Document ID: SEC-2008-1250-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: NASDAQ Stock Market LLC
Posted Date: 2008-09-15T04:00Z

[Federal Register: September 15, 2008 (Volume 73, Number 179)]
[Notices]               
[Page 53300-53303]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr15se08-123]                         

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-58489; File No. SR-NASDAQ-2008-073]

 
Self-Regulatory Organizations; the NASDAQ Stock Market LLC; 
Notice of Filing and Immediate Effectiveness of Proposed Rule Change To 
Trade Shares of 12 Funds of the WisdomTree Trust Pursuant to Unlisted 
Trading Privileges

September 8, 2008.
    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 August 29, 2008, The NASDAQ Stock Market LLC (``Nasdaq'' or 
``Exchange'') filed with the Securities and Exchange Commission 
(``Commission'') the proposed rule change as described in Items I and 
II below, which Items have been prepared by Nasdaq. Nasdaq has 
designated the proposed rule change as constituting a rule change under 
section 19(b)(3)(A) of the Act \3\ and Rule 19b-4(f)(6) thereunder,\4\ 
which renders the proposal effective upon filing with the Commission. 
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 C.F.R. 240.19b-4(f)(6).
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    Nasdaq is filing a proposed rule change to trade, pursuant to 
unlisted trading privileges (``UTP''), shares (``Shares'') of 12 funds 
(each a ``Fund'') of the WisdomTree Trust (``Trust'') under Nasdaq Rule 
4420(o) (Managed Fund Shares). The text of the proposed rule change is 
available from Nasdaq's Web site at http://nasdaq.cchwallstreet.com, at 
Nasdaq's principal office, 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, Nasdaq 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 III below. Nasdaq had 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
    Nasdaq proposes to trade the Funds on a UTP basis under Nasdaq Rule 
4420(o), which governs the trading of ``Managed Fund Shares'' on the 
Exchange. The Shares will be offered by the Trust, which was 
established as a Delaware statutory trust on December 15, 2005. The 
Trust is registered with the Commission as an investment company.\5\ 
The Commission recently approved the listing and trading of these same 
Funds by NYSE Arca, Inc. on its exchange.\6\
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    \5\ See Post-Effective Amendment No. 14 to Registration 
Statement on Form N-1A for the Trust (File Nos. 333-132380 and 811-
21864) (``Registration Statement''). The descriptions of the Funds 
and the Shares contained herein are based on information in the 
Registration Statement.
    \6\ See Securities Exchange Act Release No. 57801 (May 8, 2008), 
73 FR 27878 (May 14, 2008) (order approving SR-NYSEArca-2008-31).
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Description of the Shares and the Funds
    WisdomTree Asset Management, Inc. (``WisdomTree Asset Management'') 
is the investment adviser to each Fund.\7\ WisdomTree Asset Management 
is not affiliated with any broker-dealer. Mellon Capital Management 
serves as the sub-adviser for the Current Income Fund. The Dreyfus 
Corporation serves as the subadviser to each International Currency 
Income Fund. The Bank of New York is the administrator, custodian, and 
transfer agent for each Fund. ALPS Distributors, Inc. serves as the 
distributor for the Funds.
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    \7\ WisdomTree Investments, Inc. (``WisdomTree Investments'') is 
the parent company of WisdomTree Asset Management.
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The Current Income Fund
    The Current Income Fund seeks to earn current income while 
preserving capital and maintaining liquidity by investing primarily in 
very short term, high-quality money market securities denominated in 
U.S. dollars. Eligible investments include commercial paper, time 
deposits and certificates of deposits, asset-backed securities, 
government bills, government notes, corporate notes, and repurchase 
agreements. The Current Income Fund intends to maintain an average 
portfolio maturity of 90 days or less and will not purchase any money 
market security with a remaining maturity of more than 397 calendar 
days.
The International Currency Income Funds
    Each of the Australian Dollar Fund, British Pound Sterling Fund, 
Canadian Dollar Fund, Euro Fund, and Japanese Yen Fund: (i) Seeks to 
earn current income reflective of money market rates available to 
foreign investors in the specified country or region, and (ii) seeks to 
maintain liquidity and preserve capital measured in the currency of the 
specified country or region. Each of these Funds intends to invest 
primarily in very short term, investment grade money market securities 
denominated in the non-U.S. currency specified in its name. Eligible 
investments include short-term securities issued by non-U.S. 
governments, agencies or instrumentalities, bank debt obligations and 
time deposits, bankers' acceptances, commercial paper, short-term 
corporate debt obligations, mortgage backed securities, and asset-
backed securities.
    Each of the Brazilian Real Fund, Chinese Yuan Fund, Indian Rupee 
Fund, New Zealand Dollar Fund, South African Rand Fund, and South 
Korean Won Fund seeks: (i) To earn current income reflective of money 
market rates available to foreign investors in the specified country; 
and (ii) to provide exposure to changes in the value of the designated 
non-U.S. currency relative to the U.S. Dollar. Each of these Funds 
intends to achieve exposure to the non-U.S. market designated by its 
name using the following strategy. Each of the Funds will invest 
primarily in short term U.S. money market securities. In

[[Page 53301]]

addition, each such Fund will invest a smaller portion of its assets in 
forward currency contracts and swaps designed to provide exposure to 
exchange rates and/or money market instruments available to foreign 
investors in the non-U.S. market designated in the Fund's name. The 
combination of U.S. money market securities with forward currency 
contracts and currency swaps is designed to create a position 
economically similar to a money market instrument denominated in a non-
U.S. currency. A forward currency contract is an agreement to buy or 
sell a specific currency at a future date at a price set at the time of 
the contract. A currency swap is an agreement between two parties to 
exchange one currency for another at a future rate.\8\
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    \8\ Each of these Funds may pursue its objectives through direct 
investments in money market instruments issued by entities in the 
applicable non-U.S. country and denominated in the applicable non-
U.S. currency when WisdomTree Asset Management believes it is in the 
best interest of the Fund to do so. The decision to secure exposure 
directly or indirectly will be a function of, among other things, 
market accessibility, credit exposure, and tax ramifications for 
foreign investors. If any of these Funds pursues direct investment, 
eligible investments will include short-term securities issued by 
the applicable foreign government and its agencies or 
instrumentalities, bank debt obligations and time deposits, bankers' 
acceptances, commercial paper, short-term corporate debt 
obligations, mortgage-backed securities, and asset-backed 
securities.
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    Each International Currency Income Fund generally will maintain a 
weighted average portfolio maturity of 90 days or less and will not 
purchase any money market instrument with a remaining maturity of more 
than 397 calendar days.
    None of the Funds will invest in non-U.S. equity securities.
The Shares
    Each Fund issues and redeems Shares on a continuous basis at net 
asset value (``NAV'')\9\ only in large blocks of shares, typically 
50,000 shares or more (``Creation Units''), in transactions with 
authorized participants. Each International Currency Income Fund may 
issue and redeem Creation Units in exchange for a designated basket of 
non-U.S. currency and an amount of U.S. cash, a basket of non-U.S. 
money market instruments and a designated amount of cash, or simply a 
designated amount of cash. In addition, creations and redemptions of 
the Current Income Fund, the Brazilian Real Fund, Chinese Yuan Fund, 
Indian Rupee Fund, New Zealand Dollar Fund, South African Rand Fund, 
and South Korean Won Fund are usually in exchange for a basket of U.S. 
money market instruments and/or a designated amount of cash. Once 
created, Shares of the Funds trade on the secondary market in amounts 
less than a Creation Unit. For more information regarding the Shares 
and the Funds, including investment strategies, risks, creation and 
redemption procedures, fees, portfolio holdings disclosure policies, 
distributions and taxes, see the Registration Statement.
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    \9\ The NAV of each Fund's shares generally is calculated once 
daily Monday through Friday as of the close of regular trading (the 
``NAV Calculation Time''). NAV per share is calculated by dividing a 
Fund's net assets by the number of Shares outstanding. For more 
information regarding the valuation of Fund investments in 
calculating a Fund's NAV, see the Registration Statement.
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Availability of Information
    The Funds' Web site (http://www.wisdomtree.com), which will be 
publicly available prior to the public offering of Shares, will include 
a form of the Prospectus for each Fund that may be downloaded. The Web 
site will include additional quantitative information updated on a 
daily basis, including, for each Fund: (1) The prior business day's 
reported NAV, mid-point of the bid/ask spread at the time of 
calculation of such NAV (the ``Bid/Ask Price''); \10\ and a calculation 
of the premium and discount of the Bid/Ask Price against the NAV; and 
(2) data in chart format displaying the frequency distribution of 
discounts and premiums of the daily Bid/Ask Price against the NAV, 
within appropriate ranges, for each of the four previous calendar 
quarters. On each business day before commencement of the Regular 
Market Session on the Exchange,\11\ the Funds will disclose on their 
Web site the identities and quantities of the securities and other 
assets that will form the basis for the calculation of NAV for each 
Fund at the end of the business day (``Disclosed Portfolio'').\12\ The 
Web site and information will be publicly available at no charge.
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    \10\ The Bid/Ask Price of a Fund is determined using the 
midpoint of the highest bid and the lowest offer on the Exchange as 
of the time of calculation of such Fund's NAV. The records relating 
to Bid/Ask Prices will be retained by the Funds and their service 
providers.
    \11\ See Nasdaq Rule 4120(b)(4) (describing the three trading 
sessions on the Exchange: (1) Pre-Market Session from 7 a.m. to 9:30 
a.m.; (2) Regular Market Session from 9:30 a.m. to 4 p.m. or 4:15 
p.m.; and (3) Post-Market Session from 4 p.m. or 4:15 p.m. to 8 
p.m.).
    \12\ Under accounting procedures followed by the Funds, trades 
made on the prior business day (``T'') will be booked and reflected 
in NAV on the current business day (``T+1''). Notwithstanding the 
foregoing, portfolio trades that are executed prior to the opening 
of the Exchange on any business day may be booked and reflected in 
the NAV on such business day. Accordingly, the Funds will be able to 
disclose at the beginning of the business day the portfolio that 
will form the basis for the NAV calculation at the end of the 
business day.
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    Investors interested in a particular Fund can also obtain the 
Trust's Statement of Additional Information (``SAI''), each Fund's 
Shareholder Reports, and its Form N-CSR and Form N-SAR, filed twice a 
year. The Trust's SAI and Shareholder Reports are available free upon 
request from the Trust, and those documents and the Form N-CSR and Form 
N-SAR may be viewed on-screen or downloaded from the Commission's Web 
site (http://www.sec.gov).
    Information regarding market price and volume is and will be 
continually available on a real-time basis throughout the day on 
brokers' computer screens and other electronic services. The NAV of 
each Fund will normally be determined as of the close of the Regular 
Market Session on Nasdaq (ordinarily 4 p.m. Eastern Time or ``ET'') on 
each business day. The previous day's closing price and trading volume 
information will be published daily in the financial section of 
newspapers. Quotations and last-sale information for the Shares will be 
available through the facilities of the Consolidated Tape Association 
(``CTA''). In addition, the Intraday Indicative Value \13\ will be 
disseminated at least every 15 seconds during the Regular Market 
Session through the facilities of the CTA.
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    \13\ The Intraday Indicative Value is also sometimes referred to 
as the ``Portfolio Indicative Value'' with respect to these 
securities and is based on the current value of the components of 
the Disclosed Portfolio.
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Initial and Continued Listing
    The Shares will be subject to Rule 4420(o), which sets forth the 
initial and continued listing criteria applicable to Managed Fund 
Shares. The Exchange represents that for initial and/or continued 
listing, the Shares must be in compliance with Rule 10A-3 under the 
Act.\14\
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    \14\ See 17 CFR 240.10A-3.
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Trading Halts
    Nasdaq will halt trading in Shares under the conditions specified 
in Nasdaq Rules 4120 and 4121. The conditions for a halt include a 
regulatory halt by the listing market. UTP trading in Shares will also 
be governed by provisions of Nasdaq Rule 4120(b) relating to temporary 
interruptions in the calculation or wide dissemination of the Intraday 
Indicative Value, among other values.
    If Nasdaq becomes aware that the NAV or the Disclosed Portfolio 
with respect to a Share is not disseminated to all market participants 
at the same time,

[[Page 53302]]

it will halt trading in such series until such time as the net asset 
value or the Disclosed Portfolio is available to all market 
participants.
    Additionally, Nasdaq may cease trading Shares if other unusual 
conditions or circumstances exist which, in the opinion of Nasdaq, make 
further dealings on Nasdaq detrimental to the maintenance of a fair and 
orderly market. Nasdaq will also follow any procedures with respect to 
trading halts as set forth in Nasdaq Rule 4120(c). Finally, Nasdaq will 
stop trading Shares if the listing market delists them.
Trading Rules
    Nasdaq deems the Shares to be equity securities, thus rendering 
trading in the Shares subject to Nasdaq's existing rules governing the 
trading of equity securities. Nasdaq will allow trading in the Shares 7 
a.m. until 8 p.m.\15\ The minimum trading increment for Shares on 
Nasdaq will be $0.01.
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    \15\ See Nasdaq Rule 4420.
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Surveillance
    The Exchange intends to utilize its existing surveillance 
procedures applicable to derivative products (including exchange-traded 
funds) to monitor trading in the Shares and the Exchange represents 
that these procedures are adequate to address any concerns about the 
trading of the Shares on Nasdaq. Trading of the Shares through Nasdaq 
will be subject to FINRA's surveillance procedures for equity 
securities in general and exchange-traded funds in particular.\16\ The 
Exchange may obtain information via the Intermarket Surveillance Group 
(``ISG'') from other exchanges who are members or affiliate members of 
the ISG.\17\
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    \16\ FINRA surveils trading on Nasdaq pursuant to a regulatory 
services agreement. Nasdaq is responsible for FINRA's performance 
under this regulatory services agreement.
    \17\ For a list of the current members and affiliate members of 
ISG, see http://www.isgportal.com.
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Information Circular
    Prior to the commencement of trading, the Exchange will inform its 
members in an Information Circular of the special characteristics and 
risks associated with trading the Shares. Specifically, the Information 
Circular will discuss the following: (1) The procedures for purchases 
and redemptions of Shares in baskets of shares (and that Shares are not 
individually redeemable); (2) Nasdaq Rule 2310, which imposes 
suitability obligations on Nasdaq members with respect to recommending 
transactions in the Shares to customers; (3) how information regarding 
the Intraday Indicative Value is disseminated; (4) the requirement that 
members deliver a prospectus to investors purchasing newly issued 
Shares prior to or concurrently with the confirmation of a transaction; 
(5) the risks involved in trading the Shares during the Pre-Market and 
Post-Market Sessions when an updated Intraday Indicative Fund value 
will not be calculated or publicly disseminated; and (6) trading 
information.
    The Exchange notes that investors purchasing Shares directly from a 
Fund will receive a prospectus. Members purchasing Shares from a Fund 
for resale to investors will deliver a prospectus to such investors. 
The Information Circular will also discuss any exemptive, no-action and 
interpretive relief granted by the Commission from any rules under the 
Act.
    In addition, the Information Circular will reference that the Funds 
are subject to various fees and expenses described in the Registration 
Statement. The Information Circular will also reference that the CFTC 
has regulatory jurisdiction over the trading of futures contracts.
    The Information Circular will also disclose the trading hours of 
the Shares of the Funds and that the NAV for the Shares will be 
calculated after 4 p.m. (ET) each trading day. The Circular will 
disclose that information about the Shares of each Fund and the 
corresponding Indexes will be publicly available on the Funds' Web 
site.
2. Statutory Basis
    Nasdaq believes that the proposal is consistent with section 6(b) 
of 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, and to 
remove impediments to and perfect the mechanism of a free and open 
market and a national market system. Nasdaq believes that its rules and 
procedures governing the trading of the Shares pursuant to UTP are also 
consistent with the goals section 6(b)(5) and the protection of 
investors.
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    \18\ 15 U.S.C. 78f.
    \19\ 15 U.S.C. 78f(b)(5).
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    In addition, Nasdaq believes that the proposal is consistent with 
Rule 12f-5 under the Act \20\ because it deems each Share to be an 
equity security, thus rendering trading in the Shares subject to the 
Exchange's existing rules governing the trading of equity 
securities.\21\
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    \20\ 17 CFR 240.12f-5.
    \21\ See e-mail from Jonathon F. Cayne, Assistant General 
Counsel, Nasdsaq to Mitra Mehr, Special Counsel, Division of Trading 
and Markets, Commission on September 8, 2008, clarifying text.
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B. Self-Regulatory Organization's Statement on Burden on Competition

    Nasdaq 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.

C. Self-Regulatory Organization's Statement on Comments on the Proposed 
Rule Change Received From Members, Participants or Others

    Written comments were neither solicited nor received.

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

    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 if 
consistent with the protection of investors and the public interest, it 
has become effective pursuant to section 19(b)(3)(A) of the Act \22\ 
and Rule 19b-4(f)(6) thereunder.\23\
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    \22\ 15 U.S.C. 78s(b)(3)(A).
    \23\ 23 17 CFR 240.19b-4(f)(6). The Commission notes that Nasdaq 
has satisfied the five day pre-filing notice requirement.
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    Nasdaq has asked the Commission to waive the 30-day operative 
delay. The Commission believes that such waiver is consistent with the 
protection of investors and the public interest because such waiver 
should benefit investors by creating, without undue delay, additional 
competition in the market for the Shares. The Commission has previously 
approved the listing and trading of the Shares on another exchange \24\ 
and finds that the proposed rule change does not present any novel or 
significant regulatory issues. Therefore, the Commission designates the 
proposed rule change as operative upon filing.\25\
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    \24\ See supra note 6.
    \25\ For purposes only of waiving the operative date of this 
proposal, the Commission has considered the 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

[[Page 53303]]

Commission may summarily abrogate 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.

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 e-mail to rule-comments@sec.gov. Please include 
File Number SR-NASDAQ-2008-073 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-NASDAQ-2008-073. This 
file number should be included on the subject line if e-mail 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 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 inspection 
and copying in the Commission's Public Reference Room on official 
business days between the hours of 10 a.m. and 3 p.m. Copies of such 
filing will also be available for inspection and copying at the 
principal office of the Exchange. 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-NASDAQ-2008-073 and should be submitted on or before 
October 6, 2008.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\26\
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    \26\ 17 CFR 200.30-3(a)(12).
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Florence E. Harmon,
Acting Secretary.
[FR Doc. E8-21392 Filed 9-12-08; 8:45 am]

BILLING CODE 8010-01-P