[Federal Register Volume 86, Number 168 (Thursday, September 2, 2021)]
[Notices]
[Pages 49364-49367]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2021-18942]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-92789; File Nos. SR-MIAX-2021-28, SR-EMERALD-2021-21]


Self-Regulatory Organizations; Miami International Securities 
Exchange, LLC and MIAX Emerald, LLC; Suspension of and Order 
Instituting Proceedings To Determine Whether To Approve or Disapprove 
Proposed Rule Changes To Establish Fees for the Exchanges' cToM Market 
Data Products

August 27, 2021.

I. Introduction

    On June 30, 2021, Miami International Securities Exchange, LLC 
(``MIAX'') and MIAX Emerald, LLC (``MIAX Emerald'') (each, an 
``Exchange,'' and collectively, the ``Exchanges'') each filed with the 
Securities and Exchange Commission (``Commission''), pursuant to 
Section 19(b)(1) of the Securities Exchange Act of 1934 (``Act'') \1\ 
and Rule 19b-4 thereunder,\2\ a proposed rule change to establish fees 
for, respectively, the MIAX Complex Top of Market (``cToM'') and the 
MIAX Emerald cToM market data products. The proposed rule changes were 
immediately effective upon filing with the Commission pursuant to 
Section 19(b)(3)(A) of the Act.\3\ The proposed rule changes were 
published for comment in the Federal Register on July 15, 2021.\4\ 
Pursuant to Section 19(b)(3)(C) of the Act,\5\ the Commission is 
hereby: (1) Temporarily suspending the proposed rule changes; and (2) 
instituting proceedings to determine whether to approve or disapprove 
the proposed rule changes.
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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). A proposed rule change may take 
effect upon filing with the Commission if it is designated by the 
exchange as ``establishing or changing a due, fee, or other charge 
imposed by the self-regulatory organization on any person, whether 
or not the person is a member of the self-regulatory organization.'' 
15 U.S.C. 78s(b)(3)(A)(ii).
    \4\ See Securities Exchange Act Release Nos. 92359 (July 9, 
2021), 86 FR 37393 (SR-MIAX-2021-28); and 92358 (July 9, 2021), 86 
FR 37361 (SR-EMERALD-2021-21) (each, a ``Notice''). For ease of 
reference, page citations are to the Notice for SR-MIAX-2021-28, 
unless otherwise indicated.
    \5\ 15 U.S.C. 78s(b)(3)(C).
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II. Description of the Proposed Rule Changes

    The Exchanges propose to establish fees for their cToM market data 
products.\6\ According to the Exchanges, the cToM feed provides 
subscribers with the same information as the Exchanges' respective 
simple order market Top of Market (``ToM'') feeds, but for each 
Exchange's Strategy Book \7\ (i.e., best bid and offer for a complex 
strategy, with aggregate size, based on displayable order and quoting 
interest in the complex strategy on each Exchange), plus additional 
information specific to complex orders (i.e., identification of the 
complex strategies currently trading on each Exchange, complex strategy 
last sale information, and the status of securities underlying the 
complex strategy).\8\
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    \6\ The proposed fee changes became effective on July 1, 2021. 
See Notice, supra note 4, at 37394.
    \7\ The ``Strategy Book'' is each Exchange's electronic book of 
complex orders and complex quotes. See MIAX and MIAX Emerald Rule 
518(a)(17).
    \8\ The Exchanges state that cToM is a distinct market data 
product from ToM. They also state that ToM subscribers are not 
required to subscribe to cToM, and that cToM subscribers are not 
required to subscribe to ToM. See Notice, supra note 4, at 37394.
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    The Exchanges each propose to assess Internal Distributors \9\ 
$1,250 per month and External Distributors \10\ $1,750 per month for 
the cToM data feed.\11\ The Exchanges each will assess cToM fees on 
Internal and External Distributors in each month the Distributor is 
credentialed to use cToM, and will reduce such fees for new 
Distributors for the first month during which they subscribe to cToM 
based on the number of trading days that have been held during the 
month prior to the date on which that subscriber has been credentialed 
to use cToM.\12\
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    \9\ A ``Distributor'' of the Exchanges' data is any entity that 
receives a feed or file of data either directly from the Exchanges 
or indirectly through another entity and then distributes it either 
internally (within that entity) or externally (outside that entity). 
See MIAX and MIAX Emerald Fee Schedule, Section 6(a). All members or 
non-members that determine to receive any market data feed from the 
Exchanges must first execute, among other things, the MIAX Exchange 
Group Exchange Data Agreement (``Exchange Data Agreement''). See 
Notice, supra note 4, at 37395. Pursuant to the Exchange Data 
Agreement, ``Internal Distributors'' are restricted to the 
``internal use'' of any market data they receive, meaning they may 
only distribute the Exchanges' market data to their officers and 
employees and their affiliates. See id.
    \10\ ``External Distributors'' may distribute the Exchanges' 
market data to persons who are not their officers, employees, or 
affiliates, and may charge their own fees for the distribution of 
such market data. See Notice, supra note 4, at 37395.
    \11\ See id. at 37394. The Exchanges also propose to make a 
related change to remove ``(as applicable)'' from the explanatory 
paragraph in Section 6(a) of each Exchanges' fee schedule, as the 
Exchanges will now charge fees for both the ToM and cToM data feeds. 
See id. at 37394 n.10.
    \12\ New Distributors will be assessed a pro-rata percentage of 
the fees described above, which is the percentage of the number of 
trading days remaining in the affected calendar month as of the date 
on which they have been credentialed to use cToM, divided by the 
total number of trading days in the affected calendar month. See id. 
at 37394.

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[[Page 49365]]

III. Suspension of the Proposed Rule Changes

    Pursuant to Section 19(b)(3)(C) of the Act,\13\ at any time within 
60 days of the date of filing of an immediately effective proposed rule 
change pursuant to Section 19(b)(1) of the Act,\14\ the Commission 
summarily may temporarily suspend the change in the rules of a self-
regulatory organization (``SRO'') 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. The Commission believes a temporary suspension of the proposed 
rule changes is necessary and appropriate to allow for additional 
analysis of the proposed rule changes' consistency with the Act and the 
rules thereunder.
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    \13\ 15 U.S.C. 78s(b)(3)(C).
    \14\ 15 U.S.C. 78s(b)(1).
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    The Exchanges generally argue that the proposed fees are consistent 
with the Act because the Exchanges operate in a highly competitive 
environment that constrains their pricing of the cToM feeds.\15\ In 
particular, the Exchanges maintain that subscribing to the cToM feeds 
is optional, as is the use of complex orders themselves.\16\ The 
Exchanges argue that because complex orders are not protected or 
subject to trade-through requirements, and because market makers are 
not subject to continuous quoting requirements for complex orders (as 
they are for simple orders), it is therefore a business decision 
whether market participants use complex order strategies on the 
Exchanges and whether they purchase cToM data to help effect those 
strategies.\17\ Accordingly, the Exchanges assert that if they priced 
their complex data products too highly, and market participants wanted 
to use those data products to trade complex orders, then those market 
participants would move their complex order flow to a more 
competitively-priced exchange offering complex order functionality and 
a comparable data product.\18\ The Exchanges argue that this potential 
to lose both order flow and data subscribers on each of MIAX and/or 
MIAX Emerald constrains their pricing of the cToM feeds.\19\ The 
Exchanges also argue that the proposed fees are reasonable because they 
are similar to and generally lower than the fees assessed by other 
exchanges that provide similar data products, and that proposing fees 
excessively higher would ultimately reduce demand for the Exchanges' 
own cToM products.\20\
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    \15\ See Notice, supra note 4, at 37395-96. In support, the 
Exchanges state that MIAX and MIAX Emerald currently represent 
approximately 6.75% and 3.24% of options market share, respectively. 
See id. at 37395; Emerald Notice, supra note 4, at 37362.
    \16\ See Notice, supra note 4, at 37395.
    \17\ See id.
    \18\ See id. at 37395-96.
    \19\ See id.
    \20\ See id. In addition, the Exchanges state that the proposed 
monthly cToM fees for Internal and External Distributors are the 
same prices that the Exchanges charge for their ToM data products. 
See id. at 37396. The Exchanges also argue that the proposed fees 
are reasonable because members have had the ability to receive cToM 
data free of charge from MIAX for the past five years and from MIAX 
Emerald for the past two years, since each respective cToM market 
data product was established on each Exchange. See id. at 37395; 
Emerald Notice, supra note 4, at 37361, 37363. The Exchanges now 
assert that it is no longer necessary to provide cToM data for free 
to attract market participants, as the Exchanges' Strategy Books are 
now established and the Exchanges no longer need to rely on such fee 
waivers to attract market participants. See Notice, supra note 4, at 
37394, 37396.
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    The Exchanges further argue that the proposals are equitable and 
not unfairly discriminatory because the proposed cToM fees will apply 
to all market participants of the Exchanges on a uniform basis.\21\ 
Moreover, the Exchanges assert that it is reasonable, equitable, and 
not unfairly discriminatory to assess Internal Distributors fees that 
are lower than the fees assessed for External Distributors for 
subscriptions to the cToM data feeds, since Internal Distributors have 
limited, restricted usage rights to the market data, as compared to 
External Distributors, which have more expansive usage rights, 
including rights to commercialize such market data.\22\
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    \21\ See Notice, supra note 4, at 37396.
    \22\ See id. at 37395-96. In addition, the Exchanges argue that 
they use more resources to support External Distributors as compared 
to Internal Distributors, as External Distributors have reporting 
and monitoring obligations that Internal Distributors do not have, 
thus requiring additional time and effort of the Exchanges' staff. 
See id. at 37396.
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    Finally, the Exchanges assert that the proposed fees would not 
cause any unnecessary or inappropriate burden on inter-market 
competition, as other exchanges are free to introduce their own 
comparable data products and lower their prices to better compete with 
the Exchanges' offerings.\23\ In this regard, the Exchanges assert that 
the proposals will promote competition by permitting the Exchanges to 
sell data products similar to those offered by other competitor options 
exchanges.\24\ The Exchanges also assert that the proposed rule changes 
would not cause any unnecessary or inappropriate burden on intra-market 
competition, as the proposed fees apply uniformly to any purchaser by 
not differentiating between subscribers that purchase cToM (other than 
between Internal and External Distributors, as described above), and 
are set at a modest level allowing any interested member or non-member 
to purchase such data based on their business needs.\25\
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    \23\ See id.
    \24\ See id.
    \25\ See id.
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    When exchanges file their proposed rule changes with the 
Commission, including fee filings like the Exchanges' present 
proposals, they are required to provide a statement supporting the 
proposal's basis under the Act and the rules and regulations thereunder 
applicable to the exchange.\26\ The instructions to Form 19b-4, on 
which exchanges file their proposed rule changes, specify that such 
statement ``should be sufficiently detailed and specific to support a 
finding that the proposed rule change is consistent with [those] 
requirements.'' \27\
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    \26\ See 17 CFR 240.19b-4 (Item 3 entitled ``Self-Regulatory 
Organization's Statement of the Purpose of, and Statutory Basis for, 
the Proposed Rule Change'').
    \27\ See id.
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    Section 6 of the Act, including Sections 6(b)(4), (5), and (8), 
require the rules of an exchange to: (1) Provide for the equitable 
allocation of reasonable fees among members, issuers, and other persons 
using the exchange's facilities; \28\ (2) perfect the mechanism of a 
free and open market and a national market system, protect investors 
and the public interest, and not be designed to permit unfair 
discrimination between customers, issuers, brokers, or dealers; \29\ 
and (3) not impose any burden on competition not necessary or 
appropriate in furtherance of the purposes of the Act.\30\
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    \28\ 15 U.S.C. 78f(b)(4).
    \29\ 15 U.S.C. 78f(b)(5).
    \30\ 15 U.S.C. 78f(b)(8).
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    In temporarily suspending the Exchanges' proposed rule changes, the 
Commission intends to further consider whether the proposals to 
establish fees for the cToM market data feeds are consistent with the 
statutory requirements applicable to a national securities exchange 
under the Act. In particular, the Commission will consider whether the 
proposed rule changes satisfy the standards under the Act and the rules 
thereunder requiring, among other things, that an exchange's rules 
provide for the equitable allocation of reasonable fees among members, 
issuers, and other persons using its facilities; not permit unfair 
discrimination between customers, issuers, brokers or dealers; and do 
not impose any burden on competition not

[[Page 49366]]

necessary or appropriate in furtherance of the purposes of the Act.\31\
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    \31\ See 15 U.S.C. 78f(b)(4), (5), and (8), respectively.
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    Therefore, the Commission finds that it is appropriate in the 
public interest, for the protection of investors, and otherwise in 
furtherance of the purposes of the Act, to temporarily suspend the 
proposed rule changes.\32\
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    \32\ For purposes of temporarily suspending the proposed rule 
changes, the Commission has considered the proposed rules' impact on 
efficiency, competition, and capital formation. See 15 U.S.C. 
78c(f).
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IV. Proceedings To Determine Whether To Approve or Disapprove the 
Proposed Rule Changes

    In addition to temporarily suspending the proposals, the Commission 
also hereby institutes proceedings pursuant to Sections 19(b)(3)(C) 
\33\ and 19(b)(2)(B) of the Act \34\ to determine whether the 
Exchanges' proposed rule changes should be approved or disapproved. 
Institution of proceedings does not indicate that the Commission has 
reached any conclusions with respect to any of the issues involved. 
Rather, the Commission seeks and encourages interested persons to 
provide additional comment on the proposed rule changes to inform the 
Commission's analysis of whether to approve or disapprove the proposed 
rule changes.
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    \33\ 15 U.S.C. 78s(b)(3)(C). Once the Commission temporarily 
suspends a proposed rule change, Section 19(b)(3)(C) of the Act 
requires that the Commission institute proceedings under Section 
19(b)(2)(B) to determine whether a proposed rule change should be 
approved or disapproved.
    \34\ 15 U.S.C. 78s(b)(2)(B).
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    Pursuant to Section 19(b)(2)(B) of the Act,\35\ the Commission is 
providing notice of the grounds for possible disapproval under 
consideration:
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    \35\ Id. Section 19(b)(2)(B) of the Act also provides that 
proceedings to determine whether to disapprove a proposed rule 
change must be concluded within 180 days of the date of publication 
of notice of the filing of the proposed rule change. See id. The 
time for conclusion of the proceedings may be extended for up to 60 
days if the Commission finds good cause for such extension and 
publishes its reasons for so finding, or if the exchange consents to 
the longer period. See id.
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     Whether the Exchanges have demonstrated how their proposed 
fees are consistent with Section 6(b)(4) of the Act, which requires 
that the rules of a national securities exchange ``provide for the 
equitable allocation of reasonable dues, fees, and other charges among 
its members and issuers and other persons using its facilities''; \36\
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    \36\ 15 U.S.C. 78f(b)(4).
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     Whether the Exchanges have demonstrated how their proposed 
fees are consistent with Section 6(b)(5) of the Act, which requires, 
among other things, that the rules of a national securities exchange 
not be ``designed to permit unfair discrimination between customers, 
issuers, brokers, or dealers''; \37\ and
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    \37\ 15 U.S.C. 78f(b)(5).
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     Whether the Exchanges have demonstrated how their proposed 
fees are consistent with Section 6(b)(8) of the Act, which requires 
that the rules of a national securities exchange ``not impose any 
burden on competition not necessary or appropriate in furtherance of 
the purposes of [the Act].'' \38\
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    \38\ 15 U.S.C. 78f(b)(8).
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    As discussed in Section III above, the Exchanges made various 
arguments in support of their proposals. The Commission believes that 
there are questions as to whether the Exchanges have provided 
sufficient information to demonstrate that the proposed fees are 
consistent with the Act and the rules thereunder.
    Under the Commission's Rules of Practice, the ``burden to 
demonstrate that a proposed rule change is consistent with the [Act] 
and the rules and regulations issued thereunder . . . is on the [SRO] 
that proposed the rule change.'' \39\ The description of a proposed 
rule change, its purpose and operation, its effect, and a legal 
analysis of its consistency with applicable requirements must all be 
sufficiently detailed and specific to support an affirmative Commission 
finding,\40\ and any failure of an SRO to provide this information may 
result in the Commission not having a sufficient basis to make an 
affirmative finding that a proposed rule change is consistent with the 
Act and the applicable rules and regulations.\41\
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    \39\ 17 CFR 201.700(b)(3).
    \40\ See id.
    \41\ See id.
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    The Commission is instituting proceedings to allow for additional 
consideration and comment on the issues raised herein, including as to 
whether the proposed fees are consistent with the Act, and 
specifically, with its requirements that exchange fees be reasonable 
and equitably allocated, not be unfairly discriminatory, and not impose 
any burden on competition that is not necessary or appropriate in 
furtherance of the purposes of the Act.\42\
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    \42\ See 15 U.S.C. 78f(b)(4), (5), and (8).
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V. Commission's Solicitation of Comments

    The Commission requests written views, data, and arguments with 
respect to the concerns identified above as well as any other relevant 
concerns. Such comments should be submitted by September 23, 2021. 
Rebuttal comments should be submitted by October 7, 2021. Although 
there do not appear to be any issues relevant to approval or 
disapproval that would be facilitated by an oral presentation of views, 
data, and arguments, the Commission will consider, pursuant to Rule 
19b-4, any request for an opportunity to make an oral presentation.\43\
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    \43\ 15 U.S.C. 78s(b)(2). Section 19(b)(2) of the Act grants the 
Commission flexibility to determine what type of proceeding--either 
oral or notice and opportunity for written comments--is appropriate 
for consideration of a particular proposal by an SRO. See Securities 
Acts Amendments of 1975, Report of the Senate Committee on Banking, 
Housing and Urban Affairs to Accompany S. 249, S. Rep. No. 75, 94th 
Cong., 1st Sess. 30 (1975).
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    The Commission asks that commenters address the sufficiency and 
merit of the Exchanges' statements in support of the proposals, in 
addition to any other comments they may wish to submit about the 
proposed rule changes.
    Interested persons are invited to submit written data, views, and 
arguments concerning the proposed rule changes, including whether the 
proposed rule changes are 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 [email protected]. Please include 
File No. SR-MIAX-2021-28 or SR-EMERALD-2021-21 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 No. SR-MIAX-2021-28 or SR-EMERALD-
2021-21. The 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 (http://www.sec.gov/rules/sro.shtml). Copies of the submission, all subsequent amendments, 
all written statements with respect to the proposed rule changes that 
are filed with the Commission, and all written communications relating 
to the proposed rule changes between the Commission and any person, 
other than those that may be withheld from the public in accordance 
with the

[[Page 49367]]

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 
10:00 a.m. and 3:00 p.m. Copies of such filing also will be available 
for inspection and copying at the principal office of the Exchanges. 
All comments received will be posted without change. Persons submitting 
comments are cautioned that we do not redact or edit personal 
identifying information from comment submissions. You should submit 
only information that you wish to make publicly available. All 
submissions should refer to File No. SR-MIAX-2021-28 or SR-EMERALD-
2021-21 and should be submitted on or before September 23, 2021. 
Rebuttal comments should be submitted by October 7, 2021.

VI. Conclusion

    It is therefore ordered, pursuant to Section 19(b)(3)(C) of the 
Act,\44\ that File Nos. SR-MIAX-2021-28 and SR-EMERALD-2021-21, be and 
hereby are, temporarily suspended. In addition, the Commission is 
instituting proceedings to determine whether the proposed rule changes 
should be approved or disapproved.
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    \44\ 15 U.S.C. 78s(b)(3)(C).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\45\
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    \45\ 17 CFR 200.30-3(a)(57) and (58).
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Vanessa A. Countryman,
Secretary.
[FR Doc. 2021-18942 Filed 9-1-21; 8:45 am]
BILLING CODE 8011-01-P