Document ID: SEC-2018-2006-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: NYSE Arca, Inc.
Posted Date: 2018-12-27T05:00Z

[Federal Register Volume 83, Number 247 (Thursday, December 27, 2018)]
[Notices]
[Pages 66818-66822]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2018-27988]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-84874; File No. SR-NYSEArca-2018-80]

Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing 
and Immediate Effectiveness of Proposed Rule Change To Modify the NYSE 
Arca Options Fee Schedule in Conjunction With Relocating the Trading 
Floor to a New Trading Facility

December 19, 2018.
    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 December 18, 2018, 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 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 modify the NYSE Arca Options Fee Schedule 
(``Fee Schedule'') in conjunction with relocating the Trading Floor to 
a new trading facility. The Exchange proposes to implement the fee 
change effective

[[Page 66819]]

the first day of the month following the move. The proposed rule change 
is available on the Exchange's website 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 the 
Statutory Basis for, the Proposed Rule Change

1. Purpose
    The purpose of this filing is to modify the Fee Schedule in 
conjunction with the Exchange relocating its Trading Floor to a new 
trading facility that will be in a different physical location than the 
current Trading Floor. The Exchange is moving into a new, state-of-the-
art Trading Floor that has been built out to reflect today's market 
that is heavily reliant on technology and electronic trading. As such, 
the Exchange proposes to modify certain Trading Floor and Equipment 
fees in connection with the move (the ``Floor Fees''). The Exchange 
proposes that the Floor Fees would be implemented on the first day of 
the month following the completion of the move, which is anticipated to 
occur on or about mid-March 2019. The Exchange is filing the proposed 
Floor Fees in advance of the move to provide guidance to floor OTP 
Holders and OTP Firms (collectively, ``OTPs'') in planning for and 
determining their commercial needs to operate on the new Trading Floor.
    First, the Exchange proposes to revise the Fee Schedule regarding 
Floor Broker equipment fees. The Exchange proposes to delete reference 
to ``Floor Broker Order Capture Devices,'' which refer to Exchange-
provided hardware that Floor Brokers may use on the Trading Floor. 
Currently, not all Floor Brokers use the Exchange-provided devices, as 
some firms have chosen to use their own computers, i.e., firm-provided 
devices. Regardless of whether a Floor Broker uses an Exchange-provided 
or firm-provided device, Floor Brokers access the Exchange using the 
same software on such devices. On the new Trading Floor, Floor Broker 
firms will use their own devices that they will purchase or have 
already purchased themselves. Because the Exchange will no longer 
provide this hardware device to Floor Brokers, the Exchange proposes to 
delete reference to the associated fee for such devices from the Fee 
Schedule. Given the removal of reference to the Floor Broker Order 
Capture Device, the Exchange proposes to remove reference to the ``Pass 
Through'' market data fees associated with such devices. The Exchange 
proposes that market data fees incurred by Floor Brokers will continue 
to be passed through as they are today, only now these fees will be 
addressed under the existing line item for ``Wire Services,'' which 
modification would streamline the Fee Schedule.
    The Exchange also proposes to delete an obsolete reference to the 
``Trade Match Terminal Fee,'' which refers to a fee that is no longer 
charged (or incurred) because, as a result of advances in technology, a 
separate ``terminal'' is no longer needed to transmit information to 
clearing. The Exchange notes that this deletion is a ``clean up'' 
change and (unlike the balance of the changes) is not tied to the 
relocation. Finally, given the relocation, the Exchange proposes to 
delete as obsolete reference to the ``Vendor Equipment Room Cabinet 
Fee,'' which refers to charges for equipment stored in a room adjacent 
to the current Trading Floor, which will not exist on the new Trading 
Floor.
    Next, the Exchange proposes to modify the way it charges for Floor 
space utilized by Floor Brokers and Market Makers to reflect the 
business needs and preferences of these market participants. Floor 
Brokers utilize their Floor space (``Floor Booth'') akin to private 
office space where employees of the same firm communicate with 
customers, receive orders, and coordinate covering the Floor to 
announce such orders at designated Trading Crowds. Currently, Floor 
Brokers may combine multiple, contiguous ``Booths'' into a single 
office space. By contrast, Market Makers operate at the point of sale, 
which necessitates that their Floor space (each, a ``Podium'') be 
integrated in designated Trading Crowd locations. Because Market Maker 
Podia are integrated in the Trading Crowd, the more physical space 
occupied by a single Market Making firm (i.e., multiple Podia) in a 
given Trading Crowd means less physical space for other Market Makers 
to participate in the same Crowd. Thus, the Exchange proposes to revise 
its Fee Schedule to charge participants in a manner that reflects this 
reality and to encourage the efficient use of space by these 
participants.
    The Exchange currently charges each Floor Broker $350 per Floor 
Booth and (as noted above) firms may opt to pay for and combine several 
Booths into a single Floor space. On the new Trading Floor, the 
Exchange proposes to enable Floor Brokers to specify the amount of 
space needed for their business and to charge for the amount utilized 
(at a monthly rate of $80 per linear foot). The Exchange believes this 
pricing would offer flexibility to Floor Broker firms to customize the 
precise amount of work space needed. The Exchange proposes to modify 
the Fee Schedule to reflect this new Floor Booth pricing method.
    Further, the Exchange proposes to modify the way it charges for 
Floor space utilized by Market Makers. Currently, the Exchange charges 
$90 per month per Market Maker Podium, but the size of a ``Podium'' is 
not standardized and Market Makers have not been restricted in the 
amount of space that they use. Also, the Podium fee currently covers 
only the desk space utilized. Market Makers currently supply their own 
furniture and equipment, including monitors and there is no uniformity 
in size or number of the monitors utilized. In the new location, the 
Exchange proposes to offer workspaces that more efficiently serve Floor 
participants. To that end, on the new Trading Floor, the Market Maker 
Podia available in each Trading Crowd are designed to accommodate all 
Market Makers that want to join that Trading Crowd. As proposed, each 
Podium will come equipped with a desk, chair, computer keyboard and 
mouse, as well as four standard monitors (including set up/mounting 
apparatus to support the same).
    The Exchange proposes to implement fees that align with the 
standardized podia that will be available on the new Trading Floor. The 
proposed fee structure is designed to encourage the efficient use and 
allocation of space to Market Makers conducting business on the Trading 
Floor. Further, to reduce the potential for a single Market Making firm 
to use more podia space than needed in a Trading Crowd, the Exchange 
proposes to scale the per Podium fees as follows:
    First Podium: $200 per month;
    Second Podium: $400 per month;
    Third Podium: $800 each per month; and
    Fourth Podium: $1,600 each per month.

[[Page 66820]]

    As proposed, on the new Trading Floor, only Market Makers with an 
active OTP will be assigned a Market Maker podium in a Trading Crowd 
(i.e., Market Makers that have only a Reserve OTP are ineligible for 
podia). Market Makers with an active OTP utilize the Podia to manage 
their electronic quotes as well as to maintain a presence in the 
Trading Crowd to respond to a call for a market. Because Reserve OTPs 
are not active on a trading permit, they cannot respond to a call for 
market, and therefore do not need to be present in the Trading Crowd.
    As noted above, each Podium comes equipped with four standard 
monitors (included in the cost), but Market Makers may request up to 
two additional monitors per stand-alone Podium for a monthly surcharge 
of $100.\4\ In addition, Market Makers will have the option to upgrade 
the standard-size monitors (provided by the Exchange) to a large or 
extra-large monitor for a one-time surcharge of $200 or $300, 
respectively. In addition, to prevent Market Makers from monopolizing 
Trading Floor space, the number of podia and monitors will be limited. 
As proposed, each OTP acting as a Market Maker on the Trading Floor may 
utilize no more than four podia and each such OTP in a given Trading 
Crowd may utilize no more than two podia, or eight monitors.
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    \4\ The Exchange will only allow the additional monitors if the 
Market Maker does not have a second (or third, etc.) Podium adjacent 
to its first Podium. This is to avoid too many monitors in one area 
that may obstruct Floor participants' line of sight.
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    The proposed cost structure is designed to provide some flexibility 
for Market Makers to set up their Floor space consistent with their own 
business model, while encouraging the fair and efficient use of space. 
Specifically, the proposed cost structure allows a Market Maker to 
utilize only one Podium but to pay for additional monitors as opposed 
to paying for two Podia with the standard monitor configuration. For 
example, as proposed, it would cost $600 for two Podia, each equipped 
with four monitors (for a total of eight monitors) whereas it would 
cost $300 for one Podium that is configured to include six monitors 
(i.e., $200 for first podium plus $100 surcharge for two additional 
monitors).
    Further, the Exchange anticipates that, with the new standardized 
work space, some OTPs may require modification to a Floor Booth or 
Podium to accommodate firm-specific needs. Such modifications or 
alterations may be made upon prior approval by Exchange facilities 
staff. The Exchange proposes that the OTP be responsible for all 
related costs for such modifications or alterations, including the 
costs for Exchange staff prior approval and for restoration to standard 
configuration upon vacating or relocating (elsewhere on the Floor) the 
affected Floor Booth or Podium. The Exchange proposes that Exchange 
staff time associated with such modifications or alterations be charged 
at a rate of $200 per hour. The Exchange believes these proposed 
charges, including for staff time, further encourage the deliberate and 
efficient use of Exchange facilities and resources. These proposed 
charges are also intended to take into consideration that the 
alterations or modifications may require lengthy and expensive 
supervision of code or structural approvals by experienced Exchange 
staff.
    Regarding telephone service, the Exchange proposes to continue to 
charge $14 per month, per telephone line utilized by each Floor 
participant, which can be used to send facsimiles only. However, the 
Exchange will no longer be providing telephones for Floor organizations 
and therefore proposes to remove these fees from the Fee Schedule as 
obsolete. Instead, Floor participants that would like to have landline 
telephone service have the option to subscribe directly with the 
Exchange's exclusive service provider.
    Finally, to protect the integrity of Exchange systems and networks, 
the Exchange proposes to be the sole internet Service Provider 
(``ISP'') permitted on Exchange premises. As such, the Exchange 
proposes a new monthly ISP Connection Fee of $150 per connection, 
capped at $750 per month. Thus, an OTP that utilizes more than five 
will still only be charged $750 per month. The ISP connections may be 
used for either data or for voice-over-internet-protocol (``VOIP'') 
connections.
2. Statutory Basis
    The Exchange believes that the proposed fee change is consistent 
with Section 6(b) of the Act,\5\ in general, and furthers the 
objectives of Sections 6(b)(5) of the Act,\6\ in particular, because 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 regulating, 
clearing, settling, processing information with respect to, and 
facilitating transactions in securities, to remove impediments to, and 
perfect the mechanisms of, a free and open market and a national market 
system and, in general, to protect investors and the public interest 
and because it is not designed to permit unfair discrimination between 
customers, issuers, brokers, or dealers. In particular, the Exchange 
believes that all market participants will benefit from the relocation 
to the new Trading Floor because it will be a state-of-the-art trading 
facility that has been built out to reflect today's market that is 
heavily reliant on technology and electronic trading.
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    \5\ 15 U.S.C. 78f(b).
    \6\ 15 U.S.C. 78f(b)(5).
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    The Exchange also believes that the proposed fee change is 
consistent with Section 6(b)(4) of the Act,\7\ 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. The Exchange believes the proposal to 
modify Floor Fees in connection with the Exchange moving the Trading 
Floor to a new location is reasonable, equitable and not unfairly 
discriminatory for the following reasons. First, the Exchange is 
relocating its Trading Floor to a new, state-of-the-art trading Floor 
that has been built out to reflect today's market that is heavily 
reliant on technology and electronic trading. The proposed fee changes 
are designed to enable the Exchange to align its Floor Fees with the 
cost of the new Trading Floor, including the costs of transferring 
operations and technology to the new location and ongoing support for 
the new technology underlying the new Trading Floor.
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    \7\ 15 U.S.C. 78f(b)(4).
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    Second, the proposed Floor Fees are designed to reflect the 
business practices and needs of Floor Participants, while encouraging 
efficient use of space by all. Floor Brokers utilize Floor Booths as 
private office space, out of which they communicate with customers, 
take orders, and coordinate covering the Floor to announce such orders 
at assigned Trading Crowds. Market Makers operate out of their Podia at 
the point of sale and occupy space within the Trading Crowd. Thus, the 
Exchange believes the proposed distinctions in how it proposes to 
charge Floor Brokers and Market Makers for space utilized is reasonable 
and equitable because it is designed to reflect the differing 
businesses of these participants while offering such participants some 
flexibility in setting up their Floor space consistent with their 
particular business models/

[[Page 66821]]

commercial preference. For example, OTPs acting as Market Makers are 
not required to upgrade their equipment (or modify their work space), 
but the Exchange is providing that option as an accommodation. Further, 
the proposed Floor Fees are not unfairly discriminatory, as they are 
applied equally to all similarly situated Floor market participants.
    The proposal to limit Market Maker Podia use to Market Makers with 
an active OTP is likewise reasonable, equitable and not unfairly 
discriminatory because such participants utilize the Podia to manage 
their electronic quotes as well as to maintain a presence in the 
Trading Crowd to respond to a call for a market. Reserve OTPs are not 
unfairly burdened by this restriction because such OTPs are not active 
on a trading permit, cannot respond to a call for market, and therefore 
do not need to be present in the Trading Crowd. Given these 
distinctions the Exchange believes this limitation represents a fair 
and efficient use of Exchange resources.
    The Exchange believes the proposal to charge for staff time to 
supervise modifications or alterations to Floor Booths or Podia is 
reasonable, equitable and not unfairly discriminatory because it is 
designed to encourage the deliberate and efficient use of Exchange 
facilities and resources by all Floor participants. These proposed 
charges are designed to take into consideration that the alterations or 
modifications may require lengthy and expensive supervision of code or 
structural approvals by experienced Exchange staff.
    The Exchange believes the proposed ISP Connection fee, and the 
applicable fee cap, is reasonable, equitable and not unfairly 
discriminatory as the fee is consistent with charges for similar 
services on other options exchanges. For example, NYSE American Options 
charges (``NYSE American'') a monthly Transport Charge of $150 (the 
same as the proposed ISP Connection fee), capped at $500 per Floor 
Broker organization (slightly lower than the proposed $750 cap).\8\ The 
Exchange believes it is reasonable to charge a slightly higher fee for 
these costs than is charged on NYSE American to account for the cost of 
the new Trading Floor, including the costs of transferring operations 
and technology to the new location and ongoing support for the new 
technology underlying the new Trading Floor.
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    \8\ See NYSE American Options fee schedule, Section IV, Monthly 
Floor Communication, Connectivity, Equipment and Booth or Podia 
Fees, available at: https://www.nyse.com/publicdocs/nyse/markets/american-options/NYSE_American_Options_Fee_Schedule.pdf.
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    The Exchange also believes the proposed Floor Fees are reasonable 
and equitable because OTPs choose whether to participate on the 
Exchange solely through electronic means, or with a presence on the 
Trading Floor. The proposed Floor Fees are designed to encourage 
participants to conduct business on the Trading Floor, which may be on 
behalf of any market participant. In addition, orders brought to the 
Trading Floor benefit all market participants by providing more trading 
opportunities, which attracts Market Makers, Customers and other 
participants. An increase in activity, in turn, facilitates tighter 
spreads, which may result in a corresponding increase in order flow 
from all market participants.
    To the extent that the Exchange will no longer be offering certain 
equipment or services, the removal of such fees from the Fee Schedule 
is reasonable as it would add clarity and transparency to the Fee 
Schedule to the benefit of all participants.

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

    In accordance with Section 6(b)(8) of the Act,\9\ the Exchange does 
not believe that the proposed rule change would impose any burden on 
competition that is not necessary or appropriate in furtherance of the 
purposes of the Act. The proposed Floor Fees are designed to address 
the relocation of the Exchange Trading Floor, not to address any 
competitive issues. The Exchange believes that the proposed fees will 
encourage fair and efficient use of the new Trading Floor space. If 
this result is achieved, the proposed fees may increase both inter-
market and intra-market competition by incenting off-Floor participants 
to direct their orders to the Exchange, which would enhance the quality 
of quoting and may increase the volume of contracts traded on the 
Exchange.
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    \9\ 15 U.S.C. 78f(b)(8).
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    The Exchange does not believe that the proposed change will impair 
the ability of any market participants or competing order execution 
venues to maintain their competitive standing in the financial markets. 
Further, the proposed Floor Fees would be applied to all similarly 
situated participants (i.e., Floor Brokers and on-floor Market Makers), 
and, as such, the proposed change would not impose a disparate burden 
on competition either among or between classes of market participants. 
Further, the proposal to limit Market Maker podia use to Market Makers 
with an active OTP is likewise reasonable, equitable and not unfairly 
discriminatory because such participants utilize the podia to manage 
their electronic quotes as well as to maintain a presence in the 
Trading Crowd to respond to a call for a market. Reserve OTPs are not 
unfairly burdened by this restriction because such OTPs are not active 
on a trading permit, cannot respond to a call for market, and therefore 
do not need to be present in the Trading Crowd. Given these 
distinctions the Exchange believes this limitation represents a fair 
and efficient use of Exchange resources.

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 Exchange has filed the proposed rule change pursuant to Section 
19(b)(3)(A)(iii) of the Act \10\ and Rule 19b-4(f)(6) thereunder.\11\ 
Because the 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 prior to 
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, the proposed rule change has become 
effective pursuant to Section 19(b)(3)(A) of the Act and Rule 19b-
4(f)(6)(iii) thereunder.\12\
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    \10\ 15 U.S.C. 78s(b)(3)(A)(iii).
    \11\ 17 CFR 240.19b-4(f)(6).
    \12\ [sic] 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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    At any time within 60 days of the filing of such 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

[[Page 66822]]

under Section 19(b)(2)(B) \13\ of the Act to determine whether the 
proposed rule change should be approved or disapproved.
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    \13\ 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-2018-80 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-NYSEARCA-2018-80. 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 (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 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 the filing also will be available for inspection 
and copying at the principal office of the Exchange. 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 available publicly. All submissions 
should refer to File Number SR-NYSEARCA-2018-80 and should be submitted 
on or before January 17, 2019.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\14\
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    \14\ 17 CFR 200.30-3(a)(12).
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Brent J. Fields,
Secretary.
[FR Doc. 2018-27988 Filed 12-26-18; 8:45 am]
BILLING CODE 8011-01-P