1. There is constantly some breaking down of red cells in the circulation by fragmentation. 2. The fragments of red cells, as well as whole red cells, are phagocytized and destroyed by clasmatocytes or endothelial phagocytes. 3. When there is an increase in fragmentation in abnormal or pathological states, desquamated endothelial cells of the blood stream, as well as the clasmatocytes of the tissues, increase proportionately and take in these fragments. These cells are to be distinguished from eosinophilic leucocytes by the nature of their granules, by the type of motility of the cells, and by a negative peroxidase test. 4. The desquamated endothelial cells, clasmatocytes, in the circulating blood are positive to the peroxidase test only when they have taken in positive material. 5. The monocytes show marked variations of the oxidase reaction in different species and to different techniques. With the Sato and Sekiya technique most monocytes of human blood are positive, while most of them in rabbit blood are negative, but both positive and negative reactions are found in both human and rabbit blood.