[Federal Register Volume 89, Number 32 (Thursday, February 15, 2024)]
[Notices]
[Pages 11888-11891]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2024-03097]



[[Page 11888]]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-99507; File No. SR-CboeBZX-2024-011]


Self-Regulatory Organizations; Cboe BZX Exchange, Inc.; Notice of 
Filing and Immediate Effectiveness of a Proposed Rule Change To Amend 
its Equities Fee Schedule

February 9, 2024.
    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 February 1, 2024, Cboe BZX Exchange, Inc. (the ``Exchange'' or 
``BZX'') filed with the Securities and Exchange Commission 
(``Commission'') the proposed rule change as described in Items I, II, 
and III below, which Items have been prepared by the Exchange. The 
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

    Cboe BZX Exchange, Inc. (the ``Exchange'' or ``BZX'') proposes to 
amend its Fee Schedule. The text of the proposed rule change is 
provided in Exhibit 5.
    The text of the proposed rule change is also available on the 
Exchange's website (http://markets.cboe.com/us/equities/regulation/rule_filings/BZX/), at the Exchange's Office of the Secretary, 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 its Fee Schedule applicable to its 
equities trading platform (``BZX Equities'') by (1) modifying the rate 
associated with fee code RP; (2) modifying the criteria of Add Volume 
Tier 3; and (3) removing certain tiers from the Fee Schedule. The 
Exchange proposes to implement these changes effective February 1, 
2024.
    The Exchange first notes that it operates in a highly competitive 
market in which market participants can readily direct order flow to 
competing venues if they deem fee levels at a particular venue to be 
excessive or incentives to be insufficient. More specifically, the 
Exchange is only one of 16 registered equities exchanges, as well as a 
number of alternative trading systems and other off-exchange venues 
that do not have similar self-regulatory responsibilities under the 
Securities Exchange Act of 1934 (the ``Act''), to which market 
participants may direct their order flow. Based on publicly available 
information,\3\ no single registered equities exchange has more than 
14% of the market share. Thus, in such a low-concentrated and highly 
competitive market, no single equities exchange possesses significant 
pricing power in the execution of order flow. The Exchange in 
particular operates a ``Maker-Taker'' model whereby it pays rebates to 
members that add liquidity and assesses fees to those that remove 
liquidity. The Exchange's Fee Schedule sets forth the standard rebates 
and rates applied per share for orders that provide and remove 
liquidity, respectively. Currently, for orders in securities priced at 
or above $1.00, the Exchange provides a standard rebate of $0.00160 per 
share for orders that add liquidity and assesses a fee of $0.0030 per 
share for orders that remove liquidity.\4\ For orders in securities 
priced below $1.00, the Exchange provides a standard rebate of $0.00009 
per share for orders that add liquidity and assesses a fee of 0.30% of 
the total dollar value for orders that remove liquidity.\5\ 
Additionally, in response to the competitive environment, the Exchange 
also offers tiered pricing which provides Members opportunities to 
qualify for higher rebates or reduced fees where certain volume 
criteria and thresholds are met. Tiered pricing provides an incremental 
incentive for Members to strive for higher tier levels, which provides 
increasingly higher benefits or discounts for satisfying increasingly 
more stringent criteria.
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    \3\ See Cboe Global Markets, U.S. Equities Market Volume 
Summary, Month-to-Date (January 23, 2024), available at https://www.cboe.com/us/equities/market_statistics/.
    \4\ See BZX Equities Fee Schedule, Standard Rates.
    \5\ Id.
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Fee Code RP
    The Exchange currently offers fee code RP, which is appended to 
non-displayed orders that add liquidity to the Exchange using a 
Supplemental Peg Order.\6\ Currently, orders appended with fee code RP 
are provided a rebate of $0.00170 per share in securities priced at or 
above $1.00. For securities appended with fee code RP priced below 
$1.00 the Exchange does not provide a rebate or assess a fee. Now the 
Exchange proposes to lower the rebate amount associated with fee code 
RP from $0.00170 per share to $0.00080 per share in securities priced 
at or above $1.00. The Exchange does not propose to change its pricing 
for orders appended with fee code RP in securities priced below $1.00. 
The Exchange notes that this change is being made in order to align the 
rebate associated with fee code RP with other fee codes on the Exchange 
that provide a rebate for non-displayed orders.\7\
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    \6\ See Rule 11.9(c)(18). A ``Supplemental Peg Order'' is a non-
displayed limit order that posts to the BZX Book and thereafter is 
eligible for execution at the NBB for buy orders and NBO for sell 
orders against routable orders that are equal to or less than the 
aggregate size of the Supplemental Peg Order interest available at 
that price.
    \7\ See e.g., BZX Equities Fee Schedule, Fee Codes HB, HV, and 
HY. Each of the aforementioned fee codes provides a rebate of 
$0.00080 per share in securities priced at or above $1.00 for non-
displayed orders that add liquidity in Tapes B, A, and C securities, 
respectively.
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Add/Remove Volume Tiers
    Under footnote 1 of the Fee Schedule, the Exchange offers various 
Add/Remove Volume Tiers. In particular, the Exchange offers eight Add 
Volume Tiers that provide enhanced rebates for orders yielding fee 
codes B,\8\ V \9\ and Y \10\ where a Member reaches certain add volume-
based criteria. First, the Exchange proposes to modify the criteria of 
Add Volume Tier 3. The current criteria for Add Volume Tier 3 is as 
follows:
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    \8\ Fee code B is appended to displayed orders that add 
liquidity to BZX in Tape B securities.
    \9\ Fee code V is appended to displayed orders that add 
liquidity to BZX in Tape A securities.
    \10\ Fee code Y is appended to displayed orders that add 
liquidity to BZX in Tape C securities.
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    <bullet> Add Volume Tier 3 provides a rebate of $0.0027 per share 
in securities priced at or above $1.00 to qualifying orders (i.e., 
orders yielding fee codes B, V, or Y) where a Member has an

[[Page 11889]]

ADAV \11\ as a percentage of TCV \12\ >= 0.25% or Member has an ADAV >= 
25,000,000.
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    \11\ ``ADAV' means average daily added volume calculated as the 
number of shares added per day. ADAV is calculated on a monthly 
basis.
    \12\ ``TCV'' means total consolidated volume calculated as the 
volume reported by all exchanges and trade reporting facilities to a 
consolidated transaction reporting plan for the month for which the 
fees apply.
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    The proposed criteria for Add Volume Tier 3 is as follows:
    <bullet> Add Volume Tier 3 provides a rebate of $0.0027 per share 
in securities priced at or above $1.00 to qualifying orders (i.e., 
orders yielding fee codes B, V, or Y) where a Member has an ADAV as a 
percentage of TCV >= 0.30% or Member has an ADAV >= 30,000,000.
    The proposed modification to Add Volume Tier 3 represents a modest 
increase in difficulty to achieve the applicable tier threshold while 
maintaining the existing rebate. The Exchange believes that the 
proposed criteria continues to be commensurate with the rebate received 
and will encourage Members to grow their volume on the Exchange. 
Increased volume on the Exchange contributes to a deeper and more 
liquid market, which benefits all market participants and provides 
greater execution opportunities on the Exchange.
    In addition to the proposed modification to Add Volume Tier 3, the 
Exchange now proposes to delete Add Volume Tier 8 as the Exchange does 
not wish to, nor is required to, maintain such tier. More specifically, 
the proposed change removes this tier as the Exchange would rather 
redirect future resources and funding into other programs and tiers 
intended to incentivize increased order flow.
    Additionally, under footnote 1, the Exchange offers five Non-
Displayed Add Volume Tiers which provide enhanced rebates for orders 
yielding fee codes HB,\13\ HV,\14\ or HY \15\ where a Member reaches 
certain add volume-based criteria. The Exchange now proposes to delete 
Non-Displayed Add Volume Tier 6 as the Exchange does not wish to, nor 
is required to, maintain such tier. More specifically, the proposed 
change removes this tier as the Exchange would rather redirect future 
resources and funding into other programs and tiers intended to 
incentivize increased order flow.
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    \13\ Fee code HB is appended to non-displayed orders that add 
liquidity to BZX in Tape B securities.
    \14\ Fee code HV is appended to non-displayed orders that add 
liquidity to BZX in Tape A securities.
    \15\ Fee code HY is appended to non-displayed orders that add 
liquidity to BZX in Tape C securities.
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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.\16\ Specifically, the Exchange believes the proposed rule change 
is consistent with the Section 6(b)(5) \17\ 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) \18\ requirement that the rules of 
an exchange not be designed to permit unfair discrimination between 
customers, issuers, brokers, or dealers as well as Section 6(b)(4) \19\ 
as it is designed to provide for the equitable allocation of reasonable 
dues, fees and other charges among its Members and other persons using 
its facilities.
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    \16\ 15 U.S.C. 78f(b).
    \17\ 15 U.S.C. 78f(b)(5).
    \18\ Id.
    \19\ 15 U.S.C. 78f(b)(4).
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    As described above, the Exchange operates in a highly competitive 
market in which market participants can readily direct order flow to 
competing venues if they deem fee levels at a particular venue to be 
excessive or incentives to be insufficient. The Exchange believes that 
its proposal to modify Add Volume Tier 3 reflects a competitive pricing 
structure designed to incentivize market participants to direct their 
order flow to the Exchange, which the Exchange believes would enhance 
market quality to the benefit of all Members. Additionally, the 
Exchange notes that relative volume-based incentives and discounts have 
been widely adopted by exchanges,\20\ including the Exchange,\21\ and 
are reasonable, equitable and non-discriminatory because they are open 
to all Members on an equal basis and provide additional benefits or 
discounts that are reasonably related to (i) the value to an exchange's 
market quality and (ii) associated higher levels of market activity, 
such as higher levels of liquidity provision and/or growth patterns. 
Competing equity exchanges offer similar tiered pricing structures, 
including schedules or rebates and fees that apply based upon members 
achieving certain volume and/or growth thresholds, as well as assess 
similar fees or rebates for similar types of orders, to that of the 
Exchange.
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    \20\ See e.g., EDGX Equities Fee Schedule, Footnote 1, Add/
Remove Volume Tiers.
    \21\ See e.g., BZX Equities Fee Schedule, Footnote 1, Add/Remove 
Volume Tiers.
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    In particular, the Exchange believes its proposal to modify Add 
Volume Tier 3 is reasonable because the revised tier will be available 
to all Members and provide all Members with an opportunity to receive 
an enhanced rebate. The Exchange further believes the proposed 
modification to Add Volume Tier 3 will provide a reasonable means to 
encourage liquidity adding displayed orders in Members' order flow to 
the Exchange and to incentivize Members to continue to provide 
liquidity adding volume to the Exchange by offering them an opportunity 
to receive an enhanced rebate on qualifying orders. An overall increase 
in activity would deepen the Exchange's liquidity pool, offer 
additional cost savings, support the quality of price discovery, 
promote market transparency and improve market quality, for all 
investors.
    The Exchange believes that the proposed changes to Add Volume Tier 
3 are reasonable as they do not represent a significant departure from 
the criteria currently offered in the Fee Schedule. Further, the 
Exchange believes its proposed change to fee code RP is reasonable as 
this change does not represent a significant departure from the 
Exchange's general pricing structure. The Exchange notes that the 
proposed change to fee code RP are intended to align the rebate 
associated with Supplemental Peg Orders with existing rebates offered 
by the Exchange for other non-displayed orders adding liquidity to the 
Exchange.\22\ The Exchange also believes that the proposal represents 
an equitable allocation of fees and rebates and is not unfairly 
discriminatory because all Members continue to be eligible for the 
proposed Add Volume Tier 3 and have the opportunity to meet the tier's 
criteria and receive the corresponding enhanced rebate if such criteria 
is met. Without having a view of activity on other markets and off-
exchange venues, the Exchange has no way of knowing whether this 
proposed rule change would definitely result in any Members qualifying 
for proposed Add Volume

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Tier 3. While the Exchange has no way of predicting with certainty how 
the proposed changes will impact Member activity, based on the prior 
month's volume, the Exchange anticipates that at least one Member will 
be able to satisfy proposed Add Volume Tier 3. The Exchange also notes 
that proposed changes will not adversely impact any Member's ability to 
qualify for enhanced rebates offered under other tiers. Should a Member 
not meet the proposed new criteria, the Member will merely not receive 
that corresponding enhanced rebate.
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    \22\ Supra note 7.
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    The Exchange believes that its proposal to eliminate Add Volume 
Tier 8 and Non-Displayed Add Volume Tier 6 is reasonable because the 
Exchange is not required to maintain these tiers nor is it required to 
provide Members an opportunity to receive enhanced rebates. The 
Exchange believes its proposal to eliminate the tiers is also equitable 
and not unfairly discriminatory because it applies to all Members 
(i.e., the tiers will not be available for any Member). The Exchange 
also notes that the proposed rule change to remove these tiers merely 
results in Members not receiving an enhanced rebate, which, as noted 
above, the Exchange is not required to offer or maintain. Furthermore, 
the proposed rule change to eliminate the tiers enables the Exchange to 
redirect resources and funding into other programs and tiers intended 
to incentivize increased order flow.

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

    The Exchange does not believe that the proposed rule change will 
impose any burden on competition that is not necessary or appropriate 
in furtherance of the purposes of the Act. Rather, as discussed above, 
the Exchange believes that the proposed change would encourage the 
submission of additional order flow to a public exchange, thereby 
promoting market depth, execution incentives and enhanced execution 
opportunities, as well as price discovery and transparency for all 
Members. As a result, the Exchange believes that the proposed changes 
further the Commission's goal in adopting Regulation NMS of fostering 
competition among orders, which promotes ``more efficient pricing of 
individual stocks for all types of orders, large and small.''
    The Exchange believes the proposed rule changes do not impose any 
burden on intramarket competition that is not necessary or appropriate 
in furtherance of the purposes of the Act. Particularly, the proposed 
modification to Add Volume Tier 3 and the proposed lower rebate 
associated with fee code RP will apply to all Members equally in that 
all Members are eligible for the modified tier and lower rebate, have a 
reasonable opportunity to meet the proposed tier's criteria and will 
receive the enhanced rebate on their qualifying orders if such criteria 
is met. The Exchange does not believe the proposed changes burden 
competition, but rather, enhance competition as they are intended to 
increase the competitiveness of BZX by amending existing pricing 
incentives in order to attract order flow and incentivize participants 
to increase their participation on the Exchange, providing for 
additional execution opportunities for market participants and improved 
price transparency. Greater overall order flow, trading opportunities, 
and pricing transparency benefits all market participants on the 
Exchange by enhancing market quality and continuing to encourage 
Members to send orders, thereby contributing towards a robust and well-
balanced market ecosystem.
    Additionally, the Exchange believes the proposed elimination of Add 
Volume Tier 8 and Non-Displayed Add Volume Tier 6 does not impose any 
burden on intramarket competition that is not necessary or appropriate 
in furtherance of the purposes of the Act. Specifically, the proposed 
change to eliminate Add Volume Tier 8 and Non-Displayed Add Volume Tier 
6 will not impose any burden on intramarket competition because the 
changes apply to all Members uniformly, as in, the tiers will no longer 
be available to any Member.
    Next, the Exchange believes the proposed rule changes does not 
impose any burden on intermarket competition that is not necessary or 
appropriate in furtherance of the purposes of the Act. As previously 
discussed, the Exchange operates in a highly competitive market. 
Members have numerous alternative venues that they may participate on 
and direct their order flow, including other equities exchanges, off-
exchange venues, and alternative trading systems. Additionally, the 
Exchange represents a small percentage of the overall market. Based on 
publicly available information, no single equities exchange has more 
than 14% of the market share.\23\ Therefore, no exchange possesses 
significant pricing power in the execution of order flow. Indeed, 
participants can readily choose to send their orders to other exchange 
and off-exchange venues if they deem fee levels at those other venues 
to be more favorable. Moreover, the Commission has repeatedly expressed 
its preference for competition over regulatory intervention in 
determining prices, products, and services in the securities markets. 
Specifically, 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.'' \24\ The fact that this market is competitive has also 
long been recognized by the courts. In NetCoalition v. Securities and 
Exchange Commission, the D.C. Circuit stated as follows: ``[n]o one 
disputes that competition for order flow is `fierce.' . . . As the SEC 
explained, `[i]n the U.S. national market system, buyers and sellers of 
securities, and the broker-dealers that act as their order-routing 
agents, have a wide range of choices of where to route orders for 
execution'; [and] `no exchange can afford to take its market share 
percentages for granted' because `no exchange possesses a monopoly, 
regulatory or otherwise, in the execution of order flow from broker 
dealers'. . . .''.\25\ Accordingly, the Exchange does not believe its 
proposed fee change imposes any burden on competition that is not 
necessary or appropriate in furtherance of the purposes of the Act.
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    \23\ Supra note 3.
    \24\ See Securities Exchange Act Release No. 51808 (June 9, 
2005), 70 FR 37496, 37499 (June 29, 2005).
    \25\ NetCoalition v. SEC, 615 F.3d 525, 539 (D.C. Cir. 2010) 
(quoting Securities Exchange Act Release No. 59039 (December 2, 
2008), 73 FR 74770, 74782-83 (December 9, 2008) (SR-NYSEArca-2006-
21)).
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C. Self-Regulatory Organization's Statement on Comments on the Proposed 
Rule Change Received From Members, Participants, or Others

    The Exchange neither solicited nor received comments on the 
proposed rule change.

III. Date of Effectiveness of the Proposed Rule Change and Timing for 
Commission Action

    The foregoing rule change has become effective pursuant to Section 
19(b)(3)(A) of the Act \26\ and paragraph (f) of Rule 19b-4 \27\ 
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

[[Page 11891]]

the purposes of the Act. If the Commission takes such action, the 
Commission will institute proceedings to determine whether the proposed 
rule change should be approved or disapproved.
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    \26\ 15 U.S.C. 78s(b)(3)(A).
    \27\ 17 CFR 240.19b-4(f).
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IV. Solicitation of Comments

    Interested persons are invited to submit written data, views and 
arguments concerning the foregoing, including whether the proposed rule 
change is consistent with the Act. Comments may be submitted by any of 
the following methods:

Electronic Comments

    <bullet> Use the Commission's internet comment form (https://www.sec.gov/rules/sro.shtml); or
    <bullet> Send an email to <a href="/cdn-cgi/l/email-protection#bdcfc8d1d890ded2d0d0d8d3c9cefdced8de93dad2cb"><span class="__cf_email__" data-cfemail="6614130a034b05090b0b030812152615030548010910">[email protected]</span></a>. Please include 
file number SR-CboeBZX-2024-011 on the subject line.

Paper Comments

    <bullet> 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-CboeBZX-2024-011. 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-CboeBZX-2024-011 and should 
be submitted on or before March 7, 2024.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\28\
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    \28\ 17 CFR 200.30-3(a)(12).
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Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2024-03097 Filed 2-14-24; 8:45 am]
BILLING CODE 8011-01-P


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