[Federal Register Volume 89, Number 210 (Wednesday, October 30, 2024)]
[Notices]
[Pages 86382-86386]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2024-25147]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-101430; File No. SR-MEMX-2024-41]
Self-Regulatory Organizations; MEMX LLC; Notice of Filing and
Immediate Effectiveness of a Proposed Rule Change To Amend the Short
Term Options Series Program in Rule 19.5, Interpretation and Policy .05
October 24, 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 October 23, 2024, MEMX, LLC (``Exchange'') filed with the Securities
and Exchange Commission (``Commission'') a proposed rule change as
described in Items I and II below, which Items have been prepared by
the Exchange. The Exchange filed the proposal as a ``non-
controversial'' proposed rule change pursuant to Section
19(b)(3)(A)(iii) of the Act \3\ and Rule 19b-4(f)(6) thereunder.\4\ 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.
\3\ 15 U.S.C. 78s(b)(3)(A).
\4\ 17 CFR 240.19b-4.
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I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
The Exchange is filing with the Commission a proposed rule change
to amend the Short Term Options Series Program in Rule 19.5,
Interpretation and Policy .05. The text of the proposed rule change is
provided in Exhibit 5.
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.
[[Page 86383]]
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 Rule 19.5, Interpretation and Policy
.05 (Series of Options Contracts Open for Trading) to permit the
expansion of Monday expirations in Exchange Traded Products (``ETPs'').
Specifically, the Exchange proposes to expand the Short Term Option
Series Program to permit the listing of two Monday expirations for
options on SPDR Gold Shares (``GLD''), iShares Silver Trust (``SLV''),
and iShares 20+ Year Treasury Bond ETF (``TLT'').\5\ This is a
competitive filing that is based on a proposal submitted from Nasdaq
ISE, LLC (``Nasdaq ISE'') and recently approved by the Commission.\6\
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\5\ Today, the Exchange permits the listing of two Wednesday
expirations for options on GLD, SLV, and TLT. See Securities
Exchange Act Release No. 99211 (December 20, 2023), 88 FR 89481
(December 27, 2023) (SR-MEMX-2023-35).
\6\ See Securities Exchange Act Release No. 100837 (August 27,
2024) 89 FR 71770 (September 3, 2024) (Order approving SR-ISE-2024-
21).
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Currently, as set forth in in Exchange Rule 19.5, Interpretation
and Policy .05, after an option class has been approved for listing and
trading on the Exchange as a Short Term Option Series,\7\ the Exchange
may open for trading on any Thursday or Friday that is a business day
(``Short Term Option Opening Date'') series of options on that class
that expire at the close of business on each of the next five Fridays
that are business days and are not Fridays in which standard expiration
options series, Monthly Options Series, or Quarterly Options Series
expire (``Friday Short Term Option Expiration Dates''). The Exchange
may have no more than a total of five Short Term Option Friday
Expiration Dates (``Short Term Option Weekly Expirations''). Further,
if the Exchange is not open for business on the respective Thursday or
Friday, the Short Term Option Opening Date for Short Term Option Weekly
Expirations will be the first business day immediately prior to that
respective Thursday or Friday. Similarly, if the Exchange is not open
for business on a Friday, the Short Term Option Expiration Date for
Short Term Option Weekly Expirations will be the first business day
immediately prior to that Friday.
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\7\ The term ``Short Term Option Series'' is a series in an
option class that is approved for listing and trading on the
Exchange in which the series is opened for trading on any Monday,
Tuesday, Wednesday, Thursday or Friday that is a business day and
that expires on the Monday, Tuesday, Wednesday, Thursday, or Friday
of the next business week, or, in the case of a series that is
listed on a Friday and expires on a Monday, is listed one business
week and one business day prior to that expiration. If a Tuesday,
Wednesday, Thursday or Friday is not a business day, the series may
be opened (or shall expire) on the first business day immediately
prior to that Tuesday, Wednesday, Thursday or Friday, respectively.
For a series listed pursuant to this section for Monday expiration,
if a Monday is not a business day, the series shall expire on the
first business day immediately following that Monday. See Exchange
Rule 16.1.
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Additionally, the Exchange may open for trading series of options
on the symbols provided in Table 1 of Exchange Rule 19.5,
Interpretation and Policy .05(h) that expire at the close of business
on each of the next two Mondays, Tuesdays, Wednesdays, and Thursdays,
respectively, that are business days beyond the current week and are
not business days in which standard expiration options series, Monthly
Options Series, or Quarterly Options Series expire (``Short Term Option
Daily Expirations'').\8\ For those symbols listed in Table 1, the
Exchange may have no more than a total of two Short Term Option Daily
Expirations beyond the current week for each of Monday, Tuesday,
Wednesday, and Thursday expirations, as applicable, at one time.
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\8\ As set forth in Table 1 in Rule 19.5, Interpretation and
Policy .05(h), the Exchange currently only permits Wednesday
expirations for USO, UNG, GLD, SLV and TLT.
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At this time, the Exchange proposes to expand the Short Term Option
Daily Expirations to permit the listing and trading of options on GLD,
SLV, and TLT expiring on Mondays. The Exchange proposes to permit two
Short Term Option Expiration Dates beyond the current week for each
Monday expiration at one time, and would update Table 1 in Exchange
Rule 19.5, Interpretation and Policy .05(h) for each of those symbols
accordingly.
The proposed Monday GLD, SLV, and TLT expirations will be similar
to the current Monday SPY, QQQ, and IWM Short Term Option Daily
Expirations set forth in Exchange Rule 19.5, Interpretation and Policy
.05(h) such that the Exchange may open for trading on any Friday or
Monday that is a business day (beyond the current week) series of
options on GLD, SLV, and TLT to expire on any Monday of the month that
is a business day and is not a Monday in which standard expiration
options series, Monthly Options Series, or Quarterly Options Series
expire, provided that Monday expirations that are listed on a Friday
must be listed at least one business week and one business day prior to
the expiration (``Monday GLD Expirations,'' ``Monday SLV Expirations,''
and ``Monday TLT Expirations'') (collectively, ``Monday ETP
Expirations'').\9\ In the event Short Term Option Daily Expirations
expire on a Monday and that Monday is the same day that a standard
expiration options series, Monthly Options Series, or Quarterly Options
Series expires, the Exchange would skip that week's listing and instead
list the following week; the two weeks would therefore not be
consecutive. Today, Monday expirations in SPY, QQQ, and IWM similarly
skip the weekly listing in the event the weekly listing expires on the
same day in the same class as a standard expiration options series,
Monthly Options Series, or Quarterly Options Series.
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\9\ Today, GLV, SLV and TLT may trade on Wednesdays. See supra
note 5. They may also trade on Fridays, as is the case for all
options series in the Short Term Option Series Program.
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The interval between strike prices for the proposed Monday ETP
Expirations will be the same as those currently applicable to the Short
Term Option Series Program.\10\ Specifically, the Monday ETP
Expirations will have a strike interval of (i) $0.50 or greater for
strike prices below $100, and $1 or greater for strike prices between
$100 and $150 for all option classes that participate in the Short Term
Option Series Program, (ii) $0.50 for option classes that trade in one
dollar increments and are in the Short Term Option Series Program, or
(iii) $2.50 or greater for strike prices above $150.\11\ As is the case
with other equity options series listed pursuant to the Short Term
Option Series Program, the Monday ETP Expirations series will be P.M.-
settled.
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\10\ See Rule 19.5, Interpretation and Policy .05(e).
\11\ Id.
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Pursuant to the Exchange's definition of the Short Term Option
Series Program, if a Monday is not a business day, the series shall
expire on the first business day immediately following that Monday.\12\
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\12\ See supra note 7.
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Currently, for each option class eligible for participation in the
Short Term Option Series Program, the Exchange is limited to opening
thirty (30) series for each expiration date for the specific class.\13\
The thirty (30) series restriction does not include series that are
open by other securities exchanges under their respective weekly rules;
the Exchange may list these additional series that are listed by other
options exchanges.\14\ With the proposed changes, this thirty (30)
series restriction would apply to Monday GLD, SLV, and TLT Short Term
Option Daily Expirations as well. In addition, the
[[Page 86384]]
Exchange will be able to list series that are listed by other
exchanges, assuming they file similar rules with the Commission to list
Monday ETP Expirations.
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\13\ See Rule 19.5, Interpretation and Policy .05(a).
\14\ Id.
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With this proposal, Monday ETP Expirations would be treated
similarly to existing Monday SPY, QQQ, and IWM Expirations. With
respect to standard expiration option series, Short Term Option Daily
Expirations will be permitted to expire in the same week in which
standard expiration option series on the same class expire.\15\ Not
listing Short Term Option Daily Expirations for one week every month
because there was a standard options series on that same class on the
Friday of that week would create investor confusion.
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\15\ See Rule 19.5, Interpretation and Policy .05(b).
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Further, as with Monday SPY, QQQ, and IWM Expirations, the Exchange
would not permit Monday ETP Expirations to expire on a business day in
which standard expiration option series, Monthly Options Series, or
Quarterly Options Series expire.\16\ Therefore, all Short Term Option
Daily Expirations would expire at the close of business on each of the
next two Mondays, Tuesdays, Wednesdays, and Thursdays, respectively,
that are business days and are not business days in which standard
expiration option series, Monthly Options Series, or Quarterly Options
Series expire. The Exchange believes that it is reasonable to not
permit two expirations on the same day in which a standard expiration
option series, Monthly Options Series, a Quarterly Options Series would
expire because those options would be duplicative of each other.
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\16\ See Rule 19.5, Interpretation and Policy .05.
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The Exchange does not believe that any market disruptions will be
encountered with the introduction of Monday ETP Expirations. The
Exchange currently trades P.M.-settled Short Term Option Series that
expire Monday for SPY, QQQ and IWM and has not experienced any market
disruptions nor issues with capacity. In addition, the Exchange has not
experienced any market disruptions or issues with capacity in expanding
the three ETPs to the Wednesday expirations.\17\ Today, the Exchange
has surveillance programs in place to support and properly monitor
trading in Short Term Option Series that expire Monday for SPY, QQQ and
IWM. Further, the Exchange has the necessary capacity and surveillance
programs in place to support and properly monitor trading in the
proposed Monday ETP Expirations.
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\17\ See supra note 5.
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2. Statutory Basis
The Exchange believes that the proposal is consistent with the
requirements of Section 6(b) of the Securities Exchange Act of 1934
(the ``Act''),\18\ in general, and Section 6(b)(5) of the Act,\19\ in
particular, in that 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 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.
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\18\ 15 U.S.C. 78f(b).
\19\ 15 U.S.C. 78f(b)(5).
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Similar to Monday expirations in SPY, QQQ, and IWM, the proposal to
permit Monday ETP Expirations, subject to the proposed limitation of
two expirations beyond the current week, would protect investors and
the public interest by providing the investing public and other market
participants more choice and flexibility to closely tailor their
investment and hedging decisions in these options and allow for a
reduced premium cost of buying portfolio protection, thus allowing them
to better manage their risk exposure.
The Exchange represents that it has an adequate surveillance
program in place to detect manipulative trading in the proposed option
expirations, in the same way that it monitors trading in the current
Short Term Option Series for Monday SPY, QQQ and IWM expirations. The
Exchange also represents that it has the necessary system capacity to
support the new expirations. Finally, the Exchange does not believe
that any market disruptions will be encountered with the introduction
of these option expirations. As discussed above, the Exchange believes
that its proposal is a modest expansion of weekly expiration dates for
GLD, SLV, and TLT given that it will be limited to two Monday
expirations beyond the current week. Lastly, the Exchange believes that
its proposal will not be a strain on liquidity providers because of the
multi-class nature of GLD, SLV and TLT and the available hedges in
highly correlated instruments.
The Exchange believes that the proposal is consistent with the Act
as the proposal would overall add a small number of Monday ETP
Expirations by limiting the addition of two Monday expirations beyond
the current week. The addition of Monday ETP Expirations would remove
impediments to and perfect the mechanism of a free and open market by
encouraging Market Makers to continue to deploy capital more
efficiently and improve displayed market quality.\20\ The Exchange
believes that the proposal will allow Participants to expand hedging
tools and tailor their investment and hedging needs more effectively in
GLD, SLV, and TLT as these funds are most likely to be utilized by
market participants to hedge the underlying asset classes.
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\20\ Today, Market Makers are required to quote a specified time
in their assigned options series. See Exchange Rule 22.5.
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Similar to Monday SPY, QQQ, and IWM expirations, the introduction
of Monday ETP Expirations is consistent with the Act as it will, among
other things, expand hedging tools available to market participants and
allow for a reduced premium cost of buying portfolio protection. The
Exchange believes that Monday ETP Expirations will allow market
participants to purchase options on GLD, SLV, and TLT based on their
timing as needed and allow them to tailor their investment and hedging
needs more effectively, thus allowing them to better manage their risk
exposure. Today, the Exchange lists Monday SPY, QQQ, and IWM
Expirations.\21\
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\21\ See Rule 19.5, Interpretation and Policy .05.
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The Exchange believes the Short Term Option Series Program has been
successful to date and that Monday ETP Expirations should simply expand
the ability of investors to hedge risk against market movements
stemming from economic releases or market events that occur throughout
the month in the same way that the Short Term Option Series Program has
expanded the landscape of hedging.
There are no material differences in the treatment of Monday SPY,
QQQ and IWM expirations compared to the proposed Monday ETP
Expirations. Given the similarities between Monday SPY, QQQ and IWM
expirations and the proposed Monday ETP Expirations, the Exchange
believes that applying the provisions in Rule 19.5, Interpretation and
Policy .05 that currently apply to Monday SPY, QQQ and IWM expirations
is justified. For example, the Exchange believes that allowing Monday
ETP Expirations and monthly Exchange Traded Product expirations in the
same week will benefit investors and minimize investor confusion by
providing Monday ETP Expirations in a continuous and uniform manner.
[[Page 86385]]
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 not necessary or appropriate in
furtherance of the purposes of the Act. In this regard and as indicated
above, the Exchange notes that the rule change is being proposed as a
competitive response to a filing submitted by Nasdaq ISE that was
recently approved by the Commission.\22\
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\22\ See supra note 6.
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While the proposal will expand the Short Term Options Expirations
to allow Monday ETP Expirations to be listed on the Exchange, the
Exchange believes that this limited expansion for Monday expirations
for options on GLD, SLV, and TLT will not impose an undue burden on
competition; rather, it will meet customer demand. The Exchange
believes that Participants will continue to be able to expand hedging
tools and tailor their investment and hedging needs more effectively in
GLD, SLV, and TLT.
Similar to Monday SPY, QQQ and IWM expirations, the introduction of
Monday ETP Expirations does not impose an undue burden on competition.
The Exchange believes that it will, among other things, expand hedging
tools available to market participants and allow for a reduced premium
cost of buying portfolio protection. The Exchange believes that Monday
ETP Expirations will allow market participants to purchase options on
GLD, SLV, and TLT based on their timing as needed and allow them to
tailor their investment and hedging needs more effectively.
The Exchange does not believe the proposal will impose any burden
on intermarket competition, as nothing prevents the other options
exchanges from proposing similar rules to list and trade Monday ETP
Expirations. Further, the Exchange does not believe the proposal will
impose any burden on intra-market competition, as all market
participants will be treated in the same manner under this proposal.
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 Exchange has filed the proposed rule change pursuant to Section
19(b)(3)(A)(iii) of the Act \23\ and Rule 19b-4(f)(6) thereunder.\24\
Because the foregoing 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 for
30 days from the date on which it was filed, or such shorter time as
the Commission may designate, it has become effective pursuant to
Section 19(b)(3)(A)(iii) of the Act \25\ and subparagraph (f)(6) of
Rule 19b-4 thereunder.\26\
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\23\ 15 U.S.C. 78s(b)(3)(A)(iii).
\24\ 17 CFR 240.19b-4(f)(6).
\25\ 15 U.S.C. 78s(b)(3)(A)(iii).
\26\ 17 CFR 240.19b-4(f)(6). In addition, Rule 19b-4(f)(6)(iii)
requires a self-regulatory organization 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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A proposed rule change filed pursuant to Rule 19b-4(f)(6) under the
Act \27\ normally does not become operative for 30 days after the date
of its filing. However, Rule 19b-4(f)(6)(iii) \28\ permits the
Commission to designate a shorter time if such action is consistent
with the protection of investors and the public interest. The Exchange
has requested that the Commission waive the 30-day operative delay to
permit the Exchange to implement the proposal at the same time as its
competitors. The Exchange states that its proposal is substantively
identical in all material respects to a proposal submitted by Nasdaq
ISE that was recently approved by the Commission.\29\ The Commission
believes that the proposed rule change presents no novel issues and
that waiver of the 30-day operative delay is consistent with the
protection of investors and the public interest. Accordingly, the
Commission hereby waives the operative delay and designates the
proposed rule change operative upon filing.\30\
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\27\ 17 CFR 240.19b-4(f)(6).
\28\ 17 CFR 240.19b-4(f)(6)(iii).
\29\ See supra note 6 and accompanying text.
\30\ For purposes only of waiving the 30-day operative delay,
the Commission has also considered the proposed rule's impact on
efficiency, competition, and capital formation. See 15 U.S.C.
78c(f).
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At any time within 60 days of the filing of the proposed rule
change, the Commission summarily may temporarily suspend such rule
change if it appears to the Commission that such action is necessary or
appropriate in the public interest, for the protection of investors, or
otherwise in furtherance of the purposes of the Act. If the Commission
takes such action, the Commission shall institute proceedings to
determine whether the proposed rule should be approved or disapproved.
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-MEMX-2024-41 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-MEMX-2024-41. 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-MEMX-2024-41 and should be
submitted on or before November 20, 2024.
[[Page 86386]]
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\31\
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\31\ 17 CFR 200.30-3(a)(12), (59).
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Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2024-25147 Filed 10-29-24; 8:45 am]
BILLING CODE 8011-01-P