed change would enhance competition in the market for
circuits transmitting data into and out of colocation at the MDC by
adding VCCs, in addition to the 16 Telecoms that also sell circuits to
Users and the FIDS circuits. The MDC VCCs do not have any latency,
bandwidth, or other advantage over the Telecoms' circuits. The proposal
would not burden competition in the sale of such circuits, but rather,
enhance it by providing Users with an additional choice for their
circuit needs.
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 \20\ and Rule 19b-4(f)(6) thereunder.\21\
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) 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, the proposed rule change has become
effective pursuant to Section 19(b)(3)(A) of the Act and Rule 19b-
4(f)(6)(iii) thereunder.\22\
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\20\ 15 U.S.C. 78s(b)(3)(A)(iii).
\21\ 17 CFR 240.19b-4(f)(6).
\22\ 17 CFR 240.19b-4(f)(6). In addition, Rule 19b-4(f)(6)
requires the Exchange to give the Commission written notice of its
intent to file the proposed rule change, along with a brief
description and text of the proposed rule change, at least five
business days prior to the date of filing of the proposed rule
change, or such shorter time as designated by the Commission. The
Exchange has satisfied this requirement.
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At any time within 60 days of the filing of such proposed rule
change, the Commission summarily may
[[Page 90815]]
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) \23\
of the Act to determine whether the proposed rule change should be
approved or disapproved.
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\23\ 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 (https://www.sec.gov/rules/sro.shtml); or
Send an email to [email protected]. Please include
file number SR-NYSE-2024-69 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-NYSE-2024-69. 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 (https://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
a.m. and 3 p.m. Copies of the filing also will be available for
inspection and copying at the principal office of the Exchange. Do not
include personal identifiable information in submissions; you should
submit only information that you wish to make available publicly. We
may redact in part or withhold entirely from publication submitted
material that is obscene or subject to copyright protection. All
submissions should refer to file number SR-NYSE-2024-69 and should be
submitted on or before December 9, 2024.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\24\
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\24\ 17 CFR 200.30-3(a)(12).
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Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2024-26749 Filed 11-15-24; 8:45 am]
BILLING CODE 8011-01-P