[Federal Register Volume 90, Number 88 (Thursday, May 8, 2025)]
[Notices]
[Pages 19575-19579]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2025-07987]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-102979; File No. SR-NYSE-2024-47]
Self-Regulatory Organizations; New York Stock Exchange LLC; Order
Granting Approval of a Proposed Rule Change, as Modified by Amendment
No. 1, To Amend Section 102.01 of the NYSE Listed Company Manual To
Provide That the Stockholder Requirements Set Forth Therein Will Be
Calculated on a Worldwide Basis When Listing a Company From Outside
North America That Is Listing in Connection With Its Initial Public
Offering and Is Not Listed on Any Other Regulated Stock Exchange
May 2, 2025.
I. Introduction
On August 22, 2024, New York Stock Exchange LLC (``NYSE'' or
``Exchange'') filed with the Securities and Exchange Commission
(``Commission''), pursuant to Section 19(b)(1) of the Securities
Exchange Act of 1934 (``Exchange Act'') \1\ and Rule 19b-4
thereunder,\2\ a proposed rule change to amend Section 102.01 of the
NYSE Listed Company
[[Page 19576]]
Manual (``Manual'') to provide that the distribution standard therein
would be calculated on a worldwide basis. The proposed rule change was
published for comment in the Federal Register on September 10, 2024.\3\
On October 22, 2024, pursuant to Section 19(b)(2) of the Exchange
Act,\4\ the Commission designated a longer period within which to
approve the proposed rule change, disapprove the proposed rule change,
or institute proceedings to determine whether to disapprove the
proposed rule change.\5\ On November 18, 2024, the Exchange filed
Amendment No. 1 to the proposed rule change, which amended and replaced
the proposed rule change as originally filed and superseded such filing
in its entirety. On December 9, 2024, the Commission published notice
of the proposed rule change, as modified by Amendment No. 1, and issued
an order instituting proceedings under Section 19(b)(2) of the Exchange
Act \6\ to determine whether to approve or disapprove the proposed rule
change, as modified by Amendment No. 1.\7\ On March 5, 2025, the
Commission issued a notice of designation of a longer period of time
for Commission action on proceedings to determine whether to approve or
disapprove the proposed rule change, as modified by Amendment No. 1.\8\
The Commission received no comment letters on the proposed rule change.
This order approves the proposed rule change, as modified by Amendment
No. 1.
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\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
\3\ See Securities Exchange Act Release No. 100918 (Sept. 4,
2024), 89 FR 73463.
\4\ 15 U.S.C. 78s(b)(2).
\5\ See Securities Exchange Act Release No. 101402, 89 FR 85574
(Oct. 18, 2024). The Commission designated December 9, 2024, as the
date by which the Commission shall approve or disapprove, or
institute proceedings to determine whether to disapprove, the
proposed rule change.
\6\ 15 U.S.C. 78s(b)(2).
\7\ See Securities Exchange Act Release No. 101844, 89 FR 101064
(Dec. 13, 2024) (``Notice and OIP'').
\8\ See Securities Exchange Act Release No. 102530, 90 FR 11760
(Mar. 11, 2025). The Commission designated May 8, 2025, as the date
by which the Commission shall either approve or disapprove the
proposed rule change, as modified by Amendment No. 1.
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II. Description of the Proposed Rule Change, as Modified by Amendment
No. 1
Section 102.01A of the Manual (``Section 102.01A'') sets forth the
Exchange's minimum initial listing requirements with respect to
distribution criteria for companies seeking to list under the
Exchange's domestic company initial listing standards.\9\ Specifically,
Section 102.01A sets forth distribution criteria for the initial
listing of domestic companies based on number of stockholders, number
of publicly held shares, and/or average monthly trading volume, as
applicable.\10\ Section 102.01B of the Manual (``Section 102.01B''),
under the heading ``Calculations under the Distribution Criteria,''
describes how the Exchange determines the number of stockholders and
trading volume of a domestic company when applying the initial listing
criteria. Section 102.01B currently provides that, when considering a
listing application from a company organized under the laws of Canada,
Mexico, or the United States (``North America''), the Exchange will
include all North American holders and North American trading volume in
applying the minimum stockholder and trading volume requirements of
Section 102.01A.\11\ Section 102.01B further provides that when listing
a company from outside North America, the Exchange may, in its
discretion, include holders and trading volume in the company's home
country or primary trading market outside the United States in applying
the applicable listing standards, provided that such market is a
regulated stock exchange.\12\ Section 102.01B provides that in
exercising this discretion, the Exchange will consider all relevant
factors including: (i) whether the information is derived from a
reliable source, preferably either a government-regulated securities
market or a transfer agent that is subject to governmental regulation;
(ii) whether there exist efficient mechanisms for the transfer of
securities between the company's non-U.S. trading market and the United
States; and (iii) the number of stockholders and the extent of trading
in the company's securities in the United States prior to the
listing.\13\
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\9\ See Section 102.01A.
\10\ A company seeking to list under the Exchange's domestic
company equity listing standards would be required to meet
additional minimum initial listing requirements, including minimum
aggregate market value of publicly-held shares, minimum closing
price (or offering price) per share, and minimum financial standards
as set forth in Section 102.01 of the Manual.
\11\ See Section 102.01B. See also Notice and OIP at 101065.
\12\ See Section 102.01B. See also Notice and OIP at 101065.
\13\ See Section 102.01B. See also Notice and OIP at 101065.
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The Exchange proposes to amend Section 102.01B under the heading
``Calculations under the Distribution Criteria'' to provide that, when
listing a company from outside North America when such company is
listing in connection with its initial public offering (``IPO'') and is
not listed on any other regulated stock exchange, the Exchange will
include all holders on a global basis in applying the minimum
stockholder requirements of Section 102.01A.\14\ In addition, the
Exchange proposes to amend Section 102.01B under the heading
``Calculations under the Distribution Criteria'' to clarify that the
current rule text, which provides the Exchange discretion when listing
a company from outside North America to include stockholders and
trading volume from the company's home country or primary trading
market outside North America in applying the applicable requirements of
Section 102.01A,\15\ is applicable only when the company is listed on
another regulated stock exchange.\16\
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\14\ See Notice and OIP at 101065. The Exchange states that the
trading volume requirements contained in Section 102.01A are not
relevant to the listing of a company from outside North America when
such company is listing in connection with its IPO and is not listed
on any other regulated stock exchange because the trading volume
requirements are only applicable in the case of a quotation listing
or transfer or upon exchange of a common equity security for a
listed Equity Investment Tracking Stock and are not applicable in
the case of an IPO. See id.
\15\ See supra notes 12-13 and accompanying text.
\16\ See Notice and OIP at 101065.
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The Exchange states that the current rule, which does not allow the
Exchange to include stockholders outside of North America in
determining compliance with the stockholder distribution requirements
of Section 102.01A when the company is from outside North America and
is not listed on a regulated stock exchange, does not reflect the speed
and reliability of links that enable investors who hold securities in
brokerage accounts in countries outside North America to trade in the
U.S. listing markets.\17\ The Exchange also states that given the ease
of transfer of securities between different countries in the
contemporary securities markets, there is no reason why the holders of
a listed company's securities outside of North America cannot be active
real time participants in the U.S. trading market.\18\ The Exchange
further states that this is particularly relevant to the listing of a
foreign company listed on the Exchange when it does not have an
exchange listing in its home market because the Exchange will be the
only exchange trading market for such company and any investor wishing
to trade in such company's securities on a regulated exchange market
will have to do so on the Exchange.\19\
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\17\ See id.
\18\ See id.
\19\ See id.
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In addition, Section 102.01B under the heading ``Calculations under
the
[[Page 19577]]
Distribution Criteria'' currently includes a statement that, for
securities that trade in the format of American Depositary Receipts
(``ADRs''), volume in the ordinary shares will be adjusted to be on an
ADR-equivalent basis.\20\ The Exchange states that it has long been its
practice to adopt this same approach to include holders of ordinary
shares on an ADR-equivalent basis in calculating the compliance of
companies with the stockholder requirements of Section 102.01A and that
the Exchange will continue to include holders of ordinary shares on an
ADR-equivalent basis when applying the proposed amendment to Section
102.01B concerning a company listing from outside North America in
connection with an IPO of ADRs where the ordinary shares are not listed
on any other regulated stock exchange.\21\
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\20\ See Section 102.01B. See also Notice and OIP at 101066. The
Exchange states that a large majority of the companies from outside
North America that list on the Exchange do so in the form of ADRs.
See Notice and OIP at 101066. The Exchange also states that the
speed and ease with which shares can be deposited into an ADR
facility to create new ADRs (and withdrawn from such facility) makes
an issuer's ordinary shares ``essentially fungible'' with its ADRs
for trading purposes. See id.
\21\ See Notice and OIP at 101066.
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III. Discussion and Commission Findings
After careful review, the Commission finds that the proposed rule
change, as modified by Amendment No. 1, is consistent with the
requirements of the Exchange Act and the rules and regulations
thereunder applicable to a national securities exchange.\22\ In
particular, the Commission finds that the proposed rule change, as
modified by Amendment No. 1, is consistent with Section 6(b)(5) of the
Exchange Act,\23\ which requires, among other things, that the rules of
a national securities exchange be designed to prevent fraudulent and
manipulative acts and practices, to promote just and equitable
principles of trade, 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 not be
designed to permit unfair discrimination between customers, issuers,
brokers, or dealers; and Section 6(b)(8) of the Exchange Act,\24\ which
requires that the rules of a national securities exchange do not impose
any burden on competition not necessary or appropriate in furtherance
of the purposes of the Exchange Act.
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\22\ 15 U.S.C. 78f(b). In approving this proposed rule change,
the Commission has considered the proposed rule change's impact on
efficiency, competition, and capital formation. See 15 U.S.C.
78c(f).
\23\ 15 U.S.C. 78f(b)(5).
\24\ 15 U.S.C. 78f(b)(8).
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The development and enforcement of meaningful listing standards
\25\ for an exchange is of critical importance to financial markets and
the investing public. Among other things, such listing standards help
ensure that exchange-listed companies will have sufficient public
float, investor base, and trading interest to provide the depth and
liquidity to promote fair and orderly markets.\26\ Meaningful listing
standards also are important given investor expectations regarding the
nature of securities that have achieved an exchange listing, and the
role of an exchange in overseeing its market and assuring compliance
with its listing standards.\27\
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\25\ The Commission notes that this reference to ``listing
standards'' is referring to both initial and continued listing
standards.
\26\ Adequate listing standards, by promoting fair and orderly
markets, are consistent with Section 6(b)(5) of the Exchange Act, in
that they are, among other things, designed to prevent fraudulent
and manipulative acts and practices, promote just and equitable
principles of trade, and protect investors and the public interest.
See, e.g., Securities Exchange Act Release No. 100816 (Aug. 26,
2024), 89 FR 70674, 70677 n.47 (Aug. 30, 2024) (SR-NASDAQ-2024-019).
\27\ See, e.g., Securities Exchange Act Release Nos. 101271
(Oct. 7, 2024), 89 FR 82652, 82653 n.23 and accompanying text (Oct.
11, 2024) (SR-NASDAQ-2024-029) (Order Granting Approval of a
Proposed Rule Change, as Modified by Amendment No. 2, to Modify the
Application of Bid Price Compliance Periods); 88716 (Apr. 21, 2020),
85 FR 23393 (Apr. 27, 2020) (SR-NASDAQ-2020-001) (Order Approving a
Proposed Rule Change To Modify the Delisting Process for Securities
With a Bid Price at or Below $0.10 and for Securities That Have Had
One or More Reverse Stock Splits With a Cumulative Ratio of 250
Shares or More to One Over the Prior Two-Year Period); 88389 (Mar.
16, 2020), 85 FR 16163 (Mar. 20, 2020) (SR-NASDAQ-2019-089) (Notice
of Filing of Amendment No. 1 and Order Granting Accelerated Approval
of a Proposed Rule Change, as Modified by Amendment No. 1, To Amend
Rule 5815 To Preclude Stay During Hearing Panel Review of Staff
Delisting Determinations in Certain Circumstances). See also
Securities Exchange Act Release No. 81856 (Oct. 11, 2017), 82 FR
48296, 48298 (Oct. 17, 2017) (SR-NYSE-2017-31) (Notice of Filing of
Amendment No. 1 and Order Granting Accelerated Approval of a
Proposed Rule Change, as Modified by Amendment No. 1, To Amend the
Listed Company Manual To Adopt Initial and Continued Listing
Standards for Subscription Receipts) (stating that ``[a]dequate
standards are especially important given the expectations of
investors regarding exchange trading and the imprimatur of listing
on a particular market'' and that ``[o]nce a security has been
approved for initial listing, maintenance criteria allow an exchange
to monitor the status and trading characteristics of that issue . .
. so that fair and orderly markets can be maintained'').
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The Exchange's proposal would allow the Exchange to include all
holders on a global basis in applying the minimum initial stockholder
requirements set forth in Section 102.01A in instances where the
company being considered for listing under the domestic company equity
listing standards is from outside North America, is listing in
connection with its IPO, and is not listed on another regulated stock
exchange.\28\ When considering a listing application from a company
from outside North America, the current rule provides the Exchange with
discretion, under certain circumstances, to include holders and trading
volume in a company's home country or primary trading market outside
the United States when applying the distribution requirements in
Section 102.01A when that market is a regulated stock exchange.
However, the current rule does not allow the Exchange to include
stockholders outside of North America in determining compliance with
the stockholder distribution requirements of Section 102.01A when the
company is not listed on a regulated stock exchange outside North
America, which, according to the Exchange, makes it more difficult for
such a company to meet the distribution requirements.\29\
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\28\ Section 102.01 (Minimum Numerical Standards--Domestic
Companies--Equity Listings) of the Manual sets forth the minimum
quantitative standards for the listing of common equity securities
of domestic companies. In addition, the Exchange lists applicants
that are foreign private issuers under Section 102.01 of the Manual
where such applicants are qualified to list thereunder. See Section
101.01 of the Manual. See also Section 103.00 of the Manual (Foreign
Private Issuers) (defining ``foreign private issuer'' and ``non-U.S.
company''). However, if a foreign private issuer applicant does not
meet all of the requirements for the listing of common equity
securities applicable to domestic issuers under Section 102.01 of
the Manual, the Exchange will consider whether the applicant
qualifies for listing under the quantitative listing standards for
the listing of common equity securities of non-U.S. companies set
forth in Section 103.01 of the Manual (Minimum Numerical Standards
Non-U.S. Companies Equity Listings). See Section 101.01 of the
Manual. The Exchange is not proposing any changes to the standards
for listing equity of non-U.S. companies set forth in Section 103.01
of the Manual.
\29\ See Notice and OIP at 101066.
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The Commission finds that the proposed rule change is consistent
with the requirements of Section 6(b)(5) of the Exchange Act,\30\
including, among other things, that the rules of a national securities
exchange be designed to prevent fraudulent and manipulative acts and
practices, to promote just and equitable principles of trade, 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. The proposed rule change will provide the Exchange
with the ability to consider all holders on a global basis when
determining whether a company from outside North America that is
listing in connection with its IPO and that is not listed on another
[[Page 19578]]
regulated stock exchange satisfies the initial listing distribution
requirements, without compromising the effectiveness of the Exchange's
initial listing standards. Because such companies do not have a
regulated exchange listing in their home market and the NYSE will be
the only regulated listing exchange for such companies, any investor
wishing to trade in such companies' securities on a regulated exchange
will have to do so in the U.S. market.\31\ As a result, all holders,
including foreign holders, of such companies will be sources of
liquidity in the U.S. trading market and it is reasonable for the
Exchange to consider such holders when determining whether to list such
companies. In addition, as the Exchange states, contemporary securities
markets are global and interconnected, and investors who hold
securities in brokerage accounts outside North America are generally
able to trade such securities in the U.S. markets.\32\ The Exchange's
proposal reasonably reflects the role played by stockholders located
outside North America in the development of a liquid trading market in
the United States for the securities of non-U.S. companies listing in
connection with an IPO that are not listed on any regulated stock
exchange other than the NYSE.
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\30\ 15 U.S.C. 78f(b)(5).
\31\ While NYSE will be the primary listing exchange for the
listed securities, other national securities exchanges in the U.S.
market will be able to provide for the trading of these securities
based on unlisted trading privileges.
\32\ See Notice and OIP at 101066. The Commission has
highlighted the multinational nature of securities markets, as well
as the ease of transfer of securities between different countries.
See Rule 15a-6 Adopting Release, Securities Exchange Act Release No.
27017 (Jul. 11, 1989), 54 FR 30013 (Jul. 18, 1989) (Registration
Requirements for Foreign Broker-Dealers).
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The Exchange's proposal to include holders of ordinary shares on an
ADR-equivalent basis in determining whether non-U.S. companies listing
ADRs in connection with an IPO, where the companies' ordinary shares
are not listed on any regulated stock exchange other than the NYSE,
comply with the initial listing stockholder criteria of Section 102.01A
is consistent with its current practice and consistent with the
requirements of Section 6(b)(5) of the Exchange Act.\33\ In the case of
a non-U.S. company listing in connection with an IPO of its ADRs where
the ordinary shares are not listed on any regulated stock exchange,
there is no home market to serve as a concentrated market for the
trading of ordinary shares. The ordinary shares of a non-U.S. company
can be deposited into an ADR program at a depositary to create new ADRs
and those ADRs can be surrendered to the depositary that maintains the
ADR program in exchange for the non-U.S. company's ordinary shares.\34\
As a result, holders of the ordinary shares who deposit their shares
into the ADR program will be expected to contribute to the liquidity of
the ADRs in the U.S. market and the Exchange's practice with respect to
ADRs is reasonably designed to ensure adequate liquidity and
distribution and sufficient investor interest to support the listing of
ADRs in the United States. Further, adjusting the number of holders of
ordinary shares on an ADR-equivalent basis will more accurately reflect
the holders of the instrument trading on the Exchange because each
ordinary share of the non-U.S. company deposited into the ADR program
may be equivalent to a fraction of the ADR.
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\33\ 15 U.S.C. 78f(b)(5).
\34\ See, e.g., SEC Investor Bulletin: American Depositary
Receipts, available at https://www.sec.gov/investor/alerts/adr-bulletin.pdf.
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The Commission finds that proposed rule change is also consistent
with the requirement of Section 6(b)(5) of the Exchange Act \35\ that
the rules of a national securities exchange not be designed to permit
unfair discrimination between customers, issuers, brokers, or dealers.
It is reasonable for the Exchange to limit its proposal to companies
from outside North America listing in connection with an IPO that are
not listed on any regulated stock exchange other than the NYSE because
the absence of any alternative regulated exchange market for investors
in those companies will help to ensure that trading liquidity in their
securities is concentrated in the U.S. market.\36\ In addition, as
highlighted by the Exchange, the current rule already provides a means
for companies from outside North America that are listed on another
regulated stock exchange to include stockholders outside North America
when meeting the stockholder distribution requirements.\37\
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\35\ 15 U.S.C. 78f(b)(5).
\36\ See Notice and OIP at 101066.
\37\ See supra notes 12-13 and accompanying text. See also
Notice and OIP at 101067.
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The Exchange is responding to competitive pressures in the market
for listings in making this proposal. As the Exchange states, the rules
of the Nasdaq Stock Market LLC (``Nasdaq'') do not contain any
geographic limitation on its total stockholder initial listing criteria
when listing a company from outside North America.\38\ The Exchange
states that the proposal would remove a significant competitive
disadvantage faced by the Exchange in competing with Nasdaq for the
listing of companies from outside North America that are listing in
connection with an IPO and are not listed on any other regulated stock
exchange.\39\ Therefore the Exchange's proposal should allow it to
better compete with Nasdaq for such listings. Accordingly, the
Commission finds that the Exchange's proposal reflects the current
competitive environment for exchange listings among national securities
exchanges and is appropriate and consistent with Section 6(b)(8) of the
Exchange Act,\40\ which requires that the rules of a national
securities exchange do not impose any burden on competition not
necessary or appropriate in furtherance of the purposes of the Exchange
Act.
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\38\ See Notice and OIP at 101066 (citing Nasdaq Rule 5315(f)).
\39\ See id. at 101066.
\40\ 15 U.S.C. 78f(b)(8).
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The Exchange's proposal would also amend Section 102.01B to clarify
that the current rule text, which provides the Exchange discretion when
listing a company from outside North America to include stockholders
and trading volume from the company's home country or primary trading
market outside North America in applying the applicable requirements of
Section 102.01A,\41\ is applicable only when the applicant issuer is
listed on another regulated stock exchange. This clarification is
consistent with the Exchange's current rule text and will help ensure
that the Exchange's rules are sufficiently clear to market
participants.
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\41\ See supra notes 12-13 and accompanying text.
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For these reasons, the proposal is reasonably designed to help
ensure that the Exchange lists only those companies with sufficient
public float, investor base, and trading interest to provide the depth
and liquidity to promote fair and orderly markets. Therefore, the
Commission finds that the Exchange's proposal, as modified by Amendment
No. 1, is consistent with Sections 6(b)(5) and 6(b)(8) of the Exchange
Act.\42\
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\42\ 15 U.S.C. 78f(b)(5), (8).
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IV. Conclusion
It is therefore ordered, pursuant to Section 19(b)(2) of the
Exchange Act,\43\ that the proposed rule change (SR-NYSE-2024-47), as
modified by Amendment No. 1, be, and it hereby is, approved.
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\43\ 15 U.S.C. 78s(b)(2).
[[Page 19579]]
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For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\44\
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\44\ 17 CFR 200.30-3(a)(12).
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Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2025-07987 Filed 5-7-25; 8:45 am]
BILLING CODE 8011-01-P