Document ID: SEC-2013-0683-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing and Immediate Effectiveness of Proposed Rule Change Amending the NYSE Arca Equities Schedule of Fees and Charges for Exchange Services
Posted Date: 2013-04-10T04:00Z

[Federal Register Volume 78, Number 69 (Wednesday, April 10, 2013)]
[Notices]
[Pages 21443-21447]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2013-08385]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-69305; File No. SR-NYSEArca-2013-32]

Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing 
and Immediate Effectiveness of Proposed Rule Change Amending the NYSE 
Arca Equities Schedule of Fees and Charges for Exchange Services

April 4, 2013.
    Pursuant to Section 19(b)(1) \1\ of the Securities Exchange Act of 
1934 (the ``Act'') \2\ and Rule 19b-4 thereunder,\3\ notice is hereby 
given that, on March 25, 2013, NYSE Arca, Inc. (the ``Exchange'' or 
``NYSE Arca'') filed with the Securities and Exchange Commission (the 
``Commission'') the proposed rule change as described in Items I, II, 
and III below, which Items have been prepared by the self-regulatory 
organization. The Commission is publishing this notice to

[[Page 21444]]

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 its Schedule of Fees and Charges for 
Exchange Services (``Fee Schedule'') to (i) amend Step Up Tier 1 and 
Step Up Tier 2 (the ``Step Up Tiers'') to increase the volume threshold 
requirements needed to be eligible for each respective tier; (ii) amend 
the Cross-Asset Tier to replace the numeric benchmark needed to be 
eligible for the tier with a benchmark based on a percentage of options 
contract volume; (iii) add a new Retail Order Cross-Asset Tier; (iv) 
raise the fee charged for transactions in securities with a per share 
price below $1.00; and (v) amend the options-related volume 
requirements in certain tiers in the Fee Schedule to exclude volume in 
mini options from contributing to the volume requirements of the 
affected tiers. The Exchange proposes to implement the changes on April 
1, 2013. The text of the proposed rule change is available on the 
Exchange's Web site at www.nyse.com, at the principal office of the 
Exchange, and at the Commission's Public Reference Room.

II. Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

    In its filing with the Commission, the self-regulatory organization 
included statements concerning the purpose of, and basis for, the 
proposed rule change and discussed any comments it received on the 
proposed rule change. The text of those statements may be examined at 
the places specified in Item IV below. The Exchange has prepared 
summaries, set forth in sections A, B, and C below, of the most 
significant parts of such statements.

A. Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

1. Purpose
    The Exchange proposes to amend its Fee Schedule to (i) amend the 
Step Up Tiers to increase the volume threshold requirements needed to 
be eligible for each respective tier; (ii) amend the Cross-Asset Tier 
to replace the numeric benchmark needed to be eligible for the tier 
with a benchmark based on a percentage of options contract volume; 
(iii) add a new Retail Order Cross-Asset Tier; (iv) raise the fee 
charged for transactions in securities with a per share price below 
$1.00; and (v) amend the options-related volume requirements in certain 
tiers in the Fee Schedule to exclude volume in mini options from 
contributing to the volume requirements of the affected tiers. The 
Exchange proposes to implement the changes on April 1, 2013.
Step Up Tiers
    Currently, in order to qualify for Step Up Tier 1, an ETP Holder on 
a daily basis, measured monthly, must directly execute providing volume 
on NYSE Arca in an amount that is an increase of no less than 0.15% of 
U.S. consolidated average daily volume (``US CADV'') in Tape A, Tape B, 
and Tape C securities for that month over the ETP Holder's average 
daily providing volume in June 2011 (the ``Baseline Month''), subject 
to a minimum increase of 15 million average daily providing shares.\4\ 
The Exchange proposes to increase the eligibility requirement for Step 
Up Tier 1 to no less than 0.20% of US CADV for the month over the ETP 
Holder's average daily providing volume in the Baseline Month, subject 
to a minimum increase of 20 million average daily providing shares.
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    \4\ US CADV means United States Consolidated Average Daily 
Volume for transactions reported to the Consolidated Tape and 
excludes volume on days when the market closes early. Transactions 
that are not reported to the Consolidated Tape are not included in 
US CADV. The Exchange currently makes this data publicly available 
on a T + 1 basis from a link at http://www.nyxdata.com/US-and-European-Volumes.
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    Similarly, in order to qualify for Step Up Tier 2, an ETP Holder on 
a daily basis, measured monthly, must directly execute providing volume 
on NYSE Arca in an amount that is an increase of no less than 0.10% of 
US CADV for that month over the ETP Holder's average daily providing 
volume in the Baseline Month, subject to a minimum increase of 10 
million average daily providing shares. The Exchange proposes to 
increase the eligibility requirement for Step Up Tier 2 to no less than 
0.12% of US CADV for the month over the ETP Holder's average daily 
providing volume in the Baseline Month, subject to a minimum increase 
of 12 million average daily providing shares.
    By way of example, if an ETP Holder executed an average daily 
providing volume of 5 million shares in the Baseline Month, then to 
qualify for Step Up Tier 2 in a month where US CADV is 11 billion 
shares, that ETP Holder would need to increase its average daily 
providing volume by at least 13.2 million shares, or 0.12% of that 
month's US CADV, for a total average daily providing volume of at least 
18.2 million shares. If that same ETP Holder in that same month 
increased its average daily providing volume by at least 22 million 
shares, or 0.20% of that month's US CADV, for a total average daily 
providing volume average of at least 27 million shares, then that ETP 
Holder would qualify for Step Up Tier 1.\5\
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    \5\ In addition, for both Step Up Tiers, those ETP Holders that 
did not directly provide volume to NYSE Arca in the Baseline Month 
will be treated as having an average daily providing volume of zero 
for the Baseline Month. With respect to the increased percentage of 
US CADV, the volume requirements to reach the Step Up Tiers' pricing 
levels will adjust each calendar month based on the US CADV for that 
given month.
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    As previously explained,\6\ the goal of the Step Up Tiers is to 
incent ETP Holders to increase the orders sent directly to NYSE Arca 
and therefore provide liquidity that supports the quality of price 
discovery and promotes market transparency. In the Step Up Tiers 
Release, the Exchange explained that the Step Up Tiers were expected to 
benefit ETP Holders whose increased order flow provided added levels of 
liquidity (thereby contributing to the depth and market quality of the 
Book) but who are still not eligible for Tier 1, 2 or 3, or Investor 
Tier 1 or 2.\7\ For similar reasons, the Exchange believes that raising 
the volume requirements needed to be eligible for each respective Step 
Up Tier will continue to incent ETP Holders to increase the orders sent 
directly to NYSE Arca and therefore provide liquidity that supports the 
quality of price discovery and promotes market transparency. The 
Exchange believes that this especially is the case given that the 
credits for Tape A and Tape C securities under Step Up Tier 1 
($0.00295) and Step Up Tier 2 ($0.0029) are substantially higher that 
the credits for Tape A and Tape C securities under the Basic Rates 
($0.0021) and Tier 3 ($0.0025).
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    \6\ See Securities Exchange Act Release No. 64820 (July 6, 
2011), 76 FR 40974 (July 12, 2011) (SR-NYSEArca-2011-41) (``Step Up 
Tiers Release'').
    \7\ Id. at 76 FR 40975.
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Cross-Asset Tier
    Currently, under the Cross-Asset Tier, ETP Holders and Market 
Makers that (1) provide liquidity of 0.45% or more of the US CADV per 
month in Tape A, Tape B, and Tape C securities combined, and (2) are 
affiliated with an NYSE Arca Options Trading Permit (``OTP'') Holder or 
OTP Firm that provides an average daily volume (``ADV'') of electronic 
posted Customer executions in Penny Pilot issues on NYSE Arca Options 
of at least 90,000 contracts receive a per share credit of $0.0030 for 
orders in Tape A, Tape B

[[Page 21445]]

and Tape C securities that provide liquidity to the Book. The Exchange 
proposes to replace the current fixed 90,000-contract requirement with 
a variable requirement of at least 0.95% of total Customer equity and 
exchange-traded fund (``ETF'') option (as discussed below, excluding 
mini options) ADV, as reported by the Options Clearing Corporation 
(``OCC'').\8\ The Exchange is proposing these changes to the Cross-
Asset Tier in order to make the eligibility requirement consistent with 
the Exchange's other variable eligibility requirements that are based 
on percentage of volume. The Exchange believes that using an 
eligibility requirement based on percentage of volume will better 
reflect fluctuations in trading volumes. In this respect, the Exchange 
notes that Equity and ETF Customer volume is a widely followed 
benchmark of industry volume and is indicative of industry market 
share. The Exchange also notes that based on current volume, the 0.95% 
volume requirement is consistent with the original 110,000 contract 
requirement which was lowered July 1, 2012 due to concerns over 
temporarily lower volume on NYSE Arca Options.\9\ The proposed changes 
to the Cross-Asset Tier would thus eliminate the need to modify a fixed 
number requirement because a threshold based on volume would 
automatically make the necessary adjustments.
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    \8\ The OCC provides volume information in two product 
categories: equity and ETF volume and index volume, and the 
information can be filtered to show only Customer, firm, or market 
maker account type. Equity and ETF Customer volume numbers are 
available directly from the OCC each morning, or may be transmitted, 
upon request, free of charge from the Exchange. Total Industry 
Customer equity and ETF option ADV is comprised of those equity and 
ETF option contracts that clear in the customer account type at OCC, 
including Exchange-Traded Fund Shares, Trust Issued Receipts, 
Partnership Units, and Index-Linked Securities such as Exchange-
Traded Notes (see NYSE Arca Options Rule 5.3(g)-(j)), and does not 
include contracts that clear in either the firm or market maker 
account type at OCC or contracts overlying a security other than an 
equity or ETF security. The Exchange notes that there is one Penny 
Pilot issue, Mini NDX 100 Stock Index, that does not overlie an 
equity or ETF security that is eligible for the Customer posting 
credit. This Penny Pilot issue is not included in equity and ETF 
option ADV; however, the Exchange expects that the effect on the 
calculations for the qualification thresholds for tiered Customer 
posting credits to be negligible. Under the proposed rule change, 
Total Industry Customer equity and ETF option ADV will be that which 
is reported for the month by OCC in the month in which the credits 
may apply. The Exchange currently makes this data publicly available 
on a T+1 basis from a link at http://www.nyxdata.com/factbook.
    \9\ See Securities Exchange Act Release Nos. 67180 (June 11, 
2012), 77 FR 36027 (June 15, 2012) (SR-NYSEArca-2012-56) and 67424 
(July 12, 2012), 77 FR 42347 (July 18, 2012) (SR-NYSE-Arca-2012-70).
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Retail Order Cross-Asset Tier
    The Exchange also is proposing a new Retail Cross-Asset Tier. Under 
the Retail Cross-Asset Tier, firms that execute at least 0.30% of US 
CADV in retail orders and are affiliated with an NYSE Arca OTP Holder 
or OTP Firm that provides an ADV of electronic posted Customer 
executions in customer penny pilot options of at least 0.50% of total 
Customer equity and ETF option (as discussed below, excluding mini 
options) ADV would qualify for a $.0034 rebate for retail orders that 
provide liquidity. The Retail Cross-Asset Tier would provide firms with 
a second way to qualify for the $0.0034 rebate (in addition to Investor 
Tier 1) using equity retail and options customer post. The Exchange 
notes that the $0.0034 rebate is $.0001 higher than the current Retail 
Order Tier in light of the tier including an additional options 
requirement and a higher equity retail requirement.
Sub-$1.00 Securities
    Currently, a fee of 0.2% of the total dollar value of the 
transaction is charged for transactions with a per share price below 
$1.00 that take liquidity from the Book. The Exchange proposes raising 
the fee from 0.2% of the total dollar value of the transaction to 0.3% 
of the total dollar value of the transaction. The Exchange is proposing 
these changes as they are consistent with similar fee amounts charged 
by other exchanges.\10\
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    \10\ See, e.g., DirectEdge Fee Schedule, available at http://www.directedge.com/Membership/FeeSchedule/EDGXFeeSchedule.aspx; and 
Nasdaq Fee Schedule, available at http://www.nasdaqtrader.com/Trader.aspx?id=PriceListTrading2#execution.
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Mini Options
    The Exchange proposes to amend the Fee Schedule to specifically 
exclude volume in mini options from contributing to the volume 
requirements for tiers with an options volume-related component. 
Specifically, the proposed amendment would exclude volume in mini 
options from contributing to the volume requirements in Tier 1 and the 
Cross-Asset Tier. Mini option volume similarly would be excluded from 
the proposed Retail Order Cross-Asset Tier discussed above.
    The proposed changes are not otherwise intended to address any 
other problem, and the Exchange is not aware of any significant problem 
that the affected market participants would have in complying with the 
proposed changes.
2. Statutory Basis
    The Exchange believes that the proposed rule change is consistent 
with Section 6(b) of the Act,\11\ in general, and furthers the 
objectives of Sections 6(b)(4) and 6(b)(5) of the Act,\12\ in 
particular, because it provides for the equitable allocation of 
reasonable dues, fees, and other charges among its members, issuers and 
other persons using its facilities and does not unfairly discriminate 
between customers, issuers, brokers or dealers.
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    \11\ 15 U.S.C. 78f(b).
    \12\ 15 U.S.C. 78f(b)(4) and (5).
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    The Exchange believes that the proposed amendments to the Step Up 
Tiers that raise the volume requirements needed to be eligible for each 
respective tier are reasonable because the proposed changes are 
designed to further incent ETP Holders to increase the orders sent 
directly to NYSE Arca and therefore provide liquidity that supports the 
quality of price discovery and promotes market transparency. The 
Exchange believes that this is especially the case given that the 
credits for Tape A and Tape C securities under Step Up Tier 1 
($0.00295) and Step Up Tier 2 ($0.0029) are substantially higher than 
the credits for Tape A and Tape C securities under Basic Rates 
($0.0021) and Tier 3 ($0.0025). The Exchange further believes that the 
proposed amendments to the Step Up Tiers are equitable and not unfairly 
discriminatory because they will benefit ETP Holders whose increased 
order flow provides added levels of liquidity (thereby contributing to 
the depth and market quality of the Book), but who may still not be 
eligible for Tier 1, 2 or 3, or other tiers. Moreover, the Step Up 
Tiers are available for all ETP Holders to satisfy.
    The Exchange believes that the proposal to amend the Cross-Asset 
Tier to replace the current fixed benchmark needed to be eligible for 
the tier with a variable benchmark based on a percentage of volume is 
reasonable because it will make the eligibility requirement consistent 
with the Exchange's other variable eligibility requirements that also 
are based on percentage of volume. In addition, the Exchange believes 
that expanding the basis for the Cross-Asset Tier to include all 
Customer equity and ETF options ADV will better reflect the correlation 
between options trading and the underlying securities, which trade at 
the Exchange, including ETFs. In this respect, the Exchange notes that 
Equity and ETF Customer volume is a widely followed benchmark of 
industry volume and is indicative of industry market

[[Page 21446]]

share.\13\ In addition, the Exchange believes that the proposed 
amendments to the Cross-Asset Tier are equitable and not unfairly 
discriminatory because they will apply to all ETP Holders and Market 
Makers.
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    \13\ See supra note 8.
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    Moreover, the Cross-Asset Tier is available for all ETP Holders to 
satisfy, except for those ETP Holders that are not affiliated with an 
NYSE Arca Options OTP Holder or OTP Firm. However, the Exchange notes 
that ETP Holders that are not affiliated with an NYSE Arca Options OTP 
Holder or OTP Firm are still eligible for the $0.0030 Cross-Asset Tier 
rate when they qualify for one of the other Tiers described in the Fee 
Schedule (e.g., Tier 1).
    The Exchange believes that the proposal to add the new Retail Order 
Cross-Asset Tier is reasonable because it would provide firms with a 
way in which to qualify for $0.0034 rebate through equity retail and 
options customer orders. The Exchange further believes that the 
proposed Retail Order Cross-Asset Tier is equitable and not unfairly 
discriminatory because a firm that does not submit options orders can 
still be eligible for the $0.0034 rebate available from Investor Tier 
1.
    The Exchange believes that the proposal to raise the fee charged 
for transactions with a per share price below $1.00 that take liquidity 
from the Book from 0.2% to 0.3% of the total dollar value of the 
transaction is reasonable because the proposed new rate is consistent 
with similar fee amounts charged by other exchanges.\14\ The Exchange 
further believes that the proposed fee increase is equitable and not 
unfairly discriminatory because it will apply to all transactions that 
take liquidity from the Exchange in securities with a per share price 
below $1.00.
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    \14\ See supra note 10.
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    Finally, the Exchange believes that the proposal to exclude volume 
in mini options from contributing to the option volume requirements for 
Tier 1, the Cross-Asset Tier and the proposed Retail Order Cross-Asset 
Tier is reasonable because the options volume requirement currently in 
place in the fee schedule were established prior to the existence of 
mini options, a new product on NYSE Arca Options. Because mini options 
are such a new product, the Exchange believes it is reasonable to 
exclude mini option volume in this way. The Exchange further believes 
that the proposal to exclude volume in mini options from the tiers 
mentioned above is equitable and not unfairly discriminatory because 
all market participants that are eligible for the affected tiers will 
be similarly situated.

 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. In particular, the proposed 
amendments to the Step Up Tiers that raise the volume requirement 
needed to be eligible for each respective tier are designed to incent 
ETP Holders and Market Makers to increase the volume of orders sent 
directly to NYSE Arca and therefore provide liquidity that supports the 
quality of price discovery and promotes market transparency.
    The proposal to amend the Cross-Asset Tier to replace the numeric 
benchmark needed to be eligible for the tier with a benchmark based on 
a percentage of volume will not place an undue burden on competition 
because it will apply uniformly to all ETP Holders and Market Makers. 
The proposal to add the new Retail Order Cross-Asset Tier will not 
place an undue burden on competition because all firms can be eligible 
for the $0.0034 credit, as those firms that do not submit options 
orders can still qualify to receive the $0.0034 rebate by meeting the 
requirements of Investor Tier 1.
    The proposal to raise the fee charged for transactions with a per 
share price below $1.00 from 0.2% to 0.3% of the total value of orders 
that take liquidity from the Book is consistent with similar fees 
charged by other exchanges. Finally, the proposal to exclude volume in 
mini options from contributing to the option volume requirements for 
Tier 1, the Cross-Asset Tier and the proposed Retail Order Cross-Asset 
Tier will not place an undue burden on competition because all market 
participants will be similarly situated in their inability to the use 
volume in mini options to satisfy the options volume requirements of 
the affected tiers.
    The Exchange notes that it operates in a highly competitive market 
in which market participants can readily favor competing venues. In 
such an environment, the Exchange must continually review, and consider 
adjusting, its fees and credits to remain competitive with other 
exchanges. For the reasons described above, the Exchange believes that 
the proposed change reflects this competitive environment.

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 foregoing rule change is effective upon filing pursuant to 
Section 19(b)(3)(A)(ii) of the Act \15\ because it establishes a due, 
fee, or other charge imposed by NYSE Arca. At any time within 60 days 
of the filing of such proposed rule change, the Securities and Exchange 
Commission (``Commission'') summarily may temporarily suspend such rule 
change if it appears to the Commission that such action is necessary or 
appropriate in the public interest, for the protection of investors, or 
otherwise in furtherance of the purposes of the Act. If the Commission 
takes such action, the Commission shall institute proceedings under 
Section 19(b)(2)(B) \16\ of the Act to determine whether the proposed 
rule change should be approved or disapproved.
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    \15\ 15 U.S.C. 78s(b)(3)(A)(ii).
    \16\ 15 U.S.C. 78s(b)(2)(B).
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IV. Solicitation of Comments

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

Electronic Comments

     Use the Commission's Internet comment form (http://www.sec.gov/rules/sro.shtml); or
     Send an email to rule-comments@sec.gov. Please include 
File Number SR-NYSEArca-2013-32 on the subject line.

Paper Comments

     Send paper comments in triplicate to Elizabeth M. Murphy, 
Secretary, Securities and Exchange Commission, 100 F Street NE., 
Washington, DC 20549-1090.

All submissions should refer to File Number SR-NYSEArca-2013-32. This 
file number should be included on the subject line if email is used.
    To help the Commission process and review your comments more 
efficiently, please use only one method. The Commission will post all 
comments on the Commission's Internet Web site

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(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 Web site viewing and printing in the Commission's Public 
Reference Room, 100 F Street NE., Washington, DC 20549 on official 
business days between the hours of 10:00 a.m. and 3:00 p.m. Copies of 
such filing also will be available for inspection and copying at the 
principal offices of NYSE Arca. All comments received will be posted 
without change; the Commission does not edit personal identifying 
information from submissions. You should submit only information that 
you wish to make available publicly. All submissions should refer to 
File Number SR-NYSEArca-2013-32, and should be submitted on or before 
May 1, 2013.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\17\
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    \17\ 17 CFR 200.30-3(a)(12).
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Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2013-08385 Filed 4-9-13; 8:45 am]
BILLING CODE 8011-01-P